CONTRIBUTION AND EXCHANGE AGREEMENT by and among DORCHESTER MINERALS, L.P. DODGE JONES FOUNDATION THE LEGETT FOUNDATION KICKAPOO SPRINGS FOUNDATION THE KARAKIN FOUNDATION STILL WATER FOUNDATION XETTAM MINERALS, L.P. 2MW LIMITED PARTNERSHIP JULIA JONES MATTHEWS, TRUSTEE OF THE JULIA JONES MATTHEWS LIVING TRUST AND JOHN A. MATTHEWS, JR. March 31, 2010

 

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Exhibits
Exhibit A	Subject Units Allocation Table
Exhibit B	Contributors’ Working Interests
Exhibit C	Form of Contributors’ Conveyances
Exhibit D	Form of Assignment, Conveyance and Assumption Agreement
Exhibit 3.8	Maecenas Income Statements
Exhibit 6.3(e)	Form of Assignment of Maecenas Interests

 

Schedules
	Partnership Schedules
Schedule 2.5	Noncontravention
Schedule 2.6	Governmental Approvals
Schedule 2.7	Partnership Financial Statements
Schedule 2.8	Absence of Undisclosed Liabilities
Schedule 2.9	Absence of Certain Changes
Schedule 2.10	Compliance With Laws
	Contributors Schedules
Schedule 3	Maecenas Properties
Schedule 3.10	Liabilities
Schedule 3.11	Material Contracts
Schedule 3.16	Legal Proceedings

 

 

THIS CONTRIBUTION AND EXCHANGE AGREEMENT (“Agreement”) is executed as of March 31, 2010 by and among Dorchester Minerals, L.P., a Delaware limited partnership (the “Partnership”), Dodge Jones Foundation, a Texas nonprofit corporation (“Dodge Jones”), The Legett Foundation, a Texas nonprofit corporation (“Legett”), Kickapoo Springs Foundation, a Texas nonprofit corporation (“Kickapoo Springs”), The Karakin Foundation, a Texas nonprofit corporation (“Karakin”), Still Water Foundation, a New Mexico nonprofit corporation (“Still Water”), Xettam Minerals, L.P., a Texas limited partnership (“Xettam Minerals”), 2MW Limited Partnership, a Texas limited partnership (“2MW”), Julia Jones Matthews, Trustee of the Julia Jones Matthews Living Trust (“Julia Jones Matthews, Trustee”), and John A. Matthews, Jr. (“Matthews”, and collectively with Dodge Jones, Legett, Kickapoo Springs, Karakin, Still Water, Xettam, 2MW and Julia Jones Matthews, Trustee, the “Contributors”).

 

W I T N E S S E T H:

 

WHEREAS, the Contributors own all of the issued and outstanding partnership interests in Maecenas Minerals, L.L.P., a Texas limited liability partnership (“Maecenas”), as set forth on Exhibit A attached hereto (the “Maecenas Interests”); and

 

WHEREAS,  the Contributors also own certain working interests  in various oil and gas properties that are described more fully on Exhibit B attached hereto (the “Contributors’ Working Interests”); and

WHEREAS, prior to the closing of the transactions contemplated hereby, the Contributors desire to (i) contribute all of their right, title and interest in and to the Contributors’ Working Interests to Maecenas pursuant to conveyances in the form attached hereto as Exhibit C (the “Contributors’ Conveyances”) and (ii) subsequent to such transfer, cause Maecenas to transfer all of its right, title and interest in and to the Contributors’ Working Interests and any other working interests that Maecenas may beneficially own (together with the Contributors’ Working Interests, the “Maecenas Working Interests”) to Dorchester Minerals Operating LP, a Delaware limited partnership (“Dorchester Minerals Operating”) or its designee, retaining a net profits interest (the “Maecenas NPI”) pursuant to an Assignment, Conveyance and Assumption Agreement in the form attached hereto as Exhibit D (the “Assignment, Conveyance and Assumption Agreement”); and

WHEREAS, the Contributors desire to contribute the Maecenas Interests to the Partnership in exchange for 835,000 Common Units of the Partnership (the “Subject Units”);

WHEREAS, the Partnership desires to accept the Maecenas Interests and in exchange therefor issue to the Contributors the Subject Units; and

 

WHEREAS, the transfer of the Maecenas Interests shall be treated as a contribution under Code Section 721(a) as more specifically provided herein.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the parties hereto hereby agree as follows:

 

ARTICLE 1

 

 

1.1           Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Thompson & Knight LLP, One Arts Plaza, 1722 Routh Street, Suite 1500, Dallas, Texas 75201, at 9:00 a.m., local time, on March 31, 2010, or at such other time or place or on such other date as the parties hereto shall agree (the “Closing Date”).

 

1.2           Contribution and Exchange.  At the Closing and effective as of 9:00 a.m. local time on the Closing Date, and on the terms and subject to the conditions set forth in this Agreement:

 

(a)           the Contributors shall transfer, assign and contribute, or cause to be transferred, assigned and contributed, to the Partnership or its designee, and the Partnership or its designee shall acquire from the Contributors, the Maecenas Interests, free and clear of any and all Encumbrances;

 

(b)           the Partnership shall deliver to the Contributors the Subject Units as set forth on Exhibit A, free and clear of any and all Encumbrances.

 

ARTICLE 2

 

REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP

 

The Partnership represents and warrants to the Contributors that:

 

2.1           Organization and Existence.  The Partnership is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware.  The Partnership has full power and authority to own, lease or otherwise hold and operate its properties and assets and to carry on its business as presently conducted.  The Partnership is duly qualified and in good standing to do business as a foreign limited partnership in each jurisdiction in which the conduct or nature of its business or the ownership, leasing, holding or operating of its properties makes such qualification necessary, except such jurisdictions where the failure to be so qualified or in good standing, individually or in the aggregate, would not have a Material Adverse Effect on the Partnership.

 

2.2 Governing Documents. The Partnership Agreement has been duly authorized, executed and delivered by the Partnership and is, and will be, a valid and legally binding agreement of, enforceable against the Partnership in accordance with its terms; provided that the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws relating to or affecting creditors’ rights generally

 

 

and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

 

2.3           Capitalization of the Partnership.

 

(a)           All of the outstanding Common Units have been duly authorized and validly issued in accordance with the Partnership Agreement, are fully paid and nonassessable.  Dorchester Minerals Management LP, a Delaware limited partnership (the “Partnership GP”), is the sole general partner of the Partnership.  On the date hereof, the issued and outstanding limited partner interests of the Partnership consist of 29,840,431 Common Units.

 

(b)           The Subject Units (and the limited partner interests represented thereby), will be duly authorized in accordance with the Partnership Agreement, and, when issued and delivered to the Contributors in accordance with the terms hereof, will be validly issued, fully paid (to the extent required under the Partnership Agreement) and nonassessable and will be issued free and clear of any lien, claim or Encumbrance.

 

(c)           Except for the Subject Units or as described in the Partnership Agreement, there are no preemptive rights or other rights to subscribe for or to purchase, nor any restriction upon the voting or transfer of, any interests in the Partnership pursuant to the Partnership Agreement or any other agreement or instrument to which the Partnership is a party or by which it may be bound.  Neither the offering nor the sale of the Subject Units, as contemplated by this Agreement, gives rise to any rights for or relating to the registration of any Common Units or other securities of the Partnership.  Except for the Subject Units or as described in the Partnership Agreement, no options, warrants or other rights to purchase, agreements or other obligations to is sue, or rights to convert any obligations into or exchange any securities for, Common Units or other securities of the Partnership are outstanding.

 

(d)           The Subject Units when issued and delivered against payment therefor as provided herein, will conform in all material respects to the description thereof contained in the Partnership Agreement.  The Partnership has all requisite power and authority to issue, sell and deliver the Subject Units in accordance with and upon the terms and conditions set forth in this Agreement and the Partnership Agreement.  As of the Closing Date, all partnership action for the authorization, issuance, sale and delivery of the Subject Units shall have been validly taken, and no other authorization by any of such parties is (or will be) required therefor.

 

2.4           Authority Relative to this Agreement.  The Partnership has full partnership power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby.  The execution, delivery and performance by the Partnership of this Agreement, and the consummation by it of the transactions contemplated hereby, have been duly authorized by the Partnership GP, and no other partnership proceedings on the part of the Partnership are necessary to authorize the execution, delivery and performance by the

 

 

2.5           Noncontravention.  Except as otherwise indicated on Schedule 2.5, the execution, delivery and performance by the Partnership of this Agreement and the consummation by it of the transactions contemplated hereby do not and will not (i) conflict with or result in a violation of any provision of the Partnership Agreement or the certificate of limited partnership of the Partnership, (ii) conflict with or result in a violation of a ny provision of, or constitute (with or without the giving of notice or the passage of time or both) a default under, or give rise (with or without the giving of notice or the passage of time or both) to any right of termination, cancellation or acceleration under, any bond, debenture, note, mortgage, indenture, lease, contract, agreement or other instrument or obligation to which the Partnership is a party or by which the Partnership or any of its properties may be bound, (iii) result in the creation or imposition of any Encumbrance upon the properties of the Partnership or (iv) assuming compliance with the matters referred to in  Section 2.6, violate any Applicable Law binding upon the Partnership, except, in the case of clauses (ii), (iii) and (iv) of this Section 2.5, for any such conflicts, violations, defaults, terminations, cancellations, accelerations or Encumbrances which would not, individually or in the aggregate, have a Material Adverse Effect on the Partnership or the properties of the Partnership.

 

2.6           Governmental Approvals.  No consent, approval, order or authorization of, or declaration, filing or registration with, any Governmental Entity is required to be obtained or made by the Partnership in connection with the execution, delivery or performance by the Partnership of this Agreement or the consummation by it of the transactions contemplated hereby, other than (i) compliance with any applicable state securities or takeover laws, (ii) as set forth on Schedule 2.6, (iii) filings with Governmental Entities to occur in the ordinary course following the consummation of the transactions contemplated hereby, and (iv) such consents, approvals, orders or authorizations which, if not obtained, and such declarations, filings or registrations which, if not made, would not, individually or in the aggregate, have a Material Adverse Effect on the Partnership or the properties of the Partnership.

 

2.7           Partnership Financial Statements.  Attached as Schedule 2.7 or filed with the SEC Filings are copies of the Partnership’s audited consolidated balance sheet as of December 31, 2009 (the “Partnership Latest Balance Sheet”), and the related audited consolidated statements of income, partnership capital and cash flows for the year then ended, and the notes and sched ules thereto, together with the report thereon of Grant Thornton LLP, independent certified public accountants (the “Partnership Financial Statements”).  The Partnership Financial Statements (A) have been prepared from the books and records of the Partnership in conformity with generally accepted accounting principles applied on a basis

 

 

2.8           Absence of Undisclosed Liabilities.  To the Knowledge of the Partnership, as of the date of this Agreement, the Partnership has no liability or obligation with respect to the property held by the Partnership (whether accrued, absolute, contingent, unliquidated or otherwise), except (i) liabilities reflected on the Partnership Latest Balance Sheet, (ii) liabilities described in the notes accompanying the Partnership Financial Statements, (iii) liabilities which have arisen since the date of the Partnership Latest Balance Sheet in the ordinary course of business (none of which is a material liabili ty for breach of contract, tort or infringement), (iv) liabilities arising under executory provisions of contracts entered into in the ordinary course of business (none of which is a material liability for breach of contract), (v) liabilities disclosed on Schedule 2.8 and (vi) other liabilities which, in the aggregate, are not material to the Partnership.

 

2.9           Absence of Certain Changes.  Except as disclosed on Schedule 2.9, since the date of the Partnership Financial Statements, (i) to the Knowledge of the Partnership there has not been any Material Adverse Effect on the Partnership or any event or condition that might reasonably be expected to result in any Material Adverse Effect on the Partnership, (ii) the business of the Partnership has been conducted only in its ordinary cou rse of business, (iii) the Partnership has not incurred any material liability, engaged in any material transaction or entered into any material agreement outside the ordinary course of business, and (iv) the Partnership has not suffered any material loss, damage, destruction or other casualty to any of its assets (whether or not covered by insurance).

 

2.10           Compliance With Laws.  Except as disclosed on Schedule 2.10, to the Knowledge of the Partnership, the Partnership has complied in all respects with all Applicable Laws, except for noncompliance with such Applicable Laws which, individually or in the aggregate, do not and will not have a Material Adverse Effect on the Partnership.  Except as disclosed on Schedule 2.10, the Partnership has not received any written notice from any Governmental Entity, which has not been dismissed or otherwise disposed of, that the Partnership has not so complied.  The Partnership has not been charged or, to the Knowledge of the Partnership, threatened with, or under investigation with respect to, any violation of any Applicable Law relating to any aspect of the business of the Partnership, other than violations which, individually or in the aggregate, do not and in the reasonable judgment of the Partnership will not have a Material Adverse Effect on the Partnership.

 

2.11           Brokerage Fees.  The Partnership has not retained any financial advisor, broker, agent or finder or paid or agreed to pay any financial advisor, broker, agent or finder on account of this Agreement or any transaction contemplated hereby.

 

2.12           Listing.  The outstanding Common Units are listed for trading on the NASDAQ Global Select Market.

 

2.13           SEC Filings.  Since January 1, 2009, the Partnership has filed with the Securities and Exchange Commission all forms, reports, schedules, statements, and other

 

 

2.14           Legal Proceedings.  There are no Proceedings pending or, to the Knowledge of the Partnership, threatened against or involving the Partnership or the properties of the Partnership which, individually or in the aggregate, in the reasonable judgment of the Partnership will have a Material Adverse Effect on the Partnership or the properties of the Partnership.  There are no Proceedings pending or, to the Knowledge of the Partnership, threatened against the Partnership or the properties of the Partnership, seeking to restrain, prohibit, or obtain damages or other relief in connection with this Agreement or the transactions contemplated hereby or which could reasonably be expected to affect the Partnership’s ability to consummate the transactions contemplated hereby.

 

ARTICLE 3

 

REPRESENTATIONS AND WARRANTIES

 

Each Contributor hereby severally represents and warrants to the Partnership as to (a) such Contributor only, (b) the Maecenas Interest contributed by such Contributor (the “Contributed Maecenas Interest”), (c) Maecenas and (d) the assets owned by Maecenas, including without limitation, the properties, leaseholds and other interests listed on Schedule 3 (collectively with the Contributors’ Working Interests and the Maecenas NPI (as of the Closing Date), the “Maecenas Properties”, and each a “Maecenas Property”) as follows:

 

3.1             Organization and Existence.  The Contributor (if the Contributor is a natural person or is acting in such person’s capacity as trustee of a trust) has the requisite capacity required to enter into this Agreement and consummate the transactions contemplated hereby.  The Contributor (if the Contributor is not a natural Person or a trustee acting in its capacity as

 

 

3.2    Authority Relative to This Agreement. The Contributor has full power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance by the Contributor of this Agreement, and the consummation by it of the transactions contemplated hereby, have been duly authorized by all necessary action. This Agreement has been duly executed and delivered by the Contributor and constitutes, and each other agreement, instrument or document executed or to be executed by the Contributor in connection with the transactions contemplated hereby has been, or when executed will be, duly executed and delivered by the Contributor and constitutes, or when executed and delivered will constitute, a valid and legally binding obligation of the Contributor enforceable against the Contributor in accordan ce with their respective terms, except that such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights generally and (ii) equitable principles which may limit the availability of certain equitable remedies (such as specific performance) in certain instances.

       3.3           Noncontravention.  The execution, delivery and performance by the Contributor of this Agreement and the consummation by it of the transactions contemplated hereby, do not and will not (i) conflict with or  result in a violation of any provision of the respective governing instruments of the Contributor or Maecenas, (ii) conflict with or result in a violation of any provision of, or constitute (with or without the givi ng of notice or the passage of time or both) a default under, or give rise (with or without the giving of notice or the passage of time or both) to any right of termination, cancellation or acceleration under, any bond, debenture, note, mortgage, indenture, lease, contract, agreement or other instrument or obligation to which the Contributor or Maecenas are a party or by which the Contributor, Maecenas or any of the Maecenas Properties may be bound, (iii) result in the creation or imposition of any Encumbrance upon the Contributed Maecenas Interest or the Maecenas Properties or (iv) assuming compliance with the matters referred to in Section 3.4, violate any Applicable Law binding upon the Contributor or Maecenas, except in the case of clauses (ii), (iii) and (iv) of this Section 3.3, for any such conflicts, violations, defaults, terminations, cancellations, accelerations or Encumbrances which would not, individually or in the aggregate, have a Material Adverse Effect on the Contributor, Maecenas or the Maecenas Properties.

 

3.4          Governmental Approvals.  To the Knowledge of the Contributor, no consent, approval, order or authorization of, or declaration, filing or registration with, any Governmental Entity is required to be obtained or made by the Contributor or Maecenas in connection with the execution, delivery or performance by the Contributor of this Agreement or the consummation by it of the transactions contemplated hereby, other than (i) compliance with any applicable state

 

 

       3.5             Capitalization.  The Maecenas Interests constitute all of the authorized, issued and outstanding partnership interests in Maecenas.  Immediately prior to the Closing, Contributor will be the record and beneficial owner and holder of, and will have good title to, the Contributed Maecenas Interest, free and clear of any Encumbrance.  The Contributed Maecenas Interest has been duly authorized and validly issued, with no preemptive rights.  There are no existing agreements, options, warrants, rights, calls or commitments of any character providing for the issuance of any equity or other interest in Maecenas, or for the repurchase or redemption of equity or other interests, of Maecenas, and there are no outstanding securities or other instruments convertible into or exchangeable for equity or other interests in Maecenas and no commitments to issue such securities or instruments.

 

3.6             Subsidiaries.  Maecenas has no subsidiaries.

 

3.7    Maecenas Records. Maecenas has delivered to the Partnership true, correct and complete copies of its application for registration as a registered limited liability partnership and that certain Partnership Agreement dated December 16, 1999 by and among the Contributors or those Persons through which the Contributors acquired or accrued the Maecenas Interests (the “Maecenas Partnership Agreement”), in each case as amended and in effect on the date hereof. The Contributors have duly executed that certain Special Power of Attorney dated July 1, 2008 designating Joseph Edwin Canon as Maecenas’ ag ent and attorney-in-fact (the “Special Power of Attorney”). The Special Power of Attorney is in full force and has not been revoked. Maecenas has no minute book.

 

       3.8             Maecenas Income Statements.  Maecenas has provided the Partnership copies of its unaudited statements of income for the periods ended December 31, 2006, 2007, 2008 and 2009 attached hereto as Exhibit 3.8 and its books, records and accounts, including without limitation, records of its cash receipts and disbursements.  To the Knowledge of the Contribu tor, all books, records and accounts of Maecenas are materially accurate and complete and have been maintained in all material respects in accordance with good business practice and Applicable Law.

 

       3.9             Title to Maecenas Properties.  Maecenas has good title to the Maecenas Properties, free and clear of any Encumbrances created by, through or under Maecenas or any Contributor, except for the Permitted Encumbrances.

 

       3.10             Absence of Undisclosed Liabilities.  To the Knowledge of the Contributor, Maecenas has no liability or obligation (whether accrued, absolute, contingent, unliquidated or otherwise) other than those specifically reflected on Schedule 3.10.

 

3.11             Material Contracts.  Except as set forth on Schedule 3.11 or any Basic Document, Maecenas is not a party to or bound by any agreement or contract, lease, credit

 

 

       3.12             Employees; Employee Benefit Plans.  Maecenas has no employees and has never had any employees.  Maecenas has not adopted, nor has it ever been a party to, any employee benefit plan, program, agreement, policy, arrangement or pension plan.

 

       3.13           Absence of Certain Changes.  Since the Reference Date, (i) to the Knowledge of the Contributor, there has not been any Material Adverse Effect on Maecenas or the Maecenas Properties or any event or condition that might reasonably be expected to result in any Material Adverse Effect on Maecenas or the Maecenas Properties, (ii) the business of Maecenas has been conducted only in its ordinary course of business with respect to the Maecenas Properties, (iii) Maecenas has not incurred any material liability, engaged in any material transaction or entered into any material agreement outside the ordinary course of business with respect to the Maecenas Properties, (iv) Maecenas has not suffered any material loss, damage, destruction or other casualty to any of the Maecenas Properties (whether or not covered by insurance) and (v) the Contributor and Maecenas have not taken any of the actions set forth in Section 4.2(a)-(n) except as permitted thereunder.

 

         3.14    Tax Matters. All Tax Returns relating to Maecenas and the Maecenas Properties required to be filed by the Contributors or Maecenas have (and as of the Closing Date will have) been duly and timely filed (taking into account any extension of time to file granted or obtained) with the applicable Taxing authority, and such Tax Returns are true, correct, and complete in all material respects. All Taxes due from the Contributors or from Maec enas relating to the Maecenas Properties have (and as of the Closing Date will have) been fully and timely paid. There are no liens for Taxes (other than for Taxes not yet due and payable) upon Maecenas or any of the Maecenas Properties. There has been no issue raised or adjustment proposed (and to the Knowledge of the Contributors, none is pending) by the IRS or any other Taxing authority in connection with any such Tax Returns, nor have the Contributors or Maecenas received any written notice from the IRS or any such other Taxing authority that any such Tax Return is being audited or may be audited or examined. Neither the Contributors nor Maecenas have agreed to the waiver or extension of any statute of limitations on the assessment or collection of any such Tax or with respect to any such Tax Return. No Contributor is a “foreign person” within the meaning the Section 1445(f)(3) of the Code and the Treasury Regulations thereunder. None of the Maecenas Properties is an interest in any joint ven ture, partnership, or other entity, arrangement, or contract that could be treated as a partnership for federal income Tax purposes. No Contributor is a party to any Tax allocation or sharing agreement with respect to the Maecenas Properties. Maecenas has complied with all Applicable Laws relating to the payment and withholding of Taxes, and has duly and timely withheld and paid over to the appropriate Taxing authority all amounts required to be so withheld and paid under all Applicable Laws. The Contributors and Maecenas have made all deposits required with respect to Taxes due and payable with respect to the Maecenas Properties. Maecenas has always been treated as a partnership for federal income Tax purposes, and Maecenas has not made (and will not make before the Closing Date) any election to be treated as an association taxable as a corporation for federal income Tax purposes. The income derived by Maecenas from the Maecenas Properties is “qualifying income” as that term is defined under Sec tion 7704 of the Code. Maecenas has properly identified all hedging transactions as required by Treasury

 

 

Regulation Section 1.1221-2(f). Neither Maecenas nor any of the Contributors have participated in any “reportable transaction” within the meaning of Section 1.6011-4 of the Treasury Regulations.

 

       3.15             Compliance with Laws.  To the Knowledge of the Contributor, the Contributor and Maecenas have complied in all respects with all Applicable Laws relating to the ownership or operation of the Maecenas Properties, except for noncompliance with such Applicable Laws which, individually or in the aggregate, do not and will not have a Material Adverse Effect on the Contributor, Maecenas or the Maecenas Properties.  The Contributor and Maecenas have not received any written notice from any Governmental Entity, which has not been dis missed or otherwise disposed of, that the Contributor or Contributed Entities have not so complied.  The Contributor and Maecenas have not been charged or, to the Knowledge of the Contributor, threatened with, or under investigation with respect to, any violation of any Applicable Law relating to any aspect of the ownership or operation of the Maecenas Properties, other than violations which, individually or in the aggregate, do not and in the reasonable judgment of the Contributor will not have a Material Adverse Effect on the Contributor, Maecenas or the Maecenas Properties.

 

       3.16    Legal Proceedings. Except as set forth on Schedule 3.16, there are no Proceedings pending or, to the Knowledge of the Contributor, threatened against or involving the Contributor, the Contributed Maecenas Interest, Maecenas or the Maecenas Properties that, individually or in the aggregate, in the reasonable judgment of the Contributor will have a Material Adverse Effect o n Maecenas or the Maecenas Properties. Neither the Contributor nor Maecenas are subject to any judgment, order, writ, injunction, or decree of any Governmental Entity which has had or is reasonably likely to materially affect title to or the value of the Contributed Maecenas Interest or any of the Maecenas Properties. There are no Proceedings pending or, to the Knowledge of the Contributor, threatened against the Contributor, the Contributed Maecenas Interest, Maecenas or the Maecenas Properties, seeking to restrain, prohibit, or obtain damages or other relief in connection with this Agreement or the transactions contemplated hereby or which could reasonably be expected to affect the Contributor’s ability to consummate the transactions contemplated hereby.

 

       3.17             Permits.  The Contributor and Maecenas have not received any written notice from any Governmental Entity and no Proceeding is pending or, to the Knowledge of the Contributor, threatened with respect to any alleged failure by the Contributor or Maecenas to have any Permit the absence of which would have a Material Adverse Effect on the Contributor, Maecenas or the Maecenas Properties.

 

       3.18    Environmental Matters. The Contributor and Maecenas have not received any written notice of any investigation or inquiry regarding the Maecenas Properties from any Governmental Entity under any Applicable Law pertaining to the environment, Hazardous Substances or Hazardous Wastes (“Applicable Environmental Laws”), including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by, inter alia, the Superfund Amendments and Reauthorization Act of 1986 (“CERCLA”), and the Resource Conservation and Recovery Act of 1976, as amended by, inter alia, the Used Oil Recycling Act of 1980, the Solid Waste Disposal Act Amendments of 1980, and the Hazardous and Solid Waste Amendments of 1984 (“RCRA”).  The term “Hazardous

 

Substance” as used herein shall have the meaning specified in CERCLA, and the terms “Hazardous Waste” and “Disposal” shall have the meanings specified in RCRA.

 

       3.19             Revenue and Expense Information; Records.  To the Knowledge of the Contributor, all proceeds of production from the Maecenas Properties are being, and have been, properly paid and accounted for under appropriate division orders, transfer orders or similar documents.  In addition, to Contributor’s Knowledge, Maecenas has been correctly and timely paid by all third parties for the proceeds of Production from all Maecenas Properties.

 

       3.20   No Alienation. Within 120 days of the date hereof, Maecenas has not sold, assigned, conveyed, or transferred or contracted to sell, assign, convey or transfer any right or title to, or interest in, the Maecenas Properties, other than in the ordinary course of business.

 

       3.21    Make-Up Rights. To Contributor’s Knowledge, neither Maecenas, nor any Contributor, has received prepayments (including, but not limited to, payments for gas not taken pursuant to “take-or-pay” or similar arrangements) for any oil or gas produced from the Maecenas Properties as a result of which the obligation does or may exist to deliver oil or gas produced from the Maecenas Properties after the Reference Date without then receiving payment (or without then receiving f ull payment) therefore or to make repayments in cash (and the Contributors have not, since the Reference Date, so delivered any oil or gas from the Maecenas Properties or so made any such repayment in cash).

 

       3.22    Imbalances. To Contributor’s Knowledge, there are no imbalances among the owners of the interests in any wells and units included in the Maecenas Properties that could have a Material Adverse Effect on the net revenues that Maecenas will be entitled to receive from the Maecenas Properties from the then current month’s production.

 

       3.23            Basic Documents.

 

(a)           To the Contributor’s Knowledge, (i) the Contributor and Maecenas are not in breach or default (and no situation exists which with the passing of time or giving of notice would create a breach or default) of its obligations under any Basic Documents, and (ii) no breach or default by any third party (or situation which with the passage of time or giving of notice would create a breach or default) exists under any Basic Documents, to the extent such breach or default (whether by the Contributor, Maecenas or such third party) could reasonably be expected to have a Material Adverse Effect on the Maecenas Properties after the Closing Date;

 

(b)           No Basic Document involves an assumption by the Partnership or its successors of any pre-closing liabilities or claims; and

 

(c)           None of the Basic Documents or other contracts or agreements that comprise part of the Maecenas Properties contain terms, or conditions that are not generally customary in the oil and gas industry.

 

For the purposes of the representations contained in this Section 3.23 (and without limitation of such representations), the non-payment of an amount, or non-performance of an obligation,

 

 

where such non-payment, or non-performance, could result in the forfeiture or termination of rights of the Contributor under a Basic Document, shall be considered material.

 

3.24             Commitments, Abandonments or Proposals.

 

(a)           Maecenas has incurred no expenses, and has made no commitments to make expenditures in connection with (and no other obligations or liabilities have been incurred which would adversely affect) the ownership or operation of the Maecenas Properties by Maecenas on or after the Reference Date, other than routine expenses incurred in the normal operation of existing wells on the Maecenas Properties.

 

(b)           No proposals to Maecenas in excess of $10,000 are currently outstanding to drill additional wells, or to deepen, plug back, or rework existing wells, or to conduct other operations for which consent is required under the applicable operating agreement, or to conduct any other operations, or to abandon any wells, on the Maecenas Properties.

 

       3.25             Production Sales Contracts.  To the Knowledge of the Contributor, there exist no agreements or arrangements for the sale of production from the Maecenas Properties (including calls on, or other rights to purchase, production, whether or not the same are currently being exercised) other than agreements or arrangements which are cancelable on 90 days notice or less without penalty or detriment.

 

       3.26             Area of Mutual Interest.  Maecenas is not a party to any area of mutual interest agreement.

 

       3.27    Payment of Expenses. All expenses (including all bills for labor, materials and supplies used or furnished for use in connection with the Maecenas Properties, and all severance, production, ad valorem, windfall profit and other similar taxes) relating to the ownership or operation of the Maecenas Properties, have been, and are being, paid (timely, and before the same become delinquent) by Maecenas, except such expenses and taxes as are disputed in good faith by Maecenas and for which an adequate accounting reserve has been established by Maecenas.

 

       3.28   Reserve Report Information. To the Knowledge of the Contributor, all information furnished by the Contributor, Maecenas, or representatives thereof, to the Partnership in connection with the preparation of a reserve report with respect to the Maecenas Properties and all information set forth on the exhibits or schedules hereto are true and correct in all material respects and production has not decreased other than normal decline in production rates over time, individually, on a property-by-property or well-by-well basis or in the aggregate, from the pr oduction information furnished in connection with the preparation of the reserve report.

 

       3.29   Oral Contracts. The Contributor and Maecenas have not entered into any oral contract with respect to the Maecenas Properties.

 

       3.30   Preferential Rights and Consents to Assign. To the Contributor’s Knowledge, there are no consents to assignment or waivers of preferential rights to purchase that must be

 

 

obtained from third parties in order for the Contributor to consummate the transactions contemplated by this Agreement.

 

3.31             Brokerage Fees.  The Contributor and Maecenas have not retained any financial advisor, broker, agent or finder or paid or agreed to pay any financial advisor, broker, agent or finder on account of this Agreement or any transaction contemplated hereby.

 

3.32             Investment Intent.

 

(a)           The Contributor is an “accredited investor” within the meaning of Securities and Exchange Commission Rule 501 of Regulation D, because the Contributor is:

 

    (i)           an organization described in Section 501(c)(3) of the Code, a corporation, a Massachusetts or similar business trust, or a partnership,

not formed for the specific purpose of acquiring the Maecenas Interests, with total assets in excess of $5,000,000;

 

    (ii)           a natural person whose individual net worth, or joint net worth with such person’s spouse, at the time hereof and at the Closing exceeds $1,000,000;

 

    (iii)           a natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with such person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year;

 

    (iv)           a trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Maecenas Interests, whose purchase is directed by a sophisticated person (as used in this Section 3.32(a)(iv), “sophisticated person” means a person that has the knowledge and experience in financial and business matters such that the person is capable of evaluating the merits and risks of the investment in the Maecenas Interests); or

 

    (v)           an entity in which all of the equity owners are accredited investors, because such equity owners are persons described in this Section 3.32(a).

 

(b)           The Contributor is acquiring the Partnership Interest for its own account for investment and not with a view to, or for sale or other disposition in connection with, any public distribution of all or any part thereof.

 

 

 

ARTICLE 4

 

CONDUCT OF THE CONTRIBUTORS PENDING CLOSING;

 

4.1           Conduct and Preservation of the Business of Maecenas.  The Contributors hereby covenant and agree with the Partnership that, except as contemplated by this Agreement, during the period from the date hereof to the Closing Date, the Contributors (i) shall cause Maecenas to conduct its operations according to the ordinary course of its business and in material compliance with all Applicable Laws and (ii) shall use their reasonable best efforts to preserve, m aintain and protect the Maecenas Properties.

 

4.2           Restrictions on Certain Actions of the Contributors.  Except as otherwise expressly provided in this Agreement, prior to the Closing Date, the Contributors shall not, without the consent of the Partnership (which consent shall not be unreasonably withheld), cause Maecenas to:

 

(a)           effect any change in the capitalization of Maecenas;

 

(b)           mortgage or pledge any of the Maecenas Properties or create or suffer to exist any Encumbrance thereupon, other than Permitted Encumbrances;

 

(c)           sell, lease, transfer or otherwise dispose of, directly or indirectly, any of the Maecenas Properties, except in the ordinary course of business;

 

(d)           issue, create, incur, assume, guarantee, endorse or otherwise become liable or responsible with respect to (whether directly, contingently or otherwise) any liability, obligation or indebtedness outside the ordinary course of business of Maecenas;

 

(e)           amend, modify or change (i) any existing lease or contract with respect to the Maecenas Properties (other than in the ordinary course of the business of Maecenas), (ii) the application for registration as a registered limited liability partnership of Maecenas or (iii) the Maecenas Partnership Agreement;

 

(f)           waive, release, grant or transfer any rights of value relating to the Maecenas Properties, other than in the ordinary course of business;

 

(g)           delay payment of any account payable or any known or accrued liability relating to the Maecenas Properties beyond the earlier of thirty (30) days or its due date or the date when such liability would have been paid in the ordinary course of business, unless such delay is due to a good faith dispute as to liability or amount;

 

(h)           permit any current insurance or reinsurance or continuation coverage to lapse if such policy insures risks, contingencies or liabilities (including product liability) related to the Maecenas Properties other than in connection with any advance renewal or replacement of an existing insurance policy;

 

(i)           except as set forth in this Section 4.2, take any action which would make any of the representations or warranties of the Contributors untrue as of any time from the date of this Agreement to the Closing Date, or would result in any of the conditions set forth in this Agreement not being satisfied;

 

(j)           merge into or with or consolidate with any other Person or acquire all or substantially all of the business or assets of any other Person;

 

(k)           declare, set aside, make or pay any distribution in respect of the Maecenas Interests, except that immediately prior to the Closing, Maecenas shall distribute to the Contributors cash in the amount of net cash receipts and disbursements attributable to the Contributors’ Working Interests from the Reference Date to the Closing Date, as mutually agreed by the parties;

 

(l)           enter into any commitment for capital expenditures of Maecenas;

 

(m)           take any action which would adversely affect the ability of the parties to consummate the transactions contemplated by this Agreement; or

 

(n)           agree in writing or otherwise take any actions (i) described in this Section 4.2, or (ii) that would be reasonably expected to cause a Material Adverse Effect on the Contributor, the Contributed Maecenas Interest, Maecenas or the Maecenas Properties.

 

ARTICLE 5

 

5.1           Pre-Closing Actions Concerning Working Interests.  Prior to the Closing, the Contributors shall contribute all of their right, title and interest in and to the Contributors’ Working Interests to Maecenas pursuant to the Contributors’ Conveyances.  Subsequent to such transfer, Maecenas shall transfer all of its right, title and interest in and to the Maecenas Working Interests to Dorchester Minerals Operating or its designee, retaining the Maecenas NPI, pursuant to the Assignment, Conveyance and Assumption Agreement.

 

5.2   Access to Information; Confidentiality. The Contributors agree to cause Maecenas to afford the Partnership and its accountants, counsel, financial advisors and other representatives, full access, during normal business hours upon reasonable notice throughout the period prior to the Closing, to the Maecenas Properties and Records. During such period, Maecenas shall furnish promptly such information concerning the Maecenas Properties and the business of Maecenas as the Partnership shall reasonably request; provided, however, such investigation shall not un reasonably disrupt the operations of Maecenas. Prior to the Closing, the

 

        5.3           Notification of Certain Matters.   Each party shall give reasonably prompt notice to the other parties of (i) any fact or circumstance which would be likely to cause any representation or warranty of such party contained in this Agreement to be untrue or inaccurate in any material respect and (ii) any material failure of such party to comply with or satisfy any covenant, condition or agreement to be complied with or satis fied by it hereunder.  The delivery of any notice pursuant to this Section 5.3 shall not be deemed to (i) modify the representations or warranties hereunder of the party delivering such notice, (ii) modify the conditions set forth in ARTICLE 6 or (iii) limit or otherwise affect the remedies available hereunder to any party receiving such notice.

 

5.4           Reasonable Best Efforts.  Each party hereto agrees that it will not voluntarily undertake any course of action inconsistent with the provisions or intent of this Agreement and will use its reasonable best efforts to take, or cause to be taken, all action and to do, or cause to be done, all things reasonably necessary, proper or advisable under Applicable Laws to consummate the transactions contemplated by this Agreement, including, without limitation, (i) cooperating in determining whether any other consents, approvals, orders, authorizations, waivers, declarations, filings or registrations of or with any Governmental Entity or third party are required in connection with the consummation of the transactions contemplated hereby, (ii) using its reasonable best efforts to obtain any such consents, approvals, orders, authorizations and waivers and to effect any such declarations, filings and registrations, (iii) using its reasonable best efforts to cause to be lifted or rescinded any injunction or restraining order or other order adversely affecting the ability of the parties to consummate the transactions contemplated hereby, (iv) using its reasonable best efforts to defend, and to cooperate in defending, all lawsuits or other legal proceedings challenging this Agreement or the consummation of the transactions contemplated hereby and (v) executing of any additional instruments necessary to consummate the transactions contemplated hereby.

 

5.5           Public Announcements.  The Partnership may from time-to-time make such press releases or otherwise make public statements with respect to this Agreement of the transactions contemplated hereby as the Partnership deems appropriate, in its sole discretion.  No Contributor shall issue any press release or otherwise make any public statement with respect to this Agreement or the transactions contemplated hereby without the prior written consent of the Partnership.

 

5.6 Amendment of Schedules. Each party hereto agrees that, with respect to the representations and warranties of such party contained in this Agreement, such party shall have the continuing obligation until the Closing to supplement or amend the Schedules hereto with respect to any matter hereafter discovered which, if known at the date of this Agreement,

 

 

5.7           Fees and Expenses.  All fees and expenses, including fees and expenses of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such fee or expense, whether or not the Closing shall have occurred.

 

5.8           Taxes.

 

(a)           The Partnership and each Contributor agree to treat the contribution of the Maecenas Interests pursuant to Section 1.2 as a contribution by Contributors to the Partnership in exchange for the Subject Units pursuant to Section 721(a) of the Code and the Treasury Regulations thereunder.

 

(b)           The parties shall agree to a value of the Maecenas Interests and the allocation of such agreed value among the Maecenas Properties prior to the Closing Date (the “Allocation”).  The Contributors and the Partnership shall report the transactions contemplated hereby on all Tax Returns, including, but not limited to, for purposes of future allocations under Section 704(c) of the Code, in a manner consistent with the Allocation.  If, contrary to the intent of the parties hereto as expressed in this Section 5.8(b), any Taxing authority makes or proposes an allocation different from the Allocation, the Contributors and the Partnership shall cooperate with each other in good faith to contest such Taxing authority’s allocation (or proposed allocation); provided, however, that, after consultation with the party (or parties) adversely affected by such allocation (or proposed allocation), the other party (or parties) hereto may file such protective claims or Tax Returns as may be reasonably required to protect its (or their) interests.

 

(c)           Each Contributor agrees to report to the Partnership its tax basis in each Maecenas Property within 30 days after the Closing Date.

 

(d)           The Contributors shall timely file all Tax Returns required to be filed by or with respect to Maecenas, the Maecenas Properties and the Maecenas Working Interests for any Tax period ending on or before the Closing Date (including, for the avoidance of doubt, the final federal income Tax Return for Maecenas on IRS Form 1065 for the period that ends on the Closing Date).  The Contributors shall pay all federal and state income Taxes (excluding Texas franchise taxes) due or claimed by any Taxing authority to be due from such party with respect to Maecenas (including income Taxes attributable to the income shown on the aforementioned final IRS Form 1065), the Maecenas Properties, the Maecenas Working Interests and any production therefrom for all periods endin g on or before the Closing Date.  The Partnership shall file all other Tax Returns required to be filed by or with respect to Maecenas and the Maecenas Properties

 

and shall pay or cause to be paid all other Taxes owed with respect to Maecenas or any of the Maecenas Properties. For purposes of this Section 5.8(d), any franchise Tax paid or payable with respect to Maecenas shall be allocated to the taxable period during which the income, operations, assets or capital comprising the base of such Tax is measured, regardless of whether the right to do business for another taxable period is obtained by the payment of such Tax. The parties shall each provide each other with all information reasonably necessary to prepare a Tax Return. Notwithstanding anything in this Agreement to the contrary, each party to this Agreement shall be responsible for their own federal, state and local income tax liabilities (and, except as set forth above, any franchise tax liabilities cal culated with respect to net income).

 

(e)           The Contributors shall control and bear the cost of any audit or contest relating to Maecenas or the Maecenas Properties with respect to a Tax period (or portion thereof) ending on or before the Closing Date, and the Partnership shall control and bear the cost of any other audit or contest.  The party in control of an audit or controversy shall keep the other party informed of the status of the audit or controversy (including providing copies of correspondence and pleadings).  Neither the Partnership nor any Contributor shall settle any audit or contest in a way that would in such party’s reasonable judgment adversely affect the other party without the other party’s written consent, which the other party shall not unreasonably withhol d.  The Partnership and the Contributors shall each provide the other with all information reasonably necessary to conduct an audit or contest with respect to Taxes.

 

(f)           The Contributors shall be entitled to any refund of Taxes for which they are responsible for payment pursuant to the provisions of Section 5.8(d) above.  The Partnership shall be entitled to any refund of Taxes for which it is responsible for payment pursuant to the provisions of Section 5.8(d) above.  If a party receives a refund to which the other party is entitled, the party receiving the refund shall pay it to the party entitled to the refund within five (5) Business Days after receipt.

 

(g)           The Contributors and the Partnership shall be jointly responsible for state or local transfer, sales, use, stamp, registration or other similar Taxes resulting from the transactions contemplated by this Agreement.

 

(h)           To the extent, and only to the extent, reasonably necessary to comply with applicable securities laws and tax laws and notwithstanding anything in this Agreement to the contrary or in any other agreement to which the Partnership or any Contributor is bound, the parties hereto (and each employee, representative, or other agent of any of the parties) are expressly authorized to disclose the U.S. federal income “tax treatment” and “tax structure” (as those terms are defined in Sections 1.6011-4I(8) and (9) of the Treasury Regulations, respectively) of the transactions contemplated by this Agreement and those materials (including opinions or other tax analyses) that are provided to such parties relating to such “tax treatment” and  220;tax structure” of the transactions

 

contemplated by this Agreement.  For these purposes, “tax structure” is limited to facts relevant to the U.S. federal income tax treatment of the transaction described herein.

 

5.9           Post-Closing Assurances.  After the Closing, the Contributors and the Partnership shall execute, acknowledge and deliver or cause to be executed, acknowledged and delivered such instruments and take such other action as may be necessary or advisable to carry out their obligations under this Agreement and under any exhibit, document, certificate or other instrument delivered pursuant hereunto.

 

ARTICLE 6

 

CONDITIONS

 

6.1           Conditions to Obligations of the Parties.  The obligations of the parties to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment on or prior to the Closing Date of each of the following conditions:

 

(a)           Legal Proceedings.  No preliminary or permanent injunction or other order, decree, or ruling issued by a Governmental Entity, and no statute, rule, regulation, or executive order promulgated or enacted by a Governmental Entity, shall be in effect which restrains, enjoins, prohibits, or otherwise makes illegal the consummation of the transactions contemplated hereby; and no Proceeding by a Governmental Entity shall have been commenced or threatened (and be pending or threatened on the Closing Date) against the Partnership, any Contributor, Maecenas or the Maecenas Properties, or any of their respective affiliates, associates, directors, or officers seeking to prevent or challenging the transac tions contemplated hereby.

 

(b)           Consents.  All consents, approvals, orders, authorizations and waivers of, and all declarations, filings and registrations with, third parties (including Governmental Entities) required to be obtained or made by or on the part of the parties hereto, or otherwise reasonably necessary for the consummation of the transactions contemplated hereby, shall have been obtained or made, and all such consents, approvals, orders, authorizations, waivers, declarations, filings or registrations shall be in full force and effect at the time of Closing, unless the failure to obtain or make any such consent, approval, order, authorization, waiver, declaration, filing or registration would not have a Material Adverse Effect on the Partnership or the Contributors.

 

6.2           Conditions to Obligation of the Contributors.  The obligation of the Contributors to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment on or prior to the Closing Date of each of the following conditions:

 

(a)    Representations and Warranties. All the representations and warranties of the Partnership contained in this Agreement and in any agreement, instrument or document delivered pursuant hereto or in connection herewith on or

 

 

prior to the Closing Date, shall be true and correct in all material respects on and as of the Closing Date as if made on and as of such date, except to the extent that any such representation or warranty is made as of a specified date, in which case such representation or warranty shall have been true and correct in all material respects as of such specified date.

 

(b)           Covenants and Agreements.  The Partnership shall have performed and complied with in all material respects all covenants and agreements required by this Agreement to be performed or complied with by it on or prior to the Closing Date.

 

(c)           No Material Adverse Effect.  Since the date of this Agreement, there shall not have occurred any Material Adverse Effect with respect to the Partnership.

 

(d)           Certificates.  The Contributors shall have received a certificate from the Partnership, dated the Closing Date, representing and certifying that the conditions set forth in Sections 6.1 and 6.2 have been fulfilled and a certificate as to the incumbency of the officer(s) executing this Agreement on behalf of the Partnership.

 

6.3           Conditions to Obligation of the Partnership.  The obligation of the Partnership to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment on or prior to the Closing Date of each of the following conditions:

 

(a)           Representations and Warranties.   All the representations and warranties of the Contributors contained in this Agreement and in any agreement, instrument  or document delivered pursuant hereto or in connection herewith on or prior to the Closing Date, shall be true and correct in all material respects on and as of the Closing Date as if made on and as of such date, except to the extent that any such representation or warranty is made as of a specified date, in which case such representation or warranty shall have been true and correct in all material respects as of such specified date.

 

(b)           Covenants and Agreements.  Each Contributor shall have performed and complied with in all material respects all covenants and agreements required by this Agreement to be performed or complied with by it on or prior to the Closing Date.

 

(c)           No Material Adverse Effect.  Since the date of this Agreement, there shall not have occurred any Material Adverse Effect with respect to the Maecenas Properties.

 

(e)           Assignments of Maecenas Interests.  The Contributors shall have delivered to the Partnership duly executed assignments of the Maecenas Interests, in the form of the assignment attached as Exhibit 6.3(e) hereto.

 

(f)           Pre-Closing Transaction Documents.  The Contributors shall have executed and delivered to the Partnership the Contributors’ Conveyances and the Assignment, Conveyance and Assumption Agreement.

 

(g)           Due Diligence.  In consideration of the time and expense to be incurred by the Partnership in connection with the transactions contemplated hereby, the due diligence investigation of the Partnership with respect to the Maecenas Properties shall have been completed to the satisfaction of the Partnership, in its sole discretion, including but not limited to confirmation of the accuracy of information described in Sections 3.8 and 3.19 of this Agreement.

 

ARTICLE 7

 

TERMINATION, AMENDMENT AND WAIVER

 

7.1           Termination.  This Agreement may be terminated and the transactions contemplated hereby abandoned at any time prior to the Closing in the following manner:

 

(a)           By unanimous written consent of the parties hereto;

 

(b)           By the Contributors or the Partnership, if:

 

(i)           The Closing shall not have occurred on or before March 31, 2010, unless such failure to close shall be due to a material breach of this Agreement by the party seeking to terminate this Agreement pursuant to this Section 7.1(b)(i); or

 

(ii)           There shall be any Applicable Law that makes consummation of the transactions contemplated hereby illegal or otherwise prohibited or a Governmental Entity shall have issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated hereby, and such order, decree, ruling or other action shall have become final and nonappealable;

 

(c)           By the Contributors, if (i) any of the representations and warranties of the Partnership contained in this Agreement shall not be true and correct such that the condition set forth in Section 6.2(a) would not be satisfied, or (ii) the Partnership shall have failed to fulfill in any material respect any of its material obligations under this Agreement, which failure is material to the obligations of such party under this Agreement, and, in the case of each of clauses (i) and (ii) of this Section 7.1(c), such misrepresentation, breach of warranty or failure (provided it can be cured) has not been cured within 30 days of notice thereof by the Contributors.

 

 

(d)           By the Partnership, if (i) any of the representations and warranties of any  Contributor contained in this Agreement shall not be true and correct such that the condition set forth in Section 6.3(a) would not be satisfied or (ii) any Contributor shall have failed to fulfill in any material respect any of their material obligations under this Agreement, which failure is material to the obligations of such party under this Agreement, and, in the case of each of clauses (i) and (ii) of this Section 7.1(d), such misrepresentation, breach of warranty or failure (provided it can be cured) has not been cured within 30 days of notice thereof by the Partnership.

 

7.2           Effect of Termination.  In the event of the termination of this Agreement pursuant to Section 7.1 by the Partnership or the Contributors, written notice thereof shall forthwith be given to the Partnership or the Contributors, as applicable, specifying the provision hereof pursuant to which such termination is made, and this Agreement shall become void and have no effect, and there shall be no liability hereunder on the part of any part y hereto or the general partner of the Partnership, or any of their respective directors, officers, employees, shareholders, unitholders or representatives, except that the agreements contained in this Section 7.2 and ARTICLE 9 shall survive the termination hereof.  Nothing contained in this Section 7.2 shall otherwise relieve any party from liability for damages actually incurred as a result of any breach of this Agreement.

 

7.3           Amendment.  Any provision of this Agreement (including the Exhibits hereto) may be amended, to the extent permitted by law, prior to the Closing Date if, and only if, such amendment is in writing and signed by the parties hereto.

 

7.4           Waiver.  Any of the parties to this Agreement may (i) waive any inaccuracies in the representations and warranties of the other parties contained herein or in any document, certificate or writing delivered pursuant hereto or (ii) waive compliance by the other parties with any of the other’s agreements or fulfillment of any conditions to its own obligations contained herein.  Any agreement on the part of a party hereto to any such waiver shall be valid only if set forth in an instrument in writing signed by or on behalf of such party.  No failure or delay by a party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

 

 

8.1           Survival of Representations, Warranties, Covenants and Agreements.  All of the representations and warranties of the Partnership in ARTICLE 2 and the Contributors in ARTICLE 3 shall survive the Closing and continue in full force and effect through and including the first anniversary of the Closing Date.  All other covenants and agreements contained in this Agreement shall survive the Closing until fully performed.

 

8.2           Indemnification.

(a)           Subject to Section 8.1, the Contributors hereby agree to indemnify and hold the Partnership and its Affiliates and their respective directors, managers, officers, employees, stockholders, unitholders, members, partners, agents, attorneys, representatives, successors and assigns (collectively, the “Partnership Indemnified Parties”) harmless from and against, and pay to the applicable Partnership Indemnified Parties the amount of, any and all losses, liabilities, claims, obligations, deficiencies, demands, judgments, damages (including incidental and consequential damages), interest, fines, penalties, claims, suits, actions, causes of action, assessments, awards, costs and expenses (including attorneys’ and other professionals’ fees), or any diminution in value, whether or not involving a third party claim (individually, a “Loss” and, collectively, “Losses”):

 

(i)           based upon, attributable to or resulting from the failure of any of the representations or warranties made by the Contributors in the Transaction Documents to be true and correct in all respects at and as of the date hereof and at and as of the Closing Date; and

 

(ii)           based upon, attributable to or resulting from the breach of any covenant or other agreement on the part of any Contributor under any Transaction Document.

 

(b)           Each Contributor’s indemnity shall be several and limited to the fair market value on the Closing Date of the Subject Units received by the Contributor at the Closing.

 

(c)           Subject to Section 8.1, the Partnership hereby agrees to indemnify and hold the Contributors and their Affiliates and their respective stockholders, unitholders, directors, managers, employees, members, partners, agents, attorneys, representatives, successors and permitted assigns (collectively, the “Contributors’ Indemnified Parties”) harmless from and against, and pay to the applicable Contributors’ Indemnified Parties the amount of, any and all Losses:

(i)           based upon, attributable to or resulting from the failure of any of the representations or warranties made by the Partnership in any Transaction Document to be true and correct in all respects at the date hereof and as of the Closing Date; and

 

(ii)           based upon, attributable to or resulting from the breach of any covenant or other agreement on the part of the Partnership under any Transaction Document.

 

(d)           The remedy of indemnification set forth in this ARTICLE 8 shall be in addition to any other remedies that any indemnified party may have under Applicable Laws (whether asserted in a proceeding at law or in equity).

 

8.3           Indemnification Procedures.

(a)           A claim for indemnification for any matter not involving a third party claim must be asserted by notice to the party from whom indemnification is sought.

 

(b)           In the event that any Proceedings shall be instituted or that any claim or demand shall be asserted by any third party in respect of which indemnification may be sought under Section 8.2 (“Third Party Claim”), the indemnified party shall promptly cause written notice of the assertion of any Third Party Claim of which it has knowledge which is covered by this indemnity to be forwarded to the indemnifying party.  The failure of the indemnified party to give reasonably prompt notice of any Third Party Claim shall not release, waive or otherwise affect the indemnifying party’s obligations with respect thereto unless the indemnifying party can demonstrate actual loss and prejudice as a result of such failure.  Subject to the provisions of this Section 8.3, the indemnifying party shall have the right, at its sole expense, to be represented by counsel of its choice and to defend against, negotiate, settle or otherwise deal with any Third Party Claim which relates to any Losses indemnified against by it hereunder; provided that the indemnifying party shall have acknowledged in writing to the indemnified party its unqualified obligation to indemnify the indemnified party as provided hereunder.  If the indemnifying party elects to defend against, negotiate, settle or otherwise deal with any Third Party Claim which relates to any Losses indemnified against by it hereunder, it shall within ten days of the indemnified party’s written notice of the assertion of such Third Party Claim (or sooner, if the nature of the Third Party Claim so requires) notify the indemnified party of its intent to do so; provided that the indemnifying party must conduct its defense of the Third Party Claim actively and diligently thereafter in order to preserve its rights in this regard.  If the indemnifying party elects not to defend against, negotiate, settle or otherwise deal with any Third Party Claim which relates to any Losses indemnified against by it hereunder, fails to notify the indemnified party of its election as herein provided or contests its obligation to indemnify the indemnified party for such Losses under this Agreement, the indemnified party may defend against, negotiate, settle or otherwise deal with such Third Party Claim.  If the indemnified party defends any Third Party Claim, then the indemnifying party shall reimburse the indemnified party for the expenses of defending such Third Party Claim upon submission of periodic bills.  If the indemnifying party shall assume the defense of any Third Party Claim, the indemnified party may participate, at his or its own expense, in the defense of such Third Party Claim; provided that such indemnified party shall be entitled to participate in any such defense with separate counsel at the expense of the indemnifying party if (i) so requested by the indemnifying party to participate or (ii) in the reasonable opinion of counsel to the indemnified party a conflict or potential conflict exists between the indemnified party and the indemnifying party that would make such separate representation advisable; and provided, further, that the indemnifying party shall not be required to pay for more than one such counsel (plus any appropriate local counsel) for all indemnified parties in

 

connection with any Third Party Claim.  Each party hereto agrees to provide each other party with reasonable access to such documents and information as may reasonably be requested in connection with the defense, negotiation or settlement of any such Third Party Claim.  Notwithstanding anything in this Section 8.3 to the contrary, neither the indemnifying party nor the indemnified party shall, without the written consent of the other party, which shall not be unreasonably withheld, settle or compromise any Third Party Claim or permit a default or consent to entry of any judgment unless the claimant (or claimants) and such party provide to such other party an unqualified release from all liab ility in respect of the Third Party Claim.  If the indemnifying party makes any payment on any Third Party Claim, the indemnifying party shall be subrogated, to the extent of such payment, to all rights and remedies of the indemnified party to any insurance benefits or other claims of the indemnified party with respect to such Third Party Claim.

 

(c)           After any final decision, judgment or award shall have been rendered by a Governmental Entity of competent jurisdiction and the expiration of the time in which to appeal therefrom, or a settlement shall have been consummated, or the indemnified party and the indemnifying party shall have arrived at a mutually binding agreement, in each case with respect to an Third Party Claim hereunder, the indemnified party shall forward to the indemnifying party notice of any sums due and owing by the indemnifying party pursuant to this Agreement with respect to such matter and the indemnifying party shall pay all of such remaining sums so due and owing to the indemnified party by wire transfer of immediately available funds within 20 Business Days after the date of such notice.< /font>

 

ARTICLE 9

 

MISCELLANEOUS

 

9.1           Notices.  All notices, requests, demands and other communications required or permitted to be given or made hereunder by any party hereto shall be in writing and shall be deemed to have been duly given or made if (i) delivered personally, (ii) transmitted by first class registered or certified mail, postage prepaid, return receipt requested, (iii) sent by prepaid overnight courier service or (iv) sent by telecopy or facsimile transmission, answer back requested, to the parties at the following addresses (or at such other addresses as shall be specified by the parties by like notice):< /div>