ASSET PURCHASE AGREEMENT
DATED AS OF APRIL ____, 1996,
BY AND BETWEEN
HARDY OIL & GAS USA INC.,
AS SELLER,
AND
ARCH PETROLEUM, INC.,
AS BUYER
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
Page
ARTICLE I.
CERTAIN DEFINITIONS
Section 1.1 Certain Defined
Terms.....................................1
Section 1.2 References, Gender,
Number................................1
ARTICLE II.
SALE AND PURCHASE
ARTICLE III.
CONSIDERATION AND PAYMENT
Section 3.1
Consideration..............................................1
Section 3.2
Payment....................................................2
Section 3.3 Adjustment Period Cash
Flow................................2
Section 3.4 Post Closing
Review........................................3
Section 3.5 Gas Imbalance
Credits......................................3
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties of
Seller...................4
Section 4.2 Representations and Warranties of
Buyer....................5
ARTICLE V.
INVESTIGATION OF ASSETS: CONFIDENTIALITY
Section 5.1 Investigation of
Assets....................................6
Section 5.2 Confidential
Information...................................7
ARTICLE VI.
TITLE ADJUSTMENTS.
Section 6.1 No Warranty or
Representation..............................7
Section 6.2 Buyer's Title
Review.......................................7
Section 6.3 Determination of Title
Defects............................10
Section 6.4 Seller Title
Credit.......................................10
Section 6.5 Exclusion of Defect
Properties............................11
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Section 6.6 Deferred Claims and
Disputes..............................11
Section 6.7 No
Duplication............................................12
ARTICLE VII.
PREFERENCE RIGHTS AND CONSENTS
Section 7.1
Compliance................................................12
Section 7.2 Effect of Preference
Rights...............................12
Section 7.3 Transfer
Requirements.....................................13
ARTICLE VIII.
COVENANTS OF SELLER AND BUYER
Section 8.1 Conduct of Business Pending
Closing.......................13
Section 8.2 Qualifications on Seller's
Conduct........................15
Section 8.3
Conveyance................................................16
Section 8.4 Public
Announcements......................................16
Section 8.5 Further
Assurances........................................16
Section 8.6
Removal...................................................16
Section 8.7
Records...................................................16
ARTICLE IX.
CLOSING CONDITIONS
Section 9.1 Seller's Closing
Conditions...............................17
Section 9.2 Buyer's Closing
Conditions................................17
ARTICLE X.
CLOSING
Section 10.1
Closing...................................................18
Section 10.2 Seller's Closing
Obligations..............................18
Section 10.3 Buyer's Closing
Obligations...............................19
ARTICLE XI.
EFFECT OF CLOSING
Section 11.1
Revenues..................................................19
Section 11.2
Expenses..................................................19
Section 11.3 Payments and
Obligations..................................19
Section 11.4
Survival..................................................19
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ARTICLE XII.
CASUALTY AND CONDEMNATION
Section 12.1 No
Termination............................................20
Section 12.2 Proceeds and
Awards.......................................20
ARTICLE XIII
ASSUMPTION AND INDEMNIFICATION
Section 13.1 Indemnification By
Buyer..................................20
Section 13.2 Indemnification by
Seller.................................20
Section 13.3 Third Party
Claims........................................21
ARTICLE XIV.
TERMINATION; REMEDIES; LIMITATIONS
Section 14.1
Termination...............................................21
Section 14.2 Remedies.
...............................................22
Section 14.3
Limitations...............................................22
ARTICLE XV.
MISCELLANEOUS
Section 15.1
Counterparts..............................................24
Section 15.2 Governing
Law.............................................24
Section 15.3 Entire Agreement.
.......................................24
Section 15.4
Expenses..................................................24
Section 15.5
Notices...................................................25
Section 15.6 Successors and
Assigns....................................25
Section 15.7 Amendments and
Waivers....................................25
Section 15.8 Schedules and
Exhibits....................................25
Section 15.9 Purchase Price Allocation for Tax
Purposes................25
Section 15.10 Ad Valorem Tax
Proration..................................26
Section 15.11 Agreement for the Parties' Benefit
Only...................26
Section 15.12 Attorneys'
Fees...........................................26
Section 15.13
Severability..............................................26
Section 15.14 No
Recordation............................................26
Section 15.15 Time of
Essence...........................................26
- iii -
EXHIBITS
Exhibit 8.3
- -- Conveyance Exhibit 10.2(c)
- -- Affidavit of Non-Foreign Status Exhibit A-1
- -- Arbitration Procedures Exhibit A-2
- -- Property Schedule Exhibit B
- -- Forecast of Costs and Expenses
SCHEDULES
Schedule 4.1(d)
- -- Seller's Conflicts or Violations Schedule 4.1(e)
- -- Seller's Consents Schedule 4.1(f)
- -- Seller's Actions Schedule 4.1(g)
- -- Non-Compliance with Laws Schedule 4.2(d)
- -- Buyer's conflicts or Violations Schedule 4.2(e)
- -- Buyer's Consents Schedule 4.2(f)
- -- Buyer's Actions Schedule 7.1 - Part I
- -- Preference Rights Schedule 7.1 - Part II
- -- Transfer Requirements Schedule 8.1
- -- Conduct of Business Schedule 15.9
- -- Purchase Price Allocation for Tax Purposes Schedule A-1
- -- Certain Excluded Assets Schedule A-2
- -- Certain Permitted Encumbrances Schedule A-3
- -- Scheduled Imbalances Schedule A-4
- -- Royalty Accounts
- iv -
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as
of April ___, 1996, is by and between HARDY OIL & GAS USA,
INC., a Delaware corporation ("Seller"), and ARCH PETROLEUM,
INC., a Texas corporation ("Buyer").
WHEREAS, Seller owns certain oil and gas properties and
related assets;
WHEREAS, Seller desires to sell to Buyer, and Buyer
desires to purchase from Seller, such oil and gas properties
and related assets upon the terms and subject to the conditions
set forth herein;
NOW, THEREFORE, in consideration of the mutual
covenants and agreements hereinafter set forth, the parties
hereto agree as follows:
ARTICLE I.
CERTAIN DEFINITIONS
Section 1.1 Certain Defined Terms. Unless the
context otherwise requires, the respective terms defined in
Appendix A attached hereto and incorporated herein shall,
when used herein, have the respective meanings therein
specified, with each such definition to be equally applicable
both to the singular and the plural forms of the term so defined.
Section 1.2 References, Gender, Number. All
references in this Agreement to an "Article," "Section," or
"subsection" shall be to an Article, Section, or subsection of
this Agreement, unless the context requires otherwise. Unless
the context otherwise requires, the words "this Agreement,"
"hereof," "hereunder," "herein," "hereby," or words of similar
import shall refer to this Agreement as whole and not to a
particular Article, Section, subsection, clause or other
subdivision hereof. Whenever the context requires, the
words used herein shall include the masculine, feminine and
neuter gender, and the singular and the plural.
ARTICLE II.
SALE AND PURCHASE
Subject to the terms and conditions of this Agreement,
Seller agrees to sell and convey to Buyer, and Buyer agrees to
purchase from Seller, the Assets.
ARTICLE III.
CONSIDERATION AND PAYMENT
Section 3.1 Consideration. The consideration for
the sale and conveyance of the Assets to Buyer is
$8,000,000.00, as adjusted in accordance with the terms of this
Agreement (the "Purchase Price"). The "Adjusted Purchase Price"
shall be the Purchase Price (I) as adjusted by the Initial
Adjustment Amount determined pursuant to Section 3.3, (ii) as
adjusted for Title Defects, if any, in accordance with Section
6.2, (iii) as may be adjusted for excluded Title Defect
Properties, if any, in accordance with Section 6.5, (iv) as may
be
adjusted for undisclosed gas imbalances, if any, pursuant to
Section 3.5, (v) as may be adjusted for payments of portions
of the Purchase Price received by Seller from holder of
Preference Right contemporaneously with Closing in
accordance with and as contemplated by Section 7.2, and (vi) as
may be adjusted on account of Retained Assets as contemplated by
Section 7.3.
Section 3.2 Payment. Contemporaneously with the
execution of this Agreement, Buyer has deposited an amount
equal to twenty percent (20%) of the Purchase Price with
Seller as a deposit hereunder (the "Deposit"). At the
Closing, Buyer shall wire transfer the Adjusted Purchase Price
minus the Deposit in immediately available funds to Texas
Commerce Bank, N.A., ABA No. 113000609 for the account of
Seller, Account No. 001-01763374, or such other account
specified by Seller to Buyer on or prior to the business
day immediately preceding the Closing Date.
Section 3.3 Adjustment Period Cash Flow. (a) The
Purchase Price shall be increased or decreased, as the case
may be, by an amount equal to the Net Cash Flow with respect
to the Assets for the time period (the "Adjustment Period")
beginning at the Effective Time and ending at 7:00 a.m. (local
time) on the Closing Date. The Seller shall deliver to Buyer on
or prior to the business day immediately preceding the
Closing Date a statement (the "Adjustment Statement")
setting forth the Seller's preliminary determination (the
"Initial Adjustment Amount") of the Net Cash Flow. If the
Initial Adjustment Amount shown on the Adjustment statement is
a positive number, then the Purchase Price shall be increased
by such amount. If the Initial Adjustment Amount shown on
the Adjustment Statement is a negative number, then the
Purchase Price shall be decreased by such amount.
(b) The Adjustment Statement shall be based upon
actual information available to the Seller at the time of its
preparation and upon the Seller's good faith estimates and
assumptions. There shall be attached to the Adjustment
Statement such supporting documentation and other data as
is reasonably necessary to provide a basis for the Net Cash
Flow shown therein.
(c) The "Net Cash Flow" shall be the algebraic sum
of (i) a positive amount equal to the aggregate amount paid
by Seller as Seller's share of the costs and expenses of
exploration, maintenance, development, production and
operation of the Assets incurred with respect to the
Adjustment Period (including prepayments of any such costs or
expenses), (ii) a positive amount equal to the sum of (A) all
overhead charges paid by Seller to any operator of any of the
Assets, and (B) with respect to any properties operated by
Seller or any affiliate of Seller, the overhead charges
payable to Seller or such affiliated operator on account of
the Subject Interests in such properties under existing
operating agreements or, if no overhead charge is applicable
to a Subject Interest under an existing operating agreement,
an overhead charge to such Subject Interest equal to the
Average Drilling and Producing Well Rates in the area as
indicated in the most recent Survey of Combined Fixed Rate
Overhead Charges for Oil and Gas Producers conducted by Ernst &
Young or the prevailing rate in the area if the foregoing
survey is not available, and (iii) a negative amount equal to
the aggregate gross proceeds received by Seller from the sale or
disposition of oil, gas and other hydrocarbons produced from
the Assets during the Adjustment Period or from the rental,
sale, salvage or other disposition of any other Assets during
the Adjustment Period.
2
Section 3.4 Post Closing Review. After the Closing,
Seller shall review the Adjustment Statement and determine the
actual Net Cash Flow. On or prior to the ninetieth day after
the Closing Date, Seller shall present Buyer with a statement
of the actual Net Cash Flow and such supporting documentation
as is reasonably necessary to support the Net Cash Flow shown
therein (the "Final Adjustment Statement"). Buyer will give
representatives of Seller reasonable access to its premises
and to its books and records for purposes of preparing the
Final Adjustment Statement and will cause appropriate personnel
of Buyer to assist Seller and Seller's representatives, at
no cost to Seller, in the preparation of the Final Adjustment
Statement. Seller will give representatives of Buyer
reasonable access to its premises and to its books and
records for purposes of reviewing the calculation of Net
Cash Flow and will cause appropriate personnel of Seller to
assist Buyer and its representatives, at no cost to Buyer, in
verification of such calculation. The Final Adjustment
Statement shall become final and binding on Seller and Buyer as
to the Net Cash Flow ninety (90) days following the date the
Final Adjustment Statement is received by Buyer, except to
the extent that prior to the expiration of such ninety (90)
day period Buyer shall deliver to Seller notice, as
hereinafter required, of its disagreement with the
contents of the Final Adjustment Statement. Such notice
shall be in writing and set forth all of Buyer's
disagreements with respect to any portion of the Final
Adjustment Statement, together with Buyer's proposed changes
thereto, and shall include an explanation in reasonable detail
of, and such supporting documentation as is reasonably
necessary to support, such changes. If Buyer has timely
delivered such a notice of disagreement to Seller, then, upon
written agreement between Buyer and Seller resolving all
disagreements of Buyer set forth in such notice, the Final
Adjustment Statement will become final and binding upon Buyer
and Seller as to the Net Cash Flow. If the Final Adjustment
Statement has not become final and binding by the one hundred
twentieth (120th) day following its receipt by Buyer, then Buyer
and Seller may submit any unresolved disagreements of Buyer set
forth in such notice to final and binding arbitration in
accordance with the Arbitration Procedures. Upon resolution
of such unresolved disagreements of Buyer, the Final
Adjustment Statement shall be final and binding upon Buyer and
Seller as to the Net Cash Flow. Within three (3) business days
after the Final Adjustment Statement becomes final and binding,
Seller or Buyer, as appropriate, shall pay to the other party
the amount, if any, by which the Net Cash Flow as shown in the
Final Adjustment Statement is less than or exceeds the
Initial Adjustment Amount.
Section 3.5 Gas Imbalance Credits. The Purchase
Price shall be (a) reduced by an amount equal to (1) Unscheduled
(Negative) Imbalances multiplied by (2) $1.00 per Mcf and (b)
increased by an amount equal to (1) Unscheduled (Positive)
Imbalances multiplied by (2) $1.00 per Mcf.
3
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties of Seller.
Seller represents and warrants to Buyer as follows:
(a) Organization and Qualification. Seller is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the
requisite corporate power to carry on its business as it is now
being conducted. Seller is duly qualified to do business,
and is in good standing, in each jurisdiction in which the
Assets owned or leased by it makes such qualification necessary.
(b) Authority. Seller has all requisite corporate
power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. 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 Seller.
(c) Enforceability. This Agreement constitutes a
valid and binding agreement of Seller enforceable against
Seller in accordance with its terms, subject to (i) applicable
bankruptcy, insolvency, reorganization, moratorium and other
similar laws of general application with respect to
creditors, (ii) general principles of equity and (iii) the
power of a court to deny enforcement of remedies generally based
upon public policy.
(d) No Conflict or Violation. Neither the execution
and delivery of this Agreement nor the consummation of the
transactions and performance of the terms and conditions
contemplated hereby by Seller will (i) conflict with or result
in any breach of any provisions of the certificate of
incorporation or by-laws or other governing documents of
Seller; (ii) be rendered void or ineffective by or under the
terms, conditions or provisions of any agreement, instrument
or obligation to which Seller is a party or is subject; (iii)
result in a default under the terms, conditions or provisions
of any Asset (or of any agreement, instrument or obligation
relating to or burdening the Asset); or (iv) subject to the
limitations contained in Section 4.1(c), violate or be
rendered void or ineffective under any Law; provided that,
the representations and warranties contained in clauses (ii),
(iii) and (iv) of this Section 4.1(d) are subject to the matters
expressly described and set forth in Schedule 4.1(d).
(e) Consents. Except for (i) Preference
Rights and Transfer Requirements and (ii) the consents,
filings or notices expressly described and set forth in
Schedule 4.1(e), no consent, approval, authorization or permit
of, or filing with or notification to, any Person is required
for or in connection with the execution and delivery of this
Agreement by Seller or for or in connection with the
consummation of the transactions and performance of the terms
and conditions contemplated hereby by Seller.
4
(f) Actions. Except as set forth on Schedule
4.1(f), there are no Actions pending against Seller or, to
the knowledge of Seller, threatened against Seller which
relate to the Assets or the transactions contemplated by this
Agreement.
(g) Compliance With Laws. Except as set forth on
Schedule 4.1(g), Seller has no knowledge of any violation by
Seller of any Law applicable to the Assets which affects in any
material respect the value of the Assets taken as a whole.
(h) Brokerage Fees and Commissions. Neither Seller nor
any affiliate of Seller has incurred any obligation or
entered into any agreement for any investment banking,
brokerage or finder's fee or commission in respect of the
transactions contemplated by this Agreement for which Buyer
shall incur any liability.
(i) Bankruptcy. There are no bankruptcy,
reorganization or arrangement proceedings pending against,
being contemplated by, or, to the knowledge of Seller,
threatened against Seller.
Section 4.2 Representations and Warranties of Buyer.
Buyer represents and warrants to Seller as follows:
(a) Organization and Qualification. Buyer is in good
standing under the laws of the State of Texas and has the
requisite power to carry on its business as it is now being
conducted. Buyer is duly qualified to do business and is in
good standing in each jurisdiction in which the Assets to be
acquired by it makes such qualification necessary.
(b) Authority. Buyer has all requisite power and
authority to execute and deliver this Agreement and to perform
its obligations under this Agreement. The execution, delivery
and performance of this Agreement and the transactions
contemplated hereby have been duly and validly authorized by
Buyer.
(c) Enforceability. This Agreement constitutes a
valid and binding agreement of Buyer enforceable against
Buyer in accordance with its terms, subject to (i) applicable
bankruptcy, insolvency, reorganization, moratorium and other
similar laws of general application with respect to
creditors; (ii) general principles of equity and (iii) the
power of a court to deny enforcement of remedies generally based
upon public policy.
(d) No Conflict or Violation. Neither the execution
and delivery of this Agreement nor the consummation of the
transactions and performance of the terms and conditions
contemplated hereby by Buyer will (i) be rendered void or
ineffective by or under the terms, conditions or provisions of
any agreement, instrument or obligation to which Buyer is a
party or is subject; or (ii) subject to the limitations
contained in Section 4.2(c), violate or be rendered void or
ineffective under any Law; provided that, the
representations and warranties contained in clauses (i) and
(ii) of this Section 4.2(d) are subject to the matters expressly
described and set forth in Schedule 4.2(d).
5
(e) Consents. Except for (i) Preference
Rights and Transfer Requirements, and (ii) the consents,
filings or notices expressly described and set forth in Schedule
4.2(e), no consent, approval, authorization or permit of, or
filing with or notification to, any Person is required for or
in connection with the execution and delivery of this
Agreement by Buyer or for or in connection with the
consummation of the transaction and performance of the terms and
conditions contemplated hereby by Buyer.
(f) Actions. Except as set forth on Schedule
4.2(f), there are no Actions pending against Buyer or, to the
knowledge of Buyer, threatened against Buyer which relate to
the transactions contemplated by this Agreement.
(g) Brokerage Fees and Commissions. Neither Buyer nor
any affiliate of Buyer has incurred any obligation or
entered into any agreement for any investment banking,
brokerage or finder's fee or commission in respect of the
transactions contemplated by this Agreement for which Seller
shall incur any liability.
(h) Funds. Buyer has sufficient funds available to
enable Buyer to consummate the transactions contemplated hereby
and to pay all related fees and expenses of Buyer.
(i) Buyer's Knowledge. Buyer has no knowledge of any
fact which results in any representations or warranty of Seller
in Section 4.1 being breached.
(j) No Distribution. Buyer is an experienced and
knowledgeable investor in the oil and gas business. Prior to
entering into this Agreement, Buyer was advised by its
counsel and such other persons it has deemed appropriate
concerning this Agreement and has relied solely on an
independent investigation and evaluation of, and appraisal and
judgment with respect to, the geologic and geophysical
characteristics of the Subject Interests, the estimated
reserves recoverable therefrom, and the price and expense
assumptions applicable thereto. Buyer is not acquiring any
interests in the Assets in connection with a distribution
thereof in violation of the Securities Act of 1933 and the
rules and regulations thereunder or any applicable state blue
sky laws.
(k) Bankruptcy. There are no bankruptcy,
reorganization or arrangement proceedings pending against,
being contemplated by, or to the knowledge of Buyer,
threatened against Buyer.
ARTICLE V.
INVESTIGATION OF ASSETS: CONFIDENTIALITY
Section 5.1 Investigation of Assets. Promptly
following the execution of this Agreement and until the
Closing Date (or earlier termination of this Agreement),
Seller (i) shall permit Buyer and its representatives at
reasonable times to examine, in Seller's offices, all
abstracts of title, title opinions, title files, ownership
maps, lease files, assignments, division orders, and
documents relating to the Assets insofar as the same are in
Seller's possession and insofar as Seller may do so without (a)
violating legal constraints or any
6
legal obligation or (b) waiving any attorney/client privilege
and (ii), subject to any required consent of any third
Person, shall permit Buyer and its representatives at
reasonable times and at Buyer's sole risk, cost and expenses, to
conduct reasonable inspections of the Assets; provided,
however, Buyer shall repair any damage to the Assets resulting
from such inspections and Buyer does hereby indemnify and hold
harmless Seller from and against any and all losses, costs,
damages, obligations, claims, liabilities, expenses and causes
of action arising from Buyer's inspection of the Assets,
including, without limitation, claims for personal injuries,
property damage and reasonable attorney's fees.
Section 5.2 Confidential Information. Unless and
until the Closing occurs, Buyer agrees to maintain all
information made available to it pursuant to Section 5.1
confidential and to cause its officers, employees,
representatives, consultants and advisors to maintain all
information made available to them pursuant to Section 5.1
confidential.
ARTICLE VI.
TITLE ADJUSTMENTS.
Section 6.1 No Warranty or Representation. Without
limiting Buyer's right to adjust the Purchase Price by
operation of Section 6.2 and except for the special warranty of
title which is contained in the Conveyance, Seller makes no
warranty or representation, express, implied, statutory or
otherwise, with respect to Seller's title to any of the Assets
and Buyer hereby acknowledges and agrees that Buyer's sole
remedy for any defect of title, including any Title Defect,
with respect to any of the Assets shall be pursuant to the
procedures set forth in this Article VI, which remedies shall
cease, and be deemed to be finally and conclusively
satisfied, in all respects, upon the Closing. Furthermore,
Seller makes no warranty or representation, express,
implied, statutory or otherwise, with respect to the accuracy
or completeness of the information, records and data now,
heretofore or hereafter made available to Buyer in connection
with this Agreement (including, without limitation, any
description of the Assets, pricing assumptions, potential for
production of oil, gas or other hydrocarbons from the Subject
Interests or any other matters contained in or related to
any other material furnished to Buyer by Seller or by Seller's
agents or representatives).
Section 6.2 Buyer's Title Review.
(a) Buyer's Assertion of Title Defects. Prior to the
expiration of the fourteen (14) day period commencing on the
execution of this Agreement (the "Title Examination Period"),
Buyer shall notify Seller in writing of any matters which, in
Buyer's reasonable opinion, constitute Title Defects and which
Buyer intends to assert as a Title Defect with respect to any
portion of a Property Subdivision pursuant to this Article VI.
For all purposes of this Agreement, Buyer shall be deemed to
have waived any Title Defect which Buyer fails to assert as
a Title Defect by written notice given to Seller on or
before the expiration of the Title Examination Period. To be
effective, Buyer's written notice of a Title Defect must
include (i) a brief description of the matter constituting
the asserted Title Defect, (ii) the claimed Title Defect
Amount attributable thereto, and (iii) supporting documents
reasonably necessary for
7
Seller (as well as any title attorney or examiner hired by
Seller) to verify the existence of such asserted Title Defect.
Buyer shall promptly furnish Seller with written notice of
any Seller Title Credit which is discovered by any of Buyer's
employees or representatives while conducting Buyer's title
review, due diligence or investigation with respect to the
Subject Interests and Property Subdivisions.
(b) Purchase Price Allocations. A portion of the
Purchase Price has been allocated to the various Subject
Interests in Property Subdivisions in the manner and in
accordance with the respective values set forth in the
Property Schedule. If any adjustment is made to the Purchase
Price pursuant to this Section 6.2, a corresponding
adjustment shall be made to the portion of the Purchase Price
allocated to the affected Property Subdivision in the Property
Schedule.
(c) Seller's Opportunity to Cure. Seller shall have
until two (2) days prior to the Closing Date, at its cost and
expense, if it so elects but without obligation, to cure all
or a portion of such asserted Title Defects. Any asserted
Title Defects which are waived by Buyer or cured within such
time shall be deemed "Permitted Encumbrances" hereunder. If
Seller within such time fails to cure any Title Defect of which
Buyer has given timely written notice as required above
and Buyer has not and does not waive same on or before the day
immediately preceding the Closing Date, the Property
Subdivision affected by such uncured and unwaived Title Defect
shall be a "Title Defect Property".
(d) Buyer's Title Adjustments. Subject to Section 6.5,
as Buyer's sole and exclusive remedy with respect to Title
Defects, Buyer shall be entitled to reduce the Purchase Price
by the amount, if any, by which the aggregate amount of Title
Defect Amounts with respect to all Title Defect Properties
exceeds the sum of $400,000.00 (the "Title Defect Deductible")
plus the aggregate amount of Seller Title Credits with respect
to all Property Subdivisions. "Title Defect Amount" shall
mean, with respect to a Title Defect Property, the amount by
which the value of such Title Defect Property is impaired as a
result of the existence of one or more Title Defects, which
amount shall be determined as follows:
(1) If the Title Defect results from Seller
having a lesser Net Revenue Interest in such Title
Defect Property than the Net Revenue Interest specified
therefor in the Property Schedule, the Title Defect
Amount shall be equal to the product obtained by
multiplying the portion of the Purchase Price
allocated to such Title Defect Property in the Property
Schedule by a fraction, the numerator or which is the
reduction in the Net Revenue Interest and the denominator of
which is the Net Revenue Interest specified for such
Title Defect Property in the Property Schedule.
(2) If the Title Defect results from Seller
having a greater Working Interest in a Title Defect
Property than the Working Interest specified therefor
in the Property Schedule, the Title Defect Amount
shall be equal to the present value (discounted at 10%
compounded annually) of the increase in the costs and
expenses forecasted in Exhibit B hereto with respect
to such Title Defect Property for the period from and
after the Effective Time which is attributable to such
increase in the Seller's Working Interest.
8
(3) If the Title Defect results from the
existence of a lien, the Title Defect Amount shall be an
amount sufficient to discharge such lien.
(4) If the Title Defect results from any
matter not described in paragraphs (1), (2) or (3)
above, the Title Defect Amount shall be an amount equal
to the difference between the value of the Title Defect
Property affected by such Title Defect with such Title Defect
and the value of such Title Defect Property without
such Title Defect (taking into account the portion
of the Purchase Price allocated in the Property
Schedule to such Title Defect Property); provided, that if
such Title Defect is reasonably susceptible of being
cured, the Title Defect Amount shall be the reasonable
cost and expense of curing such Title Defect, if less.
(5) If a Title Defect is not effective or
does not affect a Title Defect Property throughout the
entire productive life of such Title Defect
Property, such fact shall be taken into account in
determining the Title Defect Amount.
(6) The Title Defect Amount with respect to
a Title Defect Property shall be determined without
duplication of any costs or losses included in another
Title Defect Amount hereunder. For example, but
without limitation, if a lien affects more than one Title
Defect Property or the curative work with respect to one
Title Defect results (or is reasonably expected to
result) in the curing of any other Title Defect
affecting the same or another Title Defect Property, the amount
necessary to discharge such lien or the cost and
expense of such curative work shall only be included in
the Title Defect Amount for one Title Defect Property
and only once in such Title Defect Amount.
(7) If a Title Defect affects only a
portion of a Property Subdivision (as contrasted with
an undivided interest in the entirety of such Property
Subdivision) and a portion of the Purchase Price has
not been allocated specifically to such portion of a
Property Subdivision in the Property Schedule, then
for purposes of computing the Title Defect Amount, the
portion of the Purchase Price allocated to such Property
Subdivision shall be further allocated among the portions
of such Property Subdivision in the proportion that the
portion of the Property Subdivision affected by such
Title Defect bears to the entire Property Subdivision.
(8) The Title Defect Amount attributable
to a Title Defect Property or any portion thereof
shall not exceed the portion of the Purchase Price
allocated to such Title Defect Property or such portion
in Section 6.2(b) and paragraph (7) above. For example, but
without limitation, if the Seller does not own fifty
percent (50%) of the Net Revenue Interest specified in
the Property Schedule for a Title Defect Property and
such unowned fifty percent (50%) interest is also burdened
by a lien, the Title Defect Amount for such Title Defect
Property shall not exceed the portion of the Purchase
Price allocable to such fifty percent (50%) interest
notwithstanding that it may be affected by multiple
Title Defects.
9
(9) No Title Defect Amount shall be allowed
on account of and to the extent that an increase in the
Seller's Working Interest in a Property Subdivision
has the effect of proportionately increasing the
Seller's Net Revenue Interest in such Property Subdivision.
(10) With respect to any Subject Interest
in a Property Subdivision in which Buyer likewise
owned an undivided interest at the Effective Time, no
Title Defect Amount shall be allowed on account of a
Title Defect affecting such Subject Interest that also affected
Buyer's interest in such Property Subdivision at the
Effective Time.
Section 6.3 Determination of Title Defects. A
portion of a Property Subdivision shall be deemed to have a
"Title Defect" if any one or more of the following statements
is untrue with respect to such portion of a Property
Subdivision as of the Effective Time and as of the Closing Date:
(a) The Seller has Defensible Title thereto.
(b) All royalties, rentals, Pugh clause
payments, shut-in gas payments and other payments due
with respect to such portion of a Property
Subdivision have been properly and timely paid, except for
payments held in suspense for title or other reasons
which are customary in the industry and which will
not result in grounds for cancellation of the
Seller's rights in such portion of a Property
Subdivision.
(c) The Seller is not in default under the
material terms of any leases, farm-out agreements
or other contracts or agreements respecting such
portion of a Property Subdivision which could (1)
prevent the Seller from receiving the proceeds of
production attributable to the Seller's interest
therein, or (2) result in cancellation of the
Seller's interest therein.
Section 6.4 Seller Title Credit. A "Seller Title
Credit" shall mean, with respect to a Property Subdivision,
the amount by which the value of such Property Subdivision is
enhanced by virtue of (a) Seller having a greater Net Revenue
Interest in such Property Subdivision than the Net Revenue
specified therefor in the Property Schedule, or (b) Seller
having a lesser Working Interest in such Property
Subdivision than the Working Interest specified therefor in
the Property Schedule, which amount shall be determined as
follows:
(1) If the Seller Title Credit results from
Seller having a greater Net Revenue Interest in such
Property Subdivision than the Net Revenue Interest
specified therefor in the Property Schedule, the
Seller Title Credit shall be equal to the product
obtained by multiplying the portion of the Purchase
Price allocated to such Property Subdivision in
the Property Schedule by a fraction, the numerator
of which is the increase in the Net Revenue Interest and the
denominator of which is the Net Revenue Interest
specified for such Property Subdivision in the Property
Schedule.
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(2) If the Seller Title Credit results from
Seller having a lesser Working Interest in a
Property Subdivision than the Working Interest
specified therefor in the Property Schedule, the Seller Title
Credit shall be equal to the present value
(discounted at 10% compounded annually) of the
decrease in the costs and expenses forecasted in
Exhibit B hereto with respect to such Property
Subdivision for the period from and after the Effective Time
which is attributable to such decrease in Seller's
Working Interest.
(3) In determining the amount of Seller
Title Credits, the principles and methodology set
forth in paragraphs (5), (6) and (7) of Section 6.2(d)
shall be applied, mutatis mutandis.
(4) No Seller Title Credit shall be allowed
on account of and to the extent that a decrease in
Seller's Working Interest in a Property Subdivision
has the effect of proportionately decreasing
Seller's Net Revenue Property Interest in such Property
Subdivision.
The Title Defect Deductible shall be restored to the extent
that any portion thereof is applied as a credit against a Title
Defect Amount attributable to a Title Defect which is
subsequently cured by Seller or determined not to
constitute a Title Defect.
Section 6.5 Exclusion of Defect Properties. On or
before the Closing Date, Seller may elect to retain and exclude
from the Assets to be conveyed to Seller by Buyer pursuant to
the terms hereof any Title Defect Property so long as the
Purchase Price is reduced by the portion of the Purchase Price
allocated to such Title Defect Property in the Property
Schedule. Upon such election by Seller, said Title Defect
Property, together with a pro rata share of all incidental
rights, oil, gas and other hydrocarbons and other assets
attributable or appurtenant thereto, shall be retained by Seller
and excluded from the Assets which are conveyed by Seller to
Buyer pursuant to the Conveyance.
Section 6.6 Deferred Claims and Disputes. In the
event that Buyer and Seller have not agree upon one or more
adjustments, credits or offsets claimed by Buyer or Seller
pursuant to and in accordance with the requirements of this
Article VI, any such claim (a "Deferred Adjustment Claim")
shall be settled pursuant to this Section 6.6 and, except as
provided in Sections 9.1(g) and 9.2(g), shall not prevent or
delay Closing. With respect to each potential Deferred
Adjustment Claim, Buyer and Seller shall deliver to the other a
written notice describing each such potential Deferred
Adjustment Claim, the amount in dispute and a statement setting
forth the facts and circumstances that support such party's
position with respect to such Deferred Adjustment Claim. At
Closing the Purchase Price shall not be adjusted on account of,
and, except as provided in Sections 9.1(e) and 9.2(e), no
effect shall be given to, the Deferred Adjustment Claim. On
or prior to the thirtieth (30th) consecutive calendar day
following the Closing Date (the "Deferred Matters Date"), the
Seller and Buyer shall attempt in good faith to reach agreement
on the Deferred Adjustment Claims and, ultimately, to resolve
by written agreement all disputes regarding the Deferred
Adjustment Claims. Any Deferred Adjustment Claims which are
not so
11
resolved on or before the Deferred Matters Date shall be
submitted to final and binding arbitration in accordance with
the Arbitration Procedures; provided, however, that the
Seller may elect at any time to resolve the disputes relating to
the Deferred Adjustment Claims by the payment to Buyer of the
amount by which the Purchase Price would have been reduced at
Closing on account of the Title Defects which constitute
Deferred Adjustment Claims if same did not constitute Deferred
Adjustment Claims. Notwithstanding anything herein provided
to the contrary, including Section 6.2(c), Seller shall be
entitled to cure any Title Defect which constitutes a Deferred
Adjustment Claim at any time prior to the point in time when
a final and binding written decision of the board of
arbitrators is made with respect thereto in accordance with
the Arbitration Procedures. The amount of any reduction in
the Purchase Price to which Buyer becomes entitled under the
final and binding written decision of the board of arbitrators
shall be promptly refunded by Seller to Buyer.
Section 6.7 No Duplication. Notwithstanding anything
herein provided to the contrary, if a Title Defect results from
a matter which could also result in the breach of any
representation or warranty of Seller set forth in Section 4.1,
then Buyer shall only be entitled to assert such matter as
a Title Defect pursuant to this Article VI and shall be
precluded from also asserting such matter as the basis of the
breach of any such representation or warranty.
ARTICLE VII.
PREFERENCE RIGHTS AND CONSENTS
Section 7.1 Compliance. To Seller's knowledge,
all agreements containing a (i) Preference Right are set
forth in Part I of Schedule 7.1 and (ii) Transfer Requirement
are set forth in Part II of Schedule 7.1 (except such agreements
with respect to which all Preference Rights and Transfer
Requirements applicable to the sale contemplated by this
Agreement have been complied with or waived). Prior to the
Closing Date, Seller shall initiate all procedures
required to comply with or obtain the waiver of all
Preference Rights and Transfer Requirements set forth in
Schedule 7.1 with respect to the transactions contemplated by
this Agreement.
Section 7.2 Effect of Preference Rights. If a third
party who has been offered a Preference Property pursuant to
Section 7.1 elects prior to Closing to purchase such
Preference Property in accordance with the terms of such
Preference Right, and Seller and Buyer receive written notice
of such election prior to the Closing Date, such Preference
Property will be eliminated from the Assets and the Purchase
Price shall be reduced by the portion of the Purchase Price
allocated to such Preference Property pursuant to the
immediately following sentence. The portion of the Purchase
Price to be allocated to any Asset or portion thereof
affected by a Preference Right (a "Preference Property")
shall be the portion of the Purchase Price allocated thereto in
the Property Schedule. If a Preference Right affects only a
portion of a Property Subdivision and a portion of the
Purchase Price has not been allocated specifically to such
portion of a Property Subdivision in the Property Schedule, then
the portion of the Purchase Price to be allocated to such
Preference Property shall be determined in the same manner as
provided in Section 6.2(d)(7) when a Title Defect affects only a
portion of a Property Subdivision. If a third party who has been
offered a Preference Property or who has been requested to
waive its Preference Right pursuant to Section 7.1 does not
elect to purchase
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such Preference Property or waive such Preference Right
with respect to the transactions contemplated by this
Agreement prior to the Closing Date, such Preference Property
shall be conveyed to Buyer at Closing subject to such
Preference Right, unless such Preference Property has been
otherwise eliminated from the Assets in accordance with other
provisions of this Agreement. If a third party elects to
purchase a Preference Property subject to a Preference Right
and Closing has already occurred with respect to such Preference
Property, Buyer shall be obligated to convey said Preference
Property to such third party and shall be entitled to the
consideration for the sale of such Preference Property.
Section 7.3 Transfer Requirements. If a Transfer
Requirement applicable to the transactions contemplated by
this Agreement is not obtained, complied with or otherwise
satisfied prior to the Closing Date; then, unless otherwise
mutually agreed by Seller and Buyer, any Asset or portion
thereof affected by such Transfer Requirement (a "Retained
Asset") shall be held back from the Assets to be transferred
and conveyed to Buyer at Closing and the Purchase Price to be
paid at Closing shall be reduced by the portion of the
Purchase Price which would be allocated to such Retained Asset
pursuant to Section 7.2 if such Retained Asset were a
Preference Property. Any Retained Asset so held back at the
initial Closing will be conveyed to Buyer within ten (10) days
following the date on which Seller obtains, complies with or
otherwise satisfies all Transfer Requirements with respect to
such Retained Assets for a purchase price equal to the amount by
which the Purchase Price was reduced on account of the
holding back of such Retained Asset; provided, however, if
all Transfer Requirements with respect to any Retained Asset
so held back at the initial Closing are not obtained, complied
with or otherwise satisfied within one hundred twenty (120)
days following the Closing Date, then such Retained Asset
shall be eliminated from the Assets and this Agreement unless
Seller and Buyer mutually agreed to proceed with a closing on
such Retained Asset in which case Buyer shall be deemed to
have waived any objection with respect to non-compliance
with such Transfer Requirements. In connection with any
subsequent conveyance of a Retained Asset, appropriate
adjustments in Net Cash Flow and proration of revenues and
expenses will be made to account for any delayed Closing
with respect to a Retained Asset.
ARTICLE VIII.
COVENANTS OF SELLER AND BUYER
Section 8.1 Conduct of Business Pending Closing.
Subject to Section 8.2 and the constraints of applicable
operating and other agreements from the date hereof through the
Closing, except as disclosed in Schedule 8.1, or as otherwise
consented to or approved by Buyer in writing (which consent or
approval shall not be unreasonably withheld or delayed), Seller
covenants and agrees that:
(a) Sales. Sellers shall not sell, transfer, assign,
convey, farmout, release, abandon or otherwise dispose of
any Assets, or enter into any transaction the effect of
which would be to cause Seller's ownership interest in any of
the Assets to be altered from Seller's ownership interest as of
the date of this Agreement, other than (i) oil, gas and other
hydrocarbons produced, saved and sold in the ordinary course
of business, and (ii) personal property
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and equipment which is replaced with personal property
and equipment of comparable or better value and utility in
the ordinary and routine maintenance and operation of the
Assets.
(b) Encumbrances. Sellers shall not create or permit
the creation of any lien, security interest or encumbrance on
any Assets, except to the extent required or permitted
incident to the operation of the Assets pursuant to this
Section 8.1.
(c) Operation of Assets. Seller shall:
(1) cause the Assets to be maintained
and operated in the ordinary course of
business, in accordance with Law, maintain
insurance now in force with respect to the Assets,
and pay or cause to be paid all costs and expenses
in connection therewith promptly when due;
(2) not commit to participate in the
drilling or any new well or other new
operations on the Assets the cost of which
(net to Seller's interest) is in excess of $15,000.00 in
any single instance, without the advance written
consent of Buyer, which consent or
non-consent must be given by Buyer within the
lesser of (x) ten (10) days of Buyer's receipt of
the notice from Seller or (y) one-half (1/2) of the
applicable notice period within which Seller is
contractually obligated to respond to third
parties to avoid a deemed election by Seller
regarding such operation, as specified in Seller's
notice to Buyer requesting such consent; and
(3) maintain and keep the Assets
in full force and effect, except where such
failure is due to (i) the failure to pay a
delay rental, royalty, shut in royalty or other payment
by mistake or oversight (including Seller's negligence)
unless caused by Seller's gross negligence or
willful misconduct, or (ii) the failure to
participate in an operation which Buyer does
not timely approve.
(d) Contracts and Agreements. Seller shall not:
(1) grant or create any Preference
Right or Transfer Requirement with respect to the
Assets except in connection with the performance by
Seller or an obligation or agreement existing on the
date hereof or pursuant to this Agreement;
(2) enter into any oil, gas or other
hydrocarbon sales, supply, exchange, processing or
transportation contract with respect to the Assets
which is not terminable without penalty or detriment on
notice of ninety (90) days or less; or
(3) voluntarily relinquish any Seller's
position as operator with respect to the Assets.
(e) Notice of Defaults. Seller shall give prompt
written notice to Buyer of any notice of default (or threat
of default, whether disputed or denied) received or given
by Seller under any material instrument or agreement affecting
the Assets to which Seller is a party or by which Seller or any
of the Assets are bound.
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Section 8.2 Qualifications on Seller's Conduct.
(a) Emergencies; Legal Requirements. Seller may take
(or not take, as the case may be) any of the actions mentioned
in Section 8.1 above if reasonably necessary under emergency
circumstances (or if required or prohibited (as the case may
be) pursuant to Law and provided Buyer is notified as soon
thereafter as practicable.
(b) Non-Operated Properties. If Seller is not the
operator of a particular portion of the Assets, the
obligations of Seller in Section 8.1 above with respect to such
portion of the Assets, which have reference to operations or
activities which pursuant to existing contracts are carried out
or performed by the operator, shall be construed to require
only that Seller use its best efforts (without being obligated
to incur any expense or institute any cause of action) to cause
the operator of such portion of the Assets to take such actions
or render such performance within the constraints of the
applicable operating agreements and other applicable agreements.
(c) Certain Operations. Should Seller not wish to pay
any lease rental or other payment or participate in any
reworking, deepening, drilling, completion, equipping or
other operation on or with respect to any well or other Property
Subdivision which may otherwise be required by Section 8.1
above, Seller shall give Buyer written notice thereof at least
fifteen (15) days prior to the date such rental or other payment
is due or, in the case of an operation, promptly after Seller
receives notice of such proposed operation from the operator
of such property (or if Seller is the operator, at the same time
Seller gives or is required to give notice of such
proposed operation to the non-operators of such property);
and Seller shall not be obligated to make any such payment or to
elect to participate in any such operation which Seller does
not wish to make or participate in unless Seller receives from
Buyer, within a reasonable time prior to the date when such
payment or election is required to be made by Seller, the
written election and agreement of Buyer (i) to require Seller
to take such action and (ii) to pay all costs and expenses of
Seller with respect to such lease rental or other payment or
such operation. Notwithstanding the foregoing, Seller shall
not be obligated to pay any lease rental or other payment or to
elect to participate in any operation if the operator of
the property involved recommends that such action not be
taken. If Buyer advances any funds pursuant to this Section
8.2(c) with respect to a particular portion of the Assets, such
portion of the Assets is not conveyed to Buyer at Closing or
Closing does not occur, and such funds are not reimbursed to
Buyer within thirty (30) days after the earlier of Closing or
termination of this Agreement, then with respect to such
particular portion of the Assets, (i) Buyer shall own and be
entitled to any interest of Seller that would have lapsed
but for such payment or (ii) in the case of operations, Buyer
shall be entitled to receive the penalty, if any, that Seller,
as nonconsenting party, would have suffered under the
applicable operating or other agreement with respect to
such operations as if Buyer were a consenting party thereunder;
in each case, subject to and after deduction of any damages or
other relief to which Seller may be entitled with respect to
any breach by Buyer of this Agreement.
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Section 8.3 Conveyance. Upon the terms and subject to
the conditions of this Agreement, at or prior to the Closing,
Seller and Buyer shall execute and deliver or cause the
execution and delivery of the General Conveyance, in
substantially the form attached hereto as Exhibit 8.3 (the
"Conveyance").
Section 8.4 Public Announcements. Without the prior
written approval of the other party hereto, no party hereto
will issue, or permit any agent or affiliate of it to issue,
any press releases or otherwise make, or cause any agent or
affiliate of it to make, any public statements with respect
to this Agreement and the transactions contemplated hereby,
except where such release or statement is deemed in good faith
by the releasing party to be required by Law or any national
securities exchange, in which case the party will use its best
efforts to provide a copy to the other party prior to any
release or statement.
Section 8.5 Further Assurances. Seller and Buyer each
agrees that, from time to time, whether before, at or after
the Closing Date, each of them will execute and deliver or cause
their respective affiliates to execute and deliver such further
instruments of conveyance and transfer and take such other
action as may be necessary to carry out the purposes and intents
of this Agreement. Any separate or additional assignment of the
Assets or any portion thereof required pursuant to this Section
8.5 (i) shall evidence the conveyance and assignment of the
Assets made or intended to be made in the Conveyance, (ii)
shall not modify or be deemed to modify any of the terms,
covenants and conditions set forth in the Conveyance, and
(iii) shall be deemed to contain all of the terms and
provisions of the Conveyance, as fully as though the same
were set forth at length in such separate or additional
assignment.
Section 8.6 Removal. Within a reasonable period of
time following the Closing, Buyer shall remove the name
and mark of Seller and any of its affiliates and any
variations and derivatives thereof and logos relating thereto
from the Assets.
Section 8.7 Records. Within a reasonable period of
time following the Closing, Seller shall make all Records
available for delivery to Buyer in Houston, Texas. Buyer
agrees to maintain the Records that are acquired pursuant to
this Agreement until the fifth anniversary of the Closing Date
(or for such longer period of time as Seller shall advise Buyer
is necessary in order to have Records available with respect to
open years for tax audit purposes), or, if any of such Records
pertain to any claim or dispute pending on the fifth anniversary
of the Closing Date, Buyer shall maintain any of such Records
designated by Seller until such claim or dispute is finally
resolved and the time for all appeals has been exhausted.
Buyer shall provide Seller and its representatives reasonable
access to and the right to copy such Records, at Seller's
expense, for the purposes of (i) preparing and delivering any
accounting provided for in this Agreement, (ii) complying
with any law, rule or regulation affecting Seller's interest
in the Assets prior to the Closing Date, (iii) preparing any
audit of the books and records of any third party relating to
Seller's interest in the Assets prior to the Closing Date, or
responding to any audit prepared by such third parties, (iv)
preparing tax returns, (v) responding to or disputing any tax
audit or (vi) asserting, defending or otherwise dealing with
any claim or dispute under this Agreement or with respect to the
Assets. In no event shall
16
Buyer destroy any such Records without giving Seller sixty
(60) days' advance written notice thereof and the opportunity,
at Seller's expense, to obtain such Records prior to their
destruction. Buyer shall have no liability to Seller
regarding this Section 8.7 in the event of any destruction of
the Records which may occur due to no fault of Buyer as a result
of an act of God.
ARTICLE IX.
CLOSING CONDITIONS
Section 9.1 Seller's Closing Conditions. The
obligation of Seller to consummate the transactions
contemplated hereby is subject, at the option of Seller, to
the satisfaction on or prior to the Closing Date of all of
the following conditions:
(a) Representations, Warranties and Covenants. The (1)
representations and warranties of Buyer contained in this
Agreement shall be true and correct in all material respects
on and as of the Closing Date, and (2) covenants and
agreements of Buyer to be performed on or before the Closing
Date in accordance with this Agreement shall have been duly
performed in all material respects.
(b) Officer's Certificate. Seller shall have
received a certificate dated as of the Closing Date, executed by
a duly authorized officer of Buyer, to the effect that to such
officer's knowledge the conditions set forth in paragraph
(a) of this Section 9.1 have bene satisfied.
(c) Conveyance. Buyer shall have executed and
delivered the Conveyance prior to or on the Closing Date.
(d) No Action. On the Closing Date, no suit, action or
other proceeding (excluding any such matter initiated by Seller
or any of its affiliates) shall be pending or threatened
before any court or governmental agency or body of competent
jurisdiction seeking to enjoin or restrain the consummation of
this Agreement or recover damages from Seller resulting
therefrom.
(e) Title Adjustments. The sum of (i) the reduction
in the Purchase Price on account of the aggregate amount of
all Title Defect Amounts and the exclusion of Title Defect
Properties pursuant to Section 6.5, and (ii) the aggregate
amount of Title Defect Amounts claimed by Buyer with
respect to unresolved Deferred Adjustment Claims, and (iii)
the reduction in the Purchase Price on account of the exclusion
of Retained Assets pursuant to Section 7.3 shall not exceed
$1,200,000.00.
(f) Lender Approval. Seller shall have received written
approval of the sale provided for under this Agreement by
Barclays Bank as lead bank pursuant to Seller's Revolving Credit
Facility dated January 21, 1991, as amended.
Section 9.2 Buyer's Closing Conditions. The
obligation of Buyer to consummate the transactions
contemplated hereby is subject, at the option of Buyer, to
the satisfaction on or prior to the Closing Date of all
of the following conditions:
17
(a) Representations, Warranties and Covenants. The (1)
representations and warranties of Seller contained in this
Agreement shall be true and correct in all material respects
on and as of the Closing Date, and (2) covenants and
agreements of Seller to be performed on or before the Closing
Date in accordance with this Agreement shall have been duly
performed in all material respects.
(b) Officer's Certificate. Buyer shall have
received a certificate dated as of the Closing Date, executed
by a duly authorized officer of Seller, to the effect that to
such officer's knowledge the conditions set forth in
paragraph (a) of this Section 9.1 have bene satisfied.
(c) Conveyance. Seller shall have executed and
delivered the Conveyance prior to or on the Closing Date.
(d) No Action. On the Closing Date, no suit, action or
other proceeding (excluding any such matter initiated by Buyer
or any of its affiliates) shall be pending or threatened
before any court or governmental agency or body of
competent jurisdiction seeking to enjoin or restrain the
consummation of this Agreement or recover damages from Buyer
resulting therefrom.
(e) Title Adjustments. The sum of (i) the reduction
in the Purchase Price on account of the aggregate amount of
all Title Defect Amounts and the exclusion of Title Defect
Properties pursuant to Section 6.5, and (ii) the aggregate
amount of Title Defect Amounts claimed by Buyer with
respect to unresolved Deferred Adjustment Claims, and (iii)
the reduction in the Purchase Price on account of the exclusion
of Retained Assets pursuant to Section 7.3 shall not exceed
$1,200,000.00.
ARTICLE X.
CLOSING
Section 10.1 Closing. The Closing shall be held on the
Closing Date at 10:00 a.m., Houston time, at the offices of
Seller at 1600 Smith Street, Suite 1400, Houston, Texas, or
at such other time or place as Seller and Buyer may otherwise
agree in writing.
Section 10.2 Seller's Closing Obligations. At
Closing, Seller shall execute and deliver, or cause to be
executed and delivered, to Buyer the following:
(a) The Conveyance;
(b) The officer's certificate referred to in Section
9.2(b);
(c) An affidavit of Non-Foreign Status,
substantially in the form attached hereto as Exhibit 10.2(c);
and
(d) Letters in lieu of division and transfer orders
executed by Seller relating to the Subject Interests in form
reasonably necessary to reflect the conveyances contemplated
hereby.
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Section 10.3 Buyer's Closing Obligations. At Closing,
Buyer shall (i) deliver or cause to be delivered, the Adjusted
Purchase Price minus the Deposit to Seller in immediately
available funds to the bank account as provided in Section
3.2 and (ii) execute and deliver, or cause to be executed and
delivered, to Seller the following:
(a) The Conveyance; and
(b) The officer's certificate of Buyer referred to in
Section 9.1(b).
ARTICLE XI.
EFFECT OF CLOSING
Section 11.1 Revenues. After Closing, all
proceeds, accounts receivable, notes receivable, income,
revenues, monies and other items included in or attributed to
the Excluded Assets and all other Excluded Assets shall
belong to and be paid over to Seller and all proceeds,
accounts receivable, notes receivable, income, revenues,
monies and other items included in or attributable to the
Assets with respect to any period of time after the
Effective Time shall belong to and be paid over to Buyer
except to the extent credited to Buyer in calculating the
Adjusted Purchase Price.
Section 11.2 Expenses. After Closing, all accounts
payable and other costs and expenses with respect to the
Assets for which Seller is given credit in the determination
of Net Cash Flow pursuant to Section 3.3, as adjusted
pursuant to Section 3.4, shall be borne by Seller.
Section 11.3 Payments and Obligations. If monies are
received by any party hereto which, under the terms of this
Article XI, belong to another party, the same shall immediately
be paid over to the proper party. If an invoice or other
evidence of an obligation is received which under the
terms of this Article XI is partially the obligation of Seller
and partially the obligation of Buyer, then the parties shall
consult each other and each shall promptly pay its portion of
such obligation to the obligee.
Section 11.4 Survival. No representation,
warranty, covenant or agreement made herein shall survive
the Closing except as provided in this Section 11.4. It is
expressly agreed that the terms and provisions of (a)
Article IV shall survive the Closing for a period of one
hundred eighty (180) days from the Closing Date and (b)
Sections 3.4, 3.6, 6.1, 6.6, 6.7, 7.2, 7.3, 8.2(c), 8.4,
8.5, 8.6, 8.7 and 14.3 and Articles XI, XIII and XV shall
survive the Closing indefinitely. In addition, the definitions
set forth in Appendix A to this Agreement which are used in
representations, warranties, covenants and agreements which
survive the Closing pursuant to this Section 11.4 shall survive
the Closing to the extent necessary to give operative effect
to such surviving representations, warranties, covenants and
agreements.
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ARTICLE XII.
CASUALTY AND CONDEMNATION
Section 12.1 No Termination. If after the Effective
Time and prior to the Closing any part of the Assets shall be
destroyed by fire or other casualty or if any part of the
Assets shall be taken in condemnation or under the right of
eminent domain or if proceedings for such purposes shall be
pending or threatened, this Agreement shall remain in full
force and effect notwithstanding any such destruction, taking or
proceeding or the threat thereof.
Section 12.2 Proceeds and Awards. To the extent
insurance proceeds, condemnation awards or other payments
are not committed, used or applied by Seller prior to the
Closing Date to repair, restore or replace such damaged or
taken Assets, Seller shall at the Closing pay to Buyer all
sums paid to Seller by reason of such destruction or taking
less any reasonable costs and expenses incurred by Seller in
collecting same.
ARTICLE XIII
ASSUMPTION AND INDEMNIFICATION
Section 13.1 Indemnification By Buyer. FROM AND AFTER
THE CLOSING DATE, BUYER SHALL ASSUME AND PAY, PERFORM,
FULFILL AN DISCHARGE ALL ASSUMED LIABILITIES, AND SHALL
INDEMNIFY AND HOLD HARMLESS THE SELLER, ITS PRESENT AND FORMER
DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS, AND EACH OF THE
DIRECTORS, OFFICERS, HEIRS, EXECUTORS, SUCCESSORS AND
ASSIGNS OF ANY OF THE FOREGOING (COLLECTIVELY, THE "SELLER
INDEMNIFIED PARTIES") FROM AND AGAINST ANY AND ALL (I) ASSUMED
LIABILITIES INCURRED BY OR ASSERTED AGAINST ANY OF THE
SELLER INDEMNIFIED PARTIES, INCLUDING, WITHOUT LIMITATION, ANY
ASSUMED LIABILITY OF THE SELLER INDEMNIFIED PARTY OR ANY OTHER
THEORY OF LIABILITY, WHETHER IN LAW (WHETHER COMMON OR
STATUTORY) OR EQUITY AND (II) ANY COVERED LIABILITY RESULTING
FROM ANY MISREPRESENTATION, BREACH OF WARRANTY OR NONFULFILLMENT
OF ANY COVENANT OR AGREEMENT ON THE PART OF BUYER HEREUNDER.
Section 13.2 Indemnification by Seller. FROM AND
AFTER THE CLOSING DATE, SELLER SHALL INDEMNIFY AND HOLD
HARMLESS THE BUYER, ITS PRESENT AND FORMER DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS, AND EACH OF THE HEIRS, EXECUTORS,
SUCCESSORS AND ASSIGNS OF ANY OF THE FOREGOING
(COLLECTIVELY, THE "BUYER INDEMNIFIED PARTIES") FROM AND
AGAINST ANY AND ALL (I) ASSUMED LIABILITIES INCURRED BY OR
ASSERTED AGAINST ANY OF THE BUYER INDEMNIFIED PARTIES,
INCLUDING, WITHOUT LIMITATION, ANY ASSUMED LIABILITY OF THE
BUYER INDEMNIFIED PARTY OR ANY OTHER THEORY OF LIABILITY,
WHETHER IN LAW (WHETHER COMMON OR STATUTORY) OR
20
EQUITY AND (II) ANY COVERED LIABILITY RESULTING FROM ANY
MISREPRESENTATION, BREACH OF WARRANTY OR NONFULFILLMENT OF ANY
COVENANT OR AGREEMENT ON THE PART OF SELLER HEREUNDER.
Section 13.3 Third Party Claims. If a claim by a
third party is made against a Seller Indemnified Party or a
Buyer Indemnified Party (an "Indemnified Party"), and if such
party intends to seek indemnity with respect thereto under this
Article XIII, such Indemnified Party shall promptly notify Buyer
or Seller, as the case may be (the "Indemnitor"), of such
claims. The Indemnitor shall have thirty (30) days after receipt
of such notice to undertake, conduct and control, through
counsel of its own choosing and at its own expense, the
settlement or defense thereof, and the Indemnified Party shall
cooperate with it in connection therewith; provided that the
Indemnitor shall permit the Indemnified Party to participate
in such settlement or defense through counsel chosen by
such Indemnified Party; however, the fees and expenses of such
counsel shall be borne by such Indemnified Party. So long as
the Indemnitor, at Indemnitor's cost and expense, (1) has
undertaken the defense of, and assumed full responsibility for
all Covered Liabilities with respect to, such claim, (2)
is reasonably contesting such claim in good faith, by
appropriate proceedings, and (3) has taken such action
(including the posting of a bond, deposit or other security) as
may be necessary to prevent any action to foreclose a
lien against or attachment of the property of the Indemnified
Party for payment of such claim, the Indemnified Party shall
not pay or settle any such claim. Notwithstanding compliance by
the Indemnitor with the preceding sentence, the Indemnified
party shall have the right to pay or settle any such claim,
provided that in such event it shall waive any right to
indemnity therefor by the Indemnitor for such claim. If, within
thirty (30) days after the receipt of the Indemnified Party's
notice of a claim of indemnity hereunder, the Indemnitor
does not notify the Indemnified Party that it elects, at
Indemnitor's cost and expense, to undertake the defense thereof
and assume full responsibility for all Covered Liabilities
with respect thereto, or gives such notice and thereafter fails
to contest such claim in good faith or to prevent action to
foreclose a lien against or attachment of the Indemnified
Party's property as contemplated above, the Indemnified
Party shall have the right to contest, settle or compromise
the claim but shall not thereby waive any right to indemnity
therefor pursuant to this Agreement.
ARTICLE XIV.
TERMINATION; REMEDIES; LIMITATIONS
Section 14.1 Termination.
(a) Termination of Agreement. This Agreement and
the transactions contemplated hereby may be terminated at any
time prior to the Closing:
(1) By the mutual consent of Seller and
Buyer; or
(2) If the Closing has not occurred by the
close of business on the Closing Date, then (i) by
Seller if any condition specified in Section 9.1 has
not been satisfied on or before such close of business,
and shall not theretofore have been waived by Seller, or
21
(ii) Buyer if any condition specified in Section
9.2 has not been satisfied on or before such close
of business, and shall not theretofore have been
waived by Buyer; provided, in each case, that the
failure to consummate the transactions contemplated hereby on or
before such date did not result from the failure by
the party or parties seeking termination of this
Agreement to fulfill any undertaking or commitment
provided for herein on the part of such party or parties
that is required to be fulfilled on or prior to Closing.
(b) Effect of Termination. In the event of
termination of this Agreement by Seller, on the one hand, or
Buyer, on the other hand, pursuant to Section 14.1, written
notice thereof shall forthwith be given by terminating party
or parties to the other party or parties hereto, Seller shall
return to Buyer the Deposit, and this Agreement shall
thereupon terminate; provided, however, that following such
termination Buyer will continue to be bound by its obligations
set forth in Article V. If this Agreement is terminated as
provided herein all filings, applications and other submissions
made to any Governmental Authority shall, to the extent
practicable, be withdrawn from the Governmental Authority to
which they were made and any notices or offers made pursuant
to Section 7.1 shall become void.
Section 14.2 Remedies.
(a) Seller's Remedies. Notwithstanding anything herein
provided to the contrary, upon the failure by Buyer to fulfill
any undertaking or commitment provided for herein on the
part of Buyer that is required to be fulfilled on or prior to
the Closing Date, Seller, at its sole option, may (i) enforce
specific performance of this Agreement or (ii) terminate this
Agreement and retain the Deposit as liquidated damages, as
Seller's sole and exclusive remedies for such default, all
other remedies being expressly waived by Seller. Seller and
Buyer agree upon the Deposit amount as liquidated damages due
to the difficulty and inconvenience of measuring actual
damages and the uncertainty thereof, and Seller and Buyer
agree that the Deposit amount is a reasonable estimate of
Seller's loss in the event of any such default by Buyer.
(b) Buyer's Remedies. Notwithstanding anything herein
provided to the contrary, upon the failure by Seller to fulfill
any undertaking or commitment provided for herein on the part
of Seller that is required to be fulfilled on or prior to the
Closing Date, Buyer, at its sole option, may (i) enforce
specific performance of this Agreement or (ii) terminate this
Agreement and retain the Deposit as liquidated damages, as
Buyer's sole and exclusive remedies for such default, all other
remedies being expressly waived by Buyer.
Section 14.3 Limitations.
(a) Disclaimer of Warranties. NOTWITHSTANDING ANYTHING
CONTAINED TO THE CONTRARY IN ANY OTHER PROVISION OF THIS
AGREEMENT, IT IS THE EXPLICIT INTENT OF EACH PARTY HERETO
THAT SELLER IS NOT MAKING ANY REPRESENTATION OR WARRANTY
WHATSOEVER, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE,
BEYOND THOSE REPRESENTATIONS OR WARRANTIES EXPRESSLY GIVEN IN
THIS AGREEMENT, AND IT IS
22
UNDERSTOOD THAT BUYER TAKES THE ASSETS AS IS AND WHERE IS AND
WITH ALL FAULTS. WITHOUT LIMITING THE GENERALITY OF THE
IMMEDIATELY PRECEDING SENTENCE, SELLER HEREBY (I) EXPRESSLY
DISCLAIMS AND NEGATES ANY REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, AT COMMON LAW, BY STATUTE OR OTHERWISE,
RELATING TO (A) THE CONDITION OF THE ASSETS (INCLUDING, WITHOUT
LIMITATION, ANY IMPLIED OR EXPRESS WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR
OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS) OR (B) ANY
INFRINGEMENT BY SELLER OR ANY OF ITS AFFILIATES OF ANY PATENT OR
PROPRIETARY RIGHT OF ANY THIRD PARTY; AND (II) NEGATES ANY
RIGHTS OF BUYER UNDER STATUTES TO CLAIM DIMINUTION OF
CONSIDERATION AND ANY CLAIMS BY BUYER FOR DAMAGES BECAUSE OF
DEFECTS, WHETHER KNOWN OR UNKNOWN, IT BEING THE INTENTION OF
SELLER AND BUYER THAT THE ASSETS ARE TO BE ACCEPTED BY BUYER IN
THEIR PRESENT CONDITION AND STATE OF REPAIR.
(b) Texas Deceptive trade Practices Act Waiver.
BUYER (A) REPRESENTS AND WARRANTS TO SELLER THAT IT (i) IS
ACQUIRING THE ASSETS FOR COMMERCIAL OR BUSINESS USE, (ii) IS
REPRESENTED BY LEGAL COUNSEL, (iii) ACKNOWLEDGES THE
CONSIDERATION PAID OR TO BE PAID FOR THE ASSETS WILL EXCEED
$500,000, AND (iv) HAS KNOWLEDGE AND EXPERIENCE IN FINANCIAL
AND BUSINESS MATTERS SUCH THAT ENABLE IT TO EVALUATE THE
MERITS AND RISKS OF THE TRANSACTION CONTEMPLATED BY THIS
AGREEMENT AND IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING
POSITION WITH RESPECT TO THE SELLER; AND (B) HEREBY
UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY AND ALL RIGHTS OR
REMEDIES IT MAY HAVE UNDER THE DECEPTIVE TRADE PRACTICES
CONSUMER PROTECTION ACT OF THE STATE OF TEXAS, TEX. BUS. &
COM. CODE ss. 17.41 ET SEQ. TO THE MAXIMUM EXTENT IT CAN DO SO
UNDER APPLICABLE LAW, IF SUCH ACT WOULD FOR ANY REASON BE
DEEMED APPLICABLE TO THE TRANSACTIONS CONTEMPLATED HEREBY.
WAIVER OF CONSUMER RIGHTS
BUYER WAIVES ITS RIGHTS UNDER THE DECEPTIVE TRADE
PRACTICES - CONSUMER PROTECTION ACT, SECTION 17.41 ET
SEQ., BUSINESS & COMMERCE CODE, A LAW THAT GIVES
CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION
WITH AN ATTORNEY OF BUYER'S OWN SELECTION, BUYER
VOLUNTARILY CONSENTS TO THIS WAIVER.
(c) Damages. NOTWITHSTANDING ANYTHING CONTAINED TO THE
CONTRARY IN ANY OTHER PROVISION OF THIS AGREEMENT, SELLER
AND BUYER AGREE THAT, EXCEPT FOR LIQUIDATED DAMAGES
SPECIFICALLY PROVIDED FOR IN SECTION 14.2, THE RECOVERY BY
23
EITHER PARTY HERETO OF ANY DAMAGES SUFFERED OR INCURRED BY IT
AS A RESULT OF ANY BREACH BY THE OTHER PARTY OF ANY OF
ITS REPRESENTATIONS, WARRANTIES OR OBLIGATIONS UNDER THIS
AGREEMENT SHALL BE LIMITED TO THE ACTUAL DAMAGES SUFFERED OR
INCURRED BY THE NON- BREACHING PARTY AS A RESULT OF THE
BREACH BY THE BREACHING PARTY OF ITS REPRESENTATIONS,
WARRANTIES OR OBLIGATIONS HEREUNDER AND IN NO EVENT SHALL THE
BREACHING PARTY BE LIABLE TO THE NON-BREACHING PARTY FOR ANY
INDIRECT, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES SUFFERED
OR INCURRED BY THE NON- BREACHING PARTY AS A RESULT OF THE
BREACH BY THE BREACHING PARTY OF ANY OF ITS REPRESENTATIONS,
WARRANTIES OR OBLIGATIONS HEREUNDER.
ARTICLE XV.
MISCELLANEOUS
Section 15.1 Counterparts. This Agreement may be
executed in one or more counterparts, all of which shall be
considered one and the same agreement, and shall become
effective when one or more counterparts have been signed by
each of the parties and delivered to the other party.
Section 15.2 Governing Law. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TEXAS WITHOUT REFERENCE TO THE CONFLICT OF LAW
PRINCIPLES THEREOF.
Section 15.3 Entire Agreement. This Agreement and
the Schedules and Exhibits hereto contain the entire agreement
between the parties with respect to the subject matter hereof
and there are no agreements, understandings,
representations or warranties between the parties other than
those set forth or referred to herein. The headings herein are
for convenience only and shall have no significance in the
interpretation hereof.
Section 15.4 Expenses Buyer shall be responsible
for (i) any sales Taxes which may become due and owing by
reason of the sale of the Assets hereunder, (ii) all
transfer, stamp, documentary and similar Taxes imposed on the
parties hereto with respect to the property transfer
contemplated pursuant to this Agreement and (iii) all
recording fees relating to the filing of instruments
transferring title to Buyer from Seller. Seller shall be
responsible for (i) all recording and other fees relating to
title curative documents and (ii) all income and other Taxes
incurred by or imposed on Seller with respect to the
transactions contemplated hereby. All other costs and expenses
incurred by each party hereto in connection with all things
required to be done by it hereunder, including attorney's
fees, accountant fees and the expense of title examination,
shall be borne by the party incurring same.
24
Section 15.5 Notices. All notices hereunder shall be
sufficiently given for all purposes hereunder if in writing
and delivered personally, sent by documented overnight
delivery service or, to the extent receipt is confirmed, by
United States Mail, telecopy, telefax or other electronic
transmission service to the appropriate address or number as set
forth below. Notices to Seller shall be addressed as follows:
Hardy Oil & Gas USA Inc. 1600
Smith Street, Suite 1400 Houston, Texas
77002-7346 Attention: James M. Fitzpatrick
Telecopy No.: (713) 951-7329
or at such other address and to the attention of such other
Person as Seller may designate by written notice to Buyer.
Notices to Buyer shall be addressed to:
Arch Petroleum, Inc. 777
Taylor Street, Suite II-A Fort Worth, Texas
76102 Attention: Larry Kalas
Telecopy No: (817) 332-9249
or at such other address and to the attention of such other
Person as Buyer may designate be written notice to Seller.
Section 15.6 Successors and Assigns. This Agreement
shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and
assigns; provided, however, that the respective rights and
obligations of the parties hereto shall not be assignable or
delegable by any party hereto without the express written
consent of the non-assigning or nondelegating party.
Section 15.7 Amendments and Waivers. This Agreement may
not be modified or amended except by an instrument or
instruments in writing signed by the party against whom
enforcement of any such modification or amendment is sought.
Any party hereto may, only by an instrument in writing, waive
compliance by another party hereto with any term or provision
of this Agreement on the part of such other party hereto to be
performed or complied with. The waiver by any party hereto
of a breach of any term or provision of this Agreement
shall not be construed as a waiver of any subsequent breach.
Section 15.8 Schedules and Exhibits. All Schedules and
Exhibits hereto which are referred to herein are hereby made
a part hereof and incorporated herein by such reference.
Section 15.9 Purchase Price Allocation for Tax
Purposes. Seller and Buyer agree that the Purchase Price shall
be allocated to the various Assets for federal and state income
tax purposes only in the manner set forth in Schedule
25
15.9. The parties agree not to take a federal or state
income tax reporting position inconsistent with the
allocations set forth on Schedule 15.9. The parties further
agree that the allocations set forth on Schedule 15.9 represent
reasonable estimates of the fair market values of the Assets
described herein.
Section 15.10 Ad Valorem Tax Proration. Ad valorem
taxes related to the Assets will be prorated as of the
Effective Time. For ad valorem taxes for a period which the
Effective Time splits which have been paid by Seller, Buyer
shall reimburse Seller for the portion thereof equal to the
percentage of such period represented by the portion of such
period beginning at the Effective Time. For ad valorem taxes
for a period which the Effective Time splits which have not
been paid by Seller, Buyer shall pay such taxes and Seller
shall reimburse Buyer for a percentage of such taxes equal
to the portion of such period which ends on the day immediately
preceding the Effective Time.
Section 15.11 Agreement for the Parties' Benefit
Only. Except as specified in Article XIII, which is also
intended to benefit and to be enforceable by any of the
Indemnified Parties, this Agreement is not intended to confer
upon any Person not a party hereto any rights or remedies
hereunder, and no Person, other than the parties hereto or the
Indemnified Parties, is entitled to rely on any representation,
warranty, covenant or agreement contained herein. In each case,
such third party beneficiary may only bring suit against
the defaulting party or parties.
Section 15.12 Attorneys' Fees. The prevailing
party in any legal proceeding brought under or to enforce
this Agreement shall be additionally entitled to recover
court costs and reasonable attorneys' fees from the
nonprevailing party.
Section 15.13 Severability. If any term or other
provision of this Agreement is invalid, illegal or incapable
of being enforced by any rule of law or public policy, all
other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated
hereby is not affected in any adverse manner to any party. Upon
such determination that any term or other provision is invalid,
illegal or incapable or being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent
possible.
Section 15.14 No Recordation. Without limiting any
party's right to file suit to enforce its rights under this
Agreement, Buyer and Seller expressly covenant and agree not to
record or place of record this Agreement or any copy or
memorandum hereof.
Section 15.15 Time of Essence. Time is of the
essence in this Agreement.
IN WITNESS WHEREOF, this Agreement has been signed by
or on behalf of each of the parties as of the day first above
written.
26
SELLER:
HARDY OIL & GAS USA INC.
By:
___________________________________
James M. Fitzpatrick,
Vice President - Land & Legal
BUYER:
ARCH PETROLEUM, INC.
By:
____________________________________
Larry Kalas
President
27
APPENDIX A
TO ASSET PURCHASE
AGREEMENT
DEFINITIONS
"Action" shall mean any action, claim, suit,
arbitration, inquiry, proceeding, investigation, condemnation
or audit by or before any court or other Governmental Authority.
"Adjustment Period" shall be as defined in Section
3.3(a).
"Adjusted Purchase Price" shall be as defined in
Section 3.1.
"Adjustment Statement" shall be as defined in Section
3.3(a).
"Arbitration Procedures" shall mean the arbitration
procedures set forth in Exhibit A-1.
"Assets" shall mean the following described assets
and properties (except to the extent constituting Excluded
Assets):
(a) the Subject Interests;
(b) the Lands;
(c) the Incidental Rights;
(d) the Claims;
(e) the Royalty Accounts; and
(f) all (i) oil, gas and other hydrocarbons
produced from or attributable to the Subject
Interests with respect to all periods
subsequent to the Effective Time and (ii) proceeds
from or of such oil, gas and other hydrocarbons.
"Assumed Liabilities" shall mean (i) all Covered
Liabilities of Seller with respect to the Royalty Accounts
and the Claims, and (ii) all Covered Liabilities to the
extent arising out of or attributable to the ownership, use,
construction, maintenance or operation of the Assets subsequent
to the Effective Time.
"Buyer Indemnified Parties" shall be as defined in
Section 13.2.
"Claims" shall mean all right, title and interest
of Seller to any claims to the extent attributable to ownership,
use, construction, maintenance or operation of the Assets
subsequent to the Effective Time, including, without
limitation, past, present or future claims, whether or not
previously asserted by Seller.
Page - 1 - of Appendix A
"Closing" shall be the consummation of the transaction
contemplated by Article X.
"Closing Date" shall mean (a) April 30, 1996, or (b)
such other date as may be mutually agreed to by Seller and Buyer.
"Conveyance" shall be as defined in Section 8.3.
"Covered Liabilities" shall mean any and all
debts, losses, liabilities, duties, claims (including, without
limitation, those arising out of any demand, assessment,
settlement, judgment or compromise relating to any actual or
threatened Action), Taxes, costs and expenses (including,
without limitation, any attorneys' fees and any and all
expenses whatsoever incurred in investigating, preparing or
defending any Action), matured or unmatured, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated,
known or unknown, including, without limitation, any of the
foregoing arising under, out of or in connection with any
Action, any order or consent decree of any Governmental
Authority, any award of any arbitrator, or any Law,
contract, commitment or undertaking.
"Defensible Title" shall mean, respectively as to the
Subject Interest or Subject Interests related to a particular
Property Subdivision, title to such Property Subdivision and
the Subject Interest or Subject Interests related to such
Property Subdivision that: (i) entitles Seller to receive not
less than the applicable Net Revenue Interest or Net Revenue
Interests specified for such Property Subdivision in the
Property Schedule; (ii) obligates Seller to bear the costs and
expenses attributable to the maintenance, development, and
operation of such Property Subdivision in an amount not
greater than the applicable Working Interest or Working
Interests specified for such Property Subdivision in the
Property Schedule; and (iii), except for Permitted Encumbrances,
is free and clear of all liens and encumbrances.
"Deferred Adjustment Claim" shall be defined in Section
6.6.
"Deferred Matters Date" shall be as defined in Section
6.6.
"Deposit" shall be as defined in Section 3.2.
"Disputed Issues" shall be as defined in the
Arbitration Procedures.
"Effective Time" shall mean 7:00 a.m., Central
Daylight Time, on January 1, 1996.
"Excluded Assets" shall mean the following:
(a) copies of all Records;
(b) except to the extent constituting the
Royalty Accounts, all deposits, cash, checks, funds
and accounts receivable attributable to Seller's
interest in the Assets with respect to any period of time
prior to the Effective Time;
Page - 2 - of Appendix A
(c) all (i) oil, gas and other hydrocarbons
produced from or attributable to the Subject Interests
with respect to all periods prior to the Effective
Time, (ii) oil, gas and other hydrocarbons
attributable to the Subject Interests which, at the Effective
Time, are in storage, within processing plants, in
pipelines or otherwise held in inventory, and (iii)
proceeds from or of such oil, gas and other
hydrocarbons;
(d) such assets as Seller elects to exclude
from the Assets pursuant to the terms hereof;
(e) all receivables and cash proceeds which
were expressly taken into account and for which credit
was given in the determination of Net Cash Flow
pursuant to Section 3.3, as adjusted pursuant to
Section 3.4;
(f) claims of Seller for refund of or loss
carry forwards with respect to (i) Taxes attributable
to any period prior to the Effective time or (ii) any
Taxes attributable to the Excluded Assets;
(g) all corporate, financial, tax and legal
records of Seller; and
(h) all rights, interests, assets and
properties described in Schedule A-1.
"Excluded Liabilities" shall mean, except to the extent
constituting an Assumed Liability, any Covered Liabilities
to the extent arising out of or attributable to the ownership,
use, construction, maintenance or operation of the Assets by
Seller prior to the Effective Time.
"Final Adjustment Statement" shall be as defined in
Section 3.4.
"Governmental Authority" shall mean (i) the United
States of America, (ii) any state, county, municipality or
other governmental subdivision within the United States of
America, and (iii) any court or any governmental
department, commission, board, bureau, agency or other
instrumentality of the United States of America or of any
state, county, municipality or other governmental
subdivision within the United States of America.
"Hydrocarbon Interests" shall mean (a) leases
affecting, relating to or covering any oil, gas and other
hydrocarbons and the leasehold interests and estates in the
nature of working or operating interests under such leases,
as well as overriding royalties, net profits interests,
production payments, carried interests, rights of recoupment
and other interests in, under or relating to such leases;
(b) fee interests in oil, gas or other hydrocarbons; (c)
royalty interests in oil, gas or other hydrocarbons; (d) any
other interest in oil, gas or other hydrocarbons in place,
(e) any economic or contractual rights, options or interests
in and to any of the foregoing, including, without limitation,
any farmout or farmin agreement or production payment affecting
any interest or estate in oil, gas or other hydrocarbons; and
(f) any and all rights and interests attributable or
allocable thereto by virtue of any pooling, unitization,
communitization, production sharing or similar agreement, order
or declaration.
Page - 3 - of Appendix A
"Incidental Rights" shall mean all right, title and
interest of Seller in and to or derived from the following
insofar as the same are attributable to the Subject Interests:
(a) all rights with respect to the use and occupancy of the
surface of and the subsurface depths under the Lands; (b) all
rights with respect to any pooled, communitized or unitized
acreage by virtue of any Subject Interest being a part thereof;
(c) all agreements and contracts, easements, rights-of-way,
servitudes and other estates; and (d) all real and personal
property located upon the Lands and used in connection with
the exploration, development or operation of the Subject
Interests; and (e) the Records.
"Indemnified Party" shall be as defined in Section 13.3.
"Indemnitor" shall be as defined in Section 13.3.
"Initial Adjustment Amount" shall be as defined in
Section 3.3(a).
"Knowledge" shall mean the actual knowledge of any
fact, circumstance or condition by the officers (if the party
involved is a corporation), partners (if the party involved is
a partnership) or employees at a supervisory or higher level of
the party involved.
"Lands" shall mean, except to the extent constituting
Excluded Assets, all right, title, and interest of Seller
in and to the lands covered by or subject to the Subject
Interests.
"Law" shall mean any applicable statute, law,
ordinance, regulation, rule, ruling, order, restriction,
requirement, writ, injunction, decree or other official act of
or by any Governmental Authority.
"Net Cash Flow" shall be as defined in Section 3.3(c).
"Net Revenue Interest" shall mean an interest
(expressed as a percentage or decimal fraction) in and to
all oil and gas produced and saved from or attributable to a
Property Subdivision.
"Permitted Encumbrances" shall mean any of the
following matters:
(a) all agreements, instruments,
documents, liens, encumbrances, and other matters
which are described in Schedule A-2;
(b) any (i) undetermined or inchoate
liens or charges constituting or securing the payment
of expenses which were incurred incidental to
maintenance, development, production or operation of the
Assets or for the purpose of developing, producing or
processing oil, gas or other hydrocarbons therefrom or
therein and (ii) materialman's, mechanics', repairman's,
employees', contractors', operators' or other similar
liens, security interests or charges for liquidated amounts
arising in the ordinary course of business incidental to
construction, maintenance, development, production or
operation
Page - 4 - of Appendix A
of the Assets or the production or processing of
oil, gas or other hydrocarbons therefrom, that are
not delinquent and that will be paid in the ordinary
course of business, or if delinquent, that are being
contested in good faith;
(c) any liens for Taxes not yet delinquent
or, if delinquent, that are being contested in good
faith in the ordinary course of business;
(d) any liens or security interests created by
Law or reserved in oil, gas and/or mineral leases for
royalty, bonus or rental or for compliance with the
terms of the Subject Interests;
(e) all Preference Rights and Transfer
Requirements;
(f) any easements, rights-of-way,
servitudes, permits, licenses, surface leases and
other rights with respect to surface operations to
the extent such matters do not interfere in any material
respect with Buyer's operation of the portion of the Assets
burdened thereby;
(g) any prohibitions or restrictions
similar to those contained in Article VIII.D. of the
A.A.P.L. Form 610-1982 Model Form Operating Agreement
and any contribution obligations under provisions
similar to Article VII.B. of said Model Form Operating Agreement;
(h) all agreements and obligations relating to
imbalances with respect to the production,
transportation or processing of gas or calls or purchase
options on oil or gas production;
(i) all royalties, overriding
royalties, net profits interests, carried interests,
reversionary interests and other burdens to the extent
that the net cumulative effect of such burdens, as to a
particular Property Subdivision, does not operate to reduce
the Net Revenue Interest of Seller in such Property
Subdivision as specified in the Property Schedule;
(j) all obligations by virtue of a prepayment,
advance payment or similar arrangement under any
contract for the sale of gas production, including
by virtue of "take-or-pay" or similar provisions, to
deliver gas produced from or attributable to the Subject
Interests after the Effective Time without then or
thereafter being entitled to receive full payment
therefor;
(k) all liens, charges, encumbrances,
contracts, agreements, instruments, obligations,
defects, irregularities and other matters affecting
any Asset which individually or in the aggregate are not such
as to interfere materially with the operation, value or
use of such Asset;
Page - 5 - of Appendix A
(l) any encumbrance, title defect or other
matter (whether or not constituting a Title Defect)
waived or deemed waived by Buyer pursuant to Article
VI;
(m) rights reserved to or vested in any
Governmental Authority to control or regulate any of the
wells or units included in the Assets and all
applicable laws, rules, regulations and orders of such
authorities so long as the same do not decrease Seller's
Net Revenue Interest below the Net Revenue Interest
shown in the Property Schedule;
(n) the terms and conditions of all contracts
and agreements relating to the Subject Interests,
including, without limitation, exploration
agreements, gas sales contracts, processing agreements,
farmins, farmouts, operating agreements, and right-of-way
agreements, to the extent such terms and conditions do
not decrease Seller's Net Revenue Interest below the
Net Revenue Interest shown in the Property Schedule; and
(o) conventional rights of reassignment
requiring notice to the holders of the rights prior
to surrendering or releasing a leasehold interest.
"Person" shall mean any Governmental Authority or any
individual, firm, partnership, corporation, joint venture,
trust, unincorporated organization or other entity or
organization.
"Preference Property" shall be as defined in Section
7.2.
"Preference Right" shall mean any right or agreement
that enables or may enable any Person to purchase or acquire any
Asset or any interest therein or portion thereof as result of
or in connection with (i) the sale, assignment, encumbrance or
other transfer of any Asset or any interest therein or portion
thereof or (ii) the execution or delivery of this Agreement or
the consummation or performance of the terms and conditions
contemplated by this Agreement.
"Property Schedule" means Exhibit A-2 attached to
and made a part of this Agreement.
"Property Subdivision" means each well location, well,
well completion, multiple well completion, unit, lease, or
other subdivision of property described or referenced in the
Property Schedule.
"Purchase Price" shall be as defined in Section 3.1.
"Records" shall mean, except to the extent
constituting Excluded Assets, and except to the extent the
transfer thereof may not be made without violating legal
constraints or legal obligations or waiving any attorney/client
privilege, any and all lease files, land files, division order
files, production marketing files, well files, production
records, seismic, geological, geophysical and engineering
data, litigation files, and all other files, maps and data (in
whatever form) arising out of or relating to the Subject
Interests or the ownership, use, maintenance or operation of the
Assets.
Page - 6 - of Appendix A
"Retained Assets" shall be defined in Section 7.3.
"Royalty Accounts" shall mean those separately
indentifiable accounts which are expressly identified and set
forth in Schedule A-4 in which Seller or any third party
operator is holding as of the Effective Time monies which (i)
are owing to third party owners of royalty, overriding royalty,
working or other interests in respect of past production of
oil, gas or other hydrocarbons attributable to the Assets or
(ii) may be subject to refund by royalty owners or other third
parties to purchasers of past production of oil, gas or
other hydrocarbons attributable to the Assets.
"Seller Indemnified Parties" shall be as defined in
Section 13.1.
"Seller Title Credit" shall be as defined in Section
6.4.
"Subject Interests" shall mean and include (i) the
undivided interests specified in the Property Schedule in, to
or under the Hydrocabon Interests specifically described in
the Property Schedule, and (ii) all other interests of Seller
in, to or under any Hydrocarbon Interests in, to or under or
derived from any lands covered by or subject to any of the
Hydrocarbon Interests described in the Property Schedule,
even though such interests of the Seller may be
incorrectly described or referred to in, or a description
thereof may be omitted from, the Property Schedule.
"Taxes" shall mean all federal, state and local
taxes or similar assessments or fees, together with all
interest, fines, penalties and additions thereto.
"Title Defect" shall be as defined in Section 6.3.
"Title Defect Amount" shall be as defined in Section
6.2(d).
"Title Defect Deductible" shall be as defined in
Section 6.2(d).
"Title Defect Property" shall be as defined in Section
6.2(c).
"Title Examination Period" shall be as defined in
Section 6.2(a).
"Transfer Requirement" shall mean any consent,
approval, authorization or permit of, or filing with or
notification to, any Person which must be obtained, made or
complied with for or in connection with any sale, assignment,
transfer or encumbrance of any Asset or any interest therein
in order (a) for such sale, assignment, transfer or encumbrance
to be effective, (b) to prevent any termination, cancellation,
default, acceleration or change in terms (or any right thereof
from arising) under any terms, conditions or provisions of
any Asset (or of any agreement, instrument or obligation
relating to or burdening any Asset) as a result of such sale,
assignment, transfer or encumbrance, or (c) to prevent the
creation or imposition of any lien, charge, penalty,
restriction, security interest or encumbrance on or with
respect to any Asset (or any right thereof from arising) as a
result of such sale, assignment, transfer or encumbrance.
Page - 7 - of Appendix A
"Unscheduled (Negative) Imbalance" shall mean,
respectively as to each Property Subdivision to which the
Subject Interests are attributable and without duplication, the
sum (expressed in Mcfs) of (i) the aggregate make-up, prepaid
or other volumes of oil, gas or other hydrocarbons, not
described on Schedule A-3, that Seller was obligated as of
the Effective time, on account of prepayment, advance
payment, take-or-pay, gas balancing or similar obligations, to
deliver from the Subject Interests attributable to such
Property Subdivision after the Effective time without then or
thereafter begin entitled to receive full payment therefor and
(ii), to the extent such obligations burden the Assets or Buyer
could incur any liability therefor as a result of the
transaction contemplated hereby and the same are not described
on Schedule A-3 or covered by clause (i) above, the aggregate
pipeline or processing plant imbalances or overdeliveries for
which Seller is obligated to pay or deliver oil, gas or other
hydrocarbons or cash to any pipeline, gatherer, transporter,
processor, co-owner or purchaser in connection with any
other oil, gas or other hydrocarbons attributable to the
Subject Interests.
"Unscheduled (Negative) Imbalance" shall mean,
respectively as to each Property Subdivision to which the
Subject Interests are attributable and without duplication, the
sum (expressed in Mcfs) of (i) the aggregate make-up, prepaid
or other volumes of oil, gas or other hydrocarbons, not
described on Schedule A-3, that Seller was obligated as of
the Effective Time, on account of prepayment, advance
payment, take-or-pay, gas balancing or similar obligations, to
deliver from the Subject Interests attributable to such
Property Subdivision after the Effective Time without then or
thereafter being entitled to receive full payment therefor and
(ii), to the extent such obligations burden the Assets or Buyer
could incur any liability therefor as a result of the
transaction contemplated hereby and the same are not described
on Schedule A-3 or covered by clause (i) above, the aggregate
pipeline or processing plant imbalances or overdeliveries for
which Seller is obligated to pay or deliver oil, gas or other
hydrocarbonds or cash to any pipeline, gatherer,
transporter, processor, co-owner or purchaser in connection
with any other oil, gas or other hydrocarbons
attributable to the Subject Interests.
"Unschedule (Positive) Imbalances" shall mean,
respectively as to each Property Subdivision to which the
Subject Interests are attributable and without duplication, the
sum (expressed in Mcfs) of (i) the aggregate make-up, prepaid
or other volumes of oil, gas or other hydrocarbons, not
described on Schedule A-3, that Seller was entitled as of
the Effective Time, on account of prepayment, advance
payment, take-or-pay, gas balancing or similar obligations, to
receive from the Subject Interests attributable to such
Property Subdivision after the Effective Time without then and
thereafter being obligated to make any payment therefor and
(ii) to the extent such entitlements run with the Assets and
the same are not described on Schedule A-3 or covered by
clause (i) above, the aggregate pipeline or processing plant
imbalances or underdeliveries for which Seller is entitled to
receive oil, gas or other hydrocarbons or cash from any
pipeline, gatherer, transporter, processor, co-owner or
purchaser in connection with any oil, gas or other
hydrocarbons attributable to the Subject Interests.
"Working Interest" shall mean the percentage of
costs and expenses attributable to the maintenance,
development and operation of a Property Settlement.
Page - 8 - of Appendix A
EXHIBIT 8.3
GENERAL CONVEYANCE
THIS GENERAL CONVEYANCE (this "Conveyance") executed by
HARDY OIL & GAS USA INC., a Delaware corporation, whose
address is 1600 Smith, Suite 1400, Houston, Texas 77002-7346
(hereinafter called "Assignor"), to ARCH PETROLEUM, INC.,
whose address is 777 Taylor Street, Suite II-A, Fort Worth,
Texas 76102 (hereinafter called "Assignee"), dated effective at
7:00 a.m., Central Daylight Time, on January 1, 1996 (said hour
and day hereinafter called the "Effective Time").
Capitalized terms used but not otherwise defined herein shall
have the meanings set forth in that certain Asset Purchase
Agreement dated April 18, 1996 (the "Agreement"), by and
between Assignor, as "Seller", and Assignee, as "Buyer".
ARTICLE I
Conveyance of Assets
Assignor, for Ten and No/100 Dollars ($10.00) and
other good and valuable consideration in hand paid by
Assignee, the receipt and sufficiency of which consideration
are hereby acknowledged and confessed, by these presents does
hereby GRANT, BARGAIN, SELLER, CONVEY, ASSIGN, TRANSFER,
SET OVER AND DELIVER unto Assignee, effective as of the
Effective time, the following described assets and
properties (except to the extent constituting "Excluded
Assets" (hereinafter defined)) (collectively, the "Assets"):
(i) (a) The undivided interests specified in
Exhibit A hereto (the "Property Schedule") in, to or
under the Hydrocarbon Interests (hereinafter defined)
specifically described in the Property Schedule, and
(b) all other interests of Assignor in, to or under any
Hydrocarbon Interests in, to or under or derived
from any lands covered by or subject to any of the
Hydrocarbon Interests described in the Property
Schedule, even though such interests of the Assignor may be
incorrectly described or referred to in, or a
description thereof may be omitted from, the Property
Schedule (collectively, the "Subject Interests");
(ii) All right, title, and interest of
Assignor in and to the lands covered by or subject to
the Subject Interests (the "Lands");
(iii) All right, title and interest of
Assignor in and to or derived from the following
insofar as the same are attributable to the Subject
Interests: (a) all rights with respect to the use and occupancy
of the surface of and the subsurface depths under the
Lands; (b) all rights with respect to any pooled,
communitized or unitized acreage by virtue of any
Subject Interest being a part thereof; (c) all agreements
and contracts, easements, rights-of-way, servitudes and other
estates; (d) all real and personal property
Page - 1 - of Exhibit 8.3
located upon the Lands and used in connection with
the exploration, development or operation of the
Subject Interests; and (e) the Records;
(iv) All right, title and interest of
Assignor to any claims to the extent attributable to
ownership, use, construction, maintenance or operation
of the Assets subsequent to the Effective Time, including,
without limitation, past, present or future claims,
whether or not previously asserted by Assignor;
(v) Those separate identifiable accounts
(the "Royalty Accounts") which are expressly
identified and set forth in Schedule A-1 hereto in which
Assignor or any third party operator is holding as of
the Effective Time monies which (a) are owing to third party
owners of royalty, overriding royalty, working or
other interests in respect of past production of oil,
gas or other hydrocarbons attributable to the Assets
or (b) may be subject to refund by royalty owners or other third
parties to purchasers of past production of oil,
gas or other hydrocarbons attributable to the Assets;
and
(vi) All (a) oil, gas and other hydrocarbons
produced from or attributable to the Subject
Interests with respect to all periods subsequent to
the Effective time and (b) proceeds from or of such oil,
gas and other hydrocarbons.
As used in this Conveyance, the term "Hydrocarbon
Interests" shall mean (a) leases affecting, relating
to or covering any oil, gas and other hydrocarbons and
the leasehold interests and estates in the nature of
working or operating interests under such leases, as well as
overriding royalties, net profits interests,
production payments, carried interests, rights of
recoupment and other interests in, under or
relating to such leases, (b) fee interests in oil, gas or
other hydrocarbons, (c) royalty interests in oil, gas
or other hydrocarbons, (d) any other interest in oil,
gas or other hydrocarbons in place, (e) any economic or
contractual rights, options or interests in and to any
of the foregoing, including, without limitation, any farmout or
farmin agreement or production payment affecting any
interest or estate in oil, gas or other hydrocarbons,
and (f) any and all rights and interests
attributable or allocable thereto by virtue of any pooling,
unitization, communitzation, production sharing or similar
agreement, order or declaration.
There is excluded from this Conveyance and the Assets
and reserved unto Assignor the following described interests,
rights and properties (collectively, the "Excluded Assets"):
(i) Copies of all Records;
(ii) Except to the extent constituting the
Royalty Accounts, all deposits, cash, checks, funds
and accounts receivable attributable to Assignor's
interest in the Assets with respect to any period of time
prior to the Effective Time;
(iii) All (a) oil, gas and other hydrocarbons
produced from or attributable to the Subject Interests
with respect to all periods prior to the Effective Time,
(b) oil, gas and other hydrocarbons attributable
Page - 2 - of Exhibit 8.3
to the Subject Interests which, at the Effective
Time, are in storage and are above pipeline
connections within processing plants, in pipelines
or otherwise held in inventory, and (c) proceeds from or of
such oil, gas and other hydrocarbons;
(iv) Such assets as Assignor elects to exclude
from the Assets pursuant to the terms of the Agreement;
(v) All receivables and cash proceeds which
were expressly taken into account and for which credit
was given in the determination of Net Cash Flow
pursuant to Section 3.3 of the Agreement, as adjusted
pursuant to Section 3.4 of the Agreement;
(vi) Claims of Assignor for refund of or loss
carry forwards with respect to (i) Taxes
attributable to any period prior to the Effective
Time or (ii) any Taxes attributable to the Excluded Assets;
(vii) All corporate, financial, tax and
legal records of Assignor; and
(viii) All rights, interests, assets and
properties described in Exhibit B hereto.
TO HAVE AND TO HOLD the Assets unto Assignee, its
successors and assigns, forever; subject, however, to the
matters set forth herein.
ARTICLE II
Limitation of Warranties; Permitted Encumbrances
Section 2.1 Limitation of Warranties.
(a) Assignor does hereby bind itself, Assignor's
successors and assigns, to warrant and forever defend all
and singular Defensible Title (hereinafter defined) to the
Subject Interests, unto Assignee, its successors and assigns,
against every person whomsoever lawfully claiming or to claim
the same or any part thereof, by, through or under Assignor,
but not otherwise, subject, however, to the Permitted
Encumbrances (hereinafter defined). As used herein, the term
"Defensible Title" shall mean, respectively, as to the Subject
Interest or Subject Interests related to a particular
Property Subdivision, title to such Property Subdivision and
the Subject Interest or Subject Interests related to such
Property Subdivision, that: (i) entitles Assignor to receive not
less than the applicable Net Revenue Interest or Net Revenue
Interests specified for such Property Subdivision in the
Property Schedule; (ii) obligates Assignor to bear the costs
and expenses relating to the maintenance, development and
operation of such Property Subdivision in an amount not
greater than the applicable Working Interest or Working
Interests specified for such Property Subdivision in the
Property Schedule unless Assignor's Net Revenue Interest
therein is proportionately increased; and (iii) except
for Permitted Encumbrances, is free and clear of liens and
encumbrances. Recourse for breach of the foregoing special
warranty of title
Page - 3 - of Exhibit 8.3
shall be limited to a return of the purchase price allocated
to the Subject Interest with respect to which such warranty
has been breached in accordance with Section 6.2(b) of the
Agreement, without interest thereon.
(b) EXCEPT FOR THE SPECIAL WARRANTY OF TITLE SET
FORTH HEREIN, THE ASSETS ARE ASSIGNED TO ASSIGNEE "AS IS
AND WHERE IS" AND WITH ALL FAULTS AND WITHOUT WARRANTY OR
REPRESENTATION OF ANY KIND OR CHARACTER, EITHER EXPRESS OR
IMPLIED. ASSIGNOR FURTHER HEREBY (I) EXPRESSLY DISCLAIMS
AND NEGATES ANY REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, AT COMMON LAW, BY STATUTE OR OTHERWISE, RELATING TO
(A) THE CONDITION OF THE ASSETS (INCLUDING, WITHOUT
LIMITATION, ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE, OR OF CONFORMITY TO
MODELS OR SAMPLES OF MATERIALS) OR (B) ANY INFRINGEMENT BY
ASSIGNOR OR ANY OF ITS AFFILIATES OF ANY PATENT OR
PROPRIETARY RIGHT OF ANY THIRD PARTY; AND (II) NEGATES ANY
RIGHTS OR ASSIGNEE UNDER STATUTES TO CLAIM DIMINUTION OF
CONSIDERATION AND ANY CLAIMS BY ASSIGNEE FOR DAMAGES BECAUSE OF
DEFECTS, WHETHER KNOWN OR UNKNOWN, IT BEING THE INTENTION OF
ASSIGNOR AND ASSIGNEE THAT THE ASSETS ARE ACCEPTED BY
ASSIGNEE IN THEIR PRESENT CONDITION AND STATE OF REPAIR.
(c) To the extent transferable, Assignee shall be
and is hereby subrogated to all covenants and warranties
of title by parties (other than Assignor) heretofore given or
made to Assignor or its predecessors in title in respect to any
of the Assets.
Section 2.2 Permitted Encumbrances. The Assets
are assigned and conveyed by Assignor and accepted by Assignee
expressly subject to the following (the "Permitted
Encumbrances"):
(a) all agreements, instruments,
documents, liens, encumbrances, and other matters
which are described in Schedule A-2;
(b) any (i) undetermined or inchoate
liens or charges constituting or securing the payment
of expenses which were incurred incidental to
maintenance, development, production or operation of the
Assets or for the purpose of developing, producing or
processing oil, gas or other hydrocarbons therefrom or
therein and (ii) materialman's, mechanics', repairman's,
employees', contractors', operators' or other similar
liens, security interests or charges for liquidated amounts
arising in the ordinary course of business incidental to
construction, maintenance, development, production or
operation of the Assets or the production or processing
of oil, gas or other hydrocarbons therefrom, that are
not delinquent and that will be paid in the ordinary course of
business or, if delinquent, that are being contested in
good faith;
Page - 4 - of Exhibit 8.3
(c) any liens for Taxes not yet delinquent
or, if delinquent, that are being contested in good
faith in the ordinary course of business;
(d) any liens or security interest created by
Law or reserved in oil, gas and/or mineral leases for
royalty, bonus or rental or for compliance with the
terms of the Subject Interests;
(e) all Preference Rights and Transfer
Requirements;
(f) any easements, rights-of-way,
servitudes, permits, licenses, surface leases and
other rights with respect to surface operations to
the extent such matters do not interfere in any material
respect with Assignee's operation of the portion of the Assets
burdened thereby;
(g) any prohibitions or restrictions
similar to those contained in Article VIII.D. of the
A.A.P.L. Form 610-1982 Model Form Operating Agreement
and any contribution obligations under provisions
similar to Article VII.B. of said Model Form Operating Agreement;
(h) all agreements and obligations relating to
imbalances with respect to the production,
transportation or processing of gas or calls or purchase
options on oil or gas production;
(i) all royalties, overriding
royalties, net profits interests, carried interests,
reversionary interests and other burdens to the extent
that the net cumulative effect of such burdens, as to a
particular Property Subdivision, does not operate to reduce
the Net Revenue Interest of Assignor in such Property
Subdivision as specified in the Property Schedule;
(j) all obligations by virtue of a prepayment,
advance payment or similar arrangement under any
contract for the sale of gas production, including
by virtue of "take-or-pay" or similar provisions, to
deliver gas produced from or attributable to the Subject
Interests after the Effective Time without then or
thereafter being entitled to receive full payment
therefor;
(k) all liens, charges, encumbrances,
contracts, agreements, instruments, obligations,
defects, irregularities and other matters affecting
any Asset which individually or in the aggregate are not such
as to interfere materially with the operation, value or
use of such Asset;
(l) any encumbrance, title defect or other
matter (whether or not constituting a Title Defect)
waived or deemed waived by Assignee pursuant to Article
VI of the Agreement;
Page - 5 - of Exhibit 8.3
(m) rights reserved to or vested in any
Governmental Authority to control or regulate any of the
wells or units included in the Assets and all
applicable laws, rules, regulations and orders of such
authorities so long as the same do not decrease Assignor's
Net Revenue Interest below the Net Revenue Interest
shown in the Property Schedule;
(n) the terms and conditions of all contracts
and agreements relating to the Subject Interests,
including, without limitation, exploration
agreements, gas sales contracts, processing agreements,
farmins, farmouts, operating agreements, and rights-of-way
agreements, to the extent such terms and conditions do
not decrease Assignor's Net Revenue Interest below the
Net Revenue Interest shown in the Property Schedule; and
(o) conventional rights of reassignment
requiring notice to the holders of the rights prior
to surrendering or releasing a leasehold interest.
By Assignee's acceptance of this Conveyance, Assignee assumes
and agrees to keep and perform the obligations of Assignor under
the Permitted Encumbrances which accrue from and after the
Effective Time.
ARTICLE III
Miscellaneous
Section 3.1 Further Assurances. Assignor covenants
and agrees to execute and deliver to Assignee all such other
and additional instruments and other documents and will do
all such other acts and things as may be necessary to more
fully assure to Assignee or its successor or assigns all
of the respective properties, rights and interests herein
and hereby granted or intended so to be.
Section 3.2 Successors and Assigns. All of the
provisions hereof shall inure to the benefit of and be binding
upon Assignor and Assignee and their respective successors
and assigns. All references herein to either Assignor or
Assignee shall include their respective successors and assigns.
Section 3.3 Counterparts. This Assignment is being
executed in several original counterparts, all of which are
identical, except that, to facilitate recordations, there are
omitted from certain counterparts those property
descriptions in the Property Schedule which contain
descriptions of property located in recording jurisdictions
other than the jurisdiction in which the particular
counterpart is to be recorded. Each such counterpart hereof
shall be deemed to be an original instrument, but all such
counterparts shall constitute but one and the same assignment.
IN WITNESS WHEREOF, the Assignor and Assignee
have caused this Conveyance to be executed on the date of
their respective acknowledgments set forth below, to be
effective, however, as of the Effective Time.
Page - 6 - of Exhibit 8.3
ASSIGNOR:
HARDY OIL & GAS USA INC.
By:
_____________________________________
James M. Fitzpatrick,
Vice President of Land and Legal
ASSIGNEE:
ARCH PETROLEUM, INC.
By:
_____________________________________
Larry Kalas, President
STATE OF TEXAS )
) COUNTY OF HARRIS )
This instrument was acknowledged before me on April
18, 1996, by James M. Fitzpatrick, Vice President of HARDY
OIL & GAS USA INC., a Delaware corporation, on behalf of
said corporation.
- -----------------------------------------
Notary Public in and for the State of Texas
My Commission Expires:
____________________
STATE OF TEXAS )
) COUNTY OF ___________ )
This instrument was acknowledged before me on April
18, 1996, by Larry Kalas, President of ARCH PETROLEUM, INC., a
Texas corporation, on behalf of said corporation.
- -----------------------------------------
Notary Public in and for the State of Texas
My Commission Expires:
____________________
Page - 7 - of Exhibit 8.3
EXHIBIT "A"
Page - 8 - of Exhibit 8.3
EXHIBIT 10.2(c)
AFFIDAVIT
STATE OF TEXAS )
) COUNTY OF HARRIS )
Section 1445 of the Internal Revenue Code provides
that a transferee (buyer) of a U.S. real property interest
must withhold tax if the transferor (seller) is a foreign
person, foreign corporation, foreign partnership, foreign trust
or foreign estate. To inform the transferee (buyer) that the
withholding of taxes is not required upon the disposition of a
U.S. real property interest, before me, the undersigned
authority, on this day personally appeared James M.
Fitzpatrick, Vice President of Hardy Oil & Gas USA Inc., a
Delaware corporation, well known to me to be the person whose
name is subscribed hereto, who being first duly sworn by me,
upon oath deposed and stated as follows:
1. Hardy Oil & Gas USA Inc. is not a foreign
person, foreign corporation, foreign partnership,
foreign trust or foreign estate (as those terms are
defined in the Internal Revenue Code and Income Tax
Regulations).
2. The U.S. employer's identification
number of Hardy Oil & Gas USA Inc. is 86-0460233.
3. The office address of Hardy Oil & Gas
USA Inc. is 1600 Smith, Suite 1400, Houston, Texas
77002-7346.
4. I understand that this Affidavit may be
disclosed to the Internal Revenue Service by the
transferee and that any false statement contained herein
could be punished by fine, imprisonment or both.
5. Under penalties of perjury, I declare that
I have examined this Affidavit and to the best of my
knowledge and belief, it is true, correct and complete.
- -------------------------------------
James M. Fitzpatrick
Page - 1 - of Exhibit 10.2(c)
STATE OF TEXAS )
) COUNTY OF HARRIS )
Subscribed, sworn to and acknowledged before me, in my
presence, this the ___ day of __________, 1996.
- ---------------------------------------
Notary Public in and for the State of Texas
My Commission Expires: __________________
Page - 2 - of Exhibit 10.2(c)
EXHIBIT A-1
ARBITRATION PROCEDURES
The Arbitration Procedures referred to in the Asset
Purchase Agreement (the "Agreement") to which this Exhibit A-1
is attached shall be as follows:
1. Capitalized terms used herein, and not otherwise herein
defined, shall have the meaning ascribed to such terms
in the Agreement.
2. (a) With respect to unresolved Deferred Adjustment
Claims, on or before the Deferred Matters Date,
Seller and Buyer shall each submit to the other the list
of what such party considers to comprise the remaining
unresolved Deferred Adjustment Claims. The two lists shall
together comprise the "Disputed Issues" relating to
Deferred Adjustment Claims which shall be resolved by
the binding arbitration provided for herein.
(b) If, pursuant to Section 3.4 of the Agreement,
either Buyer or Seller elects to submit any Final
Adjustment Statement disagreements to arbitration, such
disagreements will also constitute "Disputed Issues" to
be resolved by the binding arbitration provided for herein.
3. Seller and Buyer, each being duly authorized by
all necessary corporate, partnership or other
proceedings, if any are applicable, shall submit the
Disputed Issues to binding arbitration by a board of
arbitration to be selected by the following procedures.
Notices hereunder shall be sufficient if sent in
accordance with the terms of the Agreement. With
respect to Disputed Issues involving Deferred
Adjustment Claims, within five (5) days after the Deferred
Matters Date, Seller shall by written notice name one
arbitrator and Buyer shall by written notice name one
arbitrator. With respect to Disputed Issues involving
Final Adjustment Statement disagreements, within five
(5) days after either Buyer or Seller provides the other
party with written notice that such party desires to
submit such Final Adjustment Statement disagreements to
arbitration, Seller shall by written notice name one
arbitrator and Buyer shall by written notice name one
arbitrator. If a party fails to name an arbitrator, the
other party shall by further written notice name the
second arbitrator. The two arbitrators so appointed
shall name the third arbitrator within ten (10) days
after the selection of the second arbitrator. If they fail to
do so, either arbitrator may request the judge of the
United States District Court for the Southern
District of Texas having greatest tenure; but not
yet on retired or senior status, to appoint the third
arbitrator. If that judge fails to do so within thirty (30)
days, either party may request the judge of that
court next senior to name the third arbitrator, and if
that judge fails to do so after ten (10) days, either
party may make the request of the judge of that court next
senior, and so on, until the board of arbitration is
constituted. With respect to Disputed Issues involving
Deferred Adjustment Claims, each of the arbitrators
shall be knowledgeable about matters affecting title to
oil and gas properties in the state or other jurisdiction in
which
Page - 1 - of Exhibit A-1
such properties are located, by virtue of
managerial, land property administration, legal or
judicial experience. With respect to Disputed Issues
involving Final Adjustment Statement disagreements, each of the
arbitrators shall be knowledgeable about oil and gas
related accounting matters. In addition, the third
arbitrator, in each case, shall be required to meet
the qualification requirements of the Commercial
Arbitration Rules of the American Arbitration Association
(the "AAA Rules"), whether appointed by the arbitrators
or by a judge as provided above.
4. If prior to rendering a decision an arbitrator
resigns or becomes unable to serve, the arbitrator
shall be replaced as follows. If that arbitrator was
one of the two arbitrators appointed by the parties, the
party that names him or her shall name a replacement;
provided, however, that if that replacement is not
named within five (5) days from notice of resignation
or inability to serve, the other party shall name a
replacement. If he or she was the third arbitrator, the other
two arbitrators shall name a replacement; provided,
however, that if they fail to agree on a replacement
within ten (10) days, either arbitrator may follow
the procedures specified in Paragraph 3 above and
request judicial appoint of the replacement.
5. No party subject to these Arbitration Procedures
will commence or prosecute any suit or action
against another party subject to these Arbitration
Procedures relating to the Disputed Issues, other than as
may be necessary to compel arbitration under these
Arbitration Procedures or to enforce the award of the
board of arbitration.
6. The board of arbitration may in all matters act
through a majority of its members on each matter if
unanimity is not attained. It shall not be necessary
that the same majority agree on each and every item; that
is, the parties will be bound by majority rulings on each
Disputed Issue even though the majority is not the
same as to each Disputed Issue. In fulfilling their
duties hereunder with respect to Deferred Adjustment
Claims, each of the arbitrators shall be bound by the
matters set forth in Article VI of the Agreement. The
arbitrators shall not add any interest factor
reflecting the time value of money to any title Defect
Amount.
7. No matters whatsoever, other than the Disputed
Issues, are subject to the agreement to arbitrate
embodied in these Arbitration Procedures. The board of
arbitration shall be empowered hereunder solely to resolve
the Disputed Issues. The board of arbitration shall not
have any authority to award punitive damages. The sole
forum for the arbitration shall be Harris County,
Texas and all hearings shall be conducted in Harris
County, Texas.
8. The decision of the board of arbitration shall be
rendered in writing and shall be final and binding
upon the parties as to the Disputed Issues. The
expenses of arbitration, including reasonable compensation
to the third arbitrator, shall be borne equally by the
parties. Each party shall bear the compensation and
expenses of its own counsel, witnesses and employees
and of any arbitrator it has appointed. If the
Page - 2 - of Exhibit A-1
testimony of a witness is obtained by both
parties, the costs associated with obtaining such
testimony shall be borne equally between the parties.
9. Matters not specifically provided for in the
Arbitration Procedures shall be governed by the AAA
Rules.
Page - 3 - of Exhibit A-1