ASSET PURCHASE AND SALE AGREEMENT
between
Escondido Resources LP
as "Seller"
and
Swift Energy Operating, LLC
as "Buyer"
Dated as of September 4, 2007
TABLE
OF CONTENTS
Page
|
ARTICLE
I PROPERTIES TO BE SOLD AND PURCHASED
|
1
|
|
Section
1.1.
|
Assets
Included.
|
1
|
|
Section
1.2.
|
Assets
Excluded.
|
2
|
|
ARTICLE
II PURCHASE PRICE
|
4
|
|
Section
2.1.
|
Purchase
Price.
|
4
|
|
Section
2.2.
|
Accounting
Adjustments.
|
4
|
|
Section
2.3.
|
Closing
and Post-Closing Accounting Settlements.
|
5
|
|
Section
2.4.
|
Payment
of Adjusted Purchase Price.
|
6
|
|
Section
2.5.
|
Allocation
of Purchase Price.
|
6
|
|
ARTICLE
III THE CLOSING
|
6
|
|
ARTICLE
IV REPRESENTATIONS AND WARRANTIES OF SELLER
|
7
|
|
Section
4.1.
|
Organization
and Existence.
|
7
|
|
Section
4.2.
|
Power
and Authority.
|
7
|
|
Section
4.3.
|
Valid
and Binding Agreement.
|
7
|
|
Section
4.4.
|
Non-Contravention.
|
7
|
|
Section
4.5.
|
Approvals.
|
7
|
|
Section
4.6.
|
Pending
Litigation.
|
8
|
|
Section
4.7.
|
Contracts.
|
8
|
|
Section
4.8.
|
Commitments,
Abandonments or Proposals.
|
9
|
|
Section
4.9.
|
Production
Sales Contracts.
|
9
|
|
Section
4.10.
|
Plugging
and Abandonment.
|
9
|
|
Section
4.11.
|
Permits.
|
9
|
|
Section
4.12.
|
Payment
of Expenses.
|
9
|
|
Section
4.13.
|
Compliance
with Laws.
|
10
|
|
Section
4.14.
|
Imbalances;
Prepayments.
|
10
|
|
Section
4.15.
|
Intellectual
Property.
|
10
|
|
Section
4.16.
|
Taxes.
|
10
|
|
Section
4.17.
|
Fees
and Commissions.
|
11
|
|
Section
4.18.
|
Operations.
|
11
|
|
Section
4.19.
|
Environmental
Laws.
|
11
|
|
Section
4.20.
|
Wells.
|
11
|
|
Section
4.21.
|
Disclaimer
of Warranties.
|
11
|
|
ARTICLE
V REPRESENTATIONS AND WARRANTIES OF BUYER
|
12
|
|
Section
5.1.
|
Organization
and Existence.
|
12
|
|
Section
5.2.
|
Power
and Authority.
|
12
|
|
Section
5.3.
|
Valid
and Binding Agreement.
|
12
|
|
Section
5.4.
|
Non-Contravention.
|
13
|
|
Section
5.5.
|
Approvals.
|
13
|
|
Section
5.6.
|
Pending
Litigation.
|
13
|
|
Section
5.7.
|
Knowledgeable
Purchaser.
|
13
|
|
Section
5.8.
|
Funds.
|
14
|
|
Section
5.9.
|
Qualified
Leaseholder.
|
14
|
|
Section
5.10.
|
Fees
and Commissions.
|
14
|
|
ARTICLE
VI CERTAIN COVENANTS OF SELLER PENDING CLOSING
|
14
|
|
Section
6.1.
|
Access
to Files.
|
14
|
|
Section
6.2.
|
Conduct
of Operations.
|
14
|
|
Section
6.3.
|
Restrictions
on Certain Actions.
|
14
|
|
Section
6.4.
|
Seller's
Confidentiality Obligation.
|
15
|
|
Section
6.5.
|
Payment
of Expenses.
|
16
|
|
Section
6.6.
|
Preferential
Rights and Third Party Consents.
|
16
|
|
ARTICLE
VII ADDITIONAL PRE-CLOSING AND POST-CLOSING AGREEMENTS OF BOTH
PARTIES
|
16
|
|
Section
7.1.
|
Reasonable
Best Efforts.
|
16
|
|
Section
7.2.
|
Notice
of Litigation.
|
16
|
|
Section
7.3.
|
Notification
of Certain Matters.
|
17
|
|
Section
7.4.
|
Fees
and Expenses.
|
17
|
|
Section
7.5.
|
Public
Announcements.
|
17
|
|
Section
7.6.
|
Casualty
Loss Prior to Closing.
|
17
|
|
Section
7.7.
|
Governmental
Bonds.
|
18
|
|
Section
7.8.
|
Assumed
Obligations.
|
18
|
|
Section
7.9.
|
Books
and Records.
|
18
|
|
Section
7.10.
|
Suspended
Funds.
|
18
|
|
Section
7.11.
|
Letters-in-Lieu.
|
18
|
|
Section
7.12.
|
Logos
and Names.
|
18
|
|
Section
7.13.
|
Covenant
Regarding Joint Account.
|
18
|
|
Section
7.14.
|
Further
Assurances.
|
19
|
|
ARTICLE
VIII DUE DILIGENCE EXAMINATION
|
19
|
|
Section
8.1.
|
Title
Due Diligence Examination.
|
19
|
|
Section
8.2.
|
Environmental
Due Diligence Examination.
|
22
|
|
Section
8.3.
|
Disputes
Regarding Title Defects or Environmental Defects.
|
24
|
|
Section
8.4.
|
Adjustments
to Purchase Price for Defects.
|
24
|
|
Section
8.5.
|
Buyer
Indemnification.
|
25
|
|
ARTICLE
IX CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE
PARTIES
|
26
|
|
Section
9.1.
|
Conditions
Precedent to the Obligations of Buyer.
|
26
|
|
Section
9.2.
|
Conditions
Precedent to the Obligations of Seller.
|
27
|
|
ARTICLE
X TERMINATION, AMENDMENT AND WAIVER
|
28
|
|
Section
10.1.
|
Termination.
|
28
|
|
Section
10.2.
|
Effect
of Termination.
|
28
|
|
Section
10.3.
|
Amendment.
|
29
|
|
Section
10.4.
|
Waiver.
|
29
|
|
ARTICLE
XI SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS;
INDEMNIFICATION
|
29
|
|
Section
11.1.
|
Survival.
|
29
|
|
Section
11.2.
|
Seller's
Indemnification Obligations.
|
29
|
|
Section
11.3.
|
Buyer's
Indemnification Obligations.
|
30
|
|
Section
11.4.
|
Net
Amounts.
|
30
|
|
Section
11.5.
|
Indemnification
Proceedings.
|
31
|
|
Section
11.6.
|
Indemnification
Exclusive Remedy.
|
31
|
|
Section
11.7.
|
Limited
to Actual Damages.
|
31
|
|
Section
11.8.
|
Indemnification
Despite Negligence.
|
32
|
|
Section
11.9.
|
Limits
on Liability.
|
32
|
|
ARTICLE
XII MISCELLANEOUS MATTERS
|
32
|
|
Section
12.1.
|
Notices.
|
32
|
|
Section
12.2.
|
Entire
Agreement.
|
33
|
|
Section
12.3.
|
Injunctive
Relief.
|
33
|
|
Section
12.4.
|
Binding
Effect; Assignment; No Third Party Benefit.
|
33
|
|
Section
12.5.
|
Severability.
|
34
|
|
Section
12.6.
|
GOVERNING
LAW.
|
34
|
|
Section
12.7.
|
Counterparts.
|
34
|
|
Section
12.8.
|
WAIVER
OF CONSUMER RIGHTS.
|
34
|
|
Section
12.9.
|
Competition.
|
34
|
|
ARTICLE
XIII DEFINITIONS AND REFERENCES
|
34
|
|
Section
13.1.
|
Certain
Defined Terms.
|
34
|
|
Section
13.2.
|
Certain
Additional Defined Terms.
|
38
|
|
Section
13.3.
|
References,
Titles and Construction.
|
39
|
ASSET
PURCHASE AND SALE AGREEMENT
THIS ASSET PURCHASE AND SALE AGREEMENT dated September 4,
2007, is made by and between Escondido Resources LP, a Texas
limited partnership (" Seller "), and Swift Energy
Operating, LLC, a Texas limited liability company ("
Buyer ").
RECITALS:
A.
Seller
desires to sell, assign and convey to Buyer, and Buyer desires to
purchase and accept from Seller, certain oil and gas properties and
related assets located in the counties of Dimmit, La Salle, and
Webb, State of Texas owned and held by Seller.
B.
Seller
and Buyer deem it in their mutual best interests to execute and
deliver this Agreement.
NOW, THEREFORE, in consideration of the foregoing Recitals
and the mutual covenants and agreements contained herein, Seller
and Buyer do hereby agree as follows:
AGREEMENT:
ARTICLE I
Properties To Be Sold and Purchased
Section
1.1.
Assets Included. Subject
to Section 1.2 , Seller agrees to sell and Buyer agrees
to purchase, for the consideration hereinafter set forth, and
subject to the terms and provisions herein contained, the following
described properties, rights and interests:
(a) All
of Seller's right, title and interest in and to those
properties described in Exhibit I attached hereto
and made a part hereof for all purposes;
(b) Without
limitation of the foregoing but subject to
Section 1.2 , all other right, title and interest
(of whatever kind or character, whether legal or equitable,
and whether vested or contingent) of Seller in and to the oil,
gas and other minerals in and under or that may be produced
from the lands described in Exhibit I hereto
(including interests in Leases covering such lands, overriding
royalties, carried, backin, farmout, farmin, reversionary
interest, production payments and net profits interests in
such lands or such Leases, and fee mineral interests, fee
royalty interests and other interests in such oil, gas and
other minerals), whether such lands be described in a
description set forth in such Exhibit I or be
described in such Exhibit I by reference to
another instrument (and without limitation by any depth
limitations that may be set forth in such
Exhibit I or in any such instrument so referred to
for description), even though Seller's interest in such oil,
gas and other minerals may be incorrectly described in, or
omitted from, such Exhibit I ;
(c) All
rights, titles and interests of Seller in and to, or otherwise
derived from, all presently existing and valid oil, gas or
mineral unitization, pooling, or communitization agreements,
declarations and/or orders and in and to the properties
covered and the units created thereby (including all units
formed under orders, rules, regulations, or other official
acts of any federal, state, or other authority having
jurisdiction, voluntary unitization agreements,
(d) designations
and/or declarations) relating to the properties described in
paragraphs (a) and (b) above;
(e) All
rights, titles and interests of Seller in and to all presently
existing and valid production sales (and sales related)
contracts, operating agreements, and other agreements and
contracts which relate to any of the properties described in
paragraphs (a ), (b) and (c) above,
or which relate to the exploration, development, operation, or
maintenance thereof or the treatment, storage, transportation
or marketing of production therefrom (or allocated
thereto);
(f) All
rights, titles and interests of Seller in and to all
materials, supplies, machinery, equipment, improvements and
other personal property and fixtures (including all wells,
wellhead equipment, pumping units, flowlines, tanks,
buildings, injection facilities, saltwater disposal
facilities, compression facilities, gathering systems, and
computer equipment located on the lands covered by the
properties described above which is necessary to operate such
properties), and all easements, rights-of-way, surface leases
and other surface rights, all Permits and licenses, and all
other appurtenances being used or held for use in connection
with, or otherwise related to, the exploration, development,
operation or maintenance of any of the properties described in
paragraphs (a) , (b) and (c) above,
or the treatment, storage, transportation or marketing of
production therefrom (or allocated thereto); and
(g) Subject
to Section 1.2 , all of Seller's lease files, title
files, curative reports and information, abstracts and title
opinions, division order files, unitization files, contract
files, land surveys and maps (including those in electronic or
digital format), data sheets, land and mineral owner
correspondence, joint operating agreement files, environmental
and regulatory files and reports, operational files and
engineering, production records, well files, accounting
records relating directly to the properties described above
(but not including general financial and accounting records),
seismic records and surveys (to the extent freely assignable
to Buyer without restrictions of any kind), gravity maps,
electric logs, geological or geophysical data and records, (to
the extent freely assignable to Buyer without restrictions of
any kind), paleontological, geochemical and technical files,
analyses, interpretations, and other files, documents and
records (including data and records in electronic or digital
format) of every kind and description which relate to the
properties described above (collectively the "
Records "), that Seller has the right, power
and authority to sell, transfer, convey or disclose to Buyer.
Seller will use Reasonable Best Efforts to obtain consents to
assign and transfer seismic data licenses requested by Buyer
which may not be freely assignable.
As
used herein: (i) " Oil and Gas
Properties " means the properties and interests
described in paragraphs (a) , (b) and
(c) above, save and except for any such properties or
assets that are Excluded Assets under Section 1.2 ; and
(ii) " Properties " means any and all
portions of the Oil and Gas Properties plus the properties and
interests described in paragraphs (d) , (e)
, and (f) above, save and except for any such
properties or assets that are Excluded Assets under Section
1.2 .
Section
1.2.
Assets Excluded. Notwithstanding
anything herein contained to the contrary, the Properties do not
include, and there is hereby excepted and reserved unto Seller all
other assets, properties, and business of Seller, including the
following:
(a) All
trade credits attributable to the Properties with respect to
all periods prior to the Effective Date;
(b) All
of Seller's right, title, and interest in any oil, gas, or
mineral Leases, overriding royalties, production payments, net
profits interests, fee mineral interests, fee royalty
interests and other interests in oil, gas, and other minerals
not expressly included in the definition of Oil and Gas
Properties and all oil, gas or other Hydrocarbon production
from or attributable to the Properties with respect to all
periods prior to the Effective Date, all proceeds attributable
thereto, and all Hydrocarbons that, at the Effective Date, are
owned by Seller and are in storage or within processing
plants;
(c) Any
refund of costs, Taxes or expenses borne by Seller or Seller's
predecessors in title attributable to periods prior to the
Effective Date;
(d) Any
and all proceeds from the settlements of contract disputes
with purchasers of Hydrocarbons from the Properties, including
settlement of take-or-pay disputes, insofar as said proceeds
are attributable to periods of time prior to the Effective
Date;
(e) Any
and all proceeds from settlements with regard to
reclassification of gas produced from the Properties, insofar
as said proceeds are attributable to periods of time prior to
the Effective Date;
(f) All
claims (including insurance claims) and causes of action of
Seller against one or more third parties arising from acts,
omission or events occurring prior to the Effective Date and
all claims under any joint interest audit attributable to any
period prior to the Effective Date;
(g) All
limited partnership, financial, tax and legal (other than
title) books and records of Seller;
(h) Any
geological, geophysical or seismic data, materials or
information, including maps, interpretations records or other
technical information related to or based upon any such data,
materials or information, and any other asset, data, materials
or information, the transfer of which is restricted or
prohibited under the terms of any third party license,
confidentiality agreement or other agreement or the transfer
of which would require the payment of a fee or other
consideration to any third party; provided, however, that if
any such data, materials or information is transferable upon
payment of a fee or other consideration (which Seller will
give notice to Buyer of same), and if Buyer has paid such fee
or other consideration prior to the Closing Date, then such
data, materials or information shall be transferred to
Buyer;
(i) All
leases for office premises used by Seller, and all furniture,
fixtures and equipment located thereat, including computers,
telephone equipment and other similar items of tangible
personal property;
(j) All
of Seller's accounting or other administrative systems,
computer software (except that software which may be necessary
to operate the Properties to the extent it is freely
transferable to Buyer without restrictions of any kind),
patents, trade secrets, copyrights, names, trademarks, logos
and other intellectual property;
(k) All
documents and instruments of Seller that may be protected by
an attorney-client privilege (exclusive of title opinions in
respect of the Oil and Gas Properties);
(l) All
of the other assets described on Exhibit 1.2 ,
together with any rights, liabilities, or obligations
associated with such assets;
(m) The
Existing Hedges and all hedging transactions and any gains or
losses attributable to any hedging activities, whether
occurring before or after the Effective Date;
(n) All
(i) correspondence or other documents or instruments of Seller
relating to the transactions contemplated hereby, (ii) lists
of other prospective purchasers of Seller or the Properties
compiled by Seller, (iii) bids submitted to Seller by other
prospective purchasers of Seller or the Properties, (iv)
analyses by Seller or any Affiliates thereof submitted by
other prospective purchasers of Seller or the Properties, and
(v) correspondence between or among Seller or its Affiliates
or their respective representatives with respect to, or with,
any other prospective purchasers of Seller or the Properties;
and
(o) The
claims, actions, and litigation listed on Section 4.6
of the Seller's Disclosure Schedule.
The
properties and interests specified in the foregoing
paragraphs (a) through (o) of this
Section 1.2 are herein collectively called the "
Excluded Assets ".
ARTICLE II
Purchase Price
Section
2.1.
Purchase Price.
In consideration of the sale of
the Properties by Seller to Buyer, Buyer shall pay to Seller cash
in the amount of $245,000,000 (the " Purchase
Price "). The Purchase Price, as adjusted pursuant to this
Article II and the other applicable provisions hereof,
is herein called the " Adjusted Purchase Price
".
Section
2.2.
Accounting Adjustments.
(a) Subject
to Section 2.2(b) , appropriate adjustments shall be
made between Buyer and Seller so that:
(i)
all
expenses (including all drilling costs, all capital expenditures,
and all overhead charges under applicable operating agreements, and
all other overhead charges actually charged by third parties) for
work done in the operation of the Properties after the Effective
Date will be borne by Buyer, and all proceeds (net of applicable
production, severance, and similar Taxes) from the sale of oil, gas
or other minerals produced from the Oil and Gas Properties after
the Effective Date will be received by Buyer, and
(ii)
all
expenses for work done in the operation of the Properties before
the Effective Date will be borne by Seller and all proceeds (net of
applicable production, severance, and similar Taxes) from the sale
of oil, gas or other minerals produced therefrom before the
Effective Date will be received by Seller.
(b) It
is agreed that, in making the adjustments contemplated by
Section 2.2(a) :
(i)
oil
which was produced from the Oil and Gas Properties and which was,
on the Effective Date, stored in tanks located on the Oil and Gas
Properties (or located elsewhere but used to store oil produced
from the Oil and Gas Properties prior to delivery
(ii)
to
oil purchasers) and above pipeline connections shall be deemed to
have been produced before the Effective Date (it is recognized that
such tanks were not gauged on the Effective Date for the purposes
of this Agreement and that determination of the volume of such oil
in storage will be based on the best available data, which may
include estimates) (with the stored crude oil produced before the
Effective Date valued at the price for the month such oil was sold
(or, if not sold yet, the price for the month in which such oil can
reasonably be expected to be delivered to the purchaser
thereof)),
(iii)
ad
valorem Taxes assessed with respect to a period which the Effective
Date splits shall be prorated based on the number of days in such
period which fall on each side of the Effective Date (with the day
on which the Effective Date falls being counted in the period after
the Effective Date), and
(iv)
no
consideration shall be given to the local, state or federal income
tax liabilities of any party.
Section
2.3.
Closing and Post-Closing Accounting
Settlements.
(a) At
or before Closing, the parties shall determine, based upon the
best information reasonably available to them, the amount of
the adjustments provided for in Section 2.2 .
If the amount of adjustments so
determined which would result in a credit to Buyer exceed the
amount of adjustments so determined which would result in a
credit to Seller, Buyer shall receive a credit, for the amount
of such excess, against the Purchase Price to be paid at
Closing, and, if the converse is true, Buyer shall pay to
Seller, at Closing (in addition to amounts otherwise then
owed), the amount of such excess.
(b) On
or before 90 days after Closing, Buyer and Seller shall review
any additional information which may then be available
pertaining to the adjustments provided for in
Section 2.2 , shall determine if any additional
adjustments (whether the same be made to account for expenses
or revenues not considered in making the adjustments made at
Closing, or to correct errors made in such adjustments) should
be made beyond those made at Closing, and shall make any such
adjustments by appropriate payments from Seller to Buyer or
from Buyer to Seller. Following such
additional adjustments, no further adjustments to the Purchase
Price shall be made under this Section 2.3
.
(c) If
a dispute arises under Section 2.3(b) with respect
to any additional adjustments (an " Accounting
Dispute ") that the parties have been unable to
resolve, then, at the written request of either Seller or
Buyer (the " Request Date "), each of Seller
and Buyer shall nominate and commit one of its senior officers
to meet at a mutually agreed time and place not later than ten
days after the Request Date to attempt to resolve
same. If such senior officers have been unable to
resolve such Accounting Dispute within a period of 30 days
after the Request Date, any party shall have the right, by
written notice to the other specifying in reasonable detail
the basis for the Accounting Dispute, to resolve the
Accounting Dispute by submission thereof to a nationally
recognized independent public accounting firm commonly
considered as one of the "Big 4" and reasonably acceptable to
Seller and Buyer, which firm shall serve as sole arbitrator
(the " Accounting Referee "). The
scope of the Accounting Referee's engagement shall be limited
to the resolution of the items described in the notice of the
Accounting Dispute given in accordance with the foregoing and
the corresponding calculation of the adjustments pursuant to
Section 2.2 . The Accounting Referee shall
be instructed by the parties to resolve the
Accounting
Dispute
as soon as reasonably practicable in light of the
circumstances but in no event in excess of 15 days following
the submission of the Accounting Dispute to the Accounting
Referee. The decision and award of the Accounting
Referee shall be binding upon the parties as an award under
the Federal Arbitration Act and final and nonappealable to the
maximum extent permitted by law, and judgment thereon may be
entered in a court of competent jurisdiction and enforced by
any party as a final judgment of such court. The
fees and expenses of the Accounting Referee shall be borne
equally by Seller and Buyer.
Section
2.4.
Payment of Adjusted Purchase
Price.
The Adjusted Purchase Price shall be paid to
Seller as follows:
(a) Contemporaneously
with the execution and delivery of this Agreement, Buyer shall
tender to the Joint Account cash equal to $24,500,000 as a
deposit (such amount, together with all interest earned
thereon, the " Deposit "). The
Deposit shall (i) be distributed to Seller and applied
against the Adjusted Purchase Price owing by Buyer at the
Closing pursuant to Section 2.4(b) ,
(ii) distributed to Seller pursuant to
Section 10.2 or (iii) distributed to Buyer
pursuant to Section 10.2 , as
applicable.
(b) At
Closing, Buyer shall pay to Seller by bank transfer in
immediately available funds to the account designated by
Seller an amount equal to the Adjusted Purchase Price
less the Deposit.
(c) All
cash payments by Buyer pursuant to this
Section 2.4 shall be made in immediately available
funds by confirmed wire transfer to a bank account or accounts
designated by Seller or the Joint Account Holder, as
applicable.
Section
2.5.
Allocation of Purchase Price.
On
or before the Closing Date, the Buyer and Seller shall agree
in writing as to the allocation of the Adjusted Purchase Price
(plus any fixed liabilities assumed by the Seller or to which
the Properties are subject) among the Properties under the
methodology required by Section 1060 of the
Code. The Buyer and Seller shall report the
transactions contemplated hereby on all Tax Returns,
including, but not limited to Form 8594, in a manner
consistent with such allocation. If, contrary to
the intent of the parties hereto as expressed in this
Section 2.5 , any taxing authority makes or
proposes an allocation different from the allocation
determined under this Section 2.5 , Buyer and
Seller shall cooperate with each other in good faith to
contest such taxing authority's allocation (or proposed
allocation), provided, however, that, after consultation with
the party adversely affected by such allocation (or proposed
allocation), the other party hereto may file such protective
claims or Tax Returns as may be reasonably required to protect
its interests.
ARTICLE III
The Closing
The
closing of the transactions contemplated hereby (the "
Closing ") shall take place (i) at the
offices of Thompson & Knight LLP, Houston, Texas, at 10:00
a.m. (local Houston, Texas time) on October 11, 2007, or
(ii) at such other time or place or on such other date as
the parties hereto shall agree. The date on which
the Closing is required to take place is herein referred to as
the " Closing Date ". All Closing
transactions shall be deemed to have occurred
simultaneously.
Representations and Warranties of
Seller
Except
as provided in Seller's Disclosure Schedule, Seller hereby
represents and warrants to Buyer as follows:
Section
4.1.
Organization and Existence.
Seller is a limited partnership duly formed and validly
existing under the laws of the State of Texas.
Section
4.2.
Power and Authority.
Seller has all requisite limited partnership power and
authority to execute, deliver, and perform this Agreement and each
other agreement, instrument, or document executed or to be executed
by Seller in connection with the transactions contemplated hereby
to which it is a party and to consummate the transactions
contemplated hereby and thereby. The execution,
delivery, and performance by Seller of this Agreement and each
other agreement, instrument, or document executed or to be executed
by Seller in connection with the transactions contemplated hereby
to which it is a party, and the consummation by it of the
transactions contemplated hereby and thereby, have been duly
authorized by all necessary action of Seller.
Section
4.3.
Valid and Binding Agreement.
This
Agreement has been duly executed and delivered by Seller and
constitutes, and each other agreement, instrument, or document
executed or to be executed by Seller in connection with the
transactions contemplated hereby to which it is a party has been,
or when executed will be, duly executed and delivered by Seller and
constitutes, or when executed and delivered will constitute, a
valid and legally binding obligation of Seller, enforceable against
it in accordance with their respective terms, except that such
enforceability may be limited by (a) applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws affecting
creditors' rights generally and (b) equitable principles which
may limit the availability of certain equitable remedies (such as
specific performance) in certain instances.
Section
4.4.
Non-Contravention. Other
than requirements (if any) that there be obtained consents to
assignment (or waivers of preferential rights to purchase) from
third parties, neither the execution, delivery, and performance by
Seller of this Agreement and each other agreement, instrument, or
document executed or to be executed by Seller in connection with
the transactions contemplated hereby to which it is a party nor the
consummation by it of the transactions contemplated hereby and
thereby do and will (a) conflict with or result in a violation
of Seller's Governing Documents, (b) conflict with or result
in a violation of any provision of, or constitute (with or without
the giving of notice or the passage of time or both) a default
under, or give rise (with or without the giving of notice or the
passage of time or both) to any right of termination, cancellation,
or acceleration under, any bond, debenture, note, mortgage or
indenture, or any material lease, contract, agreement, or other
instrument or obligation to which Seller is a party or by which
Seller or any of its properties may be bound, (c) result in
the creation or imposition of any Lien upon the properties of
Seller, or (d) violate any Applicable Law binding upon Seller,
except, in the instance of clause (b) or
clause (c) above, for any such conflicts, violations,
defaults, terminations, cancellations or accelerations which would
not, individually or in the aggregate, have a Material Adverse
Effect.
Section
4.5.
Approvals. Other
than requirements (if any) that there be obtained consents to
assignment (or waivers of preferential rights to purchase) from
third parties, no
consent,
approval, order, or authorization of, or declaration, filing,
or registration with, any court or governmental agency or of
any third party is required to be obtained or made by Seller
in connection with the execution, delivery, or performance by
Seller of this Agreement, each other agreement, instrument, or
document executed or to be executed by Seller in connection
with the transactions contemplated hereby to which it is a
party or the consummation by it of the transactions
contemplated hereby and thereby, except for such consents,
approvals, orders, authorizations, declarations, filings or
registrations which, if not obtained or made (as applicable),
would not, individually or in the aggregate, have a Material
Adverse Effect.
Section
4.6.
Pending Litigation.
Except
as listed on Section 4.6
of
the Seller's
Disclosure Schedule ,
t here are no Proceedings pending or, to Seller's Knowledge,
threatened, against or affecting Seller or the Properties
(including any actions challenging or pertaining to Seller's title
to any of the Properties), or affecting the execution and delivery
of this Agreement by Seller or the consummation of the transactions
contemplated hereby by Seller. There are no outstanding
judgments requiring Seller to take any action of any kind with
respect to the Properties, or to which Seller or any of the
Properties are subject, or by which they are bound or
affected.
Section
4.7.
Contracts.
(a) The
Leases, Seller's interests in which comprise parts of the Oil
and Gas Properties, and all other material contracts and
agreements, licenses, Permits and easements, rights-of-way and
other rights-of-surface use comprising any part of or
otherwise relating to the Properties (such Leases and such
material contracts, agreements, licenses, Permits, easements,
rights-of-way and other rights-of-surface use being herein
called the " Basic Documents "), are, in all
material respects, in full force and effect and constitute
valid and binding obligations of the parties
thereto. Seller is not in breach or default (and no
situation exists which with the passing of time or giving of
notice would create a breach or default) of its obligations
under the Basic Documents, and (to Seller's Knowledge) no
breach or default by any third party (or situation which with
the passage of time or giving of notice would create a breach
or default) exists, to the extent such breach or default
(whether by Seller or such a third party) could reasonably be
expected to result in a Material Adverse Effect after the
Effective Date. All payments (including all delay
rentals, royalties, shut-in royalties and valid calls for
payment or prepayment under operating agreements) owing under
Basic Documents have been and are being made (timely, and
before the same became delinquent) by Seller (and, where the
non-payment of same by a third party could have a Material
Adverse Effect after the Effective Date, have been and are
being made, to Seller's Knowledge, by such third
parties).
(b) Section 4.7
of the Seller's Disclosure Schedule is a list of all material
contracts and agreements to which any of the Oil and Gas
Properties are bound (other than the Existing Hedges),
including (i) joint operating agreements,
(ii) agreements with any Affiliate of Seller,
(iii) any Production Sales Contracts, (iv) any
agreement of Seller to sell, lease, farmout or otherwise
dispose of any of its interests in the Oil and Gas Properties
other than conventional rights of reassignment, (v) gas
balancing agreements, (vi) exploration agreements,
(vii) pooling, unitization or communitization agreement,
(viii) area of mutual interest agreements, and
(ix) agreements containing seismic licenses, Permits and
other rights to geological or geophysical data and information
directly or indirectly relating to the Oil and Gas
Properties.
Section 4.8
Commitments, Abandonments or Proposals
. Except
as set forth in Section 6.3 of the Seller's Disclosure
Schedule: (a) Seller has incurred no expenses,
and has made no commitments to make expenditures in connection
with the ownership or operation of the Properties after the
Effective Date, other than routine expenses incurred in the
normal operation of existing wells on the Oil and Gas
Properties in accordance with generally accepted practices in
the oil and gas industry; (b) Seller has not abandoned
any wells (or removed any material items of equipment, except
those replaced by items of materially equal suitability and
value) on the Oil and Gas Properties since the Effective Date;
and (c) no proposals are currently outstanding by Seller
or other working interest owners to drill additional wells, or
to deepen, plug back, or rework existing wells, or to conduct
other operations for which consent is required under the
applicable operating agreement, or to conduct any other
operations other than normal operation of existing wells on
the Oil and Gas Properties, or to abandon any wells, on the
Oil and Gas Properties.
Section
4.9.
Production Sales Contracts.
There exist no agreements or arrangements for the sale of
Hydrocarbons from the Oil and Gas Properties (including calls on,
or other rights to purchase, production, whether or not the same
are currently being exercised) other than (a) production sales
contracts (in this Section, the "
Scheduled Production Sales Contracts ") disclosed
in Section 4.9 of the Seller's Disclosure Schedule or
(b) agreements or arrangements which are cancelable on 90 days
notice or less without penalty or detriment. Seller is
presently receiving a price for all production from (or
attributable to) each Oil and Gas Property covered by a Scheduled
Production Sales Contract as computed in accordance with the terms
of such contract, and is not having deliveries of gas from any Oil
and Gas Property subject to a Scheduled Production Sale Contract
curtailed substantially below such property's delivery
capacity. Seller has not received nor is Seller
obligated to receive any advance, take-or-pay or other similar
payments under production sales contracts that entitle the
purchasers thereunder to recoup or otherwise receive deliveries of
Hydrocarbons produced from or attributable to the Properties at any
time at or after the Effective Date without payment
therefor.
Section
4.10.
Plugging and Abandonment.
Except
for wells listed in Section 4.10 of the Seller's Disclosure
Schedule, there are no dry holes, or shut in or otherwise inactive
wells, located on the Oil and Gas Properties or on lands pooled or
unitized therewith, except for wells that have been plugged and
abandoned, and except for wells drilled to depths not included
within the Oil and Gas Properties or within units in which the Oil
and Gas Properties participate which have never been completed in
such depths.
Section
4.11.
Permits.
Seller has all Permits necessary or appropriate to own and operate
the Properties as presently being owned and operated, except for
such Permits the absence of which would not be reasonably expected
to have a Material Adverse Effect, and such Permits are in full
force and effect (and are freely transferable to Buyer or are
subject to being routinely replaced by a license or Permit issued
to Buyer as a successor owner of the Properties). Except
as set forth in Section 4.11 of the Seller's Disclosure
Schedule, Seller has not received written notice of any violations
in respect of any Permits and, to Seller's Knowledge, there are no
violations in respect of any Permit and no one has communicated to
Seller that there are any violations in respect of any Permit,
except for such violations which would not reasonably be expected
to have a Material Adverse Effect.
Section
4.12.
Payment of Expenses.
All expenses (including all bills
for labor, materials and supplies used or furnished for use in
connection with the Properties, and all
severance,
production, ad valorem and other similar Taxes) relating to
the ownership or operation by Seller of the Properties, have
been, and are being, paid (timely, and before the same become
delinquent) by Seller, except such expenses and Taxes as are
disputed in good faith by Seller and for which an adequate
accounting reserve has been established by
Seller. Seller is not delinquent with respect to
its obligations to bear costs and expenses relating to the
development and operation of the Oil and Gas
Properties.
Section
4.13.
Compliance with Laws.
The ownership and operation of
the Properties by Seller have been in compliance with all
Applicable Laws, except for such non-compliance which, individually
or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect. Notwithstanding the foregoing,
this Section 4.13 does not relate to environmental matters
(including compliance with Environmental Laws or matters that would
constitute Environmental Defects), it being agreed that such
matters are covered by and dealt with in Section 4.19 and
Article VIII exclusively.
Section
4.14.
Imbalances; Prepayments.
Section 4.14 of the Seller's Disclosure Schedule sets forth
all Imbalances as of the date set forth in such Section with
respect to the Oil and Gas Properties. Seller is not
obligated by virtue of a take or pay payment, advance payment or
other similar payment (other than royalties, overriding royalties
and similar arrangements reflected in Exhibit 8.1(c) ), to
deliver Hydrocarbons, or proceeds from the sale thereof,
attributable to the Oil and Gas Properties at some future time
without receiving payment therefor at or after the time of
delivery.
Section
4.15.
Intellectual Property.
Seller owns or has valid licenses
or other rights to use all patents, copyrights, trademarks,
software, databases, geological data, geophysical data, engineering
data, maps, interpretations and other technical information used by
Seller in connection with its ownership and operation of the
Properties as presently conducted, subject to the limitations
contained in the agreements governing the use of the same, which
limitations are customary for companies engaged in the business of
the exploration and production of Hydrocarbons.
Section
4.16.
Taxes.
(a) Except
as set forth in Section 4.16 of the Seller's Disclosure
Schedule, all ad valorem and severance Taxes due and payable
for the Properties through the year 2006 have been
paid.
(b) With
respect to all Taxes related to the Properties, (i) all
material Tax Returns relating to the Properties required to be
filed on or before the date hereof by Seller with respect to
any Taxes for any period ending on or before the date hereof
have been timely filed with the appropriate Governmental
Entity, (ii) such Tax Returns are true and correct in all
material respects, and (iii) all Taxes reported on such
Tax Returns have been paid, except those being contested in
good faith.
(c) With
respect to all Taxes related to the Properties (i) there
are not currently in effect any extension or waiver by Seller
of any statute of limitations of any jurisdiction regarding
the assessment or collection of any Tax related to the
Properties and (ii) there are no administrative
Proceedings or lawsuits pending against the Properties or
Seller with respect to the Properties by any taxing
authority.
(d) None
of the Properties were bound as of the Effective Date or will
be bound at Closing by any tax partnership agreement binding
upon Seller.
Section
4.17.
Fees and Commissions.
Except for the amounts due Simmons & Company and Griffis
and Associates by Seller in respect of the transactions
contemplated hereby, no broker, investment banker, financial
advisor or other Person is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of
Seller.
Section
4.18.
Operations.
All buildings, fixtures, machinery and equipment currently
used in the operations related to the Properties are adequate for
their normal operations consistent with commonly-accepted industry
practice, and conform with all Applicable Laws.
Section
4.19.
Environmental Laws.
With respect to environmental matters arising from, relating to or
affecting the Properties during Seller's ownership, Seller hereby
represents and warrants to Buyer that:
(a) the
Properties have been operated in material compliance with all
applicable Environmental Laws, rules and
regulations;
(b) Seller
has not entered into any agreement with a governmental
authority or private party with respect to any environmental
matters; and
(c) no
governmental authority investigation under any Environmental
Laws is pending or, to Seller's Knowledge, threatened with
respect to the Properties which would reasonable be expected
to have a Material Adverse Effect.
Section
4.20.
Wells.
To Seller's Knowledge, all of the wells included in the
Properties have been drilled and completed within the boundaries of
the Leases included in the Properties or within the limits
otherwise permitted by contract, pooling or unit agreement, and by
Applicable Law, and no well included in the Properties is subject
to penalties after the date of this Agreement because of any
violations of Applicable Law or Permits or judgments, orders or
decrees of any court or Governmental Entity.
Section
4.21.
Disclaimer of Warranties.
Other than those expressly set out in this
Article IV or elsewhere in this Agreement, Seller
hereby expressly disclaims any and all representations or
warranties with respect to the Properties, and Buyer agrees that
the Properties are being sold by Seller "where is" and "as is",
with all faults. Specifically as a part of (but not in
limitation of) the foregoing, Buyer acknowledges that Seller has
not made, and Seller hereby expressly disclaims, any representation
or warranty (express, implied, under common law, by statute or
otherwise) as to the title or condition of the Properties
(INCLUDING ANY IMPLIED OR EXPRESS WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR CONFORMITY TO
MODELS OR SAMPLES OF MATERIALS) .
OTHER THAN THOSE EXPRESSLY SET OUT IN THIS
ARTICLE IV OR ELSEWHERE IN
THIS AGREEMENT, SELLER MAKES NO REPRESENTATION OR WARRANTY AS TO
(I) THE AMOUNT, VALUE, QUALITY, QUANTITY, VOLUME, OR
DELIVERABILITY OF ANY OIL, GAS, OR OTHER MINERALS OR RESERVES (IF
ANY) IN, UNDER, OR ATTRIBUTABLE TO THE
PROPERTIES,
(II) THE PHYSICAL, OPERATING, REGULATORY COMPLIANCE, SAFETY,
OR ENVIRONMENTAL CONDITION OF THE PROPERTIES, BOTH SURFACE AND
SUBSURFACE, INCLUDING MATTERS RELATED TO THE PRESENCE, RELEASE OR
DISPOSAL OF HAZARDOUS MATERIALS, SOLID WASTES, ASBESTOS OR
NATURALLY OCCURRING RADIOACTIVE MATERIALS ( "
NORM " ), OR (III) THE GEOLOGICAL OR
ENGINEERING CONDITION OF THE PROPERTIES OR ANY VALUE
THEREOF. SELLER MAKES NO WARRANTY OR REPRESENTATION,
EXPRESS, STATUTORY, OR IMPLIED, AS TO (A) THE ACCURACY,
COMPLETENESS, OR MATERIALITY OF ANY DATA, INFORMATION, OR RECORDS
FURNISHED TO BUYER IN CONNECTION WITH THE PROPERTIES OR OTHERWISE
CONSTITUTING A PORTION OF THE PROPERTIES; (B) THE PRESENCE,
QUALITY, AND QUANTITY OF HYDROCARBON RESERVES (IF ANY) ATTRIBUTABLE
TO THE PROPERTIES; (C) THE ABILITY OF THE PROPERTIES TO
PRODUCE HYDROCARBONS, INCLUDING PRODUCTION RATES, DECLINE RATES,
AND RECOMPLETION OPPORTUNITIES; (D) IMBALANCE OR PAYOUT
ACCOUNT INFORMATION, ALLOWABLES, OR OTHER REGULATORY MATTERS,
(E) THE PRESENT OR FUTURE VALUE OF THE ANTICIPATED INCOME,
COSTS, OR PROFITS, IF ANY, TO BE DERIVED FROM THE PROPERTIES,
(F) THE ENVIRONMENTAL CONDITION OF THE PROPERTIES,
(G) ANY PROJECTIONS AS TO EVENTS THAT COULD OR COULD NOT
OCCUR, AND (H) ANY OTHER MATTERS CONTAINED IN OR OMITTED FROM
ANY INFORMATION OR MATERIAL FURNISHED TO BUYER BY SELLER OR
OTHERWISE CONSTITUTING A PORTION OF THE PROPERTIES. ANY
DATA, INFORMATION, OR OTHER RECORDS FURNISHED BY SELLER ARE
PROVIDED TO BUYER AS A CONVENIENCE AND BUYER'S RELIANCE ON OR USE
OF THE SAME IS AT BUYER'S SOLE RISK.
ARTICLE V
Representations and Warranties of
Buyer
Section
5.1.
Organization and Existence.
Buyer is a limited liability company duly organized, legally
existing and in good standing under the laws of the State of Texas,
and is qualified to do business and in good standing in the State
of Texas.
Section
5.2.
Power and Authority.
Buyer has full limited liability company power and authority
to execute, deliver, and perform this Agreement and each other
agreement, instrument, or document executed or to be executed by
Buyer in connection with the transactions contemplated hereby to
which it is a party and to consummate the transactions contemplated
hereby and thereby. The execution, delivery, and
performance by Buyer of this Agreement and each other agreement,
instrument, or document executed or to be executed by Buyer in
connection with the transactions contemplated hereby to which it is
a party, and the consummation by it of the transactions
contemplated hereby and thereby, have been duly authorized by all
necessary limited liability company power action of
Buyer.
Section
5.3.
Valid and Binding Agreement.
This Agreement has been duly executed and delivered by Buyer
and constitutes, and each other agreement, instrument, or document
executed or to be executed by Buyer in connection with the
transactions contemplated hereby to which it is a party has been,
or when executed will be, duly executed and delivered by Buyer and
constitutes, or when executed and delivered will constitute, a
valid and legally binding obligation
of
Buyer, enforceable against it in accordance with their
respective terms, except that such enforceability may be
limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium, and similar laws affecting
creditors' rights generally, and (b) equitable principles
which may limit the availability of certain equitable remedies
(such as specific performance) in certain
instances.
Section
5.4.
Non-Contravention.
The execution, delivery, and performance by Buyer of this
Agreement and each other agreement, instrument, or document
executed or to be executed by Buyer in connection with the
transactions contemplated hereby to which it is a party and the
consummation by it of the transactions contemplated hereby and
thereby do not and will not (i) conflict with or result in a
violation of any provision of Buyer's Governing Documents,
(ii) conflict with or result in a violation of any provision
of, or constitute (with or without the giving of notice or the
passage of time or both) a default under, or give rise (with or
without the giving of notice or the passage of time or both) to any
right of termination, cancellation, or acceleration under, any
bond, debenture, note, mortgage, indenture, lease, contract,
agreement, or other instrument or obligation to which Buyer is a
party or by which Buyer or any of its properties may be bound,
(iii) result in the creation or imposition of any Lien upon
the properties of Buyer, or (iv) violate any Applicable Law
binding upon Buyer.
Section
5.5.
Approvals.
No consent, approval, order, or authorization of, or
declaration, filing, or registration with, any court or
governmental agency or of any third party is required to be
obtained or made by Buyer in connection with the execution,
delivery, or performance by Buyer of this Agreement and each other
agreement, instrument, or document executed or to be executed by
Buyer in connection with the transactions contemplated hereby to
which it is a party or the consummation by it of the transactions
contemplated hereby and thereby, except for such consents,
approvals, orders, authorizations, declarations, filings or
registrations which, if not obtained or made (as applicable), would
not, individually or in the aggregate, affect the ability of the
Buyer to consummate the transactions contemplated
hereby.
Section
5.6.
Pending Litigation.
There are no Proceedings pending or, to Buyer's Knowledge,
threatened against or affecting the execution and delivery of this
Agreement by Buyer or the consummation of the transactions
contemplated hereby by Buyer.
Section
5.7.
Knowledgeable Purchaser.
Buyer is a knowledgeable purchaser, owner and operator of oil
and gas properties, has the ability to evaluate (and in fact has
evaluated) the Properties for purchase. Buyer is an
"accredited investor," as defined in Regulation D promulgated
pursuant to the Securities Act, and is acquiring the Properties for
its own account and not with the intent to make a distribution
within the meaning of the Securities Act (and the rules
and regulations pertaining thereto) or a distribution thereof in
violation of any other applicable securities laws. Buyer
has had access to the Properties, the officers and consultants of
Seller, and the books, Records, and files of Seller relating to the
Properties. In making the decision to enter into this
Agreement and to consummate the transactions contemplated hereby,
Buyer has relied on its own independent due diligence investigation
of the Properties and has been advised by and has relied solely on
its own expertise and legal, land, tax, reservoir engineering, and
other professional counsel concerning this transaction, the
Properties and the value thereof.
Section 5.8.
Funds .
Buyer has, and at the Closing
will have, sufficient cash and other sources of immediately
available funds, as are necessary in order to pay the Adjusted
Purchase Price to Seller at the Closing and otherwise consummate
the transactions contemplated hereby.
Section
5.9.
Qualified Leaseholder.
At Closing, Buyer will be in compliance with the bonding
requirements of the State of Texas and other Governmental Entities,
and after Closing, Buyer reasonably anticipates that it will
continue to be able to meet such bonding requirements.
Section
5.10.
Fees and Commissions.
No broker, investment banker, financial advisor or other
Person is entitled to any broker's, finder's, financial advisor's
or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Buyer.
ARTICLE VI
Certain Covenants of Seller Pending
Closing
Section
6.1.
Access to Files.
Subject to the terms of the Confidentiality Agreement and
Article IX , from the date hereof until Closing, Seller will
give Buyer, and its attorneys and other authorized representatives,
access at all reasonable times to the Properties and to any
contract files, lease or other title files, production files, well
files and other files of Seller pertaining to the ownership or
operation of the Properties, and Seller will use its Reasonable
Best Efforts to arrange for Buyer, and its attorneys and other
representatives, to have access to any such files in the office of
Seller. Subject to the terms of the Confidentiality
Agreement and Article IX , upon such request for any Records
of Seller, Seller shall provide to Buyer, at Buyer's expense,
requested copies made by Seller or, at either party's option, by a
third party approved by Buyer and Seller.
Section
6.2.
Conduct of Operations.
From the date hereof until
Closing, Seller will (i) continue the routine operation of the
Properties in the ordinary course of business and as would a
reasonable and prudent operator and maintain the Properties in a
condition consistent with customarily accepted oilfield industry
practices; (ii) operate the Properties in material compliance
with all Applicable Laws and Environmental Laws and in material
compliance with all Basic Documents; and (iii) fulfill all
material obligations under the Basic Documents and, in all material
respects, under such Applicable Laws and Environmental Laws and
shall carry on its business with respect to the Properties in
substantially the same manner as before execution of this
Agreement.
Section
6.3.
Restrictions on Certain Actions.
From the date hereof
until Closing, except as set forth in Seller's development plan
attached as Section 6.3 of the Seller's Disclosure Schedule, Seller
will not, without Buyer's prior consent in connection with the
Properties:
(a) expend
any funds, or make any commitments to expend funds (including
entering into new agreements which would obligate Seller to
expend funds), or otherwise incur any other obligations or
liabilities, other than to pay expenses or to incur
liabilities in connection with routine operation of the
Properties after the Effective Date and except in the event of
an emergency requiring immediate action to protect life or
preserve the Properties;
(b) except
where necessary to prevent the termination of a Lease or other
material agreement governing Seller's interest in the
Properties, propose the drilling of any
additional
(c) wells,
or propose the deepening, plugging back or reworking of any
existing wells, or propose the conducting of any other
operations which require consent under the applicable
operating agreement, or propose the conducting of any other
operations other than the normal operation of the existing
wells on the Oil and Gas Properties, or propose the
abandonment of any wells on the Oil and Gas Properties (and
Seller agrees that it will advise Buyer of any such proposals
made by third parties and will respond to each such proposal
made by a third party in the manner requested by Buyer) or
except in the ordinary course of business and consistent with
past practices, voluntarily waive or release any material
rights with respect to any Property or voluntarily relinquish
Seller's position as operator with respect to any
Property;
(d) sell,
transfer or abandon any portion of the Properties other than
items of materials, supplies, machinery, equipment,
improvements or other personal property or fixtures forming a
part of the Properties (and then only if the same is replaced
with an item of substantially equal suitability, free of
Liens, which replacement item will then, for the purposes of
this Agreement, become part of the Properties);
(e) release
(or permit to terminate), or modify or reduce its rights
under, any Lease forming a part of the Oil and Gas Properties,
or any other Basic Document, or enter into any new agreements
which would be Basic Documents, or modify any existing
production sales contracts or enter into any new production
sales contracts, except contracts terminable by Seller with
notice of 60 days or less;
(f) to
the extent that Seller is not operator of any of the
Properties, the obligations of Seller in this Section
6.3 shall be construed to require that Seller use
Reasonable Best Efforts (without being obligated to incur any
expense or institute any cause of action) to cause the
operator of such Properties to take such action or render such
performance within the constraints of the applicable operating
agreements and other applicable agreements;
(g) &
