EXECUTION COUNTERPART
SECOND AMENDED AND RESTATED
ASSET PURCHASE AND SALE AGREEMENT
BETWEEN
VOYAGER PARTNERS, LTD.
as Seller,
and
DUNE ENERGY, INC.
as Buyer
OCTOBER 6,
2006
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Table Of Contents
Page
----
ARTICLE I. DEFINITIONS AND
INTERPRETATION......................................2
1.1
Defined
Terms.....................................................2
1.2
References........................................................2
1.3
Articles
and Sections.............................................2
1.4
Number and
Gender.................................................2
ARTICLE II. PURCHASE AND
SALE..................................................2
2.1
Purchase
and Sale.................................................2
2.2
Closing by
Asset Tranche..........................................5
2.3
Excluded
Assets...................................................6
2.4
Consideration.....................................................8
2.5
Assumption
of Obligations........................................12
2.6
Retained
Liabilities.............................................13
2.7
Possession; Risk of
Loss.........................................15
2.8
Allocation
of Adjusted Consideration.............................15
ARTICLE III. REPRESENTATIONS AND
WARRANTIES...................................15
3.1
Representations and Warranties of
Seller.........................15
3.2
Representations and Warranties of
Buyer..........................20
3.3
Disclaimers......................................................21
ARTICLE IV. ACCESS; DUE
DILIGENCE.............................................22
4.1
Access to
Records; Title Due Diligence and Curative..............22
4.2
Operational and Environmental
Assessment.........................22
4.3
Environmental
Conditions.........................................22
4.4
Matters
Relating to Title........................................24
ARTICLE V. OTHER MATTERS PRIOR TO
CLOSING.....................................25
5.1
Operations.......................................................25
5.2
Casualty
Event...................................................26
5.3
Publicity........................................................27
5.4
Compliance
with Conditions.......................................27
5.5
Maintenance of
Existence.........................................28
5.6
Mutual
Assurances................................................28
5.7
Notification of Certain
Matters..................................28
5.8
Designation as
Operator..........................................28
5.9
Financial
Matters................................................29
ARTICLE VI. CONDITIONS; TERMINATION;
REMEDIES.................................30
6.1
Conditions
Precedent to Seller's Obligation to Close.............30
6.2
Conditions
Precedent to Buyer's Obligation to Close..............31
6.3
Termination......................................................32
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ARTICLE VII.
CLOSING..........................................................34
7.1
Closing..........................................................34
7.2
Preliminary Settlement
Statement.................................34
7.3
Actions at
Closing...............................................34
7.4
Records..........................................................35
ARTICLE VIII. POST CLOSING
MATTERS............................................36
8.1
Settlement
Statement.............................................36
8.2
Further
Cooperation..............................................36
8.3
Undisbursed
Revenues.............................................36
8.4
Retained
Interests Options.......................................37
ARTICLE IX. SURVIVAL;
INDEMNIFICATION.........................................39
9.1
Survival.........................................................39
9.2
Indemnity
as Sole Remedy.........................................40
9.3 Indemnities of
Buyer.............................................40
9.4
Indemnities of
Seller............................................40
9.5
Limitations on
Indemnities.......................................41
9.6
Assertion
of Claims; Notices; Defense; Settlement................41
9.7
Limitation
on Damages............................................42
ARTICLE X.
MISCELLANEOUS......................................................42
10.1
Exhibits.........................................................42
10.2
Expenses.........................................................42
10.3
Proration of
Taxes...............................................43
10.4
Assignment.......................................................43
10.5
Notices..........................................................43
10.6
ENTIRE
AGREEMENT; CONFLICTS......................................44
10.7
Amendment........................................................44
10.8
Waiver; Rights
Cumulative........................................45
10.9
GOVERNING LAW;
CONSENT TO JURISDICTION...........................45
10.10
Severability.....................................................45
10.11
Arbitration......................................................45
10.12
Restated Purchase
Agreements.....................................46
10.13
Recording
Memorandum.............................................46
10.14
Counterparts.....................................................46
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SCHEDULES
Schedule 1.1 -
Defined
Terms
Schedule 2.2(b)
- Closed
Assets Sold Pursuant to First Restated Purchase
Agreement - Tranche 1 Assets
Schedule 2.2(c)
- Closed
Assets Sold Pursuant to First Restated Purchase
Agreement - Tranche 2 Assets
Schedule 2.2(d)
-
Remaining Assets Sold at October 6, 2006
Closing - Tranche 3 Assets and Tranche 2 Assets
Schedule 2.2(e)
-
Remaining Assets Sold at January 19, 2007
Closing - Tranche 2 Assets and Tranche 3 Assets
Schedule 3.1(e)
-
Preferential Purchase Rights; Required Third Person
Consents to Assignment
Schedule 3.1(n)
-
Commitments for Expenditures
Schedule 8.5(a)
-
Additional Consideration - Hillview
Schedule 8.5(b)
-
Additional Consideration - Tranche 3 Assets
(Non-Hillview)
EXHIBITS
Exhibit A
-
Leases
Exhibit B
- Wells;
Working Interests and Net Revenue Interests;
Allocated Values
Exhibit C
- Real
Property Interests
Exhibit D
-
Contracts
Exhibit E
- Permits;
Transferable Permits
Exhibit F
- Form of
Assignment, Bill of Sale, and Conveyance
Exhibit G
- Form of
Restated AMI Agreement
Exhibit H
- Form of
Surface Use Agreement
Exhibit I
- Form of
Retained Interests Option Conveyance
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SECOND AMENDED AND RESTATED
ASSET PURCHASE AND SALE AGREEMENT
THIS SECOND AMENDED AND RESTATED ASSET PURCHASE AND SALE
AGREEMENT
("Agreement") is executed as of this 6th day of October, 2006, by
VOYAGER
PARTNERS, LTD., a Texas limited partnership ("Seller"), and DUNE
ENERGY, INC., a
Delaware corporation ("Buyer").
RECITALS
WHEREAS, Seller is the owner of certain oil and gas properties
and
assets located in the State of Texas described more particularly
herein;
WHEREAS, Seller and Buyer are parties to an Asset Purchase and
Sale
Agreement dated as of June 13, 2005, as amended (as so amended, the
"Original
Amended Purchase Agreement"), which Original Amended Purchase
Agreement was
restated and amended by an Amended and Restated Asset Purchase and
Sale
Agreement dated as of November 4, 2005, as amended by First
Amendment to Amended
and Restated Asset Purchase and Sale Agreement dated as of December
16, 2005,
Second Amendment to Amended and Restated Asset Purchase and Sale
Agreement dated
as of February 22, 2006, Third Amendment to Amended and Restated
Asset Purchase
and Sale Agreement dated as of April 13, 2006, and Fourth Amendment
to Amended
and Restated Asset Purchase and Sale Agreement dated as of May 31,
2006 (as so
amended, the "First Restated Purchase Agreement"), pursuant to
which Seller
agreed to sell and convey, and Buyer agreed to purchase and pay
for, the
"Assets" (as defined therein);
WHEREAS, since the execution of the First Restated Purchase
Agreement, three (3) "Closings" (as defined in the First Restated
Purchase
Agreement) have occurred, pursuant to which Seller and Buyer
consummated the
sale and purchase of several of the Assets, subject to and in
accordance with
the terms of the First Restated Purchase Agreement; and
WHEREAS, Seller and Buyer now desire to amend and restate the
First
Restated Purchase Agreement to amend such agreement in several
respects and to
set forth the terms and conditions under which Seller and Buyer
intend to
consummate the sale and purchase of the remaining Assets as to
which no Closing
under the First Restated Purchase Agreement has occurred as of the
date of
execution hereof.
NOW, THEREFORE, for and in consideration of the mutual promises
contained herein, the benefits to be derived by each Party
hereunder, and other
good and valuable consideration, the receipt and sufficiency of
which are hereby
acknowledged, Seller and Buyer agree as follows:
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ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1
Defined Terms. In addition to the terms defined in the
introductory
paragraph and the Recitals of this Agreement, for purposes hereof,
the
capitalized expressions and terms set forth in Schedule 1.1 shall
have the
meanings set forth therein, unless expressly indicated otherwise.
Other terms
may be defined elsewhere in this Agreement and shall, for purposes
hereof, have
the meanings so specified, unless expressly indicated
otherwise.
1.2
References. The words "hereby," "herein," "hereinabove,"
"hereinafter," "hereinbelow," "hereof," "hereto," "hereunder," and
words of
similar import when used in this Agreement shall refer to this
Agreement as a
whole and not to any particular article, section, or provision of
this
Agreement. References in this Agreement to articles, sections,
exhibits, or
schedules are to such articles, sections, exhibits, or schedules of
this
Agreement unless otherwise specified.
1.3
Articles and Sections. This Agreement, for convenience only, has
been
divided into articles and sections. The rights and other legal
relations of the
parties hereto shall be determined from this Agreement as an
entirety and
without regard to the aforesaid division into articles and sections
and without
regard to headings prefixed to such articles and sections.
1.4 Number
and Gender. Whenever the context requires, reference herein
made to a single number shall be understood to include the plural;
and likewise,
the plural shall be understood to include the singular. Words
denoting sex shall
be construed to include the masculine, feminine, and neuter, when
such
construction is appropriate; and specific enumeration shall not
exclude the
general but shall be construed as cumulative. Definitions of terms
defined in
the singular or plural shall be equally applicable to the plural or
singular, as
applicable, unless otherwise indicated.
ARTICLE II.
PURCHASE AND SALE
2.1
Purchase and Sale. Subject to the terms hereof, at the Closings
specified in Sections 2.2(d) and 2.2(e), Seller agrees to sell and
convey to
Buyer, and Buyer agrees to purchase from Seller and pay for, the
following
properties and assets (collectively, the "Remaining Assets"):
(a) an undivided ninety-five percent (95%) of the undivided
Working
Interests, associated Net Revenue Interests, and other interests
set forth on
Exhibit B, together with an undivided ninety-five percent (95%) of
any and all
other rights, titles, and interests of Seller (including in each
case, without
limitation, fee mineral interests, leasehold interests, royalty
interests,
overriding royalty interests, production payments, net profits
interests,
carried interests, reversionary interests, possibilities of
reverter, and
conversion rights and options), in, to, under, or derived from (i)
the oil and
gas leases described more particularly on Exhibit A and the
leasehold estates
created thereby, as to all lands and depths covered thereby or the
applicable
part or portion thereof if specifically limited in depth and/or
areal extent in
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Exhibit A (collectively, the "Leases"), (ii) the lands covered by
the Leases or
otherwise described on Exhibit A, (iii) all units created by the
pooling,
unitization, and communitization agreements in effect with respect
to the Leases
and the lands covered thereby or otherwise described on Exhibit A,
and (iv) the
oil and gas leases and lands included in any units with which the
Leases or the
lands covered thereby or otherwise described on Exhibit A may have
been pooled,
unitized, or communitized, and all other rights, interests,
privileges,
benefits, and powers of any kind or character conferred upon Seller
as the owner
of any of such interests;
(b) an undivided ninety-five percent (95%) of the undivided
Working
Interests and the associated Net Revenue Interests set forth in
Exhibit B,
together with an undivided ninety-five percent (95%) of any and all
other
rights, titles, and interests of Seller, in and to the wells for
the production
of Hydrocarbons that are located on the Leases or on other leases
or lands with
which the Leases or the lands covered thereby or otherwise
described on Exhibit
A may have been pooled, unitized, or communitized, also described
more
particularly on Exhibit B (collectively, the "Wells");
(c) an undivided ninety-five percent (95%) of Seller's rights,
titles, and interests in and to all crude oil, natural gas,
condensate,
distillate, natural gasoline, natural gas liquids, plant products,
refined
petroleum products, other liquid or gaseous hydrocarbons
(including, without
limitation, coalbed methane), sulphur, other gases (including,
without
limitation, hydrogen and carbon dioxide), and every other mineral
or substance,
or any of them, the right to explore for which, or an interest in
which, is
granted pursuant to the Leases or the other interests described
herein
("Hydrocarbons") (i) produced from or allocable to the interests of
Seller
described in clauses (a) and (b) of this Section 2.1 and existing
in pipelines,
storage tanks, or other processing or storage facilities upstream
of the
delivery points to the relevant purchasers as of the Effective
Time, and (ii)
produced from or allocable to such interests of Seller from and
after the
Effective Time;
(d) an undivided ninety-five percent (95%) of Seller's rights,
titles, and interests in and to all fee surface interests in land,
surface
leases, easements, rights-of-way, servitudes, licenses, franchises,
road,
railroad, and other surface use permits or agreements, and similar
rights and
interests (if any) located on the lands covered by the Leases or
otherwise
described on Exhibit A or on any units with which the Leases or the
lands
covered thereby or otherwise described on Exhibit A may have been
pooled,
unitized, or communitized, or that otherwise relate to the
interests of Seller
described in clauses (a), (b), and (e) of this Section 2.1
(including, without
limitation, the surface well pad sites located on the Tranche 3
Assets described
in Section 2.2(d) (other than the "Hillview") from and after the
Possession Time
for the Final Closing, it being understood that, prior to the Final
Closing,
such surface well pad sites will constitute Excluded Assets), and
either
described more particularly on Exhibit C or acquired by Seller
between the date
of execution hereof and the Final Closing Date (collectively, the
"Real Property
Interests");
(e) an undivided ninety-five percent (95%) of Seller's rights,
titles, and interests in and to all equipment, machinery, fixtures,
inventory,
improvements, and other personal, mixed, or movable property,
located on the
lands covered by the Leases or otherwise described on Exhibit A or
with which
the Leases or the lands covered thereby or otherwise described on
Exhibit A have
been pooled, unitized, or communitized, to the extent used in
connection with or
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attributable to the interests of Seller described in clauses (a)
and (b) of this
Section 2.1 (except for any such personal property leased from
third Persons),
including, without limitation: water wells; saltwater disposal
wells and
facilities; injection wells and facilities; well equipment; casing;
rods; tanks
and tank batteries; boilers; tubing; pumps; pumping units and
engines;
platforms; Christmas trees; production facilities; dehydration
units and
facilities; heater-treaters; processing, fractionation, treatment,
and
separation plants and facilities; testing and sampling equipment;
sulfur
recovery units and facilities; valves; gauges; meters; generators;
motors; gun
barrels; flow lines; water lines; gas lines; gathering lines,
laterals and trunk
lines, and other pipe lines; gas systems (for gathering, treatment,
and
compression); chemicals; solutions; water systems (for treatment,
disposal, and
injection); power plants; poles; lines; transformers; starters and
controllers;
and any and all additions or accessions to, substitutions for, and
replacements
of any of the foregoing, together with all attachments, components,
parts,
equipment, and accessories installed thereon or affixed thereto
(collectively,
the "Personal Property");
(f) all fees, rentals, proceeds, payments, revenues, and other
rights and economic benefits of every kind and character accruing
or payable to
the owner of the items listed in this Section 2.1 that are
attributable to the
period from and after the Effective Time;
(g) an undivided ninety-five percent (95%) of Seller's rights,
titles, and interests in, to, and under all Contracts, the transfer
of which is
not prohibited or restricted by a preferential right to purchase,
required
consent to assignment, right of first refusal, right of first
offer, or similar
provision or as to which the required waivers or consents have been
obtained, or
the appropriate time period for asserting such rights has expired,
in either
case as of the applicable Closing Date (collectively, the
"Transferred
Contracts");
(h) all Permits related to the items listed in this Section 2.1
that
are transferable by Seller to Buyer, including any such Permits
described on
Exhibit E;
(i) all intangible rights, inchoate rights, transferable rights
under warranties made by prior owners, manufacturers, vendors, and
third
Persons, and rights accruing under applicable statutes of
limitation or
prescription, insofar only as the foregoing rights and interests
relate or are
attributable to the items listed in this Section 2.1, and do not
constitute
Excluded Assets, but including, without limitation, an undivided
ninety-five
percent (95%) interest in and to all underproduction accounts or
credits of
Seller or Seller's Predecessors pertaining to Imbalances in
existence as of the
Effective Time (collectively, "Intangible Rights");
(j) all files, records (including, without limitation, land and
title records, plats, surveys, abstracts of title, title insurance
policies,
title opinions, and title curative, lease, contract, division
order, marketing,
correspondence, operations, environmental, insurance, production,
accounting,
Property-Related Tax, regulatory, and facility and well records and
files), and
other information that relate in any way to any of the items listed
in this
Section 2.1, are in the possession of Seller or Seller's
Predecessors, and the
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disclosure and transfer of which is not prohibited by
confidentiality or other
contractual arrangements in existence on the applicable Closing
Date
(collectively, the "Records"); and
(k) all maps, logs, geological, geophysical, reserve
engineering,
and other scientific and technical information, reports, and data
(including,
without limitation, conventional and 3-D seismic data) that relate
exclusively
to the items listed in this Section 2.1, are owned by Seller or
Seller's
Predecessors, do not constitute Excluded Assets, and the disclosure
and transfer
of which is not prohibited by confidentiality or other contractual
arrangements
in existence on the Closing Date (collectively, the "Transferable
Data").
2.2
Closing by Asset Tranche. For purposes of this Agreement, the
Assets
described in the First Restated Purchase Agreement have been
divided into three
(3) numbered tranches. The Assets allocated to the first tranche
(the "Tranche 1
Assets") are set forth on Schedule 2.2(b). The Assets allocated to
the second
tranche (the "Tranche 2 Assets") are so designated as they are set
forth on
Schedule 2.2(c), Schedule 2.2(d), and Schedule 2.2(e). Assets as to
which the
sale by Seller and purchase by Buyer thereof occurred prior to the
date of
execution of this Agreement shall be referred to herein as "Closed
Assets". The
Assets allocated to the third tranche (the "Tranche 3 Assets") are
so designated
as they are set forth on Schedule 2.2(d) and Schedule 2.2(e). The
Assets and
Springside Properties have been, or will be, conveyed to Buyer in
multiple
Closings as follows:
(a)
The Springside Properties are subject to the terms of the
Voyager-Hess Purchase Agreement. Pursuant to the Assignment of
Asset Purchase
Agreement dated as of October 28, 2005 (the "Hess PSA Assignment"),
Seller
transferred and assigned to Buyer all of Seller's rights, titles,
and interests
in, to, and under the Voyager-Hess Purchase Agreement. The
Springside Properties
do not constitute either Closed Assets or Remaining Assets for
purposes of this
Agreement.
(b) The Closing for the Tranche 1 Assets occurred on December
16,
2005, subject to and in accordance with the terms of the First
Restated Purchase
Agreement, as the same had been amended and was in effect on such
date. The
Tranche 1 Assets constitute "Closed Assets" for purposes of this
Agreement.
(c) The first two (2) Closings with respect to the Tranche 2
Assets
described on Schedule 2.2(c) occurred on, respectively, May 31,
2006, and July
31, 2006, subject to and in accordance with the terms of the First
Restated
Purchase Agreement, as the same had been amended and was in effect
on such date.
Such Tranche 2 Assets constitute "Closed Assets" for purposes of
this Agreement.
(d) Certain of the Tranche 2 Assets and Tranche 3 Assets are
being
sold to Buyer at a Closing held contemporaneously with the
execution of this
Agreement, and such Assets are listed on Schedule 2.2(d). Such
Tranche 2 Assets
and Tranche 3 Assets constitute "Remaining Assets" for purposes of
this
Agreement. These Remaining Assets are sold for the Base
Consideration (subject
to adjustment as provided in Section 2.4) set forth on Schedule
2.2(d).
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(e) The Closing for the remainder of the Tranche 2 Assets and
the
remainder of the Tranche 3 Assets, all as described on Schedule
2.2(e), is
scheduled for a Closing Date of January 19, 2007 (the "Final
Closing"). Such
Tranche 2 Assets and Tranche 3 Assets constitute "Remaining Assets"
for purposes
of this Agreement These Remaining Assets will be sold for the Base
Consideration
(subject to adjustment as provided in Section 2.4) set forth on
Schedule 2.2(e),
subject to the satisfaction of the conditions relating to such
Closing set forth
in Section 6.1 and Section 6.2. Notwithstanding the preceding
provisions of this
Section 2.2(e), Buyer may, at its option and for any reason, extend
the Closing
Date for the Final Closing until February 19, 2007, upon Buyer's
delivery to
Seller of written notice of Buyer's intent to extend no later than
December 20,
2006. If Buyer thus elects to extend the Closing Date for the Final
Closing,
then as consideration for such extension, Buyer shall pay to
Seller, by bank
wire transfer of immediately available U.S. funds, the sum of
$500,000.00,
unless, as of December 20, 2006, Seller is in breach in any
material respect
under the terms of this Agreement, in which case no payment under
this Section
2.2(e) shall be due from Buyer to Seller.
(f) Except as otherwise agreed to by the Parties, the conveyance
of
each Remaining Asset shall be effective as of the Effective Time,
except for the
assumption by Buyer of certain Liabilities associated with such
Remaining Asset
that are provided, in Section 2.5, to be assumed as of the
Possession Time
applicable to such Remaining Asset. All references in this
Agreement to the
Closing Date or Possession Time with reference to a Remaining Asset
shall be to
the Closing Date or Possession Time applicable to such Remaining
Asset under the
terms hereof.
2.3
Excluded Assets. Seller excepts, reserves, and retains to itself
the
following properties and assets (collectively, the "Excluded
Assets"):
(a) (i) an undivided five percent (5%) of the undivided Working
Interests, associated Net Revenue Interests, and other interests
set forth in
Exhibit B, together with an undivided five percent (5%) of any and
all other
rights, titles, and interest of Seller, in, to, under, or derived
from (A) the
Leases conveyed by Seller to Buyer pursuant hereto, (B) the lands
covered by
such Leases or otherwise described on Exhibit A, (C) all units
created by the
pooling, unitization, and communitization agreements in effect with
respect to
such Leases and the lands covered thereby or otherwise described on
Exhibit A,
and (D) the oil and gas leases and lands included in any units with
which such
Leases or the lands covered thereby or otherwise described on
Exhibit A may have
been pooled, unitized, or communitized, and all other rights,
interests
privileges, benefits, and powers of any kind or character conferred
upon Seller
as the owner of such interests; (ii) an undivided five percent (5%)
of the
undivided Working Interests and the associated Net Revenue
Interests set forth
in Exhibit B, together with an undivided five percent (5%) of any
and all other
rights, titles, and interests of Seller, in and to the Wells
conveyed by Seller
to Buyer pursuant hereto; (iii) an undivided five percent (5%) of
Seller's
rights, titles, and interests in and to all Hydrocarbons produced
from or
allocable to the interests of Seller described in clauses(i) and
(ii) of this
Section 2.3(a); (iv) an undivided five percent (5%) of Seller's
rights, titles,
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and interests in and to (A) the Real Property Interests, (B) the
Personal
Property, and (C) the Transferred Contracts, in each case
transferred by Seller
to Buyer pursuant hereto; (v) all fees, rentals, proceeds,
payments, revenues,
and other rights and economic benefits of every kind and character
accruing or
payable to the owner of the items listed in this Section 2.3(a);
and (vi) all
intangible rights, inchoate rights, transferable rights under
warranties made by
prior owners, manufacturers, vendors, and third Persons, and rights
accruing
under applicable statutes of limitation or prescription, insofar
only as the
foregoing rights and interests relate or are attributable to the
items listed in
this Section 2.3(a), including, without limitation, an undivided
five percent
(5%) interest in and to all underproduction accounts or credits of
Seller or
Seller's Predecessors pertaining to Imbalances in existence as of
the Effective
Time (collectively, the "Remaining Retained Interests");
(b) all corporate, financial, legal, and tax records of Seller;
(c) all deposits, cash, checks in process of collection, cash
equivalents, and funds attributable to Seller's interests in the
Remaining
Assets for the period prior to the Effective Time;
(d) all Hydrocarbons produced from or allocable to the
Remaining
Assets prior to the Effective Time, except for those Hydrocarbons
described in
Section 2.1(c)(i);
(e) all documents and records of Seller and Seller's
Predecessors
subject to the attorney/client privilege, confidentiality
agreements, claims of
privilege, or other restrictions on access;
(f) all rights, interests, and Claims that Seller or Seller's
Predecessors may have under any policy of insurance or indemnity,
surety bond,
or any insurance or condemnation proceeds or recoveries from third
Persons
relating to property damage or casualty loss affecting the Leases,
Wells,
Hydrocarbons, Real Property Interests, or Personal Property
occurring prior to
the applicable Possession Time;
(g) all Claims, whether in contract, in tort, or arising by
operation of Law, and whether asserted or unasserted as of the
applicable
Possession Time, that Seller or Seller's Predecessors may have
against any
Person arising out of acts, omissions, or events, or injury to or
death of
Persons or loss or destruction of or damage to property, relating
in any way to,
the Leases, Wells, Hydrocarbons, Real Property Interests, Personal
Property,
Contracts, Permits, Intangible Rights, or Transferable Data that
occurred prior
to such Possession Time; provided, however, that no such Claim may
be settled,
compromised, or otherwise resolved in a manner that results in an
obligation
borne by Buyer or the Assets from and after the applicable
Possession Time
without the prior written consent of Buyer;
(h) all exchange traded futures contracts and over-the-counter
derivative contracts of Seller and Seller's Predecessors as to
which Seller or
any Seller's Predecessor has an open position as of the Effective
Time;
(i) any and all rights to use Seller's name, marks, trade dress
or
insignia, or to use the name of any Affiliate of Seller (including,
without
limitation, Seller's Predecessors), and all of Seller's
intellectual property,
including, without limitation, proprietary or licensed computer
software;
patents; trade secrets; copyrights; geological and geophysical
information and
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data (including, without limitation, conventional and 3-D seismic
data) licensed
from third Persons, and Seller's proprietary interpretations
thereof; economic
analyses; and pricing forecasts;
(j) all amounts due or payable to Seller or Seller's Predecessors
as
adjustments to insurance premiums related to the Remaining Assets
for periods
prior to the Effective Time;
(k) all Claims of Seller or Seller's Predecessors for refunds of
or
any loss carry-forwards with respect to any taxes relating to the
Leases, Wells,
Hydrocarbons, Real Property Interests, Personal Property,
Contracts, Permits,
Intangible Rights, or Transferable Data for periods prior to the
Effective Time;
(l) all audit rights and all amounts due or payable to Seller
or
Seller's Predecessors as refunds, adjustments, or settlements of
disputes
arising under the Leases, the Real Property Interests, the Permits,
or the
Contracts for periods prior to the Effective Time;
(m) all trade credits and the proceeds of all accounts
receivable,
notes receivable, instruments, general intangibles, and other
receivables due or
payable to Seller or Seller's Predecessors relating to the Leases,
Wells,
Hydrocarbons, Real Property Interests, Personal Property,
Contracts, Permits,
Intangible Rights, or Transferable Data that accrued prior to the
Effective
Time;
(n) except as otherwise provided herein, all fees, rentals,
proceeds, payments, revenues, rights, and economic benefits of
every kind and
character (and all security or other deposits made) payable to the
owner of the
Remaining Assets and that are attributable to the period prior to
the Effective
Time;
(o) all rights, titles, and interests of Seller or any Affiliate
of
Seller in and to the Gathering System Partnerships; and
(p) until the Final Closing, all of Seller's rights, titles,
and
interests in and to the surface well pad sites located on the
Tranche 3 Assets
described on Schedule 2.2(d) (other than the "Hillview"); provided,
however,
that such surface well pad sites shall be included in the Real
Property
Interests conveyed to Buyer at the Final Closing; and
(q) all interests, rights, property, and assets of Seller not
located on or used in connection with the Remaining Assets or
otherwise
specifically included in the definition of the Remaining
Assets.
2.4
Consideration.
(a) The total base consideration to be paid by Buyer to Seller
if
all of the Remaining Assets are conveyed by Seller to Buyer
hereunder shall be
THIRTY-THREE MILLION, EIGHTY THOUSAND, SIX HUNDRED SIXTY-SIX AND
NO/100 DOLLARS
($33,080,666.00) (the "Base Consideration"). If, for any reason,
one (1) or more
Remaining Assets is not conveyed by Seller to Buyer under the terms
of this
Agreement, the Base Consideration shall be reduced by the sum of
the Allocated
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Values of the affected Remaining Assets. The portion of the Base
Consideration
payable hereunder at each Closing shall equal the sum of the
Allocated Values of
all of the Remaining Assets being sold at such Closing. The
relevant portion of
the Base Consideration, subject to the adjustments made as provided
in Sections
2.4(b) and 2.4(c), shall be payable in currency of the United
States at each
Closing in accordance with Article VII.
(b) For each Closing, the portion of the Base Consideration
payable
at such Closing shall be adjusted upward by the following:
(i) the amount
of the value of all merchantable Hydrocarbons
produced from or allocable to the Remaining Assets
conveyed by Seller to Buyer at such Closing existing in
pipelines, storage tanks, or other processing or storage
facilities (including, without limitation, unsold
inventories of plant products owned by Seller, if any)
upstream of the delivery points to the relevant
purchasers as of the Effective Time, the value to be
based on the contract price applicable to such
Hydrocarbons in effect as of the Effective Time (or the
market value, if there is no contract price, in effect
as of the Effective Time), less amounts payable as
royalties, overriding royalties, and other burdens upon
such Hydrocarbons and Property-Related Taxes deducted by
the purchaser of such Hydrocarbons;
(ii) the amount of all
direct capital, operating, and other
expenditures and costs and all prepaid costs and
expenses attributable to the Remaining Assets conveyed
by Seller to Buyer at such Closing (exclusive of
Property-Related Taxes) incurred and actually paid by or
on behalf of Seller in the ordinary course of owning and
operating such Remaining Assets that are attributable to
the period from the Effective Time through the
applicable Possession Time, including, without
limitation, (A) royalties, overriding royalties, and
other similar burdens on production, (B) rentals,
shut-in well payments, and other lease maintenance
payments made under the terms of the Leases, (C) except
as otherwise provided below in clause (D)(1) of this
paragraph, the direct overhead and other charges and
expenses billed to Seller by the operator or operators
(including, without limitation, Seller or its
Affiliates) of such Remaining Assets under applicable
operating agreements, including, without limitation,
unreimbursed expenses paid by Seller on behalf of third
Persons to which Seller is entitled to reimbursement
under such operating agreements, and (D) premiums paid
by Seller with respect to any policy of insurance or
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indemnity or any surety bond directly related to such
Remaining Assets and allocable to the period from the
Effective Time through the applicable Possession Time,
but
exclusive of (1) direct overhead and other charges
billed by Seller or its Affiliate, as operator of a
Remaining Asset, to Seller, to the extent that such
charges exceed the like charges invoiced by Seller or
its Affiliate to other co-owners of interests in the
relevant Remaining Asset, (2) expenses incurred by
Seller in connection with the remediation of
Environmental Conditions pursuant to Section 4.3, the
cure of Defects pursuant to Section 4.4 (including,
without limitation, lease acquisition costs), or the
repair of a Casualty Event or replacement of a damaged
or taken Asset pursuant to Section 5.2, (3) the general,
administrative, and office overhead expenses of Seller
and its Affiliates, and (4) all costs and expenses
incurred, or to be incurred after the date hereof, by
Seller in connection with the completion (including,
without limitation, the performance of fracturing
operations) and equipping for production of the Guyer #1
Well (such well constituting a Closed Asset for purposes
hereof);
(iii) any increase required as the result of the proration of
Property-Related Taxes under Section 10.3;
(iv) ninety-five
percent (95%) of the amount of the value of
any Imbalance pertaining to the Remaining Assets
conveyed by Seller to Buyer at such Closing as to which
Seller is in an "under" position as of the Effective
Time, such value to be based, in each case, on the
contract price applicable to the relevant category of
Hydrocarbons (or the market value thereof, if there is
no contract price) determined as of the applicable
Effective Time;
(v) any increase
required pursuant to the terms of Section
8.5; and
(vi) any other amount
provided for elsewhere in this
Agreement or otherwise agreed upon by Seller and Buyer
as being an increase to the Base Consideration.
(c) For each Closing, the portion of the Base Consideration
payable
at such Closing shall be adjusted downward by:
(i) permitted
reductions (if any) provided for in Section
4.4(d);
(ii) the proceeds
received by Seller from the sale of
Hydrocarbons produced from or allocable to the Remaining
Assets conveyed by Seller to Buyer at such Closing
during the period from the Effective Time through the
applicable Closing Date, less amounts payable as
royalties, overriding royalties, and other burdens upon
such Hydrocarbons and Property-Related Taxes deducted by
the purchaser of such Hydrocarbons;
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(iii) all other fees, rentals, proceeds from any permitted
sale, salvage, or other disposition, and other revenues
pertaining to the Remaining Assets conveyed by Seller to
Buyer at such Closing that are attributable to, and were
received by Seller during, the period from the Effective
Time through the applicable Closing Date (excluding
overhead reimbursements to Seller under applicable
operating agreements under which Seller is the
operator);
(iv) ninety-five
percent (95%) of the amount of the value of
any Imbalance pertaining to the Remaining Assets
conveyed by Seller to Buyer at such Closing as to which
Seller is in an "over" position as of the Effective
Time, as well as the amount of the value of any
Hydrocarbons produced from or allocable to such
Remaining Assets that third Persons may otherwise be
entitled to receive out of the interests therein being
transferred after the Effective Time without making full
payment therefor at or after the time of delivery as the
result of a "take-or-pay", prepayment, forward sale,
production payment, deferred production, or similar
arrangement in existence as of the Effective Time, such
value to be based, in each case, on the contract price
applicable to the relevant category of Hydrocarbons (or
the market value, if there is no contract price)
determined as of the Effective Time;
(v) any
reduction required as the result of the proration of
Property-Related Taxes under Section 10.3;
(vi)
an amount equal to all
"Advances" (as defined in the
First Restated Purchase Agreement), not to exceed, in
the aggregate $2,500,000.00, paid by Buyer to Seller as
provided in Section 5.3(a) of the First Restated
Purchase Agreement with respect to certain of the
Remaining Assets described on Schedule 2.2 (d); and
(vii) any other amount provided for elsewhere in this
Agreement or otherwise agreed upon by Seller and Buyer
as being a reduction in the Base Consideration.
(d) The Base Consideration, as adjusted pursuant to Sections
2.4(b)
and 2.4(c), shall be referred to herein as the "Adjusted
Consideration". All
adjustments to the Base Consideration provided for in Sections
2.4(b) and 2.4(c)
shall be determined without duplication and on an accrual basis, in
accordance
with generally accepted accounting principles consistently
applied.
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2.5
Assumption of Obligations. Subject to the terms of this
Agreement,
upon each Closing, Buyer assumes and agrees to pay, perform, and
discharge the
following duties, obligations, and Liabilities (collectively, the
"Assumed
Liabilities") with respect to the Remaining Assets conveyed by
Seller to Buyer
at such Closing, effective as of the Effective Time or Possession
Time, as set
forth below:
(a) the performance of the terms, conditions, and covenants of,
and
the discharge of the share attributable to the interests of Seller
to be
transferred of the duties, obligations, and liabilities (other than
obligations
or liabilities for the payment of money) arising under the terms
of, the Leases,
the Real Property Interests, the Permits, and the Transferred
Contracts conveyed
by Seller to Buyer at such Closing for the period from and after
the applicable
Possession Time;
(b) except for Retained Liabilities, all obligations and
Liabilities
of Seller for the payment of money with respect to the Remaining
Assets conveyed
by Seller to Buyer at such Closing (including, without limitation,
the payment
of ninety-five percent (95%) of Seller's share of all costs and
expenses
incurred in connection with the relevant Leases, Wells,
Hydrocarbons, Real
Property Interests, Personal Property, Transferred Contracts, and
Permits and
the payment of ninety-five percent (95%) of Seller's share of all
royalties,
overriding royalties, and other similar burdens on production, as
well as all
rentals, shut-in well payments, minimum royalties, and other lease
maintenance
payments under the terms of such Leases) for the period from and
after the
Effective Time;
(c) ninety-five percent (95%) all obligations of Seller
regarding
the plugging and abandonment of all Wells and Personal Property
conveyed by
Seller to Buyer at such Closing and the performance of all related
salvage, site
clearance, and surface restoration operations in accordance with
applicable Law
and the terms of the relevant Leases and applicable Transferred
Contracts;
(d) ALL ASSUMED ENVIRONMENTAL LIABILITIES;
(e) EXCEPT FOR RETAINED LIABILITIES, ALL OTHER CLAIMS AND
LIABILITIES FOR INJURY TO OR DEATH OF ANY PERSON, PERSONS, OR OTHER
LIVING
THINGS, OR LOSS OR DESTRUCTION OF OR DAMAGE TO PROPERTY AFFECTING
OR RELATING TO
THE LEASES, WELLS, HYDROCARBONS, REAL PROPERTY INTERESTS, AND
PERSONAL PROPERTY
CONVEYED BY SELLER TO BUYER AT SUCH CLOSING AND ALLOCABLE TO THE
INTERESTS
THEREIN BEING TRANSFERRED, REGARDLESS OF WHETHER SUCH CLAIM OR
LIABILITY
RESULTS, IN WHOLE OR IN PART, FROM THE NEGLIGENCE OR STRICT
LIABILITY OF SELLER
OR ITS AFFILIATES, EMPLOYEES, AGENTS, OR REPRESENTATIVES, TO THE
EXTENT THAT
SUCH CLAIM OR LIABILITY, OR THE ACTS, OMISSIONS, EVENTS, OR
CONDITIONS GIVING
RISE THERETO, ARISES, OCCURS, OR EXISTS AT OR AFTER THE APPLICABLE
POSSESSION
TIME;
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(f) ninety-five percent (95%) of all obligations of Seller owed
to
other Persons with respect to Imbalances (if any) pertaining to the
Remaining
Assets conveyed by Seller to Buyer at such Closing and in existence
at or
arising after the Effective Time;
(g) all Claims and Liabilities relating to the payment of taxes
(including interest, penalties, and additions to tax) for which
Buyer has agreed
to be responsible under the terms hereof;
(h) all obligations of Seller (if any) relating to the
accounting
for and distribution or payment of proceeds from the sale of the
Hydrocarbons
produced from or allocable to the Remaining Assets conveyed by
Seller to Buyer
at such Closing and the associated Retained Interests, including,
without
limitation, the distribution or payment of funds held in suspense
as of the
applicable Closing Date and transferred to Buyer pursuant to
Section 8.3;
(i) the responsibility for compliance with applicable Laws
relating
to the Assets conveyed by Seller to Buyer at such Closing, and the
maintenance
and, when necessary, procurement of Permits required by any
Governmental
Authority in connection with such Remaining Assets, in each case
for the period
from and after the applicable Possession Time;
(j) the share attributable to the owner of the Remaining Assets
conveyed by Seller to Buyer at such Closing of all Claims and
Liabilities
arising out of, resulting from, or relating in any way to Casualty
Events on or
relating to such Remaining Assets that become Assumed Liabilities
by operation
of Section 5.2(b); and
(k) all other duties, obligations, Liabilities, and Claims,
whether
in contract, in tort, or arising by operation of Law, accruing or
resulting
from, arising out of, or otherwise associated with the Remaining
Assets conveyed
by Seller to Buyer at such Closing for the period from and after
the applicable
Possession Time.
2.6
Retained Liabilities. Subject to the terms of this Agreement,
as
between Seller and Buyer, Seller hereby expressly retains and
agrees to pay,
perform, and discharge the following duties, obligations, and
Liabilities with
respect to the Remaining Assets conveyed by Seller to Buyer at each
Closing
(collectively, the "Retained Liabilities"):
(a) the performance of the terms, conditions, and covenants of,
and
the discharge of Seller's share of the duties, obligations, and
Liabilities
(other than obligations or Liabilities for the payment of money)
arising under
the terms of, the Leases, the Real Property Interests, the
Transferable Permits,
and the Contracts conveyed by Seller to Buyer at the relevant
Closing for the
period prior to the applicable Possession Time;
(b) except for Assumed Liabilities, all obligations and
Liabilities
of Seller or Seller's Predecessors for the payment of money with
respect to the
Remaining Assets conveyed by Seller to Buyer at such Closing
(including, without
limitation, the payment of such Persons' share of all costs and
expenses
incurred in connection with the relevant Leases, Wells,
Hydrocarbons, Real
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Property Interests, Personal Property, Contracts, and Permits and
the payment of
such Persons' shares of all royalties, overriding royalties, and
other similar
burdens on production, as well as all rentals, shut-in well
payments, minimum
royalties, and other lease maintenance payments under such Leases)
for the
period prior to the Effective Time;
(c) all Claims and Liabilities relating to the payment of taxes
(including interest, penalties, and additions to tax) for which
Seller has
agreed to be responsible hereunder;
(d) except for Assumed Liabilities, all Claims and Liabilities,
whether in contract, in tort, or arising by operation of Law,
against or
suffered by Seller or Seller's Predecessors that relate in any way
to, the
Remaining Assets conveyed by Seller to Buyer at such Closing
(INCLUDING, WITHOUT
LIMITATION, INJURY TO OR DEATH OF ANY PERSON, PERSONS, OR OTHER
LIVING THINGS,
OR LOSS OR DESTRUCTION OF OR DAMAGE TO PROPERTY AFFECTING OR
RELATING TO SUCH
REMAINING ASSETS, REGARDLESS OF WHETHER SUCH CLAIM OR LIABILITY
RESULTS, IN
WHOLE OR IN PART, FROM THE NEGLIGENCE OR STRICT LIABILITY OF BUYER
OR ITS
AFFILIATES, EMPLOYEES, AGENTS, OR REPRESENTATIVES), to extent that
any such
Claim or Liability, or the acts, omissions, events, or conditions
giving rise
thereto, arose, occurred, or existed prior to the applicable
Possession Time,
regardless of whether such Claim or Liability has been asserted as
of the
applicable Possession Time;
(e) all Claims (if any) of third Persons, whether as the result
of
audits or otherwise, to refunds, adjustments, settlements of
disputes, or other
amounts of any kind due under the terms of the Leases, the Real
Property
Interests, the Permits, or the Contracts conveyed by Seller to
Buyer at such
Closing and attributable to the period prior to the Effective
Time;
(f) all amounts payable by Seller or Seller's Predecessors under
the
terms of all exchange traded futures contracts and over-the-counter
derivative
contracts to which Seller or any Seller's Predecessor is a party as
of the
Effective Time, including, without limitation, all breakage costs
(if any)
incurred by Seller or Seller's Predecessors under the terms of any
such
agreement as the result of the transactions contemplated in this
Agreement;
(g) all indebtedness (if any) of Seller, whether or not
encumbering
all or any portion of the Remaining Assets;
(h) ALL RETAINED ENVIRONMENTAL LIABILITIES;
(i) all costs and expenses incurred, or to be incurred, in
connection with the completion (including, without limitation, the
performance
of fracturing operations) and equipping for production of the Guyer
#1 Well
(such well constituting a "Closed Asset" for purposes hereof);
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(j) all Liabilities for which Seller is responsible with respect
to
Environmental Conditions under Section 4.3, Defects under Section
4.4, and
Casualty Events under Section 5.2; and
(k) except for Assumed Liabilities, all other duties,
obligations,
Claims, and Liabilities, whether in contract, in tort, or arising
by operation
of Law, accruing or resulting from, arising out of, or otherwise
associated with
(i) the Remaining Assets conveyed by Seller to Buyer at such
Closing for the
period prior to the applicable Possession Time, and (ii) the
Excluded Assets.
2.7
Possession; Risk of Loss. As of the applicable Possession Time,
Seller
shall deliver to Buyer exclusive possession and control of the
Remaining Assets
conveyed by Seller to Buyer at each Closing. Seller agrees to
cooperate with
Buyer to facilitate the transition of the ownership and (if
applicable)
operation of such Remaining Assets to Buyer. As between Seller and
Buyer, and
subject to the terms of Sections 2.5 and 2.6, Seller shall assume
and bear all
risk of loss associated with the Remaining Assets conveyed by
Seller to Buyer at
each Closing prior to the applicable Possession Time, and Buyer
shall assume and
bear all risk of loss associated with such Remaining Assets from
and after the
applicable Possession Time.
2.8
Allocation of Adjusted Consideration. Buyer and Seller shall
use
commercially reasonable efforts to agree, on or before December 15,
2006, upon
an allocation of the Adjusted Consideration among the Remaining
Assets for
financial accounting and tax purposes in accordance with Section
1060 of the
Code. Buyer and Seller shall each file a Form 8594 (Asset
Acquisition Statement
Under Section 1060) on a timely basis, reporting the allocation of
the Adjusted
Consideration consistent with such allocation. Buyer and Seller
shall file, on a
timely basis, any amendments required to such Form 8594 as a result
of a
subsequent increase or decrease of the Adjusted Consideration after
the Closing
Date for the Final Closing. Buyer and Seller shall not take any
position on
their respective income tax returns that is inconsistent with the
allocation of
the Adjusted Consideration as so agreed, or as adjusted as the
result of any
subsequent increase or decrease in the Adjusted Consideration. If
Buyer and
Seller are unable to agree on the allocation of the Adjusted
Consideration
provided for in this Section 2.8 by December 15, 2006, either Buyer
or Seller
may initiate arbitration of such dispute pursuant to the terms of
Section 10.11.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1
Representations and Warranties of Seller. Seller represents and
warrants to Buyer as follows:
(a) Seller is a limited partnership duly organized and validly
existing under the Laws of the State of Texas. The general partner
of Seller is
Trek Management, LLC, a limited liability company duly organized,
validly
existing, and in good standing under the Laws of the State of
Texas. Seller has
all requisite power and authority to own and operate its property
(including,
without limitation, the Remaining Assets) and to carry on its
business as now
conducted.
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(b) Seller has full capacity, power, and authority to enter into
and
perform this Agreement and the transactions contemplated herein.
The execution,
delivery, and performance by Seller of this Agreement has been duly
and validly
authorized and approved by all necessary action on the part of
Seller, and this
Agreement and the documents executed in connection herewith are, or
upon their
execution and delivery will be, the valid and binding obligations
of Seller and
enforceable against Seller in accordance with their terms, subject
to the
effects of bankruptcy, insolvency, reorganization, moratorium, and
similar Laws,
as well as to principles of equity (regardless of whether such
enforceability is
considered in a proceeding in equity or at law).
(c) The execution, delivery, and performance by Seller of this
Agreement and the consummation of the transactions contemplated
herein will not
(i) conflict with or result in a breach of any provisions of the
organizational
documents of Seller, (ii) result in a default or the creation of
any Lien or
give rise to any right of termination, cancellation, or
acceleration under any
of the terms of any Lease, Contract, Real Property Interest,
Permit, note, bond,
mortgage, indenture, license, or other agreement, document, or
instrument to
which Seller is a party or by which Seller or any of the Remaining
Assets or
Remaining Retained Interests may be bound, or (iii) violate any
order, writ,
injunction, judgment, decree, or Law applicable to Seller, the
Remaining Assets,
or the Remaining Retained Interests.
(d) There is no Claim by any Person or Governmental Authority
(including, without limitation, expropriation or forfeiture
proceedings), and no
legal, administrative, or arbitration proceeding pending or, to
Seller's
Knowledge, threatened against Seller, Seller's Predecessors, the
Remaining
Assets, or the Remaining Retained Interests, or to which Seller or
any Seller's
Predecessor is a party, that reasonably may be expected to (i)
challenge
Seller's title to any of the Remaining Assets or Remaining Retained
Interests,
(ii) subject the owner or operator of the Remaining Assets or
Remaining Retained
Interests to liability in favor of any Governmental Authority or
other Person as
the result of the alleged violation of, or non-compliance with,
any
Environmental Law by Seller, Seller's Predecessors, or any other
Affiliate of
Seller with respect to the Remaining Assets or Remaining Retained
Interests or
require the owner or operator of the Remaining Assets or Remaining
Retained
Interests to remediate, remove, or respond to an Environmental
Condition, or a
threatened Environmental Condition, on or affecting the Remaining
Assets or
Remaining Retained Interests, or (iii) otherwise adversely affect
the Remaining
Assets or Remaining Retained Interests in any material respect or
the ability of
Seller to consummate the transactions contemplated in this
Agreement.
(e) Except as otherwise reflected in Schedule 3.1(e), none of
the
Leases, Real Property Interests, or Contracts is subject to a
preferential right
to purchase, third Person consent to assignment requirement, right
of first
refusal, right of first offer, or similar right or restriction.
(f) Except for approvals by Governmental Authorities
customarily
obtained after the Closings, no authorization, consent, approval,
exemption,
franchise, permit, or license of, or filing with, any Governmental
Authority is
required to authorize, or is otherwise required by any Governmental
Authority in
connection with, the valid execution and delivery by Seller of this
Agreement,
the transfer of the Remaining Assets or Remaining Retained
Interests to Buyer,
or the performance by Seller of its other obligations
hereunder.
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(g) Each Lease is in full force and effect as to sufficient
acreage
to provide forty (40) acres for each Well or Hydrocarbon well
location (whether
designated as "PUD" or Prob" on Exhibit B) allocated to such Lease
on Exhibit B.
Seller and Seller's Predecessors have, in all material respects,
fulfilled all
requirements for filings, certificates, consents, approvals,
disclosures, and
similar matters contained in the Leases and applicable Law, and
Seller is fully
qualified to own, operate, and transfer the Leases under the terms
thereof and
applicable Law. Neither Seller nor any of Seller's Predecessors is
in material
breach or material default, and there has occurred no event, fact,
or
circumstance that, with the lapse of time or the giving of notice,
or both,
would constitute such a material breach or material default by
Seller or
Seller's Predecessors, with respect to any terms of any Lease, and,
to Seller's
Knowledge, no other Person owning an interest in, or serving as
operator of, any
Lease is in material breach or material default with respect to any
of its
obligations thereunder. No lessor under any Lease has given or, to
Seller's
Knowledge, threatened to give notice of any action to terminate,
cancel,
rescind, repudiate, or procure a judicial reformation of any Lease
or any
provision thereof. Seller and Seller's Predecessors have correctly
made, or
caused to be correctly made, all payments, including, without
limitation,
royalties, rentals, shut-in well payments, and other lease
maintenance payments,
due in respect of the Leases thereunder.
(h) Each of the Real Property Interests is in full force and
effect.
Seller and Seller's Predecessors have, in all material respects,
fulfilled all
requirements for filings, certificates, consents, approvals,
disclosures, and
similar matters contained in the Real Property Interests and
applicable Law, and
Seller is fully qualified to own, operate, and transfer the Real
Property
Interests under the terms thereof and applicable Law. Neither
Seller nor any of
Seller's Predecessors is in material breach or material default,
and there has
occurred no event, fact, or circumstance that, with the lapse of
time or the
giving of notice, or both, would constitute such a material breach
or material
default by Seller or Seller's Predecessors, with respect to any of
its
obligations under any Real Property Interest, and, to Seller's
Knowledge, no
other Person owning an interest in any Real Property Interest or
serving as
operator of any Real Property Interest is in material breach or
material default
with respect to any of its obligations thereunder. No grantor,
lessor, licensor,
or other counterparty under any Real Property Interest has given
or, to Seller's
Knowledge, threatened to give notice of any action to terminate,
cancel,
rescind, repudiate, or procure a judicial reformation of any Real
Property
Interest or any provision thereof. Seller and Seller's Predecessors
have
correctly made, or caused to be correctly made, all rental and
other payments
due in respect of the Real Property Interests thereunder.
(i) Seller has furnished to Buyer true and correct copies of all
of
the Contracts described on Exhibit D, and there are no contracts,
agreements,
instruments, or documents affecting the Remaining Assets or the
Remaining
Retained Interests other than the Contracts described on Exhibit D.
With respect
to the Contracts: (i) all Contracts are in full force and effect;
(ii) neither
Seller nor any of Seller's Predecessors is in material breach or
material
default, and there has occurred no event, fact, or circumstance
that, with the
lapse of time or the giving of notice, or both, would constitute
such a material
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breach or material default by Seller or Seller's Predecessors, with
respect to
the terms of any Contract; (iii) to Seller's Knowledge, no other
party is in
material breach or material default with respect to the terms of
any Contract;
and (iv) neither Seller, Seller's Predecessors, nor, to Seller's
Knowledge, any
other party to any Contract has given or threatened to give notice
of any action
to terminate, cancel, rescind, or procure a judicial reformation of
any Contract
or any provision thereof.
(j) The Permits described on Exhibit E constitute all necessary
Permits affecting or pertaining to the Remaining Assets and the
Remaining
Retained Interests. All Transferable Permits are also described on
Exhibit E.
Seller, Seller's Predecessors, or, to Seller's Knowledge, each
operator of the
Remaining Assets and the Remaining Retained Interests, as
applicable, has
complied in all material respects with all Laws and Permits
relating to the
Remaining Assets and Remaining Retained Interests, including,
without
limitation, Environmental Laws and Laws requiring the provision of
surety bonds
or other forms of security or financial assurance with respect to
the
performance of operations (including, without limitation, plugging
and
abandonment operations) on the Remaining Assets and Remaining
Retained
Interests. Seller or, to Seller's Knowledge, each operator of the
Remaining
Assets and Remaining Retained Interests, as applicable, has all
Permits required
in connection with the ownership and operation of the Remaining
Assets and
Remaining Retained Interests (including those required under
Environmental
Laws), and has properly made all filings necessary or appropriate
to obtain such
Permits. All of such Permits and filings are in full force and
effect. Neither
Seller, Seller's Predecessors, nor, to Seller's Knowledge, any
other Person has
received notice from any Governmental Authority or other Person
that any such
applicable Law, Permit, or filing has been violated or not complied
with respect
to the Remaining Assets or Remaining Retained Interests by Seller,
Seller's
Predecessors, or any other Person.
(k) As of the date of this Agreement, the Wells described on
Exhibit
B are the only wells currently capable, or expected to be capable,
of producing
Hydrocarbons located on the Leases. All of such Wells have been, or
will be,
drilled, completed, and operated within the boundaries of the
Leases or within
the limits otherwise permitted by contract and by applicable Law
and in
compliance with the provisions of the applicable Contracts and all
applicable
Laws. The production of Hydrocarbons from such Wells has not been
in excess of
the allowable production established for each Well. All Hydrocarbon
wells
located on the Leases that have permanently ceased the production
of
Hydrocarbons in paying quantities, as well as all plants,
pipelines, personal
property, pits, equipment, materials, appurtenances, and facilities
located on
or used in connection with the Leases, Wells, and Real Property
Interests and
that Seller has, or Seller's Predecessors or Affiliates have,
abandoned or
otherwise permanently ceased to use, have been plugged and/or
abandoned, and all
related salvage, site clearance, and surface restoration operations
have been
completed, in accordance with applicable Laws (including, without
limitation,
Environmental Laws), and all costs and expenses incurred in
connection therewith
have been paid in full. None of the Wells has been plugged and
abandoned.
(l) There are no calls on production, options to purchase, or
similar rights in effect with respect to any portion of the
Hydrocarbons
allocable to the Remaining Assets and the Remaining Retained
Interests, and all
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Contracts for the sale of Hydrocarbons are terminable without
penalty on no more
than thirty (30) days' prior notice. Seller is currently receiving
the prices
provided for under such sales Contracts with respect to the
Hydrocarbons. All
proceeds from the sale of Hydrocarbons attributable to the
interests of Seller
in the Remaining Assets and Remaining Retained Interests have been
and are being
disbursed to Seller under appropriate division orders, transfer
orders, or
similar documents signed by or otherwise binding on Seller, and no
portion of
any such proceeds is being held in suspense, subject to a Claim for
refund by
the purchaser, used as an offset or as collateral for other
obligations (whether
disputed or undisputed), or otherwise not being paid to Seller as
it becomes due
in the ordinary course of business.
(m) Seller has no Claim constituting a Remaining Asset, and is
not
subject to any obligation constituting an Assumed Liability, with
respect to any
Imbalance that relates to any of the Remaining Assets or Remaining
Retained
Interests. Seller is not obligated by virtue of any prepayment made
under any
sales Contract or other Contract containing a "take-or-pay" clause,
or under any
production payment, forward sale, balancing, deferred production,
or similar
arrangement, to deliver Hydrocarbons produced from or allocable to
any Remaining
Asset or Remaining Retained Interest at some future time without
receiving full
payment therefor at or after the time of delivery.
(n) Seller and Seller's Predecessors have paid and discharged
their
respective proportionate shares of all amounts owed by Seller and
Seller's
Predecessors in connection with the Remaining Assets and the
Remaining Retained
Interests for which Seller or Seller's Predecessors have received
invoices from
(i) the operator(s) thereof, (ii) any Affiliate of Seller providing
equipment,
supplies, materials, or services in connection with the Remaining
Assets, and
(iii) all other Persons providing such equipment, supplies,
materials, or
services directly to Seller, Seller's Predecessors, or any
Affiliate of Seller.
There are no outstanding calls or payments due from Seller or
Seller's
Predecessors under the terms of the Contracts. Schedule 3.1(n)
contains a true
and complete list and description, as of the date of execution of
this
Agreement, of all authorities for expenditures, plans of
exploration and/or
development, and other commitments as to which Seller or Seller's
Predecessors
have become obligated regarding drilling, reworking, or other
operations or
other capital expenditures on or relating to the Remaining Assets
or the
Remaining Retained Interests for which all of the activities or
expenditures
anticipated in such AFEs, plans, or commitments have not been
completed prior to
the date of this Agreement. Except as set forth in Schedule 3.1(n),
neither the
Leases nor the Contracts contain any express contractual obligation
to drill
additional Hydrocarbon wells or engage in other operations on the
Remaining
Assets or Remaining Retained Interests as to which Seller or
Seller's
Predecessors have become obligated, except for obligations arising
under offset
well provisions and obligations arising under Contracts that allow
the parties
thereto to elect whether to participate. There are no material
operations on the
Leases under any of the Contracts with respect to which Seller,
Seller's
Predecessors, or any other Person has become a non-consenting
party.
(o) Except with respect to those Property-Related Taxes
prorated
between Seller and Buyer as provided in Section 10.3, during the
period of
ownership by Seller and Seller's Predecessors of the Remaining
Assets and the
Remaining Retained Interests, all Property-Related Taxes imposed or
assessed
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with respect to, measured by, charged against, or attributable to
the Remaining
Assets and the Remaining Retained Interests, or the ownership
thereof, or the
production, processing, gathering, treatment, transportation, and
marketing of
Hydrocarbons therefrom or allocable thereto, in each case that
became due and
payable prior to the Effective Time have been properly paid.
(p) Seller has not engaged any financial advisor, broker, or
finder,
or incurred any liability, contingent or otherwise, in favor of any
such other
Person relating to the transactions contemplated in this
Agreement.
(q) There are no bankruptcy, insolvency, reorganization, or
arrangement proceedings pending, being contemplated by, or to
Seller's
Knowledge, threatened against Seller, any Seller's Predecessor, or
any other
Affiliate that controls Seller.
(r) Seller, Seller's Predecessors, or their Affiliates, have
paid
all premiums required under, and are otherwise in compliance with,
the terms of
all insurance policies or self-insurance programs obtained by
Seller or Seller's
Predecessors with respect to the Remaining Assets and the Remaining
Retained
Interests, all of which policies or programs, or renewals thereof,
have been
during the period of ownership by Seller and Seller's Predecessors
of the
Remaining Assets and the Remaining Retained Interests, and are as
of the date of
execution of this Agreement, in full force and effect.
3.2
Representations and Warranties of Buyer. Buyer represents and
warrants
to Seller as follows:
(a) Buyer is a corporation duly organized, validly existing, and
in
good standing under the Laws of the State of Delaware. Buyer has
all requisite
power and authority to own and operate its property and to carry on
its business
as now conducted.
(b) Buyer has full capacity, power, and authority to enter into
and
perform this Agreement and the transactions contemplated herein.
The execution,
delivery, and performance by Buyer of this Agreement have been duly
and validly
authorized and approved by all necessary action of Buyer. This
Agreement and the
documents executed in connection herewith are, or upon their
execution and
delivery will be, the valid and binding obligations of Buyer and
enforceable
against Buyer in accordance with their terms, subject to the
effects of
bankruptcy, insolvency, reorganization, moratorium, and similar
Laws, as well as
to principles of equity (regardless of whether such enforceability
is considered
in a proceeding in equity or at law).
(c) The execution, delivery, and performance by Buyer of this
Agreement and the consummation of the transactions contemplated
herein will not
(i) conflict with or result in a breach of any provision of the
organizational
documents of Buyer, (ii) result in a default or the creation of any
Lien or give
rise to any right of termination, cancellation, or acceleration
under any of the
terms of any note, bond, mortgage, indenture, license, or other
agreement to
which Buyer is a party or by which Buyer or any of its property may
be bound, or
(iii) violate any order, writ, injunction, judgment, decree, or Law
applicable
to Buyer or its property.
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(d) There is no Claim by any Person or Governmental Authority
(including, without limitation, expropriation or forfeiture
proceedings), and no
legal, administrative, or arbitration proceeding pending or, to
Buyer's
Knowledge, threatened against Buyer, or to which Buyer is a party,
that
reasonably may be expected to have a material adverse effect upon
the ability of
Buyer to consummate the transactions contemplated in this
Agreement.
(e) Except for approvals by Governmental Authorities
customarily
obtained after the Closing, no authorization, consent, approval,
exemption,
franchise, permit, or license of, or filing with, any Governmental
Authority or
any other Person is required to authorize, or is otherwise required
in
connection with, the valid execution and delivery by Buyer of this
Agreement or
the performance by Buyer of its obligations hereunder and
thereunder.
(f) Buyer is responsible for all fees and expenses (if any) of
the
Maxim Group or any individual associated therewith that may be due
in connection
with the transactions contemplated herein. Buyer has not engaged
any other
financial advisor, broker, agent or finder (including, without
limitation, the
Maxim Group), or incurred any liability, contingent or otherwise,
in favor of
any other such Person relating to the transactions contemplated by
this
Agreement.
(g) There are no bankruptcy, insolvency, reorganization, or
arrangement proceedings pending, being contemplated by, or, to
Buyer's
Knowledge, threatened against Buyer or any Affiliate that controls
Buyer.
(h) Buyer is acquiring the Remaining Assets for its own account,
for
investment, and not with a view to, or for offer or resale in
connection with, a
distribution thereof (including, without limitation, the transfer
of fractional
undivided interests therein) within the meaning of the Securities
Act of 1933,
as amended, and the rules and regulations promulgated thereunder,
or a
distribution thereof in violation of any applicable securities Law.
If, in the
future, Buyer sells, transfers, or otherwise disposes of the
Remaining Assets,
or any portion thereof, or any fractional undivided interest
therein, Buyer will
do so in full compliance with any applicable securities Laws.
3.3
Disclaimers. To the extent required by applicable Law to be
operative,
the disclaimers of certain warranties contained in this Section 3.3
are
"conspicuous disclaimers" for purposes of any applicable Law.
EXCEPT AS
OTHERWISE PROVIDED IN THIS AGREEMENT AND THE CONVEYANCE, BUYER
AGREES THAT
SELLER IS CONVEYING THE REMAINING ASSETS WITHOUT REPRESENTATION,
WARRANTY, OR
INDEMNITY, EITHER EXPRESSED OR IMPLIED AT COMMON LAW, BY STATUTE,
OR OTHERWISE
(ALL OF WHICH SELLER HEREBY DISCLAIMS), RELATING TO (i) TITLE,
(ii)
MERCHANTABILITY, DESIGN, OR QUALITY, OR (iii) FITNESS FOR ANY
PARTICULAR
PURPOSE.
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ARTICLE IV.
ACCESS; DUE DILIGENCE
4.1 Access
to Records; Title Due Diligence and Curative. From and after
the date of execution hereof through the Closing Date for the Final
Closing,
Seller shall make available to Buyer and its representatives,
during normal
business hours (and, if reasonably requested, such other times as
Buyer may deem
necessary to complete its due diligence within the time period
provided herein)
at Seller's offices, all books, records, documents, and information
of every
kind and character (including, without limitation, originals or
photocopies, as
available, of the Leases, the Real Property Interests, the
Contracts, the
Permits, the Records, and the Transferable Data) in the possession
of Seller or
Seller's Predecessors relating in any way to the Remaining Assets
and the
Remaining Retained Interests. Seller shall also cause its
employees, counsel,
accountants, and other consultants to cooperate with and assist
Buyer in
connection with such due diligence review. Unless prohibited from
doing so by
confidentiality or other contractual arrangements between Seller or
Seller's
Predecessors and third Persons, Buyer shall have the right to
photocopy such
books, records, documents, and information, or any portion thereof,
at Buyer's
expense. If Buyer requests information not in the possession of
Seller or
Seller's Predecessors, Seller shall use reasonable efforts to
obtain the
requested information, at Buyer's expense, from the applicable
operators or
other Persons.
4.2
Operational and Environmental Assessment. Prior to the execution
of
this Agreement, Buyer and its authorized representatives, at the
sole cost,
risk, and expense of Buyer or its representatives, as applicable,
have conducted
such on-site inspections, inventories, and assessments of the
Remaining Assets
and the Remaining Retained Interests (including, without
limitation, the
witnessing of well tests, the exam
