EXHIBIT 2.1
PURCHASE AND SALE AGREEMENT
BETWEEN
CONOCOPHILLIPS COMPANY
AND
GASCO ENERGY, INC.
RIVERBEND FIELD, UINTAH AND DUCHESNE COUNTIES, UTAH
Effective January 1, 2004
TABLE OF CONTENTS
Page
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....................................7
3.1 Reciprocal Representations and Warranties...................7
3.2 ASSIGNOR's Representations and Warranties...................8
3.3 ASSIGNEE's Representations and Warranties...................9
3.4 Limitation as to Environmental Matters.....................10
3.5 Notice of Changes..........................................10
3.6 Representations and Warranties Exclusive...................10
ARTICLE 4 DISCLAIMER OF WARRANTIES.........................................11
4.1 Title; Encumbrances........................................11
4.2 Condition and Fitness of the Property......................11
4.3 Information About the Property.............................11
4.4 Subrogation of Warranties..................................12
ARTICLE 5 DUE DILIGENCE REVIEW OF THE PROPERTY.............................12
5.1 Records Review.............................................12
5.2 Physical Inspection........................................12
5.3 Environmental Assessment...................................13
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5.4 Bonding....................................................15
5.5 Preferential Rights and Consents to Assign.................16
5.6 Title Defects..............................................18
5.7 Casualty Losses and Governmental Takings...................20
5.8 Termination Due to Impairments to the Property.............22
5.9 Xxxx-Xxxxx-Xxxxxx..........................................22
ARTICLE 6 CLOSING AND POST-CLOSING OBLIGATIONS.............................22
6.1 Closing Date...............................................22
6.2 Conditions to Closing......................................22
6.3 Closing....................................................24
6.4 Post-Closing Obligations...................................25
ARTICLE 7 ASSUMED AND RETAINED RIGHTS AND OBLIGATIONS......................28
7.1 ASSIGNEE's Rights After Closing............................28
7.2 ASSIGNEE's Obligations After Closing.......................28
7.3 ASSIGNOR's Obligations After Closing.......................29
7.4 ASSIGNEE's Plugging and Abandonment Obligations............30
7.5 ASSIGNEE's Environmental Obligations.......................31
ARTICLE 8 INDEMNITIES......................................................32
8.1 Definition of Claims.......................................32
8.2 Application of Indemnities.................................32
8.3 ASSIGNEE's Indemnity.......................................33
8.4 ASSIGNOR's Indemnity.......................................33
8.5 Notices and Defense of Indemnified Claims..................34
8.6 ASSIGNOR's Indemnity Limit.................................34
8.7 NORM.......................................................34
8.8 Pending Litigation and Claims..............................34
8.9 Waiver of Consequential and Punitive Damages...............34
ARTICLE 9 TAXES AND EXPENSES...............................................35
9.1 Recording Expenses.........................................35
9.2 Ad Valorem, Real Property and Personal Property Taxes......35
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9.3 Severance Taxes............................................35
9.4 Tax and Financial Reporting................................35
9.5 Sales and Use Taxes........................................36
9.6 Income Taxes...............................................36
9.7 Incidental Expenses........................................36
ARTICLE 10 OPERATIONS AFTER CLOSING..........................................36
10.1 ASSIGNOR's Covenants Pending Closing.........................36
10.2 ASSIGNOR Operated Properties After Closing...................37
ARTICLE 11 MISCELLANEOUS.....................................................38
11.1 Production Imbalances........................................38
11.2 Preferential Right to Purchase and Process Production........39
11.3 Alternative Dispute Resolution...............................40
11.4 Survival.....................................................42
11.5 Confidentiality and Public Announcements.....................42
11.6 Suspense Accounts............................................42
11.7 ASSIGNOR's Marks and Logos; Post-Closing Inspections.........42
11.8 Notices......................................................43
11.9 Effective Date...............................................43
11.10 Assignment...................................................43
11.11 Entire Agreement and Amendment...............................44
11.12 Successors and Assigns.......................................44
11.13 Third Party Beneficiaries....................................44
11.14 Severability.................................................44
11.15 Counterparts.................................................44
11.16 Governing Law................................................44
11.17 Exhibits.....................................................45
11.18 Waiver.......................................................45
11.19 Interpretation...............................................45
11.20 Default and Remedies.........................................46
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PURCHASE AND SALE AGREEMENT
LIST OF EXHIBITS
A Schedule 1 - Leases
Schedule 2 - Pooled and Unitized Interests
Schedule 3 - Permits and Easements
Schedule 4 - Royalty Interests
Schedule 5 - Related Contracts
Schedule 6 - 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 Documents
E Nonforeign Affidavit
F Production Imbalances
G Tax Partnerships
2003 PRO FORMA PSA (Onshore)
E&P Asset Sales - Seller's Form
FINAL - March 26, 2003
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (the "Agreement"), dated effective as of
January 1, 2004, (the "Effective Date"), is between CONOCOPHILLIPS COMPANY
("ASSIGNOR"), a Delaware corporation, with offices at 000 Xxxxx Xxxxx Xxxxxxx,
Xxxxxxx, Xxxxx 00000, and Gasco Energy, Inc. ("ASSIGNEE"), a Delaware
corporation with offices at 00 Xxxxxxxxx Xxxxx Xxxx, Xxxxx X-000, Xxxxxxxxx,
Xxxxxxxx 00000.
RECITALS:
ASSIGNOR owns certain producing oil and gas properties in Uintah and Duchesne
Counties, Utah, together with related facilities and contractual rights, and
desires to assign its interest in these properties and facilities, and to
transfer these contractual rights.
ASSIGNEE desires to acquire ASSIGNOR's interest in these properties, facilities
and contractual rights.
Therefore, ASSIGNOR and ASSIGNEE agree to the sale of ASSIGNOR's interest in
these properties, facilities and contractual rights to ASSIGNEE 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, ASSIGNOR
shall sell, convey and assign to ASSIGNEE and ASSIGNEE shall purchase, pay for,
and accept all of ASSIGNOR's right and title to, and interest in, and all
privileges and obligations appurtenant to, the following described property
rights and interests, which collectively are intended to include all of
Assignor's Leases, Units, Xxxxx, Equipment, Permits and Easements, Related
Contracts and Property Records as to all lands and depths in Townships 9 South,
Range 19 East; 10 South, Range 19 East; 10 South, Range 18 East; 10 South, Range
17 East; and Section 33, 9 South, Range 18 East (the "Area"). These property
rights and interests, SAVE and EXCEPT the Excluded Assets described in Section
1.2, are hereafter referred to collectively as the "Property"):
1.1.1 The oil, gas and mineral lease(s), operating rights and
other interests in oil and gas described in Exhibit A, Schedule 1, insofar as
those interests, rights and leases cover and include the lands, depths and
rights described in Exhibit A, Schedule 1 (the "Leases"); provided, however,
that if Assignor owns any lands or depths lying within the Area that are not
described in Exhibit A, whether strips, larger parcels, or entire mineral
leases, all such lands and depths shall be included in the term "Leases.";
1.1.2 All rights, obligations and interest in any unit or
pooled area in which the Leases are included, to the extent that these rights,
obligations and interest arise from and are associated with the Leases or Xxxxx,
including without limitation, all rights and obligations derived from any
unitization, pooling, operating, communitization or other agreement or from any
declaration or order of any governmental authority, as described in Exhibit A,
Schedule 2 (the "Units");
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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 the Units (the "Xxxxx");
1.1.4 All equipment, facilities, flow lines, pipelines,
gathering systems (other than gas plant gathering systems), well pads, tank
batteries, improvements, fixtures, inventory, spare parts, tools, abandoned
property and junk and other personal property located on the Leases, the Units,
or the Permits and Easements (the "Equipment");
1.1.5 To the extent assignable or transferable, all easements,
rights-of-way, licenses, permits, servitudes, surface leases, surface use
agreements, surface fee tracts, and similar rights and interests to the extent
applicable to or used in operating the Leases, Units, Xxxxx, or the Equipment,
including those described in Exhibit A, Schedule 3 (the "Permits and
Easements");
1.1.6 Any royalty, overriding royalty, net profits or other
oil, gas or mineral interests in the Area, whether or not described in Exhibit
A, Schedule 4 (the "Royalty Interests"), including all rights and obligations
pertaining to the Royalty Interests under any of the Related Contracts;
1.1.7 To the extent assignable or transferable, (i) except as
set forth in (ii) below, all agreements, contracts and contractual rights,
obligations and interests applicable to the Property, including unit agreements,
farmout agreements, farmin agreements, operating agreements, including those
described in Exhibit A, Schedule 5 and (ii) only those hydrocarbon sales,
purchase, gathering, compression, transportation, treating, marketing, exchange,
processing and fractionating agreements described in Exhibit A, Schedule 5,
INSOFAR ONLY as (i) and (ii) cover and apply to the Leases, the Units, the
Xxxxx, the Equipment, the Permits and Easements and the Royalty Interests
(collectively, the "Related Contracts"); and
1.1.8 All other tangibles, miscellaneous interests or other
assets on or being used in connection with the Leases, including (subject to
Section 6.4.1) all lease files, right-of-way files, well files (including well
logs), production records, division order files, abstracts, title opinions, and
contract files, insofar as they are directly related to the Leases, the Units,
or the Xxxxx (the "Property Records").
1.2 Exclusions from the Property. The Property to be conveyed and
assigned under this Agreement does not include the following, which are reserved
by ASSIGNOR (the "Excluded Assets"):
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 from third parties, and (ii)
interpretations of seismic, geological, geochemical or geophysical data
belonging to ASSIGNOR or licensed from third parties;
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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, pending patent
applications, trade secrets, copyrights, names, marks and logos;
1.2.3. ASSIGNOR's right, title and interest in easements,
rights-of-way, licenses, permits, servitudes, surface leases, surface use
agreements, and similar rights and interests, to the extent they are not
attributable and allocable to the exploration and production rights and
interests sold by ASSIGNOR hereunder;
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, internal
valuation data, business plans, reserve reports, transaction proposals and
related information and correspondence, business studies, bids and documents
protected by any privilege), or which ASSIGNOR cannot legally provide to
ASSIGNEE because of third party restrictions;
1.2.6 Trade credits and rebates from contractors and vendors,
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 Claims of ASSIGNOR for refund of or loss carry forwards
with respect to (i) production, windfall profit, severance, ad valorem or any
other taxes attributable to any period prior to the Effective Date, (ii) income
or franchise taxes and (iii) any taxes attributable to the excluded items
described in this Section 1.2;
1.2.8 Deposits, cash, checks in process of collection, cash
equivalents, accounts and notes receivable and other funds attributable to any
periods before the Effective Date, and security or other deposits made with
third parties prior to the Effective Date;
1.2.9 All proceeds, benefits, income or revenues with respect
to the Property attributable to periods prior to the Effective Date;
1.2.10 All Claims arising from acts, omissions or events, or
damage to or destruction of the Property before the Effective Date, and all
related 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;
1.2.11 All rights and obligations applicable to the matters
listed under the section of Exhibit C entitled "ASSIGNOR's Responsibility";
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1.2.12 Contracts for support services related to the Property
(except for those support service contracts specifically listed as part of the
Related Contracts in Exhibit A, Schedule 5);
1.2.13 All swap, futures, or derivative contracts backed by
or related to the Hydrocarbons;
1.2.14 (i) Pipelines, equipment and other facilities located
on the Leases, the Units, or the Permits and Easements that are not associated
with or used in connection with the Leases or the Units; (ii) any equipment,
materials spare parts, tools and other personal property that may have been
previously used on the Leases, the Units or the Permits and Easements, but is
presently stored or warehoused at an ASSIGNOR or third party site not located on
the Property; and (iii) any gas processing plants or their associated
facilities, pipelines and gathering lines, wherever located;
1.2.15 (i) Radio towers, remote terminal units, personal
computer equipment, vehicles, communication equipment, and photocopy machines,
wherever located, (ii) all leased vehicles and equipment for which ASSIGNEE does
not assume the applicable lease under this Agreement, and (iii) all third party
equipment and property located on or used in connection with the Property,
including without limitation contractor equipment; and
1.2.16 ASSIGNOR's rights under any existing contracts
providing for the gathering, compression, treating, transportation or processing
of oil or gas produced from the Leases or Xxxxx, other than those contracts
listed on Exhibit A, Schedule 5 (ASSIGNEE will need to make its own arrangements
for these matters with respect to its production from the Leases).
1.3 Ownership of Production from the Property.
1.3.1 Production Before the Effective Date.
(a) ASSIGNOR will own all merchantable oil, gas,
casinghead gas, condensate, distillate and other
liquid and gaseous hydrocarbons of every kind or description ("Hydrocarbons")
produced from or attributable to the Property before the Effective Date.
(b) In lieu of gauging pipeline and tank inventory
and making commensurate post-closing adjustments,
ASSIGNEE agrees to pay ASSIGNOR an additional consideration of One Hundred
Thirty-two Thousand and no/100's Dollars ($132,000.00).
1.3.2 Production After the Effective Date. After Closing,
ASSIGNEE will own all Hydrocarbons produced from or attributable to the Property
on and after the Effective Date. If, however, the Effective Date precedes the
Closing Date, ASSIGNOR will sell on ASSIGNEE's behalf all Hydrocarbons produced
from or attributable to the Property between the Effective Date and the Closing
Date, and ASSIGNOR will credit ASSIGNEE for the proceeds of these sales as an
adjustment to the Purchase Price, as provided in Sections 2.2 and 2.3. Subject
to any continuing sale obligations under the Related Contracts, and ASSIGNOR's
preferential right to purchase Hydrocarbons as provided in Section 11.2,
ASSIGNEE may sell Hydrocarbons produced from or attributable to 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. ASSIGNEE will pay ASSIGNOR Three
Million, One Hundred Seventy-five Thousand and NO/100 DOLLARS ($3,175,000.00)
for the Property (the "Purchase Price"), adjusted as specified in Section 2.2
and Section 2.3 and increased by the amount specified in Section 1.3.1. For
purposes of this Agreement and for federal income tax purposes, the Purchase
Price will be allocated among the various portions of the Property and among
depreciable assets and non-depreciable assets as provided in Exhibit A, Schedule
6.
2.1.2 Performance Deposit. Upon execution of this Agreement,
ASSIGNEE shall pay to ASSIGNOR ten percent (10%) of the Purchase Price (U.S.
$317,500.00) 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) to
close the transaction in accordance with the terms of this Agreement, ASSIGNOR
may, at its sole option, retain the Performance Deposit as agreed liquidated
damages and not as a penalty. However, if this Agreement is terminated pursuant
to the provisions of Sections 5.3 (Environmental Assessment), 6.4.3
(Governmental Approvals), 5.5 (Preferential Rights and Consents to Assign), 5.6
(Title Defects), 5.7 (Casualty Loss), 5.8 (Termination Due to Impairments to the
Property) or 11.20.2 (ASSIGNEE's Remedies) of this Agreement, the Performance
Deposit shall be returned without interest as provided in this Agreement. 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.
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 three (3) days prior to the Closing Date, 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:
(a) Any increases in the Purchase Price specified in
this Agreement or otherwise agreed in writing
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between ASSIGNOR and ASSIGNEE prior to or at Closing, including but not limited
to the amount specified in Section 1.3.1 .
2.2.3 Downward Adjustments. The Purchase Price will be
decreased by the following expenses and revenues:
(a) Any decreases in the Purchase Price specified in
this Agreement or otherwise agreed in writing
between ASSIGNOR and ASSIGNEE.
2.3 Adjustments after Closing.
2.3.1 Final Settlement Statement. Within 120 days after
Closing (the "Final Settlement Date"), 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") and any amounts due pursuant to Section 10.2.1. 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. ASSIGNEE will have 30 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 take written exception
within the 30-day review period will be deemed correct.
2.3.2 Payment of Post-Closing Adjustments. Any adjustments to
the Purchase Price (excluding 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 30-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 Disputed Items. After the completion and
delivery of the Final Settlement Statement, the parties shall 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 the
parties will attempt to resolve their disagreement with respect to the disputed
items pursuant to the dispute resolution procedure set forth in Section 11.3.
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.
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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 applicable laws,
rules and regulations, 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 inconsistent with the
allocation of value for the Property in Exhibit A, Schedule 6, unless the
parties otherwise agree in writing. The value assigned to each portion of the
Property in Exhibit A, Schedule 6 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 Property 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.
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.
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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. Upon execution of this Agreement,
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 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)
maintenance 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 do 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 Brokers Fees. It has not incurred any obligation for
brokers, finders or similar fees for which the other party would be liable.
3.1.8 No Restraining Litigation. To its knowledge, there is no
action, suit, proceeding, claim or investigation by any person, entity,
administrative agency or governmental body pending or, to its knowledge,
threatened, against it before any court or governmental agency that seeks
substantial damages in connection with, or seeks to restrain, enjoin, materially
impair or prohibit the consummation of all or part of the transaction
contemplated in this Agreement.
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.
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3.2.1 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.
3.2.2 Lawsuits and Claims. Except as disclosed in Exhibit C or
disclosed to ASSIGNEE prior to closing, and limited by Section 3.4, to
ASSIGNOR's knowledge, there is no written demand or lawsuit, nor any compliance
order, notice of probable violation or similar governmental action, pending or
threatened before any court or governmental agency that (i) would result in a
material impairment or loss of title to any part of the Property, or substantial
impairment of the value thereof, or (ii) would materially hinder or impede the
operation of the Property.
3.2.3. Tax Partnerships.Except as set forth on Exhibit G,
ASSIGNOR represents that the Assets conveyed to Buyer are not subject to any Tax
Partnership Agreement or provisions requiring a Partnership Income Tax Return to
be filed under Subchapter K of Chapter 1 of Subtitle A of the Internal Revenue
Code of 1986, as amended, or any similar state statute.
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. In making the decision to
enter into this Agreement, 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, as applicable, operate
any federal oil, gas and mineral leases, and any oil, gas and mineral leases for
all states in which the Property is located, 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 ASSIGNEE
in regard 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. ss. 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, 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.
9
3.3.4 Governmental Approval. ASSIGNEE is unaware of any fact
or circumstance which would preclude or inhibit unconditional approval of
ASSIGNOR's assignment(s) of that portion of the Property which constitutes state
or federal oil, gas and mineral leases to ASSIGNEE, by any federal or state
authority having jurisdiction, including meeting existing or increased state and
federal bonding or supplemental security requirements of such authority.
3.3.5 Operator's Bond Qualifications. ASSIGNEE is unaware of
any fact or circumstance which would preclude or inhibit ASSIGNEE's
qualification to operate the Leases and Xxxxx for which ASSIGNEE is seeking
operatorship, including meeting the existing or increased state and federal
bonding or supplemental security requirements of any state or federal authority
having jurisdiction.
3.3.6 No Holding Company. ASSIGNEE is not (i) a "holding
company," or a "subsidiary company" of a "holding company," or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding company," or a
"public utility company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended, or (ii) subject in any respect to the
provisions of that act.
3.3.7 No Investment Company. ASSIGNEE is not (i) an investment
company or a company controlled by an investment company within the meaning of
the Investment Company Act of 1940, as amended, or (ii) subject in any respect
to the provisions of that act.
3.3.8 ASSIGNEE's Funds.ASSIGNEE has arranged or will arrange
to have available by the Closing Date sufficient funds to enable the ASSIGNEE to
pay in full the Purchase Price as herein provided and otherwise to perform its
obligations under this Agreement without financing that is subject to any
material contingency.
3.4 Limitation as to Environmental Matters. The warranties and
representations of ASSIGNOR in this Article 3 do not extend to environmental
matters, permits, compliance with environmental laws and regulations, and
environmental Claims pertaining to the ownership or operation of the Property.
All liabilities and obligations of ASSIGNOR and ASSIGNEE with respect to
environmental matters, permits, compliance with environmental laws and
regulations, and environmental Claims pertaining to the ownership or operation
of the Property will be governed solely and exclusively by the provisions of
Sections 4.2, 4.3, 5.3, 5.8, 7.4, 7.5, and Article 8, regardless of the
warranties or representations in this Article 3.
3.5 Notice of Changes. Prior to Closing, ASSIGNOR and ASSIGNEE will
each give the other prompt written notice of any matter materially affecting any
of their representations or warranties under this Article 3 or rendering any
such warranty or representation untrue or inaccurate.
3.6 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 WILL CONVEY THE PROPERTY TO ASSIGNEE
SUBJECT TO ALL ROYALTIES, OVERRIDING ROYALTIES, BURDENS, ENCUMBRANCES, AND
SURFACE RIGHTS CREATED PRIOR TO JANUARY 1, 2004, AND WITHOUT WARRANTY OF TITLE,
EXPRESS OR IMPLIED, OTHER THAN A WARRANTY THAT IT HAS NOT TRANSFERRED ANY
INTEREST IN THE PROPERTY OR CREATED ANY NEW LIEN OR ENCUMBRANCE AGAINST ANY OF
THE PROPERTY ON OR AFTER JANUARY 1, 2004. SPECIFICALLY WITH RESPECT TO THE
PERMITS AND EASEMENTS, ASSIGNOR EXPRESSLY DISCLAIMS, AND ASSIGNEE HEREBY WAIVES,
ALL WARRANTIES AND REPRESENTATIONS THAT ASSIGNOR OWNS THE PERMITS AND EASEMENTS,
THAT THEY ARE IN FORCE AND EFFECT; THAT THEY MAY BE ASSIGNED; THAT THEY ARE
CONTIGUOUS; THAT THE EQUIPMENT LIES WITHIN THE PERMITS AND EASEMENTS; OR THAT
THEY GRANT THE RIGHT TO LAY, MAINTAIN, REPAIR, REPLACE, OPERATE, CONSTRUCT, OR
REMOVE THE EQUIPMENT. ASSIGNOR EXPRESSLY DISCLAIMS, AND ASSIGNEE HEREBY WAIVES,
ALL WARRANTIES AND REPRESENTATIONS THAT THERE ARE ANY PERMITS AND EASEMENTS IN
FORCE AND EFFECT WITH RESPECT TO THE EQUIPMENT. If necessary, ASSIGNEE shall
secure its own rights to operate and maintain the Equipment on the lands of
others at its own expense.
4.2 Condition and Fitness of the Property. Except as expressly set
forth in this Agreement, ASSIGNOR WILL CONVEY THE PROPERTY TO ASSIGNEE WITHOUT
ANY EXPRESS, STATUTORY OR IMPLIED WARRANTY OR REPRESENTATION OF ANY KIND,
INCLUDING WARRANTIES RELATING TO (i) THE CONDITION OR MERCHANTABILITY OF THE
PROPERTY, OR (ii) THE FITNESS OF THE PROPERTY FOR A PARTICULAR PURPOSE. BEFORE
CLOSING, ASSIGNEE WILL INSPECT OR WILL HAVE BEEN GIVEN THE OPPORTUNITY TO
INSPECT, THE PROPERTY AND SUBJECT TO ASSIGNEE's RIGHTS UNDER ARTICLE 5, WILL
ACCEPT THE PROPERTY "AS IS," "WHERE IS," AND "WITH ALL FAULTS" AND IN ITS
PRESENT CONDITION AND STATE OF REPAIR. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, ASSIGNOR MAKES NO REPRESENTATION OR WARRANTY AS TO (i) THE VALUE,
QUALITY, QUANTITY, VOLUME OR DELIVERABILITY OF ANY OIL, GAS OR OTHER MINERALS OR
RESERVES (IF ANY) IN, UNDER OR ATTRIBUTABLE TO THE PROPERTY (INCLUDING WITHOUT
LIMITATION PRODUCTION RATES, DECLINE RATES AND RECOMPLETION OR DRILLING
OPPORTUNITIES), (ii) GAS BALANCING OR PAYOUT ACCOUNT INFORMATION, ALLOWABLES, OR
OTHER REGULATORY MATTERS, (iii) THE PHYSICAL, OPERATING, REGULATORY COMPLIANCE,
SAFETY OR ENVIRONMENTAL CONDITION OF THE PROPERTY, (iv) PROJECTIONS AS TO EVENTS
THAT COULD OR COULD NOT OCCUR, or (v) THE GEOLOGICAL OR ENGINEERING CONDITION OF
THE PROPERTY OR ANY VALUE THEREOF.
4.3 Information About the Property. EXCEPT AS EXPRESSLY SET FORTH IN
THIS AGREEMENT, THE PARTIES EACH DISCLAIM ALL LIABILITY AND RESPONSIBILITY FOR
ANY REPRESENTATION, WARRANTY, STATEMENTS OR COMMUNICATIONS (ORALLY OR IN
WRITING) TO THE OTHER PARTY (INCLUDING, BUT NOT LIMITED TO, ANY INFORMATION
11
CONTAINED IN ANY OPINION, INFORMATION, OR ADVICE THAT MAY HAVE BEEN PROVIDED TO
ANY SUCH PARTY BY ANY EMPLOYEE, OFFICER, DIRECTOR, AGENT, CONSULTANT, ENGINEER
OR ENGINEERING FIRM, TRUSTEE, REPRESENTATIVE, PARTNER, MEMBER, BENEFICIARY,
STOCKHOLDER OR CONTRACTOR OF SUCH DISCLAIMING PARTY OR ITS AFFILIATES) WHEREVER
AND HOWEVER MADE, INCLUDING THOSE MADE IN ANY DATA ROOM AND ANY SUPPLEMENTS OR
AMENDMENTS THERETO OR DURING ANY NEGOTIATIONS WITH RESPECT TO THIS AGREEMENT OR
ANY CONFIDENTIALITY AGREEMENT PREVIOUSLY EXECUTED BY THE PARTIES WITH RESPECT TO
THE PROPERTY. ASSIGNOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED,
AS TO THE ACCURACY, COMPLETENESS, OR MATERIALITY OF ANY DATA, INFORMATION OR
RECORDS FURNISHED TO ASSIGNEE IN CONNECTION WITH 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.
4.4 Subrogation of Warranties. To the extent transferable, 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 make
available to ASSIGNEE, and ASSIGNEE's authorized representatives, at mutually
agreeable times before Closing, during normal business hours, all contract,
lease, and operational records, to the extent such data and records are in
ASSIGNOR's possession and relate to the Property. 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. 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, (a) with respect to that
portion of the Property operated by ASSIGNOR, ASSIGNOR will permit ASSIGNEE and
its representatives, at their sole risk and expense, to conduct reasonable
inspections of the Property at times approved by ASSIGOR, and (b) with respect
to that portion of the Property not operated by ASSIGNOR, ASSIGNOR will attempt
to obtain access to the Property, in accordance with the applicable operating
agreements, for ASSIGNEE and its representatives, at their sole risk and
expense, to conduct reasonable inspections of the Property subject to the terms
and conditions required by the operator of the Property. 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 arising
12
from ASSIGNEE inspecting and observing the Property and ASSIGNOR's records
pursuant to this Article 5, including, without limitation, (a) 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 arise
out of or result in whole or in part, from the condition of the Property or
ASSIGNOR's (or its employees', agents', contractors', successors' or assigns')
sole or concurrent negligence, strict liability or fault, and (b) 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. Prior to Closing, the ASSIGNEE will have the
right to conduct a Phase I environmental assessment of the Property, subject to
the terms set forth in Section 5.2. However, the Phase I environmental
assessment must be conducted by an agent or representative of ASSIGNEE (the
"Inspector") 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, unless otherwise agreed
in writing by ASSIGNOR and ASSIGNEE.
5.3.2 Inspection Results. Each party will be entitled to
receive a copy of the Inspector's final Phase I inspection results for the
Property, including without limitation all final written reports, data and
conclusions of the Inspector. ASSIGNEE agrees not to disclose the Phase I
inspection results for the Property, or any ASSIGNOR information reviewed during
the Phase Inspection results, 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 until the Closing
Date. If Closing does not occur, ASSIGNEE shall promptly return to ASSIGNOR all
written reports, data and conclusions of the Inspector.
5.3.3 Notice of Adverse Environmental Conditions. Prior to
Closing, ASSIGNEE will review the inspection results for the Property and
determine, based on those results and such other information as may be available
to ASSIGNEE if any Adverse Environmental Conditions exist with respect to the
Property. No later than February 26, 2004, ASSIGNEE will notify ASSIGNOR in
writing of any Adverse Environmental Condition with respect to the Property.
Such notice shall describe in reasonable detail the Adverse Environmental
Condition, include all data and information in ASSIGNEE's and the Inspector's
possession or control bearing thereon, and include the estimated Environmental
Defect Value attributable thereto. The "Environmental Defect Value" attributable
to any Adverse Environmental Condition will be the estimated amount of all
reasonable costs and Claims net to ASSIGNOR's interest in the allegedly affected
portion of the Property associated with the existence, remediation or correction
of the Adverse Environmental Condition (not to exceed the Allocated Value of the
allegedly affected portion of the Property), as reasonably determined and
estimated by the Inspector on a current cost basis. "Adverse Environmental
Condition" means and includes, with respect to any portion of the Property (i)
the failure of the Property to be in compliance with applicable Environmental
13
Laws, or any contract or agreement relating to the environmental condition of
the Property (except to the extent such noncompliance with an agreement or
contract was previously waived by the other party or is barred by the statute of
limitations) or the current owner of the Property does not have standing to
assert a claim for noncompliance, (ii) the Property being subject to any
agreements, consent orders, decrees, or judgments, in existence at this time
based on any Environmental Laws that negatively impact the future use of any
material portion of the Property, or that require any change in the present
conditions of any of the Property, and (iii) the Property being subject to any
uncured notices of violations of or noncompliance with any applicable
Environmental Laws; provided, however, that no individual matter shall be deemed
to be or constitute an Adverse Environmental Condition unless the Environmental
Defect Value for such matter exceeds $150,000, net to ASSIGNOR's interest in the
allegedly affected portion of the Property. The term "Environmental Laws" means
any statute, law, ordinance, rule, regulation, code, order, judicial writ,
injunction, or decree issued by any federal, state, or local governmental
authority in effect on or before the Effective Date relating to the control of
any pollutant or protection of the air, water, land, or environment or the
release or disposal of hazardous materials, hazardous substances or waste
materials.
5.3.4 Rights and Remedies for Environmental Conditions.
(a) With respect to any Adverse Environmental
Condition affecting the Property, ASSIGNEE may (i)
request ASSIGNOR to cure the Adverse Environmental Condition, but ASSIGNOR will
have no obligation to cure the Adverse Environmental Condition, or (ii) request
an adjustment to the Purchase Price equal to the applicable Environmental Defect
Value. If ASSIGNOR refuses or is unable to cure the Adverse Environmental
Condition before Closing, ASSIGNOR and ASSIGNEE will have the rights and
remedies set forth in subpart (b) of this Section 5.3.4 with respect to the
uncured Adverse Environmental Conditions, unless the Parties otherwise agree in
writing.
(b) The rights and remedies of the Parties with
respect to uncured Adverse Environmental Conditions on
the Property (other than Adverse Environmental Conditions that ASSIGNOR has
agreed to cure pursuant to Section 5.3.4 (a)) are as follows:
(i) If the collective Environmental Defect
Values and Title Defect Values attributable to all
uncured Adverse Environmental Conditions and uncured, unwaived Title Defects is
less than or equal to Five Hundred Thousand and no/100's Dollars ($500,000.00)
(the "Deductible Amount"), the Parties will be obligated to proceed with Closing
as to all of the Property without curative action by ASSIGNOR with respect to
such Adverse Environmental Conditions and Title Defects and without an
adjustment to the Purchase Price.
(ii) If the collective Environmental Defect
Values and Title Defect Values attributable to alluncured Adverse Environmental
Conditions and uncured, unwaived Title Defects exceeds the Deductible Amount,
ASSIGNOR, at its option, may (1) exclude the entire Lease or Unit upon which
the alleged Adverse Environmental Condition(s) exists, or only that portion
of such Lease or Unit that is directly affected by the alleged Adverse
Environmental Condition, until the collective Environmental Defect Values and
Title Defect Values are less than or equal to the Deductible Amount, in which
case the Purchase Price will be reduced by the Allocated Value of the excluded
14
Lease or Unit, or portion thereof, and the Parties will be obligated to
proceed with Closing as to the remainder of the Property without curative by
ASSIGNOR, or (2) reduce the Purchase Price by the amount of the collective
Environmental Defect Values and Title Defects Values in excess of the Deductible
Amount, in which case the parties will be obligated to proceed with Closing as
to all of the Property without curative action by ASSIGNOR.
(iii) In addition to the rights and remedies
set forth in subparts (i)-(ii) of this Section
5.3.4 (b), ASSIGNOR and ASSIGNEE will have the termination rights set forth in
Section 5.8.
(c) The term "cure" or "curative" means, with respect
to any Adverse Environmental Condition, the
undertaking and completion of those actions and activities necessary to
remediate such Adverse Environmental Condition to the degree necessary such that
such Adverse Environmental Condition no longer constitutes an Adverse
Environmental Condition as defined above. ASSIGNOR shall promptly notify
ASSIGNEE at such time as it believes it has cured an Adverse Environmental
Condition. ASSIGNEE shall promptly notify ASSIGNOR of whether it agrees such
condition is cured. If ASSIGNEE fails to notify ASSIGNOR of its determination
with respect to such cure within seven (7) days following receipt of ASSIGNOR's
notice, such Adverse Environmental Condition shall be deemed cured. If ASSIGNOR
and ASSIGNEE are unable to agree that an Adverse Environmental Condition has
been cured, either party may submit such issue to alternative dispute resolution
pursuant to Section 11.3.
5.3.5 Exclusive Remedies. The remedies set forth in this
Section 5.3 are the sole and exclusive remedies of ASSIGNEE with respect to any
Adverse Environmental Condition (and all Environmental Obligations arising out
of any such Adverse Environmental Condition) attributable to ASSIGNOR's
ownership, operation or the condition of the Property prior to the Effective
Date, regardless of whether ASSIGNEE notifies ASSIGNOR of any such Adverse
Environmental Condition. ASSIGNOR shall have no liability to ASSIGNEE for any
such Adverse Environmental Condition (or its related Environmental Obligations)
if ASSIGNEE fails to notify ASSIGNOR as provided in Section 5.3.3.
5.4 Bonding
5.4.1 Bonding Requirements. ASSIGNEE agrees to promptly
purchase and post any and all bonds, supplemental bonds or other securities
which may be required of it pursuant to all applicable federal, state, tribal
and local laws, rules and regulations. ASSIGNEE shall also deliver to ASSIGNOR
an additional plugging and abandonment bond with terms and in a form approved by
ASSIGNOR in its sole discretion. The amount of the additional bond to be
delivered to ASSIGNOR at Closing under this Section 5.4 shall be One Hundred
Thousand and no/100's Dollars ($100,000.00). The additional bond to be given by
ASSIGNEE to ASSIGNOR under this Section 5.4 must be issued by an insurance
company, surety, or other financial institution approved by ASSIGNOR in its sole
discretion. ASSIGNEE shall maintain this additional bond in full force and
effect, at ASSIGNEE's sole cost and expense, until the Property has been finally
and permanently plugged, abandoned, and restored, all in accordance with
governmental regulations. The face amount of the bond may be reduced by ASSIGNEE
and its surety by the reasonable amounts spent by ASSIGNEE in partial compliance
with its Plugging and Abandonment Obligations under this Agreement, once
ASSIGNOR has determined (in its sole discretion) that such operations have been
15
satisfactorily completed and has provided written notice of same to ASSIGNEE and
its surety. ASSIGNEE's intention not to renew, or its failure to maintain, the
additional bond in force shall entitle ASSIGNOR to full payment of the face
amount of the bond on demand.
5.5 Preferential Rights and Consents to Assign.
5.5.1 Notices to Holders.
(a) If ASSIGNOR's right to convey any of the Property
to ASSIGNEE is subject to third party
preferential purchase rights, rights of first refusal, or similar rights
(collectively, "Preferential Rights"), or third party consents to assign or
similar rights, excluding consents ordinarily obtained after Closing and
consents on hydrocarbon sales, purchase, gathering, transportation, treating,
marketing, exchange, processing and fractionating agreements ("Consents"),
ASSIGNOR shall use reasonable efforts to (i) notify the holders of the
Preferential Rights and Consents that it intends to transfer the Property to
ASSIGNEE, (ii) provide them with any information about the transfer of the
Property to which they are entitled, and (iii) in the case of Consents, ask the
holders of the Consents to consent to the assignment of the affected Property to
ASSIGNEE.
(b) ASSIGNOR shall promptly notify ASSIGNEE whether
(i) any Preferential Rights are exercised or
waived, (ii) any Consents are denied, or (iii) the requisite time periods have
elapsed and any Preferential Rights are deemed waived or Consents deemed given
by the lapse of such requisite time periods under the applicable agreements.
(c) If any Preferential Rights are exercised, the
portion of the Property burdened by the exercised
Preferential Right shall be excluded, and the Purchase Price shall be adjusted
by the Allocated Value of the excluded portion of the Property. 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.
(d) Upon ASSIGNOR's receipt of all responses to its
notices to Preferential Rights holders under
Section 5.5.1(a), or such holders' requisite response times have elapsed, if the
portion of the Property to be excluded pursuant to Section 5.5.1(c) equals One
Hundred percent (100%) of the Purchase Price, ASSIGNOR shall notify ASSIGNEE.
Upon receipt of such notice, ASSIGNEE may terminate this Agreement, and neither
party will have any further obligation to conclude the transfer of the Property
under this Agreement. In order to exercise this termination right, ASSIGNEE must
give ASSIGNOR notice of its intention to terminate within two (2) business days
following the day on which ASSIGNEE receives ASSIGNOR's notice under this
Section 5.5.1(d).
5.5.2 Remedies before Closing.
(a) Preferential Rights. If before Closing, any
Preferential Right has not been waived or exercised
in accordance with the terms, and the time period for such exercise has not
expired, the Parties shall proceed to Closing as to the portion of the Property
burdened by such Preferential Rights, subject to the further obligations of
ASSIGNEE set forth in Section 5.5.3(a) in the event such Preferential Rights are
ultimately exercised.
16
(b) Consents. If ASSIGNOR is unable before Closing to
obtain the required Consents, then as the sole
pre-Closing remedy for same:
(i) ASSIGNOR and ASSIGNEE by agreement may
proceed with Closing as to the portion of the
Property affected by the unobtained Consents, subject to the further obligations
of ASSIGNOR and ASSIGNEE set forth in Section 5.5.3(b) in the event that such
Consents are ultimately denied after Closing; or
(ii) If the parties do not agree to proceed
with Closing under (b), then with respect to any
portion of the Property affected by an unobtained Consent, 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 portion of the Property, and proceed with Closing as to the remainder
of the Property. If the unobtained Consents affect all or a portion of a
unitized, communitized or pooled Property, for purposes of this clause, the
affected portion of the Property shall be deemed to be the entire unitized,
communitized or pooled Property. If the affected portion of the Property was
excluded at Closing, but ASSIGNOR obtains such Consent on or before the Final
Settlement Date, ASSIGNOR shall convey the affected portion of the Property to
ASSIGNEE, effective as of the Effective Date, and ASSIGNEE shall pay to ASSIGNOR
the Allocated Value of the affected portion of the Property, adjusted pursuant
to Section 2.2. If ASSIGNOR has not obtained such Consent as of such date, the
affected portion of the Property shall be deemed to be an Excluded Asset.
5.5.3 Remedies After Closing.
(a) Preferential Rights. After Closing, if (i) any
holder of Preferential Rights has alleged or
alleges improper notice of sale, (ii) ASSIGNOR or ASSIGNEE discover, or any
third party alleges, the existence of additional Preferential Rights, or (iii)
the time period for exercise of any Preferential Right did not expire before
Closing, ASSIGNOR and ASSIGNEE will attempt to obtain waivers of those
Preferential Rights. If ASSIGNOR and ASSIGNEE are unable to obtain waivers of
such Preferential Rights, and such Preferential Rights are not deemed waived, or
the third party ultimately establishes and exercises its rights, then ASSIGNEE
shall satisfy all such Preferential Rights obligations and shall indemnify,
defend and hold ASSIGNOR harmless from and against any and all Claims 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 to be received by ASSIGNOR
from such third party, 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 Preferential Rights are
established and exercised after Closing.
(b) Consents. After Closing, ASSIGNOR and ASSIGNEE
shall attempt to obtain any unobtained Consents,
including Consents alleged by third parties or identified after Closing. If
ASSIGNOR and ASSIGNEE are unable to obtain such Consents on or before the Final
Settlement Date, and such unobtained Consents deny the affected portion of the
Property to ASSIGNEE, then ASSIGNOR and ASSIGNEE shall rescind the assignment of
17
the affected portion of the Property after which ASSIGNOR shall pay ASSIGNEE the
Allocated Value of the affected portion of the Property, and ASSIGNEE shall
immediately reassign the affected portion of the Property to ASSIGNOR effective
as of the Final Settlement Date, free of all liens, burdens, claims, and
encumbrances arising by, through or under ASSIGNEE. Rescission of the assignment
of the affected portion of the Property and receipt of the Allocated Value of
the affected portion of the Property shall be ASSIGNEE's sole remedy if such
Consents are not obtained.
5.6 Title Defects.
5.6.1 Certain Definitions.
(a) Title Defects. For the purposes of this
Agreement, a "Title Defect" means any impairment,
encumbrance, lien, encroachment, irregularity, defect in, or dispute concerning
ASSIGNOR's title to the Property, and that in the reasonable opinion of ASSIGNEE
would materially:
(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 below that
attributable thereto and set forth in the applicable Schedule to Exhibit A;
(iii) Increase ASSIGNEE's working interest
in all or a portion of the Property above that attributable thereto and set
forth in the applicable Schedule to Exhibit A without a corresponding and
proportionate 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.
Notwithstanding the foregoing, no individual matter described above shall be
deemed to be or constitute a Title Defect unless the Title Defect Value for such
matter exceeds Two Hundred Fifty Thousand and no/100's Dollars ($250,000.00) net
to ASSIGNOR's interest in the affected portion of the Property, and no Adverse
Environmental Condition, Imbalances, or Permitted Encumbrance, Consents or
Preferential Rights will be considered a Title Defect under this Section 5.6.
(b) Permitted Encumbrances. The term "Permitted
Encumbrance" means:
(i) Any materialman's, mechanics',
repairman's, employees', contractors', operators', or
other similar liens, security interests or charges for liquidated amounts
arising in the ordinary course of business incidental to construction,
maintenance, development, production or operation of the Property, or the
production or processing of Hydrocarbons therefrom, that are not delinquent or,
if delinquent, are being contested in good faith by appropriate proceedings;
18
(ii) Production sales contracts; division
orders; contracts for sale, purchase, exchange,
refining, processing or fractionating of hydrocarbons; compression agreements;
equipment leases; surface leases; unitization and pooling designations,
declarations, orders and agreements; processing agreements; plant agreements;
pipeline, gathering, and transportation agreements; injection, repressuring, and
recycling agreements; salt water or other disposal agreements; seismic or
geophysical permits or agreements; and any and all other agreements which are
ordinary and customary in the oil and gas exploration, development, or
extraction business, or in the business of processing of gas and gas condensate
production for the extraction of products therefrom;
(iii) Any liens for taxes not yet delinquent
or, if delinquent, that are being contested in
good faith by appropriate proceedings;
(iv) Any liens or security interests created
by law or reserved in oil, gas and/or mineral leases for royalty, bonus or
rental or for compliance with the terms of any Property;
(v) Any easements, rights-of-way,
servitudes, permits, licenses, surface leases and other rights with respect to
surface operations, to the extent such matters do not interfere in any
material respect with ASSIGNOR's operation of the portion of the Property
burdened thereby;
(vi) All royalties, overriding royalties,
net profits interests, carried interests,
reversionary interests and other burdens created prior to January 1, 2004;
(vii) Conventional rights of reassignment
arising upon surrender or abandonment of any
Property; and
(viii) Rights reserved to or vested in any
governmental authority to control or regulate any of
the xxxxx or units included in the Property and all applicable laws, rules,
regulations and orders of such authorities so long as the same have not been
applied to decrease ASSIGNOR'S Net Revenue Interest below the Net Revenue
Interest specified in the applicable Schedule to Exhibit A.
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 after February 26, 2004. Such notice shall describe in reasonable detail
the Title Defect, including ASSIGNEE's reasonable estimate of the reduction in
the Allocated Value of the portion of the Leases(s) or Unit(s) affected by the
Title Defect (the "Title Defect Value"), and include all data and information in
ASSIGNEE's possession or control bearing thereon. ASSIGNEE will be deemed to
have conclusively waived any Title Defect about which it fails to notify
ASSIGNOR in writing prior to February 26, 2004.
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. 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.
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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.
(a) ASSIGNEE may waive the uncured Title Defect and
proceed with Closing without adjustment to the
Purchase Price.
(b) If the collective Title Defect Values and
Environmental Defect Values of uncured, unwaived Title
Defects and uncured Adverse Environmental Conditions are less than or equal to
the Deductible Amount, ASSIGNOR and ASSIGNEE will be obligated to proceed with
Closing as to all of the Property without curative action by ASSIGNOR with
respect to such Title Defects and Adverse Environmental Conditions and without
adjustment to the Purchase Price.
(c) If the collective Title Defect Values and
Environmental Defect Values of uncured, unwaived Title
Defects and uncured Adverse Environmental Conditions exceeds the Deductible
Amount, ASSIGNOR, at its option, may (1) exclude all or any portion of the
affected Lease(s) or Unit(s) until the collective Title Defect Values and
Environmental Defect Values affecting the remaining unexcluded Property are less
than or equal to the Deductible Amount, in which case the Purchase Price will be
reduced by the Allocated Value of the excluded Lease(s) or Unit(s) and the
parties will be obligated to proceed with Closing as to the remainder of the
Property without curative action by ASSIGNOR, or (2) reduce the Purchase Price
by the amount of the collective Title Defect Values and Environmental Defect
Values in excess of the Deductible Amount, in which case the parties will be
obligated to proceed with Closing as to all of the Property without curative
action by ASSIGNOR.
(d) In addition to the rights and remedies set forth
in subparts (a) through (c) of this Section
5.6.4, ASSIGNOR and ASSIGNEE will have the termination rights set forth in
Section 5.8.
5.6.5 Exclusive Remedy. The remedies set forth in this Section
5.6 are ASSIGNEE's exclusive remedies under this Agreement for all Title
Defects, and ASSIGNOR shall have no other liability to ASSIGNEE with respect to
Title Defects.
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 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.
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5.7.2 Remedies for Casualty Losses and Government Takings.
With respect to each Casualty Loss to or Government Taking of the Property,
ASSIGNOR and ASSIGNEE will have the following rights and remedies:
(a) 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
Two Hundred Fifty Thousand and no/100's Dollars ($250,000.00), 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.
(b) 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 Two Hundred Fifty Thousand and no/100's Dollars ($250,000.00), 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.
(c) If, on or before the Closing Date, a Casualty
Loss or Government Taking has occurred with respect
to all or a portion of the Property, and (i) ASSIGNOR and ASSIGNEE have been
unable to agree on the cost of the Casualty Loss or the value of the affected
Property taken in any Government Taking, or (ii) the agreed cost to repair or
replace the portion of the Property affected by the Casualty Loss or the agreed
value of the affected Property taken in any Government Taking equals or exceeds
Two Hundred Fifty Thousand and no/100's Dollars ($250,000.00), then either
ASSIGNOR or ASSIGNEE may exclude the affected portion of the Property, in which
case the Purchase Price will be reduced by the Allocated Value of the affected
portion of the Property, and the parties will be obligated to proceed with
Closing as to the remainder of the Property.
(d) In addition to the remedies set forth in subparts
(a), (b), and (c) 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 (i)
all insurance proceeds payable to ASSIGNOR with respect to any such Casualty
Loss, (ii) all sums paid to ASSIGNOR or ASSIGNEE by third parties by reason of
any such Casualty Loss, and (iii) all compensation paid to ASSIGNOR or ASSIGNEE
with respect to any such Government Taking.
5.7.4 Change in Condition. ASSIGNEE will assume all risk and
loss with respect to, and any change in the condition of the Property from and
after the Effective Date, including production of Hydrocarbons through normal
depletion, the watering-out, casing collapse 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.
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5.8 Termination Due to Impairments to the Property.
5.8.1 Right to Terminate. If the Allocated Value of all
Property to be excluded from the transaction contemplated by this Agreement due
to unwaived, uncured Title Defects, uncured Adverse Environmental Conditions,
Casualty Loss and Government Taking exceeds thirty percent (30%) of the Purchase
Price, 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.
5.9 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 of the initial
waiting periods prescribed in connection with the Xxxx-Xxxxx-Xxxxxx Act before
the Closing Date.
ARTICLE 6
CLOSING AND POST-CLOSING OBLIGATIONS
6.1 Closing Date. The actions and events described in Section 6.3 are
the "Closing" of this transaction, which shall be held beginning at 9:00 a.m.
local time at ASSIGNEE's offices located in Englewood, Colorado on March 15,
2004, or on such earlier or later date or at such other place as the parties
agree in writing ("Closing Date"). Time is of the essence in the performance of
this Agreement. All events of Closing shall each be deemed to have occurred
simultaneously with the other, regardless of when actually occurring, and each
shall be a condition precedent to the other. If the Closing occurs, all
conditions of Closing shall be deemed to have been satisfied or waived (but
ASSIGNOR's and ASSIGNEE's warranties and representations shall not be waived and
shall survive the Closing, to the extent provided in Section 11.4).
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. The inclusion in this Agreement
of conditions to ASSIGNOR's and ASSIGNEE's obligations at Closing shall not, in
22
and of itself, constitute a covenant of either ASSIGNOR or ASSIGNEE to satisfy
the conditions to the other party's obligations at Closing.
6.2.1 Representations and Warranties.
(a) 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.
(b) 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.
(a) 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.
(b) 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 connection 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 the
consummation of the transaction contemplated by this Agreement has not been
obtained or waived (except for approvals covered by Section 6.4.3), or
applicable waiting periods prescribed by the Xxxx-Xxxxx-Xxxxxx Act have not
elapsed or terminated.
6.2.5 Insurance. ASSIGNOR will not be obligated to close if
ASSIGNEE, as of the Closing Date, does not have insurance providing the
following minimum insurance coverages with limits of liability of not less than
those set out below:
(a) Insurance which shall comply with all applicable
Workers' Compensation and Occupational Disease Laws and which shall cover all of
the ASSIGNEE's employees performing any work or activities as to the Property;
(b) Comprehensive/Commercial General Liability
Insurance (including contractual liability coverage)
with a combined bodily injury and property damage limit of not less than
$1,000,000 for each occurrence, together with Pollution Liability Insurance with
a coverage of not less than $1,000,000 for each occurrence.
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Such insurance shall include coverage for all liability assumed by ASSIGNEE
under the terms of this Agreement with limits not less than those set out above.
As to all comprehensive/commercial general public and pollution liability
insurance policies, ASSIGNOR shall be named as an additional insured to the
extent of ASSIGNEE's liabilities and obligations hereunder. All such insurance
of ASSIGNEE hereunder shall be written on policy forms and by insurance
companies reasonably acceptable to ASSIGNOR. Upon request, ASSIGNEE shall
furnish ASSIGNOR with certificates of insurance on forms approved by ASSIGNOR,
listing all such insurance policies. All such certificates must be signed by
authorized representatives of the insurance companies and must provide for not
less than ten (10) days prior written notice to ASSIGNOR in the event of
cancellation or material change affecting ASSIGNOR's interest. ASSIGNEE shall
ensure that it and its contractors' insurers waive all rights of recovery or
subrogation against ASSIGNOR, its parent, subsidiaries, affiliates, agents,
directors, officers, employees, servants, co-lessees or co-venturers. Neither
failure to comply, nor full compliance with the insurance provisions of this
Agreement, shall limit or relieve ASSIGNEE from its indemnity obligations in
accordance with this Agreement.
6.3 Closing. At Closing, the following events shall occur and ASSIGNOR
and ASSIGNEE shall execute, acknowledge (if necessary), and exchange, as
applicable, the following items:
(a) Both parties at Closing shall execute a Closing
Statement evidencing the amounts to be wire
transferred into the accounts of each receiving party at Closing;
(b) ASSIGNEE shall deliver to ASSIGNOR the Purchase
Price, as adjusted by the amount shown on the
Preliminary Settlement Statement, by wire transfer in immediately available
funds to the account of ASSIGNOR designated in writing by ASSIGNOR prior to
Closing;
(c) If ASSIGNOR elects to return the Performance
Deposit as provided in Section 2.1.2, ASSIGNOR shall
deliver to ASSIGNEE the Performance Deposit without interest, by wire transfer
in immediately available funds to the account of ASSIGNEE designated in writing
by ASSIGNEE prior to Closing;
(d) The parties shall execute, ASSIGNOR shall deliver
and ASSIGNEE shall accept the assignment
documents (in sufficient counterparts for recording) for the assignment and
conveyance of the Property to be transferred under this Agreement substantially
in the form set forth in Exhibit D (the "Assignment Documents");
(e) ASSIGNOR shall execute and deliver a Nonforeign
Affidavit in the form of Exhibit E;
(f) ASSIGNOR shall deliver to ASSIGNEE a photostatic
copy of the letters from ASSIGNOR to its co-owners in the portions of the
Property it operates, resigning as operator for those portions of the Property;
(g) If ASSIGNEE is attempting to succeed ASSIGNOR as
operator of any of the Property, ASSIGNEE shall
24
prepare and the parties shall execute (i) appropriate change of operator notices
and any third party ballots required under applicable operating agreements, and
(ii) all applicable forms and declarations required by federal and state
agencies relative to ASSIGNEE's assumption of operations;
(h) Any ratification and joinder instruments required
to transfer the rights, obligations and
interests in applicable Related Contracts and other Property;
(i) ASSIGNOR and ASSIGNEE shall execute, acknowledge
(if necessary) and exchange, as applicable, any
applications necessary to transfer to ASSIGNEE all transferable regulatory or
governmental permits to which the Property is subject, and which ASSIGNOR has
agreed to transfer under this Agreement;
(j) ASSIGNEE shall furnish ASSIGNOR with evidence
acceptable to ASSIGNOR that ASSIGNEE is qualified to
hold title to the Leases and other Property with any federal or state agencies,
as applicable, and to operate (should ASSIGNEE become the operator of the
Property or a portion thereof) the Xxxxx, pipelines and facilities associated
therewith, including copies of all ASSIGNEE's ownership, operational, and
plugging bonds or other supplemental security arrangements for the Property, as
provided in Section 5.4;
(k) ASSIGNEE shall furnish ASSIGNOR with any
additional bond as required under Section 5.4;
(l) If requested, ASSIGNEE shall furnish ASSIGNOR
with Certificate(s) of Insurance confirming the
existence of the ASSIGNEE's insurance coverages pursuant to Section 6.2.5;
(m) ASSIGNEE shall furnish ASSIGNOR with a certified
resolution or secretary's certificate of ASSIGNEE
evidencing the authority of ASSIGNEE to enter into this Agreement and close the
transaction contemplated hereby in a form and having content satisfactory to
ASSIGNOR;
(n) ASSIGNOR shall furnish ASSIGNEE with letters in
lieu of transfer orders directing all purchasers of production from the
Property to pay ASSIGNEE the proceeds of Hydrocarbons produced from the
Property from and after the Effective Date; and
(o) The parties shall execute and deliver any other
appropriate assignments, bills of sale, deeds or
instruments necessary to transfer the Property to ASSIGNEE or to effect and
support the transaction contemplated in this Agreement, including, without
limitation, any conveyances on official forms and related documentation
necessary to transfer the Property to ASSIGNEE in accordance with requirements
of governmental regulations.
6.4 Post-Closing Obligations. ASSIGNOR and ASSIGNEE have the
following post-Closing obligations:
6.4.1 Property Records. Within sixty (60) days after Closing,
ASSIGNOR shall deliver to ASSIGNEE the originals or legible copies of the
Property Records at a location designated by ASSIGNEE by a means designated by
ASSIGNEE. Any transportation, postage or delivery costs from ASSIGNOR's offices
25
shall be at ASSIGNEE's sole cost, risk and expense. 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 agrees to
maintain the Property Records for seven (7) years after Closing. ASSIGNEE shall
provide ASSIGNOR and its representatives reasonable access to and the right to
copy such Property Records for the purposes of (a) preparing and delivering any
accounting provided under this Agreement and adjusting, prorating and settling
the charges and credits provided in this Agreement; (b) complying with any law,
rule or regulation affecting ASSIGNOR's interest in the Property prior to the
Closing Date; (c) preparing any audit of the books and records of any third
party relating to ASSIGNOR's interest in the Property prior to the Closing Date,
or responding to any audit prepared by such third parties; (d) preparing tax
returns; (e) responding to or disputing any tax audit; or (f) asserting,
defending or otherwise dealing with any claim, lawsuit or dispute pertaining to
the Property or arising under this Agreement. If, prior to expiration of this
seven (7) year period, ASSIGNEE wishes to destroy any of these Property Records,
ASSIGNEE shall notify ASSIGNOR in writing before destroying such Property
Records. If, within thirty (30) days following receipt of ASSIGNEE's notice,
ASSIGNOR notifies ASSIGNEE that ASSIGNOR desires to retain such Property
Records, ASSIGNEE shall refrain from the destruction of such Property Records
and, at ASSIGNOR's expense, deliver such Property Records to ASSIGNOR. ASSIGNOR
agrees to use all reasonable efforts, but without any obligation to incur any
cost or expense in connection therewith, to cooperate with ASSIGNEE's efforts to
obtain access to files, records and data relating to the Property not provided
by ASSIGNOR which are in the possession of any third party operator of any of
the Property.
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 federal, state, tribal or local
agencies all Assignment Documents and other federal, state, tribal or local
transfer documents required to effectuate transfer of the Property. ASSIGNEE
shall provide ASSIGNOR a recorded copy of each Assignment Document and other
recorded instruments, and approved copies of the Assignment Documents and other
federal, state, tribal or local transfer documents, as soon as they are
available.
6.4.3 Governmental Approvals.
(a) Federal and State Approvals. ASSIGNEE, within
thirty (30) days after Closing, shall file for
approval with the applicable government agencies all Assignment Documents and
other state and federal transfer documents required to effectuate the transfer
of the Property. ASSIGNEE further agrees promptly after Closing to take all
other actions required of it by federal or state agencies having jurisdiction to
obtain all requisite regulatory approvals with respect to this transaction, and
to use its best efforts to obtain the unconditional approval by such federal or
state agencies, as applicable, of (i) the Assignment Documents requiring federal
or state approval in order for ASSIGNEE to be recognized by the federal or state
agencies as the owner of the Property, and (ii) its qualification as the
operator of record with respect to that portion of the Property for which it is
elected successor operator under the operating agreements applicable to any of
the Property, together with any necessary rights of use and easements as to the
pipeline(s) included in the Property. ASSIGNEE shall provide ASSIGNOR approved
copies of the Assignment Documents and other state and federal transfer
documents as soon as they are available.
26
(b) Title Pending Governmental Approvals. Until all
of the governmental approvals provided for in this
Section 6.4.3 have been obtained by ASSIGNEE, the following shall occur with
respect to the affected portion of the Property:
(i) ASSIGNOR shall continue to hold record
title to the affected Leases and other affected
portion of the Property as nominee for ASSIGNEE;
(ii) ASSIGNEE shall assume responsibility
for all of ASSIGNEE's Assumed Obligations with
respect to the affected Leases and other affected portion of the Property as if
ASSIGNEE were the record owner of such Leases and other portion of the Property
as of the Effective Date, and shall indemnify ASSIGNOR with respect to all
Claims arising in connection with the ownership or operation of such Leases and
other Property, as provided in Section 8.3.
(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 affected Leases and other affected portion of the
Property other than those which are purely administrative or ministerial in
nature, unless otherwise specifically requested and authorized by ASSIGNEE in
writing;
(iv) ASSIGNEE shall obtain and continue to
maintain and provide at its cost the insurance coverages with minimum limits of
liability as set forth in Section 6.2.5 of this Agreement; and
(v) If ASSIGNOR continues to operate the
affected Leases and other affected portion of the
Property pending such approval, ASSIGNOR and ASSIGNEE will have the rights and
obligations with respect to the operation of such Leases and other Property set
forth in Article 10.
(c) Denial of Required Governmental Approvals. If the
federal or state agency refuses to approve the
Assignment Documents as contemplated by this Section 6.4.3, or fails to do so
within twenty-four (24) months after the Closing Date, ASSIGNOR may continue to
hold record title to the affected Leases and other affected Property as
ASSIGNEE's nominee or at ASSIGNOR's option it may terminate this Agreement and
all its obligations hereunder as to the affected Leases and other affected
portion of the Property by giving thirty (30) days written notice to ASSIGNEE.
Upon such termination: (i) this Agreement shall be null and void and terminated
as to the affected Leases and other affected portion of the Property, (ii)
ASSIGNEE shall immediately reassign and return to ASSIGNOR the Assignment
Documents and any and all other documents, materials and data previously
delivered to ASSIGNEE with respect to the affected Leases and other affected
portion of the Property, and (iii) ASSIGNOR shall return to ASSIGNEE the
Allocated Value of the affected Leases and other affected portion of the
Property previously paid to ASSIGNOR at Closing, without interest, less the
proceeds of production net of all expenses, overhead, royalties, and costs of
operations (including plugging and abandonment expenses but excluding mortgage
interest and any burdens, liens, or encumbrances created by ASSIGNEE which must
be released prior to this payment) attributable to the affected Leases or other
affected portion of the Property from the Effective Date forward. In no event,
27
however, shall ASSIGNOR ever be required to reimburse ASSIGNEE for any
expenditures associated with workovers, recompletions, or the drilling,
completion or plugging and abandonment of xxxxx drilled or work performed by
ASSIGNEE. ASSIGNOR will not be liable to ASSIGNEE if such federal or state
approvals are not obtained, except as expressly provided in this Section 6.4.3.
6.4.4 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 and bonds (or
other authorized forms of security) with all applicable federal and state
agencies relative to its assumption of operations. ASSIGNEE shall furnish to
ASSIGNOR copies of all approvals, in the form granted by such federal and state
agencies, relative to ASSIGNEE's assumption of operations, as soon as such
approvals become available.
6.4.5 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 requested and 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.
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,
together with the Plugging and Abandonment Obligations, the Environmental
Obligations, and all other obligations assumed by ASSIGNEE under the Agreement
(collectively, the "ASSIGNEE's Assumed Obligations"). Without limiting the
generality of the foregoing, the ASSIGNEE's Assumed Obligations shall also
specifically include:
(a) 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;
(b) 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, Permits and Easements and all other orders and contracts to which the
Property or the operation thereof is subject, to the extent those obligations
and covenants are required to be performed on or after the Effective Date;
(c) Responsibility for payment of all royalties,
overriding royalties, production payments, net
profits obligations, rentals, and other burdens or encumbrances to which the
Property is subject that are attributable to periods on and after the Effective
Date, and for shut-in payments payable on and after the Effective Date;
28
(d) 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;
(e) Responsibility for compliance with all applicable
laws, ordinances, rules and regulations
pertaining to the Property, and the procurement and maintenance of all permits,
consents, authorizations, and bonds required by public authorities in connection
with the Property on and after the Effective Date; and
(f) 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.
7.3 ASSIGNOR's Obligations After Closing.
7.3.1 Description of Obligations. Subject to Section 8.6,
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 specifically provided in this Agreement (the
"ASSIGNOR's Retained Obligations"). Without limiting the generality of the
foregoing, the ASSIGNOR's Retained Obligations shall also specifically include:
(a) 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;
(b) 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, the Permits and Easements, and all other orders and contracts to
which the Property or operation thereof is subject, to the extent those
obligations and covenants are required to be performed before the Effective
Date;
(c) 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 and for shut-in payments payable before the Effective Date;
(d) Responsibility for proper accounting for and
disbursement of production proceeds from or attributable to the Property
attributable to periods before the Effective Date excluding funds in any
suspense accounts transferred to ASSIGNEE;
(e) Except to the extent assumed by ASSIGNEE in this
Agreement, responsibility for compliance with all
applicable laws, ordinances, rules and regulations pertaining to the Property,
and the procurement and maintenance of all permits, consents, authorizations,
and bonds required by public authorities in connection with the Property to the
extent attributable to the period before the Effective Date; and
29
(f) 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.
7.4 ASSIGNEE's Plugging and Abandonment Obligations.
7.4.1 Description of 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 and
regardless of whether resulting from any acts or omissions of ASSIGNOR
(INCLUDING THOSE ARISING FROM ASSIGNOR'S SOLE, JOINT, CONCURRENT OR COMPARATIVE
NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT) or the condition of the Property
when acquired:
(a) The necessary and proper plugging, replugging and
abandonment of all xxxxx on the Property,
whether plugged and abandoned before or after the Effective Date;
(b) The necessary and proper removal, abandonment,
and disposal of all, structures, pipelines,
facilities, equipment, abandoned property and junk located on or comprising part
of the Property;
(c) The necessary and proper capping and burying of
all flow lines associated with the Xxxxx and
located on or comprising part of the Property;
(d) The necessary and proper restoration of the
Property, both surface and subsurface, as may be
required by applicable laws, regulation or contract;
(e) Any necessary clean-up or disposal of Property
contaminated by naturally occurring radioactive
material ("NORM"), as may be required by applicable laws, regulations or
contract;
(f) All obligations arising from contractual
requirements and demands made by courts, authorized
regulatory bodies or parties claiming a vested interest in the Property; and
(g) 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 Plugging and Abandonment
Obligations. ASSIGNEE's obligations under this Section 7.4 do not include any
civil or criminal fines or penalties that may be levied against ASSIGNOR or
ASSIGNEE 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.
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7.4.4 ASSIGNOR's Remedies. ASSIGNEE's liabilities and
obligations under this Section 7.4 are included in the liabilities and
obligations to be secured by the bonds, supplemental or additional bonds and/or
pledge of securities, as may be established pursuant to Section 5.4. 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 under this Agreement.
7.5 ASSIGNEE's Environmental Obligations.
7.5.1 Description of Obligations. Upon and after Closing,
ASSIGNEE assumes full responsibility and liability for the following
occurrences, events, conditions, and activities on or related to the Property
(the "Environmental Obligations"), regardless of whether arising from the
ownership or operation of the Property before or after the Effective Date, and
regardless of whether resulting from any acts or omissions of ASSIGNOR
(INCLUDING THOSE ARISING FROM ASSIGNOR'S SOLE, JOINT, CONCURRENT, OR COMPARATIVE
NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT) or the condition of the Property
when acquired:
(a) Environmental pollution or contamination,
including pollution or contamination of the soil, groundwater or air by
Hydrocarbons, drilling fluid or other chemicals, brine, produced water, NORM,
or any other substance;
(b) Underground injection activities and waste
disposal on the Property;
(c) Clean-up responses, and the cost of remediation,
control, assessment or compliance with respect to surface and subsurface
pollution caused by spills, pits, ponds, lagoons or subsurface storage tanks;
(d) Non-compliance with applicable land use, surface
disturbance, licensing or notification rules, regulations, demands or orders of
appropriate state or federal regulatory agencies;
(e) 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
(f) Non-compliance with Environmental Laws.
7.5.2 Exclusions from ASSIGNEE's Environmental Obligations.
ASSIGNEE's Environmental Obligations do not include:
(a) Any civil or criminal fines or penalties that may
be levied against ASSIGNOR by any court or
31
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
(b) 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.
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:
(a) breaches of contract; (b) loss or damage to property, injury to or death of
persons (including illness and disease), and other tortious injury; and (c)
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 resulting
from the investigation or defense of any Claim 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. The indemnities set forth in this Agreement do not extend
to (a) any part of an indemnified Claim that is the result of the gross
negligence, willful misconduct or fraud of the indemnified party, (b) punitive
damages assessed against the indemnified party arising from the acts or
omissions of the indemnified party, or (c) civil or criminal fines or penalties
by any court or regulatory authority assessed against the indemnified party due
the indemnified party's failure to comply with applicable laws, regulations or
orders.
8.2.2 Express Negligence Disclosure. UNLESS THIS AGREEMENT
EXPRESSLY PROVIDES TO THE CONTRARY, THE INDEMNITY, RELEASE, WAIVER AND
ASSUMPTION PROVISIONS 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 WITHOUT
LIMITATION INDEMNIFIED CLAIMS ARISING OUT OF OR RESULTING, IN WHOLE OR IN PART,
FROM, OUT OF OR IN CONNECTION WITH THE CONDITION OF THE PROPERTY OR THE
INDEMNIFIED PARTY'S (OR ITS EMPLOYEES', AGENTS', REPRESENTATIVES', CONTRACTORS',
SUCCESSORS' OR ASSIGNS') SOLE OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR
FAULT. ASSIGNEE AND ASSIGNOR ACKNOWLEDGE THAT THIS STATEMENT COMPLIES WITH THE
EXPRESS NEGLIGENCE RULE AND IS CONSPICUOUS.
8.2.3 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
32
reimbursed by any third party. The indemnifying party will pay all costs
incurred by the indemnified party in obtaining reimbursement from third parties.
There will be no upward or downward adjustment in the Purchase Price as a result
of any matter for which ASSIGNEE or ASSIGNOR 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 and
any assistance in the transition of operations under Article 10, except to the
extent caused by ASSIGNOR's gross negligence or willful misconduct;
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 Imbalances associated with the Property that
ASSIGNEE assumes under Section 11.1;
8.3.6 ASSIGNEE's ownership or operation of any portion of the
Property that is reconveyed or reassigned to ASSIGNOR pursuant to the terms of
this Agreement; and
8.3.7 ASSIGNEE's inspection of the Property pursuant to
Sections 5.2 and 5.3.
8.4 ASSIGNOR's Indemnity. Subject to Section 8.6, 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;
8.4.2 If applicable, ASSIGNOR's operation of the Property and
any assistance in the transition of operations under Article 10, to the extent
caused by ASSIGNOR's gross negligence or willful misconduct; and
8.4.3 ASSIGNOR's access to the Property after Closing for the
purposes described in this Agreement, except to the extent caused by ASSIGNEE's
gross negligence or willful misconduct.
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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, (a) in no event shall ASSIGNOR be required to indemnify ASSIGNEE for
any individual Claim of less than $10,000 and (b) the terms and provisions of
this Article 8 shall be ASSIGNEE's sole and exclusive remedy for any Claims
caused by, resulting from, or incidental to ASSIGNOR's Retained Obligations.
8.7 NORM. ASSIGNEE ACKNOWLEDGES THAT IT HAS BEEN INFORMED THAT OIL AND
GAS PRODUCING FORMATIONS CAN CONTAIN NATURALLY OCCURRING RADIOACTIVE MATERIAL.
SCALE FORMATION OR SLUDGE DEPOSITS CAN CONCENTRATE LOW LEVELS OF NORM ON
EQUIPMENT, MATERIALS 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, MATERIALS AND OTHER
PROPERTY.
8.8 Pending Litigation and Claims. Notwithstanding anything in this
Agreement to the contrary, ASSIGNEE shall INDEMNIFY, DEFEND AND HOLD ASSIGNOR
HARMLESS from and against any Claims resulting from the litigation and claims
listed on Exhibit C under the section entitled "ASSIGNEE's Responsibility,"
except as may otherwise be expressly provided in that Exhibit. ASSIGNOR shall
INDEMNIFY, DEFEND AND HOLD ASSIGNEE HARMLESS from and against any Claims
resulting from the litigation and claims listed on Exhibit C under the section
entitled "ASSIGNOR's 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, AND EACH
PARTY RELEASES THE OTHER PARTY FROM, 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 ATTORNEYS FEES, SUFFERED BY
SUCH PARTY. ASSIGNEE AND ASSIGNOR BOTH WAIVE, AND RELEASE THE OTHER FROM ANY
RIGHT TO RECOVER PUNITIVE, SPECIAL, EXEMPLARY AND CONSEQUENTIAL DAMAGES ARISING
IN CONNECTION WITH OR WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED IN THIS
AGREEMENT; PROVIDED, HOWEVER, ANY SUCH DAMAGES RECOVERED BY A THIRD PARTY (OTHER
34
THAN SUBSIDIARIES, AFFILIATES OR PARENTS OF A PARTY) FOR WHICH A PARTY OWES THE
OTHER PARTY AN INDEMNITY UNDER THIS ARTICLE 8 SHALL NOT BE WAIVED.
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 other state and federal
transfer documents, and all other instruments that must be filed to effectuate
the transfer of the Property.
9.2 Ad Valorem, Real Property and Personal Property Taxes, Excise
Taxes. All ad valorem taxes, real property taxes, personal property taxes, and
similar obligations on the Property ("Property Taxes") and excise taxes
associated with any of the Property ("Excise Taxes") are ASSIGNOR's obligation
for periods before the Effective Date and ASSIGNEE's obligation for periods
after the Effective Date. If Property or Excise 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 and Excise Taxes and
pay the Property and Excise Taxes for the current tax year and subsequent
periods. Notwithstanding the foregoing, ASSIGNOR will pay personal property
taxes for 2003. The ASSIGNOR will reimburse the ASSIGNEE for the ASSIGNOR's
proportionate share of these taxes, prorated as of the Effective Date, as a
closing adjustment to the Purchase Price at Closing (based on a good faith
estimate of these taxes) with a final adjustment upon receipt of evidence of the
ASSIGNEE's payment of the taxes. Said closing adjustment for real property taxes
shall be reflected as a deduction from the purchase price for ASSIGNOR's
proportionate share. Said closing adjustment for personal property taxes shall
be reflected as an addition to the purchase price for ASSIGNEE's proportionate
share. If Property and Excise 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.
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 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.
35
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.
9.5 Sales and Use Taxes. ASSIGNEE shall be responsible for and pay all
federal, state, or local sales, transfer, gross proceeds, use and similar taxes
incident to or applicable to the Property it receives under this Agreement, or
caused by the transfer of the Property to ASSIGNEE 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 AFTER CLOSING
10.1 ASSIGNOR's Covenants Pending Closing From and after the date of
execution of this Agreement and until the Closing, subject to Section 10.1.1 and
the constraints of applicable operating agreements, ASSIGNOR (i) shall operate,
manage and administer the Property in a good and workmanlike manner consistent
with its past practices, and shall carry on its business with respect to the
Property in substantially the same manner as before execution of this Agreement;
(ii) shall not sell, dispose of, or encumber the Property with a lien or
mortgage (other than Permitted Encumbrances), the effect of which would be to
cause ASSIGNOR's interest in the Property to be less than that set forth on
Exhibit A, Schedule 6, except with respect to preferential purchase rights as
provided herein, and with respect to the sale of Hydrocarbons in the ordinary
course of business. Notwithstanding the foregoing, ASSIGNOR shall have no
obligation to extend the primary term of any of the Leases from which
Hydrocarbons have never been produced or to renew same. From and after the date
of execution of this Agreement and until the Closing, subject to Section 10.1.1
and the constraints of applicable operating agreements, ASSIGNOR shall, except
for emergency action taken in the face of serious risk to life, property or the
environment (i) submit to ASSIGNEE, for prior written approval, all requests for
operating or capital expenditures and all proposed contracts and agreements
relating to the Property that involve individual commitments of more than
$25,000 that would be required to be expended by ASSIGNEE after the Effective
Date; and (ii) not approve or elect to go nonconsent as to any proposed well or
plug and abandon or agree to plug and abandon any well without ASSIGNEE's prior
written approval. On any matter requiring ASSIGNEE's approval under this Section
10.1, ASSIGNEE shall respond within 72 hours from ASSIGNOR's request for
approval (or such shorter period of time as may be required by the applicable
operating agreement) and failure of ASSIGNEE to respond within such time period
shall release ASSIGNOR from the obligation to obtain ASSIGNEE's approval before
proceeding on such matter as ASSIGNOR may elect in its sole discretion.
ASSIGNEE's sole remedy for ASSIGNOR's breach of its obligations under this
36
Section 10.1 shall be equal to the ASSIGNEE's actual damages, if any, not to
exceed the Allocated Value for the portion of the Property affected by such
breach.
10.1.1 Non Operated Properties. To the extent that ASSIGNOR is
not the operator of any of the Property, the obligations of ASSIGNOR in Section
10.1 concerning operations or activities that normally, or pursuant to existing
contracts are carried out or performed by the operator, shall be construed to
require only that ASSIGNOR use all reasonable efforts (without being obligated
to incur any expense or institute any cause of action) to cause the operator of
such portion of the Property to take such actions or render such performance
within the constraints of the applicable operating or other agreements.
10.2 ASSIGNOR Operated Properties After Closing. With respect to any
portion of the Property operated by ASSIGNOR, after Closing and until such time
as a successor operator of the Property has been selected in accordance with the
applicable operating agreements and approved as operator of the Property by the
federal or state agencies having jurisdiction, as applicable (the "Interim
Period"), ASSIGNOR shall continue to operate the Property, subject to ASSIGNOR's
right to resign under the terms of the applicable operating agreement, but in no
event for longer than ninety (90) days following Closing. Such continued
operations by ASSIGNOR during the Interim Period shall be for the account of
ASSIGNEE and be conducted subject to ASSIGNEE's sole direction and right of
control. In addition, ASSIGNOR's operation of the Property during the Interim
Period shall be at the sole cost, risk and expense of ASSIGNEE, and such
continued operations by ASSIGNOR shall be covered by ASSIGNEE's indemnity set
forth in Section 8.3.
10.2.1 Costs and Expenses. In connection with continued
operation of the Property by ASSIGNOR during the Interim Period, ASSIGNEE shall
reimburse ASSIGNOR for all costs and expenses incurred by ASSIGNOR in connection
with the continued operation of the Property by ASSIGNOR during the Interim
Period, including a charge for overhead in the same manner as provided in the
applicable joint operating agreement; provided that for any of the Property of
which ASSIGNOR is one hundred percent (100%) owner, the charge for overhead
shall be $___0.00_________ per month in the aggregate. 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. ASSIGNOR will be entitled to retain any overhead payments received from
other working interest owners and attributable to operations during the Interim
Period. To the extent ASSIGNOR continues to operate the Property after the Final
Settlement Statement, or to the extent such costs and expenses were not
reimbursed through the Final Settlement Statement, ASSIGNEE shall reimburse
ASSIGNOR periodically upon receipt of ASSIGNOR's invoice therefor (unpaid
invoices shall bear simple annual interest at the maximum allowed by the state
in which the applicable portion of the Property is located).
37
10.2.2 ASSIGNEE's Assumption of Operations. NOTWITHSTANDING ANYTHING TO
THE CONTRARY IN THIS AGREEMENT, ASSIGNOR DOES NOT WARRANT OR GUARANTEE THAT
ASSIGNEE WILL BECOME THE OPERATOR OF THE PROPERTY OR ANY PORTION THEREOF, AS
SUCH MATTER WILL BE CONTROLLED BY THE APPLICABLE OPERATING AGREEMENT(S) AND
APPLICABLE FEDERAL OR STATE REGULATORY REQUIREMENTS AND APPROVAL. ASSIGNEE shall
comply with all balloting procedures under such operating agreement(s) for the
election of the successor operator to ASSIGNOR. If ASSIGNEE is approved as
operator of the Property by the applicable federal or state agency, and the
provisions of Section 5.4 and Section 6.4.3 have been complied with, ASSIGNOR
shall not be obligated to continue operating any of the Property and ASSIGNEE
will immediately assume full responsibility therefore and assume all operations
thereon. After ASSIGNEE assumes operations of the Property, ASSIGNOR shall be
granted access and reasonable ingress and egress onto and across the Property
without any requirement of payment by ASSIGNOR to ASSIGNEE, but otherwise at
ASSIGNOR's sole risk, cost and expense, to allow ASSIGNOR to remove from the
Property any of its property excluded from this Agreement under Section 1.2, and
any such access, ingress and egress shall be covered by ASSIGNOR's indemnity set
forth in Section 8.4. ASSIGNOR shall make its personnel available to ASSIGNEE as
may be reasonably necessary to assist in the transition of operations, and any
such assistance shall be covered by ASSIGNEE's indemnity set forth in Section
8.3.
10.2.3 ASSIGNEE's Approval. In conducting operations after the Closing
Date, ASSIGNOR shall have no duty to ASSIGNEE other than to follow ASSIGNEE's
explicit instructions, except that ASSIGNOR shall (other than 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
$50,000 net to ASSIGNEE's interest in the Property; and (ii) 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.
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 ("Imbalances") set forth in Exhibit F. If ASSIGNOR and ASSIGNEE
determine no later than 180 days after Closing that the Imbalances stated in
Exhibit F are inaccurate, the parties agree to exchange additional compensation,
as provided in Exhibit F, for the difference between the Imbalances and the
revised Imbalances determined by the parties. Such settlement shall be final and
neither party thereafter shall make claim upon the other concerning production
imbalances with respect to the Property. Except with respect to its right to
receive the post-Closing Purchase Price adjustment set forth above, ASSIGNEE
will be solely responsible for, shall assume, and releases and will INDEMNIFY,
DEFEND AND HOLD ASSIGNOR HARMLESS from all rights against (including rights to
38
receive make-up gas or to receive cash balancing payments) and obligations to
(including obligations to make-up gas or to make cash balancing payments) third
parties with respect to any Imbalances, all of which shall constitute Assumed
Obligations.
11.2 Preferential Right to Purchase and Process Production.
11.2.1 ASSIGNOR's Right and Option. ASSIGNOR reserves and
shall have the ongoing preferential right and option, but not the obligation, to
purchase until February 28, 2007 oil, condensate or other liquid Hydrocarbons
("Liquid Hydrocarbons") produced from the Property, and payment for such Liquid
Hydrocarbons shall be at the same price and under the same terms and conditions
offered to ASSIGNEE in the best bona fide offer from a third party purchaser. If
ASSIGNEE does not have a bona fide offer from a third party purchaser, then
payment for such Liquid Hydrocarbons shall be at ASSIGNOR's posted price as
specified in ASSIGNOR's posted price bulletin in effect on the delivery date for
Liquid Hydrocarbons of like kind and quality to that produced from the Property,
less per barrel taxes and transportation deductions. If ASSIGNOR does not have a
posted price for Liquid Hydrocarbons from the Property, then payment for such
Liquid Hydrocarbons shall be based on the published price of another major oil
company on which ASSIGNOR and ASSIGNEE mutually agree, in effect on the delivery
date for Liquid Hydrocarbons of like kind, quality, and location, less per
barrel taxes and transportation deductions. ASSIGNOR also reserves and shall
have the preferential right and option to purchase or process, or cause to be
processed, natural and casinghead gas, or other gaseous Hydrocarbons ("Gaseous
Hydrocarbons") produced from the Property, with payment for the Gaseous
Hydrocarbons purchased and/or gas products recovered to be at the same price and
under the same terms and conditions offered to ASSIGNEE in any bona fide offer
from a third party purchaser. If ASSIGNEE does not have a bona fide offer from a
third party purchaser, then the price will be determined on the basis of an
agreement between ASSIGNOR and ASSIGNEE containing terms generally acceptable in
the area.
11.2.2 Third-Party Offers. If ASSIGNEE receives from a
responsible, unaffiliated third-party a bona fide offer acceptable to ASSIGNEE
to purchase Liquid Hydrocarbons or purchase and/or process Gaseous Hydrocarbons
from the Property it receives, ASSIGNEE shall furnish ASSIGNOR a copy of this
offer as written on the letterhead of the third-party offeror. ASSIGNOR shall
then have seven (7) days after receiving a copy of the offer to either waive its
right or elect to purchase and/or process, or cause to be processed, the Liquid
Hydrocarbons or Gaseous Hydrocarbons, as applicable, on terms substantially
equivalent to those offered to ASSIGNEE by the third-party offeror or on more
favorable terms and conditions to ASSIGNEE. Failure to timely reply to
ASSIGNEE's notice will be a one-time waiver of ASSIGNOR's preferential rights
under this Section 11.2. Once waived, and if ASSIGNEE accepts the third-party
offer, the preferential rights under this Section 11.2 will not be enforceable
during the term of any sale or processing contract between ASSIGNEE and the
third-party offeror. However, ASSIGNEE agrees not to enter into any sale or
processing contract with a third-party offeror with a term in excess of six
months in duration.
11.2.3 Miscellaneous.
(a) The preferential rights in this Section
11.2 shall be subject to the expiration of any existing contracts for the
purchase of Liquid Hydrocarbons or Gaseous Hydrocarbons from the Property
between ASSIGNOR and third-party purchasers that are assigned to ASSIGNEE as
part of the Related Contracts.
39
(b) The failure of ASSIGNOR to exercise its
preferential rights to purchase Liquid Hydrocarbons or
Gaseous Hydrocarbons from the Property under this Section 11.2 at any time or
times shall not constitute a waiver of those preferential rights.
(c) For the purposes of this Agreement, any exchange
or other disposition of Liquid Hydrocarbons or
Gaseous Hydrocarbons from the Property will be considered a sale under this
Section 11.2 and subject to ASSIGNOR's preferential rights under this Section
11.2.
(d) The preferential rights in this Section 11.2
shall be a covenant running with the land.
11.3 Alternative 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. Upon the occurrence of any dispute between
ASSIGNEE and ASSIGNOR in connection with their rights and obligations under this
Agreement, 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 Salt Lake City, Utah, 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. The parties shall share the cost of
the mediator equally. 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:
(a) 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 the provisions of this
Section 11.3. 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 District of Utah; 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 selected to act hereunder
shall be qualified by education, experience, and training to pass upon the
particular matter or matters in dispute.
(b) The panel of arbitrators so chosen shall proceed
promptly to hear and determine the matter or
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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 Houston, Xxxxxx
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.
(c) The award of the arbitrators, or a majority
thereof, shall be in writing, determined in accordance
with the substantive law of the State of Texas, 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, and the merits of
the parties' positions in the controversy. 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 beneficiary contract. Unless otherwise determined by
the arbitrators, all expenses in connection 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; provided that if court proceedings to stay
litigation or compel arbitration are necessary, the party who unsuccessfully
opposes such proceedings shall pay all reasonable associated costs, expenses and
attorney's fees of such court proceedings.
(d) 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 (i) in connection
with a suit for enforcement of the award, (ii) 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 (iii) 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
parties' 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.
(e) The award of the panel of arbitrators and the
obligation to abide by same and perform the
conditions thereof shall not be appealable and shall be enforceable in the
United States District Court and the Texas state district courts sitting in
Houston, Xxxxxx County, Texas, or in any federal court having jurisdiction. The
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prevailing party shall be entitled to recover all reasonable costs, expenses and
attorneys' fees in connection with any enforcement of an arbitration award. The
Parties stipulate and agree to submit to the jurisdiction and venue of the
United States District Court and the Texas State District Court sitting in
Houston, Xxxxxx County, Texas with respect to all disputes in any way relating
to enforceability or applicability of this Section 11.3.
(f) The provisions of this Section 11.3 shall
not limit the obligation of a party to defend, indemnify or hold harmless the
other party against Claims as provided in Article 8.
11.4 Survival. All of the covenants, agreements, representations and
warranties made by the parties in this Agreement will survive the Closing, the
execution and delivery of the Assignment Documents and other instruments under
this Agreement, and the transfer of the Property between the parties and they
shall not be merged into or superseded by the Assignment Documents or other
documents delivered at Closing. However, neither party to this Agreement will be
entitled to make a Claim against the other party in connection with the
inaccuracy of the representations and warranties of the other party in this
Agreement, unless the other party is notified of that Claim in writing within
six (6) months after the Closing Date.
11.5 Confidentiality and Public Announcements. This Agreement and the
terms and provisions hereof, including the Purchase Price, shall be maintained
confidential by ASSIGNEE until Closing; provided however that this Agreement and
the terms and provisions thereof may be disclosed to ASSIGNEE's lenders, if any,
and their consultants, who shall be required to keep such information
confidential. If this Agreement is terminated prior to Closing, following such
termination, the parties agree to keep all terms of this transaction
confidential. 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. Notwithstanding the foregoing, ASSIGNOR shall have the right
to also disclose the transaction to customary recipients of ASSIGNOR's INVESTOR
RELATIONS COMMUNICATIONS in the normal course of ASSIGNOR's business.
11.6 Suspense Accounts. At ASSIGNOR's option, at Closing or as soon as
practical thereafter, ASSIGNOR may transfer to ASSIGNEE all funds held in
suspense by ASSIGNOR related to proceeds of production and attributable to third
parties' interests in the Leases or lands pooled or unitized therewith or
Hydrocarbon production from the Leases or lands pooled or unitized therewith
(but not including any suspended funds relating to any Claims described in
Exhibit C), including funds suspended awaiting minimum disbursement
requirements, funds suspended under division orders and funds suspended for
title and other defects. If such funds are transferred to ASSIGNEE, ASSIGNEE
agrees to administer all such accounts and assume all payment obligations to the
proper parties in accordance with all applicable laws, rules and regulations,
which obligations shall be included in ASSIGNEE'S Assumed Obligations.
11.7 ASSIGNOR's Marks and Logos; Post-Closing Inspections. With respect
to any portion of the Property that ASSIGNOR operates, ASSIGNEE agrees that
within thirty (30) days after Closing or within thirty (30) days after
operations are actually transferred, whichever is later, it will remove or cause
to be removed the names and marks used by ASSIGNOR and all variations and
derivatives thereof and logos relating thereto from the Property and will not
thereafter make any use whatsoever of such names, marks and logos. If ASSIGNEE
fails to comply with this Section 11.7, ASSIGNOR shall have access to the
42
Property in order to remove such names, marks, and logos, all at ASSIGNEE's
expense. ASSIGNOR at its sole cost shall have the right at any time after
Closing to reasonable access to the Property for the purpose of inspecting
ASSIGNEE's compliance with the terms of this Agreement; provided, however,
ASSIGNOR shall repair any damage to the Property resulting from such inspections
and any such access shall be covered by ASSIGNOR's indemnity set forth in
Section 8.4.
11.8 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:
ConocoPhillips Company
P. O. Box 7500 (74004)
315 Xxxxxxxxx (74003)
Bartlesville, Oklahoma
Attention: Manager, Real Property Administration
Fax No.: 000-000-0000
Telephone: 000-000-0000
with copy to:
ConocoPhillips Company
000 Xxxxx Xxxxx Xxxxxxx
X.X. Xxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xx. Xxxx Xxxxxxxx - XX0 0000
Fax No.: (000) 000-0000
Telephone: (000) 000-0000
If to ASSIGNEE:
Gasco Energy, Inc.
00 Xxxxxxxxx Xxxxx Xxxx
Xxxxx X-000
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Mr. Xxxxxxx Xxxxxx
Fax No.: (000) 000-0000
Telephone: (000)000-0000
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.
11.9 Effective Date. The Effective Date of this Agreement will be 7:00
a.m., local time, where the Property is located, on January 1, 2004.
11.10 Assignment. Except as expressly provided in Section 2.7, prior to
the later of the Closing Date or the Effective Date, neither party may assign
43
its rights or obligations under this Agreement without the prior written consent
of the other, which may be withheld for any reason, including convenience. If
ASSIGNEE sells, transfers or assigns all or a portion of the Property, (a) this
Agreement shall remain in effect between ASSIGNEE and ASSIGNOR as to the
Property, regardless of such sale or assignment (and ASSIGNEE will remain
obligated hereunder) and (b) ASSIGNEE shall require its successors and assigns
expressly to assume its obligations under this Agreement, to the extent related
or applicable to the Property or portion thereof acquired by them.
11.11 Entire Agreement and Amendment. This Agreement, together with any
relevant confidentiality agreement referred to in Section 5.1, constitutes the
entire understanding between the parties, replacing and superseding all prior
negotiations, discussions, arrangements, agreements and understandings between
the parties regarding the subject transaction and subject matter hereof (whether
written or oral), excepting any written agreements that may be executed by the
parties concurrently or after the execution of this Agreement. No other
agreement, statement, or promise made by any party, or to any employee, officer
or agent of any party, which is not contained in this Agreement shall be binding
or valid. This Agreement may be amended, modified, altered, supplemented, or
revoked only by written agreement signed by duly authorized representatives of
the parties hereto.
11.12 Successors and Assigns. This Agreement binds and inures to the
benefit of the parties hereto their respective permitted successors and assigns,
and all the terms, provisions, covenants, obligations, indemnities,
representations, warranties and conditions of this Agreement shall be
enforceable by the parties hereto and their respective permitted successors and
assigns.
11.13 Third Party Beneficiaries. It is understood and agreed that there
shall be no third party beneficiary of this Agreement, and that the provisions
hereof do not impart enforceable benefits, rights, or remedies in anyone who is
not a party or a successor or assignee of a party hereto.
11.14 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.
11.15 Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute an original and all of which shall constitute one
document.
11.16 Governing Law. THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF UTAH, EXCLUDING ANY
CONFLICTS-OF-LAW RULE OR PRINCIPLE THAT MIGHT APPLY THE LAW OF ANOTHER
JURISDICTION. 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.
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11.17 Exhibits. The Exhibits and Schedules attached to this Agreement
are incorporated into and made a part of this Agreement for all purposes. In the
event of a conflict or inconsistency between the provisions of the Exhibits,
Schedules or the executed Assignment Documents and the provisions of this
Agreement, the provisions of this Agreement shall take precedence. In the event
of a conflict or inconsistency between the provisions of the pro forma
Assignment Documents and other transaction documents attached to this Agreement
as Exhibits or Schedules and the Assignment Documents and other transaction
documents actually executed by the parties, the provisions of the executed
Assignment Documents and other executed transaction documents shall take
precedence.
11.18 Waiver. Any of the terms, provisions, covenants, representations,
warranties or conditions hereof may be waived only by a written instrument
executed by the party waiving compliance. Except as otherwise expressly provided
in this Agreement, the failure of any party at any time or times to require
performance of any provision hereof shall in no manner affect such party's right
to enforce the same. No waiver by any party of any condition, or of the breach
of any term, provision, covenant, representation or warranty contained in this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be or construed as a further or continuing waiver of any such
condition or breach or a waiver of any other condition or of the breach of any
other term, provision, covenant, representation or warranty.
11.19 Interpretation. The parties stipulate and agree that this
Agreement shall be deemed and considered for all purposes to have been jointly
prepared by the parties, and shall not be construed against any one party (nor
shall any inference or presumption be made) on the basis of who drafted this
Agreement or any particular provision hereof, who supplied the form of
Agreement, or any other event of the negotiation, drafting or execution of this
Agreement. Each party agrees that this Agreement has been purposefully drawn and
correctly reflects its understanding of the transaction that it contemplates. In
construing this Agreement, the following principles will apply:
(a) The omission of certain provisions of this
Agreement from the Assignment Documents does not
constitute a conflict or inconsistency between this Agreement and the Assignment
Documents, and will not effect a merger of the omitted provisions. To the
fullest extent permitted by law, all provisions of this Agreement are hereby
deemed incorporated into the Assignment Documents by reference.
(b) The Article, Section, Exhibit and Schedules
references in this Agreement refer to the Articles,
Sections, Exhibits and Schedules of this Agreement. The headings and titles in
this Agreement are for convenience only and shall have no significance in
interpreting or otherwise affect the meaning of this Agreement.
(c) The term "knowledge," as applied to either party,
shall mean the actual knowledge of such party's officers and directors, and its
employees, agents, representatives at a supervisory level and above.
(d) The term "includes" and its derivatives shall
mean "includes, but is not limited to"and its corresponding derivative meanings.
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11.20 Default and Remedies.
11.20.1 ASSIGNOR's Remedies. Upon failure of ASSIGNEE to
perform any of the obligations under this Agreement to be performed by ASSIGNEE
prior to and on the Closing Date, ASSIGNOR, at ASSIGNOR's sole option, may (i)
enforce specific performance, or (ii) terminate this Agreement and retain the
Performance Deposit as agreed liquidated damages and not as a penalty. The
remedies set forth in this Section 11.20.1 shall be ASSIGNOR's sole and
exclusive remedies for any such default, and ASSIGNOR hereby expressly waives
and releases all other remedies (except as provided in Section 11.20.4).
11.20.2 ASSIGNEE's Remedies. Upon failure of ASSIGNOR to
perform any of the obligations to be performed by ASSIGNOR prior to and on the
Closing Date, ASSIGNEE, at ASSIGNEE's sole option, may (i) enforce specific
performance, or (ii) terminate this Agreement and receive back the Performance
Deposit (without interest) from ASSIGNOR. The remedies set forth in this Section
11.20.2 shall be ASSIGNEE's sole and exclusive remedies for such default, and
ASSIGNEE hereby expressly waives and releases all other remedies (except as
provided in Section 11.20.4).
11.20.3 Effect of Termination. Notwithstanding anything to the
contrary in this Agreement (except Section 11.20.4), in the event of termination
of this Agreement, the transaction shall not close and this Agreement shall
become void and have no further effect whatsoever, and neither ASSIGNEE nor
ASSIGNOR shall have any further liability, obligations, right or duty to the
other under this Agreement, except as provided in Sections 11.20.1, 11.20.2, and
11.20.4, as applicable.
11.20.4 Other Remedies. Notwithstanding the provisions of
Sections 11.20.1, 11.20.2 and 11.20.3, termination of this Agreement shall not
prejudice or impair ASSIGNOR's or ASSIGNEE's rights and obligations under
Sections 5.1 (and the confidentiality agreements referenced therein), 5.2
(Physical Inspections), 5.3.2 (Inspection Results), and 11.3 (Alternative
Dispute Resolution), and such other portions of this Agreement as are necessary
to the enforcement and construction of Sections 5.1, 5.2, 5.3.2, and 11.3.
IN WITNESS WHEREOF, the authorized representatives of ASSIGNOR and
ASSIGNEE execute this Agreement on the dates stated below.
CONOCOPHILLIPS COMPANY GASCO ENERGY, INC.
By: /s/ X.X. Xxxxxxx By: /s/ Xxxxxxx Xxxxxx
------------------- --------------------
Name: X.X. Xxxxxx Name: Xxxxxxx Xxxxxx
------------------- --------------------
Title: Attorney in Fact Title: Executive V.P./COO
------------------- --------------------
Date: 2/26/04 Date: 2/26/04
------------------- --------------------
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