PURCHASE AGREEMENT

Exhibit 10.1

 

PURCHASE AGREEMENT

between

GMX RESOURCES INC.,

an Oklahoma corporation,

and

KINDER MORGAN ENDEAVOR LLC,

a Delaware limited liability company

Dated October 16, 2009

 

TABLE OF CONTENTS

 

 

-i-

TABLE OF CONTENTS

(continued)

 

 

-ii-

TABLE OF CONTENTS

(continued)

 

 

-iii-

EXHIBITS

 

SCHEDULES

 

 

-iv-

PURCHASE AGREEMENT

THIS PURCHASE AGREEMENT is entered into on the 16 ^th day of October, 2009, between GMX Resources Inc., an Oklahoma corporation (“Seller”), and Kinder Morgan Endeavor LLC, a Delaware limited liability company (“Buyer”).

Recitals:

WHEREAS, subject to the terms and conditions set forth herein, Seller desires to sell, assign and transfer to Buyer and Buyer desires to purchase and take assignment from Seller of, 40% of the issued and outstanding limited liability company membership interests as more particularly described in the LLC Agreement (the “Purchased Interests”) in Endeavor Gathering LLC, a Delaware limited liability company (the “Company”); and

WHEREAS, Seller will use the proceeds from the Purchase Price to pay down debt under the GMX Credit Facilities and to fund the contracting and operation of a second drilling rig for the production of natural gas from the Dedicated Acreage, as more fully described herein.

NOW, THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements contained herein, the Parties hereto agree as follows:

ARTICLE 1

DEFINITIONS

1.1 Defined Terms . As used in this Agreement, each of the following terms shall have the meaning given to it below:

“ Affiliate ” means, with respect to any Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. For the purposes of this definition, “control” means, when used with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract, or otherwise, and the terms “controlling” and “controlled” have correlative meanings.

“ Agreement ” means this Purchase Agreement, as the same may be amended from time to time.

“ Assignment, Bill of Sale and Conveyance ” means the Assignment, Bill of Sale and Conveyance in substantially the form attached hereto as Exhibit “A”, dated as of the date of the Contribution Agreement between Seller, as assignor, and the Company, as assignee, as amended, supplemented or restated from time to time.

“ Assignment of Contract Rights ” means the Assignment of Contract Rights in substantially the form attached hereto as Exhibit “B”, dated as of the Closing Date and entered into between Endeavor Pipeline Inc., as assignor, and the Company, as assignee, as amended, supplemented or restated from time to time.

“ Assumed Obligations ” has the meaning given such term in the Contribution Agreement.

“ Balance Sheet ” has the meaning assigned to such term in Section 4.8(a).

“ Balance Sheet Date ” means July 31, 2009.

“ Benefit Plan ” means any employee benefit plan or arrangement, including any stock purchase, stock option, stock bonus, stock ownership, phantom stock or other stock or equity plan, pension, profit sharing, bonus, deferred compensation, incentive compensation, severance or termination pay, hospitalization or other medical or dental, life or other insurance, supplemental unemployment benefits plan or agreement or policy or other arrangement providing employment-related compensation, fringe benefits or other benefits and including “employee benefit plans,” as defined in Section 3(3) of ERISA.

“ Business ” means the natural gas gathering business and related facilities located in Harrison County and Panola County, Texas, including all pipelines, real property rights, compression, related equipment, inventory, equipment, contracts, capital or operating leases, and all other assets, in each case as transferred to the Company pursuant to the Contribution Agreement.

“ Business Day ” means any day other than a Saturday, Sunday or other day on which commercial banks in Houston, Texas are required or authorized to be closed.

“ Buyer ” has the meaning assigned to such term in the Introductory Paragraph.

“ Buyer Indemnitees ” means, collectively, Buyer and its respective Affiliates, officers, directors, employees, agents, and representatives, but shall not include the Company.

“ Buyer Loss ” means (i) a Loss actually incurred by a Buyer Indemnitee (other than as described in clause (ii) of this definition) and (ii) Buyer’s 40% share of a Loss actually incurred by the Company.

“ Buyer Parent Guaranty ” means the Guaranty Agreement delivered by Kinder Morgan Energy Partners, L.P. in accordance with the LLC Agreement.

“ Cash Contribution ” means TWO HUNDRED THOUSAND DOLLARS ($200,000), such amount having been contributed to the Company by Seller in accordance with the Contribution Agreement.

“ Closing ” means the closing of the transactions contemplated by this Agreement.

“ Closing Date ” means the date on which the Closing occurs.

“ Code ” means the Internal Revenue Code of 1986, as amended.

“ Commencement of Rig Notice ” means, pursuant to the Drilling Contract, the letter from Seller to Helmerich & Payne International Drilling Co. dated September 22, 2009 instructing Helmerich & Payne to activate FlexRig #384 immediately and begin drilling operations within 30 days.

 

-2-

“ Company ” has the meaning assigned to such term in the Recitals.

“ Confidentiality Agreement ” means the Confidentiality Agreement dated June 16, 2009 between Seller and Kinder Morgan Tejas Pipeline LLC.

“ Contract ” means any agreement, Lease, Permit, evidence of indebtedness, mortgage, indenture, security agreement or other contract or agreement (whether written or oral).

“ Contribution ” has the meaning assigned to such term in Section 2.1.

“ Contribution Agreement ” has the meaning assigned to such term in Section 2.1.

“ Cox Act ” has the meaning assigned to such term in Section 4.26.

“ Dedicated Acreage ” has the meaning assigned to such term in the Gathering Agreement.

“ Dedicated Gas ” has the meaning assigned to such term in the Gathering Agreement.

“ Deductible Amount ” means an amount equal to 1% of the Purchase Price.

“ Direct Claim ” means any claim by an Indemnitee on account of a Loss which does not result from a Third Party Claim.

“ Disclosure Schedule ” means the disclosure schedules attached hereto of Seller or Buyer, as the case may be.

“ Drilling Contract ” means that certain Daywork Drilling Contract – U.S. dated June 23, 2008 related to H&P FlexRig #384 between Seller and Helmerich & Payne International Drilling Co, as amended by that certain May 7, 2009 letter from Helmerich & Payne International Drilling Co to Seller, and subsequently amended by that certain July 28, 2009 letter from Helmerich & Payne International Drilling Co to Seller, and subsequently amended by that certain September 15, 2009 letter from Helmerich & Payne International Drilling Co to Seller, and subsequently amended by that certain October 2, 2009 letter from Helmerich & Payne International Drilling Co to Seller, as may be supplemented or amended from time to time.

“ Encumbrances ” means liens, charges, pledges, options, mortgages, deeds of trust, security interests, claims, restrictions (whether on voting, sale, transfer, disposition, or otherwise), easements, and other encumbrances of every type and description, whether imposed by Law, agreement, understanding, or otherwise.

“ Environmental Laws ” means any and all applicable Laws in effect as of the date of this Agreement pertaining to protection of the environment in effect in any and all jurisdictions in which the Company has conducted operations, including, without limitation, the Clean Air Act, as amended, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Federal Water Pollution Control Act, as amended, the Resource Conservation and Recovery Act of 1976, as amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as amended, the Superfund Amendments and Reauthorization Act of 1986, as amended, and the Hazardous Materials Transportation Act, as amended.

 

-3-

“ Environmental Reports ” has the meaning assigned to such term in Section 4.17(f).

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

“ Excluded Liability ” shall mean any liability or obligation of the Company, the Gathering Assets or the Business that meets any of the following criteria: such liability or obligation (a) arises out of, results from or relates to events occurring or circumstances existing prior to the Closing, (b) results from the Company’s status as an Affiliate of Seller or any of Seller Affiliates other than the Company, (c) arises out of, results from or relates to the failure to obtain the consent of the applicable rail road to assign the Railroad Boring Permit(s) listed on Schedule 4.7 to the Company or (d) arises out of, results from or relates to the failure to obtain (i) the Harrison County Road Boring Permit described on Schedule 4.7 as “Under Blocker Road (CR-1319 & CR-1019)” related to the Brown unit or (ii) either of the Texas Department of Transportation Utility Permits described on Schedule 4.7 as “Under FM2625” related to the Pawnee Lateral (Jo Ann Scott) or the “Under FM31” related to the Sanders Moore 1 to 2.

“ FERC ” has the meaning assigned to such term in Section 4.26.

“ Financial Statements ” has the meaning assigned to such term in Section 4.8(a).

“ Force Majeure ” means acts of God, strikes, lockouts or other industrial disturbances of a general nature and not specific to the affected Party, acts of terror or the threat of acts of terror, acts of the public enemy, wars, blockades, insurrections, riots, epidemics, governmental actions or requirements, landslides, lightning, earthquakes, fires, storms, hurricanes, high sea states, floods, high water, washouts, civil disturbances, explosions, breakage or accident to machinery, equipment, or lines of pipe, freezing/hydrating of wells or lines of pipe, partial or entire failure of wells, the inability of either Party to acquire, or delays on the part of such Party in acquiring, at reasonable costs, easements, rights-of-way, other surface rights, Permits, materials, equipment, or supplies which are required to enable such Party to fulfill its obligations under Section 7.5, and other causes, whether of the kind enumerated herein or otherwise, but in the case of all of the foregoing, only to the extent such event or occurrence is beyond the reasonable control of the Party claiming Force Majeure and could not be avoided or overcome by such Party by the exercise of due diligence and the performance of such Party’s obligations under Section 7.5 of this Agreement.

“ GAAP ” means United States generally accepted accounting principles with such exceptions to such United States generally accepted accounting principles as may be expressly noted or otherwise expressly referred to on any individual financial statement or schedule.

“ Gathering Agreement ” means the Gas Gathering Agreement in substantially the form attached hereto as Exhibit “D”, to be dated as of the Closing Date and entered into among the Company, Seller and Endeavor Pipeline Inc., as amended, supplemented or restated from time to time.

“ Gathering Assets ” means all of the property and assets described on Exhibit A to the Contribution Agreement.

 

-4-

“ GMX Credit Facilities ” means both (1) that certain Third Amended and Restated Loan Agreement (as first lien holder) dated effective as of June 12, 2008, among Seller, as Borrower, Capital One, N.A., as Agent, and the Banks identified therein, as amended by that certain First Amendment dated as of October 29, 2008, that certain Second Amendment dated as of November 12, 2008, that certain Third Amendment dated as of February 26, 2009 (but effective as of December 31, 2008), and that certain Fourth Amendment dated as of June 3, 2009, and (2) that certain Note Purchase Agreement (as second lien holder) with The Prudential Insurance Company of America dated as of July 31, 2007, as amended by that certain Amendment No. 1 to Note Purchase Agreement and Limited Consent dated February 11, 2008, Amendment No. 2 to Note Purchase Agreement dated June 12, 2008, Amendment No. 3 to Note Purchase Agreement and Limited Waiver dated as of February 27, 2009, and Amendment No. 4 to Note Purchase Agreement and Limited Waiver dated as of May 6, 2009, in each case as in effect from time to time.

“ Governmental Entity ” means any legislature, court, tribunal, arbitrator, authority, agency, commission, division, board, bureau, branch, official or other instrumentality of the U.S., or any domestic state, county, city, tribal or other political subdivision, governmental department or similar governing entity, and including any governmental, quasi-governmental or non-governmental body exercising similar powers of authority.

“ Guaranty Agreement ” has the meaning assigned to such term in the LLC Agreement.

“ Hazardous Materials ” means, whether alone or in combination, whether solid, liquid or gaseous, (i) any pollutant, contaminant, substance, chemical or material that is listed, classified or regulated pursuant to any Environmental Law; (ii) any petroleum, petroleum product, waste oil, crude oil and its fractions, asbestos and asbestos-containing material, urea formaldehyde, nuclear materials, natural or synthetic gas, lead-based paint, pesticide or polychlorinated biphenyl; and (iii) any hazardous substance, hazardous waste or terms of similar import, as defined in any Environmental Law, to the extent any of the foregoing are present in a quantity or concentration regulated pursuant to an applicable Environmental Law.

“ Indemnifying Party ” means a Party required to provide indemnification under Section 9.1.

“ Indemnitee ” means a Party entitled to receive indemnification under Section 9.1.

“ Intellectual Property ” has the meaning assigned to such term in Section 4.22.

“ Joint Use Agreement ” means the Joint Use Agreement in substantially the form attached hereto as Exhibit “E”, to be dated as of the Closing Date and entered into between Seller and the Company, as amended, supplemented or restated from time to time.

“ Knowledge ” or “ knowledge ” means, with respect to Seller, the actual knowledge of the Persons listed on Schedule 1.1(a) , and with respect to Buyer, the actual knowledge of the Persons listed on Schedule 1.1(b) .

“ Laws ” means any applicable statute, law (including common law), rule, ordinance, regulation, ruling, requirement, writ, injunction, decree, order or other official act of or by any Governmental Entity or any arbitral tribunal, whether such Laws now exist or hereafter come into effect.

 

-5-

“ Leased Real Property ” means all leasehold or subleasehold estates which are used in the Business, excluding oil and gas leases.

“ Leases ” means all leases, subleases, licenses, concessions and other agreements (written or oral), including all amendments, extensions, renewals, guaranties and other agreements with respect thereto, pursuant to which the Company holds any Leased Real Property used in the Business.

“ LLC Agreement ” means the Amended and Restated Limited Liability Company Agreement of the Company (including any schedules, exhibits or attachments thereto agreed upon by the Parties) in substantially the form attached hereto as Exhibit “F”, to be dated as of the Closing Date, as amended, supplemented or restated from time to time.

“ Losses ” means any and all claims, damages, liabilities, losses, causes of action, fines, penalties, litigation, lawsuits, administrative proceedings, administrative investigations, costs, and expenses, including reasonable attorneys’ fees, court costs, and other costs of suit.

“ NGA ” has the meaning assigned to such term in Section 4.26.

“ NGPA ” has the meaning assigned to such term in Section 4.26.

“ Notice ” has the meaning assigned to such term in Section 10.1.

“ Owned Real Property ” means all fee interests in land (whether in whole or in undivided interests), together with all buildings, structures, improvements and fixtures located thereon, and Rights-of-Way owned by the Company and used in the Business.

“ Parties ” means Seller and Buyer, collectively.

“ Party ” means Seller or Buyer, individually, as the case may be.

“ Permits ” means all licenses, permits, certificates of authority, authorizations, approvals, registrations, franchises, and similar consents granted or issued by any Governmental Entities or other Person and that are associated with or necessary to operate the Gathering Assets or are used in connection with the Business.

“ Permitted Encumbrances ” means (a) real estate taxes, assessments and other governmental levies, fees or charges which are not due and payable as of the Closing Date or which are being contested by appropriate proceedings, (b) statutory liens, including mechanics liens and similar liens for labor, materials or supplies incurred in the ordinary course of business for amounts which are not yet delinquent or which are being contested by appropriate proceedings, (c) zoning, building codes and other land use laws regulating the use or occupancy of the Owned Real Property or the activities conducted thereon which are imposed by any Governmental Entity having jurisdiction over the Owned Real Property, and (d) easements, covenants, conditions, restrictions and other similar matters of public record affecting title to the Owned Real Property.

 

-6-

“ Person ” means any individual or entity, including any corporation, limited liability company, partnership (general or limited), joint venture, association, joint stock company, trust, unincorporated organization or Governmental Entity.

“ Pipeline Easement Agreement ” means the Pipeline Easement Agreement in substantially the form attached hereto as Exhibit “G” dated of the Closing Date between the Company and Seller, as amended, supplemented or restated from time to time.

“ Pipeline Operating Agreement ” means the Pipeline Operating Agreement in substantially the form attached hereto as Exhibit “H”, to be dated as of the Closing Date and entered into between the Company and Endeavor Pipeline Inc., as amended, supplemented or restated from time to time.

“ Proceedings ” means all proceedings, actions, claims, suits, investigations, and inquiries by or before any Governmental Entity.

“ Purchase Price ” means THIRTY SIX MILLION DOLLARS ($36,000,000).

“ Purchase Price Allocation Statement ” has the meaning assigned to such term in Section 2.4.

“ Purchased Interests ” has the meaning set forth in the Recitals.

“ Reasonable Efforts ” means efforts in accordance with reasonable commercial practice and without the incurrence of unreasonable expense.

“ Related Agreements ” means the Assignment of Contract Rights, the Commencement of Rig Notice, the Contribution Agreement, the Gathering Agreement, the LLC Agreement, the Services Agreement, the Pipeline Operating Agreement, the Pipeline Easement Agreement, the Assignment, Bill of Sale and Conveyance and the Joint Use Agreement, and any other document or instrument executed and delivered contemporaneously with, and as a part of the transactions consummated at, the Closing.

“ Reserves ” has the meaning assigned to such term in Section 4.29.

“ Rights-of-Way ” means any easement, license, land use permit, right-of-way, or similar real property interest used in the Business, including, without limitation, easements and rights-of-way granted under oil and gas leases and any parcel of land which is utilized in the Gathering Assets but not subject to an easement, license, land use permit or right-of-way in favor of the Company.

“ RRC ” has the meaning assigned to such term in Section 4.25.

“ Securities Act ” has the meaning set forth in Section 5.7.

 

-7-

“ Seller ” has the meaning assigned to such term in the Introductory Paragraph.

“ Seller Affiliate ” means any Affiliate of Seller.

“ Seller Indemnitees ” means, collectively, Seller, Seller Affiliates and their respective officers, directors, employees, agents, and representatives.

“ Seller Loss ” means (i) a Loss actually incurred by a Seller Indemnitee (other than as described in clause (ii) of this definition) and (ii) Seller’s 60% share of a Loss actually incurred by the Company.

“ Seller Parent Guaranty ” means the Guaranty Agreement delivered by Seller in accordance with the LLC Agreement.

“ Services Agreement ” means the Management Services Agreement in substantially the form attached hereto as Exhibit “I”, to be dated as of the Closing Date and entered into between the Company and Seller, as amended, supplemented or restated from time to time.

“ Shipper Parties ” has the meaning assigned to such term in Section 4.30.

“ Subordination Agreement ” means a Subordination, Non-Disturbance and Attornment Agreement in form satisfactory to Buyer and dated as of the Closing Date among the Company, the Seller and one or more lenders under the GMX Credit Facilities (or any agent thereof), as amended, supplemented or restated from time to time.

“ Taxes ” means any federal, state, local or foreign income, gross receipts, license, payroll, parking, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, margin, single business, withholding, social security, unemployment, disability, real property, personal property, possessory interest, sales, use, transfer, registration, capital gain, production, payroll, worker’s compensation, value added, alternative or add-on minimum, amounts paid under an agreement with a Taxing Authority, estimated tax or other tax of any kind whatsoever, including any interest, fines, penalty or other like assessment or addition thereto, whether disputed or not, including such item for which a liability arises pursuant to Treasury Regulation Section 1.1502-6 (or any similar provision of foreign, state or local law), as a transferee, successor-in-interest, by contract or otherwise.

“ Taxing Authority ” means, with respect to any Tax, the Governmental Entity or political subdivision thereof that imposes such Tax, and the agency (if any) charged with the collection of such Tax for such entity or subdivision, including any governmental or quasi-governmental entity or agency that imposes, or is charged with collecting, social security or similar charges or premiums.

“ Tax Return ” means any return, report or statement required to be maintained, retained or filed with respect to any Tax (including any elections, declarations, schedules or attachments thereto, any amendment thereof, any information return (which includes, but is not limited to, federal and state wage reporting, employment and unemployment reports ( e.g. , IRS Forms 940, 941, W-2, W-3 and their state and local equivalents) as well as reports of payments made ( e.g. ,

 

-8-

IRS Forms 1099 and 1042) that are required under Law to be maintained, retained or supplied to any Taxing Authority), claim for refund, amended return or declaration of estimated Tax, and including, where permitted or required, combined, consolidated or unitary returns for any group of entities that includes the Company.

“ Tax Sharing Agreement ” means any written agreement which provides for the sharing, indemnification or allocation of Taxes between parties filing a combined, consolidated, unitary or similar group Tax Return or unwritten past practice with respect to the sharing or allocation of Taxes between parties filing a combined, consolidated, unitary or similar group Tax Return.

“ Third Party ” means any Person other than (i) Seller or any Seller Affiliates (including the Company) or (ii) Buyer or any of its Affiliates.

“ Third Party Claim ” means any claim or the commencement of any claim, action or proceeding with respect to a Loss or potential Loss made or brought by a Third Party.

“ Threshold ” has the meaning set forth in Section 9.1(c).

“ Transfer Taxes ” means any real property transfer or excise, sales, use, value added, stamp, documentary, recording, registration, conveyance, stock transfer, intangible property transfer, personal property transfer, gross receipts, registration, duty, securities transactions or similar fees or Taxes or governmental charges (together with any interest or penalty, addition to Tax or additional amount imposed), including, without limitation, any payments made in lieu of any such Taxes or governmental charges. !

“ Treasury Regulations ” means one or more treasury regulations promulgated under the Code by the Treasury Department of the United States.

1.2 Interpretation and Construction . In interpreting and construing this Agreement, the following principles shall be followed:

(a) the terms “herein,” “hereof,” “hereby,” and “hereunder,” or other similar terms, refer to this Agreement as a whole and not only to the particular Article, Section or other subdivision in which any such terms may be employed;

(b) unless otherwise indicated herein, references to Articles, Sections, and other subdivisions refer to the Articles, Sections, and other subdivisions of this Agreement;

(c) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP;

(d) no consideration shall be given to the captions of the articles, sections, subsections, or clauses, which are inserted for convenience in locating the provisions of this Agreement and not as an aid in its construction;

(e) the word “includes” and its syntactical variants mean “includes, but is not limited to” and corresponding syntactical variant expressions;

 

-9-

(f) the plural shall be deemed to include the singular, and vice versa;

(g) each exhibit, attachment, and schedule to this Agreement is a part of this Agreement, but if there is any conflict or inconsistency between the main body of this Agreement and any exhibit, attachment, or schedule, the provisions of the main body of this Agreement shall prevail; and

(h) every covenant, term and provision of this Agreement shall be construed simply according to its fair meaning and not strictly for or against any party (notwithstanding any rule of law requiring an agreement to be strictly construed against the drafting party), it being understood that the parties to this Agreement are sophisticated and have had adequate opportunity and means to retain counsel to represent their interests and to otherwise negotiate the provisions of this Agreement.

ARTICLE 2

THE TRANSACTION; PURCHASE PRICE

2.1 Contribution to the Company . Prior to the Closing, Seller shall have assigned and transferred, and/or shall have caused the applicable Seller Affiliates to have assigned and transferred, to the Company the Gathering Assets (the “Contribution”), and the Company shall have assumed the Assumed Obligations, pursuant to a Contribution Agreement between Seller and the Company in substantially the form attached hereto as Exhibit “C”, to be dated as of the Closing Date (the “Contribution Agreement”), such that, at Closing, and after giving effect to the payment of the Purchase Price as described below in Section 2.3, the Company will own the Gathering Assets free and clear of all Encumbrances, other than Permitted Encumbrances, and the only liabilities of the Company will be the Assumed Obligations.

2.2 Sale and Purchase . At the Closing, and subject to the terms and conditions in this Agreement, Seller shall sell, assign, transfer, deliver, and convey to Buyer, and Buyer shall purchase and accept from Seller, the Purchased Interests, free and clear of any and all Encumbrances.

2.3 Purchase Price . In consideration of the sale of the Purchased Interests as described herein, Buyer shall pay the Purchase Price to Capital One, N.A. for credit to Seller’s account. Such payment shall be made by confirmed wire transfer of immediately available funds to a bank account or accounts to be designated in writing by Capital One, N.A. to Buyer prior to the Closing.

2.4 Purchase Price Allocation. As set forth in Schedule 2.4 , Buyer and Seller have agreed to allocate the Purchase Price among the Buyer’s share of the Gathering Assets under the methodology required pursuant to Section 1060 of the Code (the “Purchase Price Allocation Statement”). Seller and Buyer shall report the transactions contemplated hereby on all Tax Returns (including Form 8594 and all other information returns and supplements thereto required to be filed by the Parties under Section 1060 of the Code) in a manner consistent with such Purchase Price Allocation Statement.

 

-10-

ARTICLE 3

CLOSING

3.1 Closing . Subject to the terms and conditions of this Agreement, the Closing shall be held at the offices of Bracewell & Giuliani LLP at 711 Louisiana Street, Suite 2300, Houston, Texas 77002 on such date as the Parties shall mutually agree, but such date shall be not more than five business days following the satisfaction or waiver of the last to be satisfied or waived of the conditions set forth in Article 6 (other than conditions that by their nature can be satisfied only at the Closing, but subject to the satisfaction or waiver of those conditions).

3.2 Closing Deliveries by Seller . At the Closing, Seller will deliver or cause a Seller Affiliate, as applicable, to deliver the following documents, duly executed by Seller or, if applicable, a Seller Affiliate:

(a) an assignment of limited liability company membership interests transferring the Purchased Interests to Buyer, free and clear of any and all Encumbrances;

(b) a certificate to Buyer (i) stating that Seller is not a foreign corporation, foreign partnership, foreign trust or foreign estate, (ii) providing its U.S. Employer Identification Number and (iii) providing its address, all pursuant to Section 1445 of the Code;

(c) a copy of the LLC Agreement, duly executed by Seller;

(d) a copy of the Pipeline Operating Agreement, duly executed by each of the parties thereto;

(e) a copy of the Services Agreement, duly executed by the parties thereto;

(f) a copy of the Contribution Agreement, duly executed by the parties thereto;

(g) a copy of the Gathering Agreement, duly executed by the parties thereto;

(h) a copy of the Assignment of Contract Rights, duly executed by the parties thereto;

(i) a copy of the Commencement of Rig Notice, duly executed by the parties thereto;

(j) evidence reasonably satisfactory to Buyer that all Encumbrances relating to the Gathering Assets, other than Permitted Encumbrances, have been released, which evidence shall include instruments and documents necessary to release any and all Encumbrances, other than Permitted Encumbrances, relating to the Gathering Assets, including appropriate UCC financing statement amendments (termination statements);

(k) a copy of the Joint Use Agreement, duly executed by the parties thereto;

 

-11-

(l) a copy of a Subordination Agreement with or on behalf of each lender under the GMX Credit Facilities at Closing, duly executed by the parties thereto;

(m) a copy of the Assignment, Bill of Sale and Conveyance, duly executed by the parties thereto;

(n) a copy of the Memorandum of Gas Gathering Agreement, duly executed by the parties thereto;

(o) evidence of receipt by the Company of the Cash Contribution;

(p) a copy of the Approval of Agent and Banks as described on Schedule 4.6;

(q) a copy of the Approval of Prudential Insurance Company of America as described on Schedule 4.6;

(r) a copy of the Consent of Union Pacific as described on Schedule 4.6;

(s) a copy of the Pipeline Easement Agreement, duly executed by the parties thereto;

(t) a copy of the Seller Parent Guaranty, duly executed by the party thereto;

(u) a certificate executed on behalf of Seller by the president or any vice president of Seller, dated the Closing Date, representing and certifying that the conditions set forth in Sections 6.l(a) and 6.1(b) have been fulfilled; and

(v) such other certificates, instruments of conveyance, and documents required by this Agreement or as may be reasonably requested by Buyer and agreed to by Seller prior to the Closing Date to carry out the intention and purposes of this Agreement.

3.3 Closing Deliveries by Buyer . At the Closing, in addition to the payment of the Purchase Price pursuant to Section 2.3, Buyer will deliver or cause its Affiliates, as applicable, to deliver the following documents to Seller, duly executed by Buyer or, if applicable, its Affiliate:

(a) a copy of the LLC Agreement duly executed by Buyer;

(b) a copy of the Buyer Parent Guaranty, duly executed by the party thereto;

(c) a certificate executed by an authorized officer of Buyer, dated the Closing Date, representing and certifying that the conditions set forth in Sections 6.2(a) and 6.2(b) have been fulfilled; and

(d) such other certificates, instruments, and documents required by this Agreement or as may be reasonably requested by Seller and agreed to by Buyer prior to the Closing Date to carry out the intent and purposes of this Agreement.

 

-12-

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF SELLER

Subject to the disclosures made by Seller in Seller’s Disclosure Schedule and, with respect to the Company, assuming the completion of the Contribution, Seller represents and warrants to Buyer, as of the date hereof and the Closing Date, as follows:

4.1 Organization of Seller . Seller is a corporation duly organized, validly existing, and in good standing under the Laws of the State of Oklahoma.

4.2 Company .

(a) Organization of the Company . The Company is a limited liability company duly organized, validly existing, and in good standing under the Laws of the State of Delaware. The Company has all requisite limited liability company power and authority, as applicable, to own, lease, and operate its properties and to carry on its business as now being conducted. The Company does not own, directly or indirectly, any capital stock or other equity securities of, or interests in, any other Person.

(b) Qualification . The Company is duly qualified or licensed to do business as a limited liability company and is in good standing in the jurisdictions in Schedule 4.2(b) , which are the only jurisdictions in which the property owned, leased, or operated by it or the conduct of its business requires such qualification or licensing.

(c) Ownership of Membership Interests; Encumbrances . Except as otherwise indicated on Schedule 4.2(c) , all of the limited liability company membership interests of the Company are owned directly by Seller free and clear of all Encumbrances, other than (i) restrictions on transfer that may be imposed by federal or state securities Laws or (ii) encumbrances that arise out of any actions taken by or on behalf of Buyer or its Affiliates. All outstanding limited liability company membership interests of the Company have been validly issued.

(d) Options and Rights to Acquire Equity . Except as set forth on Schedule 4.2(d) , there are outstanding (i) no securities of any Seller, Seller Affiliate or the Company convertible into or exchangeable or exercisable for shares of capital stock or other equity interests of the Company, (ii) no options, warrants, preemptive or other rights to acquire from Seller, any Seller Affiliate or the Company, and no obligation of Seller, any Seller Affiliate or the Company to issue or sell, any shares of capital stock or other equity interests of the Company or any securities convertible into or exchangeable or exercisable for such capital stock or equity interests, other than the rights of Buyer to acquire the Purchased Interests pursuant to this Agreement, and (iii) no equity equivalents or other similar rights of or with respect to the Company. There are outstanding no obligations of Seller, Seller Affiliate or the Company to repurchase, redeem, or otherwise acquire any of the foregoing shares, securities, options, equity equivalents, interests or rights.

4.3 Organizational Documents . Seller has delivered to Buyer accurate and complete copies of the organizational documents of the Company as currently in effect.

 

-13-

4.4 Seller’s Authority . Seller and each Seller Affiliate which is entering into any Related Agreement has full corporate or limited liability company power and authority to execute, deliver, and perform this Agreement and the Related Agreements to which it is a party. The execution, delivery, and performance by Seller and each Seller Affiliate, as applicable, of this Agreement and the Related Agreements, and the consummation by it of the transactions contemplated hereby and thereby, have been, or prior to the Closing, will be duly authorized by all necessary corporate or limited liability company action of Seller and such Seller Affiliate. This Agreement has been duly executed and delivered by Seller and constitutes (and each Related Agreement to be executed by Seller, or any Seller Affiliate, when executed will be duly executed and delivered by Seller or such Seller Affiliate and will constitute), a valid and legally binding obligation of Seller or such Seller Affiliate as the case may be, enforceable against Seller or such Seller Affiliate in accordance with its terms, except that such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, and similar Laws affecting creditors’ rights generally and (ii) equitable principles which may limit the availability of certain equitable remedies (such as specific performance) in certain instances.

4.5 No Conflict . Except as described on Schedule 4.5 , and except as may result from any facts or circumstances relating solely to Buyer or its Affiliates and assuming all consents, approvals, authorizations, and other actions described in Section 4.6 have been obtained and all filings and notifications listed on Schedule 4.6 have been made, the execution, delivery, and performance of this Agreement and the Related Agreements by Seller and each Seller Affiliate party thereto, and the consummation by it of the transactions contemplated hereby and thereby do not and will not:

(a) violate or breach the certificate of incorporation or bylaws (or equivalent organizational documents) of Seller, the Company or any Seller Affiliate which is entering into any Related Agreements;

(b) violate, breach or contravene any Law binding upon Seller, any Seller Affiliate or the Company; or

(c) result in any breach of, or constitute a default under, or give to others any rights of termination, acceleration or cancellation of, or result in the creation of any Encumbrance (other than a Permitted Encumbrance) on, any of the Gathering Assets pursuant to, any Contract, lease, Permit or other instrument relating to the Gathering Assets to which the Company, Seller or any Seller Affiliate is a party or by which any of the Gathering Assets is bound or affected.

4.6 Consents and Approvals . No Permit of, or declaration, filing or registration with, or notification to, any Governmental Entity, or any other Person, is required to be made or obtained by Seller, any Seller Affiliate or the Company in connection with the execution, delivery and performance of this Agreement and Related Agreements or the consummation of the transactions contemplated hereby, except as set forth on Schedule 4.6 .

4.7 Permits . Schedule 4.7 contains a true and complete list of all Permits required or used in the operation of the Business or the Gathering Assets. Prior to the date hereof, Seller has made available to Buyer true and complete copies of all such Permits. Except as disclosed on

 

-14-

Schedule 4.7 , the Company holds, and prior to the Closing Seller or a Seller Affiliate held, all Permits required by Law or otherwise necessary for the conduct of the Business as presently conducted. Except as disclosed on Schedule 4.7 , the Company is, and prior to the Closing Seller or such Seller Affiliate was, in compliance with the terms of all such applicable Permits, and no Proceeding is pending or, to the Knowledge of Seller, threatened with respect to any alleged failure by the Company, and prior to the Closing Seller or such Seller Affiliate, to have any such Permit or not to be in compliance therewith.

4.8 Financial Statements .

(a) Schedule 4.8(a) contains the unaudited, beginning balance sheet of the Company (assuming the Contribution was made on January 1, 2009) as of the Balance Sheet Date (the “Balance Sheet”), and related unaudited, pro forma statement of income for the seven (7)&