Exhibit 10.3
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement"), dated as of April
21, 1999 is between SABA ENERGY OF TEXAS, INC., a Texas corporation
("Seller"), with offices at 0000 Xxxxxxxxx 00xx Xxxxxx, Xxxxx 000, Xxxxxx,
Xxxxxxxx 00000, and ENERVEST ENERGY, L.P., a Delaware limited partnership
("Buyer") with offices at 0000 Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000.
Seller and Buyer are sometimes hereinafter collectively called the "Parties"
and individually called a "Party."
WHEREAS, Seller desires to sell, and Buyer desires to purchase, upon and
subject to the terms, conditions, reservations and exceptions hereinafter set
forth, Seller's interest in and to certain oil and gas properties and other
assets related thereto as further described hereinafter;
NOW THEREFORE, for and in consideration of the covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Seller and Buyer agree as
follows:
ARTICLE 1. PROPERTY DESCRIPTION
1.1 The Interests. Subject to the terms, conditions, reservations and
exceptions set forth in this Agreement, Seller shall sell, transfer, assign,
convey and deliver unto Buyer and Buyer shall purchase, receive, pay for and
accept, as of 7:00 a.m. local time where the properties are located, January
1, 1999 (the "Effective Date"), all of Seller's right, title and interest in
and to the following:
1.1.1 the undivided interest set forth in Exhibit A-1 attached hereto
and made a part hereof for all purposes, together with all of Seller's other
right, title and interest in and to the oil, gas and mineral leases and other
interests in oil and gas described in Exhibit A-2 including mineral, royalty
and overriding royalty interests, and all rights, privileges and obligations
appurtenant to those interests and leases (the "Leases");
1.1.2 all rights and interests in any unit or pooled area in which the
Leases are included, to the extent that these rights and interests arise from
and are associated with the Leases, including without limitation all rights
derived from any unitization, pooling, operating, communitization or other
agreement or from any declaration or order of any governmental authority;
1.1.3 all oil, gas and condensate xxxxx (whether producing, not
producing or abandoned), water source, water injection and other injection or
disposal xxxxx and systems located on the Leases or lands unitized or pooled
with the Leases;
1.1.4 all equipment, facilities, pipelines, pipeline laterals,
gathering systems, platforms, well pads, tank batteries, improvements,
fixtures, inventory, spare parts, tools, materials and other personal property
owned by Seller now or acquired by Seller as of the Effective Date on the
Leases or used in developing or operating the Leases or producing, treating,
storing, compressing, processing or transporting hydrocarbons on or from the
Leases, including, without limitation, those items listed in Exhibit B
attached hereto and made a part hereof for all purposes (the "Equipment");
1.1.5 to the extent assignable or transferable all easements, rights-
of-way, licenses, permits, servitudes, surface leases, and similar interests
applicable to or used solely in operating the Leases, the lands unitized or
pooled with the Leases, or the Equipment, including, but not limited to those
described in Exhibit C attached hereto and made a part hereof for all
purposes;
1.1.6 to the extent assignable or transferable, all contracts and
contractual rights, obligations and interests relating to the Leases or the
lands unitized or pooled with the Leases or the Equipment, including, without
limitation, unit agreements, farmout agreements, farm-in agreements, operating
agreements, and hydrocarbon sales, purchase, gathering, transportation,
treating, marketing, exchange, processing and fractionating agreements and
surface leases, whether of record or not, including, without limitation those
documents described in Exhibit D hereto (the "Contracts");
1.1.7 all other tangibles, miscellaneous interests or other assets on
or used in connection with the Leases, the Equipment and/or the Contracts,
including, without limitation, all lease files, land files, well files,
production records, division order files, abstracts, title opinions, and
contract files, insofar as they are directly related to the items described in
Sections 1.1.1 through 1.1.7 hereof.
Seller's interests in the assets described in Sections 1.1.1 through 1.1.7
above are hereinafter collectively called the "Interests".
1.2 Ownership of Production from the Interests Prior to the Effective Date.
(i) Seller will own all merchantable oil, gas, condensate and distillate
("Hydrocarbons") produced from the Interests before the Effective Date. If,
on the Effective Date, Hydrocarbons produced from the Interests before the
Effective Date are stored in the Leases or unit stock tanks (the "Stock Tank
Oil"), Buyer shall purchase from Seller the merchantable Stock Tank Oil above
pipeline connections in the stock tanks at the weighted average price received
for December 1998 production. Buyer shall pay Seller for the Stock Tank Oil
as an adjustment to the Sale Price at Closing, as provided in Section 2.2
hereof.
(ii) The Stock Tank Oil will be gauged and measured as of 7:00 a.m. local
time where the Interests are located on the Effective Date. Seller and Buyer
will accept the Lease or unit operator's tank gauge readings, meter tickets or
other inventory records of the Stock Tank Oil.
1.3 Ownership of Production from the Interests After the Effective Date.
Buyer will own all Hydrocarbons produced from the Interests on and after the
Effective Date. Seller will sell, on Buyer's behalf, all Hydrocarbons
produced from the Interests between the Effective Date and the Closing Date
(as hereinafter defined), and Seller will credit Buyer for the proceeds of
those sales as an adjustment at Closing, as provided in Section 2.2 hereof.
Subject to any continuing sales obligations under the Contracts, Buyer may
sell Hydrocarbons produced from the Interests on and after the Closing Date as
it deems appropriate.
ARTICLE 2. CONSIDERATION
2.1 Sale Price.
2.1.1 Amount Due at Closing.
(i) At Closing (as hereinafter defined), Buyer shall pay to or for
the benefit of Seller the cash sum of Twelve Million Five Hundred Thousand
UNITED STATES DOLLARS ($12,500,000 U.S.D.) for the Interests (the "Sale
Price"), as adjusted pursuant to the terms of this Agreement and as herein set
forth.
(ii) A portion of the Sale Price shall be paid, at the direction of
Seller, to Bank One Texas, N.A. in consideration for the contemporaneous
delivery of fully executed releases of the BankOne Texas, N.A. mortgage and
deed of trust together with the other related liens listed as item numbers 1
through 4 on Exhibit E hereto (the "Bank Releases"), each in form and content
satisfactory to Buyer; and
(iii) The remainder of the Sale Price, as adjusted, less the amounts set forth
in immediately preceding sub-part (ii) herein above shall be paid to Seller
by wire transfer to a bank account to be designated by Seller in accordance
with written instructions to be provided by Seller to Buyer no later than
three (3) business days prior to the Closing.
2.1.2 Allocated Values. The Sale Price shall be allocated among the
Interests as set forth in Exhibit F attached hereto and made a part hereof for
all purposes. Neither Party will take any position in preparing tax returns
that is inconsistent with the allocation of values set forth in Exhibit F,
unless the Parties otherwise agree in writing. The value assigned to each
portion of the Interests in Exhibit F is hereafter call the "Allocated Value"
of such Interest.
2.1.3 Xxxxxxx Money. Concurrently with the execution of this Agreement, Buyer
shall pay to Bank One Texas, N.A. into an interest bearing joint control
account to be established by the Parties an xxxxxxx money deposit (the
"Xxxxxxx Money") in the amount of Xxx Xxxxxxx Xxx Xxxxxxx Xxxxx Xxxxxxxx
XXXXXX XXXXXX DOLLARS ($1,250,000.00 U.S.D.) to assure Buyer's performance
under this Agreement. If Seller and Buyer close the transaction contemplated
by this Agreement, the Xxxxxxx Money together with any interest accrued
thereon, will be applied to the Sale Price. If Buyer and Seller fail to close
the transaction contemplated by this Agreement, Seller and Buyer will have the
respective rights and obligations with respect to the Xxxxxxx Money set forth
in Article 6 hereof.
2.1.4 Identification of Acquisition Funds. On or before thirty (30) days
following the date of execution by all Parties of this Agreement, Buyer shall
deposit into an account in Buyer's sole control at Bank One, N.A. the Sale
Price less the Xxxxxxx Money.
2.2 Adjustments at Closing.
2.2.1 Preliminary Settlement Statement. At Closing, the Sale
Price
will be adjusted as set forth in Sections 2.2.2 and 2.2.3. No
later than five (5) business days prior to Closing, Seller will
provide to Buyer a preliminary settlement statement identifying
all adjustments to the Sale Price to be made at Closing (the
APreliminary Settlement Statement@). Seller and Buyer
acknowledge that some items in the Preliminary Settlement
Statement may be estimates or otherwise subject to change in the
Final Settlement Statement for the Interests to be prepared
pursuant to Section 2.3 hereof.
2.2.2 Upward Adjustments. The Sale Price will be increased by the
following
(i) all production expenses, operating expenses, overhead
expenses under applicable operating agreements and capital
expenditures paid by Seller or any affiliate of Seller in
connection with the Interests (including, without
limitation, royalties, minimum royalties, rentals and
prepaid charges), to the extent they are attributable to
operation of the Interests on and after the Effective Date;
(ii) all proceeds attributable to the sale of Hydrocarbons
from, and other income attributable to, the Interests on and
after the Effective Date received by Buyer, to the extent
they are attributable to the operation of the Interests
before the Effective Date;
(iii) the value of the Stock Tank Oil as provided in Section
1.2 hereof; and
(iv) any other increases in the Sale Price agreed upon by
Buyer and Seller as specified in this Agreement.
2.2.3 Downward Adjustments. The Sale Price will be decreased by the
following:
(i) all actual production expenses, operating expenses, overhead
expenses under applicable operating agreements and capital
expenditures paid or incurred by Buyer in connection with
the Interests (including, without limitation, royalties,
minimum royalties, rentals, and prepaid charges), to the
extent they are attributable to operation of the Interests
before the Effective Date;
(ii) all proceeds attributable to the sale of Hydrocarbons
from and other income attributable to the Interests on and
after the Effective Date received by Seller, to the extent
they are attributable to the operation of the Interests on
and after the Effective Date;
(iii) the value of any unresolved Environmental Conditions
and Title Defects as provided for in Article 5 hereof;
(iv) all amounts necessary to release in full all vendor
liens listed on Exhibit E hereto (other than amounts to be
paid at the Closing in connection with the Bank Releases
pursuant to Section 2.1.1(ii) hereof);
(v) all amounts necessary to pay in full all unpaid operating
and other expenses attributable to the Interests for all
periods prior to the Effective Date as determined by the
Parties prior to Closing; and
(vi) the amount of revenues attributable to the interests
of third parties in and to the Leases which interests are
currently in non-pay status pending resolution of title or
other problems affecting such interests, as set forth in
Exhibit G attached hereto and made a part hereof for all
purposes; and
(vii) any other decreases in the Sale Price agreed upon by
Buyer and Seller as specified in this Agreement.
2.3 Adjustments After Closing.
2.3.1 Final Settlement Statement. Within ninety (90) days after
Closing, Seller will prepare a final settlement statement for
the Interests containing a final reconciliation of the
adjustments to the Sale Price specified in Section 2.1 (the
AFinal Settlement Statement@). However, the failure of Seller
to complete the Final Settlement Statement within 90 days after
Closing will not constitute a waiver of any right to an
adjustment otherwise due. Buyer will have thirty (30) days
after receiving the Final Settlement Statement to provide Seller
with written exceptions to any items in the Final Settlement
Statement that Buyer believes in good faith to be questionable.
All items in the Final Settlement Statement to which Buyer does
not except within the 30 day review period will be deemed to be
correct.
2.3.2 Payment of Post-Closing Adjustments. Any post-Closing
adjustments to the Sale Price (including disputed items which
have ultimately been resolved) 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
Sale Price within ten (10) days after the expiration of Buyer=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 agree to
negotiate in good faith to attempt to reach agreement on the
amount due with respect to any disputed items in the Final
Settlement Statement. If the Parties agree on the amount due
with respect to any disputed items, and a payment adjustment is
required, the Party owing payment will pay the other Party
within ten (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 sixty (60) days after Seller receives
Buyer=s written exceptions to the Final Settlement Statement,
then (i) the Parties will attempt to resolve their disagreement
with respect to the disputed items by mediation, as provided in
Section 11.14 hereof, and (ii) if the Parties are unable to
resolve their disagreement over the disputed items by mediation,
either Party may seek a judicial determination of the amount
actually due in connection with the disputed items.
2.4 Payment Method. Unless the Parties otherwise agree in writing, all
payments under this Agreement shall be made 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 the
Final Settlement Statement will be prepared in accordance with generally
accepted accounting principles in the petroleum industry and with
reasonable supporting documentation for each item in those statements.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES
3.1 Seller's Representations. Seller represents and warrants to Buyer
that the following statements are true and accurate as of the execution
date of this Agreement, the Effective Date and the Closing Date.
3.1.1 Corporate Authority. Seller is a duly organized corporation
validly existing and in good standing under the laws of the
State of Texas and is duly qualified to carry on its business in
each of the states in which the Interests are located, and has
full power and authority to enter into and perform pursuant to
this Agreement according to its terms, except where the failure
to so qualify and be in good standing will not have a material
adverse effect. This Agreement has been duly executed and
delivered by Seller.
3.1.2 Requisite Approvals. Seller's execution, delivery and
performance of this Agreement has been duly authorized by all
necessary corporate action and will not violate or conflict with
any agreement, law, rule, regulation, charter or other
instrument governing either Seller's organization, management or
business affairs or any instrument to which Seller is a party or
is bound.
3.1.3 Validity of Obligation. This Agreement and all other
transaction documents executed and delivered on or before the
Closing Date (i) have been duly executed by Seller=s authorized
representatives; (ii) constitute the valid and legally binding
obligations of Seller, and (iii) are enforceable against it in
accordance with their respective terms.
3.1.4 No Violation of Contractual Restrictions. The execution,
delivery and performance of this Agreement does not conflict
with or violate any agreement or instrument to which Seller is a
party or by which it is or the Interests are bound, except any
provision contained in agreements customary in the oil and gas
industry relating to (i) preferential rights to purchase all or
any portion of an Interest; (ii) required consents to transfer
and related provisions; (iii) maintenance of uniform interest
provisions in joint operating agreements, and (iv) any other
third party approvals or consents contemplated in this
Agreement.
3.1.5 No Violation of Other Legal Restrictions. The execution,
delivery and performance of this Agreement does not violate any
law, rule, regulation, ordinance, judgment, decree or order to
which Seller is or the Interests are, or upon Closing will be,
subject.
3.1.6 Bankruptcy. There are no bankruptcy, reorganization or
receivership proceedings pending, being contemplated by or, to
Seller=s actual knowledge, threatened against Seller.
3.1.7 Broker=s Fees. Seller has not incurred any liability,
contingent or otherwise, for brokers= or finders= fees relating
to the transactions contemplated by this Agreement for which
Buyer shall have any responsibility whatsoever.
3.1.8 Lawsuits and Claims. There is no action, suit, proceeding,
claim or investigation by any person, entity, administrative
agency or governmental body pending or, to the best of its
knowledge, threatened, against Seller before any governmental
authority that impedes or is likely to impede Seller=s ability
to consummate the transactions contemplated by this Agreement
except as otherwise set forth in Exhibit H attached hereto and
made a part hereof for all purposes.
3.1.9 Permits. Seller holds all permits, licenses, variances,
exemptions, orders and approvals from governmental authorities
which are material to the operation of the Interests
(collectively, the APermits@). Seller is in compliance with the
terms of the Permits, except where the failure to so comply
would not have a material adverse effect on the Interests or on
the ability of Seller to consummate the transactions
contemplated hereby.
3.1.10 Tax Partnerships. None of the Interests is subject to a tax
partnership.
3.1.11 Operations and Expenditures. With respect to the joint, unit or
other operating agreements affecting the Interests, there are no
outstanding calls or payments under authorities for expenditures
concerning any single expenditure to be made by Seller in excess
of $25,000 which are due or which Seller has committed to make
and which have not been made.
3.1.12 Prepayment Contracts. Seller is not contractually obligated by
virtue of any prepayment arrangement under any contract for the
sale of Hydrocarbons to deliver Hydrocarbons produced from the
Interests at some future time without then or thereafter
receiving full payment therefor.
3.1.13 Taxes. All production, severance or similar taxes and
assessments based on or measured by the production of
Hydrocarbons or the receipt of proceeds therefrom attributable
to the Interests have been properly paid.
3.1.14 Call on Production. At the Closing Date no party shall have any
call upon, option to purchase or similar rights under any
agreement with respect to the production of Hydrocarbons from or
attributable to the Interests.
3.1.15 Status and Operation of the Leases.
(i) The Leases are (i) in full force and effect in accordance
with their respective terms, (ii) Seller is in substantial
compliance with their respective terms regarding the payment
of royalties, and (iii) Seller is not in default in the
performance of any obligation on the part of Seller
thereunder which could reasonably be expected to result in
termination or cancellation thereof. To the best knowledge
of Seller, no party has threatened or taken action to
terminate or procure a judicial reformation of any Lease,
except as otherwise set forth in Exhibit H hereto.
(ii) To the best knowledge of Seller, except for funds
properly suspended for good cause in a separate account
maintained by Seller as set forth in Exhibit G hereto,
Seller has not received any proceeds from the sale of
Hydrocarbons from the Interests which are subject to
potential refund.
(iii) Seller is being paid, without bond or indemnity of any
kind except the usual warranties found in division orders
and Hydrocarbon sales contracts customarily used in the
petroleum industry, for its interest in the proceeds of the
sale of Hydrocarbons from the Leases.
(iv) With respect to all Leases operated by Seller or an
affiliate of Seller, and with respect to all Leases operated
by unaffiliated third parties, to the best knowledge of
Seller, all costs incurred in connection with the operation
of the Leases have been fully paid and discharged in
accordance with the terms of payment therefor except (i)
normal expenses incurred within the previous sixty (60) days
and as to which Seller has not yet been billed, (ii) costs
that are being contested in good faith by Seller, or (iii)
as otherwise set forth in Exhibit I attached hereto and made
a part hereof for all purposes.
(v) All material Contracts are in full force and effect, and
neither Seller nor, to the best knowledge of Seller, any
other party is in default thereunder in any material
respect.
(vi) To the best knowledge of Seller, no other party to any
joint operating agreement or other Contract binding on the
Interests is entitled to any adjustments of past accounts at
the expense of Seller.
(vii) Seller is not obligated, by virtue of a claim arising
from Seller having prior to the Effective Date taken gas in
excess of the volume to which Seller was entitled, to
deliver Hydrocarbons produced from the Interests at some
future time without then or thereafter receiving full
payment therefore.
3.1.16 Compliance with Laws. Seller has complied in all material
respect with all laws applicable to the Interests except as
otherwise set forth in Exhibit J attached hereto and made a part
hereof for all purposes.
3.1.17 Suitability of Equipment. To the best of Seller=s knowledge,
all of the Equipment has been maintained in a good and
workmanlike manner in accordance with normal industry standards,
excepting normal wear and tear and obsolescence. Nevertheless,
the Parties agree that all Equipment will be sold and conveyed
to Buyer AAS IS, WHERE IS WITH ALL FAULTS@, and SELLER HEREBY
DISCLAIMS, WITH RESPECT TO THE EQUIPMENT, ANY AND ALL WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
3.1.18 Accuracy of Information Furnished. The Contracts and Records
(as hereinafter defined) to which Buyer has been provided access
include all contracts, agreements and other legally binding
commitments in Seller=s possession that are related to the
Interests. To best knowledge of Seller, the information
contained in such Contracts and Records and all other
information furnished to Buyer in connection with the
transaction contemplated hereby is true.
3.2 Buyer's Representations. Buyer represents and warrants to Seller
that the following statements are true and accurate as of the execution
date of this Agreement, the Effective Date and the Closing Date.
3.2.1 Partnership Authority. Buyer is a duly organized limited
partnership validly existing and in good standing under the laws
of the State of Delaware, is duly qualified to carry on its
business in the state in which the Interests are located, and
has full power and authority to enter into and perform pursuant
to this Agreement according to its terms, except where the
failure to go qualify and be in good standing will not have a
material adverse effect. This Agreement has been duly executed
and delivered by Buyer.
3.2.2 Requisite Approvals. Buyer's execution, delivery and
performance of this Agreement has been duly authorized by all
necessary partnership action and will not conflict with or
violate any agreement, law, rule, regulation, ordinance, charter
or other instrument governing either Buyer's organization,
management or business affairs or any instrument to which Buyer
is a party or by which Buyer is bound.
3.2.3 Validity of Obligation. This Agreement and all other
transaction documents executed and delivered on or before the
Closing Date (i) have been duly executed by Buyer=s authorized
representatives; (ii) constitute the valid and legally binding
obligations of Buyer, and (iii) are enforceable against it in
accordance with their respective terms.
3.2.4 No Violation of Contractual Restrictions. The execution,
delivery and performance of this Agreement does not conflict
with or violate any agreement or instrument to which Buyer 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) preferential rights to purchase all or any portion of an
Interest; (ii) required consents to transfer and related
provisions; (iii) maintenance of uniform interest provisions in
joint operating agreements, and (iv) any other third party
approvals or consents contemplated in this Agreement.
3.2.5 No Violation of Other Legal Restrictions. The execution,
delivery and performance of this Agreement does not violate any
law, rule, regulation, ordinance, judgment, decree or order to
which Buyer or the Interests is or, upon Closing, will be
subject.
3.2.6 Bankruptcy. There are no bankruptcy, reorganization or
receivership proceedings pending, being contemplated by, or to
Buyer=s actual knowledge, threatened against Buyer.
3.2.7 Broker's Fees. Buyer has not incurred any liability, contingent
or otherwise, for brokers' or finders' fees relating to the
transactions contemplated by this Agreement for which Seller
shall have any responsibility whatsoever.
3.2.8 Lawsuits and Claims. There is no action, suit, proceeding,
claim or investigation by any person, entity, administrative
agency or governmental body pending or, to the best of its
knowledge, threatened, against Buyer before any governmental
authority that impedes or is likely to impede Buyer=s ability to
consummate the transactions contemplated by this Agreement and
to assume the liabilities to be assumed by it under this
Agreement.
3.2.9 Securities Laws. Buyer has complied with all federal and state
securities laws applicable to the purchase and sale of the
Interests and will comply with such laws if it subsequently
disposes of all or any part of the Interests.
3.3 Notice of Changes. Seller and Buyer 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 materially untrue or inaccurate or if it is
reasonably anticipated that a party will be unable to perform or comply
with any covenant or agreement contained in this Agreement.
ARTICLE 4. TITLE WARRANTY; DISCLAIMER OF WARRANTIES
4.1 Special Warranty of Title; Encumbrances. SELLER CONVEYS THE INTERESTS
TO BUYER WITHOUT WARRANTY OF TITLE, EXPRESS, STATUTORY, OR IMPLIED,
EXCEPT THAT SELLER SPECIALLY WARRANTS AND AGREES TO DEFEND TITLE TO THE
INTERESTS IT CONVEYS TO BUYER AGAINST THE CLAIMS, ENCUMBRANCES AND
DEMANDS OF ALL PERSONS CLAIMING TITLE TO THE INTERESTS BY, THROUGH, OR
UNDER SELLER BUT NOT OTHERWISE.
4.2 Condition and Fitness of the Interests. Except as set forth in Article
3 and Section 4.1 of this Agreement, SELLER CONVEYS THE INTERESTS TO
BUYER WITHOUT ANY EXPRESS, STATUTORY OR IMPLIED WARRANTY OR
REPRESENTATION OF ANY KIND, INCLUDING WARRANTIES RELATING TO (i) THE
CONDITION OR MERCHANTABILITY OF THE INTERESTS, OR (ii) THE FITNESS OF
THE INTERESTS FOR A PARTICULAR PURPOSE. BUYER HAS INSPECTED, OR BEFORE
CLOSING WILL INSPECT OR WILL HAVE BEEN GIVEN THE OPPORTUNITY TO INSPECT,
THE INTERESTS FOR ALL PURPOSES, INCLUDING WITHOUT LIMITATION FOR THE
PURPOSE OF DETECTING THE PRESENCE OF NATURALLY OCCURRING RADIOACTIVE
MATERIALS (ANORM@) AND MAN MADE MATERIAL FIBERS ("MMMF") AND, EXCEPT
WITH RESPECT TO ANY ADVERSE ENVIRONMENTAL CONDITIONS RAISED BY BUYER
PURSUANT TO SECTION 5.3.2, SATISFIED ITSELF AS TO THEIR PHYSICAL AND
ENVIRONMENTAL CONDITION, INCLUDING BUT NOT LIMITED TO CONDITIONS RELATED
TO THE PRESENCE, RELEASE, OR DISPOSAL OF HAZARDOUS SUBSTANCES. BUYER IS
RELYING SOLELY UPON THE RESULTS OF SUCH INSPECTION OF THE INTERESTS AND
SHALL ACCEPT ALL OF THE SAME IN THEIR "AS IS, WHERE IS" CONDITION AND
AWITH ALL FAULTS@. SELLER DISCLAIMS ALL LIABILITY ARISING IN CONNECTION
WITH THE PRESENCE OF NORM OR MMMF ON THE INTERESTS AND IF TESTS HAVE
BEEN CONDUCTED BY SELLER FOR THE PRESENCE OF NORM OR MMMF, SELLER
DISCLAIMS ANY WARRANTY RESPECTING THE ACCURACY OF SUCH TESTS OR RESULTS.
4.3 Information About the Interests. SELLER MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS, STATUTORY OR IMPLIED, AS TO (i) THE QUALITY AND
QUANTITY OF HYDROCARBON RESERVES (IF ANY) ATTRIBUTABLE TO THE INTERESTS;
(ii) THE ABILITY OF THE INTERESTS TO PRODUCE HYDROCARBONS, INCLUDING
WITHOUT LIMITATION PRODUCTION RATES, DECLINE RATES AND RECOMPLETION
OPPORTUNITIES; OR (iii) THE PRESENT OR FUTURE VALUE OF THE ANTICIPATED
INCOME, COSTS OR PROFITS, IF ANY, TO BE DERIVED FROM THE INTERESTS.
4.4 Subrogation of Warranties. To the extent transferable, Seller will give
and grant to Buyer, its successors and assigns full power and right of
substitution and subrogation in and to all covenants, indemnities and
warranties (including warranties of title) by preceding owners, vendors,
or others, given or made with respect to the Interests or any part
thereof prior to the Closing Date of this Agreement.
ARTICLE 5. DUE DILIGENCE REVIEW OF THE INTERESTS
5.1 Access to Records. After execution of this Agreement, Seller shall give
Buyer and its authorized representatives, during regular business hours,
at Buyer's sole risk, cost and expense, access, with copying privileges,
to all production, environmental, geological, engineering and other
technical data and records, and to all contract, land, accounting,
title, and lease records, to the extent such data and records are in
Seller's possession and relate to the Interests, and to such other
information relating to the Interests as Buyer may reasonably request.
However, Seller shall have no obligation to provide Buyer such access to
any data or information which Seller cannot legally provide Buyer
because of third-party restrictions on Seller. Buyer shall keep all
materials and data obtained confidential until the Closing Date. Any
confidentiality agreement previously executed by Seller and Buyer with
respect to the Interests will continue in force and effect until the
Closing Date and for as long thereafter as provided in the
confidentiality agreement. Buyer shall take all reasonable steps
necessary to ensure that Buyer=s authorized representatives comply with
the provisions of this Section 5.1 and any confidentiality agreement in
effect. Upon termination of this Agreement without Closing, Buyer shall
return to Seller any and all materials and data relating to any
properties not purchased at Closing and shall destroy any and all of
Buyer's notes and work papers derived therefrom in accordance with the
terms of said confidentiality agreement.
5.2 Physical and Environmental Inspection. Buyer may engage an environmental
consultant approved by Seller (the AEnvironmental Expert@) to perform a
physical inspection of the Leases and Equipment. Seller will permit
Buyer and the Environmental Expert reasonable physical access to the
Leases and Equipment at times approved by Seller and at Buyer's sole
cost, risk and expense for the purposes of inspecting the same,
conducting such tests, examinations, investigations and assessments as
may be reasonable and necessary or appropriate to evaluate the physical
and environmental condition of the Leases and Equipment. Buyer shall
repair any damage to the Interests resulting from the inspection of
Buyer and/or the Environmental Expert and shall defend and indemnify
Seller and Seller=s affiliates, partners, members, shareholders,
directors, officers, agents, representatives, consultants, advisers,
successors and assigns (collectively, the ASeller Indemnified Group@)
from any and all Claims (as hereinafter defined) arising from Buyer
and/or the Environmental Expert inspecting and observing the Interests,
including, without limitation, (i) Claims for personal injury to or
death of employees of Buyer or the Environmental Expert, their agents,
contractors, subcontractors or invitees and/or damage to the property of
Buyer or the Environmental Expert or others acting on behalf of Buyer or
Environmental Expert, REGARDLESS OF WHETHER SUCH CLAIMS ARE CAUSED BY
THE CONCURRENT NEGLIGENCE OF SELLER OR THE CONDITION OF THE INTERESTS,
and (ii) Claims for personal injury to or death of employees of Seller
or third parties and damage to the property of Seller or third parties,
to the extent caused by the negligence, gross negligence or willful
misconduct of Buyer or Environmental Expert. As used in this Agreement,
the term AClaims@ means any and all losses, liabilities, damages,
obligations, expenses, fines, penalties, costs, claims, causes of action
and judgments, including, without limitation, reasonable attorneys fees,
court costs, and other reasonable costs of litigation resulting from the
defense of any claim or cause of action within the scope of the
indemnities in this Agreement for (i) breaches of contract; (ii) loss or
damage to property, injury to or death of persons, and other tortious
injury; and (iii) violations of applicable laws, rules, regulations,
orders or any other legal right or duty actionable at law or equity.
5.3 Environmental Assessment.
5.3.1 Inspection and Test Results. Buyer agrees to provide to Seller
a copy of any and all environmental inspections and assessments
of Buyer or the Environmental Expert, including, without
limitation, all written reports, data and conclusions. Buyer
and Seller shall keep any and all data or information acquired
by all such examinations and results of all analysis of such
data and information strictly confidential and shall not
disclose same to any person or agency without the prior written
approval of the other Party, unless necessary in connection with
any pending litigation or required to do so by applicable law or
by the order of a Court or regulatory agency. Notwithstanding
the foregoing, Buyer may disclose the results of any such
environmental inspections and assessments to its employees,
agents and representatives that have a need to review same in
order to conclude the necessary environmental review and
assessment under this Agreement, provided that Buyer hereby
agrees to enter into agreements with such employees, agents and
representatives, including the Environmental Expert, binding
such persons to the same confidentiality obligations as are
contained herein. The foregoing obligation of confidentiality
shall survive for five (5) years after the Closing and will
survive for five (5) years after the termination of this
Agreement without closing.
5.3.2 Notice of Environmental Conditions. Prior to Closing, the Buyer
shall review the inspection and testing results for the
Interests and determine, based on those results, if any adverse
environmental conditions (the AEnvironmental Conditions@) exist
or may exist with respect to the Interests. No later than three
(3) business days before Closing, Buyer shall notify Seller in
writing of any Environmental Conditions, and the estimated
value of such Environmental Conditions. The value of the
Environmental Conditions for purposes of Section 5.3.3 shall be
the Buyer=s estimated amount of all costs and Claims associated
with the existence, remediation or correction of the
Environmental Conditions.
5.3.3 Rights and Remedies for Environmental Conditions.
(i) The rights and remedies of the Parties with respect to the
Environmental Conditions are as follows:
(a) Seller, at its sole option, may elect to remediate
some or all of the Environmental Conditions. If
Seller elects to remediate any of the Environmental
Conditions, the affected Interests shall be removed
from the transaction, the Sale Price shall be reduced
by the Allocated Value of the Interests removed from
the transaction, and the Parties shall proceed to
Closing as to the remaining Interests. If Seller
completes such remediation to the reasonable
satisfaction of Buyer prior to the expiration of three
(3) months after the Closing Date, (i) Seller shall
convey the affected Interests to Buyer, (ii) Buyer
shall pay to Seller the Allocated Value for such
remediated Interests, and (iii) Seller shall have no
further liability to Buyer for the remediated
Environmental Conditions, including, but not limited
to, any adjustment to the Sale Price. In the event
Seller is unable to cure the Environmental Conditions
to the reasonable satisfaction of Buyer within said
three month period, Seller shall retain the affected
Interests and Buyer shall have no further obligation
with respect to such retained Interests.
(b) If Seller elects not to remediate one or more
Environmental Conditions, the Sale Price shall be
reduced by the collective value of such non-remediated
Environmental Conditions, the Parties shall proceed to
Closing on all such Interests, and Seller shall have
no further liability to Buyer with respect to such
non-remediated Environmental Conditions.
(c) If an Environmental Condition which is significant in
nature has been identified pursuant to Section 5.3.1
and notice thereof has been timely provided pursuant
to Section 5.3.2 but for which the Parties, acting in
good faith, have been unable to assess a value in
whole or in part, Seller may elect to remediate such
Environmental Condition pursuant to subsection (a) of
this Section 5.3.3. If Seller elects not to attempt
remediation procedures, either Party may remove the
Interest effected by such Environmental Condition from
this transaction, the Sale Price shall be reduced by
the Allocated Value of the Interests removed from the
transaction, and the Parties shall proceed with
Closing as to the remaining Interests.
(ii) Except as otherwise set forth in this Section 5.3.3,
Buyer at Closing will assume all environmental obligations
with respect to the Interests, as provided in and subject to
Section 8.2.
5.4 Preferential Rights and Consents to Assign.
5.4.1 Notices to Holders.
(i) Attached hereto as Exhibit K and made a part hereof for all
purposes is a list of the Interests subject to third party
preferential purchase rights, rights of first refusal, or
similar rights (collectively, "Preferential Rights"), or
third party consents to assign, lessor's approvals or
similar rights (collectively, "Consents"). Promptly
following the execution of this Agreement, Seller shall use
reasonable efforts to 1. notify the holders of the
Preferential Rights and Consents that it intends to transfer
the Interests to Buyer, 2. provide them with any information
about the transfer of the Interests to which they are
contractually entitled, and 3. in the case of Consents, ask
the holders of the Consents to consent to the assignment of
the affected Interests to Buyer.
(ii) Seller shall promptly notify Buyer whether (a) any
Preferential Rights are exercised, waived or deemed waived,
(b) any Consents are denied, or (c) the requisite time
periods have elapsed without any Preferential Rights being
exercised or Consents being received.
5.4.2 Remedies Before Closing. If Seller is unable before Closing to
obtain the required Consents (other than Consents ordinarily
obtained after closing and Consents on hydrocarbon sales,
purchase, gathering, transportation, treating, marketing,
exchange, processing and fractionating agreements) and waivers
of all Preferential Rights, then:
(i) Seller and Buyer by agreement may proceed with Closing as to
the Interests affected by the unwaived Preferential Rights
or unobtained Consents, subject to the further obligations
of Seller and Buyer set forth in Section 5.4.3 in the event
that such Preferential Rights are validly exercised or such
Consents are ultimately denied after Closing;
(ii) Either Seller or Buyer may exclude the affected
portion of the Interests from the transaction under this
Agreement, adjust the Sale Price by the Allocated Value of
the excluded Interests, and proceed with Closing as to the
rest of the Interests; or
(iii) If neither of the remedies set forth in subparts (i)
and (ii) of this Section 5.4.2 is exercised, Seller or Buyer
may exercise the termination rights set forth in Article 6.
5.4.3 Remedies After Closing.
(i) Preferential Rights. After Closing, if (a) any holder of
Preferential Rights alleges improper notice of sale, or (b)
Seller or Buyer discover, or any third party alleges, the
existence of additional Preferential Rights, Seller and
Buyer will attempt to obtain waivers of those discovered or
alleged Preferential Rights. If Seller and Buyer are unable
to obtain waivers of such Preferential Rights, or the third
party ultimately establishes and exercises its rights, and
such exercise denies the Interests to Buyer, then Buyer and
Seller will rescind the assignment of the affected Interests
under this Agreement, after which Seller shall pay Buyer the
Allocated Value of the affected Interests, and Buyer shall
immediately reassign the affected Interests to the Seller.
(ii) Consents. After Closing, if Seller or Buyer discover,
or any third party alleges, the existence of additional
Consents, Seller and Buyer will attempt to obtain waivers of
those discovered or alleged Consents. If Seller and Buyer
are unable to obtain waivers of such Consents (other than
Consents on Hydrocarbon sales, purchase, gathering,
transportation, treating, marketing, exchange, processing
and fractionating agreements), and such unwaived Consents
deny the affected Interests to Buyer, then Seller and Buyer
will rescind the assignment of the affected Interests under
this Agreement, after which Seller shall pay Buyer the
Allocated Value of the affected Interests, and Buyer shall
immediately reassign the affected Interests to the Seller.
Rescission of the assignment of the affected Interests and
receipt of the Allocated Value of the affected Interests
shall be Buyer's sole remedy if undiscovered or alleged
Preferential Rights are exercised or Consents are denied
after Closing.
5.5 Title Defects.
5.5.1 Definition of Title Defect. For the purpose of this Agreement,
a "Title Defect" shall mean any deficiency in the Interests or
Seller's title to the Interests which results or could result
in:
(i) Seller's title, as to one or more Interests, being subject
to an outstanding mortgage, deed of trust, lien or security
interest;
(ii) Seller owning less than the net revenue interest shown
on Exhibit A-1 hereto or being obligated to bear a share of
the costs and expenses of operation greater than the working
interest shown on Exhibit A-1 hereto without a corresponding
increase in net revenue interest at any time after the
Effective Date during the life of the affected Interest;
(iii) Seller's rights and interests being reduced at any
time after the Effective Date during the life of the
affected Interest by virtue of the exercise by a third party
reversionary or back-in interest, farm-out of other than
wellbore rights, or other similar right not reflected on
Exhibit A1;
(iv) any default of Seller under any Lease or other
agreement which results or could result in the occurrence of
(i), (ii), or (iii) of this Section 5.5.1; or
(v) the restriction or termination of Buyer=s right to use an
Interest as owner, lessee, licensee or permittee, as
applicable.
5.5.2 Notice of Title Defects. Upon the discovery of a Title Defect
by Buyer, Buyer shall immediately notify Seller in writing. Any
such notice by Buyer shall include appropriate evidence and
documentation to substantiate its position and shall be
delivered to Seller on or before three (3) business days prior
to Closing Date (the ATitle Claim Date@). After the Title Claim
Date, the Interests shall be deemed to be free of Title Defects
except for those for which notice has been timely provided as
set forth herein. Any Title Defect which is not disclosed to
Seller on or before the Title Claim Date shall conclusively be
deemed waived by Buyer for all purposes except to the extent
such Title Defect may be covered by Seller=s special warranty of
title contained in the conveyance document delivered pursuant to
this Agreement.
5.5.3 Right to Cure Title Defect. If Buyer notifies Seller of a Title
Defect as provided in Section 5.5.2, Seller shall have the right
but not the obligation to cure the Title Defect. If Seller
chooses to cure a Title Defect, Seller must cure the Title
Defect to the reasonable satisfaction of Buyer before Closing,
unless the Parties otherwise agree in writing.
5.5.4 Remedies for Uncured Title Defects. If Buyer notifies Seller of
any Title Defect as provided in Section 5.5.2, and Seller
refuses or is unable to cure the Title Defect before Closing,
then Buyer and Seller will have the following rights and
remedies with respect to the uncured Title Defects, unless the
Parties otherwise agree in writing.
(i) Buyer may waive the uncured Title Defect and proceed with
Closing.
(ii) The Parties will attempt to agree on the value of each
uncured, unwaived Title Defect. If the Parties are unable
to agree as to whether a Title Defect exists or the value
thereof, Seller and Buyer may refer the matter to a mutually
agreeable third party expert for determination. The
determination of such expert shall be binding on the
Parties. Seller and Buyer shall reduce the Sale Price by
the value agreed upon by the Parties or determined by the
expert (as applicable) of each uncured, unwaived Title
Defect and proceed with Closing.
(iii) If any uncured, unwaived Title Defect reduces the
value of the affected Interest by an amount equal to or more
than fifty percent (50%) of the Allocated Value of that
Interest, either Seller or Buyer may exclude the affected
Interest from the transaction under this Agreement, in which
case Seller and Buyer will adjust the Sale Price by the
Allocated Value of the excluded Interest, and proceed with
Closing as to the balance of the Interests.
5.6 Casualty Losses and Government Takings.
5.6.1 Notice of Casualty Losses and Government Takings. If, prior to
the Closing Date, all or part of the Interests is damaged or
destroyed by fire, flood, storm or other casualty (ACasualty
Loss@), or is taken in condemnation or under the right of
eminent domain, or if proceedings for such purposes shall be
pending or threatened (AGovernment Taking@), Seller must
promptly notify Buyer in writing of the nature and extent of the
Casualty Loss or Government Taking and Seller=s estimate of the
cost required to repair or replace that portion of the Interests
affected by the Casualty Loss or value of the Interests taken by
the Government Taking.
5.6.2 Remedies for Casualty Losses and Government Takings. With
respect to each Casualty Loss to or Government Taking of the
Interests, Seller and Buyer will have the following rights and
remedies.
(i) If the agreed cost to repair or replace the portion of the
Interests affected by the Casualty Loss or the agreed value
of the Interests taken in any Government Taking is less than
twenty-five percent (25%) of the Allocated Value of the
Interests affected, the Sale Price will be adjusted by the
agreed cost of the Casualty Loss or the agreed value of the
Interests taken by the Government Taking, and the Parties
will proceed with Closing.
(ii) If the agreed cost to repair or replace the portion of
the Interests affected by the Casualty Loss or the agreed
value of the Interests taken in any Government Taking equals
or exceeds twenty-five percent (25%) of the Allocated Value
of the Interests affected, either Seller or Buyer may
exclude the affected Interest from the transaction under
this Agreement, in which case Seller and Buyer will adjust
the Sale Price by the Allocated Value of the excluded
Interest and proceed with Closing as to the balance of the
Interests.
(iii) In addition to the remedies set forth in subparts (i)
and (ii) of this Section 5.6.2, Seller and Buyer will have
the termination rights in connection with Casualty Losses
and Government Takings as set forth in Section 6.1.
5.6.3 Insurance Proceeds and Settlement Payments. If Seller and Buyer
adjust the Sale Price of the Interests due to a Casualty Loss or
Government Taking, and proceed with Closing, Seller will be
entitled to retain (i) all insurance proceeds payable to Seller
with respect to any such Casualty Loss, (ii) all sums paid to
Seller by third parties by reason of any such Casualty Loss, and
(iii) all compensation paid to Seller with respect to any such
Government Taking. Seller shall retain all insurance proceeds
paid or payable on or after the Effective Date which relate to
any Casualty Loss or Government Taking which occurred prior to
the Effective Date.
5.6.4 Exclusion of Ordinary Depreciation and Depletion. Buyer will
assume all risk and loss with respect to any change, between the
Effective Date and the Closing Date, in the condition of the
Interests resulting from production of Hydrocarbons through
normal depletion (including the watering-out or sand
infiltration of any well) and the depreciation of personal
property through ordinary wear and tear. None of the events or
conditions set forth in this Section 5.6.4 will be considered a
Casualty Loss with respect to the Interests, nor will they be
cause for any other reduction in the Sale Price, or give rise to
any right to terminate this Agreement.
ARTICLE 6. TERMINATION AND EFFECT OF TERMINATION.
6.1 Right to Terminate. If, on the Closing Date, the Sale Price is to be
reduced as a result of uncured Title Defects, unwaived Preferential
Rights, unobtained Consents, Environmental Conditions and/or Casualty
Losses or Government Takings by an aggregate amount equal to or greater
than twenty-five percent (25%) of the total unadjusted Sale Price,
either Buyer or Seller shall have the right to terminate this Agreement,
and thereafter neither Party will have any further rights, duties or
obligations under this Agreement. Either Party may exercise this right
by notifying the other Party of its election to terminate this Agreement
in writing no later than two (2) business days before the Closing Date.
6.2 Effect of Termination. The following provisions shall apply in the
event this Agreement is terminated prior to the Closing Date.
6.2.1 Termination by Agreement. If this Agreement is terminated by
the mutual agreement of the Seller and the Buyer and not as the
result of the failure of either Party to perform its obligations
hereunder, such termination shall be without liability of any
Party to this Agreement or any shareholder, director, officer,
employee, agent or representative of such party, and the Seller
shall return the Xxxxxxx Money together with any interest
accrued thereon to the Buyer promptly and neither Party will
have any further rights, duties or obligations.
6.2.2 Termination as a Result of Buyer=s Breach. If this Agreement is
terminated as a result of Buyer=s material breach of this
Agreement, then Seller shall be entitled to retain the Xxxxxxx
Money as liquidated damages and as reimbursement for Seller's
out-of-pocket fees and expenses incurred in connection with the
transactions contemplated by this Agreement. The Parties hereby
acknowledge that (i) the extent of damages to Seller occasioned
by such breach or default or failure to proceed by Buyer would
be impossible or extremely impractical to ascertain, (ii) that
the amount of the Xxxxxxx Money is a fair and reasonable
estimate of such damage, and (iii) the retention by Seller of
the Xxxxxxx Money hereunder shall constitute Seller=s sole
remedy with respect to Buyer=s breach of this Agreement.
6.2.3 Termination as a Result of Seller=s Breach. If this Agreement
is terminated as a result of Seller=s material breach of this
Agreement, then Seller shall return the Xxxxxxx Money together
with any interest accrued thereon promptly, and neither Party
shall have any further rights, duties or obligations under this
Agreement.
6.2.4 Termination Pursuant to Section 6.1. If this Agreement is
terminated pursuant to Section 6.1 hereof, then Seller shall
return the Xxxxxxx Money together with any interest accrued
thereon promptly, and neither Party shall have any further
rights, duties or obligations under this Agreement.
6.2.5 Return of Data. If this Agreement is terminated, upon written
request by Seller, Buyer shall return to Seller all data and
other information delivered to Buyer by or on behalf of Seller
in connection with the transactions contemplated in this
Agreement.
ARTICLE 7. CONDITIONS OF CLOSING AND CLOSING.
7.1 Conditions of Closing by Buyer. The obligation of Buyer to close the
transactions contemplated in this Agreement is subject to the
satisfaction of the following conditions.
7.1.1 Representations, Warranties and Covenants. All representations
and warranties of Seller contained in this Agreement shall be
true, correct, and not misleading in all material respects, and
Seller shall have performed and satisfied in all material
respects all agreements and covenants required by this Agreement
to be performed and satisfied by Seller.
7.1.2 Consents. Seller shall have obtained and delivered to Buyer all
necessary consents for transfer of the Interests, except those
which by their nature cannot be requested or obtained until
after Closing.
7.1.3 Lawsuits and Claims. No suit or other proceeding shall be
pending or threatened before any court or governmental agency
seeking to restrain or prohibit this transaction, or to declare
the transaction illegal, or to obtain substantial damages in
connection with the transaction contemplated hereby.
7.1.4 Bank Releases. Seller shall have obtained and delivered to
Buyer the fully executed Bank Releases.
7.1.5 Guaranty. Seller shall have obtained and delivered to Buyer the
guaranty of Saba Petroleum Company, a Delaware corporation and
parent entity of Seller, guaranteeing all of Seller=s continuing
obligations under or pursuant to this Agreement, such guaranty
to be in substantially the form of guaranty attached hereto as
Exhibit L and made a part hereof for all purposes (the
AGuaranty@).
7.2 Conditions of Closing by Seller. The obligation of Seller to close the
transactions contemplated in this Agreement is subject to the
satisfaction of the following conditions.
7.2.1 Representations, Warranties and Covenants. All representations
and warranties of Buyer contained in this Agreement shall be
true, correct, and not misleading in any and all material
respects, and Buyer shall have performed and satisfied in all
material respects all agreements and covenants required by this
Agreement to be performed and satisfied by Buyer.
7.2.2 Lawsuits and Claims. No suit or other proceeding shall be
pending or threatened before any court or governmental agency
seeking to restrain or prohibit this transaction, or to declare
this transaction illegal, or to obtain substantial damages in
connection with the transaction contemplated hereby.
7.2.3 Bonds and Insurance. Seller shall have received evidence that
Buyer has in place, effective on or before the Closing Date and
relating to the ownership of the Interests after the Closing
Date (i) all necessary state, federal and local bonds, and (ii)
insurance as is reasonable and customary in the industry.
7.3 Closing. The Closing ("Closing") shall occur on June 11, 1999 at 9:00
a.m. ("Closing Date"), at the offices of Seller, or on such other date
and time or at such other location as may be agreed upon by the Parties.
7.4 Actions to Occur at Closing. At Closing the following actions shall
occur.
7.4.1 Delivery of Assignment. Seller shall execute, acknowledge and
deliver an Assignment and Xxxx of Sale substantially in the form
and substance of Exhibit M attached hereto and made a part
hereof for all purposes, covering all of the Interests to be
conveyed to Buyer pursuant hereto.
7.4.2 Delivery of Bank Releases. Seller shall deliver to Buyer the
fully executed Bank Releases.
7.4.3 Delivery of Guaranty. Seller shall deliver to Buyer the fully
executed Guaranty.
7.4.4 Delivery of Sale Price. Buyer shall deliver to Seller by wire
transfer the Sale Price as adjusted hereunder, subject to
further adjustment after Closing as provided for herein.
7.4.5 Change of Operatorship Forms. Seller and Buyer shall execute
designation of operator forms required by applicable
conservation or regulatory agencies and notices to third party
working interest owners of the change of ownership.
7.4.6 Evidence of Bonds. Buyer shall deliver to Seller evidence of
its appropriate state and federal plugging bond, surety letter,
or letter of credit acceptable to such authority to authorize
Buyer's right to conduct operations.
7.4.7 Possession of the Interests. Seller shall, subject to the terms
of any applicable operating agreements and to the provisions
hereof, deliver to Buyer exclusive possession of the Interests.
7.4.8 Letters-in-Lieu. Seller and Buyer shall execute letters-in-lieu
of transfer orders.
7.4.9 Officer's Certificates. Each Party shall deliver to the other
Party a certificate executed by a duly authorized officer of
such Party certifying that the representations and warranties of
such Party contained herein are true and correct as of the
Closing Date.
7.5 Post-Closing Obligations. Seller and Buyer shall have the following
post-Closing obligations:
7.5.1 Delivery of Records. Seller shall provide Buyer, promptly after
Closing, at Buyer's sole expense, any and all original maps,
reports and other written material relating to the Interests,
including without limitation, lease files, property records,
contract files, operations files, copies of tax and accounting
records and files (other than Seller=s income tax returns), well
files, core analyses and hydrocarbon analyses, well logs, mud
logs, core data, field studies, seismic, digital data
(geographics data set) geological, geochemical or geophysical
data or interpretations thereof ("Records"); however, Seller
shall have no obligation to provide Buyer any such data or
information which Seller cannot legally provide Buyer because of
third-party restrictions on Seller. Buyer agrees to maintain
the Records and allow Seller reasonable access thereto for a
period of six (6) years after Closing.
7.5.2 Recording and Filing. Buyer, within thirty (30) days after the
Closing Date, shall (i) record all assignments, conveyances and
other instruments that must be recorded to effectuate the
transfer of the Interests, (ii) file for approval with the
applicable governmental agencies all state and federal transfer
and assignment documents for the Interests, and (iii) file with
the applicable government agencies all applications and other
documents required for the transfer of permits and operatorship
of the Interests. Buyer shall provide Seller a recorded copy of
each assignment, conveyance and other recorded instrument, and
approved copies of the state and federal transfer and assignment
documents, if any, as soon as they are available.
7.5.3 Change of Operator Requirements. Buyer shall comply with all
applicable laws, ordinances, rules and regulations, orders,
terms of permits and authorizations of any governmental body
which may have jurisdiction with respect to the Interests to be
transferred hereunder (including, without limitation, the filing
with such governmental bodies of any and all compliance reports,
notices, or other compliance documents which are due after the
Closing Date regardless of the period covered by such reports,
notices or documents) and shall promptly obtain and maintain all
permits and bonds required by public authorities in connection
with the Interests.
7.5.4 Further Assurances. Seller and Buyer agree to execute and
deliver from time to time such further instruments and do such
other acts as may be reasonably necessary to effectuate the
purposes of this Agreement.
ARTICLE 8. ASSUMED RIGHTS AND OBLIGATIONS AND INDEMNITIES.
8.1 Condition of the Interests.
8.1.1 Oil and Gas Activities. The Interests have been used for
exploring, developing, producing, treating and transporting oil
and gas. Spills of wastes, crude oil, produced water, hazardous
substances and other materials may have occurred in the past on
the Leases or in connection with the Interests. There is a
possibility that there are currently unknown, abandoned xxxxx,
plugged xxxxx, pipelines and other equipment on or underneath
the property subject to the Interests. Except as otherwise
provided in this Agreement, it is the intent of Buyer and Seller
that all liability associated with the above matters as well as
any liability to plug or replug any and all xxxxx located on the
Leases in accordance with the applicable rules, regulations and
requirements of governmental agencies be passed to the Buyer at
Closing and that Buyer shall assume all liability for such
matters and all Claims related thereto.
8.1.2 NORM. The Interests may contain asbestos, hazardous substances,
or NORM. NORM may affix or attach itself to the inside of
xxxxx, materials and equipment as scale or in other forms;
xxxxx, materials and equipment located on the Leases or included
in the Interests may contain NORM, and NORM containing material
may have been buried or otherwise disposed of on the Leases.
Special procedures may be required for remediating, removing,
transporting and disposing of asbestos, NORM, hazardous
substances and other materials from the Interests, and, except
as otherwise provided in this Agreement, Buyer assumes all
liability for any assessment, remediation, removal,
transportation, and disposal of these materials and associated
activities in accordance with the applicable rules, regulations
and requirements of governmental agencies.
8.2 Assumption of Obligations by Buyer. Buyer shall, at Closing, assume and
be responsible for and comply with all duties and obligations of Seller,
express or implied, arising on or after the Effective Time, with respect
to the Interests, including, without limitation, those arising under or
by virtue of any lease, contract, agreement, document, permit,
applicable statue or rule, regulation or order of any governmental
authority, (specifically including, without limitation, any governmental
request or requirement to plug, re-plug and/or abandon any well of
whatsoever type, status or classification, remove all equipment and
facilities, including but not limited to pipelines, pipeline laterals,
and flowlines and any such request or requirement to remove any and all
platforms and restore the site whether such obligation arose before, on
or after the Effective Time, or take any clean-up or other action with
respect to the property or premises, including hazardous waste cleanup
costs under the Resource Conservation and Recovery Act of 1976, as
amended, 42 U.S.C. 6901-6991 (ARCRA@), the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C.
9601-9675 (ACERCLA@), The Clean Water Act (33 U.S.C. & 466 et. seq.),
The Safe Drinking Water Act (14 U.S.C. & 1401-1450), The Hazardous
Materials Transportation Act (49 U.S.C. & 1401-7401 et. seq.) as
amended, The Clean Air Act amendments of 1990, or similar laws, rules or
regulations), excluding, however, any and all duties and obligations
arising from or relating to (i) contractual obligations of Seller with
respect to the Interests attributable to periods of time prior to the
Effective Date including, without limitation, the obligation to fully
and timely pay royalties (excluding, however, specific amounts by which
the Sale Price is reduced pursuant to sub-Sections 2.2.3(iii), (iv), (v)
and (vi) hereof), (ii) the gross negligence or willful misconduct of
Seller during the Interim Period and (iii) the disposal offsite from the
Interests prior to the Closing Date of any hazardous substances, wastes,
materials and products generated by or used in connection with the
operation of the Interests.
8.3 Retention of Liabilities by Seller. Seller hereby retains and shall
remain liable and responsible for any and all duties and obligations
arising from or relating to (i) contractual obligations of Seller with
respect to the Interests attributable to periods of time prior to the
Effective Date including, without limitation, (y) the obligation to
fully and timely pay royalties and (z) all such duties and obligations
reflected in Exhibits to this Agreement (excluding, however specific
amounts by which the Sale Price is reduced pursuant to sub-Sections
2.2.3(iii), (iv), (v) and (vi) hereof), (ii) the gross negligence or
willful misconduct of Seller during the Interim Period, and (iii) the
disposal offsite from the Interests prior to the Closing Date of any
hazardous substances, wastes, materials and products generated by or
used in connection with the operation of the Interests.
8.4 General Indemnification by Buyer. Buyer shall defend, indemnify and
hold the Seller Indemnified Group harmless from and against any and all
Claims for personal injury, death or damage to property or to the
environment, or for any other relief, arising directly or indirectly
from, or incident to (i) the use, occupation, operation, maintenance or
abandonment of any of the Interests, or condition of the property or
premises, whether latent or patent, and whether asserted against Buyer
and/or any member of the Seller Indemnified Group after the Effective
Date, whether or not any such Claims result from conditions, actions or
inactions at or before the Effective Time; (ii) Seller=s operation of
the Interests under Article 10 (if applicable), except to the extent
caused by Seller=s gross negligence or willful misconduct; (iii) all
obligations assumed by Buyer pursuant to this Article 8 or Section 9.5;
(iv) any obligations for broker=s fees incurred by Buyer in connection
with its purchase of the Interests; (v) any violation by Buyer of state
or federal securities laws, or Buyer=s dealings with its partners,
investors, financial institutions and other third parties in connection
with the transactions contemplated under this Agreement; (vi) Buyer=s
operation of any Interest that is reconveyed or reassigned to Seller
pursuant to Section 5.4.3(ii) due to failure to obtain requisite
Consents, and (vii) the specific amounts by which the Sale Price is
reduced pursuant to sub-Sections 2.2.3(iii), (iv), (v) and (vi) hereof,
excluding, however, any and all such Claims arising from or relating to
(i) contractual obligations of Seller with respect to the Interests and
attributable to periods of time prior to the Effective Date including,
without limitation, the obligation to fully and timely pay royalties
(excluding, however, the specific amounts by which the Sale Price is
reduced pursuant to sub-Sections 2.2.3(iii), (iv), (v) and (vi) hereof),
(ii) the gross negligence or willful misconduct of Seller during the
Interim Period, and (iii) the disposal offsite from said Interests prior
to the Closing Date of any hazardous substances, wastes, materials and
products generated by or used in connection with the operation of the
Interests. With respect to any Claim Buyer may be obligated to defend
pursuant to Buyer=s indemnification obligations contained in this
Agreement, Seller shall have the right, but not the obligation, to
participate fully in the defense of the Claim.
8.5 Indemnification by Seller. Seller shall defend, indemnify and hold the
Buyer and Buyer=s affiliates, partners, members, shareholders,
directors, officers, agents, representatives, consultants, advisers,
successors and assigns (collectively, the ABuyer Indemnified Group@)
harmless from and against any and all Claims for personal injury, death
or damage to property or to the environment, or for any other relief,
arising directly or indirectly from, or incident to, (i) contractual
obligations of Seller with respect to the Interests attributable to
periods of time prior to the Effective Date including, without
limitation, (y) the obligation to fully and timely pay royalties and (z)
all such duties and obligations reflected in Exhibits to this Agreement
(excluding, however, the specific amounts by which the Sale Price is
reduced pursuant to sub-Sections 2.2.3(iii), (iv), (v) and (vi) hereof),
(ii) the gross negligence or willful misconduct of Seller during the
Interim Period, (iii) the disposal offsite from said Interests prior to
the Closing Date of any hazardous substances, wastes, materials and
products generated by or used in connection with the operation of the
Interests, and (iv) any obligations for broker=s fees incurred by Seller
in connection with its sale of the Interests. With respect to any Claim
Seller may be obligated to defend pursuant to Seller=s indemnification
obligations contained in this Agreement, Buyer shall have the right, but
not the obligation, to participate fully in the defense of the Claim.
8.6 Environmental Indemnity and Release. Buyer releases and forever
discharges the Seller Indemnified Group and Buyer agrees to defend,
indemnify and hold the Seller Indemnified Group harmless from any and
all Claims, whether direct or indirect, known or unknown, foreseen or
unforeseen, that may arise on account of or in any way be connected with
the physical condition of the Interests and property or any law or
regulation applicable thereto, including, without limitation, CERCLA,
RCRA, The Clean Water Act (33 U.S.C. & 466 et. seq.), The Safe Drinking
Water Act (14 U.S.C. & 1401-1450), The Hazardous Materials
Transportation Act (49 U.S.C. & 1401-7401 et. seq.) as amended, The
Clean Air Act amendments of 1990, and any other applicable federal,
state or local law, regardless whether or not arising during the period
of, or from, or in connection with Seller's ownership or use of the
Interests, excluding, however, any and all such Claims arising from or
relating to duties and obligations of Seller arising from or relating to
(i) contractual obligations of Seller with respect to the Interests
attributable to periods of time prior to the Effective Date including,
without limitation, the obligation to fully and timely pay royalties,
(ii) the gross negligence or willful misconduct of Seller during the
Interim Period, and (iii) the disposal offsite from said Interests prior
to the Closing Date of any hazardous substances, wastes, materials and
products generated by or used in connection with the operation of the
Interests.
8.7 Limitations on Liabilities. Buyer=s indemnification obligations
contained in Sections 8.4 and 8.6 hereof, and Seller=s indemnification
obligations contained in Section 8.5 hereof, shall continue in force and
effect for the five (5) year period immediately following the Closing
Date and, with respect to any indemnified Claim raised during said five
year period, until final, unappealable resolution of said Claim.
Neither Seller nor Buyer shall have any obligation or liability under
this Agreement or in connection with or with respect to the transactions
contemplated in this Agreement for (i) any breach, misrepresentation or
noncompliance with respect to any representation, warranty, covenant or
obligation if such breach, misrepresentation or noncompliance shall have
been waived by the other party, (ii) any misrepresentation or breach of
warranty if such other party had knowledge of the relevant facts at or
before Closing, or (iii) any misrepresentation or breach of warranty if
such other party should have known, in the exercise of reasonable
diligence, of the relevant facts at or before Closing.
8.8 Successors and Assigns. The indemnities of this Article 8 shall inure
to the benefit of Buyer and Seller and the respective affiliates,
partners, members, officers, directors, employees, agents, successors
and assigns of each of them.
8.9 EXCEPT AS OTHERWISE PROVIDED HEREIN, THE INDEMNIFICATION, RELEASE AND
ASSUMPTION PROVISIONS PROVIDED FOR IN ARTICLE 8 OF THIS AGREEMENT SHALL
BE APPLICABLE WHETHER OR NOT THE CLAIMS IN QUESTION AROSE FROM THE
GROSS, SOLE, CONCURRENT, ACTIVE OR PASSIVE NEGLIGENCE OF THE SELLER AND
ITS EMPLOYEES AND/OR AGENTS OR ANY THIRD PARTY AND REGARDLESS OF WHO MAY
BE AT FAULT OR OTHERWISE RESPONSIBLE UNDER ANY OTHER CONTRACT, OR ANY
STATUTE, RULE, OR THEORY OF LAW, INCLUDING, BUT NOT LIMITED TO, THEORIES
OF STRICT LIABILITY. BUYER AND SELLER ACKNOWLEDGE THAT THIS STATEMENT
COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND IS CONSPICUOUS.
ARTICLE 9. TAXES AND EXPENSES.
9.1 Recording and Transfer Expenses. Buyer shall pay all costs of recording
and filing (i) the assignments delivered hereunder for the Interests,
(ii) all state, federal and Indian transfer and assignment documents,
(iii) all applications and other documents required for the transfer of
permits and operatorship of the Interests, and (iv) all other
instruments.
9.2 Ad Valorem, Real Property and Personal Property Taxes. All Ad Valorem
Taxes, Real Property Taxes, Personal Property Taxes, and similar
obligations (AProperty Taxes@) on the Interests are Seller=s obligation
for periods before the Effective Date and Buyer=s obligation for periods
on and after the Effective Date. If Property Taxes for the current year
have not been assessed and paid as of the Closing Date, (i) such taxes
shall be estimated based upon the prior year=s Property Taxes, (ii) the
Seller will reimburse the Buyer for its proportionate share of these
estimated taxes, prorated as of the Effective Date, as a closing
adjustment to the Sale Price, as provided in Section 2.2 of this
Agreement, and (iii) the Buyer shall file all required reports and
returns incident to the Property Taxes and pay the Property Taxes for
the current tax year and subsequent periods. If Property Taxes for the
current tax year have been assessed and paid as of the Closing Date, the
Buyer will reimburse the Seller for its proportionate share of these
taxes, prorated as of the Effective Date, as a closing adjustment to the
Sale Price, as provided in Section 2.2 of this Agreement.
9.3 Severance Taxes. Seller shall bear and pay all severance or other taxes
measured by Hydrocarbon production from the Interests, or the receipt of
proceeds therefrom, to the extent attributable to production from the
Interests before the Effective Date. Buyers shall bear and pay all such
taxes on production from the Interests on and after the Effective Date.
Seller shall withhold and pay on behalf of Buyer all such taxes on
production from the Interests between the Effective Date and the Closing
Date, and the amount of any such payment shall be reimbursed to Seller
as a closing adjustment to the Sale Price pursuant to Section 2.2
hereof. 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 Allocated Values of the Interests.
9.4.2 Financial Reporting. Seller and Buyer 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. Buyer shall be responsible for all sales, use and
similar taxes applicable to the transfer of the Interests. If Seller is
required to pay such sales, use or similar taxes on behalf of Buyer,
Buyer will reimburse Seller at Closing for all sale and use taxes due
and payable on the transfer of the Interests to Buyer. Buyer shall
indemnify Seller and hold Seller harmless from any liability, including,
without limitation, penalties, interest and attorneys= fees, arising out
of Buyer=s failure to pay Seller at Closing the amount equal to all
state and local sales and use taxes payable by Seller on the transfer of
ownership of any tangible personal property.
9.6 Income Taxes. Each Party shall be responsible for its own state and
federal income taxes, if any, as may result from this transaction.
9.7 Incidental Expenses. Each Party shall bear its own respective expenses
incurred in connection with the negotiation and Closing of this
transaction, including its own consultants= fees, attorneys= fees,
accountants= fees, and other similar costs and expenses.
ARTICLE 10. OPERATIONS DURING THE TRANSITION PERIOD.
10.1 Operations by Seller. Seller shall continue to operate that portion of
the Interests for which Seller is the operator during the period between
the Effective Date and 7:00 a.m., local time where the Interests are
located, on the Closing Date, or such other date as Seller and Buyer may
agree in writing or may be required by the applicable operating
agreement (the AInterim Period@). However, Seller will have no
obligation to operate any portion of the Interests after the Interim
Period. Seller shall operate the Interests during the Interim Period in
a prudent manner consistent with generally accepted industry practices
and standards, applicable laws and regulations, and all applicable lease
and operating agreements and other applicable agreements. Transfer of
operations for the Interests is controlled by the applicable operating
agreements and governmental regulatory requirements. Seller shall use
its good faith efforts to assist Buyer in becoming operator of those
Interests currently operated by Seller but shall in no event be required
to expend funds in connection therewith.
10.2 Buyer=s Approval. In conducting operations during the Interim Period,
Seller shall, except for emergency action taken in the face of serious
risk of life, property or the environment, (i) obtain Buyer=s prior
written approval of all expenditures and proposed contracts and
agreements, or amendments to existing contracts and agreements relating
to the Interests that involve individual commitments of more than
$25,000.00 which approval shall not be unreasonably withheld; (ii)
consult with and advise Buyer regarding all material matters concerning
the operation, management and administration of the Interests; and (iii)
obtain Buyer=s written approval before voting under any operating, unit,
joint venture or similar agreement which approval shall not be
unreasonably withheld. Seller shall notify Buyer of any emergency
action taken, and to the extent reasonably practicable, obtain Buyer=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
environment, Seller will have no obligation to undertake any actions
with respect to the Interests that are not required in the course of the
normal operation of the Interests.
10.3 Compensation of Seller. Buyer will pay Seller, as provided under the
applicable operating agreement, for Buyer=s working interest share of
all operating expenses and other expenditures paid by Seller in
connection with the operation of the Interests during the Interim
Period, including overhead charges at the rate specified in the
applicable operating agreement. Seller will have no obligation to make
capital expenditures or extraordinary operating expenditures in
connection with the Interests during the Interim Period. Additionally,
Seller may require Buyer to prepay on a monthly basis any and all
expenses that Seller estimates it will pay in connection with the
operation of the Interests. If Buyer is ultimately selected as operator
of the Interests, Buyer will additionally reimburse Seller for the
amounts of any unpaid operating expenses and capital expenditures of
other working interests owners paid by Seller and attributable to
operations during the Interim Period. Seller will be entitled to retain
any overhead payments received from other working interest owners and
attributable to operations during the Interim Period.
ARTICLE 11. MISCELLANEOUS.
11.1 Notices. All communications required or permitted under this Agreement
shall be in writing and any communications or delivery hereunder shall
be deemed to have been fully made if actually delivered, or if mailed by
registered or certified mail, postage prepaid or by facsimile
transmission, to the address set forth below:
SELLER
SABA ENERGY OF TEXAS, INC.
0000 Xxxxxxxxx 00xx Xxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
Phone: 000.000.0000
Fax: 000.000.0000
with a copy to:
Xxxxx X. Xxxxxx
000 Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Phone: 000.000.0000
Fax: 000.000.0000
BUYER
ENERVEST ENERGY, L.P.
c/o EnerVest Management Company, L.C.
0000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxx
Phone: 000.000.0000
Fax: 000.000.0000
with a copy to:
Xxxxxx Xxxxx Xxxxxx
Xxxxxx and Xxxxx, LLP
0000 Xxxxxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Phone: 000.000.0000
Fax: 000.000.0000
11.2 Further Assurance. After Closing, each of the Parties shall execute,
acknowledge and deliver to the other such further instruments, and take
such other actions as may be reasonably necessary to carry out the
provisions of this Agreement. However, Buyer shall assume all
responsibility for notifying the purchaser of oil and gas production
from the Interests, and such other designated persons who may be
responsible for disbursing payments for the purchase of such production,
of the change of ownership of the Interests. Buyer shall take all
actions necessary to effectuate the transfer of such payments to Buyer.
After final settlement has been made in accordance with Section 2.3,
additional proceeds received by or expenses paid by either Buyer or
Seller on behalf of the other Party shall be settled by invoicing such
Party for expenses paid or remitting to such other Party any proceeds
received.
11.3 Removal of Signs. Seller may either remove its name and signs from the
Seller-operated Interests or require Buyer to do so. Buyer grants
Seller a right of access to the Interests to remove Seller's signs and
name from all xxxxx, facilities and Leases, or to confirm that Buyer has
done so. If Seller's name or signs remain on the Interests after
Closing, Buyer will promptly, but no later than required by applicable
rules and regulations or thirty (30) days after Closing, whichever is
earlier, remove all remaining signs and references to Seller and erect
or install signs complying with applicable rules and regulations,
including signs showing the Buyer as Operator of the Interests as
operated by Seller.
11.4 Securities Laws. The solicitation of offers and the sale of the
Interests by Seller have not been registered under any securities laws.
Buyer represents that at no time has it been presented with or solicited
by or through any public promotion or any form of advertising in
connection with this transaction. Buyer represents that it intends to
acquire the Interests for its own benefit and account and that it is not
acquiring the Interests with the intent of distributing fractional,
undivided interests that would be subject to regulation by federal or
state securities laws, and that if it sells, transfers, or otherwise
disposes of the Interests or fractional, undivided interests, it will do
so in compliance with applicable federal and state securities laws.
11.5 Due Diligence. Buyer represents that it has performed, or will perform
prior to Closing, sufficient review and due diligence with respect to
the Interests, which includes reviewing well-data, title, and other
files, and performing necessary evaluations, assessments, and other
tasks involved in evaluating the Interests, to satisfy its requirements
completely and to enable it to make an informed decision to acquire the
Interests under the terms of this Agreement.
11.6 Material Factor. Buyer acknowledges that Buyer's representations under
Sections 11.4 and 11.5 are a material inducement to Seller to enter into
this Agreement with, and close the sale to, Buyer.
11.7 Press Release. There shall be no press release or public communication
concerning this purchase and sale by either Party, except as required by
law, rule, regulation or order or with the consent of the Party not
originating said release or communication. The Parties will endeavor to
consult each other in a timely manner on all press releases required by
law.
11.8 Entire Agreement. This instrument and the exhibits hereto state the
entire agreement between the Parties and may be supplemented, altered,
amended, modified or revoked by writing only, signed by all Parties.
This Agreement supersedes any prior agreements between the Parties
concerning sale of the Interests, except that any confidentiality
agreement shall continue as provided in Section 5.1 hereof. The headings
are for guidance only and shall have no significance in the
interpretations of this Agreement.
11.9 Assignability. This Agreement and the rights and obligations hereunder
shall not be assignable or delegable by either Party hereto without the
prior written consent of the other Party. This Agreement shall inure to
the benefit of the Parties and their respective successors and permitted
assigns.
11.10 Survival. Except with respect to the representations contained in
Sections 3.1.11 through 3.1.17 and unless otherwise expressly limited
herein, all of the representations, warranties, and agreements of or by
the Parties hereto shall survive the execution and delivery of the
Assignment and Xxxx of Sale. The representations contained in Section
3.1.11 through 3.1.17 shall terminate at Closing.
11.11 Severability. If any provision of this Agreement is found by a court of
competent jurisdiction to be invalid or unenforceable, that provision
will be deemed modified to the extent necessary to make it valid and
enforceable and if it cannot be so modified, it shall be deemed deleted
and the remainder of the Agreement shall continue and remain in full
force and effect.
11.12 Counterparts. This Agreement may be executed in counterparts, each of
which shall constitute an original and all of which shall constitute one
document.
11.13 Governing Law. This Agreement is governed by and must be construed
according to the laws of the State of Texas, excluding any conflicts-of-
law rule or principle that might apply the law of another jurisdiction.
11.14 Dispute Resolution. If a dispute arises between the Parties under this
Agreement, other than a dispute relating to an Environmental Condition
which shall be resolved pursuant to Section 5.3.3, and cannot be
resolved by negotiation, the Parties agree to submit the dispute to
mediation before resorting to litigation. Either Party may request
mediation of a dispute by sending a written request to the other Party.
If either Party requests mediation of a dispute, the Parties agree to
choose a mutually acceptable mediator, promptly begin mediation of the
dispute, and share the costs of all mediation services equally. Each
Party agrees to have present at all mediation conferences at least one
individual who has authority to settle the dispute. Notwithstanding
this agreement to mediate disputes, either Party may file a complaint
for statute of limitation or venue reasons, or seek a preliminary
injunction or other provisional judicial relief, if in its sole judgment
such action is necessary to avoid irreparable damage or to preserve the
status quo. Despite any such protective action, the Parties will
continue to try to resolve the dispute by negotiation or mediation.
11.15 Production Imbalances. The Sale Price does not take into account any
gas imbalances attributable to the Interests as of the Effective Date.
Set forth in Exhibit N attached hereto and made a part hereof for all
purposes is a listing of all gas imbalance volumes measured in mcf and
the aggregate net volume of overproduction or underproduction, as
applicable, attributable to the Interests as of the Effective Date. At
Closing, the Purchase Price shall be adjusted, upward or downward, as
appropriate, to reflect the value of said aggregate net volume of
overproduction or underproduction as said volume may be adjusted prior
to Closing in accordance with each Party=s due diligence investigation.
The value of said aggregate net volume of overproduction or
underproduction, as applicable, shall be the product obtained by
multiplying $1.00 by the volume of such aggregate net overproduction or
underproduction measured in mcf. The Parties acknowledge that the
imbalances assumed at Closing may be incorrect, and Buyer agrees that
the Sale Price will not be adjusted, irrespective of any actual
variance(s) from the assumed imbalances that may exist. Buyer will be
solely responsible for any liability and solely entitled to any benefit
from production imbalances relating to the Interests from and after the
Closing Date.
11.16 Exhibits. In the event of a conflict between the provisions of the
Exhibits attached to this Agreement and the foregoing provisions of this
Agreement, the provisions of this Agreement shall take precedence. The
omission of certain provisions of this Agreement from any conveyance
delivered pursuant hereto does not constitute a conflict between this
Agreement and said conveyance document and will not effect a merger of
the omitted provisions.
11.17 Amendments and Waivers. This Agreement may not be modified or amended
except by an instrument or instruments in writing signed by the Party
against whom enforcement of any such modification or amendment is
sought. Any Party hereto may, only by an instrument in writing, waive
compliance by the other Party hereto with any term or provision of this
Agreement on the part of such other Party hereto to be performed or
complied with. The waiver by any Party hereto of a breach of any term
or provision of this Agreement shall not be construed as a waiver of any
subsequent breach.
BUYER ACKNOWLEDGES THAT IT HAS READ THIS AGREEMENT IN ITS ENTIRETY, AND
THAT IT UNDERSTANDS ALL THE PROVISIONS SET FORTH THEREIN, INCLUDING, BUT NOT
LIMITED TO, THOSE PROVISIONS LOCATED IN ARTICLE 8 WHEREIN BUYER AGREES TO
INDEMNIFY SELLER IN CERTAIN CIRCUMSTANCES EVEN THOUGH THE LOSSES, COSTS,
EXPENSES AND/OR DAMAGES MAY HAVE BEEN CAUSED BY THE GROSS, SOLE, CONCURRENT,
ACTIVE OR PASSIVE NEGLIGENCE OF THE SELLER, ITS EMPLOYEES, OR ANY THIRD PARTY
AND EVEN THOUGH THE SELLER MAY BE RESPONSIBLE FOR SUCH LOSSES, COSTS, EXPENSES
AND/OR DAMAGES UNDER ANY THEORY OF LAW, INCLUDING BUT NOT LIMITED TO STRICT
LIABILITY.
EXECUTED as of the date first above mentioned.
SELLER:
SABA ENERGY OF TEXAS, INC.
By:
Xxxxxxx X. Xxxxxx
Chief Executive Officer
BUYER:
ENERVEST ENERGY, L.P.
By: EnerVest Management Company, L.C.,
Managing General Partner
By:
Xxxx X. Xxxxxx
President and Chief Executive Officer
PURCHASE AND SALE AGREEMENT
BETWEEN
SABA ENERGY OF TEXAS, INC.
AND
ENERVEST ENERGY, L.P.
DATED
April 21, 1999
TABLE OF CONTENTS
Page No.
ARTICLE 1. PROPERTY DESCRIPTION . . . . . . .1
1.1 The Interests. . . . . .1
1.2 Ownership of Production from the Interests Prior to the
Effective
Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Ownership of Production from the Interests After the Effective
Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 2. CONSIDERATION. . . . . . . . . . . . . . . . . . . . . . 4
2.1 Sale Price . . . . . . .4
2.1.1 Amount Due at Closing . . . . . . 4
2.1.2 Allocated Values. . . . . . .4
2.1.3 Xxxxxxx Money . . . . . 4
2.1.4 Identification of Acquisition Funds . . . . . . .5
2.2 Adjustments at Closing . . . . . .5
2.2.1 Preliminary Settlement Statement. . . . . . 5
2.2.2 Upward Adjustments. . . . . .5
2.2.3 Downward Adjustments. . . . . . . 6
2.3 Adjustments After Closing. . . . . . . 7
2.3.1 Final Settlement Statement. . . . . . .7
2.3.2 Payment of Post-Closing Adjustments . . . . . . .7
2.3.3 Resolution of Disputed Items. . . . . .7
2.4 Payment Method . . . . . . . 8
2.5 Principles of Accounting . . . . . . . 8
ARTICLE 3. REPRESENTATIONS AND WARRANTIES . . . . . . .8
3.1 Seller's Representations . . . . . . . 8
3.1.1 Corporate Authority . . . . . . . 8
3.1.2 Requisite Approvals . . . . . . . 8
3.1.3 Validity of Obligation. . . . . . 8
3.1.4 No Violation of Contractual Restrictions. . . . . . . 9
3.1.5 No Violation of Other Legal Restrictions. . . . . . . 9
3.1.6 Bankruptcy. . . . . . . 9
3.1.7 Broker's Fees . . . . . 9
3.1.8 Lawsuits and Claims . . . . . . . 9
3.1.9 Permits . . . . . .9
3.1.10 Tax Partnerships. . . . . . 10
3.1.11 Operations and Expenditures.. . . . . 10
3.1.12 Prepayment Contracts. . . . . . .10
3.1.13 Taxes. . . . . . 10
3.1.14 Call on Production. . . . . 10
3.1.15Status and Operation of the Leases. . . . . . . 10
3.1.16 Compliance with Laws. . . . . . .11
3.1.17 Suitability of Equipment. . . . . . . 11
3.1.18 Accuracy of Information Furnished . . . . .12
3.2 Buyer's Representations. . . . . 12
3.2.1 Partnership Authority . . . . . .12
3.2.2 Requisite Approvals . . . . . . .12
3.2.3 Validity of Obligation. . . . . .12
3.2.4 No Violation of Contractual Restrictions. . . . . . .13
3.2. No Violation of Other Legal Restrictions. . . . . . .13
3.2.6 Bankruptcy. . . . . . .13
3.2.7 Broker=s Fees . . . . .13
3.2.8 Lawsuits and Claims . . . . . . .13
3.2.9 Securities Laws . . . . . . 13
3.3 Notice of Changes. . . . . .13
ARTICLE 4. TITLE WARRANTY; DISCLAIMER OF WARRANTIES . . . . . . 14
4.1 Special Warranty of Title; Encumbrances. . . . . . . 14
4.2 Condition and Fitness of the Interests . . . . .14
4.3 Information About the Interests. . . . . . 15
4.4 Subrogation of Warranties. . . . . . .15
ARTICLE 5. DUE DILIGENCE REVIEW OF THE INTERESTS. . . . . .15
5.1 Access to Records. . . . . .15
5.2 Physical and Environmental Inspection. . . . . .16
5.3 Environmental Assessment . . . . . . .16
5.3.1 Inspection and Test Results . . . . . 16
5.3.2 Notice of Environmental Conditions. . . . . . . 17
5.3.3 Rights and Remedies for Environmental Conditions. . . . . 17
5.4 Preferential Rights and Consents to Assign . . . . . 18
5.4.1 Notices to Holders. . . . . 18
5.4.2 Remedies Before Closing . . . . .19
5.4.3 Remedies After Closing. . . . . .20
(i) Preferential Rights. . . . . . . 20
(ii) Consents . . . . .20
5.5 Title Defects. . . . . 20
5.5.1 Definition of Title Defect. . . . . . 20
5.5.2 Notice of Title Defects . . . . .21
5.5.3 Right to Cure Title Defect. . . . . . 21
5.5.4 Remedies for Uncured Title Defects. . . . . . . 22
5.6 Casualty Losses and Government Takings.. . . . . . . 22
5.6.1 Notice of Casualty Losses and Government Takings. . . . . 22
5.6.2 Remedies for Casualty Losses and Government Takings . . . . . .23
5.6.3 Insurance Proceeds and Settlement Payments. . . . . .23
5.6.4 Exclusion of Ordinary Depreciation and Depletion. . . . . 23
ARTICLE 6. TERMINATION AND EFFECT OF TERMINATION. . . . . .24
6.1 Right to Terminate . . . . .24
6.2 Effect of Termination. . . . . . 24
6.2.1 Termination by Agreement. . . . . . . 24
6.2.2 Termination as a Result of Buyer=s Breach . . . . . .24
6.2.3 Termination as a Result of Seller=s Breach. . . . . .25
6.2.4 Termination Pursuant to Section 6.1.. . . . . . 25
6.2.5 Return of Data. . . . . . . 25
ARTICLE 7. CONDITIONS OF CLOSING AND CLOSING. . . . . 25
7.1 Conditions of Closing by Buyer . . . . . . 25
7.1.1 Representations, Warranties and Covenants. . . . . . . . 25
7.1.2 Consents. . . . . 25
7.1.3 Lawsuits and Claims . . . . . . .26
7.1.4 Bank Releases . . . . .26
7.1.5 Guaranty. . . . . 26
7.2 Conditions of Closing by Seller. . . . . . 26
7.2.1 Representations, Warranties and Covenants . . . . . .26
7.2.2 Lawsuits and Claims . . . . . . .26
7.2.3 Bonds and Insurance . . . . . . .26
7.3 Closing. . . . . .27
7.4 Actions to Occur at Closing. . . . . .27
7.4.1 Delivery of Assignment. . . . . .27
7.4.2 Delivery of Bank Releases . . . . . . 27
7.4.3 Delivery of Guaranty. . . . . . .27
7.4.4 Delivery of Sale Price. . . . . .27
7.4.5 Change of Operatorship Forms. . . . . 27
7.4.6 Evidence of Bonds . . . . . 27
7.4.7 Possession of the Interests . . . . . 27
7.4.8 Letters-in-Lieu . . . . . . 27
7.4.9 Officer=s Certificates. . . . . .28
7.5 Post-Closing Obligations . . . . . . .28
7.5.1 Delivery of Records . . . . . . .28
7.5.2 Recording and Filing. . . . . . .28
7.5.3 Change of Operator Requirements . . . . . .28
7.5.4 Further Assurances. . . . . . . .29
ARTICLE 8. ASSUMED RIGHTS AND OBLIGATIONS AND INDEMNITIES.. . . . . .29
8.1 Condition of the Interests . . . . . .29
8.1.1 Oil and Gas Activities. . . . . .29
8.1.2 NORM. . . . . . . 29
8.2 Assumption of Obligations by Buyer . . . . . . .30
8.3 Retention of Liabilities by Seller . . . . . . .30
8.4 General Indemnification by Buyer . . . . . 30
8.5 Indemnification by Seller. . . . . . .31
8.6 Environmental Indemnity and Release. . . . . . .32
8.7 Limitations on Liabilities . . . . . .32
8.8 Successors and Assigns . . . . . 33
ARTICLE 9. TAXES AND EXPENSES.. . . . . . . 33
9.1 Recording and Transfer Expenses. . . . . . 33
9.2 Ad Valorem, Real Property and Personal Property Taxes. . . . . 33
9.3 Severance Taxes. . . . . . .34
9.4 Tax and Financial Reporting. . . . . .34
9.4.1 IRS Form 8594 . . . . .34
9.4.2 Financial Reporting . . . . . . .34
9.5 Sales and Use Taxes. . . . . . . 34
9.6 Income Taxes . . . . . 35
9.7 Incidental Expenses. . . . . . . 35
ARTICLE 10. OPERATIONS DURING THE TRANSITION PERIOD. . . . . . . 35
10.1 Operations by Seller . . . . . . 35
10.2 Buyer=s Approval . . . . . .35
10.3 Compensation of Seller . . . . . 36
ARTICLE 11. MISCELLANEOUS. . . . . 36
11.1 Notices. . . . . .36
11.2 Further Assurance. . . . . .37
11.3 Removal of Signs . . . . . .38
11.4 Securities Laws. . . . . . .38
11.5 Due Diligence. . . . . 38
11.6 Material Factor. . . . . . .38
11.7 Press Release. . . . . 38
11.8 Entire Agreement . . . . . .Page 39
11.9 Assignability. . . . . Page 39
11.10 Survival . . . . .Page 39
11.11 Severability . . . . . Page 39
11.12 Counterparts . . . . . Page 39
11.13 Governing Law. . . . . Page 39
11.14 Dispute Resolution . . . . .Page 39
11.15 Production Imbalances. . . . . . Page 40
11.16 Exhibits . . . . .Page 40
11.17 Amendments and Waivers . . . . . Page 40
LIST OF EXHIBITS
Exhibit A-1 Description of Interests
Exhibit A-2 Description of Leases
Exhibit B Equipment
Exhibit C Easements, Rights-of Way, Licenses, Permits, etc.
Exhibit D Contracts
Exhibit E Liens, Mortgages and Other Encumbrances Affecting the Leases
Exhibit F Allocated Values
Exhibit G Suspense Accounts
Exhibit H Lawsuits and Claims
Exhibit I Unpaid Operating Costs
Exhibit J Compliance With Laws
Exhibit K Preferential Purchase Rights and Consents to Assign
Exhibit L Guaranty of Saba Petroleum Company
Exhibit M Form of Assignment, Xxxx of Sales and Conveyance
Exhibit N Production Imbalances
