EXHIBIT 99.1
PURCHASE AND SALE AGREEMENT
AMONG
CALPINE CORPORATION
CALPINE NATURAL GAS L.P.
AND
POGO PRODUCING COMPANY
DATED AUGUST 20, 2004
EFFECTIVE DATE: JULY 1, 2004
TABLE OF CONTENTS
PART ONE............................................................... 1
SUBJECT MATTER, DEFINITIONS AND RULES OF CONSTRUCTION............. 1
Section 1.1 Subject Matter................................. 1
Section 1.2 Definitions................................... 1
Actual Knowledge........................................ 1
Affiliate............................................... 1
Agreed Rate............................................. 2
Agreement............................................... 2
Applicable Law.......................................... 2
Asset................................................... 2
Assumed Liabilities..................................... 2
Beneficial Interests.................................... 2
Burdens................................................. 3
Business Day............................................ 3
Closing................................................. 3
Closing Date............................................ 3
Code.................................................... 3
Confidentiality Agreement............................... 3
Contracts............................................... 3
Corporate Documents..................................... 3
Easements............................................... 3
Effective Date.......................................... 4
Environmental Condition................................. 4
Facilities.............................................. 6
Fee Interests........................................... 6
Governmental Body....................................... 6
HSR Act................................................. 7
Hydrocarbons............................................ 7
Leases.................................................. 7
Losses.................................................. 7
Net Revenue Interest.................................... 7
Party................................................... 7
Permitted Encumbrances.................................. 7
Person.................................................. 9
Personal Property....................................... 9
Plugging and Abandonment................................ 10
Remediation............................................. 10
Tax..................................................... 10
Third Person............................................ 11
Title Defect............................................ 11
Wells................................................... 11
Section 1.3 Other Definitions in the Agreement............. 11
Section 1.4 Rules of Construction.......................... 12
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PART TWO.................................................................................................... 13
SALE AND PURCHASE...................................................................................... 13
Section 2.1 Assets............................................................................... 13
Section 2.2 Purchase Price....................................................................... 13
Section 2.3 Allocation of Purchase Price......................................................... 14
Section 2.4 Performance Deposit and Liquidated Damages........................................... 14
Section 2.6 Method of Payment.................................................................... 15
PART THREE.................................................................................................. 15
REPRESENTATIONS AND WARRANTIES......................................................................... 15
Section 3.1 Seller............................................................................... 15
Section 3.2 Buyer................................................................................ 19
Section 3.3. Disclaimers and Notifications........................................................ 20
PART FOUR................................................................................................... 22
COVENANTS.............................................................................................. 22
Section 4.1 Covenants of Seller.................................................................. 22
Section 4.2 Covenants of Buyer................................................................... 24
Section 4.3 Covenants of Seller and Buyer........................................................ 25
PART FIVE................................................................................................... 31
TAXES.................................................................................................. 31
Section 5.1 Payment and Apportionment of Real Property Taxes and Personal Property Taxes......... 31
Section 5.2 Sales Taxes.......................................................................... 32
Section 5.3 Other Taxes.......................................................................... 32
Section 5.4 Cooperation.......................................................................... 32
Section 5.5 Tax Proceedings...................................................................... 32
Section 5.6 Purchase Price Allocation............................................................ 32
PART SIX.................................................................................................... 33
ENVIRONMENTAL MATTERS.................................................................................. 33
Section 6.5 Covenant of Cooperation.............................................................. 35
Section 6.6 Selection and Performance of Remedies................................................ 35
Section 6.10 Exclusive Remedies................................................................... 36
PART SEVEN.................................................................................................. 37
TITLE MATTERS.......................................................................................... 37
Section 7.1 Confidentiality Agreement............................................................ 37
Section 7.2 Preferential Purchase Rights......................................................... 37
Section 7.3 Required Consents.................................................................... 37
Section 7.4 Title Defects........................................................................ 38
Section 7.5 Seller's Right to Cure............................................................... 38
Section 7.6 Contested Title Defects.............................................................. 39
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Section 7.7 Title Indemnity Payments........................ 39
Section 7.8 Interest Additions.............................. 40
Section 7.8 Reconveyance.................................... 40
PART EIGHT.............................................................. 41
INDEMNITY.......................................................... 41
Section 8.1 General Indemnification......................... 41
Section 8.2 Method of Asserting Claims, Etc................. 42
Section 8.3 Payment......................................... 44
Section 8.4 Disputed Claims................................. 44
Section 8.5 Applicability of Part Eight..................... 44
PART NINE............................................................... 44
CONDITIONS PRECEDENT............................................... 44
Section 9.1 Conditions Precedent of Seller.................. 44
Section 9.2 Conditions Precedent of Buyer................... 46
PART TEN................................................................ 48
MISCELLANEOUS...................................................... 48
Section 10.1 Notices......................................... 48
Section 10.2 Modification.................................... 49
Section 10.3 Governing Law................................... 49
Section 10.4 Exhibits........................................ 49
Section 10.5 Counterparts.................................... 49
Section 10.6 Invalidity...................................... 49
Section 10.7 Entire Agreement and Construction............... 49
Section 10.8 Expenses........................................ 50
Section 10.9 Waivers and Amendments.......................... 50
Section 10.10 Binding Effect: Assignment...................... 50
Section 10.11 Survival of Representations and Covenants....... 51
Section 10.13 Arbitration of Disputes......................... 51
Section 10.12 Conflict........................................ 52
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SCHEDULES AND EXHIBITS
Schedules
A. Leases
B. Fee Interests
C. Contracts
C-l Contracts - Bisti Prospect
C-2 Contracts - Farmington Prospect
C-2(a) Farmington - ROW/Easement
C-3 Contracts - Largo Canyon
D. Beneficial Interests
E. Excluded Contracts
F. Assets Not Included
G. Permitted Encumbrances
H. Property
2.3 Allocation of Purchase Price
3.1(e) Litigation
3.1(f) Seller's Consents Not Received
3.1(i) Current Commitments
3.1(o) Gas Imbalances
3.1(q) Insurance and Bonds
3.1(r) Payout Balances
3.1 (u) Suspense Accounts
3.1 (v) Wells
4.3(f) Preferential Right to Purchase Hydrocarbons
7.2 Preferential Rights
10.13 Dispute Resolution
Exhibits
1. Assignments
2. Deeds
3. Form of Opinion Letter
4. Form of Certificates
5. Due Diligence Acknowledgement
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PURCHASE AND SALE AGREEMENT
The Agreement dated as of August 20, 2004, is made and entered into
between Calpine Corp., a Delaware corporation and Calpine Natural Gas L.P., a
Delaware limited partnership both having an office at 717 Texas Avenue, Suite
1000, Houston, Texas 77002, (collectively "Seller") and Pogo Producing Company,
a Delaware corporation, having an office at Five Greenway Plaza, Suite 2700,
Houston, Texas 77046 ("Buyer").
PART ONE
SUBJECT MATTER, DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1 Subject Matter. The subject matter of the Agreement is the
sale, assignment, transfer or conveyance of Seller's interest in the Assets, the
purchase of the Assets and the assumption of the Assumed Liabilities by Buyer,
and the terms and conditions upon which the sale shall take place.
Section 1.2 Definitions. For purposes of the Agreement, except as
otherwise expressly provided or unless the context otherwise requires, the terms
defined in this Section 1.2 have the meanings herein assigned to them and the
capitalized terms defined elsewhere in the Agreement, by inclusion in quotation
marks and parentheses, shall have the meanings so ascribed to them.
"Actual Knowledge" means actually known, after due inquiry by Hugo Cartaya
(Director of Operations), Roxy Blu (Director of Land), Art Klavan (Sr.
Vice President, Calpine Fuels Corp.), Ed Seeman (Director Reservoir
Engineering), Bill Berilgen (President, Calpine Fuels Corp), or Bert Bates
(Director, North America EH&S).
"Affiliate" means, with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of
this definition, "control" means the power to direct the management and
policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing,
it being understood and agreed that with respect to a corporation, control
shall mean a direct or indirect ownership of more than fifty percent (50%)
of the voting stock.
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"Agreed Rate" means a rate per annum which is equal to the lesser of (i) a
rate which is one percent (1%) above the prime rate of interest of [J.P.
Morgan Chase Bank], New York, New York, as announced or published by such
bank from time to time (adjusted from time to time to reflect any changes
in such rate determined hereunder), or (ii) the maximum rate from time to
time permitted by Applicable Law.
"Agreement" means this Purchase and Sale Agreement, including the
Schedules and Exhibits.
"Applicable Law" means any applicable law, order, regulation, permit,
judgment or decree of any Governmental Body, including the common or civil
law of any Governmental Body, including but not limited to those relating
to occupational safety and health, consumer product safety, employee
benefits, environmental laws, securities zoning laws or regulations.
"Assets" mean the Fee Interests, Leases, Personal Property, Facilities,
Easements, Contracts, and Beneficial Interests, but excluding the Excluded
Assets.
"Assumed Liabilities" means:
(a) all liabilities, duties, and obligations that arise on and
after the Effective Date from ownership or operation of the Assets;
(b) all liabilities and obligations with respect to Plugging and
Abandonment;
(c) all duties, liabilities and obligations that arise on and
after the Effective Date under the Contracts, Fee Interests, Leases,
Easements and Beneficial Interests, including, without limitation, all
obligations with respect to gas imbalances associated with the Assets as
set forth in Section 4.3(o);
(d) all liabilities and obligations with respect to funds
attributable to Third Persons but suspended or impounded by Seller prior
to the Effective Date but only to the extent of the amount of such
suspended or impounded funds; and
(e) all other duties, liabilities, and obligations assumed by
Buyer under the Agreement.
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"Beneficial Interests" means any and all rights, titles and interests
owned by Seller in, under or derived from all of the presently existing
pooling, unitization and communitization agreements or other operating
agreements and the units created thereby (including without limitation,
all units formed under orders, regulations, rules or other official acts
of any Governmental Body having jurisdiction) insofar and only insofar as
they relate to any of the Leases or Fee Interests or to the production of
Hydrocarbons from or attributable to such Leases or Fee Interests as set
forth on Schedule D.
"Burdens" means royalties (including both lessor royalties and
nonparticipating royalty interests), overriding royalties, production
payments, and other similar obligations payable out of production.
"Business Day" means any day when commercial banks are generally open for
regular business in the State of New Mexico.
"Closing" means the closing of the transactions contemplated by the
Agreement at 10:00 a.m., at Seller's offices at 717 Texas Ave., Houston,
Texas 77002, on the Closing Date or at such other time or place as the
Parties may mutually agree upon in writing.
"Closing Date" means September 1, 2004, or such other date as the Parties
may mutually agree upon in writing.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Confidentiality Agreement" means the Confidentiality Agreement between
Seller and Buyer dated June 29, 2004.
"Contracts" means all contracts and agreements whether recorded or
unrecorded in existence at the Effective Date, which affect the Leases,
Fee Interests, Personal Property, Beneficial Interests, Facilities and
Easements, insofar and only insofar and only to the extent as they
specifically relate to the Leases, Fee Interests, Personal Property,
Beneficial Interests, Facilities and Easements, including but not limited
to the contracts and agreements set forth on Schedule C, but specifically
excluding the Easements, Leases, Beneficial Interests, and the contracts
and agreements set forth on Schedule E.
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"Corporate Documents" means with respect to a Delaware corporation the
Certificate of Incorporation and By-Laws or the equivalent documents of a
corporation or other business entity organized under the laws of another
jurisdiction.
"Easements" means Seller's non-exclusive rights to the use and occupancy
of the surface, including, without limitation, tenements, appurtenances,
surface leases, easements, permits, licenses, franchises, servitudes and
rights-of-way in any way appertaining, belonging, affixed or incidental to
or used in connection with the ownership or operation of the Fee
Interests, Leases, Facilities and Beneficial Interests, whether recorded
or unrecorded;
"Effective Date" means 7:00 a.m., MDT, July 1, 2004 at the location of the
Assets.
"Environmental Condition" means any condition existing prior to the
Effective Date, and only to the extent in existence on the Effective Date
with respect to the air, land, soil, surface, subsurface strata, surface
water, ground water, or sediments which causes a Property to be subject to
remediation under, or not in compliance with an Environmental Law,
Environmental Permit, a Lease or a Contract, but excluding the conditions
associated with, or included in the definition of, Plugging and
Abandonment.
"Environmental Law" means any existing or future Applicable Law relating
to pollution or the protection of the environment, health or safety
including, without limitation, laws relating to air, water, land and the
generation, storage, treatment, transportation, handling, release or
disposal of waste materials including, without limitation, the Clean Air
Act, as amended, the Federal Water Pollution Control Act, as amended, the
Safe Drinking Water Act, as amended, the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), as amended, the
Superfund Amendments and Reauthorization Act of 1986 ("SARA"), as amended,
the Resource Conservation and Recovery Act ("RCRA"), as amended, the
Hazardous and Solid Waste Amendments Act of 1984, as amended, the Toxic
Substance Control Act, as amended, and the Occupational Safety and Health
Act ("OSHA"), as amended but shall not include any Applicable Law
associated with Plugging and Abandonment.
"Environmental Permits" means any environmental and health and safety
permits, licenses, approvals, consents, certificates and other
authorizations necessary for the ownership or operation of the Properties.
"Excluded Assets" means:
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(a) all (i) trade credits, accounts receivable, notes receivables
and other receivables attributable to Seller's interest in the Assets with
respect to any period of time prior to the Effective Date and (ii)
deposits, cash, checks in process of collection, cash equivalents and
funds attributable to Seller's interest in the Assets with respect to any
period of time prior to the Effective Date.
(b) all corporate, financial, legal, personnel and Tax records of
Seller;
(c) all claims and causes of action of Seller (i) arising from
acts, omissions or events, or damage to or destruction of property,
occurring prior to the Effective Date or (ii) affecting any of the
excluded assets as set forth in (a) through (r) of this definition;
(d) all rights, titles, claims and interests of Seller (i) under
any policy or agreement of insurance or indemnity; (ii) under any bond; or
(iii) to any insurance or condemnation proceeds or awards;
(e) subject to the provisions of Section 4.3(p), all Hydrocarbons
produced from or attributable to the Assets with respect to all periods
prior to the Effective Date;
(f) claims of Seller for refunds of or loss carry forwards with
respect to (i) Taxes attributable to any period prior to the Effective
Date; (ii) Taxes attributable to any of the excluded assets as set forth
in (a) through (r) of this definition; or (iii) any Tax credits accruing
to the Assets prior to the Effective Date.
(g) all amounts due or payable to Seller as adjustments or refunds
under any Contracts affecting the Assets, with respect to any period prior
to the Effective Date including, without limitation, amounts recoverable
from audits under operating agreements;
(h) all amounts due or payable to Seller as adjustments to
insurance premiums related to the Assets with respect to any period prior
to the Effective Date;
(i) all proceeds, benefits, income or revenues accruing (and any
security or other deposits made) with respect to (i) the Assets prior to
the Effective Date; and (ii) any of the excluded assets as set forth in
(a) through (r) of this definition;
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(j) all of Seller's seismic and geophysical information and data,
together with all geological information and data, whether proprietary in
Seller or licensed from Third Persons, and whether or not covering or
affecting the Assets, but only to the extent that the transfer thereof is
prohibited by law or third-party agreement and the necessary consents to
transfer are not obtained or cannot be obtained without cost to Seller;
(k) all of Seller's interpretive data;
(l) the non-exclusive right reserved unto the Seller to use the
Easements;
(m) all of Seller's intellectual property, including but not limited
to computer software, patents, trade secrets, copyrights, names, marks,
and logos;
(n) all of Seller's vehicles, trucks (including associated tools),
boats, tools, pulling machines, warehouse stocks, microwave equipment,
computer equipment and remote terminal units; equipment and material
temporarily located on the Assets; and any pipelines, easements, fixtures,
LACT units, tanks or equipment located on the Assets which belong to
lessors or other Third Persons, or to Seller's Affiliates engaged in the
business of purchasing, processing or transporting Hydrocarbons;
(o) all of Seller's interest in any lands or depths covered by the
Leases, Fee Interests and Beneficial Interests which are specifically
excluded from the descriptions set forth on Schedules A, B and C.
(p) records and documents subject to confidentiality provisions,
claims of privilege, or other restrictions on access;
(q) all rights of ingress, egress and surface use retained by Seller
in connection with its obligations under Part Six of this Agreement; and
(r) all other assets set forth on Schedule F.
"Facilities" means facilities and equipment, whether active or inactive,
that are customarily used directly in the production of Hydrocarbons,
including, but not limited to injection facilities, disposal facilities,
field separators, liquid extractors, compressors, LACT units, plants,
tanks and the like.
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"Fee Interests" means all rights, titles and interests owned by Seller in
all the fee and mineral fee interests described on Schedule B, insofar and
only insofar as such Fee Interests cover the lands and depths set forth in
Schedule B. The Fee Interests shall include all of Seller's right, title
and interest to all depths unless specifically limited on Schedule B.
"Governmental Body" means any federal, state, Indian, county, municipal,
or other federal, state or local governmental authority or judicial or
regulatory agency, board, body, department, bureau, commission,
instrumentality, court, tribunal or quasi-governmental authority in any
jurisdiction (domestic or foreign) having jurisdiction over any Asset or
Party to this transaction, or any of the transactions contemplated by the
Agreement.
"Hydrocarbons" means crude oil, natural gas, casinghead gas, condensate,
sulphur, natural gas liquids, plant products and other liquid or gaseous
hydrocarbons (including C02), and all other minerals of every kind and
character which may be covered by or included in the Assets.
"Leases" means any and all rights, titles and interests owned by Seller in
all of the oil, gas or mineral leases and other interests described on
Schedule A.
"Losses" means any and all losses, liabilities, claims, demands,
penalties, fines, assessments, settlements, damages and any related
expenses of whatever kind or nature, known or contingent or otherwise,
including, without limitation, legal, accounting, consulting and
investigation expenses and litigation costs including without limitation,
response, remedial or inspection costs or any cleanup and laboratory
costs, but excluding consequential damages.
"Net Revenue Interest" means Seller's share of production or revenue from
(or where subject to a unit or pooling agreement, allocated under such
agreement to) a Property, net of all Burdens related to such Property as
set forth on Schedule H.
"Party" means either Buyer or Seller.
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"Permitted Encumbrances" means:
(a) Burdens to the extent that the aggregate effect of such Burdens
do not reduce the Net Revenue Interest of a Property below that shown on
Exhibit H;
(b) division orders and sales contracts;
(c) rights of reassignment which arise prior to abandonment,
surrender or release of oil, gas or mineral leases;
(d) rights to consent by, required notices to, filings with, or
other actions by, any Governmental Body in connection with the sale or
conveyance of oil and gas leases or interests therein, or the assumption
of operatorship, if they are customarily obtained subsequent to the sale
or conveyance;
(e) easements, rights-of-way, servitudes, permits, surface leases
and other rights relative to surface use and occupancy including, without
limitation, pipeline operations, grazing, logging, canals, ditches,
reservoirs and similar rights and conditions, covenants or other similar
restrictions on and over the surface of the Leases, Easements, Beneficial
Interests or Fee Interests, to the extent they do not unreasonably
interfere with exploration operations on the Assets;
(f) easements for streets, alleys, highways, pipelines, telephone
lines, power lines, railways and other easements and rights-of-way, on,
over or in respect to the Leases, Beneficial Interests, Easements or Fee
Interests;
(g) all leases, operating agreements, operator liens and working
interest owner liens, unit, communitization and pooling agreements,
farmout and subleases and farmin agreements and all Contracts that do not
affect the Net Revenue Interest;
(h) all Applicable Laws of any Governmental Body, and all rights
reserved to or vested in any Governmental Body to control or regulate the
Assets in any manner, including, without limitation, any adjustment in the
Net Revenue Interest or Working Interest of a particular Property, caused
by, or as the result of, any action of a Governmental Body which is not
the result of any negligent act or omission of Seller;
8
(i) liens for Taxes or assessments not yet due and payable or not
yet delinquent, or if delinquent, that are being contested in good faith
by appropriate action brought in the normal course;
(j) reversionary interests arising under farmout and farmin
agreements, subleases, and the non-consent provisions of applicable
operating agreements provided that the affected Wells are listed on
Schedule 3.1(r);
(k) liens imposed by Applicable Law, such as carriers',
warehousemen's and mechanics' liens and other similar liens arising in the
ordinary course of business which secure payment of obligations not more
than sixty (60) days past due or which are being contested in good faith
or for which funds have been set aside;
(l) consents to assign that have been obtained or waived and
preferential rights to purchase that have been waived or for which the
time period to exercise has expired;
(m) defects that have been cured by possession under applicable
statutes of limitation;
(n) other minor defects or irregularities generally waived by
prudent purchasers of oil and gas properties and that do not materially
impair the value, ownership or use of the affected Property; and
(o) others as set forth on Schedule G.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint stock company, trust, estate,
unincorporated organization, other business entity or any Governmental
Body.
"Personal Property" means to the extent attributable to the Fee Interests,
Leases, Easements, Contracts and Beneficial Interests, but excluding any
personal property owned by any Third Person or any of Seller's Affiliates
and subject to the limitations below, all of Seller's right, title and
interest in and to:
(a) all Wells (whether plugged or unplugged), equipment, Facilities
and personal property of any kind including, but not limited to, tubing,
casing, wellheads, pumping units, production units, compressors, valves,
meters, flowlines,
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tanks, heaters, separators, dehydrators, pumps, injection units, gates and
fences, which are located on or connected with the Fee Interests, Leases,
and Beneficial Interests and which are used solely and exclusively in
connection with the production, separation, storage, treatment, gathering
or transportation of Hydrocarbons from or attributable to the Fee
Interests, Leases, and Beneficial Interests and that are not presently
used in connection with any excluded assets;
(b) all licenses, authorizations, permits, variances and similar
rights and interests related to the Fee Interests, Leases, Facilities,
Easements, Contracts and Beneficial Interests and personal property
defined in (a) above;
(c) all other rights, privileges, benefits and powers conferred upon
the owner and holder of the Fee Interests, Leases, Facilities, Easements,
Contracts and Beneficial Interests and personal property defined in (a)
and (b) above; and
(d) copies of applicable general operating records, well files
(including applicable well logs and production data), lease files, land
files, environmental compliance files, regulatory reports and
certificates, abstracts and title work pertaining to the Fee Interests,
Leases, Easements, Facilities, Contracts and Beneficial Interests and
personal property defined in (a) above, but excluding: records containing
trade secrets unrelated to the Assets, legal files, attorney-client
communications or attorney work product materials and other similar
documents covered by privilege, records and documents subject to
confidentiality provisions and auditor's reports.
"Plugging and Abandonment" means all plugging, replugging, abandonment,
removal, disposal or restoration associated with the Assets, including,
but not limited to, all plugging and abandonment, removal, surface
restoration, site clearance and disposal of the wells, structures and
Personal Property located on or associated with the Assets, the removal or
capping and burying of all associated flowlines, the restoration of the
surface in accordance with Applicable Laws or the terms and conditions of
the applicable Leases or Contracts, whichever is more stringent, site
clearance, as required by Applicable Laws, and any disposal of related
waste materials, including naturally occurring radioactive material
("NORM") and asbestos, and shall include such Wells, structures, and
Personal Property associated with any of the Assets, whether drilled or
placed on a Lease, Fee Interest, or Beneficial Interest prior to, at, or
after the Closing Date.
10
"Property" means a Well, a prospective Well location, or a unitized or
communitized area described on Schedule H.
"Remediation" or "Remediate" means affirmative actions or remedial work
taken to remove or otherwise remedy an Environmental Condition, including
but not limited to any survey, site assessment, audit, investigation,
inspection, sampling, analysis, removal, excavation, pump and treat,
cleanup, disposal, storage, handling or treatment, excluding those actions
associated with Plugging and Abandonment.
"Tax" means any and all fees (including, without limitation,
documentation, license, recording, filing and registration fees), Taxes
(including without limitation, production, gross receipts, ad valorem,
value added, windfall profit tax, environmental tax, turnover, sales, use,
personal property (tangible and intangible), stamp, leasing, lease, user,
leasing use, excise, franchise, transfer, heating value, fuel, excess
profits, occupational, interest equalization, lifting, oil, gas, or
mineral production or severance, and other taxes), levies, imposts,
duties, charges or withholdings of any nature whatsoever, imposed by any
Governmental Body or taxing authority thereof, domestic or foreign,
together with any and all penalties, fines, additions to Tax and interest
thereon, whether or not such Tax shall be existing or hereafter adopted.
"Third Person" means a Person other than a Party or an Affiliate of a
Party.
"Title Defect" means any one of the following:
(1) Seller's title as of the Effective Date as to all or any part
of the Property is subject to an outstanding mortgage, deed of
trust, lien, security interest, or other monetary encumbrance
or adverse claim not listed or referenced on Schedule G that
would induce a purchaser to suspend payment of proceeds for
the Property or require the furnishing of security or
indemnity;
(2) Seller's Net Revenue Interest attributable to a Property as of
the Effective Date is less than that shown on Schedule H or
Seller's Working Interest attributable to a Property as of the
Effective Date is greater than that shown on Schedule H
without a corresponding increase in Seller's Net Revenue
Interest in the Property; or
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(3) Seller's Net Revenue Interest would be reduced if a Third
Person were to exercise a reversionary, back-in, or other
similar right not listed or referenced on Schedule H;
but shall not include any Permitted Encumbrances or preferential rights to
purchase.
"Wells" means, whether active or inactive, any orifice in the ground,
completed or being drilled, including without limitation, those previously
plugged and abandoned, those drilled for the production of Hydrocarbons,
for injection, for disposal or for water sources.
"Working Interest" means that share of costs and expenses associated with
the exploration, maintenance, development and operation of a Property that
Seller is required to bear and pay.
Section 1.3 Other Definitions in the Agreement. The following terms shall
have the respective meanings ascribed to them in the Sections of the Agreement
set forth below opposite such terms:
Section
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AFE 3.1(h)
Aggregate Environmental Defect Value 6.6
Aggregate Title Defect Value 7.7
Assignments 9.1(i)
Buyer Preamble
Claim Notice 8.2(a)
Cure 7.5
Cure Notice 7.5
Deeds 9.1(j)
Defect Value 7.4
Environmental Defect Notice 6.2
Environmental Defect Value 6.2
Environmental Notice Deadline 6.2
Environmental Rejection Notice 6.3(b)
Final Recap Amount 4.3(h)
Final Recapitulation Statement 4.3(h)
Final Settlement Date 4.3(h)
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Indemnified Party 8.2(a)
Indemnifying Party 8.2(a)
Interest Addition 7.8
Interest Addition Notice 7.8
Interest Addition Payment 7.8
Interest Addition Rejection Notice 7.8
Interest Addition Value 7.8
Individual Threshold 6.1
NORM 1.2
Notice Period 8.2(a)
Offset 7.8
Performance Deposit 2.4
Permits 3.1(1)
Purchase Price 2.2
Rejection Notice 7.6
Review Period 6.1
Seller Preamble
Title Defect Notices 7.4
Title Indemnity Payment 7.4
Section 1.4 Rules of Construction. For purposes of the Agreement:
(a) General. Unless the context otherwise requires (i) "or" is not
exclusive; (ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with accounting principles that are generally
accepted in the United States of America; (iii) words in the singular
include the plural and words in the plural include the singular; (iv)
words in the masculine include the feminine and words in the feminine
include the masculine; (v) any date specified for any action that is not a
Business Day shall be deemed to mean the first Business Day after such
date; and (vi) a reference to a Person includes its successors and
assigns.
(b) Parts and Sections. References to Parts and Sections are, unless
otherwise specified, to Parts and Sections of the Agreement. Neither the
captions to Parts or Sections hereof nor the Table of Contents shall be
deemed to be a part of the Agreement.
(c) Exhibits and Schedules. The Exhibits and Schedules form part of
the Agreement and shall have the same force and effect as if set out in
the body of the Agreement.
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(d) Other Agreements. References herein to any agreement or other
instrument shall, unless the context otherwise requires (or the definition
thereof otherwise specifies), be deemed references to that agreement or
instrument as it may from time to time be changed, amended or extended.
There is no incorporation by reference unless stated.
PART TWO
SALE AND PURCHASE
Section 2.1 Assets. At Closing, Seller agrees to sell, assign, transfer
and convey to Buyer the Assets and Buyer agrees to purchase and pay for the
Assets and assume the Assumed Liabilities.
Section 2.2 Purchase Price. The purchase price shall be Eighty Three
Million, Eighty Seven Thousand, Two Hundred and Twenty Four Dollars
($83,087,224) plus or minus the adjustments set forth in Parts Six and Seven of
the Agreement (the "Purchase Price").
Section 2.3 Allocation of Purchase Price. Schedule 2.3 sets forth a good
faith allocation of the Purchase Price among the Properties which comprise the
Assets, which allocation was prepared by Buyer and delivered to Seller on August
13, 2004. Such allocation has been provided for the purpose of (i) establishing
a basis for certain Taxes, (ii) obtaining waivers of or making offers with
respect to any preferential rights to purchase the Assets, and (iii) handling
those instances for which the Purchase Price is adjusted as provided herein.
Section 2.4 Performance Deposit and Liquidated Damages. Buyer shall tender
to Seller immediately upon execution of the Agreement, a non-refundable cash
performance deposit in the amount of Three Million Dollars ($3,000,000) (the
"Performance Deposit"). The Performance Deposit shall bear interest at the
Agreed Rate from the date delivered to Seller through the Closing or the date
returned to Buyer, whichever is applicable. At Closing, Buyer shall pay and
deliver to Seller the remaining unpaid portion of the Purchase price as provided
herein, and adjusted upward or downward pursuant to Parts Six and Seven.
Section 2.5 Termination. The following provisions shall apply in the event
of termination of this Agreement:
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(a) If this Agreement is terminated (i) by the mutual agreement of the
Seller and the Buyer and not as the result of the failure of either Party to
perform its obligations hereunder, or (ii) pursuant to Sections 4.3(e), 6.6 or
7.7, such termination shall be without liability of any Party or any affiliate
director, officer, employee, agent or representative of such Party and Seller
shall return the Performance Deposit to the Buyer.
(b) If this Agreement is terminated as a result of the failure of Buyer to
perform its obligations hereunder, then Seller shall retain the Performance
Deposit along with interest accrued thereon and Seller shall have all remedies
available to it under the law.
(c) If this Agreement shall be terminated as a result of the failure of
Seller to perform its obligations hereunder, then Seller shall return the
Performance Deposit to Buyer and Buyer shall have all remedies available to it
under the law. Notwithstanding the foregoing, it is expressly agreed to by the
Parties that Seller's failure to secure the release of the liens described in
Section 9.2 shall not constitute a failure of Seller to perform its obligations
hereunder and, in such event, Seller will return the Performance Deposit,
together with accrued interest, to the Buyer.
Section 2.5 Method of Payment. Any amount payable under the Agreement
shall be payable in immediately available funds by means of a wire transfer, if
to Seller, to Seller's account at Bank One, Houston NA, ABA # 111000614, account
number 188-414-8246 (with immediate telephone notice to Michael Gerlich at phone
number 713.335.4037, or to such other account number as Seller may by written
notice direct, or if to Buyer, to Buyer's account as may be designated by Buyer.
PART THREE
REPRESENTATIONS AND WARRANTIES
Section 3.1 Seller. Seller represents and warrants to Buyer that:
(a) Organization and Standing. Calpine Corp. is a corporation duly
organized, validly existing, and in good standing under the laws of the
State of Delaware, and is in good standing as a foreign corporation in all
jurisdictions where the nature of the Assets requires it. Calpine Natural
Gas L.P. is a limited partnership duly organized, validly existing, and in
good standing under the laws of the State of Delaware and is in good
standing as a foreign partnership in all jurisdictions where the nature of
the Assets requires it.
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(b) Authority. Seller has the corporate power and authority to enter
into and perform the Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by Seller of
the Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all requisite corporate action and the
Agreement has been duly executed and delivered by Seller.
(c) Validity of Agreement. The Agreement is a legal, valid and
binding obligation of Seller enforceable against Seller in accordance with
the terms of the Agreement, except as enforcement may be limited by
bankruptcy, insolvency or other similar Applicable Laws now or hereafter
in effect affecting the enforcement of creditors' rights in general. The
enforceability of Seller's obligations under the Agreement is subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(d) No Violation. The execution and delivery of the Agreement and
the performance by the Seller of the terms of the Agreement do not
conflict with or result in a violation of the Corporate Documents of
Seller or any agreement, instrument, order, writ, judgment or decree to
which Seller is a party or is subject.
(e) Litigation. Except as set forth on Schedule 3.1(e), there are no
actions, suits, or proceedings pending or to the Actual Knowledge of
Seller threatened against Seller as to the Assets, before any court or
arbitration tribunal or before or by any Governmental Body in which the
claim is in excess of Fifty Thousand Dollars ($50,000.00) for any one
claim or One Million Dollars ($1,000,000.00) in the aggregate.
(f) No Consents Required. Except as set forth in Section 4.3(d) and
on Schedule 3.1(f), no preferential purchase rights, consents, approvals
or other action by, or filings with any Person or Governmental Body are
required in connection with the execution, delivery and performance by
Seller of the Agreement.
(g) Environmental Claims. Except as set forth on Schedule 3.1 (g) as
to those Assets currently operated by Seller to Seller's Actual Knowledge,
there are no pending written claims, actions or proceedings by any Third
Person or Governmental Body caused by or arising out of any Environmental
Condition pending against the Seller, the Assets, or the ownership or
operation thereof and there are no Environmental Conditions presently
under Remediation.
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(h) Current Commitments. Schedule 3.1(i) contains a complete and
accurate list as of the date of this Agreement of (i) all authorities for
expenditures ("AFEs") in excess of $50,000 to drill or rework Well or for
capital expenditures pursuant to any of the Contracts that have been
proposed by any person on or after the Effective Date, whether or not
accepted by Seller or any Third Person, and (ii) all AFEs and oral or
written commitments in excess of $50,000 to drill or rework Wells or for
other capital expenditures pursuant to any of the Contracts for which all
of the activities anticipated in such AFEs or commitments have not been
completed by the date of this Agreement.
(i) Personal Property. The Personal Property located on the Assets
currently operated by Seller constitutes the equipment and fixtures
reasonably necessary for the operations of the Assets for the production
of the Hydrocarbons. Such Personal Property currently in service is, in
good repair and operating condition and is suitable for the purpose for
which such Personal Property is employed.
(j) Status of Contracts. Seller has all Contracts necessary to
conduct the business and operations of those Assets currently operated by
Seller as they are currently operated and all such material Contracts are
set forth in Exhibit C. All of the Contracts and Easements (i) are in full
force and effect, (ii) neither Seller nor, to Seller's Actual Knowledge,
any other party to the Contracts or Easements, (1) is in breach of or
default, or with the lapse of time or the giving of notice, or both, would
be in breach or default, with respect to any of its obligations thereunder
to the extent that such breaches or default have a material adverse Impact
on any of the Assets or (2) has given notice of any default or action to
alter, terminate, rescind or procure a judicial reformation of any
Contract or Easement. There are no Contracts not set forth on Exhibit C
which would have a material adverse effect on the ownership or operation
of the Assets.
(k) Taxes. All ad valorem, property, production, severance and other
taxes based on or measured by the ownership of the Properties or the
production of Hydrocarbons from the Properties due and payable prior to
the Effective Date have been properly and timely paid except those
disputed in ordinary course of business.
(l) License. With respect to those Properties currently operated by
Seller, Seller has all material licenses, authorizations, permits,
variances and similar rights and interests from Governmental Bodies
(collectively "Permits"), which are necessary to operate the Subject
Interests. The conveyance of the Assets to Buyer shall
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not cause revocation of any of such Permits. No violations of any of such
Permit exists which could result in a termination of such Permit or that
would materially impair Buyer's ability to enjoy the economic benefit of
the Assets.
(m) Tax Partnerships. None of the Assets are subject to a tax
partnership, including, without limitation, none of such properties are
subject to any operating agreement or other agreement under which the
parties hereto have not made an effective election pursuant to Section 761
of the Internal Revenue Code, and the Treasury Regulations promulgated
thereunder, to be excluded from the application of Subchapter K, Chapter
1, Subtitle A, of the Code.
(n) Not a Foreign Person. Seller is not a "foreign person" within
the meaning of Section 1445 (or similar provisions) of the Code (i.e.,
Seller is not a non-resident alien, foreign corporation, foreign
partnership, foreign trust or foreign estate as those terms are defined in
the Code and regulations promulgated thereunder). Calpine Corporations's
taxpayer identification number is 770212977 and Calpine Natural Gas L.P.'s
taxpayer identification number is 710882453.
(o) Gas Imbalances. Schedule 3.1(o) sets forth Seller's good faith
estimate of all gas imbalances with respect to Assets as of the Effective
Date. Buyer and Seller agree that the final gas imbalances attributable to
the Assets shall be identified and resolved as set forth in Section
4.3(o).
(p) No Broker. Seller has not employed or otherwise benefited from
the services of a broker, finder or similar person in connection with the
transaction contemplated by this agreement.
(q) Insurance. Schedule 3.1(q) sets forth a list of all material
insurance policies by which the Assets are insured against the losses
described therein, all of which are in full force and effect. True,
complete and correct copies of all such policies have been previously
provided to the Buyer.
(r) Payout Balances. Schedule 3.1(r) contains a complete and
accurate list of the status of any "payout" balance, as of the Effective
Date, for those Wells that are subject to a reversion or other adjustment
at some level of cost recovery or payout (or passage of time or other
event other than termination of a Lease by its terms).
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(s) Condemnation. To Seller's Actual Knowledge, there is no actual
or threatened taking (whether permanent, temporary, whole, or partial) of
any part of the Assets by reason of condemnation or the threat of
condemnation.
(t) Bankruptcy. There are no bankruptcy, reorganization, or similar
arrangement proceedings pending, being contemplated by, or, to Seller's
Actual Knowledge, threatened against Seller.
(u) Suspense Accounts. Except as described on Schedule 3.1(u), there
are no funds attributable to Seller's obligations to pay any Burdens held
by Seller in suspense.
(v) Wells. Except as described on Schedule 3.1(v), there are no
unplugged, temporarily abandoned, or temporarily shut-in Wells situated on
the Leases or the Fee Interests.
(w) Calls on Production. Except as described on Schedule 3.1(w) and
as contemplated by Section 4.3(f), there are no calls on production or
other similar marketing restrictions affecting the Assets.
(x) Accuracy of Representations and Warranties. The representations
and warranties set forth in this Agreement do not contain any untrue
statements of a material fact or omit to state any material fact necessary
to make any statements made not misleading.
Section 3.2 Buyer. Buyer represents and warrants to Seller that:
(a) Organization and Standing. Buyer is a corporation duly
organized, validly existing in good standing under the laws of the State
of Delaware and is in good standing as a foreign corporation in all
jurisdictions where the nature of the Assets requires it and is duly
qualified to own federal, Indian and state leases in the State New Mexico.
(b) Authority. Buyer has the corporate power and authority to enter
into and perform the Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by Buyer of
the Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all
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requisite corporate action and the Agreement has been duly executed and
delivered by Buyer.
(c) Validity of Agreement. The Agreement is a legal, valid and
binding obligation of Buyer enforceable against Buyer in accordance with
the terms of the Agreement, except as enforcement may be limited by
bankruptcy, insolvency or other similar Laws affecting the enforcement of
creditors' rights in general. The enforceability of Buyer's obligations
under the Agreement is subject to general principles of equity (regardless
of whether enforceability is considered in a proceeding in equity or at
law).
(d) No Violation. The execution and delivery of the Agreement and
the performance by Buyer of the terms of Agreement do not conflict with or
result in a violation of the Corporate Documents of Buyer or of any
agreement, instrument, order, writ, judgment or decree to which Buyer is a
party or is subject.
(e) No Consents Required. Except as set forth in Section 4.3(d), no
consents, approvals or other action by, or filings with any Person or
Governmental Body are required in connection with the execution, delivery
and performance by Buyer of the Agreement.
(f) Securities Representation. Buyer is an experienced and
knowledgeable investor and operator in the oil and gas business and is
acquiring the Assets for Buyer's own account and not with a view to, or
for offer of resale in connection with, a distribution thereof, within the
meaning of the Securities Act of 1933, or any other Applicable Laws
pertaining to the distribution of securities.
(g) Buyers' Sole Reliance on Own Investigation. Buyer has, subject
to necessary Third Person operator approval as to those Assets not
operated by Seller, availed itself of the opportunity to conduct a
pre-acquisition review of the Assets. Buyer is purchasing the Assets
solely in reliance on Buyer's own investigation of the Assets.
(h) No Broker. Buyer has not retained or otherwise benefited from
the services of a broker, finder or similar person in connection with the
Agreement or the transaction contemplated herein.
(i) Buyer's Qualifications. Buyer is, or will as of the Closing be,
fully qualified and bonded as an operator by all applicable Governmental
Bodies as necessary to operate the Assets.
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(j) Accuracy of Representations and Warranties. The representations
and warranties set forth in this Agreement do not contain any untrue
statements of a material fact or omit to state any material fact necessary
to make any statements made not misleading.
Section 3.3. Disclaimers and Notifications. The Parties make the following
disclaimers and notifications:
(a) No Other Warranties. Except as otherwise provided herein there
are no express or implied warranties that apply to the transactions
contemplated herein.
(b) Disclaimer and Assumption of Risk. EXCEPT AS EXPRESSLY SET FORTH
TO THE CONTRARY HEREIN, IT IS EXPRESSLY UNDERSTOOD BY THE PARTIES THAT
SELLER DOES NOT MAKE ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED
WITH RESPECT TO THE ASSETS. WITHOUT LIMITATION OF THE FOREGOING, SELLER
MAKES NO REPRESENTATION OR WARRANTIES, EXPRESS OR IMPLIED, AS TO TITLE
(OTHER THAN THE SPECIAL WARRANTY OF TITLE SET FORTH IN THE "ASSIGNMENTS"
AND THE "DEED," AS EACH OF SUCH TERMS IS DEFINED IN SECTION 9.1(j) BELOW)
OR THE CONDITION OR STATE OF REPAIR OF THE ASSETS, THEIR VALUE, QUALITY,
MERCHANTABILITY, SUITABILITY OR FITNESS FOR ANY PARTICULAR USES OR
PURPOSES, NOR AS TO THE CURRENT VOLUME, NATURE, QUALITY, CLASSIFICATION,
OR VALUE OF THE HYDROCARBONS RESERVES THEREUNDER OR COVERED THEREBY, NOR
WITH RESPECT TO ANY APPURTENANCES THERETO BELONGING OR APPERTAINING TO THE
ASSETS, AND BUYER SHALL ACCEPT THE ASSETS IN "AS IS," "WHERE IS,"
CONDITION. WITHOUT LIMITATION OF THE FOREGOING, BUYER HEREBY WAIVES ANY
AND ALL RIGHTS AND REMEDIES BUYER MAY HAVE AGAINST SELLER ARISING FROM
SAME INCLUDING, WITHOUT LIMITATION, ANY RIGHTS AND REMEDIES BUYER MAY HAVE
AGAINST SELLER PURSUANT TOTHE THE NEW MEXICO UNFAIR TRADE PRACTICES ACT
(NEW MEXICO STATUTES ANNOTATED Section 57-12-1, ET SEQ.).
(c) Disclaimer with Respect to NORM, etc. BUYER ACKNOWLEDGES AND
AGREES THAT THE ASSETS HAVE BEEN UTILIZED BY
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SELLER FOR THE PURPOSE OF EXPLORATION, DEVELOPMENT, AND PRODUCTION OF OIL
AND GAS, AS WELL AS PROCESSING AND REFINING OPERATIONS, AND THAT MATERIALS
ASSOCIATED THEREWITH MAY HAVE BEEN STORED, KEPT OR DISPOSED OF ON OR IN
THE ASSETS. BUYER ACKNOWLEDGES THAT EQUIPMENT, PLANTS, BUILDINGS,
STRUCTURES, IMPROVEMENTS, ABANDONED AND OTHER TANKS AND PIPING, STORAGE
FACILITIES, GATHERING AND DISTRIBUTION LINES, WELLS AND OTHER PETROLEUM
PRODUCTION FACILITIES AND APPURTENANCES MAY BE LOCATED THEREON. BUYER
ACKNOWLEDGES THAT THERE MAY HAVE BEEN SPILLS OF CRUDE OIL, PRODUCED WATER
OR OTHER MATERIALS IN THE PAST ON OR IN THE ASSETS. IN ADDITION, SOME
PRODUCTION EQUIPMENT MAY CONTAIN ASBESTOS AND NORM. IN THIS REGARD, BUYER
EXPRESSLY ACKNOWLEDGES AND AGREES THAT NORM MAY AFFIX OR ATTACH ITSELF TO
THE INSIDE OF WELLS, MATERIALS AND EQUIPMENT AS SCALE, OR IN OTHER FORMS,
AND THAT WELLS, MATERIALS AND EQUIPMENT LOCATED ON THE ASSETS MAY CONTAIN
NORM AND THAT NORM-CONTAINING MATERIAL MAY BE BURIED AND OTHERWISE
DISPOSED OF ON THE ASSETS. BUYER ALSO EXPRESSLY UNDERSTANDS THAT SPECIAL
PROCEDURES MAY BE REQUIRED FOR THE REMOVAL AND DISPOSAL OF ASBESTOS AND
NORM FROM THE EQUIPMENT AND LAND WHERE IT MAY BE FOUND AND THAT BUYER
ASSUMES ALL LIABILITY AND EXPENSE FOR SUCH ASSESSMENT, REMOVAL AND
DISPOSAL OF ANY SUCH MATERIALS AND ASSOCIATED ACTIVITIES, SUBJECT,
HOWEVER, TO THE TERMS AND PROVISIONS OF THIS AGREEMENT.
(d) Disclaimer with Respect to Data. All descriptions set forth
herein and all data, evaluations, reports, and any other information,
heretofore or hereafter furnished Buyer by Seller concerning any or all of
the Assets, and the operation thereof, have been and shall be furnished
solely for Buyer's convenience and have not constituted and shall not
constitute a representation or warranty of any kind by Seller, and any
reliance thereupon by Buyer shall be at Buyer's sole risk and liability.
Seller does not warrant or represent the accuracy or completeness of any
information, data or materials furnished to Buyer with respect to this
transaction. Buyer acknowledges that Seller's information with respect to
the Assets is incomplete and Seller does not have the requisite
information with which to determine the exact nature or condition of the
Assets.
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PART FOUR
COVENANTS
Section 4.1 Covenants of Seller. Seller covenants with Buyer as follows:
(a) Access. Except for such of the Assets not operated by Seller,
Seller shall afford Buyer and Buyer's representatives full and reasonable
access to the Assets in the possession of Seller during normal working
hours.
(b) Operations Prior to Closing. After the date hereof and until the
Closing, except as otherwise consented to by Buyer in writing, Seller
shall use and maintain the Assets in substantially the same manner in
which they have been used and maintained prior to the Agreement. Seller
shall not be obligated for any expenditures relating to the Assets after
the Effective Date. Without limitation of the foregoing, after the
execution of the Agreement and prior to Closing, Seller shall have the
right to make any changes, repairs or modifications, or incur any
expenditures necessary or desirable in Seller's opinion for the protection
of the Assets or to comply with any Applicable Law or other legal
requirement relative to the premises or to prevent or react to an
emergency or environmental incident. Seller shall have the right to effect
such expenditure or action with or without such approval, acting as would
any prudent operator under similar circumstances. Unless Buyer and Seller
otherwise agree, Seller shall not materially alter the Assets (other than
the use of supplies and consumables or the normal production of
Hydrocarbons from the Assets) or remove any improvements, equipment or
property which comprise the Assets (other than the use of supplies and
consumables).
Without the prior written consent of Buyer, Seller shall not do any
of the following:
(i) make any material change in the conduct of its business or
operations;
(ii) amend in any material respect any contract or agreement
except where such amendment will not have a material adverse effect;
(iii) sell, lease or otherwise dispose of any of the Assets,
other than properties sold, leased or otherwise disposed of in the
ordinary course of business,
(iv) commit to any new operations reasonably anticipated by
the Seller to require future capital expenditures in excess of $50,000;
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(v) with respect to any wells to be completed prior to
Closing, skip any zone or abandon any zone while testing;
(vi) run pipe or abandon any well;
(vii) elect to participate in any operation on the Assets or
fail to participate in any operation proposed on the Assets, or
(viii) commit to do any of the foregoing.
In addition, from the date hereof until the Closing, unless the
prior written consent of Buyer is obtained, Seller shall:
(aa) use all reasonable efforts to cause the Assets to be
developed, maintained, or operated in a manner consistent with prior
operations and in compliance with good operating standards and in
accordance with the terms and conditions of the applicable Leases, laws
and regulations and will regularly consult with Buyer with respect to
same;
(bb) ensure the payment of all rentals, royalties, overriding
royalties and other payments due with respect to the Assets;
(cc) maintain all insurance now in force with respect to the
Assets;
(dd) maintain all material permits, approvals, bonds, and
guaranties affecting the Assets, and make all filings required under
applicable law with respect to the Assets;
(ee) maintain books of account and records with regard to the
Assets in accordance with Seller's past practices; and
(ff) promptly notify Buyer of any notice of default (or threat
of default) received or given by Seller with respect to the Assets.
(c) Consents. Subject to 4.3 (d), Seller shall use reasonable
efforts to obtain all waivers, consents, approvals, permits and
authorizations and actions of Third Parties to complete the transactions
contemplated by the Agreement. Seller shall reasonably endeavor to notify
all holders of such rights of consent to the assignment of the Assets of
its intention to sell the portion of the Assets affected thereby, and of
such terms and conditions of the Agreement to which the holders of the
rights are entitled.
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Seller shall promptly notify Buyer if any consents or approvals are
denied, or if the requisite period has elapsed without said consents or
approvals having been received.
Section 4.2 Covenants of Buyer. Buyer covenants with Seller as follows:
(a) Performance Bonds, Guaranties, Etc.. With respect to any surety
bonds, performance bonds, guarantees or financial assurances relating to
the Assets, on which Seller or Seller's Affiliates is a principal or a
guarantor, Buyer shall cause such surety bonds, performance bonds,
guarantees or financial assurances to be replaced or otherwise released
within ninety (90) days after the Closing Date. Buyer shall reimburse
Seller for any reasonable amounts paid by Seller with respect to such
surety bonds, performance bonds, guarantees or financial assurances
related to periods on and after the Effective Date.
(b) Plugging and Abandonment. Upon Closing, Buyer shall assume all
of Seller's responsibility for Plugging and Abandonment associated with
the Assets, and shall conduct all Plugging and Abandonment in a good and
workmanlike manner. If at any time during Buyer's ownership of the Assets,
Buyer sells an interest or assigns an interest or obligation in any of the
Leases, Fee Interests or Beneficial Interests, then Buyer or its assignee
shall provide Seller a performance bond (in a form and with a surety
satisfactory to Seller) or other security satisfactory to Seller in an
amount reasonably calculated by Seller at that time to pay for any of
Buyer's remaining Plugging and Abandonment obligations with respect to the
Assets.
(c) No Use of Calpine Mark. At the Closing Buyer shall cease to use
any trademarks, symbols or trade names containing "Calpine," or similar
words. Notwithstanding anything to the contrary herein, Buyer shall have
sixty (60) days from the Closing Date to remove or replace any
identifications and signs.
(d) Transfer Orders. Buyer shall execute, acknowledge and deliver
transfer orders or letters in lieu prepared by Buyer directing all
purchasers of Hydrocarbons to make payments to buyer of proceeds
attributable to Hydrocarbons produced from the Assets within sixty (60)
days after Closing.
Section 4.3 Covenants of Seller and Buyer. Seller and Buyer
covenant to each other as follows:
(a) Compliance with Conditions Precedent. Each Party shall use its
commercially reasonable efforts to cause the conditions precedent set
forth in Part Nine, applicable to such Party, to be fulfilled and
satisfied as soon as practicable.
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(b) Recording. Seller shall be solely responsible for recording of
the Assignments, and any other documents related to the conveyance of the
Assets, and shall promptly furnish Buyer with either the recorded
originals or with the recording information thereof. Seller shall also be
solely responsible for all filings with any Governmental Body for change
of operator, and shall promptly provide Buyer with the original approved
copies of all such filings, or confirmation thereof. All recording and
filing shall be at the sole cost and expense of Buyer and Buyer shall
promptly reimburse Seller for all such costs upon presentation of
appropriate invoices.
(c) Press Release. No Party shall make any press release or other
announcement respecting the Agreement without the consent of the other
Party unless a Party refuses to consent and the Party desiring to make the
release or other announcement is advised by its counsel that the release
or other announcement is required to comply with any Applicable Law or
stock exchange rule.
(d) Certain Filings, Consents and Permits. With respect to certain
filings and consents required by any Governmental Body, the Parties agree
that Buyer and Seller shall cooperate with one another to make all filings
necessary and to obtain any necessary consents, permits, authorizations,
approvals or waivers.
(e) Risk of Loss. The risk of casualty loss relating to the Assets
shall pass from Seller to Buyer as of the Effective Date. If, after the
Effective Date but prior to Closing, all or any material portion of the
Assets is destroyed by fire or other casualty, is taken in condemnation or
under the right of eminent domain or proceedings for such purposes are
pending or threatened, Buyer shall purchase such portion of the Assets
notwithstanding any such destruction, taking or pending or threatened
taking, and the Purchase Price shall not be adjusted. Seller shall, at
Closing, pay to Buyer all sums paid to Seller by Third Persons by reason
of the destruction or taking of such portion of the Assets to be assigned
to Buyer, and shall assign, transfer and set over to Buyer all of the
right, title and interest of Seller in and to any unpaid awards or other
payments from Third Persons arising out of the destruction, taking or
pending or threatened taking as to such interest. Seller shall not
voluntarily compromise, settle or adjust any material amounts payable by
reason of any material destruction, taking or pending or threatened
taking as to any of the Assets without first obtaining the written consent
of Buyer, which shall not be unreasonably withheld. In the event that
casualty losses exceed, in the aggregate, ten percent (10%) of the
Purchase Price, either Seller or Buyer may terminate this Agreement upon
written notice to the other, and neither Party thereafter shall have any
further rights or obligations hereunder.
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(f) Preferential Right to Purchase Hydrocarbon Production. Seller
shall have the right, but not the obligation, at any time and from time to
time, to designate a purchaser or to purchase as produced all Hydrocarbons
produced and saved from the Assets. If Seller elects to purchase said
Hydrocarbons, Seller and Buyer shall execute a NAESB form agreement for
such sale and the transportation of such Hydrocarbons on commercially
reasonable terms and conditions including, without limitation, those set
our in Schedule 4.3(f).
(g) Post-Closing Access. Except as otherwise expressly provided
herein, from and after the Closing Date, Buyer and Seller shall reasonably
cooperate and afford each other or cause to be afforded to their
respective officers, employees, accountants and other representatives
access, upon reasonable notice, during business hours with respect to that
portion of the Assets to which access has been requested, to review and
copy the books, documents, databases or other records relating to the
Assets, but excluding those documents subject to Third Party
confidentiality obligations or subject to the attorney-client privilege or
otherwise excluded from the definition of Assets (which books, documents,
databases, records, or employees files or other information the Parties
shall cooperate and assist one another in identifying and locating),
interview, depose or seek testimony of employees, provide assistance in
proceedings with employees as witnesses or advisors, investigate the
physical premises, take photographs or videotapes, identify employees and
contractors with knowledge of any matter which is the subject of a claim
for which a Party has responsibility and make such employees available to
such Party and provide reasonable office space to do any of the foregoing
in connection with any matter affecting or alleged to affect the Party
requesting such access. Notwithstanding the foregoing, access to Tax
records shall be governed by Part Five.
(h) Final Recapitulation Settlement. On or before one hundred eighty
(180) days after Closing ("Final Settlement Date") Seller shall deliver to
Buyer a final statement (the "Final Recapitulation Statement") which shall
set forth all of the adjustments to the Purchase Price called for in this
Section 4.3(h) ("Final Recap Amount").
(1) Seller Adjustments. The Final Settlement Statement shall
incorporate the following adjustments in favor of Seller:
(a) If appropriate, any and all merchantable
liquids in sales tanks above the pipeline connections on
the Effective Date
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that is credited to the Assets, less any Taxes required
to be withheld by the purchaser of such.
(b) If appropriate, the proceeds received for any
and all natural gas produced and credited to the Assets
as of the Effective Date.
(c) An amount equal to all capital costs,
expenses, and any Taxes that are paid by Seller, and
that are, in accordance with generally accepted
accounting principles, attributable to the Assets from
and after the Effective Date, including, without
limitation:
(i) royalties, rentals or other similar
charges;
(ii) expenses paid by or on behalf of Seller
under applicable operating agreements and, in the
absence of an operating agreement, expenses of the
sort customarily billed under such agreements; and
(iii) ad valorem, property and other Taxes
and assessments (but not including income Taxes)
based upon or measured by the ownership of the
Property or the production of Hydrocarbons or the
receipt of proceeds therefrom. For the purposes of
this Agreement ad valorem taxes shall be prorated
as of the Effective Date.
(iv) reasonable amounts paid by Seller for
surety bonds, performance bonds or other financial
assurances pursuant to Section 4.2(a); and
(d) Any other adjustments in favor of Seller as
provided for in this Agreement.
(2) Buyer Adjustments. The Final Settlement Statement shall
incorporate adjustments in favor of Buyer:
(a) the proceeds received for any and all
merchantable liquids below the pipeline connections on
the Effective Date that is credited to the Assets less
any Taxes required to be withheld by the purchaser of
such.
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(b) the actual sales price received by Seller from
any and all natural gas proceeds and credited to the
Assets after the Effective Date; and
(c) Any other adjustments in favor of Buyer as
provided for in this Agreement.
(3) Buyer shall have the right, within thirty (30) days after
receipt of the Final Recapitulation Statement, to audit and object
to such statement. If Buyer objects to the Final Recapitulation
Statement in writing within the thirty (30) day period, Buyer and
Seller shall attempt to resolve such objections within thirty (30)
days after receipt of said objection. If the Parties are unable to
resolve such objections within the thirty (30) day period, then
either Party shall have the right thereafter to submit the matter to
arbitration pursuant to the terms of the Dispute Resolution
Procedure attached as Schedule 10.13 for determination of the Final
Recap Amount.
(4) Payment of the Final Recap Amount is due thirty (30) days
from receipt of the Final Recapitulation Statement, or ten (10) days
from the determination of the Final Recap Amount under the Dispute
Resolution Procedure, whichever is later. Interest will be applied
at the Agreed Rate to any amounts if not paid when due.
(i) Audit Rights. Within one year after the Closing Date, each of
Seller and Buyer may, at its own expense and by appointment only, audit
the other Party's books, accounts and records relating to such production
proceeds, capital costs, Taxes, Expenses and Burdens relating to this
transaction. Such audit shall be conducted so as to cause a minimum of
inconvenience to the audited Party.
(j) Further Assurances. Each Party shall, from time to time at the
request of the other, and without further consideration, execute and
deliver such other instruments of sale, transfer, conveyance, assignment,
clarification and termination and take such other action as the Party
making the request may reasonably require to effectuate the intentions of
the Parties, including those reasonably required to sell, transfer, convey
and assign to and vest in Buyer, and to place Buyer in possession of the
Assets and to transfer, assign or convey the Excluded Assets to Seller.
Seller intends to convey the Assets at Closing; however, in the event it
is determined after Closing that: (i) any part of the Assets was not in
fact conveyed to Buyer, and that the title to any part of the Assets is
incorrectly in the name of Seller; (ii) any Excluded Asset is conveyed to
Buyer and that the title to such excluded Asset is incorrectly in the name
of Buyer; then each Party shall take all Such action necessary to
correctly convey any part of Assets to Buyer, or any part of the Excluded
Assets to Seller.
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(k) Affiliates Access. Seller and its Affiliates shall have a
non-exclusive right of access to and over the Fee Interests, Leases and
Easements reasonably necessary to operate, maintain or remove any
facilities or personal property in existence and owned or operated by such
Affiliates on the Effective Date.
(l) Files Transfer. Originals (or copies if originals are not in
possession of Seller) of all non-privileged and non-confidential files,
contracts, and documents affecting the Assets which are in Seller's
possession shall be shipped, using reasonable efforts, to Buyer within
thirty (30) days after Closing. Buyer shall designate the method of
shipment and the carrier far enough in advance to allow for timely
shipment and shall be solely responsible for the cost and expense of
shipment and for any Losses occurring as a result of such shipment. In the
event Buyer has not provided for shipment within a reasonable time, then
Seller may arrange and pay for shipment to Buyer; in such event, Buyer
shall reimburse Seller for all expenses associated with such shipment
within thirty (30) days of Seller's request for reimbursement.
(m) Copies. Copies of all non-privileged and non-confidential books,
records, production records, logs (originals if in possession of Seller),
well files (originals if in possession of Seller), information, and
engineering data relating to the Assets, (except information and data
excluded from the definition of Assets), shall be shipped, using
reasonable efforts, to Buyer within thirty (30) days after Closing.
(n) Assumption of Operatorship. Unless otherwise agreed to by the
Parties and subject to the terms and conditions of all applicable
Contracts, Buyer shall assume Seller's obligations for operatorship of any
Seller-operated Assets conveyed herein at 7:00 a.m. on the first Business
Day following the Closing, and thereafter shall perform all duties
required in the course of business, including without limitation, paying
Burdens and severance Taxes, pumping and gauging wells, marketing
Hydrocarbons, working over wells, drilling new wells, filing all necessary
reports required by Applicable Law or otherwise, and performing
maintenance or repair work on the Assets until such time as a successor
operator is duly elected pursuant to any applicable Contract.
Notwithstanding the foregoing, Seller does not warrant or guarantee that
Buyer shall succeed Seller as operator.
(o) Assumption of Gas Imbalances. Buyer agrees to assume and bear
any and all gas imbalances with respect to the Assets. Buyer understands
that the existence of a gas imbalance in the form of overproduction may
result in a cash payment by Buyer or in Buyer's inability to further
produce and sell gas. Further, to the extent any
30
of the Wells are underproduced, there are no warranties that any rights of
makeup or cash payment exist with respect to such underproduction. WITHOUT
LIMITATION OF ANY OTHER PROVISION CONTAINED HEREIN, BUYER HEREBY
SPECIFICALLY RELEASES SELLER FROM, AND AGREES TO FULLY DEFEND, PROTECT,
INDEMNIFY AND HOLD HARMLESS SELLER, ITS AFFILIATES AND THEIR RESPECTIVE
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES, FROM AND
AGAINST EACH AND EVERY LOSS THAT MAY BE ASSERTED BY ANY THIRD PERSON,
RELATING TO GAS IMBALANCES RESPECTING THE WELLS CONVEYED WHETHER ARISING
UNDER THE TERMS OF ANY GAS BALANCING OR OTHER SIMILAR AGREEMENT, BY
OPERATION OF APPLICABLE LAW OR OTHERWISE. Buyer represents that it has
independently investigated, to its satisfaction, the gas balancing account
associated with the Assets.
On or before the date that the Final Recapitulation Statement is due,
Seller and Buyer shall, based upon data available at that time, determine
(a) the total amount of overproduction of gas attributable to Seller's
interest (e.g. volumes of gas taken from the Properties, or on lands
unitized therewith, by Seller in excess of those volumes which Seller's
interest would be entitled to receive) and (b) the total amount of
underproduction of gas attributable to Seller's interest (e.g. volumes of
gas not taken from the Properties, or on lands unitized therewith, by
Seller despite Seller's interest in and right to receive such volumes). If
the total amount of overproduction (as so determined) exceeds the total
amount of underproduction (as so determined) Buyer shall receive a credit
against the Purchase Price equal to $3.00 per Mcf times such excess. If
the total amount of underproduction (as so determined) exceeds the total
amount of overproduction (as so determined) Buyer shall in addition to the
amount of Purchase Price payable, pay to Seller an amount equal to $3.00
per Mcf times such excess.
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PART FIVE
TAXES
Section 5.1 Payment and Apportionment of Real Property Taxes and Personal
Property Taxes. With respect to Taxes:
(a) 2004 Taxes. All property Taxes including, without limitation, ad
valorem Taxes, benefit assessments, and special assessments, shall be
prorated between the Buyer and Buyer based upon the Effective Date for the
Tax year in which the Effective Date occurs. Buyer shall pay such Taxes to
the appropriate taxing authorities. Seller shall be charged for and shall
reimburse Buyer for the Seller's allocated share of property Taxes paid by
Seller.
(b) 2003 Taxes. All real property Taxes and personal property Taxes
imposed as a result of ownership of the Assets at any time during 2003
shall be paid by Seller.
(c) 2005 Taxes. All real property Taxes and personal property Taxes
imposed as a result of ownership of the Assets at any time during 2005
shall be paid by Buyer.
Section 5.2 Sales Taxes. The Purchase Price does not include any sales
Taxes or other transfer Taxes imposed in connection with the sale of the Assets.
Buyer shall reimburse Seller for or otherwise pay any sales Tax or other
transfer Tax, as well as any applicable conveyance, transfer and recording fee,
and real estate transfer stamps or Taxes imposed on the transfer of the Assets
pursuant to the Agreement. If Buyer is of the opinion that it is exempt from the
payment of any such sales Tax or other transfer Tax in connection with the
purchase of the Assets, Buyer shall furnish to Seller the appropriate Tax
exemption certification. Sales and other transfer Taxes shall be accounted for
pursuant to Section 4.3(h).
Section 5.3 Other Taxes. All excise, windfall profit and other Taxes
(other than income Taxes) relating to production of Hydrocarbons prior to the
Effective Date shall be paid by Seller, and all such Taxes relating to such
production on or after the Effective Date shall be paid by Buyer.
Section 5.4 Cooperation. For the period ending on the seventh anniversary
of the Closing Date, each Party to the Agreement shall provide the other Party
with reasonable
32
access to all relevant documents, data and other information which may be
required by the other Party for the purpose of preparing Tax returns,
establishing or defending a Tax position and responding to any audit by any
taxing jurisdiction. Each Party to the Agreement shall cooperate with all
reasonable requests of the other Party made in connection with contesting the
imposition of Taxes. Notwithstanding anything to the contrary in the Agreement,
neither Party to the Agreement shall be required at any time to disclose to the
other Party any Tax returns or other confidential or privileged Tax information.
Section 5.5 Tax Proceedings. In the event Buyer receives notice of any
examination, claim, adjustment or other proceeding relating to the liability for
Taxes of or with respect to Seller for any period Seller is or may be liable
under the Agreement, Buyer shall within ten (10) days notify Seller in writing
thereof. As to any such Taxes for which Seller is or may be liable under the
Agreement, and Seller does not contest such liability as against Buyer, Seller
shall be entitled at Seller's expense to control or settle the contest of such
examination, claim, adjustment or other proceeding, provided Seller notifies
Buyer in writing within thirty (30) days after receipt of the notice described
in the preceding sentence that Seller desires to do so. The Parties shall
cooperate with each other in the negotiations and settlement of any proceeding
described in this Section 5.5. Buyer shall provide, or cause to be provided, to
Seller necessary authorizations, including powers of attorney, to control any
proceeding which Seller is entitled to control pursuant to this Part Five.
Section 5.6 Purchase Price Allocation. The allocation of Purchase Price
provided for in Section 2.3 is intended to comply with the allocation method
required by Section 1060 of the Code. Buyer and Seller shall cooperate to comply
with all substantive and procedural requirements of Section 1060 and regulations
thereunder, including without limitation the filing by Buyer and Seller of an
IRS Form 8594 with their federal income Tax returns for the taxable year in
which the Closing occurs. Buyer and Seller agree that each will not take for
income Tax purposes, or permit any Affiliate to take, any position inconsistent
with the allocation of Purchase Price prescribed in Section 2.3.
PART SIX
ENVIRONMENTAL MATTERS
6.1 Phase I Environmental Assessment. Beginning on the date of this
Agreement and ending on August 26, 2004 (the "Review Period"), Buyer shall have
the right,
33
at its sole cost, risk and expense, to conduct an environmental assessment of
the Assets. During normal business hours and after providing Seller reasonable
prior notice of any such activities, Buyer and its representatives shall be
permitted to enter upon the Assets operated by Seller and all buildings and
improvements thereon, inspect the same, review all of Seller's non-privileged
and non-confidential files and records related to the Assets and generally
conduct such tests, examinations, and investigations as are consistent with the
American Society for Testing and Materials standard Phase I environmental audit.
Seller will have the right to (i) observe such investigation and (ii) promptly
receive a copy of all results, analyses and reviews. All information obtained or
reviewed by Buyer shall be maintained confidential pursuant to the
Confidentiality Agreement, which shall continue in force under its terms.
6.2 Environmental Defect Notice. Buyer shall notify Seller in writing of
any Environmental Conditions (an "Environmental Defect Notice(s)") no later than
5:00 p.m. CDT August 26, 2004. The Environmental Defect Notice shall state with
reasonable specificity: (i) the Property affected or on which the Asset is
located; (ii) a complete description of the Environmental Condition claimed;
(iii) Buyer's good faith estimate of the cost of Remediation of such
Environmental Condition (the "Environmental Defect Value"); and (iv) appropriate
documentation substantiating Buyer's claim. Buyer shall conclusively be deemed
to have waived any Environmental Condition not asserted by an Environmental
Defect Notice no later than 5:00 p.m. CDT August 26, 2004 (the "Environmental
Notice Deadline").
6.3 Seller's Election. For any Environmental Conditions asserted in an
Seller shall have the option of (i) Remediating the Environmental Defect
Notice(s), Environmental Condition, (ii) contesting the existence of the
Environmental Condition or the Environmental Defect Value, (iii) paying the
Environmental Defect Value as an adjustment to the Purchase Price subject to the
limitations set forth below, or (iv) excluding the affected Property and
reducing the Purchase Price by the value allocated to the Property. Seller shall
notify Buyer in writing of its election no more than five (5) days following its
receipt of an Environmental Defect Notice.
(a) If Seller elects to Remediate an Environmental Condition, Seller
shall give written notice of such an election to Buyer no more than four
(4) days after receipt of the Environmental Defect Notice, together with
Seller's proposed plan and timing for such Remediation and Seller shall
remain liable for all Losses arising out of or in connection with such
Environmental Condition until such time as the Remediation is completed.
(b) If Seller contests the existence of an Environmental Defect or
the Environmental Defect Value, then Seller shall so notify Buyer in
writing no more than
34
four (4) days after receipt of the Environmental Defect Notice
("Environmental Rejection Notice"). The Environmental Rejection Notice
shall state with reasonable specificity the basis of Seller's rejection of
the Environmental Defect or the Environmental Defect Value. Within ten
(10) days of Buyer's receipt of the Environmental Rejection Notice,
representatives of Buyer and Seller, knowledgeable in environmental
matters, shall meet and, within twenty (20) days after Buyer's receipt of
such Environmental Rejection Notice, either: (i) agree to mutually reject
the particular Environmental Defect Notice, or (ii) agree on the validity
of such Notice including the Environmental Defect Value, in which case
Seller shall have sixty (60) days after the date of such agreement within
which to elect in writing to Remediate the Environmental Condition
pursuant to Section 6.2(a) above or to pay Buyer the Environmental Defect
Value pursuant to Section 6.2 (c) above. If the Parties cannot agree on
either options (i) or (ii) in the preceding sentence, the dispute shall be
submitted to arbitration in accordance with the procedures set forth in
Section 10.13. In such case, Seller shall have five (5) days following the
final decision of the arbitration panel to notify Buyer in writing of its
election to Remediate the Environmental Defect or to pay the Buyer the
Environmental Defect Value.
(c) In the event a contested Environmental Defect cannot be resolved
prior to Closing, Seller shall convey the affected Property to Buyer and
Buyer shall pay for the Property at Closing in accordance with the
Agreement as though there were no Environmental Defect, subject to
Seller's obligations as set forth above upon resolution of the contested
matter.
(d) If the Purchase Price is adjusted pursuant to Section 6.2(iii)
above, or if Buyer waives an Environmental Condition pursuant to Section
6.2 above or otherwise, Buyer shall assume all Losses associated with such
Environmental Condition(s).
Section 6.4 Covenant of Cooperation. The Parties shall cooperate
fully with each other and act in good faith in implementing Part Six, including
but not limited to the following:
(a) sharing with the other Party in a timely manner all material,
non-privileged, non-confidential correspondence received from any
Affiliate or Third Person that is relevant to such an Environmental
Condition for which a Party is responsible pursuant to this Part Six;
(b) affording the other Party timely access to and an opportunity to
comment on (both draft and final versions) any material non-privileged,
non-
35
confidential correspondence to Affiliates or Third Persons, study
protocols and results, drawings, charts remediation plans or reports, or
other documentation relating to an Environmental Condition for which a
Party is responsible pursuant to this Part Six;
(c) providing the other Party timely notice of and an opportunity to
attend and participate in any meetings or hearing with Governmental Bodies
or courts relating to any Environmental Condition for which a Party is
responsible pursuant to this Part Six;
(d) preparing all material strategies and plans affecting any matter
with respect to which the other Party may have liability hereunder or that
may affect the future operations of the other Party in consultation with
the other Party using appropriate cost-effective technology and clean-up
criteria, including risk-based clean-up standards where permitted, in
accordance with Applicable Law;
(e) permitting each other post-Closing access, as described in
Section 4.3(h); and
(f) cooperating with each other to assist in the collection of any
amounts that may be collectible from joint interest owners to offset
Buyer's and Seller's liabilities pursuant to Part Six;
Section 6.5 Post-Closing Access. After the Closing with prior consent of
Buyer (which consent shall be timely given and shall not be unreasonably
withheld) and, where required, the prior written consent of any operator and
landowner of any affected Property, Seller and Seller's agents and
representatives shall have the right to enter onto the affected Property during
normal business hours for the purpose of conducting any environmental
inspection, audit, test, Remediation, or any other purpose deemed necessary by
Seller for purposes of fulfilling its responsibilities under Part Six. Buyer
shall use its reasonable efforts to obtain for Seller any consent required from
any Third Person (including but not limited to the operator and landowner) to
obtain such access.
Section 6.6 Limitation. Payments of the Environmental Defect Values shall
be made by Seller to Buyer as an adjustment to the Purchase Price at Closing if
then determined or if not determined as of the Closing, thereafter, consistent
with the time frames set forth above. Notwithstanding the provisions of Sections
6.2 and 6.3, no adjustment to the Purchase Price for Environmental Defect Values
pursuant to Section 6.2(b) shall be made unless and until the aggregate value of
all such Values (the "Aggregate Environmental Defect Value")
36
exceeds a deductible (not a threshold) equal to Five Hundred Thousand Dollars
($500,000.00). If the Environmental Defect Value with respect to any single
Environmental Condition is less than $5,000, such cost shall not be considered
in calculating the Aggregate Environmental Defect Value. In the event the
Aggregate Environmental Defect Value exceeds ten percent (10%) of the Purchase
Price, either Seller or Buyer may terminate this Agreement upon written notice
to the other, and neither Party thereafter shall have any further rights or
obligations hereunder.
Section 6.7 Exclusive Remedies. The rights and remedies granted each Party
in Part Six are exclusive rights and remedies against the other Party related to
any Environmental Condition, or Losses related thereto and the other matters
contained in this Part Six, and, EXCEPT AS PROVIDED IN PART 8, EACH PARTY
EXPRESSLY WAIVES ANY AND ALL OTHER RIGHTS AND REMEDIES WHICH IT MAY HAVE AGAINST
THE OTHER PARTY REGARDING ENVIRONMENTAL CONDITIONS, WHETHER FOR CONTRIBUTION,
INDEMNITY OR OTHERWISE, REGARDLESS OF THE FAULT OR NEGLIGENCE OF THE CLAIMING
PARTY, INCLUDING STRICT OR STATUTORY LIABILITY OF THAT PARTY UNDER ANY
APPLICABLE LAW.
PART SEVEN
TITLE MATTERS
Section 7.1 Confidentiality Agreement. During the Review Period, Buyer
upon written request and at Buyer's sole cost and expense, may inspect and
review all of Seller's non-privileged and non-confidential files, records, and
similar materials relating to the Fee Interests, Leases, Beneficial Interests
and Contracts. All information made available to Buyer and designated by Seller
as confidential or proprietary shall be maintained confidential pursuant to the
Confidentiality Agreement, which shall continue in force under its terms.
Section 7.2 Preferential Purchase Rights. Seller shall have a period of
sixty (60) days from the date of the Agreement to resolve preferential purchase
rights to the Properties set forth on Schedule 7.2. To the extent any
preferential purchase rights are exercised by any Third Person entitled to
exercise such rights, or waivers thereof are not obtained prior to the Closing
Date, then the Properties subject to such preferential purchase rights shall not
be sold to Buyer and shall be excluded from the Agreement. The Purchase Price
shall be adjusted by the dollar value allocated to the Properties subject to
such preferential purchase right set forth in Schedule 2.3. In the event any
Third Person initially elects to exercise a particular preferential right, but
subsequently refuses or elects not to consummate the purchase under the
37
preferential right (whether such failure occurs before or after the Closing
Date), the Parties agree that Buyer shall purchase such interests covered by the
preferential right in accordance with the values set forth in Schedule 2.3 and
the closing of such transaction shall take place on a date designated by Seller
not more than ninety (90) days after the Closing Date.
Section 7.3 Required Consents. If Seller shall fail to obtain any consent
or waiver of maintenance of uniform interest provision required for the transfer
of any Property, Seller's failure shall be handled as follows:
(a) If the holder of the right to consent or party to a maintenance
of uniform interest provision affirmatively refuses to consent or waive
prior to Closing, such refusal shall be considered a Title Defect under
this Part Seven and the Title Indemnity Payment therefore shall equal the
value (or portion thereof) allocated to the affected Property (or portion
thereof) in Schedule 2.3.
(b) Except for approvals from Governmental Bodies normally received
subsequent to assignment, if Seller believes a consent or waiver may be
obtained subsequent to Closing, the Property shall be held by Seller for
the benefit of Buyer after Closing and Seller shall provide Buyer with the
economic benefits thereof until such consent or waiver is received or
until ninety (90) days following Closing, if later, and Buyer shall pay
for the Property at Closing in accordance with the Agreement as though the
consent or waiver had been obtained. If Seller obtains the consent or
waiver on or before ninety (90) days following Closing, then Seller shall
deliver conveyances of the Property to Buyer. If the consent or waiver is
not obtained or is affirmatively refused on or before ninety (90) days
following Closing, Seller shall refund the value allocated to the affected
portion of the Property to Buyer less any net revenues (revenues net of
costs and Burdens) received by Buyer in connection with such affected
portion of the Property and Seller's holding for the benefit of Buyer
shall terminate.
Section 7.4 Title Defects. Buyer shall notify Seller in writing of any
Title Defects ("Title Defect Notice(s)") no later than 5:00 p.m. CDT on August
26, 2004. The Title Defect Notice shall state with reasonable specificity: (i)
the Property affected; (ii) the particular Title Defect claimed; (iii) Buyer's
good faith estimate of the amount the Title Defect reduces the value allocated
to the affected Property on Schedule 2.3 (the "Defect Value"); and (iv)
appropriate documentation substantiating Buyer's claim. Buyer shall conclusively
be deemed to have waived any Title Defects not asserted by a Title Defect Notice
no later than 5:00 p.m. CDT on August 26, 2004. For all Title Defects asserted
in Title Defect Notices, Seller shall have the option of (a) curing the Title
Defect, (b) contesting the Title Defect or Buyer's good faith estimate of the
Defect Value, (c) paying Buyer's good faith estimate of the Defect Value as an
adjustment to the Purchase Price subject to the limitations set forth below (a
"Title Indemnity Payment"), or
38
(d) excluding the affected Property and reducing the Purchase Price by the value
allocated to such Property. Seller shall notify Buyer in writing of its election
no more than four (4) days following its receipt of a Title Defect Notice.
Section 7.5 Seller's Right to Cure. If Seller elects to cure a Title
Defect, then Seller shall so notify Buyer in writing within four (4) days after
receipt of the particular Title Defect Notice ("Cure Notice"). Within sixty (60)
days after receipt of the Title Defect Notice, Seller shall either cure the
Title Defect to the reasonable satisfaction of Buyer ("Cure") or if Seller is
unable to Cure such Title Defect, make a Title Indemnity Payment for such Title
Defect equal to Buyer's good faith estimate of the Defect Value set forth in the
Title Defect Notice.
If Seller is unable to Cure a Title Defect prior to Closing, Seller shall
convey the Property to Buyer and Buyer shall pay for the Property at Closing in
accordance with the Agreement as though the Title Defect had been Cured, subject
to Seller's obligation to make a Title Indemnity Payment to Buyer less any net
revenues (revenues net of costs and Burdens) received by Buyer in connection
with the affected portion of the Property if the Title Defect cannot be Cured
during the sixty (60) days following receipt of the Title Defect Notice.
Section 7.6 Contested Title Defects. If Seller contests the existence of a
Title Defect or Buyer's good faith estimate of the Defect Value, then Seller
shall so notify Buyer in writing no more than five (5) days after Seller's
receipt of the Title Defect Notice ("Rejection Notice"). The Rejection Notice
shall state with reasonable specificity the basis of Seller's rejection of the
Title Defect or Buyer's good faith estimate of the Defect Value. Within thirty
(30) days of Buyer's receipt of the Rejection Notice, representatives of Buyer
and Seller, knowledgeable in title matters, shall meet and, within ten (10) days
after Buyer's receipt of such Rejection Notice, either: (i) agree to mutually
reject the particular Title Defect, or (ii) agree on the validity of such Title
Defect and the Defect Value, in which case Seller shall have sixty (60) days
after the date of such agreement within which to Cure such Title Defect and
failing such Cure, to make the Title Indemnity Payment therefore. If the Parties
cannot agree on either options (i) or (ii) in the preceding sentence, the Title
Defect or the Defect Value subject to the Rejection Notice shall be submitted to
arbitration in accordance with the procedures set forth in Section 10.13. If
Seller fails to timely deliver a Rejection Notice or a Cure Notice, Seller shall
be deemed to have accepted the validity of the Title Defect and Buyer's good
faith estimate of the Defect Value, and shall pay Buyer a Title Indemnity
Payment for the Title Defect equal to the Defect Value within sixty (60) days of
Seller's receipt of the applicable Title Defect Notice.
In the event a contested Title Defect cannot be resolved prior to Closing,
Seller shall convey the affected Property to Buyer and Buyer shall pay for the
Property at Closing in
39
accordance with the Agreement as though there were no Title Defect, subject to
Seller's obligations as set forth in this Section 7.6 to Cure or to make a Title
Indemnity Payment to Buyer less any net revenues (revenues net of costs and
Burdens) received by Buyer in connection with the affected Property.
Section 7.7 Title Indemnity Payments. Title Indemnity Payments shall be
made by Seller to Buyer as an adjustment to the Purchase Price at Closing if
then determined or if not determined as of the Closing, thereafter, consistent
with the time frames set forth above Notwithstanding the provisions of Sections
7.3, 7.4, 7.5 and 7.6, Seller is obligated to make a Title Indemnity Payment
only if the aggregate Defect Value of all Title Defects that Seller has agreed
to pay pursuant to Section 7.4 or which is resolved pursuant to Section 7.6 (the
"Aggregate Title Defect Value") exceed a deductible (not a threshold) equal to
Five Hundred Thousand Dollars ($500,000.00). If the Defect Value for any single
Property is less than $5,000, such value shall not be considered in calculating
the Aggregate Title Defect Value. If a Defect Value is not liquidated or certain
in amount, the Defect Value shall be the amount necessary to compensate Buyer
for the adverse economic effect on the Property, taking into account all
relevant factors, including without limitation, the Property's Allocated Value,
the time value of money, the practical and legal effect of the Title Defect, and
the amount of reduction in Net Revenue Interest or increase in the Working
Interest of the affected Property. The aggregated Defect Value(s) for any
Property shall never exceed the value allocated to such Property in Schedule
2.3. In the event the Aggregate Title Defect Value exceeds ten percent (10%) of
the Purchase Price either Buyer or Seller may terminate this Agreement upon
written notice to the other, and neither Party thereafter shall have any further
rights or obligations hereunder.
Section 7.8 Interest Additions. If Seller discovers an increase in the Net
Revenue Interest shown on Schedule H with respect to a Property Interest which
is free of Title Defects (an "Interest Addition"), then Seller shall, from time
to time and without limitation, have the right to give Buyer written notice of
such Interest Additions ("Interest Addition Notice"), as soon as practicable but
no less than fifteen (15) days before Closing, stating with reasonable
specificity the Property affected, the particular Interest Addition claimed, and
Seller's good faith estimate of the amount the Additional Interest increases the
value of the affected Property over and above the value allocated to such
Property in Schedule 2.3 ("Interest Addition Value"). Seller shall conclusively
be deemed to have waived any additional Interest not asserted by an Interest
Addition Notice on or before fifteen (15) days prior to Closing. If Buyer agrees
with the existence of the Additional Interest and Seller's good faith estimate
of the Interest Addition Value, then the Interest Addition Value shall be
applied as an offset to any Title Indemnity Payment required of Seller
("Offset"). If the Interest Addition Value exceeds the amount of any Title
Indemnity Payment(s) due Buyer, the amount of such difference (an "Interest
Addition Payment") shall be paid by Buyer to Seller as an adjustment
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to the Purchase Price at Closing. If Buyer contests the existence of the
Interest Addition or Seller's good faith estimate of the Interest Addition
Value, then Buyer shall so notify Seller in writing within ten (10) days after
Buyer's receipt of the Interest Addition Notice ("Interest Addition Rejection
Notice"). The Interest Addition Rejection Notice shall state with reasonable
specificity the basis of Buyer's rejection of the Additional Interest or Buyer's
good faith estimate of the Interest Addition Value. Within ten (10) days of
Seller's receipt of the Interest Addition Rejection Notice, representatives of
Buyer and Seller, knowledgeable in title matters, shall meet and, within sixty
(60) days after Seller's receipt of such Interest Addition Rejection Notice,
either (a) agree to mutually reject the Interest Addition in which case Seller
shall waive the Interest Addition, or (b) agree on validity of such Interest
Addition and the Interest Addition Value, in which case Seller shall be entitled
to an Offset or Interest Addition Payment. If the Parties cannot agree on either
option (a) or (b) in the preceding sentence, the Interest Addition subject to
the Interest Addition Rejection Notice shall be submitted to arbitration in
accordance with the procedures set forth in Section 10.13. If Buyer fails to
timely deliver an Interest Addition Rejection Notice, Buyer shall be deemed to
have accepted the validity of the Interest Addition and Seller's good faith
estimate of the Interest Addition Value, and Seller shall be entitled to an
Offset or Interest Addition Payment as described above.
Section 7.9 Reconveyance. If Seller makes a payment for Title Defect
pursuant to Part Seven for one hundred percent (100%) of the Defect Value, Buyer
shall, at Seller's sole option to be exercised no later than sixty (60) days
after such payment, reconvey to Seller the Property or portion of the Property,
and all proceeds accruing thereto, with respect to which the Title Indemnity
Payment was made (effective as of the Effective Date).
PART EIGHT
INDEMNITY
Section 8.1 General Indemnification. Buyer and Seller agree that:
(a) Seller. Except with respect to Taxes (which are covered by Part
Five), and title matters (which are covered by Part Seven) Seller shall
indemnify, defend and hold harmless Buyer, its Affiliates and its and
their respective officers, directors, agents and employees from and
against all Losses based upon, arising out of, in connection with, or
relating to:
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(i) any breach of any representation, warranty, covenant or
agreement of Seller contained in the Agreement;
(ii) except for the Assumed Liabilities, any matter arising in
connection with the ownership or operation of the Assets prior to
the Effective Date;
(iii) all actions, proceedings, claims, litigation,
arbitration, mediation or other dispute resolution procedure pending
or to the Actual Knowledge of Seller threatened, as of the Effective
Date relating to or affecting the Assets;
and for which Buyer has submitted a Claim Notice on or before December 31,
2005 in compliance with Section 8.2. NOTWITHSTANDING THE FOREGOING,
SELLER'S FINANCIAL OBLIGATIONS UNDER THIS SECTION 8.1(a) SHALL NOT EXCEED,
IN THE AGGREGATE, AN AMOUNT EQUAL TO FIFTY PERCENT (50%) OF THE PURCHASE
PRICE AS ADJUSTED PURSUANT TO SECTION 2.2.
(b) Buyer. Except with respect to Taxes (which are covered in Part
Five), Buyer shall indemnify, defend and hold harmless Seller, its
Affiliates and its and their respective officers, directors, agents and
employees from and against all Losses based upon, arising out of, in
connection with, or relating to:
(i) any breach of any representation, warranty, covenant or
agreement of Buyer contained in the Agreement;
(ii) if the Closing occurs, any matter arising in connection
with the ownership or operation of the Assets from and after the
Effective Date;
(iii) Buyer's inspection of the Assets as set forth in Section
3.2(g) and 4.1(a);
(iv) if the Closing occurs, any dispute or claim arising after
Closing in connection with preferential purchase rights on Assets
conveyed to Buyer at the Closing;
(v) any claims asserted by Third Persons against Seller in
reliance on any interpretive data conveyed by Seller to Buyer, to
the extent such claims arise as a consequence of Buyer's disclosure
of such data;
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(vi) If Closing occurs, Losses attributable to claims against
Seller's bonds or similar instruments that remain in place after the
Closing pursuant to Section 4.2;
(vii) if the Closing occurs, the Assumed Liabilities; and
(viii) any Losses not indemnified by Seller by reason of the
limitations set forth in Section 8.1 (a).
Section 8.2 Method of Asserting Claims, Etc. Except for Claims under Parts
5 and 7, all claims for indemnification under the Agreement shall be asserted
and resolved as follows:
(a) Third Party Claims. In the event that any claim for which a
Party providing indemnification (the "Indemnifying Party") would be liable
to a Party or any of its officers, directors, employees, agents,
representatives or others entitled to indemnification hereunder (the
"Indemnified Party") is asserted against or sought to be collected by a
Third Person, the Indemnified Party shall promptly notify the Indemnifying
Party of such claim, specifying the nature of such claim and the amount or
the estimated amount thereof to the extent then feasible (which estimate
shall not be conclusive of the final amount of such claim) (the "Claim
Notice"). The Indemnified Party shall have thirty (30) days from its
receipt of the Claim Notice (the "Notice Period") to notify the
Indemnified Party (i) whether or not it disputes its liability to the
Indemnifying Party hereunder with respect to such claim, and (ii) if it
does not dispute such liability, whether or not it desires, at its sole
cost and expense, to defend the Indemnified Party against such claim;
provided, however, that the Indemnified Party is hereby authorized prior
to and during the Notice Period to file any motion, answer or other
pleading which it shall deem necessary or appropriate to protect its
interests. In the event that the Indemnifying Party notifies the
Indemnified Party within the Notice Period that it does not dispute such
liability and desires to defend against such claim or demand, then, except
as hereinafter provided, the Indemnifying Party shall have the right to
defend such claim or demand by appropriate proceedings, which proceedings
shall be promptly settled or prosecuted to a final conclusion, in such a
manner as to avoid any risk of the Indemnified Party becoming subject to
liability. If the Indemnified Party desires to participate in, but not
control, any such defense or settlement, it may do so at its own cost and
expense. If the Indemnifying Party disputes its liability with respect to
such claim, or elects not to defend against such claim, whether by not
giving timely notice as provided above or otherwise, the Indemnified Party
shall have the right
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but not the obligation to defend against such claim, and the amount of any
such claim, or if the same be contested by the Indemnifying Party or by
the Indemnified Party, then that portion thereof as to which such defense
is unsuccessful, shall be conclusively deemed to be a liability of the
Indemnifying Party hereunder (subject, if it has timely disputed
liability, to a determination in accordance with Section 10.13 that the
disputed liability is covered by this Part Eight.)
(b) Other Claims. In the event that the Indemnified Party shall have
a claim against the Indemnifying Party hereunder which does not involve a
claim or demand being asserted against or sought to be collected from it
by a Third Person, the Indemnified Party shall promptly send a Claim
Notice with respect to such claim to the Indemnifying Party. If the
Indemnifying Party does not notify the Indemnified Party within the Notice
Period that it disputes such claim, the amount of such claim shall be
conclusively deemed a liability of the Indemnifying Party hereunder.
Section 8.3 Payment. Payments under this Part Eight shall be made as
follows:
(a) Payment for Undisputed Amounts. In the event that the
Indemnifying Party is required to make any payment under this Part Eight,
the Indemnifying Party shall promptly pay the Indemnified Party the amount
so determined. If there should be a dispute as to the amount or manner of
determination of any indemnity obligation owed under Part Six or this Part
Eight, the Indemnifying Party shall nevertheless pay when due such
portion, if any, of the obligation as shall not be subject to dispute. The
difference, if any, between the amount of the obligation ultimately
determined as properly payable under Part Six or this Part Eight and the
portion, if any theretofore paid, shall bear interest at the Agreed Rate
as provided in Section 8.3(b). Upon the payment in full of any claim, the
Indemnifying Party shall be subrogated to the rights of the Indemnified
Party against any Person or other entity with respect to the subject
matter of such claim.
(b) Interest. If all or part of any indemnification obligation under
the Agreement is not paid when due upon resolution of the claim, then the
Indemnifying Party shall pay on demand to the Indemnified Party interest
at the Agreed Rate on the unpaid amount of the obligation for each day
from the date the amount became due until payment in full.
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Section 8.4 Disputed Claims. If the Indemnifying Party shall notify the
Indemnified Party during the Notice Period of any Disputed Claim under Section
8.2, the Disputed Claims shall be subject to the Dispute Resolution Procedure
pursuant to Section 10.13.
Section 8.5 Applicability of Part Eight. This Part Eight does not apply to
title matters (which are covered by Part Seven) or Tax matters (which are
covered by Part Five). This Part Eight applies to certain Environmental
Conditions only to the extent of a breach of the representation set forth in
Section 3.1(g), and Seller's obligations (if any) under Section 6.3(a) all other
Environmental Conditions or other matters being expressly subject to the terms
and conditions of Part Six.
PART NINE
CONDITIONS PRECEDENT
Section 9.1 Conditions Precedent of Seller. The obligations of Seller
under the Agreement are subject, at the sole option of Seller, to the
satisfaction, in Seller's sole opinion, at or prior to the Closing of the
following conditions:
(a) Representations and Warranties True at Closing. The
representations and warranties of Buyer contained in the Agreement or in
any certificate or document delivered pursuant to the provisions hereof,
or in connection with the transactions contemplated hereby, were true and
complete when made, and shall be true and complete on and as of the
Closing Date as though such representations and warranties were made at
and as of such date except as otherwise expressly provided herein.
(b) Compliance with Agreement. On and as of the Closing Date, Buyer
shall have performed and complied with all agreements, covenants and
conditions required by the Agreement to be performed and complied with
prior to or on the Closing Date.
(c) Validity of Agreement. The execution, delivery and performance
of this Agreement and the transactions contemplated thereby have been duly
and validly authorized by all necessary action, corporate or otherwise, on
the part of Buyer.
(d) Approvals. Seller shall have obtained all approvals including,
without limitation, those of its senior management and board of directors,
necessary to consummate the proposed transaction.
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(e) Opinion of Counsel. Seller shall have received an opinion dated
as of the closing from Buyer's counsel in substantially the form set forth
in Exhibit 3.
(f) Buyer's Certificates. Seller shall have received (i) a
certificate executed by a duly qualified officer of Buyer dated as of the
Closing in substantially the form set forth in Exhibit 4 and a certificate
of incumbency for such officer and (ii) certified copies of resolutions of
Buyer's board of directors, as appropriate, authorizing and approving the
execution, delivery and performance of the Agreement.
(g) Consents. Buyer shall have used reasonable best efforts to
obtain all necessary consents of and filings with any Governmental Body
relating to the consummation of the transactions contemplated by this
Agreement.
(h) Injunction. On the Closing Date, there shall be no injunction,
writ, or preliminary restraining order or any order of any nature issued
by a court or other Governmental Body of competent jurisdiction directing
that the transaction provided for herein or any of them not be consummated
as herein provided or imposing any conditions on the consummation of the
transactions contemplated hereby and no material proceeding or lawsuit
shall have been commenced or threatened by any Governmental Body or other
Third Person with respect to any of the transactions contemplated by the
Agreement.
(i) Due Diligence Acknowledgment. Buyer shall deliver to Seller at
Closing a signed acknowledgment in substantially the form set forth in
Exhibit 5, stating that Buyer had sufficient and adequate time and
opportunity to review all files, documents, and other information, which
Seller has made available. Buyer shall also acknowledge that as a result
of Buyer's due diligence, including but not limited to the aforementioned
file review, it has fully satisfied itself as to the condition and value
of the Assets.
(j) Conveyances. Buyer shall execute and acknowledge the assignments
which are contained in Exhibit 1 (the "Assignments), the deeds which are
contained in Exhibit 2 (the "Deeds"), as well as such certificates or
other documents as are required to effect the transfer of the Assets.
(k) Additional Agreements. Buyer shall execute, acknowledge and
deliver to Seller such other agreements as may be necessary to carry out
the purposes of the Agreement
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Section 9.2 Conditions Precedent of Buyer. The obligations of Buyer under
this Agreement are subject, at the option of Buyer, to the satisfaction, in
Buyer's sole opinion, at or prior to the Closing of the following conditions:
(a) Representations and Warranties True at Closing. The
representations and warranties of Seller contained in the Agreement or in
any certificate or document delivered pursuant to the provisions hereof,
or in connection with the transactions contemplated hereby, were true and
complete when made, and shall be true and complete on and as of the
Closing Date as though such representations and warranties were made at
and as of such date except as otherwise expressly provided herein.
(b) Compliance with Agreement. On and as of the Closing Date, Seller
shall have performed and complied with all agreements, covenants, and conditions
required by the Agreement to be performed and complied with prior to or on the
Closing Date.
(c) Validity of Agreement. The execution, delivery and performance
of this Agreement and the transactions contemplated thereby have been duly
and validly authorized by all necessary action, corporate or otherwise, on
the part of Seller.
(d) Opinion of Counsel. Buyer shall have received an opinion dated
as of the Closing from Seller's counsel in substantially the form set
forth in Exhibit 3.
(e) Seller's Certificate. Buyer shall have received (i) a
Certificate executed by a duly qualified officer of Seller dated as of the
Closing in substantially the form set forth in Exhibit 4 and a certificate
of incumbency for such officer and (ii) certified copies of resolutions of
Buyer's board of directors, as appropriate authorizing and approving the
execution, delivery and performance of the Agreement.
(f) Consents. Seller shall have used reasonable efforts to obtain
all necessary consents of and filings with any Governmental Body relating
to the consummation of the transactions contemplated by the Agreement.
(g) Injunction. On the Closing Date, there shall be no injunction,
writ, or preliminary restraining order or any order of any nature issued
by a court or other Governmental Body of competent jurisdiction directing
that the transaction provided for herein or any of them-not be consummated
as herein provided or imposing any conditions on the consummation of the
transactions contemplated hereby and no
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material proceeding or lawsuit shall have been commenced or threatened by
any Governmental Body or other Third Person with respect to any of the
transactions contemplated by the Agreement.
(h) Conveyances. Seller shall execute, acknowledge and deliver to
Buyer the Assignments as well as such certificates or other documents as
are required to effect the transfer of the Assets, or the subsequent
operation thereof. Buyer shall also execute and deliver such change of
operator forms as are required by applicable Governmental Bodies to
transfer operatorship of the Assets. Such documents as may be necessary to
carry out the purpose of the Agreement.
(i) Release of Lien. Seller shall have delivered to Buyer a release,
as to the Assets, of the liens and security interests created by the
Mortgage, Deed of Trust, Assignment, Security Agreement, Financing
Statement and Fixture Filing dated as of May 1, 2002 as delivered to the
Bank of Nova Scotia as agent as amended by the Amended and Restated
Mortgage, Deed of Trust, Assignment, Security Agreement, Financing
Statement and Fixture Filing dated July 16, 2003.
(k) Additional Agreements. Seller shall execute, acknowledge and
deliver to Seller such other agreements as may be necessary to carry out
the purposes of the Agreement.
PART TEN
MISCELLANEOUS
Section 10.1 Notices. Except as otherwise expressly provided herein, all
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given and received when actually delivered
to the addressee or received via facsimile at the number set forth below of the
Party to be notified.
If to Seller:
Calpine Corp.
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717 Texas Avenue
Houston, Texas 77002
Fax: 713.651.3056
Phone: 713.335.4001
Attention: B. A. Berilgen, President
with a copy to:
50 West San Fernando Street
San Jose, California 95113
Fax: 408.975.4648
Phone: 408.792.1226
Attention: Lisa Bodensteiner, General Counsel
If to Buyer:
Pogo Producing Company
5 Greenway Plaza, Suite 2700
Houston, Texas 77046
Fax: 713.297.5000
Phone: 713.295.5100
Attention: General Counsel
with a copy to:
Cotton, Bledsoe, Tighe & Dawson, P.C.
1415 Louisiana, Suite 2100
Houston, Texas 77002
Fax: 713.759.0458
Phone: 713.759.9281
Attention: Michael J. Byrd
Any Party may, by written notice so delivered to the other, change the address
to which the delivery shall thereafter be made.
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Section 10.2 Modification. The Agreement, including this Section 10.2 and
the Exhibits and Schedules, shall not be modified except by an instrument in
writing signed by or on behalf of all of the Parties.
Section 10.3 GOVERNING LAW. THE AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE
WITHOUT GIVING EFFECT TO CONFLICTS OF LAWS PROVISIONS THEREOF WHICH WOULD
REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION. ALL ASSIGNMENTS AND
INSTRUMENTS EXECUTED IN ACCORDANCE WITH THE CONVEYANCES TO BE DELIVERED
HEREUNDER SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF
THE STATE WHERE THE PROPERTIES CONVEYED THEREBY ARE LOCATED.
Section 10.4 Exhibits. All Exhibits and Schedules thereto, and the terms
thereof, which are referred to herein are hereby made a part of and incorporated
herein by reference.
Section 10.5 Counterparts. The Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
Section 10.6 Invalidity. If any of the provisions of the Agreement
including the Schedules and Exhibits, are held invalid or unenforceable, such
invalidity or unenforceability shall not affect in any way the validity or
enforceability of any other provision of the Agreement. In the event any
provision is held invalid or unenforceable, the Parties shall attempt to agree
on a valid or enforceable provision which shall be a reasonable substitute for
such invalid or unenforceable provision in light of the tenor of the Agreement
and, on so agreeing, shall incorporate such substitute provision in the
Agreement.
Section 10.7 Entire Agreement and Construction. Except for the
Confidentiality Agreement, this Agreement contains the entire agreement between
the Parties with respect to the transactions contemplated hereby and all prior
understandings and agreements shall merge herein. There are no additional terms,
whether consistent or inconsistent, oral or written, which are intended to be
part of the Parties' understandings which have not been incorporated into the
Agreement and the Schedules. The Parties agree that they have jointly
participated in the drafting and preparation of the Agreement and that the
language of the Agreement shall be construed as a whole according to its fair
meaning and not for or against either of the Parties hereto based upon that
Party's role in the preparation of the Agreement.
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Section 10.8 Expenses. Except as otherwise expressly provided herein, each
Party shall bear its fees, costs and expenses in connection with the
transactions contemplated herein, including, without limitation, all legal and
accounting fees and disbursements and fees and expenses of other advisors
retained by such Party.
Section 10.9 Waivers and Amendments. All amendments and other
modifications hereof shall be in writing and signed by each of the Parties. Any
Party may by written instrument (i) waive any inaccuracies in any of the
representations or warranties made to it by any other Party contained in the
Agreement or in any instruments and documents delivered to it pursuant to the
Agreement, or (ii) waive compliance or performance by any other Party with or of
any of the covenants or agreements made to it by any other Party contained in
the Agreement. The delay or failure on the part of any Party hereto to insist,
in any one instance or more, upon strict performance of any of the terms or
conditions of the Agreement, or to exercise any right or privilege herein
conferred shall not be construed as a waiver or any such terms, conditions,
rights or privileges but the same shall continue and remain in full force and
effect. All rights and remedies are cumulative.
Section 10.10 Expenses. Except as otherwise provided herein, each Party
shall be solely responsible for all expenses incurred by it in connection with
this transaction (including without limitation, fees and expenses of its own
legal counsel and accounts).
Section 10.11 Binding Effect: Assignment. All the terms, provisions,
covenants, obligations, indemnities, representations, warranties and conditions
of this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and their respective successors and assigns.
This Agreement may not be assigned by Buyer or Seller without the express
written consent of the other, such consent not to be unreasonably withheld.
Seller may condition its consent to assign this Agreement on Buyer providing
Seller with an appropriate guarantee of its assignee's performance. In the event
Buyer sells or assigns all or a portion of the Assets, this Agreement shall
remain in effect between Buyer and Seller as to all the Assets regardless of
such assignment.
Section 10.12 Survival of Representations and Covenants. All
representations and warranties contained in the Agreement shall survive the
Closing and continue for one (1) year following the Closing Date, except those
contained in Parts Six and Seven. The covenants, indemnities and agreements
contained in the Agreement shall survive the Closing and continue in accordance
with their respective terms.
Section 10.13 Arbitration of Disputes. Seller and Buyer covenant with each
other as follows:
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(a) Generally. Any claim, controversy or dispute arising out of,
relating to, or in connection with the Agreement or the agreements and
transactions contemplated hereby, by Buyer or Seller, including the
interpretation, validity, termination or breach thereof, shall be resolved
solely in accordance with the dispute resolution procedures set forth in
Schedule 10.13. The Parties covenant that they shall not resort to court
remedies except as provided for in Schedule 10.13, or for preliminary
relief in aid of arbitration.
(b) Violations. A Party who violates the covenants in Section
10.13(a) shall pay all the legal costs incurred by the other Parties in
connection with the enforcement thereof. Suits, actions or proceedings in
connection with violations of the covenants in Section 10.13 and Schedule
10.13 shall be instituted in the United States District Court for the
District of New Mexico and pursuant to Title IX of the Unites States Code.
Each Party waives any option or objection which it may now or thereafter
have to the laying of the venue in any such suit, action or proceeding and
irrevocably submits to the jurisdiction of such court in any such suit,
action or proceeding.
BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY
DISPUTE ARISING OUT OF THIS AGREEMENT DECIDED BY NEUTRAL ARBITRATION
AS PROVIDED BY NEW MEXICO LAW AND THIS SECTION 10.13. YOU ARE GIVING
UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A
COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING
UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS
ARE SPECIFICALLY INCLUDED IN THE ARBITRATION OF DISPUTES PROVISIONS.
IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS
PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF
THE NEW MEXICO CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS
ARBITRATION PROVISION IS VOLUNTARY.
WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT
DISPUTES ARISING OUT OF MATTERS INCLUDED IN THE ARBITRATION OF
DISPUTES PROVISION TO NEUTRAL ARBITRATION.
BUYER'S INITIALS: SB SELLER'S INITIALS: MG
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Section 10.14 Conflict. Should terms and conditions of this Agreement be
in conflict with the Assignment and Bill of Sale, or the Deed, as such are
executed pursuant to the terms of this Agreement, the terms and conditions of
this Agreement shall prevail.
IN WITNESS WHEREOF, the Parties hereto have entered into the Agreement as
of the date first herein above written.
CALPINE CORPORATION
By: /s/ Michael A. Gerlich
-----------------------------------------
Michael A. Gerlich, Senior Vice President
Date: August 20, 2004
CALPINE NATURAL GAS L.P.
By: /s/ Michael A. Gerlich
-----------------------------------------
Michael A. Gerlich, Senior Vice President
Date: August 20, 2004
POGO PRODUCING COMPANY
By: /s/ Stephen R. Brunner
-----------------------------------------
Stephen R. Brunner, Executive Vice President
Date: August 20, 2004
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