PURCHASEAND SALE AGREEMENT BYAND BETWEEN TALONOIL & GAS LLC, ASSELLER, AND ENERVESTENERGY INSTITUTIONAL FUND XI-A, L.P.,ENERVEST ENERGY INSTITUTIONALFUND XI-WI, L.P., ENERVEST ENERGY INSTITUTIONAL FUND XII-A,L.P., ENERVEST ENERGY INSTITUTIONAL FUND XII-WIB, L.P., ENERVEST ENERGYINSTITUTIONAL FUND XII-WIC, L.P., ENERVEST HOLDING, L.P. AND EVPROPERTIES, L.P., COLLECTIVELY ASPURCHASER _________________________________________ EXECUTIONDATE:OCTOBER 25, 2010 EFFECTIVE DATE:OCTOBER1,2010 _________________________________________ TABLE OFCONTENTS

Section 5.13          Consents and Preferential Purchase Rights.  Except as set forth in Schedule 5.13, none of the Properties, or any portion thereof, is subject to any preferential rights to purchase or required Third Party consents to assignment which may be applicable to the transactions contemplated by this Agreement, except consents and approvals of assignments by Governmental Bodies that are customarily obtained after Closing (including Customary Post-Closing Consents).

 

Section 5.14          Properties.  No default exists in the performance of any obligation of Seller under the Leases that would entitle the lessor thereunder to cancel or terminate any such Leases, and, except as set forth in Schedule 5.14, no party to any Lease or any successor to the interest of such party has filed or, to Seller’s knowledge, threatened in writing to file any action to terminate, cancel, rescind or procure judicial reformation of any such Lease.

 

Section 5.15          Non-Consent Operations.  Except as disclosed on Schedule 5.15 or otherwise reflected on Exhibit A-1 or Exhibit A-2, as applicable, no operations are being conducted or have been conducted on the Properties with respect to which Seller has elected to be a nonconsenting party under the applicable operating agreement and with respect to which all of Seller’s rights have not yet reverted to it.

 

Section 5.16          Certain Disclaimers.

 

(a)           EXCEPT AS AND TO THE EXTENT EXPRESSLY SET FORTH IN ARTICLE 4, THIS ARTICLE 5, IN THE CERTIFICATE OF SELLER TO BE DELIVERED PURSUANT TO SECTION 9.2(c) OR IN THE CONVEYANCES TO BE DELIVERED BY SELLER TO PURCHASER HEREUNDER, (i) SELLER MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS, STATUTORY OR IMPLIED, AND (ii) SELLER EXPRESSLY DISCLAIMS ALL LIABILITY AND RESPONSIBILITY FOR ANY STATEMENT OR INFORMATION MADE OR COMMUNICATED (ORALLY OR IN WRITING) TO PURCHASER OR ANY OF ITS AFFILIATES, EMPLOYEES, AGENTS, CONSULTANTS OR REPRESENTATIVES (INCLUDING ANY OPINION, INFORMATION OR ADVICE THAT MAY HAVE BEEN PROVIDED TO PURCHASER BY ANY PERSON OF THE SELLER GROUP).   

(b)           EXCEPT AS AND TO THE EXTENT EXPRESSLY SET FORTH IN ARTICLE 4, THIS ARTICLE 5, IN THE CERTIFICATE OF SELLER TO BE DELIVERED PURSUANT TO SECTION 9.2(c) OR IN THE CONVEYANCES TO BE DELIVERED BY SELLER TO PURCHASER HEREUNDER, WITHOUT LIMITING THE GENERALITY OF SECTION 5.16(a), SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, ORAL OR WRITTEN, AS TO (i) TITLE TO ANY OF THE ASSETS, (ii) THE CONTENTS, CHARACTER OR NATURE OF ANY DESCRIPTIVE MEMORANDUM, OR ANY REPORT OF ANY PETROLEUM ENGINEERING CONSULTANT, OR ANY GEOLOGICAL OR SEISMIC DATA OR INTERPRETATION, RELATING TO THE ASSETS, (iii) THE QUANTITY, QUALITY OR RECOVERABILITY OF HYDROCARBONS IN OR FROM THE ASSETS, (iv) ANY ESTIMATES OF THE VALUE OF THE ASSETS OR FUTURE REVENUES GENERATED BY THE ASSETS, (v) THE PRODUCTION OF PETROLEUM SUBSTANCES FROM THE ASSETS, OR WHETHER PRODUCTION HAS BEEN CONTINUOUS OR IN PAYING QUANTITIES, (vi) THE MAINTENANCE, REPAIR, CONDITION, QUALITY, SUITABILITY, DESIGN OR MARKETABILITY OF THE ASSETS OR (vii) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE AVAILABLE OR COMMUNICATED TO THE PURCHASER GROUP IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY DISCUSSION OR PRESENTATION RELATING THERETO (INCLUDING ANY ITEMS PROVIDED IN CONNECTION WITH SECTION 7.1), AND FURTHER DISCLAIM ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR SAMPLES, IT BEING EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES THAT PURCHASER SHALL BE DEEMED TO BE OBTAINING THE EQUIPMENT AND OTHER TANGIBLE PROPERTY TRANSFERRED HEREUNDER IN ITS PRESENT STATUS, CONDITION AND STATE OF REPAIR, “AS IS” AND “WHERE IS” WITH ALL FAULTS, AND THAT PURCHASER HAS MADE OR CAUSED TO BE MADE SUCH INSPECTIONS AS PURCHASER DEEMS APPROPRIATE.

 

(c)           EXCEPT AS AND TO THE EXTENT EXPRESSLY PROVIDED IN ARTICLE 4, SELLER SHALL NOT HAVE ANY LIABILITY IN CONNECTION WITH AND HAS NOT AND WILL NOT MAKE (AND HEREBY DISCLAIMS) ANY REPRESENTATION OR WARRANTY REGARDING ANY MATTER OR CIRCUMSTANCE RELATING TO ENVIRONMENTAL LAWS, ENVIRONMENTAL DEFECTS, ENVIRONMENTAL LIABILITIES, THE RELEASE OF HAZARDOUS SUBSTANCES, HYDROCARBONS OR NORM INTO THE ENVIRONMENT OR THE PROTECTION OF HUMAN HEALTH, SAFETY, NATURAL RESOURCES OR THE ENVIRONMENT, OR ANY OTHER ENVIRONMENTAL CONDITION OF THE ASSETS, AND NOTHING IN THIS AGREEMENT OR OTHERWISE SHALL BE CONSTRUED AS SUCH A REPRESENTATION OR WARRANTY, AND PURCHASER SHALL BE DEEMED TO BE TAKING THE ASSETS “AS IS” AND “WHERE IS” FOR PURPOSES OF THEIR ENVIRONMENTAL CONDITION.

 

 

Each Purchaser and EVOC, severally and not jointly, represents and warrants to Seller the following with respect to itself only:

 

Section 6.1            Existence and Qualification.  Each Purchaser is a limited partnership, validly existing, and in good standing under the Laws of the State of Delaware and is, or will be at the time of Closing, duly qualified to do business in the State of Texas.  EVOC is a limited liability company validly existing, and in good standing under the Laws of the State of Delaware and is duly qualified to do business in the State of Texas.

 

Section 6.2            Power.  Purchaser has the requisite power to enter into and perform this Agreement and consummate the transactions contemplated by this Agreement.

 

Section 6.3            Authorization and Enforceability.  The execution, delivery and performance of this Agreement and all documents required to be executed and delivered by Purchaser at Closing, and the performance of the transactions contemplated hereby and thereby, have been duly and validly authorized by all necessary limited liability company, corporate or partnership action on the part of Purchaser.  This Agreement has been duly executed and delivered by Purchaser (and all documents required hereunder to be executed and delivered by Purchaser at Closing will be duly executed and delivered by Purchaser) and this Agreement constitutes, and at the Closing such documents will constitute, the valid and binding obligations of Purchaser, enforceable in accordance with their terms except as such enforceability may be limited by applicable bankruptcy or other similar Laws affecting the rights and remedies of creditors generally as well as by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

 

Section 6.4           No Conflicts.  The execution, delivery and performance of this Agreement by Purchaser, and the transactions contemplated by this Agreement, will not (a) violate any provision of the certificate of incorporation, bylaws, agreement of limited partnership or other organizational documents of Purchaser, (b) result in a material default (with due notice or lapse of time or both) or the creation of any lien or encumbrance or give rise to any right of termination, cancellation or acceleration under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license or agreement to which Purchaser is a party, (c) violate any judgment, order, ruling, or regulation applicable to Purchaser as a party in interest, or (d) violate any Laws applicable to Purchaser or any of its assets.

 

Section 6.5            Liability for Brokers’ Fees.  Seller shall not directly or indirectly have any responsibility, liability or expense, as a result of undertakings or agreements of Purchaser, for brokerage fees, finder’s fees, agent’s commissions or other similar forms of compensation in connection with this Agreement or any agreement or transaction contemplated hereby.

 

Section 6.6            Litigation.  There are no actions, suits or proceedings pending, or to Purchaser’s knowledge, threatened in writing, before any Governmental Body or arbitrator against Purchaser which are reasonably likely to materially impair Purchaser’s ability to perform its obligations under this Agreement or any document required to be executed and delivered by Purchaser at Closing.  As used in this Section 6.6, “Purchaser’s knowledge” is limited to information personally known by officers of Purchaser.

 

Section 6.7           Financing.  Purchaser has and will maintain between the Execution Date and Closing sufficient cash, available lines of credit or other sources of immediately available funds (in United States dollars) to enable it to pay the Closing Payment to Seller at the Closing.

 

Section 6.8            SEC Compliance.  Purchaser is acquiring the Assets for its own account for use in its trade or business, and not with a view toward or for sale associated with any distribution thereof, nor with any present intention of making a distribution thereof within the meaning of the Securities Act of 1933, as amended, and applicable state securities Laws.

Section 6.9            Independent Evaluation.

 

(a)           Purchaser is knowledgeable of the oil and gas business and of the usual and customary practices of oil and gas producers, including those in the areas where the Assets are located.

 

(b)          Purchaser is a party capable of making such investigation, inspection, review and evaluation of the Assets as a prudent purchaser would deem appropriate under the circumstances including with respect to all matters relating to the Assets, their value, operation and suitability.

 

(c)           In making the decision to enter into this Agreement and consummate the transactions contemplated hereby, Purchaser has relied solely on the basis of its own independent due diligence investigation of the Assets and the terms and conditions of this Agreement.

 

Section 6.10          Consents, Approvals or Waivers.  Purchaser’s execution, delivery and performance of this Agreement (and any document required to be executed and delivered by Purchaser at Closing) is not and will not be subject to any consent, approval, or waiver from any Governmental Body or other third Person, except consents and approvals of assignments by Governmental Bodies that are customarily obtained after Closing.

 

Section 6.11          Bankruptcy.  There are no bankruptcy, insolvency, reorganization or receivership proceedings pending against, being contemplated by, or threatened against Purchaser.

 

Section 6.12          Qualification.  Purchaser is, or as of the Closing Date will be, qualified under applicable Law or with the appropriate Governmental Bodies, as applicable, to own and operate the Assets and has, or as of the Closing will have, complied with all necessary bonding requirements of Governmental Bodies required for Purchaser’s ownership and operation of the Assets.

 

Section 6.13          Limitation.  Purchaser acknowledges the following:

 

(a)           EXCEPT AS AND TO THE EXTENT EXPRESSLY SET FORTH IN ARTICLE 4, THIS ARTICLE 5, IN THE CERTIFICATE OF SELLER TO BE DELIVERED PURSUANT TO SECTION 9.2(c) OR IN THE CONVEYANCES TO BE DELIVERED BY SELLER TO PURCHASER HEREUNDER, THERE ARE NO REPRESENTATIONS AND WARRANTIES, EXPRESS, STATUTORY OR IMPLIED, BY SELLER AS TO THE ASSETS OR PROSPECTS THEREOF AND PURCHASER HAS NOT RELIED UPON ANY ORAL OR WRITTEN INFORMATION PROVIDED BY SELLER.

 

(b)           EXCEPT AS AND TO THE EXTENT EXPRESSLY PROVIDED IN ARTICLE 4, SELLER AND THE OTHER MEMBERS OF THE SELLER GROUP SHALL NOT HAVE ANY LIABILITY IN CONNECTION WITH AND SELLER HAS DISCLAIMED, HAS NOT MADE AND WILL NOT MAKE ANY REPRESENTATION OR WARRANTY REGARDING ANY MATTER OR CIRCUMSTANCE RELATING TO ENVIRONMENTAL LAWS, ENVIRONMENTAL DEFECTS, ENVIRONMENTAL LIABILITIES, THE RELEASE OF HAZARDOUS SUBSTANCES, HYDROCARBONS OR NORM INTO THE ENVIRONMENT OR PROTECTION OF HUMAN HEALTH, SAFETY, NATURAL RESOURCES OR THE ENVIRONMENT OR ANY OTHER ENVIRONMENTAL CONDITION OF THE ASSETS.

(c)           THE ASSETS HAVE BEEN USED FOR EXPLORATION, DEVELOPMENT AND PRODUCTION OF HYDROCARBONS AND THERE MAY BE PETROLEUM, PRODUCED WATER, WASTE, OR OTHER SUBSTANCES OR MATERIALS LOCATED IN, ON OR UNDER THE PROPERTIES OR ASSOCIATED WITH THE ASSETS.  EQUIPMENT AND SITES INCLUDED IN THE ASSETS MAY CONTAIN ASBESTOS, NORM OR OTHER HAZARDOUS SUBSTANCES.  NORM MAY AFFIX OR ATTACH ITSELF TO THE INSIDE OF WELLS, MATERIALS AND EQUIPMENT AS SCALE, OR IN OTHER FORMS.  THE WELLS, MATERIALS AND EQUIPMENT LOCATED ON THE PROPERTIES OR INCLUDED IN THE ASSETS MAY CONTAIN NORM AND OTHER WASTES OR HAZARDOUS SUBSTANCES.  NORM CONTAINING MATERIAL AND/OR OTHER WASTES OR HAZARDOUS SUBSTANCES MAY HAVE COME IN CONTACT WITH VARIOUS ENVIRONMENTAL MEDIA, INCLUDING WATER, SOILS OR SEDIMENT.  SPECIAL PROCEDURES MAY BE REQUIRED FOR THE ASSESSMENT, REMEDIATION, REMOVAL, TRANSPORTATION OR DISPOSAL OF ENVIRONMENTAL MEDIA, WASTES, ASBESTOS, NORM AND OTHER HAZARDOUS SUBSTANCES FROM THE ASSETS.

 

 

Section 7.1            Access.

 

(a)           Between the Execution Date and the Closing Date, Seller will give Purchaser access to the Assets and access to and the right to copy, at Purchaser’s sole cost, risk and expense, the Records (or originals thereof) in Seller’s possession, for the purpose of conducting a reasonable due diligence review of the Assets, but only to the extent that Seller may do so without violating any obligations to any Third Party and to the extent that Seller has the authority to grant such access without breaching any restriction binding on it.  Purchaser shall be entitled to conduct a Phase I Environmental Site Assessment of the Assets and may conduct visual inspections and record reviews relating to the Assets, including their condition and compliance with Environmental Laws, subject to receipt of Seller’s written permission prior to performing such actions.  Purchaser shall not operate any equipment or conduct any testing or sampling of soil, groundwater or other materials (including any testing or sampling for Hazardous Substances, Hydrocarbons or NORM) on or with respect to the Assets prior to Closing without the prior written consent of, and subject to a written protocol with, Seller (which consent shall not be unreasonably withheld) with respect to any recognized environmental conditions identified in the Phase I Environmental Site Assessment or other inspection conducted by Purchaser pursuant to the immediately preceding sentence.  Purchaser shall abide by Seller’s, and any Third Party operator’s, safety rules, regulations, and operating policies (including the execution and delivery of any documentation or paperwork, e.g., boarding agreements or liability releases, required by Third Party operators with respect to Purchaser’s access to any of the Assets) while conducting its due diligence evaluation of the Assets.  Any conclusions made from any examination done by Purchaser shall result from Purchaser’s own independent review and judgment.

(b)           The access granted to Purchaser under this Section 7.1 shall be limited to Seller’s normal business hours, and Purchaser’s investigation shall be conducted in a manner that minimizes interference with the operation of the Assets.  Purchaser shall coordinate its access rights of the Assets with Seller to reasonably minimize any inconvenience to or interruption of the conduct of business by Seller.  Purchaser shall provide Seller with at least forty-eight (48) hours’ written notice before the Assets are accessed pursuant to this Section 7.1, along with a description of the activities Purchaser intends to undertake.

 

(c)           Purchaser acknowledges that, pursuant to its right of access to the Assets, Purchaser will become privy to confidential and other information of Seller and that such confidential information (which includes Purchaser’s conclusions with respect to its evaluations) shall be held confidential by Purchaser in accordance with the terms of the Confidentiality Agreement and any applicable privacy Laws regarding personal information.

 

(d)           In connection with the rights of access, examination and inspection granted to Purchaser under this Section 7.1, (i) PURCHASER WAIVES AND RELEASES ALL CLAIMS AGAINST THE SELLER GROUP ARISING IN ANY WAY THEREFROM OR IN ANY WAY CONNECTED THEREWITH AND (ii) PURCHASER HEREBY AGREES TO INDEMNIFY, DEFEND AND HOLD HARMLESS EACH OF THE SELLER GROUP AND THIRD PARTY OPERATORS FROM AND AGAINST ANY AND ALL DAMAGES ATTRIBUTABLE TO PERSONAL INJURY, DEATH OR PHYSICAL PROPERTY DAMAGE, OR VIOLATION OF THE SELLER GROUP’S OR ANY THIRD PARTY OPERATOR’S RULES, REGULATIONS, OR OPERATING POLICIES, ARISING OUT OF, RESULTING FROM OR RELATING TO ANY FIELD VISIT OR OTHER DUE DILIGENCE ACTIVITY CONDUCTED BY PURCHASER WITH RESPECT TO THE ASSETS, EVEN IF SUCH LIABILITIES ARISE OUT OF OR RESULT FROM, SOLELY OR IN PART, THE SOLE, ACTIVE, PASSIVE, CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OR VIOLATION OF LAW BY THE SELLER GROUP OR THIRD PARTY OPERATORS.

 

Section 7.2            Government Reviews.  In a timely manner, Seller and Purchaser shall (a) make all required filings, prepare all required applications and conduct negotiations with each Governmental Body as to which such filings, applications or negotiations are necessary or appropriate in the consummation of the transactions contemplated hereby and (b) provide such information as each may reasonably request to make such filings, prepare such applications and conduct such negotiations.  Each Party shall reasonably cooperate with and use all reasonable efforts to assist the other with respect to such filings, applications, and negotiations.  Without limiting the foregoing, within ten (10) Business Days following the execution by Purchaser and Seller of this Agreement, Purchaser and Seller will each prepare and simultaneously file with the DOJ and the FTC the notification and report form required by the HSR Act for the transactions contemplated by this Agreement, and request early termination of the waiting period thereunder.  Purchaser and Seller agree to respond promptly to any inquiries from the DOJ or the FTC concerning such filings and to comply in all material respects with the filing requirements of the HSR Act.  Purchaser and Seller shall cooperate with each other and shall promptly furnish all information to the other Party that is necessary in connection with Purchaser’s and Seller’s compliance with the HSR Act.  Purchaser and Seller shall keep each other fully advised with respect to any requests from or communications with the DOJ or FTC concerning such filings and shall consult with each other with respect to all responses thereto.  Seller and Purchaser shall use their reasonable efforts to take all actions reasonably necessary and appropriate in connection with any HSR Act filing to consummate the transactions consummated hereby.  All filing fees incurred in connection with the HSR Act filings made pursuant to this Section 7.2 shall be borne by Purchaser.

Section 7.3            Public Announcements; Confidentiality.

 

(a)           Neither Seller nor Purchaser shall make any press release or other public announcement regarding the existence of this Agreement the contents hereof or the transactions contemplated hereby without the prior written consent of the other Party; provided, however, that the foregoing shall not restrict disclosures to the extent (i) necessary for a Party to perform this Agreement (including disclosures to Governmental Bodies or third Persons holding preferential rights to purchase, rights of consent or other rights that may be applicable to the transaction contemplated by this Agreement, as reasonably necessary to provide notices, seek waivers, amendments or termination of such rights, or seek such consents), (ii) required (upon advice of counsel) by applicable securities or other Laws or regulations or the applicable rules of any stock exchange having jurisdiction over the Parties or their respective Affiliate or (iii) subject to Section 7.3(b), such Party has given the other Party a reasonable opportunity to review such disclosure prior to its release and no objection is raised; and provided, further, that, in the case of clauses (i) and (ii), each Party shall use its reasonable efforts to consult with the other Party regarding the contents of any such release or announcement prior to making such release or announcement.

 

(b)           Notwithstanding anything in Section 7.3(a) to the contrary, the Parties shall keep all information and data relating to this Agreement and the transactions contemplated hereby strictly confidential except for disclosures to Representatives of the Parties and any disclosures required to perform this Agreement; provided, however, that the foregoing shall not restrict disclosures that are required (upon advice of counsel) by applicable securities or other Laws or regulations or the applicable rules of any stock exchange having jurisdiction over the Parties or their respective Affiliates; and provided, further, that prior to making any such disclosures to Representatives or holders of preferential rights to purchase, the Party disclosing such information shall obtain an undertaking of confidentiality from each such party.

 

Section 7.4            Operation of Business.  Except as to the matters set forth on Schedule 7.4 or as otherwise approved by Purchaser, from the Execution Date until the Closing Date, Seller:

 

(a)           will conduct its business related to the Assets in the ordinary course consistent with Seller’s recent exploration and drilling program and other recent practices;

 

(b)           will not commit to any new operation reasonably anticipated by Seller to require future capital expenditures by the owner of the Assets in excess of $100,000;

(c)           will not voluntarily terminate, materially amend, execute or extend any material Contracts;

 

(d)           will maintain insurance coverage on the Assets presently furnished by nonaffiliated third Persons in the amounts and of the types presently in force;

 

(e)           will use commercially reasonable efforts to maintain in full force and effect all Leases that are presently producing in paying quantities;

 

(f)           will maintain all material permits, approvals, bonds and guaranties affecting the Assets, and make all filings that Seller is required to make under applicable Law with respect to the Assets;

 

(g)           will not transfer, sell, hypothecate, encumber or otherwise dispose of any material Properties or Equipment except for sales and dispositions of Equipment made in the ordinary course of business consistent with past practices; and

 

(h)           will not enter into an agreement with respect to any of the foregoing.

 

Requests for approval of any action restricted by this Section 7.4 shall be delivered to either of the following individuals, each of whom shall have full authority to grant or deny such requests for approval on behalf of Purchaser:

 

 

Purchaser’s approval of any action restricted by this Section 7.4 shall be considered granted within ten (10) days (unless a shorter time is reasonably required by the circumstances and such shorter time is specified in Seller’s notice) after Seller’s notice to Purchaser requesting such consent unless Purchaser notifies Seller to the contrary during that period.  In the event of an emergency, Seller may take such action as a prudent operator would take and shall notify Purchaser of such action promptly thereafter.

 

Section 7.5            Intentionally Omitted.

 

Section 7.6            Operatorship.  Within ten (10) Business Days after Closing, Seller shall send notices to co-owners of those Properties that Seller currently operates indicating that Seller is resigning as operator, and recommending that Purchaser (or Purchaser’s designee) be elected successor operator.  Seller makes no representations or warranties to Purchaser as to the transferability of operatorship of any Properties which Seller currently operates.  Rights and obligations associated with operatorship of the Properties are governed by operating agreements or similar agreements and will be decided in accordance with the terms of such agreements.

Section 7.7            Change of Name.  Within thirty (30) days after Closing, Purchaser shall eliminate the name “Talon Oil & Gas LLC” and any variants thereof from the Assets acquired pursuant to this Agreement and shall have no right to use any logos, trademarks or trade names belonging to Seller or any of its Affiliates.

 

Section 7.8            Replacement of Bonds, Letters of Credit and Guaranties.  The Parties understand that none of the bonds, letters of credit and guaranties, if any, posted by Seller with Governmental Bodies or co-owners and relating to the Assets will be transferred to Purchaser.  Promptly following Closing, but, as to Properties operated by Seller, in no event later than the transfer of operatorship of such Properties, Purchaser shall obtain, or cause to be obtained in the name of Purchaser, replacements for such bonds, letters of credit and guaranties, to the extent such replacements are necessary to permit the cancellation of the bonds, letters of credit and guaranties posted by Seller or to consummate the transactions contemplated by this Agreement.

 

Section 7.9            Notification of Breaches.  Between the Execution Date and the Closing Date:

 

(a)           Purchaser shall notify Seller promptly after Purchaser obtains actual knowledge that any representation or warranty of Seller contained in this Agreement is untrue in any material respect or will be untrue in any material respect as of the Closing Date or that any covenant or agreement to be performed or observed by Seller prior to or on the Closing Date has not been so performed or observed in any material respect.

 

(b)           Seller shall notify Purchaser promptly after Seller obtains actual knowledge that any representation or warranty of Purchaser contained in this Agreement is untrue in any material respect or will be untrue in any material respect as of the Closing Date or that any covenant or agreement to be performed or observed by Purchaser prior to or on the Closing Date has not been so performed or observed in any material respect.

 

(c)           If any of Purchaser’s or Seller’s representations or warranties is untrue or shall become untrue in any material respect between the Execution Date and the Closing Date, or if any of Purchaser’s or Seller’s covenants or agreements to be performed or observed prior to or on the Closing Date shall not have been so performed or observed in any material respect, but if such breach of representation, warranty, covenant or agreement shall (if curable) be cured by the Closing (or, if the Closing does not occur, by the date set forth in Section 9.1), then such breach shall be considered not to have occurred for all purposes of this Agreement.

 

Section 7.10          Amendment to Schedules.

 

(a)           As of the Closing Date, all Schedules to this Agreement, as applicable, shall be deemed amended and supplemented by Seller to include reference to any matter which results in an adjustment to the Purchase Price pursuant to Section 3.3 as a result of the removal under the terms of this Agreement of any of the Assets.

(b)           Prior to Closing, Seller shall have the right to supplement its Schedules relating to the representations and warranties set forth in Article 5 with respect to any matters discovered or occurring subsequent to the Execution Date and such supplements shall, if the Closing occurs, be deemed to have been included in Seller’s representations and warranties for purposes of Seller’s indemnification obligations under Article 11; provided, however, that all such supplements shall be disregarded solely for purposes of determining whether the condition to Purchaser’s obligation to close the transaction pursuant to Section 8.2(a) has been satisfied.   If the Closing occurs and Seller has supplemented its Schedules pursuant to this Section 7.10(b), Purchaser will be deemed to have waived the matters relating to such supplements in regard to Purchaser’s obligation to close the transactions contemplated hereunder pursuant to Section 8.2(a).

 

Section 7.11         Additional Hedging Contracts.  To the extent that doing so would not cause Seller to be in violation of any provision of any credit agreement (or other loan or similar document) to which it is a party or otherwise cause Seller to be in breach of any representation and warranty contained in this Agreement, Seller shall use its reasonable efforts to enter into, in consultation with Purchaser, hedging transactions (which are capable of being transferred to or novated in favor of Purchaser) covering that portion of production from the Assets not covered by the hedges, swaps and other derivatives contracts identified in Exhibit A-5, as further described below.  Upon execution of this Agreement, Seller shall, in consultation with Purchaser, obtain quotations from counterparties with whom Seller has current ISDA agreements for straight swaps for quantities of production from the future proved developed producing oil and gas reserves attributable to the Assets that are not covered by the hedges, swaps and other derivatives contracts identified in Exhibit A-5.  Upon receipt of oral instruction from the Purchaser directing Seller which swaps to enter into and with which counterparty, subject to the indemnities set forth herein, Seller shall use its reasonable efforts to execute, for the benefit and liability of Purchaser, such transactions with the counterparty providing the terms acceptable to the Purchaser as set forth in such instruction (the “Additional Hedging Transactions”).  Immediately thereafter, Purchaser shall provide written confirmation to Seller confirming Purchaser’s oral instructions.  At Closing, all such Additional Hedging Transactions shall be transferred to or novated in favor of Purchaser.  Whether or not the Closing occurs, Purchaser shall pay, be responsible for, release, defend, indemnify and hold Seller harmless from and against any and all (i) costs and expenses of entering into the Additional Hedging Transactions, (ii) costs and expenses related to transferring to or novating in favor of Purchaser and (iii) costs, expenses and other liabilities arising from or attributable to the Additional Hedging Transactions.  In the event that this Agreement is terminated prior to Closing, Seller may, at its sole election, unwind any or all of the Additional Hedging Transactions; but in any event, Purchaser shall release, defend, indemnify and hold Seller harmless from and against any and all losses, costs, expenses or other liabilities arising from or related to the Additional Hedging Transactions, and shall make any required payments to Seller within ten (10) Business Days after receipt of invoice with respect thereto.

 

Section 7.12         Financial Statements.  Seller shall use its reasonable efforts to provide Purchaser with up to three (3) years of its, or its predecessor in interest’s, audited, and interim unaudited, financial statements related to ownership and operation of the Assets for purposes of filing with the U.S. Securities and Exchange Commission (the “Financial Statements”).

 

Section 7.13         Further Assurances.  After Closing, Seller and Purchaser agree to take such further actions and to execute, acknowledge and deliver all such further documents as are reasonably requested by the other Party for carrying out the purposes of this Agreement or of any document delivered pursuant to this Agreement.

 

Section 8.1            Seller’s Conditions to Closing.  The obligations of Seller to consummate the transactions contemplated by this Agreement are subject to the satisfaction (or waiver by Seller) on or prior to Closing of each of the following conditions precedent:

 

(a)           Representations.  The representations and warranties of Purchaser set forth in Article 6 (i) which are not qualified as to materiality, shall be true and correct in all material respects and (ii) which are qualified as to materiality, shall be true and correct in all respects, in the case of both (i) and (ii), each as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date;

 

(b)           Performance.  Purchaser shall have performed and observed, in all material respects, all covenants and agreements to be performed or observed by it under this Agreement prior to or on the Closing Date;

 

(c)           No Action.  On the Closing Date, no injunction, order or award restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated by this Agreement, or granting material damages in connection therewith, shall have been issued and remain in force, and no suit, action or other proceeding by a third Person (including any Governmental Body) seeking to restrain, enjoin or otherwise prohibit the consummation of the transactions contemplated by this Agreement, or seeking substantial damages in connection therewith, shall be pending before any Governmental Body or arbitrator; and

 

(d)           Governmental Consents.  All material consents and approvals of any Governmental Body (including those required by the HSR Act, if any) required for the transfer of the Assets from Seller to Purchaser as contemplated under this Agreement, except consents and approvals by Governmental Bodies that are customarily obtained after closing (including Customary Post-Closing Consents), shall have been granted, or the necessary waiting period shall have expired, or early termination of the waiting period shall have been granted.

 

(e)           Title Defects and Casualty Losses.  The sum of Undisputed Title Defect Amounts and Casualty Losses as of the date scheduled for Closing, in the aggregate, shall not exceed twenty-five percent (25%) of the Unadjusted Purchase Price.

 

(f)           Transfer Restrictions.  The sum of the Allocated Values for Assets for which preferential rights to purchase or consents to assign have not been waived or obtained (pursuant to Section 4.6), or the period for exercise has not expired, as of the date scheduled for Closing, in the aggregate, shall not exceed twenty-five percent (25%) of the Unadjusted Purchase Price.

 

Section 8.2            Purchaser’s Conditions to Closing.  The obligations of Purchaser to consummate the transactions contemplated by this Agreement are subject to the satisfaction (or wavier by Purchaser) on or prior to Closing of each of the following conditions precedent:

(a)           Representations.  The representations and warranties of Seller set forth in Article 5 (i) which are not qualified as to materiality, shall be true and correct in all material respects and (ii) which are qualified as to materiality, shall be true and correct in all respects, in the case of both (i) and (ii), each as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date (other than representations and warranties that refer to a specified date which need only be true and correct on and as of such specified date);

 

(b)           Performance.  Seller shall have performed and observed, in all material respects, all covenants and agreements to be performed or observed by it under this Agreement prior to or on the Closing Date;

 

(c)           No Action.  On the Closing Date, no injunction, order or award restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated by this Agreement, or granting material damages in connection therewith, shall have been issued and remain in force, and no suit, action or other proceeding by a third Person (including any Governmental Body) seeking to restrain, enjoin or otherwise prohibit the consummation of the transactions contemplated by this Agreement, or seeking substantial damages in connection therewith, shall be pending before any Governmental Body or arbitrator; and

 

(d)           Governmental Consents.  All material consents and approvals of any Governmental Body (including those required by the HSR Act, if any) required for the transfer of the Assets from Seller to Purchaser as contemplated under this Agreement, except consents and approvals by Governmental Bodies that are customarily obtained after closing (including Customary Post-Closing Consents), shall have been granted, or the necessary waiting period shall have expired, or early termination of the waiting period shall have been granted.

 

(e)           Title Defects and Casualty Losses.  The sum of Undisputed Title Defect Amounts and Casualty Losses as of the date scheduled for Closing, in the aggregate, shall not exceed twenty-five percent (25%) of the Unadjusted Purchase Price.

 

(f)           Transfer Restrictions.  The sum of the Allocated Values for Assets for which preferential rights to purchase or consents to assign have not been waived or obtained (pursuant to Section 4.6), or the period for exercise has not expired, as of the date scheduled for Closing, in the aggregate, shall not exceed twenty-five percent (25%) of the Unadjusted Purchase Price.

 

 

Section 9.1            Time and Place of Closing.  Consummation of the purchase and sale transaction as contemplated by this Agreement (the “Closing”), shall, unless otherwise agreed to in writing by Purchaser and Seller, take place at the offices of Latham & Watkins LLP, counsel to Seller, located at 717 Texas Avenue, Suite 1600, Houston, Texas 77002, at 10:00 a.m., Central Time, on December 30, 2010, or if all conditions in Article 8 to be satisfied prior to Closing have not yet been satisfied or waived, within five (5) Business Days of such conditions having been satisfied or waived, subject to the rights of the Parties under Article 10.  The date on which the Closing occurs is herein referred to as the “Closing Date.”

Section 9.2            Obligations of Seller at Closing.  At the Closing, upon the terms and subject to the conditions of this Agreement, and subject to the simultaneous performance by Purchaser of its obligations pursuant to Section 9.3, Seller shall deliver or cause to be delivered to Purchaser, among other things, the following:

 

(a)           Counterparts of the Conveyances of the Assets, in sufficient duplicate originals to allow recording in all appropriate jurisdictions and offices, duly executed by Seller and acknowledged before a notary public;

 

(b)           Counterparts of the Letter-in-lieu of Transfer Order covering the relevant Assets, duly executed by Seller;

 

(c)           A certificate duly executed by an authorized officer of Seller, dated as of Closing, certifying on behalf of Seller that the conditions set forth in Section 8.2(a) and Section 8.2(b) have been fulfilled;

 

(d)           A certificate duly executed by an authorized officer of Seller, dated as of the Closing, (i) attaching and certifying on behalf of Seller complete and correct copies of (A) the certificate of formation of Seller, (B) the resolutions of the board of directors (or similar body) of Seller authorizing the execution, delivery, and performance by Seller of this Agreement and the transactions contemplated hereby and (C) any required approval by Seller’s members of this Agreement and the transactions contemplated hereby and (ii) certifying the incumbency and true signatures of the officers who execute this Agreement and any other agreement, certificate or document related hereto or executed in connection herewith on behalf of Seller;

 

(e)           An executed statement described in Treasury Regulation § 1.1445-2(b)(2) certifying that Seller is not a foreign person within the meaning of the Code;

 

(f)           Where approvals are received by Seller pursuant to a filing or application under Section 7.2, copies of those approvals;

 

(g)           If requested by Purchaser prior to the Closing, Counterparts of the Transition Services Agreement, duly executed by Seller;

 

(h)           Counterparts of the documents whereby the Existing Hedging Transactions and the Additional Hedging Transactions are transferred to or novated in favor of Purchaser, duly executed by Seller;

 

(i)            The Financial Statements, to the extent obtained;

 

(j)            Releases of mortgages burdening the Assets; and

 

(k)           All other instruments, documents and other items reasonably necessary to effectuate the terms of this Agreement, as may be reasonably requested by Purchaser.

Section 9.3            Obligations of Purchaser at Closing.  At the Closing, upon the terms and subject to the conditions of this Agreement, and subject to the simultaneous performance by Seller of its obligations pursuant to Section 9.2, Purchaser shall deliver or cause to be delivered to Seller, among other things, the following:

 

(a)           A wire transfer of the Closing Payment to the accounts designated by Seller in immediately available funds not later than 10:00 a.m. Central Time;

 

(b)           Counterparts of the Conveyances of the Assets, in sufficient duplicate originals to allow recording in all appropriate jurisdictions and offices, duly executed by Purchaser and acknowledged before a notary public;

 

(c)           Counterparts of the Letter-in-lieu of Transfer Order covering the relevant Assets, duly executed by Purchaser;

 

(d)           A certificate by an authorized officer of Purchaser, dated as of Closing, certifying on behalf of Purchaser that the conditions set forth in Section 8.1(a) and Section 8.1(b) have been fulfilled;

 

(e)           A certificate duly executed by the secretary or any assistant secretary of Purchaser, dated as of the Closing, (i) attaching, and certifying on behalf of Purchaser as complete and correct, copies of (A) the certificate of incorporation (or formation) and bylaws, agreement of limited partnership or other organizational documents of Purchaser, each as in effect as of the Closing (B) the resolutions of the Board of Directors (or body of similar power and authority) of Purchaser or its general partner authorizing the execution, delivery, and performance by Purchaser of this Agreement and the transactions contemplated hereby and (C) any required approval by the shareholders, unit holders or partners of Purchaser of this Agreement and the transactions contemplated hereby and (ii) certifying the incumbency and true signatures of the officers who execute this Agreement and any other agreement, certificate or document related hereto or executed in connection herewith on behalf of Purchaser;

 

(f)           Where approvals are received by Purchaser pursuant to a filing or application under Section 7.2, copies of those approvals;

 

(g)           If requested by Purchaser prior to the Closing, Counterparts of the Transition Services Agreement, duly executed by Purchaser;

 

(h)           Counterparts of the documents whereby the Existing Hedging Transactions and the Additional Hedging Transactions are transferred to or novated in favor of Purchaser, duly executed by Purchaser;

 

(i)            Evidence of replacement bonds, guaranties and letters of credit pursuant to Section 7.8; and

 

(j)            All other instruments, documents and other items reasonably necessary to effectuate the terms of this Agreement, as may be reasonably requested by Purchaser.

Section 9.4            Closing Payment and Post-Closing Purchase Price Adjustments.

 

(a)           Not later than five (5) Business Days prior to the Closing Date, Seller shall prepare and deliver to Purchaser, using and based upon the best information available to Seller, a preliminary settlement statement estimating the initial Adjusted Purchase Price after giving effect to all Purchase Price adjustments set forth in Section 3.3.  The estimate delivered in accordance with this Section 9.4(a) less the Deposit and less any amounts placed in the Escrow Account pursuant to Section 4.2(b) shall constitute the dollar amount to be paid by Purchaser to Seller at the Closing (the “Closing Payment”).

 

(b)           As soon as reasonably practicable after the Closing but not later than the later of (x) the 95th day following the Closing Date and (y) the date on which the Parties or the Title Arbitrator, as applicable, finally determines all Title Defect Amounts and Title Benefit Amounts under Section 4.4, Seller shall prepare and deliver to Purchaser a statement setting forth the final calculation of the Adjusted Purchase Price and showing the calculation of each adjustment, based, to the extent possible, on actual credits, charges, receipts and other items before and after the Effective Date.  Seller shall, at Purchaser’s request, supply reasonable documentation available to support any credit, charge, receipt or other item.  As soon as reasonably practicable but not later than the 30th day following receipt of Seller’s statement hereunder, Purchaser shall deliver to Seller a written report containing any changes that Purchaser proposes be made to such statement.  Seller may deliver a written report to Purchaser during this same period reflecting any changes that Seller proposes to be made to such statement as a result of additional information received after the statement was prepared.  The Parties shall undertake to agree on the final statement of the Adjusted Purchase Price no later than 195 days after the Closing Date; provided, however, that if the date on which the Parties or the Title Arbitrator, as applicable, finally determines all Title Defect Amounts and Title Benefit Amounts under Section 4.4 is later than the 95th day following the Closing Date, such 195 day period shall be extended the same number of days that such final determination occurs beyond the 95th day following the Closing Date.  In the event that the Parties cannot reach agreement within such period of time, either Party may refer the remaining matters in dispute to the Dallas, Texas office of KPMG LLP for review and final determination by arbitration.  The accounting firm shall conduct the arbitration proceedings in Dallas, Texas in accordance with the Commercial Arbitration Rules of the American Arbitration Association, to the extent such rules do not conflict with the terms of this Section.  The accounting firm’s determination shall be made within thirty (30) days after submission of the matters in dispute and shall be final and binding on both Parties, without right of appeal.  In determining the proper amount of any adjustment to the Unadjusted Purchase Price, the accounting firm shall not increase the Unadjusted Purchase Price more than the increase proposed by Seller nor decrease the Unadjusted Purchase Price more than the decrease proposed by Purchaser, as applicable.  The accounting firm shall act as an expert for the limited purpose of determining the specific disputed matters submitted by the Parties and may not award damages or penalties to the Parties with respect to any matter.  Seller and Purchaser shall each bear its own legal fees and other costs of presenting its case.  Seller shall bear one-half and Purchaser shall bear one-half of the costs and expenses of the accounting firm.  Within ten (10) days after the earlier of (i) the expiration of Purchaser’s 30-day review period without delivery of any written report or (ii) the date on which the Parties finally determine the Adjusted Purchase Price or the accounting firm finally determines the disputed matters, as applicable, (A) Purchaser shall pay to Seller the amount by which the Adjusted Purchase Price (after deducting the Deposit amount and any amounts placed in the Escrow Account pursuant to Section 4.2(b)) exceeds the Closing Payment or (B) Seller shall pay to Purchaser the amount by which the Closing Payment exceeds the Adjusted Purchase Price (after deducting the Deposit amount and any amounts placed in the Escrow Account pursuant to Section 4.2(b)), as applicable.  Any post-closing payment pursuant to this Section 9.4(b) shall bear interest from the Closing Date to the date of payment at the Prime Rate.

(c)           Purchaser shall assist Seller in the preparation of the final statement of the Adjusted Purchase Price under Section 9.4(b) by furnishing invoices, receipts, reasonable access to personnel, and such other assistance as may be requested by Seller to facilitate such process post-Closing.

 

(d)           All payments made or to be made under this Agreement to Seller shall be made by electronic transfer of immediately available funds to the accounts designated by Seller.  All payments made or to be made hereunder to Purchaser shall be by electronic transfer or immediately available funds to a bank and account specified by Purchaser in writing to Seller.

 

 

Section 10.1          Termination.  This Agreement may be terminated at any time prior to Closing: (a) by the mutual prior written consent of Seller and Purchaser; or (b) by either Purchaser or Seller if Closing has not occurred on or before December 31, 2010; provided, however, that no Party shall be entitled to terminate this Agreement under Section 10.1(b) if the Closing has failed to occur because such Party negligently or willfully failed to perform or observe in any material respect its covenants or agreements hereunder.

 

Section 10.2          Effect of Termination.  If this Agreement is terminated pursuant to Section 10.1, without prejudice to either Party’s rights under Section 13.17 prior to termination, this Agreement shall become void and of no further force or effect (except for the Confidentiality Agreement and the provisions of Section 5.6, Section 6.5, Section 7.1(d), Section 7.3, Section 7.5, Section  7.11, Article 10, Article 13 and Appendix A, which shall continue in full force and effect) and Seller shall be free immediately to enjoy all rights of ownership of the Assets and to sell, transfer, encumber or otherwise dispose of the Assets to any party without any restriction under this Agreement.  Notwithstanding anything to the contrary in this Agreement, the termination of this Agreement under Section 10.1 shall not relieve (a) either Party, subject to Section 13.11 and without prejudice to either Party’s rights under Section 13.17 prior to termination, from liability for any willful or negligent failure to perform or observe in any material respect any of its agreements or covenants contained herein which are to be performed or observed at or prior to Closing or (b) Purchaser, subject to Sections 10.3(a) and 13.11 and without prejudice to either Party’s rights under Section 13.17 prior to termination, from liability arising from a Funding Failure.

 

Section 10.3          Distribution of Deposit Upon Termination.

 

(a)           If Seller terminates this Agreement under Section 10.1(b), and Purchaser has negligently or willfully failed to perform or observe its covenants and agreements or is in breach of its representations and warranties hereunder, or Closing has otherwise not occurred as a result of an act or omission of Purchaser (other than an act or omission expressly permitted by this Agreement), Seller shall be entitled, as liquidated damages for lost opportunities (and not as a penalty), to retain the Deposit together with any interest or income thereon, free of any claims by Purchaser or any other Person.  In such event, Seller shall be free to enjoy immediately all rights of ownership of the Assets and to sell, transfer, encumber or otherwise dispose of the Assets to any party without any restriction under this Agreement.

 

(b)           If this Agreement is terminated for any reason other than the reasons set forth in Section 10.3(a), Seller shall deliver to Purchaser the Deposit and any interest accrued thereon, free of any claims by Seller or any other Person with respect thereto.

 

 

Section 11.1         Assumption by Purchaser.  Without limiting Purchaser’s rights to indemnity under Section 11.2 and Purchaser’s remedy for Title Defects in Article 4, Purchaser, severally as to each Purchaser’s Proportionate Share and not jointly, shall assume and hereby agrees to fulfill, perform, pay and discharge (or cause to be timely fulfilled, performed, paid or discharged) all of the Assumed Purchaser Obligations; and EVOC shall assume and hereby agrees to fulfill, perform, pay and discharge (or cause to be timely fulfilled, performed, paid or discharged) all of the Assumed Purchaser Obligations with respect to the Field Office.

 

Section 11.2          Indemnification.

 

(a)           From and after Closing, Purchaser, severally as to each Purchaser’s Proportionate Share and not jointly, and EVOC shall indemnify, defend and hold harmless the Seller Group from and against all Damages incurred, suffered by or asserted against such Persons:

 

(i)           caused by or arising out of or resulting from the Assumed Purchaser Obligations (including, for purposes of certainty, Environmental Liabilities under CERCLA that constitute Assumed Purchaser Obligations);

 

(ii)          caused by or arising out of or resulting from Purchaser’s breach of any of Purchaser’s covenants or agreements contained in Article 7; or

 

(iii)         caused by or arising out of or resulting from any breach of any representation or warranty made by Purchaser contained in Article 6 of this Agreement or in the certificate delivered by Purchaser at Closing pursuant to Section 9.3(d);

 

EVEN IF SUCH DAMAGES ARE CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), STRICT LIABILITY OR OTHER LEGAL FAULT OF THE SELLER GROUP, but (i) excepting in each case (A) the gross negligence or willful misconduct of Seller and (B) Damages against which Seller would be required to indemnify Purchaser under Section 11.2(b), and (ii) it being agreed that EVOC’s indemnity in Section 11.2(a) shall be limited to Assumed Purchaser Obligations with respect to the Field Office, with respect to representations and warranties shall apply only to breaches of representations and warranties given by EVOC, and shall not apply to Section 11.2(a)(ii).

 

(b)           From and after Closing, Seller shall indemnify, defend and hold harmless the Purchaser Group from and against all Damages incurred, suffered by or asserted against such Persons:

 

(i)            caused by or arising out of or resulting from Seller’s breach of Seller’s covenants or agreements contained in Article 7; or

 

(ii)           caused by or arising out of our resulting from any breach of any representation or warranty made by Seller contained in Article 5, or in the certificate delivered by Seller at Closing pursuant to Section 9.2(c);

 

EVEN IF SUCH DAMAGES ARE CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), STRICT LIABILITY OR OTHER LEGAL FAULT OF THE PURCHASER GROUP, but excepting in each case (i) the gross negligence or willful misconduct of Purchaser and (ii) Damages against which Purchaser would be required to indemnify Seller under Section 11.2(a).

 

(c)           Notwithstanding anything to the contrary contained in this Agreement, this Section 11.2 contains the Parties’ exclusive remedies against each other with respect to breaches of the representations, warranties, covenants and agreements of the Parties in Article 5, Article 6 and Article 7 and the affirmations of such representations, warranties, covenants and agreements contained in the certificate delivered by each Party at Closing pursuant to Section 9.2(c) or Section 9.3(d), as applicable.  Except for the remedies contained in this Section 11.2, Section 10.2, and Section 10.3, and any other remedies available to the Parties at law or in equity for breaches of provisions of this Agreement other than Article 5, Article 6 and Article 7, SELLER AND PURCHASER EACH RELEASE, REMISE AND FOREVER DISCHARGE THE OTHER AND ITS AFFILIATES AND ALL SUCH PARTIES’ OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ADVISORS AND OTHER REPRESENTATIVES FROM ANY AND ALL SUITS, LEGAL OR ADMINISTRATIVE PROCEEDINGS, CLAIMS, DEMANDS, DAMAGES, LOSSES, COSTS, LIABILITIES, INTEREST, OR CAUSES OF ACTION WHATSOEVER, IN LAW OR IN EQUITY, KNOWN OR UNKNOWN, WHICH SUCH PARTIES MIGHT NOW OR SUBSEQUENTLY MAY HAVE, BASED ON, RELATING TO OR ARISING OUT OF (i) THIS AGREEMENT, (ii) SELLER’S OWNERSHIP, USE OR OPERATION OF THE ASSETS OR (iii) THE CONDITION, QUALITY, STATUS OR NATURE OF THE ASSETS, INCLUDING RIGHTS TO CONTRIBUTION UNDER CERCLA OR ANY OTHER ENVIRONMENTAL LAW, BREACHES OF STATUTORY OR IMPLIED WARRANTIES, NUISANCE OR OTHER TORT ACTIONS, RIGHTS TO PUNITIVE DAMAGES AND COMMON LAW RIGHTS OF CONTRIBUTION, RIGHTS UNDER AGREEMENTS BETWEEN SELLER AND ANY PERSONS WHO ARE AFFILIATES OF SELLER, AND RIGHTS UNDER INSURANCE MAINTAINED BY SELLER OR ANY PERSON WHO IS AN AFFILIATE OF SELLER, EVEN IF CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), STRICT LIABILITY OR OTHER LEGAL FAULT OF ANY RELEASED PERSON.

(d)           The indemnity of each Party provided in this Section 11.2 shall be for the benefit of and extend to each Person included in the Seller Group and the Purchaser Group, as applicable; provided, however, that any claim for indemnity under this Section 11.2 by any such Person must be brought and administered by a Party to this Agreement.  No Indemnified Person (including any Person within the Seller Group and the Purchaser Group) other than Seller and Purchaser shall have any rights against either Seller or Purchaser under the terms of this Section 11.2 except as may be exercised on its behalf by Purchaser or Seller, as applicable, pursuant to this Section 11.2(d).  Seller and Purchaser may elect to exercise or not exercise indemnification rights under this Section on behalf of the other Indemnified Persons affiliated with it in its sole discretion and shall have no liability to any such other Indemnified Person for any action or inaction under this Section.

 

Section 11.3          Indemnification Actions.  All claims for indemnification under Section 11.2 shall be asserted and resolved as follows:

 

(a)           For purposes hereof, (i) the term “Indemnifying Person” when used in connection with particular Damages shall mean the Person or Persons having an obligation to indemnify another Person or Persons with respect to such Damages pursuant to this Article 11 and (ii) the term “Indemnified Person” when used in connection with particular Damages shall mean the Person or Persons having the right to be indemnified with respect to such Damages by another Person or Persons pursuant to this Article 11.

 

(b)           To make a claim for indemnification under Section 11.2, an Indemnified Person shall notify the Indemnifying Person of its claim under this Section 11.3, including the specific details of and specific basis under this Agreement for its claim (the “Claim Notice”).  In the event that the claim for indemnification is based upon a claim by a third Person against the Indemnified Person (a “Third Person Claim”), the Indemnified Person shall provide its Claim Notice promptly after the Indemnified Person has actual knowledge of the Third Person Claim and shall enclose a copy of all papers (if any) served with respect to the Third Person Claim; provided that the failure of any Indemnified Person to give notice of a Third Person Claim as provided in this Section 11.3 shall not relieve the Indemnifying Person of its obligations under Section 11.2 except to the extent such failure results in insufficient time being available to permit the Indemnifying Person to effectively defend against the Third Person Claim or otherwise prejudices the Indemnifying Person’s ability to defend against the Third Person Claim.  In the event that the claim for indemnification is based upon an inaccuracy or breach of a representation, warranty, covenant or agreement, the Claim Notice shall specify the representation, warranty, covenant or agreement which was inaccurate or breached.

 

(c)           In the case of a claim for indemnification based upon a Third Person Claim, the Indemnifying Person shall have thirty (30) days from its receipt of the Claim Notice to notify the Indemnified Person whether it admits or denies its obligation to defend the Indemnified Person against such Third Person Claim under this Article 11.  If the Indemnifying Person does not notify the Indemnified Person within such 30-day period whether the Indemnifying Person admits or denies its obligation to defend the Indemnified Person, it shall be conclusively deemed to have denied such indemnification obligation hereunder.  The Indemnified Person is authorized, prior to and during such 30-day period, to file any motion, answer or other pleading that it shall deem necessary or appropriate to protect its interests or those of the Indemnifying Person and that is not prejudicial to the Indemnifying Person.

(d)           If the Indemnifying Person admits its obligation, it shall have the right and obligation to diligently defend, at its sole cost and expense, the Third Person Claim.  The Indemnifying Person shall have full control of such defense and proceedings, including any compromise or settlement thereof.  If requested by the Indemnifying Person, the Indemnified Person agrees to cooperate in contesting any Third Person Claim which the Indemnifying Person elects to contest (provided, however, that the Indemnified Person shall not be required to bring any counterclaim or cross-complaint against any Person).  The Indemnified Person may at its own expense participate in, but not control, any defense or settlement of any Third Person Claim controlled by the Indemnifying Person pursuant to this Section 11.3(d).  An Indemnifying Person shall not, without the written consent of the Indemnified Person, settle any Third Person Claim or consent to the entry of any judgment with respect thereto which (i) does not result in a final resolution of the Indemnified Person’s liability with respect to the Third Person Claim (including, in the case of a settlement, an unconditional written release of the Indemnified Person) or (ii) may materially and adversely affect the Indemnified Person (other than as a result of money damages covered by the indemnity).

 

(e)           If the Indemnifying Person does not admit its obligation or admits its obligation but fails to diligently defend or settle the Third Person Claim, then the Indemnified Person shall have the right to defend against the Third Person Claim (at the sole cost and expense of the Indemnifying Person, if the Indemnified Person is entitled to indemnification hereunder), with counsel of the Indemnified Person’s choosing, subject to the right of the Indemnifying Person to admit its obligation and assume the defense of the Third Person Claim at any time prior to settlement or final determination thereof.  If the Indemnifying Person has not yet admitted its obligation to provide indemnification with respect to a Third Person Claim, the Indemnified Person shall send written notice to the Indemnifying Person of any proposed settlement and the Indemnifying Person shall have the option for ten (10) days following receipt of such notice to (i) admit in writing its obligation to provide indemnification with respect to the Third Person Claim and (ii) if its obligation is so admitted, reject, in its reasonable judgment, the proposed settlement.  If the Indemnified Person settles any Third Person Claim over the objection of the Indemnifying Person after the Indemnifying Person has timely admitted its obligation in writing and assumed the defense of a Third Person Claim, the Indemnified Person shall be deemed to have waived any right to indemnity therefor.

 

(f)           In the case of a claim for indemnification not based upon a Third Person Claim, the Indemnifying Person shall have thirty (30) days from its receipt of the Claim Notice to (i) cure the Damages complained of, (ii) admit its obligation to provide indemnification with respect to such Damages or (iii) dispute the claim for such indemnification.  If the Indemnifying Person does not notify the Indemnified Person within such 30-day period that it has cured the Damages or that it disputes the claim for such indemnification, the Indemnifying Person shall be conclusively deemed obligated to provide such indemnification hereunder.

Section 11.4          Limitation on Actions.

 

(a)           The representations and warranties of the Parties in Article 5 and Article 6 and the covenants and agreements of the Parties in Article 7 and the corresponding representations and warranties given in the certificates delivered at Closing pursuant to Section 9.2(c) and Section 9.3(d), as applicable, shall survive the Closing for a period of six (6) months (unless a shorter period is expressly provided within the applicable Section), except that (i) the representations, warranties and acknowledgements, as applicable, in Section 5.2, Section 5.3, Section 5.4, Section 5.5, Section 5.6, Section 6.1, Section 6.2, Section 6.3, Section 6.4, Section 6.5 and Section 6.13 shall survive indefinitely, (ii) the representation and warranties in Section 5.8 shall survive Closing until the applicable statute of limitations closes the taxable year to which the subject Taxes relate, (iii) the covenants and agreements, as applicable, in Section 7.1(d), Section 7.3, Section 7.7, Section 7.8 and Section 7.11 shall survive indefinitely and (iv) the covenants and agreements in Section 7.5 shall survive for the period set forth therein.  The remainder of this Agreement (including the disclaimers in Section 5.16) shall survive the Closing without time limit except (A) as may otherwise be expressly provided herein and (B) for the provisions of Article 12, which shall survive Closing until the applicable statute of limitations closes the taxable year to which the subject Taxes relate.  Representations, warranties, covenants and agreements shall be of no further force and effect after the date of their expiration, provided that there shall be no termination of any bona fide claim asserted pursuant to this Agreement with respect to such a representation, warranty, covenant or agreement prior to its expiration date.

 

(b)           The indemnities in Section 11.2(a)(ii), Section 11.2(a)(iii), Section 11.2(b)(i) and Section 11.2(b)(ii) shall terminate as of the termination date of each respective representation, warranty, covenant or agreement that is subject to indemnification thereunder, except in each case as to matters for which a specific written claim for indemnity has been delivered to the Indemnifying Person on or before such termination date.  The indemnity in Section 11.2(a)(i) shall continue without time limit.

 

(c)           Seller shall not have any liability for any indemnification under Section 11.2 until and unless the aggregate amount of the liability for all Damages for which Claim Notices are delivered by Purchaser exceeds one percent (1%) of the Unadjusted Purchase Price, and then only to the extent such Damages exceed one percent (1%) of the Unadjusted Purchase Price.

 

(d)           Notwithstanding anything to the contrary contained elsewhere in this Agreement, Seller shall not be required to indemnify the Purchaser Group under this Article 11 for aggregate Damages in excess of fifteen percent (15%) of the Unadjusted Purchase Price.

 

(e)           The amount of any Damages for which an Indemnified Person is entitled to indemnity under this Article 11 shall be reduced by (i) the amount of insurance proceeds realized by the Indemnified Person or its Affiliates with respect to such Damages (net of any collection costs, and excluding the proceeds of any insurance policy issued or underwritten by the Indemnified Person or its Affiliates) and (ii) an amount equal to the amount of any Tax benefit reasonably expected to be received by the Indemnified Person or its Affiliates in connection with such Damages or any of the circumstances giving rise thereto.

 

(f)           Purchaser shall not be entitled to indemnification or any other remedy under this Agreement with respect to any Damages or other liability, loss, cost, expense, claim, award or judgment attributable to or arising out of the actions of Purchaser as operator of any of the Properties.

(g)           In no event shall (i) any Indemnified Person be entitled to duplicate compensation with respect to the same Damage, liability, loss, cost, expense, claim, award or judgment under more than one provision of this Agreement and the various documents delivered in connection with the Closing, and (ii) any Person be entitled to indemnification hereunder with respect to a breach by an Indemnifying Person of any of the representations, warranties or covenants made or agreed to by such Indemnifying Person hereunder of which such Person had actual knowledge prior to the Closing Date.

 

 

Section 12.1          Tax Filings.  From the Effective Date through the Closing Date, Seller shall be responsible for filing with the Tax authorities the applicable Tax Returns for ad valorem, property, severance, production and similar Taxes which are required to be filed on or before the Closing Date and paying the Taxes reflected on such Tax Returns as due and owing (provided that to the extent such Taxes relate to the periods from and after the Effective Date, such payment shall be on behalf of Purchaser, and promptly following the Closing Date, Purchaser shall pay to Seller any such Taxes; but only to the extent that such amounts have not already been accounted for under Section 3.3).  Purchaser shall be responsible for the filing with the appropriate taxing authorities the applicable Tax Returns for all ad valorem, property, severance, production and similar Taxes beginning on or after the Closing Date and paying the Taxes reflected on such Tax Returns as due and owing; provided, however, that in the event that Seller is required by applicable Tax Law to file a Tax Return with respect to such Taxes after the Closing Date which includes all or a portion of a Tax period for which Purchaser is liable for such Taxes, following Seller’s request, Purchaser shall promptly pay to Seller all such Taxes allocable to the period or portion thereof beginning on or after the Effective Date (but only to the extent that such amounts have not already been accounted for under Section 3.3), whether such Taxes arise out of the filing of an original return or a subsequent audit or assessment of Taxes.  Seller shall be entitled to all Tax credits and Tax refunds which relate to any such Taxes allocable to any Tax period, or portion thereof, ending before the Effective Date.

 

Section 12.2          Current Tax Period Taxes.  Ad valorem, property, severance, production and similar Taxes assessed against the Assets with respect to the Tax period in which the Effective Date occurs (the “Current Tax Period”), but excluding ad valorem, property, severance production or similar Taxes which are based on quantity of or the value of production of Hydrocarbons, shall be apportioned between Seller and Purchaser as of the Effective Date with (a) Seller being obligated to pay a proportionate share of the actual amount of such Taxes for the Current Tax Period determined by multiplying such actual Taxes by a fraction, the numerator of which is the number of days in the Current Tax Period prior to the Effective Date and the denominator of which is the total number of days in the Current Tax Period and (b) Purchaser being obligated to pay a proportionate share of the actual amount of such Taxes for the Current Tax Period determined by multiplying such actual Taxes by a fraction, the numerator of which is the number of days (including the Closing Date) in the Current Tax Period on and after the Effective Date and the denominator of which is the total number of days in the Current Tax Period.  As described in Section 2.4(g), ad valorem, property, severance, production and similar Taxes which are based on quantity of or the value of production of Hydrocarbons shall be apportioned between Seller and Purchaser based on the number of units or value of production actually produced, as applicable, before or at and after the Effective Date. In the event that Purchaser or Seller makes any payment for which it is entitled to reimbursement under this Article 12, the applicable Party shall make such reimbursement promptly but in no event later than ten (10) days after the presentation of a statement setting forth the amount of reimbursement to which the presenting Party is entitled along with such supporting evidence as is reasonably necessary to calculate the amount of the reimbursement.

 

 

Section 12.3         Purchase Price Adjustments.  The Unadjusted Purchase Price shall be increased pursuant to Section 3.3 by (or Purchaser shall otherwise reimburse Seller for) the amount of ad valorem, property, severance, production and similar Taxes imposed on the ownership of the Assets or the production of Hydrocarbons produced from such Assets for all Tax periods or portions thereof ending on or before the Closing Date that Seller or its Affiliates have paid or pay on behalf of other working interest owners, royalty interest owners, overriding royalty interest owners and other interests owners in such Assets and that have not been recouped by Seller before the Closing Date from such other working interest owners, royalty interest owners, overriding royalty interest owners and other interest owners in such Assets.  Notwithstanding anything to the contrary (including Section 2.4(f)), to the extent that Purchaser receives any Tax refund to which Seller is entitled as described above, or any recoupment of Taxes described in the preceding sentence, it shall immediately pay such amount to Seller to the extent the Purchase Price has not been increased pursuant to Section 3.3 on account thereof.

 

Section 12.4          Characterization of Certain Payments.  The Parties agree that any payments made pursuant to this Article 12, Article 11 or Section 9.4 shall be treated for all Tax purposes as an adjustment to the Purchase Price unless otherwise required by Law.

 

 

Section 13.1          Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original instrument, but all such counterparts together shall constitute but one agreement.  Either Party’s delivery of an executed counterpart signature page by facsimile (or email) is as effective as executing and delivering this Agreement in the presence of the other Party.  No Party shall be bound until such time as all of the Parties have executed counterparts of this Agreement.

 

Section 13.2          Notice.  All notices and other communications which are required or may be given pursuant to this Agreement must be given in writing, in English and delivered personally, by courier, by facsimile or by registered or certified mail, postage prepaid, as follows:

 

 

If to Seller:

 

Talon Oil & Gas LLC

12225 Greenville Avenue

Dallas, Texas 75243

Attn: Grant Henderson

Facsimile: (214) 751-2901

Email:   ***@***

 

With a copy to:

 

Talon Oil & Gas LLC

12225 Greenville Avenue

Dallas, Texas 75243

Attn: Joe Callaway

Facsimile: (214) 751-2901

Email:   ***@***

With a copy to:

 

Latham & Watkins LLP

717 Texas Avenue, Suite 1600

Houston, Texas 77002

Attn: Michael P. Darden and

          Michael Dillard

Facsimile: (713) 546-5401

Email:   ***@***

             ***@***

If to Purchaser and/or EVOC:

 

c/o EnerVest, Ltd.

1001 Fannin, Suite 800

Houston, Texas  77002

Attn:  Fabené J. Welch

Facsimile:   ###-###-####

Email:   ***@***

 

With a copy to:

 

EnerVest, Ltd.

1001 Fannin, Suite 800

Houston, Texas  77002

Attn:  Philip Berry

Facsimile:   ###-###-####

Email:   ***@***

 

Either Party may change its address for notice by providing notice to the other Party in the manner set forth above.  All notices shall be deemed to have been duly given at the time of receipt by the Party to which such notice is addressed.

 

Section 13.3         Tax, Recording Fees, Similar Taxes & Fees.  Purchaser shall bear any sales, use, excise, real property transfer or gain, gross receipts, goods and services, registration, capital, documentary, stamp or transfer Taxes, recording fees and similar Taxes and fees incurred and imposed upon, or with respect to, the property transfers or other transactions contemplated hereby.  If such transfers or transactions are exempt from any such Taxes or fees upon the filing of an appropriate certificate or other evidence of exemption, Purchaser will timely furnish to Seller such certificate or evidence.  Except as otherwise provided herein, all costs and expenses (including legal and financial advisory fees and expenses) incurred in connection with, or in anticipation of, this Agreement and the transactions contemplated hereby shall be paid by the Party incurring such expenses.

 

Section 13.4          Governing Law; Jurisdiction.

 

(a)           THIS AGREEMENT AND THE LEGAL RELATIONS BETWEEN THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW WHICH WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.

 

(b)           THE PARTIES HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA LOCATED IN HARRIS COUNTY, TEXAS AND APPROPRIATE APPELLATE COURTS THEREFROM, AND EACH PARTY HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH DISPUTE, CONTROVERSY OR CLAIM MAY BE HEARD AND DETERMINED IN SUCH COURTS.  THE PARTIES HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAWS, ANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH DISPUTE, CONTROVERSY OR CLAIM BROUGHT IN ANY SUCH COURT OR ANY DEFENSE OF INCONVENIENT FORUM FOR THE MAINTENANCE OF SUCH DISPUTE, CONTROVERSY OR CLAIM.  EACH PARTY AGREES THAT A JUDGMENT IN ANY SUCH DISPUTE MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY APPLICABLE LAW.

 

(c)           EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.

 

Section 13.5          Waivers.  Any failure by either Party to comply with any of its obligations, agreements or conditions herein contained may be waived by the Party to whom such compliance is owed by an instrument signed by such Party and expressly identified as a waiver, but not in any other manner.  No waiver of, or consent to a change in, any of the provisions of this Agreement shall be deemed or shall constitute a waiver of, or consent to a change in, other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.

Section 13.6    Assignment.  Except as hereinafter specifically provided, no Party shall assign all or any part of this Agreement, nor shall either Party assign or delegate any of its rights or duties hereunder, without the prior written consent of the other Party (which consent may be withheld for any reason) and any assignment or delegation made without such consent shall be void.  Notwithstanding the preceding sentence, EnerVest Holding, L.P. shall have the right to convey all of its rights, benefits, duties and obligations in, to and arising from this Agreement on or before Closing to one or more affiliated limited partnerships the general partner of which is EnerVest, Ltd. (whether one or more, the “Co-Investment Fund”), and EV Properties, L.P., EnerVest Energy Institutional Fund XII-A, L.P., EnerVest Energy Institutional Fund XII-WIB, L.P., EnerVest Energy Institutional Fund XII-WIC, L.P. shall have the right to convey a portion of their respective rights, benefits, duties and obligations in, to and arising from this Agreement on or before Closing to the Co-Investment Fund.  In the event of any such conveyance, Exhibit E shall be amended to reflect the revised Proportionate Shares.  Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and assigns.

 

Section 13.7    Entire Agreement.  This Agreement (including, for purposes of certainty, the Appendix, Exhibits and Schedules attached hereto), the documents to be executed hereunder and the Confidentiality Agreement constitute the entire agreement between the Parties pertaining to the subject matter hereof, and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties pertaining to the subject matter hereof.

 

Section 13.8    Amendment.  This Agreement may be amended or modified only by an agreement in writing executed by all Parties and expressly identified as an amendment or modification.

 

Section 13.9    No Third Party Beneficiaries.  Nothing in this Agreement shall entitle any Person other than Purchaser and Seller to any claims, cause of action, remedy or right of any kind, except the rights expressly provided in Section 4.2(e), Section 7.1(d) and Section 11.2 to the Persons described therein.

 

Section 13.10  Construction.  The Parties acknowledge that (a) Seller and Purchaser have had the opportunity to exercise business discretion in relation to the negotiation of the details of the transaction contemplated hereby, (b) this Agreement is the result of arms-length negotiations from equal bargaining positions and (c) Seller and Purchaser and their respective counsel participated in the preparation and negotiation of this Agreement.  Any rule of construction that a contract be construed against the drafter shall not apply to the interpretation or construction of this Agreement.

 

Section 13.11 Limitation on Damages.  NOTWITHSTANDING ANYTHING TO THE CONTRARY, EXCEPT IN CONNECTION WITH ANY DAMAGES INCURRED BY THIRD PARTIES FOR WHICH INDEMNIFICATION IS SOUGHT UNDER THE TERMS OF THIS AGREEMENT, NONE OF PURCHASER, SELLER OR ANY OF THEIR RESPECTIVE AFFILIATES SHALL BE ENTITLED TO CONSEQUENTIAL, SPECIAL, INDIRECT, PUNITIVE OR EXEMPLARY DAMAGES IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY AND, EXCEPT AS OTHERWISE PROVIDED IN THIS SENTENCE, EACH OF PURCHASER AND SELLER, FOR ITSELF AND ON BEHALF OF ITS AFFILIATES, HEREBY EXPRESSLY WAIVES ANY RIGHT TO CONSEQUENTIAL, SPECIAL, INDIRECT, PUNITIVE OR EXEMPLARY DAMAGES IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY.

 

Section 13.12  Recording.  As soon as practicable after Closing, Purchaser shall record the Conveyances and other assignments, if any, delivered at Closing in the appropriate counties as well as with any appropriate governmental agencies and provide Seller with copies of all recorded or approved instruments.

 

Section 13.13  Conspicuous.  SELLER AND PURCHASER AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE, THE PROVISIONS IN THIS AGREEMENT IN BOLD-TYPE FONT ARE “CONSPICUOUS” FOR THE PURPOSE OF ANY APPLICABLE LAW.

 

Section 13.14  Time of Essence.  This Agreement contains a number of dates and times by which performance or the exercise of rights is due, and the Parties intend that each and every such date and time be the firm and final date and time, as agreed.  For this reason, each Party hereby waives and relinquishes any right it might otherwise have to challenge its failure to meet any performance or rights election date applicable to it on the basis that its late action constitutes substantial performance, to require the other Party to show prejudice, or on any equitable grounds.  Without limiting the foregoing, time is of the essence in this Agreement.  If the date specified in this Agreement for giving any notice or taking any action is not a Business Day (or if the period during which any notice is required to be given or any action taken expires on a date which is not a Business Day), then the date for giving such notice or taking such action (and the expiration date of such period during which notice is required to be given or action taken) shall be the next day which is a Business Day.

 

Section 13.15  Delivery of Records.  Seller, at Purchaser’s cost and expense, shall deliver the Records to Purchaser within ten business (10) days following Purchaser’s assumption of operations.

 

Section 13.16  Severability.  The invalidity or unenforceability of any term or provision of this Agreement in any situation or jurisdiction shall not affect the validity or enforceability of the other terms or provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction and the remaining terms and provisions shall remain in full force and effect, unless doing so would result in an interpretation of this Agreement which is manifestly unjust.

 

Section 13.17  Specific Performance.  The Parties agree that if any of the provisions of this Agreement were not performed in accordance with their specific terms, irreparable damage would occur, no adequate remedy at Law would exist and damages would be difficult to determine, and the Parties shall be entitled to specific performance of the terms hereof and immediate injunctive relief, without the necessity of proving the inadequacy of money damages as a remedy, in addition to any other remedy available at law or in equity.

 

Section 13.18  Purchaser Liability.  Notwithstanding anything to the contrary in this Agreement, the Parties agree that, (a) prior to and at Closing, each Purchaser shall be jointly and severally liable for Purchaser’s obligations and liabilities under this Agreement and (b) after Closing, each Purchaser shall be severally, but not jointly, liable (each for its Proportionate Share) for Purchaser’s obligations and liabilities under this Agreement (other than the obligations set out in Section 9.4(b), for which each Purchaser shall remain jointly and severally liable).

[Signature Pages Follow]

 

IN WITNESS WHEREOF, this Agreement has been signed by each of the Parties on the date first above written.

 

 

 

	EnerVest Energy Institutional Fund XII-A, L.P.
	By:	EnerVest, Ltd., Its General Partner
	By: EnerVest Management GP, L.C., Its General Partner
	By:	/s/ James M. Vanderhider
		James M. Vanderhider
		Executive Vice President and
		Chief Financial Officer
	EnerVest Energy Institutional Fund XII-WIB, L.P.
	By:	EnerVest, Ltd., Its General Partner
	By:  EnerVest Management GP, L.C., Its General Partner
	By:	/s/ James M. Vanderhider
		James M. Vanderhider
		Executive Vice President and
		Chief Financial Officer
	EnerVest Energy Institutional Fund XII-WIC, L.P.
	By:	EnerVest, Ltd., Its General Partner
	By:  EnerVest Management GP, L.C., Its General Partner
	By:	/s/ James M. Vanderhider
		James M. Vanderhider
		Executive Vice President and
		Chief Financial Officer
	EnerVest Holding, L.P.
	By: EnerVest Operating, L.L.C., Its General Partner
	By:	/s/ Stephen A. McDaniel
		Stephen A. McDaniel
		Senior Vice President and
		General Manager - Western

	EV Properties, L.P.,
	By:  EV Properties GP, LLC, Its General Partner
	By:	/s/ Michael A. Mercer
		Michael A. Mercer
		Senior Vice President and Chief Financial Officer
	EVOC:
	EnerVest Operating, L.L.C.
	By:	/s/ Stephen A. McDaniel
		Stephen A. McDaniel
		Senior Vice President and
		General Manager - Western

 

ATTACHED TO AND MADE A PART OF THAT

CERTAIN PURCHASE AND SALE AGREEMENT, DATED AS OF October 25, 2010,
BY AND BETWEEN SELLER, PURCHASER AND EVOC

 

 

“Actual Knowledge” has the meaning set forth in Section 5.1(a).

 

“Additional Hedging Transactions” has the meaning set forth in Section 7.11.

 

“Adjusted Purchase Price” has the meaning set forth in Section 3.3.

 

“AFEs” means authorization for expenditures issued pursuant to a Contract.

 

“Affiliate” means, with respect to any Person, any Person that directly or indirectly Controls, is Controlled by or is under common Control with such Person.

 

“Aggregate Benefit Deductible” has the meaning set forth in Section 4.5(b)(ii).

 

“Aggregate Defect Deductible” has the meaning set forth in Section 4.5(b)(i).

 

“Agreement” has the meaning set forth in Preamble of this Agreement.

 

“Allocated Value” has the meaning set forth in Section 3.4.

 

“Arbitration Decision” has the meaning set forth in Section 4.4(d).

 

“Asserted Title Defect Amount” has the meaning set forth in Section 4.2(a).

 

“Assets” has the meaning set forth in Section 2.2.

 

“Assumed Purchaser Obligations” means all obligations and liabilities (including Environmental Liabilities), known or unknown, with respect to or arising from the Assets, regardless of whether such obligations or liabilities arose prior to, on or after the Effective Date, including obligations and liabilities relating in any manner to the condition, use, ownership or operation of the Assets, including obligations to (a) furnish makeup gas and/or settle Imbalances attributable to the Assets according to the terms of applicable gas sales, processing, gathering or transportation Contracts, (b) pay working interests, royalties, overriding royalties and other interest owners’ revenues or proceeds attributable to sales of Hydrocarbons produced from the Assets (including those held in suspense by Seller as of the Closing Date for which the Unadjusted Purchase Price is adjusted downward pursuant to Section 3.3(b)(vi), but excluding such amounts retained by Seller pursuant to Section 2.4(c)), (c) pay the proportionate share attributable to the Assets to properly plug and abandon any and all Wells, including temporarily abandoned Wells, (d) pay the proportionate share attributable to the Assets to dismantle or decommission and remove any property and other property of whatever kind related to or associated with operations and activities conducted by whomever on the Assets, (e) pay the proportionate share attributable to the Assets to abandon, clean up, restore and/or remediate the premises covered by or related to the Assets in accordance with applicable agreements and Laws and (f) pay the proportionate share attributable to the Assets to perform all obligations applicable to or imposed on the lessee, owner, or operator under the Leases and the Contracts, or as required by any Law including the payment of all Taxes for which Purchaser is responsible hereunder; but excluding, in all such instances, (A) prior to the Cut-off Date, matters that are the bases for the downward adjustments set forth in Section 3.3(b), which will be exclusively settled and accounted for pursuant to the terms of Section 3.3(b) and Section 9.4 and (B) matters that are subject to indemnification pursuant to Section 11.2(b)(ii).

 

Appendix A-1

“Business Day” means each calendar day except Saturdays, Sundays, and Federal holidays.

 

“Casualty Loss” has the meaning set forth in Section 4.7(a).

 

“Central Time” means the central standard time zone of the United States of America.

 

“CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et _seq., as amended.

 

“Claim Notice” has the meaning set forth in Section 11.3(b).

 

“Closing” has the meaning set forth in Section 9.1.

 

“Closing Date” has the meaning set forth in Section 9.1.

 

“Closing Payment” has the meaning set forth in Section 9.4(a).

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Co-Investment Fund” has the meaning set forth in Section 13.6.

 

“Confidentiality Agreement” means that certain Confidentiality Agreement dated  August 25, 2010 between Purchaser and Seller.

 

“Contracts” has the meaning set forth in Section 2.2(e).

 

“Control” means the ability to direct the management and policies of a Person through ownership of voting shares or other equity rights, pursuant to a written agreement, or otherwise.  The terms “Controls” and “Controlled by” and other derivatives shall be construed accordingly.

 

“Conveyance” means the Conveyance attached hereto as Exhibit B.

 

“COPAS” has the meaning set forth in Section 2.5(a).

 

“Current Tax Period” has the meaning set forth in Section 12.2.

 

Appendix A-2

“Customary Post-Closing Consents” means the consents and approvals from Governmental Bodies for the assignment of the Assets to Purchaser that are customarily obtained after the assignment of properties similar to the Assets.

 

“Cut-off Date” has the meaning set forth in Section 3.3.

 

“Damages” means the amount of any actual liability, loss, cost, expense, fine, penalty, claim, award or judgment incurred or suffered by any Person (to be indemnified under this Agreement) arising out of or resulting from the indemnified matter, whether attributable to personal injury or death, property damage, contract claims (including contractual indemnity claims), torts, or otherwise, including reasonable fees and expenses of attorneys, consultants, accountants or other agents and experts reasonably incident to matters indemnified against, and the reasonable costs of investigation and/or monitoring of such matters, and the reasonable costs of enforcement of the indemnity; provided, however, that the term “Damages” shall not include (i) loss of profits or other consequential damages suffered by the Party claiming indemnification, or any punitive damages (except as otherwise provided herein), (ii) any liability, loss, cost, expense, claim, award or judgment to the extent resulting from or to the extent increased by the actions or omissions of any Indemnified Person after the Closing Date and (iii) only in the case of claims under Section 11.2(a)(iii) or Section 11.2(b)(ii), any liability, loss, cost, expense, claim, award or judgment that does not individually exceed $50,000.

 

“Defensible Title” means that title of Seller, with respect to the Wells (including any proved undeveloped and probable locations identified by Purchaser on Schedule 3.4 hereto), that:

 

(i)           entitles Seller to receive Hydrocarbons within, produced, saved and marketed from the Wells throughout the duration of the productive life of such Wells (after satisfaction of all royalties, overriding royalties, net profits interests or other similar burdens paid to third Persons on or measured by production of Hydrocarbons, hereinafter “Net Revenue Interest”) of not less than the Net Revenue Interest shown on Exhibit A-2 for such Wells, except for (a) decreases in connection with those operations in which Seller may be a nonconsenting co-owner, (b) decreases resulting from the reversion of interests to co-owners with operations in which such co-owners elected not to consent, (c) decreases resulting from the establishment or amendment of involuntary pools or units, (d) decreases required to allow other working interest owners to make up past underproduction or pipelines to make up past under-deliveries (in each of (a) – (d), as and to the extent reflected on Exhibit A-2) and (e) as otherwise shown on Exhibit A-2;

 

(ii)           obligates Seller to bear a percentage of the costs and expenses for the maintenance and development of, and operations relating to, of each Well not greater than the working interest shown in Exhibit A-2 without increase throughout the productive life of such Wells, except for (a) increases that are accompanied by at least a proportionate increase in Seller’s Net Revenue Interest, (b) increases resulting from contribution requirements with respect to defaults by co-owners under the applicable operating agreement and (c) as otherwise shown on Exhibit A-2; and

 

(iii)           is free and clear of liens, encumbrances, obligations, or defects, except for and subject to Permitted Encumbrances.

 

Appendix A-3

“Deposit” has the meaning set forth in Section 3.1.

 

“Disputed Defect” has the meaning set forth in Section 4.2(b).

 

“Disputed Title Matters” has the meaning set forth in Section 4.4.

 

“Dollars” means U.S. Dollars.

“DOJ” means the Department of Justice.

 

“Effective Date” has the meaning set forth in Section 2.4(a).

 

“Environmental Defect” means (i) any written notice from a Governmental Body asserting or alleging a violation of an Environmental Law, (ii) a condition on or affecting an Asset which violates an Environmental Law, (iii) a condition on or affecting an Asset with respect to which remedial or corrective action is required under Environmental Law and (iv) any other Environmental Liability.

 

“Environmental Laws” means, as the same have been amended to the date hereof, CERCLA, the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et _seq.; the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et_seq.; the Clean Air Act, 42 U.S.C. § 7401 et_seq.; the Hazardous Materials Transportation Act, 49 U.S.C. § 1471 et_seq.; the Toxic Substances Control Act, 15 U.S.C. §§ 2601 through 2629; the Oil Pollution Act, 33 U.S.C. § 2701 et _seq.; the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. § 11001 et _seq.; and the Safe Drinking Water Act, 42 U.S.C. §§ 300f through 300j; and all similar Laws as of the date hereof of any Governmental Body having jurisdiction over the property in question addressing pollution or protection of the environment and all regulations implementing the foregoing that are applicable to the operation and maintenance of the Assets.

 

“Environmental Liabilities” means any and all environmental response costs (including costs of remediation), damages, natural resource damages, settlements, consulting fees, expenses, penalties, fines, orphan share, prejudgment and post-judgment interest, court costs, attorneys’ fees and other liabilities incurred or imposed (i) pursuant to any order, notice of responsibility, directive (including requirements embodied in Environmental Laws), injunction, judgment or similar act (including settlements) by any Governmental Body or court of competent jurisdiction to the extent arising out of any violation of, or remedial obligation under, any Environmental Laws which are attributable to the ownership or operation of the Assets or (ii) pursuant to any claim or cause of action by a Governmental Body or other Person for personal injury, property damage, damage to natural resources, remediation or response costs to the extent arising out of any violation of, or any remediation obligation under, any Environmental Laws which is attributable to the ownership or operation of the Assets.

 

“Equipment” has the meaning set forth in Section 2.2(g).

 

“Escrow Account” has the meaning set forth in Section 4.2(b).

 

“Escrow Agent” means the escrow agent named in the Escrow Agreement.

 

Appendix A-4

“Escrow Agreement” means that certain escrow agreement by and among the Parties and a bank selected by the Parties to serve as escrow agent, dated as of a date prior to the Closing Date in a form agreed by the Parties.

 

“EVOC” has the meaning set forth in the Preamble of this Agreement.

 

“Excluded Assets” means (i) the amounts to which Seller is entitled pursuant to Section 3.3(a), (ii) the Excluded Records, (iii) the Reassigned Properties, (iv) all claims and causes of action of Seller or any of its Affiliates arising under or with respect to any Contract that are attributable to the period of time prior to the Effective Date (including claims for adjustments or refunds), (v) all rights and interests of Seller or its Affiliates (a) under any policy or agreement of insurance or indemnity agreement, (b) under any bond and (c) to any insurance or condemnation proceeds or awards arising, in each case, from acts, omission or events, or damage to or destruction of property prior to the Effective Date, (vi) all right, title and interest in any oil, gas and interest in oil, gas or mineral leases, overriding royalties, production payments, net profits interests, fee mineral interests, fee royalty interests and other interest in oil, gas, and other minerals set forth on Exhibit A-6, if any, (vii) any Leased Assets that are not transferred to Purchaser at Closing, (viii) any Taxes, Tax refunds or Tax carry-forward amounts attributable to the Assets prior to the Effective Date or to Seller’s businesses generally, (ix) all personal property of Seller not included within the definition of Assets, (x) all geophysical and other seismic and related technical data and information relating to the Assets to the extent that such geophysical and other seismic and related technical data and information is not transferable without payment of a fee or other penalty, (xi) all of Seller’s proprietary computer software, patents, trade secrets, copyrights, names, trademarks, logos and other intellectual property, (xii) all data and Contracts that cannot be disclosed to Purchaser as a result of confidentiality arrangements under agreements with Third Parties (provided that Seller uses its commercially reasonable efforts to obtain a waiver of any such confidentiality restriction), (xiii) any of the Assets excluded from the transactions contemplated hereunder pursuant to Section 4.6 or Section 4.7(a) and (xiv) any other items expressly excluded under this Agreement or set forth on Exhibit A-6.

 

“Excluded Records” means (i) all corporate, financial, income and franchise Tax and legal records of Seller that relate to Seller’s business generally (whether or not relating to the Assets), (ii) any records to the extent disclosure or transfer is restricted by any Third Party license agreement, other Third Party agreement or applicable Law, (iii) computer software, (iv) all legal records and legal files of Seller and all other work product of and attorney-client communications with any of Seller’s legal counsel (other than copies of (a) title opinions, (b) Contracts and (c) records and files with respect to any previous litigation matters and any on-going litigation matters that Purchaser will assume pursuant to the transactions contemplated herein), (v) personnel records, (vi) records relating to the sale of the Assets, including bids received from and records of negotiations with third Persons and (vii) any records with respect to the other Excluded Assets.

 

“Execution Date” has the meaning set forth in the Preamble of this Agreement.

 

“Existing Hedging Transactions” has the meaning set forth in Section 2.2(k).

 

Appendix A-5

“Field Office” has the meaning set forth in Section 2.2(f).

 

“Final Disputed Title Matters” has the meaning set forth in Section 4.4.

 

“Financial Statements” has the meaning set forth in Section 7.12.

 

“FTC” means the Federal Trade Commission.

 

“Funding Failure” the inability or failure for any reason to make (or obtain funds sufficient to make) the Closing Payment or any amounts owed pursuant to Section 9.4(b).

 

“GAAP” means U.S. generally accepted accounting principles.

 

 “Governmental Body” means any instrumentality, subdivision, court, administrative agency, commission, official or other authority of the United States or any other country or any state, province, prefect, municipality, locality or other government or political subdivision thereof, or any quasi-governmental or private body exercising any administrative, executive, judicial, legislative, police, regulatory, taxing, importing or other governmental or quasi-governmental authority.

 

“Hazardous Substances” means any pollutants, contaminants, toxic or hazardous substances, materials, wastes, constituents, compounds or chemicals that are requested by, or may form the basis of liability under any Governmental Laws, including asbestos-containing materials (but excluding any Hydrocarbons or NORM).

 “HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

 

“Hydrocarbons” means oil, gas, condensate and other gaseous and liquid hydrocarbons or any combination thereof.

 

“Imbalances” means any imbalance at the wellhead between the amount of Hydrocarbons produced from a Well and allocated to the interests of Seller therein and the shares of production from the relevant Well to which Seller was entitled, or at the pipeline flange between the amount of Hydrocarbons nominated by or allocated to Seller and the Hydrocarbons actually delivered on behalf of Seller at that point.

 

“Indemnified Person” has the meaning set forth in Section 11.3(a).

 

“Indemnifying Person” has the meaning set forth in Section 11.3(a).

 

“Individual Benefit Threshold” has the meaning set forth in Section 4.5(b)(ii).

 

“Individual Defect Threshold” has the meaning set forth in Section 4.5(b)(i).

 

“Laws” means all Permits, statutes, rules, regulations, ordinances, orders, and codes of Governmental Bodies.

 

Appendix A-6

“Leased Assets” means all equipment, machinery, tools, fixtures, inventory, vehicles, office leases, furniture, office equipment and related peripheral equipment, computers, field equipment and related assets that are subject to or currently leased by Seller, and used or held for use solely in connection with the operation of, or the production of Hydrocarbons from, the Properties.

 

“Leases” has the meaning set forth in Section 2.2(a).

 

“Letter-in-lieu of Transfer Order” means that certain Letter-in-lieu of Transfer Order attached hereto as Exhibit C.

 

“Net Revenue Interest” has the meaning set forth in the definition of the term “Defensible Title” in this Appendix A.

 

“NORM” means naturally occurring radioactive material.

 

“Operated Properties” means those Properties for which Seller is the operator.

 

“Party” and “Parties” have the meanings set forth in the Preamble of this Agreement.

 

“Permits” means any permits, approvals or authorizations by, or filings with, Governmental Bodies.

 

“Permitted Encumbrances” means any or all of the following:

 

(i)      royalties and any overriding royalties, net profits interests, free gas arrangements, production payments, reversionary interests and other similar burdens on production to the extent that the net cumulative effect of such burdens does not reduce Seller’s Net Revenue Interest below that shown in Exhibit A-2 or increase Seller’s working interest above that shown in Exhibit A-2 without a proportionate increase in the Net Revenue Interest of Seller;

 

(ii)     all unit agreements, pooling agreements, operating agreements, farmout agreements, Hydrocarbon production sales contracts, division orders and other contracts, agreements and instruments applicable to the Properties, to the extent that the net cumulative effect of such instruments does not reduce Seller’s Net Revenue Interest below that shown in Exhibit A-2 or increase  Seller’s working interest above that shown in Exhibit A-2 without a proportionate increase in the Net Revenue Interest of Seller;

 

(iii)    preferential rights to purchase and required Third Party consents to assignments and similar transfer restrictions;

 

(iv)    liens for Taxes or assessments not yet delinquent or being contested in good faith by appropriate actions;

 

(v)     materialman’s, mechanic’s, repairman’s, employee’s, contractor’s, operator’s and other similar liens or charges arising in the ordinary course of business for amounts not yet delinquent (including any amounts being withheld as provided by Law), or if delinquent, being contested in good faith by appropriate actions;

 

Appendix A-7

(vi)   all rights to consent by, required notices to, filings with, or other actions by Governmental Bodies in connection with the sale or conveyance of the Assets or interests therein if they are not required or customarily obtained in the region where the Assets are located prior to the sale or conveyance, including Customary Post-Closing Consents;

 

(vii)   excepting circumstances where such rights have already been triggered, rights of reassignment arising upon final intention to abandon or release the Assets, or any of them;

 

(viii)  easements, rights-of-way, covenants, servitudes, permits, surface leases and other rights in respect of surface operations which do not prevent or adversely affect operations as currently conducted on the Properties covered by the Assets;

 

(ix)     calls on production under existing Contracts;

 

(x)     gas balancing and other production balancing obligations, and obligations to balance or furnish make-up Hydrocarbons under Hydrocarbon sales, gathering, processing or transportation contracts;

 

(xi)    all rights reserved to or vested in any Governmental Bodies to control or regulate any of the Assets in any manner or to assess Tax with respect to the Assets, the ownership, use or operation thereof, or revenue, income or capital gains with respect thereto, and all obligations and duties under all applicable Laws of any such Governmental Body or under any franchise, grant, license or permit issued by any Governmental Body;

 

(xii)   any lien, charge or other encumbrance on or affecting the Assets which is expressly waived, bonded or paid by Purchaser at or prior to Closing or which is discharged by Seller at or prior to Closing;

 

(xiii)  any matters shown on Exhibit A-2;

 

(xiv)  mortgages, liens and other encumbrances burdening the Assets for which releases are obtained at or prior to Closing; and

 

(xv)  any other liens, charges, encumbrances, defects or irregularities which (a) do not, individually or in the aggregate, materially detract from the value of or materially interfere with the use or ownership of the Assets subject thereto or affected thereby, (b) would be accepted by a reasonably prudent purchaser engaged in the business of owning and operating oil and gas properties in the region where the Assets are located and (c) do not reduce Seller’s Net Revenue Interest below that shown in Exhibit A-2 or increase Seller’s working interest above that shown in Exhibit A-2 without a proportionate increase in the Net Revenue Interest of Seller.

 

“Person” means any individual, firm, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization, Government Body or any other entity.

 

Appendix A-8

“Phase I Environmental Site Assessment” means an environmental site assessment performed pursuant to the American Society for Testing and Materials E1527 - 05, or any similar environmental assessment.

 

“Prime Rate” means the rate of interest published from time to time as the “Prime Rate” in the “Money Rates” section of The Wall Street Journal.

 

“Properties” has the meaning set forth in Section 2.2(c).

 

“Property Costs” means (i) all operating and production expenses (including costs of insurance, rentals, shut-in payments and royalty payments; title examination and curative actions; ad valorem, property, severance, production and similar Taxes attributable to the ownership or operation of the Assets or the production of Hydrocarbons therefrom; and gathering, processing and transportation costs in respect of Hydrocarbons produced from the Properties) and capital expenditures (including bonuses, broker fees, and other lease acquisition costs, costs of drilling and completing wells and costs of acquiring equipment) incurred in the ownership and operation of the Assets in the ordinary course of business, (ii) general and administrative costs with respect to the Assets and (iii) overhead costs charged to the Assets under the applicable operating agreement or, in the absence of an operating agreement, overhead charges that are based on overhead rates typically charged for similar services in the area where the relevant Assets are located.

 

“Proportionate Share” has the meaning set forth in the Preamble of this Agreement.

 

“Purchase Price” has the meaning set forth in Section 3.1.

 

“Purchase Price Allocation Schedule” has the meaning set forth in Section 3.2.

 

“Purchaser” has the meaning set forth in the Preamble of this Agreement.

 

“Purchaser Group” means Purchaser, its current and former Affiliates, and each of their respective officers, directors, employees, agents, advisors and other Representatives.

 

“Reassigned Properties” means those certain of the Assets reconveyed, if any, from Purchaser to Seller pursuant to Section 4.2(c) or Section 4.4.

 

“Records” means copies of any files, records, maps, information, and data, whether written or electronically stored, relating solely to the Assets, including: (i) land and title records (including abstracts of title, title opinions, and title curative documents); (ii) contract files; (iii) correspondence; (iv) operations, environmental, production, and accounting records; and (v) production, facility and well records and data; provided, however, that the term “Records” shall not include any of the foregoing items that are Excluded Assets and any information that cannot, without unreasonable effort or expense that Purchaser does not agree to undertake or pay, as applicable, be separated from any files, records, maps, information and data related to the Excluded Assets.

 

“Remedy Deadline” has the meaning set forth in Section 4.2(b).

 

Appendix A-9

“Remedy Notice” has the meaning set forth in Section 4.2(b).

 

“Representatives” means (i) partners, employees, officers, directors, members, equity owners and counsel of a Party or any of its Affiliates or any prospective purchaser of a Party or an interest in a Party; (ii) any consultant or agent retained by a Party or the parties listed in subsection (i) above; and (iii) any bank, other financial institution or entity funding, or proposing to fund, such Party’s operations in connection with the Assets, including any consultant retained by such bank, other financial institution or entity.

 

“Seller” has the meaning set forth in the Preamble of this Agreement.

 

“Seller Group” means Seller, its current and former Affiliates, and each of their respective officers, directors, employees, agents, advisors and other Representatives.

 

“Tax Return” means any return (including any information return), report, statement, schedule, notice, form, election, estimated Tax filing, claim for refund or other document (including any attachments thereto and amendments thereof) filed with or submitted to, or required to be filed with or submitted to, any Governmental Body with respect to any Tax.

 

“Taxes” means all federal, state, local, and foreign income, profits, franchise, sales, use, ad valorem, property, severance, production, excise, stamp, documentary, real property transfer or gain, gross receipts, goods and services, registration, capital, transfer, or withholding taxes or other assessments, duties, fees or charges imposed by any Governmental Body, including any interest, penalties or additional amounts which may be imposed with respect thereto.

 

“Third Party” means any Person other than a Party to this Agreement or an Affiliate of a Party to this Agreement.

 

“Third Person Claim” has the meaning set forth in Section 11.3(b).

 

“Title Arbitration Notice” has the meaning set forth in Section 4.4(a).

 

“Title Arbitrator” has the meaning set forth in Section 4.4(b).

 

“Title Benefit” means any right, circumstance or condition that operates to (i) increase the Net Revenue Interest of Seller as of the Closing Date in any of the Wells above that shown on Exhibit A-2 without a proportionate (or greater) increase in Seller’s working interest above that shown Exhibit A-2.

 

“Title Benefit Amount” has the meaning set forth in Section 4.3(b).

 

“Title Benefit Notice” has the meaning set forth in Section 4.3(a).

 

“Title Benefit Property” has the meaning set forth in Section 4.3(a).

 

“Title Claim Date” has the meaning set forth in Section 4.2(a).

 

Appendix A-10

“Title Defect” means (i) an Environmental Defect or (ii) any lien, charge, encumbrance, obligation, defect, or other similar matter that, if not cured, causes Seller not to have Defensible Title in and to the Wells; provided, however, that the following shall not be considered Title Defects for any purpose of this Agreement:

 

(a)          defects in the chain of title consisting of the failure to recite marital status in a document or omissions of successions of heirship or estate proceedings, unless Purchaser provides affirmative evidence that such failure or omission would reasonably be expected to result in another Person’s superior claim of title to the relevant Asset;

 

(b)          defects arising out of lack of survey, unless a survey is expressly required by applicable Laws;

 

(c)          defects based on a gap in Seller’s chain of title in the state’s records as to state leases, or in the county records as to other leases, unless such gap is affirmatively shown to exist in such records by an abstract of title, title opinion or landman’s title chain or runsheet, which documents shall be included in a Title Defect Notice;

 

(d)          defects as a consequence of cessation of production, insufficient production, or failure to conduct operations on any of the Properties held by production, or lands pooled, communitized or unitized therewith, except to the extent the cessation of production, insufficient production or failure to conduct operations is affirmatively shown to exist such that it would give rise to a right to terminate the lease in question, evidence of which shall be included in a Title Defect Notice;

 

(e)          defects based on references to lack of information, including lack of information in Seller’s files, the lack of Third Party records, and or the unavailability of information from regulatory agencies;

 

(f)           defects based on references to a document because such document is not in Seller’s files;

 

(g)          defects based on Tax assessment, Tax payment or similar records (or the absence of such activities or records);

 

(h)          defects arising out of lack of corporate or other entity authorization, unless such lack of authorization results in a third Person’s actual and superior claim of title to the relevant property; and

 

(i)           defects that have been cured by applicable Laws of limitations or prescription.

 

“Title Defect Amount” has the meaning set forth in Section 4.2(c).

 

“Title Defect Notice” has the meaning set forth in Section 4.2(a).

 

“Title Defect Property” has the meaning set forth in Section 4.2(a).

 

Appendix A-11

“Transition Services Agreement” means the Transition Services Agreement attached hereto as Exhibit D.

 

“Unadjusted Purchase Price” has the meaning set forth in Section 3.1.

 

“Undisputed Title Defect” means, for purposes of Article 8, a Title Defect for which (i) Purchaser has delivered to Seller a Title Defect Notice prior to the Title Claim Date, (ii) Seller has not provided notice of a Disputed Defect prior to the third (3rd) Business Day before the date scheduled for Closing and (iii) the Asserted Title Defect Amount is in excess of the Title Defect Threshold.

 

“Units” has the meaning set forth in Section 2.2(b).

 

“Wells” has the meaning set forth in Section 2.2(c).

 

Appendix A-12