This Assignment and Assumption Agreement involves
Title: ASSIGNMENT AND ASSUMPTION AGREEMENT
Governing Law: Texas Date: 10/5/2016
ASSIGNMENT AND ASSUMPTION AGREEMENT
This ASSIGNMENT AND ASSUMPTION AGREEMENT (this “ Agreement ”) is made as of the 30th day of September 2016 (the “ Effective Date ”), at 9:00 a.m. Houston, Texas time, by and among Halcón Energy Properties, Inc., a Delaware corporation (“ HEPI ”), and Halcón Gulf States, LLC, an Oklahoma limited liability company (collectively with HEPI, the “ Assignors ”) and Apollo HK TMS Investment Holdings, L.P., a Delaware limited partnership (the “ Assignee ”).
W I T N E S S E T H:
WHEREAS, Assignee owns 100% of the outstanding preferred shares of HK TMS, LLC, a Delaware limited liability company (the “ Company ”); and
WHEREAS, immediately prior to the Effective Date, Assignors collectively own 100% of the common shares of the Company (such common shares, the “ Membership Interests ”); and
WHEREAS, the Assignors desire to transfer to the Assignee, and the Assignee has agreed to accept from the Assignors, the Assignors’ right, title and interest to the Membership Interests; and
WHEREAS, Assignors and Assignee recognize and agree that (i) if the Company were liquidated as of the date hereof under Section 10.2 of the Company Agreement (as defined below), the Membership Interests would not be entitled to any liquidating distribution, and, therefore, the Membership Interests have no realizable net fair market value and (ii) the assignment that is the subject hereof is being made for the convenience, and at the request, of Assignors; and
WHEREAS, Assignee desires to be admitted to the Company as a common member, upon such admission Assignors desire to cease to be members of the Company and the parties hereto desire that the business of the Company continue without dissolution.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
1. Assignment .
(a) As of the Effective Date, each Assignor hereby assigns, grants, conveys, transfers and sets over unto Assignee, all right, title and interest of such Assignor in and to the Membership Interests. The foregoing assignment includes all rights in and claims to any Company profits, losses, distributions of any kind and all other economic and other rights of any nature allocable and accruing in respect of the Membership Interests arising from and after the Effective Date.
(b) In connection with the assignment of the Membership Interests in clause (a) above, each Assignor hereby transfers custody and possession of all of the original (or copies where originals do not exist) files, records, information and data, whether written or electronically stored, relating to (i) land and title records (including abstracts of title, title
opinions and title curative documents) of the Company, (ii) operations, environmental and production records of the Company, (iii) well records of the Company, (iv) geologic technical data including logs and maps of the Company and (v) financial information of the Company including budgets, and accounting, tax and cost records.
2. Acceptance and Assumption .
(a) As of the Effective Date, Assignee hereby (i) accepts the assignment of the Membership Interests and (ii) agrees with Assignors that Assignee will (x) assume and pay all liabilities and obligations arising from the ownership of the assigned Membership Interests from and after the Effective Date and (y) perform all of the terms, covenants and conditions on the part of Assignee to be performed under that certain Amended and Restated Limited Liability Company Agreement of HK TMS, LLC, dated as of June 16, 2014 and as subsequently amended (the “ Company Agreement ”).
(b) As of the Effective Date, Assignee shall be deemed a Common Member of the Company pursuant to the Company Agreement and agrees to be bound by all of the terms and conditions therein.
(c) As of the Effective Date and concurrently with the assignment of the Membership Interests, each Assignor does hereby withdraw as a member of the Company and ceases to hold any interest in the Company and thereupon ceases to have or exercise any right or power as a member of the Company. For purposes of clarity, as of the Effective Date, HEPI further hereby resigns as the Managing Member (as defined in the Company Agreement).
3. Consent of Assignor . For purposes of Article VI of the Company Agreement, and in their respective capacities as either Preferred Members or Common Members of the Company, the Assignors and Assignee hereby (a) consent to (i) the transactions described herein, including the assignment of the Membership Interests from the Assignors to the Assignee, (ii) the withdrawal of Assignors as a member of the Company, (iii) the resignation of HEPI as Managing Member of the Company and (iv) the admission of the Assignee as a Common Member of the Company, and (b) agrees to revise Exhibit A to the Company Agreement, in the manner set forth on Exhibit B hereto to reflect the transaction contemplated by this Agreement.
4. Tax Matters . Notwithstanding anything to the contrary in this Agreement,
(a) Assignors shall indemnify and hold harmless the Company from and against any liability (i) attributable to the inclusion of the Company in any consolidated, combined or unitary return that includes Assignors or any Affiliate for any taxable period or portion thereof ending on or prior to the Effective Date and (ii) under Treasury Regulation § 1.1502-6 and any similar provision of state or local law.
(b) Assignors shall prepare and timely file (i) all federal, state and local tax returns of the Company that have historically been filed on a consolidated or unitary basis with those of other Affiliates of Assignors attributable to each taxable period or portion thereof ending on or prior to the Effective Date or (ii) any other tax returns of the Company attributable to each taxable period or portion thereof ending on or prior to the Effective Date.
(c) Without the consent of Assignee, Assignors shall not knowingly take any action or make any tax election that would cause, and shall refrain from knowingly taking any action or making any tax election that would avoid, the net operating losses and other tax benefits available to be utilized by the Company in any taxable period or portion thereof beginning on the Effective Date being reduced or available to be utilized by any person other than the Company. The provisions of this Section 4(c) shall not apply to any actions or tax elections applicable solely to any taxable period or portion thereof ending on or prior to the Effective Date.
(d) Notwithstanding anything to the contrary in the Services Agreement (defined below) as it exists on the date hereof, the parties hereto agree that the Company shall engage a third party to prepare and file all tax returns for the Company for any taxable period beginning after the Effective Date and such third party shall bill the Company directly for such services. Except as otherwise specifically set forth in this Section 4, neither Assignors nor their Affiliates shall have any liability with respect to tax returns prepared and filed by such third party.
5. Release and Waiver . Subject to Section 4 and the terms and conditions set forth in that certain Management Services Agreement dated June 16, 2014 by and among HEPI and the Company (as the same has been amended or as the same may be amended, modified or replaced, the “ Services Agreement ”), each of the parties to this Agreement does hereby irrevocably waive and release all of such party’s rights under the Company Agreement and unconditionally and irrevocably waives any claims that it has or may have in the future against the Company, the other party hereto, or any of their respective Affiliates relating to any period on or prior to the Effective Date and such party releases, on its own behalf and on behalf of its successors and assigns, the Company, the other party hereto, or any of their respective Affiliates, from any and all claims and causes of action (whether at law or in equity) with respect thereto; provided that neither the Assignors nor their Affiliates are released from any claims arising as a result of fraud or any prior material misrepresentation made with respect to the allocation of funds or incurrence of costs of the Company. Each of the parties to this Agreement hereby waives, releases and agrees not to assert such claim or right regardless of the theory upon which any claim may be based, whether contract, equity, tort, warranty, strict liability or any other theory of liability, except to the extent such claim may be asserted in accordance with the Services Agreement. EACH OF THE ASSIGNORS AND ASSIGNEE HEREBY WAIVES ALL RIGHTS AFFORDED BY ANY STATUTE WHICH LIMITS THE EFFECT OF THE FOREGOING RELEASE WITH RESPECT TO UNKNOWN CLAIMS. ASSIGNORS UNDERSTAND THE SIGNIFICANCE OF THE FOREGOING RELEASE OF UNKNOWN CLAIMS AND WAIVER OF STATUTORY PROTECTION AGAINST A RELEASE OF UNKNOWN CLAIMS. EACH OF THE ASSIGNORS AND ASSIGNEE HEREBY ACKNOWLEDGES AND AGREES THAT THIS WAIVER IS AN ESSENTIAL AND MATERIAL TERM OF THIS ASSIGNMENT. For the purposes of this Agreement, an “Affiliate” of a person means any other person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such person. The term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
6. Further Assurances . The parties hereto covenant and agree that they will execute, deliver and acknowledge from time to time at the request of the other, and without further consideration, all such further instruments of assign