Exhibit 10.80
PURCHASE AND SALE AGREEMENT
BETWEEN
BARON PRODUCTION LLC.
AS SELLER
AND
PCEC SUB 1, LLC
AS BUYER
DATED AS OF
JULY 28, 2014
Purchase and Sale Agreement 20
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS........................................................1
Section 1.1 Certain Definitions...............................................1
Section 1.2 Other Definitions; Incorporation of Conveyance and Production
and Marketing Agreement Definitions...............................3
Section 1.3 Rules of Construction.............................................3
ARTICLE II. TRANSACTIONS......................................................4
Section 2.1 Purchase and Sale.................................................4
Section 2.2 Tax Reporting.....................................................4
ARTICLE III. REPRESENTATIONS, WARRANTIES AND COVENANTS OF WORKING
INTEREST OWNER...................................................4
Section 3.1 Representations and Warranties of Working Interest Owner..........4
Section 3.2 Use of Proceeds..................................................12
ARTICLE IV. REPRESENTATIONS OF ROYALTY OWNER.................................12
Section 4.1 Representations of Royalty Owner.................................12
ARTICLE V. CONDITIONS TO CLOSING.............................................12
Section 5.1 Conditions to Obligations of Working Interest Owner..............12
Section 5.2 Conditions to Obligations of Royalty Owner.......................13
ARTICLE VI. CLOSING..........................................................14
Section 6.1 Place of Closing.................................................14
Section 6.2 Closing Documents................................................14
Section 6.3 Preclosing and Funding...........................................16
ARTICLE VII. MISCELLANEOUS...................................................16
Section 7.1 Announcements; Confidentiality; Patriot Act......................16
Section 7.2 Survival.........................................................17
Section 7.3 Expenses.........................................................17
Section 7.4 Notices..........................................................18
Section 7.5 Governing Law....................................................18
Section 7.6 Successors and Assigns...........................................18
Section 7.7 Entire Agreement; Amendments; Waivers............................19
Section 7.8 Counterparts.....................................................19
Section 7.9 WAIVER OF JURY TRIAL AND OF PUNITIVE DAMAGES.....................20
Section 7.10 CONSENT TO JURISDICTION.........................................20
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EXHIBITS AND SCHEDULES
EXHIBIT A Certification of Non-Foreign Status
EXHIBIT B-1 Form of Legal Opinion of Stewart & Bonnett, LLP
EXHIBIT B-2 Form of Legal Opinion of Lionel Sawyer & Collins
SCHEDULE 3.1 Disclosure Schedule
SCHEDULE 6.3 Wire Instructions
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PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (this "Agreement") dated as of July 28
2014, is made by and between Baron Production LLC, a Texas limited liability
company ("Working Interest Owner" and a "Party"), and PCEC Sub 1, LLC, a Texas
limited liability company ("Royalty Owner" and a "Party").
W I T N E S S E T H:
WHEREAS, Working Interest Owner is the owner of the Subject Interests (as
defined in the Conveyance referred to below); and
WHEREAS, Working Interest Owner desires to sell and Royalty Owner desires
to purchase the Production Payment (as defined in the Conveyance);
NOW, THEREFORE, in consideration of the mutual benefits and obligations of
the Parties contained herein, the Parties hereby agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1 Certain Definitions. As used herein, the following terms shall
have the meanings set forth below, except as otherwise expressly provided:
"Closing" means the completion of certain of the transactions contemplated
hereby as described in Section 6.4.
"Closing Date" means the date on which the Closing is completed.
"Closing Documents" means, collectively, the Conveyance, and any other
documents or instruments executed or delivered by or on behalf of any Party at
or before or in connection with the Closing.
"Conveyance" means the Conveyance of Term Overriding Royalty Interest dated
as of the date hereof made by Working Interest Owner to Royalty Owner that is
executed in connection herewith.
"Disclosure Schedule" means Schedule 3.1 to this Agreement.
"Good and Defensible Title" means such title to the Subject Interests
(properly reflected of record) that, after giving effect to the Permitted
Encumbrances, (a) will enable Working Interest Owner to truthfully make the
representations and warranties in Section 1.9 of the Conveyance and (b) except
for the Permitted Encumbrances (i) is free and clear of any encumbrances, liens,
security interests, mortgages, pledges, preferential purchase rights (other than
those that have been waived), or requirements for consents to assignment (other
than those that have been obtained) that would be applicable to or exercisable
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as a result of the Conveyance and the other Closing Documents, and (ii) is free
and clear of any defects that would materially affect or interfere with the
operation, use, possession, ownership or value thereof.
"Initial Engineers" means Cawley, Gillespie and Associates and Haas
Petroleum Engineering Services, Inc.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.
"Mortgage" means the Second Lien Deed of Trust, Assignment of As-Extracted
Collateral, Security Agreement, Fixture Filing and Financing Statement of even
date herewith executed in connection herewith by Working Interest Owner for the
benefit of Royalty Owner with respect to the Retained Interests and certain
Related Assets.
"Parent" means Baron Energy, Inc. a Nevada corporation.
"Parent Guaranty Agreement" means the Guaranty Agreement of even date
herewith executed in connection herewith by Working interest Owner in favor of
Royalty Owner.
"Parties" means Working Interest Owner and Royalty Owner.
"Production and Marketing Agreement" means the Production and Marketing
Agreement dated as of the date hereof between Royalty Owner and Working Interest
Owner that is executed in connection herewith.
"Production Payment" has the meaning specified in the Conveyance.
"Projected Yield" means twenty percent (20%) per annum.
"Purchase Price" means $6,100,000.00.
"Related Assets" means (i) the Subject Interests and the Subject
Hydrocarbons, together with all rights, titles, interests, appurtenances,
benefits and privileges of Working Interest Owner attributable to each Subject
Interest; (ii) all of the real, immovable, personal and mixed property of the
Working Interest Owner (whether located on or off the Subject Interests) used in
connection with or attributable in any manner to the exploration or development
of the Subject Interests for Hydrocarbons, the operation of the Subject
Interests, the treating, storing or transporting of Hydrocarbons produced from
the Subject Interests, or the disposal or transporting of water and other
byproducts of such production (including salt water injection wells and related
facilities); (iii) all rights of the Working Interest Owner with respect to any
and all contracts, agreements, instruments, governmental orders and contractual
rights insofar as they cover or relate in any manner whatsoever to the Subject
Interests; (iv) all rights of the Working Interest Owner with respect to any and
all easements, rights-of-way, rights, permits, licenses and servitudes insofar
as they are used or held in connection with the exploration, development or
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operation of the Subject Interests or the transportation of Hydrocarbons
produced therefrom; (v) all proceeds of the foregoing; and (vi) all files,
records, data and documentation of the Working Interest Owner pertaining or
related to the Subject Interests or any of the assets described in the preceding
clauses (i) through (v).
"Ricochet PSA" means the Purchase and Sale Agreement dated as of May 29,
2014, among Ricochet Energy, Inc., the other sellers party thereto, and the
Parent.
Section 1.2 Other Definitions; Incorporation of Conveyance and Production
and Marketing Agreement Definitions. Other capitalized terms defined elsewhere
in this Agreement have the meanings so given them herein. Each capitalized term
used herein but not defined herein has the meaning given to it in the Conveyance
or (if not defined therein) in the Production and Marketing Agreement.
Section 1.3 Rules of Construction. The headings of the articles and
sections of this Agreement are for convenience of reference only and do not
limit or otherwise affect any of the terms or provisions of this Agreement. All
references in this Agreement to articles, sections, subsections and other
subdivisions refer to corresponding articles, sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any of such subdivisions are for convenience only,
do not constitute part of such subdivisions, and will be disregarded in
construing the language contained in such subdivisions. The words "this
Agreement", "this instrument", "herein", "hereof", "hereunder" and words of
similar import refer to this Agreement as a whole and not to any particular
subdivision unless expressly so limited. Unless the context otherwise requires:
"including" its grammatical variations mean "including without limitation"; "or"
is not exclusive; words in the singular form will be construed to include the
plural and vice versa; words in any gender include all other genders; references
herein to the Conveyance, the Production and Marketing Agreement, the Mortgage,
the Parent Guaranty Agreement or any other instrument or agreement refer to such
instrument or agreement as it may be from time to time amended, supplemented or
restated; and references herein to any Person include such Person's successors
and assigns. All references in this Agreement to exhibits and schedules refer to
exhibits and schedules to this Agreement unless expressly provided otherwise,
and all such exhibits and schedules are hereby incorporated herein by reference
and made a part hereof for all purposes. This Agreement and the other Closing
Documents have been drafted with the joint participation of Working Interest
Owner and Royalty Owner and are to be construed neither against nor in favor of
either Party but rather in accordance with the fair meaning hereof.
ARTICLE II.
TRANSACTIONS
Section 2.1 Purchase and Sale. Subject to and in accordance with the terms
hereof, Working Interest Owner agrees to sell and convey to Royalty Owner, and
Royalty Owner agrees to purchase from Working Interest Owner, the Production
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Payment for consideration equal to the Purchase Price, and the Parties agree to
execute and deliver the Closing Documents. Working Interest Owner acknowledges
and agrees that the foregoing constitutes payment to Working Interest Owner of
reasonably equivalent value for the Production Payment. Royalty Owner will pay
the Purchase Price to Working Interest Owner at the Closing as provided in
Section 6.3.
Section 2.2 Tax Reporting. The Parties intend for the Production Payment to
be treated for federal income tax purposes (and for the purpose of any similarly
calculated state income or franchise taxes, but for no other purposes) as a
mortgage loan (and not a "royalty" or other "economic interest" Hydrocarbons)
within the meaning of the Internal Revenue Code and the regulations and judicial
authority relating thereto, and the Parties agree to report the Production
Payment accordingly on all applicable tax returns. In so doing, Working Interest
Owner will apply the "noncontingent bond method" of calculating principal and
interest as provided in Treasury Regulation section 1.1275-4(b), using a
comparable yield equal to the Projected Yield and calculating a projected
payment schedule based on the Scheduled Quantities provided in the Conveyance.
If the Scheduled Quantities are ever adjusted as provided in the Production and
Marketing Agreement, Working Interest Owner, with the approval of Royalty Owner,
will adjust the projected payment schedule to reflect such changes in the
Scheduled Quantities and will appropriately reflect such adjustment to projected
payments in determining the amount of the net adjustment to be taken into
account under Treasury Regulation section 1.1275-4(b)(6).
ARTICLE III.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF WORKING
INTEREST OWNER
Section 3.1 Representations and Warranties of Working Interest Owner. In
order to induce Royalty Owner to enter into this Agreement and the Closing
Documents and to consummate the transactions described herein, Working Interest
Owner hereby represents and warrants to Royalty Owner, and to each beneficiary
under any Mortgage, both as of the date Working Interest Owner executes this
Agreement and as of the Closing Date, as follows:
(a) Existence and Authorization. Working Interest Owner and is limited
liability company duly organized, validly existing and in good standing under
the Laws of the State of Texas. Working Interest Owner has the right, power,
authority, and qualifications necessary to conduct its business and own its
properties (including, as applicable, the Subject Interests and the Related
Assets) in such State, to execute and deliver the Closing Documents to which it
is a party, to perform all of its obligations under the same, and to convey to
Royalty Owner the Production Payment. Working Interest Owner is not a "foreign
person" within the meaning of Sections 1445 and 7701 of the Internal Revenue
Code (i.e., Working Interest Owner is not a non-resident alien, foreign
corporation, foreign partnership, foreign trust or foreign estate as those terms
are defined in the Internal Revenue Code and any regulations promulgated
thereunder).
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(b) No Conflicts. The execution, delivery and performance by Working
Interest Owner of the Closing Documents to which it is a party (including
Working Interest Owner's application of the Purchase Price as provided in
Section 3.2) are within the limited liability company power of Working Interest
Owner, have been duly authorized by all necessary action on the part of Working
Interest Owner and its members and managers, as applicable, and do not and will
not (i) violate any provision of Working Interest Owner's charter documents or
other governing documents, (ii) violate any provision of Law or any order, writ,
judgment, decree or determination currently in effect having applicability to
Working Interest Owner, (iii) result in a breach of or constitute a default
under any Lease, any agreement binding or affecting the Subject Interests (or
Working Interest Owner with respect to the Subject Interests), any indenture,
bank loan, credit agreement or farmout agreement, program agreement, area of
mutual interest agreement, unit agreement or operating agreement, or any other
agreement or instrument to which Working Interest Owner is a party or by which
Working Interest Owner or Working Interest Owner's properties may be currently
bound or affected, (iv) cause Working Interest Owner to become obligated to (or
obligated to offer to) prepay, redeem or purchase any indebtedness, or (v)
except as set forth in Section 3.1(b) of the Disclosure Schedule and other than
pursuant to the Mortgage, result in or require the creation or imposition of any
mortgage, lien, pledge, security interest, charge or other encumbrance upon or
of any of the properties or assets of Working Interest Owner (including the
Subject Interests). Working Interest Owner is not in default under any order,
writ, judgment, decree, determination, indenture, agreement or instrument in any
manner that now or in the future could adversely affect the ability of Working
Interest Owner to perform Working Interest Owner's obligations under this
Agreement or the Closing Documents to which it is a party, and all consents or
approvals under such indentures, agreements and instruments necessary to permit
the valid execution, delivery, and performance by Working Interest Owner of the
Closing Documents to which it is a party and the conveyance of the Production
Payment to Royalty Owner have been obtained.
(c) Consents, Preferential Rights and Required Notices. Except as disclosed
in Section 3.1(c) of the Disclosure Schedule, all consents and waivers of
preferential purchase or other rights necessary to permit the valid conveyance
to Royalty Owner of the Production Payment and execution and delivery of this
Agreement and the Closing Documents have been obtained. All advance
notifications (if any) to third parties of the transactions contemplated herein
and in the Closing Documents necessary to permit the valid conveyance to Royalty
Owner of the Production Payment and execution and delivery of this Agreement and
the Closing Documents have been or will be, prior to the Closing Date, timely
and properly given.
(d) Financial Statements; No Material Adverse Changes. Working Interest
Owner has heretofore delivered to Royalty Owner true, correct and complete
copies of the Parent's most recent audited annual financial statements (dated as
of July 31, 2011), the Parent's most recent unaudited annual financial
statements (dated July 31, 2013) and the Parent's most recent unaudited
quarterly financial statements (dated as of April 30, 2014). Such financial
statements were prepared in accordance with generally accepted accounting
principles, consistently applied, and fairly represent the consolidated
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financial position of Parent and its subsidiaries as of the dates thereof and
their consolidated results of operations and consolidated cash flows for the
periods indicated therein (subject, in the case of such unaudited financial
statements, to normal year-end adjustments and the absence of footnotes). Except
for matters described in Section 3.1(d) of the Disclosure Schedule, since the
date of the most recent audited balance sheet contained in such financial
statements, no material adverse change has occurred to the consolidated
financial condition of Parent and its subsidiaries or to their consolidated
operations, cash flows, properties or prospects.
(e) Governmental Approvals. Except for approvals by governmental
authorities that are customarily obtained after closing and listed in Section
3.1(e) of the Disclosure Schedule, (i) Working Interest Owner has obtained all
authorizations, consents, approvals, licenses and exemptions of, and has made
all filings and registrations with, any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, that
are necessary for the valid execution and delivery by Working Interest Owner of
the Closing Documents to which it is a party, and (ii) Working Interest Owner
has obtained all such authorizations, consents, approvals, licenses and
exemptions, and has made all such filings or registrations, that are currently
required for the performance of its obligations under this Agreement and the
Closing Documents to which it is a party.
(f) Enforceability. This Agreement has been duly executed and delivered by
Working Interest Owner, and as of the Closing Date each of the Closing Documents
will have been duly executed and delivered by Working Interest Owner. This
Agreement constitutes, and as of the Closing Date each of the Closing Documents
will constitute, the legal, valid and binding acts and obligations of Working
Interest Owner, enforceable in accordance with its terms, subject, however, to
bankruptcy, insolvency, reorganization, moratorium and other Laws affecting
creditors' rights generally and to general principles of equity.
(g) Effective Conveyance of Property Interest. Upon due execution and
delivery by Working Interest Owner of the Conveyance, (i) the Conveyance will
constitute the legal, valid and binding conveyance of the Production Payment out
of the Subject Interests, and (ii) the Production Payment will constitute an
interest in real property owned by Royalty Owner (and not by Working Interest
Owner) and will constitute a "production payment" as defined in Section 101(42A)
of the Bankruptcy Code, and referred to in Section 541(b)(4)(B) of the
Bankruptcy Code. Neither the Conveyance nor any Subject Interest constitutes, or
will constitute, an executory contract or unexpired lease within the meaning of
Section 365 of the United States Bankruptcy Code.
(h) Full Disclosure. The information, memoranda, exhibits, reports,
financial statements and other data furnished by or on behalf of Working
Interest Owner to Royalty Owner and its Affiliates in connection with the
transactions described herein, including the data supplied by or on behalf of
Working Interest Owner to the Initial Engineers for use in evaluating the data
supplied by Working Interest Owner to Royalty Owner, do not contain any untrue
statement of a material fact or omit to state any material fact that is
necessary in order to make the statements therein, in light of the circumstances
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under which such statements were made, not misleading. There is no fact that has
not been disclosed to Royalty Owner that could reasonably be expected to
adversely affect the value of the Production Payment or adversely affect the
value of the Subject Interests. Except as listed in Section 3.1(h) of the
Disclosure Schedule, there are no reserves in the data supplied by Working
Interest Owner to Royalty Owner's reserve engineers that are attributable to
properties and interests other than the Subject Interests. Except for (i)
production from the Subject Wells in the ordinary course of business, (ii)
matters listed in Section 3.1(h) of the Disclosure Schedule, and (iii) changes
in the general market prices of oil and natural gas, no material adverse change
in the condition of or remaining recoverable proved reserves attributable to the
existing Subject Wells or the Subject Interests has occurred since April 30,
2014. The actions of Working Interest Owner in furnishing information to Royalty
Owner in connection with the transactions described herein do not and will not
violate any duty owed by Working Interest Owner to any Person to which such
information relates or any obligation of Working Interest Owner under any
existing agreement, document, or instrument.
(i) Title. Working Interest Owner owns Good and Defensible Title to each of
the Subject Interests and the other Related Assets, free and clear of any
encumbrances, liens or security interests (other than Permitted Encumbrances).
(j) Taxes. All Taxes imposed or assessed with respect to or measured by or
charged against or attributable to the Subject Interests, the Subject
Hydrocarbons and the Related Assets have been duly paid (including all property
and ad valorem taxes for 2013 and earlier years), except for those not yet due
and payable or being contested in good faith by appropriate proceedings. Working
Interest Owner has filed all Tax returns required to be filed and such returns
comply with applicable Laws. Except as may be disclosed in Section 3.01(j) of
the Disclosure Schedule, no taxing authority is asserting that Working Interest
Owner is liable for past due taxes.
(k) No Tax Partnership or Other Joint Venture. No Subject Interest is held
by, or for any purpose treated as held by, any tax partnership (i.e., any
entity, organization or group deemed to be a partnership within the meaning of
section 761 of the Internal Revenue Code, after giving effect to any applicable
elections and exclusions) or any other partnership or joint venture.
(l) Status of Leases and Wells. The Leases are in full force and effect,
and Working Interest Owner has complied with all of the terms of the Leases and
all governmental orders or directives applicable to Working Interest Owner or to
the Subject Interests. All rents, royalties and other payments due or payable
with respect to the Leases have been paid in a timely manner, and all
liabilities of any kind or nature incurred with respect to the Leases have been
paid and performed before becoming delinquent. Working Interest Owner is not in
default (and has not received any notice of default or claimed default) with
respect to any Subject Interest or any Lease or any part thereof. All wells,
facilities and equipment which constitute part of the Related Assets are in good
repair and working condition (other than wells designated for plugging and
abandonment and equipment related thereto) and have been installed and
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maintained in accordance with good industry standards and all applicable
statutes, rules, regulations, orders, permits or licenses of any governmental
authority, agency or court. No well comprising part of the Subject Interests is
or was subject to any penalty on allowables after the effective date of the
Conveyance because of any over-production (or any other judgments, orders or
decrees of any court or governmental authority or agency) which would (or did)
prevent such well from being entitled to its full legal and regular allowable
(as prescribed by any governmental authority, agency or court) from and after
such effective date. If a tract or tracts of land are listed on the Property
Exhibit to the Conveyance with respect to a Subject Well, such Subject Well is
located on such tract or tracts of land. If the Subject Interests pertaining to
a Subject Well are limited in the Conveyance to specified depths or formations,
such Subject Well is producing only from such specified depths or formations,
and all of such specified depths or formations are included within the Subject
Interests that pertain to such Subject Well. None of the reserves which comprise
Production Payment Hydrocarbons are being produced from any wells other than the
Subject Wells listed on the Property Exhibit, and if the Subject Interests
pertaining to a Subject Well are limited on the Property Exhibit to particular
depths or formations, all of such reserves pertaining to such Subject Well are
located within such depths or formations.
(m) Commitments; Contracts. Except as set forth in Section 3.1(m) of the
Disclosure Schedule:
(i) no third party has any right to purchase any Subject Hydrocarbons
(including any call, right of first refusal or preferential right to purchase)
that does not terminate within one month or is not terminable by Working
Interest Owner without penalty on notice of one month or less;
(ii) neither the Subject Interests nor the Hydrocarbons attributable
thereto are subject, committed, or dedicated to any joint operating agreement,
unit operating agreement, or area of mutual interest agreement; and
(iii) neither the Subject Interests nor the Hydrocarbons attributable
thereto are subject, committed, or dedicated to any Subject Contract that will
or could reasonably be expected to (A) reduce the percentage share of the
Hydrocarbons produced from or allocated to any Subject Interest below the
Warranted Net Revenue Interest for such Subject Interest, (B) cause Working
Interest Owner to be obligated to bear a percentage share of the cost of
operation of such Subject Interest that is greater than the Warranted Working
Interest Percentage for such Subject Interest (without a corresponding
proportional increase in the associated Net Revenue Interest or a right to
reimbursement from a non-paying joint interest owner), or (C) prevent or
interfere with the ownership, exploration, development, operation, maintenance
or use of any of the Subject Interests in accordance with prudent industry
practices or in accordance with the manner in which such Subject Interest is
currently being owned, explored, developed, operated, maintained or used.
(n) Take or Pay, etc. Except as set forth in Section 3.1(n) of the
Disclosure Schedule, neither the Subject Interests nor the Hydrocarbons
attributable thereto are subject to any contract, agreement or arrangement
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(including advance payment agreements, prepayments, take-or-pay makeup
obligations or otherwise) whereby the owner of the Hydrocarbons or any part
thereof is not entitled to convey the Hydrocarbons or to market the Hydrocarbons
and to obtain the full market price or value of the same. No Subject Interest is
subject on the date hereof to any regulatory refund obligation and, to the best
of Working Interest Owner's knowledge, no facts exist which might cause the same
to be imposed.
(o) Compliance with Laws. Except as set forth in Section 3.1(o) of the
Disclosure Schedule, (i) the Subject Interests have been owned and operated, in
accordance with all applicable Laws (including Environmental Laws) of all
governmental authorities having or asserting jurisdiction relating to the
ownership and operation of the Subject Interests, and Working Interest Owner and
all other operators of the Subject Interests are in compliance in all respects
with all licenses and permits required under any such Laws; (ii) Working
Interest Owner has taken all steps reasonably necessary to determine and has
determined that no Hazardous Substance has been disposed of or otherwise
released on or to the Subject Lands or produced on the Subject Lands and
disposed of or released elsewhere, and the use which Working Interest Owner make
and intend to make of the Subject Lands will not result in any such disposal or
release; (iii) none of the Subject Interests is the subject of any federal,
state or local investigation evaluating whether any remedial action is needed to
respond to a release of any Hazardous Substances into the environment or to the
improper storage or disposal (including storage or disposal at offsite
locations) of any Hazardous Substances; (iv) Working Interest Owner has not and,
to the knowledge of Working Interest Owner no other Person, has filed any notice
under any applicable Law indicating that any Working Interest Owner is
responsible for the improper release into the environment, or the improper
storage or disposal, of any Hazardous Substances or that any Hazardous
Substances have been improperly released, or are improperly stored or disposed
of, upon any of the Subject Lands; and (v) neither Working Interest Owner nor
any Affiliate of a Working Interest Owner otherwise has any contingent liability
under any Environmental Laws or in connection with the release into the
environment, or the storage or disposal, of any Hazardous Substances.
(p) No Casualties or Condemnation. Except as disclosed in Section 3.1(p) of
the Disclosure Schedule, during the twelve months preceding the Closing Date no
Casualty or Condemnation has occurred that, individually or in the aggregate,
adversely affects any material portion of the Related Assets or the use or
operation thereof, or adversely affects the ability of Working Interest Owner to
perform its obligations under this Agreement or the Closing Documents to which
it is a party. As used in this subsection, "Casualty or Condemnation" means (i)
any fire, blowout, leak, explosion, accident, earthquake, act of public enemy or
other casualty (whether above or below ground and regardless of whether covered
by insurance) and (ii) any pending or threatened taking, in condemnation or
under the right of eminent domain, of any Related Asset or portion thereof.
(q) Litigation. Except as set forth in Section 3.1(q) of the Disclosure
Schedule, there are no suits or proceedings pending or, to the knowledge of
Working Interest Owner, threatened against or affecting Working Interest Owner
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or the Related Assets that involve (i) a dispute or claim concerning title to,
operation of, or production from any of the Subject Interests, (ii) any actual
or purported lien, security interest, charge or burden upon any of the Subject
Interests or Subject Hydrocarbons, or (iii) any other claim which would affect a
transferee of any of the Subject Interests or would adversely affect the value
of the Production Payment. Except as set forth in Section 3.1(q) of the
Disclosure Schedule, there are no suits or proceedings pending or, to the
knowledge of Working Interest Owner, threatened against Working Interest Owner
or the Related Assets that, if decided adversely to the interest of Working
Interest Owner could adversely affect Working Interest Owner, any of the Related
Assets or the rights of Royalty Owner under the Closing Documents. There are no
bankruptcy, reorganization or similar proceedings pending, being contemplated by
or, to the knowledge of Working Interest Owner, threatened against Working
Interest Owner, and Working Interest Owner has not made a general assignment for
the benefit of creditors.
(r) No Broker's or Finder's Fees. Working Interest Owner has not incurred
any obligation or liability (or taken any action) which might impose upon
Royalty Owner or Royalty Owner's lenders or Affiliates any obligation or
liability, contingent or otherwise, for broker's or finder's fees in respect of
any of the matters provided for in this Agreement or the other Closing
Documents.
(s) Copies of Permitted Encumbrances and Listed Documents. Working Interest
Owner has furnished to Royalty Owner true and complete copies of all of the
joint operating agreements, unit agreements, and other agreements and
instruments evidencing the Permitted Encumbrances that exist as of the Closing.
Working Interest Owner has provided Royalty Owner with true and complete copies
of all contracts and instruments referred to in the Disclosure Schedule.
(t) Solvency. Upon the execution, delivery and performance by Working
Interest Owner of the Closing Documents to which it is a party (including
Working Interest Owner's application of the Purchase Price as provided in
Section 3.2), Working Interest Owner is and will be solvent (as such term is
used in applicable bankruptcy, liquidation, receivership, or insolvency or
similar Laws). Working Interest Owner's capital is adequate for the businesses
in which Working Interest Owner is engaged and intends to be engaged. Working
Interest Owner has not incurred (whether hereby or otherwise), nor does Working
Interest Owner intend to incur or believe that it will incur, debts which will
be beyond its ability to pay as such debts mature. None of the Closing Documents
and none of the transactions thereunder constitutes a fraudulent or voidable
transfer or conveyance within the scope of Section 548 of the Bankruptcy Code or
any other applicable Law pertaining to fraudulent or voidable transfers or
conveyances.
(u) No ERISA Liabilities. Working Interest Owner does not have any
liabilities or obligations of any kind with respect to any employee benefit plan
that is subject to Title IV of the Employee Retirement Income Security Act of
1974, as amended.
(v) Employee Disputes. Except as set forth in Section 3.1(v) of the
Disclosure Schedule, (i) neither the workers who operate the Related Assets nor
any other employees of Working Interest Owner are presently carrying out, or
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threatening, any strike, slowdown, picketing or work stoppage, and (ii) within
the last five years there have not been any strikes, work stoppages, slowdowns,
lockouts or other material labor disputes involving any Working Interest Owner
or any of its Affiliates or any of their respective employees, or the operation
of the Related Assets.
(w) Transmitting Utility. Working Interest Owner is not a "transmitting
utility" as defined in Section 9.102(a)(81) of the Uniform Commercial Code
presently in effect in the State of Texas.
(x) Insurance. Working Interest Owner is carrying the insurance described
on Schedule 3.7 to the Production and Marketing Agreement and is otherwise in
compliance with Section 3.7 of the Production and Marketing Agreement.
(y) No Reliance. Working Interest Owner (i) has made its own independent
decision to enter into this Purchase and Sale Agreement, the other Production
Payment Documents, and the transactions contemplated herein and therein and its
own independent judgment as to whether such transactions are appropriate or
proper for it, in each case, based upon its own judgment and upon advice from
such advisers as it has deemed necessary, and in entering into such transactions
is acting for its own account, (ii) is not relying on any communication (written
or oral) of Royalty Owner, or of Royalty Owner's Affiliates, as investment
advice or as a recommendation to enter into such transactions, it being
understood that any information and explanations related to the terms and
conditions of such transactions shall not be considered to be investment advice
or a recommendation to enter into such transactions, (iii) is capable of
assessing the merits of and understanding (on its own behalf or through
independent professional advice), and understands and accepts the terms and
conditions and risks of, such transactions and is also capable of assuming, and
assumes, such risks, and (iv) acknowledges that Royalty Owner and Royalty
Owner's Affiliates are not, and are not acting as, an adviser to Working
Interest Owner in respect of such transactions with respect to legal,
regulatory, accounting, taxation, financial or any other matters in any
jurisdiction.
Section 3.2 Use of Proceeds. Working Interest Owner warrants and agrees
that it will use the Purchase Price to pay for its and Royalty Owner's
out-of-pocket expenses and fees relating to the sale and purchase of the
Production Payment and to the Closing Documents as further set forth herein, to
provide for a portion of the purchase price for the Subject Interests located in
Frio County, Texas, and for general corporate purposes.
11
ARTICLE IV.
REPRESENTATIONS OF ROYALTY OWNER
Section 4.1 Representations of Royalty Owner. Royalty Owner hereby
represents and warrants to Working Interest Owner as follows:
(a) Royalty Owner is a limited liability company duly organized, validly
existing and in good standing under the Laws of the State of Texas. The
execution, delivery and performance of this Agreement and the transactions
described herein have been duly and validly authorized by all necessary action
on the part of Royalty Owner. Royalty Owner is a "United States person" within
the meaning of Section 7701 of the Internal Revenue Code.
(b) This Agreement has been, and as of the Closing the Closing Documents to
which Royalty Owner is a signatory will have been, duly executed and delivered
by or on behalf of Royalty Owner. This Agreement constitutes, and as of the
Closing each of the Closing Documents to which Royalty Owner is a party will
constitute, the legal, valid and binding obligations of Royalty Owner
enforceable against Royalty Owner in accordance with its terms, subject,
however, to bankruptcy, insolvency, reorganization, moratorium and other Laws
affecting creditors' rights generally and to general principles of equity.
(c) Royalty Owner is acquiring the Production Payment for its own account
and not with any intention to transfer all or any part of the Production Payment
to others in violation of the Securities Act of 1933, as amended.
ARTICLE V.
CONDITIONS TO CLOSING
Section 5.1 Conditions to Obligations of Working Interest Owner. The
obligation of Working Interest Owner to proceed with the Closing is subject to
the satisfaction, on or prior to the Closing Date, of all of the following
conditions precedent, provided that any one or more of such conditions may be
waived in whole or in part in writing by Working Interest Owner:
(a) Royalty Owner shall have performed all covenants and agreements
required to be performed by it hereunder at or prior to the Closing, and
(b) Each of Royalty Owner's representations and warranties contained in
Article IV hereof shall be true and correct on and as of the Closing Date as if
made on such date.
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Section 5.2 Conditions to Obligations of Royalty Owner. The obligation of
Royalty Owner to proceed with the Closing is subject to the satisfaction on or
prior to the Closing Date of all of the following conditions precedent, provided
that any one or more of such conditions may be waived in whole or in part in
writing by Royalty Owner:
(a) Working Interest Owner shall have performed all covenants and
agreements required to be performed by it hereunder at or prior to the Closing,
and each of the representations and warranties contained in Article III hereof
or in any of the other Closing Documents shall be true and correct on and as of
the Closing Date as if made on such date.
(b) The consummation of the Closing on the Closing Date shall not be
prohibited by any applicable Law or any applicable order or decree of any
federal or state court or agency having competent jurisdiction. No suit, action
or other proceeding shall be pending (i) that could have any adverse effect on
the Related Assets or the value of the Related Assets or any adverse effect on
the value of the Production Payment, (ii) in which there is sought any remedy to
restrain, enjoin or otherwise prevent the consummation of this Agreement or the
transactions contemplated in connection herewith, or (iii) in which any
allegation is made that this Agreement or any of the transactions contemplated
hereby is in violation of any Lease, indenture, bank loan, credit agreement,
farmout agreement, program agreement, unit agreement, operating agreement, or
other agreement or instrument to which Working Interest Owner is a party or by
which Working Interest Owner or Working Interest Owner's properties may be
currently bound or affected.
(c) The sellers under the Ricochet PSA Agreement shall have assigned to the
Working Interest Owner the Subject Interests in Frio County, Texas, and the
transactions contemplated by the Ricochet PSA shall be closed concurrently with
the transactions contemplated by this Agreement.
(d) Royalty Owner shall have received copies of (i) all of the documents
and instruments referred to in the Disclosure Schedule hereto, (ii) all
consents, waivers of preferential purchase rights, and advance notices that are
referred to in Section 3.1(c), (iii) all operating agreements and other
agreements and instruments relating to Permitted Encumbrances that are referred
to in Section 3.1(s), and (iv) any other Subject Contracts requested by Royalty
Owner; and all of the foregoing shall be in full force and effect.
(e) Royalty Owner, in Royalty Owner's sole discretion, shall be satisfied
with the results of any engineering, environmental or other review of the
Related Assets that it chooses to undertake, any due diligence investigation
with respect to the matters addressed by Working Interest Owner's
representations and warranties in the Production Payment Documents, and with all
legal matters related to the transactions contemplated in the Production Payment
Documents, including the status of the consents and amendments obtained by
Royalty Owner with respect to Working Interest Owner's loan agreements,
mortgages and indentures.
13
(f) Royalty Owner shall have received title opinions, in form and substance
reasonably acceptable to it, landman reports or other title information with
respect to title to the Subject Interests as may be requested by Royalty Owner.
(g) Royalty Owner shall have received certificates from the applicable
public officials of the State of Texas showing that Working Interest Owner is
organized, validly existing and in good standing under the Laws of such state.
(h) Royalty Owner shall have received insurance certificates establishing
that Working Interest Owner is in compliance with the requirements of Section
3.7 of the Production and Marketing Agreement.
(i) Royalty Owner shall have received a Certification of Non-Foreign Status
from Working Interest Owner, substantially in the form attached as Exhibit A
hereto.
(j) Working Interest Owner shall have paid, or reimbursed Royalty Owner,
for the out-of-pocket costs and expenses incurred by Royalty Owner in connection
with its retention of legal counsel and environmental, engineering and other
professionals to assist with its due diligence investigation of the Subject
Interests and the negotiation and preparation of the Transaction Documents.
(k) The transactions contemplated by the Credit Agreement, dated as of the
date hereof, among the Working Interest Owner, the Parent, the lenders party
thereto, and Petro Capital Energy Credit, LLC, as administrative agent for such
lenders, shall have closed concurrently with the transactions contemplated by
this Agreement.
ARTICLE VI.
CLOSING
Section 6.1 Place of Closing. The Closing will occur at 9:00 a.m. (Dallas,
Texas, Time) at the offices of Condon Thornton Sladek Harrell PLLC in Dallas,
Texas, on July 28, 2014, or at such other place and time as Working Interest
Owner and Royalty Owner may specify.
Section 6.2 Closing Documents. At or before the Closing the following
instruments shall be duly executed and acknowledged, as applicable, and
delivered, each in form and substance satisfactory to Royalty Owner in its sole
discretion and in such numbers of counterparts as may be requested by either
Party:
(a) Counterparts of the Conveyance, executed by Royalty Owner and Working
Interest Owner.
(b) Counterparts of the (i) Production and Marketing Agreement, executed by
Royalty Owner and Working Interest Owner and (ii) the Parent Guaranty Agreement
executed by the Parent.
(c) Counterparts of the Mortgage, executed by Working Interest Owner.
14
(d) Legal opinions to Royalty Owner, in form and substance satisfactory to
Royalty Owner, from Stewart & Bonnet, LLP, special counsel for Working Interest
Owner, and Lionel Sawyer & Collins, special counsel for the Parent, as set out
on Exhibits B-1 and B-2 hereto (with such additional assumptions and
qualifications as may be acceptable to Royalty Owner).
(e) A certificate of a senior executive officer of Working Interest Owner
given to Royalty Owner, dated as of the Closing Date, certifying (to the best of
his knowledge, after due inquiry) as to the matters specified in Section 5.2(a)
and (b).
(f) Certificates of a senior executive officer of Working Interest Owner,
given to Royalty Owner, containing the names and signatures of the officers of
Working Interest Owner authorized to execute the Closing Documents to which
Working Interest Owner is a party and certifying to the truth, correctness and
completeness of the following exhibits attached thereto: (i) a copy of
resolutions or written consents duly adopted by the Board of Directors, members
or managers, as applicable, of Working Interest Owner and in full force and
effect at the Closing Date, authorizing the execution of the Closing Documents
to which Working Interest Owner is a party and the consummation of the
transactions contemplated therein, and (ii) a copy of the charter documents of
such company and all amendments thereto, certified, as applicable, by the
appropriate official of the appropriate state of organization.
(g) Certificates of a senior executive officer of Parent, given to Royalty
Owner, containing the names and signatures of the officers of Parent authorized
to execute the Closing Documents to which Parent is a party and certifying to
the truth, correctness and completeness of the following exhibits attached
thereto: (i) a copy of resolutions or written consents duly adopted by the Board
of Directors, members or managers, as applicable, of Parent and in full force
and effect at the Closing Date, authorizing the execution of the Closing
Documents to which Parent is a party and the consummation of the transactions
contemplated therein, and (ii) a copy of the charter documents of such company
and all amendments thereto, certified, as applicable, by the appropriate
official of the appropriate state of organization.
(h) Such other documents as Royalty Owner may reasonably specify to
effectuate the conveyance of the Production Payment to Royalty Owner and the
other transactions contemplated herein and in the other Closing Documents.
Section 6.3 Preclosing and Funding. The Conveyance and the Mortgage will be
executed prior to the Closing and shall be delivered to Royalty Owner
contemporaneously with the funding described below and recorded promptly
thereafter. After receipt of such documents and the other items described in
Sections 5.2 and 6.2, the Closing will be completed as follows:
15
(a) Working Interest Owner will irrevocably authorize, and Working Interest
Owner does hereby irrevocably authorize, Royalty Owner to accept delivery of the
Conveyance and the Mortgage concurrently with Royalty Owner's sending of the
wire transfer described in Schedule 6.3 and to file such instruments for record
thereafter, and Royalty Owner will pay the Purchase Price to Working Interest
Owner by wire transfer of immediately available funds in the amounts and to the
accounts set out on Schedule 6.3.
(b) The Parties will take such other actions and make such other deliveries
of documents as Royalty Owner deems necessary or appropriate to effectuate the
conveyance of the Production Payment to Royalty Owner and the other transactions
contemplated herein and in the other Closing Documents.
(c) Concurrently with the Closing, Royalty Owner or its Affiliates may
execute such commodity price hedges, interest rate hedges, or other derivative
transactions as Royalty Owner deems appropriate in connection with the
Production Payment, the marketing of the Production Payment Hydrocarbons and the
calculation of the final Purchase Price.
ARTICLE VII.
MISCELLANEOUS
Section 7.1 Announcements; Confidentiality; Patriot Act. (a) Each Party
covenants and agrees with the other that, subject to applicable Law, each Party
will promptly advise and consult with the other and obtain the other's written
consent before issuing any press release or other public announcement with
respect to this Agreement or the transactions described herein; provided,
however, that if either Party believes that such release or announcement is
required by applicable Laws or by a court or agency having jurisdiction, such
Party may make such release or announcement after it has used its reasonable
efforts to give the other Party written notice thereof, has provided the text of
such release or announcement to the other Party, and has permitted the other
Party reasonable opportunity to review and comment upon such release or
announcement. Each Party will hold in confidence this Agreement, the other
Production Payment Documents (except to the extent recorded in public records),
and any confidential information it has obtained from another Party, provided
that disclosure thereof is permitted: (i) to the lenders, hedge providers and
investors of any Party or any partner or member of any such Party and to the
Affiliates of any such Party, lender, hedge provider, investor, partner or
member, (ii) to the officers, employees, agents, consultants, auditors and
attorneys of any Party or any Person described in the preceding clause (i),
(iii) in the course of any arbitration, trial, or other legal proceeding between
any of the Parties or any partner or member of any such Party, their lenders,
hedge providers or investors, or the Affiliates of any such Party, partner,
member, lender, hedge provider, or investor, (iv) to the extent legally required
16
to be disclosed or otherwise subject to legal, judicial, arbitral, regulatory or
self-regulatory requests for information or documents, and (v) in connection
with any assignment or potential assignment of such Party's, partner's,
member's, lender's, hedge provider's or investor's rights (provided that each
such assignee or potential assignee is made aware that such information is
required to be held in confidence).
(b) Each Party notifies the other Party that, to the extent the notifying
Party is subject to the USA PATRIOT Act (Title III of Pub. L. 107-56), such
notifying Party is required to obtain, verify and record information that
identifies the other Party, including the other Party's name and address and
other information that will allow such the notifying Party to identify the other
Party in accordance with such Act.
Section 7.2 Survival. The representations, warranties, covenants,
agreements and indemnities in this Agreement and the Closing Documents and other
Production Payment Documents will survive the Closing and the consummation of
the transactions described herein and therein.
Section 7.3 Expenses. Working Interest Owner will from time to time,
promptly on demand, reimburse Royalty Owner for its expenses incurred in
connection with pursuing the transactions contemplated herein, including all of
Royalty Owner's legal and title fees and expenses, engineering fees and
expenses, environmental audit fees and expenses and other professional fees and
expenses incurred by Royalty Owner or its Affiliates in connection with due
diligence review and the preparation, review, negotiation or delivery of all
documents for such transactions (whether or not any such documents are
executed), including any term sheet or mandate or commitment letter, this
Agreement, the Closing Documents, the other Production Payment Documents, and
any and all proposed supplements, amendments or waivers from time to time
prepared with respect to this Agreement, the Closing Documents, the other
Production Payment Documents, and the transactions contemplated herein and
therein. WORKING INTEREST OWNER SHALL INDEMNIFY AND HOLD HARMLESS ROYALTY OWNER
FROM AND AGAINST ANY AND ALL LIABILITY FOR ANY BROKERS' OR FINDERS' FEES ARISING
WITH RESPECT TO BROKERS OR FINDERS RETAINED OR ENGAGED BY WORKING INTEREST OWNER
OR WORKING INTEREST OWNER'S AFFILIATES IN RESPECT OF THE TRANSACTIONS DESCRIBED
HEREIN AND THEREIN. In the event that the Closing does not occur Working
Interest Owner shall promptly reimburse Royalty Owner for any loss or expense
resulting from reversing or terminating any commodity price hedge, interest rate
hedge, or other derivative transactions described at the end of Section 6.3.
Section 7.4 Notices. All notices, requests, demands, instructions and other
communications required or permitted to be given hereunder or under the other
Production Payment Documents must be in writing and must be delivered
17
personally, mailed by certified mail, postage prepaid and return receipt
requested, sent by telecopier, or sent by email confirmed by another writing, to
the Parties as follows:
To Royalty Owner, addressed to: To Working Interest Owner, addressed to:
------------------------------ ----------------------------------------
PCEC Sub 1, LLC Baron Production LLC
3710 Rawlins Street, Suite 1000 300 S CM Allen Pkwy, Suite 400
Dallas, Texas 75219 San Marcos, Texas 78666
Attention: Rosser C. Newton Attention: Chief Financial Officer
Fax No.: (214) 661-7760 Fax No.: (512) 392-5775
Phone No.: (214) 661-7761 Phone No.: (512) 392-7238
with a copy to: with a copy to:
Condon Thornton Sladek Harrell PLLC Corporate Legal, LLC
8080 Park Lane, Suite 700 12354 E. Caley Ave. Suite 201
Dallas, Texas 75231 Centennial, CO 80111
Attention: Mark Knowles Attention: Gordon Dihle
Fax No.: (214) 691-6311 Fax No.: (303) 974-5587
Phone No.: (214) 691-6316 Phone No.: (720) 458-4123
Each Party may designate for itself a new or different address by written notice
to the other. In addition, a copy of all notices, requests, demands,
instructions and other communications given under this Section will be provided
to any mortgagee of the Production Payment that is from time to time designated
by Royalty Owner or that from time to time requests such copies from Working
Interest Owner. All notices given by personal delivery or mail will be effective
on the date of actual receipt at the appropriate address. Notice given by
telecopier or email will be effective upon actual receipt if received during
recipient's normal business hours or at the beginning of the next Business Day
after receipt if received after the recipient's normal business hours.
Section 7.5 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
Section 7.6 Successors and Assigns. This Agreement will be binding upon the
Parties hereto and their respective successors and assigns and, subject to the
restrictions set forth in Section 1.8 of the Conveyance, shall inure to the
benefit of the Parties and their respective successors and permitted assigns.
Nothing contained herein or in the other Production Payment Documents will in
any way limit or restrict the right of Royalty Owner, or Royalty Owner's
successors and assigns, to transfer, assign or pledge their respective rights or
obligations hereunder and under the other Production Payment Documents, in whole
or in part. Working Interest Owner will not transfer, assign or pledge its
18
rights or obligations hereunder or under the other Production Payment Documents
without the prior written consent of Royalty Owner.
Section 7.7 Entire Agreement; Amendments; Waivers. This Agreement and the
other Closing Documents and Production Payment Documents constitute the entire
agreement between the Parties with respect to the transactions described herein
and supersede all prior negotiations, discussions, agreements and
understandings, whether oral or written, relating to such subject matter. This
Agreement may not be amended or modified, and no rights hereunder may be waived,
except by a written document signed by the Party to be charged with such
amendment, modification or waiver. Provisions of this Agreement that refer to
any consent, approval, amendment or waiver by either Party require such consent,
approval, amendment or waiver to be in writing. No waiver of any of the
provisions of this Agreement will constitute a waiver of any other provisions
hereof (whether or not similar) nor will such waiver constitute a continuing
waiver unless otherwise expressly provided. Each Party acknowledges that it has
read and understands the terms of this Agreement and the other Production
Payment Documents and has had the opportunity to consult with legal, tax and
accounting counsel and advisers of its choice concerning the meaning and effect
hereof and thereof. No Party has relied upon any other Party or its counsel or
advisers with respect to the meaning or effect of any such agreement or
instrument.
THIS WRITTEN AGREEMENT AND THE OTHER PRODUCTION PAYMENT DOCUMENTS REPRESENT
THE FINAL AGREEMENT BETWEENTHE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 7.8 Counterparts. This Agreement may be executed by Royalty Owner
and Working Interest Owner in any number of counterparts, each of which shall be
deemed an original instrument and all of which together shall constitute one and
the same Agreement. Delivery of an executed counterpart of a signature page of
this Agreement by facsimile or in electronic (i.e., "pdf" or "tif") format shall
be effective as delivery of a manually executed counterpart of this Agreement.
Section 7.9 WAIVER OF JURY TRIAL AND OF PUNITIVE DAMAGES. EACH PARTY HEREBY
KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY (A) WAIVES, TO THE
MAXIMUM EXTENT NOT PROHIBITED BYAPPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR DIRECTLY OR INDIRECTLY AT ANY
TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE
OTHER PRODUCTION PAYMENT DOCUMENTS OR ANY TRANSACTION CONTEMPLATED HEREBY OR
THEREBY OR ASSOCIATED HEREWITH OR THEREWITH; (B) WAIVES, TO THE MAXIMUM EXTENT
NOT PROHIBITED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN
ANY SUCH LITIGATION ANY "SPECIAL DAMAGES" (AS DEFINED BELOW), (C) CERTIFIES THAT
NO OTHER PARTY AND NO REPRESENTATIVE OR AGENT OR COUNSEL OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH OTHER PARTY WOULD NOT,
19
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (D)
ACKNOWLEDGES THAT IT HAS BEEN INDUCEDTO ENTER INTO THIS AGREEMENT, THE OTHER
PRODUCTION PAYMENT DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND
THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED
IN THIS SECTION. AS USED IN THIS SECTION, "SPECIAL DAMAGES" MEANS ALL
CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED) BUT DOES
NOT INCLUDE ANY PAYMENTS OR FUNDS WHICH ANY PARTY HAS EXPRESSLY PROMISED TO PAY
OR DELIVER TO ANY OTHER PARTY.
Section 7.10 CONSENT TO JURISDICTION. ANY LEGAL PROCEEDING ARISING OUT OF
OR IN ANY WAY RELATED TO ANY OF THE PRODUCTION PAYMENT DOCUMENTS WILL BE BROUGHT
AND LITIGATED EXCLUSIVELY IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF TEXAS, TO THE EXTENT IT HAS SUBJECT MATTER JURISDICTION, AND
OTHERWISE IN THE STATE COURTS SITTING IN DALLAS, TEXAS, AND EACH PARTY AGREES
AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY LEGAL PROCEEDING
RELATING TO ANY OF THE PRODUCTION PAYMENT DOCUMENTS BY ANY MEANS ALLOWED UNDER
TEXAS OR FEDERAL LAW, PROVIDED THAT LEGAL PROCEEDINGS TO ENFORCE ANY LIEN OR
SECURITY INTEREST GRANTED UNDER ANY PRODUCTION PAYMENT DOCUMENT MAY BE BROUGHT
IN ANY COURT HAVING JURISDICTION OVER SUCH PROCEEDINGS. THE PARTIES HEREBY WAIVE
AND AGREE NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, THAT ANY
SUCH PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE THEREOF IS
IMPROPER, AND FURTHER AGREE TO A TRANSFER OFANY SUCH PROCEEDING TO THE UNITED
STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS, TO THE EXTENT THAT IT
HAS SUBJECT MATTER JURISDICTION, AND OTHERWISE TO A STATE COURT IN DALLAS,
TEXAS. IN FURTHERANCE THEREOF, EACH PARTY HEREBY ACKNOWLEDGES AND AGREES THAT IT
WILL BE NEITHER INCONVENIENT NOR UNFAIR TO LITIGATE OR OTHERWISE RESOLVE ANY
DISPUTES OR CLAIMS IN ANY SUCH COURT.
[SIGNATURES ON NEXT PAGE]
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IN WITNESS OF THE FOREGOING, Working Interest Owner and Royalty Owner have
each duly executed and delivered this Agreement.
WORKING INTEREST OWNER:
BARON PRODUCTION LLC
By:
--------------------------------------------
Name:
--------------------------------------------
Title:
--------------------------------------------
21
ROYALTY OWNER:
PCEC SUB 1, LLC
By:
--------------------------------------------
Rosser C. Newton
Vice President
22
EXHIBIT A
CERTIFICATION OF NON-FOREIGN STATUS
CERTIFICATION OF NON-FOREIGN STATUS
Section 1445 of the Internal Revenue Code provides that a transferee of a
U.S. real property interest must withhold tax if the transferor is a foreign
corporation, foreign partnership, foreign trust or foreign estate. To inform
PCEC SUB 1, LLC, a Texas limited liability company ("TRANSFEREE"), that
withholding of tax is not required upon the disposition of a U.S. real property
interest owned by Baron Production LLC, a Texas limited liability company
("TRANSFEROR"), the undersigned hereby certifies the following on behalf of
Transferor:
1. Transferor is not a foreign corporation, foreign partnership, foreign
trust or foreign estate (as those terms are defined in the United States
Internal Revenue Code and the Regulations thereunder);
2. Transferor's tax identification number is ; and
3. Transferor's address is 300 S. CM Allen Pkwy, Suite 400, San Marcos,
Texas 78666..
The undersigned understands that this certification may be disclosed to the
Internal Revenue Service by Transferee and that any false statement
contained herein could be punished by fine, imprisonment or both.
Under penalties of perjury, the undersigned declares that it has full
authority to execute this certification on behalf of Transferor and that it
has examined this certification and to the best of its knowledge and belief
it is true, correct and complete.
DATED this 28th day of July, 2014.
[SIGNATURE PAGE FOLLOWS]
23
BARON PRODUCTION LLC
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
24
EXHIBIT B-1
FORM OF LEGAL OPINION OF STEWART & BONNETT, LLP
25
EXHIBIT B-2
FORM OF LEGAL OPINION OF LIONEL SAWYER & COLLINS
26
SCHEDULE 3.1
TO
PURCHASE AND SALE AGREEMENT
DISCLOSURE SCHEDULE
Section 3.1(b) Conflicts: None
Section 3.1(c) Consents, Preferential Rights and Required Notices: None
Section 3.1(d) Material Adverse Changes: None
Section 3.1(e) Governmental Approvals: None
Section 3.1(h) Full Disclosure: None
Section 3.1(j) Tax Disclosures: None
Section 3.1(n) Take or Pay, etc.: None
Section 3.1(o) Compliance with Laws: None
Section 3.1(p) No Casualties or Condemnation: None
Section 3.1(q) Litigation:: None
Section 3.1(v) Employee Disputes: None
27
SCHEDULE 6.3
TO
PURCHASE AND SALE AGREEMENT
WIRE INSTRUCTIONS
In accordance the Disbursement Letter, dated the date hereof, among the Working
Interest Owner, the Royalty Owner, the Parent, and Petro Capital Energy Credit,
LLC, as Administrative Agent.
28