Attached files
file | filename |
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8-K - TXCO Resources Inc | v170334_8k.htm |
Purchase
And Sale Agreement
BETWEEN
TXCO
Resources Inc.,
TXCO
Energy Corp.,
Texas
Tar Sands Inc.,
Output
Acquisition Corp.,
OPEX
Energy,
LLC,
Charro
Energy, Inc.,
TXCO
Drilling Corp.,
Eagle
Pass Well Service,
L.L.C.,
PPL
Operating, Inc.,
Maverick
Gas Marketing, Ltd.,
and
Maverick-Dimmit
Pipeline, Ltd.
As
Sellers
and
Anadarko
E&P Company LP
Executed
On December 31,
2009
TABLE
OF CONTENTS
Page
|
||
ARTICLE
1
|
PURCHASE
AND SALE
|
1
|
Section
1.1
|
Purchase
and Sale
|
1
|
Section
1.2
|
Assets
|
2
|
Section
1.3
|
Excluded
Assets
|
4
|
Section
1.4
|
Effective
Time; Proration of Costs and Revenues
|
4
|
Section
1.5
|
Delivery
and Maintenance of Records
|
6
|
ARTICLE
2
|
PURCHASE
PRICE
|
6
|
Section
2.1
|
Purchase
Price
|
6
|
Section
2.2
|
Deposit
|
7
|
Section
2.3
|
Adjustments
to Purchase Price
|
7
|
Section
2.4
|
Allocation
of Purchase Price
|
8
|
ARTICLE
3
|
CONSENT
TO ASSIGNMENT; PREFERENTIAL RIGHTS TO PURCHASE; CASUALTY AND CONDEMNATION
LOSS
|
9
|
Section
3.1
|
Consents
to Assignment; Preferential Rights to Purchase
|
9
|
Section
3.2
|
Casualty
and Condemnation Loss
|
10
|
ARTICLE
4
|
REPRESENTATIONS
AND WARRANTIES OF SELLER
|
10
|
Section
4.1
|
Disclaimers
|
10
|
Section
4.2
|
Existence
and Qualification
|
11
|
Section
4.3
|
Power
|
11
|
Section
4.4
|
Authorization
and Enforceability
|
11
|
Section
4.5
|
No
Conflicts
|
11
|
Section
4.6
|
Liability
for Brokers' Fees
|
12
|
Section
4.7
|
Litigation
and Claims
|
12
|
Section
4.8
|
Taxes
and Assessments
|
12
|
Section
4.9
|
Preferential
Rights; Consents
|
12
|
Section
4.10
|
Consents
|
12
|
Section
4.11
|
Contracts
|
13
|
Section
4.12
|
Wells;
Facilities
|
14
|
Section
4.13
|
Marketing;
Calls on Production
|
14
|
Section
4.14
|
Imbalances
|
15
|
Section
4.15
|
AFEs
|
15
|
Section
4.16
|
Suspense
Account
|
15
|
Section
4.17
|
Capital
Expenditures
|
15
|
Section
4.18
|
Equipment
|
15
|
ARTICLE
5
|
REPRESENTATIONS
AND WARRANTIES OF PURCHASER
|
15
|
Section
5.1
|
Existence
and Qualification
|
15
|
Section
5.2
|
Power
|
16
|
Section
5.3
|
Authorization
and Enforceability
|
16
|
Section
5.4
|
No
Conflicts
|
16
|
Section
5.5
|
Liability
for Brokers' Fees
|
16
|
Section
5.6
|
Litigation
|
16
|
Section
5.7
|
Financing
|
16
|
Section
5.8
|
Independent
Investigation
|
17
|
Section
5.9
|
Consents,
Approvals or Waivers
|
17
|
ARTICLE
6
|
COVENANTS
OF THE PARTIES
|
17
|
Section
6.1
|
Access
|
17
|
Section
6.2
|
Government
Reviews
|
17
|
Section
6.3
|
Notification
of Breaches
|
17
|
Section
6.4
|
Public
Announcements
|
18
|
Section
6.5
|
Operation
of Business
|
18
|
Section
6.6
|
Indemnity
Regarding Access
|
20
|
Section
6.7
|
Assumption
of Obligations
|
20
|
Section
6.8
|
Solicitation
Provisions; Back-Up Bid Option
|
20
|
Section
6.9
|
Tax
Matters
|
23
|
Section
6.10
|
[Intentionally
Omitted]
|
23
|
|
||
Section
6.11
|
Further
Assurances
|
23
|
Section
6.12
|
Recording
|
23
|
Section
6.13
|
Transition
Services Agreement
|
23
|
|
||
Section
6.14
|
Schedule
Updates
|
23
|
Section
6.15
|
Peregrine
Claims
|
24
|
Section
6.16
|
Sale
Order
|
24
|
-ii-
ARTICLE
7
|
CONDITIONS
TO CLOSING
|
24
|
Section
7.1
|
Conditions
of Sellers to Closing
|
24
|
Section
7.2
|
Conditions
of Purchaser to Closing
|
25
|
ARTICLE
8
|
CLOSING
|
26
|
Section
8.1
|
Time
and Place of Closing
|
26
|
Section
8.2
|
Obligations
of Sellers at Closing
|
26
|
Section
8.3
|
Obligations
of Purchaser at Closing
|
27
|
Section
8.4
|
Closing
Payment and Post-Closing Purchase Price Adjustments
|
28
|
Section
8.5
|
Further
Assurances
|
29
|
ARTICLE
9
|
TERMINATION
AND AMENDMENT
|
29
|
Section
9.1
|
Termination
|
29
|
Section
9.2
|
Effect
of Termination
|
30
|
ARTICLE
10
|
INDEMNIFICATION;
LIMITATIONS
|
30
|
Section
10.1
|
Indemnification
|
30
|
|
||
Section
10.2
|
Indemnification
Actions
|
33
|
Section
10.3
|
Limitation
on Actions
|
34
|
ARTICLE
11
|
MISCELLANEOUS
|
35
|
Section
11.1
|
Receipts
|
35
|
Section
11.2
|
Expenses
|
36
|
Section
11.3
|
Counterparts
|
36
|
Section
11.4
|
Notice
|
36
|
Section
11.5
|
Sales
or Use Tax, Recording Fees and Similar Taxes and Fees
|
37
|
Section
11.6
|
Expenses
|
37
|
Section
11.7
|
Change
of Name
|
37
|
Section
11.8
|
Replacement
of Bonds, Letters of Credit and Guarantees
|
37
|
Section
11.9
|
Governing
Law; Submission to Jurisdiction
|
38
|
Section
11.10
|
Captions
|
38
|
Section
11.11
|
Waivers
|
38
|
Section
11.12
|
Assignment
|
38
|
Section
11.13
|
Entire
Agreement
|
38
|
Section
11.14
|
Amendment
|
38
|
Section
11.15
|
No
Third Party Beneficiaries
|
38
|
-iii-
Section
11.16
|
References
|
38
|
Section
11.17
|
Construction
|
39
|
Section
11.18
|
Limitation
on Damages
|
39
|
ARTICLE
12
|
DEFINITIONS
|
39
|
-iv-
EXHIBITS:
|
||
Exhibit
A
|
-
|
Leases
and Lands
|
Exhibit
A-1
|
-
|
Interests
in Wells
|
Exhibit
A-2
|
-
|
Gathering
Systems
|
Exhibit
A-3
|
-
|
Contracts
|
Exhibit
A-4
|
-
|
Equipment
|
Exhibit
A-5
|
-
|
Inventory
|
Exhibit
A-6
|
-
|
Surface
Rights
|
Exhibit
A-7
|
-
|
Seismic
Data
|
Exhibit
A-8
|
-
|
Capital
Expenditure Budget
|
Exhibit
B
|
-
|
Form
of Escrow Agreement
|
SCHEDULES:
|
||
Schedule
4.7
|
-
|
Litigation
|
Schedule
4.8
|
-
|
Taxes
|
Schedule
4.9
|
-
|
Consents
to Assignment; Preferential Rights
|
Schedule
4.10
|
-
|
Consents
|
Schedule
4.11
|
-
|
Material
Contracts
|
Schedule
4.12
|
-
|
Plugged
and Abandoned Wells
|
Schedule
4.14
|
-
|
Imbalances
|
Schedule
4.15
|
-
|
AFEs
|
Schedule
4.16
|
-
|
Suspense
Revenues
|
Schedule
4.17
|
-
|
Unbudgeted
Capital Expenditures
|
Schedule
5.9
|
-
|
Consents,
Approvals and Waivers
|
Schedule
6.10
|
-
|
Employees
|
-v-
This Purchase and Sale Agreement (the “Agreement”),
is executed on December 31, 2009, by and between TXCO
Resources Inc., a Delaware corporation,
TXCO Energy
Corp., a Texas
corporation, Texas
Tar Sands Inc., a
Texas corporation, Output
Acquisition Corp., a Texas corporation, OPEX Energy, LLC, a Texas limited
liability company, Charro
Energy, Inc., a
Texas corporation, TXCO
Drilling
Corp., a Texas
corporation, Eagle
Pass Well Service,
L.L.C., a Texas limited liability company, PPL Operating,
Inc., a Texas
corporation, Maverick
Gas Marketing, Ltd., a Texas limited
partnership, and Maverick-Dimmit
Pipeline, Ltd., a
Texas limited partnership, (collectively, the “Sellers”),
and Anadarko
E&P Company LP, a Delaware limited partnership
(“Purchaser”). Each
Seller and Purchaser is sometimes referred
to individually as a “Party”
and collectively as the “Parties.”
WHEREAS, Sellers are debtors in
possession under the protection of Chapter 11 of the United States Bankruptcy Code pursuant to jointly administered cases
under Case Number 09-51807 filed with the United States Bankruptcy Court for the Western
District of Texas (San Antonio Division) (the “Bankruptcy
Court”); and
WHEREAS, Sellers own certain interests in oil and
gas properties, rights and related assets that are defined
and described herein; and
WHEREAS, Sellers filed with the Bankruptcy Court
a First Amended Plan of Reorganization on December 18, 2009; and
WHEREAS, subject to the Bankruptcy Court’s entry
of an Order of the Court authorizing the transactions
contemplated herein containing terms in form and substance reasonably
satisfactory to Sellers and Purchaser and
providing among other things, for the purchase and sale of Sellers’ Assets (hereinafter defined) pursuant to
the terms of this Agreement (the “Sale
Order”), Sellers desire to sell to Purchaser and Purchaser desires to purchase from
Sellers the Assets, in the manner and upon
the terms and conditions hereafter set forth; and
WHEREAS, capitalized terms used herein shall have the meanings
ascribed to them in this Agreement as such terms are defined
in Article 12
hereof.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises, representations, warranties, covenants, conditions and agreements
contained herein, and for other valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Parties
hereto, intending to be legally bound by the terms hereof, agree as
follows:
PURCHASE
AND SALE
Section
1.1 Purchase
and Sale. At the Closing, and upon the terms and subject to the conditions of this
Agreement, Sellers agree to sell and
convey to Purchaser and Purchaser agrees
to purchase, accept and pay for the Assets (as defined in
Section 1.2).
Section
1.2 Assets. As used herein, the term “Assets”
means all of Sellers’ right, title, and interest in and to
the following:
(a) The oil,
gas and mineral leases, subleases and other leaseholds, royalties, overriding
royalties, net profits interests, mineral fee interests, carried interests,
Contractual Prospects, and other properties and interests
described on Exhibit A
(collectively, the “Leases
and Lands”), and any and all oil, gas, water, CO2 or
injection wells thereon, including the
working interests and net revenue interests in Leases and the wells located
thereon shown on Exhibit A-1
attached hereto (the “Wells”);
(b) All pooled,
communitized or unitized acreage which includes all or a part of any Lease or
includes any Well (the “Units”),
and all tenements, hereditaments and appurtenances belonging to the Leases and Lands and Units;
(c) All
gathering and transportation pipelines, compressors, stabilizers, processing
facilities, disposal facilities, treatment facilities, interconnects, and other
systems, facilities and plants used solely in connection with the Units, Leases and Lands and Wells, including the gas gathering and
transportation pipelines, processing facilities, treatment facilities,
interconnects, and other systems and facilities described on Exhibit A-2
(the “Gathering
Systems”);
(d) All surface
fee interests (including the Mula Creek Ranch), easements,
permits, licenses, servitudes, rights-of-way, surface leases and other surface rights and water rights appurtenant to, and used or held for
use solely in connection with, the Properties, but excluding
any permits and other appurtenances to the extent transfer is restricted by
third-party agreement or applicable law
(the “Surface
Rights” and,
together with the Units, Leases, Lands,
Wells and Gathering Systems, the “Properties”);
(e) To the
extent transferable pursuant to Applicable Law, all
governmental (whether federal, state or local) Permits,
licenses, Orders, authorizations, franchises and related
instruments or rights required of Sellers under applicable
Law for the ownership, operation or use of the Leases, Lands, Wells, Gathering Systems, Surface Rights (the “Permits”),
including Environmental Permits
(f) All Hydrocarbons (or the proceeds from the sale of
Hydrocarbons) in storage on the Properties or in the
Gathering Systems at the Effective Time and all Hydrocarbons produced and saved
attributable to the Properties after the Effective Time and all Imbalances owed to Sellers by a Third Party as of the Effective Time;
-2-
(g) All rights
attributable to the period of time after the Effective Time under all presently
existing contracts, agreements and instruments by which the Assets are bound, to the extent applicable to the Properties (the “Contracts”),
including operating agreements, unitization, pooling and
communitization agreements, declarations and orders, area of mutual interest
agreements, joint venture agreements, farmin and farmout agreements, exchange
agreements, transportation agreements, agreements for the sale and purchase of
Hydrocarbons and processing agreements, to the extent
applicable to the Properties or the production of Hydrocarbons from the Properties, and
confidentiality agreements, to the extent applicable to the Properties or the
production of Hydrocarbons from the Properties, including those described on
Exhibit A-3, but excluding any
contracts, agreements and instruments to the extent transfer is restricted by
third-party agreement or applicable
law;
(h) All equipment, machinery, fixtures and other tangible personal property
and improvements located on the Properties or used or held
for use in connection with the operation of the Properties
including the Equipment described on
Exhibit A-4 (the
“Equipment”);
(i) All surplus
equipment, materials and inventory owned, leased or held for
use by Sellers, in connection with operations on the Properties including such surplus equipment, materials and inventory, if any, described on Exhibit A-5;
(j) All surface
leases for real property used by Sellers in connection with
the operation of the Properties (including
leases for field office, supply yards, warehouses or buildings, if any,
described on Exhibit A-6);
(k) All
geophysical and geological data, engineering and consulting reports, computer
data, seismic data (including raw data and any interpretative
data or information relating so such geologic, geophysical and seismic data) and
other proprietary data (in each case whether in written or electronic format)
owned by Sellers, together with any rights of Sellers to such
types of intellectual property owned or prepared by third parties and not subject to licensing arrangements requiring purchase
of a proprietary license by each successor-user, in each case to the extent
relating to the operation of the Leases, Lands, Wells, Gathering System, Units, and Surface Rights, including the seismic data described on Exhibit A-7;
(l) All
operating revenues and accounts receivable relating to the period after the
Effective Time, in each case associated with the Properties or the production of Hydrocarbons
attributable thereto; and
(m) The
records of Sellers relating solely to the Properties or other Assets, excluding however, (A) any records to the extent disclosure or transfer is
restricted by any third-party license agreement, other
third-party agreement or applicable law;
(B) non-transferable computer software; (C) all legal records and legal files of Sellers and all other work product of and attorney-client
communications with any of Sellers’ legal counsel (other than
(w) environmental assessments and compliance reports
(x) title opinions, (y) Contracts and (z) records and files with respect to the matters described on
Schedule 4.7); and (D) any other records to the extent constituting Excluded Assets (as defined in Section 1.3) (clauses (A) through (D) shall hereinafter be referred to as the “Excluded
Records” and subject to such exclusions, the records described in this
Subsection 1.2(m) shall
hereinafter be referred to as the “Records”).
-3-
Section
1.3 Excluded
Assets. Notwithstanding the foregoing, the Assets shall
not include, and there is excepted, reserved and excluded
from the purchase and sale contemplated hereby (collectively, the “Excluded
Assets”):
(a) all
corporate, financial, income and franchise tax and legal records of Sellers that relate to Sellers’ business
generally (whether or not relating to the Assets), all Excluded Records and all books, records and files
that relate to the Excluded Assets;
(b) all of
Sellers’ other mineral fee interests, royalties and/or
overriding royalty interests to the extent not specifically described in Section 1.2;
(c) all of
Sellers’ other (i) equipment, machinery, fixtures and other tangible personal property
and improvements to the extent not described on Exhibit A-4, including all
drilling rigs, and (ii) any computers and related
peripheral equipment and any inventory to the extent not
described on Exhibit A-5;
(d) all rights
to any refund of Taxes or other costs or expenses borne by
Sellers or Sellers’ predecessors in
interest and title attributable to periods prior to the Effective Time;
(e) all rights
attributable to the period of time prior to the Effective Time relating to
claims, causes of action, choses in action, rights of recovery, rights of set
off, and rights of recoupment (other than claims or causes of action for proceeds to which Purchaser is entitled under
Section 1.4(b));
(f) Sellers’
area-wide bonds, permits and licenses or other permits, licenses or
authorizations used in the conduct of Sellers’ business
generally and not specifically limited to the Assets;
(g) Subject to
Section 6.15,
all Sellers’ interests in, and all assets of any and all of
Sellers’ Benefit Plans;
and
(h) all
rights and interests of the Sellers in and to the confidentiality agreement
between TXCO Resources Inc. and Peregrine Oil & Gas and all rights relating
to claims, causes of action, choses in action, rights of recovery, rights of set
off, and rights of recoupment in connection with such confidentiality agreement,
whether arising or relating to any period prior to or after the Effective
Time.
(a) Possession
and ownership of the Assets shall be transferred from Sellers to Purchaser at the Closing, but, subject to consummation of the Closing, certain
financial benefits and burdens of the Assets shall be
transferred effective as of 7:00 a.m., local time, where the respective Assets are located, on January 1, 2010 (the
“Effective
Time”), as described below.
-4-
(b) Purchaser
shall be entitled to all production of Hydrocarbons from or
attributable to the Leases and Lands, Units and Wells at and after the Effective Time (and all products and proceeds
attributable thereto), and to all other income, proceeds, receipts and credits earned with respect to the Assets at or after the Effective Time, and shall
be responsible for (and entitled to any refunds with respect to) all Property Costs incurred at and after the Effective Time. Sellers shall be
entitled to all production of Hydrocarbons from or
attributable to Leases and Lands, Units
and Wells prior to the Effective Time (and
all products and proceeds attributable thereto), and to all
other income, proceeds, receipts and
credits earned with respect to the Assets prior to the Effective Time, and shall be responsible for (and entitled to any
refunds with respect to) all Property Costs incurred prior to
the Effective Time. “Earned”
and “incurred”,
as used in this Agreement, shall be interpreted in accordance
with generally accepted accounting principles and Council of
Petroleum Accountants Society (“COPAS”)
standards, and expenditures which are cash-called or advanced pursuant to a
joint operating agreement, unit agreement or similar agreement shall be deemed
incurred when expended by the operator of the applicable Leases and Lands, Unit or Well, in accordance with Sellers’ current
practice.
(c) “Property
Costs” means all operating expenses (including costs
of insurance, rentals, shut-in payments, title examination and curative actions,
and ad valorem, property, severance, production and similar Taxes based upon or measured by the ownership or operation of the
Assets or the production of Hydrocarbons
therefrom, but excluding any other Taxes) and capital
expenditures (including bonuses, broker's fees, and other
lease acquisition costs, costs of drilling and completing wells and costs of acquiring equipment) incurred
in the ownership and operation of the Assets in the ordinary
course of business, and overhead costs charged to the Assets
under the applicable operating agreement or if none, charged to the Assets on the same basis as charged on the date of this Agreement (excluding any such costs and expenses to be paid which
are excused, rejected or otherwise no longer payable by Sellers pursuant to an Order of the Bankruptcy Court).
(d) For
purposes of allocating production (and accounts receivable with respect
thereto), under this Section 1.4, (i) liquid hydrocarbons shall be deemed to
be “from or attributable to” the Leases and Lands, Units and Wells when they pass through the
pipeline connecting into the storage facilities into which they are run or, if
there are no such storage facilities, when they pass through the meters at the
point of entry into the pipelines through which they are transported from the
field, and (ii) gaseous hydrocarbons
shall be deemed to be “from or attributable to” the Leases
and Lands, Units and Wells when they pass
through the delivery point sales meters on the pipelines through which they are
transported. Sellers shall utilize reasonable interpolative
procedures to arrive at an allocation of production when exact meter readings or
gauging and strapping data is not available. Sellers shall provide to Purchaser, no later than
ten (10) Business Days prior to Closing,
evidence of all meter readings and all gauging and strapping procedures
conducted on or about the Effective Time in connection with
the Assets, together with all data necessary to support any
estimated allocation, for purposes of establishing the adjustment to the Purchase Price pursuant to Section 2.3
hereof. Taxes that are included in Property Costs, right-of-way fees, insurance premiums and other
Property Costs that are paid periodically shall be prorated
based on the number of days in the applicable period falling before and the
number of days in the applicable period falling at or after the Effective Time, except that production, severance and similar Taxes measured by the quantity of or the value of production shall
be prorated based on the number of units or value of
production actually produced and sold, as applicable, before, and at or after,
the Effective Time. In each case, Purchaser shall be responsible for the portion allocated to the
period at and after the Effective Time and Sellers shall be responsible for the portion allocated to the period
before the Effective Time.
-5-
(e) For the
avoidance of doubt, all of Sellers’ costs and expenses
relating to the filing, administration, pendency or consummation of the Bankruptcy Case shall be the responsibility of Sellers and shall not be chargeable to Purchaser
nor be an upward adjustment to the Purchase
Price.
Section
1.5 Delivery
and Maintenance of Records. Sellers, at Purchaser’s cost,
shall deliver the Records to Purchaser
within ten (10) days following Closing. Sellers may retain the copies of such Records at
their discretion. With respect to originals or
last remaining copies of any Records provided by Sellers to Purchaser, Purchaser, for a period of seven (7) years following Closing, will (i) retain the Records, (ii) provide Sellers with access to the Records following
reasonable advance notice and during normal business hours for review and
copying at Sellers’ expense in connection with any tax audit
or investigation related to Sellers, and (iii) provide Sellers with access,
following reasonable notice and during normal business hours, to (A) materials received or produced after Closing relating to any claim for indemnification made under Section 10.1 of
this Agreement (excluding, however, attorney work product and
attorney-client communications with respect to any such claim being brought by
Purchaser under this Agreement) for review
and copying at Sellers’ expense and (B) Purchaser’s and its Affiliates’ officers, employees and representatives for the purpose of discussing any such claim,
provided that Purchaser shall have the right to have its own
representatives present during any such
meeting. In addition, for a period of two (2) years following the
Closing, Purchaser will provide Sellers with access to the Records following
reasonable advance notice and during normal business hours for review and
copying at Sellers’ expense in connection with matters related to the ownership
or operation of the Excluded Assets.
PURCHASE
PRICE
Section
2.1 Purchase
Price. The
purchase price for the Assets (the “Purchase
Price”) shall be the sum of (i) an amount sufficient to (A) repay the
Sellers’ bank lenders (including the Sellers' debtor-in-possession financing and
revolver and/or term loan credit facilities) in full, (B) pay all other
creditors in full, including interest thereon, as permitted by applicable law,
and (C) pay any cure amounts of executory contracts assumed upon effectiveness
of the Sellers’ Plan of Reorganization (except the amount to cure the Claim of
Anadarko Petroleum Corporation for breach of the Confidentiality Agreement which
shall be waived at Closing) as allowed by the Bankruptcy Court and (ii)
$1,000,000; provided, however, that such
amount in total shall not exceed $ 310,000,000. The Purchase Price shall be adjusted as provided in Section 2.3.
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Section
2.2 Deposit. Within two (2) Business Days following the execution of this Agreement, Purchaser shall deposit with Escrow Agent an earnest money deposit (“Deposit”)
in the amount of $20,000,000. The Deposit shall be
held by the Escrow Agent pursuant to the Escrow Agreement. In the event that the Closing does not occur, the Deposit shall be paid
over by Escrow Agent to Purchaser with
interest accrued thereon promptly upon termination of this Agreement, unless
such Closing fails to occur as a result of Purchaser’s breach of this Agreement, in which
case the Deposit shall be paid over by Escrow Agent to Sellers with interest
accrued thereon promptly upon termination of this
Agreement. Otherwise, the Deposit shall be paid
over by Escrow Agent to Sellers and
credited against the Purchase Price at Closing.
Section
2.3 Adjustments
to Purchase
Price. The Purchase Price for the Assets shall be adjusted as follows with all such amounts being
determined in accordance with generally accepted accounting principles,
consistently applied, and COPAS standards:
(a) Reduced by
the aggregate amount of the following proceeds received by
Sellers between the Effective Time and the
Closing Date, as defined below (with the
period between the Effective Time and the Closing Date referred to as the “Adjustment
Period”): (i) proceeds from the sale of Hydrocarbons (net of
any (A) royalties, overriding royalties or other burdens
on or payable out of production, (B) gathering,
processing and transportation costs not included in Property
Costs and any (C) production, severance, sales or excise
Taxes not reimbursed to Sellers by the purchaser of
production) produced from or attributable to the Properties
during the Adjustment Period, and (ii) other proceeds earned with respect to
the Assets during the Adjustment Period
(provided that for purposes of this adjustment, “proceeds”
shall not be considered to include funds received by Sellers for the account of third Persons);
(b) Reduced as
a result of casualty or condemnation loss by the amount determined under Section 3.2;
(c) Reduced or
increased by the amount of any positive or negative imbalance
of as set forth on Schedule 4.14 based on a
price determined based on the applicable basis differential
offered to Sellers off the current prompt month futures price for natural gas as
reported on the NYMEX for the next month succeeding the Closing;
(d) Increased
by the amount of all Property Costs and other costs
attributable to the ownership and operation of the Assets
which are paid by Sellers and incurred at or after the Effective Time, except any Property Costs and
other such costs already deducted in the determination of proceeds in Section 2.3(a)(i);
(e) Increased
by the amount of capital expenditures incurred after December 11, 2009, up
to the Effective Time in connection with fracturing operations on the
O’Meara-Webb 687 Unit 1-H Well, Dimmit County, Texas, to the extent required to
maintain Seller’s contractual rights under the Joint Exploration Agreement dated
September 28, 2007, by and between EnCana Oil & Gas (USA), Inc. and
TXCO Energy Corp. to the extent Sellers are unable to negotiate an extension for
such operation with EnCana Oil & Gas (USA), Inc. after the Effective Time;
and
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(f) Increased
by the value (determined by the price most recently paid prior to the Effective
Time for such oil less all applicable deductions) of all oil and other liquid
hydrocarbons in storage or existing in stock tanks above the pipeline connection
as of the Effective Time which is credited to the Properties, less applicable
production taxes, royalty and other burdens on the production payable on such
oil, the amount of oil in storage as of the Effective Time to be based on gauge
reports to the extent available or on alternative methods to be agreed by the
Parties.
The adjustment described in Section 2.3(a) shall serve to
satisfy, up to the amount of the adjustment, Purchaser's
entitlement under Section 1.4
to Hydrocarbon production from or attributable to the Leases and Lands, Units and Wells during the Adjustment Period, and to the
value of other income, proceeds, receipts
and credits earned with respect to the Assets during the
Adjustment Period, and Purchaser shall not
have any separate rights to receive any production or income, proceeds, receipts and credits with respect to which an adjustment
has been made. Similarly, the adjustment described in Section 2.3(f) shall serve to
satisfy, up to the amount of the adjustment, Purchaser's
obligation under Section 1.4
to pay Property Costs and other costs attributable to the
ownership and operation of the Assets which are incurred
during the Adjustment Period, and Purchaser shall not be separately obligated to pay for any Property Costs or other such costs with respect to which an
adjustment has been made.
Each adjustment to the Purchase Price described
in Sections 2.3(a) through (f)
shall be applied to the portion of the Purchase Price payable
to the Sellers which owns the affected Asset.
Section
2.4 Allocation
of Purchase
Price. Except as provided in Section 3.1(a),
twenty (20) days prior to the Closing, Purchaser shall prepare and deliver to
Sellers an allocation of the unadjusted Purchase Price among
each of the Assets (the “Allocated
Values”). Any
adjustments to the Purchase Price pursuant to Sections 2.3(a) through (f)
shall be applied to the Allocated Values for the particular
affected Assets. Sellers and
Purchaser will accept such Allocated Values for purposes of
this Agreement only and the transactions contemplated hereby,
but will otherwise make no representation or warranty as to the accuracy of such
values. Sellers and Purchaser
agree that (i) the purchase and sale described herein is
not a transaction subject to the provisions of section 1060 of the Internal Revenue Code of 1986, as amended (the “Code”),
and (ii) the Allocated Values agreed
for purposes of this Section 2.4 are
not necessarily those that would be determined in accordance with the principles
of section 1060 of the Code and the Treasury Regulations thereunder. Further, if either Party later determines that it is required to file Internal Revenue Service Form 8594 as a result of this purchase and
sale transaction, such Party will notify the other Party prior to filing said form with the Internal
Revenue Service.
-8-
CONSENT
TO ASSIGNMENT; PREFERENTIAL RIGHTS TO PURCHASE;
CASUALTY
AND CONDEMNATION LOSS
(a) Promptly
after the date hereof, Sellers shall prepare and send (i) notices
to those third parties from whom any required consents to assignment requesting
consents to the Conveyances must be obtained, and (ii) notices to the holders of any applicable preferential
rights to purchase or similar rights in compliance with the terms of such rights
and requesting waivers of such rights. Any preferential purchase right must be
exercised subject to all terms and conditions set forth in this Agreement, including the successful Closing of this Agreement pursuant to Article 8. The
consideration payable under this Agreement for any particular
Asset for purposes of preferential purchase right notices
shall be the Allocated Value for such Asset. Upon notice to Sellers
from a holder of any preferential rights to purchase that
such holder desires to exercise such preferential rights to purchase, Purchaser
shall within five (5) business days provide to Sellers the Allocated Value for
the Assets subject to such preferential rights. Sellers shall use
commercially reasonable efforts to cause such consents to assignment and waivers
of preferential rights to purchase or similar rights (or the exercise thereof)
to be obtained and delivered prior to Closing, provided that
Sellers shall not be required to make payments or undertake
obligations to or for the benefit of the holders of such rights in order to
obtain the required consents and waivers. Alternatively, Sellers may
seek an order of the Bankruptcy Court to permit the Conveyances over the
objections of third parties. Purchaser shall use
commercially reasonable efforts to cooperate with Sellers in
seeking to obtain such consents to assignment, waivers of preferential rights,
or orders of the Bankruptcy Court.
(b) If
any preferential right to purchase any Assets is exercised prior to Closing,
then, for the purposes of this Agreement, such Assets shall not be included in
the transaction at Closing as Assets purchased by Purchaser and Sellers shall
either (i) pay Purchaser at Closing the Allocated Value for such Assets paid by
such holder or (ii) reduce the Purchase Price due Sellers at Closing by the
amount of the Allocated Value for such Assets.
(c)
Should a third Person fail to exercise its preferential right to
purchase as to any portion of the Assets prior to Closing and the time for exercise or waiver has not yet expired, or,
should a third Person holding a consent right fail to give
its consent to the transfer of any portion of the Assets
prior to Closing, then subject to the remaining provisions of
this Section 3.1, such Assets shall be included in the transaction at Closing, and there shall be no adjustment to the Purchase Price at Closing with respect to such
preferential right to purchase or consent requirement; provided that should
the holder of a preferential purchase right later validly exercise same, Purchaser agrees to transfer the affected Asset
to the holder of the preferential purchase right on the terms and provisions set
out herein and in the applicable preferential purchase right provision, and
Purchaser shall be entitled to the consideration paid by such
holder.
-9-
Section
3.2 Casualty
and Condemnation Loss. If, after the date of this Agreement but prior to the Closing
Date, any portion of the Assets is damaged or destroyed by
fire or other casualty or is taken in condemnation or under right of eminent
domain, Purchaser shall nevertheless be required to close and
Purchaser shall elect by written notice to Sellers prior to Closing either (i) to cause the Assets affected by any
casualty to be repaired or restored, at Sellers’ sole cost,
as promptly as reasonably practicable (which work may extend after the Closing Date), or (ii) to accept
an assignment of Sellers’ insurance proceeds and other claims against third
parties with respect to the casualty or
taking. Notwithstanding the preceding, (i) if
the aggregate losses caused by such casualties and takings exceed ten percent (10%) of the Purchase Price, either
Party may, by notice to the other at least one Business Day prior to Closing, elect to terminate
this Agreement under Section 9.1
or if the losses caused by such casualties and takings exceed ten percent (10%) of the Allocated Value of any
Lease, Purchaser may by notice to Sellers
at least one Business Day prior to Closing
elect to accept an assignment of Sellers’ insurance proceeds and other claims
against third parties with respect to such casualty and
takings.
REPRESENTATIONS
AND WARRANTIES OF SELLER
(a) EXCEPT AS
EXPRESSLY REPRESENTED OTHERWISE IN THIS ARTICLE 4,
SELLERS EXPRESSLY DISCLAIM ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
ORAL OR WRITTEN, INCLUDING ANY REPRESENTATION OR WARRANTY AS TO (I) TITLE TO ANY OF THE ASSETS, (II) THE CONTENTS, CHARACTER OR
NATURE OF ANY DESCRIPTIVE MEMORANDUM, OR ANY REPORT OF ANY
PETROLEUM ENGINEERING CONSULTANT, OR ANY GEOLOGICAL OR SEISMIC DATA OR
INTERPRETATION, RELATING TO THE ASSETS, (III) THE QUANTITY, QUALITY OR RECOVERABILITY OF HYDROCARBONS IN OR FROM THE ASSETS, (IV) ANY ESTIMATES OF THE VALUE OF THE ASSETS OR FUTURE REVENUES GENERATED BY THE ASSETS, (V) THE PRODUCTION OF PETROLEUM
SUBSTANCES FROM THE ASSETS, OR WHETHER PRODUCTION HAS BEEN
CONTINUOUS, OR IN PAYING QUANTITIES, (VI) THE
MAINTENANCE, REPAIR, CONDITION, QUALITY, SUITABILITY, DESIGN OR MARKETABILITY OF
THE ASSETS, OR (VII) ANY OTHER
MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE AVAILABLE OR
COMMUNICATED TO PURCHASER OR ITS AFFILIATES, OR ITS OR THEIR EMPLOYEES, AGENTS, CONSULTANTS, REPRESENTATIVES OR ADVISORS IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR ANY DISCUSSION OR
PRESENTATION RELATING THERETO, AND FURTHER DISCLAIM ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS OF ANY EQUIPMENT, IT BEING EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES
HERETO THAT PURCHASER SHALL BE DEEMED TO BE OBTAINING
EQUIPMENT AND OTHER TANGIBLE PROPERTY IN ITS PRESENT STATUS, CONDITION AND STATE OF REPAIR, “AS IS” AND “WHERE IS” WITH ALL
FAULTS AND THAT PURCHASER HAS MADE OR CAUSED TO BE MADE SUCH INSPECTIONS AS
PURCHASER DEEMS APPROPRIATE.
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(b) Inclusion
of a matter on a Schedule attached hereto with
respect to a representation or warranty which addresses matters having a Material Adverse Effect shall not be deemed an indication that such
matter does, or may, have a Material Adverse
Effect. Matters may be disclosed on a Schedule to this Agreement for
purposes of information only.
(c) Subject to
the foregoing provisions of this Section 4.1, and the other
terms and conditions of this Agreement, Sellers represent and warrant to Purchaser the
matters set out in Sections 4.2
through 4.18.
Section
4.2 Existence
and Qualification. Each
Seller is an entity duly created, formed, or organized and validly existing
under the laws of its state of organization and is duly authorized to conduct
its business and is in good standing in each jurisdiction where such
qualification is required, except where the failure to so qualify would not,
individually or in the aggregate, have a Material Adverse
Effect.
Section
4.3 Power. Subject to Bankruptcy Court
approval, each Seller has the requisite entity power to enter
into and perform this Agreement (and all documents required
to be executed and delivered by Sellers at Closing) and consummate the transactions contemplated by this Agreement (and such documents).
Section
4.4 Authorization
and Enforceability. The execution, delivery
and performance of this Agreement (and all documents required
to be executed and delivered by Sellers at Closing), and the performance of the transactions contemplated
hereby and thereby, have been duly and validly authorized by all necessary
corporate or entity action on the part of each Seller. This Agreement has been duly executed and delivered by each Seller (and all documents required hereunder to be executed and
delivered by such Seller at Closing will
be duly executed and delivered by such Seller) and subject to
the approval of the Bankruptcy Court, this
Agreement constitutes, and at the Closing
such documents will constitute, the valid and binding obligations of each
Seller, enforceable in accordance with their terms except as such enforceability
may be limited by applicable bankruptcy or other similar laws affecting the
rights and remedies of creditors generally as well as by general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
Section
4.5 No
Conflicts. Subject to Bankruptcy Court approval, and any applicable preferential rights to
purchase and consents to assignment, the execution, delivery and performance of
this Agreement by each Seller, and the transactions
contemplated by this Agreement will not (a) violate any provision of such Seller’s Organizational
Documents, (b) result in default (with due notice or
lapse of time or both) or the creation of any lien or encumbrance other than Permitted Encumbrances or give rise to any
right of termination, cancellation or acceleration under any note, bond,
mortgage, indenture, license or agreement to which any of the Sellers is a party or which affects the Assets, (c) violate any judgment, order,
ruling, or decree applicable to such Seller as a party in interest, or (d) violate any Laws applicable to Sellers or any of the Assets, except any matters described in clauses (b), (c) or (d) above which
would not have a Material Adverse Effect.
-11-
Section
4.6 Liability
for
Brokers' Fees. Purchaser
shall not directly or indirectly have any responsibility, liability or expense,
as a result of undertakings or agreements of Sellers, for
brokerage fees, finder's fees, agent's commissions or other similar forms of
compensation in connection with this Agreement or any
agreement or transaction contemplated hereby.
Section
4.7 Litigation
and Claims. Except as set forth in Schedule 4.7, there is no
claim by any Person or Governmental Body (including expropriation or
forfeiture proceedings), joint venture audits, and no legal, administrative, or
arbitration proceeding pending or, to any Sellers’ Knowledge,
threatened against any Seller or the Assets, or to which any Seller is a party, that reasonably may be expected to (a) impair such Sellers’ title to any of
the Assets, (b) hinder or impede
the operation of all or any portion of the Assets, (c) subject the owner or operator of the Assets to liability in favor of any Governmental Body or other Person as the result
of the alleged violation of, or non-compliance with, any Environmental Law by any Seller or any Affiliate of any Seller with respect to the
Assets or require the owner or operator of the Assets to remediate, remove, or respond to an Environmental Condition, or a threatened Environmental Condition, on or affecting the Assets, or (d) otherwise adversely affect
the Assets or the ability of Sellers to
consummate the transactions contemplated in this Agreement. Further, except as otherwise reflected in
Schedule 4.7, to each Seller’s
Knowledge there has been no Release or Threatened Release of Environmental Contaminants at, to, from or
about the Assets that requires remediation under Applicable
Law.
Section
4.8 Taxes
and
Assessments. To each
Seller’s Knowledge, each Seller has filed all material
Tax returns required to be filed by such
Seller with respect to the Assets. Except as
disclosed on Schedule 4.8, to Sellers’ Knowledge, Sellers have paid or caused
to be paid all ad valorem, property, production, severance and similar Taxes that are currently due and payable based upon or measured by
the ownership of or the production of Hydrocarbons from the
Assets required to be shown on such returns, except those
being contested in good faith. Except as disclosed on Schedule 4.8, no Seller has received written notice of any pending claim against
any Seller from any applicable taxing authority for
assessment of Taxes with respect to the Assets.
Section
4.9 Preferential
Rights; Consents. Except as otherwise
reflected in Schedule 4.9, none of the
Properties is subject to a preferential right to purchase,
third Person consent to assignment requirement, right of
first refusal, right of first offer, or similar right or
restriction.
Section
4.10 Consents. Except for Bankruptcy Court
approval and approvals by Governmental Bodies customarily
obtained after the Closing and as otherwise reflected on
Schedule 4.10, no
authorization, consent, approval, exemption, franchise, permit, or license of,
or filing with, any Governmental Body is required to
authorize, or is otherwise required by any Governmental Body
in connection with, the valid execution and delivery by Sellers of this Agreement, the transfer of the
Assets to Purchaser, or the performance
by Sellers of their other obligations
hereunder.
-12-
Section
4.11 Contracts. Schedule 4.11 describes,
with respect to each Contract to which any
Seller is a party that directly relates
to or affects the Properties including:
(a) all
existing area of mutual interests agreements and agreements that include non-competition restrictions or other similar restrictions
on doing business, all existing purchase or sale agreements (other than with
respect to production of Hydrocarbons and the disposition of
field equipment in the ordinary course), partnership (other
than tax partnerships), joint venture and/or exploration or development program
agreements;
(b) all
of the existing production sales, transportation, marketing and processing
agreements, other than such agreements which are terminable by Sellers without penalty on sixty or fewer days’
notice;
(c) any
Contracts or agreements burdening the Properties which could reasonably be expected to obligate any
Sellers to expend in excess of $100,000 in any calendar
year;
(d) all
insurance Contracts maintained by Seller and in force upon the execution date of this Agreement;
(e) any
Contract to sell, lease (other than the Leases) or otherwise dispose of any of Sellers’
interest in any of the Properties;
(f) any
existing tax partnership or tax sharing agreement;
(g) any
material operating agreement that is in effect as of the date hereof and to
which any of the Sellers interest in any of the Properties is subject;
(h) any
existing Contract to which any Seller is a party providing for forced or
voluntary pooling, forced or voluntary unitization, a carry, a backing, earnout,
reversionary Working Interest in favor of third parties, or other contingent payment or
obligation;
(i) any
Contract to which any Seller is a party for drilling or well workover services or other well services
that is in effect as of the date hereof or the Closing Date;
(j) any
Contract providing for the use, processing and/or analysis of
seismic or geophysical data or similar Contract relating to the Properties that is in
effect as of the date hereof or the Closing
Date;
(k) any
Contract to which any Seller is a party relating to indebtedness for borrowed money, letter of credit
or guarantee of the indebtedness of for borrowed money of Persons that is in effect as of the date hereof or the Closing Date for which any of the Assets have been pledged or mortgaged as collateral
therefor;
-13-
(l) any
lease (other than the Leases) under which any Seller is the lessor or lessee of real or personal property, which
lease (i) cannot be terminated by such Seller without penalty with less than 180 days notice, and (ii) involves an annual base rental in excess of
$100,000;
(m) any
firm transportation Contract for the
transportation of Hydrocarbons or disposal of produced
waters or other oilfield waste, which requires in accordance with its terms,
payments by such Seller in excess of $100,000 within the
twelve month period ending December 31, 2009, and any
interruptible transportation Contract that
any Seller reasonably anticipates will, in accordance with
its terms, involve payments by such Seller in excess of
$100,000 within the twelve month period ending December 31,
2009 (collectively “Transportation
Contracts”); and
(n) any
partnership or joint venture Contract between
Sellers and any other person related to the Assets containing a commitment to fund, loan or pay amounts in
excess of $100,000; ((a)-(n)
collectively, the “Material
Contracts”).
Sellers
have furnished to Purchaser true and correct copies of all of
the Material Contracts.
Section
4.12 Wells;
Facilities. Except as set forth in Schedule 4.12,
as of the date of this Agreement, to each Seller’s Knowledge, the Wells described on
Exhibit A-1 are the only
wells for the production of Hydrocarbons
currently located on the Leases. All of such
Wells have been drilled, completed, and operated within the
boundaries of the Leases or within the limits otherwise
permitted by the applicable Contracts and
all Applicable Laws. The production of Hydrocarbons from such Wells has not been in
excess of the allowable production established for each Well. Except as set forth on Schedule 4.12, all
Hydrocarbon wells located on the Leases that have permanently ceased the production of Hydrocarbons in paying quantities, as well as all plants,
pipelines, personal property, pits, equipment, materials,
appurtenances, and facilities located on or used in connection with the Properties and that any Seller has abandoned or
otherwise permanently ceased to use, have been plugged and/or abandoned, and all
related salvage, site clearance, and surface restoration operations have been
completed, in accordance with applicable Laws (including Environmental Laws)
and in accordance with the terms of the Leases, and all
costs and expenses incurred in connection therewith have been paid in
full. Except as otherwise provided in Schedule 4.12, none of the
Wells have been plugged or abandoned.
Section
4.13 Marketing;
Calls on Production. All proceeds from the sale of Hydrocarbons
attributable to the interests of Sellers in the Assets have been and are being disbursed to Sellers under appropriate division orders, transfer orders, or
similar documents signed by or otherwise binding on Sellers,
and no portion of any such proceeds is being held in
suspense, subject to a claim for refund by the purchaser of
production, used as an offset or as collateral for other obligations (whether
disputed or undisputed), or otherwise not being paid to Sellers as it becomes due in the ordinary course of
business. There are no calls on production, options to purchase, or
similar rights in effect with respect to any portion of Sellers’ shares of the Hydrocarbons, and all
Contracts for the sale of
Hydrocarbons are terminable without penalty on no more than
thirty (30) days’ prior notice. Sellers are
currently receiving the prices provided for under such sales Contracts with respect to the Hydrocarbons.
-14-
Section
4.14 Imbalances. Except as shown in Schedule 4.14, as of the date
of execution of this Agreement, no
Seller has a claim constituting an Asset, or is subject to
any obligation, with respect to any Imbalance that relates
to any of the Assets. Except for the Imbalances (if any) shown in Schedule 4.14, no Seller is, on the date of execution of this Agreement, nor will be after the Effective
Time, obligated by virtue of any prepayment made under any sales contract or
other contract containing a “take-or-pay” clause, or under any production
payment, forward sale, balancing, deferred production, or similar arrangement,
to deliver Hydrocarbons produced from or allocable to any
Asset at some future time without receiving full payment
therefor at or after the time of delivery.
Section
4.15 AFEs. Except as shown on Schedule 4.15, as of the date of
execution of this Agreement, there are no unfunded AFE’s
owing by Sellers or any other working interest owners with
respect to any of the Assets.
Section
4.16 Suspense
Account. Set forth on Schedule 4.16 is a
true and correct description, as of the date of execution of this Agreement, of
all amounts held by Sellers attributable to third-parties with respect to proceeds from
production attributable to the Wells (as used in Schedule 4.16, the “Suspended
Revenues”).
Section
4.17 Capital
Expenditures. Except as shown on Sellers’ budget for Fourth Quarter 2009 and
First Quarter 2010 attached hereto as Exhibit A-8 or
as set forth on Schedule 4.17, Sellers do not anticipate and have not budgeted for any capital
expenditures from the date of this Agreement until the end
of the first quarter 2010, in excess of $100,000 with respect to any Well, any Lease or with respect to any Gathering System.
Section
4.18 Equipment. Set forth on Exhibit A-4 is a
true and correct description of the Equipment.
REPRESENTATIONS
AND WARRANTIES OF PURCHASER
Section
5.1 Existence
and Qualification. Purchaser is a limited partnership duly organized and validly
existing under the laws of the state of Delaware; and Purchaser is duly authorized to conduct its business and is in good
standing in each jurisdiction where such qualification is required, except where
the failure to so qualify would not, individually or in the aggregate, have a
Material Adverse Effect; and Purchaser is duly authorized to
do business and is in good standing in each jurisdiction where the Assets to be transferred to it hereunder are
located.
-15-
Section
5.2 Power. Purchaser has the corporate power to enter into and
perform this Agreement (and all documents required to be
executed and delivered by Purchaser at Closing) and consummate the transactions contemplated by this
Agreement (and such documents).
Section
5.3 Authorization
and Enforceability. The execution,
delivery and performance of this Agreement (and all
documents required to be executed and delivered by Purchaser
at Closing), and the performance of the transactions
contemplated hereby and thereby, have been duly and validly authorized by all
necessary corporate action on the part of Purchaser. This Agreement has been
duly executed and delivered by Purchaser (and all documents
required hereunder to be executed and delivered by Purchaser
at Closing will be duly executed and delivered by Purchaser) and this Agreement constitutes, and
at the Closing such documents will constitute, the valid and
binding obligations of Purchaser, enforceable in accordance
with their terms except as such enforceability may be limited by applicable
bankruptcy or other similar laws affecting the rights and remedies of creditors
generally as well as by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law).
Section
5.4 No
Conflicts. The execution, delivery and
performance of this Agreement by Purchaser, and the transactions contemplated by this Agreement will not (a) violate any
provision of Purchaser’s Organizational Document, (b) result in a material default (with due notice or lapse of
time or both) or the creation of any lien or encumbrance or
give rise to any right of termination, cancellation or acceleration under any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
license or agreement to which Purchaser is a party, (c) violate any judgment, order,
ruling, or regulation applicable to Purchaser as a party in interest, or (d) violate any
Laws applicable to Purchaser or any of
its assets, except any matters described in clauses (b),
(c), or (d) above which would not have a
Material Adverse Effect on Purchaser.
Section
5.5 Liability
for
Brokers' Fees. Sellers
shall not directly or indirectly have any responsibility, liability or expense,
as a result of undertakings or agreements of Purchaser, for
brokerage fees, finder's fees, agent's commissions or other similar forms of
compensation in connection with this Agreement or any
agreement or transaction contemplated hereby.
Section
5.6 Litigation. There are no actions, suits or proceedings pending, or to Purchaser's Knowledge, threatened in writing before any Governmental Body against Purchaser which are
reasonably likely to impair materially Purchaser's ability
to perform its obligations under this Agreement or any
document required to be executed and delivered by Purchaser
at Closing.
Section
5.7 Financing. Purchaser has sufficient cash, available lines of
credit or other sources of immediately available funds (in United States dollars) to enable it to pay the Closing Payment to Sellers at
the Closing.
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Section
5.8 Independent
Investigation. Except for the
representations and warranties expressly made by Sellers in
Articles 3 and
4 of this
Agreement, or in any certificate furnished or to be
furnished to Purchaser pursuant to this Agreement, Purchaser acknowledges that there
are no representations or warranties, express or implied, as to the Assets or prospects thereof, and that in making its decision to
enter into this Agreement and to consummate the transactions
contemplated hereby, Purchaser has relied solely upon its
own independent investigation, verification, analysis and
evaluation.
Section
5.9 Consents,
Approvals or Waivers. Purchaser's execution, delivery and performance of this Agreement (and any document required to be executed and delivered
by Purchaser at Closing) is not and will
not be subject to any consent, approval, or waiver from any Governmental Body or other third Person, except
(i) consents and approvals of assignments by Governmental Bodies that are customarily obtained after Closing and (ii) as set forth on Schedule 5.9.
COVENANTS
OF THE PARTIES
Section
6.1 Access. Between the date of execution of this Agreement
and the Closing Date, each Seller will give Purchaser and its representatives access to the Assets and access
to and the right to copy, at Purchaser's expense, the Records in such Seller’s possession, for the
purpose of conducting an investigation of the Assets, but
only to the extent that Sellers may do so without violating
any obligations to any third party and to the extent that
such Seller has authority to grant such access without
breaching any restriction binding on such
Seller. Such access by Purchaser shall be limited
to such Seller’s normal business hours, and Purchaser's investigation shall be conducted in a manner that
minimizes interference with the operation of the Assets. All information obtained by
Purchaser and its representatives under
this Section 6.1
shall be subject to the terms of that certain confidentiality agreement between
TXCO Resources Inc. and Purchaser, as may be amended from
time to time (the “Confidentiality
Agreement”).
Section
6.2 Government
Reviews. Sellers and
Purchaser shall in a timely manner (a) make all required filings, if any, with and prepare
applications to and conduct negotiations with, each governmental agency as to
which such filings, applications or negotiations are necessary or appropriate in
the consummation of the transactions contemplated hereby, and (b) provide such information as each may reasonably request to
make such filings, prepare such applications and conduct such
negotiations. Each Party shall cooperate with and
use all reasonable efforts to assist the other with respect to such filings,
applications and negotiations.
(a) Purchaser
shall notify Sellers promptly after Purchaser obtains actual Knowledge that any representation or
warranty of Sellers contained in this Agreement is untrue in any material respect or will be untrue in
any material respect as of the Closing Date
or that any covenant or agreement to be performed or observed by Sellers prior to or on the Closing Date has not been so performed or observed in any material
respect.
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(b) Sellers
shall notify Purchaser promptly after Sellers obtain actual Knowledge that any
representation or warranty of Purchaser contained in this Agreement is untrue in
any material respect or will be untrue in any material respect as of the Closing
Date or that any covenant or agreement to be performed or observed by Purchaser
prior to or on the Closing Date has not been so performed or observed in a
material respect.
If any of
Purchaser's or Sellers’ representations or warranties is untrue or shall become
untrue in any material respect between the date of execution of this Agreement
and the Closing Date, or if any of Purchaser's or Sellers’ covenants or
agreements to be performed or observed prior to or on the Closing Date shall not
have been so performed or observed in any material respect, but if such breach
of representation, warranty, covenant or agreement shall (if curable) be cured
by the Closing (or, if the Closing does not occur, by the date set forth in
Section 8.1),
then such breach shall be considered not to have occurred for all purposes of
this Agreement.
Section
6.4 Public
Announcements. No Party shall make any press release or other
public announcement regarding the existence of this Agreement, the contents
hereof or the transactions contemplated hereby without the prior written consent
of the other; provided, however, the
foregoing shall not restrict disclosures by Purchaser or any Seller
(i) that are required by applicable securities or other laws or regulations
or the applicable rules of any stock exchange having jurisdiction over the
disclosing Party or its Affiliates, or (ii) to Governmental Bodies and
third Persons holding preferential rights to purchase or rights of consent that
may be applicable to the transactions contemplated by this Agreement, as
reasonably necessary to obtain waivers of such right or such consents. The
Parties acknowledge and understand that this Agreement will be filed with the
Bankruptcy Court and will be made available to third parties. The
Parties agree that such disclosure shall not be deemed to violate any
confidentiality obligations owing to a Party, whether pursuant to this
Agreement, the Confidentiality Agreement, or
otherwise. Notwithstanding anything to the contrary in the
Confidentiality Agreement, to the extent of any conflict between the provisions
of the Confidentiality Agreement and the terms hereof, the terms hereof shall
prevail.
Section
6.5 Operation
of Business.
(a) Until
the Closing, each Seller (i) will continue to conduct its business related
to the Assets in the ordinary course consistent with its past practices,
including incurring expenditures associated with lease acquisitions, renewals
and extensions, landmen, independent contractors, vendors, title opinions,
curative material, road, drillsite and pipeline construction, acquisition of
road and pipeline right-of-ways, drilling, and completing wells, construction of
gathering, compression and treating facilities, and marketing costs,
(ii) will furnish Purchaser with copies of all third-party and any
Seller-generated drilling, completion and workover AFEs in excess of $100,000
within five (5) Business Days of receipt of third-party AFEs or the approval of
any Seller generated AFE, (iii) will furnish Purchaser, on the 15th day of
each month, with a schedule setting forth the actual expenditures incurred
during the previous calendar month and an estimate of the expenditures that
Sellers believes that it will incur during the following reporting period,
(iv) will not after the Effective Time, without prior written approval of
Purchaser (which approval will not be unreasonably withheld), make capital or
workover expenditures with respect to the Assets in excess of One Hundred
Thousand Dollars ($100,000) (net to the respective Seller’s interest), except
for those capital expenditures set forth on Exhibit A-8 and
Schedule 4.17 or
when required by an emergency when there shall have been insufficient time to
obtain advance consent (provider, that such Seller will promptly notify
Purchaser of any such emergency expenditures), (v) will not enter into any
Material Contract relating to the Assets except for agreements relating to sales
of inventory and purchases of inventory from suppliers in the ordinary course of
business and consistent with past practices, (vi) will maintain insurance
coverage on the Assets presently furnished by nonaffiliated third parties in the
amounts and of the types presently in force, (vii) subject to the terms and
conditions imposed by its lenders and other contractual obligations, will use
commercially reasonable efforts to maintain in full force and effect all Leases
and Lands that are presently producing in paying quantities, (viii) will
maintain all material governmental permits and approvals affecting the Assets,
(ix) will not transfer, sell, hypothecate, encumber or otherwise dispose of
any material Properties or Equipment except for sales and dispositions of
Equipment made in the ordinary course of business consistent with past practices
absent Bankruptcy Court approval on notice and with a reasonable opportunity to
object by Purchaser, or (x) take or omit to take any action in
contravention of any of the foregoing actions. Purchaser's approval
of any action restricted by this Section 6.5
shall be considered granted within ten (10) days (unless a shorter time is
reasonably required by the circumstances and such shorter time is properly
specified in the notice provided to Sellers by a co-working interest owner) of
the Sellers’ notice to Purchaser requesting such consent unless Purchaser
notifies Sellers to the contrary during that period. In the event of
an emergency, Sellers may take such action as a prudent operator would take and
shall notify Purchaser of such action promptly thereafter.
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(b) Prior
to the Closing, Sellers will give Purchaser notice of all AFEs proposed by third
parties (each a “Third
Party AFE”). If Sellers elect not to pay or otherwise timely
satisfy a Third Party AFE, Purchaser shall have the right (but not the
obligation) to fund the Third Party AFE. In such event, the parties
agree to seek an emergency hearing with the Bankruptcy Court authorizing
Purchaser to advance the amount of the Third Party AFE as an administrative
expense (an “AFE
Advance”). If the Closing does not occur and this Agreement is
terminated, Purchaser shall be reimbursed the amount of all such AFE Advances on
the earlier of the consummation of a Superior Proposal or the effective date of
a plan of reorganization for Sellers in the Bankruptcy Court. If the
Closing occurs, (x) there will be no adjustment to the Purchase Price by
reason of either (i) any AFE Advance(s) or any amounts funded by such AFE
Advance in respect of such Third Party AFE(s) or (ii) any other damages or
amounts in respect of any proposed Third Party AFE that Sellers shall have
elected not to pay or otherwise satisfy and that Purchaser shall not have funded
in accordance with this paragraph (b), (y) Sellers shall have no
obligations to repay to Purchaser, or otherwise in respect of, any AFE Advance
made in respect of a Third Party AFE due at any time after the Effective Time,
and (z) if any AFE Advance has been made in respect of a Third Party AFE
due at any time prior to the Effective Time, the Purchase Price shall be reduced
by the lesser of (i) the amount of such AFE Advance or (ii) the
Allocated Value of any undeveloped, non-producing acreage that would have been
lost or forfeited if the subject Third Party AFE was not timely
paid.
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(c) Pursuant
to Agreed Order Granting
Motion to Approve Lease Participation Proposal with St. Mary Land &
Exploration Company and Agreement with Newfield Exploration Company for Purchase
of Leasehold Interests Acquired Pursuant to Participation Under Anadarko JEA,
Sellers have the right to make certain elections with respect to the St.
Mary Proposal (as defined in such order). Sellers hereby beneficially
assign to Purchaser Sellers’ rights under the order to make such elections and
to receive any reimbursements for the Election Amount (as defined in the
order). Sellers shall promptly communicate any notices required under
the order to be delivered to St. Mary as may be directed by
Purchaser.
Section
6.6 Indemnity
Regarding Access. Purchaser agrees to indemnify, defend and
hold harmless each Seller, its Affiliates, the other owners of interests in the
Properties, and all such Persons' directors, officers, employees, agents and
representatives from and against any and all claims, liabilities, losses, costs
and expenses (including court costs and reasonable attorneys' fees), including
claims, liabilities, losses, costs and expenses attributable to personal injury,
death, or property damage, arising out of or relating to access to
the Assets and to the Records and other related information prior to the Closing
by Purchaser, its Affiliates, or its or their directors, officers, employees,
agents or representatives, even
if caused in whole or in part by the negligence (whether sole, joint or
concurrent), strict liability or other legal fault of any indemnified
Person.
Section
6.7 Assumption
of Obligations. By the consummation of the transactions
contemplated by this Agreement at Closing, and without limiting the
indemnification obligations of any Party under Article 10,
Purchaser assumes and agrees to pay, perform and discharge all obligations of
Sellers to the extent accruing after the Effective Time under the Leases and
Lands, Contracts and applicable Law with respect to the Assets (the “Assumed
Obligations”), including (i) obligations to furnish makeup
Hydrocarbons according to the terms of applicable sales, gathering, processing,
or Transportation Contracts or in response to Hydrocarbon production imbalances,
(ii) obligations to pay revenues, royalties or other amounts payable to
third Persons with respect to the Properties, and (iii) obligations to plug
wells, dismantle facilities, close pits and restore the surface around such
wells, facilities and pits. Other than the Assumed Obligations,
Sellers shall remain responsible, liable and obligated to pay, perform and
discharge all other obligations with respect to the Assets and the Excluded
Assets (the “Retained
Obligations”), irrespective of whether such Retained Obligations have
been disclosed to Purchaser at any time prior to the Closing.
Section
6.8 Solicitation Provisions;
Back-Up Bid Option.
(a) Following
the date hereof, Sellers agree that neither they nor any of their wholly-owned
Subsidiaries shall, and that they shall direct any of their directors, officers,
employees, investment bankers, financial advisors, attorneys, accountants or
other advisors, agents or representatives (collectively “Representatives”)
and their wholly-owned Subsidiaries’ Representatives not to, directly or
indirectly, solicit any Acquisition Proposal; provided, however, that nothing
shall prevent the Sellers, their respective Boards of Directors or any of their
Representatives from taking any of the following actions:
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(i) complying
with its obligations under Applicable Law with regard to an Acquisition
Proposal; or
(ii) (A) engaging
in any negotiations or discussions with any Person who has made an unsolicited
Acquisition Proposal or (B) recommending an unsolicited Acquisition
Proposal to the Committee, if in the case of each of clause (A) and (B) above,
each Seller determines in good faith (after consultation with its legal and
financial advisors) that (1) such action would be reasonably likely to be
required in order to comply with its fiduciary duties under Applicable Law and
(2) such Acquisition Proposal is a Superior Proposal or is reasonably
likely to lead to a Superior Proposal; or
(iii) communicating
or engaging in discussions with the Committee or its respective advisors or
Representatives regarding any matter, whether Acquisition Proposal, proposal
relating to an Alternative Plan or otherwise.
(b) Sellers
and their Representatives may respond to any inquiries from and provide access
to the Seller Data Room and access to other non-public information for due
diligence purposes to Persons that Sellers reasonably determine in good faith
may submit a Superior Proposal (without a financing condition) and that have
executed a confidentiality agreement with Sellers, provided that
(i) in all events the Sellers shall provide such of Sellers’ respective
qualified personnel as reasonably necessary to resolve issues arising under this
Agreement, without limitation, including such matters arising under Section 3.2, and
(ii) Sellers shall provide notice to Purchaser in the event they provide
access to the Data Room or other non-public information to any Person(s), such
notice to be provided as soon as reasonably practicable and in any event within
three (3) Business Days. No Seller, nor any of its Affiliates shall
have any liability to Purchaser, either under or relating to this Agreement, or
any Applicable Law, by virtue of entering into or seeking Bankruptcy Court
approval of a Superior Proposal or the definitive agreement for such Superior
Proposal, in each case, in accordance to the terms of this Section 6.8,
following the receipt of any Superior Proposal.
(c) Sellers
shall provide Purchaser with a copy of any Acquisition Proposal as soon as
reasonably practicable and in any event within three (3) Business Days following
receipt of such Acquisition Proposal. In addition, upon Purchaser’s
written request, Seller shall promptly provide Purchaser with a report showing
the identity of all Persons who have accessed the Seller Data Room and the dates
of such access.
(d) The
last time for any Person to submit a Superior Proposal shall be 5:00 p.m., San
Antonio, Texas time on January 6, 2010. Sellers shall give notice to
Purchaser as to whether it intends to pursue a Superior Proposal or Alternative
Plan, if any, by no later than January 13, 2010.
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(e) No
Seller, nor any of its Representatives, shall have any liability to Purchaser,
either under or relating to this Agreement, or any Applicable Law, by virtue of
entering into or seeking Bankruptcy Court approval of a Superior Proposal or an
Alternative Plan or the definitive agreement for any such Superior Proposal or
Alternative Plan in accordance with the terms of this Section 6.8. Any
Seller may in its sole discretion enter into a definitive agreement with respect
to such Superior Proposal or Alternative Plan and Sellers may terminate this
Agreement prior to or after entry into such a definitive agreement in accordance
with the terms of this Section 6.8.
(f) If
Sellers elect to pursue a Superior Proposal or Alternative Plan, as applicable,
and such Superior Proposal or Alternative Plan, as applicable, is definitively
terminated prior to consummation thereof, then Sellers shall offer Purchaser the
right (the “Back-Up
Bid Option”) to consummate the purchase and sale of the purchased assets
and the assumption of any assumed liabilities in a transaction on substantially
the same terms and conditions as this Agreement; provided, however, the Back-Up
Bid Option will expire with no further obligation to Purchaser at 5:00 p.m.
(Central time) on the tenth Business Day following the date on which the Back-Up
Bid Option was offered to Purchaser unless prior to such time Sellers receive a
definitive purchase and sale agreement executed by Purchaser in the form of this
Agreement with only such modifications as are described in this Section 6.8(f)
(the “Back-Up
Bid Agreement”). The Back-Up Bid Agreement shall contain the
following modifications to this Agreement:
(i) all
dates and deadlines shall be extended to such dates following execution of the
Back-Up Bid Agreement as are consistent with the respective time periods between
the Effective Date and the dates or deadlines contained in this
Agreement;
(ii) the
covenants contained in the subsections of Section 6.5 shall be
reasonably revised as appropriate to reflect Sellers’ operations at such time;
provided, however, that Purchaser and Sellers, each acting reasonably, are able
to agree in writing on such revisions prior to expiration of the Back-Up Bid
Option; and
(iii) such
other non-substantive changes as may be reasonably required under the
circumstances and as may be agreed in writing among Purchaser, and Sellers, each
acting reasonably, prior to expiration of the Back-Up Bid Option.
Purchaser
shall be entitled to seek specific performance to enforce its right to receive
the offer of the Back-Up Bid Option from Sellers in accordance with this Section 6.8(f)
without the necessity of proving actual damages or of posting any
bond. Notwithstanding anything to the contrary contained in this
Section 6.8(f),
Purchaser’s Back-Up Bid Option shall be subordinated to any back-up bid option
right granted to Newfield Exploration Company under that certain Purchase and
Sale Agreement, dated November 6, 2009, by and among Sellers and Newfield
Exploration Company.
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Section
6.9 Tax
Matters. Subject to the provisions of Section 11.6,
Sellers shall be responsible for all Taxes (other than ad valorem, property,
severance, production and similar Taxes based upon or measured by the ownership
or operation of the Assets or the production of Hydrocarbons therefrom, which
are addressed in Section 1.4)
attributable to any period of time at or prior to the Effective Time, including
income Taxes arising as a result of the gain recognized on the transfer of the
Assets, and Purchaser shall be responsible for all such Taxes attributable to
any period of time after the Effective Time. Regardless of which
Party is responsible, Sellers shall handle payment to the appropriate
Governmental Body of all Taxes with respect to the Assets which are required to
be paid prior to Closing (and shall file all returns with respect to such
Taxes).
Section
6.10 [Intentionally
Omitted].
Section
6.11 Further
Assurances. At and after Closing, Sellers and Purchaser agree
to take such further actions and to execute, acknowledge and deliver all such
further documents as are reasonably requested by the other Party for carrying
out the purposes of this Agreement or of any document delivered pursuant to this
Agreement.
Section
6.12 Recording. As
soon as practicable after Closing, Purchaser shall record the Conveyances and
other assignments delivered at Closing in the appropriate counties as well as
with the appropriate governmental agencies and provide Sellers with copies of
all recorded or approved instruments.
Section
6.13 Transition
Services Agreement. Prior to the Closing, at Purchaser’s
option, the Parties shall use their reasonable efforts to negotiate and enter
into a Transition Services Agreement on terms and conditions mutually acceptable
to the Parties providing for Sellers’ provision to Purchaser of certain services
in connection with the operations, land and accounting related to the
Properties, including, among other terms, reimbursement to Sellers of all direct
and indirect costs associated with providing such services, including all
general and administrative overhead.
Section
6.14 Schedule
Updates. Sellers may, from time to time prior to the Closing,
by written notice to Purchaser, supplement or amend any Schedule delivered by
Sellers hereunder. For purposes of determining whether Purchaser’s
conditions set forth in Section 7.2(a)
have been fulfilled, Sellers’ Schedules shall be deemed to include only that
information contained therein on the date of this Agreement and shall be deemed
to exclude all information contained in any supplement or amendment thereto, but
if the Closing shall occur, then any matters disclosed to Purchaser pursuant to
any such supplement or amendment after the date of this Agreement and prior to
the Closing shall be deemed incorporated into such Schedules for purposes of
Article 10.
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Section
6.15 Peregrine
Claims. Sellers are currently considering the pursuit of
certain claims and causes of action relating to certain potential breaches of
one or more confidentiality agreements between one or more Sellers and one or
more third parties, such potential claims and causes of action relating to
certain oil and gas leases and/or other Assets located in Maverick County,
Texas, and Dimmit County, Texas (the “Peregrine
Claims”). After the Closing, Purchaser shall promptly pay as
incurred all costs incurred by Sellers in pursuing the Peregrine Claims
(including costs and expenses of legal counsel); provided, however, that either
Sellers, on the one hand, or Purchaser, on the other hand, may upon at least 30
days’ advance written notice to the other terminate such obligations (a “Termination
Notice”), whereupon Purchaser shall pay all such remaining unpaid costs
and expenses incurred in prosecution of the Peregrine Claims and, if such
Termination Notice was given by Sellers, Sellers shall promptly assign, without
recourse, their rights under and in respect of the Peregrine Claims to
Purchaser. Any recoveries by Sellers in respect of the Peregrine
Claims shall be for the account of Sellers. If in connection with the
Peregrine Claims Sellers acquire any oil and gas leases and/or other real
property interests in Maverick County, Texas, or Dimmit County, Texas, from the
counterparties in such claims, then Seller shall give Purchaser written notice
thereof, whereupon Purchaser shall have an option, exercisable by written notice
to Sellers for a period of sixty (60) days after Sellers’ notice to Purchaser,
to acquire all of Sellers’ right, title and interest in and to such oil and gas
leases and/or other real property interests in consideration of Purchaser’s
payment to Sellers of cash in an amount equal to one hundred ten percent (110%)
of the aggregate consideration, if any, paid by Sellers for same together with
any remaining unpaid costs and expenses incurred by Seller in pursuing the
Peregrine Claims; provided, however, that if Purchaser shall give a Termination
Notice prior to the date on which Sellers acquire such oil and gas leases and/or
other real property interests then such option shall terminate upon the giving
of such Termination Notice.
Section
6.16 Sale
Order. Sellers shall use their reasonable best efforts to
secure approval of the Sale Order in a form reasonably acceptable to Purchaser
on or prior to January 31, 2010.
ARTICLE
7
CONDITIONS
TO CLOSING
Section
7.1 Conditions
of Sellers to Closing. The obligations of Sellers to
consummate the transactions contemplated by this Agreement are subject, at the
option of Sellers, to the satisfaction on or prior to Closing of each of the
following conditions:
(a) Representations. The
representations and warranties of Purchaser set forth in Article 5 shall
be true and correct in all material respects as of the date of this Agreement
and as of the Closing Date as though made on and as of the Closing
Date;
(b) Performance. Purchaser
shall have performed and observed, in all material respects, all covenants and
agreements to be performed or observed by it under this Agreement prior to or on
the Closing Date;
(c) Bankruptcy Court
Approval. The Bankruptcy Court shall have issued a Final Order confirming
Sellers’ Plan of Reorganization in a form reasonably acceptable to the
Sellers.
(d) Pending
Litigation. On the Closing Date, no suit, action or other
proceeding by a third-party (including any Governmental Body) seeking to
restrain, enjoin or otherwise prohibit the consummation of the transactions
contemplated by this Agreement, or seeking substantial damages in connection
therewith, shall be pending before any Governmental Body;
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(e) Deliveries. Purchaser
shall have delivered to Sellers duly executed counterparts of the Conveyances
and the other documents and certificates to be delivered by Purchaser under
Section 8.3;
(f) Casualty and Condemnation
Losses. The aggregate sum of all casualty and condemnation
losses under Section
3.2 shall not be more than ten percent (10%) of the unadjusted Purchase
Price;
(g) Payment. Purchaser
shall have paid the Closing Payment; and
(h) Plan. All
conditions precedent to the occurrence of the effectiveness of the Plan shall
have been satisfied or waived in writing in accordance with the
Plan.
Section
7.2 Conditions
of Purchaser to Closing. The obligations of Purchaser to
consummate the transactions contemplated by this Agreement are subject, at the
option of Purchaser, to the satisfaction on or prior to Closing of each of the
following conditions:
(a) Representations. The
representations and warranties of Sellers set forth in Article 4 shall
be true and correct as of the date of this Agreement and as of the Closing Date
as though made on and as of the Closing Date (other than representations and
warranties that refer to a specified date which need only be true and correct on
and as of such specified date), except for such breaches, if any, as would not
have a Material Adverse Effect;
(b) Performance. Sellers
shall have performed and observed, in all material respects, all covenants and
agreements to be performed or observed by it under this Agreement prior to or on
the Closing Date;
(c) Bankruptcy Court
Approval. The Bankruptcy Court shall have issued a Final Order confirming
Sellers’ Plan of Reorganization in a form reasonably acceptable to
Purchaser;
(d) Pending
Litigation. On the Closing Date, no suit, action or other
proceeding by a third-party (including any Governmental Body) seeking to
restrain, enjoin or otherwise prohibit the consummation of the transactions
contemplated by this Agreement, or seeking substantial damages in connection
therewith, shall be pending before any Governmental Body;
(e) Deliveries. Sellers
shall have delivered to Purchaser duly executed counterparts of the Conveyances
and the other documents and certificates to be delivered by Sellers under Section 8.2;
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(f) Casualty and Condemnation
Losses. The aggregate sum of all casualty and condemnation
losses under Section
3.2 shall not be more than ten percent (10%) of the unadjusted Purchase
Price;
(g) Plan. All
conditions precedent to the occurrence of the effectiveness of the Plan shall
have been satisfied or waived in writing in accordance with the Plan;
and
(h) Assignment of Contractual
Prospects. Purchaser shall receive an assignment of each of
the Material Contracts covering the Contractual Prospects in form and substance
reasonably satisfactory to Purchaser.
ARTICLE
8
CLOSING
Section
8.1 Time and
Place of Closing.
(a) Consummation
of the purchase and sale transaction as contemplated by this Agreement (the
“Closing”),
shall be governed by the Sale Order and any other applicable orders entered by
the Bankruptcy Court.
(b) Unless
otherwise agreed to in writing by Purchaser and Sellers, Closing shall take
place at the offices of Sellers, located at 777 Sonterra Blvd., Suite 350, San
Antonio, Texas 78258, at 10:00 a.m., local time, on January 29, 2010, or if
all conditions in Article 7 to be
satisfied prior to Closing have not yet been satisfied or waived, as soon
thereafter as such conditions have been satisfied or waived, subject to the
rights of the Parties under Article 9.
(c) The
date on which the Closing occurs is herein referred to as the “Closing
Date.”
Section
8.2 Obligations
of Sellers at Closing. At the Closing, upon the terms and
subject to the conditions of this Agreement, and subject to the simultaneous
performance by Purchaser of its obligations pursuant to Section 8.3,
Sellers shall deliver or cause to be delivered to Purchaser, among other things,
the following:
(a) Conveyances
of the Assets, in sufficient duplicate originals to allow recording in all
appropriate jurisdictions and offices, duly executed and acknowledged by
Sellers;
(b) assignments,
on appropriate forms, of state and of federal leases comprising portions of the
Assets, where applicable, duly executed and acknowledged by
Sellers;
(c) letters-in-lieu
of transfer orders covering the Assets;
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(d) a
certificate duly executed by an authorized officer of each Seller, dated as of
Closing, certifying on behalf of such Seller that the conditions set forth in
Sections 7.2(a)
and 7.2(b) have
been fulfilled;
(e) a
certificate duly executed by the secretary or any assistant secretary of each
Seller, dated as of the Closing, (i) attaching and certifying on behalf of
such Seller complete and correct copies of (A) the Organizational Documents
of such Seller, each as in effect as of the Closing, (B) the resolutions of
the Board of Directors of such Seller authorizing the execution, delivery, and
performance by such Seller of this Agreement and the transactions contemplated
hereby, and (C) any required approval by the stockholders of such Seller of
this Agreement and the transactions contemplated hereby and (ii) certifying
on behalf of such Seller the incumbency of each officer of Sellers executing
this Agreement or any document delivered in connection with the
Closing;
(f) an
executed statement described in Treasury Regulation § 1.1445-2(b)(2)
certifying that no Seller is a foreign person within the meaning of the Code;
and
(g) executed
change-of-operator forms for each Lease and Land, Unit or Well operated by any
Seller that Purchaser intends to operate after Closing, which Sellers shall
file; provided,
however, that
if the operator of a Lease and Land, Unit or Well must be elected or designated
after Closing, the applicable instruments will be not be filed until after the
election or designation, as applicable, and the Purchaser provides Sellers with
notice of such election or designation.
Section
8.3 Obligations
of Purchaser at Closing. At the Closing, upon the terms and
subject to the conditions of this Agreement, and subject to the simultaneous
performance by each Seller of its obligations pursuant to Section 8.2,
Purchaser shall deliver or cause to be delivered to Sellers, among other things,
the following:
(a) a
wire transfer of the Closing Payment in same-day funds;
(b) Conveyances
of the Assets, duly executed by Purchaser;
(c) letters-in-lieu
of transfer orders covering the Assets, duly executed by Purchaser and such
change of operator forms as may be required to reflect the change of
operatorship with respect to the Properties duly executed by
Purchaser;
(d) a
certificate by an authorized corporate officer of Purchaser, dated as of
Closing, certifying on behalf of Purchaser that the conditions set
forth in Sections 7.1(a)
and 7.1(b) have
been fulfilled; and
(e) a
certificate duly executed by the secretary or any assistant secretary of
Purchaser, dated as of the Closing, (i) attaching, and certifying on behalf
of Purchaser as complete and correct, copies of the Purchaser’s Organizational
Documents, each as in effect as of the Closing, and (ii) certifying on behalf of
Purchaser: (A) that the Board of Directors of Purchaser has authorized the
execution, delivery and performance by Purchaser of this Agreement and the
transactions contemplated hereby, (B) that no approvals are required by the
stockholders of Purchaser with respect to this Agreement and the transactions
contemplated hereby, and (C) the incumbency of each officer of Purchaser
executing this Agreement or any document delivered in connection with the
Closing.
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Section
8.4 Closing
Payment and Post-Closing Purchase Price Adjustments.
(a) Not
later than five (5) Business Days prior to the Closing Date, Sellers shall
prepare and deliver to Purchaser, using and based upon the best information
available to Sellers, a preliminary settlement statement estimating the adjusted
Purchase Price after giving effect to all Purchase Price adjustments set forth
in Section 2.3. The
estimate delivered in accordance with this Section 8.4(a)
shall constitute the dollar amount to be paid by Purchaser to Sellers at the
Closing (the “Closing
Payment”).
(b) As
soon as reasonably practicable after the Closing but not later than the 90th day
following the Closing Date, Sellers shall prepare and deliver to Purchaser a
statement setting forth the final calculation of the adjusted Purchase Price and
showing the calculation of each adjustment, based, to the extent possible on
actual credits, charges, receipts and other items before and after the Effective
Time. Sellers shall at Purchaser's request supply reasonable
documentation available to support any credit, charge, receipt or other
item. As soon as reasonably practicable but not later than the 30th
day following receipt of Sellers’ statement hereunder, Purchaser shall deliver
to Sellers a written report containing any changes that Purchaser proposes be
made to such Statement. The Parties shall undertake to agree on the
final statement of the adjusted Purchase Price no later than 120 days after the
Closing Date. In the event that the Parties cannot reach agreement
within such period of time, either Party may refer the remaining matters in
dispute to the Bankruptcy Court. Upon final determination by the
Bankruptcy Court (x) Purchaser shall pay to Sellers the amount by which the
adjusted Purchase Price exceeds the Closing Payment or (y) Sellers shall
pay to Purchaser the amount by which the Closing Payment exceeds the adjusted
Purchase Price, as applicable. Any post-closing payment pursuant to this Section 8.4
shall bear interest from the Effective Time to the date of payment at the Agreed
Interest Rate.
(c) All
payments made or to be made under this Agreement to Sellers as may be specified
by Sellers in writing; provided, however, that
$1,100,000 of the Closing Payment shall be deposited with the Escrow Agent to be
held pursuant to the Escrow Agreement until both Royalty Appeals are either
dismissed or resolved through the entry of a Final Order, after which time such
$1,100,000 amount shall be paid over by the Escrow Agent to Sellers
with interest. “Royalty Appeals” shall mean the appeals styled Weatherford International v. TXCO
Resources Inc., Case No. 5:09-cv-00569-FB, which is currently pending in
the United States District Court for the Western District of Texas and the
appeal styled, Halliburton
Energy Services, Inc. et al v. TXCO Resources Inc. et al, Case No.
5:09-cv-00580-FB, which is currently pending in the United States District Court
for the Western District of Texas, both of which involve the Bankruptcy Courts
entry of the Order on Motion for Authority to Pay or Honor Prepetition Royalty
Obligations and Other Obligations under Oil & Gas Leases, whereby the
Bankruptcy Court approved the Seller’s request to pay all prepetition royalty
obligations in the ordinary course of their business. All payments made or to be
made hereunder to Purchaser shall be by electronic transfer of immediately
available funds to a bank and account specified by Purchaser in writing to
Sellers.
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Section
8.5 Further
Assurances. At the Closing and thereafter as may be necessary,
each Seller and Purchaser shall execute and deliver such other instruments and
documents and take such other actions as may be reasonably necessary to evidence
and effectuate the transactions contemplated by this Agreement.
ARTICLE
9
TERMINATION
AND AMENDMENT
Section
9.1 Termination. This
Agreement may be terminated at any time prior to Closing by:
(a) the
mutual prior written consent of the Sellers and Purchaser;
(b) either
Sellers or Purchaser pursuant to Section
3.2;
(c) Purchaser
if the Bankruptcy Court does not enter the Sale Order in form reasonably
acceptable to the parties on or before January 31, 2010;
(d) Purchaser
or Sellers if Sellers enter into or seek Bankruptcy Court approval of a Superior
Proposal or an Alternative Plan;
(e) Purchaser,
if the Sale Order is not a Final Order by February 15, 2010; or
(f) either
Purchaser or any Seller, if Closing has not occurred on or before February 28,
2010,
provided, however, that no
Party shall be entitled to terminate this Agreement under this Section 9.1 if
the Closing has failed to occur because such Party negligently or willfully
failed to perform or observe in any material respect its covenants and
agreements hereunder. This Agreement shall be deemed terminated upon
consummation of any Superior Proposal or Alternative Plan.
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Section
9.2 Effect of
Termination. If this Agreement is terminated pursuant to Section 9.1,
this Agreement shall become void and of no further force or effect (except for
the provisions of Sections 6.4,
6.6, 11.6, 11.9, 11.17 and 11.18 and of the
Confidentiality Agreement which shall continue in full force and effect) and
Sellers shall be free immediately to enjoy all rights of ownership of the Assets
and to sell, transfer, encumber or otherwise dispose of the Assets to any party
without any restriction under this Agreement. Notwithstanding
anything to the contrary in this Agreement, the termination of this Agreement
under Section 9.1(e)
shall not relieve any Party from liability for any willful or negligent failure
to perform or observe in any material respect any of its agreements or covenants
contained herein which are to be performed or observed at or prior to Closing.
In the event this Agreement terminates under Section 9.1(e)
and any Party has willfully or negligently failed to perform or observe in any
material respect any of its agreements or covenants contained herein which are
to be performed at or prior to Closing, then the other Party shall be entitled
to all remedies available at law or in equity and shall be entitled to recover
court costs and attorneys' fees in addition to any other relief to which such
Party maybe entitled; provided, however, if Purchaser fails to close and such
failure constitutes a breach of this Agreement, Sellers’ sole remedy and
recourse shall be the retention of the Deposit as liquidated damages, and in
this regard, the Parties agree that in such event Sellers’ damages are uncertain
and speculative and the amount of the Deposit is calculated by reference to
Sellers’ anticipated damages and not established as a penalty.
ARTICLE
10
INDEMNIFICATION;
LIMITATIONS
Section
10.1 Indemnification. From
and after Closing, Purchaser shall indemnify, defend and hold harmless Sellers
from and against all Damages incurred or suffered by Seller:
(i) caused
by or arising out of or resulting from the ownership, use or operation of the
Assets at any time to the extent such Damages are related solely to
Environmental Conditions of the Assets designated on Sellers’ Identified
Environmental Conditions, and as to any other Damages at any time after the
Effective Time, including the Assumed Obligations,
(ii) caused
by or arising out of or resulting from Purchaser's breach of any of Purchaser's
covenants or agreements contained in Article 6,
or
(iii) caused
by or arising out of or resulting from any breach of any representation or
warranty made by Purchaser contained in Article 5 of this
Agreement or in the certificate delivered by Purchaser at Closing pursuant to
Section 8.3(d),
even if such Damages are caused in
whole or in part by the negligence (whether sole, joint or concurrent but not
gross negligence or willful misconduct), strict liability or other legal fault
of any Indemnified Person, but excepting in each case Damages against
which Sellers would be required to indemnify Purchaser under Section 10.1(b)
at the time the claim notice is presented by Purchaser.
(b) For
a period of one hundred eighty (180) days after Closing, Sellers shall
indemnify, defend and hold harmless Purchaser against and from all Damages
incurred or suffered by Purchaser:
(i) caused
by or arising out of or resulting from the ownership, use or operation of the
Assets before the Effective Time, including the Retained
Obligations,
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(ii) caused
by or arising out of or resulting from Sellers’ breach of any of Sellers’
covenants or agreements contained in Article 6,
or
(iii) caused
by or arising out of or resulting from any breach of any representation or
warranty made by Sellers contained in Article 4 of
this Agreement (other than Sellers’ representations under Sections 4.7 and
4.12 with
respect to Environmental Condition of the Assets), or in the certificate
delivered by Sellers at Closing pursuant to Section 8.2(d);
provided, however, that
Purchaser shall be deemed to have waived in full any breach of any Seller’s
representations and warranties contained in Article 4 of which
any Purchaser has Knowledge at the date of this Agreement or, if the Closing
occurs, at the Closing and Purchaser hereby waives any right to indemnification
under this Article 10 with
respect to any such breaches;
even
if such Damages are caused in whole or in part by the negligence (whether sole,
joint or concurrent but not gross negligence or willful misconduct), strict
liability or other legal fault of any Indemnified Person.
(c) Notwithstanding
anything to the contrary contained in this Agreement, this Section 10.1
contains the Parties' exclusive remedy against each other after the Closing with
respect to breaches of the representations, warranties, covenants and agreements
of the Parties contained in this Agreement and the certificate delivered by each
Party at Closing pursuant to Sections 8.2(d)
or 8.3(d), as
applicable. Except for the remedies contained in this Section 10.1 and
Section 3.2,
effective as of the Closing, Sellers and Purchaser each release, remise and
forever discharge the other and its Affiliates and all such Parties'
stockholders, officers, directors, employees, agents, advisors and
representatives from any and all suits, legal or administrative proceedings,
claims, demands, damages, losses, costs, liabilities, interest, or causes of
action whatsoever, in law or in equity, known or unknown, which such Parties
might now or subsequently may have, based on, relating to or arising out of this
Agreement, Sellers’ ownership, use or operation of the Assets, or the condition,
quality, status or nature of the Assets, including, without limitation, rights
to contribution under the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, or any other Environmental Law, breaches
of statutory or implied warranties, nuisance or other tort actions, rights to
punitive damages and common law rights of contribution, rights under agreements
between Sellers and any Persons who are Affiliates of Sellers, and rights under
insurance maintained by Sellers or any Person who is an Affiliate of Sellers,
even if caused in whole or in
part by the negligence (whether sole, joint or concurrent), strict liability or
other legal fault of any released Person, excluding, however, any
existing contractual rights between (i) Purchaser or any of Purchaser's
Affiliates and (ii) Sellers or any of Sellers’ Affiliates under contracts
between them relating to the Assets.
(d)
Claims for Property Costs shall be exclusively handled
pursuant to the Purchase Price adjustments in Section 2.3, and
pursuant to Section 11.2, and
shall not be subject to indemnification under this Section 10.1.
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(e) “Damages”,
for purposes of this Article 10, shall
mean the amount of any actual liability, loss, cost, expense, claim, award or
judgment incurred or suffered by any Indemnified Person arising out of or
resulting from the indemnified matter, whether attributable to personal injury
or death, property damage, contract claims, torts, or otherwise, including
reasonable fees and expenses of attorneys, consultants, accountants or other
agents and experts reasonably incident to matters indemnified against, and the
costs of investigation and/or monitoring of such matters, and the costs of
enforcement of the indemnity; provided, however, that
Purchaser and Sellers shall not be entitled to indemnification under this Section 10.1
for, and “Damages” shall not include, (i) loss of profits or other
consequential damages suffered by the Party claiming indemnification, or any
punitive damages, (ii) any liability, loss, cost, expense, claim, award or
judgment that does not individually exceed one hundred thousand dollars
($100,000), except that such limitation shall not apply with respect to any
failure on the part of Purchaser to satisfy any liability or obligation assumed
pursuant hereto, and (iii) any liability, loss, cost, expense, claim, award
or judgment to the extent resulting from or increased by the actions or
omissions of any Indemnified Person after the Closing Date.
(f) The
indemnity of each Party provided in this Section 10.1
shall be for the benefit of and extend to such Party's present and former
Affiliates, and its and their directors, officers, employees, and
agents. Any claim for indemnity under this Section 10.1 by
any such Affiliate, director, officer, employee, or agent must be brought and
administered by the applicable Party to this Agreement. No
Indemnified Person other than Sellers and Purchaser shall have any rights
against either Sellers or Purchaser under the terms of this Section 10.1
except as may be exercised on its behalf by Purchaser or Sellers, as applicable,
pursuant to this Section 10.1(f). Sellers
and Purchaser may elect to exercise or not exercise indemnification rights under
this Section 10.1(f)
on behalf of the other parties affiliated with it in its sole discretion and
shall have no liability to any such other Indemnified Party for any action or
inaction under this Section 10.1(f).
(g) Purchaser
shall not conduct (or have conducted on its behalf) any material remediation
operations with respect to any claimed Damages relating to a breach of Sellers’
representation or warranty regarding compliance with Environmental Laws or any
Claim relating to the subject matter of such representation or warranty without
first giving Sellers notice of the remediation with reasonable detail at least
30 days prior thereto (or such shorter period of time as shall be required by
any Governmental Authority). Sellers shall have the option (in its
sole discretion) to conduct (or have conducted on its behalf) such remediation
operations. If Sellers shall not have notified Purchaser of its
agreement to conduct such remediation operations within such specified period,
then Purchaser may conduct (or have conducted on its behalf) such
operations. Purchaser and Sellers agree that any remediation
activities undertaken with respect to the Assets, whether conducted by Purchaser
or Sellers, shall be reasonable in extent and cost effective and shall not be
designed or implemented in such a manner as to exceed what is required to cause
a condition to be brought into compliance with Environmental
Laws. All remediation activities conducted by Sellers under this
Agreement shall be conducted to the extent reasonably possible so as not to
interfere substantially with Purchaser's operation of the
Assets.
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Section
10.2 Indemnification
Actions. All claims for indemnification under Section 10.1
shall be asserted and resolved as follows:
(a) For
purposes of this Article 10, the term
“Indemnifying
Person” when used in connection with particular Damages shall mean the
Person or Persons having an obligation to indemnify another Person or Persons
with respect to such Damages pursuant to this Article 10, and the
term “Indemnified
Person” when used in connection with particular Damages shall mean the
Person or Persons having the right to be indemnified with respect to such
Damages by another Person or Persons pursuant to this Article 10.
(b) To
make claim for indemnification under Section 10.1, an
Indemnified Person shall notify the Indemnifying Person of its claim under this
Section 10.2,
including the specific details of and specific basis under this Agreement for
its claim (the “Claim
Notice”). In the event that the claim for indemnification is
based upon a claim by a third party against the Indemnified Person (a “Claim”),
the Indemnified Person shall provide its Claim Notice promptly after the
Indemnified Person has actual knowledge of the Claim and shall enclose a copy of
all papers (if any) served with respect to the Claim; provided that the failure
of any Indemnified Person to give notice of a Claim as provided in this Section 10.2
shall not relieve the Indemnifying Person of its obligations under Section 10.1
except to the extent such failure results in insufficient time being available
to permit the Indemnifying Person to effectively defend against the Claim or
otherwise prejudices the Indemnifying Person's ability to defend against the
Claim. In the event that the claim for indemnification is based upon
an inaccuracy or breach of a representation, warranty, covenant or agreement,
the Claim Notice shall specify the representation, warranty, covenant or
agreement which was inaccurate or breached.
(c) If
the Indemnifying Person admits its obligation to indemnify the Indemnified
Person, it shall have the right and obligation to diligently defend, at its sole
cost and expense, the Claim. The Indemnifying Person shall have full
control of such defense and proceedings, including any compromise or settlement
thereof. If requested by the Indemnifying Person, the Indemnified
Person agrees to cooperate in contesting any Claim which the Indemnifying Person
elects to contest (provided, however, that the
Indemnified Person shall not be required to bring any counterclaim or
cross-complaint against any Person). The Indemnified Person may at
its own expense participate in, but not control, any defense or settlement of
any Claim controlled by the Indemnifying Person pursuant to this Section 10.2(d). An
Indemnifying Person shall not, without the written consent of the Indemnified
Person, settle any Claim or consent to the entry of any judgment with respect
thereto which (i) does not result in a final resolution of the Indemnified
Person's liability with respect to the Claim (including, in the case of a
settlement, an unconditional written release of the Indemnified Person) or
(ii) may materially and adversely affect the Indemnified Person (other than
as a result of money damages covered by the indemnity).
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(d) If
the Indemnifying Person does not admit its obligation or admits its obligation
but fails to diligently defend or settle the Claim, then the Indemnified Person
shall have the right to defend against the Claim (at the sole cost and expense
of the Indemnifying Person, if the Indemnified Person is entitled to
indemnification hereunder), with counsel of the Indemnified Person's choosing,
subject to the right of the Indemnifying Person to admit its obligation and
assume the defense of the Claim at any time prior to settlement or final
determination thereof. If the Indemnifying Person has not yet
admitted its obligation to provide indemnification with respect to a Claim, the
Indemnified Person shall send written notice to the Indemnifying Person of any
proposed settlement and the Indemnifying Person shall have the option for 10
days following receipt of such notice to (i) admit in writing its
obligation to provide indemnification with respect to the Claim and (ii) if
its obligation is so admitted, reject, in its reasonable judgment, the proposed
settlement. If the Indemnified Person settles any Claim over the
objection of the Indemnifying Person after the Indemnifying Person has timely
admitted its obligation in writing and assumed the defense of the Claim, the
Indemnified Person shall be deemed to have waived any right to indemnity
therefor.
Section
10.3 Limitation
on Actions. Notwithstanding the remaining provisions hereof,
the provisions of this Article 10 are
subject to the following:
(a) The
representations and warranties of the Parties set forth in this Agreement or any
certificate or other instrument delivered pursuant hereto, as well as the
covenants and agreements set forth herein or therein that are contemplated to be
performed prior to the Closing, shall survive the Closing for a period of one
hundred eighty (180) days after the Closing (unless a shorter period is
expressly provided within the applicable section). The covenants and
agreements set forth herein or therein that are contemplated to be performed
after the Closing, shall survive the Closing without time limit except as may
otherwise be expressly provided herein or therein. Representations,
warranties, covenants and agreements shall be of no further force and effect
after the date of their expiration, provided that there shall be no termination
of any bona fide claim asserted pursuant to this Agreement with respect to such
a representation, warranty, covenant or agreement prior to its expiration
date.
(b) The
indemnities in Sections 10.1(a)(ii),
10.1(a)(iii)
and 10.1(b)
shall terminate as of the date that is one hundred eighty (180) days after the
Closing, except in each case as to matters for which a specific written claim
for indemnity has been delivered to the Indemnifying Person on or before such
termination date. The indemnities in Section 10.1(a)(i)
shall continue without time limit.
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(c) Sellers
shall not have any liability for any indemnification under Section 10.1
until and unless the aggregate amount of the liability for all Damages for which
claim notices are delivered by such Party exceeds Two Million Five Hundred
Thousand Dollars ($2,500,000) (the “Indemnity
Deductible”), and then only to the extent such damages exceed the
Indemnity Deductible. The adjustments to the Purchase Price under
Section 2.3, any
further adjustments with respect to production, income, proceeds, receipts and
credits under Section 11.1,
any further adjustments with respect to Property Costs under Section 11.2 and
any payments in respect of any of the preceding shall not be limited by this
Section
10.3(c).
(d) The
maximum aggregate amount for which Sellers may be liable for indemnification
under Section 10.1
shall be limited to Two Million Dollars ($2,000,000).
(e) The
amount of any Damages for which an Indemnified Person is entitled to indemnity
under this Article 10 shall be reduced
by the amount of insurance proceeds realized by the Indemnified Person or its
Affiliates with respect to such Damages (net of any collection costs, and
excluding the proceeds of any insurance policy issued or underwritten by the
Indemnified Person or its Affiliates).
(f) In
no event shall the Purchaser have any obligation hereunder to indemnify any
Seller who does not actually convey any portion of the Assets to Purchaser under
this Agreement or otherwise have any direct or indirect interest in any portion
of the Assets. Likewise, no Seller who does not actually convey any
portion of the Assets to Purchaser under this Agreement or otherwise have any
direct or indirect interest in any portion of the Assets shall have any
obligation hereunder to indemnify the Purchaser. Upon the request of
any Party hereto, the Parties agree to enter into any amendment to this
Agreement reasonably necessary to remove any Seller who does not actually convey
any portion of the Assets to Purchaser under this Agreement or otherwise have
any direct or indirect interest in any portion of the Assets as a Party to this
Agreement.
ARTICLE
11
MISCELLANEOUS
Section
11.1 Receipts. Except
as otherwise provided in this Agreement, any production from or attributable to
the Assets (and all products and proceeds attributable thereto) and any other
income, proceeds, receipts and credits attributable to the Assets which are not
reflected in the adjustments to the Purchase Price following the final
adjustment pursuant to Section 8.4(b)
shall be treated as follows: (a) all production of Hydrocarbons
from or attributable to the Assets (and all products and proceeds attributable
thereto) and all other income, proceeds, receipts and credits earned with
respect to the Assets to which Purchaser is entitled under Section 1.4
shall be the sole property and entitlement of Purchaser, and, to the extent
received by Sellers, Sellers shall fully disclose, account for and remit the
same promptly to Purchaser, and (b) all production of Hydrocarbons from or
attributable to the Assets (and all products and proceeds attributable thereto)
and all other income, proceeds, receipts and credits earned with respect to the
Assets to which Sellers are entitled under Section 1.4
shall be the sole property and entitlement of Sellers and, to the extent
received by Purchaser, Purchaser shall fully disclose, account for and remit the
same promptly to Sellers.
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Section
11.2 Expenses. Except
as otherwise provided in this Agreement, any Property Costs which are not
reflected in the adjustments to the Purchase Price following the final
adjustment pursuant to Section 8.4(b)
shall be treated as follows: (a) all Property Costs for which Sellers are
responsible under Section 1.4
shall be the sole obligation of Sellers and Sellers shall promptly pay, or if
paid by Purchaser, promptly reimburse Purchaser for and hold Purchaser harmless
from and against same; and (b) all Property Costs for which Purchaser is
responsible under Section 1.4
shall be the sole obligation of Purchaser and Purchaser shall promptly pay, or
if paid by Sellers, promptly reimburse Sellers for and hold Sellers harmless
from and against same. Sellers are entitled to resolve all joint
interest audits and other audits of Property Costs covering periods for which
Sellers are in whole or in part responsible, provided that Sellers shall not
agree to any adjustments to previously assessed costs for which Purchaser is
liable without the prior written consent of Purchaser, such consent not to be
unreasonably withheld. Sellers shall provide Purchaser with a copy of
all applicable audit reports and written audit agreements received by Sellers
and relating to periods for which Purchaser is partially
responsible.
Section
11.3 Counterparts. This
Agreement may be executed in counterparts, each of which shall be deemed an
original instrument, but all such counterparts together shall constitute but one
agreement.
Section
11.4 Notice. All
notices which are required or may be given pursuant to this Agreement shall be
sufficient in all respects if given in writing and delivered personally, by
telecopy or by registered or certified mail, postage prepaid, as
follows:
If to
Seller:
TXCO
Resources Inc.
777 W.
Sonterra Blvd., Suite 350
San
Antonio, Texas 78258
Attn: James
E. Sigmon, Chairman of the Board and CEO
Facsimile:
(210) 496-3232
With a
copy to:
TXCO
Resources Inc.
777 W.
Sonterra Blvd., Suite 350
San
Antonio, Texas 78258
Attn: M.
Frank Russell, General Counsel
Facsimile:
(210) 496-3232
If to
Purchaser:
Anadarko
E&P Company LP
1201 Lake
Robbins Drive
The
Woodlands, Texas 77380
Attn:
R.A. Walker, President and Chief Operating Officer
Facsimile: (832)
636-8032
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With a
copy to:
Anadarko
E&P Company LP
1201 Lake
Robbins Drive
The
Woodlands, Texas 77380
Attn:
Robert K. Reeves, General Counsel
Facsimile: (832)
636-3214
Either
Party may change its address for notice by notice to the other in the manner set
forth above. All notices shall be deemed to have been duly given at
the time of receipt by the Party to which such notice is addressed.
Section
11.5 Sales or
Use Tax, Recording Fees and Similar Taxes and Fees. Purchaser
shall bear any sales, use, excise, real property transfer or gain, gross
receipts, goods and services, registration, capital, documentary, stamp or
transfer Taxes, recording fees and similar Taxes and fees incurred and imposed
upon, or with respect to, the property transfers or other transactions
contemplated hereby. If such transfers or transactions are exempt
from any such taxes or fees upon the filing of an appropriate certificate or
other evidence of exemption, Purchaser will timely furnish to Sellers such
certificate or evidence.
Section
11.6 Expenses. All
expenses incurred by Sellers in connection with or related to the authorization,
preparation or execution of this Agreement, the conveyances delivered hereunder
and the Exhibits and Schedules hereto and thereto, and all other matters related
to the Closing, including all fees and expenses of counsel, accountants and
financial advisers employed by Sellers, shall be borne solely and entirely by
Sellers, and all such expenses incurred by Purchaser shall be borne solely and
entirely by Purchaser.
Section
11.7 Change of
Name. As promptly as practicable, but in any case within
thirty (30) days after the Closing Date, Purchaser shall eliminate, at
Purchaser’s cost, the names of “TXCO Resources Inc.”, or any Affiliates of
Sellers and any variants thereof from the Assets acquired pursuant to this
Agreement, including the removal of any signs on the Assets that include such
names, and except with respect to such grace period for eliminating existing
usage, shall have no right to use any logos, trademarks or trade names belonging
to Sellers or any of their Affiliates.
Section
11.8 Replacement
of Bonds, Letters of Credit and Guarantees. The Parties
understand that none of the bonds, letters of credit and guarantees, if any,
posted by Sellers with Governmental Bodies and relating to the Assets will be
transferred to Purchaser. Promptly following Closing, Purchaser shall
obtain, or cause to be obtained in the name of Purchaser, replacements for such
bonds, letters of credit and guarantees, to the extent such replacements are
necessary to permit the cancellation of the bonds, letters of credit and
guarantees posted by Sellers or to consummate the transactions contemplated by
this Agreement.
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Section
11.9 Governing
Law; Submission to Jurisdiction. This Agreement and the legal
relations between the Parties shall be governed by and construed in accordance
with the laws of the State of Texas without regard to principles of conflicts of
laws otherwise applicable to such determinations except that the conveyances
delivered hereunder shall be governed by the laws of the state in which the
transferred Assets are located. To the extent the Bankruptcy Court
does not have jurisdiction over any controversy arising hereunder, each Party
submits to the exclusive jurisdiction of the state and federal courts located in
Bexar County of the State of Texas for purposes of resolving any dispute, claim
or controversy arising out of, in relation to or in connection with this
Agreement.
Section
11.10 Captions. The
captions in this Agreement are for convenience only and shall not be considered
a part of or affect the construction or interpretation of any provision of this
Agreement.
Section
11.11 Waivers. Any
failure by any Party or Parties to comply with any of its or their obligations,
agreements or conditions herein contained may be waived by the Party or Parties
to whom such compliance is owed by an instrument signed by such Party or Parties
and expressly identified as a waiver, but not in any other manner. No
waiver of, or consent to a change in, any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of, or consent to a change in,
other provisions hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
Section
11.12 Assignment. No
party hereto shall assign all or any part of this Agreement, nor shall any party
assign or delegate any of its rights or duties hereunder, without the prior
written consent of the other parties. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of the Parties and
their respective successors and assigns.
Section
11.13 Entire
Agreement. The Confidentiality Agreement, this Agreement and
the documents to be executed hereunder and the Exhibits and Schedules attached
hereto constitute the entire agreement between the Parties pertaining to the
subject matter hereof, and supersede all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the Parties pertaining
to the subject matter hereof.
Section
11.14 Amendment. This
Agreement may be amended or modified only by an agreement in writing executed by
all Parties and expressly identified as an amendment or
modification.
Section
11.15 No Third
Party Beneficiaries. Nothing in this Agreement shall entitle
any Person other than Purchaser and Sellers to any claims, cause of action,
remedy or right of any kind, except the rights expressly provided to the Persons
described in Section 10.1(f).
Section
11.16 References. In
this Agreement:
(a) References
to any gender includes a reference to all other genders;
(b) References
to the singular includes the plural, and vice versa;
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(c) Reference
to any Article or Section means an Article or Section of this
Agreement;
(d) Reference
to any Exhibit or Schedule means an Exhibit or Schedule to this Agreement, all
of which are incorporated into and made a part of this Agreement;
(e) Unless
expressly provided to the contrary, “hereunder”,
“hereof”,
“herein”
and words of similar import are references to this Agreement as a whole and not
any particular Section or other provision of this Agreement; and
(f) “Include”
and “including”
shall mean include or including without limiting the generality of the
description preceding such term.
Section
11.17 Construction. Purchaser
is a Party capable of making such investigation, inspection, review and
evaluation of the Assets as a prudent purchaser would deem appropriate under the
circumstances including with respect to all matters relating to the Assets,
their value, operation and suitability. Each of Sellers and Purchaser
has had the opportunity to exercise business discretion in relation to the
negotiation of the details of the transaction contemplated
hereby. This Agreement is the result of arm's-length negotiations
from equal bargaining positions.
Section
11.18 Limitation
on Damages. Notwithstanding anything to the contrary contained
herein, none of Purchaser, Sellers or any of their respective Affiliates shall
be entitled to punitive damages in connection with this Agreement and the
transactions contemplated hereby and Purchaser and Sellers, for itself and on
behalf of its Affiliates, hereby expressly waives any right to punitive damages
in connection with this Agreement and the transactions contemplated
hereby.
ARTICLE
12
DEFINITIONS
“Acquisition
Proposal” means any proposal or offer for a merger, recapitalization,
share exchange, debt-for-equity exchange, distribution of securities for the
benefit of stakeholders of Sellers, consolidation or similar transaction
involving a sale or purchase (directly or through a proposed investment in
equity securities, debt securities or claims of creditors) of all or
substantially all of the assets of Sellers or all or substantially all of the
equity securities of Sellers, other than the transactions contemplated by the
terms of this Agreement. For the avoidance of doubt, an Acquisition
Proposal does not include a proposal or offer for an Alternative
Plan.
“Adjustment
Period” has the meaning set forth in Section 2.3(a).
“AFE
Advance” has the
meaning set forth in Section
6.5(b).
“Affiliate”
with respect to any Person, means any person that directly or indirectly
controls, is controlled by or is under common control with such Person, with
control in such context meaning the ability to direct the management and
policies of a Person through ownership of voting shares or other equity rights,
pursuant to a written agreement, or otherwise.
-39-
“Agreed
Interest Rate” shall be three percent (3%) per annum.
“Agreement”
has the meaning set forth in the first paragraph of this Agreement.
“Allocated
Value” has the meaning set forth in Section 2.4.
“Alternative
Plan” means a plan of reorganization covering a transaction other than
with Purchaser or any of its Affiliates which the Board of Directors of Sellers
determine (after consultation with their legal and financial advisors and the
Committee) in good faith would, if consummated and taking into account all
factors deemed relevant by the Board of Directors of each Seller, be more
favorable to Sellers and their stakeholders than the transactions contemplated
by this Agreement.
“Applicable
Law” means any Law to which a specified Person, or the Assets is
subject.
“Assets”
has the meaning set forth in Section 1.2.
“Assumed
Obligations” has the meaning set forth in Section
6.7.
“Back-Up
Bid Agreement” shall have the
meaning set forth in Section
6.8(e).
“Back-Up
Bid Option” shall have the meaning set forth in Section
6.8(e).
“Bankruptcy
Cases” means the chapter 11 cases commenced by Sellers on or after May
17, 2009 (including any case commenced after the date of this Agreement),
jointly administered under Case No. 09-51807, in the Western District of Texas,
San Antonio Division.
“Bankruptcy
Code” means title 11 of the United States Code.
“Bankruptcy
Court” means the United States Bankruptcy Court for the Western District
of Texas (San Antonio Division).
“Business
Day” means each calendar day except Saturdays, Sundays, and Federal
holidays.
“Claim”
has the meaning set forth in Section 10.2(b).
“Claim
Notice” has the meaning set forth in Section 10.2(b).
“Closing”
has the meaning set forth in Section 8.1(a).
“Closing
Date” has the meaning set forth in Section 8.1(c).
“Closing
Payment” has the meaning set forth in Section 8.4(a).
-40-
“Code”
has the meaning set forth in Section 2.4.
“Committee”
shall mean the official committee of unsecured creditors of Sellers appointed in
connection with the Bankruptcy Cases.
“Confidentiality
Agreement” has the meaning set forth in Section 6.1.
“Contracts”
has the meaning set forth in Section 1.2(g).
“Contractual
Prospects” means such Lands and Leases pursuant to which Sellers hold the
right to acquire or earn title thereto under the Material Contracts listed under
Schedule
4.11.
“Conveyance”
means the conveyance to be delivered by Sellers to Purchaser in form and
substance mutually agreeable to the Parties.
“COPAS”
means the Council of Petroleum Accountants Society.
“Damages”
has the meaning set forth in Section 10.1(e).
“Deemed
Value” means, in respect of the Purchase Price or a Superior Proposal,
the aggregate dollar value to Sellers of all cash and non-cash (as applicable)
consideration comprising the Purchase Price or Superior Proposal, as applicable,
as determined by the Board of Directors of each Seller after consultation with
its financial and legal advisors, the Committee and such other advisors as the
Board of Directors of each Seller chooses, in its sole discretion, to
consult.
“Defensible
Title” means that title of Sellers which, subject to Permitted
Encumbrances:
|
(a)
|
Entitles
Sellers to receive throughout the duration of any Lease or the productive
life of any Well (in each case after satisfaction of all royalties,
overriding royalties, nonparticipating royalties, net profits interests or
other similar burdens on or measured by production of Hydrocarbons), not
less than the “net revenue interest” share shown in Exhibit A
of all Hydrocarbons produced, saved and marketed from such Lease or Well,
except decreases in connection with those operations in which Sellers may
be a nonconsenting co-owner, decreases resulting from the establishment or
amendment of pools or units, and decreases required to allow co-owners to
make up past underproduction or pipelines to make up past under deliveries
and except as stated in such Exhibit A-1;
|
|
(b)
|
Obligates
Sellers to bear a percentage of the costs and expenses for the maintenance
and development of, and operations relating to, any Lease or Well not
greater than the “working interest” shown in Exhibit A
without increase throughout the duration of such Lease or Well, except as
stated in Exhibit A and
except increases resulting from contribution requirements with respect to
defaulting co-owners under applicable operating agreements or applicable
Law and increases that are accompanied by at least a proportionate
increase in Sellers’ net revenue
interest;
|
-41-
|
(c)
|
Is
free and clear of all Encumbrances other than Permitted Encumbrances;
and
|
|
(d)
|
Notwithstanding
(a) and (b) above, for the Lands, Leases and Wells within the Contractual
Prospects, Defensible Title shall mean (i) such title as Sellers have the
right to acquire in the Contractual Prospects in accordance with the terms
of the Material Contracts related to such Contractual Prospects and (ii)
Sellers are not in breach of any of the Material Contracts related
thereto.
|
“Definitive
Agreement” means a binding definitive written agreement, enforceable
against the parties thereto, that effects the consummation of a Superior
Proposal. A Definitive Agreement does not include an executed letter
of intent or any other preliminary written agreement, nor does it include any
oral or written agreement in principle or acceptance of an offer or bid by any
Person.
“Deposit”
has the meaning set forth in Section
2.2.
“Effective
Time” has the meaning set forth in Section 1.4(a).
“Encumbrance”
means any lien, charge, encumbrance, obligation, or other defect (including a
discrepancy in net revenue interest or working interest as set forth in Exhibit A).
“Environmental
Condition” means: (a) any event or condition (including any Release
or threatened release) with respect to air, land, soil, surface, subsurface
strata, surface water, ground water, or sediment that causes the Assets to
become subject to (or their owner or operator to have Liability or be
potentially liable for) any investigation, reporting, removal, remediation, or
response action under, or not be in compliance with, any Environmental Law or
any permit pursuant to any Environmental Law; (b) the existence of any written
or oral Claim pending or threatened that reasonably may be expected to subject
the Assets or the owner or the operator of the Assets to Liability under any
Environmental Law as it pertains to the Assets or the existence of any event or
condition on the Assets described in this definition; (c) the failure of
the Assets to be in compliance, or the owner or operator of the Assets to comply
with all applicable Environmental Laws with respect to the Assets; (d) the
failure of the owner or operator of the Assets to obtain or maintain in full
force and effect any Permit required under applicable Environmental Laws with
respect to the Assets; or (e) any event or condition described in the
preceding clauses (a), (b), (c), and (d) that results, or could reasonably be
expected to result, in Liability for any investigation, removal, remediation, or
response action, or any other Person for injury to or death of any Person,
Persons, or other living thing, or damage, loss, or destruction of property
located on the Assets. An event or circumstance that results in the
inaccuracy or breach of the representations and warranties contained in Section 4.7
(insofar only as such representation and warranty relates to environmental
matters) shall constitute an Environmental Condition. The term “Environmental
Condition” includes any release, disposal, spilling, leaking, migration,
pouring, emission, emptying, discharge, injection, escape, transmission,
leaching, or dumping (collectively, a “Release”),
or any threatened Release, of any contaminants on, to or from, or related in any
way to the use, ownership, or operation of, the Assets that has not been
remediated in accordance with all applicable Environmental Laws.
-42-
“Environmental
Laws” means, as the same have been amended to the date hereof, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
§ 9601 et
seq.; the
Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq.; the Federal
Water Pollution Control Act, 33 U.S.C. § 1251 et seq.; the Clean Air
Act, 42 U.S.C. § 7401 et seq.; the Hazardous
Materials Transportation Act, 49 U.S.C. § 1471 et seq.; the Toxic
Substances Control Act, 15 U.S.C. §§ 2601 through 2629; the Oil Pollution Act,
33 U.S.C. § 2701 et seq.; the Emergency
Planning and Community Right-to-Know Act, 42 U.S.C. § 11001 et seq.; and the Safe
Drinking Water Act, 42 U.S.C. §§ 300f through 300j; and all similar Laws as
of the date hereof of any Governmental Body having jurisdiction over the
property in question addressing pollution or protection of the environment or
biological or cultural resources and all regulations implementing the
foregoing.
“Environmental
Permits” means
all permits required by the Sellers by Environmental Laws for the occupation of
the Properties and the operation of the Leases, Lands, Wells, Units and Surface
Rights.
“ERISA”
means the Employee Retirement Income Security Act of 1974, as
amended.
“Equipment”
has the meaning set forth in Section 1.2(h).
“Escrow
Agent” means Wells Fargo Bank, National Association.
“Escrow
Agreement” means the escrow agreement of even date herewith among,
Sellers, Purchaser and the Escrow Agent, the form of which is attached hereto as
Exhibit
B.
“Excluded
Assets” has the meaning set forth in Section 1.3.
“Excluded
Records” has the meaning set forth in Section 1.2(m).
“Final
Order” means (i) an Order of the Bankruptcy Court as to which the time to
appeal, petition for certiorari or motion for re-argument or rehearing has
expired and as to which no appeal, petition for certiorari or other proceedings
or motion for re-argument or rehearing shall then be pending or (ii) if an
appeal, writ of certiorari, motion for re-argument or rehearing thereof has been
filed or sought, such order of the Bankruptcy Court shall not have been
stayed.
“Gathering
Systems” has the meaning set forth in Section 1.2(c).
“Governmental
Body” means any federal, state, local, municipal, or other governments;
any governmental, regulatory or administrative agency, commission, body or other
authority exercising or entitled to exercise any administrative, executive,
judicial, legislative, police, regulatory or taxing authority or power; and any
court or governmental tribunal.
“Hydrocarbons”
means oil, gas, condensate and other gaseous and liquid hydrocarbons or any
combination thereof and sulphur extracted from hydrocarbons.
-43-
“Imbalance”
means any imbalance between (a) the quantity of Hydrocarbons produced from any
Well and allocated to a Person from time to time and the share of such
production to which such Person is actually entitled by virtue of its ownership
interest in such Well, (b) the quantity of Hydrocarbons produced from or
allocable to the Assets delivered, and the quantity of such Hydrocarbons
received, in each case for gathering, transportation, or storage for the account
of a Person, (c) the quantity of Hydrocarbons produced from or allocable to the
Assets delivered for processing or refining, and the quantity of products or
residue Hydrocarbons redelivered, in each case for the account of a Person, and
(d) other similar types of Hydrocarbon-related imbalances attributable to the
Assets.
“Indemnified
Person” has the meaning set forth in Section 10.2(a).
“Indemnifying
Person” has the meaning set forth in Section 10.2(a).
“Indemnity
Deductible” has the meaning set forth in Section
10.3(c).
“Knowledge”
means the knowledge of a Person’s officers and directors as of the date hereof
and the Closing after inquiry of such Person’s employees charged with
responsibility for a particular area of such Person’s operations.
“Laws”
means all statutes, rules, regulations, ordinances, orders, and codes of
Governmental Bodies.
“Leases
and Lands” has the meaning set forth in Section 1.2(a).
“Liabilities”
means, for purposes of this Agreement, any and all losses, judgments, damages,
liabilities, injuries, costs, expenses, interest, penalties, taxes, fines,
obligations, and deficiencies.
“Material
Adverse Effect” means any material adverse effect on the ownership,
operation or value of the Assets, as currently operated, taken as a whole, provided, however,
that “Material Adverse
Effect” shall not include material adverse effects resulting from general
changes in Hydrocarbon prices, general changes in industry, economic or
political conditions or general changes in Laws or in regulatory
policies.
“Material
Contracts” has the meaning set forth in Section
4.11.
“Order”
means any writ, judgment, decree, injunction or similar order, writ, ruling,
directive or other requirement of any Governmental Authority (in each such case
whether preliminary or final).
“Organizational
Documents” means the articles of incorporation, certificate of
incorporation, charter, bylaws, articles of formation, regulations, operating
agreement, certificate of limited partnership, partnership agreement, and all
other similar documents, instruments, or certificates executed, adopted, or
filed in connection with the creation, formation, or organization of a Person,
including any amendments thereto.
“Party”
or “Parties”
has the meaning set forth in the first paragraph of this Agreement.
-44-
“Peregrine
Claims” has the meaning set forth in Section
6.15.
“Permits”
has the meaning set forth in Section
1.2(e).
“Permitted
Encumbrances” means any or all of the following:
(a) Lessors'
royalties and any overriding royalties, reversionary interests and other burdens
to the extent that they do not, individually or in the aggregate, reduce
Sellers’ net revenue interests below that shown in Exhibit A-1 or
increase Sellers’ working interest above that shown in Exhibit A-1 without a
corresponding increase in the net revenue interest;
(b) Third-party
consent requirements and similar restrictions with respect to which waivers or
consents are obtained by Sellers from the appropriate parties prior to the
Closing Date or the appropriate time period for asserting the right has
expired;
(c) Liens
for current Taxes or assessments not yet delinquent;
(d) Materialman's,
mechanic's, repairman's, employee's, contractor's, operator's and other similar
liens or charges arising in the ordinary course of business for amounts not yet
delinquent (including any amounts being withheld as provided by
law);
(e) All
rights to consent, by required notices to, filings with, or other actions by
Governmental Bodies in connection with the sale or conveyance of oil and gas
leases or interests therein if they are customarily obtained subsequent to the
sale or conveyance;
(f) Rights
of reassignment arising upon final intention to abandon or release the Assets,
or any of them;
(g) Easements,
rights-of-way, servitudes, permits, surface leases and other rights in respect
of surface operations which do not, individually or in the aggregate, materially
detract from the value of or materially interfere with the use or ownership of
the Assets subject thereto or affected thereby (as currently used or
owned);
(h) All
rights reserved to or vested in any Governmental Body to control or regulate any
of the Assets in any manner and all obligations and duties under all applicable
laws, rules and orders of any such Governmental Body or under any franchise,
grant, license or permit issued by any such Governmental Body;
(i) Any
Encumbrance on or affecting the Assets which is discharged at or prior to
Closing;
(j) The
litigation matters described in Schedule 4.7;
or
-45-
(k) Any
of the following to the extent that they do not, individually or in the
aggregate, reduce Sellers’ net revenue interests below that shown in Exhibit A-1 or
increase Sellers’ working interest above that shown in Exhibit A-1 without a
corresponding increase in the net revenue:
(i) The
occurrence of payout under any farmout agreement, joint operating agreement or
similar arrangement, or the exercise of any other back-in right or reversionary
interest held by a third Person;
(ii) Any
lease amendment, or any consent by any non-participating royalty interest or
non-executive mineral interest, authorizing the lessee or executive rights
holder to pool a leasehold interest, royalty interest, or mineral interest
constituting part of any Property, or to pool another leasehold interest,
royalty interest, or mineral interest with any Property.
“Person”
means any individual, firm, corporation, partnership, limited liability company,
joint venture, association, trust, unincorporated organization, Government Body
or any other entity.
“Properties”
has the meaning set forth in Section 1.2(d).
“Property
Costs” has the meaning set forth in Section 1.4(c).
“Purchase
Price” has the meaning set forth in Section 2.1.
“Purchaser”
has the meaning set forth in the first paragraph of this Agreement.
“Records”
has the meaning set forth in Section 1.2(m).
“Release”
has the meaning set forth within the definition of Environmental Condition
above.
“Representatives”
has the meaning set forth in Section 6.8(a)
“Retained
Obligations” has the meaning set forth in Section
6.7.
“Sale
Order” has the meaning set forth in the recitals to this
Agreement.
“Seller”
or “Sellers”
has the meaning set forth in the first paragraph of this Agreement.
“Sellers’
Benefit Plans” mean any employee pension benefit plans as defined in
Section 3(2) of ERISA, employee welfare benefit plans as defined in Section 3(1)
of ERISA, whether or not excluded from coverage under specific titles or
subtitles of ERISA and any employee benefit programs, payroll practices,
policies, contracts, arrangement and practices that cover or are available to
employees.
-46-
“Subsidiary”
means with respect to any Person, any corporation, limited liability company,
joint venture or partnership of which such Person (a) beneficially owns, either
directly or indirectly, more than 50% of (i) the total combined voting power of
all classes of voting securities of such entity, (ii) the total combined equity
interests, or (iii) the capital or profit interest, in the case of a
partnership; or (b) otherwise has the power to vote or to direct the voting of
sufficient securities to elect a majority of the board of directors or similar
governing body.
“Superior
Proposal” means a bona fide written Acquisition Proposal that Sellers
determine (after consultation with its legal and financial advisors) in good
faith (i) is reasonably likely to be consummated in a timely manner, taking into
account all factors deemed relevant by Sellers (including all legal, financial
and regulatory aspects of the proposal and the person making the proposal), (ii)
if consummated would, taking into account all factors deemed relevant by Sellers
and, is reasonably likely to result in a transaction more favorable to Sellers
and their stakeholders than the transactions contemplated by this Agreement and
(iii) is reasonably likely to provide a Deemed Value to Sellers and their
bankruptcy estates that exceeds the Deemed Value of this Agreement and the
transactions contemplated hereby.
“Surface
Rights” has the meaning set forth in Section
1.2(d).
“Suspended
Revenues” has the meaning set forth in Section
4.16.
“Taxes”
means all federal, state, local, and foreign income, profits, franchise,
margins, sales, use, ad valorem, property, severance, production, excise, stamp,
documentary, real property transfer or gain, gross receipts, goods and services,
registration, capital, transfer, or withholding taxes or other assessments,
duties, fees or charges imposed by any Governmental Body, including any
interest, penalties or additional amounts which may be imposed with respect
thereto.
“Termination
Notice” has the meaning set forth in Section
6.15.
“Third
Party AFE” has the meaning set forth in Section
6.5(b).
“Transition
Services Agreement” means
the agreement pursuant to which Sellers agree to provide services related to the
operations, land and accounting necessary to operate the Properties during a
to-be-determined period of time following the Closing.
“Transportation
Contract” has the meaning set forth in Section
4.11.
“Units”
has the meaning set forth in Section 1.2(b).
“Wells”
has the meaning set forth in Section 1.2(a).
[signature
page follows]
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IN WITNESS WHEREOF, this
Agreement has been signed by each of the Parties hereto on the date first above
written.
SELLERS:
|
|
TXCO Resources
Inc.
|
|
By:
|
/s/ James E. Sigmon
|
Name:
James E. Sigmon
|
|
Title: Chairman
and Chief Executive Officer
|
|
TXCO
Energy Corp.
|
|
By:
|
/s/ James E. Sigmon
|
Name:
James E. Sigmon
|
|
Title: Chairman
and Chief Executive Officer
|
|
Texas
Tar Sands Inc.
|
|
By:
|
/s/ James E. Sigmon
|
Name:
James E. Sigmon
|
|
Title: Chairman
and Chief Executive Officer
|
|
Output
Acquisition Corp.
|
|
By:
|
/s/ James E. Sigmon
|
Name:
James E. Sigmon
|
|
Title: Chairman
and Chief Executive Officer
|
|
OPEX
Energy,
LLC
|
|
By:
|
/s/ James E. Sigmon
|
Name:
James E. Sigmon
|
|
Title: Chairman
and Chief Executive Officer
|
Signature
Page –
Sellers
Purchase
and Sale Agreement
Charro
Energy, Inc.
|
|
By:
|
/s/ James E. Sigmon
|
Name: James
E. Sigmon
|
|
Title: Chairman
and Chief Executive Officer
|
|
TXCO
Drilling Corp.
|
|
By:
|
/s/ James E. Sigmon
|
Name: James
E. Sigmon
|
|
Title: Chairman
and Chief Executive Officer
|
|
Eagle
Pass Well Service,
L.L.C.
|
|
By:
|
/s/ James E. Sigmon
|
Name: James
E. Sigmon
|
|
Title: Chairman
and Chief Executive Officer
|
|
PPL
Operating, Inc.
|
|
By:
|
/s/ James E. Sigmon
|
Name:
James E. Sigmon
|
|
Title: Chairman
and Chief Executive Officer
|
|
Maverick
Gas Marketing, Ltd.
|
|
By:
|
/s/ James E. Sigmon
|
Name: James
E. Sigmon
|
|
Title: Chairman
and Chief Executive Officer
|
|
Maverick-Dimmit
Pipeline, Ltd.
|
|
By:
|
/s/ James E. Sigmon
|
Name:
James E. Sigmon
|
|
Title:
Chairman and Chief Executive
Officer
|
Signature
Page – Sellers
Purchase and
Sale Agreement
PURCHASER:
|
|
Anadarko
E&P Company LP
|
|
By:
|
/s/ R.A. Walker
|
Name:
R.A. Walker
|
|
Title: President
and Chief Operating Officer
|
Signature
Page – Purchaser
Purchase
and Sale Agreement