PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (this "Agreement") dated as
of the 4th day of August 2000, is between CASTLE OFFSHORE,
L.L.C., a limited liability company organized and existing under
the laws of Louisiana ("CASTLE") and BWAB LIMITED LIABILITY
COMPANY, a limited liability company organized and existing under
the laws of Colorado ("BWAB") (collectively, the "Sellers") and
DELTA PETROLEUM CORPORATION, a corporation organized and existing
under the laws of Colorado ("Buyer"). Sellers and Buyer are
referred to herein individually as a "Party" and collectively as
the "Parties".
In consideration of the mutual promises contained herein,
the benefits to be derived by each Party hereunder and other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Buyer and Sellers agree as follows:
ARTICLE 1
PURCHASE AND SALE
1.1 Purchase and Sale. Subject to the terms and conditions
of this Agreement, Sellers agree to sell and convey and Buyer
agrees to purchase and pay for all of Sellers' right, title and
interest in and to the Interests. The Parties recognize that as
between the Sellers, Castle owns and will sell and convey seventy-
five percent (75%) of the Interests and BWAB owns and will sell
and convey twenty-five percent (25%) of the Interests.
1.2 Interests. All of the following shall be referred to
in this Agreement collectively as the "Interests" and
individually as an "Interest":
(a) The oil, gas and mineral leases described on
Exhibit "A" attached hereto (collectively, the "Leases"),
including, without limitation, working interests, overriding
royalty interests, royalty interests and any other interests of a
similar nature affecting the lands covered by the Leases
(collectively, the ALands@).
(b) The oil and gas wells described on Exhibit "A"
(individually, a "Well," and collectively, the "Wells"), together
with all oil, natural gas, casinghead gas, drip gasoline, natural
gas liquids, condensate and other minerals produced from such
Wells.
(c) All unitization, communitization, pooling,
agreements, working interest units created by operating
agreements, partnership agreements and orders covering the Leases
and Lands, or any portion thereof, and the units and pooled or communitized
areas created thereby (collectively, the "Units").
(d) The tangible personal property, tools, machinery,
materials, pipelines, plants, gathering systems, equipment,
platforms and facilities, fixtures and improvements, which are
incident or attributable to or underlie the Leases, Lands, Wells
or Units with the production, transportation, treatment, sale or
disposal of hydrocarbons or water produced therefrom or
attributable thereto, (collectively, the "Equipment").
(e) The licenses, permits, contracts, agreements and
other instruments owned by Sellers (other than bonds posted by
Sellers) which concern and relate to any of the Leases, Lands,
Wells, Units and/or Equipment, INSOFAR AND ONLY INSOFAR as same
concern or relate to the Leases, Lands, Wells, Units and/or
Equipment, or the operation thereof; including, without
limitation, oil, gas and condensate purchase and sale contracts;
permits; rights-of-way; easements; licenses; servitudes; estates;
surface leases; farmin and farmout agreements; division orders
and transfer orders; bottomhole agreements; dry hole agreements;
area-of-mutual interest agreements; salt water disposal
agreements; acreage contribution agreements; operating
agreements; balancing agreements and unit agreements; pooling
agreements; pooling orders; communitization agreements;
processing, gathering, compression and transportation agreements;
facilities or equipment leases relating thereto or used or held
for use in connection with the ownership or operation thereof or
with the production, treatment, sale or disposal of hydrocarbons;
and all other contracts and agreements related to the Leases,
Lands, Wells and/or Equipment.
(f) Subject to Section 1.3 below, originals or copies
of all computer tapes and discs, files, records, information or
data relating to the Interests in the possession of Sellers,
including, without limitation, title records (including abstracts
of title, title opinions, certificate of title and title curative
documents), accounting records and files, contracts, correspondence,
production records, electric logs, core data, pressure data,
decline curves, graphical production curves, drilling reports,
well completion reports, drill stem test charts and reports,
regulatory reports, and all related materials, INSOFAR AND ONLY
INSOFAR as the foregoing items constitute materials that may be
lawfully conveyed to Buyer (i.e., the materials are not subject
to a proprietary agreement precluding their transfer to Buyer),
and, to the extent transferable, all other contract rights,
intangible rights (excluding Sellers' trademarks and service
marks), inchoate rights, choses in action, rights under
warranties made by prior owners, manufacturers, vendors or other
third parties, and rights accruing under applicable statutes of
limitation or prescription, attributable to the Interests.
(g) All payments, and all rights to receive payments,
with respect to the ownership of the production of hydrocarbons
from or the conduct of operations on the Interests accruing after
the Effective Time.
1.3 Reserved Interests. Notwithstanding any provision of
this Agreement to the contrary, Sellers reserve and retain (i)
Sellers' corporate, financial, tax and legal records and its
other business records; (ii) cash, bank accounts, letters of
credit, travel letter accounts and prepaid insurance; (iii) the
management information systems and other intellectual property
rights of Sellers used by Sellers in the management and
administration of its business; (iv) all claims that Sellers may
have under any policy of insurance, indemnity or bond maintained
by Sellers other than claims relating to property damage or
casualty loss affecting the Interests occurring between the
Effective Time and Closing (which claims shall be included in the
Interests); (v) all accounts receivable, trade credits or notes
receivable accrued before the Effective Time; (vi) any files or
records that Sellers are contractually or otherwise obligated not
to disclose to Buyer; (vii) all claims and causes of action
arising from acts, omissions or events, or damage or destruction
of property occurring prior to the Effective Time; (viii)
engineering studies or reserve reports relating to the Interests;
(ix) all interests and rights not included in the definition of
the Interests (the "Reserved Interests").
1.4 Effective Time. The purchase and sale of the Interests
shall be effective as of July 1, 2000, at 7:00 a.m., central
standard time (herein called the "Effective Time").
1.5 Ownership of the Interests. Subject to Section 13.1
and the other provisions of this Agreement, should Closing occur,
Sellers shall be entitled to all of the rights of ownership
(including, without limitation, the right to all production,
proceeds of production and other proceeds), and shall be subject
to the duties and obligations of such ownership attributable to
the Interests for the period of time prior to the Effective Time
and Buyer shall be entitled to all of the rights of ownership
(including, without limitation, the right to all production,
proceeds of production and other proceeds) and shall be subject
to the duties and obligation of such ownership attributable to
the Interests for the period of time from and after the Effective
Time. All expenses and costs, including, without limitation, all
ad valorem, property, production, severance, and similar taxes
and assessments based upon or measured by the ownership of the
Interests, the production of hydrocarbons, or the receipt of
proceeds therefrom) attributable to the Interests, shall be: (i)
paid by or allocated to Sellers if incurred or accruing with
respect to operations conducted prior to the Effective Time; or
(ii) paid by or allocated to Buyer if incurred or accruing with
respect to operations conducted after the Effective Time. All
hydrocarbons in storage facilities above or upstream from the
pipeline connection to each storage facility, or downstream of
delivery point sales meters on gas pipelines, as of the Effective
Time, shall belong to Sellers. All of the hydrocarbons placed in
such storage facilities or upstream of the aforesaid meters on
pipelines after the Effective Time shall belong to Buyer and
shall become a part of the Interests. In order to accomplish the
foregoing allocation of production, the parties shall rely upon
the records maintained by the operator of the relevant Interest,
unless such records are demonstrated to be inaccurate.
1.6 Risk of Loss. Buyer shall assume all risk of loss with
respect to the Interests from and after the Effective Time to
Closing.
1.7 Sellers' Agent. Castle shall act as agent on
behalf of Sellers for purposes of receiving payments of money or
shares of Buyer's Common Stock under this Agreement. Nothing
herein shall limit the right of each Seller to make individual
elections as to alternative courses of action set forth in this
Agreement except as otherwise set forth in this Agreement
and the Exhibits thereto.
ARTICLE 2
PURCHASE PRICE
2.1 Purchase Price. The purchase price for the Interests
shall be comprised of One Million Seven Hundred Fifty Thousand
Dollars ($1,750,000) paid by wire transfer or other immediately
available funds (the "Money Payment") and Five Hundred Eighty-
Three Thousand Three Hundred Thirty-Three (583,333) shares of
Buyer's Common Stock (the "Stock Payment"). The Money Payment
and the Stock Payment shall collectively be herein called the
"Purchase Price". At Closing, the Purchase Price shall be
adjusted as set forth in Section 2.3 below. In connection with
the issuance of the shares of Buyer's Common Stock pursuant to
this Section 2.1 as well as other Sections of this Agreement,
Buyer and Sellers have executed contemporaneously with this
Agreement the Registration Rights Agreement and the Investment
Representation Agreements, both as defined in Section 9.6 below.
2.2 Earnest Money Deposits. Following Buyer's execution of
this Agreement, to assure Buyer's performance of its obligations
under this Agreement, Buyer shall deposit with Castle for the
account of Castle, Three and Seventy-Five One Hundredths Percent
(3.75%) of the Money Payment, Sixty Five Thousand Six Hundred
Twenty-Five Dollars ($65,625), by wire transfer or other
immediately available funds (the "Money Deposit") plus an
additional Three and Seventy-Five One Hundredths Percent (3.75%)
of the Stock Payment, Twenty One Thousand Eight Hundred Seventy-
Five (21,875) shares of Buyer's Common Stock (the AStock
Deposit@). The Cash Deposit and the Stock Deposit being herein
collectively called the "Earnest Money Deposits". If Closing
occurs, the Earnest Money Deposits will be applied to the
Adjusted Purchase Price. If Closing fails to occur, the Earnest
Money Deposits shall be handled in accordance with Section 12.2
hereof.
2.3 Adjustments to Purchase Price. At Closing, the
Purchase Price shall be adjusted as follows and the resulting
amount shall be referred to herein as the "Adjusted Purchase
Price":
(a) The Purchase Price shall be adjusted upward by the
following:
i. The amount of all actual operating or capital
expenditures or prepaid expenses attributable
to the Interests incurred by or on behalf of
Sellers in connection with the operation of
the Interests and which are, according to
generally accepted accounting principles,
attributable to the period of time between
the Effective Time and September 30, 2000.
Such expenditures and expenses shall include,
without limitation, royalties, rentals and
other charges; ad valorem, property, excise,
and any other taxes based upon or measured by
the ownership of the Interests, the
production of hydrocarbons or the receipt of
proceeds therefrom; and expenses payable to a
third person under applicable joint operating
agreements, including, without limitation,
overhead charges at normal company overhead
labor rates and royalty disbursement fees
payable to operator, or similar payments to
third party operators, or, in the absence of
any joint operating agreement, those items
customarily billed under such an agreement.
ii. The value, less taxes (other than taxes on
net income), of all hydrocarbons in storage
facilities above or upstream from the
pipeline connection in each storage facility,
or downstream of delivery point, sales meters
on gas pipelines, as of the Effective Time,
at the prevailing market value at the time of
sale in the area, adjusted for grade and
gravity.
iii. Any other amounts agreed upon by Sellers and
Buyer.
(b) The Purchase Price shall be adjusted downward by
the following:
i. The Earnest Money Deposits made to Castle;
ii. Reductions due to Title Failures as provided
in Sections 10.7.
iii. For uncured Title Defects and Contested
Defects pursuant to Section 10.8.
iv. Reductions due to Environmental Defects as
provided in Section 11.3.
v. The gross proceeds earned by Sellers, net of
applicable severance and production taxes and
compression and transportation charges, and
derived from the sale of hydrocarbons
attributable to the Interests to the extent
owned by Buyer between the Effective Time and
September 30, 2000, pursuant to the
provisions of Section 1.5 above.
vi. Reductions due to receipt by Sellers of
denials to consent and of exercises of
preferential rights as provided in Section
10.11.
vii. Any other amounts agreed upon by Sellers and
Buyer.
(c) Sellers shall pay all capital expenditures and
expenses accruing prior to the Closing Date referenced in Section
2.3(a)(i) above and shall collect and receive all proceeds
accruing prior to the Closing Date referenced in Section
2.3(b)(v) above. Sellers shall be responsible for accounting for
all revenues earned and expenses incurred through September 30,
2000.
(d) Upward and downward adjustments to the
Purchase Price pursuant to Section 2.3 shall be divided equally
between the Money Payment and the Stock Payment, on the basis of
each share of Buyer's Stock being valued at Three Dollars ($3.00)
per share, rounded off to the nearest whole share.
2.4 Purchase Price Allocation. The Purchase Price shall be
allocated among the Interests as set forth in Exhibit "B"
attached hereto (the "Allocated Values").
2.5 Preliminary Settlement Statement. Sellers shall
prepare and deliver to Buyer at least five (5) "Business Days"
(which term shall mean any day except a Saturday, Sunday or other
day on which commercial banks in Denver, Colorado are required or
authorized by law to be closed) prior to the Closing Date,
Sellers' estimate of the Adjusted Purchase Price to be paid at
Closing, together with a statement setting forth Sellers'
estimate of the amount of each adjustment to the Purchase Price
to be made pursuant to Section 2.2 (the "Preliminary Settlement
Statement"). The parties shall negotiate in good faith and
attempt to agree on such estimated adjustments prior to Closing.
In the event any estimated adjustment amounts are not agreed upon
prior to Closing, the Adjusted Purchase Price for purposes of
Closing shall be calculated based on Sellers' and Buyer's agreed
upon estimated adjustments and Sellers' good faith estimation of
any disputed amounts, which estimate shall be subject to
adjustment in the Final Settlement Statement pursuant to Section
9.1.
2.6 Letter-of-Credit Note. In consideration for the
Sellers' agreement to maintain after the Closing Date the posting
of certain letters-of-credit with respect to the Interests, Buyer
will deliver a promissory note (the "Letter-of-Credit Note") in
the amount of One Million Three Hundred Thousand Dollars
($1,300,000) payable to Sellers on or before June 30, 2001,
accruing interest at the rate of eight per cent (8%) per annum,
payable quarterly in either cash or shares of the Common Stock of
Buyer, at the option of Buyer, the value of such stock being
fixed at Four Dollars ($4.00) per share. The form of the Letter-
of-Credit Note is attached and made a part hereof as Exhibit E.
Should Buyer either repay in full the Letter-of-Credit Note or
replace the letters-of-credit pursuant to Section 9.5 on or
before December 31, 2000, Sellers shall return the Letter-of-
Credit Note to Buyer, no interest shall be due under the Letter-
of-Credit Note and any interest previously paid thereon by Buyer
in either cash or stock shall be refunded by Sellers. Should
Buyer fail to either repay the Letter-of-Credit Note or replace
the letters-of-credit pursuant to Section 9.5 on or before June
30, 2001, Sellers shall have the option to require payment of the
One Million Three Hundred Thousand Dollars ($1,300,000) principal
balance of the Letter-of-Credit Note, either (a) by wire transfer
or other immediately available funds, or (b) Three Hundred Twenty
Five Thousand (325,000) shares of Buyer's Common Stock. If Buyer
has not paid all accrued interest on the Letter-of-Credit Note on
or before June 30, 2001, Sellers shall have the option to require
payment of such accrued and unpaid interest either (a) by wire
transfer or other immediately available funds, or (b) shares of
Buyer=s Common Stock valued at $4.00 per share, rounded to the
nearest whole share.
2.7 Stock Penalty. If Closing fails to occur, Buyer shall
issue to BWAB Fourteen Thousand Five Hundred Eighty-Three
(14,583) shares of the Common Stock of Buyer (the "Stock
Penalty") in accordance with Section 12.2 hereof.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Castle. Castle
represents and warrants to Buyer the following:
(a) Castle is a limited liability company duly
organized, validly existing and in good standing under the laws
of the State of Louisiana. Castle is duly qualified to carry on
its business in the State or States in which the Interests are
located and in each State where failure to so qualify would have
a material adverse effect upon its business or the Interests.
(b) Castle has all requisite power and authority to
carry on its business as presently conducted and to enter into
this Agreement and to perform its obligations hereunder.
(c) The execution, delivery and performance of this
Agreement and the transactions contemplated herein have been duly
and validly authorized by Castle.
(d) This Agreement has been duly executed and
delivered on behalf of Castle, and all documents and instruments
required hereunder to be executed and delivered by Castle at or
prior to Closing shall have been duly executed and delivered.
This Agreement does, and such documents and instruments shall,
constitute legal, valid and binding obligations of Castle
enforceable in accordance with their terms.
(e) Castle has incurred no liability, contingent or
otherwise, for broker's or finder's fees or commissions relating
to the transactions contemplated by this Agreement for which
Buyer shall have any responsibility whatsoever.
3.2 Representations and Warranties of BWAB. BWAB
represents and warrants to Buyer the following:
(a) BWAB is a limited liability company duly
organized, validly existing and in good standing under the laws
of the State of Colorado. BWAB is duly qualified to carry on its
business in the State or States in which the Interests are
located and in each State where failure to so qualify would have
a material adverse effect upon its business or the Interests.
(b) BWAB has all requisite power and authority to
carry on its business as presently conducted and to enter into
this Agreement and to perform its obligations hereunder.
(c) The execution, delivery and performance of this
Agreement and the transactions contemplated herein have been duly
and validly authorize by BWAB.
(d) This Agreement has been duly executed and
delivered on behalf of BWAB, and all documents and instruments
required hereunder to be executed and delivered by BWAB at or
prior to Closing shall have been duly executed and delivered.
This Agreement does, and such documents and instruments shall,
constitute legal, valid and binding obligations of BWAB
enforceable in accordance with their terms.
(e) BWAB has incurred no liability, contingent or
otherwise, for broker's or finder's fees or commissions relating
to the transactions contemplated by this Agreement for which
Buyer shall have any responsibility whatsoever.
3.3 Representations and Warranties of Sellers. Each of Sellers
separately represents and warrants to Buyer the following:
(a) There are no outstanding authorizations for
expenditures ("AFEs") that (i) require the drilling of wells or
other material development operations in order to earn or to
continue to hold all or any portion of the Interests, or (ii)
obligate Sellers to make payments of any amounts in connection
with drilling of wells or other material capital expenditures
affecting the Interests.
(b) Sellers are not obligated to deliver hydrocarbons
produced from the Interests at some future time without then or
thereafter receiving full payment for the production attributable
to Sellers' ownership in and to the Interests by virtue of: (i)
a prepayment arrangement under any contract for the sale of
hydrocarbons and containing a "take or pay," or similar
provisions, (ii) a production payment, or (iii) any other
arrangement.
(c) Except for those taxes and assessments for which a
Purchase Price adjustment is made under Section 2.3(b)(v), during
the period of Sellers' ownership of the Interests, Sellers have
properly paid all ad valorem, property, production, severance,
excise and similar taxes and assessments based on or measured by
the ownership of property or the production of hydrocarbons or
the receipt of proceeds therefrom on the Interests that have
become due and payable before the Effective Time.
(d) No suit, action, claim, or other proceeding is
pending or, to the best of Sellers' knowledge, threatened before
any court, arbitration panel or governmental agency which relates
to the Interests and which might result in a material loss of
Sellers' title to any portion of the Interests, or a material
diminution of the value of any of the Interests, or that might
materially hinder or impede the operation of the Leases.
(e) As used in this Agreement, the term, "Existing
Documents" shall mean all of the oil, gas and other mineral
leases, assignments or other instruments or agreements that
comprise the Interests, and all contractually binding
arrangements to which the Interests may be subject and which will
be binding on the Interests or Buyer after Closing (including,
without limitation, oil, gas and other mineral leases, overriding
royalty assignments, farm-out and farm-in agreements, option
agreements, forced pooling orders, assignments of production
payments, partnership agreements, unit agreements, unit operating
agreements, joint operating agreements, balancing agreements,
unit operating agreements, production contracts, processing
contracts, gas sales contracts, marketing and transportation
contracts and division orders). To the best of Sellers=
knowledge, (i) all Existing Documents are in full force and
effect and are the valid and legally binding obligations of the
parties thereto and are enforceable in accordance with their
respective terms (subject to the effects of bankruptcy,
insolvency, reorganization, moratorium and similar laws); (ii)
Sellers are not in material breach or default with respect to any
of its obligations pursuant to any such Existing Documents; and
(iii) all payments (including, without limitation, royalties,
delay rentals, shut-in royalties and valid calls under unit or
operating agreements) due thereunder have been timely paid and
Sellers have received no notice of default under any of the
Existing Documents.
(f) To the best of Sellers' knowledge, all of the
Equipment Sellers operate has been maintained in a state of
repair so as to be adequate for normal operations.
(g) To the best of Sellers' knowledge, all of the
Wells that have been drilled and completed have been so drilled
and completed within the boundaries and limits permitted by
contract, pooling or unit agreement, and by law; and all
drilling, completion, and other operations on or affecting the
Leases have been conducted in compliance with all applicable
laws, ordinances, rules, regulations and permits, and judgments,
orders and decrees of any court or governmental body or agency.
No Well is subject to penalties or allowables after the date
hereof because of any over-production or any other violation of
applicable laws, rules, regulations or permits or judgments,
orders of decrees of any court or governmental body or agency.
(h) Except as set forth on Exhibit "C" attached
hereto:
(i) Sellers' operations and activities with
respect to the Interests comply in all
respects with all applicable governmental
laws, including, without limitation, health
and safety statutes and regulations and all
Environmental Laws, including any provisions
requiring notice to government agencies under
Environmental Laws.
(ii) There is no civil, criminal or administrative
action, suit, demand, claim, hearing, notice
of violation, investigation, proceeding,
notice or demand letter ("Environmental
Proceeding") known to Sellers pending or, to
the best of Sellers' knowledge, threatened
against Sellers or any of the Interests
relating in any way to the Environmental
Laws.
(iii) Neither Sellers nor, to the best of
Sellers' knowledge, any other person have
released, placed, stored, buried or dumped
any Hazardous Substances, Oil, Pollutants or
Contaminants or any other wastes on, beneath,
or adjacent to the Leases, except for
inventories of such substances to be used in
the ordinary course of business of Sellers
(which inventories and wastes, if any, were
and are stored or disposed of in accordance
with applicable laws and regulations).
(iv) To the best of Sellers' knowledge, Sellers
have not received any notice or order from
any governmental or other public agency
advising it that Sellers are responsible for
or potentially responsible for Cleanup or
paying for the cost of Cleanup of any
Hazardous Substances, Oils, Pollutants, or
Contaminants or any other waste or substance
affecting the Interests. Sellers are not
aware of any facts which might reasonably
give rise to any such notice or order.
(v) The term "Cleanup" shall mean all actions
required to: (1) cleanup, remove, treat or
remediate Hazardous Substances, Oils,
Pollutants or Contaminants; (2) prevent the
Release of Hazardous Substances, Oils,
Pollutants or Contaminants so that they do
not migrate, endanger or threaten to endanger
public health or welfare or the environment;
(3) perform pre-remedial studies and
investigations and post-remedial monitoring
and care; or (4) respond to any government
requests for information or documents in any
way relating to cleanup, removal, treatment
or remediation or potential cleanup, removal,
treatment or remediation of Hazardous
Substances, Oils, Pollutants or Contaminants
in the indoor or outdoor environment.
(vi) The term "Environmental Laws" shall mean all
foreign, Federal, state and local laws,
regulations, rules and ordinances relating to
polluting or protection of the environment,
including, without limitation, laws relating
to Releases or threatened Releases of
Hazardous Substances, Oil, Pollutants or
Contaminants into the indoor or outdoor
environment (including, without limitation,
ambient air, surface water, groundwater,
land, surface and subsurface strata) or
otherwise relating to the manufacture,
processing, distribution, use, treatment,
storage, Release, transport or handling of
Hazardous Substances, Oil, Pollutants or
Contaminants, and all laws and regulations
with regard to record keeping, notification,
disclosure and reporting requirements
respecting Hazardous Substances, Oils,
Pollutants or Contaminants.
(vii) The term "Hazardous Substances, Oils,
Pollutants or Contaminants" shall mean all
substances defined as such in the National
Oil and Hazardous Substances Pollution
Contingency Plan, or defined as such by, or
regulated as such under, any Environmental
Law.
(viii) The term "Release" or "Releases" means
any release, spill, emission, discharge,
leaking, pumping, injection, deposit,
disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor
environmental (including, without limitation,
ambient air, surface water, groundwater, and
surface or subsurface strata) or into or out
of any property, including the movement of
Hazardous Substances, Oils, Pollutants or
Contaminants through or in the air, soil,
surface water, groundwater or property.
3.4 Representations and Warranties of Buyer. Buyer
represents and warrants to Sellers the following:
(a) Buyer is a corporation, duly organized, validly
existing and in good standing under the laws of the State of
Colorado. Buyer is or will be prior to Closing duly
qualified to conduct business in the State or States in which the
Interests are located.
(b) Buyer has all requisite power and authority to
carry on its business as presently conducted, to enter into this
Agreement, and to purchase the Interests on the terms described
in this Agreement and perform its other obligations under this
Agreement.
(c) The execution, delivery and performance of this
Agreement and the transactions contemplated hereby have been duly
and validly authorized.
(d) This Agreement has been duly executed and
delivered by or on behalf of Buyer; all documents and instruments
required hereunder to be executed and delivered by Buyer at or
prior to Closing shall have been duly executed and delivered; and
this Agreement does, and such documents and instruments shall,
constitute legal, valid and binding obligations of Buyer
enforceable in accordance with their terms.
(e) Buyer has incurred no liability, contingent or
otherwise, for broker's or finder's fees or commissions relating
to the transactions contemplated by this Agreement for which
Sellers shall have any responsibility whatsoever.
(f) All shares of the Common Stock of
Buyer issued to Sellers pursuant to this Agreement shall be duly
authorized and when issued shall be fully paid, non-assessable
shares of the Common Stock of Buyer and shall carry all of the
same rights and privileges as all other issues of Buyer's Common
Stock.
(g) Prior to Closing, Buyer will have inspected the
Interests, the public records and Sellers' files for all
purposes, including, but not limited to, detecting the presence
and concentration of naturally-occurring radioactive materials
and satisfying itself as to the physical condition and
environmental condition of the Interests, both surface and
subsurface. In entering into this Agreement, Buyer has relied
solely on the express representations and covenants of Sellers in
this Agreement, its independent investigation of, and judgment
with respect to, the Interests and the advice of its own legal,
tax, economic, environmental, engineering, geological and
geophysical advisors, and not on any comments or statements of
any representatives of, or consultants or advisors engaged by
Sellers.
(h) At Closing, Buyer will meet the bonding and other
requirements required by all governmental authorities in respect
to the Interests (and Sellers agree to provide Buyer, prior to
Closing, with a list of such requirements) and, after Closing,
Buyer anticipates that it will continue to be able to meet such
bonding requirements. Buyer is, and after the Closing is
expected to continue to be, otherwise qualified to own the
Interests. The consummation of the transactions contemplated
hereby will not cause Buyer to be disqualified to be an owner of
oil, gas, and mineral leases or to exceed any acreage limitation
imposed by law, statute, rule or regulation. Buyer is not aware
of any fact that could reasonably be expected to cause the
appropriate governmental authorities to fail to unconditionally
approve the assignment of the Interests to Buyer. Sellers will
cooperate and will assist Buyer relating to the preparation and
presentation of documents relating to changes in ownership and/or
operatorship of the Interests.
(i) Buyer is an experienced and knowledgeable investor
and operator in the oil and gas business. Buyer is acquiring the
Interests for its own account and not with a view to, or for
offer of resale in connection with, a distribution thereof,
within the meaning of the Securities Act of 1933, as amended, or
any other rules, regulations, and laws pertaining to the
distribution of securities.
(j) Buyer has arranged or will have arranged to have
available by the Closing Date sufficient funds to enable the
payment to Sellers, by wire transfer, of the Adjusted Purchase
Price in accordance with Section 2.3 and to otherwise perform
Buyer's obligations under this Agreement.
ARTICLE 4
CERTAIN AGREEMENTS OF SELLERS
4.1 Agreements Between Execution of Agreement and Closing.
During the period between the execution of this Agreement and the
Closing Date, Sellers shall not, without the prior written
consent of Buyer, (i) sell, convey, assign, transfer or encumber
any of the Interests; (ii) make or agree to make any expenditure
in excess of $25,000.00, net to Sellers' interest, except for
obligations under existing contracts, expenditures necessary to
maintain the Interests, or in the event of any emergency as to
which Sellers have notified Buyer; (iii) sell oil, gas or other
minerals from the Interests except sales made in the ordinary
course of business; (iv) enter into any agreement amending,
modifying or terminating any of the Leases; or (v) take any other
action with respect to any of the Interests that would cause a
material diminution in the value thereof or that would materially
and adversely affect the use and enjoyment thereof.
4.2 Access to Records. Following the execution of this
Agreement by the Parties, Sellers shall afford to Buyer and its
authorized representatives, during normal business hours,
reasonable access to well and land files, title, contract and
legal materials and operating data and information in Sellers'
possession or to which it has access affecting the Interests.
4.3 Notification of Additional Proceedings. Sellers shall
promptly notify Buyer of any new suits, actions, claims or other
proceedings threatened or pending before, or required to be filed
with, any court, arbitrator or governmental agency which relate
to the Interests.
4.4 Consents. Sellers shall use their best efforts to
obtain any consents necessary to transfer the Interests to Buyer.
4.5 Letters-of-Credit. Subject to the provisions of
Section 9.5, Sellers will leave in place their letters-of-credit
with respect to the Interests until Buyer obtains replacement
letters-of-credit.
ARTICLE 5
CERTAIN AGREEMENTS OF BUYER
5.1 Cooperation. Buyer shall cooperate with Sellers to
assist Sellers in carrying out the agreements of Sellers
hereunder.
ARTICLE 6
BUYER'S CONDITIONS TO CLOSING
The obligations of Buyer to consummate the transactions
provided for herein are subject, at the option of Buyer, to the
fulfillment on or prior to Closing of each of the following
conditions:
6.1 Representations. The representations and warranties by
Castle set forth in Section 3.1, by BWAB set forth in Section 3.2
and by Sellers set forth in Section 3.3 above shall be true and
correct in all material respects as of the date of this Agreement
and as of the Closing Date.
6.2 Changes. There shall have been no material adverse
change in the physical condition of the Interests, except
depletion through normal production within authorized allowable
and rates of production, depreciation of equipment through
ordinary wear and tear, and other transactions permitted under
this Agreement or approved in writing by Buyer.
6.3 Performance. Sellers shall have timely performed and
complied with all agreements and covenants required by this
Agreement.
6.4 No Legal Proceedings. No suit, action or other
proceeding shall be pending or threatened before any court,
arbitration panel or governmental agency seeking to restrain,
prohibit or declare illegal, or seeking substantial damages in
connection with the purchase and sale contemplated by this
Agreement, or which might result in a material loss of any
portion of the Interests, a material diminution in the value of
any of the Interests, or materially interfere with the use or
enjoyment of the Interests, except (i) matters that are disclosed
on Exhibit "D" or (ii) any suit or proceeding affecting only a
portion of the Interests, which portion could be treated as
subject to a Title Defect in accordance with Article 10.
6.5 Existing Documents. Buyer must be reasonably satisfied
with the terms and conditions of the Existing Documents.
ARTICLE 7
SELLERS' CONDITIONS TO CLOSING
The obligations of Sellers to consummate the transactions
provided for herein are subject, at the option of Sellers, to the
fulfillment on or prior to Closing of each of the following
conditions:
7.1 Representations. The representations and warranties by
Buyer set forth in Section 3.4 above shall be true and correct in
all material respects as of the date of this Agreement and as of
the Closing Date.
7.2 Performance. Buyer shall have timely performed and
complied in all material respects with all agreements and
covenants required by this Agreement.
7.3 No Legal Proceedings. No suit or other proceeding
shall be pending before any court or governmental agency seeking
to restrain prohibit or declare illegal, or seeking substantial
damages in connection with, the sale contemplated by this
Agreement, except (i) matters with respect to which Sellers have
been adequately indemnified by Buyer or (ii) any suit or other
proceeding affecting only a portion of the Interests, which
portion could be treated as subject to a Title Defect in
accordance with Article 10.
ARTICLE 8
CLOSING
8.1 Date of Closing. Subject to the conditions stated in
this Agreement, the purchase and sale of the Interests pursuant
to this Agreement (the "Closing") shall occur on or before
September 30, 2000, at 10:00 a.m., Mountain Time, or on such
other date and time as Buyer and Sellers may agree (the "Closing
Date").
8.2 Place of Closing. The Closing shall be held at the
offices of Sellers as set forth hereinabove; provided, however,
the Parties may agree to close via facsimile or overnight mail.
8.3 Closing Obligations. At the Closing, the following
documents shall be delivered and the following events shall
occur, each event being a condition precedent to the others and
each being deemed to have occurred simultaneously with the
others:
(i) Sellers shall execute and deliver: (1) an
Assignment, Bill of Sale and Conveyance in the
form attached hereto as Exhibit "D" (the
"Assignment") (in sufficient counterparts to
facilitate recording) conveying the Interests,
subject to the Permitted Encumbrances; (2) such
other instruments as may be required to convey the
Interests to Buyer and otherwise effectuate the
transactions contemplated by this Agreement.
(ii) Sellers and Buyer shall execute and deliver the
Preliminary Settlement Statement.
(iii) Buyer shall deliver by direct bank or wire
transfer to Sellers or to Sellers' account (at
such place as may be designated by Sellers in a
written notice, such notice to be delivered to
Buyer not less than two (2) Business Days prior to
the Closing) the Money Payment of the Adjusted
Purchase Price and shall deliver to Seller the
Stock Payment of the Adjusted Purchase Price.
(iv) Sellers shall deliver on forms supplied by Buyer
transfer orders or letters in lieu thereof,
directing the operator or purchaser to make
payment of proceeds attributable to production
from the Interests after the Effective Time to
Buyer.
(v) Buyer shall execute and deliver to Sellers the
Letter-of-Credit Note.
8.4 Records. In addition to the obligations set forth
under Sections 4.2 and 8.3 above, within thirty (30) days after
Closing, Sellers shall deliver to Buyer all original well and
land files in its possession or to which it has access. Buyer
shall be entitled to all original records affecting the Interests
assigned to Buyer pursuant to the terms of this Agreement.
Sellers shall be entitled to keep a copy of such records for its
files. Buyer agrees to preserve and maintain such records for at
least five (5) years after the Closing Date and to provide
Sellers access to such records during normal business hours
during such period.
ARTICLE 9
POST-CLOSING MATTERS
9.1 Final Settlement Statement. As soon as practicable
after the Closing, but in no event later than ninety (90) days
after Closing, Sellers shall prepare and deliver to Buyer, in
accordance with this Agreement and generally accepted accounting
principles, a statement ("Final Settlement Statement") setting
forth each adjustment (other than adjustments for Title Defects)
finally determined as of Closing and showing the calculation of
such adjustments. Within thirty (30) days after receipt of the
Final Settlement Statement, Buyer shall deliver to Sellers a
written report containing any changes that Buyer proposes be made
in good faith to resolve any questions with respect to the
amounts due pursuant to such Final Settlement Statement no later
than one hundred twenty (120) days after the Closing.
9.2 Unpaid Third Party Funds. At such time as Buyer
and Sellers agree on a Final Settlement Statement, Sellers will
transfer to Buyer all funds held by Sellers in suspense for a
third party owner of royalty, overriding royalty, working
interests, mineral interest or other similar interests,
attributable to the Interests, and will deliver all records in
Sellers' possession, including a schedule of such funds listing
the owners thereof, which may be used to determine proper
disbursement. Buyer shall thereafter be responsible for
determining the proper payment of such amounts and shall
indemnify and hold harmless Sellers from and against any and all
cost, loss or expense of whatever kind, including attorneys'
fees, arising from or in connection with the claim or any person,
up to the amount listed on the schedule provided by Sellers with
respect thereto, with respect to the funds transferred to Buyer
pursuant to this Section 9.2.
9.3 Further Assurances. After Closing, Sellers, and Buyer
shall execute, acknowledge and deliver or cause to be executed,
acknowledged and delivered such instruments and take such other
action as may be necessary or advisable to carry out their
obligations under this Agreement and under any Exhibit, document,
certificate or other instrument delivered pursuant hereto.
9.4 Survival. All representations and warranties set forth
in this Agreement in Sections 3.1 (a) - (e), 3.2 (a) - (e), 3.3
(a) - (c) and 3.4 (a) - (f) shall survive the Closing, but no
other representations and warranties shall survive the Closing.
9.5 Letters-of-Credit.
(a) Subject to the provisions of this Section 9.5, Sellers
will leave in place their letters-of-credit with
respect to the Interests until Buyer obtains
replacement letters-of-credit.
(b) Buyer will use its best efforts to obtain letters-of-
credit to replace those posted by Sellers with respect
to the Interests as soon as possible, but not later
than June 30, 2001.
(c) If Sellers require payment from Buyer of the Letter-of-
Credit Note on or after June 30, 2001, and Buyer pays
the Letter-of-Credit Note, Sellers shall assign to
Buyer Sellers' One Million Three Hundred Thousand
Dollars ($1,300,000) certificates of deposit to secure
Buyer=s replacement letters-of-credit.
(d) If the beneficiaries of the posted letters-of-credit
withhold their consent to accept the letters-of-credit
obtained by Buyer in replacement for Sellers' posted
letters-of-credit, Buyer instead will obtain letters-of-
credit in favor of Sellers to support Sellers' posted
letters-of-credit within twenty (20) days following
notification by such beneficiaries withholding consent.
9.6 Buyer's Stock. Buyer grants to Sellers piggyback
registration rights with respect to any shares of Buyer's Common
Stock assigned to Sellers pursuant to this Agreement. If Buyer
does not cause such shares attributable to the Stock Deposit,
Stock Penalty or Stock Payment or to be registered on or before
December 31, 2000, Sellers are entitled to one demand
registration of such shares at Buyer's expense. If Sellers
receive shares of Buyer's Common Stock in payment for principal
and/or interest due under the Letter-of-Credit Note pursuant to
Section 2.6, and Buyer does not cause such shares to be
registered on or before December 31, 2001, Sellers are entitled
to one demand registration of such shares at Buyer=s expense. The
provisions of Sellers' registration rights are more specifically
set forth in the Registration Rights Agreement to be executed by
the Parties attached hereto as Exhibit "F" and incorporated
herein (the "Registration Rights Agreement"). The representations
of the Sellers as to their suitability to receive shares of the
Common Stock of Buyer pursuant to this Agreement are more
specifically set forth in the Investment Representation
Agreements to be executed by the Parties attached together hereto
as Exhibit "G" and incorporated herein (the "Investment
Representation Agreements").
ARTICLE 10
TITLE MATTERS
10.1 Access to Title and Other Documents.
(a) After the date hereof, Sellers will make available
to Buyer and to its representatives (such representatives to
include employees, consultants, independent contractors,
attorneys and other advisors of Buyer) for Buyer's copying and/or
inspection (at Buyer's cost and expense), at Sellers' offices
during normal business hours the following documents in Sellers'
possession or under its control:
(i) All abstracts of title, title opinions, title
curative materials, ownership reports, division
orders, bills of sale, other documents evidencing
transfers of title, tax receipts, and licenses and
registrations pertaining to the Interests.
(ii) All of the lease records, lease files, leases,
conveyances and assignments of interest in the
Leases; unitization, unit, pooling and operating
agreements; division orders; contracts; transfer
orders; orders of the applicable regulatory
authorities or administrative agencies; mortgages,
deeds of trust, security agreements, and financing
statements; and all other contracts, agreements
and documents affecting the Interests.
(iii) Instruments and documents concerning proper
payment of all general and special assessments, ad
valorem and property taxes, and production,
severance and similar taxes and assessments based
on or measured by the ownership of the Interests,
the production of hydrocarbons, or the receipt of
proceeds therefrom for 1999 and years prior for
which the applicable statute of limitations has
not expired.
(iv) All geological maps, geophysical surveys,
ownership maps, seismic surveys, logs, core
studies, and surveys relating to the Interests.
(v) All production records; transportation agreements;
contracts concerning the purchase of gas, oil,
casinghead gas, distillate, gas condensate or
other hydrocarbons; processing agreements; all
correspondence relating to the Interests; and data
sheets relating to the Interests and to bonuses,
rentals and royalties payable with respect
thereto.
(vi) All agreements relating to the purchase, sale,
processing, and transportation of production from
the Wells.
(vii) All bonds, leases, permits, easements,
licenses, orders, saltwater disposal agreements,
agreements with pumpers and other agreements in
any way relating to the Interests or the operation
thereof.
Reliance on such information shall be at the sole risk of the
Buyer, and Sellers make no guaranty or representation as to the
accuracy or completeness of such data, except as otherwise
provided in this Agreement.
Sellers shall authorize Buyer and its representatives
to consult with attorneys, abstract companies and other
consultants or independent contractors of Sellers (whether
utilized in the past or present) concerning title related
matters. Reliance on such information of such third parties
shall be at the sole risk of the Buyer, and Sellers make no
guaranty or representation as to the accuracy or completeness of
such data.
10.2 No Warranty or Representation. At the Closing, Sellers
shall convey to Buyer all the Interests. Such conveyance shall
be subject to the Permitted Encumbrances and WITHOUT ANY WARRANTY
OF TITLE, EITHER EXPRESS OR IMPLIED, AND WHETHER BY COMMON LAW,
STATUTE OR OTHERWISE, except for the warranty of title as to
persons claiming by, through and under Sellers contained in the
Assignment. Without limiting Buyer's right to reduce the
Purchase Price in the manner provided in this Article 10, Sellers
make no warranty or representation, express or implied, with
respect to the accuracy or completeness of any information.
Records or data now, heretofore, or hereafter made available to
Buyer in connection with this Agreement, including, without
limitation, any description of the Interests, pricing
assumptions, potential for production of hydrocarbons from the
Interests, or any other matters contained in any material
furnished by Sellers to Buyer or its officers, directors,
employees, agents, advisors or representatives.
10.3 Disclaimer. ALL PERSONAL PROPERTY, MACHINERY,
FIXTURES, EQUIPMENT AND MATERIALS CONVEYED HEREBY ARE SOLD AND
ASSIGNED AND ACCEPTED BY BUYER IN THEIR "WHERE IS, AS IS"
CONDITION, WITHOUT ANY WARRANTIES, EXPRESS OR IMPLIED OR
STATUTORY, OF MARKETABILITY, QUALITY, CONDITION, MERCHANTABILITY
AND/OR FITNESS FOR A PARTICULAR PURPOSE OR USE, ALL OF WHICH ARE
EXPRESSLY DISCLAIMED.
10.4 Permitted Encumbrances. As used in this Agreement, the
term "Permitted Encumbrances" shall mean the following, provided
that the same shall not operate to reduce the net revenue
interest or increase the gross working interest of an Interest
beyond that shown on Exhibit "A":
(a) Lessors' royalties, non-participating royalties,
overriding royalties, division orders, reversionary interests,
and similar burdens.
(b) Preferential rights to purchase and required third
party consents to assignments and similar agreements, with
respect to which, prior to Closing (i) waivers or consents are
obtained from the appropriate parties, (ii) the appropriate time
period for asserting such rights has expired without an exercise
of such rights, or (iii) arrangements acceptable to Buyer can be
made by Buyer and Sellers to allow Buyer to receive substantially
the same economic benefits as if all such waivers and consents to
assign have been obtained.
(c) Liens for taxes or assessments not yet due or
delinquent or, if delinquent, that are being contested in good
faith in the normal course of business.
(d) All rights to consent by, required notices to,
filing with, or other actions by governmental entities in
connection with the sale or conveyance of oil and gas leases or
interests therein, if the same are customarily obtained
subsequent to such sale or conveyance and neither Sellers nor
Buyer has no reason to believe they cannot be obtained.
(e) Such Title Defects as Buyer may have waived in
writing.
(f) Rights reserved to or vested in any governmental
authority.
(g) Rights of a common owner of any Interest in rights-
of-way or easements currently held by Sellers and such common
owner as tenants in common or through common ownership.
(h) Easements, conditions, covenants, restrictions,
servitudes, permits, rights-of-way, surface leases and other
rights in the Interests for the purpose of surface operations,
roads, alleys, highways, railways, pipelines, transmission lines,
transportation lines, distribution lines, power lines, telephone
lines, and removal of timber, grazing, logging operations,
canals, ditches, reservoirs and other like purposes, or for the
joint or common use of real estate, rights-of-way, facilities and
equipment which do not materially impair the rights held by Buyer
or the use and enjoyment of the Interests.
(i) Defects, irregularities and deficiencies in title
to any rights-of-way, easements, surface lease or other rights
which in the aggregate do not materially impair the use of such
right-of-way, easements, surface leases or other rights for the
purpose of which such rights will be held by Buyer.
(j) Zoning, planning and environmental laws and
ordinances and municipal regulations.
(k) Vendors, carriers, warehousemen, repairmen,
mechanics, workmen, materialmen, construction or other like liens
arising by operation of law in the ordinary course of business or
incident to the construction or improvement of any property in
respect of obligations which are not yet due, or which are being
contested in good faith by appropriate proceedings by or on
behalf of Sellers.
(l) Liens created under operating agreements in
respect of obligations that are not yet due or that are being
contested in good faith by appropriate proceedings by or on
behalf of Sellers.
(m) The terms and provisions of the Existing
Documents.
10.5 Good and Defensible Title. For the purposes of this
Article 10, the term "Good and Defensible Title" shall mean, with
respect to each of the Interests, that title of Sellers which,
subject to and except for Permitted Encumbrances:
(a) Entitles Sellers, throughout the duration of the
relevant Interest, to receive from such Interest (free and clear
of all royalties, overriding royalties, non-participating
royalties, net profits interests, or other burdens on or measured
by production of hydrocarbons) not less than the interest shown
as the net revenue interest on Exhibit AA@ in all hydrocarbons
produced, saved and marketed from the Interest and of all
hydrocarbons produced, saved, and marketed from any unit of which
the Interest is a part and which is allocated to such Interest;
all without reduction, suspension, or termination of the
Interest.
(b) Obligates Sellers to bear the percentage of the
costs and expenses relating to the maintenance and development
of, and operations relating to, the Interest not greater than the
gross working interest shown on Exhibit "A" without increase
throughout the duration of such Interest.
(c) Is free and clear of liens, encumbrances and
defects.
(d) All irregularities of title that would not
reasonably be expected to result in claims that would materially
and adversely affect Sellers' title to an Interest shall not be
considered a Title Defect, including but not limited to (i)
defects in the chain of title consisting of failure to recite
marital status or the omission of succession or heirship
proceedings; (ii) defects or irregularities arising out of prior
oil and gas leases which, on their face, expired more than three
(3) years prior to the Effective Time, and which have not been
released of record; (iii) defects or irregularities arising out
of acknowledgments, questions of identity, trusts or trustees,
executors and personal representatives, and the manner in which
they executed documents or were identified thereon; (iv) defects
or irregularities arising out of mortgages or deeds of trust
which, by their terms, matured more than six (6) years prior to
the Effective Time but which remain unreleased of record; (v)
defects or irregularities arising out of the lack of survey of
specific land or lease description; (vi) defects or
irregularities arising out of the lack of recorded powers of
attorneys from corporations, banks, trusts or personal
representatives to execute and deliver documents on their behalf
or on behalf of others; (vii) defects or irregularities cured by
possession under applicable statutes of limitation and statutes
relating to prescription.
10.6 Notice of Title Defect. Except for Permitted
Encumbrances, any defect in title, lien, encumbrance, or defect
that would cause Sellers' title to any Interest not to be Good
and Defensible Title shall be a title defect ("Title Defect").
Not later than five (5) days before the Closing Date (the
"Warranty Claim Date"), Buyer must notify Sellers in writing of
any matter that Buyer considers to be a Title Defect ("Notice of
Title Defect"), which notice shall include, (i) a specific
description of the matter Buyer asserts as a Title Defect, (ii) a
specific description of the Interest or the portion of the
Interest that is affected by the Title Defect, (iii) Buyer's
calculation of the amount ("Title Defect Amount") that the value
of the Interest should be reduced because of the Title Defect
based on the Allocated Value shown on Exhibit "B," and (iv)
appropriate supporting documentation.
Notwithstanding anything to the contrary in this Agreement,
the Buyer shall be deemed to have waived any Title Defect which
the Buyer has not specifically asserted in its Notice of Title
Defect presented before the Warranty Claim Date.
10.7 Title Failure. Any item that Sellers acknowledges is a
Title Defect but that Sellers are unwilling to cure shall be
deemed a title failure ("Title Failure") and, subject to Section
10.9 below, the Purchase Price shall be reduced for such Title
Defect pursuant to Section 2.3 unless, in Sellers' reasonable
judgment, it is unlikely that material losses, costs, expenses
and liabilities will be experienced with respect to such Title
Defect and Sellers agree to indemnify Buyer with respect thereto.
10.8 Defect Notice; Sellers' Opportunity to Cure. To the
extent that Sellers dispute that any item described in the Notice
of Title Defect actually constitutes a Title Defect or disputes
the Title Defect Amount assigned by Buyer to any such Title
Defect ("Contested Defect"), Sellers shall deliver to Buyer a
notice so stating ("Defect Notice"). Subject to the provisions
of 10.9 below, the portion of the Purchase Price attributable to
Title Defects which Sellers are willing to cure but which are
uncured at Closing, or which are not waived by Buyer at Closing
(including Contested Defects), shall be deposited into an escrow
account pursuant to an escrow agreement agreed to by the Parties
and the Assignment will be revised to delete all of that portion
of the Interests affected by such Title Defects (including
Contested Defects). If Sellers fail to cure a Title Defect
within ninety (90) days after Closing, it shall be deemed a Title
Failure and the funds attributable to such Title Defect shall be
released from escrow to Buyer and the property on which such
Title Defect exists shall not be conveyed to Buyer.
10.9 Title Purchase Price Adjustments. Notwithstanding any
provision hereof to the contrary, there shall be no reduction in
the Purchase Price for Title Failures and no escrow for Title
Defects or Contested Defects unless and until the aggregate
amount of such Title Defects (including Title Failures and
Contested Defects) exceeds four percent (4%) of the Purchase
Price and only for the amount in excess of such amount.
10.10 Termination Amount. Notwithstanding any provision
hereof to the contrary, in the event the aggregate adjustments
for Title Defects pursuant to this Article 10 and for
Environmental Defects pursuant to Article 11 amount to twenty
percent (20%) or more of the Adjusted Purchase Price (the
"Termination Amount"), either Party shall have the option to
terminate this Agreement, without any liability, upon written
notice to the other Party.
10.11 Preferential Rights and Consents to Assign. Some
Interests may be subject to existing preferential rights to
purchase the Interests or consents may be required in order to
assign the Interests. Sellers shall provide Buyer with a list,
and shall make a good faith effort to obtain consent and waivers
of any preferential rights which Sellers know must be obtained
prior to Closing and are not ordinarily obtained after Closing.
Buyer shall notify Sellers of any additional consent requirement
or preferential right to purchase it discovers prior to Closing.
If a preferential right is exercised or a consent is denied prior
to Closing, the Purchase Price shall be adjusted downward in an
amount equal to the price paid to Sellers for the Interest with
respect to which the preferential right has been exercised or the
consent has been denied and such Interest shall be deleted from
this Agreement. In the case of a preferential right to purchase,
Sellers shall be entitled to all proceeds paid by the third party
exercising its preferential right to purchase. If a third party
preferential purchase right burdening any Interest has not been
exercised or waived by Closing, Buyer shall pay for and accept an
assignment covering such Interest and, if the preferential right
is exercised after Closing, Buyer shall be entitled to all
proceeds paid for such interest by the third party exercising
such preferential purchase right. Buyer shall be responsible for
conveying title to the Interest affected by said preferential
right to the party exercising the same and shall indemnify and
hold Sellers harmless from and against any claim or liability for
Buyer's failure to make such conveyance.
ARTICLE 11
ENVIRONMENTAL
11.1 Inspection; Indemnity. Buyer and its authorized
representatives, at Buyer's sole risk and expense, shall have the
right to enter upon and inspect the real and personal properties
comprising the Interests, and to conduct such well, environmental
and other tests and assessments as Buyer shall deem appropriate,
subject to the approval of the operator in the case of non-
operated properties. Buyer shall repair any damages to the
Interests resulting from its inspection and shall defend and hold
Sellers harmless from and against any and all losses, damages,
claims, obligations, liabilities, expenses (including court costs
and attorneys' fees) or causes of action directly resulting from
Buyer's inspection of the Interests.
11.2 Environmental Assessment. As part of its inspection
of the Interests, Buyer and its authorized representatives shall
have the right to conduct soil and water tests and borings, and
generally to conduct such tests, examinations, investigations and
studies as may be necessary or appropriate in Buyer=s sole
judgment to make an environmental assessment of the Interests.
Buyer shall keep any data or information acquired through such
examination and the results of all analyses of such data and
information strictly confidential and shall not disclose the same
to any person or agency without the prior written approval of
Sellers unless such disclosure is required by law. Buyer shall
take all steps necessary to ensure that Buyer's authorized
representatives comply with the provisions of this Article 11.
If Buyer has discovered in its environmental assessment
circumstances which require remediation, control or other
response under environmental laws, rules or regulations then in
effect (an "Environmental Defect"), Buyer shall notify Sellers of
such circumstances as soon as practicable, but in no event less
than ten (10) days prior to Closing.
11.3 Environmental Defects. If Buyer properly notifies
Sellers of an Environmental Defect related to an Interest, Buyer
may (i) waive the Environmental Defect and Close, or (ii) request
Sellers to cure the Environmental Defect. If Buyer asks Sellers
to cure an Environmental Defect, and if the aggregate amount of
all such Environmental Defects exceeds four percent (4%) of the
Purchase Price, Sellers have the option (i) to cure the
Environmental Defect, or (ii) to exclude the Interest affected by
the Environmental Defect from this Agreement. If Sellers elect
to cure the Environmental Defect, but the cure has not been
completed by Closing, the Interest affected by the Environmental
Defect shall not be conveyed to Buyer at Closing, the Purchase
Price shall be reduced by the amount allocated to such Interest
and such amount shall be deposited into the escrow account
referred to in Section 10.7. If the Environmental Defect is
cured within ninety (90) days after Closing, within five (5) days
after the Environmental Defect is cured, Sellers will convey to
Buyer the Interest affected by the Environmental Defect and the
applicable amount shall be released from escrow to Sellers. If
Sellers elect to exclude the Interest affected by the
Environmental Defect from this Agreement, subject to Section 11.4
below, the Purchase Price will be reduced by the allocated value
of the Interest affected.
11.4 Environmental Purchase Price Adjustment.
Notwithstanding any provision hereof to the contrary, there shall
be no reduction in the Purchase Price for uncured Environmental
Defects unless, and only to the extent that, the aggregate amount
of such uncured Environmental Defects exceeds four percent (4%)
of the Purchase Price and then only for the amount in excess of
such amount.
ARTICLE 12
TERMINATION, DEFAULT AND REMEDIES
12.1 Right of Termination. The Agreement and the
transactions contemplated herein may be terminated at any time at
or prior to Closing:
(i) By Sellers, at Sellers' option, in the event any of the
conditions set forth in Article 7 have not been
satisfied as provided therein.
(ii) By Buyer, at Buyer's option, in the event any of the
conditions set forth in Article 6 have not been
satisfied as provided therein.
(iii) By either Party in the event that the adjustments
to the Purchase Price exceed the Termination Amount, as
provided for in Section 10.10.
(iv) At any time by the mutual written agreement of the
Parties.
12.2 Effect of Termination. In the event of the termination
of this Agreement by Sellers pursuant to Section 12.1 (i) hereof
due to Buyer's failure to meet a condition of Closing, Sellers
may terminate this Agreement whereupon Castle shall retain the
Earnest Money Deposits and any accrued interest thereon which
shall be Castle's sole remedy, and whereupon Buyer shall issue
to BWAB the Stock Penalty which shall be BWAB's sole remedy;
provided, however, that the rights of Sellers set forth in the
Registration Rights Agreements with respect to registration of
the shares of Buyer's Stock received by Sellers under the Stock
Deposit and the Stock Penalty, as well as the representations
made by Sellers in the Investment Representation Agreements,
shall survive such termination. In the event Buyer terminates
this Agreement pursuant to Section 12.1 (ii) hereof due to
Sellers' failure to meet a condition of Closing, Buyer may pursue
its rights and remedies against Sellers for Sellers' breach of
this Agreement and receive back the Earnest Money Deposits, with
accrued interest. In the event of the termination of this
Agreement pursuant to either Section 12.1 (iii) or (iv) hereof,
the termination shall be without penalty and the Parties shall
have no further obligations to, nor rights against, one another,
except that Sellers shall return the Earnest Money Deposits to
Buyer, with accrued interest.
12.3 Dispute Resolution. If the Parties disagree as to the
cause for termination, they will first attempt to resolve such
disagreement through a meeting, to be held within ten (10) days
of such termination, of senior executives of each party, and if
such meeting fails to resolve the matter, through a neutral
arbitrator appointed by such executives within thirty (30) days
of the date of such meeting.
12.4 Return of Documentation. Upon termination of this
Agreement, Buyer shall return to Sellers all title, geological
data, reports, contracts, and maps and other information
furnished by Sellers to Buyer and all copies thereof.
ARTICLE 13
ASSUMPTION OF OBLIGATIONS
13.1 Assumption of Obligations. At Closing, Buyer shall
assume (a) the obligation to (i) plug and abandon or remove and
dispose of all Wells (whether then producing or temporarily or
permanently abandoned), platforms, structures, flow lines,
pipelines, and the other equipment now or hereafter located on
the Interests; (ii) cap and bury all flow lines and (iii) dispose
of other pipelines now or hereafter located on the Interests, and
all other pollutants, wastes, contaminants, or hazardous,
extremely hazardous, or toxic materials, substances, chemicals or
wastes now or hereafter located on the Interests; (b) all
obligations and liabilities arising from or in connection with
any gas production, pipeline, storage, processing or other
imbalance attributable to substances produced from the Interests
on or after the Effective Time; and (c) all other costs,
obligations and liabilities that relate to the Interests and, in
each case, arise from or relate to events occurring on or after
the Effective Time. All such plugging, replugging, abandonment,
removal, disposal, and restoration operations shall be in
compliance with applicable laws and regulations and contracts,
and shall be conducted in a good and workmanlike manner.
ARTICLE 14
MISCELLANEOUS
14.1 Fees and Taxes. Except as otherwise specifically
provided, all fees, costs and expense incurred by Buyer or
Sellers in negotiating this Agreement or in consummating the
transactions contemplated by this Agreement shall be paid by the
Party incurring the same, including, without limitation, legal
and accounting fees, costs and expenses. All required
documentary, filing and recording fees for the assignments,
conveyance or other instruments required to convey title to the
Interests to Buyer shall be borne by Buyer. In addition, the
liability for any sales, use, transfer or similar tax associated
with the sale and/or transfer of the Interests shall be the
liability of, and for the account of, the Buyer and such
liability shall not be subject to proration as provided in
Section 2.3.
14.2 Notices. All notices and communications required or
permitted under this Agreement shall be in writing and shall be
deemed to have been duly made when actually delivered, including
delivery by courier, facsimile, telecopy, or other electronic
medium, or if mailed by registered to certified mail, postage
prepaid, addressed as follows:
SELLERS:
CASTLE OFFSHORE, L.L.C.
One Radnor Corporate Center, Suite 250
100 Matsonford Road
Radnor, Pennsylvania 19087
Attn: Richard E. Staedtler
Chief Financial Officer
Telephone: (610) 995-9400
Facsimile: (610) 995-0409
BWAB LIMITED LIABILITY COMPANY
Suite 1390
475 Seventeenth Street
Denver, Colorado 80202
Attn: Steven A. Roitman
Manager
Telephone: (303) 295-7444
Facsimile: (303) 294-9878
BUYER:
DELTA PETROLEUM CORPORATION
555 17th Street, Suite 3310
Denver, Colorado 80202
Attn: Aleron H. Larson, Jr.
Chief Executive Officer/Chairman
Telephone: (303) 293-9133
Facsimile: (303) 298-8251
Either Party may, by written notice so delivered to the
other, change the address to which delivery shall thereafter be
made.
14.3 Amendments. This Agreement may not be amended except
by an instrument in writing signed by Buyer and Sellers.
14.4 Preparation of Agreement. Both Sellers and Buyer
and their respective counsel participated in the preparation of
this Agreement. In the event of any ambiguity in this Agreement,
no presumption shall arise based on the identity of the draftsman
of this Agreement.
14.5 Headings. The headings of the articles and sections of
this Agreement are for guidance and convenience of reference only
and shall not limit or otherwise affect any of the terms or
provisions of this Agreement.
14.6 Counterparts. This Agreement may be executed by Buyer
and Sellers in any number of counterparts, each of which shall be
deemed an original instrument, but all of which together shall
constitute but one and the same instrument.
14.7 References. References made in this Agreement,
including use of a pronoun, shall be deemed to include, where
applicable, masculine, feminine, singular or plural, individuals
or corporations. As used in this Agreement, "person" shall mean
any natural person, corporation, partnership, trust, estate or
other entity.
14.8 Governing Law. This Agreement and the transactions
contemplated hereby shall be construed in accordance with, and
governed by, the laws of the State of Colorado without giving
effect to the conflicts of law rules thereof. Any disputes
concerning this Agreement or the subject matter hereof shall be
brought in a court of competent jurisdiction of the State of
Colorado.
14.9 Entire Agreement. This Agreement (including the
Exhibits hereto) constitutes the entire understanding between the
Parties with respect to the subject matter hereof, superseding
all negotiations, prior discussions and prior agreements and
understanding relating to such subject matter.
14.10 Assignment; Parties in Interest. Neither Party
shall assign this Agreement without the other Party's prior
written consent; provided, however, that this requirement shall
not apply to a subsidiary or other affiliate of the assigning
Party so long as the assigning Party remains responsible for its
assignee=s obligations hereunder. Subject to the foregoing, this
Agreement shall be binding upon, and shall inure to the benefit
of, the Parties and their respective successors and assigns.
14.11 Further Cooperation. After the Closing,
Buyer and Sellers shall execute and deliver, or shall caused to
be executed and delivered from time to time, such further
instruments of conveyance and transfer and
shall take such other action as any Party may reasonably request
to convey and deliver the Interests to Buyer, to accomplish the
orderly transfer of the Interests to Buyer, or to otherwise
effectuate the transactions contemplated by this Agreement. If
either Party hereto receives monies belonging to the other, such
amount shall immediately be paid over to the proper Party. If an
invoice or other evidence of an obligation is received by a
Party, which is partially an obligation of both Sellers and
Buyer, then the Parties shall consult with each other and each
shall promptly pay its portion of such obligation to the obligee.
14.12. Press Release. Neither Party shall make any
press release or other announcement
in connection with the execution of this Agreement or the Closing
without first consulting with the other Party. Following such
consultation and good faith attempt to make reasonable
accommodations, either Party may make any announcement or press
release that it believes is either required by applicable law or
the rules of any stock exchange, or is advisable in connection
with such Party=s obligation to provide public disclosure
regarding its activities. This provision shall not apply to any
filing with any governmental body or stock exchange required by
law, rule or regulation.
14.13 Subrogation. Buyer shall be subrogated to
all rights, actions and warranties that Sellers may have with
respect to Sellers' predecessors-in-interest as to the Interests.
EXECUTED as of the date first above stated, but made
effective as of the Effective Time.
SELLERS:
CASTLE OFFSHORE, L.L.C.
By s/Richard E. Staedtler
Richard E. Staedtler
Chief Financial Officer
BWAB LIMITED LIABILITY COMPANY
By s/Steven A. Roitman
Steven A. Roitman
Manager
BUYER:
DELTA PETROLEUM CORPORATION
By s/Aleron H. Larson, Jr.
Aleron H. Larson, Jr.
CEO/Chairman
