PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
PENNACO ENERGY, INC. (AS "SELLER"),
CEP - M PURCHASE, LLC (AS "PURCHASER")
AND
CURRENT ENERGY PARTNERS CORPORATION
(AS "GUARANTOR")
EFFECTIVE DATE OF JULY 1, 2010
ARTICLE 1 PROPERTY DESCRIPTION 1
1.1. PURCHASE AND SALE 1
1.2. THE PROPERTY 1
1.3. EXCLUSIONS FROM THE PROPERTY 3
1.4. OWNERSHIP OF PRODUCTION FROM THE PROPERTY 5
ARTICLE 2 5
2.1. PURCHASE PRICE 5
2.2. ADJUSTMENTS AT CLOSING 6
2.3. ADJUSTMENTS AFTER CLOSING 7
2.4. PAYMENT METHOD 8
2.5. PRINCIPLES OF ACCOUNTING 8
2.6. REPORTING VALUE OF THE PROPERTY 8
2.7. SECTION 1031 EXCHANGE 8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES 9
3.1. RECIPROCAL REPRESENTATIONS AND WARRANTIES 9
3.2. ASSIGNOR'S REPRESENTATIONS AND WARRANTIES 9
3.3. ASSIGNEE'S REPRESENTATIONS AND WARRANTIES 10
3.4. LIMITATION AS TO ENVIRONMENTAL MATTERS 11
3.5 NOTICE OF CHANGES 12
3.6 REPRESENTATIONS AND WARRANTIES EXCLUSIVE 12
ARTICLE 4 DISCLAIMER OF WARRANTIES 12
4.1 TITLE; ENCUMBRANCES 12
4.2. CONDITION AND FITNESS OF THE PROPERTY 12
4.3. INFORMATION ABOUT THE PROPERTY 13
4.4. INFORMATION IN EXHIBITS 13
4.5. APPOINTMENT AS OPERATOR 13
4.6. SUBROGATION OF WARRANTIES 13
4.7 DISCLAIMERS DEEMED CONSPICUOUS 14
ARTICLE 5 DUE DILIGENCE REVIEW AND OTHER PRE-CLOSING ACTIVITIES 14
5.1. RECORDS REVIEW 14
5.2. PHYSICAL INSPECTION 14
5.3 ENVIRONMENTAL ASSESSMENT 14
5.4. BONDING 15
5.5 PREFERENTIAL RIGHTS AND CONSENTS TO ASSIGN 15
5.6. TITLE DEFECTS 16
5.7 CASUALTY LOSSES AND GOVERNMENT TAKINGS 19
5.8. TERMINATION DUE TO IMPAIRMENTS TO THE PROPERTY 20
5.9. HART-SCOTT-RODINO 20
5.10 TRAILBLAZER CAPACITY 20
5.10 TRAILBLAZER CAPACITY 21
ARTICLE 6 CLOSING AND POST-CLEANING OBLIGATIONS 21
6.1 CLOSING DATE 21
6.2. CONDITIONS TO CLOSING 21
6.3. CLOSING 22
6.4. POST-CLOSING OBLIGATIONS 24
ARTICLE7 ASSUMED AND RETAINED RIGHTS AND OBLIGATIONS 26
7.1 PURCHASER'S RIGHTS AFTER CLOSING 26
7.2 PURCHASER'S OBLIGATIONS AFTER CLOSING 26
7.3 SELLER'S OBLIGATIONS AFTER CLOSING 28
7.4. PLUGGING AND ABANDONMENT OBLIGATIONS 29
7.5. ENVIRONMENTAL OBLIGATIONS 30
ARTICLE 8 INDEMNITIES 31
8.1. DEFINITION OF CLAIMS 31
8.2. APPLICATION OF INDEMNITIES 31
8.3. PURCHASER'S INDEMNITY 32
8.4 SELLER'S INDEMNITY 32
8.5. NOTICES AND DEFENSE OF INDEMNIFIED CLAIMS 33
8.7. NORM 33
8.8. PENDING LITIGATION AND CLAIMS 33
8.9. WAIVER OF CONSEQUENTIAL AND PUNITIVE DAMAGES 33
ARTICLE 9 TAXES AND EXPENSES 34
9.1. RECORDING EXPENSES 34
9.2. AD VALOREM, REAL PROPERTY AND PERSONAL PROPERTY TAXES 34
9.3. SEVERANCE TAXES 34
9.4. TAX AND FINANCIAL REPORTING 34
9.5. SALES AND USE TAXES 35
9.6. INCOME TAXES 35
9.7. INCIDENTAL EXPENSES 35
9.8. IBGP TAX PARTNERSHIP 35
ARTICLE 10 MISCELLANEOUS 35
10.1. PRODUCTION IMBALANCES 35
10.2 ALTERNATIVE DISPUTE RESOLUTION 35
10.3. SURVIVAL OF REPRESENTATIONS, WARRANTIES 38
10.4. CONFIDENTIALITY AND PUBLIC ANNOUNCEMENTS 38
10.5 SUSPENSE ACCOUNTS 38
10.6. SELLER'S MARKS AND LOGOS; POST-CLOSING INSPECTIONS 39
10.7. NOTICES 39
10.8. EFFECTIVE DATE 40
10.9. ASSIGNMENT 40
10.10. ENTIRE AGREEMENT AND AMENDMENT 40
10.11. SUCCESSORS AND ASSIGNS 40
10.12. THIRD PARTY BENEFICIARIES 40
10.13. SEVERABILITY 40
10.14. COUNTERPARTS 40
10.15. GOVERNING LAW 40
10.16. EXHIBITS 41
10.17. WAIVER 41
10.18. INTERPRETATION 41
10.19. DEFAULT AND REMEDIES 42
10.20 U.S. PROHIBITED PARTIES LIST 42
ARTICLE 11 EMPLOYEE MATTERS 43
11.1 EMPLOYEES 43
11.2 EMPLOYMENT OFFERS 43
11.3 TRANSFER TIME 43
11.4 WARN ACT 44
EXHIBITS 45
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (the "AGREEMENT"), dated effective as of July
1, 2010 (the "EFFECTIVE DATE") by and among Pennaco Energy, Inc., a Delaware
corporation, ("SELLER"), CEP - M Purchase, LLC, a Delaware limited liability
company ("PURCHASER" and, together with Seller, the "PARTIES") and Current
Energy Partners Corporation (as "GUARANTOR")
RECITALS:
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WHEREAS, Seller owns an interest in certain producing and non-producing oil and
gas properties in the Fairway area in Campbell, Johnson and Sheridan Counties,
Wyoming, together with related facilities and contractual rights, and
WHEREAS, Seller desires to sell and Purchaser desires to purchase all of
Seller's right, title and interest in and to the Property (as defined herein),
in accordance with and subject to the terms and conditions set forth in this
Agreement,
IN CONSIDERATION of the above recitals, the benefits to be derived by each party
under this Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Seller and Purchaser hereby agree
as follows:
ARTICLE 1 PROPERTY DESCRIPTION
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1.1. PURCHASE AND SALE. Subject to the limitations, conditions, reservations
agreements and exceptions set forth in this Agreement, Seller shall sell,
convey, and assign to Purchaser and Purchaser shall purchase, acquire, and
accept from Seller one hundred percent (100%) of Seller's right, title and
interest in, to and under the Property.
1.2 THE PROPERTY. As used herein, the "PROPERTY" shall include one hundred
percent (100%) of Seller's right, title and interest in, to, under or derived
from the following described property rights and interests, SAVE and EXCEPT the
Excluded Assets:
1.2.1. The oil, gas and mineral leases described in Exhibit A-1 (the
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"LEASES"), INSOFAR AND ONLY INSOFAR as those leases cover and include the lands
described in Exhibit A-1 and specifically limited to the interval from the
surface to a depth defined as the base of the Tertiary Paleocene Ft. Union
formation;
1.2.2. All rights, obligations and interests in any unit or pooled area in
which the Leases are included, to the extent that these rights, obligations and
interests arise from and are associated with the Leases or Wells, including
without limitation, all rights and obligations derived from any unitization,
pooling, operating, communitization or other agreement or from any declaration
or order of any governmental authority, as described in Exhibit A-2, (the
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"UNITS", and collectively with the Leases and Royalty Interest, the "OIL AND GAS
PROPERTIES");
1.2.3. Ail oil, gas and condensate wells, monitoring wells, water source,
water injection and other injection or disposal wells and systems located (a) on
the Leases or lands unitized or pooled with the Leases, or (b) on other lands
included in the Property held for use in connection with the Oil and Gas
Properties, pursuant to a surface contract or lease, in all cases whether
producing, not producing, shut-in or abandoned SAVE AND EXCEPT the Pennaco P&A
Wells and the Pennaco Monitoring Wells (the "WELLS"); the term "Wells" includes,
but is not limited to, the wells listed in Exhibit A-3;
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1.2.4 All natural gas, other hydrocarbons, and other minerals or materials of
every kind and description (collectively, the "HYDROCARBONS"), that are produced
from or attributable to the Oil and Gas Properties and/or the Wells after the
Effective Date;
1.2.5. All equipment and ail facilities, including, but not limited to, flow
lines, pipelines, gathering systems (from the wellhead to the outlet of the
central delivery point), water disposal drip systems, well pads, improvements,
outfalls, SCADA equipment and transmitters, fixtures, and other personal
property either (a) located (i) on the Leases or lands unitized or pooled with
the Leases, or (ii) on other lands included in the Property held for use in
connection with the Oil and Gas Properties, pursuant to a surface contract or
lease, or (b) used solely and directly in developing or operating the Leases and
Wells, or producing, storing or transporting Hydrocarbons or produced water on
and from the Leases (collectively, the "PERSONAL PROPERTY");
1.2.6 To the extent assignable or transferable, all reservoirs, pits, outfalls
and similar facilities used solely and directly in developing or operating the
Leases and Wells Including facilities used in producing, storing or transporting
produced water on and from the Leases (collectively, the "WATER MANAGEMENT
FACILITIES"); the term "Water Management Facilities" includes, but is not
limited to, the reservoirs, pits and outfalls listed in Exhibit A-4;
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1.2.7. To the extent assignable or transferable, all easements,
rights-of-way, licenses, permits, servitudes, surface leases, surface use
agreements, water management agreements and similar rights and interests to the
extent used directly in operating the Leases, Wells, Water Management
Facilities, the lands unitized or pooled with the Leases, or the Personal
Property, including, but not limited to, those described in Exhibit A-5 (the
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"PERMITS AND EASEMENTS");
1.2.8. Any royalty, overriding royalty, net profits, production payment or
other interests in the Leases (the "ROYALTY INTERESTS"), INSOFAR AND ONLY
INSOFAR AS the Leases cover and include the lands, depths and rights described
in Exhibit A-6. including all rights and obligations pertaining to the Royalty
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Interests under any of the Related Contracts;
1.2.9. To the extent assignable or transferable, all agreements, contracts
and contractual rights, obligations and interests INSOFAR AND ONLY INSOFAR as
they cover and are attributable to the Oil and Gas Properties, Wells,
Hydrocarbons, Personal Property, Water Management Facilities, and Permits and
Easements, including without limitation, unit agreements, farmout agreements,
farmin agreements, operating agreements, water management or disposal
agreements, sub-drip irrigation agreements and hydrocarbon sales, purchase,
gathering, transportation, treating, marketing, exchange, processing and
fractionating agreements including, but not limited to, those described in
Exhibit A-7 (the "RELATED CONTRACTS"); and
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1.2.10. All other tangibles, miscellaneous interests or other assets on or
used solely in connection with the Oil and Gas Properties, Wells, Hydrocarbons,
Personal Property, Water Management Facilities and Permits and Easements, and
Related Contracts, including, but not limited to, copies of Records; the term
"RECORDS" includes lease files, land files, well files, production records,
division order files, abstracts, title opinions, and contract flies, INSOFAR AND
ONLY INSOFAR as they are directly related to the Property; however, SELLER shall
have no obligation to furnish PURCHASER any data or information that is subject
to third party disclosure restrictions.
1.2.11 Mineral interests in and to the lands described on Exhibit A-8 (the
"MINERAL INTERESTS").
1.3 EXCLUSIONS FROM THE PROPERTY Notwithstanding any provision of this Agreement
to the contrary, the Property to be conveyed and assigned under this Agreement
does not include the following: (the "EXCLUDED ASSETS")
1.3.1. Unless the parties otherwise agree in writing and enter into a
separate data license agreement, (i) seismic, geological, geochemical, or
geophysical data (including cores and other physical samples or materials from
wells or tests) belonging to SELLER or licensed from third parties, and (ii)
interpretations of seismic, geological, geochemical or geophysical data
belonging to SELLER or licensed from third parties;
1.3.2. SELLER'S intellectual property used in developing or operating the
Property, including without limitation, proprietary computer software, computer
software licensed from third parties, patents, pending patent applications,
trade secrets, copyrights, names, marks and logos;
13.3. SELLER'S right, title and interest in the Permits and Easements, to the
extent they are attributable and allocable to rights and interests retained by
SELLER (if any);
1.3.4. SELLER'S corporate, financial and tax records, and legal files,
except that SELLER will provide PURCHASER with copies of any tax records that
are necessary for PURCHASER'S ownership, administration or operation of the
Property;
1.3.5. Notwithstanding any other provision of this Agreement to the
contrary, any records or information that Seller considers proprietary or
confidential (including without limitation, employee information, internal
valuation data, business plans, reserve reports, transaction proposals and
related information and correspondence, business studies, bids and documents
protected by any privilege), or which SELLER cannot legally provide to PURCHASER
because of third party restrictions;
1.3.6. Trade credits and rebates from contractors and vendors, and
adjustments or refunds attributable to SELLER'S interest in the Property that
relate to any period before the Effective Date, including without limitation,
transportation tax credits and refunds, tariff refunds, take-or-pay claims,
insurance premium adjustments, and audit adjustments under the Related
Contracts;
1.3.7. Claims of SELLER for refund of or loss carry forwards with respect to
(i) production, windfall profit, severance, ad valorem or any other taxes
attributable to any period
prior to the Effective Date, (ii) income, franchise and any other taxes, and
(iii) any taxes attributable to the excluded items described in this Section
1.3;
1.3.8. Deposits, cash, checks in process of collection, cash equivalents,
accounts and notes receivable and other funds attributable to any periods before
the Effective Date, and security or other deposits made with third parties prior
to the Effective Date;
1.3.9. All Claims arising from acts, omissions or events, or damage to or
destruction of the Property before the Effective Date, and ail rights, titles,
claims and interests of SELLER (i) under any policy or agreement of insurance or
indemnity, (ii) under any bond or letter of credit, or (iii) to any insurance or
condemnation proceeds or awards;
1.3.10. All rights, benefits, awards, judgments, and settlements, if any,
applicable to the pending and potential litigation relating to periods prior to
the Effective Date, and Claims listed on Exhibit C to the extent Seller retains
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responsibility under this Agreement as described on Exhibit C;
1.3.11. All rights to recover any working interest or royalty interest
overpayments for production prior to the Effective Date;
1.3.12 Contracts for support services, building leases and equipment leases
related to the Property (except for those contracts specifically listed as part
of the Related Contracts in Exhibit A);
1.3.13. Related Contracts insofar as they pertain to oil and gas interests
of SELLER other than the Property being assigned and conveyed to PURCHASER under
this Agreement;
1.3.14. Any production sales contracts between SELLER and SELLER'S
affiliates or subsidiaries, and all swap, futures, or derivative contracts
backed by or related to the Hydrocarbons;
1.3.15. All personal computers, servers and related equipment located in the
Gillette office or the Sheridan offices;
1.3.16 All vehicles, wherever located;
1.3.17 All third party equipment and property located on or used in
connection with the Leases, Wells or Units, including without limitation
contractor equipment;
1.3.18. Any and all rights of SELLER in and to depths below the base of the
Tertiary Paleocene Ft. Union formation (the "DEEP RIGHTS"), including (on a
non-exclusive basis) all rights of use and access through and over the Property
for the purpose of exploring, drilling, producing, storing and marketing oil and
gas associated with the Deep Rights;
1.3.19. All wells listed on Exhibit G and subject to Seller's 2010 plugging
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and abandonment program (the "PENNACO P&A WELLS") together with any and all
surface access and other rights reasonable or necessary to plug and abandon the
Pennaco P&A wells;
1.3.20. The Gillette office lease, the Sheridan office lease, and all
personal property located at either the Gillette office or the Sheridan office;
1.3.21. All inventory, wherever located, that is not directly associated
with the ownership or operation of the Property;
1.3.22. All monitoring wells listed on ExhibitI (the "PENNACO MONITORING
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WELLS") together with any and all surface access and other rights reasonable or
necessary to plug and abandon the Pennaco Monitoring Wells; and
1.3.23 All rights, title, claim, benefit and interest in and to the funds held
in escrow in account number 807707575 at First Interstate Bank.
1.4 OWNERSHIP OF PRODUCTION FROM THE PROPERTY
1.4.1. PRODUCTION BEFORE THE EFFECTIVE DATE. SELLER will own all
Hydrocarbons produced from or attributable to the Property before the Effective
Date.
1.4.2. PRODUCTION AFTER THE EFFECTIVE DATE. PURCHASER will own all
Hydrocarbons produced from or attributable to the Property on and after the
Effective Date. If the Effective Date precedes the Closing Date, SELLER will
sell on PURCHASER'S behalf all Hydrocarbons produced from or attributable to the
Property between the Effective Date and the Closing Date, and SELLER will credit
PURCHASER for the proceeds of these sales as an adjustment to the Purchase Price
at Closing, as provided in Section 2.2. Subject to any continuing sale
obligations under the Related Contracts, PURCHASER may sell Hydrocarbons
produced from or attributable to the Property on and after the Closing Date as
it deems appropriate.
ARTICLE 2 CONSIDERATION
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2.1 PURCHASE PRICE
2.1.1. AMOUNT DUE AT CLOSING. PURCHASER will pay SELLER Ten Million and
NO/100 DOLLARS (U. S. $10,000,000.00) for the Property (the "PURCHASE PRICE"),
adjusted by the Closing adjustments specified in Section 2.2. The Purchase Price
will be subject to the further post-Closing adjustments specified in Section
2.3. For purposes of this Agreement and for federal income tax purposes, the
Purchase Price will be allocated among the various portions of the Property and
among depreciable assets and non-depreciable assets as provided in Exhibit B.
2.1.2. PERFORMANCE DEPOSIT. Upon execution of this Agreement, PURCHASER
shall pay to SELLER seven and one-half percent (7.5%) of the Purchase Price as a
performance deposit ("PERFORMANCE DEPOSIT") on the Property to be transferred to
SELLER to assure PURCHASER'S performance under this Agreement. The Performance
Deposit is solely to assure the performance of PURCHASER pursuant to the terms
and conditions of this Agreement. If PURCHASER refuses or is unable for any
reason (including failure to obtain financing) to close the transaction in
accordance with the terms of this Agreement, SELLER may, at its sole option,
retain the Performance Deposit as agreed liquidated damages and not as a
penalty. However, if this Agreement is terminated pursuant to
the provisions of Sections 5.8 (Termination Due to Impairments to the Property)
or 10.19.2 (PURCHASER'S Remedies) of this Agreement, the Performance Deposit
shall be returned without interest as provided in this Agreement. If Closing
occurs, SELLER at its sole option may either (i) return the Performance Deposit
to PURCHASER, without interest, at Closing, in which case PURCHASER must pay
SELLER the full amount of the Purchase Price at Closing, adjusted as provided in
Section 2.2, or (ii) retain and credit the Performance Deposit, without
interest, against the Purchase Price at Closing, in which case PURCHASER must
pay SELLER an amount equal to the Purchase Price, adjusted as provided in
Section 2.2., less the Performance Deposit.
2.2. ADJUSTMENTS AT CLOSING.
2.2.1. PRELIMINARY SETTLEMENT STATEMENT. At Closing, the Purchase Price will
be adjusted as set forth in Sections 2.2.2 and 2.2.3. No later than five (5)
business days prior to Closing, SELLER will provide PURCHASER a preliminary
settlement statement identifying adjustments to the Purchase Price to be made at
Closing (the "PRELIMINARY SETTLEMENT STATEMENT"). SELLER and PURCHASER
acknowledge that some items in the Preliminary Settlement Statement may be
estimates or otherwise subject to change in the Final Settlement Statement for
the Property, to be prepared pursuant to Section 2.3.
2.2.2. UPWARD ADJUSTMENTS. The Purchase Price will be increased by the
following expenses and revenues:
(a) SELLER'S share of all actual production and operating costs and
expenses, overhead charges under applicable operating agreements, capital
expenditures paid or incurred by SELLER in connection with ownership or
operation of the Property (including without limitation royalties, minimum
royalties, rentals, and prepaid charges), to the extent they are attributable to
the Property, for the period on and after the Effective Date; provided that,
with respect to those portions of the Property for which SELLER is a one hundred
percent (100%) working interest owner or for which there is not an applicable
operating agreement, overhead charges shall be deemed to be Eight Hundred and
NO/DOLLARS (U. S. $800.00) per well per month;
(b) SELLER'S share of any proceeds from the sale of Hydrocarbons produced
from or attributable to the Property and other income from the Property received
by PURCHASER, to the extent they are attributable to the ownership or operation
of the Property before the Effective Date;
(c) Expenses paid or incurred by Seller after the Effective Date and before
the Closing Date in connection with the Water Well Claims; and
(d) Any other increases in the Purchase Price specified in this Agreement or
otherwise agreed in writing between SELLER and PURCHASER prior to or at Closing.
2.2.3. DOWNWARD ADJUSTMENTS. The Purchase Price will be decreased by the
following expenses and revenues:
(a) SELLER'S share of all actual production and operating costs and expenses,
overhead charges under applicable operating agreements, capital expenditures
paid or incurred by PURCHASER in connection with ownership or operation of the
Property (including without limitation royalties, minimum royalties, rentals,
and prepaid charges), to the extent they are attributable to the Property for
the period before the Effective Date; provided that, with respect to those
portions of the Property for which SELLER is a one hundred percent (100%)
working interest owner or for which there is not an applicable operating
agreement, overhead charges shall be deemed to be Eight Hundred and NO/DOLLARS
(U. S. $800.00) per well per month;
(b) SELLER'S share of any proceeds from the sale of Hydrocarbons
produced from or attributable to the Property and other income attributable to
the Property
and received by SELLER, to the extent they are attributable to the ownership and
operation
of the Property on or after the Effective Date; and
(c) Any other decreases in the Purchase Price specified in this
Agreement or otherwise agreed in writing between SELLER and PURCHASER.
2.3 ADJUSTMENTS AFTER CLOSING
2.3.1. FINAL SETTLEMENT STATEMENT. Within 120 days after Closing, SELLER
will prepare a final settlement statement for the Property containing a final
reconciliation of the adjustments to the Purchase Price specified in Section 2.2
(the "FINAL SETTLEMENT STATEMENT"). However, failure of SELLER to complete the
Final Settlement Statement within 120 days after Closing will not constitute a
waiver of any right to an adjustment otherwise due. PURCHASER will have 30 days
after receiving the Final Settlement Statement to provide SELLER with written
exceptions to any items in the Final Settlement Statement that PURCHASER
believes in good faith to be questionable. All items in the Final Settlement
Statement to which PURCHASER does not take written exception within the 30-day
review period will be deemed correct.
2.3.2. PAYMENT OF POST-CLOSING ADJUSTMENTS. Any additional adjustments to
the Purchase Price (including disputed items) will be offset against each other
so that only one payment is required. The party owing payment will pay the other
party the net post-Closing adjustment to the Purchase Price within 10 days after
the expiration of PURCHASER'S 30-day review period for the Final Settlement
Statement. However, the payment of any disputed items will be subject to the
further rights of the parties under Section 2.3.3.
2.3.3. RESOLUTION OF DISPUTED ITEMS. After the completion and delivery of
the Final Settlement Statement, the parties agree to negotiate in good faith to
attempt to reach agreement on the amount due with respect to any disputed items
in the Final Settlement Statement. If the parties agree on the amount due with
respect to any disputed items, and a payment adjustment is required, the party
owing payment will pay the other party within 10 days after the parties reach
agreement. If the parties are unable to agree on the amount due with respect to
any disputed items within 60 days after SELLER receives PURCHASER'S written
exceptions to the Final Settlement Statement, then the parties will attempt to
resolve their disagreement with respect to the disputed items pursuant to the
dispute resolution procedure set forth in Section 10.2.
2.3.4. FURTHER REVENUES AND EXPENSES. After the completion of the
post-Closing adjustments under this Section 2.3, (i) if either party receives
revenues that belong to the other party under this Agreement, the party
receiving the revenues agrees to promptly remit
those revenues to the other party, and (ii) if either party pays expenses that
are the responsibility of the other party under this Agreement, the party on
whose behalf the expenses were paid agrees to promptly reimburse the other party
for the expenses paid on its behalf upon receiving satisfactory evidence of such
payment. However, neither party will be obligated to reimburse the other party
for any such expense in excess of $5,000 unless it has been consulted about that
expense prior to payment, unless that payment was required by a government
agency or other government entity.
2.4. PAYMENT METHOD. Unless the parties otherwise agree in writing, all
payments under this Agreement will be by wire transfer in immediately available
funds to an account designated by the party receiving payment.
2.5. PRINCIPLES OF ACCOUNTING. The Preliminary Settlement Statement and
Final Settlement Statement will be prepared in accordance with generally
accepted accounting principles in the petroleum industry and with reasonable
supporting documentation for each item in those statements.
2.6. REPORTING VALUE OF THE PROPERTY. Neither party will take any position
in preparing financial statements, tax returns, reports to shareholders or
governmental authorities, or otherwise, that is inconsistent with allocation of
value for the Property in Exhibit B, unless required by law or the parties
otherwise agree in writing. The value assigned to each portion of the Property
in Exhibit B is hereafter referred to as the "Allocated Value" of that portion
of the Property.
2.7. SECTION 1031 EXCHANGE. SELLER and PURCHASER hereby agree that PURCHASER
shall have the right at any time prior to Closing to assign all or a portion of
its rights under this Agreement to a Qualified Intermediary (as that term is
defined in Section 1.1031(k)-1(g)(4)(iii) of the Treasury Regulations) in order
to accomplish the transaction in a manner that will comply, either in whole or
in part, with the requirements of a like-kind exchange pursuant to Section 1031
of the Internal Revenue Code of 1986, as amended, ("Code"). Likewise, SELLER
shall have the right at any time prior to Closing to assign all or a portion of
its rights under this Agreement to a Qualified Intermediary for the same
purpose. In the event either party assigns its rights under this Agreement
pursuant to this Section 2.7, such party agrees to notify the other party in
writing of such assignment at or before Closing. If SELLER assigns its rights
under this Agreement for this purpose, PURCHASER agrees to (i) consent to
SELLER'S assignment of its rights in this Agreement, and (ii) pay the Purchase
Price into a qualified escrow or qualified trust account at Closing as directed
in writing. If PURCHASER assigns its rights under this Agreement for this
purpose, SELLER agrees to (i) consent to PURCHASER'S assignment of its rights in
this Agreement, (ii) accept the Purchase Price from the qualified escrow or
qualified trust account at Closing, and (iii) at Closing, convey and assign
directly to PURCHASER the Property upon satisfaction of the other conditions to
Closing and other terms and conditions hereof. SELLER and PURCHASER acknowledge
and agree that any assignment of this Agreement to a Qualified Intermediary
shall not release either party from any of their respective liabilities and
obligations to each other under this Agreement, and that neither party
represents to the other that any particular tax treatment will be given to
either party as a result thereof. Notwithstanding the foregoing, the Closing
Date shall be determined in accordance with Section 6.1.
ARTICLE 3 REPRESENTATIONS AND WARRANTIES
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3.1. RECIPROCAL REPRESENTATIONS AND WARRANTIES. By their execution of
this
Agreement, SELLER and PURCHASER each represent and warrant that the following
statements are true and accurate as to itself, as of the execution date of this
Agreement, the
Effective Date and the Closing Date.
3.1.1. PURCHASER is a wholly owned subsidiary of Guarantor.
3.1.2. REQUISITE APPROVALS. Upon execution of this Agreement, it will have
taken all necessary actions pursuant to its articles of incorporation, by-laws
and other governing documents to fully authorize (i) the execution and delivery
of this Agreement and any transaction documents related to this Agreement; and
(ii) the consummation of the transaction contemplated by this Agreement.
3.1.3. VALIDITY OF OBLIGATION. This Agreement and all other transaction
documents it is to execute and deliver on or before the Closing Date (i) have
been duly executed by its authorized representatives; (ii) constitute its valid
and legally binding obligations; and (iii) are enforceable against it in
accordance with their respective terms.
3.1.4. NO VIOLATION OF CONTRACTUAL RESTRICTIONS. Its execution, delivery and
performance of this Agreement does not conflict with or violate any agreement or
instrument to which it is a party or by which it is bound, except any provision
contained in agreements customary in the oil and gas industry relating to (I)
the preferential right to purchase all or any portion of the Property; (ii)
required consents to transfer and related provisions; (iii) maintenance of
uniform interest provisions; and (iv) any other third-party approvals or
consents contemplated in this Agreement.
3.1.5. NO VIOLATION OF OTHER LEGAL RESTRICTIONS. Its execution, delivery and
performance of this Agreement does not violate any law, rule, regulation,
ordinance, judgment, decree or order to which it or the Property is subject.
3.1.6. BANKRUPTCY. There are no bankruptcy, reorganization or receivership
proceedings pending, being contemplated by, or, to its actual knowledge,
threatened against it.
3.1.7. BROKERS FEES. It has not incurred any obligation for brokers, finders
or similar fees for which the other party would be liable.
3.1.8. NO RESTRAINING LITIGATION. To its knowledge, there is no action,
suit, proceeding, claim or investigation by any person, entity, administrative
agency or governmental body pending or, to its knowledge, threatened, against it
before any court or governmental agency that seeks substantial damages in
connection with, or seeks to restrain, enjoin, materially impair or prohibit the
consummation of all or part of the transaction contemplated in this Agreement.
3.2. SELLER'S REPRESENTATIONS AND WARRANTIES. By its execution of this
Agreement, SELLER represents and warrants to PURCHASER that the following
statements
are true and accurate, as of the execution date of this Agreement, the Effective
Date and the
Closing Date.
3.2.1. MORTGAGES AND OTHER INSTRUMENTS. The transfer of the Property to
PURCHASER does not violate any covenants or restrictions imposed on SELLER by
any bank or other financial institution in connection with a mortgage or other
instrument, and will not result in the creation or imposition of a lien on any
portion of the Property.
3.2.2. LAWSUITS AND CLAIMS. Except as disclosed in Exhibit C and limited by
Section 3.4, to SELLER'S knowledge, there is no demand or lawsuit, nor any
compliance order, notice of probable violation or similar governmental action,
pending or threatened before any court or governmental agency that (i) would
result in a material impairment or loss of title to any part of the Property, or
substantial impairment of the value thereof, or (ii) would materially hinder or
impede the operation of the Property.
3.2.3 AUTHORITY OF SELLER. SELLER is a corporation duly organized and in good
standing under the laws of its state of incorporation, is duly qualified to
carry on its business in the states where the Property is located, and has all
the requisite power and authority to enter into and perform this Agreement.
3.3. PURCHASER'S REPRESENTATIONS AND WARRANTIES. By its execution of this
Agreement, PURCHASER represents and warrants to SELLER that the following
statements are true and accurate, as of the execution date of this Agreement,
the Effective Date and the Closing Date.
3.3.1. INDEPENDENT EVALUATION. PURCHASER is an experienced and knowledgeable
investor in the oil and gas business. In making the decision to enter into this
Agreement, PURCHASER has been advised by and has relied solely on its own
expertise and legal, tax, reservoir engineering and other professional counsel
concerning this transaction, the Property and the value thereof.
3.3.2. QUALIFICATION. PURCHASER is now or at Closing will be, and thereafter
will continue to be, qualified to own and, as applicable, operate any federal
oil, gas and mineral leases, and any oil, gas and mineral leases for all states
in which the Property is located, including meeting all bonding requirements.
Consummating the transaction contemplated in this Agreement will not cause
PURCHASER to be disqualified or to exceed any acreage limitation imposed by law,
statute or regulation.
3.3.3. SECURITIES LAWS AND PURCHASER'S OTHER DEALINGS. PURCHASER has
complied with all federal and state securities laws applicable to the sale of
the Property and will comply with such laws if it subsequently disposes of all
or any part of the Property. PURCHASER is acquiring the Property for its 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, 15
U.S.C. Sec. 77a et seq., and any other rules, regulations, and laws pertaining
to the distribution of securities. Except for traditional mortgage financing or
structured financings from reputable financial institutions and equity providers
(but, in any case, only in one or more transactions that is exempt from the
application of any registration or qualification requirements of any applicable
federal, state or other securities or "blue sky" laws, as confirmed in a written
opinion from outside counsel to PURCHASER), PURCHASER has not sought or
solicited, nor is PURCHASER participating with, investors, partners or other
third parties in order to fund the Purchase Price or the Performance Deposit and
to close this
transaction, and ali funds used by PURCHASER in connection with this transaction
are PURCHASER'S own funds.
3.3.4. GOVERNMENTAL BONDING. PURCHASER is unaware of any fact or
circumstance which would preclude or inhibit unconditional approval of SELLER'S
assignments) of that portion of the Property which constitutes state or federal
oil, gas and mineral leases to PURCHASER, by any federal or state authority
having jurisdiction, including meeting existing or increased state and federal
bonding or supplemental security requirements of such authority.
3.3.5. BOND QUALIFICATIONS. PURCHASER is unaware of any fact or circumstance
which would preclude or inhibit PURCHASER'S qualification to operate the Leases,
Units, Wells and Water Management Facilities for which PURCHASER is seeking
operatorship, including meeting the existing or increased state and federal
bonding or supplemental security requirements of any state or federal authority
having jurisdiction, including, without limitation, the Wyoming Oil and Gas
Commission, the Wyoming Department of Environmental Quality, the Wyoming State
Engineers Office, the Wyoming Office of State Lands, and the U. S. Bureau of
Land Management.
3.3.6. NO HOLDING COMPANY. PURCHASER is not (i) a "holding company," or a
"subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," or a "public
utility company" within the meaning of the Public Utility Holding Company Act of
1935, as amended, or (ii) subject in any respect to the provisions of that act.
3.3.7. NO INVESTMENT COMPANY. PURCHASER is not (i) an investment company or
a company controlled by an investment company within the meaning of the
Investment Company Act of 1940, as amended, or (ii) subject in any respect to
the provisions of that act.
3.3.8 AUTHORITY OF PURCHASER. PURCHASER is a limited liability company duly
organized and in good standing under the laws of Delaware, is duly qualified to
carry on its business in the states where the Property is located, and has all
the requisite power and authority to enter into and perform this Agreement.
3.3.9 INTERSTATE PIPELINE CREDITWORTHINESS. PURCHASER has reviewed tariff
and credit requirements for Trailblazer and WIC, and PURCHASER is not aware of
any fact or circumstance which would preclude or inhibit PURCHASER'S
qualification as a replacement shipper on Trailblazer and WIC.
3.4. LIMITATION AS TO ENVIRONMENTAL MATTERS. The warranties and representations
of SELLER in this Article 3 do not extend to environmental matters, including
without limitation, permits, compliance with environmental laws and regulations,
and environmental Claims pertaining to the Property. All liabilities and
obligations of SELLER and PURCHASER with respect to environmental matters,
permits, compliance with environmental laws and regulations, and environmental
Claims pertaining to the Property will be governed solely and exclusively by the
provisions of Sections 5.3, 7.4, 7.5, 8.3 and 8.4, regardless of the warranties
or representations in this Article 3.
3.5 NOTICE OF CHANGES. Prior to Closing, SELLER and PURCHASER will each
give the other prompt written notice of any matter materially affecting any of
their representations or warranties under this Article 3 or rendering any such
warranty or representation untrue or inaccurate.
3.6 REPRESENTATIONS AND WARRANTIES EXCLUSIVE. All representations and
warranties contained in this Agreement (including without limitation those in
this Article 3 are exclusive, and are given in lieu of all other representations
and warranties, express or implied.
ARTICLE 4 WARRANTIES AND DISCLAIMERS
--------------------------
4.1 TITLE; ENCUMBRANCES. SELLER CONVEYS THE PROPERTY TO PURCHASER SUBJECT
TO THE PERMITTED ENCUMBRANCES (AS DEFINED IN SECTION 5.6.1(b)), ALL ROYALTIES,
OVERRIDING ROYALTIES, BURDENS, ENCUMBRANCES, AND SURFACE RIGHTS, AND WARRANTS
TITLE TO THE LEASES, BUT ONLY AS TO THE PRODUCING FORMATIONS IN THE INDIVIDUAL
PROPERTIES, AGAINST ALL CLAIMS ARISING BY, THROUGH AND UNDER SELLER, BUT NOT
OTHERWISE.
NOTWITHSTANDING THE FOREGOING, SELLER EXPRESSLY DISCLAIMS, AND PURCHASER HEREBY
WAIVES, ALL WARRANTIES AND REPRESENTATIONS THAT ANY OF THE LEASES IS VALID AND
HAS NOT BEEN FORFEITED OR OTHERWISE LOST BY OPERATION OF THE TERMS OF THE LEASE.
FURTHERMORE, WITH RESPECT TO THE EASEMENTS, RIGHTS-OF-WAY AND PERMITS FOR THE
PIPELINES AND WATER MANAGEMENT FACILITIES COMPRISING A PART OF THE PROPERTY,
SELLER EXPRESSLY DISCLAIMS, AND PURCHASER HEREBY WAIVES, ALL WARRANTIES AND
REPRESENTATIONS THAT SELLER OWNS THE EASEMENTS, RIGHTS-OF-WAY AND PERMITS; THAT
THEY ARE IN FORCE AND EFFECT; THAT THEY MAY BE ASSIGNED; THAT THEY ARE
CONTIGUOUS; THAT SELLER IS IN COMPLIANCE WITH THE TERMS OF THE EASEMENTS,
RIGHTS-OF-WAY AND PERMITS; THAT THE PIPELINES AND WATER MANAGEMENT FACILITIES
LIE WITHIN THE EASEMENTS, RIGHTS-OF-WAY AND PERMITS; OR THAT THEY GRANT THE
RIGHT TO LAY, MAINTAIN, REPAIR, REPLACE, OPERATE, CONSTRUCT, OR REMOVE THE
PIPELINES AND WATER MANAGEMENT FACILITIES. SELLER EXPRESSLY DISCLAIMS, AND
PURCHASER HEREBY WAIVES, ALL WARRANTIES AND REPRESENTATIONS THAT THERE ARE ANY
EASEMENTS, RIGHTS-OF-WAY, OR PERMITS IN FORCE AND EFFECT WITH RESPECT TO THE
PIPELINES AND WATER MANAGEMENT FACILITIES. If necessary, PURCHASER shall secure
its own rights to operate and maintain the pipelines and Water Management
Facilities on the lands of others at its own expense.
4.2. CONDITION AND FITNESS OF THE PROPERTY. Except as expressly set forth in
this Agreement, SELLER CONVEYS THE PROPERTY TO PURCHASER WITHOUT ANY EXPRESS,
STATUTORY OR IMPLIED WARRANTY OR REPRESENTATION OF ANY KIND, INCLUDING
WARRANTIES RELATING TO (i) THE CONDITION OR MERCHANTABILITY OF THE PROPERTY, OR
(ii) THE FITNESS OF THE PROPERTY FOR A PARTICULAR PURPOSE. PURCHASER HAS
INSPECTED, OR BEFORE CLOSING WILL INSPECT OR WILL HAVE BEEN GIVEN THE
OPPORTUNITY TO INSPECT, THE PROPERTY AND IS SATISFIED AS TO THE PHYSICAL,
OPERATING, REGULATORY COMPLIANCE, SAFETY
AND ENVIRONMENTAL CONDITION (BOTH SURFACE AND SUBSURFACE) OF THE PROPERTY AND
ACCEPTS THE PROPERTY "AS IS," "WHERE IS," AND "WITH ALL FAULTS" AND IN ITS
PRESENT CONDITION AND STATE OF REPAIR. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, SELLER MAKES NO REPRESENTATION OR WARRANTY AS TO (I) THE VALUE,
QUALITY, QUANTITY, VOLUME OR DELIVERABILITY OF ANY OIL, GAS OR OTHER MINERALS OR
RESERVES (IF ANY) IN, UNDER OR ATTRIBUTABLE TO THE PROPERTY (INCLUDING WITHOUT
LIMITATION PRODUCTION RATES, DECLINE RATES AND RECOMPLETION OR DRILLING
OPPORTUNITIES), (ii) GAS BALANCING OR PAYOUT ACCOUNT INFORMATION, ALLOWABLES, OR
OTHER REGULATORY MATTERS, (iii) THE PHYSICAL, OPERATING, REGULATORY COMPLIANCE,
SAFETY OR ENVIRONMENTAL CONDITION OF THE PROPERTY, (iv) PROJECTIONS AS TO EVENTS
THAT COULD OR COULD NOT OCCUR, or (v) THE GEOLOGICAL OR ENGINEERING CONDITION OF
THE PROPERTY OR ANY VALUE THEREOF.
4.3. INFORMATION ABOUT THE PROPERTY. EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT, THE PARTIES EACH DISCLAIM ALL LIABILITY AND RESPONSIBILITY FOR ANY
REPRESENTATION, WARRANTY, STATEMENTS OR COMMUNICATIONS (ORALLY OR IN WRITING) TO
THE OTHER PARTY (INCLUDING, BUT NOT LIMITED TO, ANY INFORMATION CONTAINED IN ANY
OPINION, INFORMATION, OR ADVICE THAT MAY HAVE BEEN PROVIDED TO ANY SUCH PARTY BY
ANY EMPLOYEE, OFFICER, DIRECTOR, AGENT, CONSULTANT, ENGINEER OR ENGINEERING
FIRM, TRUSTEE, REPRESENTATIVE, PARTNER, MEMBER, BENEFICIARY, STOCKHOLDER OR
CONTRACTOR OF SUCH DISCLAIMING PARTY OR ITS AFFILIATES) WHEREVER AND HOWEVER
MADE, INCLUDING THOSE MADE IN ANY DATA ROOM AND ANY SUPPLEMENTS OR AMENDMENTS
THERETO OR DURING ANY NEGOTIATIONS WITH RESPECT TO THIS AGREEMENT OR ANY
CONFIDENTIALITY AGREEMENT PREVIOUSLY EXECUTED BY THE PARTIES WITH RESPECT TO THE
PROPERTY. SELLER MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, AS TO
THE ACCURACY, COMPLETENESS, OR MATERIALITY OF ANY DATA, INFORMATION OR RECORDS
FURNISHED TO PURCHASER IN CONNECTION WITH THE PROPERTY. ANY DATA, INFORMATION OR
OTHER RECORDS FURNISHED BY SELLER ARE PROVIDED TO PURCHASER AS A CONVENIENCE AND
PURCHASER'S RELIANCE ON OR USE OF THE SAME IS AT PURCHASER'S SOLE RISK.
4.4. INFORMATION IN EXHIBITS. SELLER MAKES NO REPRESENTATION OR WARRANTY AS
TO THE COMPLETENESS OR ACCURACY OF THE INFORMATION CONTAINED IN THE EXHIBITS.
4.5. APPOINTMENT AS OPERATOR. SELLER MAKES NO REPRESENTATION OR WARRANTY
THAT PURCHASER WILL BECOME OPERATOR OF ANY PART OF THE PROPERTY FOLLOWING
CLOSING, AS SUCH MATTERS WILL BE CONTROLLED BY THE APPLICABLE OPERATING
AGREEMENTS AND APPLICABLE FEDERAL OR STATE REGULATORY REQUIREMENTS AND APPROVAL.
4.6. SUBROGATION OF WARRANTIES To the extent transferable, SELLER will give
and grant to PURCHASER, its successors and assigns full power and right of
substitution and subrogation in and to all covenants and warranties (including
warranties of title) by preceding owners, vendors, or others, given or made with
respect to the Property or any part thereof prior to the Effective Date of this
Agreement.
4.7 DISCLAIMERS DEEMED CONSPICUOUS To the extent required to be operative,
PURCHASER hereby agrees that the disclaimers of warranties contained in this
Agreement are conspicuous disclaimers for the purpose of any applicable law,
rule or order.
ARTICLE 5
DUE DILIGENCE REVIEW AND OTHER PRE-CLOSING ACTIVITIES
-----------------------------------------------------
5.1. RECORDS REVIEW To allow PURCHASER to confirm SELLER'S title and conduct
other due diligence with respect to the Property, SELLER shall give PURCHASER,
and PURCHASER'S authorized representatives, at mutually agreeable times before
Closing, access during normal business hours to SELLER'S contract, land, lease
and operational records, to the extent such records are in SELLER'S possession
and relate to the Property. With SELLER'S permission, PURCHASER may photocopy
such records at its sole expense. PURCHASER shall keep confidential all
information made available to PURCHASER until the later of the Closing Date or
the Effective Date. Any confidentiality agreement previously executed by SELLER
and PURCHASER with respect to the Property will continue in force until the
later of the Closing Date or the Effective Date. PURCHASER shall take all
reasonable steps necessary to ensure that PURCHASER'S authorized representatives
comply with the provisions of this Section 5.1 and any confidentiality agreement
in effect.
5.2. PHYSICAL INSPECTION Before Closing, (a) with respect to that portion of
the Property operated by SELLER, SELLER will permit PURCHASER and its
representatives, at their sole risk and expense, to conduct reasonable
inspections of the Property at times approved by SELLER, and (b) with respect to
that portion of the Property not operated by SELLER, SELLER will attempt to
obtain access to the Property, in accordance with the applicable operating
agreements, for PURCHASER and its representatives, at their sole risk and
expense, to conduct reasonable inspections of the Property at times approved by
the operator of the Property. PURCHASER shall repair any damage to the Property
resulting from its inspection and shall indemnify, defend and hold SELLER
harmless from and against any and all Claims arising from PURCHASER inspecting
and observing the Property, including, without limitation, (a) Claims for
personal injuries to or death of employees of the PURCHASER, its contractors,
agents, consultants and representatives, and damage to the property of PURCHASER
or others acting on behalf of PURCHASER, REGARDLESS OF WHETHER SUCH CLAIMS ARISE
OUT OF OR RESULT IN WHOLE OR IN PART, FROM THE CONDITION OF THE PROPERTY OR
SELLER'S (OR ITS EMPLOYEES', AGENTS', CONTRACTORS', SUCCESSORS' OR ASSIGNS')
SOLE OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR FAULT, and (b) Claims for
persona! injuries to or death of employees of SELLER or third parties, and
damage to the property of SELLER or third parties, to the extent caused by the
negligence, gross negligence or willful misconduct of PURCHASER.
5.3 ENVIRONMENTAL ASSESSMENT. Prior to execution of this Agreement, PURCHASER
has received and reviewed the Due Diligence Investigation for the North and
South Fairway CBM Development prepared by ARCADIS U.S., Inc. and dated May 2010
(the "ARCADIS REPORT." Subject to the other terms of this Agreement, PURCHASER
understands that it will be accepting transfer of the Property "AS IS, WHERE IS"
with regard to environmental condition and without any Purchase Price adjustment
due to alleged or actual environmental condition.
5.4. BONDING
5.4.1. STATE BONDING REQUIREMENTS. PURCHASER agrees to promptly purchase and
post any and all bonds, supplemental bonds or other securities which may be
required of it pursuant to the laws, rules and regulations of the state In which
the Property is located.
5.5 PREFERENTIAL RIGHTS AND CONSENTS TO ASSIGN
5.5.1. NOTICES TO HOLDERS.
(a) If any of the Property is subject to third party preferential purchase
rights, rights of first refusal, or similar rights (collectively, "PREFERENTIAL
RIGHTS"), or third party consents to assign or similar rights (collectively,
"CONSENTS"), SELLER shall use reasonable efforts to (i) notify the holders of
the Preferential Rights and Consents that it intends to transfer the Property to
PURCHASER, (ii) provide them with any information about the transfer of the
Property to which they are entitled, and (iii) in the case of Consents, ask the
holders of the Consents to consent to the assignment of the affected Property to
PURCHASER. For purposes of this Section 5.5, the term "third party" excludes
Seller's parent, Marathon Oil Company, and its affiliates.
(b) SELLER shall promptly notify PURCHASER whether (i) any Preferential
Rights are exercised, waived or deemed waived, (ii) any Consents are denied, or
(iii) the requisite time periods have elapsed without any Preferential Rights
being exercised or Consents being received. SELLER will not be liable to
PURCHASER if any Preferential Rights are exercised, or any Consents are denied,
except as expressly provided in this Section 5.5.
5.5.2. REMEDIES BEFORE CLOSING. If SELLER is unable before Closing to obtain
the required Consents (other than Consents ordinarily obtained after closing and
Consents on surface use, hydrocarbon sales, purchase, gathering, transportation,
treating, marketing, exchange, processing and fractionating agreements) and
waivers of all Preferential Rights, then as the sole pre-Closing remedy for
same:
(a) SELLER and PURCHASER by agreement may proceed with Closing as to the
Property affected by the unwaived Preferential Rights or unobtained Consents,
subject to the further obligations of SELLER and PURCHASER set forth in Section
5.5.3 in the event that such Preferential Rights are validly exercised or such
Consents are ultimately denied after Closing; or
(b) Either SELLER or PURCHASER will exclude the affected portion of the
Property from the transaction under this Agreement, adjust the Purchase Price by
the Allocated Value of the excluded Property, and proceed with Closing as to the
rest of the Property.
If the unwaived Preferential Rights or unobtained Consents affect all or a
portion of a unitized, communitized or pooled Property, for purposes of this
clause, the affected portion of the Property shall be deemed to be the entire
unitized, communitized or pooled Property.
5.5.3. REMEDIES AFTER CLOSING.
(a) PREFERENTIAL RIGHTS. After Closing, if (i) any holder of Preferential
Rights alleges improper notice of sale, or (ii) SELLER or PURCHASER discover, or
any third party alleges, the existence of additional Preferential Rights, SELLER
and PURCHASER will attempt to obtain waivers of those Preferential Rights. If
SELLER and PURCHASER are unable to obtain waivers of such Preferential Rights,
and such Preferential Rights are not deemed waived, or the third party
ultimately establishes and exercises its rights, and such exercise denies the
Property to PURCHASER, then the Parties shall address unwaived Preferential
Rights as follows:
(i) To the extent that the Preferential Rights are rights of first refusal on
the same terms and conditions as required by this Agreement, PURCHASER shall
satisfy the Preferential Rights obligations and shall indemnify, defend and hold
SELLER harmless from and against any and all Claims arising from or related to
PURCHASER'S satisfaction of any such Preferential Rights obligations. PURCHASER
shall be entitled to receive (and SELLER hereby assigns to PURCHASER all of
SELLER'S rights to) all proceeds received by SELLER, in connection with the
sale, due to an exercise of Preferential Rights, of any portion of the Property
PURCHASER was to receive under this Agreement. PURCHASER'S receipt of proceeds
from the sale of the affected Property shall be PURCHASER'S sole remedy with
respect to if undiscovered or alleged rights of first refusal are established
and exercised after Closing.
(ii) To the extent the unwaived Preferential Right are not addressed in Section
5.5.3(a)(i) above, then SELLER and PURCHASER will rescind the assignment of the
affected Property under this Agreement, after which SELLER shall pay PURCHASER
the Allocated Value of the affected Property, and PURCHASER shall immediately
reassign the affected Property to the SELLER free of all liens, burdens, and
encumbrances arising by, through or under PURCHASER. Rescission of the
assignment of the affected Property and receipt of the Allocated Value of the
affected Property shall be PURCHASER'S sole remedy if undiscovered or alleged
Preferential Rights (not covered in Section 5.5.3(a)(i))are established and
exercised after Closing.
(b) CONSENTS. After Closing, if SELLER or PURCHASER discover, or any third party
alleges, the existence of additional Consents, SELLER and PURCHASER will attempt
to obtain waivers of those Consents. If SELLER and PURCHASER are unable to
obtain waivers of such Consents (other than Consents on surface use, hydrocarbon
sales, purchase, gathering, transportation, treating, marketing, exchange,
processing and fractionating agreements), and such unwaived Consents deny the
affected Property to PURCHASER, then SELLER and PURCHASER will rescind the
assignment of the affected Property under this Agreement, after which SELLER
shall pay PURCHASER the Allocated Value of the affected Property, and PURCHASER
shall immediately reassign the affected Property to the SELLER free of all
liens, burdens, and encumbrances arising by, through or under PURCHASER.
Rescission of the assignment of the affected Property and receipt of the
Allocated Value of the affected Property shall be PURCHASER'S sole remedy if
undiscovered or alleged Consents are established and denied after Closing.
5.6. TITLE DEFECTS
5.6.1. CERTAIN DEFINITIONS.
(a) TITLE DEFECTS. For the purposes of this Agreement, a "Title Defect"
means any impairment, encumbrance, encroachment, irregularity, defect in, or
dispute concerning SELLER'S title to the Property, and that in the reasonable
opinion of PURCHASER would materially:
(i) Reduce, impair or prevent PURCHASER from receiving payment from the
purchasers of production from the Property;
(ii) Reduce PURCHASER'S net revenue interest in all or a portion of the
Property below that attributable thereto and set forth in Exhibit A;
(iii) increase PURCHASER'S working interest in all or a portion of the
Property above that attributable thereto and set forth in Exhibit A without a
corresponding and proportionate increase in net revenue interest; or
(iv) Restrict or extinguish PURCHASER'S right to use the Property as owner,
lessee, licensee or permittee, as applicable.
Notwithstanding the foregoing, no Imbalances, or Permitted Encumbrance, nor any
Consents or Preferential Rights will be considered a Title Defect under this
Section 5.6.
(b) PERMITTED ENCUMBRANCES. The term "PERMITTED ENCUMBRANCE" means:
(i) All Related Contracts, agreements, instruments, documents, liens,
encumbrances, and other matters, and the terms and provisions thereof, described
or referred to in any Exhibit or schedule attached hereto;
(ii) Any materialman's, mechanics', repairman's, employees', contractors',
operators', or other similar liens, security interests or charges for liquidated
amounts arising in the ordinary course of business incidental to construction,
maintenance, development, production or operation of the Property, or the
production or processing of Hydrocarbons therefrom, that are not delinquent or,
if delinquent, are being contested in good faith by appropriate proceedings;
(iii) Production sales contracts; division orders; contracts for sale,
purchase, exchange, refining, processing or fractionating of hydrocarbons;
compression agreements; equipment leases; surface leases; unitization and
pooling designations, declarations, orders and agreements; processing
agreements; plant agreements; pipeline, gathering, and transportation
agreements; injection, repressuring, and recycling agreements; produced water
storage, transportation or disposal agreements; other disposal agreements;
seismic or geophysical permits or agreements; and any and all other agreements
which are ordinary and customary in the oil and gas (including coalbed methane)
exploration, development, or extraction business;
(iv) Any liens for taxes not yet delinquent or, if delinquent, that are
being contested in good faith by appropriate proceedings;
(v) Any liens or security interests created by law or reserved in oil, gas
and/or mineral leases for royalty, bonus or rental or for compliance with the
terms of
(i)
any Property;
(vi) Any easements, rights-of-way, servitudes, permits, licenses, surface
leases and other rights with respect to surface operations, to the extent such
matters do not interfere in any material respect with SELLER'S operation of the
portion of the Property burdened thereby;
(vii) All royalties, overriding royalties, net profits interests, carried
interests, reversionary interests and other burdens, to the extent that the net
cumulative effect of such burdens, as to a particular Property, does not operate
to reduce the Net Revenue Interest of SELLER in such Property below that
specified in the applicable Schedule to Exhibit A;
(viii) Conventional rights of reassignment arising upon surrender or
abandonment of any Property;
(ix) Rights reserved to or vested in any governmental authority to control
or regulate any of the Wells, Units, or Water Management Facilities included in
the Property and all applicable laws, rules, regulations and orders of such
authorities so long as the same have not been applied to decrease SELLER'S Net
Revenue Interest below the Net Revenue interest specified in Exhibit B;
(x) Any other defects and irregularities affecting the Property which
individually or in the aggregate are not such as to interfere materially with
the operation, value or use of the Property, taken as a whole; and
(xi) All matters visible and apparent on the ground or that would be
revealed by a true and correct survey;
(xii) Lack of title to any individual horizons or intervals underlying any
Lease, which were not producing hydrocarbons from that Lease on the Effective
Date, unless otherwise provided herein; and
(xiii) All matters listed on Schedule 5.6.1.
5.6.2. NOTICE OF TITLE DEFECTS. PURCHASER will review title to the Property
prior to Closing and notify SELLER in writing of any Title Defect it discovers
as soon as reasonably practicable after its discovery, but in no event less than
ten (10) business days before the Closing Date. Such notice shall describe in
reasonable detail the Title Defect, include PURCHASER'S reasonable estimate of
the Title Defect Value, and include all data and information in PURCHASER'S
possession or control bearing thereon. PURCHASER will be deemed to have
conclusively waived any Title Defect about which it fails to notify SELLER in
writing at least ten (10) business days before the Closing Date.
5.6.3. REQUEST TO CURE TITLE DEFECTS. If PURCHASER notifies SELLER of a
Title Defect as provided in Section 5.6.2, PURCHASER may request SELLER to cure
the Title Defect, but SELLER will have no obligation to cure any Title Defect.
If SELLER agrees to attempt to cure a Title Defect, SELLER must cure the Title
Defect before Closing, unless the parties otherwise agree in writing.
5.6.4. REMEDIES FOR UNCURED TITLE DEFECTS. If PURCHASER notifies SELLER of
any Title Defect as provided in Section 5.6.2, and SELLER refuses or is unable
to cure the Title Defect before Closing, then PURCHASER and SELLER will have the
following rights and remedies with respect to the uncured Title Defect(s) in the
Property, unless the parties otherwise agree in writing.
(a) PURCHASER may waive the uncured Title Defect and proceed
with Closing.
(b) If the aggregate value of all uncured, unwaived Title Defects reduces
the value of the Property by an amount less than five percent (5%) of the
Purchase Price, SELLER and PURCHASER will be obligated to proceed with Closing
without adjustment to the Purchase Price.
(c) If the aggregate value of all uncured, unwaived Title Defects reduces
the value of the Property by an amount equal to or more than five percent (5%)
of the Purchase Price, either SELLER or PURCHASER may exclude the portion of the
Property affected by the Title Defect from the transaction under this Agreement,
in which case SELLER and PURCHASER will adjust the Purchase Price by the
Allocated Value of the excluded portion of the Property, and proceed with
Closing as to the rest of the Property.
(d) In addition to the rights and remedies set forth in subparts (a) through
(c) of this Section 5.6.4, SELLER and PURCHASER will have the termination rights
set forth in Section 5.8.
5.6.5. EXCLUSIVE REMEDY. The remedies set forth in this Section 5.6 are the
exclusive remedies under this Agreement for all Title Defect matters, and SELLER
shall have no other liability to PURCHASER with respect to Title Defects.
5.6.6. INTEREST ADDITIONS. If it is determined prior to Closing that SELLER
owns a net revenue interest in any portion of the Property that is greater than
the net revenue interest set forth in Exhibit A, the parties shall use their
best efforts to reach mutual agreement regarding an upward adjustment to the
Purchase Price on account of the greater interest. If the parties are unable to
agree on the amount of the upward adjustment, Closing shall nevertheless occur
and the dispute shall be resolved under the dispute resolution provisions of
Section 10.2.
5.7 CASUALTY LOSSES AND GOVERNMENT TAKINGS
5.7.1. DEFINITION OF CASUALTY LOSS. The term "Casualty Loss" shall mean ail
or any part of the Property is damaged or destroyed by fire, blowout, flood,
storm, tornado or other windstorm event, other casualty, other event beyond the
reasonable control of SELLER, or is taken in condemnation or under the right of
eminent domain, or if proceedings for such purposes shall be pending or
threatened.
5.7.2. NOTICE OF CASUALTY LOSSES. If, prior to the Closing Date, a Casualty
Loss occurs, SELLER shall promptly notify PURCHASER in writing of the nature and
extent of the Casualty Loss.
5.7.3. ASSUMPTION OF RISK AND LOSS. PURCHASER will assume all risk and loss
between the Effective Date and the Closing Date due to Casualty Loss and with
respect to any change in the condition of the Property resulting from production
of Hydrocarbons through normal depletion (including without limitation, the
watering-out, casing collapse or sand infiltration of any well) and the
depreciation of personal property through ordinary wear and tear. Neither
Casualty Loss nor any of the other events or conditions described in this
Section 5.7.3 will be cause for any reduction in the Purchase Price, or give
rise to any right to terminate this Agreement, except as otherwise provided
herein.
5.8. TERMINATION DUE TO IMPAIRMENTS TO THE PROPERTY
5.8.1. RIGHT TO TERMINATE.
(a) If, on the Closing Date, the Allocated Value of all Property to be
excluded from the transaction contemplated by this Agreement due to unwaived,
uncured Title Defects exceeds ten percent (10%) of the total Allocated Value of
all of the Property, either SELLER or PURCHASER may terminate this Agreement,
and neither party will have any further obligation to conclude the transfer of
the Property under this Agreement.
(b) If, on or before the Closing Date, a Casualty Loss has occurred with
respect to the Property, and the agreed cost to repair or replace the portion of
the Property affected by the Casualty Loss equals or exceeds twenty-five percent
(25%) of the Purchase Price, then SELLER may terminate this Agreement, and
neither party will have any further obligation to conclude the transfer of the
Property under this Agreement. PURCHASER shall have the same right to terminate
this Agreement in the event of such Casualty Loss, with neither party having any
further obligation to conclude the transfer of the Property under this
Agreement, unless SELLER agrees within ten (10) business days of the Casualty
Loss that, following Closing, SELLER will restore the Property to its condition
prior to the Casualty Loss, at SELLER'S sole expense. If SELLER does so agree,
SELLER shall transfer to PURCHASER the Property notwithstanding such Casualty
Loss, without adjustment to the Purchase Price, and SELLER shall retain all sums
paid to SELLER as insurance proceeds, awards or other payments arising out of
such Casualty Loss.
5.8.2. NOTICE OF TERMINATION. Any party exercising a right of termination
under this Section 5.8 must notify the other party in writing no later than five
(5) business days before the Closing Date of its election to terminate this
Agreement.
5.9. HART-SCOTT-RODINO. This Agreement is subject in all respects to
and
conditioned upon compliance by the parties with Title II of the
Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "Hart-Scott-Rodino Act"), and rules and
regulations
promulgated pursuant thereto, to the extent that said act, rules and regulations
are applicable
to the transaction contemplated by this Agreement. PURCHASER and SELLER agree to
make
such filings with and provide such information to the Federal Trade Commission
and the
Department of Justice with respect to the transaction contemplated by this
Agreement as are
required in connection with the Hart-Scott-Rodino Act sufficiently in advance of
the Closing
Date to permit the lapse of the initial waiting periods prescribed in connection
with the Hart-
Scott-Rodino Act before the Closing Date.
5.10 TRAILBLAZER CAPACITY. Trailblazer Pipeline Company, LLC ("TRAILBLAZER")
may
be required to obtain FERC approval in order to release the capacity associated
with the Property to Purchaser. Seller and Purchaser agree to support
Trailblazer's application to obtain FERC approval of an appropriate capacity
release on the Trailblazer pipeline, and Purchaser further agrees to be a
replacement shipper for Trailblazer in support of its application. In the event
Trailblazer is unable to secure an appropriate release of SELLER'S capacity on
the Trailblazer pipeline on or before the Closing Date, Seller will not be
obligated to close.
5.11 WIC CAPACITY. PURCHASER agrees to be the prearrange shipper for a permanent
capacity release for SELLER'S capacity on Wyoming Interstate Company ("WIC"). In
the event PURCHASER is unable to secure an appropriate capacity release of
SELLER'S capacity on WIC on or before the Closing Date, Seller will not be
obligated to close.
ARTICLE 6
CLOSING AND POST- CLOSING OBLIGATIONS
-------------------------------------
6.1 CLOSING DATE The actions and events described in Section 6.3 are the
"Closing" of this transaction, which shall be held beginning at 9:00 a.m. local
time at SELLER'S offices located at 5555 San Felipe Road, Houston, Texas 77056
on September 15, 2010, or on such earlier or later date or at such other place
as the parties agree in writing ("Closing Date"). Time is of the essence in the
performance of this Agreement. All events of Closing shall each be deemed to
have occurred simultaneously with the other, regardless of when actually
occurring, and each shall be a condition precedent to the other. If the Closing
occurs, all conditions of Closing shall be deemed to nave been satisfied or
waived (but SELLER'S and PURCHASER'S warranties and representations shall not be
waived and shall survive the Closing, to the extent provided in Section 10.4).
6.2. CONDITIONS TO CLOSING Neither SELLER nor PURCHASER will be obligated to
close the transaction described in this Agreement, and will have the right to
terminate this Agreement, unless each of the conditions to its performance set
forth in this Section 6.2 is satisfied as of the Closing Date, or it waives in
whole or part any such condition to its performance that is unsatisfied as of
the Closing Date. If a party elects to terminate this Agreement because a
condition to its performance is not satisfied, the terminating party must give
the other party written notice of termination on or before the Closing Date,
after which neither party will have any further obligation to conclude the
transfer of the Property under this Agreement. The inclusion in this Agreement
of conditions to SELLER'S and PURCHASER'S obligations at Closing shall not, in
and of itself, constitute a covenant of either SELLER or PURCHASER to satisfy
the conditions to the other party's obligations at Closing.
6.2.1. REPRESENTATIONS AND WARRANTIES.
(a) SELLER will not be obligated to close if, as of the Closing Date, any matter
represented or warranted in this Agreement by the PURCHASER is untrue,
inaccurate or is misleading in any material respect.
(b) PURCHASER will not be obligated to close if, as of the Closing Date,
any matter represented or warranted in this Agreement by the SELLER is untrue,
inaccurate or is misleading in any material respect.
6.2.2 PERFORMANCE OF OBLIGATIONS.
(a) SELLER will not be obligated to close if, as of the Closing Date,
PURCHASER has not performed all obligations under this Agreement that PURCHASER
is required to perform on or before Closing.
(b) PURCHASER will not be obligated to close if, as of the Closing Date,
SELLER has not performed all obligations under this Agreement that SELLER is
required to perform on or before Closing.
6.2.3. LEGAL PROCEEDINGS. Neither party will be obligated to close if, as of the
Closing Date, any suit or other proceeding is pending or threatened before any
court or governmental agency seeking to restrain, prohibit, or declare illegal,
or seeking substantial damages in connection with, the transaction that is the
subject of this Agreement, or there is reasonable basis for any such suit or
other proceeding,
6.2.4 FTC CONSENT. Neither party will be obligated to close if, as of the
Closing Date, any necessary consent of the Federal Trade Commission or any other
state or federal governmental authority relating to the consummation of the
transaction contemplated by this Agreement has not been obtained or waived
(except for approvals covered by Section 6.4.3), or applicable waiting periods
prescribed by the Hart-Scott-Rodino Act have not elapsed or terminated.
6.2.5 ONE CLOSING. SELLER will not be obligated to close if PURCHASER has
made an election under this Agreement or some other event has occurred that will
prevent SELLER from Closing on, or will cause SELLER to be unable to close and
convey, all of the Property at one Closing and to receive at such Closing the
entire Purchase Price, adjusted as provided in Section 2.2, and to be paid
pursuant to Section 6.3.
6.3. CLOSING. At Closing, the following events shall occur and SELLER and
PURCHASER shall execute, acknowledge (if necessary), and exchange, as
applicable, the following items:
(a) Both parties at Closing shall execute a Preliminary Settlement Statement
evidencing the amounts to be wire transferred into the accounts of each
receiving party at Closing;
(b) PURCHASER shall deliver to SELLER the Purchase Price, as adjusted by the
amount shown on the Preliminary Settlement Statement, by wire transfer in
immediately available funds to the account of SELLER designated in writing by
SELLER prior to Closing;
(c) If SELLER elects to return the Performance Deposit, SELLER shall deliver
to PURCHASER the Performance Deposit without interest, by wire transfer in
immediately available funds to the account of PURCHASER designated in writing by
PURCHASER prior to Closing;
(d) The parties shall execute, SELLER shall deliver and PURCHASER shall
accept the assignment documents (in sufficient counterparts for recording) for
the assignment and conveyance of the Property to be transferred under this
Agreement substantially in the form set forth in Exhibit D (the "ASSIGNMENT
DOCUMENTS");
(e) SELLER shall execute and deliver a Non-Foreign Affidavit in the
Form of Exhibit E;
(f) SELLER shall deliver to PURCHASER a photocopy of the letters from SELLER
to its co-owners in the portions of the Property it operates, resigning as
operator for those portions of the Property;
(g) if PURCHASER is attempting to succeed SELLER as operator of any of the
Property, PURCHASER shall prepare and the parties shall execute (i) appropriate
change of operator notices and any third party ballots required under applicable
operating agreements, and (ii) all applicable forms and declarations required by
federal and state agencies (including, without limitation, U.S. Bureau of Land
Management, Wyoming Oil and Gas Commission, Wyoming Office of State Lands,
Wyoming State Engineers Office, and Wyoming Department of Environmental Quality)
relative to PURCHASER'S assumption of operations;
(h) PURCHASER shall deliver to SELLER any ratification and joinder
instruments required to transfer the rights, obligations and interests in
applicable Related Contracts;
(i) SELLER and PURCHASER shall execute, acknowledge (if
necessary) and exchange, as applicable, any applications necessary to transfer
to
PURCHASER all transferable regulatory or governmental permits to which the
Property is
subject, and which SELLER has agreed to transfer under this Agreement;
(j) PURCHASER shall furnish SELLER with evidence acceptable to SELLER that
PURCHASER is qualified to hold title to the Leases and other Property with any
federal or state agencies, as applicable, and to operate (should PURCHASER
become the operator of the Property or a portion thereof) the Wells, pipelines
and facilities associated therewith (including, without limitation, pipelines
and Water Management Facilities), including copies of all PURCHASER'S ownership,
operational, and plugging bonds for the Property, as provided in Section 5.4;
(k) PURCHASER shall furnish SELLER with a certified resolution or secretary's
certificate of PURCHASER evidencing the authority of PURCHASER to enter into
this Agreement and close the transaction contemplated hereby in a form and
having content satisfactory to SELLER;
(l) SELLER shall furnish PURCHASER with letters in lieu of transfer orders
directing all purchasers of production from the Property to pay PURCHASER the
proceeds of Hydrocarbons produced from the Property from and after the Effective
Date;
(m) The parties shall execute and deliver any other appropriate
assignments, bills of sale, deeds or instruments necessary to transfer the
Property to PURCHASER or to effect and support the transaction contemplated in
this Agreement, including, without limitation, any conveyances on official forms
and related documentation necessary to transfer the Property to PURCHASER in
accordance with requirements of governmental regulations; and
(n) Current Energy Partners Corporation shall provide a parent guaranty with
respect to the obligations of PURCHASER assumed under this Agreement
substantially in the form set forth in Exhibit J; and
(o) PURCHASER shall furnish SELLER with a written opinion from outside counsel
to PURCHASER as required by Section 3.3.3.
6.4. POST-CLOSING OBLIGATIONS. SELLER and PURCHASER have the following
post-Closing obligations:
6.4.1. RECORDS. Within ninety (90) days after Closing, SELLER shall deliver
to PURCHASER copies of the Records, at a location designated by PURCHASER.
Copies shall be in paper or electronic form. Any third-party copying costs
incurred by SELLER, and any transportation, postage or delivery costs from
SELLER'S offices shall be at PURCHASER'S sole cost, risk and expense. PURCHASER
shall have the right to access and review the original Records during normal
business hours. SELLER agrees to maintain the original Records for seven (7)
years after Closing. SELLER shall provide PURCHASER and its representatives
reasonable access to and the right to copy such Records for the purposes of (a)
preparing and delivering any accounting provided under this Agreement and
adjusting, prorating and settling the charges and credits provided in this
Agreement; (b) complying with any law, rule or regulation affecting PURCHASER'S
interest in the Property after the Closing Date; (c) preparing any audit of the
books and records of any third party relating to PURCHASER'S interest in the
Property after the Closing Date, or responding to any audit prepared by such
third parties; (d) preparing tax returns; (e) responding to or disputing any tax
audit; or (f) asserting, defending or otherwise dealing with any claim or
dispute under this Agreement. SELLER agrees to use all reasonable efforts, but
without any obligation to incur any cost or expense in connection therewith, to
cooperate with PURCHASER'S efforts to obtain access to files, records and data
relating to the Property not provided by SELLER which are in the possession of
any third party operator of any of the Property.
6.4.2. RECORDING. PURCHASER, within thirty (30) days after Closing, shall
record all Assignment Documents and all other instruments that must be recorded
to effectuate the transfer of the Property and shall provide SELLER a recorded
copy of each Assignment Document and other recorded instruments, as soon as they
are available.
6.4.3. GOVERNMENTAL APPROVALS.
(a) FEDERAL AND STATE APPROVALS. PURCHASER, within thirty (30) days after
Closing, shall file for approval with the applicable government agencies all
Assignment Documents and other state and federal transfer documents required to
effectuate the transfer of the Property. PURCHASER further agrees promptly after
Closing to take all other actions required of it by federal or state agencies
having jurisdiction to obtain all requisite regulatory approvals with respect to
this transaction, and to use its best efforts to obtain the unconditional
approval by such federal or state agencies, as applicable, of (i) the Assignment
Documents requiring federal or state approval in order for PURCHASER to be
recognized by the federal or state agencies as the owner of the Property, and
(ii) in the event PURCHASER is elected successor operator under the operating
agreements applicable to any of the Property, its qualification as the operator
of record with respect to that portion of the Property for which it is seeking
operatorship, together with any necessary rights of use and easements as to the
pipeline(s) and Water Management Facilities included in the Property. PURCHASER
shall provide SELLER approved copies of the Assignment Documents and other state
and federal transfer documents as soon as they are available.
(b) TITLE PENDING GOVERNMENTAL APPROVALS. Until all of the governmental
approvals provided for in this Section 6.4.3 have been obtained by PURCHASER,
the following shall occur with respect to the affected Property:
(i) SELLER shall continue to hold record title to the affected Leases and
other affected Property as nominee for PURCHASER;
(ii) PURCHASER shall assume responsibility for all of PURCHASER'S Assumed
Obligations with respect to the affected Leases and other affected Property as
if PURCHASER were the record owner of such Leases and other Property as of the
Effective Date, and shall indemnify SELLER with respect to all Claims arising in
connection with the ownership or operation of such Leases and other Property, as
provided in Section 8.3;
(iii) SELLER shall act as PURCHASER'S nominee but shall be authorized to act
only upon and in accordance with PURCHASER'S specific written instructions, and
SELLER shall have no authority, responsibility or discretion to perform any
tasks or functions with respect to the affected Leases and other affected
Property other than those which are purely administrative or ministerial in
nature, unless otherwise specifically requested and authorized by PURCHASER in
writing; and
(iv) If SELLER continues to operate the affected Leases and other affected
Property pending such approval, SELLER and PURCHASER will have the rights and
obligations with respect to the operation of such Leases and other Property set
forth in Article 10.
(c) DENIAL OF REQUIRED GOVERNMENTAL APPROVALS. If the federal or state
agency refuses to approve the Assignment Documents as contemplated by this
Section 6.4.3, or fails to do so within twenty-four (24) months after the
Closing Date, SELLER may continue to hold record title to the affected Leases
and other affected Property as PURCHASER'S nominee or at SELLER'S option it may
cancel and terminate this Agreement and all its obligations hereunder as to the
affected Leases and other affected Property by giving thirty (30) days written
notice to PURCHASER. Upon such termination: (i) this Agreement shall be null and
void and terminated as to the affected Leases and other affected Property, (ii)
PURCHASER shall immediately reassign and return to SELLER the Assignment
Documents and any and all other documents, materials and data previously
delivered to PURCHASER with respect to the affected Leases and other affected
Property, and (iii) SELLER shall return to PURCHASER the Allocated Value of the
affected Leases and other affected Property previously paid to SELLER at
Closing, without interest, less the proceeds of production net of all expenses,
overhead, royalties, and costs of operations (including plugging, abandonment,
reclamation and remediation expenses, but excluding mortgage interest and any
burdens, liens, or encumbrances created by PURCHASER which must be released
prior to this payment) attributable to the affected Leases or other affected
Property
from the Effective Date forward. In no event, however, shall SELLER ever be
required to reimburse PURCHASER for any expenditures associated with workovers,
recompletions, the drilling, completion or plugging and abandonment of wells
drilled, or the remediation or reclamation of surface, or other work performed
by PURCHASER. SELLER will not be liable to PURCHASER if such federal or state
approvals are not obtained, except as expressly provided in this Section 6.4.3.
6.4.4. CHANGE OF OPERATOR REQUIREMENTS. If PURCHASER is attempting to
succeed SELLER as operator of any portion of the Property, PURCHASER shall
promptly file all appropriate forms, declarations and bonds (or other authorized
forms of security) with all applicable federal and state agencies (including,
without limitation, U.S. Bureau of Land Management, Wyoming Oil and Gas
Commission, Wyoming Office of State Lands, Wyoming State Engineers Office, and
Wyoming Department of Environmental Quality) relative to its assumption of
operations. PURCHASER shall furnish to SELLER copies of all approvals, in the
form granted by such federal and state agencies, relative to PURCHASER'S
assumption of operations, as soon as such approvals become available. Where a
vote is required under a joint operating or other agreement to determine what
party will succeed SELLER as operator of a Property, SELLER shall comply with
all balloting procedures under such operating agreements for the election of the
successor operator to SELLER. SELLER shall recommend to all working interest
owners in the Property involved that PURCHASER be elected operator and SELLER
shall vote for PURCHASER as operator if SELLER retains in interest in the
Property after Closing.
6.4.5. FURTHER ASSURANCES. PURCHASER and SELLER agree to execute and deliver
from time to time such further instruments and do such other acts as may be
reasonably requested and necessary to effectuate the purposes of this Agreement.
ARTICLE 7
ASSUMED AND RETAINED RIGHTS AND OBLIGATIONS
7.1 PURCHASER'S RIGHTS AFTER CLOSING. Upon and after Closing, PURCHASER will
receive and assume all of SELLER'S right, title and interest in the Property,
with effect as of the Effective Date.
7.2 PURCHASER'S OBLIGATIONS AFTER CLOSING.
7.2.1. DESCRIPTION OF OBLIGATIONS. Upon and after Closing, PURCHASER will
assume, pay and perform the Plugging and Abandonment Obligations, the
Environmental Obligations and all the obligations, liabilities and duties with
respect to the ownership and (if applicable) operation of the Property that are
attributable to periods on and after the Effective Date (the "PURCHASER'S
Assumed Obligations"), including, without limitation, the following;
(a) Responsibility for payment of all operating expenses and capital
expenditures related to the Property and attributable to the period on and after
the Effective Date;
(b) Responsibility for performance of all express and implied obligations
and covenants under the terms of the Leases, other instruments in the chain of
title, the Related Contracts, and all other orders and contracts to which the
Property or the operation thereof is subject, to the extent those obligations
and covenants are required to be performed on or after the Effective Date;
(c) Responsibility for payment of all royalties, overriding royalties,
production payments, net profits obligations, rentals, shut-in payments and
other burdens or encumbrances to which the Property is subject that are
attributable to periods on and after the Effective Date;
(d) Responsibility for compliance with the terms of the class action
settlement in Barlow et al v. Pennaco Energy, Inc., et al., Sixth Judicial
District, Civil Action No. 25244, Campbell County Wyoming (the "BARTOW
SETTLEMENT") and any settlement agreements with opt-out claimants, to the extent
such settlements are applicable to the Leases on and after the Effective Date;
(e) Responsibility for proper accounting for and disbursement of production
proceeds from the Property attributable to periods on and after the Effective
Date, including funds in any suspense accounts received from SELLER;
(f) Responsibility for compliance with all applicable laws, ordinances,
rules and regulations pertaining to the Property, and the procurement and
maintenance of all permits required by public authorities in connection with the
Property on and after the Effective Date;
(g) The Plugging and Abandonment Obligations, the Environmental Obligations,
and all other obligations assumed by PURCHASER under this Agreement;
(h) Responsibility for all obligations with respect to gas production or
processing imbalances with third parties attributable to the property for
production from and after the Effective Date;
(i) Liabilities arising out of the matters listed in Exhibit C, Section
I,
where related to production of Hydrocarbons after the Effective Date;
(j) Liability and responsibility for all obligations with respect claims
asserting impairment of water wells on the Property ("WATER WELL CLAIMS"),
including claims raised before the Effective date and listed in Exhibit H; and
---------
(k) Responsibility for payment of all applicable taxes on and after the
Effective Date.
7.2.2. NON-OPERATOR'S OBLIGATIONS. With respect to (a) any part of the
Property for which PURCHASER is not duly elected operator, or (b) any
non-operating
interests in the Property, PURCHASER shall assume full responsibility and
liability for PURCHASER'S Assumed Obligations with respect to the non-operating
interests being conveyed and assigned under this Agreement.
7.2.3 MAINTENANCE OF DEEP RIGHTS. Purchaser agrees to endeavor in good faith to
notify Seller sixty (60) days prior to surrendering, releasing or allowing to
terminate any Lease in which Seller retains Deep Rights. Purchaser further
agrees to make good faith efforts to notify Seller of any Lease release demands
or termination notices that it may receive affecting Seller's retained Deep
Rights, as soon as practical after receipt by Purchaser. Seller understands and
agrees that Purchaser shall not be liable to Seller for any failure of title in
retained Deep Rights due to Purchaser's act or omission under this Section
7.2.3.
7.3 SELLER'S OBLIGATIONS AFTER CLOSING.
7.3.1 DESCRIPTION OF OBLIGATIONS. After Closing, SELLER will retain
responsibility for all liabilities, obligations and duties with respect to the
ownership and (if applicable) operation of the Property that are attributable to
periods before the Effective Date, except as otherwise specifically provided in
this Agreement (the "SELLER'S Retained Obligations"). The SELLER'S Retained
Obligations include without limitation, the following:
(a) Responsibility for the payment of all operating expenses and capital
expenditures related to the Property and attributable to the period prior to the
Effective Date;
(b) Responsibility for performance of all express and implied obligations
and covenants under the terms of the Leases, other instruments in the chain of
title, the Related Contracts, and all other orders and contracts to which the
Property or operation thereof is subject, to the extent those obligations and
covenants are required to be performed before the Effective Date;
(c) Responsibility for payment of all royalties, overriding royalties,
production payments, net profits obligations, rentals, shut-in payments and
other burdens or encumbrances to which the Property is subject that are
attributable to production occurring during periods before the Effective Date;
(d) Responsibility for proper accounting for and disbursement of production
proceeds from or attributable to the Property attributable to periods before the
Effective Date;
(e) Responsibility for compliance with all applicable laws, ordinances,
rules and regulations pertaining to the Property, and the procurement and
maintenance of all permits required by public authorities in connection with the
Property to the extent attributable to the period before the Effective Date;
(f) Responsibility for the exclusions from the Plugging and Abandonment
Obligations described in Section 7.4.2, and the exclusions from the
Environmental Obligations described in Section 7.5.2;
(g) Liabilities arising out of the matters listed in Exhibit
C, Section I,
where related to production of Hydrocarbons before the Effective Date.
7.3.2. NON-OPERATOR'S OBLIGATIONS. With respect to (a) any periods of time
before the Effective Date during which SELLER was not operator of the Property,
or (b) any non-operating interests in the Property, SELLER retains full
responsibility and liability for SELLER'S Retained Obligations with respect to
the non-operating interests being conveyed and assigned under this Agreement.
7.4. PLUGGING AND ABANDONMENT OBLIGATIONS.
7.4.1. PURCHASER'S OBLIGATIONS. Upon and after Closing, PURCHASER assumes
full responsibility and liability for the following plugging and abandonment
obligations related to the Property (the "Plugging and Abandonment
Obligations"), regardless of whether they are attributable to the ownership or
operation of the Property before or after the Effective Date:
(a) The necessary and proper plugging, re-plugging and abandonment of all
wells on the Property, whether plugged and abandoned before or after the
Effective Date;
(b) The necessary and proper removal, abandonment, and disposal of all,
structures, pipelines, facilities, equipment, abandoned property and junk
located on or comprising part of the Property;
(c) The necessary and proper capping and burying of all flow lines
associated with the Wells and located on or comprising part of the Property;
(d) The necessary and proper restoration, reclamation or remediation of the
Property, both surface and subsurface, as may be required by applicable laws,
regulation or contract, including without limitation, the restoration,
reclamation or remediation of any Water Management Facilities;
(e) Any necessary clean-up or disposal of Property contaminated by naturally
occurring radioactive material ("NORM"), as may be required by applicable laws,
regulations or contract;
(f) All obligations arising from contractual requirements and demands made
by courts, authorized regulatory bodies or parties claiming a vested interest in
the Property; and
(g) Obtaining and maintaining all bonds, or supplemental or additional
bonds, that may be required contractually or by governmental authorities.
7.4.2. EXCLUSIONS FROM PURCHASER'S OBLIGATIONS. PURCHASER'S obligations
under this Section 7.4 do not include:
(a) any civil or criminal fines or penalties that may be levied against SELLER
or PURCHASER by any court or regulatory authority for non-compliance with
applicable laws, regulations or orders in connection with the ownership or
operation of the Property before the Effective Date; or
(b) The plugging and abandonment of the Pennaco P&A Wells listed
on Exhibit G.
7.4.3. STANDARD OF OPERATIONS. PURCHASER shall conduct all plugging,
re-plugging, abandonment, removal, disposal and restoration operations in a good
and workmanlike manner and in compliance with all applicable laws and
regulations.
7.4.4. NON-OPERATOR'S OBLIGATIONS. With respect to any non-operating
interests in the Property, PURCHASER shall assume full responsibility and
liability, from and after the Effective Date, for the Plugging and Abandonment
Obligations with respect to the non-operating interests being conveyed and
assigned under this Agreement.
7.4.5. SELLER'S REMEDIES. PURCHASER'S liabilities and obligations under this
Section 7.4 are included in the liabilities and obligations to be secured by the
bonds, supplemental or additional bonds and/or pledge of securities, as may be
established pursuant to Section 5.4. If PURCHASER defaults in the performance of
its obligations pursuant to this Section 7.4, SELLER, at its option, and after
reasonable notice, may complete, or have completed, the plugging, re-plugging,
abandonment, removal, disposal, capping, burying, and restoration operations at
PURCHASER'S expense. Exercise of SELLER'S rights hereunder shall in no way limit
SELLER'S rights to seek recovery for any uncompensated damages resulting from
such default or to exercise any other legal rights and remedies under this
Agreement.
7.5. ENVIRONMENTAL OBLIGATIONS.
7.5.1. PURCHASER'S OBLIGATIONS. Upon and after Closing, PURCHASER assumes full
responsibility and liability for the following occurrences, events, conditions,
and activities on or related to the Property ("ENVIRONMENTAL OBLIGATIONS"),
regardless of whether arising from the ownership or operation of the Property
before or after the Effective Date, and regardless of whether resulting from any
acts or omissions of SELLER or the condition of the Property when acquired:
(a) Environmental pollution or contamination, including pollution or
contamination of the soil, groundwater or air by Hydrocarbons, brine, NORM or
otherwise;
(b) Underground injection activities and waste disposal on the Property;
clean-up responses, and the cost of reclamation, remediation, control,
assessment or compliance with respect to surface and subsurface pollution caused
by spills, outfalls, reservoirs, pits, ponds, lagoons or subsurface storage
tanks;
(c) Failure to comply with applicable land use, surface disturbance,
licensing or notification requirements;
(d) Disposal on the Property of any produced water, hazardous substances,
wastes, materials and products generated by or used in connection with the
ownership or operation of the Property before or after the Effective Date; and
(e) Non-compliance with environmental or land use rules, regulations,
demands or orders of appropriate state or federal regulatory agencies.
7.5.2. EXCLUSIONS FROM PURCHASER'S OBLIGATIONS. PURCHASER'S Environmental
Obligations do not include:
(a) Any civil or criminal fines or penalties that may be levied against
SELLER by any court or regulatory authority for any such violation of any laws,
rules or regulations in connection with the ownership or operation of the
Property before the Effective Date, all of which shall remain the responsibility
of SELLER; and
(b) Disposal offsite from the Property before the Effective Date of any
hazardous substances, wastes, NORM, materials and products generated by or used
in connection with the ownership or operation of the Property before the
Effective Date.
7.5.3. NON-OPERATOR'S OBLIGATIONS. With respect to any non-operating interests
in the Property being transferred to PURCHASER under this Agreement, PURCHASER
agrees to assume full responsibility and liability for the Environmental
Obligations with respect to the non-operating interests being conveyed and
assigned under this Agreement.
ARTICLE 8 INDEMNITIES
8.1. DEFINITION OF CLAIMS. As used in this Agreement, the term "Claims"
means any and all losses, liabilities, damages, punitive damages, obligations,
expenses, fines, penalties, costs, claims, causes of action and judgments for:
(a) breaches of contract; (b) loss or damage to property, injury to or death of
persons (including illness and disease), and other tortious injury; and (c)
violations of applicable laws, rules, regulations, orders or any other legal
right or duty actionable at law or equity. The term "Claims" also includes
reasonable attorneys fees, court costs, and other reasonable costs resulting
from the investigation or defense of any Claim.
8.2. APPLICATION OF INDEMNITIES.
8.2.1. COVERED CLAIMS AND PARTIES. All indemnities set forth in this
Agreement extend to the officers, directors, employees and affiliates of the
party indemnified. The indemnities set forth in this Agreement do not extend to
any part of an indemnified Claim that (a) is the result of the imposition of
punitive damages on the indemnified party arising from the acts or omissions of
the indemnified party, or (b) is the result of the imposition of civil or
criminal fines or penalties by any court or regulatory authority on the
indemnified party due the indemnified party's failure to comply with applicable
laws, regulations or orders.
8.2.2. EXPRESS NEGLIGENCE DISCLOSURE. UNLESS THIS AGREEMENT EXPRESSLY
PROVIDES TO THE CONTRARY, THE INDEMNITY, RELEASE, WAIVER AND ASSUMPTION
PROVISIONS SET FORTH IN THIS AGREEMENT APPLY REGARDLESS OF WHETHER THE
INDEMNIFIED PARTY (OR ITS EMPLOYEES, AGENTS, CONTRACTORS, SUCCESSORS OR ASSIGNS)
CAUSES, IN WHOLE OR PART, AN INDEMNIFIED CLAIM, INCLUDING WITHOUT LIMITATION AN
INDEMNIFIED CLAIM ARISING OUT OF OR RESULTING, IN WHOLE OR IN PART, FROM, OUT OF
OR IN CONNECTION WITH THE CONDITION OF THE PROPERTY OR THE INDEMNIFIED PARTY'S
(OR ITS EMPLOYEES',
AGENTS', REPRESENTATIVES', CONTRACTORS', SUCCESSORS' OR ASSIGNS') SOLE OR
CONCURRENT NEGLIGENCE, STRICT LIABILITY OR FAULT. PURCHASER AND SELLER
ACKNOWLEDGE THAT THIS STATEMENT COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND IS
CONSPICUOUS.
8.2.3. OTHER LIMITATIONS. The indemnities of the indemnifying party in this
Agreement do not cover or include any amounts that the indemnified party may
legally recoup from other third party owners under applicable joint operating
agreements or other agreements, or for which the indemnified party is reimbursed
by any third party. The indemnities in this Agreement do not relieve the parties
to this Agreement from any obligations to third parties. The indemnities of the
parties in this Agreement do not relieve the indemnified party from any
obligations of the indemnified party under the terms of any operating agreement
or other cost-sharing arrangement which is applicable to any Claim. There will
be no upward or downward adjustment in the Purchase Price as a result of any
matter for which PURCHASER or SELLER is indemnified under this Agreement.
8.3. PURCHASER'S INDEMNITY. PURCHASER SHALL INDEMNIFY, DEFEND AND HOLD SELLER
HARMLESS from and against any and all Claims caused by, resulting from or
incidental to:
8.3.1. PURCHASER'S Assumed Obligations, including without limitation, the
Plugging and Abandonment Obligations and the Environmental Obligations;
8.3.2. Any obligations for brokerage or finder's fee or commission incurred
by PURCHASER in connection with its purchase of the Property;
8.3.3. Any violation by PURCHASER of state or federal securities laws, or
PURCHASER'S dealings (including any dealings in breach of PURCHASER'S warranties
and representations in Section 3.3.3) with its partners, investors, financial
institutions, Purchasers and other third parties in connection with the
transaction under this Agreement, or any subsequent sale or other disposition of
the Property (or portion thereof) by PURCHASER, its affiliates or Purchasers;
8.3.4. Any Imbalances associated with the Property that PURCHASER assumes
under Section 10.1;
8.3.5. PURCHASER'S ownership or operation of any portion of the Property
that is reconveyed or reassigned to SELLER pursuant to the terms of this
Agreement; and
8.3.6. PURCHASER'S inspection of the Property pursuant to Sections 5.2 and
5.3
8.4 SELLER'S INDEMNITY. Subject to Section 8.6, SELLER shall INDEMNIFY, DEFEND
AND HOLD PURCHASER HARMLESS from and against any and all Claims caused by,
resulting from or incidental to:
8.4.1. SELLER'S Retained Obligations, including the exclusions from the Plugging
and Abandonment Obligations, and the exclusions from the Environmental
Obligations;
8.4.2. SELLER'S access to the Property after Closing for the purposes
described in this Agreement, except to the extent caused by PURCHASER'S gross
negligence or willful misconduct.
8.5. NOTICES AND DEFENSE OF INDEMNIFIED CLAIMS. Each party shall immediately
notify the other party of any Claim of which it becomes aware and for which it
is entitled to indemnification from the other party under this Agreement. The
indemnifying party shall be obligated to defend at the indemnifying party's sole
expense any litigation or other administrative or adversaria! proceeding against
the indemnified party relating to any Claim for which the indemnifying party has
agreed to indemnify and hold the indemnified party harmless under this
Agreement. However, the indemnified party shall have the right to participate
with the indemnifying party in the defense of any such Claim at its own expense.
8.7. NORM. PURCHASER ACKNOWLEDGES THAT IT HAS BEEN INFORMED THAT OIL AND GAS
PRODUCING FORMATIONS CAN CONTAIN NATURALLY OCCURRING RADIOACTIVE MATERIAL. SCALE
FORMATION OR SLUDGE DEPOSITS CAN CONCENTRATE LOW LEVELS OF NORM ON EQUIPMENT,
MATERIALS AND OTHER PROPERTY. SOME OR ALL OF THE EQUIPMENT, MATERIALS AND OTHER
PROPERTY SUBJECT TO THIS AGREEMENT MAY HAVE LEVELS OF NORM ABOVE BACKGROUND
LEVELS. A HEALTH HAZARD MAY EXIST IN CONNECTION WITH THIS EQUIPMENT, MATERIALS
AND OTHER PROPERTY BY REASON THEREOF. THEREFORE, PURCHASER MAY NEED TO FOLLOW
SAFETY PROCEDURES WHEN HANDLING THIS EQUIPMENT, MATERIALS AND OTHER PROPERTY.
8.8. PENDING LITIGATION AND CLAIMS. Notwithstanding anything in this
Agreement to the contrary, PURCHASER shall INDEMNIFY, DEFEND AND HOLD SELLER
HARMLESS from and against any Claims resulting from the litigation and claims
listed on Exhibit C, to the extent PURCHASER, by this Agreement, has accepted
liability related to such claims and litigation. SELLER shall INDEMNIFY, DEFEND
AND HOLD PURCHASER HARMLESS from and against any Claims resulting from the
litigation and claims listed on Exhibit C, to the extent SELLER, by this
Agreement, has accepted liability related to such claims and litigation.
8.9. WAIVER OF CONSEQUENTIAL AND PUNITIVE DAMAGES. NEITHER PURCHASER NOR
SELLER SHALL BE ENTITLED TO RECOVER FROM THE OTHER, AND EACH PARTY RELEASES THE
OTHER PARTY FROM, ANY LOSSES, COSTS, EXPENSES, OR DAMAGES ARISING UNDER THIS
AGREEMENT OR IN CONNECTION WITH OR WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
IN THIS AGREEMENT IN ANY AMOUNT IN EXCESS OF THE ACTUAL COMPENSATORY DAMAGES,
COURT COSTS AND REASONABLE ATTORNEYS FEES, SUFFERED BY SUCH PARTY. PURCHASER AND
SELLER BOTH WAIVE, AND RELEASE THE OTHER FROM ANY RIGHT TO RECOVER PUNITIVE,
SPECIAL, EXEMPLARY AND CONSEQUENTIAL DAMAGES ARISING IN CONNECTION WITH OR WITH
RESPECT TO THE TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT; PROVIDED, HOWEVER,
ANY SUCH DAMAGES RECOVERED BY A THIRD PARTY (OTHER THAN SUBSIDIARIES, AFFILIATES
OR PARENTS OF A PARTY) FOR WHICH A PARTY OWES THE OTHER PARTY AN INDEMNITY UNDER
THIS ARTICLE 8 SHALL NOT BE WAIVED. PURCHASER hereby fully and unconditionally
releases SELLER and their affiliates and subsidiaries and their officer,
directors and employees, from any and all Claims, causes of action or damages,
if any, arising in favor of PURCHASER from SELLER'S data room process and
proposal procedures in
connection with its saie of the Property.
ARTICLE 9
TAXES AND EXPENSES
9.1 RECORDING EXPENSES. PURCHASER shall pay ail costs of recording and
filing the Assignment Documents for the Property, all other state and federal
transfer documents, and all other instruments that must be filed to effectuate
the transfer of the Property.
9.2. AD VALOREM, REAL PROPERTY AND PERSONAL PROPERTY TAXES. All ad valorem
taxes, real property taxes, personal property taxes, and similar obligations
("Property Taxes") on the Property are SELLER'S obligation for periods before
the Effective Date and PURCHASER'S obligation for periods beginning on and after
the Effective Date. If Property Taxes for the current tax year have not been
assessed and paid as of the Closing Date, the PURCHASER shall file all required
reports and returns incident to the Property Taxes and pay the Property Taxes
for the current tax year and subsequent periods. The SELLER will reimburse the
PURCHASER promptly for the SELLER'S proportionate share of these taxes, prorated
as of the Effective Date, upon receipt of evidence of the PURCHASER'S payment of
the taxes. If Property Taxes for the current tax year have been assessed and
paid as of the Closing Date, the PURCHASER will reimburse the SELLER for its
proportionate share of these taxes, prorated as of the Effective Date, as a
closing adjustment to the Purchase Price, as provided in Section 2.2.
9.3. SEVERANCE TAXES. SELLER shall bear and pay all severance or other taxes
measured by Hydrocarbon production from the Property, or the receipt of proceeds
therefrom, to the extent attributable to production from the Property before the
Effective Date. PURCHASER shall bear and pay all such taxes on production from
the Property on and after the Effective Date. SELLER shall withhold and pay on
behalf of PURCHASER all such taxes on production from the Property between the
Effective Date and the Closing Date, if the Closing Date follows the Effective
Date, and the amount of any such payment shall be reimbursed to SELLER as a
closing adjustment to the Purchase Price pursuant to Section 2.2. IF either
party pays taxes owed by the other, upon receipt of evidence of payment the
nonpaying party will reimburse the paying party promptly for its proportionate
share of such taxes.
9.4. TAX AND FINANCIAL REPORTING.
9.4.1. IRS FORM 8594. If the parties mutually agree that a filing of Form
8594 is required, the parties will confer and cooperate in the preparation and
filing of their respective forms to reflect a consistent reporting of the agreed
upon allocation of the value of the Property.
9.4.2. FINANCIAL REPORTING. SELLER and PURCHASER agree to furnish to each
other at Closing or as soon thereafter as practicable any and all information
and documents reasonably required to comply with tax and financial reporting
requirements and audits.
9.5. SALES AND USE TAXES. PURCHASER shall be responsible for and pay
all federal, state, or local sales, transfer, gross proceeds, use and similar
taxes incident to or applicable to the Property it receives under this
Agreement, or caused by the transfer of the Property to PURCHASER under this
Agreement. If SELLER is required to pay such sales, use or similar taxes on
behalf of PURCHASER, PURCHASER will reimburse SELLER at Closing for all sales
and use taxes due and payable on the transfer of the Property to PURCHASER.
9.6. INCOME TAXES. Each party shall be responsible for its own income taxes
imposed by any local, state, federal or governmental authority and any other
taxes not specifically addressed in this Article 9, if any, as may result from
this transaction.
9.7. INCIDENTAL EXPENSES. Each party shall bear its own respective expenses
incurred in connection with the negotiation and Closing of this transaction,
including its own consultants' fees, attorneys' fees, accountants' fees, and
other similar costs and expenses.
ARTICLE 10 MISCELLANEOUS
10.1. PRODUCTION IMBALANCES. The Purchase Price paid by PURCHASER is based
on the assumed oil or gas production imbalances with respect to the Property
("Imbalances") set forth in Exhibit F. If SELLER and PURCHASER determine no
later than 120 days after Closing that the Imbalances stated in Exhibit F are
inaccurate, the parties agree to exchange additional compensation, as provided
in Exhibit F, for the difference between the Imbalances and the revised
Imbalances determined by the parties. Such settlement shall be final and neither
party thereafter shall make claim upon the other concerning production
imbalances with respect to the Property. Except with respect to its right to
receive the post-Closing Purchase Price adjustment set forth above, PURCHASER
will be solely responsible for, shall assume, and releases and will indemnify,
defend and hold SELLER harmless from all rights against (including rights to
receive make-up gas or to receive cash balancing payments) and obligations to
(including obligations to make-up gas or to make cash balancing payments) third
parties with respect to any Imbalances, all of which shall constitute Assumed
Obligations.
10.2. ALTERNATIVE DISPUTE RESOLUTION. Compliance with this Section 10.2 shall
constitute a condition precedent to either Party seeking judicial enforcement of
any provisions of this Agreement. Any dispute concerning this Agreement shall be
resolved under the mediation and binding arbitration procedures of this Section
10.2. Upon the occurrence of any dispute between PURCHASER and SELLER in
connection with their rights and obligations under this Agreement, PURCHASER and
SELLER will first attempt in good faith to resolve all disputes by negotiations
between management level persons who have authority to settle the controversy.
If either party believes further negotiations are futile, such party may
initiate the mediation process by so notifying the other party in writing. Both
parties shall then attempt in good faith to resolve the dispute by mediation in
Houston, Texas, employing management level persons with authority to settle the
dispute, in accordance with the Center for Public Resources Model Procedure for
Mediation of Business Disputes, as such procedure may be modified by agreement
of the parties. The parties shall share the cost of the mediator equally. If the
dispute has not been resolved pursuant to mediation within sixty (60) days after
initiating the mediation process, the dispute shall be finally resolved through
binding arbitration, as follows:
(a) If any dispute or controversy shall arise between the parties out of
this Agreement, the alleged breach thereof or any tort in connection therewith,
or out of the refusal to perform the whole or any part thereof, and the parties
shall be unable to agree with respect to the matter or matters in dispute or
controversy, the same shall be submitted to arbitration before a panel of
arbitrators in accordance with the Texas General Arbitration Act, V.A.C.S. art.
224, et seq and the provisions of this Section 10.2. The panel of arbitrators
shall be chosen as follows: Upon the written demand of either party and within
ten (10) working days from the date of such demand, each party shall name an
arbitrator and these two so named shall promptly thereafter choose a third. If
either party shall fail to name an arbitrator within ten (10) working days from
such demand, the other party shall name the second arbitrator as well as the
first, or if the two arbitrators shall fail within ten (10) working days from
their appointment to agree upon and appoint the third arbitrator, then upon
written application by either party such third arbitrator may be appointed by
the senior Judge in active service of the United States District Court for the
Southern District of Texas; and if said Judge shall fail to act, then such third
arbitrator shall be appointed by the President of the Center for Public
Resources, Inc. The arbitrators selected to act hereunder shall be qualified by
education, experience, and training to pass upon the particular matter or
matters in dispute.
(b) The panel of arbitrators so chosen shall proceed promptly to hear and
determine the matter or matters in dispute, after giving the parties due notice
of hearing and a reasonable opportunity to be heard. The procedure of the
arbitration proceedings shall be in accordance with the Center for Public
Resources Rules for Non-Administered Arbitration of Business Disputes, as may be
modified by the panel of arbitrators. Unless otherwise determined by the
arbitrators, the hearing and presentations of the parties shall not exceed two
days cumulative. The location of all arbitration proceedings hereunder shall be
Houston, Harris County, Texas, unless the panel of arbitrators determines that
another venue is more appropriate. The award of the panel of arbitrators or a
majority thereof shall be made within forty-five (45) days after the appointment
of the third arbitrator, subject to any reasonable delay due to unforeseen
circumstances. In the event of the panel or a majority thereof failing to make
an award within sixty (60) days after the appointment of the third arbitrator,
new arbitrators may at the election of either party be chosen in like manner as
if none had been previously selected.
(c) The award of the arbitrators, or a majority thereof, shall be in
writing, determined in accordance with the substantive law of the State of
Wyoming, and shall be final and binding on the parties as to the question or
questions submitted, and the parties shall abide by such award and perform the
conditions thereof. The award of the arbitrators shall be based on the
applicable law and facts, the merits of the parties' positions in the
controversy or dispute, and the arbitrators' assessment of the fairness and
reasonableness of any settlement proposal of any party. The award shall not
provide or create any rights or benefits in any person or entity which is not a
party to this Agreement, as this Agreement and any arbitration thereunder shall
not be construed as a third party beneficiary contract. Unless otherwise
determined by the arbitrators, all expenses in connection with such arbitration
shall be divided equally between the parties thereto, except that the expenses
of counsel, witnesses, and employees of each party shall be borne solely by the
party incurring them, and the compensation of any arbitrator named by a party
shall be borne solely by such party; provided that if court proceedings to stay
litigation or compel arbitration are necessary, the party who unsuccessfully
opposes such proceedings shall pay all reasonable associated costs, expenses and
attorney's fees of such court proceedings.
(d) The arbitrators shall not be required to explain reasons for the award.
No transcript or other recording shall be made of the arbitration proceedings-
Except (i) in connection with a suit for enforcement of the award, (ii) as
required by law, court order or regulation, (c) when reasonably necessary to
explain the terms and conditions of the award to outside attorneys, auditors,
and insurers, or (iii) as part of good faith compliance with disclosure
obligations under applicable law. The arbitration proceedings, the award, and
the parties' actions in connection with the arbitration are confidential and
shall not be disclosed to third parties, and no disclosure of or reference to
the arbitration, the award, or of the parties' statements or actions in
connection with the arbitration shall be made to any third party. All offers,
promises, conduct, statements, and evidence, whether oral or written, made in
the course of the arbitration by any of the parties, their agents, employees,
experts, or attorneys are confidential. Such offers, promises, conduct,
statements, and evidence shall be considered inadmissible under Rule 408 of the
Federal Rules of Evidence and any similar state provisions, and shall be
inadmissible for any purpose, including impeachment. However, evidence that is
otherwise admissible shall not be rendered inadmissible as a result of its use
in the arbitration.
(e) The award of the panel of arbitrators and the obligation
to abide
by same and perform the conditions thereof shall not be appealable and shall be
enforceable in the Texas state district courts in Houston, Harris County, Texas,
or in any federal court having jurisdiction. Each party shall bear its own
attorneys' fees in connection with any enforcement of an arbitration award, or
in any other court litigation arising out of this Agreement.
(f) The provisions of this Section 10.2 shall not limit the obligation of a
party to defend, indemnify or hold harmless the other party against Claims as
provided in Article 8.
10.3. SURVIVAL OF REPRESENTATIONS, WARRANTIES. All of the representations
and warranties made by the parties in this Agreement will survive the Closing,
the execution and delivery of the Assignment Documents and other instruments
under this Agreement, and the transfer of the Property between the parties and
they shall not be merged into or superseded by the Assignment Documents or other
documents delivered at Closing. However, neither party to this Agreement will be
entitled to make a Claim against the other party in connection with the
inaccuracy of the representations and warranties of the other party in this
Agreement, unless the other party is notified of that Claim in writing within
six (6) months after the Closing Date.
10.4. CONFIDENTIALITY AND PUBLIC ANNOUNCEMENTS. This Agreement and the terms
and provisions hereof, including the Purchase Price, shall be maintained
confidential by PURCHASER until Closing; provided however that this Agreement
and the terms and provisions thereof may be disclosed to PURCHASER'S lenders, if
any, and their consultants, who shall be required to keep such information
confidential. If this Agreement is terminated prior to Closing, following such
termination, the parties agree to keep all terms of this transaction
confidential. Neither party may make a press release or other public
announcement concerning this transaction, without the other party's prior
written approval and agreement to the form of the announcement, except as may be
required by applicable laws or rules and regulation of any governmental agency
or stock exchange. Notwithstanding the foregoing, SELLER shall have the right to
also disclose the transaction to customary recipients of SELLER'S investor
relations communications in the normal course of SELLER'S business.
10.5 SUSPENSE ACCOUNTS. As soon as practical after the Closing, SELLER may
transfer to PURCHASER any or all funds held in suspense by SELLER related to
proceeds of production and attributable to third parties' interests in the
Leases or lands pooled or unitized therewith or Hydrocarbon production from the
Leases or lands pooled or unitized therewith (but not including any suspended
funds relating to any Excluded Assets described in Section 1.3), including funds
suspended awaiting minimum disbursement requirements, funds suspended under
division orders and funds suspended for title and other defects. If such funds
are transferred to PURCHASER, PURCHASER agrees to administer all such accounts
and assume all payment obligations relating thereto in accordance with all
applicable laws, rules and regulations, and shall be liable for the payment
thereof to the proper parties. PURCHASER shall defend and hold SELLER harmless
from any and all Claims arising from PURCHASER'S failure to properly administer
the funds and accounts so transferred.
10.6. SELLER'S MARKS AND LOGOS; POST-CLOSING INSPECTIONS. With respect
to any portion of the Property that SELLER operates, PURCHASER agrees that
within sixty (60) days after Closing or within thirty (30) days after operations
are actually transferred, whichever is later, it will remove or cause to be
removed the names and marks used by SELLER and all variations and derivatives
thereof and logos relating thereto from the Property and will not thereafter
make any use whatsoever of such names, marks and logos. If PURCHASER fails to
comply with this Section 10.6, SELLER shall have access to the Property in order
to remove such names, marks, and logos, all at PURCHASER'S expense. SELLER shall
have the right at any time after Closing to reasonable access to the Property
for the purpose of inspecting PURCHASER'S compliance with the terms of this
Agreement.
10.7. NOTICES. All notices under this Agreement must be in writing. Any
notice under this Agreement may be given by personal delivery, facsimile
transmission, U.S. mail (postage prepaid), or commercial delivery service, and
will be deemed duly given when received by the party charged with such notice
and addressed as follows:
If to SELLER: Pennaco Energy, Inc.
5555 San Felipe
Houston, Texas 77056
Attention: Business Development Manager
Fax No.: 713-499-8470
Telephone: 713-629-6600
If to PURCHASER: CEP - M Purchase, LLC
C/O Current Energy Partners Corporation
Attention: Brent M. Cook
Fax No.: (801-492-0716)
11038 North Highland Blvd. Suite 400
Highland, Utah 84003
Telephone: (801-492-0713)
Cell: (801-361-6490)
With a Copy to :
Current Energy Partners Corporation Attn: General Counsel 11038 North Highland
Blvd, Suite 400 Highland, Utah 84003
With a Copy to :
Miller Guymon, P.C.
Attn: Blake Miller
165 Regent Street
Salt Lake City, Utah 84111
Fax No.: (801)363-5601
Telephone: (801) 363-5600
Any party, by written notice to the other, may change the address or the
individual to which or to whom notices are to be sent under this Agreement.
10.8. EFFECTIVE DATE. The Effective Date of this Agreement will be
12.01 a.m., Mountain time, where the Property is located, on July 1, 2010.
10.9. ASSIGNMENT. Except as expressly provided in Section 2.7, prior to the
later of the Closing Date or the Effective Date, neither party may assign its
rights or obligations under this Agreement without the prior written consent of
the other, which may be withheld for any reason, including convenience. If
PURCHASER sells, transfers or assigns all or a portion of the Property, (a) this
Agreement shall remain in effect between PURCHASER and SELLER as to the
Property, regardless of such sale or assignment (and PURCHASER will remain
obligated hereunder) and (b) PURCHASER shall require its successors and assigns
expressly to assume its obligations under this Agreement, to the extent related
or applicable to the Property or portion thereof acquired by them.
10.10. ENTIRE AGREEMENT AND AMENDMENT. This Agreement, together with any
relevant confidentiality agreement referred to in Section 5.1, constitutes the
entire understanding between the parties, replacing and superseding all prior
negotiations, discussions, arrangements, agreements and understandings between
the parties regarding the subject transaction and subject matter hereof (whether
written or oral), excepting any written agreements that may be executed by the
parties concurrently or after the execution of this Agreement. No other
agreement, statement, or promise made by any party, or to any employee, officer
or agent of any party, which is not contained in this Agreement, shall be
binding or valid. This Agreement may be amended, modified, altered,
supplemented, or revoked only by written agreement signed by duly authorized
representatives of the parties hereto.
10.11. SUCCESSORS AND ASSIGNS. This Agreement binds and inures to the
benefit of the parties hereto their respective permitted successors and assigns,
and all the terms, provisions, covenants, obligations, indemnities,
representations, warranties and conditions of this Agreement shall be
enforceable by the parties hereto and their respective permitted successors and
assigns.
10.12. THIRD PARTY BENEFICIARIES. It is understood and agreed that there
shall be no third party beneficiary of this Agreement, and that the provisions
hereof do not impart enforceable benefits, rights, or remedies in anyone who is
not a party or a successor or Purchaser of a party hereto.
10.13. SEVERABILITY. If any provision of this Agreement is found by a court
of competent jurisdiction to be invalid or unenforceable, that provision will be
deemed modified to the extent necessary to make it valid and enforceable and if
it cannot be so modified, it shall be deemed deleted and the remainder of the
Agreement shall continue and remain in full force and effect.
10.14. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall constitute an original and all of which shall constitute one
document.
10.15. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF WYOMING, EXCLUDING ANY
CONFLICTS-OF-LAW RULE OR PRINCIPLE THAT MIGHT APPLY THE LAW OF ANOTHER
JURISDICTION. THE ASSIGNMENT DOCUMENTS, AND ANY OTHER
INSTRUMENTS OF CONVEYANCE EXECUTED UNDER THIS AGREEMENT, WILL BE GOVERNED BY AND
MUST BE CONSTRUED ACCORDING TO THE LAWS OF THE STATE WHERE THE PROPERTY TO WHICH
THEY PERTAIN IS LOCATED, EXCLUDING ANY CONFLICTS-OF-LAW RULE OR PRINCIPLE THAT
MIGHT APPLY THE LAW OF ANOTHER JURISDICTION, EXCEPT AS OTHERWISE PROVIDED IN THE
ASSIGNMENT DOCUMENTS OR INSTRUMENTS.
10.16. EXHIBITS. The Exhibits and Schedules attached to this Agreement are
incorporated into and made a part of this Agreement for all purposes. In the
event of a conflict or inconsistency between the provisions of the Exhibits,
Schedules or the executed Assignment Documents and the foregoing provisions of
this Agreement, the provisions of this Agreement shall take precedence. In the
event of a conflict or inconsistency between the provisions of the pro forma
Assignment Documents and other transaction documents attached to this Agreement
as Exhibits or Schedules and the Assignment Documents and other transaction
documents actually executed by the parties, the provisions of the executed
Assignment Documents and other executed transaction documents shall take
precedence.
10.17. WAIVER. Any of the terms, provisions, covenants, representations,
warranties or conditions hereof may be waived only by a written instrument
executed by the party waiving compliance. Except as otherwise expressly provided
in this Agreement, the failure of any party at any time or times to require
performance of any provision hereof shall in no manner affect such party's right
to enforce the same. No waiver by any party of any condition, or of the breach
of any term, provision, covenant, representation or warranty contained in this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be or construed as a further or continuing waiver of any such
condition or breach or a waiver of any other condition or of the breach of any
other term, provision, covenant, representation or warranty.
10.18. INTERPRETATION. The parties stipulate and agree that this Agreement
shall be deemed and considered for all purposes to have been jointly prepared by
the parties, and shall not be construed against any one party (nor shall any
inference or presumption be made) on the basis of who drafted this Agreement or
any particular provision hereof, who supplied the form of Agreement, or any
other event of the negotiation, drafting or execution of this Agreement. Each
party agrees that this Agreement has been purposefully drawn and correctly
reflects its understanding of the transaction that it contemplates. In
construing this Agreement, the following principles will apply.
(a) The omission of certain provisions of this Agreement from the Assignment
Documents does not constitute a conflict or inconsistency between this Agreement
and the Assignment Documents, and will not effect a merger of the omitted
provisions. To the fullest extent permitted by law, all provisions of this
Agreement are hereby deemed incorporated into the Assignment Documents by
reference.
(b) The Article, Section, Exhibit and Schedules references in this Agreement
refer to the Articles, Sections, Exhibits and Schedules of this Agreement. The
headings and titles in this Agreement are for convenience only and shall have no
significance in interpreting or otherwise affect the meaning of this Agreement.
(c) The term "knowledge," as applied to either party, shall mean the actual
knowledge of such party's officers and directors, and its employees, agents,
representatives at a supervisory level and above. 10.19.
DEFAULT AND REMEDIES.
10.19.1. SELLER'S REMEDIES. Upon failure of PURCHASER to perform any of
the obligations under this Agreement to be performed by PURCHASER prior to and
on the Closing Date, SELLER, at SELLER'S sole option, may (i) enforce specific
performance, or (ii) terminate this Agreement and retain the Performance Deposit
as agreed liquidated damages and not as a penalty. The remedies set forth in
this Section 10.19.1 shall be SELLER'S sole and exclusive remedies for any such
default, and SELLER hereby expressly waives and releases all other remedies
(except as provided in Section 10.19.4).
10.19.2. PURCHASER'S REMEDIES. Upon failure of SELLER to perform any of the
obligations to be performed by SELLER prior to and on the Closing Date,
PURCHASER, at PURCHASER'S sole option, may (i) enforce specific performance, or
(ii) terminate this Agreement and receive back the Performance Deposit (without
interest) from SELLER. The remedies set forth in this Section 10.19.2 shall be
PURCHASER'S sole and exclusive remedies for such default, and PURCHASER hereby
expressly waives and releases all other remedies (except as provided in Section
10.19.4).
10.19.3. EFFECT OF TERMINATION. Notwithstanding anything to the contrary in
this Agreement (except Section 10.19.4), in the event of termination of this
Agreement, the transaction shall not close and this Agreement shall become void
and have no further effect whatsoever, and neither PURCHASER nor SELLER shall
have any further liability, obligations, right or duty to the other under this
Agreement, except as provided in Sections 10.19.1, 10.19.2, and 10.19.4, as
applicable.
10.19.4. OTHER REMEDIES. Notwithstanding the provisions of Sections 10.19,
1, 10.19.2 and 10.19.3, termination of this Agreement shall not prejudice or
impair SELLER'S or PURCHASER'S rights and obligations under Sections 5.1 (and
the confidentiality agreements referenced therein), 5.2 (PURCHASER'S
inspections), and 10.2 (dispute resolution), and such other portions of this
Agreement as are necessary to the enforcement and construction of Sections 5.1,
5.2, 5.3.2, and 10.
10.20 U.S. PROHIBITED PARTIES LIST. Notwithstanding anything to the contrary in
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this Agreement, should any party to this Agreement ("Prohibited Party"), its
principals, including but not limited to its shareholders, members and owners
("Principals"), or its directors be placed on any prohibited parties list
established under U.S. laws or regulations, including but not limited to those
referred to in Executive Order 13224 ("Prohibited Parties List"), or should a
party to this Agreement other than Prohibited Party ("Other Party") determine
that Prohibited Party, its Principals or directors, contrary to U.S. laws or
regulations, employ or do business, directly or indirectly, with a party
appearing on any Prohibited Parties List, Other Party shall have the right
hereunder to terminate this Agreement immediately upon written notice without
any further obligation to Prohibited Party. With respect to rights which may
have been earned under this Agreement as of the time of such termination, Other
Party shall have the right to take any and all steps necessary to comply with
any applicable laws or regulations, including, but not limited to, turning over
any property to which Prohibited Party is entitled, including payments due and
assignments of real property, to the applicable agency or court with
jurisdiction if required by such laws or regulations. No party to this Agreement
shall transfer any of its rights under this Agreement to a person who is, or any
of whose Principals or
directors are, on the Prohibited Parties List. Should such a transfer occur, the
non-transferring party or parties shall have the same right to terminate this
Agreement as is set out above in this paragraph.
ARTICLE 11 EMPLOYEE MATTERS
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11.1 EMPLOYEES. Employees of SELLER, including employees who are receiving
disability benefits or are on family, medical, administrative, military, or any
other type of leave that entitles the employee to reinstatement upon completion
of the leave under the applicable leave policies of SELLER (collectively,
"Leave"), are hereinafter referred to collectively as the "Employees" and
individually as an "Employee". All Employees who accept employment with
PURCHASER pursuant to the offers described in this Article 12 are referred to
herein as "Former Employees of SELLER."
11.2 EMPLOYMENT OFFERS. If PURCHASER makes an offer of employment to an
Employee, prior to Closing, PURCHASER will recognize the Employee's service with
SELLER for benefits eligibility and vesting in PURCHASER'S benefit programs as
follows:
(a) vacation - recognition of service with SELLER for purposes of vacation
under PURCHASER'S vacation plan; vacation benefit eligibility for the remainder
of the year in which Closing occurs shall be reduced by any vacation days taken
under SELLER'S vacation plan or for any unused vacation days for which eligible
Employees were compensated, provided that PURCHASER will not recognize any
vacation carried over from previous years;
(b) medical plans - immediate eligibility with no waiting period;
(c) short term disability - recognition of service with SELLER, for
eligibility for sick benefits under the PURCHASER'S sick benefit plan;
(d) 401 (k) - recognition of up to three (3) years vesting service with SELLER,
for vesting and eligibility purposes under PURCHASER'S 401K plan;
(e) pension plan - recognition of up to five (5) years vesting service with
SELLER, for vesting and eligibility purposes only, but not for participation or
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benefit accrual, under the PURCHASER'S retirement plan;
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(f) variable pay - immediate eligibility to participate in PURCHASER'S bonus or
gainsharing programs in the same manner as PURCHASER'S employees in similar
positions; and
(g) severance - in the event that any Former Employee of SELLER is terminated
(other than for cause) following the Closing Date, PURCHASER will provide such
terminated Former Employee of SELLER with severance payments and benefits
consistent with PURCHASER'S severance programs and will recognize up to five (5)
years of such Former Employee of SELLER'S service with SELLER.
11.3 TRANSFER TIME. Each Former Employee of SELLER, who receives an offer of
employment from PURCHASER prior to Closing, shall become an employee of
PURCHASER
as of the later of 12:01 a.m., Central Time, on the Closing Date, or the date on
which PURCHASER or another party succeeds SELLER as operator of the portion of
the Property on which the Employee will work, and except as otherwise provided
herein, at such time, PURCHASER shall commence and be responsible for payment of
all salaries and benefits and all other costs and liabilities relating to the
Former Employees of SELLER, except that with regard to an Employee on Leave,
such obligations shall not attach until such Employee on Leave commences active
employment with PURCHASER. Not later than two business days before Closing
PURCHASER shall provide SELLER with a list of all Former Employees of SELLER to
whom offers of employment were made by PURCHASER which shall include the name,
the base salary offered and the date the offer was made to the Former Employee
of the Seller. Purchaser shall update the list 30 days after Closing to reflect
any subsequent employee offers to Former Employees of Seller.
11.4 WARN ACT. After the Effective Date, PURCHASER shall be responsible for
all requirements under the United States Federal Worker Adjustment, Retraining
and Notification Act of 1988, as amended, as such requirements apply to the
Former Employees of SELLER.
IN WITNESS WHEREOF, the authorized representatives of SELLER and PURCHASER
execute this Agreement on the dates stated below.
SELLER PURCHASER
PENNACO ENERGY, INC. CEP - M PURCHASE, LLC
By: /s/ James L. Bowzer By: /s/ Brandon W. Hargett
Name: James L. Bowzer Name: Brandon W. Hargett
Title: President Title: Director
Date: July 21, 2010 Date: July 21, 2010
GUARANTOR
CURRENT ENERGY PARTNERS
CORPORATION
By: /s/ Brandon W. Hargett
Name: Brandon W. Hargett
Title: Director
Date: July 21, 2010