EXHIBIT 10.7
AGREEMENT FOR SALE
▇▇▇▇▇▇▇▇ GAS PROCESSING PLANT
AND GRASSLANDS GAS GATHERING SYSTEM
THIS AGREEMENT is made and entered into this ___ day of October, 1996, by
and between ▇▇▇▇ HYDROCARBON COMPANY, a division of ▇▇▇▇ INDUSTRIES, INC., a
Kansas corporation ("Seller") and TransMontaigne Oil Company, by and through its
subsidiary Bear Paw Energy, Inc., a Colorado corporation ("Buyer").
WHEREAS, Seller owns a natural gas processing plant located in ▇▇▇▇▇▇▇▇
County, North Dakota (hereinafter the "▇▇▇▇▇▇▇▇ Plant"), and related gathering
system and compression facilities located in Divide, Williams, McKenzie,
Mountrail, ▇▇▇▇, Golden Valley, ▇▇▇▇▇▇▇▇, ▇▇▇▇ and ▇▇▇▇▇ Counties, North Dakota,
and in Sheridan, Roosevelt, and Richland Counties, Montana, as more particularly
described on the maps constituting SCHEDULE 1.1 (a) which includes, without
limitation, the "Grasslands Gas Gathering System" and the "▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Gas
Gathering System" (the ▇▇▇▇▇▇▇▇ Plant, Grasslands Gas Gathering System, ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ Gas Gathering System, and related compression facilities are
collectively hereinafter referred to as the "▇▇▇▇▇▇▇▇ System");
WHEREAS, pursuant to the terms of this Agreement, Seller desires to sell
and Buyer desires to purchase the ▇▇▇▇▇▇▇▇ System, along with all appurtenances,
interests in real property, and contracts related thereto that are referenced
herein:
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein, the parties agree as follows:
ARTICLE I
SALE OF GAS GATHERING AND PROCESSING ASSETS
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1.1 Sale of Assets. Subject to the terms and conditions of this
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Agreement, Seller agrees to sell and Buyer agrees to purchase all of Seller's
right, title and interest (including that of any of Seller's affiliates) in the
processing plant, lines of pipe used for natural gas, generally commencing at
the inlet to the custody transfer meter, compression facilities and related
equipment comprising the ▇▇▇▇▇▇▇▇ System, together with all personal property
and inventory-on-hand or on location, rights-of-way, easements and interests in
real property associated therewith, and contracts as more completely described
in the schedules referenced immediately below ("Assets"), including:
(a) the ▇▇▇▇▇▇▇▇ Plant (including the Riverview terminal),
compression facilities, and the gas gathering pipelines which include the
Grasslands Gas Gathering System and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Gas Gathering System,
comprising approximately 2500 miles
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of pipelines ranging in diameter from 2" to 16" as depicted on the maps
attached hereto as SCHEDULE 1.1(a);
(b) the ▇▇▇▇▇▇▇▇ System equipment, including but not limited to the
compressor units, scrubbers, dehydration units, tanks, traps, cathodic
protection equipment, gas processing facilities, office equipment, that
portion of the telemetry system utilized to measure (but not monitor) the
▇▇▇▇▇▇▇▇ System, all computer software programs utilized to operate
Seller's spreadsheet allocation system (not including any mainframe or
payment distribution systems) subject to transferability of licenses and
agreements which such transfers do not incur a charge or reporting
requirement to or by Seller and/or if developed by Seller, are not deemed
by Seller to be proprietary to it (except that Seller shall provide at no
cost to Buyer a license (nontransferable except to an affiliate of Buyer)
to utilize for its own benefit up to 5 copies of any software developed by
Seller utilized to operate Seller's spreadsheet allocation system), and
other personal property listed on SCHEDULE 1.1(b) and incorporated herein
by this reference;
(c) the real property interests, together with buildings and
structures located thereon, including fee interests, surface leases,
easements, rights-of-way and prescriptive rights relating to the ▇▇▇▇▇▇▇▇
System real property interests ("Real Property Interests"), whether or not
listed on the attached SCHEDULE 1.1(c);
(d) the vehicles and heavy motorized equipment, and personal
property and equipment located on such vehicles, trailers and like
equipment listed on the attached SCHEDULE 1.1(d);
(e) the gas purchase and processing agreements and gas gathering
agreements, products marketing agreements, together with the third party
contractor or supplier agreements, all as listed on SCHEDULE 1.1(e) (the
"Contracts");
(f) any and all other facilities or equipment located at the
▇▇▇▇▇▇▇▇ Plant or attached or appurtenant to the ▇▇▇▇▇▇▇▇ System gathering
lines, whether in use or non-use, whether specifically described in the
schedules above, except:
(i) those items, property interests, vehicles, and facilities
listed on SCHEDULE 1.1(f), which are specifically excluded from the
sale, and further excepting;
(ii) those facilities and equipment located at the ▇▇▇▇▇▇▇▇
Plant or attached or appurtenant to the ▇▇▇▇▇▇▇▇ System gathering
lines which
(aa) are used solely by either ▇▇▇▇ Oil Company; ▇▇▇▇
Pipeline Company, L.P., or ▇▇▇▇ Exploration Company, or
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(bb) if used jointly by Seller and one of its
affiliates, Seller and Buyer shall cooperate with each other to
segregate the use of such facilities and equipment as soon as
immediately practical, or if not immediately practical without
significant expense, Buyer shall be granted such rights to
access, use, and enjoyment of the benefits of such facilities and
equipment as are currently enjoyed by Seller;
Seller and Buyer shall use good faith efforts to identify facilities and
equipment falling into 1.1(f)(ii) prior to Closing so that arrangements, if
necessary, can be made for their segregation or such continued joint use without
interruption or conflict; and
(g) any inventory of natural gas, liquid hydrocarbon mix, sulfur
and fractionated products in storage at the ▇▇▇▇▇▇▇▇ Plant or line pack for
the account of Seller located in the ▇▇▇▇▇▇▇▇ System.
1.2 Assignment of Realty, Agreements, Permits and Authorizations. Seller
------------------------------------------------------------
shall transfer to Buyer, to the extent legally transferable or assignable, all
of its right, title and interest in all Real Property Interests, Contracts,
agreements and permits owned or held by Seller in connection with ownership and
operation of the Assets pursuant to assignments and bills of sale, substantially
in the forms attached hereto as EXHIBIT "A", and deeds substantially in the form
attached hereto as EXHIBIT "B".
1.3 Environmental and Operating Permits. A list of environmental and
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operating permits associated with the ▇▇▇▇▇▇▇▇ System which shall be transferred
to Buyer at Closing, to the extent legally transferable, is set forth as
SCHEDULE 1.3 hereto. Buyer shall be responsible for undertaking any
applications or notices for facilitating the assignment and receipt of such
permits, and Seller covenants to undertake such acts as may be helpful to Buyer
to obtain transfer of the benefits of such permits, including joint submissions,
to the extent such undertakings incur no cost or continuing obligation to Seller
other than the incurrence of ordinary general and administrative expenses
related to the preparation of any applications or transfer documents. Buyer
shall be responsible for any transfer fees.
1.4 Assignment of other Permits and Authorizations. Seller shall transfer
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or cause to be transferred to Buyer, to the extent legally transferable or
assignable, all of its right, title and interest in all non-environmental
related permits and licenses owned or held by Seller in connection with
ownership and operation of the Assets. Buyer shall be responsible for
undertaking any applications or notices for facilitating the assignment and
receipt of such permits, and Seller covenants to undertake such acts as may be
helpful to Buyer to obtain transfer of the benefits of such permits, including
joint submissions to the extent such undertakings incur no cost or continuing
obligation to Seller other
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than the incurrence of ordinary general and administrative expenses related to
the preparation of any applications or transfer documents. Buyer shall be
responsible for any transfer fees.
ARTICLE II
PURCHASE PRICE AND CLOSING
--------------------------
2.1 Purchase Price. Subject to the terms and conditions of this
--------------
Agreement, and in full payment for conveyance of the Assets, Buyer shall pay
Seller at Closing (as such term is defined hereinafter), by wire transfer, the
sum of $81,127,000, as may be adjusted pursuant to the provisions of this
Agreement (the "Purchase Price") as evidenced by the Preliminary Settlement
Statement described in 7.5(b). In addition, Buyer shall pay the cost of
recording the assignments and bills of sale, deeds and other instruments, and
the cost of any transfer tax, documentary stamps, mortgage tax, sales tax, use
tax or similar tax due as a result of the sale of the Assets. Should the Seller
be required by statute to collect any such taxes from Buyer at Closing. Seller
shall notify Buyer as soon as possible after execution of this Agreement if it
intends to collect such taxes so that Buyer may address such taxes with the
taxing authority. Such amounts as determined by the taxing authority will be
added to the Purchase Price and be wired directly to the Seller at the time of
Closing.
2.2 Adjustments to the Purchase Price. The Purchase Price shall be
---------------------------------
adjusted at Closing by the following adjustments ("Purchase Price Adjustments").
(a) Upward Adjustments. The Purchase Price shall be adjusted
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upward by the following:
(i) The amount of expenses, costs, taxes, charges incurred or
paid by Seller that are directly attributable to the ownership and
operation of the Assets on or after the Effective Date, including but
not limited to:
(A) the normal course of operation and maintenance of the
Assets;
(B) any capital expenditures pursuant to AFE's approved
after the Effective Date through the Closing provided such
capital expenditures are incurred with the written consent of
Buyer;
(C) any capital expenditures due to replacement caused by
an emergency, act of God, or other circumstance requiring an
expenditure to keep the ▇▇▇▇▇▇▇▇ System or component thereof in
operation; and
(D) actual administrative and general expenses not to
exceed $40,000 per month as currently allocated by Seller to the
ownership
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or operation of Assets based upon past practice for the period
of time between the Effective Date and Closing;
(ii) the cost of any transfer tax, documentary stamps, mortgage
tax, sales tax, use tax or similar tax due as a result of the sale of
the Assets, should the Seller be required by statute, to collect any
such taxes from Buyer at Closing; and
(iii) any other amounts agreed upon by Seller and Buyer.
(b) Downward Adjustments. The Purchase Price shall be adjusted
--------------------
downward by the following:
(i) the amount of all income, revenues and proceeds received
by Seller that are attributable to the ownership and operation of the
Assets on or after the Effective Date including, but not limited to:
(A) income, revenues and proceeds for payment of gas,
natural gas liquids and other plant products saved and sold;
(B) income, revenues and proceeds from other sources and
attributable to the ownership and operation of the Assets for
periods on or after the Effective Date; and
(C) ad valorem, property, general real estate and other
taxes that are allocated to the Seller pursuant to Section 2.3;
(ii) the amount of any Casualty loss pursuant to Section 7.1
which occurs prior to Closing;
(iii) the amount assigned to any pre-Closing Defective
Interests in accord with Section 6.2 and the amount assigned to any
pre-Closing Identified Liabilities in accord with Section 6.3, and any
amounts agreed upon due to imbalances in accord with Section 4.1(s),
provided such amounts in the aggregate do not exceed five million
dollars ($5,000,000), unless Seller expressly waives in writing to
Buyer prior to Closing, Seller's right to terminate this Agreement
pursuant to Section 15.6(e);
(iv) an adjustment, if any, pursuant to Section 7.12 related
to the agreement between the parties with respect to the Burlington
Resources (Meridian Oil) agreement No. MCK-1873; and
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(v) any other amounts agreed upon by Seller and Buyer.
2.3 Property Tax Proration. Real estate and personal property taxes for
----------------------
the calendar year January 1, 1996, through December 31, 1996, shall be prorated
to the Effective Date (as hereinafter defined) based upon the most recent
property tax assessments and most recent certified tax rates. Such tax proration
shall be settled at Closing by an adjustment to the Purchase Price. Buyer will
assume responsibility for the actual payment to applicable government
authorities of any unpaid property taxes not yet due.
2.4 Effective Date. The purchase and sale of the Assets shall be
--------------
effective as of October 1, 1996, at 7:00 A.M., Central Daylight Time (herein
called the "Effective Date"). For purposes of allocation of natural gas and
product inventory between Buyer and Seller, chart readings taken October 1, 1996
for the month of September production shall be utilized by the parties for
allocation of the ownership of natural gas and product inventory.
2.5 Deposit. Buyer shall, upon the execution of this Agreement by both
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parties, pay by means of a wire transfer to the account of Seller (pursuant to
the same wire instructions set forth in Section 8.3 for payment of the Purchase
Price at Closing) the sum of Three Million Dollars ($3,000,000) as a deposit to
be credited towards the Purchase Price upon Closing. Such sum shall be refunded
to Buyer, without interest, in the event of termination of this Agreement
without Closing because of:
(a) a ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ ruling which is unsatisfactory in a
material part to either party;
(b) Seller's failure to close its purchase of the ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Gathering System on or before January 31, 1997;
(c) Seller's exercise of Seller's option to terminate this
Agreement in the event Purchase Price adjustments under Section 2.2(b)(iii)
exceed $5,000,000;
(d) Seller or Buyer, pursuant to Section 6.2(e), elects to
terminate because Defective Interests exceed 25% of the Purchase Price;
(e) Buyer exercises its right not to Close pursuant to Section 8.2,
except for Section 8.2(f), which such subsection, if being the basis for
Buyer not to Close pursuant to Section 8.2, shall not preclude Seller from
retaining the deposit made by Buyer pursuant to this provision; or
(f) Seller exercises its right to terminate this Agreement pursuant
to Section 15.6(d) because the sum of all Purchase Price Adjustments of any
kind, any nature, exceeded 25%.
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In the event Buyer fails to timely close the transaction contemplated
herein for any reason other than those listed immediately above, then
Seller shall retain such $3,000,000 sum as liquidated damages (and not as a
penalty) for all losses or claims Seller may have against Buyer.
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ARTICLE III
ASSIGNMENT AND ASSUMPTION OF CONTRACTS
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3.1 Gas Purchase and Processing Contracts. To the extent legally
-------------------------------------
assignable, Seller agrees to assign to Buyer, and Buyer agrees to assume all
rights and obligations of Seller under the Contracts for matters related to such
Contracts on or after the Effective Date, together with all amendments and
ratifications pertaining to them. Nothing provided herein shall be construed to
require Buyer to assume the claims or proceedings listed on SCHEDULES 4.1(d),
(g), (h), or (i). (Buyer agrees, however, to assume the rights and obligations
of those contracts listed on SCHEDULES 4.1(d), (g), and (h) which may be pending
but unexecuted or are terminated by Seller pursuant to their terms provided the
other party to any such unexecuted Contract or terminated Contract has not
brought a claim or proceeding, which Seller has separately listed, which such
claim or proceeding Seller agrees to retain).
3.2 Performance Prior to Closing. Subject to the provisions of Section
----------------------------
10.7, Buyer shall assume responsibility for operation of the Assets and for
performance of the Contracts as of the Closing Date. Seller shall be entitled to
receive payment for all gas, natural gas liquids and other plant products saved
and sold prior to the Closing Date, provided that Seller shall make payment for
all such gas to the producers, natural gas liquids and other plant products
pursuant to the Contracts, with the allocation of the plant, marketing and
transportation fees taken into account, such payments being adjustments under
Section 2.2(b)(i). Except as otherwise provided herein, Buyer agrees to assume
all rights and obligations of the Seller under the Contracts to be assigned as
of the Closing Date. The parties recognize that Seller will be managing the
Contracts on behalf of Buyer during the period of time between the Effective
Date and the Closing. During this period of time, Buyer agrees to defend,
indemnify and hold Seller harmless from any and all costs, expenses and
liabilities under such Contracts accruing on and after the Effective Date,
provided Seller fulfills the obligations set forth under the Contracts as a
reasonably prudent operator of natural gas facilities. This indemnity shall not
apply to any acts of Seller which are grossly negligent or which involve willful
or wanton misconduct respecting such Contracts. Seller shall defend, indemnify
and hold Buyer harmless from any and all costs, expenses and liabilities
directly attributable to the gross negligence, willful or wanton misconduct in
the administration or performance under such Contracts, but not otherwise,
occurring between the Effective Date and Closing.
ARTICLE IV
REPRESENTATION AND WARRANTIES OF SELLER
---------------------------------------
Seller hereby represents and warrants to Buyer as follows:
4.1 Seller. Seller represents and warrants to Buyer that:
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(a) Organization and Standing. Seller is a corporation duly
-------------------------
organized, validly existing and in good standing under the laws of the
State of Kansas, and registered and in good standing as a foreign
corporation in North Dakota and Montana and has all requisite power to own,
lease and operate the Assets and to carry on its business as now being
conducted.
(b) Authority. Seller has the power and authority to enter into
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and perform this Agreement and to carry out the transactions contemplated
herein. Seller has all the requisite legal authority to own the Assets and
to carry on its business as now conducted in regard to the Assets. The
execution and delivery of this Agreement and the consummation by Seller of
the transactions contemplated herein have been duly and validly authorized
by all necessary action of the Board of Directors of Seller, and this
Agreement constitutes a valid and binding obligation of the Seller
enforceable in accordance with its terms. To the best knowledge of the
Seller, the making and performance of this Agreement by Seller will not
violate any provisions of any federal, state or local laws or the Articles
of Incorporation or Bylaws of Seller, and will not result in the breach or
violation of, constitute a default under, or result in the creation of any
lien, charge or encumbrance upon any of the Assets, under any contractual
agreement.
(c) Validity of Agreement. The Agreement is a legal, valid and
---------------------
binding obligation of Seller enforceable against Seller in accordance with
the terms of this Agreement, except as enforcement may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights in general. The enforceability of Seller's obligations
under this Agreement is subject to general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or
at law). Neither the execution of this Agreement nor the consummation of
the transactions contemplated herein will constitute a violation of, or
conflict with, or default under, any order, judgment, decree, or any
contract, commitment, agreement, understanding, arrangement or restriction
of any kind to which Seller is a party or by which Seller is bound, other
than as disclosed in the exhibits and schedules to this Agreement or as may
be otherwise provided for herein.
(d) No Claims. Except as disclosed in SCHEDULE 4.1(d), Seller
---------
represents and warrants to its knowledge that there are no governmental or
other legal actions, claims, suits or proceedings pending or threatened,
and Seller is unaware of any facts which would result in an action, claim,
suit or proceeding to which Seller is or would be a party, to which any of
the Assets are or may be subject or that, if adversely determined, may
prevent or interfere with the consummation of the transactions contemplated
by this Agreement. Seller has not received any notices of claims from any
person purporting to act in an official capacity as a representative of any
federal, state or local governmental agency, bureau, department or
authority asserting a claim that Seller is in violation of any applicable
law, order or regulation
9
of a nature which governs the operations of the Assets and remains uncured,
or the enforcement of which in the event of a violation would "adversely
affect" any significant portion of the Assets or significantly impair the
ability to operate the Assets as they are operated today.
(e) Compliance with Applicable Laws. Except as set forth in
-------------------------------
SCHEDULE 4.1(e), to the knowledge of Seller, Seller is in compliance with
applicable laws, orders, rules, regulations, judgments or decrees affecting
the ownership, operation or use of the Assets, including "Environmental
Laws" as defined hereafter, of Governmental Authorities with jurisdiction
over the Assets, except for those non-compliance matters, which based upon
past practice generally or based upon the experience of Seller or Buyer,
would not subject the owner or holder of the Assets to any fine,
imprisonment, or denial of the benefits of the use and ownership of such
Assets.
(f) Indebtedness. The Assets are not subject to any lien,
------------
encumbrance, charge, instrument or agreement evidencing or related to
indebtedness for borrowed money, whether directly or indirectly; or any
agreement, other than those involving the processing or purchase of gas.
(g) Contracts. Except as disclosed in SCHEDULE 4.1(g), all
---------
Contracts are to Seller's knowledge in full force and effect and constitute
valid and legally binding obligations of the parties thereto and are
enforceable in accordance with their respective terms. Seller has no
knowledge of any circumstances except as disclosed on SCHEDULE 4.1(g) which
exist which more likely than not would rise to a material claim against
Seller respecting the performance, breach or compliance with the terms and
conditions of any such Contracts. All such Contracts are assignable to
Buyer in accordance with their terms.
(h) Contract Breach. Except as disclosed on SCHEDULE 4.1(h),
---------------
Seller is not in breach or default with respect to any of its obligations
pursuant to any Contracts, which if breached or in default, would provide
reasonable cause for the other party to any such Contract to bring an
action for damages. Seller has no knowledge of any circumstances except as
disclosed on SCHEDULE 4.1(h) which exist which more likely than not would
rise to a material claim against Seller respecting the performance, breach
or compliance with the terms and conditions of any such Contracts. Seller
has accounted for distribution of proceeds and allocation of proceeds of
production in accord with the terms and conditions of those Contracts with
producers relating to the purchase, processing or gathering of natural gas.
(i) Termination. Except as provided on SCHEDULE 4.1(i), to Seller's
-----------
knowledge, no party to any Contract has given notice of any action to
terminate, cancel, rescind, or procure a judicial reformation of their
contract or any material provision thereof.
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(j) Exchange of Equipment. Except as set forth in SCHEDULE 4.1(j),
---------------------
since August 1, 1996, with respect to each of the Assets,
(i) Seller has not exchanged any of the Assets for an asset
of lesser value; and
(ii) Seller has not removed any idle equipment or inventory
from the Assets other than in the ordinary course of business.
(k) No Consents Required. Except for that certain ▇▇▇▇-▇▇▇▇▇-
--------------------
▇▇▇▇▇▇ ("HSR") filing to be made, no consents are required from any
Governmental Authorities, no preferential purchase rights, consents, calls
upon, options to purchase, approvals or other action by, or filing with any
person or governmental body is required in connection with the execution,
delivery and performance by Seller of this Agreement other than those to
reflect a change of ownership and operatorship of the ▇▇▇▇▇▇▇▇ Plant, the
▇▇▇▇▇▇▇▇ System, and its component parts, jointly or individually. All
board of director approvals for the execution of this Agreement and the
consummation of the transaction(s) set forth herein have been obtained.
Except as provided in SCHEDULE 4.1(k), no consents are required to the
transfer of Contracts, easements, rights-of-way or surface leases
underlying or affecting the ▇▇▇▇▇▇▇▇ System or ▇▇▇▇▇▇▇▇ Plant.
(l) Conduct of Business. Except as set forth on SCHEDULE 4.1(l),
-------------------
since August 1, 1996, the Assets have not been operated other than in the
ordinary course of business in accordance with standard processing plant
and gathering practices.
(m) Permits. Except as would not prevent Buyer from enjoying the
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benefits of ownership or operation of any of the Assets, Seller to the best
of its knowledge: has the permits necessary for the ownership and
operation of the Assets as currently conducted, including, without limit,
operating, environmental and special use permits; each such permit is in
full force and effect; and Seller is in compliance with all its obligations
with respect thereto, and no event has occurred which permits, or upon the
giving of notice or the passage of time or both would allow, the revocation
or termination of any such permit.
(n) Assets and Title to Assets. Seller has Defensible Title (as
--------------------------
defined below), free and clear of all liens and encumbrances, other than
Permitted Encumbrances, to those Assets for which an indicia of title
commonly recorded in county or state records, such as a deed for real
property or a certificate of title issued by a state with respect to
personal property, such as vehicles and trailers, or in the case of leased
Real Property Interests, the valid right to possession of the same pursuant
to valid leases or other agreements exist. As used herein, "Defensible
Title" shall mean title that is held in the name of Seller or an
arrangement that
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otherwise grants Seller the right to use such Asset and is presently
uncontested, but which, if contested, may require Seller to obtain and
record appropriate curative instruments or, in the alternative, institute
an action to quiet title or other judicial action in order to render the
same marketable taking the Permitted Encumbrances into account.
For purposes of this Agreement, the term "Permitted Encumbrances" shall
mean:
(1) Preferential rights to purchase and required third
party consents to assignments and similar agreements with respect to
which (i) waivers or consents are obtained prior to Closing from the
appropriate parties; (ii) the appropriate time period for asserting
such rights has expired without an exercise of such rights; (iii) such
consents (other than those which by the express terms of the
underlying agreement may arbitrarily be withheld), which if not
obtained prior to Closing, would not reasonably preclude Buyer from
substantially enjoying the benefits of the assignment of the Real
Property Interests; or (iv) Buyer has otherwise agreed to treat such
rights or consents as Permitted Encumbrances;
(2) Materialman's, mechanic's, repairman's, contractor's,
operator's, tax and other similar liens or charges arising in the
ordinary course of business: (i) if they have not been filed pursuant
to law or if they are liens or mortgages to be released at Closing;
(ii) if filed, payment is being withheld as provided by law; (iii)
if they are against a Property in which Seller owns only an undivided
interest and they arise pursuant to operations governed by any
agreement which disclaims the existence of joint and several
liability, then in such a proportion as such lien or charge encumbers
interests other than the undivided interest of Seller; (iv) if their
validity is being contested in good faith by appropriate action, and
Seller agrees to indemnify Buyer from all costs and expenses relating
to such lien or charge and the related action;
(3) All rights to consent by, required notices to, filings
with, or other actions by governmental entities in connection with the
sale or conveyance of oil and gas easements and rights of way therein
if ordinarily given upon proper notice, application, and/or payment of
a fee by Buyer or Seller, as may be appropriate;
(4) Easements, rights-of-way, servitudes, permits, surface
leases and other like rights in respect of surface and subsurface
operations;
(5) Such title defects as Buyer has waived or released or
is deemed to have waived pursuant to the terms of this Agreement; or
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(6) Minor or technical imperfections of title, the
existence of which would not reasonably be expected to affect the use
or operation of the property subject thereto, consistent with past
practice of the industry.
(o) Public Utility Holding Company Act. Seller is not a "holding
----------------------------------
company," or a "subsidiary company" of a "holding company" or an
"affiliate" of a "holding company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
(p) Environmental Compliance. Except as disclosed on SCHEDULE
------------------------
4.1(p), to the knowledge of Seller:
(i) the Assets are in compliance with applicable
Environmental Laws, except where the failure to comply has not and
would not, individually or in the aggregate, have an adverse effect on
the Assets or any significant part thereof. As used herein,
Environmental Laws shall mean the local, state and federal laws, rules
and regulations in effect as of the Effective Date directly relating
to pollution or protection of the environment (including ambient air,
surface water, ground water, land surface or subsurface strata),
including without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), the Resources Conservation and Recovery Act of 1976, as
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amended ("RCRA"), the Toxic Substances Control Act ("TSCA"); the Clean
---- ----
Air Act, and the Clean Water Act, or polychlorinated biphenyls
("PCBs"), if not included within any of the Acts stated above;
----
(ii) there are no locations or premises that are or have been
a part of the ▇▇▇▇▇▇▇▇ Plant or ▇▇▇▇▇▇▇▇ System where polluting
substances have entered on, under or into the soil, air, surface
waters, or into groundwater in violation of applicable Environmental
Laws, except for such violations as have been reported, remediated or
brought to closure with the appropriate Government Agency, and/or have
not and would not, individually have a "Material Adverse Effect" on
the Assets. As used herein, Material Adverse Effect shall mean any
circumstance, change, development or event which has had or is
reasonably expected to have a material adverse effect on the ▇▇▇▇▇▇▇▇
Plant, ▇▇▇▇▇▇▇▇ System, the Assets or the operations, earnings or
prospects with respect thereto which individually, would exceed
$25,000, provided that the term "Material Adverse Effect" shall not
include Identified Liabilities, which shall be governed solely by
Article VI which such Article VI shall not be subject to the $25,000
threshold;
(iii) Seller has not received any written notice from any third
party or any Governmental Authority of any non-compliance (or any
past, present or future events, conditions, circumstances, activities,
practices, incidents, actions or plans
13
which will interfere with or prevent continued substantial compliance)
with the terms and conditions of any permits which remain uncured or
unresolved with respect to the ▇▇▇▇▇▇▇▇ Plant or ▇▇▇▇▇▇▇▇ System or
the Assets where any such non-compliance, individually or in the
aggregate, results in a Material Adverse Effect on the Assets.
Governmental Authority as used in this Agreement shall mean any
federal, state, or local, administrative authority or agency;
(iv) Seller has not received any notice of any civil, criminal
or administrative proceeding which remains open or unresolved
involving the ▇▇▇▇▇▇▇▇ Plant or ▇▇▇▇▇▇▇▇ System or the Assets relating
in any way to applicable Environmental Laws where any such proceeding,
individually or in the aggregate, result in a Material Adverse Effect
on the Assets.
(q) Employee Relations. Seller is not a party to any collective
------------------
bargaining agreement covering or relating to any employees at the ▇▇▇▇▇▇▇▇
Plant or ▇▇▇▇▇▇▇▇ System and has not recognized any collective bargaining
representative. Seller is not a party to any Contract with any employee
which is not terminable at will. Seller shall remain fully responsible for
any obligations to its employees regarding severance pay and all other
benefits due for any of Seller's employees employed at the site of the
▇▇▇▇▇▇▇▇ System not hired by Buyer. Buyer shall retain the option until 10
days prior to Closing to notify Seller whether it wishes to retain any of
Seller's ▇▇▇▇▇▇▇▇ System employees who wish to be transferred to Buyer.
Prior to November 15, 1996, Seller will furnish to Buyer a list of such
employees, a description of their duties and their salary as of October 1,
1996. To the extent applicable, Seller has or shall fully comply with the
provisions of the Federal Worker Adjustment and Retraining and Notification
Act.
(r) Taxes. To the best of the knowledge of Seller, all property,
-----
severance, ad valorem, excise and similar taxes and assessments based on or
measured by the ownership of Assets or the receipt of proceeds therefrom on
the Assets that have become due and payable through the Closing Date have
been or will be paid by Seller prior to Closing.
(s) Imbalances. All imbalances which exist or relate to the
----------
▇▇▇▇▇▇▇▇ System or ▇▇▇▇▇▇▇▇ Plant as of the Effective Date, shall remain
the responsibility of Seller and shall be resolved prior to Closing in a
manner satisfactory to Buyer. Should imbalances need to be remedied after
the Effective Date, the Purchase Price shall be adjusted either upward or
downward to account for the resolution of such imbalances.
(t) Access to Records. To the best of its knowledge, Seller has
-----------------
granted, or will grant sufficiently before Closing, access to Buyer or its
duly authorized representatives to files and records in its possession or
control which a prospective purchaser of the Assets would reasonably expect
to have access to in order to conduct due diligence. To Seller's knowledge,
no such files or records have been removed by Seller except those that may,
in
14
the ordinary course of business and pursuant to past practice, have been
destroyed, except that, certain such files and records may have had certain
correspondence, studies, analyses, and notes deleted or removed due to
Seller's concerns of confidentiality and consideration of the proprietary
status of such information to Seller or Seller's affiliates, or to maintain
the assertion of the attorney-client privilege. To the knowledge and belief
of Seller, none of such materials deleted or removed, if any, would affect
a Seller's decision to purchase the Assets, in all or any significant part,
if such materials had not been deleted or removed and would have been made
available for Purchaser's review. No materials were removed for the purpose
of misrepresenting a fact or matter to Buyer. To the best of Seller's
knowledge, all contract files contain complete copies of the Contracts,
amendments, and modifications thereto.
ARTICLE V
REPRESENTATIONS AND WARRANTIES BY BUYER
---------------------------------------
Buyer hereby represents and warrants to Seller as follows:
5.1 Buyer. Buyer represents and warrants to Seller that:
-----
(a) Organization and Standing. Buyer is a corporation duly
-------------------------
organized, validly existing and in good standing under the laws of the
State of Colorado, and will be in good standing and authorized to do
business in North Dakota and Montana at the time of Closing.
(b) Authority. Buyer has the power and authority to enter into and
---------
perform this Agreement and to carry out the transactions contemplated
herein. Buyer has all the requisite legal authority to own the Assets and
to carry on its business as now conducted and after it acquires the Assets.
The execution and delivery of this Agreement and the consummation by Buyer
of the transactions contemplated herein have been duly and validly
authorized by all necessary action of the Board of Directors of the Buyer,
and this Agreement constitutes a valid and binding obligation of Buyer
enforceable in accordance with its terms. To the best knowledge of Buyer,
the making and performance of this Agreement by Buyer will not violate any
provisions of any federal, state or local laws or the articles of
incorporation or bylaws of Buyer.
(c) Validity of Agreement. The Agreement is a legal, valid and
---------------------
binding obligation of Buyer enforceable against Buyer in accordance with
the terms of this Agreement, except as enforcement may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights in general. The enforceability of Buyer's obligations
under this Agreement is subject to general principles of equity (regardless
of
15
whether enforceability is considered in a proceeding in equity or at law).
Neither the execution of this Agreement nor the consummation of the
transactions contemplated herein will constitute a violation of, or
conflict with, or default under, any order, judgment, decree, or any
contract, commitment, agreement, understanding, arrangement or restriction
of any kind to which Buyer is a party or by which Buyer is bound. Buyer
represents and warrants to its knowledge that there are no governmental or
other legal actions, claims, suits or proceedings pending or threatened, to
which Buyer is or would be a party, that would prevent or interfere with
the consummation of the transactions contemplated by this Agreement.
(d) No Consents Required. Except for that certain HSR filing to be
--------------------
made, no consents, approvals or other action by, or filing with any person
or governmental body is required in connection with the execution, delivery
and performance by Buyer of this Agreement other than those to reflect a
change of ownership and operatorship of the ▇▇▇▇▇▇▇▇ Plant, the ▇▇▇▇▇▇▇▇
System, and its component parts, jointly or individually. All board of
director approvals for the execution of this Agreement and the consummation
of the transaction(s) will be obtained prior to Closing.
(e) Securities Representation. Buyer is an experienced and
-------------------------
knowledgeable investor and operator in the oil, gas and processing business
and is acquiring the Assets for Buyers own account and not with a view to,
or for offer of resale in connection with, a distribution thereof, within
the meaning of the Securities Act of 1933.
(f) Knowledge of Non-Compliance. Buyer has no knowledge of any facts
---------------------------
or circumstances not disclosed to Seller in writing which gives rise or
would give rise to Seller being in breach of any of the representations and
warranties provided by Seller in Section 4.1.
ARTICLE VI
TITLE/ENVIRONMENTAL
-------------------
6.1 Special Warranty of Title. EXCEPT AS MAY OTHERWISE BE SET FORTH IN ANY
-------------------------
DEEDS WHICH MAY EXPRESSLY GRANT A GENERAL WARRANTY, SELLER WARRANTS AND FOREVER
DEFENDS TITLE TO THE ASSETS UNTO BUYER, AGAINST EVERY PERSON WHOMSOEVER LAWFULLY
CLAIMING THE SAME OR ANY PART THEREOF BY THROUGH AND UNDER SELLER, BUT NOT
OTHERWISE. SELLER MAKES NO OTHER WARRANTY OR REPRESENTATION OF ANY KIND,
EXPRESSED OR IMPLIED, RELATIVE TO THE ASSETS SOLD HEREUNDER OR THEIR FITNESS FOR
ANY PURPOSE OTHER THAN THOSE REPRESENTATIONS AND WARRANTIES WHICH ARE EXPRESSLY
STATED ELSEWHERE IN THIS AGREEMENT OR AS SET FORTH IN THE ASSIGNMENTS AND
CONVEYANCES. ALL PERSONAL PROPERTY WHICH IS PART OF
16
THE ASSETS SOLD TO BUYER UNDER THIS AGREEMENT IS SOLD AS IS, WHERE IS, AND IN
ITS CURRENT CONDITION.
6.2 Defective Interests: Title Defects in Real Property Interests.
---------------------------------------------------------------
(a) "Defective Interests" shall mean that portion of the Real
Property Interests affected by a title defect precluding Buyer from
receiving Defensible Title from Seller and of which Seller has been given
notice by Buyer on or before ten (10) days prior to Closing or that Buyer
is otherwise entitled under this Article VI to treat as Defective
Interests. Permitted Encumbrances shall not be title defects. Such notice
shall be in writing and shall include (i) the legal description of each
Defective Interest; (ii) the basis for the defect that Buyer believes
causes each such Real Property Interest to be treated as a Defective
Interest; and (iii) the amount by which Buyer reasonably believes the fair
market value of each Defective Interest has been reduced.
(b) Any title defect in a Real Property Interest designated by Buyer
as a Defective Interest discovered prior to ten (10) days prior to Closing
shall be resolved prior to Closing as follows:
(i) Seller may cure, resolve, or otherwise remove the title
defect creating the Defective Interest so that Seller conveys and
Buyer obtains the Real Property Interest without such impediment at
Closing;
(ii) Buyer may agree in writing to waive the title defect
creating the Defective Interest so that Seller conveys and Buyer
obtains the Real Property Interest at Closing notwithstanding the
title defect;
(iii) provided that Buyer, in its discretion, agrees to accept
such indemnification, Seller may agree to cure, resolve, or otherwise
remove after Closing the title defect creating the Defective Interest,
and Seller agrees to indemnify and hold Buyer harmless against all
losses, costs, expenses and liabilities, but limited to the fair
market value of the asset with respect to such Defective Interest
(such indemnification to be in lieu of any indemnification set forth
in Section 9.2), so that at Closing Buyer withholds a portion of the
Purchase Price not greater than the fair market value of the
individual Real Property Interest(s) affected by the curative work
required, and Seller conveys and Buyer obtains the Real Property
Interest at Closing, or within a reasonable time after Closing upon
completion of such curative work, whereupon which, Buyer shall make
payment to Seller of the Purchase Price amount so withheld (the
parties contemplating that such payment may be made in partial
payments as curative work is completed in stages, if feasible), all as
the parties may
17
agree to such amount to be withheld, payments, and timing of the
conveyance, given the nature of the title defect; or
(iv) Buyer and Seller mutually agree to an amount by which the
value of the Real Property Interest has been reduced due to a defect,
and the parties agree to reduce the Purchase Price by such amount in
accordance with Section 2.2(b)(iii) so that Seller conveys and Buyer
obtains the Real Property Interest at Closing.
If agreement on the resolution of the title defect creating a Defective
Interest in an individual Real Property Interest cannot be reached by one
of the means above prior to Closing, then the Real Property Interest so
affected may be excluded from the Assets to be purchased by Buyer hereunder
at Closing and the Purchase Price shall be reduced pursuant to Section
2.2(b)(iii) in accordance with an amount agreed upon by the parties, such
amount not to exceed the fair market value of the individual Real Property
Interest so affected.
Any such matter identified as a Defective Interest, including the
exclusion of the interest from the Assets as set forth in the paragraph
immediately above, shall be resolved pursuant to this Section 6.2, subject
to Seller's rights under Section 15.6(e), and Buyer shall be precluded
from seeking indemnification for such Defective Interest from Seller under
Section 9.2.
(c) In the event the parties cannot agree as to the fair market value
of the Real Property Interests affected by a title defect for purposes of a
Purchase Price reduction, then the issue shall be resolved by submission to
a qualified independent ▇▇▇▇▇▇▇, mutually agreeable to the parties, having
experience in oil and gas and in commercial transactions, who shall
estimate the fair market value. If the parties cannot agree upon such an
individual, each party shall designate a ▇▇▇▇▇▇▇ located either in North
Dakota, or in the Denver, Colorado area, which such two landmen will
designate a third like ▇▇▇▇▇▇▇, the three of whom make the determination of
the fair market value of the Real Property Interests affected by a title
defect for purposes of a Purchase Price reduction. If the three landmen
cannot agree upon such fair market value jointly, then such fair market
value will be determined by the agreement of just two of the landmen so
selected. If two landmen cannot agree upon such a determination, then the
average of the three values rendered by the three landmen shall be used for
such purpose.
(d) In determining that an Asset is a Defective Interest, it is the
intent of the parties to include, when possible, only that portion of the
Assets actually affected by the defect for purposes of valuation and
exclusion.
(e) If Seller fails to cure or Buyer and Seller otherwise fail to
resolve Defective Interests so that there remains prior to two (2) days
prior Closing Defective Interests having an aggregate "value reduction"
exceeding twenty-five percent (25%) of the Purchase Price,
18
either Buyer or Seller will have the right to terminate this Agreement by
providing written notice prior to the Closing Date of such termination to
the other party without liability to the other party. As used herein,
"value reduction" shall mean the lesser of: (i) the actual cost or expense
to cure the Defective Interests or (ii) the fair market value of the Real
Property Interests affected.
(f) If, prior to Closing, Buyer becomes aware of any proceeding, that
might reasonably be expected to result in loss or imminent risk of loss, or
impairment of Seller's title to any portion of the Real Property Interests,
Buyer may elect to provide notice of such proceeding to Seller, and then
treat that portion of the Real Property Interests affected thereby as a
Defective Interest by giving Seller notice thereof in accordance with
Section 6.2(a).
6.3 Pre-Closing Identified Liabilities: Identification of Additional
----------------------------------------------------------------
Matters for which Seller shall provide a Purchase Price Adjustment.
------------------------------------------------------------------
(a) If, prior to Closing, (i) Seller has received notice of
noncompliance with any law or order, injunction, decree, judgment,
stipulation or writ of any Environmental Governmental Authority having
jurisdiction over the Real Property Interests or equipment that Seller is
in noncompliance with an Environmental Law pursuant to which corrective
action or remediation must be undertaken of a Real Property Interest or
equipment located thereon, or (ii) if Buyer should discover a matter in
violation of an Environmental Law which would cause a breach of Seller's
representation in Section 4.1(p) (disregarding Sellers' knowledge qualifier
in such representation), then such party shall give the other party written
notice thereof no later than ten days prior to Closing (either such item
(i) or (ii) being defined as an "Identified Liability"). Such notice of an
Identified Liability shall be in writing and shall include (i) a
description of each Real Property Interest or equipment item so affected;
(ii) the basis for asserting that the Real Property Interest or equipment
so affected should be treated as an Identified Liability; and (iii) the
amount by which Buyer reasonably believes remediation will cost.
(b) Any Real Property Interest or equipment designated as an
Identified Liability under Section 6.3(a) discovered prior to ten (10) days
prior to Closing shall be resolved as follows:
(i) Seller may cure, resolve, remediate or otherwise remove the
basis for treating such Real Property Interest or equipment as an
Identified Liability so that Seller conveys and Buyer obtains the Real
Property Interest or equipment without such impediment at Closing;
19
(ii) Buyer may agree in writing to waive the matter as an
Identified Liability so that Seller conveys and Buyer obtains the Real
Property Interest or equipment at Closing notwithstanding the
noncompliance;
(iii) provided that the parties agree to enter into the Access
Agreement described in subsection (c) immediately below, Seller may
cure, resolve, remediate or otherwise remove the basis for treating
such Real Property Interest or equipment as an Identified Liability
after Closing, so that at Closing Buyer withholds a mutually agreed
upon amount of the Purchase Price, not to exceed the reasonable
estimate of such cost of remediation, and Seller conveys and Buyer
obtains the Real Property Interest or equipment either at Closing
prior to completion of the remediation, or within a reasonable time
after Closing upon completion of the remediation, whereupon after such
completion of the remediation, Buyer shall make payment of such amount
of the Purchase Price withheld to Seller (the parties further
contemplating that such payment may be made in partial payments as
remediation is completed in stages "Progress Payments"), all as the
parties may agree to such amount to be withheld, Progress Payments,
and timing of the conveyance, given the nature of the environmental
matter being resolved; or
(iv) Buyer and Seller may mutually agree to an amount by which
the value of the Real Property Interest or equipment has been reduced
by Identified Liability, reducing the Purchase Price by such amount in
accordance with Section 2.2(b)(iii) so that Seller conveys and Buyer
obtains the Real Property Interest or equipment at Closing, or in the
event the estimated remediation costs exceed the value of the Real
Property Interest or equipment affected, Buyer shall have the election
to exclude the Real Property Interest or equipment affected, with
Buyer receiving a downward Purchase Price adjustment equal to its fair
market value.
If mutual agreement on the resolution of the Real Property Interest or
equipment designated as an Identified Liability cannot be reached on one of
the means above, then the issue shall be resolved by submission to a
mutually agreed qualified independent environmental engineering firm
("Engineering Firm") having experience in oil and gas and in commercial
transactions, who shall determine the extent of the remediation required to
be immediately performed pursuant to Environmental Law, the procedures or
manner in which such work is to be performed, and the estimated the cost of
such work. If the matter goes to an Engineering Firm prior to Closing, but
cannot be determined by the Engineering Firm until after Closing, at
Closing Buyer shall withhold a portion of the Purchase Price related to the
remediation required equal to the amount of Seller's estimate to remediate
the matter, and upon such determination after Closing by the Engineering
Firm, Seller and Buyer shall utilize the procedures set forth in Section
6.3(b)(iii) whereby Seller remediates pursuant to the Engineering Firm's
determinations. With respect to any such remediation work to be
20
performed by Seller post-Closing or the deferral of a dispute to an
Engineering Firm, the parties shall utilize the procedures set forth in
Section 6.5 (c), (d), and (e).
Any matter identified as an Identified Liability shall be resolved as
a pre-Closing matter pursuant to this Section 6.3, subject to Seller's
rights under Section 15.6(e), precluding Buyer from seeking indemnification
for such Identified Liability from Seller under Section 9.2 (except for
Seller's failure to perform such remediation) for any such matter.
6.4 Title Insurance. With respect to any Real Property Interest which
---------------
comprises a portion of the Real Property Interests which Seller owns in fee,
Buyer may obtain a current commitment for title insurance at Buyer's expense.
Any defects noted on the title commitment, other than those falling within the
definition of Permitted Encumbrances, will be addressed pursuant to Section
6.2(b). Seller shall in good faith attempt to identify any title insurance
policies it may have on the Assets and disclose them to Buyer within 10 days of
the execution of this Agreement so that Buyer could have the benefit of
providing such policies to its insurer.
6.5 Post Closing Environmental Matters
----------------------------------
(a) Buyer shall have a two (2) year period from the date of Closing
to assert an Environmental Claim pursuant to the indemnity provision in
Section 9.2(d) against Seller with respect to the environmental condition
of the Assets as such condition exists prior to Closing. As used herein, an
Environmental Claim shall mean any claim asserted by Buyer in writing prior
to the expiration of the two (2) year period from the date of Closing,
relating to a violation caused by Seller or its predecessors of soil, air,
surface waters, or groundwater standards set forth under an Environmental
Law administered by the state or federal agency having lead jurisdiction
over such matter ("Environmental Governmental Authority"), which such
violation requires immediate remediation of a site pursuant to
Environmental Law. After such two (2) year period, Buyer shall assume full
responsibility for the environmental condition of all Assets purchased
under this Agreement.
(b) Environmental Claims shall be addressed by one of the following:
(i) Seller shall remediate such environmental claims to the reasonable
satisfaction of the Environmental Governmental Authority pursuant to a
Remedial Action Work Plan prepared by Seller ("RAWP"); or (ii) if both
parties are agreeable, the parties may otherwise enter into a mutually
acceptable agreement resolving such defects ("Environmental Agreement").
Nothing herein shall preclude Seller prior to Closing or Buyer after
Closing, as the case may be, from notifying the Environmental or
Governmental Authority if required under applicable law. Seller shall
expeditiously undertake to remediate such violations of Environmental Law
specified in the RAWP or any amendments thereto which such violations
require immediate
21
remediation of the soil, air, surface waters, or groundwater of a site
(collectively, the "Work") in the manner set forth in Section 6.5(d), or if
the parties agreed to another method to resolve the matter through an
Environmental Agreement, pursuant to such terms of such Environmental
Agreement.
(c) Buyer agrees to permit such access to the ▇▇▇▇▇▇▇▇ Plant and
▇▇▇▇▇▇▇▇ System as Seller and/or Seller's employees, agents and contractors
may require in order to conduct the Work or such matters under an
alternative Environmental Agreement to be implemented by Seller or Seller's
contractor as contemplated under this Agreement; provided, however, that
Seller and Buyer enter into an appropriate access agreement. The access
granted to Seller under such "Access Agreement" shall include the right to
excavate, remove, dispose of and/or treat the soil and/or groundwater, and
undertake such other activities as are necessary to conduct the Work,
subject to the reasonable approval of Buyer for reasons of safety; further
provided, however, that Seller shall conduct all such remediation in a
manner that will not unreasonably disrupt the operations of Buyer on the
▇▇▇▇▇▇▇▇ Plant or ▇▇▇▇▇▇▇▇ System and Seller shall indemnify Buyer for any
damage caused by Seller in conducting its remediation. The form of the
Access Agreement which will be entered into by the parties is attached
hereto as EXHIBIT "C".
(d) Prior to undertaking any Work under Section 6.3 or 6.5(b), Seller
shall prepare a RAWP, or if remediation is performed pursuant to an
Environmental Agreement, Seller shall prepare such pre-work documentation
or plan as the parties agreed to in the Environmental Agreement. Prior to
undertaking the Work under a RAWP or obligations under an Environmental
Agreement, Seller shall provide a copy of the RAWP, or such other
documentation or plan as the parties may have agreed that Seller shall
prepare, to Buyer for review, comment, and recommendation, which such
comments and recommendations Seller shall incorporate if practical and
feasible, provided however, Seller shall not be obligated to accept such
recommendations or undertake remediation work in excess of what is
minimally acceptable to the Environmental Governmental Authority, at which
point, if Buyer insists on such work in excess of what is minimally
acceptable to an Environmental Governmental Authority, Buyer will assume
responsibility of the Work or remediation as it may wish to undertake, at
its own expense. Seller and Buyer shall promptly provide copies to each
other of all correspondence between them and any Environmental Governmental
Authorities or Engineering Firm relating to the RAWP or such other
documentation or plan as the parties agreed. Seller shall expeditiously
proceed with and perform, or cause to be performed, the Work in the manner
provided in the RAWP or such other remediation in the Environmental
Agreement as the parties agreed. Such Work or other remediation as agreed
to in the Environmental Agreement shall be completed to the reasonable
standards of the Environmental Governmental Authorities, at Seller's sole
cost, risk and expense, provided however, Seller shall not be obligated to
complete such Work or other remediation at its cost, risk and expense in
excess of its indemnification obligations set forth in Section 9.2 under
this Agreement if such work is performed pursuant to post-closing claims,
or in excess of the
22
$5,000,000 amount referenced in Section 15.6(e) with respect to pre-closing
matters set forth in Sections 6.2 and 6.3, at which point Buyer would
assume such cost, risk and expense. Any contractor or subcontractor
retained by Seller in connection with the Work or other remediation as
agreed in the Environmental Agreement shall be reasonably acceptable to
Buyer.
(e) All disputes between Seller and Buyer with respect to a RAWP or
such other documentation or plan pursuant to the Environmental Agreement,
and its implementation shall be resolved at the earliest practicable date,
by referral to the Engineering Firm for resoultion (or if the parties are
otherwise agreeable, to the Environmental Governmental Authority first for
resolution, and then to the Environmental Governmental Authority as may be
required by applicable law. Any decision by the Environmental Governmental
Authority or Engineering Firm, as the case may be, shall be final and
binding upon the parties. The Engineering Firm shall be provided with all
data or results of any environmental audit and investigations and
statements as to the positions of the parties relating to the matters in
dispute. A visual site inspection may be undertaken by the Engineering
Firm, if needed. Within twenty (20) days after such submissions, the
Engineering Firm shall issue a letter report outlining the remediation to
be performed. Upon receipt, the parties shall have five (5) business days
to review and submit written comments to the Engineering Firm and other
Party if one or the other, or both, are in disagreement. The Engineering
Firm shall then have ten (10) business days to review such submission and
issue a final report of the remediation it believes needs to be done to
satisfy the minimum Environmental Governmental Authority requirements. This
final letter decision (or the initial letter report if not timely appealed
with written comments from either Party) shall be final and binding on the
parties, yet shall be subject to the pre-Closing limitation of $5,000,000
and post-Closing limitation contained in Section 9.2 as described in
subsection (d) immediately above. Any fees and expenses of the Engineering
Firm shall be shared equally by the parties. Each party shall bear the
other fees and expenses incurred by it in resolving any such disputes. The
fees and expenses of the Engineering Firm, as well as the other fees and
expenses incurred by either Party in resolving any such disputes shall not
be amounts falling within the indemnification provisions of this Agreement,
but rather shall be borne, by each Party without recourse to any remedy,
indemnification, or reimbursement.
ARTICLE VII
COVENANTS
---------
7.1 Casualty Loss. The risk of casualty loss relating to the Assets shall
-------------
pass to Buyer as of the Closing Date. If, prior to the Closing, all or any
portion of the Assets have been or are destroyed by fire, flood, storm or other
casualty of a similar nature or shall be taken by condemnation or under the
right of eminent domain (all of which are herein called "Casualty Loss"), Seller
shall bear the risk
23
of loss and shall retain all sums paid to Seller by persons or Governmental
Authorities by reason of the destruction or taking of such Asset. Buyer shall
obtain an adjustment to the Purchase Price pursuant to Section 2.2(b)(ii) to the
extent of the fair market value of the individual Asset so destroyed or
otherwise lost. If such Asset is not totally destroyed, damaged or lost, and
continues to have use to Buyer, then the adjustment to the Purchase Price shall
not exceed the lesser of the actual cost to repair and restore the Asset or its
fair market value.
7.2 Conduct of Business Prior to Closing.
------------------------------------
(a) Prior to Closing, Seller shall:
(i) maintain and operate the Assets in the ordinary course
of business in accordance with standard processing plant and gathering
practices historically employed with respect to the Assets; and
(ii) continue the marketing of gas, natural gas liquids and
other plant products consistent with past practice.
(b) Without the consent of Buyer (which shall be provided as
reasonably far in advance of the deadline for responses to third persons as
will provide Seller with reasonable time to respond, or shall be deemed to
be denied), prior to Closing Seller shall not:
(i) waive, compromise or settle any right or claims in
excess of Ten Thousand Dollars ($10,000) for which Buyer will have
liability hereunder:
(ii) incur obligations with respect to or undertake any
transactions relating to the Assets other than transactions (1) in the
normal, usual and customary manner, (2) of a nature and in an amount
consistent with prior practice, and (3) in the ordinary course of
business of owning and operating the Assets;
(iii) enter into any new material agreements or commitments
with respect to the Assets other than those capital expenditures set
forth in Section 2.2(a)(i)(B) and (C);
(iv) modify any material Contracts other than as the
parties agree; or
(v) encumber, sell or otherwise dispose of any of the
Assets, other than property which is replaced by equivalent property
or which is used, consumed or abandoned in the normal operations of
Seller's business.
24
7.3 Notice of Claims. Seller shall promptly notify Buyer, if, between
----------------
the date hereof and the Closing Date, Seller receives actual notice of any
claim, suit, action or other proceeding having a potential adverse impact on the
Assets or their operation in excess of $25,000.
7.4 Compliance with Conditions Precedent. Each respective party shall use
------------------------------------
its best efforts to cause the conditions precedent set forth in Sections 8.2 and
8.3, applicable to such party, to be fulfilled and satisfied as soon as
practicable but in any event prior to Closing.
7.5 Preparation of Closing Documents.
--------------------------------
(a) Forms of Assignments. Seller shall commence the preparation
--------------------
of all forms of assignments, bills of sale, deeds, and other
conveyances and transfers pursuant to this Agreement, forms of which
are attached as EXHIBITS "A" and "B" as provided in Section 1.2, along
with all applicable schedules and exhibits to such forms of
assignments, deeds and other conveyances and shall begin delivering
such draft forms to Buyer reasonably promptly so that Buyer can review
and agree to such documents between the time of execution of this
Agreement and Closing.
(b) Preliminary Settlement Statement. No later than three (3)
--------------------------------
days prior to Closing, Seller shall prepare a proposed preliminary
settlement statement ("Preliminary Settlement Statement") showing the
calculation of the Purchase Price, as adjusted, ("Closing Amount").
7.6 Press Release. Prior to Closing and for a period of thirty (30)
-------------
days following Closing, neither party shall make any press release or other
announcement in connection with this Agreement without first consulting with the
other party and accommodating all reasonable requests of the other party
regarding postponement of such press release or announcement or the statements
made in such press release or announcement. Following such consultation and good
faith attempt to make reasonable accommodations, either party may make any
announcement or press release that it believes is either required by applicable
law or the rules of any stock exchange, or is advisable in connection with such
party's obligation to provide public disclosure regarding its activities. This
provision shall not apply to any filing with any governmental body or stock
exchange required by law, rule or regulation.
7.7 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Filing. Buyer and Seller shall promptly make all
------------------------
required filings under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ ("HSR") Act. Each party shall
pay their respective expenses, including any filing fees for each party's
respective filing.
7.8 Monitoring Agreement. Buyer and Seller shall enter into that certain
--------------------
Automated Monitoring Equipment Agreement attached hereto as EXHIBIT "D".
25
7.9 Non-Foreign Affidavit. Seller shall provide a non-foreign affidavit to
---------------------
Buyer in the form set forth in EXHIBIT "E".
7.10 Closure of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Acquisition. With respect to the Teddy
--------------------------------------
Roosevelt Gas Gathering System, Seller shall have completed its transaction with
Western Gas Processors for the acquisition of those assets which are included in
this transaction. Should Seller not complete such transaction by December 15,
1996 and transfer and assign such assets to Buyer, then Seller shall continue to
be obligated to diligently pursue completion of the transaction with Western Gas
Processors for the acquisition of the ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Gas Gathering System with
all due dispatch, and shall transfer such system to Buyer upon its completion of
that transaction, or if not completed by January 31, 1997, shall have the right
to exercise termination of the Agreement, as does Buyer, pursuant to Section
15.6(f).
7.11 Subleases. At Closing, the parties will enter into those certain
---------
lease agreements, conveyances, or other form of agreements as may be appropriate
set forth as EXHIBITS "F, "G, or "H, whereby (i) Seller or Seller's affiliates
are leased space at their current location at the ▇▇▇▇▇▇▇▇ Plant for their
automated monitoring equipment operations (EXHIBIT "F"); (ii) whereby Buyer or
Buyer's affiliates are sold a building and the fee interest or lease, as the
case may prove to be based upon Seller's affiliate's ownership rights, for
$25,000 at Seller's Belfield location for use in Buyer's operation of the
▇▇▇▇▇▇▇▇ System (EXHIBIT "G"), and (iii) whereby the usage, assignment of a sub-
easement, or other instrument granting use of right-of-way and/or easements by
Seller or Seller's affiliates having oil pipeline operations in a right-of-way
or easement common to both an oil pipeline and a gas gathering line are extended
to Seller, Seller's affiliates, and/or Buyer, as the case may be, not owning the
right-of-way or easement for the asset it holds, or in the case of Buyer, will
hold,, through a usage agreement, sub-conveyance, or partial assignment from
Seller to Seller's affiliate, if held by Seller, or from Seller's affiliate to
Seller, then to Buyer, if first held by an affiliate of Seller (EXHIBIT "H").
7.12 Burlington Resources Agreement.
------------------------------
(a) If Seller should not be able to resolve its contract issues with
Burlington Resources by Closing with regard to Contract No. MCK-1873 at the
full $0.29 per MMBtu value Seller recently has sought to increase its
revenues over its prior arrangement with respect to charges, fees,
proceeds, fuel reimbursement and other revenue and expense components of
the arrangement to take and process gas and liquids from Burlington
Resources' production by means of a contract for a term of at least five
(5) years, then Seller shall adjust the Purchase Price downward by an
amount proportionate to the $4,250,000 value Buyer places on such $0.29 per
MMBtu increase it negotiates, up to, but not to exceed, the $4,250,000
amount. (Example: Should Seller only obtain a $0.145 increase, then the
Purchase Price shall be reduced by such proportion such increase bears to
$0.29--i.e. 50%., or $2,125,000).
26
(b) If Seller does not enter into such a new agreement with
Burlington Resources prior to Closing for a term of at least five (5)
years, but instead should Buyer prior to ninety (90) days after Closing
enter into an agreement with Burlington Resources resulting in an increase
in revenues similar to that described in subparagraph (a) above, then Buyer
shall pay 50% of such revenue increase proportionate to the Purchase Price
adjustment made pursuant to subparagraph (a), up to, but not to exceed
$2,125,000. (Example: Should Buyer obtain within ninety (90) days after
Closing, a $0.145 increase, then Seller shall obtain an immediate payment
of $1,062,500 from Buyer).
ARTICLE VIII
CLOSING
-------
8.1 Time and Place. The Closing of the transaction contemplated by this
--------------
Agreement shall take place at the offices of Seller in Wichita, Kansas, at the
later of (i) 10:30 a.m. local time December 16, 1996; (ii) such other location,
date and time as mutually agreed by the parties; (iii) the acquisition by Seller
of the ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Gas Gathering System; or (iv) or after such time as the
requisite approval from the Federal Trade Commission has been received for the
HSR filing. In no event shall either party be required to close this
transaction after January 31, 1997.
8.2 Conditions to Buyer's Obligations. The obligation of Buyer to close
---------------------------------
is, at the option of Buyer to waive any or all requirements, subject to each of
the conditions set forth below.
(a) The representations and warranties made by Seller in this
Agreement shall be true and accurate in all material respects on and as of
the Closing with the same effect as though such representations and
warranties have been given on and as of the Closing. Seller shall also have
performed or complied with, in all material respects, all of its
obligations under this Agreement which are to be performed or complied with
by it as of the Closing.
(b) Buyer shall have received the assignments, bills of sale and
deeds described in Section 1.2.
(c) Buyer shall have received from corporate counsel for Seller a
written opinion dated as of the Closing, addressed to Buyer and
satisfactory in form and substance to counsel for Buyer, that:
(i) Seller is duly organized, existing in good standing under
the laws of Kansas, and has the corporate power and authority to carry
on its business in that state and the States of North Dakota and
Montana.
27
(ii) Seller has the power and authority to enter into and to
perform this Agreement, such other agreements and all documents and
actions required by it hereunder, and that any and all necessary
stockholder approvals and/or Board approvals, necessary for the
execution and performance of this Agreement and the assignments and
bills of sale, deeds, and other agreements contemplated herein have
been delivered and that this Agreement, the assignments and bills of
sale, deeds and other agreements when duly executed and delivered
shall constitute the valid and binding obligations of the Seller
enforceable in accordance with their terms.
(iii) The making and performance of this Agreement by Seller
does not violate any provisions of any federal, state or local laws
known to counsel for Seller or to Seller's respective Articles of
Incorporation or Bylaws and does not result in the breach or violation
of, constitute a default under, or result in the creation of any lien,
charge or encumbrance upon any of the Assets under any contractual
agreement known to counsel after making a reasonable inquiry
concerning such matters.
(iv) No actions, suits, or proceedings are pending or, to the
best of counsel's knowledge, are threatened against Seller which, if
adversely resolved, would materially affect the overall operations of
the Assets or Seller's abilities to consummate this Agreement.
In rendering such opinions, counsel may rely on the opinions of local
counsel and certificates of officers of Seller and of public officials.
(d) There shall not be on the Closing (i) any order, decree or ruling
by any court or Governmental Authority, (ii) any threat thereof by any
governmental agency, which is evidenced by a writing by the threatening
agency, or (iii) any lawsuit which might prohibit, render illegal or
otherwise preclude, postpone, or prevent this transaction.
(e) Buyer and Seller shall have received a favorable ruling
respecting the HSR filing without any significant adverse conditions
relating to the purchase and sale contemplated hereby.
(f) Seller shall have obtained all material third party consents or
waivers necessary to consummate the transactions contemplated by this
Agreement in a form and substance reasonably satisfactory to Buyer.
(g) Seller shall have completed the acquisition of the ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ Gas Gathering System pursuant to its agreement with Western Gas
Resources such that it shall comprise part of the Assets to be conveyed to
Buyer through the assignment documents.
28
(h) Seller shall have executed the Automated Monitoring Agreement
attached hereto as EXHIBIT "D".
(i) Seller shall have delivered and executed the non-foreign
affidavit in the form of EXHIBIT "E".
(j) Seller shall have executed the Accounting Services Agreement
attached hereto as EXHIBIT "I".
(k) Seller shall have executed the various property Agreements
attached hereto as EXHIBITS "F", "G" and "H" described in Section 7.11.
8.3 Conditions to Seller's Obligations. The obligation of Seller to close
----------------------------------
is, at the option of Seller to waive any or all requirements, subject to each of
the conditions set forth below:
(a) The representations and warranties made by Buyer in this
Agreement shall be true and accurate in all material respects on and as of
the Closing with the same effect as though such representations and
warranties had been given on and as of the Closing. Buyer shall also have
performed or complied in all material respects with all of its obligations
under this Agreement which are to be performed or complied with by it prior
to or on the Closing.
(b) Seller shall have received the payment of the Purchase Price set
forth in the Preliminary Settlement Statement, and Buyer shall have wired
full payment of the Purchase Price as adjusted herein, less the deposit in
Section 2.5 made by Buyer, in immediately available same day funds for
credit to Seller's account, pursuant to the wire transfer instructions
provided by Seller to Buyer immediately prior to Closing.
(c) Seller shall have received from corporate counsel for Buyer a
written opinion dated as of the Closing, addressed to Seller and
satisfactory in form and substance to counsel for Seller that:
(i) Buyer is a corporation duly organized, existing in good
standing under the laws of Colorado and has the legal authority to
carry on its business in that state and as a foreign corporation in
the States of Montana and North Dakota.
(ii) Buyer has the power and authority to enter into and to
perform this Agreement, such other agreements and all documents and
actions required by it hereunder and that all corporate proceedings,
including any and all necessary stockholder approvals and/or Board
approvals, necessary for the execution and
29
performance of this Agreement and the assignments and bills of sale,
deeds, and other agreements have occurred; and that this Agreement,
and other agreements when duly executed and delivered shall constitute
the valid and binding obligations of the Buyer enforceable in
accordance with their terms.
(iii) The making and performance of this Agreement by Buyer does
not violate any provision of any federal, state or local laws known to
counsel for Buyer or to Buyer's Articles of Incorporation or Bylaws.
(iv) No actions, suits, or proceedings are pending or, to the
best of counsel's knowledge, are threatened against Buyer which, if
adversely resolved, would materially affect Buyer's abilities to
consummate this Agreement.
In rendering such opinions, counsel may rely on the opinions of local
counsel and certificates of officers of Buyer and of public officials.
(d) All agreements, documents, and instruments contemplated under
this Agreement to be executed by Buyer shall have been duly executed by
Buyer and be ready for delivery concurrently with the consummation of the
transactions contemplated by this Agreement.
(e) Buyer and Seller shall have received a favorable ruling
respecting the HSR filing without any significant adverse conditions
relating to the purchase and sale contemplated hereby.
(f) Buyer shall have executed the Automated Monitoring Agreement
attached hereto as EXHIBIT "D".
(g) Buyer shall have received the non-foreign affidavit in the form
set forth on EXHIBIT "E".
(h) Buyer shall have executed the Accounting Services Agreement
attached hereto as EXHIBIT "I".
(i) Buyer shall have executed the various property Agreements
attached hereto as EXHIBITS "F", "G" and "H" described in Section 7.11.
ARTICLE IX
INDEMNIFICATION
---------------
30
9.1 Survival of Representations. The representations and warranties of
---------------------------
Seller and Buyer contained in this Agreement shall survive the Closing for a two
(2) year period after which time they shall expire and be of no further force
and effect. During such time period, if no bona fide claim in writing, as set
forth below, has been brought by the party to whom such respective
representations and warranties have been made, then such party shall be forever
barred from bringing any claim or action for a breach thereof, notwithstanding
any longer period of limitation of actions which may otherwise be available to
such party by statute or law.
9.2 Indemnification by Seller. As provided immediately below, Seller
-------------------------
agrees for two (2) years to indemnify and defend and hold harmless Buyer from
and against all liabilities, losses, claims, costs or damages, whatsoever
arising out of or from or based upon:
(a) the inaccuracy of any representation or warranty contained in
Section 4.1 made by Seller; or
(b) the non-performance by Seller of any covenant, agreement or
obligation to be performed by Seller hereunder;
(c) any and all matters arising from or in connection with or related
to the ownership, use or operation of the Assets prior to the Closing Date not
covered by the indemnities given in Section 9.2(a), (b), or (d) including the
indemnification for losses, claims, and expenses attributed to consents which
are otherwise Permitted Encumbrances under Section 4.1(n) (1) and (3); or
(d) all liabilities, losses, claims, costs or damages, whatsoever
arising out of or from or based upon Environmental Claims asserted by Seller
pursuant to Section 6.5.
The foregoing indemnification obligations of Seller shall only apply if a claim
for such indemnification is provided to Seller in writing at the address set
forth in Section 15.10 setting forth in detail the particular facts and
circumstances which give rise to the claim; and further provided, that any such
claim must be submitted within two (2) years of Closing. Under no circumstance
shall Seller be obligated to make payment or incur liability under this
indemnification provision for the first $125,000 in the aggregate of such
liabilities, losses, claims, costs or damages asserted pursuant to Sections
9.2(a),(b) and (c), nor shall Seller be obligated to make payment or incur
liability under this indemnification provision for the first $125,000 in the
aggregate of such liabilities, losses, claims, costs or damages asserted
pursuant to Section 9.2(d). Seller's obligation to make payment or incur
liability under these indemnification provisions or any other indemnity herein
is further limited in that Seller's liabilities, payments, costs and expenses
for all indemnified claims contained in Sections 9.2(a), (b), and (c) shall not
exceed $4,000,000, and that Seller's liabilities, payments, costs and expenses
for all indemnified claims contained in 9.2(d) or elsewhere for any
31
Environmental Claims asserted after Closing, or other environmental matters
falling within this section for indemnification in all or part, shall not exceed
a separate amount of $4,000,000.
9.3 Indemnification by Buyer.
------------------------
(a) Buyer agrees for two (2) years from the date of Closing to
indemnify and defend and hold harmless Seller from and against all
liabilities, losses, claims, costs or damages, whatsoever arising out of or
from or based upon:
(i) the inaccuracy of any representation or warranty
contained herein made by Buyer; or
(ii) the non-performance by Buyer of any covenant,
agreement or obligation to be performed by Buyer hereunder; and
(b) for any and all matters arising from or in connection with
or related to the ownership, use, or operation of the Assets on or after
Closing, including all environmental matters and violation of Environmental
Laws, and arising from any cause whatsoever, whether prior to or after
Closing, beginning (i) two (2) years after Closing, (ii) or sooner with
respect to environmental matters at such time as Seller has incurred
$4,000,000 in costs and expenses with respect to its indemnification of
Buyer under Section 9.2(d), (iii) or sooner, with respect to non-
environmental matters at such time as Seller has incurred $4,000,000 in
costs and expenses with respect to its indemnification of Buyer under
Section 9.2(a), (b) and/or (c).
9.4 Conditions of Indemnification
-----------------------------
(a) Whenever any claims are made with respect to any matter to
which the indemnifications contained in this Article IX relate, the
indemnified party (the "Indemnitee") shall notify the indemnifying party
(the "Indemnitor") in writing as soon as practical after the Indemnitee
becomes aware of such claim or after such claim or series of claims exceed
the thresholds set forth in Section 9.2, (such notice without exception
shall be given within thirty (30) days of the Indemnitee becoming aware of
any claim or within thirty (30) days after such thresholds have been
exceeded), but in no event more than thirty (30) days thereafter (a "Notice
of Claim") to the Indemnitor. The Notice of Claim shall specify all facts
known to the Indemnitee giving rise to such indemnification claim and the
amount or an estimate of the amount of the liability arising therefrom. To
the extent any claims are of an immaterial nature on an individual basis
(i.e., less than $25,000), the Indemnitee shall be entitled to accumulate
such claims and present the Notice of Claim to the Indemnitor on a
quarterly basis. For purposes of 9.4(b), each claim identified in a Notice
of Claim shall be treated as a separate claim.
32
(b) Each Notice of Claim will be deemed disapproved by the
Indemnitor, unless the Indemnitor gives the Indemnitee written notice of
approval within thirty (30) days of receipt of the Notice of Claim. The
parties shall undertake, in good faith, to resolve any dispute with respect
to the validity of any such claim which is disapproved and resolve the
obligation of the Indemnitor to indemnify the Indemnitee. If the parties
are unable to agree on such resolution within thirty (30) days after either
the Indemnitee receives express notice of disapproval, or the lapse of the
30 day period for Indemnitor to give written notice of approval or
disapproval, the respective rights of the parties as to the validity of
such claim and responsibility of the Indemnitor to indemnify the Indemnitee
shall be determined by arbitration, in which case, each party shall select
an arbitrator experienced in arbitration and acknowledged by a state bar
association or the American Bar Association within fifteen (15) days from
the expiration of the thirty (30) day period during which the parties were
to agree to a resolution. Such two (2) arbitrators shall select and agree
among themselves upon a third arbitrator within fifteen (15) days
thereafter. Failure by one party to select an arbitrator shall entitle the
other party to petition the courts for such appointment, with attorneys
fees and costs for such petition to be borne by the party who failed to
make such timely appointment. The arbitrators shall resolve the validity of
such claim and the obligation of the Indemnitor to indemnify the Indemnitee
thereof within sixty (60) days of their appointment. Any such arbitration
shall be held in Denver, Colorado, unless the parties agree otherwise.
(c) If the facts giving rise to any such indemnification shall
involve any actual, threatened or possible claim or demand by any person
against the Indemnitee, the Indemnitor shall be entitled to contest or
defend such claim at its expense and through counsel of its own choosing if
its gives written notice of its intention to assume the contest and defense
of such claim to the Indemnitee within thirty (30) days after receipt of
the Notice of Claim. If the Indemnitor shall exercise such option, it shall
have control over such contest and defense and over the payment, settlement
or compromise of such claim, and the Indemnitee agrees to cooperate fully
with the Indemnitor and its attorneys with respect to such contest and
defense. If the Indemnitor shall not exercise such option, the Indemnitee
may, but shall not be obligated to, assume the contest and defense of such
claim. Any payment or settlement resulting from such contest, together with
the total expenses thereof, including but not limited to attorneys' fees,
shall be binding upon the Indemnitor and Indemnitee.
ARTICLE X
POST-CLOSING AGREEMENTS
-----------------------
10.1 Post-Closing Access. Within ninety (90) days after Closing, Buyer
-------------------
shall be entitled to obtain the originals of all records relating to the Assets.
Seller may retain copies if it so
33
desires. Buyer and Seller shall cooperate and afford each other access to the
books and records relating to the Assets prior to or after the Effective Date as
may be reasonably needed by either party, including without limit, access for
the purposes set forth in Section 10.8.
10.2 Final Settlement Statement; Subsequent Audits and Settlements. With
-------------------------------------------------------------
respect to final recapitulation and audits:
(a) Within ninety (90) days after the Closing, Seller shall provide
to Buyer, for Buyer's review, a proposed final settlement statement (the
"Final Settlement Statement") to account for all adjustments to the
Purchase Price pursuant to Section 2.2 (the "Final Settlement"). Buyer
shall have the right, within thirty (30) days after receipt of the Final
Settlement Statement, to audit the Final Settlement Statement. If Buyer
disagrees with the Final Settlement Statement, Buyer and Seller shall use
best efforts to reach agreement within thirty (30) days following Buyer's
audit of the Final Settlement Statement.
(b) Should the parties be unable to resolve any disagreements, such
disagreement shall, at the earliest practicable date, be referred, by
either or both of the parties, to an independent accounting firm mutually
agreeable to each party (the "Accounting Firm"), along with all audit
reports, work papers, schedules and calculations related to the matter in
dispute. Within thirty (30) days after such submission, the Accounting Firm
shall issue a letter report determining the Final Settlement, which shall
be final and binding. Any fees and expenses incurred in resolving disputes
shall be borne equally by the parties.
(c) Payment of any amounts owed under the Final Settlement is due
thirty (30) days from the date Seller and Buyer agree on the Final
Settlement Statement, or ten (10) days from the determination of the Final
Settlement by the Accounting Firm, whichever is later.
10.3 Recording. Buyer shall be solely responsible for promptly recording
---------
the assignments, deeds, and any other instruments related to the conveyance of
the Assets, and shall promptly furnish Seller with the recording information.
Buyer shall be responsible for all filings with state and federal agencies for
change of owner or operator, and shall promptly provide Seller with the copies
of all such filings when made and confirmation thereof when received. All
recording and filing fees shall be paid by Buyer and where paid by Seller,
reimbursed by Buyer promptly after receipt of an invoice.
10.4 Contracts Requiring Consents. If Seller and Buyer should be unable to
----------------------------
obtain any consent required for the transfer of any Contract, surface lease,
right of way, easement or other document to be assigned to Buyer, if Buyer so
elects, the Contract shall be held by Seller for the benefit of Buyer after
Closing for its term and Seller shall provide Buyer with the economic benefits
thereof until or unless such consent is received or said Contract is terminated.
34
10.5 Further Assurances. Each party shall, from time to time at the
------------------
request of the other, and without further consideration, execute and deliver
such other instruments of sale, transfer, conveyance, assignment, clarification
and termination and take such other action as the party making the request may
require to effectuate the intentions of the parties, including those required to
sell, transfer, convey and assign to, and vest in Buyer, and to place Buyer in
possession of the Assets and to transfer, assign or convey the excluded assets
to Seller. Seller intends to convey the Assets at Closing; however, in the event
it is determined after Closing that: (i) any part of the Assets was not in fact
conveyed to Buyer, and that the title to any part of the Assets is incorrectly
in the name of Seller; or that (ii) any excluded asset is conveyed to Buyer and
that the title to such excluded asset is incorrectly in the name of Buyer; then
each party shall take all such action necessary to correctly convey any part of
the Assets to Buyer, or any part of the excluded assets to Seller.
10.6 Suspense Account Funds. Seller acknowledges that certain funds
----------------------
otherwise payable to operators, working interest owners, overriding royalty
interest owners and/or royalty interest owners in ▇▇▇▇▇ connected to the
▇▇▇▇▇▇▇▇ System or processed through the ▇▇▇▇▇▇▇▇ Plant pursuant to certain of
the Contracts have been placed in suspense (the "Seller Suspense Account Funds")
-------------------------------
pending resolution of questions of title, execution of division or transfer
orders, or for similar reasons. Upon request by Buyer, but no later than ninety
(90) days after the Closing Date, Seller shall transfer to Buyer all Seller
Suspense Account Funds, together with all accounting records, well files,
division orders, correspondence and other documents in any way relating thereto
so as to permit Buyer to assume such obligations. Thereafter, Buyer shall be
responsible for the administration and payment of the Seller Suspense Account
Funds transferred to Buyer and shall fully indemnify Seller with respect
thereto; provided, however, that Seller shall discharge all obligations and
liabilities which exceed the amount of each suspense account transferred to
Buyer which have accrued prior to the Closing Date with respect to such Seller
Suspense Account Funds.
10.7 Post-Closing Accounting Support. After Closing, Seller agrees to
-------------------------------
continue to perform certain accounting services respecting the ▇▇▇▇▇▇▇▇ Plant
and ▇▇▇▇▇▇▇▇ System to facilitate an orderly transition of these functions to
Buyer's personnel for a period of three (3) months after Closing. Seller also
agrees to provide advice on a consultation basis for a period not to exceed two
(2) months following the expiration of the three (3) month period, all as set
forth in EXHIBIT "I". Buyer shall reimburse Seller for these services in
amounts as agreed upon by the parties set forth in EXHIBIT "F" and shall
indemnify Seller for any claims. Buyer shall indemnify Seller, notwithstanding
any other provision to the contrary in this agreement, including any limitation
on the amount payable to Seller, for any and all losses, claims, personal
injuries, or damages to property of Seller or Seller's employees in the course
of the fulfillment of this provision of accounting services pursuant to this
provision as such services are more fully set forth in EXHIBIT "I".
10.8 Prior and Current Financial Statements and Records. In order for
--------------------------------------------------
Buyer to properly restate its financial statements in accord with Section 305 of
the Rules and Regulations of
35
the Securities and Exchange Commission, recognizing the purchase of the Assets,
immediately after execution of this Agreement, Seller agrees to provide Buyer
and its accountants with such access to its financial statements, records and
knowledgeable personnel as they relate to the Assets for up to the past three
(3) years and the current year-to-date as may be required for Seller to satisfy
the above SEC requirements. Access to such financial records shall be granted in
Seller's offices for purposes of such audit. Such records shall not be used by
Buyer for any other purpose except to fulfill its obligations with the SEC. If
any matter is disclosed in the course of such SEC compliance audit which
indicates that Seller is in breach of a representation or warranty granted in
this Agreement, Buyer shall not be entitled to pursue its remedies under this
Agreement against Seller with respect to such breach. Any disclosure by Seller
to Buyer shall be treated with the utmost confidence and shall not be disclosed
to Buyer's employees, accountants, attorneys and agents except those that need
to know and have access to such information for purposes of complying with the
SEC obligations under Section 305 of the Rules and Regulations of the SEC, nor
shall any information disclosed to Buyer pursuant to the provision be disclosed
to any third party.
10.9 Non-Compete. For a period of two (2) years from the Effective Date,
-----------
Seller agrees not to compete with Buyer, either directly or indirectly, in the
gathering and processing of natural gas within the counties of Roosevelt,
Richland, Sheridan, Daniels, Dawson, Wibaux and Fallon, located in Montana, and
within the counties of Divide, Burke, Williams, ▇▇▇▇▇▇▇▇, Golden Valley,
Billings, Slope, ▇▇▇▇▇▇, Montrail, Ward, McClean, Dunn, Mercer, Stark, Morton,
Grant, or Hettinger located in North Dakota, provided, however, nothing shall
prevent Seller from participating in its remaining businesses and expansion
thereof within such counties, for the gathering, treatment, monitoring and
production from oil and gas producing properties in which Seller has a working
interest or of which Seller is the operator, and the gathering and
transportation of crude oil production, natural gas liquids, and products
through Seller's affiliated companies' pipeline systems and other transportation
systems, including trucking. This clause shall be narrowly construed to extend
protection to Buyer only for the gathering and processing of natural gas, and
not for any other activity that Seller may undertake in the geographical area
described herein. Nor shall Seller be precluded from participating in such
activities by virtue of having the opportunity to purchase or otherwise acquire
a gathering or processing facility in such geographic area, provided that Seller
first offers such a bona fide opportunity to Buyer on the same terms and
conditions that Seller is being provided by a third party, or should Buyer not
exercise such option to so acquire such facilities within thirty (30) days of
Seller's notice to Buyer, it may, within such same thirty (30) day period elect
to operate such facility on behalf of Seller, should Seller have such right to
operate, notwithstanding Buyer's election not to purchase. Seller agrees that
these restrictions are reasonable as to both time and geographic area and that
this non-compete clause is not a penalty but a reasonable covenant delivered to
Buyer in exchange for Buyer's payment to Seller of the Purchase Price.
10.10 Signs. Buyer agrees within ninety (90) days to replace all signage
-----
and other indications of ownership of the Assets by Seller or its affiliates
with signage and/or such replacement indications demonstrating Buyer now owns
and operates the Assets.
36
ARTICLE XI
AS IS - WHERE IS SALE; DISCLAIMER
---------------------------------
11.1 General. EXCEPT AS OTHERWISE EXPRESSLY REPRESENTED AND WARRANTED OR
-------
TO THE LIMITED EXTENT INDEMNIFIED IN THIS AGREEMENT: (i) IT IS EXPRESSLY
UNDERSTOOD BY THE PARTIES HERETO THAT THE ASSETS ARE TO BE SOLD BY SELLER AND
PURCHASED BY BUYER AS IS, WHERE IS, WITHOUT WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, EITHER EXPRESS OR IMPLIED, AND THAT BUYER
ACKNOWLEDGES IT HAS HAD OR WILL HAVE HAD A REASONABLE OPPORTUNITY TO INSPECT AND
EXAMINE THE CONDITION OF EACH AND EVERY ITEM THEREOF INCLUDING THE ENVIRONMENTAL
CONDITION OF THE ASSETS, PRIOR TO CLOSING, AND BUYER IS AWARE OF AND ACCEPTS
SUCH PHYSICAL CONDITION AND ENVIRONMENTAL CONDITION; (ii) ALTHOUGH SELLER HAS
MADE, AND UNTIL CLOSING WILL MAKE, ALL OF ITS FILES AND RECORDS AVAILABLE TO
BUYER, EXCEPT AS SPECIFICALLY STATED IN THIS AGREEMENT, SELLER MAKES NO WARRANTY
OR REPRESENTATION, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, AS TO THE ACCURACY
OR COMPLETENESS OF ANY ORAL OR WRITTEN STATEMENT, DESCRIPTION, TITLE OPINION,
DATA, REPORTS, RECORDS, PROJECTIONS, INFORMATION OR MATERIALS NOW, HERETOFORE OR
HEREAFTER FURNISHED OR MADE AVAILABLE TO BUYER IN CONNECTION WITH THIS AGREEMENT
INCLUDING, WITHOUT LIMITATION, ANY DESCRIPTION OF THE ASSETS ANY PRICING
ASSUMPTIONS, ENVIRONMENTAL CONDITION OF THE ASSETS, OR ANY OTHER MATTERS
CONTAINED IN THE PROPRIETARY DATA OR ANY OTHER MATERIALS FURNISHED OR MADE
AVAILABLE TO BUYER BY SELLER OR BY SELLER'S AGENTS OR REPRESENTATIVES. IN
ENTERING INTO AND PERFORMING THIS AGREEMENT, BUYER HAS RELIED AND WILL RELY
SOLELY UPON ITS INDEPENDENT INVESTIGATION OF, AND JUDGMENT WITH RESPECT TO, THE
ASSETS AND THEIR VALUE.
11. 2 CONSUMER LAW. TO THE MAXIMUM EXTENT PERMITTED BY LAW, BUYER EXPRESSLY
------------
WAIVES THE PROVISIONS OF CHAPTER 50, SECTIONS 50-601 TO 50-692, UNFAIR TRADE AND
CONSUMER PROTECTION, KANSAS STATUTES ANNOTATED, AND ANY RELATED AND LIKE
STATUTES, REGULATIONS OR RULES OF THE FEDERAL GOVERNMENT AND ANY STATE,
INCLUDING WITHOUT LIMITATION, COLORADO AND NORTH DAKOTA, DEALING WITH DECEPTIVE
TRADE PRACTICES OR ANY CONSUMER PROTECTION ACT.
ARTICLE XII
37
INSPECTION AND RECORDS
----------------------
12.1 Prior to Closing and thereafter as provided in Section 10.8 or
otherwise, at any reasonable time and from time to time, Seller shall permit the
representatives of Buyer to inspect the Assets and observe the operating and
maintenance personnel therein employed, and further to observe any and all
activities related to the maintenance, operation, contracting and administration
thereof. As provided in Section 10.1, Seller shall promptly after Closing
furnish Buyer with the Contracts and files and all records pertaining to the
Assets for the purpose of achieving an efficient transfer of administration of
the Assets.
ARTICLE XIII
EMPLOYEE MATTERS
----------------
13.1 Employment of Personnel.
-----------------------
(a) As soon as requested by Buyer after execution of this Agreement,
Seller shall make available to Buyer for interviewing by Buyer those employees
Seller then has employed in connection with the ▇▇▇▇▇▇▇▇ System and ▇▇▇▇▇▇▇▇
Plant listed on SCHEDULE 13.1(a) which Seller shall make available for
interview (those employees available for interviewing hereinafter referred to
as "Employees").
(b) At least ten (10) days prior to Closing, Buyer shall provide
Seller with a list of those Employees set forth on SCHEDULE 13.1(b) with the
▇▇▇▇▇▇▇▇ System whom Buyer intends to offer employment with Buyer after
Closing.
(c) With respect to any of the Employees to whom Buyer offers
employment and who accept such offer of employment as of the Closing
(collectively, the "Transferring Employees"), Buyer agrees that it will not
treat the Transferring Employees any less favorably than other similarly
situated employees of Buyer.
(d) Seller shall (i) terminate the relationship of Transferring
Employees with Seller effective as of the Closing and shall be responsible for
(ii) the payment of all wages and other remuneration due to Transferring
Employees with respect to their services as employees of Seller prior to
Closing, (iii) the provision of health plan continuation coverage in
accordance with the requirement of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, and Section 601 through 609 of ERISA
("COBRA") and (iii) be responsible for handling relationships with and
liabilities to causes, demands, suits, proceedings or the like arising prior
to Closing, provided that such indemnification will not apply to claims,
expenses, loss, and liabilities arising from Buyer's employment related
decisions.
38
13.2 Transferring Employee Benefits.
------------------------------
(a) Seller will terminate coverage under all employee benefits
including pension, medical, dental, long term disability benefits and medical,
dental, accident and sickness, disability and life insurance coverages of the
Transferred Employees as of the Closing other than as required by 13.1(d)
above and Buyer will assume liability for any such benefits to the extent any
such plans may be in place for Buyer employees arising at Closing (subject to
the fact that such plans may be amended from time to time after Closing with
lesser or better benefits) or as provided in Buyer's offers of employment to
such Transferring Employees.
(b) Buyer agrees that all Transferring Employees shall be provided
all health and welfare, group insurance and disability benefits available to
similarly situated employees covered by such plans of Buyer, giving full
credit to Transferring Employees for years of service previously credited to
such Transferring Employees, individually, by Seller to the extent permitted
by law. To the extent permitted by law, Transferring Employees shall not be
subject to any exclusions for pre-existing conditions (unless subject to some
under Seller's plan for such existing condition), qualification for plan
participation or satisfaction of applicable deductibles or be required to
begin again any waiting period because of change in plan participation. Seller
shall retain all assets under any employee health, welfare, group insurance,
or other employee benefit plans of Seller in which the Transferring Employee
may have participated prior to Closing.
(c) Employee Retirement and Pension Plans:
(i) All assets and liabilities of any pension and savings
and investment plan of any Transferring Employee prior to Closing shall
be retained or distributed by Seller as provided in such plans. Seller
shall be solely responsible for the administration of such plans and the
payment of all benefits of those employees who have retired or become
disabled prior to Closing and to vested terminated employees as such
become due and payable as fixed by the amount and formula of the plan as
of the Closing.
(ii) Buyer agrees that all Transferring Employees shall be
provided eligibility, vesting and benefit service in any pension and
savings program to the extent such programs may be maintained by Buyer,
equal to similarly situated new employees covered by such plans of Buyer.
Buyer covenants to provide the Transferring Employees the benefits of any
pension and savings and investment plan of Buyer on the same terms and
conditions applicable to similarly situated employees of Buyer or its
affiliated companies.
39
(d) If Buyer offers retiree life and medical benefits to its present
employees, Buyer agrees to provide retiree life and medical benefits under its
own plans (if any) to the Transferring Employees who retire subsequent to
Closing on the same terms and conditions as those benefits are provided to
other similarly situated employees retiring at such times under the then
existing terms and conditions of Buyer's plans in accordance with 13.2 above.
Nothing in this provision requires Buyer to provide such benefits to
Transferring Employees, presently or in the future, if no such benefits are
currently offered by Buyer to its own employees.
(e) The parties expressly acknowledge that this Agreement is not
intended to create a contract between Buyer or Seller and any employee of the
Seller nor may any employee rely on this Agreement as the basis for any breach
of contract claim against Buyer or Seller. Seller shall not in any manner be
responsible or liable for administration or the payment of any benefit due
under any plans maintained by Buyer after the Closing.
(f) All Transferring Employees shall be subject to Buyer's vacation
policy, being given credit for the years of service they were credited with by
Seller. Any accrued vacation of a Transferred Employee shall be cashed out and
paid to such Transferred Employee by Seller, or with Buyer's consent any
accrued vacation carried forward being funded by Seller by payment to Buyer as
an adjustment to Purchase Price at Closing. Any such accrued vacation carried
forward shall be required to be used or taken by such Transferring Employees
subject to Buyer's existing vacation policy, including forfeiture if not used
or taken. Buyer shall not change its existing vacation policies in a manner as
to cause forfeiture of such accrued vacation prior to June 30, 1997. Seller
shall provide at or prior to Closing a list of all vacation accrued but not
taken as of the Closing as SCHEDULE 13.2(f).
13.3 Federal Worker Adjustment and Retraining Notification Act.
---------------------------------------------------------
(a) Buyer shall be responsible for and shall pay any amounts
(including benefit payments) required to be paid by applicable law or the
present severance policies of general application to the Transferring
Employees who shall be terminated or laid off after the Closing for any reason
enumerated in such laws or regulations. It is the intent of the parties that
Seller will not be responsible for, and that Buyer will assume liability for,
any amounts required by law or regulations of general application, including,
but not limited to the Federal Worker Adjustment and Retraining Notification
Act, to be paid as a result of termination or layoff of any Transferring
Employee after the Closing.
(b) Seller shall be responsible for and shall pay any amounts
(including benefit payments) required to be paid by applicable law to
Employees who are deemed under applicable law to have been laid off on or
before the Closing.
40
13.4 Non-Transferring Employees. Seller shall remain solely liable for
--------------------------
all of its non-Transferring Employee salaries, benefits and obligations and
shall hold Buyer harmless from any and all liability therefore.
ARTICLE XIV
TAXES
-----
14.1 Tax Proceedings. Notwithstanding anything to the contrary herein,
---------------
Seller shall be responsible for all income, franchise, and processing taxes
attributable to periods of ownership prior to the Effective Date, and Buyer
shall be responsible for all income, franchise, and processing taxes
attributable to periods of ownership on and after the Effective Date. In the
event Buyer or any of Buyer's affiliates receives notice of any examination,
claim, adjustment or other proceeding relating to the liability for taxes of or
with respect to Seller for any period prior to the Effective Date, Buyer shall
notify Seller in writing within ten (10) days of receiving notice thereof. As to
any such taxes for which Seller is or may be liable, Seller shall at Seller's
expense control or settle the contest of such examination, claim, adjustment or
other proceeding, and shall indemnify Buyer against all losses in connection
therewith. The parties shall cooperate with each other and with their respective
affiliates in the negotiations and settlement of any proceeding described in
this Section 14.1.
14.2 Like - Kind Exchange. Notwithstanding anything contained in this
--------------------
Agreement to the contrary, Seller and Buyer hereby acknowledge and agree that:
(a) Seller desires to complete the sale of all or part of the Assets
to effect a qualified like-kind exchange for other property ("Exchange
Property") in a transaction that qualifies as a deferred exchange in
accordance with section 1031 of the Internal Revenue Code and regulations
thereunder.
(b) At the direction of Seller at Closing, Buyer shall deposit all or
a part of the Purchase Price as may be directed three (3) days before Closing
with a mutually-agreed upon qualified escrow agent, who shall hold the same in
accordance with the terms of the Escrow Agreement entered into by Seller,
Buyer and the mutually agreed-upon escrow agent ("Escrow Agent"). The purpose
of the escrow is to provide for the acquisition of Exchange Property to
complete a qualified deferred exchange.
(c) Buyer agrees to reasonably cooperate with Seller in effecting a
qualified like-kind exchange, including the execution of reasonable documents
deemed necessary to qualify the transaction as a deferred exchange. However,
it is specifically agreed that Buyer shall be an accommodating party only and
Seller shall indemnify and hold Buyer harmless
41
from any additional liability or expense as a result of such qualified
deferred exchange. It shall be the sole responsibility of Seller to locate and
identify the Exchange Property.
ARTICLE XV
MISCELLANEOUS PROVISIONS
------------------------
15.1 Commission. Each of the parties hereto represents and warrants that
----------
there are no claims for brokerage commission or finders' fees in connection with
the transaction contemplated by this Agreement, and Seller and Buyer will
respectively pay or discharge, and will indemnify the other for, brokerage
commissions or finders' fees incurred by reason of any action taken by such
indemnifying party.
15.2 Assignment. The terms, provisions and conditions of this Agreement
----------
shall extend to, be binding upon and inure to the benefit of the parties hereto,
their respective successors, assigns and legal representatives, provided
however, no party will make an assignment without the advance written consent of
the other, which such consent may be withheld, except for an assignment to a
wholly owned subsidiary or a wholly owned affiliate of a parent corporation,
provided that such assignor or parent corporation, as the case may be,
guarantees the performance of the obligations herein.
15.3 Entire Agreement; Amendments. This Agreement and the exhibits and
----------------------------
schedules attached hereto and incorporated by reference herein contain the
entire understanding of the parties with respect to its subject matter. There
are no restrictions, agreements, promises, warranties, covenants or undertakings
other than those expressly set forth herein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to its
subject matter, except for that certain Confidentiality Agreement between the
parties which shall remain in full force and effect pursuant to its terms. This
Agreement may be amended only by a written instrument duly executed by the
parties. Any condition to a party's obligations hereunder may be waived in
writing by such party. No waiver by any party of any one or more defaults by
the other in performance of any of the provisions of this Agreement shall
operate or be construed as a waiver of any future default or defaults, whether
of a like or different character.
15.4 Severability. Each portion of this Agreement is intended to be
------------
severable. If any term or provision hereof is illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the validity of the
remainder of this Agreement.
15.5 Actions. Seller and Buyer, singularly and plurally, warrant and agree
-------
that each shall use its best efforts to take or cause to be taken all such
action as may be necessary to consummate and make effective the transaction as
set forth in this Agreement and to assure that it will not be under any material
corporate, legal or contractual restriction that would prohibit or delay the
timely consummation of such transaction.
42
15.6 Termination. This Agreement may be terminated at any time on or
-----------
prior to the Closing:
(a) by mutual written consent of Seller and Buyer;
(b) by Seller on the Closing if the conditions set forth in Section
8.3 have not been satisfied in all material respects by Buyer or not waived by
Seller in writing by the Closing;
(c) by Buyer on the Closing if the conditions set forth in Section
8.2 have not been satisfied in all material respects by Seller or waived by
Buyer, as appropriate, in writing by the Closing;
(d) by Seller if, as a result of all purchase price adjustments, the
Purchase Price has been reduced by an amount greater than 25 % of the amount
stated in Section 2.2;
(e) by Seller if, certain pre-Closing Purchase Price Adjustments
pursuant to Sections 6.2 and 6.3 or any other provision in this Agreement,
except as set forth below, exceed $5,000,000. In determining such $5,000,000
amount, Seller shall not take into account the following expenses or
liabilities:
(i) those Purchase Price Adjustments set forth in Section
2.2(b)(i), or Section 2.2(b)(ii);
(ii) SCHEDULE 4.1(d)--"Pending Claims", which such items
shall not be Purchase Price Adjustments, but rather matters retained by
Seller;
(iii) the contract with Meridian Oil, Inc., Contract No. MCK-
1873, which is terminated with respect to certain, but not all gas ▇▇▇▇▇,
and which has not yet been renegotiated by Seller, as such matter is
discussed and disclosed in Section 2.2(b)(v) and Section 7.12;
(iv) claims listed on SCHEDULES 4.1(g)(h) or (i)), other
than the notation that certain Contracts have audit rights not yet
undertaken by producers, which could incur a liability prospectively,
which such matter shall not be a pre-Closing Purchase Price Adjustment,
but rather a matter to be indemnified by Seller pursuant to Section
9.2(a), (b), or (c);
43
(v) the fair market value for matters listed on SCHEDULE
4.1(j)--Equipment Removed since the Effective Date;
(vi) the value of matters set forth on SCHEDULE 4.1(k),
Agreements Requiring consents to Assign, none of which shall be a pre-
Closing Purchase Price Adjustment, but rather a matter to be indemnified
by Seller pursuant to Section 9.2(a),(b) or (c); or
(vii) matters listed on SCHEDULE 4.1(p)--Governmental
Compliance;
(f) by Buyer or Seller if, after good faith efforts, Seller has been
unable to complete the acquisition of the ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Gas Gathering System
by January 31, 1997;
(g) by either Buyer or Seller if Closing is not able to take place by
January 31, 1997 due to a provision or circumstance not the fault of or
attributable to the party seeking termination or attributable to a condition
or obligation such party seeking termination had to fulfill pursuant to this
Agreement; or
(h) by Buyer should it not be able to obtain financing by Closing.
If a non-defaulting party elects to treat this Agreement as being in full force
and effect, the non-defaulting party shall have, in addition to any other
available remedy at law or equity, the right to an action for specific
performance and/or damages, except to the extent Seller is entitled to obtain
its relief through Section 2.5 to the exclusion of this provision.
15.7 Counterparts. This Agreement may be executed simultaneously in any
------------
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
15.8 Governing law, etc. This Agreement shall be governed by, enforced in
-------------------
accordance with, and interpreted under, the laws of the State of Kansas, without
giving effect to the conflict of laws rules thereof. Seller and Buyer hereby
irrevocably submit venue to the jurisdiction of the Federal District Court of
the United States of America, District of Kansas, located in Kansas, with
preference for venue being in Kansas City, Kansas, rather than Wichita, Kansas.
The parties hereby waive, and agree not to assert, as a defense in any action,
suit or proceeding for the interpretation or enforcement hereof or of any such
document, that it is not subject thereto or that such action, suit or proceeding
may not be brought or is not maintainable in said courts or that the venue
thereof may not be appropriate or that this Agreement or any of such document
may not be enforced in or by said courts, and the parties irrevocably agree that
all claims with respect to such action or proceeding shall be heard and
determined in such Federal District Court of Kansas. Seller and Buyer hereby
consent to and grant any such court jurisdiction over the person of such parties
hereto and over the
44
subject matter of any such dispute and agree that service of process or other
papers in connection with any such action or proceeding in the manner provided
by the federal rules of civil procedure shall be valid and sufficient service
thereof.
15.9 Preparation of Agreement. This Agreement was prepared jointly by the
------------------------
parties hereto and not by either to the exclusion of the other.
15.10 Notices and Addresses. Any notice, request, instruction, waiver or
---------------------
other communication to be given hereunder by any party shall be in writing and
shall be considered duly delivered if personally delivered, facsimile, mailed by
certified mail with postage prepaid or sent by telegraph to the addresses or
facsimile of the parties as follows
Seller: ▇▇▇▇ Hydrocarbon Company
P. O. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Legal Department
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Buyer: Bear Paw Energy, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address as either party may designate by written notice.
15.11 Time is of the Essence. Time is of the essence for any provision in
----------------------
this Agreement unless the parties, in writing, mutually agree otherwise with
respect to a certain matter identified in such writing.
45
IN WITNESS WHEREOF, the parties have hereto set their hands by their duly
authorized officials as of the date set forth above.
"BUYER"
BEAR PAW ENERGY, INC.
ATTEST:
/s/
____________________ By:______________________________
Title: ____________________________
"SELLER"
▇▇▇▇ HYDROCARBON COMPANY
A Division of
▇▇▇▇ INDUSTRIES, INC.
ATTEST:
/s/
____________________ By:________________________________
Asst. Secretary Title: ____________________________
46
