Attached files
Exhibit
2.2
Execution
Version
Purchase
and Sale Agreement
Dated
as of December 23, 2009
By
and Between
Hilcorp
Energy I, L.P.
as
Seller
and
Penn
Virginia Oil & Gas Corporation
as
Buyer
Page
|
||||
ARTICLE
1
|
DEFINITIONS
|
1
|
||
1.1
|
Defined
Terms
|
1
|
||
1.2
|
References
and Titles
|
8
|
||
ARTICLE
2
|
PURCHASE
AND SALE
|
9
|
||
2.1
|
Purchase
and Sale of Purchased Assets
|
9
|
||
2.2
|
Assumption
of Liabilities
|
10
|
||
ARTICLE
3
|
PURCHASE
PRICE
|
10
|
||
3.1
|
Purchase
Price
|
10
|
||
3.2
|
Purchase
Price Allocation
|
11
|
||
3.3
|
Purchase
Price Adjustments
|
11
|
||
3.4
|
Closing
Payment
|
12
|
||
3.5
|
Proceeds
Received Post-Closing
|
12
|
||
ARTICLE
4
|
REPRESENTATIONS
AND WARRANTIES
|
12
|
||
4.1
|
Representations
and Warranties of Seller
|
12
|
||
4.2
|
Representations
and Warranties of Buyer
|
16
|
||
ARTICLE
5
|
TITLE
AND ENVIRONMENTAL MATTERS
|
18
|
||
5.1
|
Title
Adjustments
|
18
|
||
5.2
|
Determination
of Title Defects, Benefits and Values
|
19
|
||
5.3
|
Calculation
of Defect Value
|
20
|
||
5.4
|
Remedies
for Title Defects
|
20
|
||
5.5
|
Consents
|
22
|
||
5.6
|
Preferential
Rights
|
24
|
||
5.7
|
Casualty
and Condemnation
|
24
|
||
5.8
|
Termination
as a Remedy
|
25
|
||
ARTICLE
6
|
COVENANTS
|
25
|
||
6.1
|
General
|
25
|
||
6.2
|
Access
|
25
|
||
6.3
|
Conduct
of Seller’s Business
|
26
|
||
6.4
|
Taxes
|
27
|
||
6.5
|
Transaction
Expenses
|
27
|
||
6.6
|
Maintenance
of Books and Records
|
27
|
||
6.7
|
Confidentiality
|
27
|
||
6.8
|
Names
|
28
|
||
6.9
|
Further
Assurances
|
28
|
||
6.10
|
Revised
Schedules
|
28
|
||
6.11
|
Bonds
|
28
|
||
ARTICLE
7
|
CLOSING
|
28
|
||
7.1
|
Time
and Place of Closing
|
28
|
||
7.2
|
Conditions
to Obligation of Buyer
|
29
|
||
7.3
|
Conditions
to Obligation of Seller
|
29
|
||
7.4
|
Deliveries
by Seller at Closing
|
30
|
||
7.5
|
Deliveries
by Buyer at Closing
|
31
|
i
ARTICLE
8
|
INDEMNIFICATION
|
31
|
||
8.1
|
Survival
of Representations, Warranties and Covenants
|
31
|
||
8.2
|
Indemnification
By Seller
|
32
|
||
8.3
|
Indemnification
By Buyer
|
32
|
||
8.4
|
Indemnification
Procedures
|
33
|
||
8.5
|
Other
Limitations on Indemnification
|
34
|
||
8.6
|
Exclusive
Remedy
|
35
|
||
ARTICLE
9
|
TERMINATION
|
35
|
||
9.1
|
Termination
of Agreement
|
35
|
||
9.2
|
Effect
of Termination
|
35
|
||
ARTICLE
10
|
MISCELLANEOUS
|
37
|
||
10.1
|
Amendment
and Waiver
|
37
|
||
10.2
|
Successors
and Assigns
|
37
|
||
10.3
|
Notices
|
37
|
||
10.4
|
Severability
|
39
|
||
10.5
|
No
Third Party Beneficiaries
|
39
|
||
10.6
|
Construction
|
39
|
||
10.7
|
Exhibits
and Schedules
|
39
|
||
10.8
|
Headings
|
39
|
||
10.9
|
Counterparts
|
39
|
||
10.10
|
Entire
Agreement
|
39
|
||
10.11
|
Applicable
Law
|
40
|
||
10.12
|
Like-Kind
Exchange
|
40
|
||
10.13
|
Right
of Set-Off
|
41
|
ii
Exhibit A-1
|
Purchased
Leases
|
Exhibit A-2
|
Purchased
Wells
|
Exhibit A-3
|
Purchased
Easements
|
Exhibit A-4
|
Purchased
Contracts
|
Exhibit B
|
Purchased
Asset Allocated Values
|
Exhibit C
|
Form
of Assignment and Bill of Sale
|
Schedules
|
|
Schedule I-1
|
Seller
Officers with Knowledge
|
Schedule I-2
|
Buyer
Officers with Knowledge
|
Schedule 4.1(d)
|
Seller
Consents
|
Schedule 4.1(e)
|
Seller
Proceedings
|
Schedule 4.1(g)
|
Seller
Violations
|
Schedule 4.1(l)
|
Seller
Payout Balances
|
Seller
Capital Expenditures
|
|
Schedule 6.11
|
Seller
Bonds
|
iii
PURCHASE AND SALE
AGREEMENT
THIS
PURCHASE AND SALE AGREEMENT (this “Agreement”), dated
December 23, 2009, is by and between Hilcorp Energy I, L.P., a Texas
limited partnership whose mailing address is 1201 Louisiana St., Suite 1400,
Houston, Texas 77002 (“Seller”), and Penn
Virginia Oil & Gas Corporation, a Virginia corporation whose mailing address
is Seven Sheridan Square, Suite 200, Kingsport, Tennessee 37660 (“Buyer”). Seller
and Buyer are referred to individually as a “Party” and
collectively as the “Parties”.
RECITALS
WHEREAS,
Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, on
the terms and conditions set forth in this Agreement, all of Seller’s right,
title and interest of whatever kind or nature in and to all of Seller’s oil, gas
and other mineral interests, whether leasehold or other interests, located in
Jefferson Davis County, Mississippi and described in this Agreement, and all of
Seller’s right, title and interest in and to that certain equipment and assets
described in this Agreement associated with such interests; and
NOW,
THEREFORE, in consideration of the mutual covenants and promises contained in
this Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby specifically acknowledged, and intending to be
legally bound hereby, Seller and Buyer hereby agree as follows:
ARTICLE
1
DEFINITIONS
1.1 Defined
Terms. As
used in this Agreement, each of the following terms has the meaning given in
this Section 1.1 or in the Section referred to below:
“Adverse Environmental
Condition” means any condition, occurrence, event or activity on or
attributable to, related to or incurred with respect to the ownership, operation
or use of the Purchased Assets to the extent that the same (i) constitutes
a violation of applicable Environmental Laws or (ii) currently requires
corrective or remediation action pursuant to applicable Environmental
Laws.
“Affiliate” means,
with respect to any Person, each other Person that, directly or indirectly
(through one or more intermediaries or otherwise), controls, is controlled by,
or is under common control with such Person. For purposes of this
definition, the term “control” (including
the terms “controlled
by” and “under
common control with”) means (i) the ownership, directly or
indirectly, of an equity interest entitled to cast more than fifty percent (50%)
of the votes entitled to be cast with respect to the election of members of the
board of directors or other governing body of such Person or (ii) the
ability to direct the management or policies of a Person through ownership of
voting shares, equity interests or other securities, pursuant to a written
agreement or otherwise.
1
“Affiliated Purchase
Agreement” means that certain Purchase and Sale Agreement dated as of the
date hereof between PVOG LP, as seller thereunder, and Seller, as buyer
thereunder, as such may be amended, modified or supplemented.
“Agreement” has the
meaning set forth in the introductory paragraph to this Agreement, and includes
all exhibits and schedules attached hereto.
“Allocated Value”
means, with respect to any Purchased Asset described in Exhibit B, that
portion of the Base Purchase Price allocated to such Purchased Asset in Exhibit B.
“Assignments” has the
meaning set forth in Section 7.4(a).
“Audit Firm” means a
nationally recognized independent accounting firm with offices in Houston,
Texas, as selected by mutual agreement of Buyer and Seller or, absent such
agreement within 15 days, as selected by the Houston office of the American
Arbitration Association.
“Base Purchase Price”
has the meaning set forth in Section 3.1.
“Benefit Value” means
the amount which is determined in accordance with Section 5.3 with respect
to each Title Benefit which is accepted by Buyer or determined to be a Title
Benefit pursuant to Section 5.2.
“Buyer” has the
meaning set forth in the introductory paragraph to this Agreement.
“Buyer Assumed
Liabilities” has the meaning set forth in Section 2.2.
“Buyer Indemnified
Parties” has the meaning set forth in Section 8.2.
“Casualty Event” has
the meaning set forth in Section 5.7.
“Closing” has the
meaning set forth in Section 7.1.
“Closing Date” has the
meaning set forth in Section 7.1.
“Closing Payment”
means (i) the Base Purchase Price, minus (ii) the
Deposit, minus
(iii) Seller’s good faith estimate of the Operating Balance if such
estimate is more than zero, plus
(iv) Seller’s good faith estimate of the Operating Balance if such estimate
is less than zero, minus (v) the
aggregate amount of all reductions of the Base Purchase Price, if any, required
pursuant to Sections 5.4, 5.5, 5.6 and 5.7, plus (vi) the
aggregate Benefit Values with respect to all valid Title Benefits, if any,
determined as of the Closing Date for which Seller is entitled to an increase of
the Base Purchase Price pursuant to Article 5.
“Code” means the
Internal Revenue Code of 1986, as amended.
“Confidentiality
Agreement” means that certain Confidentiality Agreement dated
August 24, 2009 between the Parties or their Affiliates.
2
“Consultant” means,
(i) with respect to any Title Defects other than Adverse Environmental
Conditions, a title attorney with at least 10 years’ experience in oil and gas
titles in the state in which the disputed Purchased Assets in question are
located, as selected by mutual agreement of Buyer and Seller or, absent such
agreement within 15 days, as selected by the Houston office of the American
Arbitration Association and (ii) with respect to any Adverse Environmental
Conditions, a regionally recognized independent environmental consulting firm,
as selected by mutual agreement of Buyer and Seller or, absent such agreement
within 15 days, as selected by the Houston office of the American Arbitration
Association.
“Customary Post-Closing
Consents” has the meaning set forth in Section 4.1(d).
“Damages” means all
liabilities, Taxes, Liens, injunctions, awards, judgments, orders, obligations,
damages, losses, fines, penalties, amounts paid in settlement, and all costs,
fees and expenses (including court costs and reasonable legal and other
professional fees and expenses actually incurred in investigating, defending and
preparing for any claim, demand, charge, suit, litigation, judicial or
administrative proceeding, action, suit, hearing, investigation or
complaint).
“Defect Threshold”
means $120,000.00.
“Defect Value” means
the amount which is determined in accordance with Section 5.3 with respect
to each Title Defect which is accepted by Seller or determined to be a Title
Defect pursuant to Section 5.2.
“Effective Time” has
the meaning set forth in Section 7.1.
“Environmental Laws”
means Laws and Regulations relating to pollution or the protection of human
health or the environment, as the same have been amended to the date hereof,
including, 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 Coastal
Zone Management Act, 33 U.S.C. § 1451 et seq.; and the Safe
Drinking Water Act, 42 U.S.C. §§ 300f through 300j, in each case as amended
to the date hereof.
“Fundamental
Representations” has the meaning set forth in
Section 8.1.
“Governmental
Authority” means any federal, state or local governmental or regulatory
entity (or any agency, authority, board, bureau, commission, department, tribal
authority or political subdivision thereof) or any court or
arbitrator.
“Indemnification
Threshold” means $60,000.00.
“Indemnified Party”
has the meaning set forth in Section 8.4(a).
“Indemnifying Party”
has the meaning set forth in Section 8.4(a).
3
“Knowledge” means
(i) with respect to Seller, the actual knowledge of any of the officers,
managers or employees of Seller or any Affiliate of Seller set forth on Schedule I-1 or
(ii) with respect to Buyer, the actual knowledge of any of the officers,
managers or employees of Buyer or any Affiliate of Buyer set forth on Schedule I-2.
“Laws and Regulations”
means all federal, state or local constitutions, statutes, laws, ordinances,
rules, regulations and Orders of any Governmental Authority.
“Lien” means any lien,
mortgage, pledge (other than liens, mortgages and pledges to be released at the
Closing), claim, charge, option or other encumbrance substantially equivalent
thereto.
“Material Adverse
Effect” means an event, occurrence or condition, either individually or
together with all other events, occurrences or conditions, that
(x) individually or in the aggregate has a material adverse effect on the
ownership, use, operation or value of the Purchased Assets, as applicable,
taking into account the nature and valuation of the Purchased Assets, or
(y) individually or in the aggregate materially hinders or impedes the
consummation of the transactions contemplated by this Agreement, except to the
extent resulting from or arising in connection with (i) this Agreement or
the transactions contemplated hereby or the public announcement thereof;
(ii) changes, circumstances or effects (A) that affect generally the
oil and gas industry, such as fluctuations in the price of oil and gas, or
(B) that result from (1) international, national, regional, state or
local economic conditions, (2) general developments or conditions in the
oil and gas industry, (3) changes in applicable Laws and Regulations or the
application or interpretation thereof by any Governmental Authority enacted,
promulgated or issued on or after the date hereof or (4) other general
economic conditions, facts or circumstances that are not subject to the
reasonable control of the Parties; (iii) effects of conditions or events
resulting from an outbreak or escalation of hostilities (whether nationally or
internationally), or the occurrence of any other calamity or crisis (whether
nationally or internationally), including the occurrence of one or more
terrorist attacks; or (iv) any action taken at the written request, or with
the written approval, of the other Party; provided, however, that for
purposes of Buyer’s representations and warranties set forth in
Section 4.2, subpart (x) of this definition of “Material Adverse Effect”
shall be deemed to be deleted.
“Missing Consent
Period” has the meaning set forth in Section 5.5(b)(i).
“Net Revenue Interest”
means, with respect to any Purchased Well, Seller’s decimal interest in and to
all production of oil, gas and other minerals saved, produced and sold from such
Purchased Well (including any fee mineral interests or mineral servitudes
included therein) after giving effect to all valid lessor’s royalties,
overriding royalties, production payments, carried interests, Liens or charges
against production therefrom.
“Notice Deadline” has
the meaning set forth in Section 5.1(a).
“Notice of
Disagreement” has the meaning set forth in
Section 3.3(c).
4
“Operating Balance”
means the positive or negative amount, if any, equal to (i) all proceeds
collected by Seller in respect of the Purchased Assets attributable to the
period after the Effective Time that have not been remitted to Buyer pursuant to
Section 3.6, minus (ii) all
costs and expenses incurred after the Effective Time and paid by Seller in
respect of the Purchased Assets after the Effective Time (it being understood
that all property and ad valorem Taxes attributable to the Purchased Assets
shall be apportioned on a calendar year basis as of the Effective Time based
upon 2009 Taxes assessed on the Purchased Assets).
“Orders” means all
judgments, writs, decrees, injunctions, rulings, orders or awards of any
Governmental Authority.
“Party” and “Parties” have the
meanings set forth in the introductory paragraph to this Agreement.
“Payout Balance(s)”
means the balance of the recovery by Seller, as of the dates of Seller’s
calculations as set forth on Schedule 4.1(l),
of a cost amount specified in any Purchased Contract relating to a Purchased
Well out of the revenue from such Purchased Well where the Net Revenue Interest
of Seller thereof will be reduced when such amount has been
recovered.
“Permitted Liens”
means (i) defects, irregularities and deficiencies in title and lessors’
royalties, overriding royalties, reversionary interests and similar burdens if
the cumulative effect of such items does not operate to (A) reduce the Net
Revenue Interest of Seller for any Purchased Well from that set forth in Exhibit A-2 or
(B) increase the Working Interest of Seller for any Purchased Well from
that set forth in Exhibit A-2,
without a corresponding increase in the Net Revenue Interest for such Purchased
Well, (ii) division orders and sales contracts terminable without penalty
upon no more than 90 days’ notice to Buyer, (iii) materialman’s,
mechanic’s, repairman’s, employee’s, contractor’s, operator’s, Tax and other
similar liens or charges arising in the ordinary course of business for
obligations that are not delinquent and that will be paid and discharged in the
ordinary course of business or, if delinquent, that are being contested in good
faith by appropriate action of which Buyer is notified in writing before the
Closing, (iv) all Customary Post-Closing Consents, (v) easements,
rights-of-way, servitudes, permits, surface leases and other rights in respect
of surface operations that do not materially interfere with or have an adverse
effect on the ownership, use, value or operation of the Purchased Assets,
(vi) all operating agreements, unit agreements, unit operating agreements,
pooling agreements and pooling designations affecting the Purchased Assets so
long as they do not operate to (A) reduce the Net Revenue Interest of
Seller for any Purchased Well from that set forth in Exhibit A-2 or
(B) increase the Working Interest of Seller for any Purchased Well from
that set forth in Exhibit A-2,
without a corresponding increase in the Net Revenue Interest for such Purchased
Well, (vii) conventional rights of reassignment prior to release or
surrender requiring notice to the holders of such rights, (viii) all rights
reserved to or vested in any Governmental Authority to control or regulate any
of the Purchased Assets in any manner, and all applicable Laws and Regulations,
(ix) the terms and conditions of the Purchased Leases, Purchased Easements
and Purchased Contracts so long as they do not operate to (A) reduce the
Net Revenue Interest of Seller for any Purchased Well from that set forth in
Exhibit A-2 or
(B) increase the Working Interest of Seller for any Purchased Well from
that set forth in Exhibit A-2,
without a corresponding increase in the Net Revenue Interest for such Purchased
Well, (x) Liens released at the Closing; (xi) all Required Consents and
Preferential Rights; and (xii) any Title Defects Buyer has expressly waived
in writing or which are deemed to have become Permitted Liens under
Section 5.1(a).
5
“Person” means an
individual, a partnership, a corporation, a limited liability company, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, any other business entity or a Governmental
Authority.
“Phase I” has the
meaning set forth in Section 6.2.
“Phase II” has the
meaning set forth in Section 6.2.
“Post-Closing Period”
has the meaning set forth in Section 5.5(b)(ii).
“Preferential Rights”
has the meaning set forth in Section 5.6(a).
“Preliminary Settlement
Statement” has the meaning set forth in Section 3.3(a).
“Proceedings” means
all actions, suits, claims or proceedings (including arbitrations, mediations or
similar proceedings) by or before any Governmental Authority.
“Production Payment
Documents” has the meaning set forth in Section 7.4(b).
“Proposed Final Settlement
Statement” has the meaning set forth in Section 3.3(b).
“Purchase Price” has
the meaning set forth in Section 3.1.
“Purchased Assets” has
the meaning set forth in Section 2.1.
“Purchased Contracts”
has the meaning set forth in Section 2.1(e).
“Purchased Easements”
has the meaning set forth in Section 2.1(c).
“Purchased Leases” has
the meaning set forth in Section 2.1(a).
“Purchased Permits”
has the meaning set forth in Section 2.1(d).
“Purchased Records”
has the meaning set forth in Section 2.1(h).
“Purchased Wells” has
the meaning set forth in Section 2.1(b).
“PVOG LP” means Penn
Virginia Oil & Gas, L.P., a Texas limited partnership.
“Required Consents”
has the meaning set forth in Section 5.5(a).
“Restricted Assets”
has the meaning set forth in Section 5.5(b)(i).
“Restricted Contracts”
has the meaning set forth in Section 5.5(b)(i).
“Seller” has the
meaning set forth in the introductory paragraph to this Agreement.
“Seller Indemnified
Parties” has the meaning set forth in Section 8.3.
6
“Seller Retained
Liabilities” means any and all liabilities, claims, losses, Orders,
duties, obligations and responsibilities of every kind whatsoever attributable
to, related to or incurred with respect to: (i) any payment, mis-payment or
non-payment of any royalties, Taxes (including severance and ad valorem Taxes),
proceeds and operating costs and expenses accruing prior to the Effective Time
with respect to the Purchased Assets; (ii) any and all property damage,
death and personal injury claims of any Persons arising from events occurring
prior to the Closing Date with respect to the ownership or operation of the
Purchased Assets; (iii) any and all Proceedings and claims related to or
incurred in connection with the ownership or operation of the Purchased Assets
pending or threatened in writing on or prior to the Closing Date (whether or not
described on any schedule or exhibit hereto); (iv) the ownership or
operation of any assets or properties originally included in the Purchased
Assets that are excluded from the Purchased Assets in accordance with the terms
hereof; (v) any and all Adverse Environmental Conditions to the extent
(A) attributable to, related to or incurred with respect to the ownership,
operation or use of the Purchased Assets and (B) occurring or existing on
lands or premises not burdened by or subject to the Purchased Easements, the
Purchased Leases or any lands unitized, communitized or pooled therewith; and
(vi) any and all amounts owed by Seller to any Affiliate at the end of the
Closing Date that are not incurred for the provision of goods or services, for
employment related costs, or otherwise in the ordinary course of business with
respect to the ownership or operation of the Purchased Assets.
“Survival Period” has
the meaning set forth in Section 8.1.
“Taxes” means all
taxes, including any foreign, federal, state or local income tax, surtax,
remittance tax, presumptive tax, net worth tax, special contribution, production
tax, pipeline transportation tax, freehold mineral tax, value added tax,
withholding tax, gross receipts tax, windfall profits tax, profits tax,
severance tax, personal property tax, real property tax, ad valorem tax, sales
tax, goods and services tax, service tax, transfer tax, use tax, excise tax,
premium tax, stamp tax, motor vehicle tax, entertainment tax, insurance tax,
capital stock tax, franchise tax, occupation tax, payroll tax, employment tax,
unemployment tax, disability tax, alternative or add-on minimum tax and
estimated tax, imposed by a Governmental Authority, together with any interest,
fine or penalty thereon, and with such term to include transferee liability for
any of the preceding.
“Termination Date”
means February 26, 2010.
“Third Party” means
any Person other than Seller, Buyer or any Affiliate thereof.
“Third Party Claim”
has the meaning set forth in Section 8.4(a).
“Title Benefit” means,
as of the Effective Time and the Closing Date, with respect to Seller’s interest
in each of the Purchased Wells, (i) Seller being entitled to receive a
percentage of all proceeds of production therefrom throughout the duration of
the productive life of such Purchased Well greater than the Net Revenue Interest
of Seller set forth in Exhibit A-2 for
such Purchased Well or (ii) Seller being obligated to pay costs and
expenses relating to the operations on and the maintenance and development of
such Purchased Well throughout the duration of the productive life of such
Purchased Well in an amount lesser than the Working Interest set forth in Exhibit A-2 for
such Purchased Well, without a corresponding decrease in the Net Revenue
Interest for such Purchased Well.
7
“Title Benefit Notice”
has the meaning set forth in Section 5.1(b).
“Title Defect” means,
as of the Effective Time and the Closing Date, (i) with respect to Seller’s
interest in each of the Purchased Wells (and the Purchased Leases attributable
thereto in the case of the Purchased Wells constituting proved undeveloped
locations), any defect or Lien, other than a Permitted Lien, which results in
(A) Seller being entitled to receive a percentage of all proceeds of
production therefrom throughout the duration of the productive life of such
Purchased Well less than the Net Revenue Interest of Seller set forth in Exhibit A-2 for
such Purchased Well or (B) Seller being obligated to pay costs and expenses
relating to the operations on and the maintenance and development of such
Purchased Well throughout the duration of the productive life of such in an
amount greater than the Working Interest set forth in Exhibit A-2 for
such Purchased Well, without a corresponding increase in the Net Revenue
Interest for such Purchased Well, (ii) with respect to any Purchased Asset,
any Adverse Environmental Condition, (iii) with respect to any Purchased
Asset, any Lien burdening such Purchased Asset other than a Permitted Lien and
(iv) with respect to any Purchased Asset other than a Purchased Lease or
Purchased Well, the failure of Seller to have title thereto, free and clear of
all Liens other than Permitted Liens.
“Title Defect Notice”
has the meaning set forth in Section 5.1(a).
“Transaction
Documents” means this Agreement and all other agreements and documents
entered into by one or more of the Parties as contemplated by or in connection
with this Agreement.
“Transferred
Contracts” means all of the Purchased Leases, Purchased Easements and
Purchased Contracts to be sold, assigned or transferred by Seller to Buyer
pursuant to the terms and conditions of this Agreement.
“Working Interest”
means, with respect to any Purchased Well, Seller’s decimal interest in and to
such Purchased Well (including any leasehold estate created under and by virtue
of the Purchased Leases, fee mineral interests or mineral servitudes included
therein held in connection with such Purchased Well) and all rights and
obligations of every kind and character appurtenant thereto or arising
therefrom, without regard to any valid lessor’s royalty, overriding royalties,
production payments, carried interests, Liens or charges against production
therefrom insofar as such interest in such Purchased Well (and such leasehold
estate, fee mineral interests or mineral servitudes included therein) is
burdened with the obligation to bear and pay costs of operations.
1.2 References and
Titles. All
references to cash or monetary amounts refer to U.S. Dollars only unless
specifically stated to be in the currency of another government. The
words “this
Agreement,” “herein,” “hereby,” “hereunder” and “hereof,” and words of
similar import, refer to this Agreement as a whole and not to any particular
subdivision, unless expressly so limited. The words “this Article,” “this Section” and
“this
subsection,” and words of similar import, refer only to the Articles,
Sections or subsections, respectively, hereof in which such words
occur. The word “including” (in its
various forms) means “including without
limitation.” Any reference to any federal, state or local
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires
otherwise. Pronouns in masculine, feminine or neuter genders shall be
construed to state and include any other gender and words, terms and titles
(including terms defined herein) in the singular form shall be construed to
include the plural and vice versa, unless the context otherwise expressly
requires. Unless the context otherwise requires, all defined terms
contained herein shall include the singular and plural and the conjunctive and
disjunctive forms of such defined terms.
8
ARTICLE
2
PURCHASE
AND SALE
2.1 Purchase and Sale of
Purchased Assets. Subject
to the terms and conditions of this Agreement, Seller agrees to sell, assign,
transfer and deliver to Buyer, and Buyer agrees to purchase and acquire from
Seller, as of the Effective Time, all right, title and interest of Seller in and
to the following assets (collectively, the “Purchased Assets”),
to-wit:
(a) the
lands and the oil, gas and mineral interests described in Exhibit A-1 or
described in or referred to in the instruments and agreements listed on Exhibit A-1,
whether the interests of Seller in such property are real or beneficial fee
interests, leasehold interests, mineral servitudes, licenses, concessions,
working interests, farmout rights or other mineral rights of any nature
(collectively, the “Purchased
Leases”);
(b) (i) the
oil and/or gas wells (whether producing, non-producing or shut-in), the water
source wells and any other types of injection and disposal wells located on the
property subject to the Purchased Leases, including those described in Exhibit A-2, and
(ii) the Purchased Leases containing proved undeveloped locations to the
extent listed on Exhibit A-2, in each
case with respect to the foregoing, the rights to pooled or unitized acreage of
which the Purchased Leases and such wells are a part and any royalties and
overriding royalties incident to the Purchased Leases (collectively, the “Purchased
Wells”);
(c) all
servitudes, easements, rights-of-way, surface leases and other similar interests
used, or held for use, in connection with the ownership or operation of the
other Purchased Assets, or with the production or treatment of hydrocarbons
from, or attributable to, the Purchased Assets, including the easements and
other items described in Exhibit A-3
(collectively, the “Purchased
Easements”);
(d) to
the extent assignable under applicable Laws and Regulations, all permits,
licenses, variances, exemptions, orders, franchises, registrations, approvals
and authorizations obtained from any Governmental Authority, and all pending
applications therefor, used, or held for use, in connection with the ownership
or operation of the Purchased Assets, or with the production or treatment of
hydrocarbons from, or attributable to, the Purchased Assets (collectively, the
“Purchased
Permits”);
9
(e) all
lease agreements (other than the Purchased Leases and the Purchased Easements),
royalty agreements, assignments, gas purchase and sale contracts, oil purchase
and sale agreements, farmin and farmout agreements, transportation and marketing
agreements, joint and other operating agreements, exploration agreements, unit
agreements, processing agreements, options, facilities or equipment leases and
other contracts, agreements and rights used, or held for use, in connection with
the ownership or operation of the Purchased Assets, or with the production or
treatment of hydrocarbons from, or attributable to, the Purchased Assets,
including the contracts and other items described in Exhibit A-4
(collectively, the “Purchased
Contracts”); it being understood that Seller shall retain, and Seller
shall not sell, assign or transfer to Buyer, any audit rights under to the
Purchased Contracts to the extent that such audits relate to periods prior to
the Effective Time;
(f) all
equipment, machinery, fixtures and other real, personal and mixed property
situated on the Purchased Leases and used or held for use in connection with the
ownership or operation of the Purchased Assets, including well equipment,
casing, rods, tanks, boilers, buildings, tubing, pumps, motors, fixtures,
machinery, inventory, separators, dehydrators, compressors, treaters, power
lines, field processing facilities, flowlines, gathering lines, transmission
lines and all other pipelines, equipment and property;
(g) all
oil, gas, hydrocarbons and other minerals produced from or attributable to the
Purchased Wells after the Effective Time; and
(h) all
of the files, books, records, information and data directly pertaining to the
Purchased Assets in Seller’s possession or control or to which Seller has a
right, including title records, abstracts, title opinions, title certificates,
interpretive data, computer records, production records, severance tax records,
geological and geophysical data, reservoir and well information, but excluding
any files, books, records, information and data (i) to the extent that the
disclosure or transfer thereof is prohibited by Third Party agreement or
applicable Laws and Regulations, (ii) relating to Seller’s business
generally, (iii) constituting work product of Seller’s legal counsel (other
than title opinions) and (iv) relating to the negotiation and consummation
of the sale of the Purchased Assets (collectively, the “Purchased Records”);
provided, however, that
Seller may retain a copy of such Records as may be necessary for litigation,
Tax, accounting or auditing purposes or as otherwise may be required by
applicable Laws and Regulations.
Except
for the Purchased Assets expressly described in Sections 2.1(a) through
2.1(h) above, Seller shall not sell, and Buyer shall not purchase, any other
assets, properties, interests or rights of Seller.
2.2 Assumption of
Liabilities. As
of the Effective Time, Buyer shall assume all liabilities, duties, obligations
and responsibilities of every kind whatsoever attributable to the Purchased
Assets, whether known or unknown, whether attributable to the period of time
before or after the Effective Time (the “Buyer Assumed
Liabilities”); provided, however, that the
Buyer Assumed Liabilities shall exclude, and Seller shall retain, any and all
Seller Retained Liabilities.
ARTICLE
3
PURCHASE
PRICE
3.1 Purchase
Price. The
aggregate purchase price for the Purchased Assets (the “Purchase Price”)
shall be (a) $6,000,000.00 (the “Base Purchase
Price”), minus (b) the
amount, if any, by which the Operating Balance is more than zero, plus (c) the amount,
if any, by which the Operating Balance is less than zero, minus (d) the
aggregate amount of all reductions of the Base Purchase Price, if any, required
pursuant to Sections 5.4, 5.5, 5.6 and 5.7, plus (e) the
aggregate Benefit Values with respect to all valid Title Benefits, if any, for
which Seller is entitled to an increases of the Base Purchase Price pursuant to
Article 5.
10
3.2 Purchase Price
Allocation. The
Base Purchase Price shall be allocated among the Purchased Assets as set forth
in Exhibit B. The
Parties shall each report the federal, state and local income and other Tax
consequences of the transactions contemplated by this Agreement (which for such
purposes includes the Transaction Documents) in a manner consistent with such
allocation, including the preparation and filing of Form 8594 under
Section 1060 of the Code (or any successor form or successor provision of
any future Tax law, or any comparable provision of state or local Tax law), with
respect to their respective Tax returns for the taxable year that includes the
Closing Date.
3.3 Purchase Price
Adjustments.
(a) No
later than three days prior to the Closing, Seller shall prepare and deliver to
Buyer a preliminary settlement statement prepared by Seller in accordance with
this Agreement and generally accepted accounting principles consistently applied
by Seller (the “Preliminary Settlement
Statement”), which sets forth Seller’s good faith estimate of the
Operating Balance and Seller’s good faith calculation of the Closing
Payment.
(b) As
soon as practicable but no later than the date that is the later of (i) 90
days after the Closing or (ii) the date two business days after the final
resolution of all disputed Title Defects and Title Benefits in accordance with
Section 5.2, Seller shall prepare and deliver to Buyer a statement in the
same form of and on the same basis as the Preliminary Statement (the “Proposed Final Settlement
Statement”), which sets forth Seller’s calculation of the final Purchase
Price and each adjustment or payment that was not finally determined on the
Preliminary Settlement Statement. Each Party shall, during normal
business hours, grant and provide the other Party access to the Purchased
Records in the possession or control of such Party for the purposes of
conducting an audit of the information set forth in the Proposed Final
Settlement Statement.
(c) Within
30 days following receipt by Buyer of the Proposed Final Settlement Statement,
Buyer shall, if applicable, provide Seller with a written objection (a “Notice of
Disagreement”) detailing Buyer’s objections, if any, to Seller’s
calculation of the final Purchase Price. To the extent such written
notice is not delivered by Buyer within such time period, Seller’s calculation
of the final Purchase Price, and each component thereof, shall become final and
binding upon the Parties.
11
(d) Any
disagreement between Buyer and Seller regarding Seller’s calculation of the
final Purchase Price that cannot be resolved within 30 days after the date of
the Notice of Disagreement shall be resolved by the Audit Firm, who shall
calculate the final Purchase Price in a manner consistent with the Preliminary
Settlement Statement and this Agreement in all respects. Seller and
Buyer shall each have an opportunity to present its position to the Audit Firm
and shall cooperate with the Audit Firm in making available to it any records or
work papers requested by the Audit Firm. The determination of the
Audit Firm shall be expressly limited to the determination of the final Purchase
Price, and the Audit Firm will not render any decision or have any authority to
render a decision with respect to any other matter relating to this Agreement,
including with respect to any alleged breach of a representation, warranty or
covenant by any Party. In making such determination, the Audit Firm
shall consider only those items and amounts in the Proposed Final Settlement
Statement with which Buyer has disagreed and which are set forth in the Notice
of Disagreement. In no event shall the final Purchase Price as
determined by the Audit Firm be more favorable to Seller than reflected on the
Proposed Final Settlement Statement by Seller nor more favorable to Buyer than
shown in the proposed changes set forth in the Notice of
Disagreement. Subject to the provisions set forth in this
Section 3.3(d), the decision of the Audit Firm shall be set forth in
writing and shall be conclusive and binding on the Parties and subject to
judicial enforcement. The fees charged by the Audit Firm shall be
borne equally by Buyer and Seller and each Party shall bear all of its own costs
and expenses associated with the submission of any disputed matters to the Audit
Firm.
(e) If
the final Purchase Price, as determined pursuant to this Section 3.4
exceeds the sum of (i) the Closing Payment plus (ii) the Deposit ,
then Buyer shall pay to Seller the amount of such excess. If the
final Purchase Price, as determined pursuant to this Section 3.4, is less
than the sum of (A) the Closing Payment plus (B) the Deposit, then
Seller shall pay to Buyer the amount of such deficiency. Any payment
shall be made within three days after the date the final Purchase Price is
deemed to be finally determined pursuant to this Section 3.4 via wire
transfer of immediately available funds to the account(s) designated in writing
by the Party entitled to such payment.
3.4 Closing
Payment. At
the Closing, Buyer shall pay to Seller the Closing Payment by wire transfer of
immediately available funds to such account(s) as Seller nominates in writing
prior to the Closing.
3.5 Proceeds Received
Post-Closing.
(a) After
the Closing, if Buyer or any of its Affiliates receives any proceeds
attributable to the ownership, operation or use of the Purchased Assets for
periods prior to the Effective Time, then Seller shall be entitled to all such
proceeds, and Buyer shall promptly remit to Seller all such
proceeds.
(b) After
the Closing, if Seller or any of its Affiliates receives any proceeds
attributable to the ownership, operation or use of the Purchased Assets for
periods on or after the Effective Time, then Buyer shall be entitled to all such
proceeds, and Seller shall promptly remit to Buyer all such
proceeds.
ARTICLE
4
REPRESENTATIONS
AND WARRANTIES
4.1 Representations and
Warranties of Seller. Seller
represents and warrants to Buyer as of the date hereof and as of the Closing
Date that:
(a) Organization and Good
Standing. Seller is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of
Texas. Seller has all requisite limited partnership power and
authority to own, lease and operate the Purchased Assets and conduct its
business as and where such business is currently being
conducted. Seller is qualified or registered to do business and is in
good standing as a foreign entity in the State of Mississippi.
12
(b) Authorization and
Enforceability. Seller has the requisite limited partnership
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary limited partnership action on the
part of Seller. This Agreement has been duly and validly executed and
delivered by Seller and (assuming that this Agreement constitutes a valid and
binding obligation of Buyer) constitutes a legal, valid and binding obligation
of Seller enforceable against Seller in accordance with its terms, except as
limited by applicable bankruptcy, insolvency, moratorium, reorganization,
fraudulent conveyance and similar laws affecting creditors’ rights generally and
except to the extent that general equitable principles may affect the
availability of certain remedies.
(c) No
Violations. The execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated hereby and the
compliance by Seller with the provisions hereof will not, conflict with, result
in any violation of or default (with or without notice or lapse of time or both)
under, give rise to a right of termination, cancellation or acceleration of any
obligation or to the loss of a material benefit under, or result in the creation
of any Lien on any of the Purchased Assets under, any provision of (i) the
certificate of limited partnership or limited partnership agreement of Seller,
(ii) any loan or credit agreement, note, bond, mortgage, indenture,
contract, lease, permit, concession, franchise, license or other agreement or
instrument applicable to Seller (other than any Purchased Lease, Purchased
Easement or Purchased Contract), (iii) any Purchased Lease, Purchased Easement
or Purchased Contract (except as set forth on Schedule 4.1(d))
or (iv) any Laws and Regulations applicable to Seller or the Purchased
Assets, except, in the cases of clauses (ii), (iii) and (iv), for any such
conflicts, violations, defaults, rights, losses or Liens that would not have a
Material Adverse Effect on Seller or the Purchased Assets.
(d) Approvals and
Consents. Except as set forth on Schedule 4.1(d),
(i) there are no Required Consents and no other notice, consent, approval,
order or authorization of, registration, declaration or filing with, or permit
from, any Governmental Authority or other Third Party is required by or with
respect to Seller in connection with the execution and delivery of this
Agreement by Seller or the consummation by Seller of the transactions
contemplated hereby, except for consents or approvals of, or notices to, any
Governmental Authority that are customarily obtained or given after closing in
connection with the transactions contemplated hereby (collectively, the “Customary Post-Closing
Consents”), and (ii) no Purchased Asset is subject to any
preferential right to purchase, right of first refusal, right of first offer or
similar right which would be binding on Buyer after the consummation of the
transactions contemplated hereby.
(e) Proceedings;
Orders. Except set forth on Schedule 4.1(e),
there are no Proceedings pending or, to Seller’s Knowledge, threatened against
Seller or the Purchased Assets affecting the Purchased Assets or that would
prohibit, restrict or delay in any material respect the consummation of the
transactions contemplated hereby. There are currently no outstanding
Orders against Seller which relate to or arise out of the ownership, use or
operation of the Purchased Assets or that would prohibit, restrict or delay in
any material respect the consummation of the transactions contemplated
hereby.
13
(f) Brokerage. Neither
Seller nor any of its Affiliates has made any agreement or taken any other
action which might cause any Person to become entitled to a broker’s or finder’s
fee or commission for which Buyer or any of Buyer’s Affiliates shall directly or
indirectly have any responsibility, liability or expense as a result of the
transactions contemplated hereby.
(g) Compliance with
Laws. Except as set forth on Schedule 4.1(g),
Seller has not violated or failed to comply with any Laws and Regulations
applicable to the Purchased Assets, except for any such violations or failures
as would not have a Material Adverse Effect on Seller or the Purchased
Assets. Except as set forth on Schedule 4.1(g),
Seller has not received any written notice from any Governmental Authority of
any violation of any Laws and Regulations applicable to the Purchased
Assets. The representations and warranties contained in this
Section 4.1(g) shall not apply to violations of or compliance with
Environmental Laws (it being acknowledged and agreed that Article 5
contains the sole provisions relating to compliance with Environmental
Laws).
(h) Permits. Seller
(i) possesses all Purchased Permits required to own, lease, operate or use
the Purchased Assets under all Laws and Regulations and (ii) is in
compliance with all terms, provisions and conditions of the Purchased Permits,
except, in the cases of clauses (i) and (ii), for any such failures to
possess or comply as would not have a Material Adverse Effect on Seller or the
Purchased Assets. All Purchased Permits are in full force and effect,
and there are no Proceedings pending or, to Seller’s Knowledge, threatened that
seek the revocation, cancellation, suspension or any materially adverse
modification, or the imposition of any penalty with respect to, any Purchased
Permits. The representations and warranties contained in this
Section 4.1(h) shall not apply to violations of or compliance with
Purchased Permits issued under Environmental Laws (it being acknowledged and
agreed that Article 5 contains the sole provisions relating to compliance
with Environmental Laws).
(i) Leases, Easements and
Contracts. The Purchased Leases, the Purchased Easements and
the Purchased Contracts listed in Exhibits A-1,
A-3 and A-4 comprise all of
the material Purchased Leases, material Purchased Easements and material
Purchased Contracts. With respect to each Purchased Lease, Purchased
Easement and Purchased Contract, Seller is not in breach of or default under,
and no event has occurred which with notice or lapse of time (or both) would
constitute a breach by Seller of or default by Seller under, such Purchased
Lease, Purchased Easement or Purchased Contract, except for any such breaches or
defaults as would not have a Material Adverse Effect on Seller or the Purchased
Assets. All Purchased Leases, Purchased Easements and Purchased
Contracts are in full force and effect and, except as disclosed on Exhibits A-1,
A-3 and A-4, there are no
Purchased Contracts with Affiliates of Seller that will be binding on the
Purchased Assets after the Closing.
(j) Gas
Imbalances. (i) There are no aggregate production,
pipeline, transportation or processing imbalances existing with respect to the
Purchased Assets and (ii) Seller has not received any deficiency payments
under gas contracts for which any party has a right to take deficiency gas from
Seller, nor has Seller received any payments for production which are subject to
refund or recoupment out of future production.
14
(k) Royalties. Seller
has not received any written claims or demands that royalties and other payments
due by it under any of the Purchased Leases have not been properly and timely
paid or that any conditions necessary to keep the Purchased Leases in force have
not been fully performed.
(l) Payout Balances;
Non-Consents. The Payout Balance for any Purchased Well is
properly reflected on Schedule 4.1(l)
as of the respective dates shown thereon.
(m) Prepayments; Production
Sales Contracts. No prepayment for hydrocarbon sales have been
received by Seller for hydrocarbons produced from the Purchased Assets which
have not been delivered as of the date hereof. There are no future
derivative, swap, collar, put, call, cap, option or other contract that is
intended to benefit from, relate to, or reduce or eliminate the risk of
fluctuations in interest rates, basis risk or the price of commodities,
including hydrocarbons, that will be binding on Buyer or the Purchased Assets
after the Closing. There exist no agreements or arrangements for the
sale of production from the Purchased Assets (including calls on, or other
rights to purchase, production, whether or not the same are currently being
exercised) other than (i) pursuant to Purchased Contracts described in
Exhibit A-4 or
(ii) production sales contracts or arrangements which are cancellable on 90
days notice or less without penalty or detriment. Seller is presently
not having deliveries of gas from any Purchased Well curtailed substantially
below such Purchased Well’s delivery capacity.
(n) Capital
Expenditures. As of the date of this Agreement, except as set
forth on Schedule 4.1(n),
the presently approved face amount of any currently outstanding and effective
authorizations for expenditure or other obligation for capital commitments with
respect to the Purchased Assets would not require Seller to make or incur after
the Closing capital expenditures with respect to any individual Purchased Well
or Purchased Lease in excess of $50,000.00.
(o) Future Delivery of
Hydrocarbons. Seller is not obligated by virtue of any
prepayment arrangement, “take or pay” arrangement, production payment
arrangement, gas balancing agreement or otherwise to deliver hydrocarbons
produced from the Purchased Assets at some future time without then or
thereafter receiving full payment therefor without deduction or credit on
account of such arrangement from the price that would otherwise be
received.
(p) Tax
Partnership. None of the Purchased Assets are subject to any
Tax partnership agreement requiring a partnership income tax return to be filed
under Subchapter K of Chapter 1 of Subtitle A of the Code.
(q) Additional Drilling
Obligations; Wells. (i) Seller has no obligation,
including any obligations implied in law, to drill additional wells or conduct
other development operations in order to earn or continue to hold any portion of
the Purchased Assets and (ii) Seller has not been notified in writing by a
lessor under any Purchased Lease of any requirements or demands to drill
additional wells or conduct additional development operations.
15
(r) No Other Seller
Representations. EXCEPT AS EXPRESSLY SET FORTH IN THIS
SECTION 4.1, THE ASSIGNMENTS OR ANY OTHER AGREEMENTS OR INSTRUMENTS
DELIVERED AT THE CLOSING PURSUANT TO SECTION 7.4, SELLER AND ITS
REPRESENTATIVES AND ADVISORS HAVE NOT MADE AND MAKE NO REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, IN RESPECT OF ANY OF THE
PURCHASED ASSETS OR ANY LIABILITIES OR OPERATIONS RELATED THERETO, INCLUDING
WITH RESPECT TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, AND ANY
SUCH OTHER REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED, IN
EACH CASE INCLUDING, BUT NOT LIMITED TO, ANY REPRESENTATION OR WARRANTY, EXPRESS
OR IMPLIED AS TO (I) TITLE TO ANY OF THE PURCHASED 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 PURCHASED ASSETS, (III) THE QUANTITY,
QUALITY OR RECOVERABILITY OF PETROLEUM SUBSTANCES IN OR FROM THE PURCHASED
ASSETS, (IV) THE EXISTENCE OF ANY PROSPECT, RECOMPLETION, INFILL OR
STEP-OUT DRILLING OPPORTUNITIES, (V) ANY ESTIMATES OF THE VALUE OF THE
PURCHASED ASSETS OR FUTURE REVENUES GENERATED BY THE PURCHASED ASSETS,
(VI) THE PRODUCTION OF PETROLEUM SUBSTANCES FROM THE PURCHASED ASSETS, OR
WHETHER PRODUCTION HAS BEEN CONTINUOUS, OR IN PAYING QUANTITIES, OR ANY
PRODUCTION OR DECLINE RATES, (VII) THE MAINTENANCE, REPAIR, CONDITION,
QUALITY, SUITABILITY, DESIGN OR MARKETABILITY OF THE PURCHASED ASSETS,
(VIII) INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHT OR (IX) ANY
OTHER RECORD, FILES OR MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE
AVAILABLE OR COMMUNICATED TO BUYER OR ITS AFFILIATES, OR ITS OR THEIR EMPLOYEES,
AGENTS, CONSULTANTS, REPRESENTATIVES OR ADVISORS IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED HEREBY. SELLER FURTHER DISCLAIMS ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF CONFORMITY TO MODELS OR
SAMPLES OF MATERIALS OF ANY EQUIPMENT. BUYER HEREBY ACKNOWLEDGES AND
AGREES THAT, EXCEPT TO THE EXTENT SPECIFICALLY SET FORTH IN THIS
SECTION 4.1, THE ASSIGNMENTS OR ANY OTHER AGREEMENTS OR INSTRUMENTS
DELIVERED AT THE CLOSING PURSUANT TO SECTION 7.4, BUYER IS PURCHASING THE
PURCHASED ASSETS ON AN “AS-IS, WHERE-IS” BASIS WITH ALL FAULTS AND DEFECTS AND
BUYER HAS MADE OR CAUSED TO BE MADE SUCH INSPECTIONS AS BUYER DEEMS
APPROPRIATE.
4.2 Representations and
Warranties of Buyer. Buyer
represents and warrants to Seller as of the date hereof and as of the Closing
Date that:
(a) Organization and Good
Standing. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Virginia. Buyer has all requisite corporate power and authority to
own, lease and operate its assets and properties and conduct its business as and
where such business is currently being conducted. Buyer is qualified
or registered to do business and is in good standing as a foreign entity in the
State of Mississippi.
16
(b) Authorization and
Enforceability. Buyer has the requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on the part of
Buyer. This Agreement has been duly and validly executed and
delivered by Buyer and (assuming that this Agreement constitutes a valid and
binding obligation of Seller) constitutes a legal, valid and binding obligation
of Buyer enforceable against Buyer in accordance with its terms, except as
limited by applicable bankruptcy, insolvency, moratorium, reorganization,
fraudulent conveyance and similar laws affecting creditors’ rights generally and
except to the extent that general equitable principles may affect the
availability of certain remedies.
(c) No
Violations. The execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated hereby and the
compliance by Buyer with the provisions hereof will not, conflict with, result
in any violation of or default (with or without notice or lapse of time or both)
under, give rise to a right of termination, cancellation or acceleration of any
obligation or to the loss of a material benefit under, any provision of
(i) the certificate of articles of incorporation or bylaws of Buyer,
(ii) any loan or credit agreement, note, bond, mortgage, indenture,
contract, lease, permit, concession, franchise, license or other agreement or
instrument applicable to Buyer or (iii) any Laws and Regulations applicable
to Buyer or its assets or properties, except, in the cases of clauses (i),
(ii) and (iii), for any such conflicts, violations, defaults, rights, losses or
Liens that would not have a Material Adverse Effect.
(d) Approvals and
Consents. No consent, approval, order or authorization of,
registration, declaration or filing with, or permit from, any Governmental
Authority or other Third Party is required by or with respect to Buyer in
connection with the execution and delivery of this Agreement by Buyer or the
consummation by Buyer of the transactions contemplated hereby, except for the
Customary Post-Closing Consents, Required Consents, Preferential Rights and any
other consents, approvals, orders or authorizations of, registrations,
declarations or filings with, or permits that, in each case, are binding on
Seller or the Purchased Assets.
(e) Proceedings;
Orders. There are no Proceedings pending or, to Buyer’s
Knowledge, threatened against Buyer that would prohibit, restrict or delay in
any material respect the consummation of the transactions contemplated
hereby. There are currently no outstanding Orders against Buyer that
would prohibit, restrict or delay in any material respect the consummation of
the transactions contemplated hereby.
(f) Brokerage. Neither
Buyer nor any of its Affiliates has made any agreement or taken any other action
which might cause any Person to become entitled to a broker’s or finder’s fee or
commission for which Seller or any of Seller’s Affiliates shall directly or
indirectly have any responsibility, liability or expense as a result of the
transactions contemplated hereby.
17
(g) Funding. Buyer
has available adequate funds or the means to obtain adequate funds in the
aggregate amount sufficient to pay (i) the Purchase Price and (ii) all
expenses incurred by Buyer in connection with this Agreement and the
transactions contemplated hereby.
(h) Due Diligence
Investigation. Buyer has the expertise, knowledge and
sophistication in financial and business matters generally and with respect to
the oil and gas industry that make it capable of evaluating, and it has
evaluated, the merits and economic risks of its investment in the Purchased
Assets. Buyer has had the opportunity to examine all aspects of the
Purchased Assets Buyer has deemed relevant and has had access to all information
requested by Buyer with respect to the Purchased Assets and the Buyer Assumed
Liabilities in order to make an evaluation thereof. In making its
decision to enter into this Agreement and to consummate the transactions
contemplated hereby, Buyer has relied and will rely solely on the provisions of
this Agreement and its own independent investigation and evaluation of the
Purchased Assets and the value thereof.
ARTICLE
5
TITLE
AND ENVIRONMENTAL MATTERS
5.1 Title
Adjustments.
(a) Buyer
shall notify Seller in writing (each a “Title Defect Notice”)
of any claimed Title Defects promptly upon Buyer’s discovery thereof and in no
event later than 5:00 p.m., central standard time, on January 19, 2010 (the
“Notice
Deadline”); provided,
however, that no single Title Defect may be claimed unless the Defect
Value thereof shall exceed $50,000.00. The Title Defect Notice shall
set forth in reasonable detail (i) the Purchased Well, Purchased Lease or
other Purchased Asset with respect to which a claimed Title Defect is made,
(ii) the nature of such claimed Title Defect and (iii) Buyer’s good
faith calculation of the Defect Value thereof in accordance with the guidelines
set forth in Section 5.3. Each Title Defect Notice shall be
accompanied by supporting documents reasonably necessary for Seller (or any
title attorney or examiner hired by Seller) to verify or investigate the
existence of the alleged Title Defect(s). Except as provided in the
immediately following sentence, any Title Defect that is not identified in a
Title Defect Notice by the Notice Deadline shall thereafter be forever waived
and expressly assumed by Buyer and shall be deemed to have become a Permitted
Lien and a Buyer Assumed Liability. For the avoidance of doubt,
(A) during the period from the date hereof until the Notice Deadline, the
failure of Buyer to assert any individual Title Defect in any individual Title
Defect Notice shall not constitute a waiver of Buyer’s right to assert such
Title Defect anytime on or prior to the Notice Deadline and (B) the waiver
of, or the failure of Buyer to assert, any individual Title Defect shall not
constitute a waiver of any claim or liability arising out of or attributable to
any breach or failure of any representation or warranty of Seller set forth in
Section 4.1(i) or any Seller’s special warranty of title set forth in any
Assignment, Deed or other instrument delivered in connection with the
transactions contemplated hereby.
18
(b) As
soon as practicable after Buyer has knowledge thereof, Buyer shall notify Seller
in writing of any Title Benefit. Seller may request an increase of
the Base Purchase Price by notifying Buyer of such Title Benefit on or before
the Notice Deadline (a “Title Benefit
Notice”); provided,
however, that no single Title Benefit may be claimed unless the Benefit
Value thereof shall exceed $50,000.00. The Title Benefit Notice shall
set forth in reasonable detail (i) the Purchased Well, Purchased Lease or
other Purchased Asset with respect to which a claimed Title Benefit is made,
(ii) the nature of such claimed Title Benefit and (iii) Buyer’s good
faith calculation of the Benefit Value thereof in accordance with the guidelines
set forth in Section 5.3. Each Title Benefit Notice shall be
accompanied by supporting documents reasonably necessary for Seller (or any
title attorney or examiner hired by Seller) to verify or investigate the
existence of the alleged Title Benefit(s). Any Title Benefit that is
not identified in a Title Benefit Notice by the Notice Deadline shall thereafter
be forever waived.
5.2 Determination of Title
Defects, Benefits and Values. Within
five days after a Party’s receipt of any Title Defect Notice or Title Benefit
Notice, such Party shall notify the delivering Party whether such receiving
Party agrees with any claimed Title Defects or Title Benefits contained therein
and the proposed Defect Values or Benefit Values therefor, as
applicable. If the receiving Party does not agree with any claimed
Title Defect or Title Benefit or the proposed Defect Value or Benefit Value
therefor, as applicable, then the Parties shall enter into good faith
negotiations and shall attempt to agree on such matters. If the
Parties cannot reach agreement prior to the Closing concerning either the
existence of a Title Defect or Title Benefit or a Defect Value or Benefit Value
regarding any Purchased Asset, then, upon any Party’s written request, the
Parties shall retain the applicable Consultant to resolve all points of
disagreement relating to Title Defects, Title Benefits, Defect Values and
Benefit Values. If necessary, the Closing shall be deferred only as
to those Purchased Assets with respect to which the existence or value of a
Title Defect (but not a Title Benefit) is an issue until the Consultant has made
a determination of the disputed issues with respect thereto. All
Purchased Assets as to which no such dispute(s) exist at the Closing shall be
conveyed to Buyer subject to the terms of this Agreement at the
Closing. The Consultant’s determination shall be made within 30 days
after submission of the matters in dispute and such determination by the
Consultant shall be final, conclusive and binding on the Parties and shall be
enforceable against any Party in any court of competent
jurisdiction. Once the Consultant’s determination has been expressed
to the Parties, (i) with respect to Title Defects and Defect Values, Seller
shall have five days in which to advise Buyer in writing which of the options
available to Seller under Section 5.4 Seller elects regarding each of the
Purchased Assets as to which the Consultant has made a determination,
(ii) to the extent that Seller has not elected to exclude such Purchased
Assets, Seller and Buyer shall effect a Closing pursuant to Article 7 (and
the other terms and conditions herein) with respect to, and Seller shall
transfer to Buyer, the Purchased Assets subject to such Title Defects, and Buyer
shall (A) pay to Seller an amount equal to the aggregate Allocated Values
of such Purchased Assets (minus any Defect Values attributable thereto) or
(B) to the extent that any such Defect Values with respect to Adverse
Environmental Conditions exceed the Allocated Values of the applicable Purchased
Assets burdened thereby, Seller shall promptly pay to Buyer an amount equal to
such excess and (iii) with respect to Title Benefits and Benefit Values,
Buyer shall promptly pay to Seller the aggregate Benefit Values determined by
the Consultant, if any. In making its determination, the Consultant
shall be bound by the rules set forth in this Article 5. The
Consultant shall act as an expert for the limited purpose of determining the
specific disputed Title Defect, Title Benefit, Defect Value or Benefit Value
submitted by any Party and may not award damages, interest or penalties to any
Party with respect to any matter. The fees charged by the Consultant
shall be borne equally by Buyer and Seller and each Party shall bear all of its
own costs and expenses associated with the submission of any disputed matters to
the Consultant.
19
5.3 Calculation of Defect
Value.
(a) Different
Interests. If a Title Defect or Title Benefit represents a
discrepancy between (i) the Net Revenue Interest for any Purchased Well and
(ii) the Net Revenue Interest or percentage set forth in Exhibit A-2 for
such Purchased Well, then the Defect Value or the Benefit Value thereof shall be
the product of the Allocated Value of such Purchased Well, multiplied by a
fraction, the numerator of which is the Net Revenue Interest or percentage
ownership decrease and the denominator of which is the Net Revenue Interest or
percentage ownership set forth in Exhibit A-2 for
such Purchased Well; provided,
however, that if the Title Defect does not affect the Purchased Well
throughout its entire productive life, the Defect Value or the Benefit Value
determined pursuant to this Section 5.3(a) shall be reduced to take into
account such applicable time period only.
(b) Liens. If
a Title Defect is a Lien upon a Purchased Asset which is liquidated in amount,
then the Defect Value thereof shall be the sum necessary to be paid to the
obligee to remove the Lien from such Purchased Asset. If a Title
Defect is a Lien upon a Purchased Asset which is not liquidated in amount but
can be estimated with reasonable certainty, then the Defect Value thereof shall
be the sum necessary to compensate Buyer for the adverse economic effect on such
Purchased Asset.
(c) Adverse Environmental
Conditions. If a Title Defect is an Adverse Environmental
Condition, then the Defect Value thereof shall be the costs and expenses
reasonably necessary to remediate such Adverse Environmental
Condition.
(d) Other Title
Defects. If the Title Defect is not of a type not described in
Sections 5.3(a) through (c), then the Defect Value thereof shall be
determined by taking into account the Allocated Value of the Purchased Asset so
affected, the portion of Seller’s interest in the Purchased Asset affected by
the Title Defect, the legal effect of the Title Defect, the potential economic
effect of the Title Defect over the life of the affected Purchased Asset, the
values placed upon the Title Defect by Seller and Buyer and such other factors
as are necessary to make a proper evaluation.
(e) No
Duplication. The Defect Value with respect to any Title Defect
shall be determined without duplication of any costs or losses included in
another Defect Value hereunder, or for which Buyer otherwise receives credit in
the calculation of any Defect Value with respect to any Title
Defect.
5.4 Remedies for Title
Defects.
(a) Seller’s Right to Cure or
Remediate. Seller shall have the right, but not the
obligation, to cure or remediate at or prior to the Closing any Title Defect
accepted by Seller or determined to be a Title Defect pursuant to
Section 5.2. If a Title Defect to be cured or remediated is not
cured or remediated prior to the originally scheduled Closing Date, then Seller
may elect to extend the Closing Date for the Purchased Assets affected by such
Title Defect up to 60 days and complete the cure or remediation. If
Seller elects to extend the Closing Date for the Purchased Assets affected by a
Title Defect, it shall give Buyer written notice of its election at least two
days prior to the originally scheduled Closing Date and provide a new date for
the Closing Date for such Purchased Assets. All Purchased Assets as
to which no such election has been made shall be conveyed to Buyer subject to
the terms of this Agreement on the originally scheduled Closing
Date. With respect to any Title Defect that Seller elects not to cure
or remediate or that Seller fails to cure or remediate at or prior to the
Closing, the provisions of Section 5.4(b) or Section 5.4(c) shall
apply.
20
(b) Defects Other than Adverse
Environmental Conditions. In the event that the Title Defect
is not an Adverse Environmental Condition, Seller shall have the option,
exercisable in writing delivered to Buyer, to:
(i) include
the Purchased Asset affected by such Title Defect in this Agreement and not cure
such Title Defect, in which event (A) the Base Purchase Price shall be
reduced by the Defect Value related to such Title Defect and (B) Seller
shall have no other or further obligation or liability in respect of such Title
Defect; or
(ii) exclude
from this Agreement the Purchased Asset affected by such Title Defect and all
other Purchased Assets as may be reasonably necessary to effect the exclusion of
the affected Purchased Asset due to any uniformity of interest provisions, unit
agreements or other contractual or operational restrictions on the transfer of
such affected Purchased Asset, in which event the Base Purchase Price shall be
reduced by the aggregate Allocated Values of all such excluded Purchased
Assets.
Each
election under this Section 5.4(b) shall be made by Seller no later than
the Closing Date (either the originally scheduled Closing Date or the new
Closing Date elected pursuant to Section 5.4(a)). Any failure by
Seller to validly make such election shall be deemed hereunder to be an election
by Seller of the option set forth in Section 5.4(b)(i) above.
(c) Adverse Environmental
Conditions. In the event that the Title Defect is an Adverse
Environmental Condition, Seller shall have the option, exercisable in writing
delivered to Buyer, to:
(i) include
the Purchased Asset affected by such Adverse Environmental Condition in this
Agreement and not remediate such Adverse Environmental Condition, in which event
(A) the Base Purchase Price shall be reduced by the Defect Value related to
such Adverse Environmental Condition and (B) Seller shall have no other or
further obligation or liability in respect of such Adverse Environmental
Condition; or
(ii) exclude
from this Agreement the Purchased Asset affected by such Adverse Environmental
Condition and all other Purchased Assets as may be reasonably necessary to
effect the exclusion of the affected Purchased Asset due to any uniformity of
interest provisions, unit agreements or other contractual or operational
restrictions on the transfer of such affected Purchased Asset, in which event
the Base Purchase Price shall be reduced by the aggregate Allocated Values of
all such excluded Purchased Assets.
Each
election under this Section 5.4(c) shall be made by Seller no later than
the Closing Date (either the originally scheduled Closing Date or the new
Closing Date elected pursuant to Section 5.4(a)). Any failure by
Seller to validly make such election shall be deemed hereunder to be an election
by Seller of the option set forth in Section 5.4(c)(i)
above.
21
(d) Effect of
Remedies. (i) Any adjustments to the Base Purchase Price
pursuant to Section 5.4(b) or Section 5.4(c) shall be taken into
account in determining the Closing Payment and (ii) any Purchased Assets
excluded from this Agreement in accordance with the terms of
Section 5.4(b)(ii) or Section 5.4(c)(ii) shall be excluded from the
Closing and deemed deleted from the exhibits and schedules hereto.
(e) Limitations. Notwithstanding
anything herein to the contrary: (i) Buyer may not assert any
Title Defect after the Notice Deadline; (ii) in no event shall the Defect
Value for any Title Defect that is not an Adverse Environmental Condition exceed
the Allocated Value of the affected Purchased Asset (it being understood by the
Parties that the Defect Value of any Title Defect that is an Adverse
Environmental Condition shall not be limited under this
Section 5.4(e)(ii)); (iii) no reduction of the Base Purchase Price
shall be made for Title Defects unless and until the aggregate uncured Defect
Values exceed the Defect Threshold, and only then to the extent of the excess
over the Defect Threshold; (iv) no adjustments shall be made for Title
Benefits unless and until the aggregate Benefit Values exceed the Defect
Threshold, and only then to the extent of the excess over the Defect Threshold;
and (iv) this Article 5 sets forth Buyer’s sole remedies for all Title
Defects (other than any claim or liability arising out of or attributable to any
breach or failure of Seller’s special warranty of title set forth in any
Assignment, Deed or other instrument delivered in connection with the
transactions contemplated hereby).
5.5 Consents.
(a) After
the date hereof and prior to the Closing, Seller shall use commercially
reasonable efforts to obtain the written consent from any Third Party with
respect to any Transferred Contract which is required to permit the sale,
transfer and assignment of such Transferred Contract pursuant to the terms and
conditions thereof (collectively, the “Required
Consents”). Notwithstanding anything in this Agreement to the
contrary, neither Party shall be obligated to make any payments to any Third
Party holder of any Required Consent or incur any other material burden in order
to comply with the requirements set forth in this Section 5.5 and the
failure to obtain any such Required Consent shall not be deemed a breach of any
covenant or condition of any Party hereunder.
(b) If
there are any Required Consents which have not been obtained as of the Closing,
then the provisions of Section 5.5(b)(i) or Section 5.5(b)(ii) shall
apply.
22
(i) If
the sum of (x) the aggregate Allocated Values of the Transferred Contracts
as to which any Required Consents were not obtained (collectively, the “Restricted
Contracts”) and all other Purchased Assets reasonably related to the
Restricted Contracts due to any uniformity of interest provisions, unit
agreements or other contractual or operational restrictions on the transfer of
the Restricted Contracts (collectively with the Restricted Contracts, the “Restricted Assets”)
plus (y) the aggregate uncured Defect Values of all Title Defects validly
asserted on or prior to the Closing does not exceed the Defect Threshold, then
(A) the Closing with respect to all Restricted Contracts shall, subject to
the terms of this Section 5.5(b)(i), be deferred and excluded from the
initial Closing hereunder, (B) the Parties shall proceed to close the
transaction in accordance with Article 7 (and the other terms and
conditions herein) without any adjustment of the Base Purchase Price and
(C) Seller shall continue after the Closing to use commercially reasonable
efforts to obtain the written consent from any Third Party with respect to all
un-obtained Required Consents. In the event of the foregoing,
notwithstanding anything herein to the contrary (including Sections 2.1 and
2.2), neither this Agreement nor any of the other Transaction Documents shall
constitute a sale, assignment, assumption, transfer, conveyance or delivery, or
an attempted sale, assignment, assumption, transfer, conveyance or delivery, of
the Restricted Contracts, and following the Closing, until the earlier of the
term of the applicable Restricted Contract or June 30, 2010 (the “Missing Consent
Period”), Seller and Buyer shall, subject to Section 5.5(a), use
their commercially reasonable efforts, and cooperate with each other, to obtain
the Required Consent relating to each Restricted Contract as quickly as
practicable. Pending the obtaining of the Required Consent relating
to any Restricted Contract, Seller and Buyer shall cooperate with each other in
any reasonable and lawful arrangements designed to provide to Buyer the benefits
of the use of the Restricted Contract on and after the Closing Date (or any
right or benefit arising thereunder, including the enforcement for the benefit
of Buyer, at Buyer’s cost and expense, of any and all rights of Seller against a
Third Party thereunder), subject to the burdens of use of the Restricted
Contract (or any liability arising thereunder, including the defense of Seller,
at Buyer’s cost and expense, of any claims made or asserted by a Third Party
thereunder). Upon the earlier of the expiration of the Missing
Consent Period or Seller obtaining a Required Consent for a Restricted Contract,
Seller shall promptly assign, transfer, convey and deliver such Restricted
Contract to Buyer without any further monetary consideration, and Buyer shall
expressly assume the obligations under such Restricted Contract assigned to
Buyer from and after the date of assignment to Buyer pursuant to a special
purpose assignment and assumption agreement substantially similar in terms to
the Assignment (which special purpose agreement the Parties shall prepare,
execute and deliver in good faith at the time of such transfer).
(ii) If
the sum of (x) the aggregate Allocated Values of the Restricted Assets plus
(y) the aggregate uncured Defect Values of all Title Defects validly
asserted on or prior to the Closing exceeds the Defect Threshold, then each
Restricted Asset shall be excluded from the Closing and (A) the Parties
shall proceed to close the transaction in accordance with Article 7 with
(1) a reduction of the Base Purchase Price by an amount equal to the
Allocated Value for such Restricted Asset and (B) Seller shall retain such
Restricted Asset. During the period from the Closing until the day
prior to final settlement required in accordance with Section 3.3 (the
“Post-Closing
Period”), Seller and Buyer shall use their commercially reasonable
efforts (but without any obligation to pay any amounts to any Third Party), and
cooperate with each other, to obtain the Required Consent relating to each
Restricted Contract as quickly as practicable. In the event that
Seller obtains a Required Consent for a Restricted Contract prior to the
expiration of the Post-Closing Period, Seller and Buyer shall effect a Closing
pursuant to Article 7 (and the other terms and conditions herein) with
respect to, and Seller shall transfer to Buyer, such Restricted Contract and all
other Restricted Assets related to such Restricted Contract, and Buyer shall pay
to Seller an amount equal to the aggregate Allocated Values of such Restricted
Contract and such other Restricted Assets.
23
5.6 Preferential
Rights.
(a) After
the date hereof, Seller shall promptly notify all holders of preferential rights
to purchase all or any portion of the Purchased Assets (“Preferential Rights”)
of their rights as result of this Agreement.
(b) In
the event that any holder of Preferential Right exercises such Preferential
Right prior to the Closing, the Purchased Assets subject to such Preferential
Right (as well as all other Purchased Assets as may be reasonably necessary to
effect the exclusion of the affected Purchased Asset due to any uniformity of
interest provisions, unit agreements or other contractual or operational
restrictions on the transfer of such affected Purchased Asset) shall be excluded
and deleted from this Agreement, the Base Purchase Price shall be reduced by an
amount equal to the aggregate Allocated Values of such affected Purchased Assets
and, subject to Sections 7.2 and 7.3, the Closing shall occur as to the
remainder of the Purchased Assets, if any.
(c) In
the event that any holder of Preferential Right fails to exercise such
Preferential Right prior to the Closing and the time period for exercise or
waiver of such Preferential Right has not yet expired, the Purchased Assets
subject to such Preferential Right and all other Purchased Assets as may be
reasonably necessary to effect the exclusion of the affected Purchased Asset due
to any uniformity of interest provisions, unit agreements or other contractual
or operational restrictions on the transfer of such affected Purchased Asset
shall be retained by Seller and the Base Purchase Price shall be
(i) reduced by an amount equal to the aggregate Allocated Values of such
Purchased Assets, and, subject to Sections 7.2 and 7.3, the Closing shall
occur as to the remainder of the Purchased Assets, if any.
(d) If,
subsequent to the Closing, any Preferential Right is waived, or if the time
period otherwise set forth for exercising such Preferential Right expires, in
either case prior to the day prior to final settlement required in accordance
with Section 3.3, Seller and Buyer shall effect a Closing pursuant to
Article 7 (and the other terms and conditions herein) with respect to, and
Seller shall transfer to Buyer, the Purchased Assets subject to such
Preferential Right, and Buyer shall pay to Seller an amount equal to the
aggregate Allocated Values of such Purchased Assets.
5.7 Casualty and
Condemnation. If,
after the date of this Agreement but prior to Closing Date, any portion of the
Purchased Assets is destroyed by fire or other casualty or is expropriated or
taken in condemnation or under right of eminent domain (each a “Casualty Event”), the
Parties shall nevertheless be required to consummate the transactions
contemplated by this Agreement. In the event that the aggregate
amount of costs and expenses associated with repairing, restoring or replacing
all Purchased Assets affected by Casualty Events exceeds the Defect Threshold,
Seller must elect, by written notice to Buyer prior to the Closing Date, either
to (i) cause the Purchased Assets affected by the Casualty Events to be
repaired, restored or replaced, at Seller’s sole cost, as promptly as reasonably
practicable (which work may extend after the Closing Date), (ii) indemnify
Buyer, pursuant an agreement to be executed at the Closing reasonably acceptable
to the Parties, against any costs or expenses that Buyer reasonably incurs to
repair, restore or replace the Purchased Assets or (iii) treat the costs
and expenses associated with repairing, restoring or replacing the affected
Purchased Assets as Title Defects under this Article 5. In each
case, Seller shall retain all rights to insurance and other claims against Third
Parties with respect to the Casualty Events, except to the extent the Parties
otherwise agree in writing.
24
5.8 Termination as a
Remedy. In
the event that the aggregate sum of (i) the Defect Values attributable to
uncured Title Defects related to the Purchased Assets which were the subject of
a Title Defect Notice delivered no later than the Notice Deadline, plus (ii) the
Allocated Values of all Restricted Contracts as to which any Required Consents
are not obtained by the Closing and all other Restricted Assets reasonably
related to such Restricted Contracts, plus (iii) the
Allocated Values of all Purchased Assets for which applicable Preferential
Rights have been validly exercised on or before the Closing Date plus (iv) the
aggregate amount of costs and expenses associated with repairing, restoring or
replacing the Purchased Assets affected by Casualty Events, exceeds
$2,000,000.00, then either Buyer or Seller may elect to terminate this Agreement
and upon such election, notwithstanding anything herein to the contrary, no
Party shall have any further liability or obligation to the other hereunder
except that the indemnification obligations set forth in Section 6.2 shall
survive such termination and be enforceable in accordance with the terms
hereof.
ARTICLE
6
COVENANTS
6.1 General. Each
of Buyer and Seller shall use its reasonable efforts in good faith to take all
actions and to do all things necessary or advisable in order to consummate and
make effective the purchase and sale of the Purchased Assets contemplated by
this Agreement, including satisfaction of the closing conditions set forth in
Article 7.
6.2 Access. From
and after the date of this Agreement and until the Closing Date, Seller shall
permit Buyer’s officers, employees, agents and advisors, at Buyer’s sole risk
and expense, to (i) have reasonable access to the Purchased Assets (so long
as such access occurs during normal business hours or at mutually agreeable
times and does not unreasonably interfere with the operation of the Purchased
Assets) to observe the condition, use and operation of the Purchased Assets and
to facilitate the transactions contemplated by this Agreement and
(ii) otherwise perform due diligence activities, including title searches
and physical and environmental investigations and inspections of the Purchased
Assets to the extent reasonably necessary to conduct and prepare a Phase I
Environmental Site Assessment in accordance with the American Society for
Testing and Materials (A.S.T.M.) Standard Practice Environmental Site
Assessments: Phase I Environmental Site Assessment Process (Publication
Designation: E1527-05) covering such subject Purchased Assets (“Phase I”); provided, however, that Buyer
shall not conduct any other physical environmental examination (including, but
not limited to a Phase II Environmental Site Assessment in accordance with
the American Society for Testing and Materials (A.S.T.M.) Standard Practice
Environmental Site Assessments: Phase II Environmental Site Assessment
Process (Publication Designation: E1903-97) (“Phase II”)) or
any other soil or water tests or borings or other invasive tests or examinations
with respect to the Purchased Assets without the prior written consent of
Seller. In the event that Seller withholds consent for Buyer to
conduct any requested Phase II or additional environmental investigation of
any Purchased Asset that a Phase I indicates the need thereof, such
Purchased Asset shall be excluded from the transactions contemplated under this
Agreement and (i) the Base Purchase Price shall be adjusted downward by an
amount equal to the Allocated Value of such excluded Purchased Asset in
accordance with the terms of Section 5.4(c)(ii), and (ii) such
excluded Purchased Asset shall be deemed to be deleted from the exhibits and
schedules hereto and such excluded Purchased Asset shall be deemed to constitute
a “Seller Retained Liability” hereunder. Buyer agrees to maintain the
confidentiality of all information acquired by Buyer pursuant to this
Section 6.2 in accordance with the terms of the Confidentiality
Agreement. Buyer agrees to indemnify, defend and hold harmless the
Seller Indemnified Parties from and against any and all Damages arising out of
or relating to access to the Purchased Assets prior to the Closing by Buyer,
even if caused in whole or in part by the negligence (whether sole, joint or
concurrent), strict liability or other legal fault of any Seller Indemnified
Parties (but excluding gross negligence or willful misconduct on the part of any
Seller Indemnified Parties).
25
6.3 Conduct of Seller’s
Business. From
and after the date of this Agreement and until the Closing Date, Seller agrees
that:
(a) Seller
shall maintain, operate and administer the Purchased Assets utilizing prudent
oilfield practices, in the ordinary course of business and consistent with past
practice and in compliance with all applicable Laws and Regulations as if Seller
were going to continue to own the Purchased Assets after the Closing and without
regard to the existence of this Agreement;
(b) Seller
shall:
(i) not,
except as set forth on Schedule 4.1(n),
agree to, approve or incur any authorizations for expenditure, cost or other
obligation for commitments with respect to the Purchased Assets in excess of
$50,000.00.
(ii) not
sell, assign, transfer or lease or agree to sell, assign, transfer, lease or
otherwise dispose of any of the Purchased Assets, except for (A) sales and
dispositions of oil and gas in the ordinary course of business and
(B) sales and dispositions of equipment and materials that are surplus,
obsolete or replaced;
(iii) not
subject any of the Purchased Assets to any Lien (other than a Permitted
Lien);
(iv) not
modify, amend, extend or terminate any Purchased Lease, Purchased Easement or
Purchased Contract; or
(v) not
waive, compromise or settle any material rights under any Purchased Lease,
Purchased Easement or Purchased Contract.
(vi) maintain
insurance coverage on the Purchased Assets in the amounts and of the types
currently in force;
(vii) use
commercially reasonable efforts to maintain in full force and effect all
Purchased Leases associated with Purchased Wells that are capable of producing
in paying quantities; and
26
(viii) maintain
all Purchased Permits.
Buyer’s
approval of any action restricted by this Section 6.3 shall not be
unreasonably withheld or delayed and shall be considered granted 10 days (unless
a shorter time is reasonably required by the circumstances and such shorter time
is specified in Seller’s notice) of Seller’s notice to Buyer requesting such
consent unless Buyer notifies Seller to the contrary during that
period. Notwithstanding the foregoing provisions of this
Section 6.3, in the event of an emergency, Seller may take such action as
reasonably necessary and shall notify Buyer of such action promptly
thereafter.
6.4 Taxes. Buyer
shall pay all sales, use, gross receipts, transfer, real property transfer,
documentary stamp, recording and other similar Taxes arising from and with
respect to the purchase and sale of the Purchased Assets acquired hereunder by
Buyer. All ad valorem real property Taxes, personal property Taxes,
fees or assessments due with respect to the Purchased Assets shall be included
and apportioned as provided in the definition of “Operating
Balance.” Each Party shall be responsible for its own income Taxes,
if any, which may result from the transactions contemplated by this
Agreement.
6.5 Transaction
Expenses. Except
as expressly provided otherwise herein, each Party shall pay its own expenses
and the fees and expenses of its counsel, accountants, consultants and other
experts and representatives incurred in connection with the execution and
delivery of this Agreement and the other Transaction Documents and the
consummation of the transactions contemplated hereby and thereby.
6.6 Maintenance of Books and
Records. At
the Closing, Seller shall deliver to Buyer the Purchased
Records. Buyer and Seller shall cooperate fully with one another
after the Closing so that (subject to any limitations that are reasonably
required to preserve any applicable attorney-client or other legal privilege)
each Party has access to the business records, contracts and other information
existing at the Closing Date and relating in any manner to the Purchased Assets
(whether in the possession of Seller or Buyer). No files, books or
records existing at the Closing Date and relating in any manner to the Purchased
Assets shall be destroyed by any Party for a period of two years after the
Closing Date (or such longer period as is required by applicable Laws and
Regulations) without giving the other Party at least 30 days prior written
notice, during which time such other Party shall have the right (subject to the
provisions hereof) to examine and to remove any such files, books and records
prior to their destruction. The access to files, books and records
contemplated by this Section 6.6 shall be during normal business hours and
upon not less than two days prior written request, shall be subject to such
reasonable limitations as the Party having custody or control thereof may impose
to preserve the confidentiality of information contained therein, and shall not
extend to material subject to a claim of privilege unless expressly waived by
the Party entitled to claim the same.
6.7 Confidentiality. The
respective obligations of the Parties with regard to the use and disclosure of
information provided to one Party by the other are set forth in the
Confidentiality Agreement. Notwithstanding anything in the
Confidentiality Agreement or this Agreement to the contrary, Seller and Buyer
shall consult with each other with regard to all publicity and other public
releases concerning this Agreement and the transactions contemplated hereby;
provided, however, that
nothing contained in this Agreement or the Confidentiality Agreement shall
restrict either Party or any Affiliate of either Party from making any
disclosure required by applicable Laws and Regulations or the applicable rules
of any stock exchange.
27
6.8 Names. As
soon as reasonably possible after the Closing, but in no event later than 60
days after the Closing, Buyer shall remove the names of Seller, including
“Hilcorp Energy,” “Hilcorp Energy Company” and all variations thereof, from all
of the Purchased Assets and make the requisite filings with, and provide the
requisite notices to, the appropriate Governmental Authorities to place the
title or other indicia of ownership, including operation of the Purchased
Assets, in a name other than any name of Seller or any variations
thereof.
6.9 Further
Assurances. At or after the Closing, either Party, at the
request of the other Party and without additional consideration, shall execute
and deliver to the requesting Party all such further assignments, deeds,
agreements, contracts, instruments and other documents as the requesting Party
may reasonably request in order to perform, accomplish, perfect or record, if
reasonably necessary, the sale, assignment, transfer and delivery to Buyer of
the Purchased Assets acquired by Buyer hereunder as contemplated by this
Agreement, to obtain the Customary Post-Closing Consents and to otherwise carry
out the intention of this Agreement.
6.10 Revised
Schedules. On
one or more occasions not later than three days prior to the Closing Date,
Seller may prepare and deliver to Buyer revised Schedules to this Agreement
relating to the representations and warranties set forth in Section 4.1,
which revised Schedules may include new Schedules to the extent that any of the
representations and warranties set forth in Section 4.1 do not provide for
Schedules, reflecting events or changes in circumstances occurring after the
date of this Agreement. Prior to the Closing, any such revised or
supplemental Schedules shall be for informational purposes only and of no force
or effect in connection with determining whether the conditions to the Closing
set forth in Section 7.2 have occurred or been satisfied. In the
event that the Closing occurs, then for the sole purposes of the indemnification
provisions set forth in Article 8, any representations and warranties of
Seller as set forth in Section 4.1 shall be subject to, and modified by,
any such timely delivered revisions or supplements to the Schedules to this
Agreement.
6.11 Bonds. The
Parties understand that none of the bonds, letters of credit and guarantees, if
any, set forth on Schedule 6.11
relating to the Purchased Assets are to be transferred to Buyer. On
or before Closing, Buyer shall obtain, or cause to be obtained in the name of
Buyer, replacements for such bonds, letters of credit and guarantees set forth
on Schedule 6.11
(but only to the extent such replacements are necessary or required under the
Purchased Contracts or by applicable Laws and Regulations).
ARTICLE
7
CLOSING
7.1 Time and Place of
Closing. The
consummation of the transactions contemplated by this Agreement (the “Closing”) shall take
place on January 29, 2010 (the “Closing Date”) at
10:00 a.m. in the offices of Seller at 840 Gessner, Suite 800, Houston,
Texas 77024, or at such other time and place as agreed to by the
Parties. Notwithstanding the foregoing, the purchase and sale of the
Purchased Assets shall be effective as of 12:01 a.m., Houston, Texas time on
October 1, 2009 (the “Effective
Time”).
28
7.2 Conditions to Obligation of
Buyer. The
obligation of Buyer to consummate the transactions contemplated by this
Agreement is subject to the satisfaction of the following
conditions:
(a) the
representations and warranties of Seller set forth in Section 4.1 shall be
true and correct in all material respects at 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);
(b) Seller
shall have performed and complied with in all material respects all of its
obligations, covenants and agreements contained in this Agreement to be
performed or complied with by it at or prior to the Closing;
(c) Seller
and Buyer shall each be in compliance with all material regulatory requirements
of all applicable Governmental Authorities necessary to consummate the
transactions contemplated herein (all of which shall be in full force and effect
as of the Closing);
(d) no
Order or Proceeding shall be outstanding or pending that restrains, enjoins or
otherwise prohibits, or could reasonably be expected to restrain, enjoin or
otherwise prohibit, the consummation of the transactions contemplated by this
Agreement;
(e) Buyer
shall have received all of the deliveries required by
Section 7.4;
(f) there
shall be no bankruptcy, reorganization, receivership or arrangement proceedings
pending against Seller or any Affiliate of Seller; and
(g) the
conditions set forth in Section 7.3 of the Affiliated Purchase Agreement
shall have been satisfied as of the Closing Date or waived in writing by PVOG LP
on or prior to the Closing Date.
Buyer may
waive any condition specified in this Section 7.2 if it executes a writing
so stating at or prior to the Closing.
7.3 Conditions to Obligation of
Seller. The
obligation of Seller to consummate the transactions contemplated by this
Agreement is subject to the satisfaction of the following
conditions:
(a) the
representations and warranties of Buyer set forth in Section 4.2 shall be
true and correct in all material respects at 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);
(b) Buyer
shall have performed and complied with in all material respects all of its
obligations, covenants and agreements contained in this Agreement to be
performed or complied with by it at or prior to the Closing;
(c) Buyer
and Seller shall each be in compliance with all material regulatory requirements
of all applicable Governmental Authorities necessary to consummate the
transactions contemplated herein (all of which shall be in full force and effect
as of the Closing);
29
(d) no
Order or Proceeding shall be outstanding or pending that restrains, enjoins or
otherwise prohibits, or could reasonably be expected to restrain, enjoin or
otherwise prohibit, the consummation of the transactions contemplated by this
Agreement;
(e) Seller
shall have received all of the deliveries required by
Section 7.5;
(f) there
shall be no bankruptcy, reorganization, receivership or arrangement proceedings
pending against Buyer or any Affiliate of Buyer; and
(g) the
conditions set forth in Section 7.2 of the Affiliated Purchase Agreement
shall have been satisfied as of the Closing Date or waived in writing by Seller
on or prior to the Closing Date.
Seller
may waive any condition specified in this Section 7.3 if it executes a
writing so stating at or prior to the Closing.
7.4 Deliveries by Seller at
Closing. At
the Closing, Seller shall execute and deliver, or cause to be executed and
delivered, or just delivered, where no execution is required, to
Buyer:
(a) one
or more assignments and bills of sale containing a special warranty of title in
substantially the form of Exhibit C
(collectively, the “Assignments”),
conveying to Buyer all of the Purchased Assets;
(b) transfer
orders or letters-in-lieu thereof, as applicable (the “Production Payment
Documents”), directing all buyers of production to make payments in the
future directly to Buyer of proceeds attributable to production from the
Purchased Assets;
(c) exclusive
possession of the Purchased Assets, including all monies held in suspense and
for account of Third Parties;
(d) such
assignments and consents necessary to transfer to Buyer all Purchased Permits
which are transferable to Buyer under applicable Laws and
Regulations;
(e) any
required change of operator forms and similar forms necessary to transfer the
operatorship of the Purchased Assets from Seller to Buyer or its designated
operator;
(f) a
certificate signed by an officer of Seller certifying that the conditions set
forth in Sections 7.2(a), 7.2(b) and 7.2(g) have been satisfied or validly
waived;
(g) a
certificate signed by an officer of Seller certifying that Seller is not a
foreign person in accordance with Section 1.1445-2(b) of the Treasury
Regulations;
(h) a
certificate of existence for Seller issued by the Secretary of State of the
State of Texas and a certificate of good standing for Seller issued by the
Secretary of State of the State of Mississippi, each dated not more than five
days prior to the Closing Date; and
30
(i) any
other agreements, documents, certificates, approvals, consents or other
instruments reasonably necessary to consummate the transactions contemplated by
this Agreement.
7.5 Deliveries by Buyer at
Closing. At
the Closing, Buyer shall execute and deliver or cause to be executed and
delivered, or just delivered, where no execution is required, to Seller the
following:
(a) the
Closing Payment as provided in Section 3.4;
(b) Assignments,
conveying to Buyer all of the Purchased Assets;
(c) Production
Payment Documents directing all buyers of production to make payments in the
future directly to Buyer of proceeds attributable to production from the
Purchased Assets;
(d) such
assignments and consents necessary to transfer to Buyer all Purchased Permits
which are transferable to Buyer under applicable Laws and
Regulations;
(e) any
required change of operator forms and similar forms necessary to transfer the
operatorship of the Purchased Assets from Seller to Buyer or its designated
operator;
(f) a
certificate signed by an officer of Buyer certifying that the conditions set
forth in Sections 7.3(a), 7.2(b) and 7.3(g) have been satisfied or validly
waived;
(g) certificates
of good standing for Buyer issued by the Secretary of State of the Commonwealth
of Virginia and the Secretary of State of the State of Mississippi, each dated
not more than five days prior to the Closing Date; and
(h) any
other agreements, documents, certificates, approvals consents or other
instruments reasonably necessary to consummate the transactions contemplated by
this Agreement.
ARTICLE
8
INDEMNIFICATION
8.1 Survival of Representations,
Warranties and Covenants. The
representations, warranties and covenants of the Parties in this Agreement or
any certificate delivered pursuant to this Agreement shall survive and continue
in full force and effect as follows (each applicable period, the “Survival
Period”):
(a) All
of the representations, warranties and covenants of Seller contained in
Sections 4.1 (other than the Fundamental Representations) and 6.3 shall
survive the Closing and continue in full force and effect for a period of nine
months after the Closing;
(b) All
of the representations and warranties of Seller set forth in
Sections 4.1(a), (b), (c)(i), (c)(ii) and (f) (collectively, the “Fundamental
Representations”) shall continue in full force and effect
indefinitely;
31
(c) All
of the representations and warranties of Buyer set forth in Section 4.2
shall continue in full force and effect indefinitely; and
(d) All
of the covenants set forth herein (other than those set forth in
Section 6.3) shall continue in full force and effect
indefinitely.
After the
expiration of the applicable Survival Period for a particular representation,
warranty or covenant, such representation, warranty or covenant shall
automatically expire and terminate. Any claim for indemnification
with respect to any breach of any representation, warranty or covenant which is
not asserted within the applicable Survival Period by a written notice given as
herein provided that identifies the breach underlying such claim may not be
pursued and shall be thereafter forever barred.
8.2 Indemnification By
Seller. In
the event that the Closing occurs then, notwithstanding any investigation by or
on behalf of any Person, Seller hereby agrees to indemnify, defend and hold
Buyer and its Affiliates, each of its and their respective shareholders,
members, partners, directors, officers, employees and agents and each of their
respective successors and permitted assigns (collectively, the “Buyer Indemnified
Parties”) harmless from and against any and all Damages directly or
indirectly arising out of, resulting from or in connection with any of the
following:
(a) the
breach of or inaccuracy in any representation or warranty made by Seller in this
Agreement or any certificate delivered pursuant to this Agreement;
and
(b) the
breach of or default in the performance by Seller of any covenant, agreement or
obligation in this Agreement; and
(c) the
Seller Retained Liabilities; provided, however, that any
claim for indemnification pursuant to this Section 8.2(c) must be asserted
by a notice given as herein provided within two years of the Closing and any
claim not asserted within such time period may not be pursued and shall be
thereafter forever barred.
8.3 Indemnification By
Buyer. In
the event that the Closing occurs, then, notwithstanding any investigation by or
on behalf of any Person, Buyer agrees to indemnify, defend and hold Seller and
its Affiliates, each of its and their respective shareholders, members,
partners, directors, officers, employees and agents and each of their respective
successors and permitted assigns (collectively, the “Seller Indemnified
Parties”) harmless from and against any and all Damages directly or
indirectly arising out of, resulting from or in connection with any of the
following:
(a) the
breach of or inaccuracy in any representation or warranty made by Buyer in this
Agreement or any certificate delivered pursuant to this Agreement;
(b) the
breach or default in performance by Buyer of any covenant, agreement or
obligation in this Agreement; and
(c) the
Buyer Assumed Liabilities.
32
8.4 Indemnification
Procedures. All
claims for indemnification under this Agreement related to Third Party Claims
shall be asserted and resolved pursuant to this Section 8.4.
(a) Promptly
after the receipt by any Person seeking indemnification hereunder (an “Indemnified Party”)
of a notice of any Proceeding by any Third Party that may be subject to
indemnification hereunder (a “Third Party Claim”),
such Indemnified Party shall give written notice of such Third Party Claim to
the indemnifying Party (the “Indemnifying Party”)
stating the nature and basis of the Third Party Claim and the amount thereof, to
the extent known, along with copies of the relevant documents evidencing the
Third Party Claim and the basis for indemnification sought. Failure
of the Indemnified Party to give such notice shall not relieve the Indemnifying
Party from liability on account of this indemnification, except if and to the
extent that the Indemnifying Party is actually prejudiced thereby.
(b) The
Indemnifying Party, at its own expense, shall have the right, exercisable within
30 days of receipt of notice of the Third Party Claim, to assume the defense of
the Indemnified Party against the Third Party Claim so long as (i) the
Indemnifying Party proceeds in good faith and in a timely manner and
(ii) such Third Party Claim involves (and continues to involve) solely
monetary damages.
(c) So
long as the Indemnifying Party has assumed the defense of the Third Party Claim
in accordance Section 8.4(b), (i) the Indemnified Party may retain
separate co-counsel at its sole cost and expense and participate in the defense
of the Third Party Claim, it being understood that the Indemnifying Party shall
pay all costs and expenses of counsel for the Indemnified Party (A) for all
periods prior to such time as the Indemnifying Party has notified the
Indemnified Party that it has assumed the defense of such Third Party Claim and
(B) if there is a conflict of interest between the Indemnifying Party and
the Indemnified Party, (ii) the Indemnified Party shall not file any papers
or consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (which consent shall not to be unreasonably withheld or
delayed), and (iii) the Indemnifying Party shall not consent to the entry
of any judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnified Party (which consent
shall not to be unreasonably withheld or delayed).
(d) The
Parties shall use commercially reasonable efforts to minimize Damages from Third
Party Claims and shall act in good faith and in a timely manner in responding
to, defending against, settling or otherwise dealing with Third Party
Claims. The Parties shall also cooperate in any such defense and give
each other reasonable access to all information relevant
thereto. Whether or not the Indemnifying Party shall have assumed the
defense of a Third Party Claim, the Indemnifying Party shall not be obligated to
indemnify the Indemnified Party hereunder for any settlement entered into
without the Indemnifying Party’s prior written consent, which consent shall not
unreasonably withheld or delayed. Notwithstanding the foregoing, the
Indemnified Party shall have the sole and exclusive right to settle any Third
Party Claim, on such terms and conditions as it deems reasonably appropriate, to
the extent such claim involves equitable or other non-monetary
relief.
33
8.5 Other Limitations on
Indemnification.
(a) Seller
shall not have any liability to the Buyer Indemnified Parties pursuant to
Section 8.2(c) or Section 8.2(a) with respect to any breach of any
representation or warranty set forth in Section 4.1 (other than any
Fundamental Representation) unless and until the aggregate amount of all of the
Damages to the Buyer Indemnified Parties exceeds the Indemnification Threshold,
in which case the Buyer Indemnified Parties shall be entitled to indemnification
only to the extent of the excess over the Indemnification
Threshold. There shall be no threshold or deductible with respect to
(i) Seller’s obligations to Buyer pursuant to Section 8.2(a) with respect
to any breach of any Fundamental Representation or pursuant to
Section 8.2(b) or (ii) Buyer’s obligations to Seller pursuant to
Section 8.3.
(b) The
aggregate liability of Seller pursuant to Section 8.2(c) and
Section 8.2(a) with respect to any and all breaches of any representations
or warranties set forth in Section 4.1 (other than any Fundamental
Representations) shall in no event exceed, individually or in the aggregate,
$3,000,000.00. Subject to Section 8.5(c), Seller’s liability
pursuant to Section 8.2(a) with respect to any breach of any Fundamental
Representation and pursuant to Section 8.2(b) shall, in each case, be
without limit. Subject to Section 8.5(c), Buyer’s liability
pursuant to Section 8.3 shall, in each case, be without limit.
(c) Under
no circumstances shall any Party be liable to the other Party for any indirect,
contingent, consequential, unforeseen, exemplary or punitive, special Damages of
any nature (including lost profits); provided, however, that any
such Damages recovered by any Third Party for which a Party owes another Party
an indemnity under this Agreement shall not be waived. Each of Buyer
and Seller hereby expressly waives any right to indirect, contingent
consequential, unforeseen, exemplary or punitive, special Damages of any nature
(including lost profits) with this Agreement and the transactions contemplated
hereby (other than Damages recovered by any Third Party for which a Party owes
another Party an indemnity under this Agreement).
(d) The
Parties will make appropriate adjustments for any insurance proceeds actually
received by the Indemnified Party in determining Damages for purposes of this
Article 8. All indemnification payments under this
Article 8 will be deemed to be adjustments to the amounts paid to Seller
pursuant to Article 2. Any liability for indemnification under
this Agreement shall be determined without duplication of recovery by reason of
the state of facts giving rise to such liability constituting a breach of more
than one representation, warranty, covenant or agreement.
(e) Each
Indemnified Party seeking indemnification hereunder shall use commercially
reasonable efforts to mitigate any Damages that it asserts under this
Article 8, but any reasonable costs and expenses (other than internal costs
and expenses) incurred in connection therewith shall constitute
Damages.
34
8.6 Exclusive
Remedy. IN
THE ABSENCE OF FRAUD, AFTER THE CLOSING THE RIGHT OF THE PARTIES TO ASSERT
INDEMNIFICATION CLAIMS AND RECEIVE INDEMNITY PAYMENTS UNDER THIS AGREEMENT IS
THE SOLE AND EXCLUSIVE RIGHT AND REMEDY EXERCISABLE BY THE PARTIES WITH RESPECT
TO ANY DAMAGES ARISING OUT OF ANY BREACH BY ANY PARTY OF ANY REPRESENTATION,
WARRANTY, COVENANT OR AGREEMENT OF SUCH PARTY SET FORTH IN THIS AGREEMENT OR
OTHERWISE RELATING TO THE CONTEMPLATED TRANSACTIONS. NO PARTY WILL
HAVE ANY OTHER REMEDY (STATUTORY, EQUITABLE, COMMON LAW OR OTHERWISE) AGAINST
ANY OTHER PARTY WITH RESPECT TO SUCH MATTERS, AND ALL SUCH OTHER REMEDIES ARE
HEREBY WAIVED. WITHOUT LIMITING THE FOREGOING, IN THE ABSENCE OF
FRAUD, EACH OF THE PARTIES ACKNOWLEDGES AND AGREES THAT SUCH PARTY WILL NOT HAVE
ANY REMEDY AFTER THE CLOSING FOR ANY BREACH OF ANY REPRESENTATION, WARRANTY,
COVENANT OR AGREEMENT SET FORTH IN THIS AGREEMENT, EXCEPT AS EXPRESSLY PROVIDED
IN THIS ARTICLE 8.
ARTICLE
9
TERMINATION
9.1 Termination of
Agreement. The
Parties may terminate this Agreement as provided below:
(a) Buyer
and Seller may terminate this Agreement by mutual written consent at any time
prior to the Closing;
(b) Buyer
may terminate this Agreement by giving written notice to Seller (i) at any
time prior to the Closing in the event that Seller has breached in any material
respect any representation, warranty or covenant contained in this Agreement,
Buyer has notified Seller of the breach, and the breach has continued without
cure for a period of 30 days after the notice of breach, (ii) at any time
following the Termination Date if the Closing shall not have occurred on or
before the Termination Date, (iii) at any time prior to the Closing in the
event that the Affiliated Purchase Agreement has been terminated in accordance
with its terms or (iv) at any time prior to the Closing if the conditions
set forth in Section 5.8 have been satisfied; or
(c) Seller
may terminate this Agreement by giving written notice to Buyer (i) at any
time prior to the Closing in the event that Buyer has breached in any material
respect any representation, warranty or covenant contained in this Agreement,
Seller has notified Buyer of the breach, and the breach has continued without
cure for a period of 30 days after the notice of breach, (ii) at any time
following the Termination Date if the Closing shall not have occurred on or
before the Termination Date, (iii) at any time prior to the Closing in the
event that the Affiliated Purchase Agreement has been terminated in accordance
with its terms or (iv) at any time prior to the Closing if the conditions
set forth in Section 5.8 have been satisfied.
9.2 Effect of
Termination.
(a) In
the event that this Agreement is terminated by either Party pursuant to
Section 9.1, then, except as expressly hereinafter provided, this Agreement
shall become void and have no effect; provided, however, that
(a) the provisions of Sections 6.2, 6.7, 8.4, 8.5(c), 8.5(d) and
8.5(e), this Article 9 and Article 10 shall survive any such
termination and (b) each Party shall, in all events, remain bound by and
continue to be subject to the terms of the Confidentiality
Agreement.
35
(b) In
the event that (i) Buyer terminates this Agreement pursuant to
Section 9.1(b)(i) or Section 9.1(b)(ii) or PVOG LP terminates the
Affiliated Purchase Agreement pursuant to Section 9.1(c)(i) or
Section 9.1(c)(ii) thereof, (ii) (A) Seller has knowingly taken
any action or knowingly omitted to take any action where such action or omission
to take any such action resulted in the breach or failure in any material
respect of any of Seller’s representations or warranties set forth herein or in
the Affiliated Purchase Agreement or any covenants of Seller which are to be
performed or observed at or prior to the Closing hereunder or the closing
contemplated pursuant to the Affiliated Purchase Agreement and (iii) as of
the date of such termination, (A) Buyer has not breached in any material
respect any representation, warranty or covenant of Buyer contained in this
Agreement (including Buyer’s failure to consummate the transactions contemplated
by this Agreement upon satisfaction of the conditions set forth in
Section 7.3 herein) and (B) PVOG LP has not breached in any material
respect any representation, warranty or covenant of PVOG LP contained in the
Affiliated Purchase Agreement (including PVOG LP’s failure to consummate the
transactions contemplated by the Affiliated Purchase Agreement upon satisfaction
of the conditions set forth in Section 7.2 thereof), then (1) PVOG
LP’s retention of the Deposit (as such term is defined in the Affiliated
Purchase Agreement) in accordance with the terms of the Affiliated Purchase
Agreement shall constitute liquidated damages hereunder, which remedy shall be
the sole and exclusive remedy available to Buyer or any Affiliate of Buyer for
Seller’s failure to consummate the transactions contemplated by this Agreement
or the Affiliated Purchase Agreement or any breach or failure of any
representation, warranty or covenant of Seller contained herein or in the
Affiliated Purchase Agreement and (2) no Party shall have any obligations
or liabilities hereunder except for the obligations and liabilities with respect
to Sections 6.2 and 6.7, this Article 9 and
Article 10. Seller and Buyer acknowledge and agree that
(x) Buyer’s actual Damages upon the event of such a termination are
difficult to ascertain with any certainty, (y) the Deposit is a reasonable
estimate by the Parties of such actual Damages and (z) such liquidated
damages do not constitute a penalty.
(c) In
the event that (i) Seller terminates this Agreement pursuant to
Section 9.1(c)(i) or Section 9.1(c)(ii) or Seller terminates the
Affiliated Purchase Agreement pursuant to Section 9.1(b)(i) or
Section 9.1(b)(ii) thereof, (ii) (A) Buyer has knowingly taken
any action or knowingly omitted to take any action where such action or omission
to take any such action resulted in the breach or failure in any material
respect of any of Buyer’s representations or warranties set forth herein or any
covenants of Buyer which are to be performed or observed at or prior to the
Closing or (B) PVOG LP has knowingly taken any action or knowingly omitted
to take any action where such action or omission to take any such action
resulted in the breach or failure in any material respect of any of PVOG LP’s
representations or warranties set forth in the Affiliated Purchase Agreement or
any covenants of PVOG LP in the Affiliate Purchase Agreement which are to be
performed or observed at or prior to the closing thereunder and (iii) as of
the date of such termination, Seller has not breached in any material respect
any representation, warranty or covenant of Seller contained in this Agreement
or the Affiliated Purchase Agreement (including Seller’s failure to consummate
the transactions contemplated by this Agreement or the Affiliated Purchase
Agreement upon satisfaction of the conditions set forth in Section 7.3
herein or Section 7.2 thereof), then, subject to the limitations set forth in
Section 8.5(c) and this Section 9.2, Seller shall be entitled to all
remedies available at law or in equity (including specific performance to the
extent that a court of competent jurisdiction determines that Seller is entitled
to such remedy).
36
(d) In
the event that (i) this Agreement terminates pursuant to Section 9.1
and (ii) the conditions described in either Section 9.2(b) or
Section 9.2(c) have not been satisfied, then no Party shall have any
obligations or liabilities hereunder except for the obligations and liabilities
with respect to Sections 6.2 and 6.7, this Article 9 and
Article 10.
ARTICLE
10
MISCELLANEOUS
10.1 Amendment and
Waiver. The
Parties may, by mutual written agreement, amend this Agreement in any respect,
and either Party, as to such Party, may (i) extend the time for the
performance of any of the obligations of the other Party; (ii) waive any
inaccuracies in representations and warranties by the other Party;
(iii) waive compliance by the other Party with any of the covenants or
agreements contained herein and performance of any obligations by the other
Party; and (iv) waive the fulfillment of any condition that is precedent to
the performance by such Party of any of its obligations under this
Agreement. To be effective, any such extension or waiver must be in
writing and be signed by the Party providing such waiver or extension, as the
case may be. No such extension or waiver by any Party, nor any waiver
by any Party of any breach of any provision of this Agreement, shall operate or
be construed as a waiver of any subsequent breach, whether or not
similar. No failure or any delay by any Party in exercising any
right, power or privilege under this Agreement or any of the other Transaction
Documents shall operate as a waiver of such right, power or privilege, and no
single or partial exercise of any such right, power or privilege shall preclude
any other or further exercise of such right, power or privilege or the exercise
of any other right, power or privilege. Except as otherwise provided
in this Agreement, the rights and remedies herein provided are cumulative and
are not alternative.
10.2 Successors and
Assigns. The
provisions of this Agreement shall be binding upon and inure to the benefit of
the Parties and their respective successors and permitted assigns; provided, however, that no
Party may assign, delegate or otherwise transfer any of its rights or
obligations under this Agreement without the prior written consent of the other
Party. Any transfer or assignment in violation of this
Section 10.2 shall be void ab initio.
10.3 Notices. All
notices, requests, demands and communications required or permitted under this
Agreement shall be in writing, and any communication or delivery hereunder shall
be deemed to have been duly made when personally delivered to the individual
indicated below, or if mailed or by facsimile or email transmission, when
received by the Party charged with such notice and addressed as
follows:
If to
Seller:
Penn
Virginia Oil & Gas, L.P.
Three
Radnor Corporate Center, Suite 300
100
Matsonford Road
Radnor,
Pennsylvania 19087-4564
Attention: H.
Baird Whitehead
37
Fax: (610)
687-7850
Email: baird.whitehead@pennvirginia.com
With a
copy to:
Penn
Virginia Oil & Gas, L.P.
840
Gessner, Suite 800
Houston,
Texas 77024
Attention: Edward
L. Johnson
Fax: (713)
722-6609
Email: ed.johnson@pennvirginia.com
and
Penn
Virginia Corporation
Three
Radnor Corporate Center, Suite 300
100
Matsonford Road
Radnor,
Pennsylvania 19087-4564
Attention: Nancy
M. Snyder
Fax: (610)
687-3688
Email: nancy.snyder@pennvirginia.com
If to
Buyer:
Hilcorp
Energy I, L.P.
1201
Louisiana St., Suite 1400
Houston,
Texas 77002
Attention: Gregory
M. Hoffman
Fax: (713)
209-2425
Email: ghoffman@hilcorp.com
With a
copy to:
Hilcorp
Energy I, L.P.
1201
Louisiana St., Suite 1400
Houston,
Texas 77002
Attention: William
P. Swenson
Fax: (713)
289-2650
Email: bswenson@hilcorp.com
Any Party
may, by written notice so delivered to the other Parties, change the address or
individual to which delivery shall thereafter be made. If any Party
rejects or otherwise refuses to accept a notice, or if the notice cannot be
delivered because of a change in address for which no notice was given to the
Party attempting to give or make such notice, such notice shall be deemed to
have been received upon such rejection, refusal or such inability to
deliver.
38
10.4 Severability. The
Parties agree that (i) the provisions of this Agreement shall be severable
in the event that any provision hereof is held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, (ii) such
invalid, void or otherwise unenforceable provision shall be automatically
replaced by another provision which is as similar as possible in terms to such
invalid, void or otherwise unenforceable provision but which is valid and
enforceable and (iii) the remaining provisions shall remain enforceable to
the fullest extent permitted by law.
10.5 No Third Party
Beneficiaries. Nothing
in this Agreement, express or implied, is intended to or shall (i) confer
on any Person, other than the Parties (and the Indemnified Parties referred to
in Article 8) and their respective successors or permitted assigns, any
rights (including third party beneficiary rights), remedies, obligations or
liabilities under or by reason of this Agreement, or (ii) constitute the
Parties as partners or as participants in a joint venture. This
Agreement shall not provide Third Parties with any remedy, claim, liability,
reimbursement, cause of action or other right in excess of those existing
without reference to the terms of this Agreement. No Third Party
shall have any right, independent of any right which may exist irrespective of
this Agreement, under or granted by this Agreement, to bring any suit at law or
equity for any matter governed by or subject to the provisions of this
Agreement.
10.6 Construction. Buyer
and Seller have participated jointly in the negotiation and drafting of this
Agreement and the Transaction Documents. In the event that any
ambiguity or question of intent or interpretation arises, this Agreement and the
Transaction Documents shall be construed as if drafted jointly by Buyer and
Seller, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement or the other Transaction Documents.
10.7 Exhibits and
Schedules. All
exhibits and schedules annexed hereto or referred to herein are hereby
incorporated in and made a part of this Agreement as if set forth in full
herein.
10.8 Headings. The
headings preceding the text of the articles, sections and paragraphs hereof are
inserted solely for convenience of reference and shall not constitute a part of
this Agreement nor shall they affect its meaning, construction or
effect.
10.9 Counterparts. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but which together shall constitute one and the same
instrument. Any executed counterpart delivered by facsimile or other
means of electronic transmission shall be deemed an original for all
purposes.
10.10 Entire
Agreement. This
Agreement, together with the exhibits and schedules attached hereto and the
other Transaction Documents, and the Confidentiality Agreement constitute the
entire understanding of the Parties with respect to the subject
matter hereof, superseding all prior negotiations, discussions, agreements
or understandings, written or oral, between the Parties with respect to the
subject matter hereof.
39
10.11 Applicable
Law. This
Agreement shall be governed by, and construed, enforced and interpreted in
accordance with the Laws and Regulations of the State of Texas, without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Texas or any other jurisdiction) that would cause the application of the Laws
and Regulations of any jurisdiction other than the State of
Texas. The Parties hereby irrevocably consent to the exclusive
jurisdiction of the courts of the State of Texas in and for Harris County and
the United States District Court for the Southern District of Texas, Houston
Division in connection with any litigation arising out of this Agreement or any
of the transactions contemplated thereby. All disputes between the
Parties to this Agreement and the transactions contemplated thereby shall have
jurisdiction and venue only in the courts of the State of Texas in and for
Harris County and the United States District Court for the Southern District of
Texas, Houston Division. Each Party waives any objection which it may
have pertaining to improper venue or forum non-conveniens to the conduct of any
proceeding in the foregoing courts. Each Party agrees that any and
all process directed to it in any such litigation may be served upon it outside
of the State of Texas with the same force and effect as if such service had been
made within Texas. EACH OF THE PARTIES HEREBY VOLUNTARILY AND
IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION OR OTHER PROCEEDING BROUGHT IN
CONNECTION WITH THIS AGREEMENT.
10.12 Like-Kind
Exchange. Seller
may, at or before Closing, elect to effect a tax-deferred exchange of
the Purchased Assets for other qualifying properties (the “Exchange Property”)
in accordance with the following:
(a) In
the event that Seller makes such an election prior to the Closing, Seller may
elect, by notice to Buyer delivered on or before the Closing Date, to have (i)
all or a portion of its rights under the Agreement assigned to a qualified
intermediary and (ii) all or a portion of the Purchase Price paid to a qualified
intermediary until such Seller has designated the Exchange
Property. The Exchange Property shall be designated by Seller and
acquired by the qualified intermediary within the time periods prescribed in
Section 1031(a)(3) of the Code and shall thereupon be conveyed to
Seller. In the event that Seller fails to designate, and the
qualified intermediary fails to acquire, the Exchange Property within such time
periods, unless the agreement with the qualified intermediary provides
otherwise, the agency or trust shall terminate and the proceeds then held by the
qualified intermediary shall be paid immediately to Seller.
(b) The
rights and responsibilities of Seller, Buyer and the qualified intermediary
shall be documented with such agreements containing such terms and provisions as
shall be reasonably determined by the applicable Parties to be necessary to
accomplish a tax deferred exchange under Section 1031 of the Code, subject,
however, to the limitations on costs and liabilities of Buyer and Seller set
forth below. If Seller makes a tax deferred exchange election, Buyer
shall not be obligated to pay Buyer or any Third Party any additional costs or
expenses or incur any additional liabilities or obligations other than those
expressly set forth herein in the consummation of the transactions contemplated
by this Agreement. Any such tax deferred exchange election by Seller
shall not affect the duties, rights or obligations of the Parties hereunder
except as expressly set forth in this Section 10.12. Seller and
Buyer acknowledge and agree that any assignment of this Agreement to a qualified
intermediary shall not release any Party from any of its liabilities and
obligations to the other Party under this Agreement, and that no Party
represents to the other Party that any particular Tax treatment will be given to
any Party as a result thereof.
40
10.13 Right of
Set-Off.
(a) To
the extent that Seller owes Buyer any amounts (a) after the Closing Date under
Article 8 or (b) under Article 9 upon the termination of this
Agreement, then, in either case, such amounts shall be reduced by and set-off
against any outstanding unpaid amounts due Seller from PVOG LP under the terms
of the Affiliated Purchase Agreement. To the extent that such amounts
owed hereunder are so set off, such amounts shall be discharged promptly and in
all respects. Seller shall promptly give written notice to Buyer of
any set-off effected under this Section 10.13(a).
(b) To
the extent that Buyer owes Seller any amounts (a) after the Closing Date under
Article 8 or (b) under Article 9 upon the termination of this
Agreement, then, in either case, such amounts shall be reduced by and set-off
against any outstanding unpaid amounts due PVOG LP from Seller under the terms
of the Affiliated Purchase Agreement. To the extent that such amounts
owed hereunder are so set off, such amounts shall be discharged promptly and in
all respects. Buyer shall give promptly give written notice to Seller
of any set-off effected under this Section 10.13(b).
[Signature
Page Follows]
41
IN
WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their
respective duly authorized officers as of the date first written
above.
HILCORP
ENERGY I, L.P.
|
||
By:
|
HILCORP
ENERGY COMPANY,
|
|
its
general partner
|
||
By:
|
/s/ Gregory M. Hoffman
|
|
Name:
|
Gregory
M. Hoffman
|
|
Title:
|
Vice
President Business Development
|
|
PENN
VIRGINIA OIL & GAS CORPORATION
|
||
By:
|
/s/ Nancy M. Snyder
|
|
Name:
|
Nancy
M. Snyder
|
|
Title:
|
Vice
President and Chief Administrative
Officer
|
Signature
Page to Hilcorp/PVOG Corp Purchase and Sale Agreement