AGREEMENT OF SALE AND PURCHASE
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This Agreement dated as of October 16, 2000, by and between JN
EXPLORATION & PRODUCTION LIMITED PARTNERSHIP, a Delaware limited partnership
("JN E&P"), COLT RESOURCES CORPORATION, a Delaware corporation ("Colt") and
PRINCEPS PARTNERS, INC., a Colorado corporation ("Princeps") (JN E&P, Colt and
Princeps being hereinafter called the "JN Group"), THE WILLIAM G. HELIS COMPANY,
L.L.C., a Louisiana limited liability company ("Helis"), (the JN Group and Helis
being hereinafter called "Sellers") and ST. MARY LAND & EXPLORATION COMPANY, a
Delaware corporation (hereinafter called "Buyer").
W I T N E S S E T H:
1. Property to be Sold and Purchased. Sellers agree to sell and convey and Buyer
agrees to purchase, for the consideration hereinafter set forth, and subject to
the terms and provisions herein contained, the following described properties,
rights and interests:
(a) All of Sellers' right, title and interest in and to the oil, gas and/or
mineral leases described in Exhibit A hereto (and any ratifications
and/or amendments to such leases, whether or not such ratifications or
amendments are described in Exhibit A) (the "Leases"); and
(b) Without limitation of the foregoing, all other right, title and
interest (of whatever kind or character, whether legal or equitable,
and whether vested or contingent) of Sellers in and to the oil, gas and
other minerals in and under or that may be produced from the lands and
depths described in Exhibit A hereto or described in any of the Leases
(including, without limitation, interests in oil, gas and/or mineral
leases covering such lands and depths, overriding royalties, production
payments and net profits interests in such lands and depths or such
leases, and fee mineral interests, fee royalty interests and other
interests in such oil, gas and other minerals), even though Sellers'
interest in such oil, gas and other minerals may be incorrectly
described in, or omitted from, such Exhibit A; and
(c) All right, title and interest of Sellers in and to all materials,
supplies, machinery, equipment, improvements and other personal
property and fixtures, including, but not by way of limitation, all
wells and Sellers' ownership interest therein as set forth on Exhibit B
(the "Wells"), together with the production therefrom, wellhead
equipment, pumping units, flowlines, tanks, buildings, injection
facilities, saltwater disposal facilities, compression facilities,
gathering systems, and other equipment, which are located on the
properties described in subsections (a), (b) and (d) in this Section 1
and used in connection with the exploration, development, operation or
maintenance thereof; and
(d) All right, title and interest of Sellers in and to, or otherwise
derived from, all presently existing and valid oil, gas and/or mineral
unitization, pooling, and/or communitization agreements, declarations
and/or orders, including, without limitation, all units formed under
orders, rules, regulations, or other official acts of any federal,
state, or other authority having jurisdiction, and voluntary
unitization agreements, designations and/or declarations, relating to
the properties described in subsections (a), (b) and (c) above, to the
extent, and only to the extent, such rights, titles and interests are
attributable to the properties described in subsections (a), (b) and
(c) above; and
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(e) All right, title and interest of Sellers in and to all presently
existing permits, licenses, servitudes, rights-of-way, division
orders, gas purchase and sale agreements (wherein any Seller is a
selling party), crude oil purchase and sale agreements (wherein any
Seller is a selling party), surface leases, farmin agreements, farmout
agreements, bottomhole agreements, acreage contribution agreements,
operating agreements, unit agreements, processing agreements, and all
other contracts or agreements that are appurtenant to or used or held
for use in connection with the operation of the leases, which relate
to any of the properties described in subsections (a), (b), (c) and
(d) above, to the extent, and only to the extent, such rights, titles
and interests are attributable to the properties described in
subsections (a), (b), (c) and (d) above; and
(f) All of Sellers' original title, contract and lease files, title
opinions, abstracts and other title information, production records,
well files, accounting records (but not including general financial
accounting or tax accounting records), all technical information in the
possession of Sellers, seismic records and surveys, electric logs,
geological or geophysical data and records (to the extent that Sellers
have the legal right to transfer such technical information, seismic
records and other geological and geophysical data and records to
Buyer), and other files and copies of Sellers' computer records
relating or pertaining to the Leases, lands, wells, equipment or
contracts which affect or relate to the Properties described above,
documents and records which directly relate to the properties described
above.
The properties and interests specified in the foregoing subsections
(a), (b) and (c) are herein sometimes collectively called the "Oil and Gas
Properties," and the properties and interests specified in the foregoing
subsections (a), (b), (c), (d), (e) and (f) are herein sometimes collectively
called the "Properties".
2. Purchase Price. The purchase price for the Properties shall be Thirty-Seven
Million, Two Hundred Thousand Dollars ($37,200,000) (herein called the "Base
Purchase Price"). Such Base Purchase Price may be adjusted as hereinafter
provided (the Base Purchase Price, as so adjusted, and as the same may otherwise
be adjusted by mutual agreement of the parties, being herein called the
"Purchase Price"). The Purchase Price shall be paid in cash at the Closing as
hereinafter provided, to the Sellers in the proportions set forth on Exhibit B-1
attached hereto and made a part hereof.
3. Deposit. Contemporaneously with the execution of this Agreement, Buyer has
paid to Sellers the amount of Three Million Seven Hundred Twenty Thousand
Dollars ($3,720,000.00) (hereinafter called the "Deposit"). If the sale
hereunder is consummated in accordance with the terms hereof, the Deposit shall
be applied to the Purchase Price to be paid by Buyer at the Closing. In the
event this Agreement is terminated by Buyer or Sellers in accordance with the
terms hereof, or in the event the transaction contemplated hereby is not
consummated due to a default by Sellers which occurs in the absence of a default
by Buyer, then the Deposit shall be promptly returned to Buyer. Except as
provided in the preceding sentence, if Buyer fails or refuses to consummate the
transaction contemplated by this Agreement and in the absence of default by
Sellers, Sellers shall retain the Deposit as liquidated damages and Buyer shall
have no further liability hereunder except as set forth in Sections 6(a) and
20(e). The parties agree that damages in such an event would be extremely
difficult to determine, that the Deposit represents a fair and reasonable
estimate of such damages under the circumstances, and that such a retention of
the Deposit does not constitute a Penalty.
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4. Representations and Warranties of Sellers. Each Seller severally
and individually (and not jointly and severally) represents and warrants to
Buyer that:
(a) Such Seller is an entity duly formed and legally existing under the
laws of the state of its formation, and is qualified to do business in
and in good standing under (to the extent that the law of such state
provide therefor) each state in which its Oil and Gas Properties are
located where the laws of such state require such an entity owning the
Oil and Gas Properties to qualify to do business;
(b) Such Seller has full power under the provisions of applicable law to
enter into and perform its obligations under this Agreement and has
taken all proper action to authorize entering into this Agreement and
performance of its obligations hereunder;
(c) Other than requirements (if any) that there be obtained consents to
assignment or waivers of preferential rights to purchase from third
parties, and except for approvals ("Routine Governmental Approvals")
required to be obtained from governmental entities who are lessors
under leases forming a part of the Oil and Gas Properties (or who
administer such leases on behalf of such lessors) which are
customarily obtained post-closing, neither the execution and delivery
of this Agreement, nor the consummation of the transactions
contemplated hereby, nor the compliance with the terms hereof, will
violate or result in any default under any agreement or instrument to
which such Seller is a party or by which such Seller or the Properties
are bound, or violate any order, writ, judgment, injunction, decree,
statute, rule or regulation applicable to such Seller or to the
Properties or result in a lien, charge or other encumbrance on the
Properties;
(d) This Agreement constitutes, and the Conveyance and all other documents
required to be delivered at Closing will, when executed and delivered,
constitute, the legal, valid and binding obligation of such Seller,
enforceable in accordance with its terms, except as limited by
bankruptcy or other laws applicable generally to creditor's rights and
as limited by general equitable principles;
(e) Except as disclosed in Exhibit D to this Agreement, to the knowledge of
the officers (or other similar representatives) of such Seller set
forth on Exhibit "G" hereto (the knowledge of such persons being
hereinafter called "Seller's Knowledge"), there is no written claim or
demand or pending lawsuit, nor any compliance order, notice of probable
violation or similar governmental action, pending or threatened before
any court or governmental agency that (i) would result in an impairment
or loss of title to any part of the Property, or impairment of the
value thereof, (ii) would hinder or impede the operation of the
Property, or (iii) seeks to restrain or prohibit, or to obtain
substantial damages from such Seller, with respect to this Agreement or
the consummation of all or part of the transactions contemplated in
this Agreement;
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(f) To Seller's Knowledge and subject to the provisions of this paragraph,
the historical production and expense data described on the Albrecht
ARIES Engineering disk and in the JN Resources, Inc/The William G.
Helis Company, L.L.C. Summary Brochure and Detail Brochure - Mid
Continent" which were provided on behalf of Sellers to Buyer (the
"Information"), and any supplement thereto, was substantially complete
and correct as of the date of such delivery. Except as set forth in
this paragraph 4(f) no representation or warranty of any kind are made
by Sellers as to the Information or with respect to the interests to
which the Information relates and Buyer expressly agrees that any
conclusions drawn therefrom shall be the result of its own independent
review and judgment. The representations contained in this paragraph
shall apply only to matters of fact, and shall not apply to any
information, data, printouts, extrapolations, projections,
documentation, maps, graphs, charts, or tables which reflect, depict,
present, portray, or represent, or which are based upon or derived
from, in whole or in part, interpretation of the Information
including, but not limited to, matters of geological, geophysical,
engineering, or scientific interpretation;
(g) The transfer of the Properties to Buyer does not violate any covenants
or restrictions imposed on such Seller by any bank or other financial
institution under any mortgage or other similar instrument, and will
not result in the creation or imposition of a lien on any portion of
the Properties;
(h) Except as disclosed by such Seller in writing, to Seller's Knowledge,
such Seller is in material compliance with all laws, rules,
regulations, ordinances, codes, orders, licenses, concessions and
permits pertaining to the Properties. The representation in this
paragraph 4(h) does not extend to compliance with environmental laws,
rules, regulations, or permits pertaining to the ownership or operation
of the Properties, which is separately addressed in other provisions of
this Agreement;
(i) To Seller's Knowledge, (i) such Seller has all material governmental
licenses and permits and has properly made all material filings,
necessary or appropriate to obtain those licenses and permits to own
and operate the Properties, (ii) such licenses, permits and filings are
in full force and effect, (iii) no material violations exist in respect
of any such licenses, permits or filings, and (iv) no proceeding is
pending or has been threatened in writing challenging, or seeking the
revocation or limitation of any such licenses, permits or filings;
(j) To Seller's Knowledge, and except with respect to matters that would
not have a material adverse effect on the Oil and Gas Properties taken
as a whole (a "Material Adverse Effect") (i) the terms of the Leases,
operating agreements, production sales contracts, farmout agreements
and other contracts or agreements respecting the Properties can be
found either of record in the counties in which the Properties are
located or are reflected or referenced in Sellers' files, and (ii) the
Leases and the contracts affecting the Leases are currently in full
force and effect in accordance with their applicable terms. Such
Seller has not received any written notice asserting a claim of any
defaults, offsets, or cancellations from any lessors with respect to
the Leases, or from any other party under any of the contracts or
agreements to which such Seller is a party and which affect the
Properties, which would reasonably be expected to have a Material
Adverse Effect;
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(k) To Seller's Knowledge, and except as described on Exhibit E, such
Seller is not obligated by virtue of any prepayment arrangement under
any contract for the sale of hydrocarbons, including "take or pay"
obligation, hedging or forward sale agreements, or similar provisions
or a production payment or any other arrangement to deliver
hydrocarbons from the Properties at some future time without then or
thereafter receiving full payment therefor;
(l) To Seller's Knowledge, there are no surface use or access agreements
currently in force and effect that materially interfere with the manner
in which oil and gas operations are currently taking place on the
Leases;
(m) To Seller's Knowledge, none of the Wells included within the Properties
has been represented by its operator, either in a pending AFE or other
written proposal, to other well participants as being currently
required to be plugged and abandoned;
(n) All ad valorem, property, production, severance 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 with
respect to the Properties for all periods prior to the Effective Date
have been properly paid and all such taxes and assessments which must
be paid prior to the Closing shall have been properly paid by Seller;
(o) To Seller's Knowledge, the oil and gas operations being conducted
on the Properties do not violate any Federal, state, or local,
(including common law), ordinance, rule, standard, prohibition, or
regulation relating to health, safety, or the environment including,
without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act 42 U.S.C. 9601 et seq., as amended
("CERCLA"), the Resource Conservation and Recovery Act ("RCRA"), the
Clean Air Act, the Clean Water Act and the Safe Drinking Water Act, or
any other pertinent rule, order, regulation, or statute, whether
state, federal or local, and pertaining to environmental matters as
the same exist as of the Effective Date (collectively "Environmental
Laws"). To Seller's Knowledge, such Seller has timely filed all
required reports, obtained all required approvals and permits, and
generated and maintained all required data, documentation and records
which such Seller is required to file under any applicable
Environmental Laws;
(p) To Seller's Knowledge, there has not been, and is not occurring, any
discharge or release of any "Hazardous Substances" in, on or around any
of the Properties of Sellers in amounts or concentrations which
reasonably could be expected to give rise to liabilities or obligations
exceeding $50,000 in any instance or exceeding $150,000 in the
aggregate (net to the interests of Sellers therein) and such Seller
warrants that Buyer does not, and after Closing will not, have any
liabilities or obligations in excess of the aforesaid amounts with
respect to the introduction of Hazardous Substances into the
environment for activities relating to the operation of the Properties
prior to Closing. For purposes of this Agreement, the term "Hazardous
Substances" shall mean any material regulated as such or addressed as
such under any Environmental Laws;
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(q) Such Seller has not sent Hazardous Substances to a site which pursuant
to CERCLA, RCRA, or any similar state law has been placed, or is
proposed to be placed, on the "National Priority List" of hazardous
waste sites or which is subject to a claim, an administrative order or
other request to take any cleanup, removal, or remedial action or to
pay for any costs relating to such site;
(r) To Seller's Knowledge, there is no existing naturally occurring
radioactive material (NORM) within the Properties in excess of levels
permitted by applicable Environmental Laws;
(s) To Seller's Knowledge there are no pending or threatened claims nor any
basis for claims against such Seller relating to the Properties under
Environmental Laws which would reasonably be expected to have a
Material Adverse Effect;
(t) Such Seller has not constructed, placed, deposited, stored, disposed of
nor located on the Properties any polychlorinated biphenyls (PCBs) nor
transformers, compressors nor other equipment which contains PCBs; and
(u) Except as set forth on Exhibit F attached hereto and made a part
hereof, to Seller's Knowledge, there are no calls on production or
production purchase agreements that cannot be terminated with sixty
(60) days (or less) prior written notice, in place which will burden
the Oil and Gas Properties in any material respect from and after the
Closing.
5. Representations and Warranties of Buyer. Buyer represents and warrants to
Sellers that:
(a) Buyer is a corporation duly organized and legally existing and under
the laws of the State of Delaware, and is qualified to do business and
in good standing in each of the states in which Oil and Gas Properties
are located where the laws of such state would require a corporation
owning the Oil and Gas Properties located in such state to qualify to
do business.
(b) Buyer has full power to enter into and perform its obligations under
this Agreement and has taken all proper action to authorize entering
into this Agreement and performance of its obligations hereunder.
(c) Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, nor the
compliance with the terms hereof, will result in any default under any
agreement or instrument to which Buyer is a party or by which the
Properties are bound, or violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Buyer or to the Properties.
(d) This Agreement constitutes, and the Conveyance provided for herein to
be delivered at Closing will, when executed and delivered, constitute,
the legal, valid and binding obligation of Buyer, enforceable in
accordance with its terms, except as limited by bankruptcy or other
laws applicable generally to creditor's rights and as limited by
general equitable principles.
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(e) There are no pending suits, actions, or other proceedings in which
Buyer is a party which affect the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
(f) Buyer is a knowledgeable purchaser, owner and operator of oil and gas
properties, has the ability to evaluate (and in fact has evaluated) the
Properties for purchase, and is acquiring the Properties for its own
account and not with the intent to make a distribution within the
meaning of the Securities Act of 1933 (and the rules and regulations
pertaining thereto) or a distribution thereof in violation of any other
applicable securities laws.
6. Certain Covenants of Sellers Pending Closing. Between the date of this
Agreement and the Closing Date:
(a) Each Seller will continue to give Buyer and its attorneys and other
representatives access at all reasonable times and upon reasonable
notice to the Properties and, at such Seller's office, to such
Seller's records pertaining to the ownership and/or operation of the
Properties, (including, without limitation, title files, lease files,
land files, division order files, well files, environmental records,
production records, accounting records, marketing files, equipment
inventories, and production, severance and ad valorem tax records)
relating to the Properties. No Seller shall be obligated to provide
Buyer with access to any records or data which such Seller considers
to be proprietary or confidential to it or which such Seller cannot
legally provide to Buyer without, in such Seller's opinion, breaching,
or risking a breach of, confidentiality agreements with other parties.
Buyer recognizes and agrees that all materials made available to it
(whether pursuant to this Section or otherwise) in connection with the
transaction contemplated hereby are made available to it as an
accommodation, and except to the limited extent set forth in Section
4(f) above, without representation or warranty of any kind as to the
accuracy and completeness of such materials. Buyer waives and releases
all claims against each Seller, its respective parent or subsidiary
companies, partners or other affiliates, and its and their directors,
officers, employees and agents, for injury to, or death of, persons or
for damage to property arising in any way from the conduct of the
investigations and examinations contemplated by this Section or the
conduct of its employees, agents or contractors in connection with
such investigations and examinations (or the exercise of such rights
of access).
(b) Each Seller will continue to cause the operation of the Oil and Gas
Properties in the ordinary course of its business (or, where such
Seller is not the operator of an Oil and Gas Property, will continue
its actions as a non-operator in the ordinary course of its business),
and will not sell or otherwise dispose of any portion of the Oil and
Gas Properties, without the prior written consent of Buyer. From and
after the date hereof until the Closing, no Seller will propose the
drilling of any additional wells, or propose the deepening, plugging
back or reworking of any existing wells, or propose the conducting of
any other operations which require consent under the applicable
operating agreement, or propose the conducting of any other operations
other than the normal operation of the existing wells on the Oil and
Gas Properties, or propose the abandonment of any wells on the Oil and
Gas Properties; Sellers will advise Buyer of any such proposals made
by third parties and will respond to each such proposal made by a
third party in the manner reasonably requested by Buyer. Should Buyer
fail to respond to any such proposal sufficiently in advance of the
time that an election must be made under the applicable operating
agreement or other relevant agreement, Sellers may take such action
(or fail to take action) as they deem appropriate under the
circumstances, and neither such action or any effect on the Properties
arising from or in connection with such action shall affect the
obligations or Buyer hereunder or result in any liability or
responsibility of Sellers to Buyer hereunder.
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(c) Each Seller will use reasonable commercial efforts, consistent with
industry practices in transactions of this type, to identify (i) all
preferential rights to purchase and all rights to require that
consents to assignment be obtained which would be applicable to the
transactions contemplated hereby and (ii) the parties holding such
rights; in attempting to identify the same, such Seller shall in no
event be obligated to go beyond its own records. Each Seller will
request, from the parties so identified, and in accordance with the
documents creating such rights, waivers of the preferential rights to
purchase and requirements that consent to assignment be obtained which
were so identified. No Seller shall have any obligation hereunder
other than to so attempt to identify such preferential rights and
requirements for consent to assignment and to so request such waivers.
Without limiting the foregoing, each Seller specifically shall have no
obligation to assure that such waivers are obtained nor to expend any
sums to obtain such waivers. Except to the extent that Buyer can
establish that a Seller failed to fulfill the obligations set forth
above in this subsection, Buyer shall indemnify and hold each Seller
harmless from and against all claims, actions, liabilities, damages,
losses, costs or expenses (including court costs and attorney's fees)
whatsoever that arise out of the failure to obtain waivers of
preferential rights to purchase or requirements for consent to
assignment with respect to any transfer by a Seller to Buyer of any
part of the Properties and with respect to any subsequent transfers;
provided however should Buyer be compelled to transfer after Closing
any portion of the Properties to a party holding an unwaived
preferential right to purchase, Buyer shall be entitled to retain all
sums paid by this third party for such portion of the Properties. If a
party from whom a waiver of a preferential right to purchase is
requested refuses to give such waiver, the affected Seller will tender
the required interest in the Property affected by such unwaived
preferential right to the holder, or holders, of such right who have
elected not to waive such preferential right to purchase. Each
affected Seller will tender such required interest at a price equal to
the amount specified in Exhibit B hereto for the Wells or specifically
identified and valued undrilled location or non-producing interval
located on such Property and for the units in which such Property
participates, reduced appropriately, as determined by Sellers, if less
than the entire Property must be tendered. If, and to the extent that,
such preferential right to purchase is exercised by such party or
parties, and such interest in such Property is actually sold to such
party or parties so exercising such right, such interest in such
Property will be excluded from the transaction contemplated hereby and
the Base Purchase Price payable to the affected Seller will be reduced
by the amount due to such Seller by the party or parties exercising
such right.
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(d) Each Seller shall exercise reasonable commercial efforts to cause all
policies of insurance currently in force and effect and pertaining to
the Properties (or policies containing coverage substantially similar
to such policies) be maintained by such Seller in full force and effect
through Closing.
7. Due Diligence Reviews.
(a) Buyer may, to the extent it deems appropriate, conduct, at its sole
cost, such title examination or investigation, and other examinations
and investigations, as it may choose to conduct with respect to the
Properties. Should, as a result of such examinations and
investigations, or otherwise, matters come to Buyer's attention which
would constitute "Defects" (as below defined), and should there be one
or more of such Defects which Buyer is unwilling to waive and close
the transaction contemplated hereby so long as such Defects exist,
Buyer shall notify JN E&P in writing of such Defects no later than
December 15, 2000. To be effective, Buyer's notice of Defects (herein
called a "Defect Notice") must include (i) a brief description of the
matter constituting the Defect so asserted, (ii) the title opinion,
other reports of experts, or other documentation on which Buyer's
assertion of a Defect is based, (iii) such supporting documents
reasonably necessary for Sellers (or a title attorney retained by
Sellers) to verify the existence of any such Defect, and (iv) Buyer's
estimate of the diminution in the sum to be paid at Closing resulting
from such alleged Defect. Such Defects of which Buyer so provides
notice are herein called "Asserted Defects". All matters which would
constitute Defects with respect to which Buyer fails to so give JN E&P
notice will be deemed waived for all purposes.
(b) The term "Defect" as used in this Section shall mean the following:
(i) Any Seller's ownership of the Properties is such that,
with respect to a Well or specifically identified and valued
undrilled location or non producing interval or unit listed
on Exhibit B hereto, (A) Sellers are entitled to receive a
decimal share of the oil, gas and other hydrocarbons
produced from, or allocated to, such Well or specifically
identified and valued undrilled location or non producing
interval or unit less than the decimal share set forth on
Exhibit B in connection with such Well or unit in the column
headed "Net Revenue Interest" or (B) Sellers are obligated
to bear a decimal share of the cost of operation of such
Well or specifically identified and valued undrilled
location or non producing interval or unit greater than the
decimal share set forth on Exhibit B in connection therewith
in the column headed "Working Interest"; or
(ii) Any Seller's ownership of an Oil and Gas Property is subject
to a mortgage, lien or other encumbrance other than (A) as
reflected on Exhibit A hereto, (B) a lien for taxes not yet
delinquent, or (C) a mechanic's or materialmen's lien (or
other similar lien), or a lien under an operating agreement or
similar agreement, to the extent the same relates to expenses
incurred which are not yet due, or which is being contested by
such Seller in good faith and for which such Seller has agreed
to remain responsible and to indemnify Buyer therefor; or
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(iii) Any Seller's ownership of an Oil and Gas Property is subject
to a preferential right to purchase or a requirement that a
consent to assignment be obtained which is actually applicable
to the transaction contemplated hereby, unless a waiver of
such right has been obtained with respect to the transaction
contemplated hereby or, in the case of a preferential right to
purchase, an appropriate tender of the applicable interest has
been made to the party holding such right, and such party has
either declined to exercise such right, or the period of time
required for such party to exercise such right has expired
without such party exercising such right; or
(iv) Any Seller's ownership of an Oil and Gas Property is subject
to an imperfection in title which, if asserted, would cause a
Defect, as defined in clause (i) above, to exist, and such
imperfection in title is not such as would normally be waived
by persons engaged in the oil and gas business purchasing
producing property; or
(v) An Oil and Gas Property is in violation of applicable
environmental laws in any material respect. As used herein,
the term "applicable environmental laws" shall mean all
federal, state or local laws, rules, orders or regulations
pertaining to health or the environment, including those
relating to waste materials and/or hazardous substances.
(vi) Sellers are in Material Breach of any representations or
warranties made herein. A breach shall be a Material Breach if
the liability associated with the matter affected by such
breach shall exceed $50,000 as to any single occurrence or
$150,000 in the aggregate as to all such events of breach.
(c) After the execution of this Agreement, Buyer and its authorized
representatives shall have physical access to the Properties at
Buyer's sole cost, risk and expense for the purpose of inspecting the
Properties, conducting such tests, examination, investigations and
assessments as may be reasonable and necessary or appropriate to
evaluate the environmental and physical conditions of the Properties,
including the identification of wetlands. For those Properties which
are not operated by Sellers, Buyer shall obtain permission from the
operator to conduct such inspections. Sellers shall provide all
reasonable assistance in obtaining this permission for Buyer. Buyer
shall defend and indemnify Sellers from any and all liability, claims,
causes of action, injury to Buyer's employees, agents or contractors
or to Buyer's property, and/or injury to Sellers' property, employees,
agents or contractors which may arise out of Buyer's inspections, but
only to the extent of Buyer's negligence. Buyer agrees to provide to
Sellers, upon request, a copy of any environmental assessments,
including any reports, data, and conclusions. Likewise, Sellers shall
furnish to Buyer a copy of any environmental assessments, including
any reports, data, and conclusions pertaining to the Properties in the
possession of Sellers. Buyer and Sellers shall keep any and all data
or information acquired by all such examinations and results of all
analysis of such data and information strictly confidential and not
disclose same to any person or agency without the prior written
approval of both Buyer and Sellers. The foregoing obligation of
confidentiality shall survive Closing or termination of this Agreement
without Closing.
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(d) Buyer waives and releases all claims against Sellers, their respective
parent or subsidiary companies or other affiliates, and their
directors, officers, employees and agents, for injury to, or death of,
persons or for damage to property arising in any way from the conduct
of the investigations and examinations contemplated by this Section
(or the exercise of rights of access under Section 7(a) above) or the
conduct of its employees, agents or contractors in connection with
such investigations and examinations (or the exercise of such rights
of access). Buyer shall indemnify Sellers, their respective parent and
subsidiary companies and other affiliates, and their directors,
officers, employees and agents from and against any and all claims,
actions, liabilities, losses, damages, costs or expenses (including
court costs and attorney fees) to Buyer's employees, agents,
representatives, contractors, or subcontractors whatsoever arising out
of the exercise of such rights of investigation and examination (or
exercise of such rights of access). THE FOREGOING RELEASE AND
INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH CLAIMS, ACTIONS,
CAUSES OF ACTION, LIABILITIES, DAMAGES, LOSSES, COSTS, OR EXPENSES
ARISE OUT OF (i) NEGLIGENCE (INCLUDING SOLE NEGLIGENCE, SINGLE
NEGLIGENCE, CONCURRENT NEGLIGENCE, ACTIVE NEGLIGENCE, OR PASSIVE
NEGLIGENCE, BUT EXPRESSLY NOT INCLUDING GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT) OF SELLERS OR ANY OTHER INDEMNIFIED PARTY, OR (ii) STRICT
LIABILITY.
(e) Upon request by Sellers, Buyer agrees to provide Sellers with a copy of
the results of any investigations or examinations conducted pursuant to
this Section 7, including but not limited to, any results of sampling
of soil or water or any environmental assessments of the Properties.
Buyer agrees that any results of such investigations or examinations
are confidential and shall not be disclosed to any third party.
8. Certain Price Adjustments. In the event that Buyer notifies JN E&P of
Asserted Defects, Sellers shall have the right (but not the obligation) to
attempt to cure, prior to Closing, such Asserted Defects. If Sellers are unable
(or unwilling) to cure such Asserted Defects prior to Closing, or in the event
that Buyer has elected to treat an Oil and Gas Property affected by a casualty
loss as if it was an Oil and Gas Property affected by an Asserted Defect, then
(a) Buyer and Sellers shall, with respect to each Oil and Gas Property
affected by such matters, attempt to agree upon an appropriate
adjustment to the Purchase Price to account for such matters, in
accordance with the following principles:
(i) If the Asserted Defect is a mortgage, lien, encumbrance or
other charge which is undisputed and liquidated in amount,
then (subject to the provisions of paragraph (iv) below) the
adjustment would be the amount necessary to be paid to remove
the Asserted Defect from the affected Property;
(ii) If there shall be an Asserted Defect (or "NRI Increase", as
defined below) which (A) represents a discrepancy between
(1) the Net Revenue Interest to which Sellers are entitled
to receive from any Property and (2) the Net Revenue
Interest stated on Exhibit B, and (B) there is a Working
Interest change proportionate to the change in the Net
Revenue Interest resulting from the Asserted Defect (or NRI
Increase), then the amount of the adjustment shall be the
product of the value allocated to Sellers' interest in the
applicable Property as set forth on Exhibit B (herein called
the "Allocated Value") multiplied by a fraction, the
numerator of which shall be the change in the Net Revenue
Interest of Sellers and the denominator of which shall be
the Net Revenue Interest of Sellers set forth on Exhibit B;
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(iii) If the Asserted Defect represents a matter of a type not
described in paragraphs (i) or (ii) above, the adjustment
amount shall be determined by taking into account the
Allocated Value of the Property so affected, the portion of
the Property affected by the Asserted Defect, the legal effect
of the Asserted Defect, the potential economic effect of the
Asserted Defect over the life of the affected Property and
such other factors as are necessary to make a proper
evaluation of the value of the Asserted Defect;
(iv) Notwithstanding any other provision contained herein, the
aggregate adjustment attributable to the effect of all
Asserted Defects related to a given Property shall not exceed
the Allocated Value of such Property; provided, however, that
Buyer, may elect to have a Property affected by a Defect
excluded from the transaction contemplated hereby if such
Property is subject to a Defect which will either (A) require
remediation operations to be performed on the affected
Property, the cost of which is reasonably expected to exceed,
or (B) otherwise require the current expenditure of funds in
an amount exceeding, the Allocated Value thereof, unless
Sellers agree to adjust the Purchase Price in an amount equal
to the full costs of such remediation obligations or other
required expenditure of funds.
(b) Should Sellers determine, or should Buyer, in the course of its due
diligence reviews contemplated by Section 7 above, have reasonable
cause to believe, that the ownership of the Properties by Sellers
entitles the Sellers (whether individually or collectively) to a
decimal share of the production from a Well or item listed on Exhibit
B greater than the decimal share shown for such Well or item under the
column headed "Net Revenue Interest" on Exhibit B (herein called an
"NRI Increase"), then the party making the determination (or having
such cause to believe) that an NRI Increase exists shall promptly
notify the other party thereof. JN E&P or Helis may thereafter propose
an upward adjustment to the Purchase Price to account for such fact,
in which case such adjustment shall be handled in the same manner as
provided above with respect to adjustments for Asserted Defects;
provided that the party making such determination shall notify the
other party no later than December 15, 2000.
(c) Should the parties be unable to agree upon an appropriate adjustment
in light of the factors set forth above, then each of JN E&P (on
behalf of the JN Group) and Helis (each a "Seller Group") shall have
the right to separately elect to either (i) require that the Closing
take place, deposit that portion of the estimated diminution in the
Allocated Value of the Property affected thereby as set forth in the
Defect Notice (but in no event to exceed the Allocated Value of the
Property affected thereby) attributable to such Seller Group in an
escrow account and attempt to cure one or more Asserted Defects after
the Closing; (ii) refer the matter for arbitration in accordance with
the provisions of Section 8(d) below, in which case, subject to
Section 8(a)(iv) above and the final two sentences of this Section
8(c), the price to be paid at Closing shall be reduced by the average
of Sellers' and Buyer's estimates of the diminution in the Allocated
Value of the Property affected thereby resulting from such Asserted
Defect, or (iii) exclude the interest of such Seller Group in the
Property affected thereby from the transaction contemplated hereby, in
which case the Purchase Price will be reduced by the Allocated Value
of the Property affected thereby, subject to Section 8(a)(iv) above
and the final two sentences of this Section 8(c). If the Purchase
Price reduction (or increase) attributable to the interest of all
Sellers which would result from the above provided for procedure
(whether determined at Closing o r pursuant to the arbitration pursuant
to Section 8(d) below) does not exceed $300,000, then the Purchase
Price shall not be adjusted, and if pursuant to the provisions above
set forth, Properties were to be excluded from the transaction, none
of the Properties which would be excluded by such procedure shall be
excluded, except for those properties which Buyer, may, nevertheless,
elect to have excluded notwithstanding the fact that no Purchase Price
adjustment occurs. If the Purchase Price reduction (increase)
attributable to the interest of all Sellers which would result from
the above provided for procedure exceeds $300,000, the Purchase Price
shall be adjusted by the total amount of such reduction (or increase).
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(d) If Sellers or Buyer are unable to agree as to whether a Defect exists,
the value to be attributable to an Asserted Defect prior to Closing
and any Seller Group has elected not to exclude the affected Property
pursuant to the provisions of paragraph 8(c) above, then either Buyer
or any such Seller Group may elect to refer the matter to be resolved
by a Defect Expert ("Defect Expert"), to be selected by the parties.
Such Defect Expert shall be an attorney or other party with not less
than 15 years experience in the oil and gas industry such that he or
she is considered an expert in oil and gas title matters. The Defect
Expert may enlist the advice of a petroleum engineer mutually agreed
by the parties with respect to any valuation issues and any other
experts as such Defect Expect shall deem reasonably necessary. Within
10 business days after referral of such matter to Defect Expert, each
of Buyer and the Seller Group(s) participating in such proceeding
acting as a single party (the "Participating Sellers") shall deliver
to each other and to the Defect Expert a notice setting forth in
adequate detail the issues to be determined by the Defect Expert and
the decision (on a word for word basis) that such party desires the
Defect Expert to make with respect to the issues being determined (the
"Decision Notice"); provided, however, in preparing the Decision
Notice each party (as well as the Defect Expert) shall be bound by the
provisions of Section 8(a)(iv) above. Within two business days after
giving of the two Decision Notices, the Parties shall attend a meeting
with the Defect Expert at a mutually acceptable time and place to
discuss fully the content of such Decision Notice and based thereon
whether either or both wish to modify their Decision Notices in any
way. Any such modifications shall be discussed, so that when each
party finalizes its Decision Notice, it shall do so with full
knowledge of the content of the other parties' final Decision Notice.
The finalization of such Decision Notices and the deliver of same by
each party to the other shall occur at such meeting unless by mutual
agreement they agree to have one or more additional meetings for such
purposes. The Defect Expect shall be required to adopt a decision set
forth in either Decision Notice and shall have no power to reach any
other result. Such Defect Expert shall adopt a decision that in his or
her judgment is more fair and equitable and in conformity with the
principles set forth in subparagraphs (a)(i) through (a)(iv) of this
Section 8, the Allocated Value of affected Property, the likelihood of
its economic effect on the affected Property and such other reasonable
and customary standards as are applicable to the situation. The
decision, to be made in writing and signed by the Defect Expert shall
determine such dispute. Such decision shall be made, signed and
delivered to the parties at the meeting unless otherwise agreed by the
parties. The expenses of the Defect Expert and any other expert
retained by the Defect Expert shall be borne one-half by the
Participating Sellers and one-half by Buyer except that such party
shall pay fees and expenses of its counsel, witnesses and employees.
The determination and award of the Defect Expect shall be final and
binding upon the parties and judgment may be entered thereon in any
court of competent jurisdiction upon the application therefore of
either party. Within five (5) business days from the execution of such
decision, any payment resulting from the decision shall be made.
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9. Conditions Precedent to the Obligations of Buyer. The obligations of
Buyer under this Agreement are subject to each of the following conditions being
met:
(a) Each and every representation and warranty of Sellers under this
Agreement shall be true and accurate in all material respects as of the
date when made and shall be deemed to have been made again at and as of
the time of Closing and shall at and as of such time of Closing be true
and accurate in all respects except as to changes specifically
contemplated by this Agreement or consented to by Buyer.
(b) Sellers shall have performed and complied in all material respects with
(or compliance therewith shall have been waived by Buyer) each and
every covenant, agreement and condition required by this Agreement to
be performed or complied with by Sellers prior to or at the Closing.
(c) No suit, action or other proceedings shall, on the date of Closing, be
pending or threatened before any court or governmental agency seeking
to restrain, prohibit, or obtain damages or other relief in connection
with the consummation of the transactions contemplated by this
Agreement.
(d) The Purchase Price reduction arising under Section 8 hereof will not
reduce the Purchase Price by more than twenty five percent (25%)
(inclusive of exercised preferential purchase rights).
If any such condition on the obligations of Buyer under this Agreement
is not met as of the Closing Date, or in the event the Closing does not occur on
or before December 29, 2000 (herein called the "Termination Date"), and in
either case Buyer is not in breach of its obligations hereunder, this Agreement
may, at the option of Buyer, be terminated.
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10. Conditions Precedent to the Obligations of Sellers. The obligations
of Sellers under this Agreement are subject to each of the following conditions
being met:
(a) Each and every representation and warranty of Buyer under this
Agreement shall be true and accurate in all material respects as of the
date when made and shall be deemed to have been made again at and as of
the time of Closing and shall at and as of such time of Closing be true
and accurate in all respects except as to changes specifically
contemplated by this Agreement or consented to by Sellers.
(b) Buyer shall have performed and complied in all material respects with
(or compliance therewith shall have been waived by Sellers) each and
every covenant, agreement and condition required by this Agreement to
be performed or complied with by Buyer prior to or at the Closing.
(c) The Purchase Price reduction (if any) which results from the
application of Section 8 does not exceed twenty five percent (25%)
percent of the Base Purchase Price (inclusive of exercised preferential
purchase rights).
(d) Sellers shall have been furnished with evidence reasonably satisfactory
to them that Buyer shall have caused to have in effect any bonds
required in connection with the ownership and operation of the
Properties subsequent to the Closing, such that the bonds of Sellers
presently in place may be released in the ordinary course of business.
(e) No suit, action or other proceedings shall, on the date of Closing, be
pending or threatened before any court or governmental agency seeking
to restrain, prohibit, or obtain damages or other relief in connection
with the consummation of the transactions contemplated by this
Agreement.
If any such condition on the obligations of Sellers under this
Agreement is not met as of the Closing Date, or in the event the Closing does
not occur on or before the Termination Date and (in either case) Sellers are not
in breach of its obligations hereunder in the absence of Buyer also being in
breach of its Obligations hereunder, this Agreement may, at the option of any
Seller Group, be terminated.
11. Termination of Agreement.
(a) If this Agreement is terminated by Buyer as set forth in Section 9
above, then the Deposit shall be promptly returned to Buyer, which
shall be Buyer's sole remedy hereunder, unless such termination is a
result of Sellers' willful and wrongful failure to close the
transaction contemplated hereby under circumstances in which all
conditions precedent to Sellers' obligations as set forth in Section
10 shall have been performed or satisfied (herein called "Seller
Default"), in which event Buyer shall be entitled to pursue any
remedies existing at law or in equity. From and after termination due
to the first instance set forth above in this Section 11(a), the
parties shall have no further obligations to one another hereunder
(other than the obligations under Section 16 hereof and under the last
two sentences of Section 7 hereof, which will survive such
termination), but such termination will not affect any liability or
obligation related to the failure of a party to perform its
obligations hereunder prior to such termination.
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(b) If this Agreement is terminated by Sellers as set forth in Section 10
above, then the Deposit shall be retained by Sellers as liquidated
Damages, unless at such time Buyer shall not be in breach of its
obligations hereunder, in which case the Deposit shall be promptly
returned to Buyer. Upon such termination, the parties shall have no
further obligations to one another hereunder (other than the
obligations under Section 16 hereof and under the last two sentences of
Section 7 hereof, which will survive such termination). The parties
agree that time is of the essence for the consummation of the
transaction contemplated hereby and that the amount of damages caused
by Buyer's breach would be very difficult to calculate exactly. The
provision for liquidated damages shall be Sellers' sole remedy
hereunder.
(c) Upon the termination of this Agreement, whether pursuant to paragraph
(a) or (b) above, Sellers shall be free to sell the Property (or any
portion thereof) to any other party without any limitation under or by
reason of this Agreement, unless at such time a condition of Seller
Default shall exist. Buyer shall cooperate with Sellers in effectuating
any such sale and shall promptly execute any instrument evidencing the
termination of Buyer's right to acquire the Property as may be
reasonably requested by Sellers. Buyer shall also immediately return to
Sellers all data and other information (and all copies thereof)
furnished to Buyer by or on behalf of Sellers in connection with this
transaction.
12. The Closing. The closing (herein called the "Closing") of the transaction
contemplated hereby shall take place in the offices of JN E&P in Billings,
Montana, on or before December 29, 2000, at 10 a.m. Mountain Time, or at such
other date and location (i) as the Buyer and Sellers may mutually agree upon or
(ii) to which Sellers may postpone the Closing pursuant to Section 7 hereof
(such date and location, as changed pursuant to clauses (i) and (ii), being
herein called the "Closing Date"). At the Closing:
(a) Sellers shall:
(i) execute, acknowledge and deliver to Buyer a conveyance of the
Properties, (the "Conveyance"), in the form attached hereto as
Exhibit C (and with Exhibit A hereto being attached thereto),
effective as to runs of oil and deliveries of gas and other
products as of 7:00 a.m., local time at the locations of the
Properties, respectively, on September 1, 2000, (herein called
the "Effective Date"); and
(ii) execute and deliver to Buyer letters in lieu of transfer
orders (or similar documentation), in form acceptable to
both parties; and
(iii) deliver to Buyer affidavits or other certification (as
permitted by such code) from each Seller that such Seller is
not a "foreign person" within the meaning of Section 1445 (or
similar provisions) of the Internal Revenue Code of 1986 as
amended (i.e., no Seller is a non-resident alien, foreign
corporation, foreign partnership, foreign trust or foreign
estate as those terms are defined in such code and regulations
promulgated thereunder); and
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(iv) turn over possession of the Properties.
(v) within thirty (30) days after Closing, Sellers will deliver to
Buyer the records and other materials described in Section
1(f) above.
(b) Buyer shall:
(i) deliver to each Seller Group, by wire transfer to an account
designated by Sellers in a bank located in the United States,
an amount equal to the proportionate part of (a) the Purchase
Price allocated to such Seller Group as set forth on Exhibit
B-1 (b) less the Deposit; and
(ii) with respect to properties operated by any Seller, execute and
deliver to Sellers appropriate evidence reflecting change of
operation as required by applicable authorities, and such
evidence as Sellers may reasonably require that Buyer is
qualified with such authorities to succeed such Seller as
operator.
(c) With respect to each Oil and Gas Property with respect to which any
Seller is disbursing proceeds of production attributable to other
parties entitled thereto, (i) such Seller shall continue to collect
proceeds of production during the month in which Closing occurs and
shall be responsible for making disbursements, in accordance with its
normal procedures (and at normal times) of such proceeds of production
so collected to the parties entitled to same, with any proceeds of
production thereafter collected by such Seller to be promptly
forwarded to Buyer (who shall thereafter account for same to the
parties entitled thereto), (ii) such Seller shall, as promptly as
possible after Closing deliver to Buyer (A) a copy of its "pay list"
for each such property, (B) a list of all parties for whom it is
holding in suspense proceeds of production, and (C) a check (which
shall be delivered within thirty days after the end of the month in
which the Closing occurs) in an amount equal to all suspended funds.
Following delivery of the materials referred to in clause (ii) above,
Buyer shall become responsible for all disbursements of proceeds of
production (including suspense and other disbursements attributable to
periods prior to the Effective Date) and such disbursement activities
shall be included in the matters which Buyer assumes, and indemnifies
Sellers with respect to, under Section 14 below. It is understood and
agreed that such Seller does not represent or warrant to Buyer the
accuracy of the pay lists so delivered.
13. Certain Accounting Adjustments. Appropriate adjustments shall be made
between Buyer and Sellers so that (i) all expenses which are incurred in the
operation of the Properties before the Effective Date will be borne by Sellers
and all proceeds (net of applicable production, severance, and similar taxes)
from sale of oil, gas and/or other minerals produced therefrom before the
Effective Date will be received by Sellers, and (ii) all expenses which are
incurred in the operation of the Properties after the Effective Date will be
borne by Buyer and all proceeds (net of applicable production, severance, and
similar taxes) from the sale of oil, gas and/or other minerals produced
therefrom after the Effective Date will be received by Buyer. It is agreed that,
in making such adjustments: (i) oil which was produced from the Oil and Gas
Properties and which was, on the Effective Date, stored in tanks located on the
Oil and Gas Properties (or located elsewhere but used by Sellers to store oil
produced from the Oil and Gas Properties prior to delivery to oil purchasers)
and natural gas above pipeline connections shall be deemed to have been produced
before the Effective Date, and (ii) ad valorem taxes assessed with respect to a
period which the Effective Date splits (regardless of whether such taxes are
computed based upon production in a prior period) shall be prorated based on the
number of days in such period which fall on each side of the Effective Date
(with the day on which the Effective Date falls being counted in the period
after the Effective Date), and shall, where the current year's taxes are not yet
known, be based on the previous year's taxes, (iii) no consideration shall be
given to the local, state or federal income tax liabilities of any party, and
(iv) in calculating expenses, with respect to each well or wells as to which any
Seller is the operator, there shall be included in expenses for the period from
the Effective Date to Closing an amount (A) equal to the overhead rate which
would be chargeable to such Seller during such time under the terms of the
applicable joint operating agreement if such Seller were a non-operator, or (B)
if there is no applicable joint operating agreement, at the applicable rates set
forth under Exhibit H attached hereto. On or before 75 days after Closing, Buyer
and Sellers shall determine the amounts of such adjustments, and shall make such
adjustments by appropriate payments from Sellers to Buyer or from Buyer to
Sellers.
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Buyer and Sellers agree that the net gas imbalance attributable to the
Properties as of the Effective Date is believed to be that which is set forth on
Exhibit "I" (the "Agreed Imbalance"), notwithstanding that the actual imbalance
may be lesser or greater. Buyer and Sellers shall verify the actual net gas
imbalance in the Post-Closing accounting, if not before, and any imbalance shall
be accounted for between the parties at the price of $1.50 per MCF but only as
to those volumes which exceed or are less than the Agreed Imbalance; provided,
however, that if an applicable operating or gas balancing agreement requires
cash balancing upon conveyance of the Properties, the adjustment price shall
equal the price received in the cash balancing. Such settlement shall become
final ninety (90) days after Closing, it being understood and agreed by the
parties that should any variance in the gas imbalance be discovered after the
Post-Closing accounting within the period of time ending ninety days after
Closing, the parties will adjust therefor in the same manner as set forth in
this paragraph, and thereafter neither party shall make claim upon the other
concerning the gas balances of the Properties. Upon Closing, Buyer shall own and
assume all rights and liabilities relating to gas imbalances discovered after
the ninety day period set forth above, including any revenue adjustment caused
by such subsequently discovered imbalance.
14. Assumption and Indemnification.
(a) Buyer shall, on the date of Closing, agree (and, upon the delivery
to Buyer of the Conveyance shall be deemed to have agreed) (a) to
assume, and to timely pay and perform, all duties, obligations and
liabilities relating to the ownership and/or operation of the
Properties after the Effective Date (including, without limitation,
those arising under the contracts and agreements described in Section
1(d) above), and (b) to indemnify and hold each Seller, its parent and
subsidiary companies and other affiliates, and its and their
directors, officers, employees and agents harmless from and against
any and all claims, actions, liabilities, losses, damages, costs or
expenses (including court costs and attorneys' fees) of any kind or
character arising out of or otherwise relating to the ownership and/or
operation of the Properties after the Effective Date. In connection
with (but not in limitation of) the foregoing, it is specifically
understood and agreed that matters arising out of or otherwise
relating to the ownership and/or operation of the Properties after the
Effective Date shall include all matters arising out of the condition
of the Properties on the Effective Date (including, without
limitation, within such matters all obligations to properly plug and
abandon, or replug and re-abandon, wells located on the Properties, to
restore the surface of the Properties and to comply with, or to bring
the Properties into compliance with, applicable environmental laws,
including conducting any remediation activities which may be required
on or otherwise in connection with activities on the Properties),
regardless of when the events occurred which give rise to such
condition (and regardless of whether any Seller, its officers,
employees, agents or other representatives, were wholly or partially
negligent or otherwise, at fault), and the above provided for
assumptions and indemnifications by Buyer shall expressly cover and
include such matters so arising out of such condition. Buyer also
assumes, and agrees to timely pay and perform, and to indemnify
Sellers with respect to, all obligations and liabilities with respect
to any sales and/or use tax that may be applicable to the transaction
contemplated by this Agreement. This indemnifications contained in
this Section 14 expressly includes any claims that arise as a result
of strict liability.
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(b) Subject to the terms and conditions of this Section 14, Sellers shall
severally (and not jointly and severally) indemnify, defend, and hold
harmless Buyer from and against any and all costs, expenses or other
liabilities asserted against, resulting to, imposed upon, or incurred
by Buyer, directly or indirectly, by reason of or resulting from any
proceeding initiated by a person or entity other than Buyer or any
affiliate of Buyer (a "Third Party") against Buyer or with respect to
the Properties as a result of a condition existing on the Oil and Gas
Properties as of the Closing which constitutes a violation of existing
Applicable Environmental Laws (an "Environmental Claim"), with respect
to which Buyer has given written notice to Sellers prior to 5 p.m.
Mountain Time on April 15, 2001, except for Environmental Claims for
which Purchase Price adjustments under Section 8 hereof have been made
or which were asserted prior to the Defect Date, and as further set
forth in this section. Buyer covenants and agrees that neither Buyer
nor any affiliate of Buyer will disclose or otherwise reveal to any
Third Party any facts or other information concerning or relating to
any matter which might be the subject of an Environmental Claim.
Without limiting the foregoing, neither Buyer nor any affiliate of
Buyer shall solicit or encourage Third Parties to commence any
Environmental Claim against Buyer or with respect to the Properties
for which Buyer would be entitled to indemnification under this
Section 14. To the extent that Buyer (or its affiliates) breaches its
covenants set forth in the preceding sentences, the indemnification
set forth in this Section 14 shall not be applicable to any
Environmental Claim in any way arising from or connection with such
breach.
15. Disclaimer of Warranties. The Properties are being sold by each Seller
"where is" and "as is" without any warranty of title, except with respect to the
Oil and Gas Properties, as to those claiming by, through or under such Seller.
Each Seller hereby expressly disclaims any and all representations or warranties
(other than those expressly set out in Section 4 above) with respect to the
Properties or the transaction contemplated hereby. Specifically as a part of
(but not a limitation of) the foregoing, Buyer acknowledges that no Seller has
made, and each Seller hereby expressly disclaims, any representation or warranty
(express, implied, under common law, by statute or otherwise) relating to titles
of the properties, the condition of the properties (INCLUDING WITHOUT
LIMITATION, SELLERS DISCLAIM ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, OR CONFORMITY TO MODELS OR SAMPLES OF
MATERIALS), the extent of oil, gas and/or other mineral reserves, the
recoverability of or the cost of covering any of such reserves, the value of
reserves, prices (or anticipated prices) at which production has been or will be
sold, the ability to sell oil or gas production from the Properties, and the
environmental condition of the Oil and Gas Properties, including, but not
limited to, practices or conditions that may have resulted in environmental
contamination or violations of applicable environmental laws.
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16. Commissions. Sellers agree to indemnify and hold harmless Buyer from and
against any and all claims, obligations, actions, liabilities, losses, damages,
costs or expenses (including court costs and attorneys fees) of any kind or
character arising out of or resulting from any agreement, arrangement or
understanding alleged to have been made by, or on behalf of, any Seller with any
broker or finder in connection with this Agreement or the transaction
contemplated hereby. Buyer agrees to indemnify and hold harmless each Seller
from and against any and all claims, obligations, actions, liabilities, losses,
damages, costs or expenses (including court costs and attorneys fees) of any
kind or character arising out of or resulting from any agreement, arrangement or
understanding alleged to have been made by, or on behalf of, Buyer with any
broker or finder in connection with this Agreement or the transaction
contemplated hereby.
17. Casualty Loss. In the event of damage by fire or other casualty to the
Properties prior to the Closing, then this Agreement shall remain in full force
and effect, and (unless Buyer and Sellers shall otherwise agree) in such event
as to any Properties so damaged, then, at Buyer's election, either (A) such
Property shall be treated as if it had an Asserted Defect associated with it and
the procedure provided for in Section 8 shall be applicable thereto, or (B) the
Purchase Price will not be adjusted, and if any Seller should be entitled to
make any claims under any insurance policy with respect to such damage, such
Seller shall, at such Seller's election, either collect (and when collected pay
over to Buyer), or assign to Buyer, such claims. To the extent that sums are
properly paid over to Buyer under this Section 17 less the deductible provided
in such insurance policy, Sellers shall reimburse Buyer for the amount of such
deductible amount so withheld.
18. Notices. All notices and other communications required under this Agreement
shall (unless otherwise specifically provided herein) be in writing and be
delivered personally, by recognized commercial courier or delivery service
(which provides a receipt), by telex or telecopier (with receipt acknowledged),
or by registered or certified mail (postage prepaid), at the following
addresses:
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If to Buyer:
St. Mary Land & Exploration Company
7060 S. Yale, Suite 800
Tulsa, Oklahoma 74136-5741
Facsimile: Tulsa, Oklahoma (918) 488-0105
Attention: Julian C. Pope
With a copy to:
St. Mary Land & Exploration Company
1776 Lincoln Street, Suite 1100
Denver, Colorado 80203
Facsimile: (303) 863-1040
Attention: Milam Randolph Pharo
If to Sellers:
JN Exploration & Production Limited Partnership
c/o JN Oil and Gas, Inc.
550 North 31st Street, Suite 300
Billings, Montana 59101
Facsimile: (406) 248-5253
Attention: G.K. Nelson
With a copy to:
The William G. Helis Company, L.L.C.
228 St. Charles Avenue, Suite 912
New Orleans, Louisiana 70130
Facsimile: (504) 522-6486
Attention: David Kerstein
and shall be considered delivered on the date of receipt. Either Buyer or any
Seller may specify as its proper address any other post office address within
the continental limits of the United States by giving notice to the other party,
in the manner provided in this Section, at least ten (10) days prior to the
effective date of such change of address.
19. Survival of Provisions. The representations and warranties made herein by
Buyer and Sellers shall expire at the Closing hereof and shall be of no further
force or effect thereafter. If the Closing occurs under this Agreement, all
conditions of Closing shall be deemed to have been waived or satisfied and after
such Closing, neither party shall have any liability whatsoever to the other
arising out of, resulting from, or attributable to any such conditions of
Closing, irrespective of whether such conditions of Closing were, in fact,
explicitly waived or satisfied. Notwithstanding the foregoing, nothing contained
in this Section 19 shall alter, limit or otherwise affect the rights and
obligations of the parties set forth in Sections 13 through 20 inclusive, which
rights and obligations shall also survive the Closing and the delivery of the
Conveyance.
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20. Miscellaneous Matters.
(a) After the Closing, Sellers shall execute and deliver, and shall
otherwise cause to be executed and delivered, from time to time, such
further instruments, notices, division orders, transfer orders and
other documents, and do such other and further acts and things, as may
be reasonably necessary to more fully and effectively grant, convey and
assign the Properties to Buyer.
(b) Neither party shall have the right to assign its rights under this
Agreement, without the prior written consent of the other party first
having been obtained.
(c) On the date of Closing (and, upon the delivery to Buyer of the
Conveyance), Buyer shall succeed to the position of Sellers with
respect to all gas imbalances and to the position of Sellers with
respect to all make-up obligations. As a result of such succession
Buyer shall (i) be entitled to receive any and all benefits, including
payments of proceeds of production in excess of amounts which it would
otherwise be entitled to produce and receive by virtue of ownership of
the Oil and Gas Properties, which Sellers would have been entitled to
receive by virtue of such position, and (ii) shall be obligated to
suffer any detriments (whether the same be in the form of obligations
to deliver production which would have otherwise been attributable to
its ownership of the Oil and Gas Properties without receiving full
payment therefor, or be in the form of the obligation to make payment
in cash) which Sellers would have been obligated to suffer by virtue
of such positions.
(d) To the extent applicable to the transaction contemplated hereby or any
portion thereof, Buyer waives the provisions of the Texas Deceptive
Trade Practices Act, Chapter 17, Subchapter E, Sections 17.41 through
17.63, inclusive (other than Section 17.555 which is not waived), Texas
Business and Commerce Code. In connection with such waiver, Buyer
hereby represents and warrants to each Seller that Buyer (a) is in the
business of seeking or acquiring by purchase or lease, goods, or
services, for commercial or business use, (b) has knowledge and
experience in financial and business matters that enable it to evaluate
the merits and risks of the transaction contemplated hereby and (c) is
not in a significantly disparate bargaining position.
(e) In connection with Buyer's evaluation of the Properties, Sellers shall
disclose to Buyer certain confidential information, which is
proprietary, and includes, but is not necessarily limited to,
geological and geophysical data; maps, models, and interpretations; and
commercial, contractual, and financial information. All such data
disclosed by any Seller to Buyer shall hereinafter be referred to as
the "Confidential Information". If, for any reason the Closing does not
occur, Buyer agrees that the Confidential Information shall be kept
strictly confidential and shall not be sold, traded, published, or
otherwise disclosed to anyone in any manner whatsoever, including by
means of photocopy or reproduction, without JN E&P' prior written
consent, except as provided in Sections 20(e)(i), 20(e)(ii), and
20(e)(iii) below.
(i) Buyer may disclose the Confidential Information without
JN E&P' prior written consent only to the extent such
information:
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(A) is already known to Buyer as of the date of disclosure
hereunder;
(B) is already in possession of the public or becomes
available to the public other than through the act or
omission of Buyer;
(C) is required to be disclosed under applicable law or by
a governmental order, decree, regulation, or rule
(provided that Buyer shall give written notice to JN
E&P prior to such disclosure); or
(D) is acquired independently from a third party that has
the right to disseminate such information at the time it
is acquired by Buyer.
(ii) Buyer shall be entitled to disclose the Confidential
Information without JN E&P's prior written consent to such of
the following persons who have a clear need to know in order
to evaluate Sellers' petroleum exploration and production
rights:
(A) employees, officers, and directors of Buyer;
(B) any professional consultant or agent retained by
Buyer for the purpose of evaluating the Confidential
Information.
(iii) Prior to making any such disclosures to persons under
subparagraph 20(e)(ii) above, however, Buyer shall obtain an
undertaking of confidentiality, in the same form and content
as this Agreement, from each such person.
(iv) Buyer shall use, or permit the use of the Confidential
Information disclosed under Section 20 (e)(ii) or 20(e)(iii)
above, only to evaluate petroleum exploration and production
rights held by Sellers.
(v) Buyer shall be responsible for ensuring that all persons to
whom the Confidential Information is disclosed under this
Agreement shall keep such information confidential and shall
not disclose or divulge the same to any unauthorized person.
Neither Sellers nor Buyer shall be liable in an action
initiated by one against the other for special, indirect, or
consequential damages resulting from or arising out of this
Agreement, including, without limitation, loss of profit or
business interruptions, however same may be caused.
(vi) The Confidential Information shall remain the property of
Sellers, and any Seller may demand the return thereof at any
time upon giving written notice to Buyer. Within ten (10) days
of receipt of such notice, Buyer shall return all of the
original Confidential Information and shall destroy all copies
and reproductions (both written and electronic) in its
possession and in the possession of persons to whom it was
disclosed pursuant to Sections 20(e)(ii) and 20(e)(iii)
hereof.
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(vii) The term of this Section 20(e) and the rights and obligations
created hereunder shall commence upon the date hereof and
shall continue for a period of two (2) years or Closing,
whichever first occurs.
(viii) No Seller makes any representations or warranties, express or
implied, as to the quality, accuracy, and completeness of the
Confidential Information disclosed hereunder. No Seller
(including its affiliated companies, and their officers,
directors, employees) shall have any liability whatsoever with
respect to the use of or reliance upon the Confidential
Information by Buyer.
Buyer and Sellers agree, to the best of their ability, to keep the terms and
conditions of this sale confidential, both prior to and for a period of six
months after Closing, except upon written consent of the other or as may be
required by law, rule or regulation.
(f) Each party hereto shall bear and pay all expenses incurred by it in
connection with the transaction contemplated by this Agreement.
(g) Notwithstanding any other provision of this Agreement to the contrary,
the representations, warranties, covenants and other obligations of the
Sellers under this Agreement are and shall be several and not joint and
several.
(h) No assignment or other transfer by Buyer of any interest in the
Properties or of its rights and/or obligations under this Agreement
shall relieve or release Buyer from any liabilities or other
obligations to Sellers under this Agreement. Without limiting the
foregoing, Buyer agrees that it shall cause the transferee of any such
assignment or other transfer to specifically agree to be bound by and
to perform all obligations and liabilities of Buyer under this
Agreement.
(i) This Agreement and the documents to be delivered at Closing contains
the entire understanding of the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements,
understandings, negotiations, and discussions among the parties with
respect to such subject matter. The descriptive headings contained in
this Agreement are for convenience only and shall not control or affect
the meaning or construction of any provision of this Agreement. Within
this Agreement words of any gender shall be held and construed to cover
any other gender, and words in the singular shall be held and construed
to cover the plural, unless the context otherwise requires. Time is of
the essence in this Agreement.
(j) This Agreement may be amended, modified, supplemented, restated or
discharged (and provisions hereof may be waived) only by an instrument
in writing signed by the party against whom enforcement of the
amendment, modification, supplement, restatement or discharge (or
waiver) is sought.
(k) The Agreement shall be binding on the parties hereto and their
respective successors and assigns.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, this Agreement is executed by the parties hereto on
the date set forth above.
SELLERS:
JN EXPLORATION & PRODUCTION LIMITED PARTNERSHIP
By JN Oil and Gas, Inc., Its General Partner
By: /s/G.K. NELSON
--------------
Name: G. K. Nelson
Title: President
COLT RESOURCES CORPORATION
By: /s/G.K.NELSON
-------------
Name: G. K. Nelson
Title: President
PRINCEPS PARTNERS, INC.
By: /s/G.K.NELSON
-------------
Name: G. K. Nelson
Title: President
THE WILLIAM G. HELIS COMPANY, L.L.C.
By: /s/DAVID A. KERSTEIN
--------------------
Name: David A. Kerstein
Title: President of Helis Oil & Gas Corporation
Manager and a Member of
The William G. Helis Company, L.L.C.
BUYER:
ST. MARY LAND & EXPLORATION COMPANY
By: /s/MILAM RANDOLPH PHARO
-----------------------
Name: Milam Randolph Pharo
Title: Vice President - Land & Legal
Signature Page 1
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THE STATE OF MONTANA
COUNTY OF YELLOWSTONE
This instrument was acknowledged before me on this 17 day of
------
October, 2000, by G. K. Nelson as President of JN Oil and Gas, Inc., a Wyoming
corporation, Managing Partner for JN EXPLORATION & PRODUCTION LIMITED
PARTNERSHIP, a Delaware limited partnership, for and on behalf of such
corporation.
[SEAL] /s/MELODY MYHRE
-------------------------------
Notary Public, State of Montana
My Commission expires: 3/15/2004
THE STATE OF MONTANA
COUNTY OF YELLOWSTONE
This instrument was acknowledged before me on this 17 day of
------
October, 2000, by G. K. Nelson as President of COLT RESOURCES CORPORATION, a
Delaware corporation, for and on behalf of such corporation.
[SEAL] /s/MELODY MYHRE
-------------------------------
Notary Public, State of Montana
My Commission expires: 3/15/2004
THE STATE OF MONTANA
COUNTY OF YELLOWSTONE
This instrument was acknowledged before me on this 17 day of
------
October, 2000, by G. K. Nelson as President of PRINCEPS PARTNERS, INC., a
Colorado corporation, for and on behalf of such corporation.
[SEAL] /s/MELODY MYHRE
-------------------------------
Notary Public, State of Montana
My Commission expires: 3/15/2004
Signature Page 2
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<PAGE>
THE STATE OF LOUISIANA
PARISH OF ORLEANS
This instrument was acknowledged before me on this 20 day of
-----
October, 2000, by David A. Kerstein as President of Helis Oil & Gas
Corporation, Manager and a Member of THE WILLIAM G. HELIS COMPANY, L.L.C.,
a Louisiana limited partnership, for and on behalf of such corporation.
[SEAL] /s/MARY ANN MEYER
Notary Public, State of Louisiana
My Commission expires: at death
THE STATE OF COLORADO
COUNTY OF DENVER
This instrument was acknowledged before me on this 18 day of
-----
October, 2000, by Milam Randolph as Vice President - Land & Legal of
St. Mary Land & Exploration Company, a Delaware corporation, on behalf of such
corporation.
[SEAL] /s/PATRICIA FLANIGAN
--------------------------------
Notary Public, State of Colorado
My Commission expires: 5/15/03
[fix acknowledgement if states not using above form are included]
Signature Page 2
27
