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ASSET PURCHASE AND SALE AGREEMENT

asset purchase agreement

ASSET PURCHASE AND SALE AGREEMENT | Document Parties: SAMSON OIL  GAS LTD | FORT PECK ENERGY COMPANY, LLC | Native American Resource Partners, LLC | SAMSON OIL AND GAS USA MONTANA, INC | SAMSON OIL AND GAS USA, INC | TAURUS ENERGY, LLC You are currently viewing:
This Asset Purchase Agreement involves

SAMSON OIL GAS LTD | FORT PECK ENERGY COMPANY, LLC | Native American Resource Partners, LLC | SAMSON OIL AND GAS USA MONTANA, INC | SAMSON OIL AND GAS USA, INC | TAURUS ENERGY, LLC

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Title: ASSET PURCHASE AND SALE AGREEMENT
Governing Law: Texas     Date: 6/27/2013
Industry: Oil and Gas Operations     Law Firm: Davis Graham;Vinson Elkins;Sutherland Asbill     Sector: Energy

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Execution Version

 

ASSET PURCHASE AND SALE AGREEMENT

 

BY AND BETWEEN

 

SAMSON OIL AND GAS USA MONTANA, INC.

 

AND FORT PECK ENERGY COMPANY, LLC

 

(Sellers)

 

AND

 

SAMSON OIL AND GAS USA, INC.

 

(Guarantor)

 

AND

 

TAURUS ENERGY, LLC

 

(Buyer)

 

 

 

 

 

DATED AS OF JUNE 21, 2013

 

 

 

 

TABLE OF CONTENTS

  

 

Page

article 1 AGREEMENT FOR PURCHASE AND SALE OF ASSETS

1

1.1

Agreement for Purchase and Sale of Assets

1

1.2

Effective Time

1

1.3

Joint Assets

2

1.4

Samson Assets

2

1.5

Excluded Assets

3

1.6

Purchase Price for Assets

4

article 2 TITLE MATTERS

6

2.1

Title Review

6

2.2

Defensible Title

6

2.3

Permitted Encumbrances

7

2.4

Title Defect

7

2.5

Defect Value

7

2.6

Notice of Title Defects

8

2.7

Seller’s Right to Cure

8

2.8

Title Defect Remedies

8

2.9

Title Dispute Resolution

9

2.10

Casualty Loss

9

article 3 REPRESENTATIONS AND WARRANTIES

9

3.1

Samson’s Representations and Warranties

9

3.2

FPEC’s Representations and Warranties

12

3.3

Buyer’s Representations and Warranties

14

article 4 PRE-CLOSING OBLIGATIONS

15

4.1

Encumbrances

15

4.2

Operation of Business

16

4.3

Consents and Filings

16

4.4

Compliance with Laws

16

4.5

Notification Requirements

16

article 5 CLOSING

16

5.1

Closing

16

5.2

Conditions Precedent to Closing

16

5.3

Closing Deliveries

18

5.4

Termination

19

5.5

Liabilities Upon Termination

19

5.6

Environmental Remediation

21

article 6 POST-CLOSING OBLIGATIONS

22

6.1

Post-Closing Obligations

22

article 7 TAX MATTERS

24

7.1

Definitions

24

7.2

Production Tax Liability

24

7.3

Tax Notices, Statements and Returns

24

 

i

 

 

 

TABLE OF CONTENTS

 

 

Page

 

 

 

7.4

Tax Allocation

24

article 8 DISCLAIMERS

24

8.1

Disclaimer; Title; Condition and Fitness of the Assets

24

8.2

Information About the Assets

25

article 9 MISCELLANEOUS

26

9.1

Exhibits and Schedules

26

9.2

Expenses

26

9.3

Notices

26

9.4

Amendments

27

9.5

Headings

27

9.6

Counterparts/Fax Signatures

28

9.7

References

28

9.8

Governing Law; Waiver of Jury Trial

28

9.9

Arbitration

28

9.10

Confidentiality

29

9.11

Entire Agreement

29

9.12

Indemnification

29

9.13

Binding Effect

31

9.14

No Third-Party Beneficiaries

31

9.15

Survival

32

9.16

Waiver

32

9.17

Limitation on Damages

32

9.18

Severability

32

9.19

Announcements

32

9.20

Transfer Taxes and Recording Fees

32

9.21

Relationship of the Parties

32

9.22

Further Assurances

32

9.23

Samson Parent Guaranty

33

9.24

Seller Liability

33

9.25

Environmental Review

33

 

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SCHEDULES :

 

Schedule 3.1(e)

Samson Lawsuits and Claims

 

Schedule 3.1(j)

Samson Contracts

 

Schedule 3.1(k)

Samson Consents

 

Schedule 3.1(l)

Samson Preferential Rights

 

Schedule 3.1(m)

Samson AMI; Farmout; JOA; Tax Partnership

 

Schedule 3.1(n)

Samson Non-Competition

 

Schedule 3.1(o)

Samson Lease Status

 

Schedule 3.2(e)

FPEC Lawsuits and Claims

 

Schedule 3.2(j)

FPEC Contracts

 

Schedule 3.2(k)

FPEC Consents

 

Schedule 3.2(l)

FPEC Preferential Rights

 

Schedule 3.2(m)

FPEC AMI; Farmout; JOA; Tax Partnership

 

Schedule 3.2(n)

FPEC Non-Competition

 

Schedule 3.2(o)

FPEC Lease Status

 

Schedule 3.2(p)

FPEC Advance Payments

 

EXHIBITS :

 

Exhibit A-1

Joint Leases

 

Exhibit A-2

Samson Leases

 

Exhibit A-3

Excluded Assets

 

Exhibit B

Wells

 

Exhibit C

Form of Assignment

 

Exhibit D-1

Joint Contracts

 

Exhibit D-2

Samson Contracts

 

Exhibit E

Well Equipment

 

iii

 

 

INDEX OF DEFINED TERMS  

 

accredited investor

15

 

Losses

30

Additional Remediation Amount

22

 

Marketable Title

6

Agreement

1

 

Material Adverse Effect

9

Allocated Value

4

 

Net Acre Prices

4

Asset

3

 

Net Acres

4

Assets

3

 

NRI

6

Assignment

18

 

Operating Expenses

1

Assumed Liabilities

23

 

Outstanding Title Defect

8

Buyer

1

 

Overrun Estimate

21

Buyer Basket

31

 

Parties

1

Buyer Indemnified Parties

29

 

Party

1

Casualty Defect

9

 

Permitted Encumbrances

7

Closing

16

 

person

27

Closing Date

16

 

Production Taxes

24

Code

24

 

Records

2

Cure Period

8

 

Remediation Date

22

Defect Notice Date

6

 

Remediation Holdback

21

Defect Value

7

 

Retained Liabilities

23

Due Diligence Materials

29

 

Rule

10

Effective Date

1

 

Samson

1

Environmental Conditions

21

 

Samson Assets

2

Environmental Estimate

21

 

Samson Closing Amount

5

Excluded Assets

3

 

Samson Contracts

11

Execution Date

1

 

Samson Default

20

Final Remediation Cost

22

 

Samson Deposit

5

FPEC

1

 

Samson Hydrocarbons

3

FPEC Closing Amount

6

 

Samson Lands

2

FPEC Contracts

13

 

Samson Leases

2

FPEC Deposit

5

 

Samson Parent

1

Governmental Authority

11

 

Samson Purchase Price

4

Hydrocarbons

3

 

Samson Records

3

Interim Period

15

 

Samson Surface Agreements

3

Joint Assets

2

 

Securities Laws

15

Joint Hydrocarbons

2

 

Seller Indemnified Parties

30

Joint Lands

2

 

Sellers

1

Joint Leases

2

 

Settlement Statement

5

Joint Purchase Price

4

 

Surface Agreements

2

Knowledge with respect to FPEC

12

 

Title Defect

7

Knowledge with respect to Samson

9

 

Title Defect Notice

8

Lands

3

 

Title Disputed Matters

9

Lease

3

 

Wells

3

Leases

3

 

 

 

 

iv

 

 

Execution Version

ASSET PURCHASE AND SALE AGREEMENT

 

This Asset Purchase and Sale Agreement (“ Agreement ”), dated this 21st day of June, 2013 (the “ Execution Date ”), is by and between SAMSON OIL AND GAS USA MONTANA, INC., a Colorado corporation (“ Samson ”), SAMSON OIL AND GAS USA, INC., a Colorado corporation (“ Samson Parent ”), FORT PECK ENERGY COMPANY, LLC, a Delaware limited liability company (“ FPEC ”), and TAURUS ENERGY, LLC, a Montana limited liability company (“ Buyer ”). Samson and FPEC are collectively referred to herein as “ Sellers ” and individually as a “ Seller .” Sellers and Buyer are sometimes referred to herein individually as a “ Party ” and collectively as the “ Parties .”

 

WITNESSETH

 

WHEREAS, Sellers jointly own certain oil and gas leases covering lands in Roosevelt and Richland Counties, Montana, and associated assets as more fully described in Section 1.3;

 

WHEREAS, Samson individually owns certain oil and gas leases and associated assets as more fully described in Section 1.4; and

 

WHEREAS, Sellers desire to sell to Buyer, and Buyer desires to purchase from Sellers, all of each Seller’s interest in such jointly owned leases and associated assets, together with such leases and assets owned individually by Samson, upon the terms and conditions set forth in this Agreement.

 

NOW, THEREFORE, for and in consideration of the mutual covenants herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

 

article 1
AGREEMENT FOR PURCHASE AND SALE OF ASSETS

 

1.1           Agreement for Purchase and Sale of Assets . Subject to the terms and conditions of this Agreement and the reservations and exceptions set forth herein, Buyer agrees to purchase from Sellers, and Sellers agree to sell, assign and deliver to Buyer, all of Sellers’ right, title and interest in and to the Assets for the consideration set forth in Section 1.6.

 

1.2           Effective Time . The purchase and sale of the Assets shall be effective as of 7:00 a.m. (MDT) on July 1, 2013, (the “ Effective Date ”); provided , if Closing occurs on or before June 30, 2013, the “ Effective Date ” shall be 7:00 a.m. (MDT) on June 1, 2013. Except as expressly provided in Section 6.1 or otherwise in this Agreement, each Seller shall remain entitled to all of the rights of ownership (including the right to all production, proceeds of production and other proceeds) and shall remain responsible for all operating expenses and capital expenditures (including all lease bonus payments, fees, rentals, royalties or production payments attributable to the Joint Assets) incurred in the ownership and operation of its portion of the Joint Assets (“ Operating Expenses ”), in each case attributable to the Joint Assets for the period of time prior to the Effective Date. Except as expressly provided otherwise in this Agreement, and subject to the occurrence of the Closing, Buyer shall be entitled to all of the rights of ownership (including the right to all production, proceeds of production, and other proceeds), and shall be responsible for all Operating Expenses, in each case attributable to the Joint Assets beginning with the Effective Date and thereafter.

 

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1.3           Joint Assets . “ Joint Assets ” shall mean all of each Seller’s undivided right, title and interest in and to the following, but reserving unto each respective Seller the Excluded Assets:

 

(a)                The oil and gas leases (including all leasehold estates, mineral interests, royalty interests, overriding royalty interests, net profits interests, or similar interests) specifically described in Exhibit A-1 (the “ Joint Leases ”) and the lands covered thereby or pooled or unitized therewith (the “ Joint Lands ”);

 

(b)                     The oil, gas, casinghead gas, coalbed methane, condensate and other gaseous and liquid hydrocarbons or any combination thereof that may be produced and saved under the Joint Leases or lands pooled or unitized therewith (“ Joint Hydrocarbons ”);

 

(c)                The unitization, pooling and communitization agreements, declarations, orders, and the units created thereby relating to the Joint Leases and to the production of Hydrocarbons;

 

(d)               All surface leases, permits, rights-of-way, licenses, easements and other surface use or access agreements pertaining to the Joint Leases and Joint Lands, or used in connection with the production, gathering, treatment, processing, storing, sale or disposal of Hydrocarbons (the “ Surface Agreements ”);

 

(e)                The contracts, including the Surface Agreements, described on Exhibit D-1 ; and

 

(f)                To the extent transferable and in Sellers’ possession, a ll files, records and data relating to the items described in Sections 1.3(a) through (e) above, including without limitation, (i) lease records, well records, division order records, title records (including broker runsheets and ownership reports, lessor and/or landowner contact information abstracts of title, title opinions and memoranda, and title curative documents), correspondence and maps, and (ii) engineering records, geological and geophysical data (including seismic data), electronic data files, technical evaluations and interpretive data, monthly production records, electric logs, core data, pressure data, decline curves, graphical production curves, reserve reports, appraisals and accounting records (the “ Records ”). Records shall not include Sellers’ internal memoranda, notes and correspondence.

 

1.4           Samson Assets . “ Samson Assets ” shall mean all of Samson’s right, title and interest in and to the following, but reserving unto Samson the Excluded Assets:

 

(a)                The oil and gas leases (including all leasehold estates, mineral interests, royalty interests, overriding royalty interests, net profits interests, or similar interests) specifically described in Exhibit A-2 (the “ Samson Leases ”) and the lands covered thereby or pooled or unitized therewith (the “ Samson Lands ”);

 

2

 

 

(b)               The oil and gas wells described on Exhibit B , including all rights-of-way related thereto (the “ Wells s "”), and including all of the personal property, equipment, fixtures and improvements used in connection therewith as described on Exhibit E ;

 

(c)                The oil, gas, casinghead gas, coalbed methane, condensate and other gaseous and liquid hydrocarbons or any combination thereof that may be produced and saved under the Samson Leases or lands pooled or unitized therewith (the “ Samson Hydrocarbons ”);

 

(d)               The unitization, pooling and communitization agreements, declarations, orders, and the units created thereby relating to the Samson Leases and to the production of Samson Hydrocarbons;

 

(e)                All surface leases, permits, rights-of-way, licenses, easements and other surface use or access agreements pertaining to the Leases and Lands, or used in connection with the production, gathering, treatment, processing, storing, sale or disposal of Samson Hydrocarbons (the “ Samson Surface Agreements ”);

 

(f)                The contracts, including the Samson Surface Agreements, described on Exhibit D-2 ; and

 

(g)               To the extent transferable and in Samson’s possession, a ll files, records and data relating to the items described in Sections 1.4(a) through (f) above, including without limitation, (i) well records, division order records, title records (including broker runsheets and ownership reports, lessor and/or landowner contact information abstracts of title, title opinions and memoranda, and title curative documents), correspondence and maps, and (ii) engineering records, geological and geophysical data (including seismic data), electronic data files, technical evaluations and interpretive data, monthly production records, electric logs, core data, pressure data, decline curves, graphical production curves, reserve reports, appraisals and accounting records (the “ Samson Records ”). Samson Records shall not include Samson’s internal memoranda, notes and correspondence.

 

The Joint Assets and the Samson Assets are sometimes referred to collectively herein as the “ Assets ” and individually as an “ Asset .” The Joint Leases and the Samson Leases are sometimes referred to collectively herein as the “ Leases ” and individually as a “ Lease .” The Joint Lands and the Samson Lands are sometimes referred to individually herein as the “ Lands. ” The Joint Hydrocarbons and the Samson Hydrocarbons are sometimes referred to individually herein as the “ Hydrocarbons .”

 

1.5           Excluded Assets . Each Seller hereby expressly reserves and excepts unto such Seller all right, title and interest in and to the following (the “ Excluded Assets ”):

 

(a)                all of Seller’s corporate minute books, financial records and other business records that relate to Seller’s business generally;

 

(b)               all such Seller’s interest in any trade credits, accounts receivable, notes receivable, take or pay amounts receivable, and all other proceeds, income or revenues attributable to the Joint Assets with respect to any period of time prior to the Effective Date;

 

3

 

 

(c)                all such Seller’s interest in any claims and causes of action of such Seller arising under or with respect to any contracts that are attributable to periods of time prior to the Effective Date (including claims for adjustments or refunds);

 

(d)               any refunds due to Seller by a third party for any over payment of lease bonus payments, fees, rentals, royalties or production payments attributable to the Joint Assets with respect to any period of time prior to the Effective Date;

 

(e)                all claims and rights of Seller for refunds of or loss carry forwards with respect to (i) income or franchise taxes, or (ii) any taxes attributable to the items described in Section 1.3(a) through (e);

 

(f)                all assets, property, or other interests set forth on Exhibit A-3 ; and

 

(g)               all assets , property, or other interests of Seller not otherwise specifically identified in Section 1.3 and Section 1.4.

 

1.6           Purchase Price for Assets .

 

(a)                Joint Assets . The purchase price for the Joint Assets shall be EIGHTEEN MILLION SEVEN HUNDRED FIFTY THOUSAND DOLLARS ($18,750,000) (the “ Joint Purchase Price ”), subject to adjustment pursuant to Section 1.6(d) below. The Joint Purchase Price shall be paid at Closing by wire transfer of immediately available funds to Sellers as follows:

 

 

Samson:

$12,500,000

 

 

FPEC:

$6,250,000

 

  

The Joint Purchase Price is allocated among the Joint Leases on the basis of $417 per Net Acre (the “ Net Acre Price ”). The “ Allocated Value ” of each Joint Lease shall be the number of Net Acres covered by the Joint Lease, multiplied by the Net Acre Price. For purposes of this Agreement, “ Net Acres ” shall mean with respect to a Lease (i) the undivided interest of the respective Seller in the leasehold estate created by the applicable Lease multiplied by (ii) the number of acres covered by the Lease multiplied by (iii) the lessor’s percentage interest in the oil and gas mineral estate in the Lands covered by the Lease.

 

(b)               Samson Assets . The purchase price for the Wells shall be FIVE HUNDRED THOUSAND DOLLARS ($500,000), and the purchase price for the Samson Leases shall be FIVE HUNDRED THIRTY THREE THOUSAND SEVEN HUNDRED SIXTY DOLLARS ($533,760.00) (collectively the “ Samson Purchase Price ”), subject to adjustment pursuant to Section 1.6(d) below. The Samson Purchase Price shall be paid to Samson at Closing by wire transfer of immediately available funds. The portion of the Samson Purchase Price attributable to the Samson Leases is allocated among the Samson Leases on the basis of the Net Acre Price. The Allocated Value of each Samson Lease shall be the number of Net Acres covered by the Samson Lease, multiplied by the Net Acre Price.

 

(c)                Deposit . Concurrently with the execution of this Agreement, Buyer shall pay (i) to Samson Parent an earnest money deposit in an amount equal to ONE HUNDRED THOUSAND DOLLARS ($100,000) (the “Samson Deposit ”), and (ii) to FPEC an earnest money deposit in an amount equal to FIFTY THOUSAND DOLLARS ($50,000) (the “FPEC Deposit ”). Each of the Samson Deposit and the FPEC Deposit shall be non-interest bearing and applied against the Samson Closing Amount and the FPEC Closing Amount, respectively, if Closing occurs or shall be otherwise distributed in accordance with the terms of this Agreement.

 

4

 

 

(d)               Adjustments to the Purchase Price . The Joint Purchase Price and the Samson Purchase Price to be paid by Buyer at Closing shall be adjusted, without duplication, as follows:

 

(i)                 adjusted downward by (A) the sum of all Defect Values attributable to any Outstanding Title Defects, in accordance with Sections 2.8(a) or Section 2.8(c), as applicable, and (B) the Allocated Value of any Lease affected by a Title Defect and excluded from the transaction pursuant to Section 2.5(b), Section 2.5(d) or Section 2.8(c);

 

(ii)               adjusted downward by the Allocated Value of any Leases affected by an unresolved Title Disputed Matter pursuant to Section 2.9;

 

(iii)             adjusted upward, on a lease-by-lease basis by an amount equal to $417 per Net Acre in excess of the Net Acres for such Lease as set forth on Exhibit A-1 or Exhibit A-2 , as applicable; and

 

(iv)             adjusted upward or downward by any other amount mutually agreed upon by Sellers and Buyer.

 

At Closing, the Joint Purchase Price and the Samson Purchase Price shall be adjusted according to this Section 1.6(d). All such adjustments shall be set forth on a settlement statement (the “ Settlement Statement Settlement Statement "”), which Samson shall prepare and provide to Buyer, along with supporting schedules and workpapers on which the calculation is based, at least three (3) business days before Closing. If Buyer has disagreements regarding the calculation of the Settlement Statement, Buyer may contact Sellers at least one (1) business day prior to Closing, and in such case Sellers and Buyer shall in good faith attempt to resolve any disagreements related thereto. Adjustments to the Joint Purchase Price as set forth on Settlement Statement shall be approved by Buyer and Sellers on or before Closing. Adjustments to the Samson Purchase Price as set forth on Settlement Statement shall be approved by Buyer and Samson on or before Closing. If the parties are unable to reach agreement regarding the calculation of the Settlement Statement, then Buyer shall pay the undisputed portion of the Joint Purchase Price and Samson Purchase Price at Closing, and the Sellers shall have the right within thirty (30) days after Closing to submit the dispute for resolution by arbitration pursuant to Section 9.9. If the Sellers fail to submit the matter to arbitration within such thirty (30) day period, Sellers shall be deemed to have accepted Buyer’s payments of the Joint Purchase Price and Samson Purchase Price as payments in full, and Buyer shall have no further liability with respect to such payment obligations. The portion of the Joint Purchase Price payable to Samson and the Samson Purchase Price, as so adjusted, shall be paid at Closing by Buyer to Samson in accordance with Section 5.3(a) and is referred to herein as the “ Samson Closing Amount .” The portion of the Joint Purchase Price payable to FPEC, as so adjusted, shall be paid at Closing by Buyer to FPEC in accordance with Section 5.3(a) and is referred to herein as the “ FPEC Closing Amount .”

 

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article 2
TITLE MATTERS

 

2.1           Title Review .

 

(a)                From the date hereof until 5:00 p.m. (MDT) on June 25, 2013 (the “ Defect Notice Date ”), Buyer and any representative of Buyer shall have the right to examine and inspect all the Records and Samson Records. All such activities shall be conducted by Buyer or its representatives at Buyer’s sole cost, risk and expense.

 

(b)               Each Sell e r shall make its Records and Samson shall make the Samson Records available to Buyer at the offices of such Seller during Seller’s normal business hours. Upon Buyer’s request each Seller will use its best efforts to submit to Buyer, at Buyer’s expense, as promptly as practicable, such abstracts, title reports, and certificates of title covering the Joint Assets and/or Samson Assets, as applicable, which are in such Seller’s possession as of the date hereof. Subject to the consent and cooperation of third parties, each Seller will assist Buyer in Buyer’s efforts to obtain, at Buyer’s expense, such additional information from such third parties as Buyer may reasonably request. Buyer may inspect the Records and Samson Records and such additional information only to the extent that it may do so without violating any obligation of confidence or contractual commitment of such Seller to a third party. Sellers shall use commercially reasonable efforts, but at no cost or expense to Sellers, to obtain the necessary consents to allow Buyer’s examination of any confidential information that is material to the transaction contemplated by this Agreement.

 

(c)                Except for the representations and warranties contained in this Agreement, Sellers make no warranty or representation of any kind as to the Records and Samson Records or any information contained therein. Buyer agrees that any conclusions drawn from the Records and Samson Records shall be the result of its own independent review and judgment.

 

(d)               Buyer hereby agrees to defend, indemnify and hold harmless each of the third party operators and owners of the Assets and Seller Indemnified Parties from and against any and all Losses arising out of, resulting from or relating to any field visit, on-site inspection, or other due diligence activity conducted by Buyer or any representative of Buyer with respect to the Assets, even if such Losses arise out of or result from, solely or in part, the sole, active, passive, concurrent or comparative negligence, strict liability or other fault or violation of Law of or by any such third party operator or owner or Seller Indemnified Party, excepting only Losses actually resulting on the account of the gross negligence or willful misconduct of such person.

 

2.2           Defensible Title (a). The term “ Defensible Title ” means such title of a Seller in and to a Lease that, subject to the Permitted Encumbrances: (i) entitles such Seller to receive not less than the net revenue interest (the “ NRI ”) in such Lease as specified in Exhibit A-1 or Exhibit A-2 , as applicable, proportionately reduced in the event such Seller’s working interest in such Lease is less than 100% or the subject lease covers less than 100% of the mineral estate in the lands covered thereby; (ii) entitles such Seller to a share of the working interest in each Lease as specified in Exhibit A-1 or Exhibit A-2 , as applicable, (iii) entitles such Seller to not less than the Net Acres for such Lease as set forth on Exhibit A-1 or Exhibit A-2 , as applicable; and (iv) except for the Permitted Encumbrances, is free and clear of liens, taxes, encumbrances, mortgages, claims, lis pendens , production payments, and any other defects, matters or conditions that would cause an impairment in the use and enjoyment of, or loss of interest in, the affected Lease.

 

2.3           Permitted Encumbrances . The term “ Permitted Encumbrances ” shall mean:

 

6

 

 

(a)                lessors’ royalties, overriding royalties, net profits interests, production payments, reversionary interests and other burdens if the cumulative effect of such burdens does not reduce the NRI, on a Lease-by-Lease basis, below the NRI in such Lease as specified in Exhibit A-1 or Exhibit A-2 , as applicable;

 

(b)               all consents , notices, filings, or other actions by federal, state or local governmental bodies in connection with the conveyance of an Asset that is customarily sought after Closing;

 

(c)                rights of reassignment upon the surrender or expiration of any Lease;

 

(d)               easements , rights-of-way, servitudes, permits, surface leases and other rights with respect to surface operations, on, over or in respect of any of the Leases or any restriction on access thereto that do not interfere with the operation of the affected Lease;

 

(e)                liens for taxes or assessments not yet due or not yet delinquent; and

 

(f)                such Title Defects as Buyer has waived.

 

2.4           Title Defect . The term “ Title Defect ” means, with respect to a Lease, any lien, encumbrance, adverse claim, default, expiration, failure, defect, matter or condition, excluding the Permitted Encumbrances, that alone or in combination, renders the respective Seller’s title to the particular Lease less than Defensible Title.

 

2.5           Defect Value . The term “ Defect Value ” means the amount by which the Allocated Value of the applicable Lease is reduced by a Title Defect. The Defect Value shall be determined by the Parties in good faith, or otherwise in accordance with Section 2.9, taking into account all relevant factors, including without limitation, the following:

 

(a)                If the Title Defect is a lien or encumbrance on a Lease, the Defect Value shall be the cost of removing such lien or encumbrance, not to exceed the Allocated Value of the affected Lease;

 

(b)               If the Title Defect is an actual reduction in NRI below the NRI in such Lease as specified in Exhibit A-1 or Exhibit A-2 , as applicable, the Defect Value shall be (i) the Allocated Value for the affected Lease, proportionately reduced by the ratio of the reduction in the actual NRI in such Lease to the NRI as specified in Exhibit A-1 or Exhibit A-2 , as applicable (e.g., if the actual NRI is 78% and the NRI for such Lease as specified Exhibit A-1 or Exhibit A-2 , as applicable, is 80% , then the Defect Value would be 2/80ths of the Allocated Value);

 

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(c)                If the Title Defect is an actual reduction in Net Acres covered by the Lease from the number of Net Acres set forth in Exhibit A-1 or Exhibit A-2 , as applicable, for such Lease, the Defect Value shall be an amount equal to such difference in Net Acres multiplied by the Net Acre Price; or

 

(d)               If the Title Defect is a preferential right to purchase affecting a Lease or a third party’s consent required to assign a Lease, such Lease shall be excluded from the transaction, whereupon the Defect Value shall be 100% of the Allocated Value of such Lease.

 

2.6           Notice of Title Defects . On or before 5:00 p.m. (MDT) on the Defect Notice Date, as may be extended by the signed mutual agreement of the Parties, Buyer shall deliver to the respective Seller a written notice (a “ Title Defect Notice ”) describing (a) each Title Defect and the Lease(s) affected thereby, (b) the basis for each Title Defect, (c) Buyer’s good faith estimate of the Defect Value of each Title Defect, and (d) supporting documentation of the Title Defect. The failure of Buyer to notify the respective Seller of a Title Defect in a Title Defect Notice on or before the Defect Notice Date shall be deemed a waiver by Buyer of such Title Defect.

 

2.7           Seller’s Right to Cure . Each Seller shall have the option, but not the obligation, to attempt to cure any Title Defect, to Buyer’s reasonable satisfaction, on or before 5:00 p.m. (MDT) on the day prior to Closing (“ Cure Period ”). Prior to the end of the Cure Period, Seller shall provide to Buyer evidence that a Title Defect has been cured. Prior to Closing, Buyer shall notify the respective Seller whether such Title Defect has been cured to the reasonable satisfaction of Buyer.

 

2.8           Title Defect Remedies . If any Title Defect timely asserted by Buyer pursuant to Section 2.6 is not (a) cured within the Cure Period to Buyer’s reasonable satisfaction, or (b) waived by Buyer on or before Closing (an “ Outstanding Title Defect ”), the respective Seller shall elect any of the following:

 

(a)                the Joint Purchase Price or the Samson Purchase Price, as the case may be, shall be adjusted downward by the Defect Value attributable to the Outstanding Title Defect and retain the right to cure the Title Defect after Closing. The respective Seller shall have ninety (90) calendar days after the Closing Date in which to attempt to cure any such Title Defects to Buyer’s reasonable satisfaction. If the respective Seller cures any such Title Defect, then Buyer shall promptly pay Sellers (or the applicable Seller) the Defect Value with respect to the Title Defect that is so cured; provided, however, that the aggregate amount of Defect Values to be paid by Buyer to Sellers on account of Sellers’ curing of Title Defects after Closing shall not exceed the aggregate amount of the reductions in the Joint Purchase Price and/or the Samson Purchase Price, as the case may be, that Buyer received as a result of any Title Defects;

 

(b)               with the consent of Buyer, convey the Leases or Wells affected by a Title Defect to Buyer at Closing, without adjustment to the Joint Purchase Price or Samson Purchase Price, as the case may be, and in such case, such Seller shall indemnify Buyer against all liability, loss, cost and expense resulting from such Title Defect pursuant to an indemnity agreement in form and substance mutually satisfactory to Seller and Buyer;

 

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(c)                retain the entirety of the Leases or Wells subject to such Title Defect, together with all associated Assets, in which event the Joint Purchase Price or the Samson Purchase Price, as the case may be, shall be reduced by an amount equal to the Allocated Value of such property and such associated Assets; or

 

(d)               in the case of Samson, terminate this agreement in accordance with Section 5.4(e).

 

2.9           Title Dispute Resolution . The affected Parties shall attempt to resolve, through good faith negotiations, all disputes concerning (a) the existence and scope of a Title Defect, (b) the amount of the Defect Value and (c) the adequacy of the respective Seller’s Title Defect curative materials and Buyer’s reasonable satisfaction thereof (the “ Title Disputed Matters ”). In the event the Parties cannot resolve any Title Disputed Matters on or before Closing, the Lease affected by any unresolved Title Disputed Matter shall be excluded from the transaction and the Joint Purchase Price or the Samson Purchase Price, as the case may be, shall be reduced by 100% of the Allocated Value of such Lease, and any party shall have the right within thirty (30) days after Closing to submit any Title Disputed Matter to arbitration for resolution pursuant to Section 9.9.

 

2.10       Casualty Loss . If prior to Closing any of the Assets are substantially damaged or destroyed by fire, blow out, casing collapse, or any other casualty (a “ Casualty Defect Casualty Defect " ”), Sellers shall notify Buyer promptly after any Seller has Knowledge of the occurrence of such event. Sellers shall have the right, but not the obligation, to cure any such Casualty Defect by repairing such damage or, in the case of personal property or fixtures, replacing the Assets affected thereby with equivalent items no later than the Closing Date. If any Casualty Defect exists at Closing, Buyer shall have the right, but not the obligation, to proceed to purchase the Assets affected thereby, and the Joint Purchase Price and/or the Samson Purchase Price, as applicable, shall be reduced by the aggregate reduction in the value of such Assets on account of such Casualty Defects, as determined by the mutual agreement of the parties, or if the parties are unable to agree on such amount prior to Closing, then such dispute shall be submitted to arbitration pursuant to Section 9.9. Notwithstanding anything to the contrary contained herein, Sellers shall be entitled to retain all insurance proceeds and claims against other parties in respect of such Casualty Defect that occurs prior to Closing.

 

article 3
REPRESENTATIONS AND WARRANTIES

 

The term “ Material Adverse Effect ” shall mean any change, development, or effect (individually or in the aggregate) which is, or is reasonably likely to be, materially adverse to the Assets, as a whole, or to any Samson Asset, as the context may require.

 

3.1           Samson’s Representations and Warranties . With respect to Samson, “ Knowledge ” shall mean the information actually known by Terence Barr only, or such information of which such person has received written notice, but does not include knowledge or awareness of any other person, or imputed knowledge. Samson makes the following representations and warranties as to (i) its undivided interest in the Joint Assets and (ii) the Samson Assets:

 

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(a)                Organization and Standing . Samson is a corporation duly organized, validly existing and in good standing under the laws of the State of Colorado, and is qualified to do business in the State of Montana.

 

(b)               Power . Samson has all requisite power and authority to carry on its business as presently conducted. The execution, delivery and performance of this Agreement does not, and the fulfillment of and compliance with the terms and conditions hereof will not, as of the Closing Date, violate, or be in conflict with, any material provision of Samson’s governing documents, or any material provision of any agreement or instrument to which Samson is a party or by which it is bound, or any judgment, decree, order, statute, rule or regulation applicable to Samson.

 

(c)                Authorization and Enforceability . The execution, delivery and performance of this Agreement and the transactions contemplated hereby have been duly and validly authorized by all requisite corporate action on the part of Samson. This Agreement constitutes Samson’s legal, valid and binding obligation, enforceable in accordance with its terms, subject, however, to the effects of bankruptcy , insolvency, reorganization, moratorium and other laws for the protection of creditors, as well as to general principles of equity, regardless whether such enforceability is considered in a proceeding in equity or at law.

 

(d)               Liability for Brokers’ Fees . Samson has not incurred any liability, contingent or otherwise, for brokers’ or finders’ fees relating to the transactions contemplated by this Agreement for which Buyer shall have any responsibility whatsoever.

 

(e)                Lawsuits and Claims . Except as disclosed in Schedule 3.1(e) , there are no suits, actions or other proceedings pending against Samson with respect to the Joint Assets and the Samson Assets and there is no proceeding, claim or investigation pending or threatened with respect to the Joint Assets or the Samson Assets that would likely result in a Material Adverse Effect.

 

(f)                No Bankruptcy . There are no bankruptcy proceedings pending, being contemplated by or threatened against Samson.

 

(g)               Compliance with Laws . Samson is not in violation of any law, rule, regulation, order, permit, certificate, writ, judgment, stipulation, injunction, decree, determination, award or decision (a “ Rule Rule " ”) of any court, government, or governmental agency or instrumentality, or arbitrator binding upon Samson which violation or alleged violation is reasonably likely to have a Material Adverse Effect on: (i) the Leases or their value; or (ii) the ability of Samson to perform under this Agreement. Samson has received no notice from any Governmental Authority that Samson is alleged to be in violation of any Rule binding upon Samson. Further, Samson has all governmental licenses and permits, and has properly made all filings, necessary or appropriate to obtain such licenses and permits and to own and operate the Assets as presently being owned and operated, and such licenses, permits and filings are in full force and effect, and no material violations exist or have been recorded in respect of any such licenses, permits or filings, no proceeding is pending or is threatened that would challenge, revoke or limit any such licenses, permits or filings.

 

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(h)               Taxes . Samson has paid in full all taxes, assessments, and other charges assessed or imposed on Samson with respect to the Leases by any local, state, tribal, or federal taxing authority, other than income or sales taxes, except those that are not yet past due and payable.

 

(i)                 Accuracy of the Records . Samson makes no representations regarding the accuracy or completeness of any of the Records or the Samson Records; provided, however, Samson does represent that (i) all of the Records and Samson Records are files, or copies thereof, that Samson has used in the ordinary course of operating and owning the Joint Assets and the Samson Assets, respectively, (ii) Samson has made, or prior to Closing will make, all Records and Samson Records in its possession available to Buyer and (iii) Samson has not intentionally withheld any of the Records or Samson Records from Buyer.

 

(j)                 Contracts; No Default . Except as set forth in Schedule 3.1(j) , Samson is not a party to, or otherwise subject to any obligations under, any agreement related solely to the Assets other than the Leases and the agreements set forth on Exhibits D-1 and D-2 (the “ Samson Contracts Samson Contracts " ”). To Samson’s Knowledge, Samson is not in breach or default in any material respect, and Samson has received no notice that it is alleged to be in breach or default in any material respect, under the terms of any Samson Contract, which breach or default has not been cured by Closing, and the Leases are in full force and effect and Samson has made all payments (including any applicable bonus, delay rentals, or similar payments) due thereunder or required to be made by Samson to maintain such Samson Contract in effect. To Samson’s Knowledge, no other party to any Samson Contract is in breach or default with respect to any of its obligations thereunder. There has not occurred any event, fact or circumstance which with the lapse of time or the giving of notice, or both, would constitute a breach or default on behalf of Samson, or to Samson’s Knowledge, with respect to any other party to any Samson Contract. Neither Samson, nor to Samson’s Knowledge, any other party to any Samson Contract has given or threatened to give notice of any action to terminate, cancel or rescind any such agreement or any provision thereof.

 

(k)               Consents . Except as set forth on Schedule 3.1(k) , no consent, authorization, order, or approval of, or filing or registration with, any Governmental Authority is required for the consummation of the transactions contemplated hereby by Samson, except any such consent, authorization, order, or approval that is customarily obtained, or any such filing or registration that is customarily made, after the consummation of the purchase and sale of the oil and gas properties, such as any authorization, consent, or approval of the Bureau of Indian Affairs or Bureau of Land Management with respect to the assignment of any Leases or transfer of operations subject to such Governmental Authority’s jurisdiction. As used in this Agreement, “ Governmental Authority ” means any national, state, local or tribal government or any subdivision, agency, court, commission, department, board, bureau, regulatory authority or other division or instrumentality thereof.

 

(l)                 Preferential Rights and Consents . Except as set forth on Schedule 3.1(l) , there are no preferential rights to purchase, rights of first refusal, tag-along rights or similar rights affecting any of the Joint Assets or Samson Assets, and no third party’s consent is required to assign any Joint Asset or Samson Asset.

 

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(m)             AMI/Farmout/JOA/Tax Partnership . Except as set forth on Schedule 3.1(m) , none of the Joint Assets or Samson Assets are subject to an area of mutual interest, exploration agreement, participation agreement, farmout, joint operating agreement, tax partnership or similar agreement.

 

(n)               Non-Competition . Except as set forth on Schedule 3.1(n) , there are no non- competition or similar agreements which will be binding upon Buyer after Closing.

 

(o)               Lease Status/Royalties . To Samson’s Knowledge, except as set forth on Schedule 3.1(o) , the Leases are in full force and effect and all obligations under the Leases have been fully performed, including but not limited to, the proper and timely payment of all royalties, shut- in payments or delay rentals. Samson has not received a written notice of any request or demand for payments, adjustments of payments or performance pursuant to obligations under the Leases that is still outstanding.

 

(p)               Advance Payments . Samson is not obligated by virtue of a prepayment arrangement under any contract for the sale of Hydrocarbons and containing a “take or pay” or similar provision, of a production payment, gas balancing agreement, of an advance payment contract, of a forward sale contract, or of any other arrangement, to deliver Hydrocarbons produced from the Leases at some future time without then or thereafter receiving full payment therefor.

 

3.2           FPEC’s Representations and Warranties . With respect to FPEC, “ Knowledge ” shall mean the information actually known by Lynn Becker only, or such information of which such person has received written notice, but does not include knowledge or awareness of any other person, or imputed knowledge. FPEC makes the following representations and warranties as to its undivided interest in the Joint Assets:

 

(a)                Organization and Standing . FPEC is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware, and is qualified to do business in the State of Montana.

 

(b)               Power . FPEC has all requisite power and authority to carry on its business as presently conducted. The execution, delivery and performance of this Agreement does not, and the fulfillment of an d compliance with the terms and conditions hereof will not, as of the Closing Date, violate, or be in conflict with, any material provision of FPEC’s governing documents, or any material provision of any agreement or instrument to which FPEC is a party or by which it is bound, or any judgment, decree, order, statute, rule or regulation applicable to FPEC.

 

(c)                Authorization and Enforceability . The execution, delivery and performance of this Agreement and the transactions contemplated hereby have been duly and validly authorized by all requisite limited liability company action on the part of FPEC. This Agreement constitutes FPEC’s legal, valid and binding obligation, enforceable in accordance with its terms, subject, however, to the effects of bankruptcy, insolvency, reorganization, moratorium and other laws for the protection of creditors, as well as to general principles of equity, regardless whether such enforceability is consi


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