Attached files
file | filename |
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8-K - 8-K - Harvest Oil & Gas Corp. | v193174_8k.htm |
EX-99.1 - EX-99.1 - Harvest Oil & Gas Corp. | v193174_ex99-1.htm |
AGREEMENT
OF SALE AND PURCHASE
BY
AND AMONG
PETROHAWK
PROPERTIES, LP,
KCS
RESOURCES, LLC
AND
HAWK
FIELD SERVICES, LLC
TOGETHER,
AS SELLER
AND
EV
PROPERTIES, L.P.
AS
PURCHASER
TABLE
OF CONTENTS
ARTICLE
1 PURCHASE AND SALE
|
1
|
Section
1.1 Purchase and Sale
|
1
|
Section
1.2 Assets
|
1
|
Section
1.3 Excluded Assets
|
3
|
Section
1.4 Effective Time; Proration of Costs and
Revenues
|
4
|
Section
1.5 Delivery and Maintenance of Records
|
5
|
ARTICLE
2 PURCHASE PRICE
|
5
|
Section
2.1 Purchase Price
|
5
|
Section
2.2 Adjustments to Purchase Price
|
5
|
Section
2.3 Allocation of Purchase Price
|
7
|
ARTICLE
3 TITLE MATTERS
|
7
|
Section
3.1 Seller's Title
|
7
|
Section
3.2 Definition of Defensible Title
|
7
|
Section
3.3 Definition of Permitted Encumbrances
|
9
|
Section
3.4 Notice of Title Defect Adjustments
|
10
|
Section
3.5 Casualty or Condemnation Loss
|
14
|
Section
3.6 Limitations on Applicability
|
15
|
Section
3.7 Government Approvals Respecting Assets
|
15
|
ARTICLE
4 ENVIRONMENTAL MATTERS
|
16
|
Section
4.1 Assessment
|
16
|
Section
4.2 NORM, Wastes and Other Substances
|
17
|
Section
4.3 Environmental Defects
|
18
|
Section
4.4 Inspection Indemnity
|
19
|
ARTICLE
5 REPRESENTATIONS AND WARRANTIES OF SELLER
|
19
|
Section
5.1 Generally
|
19
|
Section
5.2 Existence and Qualification
|
19
|
Section
5.3 Power
|
19
|
Section
5.4 Authorization and Enforceability
|
20
|
Section
5.5 No Conflicts
|
20
|
Section
5.6 Liability for Brokers' Fees
|
20
|
Section
5.7 Litigation
|
20
|
Section
5.8 Taxes and Assessments
|
20
|
Section
5.9 Compliance with Laws
|
21
|
Section
5.10 Contracts
|
21
|
Section
5.11 Payments for Hydrocarbon Production
|
21
|
Section
5.12 Governmental Authorizations
|
22
|
Section
5.13 Preference Rights and Transfer
Requirements
|
22
|
Section
5.14 Payout Balances
|
22
|
Section
5.15 Outstanding Capital Commitments
|
22
|
i
Section
5.16 Imbalances
|
22
|
Section
5.17 Condemnation
|
23
|
Section
5.18 Bankruptcy
|
23
|
Section
5.19 Production Allowables
|
23
|
Section
5.20 Foreign Person
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23
|
Section
5.21 Collective Bargaining Agreements
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23
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ARTICLE
6 REPRESENTATIONS AND WARRANTIES OF PURCHASER
|
23
|
Section
6.1 Existence and Qualification
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23
|
Section
6.2 Power
|
23
|
Section
6.3 Authorization and Enforceability
|
24
|
Section
6.4 No Conflicts
|
24
|
Section
6.5 Liability for Brokers' Fees
|
24
|
Section
6.6 Litigation
|
24
|
Section
6.7 Limitation and Independent Evaluation
|
24
|
Section
6.8 SEC Disclosure
|
25
|
Section
6.9 Bankruptcy
|
25
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Section
6.10 Qualification
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25
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Section
6.11 Financing
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25
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ARTICLE
7 COVENANTS OF THE PARTIES
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25
|
Section
7.1 Access
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25
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Section
7.2 Government Reviews
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26
|
Section
7.3 Notification of Breaches
|
26
|
Section
7.4 Letters-in-Lieu; Assignments; Operatorship
|
26
|
Section
7.5 Public Announcements
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27
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Section
7.6 Operation of Business
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28
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Section
7.7 Preference Rights and Transfer Requirements
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28
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Section
7.8 Tax Matters
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30
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Section
7.9 Further Assurances; Audit Cooperation
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31
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Section
7.10 Interim Hedging Transactions
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32
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ARTICLE
8 CONDITIONS TO CLOSING
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33
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Section
8.1 Conditions of Seller to Closing
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33
|
Section
8.2 Conditions of Purchaser to Closing
|
33
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ARTICLE
9 CLOSING
|
34
|
Section
9.1 Time and Place of Closing
|
34
|
Section
9.2 Obligations of Seller at Closing
|
35
|
Section
9.3 Obligations of Purchaser at Closing
|
35
|
Section
9.4 Closing Adjustments
|
35
|
ARTICLE
10 TERMINATION
|
36
|
Section
10.1 Termination
|
36
|
Section
10.2 Effect of Termination
|
38
|
ARTICLE
11 POST-CLOSING OBLIGATIONS; INDEMNIFICATION; LIMITATIONS;
DISCLAIMERS AND WAIVERS
|
38
|
ii
Section
11.1 Receipts
|
38
|
Section
11.2 Expenses
|
39
|
Section
11.3 Assumed Seller Obligations
|
39
|
Section
11.4 Survival and Limitations
|
40
|
Section
11.5 Indemnification by Seller
|
41
|
Section
11.6 Indemnification by Purchaser
|
41
|
Section
11.7 Indemnification Proceedings
|
42
|
Section
11.8 Release
|
44
|
Section
11.9 Disclaimers
|
44
|
Section
11.10 Waiver of Trade Practices Acts
|
45
|
Section
11.11 Recording
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46
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ARTICLE
12 MISCELLANEOUS
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46
|
Section
12.1 Counterparts
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46
|
Section
12.2 Notice
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46
|
Section
12.3 Sales or Use Tax Recording Fees and Similar Taxes and
Fees
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48
|
Section
12.4 Expenses
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48
|
Section
12.5 Change of Name
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48
|
Section
12.6 Replacement of Bonds, Letters of Credit and
Guarantees
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48
|
Section
12.7 Threshold for “Material” and “Materiality”
|
48
|
Section
12.8 Governing Law and Venue
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48
|
Section
12.9 Captions
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49
|
Section
12.10 Waivers
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49
|
Section
12.11 Assignment
|
49
|
Section
12.12 Entire Agreement
|
49
|
Section
12.13 Amendment
|
49
|
Section
12.14 No Third-Party Beneficiaries
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49
|
Section
12.15 References
|
49
|
Section
12.16 Construction
|
50
|
Section
12.17 Conspicuousness
|
50
|
Section
12.18 Severability
|
50
|
Section
12.19 Time of Essence
|
50
|
Section
12.20 Limitation on Damages
|
50
|
Section
12.21 Limited Reimbursement Regarding Young and Wytex
Cases
|
51
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Exhibit
A
|
Leases
|
|
Exhibit
A-1
|
Wells,
Future Wells, Units, and Allocated Values
|
|
Exhibit
A-2
|
Equipment
|
|
Exhibit
B
|
Conveyance
for Assets
|
SCHEDULES
Schedule
1.2(d)
|
Contracts
|
|
Schedule
1.2(e)
|
Surface
Contracts
|
|
Schedule
1.2(g)
|
Pipelines
|
|
Schedule
1.2(j)
|
Proprietary
Seismic Data
|
|
Schedule
1.2(k)
|
Vehicles
|
|
Schedule
1.3(d)
|
Excluded
Items
|
|
Schedule
1.4
|
Overhead
Costs
|
|
Schedule
5.1
|
Identification
of Certain Officers and Employees of Seller and Identification of Certain
Officers and Employees of Purchaser
|
|
Schedule
5.7(a)
|
Party
Proceedings
|
|
Schedule
5.7(b)
|
Non-Party
Proceedings
|
|
Schedule
5.8
|
Taxes
and Assessments
|
|
Schedule
5.9
|
Compliance
with Laws
|
|
Schedule
5.10(a)
|
Contract
Matters
|
|
Schedule
5.11
|
Hydrocarbon
Production Payments
|
|
Schedule
5.12
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Governmental
Authorizations
|
|
Schedule
5.13
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Preference
Rights and Transfer Requirements
|
|
Schedule
5.14
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Payout
Balances
|
|
Schedule
5.15
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Outstanding
Capital Commitments
|
|
Schedule
5.16
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Imbalances
|
|
Schedule
7.6
|
Operation
of Business
|
|
Schedule
9.4(c)
|
Petrohawk
Account Information
|
iv
DEFINITIONS
"1031
Assets" has the meaning set forth in Section 7.8(c).
"Actual
Knowledge" has the meaning set forth in Section 5.1(a).
"Adjusted
Purchase Price" shall mean the Purchase Price after calculating and applying the
adjustments set forth in Section 2.2.
"Adjustment
Period" has the meaning set forth in Section 2.2(a).
"AFE"
means authority for expenditure.
"Affiliates"
with respect to any Person, means any Person that directly or indirectly
controls, is controlled by or is under common control with such Person. The
concept of control, controlling or controlled as used in the aforesaid context
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of another, whether through the
ownership of voting securities, by contract or otherwise. No Person shall be
deemed an Affiliate of any Person by reason of the exercise or existence of
rights, interests or remedies under this Agreement.
"Aggregate
Benefit Deductible" has the meaning set forth in Section 3.4(j).
"Aggregate
Defect Deductible" has the meaning set forth in Section 3.4(j).
"Aggregate
Indemnity Deductible" has the meaning set forth in Section 11.4(c).
"Agreed
Accounting Firm" has the meaning set forth in Section 9.4(b).
"Agreement"
means this Agreement of Sale and Purchase.
"Allocated
Value" has the meaning set forth in Section 3.4(a).
"Assets"
has the meaning set forth in Section 1.2.
"Assumed
Seller Obligations" has the meaning set forth in Section 11.3.
"Business
Day" means each calendar day except Saturdays, Sundays, and federal
holidays.
"Calculation
Date" has the meaning set forth in Section 7.10(d).
"CERCLA"
has the meaning set forth in the definition of Environmental Laws.
"Claim
Notice" has the meaning set forth in Section 11.4(b).
"Closing"
has the meaning set forth in Section 9.1(a).
v
"Closing
Date" has the meaning set forth in Section 9.1(b).
"Closing
Payment" has the meaning set forth in Section 9.4(a).
"Code"
means the United States Internal Revenue Code of 1986, as amended.
"Confidentiality
Agreement" has the meaning set forth in Section 7.1(a).
"Contracts"
has the meaning set forth in Section 1.2(d).
"Core
Assets” means that portion of the Assets which are identified on Exhibit A, Exhibit A-1
and Exhibit A-2
as Core Assets.
"Cure
Period" has the meaning set forth in Section 3.4(c).
"Defensible
Title" has the meaning set forth in Section 3.2.
"DTPA"
has the meaning set forth in Section 11.10(a).
"Earned"
has the meaning set forth in Section 1.4(b).
"Effective
Time" has the meaning set forth in Section 1.4(a).
"Environmental
Claim Date" has the meaning set forth in Section 4.3.
"Environmental
Defect" has the meaning set forth in Section 4.3.
"Environmental
Defect Amount" has the meaning set forth in Section 4.3.
"Environmental
Defect Notice" has the meaning set forth in Section 4.3.
"Environmental
Laws" means, as the same may have been amended, any federal, state or local law
relating to (i) the control of any potential pollutant or protection of the
environment, including air, water or land, (ii) the generation, handling,
treatment, storage, disposal or transportation of waste materials, or
(iii) the regulation of or exposure to hazardous, toxic or other substances
alleged to be harmful, including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq. ("CERCLA"); the
Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq. ("RCRA"); the Federal
Water Pollution Control Act, 33 U.S.C. § 1251 et seq.; the Clean Air Act,
42 U.S.C. § 7401 et
seq. the Hazardous Materials Transportation Act, 49 U.S.C. § 1471 et seq.; the Toxic Substances
Control Act, 15 U.S.C. §§ 2601 through 2629; the Oil Pollution Act, 33 U.S.C. §
2701 et seq.; the
Emergency Planning and Community Right-to-Know Act, 42 U.S.C. § 11001 et seq.; the Safe Drinking
Water Act, 42 U.S.C. §§ 300f through 300j; the Federal Insecticide, Fungicide
and Rodenticide Act, 7 U.S.C. § 136 et seq.; the Occupational Safety and Health
Act, 29 U.S.C. § 651 et
seq.; the Atomic Energy Act, 42 U.S.C. § 2011 et seq. (“AEA”); and all
applicable related law, whether local, state, territorial, or national, of any
Governmental Body having jurisdiction over the property in question addressing
pollution or protection of human health, safety, natural resources or the
environment and all regulations implementing the foregoing. The term
"Environmental Laws" includes all judicial and administrative decisions, orders,
directives, and decrees issued by a Governmental Body pursuant to the
foregoing.
vi
"Environmental
Liabilities" shall mean any and all environmental response costs (including
costs of remediation), damages, natural resource damages, settlements,
consulting fees, expenses, penalties, fines, orphan share, prejudgment and
post-judgment interest, court costs, attorneys' fees, and other liabilities
incurred or imposed (i) pursuant to any order, notice of responsibility,
directive (including requirements embodied in Environmental Laws), injunction,
judgment or similar act (including settlements) by any Governmental Body to the
extent arising out of any violation of, or remedial obligation under, any
Environmental Laws which are attributable to the ownership or operation of
the Assets prior to the Effective Time or (ii) pursuant to any
claim or cause of action by a Governmental Body or other Person for personal
injury, property damage, damage to natural resources, remediation or response
costs to the extent arising out of any violation of, or any remediation
obligation under, any Environmental Laws which is attributable to the ownership
or operation of the Assets prior to the Closing.
"Event"
has the meaning set forth in definition of Material Adverse Effect.
"Exchange
Act" means the Securities Exchange Act of 1934, as amended, together with the
rules and regulations of the SEC promulgated thereunder.
"Excluded
Assets" has the meaning set forth in Section 1.3.
"Excluded
Seller Obligations" has the meaning set forth in Section 11.3.
"Final
Purchase Price" has the meaning set forth in Section 9.4(b).
"Final
Settlement Date" has the meaning set forth in Section 9.4(b).
"Fundamental
Representations" has the meaning set forth in Section 11.4(a).
"Future
Well" means a well that may be drilled in the future on a Future Well Location,
which (for the purposes of determining Defensible Title thereto and any Title
Defects associated therewith pursuant to this Agreement) shall be treated as if
such well had been drilled and completed and was in existence at or prior to the
date of this Agreement.
"Future
Well Location" means each drilling location identified on Exhibit A-1, subject to
any depth restriction set forth in such Exhibit A-1 with respect
to such location.
vii
"GAAP"
means generally accepted accounting principles in effect in the United States as
amended from time to time.
"Governmental
Authorizations" has the meaning set forth in Section 5.12.
"Governmental
Body" or "Governmental Bodies" means any federal, state, local, municipal, or
other government; any governmental, regulatory or administrative agency,
commission, body, arbitrator or arbitration panel or other authority exercising
or entitled to exercise any administrative, executive, judicial, legislative,
police, regulatory or taxing authority or power; and any court or governmental
tribunal.
"Hazardous
Material" means (i) any "hazardous substance," as defined by CERCLA,
(ii) any "hazardous waste" or "solid waste," in either case as defined by
RCRA, and any analogous state statutes, and any regulations promulgated
thereunder, (iii) any solid, hazardous, dangerous or toxic chemical,
material, waste or substance, within the meaning of and regulated by any
applicable Environmental Laws, (iv) any radioactive material, including any
naturally occurring radioactive material, and any source, special or byproduct
material as defined in AEA and any amendments or authorizations thereof,
(v) any regulated asbestos-containing materials in any form or condition,
(vi) any regulated polychlorinated biphenyls in any form or condition, and
(vii) petroleum, petroleum hydrocarbons or any fraction or byproducts
thereof.
"HFS”
means Hawk Field Services, LLC, an Oklahoma limited liability
company.
"Hydrocarbons"
means oil, gas, casinghead gas, condensate, natural gas liquids, and other
gaseous and liquid hydrocarbons or any combination thereof and sulphur and other
minerals extracted from or produced with the foregoing.
"Imbalance"
or "Imbalances" means any over-production, under-production, over-delivery,
under-delivery or similar imbalance of Hydrocarbons produced from or allocated
to the Assets, regardless of whether such over-production, under-production,
over-delivery, under-delivery or similar imbalance arises at the wellhead,
pipeline, gathering system, transportation system, processing plant or other
location.
"incurred"
has the meaning set forth in Section 1.4(b).
"Indemnified
Party" has the meaning set forth in Section 11.7(a).
"Indemnifying
Party" has the meaning set forth in Section 11.7(a).
"Indemnity
Agreement" has the meaning set forth in Section 3.4(d)(ii).
"Independent
Expert" has the meaning set forth in Section 4.3.
"Individual
Indemnity Threshold” has the meaning set forth in Section 11.4(c)
"Individual
Benefit Threshold" has the meaning set forth in Section 3.4(j).
"Individual
Environmental Threshold" has the meaning set forth in Section 4.3.
viii
"Individual
Title Threshold" has the meaning set forth in Section 3.4(j).
"KCS”
means KCS Resources, LLC, a Delaware limited liability company.
"Lands"
has the meaning set forth in Section 1.2(a).
"Laws"
means all statutes, laws, rules, regulations, ordinances, orders, decrees and
codes of Governmental Bodies.
"Leases"
has the meaning set forth in Section 1.2(a).
"Like-Kind
Exchange" has the meaning set forth Section 7.8(c).
"Losses"
means any and all debts, obligations and other liabilities (whether absolute,
accrued, contingent, fixed or otherwise, or whether known or unknown, or due or
to become due or otherwise), diminution in value, monetary damages, fines, fees,
Taxes, penalties, interest obligations, deficiencies, losses and expenses
(including amounts paid in settlement, interest, court costs, costs of
investigators, reasonable fees and expenses of attorneys, accountants, financial
advisors and other experts, and other actual out of pocket expenses incurred in
investigating and preparing for or in connection with any Proceeding); however,
excluding special, punitive, exemplary, consequential or indirect damages,
except to the extent a party is required to pay such damages to a third party in
connection with a matter for which such party is entitled to indemnification
under Article
11.
"Lowest
Cost Response" means the response required or allowed under Environmental Laws
that addresses the condition present at the lowest cost (considered as a whole
taking into consideration any material negative impact such response may have on
the operations of the relevant assets and any potential material additional
costs or liabilities that may likely arise as a result of such response) as
compared to any other response that is required or allowed under Environmental
Laws.
"Material
Adverse Effect" means, with respect to Seller, any change, inaccuracy,
circumstance, effect, event, result, occurrence, condition or fact (each an
"Event") (whether or not (i) foreseeable or known as of the date of this
Agreement or (ii) covered by insurance) that has had, or could reasonably
be expected to have, a material adverse effect on (i) the ownership,
operation or value of the Assets, taken as a whole, or (ii) the ability of
Seller to consummate the transactions contemplated hereby. “Material Adverse
Effect” means, with respect to Purchaser, any Event (whether or not
(i) foreseeable or known as of the date of this Agreement or
(ii) covered by insurance) that has had, or could reasonably be expected to
have, a material adverse effect on the ability of Purchaser to consummate the
transactions contemplated hereby. Excluded from such Events for the purposes of
determining whether a "Material Adverse Effect" has occurred or could reasonably
be expected to occur are (A) Events resulting from entering into this
Agreement or the announcement of the transactions contemplated by this
Agreement, (B) Events resulting from changes in general market, economic,
financial or political conditions or any outbreak of hostilities or war or
terrorist events, (C) Events that affect the Hydrocarbon exploration,
production, development, processing, gathering and/or transportation industry
generally (including changes in commodity prices or general market prices in the
Hydrocarbon exploration, production, development, processing, gathering and/or
transportation industry generally), (D) any effect resulting from a change
in Laws or regulatory policies, and (E) the consequences of drilling and
production operations (including but not limited to depletion, the watering out
of any Well(s), collapsed casing or sand infiltration of any Well(s), sidetrack
drilling operations on any Well(s), drilling results of any Well(s), and the
depreciation of personal property due to ordinary wear and tear with respect to
the Assets).
ix
"Material
Contracts" has the meaning set forth in Section 5.10.
"Net
Revenue Interest" has the meaning set forth in Section 3.2(a).
"Non-Core
Assets” means the portion of the Assets which are identified on Exhibit A, Exhibit A-1
and Exhibit A-2
as Non-Core Assets.
"NORM"
means naturally occurring radioactive material.
"Notice
Period" has the meaning set forth in Section 11.7(a).
"PEC"
means Petrohawk Energy Corporation, a Delaware corporation and ultimate parent
of Seller.
"Permitted
Encumbrances" has the meaning set forth in Section 3.3.
"Person"
means any individual, firm, corporation, partnership, limited liability company,
joint venture, association, trust, unincorporated organization, Governmental
Body or any other entity.
"Petrohawk
Properties” means Petrohawk Properties, LP, a Texas limited
partnership.
"Personal
Property" has the meaning set forth in Section 1.2(g).
"Pipelines"
has the meaning set forth in Section 1.2(g).
"Preference
Property" has the meaning set forth in Section 7.7(b).
"Preference
Right" means any right or agreement that enables any Person to purchase or
acquire any Asset or any interest therein or portion thereof as a result of or
in connection with (i) the sale, assignment or other transfer of any Asset
or any interest therein or portion thereof or (ii) the execution or
delivery of this Agreement or the consummation or performance of the terms and
conditions contemplated by this Agreement.
"Proceeding"
or "Proceedings" has the meaning set forth in Section 5.7.
"Properties"
has the meaning set forth in Section 1.2(c).
"Property
Costs" has the meaning set forth in Section 1.4(b).
"Purchase
Price" has the meaning set forth in Section 2.1.
"Purchaser"
has the meaning set forth in the preamble hereto.
x
"Purchaser
Indemnified Persons" has the meaning set forth in Section 11.5.
"Qualified
Intermediary" has the meaning set forth in Section 7.8(c).
"Records"
has the meaning set forth in Section 1.2(i).
"REGARDLESS OF FAULT" means
WITHOUT REGARD TO THE CAUSE OR
CAUSES OF ANY CLAIM, INCLUDING, WITHOUT LIMITATION, EVEN THOUGH A CLAIM IS
CAUSED IN WHOLE OR IN PART BY:
OTHER
THAN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, THE NEGLIGENCE (WHETHER SOLE,
JOINT, CONCURRENT, COMPARATIVE, CONTRIBUTORY, ACTIVE OR PASSIVE), STRICT
LIABILITY, OR OTHER FAULT OF THE SELLER INDEMNIFIED PERSONS; AND/OR
A
PRE-EXISTING DEFECT, WHETHER PATENT OR LATENT, OF THE PREMISES OF PURCHASER'S
PROPERTY OR SELLER'S PROPERTY (INCLUDING WITHOUT LIMITATION THE ASSETS),
INVITEES AND/OR THIRD PARTIES; AND/OR
THE
UNSEAWORTHINESS OF ANY VESSEL OR UNAIRWORTHINESS OF ANY AIRCRAFT OF A PARTY
WHETHER CHARTERED, OWNED, OR PROVIDED BY THE PURCHASER INDEMNIFIED PERSONS,
SELLER INDEMNIFIED PERSONS, INVITEES AND/OR THIRD PARTIES.
"Retained
Asset" has the meaning set forth in Section 7.7(c).
"Retained
Employee Liabilities" shall mean any liabilities of Seller (i) to employees
of Seller arising under the Worker Adjustment Retraining Notification Act of
1988 as a result of actions taken by Seller prior to the Closing,
(ii) arising out of claims by Seller employees with respect to events that
occur prior to the Closing and that relate to their employment with, or the
terminations of their employment from, Seller, (iii) with respect to
employees of Seller arising under any "employee benefit plan" (as defined in
Section 3(3) of ERISA) that is sponsored by, contributed to, or maintained
by, Seller, or (iv) arising under ERISA for which Purchaser may have any
liability under ERISA solely as a result of the consummation of the transaction
contemplated by this Agreement.
"Retention
Notice" has the meaning set forth in Section 7.10(d).
"SEC” means the U.S.
Securities and Exchange Commission.
"Securities
Act" means the Securities Act of 1933, as amended, together with the rules and
regulations of the SEC promulgated thereunder.
"Seller"
has the meaning set forth in the preamble hereto.
xi
"Seller
Indemnified Persons" has the meaning set forth in Section 11.6.
"Seller
Operated Assets" means Assets operated by Seller or an Affiliate of
Seller.
"Surface
Contracts" has the meaning set forth in Section 1.2(e).
"Taxes"
means all federal, state, local, and foreign income, profits, franchise, sales,
use, ad valorem, property, severance, production, excise, stamp, documentary,
real property transfer or gain, gross receipts, goods and services,
registration, capital, transfer, or withholding taxes or other governmental fees
or charges imposed by any Governmental Body, including any interest, penalties
or additional amounts which may be imposed with respect thereto.
"Tax
Returns" has the meaning set forth in Section 5.8(a).
"Termination
Date" has the meaning set forth in Section 10.1(b)(i).
"Termination
Cost" has the meaning set forth in Section 7.10(d).
"Third
Party Claim" has the meaning set forth in Section 11.7(a).
"Title
Benefit Notice" has the meaning set forth in Section 3.4(b).
"Title
Claim Date" has the meaning set forth in Section 3.4(a).
"Title
Defect" has the meaning set forth in Section 3.2(d).
"Title
Defect Amount" has the meaning set forth in Section 3.4(d)(i).
"Title
Defect Notice" has the meaning set forth in Section 3.4(a).
"Title
Defect Property" has the meaning set forth in Section 3.4(a).
"Title
Expert" has the meaning set forth in Section 3.4(i).
"Transfer
Requirement" means any consent, approval, authorization or permit of, or filing
with or notification to, any Person which is required to be obtained, made or
complied with for or in connection with any sale, assignment or transfer of any
Asset or any interest therein; provided, however, that "Transfer Requirement"
shall not include any consent of, notice to, filing with, or other action by any
Governmental Body in connection with the sale or conveyance of oil and/or gas
leases or interests therein or Surface Contracts or interests therein, if they
are not required prior to the assignment of such oil and/or gas leases, Surface
Contracts or interests or they are customarily obtained subsequent to the sale
or conveyance (including consents from state agencies).
"Transfer
Taxes" has the meaning set forth in Section 12.3.
xii
"Units"
has the meaning set forth in Section 1.2(c).
"Unwind
Notice" has the meaning set forth in Section 7.10(d).
"Warranty
Well" means a Well or a Future Well, as the context requires.
"Wytex
Case" has the meaning set forth in Section 12.21.
"Young
Case" has the meaning set forth in Section 12.21.
xiii
AGREEMENT
OF SALE AND PURCHASE
This
Agreement of Sale and Purchase is executed on August 9, 2010, by and among
Petrohawk Properties, LP, a Texas limited partnership, KCS Resources, LLC, a
Delaware limited liability company and Hawk Field Services, LLC, an Oklahoma
limited liability company (together "Seller"), and EV Properties, L.P., a
Delaware limited partnership ("Purchaser").
RECITALS
A. Seller
owns the Assets as more fully described in Section 1.2 and the
exhibits hereto.
B. Seller
desires to sell to Purchaser and Purchaser desires to purchase from Seller the
properties and rights of Seller hereafter described, in the manner and upon the
terms and conditions hereafter set forth.
NOW,
THEREFORE, in consideration of the premises and of the mutual promises,
representations, warranties, covenants, conditions and agreements contained
herein, and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally bound
by the terms hereof, agree as follows:
ARTICLE
1
PURCHASE
AND SALE
Section
1.1 Purchase and
Sale. At
the Closing, and upon the terms and subject to the conditions of this Agreement,
Seller agrees to sell, transfer and convey the Assets to Purchaser and Purchaser
agrees to purchase, accept and pay for the Assets and to assume the Assumed
Seller Obligations.
Section
1.2 Assets. As
used herein, the term "Assets" means, subject to the terms and conditions of
this Agreement, all of Seller's right, title, interest and estate, in and to the
following (but excluding the Excluded Assets):
(a) All
of the oil and gas leases; subleases and other leaseholds; interests in fee;
carried interests; reversionary interests; net profits interests; royalty
interests; overriding royalty interests; forced pooled interests; farmout
rights; options; mineral interests and other properties and interests described
on Exhibit A,
subject to such depth limitations and other restrictions as may be set forth in
the oil and gas leases or other agreements of record (collectively, the
"Leases"), together with each and every kind and character of right, title,
claim, and interest that Seller has in and to the lands covered by the Leases
and the interests currently pooled, unitized, communitized or consolidated
therewith (the "Lands");
(b) All
oil, gas, water or injection wells located on the Lands, whether producing,
shut-in, or temporarily abandoned, including but not limited to the interests in
the wells shown on Exhibit A-1 attached
hereto (collectively, the "Wells");
(c) All
leasehold interests of Seller in or to any currently existing pools or units
which include any Lands or all or a part of any Leases or include any Wells,
including those pools or units related to the Properties and associated with the
Wells shown on Exhibit A-1 (the "Units";
the Units, together with the Leases, Lands and Wells, being hereinafter referred
to as the "Properties"), and including all leasehold interests of Seller in
production of Hydrocarbons from any such Unit, whether such Unit production of
Hydrocarbons comes from Wells located on or off of a Lease, and all tenements,
hereditaments and appurtenances belonging to the Leases and Units;
(e) All
easements, permits, licenses, servitudes, rights-of-way, surface leases and
other surface rights ("Surface Contracts") appurtenant to, and used or held for
use in connection with the Properties (including those identified on Schedule 1.2(e)), but
excluding any permits and other rights to the extent transfer would result in a
violation of applicable Law or is restricted by any Transfer Requirement that is
not waived by Purchaser or satisfied pursuant to Section 7.7;
(f) All
treatment and processing plants and equipment, machinery, fixtures and other
tangible personal property and improvements located on the Properties or used or
held for use in connection with the operation of the Properties, including those
identified on Exhibit A-2
("Equipment");
(g) All
flow lines, pipelines, gathering systems and appurtenances thereto located on
the Properties or used, or held for use, in connection with the operation of the
Properties, including those identified on Schedule 1.2(g)
("Pipelines" and, together with the Equipment and Wells, "Personal
Property");
(h) All
Hydrocarbons produced from or attributable to the Leases, Lands, and Wells from
and after the Effective Time, together with Imbalances associated with the
Properties;
2
(i) All
lease files, land files, well files, gas and oil sales contract files, gas
processing and transportation files, division order files, abstracts, title
opinions, land surveys, logs, maps, engineering data and reports, interpretive
data, technical evaluations and technical outputs, and other books, records,
data, files, and accounting records, including but not limited to records
showing all funds payable to owners of working interests, royalties and
overriding royalties and other interests in the Properties held in suspense by
Seller as of the Closing Date, in each case to the extent related to the
Properties, or used or held for use in connection with the maintenance or
operation thereof, but excluding (i) any books, records, data, files, logs,
maps, evaluations, outputs, and accounting records to the extent disclosure or
transfer would result in a violation of applicable Law or is restricted by any
Transfer Requirement that is not satisfied pursuant to Section 7.7,
(ii) computer or communications software or intellectual property
(including tapes, codes, data and program documentation and all tangible
manifestations and technical information relating thereto),
(iii) attorney-client privileged communications and work product of
Seller's or any of its Affiliates' legal counsel (other than title opinions),
(iv) third party reserve reports and evaluations, and (v) records relating to
the marketing, negotiation, and consummation of the sale of the Assets (subject
to such exclusions, the "Records"); provided, however, that Seller may retain
the originals of such Records as Seller has reasonably determined may be
required for existing litigation, tax, accounting, and auditing
purposes;
(j) To
the extent transferable, and subject to payment by Purchaser of all third party
transfer and license fees, all geological and geophysical data (including all
seismic data, as well as reprocessed data) related exclusively to the
Properties, including those items identified in Schedule 1.2(j);
(k) All
vehicles identified on Schedule
1.2(k); and
(l) All
funds payable to owners of working interests, royalties and overriding royalties
and other interests in the Properties held in suspense by Seller as of the
Closing Date.
Section
1.3 Excluded
Assets. Notwithstanding the foregoing, the Assets shall not
include, and there is excepted, reserved and excluded from the transaction
contemplated hereby (collectively, the "Excluded Assets"):
(a) except
to the extent necessary to satisfy Seller's obligations under Section 7.1, (i) all
corporate, financial, income and franchise tax and legal records of Seller that
relate to Seller's business generally (whether or not relating to the Assets),
(ii) all books, records and files that relate to the Excluded Assets,
(iii) those records retained by Seller pursuant to Section 1.2(i) and
(iv) copies of any other Records retained by Seller pursuant to Section 1.5;
(b) all
rights to any refund related to the Excluded Seller Obligations or Taxes or
other costs or expenses borne by Seller or Seller's predecessors in interest and
title attributable to periods prior to the Effective Time;
(c) Seller's
area-wide bonds, permits and licenses or other permits, licenses or
authorizations used in the conduct of Seller's business generally;
(d) those
items listed in Schedule 1.3(d);
(e) all
trade credits, accounts receivable, notes receivable, take-or-pay amounts
receivable, pre-paid expenses and deposits, and other receivables attributable
to the Assets with respect to any period of time prior to the Effective
Time;
(f) all
right, title and interest of Seller in and to vehicles used in connection with
the Assets, other than those identified on Schedule
1.2(k);
3
(g) all
rights, titles, claims and interests of Seller or any Affiliate of Seller
(i) to or under any policy or agreement of insurance or any insurance
proceeds; except to the extent provided in Section 3.5, and
(ii) to or under any bond or bond proceeds;
(h) subject
to Section 12.5,
any patent, patent application, logo, service mark, copyright, trade name or
trademark of or associated with Seller or any Affiliate of Seller or any
business of Seller or of any Affiliate of Seller;
(i) a
nonexclusive right to freely use any copies of any logs, interpretive data,
technical outputs, technical evaluations, maps, engineering data and reports,
and other data and information being transferred as a part of the Assets that
Seller is entitled to retain pursuant to Section 1.5;
and
(j) all
Retained Assets not conveyed to Purchaser pursuant to Section 7.7 and any
Property excluded pursuant to Section 3.4(d)(iii)
Section
1.4 Effective Time;
Proration of Costs and Revenues.
(a) Subject
to Section 1.5,
possession of the Assets shall be transferred from Seller to Purchaser at the
Closing, but certain financial benefits and burdens of the Assets shall be
transferred effective as of 7:00 A.M., local time, where the respective
Assets are located, on July 1, 2010 (the "Effective Time"), as
described below.
(b) Purchaser
shall be entitled to all Hydrocarbon production from or attributable to the
Properties at and after the Effective Time (and all products and proceeds
attributable thereto), and to all other income, proceeds, receipts and credits
earned with respect to the Assets at or after the Effective Time, and shall be
responsible for (and entitled to any refunds with respect to) all Property Costs
incurred at and after the Effective Time. Seller shall be entitled to all
Hydrocarbon production from or attributable to the Properties prior to the
Effective Time (and all products and proceeds attributable thereto), and to all
other income, proceeds, receipts and credits earned with respect to the Assets
prior to the Effective Time, and shall be responsible for (and entitled to any
refunds with respect to) all Property Costs incurred prior to the Effective
Time. "Earned" and "incurred", as used in this Agreement, shall be interpreted
in accordance with GAAP and Council of Petroleum Accountants Society (COPAS)
standards, as applicable. "Property Costs" means all costs attributable to the
ownership and operation of the Assets (including without limitation costs of
insurance relating specifically to the Assets and ad valorem, property,
severance, Hydrocarbon production and similar Taxes based upon or measured by
the ownership or operation of the Assets or the production of Hydrocarbons
therefrom, but excluding any other Taxes) and capital expenditures incurred in
the ownership and operation of the Assets and, where applicable, in accordance
with the relevant operating or unit agreement, if any, and overhead costs
charged to the Assets under the relevant operating agreement or unit agreement,
if any, and regardless of whether charged by an Affiliate of Seller or by a
third party, or, if none, the amounts shown under Schedule 1.4 shall be the
overhead amounts deemed charged to the Assets. For purposes of this
Section 1.4,
determination of whether Property Costs are attributable to the period before or
after the Effective Time shall be based on when services are rendered, when the
goods are delivered, or when the work is performed. For clarification, the date
an item or work is ordered is not the date of a pre-Effective Time transaction
for settlement purposes, but rather the date on which the item ordered is
delivered to the job site, or the date on which the work ordered is performed,
shall be the relevant date. For purposes of allocating Hydrocarbon production
(and accounts receivable with respect thereto), under this Section 1.4,
(i) liquid Hydrocarbons shall be deemed to be "from or attributable to" the
Properties when they are placed into the storage facilities and
(ii) gaseous Hydrocarbons shall be deemed to be "from or attributable to"
the Properties when they pass through the delivery point sales meters on the
pipelines through which they are transported. Seller shall utilize reasonable
interpolative procedures to arrive at an allocation of Hydrocarbon production
when exact meter readings or gauging and strapping data is not available. Seller
shall provide to Purchaser, no later than five (5) Business Days prior to
Closing, all data necessary to support any estimated allocation, for purposes of
establishing the adjustment to the Purchase Price pursuant to Section 2.2 hereof that
will be used to determine the Closing Payment. Property Costs that are paid
periodically shall be prorated based on the number of days in the applicable
period falling before and the number of days in the applicable period falling at
or after the Effective Time, except that Hydrocarbon production, severance and
similar Taxes shall be prorated based on the number of units actually produced,
purchased or sold or proceeds of sale, as applicable, before, and at or after,
the Effective Time. In each case, Purchaser shall be responsible for the portion
allocated to the period at and after the Effective Time and Seller shall be
responsible for the portion allocated to the period before the Effective
Time.
4
Section
1.5 Delivery and
Maintenance of Records. Seller shall deliver the Records (FOB
Seller's office) to Purchaser within fifteen (15) days following Closing.
Other than any original Records retained by Seller pursuant to Section 1.2(i), Purchaser
shall be entitled to all original Records maintained by Seller. Seller shall be
entitled to keep a copy or copies of all Records; provided, however, that Seller
shall not sell or otherwise allow third parties to review, copy or otherwise use
any Records retained by Seller except as required by law or permitted in
connection with a transfer pursuant to Section 12.10. Purchaser shall preserve
the Records for a period of seven (7) years following the Closing and will
allow Seller and its representatives, consultants and advisors reasonable
access, during normal business hours and upon reasonable notice, to the Records
for any legitimate business reason of Seller, including in order for Seller to
comply with a Tax or other legally required reporting obligation or Tax or legal
dispute. Any such access shall be at the sole cost and expense of
Seller. Unless otherwise consented to in writing by Seller, for a period of
seven (7) years following the Closing Date, Purchaser shall not and shall
cause its Affiliates not to, destroy, alter or otherwise dispose of the Records,
or any portions thereof, without first giving at least thirty (30) days
prior written notice to Seller and offering to surrender to Seller the Records
or such portions thereof.
ARTICLE
2
PURCHASE
PRICE
Section
2.1 Purchase
Price. The purchase price for the Assets (the "Purchase
Price") shall be $123,000,000 adjusted as provided in Section 2.2.
Section
2.2 Adjustments to
Purchase Price. The Purchase Price for the Assets shall be
adjusted in the manner specified below (without duplication), with all such
amounts being determined in accordance with GAAP and COPAS standards, as
applicable, in order to reach the Adjusted Purchase Price:
5
(a) Reduced
by the aggregate amount of the following proceeds received by Seller between
(and including) the Effective Time and the Closing Date (with the period between
the Effective Time and the Closing Date referred to as the "Adjustment Period"):
(i) proceeds from the sale of Hydrocarbons (net of any royalties,
overriding royalties or other burdens on or payable out of production,
gathering, processing and transportation costs and any production, severance,
sales, excise or similar Taxes not reimbursed to Seller by the purchaser of
production) produced from or attributable to the Properties during the
Adjustment Period, and (ii) other proceeds earned with respect to the
Assets during the Adjustment Period;
(b) Reduced
to the extent provided in Section 7.7 with respect
to Preference Rights and Retained Assets;
(c) (i) If
the parties make the election under Section 3.4(d)(i) with
respect to a Title Defect, subject to the Individual Title Threshold and the
Aggregate Defect Deductible, reduced by the Title Defect Amount with respect to
such Title Defect if the Title Defect Amount has been determined prior to
Closing and (ii) subject to the Individual Benefit Threshold and the
Aggregate Benefit Deductible, increased by the Title Benefit Amount with respect
to each Title Benefit for which the Title Benefit Amount has been determined
prior to Closing;
(d) Increased
by the amount of all Property Costs and other costs attributable to the
ownership and operation of the Assets which are paid by Seller and incurred
during the Adjustment Period (including any overhead costs under Schedule 1.4 deemed
charged to the Assets with respect to the Adjustment Period even though not
actually paid), except any Property Costs and other such costs already deducted
in the determination of proceeds in Section 2.2(a);
(e) Reduced
to the extent provided in Section 3.4(d)(iii) for
any Properties excluded from the Assets pursuant to Section 3.4(d)(iii) and
reduced to the extent provided in Section 4.3 for
Environmental Defects;
(f) Increased
or reduced as mutually agreed upon in writing prior to Closing by Seller and
Purchaser;
(g) Increased
by the value of the amount of any and all Hydrocarbons stored in tanks and
pipelines attributable to the ownership and operation of the Assets that belong
to Seller as of the Effective Time (which value shall be computed at the
applicable third-party contract prices for the month of June 2010 for such
stored Hydrocarbons);
(h) Reduced
or increased, as the case may be, by the actual net aggregate Imbalances, if
any, owed by Seller to third parties, or third parties to Seller, as of the
Effective Time, multiplied by a price of $3.00 per MMBtu;
(i) Increased
by the amount of the funds transferred pursuant to Section 1.2(l);
and
Each
adjustment made pursuant to Section 2.2(a) shall
serve to satisfy, up to the amount of the adjustment, Purchaser's entitlement
under Section 1.4
to Hydrocarbon production from or attributable to the Properties during the
Adjustment Period, and to the value of other income, proceeds, receipts and
credits earned with respect to the Assets during the Adjustment Period, and as
such, Purchaser shall not have any separate rights to receive any Hydrocarbon
production or income, proceeds, receipts and credits with respect to which an
adjustment has been made. Similarly, the adjustment described in Section 2.2(d) shall
serve to satisfy, up to the amount of the adjustment, Purchaser's obligation
under Section 1.4
to pay Property Costs and other costs attributable to the ownership and
operation of the Assets which are incurred during the Adjustment
Period.
6
Section
2.3 Allocation of
Purchase Price. The Allocated Values are contained in Exhibit
A-1. Purchaser shall be responsible for assigning the
Allocated Values, subject to Seller’s right to review the Allocated Values for
reasonableness.
ARTICLE
3
TITLE
MATTERS
Section 3.1 Seller's
Title.
(a) PURCHASER ACKNOWLEDGES THAT THE SOLE
AND EXCLUSIVE REMEDY FOR TITLE DEFECTS SHALL BE AS SET FORTH IN SECTION
3.4.
(b) The
assignment and conveyance documents to be delivered by Seller to Purchaser shall
be substantially in the form of Exhibit B hereto (the
"Conveyance"), which shall disclaim warranty of title except for those claiming
by, through or under Seller.
(c) Notwithstanding
anything herein provided to the contrary, if a Title Defect under this Article 3 results from
any matter which could also result in the breach of any representation or
warranty of Seller set forth in Article 5, then Purchaser
shall only be entitled to assert such matter as a Title Defect to the extent
permitted by this Article 3, and shall be
precluded from also asserting such matter as the basis of the breach of any
representation or warranty.
Section
3.2 Definition of
Defensible Title. As used in this Agreement, the term
"Defensible Title" means that title of Seller with respect to the Units,
Warranty Wells or other Assets shown in Exhibit A-1 that, except
for and subject to Permitted Encumbrances:
(a) Entitles
Seller to receive a share of the Hydrocarbons produced, saved and marketed from
any Unit, Warranty Well or other Asset shown in Exhibit A-1 throughout
the duration of the productive life of such Unit, Warranty Well or other Asset
(after satisfaction of all royalties, overriding royalties, net profits
interests or other similar burdens on or measured by production of Hydrocarbons)
(a "Net Revenue Interest"), of not less than the Net Revenue Interest shown in
Exhibit A-1 for
such Unit, Warranty Well or other Asset, except (solely to the extent that such
actions do not cause a breach of Seller's covenants under Section 7.6) for
decreases in connection with those operations in which Seller may from and after
the Effective Time become a non-consenting co-owner, decreases resulting from
the establishment or amendment from and after the Effective Time of pools or
units, and decreases required to allow other working interest owners to make up
past underproduction of Hydrocarbons or pipelines to make up past under
deliveries of Hydrocarbons, and except as stated in such Exhibit A-1;
(b) Obligates
Seller to bear a percentage of the costs and expenses for the maintenance and
development of, and operations relating to, (i) any Unit, Warranty Well or
other Asset shown in Exhibit A-1 not greater
than the "working interest" shown in Exhibit A-1 for such
Unit, Warranty Well or other Asset without increase throughout the productive
life of such Unit, Warranty Well or other Asset, except as stated in Exhibit A-1 and except
for increases resulting from contribution requirements with respect to
non-consenting or defaulting co-owners under applicable operating agreements and
increases that are accompanied by at least a proportionate increase in Seller's
Net Revenue Interest; and
7
(c) Is
free and clear of liens, encumbrances, obligations, security interests,
irregularities, pledges, or other defects.
(d) As
used in this Agreement, the term "Title Defect" means any lien, charge,
encumbrance, obligation (including contract obligation), defect, or other matter
(including without limitation a discrepancy in Net Revenue Interest or working
interest) that causes Seller not to have Defensible Title in and to the Units,
Warranty Wells or other Assets shown on Exhibit A-1 as of the
Effective Time and the Closing. As used in this Agreement, the term "Title
Benefit" shall mean any right, circumstance or condition that operates to
increase the Net Revenue Interest of Seller in any Unit, Warranty Well or other
Asset shown on Exhibit A-1, without
causing a greater than proportionate increase in Seller's working interest above
that shown in Exhibit A-1 as of the
Effective Time. Notwithstanding the foregoing, the following shall not be
considered Title Defects:
|
(i)
|
defects
based solely on (1) lack of information in Seller's files, or
(2) references to a document(s) if such document(s) is not in
Seller's files;
|
|
(ii)
|
defects
arising out of lack of corporate or other entity authorization unless
Purchaser provides affirmative written evidence that the action was not
authorized and results in another Person’s superior claim of
title;
|
|
(iii)
|
defects
based on failure to record Leases issued by any state or federal
Governmental Body, or any assignments of such Leases, in the real
property, conveyance or other records of the county in which such Property
is located;
|
|
(iv)
|
Intentionally
Deleted.
|
|
(v)
|
defects
arising out of lack of survey, unless a survey is expressly required by
applicable Laws;
|
|
(vi)
|
defects
in the chain of title consisting of the failure to recite marital status
in a document or omissions of successions of heirship or estate
proceedings, unless Purchaser provides affirmative evidence that such
failure or omission has resulted in another Person’s superior claim of
title; and
|
|
(vii)
|
defects
that have been cured by applicable Laws of limitation or
prescription.,
|
8
Section
3.3 Definition of
Permitted Encumbrances.
As used
herein, the term "Permitted Encumbrances" means any or all of the
following:
(a) Royalties
and any overriding royalties, reversionary interests, net profit interests,
production payments, carried interests, and other burdens, to the extent that
any such burden does not reduce Seller's Net Revenue Interest below that shown
in Exhibit A-1 or
increase Seller's working interest above that shown in Exhibit A-1 without a
proportionate increase in the Net Revenue Interest;
(b) All
Leases, unit agreements, pooling agreements, operating agreements, Hydrocarbon
production sales contracts, division orders and other contracts, agreements and
instruments applicable to the Assets, to the extent that they do not,
individually or in the aggregate, reduce Seller's Net Revenue Interest below
that shown in Exhibit A-1 or increase
Seller's working interest above that shown in Exhibit A-1 without a
proportionate increase in the Net Revenue Interest;
(c) Preference
Rights applicable to this or any future transaction, to the extent such
Preference Right is exercised, waived or otherwise terminated prior to
Closing;
(d) Transfer
Requirements applicable to this or any future transaction, to the extent such
Preference Right is exercised, waived or otherwise terminated prior to
Closing;
(e) Liens
for current Taxes or assessments not yet delinquent or, if delinquent, being
contested in good faith by appropriate actions;
(f) Materialman's,
mechanic's, repairman's, employee's, contractor's, operator's and other similar
liens or charges arising in the ordinary course of business for amounts not yet
delinquent (including any amounts being withheld as provided by Law) or, if
delinquent, being contested in good faith by appropriate actions;
(g) All
rights to consent by, required notices to, filings with, or other actions by
Governmental Bodies in connection with the sale or conveyance of the Assets or
interests therein pursuant to this or to any future transaction if they are not
required or customarily obtained prior to the sale or conveyance;
(h) Rights
of reassignment arising upon final intention to abandon or release the Assets,
or any of them;
(i) Easements,
rights-of-way, servitudes, permits, surface leases and other rights in respect
of surface operations, to the extent that they do not (i) reduce Seller's
Net Revenue Interest below that shown in Exhibit A-1,
(ii) increase Seller's working interest above that shown in Exhibit A-1 without a
proportionate increase in Net Revenue Interest, or (iii) detract in any
material respect from the value of, or interfere in any material respect with
the use, ownership or operation of, the Assets subject thereto or affected
thereby (as currently used, owned and operated) and which would be acceptable by
a reasonably prudent purchaser engaged in the business of owning and operating
oil and gas properties;
(j) Calls
on Hydrocarbon production under existing Contracts that are listed on Schedule 1.2(d);
9
(k) All
rights reserved to or vested in any Governmental Body to control or regulate any
of the Assets in any manner, and all obligations and duties under all applicable
Laws or under any franchise, grant, license or permit issued by any such
Governmental Body;
(l) Any
encumbrance on or affecting the Assets which is discharged by Seller at or prior
to Closing;
(m) Any
matters shown on Exhibit A-1;
(n) Intentionally
Deleted.
(o) Matters
that would otherwise be considered Title Defects but that do not meet the
Individual Title Threshold set forth in Section 3.4(j);
(p) Imbalances
associated with the Assets;
(q) Liens
granted under applicable joint operating agreements and similar
agreements;
(r) The
matters disclosed in Schedules 5.7(a) and 5.7(b);
(s) Any
other liens, charges, encumbrances, defects or irregularities which do not,
individually or in the aggregate, detract in any material respect from the value
of, or interfere in any material respect with the use or ownership of, the
Assets subject thereto or affected thereby (as currently used or owned), which
would be accepted by a reasonably prudent purchaser engaged in the business of
owning and operating oil and gas properties, and which do not reduce Seller's
Net Revenue Interest below that shown in Exhibit A-1, or increase
Seller's working interest above that shown in Exhibit A-1 without a
proportionate increase in Net Revenue Interest; and
(t) Any
lien or trust arising in connection with workers’ compensation, unemployment
insurance, pension, employment, or child support laws or
regulations.
Section
3.4 Notice of Title
Defect Adjustments.
(a) To
assert a claim of a Title Defect prior to Closing, Purchaser must deliver claim
notices to Seller (each a "Title Defect Notice") on or before 5:00 pm C.D.T. on
September 20, 2010, (the "Title Claim Date"); provided, however, that
Purchaser agrees that it shall furnish Seller once every two (2) weeks
until the Title Claim Date with a Title Defect Notice if any officer of
Purchaser or its Affiliates discover or learn of any Title Defect during such
two (2) week period; provided further that Purchaser’s failure to provide
such notice every 2 weeks shall not constitute a waiver of Purchaser’s right to
assert a claim on the Title Claim Date. Each Title Defect Notice shall be in
writing and shall include (i) a description of the alleged Title Defect(s),
(ii) the Units, Warranty Wells or other Assets in Exhibit A-1 affected by
the Title Defect (each a "Title Defect Property"), (iii) the Allocated
Value of each Title Defect Property, (iv) supporting documents reasonably
necessary for Seller (as well as any title attorney or examiner hired by Seller)
to verify the existence of the alleged Title Defect(s), and (v) the amount
by which Purchaser reasonably believes the Allocated Value of each Title Defect
Property is reduced by the alleged Title Defect(s) and the computations and
information upon which Purchaser's belief is based. NOTWITHSTANDING ANY OTHER
PROVISION OF THIS AGREEMENT TO THE CONTRARY, PURCHASER SHALL BE DEEMED TO HAVE
WAIVED ITS RIGHT TO ASSERT TITLE DEFECTS OF WHICH SELLER HAS NOT BEEN GIVEN
NOTICE ON OR BEFORE THE TITLE CLAIM DATE. For purposes hereof, the "Allocated
Value" of an Asset shall mean the portion of the Purchase Price that has been
allocated to a particular Unit, Warranty Well or other Asset in Exhibit A-1 as prepared
by Purchaser and reviewed for reasonableness by Seller.
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(b) Seller
shall have the right, but not the obligation, to deliver to Purchaser on or
before the Title Claim Date, with respect to each Title Benefit, a notice (a
"Title Benefit Notice") including (i) a description of the Title Benefit,
(ii) the Units, Warranty Wells or other Assets in Exhibit A-1 affected,
(iii) the Allocated Values of the Units, Warranty Wells or other Assets in
Exhibit A-1 subject
to such Title Benefit and (iv) the amount by which Seller reasonably
believes the Allocated Value of those Units, Warranty Wells or other Assets is
increased by the Title Benefit, and the computations and information upon which
Seller's belief is based. Seller shall be deemed to have waived all Title
Benefits of which it has not given notice to Purchaser on or before the Title
Claim Date.
(c) Seller
shall have the right, but not the obligation, to attempt, at its sole cost, to
cure or remove Title Defects at any time prior to Closing (the "Cure Period"),
unless the parties otherwise agree, any Title Defects of which it has been
advised in writing by Purchaser.
(d) Remedies
for Title Defects.
In the
event that any Title Defect is not waived by Purchaser or cured on or before
Closing, Purchaser and Seller shall mutually elect to have one of the following
remedies apply:
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(i)
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subject
to the Individual Title Threshold and the Aggregate Defect Deductible,
have the Purchase Price reduced by an amount agreed upon ("Title Defect
Amount") pursuant to Section 3.4(g) or
Section 3.4(i) by
Purchaser and Seller as being the value of such Title Defect, taking into
consideration the Allocated Value of the Property subject to such Title
Defect, the portion of the Property subject to such Title Defect and the
legal effect of such Title Defect on the Property affected thereby;
provided, however, that the methodology, terms and conditions of Section 3.4(g)
shall control any such
determination;
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(ii)
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have
Seller retain the entirety of the Property that is subject to such Title
Defect, together with all associated Assets, in which event the Purchase
Price shall be reduced by an amount equal to the Allocated Value of such
Property; or
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(iii)
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at
Closing, the affected Asset shall be held back from the Assets to be
transferred and conveyed to Purchaser at Closing and the Purchase Price to
be paid at Closing shall be reduced by the Allocated Value of such
Retained Asset pursuant to Section
7.7(b). Seller shall then have 180 days after Closing in
which to cure the Title Defect. Any Property so held back from
the initial Closing will be conveyed to Purchaser at a delayed Closing
within ten (10) days following the date that the Title Defect is cured, at
which time Seller shall be entitled to withdraw the full Allocated Value
of the Property from escrow, and provided further that if multiple delayed
Closings are contemplated as a result of this provision and/or Section 7.7(c), the
delayed Closings may be consolidated on dates mutually agreeable to the
parties, but shall not be less than once every sixty (60)
days. In the event that Seller is unable to cure the Title
Defect within 180 days of the initial Closing, then Seller shall, at its
sole election, select the remedy set forth in subsection (i) or (ii) above
as the remedy for such Title Defect. Should Seller’s choice
ultimately lead to application of Section 3.4(i), the
Title Expert shall be selected within fifteen (15) Business Days of the
end of this 180 day cure period. All other provisions of Section 3.4(i) shall
apply as written.
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In the
event that Purchaser and Seller cannot mutually agree upon one of the foregoing
remedies with respect to a Title Defect asserted by Purchaser pursuant to Section 3.4(a) prior to
Closing, then Seller shall, at its sole election, select the remedy set forth in
subsection (i) (ii) or (iii) above as the remedy for such Title
Defect.
(e) With
respect to each Unit, Warranty Well or other Asset in Exhibit A-1 affected by
Title Benefits reported under Section 3.4(b), subject
to the Individual Benefit Threshold and the Aggregate Defect Deductible, the
Purchase Price shall be increased by an amount (the "Title Benefit Amount")
equal to the increase in the Allocated Value for such Unit, Warranty Well or
other Asset in Exhibit A-1 caused by
such Title Benefits, as determined pursuant to Section 3.4(h).
(f) Section 3.4(d) shall be
the exclusive right and remedy of Purchaser with respect to Title Defects
asserted by Purchaser pursuant to Section 3.4(a). Section 3.4(e) shall be the
exclusive right and remedy of Seller with respect to Title Benefits asserted by
Seller pursuant to Section
3.4(b).
(g) The
Title Defect Amount resulting from a Title Defect shall be the amount by which
the Allocated Value of the Title Defect Property is reduced as a result of the
existence of such Title Defect and shall be determined in accordance with the
following methodology, terms and conditions:
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(i)
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if
Purchaser and Seller agree on the Title Defect Amount, that amount shall
be the Title Defect Amount;
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(ii)
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if
the Title Defect is a lien, encumbrance or other charge which is
undisputed and liquidated in amount, then the Title Defect Amount shall be
the amount necessary to be paid to remove the Title Defect from the Title
Defect Property;
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(iii)
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if
the Title Defect represents a discrepancy between (A) the Net Revenue
Interest for any Title Defect Property and (B) the Net Revenue
Interest stated on Exhibit A-1 and
causes a proportionate decrease to Seller’s working interest shown on
Exhibit A-1, then
the Title Defect Amount shall be the product of the Allocated Value of
such Title Defect Property multiplied by a fraction, the numerator of
which is the Net Revenue Interest decrease and the denominator of which is
the Net Revenue Interest stated on Exhibit A-1;
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(iv)
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if
the Title Defect represents an obligation, encumbrance, burden or charge
upon or other defect in title to the Title Defect Property of a type not
described in subsections (i), (ii) or (iii) above, the Title
Defect Amount shall be determined by taking into account the Allocated
Value of the Title Defect Property, the portion of the Title Defect
Property 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 Title Defect Property, the values placed upon the Title Defect by
Purchaser and Seller and such other factors as are necessary to make a
proper evaluation; and
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(v)
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notwithstanding
anything to the contrary in this Article 3, the
aggregate Title Defect Amounts attributable to the effects of all Title
Defects upon any Title Defect Property shall not exceed the Allocated
Value of the Title Defect Property.
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(h) The
Title Benefit Amount for any Title Benefit shall be the product of the Allocated
Value of the affected Unit, Warranty Well or other Asset in Exhibit A-1 multiplied by
a fraction, the numerator of which is the Net Revenue Interest increase and the
denominator of which is the Net Revenue Interest stated on Exhibit A-1.
(i) Seller
and Purchaser shall attempt in good faith to agree on all Title Defect Amounts
and Title Benefit Amounts prior to Closing. If Seller and Purchaser are unable
to agree by Closing, the Title Defect Amounts and Title Benefit Amounts in
dispute shall be exclusively and finally resolved pursuant to this Section 3.4(i). There
shall be a single arbitrator, who shall be a title attorney with at least ten
(10) years experience in oil and gas titles involving properties in the
regional area in which the Properties are located, as selected by mutual
agreement of Purchaser and Seller within fifteen (15) Business Days after
the end of the Cure Period (the "Title Expert"). The Title Expert's
determination shall be made within fifteen (15) Business Days after
submission of the matters in dispute and shall be final and binding upon both
parties, without right of appeal. In making his determination, the Title Expert
shall be bound by the rules set forth in Section 3.4(g) and Section 3.4(h) and may
consider such other matters as in the opinion of the Title Expert are necessary
or helpful to make a proper determination. The Title Expert may allow the
parties to make written submissions of their positions in the manner and to the
extent the Title Expert deems appropriate, and the Title Expert may call on the
parties to submit such other materials as the Title Expert deems helpful and
appropriate to resolution of the dispute. Additionally, the Title
Expert may consult with and engage disinterested third parties to advise the
arbitrator, including without limitation petroleum engineers. The Title Expert
shall act as an expert for the limited purpose of determining the specific
disputed Title Defect Amounts and Title Benefit Amounts submitted by either
party and may not award damages, interest or penalties to either party with
respect to any matter. Seller and Purchaser shall each bear its own legal fees
and other costs of presenting its case. Each party shall bear one-half of the
costs and expenses of the Title Expert, including any costs incurred by the
Title Expert that are attributable to such third party consultation. Within ten
(10) days after the Title Expert delivers written notice to Purchaser and
Seller of his award with respect to a Title Defect Amount or a Title Benefit
Amount, (i) Purchaser shall pay to Seller the amount, if any, so awarded by
the Title Expert to Seller and (ii) Seller shall pay to Purchaser the
amount, if any, so awarded by the Title Expert to Purchaser.
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(j) Notwithstanding
anything to the contrary, (i) in no event shall there be any adjustments to
the Purchase Price or other remedies provided by Seller for any individual
uncured Title Defect for which the Title Defect Amount therefor does not
exceed $15,000 ("Individual
Title Threshold"); and (ii) in no event shall there be any adjustments to
the Purchase Price or other remedies provided by Seller for uncured Title
Defects unless the aggregate Title Defect Amounts attributable to all uncured
Title Defects, taken together with the aggregate Environmental Defect Amounts
attributable to all uncured Environmental Defects, exceeds a deductible in an
amount equal to 1.5% of Purchase Price ("Aggregate Defect Deductible"), after
which point adjustments to the Purchase Price or other remedies shall be made or
available to Purchaser only with respect to uncured Title Defects and uncured
Environmental Defects where the aggregate Title Defect Amounts and Environmental
Defect Amounts attributable are in excess of such Aggregate Defect Deductible.
Notwithstanding anything to the contrary, (i) in no event shall there be
any adjustments to the Purchase Price for any individual Title Benefit for which
the Title Benefit Amount does not exceed $15,000 ("Individual
Benefit Threshold"); and (ii) in no event shall there be any adjustments to
the Purchase Price for any Title Benefit unless the aggregate Title Benefit
Amounts attributable to all such Title Benefits, exceeds a deductible in an
amount equal to 1.5% of Purchase Price ("Aggregate
Benefit Deductible"), after which point adjustments to the Purchase Price shall
be made only with respect to such Title Benefit Amounts in excess of such
Aggregate Benefit Deductible.
Section
3.5 Casualty or
Condemnation Loss.
(a) From
and after the Effective Time, but subject to the provisions of Section 3.5(b) and (c) below, Purchaser shall
assume all risk of loss with respect to and any change in the condition of the
Assets and for production of Hydrocarbons through normal depletion (including
but not limited to the watering out of any Well, collapsed casing or sand
infiltration of any Well) and the depreciation of personal property due to
ordinary wear and tear with respect to the Assets.
(b) If,
after the date of this Agreement but prior to the Closing Date, any portion of
the Assets is destroyed by fire or other casualty or is taken in condemnation or
under right of eminent domain, and the loss as a result of such individual
casualty or taking, taken together with all other casualty losses and takings,
equals or exceeds twenty
percent (20%) of the Purchase Price, unless this Agreement is terminated
pursuant to Section 10.1, the transactions evidenced by this Agreement shall
nevertheless be consummated and Seller shall elect by written notice to
Purchaser prior to Closing either (i) to cause the Assets affected by any
casualty or taking to be repaired or restored to at least its condition prior to
such casualty, at Seller's sole cost, as promptly as reasonably practicable
(which work may extend after the Closing Date), or (ii) to treat such casualty
or taking as a Title Defect with respect to the affected Property or Properties
under Section 3.4. In
each case, Seller shall retain all rights to insurance and other claims against
third parties with respect to the casualty or taking except to the extent the
parties otherwise agree in writing.
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(c) If,
after the date of this Agreement but prior to the Closing Date, any portion of
the Assets is destroyed by fire or other casualty or is taken in condemnation or
under right of eminent domain, and the loss to the Assets as a result of such
individual casualty or taking, taken together with all other casualty losses and
takings, is less
than twenty percent (20%) of the Purchase Price, the transaction evidenced by
this Agreement shall nevertheless be consummated and Seller shall, at Closing,
pay to Purchaser all sums paid to Seller by third parties by reason of such
casualty or taking and shall assign, transfer and set over to Purchaser all of
Seller's right, title and interest (if any) in insurance claims, unpaid awards,
and other rights against third parties (other than Affiliates of Seller and its
and their directors, officers, employees and agents) arising out of the casualty
or taking.
Section
3.6 Limitations on
Applicability. The right of Purchaser to assert a Title Defect
under this Agreement and Seller’s right to assert a Title Benefit under this
Agreement shall terminate as of the Title Claim Date, provided there shall be no
termination of Purchaser's or Seller's rights under Section 3.4 with respect
to any bona fide Title Defect properly reported in a Title Defect Notice or bona
fide Title Benefit Claim properly reported in a Title Benefit Notice on or
before the Title Claim Date.
Section
3.7 Government
Approvals Respecting Assets.
(a) Federal and State Approvals.
Purchaser shall, within thirty (30) days after Closing and at Purchaser's
own expense, file for approval with the applicable Governmental Bodies all
assignment documents and other state and federal transfer documents required to
effectuate the transfer of the Assets. Purchaser further agrees, promptly after
Closing, to take all other actions reasonably required of it by federal or state
agencies having jurisdiction to obtain all requisite regulatory approvals with
respect to this transaction, and to use its commercially reasonable efforts to
obtain the approval by such federal or state agencies, as applicable, of
Seller's assignment documents requiring federal or state approval in order for
Purchaser to be recognized by the federal or state agencies as the owner of the
Assets. Purchaser shall provide Seller with approved copies of the assignment
documents and other state and federal transfer documents, as soon as they are
available.
(b) Title Pending Governmental
Approvals. Until all of the governmental approvals provided for in Section 3.7(a) have been
obtained, the following shall occur with respect to the affected portion of the
Assets:
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(i)
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Seller
shall continue to hold record title to the affected Leases and other
affected portion of the Assets as nominee for
Purchaser;
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(ii)
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Purchaser
shall be responsible for all Assumed Seller Obligations with respect to
the affected Leases and other affected portion of the Assets as if
Purchaser was the record owner of such Leases and other portion of the
Assets as of the Effective Time;
and
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(iii)
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Seller
shall act as Purchaser's nominee but shall be authorized to act only upon
and in accordance with Purchaser's instructions, and Seller shall have no
authority, responsibility or discretion to perform any tasks or functions
with respect to the affected Leases and other affected portion of the
Assets other than those which are purely administrative or ministerial in
nature, unless otherwise specifically requested and authorized by
Purchaser in writing.
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ENVIRONMENTAL
MATTERS
Section
4.1 Assessment. Subject
to this Section 4.1,
from and after the date of execution of this Agreement until the Closing Date,
Seller shall afford to Purchaser and its officers, employees, agents and
authorized representatives reasonable access to the Assets, including the
Records in accordance with Section 7.1. Purchaser
shall be entitled to conduct a Phase I environmental property assessment with
respect to the Assets that satisfies the basic assessment requirements set forth
under the current American Society for Testing and Material Standard Practice
for Phase I environmental property assessments (Designation E1527-00) but such
Phase I environmental property assessment shall not include on-site testing of
any non-scope issues as such issues are described in Article 12 of such Standard
Practice. The Phase I and Purchaser’s other diligence activities
shall be conducted at the sole cost and expense of Purchaser, and shall be
subject to the indemnity provisions of Section 4.4. Seller
or its designee shall have the right to accompany Purchaser and Purchaser’s
representatives whenever they are on site on Assets and also to collect split
test samples if any are collected. Notwithstanding anything herein to
the contrary, Purchaser shall not have access to, and shall not be permitted to
conduct any environmental due diligence (including any Phase I environmental
property assessments) with respect to any Assets where Seller or its Affiliates
do not have the authority to grant access for such due diligence (provided, however,
Seller and its Affiliates shall use their commercially reasonable efforts to
obtain permission from any other Person to allow Purchaser and Purchaser’s
representatives such access and as long as Seller and its Affiliates have
exercised such commercially reasonable efforts, Seller shall have no liability
to Purchaser for failure to obtain any such other Person’s
permission). Provided, however, in the event Purchaser requests
access to an Asset for the purpose of conducting such due diligence, if
Purchaser is denied reasonable access for any reason, Purchaser may exclude the
affected Asset from the Assets to be transferred and conveyed to Purchaser at
Closing and the Purchase Price to be paid at Closing shall be reduced by the
Allocated Value of such Retained Asset pursuant to Section 7.7(b). In the event
that Purchaser’s Phase I environmental property assessments identify actual or
potential “recognized environmental concerns,” then Purchaser may request
Seller’s consent to conduct additional Phase II environmental property
assessments, which consent shall not be unreasonably withheld. The
additional Phase II environmental property assessment procedures relating to any
additional investigation shall be submitted to Seller in a Phase II
environmental property assessment plan, and shall be reasonable based on the
recognized environmental concerns identified by the Phase I
assessment. Thereafter, Seller may, in its sole discretion, approve
said Phase II environmental property assessment plan, in whole or in part, and
Purchaser shall not have the right to conduct any activities set forth in such
plan until such time that Seller has approved such plan in writing, provided,
however, if such plan is not approved, Purchaser may terminate this Agreement
and such termination shall be considered a termination by mutual consent under
Section 10.1(a) of this
Agreement. Any such approved Phase II environmental property
assessment plan shall be performed in accordance with this Article 4 and in compliance
with all Laws. Purchaser shall maintain, and shall cause its officers,
employees, representatives, consultants and advisors to maintain, all
information obtained by Purchaser pursuant to any Phase I or other due diligence
activity as strictly confidential until the Closing occurs, unless disclosure of
any facts discovered through such Phase I is required under applicable Law.
Purchaser shall provide Seller with a copy of the final version of all
environmental reports prepared by, or on behalf of, Purchaser with respect to
any Phase I or other environmental due diligence activity conducted on the
Properties. In the event that any necessary disclosures under applicable Laws
are required with respect to matters discovered by any Phase I or other
environmental due diligence conducted by, for or on behalf of Purchaser,
Purchaser agrees that Seller shall be the responsible party for disclosing such
matters to the appropriate Governmental Bodies; provided that, if Seller fails
to promptly make such disclosure and Purchaser or any of its Affiliates is
legally obligated to make such disclosure, such Person shall have the right to
fully comply with such legal obligation.
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Section
4.2 NORM, Wastes and
Other Substances. Purchaser acknowledges that the Assets have
been used for the exploration, development, and production of Hydrocarbons and
that there may be petroleum, produced water, wastes, or other substances or
materials located in, on or under the Properties or associated with the Assets.
Equipment and sites included in the Assets may contain Hazardous Materials,
including NORM. NORM may affix or attach itself to the inside of wells,
materials, and equipment as scale, or in other forms. The wells, materials, and
equipment located on the Properties or included in the Assets may contain
Hazardous Materials, including NORM. Hazardous Materials, including NORM, may
have come in contact with various environmental media, including without
limitation, water, soils or sediment. Special procedures may be required for the
assessment, remediation, removal, transportation, or disposal of environmental
media and Hazardous Materials, including NORM, from the Assets.
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Section
4.3 Environmental
Defects. If, as a result of its investigation pursuant to
Section 4.1,
Purchaser determines that with respect to the Assets, there exists a violation
of an Environmental Law (other than with respect to NORM) (in each case, an
"Environmental Defect"), then on or prior to 5:00 pm C.D.T. on September 20,
2010 (the "Environmental Claim Date"), Purchaser may notify Seller in writing of
such Environmental Defect (an "Environmental Defect Notice"). FOR ALL PURPOSES OF THIS AGREEMENT,
PURCHASER SHALL BE DEEMED TO HAVE WAIVED ANY ENVIRONMENTAL DEFECT WHICH
PURCHASER FAILS TO ASSERT AS AN ENVIRONMENTAL DEFECT BY AN ENVIRONMENTAL DEFECT
NOTICE RECEIVED BY SELLER ON OR BEFORE THE ENVIRONMENTAL CLAIM DATE. To
be effective, each such notice shall set forth (i) a description of the
matter constituting the alleged Environmental Defect, (ii) the
Units/Warranty Wells and associated Assets affected by the Environmental Defect,
(iii) the estimated Lowest Cost Response to eliminate the Environmental
Defect in question (the "Environmental Defect Amount"), and (iv) supporting
documents reasonably necessary for Seller to verify the existence of the alleged
Environmental Defect and the Environmental Defect Amount. Seller
shall have the right, but not the obligation, to cure any Environmental Defect
before Closing or, provided that the parties shall have agreed to the general
plan of remediation with respect to such Environmental Defect and the time
period by which such remediation shall take place, after Closing. If Seller
disagrees with any of Purchaser's assertions with respect to the existence of an
Environmental Defect or the Environmental Defect Amount, Purchaser and Seller
will attempt to resolve the dispute prior to Closing. If the dispute cannot be
resolved within ten (10) days of the first meeting of Purchaser and Seller,
either party may submit the dispute to an environmental consultant approved in
writing by Seller and Purchaser that is experienced in environmental corrective
action at oil and gas properties in the relevant jurisdiction and that shall not
have performed professional services for either party or any of their respective
Affiliates during the previous three years (the "Independent Expert"). The
Independent Expert may elect to conduct the dispute resolution proceeding by
written submissions from Purchaser and Seller with exhibits, including
interrogatories, supplemented with appearances by Purchaser and Seller, if
necessary, as the Independent Expert may deem necessary. After the parties and
Independent Expert have had the opportunity to review all such submissions, the
Independent Expert shall call for a final, written offer of resolution from each
party. The Independent Expert shall render its decision within fifteen
(15) Business Days of receiving such offers by selecting one or the other
of the offers, or by crafting a decision that represents a compromise between
the two offers. The Independent Expert may not award damages, interest or
penalties to either party with respect to any matter. The decision of the
Independent Expert shall be final and binding upon both parties, without right
of appeal. Seller and Purchaser shall each bear its own legal fees and other
costs of presenting its case to the Independent Expert. Each party shall bear
one-half of the costs and expenses of the Independent Expert. The parties shall
adjust the Purchase Price to reflect the Environmental Defect Amounts, as agreed
by the parties or as determined by the Independent Expert, for all uncured
Environmental Defects; provided, that notwithstanding anything to the contrary,
(a) in no event shall there be any adjustments to the Purchase Price for
any individual uncured Environmental Defect for which the Environmental Defect
Amount therefor does not exceed $15,000 ("Individual Environmental Threshold");
and (b) in no event shall there be any adjustments to the Purchase Price
for any uncured Environmental Defect unless the aggregate Environmental Defect
Amount attributable to all such Environmental Defects, taken together with the
aggregate Title Defect Amounts attributable to all uncured Title Defects,
exceeds the Aggregate Defect Deductible, after which point Purchaser shall be
entitled to adjustments to the Purchase Price or other remedies only with
respect to uncured Title Defects and uncured Environmental Defects where the
aggregate Title Defect Amounts and Environmental Defect Amounts attributable
thereto are in excess of such Aggregate Defect Deductible. To the extent the
Independent Expert fails to determine any disputed Environmental Defect Amounts
prior to Closing, then, within ten (10) days after the Independent Expert
delivers written notice to Purchaser and Seller of his award with respect to an
Environmental Defect Amount, Seller shall pay to Purchaser the amount, if any,
so awarded by the Independent Expert. Notwithstanding anything to the
contrary contained herein, if the Lowest Cost Response of an affected Asset
equals or exceeds the Allocated Value of such Asset, either Seller or Buyer may
exclude the affected Asset from the Assets to be transferred and conveyed to
Purchaser at Closing and the Purchase Price to be paid at Closing shall be
reduced by the Allocated Value of such Retained Asset pursuant to Section
7.7(b).
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Section
4.4 Inspection
Indemnity. PURCHASER HEREBY AGREES TO DEFEND,
INDEMNIFY, RELEASE, PROTECT, SAVE AND HOLD HARMLESS THE SELLER INDEMNIFIED
PERSONS FROM AND AGAINST ANY AND ALL LOSSES ARISING OUT OF OR RELATING TO ANY
DUE DILIGENCE ACTIVITY CONDUCTED BY PURCHASER OR ITS AGENTS, WHETHER BEFORE OR
AFTER THE EXECUTION OF THIS AGREEMENT, REGARDLESS OF FAULT. The indemnity
obligation set forth in this Section 4.4 shall survive the Closing or
termination of this Agreement.
ARTICLE
5
REPRESENTATIONS
AND WARRANTIES OF SELLER
Section 5.1 Generally.
(a) Any
representation or warranty qualified "to the knowledge of Seller" or "to
Seller's knowledge" or with any similar knowledge qualification is limited to
matters within the Actual Knowledge of the officers and employees of Seller who
have direct responsibility for the Assets and who have the titles specified on
Schedule
5.1. "Actual Knowledge" for purposes of this Agreement means
information actually personally known by the individuals who have the titles
specified on Schedule
5.1.
(b) The
disclosure of any fact or item on any Schedule shall, should the existence of
such fact or item be relevant to any other Schedule, be deemed to be disclosed
with respect to that other section to the extent the text of such disclosure is
made in a manner that makes the relevance to the other Schedule reasonably
apparent. Subject to the foregoing provisions of this Section 5.1, the
disclaimers and waivers contained in Sections 11.9 and 11.10 and the other terms and
conditions of this Agreement, Seller represents and warrants to Purchaser the
matters set out in the remainder of this Article 5.
Section
5.2 Existence and
Qualification. Petrohawk Properties is a limited partnership
duly organized, validly existing and in good standing under the laws of the
State of Texas and is duly qualified to do business as a foreign limited
partnership where the Assets it owns are located. KCS is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware and is duly qualified to do business as a
foreign limited liability company where the Assets it owns are
located. HFS is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Oklahoma and is
duly qualified to do business as a foreign limited liability company where the
Assets it owns are located.
Section
5.3 Power. Petrohawk
Properties has the limited partnership power to enter into and perform this
Agreement and consummate the transactions contemplated by this
Agreement. KCS has the limited liability company power to enter into
and perform this Agreement and consummate the transactions contemplated by this
Agreement. HFS has the limited liability company power to enter into
and perform this Agreement and consummate the transactions contemplated by this
Agreement.
19
Section
5.4 Authorization and
Enforceability. The execution, delivery and performance of
this Agreement, and the performance of the transactions contemplated hereby,
have been duly and validly authorized by all necessary limited
partnership or limited liability company (as applicable) action on the part of
Seller. This Agreement has been duly executed and delivered by Seller (and all
documents required hereunder to be executed and delivered by Seller at Closing
will be duly executed and delivered by Seller) and this Agreement constitutes,
and at the Closing such documents will constitute, the valid and binding
obligations of Seller, enforceable against Seller in accordance with their terms
except as such enforceability may be limited by applicable bankruptcy or other
similar laws affecting the rights and remedies of creditors generally as well as
to general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at Law).
Section
5.5 No
Conflicts. Subject to compliance with the Preference Rights
and Transfer Requirements set forth in Schedule 5.13, the
execution, delivery and performance of this Agreement by Seller, and the
transactions contemplated by this Agreement will not (i) violate any
provision of the certificate of partnership or articles of organization,
partnership agreement, limited liability agreement of Petrohawk Properties, KCS
or HFS, (ii) result in default (with due notice or lapse of time or both)
or the creation of any lien or encumbrance or give rise to any right of
termination, cancellation or acceleration under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license or agreement to which
Seller is a party or which affect the Core Assets, (iii) violate any
judgment, order, ruling, or decree applicable to Seller as a party in interest,
(iv) violate any Laws applicable to Seller or any of the Assets, except for
(a) rights to consent by, required notices to, filings with, approval or
authorizations of, or other actions by any Governmental Body where the same are
not required prior to the assignment of the related Asset or they are
customarily obtained subsequent to the sale or conveyance thereof and
(b) any matters described in clauses (ii), (iii) or (iv) above
which would not have a Material Adverse Effect on Seller.
Section
5.6 Liability for
Brokers' Fees. Purchaser shall not directly or indirectly have
any responsibility, liability or expense, as a result of undertakings or
agreements of Seller or its Affiliates, for brokerage fees, finder's fees,
agent's commissions or other similar forms of compensation in connection with
this Agreement or any agreement or transaction contemplated
hereby.
Section
5.7 Litigation. With
respect to the Assets and Seller's or any of its Affiliates' ownership,
operation, development, maintenance, or use of any of the Assets, except as set
forth in: (i) Schedule 5.7(a), no
proceeding, arbitration, action, suit, pending settlement, or other legal
proceeding of any kind or nature before or by any Governmental Body (each, a
"Proceeding," and collectively "Proceedings") (including any take-or-pay claims)
to which Seller or any of its Affiliates is a party and which relates to the
Assets is pending or, to Seller's knowledge, threatened against Seller or any of
its Affiliates; (ii) Schedule 5.7(b), to
Seller's knowledge, no Proceeding or investigation to which Seller is not a
party which relates to the Assets is pending or threatened.
Section
5.8 Taxes and
Assessments.
(a) With
respect to all Taxes related to the Assets, (i) all reports, returns,
statements (including estimated reports, returns or statements), and other
similar filings (the "Tax Returns") relating to the Assets required to be filed
by Seller with respect to such Taxes have been timely filed with the appropriate
Governmental Body in all jurisdictions in which such Tax Returns are required to
be filed; and (ii) such Tax Returns are true and correct in all material
respects, and (iii) all Taxes due with respect to such Tax Returns have
been paid, except those being contested in good faith.
20
(b) With
respect to all Taxes related to the Assets, except as set forth on Schedule 5.8,
(i) there are not currently in effect any extensions or waivers of any
statute of limitations of any jurisdiction regarding the assessment or
collection of any such Tax; (ii) there are no Proceedings against the
Assets or Seller by any Governmental Body; and (iii) there are no Tax liens
on any of the Assets except for liens for Taxes not yet due.
Section
5.9 Compliance with
Laws. Except as disclosed on Schedule 5.9, the Assets
are, and the ownership, operation, development, maintenance, and use of any of
the Assets are, in material compliance with the provisions and requirements of
all Laws of all Governmental Bodies having jurisdiction with respect to the
Assets, or the ownership, operation, development, maintenance, or use of any of
the Assets, except where the failure to so comply would not have a Material
Adverse Effect on Seller. Notwithstanding the foregoing, Seller makes no
representation or warranty, express or implied, under this Section 5.9 relating to
any Environmental Liabilities or Environmental Law, except that Seller has not
received any written notice from any Governmental Body of any current alleged
violation of Environmental Liability or Environmental Law affecting the
Assets.
Section
5.10 Contracts. All
Material Contracts relating to the Core Assets have been identified among the
Contracts listed in Schedule
1.2(d). Seller is in compliance and, to Seller's knowledge,
all counterparties are in compliance under all Material Contract relating to the
Core Assets, except as disclosed on Schedule 5.10(a) and
except for such non-compliance as would not, individually or in the aggregate,
have a Material Adverse Effect on Seller. "Material Contracts" means
any Contract (other than any joint operating agreement included within the
Contracts) that could reasonably be expected to result in aggregate payments by
Purchaser with respect to the Assets of more than $500,000 during the current or
any subsequent year (based solely on the terms thereof and without regard to any
expected increase in volumes or revenues) and which requires more than ninety
(90) days notice by Purchaser in order to terminate the
Contract.
Section
5.11 Payments for
Hydrocarbon Production. Except as set forth on
Schedule 5.11,
(a) to
the knowledge of Seller, all rentals, royalties, excess royalty, overriding
royalty interests, Hydrocarbon production payments, and other payments due and
payable by Seller to overriding royalty interest holders and other interest
owners under or with respect to the Core Assets and the Hydrocarbons produced
therefrom or attributable thereto, have been paid, or if not paid, (i) are being
contested in good faith in the normal course of business; or (ii) Seller is
otherwise entitled to withhold payment while resolving questions of title,
obtaining division orders, or resolving other matters in the ordinary course of
business; and
(b) Seller
is not obligated under any contract or agreement for the sale of gas from the
Core Assets containing a take-or-pay, advance payment, prepayment, or similar
provision, or under any gathering, transmission, or any other contract or
agreement with respect to any of the Assets to gather, deliver, process, or
transport any gas without then or thereafter receiving full payment
therefor.
21
Section
5.12 Governmental
Authorizations. To Seller's knowledge, except as disclosed on
Schedule 5.12,
Seller has obtained and is maintaining all material federal, state and local
governmental licenses, permits, franchises, orders, exemptions, variances,
waivers, authorizations, certificates, consents, rights, privileges and
applications therefor (the "Governmental Authorizations") that are presently
necessary or required for the ownership and operation of the Seller Operated
Assets as currently owned and operated (excluding Governmental Authorizations
required by Environmental Law). To Seller's knowledge, except as
disclosed in Schedule 5.7(a), Schedule 5.7(b) or Schedule 5.12,
(i) Seller has operated the Seller Operated Assets in all material respects
in accordance with the conditions and provisions of such Governmental
Authorizations, and (ii) no written notices of material violation have been
received by Seller, and no Proceedings are pending or, to Seller's knowledge,
threatened in writing that might result in any material modification,
revocation, termination or suspension of any such Governmental Authorizations or
which would require any material corrective or remediation action by
Seller.
Section
5.13 Preference Rights
and Transfer Requirements. To Seller’s knowledge, Schedule 5.13 sets forth
all Preference Rights and Transfer Requirements applicable to the Core Assets,
including Preference Rights and Transfer Requirements contained in easements,
rights-of-way or equipment leases included in the Core Assets. None of the Core
Assets, or any portion thereof, is subject to any Preference Right or Transfer
Requirement which may be applicable to the transactions contemplated by this
Agreement, except for Preference Rights and Transfer Requirements as are set
forth on Schedule 5.13.
Section
5.14 Payout
Balances. To Seller's knowledge, Schedule 5.14 contains a
complete and accurate list of the status of any "payout" balance for the Wells
and Units listed on Exhibit A-1 which are
Core Assets that are subject to a reversion or other adjustment at some level of
cost recovery or payout (or passage of time or other event other than
termination of a Lease by its terms).
Section
5.15 Outstanding
Capital Commitments. As of the date hereof, there are no
outstanding AFEs or other commitments to make capital expenditures which are
binding on the Assets and which Seller reasonably anticipates will individually
require expenditures by the owner of the Assets after the Effective Time in
excess of $50,000 other than those shown
on Schedule 5.15.
Section
5.16 Imbalances. To
Seller's knowledge, Schedule 5.16 accurately
sets forth in all material respects all of Seller's Imbalances arising with
respect to the Core Assets and, except as disclosed in Schedule 5.16,
(i) no Person is entitled to receive any material portion of Seller's
Hydrocarbons produced from the Core Assets or to receive material cash or other
payments to "balance" any disproportionate allocation of Hydrocarbons produced
from the Core Assets under any operating agreement, gas balancing or storage
agreement, gas processing or dehydration agreement, gas transportation
agreement, gas purchase agreement, or other agreements, whether similar or
dissimilar, (ii) Seller is not obligated to deliver any material quantities
of gas or to pay any material penalties or other material amounts, in connection
with the violation of any of the terms of any gas contract or other agreement
with shippers with respect to the Core Assets, and (iii) Seller is not
obligated to pay any material penalties or other material payments under any gas
transportation or other agreement as a result of the delivery of quantities of
gas from the Wells which constitute a portion of the Core Assets in excess of
the contract requirements. Except as set forth on Schedule 5.16, Seller has
not received, or is not obligated to receive, prepayments (including payments
for gas not taken pursuant to "take or pay" arrangements) for any of Seller's
share of the Hydrocarbons produced from the Properties which constitute a
portion of the Core Assets, as a result of which the obligation exists to
deliver Hydrocarbons produced from the Properties which constitute a portion of
the Core Assets after the Effective Time without then or thereafter receiving
payment therefor.
22
Section
5.17 Condemnation. There
is no actual or, to Seller’s knowledge, threatened taking (whether permanent,
temporary, whole or partial) of any part of the Properties by reason of
condemnation or the threat of condemnation.
Section
5.18 Bankruptcy. There
are no bankruptcy, reorganization, or receivership proceedings pending against,
or, to Seller's knowledge, being contemplated by or threatened against
Seller.
Section
5.19 Production
Allowables. Seller has not received written notice that there
has been any change proposed in the production allowables for any Wells which
constitute a portion of the Core Assets listed on Exhibit A-1.
Section
5.20 Foreign
Person. Seller is not a "foreign person" within the meaning of
Section 1445 of the Code.
Section
5.21 Collective
Bargaining Agreements. Neither Seller or any of its Affiliates
has agreed to recognize any labor union or other collective bargaining
representative of, nor has any labor union or other collective bargaining
representative been certified as the exclusive bargaining representative of, any
individual employed or otherwise engaged by Seller (or an Affiliate thereof) who
is primarily involved in the business associated with the Assets.
ARTICLE
6
REPRESENTATIONS
AND WARRANTIES OF PURCHASER
Purchaser
represents and warrants to Seller the following:
Section
6.1 Existence and
Qualification. Purchaser is a limited partnership duly formed,
validly existing and in good standing under the laws of the state of its
formation; and Purchaser is duly qualified to do business as a foreign limited
partnership in every jurisdiction in which it is required to qualify in order to
conduct its business, except where the failure to so qualify would not have a
Material Adverse Effect on Purchaser; and Purchaser is or will be as of Closing
duly qualified to do business as a foreign limited partnership in the respective
jurisdictions where the Assets are located.
Section
6.2 Power. Purchaser
has the power to enter into and perform this Agreement and consummate the
transactions contemplated by this Agreement.
23
Section
6.3 Authorization and
Enforceability. The execution, delivery and performance of
this Agreement, and the performance of the transaction contemplated hereby, have
been duly and validly authorized by all necessary limited partnership action on
the part of Purchaser. This Agreement has been duly executed and delivered by
Purchaser (and all documents required hereunder to be executed and delivered by
Purchaser at Closing will be duly executed and delivered by Purchaser) and this
Agreement constitutes, and at the Closing such documents will constitute, the
valid and binding obligations of Purchaser, enforceable against Purchaser in
accordance with their terms except as such enforceability may be limited by
applicable bankruptcy or other similar laws affecting the rights and remedies of
creditors generally as well as to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law).
Section
6.4 No
Conflicts. The execution, delivery and performance of this
Agreement by Purchaser, and the transactions contemplated by this Agreement will
not (i) violate any provision of the organizational documents of Purchaser,
(ii) result in a default (with due notice or lapse of time or both) or the
creation of any lien or encumbrance or give rise to any right of termination,
cancellation or acceleration under any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, license or agreement to which Purchaser is
a party, (iii) violate any judgment, order, ruling, or regulation
applicable to Purchaser as a party in interest, or (iv) violate any Law
applicable to Purchaser or any of its assets, or (v) require any filing
with, notification of or consent, approval or authorization of any Governmental
Body or authority, except any matters described in clauses (ii), (iii),
(iv) or (v) above which would not have a Material Adverse Effect on
Purchaser or the transactions contemplated hereby.
Section
6.5 Liability for
Brokers' Fees. Seller shall not directly or indirectly have
any responsibility, liability or expense, as a result of undertakings or
agreements of Purchaser or its Affiliates, for brokerage fees, finder's fees,
agent's commissions or other similar forms of compensation in connection with
this Agreement or any agreement or transaction contemplated hereby.
Section
6.6 Litigation. There
are no Proceedings pending, or to the Actual Knowledge of Purchaser, threatened
in writing before any Governmental Body against Purchaser or any Affiliate of
Purchaser which are reasonably likely to impair materially Purchaser's ability
to perform its obligations under this Agreement.
Section
6.7 Limitation and
Independent Evaluation. Except for the representations and
warranties expressly made by Seller in Article 5 of this
Agreement, or in the Conveyance or in any certificate furnished or to be
furnished to Purchaser pursuant to this Agreement, Purchaser represents and
acknowledges that (i) there are no representations or warranties, express,
statutory or implied, as to the Assets or prospects thereof, and
(ii) Purchaser has not relied upon any oral or written information provided
by Seller. Without limiting the generality of the foregoing, subject to Section 5.7, Purchaser
represents and acknowledges that Seller has made and will make no representation
or warranty regarding any matter or circumstance relating to Environmental Laws,
Environmental Liabilities, the release of materials into the environment or
protection of human health, safety, natural resources or the environment or any
other environmental condition of the Assets. Purchaser further represents and
acknowledges that it is knowledgeable of the oil and gas business and of the
usual and customary practices of producers such as Seller, and that it has
retained and taken advice concerning the Assets and transactions herein from
advisors and consultants which are knowledgeable about the oil and gas business,
and that is aware of the risks inherent in the oil and gas
business. Except as set forth in this Agreement, Purchaser represents
that it has relied solely on the basis of its own independent evaluation and due
diligence investigation of the Assets, and its own independent evaluation of the
business, economic, legal, tax, or other consequences of this transaction
including its own estimate and appraisal of the extent and value of the oil,
natural gas, and other reserves attributable to the
Properties.
24
Section
6.8 SEC
Disclosure. Purchaser is acquiring the Assets for its own
account for use in its trade or business, and not with a view toward or for sale
associated with any distribution thereof, nor with any present intention of
making a distribution thereof within the meaning of the Securities Act and
applicable state securities laws.
Section
6.9 Bankruptcy. There
are no bankruptcy, reorganization or receivership proceedings pending against,
or, to the knowledge of Purchaser, being contemplated by, or threatened against
Purchaser. Purchaser is, and will be immediately after giving effect
to the transaction contemplated by this Agreement, solvent.
Section
6.10 Qualification. As
of Closing, Purchaser will be qualified to own and assume operatorship of
federal and state oil, gas and mineral leases in all jurisdictions where the
Assets to be transferred to it are located, and the consummation of the
transactions contemplated in this Agreement will not cause Purchaser to be
disqualified as such an owner or operator. To the extent required by the
applicable Law, as of the Closing, Purchaser will have lease bonds, area-wide
bonds or any other surety bonds as may be required by, and in accordance with,
such state or federal regulations (or other requirements) governing the
ownership and operation of the Assets.
Section
6.11 Financing. Purchaser
has sufficient cash, available lines of credit or other sources of immediately
available funds to enable it to pay the Purchase Price to Seller at
Closing.
COVENANTS
OF THE PARTIES
Section
7.1 Access. From
the date of this Agreement until the Closing, Seller shall cooperate with
Purchaser and provide Purchaser and its representatives, consultants and
advisors, reasonable access to the Assets and access to the Records, but only to
the extent that Seller may do so without violating any obligations to any third
party and to the extent that Seller has authority to grant such access without
breaching any restriction legally binding on Seller. Purchaser shall conduct all
such inspections and other information gathering described above only
(i) (x) during regular business hours and (y) during any weekends and
after hours requested by Purchaser that can be reasonably accommodated by
Seller, and (ii) in a manner which will not unduly interfere with Seller's
operation of the Assets. All information obtained by Purchaser and its
representatives pursuant to this Section 7.1 shall be
subject to the terms of that certain confidentiality agreement dated July 8,
2010 (the "Confidentiality Agreement"), by and between Seller and Purchaser and
any applicable Contracts or Surface Contracts, in accordance with their
terms.
25
Section
7.2 Government
Reviews. Seller and Purchaser shall in a timely manner
(a) make all required filings, if any, with and prepare applications to and
conduct negotiations with, each Governmental Body as to which such filings,
applications or negotiations are necessary or appropriate in the consummation of
the transactions contemplated hereby and (b) provide such information as
each may reasonably request to make such filings, prepare such applications and
conduct such negotiations. Each party shall cooperate with and use all
commercially reasonable efforts to assist the other with respect to such
filings, applications and negotiations.
Until the
Closing,
(a) Purchaser
shall notify Seller promptly after Purchaser obtains Actual Knowledge that any
representation or warranty of Seller, as applicable, contained in this Agreement
is untrue in any material respect or will be untrue in any material respect as
of the Closing Date, or that any covenant or agreement to be performed or
observed by Seller prior to or on the Closing Date has not been so performed or
observed in any material respect.
(b) Seller
shall notify Purchaser promptly after Seller obtains Actual Knowledge that any
representation or warranty of Purchaser contained in this Agreement is untrue in
any material respect or will be untrue in any material respect as of the Closing
Date, or that any covenant or agreement to be performed or observed by Purchaser
prior to or on the Closing Date has not been so performed or observed in any
material respect.
(c) If
any of Purchaser's or Seller's representations or warranties is untrue or shall
become untrue in any material respect between the date of execution of this
Agreement and the Closing Date, or if any of Purchaser's or Seller's covenants
or agreements to be performed or observed prior to or on the Closing Date shall
not have been so performed or observed in any material respect, but if such
breach of representation, warranty, covenant or agreement shall (if curable) be
cured by the Closing, then such breach shall be considered not to have occurred
for all purposes of this Agreement. No such notification shall affect the
representations or warranties of the parties or the conditions to their
respective obligations hereunder.
(d) There
shall be no breach of the covenants in this Section as a result of a party's
failure to report a breach of any representation or warranty or a failure to
perform or observe any covenant or agreement of which it had knowledge if the
party subject to the breach or failure also had knowledge thereof prior to
Closing.
Section
7.4 Letters-in-Lieu;
Assignments; Operatorship.
(a) Seller
will execute on the Closing Date letters in lieu of division and transfer orders
relating to the Assets, on forms prepared by Seller and reasonably satisfactory
to Purchaser, to reflect the transaction contemplated hereby.
(b) Seller
will prepare and execute, and Purchaser will execute, on the Closing Date, all
assignments necessary to convey to Purchaser all federal and state Leases in the
form as prescribed by the applicable Governmental Body and otherwise acceptable
to Purchaser and Seller.
26
(c) Seller
makes no representations or warranties to Purchaser as to transferability or
assignability of operatorship of any Seller Operated Assets. Rights and
obligations associated with operatorship of such Properties are governed by
operating and similar agreements covering the Properties and will be determined
in accordance with the terms of such agreements. However, Seller will assist
Purchaser in Purchaser's efforts to succeed Seller or Seller’s Affiliate as
operator of any Wells and Units included in the Assets. Purchaser shall,
promptly following Closing, file all appropriate forms and declarations or bonds
with federal and state agencies relative to its assumption of operatorship. For
all Seller Operated Assets, Seller and Purchaser shall execute the appropriate
forms on the Closing Date and Seller shall thereafter promptly file said forms
with the applicable regulatory agency transferring operatorship of such assets
to Purchaser.
Section
7.5 Public
Announcements. Until the Closing, neither Seller nor Purchaser
shall make any press release or other public announcement regarding the
existence of this Agreement, the contents hereof or the transactions
contemplated hereby without the prior written consent of the others; provided,
however, the foregoing shall not restrict disclosures by Purchaser or Seller
which are required by applicable securities or other laws or regulations or the
applicable rules of any stock exchange having jurisdiction over the disclosing
party or its Affiliates; provided further that Purchaser may issue a press
release announcing this transaction, subject to the terms of this Section 7.5.
The content of any press release or public announcement first announcing this
transaction shall be subject to the prior review and reasonable approval of
Seller and Purchaser; provided, however, the foregoing shall not restrict
disclosures by Purchaser or Seller which are required by applicable securities
or other laws or regulations or the applicable rules of any stock exchange
having jurisdiction over the disclosing party or its
Affiliates. Purchaser acknowledges that certain securities of PEC are
publicly-traded, PEC is required to disclose the existence of material
agreements through filings with the SEC, PEC may be required to disclose and
file this Agreement with the SEC and it may become public upon such disclosure
and PEC may issue a press release and make other disclosures immediately after
the execution of this Agreement and/or Closing which may contain details of the
transactions contemplated herein, all without Purchaser’s
consent. Seller acknowledges that certain securities of Purchaser are
publicly-traded, Purchaser is required to disclose the existence of material
agreements through filings with the SEC, Purchaser may be required to disclose
and file this Agreement with the SEC and it may become public upon such
disclosure,
27
Section
7.6 Operation of
Business. Except as set forth on Schedule 7.6, until the
Closing, Seller (i) will operate the Assets and the business thereof as a
reasonably prudent operator and consistent with past practices, (ii) will
not, without the prior written consent of Purchaser, which consent shall not be
unreasonably withheld, commit to any operation, or series of related operations
thereon, reasonably anticipated to require future capital expenditures by
Purchaser as owner of the Assets in excess of $50,000
for any single expenditure or $1,000,000 in the aggregate, or make any capital
expenditures in respect of the Assets in excess of $50,000
for any single expenditure or $1,000,000 in the aggregate, or terminate,
materially amend, execute or extend any material contracts affecting the Assets,
(iii) will maintain insurance coverage on the Assets presently furnished by
nonaffiliated third parties in the amounts and of the types presently in force,
(iv) will use commercially reasonable efforts to maintain in full force and
effect all Leases, (v) will maintain all material governmental permits and
approvals affecting the Assets, (vi) will not transfer, farmout, sell,
hypothecate, encumber or otherwise dispose of any Assets, except for sales and
dispositions of Hydrocarbon production in the ordinary course of business consistent with
past practices, (vii) will not enter into any settlement or agreement with
respect to Taxes with any Governmental Body, or make or change any election with
respect to Taxes, relating to the Assets and (viii) will not commit to do
any of the foregoing. Purchaser's approval of any action restricted by this
Section 7.6 shall
be considered granted within ten (10) days (unless a shorter time is
reasonably required by the circumstances and such shorter time is specified in
Seller's written notice) of Seller's written notice to Purchaser requesting such
consent unless Purchaser notifies Seller to the contrary in writing during that
period. In the event of an emergency, Seller may take such action as a prudent
operator would take and shall notify Purchaser of such action promptly
thereafter.
Purchaser
acknowledges that Seller may own an undivided interest in certain of the Assets,
and Purchaser agrees that the acts or omissions of the other working interest
owners who are not affiliated with Seller shall not constitute a violation of
the provisions of this Section 7.6 nor shall any
action required by a vote of working interest owners constitute such a violation
so long as Seller has voted its interest in a manner consistent with the
provisions of this Section 7.6.
Section
7.7 Preference Rights
and Transfer Requirements.
(a) The
transactions contemplated by this Agreement are expressly subject to all validly
existing and applicable Preference Rights and Transfer Requirements. Prior to
the Closing Date, Seller shall initiate all procedures which are reasonably
required to comply with or obtain the waiver of all Preference Rights and
Transfer Requirements set forth in Schedule 5.13 with
respect to the transactions contemplated by this Agreement. Seller shall use its
commercially reasonable efforts to obtain all applicable consents related to
Transfer Requirements set forth on Schedule 5.13 and to obtain
waivers of applicable Preference Rights set forth on Schedule 5.13; provided,
however, Seller shall not be obligated to pay any consideration to (or incur any
cost or expense for the benefit of) the holder of any Preference Right or
Transfer Requirement in order to obtain the waiver thereof or compliance
therewith.
(b) If
the holder of a Preference Right elects prior to Closing to purchase the Asset
subject to a Preference Right (a "Preference Property") in accordance with the
terms of such Preference Right, and Seller receives written notice of such
election prior to the Closing, such Preference Property will be eliminated from
the Assets and the Purchase Price shall be reduced by the Allocated Value of the
Preference Property.
(c) If
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(i)
|
a
third party brings any suit, action or other proceeding prior to the
Closing seeking to restrain, enjoin or otherwise prohibit the consummation
of the transactions contemplated hereby in connection with a claim to
enforce a Preference Right;
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28
|
(ii)
|
an
Asset is subject to a Transfer Requirement that provides that transfer of
such Asset without compliance with such Transfer Requirement will result
in termination or other material impairment of any rights in relation to
such Asset, and such Transfer Requirement is not waived, complied with or
otherwise satisfied prior to the Closing Date;
or
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|
(iii)
|
the
holder of a Preference Right does not elect to purchase such Preference
Property or waive such Preference Right with respect to the transactions
contemplated by this Agreement prior to the Closing Date and the time in
which the Preference Right may be exercised has not
expired;
|
then,
unless otherwise agreed by Seller and Purchaser, the Asset or portion thereof
affected by such Preference Right or Transfer Requirement (a "Retained Asset")
shall be held back from the Assets to be transferred and conveyed to Purchaser
at Closing and the Purchase Price to be paid at Closing shall be reduced by the
Allocated Value of such Retained Asset pursuant to Section 7.7(b). Any
Retained Asset so held back at the initial Closing will be conveyed to Purchaser
at a delayed Closing (which shall become the new Closing Date with respect to
such Retained Asset), within ten (10) days following the date on which the
suit, action or other proceeding, if any, referenced in clause (i) above is
settled or a judgment is rendered (and no longer subject to appeal) permitting
transfer of the Retained Asset to Purchaser pursuant to this Agreement and
Seller obtains, complies with, obtains a waiver of or notice of election not to
exercise or otherwise satisfies all remaining Preference Rights and Transfer
Requirements with respect to such Retained Asset as contemplated by this Section 7.7(c) (or if multiple
Assets are Retained Assets, on a date mutually agreed to by the parties in order
to consolidate, to the extent reasonably possible, the number of Closings). At
the delayed Closing, Purchaser shall pay Seller a purchase price equal to the
amount by which the Purchase Price was reduced on account of the holding back of
such Retained Asset (as adjusted pursuant to Section 2.2 through the
new Closing Date therefor); provided, however, if all such Preference Rights and
Transfer Requirements with respect to any Retained Asset so held back at the
initial Closing are not obtained, complied with, waived or otherwise satisfied
as contemplated by this Section within one hundred eighty (180) days after
the initial Closing has occurred with respect to any Asset, then such Retained
Asset shall be eliminated from the Assets and shall become an Excluded Asset,
unless Seller and Purchaser agree to proceed with a closing on such Retained
Asset, in which case Purchaser shall be deemed to have waived any objection (and
shall be obligated to indemnify the Seller Indemnified Persons for all Losses)
with respect to non-compliance with such Preference Rights and Transfer
Requirements with respect to such Retained Asset(s).
(d) Purchaser
acknowledges that Seller desires to sell all of the Assets to Purchaser and
would not have entered into this Agreement but for Purchaser's agreement to
purchase all of the Assets as herein provided. Accordingly, it is expressly
understood and agreed that Seller does not desire to sell any Property affected
by a Preference Right to Purchaser unless the sale of all of the Assets is
consummated by the Closing Date in accordance with the terms of this Agreement.
In furtherance of the foregoing, Seller's obligation hereunder to sell the
Preference Properties to Purchaser is expressly conditioned upon the
consummation by the Closing Date of the sale of all of the Assets (other than
Retained Assets or other Assets excluded pursuant to the express provisions of
this Agreement) in accordance with the terms of this Agreement, either by
conveyance to Purchaser or conveyance pursuant to an applicable Preference
Right; provided that, nothing herein is intended or shall operate to extend or
apply any Preference Right to any portion of the Assets which is not otherwise
burdened thereby. Time is of the essence with respect to the parties' agreement
to consummate the sale of the Assets by the Closing Date (or by the delayed
Closing Date pursuant to Section 7.7(c)).
29
(a) Subject
to the provisions of Section 12.3, Seller
shall be responsible for all Taxes related to the Assets (other than ad valorem,
property, severance, Hydrocarbon production and similar Taxes based upon or
measured by the ownership or operation of the Assets or the production of
Hydrocarbons therefrom, which are addressed in Section 1.4) attributable
to any period of time prior to the Closing Date, and Purchaser shall be
responsible for all such Taxes related to the Assets attributable to any period
of time on and after the Closing Date. Notwithstanding the foregoing, Seller
shall handle payment to the appropriate Governmental Body of all Taxes with
respect to the Assets which are required to be paid prior to Closing (and shall
file all Tax Returns with respect to such Taxes). If requested by Purchaser,
Seller will assist Purchaser with preparation of all ad valorem and property Tax
Returns for periods ending on or before December 31, 2010 (including any
extensions requested). Seller shall deliver to Purchaser within thirty
(30) days of filing copies of all Tax Returns to be filed by Seller
relating to the Assets and any supporting documentation to be provided by Seller
to Governmental Bodies for Purchaser's approval, which shall not be unreasonably
withheld, excluding Tax Returns related to income tax, franchise tax, or other
similar Taxes. Purchaser shall file all Tax Returns covering Taxes treated as
Property Costs that are required to be filed after the Closing Date unless
covered above. With respect to such Tax Returns covering a taxable period which
includes the Effective Date, Purchaser shall provide a copy of such Tax Return
to Seller within 30 days prior to filing for Seller's approval, which shall
not be unreasonably withheld.
(b) Purchaser
and Seller shall cooperate fully, as and to the extent reasonably requested by
the other party, in connection with the filing of any Tax Returns and any audit,
litigation or other Proceeding with respect to Taxes. Such cooperation shall
include the retention and (upon the other party's request) the provision of
records and information which are reasonably relevant to any such audit,
litigation or other Proceeding and making employees reasonably available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. Each of Purchaser and Seller agrees (i) to
retain all books and records with respect to Tax matters pertinent to the
acquired assets relating to any taxable period beginning before the Closing Date
until the expiration of the statute of limitations (and, to the extent notified
by Purchaser or Seller, any extensions thereof) of the respective taxable
periods, and to abide by all record retention agreements entered into with any
Governmental Body, and (ii) to give the other party reasonable written
notice prior to transferring, destroying or discarding any such books and
records and, if the other party so requests, each party shall allow the other
party the option of taking possession of such books and records prior to their
disposal. Purchaser and Seller further agree, upon request, to use their
commercially reasonable efforts to obtain any certificate or other document from
any Governmental Body or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed with respect to the
transactions contemplated.
30
(c) Purchaser
and Seller shall cooperate fully, as and to the extent reasonably requested by
the other party, in connection of accommodating a 1031 exchange (as provided for
under Section 1031 of the Code). Purchaser and Seller each reserves the
right, at or prior to Closing, to assign its rights under this Agreement with
respect to all or a portion of the Purchase Price, and that portion of the
Assets associated therewith ("1031 Assets"), to a "Qualified Intermediary" (as
that term is defined in Section 1.1031(k)-1(g)(4)(v) of the Treasury
Regulations) to accomplish this transaction, in whole or in part, in a manner
that will comply with the requirements of a like-kind exchange ("Like-Kind
Exchange") pursuant to Section 1031 of the Code. If Purchaser so
elects, Purchaser may assign its rights under this Agreement to the 1031 Assets
to the Qualified Intermediary. Seller hereby (i) consents to Purchaser's
assignment of its rights in this Agreement with respect to the 1031 Assets, and
(ii) if such an assignment is made, agrees to
transfer all or a portion of the Assets into the qualified trust account at
Closing as directed in writing by Purchaser. Purchaser and Seller each
acknowledge and agree that a whole or partial assignment of this Agreement to a
Qualified Intermediary shall not release the other party from any of its
respective promises, liabilities and obligations to the other party or expand
any promises, liabilities or obligations of such party under this Agreement.
Neither party represents to the other that any particular tax treatment will be
given to either party as a result of the Like-Kind Exchange. Neither party shall
be obligated to pay any additional costs or incur any additional obligations in
its sale of the Assets if such costs are the result of the other party’s
Like-Kind Exchange, and each party shall hold harmless and indemnify the other
party from and against all claims, losses and liabilities (including reasonable
attorneys' fees, court costs and related expenses), if any, resulting from such
a Like-Kind Exchange.
Section
7.9 Further
Assurances; Audit Cooperation. After the Closing, Seller and
Purchaser shall cause their Affiliates to, execute, acknowledge and deliver all
such further conveyances, transfer orders, division orders, notices assumptions,
releases and acquittances, and such other instruments, and shall take such
further actions as may be necessary or appropriate to assure fully to Purchaser
or Seller (including their successors and assigns) as the case may be, that the
transactions described in this Agreement shall be completed and that all of the
Properties intended to be conveyed under the terms of this Agreement are so
conveyed, including such Properties that are improperly described herein or
inadvertently omitted from this Agreement and/or the Conveyance (including the
Exhibits attached to each) and to assure fully that Purchaser has assumed the
liabilities and obligations intended to be assumed by Purchaser pursuant to this
Agreement. Seller
acknowledges that Purchaser may need audited financial statements relating to
the Assets for purposes of filing with the SEC. Upon request of
Purchaser, Seller agrees to engage Deloitte & Touche LLP to provide audit
services in connection with such filing. Seller agrees to reasonably
cooperate with Deloitte & Touche LLP and Purchaser in the preparation of
such audited financial statement and to make Sellers’ records and personnel
available at reasonable times and durations, given other demands Seller’s
personnel may have in performing other duties for Seller, provided, however,
that Seller makes no representation or guarantee that such audited financial
statements will be generated in any particular amount of time or by any
date. Purchaser agrees to reimburse Seller for all costs and expenses
associated with Deloitte & Touche LLP’s engagement pursuant to this Section
7.9.
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Section
7.10. Interim Hedging
Arrangements.
Seller
and Purchaser agree as follows:
(a) From
time to time at the request and direction of Purchaser, Seller will enter into
confirmations of hedge transactions with the counterparties, at the prices for
the commodities, in the volumes, for the months and at the location or indices
as directed by Purchaser, which hedge transactions will be assigned to Purchaser
at Closing (the “Subject Hedge Transactions”). The Seller and
Purchaser mutually agreed upon Wells Fargo Bank, N.A., JPMorgan Chase Bank,
N.A., or BNP Paribas or both as counterparties for the Subject Hedge
Transactions by (the “Counterparty”) The Counterparty shall agree in advance to
the transfer from Seller to Purchaser referred to in (c) below. Seller and
Purchaser will cooperate to arrange the Subject Hedge Transactions, but with the
understanding that Purchaser shall have the right to direct and Seller shall
have the right to approve or disapprove any particular transaction which
approval shall not be unreasonably withheld.
(b) The
terms of the documentation and specific trade or trades shall be reasonably
acceptable to both Seller and Purchaser.
(c) Within
three (3) Business Days after Closing, Seller and Purchaser will enter into and
cause the Counterparty to novate the Subject Hedge Transactions from Seller to
Purchaser with an ISDA Novation Agreement and Novation Confirmation letter in
such form as shall be acceptable to each of Seller, Purchaser, and
Counterparty.
(d) At
any time prior to the Agreement being terminated, Purchaser may require Seller
to unwind the then existing Subject Hedge Transactions by providing written
notice to Seller (the “Unwind Notice”). In the event that (i) an
Unwind Notice is delivered, or (ii) the Agreement is terminated for any reason,
then no later than 11:00 AM local time in Houston, Texas on the second Business
Day immediately after (x) the delivery of Unwind Notice or (y) the date that the
Agreement is terminated (such second Business Day being the “Calculation Date”
as applicable) then [“then” should be deleted] Seller may elect to retain the
then existing Subject Hedge Transactions by delivering a written notice to
Purchaser (a “Retention Notice”). Upon Seller’s timely delivery of a
Retention Notice, the Subject Hedge Transactions shall remain unmodified and in
full force and effect and Purchaser and all of its Affiliates shall be released
from any and all obligations with respect to the Subject Hedge Transactions and
have no further obligations or rights with respect thereto. If a
Retention Notice is not timely provided on the Calculation Date, then
immediately thereafter on the Calculation Date, Seller and Purchaser shall
initiate a conference call, or other mutually acceptable means, with the
applicable Counterparty of each Subject Hedge Transaction and request that the
Counterparty quote the cost, if any, of terminating or otherwise unwinding such
Subject Hedge Transaction (each such quoted cost, a “Termination
Cost”). The Termination Cost shall be deemed to be the amount that
Purchaser shall be obligated to pay to Seller as satisfaction in full all
obligations of Purchaser with respect to such Subject Hedge Transaction arising
out of or related to this Agreement and upon payment of such amount, which shall
be made no later than one Business Day following the Calculation Date, Purchaser
shall be released from any and all obligations with respect to the Subject Hedge
Transaction and have no further obligations with respect thereto. In
the event Purchaser and Seller unwind or terminate one or more Subject Hedge
Transactions pursuant to this Section 7.10(d) and such unwinding or termination
results in a payment by a Counterparty to Seller, Seller shall have exclusive
right to such payment.
32
ARTICLE
8
CONDITIONS
TO CLOSING
Section
8.1 Conditions of
Seller to Closing. The obligations of Seller to consummate the
transactions contemplated by this Agreement are subject, at the option of
Seller, to the satisfaction or waiver by Seller on or prior to Closing of each
of the following conditions:
(a) Representations. Each of the
representations and warranties of Purchaser contained in this Agreement shall be
true and correct (in each case, without giving effect to any materiality
standard or Material Adverse Effect qualification) as of the date hereof and as
of the Closing Date as though made on and as of the Closing Date, except (i) to
the extent that any such representation or warranty is made as of a specified
date, in which case such representation or warranty shall have been true and
correct as of such specified date; and (ii) to the extent the failure of such
representations or warranties to be true and correct would not, individually or
in the aggregate, result in a Material Adverse Effect as to Purchaser;
(b) Performance. Purchaser shall
have performed and observed, in all material respects, all covenants and
agreements to be performed or observed by it under this Agreement prior to or on
the Closing Date;
(c) Proceedings. No Proceeding by
a third party (including any Governmental Body) seeking to restrain, enjoin or
otherwise prohibit the consummation of the transactions contemplated by this
Agreement shall be pending before any Governmental Body and no order, writ,
injunction or decree shall have been entered and be in effect by any court or
any Governmental Body of competent jurisdiction, and no statute, rule,
regulation or other requirement shall have been promulgated or enacted and be in
effect, that on a temporary or permanent basis restrains, enjoins or invalidates
the transactions contemplated hereby; provided, however, the
Closing shall proceed notwithstanding any Proceedings seeking to restrain,
enjoin or otherwise prohibit consummation of the transactions contemplated
hereby brought by holders of Preference Rights seeking to enforce such rights
with respect to the Assets, and the Assets subject to such Proceedings shall be
treated in accordance with Section 7.7;
and
(d) Deliveries. Purchaser shall
have delivered (or be ready, willing and able to immediately deliver) to Seller
duly executed counterparts of the Conveyance and all other documents and
certificates to be delivered by Purchaser under Section 9.3 and shall
have performed (or be ready, willing and able to immediately perform) the other
obligations required to be performed by it under Section 9.3.
Section
8.2 Conditions of
Purchaser to Closing. The obligations of Purchaser to
consummate the transactions contemplated by this Agreement are subject, at the
option of Purchaser, to the satisfaction or waiver by Purchaser on or prior to
Closing of each of the following conditions:
33
(a) Representations. Each of the
representations and warranties of Seller contained in this Agreement shall be
true and correct (in each case, without giving effect to any materiality
standard or Material Adverse Effect qualification) as of the date hereof and as
of the Closing Date as though made on and as of the Closing Date, except (i) to
the extent that any such representation or warranty is made as of a specified
date, in which case such representation or warranty shall have been true and
correct as of such specified date; and (ii) to the extent the failure of such
representations or warranties to be true and correct would not, individually or
in the aggregate, result in a Material Adverse Effect as to Seller;
(b) Performance. Seller shall
have performed and observed, in all material respects, all covenants and
agreements to be performed or observed by it under this Agreement prior to or on
the Closing Date;
(c) Proceedings. No Proceeding by
a third party (including any Governmental Body) seeking to restrain, enjoin or
otherwise prohibit the consummation of the transactions contemplated by this
Agreement shall be pending before any Governmental Body and no order, writ,
injunction or decree shall have been entered and be in effect by any court or
any Governmental Body of competent jurisdiction, and no statute, rule,
regulation or other requirement shall have been promulgated or enacted and be in
effect, that on a temporary or permanent basis restrains, enjoins or invalidates
the transactions contemplated hereby; provided, however, the
Closing shall proceed notwithstanding any Proceedings seeking to restrain,
enjoin or otherwise prohibit consummation of the transactions contemplated
hereby brought by holders of Preference Rights seeking to enforce such rights
with respect to the Assets, and the Assets subject to such Proceedings shall be
treated in accordance with Section 7.7;
and
(d) Deliveries. Seller shall have
delivered (or be ready, willing and able to immediately deliver) to Purchaser
duly executed counterparts of the Conveyance and all other documents and
certificates to be delivered by Seller under Section 9.2.
ARTICLE
9
CLOSING
Section
9.1 Time and Place of
Closing.
(a) Unless
this Agreement shall have been terminated and the transactions herein
contemplated shall have been abandoned pursuant to Article 10, and subject
to the satisfaction or waiver of the conditions set forth in Article 8 (other than
conditions the fulfillment of which by their nature is to occur at the
completion of the transactions contemplated by this Agreement (the "Closing")),
the Closing shall take place at 10:00 a.m., local time, on September 29,
2010, at the offices of Seller, 1000 Louisiana, Suite 5600, Houston, Texas,
unless another date, time or place is mutually agreed to in writing by Purchaser
and Seller. If any of the conditions (other than conditions the fulfillment of
which by their nature is to occur at the Closing) set forth in Article 8 are not
satisfied or waived at the time the Closing is to occur pursuant to this Section 9.1(a), then the
Closing shall occur on a date that is the third Business Day after the
satisfaction or waiver of all such conditions.
(b) The
date on which the Closing occurs is herein referred to as the "Closing
Date."
34
Section
9.2 Obligations of
Seller at Closing. At the Closing, upon the terms and subject
to the conditions of this Agreement, Seller shall deliver or cause to be
delivered to Purchaser, or perform or cause to be performed, the
following:
(a) the
Conveyance, in sufficient duplicate originals to allow recording in all
appropriate jurisdictions and offices, duly executed by Seller;
(b) letters-in-lieu
of transfer orders covering the Assets, duly executed by Seller;
(c) a
certificate duly executed by an authorized corporate officer of Seller, dated as
of Closing, certifying on behalf of Seller that the conditions set forth in
Section 8.2(a) and
Section 8.2(b) have
been fulfilled;
(d) evidence
that all liens or releases from Seller’s lenders have been obtained relating to
all mortgages and UCC filings regarding the Assets; and
(e) the
change of operator forms referenced in Section 7.4(c) to be executed by Seller
and Purchaser and which shall be filed by Seller pursuant to Section 7.4(c)
after Closing.
Section
9.3 Obligations of
Purchaser at Closing. At the Closing, upon the terms and
subject to the conditions of this Agreement, Purchaser shall deliver or cause to
be delivered to Seller, or perform or caused to be performed, the
following:
(a) a
wire transfer in an amount equal to the Closing Payment, in same-day
funds;
(b) the
Conveyance, duly executed by Purchaser;
(c) letters-in-lieu
of transfer orders covering the Assets, duly executed by Purchaser;
and
(d) a
certificate by an authorized corporate officer of Purchaser, dated as of
Closing, certifying on behalf of Purchaser that the conditions set forth in
Section 8.1(a) and
Section 8.1(b) have
been fulfilled.
Section
9.4 Closing
Adjustments.
(a) Not
later than five (5) Business Days prior to the Closing Date, Seller shall
prepare and deliver to Purchaser, based upon the best information available to
Seller, a preliminary settlement statement estimating the Adjusted Purchase
Price after giving effect to all adjustments listed in Section 2.2. The estimate
delivered in accordance with this Section 9.4(a) shall
constitute the dollar amount to be paid by Purchaser to Seller at the Closing
(the "Closing Payment"). Until two (2) Business Days before the Closing
Date, Purchaser shall have the opportunity to review and discuss the preliminary
settlement statement with Seller; provided, however, Seller shall not be
required to make any change thereto to which Seller does not
agree.
35
(b) As
soon as reasonably practicable after the Closing but not later than ninety (90)
days following the Closing Date, Seller shall prepare and deliver to Purchaser a
statement setting forth the final calculation of the Adjusted Purchase Price and
showing the calculation of each adjustment, based, to the extent possible, on
actual credits, charges, receipts and other items before and after the Effective
Time and taking into account all adjustments provided for in this Agreement (the
"Final Purchase Price"). Seller shall, at Purchaser's request, supply reasonable
documentation available to support any credit, charge, receipt or other item.
Seller shall afford Purchaser and its representatives the opportunity to review
such statement and the supporting schedules, analyses, workpapers, and other
underlying records or documentation as are reasonably necessary and appropriate
in Purchaser's review of such statement. Each party shall cooperate fully and
promptly with the other and their respective representatives in such examination
with respect to all reasonable requests related thereto. As soon as reasonably
practicable but not later than the 30th day following receipt of Seller's
statement hereunder, Purchaser shall deliver to Seller a written report
containing any changes that Purchaser proposes be made to such statement. Seller
and Purchaser shall undertake to agree on the final statement of the Final
Purchase Price no later than one hundred twenty (120) days after the
Closing Date (the "Final Settlement Date"). In the event that Seller and
Purchaser cannot reach agreement by the Final Settlement Date, either party may
refer the remaining matters in dispute to UHY LLP, or such other
nationally-recognized independent accounting firm as may be mutually accepted by
Purchaser and Seller, for review and final determination (the "Agreed Accounting
Firm"). Each party shall summarize its position with regard to the
remaining matters in dispute in a written document of twenty-five pages or less
and submit such summaries to the Agreed Accounting Firm, together with any other
documentation such party may desire to submit. Within fifteen (15) Business Days
after receiving the parties' respective submissions, the Agreed Accounting Firm
shall render in writing a decision choosing either Seller’s position or
Purchaser’s position or a position in between those (but in no event higher or
lower than the amounts proposed in the post-Closing statements exchanged between
the parties, as described earlier in this subsection) based on the materials
described above. The Agreed Accounting Firm may not award damages or
penalties to either party. Any decision rendered by the Agreed
Accounting Firm pursuant hereto shall be final, conclusive and binding on Seller
and Purchaser and will be enforceable against any of the parties in any court of
competent jurisdiction. The fees of the Agreed Accounting Firm shall be borne
and paid one-half by Sellers and one-half by Purchaser. Seller and
Purchaser shall each bear its own legal fees and other costs of presenting its
case. Within ten (10) Business Days after the date on which the
parties or the Agreed Accounting Firm, as applicable, finally determines the
disputed matters, (x) Purchaser shall pay to Seller the amount by which the
Final Purchase Price exceeds the Closing Payment or (y) Seller shall pay to
Purchaser the amount by which the Closing Payment exceeds the Final Purchase
Price, as applicable.
(c) All
payments made or to be made hereunder to Seller shall be by electronic transfer
of immediately available funds to the account Seller as set forth on Schedule 9.4(c), for the
credit of Seller or to such other bank and account as may be specified by Seller
in writing. All payments made or to be made hereunder to Purchaser shall be by
electronic transfer of immediately available funds to a bank and account
specified by Purchaser in writing to Seller.
ARTICLE
10
TERMINATION
Section
10.1 Termination. This
Agreement may be terminated and the transactions contemplated hereby abandoned
at any time prior to the Closing:
36
(a) by
mutual written consent of Seller and Purchaser;
(b) by
either Seller or Purchaser, if:
|
(i)
|
the
Closing shall not have occurred on or before October 30, 2010 (the
"Termination Date"); provided, however, that the right to terminate this
Agreement under this Section 10.1(b)(i)
shall not be available (A) to Seller, if any breach of this Agreement
by Seller has been the principal cause of, or resulted in, the failure of
the Closing to occur on or before the Termination Date or (B) to
Purchaser, if any breach of this Agreement by Purchaser has been the
principal cause of, or resulted in, the failure of the Closing to occur on
or before the Termination Date; or
|
|
(ii)
|
there
shall be any Law that makes consummation of the transactions contemplated
hereby illegal or otherwise prohibited or a Governmental Body shall have
issued an order, decree, or ruling or taken any other action permanently
restraining, enjoining, or otherwise prohibiting the consummation of the
transactions contemplated hereby, and such order, decree, ruling, or other
action shall have become final and non
appealable;
|
(c) by
Seller, if (i) any of the representations and warranties of Purchaser
contained in this Agreement shall not be true and correct in all material
respects (provided that any such representation or warranty that is already
qualified by a materiality or Material Adverse Effect qualification shall not be
further qualified) as of the date hereof and as of the Closing Date as though
made on and as of the Closing Date, except (A) to the extent that any such
representation or warranty is made as of a specified date, in which case such
representation or warranty shall have been true and correct as of such specified
date; and (B) to the extent the failure of such representations or warranties to
be true and correct would not, individually or in the aggregate, result in a
Material Adverse Effect on Purchaser; or (ii) Purchaser shall have failed
to fulfill in any material respect any of its obligations under this Agreement;
and such failure has not been cured within ten (10) days after written
notice thereof from Seller to Purchaser; provided that any cure period shall not
extend beyond the Termination Date and shall not extend the Termination
Date;
(d) by
Purchaser, if (i) any of the representations and warranties of Seller
contained in this Agreement shall not be true and correct in all material
respects (provided that any such representation or warranty that is already
qualified by a materiality or Material Adverse Effect qualification shall not be
further qualified); as of the date hereof and as of the Closing Date as though
made on and as of the Closing Date, except (A) to the extent that any such
representation or warranty is made as of a specified date, in which case such
representation or warranty shall have been true and correct as of such specified
date; and (B) to the extent the failure of such representations or warranties to
be true and correct would not, individually or in the aggregate, result in a
Material Adverse Effect on Seller; or (ii) Seller shall have failed to
fulfill in any material respect any of its obligations under this Agreement,
and, in the case of each of clauses (i) and (ii), such misrepresentation,
breach of warranty or failure, if curable, has not been cured within ten
(10) days after written notice thereof from Purchaser to Seller; provided
that any cure period shall not extend beyond the Termination Date and shall not
extend the Termination Date;
37
(e) by
either Seller or Purchaser if the total aggregate adjustments to the Purchase
Price for Title Defects, Environmental Defects and Casualty Loss
exceeds twenty-five percent (25%) of the Purchase Price; or
(f) by
either Seller or Purchaser if the value of uncured Casualty Loss exceeds
twenty-five percent (25%) of the Purchase Price.
Section
10.2 Effect of
Termination. If this Agreement is terminated pursuant to Section 10.1, this
Agreement shall become void and of no further force or effect and the parties
shall have no liability or obligation hereunder (except for the provisions of
Section 4.4,
Section 5.6, Section 6.5, Section 7.5, Section 11.9 and Section 11.10 of this
Agreement and this Article 10, the Section
entitled "Definitions," and Article 12 (other than
Section 12.6), all
of which shall continue in full force and effect). Notwithstanding the
foregoing, nothing contained in this Section 10.2 shall
relieve any party from liability for Losses resulting from its breach of this
Agreement. If Seller terminates this Agreement (i) because
Purchaser has failed to comply with any provision of Sections 8.1(a), 8.1(b) or 8.1(d); or (ii) as the
result of any default or breach by Purchaser of Purchaser's obligations
hereunder, then Seller shall be entitled to one or more of any and all remedies
as may be available to Seller at law or in equity, including but not limited to
specific performance. If Purchaser terminates this Agreement (i) because
Seller has failed to comply with any provision of Sections 8.2(a), 8.2(b) or 8.2(d); or (ii) as the
result of any default or breach by Seller of Seller's obligations hereunder,
then Purchaser shall be entitled to all remedies as may be available to
Purchaser at law or in equity, including but not limited to specific
performance.
ARTICLE
11
POST-CLOSING
OBLIGATIONS; INDEMNIFICATION; LIMITATIONS;
DISCLAIMERS
AND WAIVERS
Section
11.1 Receipts. Except
as otherwise provided in this Agreement, any Hydrocarbons produced from or
attributable to the Assets (and all products and proceeds attributable thereto)
and any other income, proceeds, receipts and credits attributable to the Assets
which are not reflected in the adjustments to the Purchase Price following the
final adjustment pursuant to Section 9.4(b) shall be
treated as follows: (a) all Hydrocarbons produced from or attributable to
the Assets (and all products and proceeds attributable thereto) and all other
income, proceeds, receipts and credits earned with respect to the Assets to
which Purchaser is entitled under Section 1.4 shall be the
sole property and entitlement of Purchaser, and, to the extent received by
Seller, Seller shall fully disclose, account for and remit the same promptly to
Purchaser, and (b) all Hydrocarbons produced from or attributable to the
Assets (and all products and proceeds attributable thereto) and all other
income, proceeds, receipts and credits earned with respect to the Assets to
which Seller is entitled under Section 1.4 shall be the
sole property and entitlement of Seller and, to the extent received by
Purchaser, Purchaser shall fully disclose, account for and remit the same
promptly to Seller.
38
Section
11.2 Expenses. Except
as otherwise provided in this Agreement, any Property Costs which are not
reflected in the adjustments to the Purchase Price following the final
adjustment pursuant to Section 9.4(b) shall be
treated as follows: (a) all Property Costs for which Seller is responsible
under Section 1.4
shall be the sole obligation of Seller and Seller shall promptly pay, or if paid
by Purchaser, promptly reimburse Purchaser for and hold Purchaser harmless from
and against same; and (b) all Property Costs for which Purchaser is
responsible under Section 1.4 shall be the
sole obligation of Purchaser, and Purchaser shall promptly pay, or if paid by
Seller, promptly reimburse Seller for and hold Seller harmless from and against
same. Seller is entitled to resolve all joint interest audits and other audits
of Property Costs covering periods for which Seller is wholly responsible and
Purchaser is entitled to resolve all joint interest audits and other audits of
Property Costs covering periods for which Purchaser is in whole or in part
responsible; provided that Purchaser shall not agree to any adjustments to
previously assessed costs for which Seller is liable without the prior written
consent of Seller, such consent not to be unreasonably withheld. Purchaser shall
provide Seller with a copy of all applicable audit reports and written audit
agreements received by Purchaser and relating to periods for which Seller is
partially responsible.
Section
11.3 Assumed Seller
Obligations. Subject to the indemnification by Seller under
Section 11.5, on
the Closing Date, Purchaser shall assume and hereby agrees to fulfill, perform,
pay and discharge (or cause to be fulfilled, performed, paid or discharged) all
of the obligations and liabilities of Seller, known or unknown, with respect to
the Assets, regardless of whether such obligations or liabilities arose prior
to, on or after the Effective Time, including but not limited to obligations to
(a) furnish makeup gas according to the terms of applicable gas sales,
gathering or transportation contracts, and to satisfy all other gas balancing
obligations, if any, (b) pay working interests, royalties, overriding
royalties and other interests held in suspense (it being agreed that,
notwithstanding anything in this Agreement to the contrary, Purchaser shall be
solely responsible for the distribution of all suspended funds included in the
Assets and transferred to Purchaser pursuant hereto), (c) properly plug and
abandon any and all wells, including inactive wells or temporarily abandoned
wells, drilled on the Properties, as required by Law, (d) replug any well,
wellbore, or previously plugged well on the Properties to the extent required by
Governmental Body, (e) dismantle, salvage and remove any equipment,
structures, materials, flowlines, and property of whatever kind related to or
associated with operations and activities conducted on the Properties,
(f) clean up, restore and/or remediate the premises covered by or related
to the Assets in accordance with applicable agreements and
Laws, (g) perform all obligations applicable to or imposed on
the lessee, owner, or operator under the Leases and related contracts, or as
required by applicable Laws and (h) assumption of all obligations
related to the litigation on Schedule 5.7(a) except with
respect to those obligations as specifically identified on Schedule 5.7(a) as being
retained by Seller (all of said obligations and liabilities, subject to the
exclusions below, herein being referred to as the "Assumed Seller Obligations");
provided, however, that the Assumed Seller Obligations shall not include, and
Purchaser shall have no obligation to assume, any obligations or liabilities of
Seller to the extent that they are (such excluded obligations and liabilities,
the "Excluded Seller Obligations"):
|
(i)
|
attributable
to or arise out of the Excluded
Assets;
|
|
(ii)
|
the
continuing responsibility of Seller under Section 11.1 or
Section 11.2;
|
|
(iii)
|
Property
Costs for which Seller is responsible pursuant to Section 1.4(b);
|
39
|
(iv)
|
obligations
and liabilities arising from or relating to Item 1 on Schedule 5.7(a) (the
Coll case), but only to the extent relating to periods prior to the
Effective Time;
|
|
(v)
|
obligations
and liabilities relating to third party personal injury or death claims
for events occurring prior to the Effective Time, but excluding all
Environmental Liabilities (for avoidance of doubt, such Environmental
Liabilities shall not constitute Excluded Seller Obligations);
and
|
|
(vi)
|
Retained
Employee Liabilities.
|
(a) The
representations and warranties contained in Section 5.5, Section 5.7,
Section 5.8, Section 5.9, Section 5.10, Section 5.11, Section 5.15, Section 5.16, Section 5.17, Section 5.18, Section 5.19, Section 5.20, and Section 5.21 shall terminate
six (6) months after Closing. The representations and warranties
contained in Section 5.3, Section 5.4, Section 5.6,
Section 6.2, Section 6.3, and Section 6.5 (collectively, the
"Fundamental Representations") shall survive until the expiration of the
applicable statute of limitations period. All other representations and
warranties of Seller and Purchaser contained herein shall terminate three (3)
months after Closing. Upon the termination of a representation or
warranty in accordance with the foregoing, such representation or warranty shall
have no further force or effect for any purpose under this Agreement. The
covenants and other agreements of Seller and Purchaser set forth in this
Agreement shall survive the Closing Date until fully performed.
(b) No
party hereto shall have any indemnification obligation pursuant to this Article 11 or otherwise
in respect of any representation, warranty, covenant or agreement unless it
shall have received from the party seeking indemnification a written notice (a
"Claim Notice") of the existence of the claim for or in respect of which
indemnification in respect of such representation, warranty, covenant or
agreement is being sought on or before the expiration of the applicable survival
period set forth in Section 11.4(a). If an
Indemnified Party delivers a Claim Notice to an Indemnifying Party before the
expiration of the applicable survival period set forth in Section 11.4(a), then the
applicable representation, warranty, covenant or agreement shall survive until,
but only for purposes of, the resolution of the matter covered by such Claim
Notice. A Claim Notice shall set forth with reasonable specificity (1) the
basis for such claim under this Agreement, and the facts that otherwise form the
basis of such claim and (2) to the extent reasonably estimable, an estimate
of the amount of such claim (which estimate shall not be conclusive of the final
amount of such claim) and an explanation of the calculation of such
estimate.
(c) Neither
Seller nor Purchaser shall have any liability for any indemnification under this
Agreement, nor any liability for breach of any representations, warranties, or
covenants under this Agreement, until and unless (i) the amount of the liability
for any individual claim or series of claims arising out of the same or similar
set of facts, for which a Claim Notice is delivered by Purchaser or Seller, as
applicable, exceeds $250,000, and then only to the extent such damage exceeds
$250,000 (“Individual Indemnity Threshold”), and (ii) the aggregate amount of
the liabilities for all claims for which Claim Notices are delivered by
Purchaser or Seller, as applicable, exceeds two percent (1.5%) of the Purchase
Price, and then only to the extent such damages exceed two percent (1.5%) of the
Purchase Price (the “Aggregate Indemnity Deductible”).
40
(d) Except
as expressly provided elsewhere in this Agreement, neither party shall be
required to indemnify the other party, or otherwise be liable for breaching any
representations, warranties, or covenants under this Agreement, for aggregate
damages in excess of an amount equal to fifteen percent (15%) of the Purchase
Price.
(e) For
purposes of this Article 11 only, the “material”, “materiality”, “all material
respects” or “Material Adverse Effect” or similar qualifiers contained in the
representations and warranties in Article 5 and Article 6 and which are
subject to indemnification shall be disregarded for purposes of determining the
Individual Indemnity Threshold and the Aggregate Indemnity
Deductible.
Section
11.5 Indemnification
by Seller. Subject to the terms, conditions, and
limitations of this Article 11, from and after the Closing, Seller shall
jointly and severally indemnify, defend and hold harmless Purchaser and its
directors, officers, employees, stockholders, members, agents, consultants,
advisors and other representatives (including legal counsel, accountants and
financial advisors) and Affiliates and the successors and permitted assigns of
this Agreement of Purchaser (collectively, the "Purchaser Indemnified Persons")
from and against any and all Losses asserted against, resulting from, imposed
upon, or incurred or suffered by any Purchaser Indemnified Person to the extent
resulting from, arising out of or relating to:
(a) any
breach of any representation or warranty of Seller contained in this Agreement
or in any certificate furnished by or on behalf of Seller in connection with
this Agreement;
(b) any
breach or nonfulfillment of or failure to perform any covenant or agreement of
Seller contained in this Agreement or in any certificate furnished by or on
behalf of Seller in connection with this Agreement;
(c) any
Excluded Seller Obligations; and
(d) The
indemnity obligations in Section 11.5(c) with respect
to Excluded Seller Obligations shall not be subject to the deductibles and
limitations in Section
11.4.
Section
11.6 Indemnification
by Purchaser. From and after the Closing, subject to the terms
and conditions of this Article 11, Purchaser
shall indemnify, defend and hold harmless Seller and its directors, officers,
employees, agents, consultants, stockholders, advisors and other representatives
(including legal counsel, accountants and financial advisors), and Seller's
successors, permitted assigns of this Agreement and Affiliates (collectively,
the "Seller Indemnified Persons") from and against any and all Losses, asserted
against, resulting from, imposed upon, or incurred or suffered by any Seller
Indemnified Person, directly or indirectly, to the extent resulting from,
arising out of, or relating to:
41
(a) any
breach of any representation or warranty of Purchaser contained in this
Agreement or in any certificate furnished by or on behalf of Purchaser to Seller
in connection with this Agreement REGARDLESS OF
FAULT;
(b) any
breach or nonfulfillment of or failure to perform any covenant or agreement of
Purchaser contained in this Agreement REGARDLESS OF FAULT or any
certificate furnished by or on behalf of Purchaser to Seller in connection with
this Agreement;
(c) the
ownership, use or operation of the Assets after the Effective Time, REGARDLESS OF
FAULT;
(d) the
Assumed Seller Obligations REGARDLESS OF FAULT;
and
(e) Environmental
Laws, Environmental Liabilities, the release of materials into the environment
or protection of human health, safety, natural resources or the environment, or
any other environmental condition of the Assets, REGARDLESS OF THE TIME OF OCCURRENCE
AND REGARDLESS OF FAULT.
(f) The
indemnity obligations in Section 11.6(c), (d), and (e) shall not be subject to
the deductibles and limitations in Section 11.4.
Section
11.7 Indemnification
Proceedings.
(a) In
the event that any claim or demand for which Seller or Purchaser (such Person,
an "Indemnifying Party") may be liable to a Purchaser Indemnified Person under
Section 11.5 or to
a Seller Indemnified Person under Section 11.6 (an
"Indemnified Party") is asserted against or sought to be collected from an
Indemnified Party by a third party (a "Third Party Claim,") the Indemnified
Party shall with reasonable promptness notify the Indemnifying Party of such
Third Party Claim by delivery of a Claim Notice, provided that the failure or
delay to so notify the Indemnifying Party shall not relieve the Indemnifying
Party of its obligations under this Article 11, except (and
solely) to the extent that the Indemnifying Party demonstrates that its defense
of such Third Party Claim is actually and materially prejudiced thereby. The
Indemnifying Party shall have thirty (30) days from receipt of the Claim
Notice from the Indemnified Party (in this Section 11.7, the "Notice
Period") to notify the Indemnified Party whether or not the Indemnifying Party
desires, at the Indemnifying Party's sole cost and expense, to defend the
Indemnified Party against such claim or demand; provided, that the Indemnified
Party is hereby authorized prior to and during the Notice Period, and at the
cost and expense of the Indemnifying Party, to file any motion, answer or other
pleading that it shall reasonably deem necessary to protect its interests or
those of the Indemnifying Party. The Indemnifying Party shall have the right to
assume the defense of such Third Party Claim only if and for so long as the
Indemnifying Party (i) notifies the Indemnified Party during the Notice
Period that the Indemnifying Party is assuming the defense of such Third Party
Claim, (ii) uses counsel of its own choosing that is reasonably
satisfactory to the Indemnified Party, and (iii) conducts the defense of
such Third Party Claim in an active and diligent manner. If the Indemnifying
Party is entitled to, and does, assume the defense of any such Third Party
Claim, the Indemnified Party shall have the right to employ separate counsel at
its own expense and to participate in the defense thereof; provided, however,
that notwithstanding the foregoing, the Indemnifying Party shall pay the
reasonable attorneys' fees of the Indemnified Party if the Indemnified Party's
counsel shall have advised the Indemnified Party that there is a conflict of
interest that could make it inappropriate under applicable standards of
professional conduct to have common counsel for the Indemnifying
Party and the Indemnified Party (provided that the Indemnifying Party shall not
be responsible for paying for more than one separate firm of attorneys and one
local counsel to represent all of the Indemnified Parties subject to such Third
Party Claim). If the Indemnifying Party elects (and is entitled) to assume the
defense of such Third Party Claim, (i) no compromise or settlement thereof
or consent to any admission or the entry of any judgment with respect to such
Third Party Claim may be effected by the Indemnifying Party without the
Indemnified Party's written consent (which shall not be unreasonably withheld,
conditioned or delayed) unless the sole relief provided is monetary damages that
are paid in full by the Indemnifying Party (and no injunctive or other equitable
relief is imposed upon the Indemnified Party) and there is an unconditional
provision whereby each plaintiff or claimant in such Third Party Claim releases
the Indemnified Party from all liability with respect thereto and (ii) the
Indemnified Party shall have no liability with respect to any compromise or
settlement thereof effected without its written consent (which shall not be
unreasonably withheld). If the Indemnifying Party elects not to assume the
defense of such Third Party Claim (or fails to give notice to the Indemnified
Party during the Notice Period or otherwise is not entitled to assume such
defense), the Indemnified Party shall be entitled to assume the defense of such
Third Party Claim with counsel of its own choice, at the expense and for the
account of the Indemnifying Party; provided, however, that the Indemnified Party
shall make no settlement, compromise, admission, or acknowledgment that would
give rise to liability on the part of any Indemnifying Party without the prior
written consent of such Indemnifying Party, which consent shall not be
unreasonably withheld, conditioned or delayed.
42
(b) Notwithstanding
the foregoing, the Indemnifying Party shall not be entitled to control (but
shall be entitled to participate at its own expense in the defense of), and the
Indemnified Party, shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any Third Party Claim
(i) at the reasonable expense of the Indemnifying Party, as to which the
Indemnifying Party fails to assume the defense during the Notice Period after
the Indemnified Party gives notice thereof to the Indemnifying Party or
(ii) at the reasonable expense of the Indemnifying Party, to the extent the
Third Party Claim seeks an order, injunction, or other equitable relief against
the Indemnified Party which, if successful, could materially adversely affect
the business, condition (financial or other), capitalization, assets,
liabilities, results of operations or prospects of the Indemnified Party. The
Indemnified Party shall make no settlement, compromise, admission, or
acknowledgment that would give rise to liability on the part of the Indemnifying
Party without the prior written consent of the Indemnifying Party (which consent
shall not be unreasonably withheld, conditioned or delayed).
(c) In
any case in which an Indemnified Party seeks indemnification hereunder and no
Third Party Claim is involved, the Indemnified Party shall deliver a Claim
Notice to the Indemnifying Party within a reasonably prompt period of time after
an officer of such Indemnified Party or its Affiliates has obtained knowledge of
the Loss giving rise to indemnification hereunder. The failure or delay to so
notify the Indemnifying Party shall not relieve the Indemnifying Party of its
obligations under this Article 11 except to the
extent such failure results in insufficient time being available to permit the
Indemnifying Party to effectively mitigate the resulting Losses or otherwise
prejudices the Indemnifying Party.
43
Section
11.8 Release. EXCEPT WITH RESPECT TO POST-CLOSING
REMEDIATION AGREED TO PURSUANT TO SECTION 4.3, PURCHASER HEREBY RELEASES,
REMISES AND FOREVER DISCHARGES THE SELLER INDEMNIFIED PERSONS FROM ANY AND ALL
CLAIMS, KNOWN OR UNKNOWN, WHETHER NOW EXISTING OR ARISING IN THE FUTURE,
CONTINGENT OR OTHERWISE, WHICH PURCHASER MIGHT NOW OR SUBSEQUENTLY MAY HAVE
AGAINST THE SELLER INDEMNIFIED PERSONS, RELATING DIRECTLY OR INDIRECTLY TO THE
CLAIMS ARISING OUT OF OR INCIDENT TO ENVIRONMENTAL LAWS, ENVIRONMENTAL
LIABILITIES, THE RELEASE OF MATERIALS INTO THE ENVIRONMENT OR PROTECTION OF
HUMAN HEALTH, SAFETY, NATURAL RESOURCES OR THE ENVIRONMENT, INCLUDING, WITHOUT
LIMITATION, RIGHTS TO CONTRIBUTION UNDER CERCLA, REGARDLESS OF
FAULT.
(a) EXCEPT AS AND TO THE EXTENT EXPRESSLY
SET FORTH IN THIS AGREEMENT, OR IN THE CERTIFICATE OF SELLER TO BE DELIVERED
PURSUANT TO SECTION 9.2(c), OR IN THE CONVEYANCE, (I) SELLER MAKES NO
REPRESENTATIONS OR WARRANTIES, EXPRESS, STATUTORY OR IMPLIED, AND
(II) SELLER EXPRESSLY DISCLAIMS ALL LIABILITY AND RESPONSIBILITY FOR ANY
REPRESENTATION, WARRANTY, STATEMENT OR INFORMATION MADE OR COMMUNICATED (ORALLY
OR IN WRITING) TO PURCHASER OR ANY OF ITS AFFILIATES, EMPLOYEES, AGENTS,
CONSULTANTS OR REPRESENTATIVES (INCLUDING, WITHOUT LIMITATION, ANY OPINION,
INFORMATION, PROJECTION OR ADVICE THAT MAY HAVE BEEN PROVIDED TO PURCHASER BY
ANY OFFICER, DIRECTOR, EMPLOYEE, AGENT, CONSULTANT, REPRESENTATIVE OR ADVISOR OF
SELLER OR ANY OF ITS AFFILIATES).
44
(b) EXCEPT AS EXPRESSLY REPRESENTED
OTHERWISE IN ARTICLE 5 OF THIS AGREEMENT, OR IN THE CERTIFICATE OF SELLER TO BE
DELIVERED PURSUANT TO SECTION 9.2(c), OR IN THE CONVEYANCE, AND WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATION
OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, AS TO (I) TITLE TO ANY OF THE
ASSETS, (II) THE CONTENTS, CHARACTER OR NATURE OF ANY DESCRIPTIVE
MEMORANDUM, OR ANY REPORT OF ANY PETROLEUM ENGINEERING CONSULTANT, OR ANY
GEOLOGICAL OR SEISMIC DATA OR INTERPRETATION, RELATING TO THE ASSETS,
(III) THE QUANTITY, QUALITY OR RECOVERABILITY OF HYDROCARBONS IN OR FROM
THE ASSETS, (IV) ANY ESTIMATES OF THE VALUE OF THE ASSETS OR FUTURE
REVENUES GENERATED BY THE ASSETS, (V) THE PRODUCTION OF HYDROCARBONS FROM
THE ASSETS, (VI) THE MAINTENANCE, REPAIR, CONDITION, QUALITY, SUITABILITY,
DESIGN OR MARKETABILITY OF THE ASSETS, (VII) THE CONTENT, CHARACTER OR
NATURE OF ANY DESCRIPTIVE MEMORANDUM, REPORTS, BROCHURES, CHARTS OR STATEMENTS
PREPARED BY SELLER OR ANY THIRD PARTIES, (VIII) ANY OTHER MATERIALS OR
INFORMATION THAT MAY HAVE BEEN MADE AVAILABLE OR COMMUNICATED TO PURCHASER OR
ITS AFFILIATES, OR ITS OR THEIR EMPLOYEES, AGENTS, CONSULTANTS, REPRESENTATIVES
OR ADVISORS IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT
OR ANY DISCUSSION OR PRESENTATION RELATING THERETO, (IX) REDHIBITORY, PATENT OR
LATENT DEFECTS, AND FURTHER DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS,
STATUTORY OR IMPLIED, OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR
CONFORMITY TO MODELS OR SAMPLES OF MATERIALS OF ANY EQUIPMENT, IT BEING
EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES HERETO THAT PURCHASER SHALL BE
DEEMED TO BE OBTAINING THE ASSETS IN THEIR PRESENT STATUS, CONDITION AND STATE
OF REPAIR, "AS IS" AND "WHERE IS" WITH ALL FAULTS AND THAT PURCHASER HAS MADE OR
CAUSED TO BE MADE SUCH INSPECTIONS AS PURCHASER DEEMS APPROPRIATE, OR
(IX) ANY IMPLIED OR EXPRESS WARRANTY OF FREEDOM FROM PATENT OR TRADEMARK
INFRINGEMENT.
(c) SELLER HAS NOT AND WILL NOT MAKE ANY
REPRESENTATION OR WARRANTY REGARDING ANY MATTER OR CIRCUMSTANCE RELATING TO
ENVIRONMENTAL LAWS, ENVIRONMENTAL LIABILITIES, THE RELEASE OF MATERIALS INTO THE
ENVIRONMENT OR THE PROTECTION OF HUMAN HEALTH, SAFETY, NATURAL RESOURCES OR THE
ENVIRONMENT, OR ANY OTHER ENVIRONMENTAL CONDITION OF THE ASSETS, AND NOTHING IN
THIS AGREEMENT OR OTHERWISE SHALL BE CONSTRUED AS SUCH A REPRESENTATION OR
WARRANTY, AND PURCHASER SHALL BE DEEMED TO BE TAKING THE ASSETS "AS IS" AND
"WHERE IS" FOR PURPOSES OF THEIR ENVIRONMENTAL CONDITION.
(a) It
is the intention of the parties that Purchaser's rights and remedies with
respect to this transaction and with respect to all acts or practices of Seller,
past, present or future, in connection with this transaction shall be governed
by legal principles other than the Texas Deceptive Trade Practices—Consumer
Protection Act, Tex. Bus. & Com. Code Ann. § 17.41 et seq. (the "DTPA"). As
such, Purchaser hereby waives the applicability of the DTPA to this transaction
and any and all duties, rights or remedies that might be imposed by the DTPA,
whether such duties, rights and remedies are applied directly by the DTPA itself
or indirectly in connection with other statutes. Purchaser acknowledges,
represents and warrants that it is purchasing the goods and/or services covered
by this Agreement for commercial or business use; that it has assets of
$25,000,000 or more according to its most recent financial statement prepared in
accordance with GAAP; that it has knowledge and experience in financial and
business matters that enable it to evaluate the merits and risks of a
transaction such as this; and that it is not in a significantly disparate
bargaining position with Seller.
45
(b) Purchaser
expressly recognizes that the price for which Seller has agreed to perform its
obligations under this Agreement has been predicated upon the inapplicability of
the DTPA and this waiver of the DTPA. Purchaser further recognizes that Seller,
in determining to proceed with the entering into this Agreement, has expressly
relied on this waiver and the inapplicability of the DTPA.
(c) In
addition to the foregoing, and in order to ensure compliance with Texas’ DTPA
Section 17.42(c), Purchaser waives all rights it may possess, if any, under the
DTPA with the following certification:
WAIVER
OF RIGHTS
PURCHASER
WAIVES ITS RIGHTS UNDER THE DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT,
SECTION 17.41 ET SEQ., BUSINESS & COMMERCE CODE, A LAW THAT GIVES CONSUMERS
SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF ITS OWN
SELECTION, PURCHASER VOLUNTARILY CONSENTS TO THIS WAIVER.
Section
11.11 Recording. As
soon as practicable after Closing, Purchaser shall record the Conveyance in the
appropriate counties where the Properties are located and provide Seller with
copies of all recorded or approved instruments. The Conveyance in the form
attached as Exhibit B is intended to
convey all of the Properties being conveyed pursuant to this Agreement. Certain
Properties or specific portions of the Properties that are leased from, or
require the approval to transfer by, a Governmental Body are conveyed under the
Conveyance and also are described and covered under separate assignments made by
Seller to Purchaser on officially approved forms, or forms acceptable to such
entity, in sufficient multiple originals to satisfy applicable statutory and
regulatory requirements. The interests conveyed by such separate assignments are
the same, and not in addition to, the interests conveyed in the Conveyance
attached as Exhibit B. Further, such
assignments shall be deemed to contain all of the exceptions, reservations,
rights, titles, power and privileges set forth herein and in the Conveyance as
fully and only to the extent as though they were set forth in each such separate
assignment.
MISCELLANEOUS
Section
12.1 Counterparts. This
Agreement may be executed and delivered (including by facsimile transmission or
electronic mail) in counterparts, each of which shall be deemed an original
instrument, but all such counterparts together shall constitute but one
agreement.
Section
12.2 Notice. All
notices which are required or may be given pursuant to this Agreement shall be
sufficient in all respects if given in writing and delivered personally, by fax,
by electronic mail or by registered or certified mail, postage prepaid, as
follows:
46
If
to Seller:
|
Petrohawk
Properties, LP
|
|
KCS
Energy, LLC
|
||
Hawk
Field Services, LLC
|
||
1000
Louisiana, Suite 5600
|
||
Houston,
Texas 77002
|
||
Attention: Stephen
W. Herod
|
||
Telephone: 832-204-2701
|
||
Facsimile: 832-204-2801
|
||
sherod@petrohawk.com
|
||
and
|
||
David
S. Elkouri
|
||
Telephone: 832-204-2772
|
||
Facsimile: 832-204-2872
|
||
delkouri@petrohawk.com
|
||
If
to Purchaser:
|
EV
Properties, L.P.
|
|
1001
Fannin, Suite 800
|
||
Houston,
Texas 77002
|
||
Attn:
Ron Gajdica
|
||
Telephone:
713-495-6536
|
||
Facsimile:
713-651-1260
|
||
rgajdica@enervest.net
|
||
and
|
||
Mike
Mercer
|
||
Telephone:
713-495-6583
|
||
Facsimile:
713-651-1260
|
||
mmercer@enervest.net
|
||
With
a copy to
(which
|
||
shall
not constitute
|
||
Notice
to Purchaser):
|
EV
Properties, L.P.
|
|
1001
Fannin, Suite 800
|
||
Attn:
Fabene Welch
|
||
Telephone:
713-495-5386
|
||
Facsimile:
713-659-3556
|
||
fwelch@enervest.net
|
Either
party may change its address for notice by notice to the other in the manner set
forth above. All notices shall be deemed to have been duly given at the time of
receipt by the party to which such notice is addressed. Reference to
“Seller” shall mean each Seller jointly and severally, provided that any
election or notices may be made to Seller hereunder shall be the sole discretion
of Petrohawk Properties, LP, which decision shall be binding upon Petrohawk
Properties, LP, KCS Resources, LLC and Hawk Field Services,
LLC.
47
Section
12.3 Sales or Use Tax
Recording Fees and Similar Taxes and Fees. Purchaser shall
bear any sales, use, excise, real property transfer, gross receipts, goods and
services, registration, capital, documentary, stamp or transfer Taxes, recording
fees and similar Taxes and fees (collectively "Transfer Taxes") incurred and
imposed upon, or with respect to, the transactions contemplated by this
Agreement. Seller will determine, and Purchaser will cooperate with Seller in
determining the amount of any Transfer Taxes, if any, that is due in connection
with the transactions contemplated by this Agreement and Purchaser agrees to pay
any such Transfer Tax to Seller or to the appropriate Governmental Body. If any
of the transactions contemplated by this Agreement are exempt from any such
Transfer Taxes upon the filing of an appropriate certificate or other evidence
of exemption, Purchaser will timely furnish to Seller such certificate or
evidence.
Section
12.4 Expenses. Except
as otherwise expressly provided in Section 12.3 or elsewhere
in this Agreement, (a) all expenses incurred by Seller in connection with
or related to the authorization, preparation or execution of this Agreement, the
Conveyance delivered hereunder and the Exhibits and Schedules hereto and
thereto, and all other matters related to the Closing, including without
limitation, all fees and expenses of counsel, accountants and financial advisers
employed by Seller, shall be borne solely and entirely by Seller, and
(b) all such expenses incurred by Purchaser shall be borne solely and
entirely by Purchaser.
Section
12.5 Change of
Name. As promptly as practicable, but in any case within
thirty (30) days after the Closing Date, Purchaser shall eliminate the
names "Petrohawk”, “Petrohawk Properties, LP”, “KCS Resources, LLC", “Petrohawk
Energy Corporation,” “Hawk Field Services, LLC” and any variants thereof from
the Assets acquired pursuant to this Agreement and, except with respect to such
grace period for eliminating existing usage, shall have no right to use any
logos, trademarks or trade names belonging to Seller or any of its
Affiliates.
Section
12.6 Replacement of
Bonds, Letters of Credit and Guarantees. The parties
understand that none of the bonds, letters of credit and guarantees, if any,
posted by Seller or any of its Affiliates with Governmental Bodies and relating
to the Assets may be transferable to Purchaser. Prior to Closing, Purchaser
shall have obtained, or caused to be obtained in the name of Purchaser,
replacements for such bonds, letters of credit and guarantees, to the extent
such replacements are necessary to permit the cancellation of the bonds, letters
of credit and guarantees posted by Seller or any of its Affiliates or to
consummate the transactions contemplated by this Agreement.
Section
12.7 Threshold for “Material” and
“Materiality”. As used in Sections 3.3(i), 3.3(s), 5.9, 5.16,
7.6 and 7.7(b), “material” and “materiality” each mean having a value in excess
of $37,500 on an individual Asset or occurrence basis, as
applicable.
Section
12.8 Governing Law and
Venue. THIS AGREEMENT AND THE LEGAL RELATIONS BETWEEN THE
PARTIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TEXAS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS OTHERWISE
APPLICABLE TO SUCH DETERMINATIONS. JURISDICTION AND VENUE WITH RESPECT TO ANY
DISPUTES ARISING HEREUNDER SHALL BE PROPER ONLY IN HARRIS COUNTY,
TEXAS.
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Section
12.9 Captions. The
captions in this Agreement are for convenience only and shall not be considered
a part of or affect the construction or interpretation of any provision of this
Agreement.
Section
12.10 Waivers. Any
failure by any party or parties to comply with any of its or their obligations,
agreements or conditions herein contained may be waived in writing, but not in
any other manner, by the party or parties to whom such compliance is owed. No
waiver of, or consent to a change in, any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of, or consent to a change in,
other provisions hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
Section
12.11 Assignment. No
party shall assign all or any part of this Agreement, nor shall any party assign
or delegate any of its rights or duties hereunder, without the prior written
consent of the other party, which shall not be unreasonably withheld,
conditioned or delayed. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
Section
12.12 Entire
Agreement. The Confidentiality Agreement, this Agreement and
the Exhibits and Schedules attached hereto, and the documents to be executed
hereunder constitute the entire agreement between the parties pertaining to the
subject matter hereof, and supersede all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the parties pertaining
to the subject matter hereof.
Section
12.13 Amendment.
(a) This
Agreement may be amended or modified only by an agreement in writing executed by
the parties hereto.
(b) No
waiver of any right under this Agreement shall be binding unless executed in
writing by the party to be bound thereby.
Section
12.14 No Third-Party
Beneficiaries. Nothing in this Agreement shall entitle any
Person other than Purchaser or Seller to any claims, remedy or right of any
kind, except as to those rights expressly provided to the Seller Indemnified
Persons and Purchaser Indemnified Persons (provided, however, any claim for
indemnity hereunder on behalf of an Seller Indemnified Person or an Purchaser
Indemnified Person must be made and administered by a party to this
Agreement).
Section
12.15 References. In
this Agreement:
(a) References
to any gender includes a reference to all other genders;
(b) References
to the singular includes the plural, and vice versa;
(c) Reference
to any Article or Section means an Article or Section of this
Agreement;
49
(d) Reference
to any Exhibit or Schedule means an Exhibit or Schedule to this Agreement, all
of which are incorporated into and made a part of this
Agreement;
(e) Unless
expressly provided to the contrary, "hereunder", "hereof”, "herein" and words of
similar import are references to this Agreement as a whole and not any
particular Section or other provision of this Agreement;
(f) "Include"
and "including" shall mean include or including without limiting the generality
of the description preceding such term; and
(g) Capitalized
terms used herein shall have the meanings ascribed to them in this Agreement as
such terms are identified and/or defined in the Definitions section
hereof.
Section
12.16 Construction. Purchaser
is a party capable of making such investigation, inspection, review and
evaluation of the Assets as a prudent party would deem appropriate under the
circumstances including with respect to all matters relating to the Assets,
their value, operation and suitability. Each of Seller and Purchaser has had
substantial input into the drafting and preparation of this Agreement and has
had the opportunity to exercise business discretion in relation to the
negotiation of the details of the transactions contemplated hereby. This
Agreement is the result of arm's-length negotiations from equal bargaining
positions. In the event of a dispute over the meaning or application of this
Agreement, it shall be construed fairly and reasonably and neither more strongly
for nor against either party.
Section
12.17 Conspicuousness. The
parties agree that provisions in this Agreement in "bold" type satisfy any
requirements of the "express negligence rule" and any other requirements at law
or in equity that provisions be conspicuously marked or
highlighted.
Section
12.18 Severability. If
any term or other provisions of this Agreement is held invalid, illegal or
incapable of being enforced under any rule of law, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in a materially adverse manner with respect to either
party; provided, however, that if any such term or provision may be made
enforceable by limitation thereof, then such term or provision shall be deemed
to be so limited and shall be enforceable to the maximum extent permitted by
applicable Law.
Section
12.19 Time of
Essence. Time is of the essence in this Agreement. If the date
specified in this Agreement for giving any notice or taking any action is not a
Business Day (or if the period during which any notice is required to be given
or any action taken expires on a date which is not a Business Day), then the
date for giving such notice or taking such action (and the expiration date of
such period during which notice is required to be given or action taken) shall
be the next day which is a Business Day.
Section
12.20 Limitation on
Damages. Notwithstanding any other provision contained
elsewhere in this Agreement to the contrary, the parties acknowledge that this
Agreement does not authorize one party to sue for or collect from the other
party its own punitive damages, or its own consequential or indirect damages in
connection with this Agreement and the transactions contemplated hereby and each
party expressly waives for itself and on behalf of its Affiliates, any and all
Claims it may have against the other party for its own such damages in
connection with this Agreement and the transactions contemplated
hereby.
50
Section
12.21 Limited
Reimbursement regarding the Young and Wytex
Cases. Notwithstanding anything herein to the contrary,
Purchaser’s sole and exclusive right and remedy with respect to item 2 on Schedule 5.7(a) (the “Wytex
Case”) and item 3 on Schedule
5.7(a) (the “Young Case”) shall be pursuant to this Section
12.21. By way of clarification and not of limitation,
Purchaser shall not be entitled to claim a Title Defect with respect to any of
the Assets related to the Wytex Case or the Young Case, nor shall Purchaser be
entitled to make any claim for indemnification pursuant to Article XI
hereof. At Closing, Purchaser shall, at Purchaser’s sole cost and
expense, assume the defense of both the Young Case and the Wytex Case and
conduct such defense in an active and diligent manner. Seller shall
have the right, but not the obligation to employ separate counsel at its own
expense and to participate in the defense thereof. Purchaser shall make no
settlement, compromise, admission, or acknowledgment that would give rise to
liability on the part of Purchaser or Seller in either the Wytex Case or the
Young Case without the prior written consent of Seller, which consent shall not
be unreasonably withheld, conditioned or delayed. In the event
Purchaser settles in exchange for a monetary payment (with Seller’s consent) or
receives a final, non-appealable judgment for monetary damages against Purchaser
in either or both of the Wytex Case or the Young Case, Purchaser shall be
entitled to reimbursement for such monetary settlement or damages, as
applicable, but only up to the Allocated Value of the Properties associated with
each such case and exclusive of any cost, expense or other Losses associated
with either the Wytex Case or the Young Case. By further way of
clarification, Purchaser’s right to reimbursement for each of the Wytex Case and
the Young case shall be limited to the Allocated Value of the Properties
associated with each case (i.e. Purchaser shall not be entitled to reimbursement
for the Wytex Case for the Allocated Value of any Properties associated with the
Young Case, nor shall Purchaser be entitled to reimbursement for the Young Case
for the Allocated Value of any Properties associated with the Wytex
case). Seller shall make any reimbursement payment to Purchaser
pursuant to this Section
12.21 within five (5) Business Days after settlement or final judgment of
either the Young Case or the Wytex Case. Except with respect to the
reimbursement payments contemplated by this Section 12.21 and
notwithstanding anything contained in this Agreement or the Conveyance to the
contrary, Purchaser agrees to indemnify, release, defend and hold all Seller
Indemnified Persons harmless from any and all damages, obligations and any other
Losses associated with the Wytex Case and the Young Case REGARDLESS OF
FAULT.
[SIGNATURES
BEGIN ON THE FOLLOWING PAGE]
51
IN WITNESS
WHEREOF, this Agreement has been signed by each of the parties hereto on the
date first above written.
SELLER:
|
||
PETROHAWK
PROPERTIES, LP
|
||
By:
|
P-H
Energy, LLC, its general partner
|
|
By:
|
/s/ David S. Elkouri
|
|
David
S. Elkouri
|
||
Executive
Vice President-General Counsel and Secretary
|
||
KCS
RESOURCES, LLC
|
||
By:
|
/s/ David S. Elkouri
|
|
David
S. Elkouri
|
||
Executive
Vice President-General Counsel and Secretary
|
||
HAWK
FIELD SERVICES, LLC
|
||
By:
|
/s/ David S. Elkouri
|
|
David
S. Elkouri
|
||
Executive
Vice President-General Counsel and Secretary
|
||
PURCHASER
|
||
EV
PROPERTIES, L.P.
|
||
By:
|
/s/ Mark A. Houser
|
|
Name:
|
Mark A. Houser
|
|
Title:
|
President and Chief Operating
Officer
|
52