Exhibit 2.3
Execution Version
PURCHASE AND SALE AGREEMENT
DATED MAY 25, 2017,
BY AND BETWEEN
LINN ENERGY HOLDINGS, LLC AND LINN OPERATING, LLC
AS SELLER,
AND
DENBURY ONSHORE, LLC
AS BUYER
TABLE OF CONTENTS
Table of Contents
Page
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ARTICLE 1 DEFINITIONS
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1
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ARTICLE 2 SALE AND TRANSFER OF ASSETS; CLOSING
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20
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2.01
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Assets
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20
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2.02
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Purchase Price; Deposit
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20
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2.03
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Closing; Preliminary Settlement Statement
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20
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2.04
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Closing Obligations
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21
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2.05
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Allocations and Adjustments
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22
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2.06
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Assumption
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25
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2.07
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Allocation of Purchase Price
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27
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2.08
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Withholding
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27
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ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER
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28
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3.01
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Organization and Good Standing
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28
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3.02
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Authority; No Conflict
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28
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3.03
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Bankruptcy
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29
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3.04
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Taxes
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29
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3.05
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Legal Proceedings
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29
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3.06
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Brokers
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29
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3.07
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Compliance with Legal Requirements
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30
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3.08
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Prepayments
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30
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3.09
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Imbalances
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30
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3.10
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Material Contracts
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30
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3.11
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Consents and Preferential Purchase Rights
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31
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3.12
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Current Commitments
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31
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3.13
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Environmental Laws
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31
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3.14
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Necessary Surface Rights
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32
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3.15
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Royalties
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32
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3.16
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Letters of Credit
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32
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3.17
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Disclosures with Multiple Applicability; Materiality
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32
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ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER
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32
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4.01
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Organization and Good Standing
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32
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4.02
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Authority; No Conflict
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32
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4.03
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Certain Proceedings
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33
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4.04
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Knowledgeable Investor
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33
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4.05
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Qualification
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34
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4.06
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Brokers
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34
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4.07
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Financial Ability
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34
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4.08
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Securities Laws
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34
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4.09
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Due Diligence
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35
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4.10
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Basis of Buyer’s Decision
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35
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4.11
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Business Use, Bargaining Position
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35
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4.12
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Bankruptcy
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36
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ARTICLE 5 COVENANTS OF SELLER
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36
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5.01
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Access and Investigation
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36
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5.02
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Ownership of the Assets
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37
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5.03
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Insurance
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38
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5.04
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Consent and Waivers
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38
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5.05
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Amendment to Schedules
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39
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5.06
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Affiliate Contracts
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39
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ARTICLE 6 OTHER COVENANTS
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39
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6.01
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Notification and Cure
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39
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6.02
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Satisfaction of Conditions
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39
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6.03
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Replacement of Insurance, Bonds, Letters of Credit, and Guaranties
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39
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6.04
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Governmental Reviews
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40
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6.05
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HSR Act
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40
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ARTICLE 7 CONDITIONS PRECEDENT TO BUYER’S OBLIGATION TO CLOSE
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40
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7.01
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Accuracy of Representations
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40
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7.02
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Seller’s Performance
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41
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7.03
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No Proceedings
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41
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7.04
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No Orders
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41
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7.05
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Necessary Consents and Approvals
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41
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7.06
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HSR Act
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41
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7.07
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Closing Deliverables
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41
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7.08
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Title Defect Values, Environmental Defect Values, etc.
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41
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ARTICLE 8 CONDITIONS PRECEDENT TO SELLER’S OBLIGATION TO CLOSE
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42
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8.01
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Accuracy of Representations
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42
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8.02
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Buyer’s Performance
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42
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8.03
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No Proceedings
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42
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8.04
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No Orders
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42
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8.05
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Necessary Consents and Approvals
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42
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8.06
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HSR Act
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42
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8.07
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Closing Deliverables
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42
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8.08
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Title Defect Values, Environmental Defect Values, etc.
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42
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ARTICLE 9 TERMINATION
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43
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9.01
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Termination Events
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43
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9.02
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Effect of Termination; Distribution of the Deposit Amount
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44
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9.03
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Return of Records Upon Termination
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46
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ARTICLE 10 INDEMNIFICATION; REMEDIES
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46
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10.01
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Survival
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46
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10.02
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Indemnification and Payment of Damages by Seller
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47
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10.03
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Indemnification and Payment of Damages by Buyer
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47
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10.04
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Indemnity Net of Insurance
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48
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10.05
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Limitations on Liability
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48
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10.06
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Procedure for Indemnification‑‑Third Party Claims
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49
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10.07
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Procedure for Indemnification – Other Claims
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50
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10.08
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Indemnification of Group Members
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50
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10.09
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Extent of Representations and Warranties
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50
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10.10
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Compliance With Express Negligence Test
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51
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10.11
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Limitations of Liability
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52
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10.12
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No Duplication
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52
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10.13
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Disclaimer of Application of Anti-Indemnity Statutes
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52
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10.14
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Waiver of Right to Rescission
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52
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10.15
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Joint and Several
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52
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ARTICLE 11 TITLE MATTERS AND ENVIRONMENTAL MATTERS; PREFERENTIAL PURCHASE RIGHTS; CONSENTS
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52
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11.01
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Title Examination and Access
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52
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11.02
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Preferential Purchase Rights
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52
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11.03
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Consents
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53
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11.04
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Title Defects
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53
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11.05
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Title Defect Value
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54
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11.06
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Seller’s Cure or Contest of Title Defects
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54
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11.07
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Limitations on Adjustments for Title Defects
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55
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11.08
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Title Benefits
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56
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11.09
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Buyer’s Environmental Assessment
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57
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11.10
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Environmental Defect Notice
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58
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11.11
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Seller’s Exclusion, Cure or Contest of Environmental Defects
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59
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11.12
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Limitations
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59
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11.13
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Exclusive Remedies
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60
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11.14
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Casualty Loss and Condemnation
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60
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11.15
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Expert Proceedings
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60
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ARTICLE 12 GENERAL PROVISIONS
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62
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12.01
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Records
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62
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12.02
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Expenses and Taxes
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62
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12.03
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Notices
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64
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12.04
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Governing Law; Jurisdiction; Service of Process; Jury Waiver
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66
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12.05
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Further Assurances
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67
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12.06
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Waiver
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67
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12.07
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Entire Agreement and Modification
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67
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12.08
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Assignments, Successors, and No Third Party Rights
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67
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12.09
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Severability
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68
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12.10
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Article and Section Headings, Construction
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68
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12.11
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Counterparts
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68
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12.12
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Press Release
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69
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12.13
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Confidentiality
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69
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12.14
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Name Change
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69
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12.15
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Preparation of Agreement
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70
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12.16
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Appendices, Exhibits and Schedules
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70
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12.17
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Specific Performance
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70
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12.18
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Non-Recourse
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70
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EXHIBITS AND SCHEDULES
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Exhibit A
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Leases; Specified Area
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Exhibit A-1
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Easements and Surface Interests
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Exhibit B
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Wells
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Exhibit B-1
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SWD Wells
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Exhibit C
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[Intentionally Omitted]
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Exhibit D
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Form of Assignment and Bill of Sale
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Exhibit E
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Excluded Assets
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Exhibit F
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Form of Certificate
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Exhibit G
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Target Formations
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Schedule 1.01
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Permitted Encumbrance
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Schedule 1.01(b)
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Retained Liabilities
|
Schedule 2.07(a)
|
Allocation of Purchase Price
|
Schedule 3.02(b)
|
No Conflict
|
Schedule 3.04
|
Taxes
|
Schedule 3.07
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Compliance with Legal Requirements
|
Schedule 3.08
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Prepayments
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Schedule 3.09
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Imbalances
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Schedule 3.10
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Material Contracts
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Schedule 3.11
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Consents and Preferential Purchase Rights
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Schedule 3.12
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Current Commitments
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Schedule 3.13
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Environmental Laws
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Schedule 3.15
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Royalties
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Schedule 3.17
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Letters of Credit
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Schedule 5.02
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Certain Authorized Pre-Closing Actions
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Schedule 5.03
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Insurance
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Schedule 6.03(a)
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Replacement of Insurance, Bonds, Letters of Credit, and Guaranties
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PURCHASE AND SALE AGREEMENT
This PURCHASE AND SALE AGREEMENT (this “
Agreement
”) is made as of May 25, 2017 (the “
Execution Date
”), by and between Linn Energy Holdings, LLC, a Delaware limited liability company (“
LEH
”), and Linn Operating, LLC, a Delaware limited liability company (“
LOL
” and together with LEH, the “
Seller
”), and Denbury Onshore, LLC, a Delaware limited liability company (“
Buyer
”). Seller and Buyer are sometimes hereinafter referred to individually as a “
Party
” and collectively as the “
Parties
.”
RECITAL
Seller desires to sell, and Buyer desires to purchase, all of Seller’s right, title and interest in and to certain oil and gas properties and related assets and contracts, effective as of the Effective Time, for the consideration and on the terms set forth in this Agreement.
AGREEMENT
For and in consideration of the promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, in addition to other capitalized terms defined in this Agreement, the following terms have the meanings specified or referred to in this
Article 1
when capitalized:
“
AAA
” – the American Arbitration Association.
“
Accounting Expert
” – as defined in
Section 2.05(d)
.
“
AFE
” – as defined in
Section 3.12
.
“
Affiliate
” – with respect to a Party, any Person directly or indirectly controlled by, controlling, or under common control with, such Party, including any subsidiary of such Party and any “affiliate” of such Party within the meaning of Reg. §240.12b-2 of the Securities Exchange Act of 1934, as amended. As used in this definition, “control” means possession, directly or indirectly, of the power to direct or cause the direction of management, policies, or action through ownership of voting securities, contract, voting trust, or membership in management or in the group appointing or electing management or otherwise through formal or informal arrangements or business relationships. The terms “controlled by,” “controlling,” and other derivatives shall be construed accordingly.
“
Aggregate Defect Deductible
” – an amount equal to two percent (2%) of the unadjusted Purchase Price.
“
Aggregate Environmental Defect Value
” – as defined in
Section 11.12
.
“
Aggregate Title Defect Value
” – as defined in
Section 11.07
.
“
Allocated Values
” – the values assigned among the Assets as set forth on
Schedule 2.07(a)
.
“
Allocation Objections
” – as defined in
Section 2.07(b)
.
“
Applicable Contracts
” – all Contracts to which Seller is a party or is bound or are otherwise binding on the Assets that primarily relate, to any of the Assets and (in each case) that will be binding on Buyer after the Closing, including: communitization agreements; net profits agreements; production payment agreements; area of mutual interest agreements; joint venture agreements; confidentiality agreements; farmin and farmout agreements; bottom hole agreements; crude oil, condensate, and natural gas purchase and sale, gathering, transportation, and marketing agreements; hydrocarbon storage agreements; acreage contribution agreements; operating agreements; balancing agreements; pooling declarations or agreements; unitization agreements; processing agreements; saltwater disposal agreements; facilities or equipment leases; and other similar contracts and agreements, but exclusive of any master service agreements, Debt Contracts, Hedge Contracts and Contracts to the extent relating to the Excluded Assets.
“Asset Taxes
” – ad valorem, property, excise, severance, production, sales, real estate, use, personal property and similar Taxes based upon the operation or ownership of the Assets, the production of Hydrocarbons or the receipt of proceeds therefrom, but excluding, for the avoidance of doubt Income Taxes and Transfer Taxes.
“
Assets
” – all of Seller’s right, title, and interest in, to, and under the following, without duplication, except to the extent constituting Excluded Assets:
(a)
all of the oil and gas leases, subleases and other leaseholds located in the Specified Area (including the oil and gas leases, subleases and other leaseholds described in
Exhibit A
), together with (i) any and all other right, title and interest of Seller in and to the leasehold estates created thereby subject to the terms, conditions, covenants and obligations set forth in such leases or
Exhibit A
(such interest in such leases, the “
Leases
”), (ii) all related rights and interests in the lands covered by the Leases and any lands pooled or unitized therewith (such lands, the “
Lands
”), (iii) all Royalties applicable to the Leases or the Lands, (iv) any amendments, extensions, acreage designations, ratifications, and/or partial releases affecting the Leases, (v) all rights, privileges, benefits and powers conferred upon the holder of the Leases with respect to the use and occupation of the Lands, and (vi) all tenements, hereditaments, and appurtenances belonging to such Leases and the Lands;
(b)
any and all oil, gas, water, observation, injection, CO2 and disposal wells located on any of the Lands (such interest in such wells, including the wells set forth in
Exhibit B
, the “
Wells
”), and all Hydrocarbons produced therefrom or allocated thereto from and after the Effective Time;
(c)
all rights and interests in, under or derived from all communitization, unitization and pooling agreements, declarations and orders in effect with respect to any of the Leases or Wells and the units (including the participating areas therein) created thereby (such units
(including the participating areas therein), the “
Units
”) (the Leases, the Lands, the Units and the Wells being collectively referred to hereinafter as the “
Properties
” or individually as a “
Property
”);
(d)
to the extent that they may be assigned, transferred or re-issued by Seller (with consent, if applicable, but without the payment of any fee unless Buyer agrees in writing to pay such fee;
provided
Seller shall use commercially reasonable efforts to cause the transfer of all such rights and interests to Buyer), all permits, licenses, allowances, water rights, registrations, consents, orders, approvals, variances, authorizations, servitudes, easements, rights-of-way, surface leases, surface fee interests, other surface interests and surface rights to the extent appurtenant to or primarily used or primarily held for use in connection with the Assets or otherwise primarily relating to the ownership, operation, production, gathering, treatment, processing, storing, sale or disposal of Hydrocarbons or produced water from the Properties or any of the Assets, including those described on
Exhibit A-1
;
(e)
all equipment, machinery, tools, inventory, fixtures, improvements and other personal, movable and mixed property located on any of the Properties or other Assets that is used or held for use in connection therewith, and including well equipment, casing, tubing, pumps, motors, machinery, platforms, rods, tanks, boilers, fixtures, compression equipment, flowlines, pipelines, gathering systems associated with the Wells, manifolds, processing and separation facilities, pads, structures, materials, and other items used or held for use in the operation thereof (collectively, the “
Personal Property
”);
(f)
all salt water disposal wells and evaporation pits that are located in the Specified Area, including those described on
Exhibit B-1
;
(g)
to the extent assignable (with consent, if applicable, but without the payment of any fee unless Buyer agrees in writing to pay such fee;
provided
Seller shall use commercially reasonable efforts to cause the transfer of all such rights and interests to Buyer), all Applicable Contracts and all rights thereunder insofar as and only to the extent relating to the Assets;
(h)
the Salt Creek EOR Participation Agreement by and between Howell Petroleum Corporation and LEH dated April 3, 2012;
(i)
all Imbalances relating to the Assets;
(j)
originals (if available, and otherwise copies) and copies in digital form (if available) of all of the books, files, records, information and data, whether written or electronically stored, primarily relating to the Assets maintained by Seller or its Affiliates or in Seller’s or its Affiliates’ possession, including: (i) land and title records (including division order files, prospect files, maps, lease records, abstracts of title, title opinions and title curative documents); (ii) Applicable Contract files; (iii) correspondence; (iv) operations, environmental, production, Asset Tax and accounting records; (v) facility and well records; and (vi) to the extent assignable (with consent, if applicable, but without the payment of any fee unless Buyer agrees in writing to pay such fee;
provided
Seller shall use commercially reasonable efforts to cause the transfer of all such rights and interests to Buyer), geological and seismic data (collectively, “
Records
”);
(k)
all Hydrocarbons in storage or existing in stock tanks, pipelines or plants (including inventory);
(l)
all radio equipment, SCADA and measurement technology, and other production related mobility devices (such as SCADA controllers), well communication devices, and any other information technology systems and licenses associated with the foregoing, in each case only to the extent such assets and licenses are (i) used or held for use solely in connection the Properties, (ii) assignable (with consent, if applicable, but without the payment of any fee unless Buyer agrees in writing to pay such fee;
provided
Seller shall use commercially reasonable efforts to cause the transfer of all such rights and interests to Buyer), and (iii) located on the Properties (the “
Production Related IT Equipment
”);
(m)
all (i) trade credits, accounts receivable, notes receivable, take-or-pay amounts receivable, and other receivables and general intangibles, attributable to the Assets with respect to periods of time from and after the Effective Time; and (ii) liens and security interests in favor of Seller or its Affiliates, whether choate or inchoate, under any Legal Requirement or Contract to the extent arising from, or relating to, the ownership, operation, or sale or other disposition on or after the Effective Time of any of the Assets or to the extent arising in favor of Seller or its Affiliates as to the operator or non-operator of any Asset;
(n)
all rights of Seller and its Affiliates to audit the records of any Person and to receive refunds or payments of any nature, and all amounts of money relating thereto, only to the extent related to the obligations assumed by Buyer pursuant to this Agreement or with respect to which Buyer has an obligation to indemnify Seller; and
(o)
all rights, claims, and causes of action (including warranty and similar claims, indemnity claims, and defenses) of Seller or any of its Affiliates whether arising before, on, or after the Effective Time, only to the extent such rights, claims, and causes of action relate to any of the Assumed Liabilities.
“
Assignment
” – the Assignment and Bill of Sale from Seller to Buyer, pertaining to the Assets, substantially in the form attached to this Agreement as
Exhibit D
.
“
Assumed Liabilities
” – as defined in
Section 2.06
.
“
Bankruptcy Cases
” – the bankruptcy cases commenced by the filing by Seller (or its applicable predecessor or Affiliate) for voluntary petitions for relief under chapter 11 of title 11 of the United States Code in the Bankruptcy Court that were jointly administered under Case No. 16-60040.
“
Bankruptcy Court
” – the United States Bankruptcy Court for the Southern District of Texas, Houston Division.
“
Breach
” – a “Breach” of a representation, warranty, covenant, obligation, or other provision of this Agreement or any certificate delivered pursuant to
Section 2.04(a)(iii)
or
Section 2.04(b)(iii)
of this Agreement shall be deemed to have occurred if there is or has been any inaccuracy in or breach of, or any failure to perform or comply with, such representation, warranty, covenant, obligation, or other provision.
“
Business Day
” – any day other than a Saturday, Sunday, or any other day on which commercial banks in the State of Texas are authorized or required by law or executive order to close.
“
Buyer
” – as defined in the preamble to this Agreement.
“
Buyer’s Closing Documents
” – as defined in
Section 4.02(a)
.
“
Buyer Group
” – Buyer and its Affiliates, and their respective Representatives.
“
Casualty Loss
” – as defined in
Section 11.14
.
“
Closing
” – the closing of the Contemplated Transactions.
“
Closing Date
” – as defined in
Section 2.03
.
“
Code
” – the Internal Revenue Code of 1986, as amended.
“
Complete Remediation
” – with respect to an Environmental Defect, a remediation or cure of such Environmental Defect which is completed in accordance with the Lowest Cost Response.
“
Confidentiality Agreement
” – that certain confidentiality agreement dated as of March 29, 2017 by and between Buyer and LEH.
“
Consent
” – any approval, consent, ratification, waiver, or other authorization (including any Governmental Authorization) from any Person that is required to be obtained in connection with the execution or delivery of this Agreement or the consummation of the Contemplated Transactions.
“
Contemplated Transactions
” – all of the transactions contemplated by this Agreement, including:
(a)
the sale of the Assets by Seller to Buyer;
(b)
the performance by the Parties of their respective covenants and obligations under this Agreement; and
(c)
Buyer’s acquisition, ownership, and exercise of control over the Assets.
“
Contract
” – any written contract, agreement or any other legally binding arrangement, but excluding, however, any Lease, easement, right-of-way, permit or other instrument creating or evidencing an ownership interest in the Assets or any real or immovable property related to or used in connection with the operations of any Assets.
“
Cure
” – as defined in
Section 11.06(a)(i)
.
“
Cure Amounts
” – as defined in the Stipulation and Agreed Order.
“
Damages
” – any and all claims, demands, payments, charges, judgments, assessments, losses, liabilities, damages, Taxes, penalties, fines, expenses, costs, fees, settlements, and deficiencies, including any attorneys’ fees, legal, and other costs and expenses suffered or incurred therewith.
“
Debt Contract
” – any indenture, mortgage, loan, credit or similar agreement entered into by Seller or its Affiliates creating indebtedness on the part of Seller or its Affiliates for borrowed money or the deferred purchase price of property acquired by, or for services rendered to, Seller or its Affiliates.
“
De Minimis Environmental Defect Cost
” – Fifty Thousand Dollars ($50,000).
“
De Minimis Title Defect Cost
” – Fifty Thousand Dollars ($50,000).
“
Defect Notice Date
” – as defined in
Section 11.04
.
“
Defensible Title
” – title of Seller with respect to the Wells and Leases that, as of the Closing Date and the Effective Date and subject to the Permitted Encumbrances, which is deducible of record or, with respect to any Lease with the Bureau of Land Management or the State of Wyoming, is evidenced by Seller having record title or operating rights in and to such Lease, and:
(a)
with respect to the Target Formation(s) set forth in
Schedule 2.07
for each Unit (in each case, subject to any reservations, limitations or depth restrictions described in
Schedule 2.07
), entitles Seller to receive not less than the Net Revenue Interest set forth in
Schedule 2.07
for such Unit, except for (i) decreases in connection with those operations in which Seller or its successors or assigns may from and after the Execution Date and in accordance with the terms of this Agreement elect to be a non-consenting co-owner, (ii) decreases resulting from the establishment or amendment from and after the Execution Date of pools or units in accordance with this Agreement, and (iii) decreases required to allow other Working Interest owners to make up past underproduction or pipelines to make up past under deliveries described in
Schedule 3.09
;
(b)
with respect to the Target Formation(s) set forth in
Schedule 2.07
for each Unit (in each case, subject to any reservations, limitations or depth restrictions described in
Schedule 2.07
), obligates Seller to bear not more than the Working Interest set forth in
Schedule 2.07
for such Target Formation(s) for such Unit, except (i) increases resulting from contribution requirements with respect to defaulting co-owners from and after the Execution Date under applicable operating agreements, or (ii) increases to the extent that such increases are accompanied by a proportionate increase in Seller’s Net Revenue Interest;
(c)
with respect to the Target Formation(s) set forth in
Schedule 2.07
for each Unit (in each case, subject to any reservations, limitations or depth restrictions described in
Schedule 2.07
), entitles Seller to not less than the Net Acres set forth on
Schedule 2.07
for such Unit in the applicable Target Formation(s); and
|
|
(d)
|
is free and clear of all Encumbrances.
|
“
Deposit Amount
” – Ten percent (10%) of the unadjusted Purchase Price (including any interest accrued thereon).
“
Dispute Notice
” – as defined in
Section 2.05(d)
.
“
Disputed Matter
” – as defined in
Section 11.15(a)
.
“
DOJ
” – the Antitrust Division of the U.S. Department of Justice.
“
Effective Time
” – March 1, 2017, at 12:01 a.m. local time at the location of the Assets.
“
Encumbrance
” – any burden, encumbrance, charge, equitable interest, privilege, lien, mortgage, deed of trust, production payment, option, pledge, collateral assignment, security interest, or other arrangement substantially equivalent to any of the foregoing.
“
Environmental Condition
” – any event occurring or condition existing on the Defect Notice Date with respect to the Leases, Wells or other Assets that causes a Lease, Well or other Asset to be subject to remediation under, or in violation of, an Environmental Law, or any provision of any Lease governing the Assets with respect to any Environmental Law, other than such event or condition to the extent caused by or relating to NORM.
“
Environmental Defect
” – an Environmental Condition discovered by Buyer or its Representatives as a result of any environmental diligence conducted by or on behalf of Buyer pursuant to
Section 11.09
of this Agreement.
“
Environmental Defect Notice
” – as defined in
Section 11.10
.
“
Environmental Defect Value
” – with respect to each Environmental Defect, the amount of the Lowest Cost Response for such Environmental Defect.
“
Environmental Law
” – any applicable Legal Requirement in effect as of the Execution Date relating to pollution or the protection of the environment, including those Legal Requirements relating to the storage, handling, and use of Hazardous Materials and those Legal Requirements relating to the generation, processing, treatment, storage, transportation, disposal or other management thereof. The term “Environmental Law” does not include good or desirable operating practices or standards that may be voluntarily employed or adopted by other oil and gas well operators or recommended, but not required, by a Governmental Body.
“
Environmental Liabilities
” – all costs, Damages, expenses, liabilities, obligations, and other responsibilities arising from or under either Environmental Laws or Third Party claims relating to the environment, and which relate to the Assets or the ownership or operation of the same.
“
Escrow Account
” – as defined in
Section 2.02
.
“
Escrow Agent
” – JPMorgan Chase Bank, N.A.
“
Escrow Agreement
” – as defined in
Section 2.02
.
“
Excluded Assets
” – with respect to Seller, (a) all of Seller’s corporate minute books, financial records and other business records that relate to Seller’s business generally (including the ownership of the Assets but excluding any such records related to the Assets); (b) except to the extent related to any Assumed Liabilities, all trade credits, all accounts, all receivables of Seller and all other proceeds, income or revenues of Seller attributable to the Assets that are attributable to any period of time prior to the Effective Time (other than the Suspense Funds); (c) except to the extent related to any Assumed Liabilities, all claims and causes of action of Seller or its Affiliates that are attributable to periods of time prior to the Effective Time (including claims for adjustments or refunds); (d) except to the extent related to any Assumed Liabilities subject to
Section 11.14
, all rights and interests of Seller (i) under any policy or agreement of insurance or indemnity, (ii) under any bond, or (iii) to any insurance or condemnation proceeds or awards arising, in each case, from acts, omissions or events or damage to or destruction of property; (e) except to the extent of an upward adjustment to the Purchase Price, Seller’s rights with respect to all Hydrocarbons produced and sold from the Assets with respect to all periods prior to the Effective Time; (f) all claims of Seller or any of its Affiliates for refunds of, rights to receive funds from any Governmental Body, or loss carry forwards or credits with respect to (i) Asset Taxes attributable to any period (or portion thereof) prior to the Effective Time, (ii) income Taxes paid by Seller or its Affiliates, or (iii) any Taxes attributable to the Excluded Assets; (g) all information technology assets, other than the Production Related IT Equipment, including desktop computers, laptop computers, servers, networking equipment and any associated peripherals and other computer hardware, computer software, all radio and telephone equipment, well communication devices, and any other information technology systems; (h) except to the extent related to any Assumed Liabilities, all rights, benefits and releases of Seller or its Affiliates under or with respect to any Contract that are attributable to periods of time prior to the Closing; (i) all of Seller’s proprietary computer software, patents, trade secrets, copyrights, names, trademarks, logos and other similar intellectual property; (j) all documents and instruments of Seller that may be protected by an attorney-client privilege or any attorney work product doctrine but excluding all title opinions and other such records related to the Assets; (k) all audit rights or obligations of Seller for which Seller bears responsibility arising under any of the Applicable Contracts or otherwise with respect to any period prior to the Effective Time or to any of the Excluded Assets, except for such rights or obligations related to any Assumed Liabilities or any Imbalances assumed by Buyer; (l) Seller’s interpretations of any geophysical or seismic data relating to the Assets; (m) documents prepared or received by Seller or its Affiliates with respect to (i) lists of prospective purchasers for such transactions compiled by Seller, (ii) bids submitted by other prospective purchasers of the Assets, (iii) analyses by Seller or its Affiliates of any bids submitted by any prospective purchaser, (iv) correspondence between or among Seller, its Representatives, and any prospective purchaser other than Buyer, and (v) correspondence between Seller or any of its Representatives with respect to any of the bids, the prospective purchasers or the transactions contemplated by this Agreement; (n) subject to
Section 12.13
, a copy of all Records; (o) any Contracts that constitute master services agreements or similar contracts; (p) any Hedge Contracts; (q) any Debt Contracts; (r) any of Seller’s assets other than the Assets; and (s) any leases, rights and other assets specifically listed in
Exhibit E
.
“
Execution Date
” – as defined in the preamble to this Agreement.
“
Expert
” – as defined in
Section 11.15(b)
.
“
Expert Decision
” – as defined in
Section 11.15(d)
.
“
Expert Proceeding Notice
” – as defined in
Section 11.15(a)
.
“
Final Amount
” – as defined in
Section 2.05(d)
.
“
Final Settlement Date
” – as defined in
Section 2.05(d)
.
“
Final Settlement Statement
” – as defined in
Section 2.05(d)
.
“
FTC
” – the Federal Trade Commission.
“
Fundamental Representations
” – those representations set forth in
Sections 3.01
,
3.02
, and
3.06
.
“
Governmental Authorization
” – any approval, consent, license, permit, registration, variance, exemption, waiver, or other authorization issued, granted, given, or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement.
“
Governmental Body
” – any (a) nation, state, county, city, town, village, district, or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign, or other government; (c) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal); (d) multi-national organization or body; or (e) body or authority exercising, or entitled to exercise, any administrative, arbitration, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature.
“
Gross Products Tax
”
–
property or ad valorem Asset Taxes assessed by the State of Wyoming that are measured by the production of Hydrocarbons.
“
Group
” – either Buyer Group or Seller Group, as applicable.
“
Hazardous Materials
” – any (a) chemical, constituent, material, pollutant, contaminant, substance, or waste that is regulated by any Governmental Body or may form the basis of liability under any Environmental Law; and (b) petroleum, Hydrocarbons or petroleum products.
“
Hedge Contract
” – any Contract to which Seller or any of its Affiliates is a party with respect to any swap, forward, put, call, floor, cap, collar option, future or derivative transaction or option or similar agreement, whether exchange traded, “over-the-counter” or otherwise, involving, or settled by reference to, one or more rates, currencies, commodities (including Hydrocarbons), equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions.
“
HSR Act
” – the Hart-Scott-Rodino-Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.
“
Hydrocarbons
” – oil and gas and other hydrocarbons (including condensate) produced or processed in association therewith (whether or not such item is in liquid or gaseous form), or any combination thereof, and any minerals produced in association therewith.
“
Imbalances
” – over-production or under-production or over-deliveries or under-deliveries with respect to Hydrocarbons produced from or allocated to the Assets, regardless of whether such over-production or under-production or over-deliveries or under-deliveries arise at the wellhead, pipeline, gathering system, transportation system, processing plant, or other location, including any imbalances under gas balancing or similar agreements, imbalances under production handling agreements, imbalances under processing agreements, imbalances under the Leases, and imbalances under gathering or transportation agreements.
“
Income Taxes
”
–
income or franchise Taxes based upon, measured by, or calculated with respect to gross or net income, profits, capital, or similar measures (or multiple bases, including corporate, franchise, business and occupation, business license, or similar Taxes, if gross or net income, profits, capital, or a similar measure is one of the bases on which such Tax is based, measured, or calculated), but excluding ad valorem, property, excise, severance, production, sales, use, real or personal property transfer or other similar Taxes.
“
Individual Claim Threshold
” – as defined in
Section 10.05
.
“
Instruments of Conveyance
” – the Assignment. Except for the special warranty of Defensible Title by, through and under Seller and its Affiliates contained therein, the foregoing Instruments of Conveyance shall be without warranty of title, whether express, implied, statutory, or otherwise, it being understood that Buyer shall have the right to conduct pre-Closing title due diligence as described below in
Article 11
, and that the rights and remedies set forth in
Article 11
shall be Buyer’s sole rights and remedies with respect to title.
“
Knowledge
” – an individual will be deemed to have “Knowledge” of a particular fact or other matter if such individual is actually aware of such fact or other matter, without any duty of inquiry. A Seller Party will be deemed to have “Knowledge” of a particular fact or other matter if any of the following individuals has Knowledge of such fact or other matter: Mark E. Ellis (President and Chief Executive Officer), David B. Rottino (Executive Vice President and Chief Financial Officer), Arden L. Walker, Jr. (Executive Vice President and Chief Operating Officer), Thomas Emmons (Senior Vice President, Corporate Services), Jamin McNeil (Senior Vice President, Houston Division Operations) and Scott Carrasco (Asset Manager). Buyer will be deemed to have “Knowledge” of a particular fact or other matter if John Kleckner (Director, Acquisitions and Divestitures) has Knowledge of such fact or other matter.
“
Lands
” – as set forth in the definition of “Assets”.
“
Leases
” – as set forth in the definition of “Assets”.
“
Legal Requirement
” – any federal, state, local, municipal, foreign, international, or multinational law, Order, constitution, ordinance, or rule, including rules of common law, regulation, statute, treaty, or other legally enforceable directive or requirement.
“
Lowest Cost Response
” – the response required or allowed under Environmental Laws in effect as of the Defect Notice Date and under the Leases (if applicable and explicitly addressed therein), that addresses and resolves (for current and future use in the same manner as currently used) the identified Environmental Condition in the most cost-effective manner (considered as a whole and allowing for the continued use and operation of the Assets in the same manner currently used or operated) as compared to any other response that is required or allowed under Environmental Laws and the Leases. The Lowest Cost Response shall include taking no action, leaving the condition unaddressed, periodic monitoring or the recording of notices in lieu of remediation, if such responses are allowed under Environmental Laws and the Leases. The Lowest Cost Response shall not include any costs or expenses relating to the assessment, remediation, removal, abatement, transportation or disposal of any asbestos, asbestos-containing material or NORM unless such costs or expenses are incurred in connection with the removal from the Lands of equipment with NORM, asbestos or asbestos-containing material and such equipment has not been used during the twelve (12) months immediately preceding the Closing Date.
“
Material Contracts
” – as defined in
Section 3.10
.
“
Midwest School Gas Leak
” – the presence, or release, migration or leak of Hazardous Materials or carbon dioxide that first exists or commences before the Closing Date from or in connection with the 24WC2NE25 and 40HWC2SE25 wells at or adjacent to the Midwest School in Midwest, Wyoming and all actions taken to remediate such presence, release, migration or leak, including investigation, sampling, monitoring, expansion or implementation of a water curtain, review of wells, off-gassing mitigation, installation, testing and operation of a sub slab mitigation system or ventilation system, plugging or re-plugging wells, vapor extraction, and relocation of Persons, including school occupants, residents and businesses.
“
Net Acre
”
–
as computed separately with respect to each Unit identified on
Schedule 2.07
, (a) the gross number of mineral acres in the lands covered by all Leases on
Exhibit A
for such Unit,
multiplied
by (b) the undivided fee simple mineral interest (expressed as a percentage) in the lands covered by such Leases for such Unit (as determined by aggregating the fee simple mineral interests owned by each lessor of that Lease in the lands covered by such Leases) as to the applicable Target Formation(s),
multiplied
by (c) Seller’s undivided percentage interest that is burdened with the obligation to bear and pay costs and expenses in such Leases for such Units;
provided
that if the items in (b) or (c) vary as to different tracts covered by such Leases, a separate calculation shall be done for each such tract. For example, if a Lease in which Seller owns an undivided fifty percent (50%) working interest covers a 20-acre tract in which the lessors of such Lease own an undivided one-half (1/2) fee mineral interest as to the applicable Target Formation and a separate and distinct 40-acre tract in which the lessors of such Lease own an undivided one fourth (1/4) fee mineral interest as to the applicable Target Formation(s), then the Lease would cover ten (10) Net Acres (i.e., (20 × 0.5 × 0.5) + (40 × 0.25 × 0.5) = 10).
“
Net Revenue Interest
” – with respect to any Unit, the interest in and to all Hydrocarbons produced, saved and sold from or allocated to any Well drilled in such Unit, in each case, limited to the applicable Target Formation as described in the definition of “Defensible Title” and subject to any reservations, limitations or depth restrictions described in
Schedule 2.07
, after satisfaction of all other Royalties.
“
NORM
” – naturally occurring radioactive material.
“
Order
” – any award, decision, injunction, judgment, order, ruling, subpoena, or verdict entered, issued, made, or rendered by any court, administrative agency, or other Governmental Body or by any arbitrator.
“
Organizational Documents
” – (a) the articles or certificate of incorporation and the bylaws of a corporation; (b) the articles of organization and resolutions of a limited liability company; (c) the certificate of limited partnership and limited partnership agreement of a limited partnership; and (d) any amendment to any of the foregoing.
“
Outside Date
” – as defined in
Section 9.01(b)
.
“
Party
” or “
Parties
” – as defined in the preamble to this Agreement.
“
Party Affiliates
” – as defined in
Section 12.18
.
“
Permitted Encumbrance
” – any of the following:
(a)
the terms and conditions of all Leases and Contracts if the net cumulative effect of such Leases and Contracts does not (i) materially interfere with the operation or use of any of the Assets (as currently operated and used) or the ability of a reasonably prudent operator to drill a well on a Lease, (ii) operate to reduce the Net Revenue Interest of Seller with respect to the Target Formation(s) set forth in
Schedule 2.07
to an amount less than the Net Revenue Interest set forth in
Schedule 2.07
for such Unit, (iii) obligate Seller to bear a Working Interest with respect to the Target Formation(s) set forth in
Schedule 2.07
for any Unit in any amount greater than the Working Interest set forth in
Schedule 2.07
for such Unit (unless the Net Revenue Interest for such Unit is greater than the Net Revenue Interest set forth in
Schedule 2.07
for such Unit, in the same or greater proportion as any increase in such Working Interest), or (v) reduce the Net Acres of Seller with respect to any Unit to an amount less than the Net Acres set forth on
Schedule 2.07
for the applicable Target Formation for such Unit;
(b)
any Preferential Purchase Rights, Consents and similar agreements;
(c)
excepting circumstances where such rights have already been triggered prior to the Effective Time, rights of reassignment arising upon final intention to abandon or release the Assets;
(d)
liens for Taxes not yet due or delinquent or, if delinquent, that are being contested in good faith by appropriate proceedings by or on behalf of Seller;
(e)
all rights to consent by, required notices to, filings with, or other actions by Governmental Bodies in connection with the conveyance of the Leases, if the same are customarily sought and received after the Closing;
(f)
all Legal Requirements and all rights reserved to or vested in any Governmental Body (i) to control or regulate any Asset in any manner; (ii) by the terms of any right, power, franchise, grant, license or permit, or by any provision of law, to terminate such right, power,
franchise, grant, license or permit or to purchase, condemn, expropriate or recapture or to designate a purchaser of any of the Assets; (iii) to use such property in a manner which does not materially impair the use of such property for the purposes for which it is currently owned and operated; or (iv) to enforce any obligations or duties affecting the Assets to any Governmental Body with respect to any right, power, franchise, grant, license or permit;
(g)
rights of a common owner of any interest currently held by Seller and such common owner as tenants in common or through common ownership to the extent that the same does not (i) materially interfere with the use or operation of any of the Assets (as currently used and operated) or the ability of a reasonably prudent operator to drill a well on a Lease, (ii) operate to reduce the Net Revenue Interest of Seller with respect to the Target Formation(s) set forth in
Schedule 2.07
or each currently producing formation, as applicable, for any Unit to an amount less than the Net Revenue Interest set forth in
Schedule 2.07
for such Unit, (iii) obligate Seller to bear a Working Interest with respect to the Target Formation(s) set forth in
Schedule 2.07
for any Unit in any amount greater than the Working Interest set forth in
Schedule 2.07
for such Unit (unless the Net Revenue Interest for such Unit is greater than the Net Revenue Interest set forth in
Schedule 2.07
for such Unit, in the same or greater proportion as any increase in such Working Interest), or (iv) reduce the Net Acres of Seller with respect to any Unit to an amount less than the Net Acres set forth on
Schedule 2.07
for the applicable Target Formation in such Unit;
(h)
easements, servitudes, permits, rights-of-way, surface leases, and other rights in the Assets for the purpose of operations, facilities, roads, alleys, highways, railways, pipelines, transmission lines, transportation lines, distribution lines, power lines, telephone lines, 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, in each case, do not (i) materially interfere with the operation or use of any of the Assets (as currently operated and used) or the ability of a reasonably prudent operator to drill a well on a Lease, (ii) operate to reduce the Net Revenue Interest of Seller with respect to the Target Formation(s) set forth in
Schedule 2.07
or each currently producing formation, as applicable, for any Unit to an amount less than the Net Revenue Interest set forth in
Schedule 2.07
for such Unit, (iii) obligate Seller to bear a Working Interest with respect to the Target Formation(s) set forth in
Schedule 2.07
for any Unit in any amount greater than the Working Interest set forth in
Schedule 2.07
for such Unit (unless the Net Revenue Interest for such Unit is greater than the Net Revenue Interest set forth in
Schedule 2.07
for such Unit, in the same or greater proportion as any increase in such Working Interest), or (iv)
reduce the Net Acres of Seller with respect to any Unit identified on
Schedule 2.07
to an amount less than the Net Acres set forth on
Schedule 2.07
for the applicable Target Formation for each Unit;
(i)
vendors, carriers, warehousemen’s, repairmen’s, mechanics’, workmen’s, materialmen’s, 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 Seller, in each case (A) as set forth on
Schedule 1.01
or (B) otherwise arising from and after the Execution Date;
(j)
Encumbrances created under Leases or any joint operating agreements applicable to the Assets or by operation of law 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 Seller, in each case (A) as set forth on
Schedule 1.01
or (B) otherwise arising from and after the Execution Date;
(k)
any Encumbrance affecting the Assets that is discharged by Seller or expressly waived in writing by Buyer pursuant to the terms of this Agreement at or prior to Closing;
(l)
defects based solely on assertions that Seller’s files lack information (including title opinions);
(m)
lessor’s royalties, overriding royalties, production payments, net profits interests, reversionary interests, and similar burdens if the net cumulative effect of such burdens (i) does not materially interfere with the operation or use of any of the Assets (as currently operated and used) or the ability of a reasonably prudent operator to drill a well on a Lease, (ii) does not reduce the Net Revenue Interest of Seller with respect to any Unit to an amount less than the Net Revenue Interest set forth in
Schedule 2.07
for such Unit, (iii) does not obligate Seller to bear a Working Interest in any amount greater than the Working Interest set forth in
Schedule 2.07
for any Unit (unless the Net Revenue Interest for such Unit is greater than the Net Revenue Interest set forth in
Schedule 2.07
for such Unit, in the same or greater proportion as any increase in such Working Interest), and (iv) does not entitle Seller to less than the Net Acres set forth on
Schedule 2.07
for the applicable Target Formation for any Unit;
(n)
defects or irregularities of title (i) as to which the relevant statute(s) of limitations or prescription would bar any attack or claim against Seller’s title; (ii) to the extent arising out of lack of evidence of, or other defects to the extent related to, authorization, execution, delivery, acknowledgment, or approval of any instrument in Seller’s chain of title absent reasonable evidence of an actual claim of superior title from a Third Party attributable to such matter; (iii) to the extent consisting of the failure to recite marital status or omissions of heirship proceedings in documents; (iv) resulting from lack of survey, unless a survey is expressly required by applicable Legal Requirements; (v) to the extent arising out of lack of entity authorization unless Buyer provides affirmative evidence that such entity action was not authorized and results in another Person’s actual and superior claim of title or (vi) that have been cured by prescription or limitations;
(o)
Imbalances set forth on
Schedule 3.09
;
(p)
calls on Hydrocarbon production under existing Contracts set forth on
Schedule 3.10
;
(q)
any matters referenced or set forth on
Schedule 1.01
;
(s) mortgages on the lessor’s interest under a Lease, whether or not subordinate to such Lease, that have expired on their own terms or the enforcement of which are barred by applicable statute(s) of limitations or prescription; and
(t) the failure of Seller to have Record title (as that term is defined in 43 CFR § 3100.0 5(c)) to any Lease by the Bureau of Land Management if the Seller has the represented operating rights in such Lease.
“
Person
” – any individual, firm, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or other entity or Governmental Body.
“
Personal Property
” – as set forth in the definition of “Assets”.
“
Phase I Environmental Site Assessment
” – a Phase I environmental property assessment of the Assets that satisfies the basic assessment requirements set forth under the current ASTM International Standard Practice for Environmental Site Assessments (Designation E1527-13) or any other visual site assessment or review of records, reports or documents, and any desktop evaluation of the Assets’ compliance with Environmental Laws.
“
Plan of Reorganization
” – the
Amended Joint Chapter 11 Plan of Reorganization of Linn Energy, LLC and Its Debtor Affiliates Other than LINN Acquisition Company, LLC and Berry Petroleum Company, LLC,
as confirmed in the Bankruptcy Cases by the
Order Confirming (i) Amended Joint Chapter 11 Plan of Reorganization of Linn Energy, LLC and its Debtor Affiliates other than Linn Acquisition Company, LLC and Berry Petroleum Company, LLC and (ii) Amended Join Chapter 11 Plan of Reorganization of Linn Acquisition Company, LLC and Berry Petroleum Company, LLC
[Docket No. 1629].
“
Post-Closing Date
” – as defined in
Section 2.05(d)
.
“
Post-Closing Gross Products Taxes
” – as defined in
Section 12.02(c)(ii)
.
“
Potential Discharged Claims
” – all Claims (as defined in 11 U.S.C. § 101(5)) that (i) were discharged in the Bankruptcy Cases and were treated in accordance with the Plan of Reorganization, or (ii) would have been discharged in the Bankruptcy Cases and treated in accordance with the Plan of Reorganization in the event the holder of such Claim had received proper notice of (a) the pendency of the Bankruptcy Cases, (b) the opportunity to timely file a Claim therein, and (c) the opportunity to timely object to the Plan of Reorganization.
“
Preferential Purchase Right
” – any right or agreement that enables any Person to purchase or acquire any Asset or any interest therein or portion thereof as a result of or in connection with the execution or delivery of this Agreement or the consummation of the Contemplated Transactions.
“
Preliminary Allocation
” – as defined in
Section 2.07(a)
.
“
Preliminary Amount
” – the Purchase Price, adjusted as provided in
Section 2.03
, based upon the best information available at the time of the Closing.
“
Preliminary Settlement Statement
” – as defined in
Section 2.03
.
“
Proceeding
” – any proceeding, action, arbitration, audit, hearing, investigation, request for information, litigation, or suit (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Body.
“
Production Related IT Equipment
” – as set forth in the definition of “Assets”.
“
Property
” or “
Properties
” – as set forth in the definition of “Assets”.
“
Property Costs
” – all operating expenses (including utilities, costs of insurance, rentals, and third party overhead costs) and, capital expenditures (including costs of acquiring equipment), respectively, incurred in the ordinary course of business attributable to the use, operation, and ownership of the Assets, but “Property Costs” shall not include and Seller shall be responsible for all costs, expenses and Damages attributable to (a) personal injury or death, property damage, torts, breach of contract, or violation of any Legal Requirement, (b) obligations relating to the abandonment or plugging of Wells, dismantling or decommissioning facilities, closing pits and restoring the surface around such Wells, facilities and pits prior to Closing, (c) Retained Liabilities, curing Title Defects, Environmental Defects or Breaches of this Agreement by Seller and the matters covered by the indemnities in
Section 10.02
, (d) obligations with respect to Imbalances, (e) obligations to pay Royalties or other interest owners revenues or proceeds relating to the Assets but held in suspense, including Suspense Funds, (f) rentals, options, lease maintenance, broker fees and other property acquisition costs, (g) any of Seller’s or its Affiliates internal overhead or any general and administrative expenses, (h) insurance premiums attributable to policies directly entered into by Seller or its Affiliates, whether or not related to the Assets, and (i) claims for indemnification or reimbursement from any Third Party with respect to costs of the types described in the preceding clauses (a) through (h), whether such claims are made pursuant to contract or otherwise. Notwithstanding anything to the contrary in this Agreement, “Property Costs” shall not include any Asset Taxes, Income Taxes or Transfer Taxes.
“
Purchase Price
” – as defined in
Section 2.02
.
“
Records
” – as set forth in the definition of “Assets”.
“
Representative
” – with respect to a particular Person, any director, officer, manager, employee, agent, consultant, advisor, or other representative of such Person, including legal counsel, accountants, and financial advisors.
“
Required Consent
” – any Consent with respect to which (a) there is a provision within the applicable instrument that such Consent may be withheld in the sole and absolute discretion of the holder or words of similar effect, or (b) there is provision within the applicable instrument expressly stating that an assignment in violation thereof (i) is void or voidable, (ii) triggers the payment of specified liquidated damages, or (iii) causes termination of or right of any counterparty to terminate the applicable Assets to be assigned, or words of similar effect.
“
Retained Assets
” – any rights, titles, interests, assets, and properties that are originally included in the Assets under the terms of this Agreement, but that are subsequently excluded from the Assets or sale under this Agreement pursuant to the terms of this Agreement.
“
Retained Liabilities
” – Damages, liabilities and obligations attributable to, arising out of or in connection with, or based upon (a) the disposal or transportation prior to Closing of any Hazardous Materials generated or used by Seller and taken from the Assets to any location that is not an Asset; (b) personal injury (including death) claims attributable to Seller’s or its Affiliate’s ownership of the Assets prior to the Closing; (c) failure to properly and timely pay, in accordance with the terms of any Lease, Contract or applicable Legal Requirement, all Royalties and any other Working Interest amounts (in each case) with respect to the Assets that are due by Seller or any of its Affiliates and attributable to Seller’s ownership of the Assets prior to the Effective Time; (d) the matters identified in
Schedule 1.01(b)
solely to the extent Buyer does not receive indemnification therefore under either Title Indemnity Agreement; (e) the Midwest School Gas Leak; (f) any claim made by an employee of Seller or any Affiliate of Seller directly relating to such employment; (g) except to the extent the Purchase Price is reduced pursuant to
Section 2.05
, any Property Costs attributable to Seller’s or its Affiliates’ ownership or operation of the Assets prior to the Effective Time; (h) the Potential Discharged Claims and any failure of Seller to take any action, or pursue or enforce any right, remedy or cause of action, to cause the discharge of or prevent the enforcement or collection of any Potential Discharged Claim; (i) except for clause (c) in the definition of Assumed Liabilities, any amounts payable to any Governmental Body in the future to satisfy claims of such Governmental Body that are expressly reserved or preserved under the Stipulation and Agreed Order and attributable to pre-Effective Time periods, including any Cure Amounts; and (j) any civil or administrative fines or penalties and criminal sanctions imposed on the Seller or its Affiliates in connection with any pre-Closing violation of, or failure to comply with Legal Requirements (excluding Environmental Laws);
provided
that, from and after the date that is twenty-four (24) months following the Closing Date, all Damages, liabilities and obligations arising out of clause (b), other than in connection with the Midwest School Gas Leak, and clause (c) shall no longer be Retained Liabilities and shall be deemed Assumed Liabilities.
“
Royalties
” – royalties, overriding royalties, production payments, carried interests, net profits interests, reversionary interests, options, back-in interests, contractual rights to production, and other burdens upon, measured by or payable out of production, excluding, for the avoidance of doubt, any Taxes.
“
Scheduled Closing Date
” – as defined in
Section 2.03
.
“
Schedules
” – the aggregate of all schedules that set forth exceptions, disclosures, or otherwise relate to or are referenced in any of the representations, warranties or covenants set forth herein.
“
Seller
” – as defined in the preamble to this Agreement.
“
Seller Closing Documents
” – as defined in
Section 3.02(a)
.
“
Seller Group
” – Seller and its Affiliates, and their respective Representatives.
“
Seller Party
” – each of LEH and LOL individually.
“
Seller Taxes
” – (a) all Income Taxes imposed by any applicable laws on any Seller Party, any of its direct or indirect owners or Affiliates, or any combined, unitary, or consolidated
group of which any of the foregoing is or was a member, (b) Asset Taxes allocable to Seller pursuant to
Section 12.02(c)
(taking into account, and without duplication of, such Asset Taxes effectively borne by Seller as a result of (i) the adjustments to the Purchase Price made pursuant to
Section 2.03
,
Section 2.05(c)
or
Section 2.05(d)
, as applicable, and (ii) any payments made from one Party to the other in respect of Asset Taxes pursuant to
Section 12.02(c)(iii)
), (c) any Taxes imposed on or with respect to the ownership or operation of the Excluded Assets or that are attributable to any asset or business of any Seller Party that is not part of the Assets, and (d) any and all Taxes (other than the Taxes described in
clauses (a)
,
(b)
or
(c)
of this definition) imposed on or with respect to the ownership or operation of the Assets or the production of Hydrocarbons or the receipt of proceeds therefrom for any Tax period (or portion thereof) ending before the Effective Time.
“
Specified Area
” – the area inside the boundary of the Salt Creek Unit and Salt Creek South Unit as defined in the applicable unit agreements.
“
Stipulation and Agreed Order
” – the Stipulation and Agreed Order, dated April 27, 2017, executed by Seller (or its applicable predecessor or Affiliate) and the United States Department of the Interior and ordered by the Bankruptcy Court.
“
Straddle Period
” – any Tax period beginning before and ending after the Effective Time.
“
Suspense Funds
” – proceeds of production and associated penalties and interest in respect of any of the Wells that are payable to any Third Party and are being held in suspense by Seller as the operator of such Wells.
“
Target Formation
” – as set forth in
Exhibit G
.
“
Tax
” or “
Taxes
” – (a) any and all federal, state, provincial, local, foreign and other taxes, levies, fees, imposts, duties, assessments, unclaimed property and escheat obligations and other governmental charges imposed by any Governmental Body, including income, profits, franchise, alternative or add-on minimum, gross receipts, environmental (including taxes under Section 59A of the Code), registration, withholding, employment, social security (or similar), disability, occupation, ad valorem, property, value added, capital gains, sales, goods and services, use, real or personal property, capital stock, license, branch, payroll, estimated, unemployment, severance, compensation, utility, stamp, premium, windfall profits, transfer, gains, production and excise taxes, and customs duties, together with any interest, penalties, fines or additions thereto and (b) any successor or transferee liability or any liability that arises by reason of being a member of a consolidated, combined or unitary group, in each case, in respect of any items described in clause (a) above.
“
Tax Allocation
” – as defined in
Section 2.07(b)
.
“
Tax Returns
” – any and all reports, returns, declarations, claims for refund, elections, disclosures, estimates, information reports or returns or statements supplied or required to be supplied to a Governmental Body in connection with Taxes, including any schedule or attachment thereto or amendment thereof.
“
Third Party
” – any Person other than a Party or an Affiliate of a Party.
“
Threatened
” – a claim, Proceeding, dispute, action, or other matter will be deemed to have been “Threatened” if any demand or statement has been made in writing to a Party or any of its officers, directors, or employees that would lead a prudent Person to conclude that such a claim, Proceeding, dispute, action, or other matter is likely to be asserted, commenced, taken, or otherwise pursued in the future.
“
Title Benefit
” – as defined in
Section 11.08
.
“
Title Benefit Notice
” – as defined in
Section 11.08
.
“
Title Benefit Properties
” – as defined in
Section 11.08
.
“
Title Benefit Value
” – as defined in
Section 11.08
.
“
Title Defect
” – any Encumbrance, defect or other matter that causes Seller not to have Defensible Title in and to the Wells or Leases in any Unit, without duplication;
provided
that the following shall not be considered Title Defects:
(a) defects arising out of the lack of corporate or other entity authorization unless Buyer provides affirmative evidence that such corporate or other entity action was not authorized and results in (or could reasonably be expected to result in) another Person’s actual and superior claim of title to the relevant Assets;
(b) defects based on a gap in Seller’s chain of title in the county or parish records, unless Buyer affirmatively shows such gap to exist in such records by an abstract of title, title opinion, landman’s title chain, run sheet or other document, which documents (if any) shall be included in a Title Defect Notice (for the avoidance of doubt, a non-certified, cursory or limited title chain will satisfy this requirement);
(c) defects based upon the failure to record any federal or state Leases or any assignments of interests in such Leases or any assignments of interests in such Leases in any applicable public records;
provided
that failures to record any federal or state Lease or any assignments of interest in such Lease in the applicable public record may be defects if the failure to so record cannot be cured by filing the same after the Effective Date in the applicable public record;
(d) defects arising from any change in any applicable Legal Requirement after the Execution Date; and
(f) defects based solely on the lack of information in Seller’s files.
“
Title Defect Cure Period
” – as defined in
Section 11.06(a)
.
“
Title Defect Notice
” – as defined in
Section 11.04
.
“
Title Defect Property
” – as defined in
Section 11.04
.
“
Title Defect Value
” – as defined in
Section 11.04
.
“
Title Indemnity Agreements
” – collectively, (i) that certain Title Indemnity Agreement Salt Creek Unit by and between Howell Petroleum Corporation and Linn Energy Holdings, LLC dated April 1, 2012, and (ii) that certain Title Indemnity Agreement Salt Creek South Unit by and between Howell Petroleum Corporation and Linn Energy Holdings, LLC dated April 1, 2012.
“
Transfer Tax
” – all transfer, sales, use, stamp, registration and similar Taxes (but excluding (a) all related documentary, filing and recording fees and expenses and (b) Income Taxes) arising out of, or in connection with, the transactions contemplated by this Agreement.
“
Units
” – as set forth in the definition of “Assets”.
“
Wells
” – as set forth in the definition of “Assets”.
“
Working Interest
” – with respect to any Unit, the interest in and to such Unit, the interest in and to any well drilled in such Unit that is burdened with the obligation to bear and pay costs and expenses of maintenance, development and operations on or in connection with such Unit (in each case, limited to the applicable Target Formation(s) as described in the definition of “Defensible Title” and subject to any reservations, limitations or depth restrictions described in
Schedule 2.07
), but without regard to the effect of any Royalties or other burdens.
ARTICLE 2
SALE AND TRANSFER OF ASSETS; CLOSING
2.01
Assets. Subject to the terms and conditions of this Agreement, at the Closing, Seller shall sell and transfer (or shall cause to be sold and transferred) the Assets to Buyer, and Buyer shall purchase, pay for, and accept the Assets from Seller.
2.02
Purchase Price; Deposit. Subject to any adjustments that may be made under Section 2.05, the purchase price for the Assets will be
Seventy-One Million Five Hundred Thousand Dollars ($71,500,000) (the “
Purchase Price
”). Within one (1) Business Day after the Execution Date, Buyer will deposit by wire transfer in same day funds into an escrow account (the “Escrow Account”) established pursuant to the terms of a mutually agreeable Escrow Agreement (the “Escrow Agreement”) an amount equal to the Deposit Amount. The Deposit Amount shall be held by the Escrow Agent, and if the Closing timely occurs, on or before the Closing Date, the Parties shall execute and deliver to the Escrow Agent a joint instruction letter directing the Escrow Agent to release the Deposit Amount to Seller at Closing, which Deposit Amount shall be applied as a credit toward the Preliminary Amount as provided in Section 2.05(a). If this Agreement is terminated prior to the Closing in accordance with Section 9.01, then the provisions of Section 9.02 shall apply and the distribution of the Deposit Amount shall be governed in accordance therewith.
2.03
Closing; Preliminary Settlement Statement. The Closing shall take place at the offices of Kirkland and Ellis LLP at 600 Travis Street, Suite 3300, Houston, Texas 77002 on or before June 30, 2017 (the “
Scheduled Closing Date
”), or if all conditions to Closing under
Article 7
and
Article 8
have not yet been satisfied or waived, within ten (10) Business Days after such conditions have been satisfied or waived, subject to such conditions being satisfied or waived at the Closing and subject to the provisions of
Article 9
. The date on which Closing
occurs shall be the “
Closing Date
”. Subject to the provisions of
Articles 7
,
8
, and
9
, failure to consummate the purchase and sale provided for in this Agreement on the date and time and at the place determined pursuant to this
Section 2.03
shall not result in the termination of this Agreement and shall not relieve either Party of any obligation under this Agreement. Not later than five (5) Business Days prior to the Closing Date, Seller will deliver to Buyer a statement setting forth in reasonable detail Seller’s reasonable good faith determination of the Preliminary Amount based upon the best information available at that time (the “
Preliminary Settlement Statement
”). Within two (2) Business Days after its receipt of the Preliminary Settlement Statement, Buyer may submit to Seller in writing any objections or proposed changes thereto and Seller shall consider all such objections and proposed changes in good faith. The estimate agreed to by Seller and Buyer, or, absent such agreement, delivered in the Preliminary Settlement Statement by Seller in accordance with this
Section 2.03
, will, absent manifest error, be the Preliminary Amount to be paid by Buyer to Seller at the Closing.
2.04
Closing Obligations. At the Closing:
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(a)
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Each Seller Party shall deliver (and execute, as appropriate), or cause to be delivered (and executed, as appropriate), to Buyer:
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(i)
|
the Instruments of Conveyance in the appropriate number for recording in the real property records where the Assets are located, together with any assignments, on appropriate forms, of state and of federal Leases comprising portions of the Assets, if any, in sufficient counterparts necessary to facilitate filing with the applicable Governmental Bodies;
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(ii)
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possession of the Assets (except the Suspense Funds, which shall be conveyed to Buyer by way of one or more adjustments to the Purchase Price as provided in
Section 2.05(c)(ii)(E)
);
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(iii)
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a certificate, in substantially the form set forth in
Exhibit F
executed by an officer of such Seller Party, certifying on behalf of such Seller Party that the conditions to Closing set forth in
Sections 7.01
and
7.02
have been fulfilled;
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(iv)
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a Treasury Regulation Section 1.1445-2(b)(2) statement, certifying that such Seller Party (or its regarded owner, if such Seller Party is an entity disregarded as separate from its owner) is not a “foreign person” within the meaning of the Code;
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(v)
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an executed counterpart of the Preliminary Settlement Statement;
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(vi)
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a recordable release in a form reasonably acceptable to Buyer of any trust, mortgages, financing statements, fixture filings and security agreements, in each case, securing indebtedness for borrowed money made by such Seller Party or its Affiliates affecting the Assets; and
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(vii)
|
such documents as Buyer or counsel for Buyer may reasonably request, including letters-in-lieu of transfer order to third party operators and purchasers of production from the Wells (which shall be prepared and provided by Buyer (with
|
assistance from Seller) and reasonably satisfactory to Seller) and documents needed to transfer any Governmental Authorizations.
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(b)
|
Buyer shall deliver (and execute, as appropriate) to Seller:
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(i)
|
the Preliminary Amount (less the Deposit Amount) by wire transfer to the accounts specified by Seller in written notices given by Seller to Buyer at least two (2) Business Days prior to the Closing Date;
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(ii)
|
the Instruments of Conveyance in the appropriate number for recording in the real property records where the Assets are located, together with any assignments, on appropriate forms, of state and of federal Leases comprising portions of the Assets, if any, in sufficient counterparts necessary to facilitate filing with the applicable Governmental Bodies;
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(iii)
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a certificate, in substantially the form set forth in
Exhibit F
executed by an officer of Buyer, certifying on behalf of Buyer that the conditions to Closing set forth in
Sections 8.01
and
8.02
have been fulfilled;
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(iv)
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an executed counterpart of the Preliminary Settlement Statement;
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(v)
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evidence of replacement bonds, guarantees, and other sureties pursuant to
Section 6.03(a)
and evidence of such other authorizations and qualifications as may be necessary for Buyer to own the Assets; and
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(vi)
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such other documents as Seller or counsel for Seller may reasonably request, including letters-in-lieu of transfer order to purchasers of production from the Wells (which shall be prepared and provided by Buyer and reasonably satisfactory to Seller).
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2.05
Allocations and Adjustments. If the Closing occurs:
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(a)
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Buyer shall be entitled to all production and products from or attributable to the Assets from and after the Effective Time and the proceeds thereof, and to all other income, proceeds, receipts, and credits earned with respect to the Assets on or after the Effective Time, and shall be responsible for (and entitled to any refunds with respect to) all Property Costs attributable to the Assets and incurred from and after the Effective Time. Seller shall be entitled to all production and products from or attributable to the Assets prior to the Effective Time and the proceeds thereof, and shall be responsible for (and entitled to any refunds with respect to) all Property Costs attributable to the Assets and incurred prior to the Effective Time. “Earned” and “incurred,” as used in this Agreement, shall be interpreted in accordance with generally accepted accounting principles and Council of Petroleum Accountants Society (COPAS) standards.
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(b)
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For purposes of allocating revenues, production, proceeds, income, accounts receivable, and products under this
Section 2.05
, (A) liquid Hydrocarbons produced into storage facilities will be deemed to be “from or attributable to” the Wells when they pass through the pipeline connecting into the storage facilities into which they are run, and
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(B) gaseous Hydrocarbons and liquid Hydrocarbons produced into pipelines will be deemed to be “from or attributable to” the Wells when they pass through the receipt point sales meters on the pipelines through which they are transported. In order to accomplish the foregoing allocation of production, the Parties shall rely upon the gauging, metering, and strapping procedures which were conducted by Seller on or about the Effective Time and, unless demonstrated to be inaccurate, shall utilize reasonable interpolating procedures to arrive at an allocation of production when exact gauging, metering, and strapping data is not available on hand as of the Effective Time. Asset Taxes for 2017 shall be prorated in accordance with
Section 12.02(b)
. Seller shall provide to Buyer evidence of all meter readings and all gauging and strapping procedures conducted on or about the Effective Time in connection with the Assets, together with all data necessary to support any estimated allocation, for purposes of establishing the adjustment to the Purchase Price pursuant to
Section 2.05(a)
.
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(c)
|
The Purchase Price shall be, without duplication,
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(i)
|
increased by the following amounts:
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(A)
|
the aggregate amount of (i) proceeds received by Buyer from the sale of Hydrocarbons produced from and attributable to the Assets during any period prior to the Effective Time to which Seller is entitled under
Section 2.05(a)
(net
of any (x) Royalties and (y) third party gathering, processing, transportation and other similar midstream costs) and (ii) other proceeds received with respect to the Assets for which Seller would otherwise be entitled under
Section 2.05(a)
;
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(B)
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the amount of all Asset Taxes allocable to Buyer pursuant to
Section 12.02(b)
but paid or economically borne by Seller (excluding, for the avoidance of doubt, any Asset Taxes that were withheld or deducted from the gross amount paid or payable to Seller in connection with a transaction to which
Section 2.05(c)(ii)(A)
applies, and therefore were taken into account in determining the “proceeds received” by Seller for purposes of applying
Section 2.05(c)(ii)(A)
with respect to such transaction);
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(C)
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the aggregate amount of all non-reimbursed Property Costs that have been paid by Seller that are attributable to the ownership of the Assets after the Effective Time (including the amount of any prepayments of Property Costs made by Seller (or its immediate predecessor in title) that are applied against operations conducted between the Effective Time and Closing, but excluding all other prepayments);
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(D)
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the amount of any prepayments of Property Costs made by Seller (or its immediate predecessor in title) to Buyer or its Affiliates for operations not completed prior to Closing and that are not reimbursed to Seller on or prior to the Closing;
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(E)
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the amount of any other upward adjustment specifically provided for in this Agreement or mutually agreed upon by the Parties;
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(F)
|
to the extent that proceeds for such volumes have not been received by Seller, an amount equal to the value of all Hydrocarbons attributable to the Assets in storage or existing in stock tanks, pipelines or plants (including inventory) above the load line as of the Effective Time; and
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(ii)
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decreased by the following amounts:
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(A)
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the aggregate amount of (i) proceeds received by Seller from the sale of Hydrocarbons produced from and attributable to the Assets from and after the Effective Time to which Buyer is entitled under
Section 2.05(a)
(net
of any (x) Royalties and (y) third party gathering, processing, transportation and other similar midstream costs) and (ii) other proceeds received by Seller with respect to the Assets for which Buyer would otherwise be entitled under
Section 2.05(a)
;
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(B)
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the amount of all Asset Taxes allocable to Seller pursuant to
Section 12.02(b)
but paid or economically borne by Buyer (excluding, for the avoidance of doubt, any Asset Taxes that were withheld or deducted from the gross amount paid or payable to Buyer in connection with a transaction to which
Section 2.05(c)(i)(A)
applies, and therefore were taken into account in determining the “proceeds received” by Buyer for purposes of applying
Section 2.05(c)(i)(A)
with respect to such transaction);
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(C)
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the aggregate amount of all downward adjustments pursuant to
Article 11
;
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(D)
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the aggregate amount of all non-reimbursed Property Costs that are attributable to the ownership of the Assets prior to the Effective Time (excluding prepayments with respect to any period after the Effective Time) and paid by Buyer;
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(E)
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the amount of the Suspense Funds; and
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(F)
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the amount of any other downward adjustment specifically provided for in this Agreement or mutually agreed upon by the Parties.
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(d)
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No earlier than sixty (60) days following the Closing Date and no later than ninety (90) days following the Closing Date, Seller shall prepare and submit to Buyer a statement (the “
Final Settlement Statement
”) setting forth each adjustment or payment which was not finally determined as of the Closing Date and showing the values used to determine such adjustments to reflect the final adjusted Purchase Price calculated in accordance with this
Section 2.05
, together with all available documentation in reasonable detail to support any credit, charge, receipt or other item, including all such documentation used by Seller in the preparation of such statement. On or before thirty (30) days after receipt of the Final Settlement Statement, Buyer shall deliver to Seller a written report
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containing any changes that Buyer proposes be made to the Final Settlement Statement and an explanation of any such changes and the reasons therefor together with any supporting information (the “
Dispute Notice
”). During such thirty (30)-day period, Buyer shall be given reasonable access to Seller’s and its Affiliates’ books and records relating to the matters required to be accounted for in the Final Settlement Statement to allow Buyer to conduct an audit and review such items. Any changes not included in the Dispute Notice shall be deemed waived. If Buyer fails to timely deliver a Dispute Notice to Seller containing changes Buyer proposes to be made to the Final Settlement Statement, the Final Settlement Statement as delivered by Seller will be deemed to be mutually agreed upon by the Parties and will, without limiting
Section 12.02(c)(iii)
or Buyer’s right to indemnity under
Section 10.02(c)
for Seller Taxes, be final and binding on the Parties. Upon delivery of the Dispute Notice, the Parties shall undertake to agree with respect to any disputed amounts identified therein by the date that is one hundred twenty (120) days after the Closing Date (the “
Post-Closing Date
”). Except for Title Defect and Environmental Defect adjustments pursuant to Section
2.05(c)(ii)(B)
, which shall be subject to the arbitration provisions of
Section 11.15
, if the Parties are still unable to agree regarding any item set forth in the Dispute Notice as of the Post-Closing Date, then the Parties shall submit to a nationally-recognized independent accounting firm mutually agreed upon by the Parties (the “
Accounting Expert
”) a written notice of such dispute along with reasonable supporting detail for the position of Buyer and Seller, respectively, and the Accounting Expert shall finally determine such disputed item in accordance with the terms of this Agreement. If, within five (5) Business Days after delivery of a Dispute Notice, the Parties cannot mutually agree on an Accounting Expert, then the Parties shall utilize the same method to choose a nationally-recognized independent accounting firm to act as an accounting expert as set forth in
Section 11.15(b)
, with appropriate modifications to such provisions to reflect the selection of an accounting expert instead of an Expert. The Accounting Expert shall act as an expert and not an arbitrator. In determining the proper amount of any adjustment to the Purchase Price related to the disputed item, the Accounting Expert shall not increase the Purchase Price more than the increase proposed by Seller nor decrease the Purchase Price more than the decrease proposed by Buyer, as applicable. The decision of the Accounting Expert shall, without limiting
Section 12.02(c)(iii)
or Buyer’s right to indemnity under
Section 10.02(c)
for Seller Taxes, be binding on the Parties, and the fees and expenses of the Accounting Expert shall be borne one-half (1/2) by Seller and one-half (1/2) by Buyer. The date upon which all adjustments and amounts in the Final Settlement Statement are agreed to (or deemed agreed to) or fully and finally determined by the Accounting Expert as set forth in this
Section 2.05(d)
shall be called the “
Final Settlement Date
,” and the final adjusted Purchase Price shall be called the “
Final Amount
.” If (a) the Final Amount is more than the Preliminary Amount, Buyer shall pay to Seller an amount equal to the Final Amount,
minus
the Preliminary Amount; or (b) the Final Amount is less than the Preliminary Amount, Seller shall pay to Buyer an amount equal to the Preliminary Amount,
minus
the Final Amount. Such payment shall be made within five (5) Business Days after the Final Settlement Date by wire transfer of immediately available funds to the accounts specified pursuant to wire instructions delivered in advance by Seller or Buyer, as applicable.
2.06
Assumption. If the Closing occurs, from and after the Closing Date, Buyer shall assume, fulfill, perform, pay, and discharge the following liabilities (except to the extent any such liabilities were Potential Discharged Claims) arising from, based upon, related to, or associated with the Assets and only to the extent not constituting Retained Liabilities (collectively, the “
Assumed Liabilities
”) subject to Seller’s indemnity obligations under
Section 10.02
(further subject to the limitations and restrictions in
Article 10
): any and all Damages and obligations, known or unknown, allocable to the Assets prior to, at, or after the Effective Time, including any and all Damages and obligations: (a) attributable to or resulting from the use, maintenance or ownership of the Assets, regardless whether arising before, at or after the Effective Time, except for Property Costs which shall have been accounted for as provided under
Section 2.05
; (b) imposed by any Legal Requirement or Governmental Body relating to the Assets, (c) for plugging, abandonment, decommissioning, and surface restoration of the Assets, including oil, gas, injection, water, or other wells and all surface facilities; (d) subject to Buyer’s rights and remedies set forth in
Article 11
and the special warranty of Defensible Title set forth in the Instruments of Conveyance, attributable to or resulting from lack of Defensible Title to the Assets; (e) attributable to the surface manifestation of underground emissions directly from the Assets; (f) attributable to the Imbalances; (g) subject to Buyer’s rights and remedies set forth in
Article 11
and attributable to or resulting from all Environmental Liabilities relating to the Assets; (h) related to the conveyance of the Assets to Buyer at Closing (including, subject to
Section 11.02
and
Section 11.03
, arising from the conveyance thereof without consent or in violation of a preferential purchase right or any maintenance of uniform interest provisions); (i) attributable to or resulting from Transfer Taxes; (j) attributable to or resulting from Asset Taxes to the extent attributable to periods (or portions thereof) from and after the Effective Time, pursuant to
Section 12.02(c)
(taking into account, and without duplication of, such Asset Taxes effectively borne by Buyer as a result of (i) the adjustments to the Purchase Price made pursuant to
Section 2.03
,
Section 2.05(c)
or
Section 2.05(d)
, as applicable, and (ii) any payments made from one Party to the other in respect of Asset Taxes pursuant to
Section 12.02(c)(iii)
); and (k) attributable to the Leases and the Applicable Contracts. Buyer acknowledges that: (i) the Assets have been used in connection with the exploration for, and the development, production, treatment, and transportation of, Hydrocarbons; (ii) spills of wastes, Hydrocarbons, produced water, Hazardous Materials, and other materials and substances may have occurred in the past or in connection with the Assets; (iii) there is a possibility that there are currently unknown, abandoned wells, plugged wells, pipelines, and other equipment on or underneath the property underlying the Assets; (iv) it is the intent of the Parties that, subject to the terms and conditions of this Agreement, all liability associated with the matters described in clauses (i) through (iii) above as well as any responsibility and liability to decommission, plug, or replug such wells (including the Wells) in accordance with all Legal Requirements and requirements of Governmental Bodies be passed to Buyer effective as of the Effective Time and that Buyer shall assume all responsibility and liability for such matters and all claims and demands related thereto; (v) the Assets may contain asbestos, Hazardous Materials, or NORM; (vi) NORM may affix or attach itself to the inside of wells, materials, and equipment as scale or in other forms; (vii) wells, materials, and equipment located on the Assets may contain NORM; and (viii) special procedures may be required for remediating, removing, transporting, and disposing of asbestos, NORM, Hazardous Materials, and other materials from the Assets. From and after the Closing, but effective as of the Effective Time, subject to Seller’s indemnity obligations under
Section 10.02
(subject to the limitations and restrictions in
Article 10
), Buyer
shall assume, with respect to the Assets, all responsibility and liability for any assessment, remediation, removal, transportation, and disposal of these materials and associated activities in accordance with all Legal Requirements and requirements of Governmental Bodies.
2.07
Allocation of Purchase Price.
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(a)
|
Preliminary Allocation
. The Purchase Price shall be allocated as set forth in
Schedule 2.07(a)
hereto (the “
Preliminary Allocation
”). Seller and Buyer agree to be bound by the values assigned among the Assets as set forth on the Preliminary Allocation for purposes of
Article 11
hereof.
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(b)
|
Within ninety (90) days following the Closing Date, Buyer shall deliver to the Seller a schedule allocating the Purchase Price (and all other amounts treated as consideration for federal income tax purposes), among the Assets (the “
Tax Allocation
”). The Tax Allocation shall be reasonable and prepared in accordance with Section 1060 of the Code and in a manner consistent with the Preliminary Allocation to the extent permitted by applicable Legal Requirements. The Tax Allocation shall be deemed final, and shall be conclusive and binding on all Parties, unless the Seller delivers to Buyer a written notice identifying each item reflected in the Tax Allocation to which the Seller takes exception within thirty (30) days after delivery of the Tax Allocation to the Seller (such items “
Allocation Objections
”) (it being understood that any amounts not disputed by the Seller shall be final and binding). Upon delivery of the Allocation Objections, if any, the Seller and Buyer shall negotiate in good faith to resolve such dispute;
provided
,
however
, that if the Seller and Buyer are unable to resolve any dispute with respect to the Tax Allocation within thirty (30) days after the delivery of any Allocation Objections, then the Seller and Buyer shall each be entitled to adopt their own positions regarding the allocation of the Purchase Price among the Assets for applicable Tax purposes. If the Parties agree on the Tax Allocation (or such schedule is deemed accepted), the Seller and Buyer agree to file their respective IRS Forms 8594 and all federal, state and local Tax Returns in accordance with the Tax Allocation, and shall file any additional information returns required to be filed to reflect any subsequent mutually agreed upon adjustments to the Tax Allocation;
provided, however
, that neither Party shall be unreasonably impeded in its ability and discretion to negotiate, compromise and/or settle any Tax audit, claim or similar proceedings in connection with such allocation.
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2.08
Withholding. Buyer, the Escrow Agent and each of their respective Affiliates shall be entitled to deduct or withhold from the amounts payable under this Agreement such amounts as may be required to be deducted and withheld under the Code and any other applicable Tax laws. Any such amount withheld and paid over to the appropriate Tax authority shall be treated as though it had been paid to the Person in respect of which such withholding was required.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Each Seller Party represents and warrants to Buyer as of the Execution Date and the Closing Date, the following:
3.01
Organization and Good Standing. Such Seller Party is a Delaware limited liability company, and is duly organized, validly existing, and in good standing under the laws of the State of Delaware and, where required, is duly qualified to do business and is in good standing in each jurisdiction in which the Assets are located, with full limited liability company power and authority to conduct its business as it is now being conducted, and to own or use the properties and assets that it purports to own or use. Such Seller Party is not a “foreign person” for purposes of Section 1445 of the Code.
3.02
Authority; No Conflict.
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(a)
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The execution, delivery, and performance of this Agreement and the Contemplated Transactions have been duly and validly authorized by all necessary limited liability company action on the part of such Seller Party. This Agreement has been duly executed and delivered by such Seller Party and at the Closing, all instruments executed and delivered by such Seller Party at or in connection with the Closing shall have been duly executed and delivered by such Seller Party. This Agreement constitutes the legal, valid, and binding obligation of such Seller Party, enforceable against such Seller Party in accordance with its terms, except as such enforceability may be limited by a bankruptcy proceeding commenced after the date hereof or other similar laws affecting the rights and remedies of creditors generally and by general principles of equity (regardless of whether such enforceability is considered in a Proceeding in equity or at law). Upon execution and delivery by such Seller Party of the Instruments of Conveyance at the Closing, such Instruments of Conveyance shall constitute legal, valid and binding transfers and conveyances of the Assets. Upon the execution and delivery by such Seller Party of any other documents at the Closing (collectively with the Instruments of Conveyance, such Seller Party’s “
Seller Closing Documents
”), such Seller Closing Documents shall constitute the legal, valid, and binding obligations of such Seller Party, enforceable against such Seller Party in accordance with their terms, except as such enforceability may be limited by a bankruptcy proceeding commenced after the Closing or other similar laws affecting the rights and remedies of creditors generally and by general principles of equity (regardless of whether such enforceability is considered in a Proceeding in equity or at law).
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(b)
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Except as set forth in
Schedule 3.02(b)
, and assuming the receipt of all Consents and the waiver of all Preferential Purchase Rights (in each case) applicable to the Contemplated Transactions, and assuming compliance with the HSR Act, neither the execution and delivery of this Agreement by such Seller Party nor the consummation or performance of any of the Contemplated Transactions by such Seller Party shall, directly or indirectly (with or without notice or lapse of time):
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(i)
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contravene, conflict with, or result in a violation of (A) any provision of the Organizational Documents of such Seller Party, or (B) any resolution adopted by the board of directors, managers or officers of such Seller Party;
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(ii)
|
contravene, conflict with, or result in a violation of, or give any Governmental Body or other Person the right to challenge any of the Contemplated Transactions, to terminate, accelerate, or modify any terms of, or to exercise any remedy or obtain any relief under, any Contract or agreement or any Legal Requirement or Order to which such Seller Party, or any of the Assets, may be subject;
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(iii)
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contravene, conflict with, or result in a violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental Authorization that relates to the Assets; or
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(iv)
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(A) result in a default, in any material respect, or the imposition, creation or continuance of any Encumbrance upon or with respect to any of the Assets or (B) give rise to any right of termination, cancellation or acceleration under, or require any consent under, any note, bond, mortgage or indenture to which such Seller Party is a party or by which the Assets are bound, in each case except for Permitted Encumbrances.
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3.03
Bankruptcy. Except for claims or matters related to the Bankruptcy Cases commenced on May 11, 2016 where the Plan of Reorganization concluded on February 28, 2017, for which the United States Bankruptcy Court for the Southern District of Texas retains limited jurisdiction, there are no bankruptcy, reorganization, receivership, or arrangement proceedings pending or being contemplated by such Seller Party or, to such Seller Party’s Knowledge, Threatened, against such Seller Party.
3.04
Taxes. All material Tax Returns required to be filed by such Seller Party with respect to Asset Taxes have been timely filed and all such Tax Returns are correct and complete in all material respects. All material Asset Taxes that are or have become due have been timely paid in full, and such Seller Party is not delinquent in the payment of any such Asset Taxes. There is not currently in effect any extension or waiver of any statute of limitations of any jurisdiction regarding the assessment or collection of any Asset Taxes. There are no Encumbrances on any of the Assets attributable to Taxes other than Permitted Encumbrances. There are no administrative or judicial proceedings by any taxing authority pending against Seller relating to or in connection with any material Asset Taxes. All Tax withholding and deposit requirements imposed by applicable Legal Requirements with respect to any of the Assets have been satisfied in all material respects. Except as disclosed on
Schedule 3.04
, no Asset is subject to any tax partnership agreement or is otherwise treated, or required to be treated, as held in an arrangement requiring a partnership income tax return to be filed under Subchapter K of Chapter 1 of Subtitle A of the Code or any similar state statute. Such Seller Party paid Wyoming sales and use tax on the original purchase of the Assets to the extent required under applicable Legal Requirements.
3.05
Legal Proceedings. Such Seller Party has not been served with any Proceeding, and there is no pending or, to such Seller Party’s Knowledge, Threatened, Proceeding against such Seller Party or any of its Affiliates, in each case, that (a) relates to such Seller Party’s ownership of any of the Assets, or (b) challenges, or may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the Contemplated Transactions. To such Seller Party’s Knowledge, there are no pending or Threatened Proceedings relating to the ownership or operation of the Assets to which neither such Seller Party nor any of its Affiliates is party.
3.06
Brokers. Neither such Seller Party nor its Affiliates have incurred any obligation or liability, contingent or otherwise, for broker’s or finder’s fees with respect to the Contemplated Transactions other than obligations that are and will remain the sole responsibility of such Seller Party and its Affiliates.
3.07
Compliance with Legal Requirements. Except as set forth in
Schedule 3.07
, there is no uncured material violation by such Seller Party of any Legal Requirements (other than Environmental Laws) with respect to such Seller Party’s ownership or operation of the Assets. To such Seller Party’s Knowledge, all Assets operated by Third Parties have been operated in all material respects in compliance with all applicable Legal Requirements (other than Environmental Laws). Neither such Seller Party nor any of its Affiliates have received any written notice from any Governmental Body or Third Party of any material violation of or material default by such Seller Party with respect to any Legal Requirement that remains unresolved.
3.08
Prepayments. Except for any Imbalances or as otherwise set forth on
Schedule 3.08
, such Seller Party has not received payment under any Contract for the sale of Hydrocarbons produced from the Assets which requires delivery in the future to any party of Hydrocarbons previously paid for and not yet delivered.
3.09
Imbalances
.
Except as set forth in
Schedule 3.09
, there are no Imbalances with respect to such Seller Party’s obligations relating to the Wells as of the Effective Time.
3.10
Material Contracts.
Schedule 3.10
sets forth all Applicable Contracts of the type described below as of the Execution Date (collectively, the “
Material Contracts
”):
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(a)
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any Applicable Contract that is a Hydrocarbon purchase and sale, transportation, gathering, treating, processing, compression, marketing or similar Applicable Contract that is not terminable by such Seller Party without penalty on sixty (60) days’ or less notice, including any Contract that includes an acreage dedication or minimum volume commitment;
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(b)
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any Applicable Contract that can reasonably be expected to result in aggregate payments or receipts of revenue by Seller of more than One Hundred Thousand Dollars ($100,000) net to Seller’s interest during the current or any subsequent fiscal year or more than One Million Dollars ($1,000,000) in the aggregate net to Seller’s interest over the term of such Applicable Contract (based on the terms thereof and contracted (or if none, current) quantities where applicable);
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(c)
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any Applicable Contract that is an indenture, mortgage, deed of trust, loan, credit agreement, sale-leaseback, guaranty of any obligation, bond, letter of credit, security interest, hedging or similar financial Contract;
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(d)
|
any Applicable Contract that constitutes a partnership agreement, joint venture agreement, area of mutual interest agreement, non-compete agreement, joint exploration agreement, joint development agreement, joint operating agreement, drilling contract, farmin or farmout agreement, carry agreement, net profits interest agreement, participation agreement, production sharing agreement, unit agreement, purchase and sale agreement, exchange agreement or similar Contract where any material obligation has not been completed prior to the Effective Time (in each case, excluding any tax partnership);
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(e)
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any Applicable Contract that provides for a call upon, option to purchase or similar right under any agreements with respect to the Hydrocarbons from the Assets;
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(f)
|
any Applicable Contract that provides for an irrevocable power of attorney that will be in effect after the Closing Date;
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(g)
|
any Applicable Contract that provides for, as its primary purpose, an indemnity; and
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(h)
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any Applicable Contract for the sale, lease or farmout, or exchange of such Seller Party’s interest in the Assets.
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Except as set forth in
Schedule 3.10
, each Material Contract set forth (or required to be set forth) in
Schedule 3.10
is a legal, valid and binding obligation against such Seller Party and, to the Knowledge of such Seller Party, each other party thereto, is enforceable in accordance with its terms against such Seller Party and, to the Knowledge of such Seller Party, each other party thereto, and is in full force and effect, subject to any bankruptcy proceeding commenced after the date hereof or other Legal Requirements now or hereafter in effect. Neither such Seller Party, nor to the Knowledge of such Seller Party, any other party is in material breach of or in default under any Material Contract, and no event, occurrence, condition or act has occurred that, with the giving of notice, the lapse of time or the happening of any other event or condition, would become a material breach, default or event of default by such Seller Party or, to the Knowledge of such Seller Party, any other party thereto, in each case except as set forth in
Schedule 3.10
. Except as set forth in
Schedule 3.10
, such Seller Party has not received any notice from a Third Party alleging a violation or breach of any Material Contract by such Seller Party or any its Affiliates. Except as set forth in
Schedule 3.10
, there are no Contracts with Affiliates of such Seller Party, Hedge Contracts or Debt Contracts that will be binding on the Assets after Closing. Prior to the Execution Date, such Seller Party has delivered to Buyer true and complete copies of each Material Contract and any and all amendments thereto.
3.11
Consents and Preferential Purchase Rights. Except as set forth in
Schedule 3.11
, none of the Assets (and no portion of the Assets) is subject to any Preferential Purchase Rights or Consents required to be obtained by such Seller Party which may be applicable to the Contemplated Transactions, except for (a) Consents and approvals of Governmental Bodies that
are customarily obtained after Closing and (b) Contracts that are terminable by the counterparty upon not greater than thirty (30) days’ notice, and (c) compliance with the HSR Act.
3.12
Current Commitments.
Schedule 3.12
sets forth, as of the Execution Date, all approved authorizations for expenditures and other approved capital commitments, individually equal to or greater than One Hundred Thousand Dollars ($100,000) (net to Seller’s interest) (the “AFEs”) relating to the Assets and which are binding on the owner of the Assets following the Effective Time to drill or rework any Wells or for other capital expenditures for which all of the activities anticipated in such AFEs have not been completed by the Effective Time.
3.13
Environmental Laws. Except as disclosed on
Schedule 3.13
, (a) there are no actions, suits or proceedings pending, or to such Seller Party’s Knowledge, threatened in writing, before any Governmental Body with respect to the Assets alleging material violations of, or material liabilities under, Environmental Laws, or claiming remediation obligations, and (b) such Seller Party has received no notice from any Governmental Body or other Person of any alleged or actual material violation or non-compliance with, or material liability under, any Environmental Law or of material non-compliance with the terms or conditions of any environmental permits, arising from, based upon, associated with or related to the Assets or the ownership or operation of any thereof and (c) to such Seller Party’s Knowledge, there is no uncured material violation (i) by such Seller Party of any Environmental Laws with respect to such Seller Party’s ownership of the Assets, or (ii) of any Environmental Laws with regard to operation of the Assets by Third Parties.
3.14
Necessary Surface Rights. The Properties include all of the material easements and other surface rights reasonably necessary to maintain normal operations in accordance with past practices.
3.15
Royalties. Except as set forth in
Schedule 3.15
, such Seller Party has duly and properly paid, or caused to be duly and properly paid in all material respects, all Royalties due by such Seller Party during the period of such Seller Party’s ownership of the Assets;
provided
, however that no failure to comply with the foregoing that does not result in the termination of a Lease shall be considered a breach of this
Section 3.15
.
3.16
Letters of Credit.
Schedule 3.16
lists all material letters of credit held by such Seller Party or any its Affiliates (as applicable) that are required by applicable third Persons in order for such Seller Party to own the Properties.
3.17
Disclosures with Multiple Applicability; Materiality. If any fact, condition, or matter disclosed in Seller’s disclosure Schedules applies to more than one Section of this
Article 3
, a single disclosure of such fact, condition, or matter on Seller’s disclosure Schedules shall constitute disclosure with respect to all sections of this
Article 3
to which such fact, condition, or other matter applies to the extent reasonably apparent on the face of Seller’s disclosure Schedules, regardless of the section of Seller’s disclosure Schedules in which such fact, condition, or other matter is described. Inclusion of a matter on Seller’s disclosure Schedules with respect to a representation or warranty that is qualified by “material” or any variant thereof shall not necessarily be deemed an indication that such matter does, or may, be material. Matters may be disclosed on a Schedule to this Agreement for purposes of information only.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller, as of the Execution Date and the Closing Date, the following:
4.01
Organization and Good Standing. Buyer is a limited liability company and duly organized, validly existing, and in good standing under the laws of Delaware and is duly qualified to do business and is in good standing in each jurisdiction in which the Assets are located.
4.02
Authority; No Conflict.
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(a)
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This Agreement constitutes the legal, valid, and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy or other similar laws affecting the rights and remedies of creditors generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). Upon the execution and delivery by Buyer of the Instruments of Conveyance and any other documents executed and delivered by Buyer at the Closing (collectively, “
Buyer’s Closing Documents
”), Buyer’s Closing Documents shall constitute the legal, valid, and binding obligations of Buyer enforceable against Buyer in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy or other similar laws affecting the rights and remedies of creditors generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). Buyer has the requisite right, power, authority, and capacity to execute and deliver this Agreement and Buyer’s Closing Documents, and to perform its obligations under this Agreement and Buyer’s Closing Documents.
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(b)
|
Neither the execution and delivery of this Agreement by Buyer nor the consummation or performance of any of the Contemplated Transactions by Buyer shall give any Person the right to prevent, delay, or otherwise interfere with any of the Contemplated Transactions.
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(c)
|
Neither the execution and delivery of this Agreement by Buyer nor the consummation or performance of any of the Contemplated Transactions by Buyer shall (i) contravene, conflict with, or result in a violation of any provision of the Organizational Documents of Buyer, (ii) contravene, conflict with, or result in a violation of any resolution adopted by the board of managers, or members of Buyer, or (iii) contravene, conflict with, or result in a violation of, or give any Governmental Body or other Person the right to challenge any of the Contemplated Transactions, to terminate, accelerate, or modify any terms of, or to exercise any remedy or obtain any relief under, any agreement or any Legal Requirement or Order to which Buyer may be subject.
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(d)
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Buyer is not and shall not be required to give any notice to or obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions.
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4.03
Certain Proceedings. There is no Proceeding pending against Buyer that challenges, or may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the Contemplated Transactions. To Buyer’s Knowledge, no such Proceeding has been Threatened.
4.04
Knowledgeable Investor. Buyer is an experienced and knowledgeable investor in the oil and gas business. Prior to entering into this Agreement, Buyer was advised by its own legal, tax, and other professional counsel concerning this Agreement, the Contemplated Transactions, the Assets, and their value, and it has relied solely thereon and on the representations and obligations of Seller in this Agreement and the documents to be executed by Seller in connection with this Agreement at the Closing. Buyer is acquiring the Assets for its own account and not for sale or distribution in violation of the Securities Act of 1933, as amended, the rules and regulations thereunder, any applicable state blue sky laws, or any other applicable Legal Requirements.
4.05
Qualification. Buyer is an “accredited investor,” as such term is defined in Regulation D of the Securities Act of 1933, as amended. Buyer is not acquiring the Assets in connection with a distribution or resale thereof in violation of federal or state securities laws and the rules and regulations thereunder. Without limiting
Section 6.02
, Buyer is, or as of the Closing will be, qualified under applicable Legal Requirements to hold leases, rights-of-way, and other rights issued or controlled by (or on behalf of) any applicable Governmental Body and will be qualified under applicable Legal Requirements to own the Assets. Buyer has, or as of the Closing will have, posted such bonds as may be required for the ownership or, where applicable, operatorship by Buyer of the Assets. To Buyer’s Knowledge, no fact or condition exists with respect to Buyer or the Assets which may cause any Governmental Body to withhold its approval of the Contemplated Transactions.
4.06
Brokers. Neither Buyer nor its Affiliates have incurred any obligation or liability, contingent or otherwise, for broker’s or finder’s fees with respect to the Contemplated Transactions other than obligations that are or will remain the sole responsibility of Buyer and its Affiliates.
4.07
Financial Ability. Buyer has sufficient cash, available lines of credit, or other sources of immediately available funds to enable it to (a) deliver the amounts due at the Closing, (b) take such actions as may be required to consummate the Contemplated Transactions, and (c) timely pay and perform Buyer’s obligations under this Agreement and Buyer’s Closing Documents. Buyer expressly acknowledges that the failure to have sufficient funds shall in no event be a condition to the performance of its obligations hereunder, and in no event shall the Buyer’s failure to perform its obligations hereunder be excused by failure to receive funds from any source.
4.08
Securities Laws. The solicitation of offers and the sale of the Assets by Seller have not been registered under any securities laws. At no time has Buyer been presented with or solicited by or through any public promotion or any form of advertising in connection with the Contemplated Transactions. Buyer is not acquiring the Assets with the intent of distributing fractional, undivided interests that would be subject to regulation by federal or state securities
laws, and that if it sells, transfers, or otherwise disposes of the Assets or fractional undivided interests therein, it shall do so in compliance with applicable federal and state securities laws.
4.09
Due Diligence. Without limiting or impairing any representation, warranty, covenant or agreement of Seller contained in this Agreement and the Seller Closing Documents, or Buyer’s right to rely thereon, subject to Buyer’s right to access the Assets to conduct a due diligence review in accordance with this Agreement, at Closing Buyer and its Representatives have (a) been permitted access to materials relating to the Assets, (b) been afforded the opportunity to ask all questions of Seller (or Seller’s Representatives) concerning the Assets, (c) been afforded the opportunity to investigate the condition of the Assets, and (d) had the opportunity to take such other actions and make such other independent investigations as Buyer deems necessary to evaluate the Assets and understand the merits and risks of an investment therein and to verify the truth, accuracy, and completeness of the materials, documents, and other information provided or made available to Buyer (whether by Seller or otherwise).
WITHOUT LIMITING OR IMPAIRING ANY REPRESENTATION, WARRANTY, COVENANT OR AGREEMENT OF THE SELLER PARTIES CONTAINED IN THIS AGREEMENT AND THE SELLER’S CLOSING DOCUMENTS (INCLUDING THE SPECIAL WARRANTY OF DEFENSIBLE TITLE SET FORTH IN THE INSTRUMENTS OF CONVEYANCE), OR BUYER’S RIGHT TO RELY UPON EACH OF THE FOREGOING OR BUYER’S RIGHTS UNDER
ARTICLE 11
, BUYER HEREBY WAIVES ANY CLAIMS ARISING OUT OF ANY MATERIALS, DOCUMENTS, OR OTHER INFORMATION PROVIDED OR MADE AVAILABLE TO BUYER (WHETHER BY SELLER OR OTHERWISE), WHETHER UNDER THIS AGREEMENT, AT COMMON LAW, BY STATUTE, OR OTHERWISE.
4.10
Basis of Buyer’s Decision. By reason of Buyer’s knowledge and experience in the evaluation, acquisition, and operation of oil and gas properties, Buyer has evaluated the merits and the risks of purchasing the Assets from Seller and has formed an opinion based solely on Buyer’s knowledge and experience, Buyer’s due diligence, and Seller’s representations, warranties, covenants, and agreements contained in this Agreement and the Seller Closing Documents, and not on any other representations or warranties by Seller. Buyer has not relied and shall not rely on any statements by Seller or its Representatives (other than those representations, warranties, covenants, and agreements of Seller contained in this Agreement and the Seller Closing Documents) in making its decision to enter into this Agreement or to close the Contemplated Transactions.
BUYER UNDERSTANDS AND ACKNOWLEDGES THAT NEITHER THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER GOVERNMENTAL BODY HAS PASSED UPON THE ASSETS OR MADE ANY FINDING OR DETERMINATION AS TO THE FAIRNESS OF AN INVESTMENT IN THE ASSETS OR THE ACCURACY OR ADEQUACY OF THE DISCLOSURES MADE TO BUYER, AND, EXCEPT AS SET FORTH IN
Article 9
, BUYER IS NOT ENTITLED TO CANCEL, TERMINATE, OR REVOKE THIS AGREEMENT, WHETHER DUE TO THE INABILITY OF BUYER TO OBTAIN FINANCING OR PAY THE PURCHASE PRICE, OR OTHERWISE.
4.11
Business Use, Bargaining Position. Buyer is purchasing the Assets for commercial or business use. Buyer has sufficient knowledge and experience in financial and business matters that enables it to evaluate the merits and the risks of transactions such as the Contemplated Transactions, and Buyer is not in a significantly disparate bargaining position with Seller. Buyer expressly acknowledges and recognizes that the price for which Seller has agreed to sell the Assets and perform its obligations under the terms of this Agreement has been predicated upon the inapplicability of the Texas Deceptive Trade Practices - Consumer
Protection Act, V.C.T.A. BUS & COMM ANN. § 17.41 et seq., to the extent applicable, or any similar Legal Requirement.
BUYER FURTHER RECOGNIZES THAT SELLER, IN DETERMINING TO PROCEED WITH ENTERING INTO THIS AGREEMENT, HAS EXPRESSLY RELIED ON THE PROVISIONS OF THIS
ARTICLE 4
.
4.12
Bankruptcy. There are no bankruptcy, reorganization, receivership, or arrangement proceedings pending or being contemplated by Buyer or, to Buyer’s Knowledge, Threatened against Buyer. Buyer is, and will be immediately after giving effect to the Contemplated Transactions, solvent.
ARTICLE 5
COVENANTS OF SELLER
5.01
Access and Investigation.
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(a)
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Between the Execution Date and the Closing Date, to the extent doing so would not violate applicable Legal Requirements, Seller’s obligations to any Third Party or other restrictions on Seller, Seller shall (a) afford Buyer and its Representatives access, at such times as Buyer may reasonably request during Seller’s regular hours of business, to reasonably appropriate Seller’s personnel, any contracts, books and Records, and other documents and data related to the Assets, except any such contracts, books and records, or other documents and data to the extent they are Excluded Assets, and (b) promptly furnish Buyer and its Representatives, at Buyer’s sole cost and expense, with electronic copies of all such Records, contracts, books and records, and other existing documents and data as Buyer and its Representatives may reasonably request, except for any such contracts, books and records, or other documents and data to the extent they are Excluded Assets (and upon Buyer’s request, Seller shall use reasonable efforts to obtain the consent of Third Party operators to give Buyer and its Representatives reasonable access to similar information with respect to Assets not operated by Seller or its Affiliates;
provided
that Seller shall not be required to make payments or undertake obligations in favor any Third parties in order to obtain such consent);
PROVIDED
THAT, EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT OR IN THE INSTRUMENTS OF CONVEYANCE, SELLER MAKES NO REPRESENTATION OR WARRANTY, AND EXPRESSLY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES AS TO THE ACCURACY OR COMPLETENESS OF THE DOCUMENTS, INFORMATION, BOOKS, RECORDS, FILES, AND OTHER DATA THAT IT MAY PROVIDE OR DISCLOSE TO BUYER
.
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(b)
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Notwithstanding the provisions of
Section 5.01(a)
, (i) Buyer’s investigation shall be conducted in a manner that (to the extent practicable) minimizes interference with the field operations of the business of Seller and any applicable Third Parties, and (ii) subject to
Section 11.09
, Buyer’s right of access shall not entitle Buyer to operate equipment or conduct subsurface or other invasive testing or sampling. Environmental review shall not exceed the review contemplated by a Phase I Environmental Site Assessment without Seller’s prior written permission, which may be withheld in Seller’s sole discretion.
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(c)
|
Buyer acknowledges that, pursuant to its right of access to the Records and the Assets, Buyer will become privy to confidential and other information of Seller and Seller’s Affiliates and the Assets and that such confidential information shall be held confidential by Buyer and Buyer’s Representatives in accordance with the terms of the Confidentiality Agreement. If the Closing should occur, the foregoing confidentiality restriction on Buyer, including the Confidentiality Agreement, shall terminate (except as to the Excluded Assets);
provided
that such termination of the Confidentiality Agreement shall not relieve any party thereto from any liability thereunder for the breach of such agreement prior to the Execution Date.
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5.02
Ownership of the Assets. Except as set forth on
Schedule 5.02
, or as required by applicable Legal Requirements, between the Execution Date and the Closing, Seller shall operate its business (including the sale of Hydrocarbons) with respect to its ownership of the Assets in the ordinary course as a reasonably prudent operator, and, without limiting the generality of the preceding, shall:
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(a)
|
not transfer, sell, hypothecate, Encumber, or otherwise dispose of any of the Assets, except as required under any Leases or Contracts, and except for sales of Hydrocarbons, equipment and inventory in the ordinary course of business;
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(b)
|
subject to clause (i) below, not abandon any Asset (except the abandonment or expiration of Leases in accordance with their terms, including with respect to leases not capable of producing in paying quantities after the expiration of their primary terms or for failure to pay delay rentals or shut-in royalties or similar types of lease maintenance payments);
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(c)
|
not propose, or agree to participate in any single operation with respect to the Leases or Wells with an anticipated cost in excess of Fifty Thousand Dollars ($50,000) net to Seller’s interest, except for any emergency operations otherwise conducted in compliance with this Agreement;
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(d)
|
not execute, terminate, cancel, extend, or materially amend or modify any Material Contract or Lease;
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(e)
|
not make any election (or fail to make an election, the result of which is) to go non-consent with respect to any of the Assets;
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(f)
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unless Buyer fails to provide consent under clause (d), use commercially reasonable efforts to maintain in full force and effect each Lease, and timely and properly pay all Lease renewals and extensions that become due after the date of this Agreement but prior to Closing in accordance with the terms of the applicable Lease;
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(g)
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not waive, release, assign, settle or compromise any proceeding, material right or claim relating to the Assets, other than the Retained Liabilities or waivers, releases, assignments, settlements or compromises that involve only the payment of monetary damages not in excess of Fifty Thousand Dollars ($50,000) individually (excluding amounts to be paid under insurance policies);
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(h)
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not take, nor permit any of their Affiliates (or authorize any investment banker, financial advisor, attorney, accountant or other Person retained by, acting for or on behalf of Seller or any such Affiliate) to take, directly or indirectly, any action to solicit, or negotiate, any offer from any Person concerning the direct or indirect acquisition of the Assets by any Person other than Buyer or its Affiliates except for sales of Hydrocarbons, equipment and inventory in the ordinary course of business;
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(i)
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pay (or cause to be paid) any and all Asset Taxes that could result in an Encumbrance with respect to the Assets that become due and payable on or prior to the Closing Date; and
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(j)
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not enter into any agreement with respect to any of the foregoing.
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Buyer acknowledges that Seller owns undivided interests in certain of the properties comprising the Assets, and Buyer agrees that the acts or omissions of the other working interest owners who are not Seller or an Affiliate of Seller shall not constitute a Breach of the provisions of this
Section 5.02
, nor shall any action required by a vote of working interest owners constitute such a Breach so long as Seller and any Affiliate of Seller owning an interest in the applicable Assets (or portion of the Assets) have voted its interest in a manner that complies with the provisions of this
Section 5.02
. Further, no action or inaction of any Third Party operator with respect to any Asset shall constitute a Breach of this
Section 5.02
to the extent Seller uses commercially reasonable efforts to cause such Third Party operator to operate such applicable Asset in a manner consistent with this
Section 5.02
. Seller may seek Buyer’s approval to perform any action that would otherwise be restricted by this
Section 5.02
, and Buyer’s approval of any such action shall not be unreasonably withheld, conditioned, or delayed, and shall be considered granted ten (10) days after delivery of notice from Seller to Buyer requesting such consent unless Buyer notifies Seller to the contrary during such ten (10)-day period. Notwithstanding the foregoing provisions of this
Section 5.02
, in the event of an emergency involving imminent threat to property or life, Seller may take such action as reasonably necessary and shall notify Buyer of such action promptly thereafter. Any matter approved (or deemed approved) by Buyer pursuant to this
Section 5.02
that would otherwise constitute a Breach of one of Seller’s representations and warranties in
Article 3
shall be deemed to be an exclusion from all representations and warranties for which it is relevant.
5.03
Insurance. Seller shall maintain in force during the period from the Execution Date until the Closing, insurance policies (including qualified self-insurance) pertaining to the Assets with the minimum coverages as set forth on
Schedule 5.03
.
5.04
Consent and Waivers. Seller shall use commercially reasonable efforts to obtain prior to the Closing written waivers of all Preferential Purchase Rights and all Consents necessary for the transfer of the Assets to Buyer;
provided
that in the event Seller is unable to obtain all such waivers of Preferential Purchase Rights and Consents after using such commercially reasonable efforts, such failure to satisfy shall not constitute a Breach of this Agreement. Seller shall not be required to make any payments to, or undertake any obligations for the benefit of, the holders of such rights in order to obtain the Required Consents. Buyer shall reasonably cooperate with Seller in seeking to obtain such Consents.
5.05
Amendment to Schedules. Until the fifth (5th) Business Day before Closing, Seller shall have the right (but not the obligation) to supplement the Schedules with respect to any matters that first occur following the Execution Date. Except to the extent such updates are a direct result of actions taken with Buyer’s consent pursuant to
Section 5.02
, prior to Closing, any such supplement shall not be considered for purposes of determining if Buyer’s Closing conditions have been met under
Section 7.01
or for determining any remedies available under this Agreement.
5.06
Affiliate Contracts. Seller will terminate or cause its respective Affiliates to terminate, effective as of the Closing Date, any contracts or agreements between Seller and its Affiliates insofar and only insofar as such contracts or agreements relate to or bind the Assets.
ARTICLE 6
OTHER COVENANTS
6.01
Notification and Cure. Between the Execution Date and the Closing Date, Buyer shall promptly notify Seller in writing and Seller shall promptly notify Buyer in writing if Seller or Buyer, as applicable, obtain Knowledge following the Execution Date of any Breach in any material respect, of its or the other Party’s representations and warranties or covenants, in any material respect;
provided
that failure to provide such notice shall not limit a Party’s rights or remedies under this Agreement with respect to such Breach. If any of Buyer’s or Seller’s representations or warranties are untrue or shall become untrue in any material respect between the Execution Date and the Closing Date, or if any of Buyer’s or Seller’s covenants or agreements to be performed or observed prior to or on the Closing Date shall not have been so performed or observed in any material respect, and such Breach of representation, warranty, covenant or agreement shall (if curable) be cured by the Closing (or, if the Closing does not occur, prior to the termination of this Agreement in accordance with
Section 9.01
), then such Breach shall be considered not to have occurred for all purposes of this Agreement.
6.02
Satisfaction of Conditions. Between the Execution Date and the Closing Date (a) Seller shall use commercially reasonable efforts to cause the conditions in
Article 7
to be satisfied, and (b) Buyer shall use commercially reasonable efforts to cause the conditions in
Article 8
to be satisfied.
6.03
Replacement of Insurance, Bonds, Letters of Credit, and Guaranties.
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(a)
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The Parties understand that none of the insurance currently maintained by Seller or Seller’s Affiliates covering the Assets, nor any of the bonds, letters of credit, or guaranties, if any, posted by Seller or Seller’s Affiliates with Governmental Bodies or co-owners and relating to the Assets will be transferred to Buyer. On or before the Closing Date, Buyer shall use commercially reasonable efforts to obtain, and deliver to Seller evidence of, all replacement bonds, letters of credit, and guaranties, and evidence of such other authorizations, qualifications, and approvals, in each case, as set forth on
Schedule 6.03(a)
and necessary for Buyer to own the Assets.
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(b)
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Promptly (but in no event later than thirty (30) days) after Closing, Buyer shall, at its sole cost and expense, make all filings with Governmental Bodies necessary to assign
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and transfer the Assets and title thereto and to comply with applicable Legal Requirements, and Seller shall reasonably assist Buyer with such filings.
6.04
Governmental Reviews. Except for the HSR Act, Seller and Buyer shall (and shall cause their respective Affiliates to), in a timely manner, make all other required filings (if any) with, prepare applications to, and conduct negotiations with Governmental Bodies as required to consummate the Contemplated Transactions. Each Party shall, to the extent permitted pursuant to applicable Legal Requirements, cooperate with and use all reasonable efforts to assist the other with respect to such filings, applications and negotiations. Buyer shall bear the cost of all filing or application fees payable to any Governmental Body with respect to the Contemplated Transactions, regardless of whether Buyer, Seller, or any Affiliate of any of them is required to make the payment.
6.05
HSR Act. If applicable, within ten (10) Business Days following the execution by Buyer and Seller of this Agreement, Buyer and Seller will each prepare and simultaneously file with the DOJ and the FTC the notification and report form required for the transactions contemplated by this Agreement by the HSR Act and request early termination of the waiting period thereunder. Buyer and Seller agree to respond promptly to any inquiries or requests for information or documentary material from the DOJ or the FTC concerning such filings and to comply in all material respects with the filing requirements of the HSR Act. Buyer and Seller shall cooperate with each other and, subject to the terms of the Confidentiality Agreement, shall promptly furnish all information to the other Party that is necessary in connection with Buyer’s and Seller’s compliance with the HSR Act. Buyer and Seller shall keep each other fully advised with respect to any requests from or communications with the DOJ or FTC concerning such filings and shall consult with each other with respect to all responses thereto. Each of Seller and Buyer shall use its commercially reasonable efforts to take all actions reasonably necessary and appropriate in connection with any HSR Act filing to satisfy the conditions to the Closing and consummate Contemplated Transactions as promptly as practicable and in any event not later than the Outside Date,
provided
,
however
, nothing in this Agreement shall require Buyer or Seller to propose, negotiate, effect or agree to, the sale, divestiture, license or other disposition of any assets or businesses of Buyer or Seller (including the Assets) or otherwise take any action that limits the freedom of action with respect to, or its ability to retain or operate any of the businesses of the Buyer or Seller or the Assets. The filing fees associated with any such HSR Act filing shall be borne by Buyer. Notwithstanding any provision of this
Section 6.05
, no Party shall be required to provide the other Party with information regarding the value of the transaction or subject to the attorney client privilege, work product doctrine or other similar privilege absent entering into a mutually acceptable joint defense agreement.
ARTICLE 7
CONDITIONS PRECEDENT TO BUYER’S OBLIGATION TO CLOSE
Buyer’s obligation to purchase the Assets and to take the other actions required to be taken by Buyer at the Closing is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived in writing by Buyer, in whole or in part):
7.01
Accuracy of Representations. All of Seller’s representations and warranties in this Agreement must have been true and correct in all material respects (or, with respect to
representations and warranties qualified by materiality, true and correct in all respects) as of the Execution Date, and must be true and correct in all material respects (or, with respect to representations and warranties qualified by materiality, true and correct in all respects) as of the Closing Date as if made on the Closing Date, other than any such representation and warranty that refers to a specified date, which need only be true and correct in all material respects (or, if qualified by materiality, true and correct in all respects) on and as of such specified date.
7.02
Seller’s Performance. All of the covenants and obligations that Seller is required to perform or to comply with pursuant to this Agreement at or prior to the Closing must have been duly performed and complied with in all material respects.
7.03
No Proceedings. Since the Execution Date, there must not have been commenced or Threatened against Seller, or against any of Seller’s Affiliates, any Proceeding (other than any matter initiated by Buyer or an Affiliate of Buyer) seeking to restrain, enjoin, or otherwise prohibit or make illegal, or seeking to recover material damages on account of, any of the Contemplated Transactions.
7.04
No Orders. On the Closing Date, there shall be no Order pending or remaining in force of any Governmental Body having appropriate jurisdiction that attempts to restrain, enjoin, or otherwise prohibit the consummation of the Contemplated Transactions, or that grants material damages in connection therewith.
7.05
Necessary Consents and Approvals. All Consents from Governmental Bodies and all approvals from Governmental Bodies required for the Contemplated Transactions, except Consents and approvals of assignments by Governmental Bodies that are customarily obtained after closing, shall have been granted, or the necessary waiting period shall have expired, or early termination of the waiting period shall have been granted.
7.06
HSR Act. Any waiting period applicable to the consummation of the Contemplated Transactions under the terms of this Agreement under the HSR Act shall have expired or been terminated.
7.07
Closing Deliverables. Seller shall have delivered (or be ready, willing and able to deliver at the Closing) to Buyer the documents and other items required to be delivered by Seller under
Section 2.04(a)
.
7.08
Title Defect Values, Environmental Defect Values, etc. The sum of (i) all Title Defect Values asserted by Buyer in good faith and without taking into account the Aggregate Defect Deductible (less the sum of all Title Benefit Values asserted by Seller in good faith), plus (ii) the Aggregate Environmental Defect Values asserted by Buyer in good faith and without taking into account the Aggregate Defect Deductible, plus (iii) the aggregate downward Purchase Price adjustments under
Section 11.02
, plus (iv) the aggregate downward Purchase Price adjustments under
Section 11.03
, plus (v) the aggregate downward Purchase Price adjustments under
Section 11.11
, plus (vi) the aggregate amount of all Casualty Losses (as determined by Buyer acting in good faith) shall be less than or equal to twenty percent (20%) of the unadjusted Purchase Price.
ARTICLE 8
CONDITIONS PRECEDENT TO SELLER’S OBLIGATION TO CLOSE
Seller’s obligation to sell the Assets and to take the other actions required to be taken by Seller at the Closing is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived in writing by Seller, in whole or in part):
8.01
Accuracy of Representations. All of Buyer’s representations and warranties in this Agreement must have been true and correct in all material respects (or, with respect to representations and warranties qualified by materiality, true and correct in all respects) as of the Execution Date, and must be true and correct in all material respects (or, with respect to representations and warranties qualified by materiality, true and correct in all respects) as of the Closing Date as if made on the Closing Date, other than any such representation and warranty that refers to a specified date, which need only be true and correct in all material respects (or, if qualified by materiality, true and correct in all respects) on and as of such specified date.
8.02
Buyer’s Performance. All of the covenants and obligations that Buyer is required to perform or to comply with pursuant to this Agreement at or prior to the Closing must have been duly performed and complied with in all material respects.
8.03
No Proceedings. Since the Execution Date, there must not have been commenced or Threatened against Buyer or against any of its Affiliates, any Proceeding (other than any matter initiated by Seller or an Affiliate of Seller) seeking to restrain, enjoin, or otherwise prohibit or make illegal, or seeking to recover material damages on account of, any of the Contemplated Transaction.No Orders. On the Closing Date, there shall be no Order pending or remaining in force of any Governmental Body having appropriate jurisdiction that attempts to restrain, enjoin, or otherwise prohibit the consummation of the Contemplated Transactions, or that grants material damages in connection therewith.Necessary Consents and Approvals. All Consents from Governmental Bodies and all approvals from Governmental Bodies required for the Contemplated Transactions, except Consents and approvals of assignments by Governmental Bodies that are customarily obtained after closing, shall have been granted, or the necessary waiting period shall have expired, or early termination of the waiting period shall have been granted.
8.06
HSR Act. Any waiting period applicable to the consummation of the Contemplated Transactions under the HSR Act shall have expired or been terminated.
8.07
Closing Deliverables. Buyer shall have delivered (or be ready, willing and able to deliver at the Closing) to Seller the documents and other items required to be delivered by Buyer under
Section 2.04(b)
.
8.08
Title Defect Values, Environmental Defect Values, etc. The sum of (i) all Title Defect Values asserted by Buyer in good faith and without taking into account the Aggregate Defect Deductible (less the sum of all Title Benefit Values asserted by Seller in good faith), plus (ii) the Aggregate Environmental Defect Values asserted by Buyer in good faith and without taking into account the Aggregate Defect Deductible, plus (iii) the aggregate downward Purchase Price adjustments under
Section 11.02
, plus (iv) the aggregate downward Purchase Price
adjustments under
Section 11.03
, plus (v) the aggregate downward Purchase Price adjustments under
Section 11.11
, plus (vi) the aggregate amount of all Casualty Losses (as determined by Buyer acting in good faith) shall be less than or equal to twenty percent (20%) of the unadjusted Purchase Price.
ARTICLE 9
TERMINATION
9.01
Termination Events. This Agreement may, by written notice given prior to or at the Closing, be terminated:
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(a)
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by mutual written consent of Seller and Buyer;
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(b)
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by Buyer, if Seller has committed a material Breach of this Agreement and such Breach causes any of the conditions to Closing set forth in
Article 7
not to be satisfied (or, if prior to Closing, such Breach is of such a magnitude or effect that it will not be possible for such condition to be satisfied);
provided
,
however
, that in the case of a Breach that is capable of being cured, Seller shall have a period of ten (10) Business Days following receipt of such notice to attempt to cure the Breach and the termination under this
Section 9.01(b)
shall not become effective unless Seller fails to cure such Breach prior to the end of such ten (10) Business Day period;
provided
,
further
, if (i) Seller’s conditions to Closing have been satisfied or waived (in writing) by Buyer in full on or after the Scheduled Closing Date, (ii) Buyer is not in material Breach of the terms of this Agreement and (iii) Seller refuses or willfully or negligently delays to timely close the Contemplated Transactions, then such refusal or delay shall constitute a material Breach of this Agreement;
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(c)
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by Seller, if Buyer has committed a material Breach of this Agreement and such breach causes any of the conditions to Closing set forth in
Article 8
not to be satisfied (or, if prior to Closing, such Breach is of such a magnitude or effect that it will not be possible for such condition to be satisfied);
provided
,
however
, that in the case of a Breach that is capable of being cured, Buyer shall have a period of ten (10) Business Days following receipt of such notice to attempt to cure the Breach and the termination under this
Section 9.01(b)
shall not become effective unless Buyer fails to cure such Breach prior to the end of such ten (10) Business Day period;
provided
,
further
, if (i) Buyer’s conditions to Closing have been satisfied or waived (in writing) by Seller in full on or after the Scheduled Closing Date, (ii) Seller is not in material Breach of the terms of this Agreement and (iii) Buyer refuses or willfully or negligently delays to timely close the Contemplated Transactions, then such refusal or delay shall constitute a material Breach of this Agreement;
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(d)
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by either Seller or Buyer if the Closing has not occurred on or before August 1, 2017 (the “
Outside Date
”), or such later date as the Parties may agree upon in writing;
provided
that such failure does not result primarily from the terminating Party’s material Breach of this Agreement;
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(e)
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by either Seller or Buyer if (i) any Legal Requirement has made the consummation of the Contemplated Transactions illegal or otherwise prohibited, or (ii) a Governmental Body has issued an Order, or taken any other action permanently restraining, enjoining, or otherwise prohibiting the consummation of the Contemplated Transactions, and such order, decree, ruling, or other action has become final and nonappealable; or
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(f)
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by Seller if the Closing condition in
Section 8.08
is not satisfied (or not possible of being satisfied at Closing);
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(g)
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by Buyer if the Closing condition in
Section 7.08
is not satisfied (or not possible of being satisfied at Closing); or
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(h)
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by Seller if Buyer fails to deposit the Deposit Amount into the Escrow Account on or before 5:00 p.m. (Central Time) on the first (1st) Business Day after the Execution Date.
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9.02
Effect of Termination; Distribution of the Deposit Amount.
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(a)
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If this Agreement is terminated pursuant to
Section 9.01
, all further obligations of the Parties under this Agreement shall terminate;
provided
that (a) such termination shall not impair nor restrict the rights of either Party against the other under
Section 9.02(a)
or
Section 9.02(c)
, and (b) the following provisions shall survive the termination:
Article 1
,
Sections 9.02
,
10.02(c)
,
10.03(c)
,
10.06
,
10.07
,
10.10
,
10.11
,
10.12
,
Article 12
(other than
Section 12.01
,
Section 12.02(b)
through
(d)
,
Section 12.14
and
Section 12.17
, which shall terminate) and any such terms as set forth in this Agreement that are necessary to give context to any of the foregoing surviving Sections.
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(b)
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Notwithstanding anything to the contrary in
Section 9.02(a)
:
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(i)
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If (A) Seller has the right to terminate this Agreement pursuant to
Section 9.01(c)
, (B) all of Buyer’s Closing conditions contained in
Article 7
shall have been satisfied or waived (in writing) by Buyer, and (C) Seller has performed or is ready, willing and able to perform all of its agreements and covenants contained in this Agreement which are to be performed or observed at or prior to Closing and has provided Buyer with written notice of same, then Seller shall, as its sole recourse in such scenario, terminate this Agreement and receive the Deposit Amount as liquidated damages (and not as a penalty. If Seller terminates this Agreement pursuant to this
Section 9.02(b)(i)
and receives the Deposit Amount as liquidated damages, (x) the Parties shall, within two (2) Business Days of Seller’s election, execute and deliver to the Escrow Agent a joint instruction letter directing the Escrow Agent to release the Deposit Amount to Seller and (y) Seller shall be free to enjoy immediately all rights of ownership of the Assets and to sell, transfer, encumber, or otherwise dispose of the Assets to any Person without any restriction under this Agreement. The Parties recognize that the actual damages to Seller in the scenario described above in this
Section 9.02(b)(i)
would be difficult or impossible to ascertain with reasonable certainty and agree that the
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Deposit Amount would be a reasonable liquidated damages amount for such material Breach.
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(ii)
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If (A) Buyer has the right to terminate this Agreement pursuant to
Section 9.01(b)
, (B) all of Seller’s Closing conditions contained in
Article 8
shall have been satisfied or waived (in writing) by Seller, and (C) Buyer has performed or is ready, willing and able to perform all of its agreements and covenants contained in this Agreement which are to be performed or observed at or prior to Closing and has provided Seller with written notice of same, then, in either case, Buyer shall have the right, at its sole discretion, to either (1) enforce specific performance by Seller of this Agreement, without posting any bond or the necessity of proving the inadequacy as a remedy of monetary damages, in which event the Deposit Amount will be applied as called for herein, or (2) if Buyer does not seek and successfully enforce specific performance, terminate this Agreement and (in addition to receiving a return of the Deposit Amount) seek to recover damages from Seller in an amount up to, but not exceeding, an amount equal to the Deposit Amount. If Buyer elects to terminate this Agreement pursuant to this
Section 9.02(b)(ii)
and seek damages in an amount up to the Deposit Amount, the Parties shall, within two (2) Business Days of Buyer’s election, (x) execute and deliver to the Escrow Agent a joint instruction letter directing the Escrow Agent to release the Deposit Amount to Buyer and (y) Seller shall be free to enjoy immediately all rights of ownership of the Assets and to sell, transfer, encumber, or otherwise dispose of the Assets to any Person without any restriction under this Agreement.
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(iii)
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If this Agreement is terminated by Seller in accordance with
Section 9.01(h)
, then the Parties shall have no additional remedies against one another as a result of such termination, and Seller shall be free to enjoy immediately all rights of ownership of the Assets and to sell, transfer, encumber, or otherwise dispose of the Assets to any Person without any restriction under this Agreement.
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(c)
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If this Agreement is terminated by either Buyer or Seller pursuant to
Section 9.01
for any reason other than as described in
Section 9.02(a)
, then, in any such case, the Parties shall, within two (2) Business Days of such termination, execute and deliver to the Escrow Agent a joint instruction letter directing the Escrow Agent to release the Deposit Amount to Buyer.
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(d)
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THE PARTIES FURTHER AGREE THAT, UNLESS AND UNTIL THE CLOSING OCCURS, THE SOLE AND EXCLUSIVE REMEDY OF SELLER AND ITS AFFILIATES AGAINST BUYER ARISING FROM OR RELATING TO THIS AGREEMENT AND THE CONTEMPLATED TRANSACTIONS, INCLUDING FOR ANY FAILURE OF BUYER TO EFFECT THE CLOSING OR OTHERWISE TO PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT (WHETHER WILLFULLY, INTENTIONALLY, UNINTENTIONALLY OR OTHERWISE), WHETHER IN CONTRACT, TORT OR OTHERWISE, SHALL BE THE RIGHTS AND REMEDIES AGAINST BUYER DESCRIBED IN THIS
SECTION 9.02
. EXCEPT FOR THE RIGHTS AND REMEDIES AGAINST BUYER DESCRIBED IN
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THIS
SECTION 9.02
, IN FURTHERANCE OF THE FOREGOING, (A) SELLER RELEASES BUYER, WAIVES ANY RIGHT OF RECOVERY FOR AND AGREES NOT TO SEEK ANY RECOVERY FOR ANY LOSS SUFFERED AS A RESULT OF ANY BREACH OF ANY COVENANT, OBLIGATION, REPRESENTATION OR WARRANTY IN THIS AGREEMENT OR THE FAILURE OF THE TRANSACTION TO BE CONSUMMATED, OR IN RESPECT OF ANY ORAL REPRESENTATION MADE OR ALLEGED TO HAVE BEEN MADE IN CONNECTION HEREWITH AND (B) THE MAXIMUM AGGREGATE MONETARY LIABILITY THAT BUYER SHALL HAVE IN CONNECTION WITH SUCH LOSS SHALL BE THE FORFEITURE OF THE DEPOSIT AMOUNT IN ACCORDANCE WITH THIS
SECTION 9.02
.
9.03
Return of Records Upon Termination. Upon termination of this Agreement,
(a) Buyer shall promptly return to Seller or destroy all title, engineering, geological and geophysical data, environmental assessments and reports, maps, documents and other information furnished by Seller to Buyer in connection with its due diligence investigation of the Assets in accordance with the Confidentiality Agreement and (b) an officer of Buyer shall certify Buyer’s compliance with the preceding clause (a) to Seller in writing.
ARTICLE 10
INDEMNIFICATION; REMEDIES
10.01
Survival. The survival periods for the various representations, warranties, covenants and agreements contained herein shall be as follows: (a) Fundamental Representations shall survive indefinitely, (b) the representations and warranties in
Section 3.04
shall survive for the applicable statute of limitations plus sixty (60) days, (c) the special warranty of Defensible Title set forth in the Instruments of Conveyance shall survive for twenty-four (24) months after Closing, (e) all covenants and agreements of Seller to be performed at or following the Closing shall survive until fully performed (f) all other representations and warranties and pre-closing covenants and agreements of Seller shall survive for twenty-four (24) months after Closing;
provided
that the covenants and agreements of Buyer and Seller set forth in
Section 2.07(b)
and
Section 12.02
shall survive for the applicable statute of limitations plus sixty (60) days and (g) all other representations, warranties, covenants and agreements of Buyer shall survive indefinitely. Representations, warranties, covenants and agreements shall be of no further force and effect after the date of their expiration;
provided
that there shall be no termination of any bona fide claim asserted pursuant to this Agreement with respect to such a representation, warranty, covenant or agreement prior to its expiration date. The indemnities in
Sections 10.02(a)
,
10.02(b)
,
10.03(a)
and
10.03(b)
shall terminate as of the termination date of each respective representation, warranty, covenant or agreement that is subject to indemnification thereunder, except in each case as to matters for which a specific written claim for indemnity has been delivered to the indemnifying person on or before such termination date. The indemnities in
Section 10.02(c)
with respect to the matters described in clause (a), clause (b), other than in connection with the Midwest School Gas Leak, and clause (c) of the definition of Retained Liabilities shall continue for twenty-four months following the Closing Date and the indemnities in
Section 10.02(c)
with respect to all Retained Liabilities other than the matters described in clause (a), clause (b), other than in connection with the Midwest School Gas Leak, and clause (c) of the definition of Retained Liabilities shall survive the Closing
indefinitely. All other indemnities, and all other provisions of this Agreement, shall survive the Closing without time limit except as may otherwise be expressly provided herein.
10.02
Indemnification and Payment of Damages by Seller. Except as otherwise limited in this
Article 10
, from and after the Closing, Seller shall defend, release, indemnify, and hold harmless Buyer Group from and against, and shall pay to the Buyer Group the amount of, any and all Damages, whether or not involving a Third Party claim or incurred in the investigation or defense of any of the same or in asserting, preserving, or enforcing any of their respective rights under this Agreement arising from, based upon, related to, or associated with:
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(a)
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any Breach of any representation or warranty made by Seller in this Agreement, or in any certificate delivered by Seller pursuant to this Agreement;
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(b)
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any Breach by Seller of any covenant, obligation, or agreement of Seller in this Agreement;
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(c)
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the Retained Liabilities;
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(d)
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the use or ownership of the Excluded Assets; and
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(e)
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the use or ownership of the Retained Assets.
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Notwithstanding anything to the contrary contained in this Agreement, from and after the Closing, the remedies provided in this
Article 10
,
Article 11
and
Section 12.17
, along with the special warranty of Defensible Title set forth in the Instruments of Conveyance, are Buyer Group’s exclusive legal remedies against Seller with respect to this Agreement and the Contemplated Transactions, including Breaches of the representations, warranties, covenants, obligations, and agreements of the Parties contained in this Agreement or the affirmations of such representations, warranties, covenants, obligations, and agreements contained in the certificate delivered by Seller at Closing pursuant to
Section 2.04
, and, except for the remedies provided in this
Article 10
,
Article 11
and
Section 12.17
, along with the special warranty of Defensible Title set forth in the Instruments of Conveyance,
BUYER RELEASES SELLER GROUP FROM ANY AND ALL CLAIMS, CAUSES OF ACTION, PROCEEDINGS, OR OTHER LEGAL RIGHTS AND REMEDIES OF BUYER GROUP, KNOWN OR UNKNOWN, WHICH BUYER MIGHT NOW OR SUBSEQUENTLY HAVE, BASED ON, RELATING TO OR IN ANY WAY ARISING OUT OF THIS AGREEMENT, THE CONTEMPLATED TRANSACTIONS, THE OWNERSHIP, USE OR OPERATION OF THE ASSETS PRIOR TO THE CLOSING, OR THE CONDITION, QUALITY, STATUS, OR NATURE OF THE ASSETS PRIOR TO THE CLOSING, INCLUDING ANY AND ALL CLAIMS RELATED TO ENVIRONMENTAL MATTERS OR LIABILITY OR VIOLATIONS OF ENVIRONMENTAL LAWS AND INCLUDING RIGHTS TO CONTRIBUTION UNDER THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION, AND LIABILITY ACT OF 1980, AS AMENDED, BREACHES OF STATUTORY OR IMPLIED WARRANTIES, NUISANCE, OR OTHER TORT ACTIONS, RIGHTS TO PUNITIVE DAMAGES, COMMON LAW RIGHTS OF CONTRIBUTION, AND RIGHTS UNDER INSURANCE MAINTAINED BY SELLER OR ANY OF SELLER’S AFFILIATES
.
Nothing in this Agreement shall release or relieve Seller for actual fraud.
10.03
Indemnification and Payment of Damages by Buyer. Except as otherwise limited in this
Article 10
and
Article 11
, from and after the Closing, Buyer shall assume, be responsible
for, pay on a current basis, and shall defend, release, indemnify, and hold harmless Seller Group from and against, and shall pay to Seller Group the amount of any and all Damages, whether or not involving a Third Party claim or incurred in the investigation or defense of any of the same or in asserting, preserving, or enforcing any of their respective rights under this Agreement arising from, based upon, related to, or associated with:
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(a)
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any Breach of any representation or warranty made by Buyer in this Agreement or in any certificate delivered by Buyer pursuant to this Agreement;
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(b)
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any Breach by Buyer of any covenant, obligation, or agreement of Buyer in this Agreement;
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(c)
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any Damages arising out of or relating to Buyer’s and its representatives’ access to the Assets and contracts, books and records and other documents and data relating thereto prior to the Closing, including Buyer’s title and environmental inspections pursuant to
Sections 11.01
and
11.10
, including Damages attributable to personal injury, illness or death, or property damage arising from such access; and
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(d)
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the Assumed Liabilities.
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Notwithstanding anything to the contrary contained in this Agreement, from and after Closing, the remedies provided in this
Article 10
and
Section 12.17
are Seller Group’s exclusive legal remedies for Buyer’s Breaches, all other legal rights and remedies being expressly waived by Seller Group.
10.04
Indemnity Net of Insurance. The amount of any Damages for which an indemnified Party is entitled to indemnity under this
Article 10
shall be reduced by the amount of insurance or indemnification proceeds actually received by the indemnified Party or its Affiliates with respect to such Damages (net of any collection costs, and excluding the proceeds of any insurance policy issued or underwritten, or indemnity granted, by the indemnified Party or its Affiliates).
10.05
Limitations on Liability.
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(a)
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Except with respect to the Fundamental Representations and the representations and warranties included in
Section 3.04
, if the Closing occurs, Seller shall not have any liability for any indemnification under
Section 10.02(a)
: (i) for any Damages with respect to any occurrence, claim, award or judgment that do not individually exceed One Hundred Thousand Dollars ($100,000) net to Seller’s interest (the “
Individual Claim Threshold
”); or (ii) unless and until the aggregate Damages for which claim notices for claims meeting the Individual Claim Threshold are delivered by Buyer exceed two percent (2%) of the unadjusted Purchase Price, and then only to the extent such Damages exceed two percent (2%) of the unadjusted Purchase Price. Except with respect to the Fundamental Representations and the representations and warranties included in
Section 3.04
, in no event will Seller be liable for Damages indemnified under
Section 10.02(a)
to the extent such damages, exceed twenty percent (20%) of the unadjusted Purchase Price. Notwithstanding anything herein to the contrary, in no event
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will Seller’s aggregate liability under this Agreement exceed one hundred percent (100%) of the unadjusted Purchase Price.
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(b)
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Notwithstanding anything herein to the contrary, the obligations and rights of the Parties hereunder, and the Damages for which any Party is obligated to indemnify or entitled to indemnity under
Section 11.02
or
Section 11.03
shall be determined and calculated by excluding and without giving effect to any qualifiers as to materiality or other similar qualifiers set forth in any representation or warranty (including any bringdown of such representation or warranty in any certificate delivered pursuant to this Agreement).
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(c)
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Notwithstanding anything in this Agreement to the contrary, Seller shall not be required to indemnify Buyer under
Section 10.02(a)
for any Asset Tax (or portion thereof) allocable to Buyer under
Section 12.02(c)
as a result of a breach by Seller of any representation or warranty set forth in
Section 3.04
, except to the extent the amount of such Asset Tax (or portion thereof) (i) exceeds the amount that would have been due absent such breach or (ii) was taken into account as an adjustment to the Purchase Price under
Section 2.03
,
Section 2.05(c)
,
Section 2.05(d)
or
Section 12.02(c)(iii)
.
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10.06
Procedure for Indemnification‑‑Third Party Claims.
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(a)
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Promptly after receipt by an indemnified party under
Section 10.02
or
10.03
of a Third Party claim for Damages or notice of the commencement of any Proceeding against it, such indemnified party shall, if a claim is to be made against an indemnifying Party under such Section, give notice to the indemnifying Party of the commencement of such claim or Proceeding, together with a claim for indemnification pursuant to this
Article 10
. The failure of any indemnified party to give notice of a Third Party claim or Proceeding as provided in this
Section 10.06
shall not relieve the indemnifying Party of its obligations under this
Article 10
except to the extent such failure results in insufficient time being available to permit the indemnifying Party to effectively defend against the Third Party claim or participate in the Proceeding or otherwise prejudices the indemnifying Party’s ability to defend against the Third Party claim or participate in the Proceeding.
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(b)
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If any Proceeding referred to in
Section 10.06(a)
is brought against an indemnified party and the indemnified party gives notice to the indemnifying Party of the commencement of such Proceeding, the indemnifying Party shall be entitled to participate in such Proceeding and, to the extent that it wishes (unless (i) the indemnifying Party is also a party to such Proceeding and the indemnified party determines in good faith that joint representation would be inappropriate, or (ii) the indemnifying Party fails to provide reasonable assurance to the indemnified party of its financial capacity to defend such Proceeding and provide indemnification with respect to such Proceeding), to assume the defense of such Proceeding with counsel reasonably satisfactory to the indemnified party, and, after notice from the indemnifying Party to the indemnified party of the indemnifying Party’s election to assume the defense of such Proceeding, the indemnifying Party shall not, as long as it diligently conducts such defense, be liable to the indemnified party under this
Article 10
for any fees of other counsel or any other expenses with respect to the defense of such Proceeding, in each case subsequently
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incurred by the indemnified party in connection with the defense of such Proceeding. Notwithstanding anything to the contrary in this Agreement, the indemnifying Party shall not be entitled to assume or continue control of the defense of any such Proceeding if (A) such Proceeding relates to or arises in connection with any criminal proceeding, (B) such Proceeding seeks an injunction or equitable relief against any indemnified Party, (C), in the case of an indemnification claim by Buyer pursuant to
Section 10.02(a)
(other than with respect to a Fundamental Representation) such Proceeding has or would reasonably be expected to result in Damages in excess of the amount set forth in
Section 10.05
(i.e., twenty percent (20%) of the unadjusted Purchase Price), or (D) the indemnifying Party has failed or is failing to defend in good faith such Proceeding. If the indemnifying Party assumes the defense of a Proceeding, no compromise or settlement of such Third Party claims or Proceedings may be effected by the indemnifying Party without the indemnified party’s prior written consent unless (A) there is no finding or admission of any violation of Legal Requirements or any violation of the rights of any Person and no effect on any other Third Party claims that may be made against the indemnified party, and (B) the sole relief provided is monetary damages that are paid in full by the indemnifying Party, and (C) the indemnified party shall have no liability with respect to any compromise or settlement of such Third Party claims or Proceedings effected without its consent.
10.07
Procedure for Indemnification – Other Claims. A claim for indemnification for any matter not involving a Third Party claim may be asserted by notice to the Party from whom indemnification is sought.
10.08
Indemnification of Group Members. The indemnities in favor of Buyer and Seller provided in
Section 10.08
and
Section 10.03
, respectively, shall be for the benefit of and extend to such Party’s present and former Group members. Any claim for indemnity under this
Article 10
by any Group member other than Buyer or Seller must be brought and administered by the relevant Party to this Agreement. No indemnified party other than Buyer and Seller shall have any rights against either Seller or Buyer under the terms of this
Article 10
except as may be exercised on its behalf by Buyer or Seller, as applicable, pursuant to this
Section 10.08
. Each of Seller and Buyer may elect to exercise or not exercise indemnification rights under this Section on behalf of the other indemnified party affiliated with it in its sole discretion and shall have no liability to any such other indemnified party for any action or inaction under this Section.
10.09
Extent of Representations and Warranties.
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(a)
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NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, EXCEPT AS AND TO THE EXTENT EXPRESSLY SET FORTH IN THIS AGREEMENT, THE CERTIFICATES DELIVERED BY SELLER AT CLOSING OR IN THE INSTRUMENTS OF CONVEYANCE, SELLER MAKES NO REPRESENTATIONS OR WARRANTIES WHATSOEVER, AND DISCLAIMS ALL LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, STATEMENT, OR INFORMATION MADE OR COMMUNICATED (ORALLY OR IN WRITING) TO BUYER (INCLUDING ANY OPINION, INFORMATION, OR ADVICE THAT MAY HAVE BEEN PROVIDED TO BUYER OR ITS AFFILIATES OR REPRESENTATIVES BY ANY AFFILIATES OR REPRESENTATIVES OF SELLER OR BY ANY INVESTMENT BANK OR INVESTMENT BANKING FIRM, ANY PETROLEUM ENGINEER OR ENGINEERING FIRM, SELLER’S COUNSEL, OR ANY OTHER AGENT,
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CONSULTANT, OR REPRESENTATIVE OF SELLER). WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EXCEPT AS AND TO THE EXTENT EXPRESSLY SET FORTH IN THIS AGREEMENT, THE CERTIFICATES DELIVERED BY SELLER AT CLOSING OR IN THE INSTRUMENTS OF CONVEYANCE, SELLER EXPRESSLY DISCLAIMS AND NEGATES ANY REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT COMMON LAW, BY STATUTE, OR OTHERWISE, RELATING TO (A) THE TITLE TO ANY OF THE ASSETS, (B) THE CONDITION OF THE ASSETS (INCLUDING ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS), IT BEING DISTINCTLY UNDERSTOOD THAT THE ASSETS ARE BEING SOLD “AS IS,” “WHERE IS,” AND “WITH ALL FAULTS AS TO ALL MATTERS,” (C) ANY INFRINGEMENT BY SELLER OF ANY PATENT OR PROPRIETARY RIGHT OF ANY THIRD PARTY, (D) ANY INFORMATION, DATA, OR OTHER MATERIALS (WRITTEN OR ORAL) FURNISHED TO BUYER BY OR ON BEHALF OF SELLER (INCLUDING THE EXISTENCE OR EXTENT OF HYDROCARBONS OR THE MINERAL RESERVES, THE RECOVERABILITY OF SUCH RESERVES, ANY PRODUCT PRICING ASSUMPTIONS, AND THE ABILITY TO SELL HYDROCARBON PRODUCTION AFTER THE CLOSING), AND (E) THE ENVIRONMENTAL CONDITION AND OTHER CONDITION OF THE ASSETS AND ANY POTENTIAL LIABILITY ARISING FROM OR RELATED TO THE ASSETS.
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(b)
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Buyer acknowledges and affirms that it has made and prior to Closing will make its own independent investigation, analysis, and evaluation of the Contemplated Transactions and the Assets (including Buyer’s own estimate and appraisal of the extent and value of Seller’s Hydrocarbon reserves attributable to the Assets and an independent assessment and appraisal of the environmental risks associated with the acquisition of the Assets). Buyer acknowledges that in entering into this Agreement, it has relied on the aforementioned investigation and the express representations and warranties of Seller contained in this Agreement and the Seller Closing Documents.
Buyer hereby irrevocably covenants to refrain from, directly or indirectly, asserting any claim, or commencing, instituting, or causing to be commenced, any Proceeding of any kind against Seller or its Affiliates, alleging facts contrary to the foregoing acknowledgment and affirmation.
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10.10
Compliance With Express Negligence Test
.
THE PARTIES AGREE THAT ANY INDEMNITY, DEFENSE, AND/OR RELEASE OBLIGATION ARISING UNDER THIS AGREEMENT SHALL APPLY WITHOUT REGARD TO THE NEGLIGENCE, STRICT LIABILITY, OR OTHER FAULT OF THE INDEMNIFIED PARTY, WHETHER ACTIVE, PASSIVE, JOINT, CONCURRENT, COMPARATIVE, CONTRIBUTORY OR SOLE, OR ANY PRE-EXISTING CONDITION, ANY BREACH OF CONTRACT OR BREACH OF WARRANTY, OR VIOLATION OF ANY LEGAL REQUIREMENT, EXCEPT TO THE EXTENT SUCH DAMAGES WERE OCCASIONED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE INDEMNIFIED PARTY OR ANY GROUP MEMBER THEREOF, IT BEING THE PARTIES’ INTENTION THAT DAMAGES TO THE EXTENT ARISING FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE INDEMNIFIED PARTY OR ANY GROUP MEMBER THEREOF NOT BE COVERED BY THE RELEASE, DEFENSE, OR INDEMNITY OBLIGATIONS IN THIS AGREEMENT.
The foregoing is a specifically bargained for allocation of risk among the Parties, which the Parties agree and acknowledge satisfies the express negligence rule and conspicuousness requirement under Texas law.
10.11
Limitations of Liability. Notwithstanding anything to the contrary contained in this Agreement,
IN NO EVENT SHALL SELLER OR BUYER EVER BE LIABLE FOR, AND EACH PARTY RELEASES THE OTHER FROM, ANY CONSEQUENTIAL, SPECIAL, INDIRECT, EXEMPLARY, OR PUNITIVE DAMAGES OR CLAIMS RELATING TO OR ARISING OUT OF THE CONTEMPLATED TRANSACTIONS OR THIS AGREEMENT
;
provided, however
, that any consequential, special, indirect, exemplary, or punitive damages recovered by a Third Party (including a Governmental Body, but excluding any Affiliate of any Group member) against a Person entitled to indemnity pursuant to this
Article 10
shall be included in the Damages recoverable under such indemnity. Notwithstanding the foregoing, lost profits shall not be excluded by this provision as to recovery hereunder to the extent constituting direct Damages.
10.12
No Duplication. Any liability for indemnification hereunder shall be determined without duplication of recovery by reason of the state of facts giving rise to such liability constituting a Breach of more than one representation, warranty, covenant, obligation, or agreement herein. Neither Buyer nor Seller shall be liable for indemnification with respect to any Damages based on any sets of facts to the extent the Purchase Price is being or has been adjusted pursuant to
Section 2.05
by reason of the same set of facts.
10.13
Disclaimer of Application of Anti-Indemnity Statutes. Seller and Buyer acknowledge and agree that the provisions of any anti-indemnity statute relating to oilfield services and associated activities shall not be applicable to this Agreement and/or the Contemplated Transactions.
10.14
Waiver of Right to Rescission. Seller and Buyer acknowledge that, following the Closing, the payment of money, as limited by the terms of this Agreement, shall be adequate compensation for Breach of any representation, warranty, covenant or agreement contained herein or for any other claim arising in connection with or with respect to the Contemplated Transactions. As the payment of money shall be adequate compensation, following Closing, Seller and Buyer waive any right to rescind this Agreement or any of the transactions contemplated hereby.
10.15
Joint and Several. Each Seller Party shall be jointly and severally liable for each representation, warranty, covenant, agreement, indemnification obligation and Breach of this Agreement and the Seller Closing Documents by each other Seller Party.
ARTICLE 11
TITLE MATTERS AND ENVIRONMENTAL MATTERS; PREFERENTIAL PURCHASE RIGHTS; CONSENTS
11.01
Title Examination and Access. Buyer may make or cause to be made at its expense such examination as it may desire of Seller’s title to the Assets. For such purposes, until the Closing, Seller shall give to Buyer and its Representatives access during Seller’s regular hours of business to originals or copies (including electronic copies if available) of all of the Records, files, records, contracts, correspondence, maps, data, reports, plats, abstracts of title, lease files, well files, unit files, division order files, production marketing files, title opinions, title files, title records, ownership maps, surveys, and any other information, data, records, and files that Seller or its Affiliates have relating in any way to the title to the Assets, the past or
present operation thereof, and the marketing of production therefrom, in accordance with, and subject to the limitations in,
Section 5.01
.
11.02
Preferential Purchase Rights. Seller shall, as promptly as practical but in no event later than ten (10) Business Days after the Execution Date, provide all notices necessary to comply with or obtain the waiver of all Preferential Purchase Rights which are applicable to the Contemplated Transactions prior to the Closing Date and in compliance with the contractual provisions applicable thereto. To the extent any such Preferential Purchase Rights are properly exercised by any holders thereof or the time period for exercising any Preferential Purchase Right has not expired and no notice of waiver has been received from the holder thereof, then the Asset(s) subject to any such Preferential Purchase Rights shall not be sold to Buyer and shall be excluded from the Assets and sale under this Agreement and shall be considered Retained Assets. The Purchase Price shall be adjusted downward by the Allocated Value of the Asset(s) so retained. If any holder of a Preferential Purchase Right initially elects to exercise that Preferential Purchase Right, but after the Closing Date, refuses to consummate the purchase of the affected Asset(s), or if the time period for exercising any Preferential Purchase Right expires after the Closing without exercise by the holder thereof (or if Seller receives a waiver of any Preferential Purchase Right after the Closing), then, in each case, subject to the Parties’ respective rights and remedies as to the obligation to consummate the Contemplated Transactions, Buyer shall purchase such Retained Asset(s) for the Allocated Value thereof (subject to the adjustments pursuant to
Section 2.05
), and the closing of such transaction shall take place on a date reasonably designated by Seller not more than one hundred eighty (180) days after the Closing Date.
11.03
Consents. Seller shall, as promptly as practical but in no event later than ten (10)
Business Days after the Execution Date, provide all notices required to comply with or obtain all Consents in compliance with the contractual provisions applicable thereto required for the transfer of the Assets and in accordance with
Section 5.04
.
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(a)
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If Seller fails to obtain any Consent necessary for the transfer of any Asset to Buyer, Seller’s failure shall be handled as follows:
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(i)
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If the Consent is not a Required Consent and has not been denied in writing, then the affected Assets shall nevertheless be conveyed at the Closing as part of the Assets. Any Damages that arise due to the failure to obtain such Consent shall be borne by Buyer.
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(ii)
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If the Consent is a Required Consent or a Consent that has been denied in writing, the Purchase Price shall be adjusted downward by the Allocated Value of the affected Assets (which affected Assets shall include all Leases and Wells affected by the Applicable Contract or Lease for which a Consent is refused), and the affected Assets shall be treated as Retained Assets.
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(b)
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Notwithstanding the provisions of
Section 11.03(a)
, if Seller obtains a Consent described in
Section 11.03(a)(ii)
within one hundred eighty (180) days after the Closing, then Seller shall promptly deliver conveyances of the affected Retained Asset(s) to Buyer and Buyer shall pay to Seller an amount equal to the Allocated Value of the
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affected Retained Asset(s) in accordance with wire transfer instructions provided by Seller (subject to the adjustments set forth in
Section 2.05)
.
11.04
Title Defects. Buyer shall notify Seller of Title Defects (“
Title Defect Notice(s)
”) promptly after the discovery thereof, but in no event later than 5:00 p.m. Central Time on June 26, 2017 (the “
Defect Notice Date
”). To be effective, each Title Defect Notice shall be in writing and include (a) a description of the alleged Title Defect and the Unit or portion thereof (including the Target Formation(s), as applicable) affected by such alleged Title Defect (each, a “
Title Defect Property
”), (b) the Allocated Value of each Title Defect Property, (c) supporting documents reasonably necessary for Seller to verify the existence of the alleged Title Defect and (d) the amount by which Buyer reasonably believes the Allocated Value of each Title Defect Property is reduced by such alleged Title Defect and the computations upon which Buyer’s belief is based (the “
Title Defect Value
”). To give Seller an opportunity to commence reviewing and curing Title Defects, Buyer agrees to use reasonable efforts to give Seller, on a weekly basis prior to the Defect Notice Date, written notice of all alleged Title Defects (as well as any claims that would be claims under the special warranty of Defensible Title set forth in the Instruments of Conveyance) discovered by Buyer during the preceding week;
provided
that the failure to provide any such preliminary notice shall not affect Buyer’s right to assert Title Defects at any time prior to the Defect Notice Date. Notwithstanding anything herein to the contrary, subject to Buyer’s rights under the Instruments of Conveyance, Buyer forever waives, and Seller shall have no liability for, Title Defects not asserted by a Title Defect Notice meeting substantially all of the requirements set forth in the preceding sentence by no later than 5:00 p.m. Central Time on the Defect Notice Date.
11.05
Title Defect Value. The Title Defect Value shall be determined pursuant to the following guidelines, where applicable:
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(a)
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if the Parties agree on the Title Defect Value, then that amount shall be the Title Defect Value;
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(b)
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if the Title Defect is an Encumbrance that is undisputed and liquidated in amount, then the Title Defect Value shall be the amount necessary to be paid to remove the Title Defect from the Title Defect Property;
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(c)
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if the Title Defect represents a discrepancy between (i) Seller’s Net Revenue Interest for the Title Defect Property and (ii) the Net Revenue Interest set forth for such Title Defect Property in
Schedule 2.07
, then the Title Defect Value shall be the product of the Allocated Value of such Title Defect Property,
multiplied
by a fraction, the numerator of which is the Net Revenue Interest decrease and the denominator of which is the Net Revenue Interest set forth for such Title Defect Property in
Schedule 2.07
;
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(d)
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if the Title Defect represents an increase of (i) Seller’s Working Interest for any Title Defect Property over (ii) the Working Interest set forth for such Title Defect Property in
Schedule 2.07
(in each case, except (A) increases resulting from contribution requirements with respect to defaulting co-owners from and after the Execution Date under applicable operating agreements, or (B) increases to the extent that such increases are accompanied by a proportionate increase in Seller’s Net Revenue Interest), then the
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Title Defect Value shall be determined by calculating the Net Revenue Interest that results from such larger Working Interest, determining what the Net Revenue Interest would be using such calculated Net Revenue Interest and the Working Interest set forth for such Well in
Schedule 2.07
and then calculating the adjustment in the manner set forth in clause (c) above;
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(e)
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if the Title Defect with respect to a Unit results from a discrepancy where (i) the actual Net Acres for such Title Defect Property as to the Target Formation(s) is less than (ii) the Net Acres set forth on
Schedule 2.07
for such Title Defect Property, then the Title Defect Value shall be calculated by multiplying the Net Acre deficiency for such Unit by the per-Net Acre Allocated Value of such Unit; and
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(f)
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if the Title Defect represents an obligation or Encumbrance upon or other defect in title to the Title Defect Property of a type not described above, then the Title Defect Value shall be determined by taking into account the Allocated Value of the Title Defect Property, the portion of the Title Defect Property affected by the Title Defect, the legal effect of the Title Defect, the potential economic effect of the Title Defect over the life of the Title Defect Property, the values placed upon the Title Defect by Buyer and Seller and such other reasonable factors as are necessary to make a proper evaluation.
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In no event, however, shall the total of the Title Defect Values related to a particular Asset exceed the Allocated Value of such Asset. The Title Defect Value with respect to a Title Defect shall be determined without any duplication of any costs or losses included in any other Title Defect Value hereunder, or for which Buyer otherwise receives credit in the calculation of the Purchase Price.
11.06
Seller’s Cure or Contest of Title Defects.
Seller may contest any asserted Title Defect or Buyer’s good faith estimate of the Title Defect Value as described in
Section 11.06(c)
and may seek to cure any asserted Title Defect as described in
Section 11.06(a)
.
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(a)
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Seller shall have the right to cure any Title Defect on or before sixty (60) days after the Defect Notice Date (the “
Title Defect Cure Period
”) by giving written notice to Buyer of its election to cure prior to the Closing Date. If Seller elects prior to the Closing to cure and:
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(i)
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actually cures the Title Defect (“
Cure
”) prior to the Closing, then the Asset affected by such Title Defect shall be conveyed to Buyer at the Closing, and no Purchase Price adjustment will be made for such Title Defect; or
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(ii)
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does not actually cure the Title Defect prior to the Closing, then Seller shall:
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(A)
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convey the affected Asset to Buyer and Buyer shall pay the Title Defect Value attributable to the affected Asset to the Escrow Agent at the Closing;
provided, however
that if Seller is unable to Cure the Title Defect by the end of the Title Defect Cure Period, then (i) Seller shall include a downward adjustment in the Final Settlement Statement equal to the Title
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Defect Value for such Asset and (ii) the Parties shall issue joint written instructions to the Escrow Agent to release such Title Defect Value to Buyer; or
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(B)
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if and only if Buyer agrees to this remedy in its sole discretion, indemnify Buyer against all Damages (up to the Allocated Value of the applicable Title Defect Property) resulting from such Title Defect with respect to such Title Defect Property pursuant to an indemnity agreement prepared by Seller in a form and substance reasonably acceptable to Buyer.
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(b)
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If Seller does not elect prior to the Closing to cure the Title Defect, subject to Seller’s continuing right to dispute the Title Defect, Seller shall convey the affected Asset to Buyer at the Closing and the Purchase Price shall be adjusted in accordance with the terms of this Agreement.
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(c)
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Seller and Buyer shall attempt to agree on the existence and Title Defect Value for all Title Defects. Representatives of the Parties, knowledgeable in title matters, shall meet during the Title Defect Cure Period for this purpose. However, either Party may at any time prior to the final resolution of the applicable Title Defect hereunder submit any disputed Title Defect or the Title Defect Value to arbitration in accordance with the procedures set forth in
Section 11.15
within ninety (90) days after the Closing. If a contested Title Defect cannot be resolved prior to Closing, except as otherwise provided herein, the Asset affected by such Title Defect shall nevertheless be conveyed to Buyer at the Closing, and the Purchase Price will be adjusted downward in an amount equal to the Title Defect Value as determined in good faith by Buyer for such Asset;
provided, however
, that if the Title Defect Value as finally decided between the Parties or by the Expert, as applicable, is less than the Title Defect Value used for the Purchase Price adjustment, then Seller shall include an upward adjustment in the Final Settlement Statement equal to the amount that the Title Defect Value (as of Closing) exceeds the Title Defect Value as finally determined.
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11.07
Limitations on Adjustments for Title Defects.
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(a)
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Notwithstanding the provisions of
Sections 11.04
,
11.05
and
11.06
, other than with respect to the special warranty of Defensible Title to be provided in the Instruments of Conveyance, Seller shall be obligated to adjust the Purchase Price to account for uncured Title Defects only to the extent that the sum of (x) the aggregate Title Defect Values of all uncured Title Defects (the “
Aggregate Title Defect Value
”) (after taking into account any offsetting Title Benefit Values)
plus
(y) the Aggregate Environmental Defect Value exceeds the Aggregate Defect Deductible. In addition, if the Title Defect Value(s) for any single Title Defect affecting a Title Defect Property or multiple Title Defect Properties (with all Title Defect Values of all affected Title Defect Properties attributable to a single Title Defect being aggregated for such calculation) is less than the De Minimis Title Defect Cost, such value shall not be considered in calculating the Aggregate Title Defect Value.
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(b)
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Notwithstanding anything contained in
Section 11.07(a)
to the contrary, for any Title Defect that is identified in a Title Defect Notice delivered on or prior to the Defect Notice Date, if (1) such Title Defect would constitute a breach of the special warranty of Defensible Title if such special warranty of Defensible Title were in effect as of such time, then (2) such Title Defect shall not be subject to the De Minimis Title Defect Cost or the Aggregate Defect Deductible.
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11.08
Title Benefits. If Seller discovers any right, circumstance or condition that operates (a) to increase the Net Revenue Interest for any Unit above that shown in
Schedule 2.07
, to the extent the same does not cause a greater than proportionate increase in Seller’s Working Interest therein above that shown in
Schedule 2.07
, (b) to decrease the Working Interest of Seller in any Unit below that shown in
Schedule 2.07
, to the extent the same causes a decrease in Seller’s Working Interest that is proportionately greater than the decrease in Seller’s Net Revenue Interest therein below that shown in
Schedule 2.07
, or (c) to increase the Net Acres for the Leases located in a Unit as to the applicable Target Formation(s) above the Net Acres set forth for such Unit on Schedule 2.07 (each, a “
Title Benefit
”), then Seller shall, from time to time and without limitation, have the right, but not the obligation, to give Buyer written notice of any such Title Benefits (a “
Title Benefit Notice
”), as soon as practicable but not later than 5:00 p.m. Central Time on the Defect Notice Date, stating with reasonable specificity the Assets affected (the “Title Benefit Properties”), the particular Title Benefit claimed, and Seller’s good faith estimate of the amount the additional interest increases the value of the affected Assets over and above that Asset’s Allocated Value (the “
Title Benefit Value
”). Buyer shall also promptly furnish Seller with written notice of any Title Benefit (including a description of such Title Benefit and the Title Benefit Properties with reasonable specificity) which is discovered by any of Buyer’s or any of its Affiliates’ Representatives, employees, title attorneys, landmen, or other title examiners. The Title Benefit Value of any Title Benefit shall be determined by the following methodology, terms and conditions (without duplication): (i) if the Parties agree on the Title Benefit Value, then that amount shall be the Title Benefit Value; (ii) if the Title Benefit represents a discrepancy between (A) Seller’s Net Revenue Interest for any Title Benefit Property and (B) the Net Revenue Interest set forth for such Title Benefit Property in
Schedule 2.07
then the Title Benefit Value shall be the product of the Allocated Value of such Title Benefit Property
multiplied
by a fraction, the numerator of which is the Net Revenue Interest increase and the denominator of which is the Net Revenue Interest set forth for such Title Benefit Property in
Schedule 2.07
; (iii) if the Title Benefit represents a decrease of (A) Seller’s Working Interest for any Title Benefit Property below (B) the Working Interest set forth for such Title Benefit Property in
Schedule 2.07
, then the Title Benefit Value shall be determined by calculating the Net Revenue Interest that results from such reduced Working Interest, determining what the Net Revenue Interest would be using such calculated Net Revenue Interest and the Working Interest set forth in
Schedule 2.07
; (iv) if the Title Benefit represents an increase in Net Acres for the Leases located in a Unit as to the applicable Target Formation(s), then the Title Benefit Amount shall be determined by multiplying the Net Acre increase with respect to such Unit by the per-Net Acre Allocated Value; and (v) if the Title Benefit is of a type not described above, then the Title Benefit Value shall be determined by taking into account the Allocated Value of the Title Benefit Property, the portion of such Title Benefit Property affected by such Title Benefit, the legal effect of the Title Benefit, the potential economic effect of the Title Benefit over the life of such Title Benefit Property, the values placed upon the Title Benefit
by Buyer and Seller and such other reasonable factors as are necessary to make a proper evaluation.
Seller and Buyer shall attempt to agree on the existence and Title Benefit Value for all Title Benefits on before the end of the Title Defect Cure Period. If Buyer agrees with the existence of the Title Benefit and Seller’s good faith estimate of the Title Benefit Value, then the Aggregate Title Defect Value shall be offset by the amount of the Title Benefit Value. If the Parties cannot reach agreement by the end of the Title Defect Cure Period, the Title Benefit or the Title Benefit Value in dispute shall be submitted to arbitration in accordance with the procedures set forth in
Section 11.15
within ninety (90) days after the end of the Title Defect Cure Period. Notwithstanding the foregoing, the Parties agree and acknowledge that there shall be no upward adjustment to the Purchase Price for any Title Benefit. If a contested Title Benefit cannot be resolved prior to the Closing, Seller shall convey the affected Asset to Buyer and Buyer shall pay for the Asset at the Closing in accordance with this Agreement as though there were no Title Benefits;
provided, however
, if the Title Benefit contest results in a determination that a Title Benefit exists, then the Aggregate Title Defect Value shall be offset by and adjusted downward by the Title Benefit Value as determined in such contest (which adjustment shall be made on the Final Settlement Statement).
11.09
Buyer’s Environmental Assessment. Beginning on the Execution Date and ending at 5:00 p.m. Central Time on the Defect Notice Date, Buyer shall have the right, at its sole cost, risk, liability, and expense, to conduct a Phase I Environmental Site Assessment of the Assets. During Seller’s regular hours of business and after providing Seller with written notice of any such activities no less than two (2) Business Days in advance (which written notice shall include the written permission of the operator (if other than Seller) and any applicable Third Party operator or other Third Party whose permission is legally required, which Seller shall reasonably cooperate with Buyer in securing), Buyer and its representatives shall be permitted to enter upon the Assets, inspect the same, review all of Seller’s files and records (other than those for which Seller has an attorney-client privilege) relating to the Assets, and generally conduct visual, non-invasive tests, examinations, and investigations. No sampling or other invasive inspections of the Assets may be conducted prior to Closing without Seller’s prior written consent. Buyer’s access shall be in accordance with, and subject to the limitations in,
Section 5.01
.
11.10
Environmental Defect Notice. Buyer shall notify Seller in writing of any Environmental Defect (an “
Environmental Defect Notice
”) promptly after the discovery thereof, but in no event later than 5:00 p.m. Central Time on the Defect Notice Date. To be effective, an Environmental Defect Notice shall include: (i) the Lease(s), Well(s) or Unit(s) affected; (ii) a reasonably detailed description of the alleged Environmental Defect and the basis for such assertion under the terms of this Agreement; (iii) Buyer’s good faith estimate of the Environmental Defect Value with respect to such Environmental Defect; and (iv) appropriate documentation reasonably necessary for Seller to substantiate Buyer’s claim and calculation of the Environmental Defect Value. Notwithstanding anything herein to the contrary, Buyer forever waives Environmental Defects not asserted by an Environmental Defect Notice meeting all of the requirements set forth in the preceding sentence no later than 5:00 p.m. Central Time on the Defect Notice Date.
11.11
Seller’s Exclusion, Cure or Contest of Environmental Defects. Seller, in its sole discretion, (x) may elect to exclude at Closing any Asset (which will become a Retained Asset) affected by an asserted Environmental Defect if the Environmental Defect Value with respect to such Environmental Defect equals or exceeds the Allocated Value of the affected Asset(s) and reduce the Purchase Price by the Allocated Value(s) thereof, (y) may contest any asserted Environmental Defect or Buyer’s good faith estimate of the Environmental Defect Value as described in
Section 11.11(b)
and/or (z) may seek to remediate or cure any asserted Environmental Defect to the extent of the Lowest Cost Response as described in
Section 11.11(a)
.
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(a)
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Seller shall have the right to remediate or cure an Environmental Defect to the extent of the Lowest Cost Response on or before the Closing Date. If Seller elects to pursue remediation or cure as set forth in this clause (a), Seller shall implement such remediation or cure in a manner that is in compliance with all applicable Legal Requirements in a prompt and timely fashion for the type of remediation or cure. If Seller elects to pursue remediation or cure and:
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(i)
|
completes a Complete Remediation of an Environmental Defect prior to the Closing Date, the affected Lease(s) or Well(s) shall be included in the Assets conveyed at Closing, and no Purchase Price adjustment will be made for such Environmental Defect;
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(ii)
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does not complete a Complete Remediation prior to the Closing, then Seller shall convey the affected Asset(s) to Buyer and the Purchase Price shall be reduced by an amount equal to the Environmental Defect Value for such Asset(s).
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(b)
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Seller and Buyer shall attempt to agree on the existence and Environmental Defect Value of all Environmental Defects. Representatives of the Parties, knowledgeable in environmental matters, shall meet for this purpose. However, a Party may at any time prior to the final resolution of the applicable Environmental Defect hereunder elect to submit any disputed item to arbitration in accordance with the procedures set forth in
Section 11.15
no later than ninety (90) days after the Closing. If a contested Environmental Defect cannot be resolved prior to the Closing, the affected Lease(s) or Well(s) (together with any other Assets appurtenant thereto) shall be included with the Assets conveyed to Buyer at Closing and the Purchase Price shall be reduced by the estimated Environmental Defect Value set forth in the Environmental Defect Notice for such contested Environmental Defect, and the final determination of the Environmental Defect and/or Environmental Defect Value shall be resolved pursuance to
Section 11.15
.
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11.12
Limitations. Notwithstanding the provisions of
Sections 11.10
and
11.11
, no adjustment to the Purchase Price for Environmental Defect Values shall be made unless and until the sum of (x) the aggregate value of all Environmental Defect Values (the “
Aggregate Environmental Defect Value
”)
plus
(y) the Aggregate Title Defect Value (after taking into account any offsetting Title Benefit Values) exceeds the Aggregate Defect Deductible. If the Environmental Defect Value with respect to any single Environmental Defect is less than the De Minimis Environmental Defect Cost, such cost shall not be considered in calculating the Aggregate Environmental Defect Value.
11.13
Exclusive Remedies. The rights and remedies granted to Buyer in this Agreement are the exclusive rights and remedies against Seller related to any Environmental Condition, or Damages related thereto.
EXCEPT AS SET FORTH IN THIS AGREEMENT, BUYER EXPRESSLY WAIVES, AND RELEASES SELLER GROUP FROM, ANY AND ALL OTHER RIGHTS AND REMEDIES IT MAY HAVE UNDER ENVIRONMENTAL LAWS AGAINST SELLER REGARDING ENVIRONMENTAL CONDITIONS, WHETHER FOR CONTRIBUTION, INDEMNITY, OR OTHERWISE.
The foregoing is a specifically bargained for allocation of risk among the Parties, which the Parties agree and acknowledge satisfies the express negligence rule and conspicuousness requirement under Texas law.
11.14
Casualty Loss and Condemnation. If, after the Execution Date but prior to Closing Date, any portion of the Assets is destroyed or damaged by fire or other casualty or is expropriated or taken in condemnation or under right of eminent domain (a “
Casualty Loss
”), subject to
Section 7.08
and
Section 8.08
, this Agreement shall remain in full force and effect, and Buyer shall nevertheless be required to close the Contemplated Transactions. In the event that the amount of the costs and expenses associated with repairing or restoring the Assets affected by such Casualty Loss exceeds Two Hundred Fifty Thousand Dollars ($250,000) net to Seller’s interest, (a) Seller must elect by written notice to Buyer prior to Closing either to (x) cause the Assets affected by such Casualty Loss to be repaired or restored, at Seller’s sole cost prior to the Closing Date or (y) reduce the Purchase Price by the amount of the Casualty Loss and (b) Seller shall retain all rights to insurance and other claims against Third Parties with respect to the applicable Casualty Loss except to the extent the Parties otherwise agree in writing. With respect to all other Casualty Losses, Seller shall assign and subrogate to Buyer all rights to insurance and other claims with respect to such Casualty Loss.
11.15
Expert Proceedings.
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(a)
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Each matter referred to this
Section 11.15
(a “
Disputed Matter
”) shall be conducted in accordance with the Commercial Arbitration Rules of the AAA as supplemented to the extent necessary to determine any procedural appeal questions by the Federal Arbitration Act (Title 9 of the United States Code), but only to the extent that such rules do not conflict with the terms of this
Section 11.15
. Any notice from one Party to the other referring a dispute to this
Section 11.15
shall be referred to herein as an “
Expert Proceeding Notice
”.
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(b)
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The arbitration shall be held before a one member arbitration panel (the “
Expert
”), mutually agreed by the Parties. The Expert must (a) be a neutral party who has never been an officer, director or employee of or performed material work for a Party or any Party’s Affiliate within the preceding five (5)-year period and (b) agree in writing to keep strictly confidential the specifics and existence of the dispute as well as all proprietary records of the Parties reviewed by the Expert in the process of resolving such dispute. The Expert must have not less than fifteen (15) years’ experience as a lawyer in the State of Wyoming with experience in exploration and production title and/or environmental issues, as appropriate based on the nature of the dispute(s). If disputes exist with respect to both title and environmental matters, the Parties may mutually agree to conduct separate arbitration proceedings with the title disputes and environmental disputes being submitted to separate Experts. If, within five (5) Business
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Days after delivery of an Expert Proceeding Notice, the Parties cannot mutually agree on an Expert, then within seven (7) Business Days after delivery of such Expert Proceeding Notice, each Party shall provide the other with a list of three (3) acceptable, qualified experts, and within ten (10) Business Days after delivery of such Expert Proceeding Notice, the Parties shall each separately rank from one through six in order of preference each proposed expert on the combined lists, with a rank of one being the most preferred expert and the rank of six being the least preferred expert, and provide their respective rankings to the Dallas office of the AAA. Based on those rankings, the AAA will appoint the expert with the combined lowest numerical ranking to serve as the Expert for the Disputed Matters. If the rankings result in a tie or the AAA is otherwise unable to determine an Expert using the Parties’ rankings, the AAA will appoint an arbitrator from one of the Parties’ lists as soon as practicable upon receiving the Parties’ rankings. Each Party will be responsible for paying one-half (1/2) of the fees charged by the AAA for the services provided in connection with this
Section 11.15(b)
.
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(c)
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Within five (5) Business Days following the receipt by either Party of the Expert Proceeding Notice, the Parties will exchange their written description of the proposed resolution of the Disputed Matters. Provided that no resolution has been reached, within five (5) Business Days following the selection of the Expert, the Parties shall submit to the Expert the following: (i) this Agreement, with specific reference to this
Section 11.15
and the other applicable provisions of this
Article 11
, (ii) Buyer’s written description of the proposed resolution of the Disputed Matters, together with any relevant supporting materials, (iii) Seller’s written description of the proposed resolution of the Disputed Matters, together with any relevant supporting materials, and (iv) the Expert Proceeding Notice.
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(d)
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The Expert shall make its determination by written decision within fifteen (15) days following receipt of the materials described in
Section 11.15(c)
above (the “
Expert Decision
”). The Expert Decision with respect to the Disputed Matters shall be limited to the selection of the single proposal for the resolution of the aggregate Disputed Matters proposed by a Party that best reflects the terms and provisions of this Agreement,
i.e.
, the Expert must select either Buyer’s proposal or Seller’s proposal for resolution of the aggregate Disputed Matters.
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(e)
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The Expert Decision shall be final and binding upon the Parties, without right of appeal, absent manifest error. In making its determination, the Expert shall be bound by the rules set forth in this
Article 11
. The Expert may consult with and engage disinterested Third Parties to advise the Expert, but shall disclose to the Parties the identities of such consultants. Any such consultant shall not have worked as an employee or consultant for either Party or its Affiliates during the five (5)-year period preceding the arbitration nor have any financial interest in the dispute.
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(f)
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The Expert shall act as an expert for the limited purpose of determining the specific matters submitted for resolution herein and shall not be empowered to award damages, interest, or penalties to either Party with respect to any matter. Each Party shall bear its own legal fees and other costs of preparing and presenting its case. All costs and
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expenses of the Expert shall be borne by the non-prevailing Party in any such arbitration proceeding.
ARTICLE 12
GENERAL PROVISIONS
12.01
Records. Seller, at Buyer’s cost and expense, shall deliver (a) all electronic Records to Buyer as soon as practical on or following the Closing Date (and shall use commercially reasonable efforts to deliver such electronic Records no later than three (3) Business Days following the Closing Date) and (b) originals (or copies where no original exists) of all other Records to Buyer (FOB Seller’s office) within thirty (30) days following the Closing Date;
provided
that Seller is entitled to retain the original Records related to accounting and Asset Taxes prior to the Effective Time and may provide Buyer with a copy in lieu of the original Record. With respect to any other original Records delivered to Buyer, subject to
Section 12.13
, (a) Seller shall be entitled to retain copies of such Records, and (b) Buyer shall retain any such original Records for at least seven (7) years beyond the Closing Date, during which seven (7)-year period Seller shall be entitled to obtain access to such Records, at reasonable business hours and upon prior notice to Buyer, so that Seller may make copies of such original Records, at its own expense, as may be reasonable or necessary for tax purposes or in connection with any Proceeding or Threatened Proceeding against Seller.
12.02
Expenses and Taxes.
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(a)
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Except as otherwise expressly provided in this Agreement, each Party to this Agreement shall bear its respective expenses incurred in connection with the preparation, execution, and performance of this Agreement and the Contemplated Transactions, including all fees and expenses of agents, representatives, counsel, and accountants.
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(b)
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Transfer Taxes and Fees
. All Transfer Taxes and all required documentary, filing and recording fees and expenses in connection with the filing and recording of the assignments, conveyances or other Instruments of Conveyance required to convey title to the Assets to Buyer shall be borne by Buyer.
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(i)
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From and after the Closing, Seller shall be allocated and bear all Asset Taxes attributable to (A) any Tax period ending prior to the Effective Time, and (B) the portion of any Straddle Period ending immediately prior to the Effective Time. From and after the Closing, Buyer shall be allocated and bear all Asset Taxes attributable to (x) any Tax period beginning on or after the Effective Time, and (y) the portion of any Straddle Period beginning on the Effective Time.
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(ii)
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For purposes of determining the allocations described in
Section 12.02(c)(i)
, (A) Asset Taxes that are attributable to the severance or production of Hydrocarbons (other than such Asset Taxes described in clause (C), below) shall be allocated to the period in which the severance or production giving rise to such Asset Taxes occurred, (B) Asset Taxes that are based upon or related to sales or receipts or imposed on a transactional basis (other than such Asset Taxes described in clause
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(A) or (C)), shall be allocated to the period in which the transaction giving rise to such Asset Taxes occurred, and (C) Asset Taxes that are ad valorem, property or other Asset Taxes imposed on a periodic basis pertaining to a Straddle Period shall be allocated between the portion of such Straddle Period ending immediately prior to the Effective Time and the portion of such Straddle Period beginning on the Effective Time by prorating each such Asset Tax based on the number of days in the applicable Straddle Period that occur before the Effective Time, on the one hand, and the number of days in such Straddle Period that occur after the Effective Time, on the other hand. Notwithstanding anything in this
Section 12.02(c)(ii)
to the contrary, Gross Products Taxes shall be deemed attributable to the period during which the production giving rise to the Gross Products Taxes occurs, and liability therefor apportioned between the Parties in accordance with the production attributable to their relative ownership prior to or after the Effective Time, as applicable. For the avoidance of doubt, (x) Gross Products Taxes based on the value of production of Hydrocarbons that occurs prior to the Effective Time, shall be allocated entirely to Seller and (y) Gross Products Taxes based on the value of production of Hydrocarbons that occurs after the Effective Time and payable in 2018 and 2019 (“
Post-Closing Gross Products Taxes
”) shall be allocated entirely to Buyer.
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(iii)
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To the extent the actual amount of an Asset Tax is not known at the time an adjustment is to be made with respect to such Asset Tax pursuant to
Section 2.03
,
Section 2.05(c)
or
Section 2.05(d)
, as applicable, the Parties shall utilize the most recent information available in estimating the amount of such Asset Tax for purposes of such adjustment. To the extent the actual amount of an Asset Tax (or the amount thereof paid or economically borne by a Party) is ultimately determined to be different than the amount (if any) that was taken into account in the Final Settlement Statement as finally determined pursuant to
Section 2.05(d)
, timely payments will be made from one Party to the other to the extent necessary to cause each Party to bear the amount of such Asset Tax that is allocable to such Party under this
Section 12.02(c)
.
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(d)
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Tax Returns and Payments
. Except as required by applicable Legal Requirements:
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(i)
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Seller shall be responsible for timely paying, or withholding and remitting, as applicable, (A) all Asset Taxes that are based on production of Hydrocarbons occurring on or prior to the Closing Date (including, for the avoidance of doubt, all Gross Products Taxes attributable to production that occurs prior to January 1, 2017, and all 2017 Gross Products Taxes attributable to production that occurs from January 1, 2017 through and including the Closing Date), (B) all Asset Taxes (other than the Asset Taxes described in clause (A)) that are ad valorem or property Taxes imposed on a periodic basis relating to any Tax period that ends before or includes the Effective Time, and (C) all other Asset Taxes required to be paid on or prior to the Closing Date, and Seller shall file with the appropriate Governmental Body any and all Tax Returns required to be filed with respect to such Asset Taxes.
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(ii)
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Buyer shall be responsible for timely paying, or withholding and remitting, as applicable, (A) all Asset Taxes that are based on production of Hydrocarbons occurring after the Closing Date through December 31, 2017 (including, for the avoidance of doubt, all 2017 Gross Products Taxes attributable to production that occurs after the Closing Date through December 31, 2017) and (B) all other Asset Taxes relating to any Tax period that ends before or includes the Effective Time that are required to be paid after the Closing Date (except, in each case, to the extent such Taxes are required to be paid, withheld or remitted by Seller in accordance with
Section 12.02(d)(i)
), and Buyer shall file with the appropriate Governmental Body any and all Tax Returns required to be filed with respect to such Asset Taxes. Buyer shall prepare all such Tax Returns relating to any Tax period ending before or including the Effective Time on a basis consistent with past practice except to the extent otherwise required by applicable Legal Requirements. Buyer shall provide Seller with a copy of any such Tax Return for Seller’s review reasonably in advance of the due date for the filing of such Tax Return, and Buyer shall incorporate all reasonable comments of Seller provided to Buyer in advance of the due date for the filing of such Tax Return.
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(e)
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The Parties agree that (x) this
Section 12.02(d)
is intended to solely address the timing and manner in which certain Tax Returns relating to Asset Taxes are filed and the Asset Taxes shown thereon are paid to the applicable taxing authority, and (y) nothing in this
Section 12.02(d)
shall be interpreted as altering the manner in which Asset Taxes are allocated to and economically borne by the Parties.
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(f)
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Cooperation
. Buyer and Seller agree to furnish or cause to be furnished to the other, upon request, as promptly as practicable, such information and assistance relating to the Assets, including access to books and records, as is reasonably necessary for the filing of all Tax Returns by Buyer or Seller, the making of any election relating to Taxes, the preparation for any audit by any taxing authority and the prosecution or defense of any claim, suit or proceeding relating to any Tax. The Parties agree to retain all books and records with respect to Tax matters pertinent to the Assets relating to any Tax period beginning before the Closing Date until sixty (60) days after the expiration of the statute of limitations of the respective Tax periods (taking into account any extensions thereof) and to abide by all record retention agreements entered into with any taxing authority.
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(g)
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Refunds
. Seller shall be entitled to any and all refunds of Asset Taxes allocated to Seller pursuant to
Section 12.02(c)
, and Buyer shall be entitled to any and all refunds of Asset Taxes allocated to Buyer pursuant to
Section 12.02(c)
. If a Party receives a refund of Asset Taxes to which the other Party is entitled pursuant to this
Section 12.02(f)
, the first Party shall promptly pay such amount to the other Party, net of any reasonable costs or expenses incurred by the first Party in procuring such refund.
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12.03
Notices. All notices, consents, waivers, and other communications under this Agreement must be in writing and shall be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by fax (with written confirmation of receipt), (c) sent by electronic mail with receipt acknowledged, with the receiving Party affirmatively obligated to promptly acknowledge receipt, or (d) when received by the addressee,
if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate recipients, addresses, and fax numbers set forth below (or to such other recipients, addresses, or fax numbers as a Party may from time to time designate by notice to the other Party):
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NOTICES TO BUYER
:
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Denbury Onshore, LLC
5320 Legacy Dr.
Plano, TX 75024
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Attention:
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John Kleckner
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James S. Matthews
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Fax: (972) 535-4708
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E-mail:
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john.kleckner@denbury.com
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jim.matthews@denbury.com
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With a copy (which shall not constitute notice) to:
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Sidley Austin LLP
2021 McKinney Avenue, Suite 2000
Dallas, TX 75201
Attention: Marc Rose
Fax: 214-981-3400
Email: mrose@sidley.com
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NOTICES TO SELLER:
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c/o Linn Energy Holdings, LLC
600 Travis Street, Suite 5100
Houston, Texas 77002
Attention: Candice J. Wells, General Counsel
Fax: (832) 726-5955
E-mail: CWells@linnenergy.com
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With a copy (which shall not constitute notice) to:
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Kirkland & Ellis LLP
600 Travis Street, 33rd Floor
Houston, TX 77002
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Attention:
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Anthony Speier, P.C.
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Rahul Vashi
|
Fax: (713) 835-3601
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E-mail:
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anthony.speier@kirkland.com
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rahul.vashi@kirkland.com
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12.04
Governing Law; Jurisdiction; Service of Process; Jury Waiver.
THIS AGREEMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THE RIGHTS, DUTIES AND THE LEGAL RELATIONS AMONG THE PARTIES HERETO AND THERETO SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCLUDING ANY CONFLICTS OF LAW RULE OR PRINCIPLE THAT MIGHT REFER CONSTRUCTION OF SUCH PROVISIONS TO THE LAWS OF ANOTHER JURISDICTION;
PROVIDED, HOWEVER,
THAT ANY MATTERS RELATED TO REAL PROPERTY SHALL BE GOVERNED BY THE LAWS OF THE STATE OF WYOMING. WITHOUT LIMITING THE PARTIES’ AGREEMENT TO ARBITRATE IN
SECTION 11.15
OR THE DISPUTE RESOLUTION PROCEDURE PROVIDED IN
SECTION 2.05(D)
WITH RESPECT TO DISPUTES ARISING THEREUNDER, THE PARTIES HERETO CONSENT TO THE EXERCISE OF JURISDICTION IN PERSONAM BY THE FEDERAL COURTS OF THE UNITED STATES LOCATED IN HOUSTON, TEXAS OR THE STATE COURTS LOCATED IN HOUSTON, TEXAS FOR ANY ACTION ARISING OUT OF THIS AGREEMENT, ANY TRANSACTION DOCUMENTS, OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR FROM THIS AGREEMENT, ANY TRANSACTION DOCUMENTS OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY SHALL BE EXCLUSIVELY LITIGATED IN SUCH COURTS DESCRIBED ABOVE HAVING SITES IN HOUSTON, TEXAS AND EACH PARTY IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURTS SOLELY IN RESPECT OF ANY PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT. EACH PARTY HERETO VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENTS, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY TRANSACTION DOCUMENTS OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY. THE PARTIES FURTHER AGREE, TO THE EXTENT PERMITTED BY LAW, THAT A FINAL AND NONAPPEALABLE JUDGMENT AGAINST A PARTY IN ANY ACTION OR PROCEEDING CONTEMPLATED ABOVE SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER JURISDICTION WITHIN OR OUTSIDE THE UNITED STATES BY SUIT ON THE JUDGMENT, A CERTIFIED OR EXEMPLIFIED COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND AMOUNT OF SUCH JUDGMENT. TO THE EXTENT THAT A PARTY OR ANY OF ITS AFFILIATES HAS ACQUIRED, OR HEREAFTER MAY ACQUIRE, ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, SUCH PARTY (ON ITS OWN BEHALF AND ON BEHALF OF ITS AFFILIATES) HEREBY IRREVOCABLY (I) WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS
WITH RESPECT TO THIS AGREEMENT AND (II) SUBMITS TO THE PERSONAL JURISDICTION OF ANY COURT DESCRIBED IN THIS
SECTION 12.04
.
12.05
Further Assurances. Each Party agrees (a) to furnish upon request to each other such further information, (b) to execute, acknowledge, and deliver to each other such other documents, and (c) to do such other acts and things, all as the other Party may reasonably request for the purpose of carrying out the intent of this Agreement and the documents referred to in this Agreement.
12.06
Waiver. The rights and remedies of the Parties are cumulative and not alternative. Neither the failure nor any delay by either Party in exercising any right, power, or privilege under this Agreement or the documents referred to in this Agreement shall operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege shall preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable Legal Requirement, (a) no claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged by one Party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other Party, (b) no waiver that may be given by a Party shall be applicable except in the specific instance for which it is given, and (c) no notice to or demand on one Party shall be deemed to be a waiver of any obligation of such Party or of the right of the Party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement.
12.07
Entire Agreement and Modification. Subject to
Section 12.13
, this Agreement supersedes all prior discussions, communications, and agreements (whether oral or written) between the Parties with respect to its subject matter and constitutes (along with the documents referred to in this Agreement) a complete and exclusive statement of the terms of the agreement between the Parties with respect to its subject matter. This Agreement may not be amended or otherwise modified except by a written agreement executed by both Parties. No representation, promise, inducement, or statement of intention with respect to the subject matter of this Agreement has been made by either Party that is not embodied in this Agreement together with the documents, instruments, and writings that are delivered pursuant hereto, and neither Party shall be bound by or liable for any alleged representation, promise, inducement, or statement of intention not so set forth. In the event of a conflict between the terms and provisions of this Agreement and the terms and provisions of any Schedule or Exhibit hereto, the terms and provisions of this Agreement shall govern, control, and prevail.
12.08
Assignments, Successors, and No Third Party Rights. Neither Party may assign any of its rights, liabilities, covenants, or obligations under this Agreement without the prior written consent of the other Party (which consent may be granted or denied at the sole discretion of the other Party);
provided
that Buyer (without the consent of Seller) may assign all or part of its rights under this Agreement (including its rights to receive the Assets) to one or more Affiliates, and (a) any assignment (other than an assignment by Buyer to an Affiliate) made without such consent shall be void, and (b) in the event of such consent (or an assignment by Buyer to an Affiliate), such assignment nevertheless shall not relieve such assigning Party of any of its obligations under this Agreement without the prior written consent of the other Party. Subject to the preceding sentence, this Agreement shall apply to, be binding in all respects upon,
and inure to the benefit of the successors and permitted assigns of the Parties. Nothing expressed or referred to in this Agreement or any other agreement contemplated herein shall be construed to give any Person other than the Parties and their permitted assignees (and Buyer Group and Seller Group who are entitled to indemnification under
Article 10
), any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. Subject to the preceding sentence, this Agreement, any other agreement contemplated herein, and all provisions and conditions hereof and thereof, are for the sole and exclusive benefit of the Parties and such other agreements (and Buyer Group and Seller Group who are entitled to indemnification under
Article 10
), and their respective successors and permitted assigns.
12.09
Severability. If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement shall remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree shall remain in full force and effect to the extent not held invalid or unenforceable. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.
12.10
Article and Section Headings, Construction. The headings of Sections, Articles, Exhibits, and Schedules in this Agreement are provided for convenience only and shall not affect its construction or interpretation. All references to “Section,” “Article,” “Exhibit,” or “Schedule” refer to the corresponding Section, Article, Exhibit, or Schedule of this Agreement. Unless expressly provided to the contrary, the words “hereunder,” “hereof,” “herein,” and words of similar import are references to this Agreement as a whole and not any particular Section, Article, Exhibit, Schedule, or other provision of this Agreement. Each definition of a defined term herein shall be equally applicable both to the singular and the plural forms of the term so defined. All words used in this Agreement shall be construed to be of such gender or number, as the circumstances require. Unless otherwise expressly provided, the word “including” does not limit the preceding words or terms and (in its various forms) means including without limitation. If the date specified in this Agreement for giving any notice or taking any action is not a Business Day (or if the period during which any notice is required to be given or any action taken expires on a date which is not a Business Day), then the date for giving such notice or taking such action (or the expiration date of such period during which notice is required to be given or action taken) shall be the next day which is a Business Day. Each Party has had substantial input into the drafting and preparation of this Agreement and has had the opportunity to exercise business discretion in relation to the negotiation of the details of the Contemplated Transactions. This Agreement is the result of arm’s-length negotiations from equal bargaining positions. This Agreement shall not be construed against either Party, and no consideration shall be given or presumption made on the basis of who drafted this Agreement or any particular provision hereof or who supplied the form of Agreement.
12.11
Counterparts. This Agreement may be executed and delivered (including by facsimile or e-mail transmission) in one or more counterparts, each of which shall be deemed to be an original copy of this Agreement and all of which, when taken together, shall be deemed to constitute one and the same agreement.
12.12
Press Release. Subject to
Section 12.13
, any Party wishes to make a press release or other public announcement respecting this Agreement or the Contemplated Transactions, such Party will provide the others with a draft of the press release or other public announcement for review at least one (1) Business Days prior to the time that such press release or other public announcement is to be made. The Parties will attempt in good faith to expeditiously reach agreement on such press release or other public announcement and the contents thereof;
provided
that failure to reach such agreement shall not prohibit a Party from (a) making a press release or public announcement that does not include the other Party’s name or (b) making any filings or disclosures required by Legal Requirements or any standards or rules of any stock exchange to which such Party or any of its Affiliates is subject. Failure to provide comments back to the other Party within two (2) Business Days of receipt of the draft release or announcement will be deemed consent to the public disclosure of such press release or other public announcement and the content thereof. Seller and Buyer shall each be liable for the compliance of their respective Affiliates with the terms of this
Section 12.12
. Notwithstanding anything to the contrary in this
Section 12.12
, no Party shall issue a press release or other public announcement that includes the name of a non-releasing Party or its Affiliates without the prior written consent of such non-releasing Party (which consent may be withheld in such non-releasing Party’s sole discretion).
12.13
Confidentiality. The Confidentiality Agreement shall terminate on the Closing Date and will thereafter be of no further force or effect. Each Party shall keep confidential, and cause its Affiliates and instruct its Representatives to keep confidential, all terms and provisions of this Agreement, except (a) as required by Legal Requirements or any standards or rules of any stock exchange to which such Party or any of its Affiliates is subject, (b) for information that is available to the public on the Closing Date, or thereafter becomes available to the public other than as a result of a breach of this
Section 12.13
, (c) to the extent required to be disclosed in connection with complying with or obtaining a waiver of any Preferential Purchase Right or Consent, (d) to any Affiliate or Representative, (e) in the case of Buyer, to any potential purchase of (or joint venture partner with respect to) all or any portion of the Assets and any direct and/or indirect (current or potential) investor or lender, and (f) to the extent that such Party must disclose the same in any Proceeding brought or Threatened by or against it to enforce or defend its rights under this Agreement. This
Section 12.13
shall not prevent either Party from recording the Instruments of Conveyance delivered at the Closing or from complying with any disclosure requirements of Governmental Bodies that are applicable to the transfer of the Assets. Additionally, from and after the Closing, Seller shall keep confidential and not use any of the Records other than for tax purposes or in connection with any Proceeding or Threatened Proceeding against Seller. The covenant set forth in this Section shall terminate two (2) years after the Closing Date.
12.14
Name Change. As promptly as practicable, but in any event within sixty (60) days after the Closing Date, Buyer shall eliminate, remove or paint over the use of the name “Linn” and variants thereof from the Assets, and, except with respect to such grace period for eliminating the existing usage, shall have no right to use any logos, trademarks, or trade names belonging to Seller or any of its Affiliates. Buyer shall be solely responsible for any direct or indirect costs or expenses resulting from the change in use of name and any resulting notification or approval requirements.
12.15
Preparation of Agreement. Both Seller 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.
12.16
Appendices, Exhibits and Schedules. All of the Appendices, Exhibits and Schedules referred to in this Agreement are hereby incorporated into this Agreement by reference and constitute a part of this Agreement. Each Party to this Agreement and its counsel has received a complete set of Appendices, Exhibits and Schedules prior to and as of the execution of this Agreement.
12.17
Specific Performance. Each Party hereby acknowledges and agrees that the rights of each Party to consummate the Contemplated Transactions are special, unique and of extraordinary character and that, if before Closing, Seller, or after Closing, Buyer or Seller, violates or fails or refuses to perform any covenant or agreement made by it herein, the non-breaching Parties may be without an adequate remedy at Law. If before Closing, Seller, or after Closing, Buyer or Seller, violates or fails or refuses to perform any covenant or agreement made by such Party herein, the non-breaching Parties, subject to the terms hereof and in addition to any remedy at Law for damages or other relief permitted under this Agreement, may (at any time prior to the valid termination of this Agreement pursuant to Article 9) institute and prosecute an action in any court of competent jurisdiction to enforce specific performance of such covenant or agreement or seek any other equitable relief, without the necessity of proving actual damages or posting of a bond. For clarity, Seller shall only have the right to seek specific performance of Buyer’s covenants and agreements contained herein following the Closing.
12.18
Non-Recourse. This Agreement may only be enforced against, and any Damages based upon, arising out of, or related to this Agreement or the negotiation, execution or performance of this Agreement may only be brought against, the entities that are expressly named as Parties hereto and then only with respect to the specific obligations set forth herein or therein with respect to such Party. For further clarity, no past, present or future director, manager, officer, employee, incorporator, member, partner, stockholder, Affiliate, agent, attorney or other representative (in each case, in their capacities as such) of any Party hereto or of any Affiliate of any Party hereto or any such past, present or future director, manager, officer, employee, incorporator, member, partner, stockholder, Affiliate, agent, attorney or other representative (in each case, in their capacities as such) (collectively, a “Party Affiliate”), or any of their successors or permitted assigns, shall have any liability for any obligations or liabilities of any Party hereto or thereto under this Agreement or for any Damages based on, in respect of or by reason of the transactions contemplated hereby or thereby.
[
Signature Page Follows
]
IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement as of the date first written above.
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SELLER
:
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Linn Energy Holdings, LLC
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By:
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/s/ David B. Rottino
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Name:
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David B. Rottino
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Title:
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Executive Vice President and Chief Financial Officer
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Linn Operating, LLC
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By:
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/s/ David B. Rottino
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Name:
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David B. Rottino
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Title:
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Executive Vice President and Chief Financial Officer
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Signature Page to Purchase and Sale Agreement
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BUYER
:
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Denbury Onshore, LLC
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By:
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/s/ Matthew Dahan
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Name:
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Matthew Dahan
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Title:
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Vice President – North Region Production Operations
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Signature Page to Purchase and Sale Agreement
Exhibit 2.5
Execution Version
PURCHASE AND SALE AGREEMENT
DATED JUNE 1, 2017,
BY AND BETWEEN
LINN ENERGY HOLDINGS, LLC, LINN OPERATING, LLC, AND LINN MIDSTREAM, LLC
AS SELLER,
AND
BRIDGE ENERGY LLC
AS BUYER
TABLE OF CONTENTS
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ARTICLE 1 DEFINITIONS
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1
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ARTICLE 2 SALE AND TRANSFER OF ASSETS; CLOSING
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22
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2.01
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Assets
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22
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2.02
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Purchase Price; Deposit
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22
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2.03
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Closing; Preliminary Settlement Statement
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22
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2.04
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Closing Obligations
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23
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2.05
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Allocations and Adjustments
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24
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2.06
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Assumption
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28
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2.07
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Allocation of Purchase Price
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29
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ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER
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29
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3.01
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Organization and Good Standing
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29
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3.02
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Authority; No Conflict
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30
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3.03
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Bankruptcy
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31
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3.04
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Taxes
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31
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3.05
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Legal Proceedings
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31
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3.06
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Brokers
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31
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3.07
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Compliance with Legal Requirements
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31
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3.08
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Prepayments
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31
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3.09
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Imbalances
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32
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3.10
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Material Contracts
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32
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3.11
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Consents and Preferential Purchase Rights
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33
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3.12
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Permits
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33
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3.13
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Current Commitments
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33
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3.14
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Environmental Laws
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33
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3.15
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Wells
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34
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3.16
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Non-Consent Operations
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34
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3.17
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Condemnation and Eminent Domain
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34
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3.18
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Payment of Royalties; Compliance with Leases
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34
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3.19
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Bonds and Credit Support
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34
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3.20
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Payout Status
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34
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3.21
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Employee Benefits
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35
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3.22
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Suspense Accounts
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35
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3.23
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Drilling Obligations
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35
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3.24
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Disclosures with Multiple Applicability; Materiality
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35
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ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER
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36
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4.01
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Organization and Good Standing
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36
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4.02
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Authority; No Conflict
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36
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4.03
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Certain Proceedings
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37
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4.04
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Knowledgeable Investor
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37
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4.05
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Qualification
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37
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4.06
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Brokers
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37
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4.07
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Financial Ability
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37
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4.08
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Securities Laws
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37
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4.09
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Due Diligence
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38
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4.10
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Basis of Buyer’s Decision
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38
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4.11
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Business Use, Bargaining Position
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38
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4.12
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Bankruptcy
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39
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ARTICLE 5 COVENANTS OF SELLER
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39
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5.01
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Access and Investigation
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39
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5.02
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Operation of the Assets
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40
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5.03
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Insurance
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42
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5.04
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Consent and Waivers
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42
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5.05
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Amendment to Schedules
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42
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5.06
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Successor Operator
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42
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ARTICLE 6 OTHER COVENANTS
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43
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6.01
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Notification and Cure
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43
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6.02
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Satisfaction of Conditions
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43
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6.03
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Replacement of Insurance, Bonds, Letters of Credit, and Guaranties
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43
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6.04
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Governmental Reviews
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44
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6.05
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Financing Matters
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44
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6.06
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HSR Act
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46
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6.07
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Override Assignment
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46
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ARTICLE 7 CONDITIONS PRECEDENT TO BUYER’S OBLIGATION TO CLOSE
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47
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7.01
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Accuracy of Representations
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47
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7.02
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Seller’s Performance
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47
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7.03
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No Proceedings
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47
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7.04
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No Orders
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47
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7.05
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Necessary Consents and Approvals
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47
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7.06
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HSR Act
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48
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7.07
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Closing Deliverables
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48
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ARTICLE 8 CONDITIONS PRECEDENT TO SELLER’S OBLIGATION TO CLOSE
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48
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8.01
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Accuracy of Representations
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48
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8.02
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Buyer’s Performance
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48
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8.03
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No Proceedings
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48
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8.04
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No Orders
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48
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8.05
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Necessary Consents and Approvals
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48
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8.06
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HSR Act
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48
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8.07
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Closing Deliverables
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49
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ARTICLE 9 TERMINATION
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49
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9.01
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Termination Events
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49
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9.02
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Effect of Termination; Distribution of the Deposit Amount
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50
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9.03
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Return of Records Upon Termination
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52
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ARTICLE 10 INDEMNIFICATION; REMEDIES
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52
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10.01
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Survival
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52
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10.02
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Indemnification and Payment of Damages by Seller
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53
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10.03
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Indemnification and Payment of Damages by Buyer
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54
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10.04
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Indemnity Net of Insurance
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54
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10.05
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Limitations on Liability
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55
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10.06
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Procedure for Indemnification‑‑Third Party Claims
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55
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10.07
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Procedure for Indemnification – Other Claims
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56
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10.08
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Indemnification of Group Members
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56
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10.09
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Extent of Representations and Warranties
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56
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10.10
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Compliance With Express Negligence Test
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57
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10.11
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Limitations of Liability
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58
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10.12
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No Duplication
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58
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10.13
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Disclaimer of Application of Anti-Indemnity Statutes
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58
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10.14
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Waiver of Right to Rescission
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58
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10.15
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Joint and Several
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58
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ARTICLE 11 TITLE MATTERS AND ENVIRONMENTAL MATTERS; PREFERENTIAL PURCHASE RIGHTS; CONSENTS
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59
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11.01
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Title Examination and Access
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59
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11.02
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Preferential Purchase Rights
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59
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11.03
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Consents
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59
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11.04
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Title Defects
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60
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11.05
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Title Defect Value
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61
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11.06
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Seller’s Cure or Contest of Title Defects
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62
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11.07
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Limitations on Adjustments for Title Defects
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63
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11.08
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Title Benefits
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63
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11.09
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Buyer’s Environmental Assessment
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64
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11.10
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Environmental Defect Notice
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65
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11.11
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Seller’s Exclusion, Cure or Contest of Environmental Defects
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65
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11.12
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Limitations
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66
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11.13
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Exclusive Remedies
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67
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11.14
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Casualty Loss and Condemnation
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67
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11.15
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Expert Proceedings
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67
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ARTICLE 12 EMPLOYMENT MATTERS
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69
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12.01
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Seller Benefit Plans
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69
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12.02
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Pre-Employee Start Date Claims under Seller Benefit Plans
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69
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12.03
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Available Employees’ Offers and Post-Employee Start Date Employment and Benefits
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69
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12.04
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Savings Plans
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71
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12.05
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Post-Employee Start Date Employment Claims
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71
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12.06
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Buyer Welfare Plans
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71
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12.07
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WARN Act
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71
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12.08
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No Third Party Beneficiary Rights
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72
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12.09
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Severance Obligation
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72
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ARTICLE 13 GENERAL PROVISIONS
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72
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13.01
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Records
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72
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13.02
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Expenses
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72
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13.03
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Notices
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74
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13.04
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Governing Law; Jurisdiction; Service of Process; Jury Waiver
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75
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13.05
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Further Assurances
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77
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13.06
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Waiver
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77
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13.07
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Entire Agreement and Modification
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77
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13.08
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Assignments, Successors, and No Third Party Rights
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77
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13.09
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Severability
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78
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13.10
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Article and Section Headings, Construction
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78
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13.11
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Counterparts
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78
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13.12
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Press Release
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79
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13.13
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Confidentiality
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79
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13.14
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Name Change
|
79
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13.15
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Preparation of Agreement
|
80
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13.16
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Appendices, Exhibits and Schedules
|
80
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EXHIBITS AND SCHEDULES
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Exhibit A
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Leases
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Exhibit A-1
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Reserved
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Exhibit A-2
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Fee Minerals
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Exhibit A-3
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Easements and Surface Interests
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Exhibit A-4
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Field Offices and Other Real Property
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Exhibit A-5
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Pipeline and Gathering Systems
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Exhibit A-6
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Surface Deeds
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Exhibit A-7
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Vehicles
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Exhibit B
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Wells
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Exhibit C
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Personal Property
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Exhibit D
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Form of Assignment and Bill of Sale
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Exhibit E
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Excluded Assets
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Exhibit F
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Severance Plan
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Exhibit G
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Form of Deed
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Exhibit H
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Form of Certificate
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Exhibit I
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Reserved
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Exhibit J
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Available Employee Limits
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Exhibit K
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Transition Services Agreement
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Schedule 1.1(a)
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Carbon Credits
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Schedule 2.02(b)
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Operating Contingencies
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Schedule 2.07(a)
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Allocation of Purchase Price
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Schedule 2.07(b)
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Secondary Allocation of Purchase Price
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Schedule 3.02(b)
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No Conflict
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Schedule 3.04
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Taxes
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Schedule 3.05
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Assumed Litigation and Retained Litigation
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Schedule 3.07
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Compliance with Legal Requirements
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Schedule 3.09
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Imbalances
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Schedule 3.10
|
Material Contracts
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Schedule 3.11
|
Consents and Preferential Purchase Rights
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Schedule 3.12
|
Permits
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Schedule 3.13
|
Current Commitments
|
Schedule 3.14
|
Environmental Laws
|
Schedule 3.15
|
Wells
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Schedule 3.18
|
Payment of Royalties; Compliance with Leases
|
Schedule 3.19
|
Bonds and Credit Support
|
Schedule 3.20
|
Payout Status
|
Schedule 3.21(a)
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Employee Benefits
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Schedule 3.22
|
Suspense Accounts
|
Schedule 5.02
|
Certain Authorized Pre-Closing Actions
|
PURCHASE AND SALE AGREEMENT
This PURCHASE AND SALE AGREEMENT (this “
Agreement
”) is made as of June 1, 2017 (the “
Execution Date
”), by and between Linn Energy Holdings, LLC, a Delaware limited liability company (“
LEH
”), Linn Operating, LLC, a Delaware limited liability company (“
LOI
”), and Linn Midstream, LLC, a Delaware limited liability company, (“
LM
” and together with LEH and LOI the “
Seller
”), and Bridge Energy LLC a Delaware limited liability company, (“
Buyer
”). Seller and Buyer are sometimes hereinafter referred to individually as a “
Party
” and collectively as the “
Parties
.”
RECITAL
Seller desires to sell, and Buyer desires to purchase, all of Seller’s right, title and interest in and to certain oil and gas properties and related assets and contracts, effective as of the Effective Time, for the consideration and on the terms set forth in this Agreement.
AGREEMENT
For and in consideration of the promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, in addition to other capitalized terms defined in this Agreement, the following terms have the meanings specified or referred to in this Article 1 when capitalized:
“
AAA
” – the American Arbitration Association.
“
Accounting Expert
” - as defined in
Section 2.05(d)
.
“
Aera Lease
” – that certain oil and gas lease entered into as of February 1, 2007 by and among Aera Energy, LLC, Linn Energy, LLC, Linn Energy Holdings, LLC, Linn Western Operating, Inc., and Blacksand Energy, LLC.
“
Aera Sinking Fund
” – that certain sinking fund account established pursuant to that certain Sinking Fund Trust Agreement effective as of February 1, 2007 by and among Linn Energy, LLC, Linn Energy Holdings, LLC, Linn Western Operating, Inc., Blacksand Energy, LLC and Aera Energy LLC, which is checking account number 2000035845843 and savings account number 2000035845898 in the name of Linn Operating, LLC at Well Fargo Bank, N.A.
“
AFE
” – as defined in
Section 3.13
.
“
Affiliate
” – with respect to a Party, any Person directly or indirectly controlled by, controlling, or under common control with, such Party, including any subsidiary of such Party and any “affiliate” of such Party within the meaning of Reg. §240.12b-2 of the Securities
Exchange Act of 1934, as amended. As used in this definition, “control” means possession, directly or indirectly, of the power to direct or cause the direction of management, policies, or action through ownership of voting securities, contract, voting trust, or membership in management or in the group appointing or electing management or otherwise through formal or informal arrangements or business relationships, provided however,
that KKR & Co. L.P. and its affiliates, including any portfolio companies of investment funds controlled by affiliates of KKR & Co. L.P. (other than Buyer and any wholly-owned subsidiaries of Buyer) shall not be deemed to be an Affiliate of Buyer for purposes of this Agreement. T
he terms “controlled by,” “controlling,” and other derivatives shall be construed accordingly.
“
Aggregate Defect Deductible
” – an amount equal to two and one-half percent (2.5%) of the unadjusted Purchase Price.
“
Aggregate Environmental Defect Value
” – as defined in
Section 11.12
.
“
Aggregate Title Defect Value
” – as defined in
Section 11.07
.
“
Allocated Values
” – the values assigned among the Assets as set forth on
Schedule 2.07(a)
.
“
Alternative Financial Statement
” – as defined in
Section 6.05(a)(ii)
.
“
Annual Financial Statements
” – as defined in
Section 6.05(b)(i)
.
“
Applicable Contracts
” – all Contracts to which Seller is a party or is bound that primarily relate to any of the Assets and (in each case) that will be binding on Buyer after the Closing, including: communitization agreements; net profits agreements; production payment agreements; area of mutual interest agreements; joint venture agreements; confidentiality agreements; farmin and farmout agreements; bottom hole agreements; crude oil, condensate, and natural gas purchase and sale, gathering, transportation, and marketing agreements; hydrocarbon storage agreements; acreage contribution agreements; operating agreements; balancing agreements; pooling declarations or agreements; unitization agreements; processing agreements; saltwater disposal agreements; facilities or equipment leases; and other similar contracts and agreements, but exclusive of any master service agreements and Contracts to the extent relating to the Excluded Assets.
“
Asset Taxes
” – ad valorem, property, excise, severance, production, sales, real estate, use, personal property and similar Taxes (including any interest, fine, penalty or additions to tax imposed by Governmental Bodies in connection with such Taxes) based upon the operation or ownership of the Assets, the production of Hydrocarbons or the receipt of proceeds therefrom, but excluding, for the avoidance of doubt, income or franchise Taxes based upon, measured by, or calculated with respect to net income, profits, capital, or similar measures (or multiple bases, including corporate, franchise, business and occupation, business license, or similar Taxes, if net income, profits, capital, or a similar measure is one of the bases on which such Tax is based, measured, or calculated) and Transfer Taxes.
“
Assets
” – all of Seller’s right, title, and interest in, to, and under the following, without duplication, except to the extent constituting Excluded Assets:
(a) all of the oil and gas leases and subleases located in Orange County or Los Angeles County, California (including the oil and gas leases and subleases described in
Exhibit A
), together with any and all other right, title and interest of Seller in and to the leasehold estates created thereby subject to the terms, conditions, covenants and obligations set forth in such leases or
Exhibit A
(such interest in such leases, the “
Leases
”), all related rights and interests in the lands covered by the Leases and any lands pooled or unitized therewith (such lands, the “
Lands
”), and all Royalties applicable to the Leases;
(b) any and all oil, gas, water, CO2 and disposal wells located on any of the Lands or Fee Minerals (such interest in such wells, including the wells set forth in
Exhibit B
, the “
Wells
”), and all Hydrocarbons or water produced therefrom or allocated thereto from and after the Effective Time;
(c) all fee mineral interests within Orange County or Los Angeles County, California, including those described in
Exhibit A-2
(such interest, the “
Fee Minerals
”);
(d) all rights and interests in, under or derived from all unitization and pooling agreements, declarations and orders in effect with respect to any of the Leases, Fee Minerals or Wells and the units created thereby (the “
Units
”);
(e) to the extent that they may be assigned, transferred or re-issued by Seller (with consent, if applicable, but without the payment of any fee unless Buyer agrees in writing to pay such fee), all permits, licenses, allowances, water rights, registrations, consents, orders, approvals, variances, authorizations, servitudes, easements, rights-of-way, surface leases, other surface and subsurface interests and surface and subsurface rights to the extent appurtenant to or used primarily in connection with the ownership, operation, production, gathering, treatment, processing, storing, sale or disposal of Hydrocarbons or produced water from the Properties or any of the Assets, including those described on
Exhibit A-3
(collectively, the “
Easements
”) (the Leases, the Lands, the Fee Minerals, the Units, the Easements and the Wells being collectively referred to hereinafter as the “
Properties
” or individually as a “
Property
”);
(f) all equipment, machinery, fixtures and other personal, movable and mixed property located on any of the Properties or other Assets that is used primarily in connection therewith, including those items listed in
Exhibit C
, and including well equipment, casing, tubing, pumps, motors, machinery, platforms, rods, tanks, boilers, fixtures, compression equipment, flowlines, pipelines, gathering systems associated with the Wells, manifolds, processing and separation facilities, pads, structures, materials, and other items primarily used in the operation thereof (collectively, the “
Personal Property
”);
(g) the real property described on
Exhibit A-4
and any Personal Property located thereon;
(h) all pipelines and gathering systems described on
Exhibit A-5
;
(i) all surface deeds described on
Exhibit A-6
;
(j) the vehicles described on
Exhibit A-7
;
(k) all salt water disposal wells and evaporation pits that are located on the Lands;
(l) to the extent assignable (with consent, if applicable, but without the payment of any fee unless Buyer agrees in writing to pay such fee), all Applicable Contracts and all rights thereunder insofar as and only to the extent relating to the Assets;
(m) all Imbalances relating to the Assets;
(n) the Suspense Funds;
(o) the Specified Receivables;
(p) originals (if available, and otherwise copies) and copies in digital form (if available) of all of the books, files, records, information and data, whether written or electronically stored, primarily relating to the Assets in Seller’s possession, including: (i) land and title records (including prospect files, maps, lease records, abstracts of title, title opinions and title curative documents); (ii) Applicable Contract files; (iii) correspondence; (iv) operations, environmental, production, accounting and Asset Tax records (other than, for the avoidance of doubt, those relating to income Taxes or that relate to Seller’s businesses generally); (v) facility and well records; and (vi) to the extent assignable (with consent, if applicable, but without the payment of any fee unless Buyer agrees in writing to pay such fee), geological, geophysical, gravitational, seismic, engineering and technical data (excluding interpretive data) and all Well logs (collectively, “
Records
”);
(q) all Hydrocarbons in storage or existing in stock tanks, pipelines or plants (including inventory and line fill);
(r) the Aera Sinking Fund; provided the Aera Sinking Fund will not be assigned and will be treated as an Excluded Asset if the Aera Lease is treated as an Excluded Asset; provided further that the Area Lease will not be assigned and will be treated as an Excluded Asset if the Aera Sinking Fund is treated as an Excluded Asset.
(s) the carbon dioxide allowances and offset credits described on
Schedule 1.1(a)
(the “
Carbon Credits
”), which does not include any Carbon Credits actually used by Seller prior to Closing to satisfy Emissions Fees actually imposed against Seller or with respect to the Assets prior to Closing;
(t) all radio equipment, SCADA and measurement technology, and other production related mobility devices (such as SCADA controllers), well communication devices, and any other information technology systems and licenses associated with the foregoing, in each case only to the extent such assets and licenses are (i) used or held for use solely in connection with the operation of the Properties, (ii) assignable (with consent, if applicable, but without the payment of any fee unless Buyer agrees in writing to pay such fee;
provided
Seller shall use commercially reasonable efforts to cause the transfer of all such rights and interests to Buyer), and (iii) located on the Property (the “
Production Related IT Equipment
”);
(u) to the extent assignable (with consent, if applicable, but without the payment of any fee unless Buyer agrees in writing to pay such fee), all Permits and all rights thereunder insofar as and only to the extent relating to the Assets;
(v) all Encumbrances securing payment for the sale or other disposition of Hydrocarbons produced from or allocated to the Properties, including the security interests granted under applicable Uniform Commercial Code provisions, but only to the extent that such Encumbrances relate to the period from and after the Effective Time; and
(w) all rights, claims and causes of action to the extent, and only to the extent, that such rights, claims or causes of action are associated with the Assets as of the Closing Date and (A) relate to the period from and after the Effective Time or (B) relate to both the period prior to the Effective Time and the Assumed Liabilities for which Buyer is responsible, including, all rights of Seller under the Bankruptcy Order issued by the Bankruptcy Court to affirmatively file certain releases of Encumbrances affecting the Assets securing obligations related to periods prior to the Effective Time;
provided
that, at Buyer’s request, Seller shall use its reasonable efforts to enforce, for the benefit of Buyer, at Buyer’s cost and expense, any right, claim or cause of action that would otherwise be transferred hereunder but is not transferable.
“
Assignment
” – the Assignment and Bill of Sale from Seller to Buyer, pertaining to the Assets, substantially in the form attached to this Agreement as
Exhibit D
.
“
Assumed Liabilities
” – as defined in
Section 2.06
.
“
Assumed Litigation
” – the litigation set forth in
Schedule 3.05
Part A.
“
Available Employee
”– certain employees of Seller or its Affiliates identified in the Employee Letter to whom Buyer may, but shall not be obligated to, make an offer of employment;
provided
,
however
that Seller may not identify employees in the Employee Letter beyond the job titles indicated on
Exhibit J
without approval of the Buyer.
“
Bankruptcy Cases
” – the bankruptcy cases commenced by the filing by Seller (or its applicable predecessor or Affiliate) for voluntary petitions for relief under chapter 11 of title 11 of the United States Code in the Bankruptcy Court that were jointly administered under Case No. 16-60040.
“
Bankruptcy Court
” – the United States Bankruptcy Court for the Southern District of Texas, Houston Division.
“
Breach
” – a “Breach” of a representation, warranty, covenant, obligation, or other provision of this Agreement or any certificate delivered pursuant to
Section 2.04(a)(iii)
or
Section 2.04(b)(iii)
of this Agreement shall be deemed to have occurred if there is or has been any inaccuracy in or breach of, or any failure to perform or comply with, such representation, warranty, covenant, obligation, or other provision.
“
Business Day
” – any day other than a Saturday, Sunday, or any other day on which commercial banks in the State of Texas are authorized or required by law or executive order to close.
“
Buyer
” – as defined in the preamble to this Agreement.
“
Buyer’s Auditor
” – as defined in
Section 6.05(b)(i)
.
“
Buyer’s Closing Documents
” – as defined in
Section 4.02(a)
.
“
Buyer Group
” – Buyer and its Affiliates, and their respective Representatives.
“
Buyer Related Parties
” – as defined in
Section 9.02(e)
.
“
Buyer Savings Plan
” – as defined in
Section 12.04
.
“
Carbon Credits
” – as set forth in the definition of “Assets”.
“
Casualty Loss
” – as defined in
Section 11.14
.
“
COBRA
” – as defined in
Section 12.06
.
“
Closing
” – the closing of the Contemplated Transactions.
“
Closing Date
” – as defined in
Section 2.03
.
“
Code
” – the Internal Revenue Code of 1986, as amended.
“
Complete Remediation
” – with respect to an Environmental Defect, a remediation or cure of such Environmental Defect which is completed in accordance with the Lowest Cost Response.
“
Confidentiality Agreement
” – that certain confidentiality agreement dated as of March 4, 2017 by and between Linn Energy Holdings, LLC and Pacific Coast Energy Company LP.
“
Consent
” – any approval, consent, ratification, waiver, or other authorization (including any Governmental Authorization) from any Person or obligation to provide advance notice to any Person that is required to be obtained in connection with the execution or delivery of this Agreement or the consummation of the Contemplated Transactions.
“
Contemplated Transactions
” – all of the transactions contemplated by this Agreement, including:
(a) the sale of the Assets by Seller to Buyer;
(b) the performance by the Parties of their respective covenants and obligations under this Agreement; and
(c) Buyer’s acquisition, ownership, and exercise of control over the Assets.
“
Continuing Employees
” – as defined in
Section 12.03(d)
.
“
Contract
” – any written or oral contract, agreement or any other legally binding arrangement, but excluding, however, any Lease, easement, right-of-way, permit or other instrument creating or evidencing an interest in the Assets or any real or immovable property related to or used in connection with the operations of any Assets.
“
Contingent Purchase Price
” – as defined in
Section 2.02(b)
.
“
Cure
” – as defined in
Section 11.06
.
“
Damages
” – any and all claims, demands, payments, charges, judgments, assessments, losses, liabilities, damages, penalties, fines, expenses, costs, fees, settlements, and deficiencies, including any attorneys’ fees, legal, and other costs and expenses suffered or incurred therewith.
“
Debt Financing
” – the amendment or replacement by Buyer’s and its Affiliates of their reserve based credit facility and/or any other alternative debt financing incurred or intended to be incurred by Buyer and its Affiliates, in each case, in regards to financing the Contemplated Transactions.
“
De Minimis Environmental Defect Cost
” – Twenty Five Thousand Dollars ($25,000).
“
De Minimis Title Defect Cost
” – Twenty Five Thousand Dollars ($25,000).
“
Deed
” – the Deed from Seller to Buyer, pertaining to the applicable surface fee interests and Fee Minerals included in the Assets, substantially in the form attached to this Agreement as
Exhibit G
.
“
Defect Notice Date
” – as defined in
Section 11.04
.
“
Defensible Title
” – record and beneficial title of Seller with respect to the Wells that, as of the Effective Time and Closing Date (for the entire productive life of such Wells) and subject to the Permitted Encumbrances, is deducible of record and/or evidenced by unrecorded instruments or elections, in each case, made or delivered pursuant to joint operating agreements, pooling agreements, unitization agreements or any other Contract, Fee Mineral or Lease and:
(a) with respect to each currently producing formation set forth in
Exhibit B
for each Well (in each case, subject to any reservations, limitations or depth restrictions described in
Exhibit B)
, entitles Seller to receive not less than the Net Revenue Interest set forth in
Exhibit B
for such producing formation, except for (i) decreases in connection with those operations in which Seller or its successors or assigns may from and after the Execution Date and in accordance with the terms of this Agreement elect to be a non-consenting co-owner as permitted pursuant to this Agreement, (ii) decreases resulting from the establishment or amendment from and after the Execution Date of pools or units in accordance with this Agreement as permitted pursuant to this Agreement, and (iii) decreases required to allow other Working Interest owners to make up past underproduction or pipelines to make up past under deliveries;
(b) with respect to each currently producing formation set forth in
Exhibit B
for each Well (in each case, subject to any reservations, limitations or depth restrictions described in
Exhibit B
), obligates Seller to bear not more than the Working Interest set forth in
Exhibit B
for
such producing formation, except (i) increases resulting from contribution requirements with respect to defaulting co-owners under from and after the Execution Date under applicable operating agreements, or (ii) increases to the extent that such increases are accompanied by a proportionate increase in Seller’s Net Revenue Interest; and
(c) is free and clear of all Encumbrances.
“
Deposit Amount
” – Ten percent (10%) of the unadjusted Purchase Price (including any interest accrued thereon).
“
Discharged Claims
” – all Claims (as defined in 11 U.S.C. § 101(5)) that (i) were discharged in the Bankruptcy Cases and were treated in accordance with the Plan of Reorganization, or (ii) would have been discharged in the Bankruptcy Cases were discharged in the Bankruptcy Cases pursuant to the Plan of Reorganization or otherwise in the event the holder of such Claim had received proper notice of (a) the pendency of the Bankruptcy Cases, (b) the opportunity to timely file a Claim therein, and (c) the opportunity to timely object to the Plan of Reorganization.
“
Dispute Notice
” – as defined in
Section 2.05(d)
.
“
Disputed Matter
” – as defined in
Section 11.15(a)
.
“
DOJ
” – the Antitrust Division of the U.S. Department of Justice.
“
DTPA
” – as defined in
Section 4.11
.
“
Easement
” or “
Easements
” – as set forth in the definition of “Assets”.
“
Effective Time
” – March 1, 2017, at 12:01 a.m. local time at the location of the Assets.
“
Emissions Fees”
– any taxes, fees or similar payments imposed by any Governmental Body, the amount of which is calculated and/or determined based on emissions from the Assets.
“
Employee Letter
” – as defined in
Section 12.03
.
“
Employee Start Date
” – with respect to each Continuing Employee (i) who is not on a leave of absence on the Transition Date, the Transition Date and (ii) who is on a Seller-approved leave of absence on the Transition Date, the date on which such employee reports to work at such employee’s work location, provided that such employee reports to work on or prior to the earlier to occur of the first Business Day following the end of the Seller-approved leave period or the twelve (12)-month anniversary of the Closing Date (or, if such anniversary falls on a weekend or holiday, the first Business Day following such anniversary).
“
Encumbrance
” – any charge, equitable interest, privilege, lien, mortgage, deed of trust, production payment, option, pledge, collateral assignment, security interest, or other arrangement substantially equivalent thereto.
“
Environmental Condition
” – any event occurring or condition existing on the Execution Date or on or before the Defect Claim Date with respect to the Assets that causes an Asset (or Seller or its Affiliates with respect to such Asset) to be subject to remediation under, or in violation of, an Environmental Law, the Easements or the Leases or Fee Minerals, other than any such event or condition to the extent caused by or relating to NORM or that was disclosed pursuant to
Schedule 3.14
.
“
Environmental Defect
” – an Environmental Condition discovered by Buyer or its Representatives as a result of any environmental diligence conducted by or on behalf of Buyer pursuant to
Section 11.09
of this Agreement.
“
Environmental Defect Notice
” – as defined in
Section 11.10
.
“
Environmental Defect Value
” – with respect to each Environmental Defect, the amount of the Lowest Cost Response for such Environmental Defect.
“
Environmental Law
” – any applicable Legal Requirement in effect as of the Execution Date relating to pollution or the protection of the environment, including those Legal Requirements relating to the storage, handling, and use of Hazardous Materials and those Legal Requirements relating to the generation, processing, treatment, storage, transportation, disposal or other management thereof. The term “Environmental Law” does not include (a) good or desirable operating practices or standards that may be voluntarily employed or adopted by other oil and gas well operators or recommended, but not required, by a Governmental Body or (b) the Occupational Safety and Health Act of 1970, 29 U.S.C. § 651
et seq.
, as amended, or any other Legal Requirement governing worker safety or workplace conditions, except to the extent that such Legal Requirements expressly address matters related to pollution, the environment or Hazardous Materials.
“
Environmental Liabilities
” – all costs, Damages, expenses, liabilities, obligations, and other responsibilities arising from or under either Environmental Laws or Third Party claims relating to any Environmental Condition, and which relate to the Assets or the ownership or operation of the same.
“
ERISA
” – the Employee Retirement Security Act of 1974, as amended.
“
ERISA Affiliate
” – with respect to any entity, any other entity, trade or business that is a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes such first entity, or that is a member of the same “controlled group” as such first entity pursuant to Section 4001(a)(14) of ERISA.
“
Escrow Account
” – as defined in
Section 2.02
.
“
Escrow Agent
” – JPMorgan Chase Bank, N.A.
“
Escrow Agreement
” – as defined in
Section 2.02
.
“
Excluded Assets
” – with respect to Seller, (a) all of Seller’s corporate minute books, financial records and other business records that relate to Seller’s business generally (including
the ownership and operation of the Assets); (b) except to the extent related to any Assumed Liabilities and except for the Aera Sinking Fund, all trade credits, all accounts, all receivables of Seller and all other proceeds, income or revenues of Seller attributable to the Assets and attributable to any period of time prior to the Effective Time (other than the Suspense Funds and Specified Receivables); (c) except to the extent related to any Assumed Liabilities all claims and causes of action of Seller or its Affiliates that are attributable to periods of time prior to the Effective Time (including claims for adjustments or refunds); (d) except to the extent related to any Assumed Liabilities subject to
Section 11.14
, all rights and interests of Seller (i) under any policy or agreement of insurance or indemnity, (ii) under any bond, or (iii) to any insurance or condemnation proceeds or awards arising, in each case, from acts, omissions or events or damage to or destruction of property; (e) Seller’s rights with respect to all Hydrocarbons produced and sold from the Assets with respect to all periods prior to the Effective Time; (f) all claims of Seller or any of its Affiliates for refunds of, rights to receive funds from any Governmental Body, or loss carry forwards or credits with respect to (i) Asset Taxes attributable to any period (or portion thereof) prior to the Effective Time, (ii) income Taxes paid by Seller or its Affiliates, or (iii) any Taxes attributable to the Excluded Assets; (g) all information technology assets, other than the Production Related IT Equipment, including all desktop computers, laptop computers, servers, networking equipment and any associated peripherals and other computer hardware, or computer software and telephone equipment; (h) except to the extent related to any Assumed Liabilities, all rights, benefits and releases of Seller or its Affiliates under or with respect to any Contract that are attributable to periods of time prior to Closing; (i) all of Seller’s proprietary computer software, patents, trade secrets, copyrights, names, trademarks, logos and other intellectual property; (j) except for any title opinions, surveys or other similar title documents and any environmental assessments, all documents and instruments of Seller that are protected by an attorney-client privilege or any attorney work product doctrine; (k) all data that cannot be disclosed to Buyer as a result of confidentiality arrangements under existing written agreements, provided that Seller shall use its commercially reasonable efforts (but without payment of any fee) to obtain a waiver of any such restrictions; (l) except to the extent related to any Assumed Liabilities, all audit rights or obligations of Seller for which Seller bears responsibility arising under any of the Applicable Contracts or otherwise with respect to any period prior to the Effective Time or to any of the Excluded Assets, except for any Imbalances assumed by Buyer; (m) Seller’s interpretations of any geophysical or other seismic and related technical data and information relating to the Assets; (n) documents prepared or received by Seller or its Affiliates with respect to (i) lists of prospective purchasers for such transactions compiled by Seller, (ii) bids submitted by other prospective purchasers of the Assets, (iii) analyses by Seller or its Affiliates of any bids submitted by any prospective purchaser, (iv) correspondence between or among Seller, its Representatives, and any prospective purchaser other than Buyer, and (v) correspondence between Seller or any of its Representatives with respect to any of the bids, the prospective purchasers or the transactions contemplated by this Agreement; (o) except for field offices described on
Exhibit A-4
, any offices, office leases and any personal property located in or on such offices or office leases; (p) other than any tract of land described in the Surface Deeds listed on
Exhibit A-6
, in any Easement listed in
Exhibit A-3
or the Fee Minerals listed on
Exhibit A-2
any fee simple surface estate; (q) any fee mineral interests that are not Fee Minerals, and any right to production revenues associated therewith; (r) a copy of all Records; (s) any Contracts that constitute master services agreements or similar contracts; (t) all Hedge Contracts, if any; (u) any debt
instruments; (v) any of Seller’s assets other than the Assets; (w) all of Seller’s right, title and interest in and to any carbon dioxide allowances other than the Carbon Credits, together with any carbon dioxide allowances used by Seller prior to Closing to satisfy Emissions Fees imposed against Seller with respect to the Assets prior to Closing(x) any leases, rights and other assets specifically listed in
Exhibit E
; and (y) that certain Tonner Canyon Prospect Agreement Covering Portions of Los Angeles and Orange Counties, California, dated effective August 1, 2006, by and between Glenn Gregory (d/b/a Gregory Geological Services) and Linn Western Operating, Inc.
“
Excluded Employee Liabilities
” means the following liabilities of Seller and/or any Affiliate of such Seller relating to any employee or any other current or former employee or other service provider of Seller or any Affiliate of Seller, or any spouse, dependent or beneficiary thereof: (i) any liabilities assumed by Seller pursuant to Article XII, (ii) any liabilities arising under the WARN Act with respect to any mass layoff, plant closing or other termination of employees, in any case, occurring on or prior to the Closing Date, (iii) any liabilities arising under COBRA with respect to an Available Employee who does not become a Continuing Employee, (iv) any liabilities that is or may be imposed on Seller or any Affiliate of Seller due to such entity’s status as an ERISA Affiliate of any other entity, and (v) any claim of an unfair labor practice, or any claim under any state unemployment compensation or worker’s compensation Legal Requirement or regulation or under any federal or state employment Legal Requirement or other Legal Requirement or regulation relating to employment, discrimination, classification or other matters relating to employees or other service providers, in any case, with respect to (A) any employee or other service provider of Seller or any Affiliate of Seller who does not become a Continuing Employee (or any dependent or beneficiary thereof), and (B) any Continuing Employee, to the extent arising on or prior to such employee’s Employee Start Date.
“
Execution Date
” – as defined in the preamble to this Agreement.
“
Expert
” – as defined in
Section 11.15(b)
.
“
Expert Decision
” – as defined in
Section 11.15(d)
.
“
Expert Proceeding Notice
” – as defined in
Section 11.15(a)
.
“
Fee Minerals
” – as set forth in the definition of “Assets”.
“
Final Amount
” – as defined in
Section 2.05(d)
.
“
Final Settlement Date
” – as defined in
Section 2.05(d)
.
“
Final Settlement Statement
” – as defined in
Section 2.05(d)
.
“
Financing Sources
” – any potential or actual lenders and investors for the Debt Financing, together with their Affiliates and their respective Representatives.
“
FTC
” – the Federal Trade Commission.
“
Fundamental Representations
” – those representations set forth in
Sections 3.01
,
3.02
,
3.03
and
3.06
.
“
GAAP
” – generally accepted accounting principles in the United States as interpreted as of the Execution Date.
“
Governmental Authorization
” – any approval, consent, license, permit, registration, variance, exemption, waiver, or other authorization issued, granted, given, or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement.
“
Governmental Body
” – any (a) nation, state, county, city, town, village, district, or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign, tribal or other government; (c) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal); (d) multi-national organization or body; or (e) body exercising, or entitled to exercise, any administrative, arbitration, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature.
“
Group
” – either Buyer Group or Seller Group, as applicable.
“
Hazardous Materials
” – any (a) chemical, constituent, material, pollutant, contaminant, substance, or waste that is regulated by any Governmental Body or may form the basis of liability under any Environmental Law; and (b) petroleum, Hydrocarbons, or petroleum products.
“
Hedge Contract
” – any Contract to which Seller or any of its Affiliates is a party with respect to any swap, forward, future or derivative transaction or option or similar agreement, whether exchange traded, “over-the-counter” or otherwise, involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions.
“
HSR Act
” – the Hart-Scott-Rodino-Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.
“
Hydrocarbons
” – oil and gas and other hydrocarbons (including condensate) produced or processed in association therewith (whether or not such item is in liquid or gaseous form), or any combination thereof, and any minerals produced in association therewith.
“
Imbalances
” – over-production or under-production or over-deliveries or under-deliveries with respect to Hydrocarbons produced from or allocated to the Assets, regardless of whether such over-production or under-production or over-deliveries or under-deliveries arise at the wellhead, pipeline, gathering system, transportation system, processing plant, or other location, including any imbalances under gas balancing or similar agreements, imbalances under production handling agreements, imbalances under processing agreements, imbalances under the Leases, and imbalances under gathering or transportation agreements.
“
Individual Claim Threshold
” – as defined in
Section 10.05
.
“
Instruments of Conveyance
” – the Assignment and Deed and any other assignment forms that may be required by any Governmental Body to transfer title to the Assets from Seller to Buyer.
Except for the special warranty of Defensible Title by, through and under Seller and its Affiliates contained therein, the foregoing Instruments of Conveyance shall be without warranty of title, whether express, implied, statutory, or otherwise, it being understood that Buyer shall have the right to conduct pre-Closing title due diligence as described below in
Article 11
, and that the rights and remedies set forth in
Article 11
shall be Buyer’s sole rights and remedies with respect to title.
“
Interim Financial Statements
” – as defined in
Section 6.05(b)(i)
.
“
Knowledge
” – an individual will be deemed to have “Knowledge” of a particular fact or other matter if such individual is actually aware of such fact or other matter, without any duty of inquiry. A Seller Party will be deemed to have “Knowledge” of a particular fact or other matter if any of the following individuals has Knowledge of such fact or other matter: Mark E. Ellis, President and Chief Executive Officer, Arden L. Walker, Jr., Executive Vice President and Chief Operating Officer, David B. Rottino, Executive Vice President and Chief Operating Officer, and Thomas E. Emmons, Senior Vice President, Corporate Services.
Buyer will be deemed to have “Knowledge” of a particular fact or other matter if any of the following individuals has Knowledge of such fact or other matter: Randall H. Breitenbach, Vice President - Acquisition Activities and Peter Singh, Vice President.
“
Lands
” – as set forth in the definition of “Assets”.
“
Leases
” – as set forth in the definition of “Assets”.
“
Legal Requirement
” – any federal, state, local, municipal, foreign, international, or multinational law, Order, constitution, ordinance, or rule, including rules of common law, regulation, statute, treaty, or other legally enforceable directive or requirement.
“
Lowest Cost Response
” – the response required under Environmental Laws in effect as of the Defect Notice Date that addresses and resolves (for current and future use in the same manner as currently used) the identified Environmental Condition in the most cost-effective manner (considered as a whole) as compared to any other response that is required under Environmental Laws. The Lowest Cost Response shall include taking no action, leaving the condition unaddressed, periodic monitoring or the recording of notices in lieu of remediation, if such responses are allowed under Environmental Laws. The Lowest Cost Response shall not include any costs or expenses relating to the assessment, remediation, removal, abatement, transportation and disposal of any asbestos, asbestos containing materials or NORM.
“
Material Adverse Effect
” – any change, inaccuracy, effect, event, result, occurrence, condition or fact (for the purposes of this definition, each, an “event”) (whether foreseeable or not and whether covered by insurance or not) that has had or would be reasonably likely to have, individually or in the aggregate with any other event or events, a material adverse effect on the ownership, operation or financial condition of the Assets, taken as a whole;
provided, however
, that the term “Material Adverse Effect” shall not include material adverse effects resulting from (i) entering into this Agreement or the announcement of the Contemplated Transactions; (ii)
changes in Hydrocarbon prices; (iii) any action or omission of Seller taken in accordance with the terms of this Agreement or with the prior consent of Buyer; (iv) any effect resulting from general changes in industry, economic or political conditions in the United States; (v) civil unrest, any outbreak of disease or hostilities, terrorist activities or war or any similar disorder; (vi) acts or failures to act of any Governmental Body (including any new regulations related to the upstream industry), except to the extent arising from Seller’s action or inaction; (vii) acts of God, including hurricanes and storms; (viii) any reclassification or recalculation of reserves in the ordinary course of business; (ix) natural declines in well performance; (x) general changes in Legal Requirements, in regulatory policies, or in GAAP; (xi) changes in the stock price of Buyer; (xii) matters that are cured or no longer exist by the earlier of Closing and the termination of this Agreement; or (xiii) matters as to which an adjustment is provided for under
Section 2.05(c)
or Seller has indemnified Buyer hereunder.
“
Material Contracts
” – as defined in
Section 3.10
.
“
Net Revenue Interest
” – with respect to any Well, the interest in and to all Hydrocarbons produced, saved and sold from or allocated to Well (in each case, limited to the applicable currently producing formation as described in the definition of “Defensible Title” and subject to any reservations, limitations or depth restrictions described in
Exhibit B
(for any Well)), after satisfaction of all other Royalties.
“
NORM
” – naturally occurring radioactive material.
“
Operating Contingencies
” mean the contingencies described on
Schedule 2.02(b)
.
“
Order
” – any award, decision, injunction, judgment, order, ruling, subpoena, or verdict entered, issued, made, or rendered by any court, administrative agency, or other Governmental Body or by any arbitrator.
“
Organizational Documents
” – (a) the articles or certificate of incorporation and the bylaws of a corporation; (b) the articles of organization and resolutions of a limited liability company; (c) the certificate of limited partnership and limited partnership agreement of a limited partnership; and (d) any amendment to any of the foregoing.
“
Outside Date
” – as defined in
Section 9.01(d)
.
“
Party
” or “
Parties
” – as defined in the preamble to this Agreement.
“
Permits
” – all environmental and other governmental (whether federal, state, local or tribal) certificates, consents, permits (including conditional use permits), licenses, orders, authorizations, franchises and related instruments or rights solely relating to the ownership, operation or use of the Assets.
“
Permitted Encumbrance
” – any of the following:
(a) the terms and conditions of all Leases and Contracts if the net cumulative effect of such Leases and Contracts does not (i) materially interfere with the operation or use of any of the Assets (as currently operated and used), (ii) operate to reduce the Net Revenue Interest of Seller
with respect to any Well to an amount less than the Net Revenue Interest set forth in
Exhibit B
for such Well, (iii) obligate Seller to bear a Working Interest with respect to any Well in any amount greater than the Working Interest set forth in
Exhibit B
for such Well (unless the Net Revenue Interest for such Well is greater than the Net Revenue Interest set forth in
Exhibit B
, in the same or greater proportion as any increase in such Working Interest);
provided, however
that any drilling obligations included in Leases will be considered Permitted Encumbrances so long as Seller is not in breach of such obligations;
(b) any Preferential Purchase Rights, Consents and similar agreements;
(c) excepting circumstances where such rights have already been triggered prior to the Effective Time, customary rights of reassignment arising upon final intention to abandon or release the Assets;
(d) liens for Taxes not yet due or delinquent;
(e) all rights to consent by, required notices to, filings with, or other actions by Governmental Bodies in connection with the conveyance of the Leases, if the same are customarily sought and received after the Closing;
(f) except for claims under the special warranty of Defensible Title set forth in the Instruments of Conveyance, Encumbrances or defects that Buyer has waived or is deemed to have waived pursuant to the terms of this Agreement or Title Defects that were not properly asserted by Buyer prior to the Defect Notice Date;
(g) all Legal Requirements and all rights reserved to or vested in any Governmental Body (i) to control or regulate any Asset in any manner; (ii) by the terms of any right, power, franchise, grant, license or permit, or by any provision of law, to terminate such right, power, franchise, grant, license or permit or to purchase, condemn, expropriate or recapture or to designate a purchaser of any of the Assets; (iii) to use such property in a manner which does not materially impair the use of such property for the purposes for which it is currently owned and operated; or (iv) to enforce any obligations or duties affecting the Assets to any Governmental Body with respect to any right, power, franchise, grant, license or permit;
(h) rights of a common owner of any interest currently held by Seller and such common owner as tenants in common or through common ownership if the net cumulative effect does not (i) materially interfere with the operation or use of any of the Assets (as currently operated and used), (ii) operate to reduce the Net Revenue Interest of Seller with respect to any Well to an amount less than the Net Revenue Interest set forth in
Exhibit B
for such Well, (iii) obligate Seller to bear a Working Interest with respect to any Well in any amount greater than the Working Interest set forth in
Exhibit B
for such Well (unless the Net Revenue Interest for such Well is greater than the Net Revenue Interest set forth in
Exhibit B
, in the same or greater proportion as any increase in such Working Interest);
(i) easements, conditions, covenants, restrictions, servitudes, permits, rights-of-way, surface leases, and other rights in the Assets for the purpose of operations, facilities, roads, alleys, highways, railways, pipelines, transmission lines, transportation lines, distribution lines, power lines, telephone lines, 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, if the net cumulative effect does not (i) materially interfere with the operation or use of any of the Assets (as currently operated and used), (ii) operate to reduce the Net Revenue Interest of Seller with respect to any Well to an amount less than the Net Revenue Interest set forth in
Exhibit B
for such Well, (iii) obligate Seller to bear a Working Interest with respect to any Well in any amount greater than the Working Interest set forth in
Exhibit B
for such Well (unless the Net Revenue Interest for such Well is greater than the Net Revenue Interest set forth in
Exhibit B
, in the same or greater proportion as any increase in such Working Interest);
(j) vendors, carriers, warehousemen’s, repairmen’s, mechanics’, workmen’s, materialmen’s, 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 which are set forth on
Schedule 3.05
by or on behalf of Seller;
(k) Encumbrances created under Leases or any joint operating agreements applicable to the Assets or by operation of law in respect of obligations that are not yet due if the net cumulative effect of such Encumbrances does not (i) materially interfere with the operation or use of any of the Assets (as currently operated and used), (ii) operate to reduce the Net Revenue Interest of Seller with respect to any Well to an amount less than the Net Revenue Interest set forth in
Exhibit B
for such Well, (iii) obligate Seller to bear a Working Interest with respect to any Well in any amount greater than the Working Interest set forth in
Exhibit B
for such Well (unless the Net Revenue Interest for such Well is greater than the Net Revenue Interest set forth in
Exhibit B
, in the same or greater proportion as any increase in such Working Interest);
(l) any Encumbrance affecting the Assets that is discharged by Seller or expressly waived in writing by Buyer pursuant to the terms of this Agreement at or prior to Closing;
(m) the Assumed Litigation;
(n) defects based solely on assertions that Seller’s files lack information (including title opinions);
(o) lessor’s royalties, overriding royalties, production payments, net profits interests, reversionary interests, and similar burdens if the net cumulative effect of such burdens (i) does not materially interfere with the operation or use of any of the Assets (as currently operated and used), (ii) does not reduce the Net Revenue Interest of Seller with respect to such Well to an amount less than the Net Revenue Interest set forth in
Exhibit B
for such Well, and (iii) does not obligate Seller to bear a Working Interest in any amount greater than the Working Interest set forth in
Exhibit B
for such Well (unless the Net Revenue Interest for such Well is greater than the Net Revenue Interest set forth in
Exhibit B
, in the same or greater proportion as any increase in such Working Interest);
(p) defects or irregularities of title (i) arising out of lack of evidence of, or other defects with respect to, authorization, execution, delivery, acknowledgement, or approval of any instrument in Seller’s chain of title absent reasonable evidence of an actual claim of superior title
from a Third Party attributable to such matter; (ii) consisting of the failure to recite marital status or omissions of heirship proceedings in documents (provided that such proceedings have actually occurred and can be verified); (iii) resulting from lack of survey, unless a survey is expressly required by applicable Legal Requirements; (iv) resulting from failure to record releases of liens, production payments, or mortgages that have expired by their own terms or the enforcement of which are barred by the applicable statute(s) of limitations or prescription; (v) arising out of lack of entity authorization unless Buyer provides affirmative evidence that such entity action could reasonably result in another Person’s actual and superior claim of title; (vi) resulting from or related to probate proceedings or the lack thereof that have been outstanding for ten (10) years or more; (vii) based on a gap in Seller’s chain of title to any Well or Lease (A) so long as such gap does not provide a Third Party with a reasonable claim of superior claim or (B) unless Buyer affirmatively shows such gap to exist in such records by an abstract of title, title opinion or landman’s title chain; or (viii) consisting of the lack of a lease amendment or consent authorizing pooling or unitization unless such Lease has been pooled in violation of the terms of such Lease;
(q) Imbalances to the extent that the Purchase Price is adjusted accordingly;
(r) future plugging and surface restoration obligations that have not been triggered as of the Execution Date, but only to the extent such obligations do not interfere in any material respect with the use or operation of any Assets (as currently used or operated);
(s) calls on Hydrocarbon production under existing Contracts to the extent such Contracts are set forth on
Schedule 3.10
;
(t) any matters referenced or set forth on
Exhibit A
or
Exhibit B
;
(u) mortgages on the lessor’s interest under a Lease, whether or not subordinate to such Lease, that have expired on their own terms or the enforcement of which are barred by applicable statute(s) of limitations or prescription;
(v) any maintenance of uniform interest provision in an operating agreement if waived in writing with respect to the Contemplated Transactions by the party or parties having the right to enforce such provision or if the violation of such provision would not give rise to the unwinding of the sale of the affected Asset from Seller to Buyer or the potential claim against Buyer or Seller for material damages in connection therewith; and
(w) any reductions in Net Revenue Interest due to the net profits interest held by Aera Energy LLC pursuant to the Aera Lease, if the net cumulative effect of such burdens does not reduce the Net Revenue Interest of Seller with respect to such Well to an amount less than the Net Revenue Interest set forth in
Exhibit B
or
Schedule 3.20
for such Well.
“
Person
” – any individual, firm, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or other entity or Governmental Body.
“
Personal Property
” – as set forth in the definition of “Assets”.
“
Phase I Environmental Site Assessment
” – a Phase I environmental property assessment of the Assets that satisfies the basic assessment requirements set forth under the current ASTM International Standard Practice for Environmental Site Assessments (Designation E1527-13) or any other visual site assessment or review of records, reports or documents.
“
Plan of Reorganization
” – the Amended Joint Chapter 11 Plan of Reorganization of Linn Energy, LLC and Its Debtor Affiliates Other than LINN Acquisition Company, LLC and Berry Petroleum Company, LLC, as confirmed in the Bankruptcy Cases by the Order Confirming (i) Amended Joint Chapter 11 Plan of Reorganization of Linn Energy, LLC and its Debtor Affiliates other than Linn Acquisition Company, LLC and Berry Petroleum Company, LLC and (ii) Amended Joint Chapter 11 Plan of Reorganization of Linn Acquisition Company, LLC and Berry Petroleum Company, LLC Docket No. 1629.
“
Post-Closing Date
” – as defined in
Section 2.05(d)
.
“
Preferential Purchase Right
” – any right or agreement that enables any Person to purchase or acquire any Asset or any interest therein or portion thereof as a result of or in connection with the execution or delivery of this Agreement or the consummation of the Contemplated Transactions.
“
Preliminary Amount
” – the Purchase Price, adjusted as provided in
Section 2.05(c)
,
Section 2.02(b)
(if applicable), based upon the best information available at the time of the Closing.
“
Preliminary Settlement Statement
” – as defined in
Section 2.03
.
“
Proceeding
” – any proceeding, action, arbitration, audit, hearing, investigation, request for information, litigation, or suit (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Body or arbitrator.
“
Production Related IT Equipment
” – as set forth in the definition of “Assets”.
“
Property
” or “
Properties
” – as set forth in the definition of “Assets”.
“
Property Costs
” – all operating expenses (including utilities, payroll, costs of insurance, rentals, and overhead costs set forth in
Section 2.05(b)
), capital expenditures (including rentals, options and other lease maintenance payments, broker fees and other property acquisition costs and costs of acquiring equipment), and Asset Taxes, respectively, incurred in the ordinary course of business attributable to the use, operation, and ownership of the Assets, but excluding Damages attributable to (a) personal injury or death, property damage, torts, breach of contract, or violation of any Legal Requirement, (b) obligations relating to the abandonment or plugging of Wells, dismantling or decommissioning facilities, closing pits and restoring the surface around such Wells, facilities and pits, (c) Environmental Liabilities, (d) obligations with respect to Imbalances, (e) obligations to pay Royalties or other interest owners revenues or proceeds relating to the Assets but held in suspense, including Suspense Funds, (f) Emissions Fees, and (g) claims for indemnification or reimbursement from any Third Party with respect to costs of the
types described in the preceding clauses (a) through (g), whether such claims are made pursuant to contract or otherwise.
“
Purchase Price
” – as defined in
Section 2.02
.
“
Records
” – as set forth in the definition of “Assets”.
“
Representative
” – with respect to a particular Person, any director, officer, manager, employee, agent, consultant, advisor, direct or indirect equity owner, or other representative of such Person, including legal counsel, accountants, and financial advisors.
“
Required Consent
” – any Consent with respect to which (a) there is a provision within the applicable instrument that such Consent may be withheld in the sole and absolute discretion of the holder, (b) there is provision within the applicable instrument expressly stating that an assignment in violation thereof (i) is void or voidable, (ii) triggers the payment of specified liquidated damages, or (iii) causes termination of the applicable Assets to be assigned, or (c) that is denied in writing by the applicable Third Party. For the avoidance of doubt, “Required Consent” does not include any Consent, which, by its terms, cannot be unreasonably withheld.
“
Retained Assets
” – any rights, titles, interests, assets, and properties that are originally included in the Assets under the terms of this Agreement, but that are subsequently excluded from the Assets or sale under this Agreement pursuant to the terms of this Agreement at any time before or after the Closing.
“
Retained Liabilities
” –Damages, liabilities and obligations arising out of or attributable to (a) the disposal or transportation prior to Closing of any Hazardous Materials generated or used by Seller and taken from the Assets to any location that is not an Asset; (b) property damage attributable to Seller’s or its Affiliate’s operation of the Assets prior to the Execution Date and illness and personal injury (including death) claims attributable to Seller’s or its Affiliate’s operation of the Assets prior to the Closing Date; (c) failure to properly and timely pay, in accordance with the terms of any Lease, Contract or applicable Legal Requirement, all Royalties and any other Working Interest amounts (in each case) with respect to the Assets that are due by Seller or any of its Affiliates and attributable to Seller’s ownership of the Assets prior to the Effective Time; (d) any Excluded Employee Liability; (e) the gross negligence or willful misconduct of Seller or any of its Affiliates in connection with its operations, prior to the Closing Date, of the Assets in its capacity as operator thereof; (f) all fines or penalties and criminal sanctions imposed on Seller or its Affiliates in connection with the ownership or operation of the Assets prior to the Closing; (g) the Discharged Claims; (h) any amounts payable to any Governmental Body in the future to satisfy claims of such Governmental Body that are expressly reserved or preserved under the Stipulation and Agreed Order and attributable to pre-Effective Time periods, including any cure amounts; (i) the Retained Litigation; and (j) any Tax of Seller or otherwise imposed on the Assets or with respect Seller’s business, including without limitation any liability of Seller for the Taxes of any other Person under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract or otherwise, but excluding any Asset Taxes to the extent specifically allocated to Buyer pursuant to
Section 13.02(b)
.
“
Retained Litigation
” – the litigation set forth in
Schedule 3.05
Part B.
“
Royalties
” – royalties, overriding royalties, production payments, carried interests, net profits interests, reversionary interests, back-in interests and other burdens upon, measured by or payable out of production.
“
SEC Filings
” – as defined in
Section 6.05(b)(i)
.
“
Secondary Allocated Values
” – the values assigned among certain Wells as set forth on
Schedule 2.07(b)
which shall take into account the contingent nature of the Purchase Price associated therewith.
“
Secondary Title Defect Values
” – as defined in
Section 11.05
.
“
Seller
” – as defined in the preamble to this Agreement.
“
Seller Closing Documents
” – as defined in
Section 3.02(a)
.
“
Seller Group
” – Seller and its Affiliates, and their respective Representatives.
“
Seller Party
” – each of LEH, LOI and LM, individually.
“
Severance Plan
” – the terms and conditions of that certain Severance Plan of Linn Energy, Inc., effective February 28, 2017, and attached as
Exhibit F
hereto.
“
Special Financial Statements
” – as defined in
Section 6.05(b)(i)
.
“
Specified Receivables
” – accounts receivable owed to Seller as operator of any Wells to satisfy previous overpayments by Seller to Third Parties, and the right to recoup same out of proceeds of production in respect of such Wells.
“
Straddle Period
” – any Tax period beginning before and ending after the Effective Time.
“
Suspense Funds
” – proceeds of production and associated penalties and interest in respect of any of the Wells that are payable to any Third Party and are being held in suspense by Seller as the operator of such Wells.
“
Tax
” or “
Taxes
” – (a) any and all federal, state, provincial, local, foreign and other taxes, levies, fees, imposts, duties, assessments, unclaimed property and escheat obligations and other governmental charges imposed by any Governmental Body, including income, profits, franchise, alternative or add-on minimum, gross receipts, environmental (including taxes under Section 59A of the Code), registration, withholding, employment, social security (or similar), disability, occupation, ad valorem, property, value added, capital gains, sales, goods and services, use, real or personal property, capital stock, license, branch, payroll, estimated, unemployment, severance, compensation, utility, stamp, premium, windfall profits, transfer, gains, production and excise taxes, and customs duties, together with any interest, penalties, fines or additions thereto and (b) any successor or transferee liability in respect of any items described in clause (a) above;
provided, however
, that such term shall not include any taxes, fees or similar
payments the amount of which is calculated and/or determined based on emissions from the Assets.
“
Tax Allocation
” – as defined in
Section 2.07
.
“
Tax Returns
” – any and all reports, returns, declarations, claims for refund, elections, disclosures, estimates, information reports or returns or statements supplied or required to be supplied to a Governmental Body in connection with Taxes, including any schedule or attachment thereto or amendment thereof.
“
Third Party
” – any Person other than a Party or an Affiliate of a Party.
“
Threatened
” – a claim, Proceeding, dispute, action, or other matter will be deemed to have been “Threatened” if any demand or statement has been made in writing to a Party or any of its officers, directors, or employees, that would lead a prudent Person to conclude that such a claim, Proceeding, dispute, action, or other matter is likely to be asserted, commenced, taken, or otherwise pursued in the future.
“
Title Benefit
” – as defined in
Section 11.08
.
“
Title Benefit Notice
” – as defined in
Section 11.08
.
“
Title Benefit Properties
” – as defined in
Section 11.08
.
“
Title Benefit Value
” – as defined in
Section 11.08
.
“
Title Defect
” – any Encumbrance, defect or other matter that causes Seller not to have Defensible Title in and to the Wells, without duplication;
provided
that, for the avoidance of doubt, that defects arising from any change in applicable Legal Requirement after the Execution Date shall not be considered Title Defects.
“
Title Defect Cure Period
” – as defined in
Section 11.06(a)
.
“
Title Defect Notice
” – as defined in
Section 11.04
.
“
Title Defect Property
” – as defined in
Section 11.04
.
“
Title Defect Value
” – as defined in
Section 11.04
.
“
Tonner Canyon Prospect Agreement
” – Tonner Canyon Prospect Agreement Covering Portions of Los Angeles and Orange Counties, California, dated effective August 1, 2006, by and between Glenn Gregory (d/b/a Gregory Geological Services) and Linn Western Operating, Inc.
“
Transfer Tax
” – all transfer, documentary, sales, use, stamp, registration and similar Taxes (but excluding income Taxes) and fees arising out of, or in connection with, the transfer of the Assets.
“
Transition Date
” – the end of the Term under the Transition Services Agreement as the Term is defined therein.
“
Transition Services Agreement
” – a Transition Services Agreement substantially in the form of
Exhibit K
attached hereto.
“
Units
” – as set forth in the definition of “Assets”.
“
Wells
” – as set forth in the definition of “Assets”.
“
Working Interest
” – with respect to any Well, the interest in and to such Well that is burdened with the obligation to bear and pay costs and expenses of maintenance, development and operations on or in connection with such Well (in each case, limited to the applicable currently producing formation as described in the definition of “Defensible Title” and subject to any reservations, limitations or depth restrictions described in
Exhibit B)
, but without regard to the effect of any Royalties or other burdens.
ARTICLE 2
SALE AND TRANSFER OF ASSETS; CLOSING
2.01
Assets
.
Subject to the terms and conditions of this Agreement, at the Closing, Seller shall sell and transfer (or shall cause to be sold and transferred) the Assets to Buyer, and Buyer shall purchase, pay for, and accept the Assets from Seller.
2.02
Purchase Price; Deposit
.
|
|
(a)
|
Subject to any adjustments that may be made under
Section 2.02(b)
or
Section 2.05
, the purchase price for the Assets will be
One Hundred Million Dollars ($100,000,000) (the “
Purchase Price
”). Within one (1) Business Day after the Execution Date, Buyer or an Affiliate has deposited by wire transfer in same day funds into an escrow account (the “
Escrow Account
”) established pursuant to the terms of a mutually agreeable Escrow Agreement (the “
Escrow Agreement
”) an amount equal to the Deposit Amount. The Deposit Amount shall be held by the Escrow Agent, and if the Closing timely occurs, on or before the Closing Date, the Parties shall (or shall cause their Affiliate who is party to the Escrow Agreement to) execute and deliver to the Escrow Agent a joint instruction letter directing the Escrow Agent to release the Deposit Amount to Seller at Closing, which Deposit Amount shall be applied as a credit toward the Preliminary Amount as provided in
Section 2.05(a)
. If this Agreement is terminated prior to the Closing in accordance with
Section 9.01
, then the provisions of
Section 9.02
shall apply and the distribution of the Deposit Amount shall be governed in accordance therewith.
|
|
|
(b)
|
If the Operating Contingencies described on
Schedule 2.02(b)
are satisfied, then Buyer shall, within five (5) days, promptly pay an additional Seven Million Dollars ($7,000,000) in same day funds to Seller (the “Contingent Purchase Price
”)
, less any Secondary Title Defect Values determined in accordance with
Article 11
.
|
2.03
Closing; Preliminary Settlement Statement
.
The Closing shall take place at the offices of Kirkland and Ellis LLP at 600 Travis Street, Suite 3300, Houston, Texas 77002 on or before July 18, 2017 (the “
Scheduled Closing
”), or if all conditions to Closing under
Article 7
and
Article 8
have not yet been satisfied or waived, within ten (10) Business Days after such conditions have been satisfied or waived, subject to the provisions of
Article 9
(the date on
which the Closing actually occurs, the “
Closing Date
”). Subject to the provisions of
Articles 7
,
8
, and
9
, failure to consummate the purchase and sale provided for in this Agreement on the date and time and at the place determined pursuant to this
Section 2.03
shall not result in the termination of this Agreement and shall not relieve either Party of any obligation under this Agreement. Not later than five (5) Business Days prior to the Closing Date, Seller will deliver to Buyer a statement setting forth in reasonable detail Seller’s reasonable determination of the Preliminary Amount based upon the best information available at that time (the “
Preliminary Settlement Statement
”) with reasonable supporting documentation for same. As part of the Preliminary Settlement Statement, Buyer shall provide to Seller such data as is reasonably necessary to support any estimated allocation, for purposes of establishing the Preliminary Amount. Within two (2) Business Days after its receipt of the Preliminary Settlement Statement, Buyer may submit to Seller in writing any objections or proposed changes thereto and Seller shall consider all such objections and proposed changes in good faith. The estimate agreed to by Seller and Buyer, or, absent such agreement, in the Preliminary Settlement Statement delivered by Seller in good faith in accordance with this
Section 2.03
, will be the Preliminary Amount to be paid by Buyer to Seller at the Closing.
Closing Obligations
.
At the Closing:
|
|
(a)
|
Each Seller Party shall deliver (and execute, as appropriate), or cause to be delivered (and executed, as appropriate), to Buyer:
|
|
|
(i)
|
the Instruments of Conveyance in the appropriate number for recording in the real property records where the Assets are located;
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(ii)
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possession of the Assets (except the Specified Receivables and the Suspense Funds, which shall be conveyed to Buyer by way of one or more adjustments to the Purchase Price as provided in
Section 2.05(c)(ii)(E)
);
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(iii)
|
a certificate, in substantially the form set forth in
Exhibit H
executed by an officer of such Seller Party, certifying on behalf of such Seller Party that the conditions to Closing set forth in
Sections 7.01
and
7.02
have been fulfilled;
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(iv)
|
a Treasury Regulation Section 1.1445-2(b)(2) statement, certifying that such Seller Party is not a “foreign person” within the meaning of the Code;
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(v)
|
an executed counterpart of the Preliminary Settlement Statement;
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(vi)
|
for each Well operated by such Seller Party or its Affiliate on the Closing Date, such regulatory documentation on forms prepared by Seller (with assistance from Buyer) as is necessary to designate Buyer as operator of such Wells;
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(vii)
|
a recordable release in a form reasonably acceptable to Buyer of any trust, mortgages, financing statements, fixture filings and security agreements, in each case, securing indebtedness for borrowed money made by such Seller Party or its Affiliates affecting the Assets;
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(viii)
|
all documentation, including signature cards, necessary to transfer ownership and control of the Aera Sinking Fund to Buyer;
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(ix)
|
all vehicle titles and other documentation necessary to transfer the vehicles described on
Exhibit A-7
to Buyer;
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(x)
|
an executed counterpart of the Transition Services Agreement; and
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(xi)
|
such documents as Buyer or counsel for Buyer may reasonably request that are reasonably necessary to effect the Contemplated Transactions, including letters-in-lieu of transfer order to purchasers of production from the Wells (which shall be prepared and provided by Buyer and reasonably satisfactory to Seller).
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(b)
|
Buyer shall deliver (and execute, as appropriate) to Seller:
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(i)
|
the Preliminary Amount (less the Deposit Amount and less any amounts deposited with the Escrow Agent pursuant to
Section 11.06
) by wire transfer to the accounts specified by Seller in written notices given by Seller to Buyer at least two (2) Business Days prior to the Closing Date;
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(ii)
|
the Instruments of Conveyance in the appropriate number for recording in the real property records where the Assets are located;
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(iii)
|
a certificate, in substantially the form set forth in
Exhibit H
executed by an officer of Buyer, certifying on behalf of Buyer that the conditions to Closing set forth in
Sections 8.01
and
8.02
have been fulfilled;
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(iv)
|
an executed counterpart of the Preliminary Settlement Statement;
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|
(v)
|
for each Well operated by any Seller Party or its Affiliate on the Closing Date, such regulatory documentation as is necessary to designate Buyer as operator of such Wells and the other Assets;
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(vi)
|
evidence of replacement bonds, guarantees, and other sureties pursuant to
Section 6.03(a)
and evidence of such other authorizations and qualifications as may be necessary for Buyer to own and operate the Assets;
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|
(vii)
|
an executed counterpart of the Transition Services Agreement; and
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(viii)
|
such other documents as Seller or counsel for Seller may request that are reasonably necessary to effect the Contemplated Transactions, including letters-in-lieu of transfer order to purchasers of production from the Wells (which shall be prepared and provided by Buyer and reasonably satisfactory to Seller).
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2.05
Allocations and Adjustments
.
If the Closing occurs:
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(a)
|
Buyer shall be entitled to all production and products from or attributable to the Assets from and after the Effective Time and the proceeds thereof, and to all other income,
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proceeds, receipts, and credits earned with respect to the Assets on or after the Effective Time, and shall be responsible for (and entitled to any refunds with respect to) all Property Costs attributable to the Assets and incurred from and after the Effective Time. Seller shall be entitled to all production and products from or attributable to the Assets prior to the Effective Time and the proceeds thereof, and shall be responsible for (and entitled to any refunds with respect to (but for the avoidance of doubt, not including any amounts associated with the Aera Sinking Fund)) all Property Costs attributable to the Assets and incurred prior to the Effective Time. “Earned” and “incurred,” as used in this Agreement, shall be interpreted in accordance with generally accepted accounting principles and Council of Petroleum Accountants Society (COPAS) standards.
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(b)
|
Without limiting the allocation of costs and receipts set forth in
Section 2.05(a)
, for each Well operated by Seller or its Affiliate, in lieu of all COPAS charges and all other overhead amounts for the period between the Effective Time and the Closing Date (which shall be treated as proceeds attributable to the Assets that are allocated to Buyer pursuant to
Section 2.05(a)
or
Section 2.05(c)(ii)(A)
), Seller or its Affiliate shall be entitled to deduct and retain as overhead charges an amount equal to $175,000 per month for the period between the Effective Time and the Closing Date. The charges and deductions under this
Section 2.05(b)
shall accrue from the Effective Time through the Closing;
provided however
, that the overhead charges for the month in which Closing occurs shall be prorated based upon the number of days in such month that Seller or its Affiliate operated such Wells (and for the number of days that the Well was in drilling or completion, or was in production, as applicable). For purposes of allocating revenues, production, proceeds, income, accounts receivable, and products under this
Section 2.05
, (A) liquid Hydrocarbons produced into storage facilities will be deemed to be “from or attributable to” the Wells when they pass through the pipeline connecting into the storage facilities into which they are run, and (B) gaseous Hydrocarbons and liquid Hydrocarbons produced into pipelines will be deemed to be “from or attributable to” the Wells when they pass through the receipt point sales meters on the pipelines through which they are transported. In order to accomplish the foregoing allocation of production, the Parties shall rely upon the gauging, metering, and strapping procedures which were conducted by Seller
on or about the Effective Time and, unless demonstrated to be inaccurate, shall utilize reasonable interpolating procedures to arrive at an allocation of production when exact gauging, metering, and strapping data is not available on hand as of the Effective Time. Asset Taxes for 2017 shall be prorated in accordance with
Section 13.02(b)
.
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(c)
|
The Purchase Price shall be, without duplication,
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(i)
|
increased by the following amounts:
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|
(A)
|
the aggregate amount of (i) proceeds received by Buyer from the sale of Hydrocarbons produced from and attributable to the Assets during any period prior to the Effective Time to which Seller is entitled under
Section 2.05(a)
(net
of any (x) Royalties and (y) gathering, processing, transportation and other midstream costs) and (ii) other proceeds received
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by Buyer with respect to the Assets for which Seller would otherwise be entitled under
Section 2.05(a)
;
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(B)
|
the amount of all Asset Taxes allocable to Buyer pursuant to
Section 13.02(b)
but paid or economically borne by Seller;
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(C)
|
the aggregate amount of all non-reimbursed Property Costs (other than Asset Taxes) that have been paid by any Seller Party to Third Parties that are attributable to the ownership and operation of the Assets after the Effective Time (including prepayments with respect to any period after the Effective Time (but for the avoidance of doubt, not including any amounts associated with the Aera Sinking Fund));
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(D)
|
the amount of any other upward adjustment specifically provided for in this Agreement or mutually agreed upon by the Parties;
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(E)
|
to the extent that proceeds for such volumes have not been received by Seller, an amount equal to the value of all Hydrocarbons attributable to the Assets in storage or existing in stock tanks, pipelines or plants (including inventory and linefill) as of the Effective Time;
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(F)
|
the amount of all Specified Receivables attributable to any period prior to the Effective Time and set forth on
Schedule 3.22
;
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(G)
|
the amount of the Carbon Credits
multiplied by
Thirteen Dollars and Ninety-Five Cents ($13.95); and
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(ii)
|
decreased by the following amounts:
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(A)
|
the aggregate amount of (i) proceeds received by Seller from the sale of Hydrocarbons produced from and attributable to the Assets from and after the Effective Time to which Buyer is entitled under
Section 2.05(a)
(net
of any (x) Royalties and (y) gathering, processing, transportation and other midstream costs) and (ii) other proceeds received by Seller with respect to the Assets for which Buyer would otherwise be entitled under
Section 2.05(a)
;
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(B)
|
the amount of all Asset Taxes allocable to Seller pursuant to
Section 13.02(b)
but paid or economically borne by Buyer;
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|
(C)
|
the aggregate amount of all downward adjustments pursuant to
Article 11
;
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(D)
|
the aggregate amount of all non-reimbursed Property Costs (other than Asset Taxes) that are attributable to the ownership or operation of the Assets prior to the Effective Time (excluding prepayments with respect to any period after the Effective Time) and paid by Buyer;
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(E)
|
the amount of the Suspense Funds;
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(F)
|
the amount of any other downward adjustment specifically provided for in this Agreement or mutually agreed upon by the Parties; and
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(G)
|
the amount of all carbon dioxide allowances and offset credits that will be required by Buyer post-Closing to satisfy Emissions Fees imposed with respect to the assets attributable to the ownership and operation thereof prior to the Effective Time
multiplied by
Thirteen Dollars and Ninety-Five Cents ($13.95).
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(d)
|
No later than one hundred eighty (180) days following the Closing Date, Seller shall prepare and submit to Buyer a statement (the “
Final Settlement Statement
”) setting forth each adjustment or payment which was not finally determined as of the Closing Date and showing the values used to determine such adjustments to reflect the final adjusted Purchase Price and taking into account any applicable payments under the Transition Services Agreement. On or before thirty (30) days after receipt of the Final Settlement Statement, Buyer shall deliver to Seller a written report containing any changes that Buyer proposes be made to the Final Settlement Statement and an explanation of any such changes and the reasons therefor together with any supporting information (the “
Dispute Notice
”). During such thirty (30)-day period, Buyer shall be given reasonable access to Seller’s books and records relating to the matters required to be accounted for in the Final Settlement Statement. Any changes not included in the Dispute Notice shall be deemed waived. If Buyer fails to timely deliver a Dispute Notice to Seller containing changes Buyer proposes to be made to the Final Settlement Statement, the Final Settlement Statement as delivered by Seller will be deemed to be mutually agreed upon by the Parties and, subject to the rights of the Parties under
Article 10
and the special warranty of Defensible Title in the Instruments of Conveyance, will be final and binding on the Parties. Upon delivery of the Dispute Notice, the Parties shall undertake to agree with respect to any disputed amounts identified therein by the date that is Two Hundred Ten (210) days after the Closing Date (the “
Post-Closing Date
”). Except for Title Defect and Environmental Defect adjustments pursuant to Section
2.05(c)(ii)(C)
, which shall be subject to the arbitration provisions of
Section 11.15
, if the Parties are still unable to agree regarding any item set forth in the Dispute Notice as of the Post-Closing Date, then the Parties shall submit to a nationally-recognized accounting form mutually agreed upon by the Parties (the “
Accounting Expert
”) a written notice of such dispute along with reasonable supporting detail for the position of Buyer and Seller, respectively, and the Accounting Expert shall finally determine such disputed item in accordance with the terms of this Agreement. The Accounting Expert shall act as an expert and not an arbitrator. In determining the proper amount of any adjustment to the Purchase Price related to the disputed item, the Accounting Expert shall not increase the Purchase Price more than the increase proposed by Seller nor decrease the Purchase Price more than the decrease proposed by Buyer, as applicable. The decision of such Accounting Expert shall be binding on the Parties, and the fees and expenses of such Accounting Expert shall be borne one-half (1/2) by Seller and one-half (1/2) by Buyer. The date upon which all adjustments and amounts in the Final Settlement Statement are agreed to (or deemed agreed to) or fully and finally determined by the Accounting Expert as set forth in this
Section 2.05(d)
shall be called the “
Final Settlement Date
,” and the final adjusted Purchase Price shall be called the “
Final Amount
.” If (a) the Final Amount is more than
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the Preliminary Amount, Buyer shall pay to Seller an amount equal to the Final Amount,
minus
the Preliminary Amount; or (b) the Final Amount is less than the Preliminary Amount, Seller shall pay to Buyer an amount equal to the Preliminary Amount,
minus
the Final Amount. Such payment shall be made within five (5) Business Days after the Final Settlement Date by wire transfer of immediately available funds to the accounts specified pursuant to wire instructions delivered in advance by Seller or Buyer, as applicable.
2.06
Assumption
.
If the Closing occurs, from and after the Closing Date, Buyer shall assume, fulfill, perform, pay, and discharge the following liabilities (except to the extent any such liabilities are Discharged Claims) arising from, based upon, related to, or associated with the Assets and only to the extent not constituting Retained Liabilities (collectively, the “
Assumed Liabilities
”) subject to Seller’s indemnity obligations under
Section 10.02
(further subject to the limitations and restrictions in
Article 10
): any and all Damages and obligations, known or unknown, allocable to the Assets prior to, at, or after the Effective Time, including any and all Damages and obligations: (a) attributable to or resulting from the use, maintenance, ownership, or operation of the Assets, regardless whether arising before, at or after the Effective Time, except for Property Costs and other amounts which shall have been accounted for as provided under
Section 2.05
; (b) imposed by any Legal Requirement or Governmental Body relating to the Assets, (c) for plugging, abandonment, decommissioning, and surface restoration of the Assets, including oil, gas, injection, water, or other wells and all surface facilities; (d) subject to Buyer’s rights and remedies set forth in
Article 11
and the special warranty of Defensible Title set forth in the Instruments of Conveyance, attributable to or resulting from lack of Defensible Title to the Assets; (e) attributable to the Suspense Funds, to the extent actually received by Buyer (or for which a reduction to the Purchase Price was made); (f) attributable to the Imbalances to the extent actually received by Buyer (or for which a reduction to the Purchase Price was made); (g) subject to Buyer’s rights and remedies set forth in
Article 11
, attributable to or resulting from all Environmental Liabilities relating to the Assets; (h) subject to Buyer’s rights and remedies set forth in
Article 11
, related to the conveyance of the Assets to Buyer at Closing (including arising from the conveyance thereof without consent or in violation of a preferential purchase right or any maintenance of uniform interest provision); (i) subject to Buyer’s rights and remedies set forth in
Article 11
, attributable to the Leases and the Applicable Contracts; (j) attributable to or resulting from Asset Taxes to the extent specifically allocated to Buyer pursuant to
Section 13.02(b)
; (k) attributable to or resulting from Transfer Taxes, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties, if any, to the extent specifically allocated to Buyer pursuant to Section 13.02(b); (l) attributable to Emissions Fees imposed during any period following the Closing; and (m) attributable to the Assumed Litigation. Buyer acknowledges that: (i) the Assets have been used in connection with the exploration for, and the development, production, treatment, and transportation of, Hydrocarbons; (ii) spills of wastes, Hydrocarbons, produced water, Hazardous Materials, and other materials and substances may have occurred in the past or in connection with the Assets; (iii) there is a possibility that there are currently unknown, abandoned wells, plugged wells, pipelines, and other equipment on or underneath the property underlying the Assets; (iv) it is the intent of the Parties that, subject to Buyer’s rights and remedies set forth in Article 10 and
Article 11
and the special warranty of Defensible Title set forth in the Instruments of Conveyance all liability associated with the above matters as well as any responsibility and liability to decommission, plug, or replug such wells (including the Wells) in accordance with all Legal Requirements and requirements of Governmental Bodies be passed
to Buyer effective as of the Effective Time and that Buyer shall assume all responsibility and liability for such matters and all claims and demands related thereto; (v) the Assets may contain asbestos, Hazardous Materials, or NORM; (vi) NORM may affix or attach itself to the inside of wells, materials, and equipment as scale or in other forms; (vii) wells, materials, and equipment located on the Assets may contain NORM; and (viii) special procedures may be required for remediating, removing, transporting, and disposing of asbestos, NORM, Hazardous Materials, and other materials from the Assets, subject however to Buyer’s rights and remedies set forth in Article 10 and
Article 11
. From and after the Closing, but effective as of the Effective Time, subject to Seller’s indemnity obligations under
Section 10.02
(subject to the limitations and restrictions in
Article 10
) and
Article 11
, Buyer shall assume, with respect to the Assets, all responsibility and liability for any assessment, remediation, removal, transportation, and disposal of these materials and associated activities in accordance with all Legal Requirements and requirements of Governmental Bodies.
2.07
Allocation of Purchase Price
.
(a) The Purchase Price shall be allocated among the Assets as set forth in
Schedule 2.07(a)
hereto, and, (b) the Contingent Purchase Price shall be allocated among the Wells as set forth in
Schedule 2.07(b)
. Seller and Buyer agree to be bound by the Allocated Values set forth in
Schedule 2.07
for purposes of
Article 11
hereof. Seller and Buyer further agree that for the purpose of making the requisite filings under Section 1060 of the Code, and the regulations thereunder, the Purchase Price as adjusted, and other amounts treated for U.S. federal income Tax purposes as consideration for a sale transaction (to the extent known at such time) shall be allocated among the Assets in a manner consistent with the Allocated Values, as set forth on
Schedule 2.07
(the “
Tax Allocation
”). Seller and Buyer each agree to report, and to cause their respective Affiliates to report, the federal, state, and local income and other Tax consequences of the Contemplated Transactions, and in particular to report the information required by Section 1060(b) of the Code, and to jointly prepare Form 8594 (Asset Acquisition Statement under Section 1060 of the Code) as promptly as possible following the Closing Date and in a manner consistent with the Tax Allocation as revised to take into account subsequent adjustments to the Purchase Price, including any adjustments pursuant to the Agreement to determine the Final Amount, and shall not take any position inconsistent therewith upon examination of any tax return, in any refund claim, in any litigation, investigation or otherwise, unless required to do so by any Legal Requirement after notice to and discussions with the other Party, or with such other Party’s prior consent.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Each Seller Party represents and warrants to Buyer as of the Execution Date and the Closing Date, the following:
3.01
Organization and Good Standing
.
Such Seller Party is a Delaware limited liability company, and is duly organized, validly existing, and in good standing under the laws of the State of Delaware and, where required, is duly qualified to do business and is in good standing in each jurisdiction in which the Assets are located, with full limited liability company power and authority to conduct its business as it is now being conducted, and to own or use the properties and assets that it purports to own or use. Such Seller Party is not a “foreign person” for purposes of Section 1445 of the Code.
3.02
Authority; No Conflict.
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(a)
|
The execution, delivery, and performance of this Agreement and the Contemplated Transactions have been duly and validly authorized by all necessary limited liability company action on the part of such Seller Party. This Agreement has been duly executed and delivered by such Seller Party and at the Closing, all instruments executed and delivered by such Seller Party at or in connection with the Closing shall have been duly executed and delivered by such Seller Party. This Agreement constitutes the legal, valid, and binding obligation of such Seller Party, enforceable against such Seller Party in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy or other similar laws affecting the rights and remedies of creditors generally and by general principles of equity (regardless of whether such enforceability is considered in a Proceeding in equity or at law). Upon execution and delivery by such Seller Party of the Instruments of Conveyance at the Closing, such Instruments of Conveyance shall constitute legal, valid and binding transfers and conveyances of the Assets. Upon the execution and delivery by such Seller Party of any other documents at the Closing (collectively with the Instruments of Conveyance, such Seller Party’s “
Seller Closing Documents
”), such Seller Closing Documents shall constitute the legal, valid, and binding obligations of such Seller Party, enforceable against such Seller Party in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy or other similar laws affecting the rights and remedies of creditors generally and by general principles of equity (regardless of whether such enforceability is considered in a Proceeding in equity or at law).
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(b)
|
Except as set forth in
Schedule 3.02(b)
, and assuming the receipt of all Consents and the waiver of all Preferential Purchase Rights (in each case) applicable to the Contemplated Transactions, and assuming compliance with the HSR Act, neither the execution and delivery of this Agreement by such Seller Party nor the consummation or performance of any of the Contemplated Transactions by such Seller Party shall, directly or indirectly (with or without notice or lapse of time):
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(i)
|
contravene, conflict with, or result in a violation of (A) any provision of the Organizational Documents of such Seller Party, or (B) any resolution adopted by the board of directors, managers or officers of such Seller Party;
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(ii)
|
contravene, conflict with, or result in a violation of, or give any Governmental Body or other Person the right to challenge any of the Contemplated Transactions, to terminate, accelerate, or modify any terms of, or to exercise any remedy or obtain any relief under, any Lease, Fee Mineral or Contract or any Legal Requirement or Order to which such Seller Party, or any of the Assets, may be subject;
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(iii)
|
contravene, conflict with, or result in a violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental Authorization that relates to the Assets; or
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(iv)
|
result in the imposition or creation of any Encumbrance upon or with respect to any of the Assets, except for Permitted Encumbrances.
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3.03
Bankruptcy
.
Except for claims or matters related to the Bankruptcy Case commenced on May 11, 2016 and concluded on February 28, 2017, for which the United States Bankruptcy Court for the Southern District of Texas retains jurisdiction, there are no bankruptcy, reorganization, receivership, or arrangement proceedings pending or being contemplated by such Seller Party or, to such Seller Party’s Knowledge, Threatened against such Seller Party or any of its Affiliates.
3.04
Taxes
.
Except as disclosed on
Schedule 3.04
, all Tax Returns required to be filed by such Seller Party with respect to Asset Taxes have been timely filed and all such Tax Returns are correct and complete in all material respects. Except as disclosed on
Schedule 3.04
, all Asset Taxes required to be paid by such Seller Party with respect to the Assets that are or have become due have been timely paid in full, and such Seller Party is not delinquent in the payment of any such Asset Taxes. There are no Encumbrances for Taxes on such Seller Party’s interest in the Assets, other than Permitted Encumbrances. Except as disclosed on
Schedule 3.04
, there is not currently in effect any extension or waiver of any statute of limitations of any jurisdiction regarding the assessment or collection of any Asset Taxes relating to the Assets. There are no administrative or judicial proceedings by any Governmental Body pending against such Seller Party relating to the Assets with respect to Asset Taxes. All Tax withholding and deposit requirements imposed by applicable Legal Requirements with respect to any of the Assets have been satisfied in all material respects. Except as disclosed on
Schedule 3.04
, no Asset is subject to any Tax partnership agreement or provisions requiring a partnership income Tax Return to be filed under Subchapter K of Chapter 1 of Subtitle A of the Code or any similar state statute.
3.05
Legal Proceedings
.
Other than the Assumed Litigation and Retained Litigation, such Seller Party has not been served with any Proceeding, and, to such Seller Party’s Knowledge, there is no pending or Threatened Proceeding (except for immaterial or frivolous claims) against such Seller Party or any of its Affiliates or any of the Assets, in each case, that (a) relates to such Seller Party’s ownership or operation of any of the Assets, or (b) challenges, or may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the Contemplated Transactions.
3.06
Brokers
.
Neither such Seller Party nor its Affiliates have incurred any obligation or liability, contingent or otherwise, for broker’s or finder’s fees with respect to the Contemplated Transactions other than obligations that are and will remain the sole responsibility of such Seller Party and its Affiliates.
3.07
Compliance with Legal Requirements
.
Except as set forth in
Schedule 3.07
, there is no material uncured violation by such Seller Party of any Legal Requirements (other than Environmental Laws) with respect to such Seller Party’s ownership or operation of the Assets.
3.08
Prepayments
.
Except for any Imbalances, such Seller Party has not received payment under any Contract for the sale of Hydrocarbons produced from the Assets which requires delivery in the future to any party of Hydrocarbons previously paid for and not yet delivered.
3.09
Imbalances
.
Except as set forth in
Schedule 3.09
, there are no Imbalances with respect to such Seller Party’s obligations relating to the Wells as of the Effective Time.
3.10
Material Contracts
.
Schedule 3.10
sets forth all Applicable Contracts with respect to such Seller Party of the type described below as of the Execution Date (collectively, the “
Material Contracts
”);
provided
that with respect to Applicable Contracts related solely to Assets that are not operated by any Seller Party, the entirety of this
Section 3.10
is made to Seller Party’s Knowledge:
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(a)
|
any Applicable Contract that is a Hydrocarbon purchase and sale, transportation, gathering, treating, compression, marketing, processing, or similar Applicable Contract that is not terminable without penalty on thirty-five (35) days’ or less notice;
|
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(b)
|
any Applicable Contract that can reasonably be expected to result in aggregate payments by such Seller Party or revenues payable to Seller of more than Two Hundred Thousand Dollars ($200,000) net to such Seller Party’s interest during the current or any subsequent fiscal year or more than One Million Dollars ($1,000,000) net to such Seller Party’s interest in the aggregate over the term of such Applicable Contract (based on the terms thereof and contracted (or if none, current) quantities where applicable);
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(c)
|
any Applicable Contract that is an indenture, mortgage, security interest, loan, credit agreement, sale-leaseback, guaranty of any obligation, bond, letter of credit, or similar financial Contract;
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(d)
|
any Applicable Contract that constitutes a lease under which Seller or any Affiliate of Seller is the lessor or the lessee of any real or personal property (other than a Lease) which lease cannot be terminated by Seller without penalty upon 60 days or less notice;
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(e)
|
any Applicable Contract that contains calls upon or options to purchase production, take-or-pay payments, production payments, advance payments or other similar payment, with respect to obligations to deliver Hydrocarbons, or proceeds from the sale thereof, attributable to the Assets at some future time without receiving payment therefor at or after the time of delivery or is a dedication of production or otherwise requires production to be transported, processed or sold in a particular fashion;
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(f)
|
any Applicable Contract (executory or otherwise) to sell, lease, farmout, or otherwise dispose of or encumber any interest in any of the Assets after the Execution Date, other than conventional rights of reassignment arising in connection with Seller’s surrender or release of any of the Assets;
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(g)
|
any Applicable Contract that constitutes a joint venture or unit operating agreement;
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|
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(h)
|
any Applicable Contract for which the primary purpose is to provide for the indemnification of another Person; and
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(i)
|
any Applicable Contract that constitutes a partnership agreement, joint venture agreement, area of mutual interest agreement, joint development agreement, joint operating agreement, non-compete agreement, development agreement, participation
|
agreement, farmin or farmout agreement, and any agreement that purports to restrict, limit or prohibit the manner in which, or the locations in which, Seller or any Affiliate of Seller conducts business or any similar Contract where the primary obligation has not been completed prior to the Effective Time (in each case, excluding any Tax partnership).
Neither such Seller Party, nor to the Knowledge of such Seller Party, any other party, is in default under any Material Contract (and to Seller’s Knowledge, no event has occurred that upon receipt of notice or lapse of time or both would constitute any default) except as set forth in
Schedule 3.10
. Except as set forth in
Schedule 3.10
, (i) there are no Contracts with Affiliates of such Seller Party that will be binding on the Assets after Closing, and (ii) Seller has not given nor received any unresolved written notice of default, amendment, waiver, price redetermination, market out, curtailment or termination with respect to any Material Contract. Prior to the execution of this Agreement, Seller has made available to Buyer true and complete copies of each Material Contract and all amendments thereto.
3.11
Consents and Preferential Purchase Rights
.
Except as set forth in
Schedule 3.11
, none of the Assets is subject to any Preferential Purchase Rights or Consents required to be obtained by such Seller Party which may be applicable to the Contemplated Transactions, except for (a) Consents and approvals of Governmental Bodies that are customarily obtained after Closing, (b) Contracts that are terminable upon not greater than thirty (30) days’ notice without payment of any fee, and (c) compliance with the HSR Act.
3.12
Permits
.
To such Seller Party’s Knowledge, except as set forth in
Schedule 3.12
, (a) with respect to Assets currently operated by such Seller Party or any of its Affiliates, such Seller Party or its Affiliate (as applicable) has acquired all Permits from appropriate Governmental Bodies to conduct operations on such Assets in material compliance with all applicable Legal Requirements; (b) all such Permits are in full force and effect and no Proceeding is pending or, to such Seller Party’s Knowledge, Threatened to suspend, revoke or terminate any such Permit or declare any such Permit invalid; and (c) such Seller Party is in compliance in all material respects with all such Permits.
3.13
Current Commitments.
Schedule 3.13
sets forth, as of the Execution Date, all approved authorizations for expenditures and other approved capital commitments, individually equal to or greater than One Hundred Thousand Dollars ($100,000) (net to such Seller Party’s interest) (the “AFEs”) relating to the Assets to drill or rework any Wells or for other capital expenditures pursuant to any of the Material Contracts, Fee Minerals or Leases for which all of the activities anticipated in such AFEs have not been completed by the Effective Time.
3.14
Environmental Laws
.
Except as disclosed on
Schedule 3.14
, (a) there are no actions, suits or proceedings pending, or, to such Seller Party’s Knowledge, Threatened in writing before any Governmental Body with respect to the Assets alleging material violations of, or material liabilities under, Environmental Laws, or claiming remediation obligations, (b) such Seller Party has not entered into nor is a party (directly or as successor in interest) to, any agreement with, plea, diversion agreement or consent, order, decree or judgment of any Governmental Authority that are uncured as of the Execution Date with respect to the Assets, and (c) such Seller Party has not received any written notice from (x) any Governmental Body or (y) within two (2) years prior to the Execution Date, any Person, of any alleged or actual material
violation or non-compliance with, obligation to remediate, or material liability under, any Environmental Law or of material non-compliance with the terms or conditions of any environmental permits, arising from, based upon, associated with or related to the Assets or the ownership or operation of any thereof. As of the Execution Date, Seller has provided Buyer all material, non-privileged, written reports prepared by a Third Party on behalf of Seller within three (3) years of the Execution Date with respect to any of the Assets.
3.15
Wells.
Except as disclosed on
Schedule 3.15
(a) no Well is subject to material penalties on allowable production after the Effective Time because of any overproduction, and (b) there are no Wells that such Seller Party is obligated by applicable Law or contract to plug or abandon or that are currently subject to exceptions to a requirement to plug or abandon issued by a Governmental Body. All wells plugged and abandoned by Seller have been plugged and abandoned in accordance with applicable Legal Requirements, the Fee Minerals and the Leases.
3.16
Non-Consent Operations
. Such Seller Party has neither elected nor been deemed to have elected to “non-consent”, nor failed to participate in, the drilling or reworking of a well, any seismic program or any other operation which would cause such Seller Party or Buyer to suffer a penalty or lose or forfeit any material interests in the Assets under any applicable operating agreement.
3.17
Condemnation and Eminent Domain
. As of the Execution Date, no action for condemnation or taking under right of eminent domain is pending or, to such Seller Party’s Knowledge, Threatened with respect to any Asset or portion thereof.
3.18
Payment of Royalties; Compliance with Leases
.
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(a)
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Except (a) for the Suspense Funds that are being held in compliance with applicable Legal Requirements and Leases and (b) as set forth in
Schedule 3.18
and
Schedule 3.05
, such Seller Party has duly and properly paid, or caused to be duly and properly paid in all material respects, all Royalties due by such Seller Party during the period of such Seller Party’s ownership of the Assets;
provided
, however that no failure to comply with the foregoing that does not result in the termination of a Lease shall be considered a breach of this
Section 3.18
.
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(b)
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Since January 1, 2016, such Seller Party has not received any written notice from any lessor under any of the Leases seeking to terminate, cancel or rescind any Lease, and such Seller Party has not received any written notice from any lessor under any of the Leases alleging any unresolved material default under any Lease.
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3.19
Bonds and Credit Support
.
Schedule 3.19
lists all material bonds, letters of credit and other similar credit support instruments maintained by Seller or any Affiliate of Seller with any Governmental Authority or other Third Party with respect to the Assets.
3.20
Payout Status
. As of the Execution Date, except as set forth in
Schedule 3.20
, such Seller Party has not elected (and was not deemed to have elected) not to participate in any operation or activity proposed with respect to the Assets.
Schedule 3.20
contains a complete and accurate list of the status of any “payout” balance, as of the Effective Time, for the Linn operated
Wells subject to a reversion or other adjustment at some level of cost recovery or payout (or passage of time or other event other than termination of a Lease by its terms).
3.21
Employee Benefits
.
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(a)
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Schedule 3.21(a)
contains a true and complete list of each “employee benefit plan,” as defined in Section 3(3) of ERISA, and all other retirement, pension, deferred compensation, bonus, incentive, severance, executive life insurance, medical, dental, vision, disability, cafeteria, flexible spending, leave of absence, vacation, stock purchase, stock option, phantom stock, equity, employment, profit sharing, retention, stay bonus, change of control and other compensation or benefit plans, programs, agreements or arrangements maintained, sponsored or contributed to by such Seller Party or any of its ERISA Affiliates for the benefit of any Available Employee (collectively, such Seller Party’s “
Seller Benefit Plans
”).
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(b)
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The Seller has not incurred nor could Seller incur any liability (whether fixed or contingent) under Title IV of ERISA which will result in any such liability to Buyer.
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(c)
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Each Seller Benefit Plan intended to qualify under Section 401(a) of the Code has either received a favorable determination letter or opinion letter from the Internal Revenue Service that it is so qualified and each related trust that is intended to be exempt from federal income taxation under Section 501(a) of the Code has received a determination letter or opinion letter from the Internal Revenue Service that it is so exempt, and, to the Knowledge of Sellers, no fact or event has occurred that could reasonably be expected to affect adversely the qualified status of any such Seller Plan or the exempt status of any such trust.
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3.22
Suspense Accounts
.
Schedule 3.22
lists all Suspense Funds held in suspense by Seller and its Affiliates and all Specified Receivables as of the date set forth on
Schedule 3.22
, a description of the source of the Suspense Funds or Specified Receivables and the reason they are being held in suspense and, if known, the name or names of the Persons claiming the Suspense Funds, to whom the Suspense Funds are owed or who owes such Specified Receivables.
3.23
Drilling Obligations
. Seller does not have any unfulfilled drilling obligations (including offset drilling obligations) under any Lease or Fee Mineral or otherwise affecting the Leases or Fee Minerals by virtue of a Contract relating to the Assets or the ownership or operation thereof or any obligation to pay compensatory royalties resulting from any such drilling obligation.
3.24
Disclosures with Multiple Applicability; Materiality
.
If it is reasonably apparent on the face of any disclosure that such fact, condition, or matter disclosed in Seller’s disclosure Schedules applies to more than one Section of this
Article 3
, a single disclosure of such fact, condition, or matter on Seller’s disclosure Schedules shall constitute disclosure with respect to all sections of this
Article 3
to which such fact, condition, or other matter applies, regardless of the section of Seller’s disclosure Schedules in which such fact, condition, or other matter is described. Inclusion of a matter on Seller’s disclosure Schedules with respect to a representation or warranty that is qualified by “material” or “Material Adverse Effect” or any
variant thereof shall not necessarily be deemed an indication that such matter does, or may, be material or have a Material Adverse Effect. Matters may be disclosed on a Schedule to this Agreement for purposes of information only.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller, as of the Execution Date and the Closing Date, the following:
4.01
Organization and Good Standing
.
Buyer is a limited liability company and duly organized, validly existing, and in good standing under the laws of Delaware and is duly qualified to do business and is in good standing in each jurisdiction in which the Assets are located.
4.02
Authority; No Conflict
.
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(a)
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This Agreement constitutes the legal, valid, and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy or other similar laws affecting the rights and remedies of creditors generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). Upon the execution and delivery by Buyer of the Instruments of Conveyance and any other documents executed and delivered by Buyer at the Closing (collectively, “
Buyer’s Closing Documents
”), Buyer’s Closing Documents shall constitute the legal, valid, and binding obligations of Buyer enforceable against Buyer in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy or other similar laws affecting the rights and remedies of creditors generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). Buyer has the absolute and unrestricted right, power, authority, and capacity to execute and deliver this Agreement and Buyer’s Closing Documents, and to perform its obligations under this Agreement and Buyer’s Closing Documents.
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(b)
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Neither the execution and delivery of this Agreement by Buyer nor the consummation or performance of any of the Contemplated Transactions by Buyer shall give any Person the right to prevent, delay, or otherwise interfere with any of the Contemplated Transactions.
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(c)
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Neither the execution and delivery of this Agreement by Buyer nor the consummation or performance of any of the Contemplated Transactions by Buyer shall (i) contravene, conflict with, or result in a violation of any provision of the Organizational Documents of Buyer, (ii) contravene, conflict with, or result in a violation of any resolution adopted by the board of managers, or members of Buyer, or (iii) contravene, conflict with, or result in a violation of, or give any Governmental Body or other Person the right to challenge any of the Contemplated Transactions, to terminate, accelerate, or modify any terms of, or to exercise any remedy or obtain any relief under, any agreement or any Legal Requirement or Order to which Buyer may be subject.
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(d)
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Buyer is not and shall not be required to give any notice to or obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions.
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4.03
Certain Proceedings
.
There is no Proceeding pending against Buyer that challenges, or may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the Contemplated Transactions. To Buyer’s Knowledge, no such Proceeding has been Threatened.
4.04
Knowledgeable Investor
.
Buyer is an experienced and knowledgeable investor in the oil and gas business. Prior to entering into this Agreement, Buyer was advised by its own legal, Tax, and other professional counsel concerning this Agreement, the Contemplated Transactions, the Assets, and their value, and it has relied solely thereon and on the representations and obligations of Seller in this Agreement and the documents to be executed by Seller in connection with this Agreement at the Closing. Buyer is acquiring the Assets for its own account and not for sale or distribution in violation of the Securities Act of 1933, as amended, the rules and regulations thereunder, any applicable state blue sky laws, or any other applicable Legal Requirements.
4.05
Qualification
.
Buyer is an “accredited investor,” as such term is defined in Regulation D of the Securities Act of 1933, as amended. Buyer is not acquiring the Assets in connection with a distribution or resale thereof in violation of federal or state securities laws and the rules and regulations thereunder. Without limiting
Section 6.02
, Buyer is, or will be as of the Closing, qualified under applicable Legal Requirements to hold leases, rights-of-way, and other rights issued or controlled by (or on behalf of) any applicable Governmental Body and will be qualified under applicable Legal Requirements to own and operate the Assets. To Buyer’s Knowledge, no fact or condition exists with respect to Buyer or the Assets which may cause any Governmental Body to withhold its approval of the Contemplated Transactions.
4.06
Brokers
.
Neither Buyer nor its Affiliates have incurred any obligation or liability, contingent or otherwise, for broker’s or finder’s fees with respect to the Contemplated Transactions other than obligations that are or will remain the sole responsibility of Buyer and its Affiliates.
4.07
Financial Ability
.
Buyer will have, as of the Closing, sufficient cash, available lines of credit, or other sources of immediately available funds to enable it to (a) deliver the amounts due at the Closing, (b) take such actions as may be required to consummate the Contemplated Transactions (other than payment of the Assumed Liabilities), and (c) timely pay and perform Buyer’s obligations under this Agreement and Buyer’s Closing Documents. Buyer expressly acknowledges that the failure to have sufficient funds shall in no event be a condition to the performance of its obligations hereunder, and in no event shall the Buyer’s failure to perform its obligations hereunder be excused by failure to receive funds from any source.
4.08
Securities Laws
.
The solicitation of offers and the sale of the Assets by Seller have not been registered under any securities laws. At no time has Buyer been presented with or solicited by or through any public promotion or any form of advertising in connection with the Contemplated Transactions. Buyer is not acquiring the Assets with the intent of distributing
fractional, undivided interests that would be subject to regulation by federal or state securities laws, and that if it sells, transfers, or otherwise disposes of the Assets or fractional undivided interests therein, it shall do so in compliance with applicable federal and state securities laws.
4.09
Due Diligence
.
Without limiting or impairing any representation, warranty, covenant or agreement of Seller contained in this Agreement and the Seller Closing Documents, or Buyer’s right to rely thereon, Buyer and its Representatives have (a) been permitted full and complete access to all materials relating to the Assets, (b) been afforded the opportunity to ask all questions of Seller (or Seller’s Representatives) concerning the Assets, (c) been afforded the opportunity to investigate the condition of the Assets, and (d) had the opportunity to take such other actions and make such other independent investigations as Buyer deems necessary to evaluate the Assets and understand the merits and risks of an investment therein and to verify the truth, accuracy, and completeness of the materials, documents, and other information provided or made available to Buyer (whether by Seller or otherwise).
WITHOUT LIMITING ANY OF ITS EXPRESS REMEDIES IN THIS AGREEMENT OR ANY OF BUYER’S CLOSING DOCUMENTS OR SELLER’S CLOSING DOCUMENTS,
BUYER HEREBY WAIVES ANY CLAIMS ARISING OUT OF ANY MATERIALS, DOCUMENTS, OR OTHER INFORMATION PROVIDED OR MADE AVAILABLE TO BUYER (WHETHER BY SELLER OR OTHERWISE), WHETHER UNDER THIS AGREEMENT, AT COMMON LAW, BY STATUTE, OR OTHERWISE.
4.10
Basis of Buyer’s Decision
.
By reason of Buyer’s knowledge and experience in the evaluation, acquisition, and operation of oil and gas properties, Buyer has evaluated the merits and the risks of purchasing the Assets from Seller and has formed an opinion based solely on Buyer’s knowledge and experience, Buyer’s due diligence, and Seller’s representations, warranties, covenants, and agreements contained in this Agreement and the Seller Closing Documents, and not on any other representations or warranties by Seller. Buyer has not relied and shall not rely on any statements by Seller or its Representatives (other than those representations, warranties, covenants, and agreements of Seller contained in this Agreement and the Seller Closing Documents) in making its decision to enter into this Agreement or to close the Contemplated Transactions.
BUYER UNDERSTANDS AND ACKNOWLEDGES THAT NEITHER THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER GOVERNMENTAL BODY HAS PASSED UPON THE ASSETS OR MADE ANY FINDING OR DETERMINATION AS TO THE FAIRNESS OF AN INVESTMENT IN THE ASSETS OR THE ACCURACY OR ADEQUACY OF THE DISCLOSURES MADE TO BUYER, AND, EXCEPT AS SET FORTH IN
ARTICLE 9
, BUYER IS NOT ENTITLED TO CANCEL, TERMINATE, OR REVOKE THIS AGREEMENT, WHETHER DUE TO THE INABILITY OF BUYER TO OBTAIN FINANCING OR PAY THE PURCHASE PRICE, OR OTHERWISE.
4.11
Business Use, Bargaining Position
.
Buyer is purchasing the Assets for commercial or business use. Buyer has sufficient knowledge and experience in financial and business matters that enables it to evaluate the merits and the risks of transactions such as the Contemplated Transactions, and Buyer is not in a significantly disparate bargaining position with Seller. Buyer expressly acknowledges and recognizes that the price for which Seller has agreed to sell the Assets and perform its obligations under the terms of this Agreement has been predicated upon the inapplicability of the Texas Deceptive Trade Practices - Consumer Protection Act, V.C.T.A. BUS & COMM ANN. § 17.41 et seq. (the “
DTPA
”), to the extent applicable, or any similar Legal Requirement, and the waiver of the DTPA, and any similar Legal Requirement, by Buyer contained in
Section 13.04
.
BUYER FURTHER RECOGNIZES THAT
SELLER, IN DETERMINING TO PROCEED WITH ENTERING INTO THIS AGREEMENT, HAS EXPRESSLY RELIED ON THE PROVISIONS OF THIS
ARTICLE 4
.
4.12
Bankruptcy
.
There are no bankruptcy, reorganization, receivership, or arrangement proceedings pending or being contemplated by Buyer or, to Buyer’s Knowledge, Threatened against Buyer. Buyer is, and will be immediately after giving effect to the Contemplated Transactions, solvent.
ARTICLE 5
COVENANTS OF SELLER
5.01
Access and Investigation
.
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(A)
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Between the Execution Date and the Closing Date, to the extent doing so would not violate applicable Legal Requirements, Seller’s obligations to any Third Party or other restrictions on Seller (provided that Seller shall use its commercially reasonable efforts to obtain waivers of any such restriction upon request from Buyer), Seller shall afford Buyer and its Representatives access, by appointment only, during Seller’s regular hours of business to reasonably appropriate Seller’s personnel, any Seller operated Assets, Records, contracts, books and records, and other documents and data related to the Assets, except any such contracts, books and records, or other documents and data that are Excluded Assets or that cannot, without unreasonable effort or expense, be separated from any contracts, books and records, or other documents and data that are Excluded Assets (and upon Buyer’s request, Seller shall use reasonable efforts to obtain the consent of Third Party operators to give Buyer and its Representatives reasonable access to similar information with respect to Assets not operated by Seller or its Affiliates;
provided
that Seller shall not be required to make payments or undertake obligations in favor any Third parties in order to obtain such consent unless Buyer agrees to reimburse Seller therefor);
PROVIDED
THAT, EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT OR IN THE INSTRUMENTS OF CONVEYANCE, SELLER MAKES NO REPRESENTATION OR WARRANTY, AND EXPRESSLY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES AS TO THE ACCURACY OR COMPLETENESS OF THE DOCUMENTS, INFORMATION, BOOKS, RECORDS, FILES, AND OTHER DATA THAT IT MAY PROVIDE OR DISCLOSE TO BUYER
.
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(b)
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Notwithstanding the provisions of
Section 5.01(a)
, (i) Buyer’s investigation shall be conducted in a manner that reasonably minimizes interference with the operation of the business of Seller and any applicable Third Parties, and (ii) Buyer’s right of access shall not entitle Buyer to operate equipment or conduct subsurface or other invasive testing or sampling. Environmental review shall not exceed the review contemplated by a Phase I Environmental Site Assessment without Seller’s prior written permission, which may be withheld in Seller’s sole discretion, subject to the provisions of
Section 11.09
.
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(c)
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Buyer acknowledges that, pursuant to its right of access to the Records and the Assets, Buyer will become privy to confidential and other information of Seller and Seller’s Affiliates and the Assets and that such confidential information shall be held confidential by Buyer and Buyer’s Representatives in accordance with the terms of the Confidentiality Agreement. If the Closing should occur, the foregoing confidentiality restriction on
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Buyer, including the Confidentiality Agreement, shall terminate (except as to the Excluded Assets);
provided
that such termination of the Confidentiality Agreement shall not relieve any party thereto from any liability thereunder for the breach of such agreement prior to the Execution Date.
5.02
Operation of the Assets
.
Except as set forth on Schedule 5.02, or as required by applicable Legal Requirements, between the Execution Date and the Closing, Seller shall:
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(a)
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operate the Assets operated by Seller or its Affiliates, and use its reasonable efforts to cause the operation of the Assets operated by a Third Party to be operated, in each case (A) as would a reasonable and prudent operator, (B) in the ordinary course of business consistent with past practice, and (C) in accordance with all applicable Laws and the terms of the Leases, Fee Minerals and Applicable Contracts;
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(b)
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maintain, or use commercially reasonable efforts to cause the applicable Third Party operators to maintain, all Leases, Fee Minerals, Easements, Permits and Applicable Contracts in full force and effect and in accordance with the terms of the Leases, Permits, Fee Minerals and the Applicable Contracts relating thereto;
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(c)
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subject to
Section 2.05(a)
, pay all Property Costs, Royalties and other expenses incurred with respect to the Assets in the ordinary course of business;
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(d)
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maintain the books of account and records relating to the Assets in the ordinary course of business, in accordance with the usual accounting practices of each such Person;
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(e)
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give prompt notice to Buyer of any written notice received by Seller or any of its Affiliates of any material claim asserting any breach of Contract, tort or violation of Legal Requirement or any investigation, suit, action or litigation by or before a Governmental Body, that, in each case, relates to the Assets;
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(f)
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give prompt notice to Buyer of (A) any written notice of any material damage to or destruction of any of the Assets and (B) any written notice received by Seller or any of its Affiliates of any material claim asserting any breach of contract, tort or violation of Law or any investigation, suit, action or litigation by or before a Governmental Authority, that, in each case, relates to the Assets;
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(g)
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not transfer, sell, hypothecate, encumber, or otherwise dispose of any of the Assets, except as required under any Leases or Applicable Contracts, and except for sales of Hydrocarbons, equipment and inventory in the ordinary course of business;
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(h)
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not abandon any Asset (except the abandonment or expiration of Leases in accordance with their terms, including with respect to leases not capable of producing in paying quantities after the expiration of their primary terms or for failure to pay delay rentals or shut-in royalties or similar types of lease maintenance payments, which shall, in each case, be at Seller’s sole discretion);
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(i)
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not commence, propose, or agree to participate in any single operation with respect to the Wells, Fee Minerals or Leases with an anticipated cost in excess of One Hundred
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Thousand Dollars ($100,000) net to Seller’s interest, except for any emergency operations;
(A) With respect to any AFE for an operation to be conducted in connection with the Assets that is anticipated to cost in excess of $100,000 per operation, upon receipt of such AFE from Seller, Buyer shall review and respond, within five (5) days of its receipt thereof, to Seller in writing with respect to whether it desires to consent or non-consent the operation covered by such AFE;
provided
that if Buyer does not timely respond with its election with respect to any such AFE within such five day period, then Buyer shall be deemed to have responded to approve such AFE; and
(B) If Buyer affirmatively elects to non-consent to any such operation proposed by a Third Party that is anticipated to cost in excess of $100,000, Seller shall not be entitled to consent to such operation;
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(j)
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not execute, terminate, cancel, extend, or materially amend or modify any Lease, Fee Minerals, Material Contract or Contract that would have been a Material Contract on the Execution Date if in effect at such time other than the execution or extension of a Contract for the sale, exchange, transportation, gathering, treating, or processing of Hydrocarbons terminable without penalty on thirty-five (35) days’ or shorter notice;
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(k)
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not settle any suit or litigation or waive any claims or rights of value, in each case, attributable to the Assumed Liabilities;
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(l)
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not voluntarily relinquish its position as operator with respect to any Asset that Seller or its Affiliates operated as of the Execution Date;
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(m)
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except for any actions taken pursuant to
Section 5.04
, not (i) make, change or revoke any Tax election; (ii) change an annual accounting period; (iii) adopt or change any accounting method with respect to Taxes; (iv) file any amended Tax Return; (v) enter into any closing agreement; settle or compromise any Tax claim or assessment; or (vi) consent to any extension or waiver of the limitation period applicable to any claim or assessment with respect to Taxes; in each case to the extent such action would materially and adversely affect the Assets;
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(n)
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not abandon any Well capable of commercial production, or release or abandon all or any part of the Assets capable of commercial production, or release or abandon all or any portion of the Leases or Fee Minerals;
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(o)
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not relinquish its position as operator of any Asset; and
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(p)
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not commit to do any of the foregoing.
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Buyer acknowledges that Seller owns undivided interests in certain of the properties comprising the Assets, and Buyer agrees that the acts or omissions of the other working interest owners who are not Seller or an Affiliate of Seller shall not constitute a Breach of the provisions of this
Section 5.02
, nor shall any action required by a vote of working interest owners constitute such a Breach so long as Seller or its Affiliate has voted its interest in a manner that complies with the
provisions of this
Section 5.02
. Further, no action or inaction of any Third Party operator with respect to any Asset shall constitute a Breach of this
Section 5.02
to the extent Seller uses commercially reasonable efforts to cause such Third Party operator to operate such applicable Asset in a manner consistent with this
Section 5.02
. Seller may seek Buyer’s approval to perform any action that would otherwise be restricted by this
Section 5.02
, and Buyer’s approval of any such action shall not be unreasonably withheld, conditioned, or delayed, and shall be considered granted ten (10) days (unless a shorter time is reasonably required by the circumstances and such shorter time is specified in Seller’s notice) after delivery of notice from Seller to Buyer requesting such consent unless Buyer notifies Seller to the contrary during such ten (10)-day period. Notwithstanding the foregoing provisions of this
Section 5.02
, in the event of an emergency, Seller may take such action as reasonably necessary to address any immediate threats of property damage, injury to Person, damage to the environment or violations of Legal Requirements and shall notify Buyer of such action promptly thereafter. Any matter approved (or deemed approved) by Buyer pursuant to this
Section 5.02
that would otherwise constitute a Breach of one of Seller’s representations and warranties in
Article 3
shall be deemed to be an exclusion from all representations and warranties for which it is relevant to the extent that such operation (i) is conducted in accordance with the proposal for consent submitted to Buyer pursuant to this
Section 5.02
and (ii) is otherwise conducted in accordance with
Section 5.02(a)
.
5.03
Insurance
.
Seller shall maintain in force during the period from the Execution Date until the Closing, all of Seller’s insurance policies pertaining to the Assets in the amounts and with the coverages currently maintained by Seller. The daily pro-rated annual premiums for insurance that accrue after the Effective Time and are attributable to the insurance coverage for the period after the Effective Time until the Closing will constitute Property Costs.
5.04
Consent and Waivers
.
Seller shall use commercially reasonable efforts to obtain prior to the Closing written waivers of all Preferential Purchase Rights (and post-Closing with respect to any matters not resolved prior to Closing) and all Consents necessary for the transfer of the Assets to Buyer;
provided
that in the event Seller is unable to obtain all such waivers of Preferential Purchase Rights and Consents after using such commercially reasonable efforts, such failure to satisfy shall not constitute a Breach of this Agreement. Seller shall not be required to make any payments to, or undertake any obligations for the benefit of, the holders of such rights in order to obtain the Required Consents. Buyer shall reasonably cooperate with Seller in seeking to obtain such Consents, but Buyer shall not be required to make any payments to, or undertake any obligations for the benefit of, the holders of such rights in order to obtain the Required Consents.
5.05
Amendment to Schedules
.
Until the fifth (5th) Business Day before Closing, Seller shall have the right (but not the obligation) to supplement the Schedules relating to the representations and warranties set forth in
Article 3
with respect to any matters occurring subsequent to the Execution Date. Except to the extent such updates are a direct result of actions taken with Buyer’s consent pursuant to
Section 5.02
, prior to Closing, any such supplement shall not be considered for purposes of determining if Buyer’s Closing conditions have been met under
Section 7.01
or for determining any remedies available under this Agreement.
5.06
Successor Operator
.
While Buyer acknowledges that it desires to succeed Seller (or its Affiliates) as operator of those Assets or portions thereof that Seller (or its Affiliates) may
presently operate, Buyer acknowledges and agrees that Seller cannot and does not covenant or warrant that Buyer shall become successor operator of such Assets because the Assets or portions thereof may be subject to operating or other agreements that control the appointment of a successor operator. Seller agrees, however, that as to the Assets any Seller Party or its Affiliate operates, Seller shall use commercially reasonable efforts to support Buyer’s efforts to become successor operator of such Assets (to the extent permitted under any applicable operating agreement) effective as of the Closing (at Buyer’s sole cost and expense) and to designate or appoint, to the extent legally possible and permitted under any applicable operating agreement, Buyer as successor operator of such Assets effective as of Closing.
ARTICLE 6
OTHER COVENANTS
6.01
Notification and Cure
.
Between the Execution Date and the Closing Date, Buyer shall promptly notify Seller in writing and Seller shall promptly notify Buyer in writing if Seller or Buyer, as applicable, obtain Knowledge of any Breach, in any material respect, of the other Party’s representations and warranties or covenants as of the Execution Date, or of an occurrence after the Execution Date that would cause or constitute a Breach, in any material respect, of any such representation and warranty or covenant had such representation and warranty or covenants been made as of the time of occurrence or discovery of such fact or condition;
provided
that failure to provide such notice shall not limit a Party’s rights or remedies under this Agreement with respect to such Breach. If any of Buyer’s or Seller’s representations or warranties are untrue or shall become untrue in any material respect between the Execution Date and the Closing Date, or if any of Buyer’s or Seller’s covenants or agreements to be performed or observed prior to or on the Closing Date shall not have been so performed or observed in any material respect, and if such breach of representation, warranty, covenant or agreement shall (if curable) be cured by the Closing (or, if the Closing does not occur, by the date set forth in
Section 9.01(d)
), then such Breach shall be considered not to have occurred for all purposes of this Agreement.
6.02
Satisfaction of Conditions
.
Between the Execution Date and the Closing Date (a) Seller shall use commercially reasonable efforts to cause the conditions in
Article 7
to be satisfied, and (b) Buyer shall use commercially reasonable efforts to cause the conditions in
Article 8
to be satisfied.
6.03
Replacement of Insurance, Bonds, Letters of Credit, and Guaranties
.
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(a)
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The Parties understand that none of the insurance currently maintained by Seller or Seller’s Affiliates covering the Assets, nor any of the bonds, letters of credit, or guaranties, if any, posted by Seller or Seller’s Affiliates with Governmental Bodies or co-owners and relating to the Assets will be transferred to Buyer. On or before the Closing Date, Buyer shall use its commercially reasonable efforts to obtain, and deliver to Seller evidence of, all necessary replacement bonds, letters of credit, and guaranties, and evidence of such other authorizations, qualifications, and approvals as may be necessary for Buyer to own and, with respect to Assets currently operated by Seller or its Affiliates, operate the Assets. Promptly following the Closing, Buyer shall obtain or cause to be
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obtained in the name of Buyer, such insurance covering the Assets as would be obtained by a reasonably prudent operator in a similar situation.
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(b)
|
Promptly (but in no event later than thirty (30) days) after Closing, Buyer shall, at its sole cost and expense, make all filings with Governmental Bodies necessary to assign and transfer the Assets and title thereto and to comply with applicable Legal Requirements, and Seller shall reasonably assist Buyer with such filings. Buyer shall indemnify, defend, and hold harmless Seller Group from and against all Damages arising out of Buyer’s holding of such title or operatorship of the Assets after the Closing and prior to the securing of any necessary replacement bonds, letters of credit, guaranties, Consents and approvals of the Contemplated Transactions from Governmental Bodies.
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6.04
Governmental Reviews
.
Except for the HSR Act, Seller and Buyer shall (and shall cause their respective Affiliates to), in a timely manner, make all other required filings (if any) with, prepare applications to, and conduct negotiations with Governmental Bodies as required to consummate the Contemplated Transactions. Each Party shall, to the extent permitted pursuant to applicable Legal Requirements, cooperate with and use all reasonable efforts to assist the other with respect to such filings, applications and negotiations. Buyer shall bear the cost of all filing or application fees payable to any Governmental Body with respect to the Contemplated Transactions, regardless of whether Buyer, Seller, or any Affiliate of any of them is required to make the payment.
6.05
Financing Matters
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(a)
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Assistance with Financing.
Prior to the Closing Date, Seller shall provide, and shall use its commercially reasonable efforts to cause its Affiliates and its and its Affiliates’ Representatives to provide, Buyer such cooperation as may be reasonably requested by Buyer with respect to the Debt Financing; provided, that such requested cooperation does not materially and adversely interfere with operations of Seller and the Assets and that any information requested by Buyer is reasonably available to Seller or any of its Affiliates or its or their Representatives. Such cooperation shall include using commercially reasonable efforts (i) to assist Buyer in Buyer’s preparation of disclosure schedules related to the Assets in connection with the Debt Financing and (ii) to facilitate Buyer’s preparation of the documentation necessary to pledge and mortgage the Assets that will be collateral under the Debt Financing; provided that Seller’s obligations under the foregoing clauses (i) and (ii) shall be limited to providing information and data in its current format in Seller’s records and not require that Seller generate new reports regarding the Assets.
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(b)
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Financial Information.
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(i)
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Seller shall use its commercially reasonable efforts to cooperate with Buyer and its independent auditor (“
Buyer’s Auditor
”) in Buyer’s preparation, at the sole cost and expense of Buyer, of the Special Financial Statements (as defined below), in such form that such statements and the notes thereto can be audited (in the case of the Annual Financial Statements (as defined below)) or reviewed (in the case of the Interim Financial Statements (as defined below)) by Buyer’s
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Auditor. The “
Special Financial Statements
” shall refer to (A) statements of revenues and direct operating expenses attributable to the Assets for the fiscal years ended December 31, 2016 and 2015 (the “
Annual Financial Statements
”) and (B) statements of revenues and direct operating expenses attributable to the Assets for the three months ended March 31, 2017 and 2016, or if the Closing shall occur on or after June 30, 2017, for the six months ended June 30, 2017 and 2016 (the “
Interim Financial Statements
”). The Special Financial Statements will be prepared in accordance with GAAP and any requirements of the Securities Act of 1933, as amended, and any rules or regulations promulgated thereunder. The Annual Financial Statements shall include the required oil and gas disclosures, including estimates of quantities of proved reserves as of, and a reconciliation of proved oil and gas reserves for, each of the fiscal years ended December 31, 2016 and 2015, and the standardized measure of discounted future net cash flows as of, and a reconciliation of the standardized measure of future discounted cash flows for, each of the fiscal years ended December 31, 2016 and 2015. Seller shall provide Buyer, its Representatives, and Buyer’s Auditor with reasonable access to Seller’s personnel, auditors and Affiliates, in each case reasonably requested by Buyer for the preparation of the Special Financial Statements. Seller agrees to provide, and will use its commercially reasonable efforts to cause its Affiliates to provide, at Buyer’s sole cost and expense, information from, and reasonable access to, its accounting records to the extent required to prepare any pro forma financial statements of Buyer that include pro forma adjustments with respect to Seller, which may be required in any reports, registration statements and other filings to be made by Buyer or any of its Affiliates with the SEC pursuant to the Securities Act and the rules and regulations thereunder or the Exchange Act and the rules and regulations thereunder (the “
SEC Filings
”).
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(ii)
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In the event the SEC requires financial statements in respect of the Assets that vary in form or content from, or in the periods covered by, the Special Financial Statements (“
Alternative Financial Statements
”), Seller shall, at the sole cost and expense of Buyer, use its commercially reasonable efforts to cooperate with Buyer in the preparation of such financial statements.
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(iii)
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Notwithstanding anything to the contrary, (A) Seller shall in no event be required to create new records relating to the Assets or Special Financial Statements, (B) the access to be provided to Buyer, its Representatives, and Buyer’s Auditor shall not interfere with Seller’s ability to prepare its own financial statements or its regular conduct of business and shall be made available during Seller’s normal business hours and (C) such cooperation shall not include any actions that Seller reasonably believes would result in a violation of any material agreement or any confidentiality arrangement or the loss of any legal or other applicable privilege. All non-public or otherwise confidential information regarding Seller obtained by Buyer, its Representatives, or Buyer’s Auditor shall be kept confidential for a period of one year from such disclosure in accordance with the terms of the Confidentiality Agreement as if the Confidentiality Agreement were still in effect.
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(c)
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Costs and Expenses
. Buyer shall promptly, upon request by Seller, reimburse Seller for all reasonable and documented out-of-pocket costs and expenses incurred by Seller in connection with its cooperation contemplated by this
Section 6.05
. Except in the case of actual fraud, (i) all of the information provided by Seller pursuant to this
Section 6.05
is given without any representation or warranty, express or implied, and (ii) in no event will Seller or its Affiliates or Representatives have any liability of any kind or nature to Buyer, its Financing Sources or any other Person arising or resulting from the cooperation provided in this
Section 6.05
or any use of any information provided by Seller or its Affiliates or Representatives provided pursuant to this
Section 6.05
. Without affecting Buyer’s rights under this Agreement, Buyer shall indemnify and hold harmless the Seller Group from and against any and all Damages suffered or incurred by any of them in connection with the arrangement of the Debt Financing and any information provided by Seller to Buyer pursuant to this
Section 6.05
; provided, however, that Buyer shall not be required to indemnify and hold harmless the Seller Group to the extent that such Damages arise from or are related to actual fraud by any member of the Seller Group.
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6.06
HSR Act
.
If applicable, within ten (10) Business Days following the execution by Buyer and Seller of this Agreement, Buyer and Seller will each prepare and simultaneously file with the DOJ and the FTC the notification and report form required for the transactions contemplated by this Agreement by the HSR Act and request early termination of the waiting period thereunder. Buyer and Seller agree to respond promptly to any inquiries or requests for information or documentary material from the DOJ or the FTC concerning such filings and to comply in all material respects with the filing requirements of the HSR Act. Buyer and Seller shall cooperate with each other and, subject to the terms of the Confidentiality Agreement, shall promptly furnish all information to the other Party that is necessary in connection with Buyer’s and Seller’s compliance with the HSR Act. Buyer and Seller shall keep each other fully advised with respect to any requests from or communications with the DOJ or FTC concerning such filings and shall consult with each other with respect to all responses thereto. Each of Seller and Buyer shall use its commercially reasonable efforts to take all actions reasonably necessary and appropriate in connection with any HSR Act filing to satisfy the conditions to the Closing and consummate Contemplated Transactions as promptly as practicable and in any event not later than the Outside Date,
provided
,
however
, nothing in this Agreement shall require Buyer or Seller to propose, negotiate, effect or agree to, the sale, divestiture, license or other disposition of any assets or businesses of Buyer or Seller (including the Assets) or otherwise take any action that limits the freedom of action with respect to, or its ability to retain or operate any of the businesses of the Buyer or Seller or the Assets. The filing fees associated with any such HSR Act filing shall be borne by Buyer. Notwithstanding any provision of this
Section 6.06
, no Party shall be required to provide the other Party with information regarding the value of the transaction or subject to the attorney client privilege, work product doctrine or other similar privilege absent entering into a mutually acceptable joint defense agreement.
6.07
Override Assignment
. Between the Execution Date and the Closing Date, Seller shall use its commercially reasonable efforts to execute and deliver assignments of overriding royalty interests covering the Wells set forth on Annex I to
Schedule 5.02
in a form substantially similar to that set forth on such
Annex I
but subject to the restrictions of
Section 5.02
;
provided, however,
that should Seller be unable to execute and deliver such assignments prior to the
Closing Date, Buyer shall be obligated to execute and deliver assignments of overriding royalty interests covering the Wells set forth on Annex I to
Schedule 5.02
(limited to the assignment of the percentage overriding royalty interests described on Annex I to
Schedule 5.02
and the terms set forth in Paragraph 3 of that certain Tonner Canyon Prospect Agreement) upon such time as Glenn Gregory (d/b/a Gregory Geological Services) waives or settles all of his claims with respect to the proper calculation of overriding royalties for gas and assignment of certain overriding royalties, to the extent the foregoing relates to periods on or after the Effective Time, and otherwise pursuant to the Tonner Canyon Prospect Agreement.
ARTICLE 7
CONDITIONS PRECEDENT TO BUYER’S OBLIGATION TO CLOSE
Buyer’s obligation to purchase the Assets and to take the other actions required to be taken by Buyer at the Closing is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by Buyer, in whole or in part):
7.01
Accuracy of Representations
.
All of Seller’s representations and warranties in this Agreement must have been true and correct in all material respects (or, with respect to representations and warranties qualified by materiality or Material Adverse Effect, true and correct in all respects) as of the Execution Date, and must be true and correct in all material respects (or, with respect to representations and warranties qualified by materiality or Material Adverse Effect, true and correct in all respects) as of the Closing Date as if made on the Closing Date, other than any such representation and warranty that refers to a specified date, which need only be true and correct in all material respects (or, if qualified by materiality or Material Adverse Effect, true and correct in all respects) on and as of such specified date.
7.02
Seller’s Performance
.
All of the covenants and obligations that Seller is required to perform or to comply with pursuant to this Agreement at or prior to the Closing must have been duly performed and complied with in all material respects.
7.03
No Proceedings
.
Since the Execution Date, there must not have been commenced or Threatened against Seller, or against any of Seller’s Affiliates, any Proceeding (other than any matter initiated by either Buyer or its Affiliates) seeking to restrain, enjoin, or otherwise prohibit or make illegal, or seeking to recover material damages on account of, any of the Contemplated Transactions.
7.04
No Orders
.
On the Closing Date, there shall be no Order pending or remaining in force of any Governmental Body having appropriate jurisdiction that attempts to restrain, enjoin, or otherwise prohibit the consummation of the Contemplated Transactions, or that grants material damages in connection therewith.
7.05
Necessary Consents and Approvals
.
All Consents from Governmental Bodies and all approvals from Governmental Bodies required for the Contemplated Transactions, except Consents and approvals of assignments by Governmental Bodies that are customarily obtained after closing, shall have been granted, or the necessary waiting period shall have expired, or early termination of the waiting period shall have been granted.
7.06
HSR Act
.
Any waiting period applicable to the consummation of the Contemplated Transactions under the HSR Act shall have expired or been terminated.
7.07
Closing Deliverables
.
Seller shall have delivered (or be ready, willing and able to deliver at the Closing) to Buyer the documents and other items required to be delivered by Seller under Section 2.04(a).
ARTICLE 8
CONDITIONS PRECEDENT TO SELLER’S OBLIGATION TO CLOSE
Seller’s obligation to sell the Assets and to take the other actions required to be taken by Seller at the Closing is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by Seller, in whole or in part):
8.01
Accuracy of Representations
.
All of Buyer’s representations and warranties in this Agreement must have been true and correct in all material respects (or, with respect to representations and warranties qualified by materiality or Material Adverse Effect, true and correct in all respects) as of the Execution Date, and must be true and correct in all material respects (or, with respect to representations and warranties qualified by materiality or Material Adverse Effect, true and correct in all respects) as of the Closing Date as if made on the Closing Date, other than any such representation and warranty that refers to a specified date, which need only be true and correct in all material respects (or, if qualified by materiality or Material Adverse Effect, true and correct in all respects) on and as of such specified date.
8.02
Buyer’s Performance
.
All of the covenants and obligations that Buyer is required to perform or to comply with pursuant to this Agreement at or prior to the Closing must have been duly performed and complied with in all material respects.
8.03
No Proceedings
.
Since the Execution Date, there must not have been commenced or Threatened against Buyer or against any of its Affiliates, any Proceeding (other than any matter initiated by Seller or an Affiliate of Seller) seeking to restrain, enjoin, or otherwise prohibit or make illegal, or seeking to recover material damages on account of, any of the Contemplated Transactions.
8.04
No Orders
.
On the Closing Date, there shall be no Order pending or remaining in force of any Governmental Body having appropriate jurisdiction that attempts to restrain, enjoin, or otherwise prohibit the consummation of the Contemplated Transactions, or that grants material damages in connection therewith.
8.05
Necessary Consents and Approvals
.
All Consents from Governmental Bodies and all approvals from Governmental Bodies required for the Contemplated Transactions, except Consents and approvals of assignments by Governmental Bodies that are customarily obtained after closing, shall have been granted, or the necessary waiting period shall have expired, or early termination of the waiting period shall have been granted.
8.06
HSR Act
.
Any waiting period applicable to the consummation of the Contemplated Transactions under the HSR Act shall have expired or been terminated.
8.07
Closing Deliverables
.
Buyer shall have delivered (or be ready, willing and able to deliver at the Closing) to Seller the documents and other items required to be delivered by Buyer under Section 2.04(b).
ARTICLE 9
TERMINATION
9.01
Termination Events
.
This Agreement may, by written notice given prior to or at the Closing, be terminated:
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(a)
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by mutual written consent of Seller and Buyer;
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(b)
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by Buyer, if Seller has committed a material Breach of this Agreement and such Breach causes any of the conditions to Closing set forth in
Article 7
not to be satisfied on or before the Outside Date (or, if prior to Closing, such Breach is of such a magnitude or effect that it will not be possible for such condition to be satisfied);
provided
,
however
, if (i) Seller’s conditions to Closing have been satisfied or waived in full on or before the Closing, (ii) Buyer is not in material Breach of the terms of this Agreement and (iii) all of Buyer’s conditions to Closing have been satisfied or waived, then the refusal or willful or negligent delay by Seller to timely close the Contemplated Transactions shall constitute a material Breach of this Agreement;
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(c)
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by Seller, if Buyer has committed a material Breach of this Agreement and such breach causes any of the conditions to Closing set forth in
Article 8
not to be satisfied on or before the Outside Date (or, if prior to Closing, such Breach is of such a magnitude or effect that it will not be possible for such condition to be satisfied);
provided
,
however
, if (i) Buyer’s conditions to Closing have been satisfied or waived in full on or before the Closing, (ii) Seller is not in material Breach of the terms of this Agreement and (iii) all of Seller’s conditions to Closing have been satisfied or waived, then the refusal or willful or negligent delay by Buyer to timely close the Contemplated Transactions shall constitute a material Breach of this Agreement;
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(d)
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by either Seller or Buyer if the Closing has not occurred on or before July 30, 2017 (the “
Outside Date
”), or such later date as the Parties may agree upon in writing;
provided
that such failure does not result primarily from the terminating Party’s material Breach of this Agreement;
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(e)
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by either Seller or Buyer if (i) any Legal Requirement has made the consummation of the Contemplated Transactions illegal or otherwise prohibited, or (ii) a Governmental Body has issued an Order, or taken any other action permanently restraining, enjoining, or otherwise prohibiting the consummation of the Contemplated Transactions, and such order, decree, ruling, or other action has become final and nonappealable;
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(f)
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by Seller if the sum of (i) all Title Defect Values asserted by Buyer in good faith and without taking into account the Aggregate Defect Deductible (
less
the sum of all Title Benefit Values),
plus
(ii) the Aggregate Environmental Defect Values asserted by Buyer in good faith and without taking into account the Aggregate Defect Deductible,
plus
(iii) the aggregate downward Purchase Price adjustments under
Section 11.02
,
plus
(iv) the
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aggregate downward Purchase Price adjustments under
Section 11.03
,
plus
(v) the aggregate Casualty Losses under
Section 11.14
exceeds twenty-five percent (25%) of the unadjusted Purchase Price; or
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(g)
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by Buyer if the sum of (i) all Title Defect Values asserted by Buyer in good faith and without taking into account the Aggregate Defect Deductible (
less
the sum of all Title Benefit Values),
plus
(ii) the Aggregate Environmental Defect Values asserted by Buyer in good faith and without taking into account the Aggregate Defect Deductible,
plus
(iii) the aggregate downward Purchase Price adjustments under
Section 11.02
,
plus
(iv) the aggregate downward Purchase Price adjustments under
Section 11.03
,
plus
(v) the aggregate Casualty Losses under
Section 11.14
, exceeds twenty-five percent (25%) of the unadjusted Purchase Price;
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(h)
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by Seller if Buyer fails to deposit the Deposit Amount into the Escrow Account on or before 5:00 p.m. (Central Time) on the first (1st) Business Day after the Execution Date;
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provided, that no Party shall have the ability to terminate this Agreement under
Section 9.01(b)
,
Section 9.01(c)
or
Section 9.01(d)
if such Party is also in Breach of any material obligations under this Agreement at such time.
9.02
Effect of Termination; Distribution of the Deposit Amount
.
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(a)
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If this Agreement is terminated pursuant to
Section 9.01
, all further obligations of the Parties under this Agreement shall terminate;
provided
that (a) such termination shall not impair nor restrict the rights of either Party against the other with respect to the Deposit Amount pursuant to
Section 9.02(b)
, and (b) the following provisions shall survive the termination:
Article 1
,
Sections 9.02
,
10.02(c)
,
10.03(c)
,
10.06
,
10.07
,
10.10
,
10.11
,
10.12
,
Article 13
(other than
Section 13.01
) and any such terms as set forth in this Agreement that are necessary to give context to any of the foregoing surviving Sections.
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(b)
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Notwithstanding anything to the contrary in
Section 9.02(a)
:
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(i)
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If Seller has the right to terminate this Agreement (A) pursuant to
Section 9.01(c)
or (B) pursuant to
Section 9.01(d)
, if at such time Seller could have terminated this Agreement pursuant to
Section 9.01(c)
(without regard to any cure periods contemplated therein), then, in either case, Seller shall have the right to terminate this Agreement and receive the Deposit Amount as liquidated damages (and not as a penalty). If Seller elects to terminate this Agreement pursuant to this
Section 9.02(b)(i)
and receive the Deposit Amount as liquidated damages, (x) the Parties shall (or shall cause their Affiliate who is party to the Escrow Agreement), within two (2) Business Days of Seller’s election, execute and deliver to the Escrow Agent a joint instruction letter directing the Escrow Agent to release the Deposit Amount to Seller and (y) Seller shall be free to enjoy immediately all rights of ownership of the Assets and to sell, transfer, encumber, or otherwise dispose of the Assets to any Person without any restriction under this Agreement.
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(ii)
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If Buyer has the right to terminate this Agreement (A) pursuant to
Section 9.01(b)
or (B) pursuant to
Section 9.01(d)
, if at such time Seller could have terminated
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this Agreement pursuant to
Section 9.01(b)
(without regard to any cure periods contemplated therein), then, in either case, Buyer shall have the right, at its sole discretion, to either (1) enforce specific performance by Buyer of this Agreement, without posting any bond or the necessity of proving the inadequacy as a remedy of monetary damages, in which event the Deposit Amount will be applied as called for herein, or (2) if Buyer does not seek and successfully enforce specific performance, terminate this Agreement and (in addition to retention of the Deposit Amount) seek to recover damages from Seller in an amount up to, but not exceeding the Deposit Amount, as liquidated damages (and not as a penalty). If Buyer elects to terminate this Agreement pursuant to this
Section 9.02(b)(ii)
and seek damages in an amount up to the Deposit Amount as liquidated damages, the Parties shall (or shall cause their Affiliate who is party to the Escrow Agreement to), within two (2) Business Days of Buyer’s election, (x) execute and deliver to the Escrow Agent a joint instruction letter directing the Escrow Agent to release the Deposit Amount to Buyer and (y) Seller shall be free to enjoy immediately all rights of ownership of the Assets and to sell, transfer, encumber, or otherwise dispose of the Assets to any Person without any restriction under this Agreement.
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(iii)
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If this Agreement is terminated by Seller in accordance with
Section 9.01(h)
, then the Parties shall have no additional remedies against one another as a result of such termination, and Seller shall be free to enjoy immediately all rights of ownership of the Assets and to sell, transfer, encumber, or otherwise dispose of the Assets to any Person without any restriction under this Agreement.
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(c)
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The Parties recognize that the actual damages for a Party’s material Breach of this Agreement would be difficult or impossible to ascertain with reasonable certainty and agree that the Deposit Amount would be a reasonable liquidated damages amount for such material Breach.
Section 9.02
and
Section 9.03
are the Parties’ sole and exclusive rights with respect to any termination of this Agreement and, except as set forth therein, no Party shall have any obligations hereunder after any such termination.
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(d)
|
If this Agreement is terminated by either Buyer or Seller pursuant to
Section 9.01
for any reason other than as described in
Section 9.02(b)
, then, in any such case, the Parties shall (or shall cause their Affiliate who is party to the Escrow Agreement to), within two (2) Business Days of such termination, execute and deliver to the Escrow Agent a joint instruction letter directing the Escrow Agent to release the Deposit Amount to Buyer.
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(e)
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THE PARTIES FURTHER AGREE THAT, UNLESS AND UNTIL THE CLOSING OCCURS, THE SOLE AND EXCLUSIVE REMEDY OF SELLER AND ITS AFFILIATES AGAINST BUYER, ITS DEBT OR EQUITY FINANCING SOURCES, AND ANY OF THEIR RESPECTIVE FORMER, CURRENT OR FUTURE GENERAL OR LIMITED PARTNERS, EQUITY HOLDERS, CONTROLLING PERSONS, MANAGEMENT COMPANIES, REPRESENTATIVES, ASSIGNEES OR AFFILIATES AND ANY AND ALL FORMER, CURRENT OR FUTURE HEIRS, EXECUTORS, ADMINISTRATORS, TRUSTEES, SUCCESSORS OR ASSIGNS OF THE FOREGOING (COLLECTIVELY, THE “
BUYER RELATED PARTIES
”)
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ARISING FROM OR RELATING TO THIS AGREEMENT AND THE CONTEMPLATED TRANSACTIONS, INCLUDING FOR ANY FAILURE OF BUYER TO EFFECT THE CLOSING OR OTHERWISE TO PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT (WHETHER WILLFULLY, INTENTIONALLY, UNINTENTIONALLY OR OTHERWISE), WHETHER IN CONTRACT, TORT OR OTHERWISE, SHALL BE THE RIGHTS AND REMEDIES AGAINST BUYER DESCRIBED IN THIS
SECTION 9.02
. EXCEPT FOR THE RIGHTS AND REMEDIES AGAINST BUYER DESCRIBED IN THIS
SECTION 9.02
, IN FURTHERANCE OF THE FOREGOING, (A) SELLER RELEASES THE BUYER RELATED PARTIES, WAIVES ANY RIGHT OF RECOVERY FOR AND AGREES NOT TO SEEK ANY RECOVERY FOR ANY LOSS SUFFERED AS A RESULT OF ANY BREACH OF ANY COVENANT, OBLIGATION, REPRESENTATION OR WARRANTY IN THIS AGREEMENT OR THE FAILURE OF THE TRANSACTION TO BE CONSUMMATED, OR IN RESPECT OF ANY ORAL REPRESENTATION MADE OR ALLEGED TO HAVE BEEN MADE IN CONNECTION HEREWITH AND (B) THE MAXIMUM AGGREGATE MONETARY LIABILITY THAT THE BUYER RELATED PARTIES SHALL HAVE IN CONNECTION WITH SUCH LOSS SHALL BE THE FORFEITURE OF THE DEPOSIT AMOUNT IN ACCORDANCE WITH THIS
SECTION 9.02
.
9.03
Return of Records Upon Termination
.
Upon termination of this Agreement, (a) Buyer shall promptly return to Seller or destroy (at Seller’s option) all title, engineering, geological and geophysical data, environmental assessments and reports, maps, documents and other information furnished by Seller to Buyer in connection with its due diligence investigation of the Assets other than customary electronic backup data and (b) an officer of Buyer shall certify Buyer’s compliance with the preceding clause (a) to Seller in writing.
ARTICLE 10
INDEMNIFICATION; REMEDIES
10.01
Survival
.
The survival periods for the various representations, warranties, covenants and agreements contained herein shall be as follows: (a) Fundamental Representations shall survive for thirty-six (36) months after Closing, (b) the representations and warranties in
Section 3.04
shall survive for the applicable statute of limitations plus sixty (60) days, (c) the special warranty of Defensible Title set forth in the Instruments of Conveyance shall survive indefinitely, (d) all other representations, warranties, pre-Closing covenants and agreements of Seller shall survive for twelve (12) months after Closing, and (e) all other representations, warranties, covenants and agreements of Buyer and post-Closing covenants of Seller shall survive indefinitely. Representations, warranties, covenants and agreements shall be of no further force and effect after the date of their expiration;
provided
that there shall be no termination of any bona fide claim asserted pursuant to this Agreement with respect to such a representation, warranty, covenant or agreement prior to its expiration date. The indemnities in
Sections 10.02(a)
,
10.02(b)
,
10.03(a)
and
10.03(b)
shall terminate as of the termination date of each respective representation, warranty, covenant or agreement that is subject to indemnification thereunder, except in each case as to matters for which a specific written claim for indemnity has been delivered to the indemnifying person on or before such termination date.
The indemnities in
Section 10.02(c)
(with respect only to clauses (a), (b) and (c) in the definition of Retained Liabilities) shall terminate twenty-four (24) months following the Closing Date. The indemnities in
Section 10.02(c)
(with respect only to clause (i) in the definition of Retained Liabilities) shall survive for the applicable statute of limitations plus sixty (60) days. The indemnities in
Section 10.02(c)
(with respect to Retained Liabilities other than those described in clauses (a), (b), (c) and (i) in the definition of Retained Liabilities) shall continue indefinitely. All other indemnities, and all other provisions of this Agreement, shall survive the Closing without time limit except as may otherwise be expressly provided herein.
10.02
Indemnification and Payment of Damages by Seller
.
Except as otherwise limited in this
Article 10
, from and after the Closing, Seller shall defend, release, indemnify, and hold harmless Buyer Group from and against, and shall pay to the Buyer Group the amount of, any and all Damages, whether or not involving a Third Party claim or incurred in the investigation or defense of any of the same or in asserting, preserving, or enforcing any of their respective rights under this Agreement arising from, based upon, related to, or associated with:
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(a)
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any Breach of any representation or warranty made by Seller in this Agreement, or in any certificate delivered by Seller pursuant to this Agreement;
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(b)
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any Breach by Seller of any covenant, obligation, or agreement of Seller in this Agreement;
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(c)
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the Retained Liabilities;
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(d)
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the use, ownership or operation of the Excluded Assets; and
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(e)
|
the use, ownership or operation of the Retained Assets.
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Notwithstanding anything to the contrary contained in this Agreement, after the Closing, the remedies provided in this
Article 10
and
Article 11
, along with the special warranty of Defensible Title set forth in the Instruments of Conveyance, are Buyer Group’s exclusive legal remedies against Seller with respect to this Agreement and the Contemplated Transactions, including breaches of the representations, warranties, covenants, obligations, and agreements of the Parties contained in this Agreement or the affirmations of such representations, warranties, covenants, obligations, and agreements contained in the certificate delivered by Seller at Closing pursuant to
Section 2.04
, and except for the remedies provided in
Article 10
and
Article 11
, along with the special warranty of Defensible Title set forth in the Instruments of Conveyance,
BUYER RELEASES SELLER GROUP FROM ANY AND ALL CLAIMS, CAUSES OF ACTION, PROCEEDINGS, OR OTHER LEGAL RIGHTS AND REMEDIES OF BUYER GROUP, KNOWN OR UNKNOWN, WHICH BUYER MIGHT NOW OR SUBSEQUENTLY HAVE, BASED ON, RELATING TO OR IN ANY WAY ARISING OUT OF THIS AGREEMENT, THE CONTEMPLATED TRANSACTIONS, THE OWNERSHIP, USE OR OPERATION OF THE ASSETS PRIOR TO THE CLOSING, OR THE CONDITION, QUALITY, STATUS, OR NATURE OF THE ASSETS PRIOR TO THE CLOSING, INCLUDING ANY AND ALL CLAIMS RELATED TO ENVIRONMENTAL MATTERS OR LIABILITY OR VIOLATIONS OF ENVIRONMENTAL LAWS AND INCLUDING RIGHTS TO CONTRIBUTION UNDER THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION, AND LIABILITY ACT OF 1980, AS AMENDED, BREACHES OF STATUTORY OR IMPLIED WARRANTIES, NUISANCE, OR OTHER TORT
ACTIONS, RIGHTS TO PUNITIVE DAMAGES, COMMON LAW RIGHTS OF CONTRIBUTION, AND RIGHTS UNDER INSURANCE MAINTAINED BY SELLER OR ANY OF SELLER’S AFFILIATES
. Nothing in this Agreement or otherwise shall release or relieve Seller for actual fraud.
10.03
Indemnification and Payment of Damages by Buyer
.
Except as otherwise limited in this
Article 10
(including Seller’s indemnification obligations in
Section 10.02
) and
Article 11
, from and after the Closing, Buyer shall assume, be responsible for, pay on a current basis, and shall defend, release, indemnify, and hold harmless Seller Group from and against, and shall pay to Seller Group the amount of any and all Damages, whether or not involving a Third Party claim or incurred in the investigation or defense of any of the same or in asserting, preserving, or enforcing any of their respective rights under this Agreement arising from, based upon, related to, or associated with:
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(a)
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any Breach of any representation or warranty made by Buyer in this Agreement or in any certificate delivered by Buyer pursuant to this Agreement;
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(b)
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any Breach by Buyer of any covenant, obligation, or agreement of Buyer in this Agreement;
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(c)
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any Damages arising out of or relating to access to the Assets and contracts, books and records and other documents and data relating thereto prior to the Closing, including Buyer’s title and environmental inspections pursuant to
Sections 11.01
and
11.10
, including Damages attributable to personal injury, illness or death, or property damage; and
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(d)
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the Assumed Liabilities.
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Notwithstanding anything to the contrary contained in this Agreement, after the Closing, the remedies provided in this
Article 10
and
Article 11
are Seller Group’s exclusive legal remedies against Buyer with respect to this Agreement and the Contemplated Transactions, including breaches of the representations, warranties, covenants, obligations, and agreements of the Parties contained in this Agreement or the affirmations of such representations, warranties, covenants, obligations, and agreements contained in the certificate delivered by Buyer at Closing pursuant to
Section 2.04
, and except for the remedies provided in
Article 10
and
Article 11
,
SELLER RELEASES BUYER GROUP FROM ANY AND ALL CLAIMS, CAUSES OF ACTION, PROCEEDINGS, OR OTHER LEGAL RIGHTS AND REMEDIES OF SELLER GROUP, KNOWN OR UNKNOWN, WHICH SELLER MIGHT NOW OR SUBSEQUENTLY HAVE, BASED ON, RELATING TO OR IN ANY WAY ARISING OUT OF THIS AGREEMENT, THE CONTEMPLATED TRANSACTIONS, THE OWNERSHIP, USE OR OPERATION OF THE ASSETS AFTER THE CLOSING, BREACHES OF STATUTORY OR IMPLIED WARRANTIES, NUISANCE, OR OTHER TORT ACTIONS, RIGHTS TO PUNITIVE DAMAGES, COMMON LAW RIGHTS OF CONTRIBUTION, AND RIGHTS UNDER INSURANCE MAINTAINED BY BUYER OR ANY OF BUYER’S AFFILIATES
. Nothing in this Agreement or otherwise shall release or relieve Buyer for actual fraud.
10.04
Indemnity Net of Insurance
.
The amount of any Damages for which an indemnified Party is entitled to indemnity under this
Article 10
shall be reduced by the amount of insurance or indemnification proceeds realized by the indemnified Party or its Affiliates with
respect to such Damages (net of any collection costs, and excluding the proceeds of any insurance policy issued or underwritten, or indemnity granted, by the indemnified Party or its Affiliates).
10.05
Limitations on Liability
.
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(a)
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Except with respect to the Fundamental Representations and the representations and warranties included in
Section 3.04
, if the Closing occurs, Seller shall not have any liability for any indemnification under
Section 10.02(a)
: (a) for any Damages with respect to any occurrence, claim, award or judgment with respect to that do not individually exceed Seventy Five Thousand Dollars ($75,000) net to Seller’s interest (the “
Individual Claim Threshold
”); or (b) unless and until the aggregate Damages for which claim notices for claims meeting the Individual Claim Threshold are delivered by Buyer exceed two percent (2%) of the unadjusted Purchase Price, and then only to the extent such Damages exceed two percent (2%) of the unadjusted Purchase Price. Except with respect to the Fundamental Representations and the representations and warranties included in
Section 3.04
, in no event will Seller be liable for Damages indemnified under
Section 10.02(a)
to the extent such damages, exceed twenty percent (20%) of the unadjusted Purchase Price. Notwithstanding anything herein to the contrary, in no event will Seller’s aggregate liability under this Agreement exceed one hundred percent (100%) of the unadjusted Purchase Price.
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(b)
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Notwithstanding anything herein to the contrary, the obligations and rights of the Parties hereunder, and the Damages for which any Party is obligated to indemnify or entitled to indemnity under
Section 11.02
or
Section 11.03
shall be determined and calculated by excluding and without giving effect to any qualifiers as to “Material Adverse Effect”, materiality or other similar qualifiers set forth in any representation or warranty (including any bringdown of such representation or warranty in any certificate delivered pursuant to this Agreement).
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10.06
Procedure for Indemnification‑‑Third Party Claims
.
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(a)
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Promptly after receipt by an indemnified party under
Section 10.02
or
10.03
of a Third Party claim for Damages or notice of the commencement of any Proceeding against it, such indemnified party shall, if a claim is to be made against an indemnifying Party under such Section, give notice to the indemnifying Party of the commencement of such claim or Proceeding, together with a claim for indemnification pursuant to this
Article 10
. The failure of any indemnified party to give notice of a Third Party claim or Proceeding as provided in this
Section 10.06
shall not relieve the indemnifying Party of its obligations under this
Article 10
except to the extent and then only to the extent such failure results in insufficient time being available to permit the indemnifying Party to effectively defend against the Third Party claim or participate in the Proceeding or otherwise prejudices the indemnifying Party’s ability to defend against the Third Party claim or participate in the Proceeding.
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(b)
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If any Proceeding referred to in
Section 10.06(a)
is brought against an indemnified party and the indemnified party gives notice to the indemnifying Party of the commencement
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of such Proceeding, the indemnifying Party shall be entitled to participate in such Proceeding and, to the extent that it wishes (unless (i) the indemnifying Party is also a party to such Proceeding and the indemnified party determines in good faith that joint representation would be inappropriate, or (ii) the indemnifying Party fails to provide reasonable assurance to the indemnified party of its financial capacity to defend such Proceeding and provide indemnification with respect to such Proceeding), to assume the defense of such Proceeding with counsel reasonably satisfactory to the indemnified party, and, after notice from the indemnifying Party to the indemnified party of the indemnifying Party’s election to assume the defense of such Proceeding, the indemnifying Party shall not, as long as it diligently conducts such defense, be liable to the indemnified party under this
Article 10
for any fees of other counsel or any other expenses with respect to the defense of such Proceeding, in each case subsequently incurred by the indemnified party in connection with the defense of such Proceeding. Notwithstanding anything to the contrary in this Agreement, the indemnifying Party shall not be entitled to assume or continue control of the defense of any such Proceeding if (A) such Proceeding relates to or arises in connection with any criminal proceeding, (B) such Proceeding seeks an injunction or equitable relief against any indemnified Party, (C) such Proceeding has or would reasonably be expected to result in Damages in excess of the amount set forth in
Section 10.05
(i.e., twenty percent (20%) of the unadjusted Purchase Price), or (D) the indemnifying Party has failed or is failing to defend in good faith such Proceeding. If the indemnifying Party assumes the defense of a Proceeding, no compromise or settlement of such Third Party claims or Proceedings may be effected by the indemnifying Party without the indemnified party’s prior written consent unless (A) there is no finding or admission of any violation of Legal Requirements or any violation of the rights of any Person and no effect on any other Third Party claims that may be made against the indemnified party, and (B) the sole relief provided is monetary damages that are paid in full by the indemnifying Party, and (C) the indemnified party shall have no liability with respect to any compromise or settlement of such Third Party claims or Proceedings effected without its consent.
10.07
Procedure for Indemnification – Other Claims
.
A claim for indemnification for any matter not involving a Third Party claim may be asserted by notice to the Party from whom indemnification is sought.
10.08
Indemnification of Group Members
.
The indemnities in favor of Buyer and Seller provided in
Section 10.08
and
Section 10.03
, respectively, shall be for the benefit of and extend to such Party’s present and former Group members. Any claim for indemnity under this
Article 10
by any Group member other than Buyer or Seller must be brought and administered by the relevant Party to this Agreement. No indemnified party other than Buyer and Seller shall have any rights against either Seller or Buyer under the terms of this
Article 10
except as may be exercised on its behalf by Buyer or Seller, as applicable, pursuant to this
Section 10.08
. Each of Seller and Buyer may elect to exercise or not exercise indemnification rights under this Section on behalf of the other indemnified party affiliated with it in its sole discretion and shall have no liability to any such other indemnified party for any action or inaction under this Section.
10.09
Extent of Representations and Warranties
.
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(a)
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NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, EXCEPT AS AND TO THE EXTENT EXPRESSLY SET FORTH IN THIS AGREEMENT OR IN THE INSTRUMENTS OF CONVEYANCE, SELLER MAKES NO REPRESENTATIONS OR WARRANTIES WHATSOEVER, AND DISCLAIMS ALL LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, STATEMENT, OR INFORMATION MADE OR COMMUNICATED (ORALLY OR IN WRITING) TO BUYER (INCLUDING ANY OPINION, INFORMATION, OR ADVICE THAT MAY HAVE BEEN PROVIDED TO BUYER OR ITS AFFILIATES OR REPRESENTATIVES BY ANY AFFILIATES OR REPRESENTATIVES OF SELLER OR BY ANY INVESTMENT BANK OR INVESTMENT BANKING FIRM, ANY PETROLEUM ENGINEER OR ENGINEERING FIRM, SELLER’S COUNSEL, OR ANY OTHER AGENT, CONSULTANT, OR REPRESENTATIVE OF SELLER). WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EXCEPT AS AND TO THE EXTENT EXPRESSLY SET FORTH IN THIS AGREEMENT OR IN THE INSTRUMENTS OF CONVEYANCE, SELLER EXPRESSLY DISCLAIMS AND NEGATES ANY REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT COMMON LAW, BY STATUTE, OR OTHERWISE, RELATING TO (A) THE TITLE TO ANY OF THE ASSETS, (B) THE CONDITION OF THE ASSETS (INCLUDING ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS), IT BEING DISTINCTLY UNDERSTOOD THAT THE ASSETS ARE BEING SOLD “AS IS,” “WHERE IS,” AND “WITH ALL FAULTS AS TO ALL MATTERS,” (C) ANY INFRINGEMENT BY SELLER OF ANY PATENT OR PROPRIETARY RIGHT OF ANY THIRD PARTY, (D) ANY INFORMATION, DATA, OR OTHER MATERIALS (WRITTEN OR ORAL) FURNISHED TO BUYER BY OR ON BEHALF OF SELLER (INCLUDING THE EXISTENCE OR EXTENT OF HYDROCARBONS OR THE MINERAL RESERVES, THE RECOVERABILITY OF SUCH RESERVES, ANY PRODUCT PRICING ASSUMPTIONS, AND THE ABILITY TO SELL HYDROCARBON PRODUCTION AFTER THE CLOSING), AND (E) THE ENVIRONMENTAL CONDITION AND OTHER CONDITION OF THE ASSETS AND ANY POTENTIAL LIABILITY ARISING FROM OR RELATED TO THE ASSETS.
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(b)
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Buyer acknowledges and affirms that it has made its own independent investigation, analysis, and evaluation of the Contemplated Transactions and the Assets (including Buyer’s own estimate and appraisal of the extent and value of Seller’s Hydrocarbon reserves attributable to the Assets and an independent assessment and appraisal of the environmental risks associated with the acquisition of the Assets). Buyer acknowledges that in entering into this Agreement, it has relied on the aforementioned investigation and the express representations and warranties of Seller contained in this Agreement and the Seller Closing Documents.
Buyer hereby irrevocably covenants to refrain from, directly or indirectly, asserting any claim, or commencing, instituting, or causing to be commenced, any Proceeding of any kind against Seller or its Affiliates, alleging facts contrary to the foregoing acknowledgment and affirmation.
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10.10
Compliance With Express Negligence Test
.
THE PARTIES AGREE THAT ANY INDEMNITY, DEFENSE, AND/OR RELEASE OBLIGATION ARISING UNDER THIS AGREEMENT SHALL APPLY WITHOUT REGARD TO THE NEGLIGENCE, STRICT LIABILITY, OR OTHER FAULT OF THE INDEMNIFIED PARTY,
WHETHER
ACTIVE, PASSIVE, JOINT, CONCURRENT, COMPARATIVE, CONTRIBUTORY OR SOLE, OR ANY PRE-EXISTING CONDITION, ANY BREACH OF CONTRACT OR BREACH OF WARRANTY, OR VIOLATION OF ANY LEGAL REQUIREMENT EXCEPT TO THE EXTENT SUCH DAMAGES WERE OCCASIONED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
THE INDEMNIFIED PARTY OR ANY GROUP MEMBER THEREOF, IT BEING THE PARTIES’ INTENTION THAT DAMAGES TO THE EXTENT ARISING FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE INDEMNIFIED PARTY OR ANY GROUP MEMBER THEREOF NOT BE COVERED BY THE RELEASE, DEFENSE, OR INDEMNITY OBLIGATIONS IN THIS AGREEMENT.
The foregoing is a specifically bargained for allocation of risk among the Parties, which the Parties agree and acknowledge satisfies the express negligence rule and conspicuousness requirement under Texas law.
10.11
Limitations of Liability
.
Notwithstanding anything to the contrary contained in this Agreement,
IN NO EVENT SHALL SELLER OR BUYER EVER BE LIABLE FOR, AND EACH PARTY RELEASES THE OTHER FROM, ANY CONSEQUENTIAL, SPECIAL, INDIRECT, EXEMPLARY, OR PUNITIVE DAMAGES OR CLAIMS RELATING TO OR ARISING OUT OF THE CONTEMPLATED TRANSACTIONS OR THIS AGREEMENT
;
provided, however
, that any consequential, special, indirect, exemplary, or punitive damages recovered by a Third Party (including a Governmental Body, but excluding any Affiliate of any Group member) against a Person entitled to indemnity pursuant to this
Article 10
shall be included in the Damages recoverable under such indemnity. Notwithstanding the foregoing, lost profits shall not be excluded by this provision as to recovery hereunder to the extent constituting direct Damages.
10.12
No Duplication
.
Any liability for indemnification hereunder shall be determined without duplication of recovery by reason of the state of facts giving rise to such liability constituting a Breach of more than one representation, warranty, covenant, obligation, or agreement herein. Neither Buyer nor Seller shall be liable for indemnification with respect to any Damages based on any sets of facts to the extent the Purchase Price is being or has been adjusted pursuant to
Section 2.05
by reason of the same set of facts.
10.13
Disclaimer of Application of Anti-Indemnity Statutes
.
Seller and Buyer acknowledge and agree that the provisions of any anti-indemnity statute relating to oilfield services and associated activities shall not be applicable to this Agreement and/or the Contemplated Transactions.
10.14
Waiver of Right to Rescission.
Seller and Buyer acknowledge that, following the Closing, the payment of money, as limited by the terms of this Agreement, shall be adequate compensation for Breach of any representation, warranty, covenant or agreement contained herein or for any other claim arising in connection with or with respect to the Contemplated Transactions. As the payment of money shall be adequate compensation, following Closing, Seller and Buyer waive any right to rescind this Agreement or any of the transactions contemplated hereby.
10.15
Joint and Several.
Each Seller shall be jointly and severally liable for each representation, warranty, covenant, agreement, indemnification obligation and Breach of this Agreement and the Seller Closing Documents by each other Seller.
ARTICLE 11
TITLE MATTERS AND ENVIRONMENTAL MATTERS; PREFERENTIAL PURCHASE RIGHTS; CONSENTS
11.01
Title Examination and Access
.
Buyer may make or cause to be made at its expense such examination as it may desire of Seller’s title to the Assets. For such purposes, until the Closing, Seller shall give to Buyer and its Representatives access during Seller’s regular hours of business to originals or, in Seller’s sole discretion, copies (which copies may, at Seller’s sole discretion, be in electronic format), of all of the files, records, contracts, correspondence, maps, data, reports, plats, abstracts of title, lease files, well files, unit files, division order files, production marketing files, title opinions, title files, title records, ownership maps, surveys, and any other information, data, records, and files that Seller or its Affiliates relating in any way to the title to the Assets, the past or present operation thereof, and the marketing of production therefrom, in accordance with, and subject to the limitations in,
Section 5.01
.
11.02
Preferential Purchase Rights
.
Seller shall, promptly after the Execution Date, provide all notices necessary to comply with or obtain the waiver of all Preferential Purchase Rights which are applicable to the Contemplated Transactions prior to the Closing Date and in accordance with
Section 5.04
and the provisions of the underlying Lease, Fee Mineral or Contract giving rise to such Preferential Purchase Right. (i) To the extent any such Preferential Purchase Rights are exercised by any holders thereof, or (ii) if the time period for exercising any Preferential Purchase Right has not expired, but no notice of waiver (nor of the exercise of such Preferential Purchase Right) has been received from the holder thereof, then, in each case, the Asset(s) subject to such Preferential Purchase Rights shall not be sold to Buyer and shall be excluded from the Assets and sale under this Agreement and shall be considered Retained Assets and the Purchase Price shall be reduced by the Allocated Value thereof. The Purchase Price shall be adjusted downward by the Allocated Value of the Asset(s) so retained. If any holder of a Preferential Purchase Right initially elects to exercise that Preferential Purchase Right, but after the Closing Date, refuses to consummate the purchase of the affected Asset(s) or the right to so exercise expires, then, subject to the Parties’ respective rights and remedies as to the obligation to consummate the Contemplated Transactions, Buyer shall purchase such Asset(s) for the Allocated Value thereof (subject to the adjustments pursuant to
Section 2.05
), and the closing of such transaction shall take place on a date designated by Seller not more than one hundred eighty (180) days after the Closing Date. If such holder’s refusal to consummate the purchase of the affected Asset(s) occurs prior to the Closing Date, then, subject to the Parties’ respective rights and remedies as to the obligation to consummate the Contemplated Transactions, Buyer shall purchase the affected Asset(s) at the Closing in accordance with the terms of this Agreement.
11.03
Consents
.
Seller shall initiate all procedures required to comply with or obtain all Consents required for the transfer of the Assets in accordance with
Section 5.04
and the provisions of the underlying Lease, Fee Mineral or Contract giving rise to such Consent.
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(a)
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If Seller fails to obtain any Consent necessary for the transfer of any Asset to Buyer, Seller’s failure shall be handled as follows:
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(i)
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If the Consent is a not a Required Consent, then the affected Assets shall nevertheless be conveyed at the Closing as part of the Assets. Any Damages that
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arise due to the failure to obtain such Consent shall be treated as Assumed Liabilities.
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(ii)
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Except as set forth in
Section 11.03(a)(ii)
below, if the Consent is a Required Consent, the Purchase Price shall be adjusted downward by the Allocated Value of the affected Assets (which affected Assets shall include all Leases, Fee Minerals and Wells affected by the Applicable Contract, Fee Mineral or Lease for which a Consent is refused), and the affected Assets shall be treated as Retained Assets and the Purchase Price shall be reduced by the Allocated Value thereof.
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(iii)
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If the Consent is pursuant to that certain License Agreement, dated September 9, 2003, by and between Aera Energy, LLC and BlackSand Partners, L.P., then the such Contract shall be treated as a Retained Asset (but no other Assets shall be excluded from Closing due to the failure to obtain such Consent, and the Purchase Price shall not be reduced due to the failure to obtain such Consent), Seller shall hold such Contract for the benefit of Buyer after Closing and provide Buyer with all rights and benefits of ownership thereof, including control thereof and the economic benefits, until such Consent is received, and Buyer shall be responsible for (and shall indemnify Seller Group for) all Assumed Liabilities arising from the ownership and operation thereof, as if such Contract had been assigned to Buyer at Closing (which Assumed Liabilities do not include any Damages associated with the failure to obtain such Consent).
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(b)
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Notwithstanding the provisions of
Section 11.03(a)
, if Seller obtains a Required Consent described in
Section 11.03(a)(ii)
or
Section 11.03(a)(iii)
within one hundred eighty (180) days after the Closing, then Seller shall promptly deliver conveyances of the affected Asset(s) to Buyer and, with respect to Required Consents described in
Section 11.03(a)(ii)
only, Buyer shall pay to Seller an amount equal to the Allocated Value of the affected Asset(s) in accordance with wire transfer instructions provided by Seller (subject to the adjustments set forth in
Section 2.05)
.
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11.04
Title Defects
.
Buyer shall notify Seller of Title Defects (“
Title Defect Notice(s)
”) promptly after the discovery thereof, but in no event later than 5:00 p.m. Central Time on July 11, 2017 (the “
Defect Notice Date
”). To be effective, each Title Defect Notice shall be in writing and include (a) a description of the alleged Title Defect and the Well or portion thereof (including by the currently producing formation) affected by such alleged Title Defect (each, a “
Title Defect Property
”), (b) the Allocated Value of each Title Defect Property (including any Secondary Allocated Value, if applicable), (c) supporting documents reasonably necessary for Seller to verify the existence of the alleged Title Defect, (d) Buyer’s preferred manner of curing such Title Defect, and (e) the amount by which Buyer reasonably believes the Allocated Value (including any Secondary Allocated Value, if applicable) of each Title Defect Property is reduced by such alleged Title Defect and the computations upon which Buyer’s belief is based (the “
Title Defect Value
”). To give Seller an opportunity to commence reviewing and curing Title Defects, Buyer agrees to use reasonable efforts to give Seller, on a weekly basis prior to the Defect Notice Date, written notice of all alleged Title Defects (as well as any claims that would be claims under the special warranty of Defensible Title set forth in the Instruments of Conveyance) discovered by Buyer during the preceding week. Notwithstanding anything
herein to the contrary including Buyer’s rights under
Section 10.02
, and subject to Buyer’s rights under the Instruments of Conveyance, Buyer forever waives, and Seller shall have no liability for, Title Defects not asserted by 5:00 p.m. Central Time on the Defect Notice Date.
11.05
Title Defect Value
.
The Title Defect Value shall be determined pursuant to the following guidelines, where applicable:
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(a)
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if the Parties agree on the Title Defect Value, then that amount shall be the Title Defect Value;
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(b)
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if the Title Defect is an Encumbrance that is undisputed and liquidated in amount, then the Title Defect Value shall be the amount necessary to be paid to remove the Title Defect from the Title Defect Property;
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(c)
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if the Title Defect represents a discrepancy between (i) Seller’s Net Revenue Interest for the Title Defect Property and (ii) the Net Revenue Interest set forth for such Title Defect Property in
Exhibit B
, and there is a proportional decrease in Seller's Working Interest set forth for such Title Defect Property in
Exhibit B
, then the Title Defect Value shall be the product of the Allocated Value of such Title Defect Property,
multiplied
by a fraction, the numerator of which is the Net Revenue Interest decrease and the denominator of which is the Net Revenue Interest set forth for such Title Defect Property in
Exhibit B
;
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(d)
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if the Title Defect represents an increase of (i) Seller’s Working Interest for any Title Defect Property over (ii) the Working Interest set forth for such Title Defect Property in
Exhibit B
(in each case, except (A) increases resulting from contribution requirements with respect to defaulting co-owners under applicable operating agreements, or (B) increases to the extent that such increases are accompanied by a proportionate increase in Seller’s Net Revenue Interest), then the Title Defect Value shall be determined by taking into account the Allocated Value of the Title Defect Property, the portion of the Title Defect Property affected by the Title Defect, the legal effect of the Title Defect, the potential economic effect of the Title Defect over the life of the Title Defect Property, the values placed upon the Title Defect by Buyer and Seller and such other reasonable factors as are necessary to make a proper evaluation; and
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(e)
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if the Title Defect represents an obligation or Encumbrance upon or other defect in title to the Title Defect Property of a type not described above, then the Title Defect Value shall be determined by taking into account the Allocated Value of the Title Defect Property, the portion of the Title Defect Property affected by the Title Defect, the legal effect of the Title Defect, the potential economic effect of the Title Defect over the life of the Title Defect Property, the values placed upon the Title Defect by Buyer and Seller and such other reasonable factors as are necessary to make a proper evaluation.
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In no event, however, shall the total of the Title Defect Values related to a particular Asset exceed the Allocated Value of such Asset. The Title Defect Value with respect to a Title Defect shall be determined without any duplication of any costs or losses included in any other Title Defect Value hereunder, or for which Buyer otherwise receives credit in the calculation of the Purchase Price.
The amount by which the Secondary Allocated Value of each applicable Title Defect Property is reduced by such alleged Title Defect shall be referred to herein as the “
Secondary Title Defect Value
.” The Secondary Title Defect Value shall be calculated pursuant to the guidelines set forth above in this
Section 11.05
, except that all references to Allocated Value shall be replaced with references to the Secondary Allocated Value, and all other provisions of
Section 11.06
,
11.07
,
11.08
and
11.15
shall apply with respect to the Secondary Title Defect Values,
mutatis mutandis
. Subject to Seller’s right to cure or contest a Title Defect pursuant to
Section 11.06
, the Contingent Purchase Price provided for in
Section 2.02(b)
will be reduced by the amount of any Secondary Title Defect Value.
11.06
Seller’s Cure or Contest of Title Defects
.
Seller may contest any asserted Title Defect or Buyer’s good faith estimate of the Title Defect Value as described in
Section 11.06(b)
and may seek to cure any asserted Title Defect as described in
Section 11.06(a)
.
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(a)
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Seller shall have the right to cure any Title Defect on or before sixty (60) days after the Defect Notice Date or, if later, after the date of resolution of such Title Defect or the Title Defect Value by an Expert pursuant to
Section 11.15
(the “
Title Defect Cure Period
”) by giving written notice to Buyer of its election to cure prior to the Closing Date or, if later, after the applicable Expert Decision date. If Seller elects:
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(i)
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to cure and actually cures the Title Defect (“
Cure
”), prior to the Closing, then the Asset affected by such Title Defect shall be conveyed to Buyer at the Closing, and no Purchase Price adjustment will be made for such Title Defect;
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(ii)
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to cure and does not cure the Title Defect prior to the Closing, then:
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(A)
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at Closing (x) Seller shall convey the affected Title Defect Property to Buyer and (y) the Purchase Price shall be reduced by the applicable Title Defect Value and Buyer or an Affiliate shall by wire transfer in same day funds (1) deposit the Title Defect Value attributable to the affected Asset into the Escrow Account and (2) pay the remaining Allocated Value of the affected Title Defect Property to Seller in accordance with
Section 2.04(b)
; or
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(B)
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if Seller is unable to Cure the Title Defect by the end of the Title Defect Cure Period, then Seller shall include a downward adjustment in the Final Settlement Statement equal to the Title Defect Value for such Asset and the Parties shall (or shall cause their Affiliate who is party to the Escrow Agreement to) within five (5) Business Days issue joint written instructions to the Escrow Agent to release such Title Defect Value to Buyer; or
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(C)
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if Seller is able to Cure the Title Defect by the end of the Title Defect Cure Period, then Seller shall remove the downward adjustment in the Final Settlement Statement equal to the Title Defect Value for such Asset and then the Parties shall within five (5) Business Days issue joint written
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instructions to the Escrow Agent to release such Title Defect Value to Seller.
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(iii)
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not to cure the Title Defect, if and only if Buyer agrees to this remedy in its sole discretion, Seller shall indemnify Buyer against all Damages (up to the Allocated Value of the applicable Title Defect Property) resulting from such Title Defect with respect to such Title Defect Property pursuant to an indemnity agreement prepared by Seller in a form and substance reasonably acceptable to Buyer.
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(iv)
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not to cure the Title Defect, subject to Seller’s continuing right to dispute the Title Defect, Seller shall convey the affected Asset(s) to Buyer at the Closing and the Purchase Price shall be reduced by the applicable Title Defect Value in accordance with the terms of this Agreement.
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(b)
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Seller and Buyer shall attempt to agree on the existence, curative efforts and Title Defect Value for all Title Defects. Representatives of the Parties, knowledgeable in title matters, shall meet during the Title Defect Cure Period for this purpose. However, either Party may at any time prior to the final resolution of the applicable Title Defect hereunder submit any disputed Title Defect or the Title Defect Value to arbitration in accordance with the procedures set forth in
Section 11.15
. If a contested Title Defect cannot be resolved prior to Closing, except as otherwise provided herein, the Asset affected by such Title Defect shall nevertheless be conveyed to Buyer at the Closing, and the Purchase Price will be adjusted downward in an amount equal to the Title Defect Value for such Asset;
provided, however
, that if the Title Defect Value as finally decided between the Parties or by the Expert, as applicable, is less than the Title Defect Value used for the Purchase Price adjustment, then Seller shall include an upward adjustment in the Final Settlement Statement equal to the amount that the Title Defect Value (as of Closing) exceeds the Title Defect Value as finally determined.
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11.07
Limitations on Adjustments for Title Defects
.
Notwithstanding the provisions of
Sections 11.04
,
11.05
and
11.06
, Seller shall be obligated to adjust the Purchase Price to account for uncured Title Defects only to the extent that the sum of (x) the aggregate Title Defect Values of all uncured Title Defects (the “
Aggregate Title Defect Value
”) (after taking into account any offsetting Title Benefit Values)
plus
(y) the Aggregate Environmental Defect Value exceeds the Aggregate Defect Deductible. In addition, if the Title Defect Value for any single Well is less than the De Minimis Title Defect Cost, such value shall not be considered in calculating the Aggregate Title Defect Value. The limitations in this
Section 11.07
shall not apply to the special warranty of Defensible Title in the Instruments of Conveyance.
11.08
Title Benefits
.
If Seller discovers any right, circumstance or condition that operates to (a) increase the Net Revenue Interest above that shown in
Exhibit B
, to the extent the same does not cause a greater than proportionate increase in Seller’s Working Interest therein above that shown in
Exhibit B
, or (b) to decrease the Working Interest of Seller in any Well below that shown in
Exhibit B
, to the extent the same causes a decrease in Seller’s Working Interest that is proportionately greater than the decrease in Seller’s Net Revenue Interest therein below that shown in
Exhibit B
(each, a “
Title Benefit
”), then Seller shall, from time to time and without limitation, have the right, but not the obligation, to give Buyer written notice of any such
Title Benefits (a “
Title Benefit Notice
”), as soon as practicable but not later than 5:00 p.m. Central Time on the Defect Notice Date, stating with reasonable specificity the Assets affected, the particular Title Benefit claimed, and Seller’s good faith estimate of the amount the additional interest increases the value of the affected Assets over and above that Asset’s Allocated Value (the “
Title Benefit Value
”). Buyer shall also promptly furnish Seller with written notice of any Title Benefit (including a description of such Title Benefit and the Assets affected thereby with reasonable specificity (the “
Title Benefit Properties
”)) which is discovered by any of Buyer’s or any of its Affiliates’ Representatives, employees, title attorneys, landmen, or other title examiners. The Title Benefit Value of any Title Benefit shall be determined by the following methodology, terms and conditions (without duplication): (i) if the Parties agree on the Title Benefit Value, then that amount shall be the Title Benefit Value; (ii) if the Title Benefit represents a discrepancy between (A) Seller’s Net Revenue Interest for any Title Benefit Property and (B) the Net Revenue Interest set forth for such Title Benefit Property in
Exhibit B
then the Title Benefit Value shall be the product of the Allocated Value of such Title Benefit Property
multiplied
by a fraction, the numerator of which is the Net Revenue Interest increase and the denominator of which is the Net Revenue Interest set forth for such Title Benefit Property in
Exhibit B
; (iii) if the Title Benefit represents a decrease of (A) Seller’s Working Interest for any Title Benefit Property below (B) the Working Interest set forth for such Title Benefit Property in
Exhibit B
, then the Title Benefit Value shall be determined by calculating the Net Revenue Interest that results from such reduced Working Interest, determining what the Net Revenue Interest would be using such calculated Net Revenue Interest and the Working Interest set forth in
Exhibit B
, and then calculating the adjustment in the manner set forth in clause (ii) above; and (iv) if the Title Benefit is of a type not described above, then the Title Benefit Value shall be determined by taking into account the Allocated Value of the Title Benefit Property, the portion of such Title Benefit Property affected by such Title Benefit, the legal effect of the Title Benefit, the potential economic effect of the Title Benefit over the life of such Title Benefit Property, the values placed upon the Title Benefit by Buyer and Seller and such other reasonable factors as are necessary to make a proper evaluation.
Seller and Buyer shall attempt to agree on the existence and Title Benefit Value for all Title Benefits on before the end of the Title Defect Cure Period. If Buyer agrees with the existence of the Title Benefit and Seller’s good faith estimate of the Title Benefit Value, then the Aggregate Title Defect Value shall be offset by the amount of the Title Benefit Value. If the Parties cannot reach agreement by the end of the Title Defect Cure Period, the Title Benefit or the Title Benefit Value in dispute shall be submitted to arbitration in accordance with the procedures set forth in
Section 11.15
. Notwithstanding the foregoing, the Parties agree and acknowledge that there shall be no upward adjustment to the Purchase Price for any Title Benefit. If a contested Title Benefit cannot be resolved prior to the Closing, Seller shall convey the affected Asset to Buyer and Buyer shall pay for the Asset at the Closing in accordance with this Agreement as though there were no Title Benefits;
provided, however
, if the Title Benefit contest results in a determination that a Title Benefit exists, then the Aggregate Title Defect Value shall be adjusted downward by the Title Benefit Value as determined in such contest (which adjustment shall be made on the Final Settlement Statement).
11.09
Buyer’s Environmental Assessment
.
Beginning on the Execution Date and ending at 5:00 p.m. Central Time on the Defect Notice Date, Buyer shall have the right, at its sole cost, risk, liability, and expense, to conduct a Phase I Environmental Site Assessment of the
Assets. During Seller’s regular hours of business and after providing Seller with written notice of any such activities no less than two (2) Business Days in advance (which written notice shall include the written permission of the operator (if other than Seller) and any applicable Third Party operator or other Third Party whose permission is legally required, which Seller shall reasonably cooperate with Buyer in securing), Buyer and its representatives shall be permitted to enter upon the Assets, inspect the same, review all of Seller’s files and records relating to the Assets, and generally conduct visual, non-invasive tests, examinations, and investigations. No sampling or other invasive inspections of the Assets may be conducted prior to Closing without Seller’s prior written consent. Buyer’s access shall be in accordance with, and subject to the limitations in,
Section 5.01
.
11.10
Environmental Defect Notice
.
Buyer shall notify Seller in writing of any Environmental Defect (an “
Environmental Defect Notice
”) promptly after the discovery thereof, but in no evet later than 5:00 p.m. Central Time on the Defect Notice Date. To be effective, an Environmental Defect Notice shall include: (i) the Asset(s) affected; (ii) a detailed description of the alleged Environmental Defect and the basis for such assertion under the terms of this Agreement; (iii) Buyer’s good faith estimate of the Environmental Defect Value with respect to such Environmental Defect; and (iv) appropriate documentation reasonably necessary for Seller to substantiate Buyer’s claim and calculation of the Environmental Defect Value. Notwithstanding anything herein to the contrary including Buyer’s rights under
Section 10.02
, Buyer forever waives Environmental Defects not asserted by an Environmental Defect Notice meeting all of the requirements set forth in the preceding sentence no later than 5:00 p.m. Central Time on the Defect Notice Date.
11.11
Seller’s Exclusion, Cure or Contest of Environmental Defects
.
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(a)
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Seller, in its sole discretion, (x) may contest any asserted Environmental Defect or Buyer’s good faith estimate of the Environmental Defect Value as described in
Section 11.11
and/or (y) may seek to remediate or cure any asserted Environmental Defect to the extent of the Lowest Cost Response as described in
Section 11.11(b)
;
provided
, if the Environmental Defect Value asserted in good faith by Buyer (I) equals or exceeds the De Minimis Environmental Defect Cost,
and
(II) is equal to or exceeds the lesser of (1) fifty percent (50%) of the Allocated Value of the affected Assets or (2) two million dollars ($2,000,000), then Buyer may elect to exclude such affected Assets, together with all associated Assets, and reduce the Purchase Price by the Allocated Value of such Assets (which will become Retained Assets). If Seller disputes Buyer’s good faith assertion and the final determination pursuant to
Section 11.15
occurs following the Closing, Buyer or an Affiliate by wire transfer in same day funds shall deposit the Allocated Value attributable to the affected Asset into the Escrow Account and if the final determination pursuant to
Section 11.15
(A) results in a determination of the Environmental Defect Value that is less than two million dollars ($2,000,000) and fifty percent (50%) of the Allocated Value of the affected Assets, then Seller shall assign such affected Assets to Buyer pursuant to an assignment in form and substance reasonably acceptable to the Parties and the Parties shall (or shall cause their Affiliate who is party to the Escrow Agreement to) within five (5) Business Days thereof issue joint written instructions to the Escrow Agent to release to Seller the Allocated Value of such Assets, less the applicable Environmental Defect Value, or (B) results in a determination of the Environmental
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Defect Value that is greater than or equal to the lesser of two million dollars ($2,000,000) and fifty percent (50%) of the Allocated Value of the affected Assets, such Asset shall remain a Retained Asset and the Parties shall (or shall cause their Affiliate who is party to the Escrow Agreement to) within five (5) Business Days thereof issue joint written instructions to the Escrow Agent to release to Buyer the Allocated Value of such Assets.
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(b)
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Seller shall have the right to remediate or cure an Environmental Defect to the extent of the Lowest Cost Response on or before the Closing Date by giving written notice to Buyer to that effect prior to the Closing Date. If Seller elects to pursue remediation or cure as set forth in this clause (a), Seller shall implement such remediation or cure in a manner that is in compliance with all applicable Legal Requirements in a prompt and timely fashion for the type of remediation or cure. If Seller elects to pursue remediation or cure and:
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(i)
|
completes a Complete Remediation of an Environmental Defect prior to the Closing Date, the affected Well(s) shall be included in the Assets conveyed at Closing, and no Purchase Price adjustment will be made for such Environmental Defect;
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(ii)
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does not complete a Complete Remediation prior to the Closing, then unless Buyer elects to exclude such Asset(s) in accordance with its respective rights under
Section 11.11
(a), Seller shall convey the affected Asset(s) to Buyer at Closing and the Purchase Price shall be reduced by the Environmental Defect Value of the affected Asset(s).
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(c)
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Seller and Buyer shall attempt to agree on the existence and Environmental Defect Value of all Environmental Defects. Representatives of the Parties, knowledgeable in environmental matters, shall meet for this purpose. However, a Party may at any time prior to the final resolution of the applicable Environmental Defect hereunder elect to submit any disputed item to arbitration in accordance with the procedures set forth in
Section 11.15
. If a contested Environmental Defect cannot be resolved prior to the Closing, subject to the terms of this
Section 11.11
the affected Assets(s) shall be excluded from the Assets conveyed to Buyer at Closing and the Purchase Price shall be reduced by the Allocated Value of the affected Asset(s), and Buyer or an Affiliate by wire transfer in same day funds shall deposit the Allocated Value attributable to the affected Asset into the Escrow Account and the final determination of the Environmental Defect and/or Environmental Defect Value shall be resolved pursuant to Section
11.15,
subject to Seller’s and Buyer’s rights to elect to exclude such Asset(s) after the resolution of such dispute in accordance with this
Section 11.11
.
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11.12
Limitations
.
Notwithstanding the provisions of
Sections 11.10
and
11.11
, no adjustment to the Purchase Price for Environmental Defect Values shall be made unless and until the sum of (x) the aggregate value of all Environmental Defect Values (the “
Aggregate Environmental Defect Value
”)
plus
(y) the Aggregate Title Defect Value (after taking into account any offsetting Title Benefit Values) exceeds the Aggregate Defect Deductible. If the Environmental Defect Value with respect to any single Environmental Defect is less than the De
Minimis Environmental Defect Cost, such cost shall not be considered in calculating the Aggregate Environmental Defect Value.
11.13
Exclusive Remedies
.
The rights and remedies granted to Buyer in this Agreement are the exclusive rights and remedies against Seller related to any Environmental Condition, or Damages related thereto. Except for the remedies set forth in
Article 10
or
Article 11
or any Seller Closing Documents,
BUYER EXPRESSLY WAIVES, AND RELEASES SELLER GROUP FROM, ANY AND ALL OTHER RIGHTS AND REMEDIES IT MAY HAVE UNDER ENVIRONMENTAL LAWS AGAINST SELLER REGARDING ENVIRONMENTAL CONDITIONS, WHETHER FOR CONTRIBUTION, INDEMNITY, OR OTHERWISE.
The foregoing is a specifically bargained for allocation of risk among the Parties, which the Parties agree and acknowledge satisfies the express negligence rule and conspicuousness requirement under Texas law.
11.14
Casualty Loss and Condemnation
.
If, after the Execution Date but prior to Closing Date, any portion of the Assets is destroyed by fire or other casualty or is expropriated or taken in condemnation or under right of eminent domain (a “Casualty Loss”), this Agreement shall remain in full force and effect, and Buyer shall nevertheless be required to close the Contemplated Transactions. In the event that the amount of the costs and expenses associated with repairing or restoring the Assets affected by such Casualty Loss exceeds Three Hundred Thousand Dollars ($300,000) net to Seller’s interest, Seller must elect by written notice to Buyer prior to Closing either to (a) cause the Assets affected by such Casualty Loss to be repaired or restored, at Seller’s sole cost, as promptly as reasonably practicable (which work may extend after the Closing Date), or (b) reduce the Purchase Price by the amount of the Casualty Loss. In each case, Seller shall retain all rights to insurance and other claims against Third Parties with respect to the applicable Casualty Loss except to the extent the Parties otherwise agree in writing. Except as set forth in
Article 10
, Seller shall have no other liability or responsibility to Buyer with respect to a condemnation or Casualty Loss,
EVEN IF SUCH CASUALTY LOSS SHALL HAVE RESULTED FROM OR SHALL HAVE ARISEN OUT OF THE SOLE OR CONCURRENT NEGLIGENCE, FAULT, VIOLATION OF A LEGAL REQUIREMENT OF SELLER OR ANY MEMBER OF SELLER GROUP.
11.15
Expert Proceedings
.
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(a)
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Each matter referred to this
Section 11.15
(a “
Disputed Matter
”) shall be conducted in accordance with the Commercial Arbitration Rules of the AAA as supplemented to the extent necessary to determine any procedural appeal questions by the Federal Arbitration Act (Title 9 of the United States Code), but only to the extent that such rules do not conflict with the terms of this
Section 11.15
. Any notice from one Party to the other referring a dispute to this
Section 11.15
shall be referred to herein as an “
Expert Proceeding Notice
”.
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(b)
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The arbitration shall be held before a one member arbitration panel (the “
Expert
”), mutually agreed by the Parties. The Expert must (a) be a neutral party who has never been an officer, director or employee of or performed material work for a Party or any Party’s Affiliate within the preceding five (5)-year period and (b) agree in writing to keep strictly confidential the specifics and existence of the dispute as well as all proprietary records of the Parties reviewed by the Expert in the process of resolving such dispute.
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The Expert must have not less than ten (10) years’ experience as a lawyer in the State of California with experience in exploration and production issues. If disputes exist with respect to both title and environmental matters, the Parties may mutually agree to conduct separate arbitration proceedings with the title disputes and environmental disputes being submitted to separate Experts. If, within five (5) Business Days after delivery of an Expert Proceeding Notice, the Parties cannot mutually agree on an Expert, then within seven (7) Business Days after delivery of such Expert Proceeding Notice, each Party shall provide the other with a list of three (3) acceptable, qualified experts, and within ten (10) Business Days after delivery of such Expert Proceeding Notice, the Parties shall each separately rank from one through six in order of preference each proposed expert on the combined lists, with a rank of one being the most preferred expert and the rank of six being the least preferred expert, and provide their respective rankings to the Dallas office of the AAA. Based on those rankings, the AAA will appoint the expert with the combined lowest numerical ranking to serve as the Expert for the Disputed Matters. If the rankings result in a tie or the AAA is otherwise unable to determine an Expert using the Parties’ rankings, the AAA will appoint an arbitrator from one of the Parties’ lists as soon as practicable upon receiving the Parties’ rankings. Each Party will be responsible for paying one-half (1/2) of the fees charged by the AAA for the services provided in connection with this
Section 11.15(b)
.
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(c)
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Within five (5) Business Days following the receipt by either Party of the Expert Proceeding Notice, the Parties will exchange their written description of the proposed resolution of the Disputed Matters. Provided that no resolution has been reached, within five (5) Business Days following the selection of the Expert, the Parties shall submit to the Expert the following: (i) this Agreement, with specific reference to this
Section 11.15
and the other applicable provisions of this
Article 11
, (ii) Buyer’s written description of the proposed resolution of the Disputed Matters, together with any relevant supporting materials, (iii) Seller’s written description of the proposed resolution of the Disputed Matters, together with any relevant supporting materials, and (iv) the Expert Proceeding Notice.
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(d)
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The Expert shall make its determination by written decision within fifteen (15) days following receipt of the materials described in
Section 11.15(c)
above (the “
Expert Decision
”). For any Disputed Matter relating to a Title Defect if such defect or irregularity would customarily be waived by a reasonably prudent owner or operator of oil and gas properties in the same geographic area where the Assets are located, as determined by the Expert, then such Expert shall determine that such Disputed Matter is not a Title Defect. The Expert Decision with respect to the Disputed Matters shall be limited to the selection of the single proposal for the resolution of the aggregate Disputed Matters proposed by a Party that best reflects the terms and provisions of this Agreement,
i.e.
, the Expert must select either Buyer’s proposal or Seller’s proposal for resolution of the aggregate Disputed Matters.
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(e)
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The Expert Decision shall be final and binding upon the Parties, without right of appeal, absent manifest error. In making its determination, the Expert shall be bound by the rules set forth in this
Article 11
. The Expert may consult with and engage disinterested Third Parties to advise the Expert, but shall disclose to the Parties the identities of such
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consultants. Any such consultant shall not have worked as an employee or consultant for either Party or its Affiliates during the five (5)-year period preceding the arbitration nor have any financial interest in the dispute.
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(f)
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The Expert shall act as an expert for the limited purpose of determining the specific matters submitted for resolution herein and shall not be empowered to award damages, interest, or penalties to either Party with respect to any matter. Each Party shall bear its own legal fees and other costs of preparing and presenting its case. All costs and expenses of the Expert shall be borne by the non-prevailing Party in any such arbitration proceeding.
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ARTICLE 12
EMPLOYMENT MATTERS
12.01
Seller Benefit Plans
. Effective as of the Employee Start Date, the Continuing Employees shall cease to accrue further benefits and shall cease to be active participants under the Seller Benefit Plans. Buyer shall not assume any of the Seller Benefits Plans. From and after the Employee Start Date, Seller and its ERISA Affiliates shall retain and shall be solely responsible for all obligations and liabilities under the Seller Benefit Plans, and neither Buyer nor its Affiliates shall have any obligation, liability or responsibility from and after the Employee Start Date to or under the Seller Benefit Plans, whether such obligation, liability or responsibility arose before, on or after the Employee Start Date.
12.02
Pre-Employee Start Date Claims under Seller Benefit Plans
.
(a) To the extent that an Available Employee was a participant in a Seller Benefit Plan, the Seller Benefit Plans shall be responsible for providing welfare benefits (including medical, hospital, dental, accidental death and dismemberment, life, disability and other similar benefits) to any participating Available Employees for all claims incurred prior to the Employee Start Date under and subject to the generally applicable terms and conditions of such plans. For purposes of this
Section 12.02
, a claim is incurred with respect to (i) accidental death and dismemberment, disability, life and other similar benefits when the event giving rise to such claim occurred and (ii) medical, hospital, dental and other similar benefits when the services with respect to such claim are rendered.
12.03
Available Employees’ Offers and Post-Employee Start Date Employment and Benefits
. Within one (1) Business Day of the Execution Date, Seller shall deliver to Buyer a schedule that includes a list of all Available Employees and a list of those employees described in
Section 12.03(d)(ii)
(the “
Employee Letter
”). The list shall include the following data: name, job title, salary or wage, bonus eligibility / target, long term incentive eligibility / target, whether such employee is on a leave of absence, current location, and start date. Buyer shall:
(a) Within ten (10) Business Days of receiving the Employee Letter, make written offers of employment to each of the Available Employees to whom Buyer elects to make an offer of employment, with such offers to be no less than the Available Employee’s base salary or hourly wage rate as of the Execution Date, at a location within fifty (50) miles of the
Available Employee’s current location, and providing such Available Employees at least ten (10) Business Days to either accept or reject such offers;
(b) no later than the date that is three (3) Business Days prior to the anticipated Closing Date, Buyer shall notify Seller as to each Available Employee who has accepted employment with Buyer or any of its Affiliates, which acceptance shall be conditioned upon the occurrence of the Closing and effective as of the Employee Start Date and may be conditioned on other typical hiring policies, and each Available Employee who has rejected Buyer’s offer of employment;
(c) indemnify and hold harmless Seller and its Affiliates with respect to all claims and liabilities relating to or arising out of Buyer’s employee selection and employment offer process described in this
Section 12.03
with regards to any claim of discrimination or other breach of a Legal Requirement in such selection and offer process;
(d) provide to each Available Employee who is actively at work as of the end of the Term under the Transition Services Agreement (as such term is defined therein) or is on a previously scheduled and approved (by Seller or its Affiliates) short-term disability, long-term disability, workers’ compensation or other approved leave of absence and accepts an offer of employment from Buyer (the “
Continuing Employees
”), during the twelve (12) month period immediately following the Closing Date, (i) base salary or hourly wage rate at least equal to the base salary or hourly wage rate provided to the Available Employee as of the Execution Date and (ii) reemployment or hiring, as applicable, to the Available Employees offered by Buyer but identified in the Employee Letter as “Inactive Available Employees” who are not actively at work as of the Closing Date due to short-term disability, workers’ compensation or other Seller-approved leave of absence, such reemployment or hiring to be effective as of the date, if any, each such Available Employee has been cleared for and returns to active employment and to be in a position comparable to that which such Available Employee has prior to the commencement of his or her absence from active employment, which in no event may be later than the twelve (12) month anniversary of the Closing Date;
provided
that nothing in the foregoing shall affect the right of Seller and its Affiliates to terminate the employment of an Available Employee for any reason or at any time;
(e) use commercially reasonable efforts to cause each Continuing Employee and his or her eligible dependents (including all such employee’s dependents covered immediately prior to the Employee Start Date by a group health plan maintained by Seller or its Affiliates) to be covered under a group health plan maintained by Buyer or its Affiliate that (i) provides major medical and dental benefits coverage to the Continuing Employee and such eligible dependents effective immediately upon the Employee Start Date and (ii) credits or reimburses, at Buyer’s option, such Continuing Employee, for the year during which such coverage under such group health plan begins, with any deductibles incurred during such year under a group health plan maintained by Seller or its Affiliates; and
(f) provide full service credit for all purposes (other than to the extent that such credit would result in duplication of benefits with respect to the same period of service, and excepting credit for Buyer’s long term equity compensation plan)
under all vacation, incentive, compensation and employee benefit plans, policies and arrangements made available to
Continuing Employees by Buyer or any of its Affiliates on or after the Employee Start Date to the same extent such Continuing Employee’s service was recognized under the corresponding type of benefit plans in which such Continuing Employee participated immediately prior to the Employee Start Date.
12.04
Savings Plans
. Effective as of the Employee Start Date, Buyer shall establish or maintain a defined contribution pension plan (or plans) and trust (or trusts) intended to qualify under Sections 401(a) and 501(a) of the Code in which all Continuing Employees shall be eligible to participate (the “
Buyer Savings Plan
”) as of the Employee Start Date. Buyer shall cause the Buyer Savings Plan to accept the direct rollover of electing Continuing Employees’ benefits in cash and, if applicable, promissory notes from the Seller Savings Plan that constitutes an eligible rollover distribution pursuant to Code Section 402(c)(4).
12.05
Post-Employee Start Date Employment Claims
. Buyer shall indemnify, defend and hold Seller and its Affiliates harmless from and against any and all liability of any kind or nature involving or related to the employment of the Continuing Employees by Buyer after the Employee Start Date, including any liability related to any employee benefit plan sponsored or maintained by Buyer or its ERISA Affiliates after the Employee Start Date. Seller shall indemnify, defend and hold Buyer and its Affiliates harmless from and against any and all liability of any kind or nature or related to (a) the employment of any Available Employee who does not become a Continuing Employee, including any liability related to any Seller Benefit Plan and (b) the employment of the Continuing Employees by Seller before the Employee Start Date, including any liability related to any employee benefit plan sponsored or maintained by Seller or its ERISA Affiliates before the Employee Start Date. Any Available Employee who rejects Buyer’s offer of employment in
Section 12.03
will not be eligible for severance under Seller’s Severance Plan.
12.06
Buyer Welfare Plans
. Buyer shall cause the waiver of all limitations as to pre-existing conditions, exclusions and waiting periods with respect to participation and coverage requirements applicable to the Continuing Employees. Buyer shall provide continuation health care coverage to Continuing Employees and their qualified beneficiaries who incur a qualifying event, in accordance with the continuation health care coverage requirements of Section 4980B of the Code and Title I, Subtitle B, Part 6 of ERISA (“
COBRA
”) or any similar provisions of state Legal Requirement, on or after the Employee Start Date. Buyer shall provide any required notice under COBRA or any similar provisions of any state Legal Requirement to Continuing Employees in respect of any qualifying event that occurs as a result of the transactions contemplated by this Agreement.
12.07
WARN Act
. From the date of this Agreement until the Employee Start Date, Seller shall not and shall cause its Affiliates not to terminate the employment of any Available Employees such that a “plant closing” or “mass layoff” (as those terms are defined in the WARN Act or any similar state Legal Requirement) occurs prior to the Employee Start Date without complying with the WARN Act. Buyer agrees to provide any notice required under the WARN Act or any similar state Legal Requirement with respect to any “plant closing” or “mass layoff” affecting Continuing Employees that may occur after the Employee Start Date or arise, in whole or in part, as a result of the transactions contemplated by this Agreement. In addition, Buyer shall not effectuate a “plant closing” or “mass layoff” or any other similar triggering event under
the WARN Act or any other applicable Legal Requirement for six (6) months after the Employee Start Date, affecting any Continuing Employee, except in compliance with the WARN Act or other applicable Legal Requirement.
12.08
No Third Party Beneficiary Rights
. Nothing herein, expressed or implied, shall confer upon any Available Employees (or any of their beneficiaries or alternate payees) any rights or remedies (including any right to employment or continued employment, or any right to compensation or benefits for any period) of any nature or kind whatsoever, under or by reason of this Agreement or otherwise. In addition, the provisions of this
Article 12
, are for the sole benefit of the Parties and are not for the benefit of any Third Party.
12.09
Severance Obligation
. If any Available Employee is entitled to severance benefits under the Seller’s Severance Plan as a result of a Qualifying Termination caused by the failure of Buyer or its Affiliate to give an offer of employment to such Available Employee or the failure of Buyer to give an offer of employment to the Available Employee that would avoid a Qualifying Termination, Seller shall bear one hundred percent (100%) of the amount of severance benefits paid to such Available Employee;
provided
that if buyer or its Affiliate hires any such Available Employee on or before the date that is six (6) months after the Transition Date, Buyer shall promptly pay, or cause to be paid to, Seller the amount of any severance benefits paid to such Available Employee pursuant to Seller’s Severance Plan.
ARTICLE 13
GENERAL PROVISIONS
13.01
Records
.
Seller, at Buyer’s cost and expense, shall deliver originals of all Records to Buyer (FOB Seller’s office) within sixty (60) days after the Transition Date. With respect to any original Records delivered to Buyer, (a) Seller shall be entitled to retain copies of such Records, and (b) Buyer shall retain any such original Records for at least seven (7) years beyond the Closing Date, during which seven (7)-year period Seller shall be entitled to obtain access to such Records, at reasonable business hours and upon prior notice to Buyer, so that Seller may make copies of such original Records, at its own expense, as may be reasonable or necessary for Tax purposes or in connection with any Proceeding or Threatened Proceeding against Seller.
13.02
Expenses
.
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(a)
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Except as otherwise expressly provided in this Agreement, each Party to this Agreement shall bear its respective expenses incurred in connection with the preparation, execution, and performance of this Agreement and the Contemplated Transactions, including all fees and expenses of agents, representatives, counsel, and accountants. However, the prevailing Party in any Proceeding brought under or to enforce this Agreement, excluding any expert proceeding pursuant to
Section 11.15
or
Section 2.05(d)
, shall be entitled to recover court costs and arbitration costs, as applicable, and reasonable attorneys’ fees from the non-prevailing Party or Parties, in addition to any other relief to which such Party is entitled.
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(b)
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All Transfer Taxes and all required documentary, filing and recording fees and expenses in connection with the filing and recording of the assignments, conveyances or other Instruments of Conveyance required to convey title to the Assets to Buyer shall be borne by Buyer. Seller shall retain responsibility for, and shall bear, all Asset Taxes assessed with respect to the Assets for (i) any period ending prior to the Effective Time and (ii) the portion of any Straddle Period ending immediately prior to the Effective Time. All Asset Taxes with respect to the Assets arising on or after the Effective Time (including the portion of any Straddle Period beginning at the Effective Time) shall be allocated to and borne by Buyer. For purposes of allocation between the Parties of Asset Taxes assessed with respect to the Assets for any Straddle Period, (A) Asset Taxes that are attributable to the severance or production of Hydrocarbons shall be allocated based on severance or production occurring before the Effective Time (which shall be Seller’s responsibility) and from and after the Effective Time (which shall be Buyer’s responsibility); (B) Asset Taxes that are based upon or related to income or receipts or imposed on a transactional basis (other than such Asset Taxes described in clause (A)) shall be allocated based on revenues from sales occurring before the Effective Time (which shall be Seller’s responsibility) and from and after the Effective Time (which shall be Buyer’s responsibility); and (C) Asset Taxes that are ad valorem, property or other Asset Taxes imposed on a periodic basis shall be allocated
pro rata
per day between the portion of the Straddle Period ending immediately prior to the Effective Time (which shall be Seller’s responsibility) and the portion of the Straddle Period beginning at the Effective Time (which shall be Buyer’s responsibility). For purposes of the preceding sentence, any exemption, deduction, credit or other item that is calculated on an annual basis shall be allocated
pro rata
per day between the portion of the Straddle Period ending immediately prior to the Effective Time and the portion of the Straddle Period beginning at the Effective Time. To the extent the actual amount of any Asset Taxes described in this
Section 13.02(b)
is not determinable at Closing, Buyer and Seller shall utilize the most recent information available in estimating the amount of such Asset Taxes for purposes of
Section 2.05
. Upon determination of the actual amount of such Asset Taxes, timely payments will be made from one Party to the other to the extent necessary to cause each Party to bear the amount of such Asset Tax that is allocable to such Party under this
Section 13.02(b)
.
Any allocation of Asset Taxes between the Parties shall be in accordance with this
Section 13.02(b)
.
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(c)
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Except as required by applicable Legal Requirements, in respect of Asset Taxes, (i) Seller shall be responsible for timely remitting all (A) Asset Taxes due (excluding ad valorem and property Taxes) with respect to the Assets for periods ending prior to the Closing Date, (B) ad valorem and property Taxes due with respect to the Assets for periods ending prior to the Effective Time (no matter when due), and (C) ad valorem and property Taxes due with respect to the Assets due prior to the Closing Date (subject, in each case, to Seller’s right to reimbursement by Buyer under
Section 13.02(b)
), (ii) Buyer shall be responsible for timely remitting all (A) Asset Taxes (excluding ad valorem and property Taxes) with respect to the Assets for periods ending on or after the Closing Date, and (B) all ad valorem and property Taxes due on or after the Closing Date (subject, in each case, to Buyer’s right to reimbursement by Seller under
Section 13.02(b)
), in each case, to the applicable taxing authority, (iii) Seller shall prepare and timely file any (A) Tax Return for Asset Taxes (excluding ad valorem and property
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Taxes) with respect to the Assets required to be filed for periods ending prior to the Closing Date, and (B) Tax Return for ad valorem and property Taxes with respect to the Assets due prior to the Closing Date, and (iv) Buyer shall prepare and timely file any (A) Tax Return for Asset Taxes (excluding ad valorem and property Taxes) with respect to the Assets required to be filed for periods ending on or after the Closing Date, and (B) Tax Return for ad valorem and property Taxes in respect to the Assets required to be filed on or after the Closing Date (including Tax Returns related to any Straddle Period). Each Party shall indemnify and hold the other Party harmless for any failure to file such Tax Returns and to make such payments. Buyer shall prepare all such Tax Returns relating to any Straddle Period on a basis consistent with past practice except to the extent otherwise required by applicable Legal Requirements. Buyer shall provide Seller with a copy of any Tax Return relating to any Straddle Period for Seller’s review at least ten (10) days prior to the due date for the filing of such Tax Return (or within a commercially reasonable period after the end of the relevant Taxable period, if such Tax Return is required to be filed less than ten (10) days after the close of such Taxable period), and Buyer shall incorporate all reasonable comments of Seller provided to Buyer at least three (3) days prior to the due date for the filing of such Tax Return.
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(d)
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Buyer and Seller agree to furnish or cause to be furnished to the other, upon request, as promptly as practicable, such information and assistance relating to the Assets, including access to books and records, as is reasonably necessary for the filing of all Tax Returns by Buyer or Seller, the making of any election relating to taxes, the preparation for any audit by any Governmental Body and the prosecution or defense of any claim, suit or proceeding relating to any tax. The Parties agree to retain all books and records with respect to Tax matters pertinent to the Assets relating to any Tax period beginning before the Closing Date until sixty (60) days after the expiration of the statute of limitations of the respective Tax periods (taking into account any extensions thereof) and to abide by all record retention agreements entered into with any Governmental Body.
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(e)
|
Any payments made to any Party pursuant to
Article 10
or this
Section 13.02
shall constitute an adjustment of the Purchase Price for Tax purposes and shall be treated as such by Buyer and Seller on their Tax Returns to the extent permitted by applicable Legal Requirements.
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13.03
Notices
.
All notices, consents, waivers, and other communications under this Agreement must be in writing and shall be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by fax (with written confirmation of receipt), (c) sent by electronic mail with receipt acknowledged, with the receiving Party affirmatively obligated to promptly acknowledge receipt, or (d) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate recipients, addresses, and fax numbers set forth below (or to such other recipients, addresses, or fax numbers as a Party may from time to time designate by notice to the other Party):
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NOTICES TO BUYER
:
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Bridge Energy LLC
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707 Wilshire Boulevard, Suite 4600
Los Angeles, California 90017
Attention: Randall Breitenbach
Fax: (213) 225-5916
E-mail: rb@pceclp.com
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With a copy (which shall not constitute notice) to:
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EIGF Aggregator LLC
c/o Kohlberg, Kravis Roberts & Co.
600 Travis Street, Suite 7200
Houston, Texas 77002
Attention: Dash Lane
Fax: (713) 583-9430
Email: Dash.Lane@kkr.com
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NOTICES TO SELLER:
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c/o Linn Energy Holdings, LLC
600 Travis Street, Suite 5100
Houston, Texas 77002
Attention: Candice J. Wells, General Counsel
Fax: (832) 726-5955
E-mail: CWells@linnenergy.com
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With a copy (which shall not constitute notice) to:
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Kirkland & Ellis LLP
600 Travis Street, 33rd Floor
Houston, TX 77002
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Attention:
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Anthony Speier, P.C.
|
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Rahul Vashi
|
Fax: (713) 835-3601
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E-mail:
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anthony.speier@kirkland.com
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rahul.vashi@kirkland.com
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13.04
Governing Law; Jurisdiction; Service of Process; Jury Waiver
.
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(A)
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THIS AGREEMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THE RIGHTS, DUTIES AND THE LEGAL RELATIONS AMONG THE PARTIES HERETO AND THERETO SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCLUDING ANY CONFLICTS OF LAW RULE OR PRINCIPLE THAT MIGHT REFER CONSTRUCTION OF SUCH PROVISIONS TO THE LAWS OF ANOTHER JURISDICTION;
PROVIDED,
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HOWEVER
, THAT ANY MATTER RELATED TO REAL PROPERTY SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA. WITHOUT LIMITING THE PARTIES’ AGREEMENT TO ARBITRATE IN
SECTION 11.15
OR THE DISPUTE RESOLUTION PROCEDURE PROVIDED IN
SECTION 2.05(D)
WITH RESPECT TO DISPUTES ARISING THEREUNDER, THE PARTIES HERETO CONSENT TO THE EXERCISE OF JURISDICTION IN PERSONAM BY THE FEDERAL COURTS OF THE UNITED STATES LOCATED IN HOUSTON, TEXAS OR THE STATE COURTS LOCATED IN HOUSTON, TEXAS FOR ANY ACTION ARISING OUT OF THIS AGREEMENT, ANY TRANSACTION DOCUMENTS, OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR FROM THIS AGREEMENT, ANY TRANSACTION DOCUMENTS OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY SHALL BE EXCLUSIVELY LITIGATED IN SUCH COURTS DESCRIBED ABOVE HAVING SITES IN HOUSTON, TEXAS AND EACH PARTY IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURTS SOLELY IN RESPECT OF ANY PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT. EACH PARTY HERETO VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENTS, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY TRANSACTION DOCUMENTS OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY. THE PARTIES FURTHER AGREE, TO THE EXTENT PERMITTED BY LAW, THAT A FINAL AND NONAPPEALABLE JUDGMENT AGAINST A PARTY IN ANY ACTION OR PROCEEDING CONTEMPLATED ABOVE SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER JURISDICTION WITHIN OR OUTSIDE THE UNITED STATES BY SUIT ON THE JUDGMENT, A CERTIFIED OR EXEMPLIFIED COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND AMOUNT OF SUCH JUDGMENT. TO THE EXTENT THAT A PARTY OR ANY OF ITS AFFILIATES HAS ACQUIRED, OR HEREAFTER MAY ACQUIRE, ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, SUCH PARTY (ON ITS OWN BEHALF AND ON BEHALF OF ITS AFFILIATES) HEREBY IRREVOCABLY (I) WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS WITH RESPECT TO THIS AGREEMENT AND (II) SUBMITS TO THE PERSONAL JURISDICTION OF ANY COURT DESCRIBED IN THIS
SECTION 13.04
.
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(B)
|
Notwithstanding anything herein to the contrary, each of the Parties agrees that it will not bring or support any action, cause of action, claim, cross-claim or third-Person claim of any kind or description, whether in law or in equity, whether in contract or in tort or
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otherwise, against the Financing Sources in any way relating to this Agreement or the Contemplated Transaction, including any Proceeding arising out of or relating in any way to the Debt Financing or the performance thereof, in any forum other than the Supreme Court of the State of New York, County of New York, or, if under applicable Legal Requirements exclusive jurisdiction is vested in the federal courts, the United States District Court for the Southern District of New York (and appellate courts thereof). Each of the Parties irrevocably agrees to waive trial by jury in any action, cause of action, claim, cross-claim or third-Person claim referred to in this paragraph.
13.05
Further Assurances
.
The Parties agree (a) to furnish upon request to each other such further information, (b) to execute, acknowledge, and deliver to each other such other documents, and (c) to do such other acts and things, all as the other Party may reasonably request for the purpose of carrying out the intent of this Agreement and the documents referred to in this Agreement.
13.06
Waiver
.
The rights and remedies of the Parties are cumulative and not alternative. Neither the failure nor any delay by either Party in exercising any right, power, or privilege under this Agreement or the documents referred to in this Agreement shall operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege shall preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable Legal Requirement, (a) no claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged by one Party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other Party, (b) no waiver that may be given by a Party shall be applicable except in the specific instance for which it is given, and (c) no notice to or demand on one Party shall be deemed to be a waiver of any obligation of such Party or of the right of the Party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement.
13.07
Entire Agreement and Modification
.
This Agreement supersedes all prior discussions, communications, and agreements (whether oral or written) between the Parties with respect to its subject matter and constitutes (along with the documents referred to in this Agreement) a complete and exclusive statement of the terms of the agreement between the Parties with respect to its subject matter. This Agreement may not be amended or otherwise modified except by a written agreement executed by both Parties. No representation, promise, inducement, or statement of intention with respect to the subject matter of this Agreement has been made by either Party that is not embodied in this Agreement together with the documents, instruments, and writings that are delivered pursuant hereto, and neither Party shall be bound by or liable for any alleged representation, promise, inducement, or statement of intention not so set forth. In the event of a conflict between the terms and provisions of this Agreement and the terms and provisions of any Schedule or Exhibit hereto, the terms and provisions of this Agreement shall govern, control, and prevail.
13.08
Assignments, Successors, and No Third Party Rights
.
Neither Party may assign any of its rights, liabilities, covenants, or obligations under this Agreement without the prior written consent of the other Party (which consent may be granted or denied at the sole
discretion of the other Party), and (a) any assignment made without such consent shall be void, and (b) in the event of such consent, such assignment nevertheless shall not relieve such assigning Party of any of its obligations under this Agreement without the prior written consent of the other Party. Subject to the preceding sentence, this Agreement shall apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the Parties. Nothing expressed or referred to in this Agreement shall be construed to give any Person other than the Parties or any other agreement contemplated herein (and Buyer Group and Seller Group who are entitled to indemnification under
Article 10
), any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. Subject to the preceding sentence, this Agreement, any other agreement contemplated herein, and all provisions and conditions hereof and thereof, are for the sole and exclusive benefit of the Parties and such other agreements (and Buyer Group and Seller Group who are entitled to indemnification under
Article 10
), and their respective successors and permitted assigns. Notwithstanding the foregoing, the Financing Sources shall be deemed third-Person beneficiaries of
Sections 9.02
,
Section 13.04(b)
and this
Section 13.08
hereof, each of which shall be enforceable by each Financing Source and, to the extent enforced thereby, construed in accordance with, and governed by, the Laws of the State of New York without reference to the conflict of laws principles thereof, and none of which shall be amended or otherwise modified in any way that adversely affects the rights of any Financing Source without the prior written consent of the Financing Sources.
13.09
Severability
.
If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement shall remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree shall remain in full force and effect to the extent not held invalid or unenforceable.
13.10
Article and Section Headings, Construction
.
The headings of Sections, Articles, Exhibits, and Schedules in this Agreement are provided for convenience only and shall not affect its construction or interpretation. All references to “Section,” “Article,” “Exhibit,” or “Schedule” refer to the corresponding Section, Article, Exhibit, or Schedule of this Agreement. Unless expressly provided to the contrary, the words “hereunder,” “hereof,” “herein,” and words of similar import are references to this Agreement as a whole and not any particular Section, Article, Exhibit, Schedule, or other provision of this Agreement. Each definition of a defined term herein shall be equally applicable both to the singular and the plural forms of the term so defined. All words used in this Agreement shall be construed to be of such gender or number, as the circumstances require. Unless otherwise expressly provided, the word “including” does not limit the preceding words or terms and (in its various forms) means including without limitation. Each Party has had substantial input into the drafting and preparation of this Agreement and has had the opportunity to exercise business discretion in relation to the negotiation of the details of the Contemplated Transactions. This Agreement is the result of arm’s-length negotiations from equal bargaining positions. This Agreement shall not be construed against either Party, and no consideration shall be given or presumption made on the basis of who drafted this Agreement or any particular provision hereof or who supplied the form of Agreement.
13.11
Counterparts
.
This Agreement may be executed and delivered (including by facsimile or e-mail transmission) in one or more counterparts, each of which shall be deemed to
be an original copy of this Agreement and all of which, when taken together, shall be deemed to constitute one and the same agreement.
13.12
Press Release
.
No Party shall make any press release or other public announcement respecting this Agreement or the Contemplated Transactions prior to the time that is twenty-four (24) hours following the execution and delivery of this Agreement by the Parties. Subject to
Section 13.13
, if, prior to Closing, any Party wishes to make a press release or other public announcement respecting this Agreement or the Contemplated Transactions, such Party will provide the others with a draft of the press release or other public announcement for review at least twenty-four (24) hours prior to the time that such press release or other public announcement is to be made. The Parties will attempt in good faith to expeditiously reach agreement on such press release or other public announcement and the contents thereof;
provided
that failure to reach such agreement shall not prohibit a Party from making a press release or public announcement. Failure to provide comments back to the other Party within twenty-four (24) hours of receipt of the draft release or announcement will be deemed consent to the public disclosure of such press release or other public announcement and the content thereof. Seller and Buyer shall each be liable for the compliance of their respective Affiliates with the terms of this
Section 13.12
. Notwithstanding anything to the contrary in this
Section 13.12
, no Party shall issue a press release or other public announcement relating to the Contemplated Transactions that includes the name of a non-releasing Party or its Affiliates (or, in the case of Buyer, the name of
KKR & Co. L.P. and its affiliates, including any portfolio companies of investment funds controlled by affiliates of KKR & Co. L.P.)
without the prior written consent of such non-releasing Party (which consent may be withheld in such non-releasing Party’s sole discretion).
13.13
Confidentiality
.
The Confidentiality Agreement shall terminate on the Closing Date and will thereafter be of no further force or effect. Each Party shall keep confidential, and cause its Affiliates and instruct its Representatives to keep confidential, all terms and provisions of this Agreement, except (a) as required by Legal Requirements or any standards or rules of any stock exchange to which such Party or any of its Affiliates is subject, (b) for information that is available to the public on the Closing Date, or thereafter becomes available to the public other than as a result of a breach of this
Section 13.13
, (c) to the extent required to be disclosed in connection with complying with or obtaining a waiver of any Preferential Purchase Right or Consent, and (d) to the extent that such Party must disclose the same in any Proceeding brought by it to enforce its rights under this Agreement. This
Section 13.13
shall not prevent either Party from recording the Instruments of Conveyance delivered at the Closing or from complying with any disclosure requirements of Governmental Bodies that are applicable to the transfer of the Assets. The covenant set forth in this Section shall terminate two (2) years after the Closing Date.
13.14
Name Change
.
As promptly as practicable, but in any event within one hundred twenty (120) days after the Closing Date, Buyer shall eliminate, remove or paint over the use of the name “Linn” and variants thereof from the Assets, and, except with respect to such grace period for eliminating the existing usage, shall have no right to use any logos, trademarks, or trade names belonging to Seller or any of its Affiliates. Buyer shall be solely responsible for any direct or indirect costs or expenses resulting from the change in use of name and any resulting notification or approval requirements.
13.15
Preparation of Agreement
.
Both Seller 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.
13.16
Appendices, Exhibits and Schedules
.
All of the Appendices, Exhibits and Schedules referred to in this Agreement are hereby incorporated into this Agreement by reference and constitute a part of this Agreement. Each Party to this Agreement and its counsel has received a complete set of Appendices, Exhibits and Schedules prior to and as of the execution of this Agreement.
[
Signature Page Follows
]
IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement as of the date first written above.
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SELLER
:
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Linn Energy Holdings, LLC
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By:
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/s/ David B. Rottino
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Name:
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David B. Rottino
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Title:
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Executive Vice President and Chief Financial Officer
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Linn Operating, LLC
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By:
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/s/ David B. Rottino
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Name:
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David B. Rottino
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Title:
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Executive Vice President and Chief Financial Officer
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Linn Midstream, LLC
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By:
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/s/ David B. Rottino
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Name:
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David B. Rottino
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Title:
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Executive Vice President and Chief Financial Officer
|
Signature Page to Purchase and Sale Agreement
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BUYER
:
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Bridge Energy LLC
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By:
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/s/ Randall H. Breitenbach
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Name:
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Randall H. Breitenbach
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Title:
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Vice President - Acquisition Activities
|
Signature Page to Purchase and Sale Agreement
CONTRIBUTION AGREEMENT
BY AND AMONG
LINN ENERGY HOLDINGS, LLC, LINN OPERATING, LLC,
CITIZEN ENERGY II, LLC
AND
ROAN RESOURCES LLC
DATED JUNE 27
,
2017
19368523.18
US-DOCS\83219354.25
TABLE OF CONTENTS
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ARTICLE 1
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DEFINITIONS AND INTERPRETATION
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Section 1.1
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Defined Terms
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1
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Section 1.2
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References and Rules of Construction
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1
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ARTICLE 2
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CONTRIBUTION
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Section 2.1
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Contribution
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2
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ARTICLE 3
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CONSIDERATION
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Section 3.1
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Consideration
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2
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Section 3.2
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Linn Adjustments
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3
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Section 3.3
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Citizen Adjustments
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7
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Section 3.4
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Allocated Values
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12
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Section 3.5
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Resolution of Final Linn Adjustment Amount and Final Citizen Adjustment Amount
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13
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Section 3.6
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Allocation of Costs and Revenues
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13
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ARTICLE 4
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TITLE MATTERS
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Section 4.1
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General Disclaimer of Title Warranties and Representations
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14
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Section 4.2
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Linn Title Defects and Linn Title Benefits
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14
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Section 4.3
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Citizen Title Defects and Citizen Title Benefits
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20
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Section 4.4
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Title Disputes
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25
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Section 4.5
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Linn Preferential Purchase Rights; Linn Consents to Assign
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26
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Section 4.6
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Citizen Preferential Purchase Rights; Citizen Consents to Assign
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27
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Section 4.7
|
Casualty Loss
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29
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ARTICLE 5
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ENVIRONMENTAL MATTERS
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Section 5.1
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Notice of Linn Environmental Defects
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29
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Section 5.2
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Notice of Citizen Environmental Defects
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32
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Section 5.3
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Environmental Disputes
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34
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Section 5.4
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NORM; Wastes and other Substances
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35
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ARTICLE 6
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ACCESS; CERTAIN DISCLAIMERS
|
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Section 6.1
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Access to Assets
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35
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Section 6.2
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Confidentiality
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37
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Section 6.3
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Certain Disclaimers
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37
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ARTICLE 7
|
REPRESENTATIONS AND WARRANTIES OF LINN
|
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Section 7.1
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Organization, Existence and Qualification
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40
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Section 7.2
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Authority, Approval and Enforceability
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40
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Section 7.3
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No Conflicts
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40
|
Section 7.4
|
Bankruptcy
|
40
|
Section 7.5
|
Brokers’ Fees
|
41
|
Section 7.6
|
Litigation
|
41
|
Section 7.7
|
No Violation of Laws
|
41
|
Section 7.8
|
Taxes
|
41
|
Section 7.9
|
Accredited Investor
|
42
|
Section 7.10
|
Independent Evaluation
|
42
|
Section 7.11
|
Linn Consents
|
42
|
Section 7.12
|
Linn Preferential Purchase Rights
|
42
|
Section 7.13
|
Material Contracts
|
42
|
Section 7.14
|
Environmental Matters
|
44
|
Section 7.15
|
Non-Consent Elections
|
45
|
Section 7.16
|
Royalties
|
45
|
Section 7.17
|
Imbalances
|
45
|
Section 7.18
|
Current Commitments
|
45
|
Section 7.19
|
Wells
|
45
|
Section 7.20
|
No Prepayments; No Calls on Production
|
45
|
Section 7.21
|
Compliance with Permits
|
46
|
Section 7.22
|
Condemnation
|
46
|
Section 7.23
|
Certain Linn Employees
|
46
|
Section 7.24
|
Equipment; No Related Assets
|
46
|
Section 7.25
|
Bonds
|
47
|
Section 7.26
|
Midstream Dedications
|
47
|
Section 7.27
|
Area of Mutual Interest and Other Agreements
|
47
|
Section 7.28
|
Linn Casualty Loss
|
47
|
|
ARTICLE 8
|
REPRESENTATIONS AND WARRANTIES OF CITIZEN
|
|
|
|
Section 8.1
|
Organization, Existence and Qualification
|
47
|
Section 8.2
|
Authority, Approval and Enforceability
|
47
|
Section 8.3
|
No Conflicts
|
48
|
Section 8.4
|
Bankruptcy
|
48
|
Section 8.5
|
Brokers’ Fees
|
48
|
Section 8.6
|
Litigation
|
48
|
Section 8.7
|
No Violation of Laws
|
48
|
Section 8.8
|
Taxes
|
48
|
Section 8.9
|
Accredited Investor
|
49
|
Section 8.10
|
Independent Evaluation
|
49
|
|
|
|
|
Section 8.11
|
Citizen Consents
|
49
|
Section 8.12
|
Citizen Preferential Purchase Rights
|
50
|
Section 8.13
|
Material Contracts
|
50
|
Section 8.14
|
Environmental Matters
|
51
|
Section 8.15
|
Non-Consent Elections
|
52
|
Section 8.16
|
Royalties
|
52
|
Section 8.17
|
Imbalances
|
53
|
Section 8.18
|
Current Commitments
|
53
|
Section 8.19
|
Wells
|
53
|
Section 8.20
|
No Prepayments; No Calls on Production
|
53
|
Section 8.21
|
Compliance with Permits
|
53
|
Section 8.22
|
Condemnation
|
53
|
Section 8.23
|
Certain Citizen Employees
|
53
|
Section 8.24
|
Equipment; No Related Assets
|
54
|
Section 8.25
|
Bonds
|
54
|
Section 8.26
|
Midstream Dedications
|
54
|
Section 8.27
|
Area of Mutual Interest and Other Agreements
|
54
|
Section 8.28
|
Citizen Casualty Loss
|
54
|
|
ARTICLE 9
|
REPRESENTATIONS AND WARRANTIES OF Company
|
|
|
|
Section 9.1
|
Organization, Existence and Qualification
|
55
|
Section 9.2
|
Authority, Approval and Enforceability
|
55
|
Section 9.3
|
No Conflicts
|
55
|
Section 9.4
|
Bankruptcy
|
55
|
Section 9.5
|
Brokers’ Fees
|
55
|
Section 9.6
|
Litigation
|
55
|
Section 9.7
|
Independent Evaluation
|
56
|
|
ARTICLE 10
|
COVENANTS OF THE PARTIES
|
|
|
|
Section 10.1
|
Linn Conduct of Business
|
56
|
Section 10.2
|
Citizen Conduct of Business
|
58
|
Section 10.3
|
Public Announcements; Confidentiality
|
60
|
Section 10.4
|
Further Assurances
|
61
|
Section 10.5
|
Linn and Citizen Bonds
|
61
|
Section 10.6
|
Amendment to Schedules
|
61
|
Section 10.7
|
Letters-in-Lieu; Change of Operator; Qualification of Company
|
62
|
Section 10.8
|
Rights Associated with Linn Waterflood Assets
|
62
|
Section 10.9
|
Reserve-Based Loan
|
62
|
Section 10.10
|
Certain Citizen Excluded Assets
|
62
|
|
|
|
|
|
ARTICLE 11
|
LINN CONDITIONS TO CLOSING
|
|
|
|
Section 11.1
|
Citizen Representations
|
63
|
Section 11.2
|
Citizen Covenants
|
63
|
Section 11.3
|
No Legal Proceedings
|
63
|
Section 11.4
|
Citizen Title Defects and Citizen Environmental Defects
|
63
|
Section 11.5
|
Linn Title Defects and Linn Environmental Defects
|
63
|
Section 11.6
|
Citizen Closing Certificate
|
64
|
Section 11.7
|
Citizen Closing Deliverables
|
64
|
Section 11.8
|
Company Representations
|
64
|
Section 11.9
|
Company Covenants
|
64
|
Section 11.10
|
Company Closing Certificate
|
64
|
Section 11.11
|
Company Closing Deliverables
|
64
|
|
ARTICLE 12
|
CITIZEN CONDITIONS TO CLOSING
|
|
|
|
Section 12.1
|
Linn Representations
|
64
|
Section 12.2
|
Linn Covenants
|
65
|
Section 12.3
|
No Legal Proceedings
|
65
|
Section 12.4
|
Linn Title Defects and Linn Environmental Defects
|
65
|
Section 12.5
|
Citizen Title Defects and Citizen Environmental Defects
|
65
|
Section 12.6
|
Linn Closing Certificate
|
65
|
Section 12.7
|
Linn Closing Deliverables
|
65
|
Section 12.8
|
Company Representations
|
65
|
Section 12.9
|
Company Covenants
|
66
|
Section 12.10
|
Company Closing Certificate
|
66
|
Section 12.11
|
Company Closing Deliverables
|
66
|
|
ARTICLE 13
|
CLOSING
|
|
|
|
Section 13.1
|
Time and Place of Closing
|
66
|
Section 13.2
|
Obligations of Linn at Closing
|
66
|
Section 13.3
|
Obligations of Citizen at Closing
|
67
|
Section 13.4
|
Obligations of the Company at Closing
|
67
|
|
ARTICLE 14
|
TERMINATION; DEFAULT AND REMEDIES
|
|
|
|
Section 14.1
|
Right of Termination
|
68
|
Section 14.2
|
Effect of Termination
|
68
|
Section 14.3
|
Return of Documentation and Confidentiality
|
69
|
|
|
|
|
|
ARTICLE 15
|
INDEMNIFICATION; ASSUMPTION OF LIABILITIES
|
|
|
|
Section 15.1
|
Indemnification by Linn
|
70
|
Section 15.2
|
Indemnification by Citizen
|
70
|
Section 15.3
|
Indemnification by the Company
|
71
|
Section 15.4
|
Exclusive Remedy
|
71
|
Section 15.5
|
Indemnification Rights
|
71
|
Section 15.6
|
Assumption of Liabilities
|
71
|
Section 15.7
|
Indemnification Actions
|
72
|
Section 15.8
|
Limitation on Actions.
|
74
|
|
ARTICLE 16
|
TAX MATTERS
|
|
|
|
Section 16.1
|
Allocation of Asset Taxes
|
77
|
Section 16.2
|
Tax Returns
|
77
|
Section 16.3
|
Tax Cooperation
|
78
|
Section 16.4
|
Transfer Taxes
|
78
|
Section 16.5
|
Tax Refunds
|
78
|
|
|
|
ARTICLE 17
|
MISCELLANEOUS
|
|
|
|
Section 17.1
|
Governing Law
|
78
|
Section 17.2
|
Conspicuous Language
|
79
|
Section 17.3
|
Dispute Resolution
|
79
|
Section 17.4
|
Counterparts
|
81
|
Section 17.5
|
Notices
|
81
|
Section 17.6
|
Expenses
|
84
|
Section 17.7
|
Waiver; Rights Cumulative
|
84
|
Section 17.8
|
Entire Agreement; Conflicts
|
84
|
Section 17.9
|
Amendment
|
85
|
Section 17.10
|
Parties in Interest
|
85
|
Section 17.11
|
Binding Effect
|
85
|
Section 17.12
|
Preparation of Agreement
|
85
|
Section 17.13
|
Severability
|
85
|
Section 17.14
|
Limitation on Damages
|
86
|
Section 17.15
|
Assignment
|
86
|
Section 17.16
|
Time is of the Essence
|
86
|
Section 17.17
|
Employee Issues
|
86
|
Section 17.18
|
Retained Litigation
|
87
|
|
|
|
|
|
|
APPENDICES:
|
|
|
|
|
|
Appendix A
|
-
|
Definitions
|
|
|
|
|
|
|
EXHIBITS:
|
|
|
|
|
|
Exhibit A-1 (Part I)
|
-
|
Linn Leases
|
Exhibit A-1 (Part II)
|
-
|
Citizen Leases
|
Exhibit A-2 (Part I)
|
-
|
Linn Wells
|
Exhibit A-2 (Part II)
|
-
|
Citizen Wells
|
Exhibit A-3 (Part I)
|
-
|
Linn Rights-of-Way
|
Exhibit A-3 (Part II)
|
-
|
Citizen Rights-of-Way
|
Exhibit A-4 (Part I)
|
-
|
Linn Equipment
|
Exhibit A-4 (Part II)
|
-
|
Citizen Equipment
|
Exhibit A-5-1
|
-
|
Linn Additional Leases
|
Exhibit A-5-2 (Part I)
|
-
|
Citizen Additional Leases (post 3-31-17)
|
Exhibit A-5-2 (Part II)
|
-
|
Citizen Additional Leases (pre 3-31-17)
|
Exhibit B (Part I)
|
-
|
Form of Linn Closing Certificate
|
Exhibit B (Part II)
|
-
|
Form of Citizen Closing Certificate
|
Exhibit B (Part III)
|
-
|
Form of Company Closing Certificate
|
Exhibit C (Part I)
|
-
|
Form of Linn Assignment
|
Exhibit C (Part II)
|
-
|
Form of Citizen Assignment
|
Exhibit D
|
-
|
Form of Company Certificate
|
Exhibit E (Part I)
|
-
|
Certain Linn Excluded Assets
|
Exhibit E (Part II)
|
-
|
Certain Citizen Excluded Assets
|
Exhibit F
|
-
|
Form of LLC Agreement
|
Exhibit G-1
|
-
|
Form of Linn Master Services Agreement
|
Exhibit G-2
|
-
|
Form of Citizen Master Services Agreement
|
Exhibit H
|
-
|
Zone Pricing
|
Exhibit I
|
-
|
Linn Waterflood Assets
|
|
|
|
SCHEDULES:
|
|
|
|
|
|
Schedule 3.4A
|
-
|
Allocated Values- Linn Sections and Citizen Sections
|
Schedule 3.4B (Part I)
|
-
|
Allocated Values- Linn Wells
|
Schedule 3.4B (Part II)
|
-
|
Allocated Values- Citizen Wells
|
Schedule 6.1(e)
|
-
|
Insurance Requirements
|
Schedule 7.6
|
-
|
Linn Litigation
|
Schedule 7.8
|
-
|
Certain Linn Tax Issues
|
Schedule 7.11
|
-
|
Linn Consents
|
Schedule 7.12
|
-
|
Linn Preferential Purchase Rights
|
Schedule 7.13(a)
|
-
|
Linn Material Contracts
|
Schedule 7.13(b)
|
-
|
Certain Issues Relating to Linn Material Contracts
|
Schedule 7.14
|
-
|
Linn Environmental Matters
|
Schedule 7.15
|
-
|
Linn Non-Consent Elections
|
|
|
|
|
Schedule 7.16
|
-
|
Linn Royalty Issues
|
Schedule 7.17
|
-
|
Linn Imbalances
|
Schedule 7.18
|
-
|
Linn AFEs
|
Schedule 7.19
|
-
|
Linn Plugged Wells
|
Schedule 7.20
|
-
|
Linn Calls on Production
|
Schedule 7.25
|
-
|
Linn Bonds
|
Schedule 7.26
|
-
|
Dedications
|
Schedule 7.27
|
-
|
AMIs
|
Schedule 7.28
|
-
|
Casualty Losses
|
Schedule 8.6
|
-
|
Citizen Litigation
|
Schedule 8.8
|
-
|
Certain Citizen Tax Issues
|
Schedule 8.11
|
-
|
Citizen Consents
|
Schedule 8.12
|
-
|
Citizen Preferential Purchase Rights
|
Schedule 8.13(a)
|
-
|
Citizen Material Contracts
|
Schedule 8.13(b)
|
-
|
Certain Issues Relating to Citizen Material Contracts
|
Schedule 8.14
|
-
|
Citizen Environmental Matters
|
Schedule 8.15
|
-
|
Citizen Non-Consent Elections
|
Schedule 8.16
|
-
|
Citizen Royalty Issues
|
Schedule 8.17
|
-
|
Citizen Imbalances
|
Schedule 8.18
|
-
|
Citizen AFEs
|
Schedule 8.19
|
-
|
Citizen Plugged Wells
|
Schedule 8.20
|
-
|
Citizen Calls on Production
|
Schedule 8.25
|
-
|
Citizen Bonds
|
Schedule 8.26
|
-
|
Dedications
|
Schedule 8.27
|
-
|
AMIs
|
Schedule 8.28
|
-
|
Casualty Losses
|
Schedule 10.1(a)
|
-
|
Linn Interim Period Operations
|
Schedule 10.2(a)
|
-
|
Citizen Interim Period Operations
|
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (as may be amended, restated, supplemented or otherwise modified from time to time, this “
Agreement
”) is dated as of June 27, 2017 (the “
Execution Date
”), by and among Linn Energy Holdings, LLC, a Delaware limited liability company (“
LEH
”), Linn Operating, LLC, a Delaware limited liability company (“
LOI
”, and together with LEH, “
Linn
”), Citizen Energy II, LLC, an Oklahoma limited liability company (“
Citizen
” and each of Linn and Citizen, a “
Transacting Party
” and collectively, the “
Transacting Parties
”) and Roan Resources LLC, a Delaware limited liability company (the “
Company
”, and each of the Company, Linn and Citizen, a “
Party
”, and collectively, the “
Parties
”).
RECITALS:
A.
WHEREAS, Linn owns certain interests in oil and gas properties, rights and related assets that are defined and described herein as the Linn Assets.
B.
WHEREAS, Citizen owns certain interests in oil and gas properties, rights and related assets that are defined and described herein as the Citizen Assets.
C.
WHEREAS, Linn and its Affiliates own and operate certain plants, gathering systems and related midstream infrastructure defined and described herein as “Linn Excluded Midstream Assets” that are not part of the Linn Assets and are to be treated as Linn Excluded Assets for all purposes of this Agreement.
D.
WHEREAS, on May 13, 2017, the Transacting Parties formed the Company.
E.
WHEREAS, at the Closing, Linn shall contribute to the Company the Linn Assets in exchange for the issuance by the Company to Linn of certain equity interests in the Company; and
F.
WHEREAS, at the Closing, Citizen shall contribute to the Company the Citizen Assets in exchange for the issuance by the Company to Citizen of certain equity interests in the Company.
NOW, THEREFORE, in consideration of the premises and of the mutual promises, representations, warranties, covenants, conditions and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound by the terms hereof, agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
Section 1.1
Defined Terms
. Unless the context otherwise requires, the capitalized terms used herein and not otherwise defined shall have the meanings set forth in
Appendix A
.
Section 1.2
References and Rules of Construction
. In this Agreement, except as otherwise expressly provided herein: (a) pronouns in the masculine, feminine and neuter genders
shall be construed to include any other gender, and words in the singular form shall be construed to include the plural and vice versa; (b) the term “including” shall be construed to be expansive rather than limiting in nature and to mean “including, without limitation;” (c) references to Articles and Sections refer to Articles and Sections of this Agreement; (d) the words “this Agreement,” “herein,” “hereof,” “hereby,” “hereunder” and words of similar import refer to this Agreement as a whole, including the Appendix, Exhibits and Schedules attached to this Agreement, and not to any particular subdivision unless expressly so limited; (e) references in any Article or Section or definition to any clause means such clause of such Article, Section or definition; (f) references to the Appendix, Exhibits and Schedules are to the items attached hereto as the described Appendix, Exhibits or Schedules hereto, each of which is hereby incorporated herein and made a part of this Agreement for all purposes as if set forth in full herein; (g) references to dollars or money refer to the lawful currency of the United States; (h) references to “federal” or “Federal” mean U.S. federal or U.S. Federal, respectively; (i) references to the “IRS” or the “Internal Revenue Service” refer to the United States Internal Revenue Service; (j) references to “Revenue Procedures,” or “Revenue Rulings” refer to Revenue Procedures or Revenue Rulings, respectively, published by the Internal Revenue Service; (k) references to any agreement (including this Agreement), document or instrument means such agreement, document or instrument as amended or modified (including any waiver or consent) and in effect from time to time in accordance with the terms thereof; and (l) references to any Law means such Law as amended, modified, codified, reenacted or replaced and in effect from time to time. The Table of Contents and the Article and Section titles and headings in this Agreement are inserted for convenience of reference only and are not intended to be a part of, or to affect the meaning or interpretation of, this Agreement.
ARTICLE 2
CONTRIBUTION
Section 2.1
Contribution
. At the Closing, subject to the terms and conditions of this Agreement: (a) Linn shall contribute to the Company the Linn Assets; and (b) Citizen shall contribute to the Company the Citizen Assets.
ARTICLE 3
CONSIDERATION
Section 3.1
Consideration
.
(a)
Linn Consideration
. Subject to the terms and conditions of this Agreement, the aggregate consideration for the contribution of the Linn Assets shall be the issuance by the Company to Linn at Closing of an aggregate of 1,500,000,000 Units of the Company having an agreed aggregate value as of Closing of $1,500,000,000 (the “
Initial Linn Agreed Value
”) and a per Unit value of $1.00, which aggregate value represents the value of the Linn Assets (the “
Linn Consideration Units
”, and together with the Citizen Consideration Units, the “
Total Consideration
”).
(b)
Citizen Consideration
. Subject to the terms and conditions of this Agreement, the aggregate consideration for the contribution of the Citizen Assets shall be the issuance by the Company to Citizen at Closing of an aggregate of 1,500,000,000 Units of the
Company having an agreed aggregate value as of Closing of $1,500,000,000 (the “
Initial Citizen Agreed Value
”) and a per Unit value of $1.00, which aggregate value represents the value of the Citizen Assets (the “
Citizen Consideration Units
”).
Section 3.2
Linn Adjustments
.
(a)
Adjustments to Initial Linn Agreed Value
.
(i)
The Linn Consideration Units shall be adjusted pursuant to
Section 3.2(b)
based on the following adjustments to the Initial Linn Agreed Value:
(A)
upward by an amount equal to the value (using the per MMBtu or per barrel value, as applicable, set forth in subparagraph (E) below) of all (I) Hydrocarbons attributable to the Linn Leases and/or Linn Wells in pipelines or in tanks above the pipeline sales connection, in each case, as of the Effective Time, plus (II) the unsold inventory of gas products attributable to the Linn Leases and/or Linn Wells as of the Effective Time, in each case such value to be based upon the arms-length contract price in effect as of the Effective Time (or if no such arms-length contract is in effect, the market value in the area as of the Effective Time), less (1) amounts payable as royalties, overriding royalties and other burdens upon, measured by or payable out of such production and (2) severance Taxes deducted by the purchaser of such production;
(B)
upward by an amount equal to all Property Expenses paid by Linn to Third Parties and those costs and expenses paid by Linn to Linn Midstream, LLC pursuant to that certain Amended and Restated Linn Midstream Agreement (excluding, however, those Liabilities set forth in items (a) through (j) in the definition of “Property Expenses”, and excluding any costs or expenses for which Linn is obligated to indemnify Citizen or the Company, and also excluding any of Linn’s costs and expenses related to the transactions contemplated in this Agreement, or to any legal fees, investment banker fees and consultant and advisor fees relating thereto, and also excluding any costs or expenses associated with any Linn Casualty Losses) that are attributable to the ownership or operation of the Linn Assets from and after the Effective Time (whether paid before or after the Effective Time);
(C)
upward by the amount of all Asset Taxes prorated to the Company in accordance with
Article 16
but paid or payable by Linn;
(D)
upward in accordance with
Section 4.2(e)(iv)
;
(E)
to the extent that Linn maintains an under produced Well Imbalance with respect to any Linn Well as of the Effective Time
and
the over produced parties are not Affiliates of Linn, upward by the sum of the product of the following for each such Linn Well: (A) the under produced volumes for such Linn Well as of the Effective Time times (B)
$2.71/MMBtu for gaseous Hydrocarbons, and an amount equal to the product of (x) the under produced volumes times (y) $45.00/Bbl for oil, or $22.50/Bbl for natural gas liquids, as applicable;
(F)
to the extent that Linn maintains an under delivered Pipeline Imbalance with respect to any Linn Contract as of the Effective Time
and
none of the other parties to such Linn Contract are Affiliates of Linn, upward by the sum of the product of the following for each such Linn Contract: (A) the under delivered volumes for such Linn Contract as of the Effective Time times (B) $2.71/MMBtu for gaseous Hydrocarbons, and an amount equal to the product of (x) the under delivered volumes times (y) $45.00/Bbl for oil, or $22.50/Bbl for natural gas liquids, as applicable;
(G)
to the extent that Linn maintains an over produced Well Imbalance with respect to any Linn Well as of the Effective Time
and
the under produced parties are not Affiliates of Linn, downward by the sum of the product of the following for each such Linn Well: (A) the over produced volumes for such Linn Well as of the Effective Time times (B) $2.71/MMBtu for gaseous Hydrocarbons, and an amount equal to the product of (x) the over produced volumes times (y) $45.00/Bbl for oil, or $22.50/Bbl for natural gas liquids, as applicable;
(H)
to the extent that Linn maintains an over delivered Pipeline Imbalance with respect to any Linn Contract as of the Effective Time
and
none of the other parties to such Linn Contract are Affiliates of Linn, downward by the sum of the product of the following for each such Linn Contract: (A) the over delivered volumes for such Linn Contract as of the Effective Time times (B) $2.71/MMBtu for gaseous Hydrocarbons, and an amount equal to the product of (x) the over delivered volumes times (y) $45.00/Bbl for oil, or $22.50/Bbl for natural gas liquids, as applicable;
(I)
downward by an amount equal to the Linn Suspense Funds;
(J)
downward by an amount equal to all proceeds received by Linn attributable to the ownership or operation of the Linn Assets from and after the Effective Time, including the sale of Hydrocarbons produced from the Linn Assets or allocable thereto, net of any sales, excise or similar Taxes in connection therewith not reimbursed to Linn or its Affiliates, as applicable, by a Third Party purchaser;
(K)
downward by the amount of all Asset Taxes prorated to Linn in accordance with
Article 16
but paid or payable by the Company;
(L)
downward in accordance with
Section 4.2(d)
(but subject always to
Section 4.2(e)
);
(M)
downward in accordance with
Section 4.5(b)
;
(N)
downward in accordance with
Section 4.5(e)
;
(O)
downward in accordance with
Section 4.7(b)
;
(P)
downward in accordance with
Section 6.1(b);
and
(Q)
as otherwise adjusted in accordance with any other provisions of this Agreement.
(ii)
No adjustment may be accounted for in more than one of
Section 3.2(a)(i)(A)
through
Section 3.2(a)(i)(Q)
.
(iii)
Not less than five (5) Business Days prior to Closing, Linn shall prepare and submit to Citizen for review a draft settlement statement (the “
Linn Closing Settlement Statement
”) calculating the adjustments (if any) to the Initial Linn Agreed Value determined by Linn in good faith in accordance with
Section 3.2(a)(i)
. Within three (3) Business Days after receipt of the Linn Closing Settlement Statement, Citizen has the right to deliver to Linn a written report containing all changes with the explanation therefor that Citizen proposes to be made to the Linn Closing Settlement Statement, and Linn shall consider such proposed changes in good faith. The Linn Closing Settlement Statement, as agreed upon by the Transacting Parties, will be used to adjust the Initial Linn Agreed Value at Closing;
provided
that if the Transacting Parties do not agree upon an adjustment set forth in the Linn Closing Settlement Statement, then the amount of such adjustment used to adjust the Initial Linn Agreed Value at Closing shall be that amount set forth in the draft Linn Closing Settlement Statement delivered by Linn to Citizen pursuant to this
Section 3.2(a)(iii)
. The aggregate dollar amount of the adjustments to the Initial Linn Agreed Value as set forth in the Linn Closing Settlement Statement is hereinafter referred to as the “
Preliminary Linn Adjustment Amount
”.
(b)
Adjustments to Linn Consideration Units
.
(i)
If the Preliminary Linn Adjustment Amount is a positive amount (the “
Positive Linn Adjustment Amount
”), the number of Linn Consideration Units to be issued to Linn at Closing shall be increased by one Linn Consideration Unit for every $1.00 of Positive Linn Adjustment Amount. If the Preliminary Linn Adjustment Amount is a negative amount (the “
Negative Linn Adjustment Amount
”), the number of Linn Consideration Units to be issued to Linn at Closing shall be decreased by one Linn Consideration Unit for every $1.00 of Negative Linn Adjustment Amount. If the Preliminary Linn Adjustment Amount is zero dollars, the Linn Consideration Units shall not be adjusted pursuant to this
Section 3.2(b)(i)
. The number of Linn Consideration Units to be issued to Linn at Closing, as may be adjusted pursuant to this
Section 3.2(b)
, is hereinafter referred to as the “
Closing Linn Consideration Units
.”
(ii)
As soon as reasonably practicable after the Closing but not later than the first (1
st
) Business Day following the expiration of one hundred fifty (150) days following the Closing, Citizen shall prepare and deliver to Linn a draft statement (the “
Post-Closing Citizen Statement
”) setting forth the final calculation of the proposed adjustment to the Preliminary Linn Adjustment Amount. As soon as reasonably practicable, but not later than the first (1
st
) Business Day following the expiration of thirty (30) days following receipt of the Post-Closing Citizen Statement, Linn shall deliver to Citizen a written report (a “
Linn Adjustment
Notice
”) containing any changes that Linn proposes be made in such statement. Citizen shall be deemed to have accepted and agreed to all items and amounts in the Preliminary Linn Adjustment Amount (and the Linn Closing Settlement Statement) except to the extent Citizen timely delivers to Linn the Post-Closing Citizen Statement. Linn shall be deemed to have accepted and agreed to all items and amounts included in the Post-Closing Citizen Statement other than such matters and amounts that are proposed to be changed in the Linn Adjustment Notice timely delivered to Citizen.
(iii)
If Citizen fails to deliver timely to Linn the Post-Closing Citizen Statement, the Closing Linn Consideration Units shall not be subject to further adjustment under this
Section 3.2
and the Preliminary Linn Adjustment Amount shall constitute the “
Final Linn Adjustment Amount
” and such Final Linn Adjustment Amount shall be conclusive and binding on the Parties. If Linn fails to deliver timely to Citizen the Linn Adjustment Notice, the final calculation of the proposed adjustment to the Preliminary Linn Adjustment Amount as set forth in the Post-Closing Citizen Statement shall constitute the “
Final Linn Adjustment Amount
” and such Final Linn Adjustment Amount shall be conclusive and binding on the Parties. Notwithstanding the foregoing provisions of this
Section 3.2(b)(iii)
, nothing in this
Section 3.2
is a limitation on any other adjustment to the Closing Linn Consideration Units provided under the other provisions of this Agreement or the LLC Agreement.
(iv)
The Transacting Parties shall undertake to agree on the adjustments, if any, to the Preliminary Linn Adjustment Amount no later than ten (10) Business Days after Linn’s timely delivery of the Linn Adjustment Notice to Citizen. If the Transacting Parties mutually agree in writing within such ten (10) Business Days that (x) no adjustments shall be made to the Preliminary Linn Adjustment Amount or (y) they agree in writing to all adjustments to such amount within such ten (10) Business Days, the Preliminary Linn Adjustment Amount (as it may be so adjusted as provided in
clause (y)
) shall constitute the “
Final Linn Adjustment Amount
” and such Final Linn Adjustment Amount shall be conclusive and binding on the Parties. If the Final Linn Adjustment Amount is not determined during such ten (10) Business Day period, then Deloitte (the “
Dispute Auditor
”) shall resolve any disagreements with respect thereto. Should Deloitte fail or refuse to agree to serve as Dispute Auditor within ten (10) Business Days after written request from either Transacting Party to serve, and the Transacting Parties fail to agree in writing on a replacement Dispute Auditor within five (5) Business Days after the end of that ten (10) Business Day period, or should no replacement Dispute Auditor agree to serve within fifteen (15) days after the original written request pursuant to this sentence, the Dispute Auditor shall be appointed by the Dallas, Texas office of the American Arbitration Association. In connection with the engagement of the Dispute Auditor, each of the Transacting Parties shall execute such engagement, indemnity and other agreements as the Dispute Auditor shall reasonably require as a condition to such engagement. The Dispute Auditor shall determine as promptly as practicable, but in any event within thirty (30) days after the selection of the Dispute Auditor, based solely on written submissions provided by the Transacting Parties to the Dispute Auditor (and without independent investigation on the part of the Dispute Auditor) within ten (10) Business Days following the Dispute Auditor's selection, whether and to what extent (if any) the Linn Adjustment Notice requires adjustment. In resolving any disputed item, the Dispute Auditor shall act as an expert and not an arbitrator, and shall resolve only the items set forth in the Linn Adjustment Notice that are still in dispute and may not assign a value to any item greater than the highest value for such item claimed by either Transacting Party or less than the lowest value for
such item claimed by either Transacting Party. The fees and expenses of the Dispute Auditor shall be paid by 50% by Linn and 50% by Citizen. The determination by the Dispute Auditor of adjustments (if any) to the Preliminary Linn Adjustment Amount shall be final, conclusive and binding on the Parties. The Preliminary Linn Adjustment Amount, as it may be adjusted by the Dispute Auditor and as otherwise agreed in writing by the Transacting Parties, shall constitute the “
Final Linn Adjustment Amount
” and such Final Linn Adjustment Amount shall be conclusive and binding on the Parties.
(v)
The date on which the Final Linn Adjustment Amount is finally determined in accordance with this
Section 3.2(b)
is hereinafter referred to as the “
Final Linn Adjustment Determination Date
.”
(vi)
(A)
If the Final Linn Adjustment Amount is greater than the Preliminary Linn Adjustment Amount (the positive difference, the “
Increased Linn Amount
”), then the Company shall issue to Linn one additional Linn Consideration Unit (without the payment of any consideration therefor) for every $1.00 of Increased Linn Amount.
(B)
If the Preliminary Linn Adjustment Amount is greater than the Final Linn Adjustment Amount (the positive difference, the “
Decreased Linn Amount
”), then the number of Closing Linn Consideration Units shall be reduced one Linn Consideration Unit for every $1.00 of Decreased Linn Amount.
(C)
If the sum of the Initial Citizen Agreed Value and the Final Citizen Adjustment Amount (the “
Relevant Citizen Value
”) is greater than the sum of the Initial Linn Agreed Value and the Final Linn Adjustment Amount (the “
Relevant Linn Value
”) (such positive difference between the Relevant Citizen Value
minus
the Relevant Linn Value, the “
Linn Delta Value
”), then on or before ten (10) Business Days after the later to occur of the Final Linn Adjustment Determination Date or the Final Citizen Adjustment Determination Date, Linn shall have a one-time optional right (but not an obligation) to contribute to the Company an amount of cash and/or agreed value (through the contribution of Linn Additional Leases, which value shall be computed as described in
Section 4.2(e)(vii)
, and otherwise in accordance with the provisions of
Section 4.2(e)
below (to the extent Linn Additional Leases are used for this purpose, they are herein referred to as “
Linn True-Up Leases
”)) up to an amount equal to the Linn Delta Value, and the Company shall issue one additional Closing Linn Consideration Unit for every $1.00 so contributed to the Company by Linn pursuant to this
Section 3.2(b)(vi)(C)
. If the Relevant Citizen Value is less than the Relevant Linn Value, this Section shall not apply.
(vii)
Citizen shall assist Linn in the preparation of the Linn Adjustment Notice and reviewing and verifying the Post-Closing Citizen Statement by furnishing invoices, receipts, reasonable access to personnel and such other assistance as may be reasonably requested by Linn in connection therewith.
Section 3.3
Citizen Adjustments
.
(a)
Adjustments to Initial Citizen Agreed Value
.
(i)
The Citizen Consideration Units shall be adjusted pursuant to
Section 3.3(b)
based on the following adjustments to the Initial Citizen Agreed Value:
(A)
upward by an amount equal to the value (using the per MMBtu or per barrel value, as applicable, set forth in subparagraph (E) below) of all (I) Hydrocarbons attributable to the Citizen Leases and/or Citizen Wells in pipelines or in tanks above the pipeline sales connection, in each case, as of the Effective Time, plus (II) the unsold inventory of gas products attributable to the Citizen Leases and/or Citizen Wells as of the Effective Time, in each case such value to be based upon the arms-length contract price in effect as of the Effective Time (or if no such arms-length contract is in effect, the market value in the area as of the Effective Time), less (1) amounts payable as royalties, overriding royalties and other burdens upon, measured by or payable out of such production and (2) severance Taxes deducted by the purchaser of such production;
(B)
upward by an amount equal to all Property Expenses paid by Citizen to Third Parties (excluding, however, those Liabilities set forth in items (a) through (j) in the definition of “Property Expenses”, and excluding any costs or expenses for which Citizen is obligated to indemnify Linn or the Company, and also excluding any of Citizen’s costs and expenses related to the transactions contemplated in this Agreement, or to any legal fees, investment banker fees and consultant and advisor fees relating thereto, and also excluding any costs or expenses associated with any Citizen Casualty Losses) that are attributable to the ownership or operation of the Citizen Assets from and after the Effective Time (whether paid before or after the Effective Time);
(C)
upward by the amount of all Asset Taxes prorated to the Company in accordance with
Article 16
but paid or payable by Citizen;
(D)
upward in accordance with
Section 4.3(e)(iv)
;
(E)
to the extent that Citizen maintains an under produced Well Imbalance with respect to any Citizen Well as of the Effective Time
and
the over produced parties are not Affiliates of Citizen, upward by the sum of the product of the following for each such Citizen Well: (A) the under produced volumes for such Citizen Well as of the Effective Time times (B) $2.71/MMBtu for gaseous Hydrocarbons, and an amount equal to the product of (x) the under produced volumes times (y) $45.00/Bbl for oil, or $22.50/Bbl for natural gas liquids, as applicable;
(F)
to the extent that Citizen maintains an under delivered Pipeline Imbalance with respect to any Citizen Contract as of the Effective Time
and
none of the other parties to such Citizen Contract are Affiliates
of Citizen, upward by the sum of the product of the following for each such Citizen Contract: (A) the under delivered volumes for such Citizen Contract as of the Effective Time times (B) $2.71/MMBtu for gaseous Hydrocarbons, and an amount equal to the product of (x) the under delivered volumes times (y) $45.00/Bbl for oil, or $22.50/Bbl for natural gas liquids, as applicable;
(G)
to the extent that Citizen maintains an over produced Well Imbalance with respect to any Citizen Well as of the Effective Time
and
the under produced parties are not Affiliates of Citizen, downward by the sum of the product of the following for each such Citizen Well: (A) the over produced volumes for such Citizen Well as of the Effective Time times (B) $2.71/MMBtu for gaseous Hydrocarbons, and an amount equal to the product of (x) the over produced volumes times (y) $45.00/Bbl for oil, or $22.50/Bbl for natural gas liquids, as applicable;
(H)
to the extent that Citizen maintains an over delivered Pipeline Imbalance with respect to any Citizen Contract as of the Effective Time
and
none of the other parties to such Citizen Contract are Affiliates of Citizen, downward by the sum of the product of the following for each such Citizen Contract: (A) the over delivered volumes for such Citizen Contract as of the Effective Time times (B) $2.71/MMBtu for gaseous Hydrocarbons, and an amount equal to the product of (x) the over delivered volumes times (y) $45.00/Bbl for oil, or $22.50/Bbl for natural gas liquids, as applicable;
(I)
downward by an amount equal to the Citizen Suspense Funds;
(J)
downward by an amount equal to all proceeds received by Citizen attributable to the ownership or operation of the Citizen Assets from and after the Effective Time, including the sale of Hydrocarbons produced from the Citizen Assets or allocable thereto, net of any sales, excise or similar Taxes in connection therewith not reimbursed to Citizen or its Affiliates, as applicable, by a Third Party purchaser;
(K)
downward by the amount of all Asset Taxes prorated to Citizen in accordance with
Article 16
but paid or payable by the Company;
(L)
downward in accordance with
Section 4.3(d)
(but subject always to
Section 4.3(e)
);
(M)
downward in accordance with
Section 4.6(b)
;
(N)
downward in accordance with
Section 4.6(e)
;
(O)
downward in accordance with
Section 4.7(c)
;
(P)
downward in accordance with
Section 6.1(b)
; and
(Q)
as otherwise adjusted in accordance with any other provisions of this Agreement.
(ii)
No adjustment may be accounted for in more than one of
Section 3.3(a)(i)(A)
through
Section 3.3(a)(i)(Q)
.
(iii)
Not less than five (5) Business Days prior to Closing, Citizen shall prepare and submit to Linn for review a draft settlement statement (the “
Citizen Closing Settlement Statement
”) calculating the adjustments (if any) to the Initial Citizen Agreed Value determined by Citizen in good faith in accordance with
Section 3.3(a)(i)
. Within three (3) Business Days after receipt of the Citizen Closing Settlement Statement, Linn has the right to deliver to Citizen a written report containing all changes with the explanation therefor that Linn proposes to be made to the Citizen Closing Settlement Statement, and Citizen shall consider such proposed changes in good faith. The Citizen Closing Settlement Statement, as agreed upon by the Transacting Parties, will be used to adjust the Initial Citizen Agreed Value at Closing;
provided
that if the Transacting Parties do not agree upon an adjustment set forth in the Citizen Closing Settlement Statement, then the amount of such adjustment used to adjust the Initial Citizen Agreed Value at Closing shall be that amount set forth in the draft Citizen Closing Settlement Statement delivered by Citizen to Linn pursuant to this
Section 3.3(a)(iii)
. The aggregate dollar amount of the adjustments to the Initial Citizen Agreed Value as set forth in the Citizen Closing Settlement Statement is hereinafter referred to as the “
Preliminary Citizen Adjustment Amount
”.
(b)
Adjustments to Citizen Consideration Units
.
(i)
If the Preliminary Citizen Adjustment Amount is a positive amount (the “
Positive Citizen Adjustment Amount
”), the number of Citizen Consideration Units to be issued to Citizen at Closing shall be increased by one Citizen Consideration Unit for every $1.00 of Positive Citizen Adjustment Amount. If the Preliminary Citizen Adjustment Amount is a negative amount (the “
Negative Citizen Adjustment Amount
”), the number of Citizen Consideration Units to be issued to Citizen at Closing shall be decreased by one Citizen Consideration Unit for every $1.00 of Negative Citizen Adjustment Amount. If the Preliminary Citizen Adjustment Amount is zero dollars, the Citizen Consideration Units shall not be adjusted pursuant to this
Section 3.3(b)(i)
. The number of Citizen Consideration Units to be issued to Citizen at Closing, as may be adjusted pursuant to this
Section 3.3(b)
, is hereinafter referred to as the “
Closing Citizen Consideration Units
.”
(ii)
As soon as reasonably practicable after the Closing but not later than the first (1
st
) Business Day following the expiration of one hundred fifty (150) days following the Closing, Linn shall prepare and deliver to Citizen a draft statement (the “
Post-Closing Linn Statement
”) setting forth the final calculation of the proposed adjustment to the Preliminary Citizen Adjustment Amount. As soon as reasonably practicable, but not later than the first (1
st
) Business Day following the expiration of thirty (30) days following receipt of the Post-Closing Linn Statement, Citizen shall deliver to Linn a written report (a “
Citizen Adjustment Notice
”) containing any changes that Citizen proposes be made in such statement.
Linn shall be deemed to have accepted and agreed to all items and amounts in the Preliminary Citizen Adjustment Amount (and the Citizen Closing Settlement Statement) except to the extent Linn timely delivers to Citizen the Post-Closing Linn Statement. Citizen shall be deemed to have accepted and agreed to all items and amounts included in the Post-Closing Linn Statement other than such matters and amounts that are proposed to be changed in the Citizen Adjustment Notice timely delivered to Linn.
(iii)
If Linn fails to deliver timely to Citizen the Post-Closing Linn Statement, the Closing Citizen Consideration Units shall not be subject to further adjustment under this
Section 3.3
and the Preliminary Citizen Adjustment Amount shall constitute the “
Final Citizen Adjustment Amount
” and such Final Citizen Adjustment Amount shall be conclusive and binding on the Parties. If Citizen fails to deliver timely to Linn the Citizen Adjustment Notice, the final calculation of the proposed adjustment to the Preliminary Citizen Adjustment Amount as set forth in the Post-Closing Linn Statement shall constitute the “
Final Citizen Adjustment Amount
” and such Final Citizen Adjustment Amount shall be conclusive and binding on the Parties. Notwithstanding the foregoing provisions of this
Section 3.3(b)(iii)
, nothing in this
Section 3.3
is a limitation on any other adjustment to the Closing Citizen Consideration Units provided under the other provisions of this Agreement or the LLC Agreement.
(iv)
The Transacting Parties shall undertake to agree on the adjustments, if any, to the Preliminary Citizen Adjustment Amount no later than ten (10) Business Days after Citizen’s timely delivery of the Citizen Adjustment Notice to Linn. If the Transacting Parties mutually agree in writing within such ten (10) Business Days that (x) no adjustments shall be made to the Preliminary Citizen Adjustment Amount or (y) they agree in writing to all adjustments to such amount within such ten (10) Business Days, the Preliminary Citizen Adjustment Amount (as it may be so adjusted as provided in
clause (y)
) shall constitute the “
Final Citizen Adjustment Amount
” and such Final Citizen Adjustment Amount shall be conclusive and binding on the Parties. If the Final Citizen Adjustment Amount is not determined during such ten (10) Business Day period, then Deloitte, as the Dispute Auditor, shall resolve any disagreements with respect thereto. Should Deloitte fail or refuse to agree to serve as Dispute Auditor within ten (10) Business Days after written request from either Transacting Party to serve, and the Transacting Parties fail to agree in writing on a replacement Dispute Auditor within five (5) Business Days after the end of that ten (10) Business Day period, or should no replacement Dispute Auditor agree to serve within fifteen (15) days after the original written request pursuant to this sentence, the Dispute Auditor shall be appointed by the Dallas, Texas office of the American Arbitration Association. In connection with the engagement of the Dispute Auditor, each of the Transacting Parties shall execute such engagement, indemnity and other agreements as the Dispute Auditor shall reasonably require as a condition to such engagement. The Dispute Auditor shall determine as promptly as practicable, but in any event within thirty (30) days after the selection of the Dispute Auditor, based solely on written submissions provided by the Transacting Parties to the Dispute Auditor (and without independent investigation on the part of the Dispute Auditor) within ten (10) Business Days following the Dispute Auditor's selection, whether and to what extent (if any) the Citizen Adjustment Notice requires adjustment. In resolving any disputed item, the Dispute Auditor shall act as an expert and not an arbitrator, and shall resolve only the items set forth in the Citizen Adjustment Notice that are still in dispute and may not assign a value to any item greater than the highest value for such item claimed by either Transacting Party or less than
the lowest value for such item claimed by either Transacting Party. The fees and expenses of the Dispute Auditor shall be paid by 50% by Citizen and 50% by Linn. The determination by the Dispute Auditor of adjustments (if any) to the Preliminary Citizen Adjustment Amount shall be final, conclusive and binding on the Parties. The Preliminary Citizen Adjustment Amount, as it may be adjusted by the Dispute Auditor and as otherwise agreed in writing by the Transacting Parties, shall constitute the “
Final Citizen Adjustment Amount
” and such Final Citizen Adjustment Amount shall be conclusive and binding on the Parties.
(v)
The date on which the Final Citizen Adjustment Amount is finally determined in accordance with this
Section 3.3(b)
is hereinafter referred to as the “
Final Citizen Adjustment Determination Date
.”
(vi)
(A)
If the Final Citizen Adjustment Amount is greater than the Preliminary Citizen Adjustment Amount (the positive difference, the “
Increased Citizen Amount
”), then the Company shall issue to Citizen one additional Citizen Consideration Unit (without the payment of any consideration therefor) for every $1.00 of Increased Citizen Amount.
(B)
If the Preliminary Citizen Adjustment Amount is greater than the Final Citizen Adjustment Amount (the positive difference, the “
Decreased Citizen Amount
”), then the number of Closing Citizen Consideration Units shall be reduced one Citizen Consideration Unit for every $1.00 of Decreased Citizen Amount.
(C)
If the Relevant Linn Value is greater than the Relevant Citizen Value (such positive difference between the Relevant Linn Value
minus
the Relevant Citizen Value, the “
Citizen Delta Value
”), then on or before ten (10) Business Days after the later to occur of the Final Citizen Adjustment Determination Date or the Final Linn Adjustment Determination Date, Citizen shall have a one-time optional right (but not an obligation) to contribute to the Company an amount of cash and/or agreed value (through the contribution of Citizen Additional Leases, which value shall be computed as described in
Section 4.3(e)(vii)
, and otherwise in accordance with the provisions of
Section 4.3(e)
below (to the extent Citizen Additional Leases are used for this purpose, they are herein referred to as “
Citizen True-Up Leases
”)) up to an amount equal to the Citizen Delta Value, and the Company shall issue one additional Closing Citizen Consideration Unit for every $1.00 so contributed to the Company by Citizen pursuant to this
Section 3.3(b)(vi)(C)
. If the Relevant Linn Value is less than the Relevant Citizen Value, this Section shall not apply.
(vii)
Linn shall assist Citizen in the preparation of the Citizen Adjustment Notice and reviewing and verifying the Post-Closing Linn Statement by furnishing invoices, receipts, reasonable access to personnel and such other assistance as may be reasonably requested by Citizen in connection therewith.
Section 3.4
Allocated Values
.
(a)
The Total Consideration has been allocated by the Parties among the Linn Assets and the Citizen Assets as set forth on
Schedule 3.4A
,
Schedule 3.4B (Part I)
and
Schedule 3.4B
(Part II)
(the “
Allocated Values
”). For the avoidance of doubt, in the event that any Linn Well or Citizen Well identified on Exhibit A-2 (Part I) or Exhibit A-2 (Part II), as applicable, is not allocated value in Schedule 3.4B (Part I) or Schedule 3.4B (Part II), such Linn Well or Citizen Well shall be deemed to have an Allocated Value of $0.
(b)
On or before the first (1
st
) Business Day following the expiration of thirty (30) days after the date on which all adjustments have been determined under
Section 3.2
and
Section 3.3
, the Company shall prepare and deliver to the Transacting Parties a schedule allocating the dollar value of the Total Consideration and any other amounts treated as consideration for U.S. federal income tax purposes, as adjusted, among the Linn Assets and the Citizen Assets consistent with the Allocated Values and in accordance with Section 1060 of the Code and the Treasury Regulations promulgated thereunder (and any similar provision of Law, as appropriate) (the “
Allocation Schedule
”). If the Transacting Parties agree to an Allocation Schedule, such Allocation Schedule shall be the “
Final Allocation Schedule
.” If, within thirty (30) days after delivery of such Allocation Schedule in accordance with the first sentence of this
Section 3.4(b)
, the Transacting Parties fail to agree in writing upon a Final Allocation Schedule, the Transacting Parties shall submit the disputed matters to binding arbitration to be conducted in accordance with
Section 3.2(b)(iv)
, but subject to the further provisions of
Article 4
as for title matters, to finally determine the proper allocation of value, and shall request that the Dispute Auditor issue a final allocation schedule (which shall then be the Final Allocation Schedule) within thirty (30) days of the submission of the dispute.
(c)
Each Party agrees that it will take no position inconsistent with, and will support the validity of, the allocations set forth on the Final Allocation Schedule on any applicable Tax Return, in any audit or proceeding before any Governmental Body related to Taxes, in any report made for Tax, financial accounting or any other purpose, except as otherwise required by Law or with the consent of the other Parties (not to be unreasonably withheld, conditioned or delayed);
provided
,
however
, that nothing contained herein shall prevent any Party from settling any proposed deficiency or adjustment by any Governmental Body based upon or arising out of the Final Allocation Schedule, and no Party shall be required to litigate before any court any proposed deficiency or adjustment by any Governmental Body challenging such Final Allocation Schedule. In the event that the Final Allocation Schedule described herein is disputed by any Governmental Body, the Party receiving notice of the dispute shall promptly notify the other Parties of the existence and nature of the dispute.
Section 3.5
Resolution of Final Linn Adjustment Amount and Final Citizen Adjustment Amount
. The Transacting Parties will endeavor in good faith to contemporaneously finalize or otherwise resolve the Final Linn Adjustment Amount and the Final Citizen Adjustment Amount, to the extent reasonably practicable, but neither Transacting Party shall have any liability under this
Section 3.5
to the extent the Final Linn Adjustment Amount and the Final Citizen Adjustment Amount are not so contemporaneously finalized or otherwise resolved.
Section 3.6
Allocation of Costs and Revenues
. The term “incurred,” as used in this Agreement shall be interpreted in accordance with GAAP and COPAS standards, except as otherwise specified in this Agreement. For purposes of allocating production and proceeds
received with respect thereto under
Sections 3.2
and
3.3
, (a) liquid Hydrocarbons shall be deemed to be “from or attributable to” the Linn Assets or the Citizen Assets, as applicable, when they pass through the pipeline connecting into the storage facilities into which they are run and (b) gaseous Hydrocarbons shall be deemed to be “from or attributable to” the Linn Assets or the Citizen Assets, as applicable, when they pass through the royalty measurement meters, delivery point sales meters, or custody transfer meters on the gathering lines or pipelines through which they are transported (whichever meter is closest to the well). Linn and Citizen shall utilize reasonable interpolative procedures, consistent with industry practice, to arrive at an allocation of production from or attributable to the Linn Assets or the Citizen Assets, as applicable, when exact meter readings or gauging and strapping data are not available.
ARTICLE 4
TITLE MATTERS
Section 4.1
General Disclaimer of Title Warranties and Representations
. Without limiting the remedies for (I) Linn Title Defects or Citizen Title Defects set forth in this
Article 4
and (II) each Party’s rights to indemnity under
Article 15
, and except for the special warranties of title set forth in the Assignments:
(a)
Linn makes no representation or warranty, express or implied, statutory or otherwise, with respect to title to any of the Linn Assets or the Linn Additional Assets, and the sole remedy for any Linn Title Defect with respect to any of the Linn Assets or the Linn Additional Assets shall be as set forth in this
Article 4
; and
(b)
Citizen makes no representation or warranty, express or implied, statutory or otherwise, with respect to title to any of the Citizen Assets or the Citizen Additional Assets, and the sole remedy for any Citizen Title Defect with respect to any of the Citizen Assets or the Citizen Additional Assets shall be as set forth in this
Article 4
.
Section 4.2
Linn Title Defects and Linn Title Benefits
.
(a)
Linn Title Defect Notices
. On or prior to the last day of the Review Period, Citizen shall have the right to assert claims for Linn Title Defects against Linn in accordance with this
Section 4.2(a)
. To assert a Linn Title Defect, Citizen shall give written notice prior to the end of the Review Period to Linn via email or writing meeting the requirements of this
Section 4.2(a)
(each, a “
Linn Title Defect Notice
” and collectively, the “
Linn Title Defect Notices
”). Except for the special warranty of title in the Linn Assignment and without limiting any rights to indemnity pursuant to
Article 15
, any matters that may otherwise constitute Linn Title Defects but that are not alleged in any Linn Title Defect Notice prior to the expiration of the Review Period shall be deemed to have been waived by Citizen. To be effective, each Linn Title Defect Notice shall be in writing or email, and shall include (i) a reasonable description of each alleged Linn Title Defect, (ii) the Linn Assets or portion thereof affected thereby (each, a “
Linn Title Defect Property
”), (iii) supporting documents reasonably necessary to verify the existence of the alleged Linn Title Defect(s), and (iv) Citizen’s good faith estimate of the Linn Title Defect Amount for such Linn Title Defect and the computations upon which Citizen’s estimate is based. Citizen will also use reasonable efforts (without any liability for failure to do so) to promptly furnish to Linn written notice during the Review Period of any
Linn Title Benefit with respect to which Citizen acquired Knowledge during the Review Period, or discovered during the Review Period, to Citizen’s Knowledge, by any of its Affiliates, employees, title attorneys, landmen or other title examiners prior to the end of the Review Period.
(b)
Title Benefit Notices
. On or prior to the last day of the Review Period, Linn shall have the right to assert Linn Title Benefits in accordance with this
Section 4.2(b)
. To assert a Linn Title Benefit, Linn shall give written notice prior to the end of the Review Period to Citizen via email (with hardcopy sent for delivery the day after the end of the Review Period) meeting the requirements of this
Section 4.2(b)
(each, a “
Linn Title Benefit Notice
” and collectively, the “
Linn Title Benefit Notices
”). To be effective, each Linn Title Benefit Notice shall include (i) a reasonable description of each alleged Linn Title Benefit, (ii) the Linn Assets or portion thereof affected thereby, (iii) supporting documents in Linn’s possession reasonably necessary for Citizen to verify the existence of the alleged Linn Title Benefit(s), and (iv) Linn’s good faith estimate of the Linn Title Benefit Amount for such Linn Title Benefit and the computations upon which Linn’s estimate is based. Any matters that may otherwise constitute Linn Title Benefits but that are not alleged in any Linn Title Benefit Notice prior to the expiration of the Review Period shall be deemed to have been waived by Linn.
(c)
Right to Cure; Right to Dispute
.
(i)
Linn shall have the option, but not the obligation, to attempt to cure, or cause to be cured, at its sole cost and expense, any Linn Title Defects within ninety (90) days following the Closing (the “
Title Cure Period
”).
(ii)
Prior to the Scheduled Closing Date, Linn and Citizen shall attempt to agree on all disputes related to the existence of any Linn Title Defect or Linn Title Benefit or the applicable Linn Title Defect Amount or Linn Title Benefit Amount with respect thereto or the effect of any curative actions with respect to any Linn Title Defect. With regard to any Linn Asset that is subject to such an unresolved dispute as to a Linn Title Defect as of the Closing, and the alleged Title Defect Amount is less than or equal to 90% of the Allocated Value of the affected Linn Asset, then such Linn Asset shall nevertheless be conveyed at Closing without adjustment to the Initial Linn Agreed Value for such disputed Linn Title Defect. Upon resolution of such dispute under
Section 4.4
, appropriate adjustments shall be made to the Initial Linn Agreed Value in accordance with
Section 3.2
. With regard to any Linn Asset that is subject to such an unresolved dispute as to Linn Title Defects as of the Closing, and the alleged Title Defect Amount is greater than 90% of the Allocated Value of the affected Linn Asset, then such Linn Asset shall be retained at Closing, and treated as a Linn Excluded Asset hereunder. If it is ultimately determined pursuant to
Section 4.4
that the actual Title Defect Amount burdening such Linn Asset is less than or equal to 90% of the Allocated Value of such Linn Asset, within five (5) Business Days of such determination, Linn shall convey such Linn Asset to the Company pursuant to a Linn Assignment and the Initial Linn Agreed Value shall be adjusted in accordance with
Section 3.2
to reflect the contribution of such Linn Asset to the Company.
(d)
Remedies for Linn Title Defects and Linn Title Benefits
.
(i)
Subject to
Sections 4.2(d)(ii)
,
4.2(d)(iii)
and
4.2(d)(iv)
, upon the final determination of the existence of any uncured Linn Title Defect and Linn Title Defect Amount relating thereto (whether by written agreement between the Transacting Parties or under
Section 4.4
), the Initial Linn Agreed Value shall be reduced by such Linn Title Defect Amount (or if the Closing has already occurred as of such time, the number of Closing Linn Consideration Units shall be reduced by one Closing Linn Consideration Unit for every $1.00 of such Linn Title Defect Amount) in full satisfaction of such Linn Title Defect.
(ii)
Notwithstanding anything to the contrary herein, with respect to Linn Title Defects for which the Linn Title Defect Amount exceeds 90% of the Allocated Value of the affected Linn Title Defect Property, Linn or Citizen shall have the right but not the obligation to exclude the entirety of the Linn Title Defect Property, together with all Linn Assets associated with such Linn Title Defect Property, in which event the Initial Linn Agreed Value shall be reduced by the Allocated Value of such Linn Title Defect Property and associated Linn Assets in full satisfaction of such Linn Title Defect (except to the extent such Linn Title Defect pertains to other Linn Assets that are not so excluded), and such Linn Title Defect Property, together with all Linn Assets associated with such Linn Title Defect Property, shall be deemed Linn Excluded Assets hereunder for all purposes. Any such election must be made by a Transacting Party by notice to the other Transacting Party on or before the Closing, and failure of a Transacting Party to so make such an election shall be deemed a waiver by such Transacting Party of its rights under this
Section 4.2(d)(ii)
.
(iii)
Notwithstanding anything to the contrary in
Section 4.2(d)(i)
, in no event shall there be any adjustments to the Initial Linn Agreed Value or Closing Linn Consideration Units under
Section 4.2(d)(i)
in respect of Linn Title Defects, and Linn shall not be responsible for any Linn Title Defect Amounts unless the sum of (X) the aggregate Linn Title Defect Amounts of all such Linn Title Defects, after setting off all Linn Title Benefit Amounts and excluding any Linn Title Defect Amounts attributable to Linn Title Defects cured by Linn pursuant to
Section 4.2(c)(ii)
or
Section 4.2(e)
or Linn Title Defect Properties retained by Linn pursuant to
Section 4.2(d)(ii)
(it being acknowledged and agreed that the Initial Linn Agreed Value shall be reduced at Closing for the Allocated Value of the retained or excluded Linn Title Defect Properties) and (Y) the aggregate Remediation Amounts of all Linn Environmental Defects that exceed the Individual Environmental Threshold (excluding any Remediation Amounts attributable to Linn Environmental Defects cured by Linn pursuant to
Section 5.1(b)(i)
or (2) Linn Environmental Defect Properties retained by Linn pursuant to
Section 5.1(c)(ii)
) (it being acknowledged and agreed that the Initial Linn Agreed Value shall be reduced at Closing for the Allocated Value of the retained or excluded Linn Environmental Defect Properties), exceeds 2.0% of the Initial Linn Agreed Value prior to any adjustments to the Initial Linn Agreed Value under this Agreement (the “
Linn Aggregate Deductible
”), in which case, the adjustments to the Initial Linn Agreed Value or Closing Linn Consideration Units under
Section 4.2(d)(i)
shall only be for the amount by which such total exceeds the Linn Aggregate Deductible.
(iv)
Notwithstanding the foregoing
Sections 4.2(d)(i)
and
(iii)
, the Linn Title Benefit Amount of any Linn Title Benefit shall serve only to reduce the aggregate Linn
Title Defect Amount, and in no event shall any Linn Title Benefit Amount otherwise result in any adjustment to the Initial Linn Agreed Value or Closing Linn Consideration Units.
(e)
Linn Additional Assets; Cures with Linn Additional Leases; Adjustments to Initial Linn Agreed Value or Closing Linn Consideration Units for Linn Additional Assets
.
(i)
Until the Closing, Linn may acquire Linn Additional Assets, and Linn may also acquire certain Linn Additional Leases after Closing until the expiration of the Title Cure Period (provided, however, that the post-Closing acquisitions shall only be allowed through permitted acreage trades, as further described in the definition of “Linn Additional Leases”). Linn shall use its best efforts to, within ten (10) Business Days after the acquisition of any Linn Additional Asset, notify Citizen of such acquisition, and shall provide Citizen with copies of the underlying instrument creating such Linn Additional Asset, the agreement(s) pursuant to which Linn acquired such Linn Additional Asset, the contract(s) burdening or affecting such Linn Additional Asset of which Linn has copies, the total Raw Net Acres for each acquired Linn Additional Lease, the Net Acres subject to each such Linn Additional Lease on a Governmental Section and Target Formation basis, the Linn Section Weighted Average NRI for each acquired Linn Additional Lease on a Governmental Section and Target Formation basis, the lease expiration date for each acquired Linn Additional Lease, the estimated Linn Cost Credited Asset Acquisition Costs for each acquisition, and any other information or materials in Linn’s possession related to such Linn Additional Asset. Linn Additional Assets will be subject to title review and environmental review by Citizen in accordance with the other applicable provisions of
Article 4
(including
Section 4.2(d)(iii)
) and
Article 5
(including
Section 5.1(c)(iii)
), except that the Review Period with respect thereto shall commence on the first (1
st
) Business Day after Citizen has received written notice from Linn identifying such Linn Additional Assets, together with all information to be delivered pursuant to the immediately preceding sentence (and no Review Period shall be deemed to have commenced to run unless and until Citizen has received all of such information), and shall end upon the later of the expiration of the Review Period and 11:59 p.m. Central Prevailing Time on the first (1
st
) Business Day that is 30 Business Days after Citizen has received such written notice from Linn. On or before five (5) Business Days after the latest to occur of (A) the expiration of the review period provided hereunder for each Linn Additional Asset, (B) the resolution of all Title Disputes and Environmental Disputes with regard to the Linn Additional Assets and (C) 30 days after Citizen has received a Linn Lease Designation Notice for such Linn Additional Assets, Linn shall contribute all such Linn Additional Assets to the Company (subject always to the other terms of
Articles 4
and
5
) pursuant to a conveyance in substantially the form of the Linn Assignment, and simultaneous therewith shall provide Citizen and the Company an officer’s certificate, dated as of the date of the execution of such conveyance, certifying that the representations and warranties of Linn in
Article 7
are true and correct as to each such Linn Additional Asset on and as of such date (other than representations and warranties that refer to a specified date, which need only be true and correct on and as of such specified date) in all material respects,
provided
that in no event shall Linn be entitled to contribute any Linn Additional Asset to the Company for which Linn is unable to make such certification.
(ii)
To the extent Linn has acquired Linn Additional Assets and has not otherwise cured an asserted Linn Title Defect or completed the Remediation of an asserted Linn Environmental Defect, Linn may designate any Linn Additional Lease as either a Linn
True-Up Lease or a Linn Substitute Lease, provided that Linn shall first (and prior to Linn’s ability to use such Linn Additional Assets under
Section 3.2(b)(vi)(C)
as Linn True-Up Leases or to designate them as Linn Cost Credited Leases) designate and use any such Additional Linn Lease as a Linn Substitute Lease. “
Linn Substitute Leases
” means any Linn Additional Leases utilized to cure (in whole or in part) any such Linn Title Defect or such Linn Environmental Defect properly asserted by Citizen with respect to any Linn Asset for which the Initial Linn Agreed Value is to be adjusted downward by designating one or more Linn Additional Leases (in whole or in part) to cure such Linn Title Defect
or Linn Environmental Defect, in each case at no cost to the Company or such designee and without Linn receiving any additional Units or any other consideration therefor from the Company or such designee. Linn shall designate or otherwise identify any Linn Substitute Lease or Linn True-Up Lease by one or more written notices (each, a “
Linn Lease Designation Notice
”) to Citizen prior to the expiration of the Title Cure Period. Any Linn Lease Designation Notice in respect of Linn Substitute Leases shall also identify the Linn Title Defect Amounts associated with the relevant Linn Title Defects and the Remediation Amounts associated with the relevant Linn Environmental Defects that Linn believes have been reduced as a result of Linn’s cure of such Linn Title Defects and Linn Environmental Defects pursuant to this
Section 4.2(e)(ii
). Each Linn Lease Designation Notice must provide the asserted Net Acres and Linn Section Weighted NRI for the designated Linn Additional Leases by Governmental Section and Target Formation. If Linn fails to timely provide the aforesaid notice with respect to any Linn Title Defect or Linn Environmental Defect, Linn shall not have the right to cure such Linn Title Defect or Linn Environmental Defect under this
Section 4.2(e)
. For all purposes of this
Section 4.2
, the Allocated Value of Linn Substitute Leases shall be computed as described in
Section 4.2(e)(vii)
. If Linn designates Linn Additional Leases as Linn True-Up Leases, but the Allocated Values for such Linn Additional Leases exceed the Linn Delta Value, such Linn Additional Leases (to the extent the Allocated Value thereof) will not be considered Linn True-Up Leases and will instead be Linn Cost Credited Leases hereunder, subject to all of the provisions herein with respect to Linn Cost Credit Credited Leases.
(iii)
The reduction in the Linn Title Defect Amount associated with any Linn Title Defect that Linn cures under this
Section 4.2(e)
by designating one or more Linn Additional Leases (or portions thereof) as Linn Substitute Leases and is deemed to have successfully cured such Linn Title Defect under
Section 4.2(e)(ii)
shall be equal to the result of such Linn Title Defect Amount (and if the Linn Asset in question is being retained, then the Linn Title Defect Amount is the Allocated Value therefor)
minus
the Allocated Value of the applicable Linn Substitute Leases as computed as described in
Section 4.2(e)(vii)
.
(iv)
In the event less than the entirety of all of Linn Additional Leases are designated either as Linn Substitute Leases or Linn True-Up Leases (all such Linn Additional Leases to the extent not designated as Linn Substitute Leases or Linn True-Up Leases collectively, “
Linn Cost Credited Leases
”), all such Linn Cost Credited Leases (or remainder thereof not designated either as Linn Substitute Leases or Linn True-Up Leases) shall be sold and assigned to the Company by Linn on the second (2
nd
) Business Day after both the Final Linn Adjustment Determination Date and the Final Citizen Adjustment Determination Date have occurred for a cash purchase price equal to all Linn Cost Credited Asset Acquisition Costs for all of such Linn Cost Credited Leases and the associated Linn Additional Assets, in each case, adjusted in accordance with
Section 3.2(a)
as such adjustments may apply to such Linn Cost
Credited Leases and associated Linn Additional Assets. Each member of the Company shall bear its respective Percentage Interest share (as of the time of such sale and purchase) of the purchase price for such Linn Additional Assets.
(v)
Interim Sales
. Notwithstanding anything to the contrary in this
Section 4.2
, and without limitation of Citizen’s right to indemnification under
Article 15
for breach of Linn’s covenants in
Section 10.1
, the Linn Aggregate Deductible shall not apply to any Linn Title Defect resulting from the sale, trade or other disposition prior to the Closing of Linn’s interest in any Linn Lease and/or Linn Well (or portion thereof).
(vi)
Linn Additional Leases
.
(A)
Linn has identified on
Exhibit A-5-1
those Linn Additional Leases that have been acquired by Linn from and after April 1, 2017 until the date that is five (5) Business Days prior to the Execution Date. Linn shall use its best efforts to supplement such Exhibit within ten (10) Business Days after the Execution Date to provide the total Raw Net Acres for each such acquired Linn Additional Lease, the Net Acres subject to each such Linn Additional Lease on a Governmental Section and Target Formation basis, the Linn Section Weighted Average NRI for each such acquired Linn Additional Lease on a Governmental Section and Target Formation basis, and the lease expiration date for each acquired Linn Additional Lease. In addition, within this same time period, Linn shall also use its best efforts to provide Citizen with the other information related to such Additional Linn Assets as is contemplated under
Section 4.2(e)(i)
above. With regard to Linn Additional Leases and Linn Additional Asset acquired, the date that is five (5) Business Days prior to the Execution Date, Linn shall use its best efforts to supplement such Exhibit within ten (10) Business Days (but for those acquired after Closing, no later than the expiration the Title Cure Period) after any such Linn Additional Asset acquisition, and provide to Citizen such other information as is contemplated under
Section 4.2(e)(i)
above within this same period.
(B)
To the extent less than 100% of the Linn Additional Leases acquired in a single acquisition are Linn Cost Credited Leases, Linn will further provide, with respect to any such acquisition, the Raw Net Acres included in the entire relevant acquisition as compared to the Raw Net Acres for the relevant Linn Cost Credited Leases, together with full consideration payable for the acquisition and full costs of Third Party expenses that constitute Linn Cost Credited Acquisition Costs (the
“
Linn Gross Acquisition Cost
”). In such event, the Linn Cost Credited Acquisition Costs for such Linn Cost Credited Leases will be the (A) the Raw Net Acres included in the entire relevant acquisition
divided by
the Raw Net Acres for the relevant Linn Cost Credited Leases,
multiplied by
(B) the Linn Gross Acquisition Cost.
(vii)
The Allocated Value of any Linn Additional Leases (or portions thereof) utilized as Linn True-Up Leases or Linn Substitute Leases shall be calculated with respect to each applicable Governmental Section and each Target Formation within each such Governmental Section as follows, and the relevant Allocated Value for a Target Formation in a Governmental Section will be the product of (a) the actual aggregate Linn Section Net Acres subject to the Linn Additional Leases in such Target Formation in such Governmental Section,
and (b) the sum of (i) the Zone Price for such Target Formation in such Governmental Section and (ii) the product of (A) the Zone NRI Value for such Target Formation in such Governmental Section, (B) the amount (whether positive, negative or zero) obtained by subtracting the Zone Average NRI for such Target Formation in such Governmental Section from the actual Linn
Section Weighted Average NRI associated with the Linn Additional Leases in such Target Formation in such Governmental Section; and (C) 100.
Section 4.3
Citizen Title Defects and Citizen Title Benefits
.
(a)
Citizen Title Defect Notices
. On or prior to the last day of the Review Period, Linn shall have the right to assert claims for Citizen Title Defects against Citizen in accordance with this
Section 4.3(a)
. To assert a Citizen Title Defect, Linn shall give written notice prior to the end of the Review Period to Citizen via email or writing meeting the requirements of this
Section 4.3(a)
(each, a “
Citizen Title Defect Notice
” and collectively, the “
Citizen Title Defect Notices
”). Except for the special warranty of title in the Citizen Assignment and without limiting any rights to indemnity pursuant to
Article 15
, any matters that may otherwise constitute Citizen Title Defects but that are not alleged in any Citizen Title Defect Notice prior to the expiration of the Review Period shall be deemed to have been waived by Linn. To be effective, each Citizen Title Defect Notice shall be in writing or email, and shall include (i) a reasonable description of each alleged Citizen Title Defect, (ii) the Citizen Assets or portion thereof affected thereby (each, a “
Citizen Title Defect Property
”), (iii) supporting documents reasonably necessary to verify the existence of the alleged Citizen Title Defect(s), and (iv) Linn’s good faith estimate of the Citizen Title Defect Amount for such Citizen Title Defect and the computations upon which Linn’s estimate is based. Linn will also use reasonable efforts (without any liability for failure to do so) to promptly furnish to Citizen written notice during the Review Period of any Citizen Title Benefit with respect to which Linn acquired Knowledge during the Review Period, or discovered during the Review Period, to Linn’s Knowledge, by any of its Affiliates, employees, title attorneys, landmen or other title examiners prior to the end of the Review Period.
(b)
Title Benefit Notices
. On or prior to the last day of the Review Period, Citizen shall have the right to assert Citizen Title Benefits in accordance with this
Section 4.3(b)
. To assert a Citizen Title Benefit, Citizen shall give written notice prior to the end of the Review Period to Linn via email (with hardcopy sent for delivery the day after the end of the Review Period) meeting the requirements of this
Section 4.3(b)
(each, a “
Citizen Title Benefit Notice
” and collectively, the “
Citizen Title Benefit Notices
”). To be effective, each Citizen Title Benefit Notice shall include (i) a reasonable description of each alleged Citizen Title Benefit, (ii) the Citizen Assets or portion thereof affected thereby, (iii) supporting documents in Citizen’s possession reasonably necessary for Linn to verify the existence of the alleged Citizen Title Benefit(s), and (iv) Citizen’s good faith estimate of the Citizen Title Benefit Amount for such Citizen Title Benefit and the computations upon which Citizen’s estimate is based. Any matters that may otherwise constitute Citizen Title Benefits but that are not alleged in any Citizen Title Benefit Notice prior to the expiration of the Review Period shall be deemed to have been waived by Citizen.
(c)
Right to Cure; Right to Dispute
.
(i)
Citizen shall have the option, but not the obligation, to attempt to cure, or cause to be cured, at its sole cost and expense, any Citizen Title Defects within the Title Cure Period.
(ii)
Prior to the Scheduled Closing Date, Citizen and Linn shall attempt to agree on all disputes related to the existence of any Citizen Title Defect or Citizen Title Benefit or the applicable Citizen Title Defect Amount or Citizen Title Benefit Amount with respect thereto or the effect of any curative actions with respect to any Citizen Title Defect. With regard to any Citizen Asset that is subject to such an unresolved dispute as to a Citizen Title Defect as of the Closing, and the alleged Title Defect Amount is less than or equal to 90% of the Allocated Value of the affected Citizen Asset, then such Citizen Asset shall nevertheless be conveyed at Closing without adjustment to the Initial Citizen Agreed Value for such disputed Citizen Title Defect. Upon resolution of such dispute under
Section 4.4
, appropriate adjustments shall be made to the Initial Citizen Agreed Value in accordance with
Section 3.3
. With regard to any Citizen Asset that is subject to such an unresolved dispute as to Citizen Title Defects as of the Closing, and the alleged Title Defect Amount is greater than 90% of the Allocated Value of the affected Citizen Asset, then such Citizen Asset shall be retained at Closing, and treated as a Citizen Excluded Asset hereunder. If it is ultimately determined pursuant to
Section 4.4
that the actual Title Defect Amount burdening such Citizen Asset is less than or equal to 90% of the Allocated Value of such Citizen Asset, within five (5) Business Days of such determination, Citizen shall convey such Citizen Asset to the Company pursuant to a Citizen Assignment and the Initial Citizen Agreed Value shall be adjusted in accordance with
Section 3.3
to reflect the contribution of such Citizen Asset to the Company.
(d)
Remedies for Citizen Title Defects and Citizen Title Benefits
.
(i)
Subject to
Sections 4.3(d)(ii)
,
4.3(d)(iii)
and
4.3(d)(iv)
, upon the final determination of the existence of any uncured Citizen Title Defect and Citizen Title Defect Amount relating thereto (whether by written agreement between the Transacting Parties or under
Section 4.4
), the Initial Citizen Agreed Value shall be reduced by such Citizen Title Defect Amount (or if the Closing has already occurred as of such time, the number of Closing Citizen Consideration Units shall be reduced by one Closing Citizen Consideration Unit for every $1.00 of such Citizen Title Defect Amount) in full satisfaction of such Citizen Title Defect.
(ii)
Notwithstanding anything to the contrary herein, with respect to Citizen Title Defects for which the Citizen Title Defect Amount exceeds 90% of the Allocated Value of the affected Citizen Title Defect Property, Citizen or Linn shall have the right but not the obligation to exclude the entirety of the Citizen Title Defect Property, together with all Citizen Assets associated with such Citizen Title Defect Property, in which event the Initial Citizen Agreed Value shall be reduced by the Allocated Value of such Citizen Title Defect Property and associated Citizen Assets in full satisfaction of such Citizen Title Defect (except to the extent such Citizen Title Defect pertains to other Citizen Assets that are not so excluded), and such Citizen Title Defect Property, together with all Citizen Assets associated with such Citizen Title Defect Property, shall be deemed Citizen Excluded Assets hereunder for all purposes. Any such election must be made by a Transacting Party by notice to the other Transacting Party on or before the Closing, and failure of a Transacting Party to so make such an election shall be deemed a waiver by such Transacting Party of its rights under this
Section 4.3(d)(ii)
.
(iii)
Notwithstanding anything to the contrary in
Section 4.3(d)(i)
, in no event shall there be any adjustments to the Initial Citizen Agreed Value or Closing Citizen Consideration Units under
Section 4.3(d)(i)
in respect of Citizen Title Defects, and Citizen shall
not be responsible for any Citizen Title Defect Amounts unless the sum of (X) the aggregate Citizen Title Defect Amounts of all such Citizen Title Defects, after setting off all Citizen Title Benefit Amounts and excluding any Citizen Title Defect Amounts attributable to Citizen Title Defects cured by Citizen pursuant to
Section 4.3(c)(ii)
or
Section 4.3(e)
or Citizen Title Defect Properties retained by Citizen pursuant to
Section 4.3(d)(ii)
(it being acknowledged and agreed that the Initial Citizen Agreed Value shall be reduced at Closing for the Allocated Value of the retained or excluded Citizen Title Defect Properties) and (Y) the aggregate Remediation Amounts of all Citizen Environmental Defects that exceed the Individual Environmental Threshold (excluding any Remediation Amounts attributable to Citizen Environmental Defects cured by Citizen pursuant to
Section 5.2(b)(i)
or (2) Citizen Environmental Defect Properties retained by Citizen pursuant to
Section 5.2(c)(ii)
) (it being acknowledged and agreed that the Initial Citizen Agreed Value shall be reduced at Closing for the Allocated Value of the retained or excluded Citizen Environmental Defect Properties), exceeds 2.0% of the Initial Citizen Agreed Value prior to any adjustments to the Initial Citizen Agreed Value under this Agreement (the “
Citizen Aggregate Deductible
”), in which case, the adjustments to the Initial Citizen Agreed Value or Closing Citizen Consideration Units under
Section 4.2(d)(i)
shall only be for the amount by which such total exceeds the Citizen Aggregate Deductible.
(iv)
Notwithstanding the foregoing
Sections 4.3(d)(i)
and
(iii)
, the Citizen Title Benefit Amount of any Citizen Title Benefit shall serve only to reduce the aggregate Citizen Title Defect Amount, and in no event shall any Citizen Title Benefit Amount otherwise result in any adjustment to the Initial Citizen Agreed Value or Closing Citizen Consideration Units.
(e)
Citizen Additional Assets; Cures with Citizen Additional Leases; Adjustments to Initial Citizen Agreed Value or Closing Citizen Consideration Units for Citizen Additional Assets
.
(i)
Until the Closing, Citizen may acquire Citizen Additional Assets, and Citizen may also acquire certain Citizen Additional Leases after Closing until the expiration of the Title Cure Period (provided, however, that the post-Closing acquisitions shall only be allowed through permitted acreage trades, as further described in the definition of “Citizen Additional Leases”). Citizen shall use its best efforts to, within ten (10) Business Days after the acquisition of any Citizen Additional Asset, notify Linn of such acquisition, and shall provide Linn with copies of the underlying instrument creating such Citizen Additional Asset, the agreement(s) pursuant to which Citizen acquired such Citizen Additional Asset, the contract(s) burdening or affecting such Citizen Additional Asset of which Citizen has copies, the total Raw Net Acres for each acquired Linn Additional Lease, the Net Acres subject to each such Linn Additional Lease on a Governmental Section and Target Formation basis, the Linn Section Weighted Average NRI for each acquired Linn Additional Lease on a Governmental Section and Target Formation basis, the lease expiration date for each acquired Linn Additional Lease, the estimated Citizen Cost Credited Asset Acquisition Costs for each acquisition, and any other information or materials in Citizen’s possession related to such Citizen Additional Asset. Citizen Additional Assets will be subject to title review and environmental review by Linn in accordance with the other applicable provisions of
Article 4
(including
Section 4.3(d)(iii)
) and
Article 5
(including
Section 5.2(c)(iii)
), except that the Review Period with respect thereto shall commence on the first (1
st
) Business Day after Linn has received written notice from Citizen
identifying such Citizen Additional Assets, together with all information to be delivered pursuant to the immediately preceding sentence (and no Review Period shall be deemed to have commenced to run unless and until Linn has received all of such information), and shall end upon the later of the expiration of the Review Period and 11:59 p.m. Central Prevailing Time on the first (1
st
) Business Day that is 30 Business Days after Linn has received such written notice from Citizen. On or before five (5) Business Days after the latest to occur of (A) the expiration of the review period provided hereunder for each Citizen Additional Asset, (B) the resolution of all Title Disputes and Environmental Disputes with regard to the Citizen Additional Assets, and (C) 30 days after Linn has received a Citizen Lease Designation Notice for such Citizen Additional Assets, Citizen shall contribute all such Citizen Additional Assets to the Company (subject always to the other terms of
Articles 4
and
5
) pursuant to a conveyance in substantially the form of the Citizen Assignment, and simultaneous therewith shall provide Linn and the Company an officer’s certificate, dated as of the date of the execution of such conveyance, certifying that the representations and warranties of Citizen in
Article 8
are true and correct as to each such Citizen Additional Asset on and as of such date (other than representations and warranties that refer to a specified date, which need only be true and correct on and as of such specified date) in all material respects,
provided
that in no event shall Citizen be entitled to contribute any Citizen Additional Asset to the Company for which Citizen is unable to make such certification.
(ii)
To the extent Citizen has acquired Citizen Additional Assets and has not otherwise cured an asserted Citizen Title Defect or completed the Remediation of an asserted Citizen Environmental Defect, Citizen may designate any Citizen Additional Lease as either a Citizen True-Up Lease or a Citizen Substitute Lease, provided that Citizen shall first (and prior to Citizen’s ability to use such Citizen Additional Assets under
Section 3.3(b)(vi)(C)
as Citizen True-Up Leases or to designate them as Citizen Cost Credited Leases) designate and use any such Additional Citizen Lease as a Citizen Substitute Lease. “
Citizen Substitute Leases
” means any Citizen Additional Leases utilized to cure (in whole or in part) any such Citizen Title Defect or such Citizen Environmental Defect properly asserted by Linn with respect to any Citizen Asset for which the Initial Citizen Agreed Value is to be adjusted downward by designating one or more Citizen Additional Leases (in whole or in part) to cure such Citizen Title Defect
or Citizen Environmental Defect, in each case at no cost to the Company or such designee and without Citizen receiving any additional Units or any other consideration therefor from the Company or such designee. Citizen shall designate or otherwise identify any Citizen Substitute Lease or Citizen True-Up Lease by one or more written notices (each, a “
Citizen Lease Designation Notice
”) to Linn prior to the expiration of the Title Cure Period. Any Citizen Lease Designation Notice in respect of Citizen Substitute Leases shall also identify the Citizen Title Defect Amounts associated with the relevant Citizen Title Defects and the Remediation Amounts associated with the relevant Citizen Environmental Defects that Citizen believes have been reduced as a result of Citizen’s cure of such Citizen Title Defects and Citizen Environmental Defects pursuant to this
Section 4.3(e)(ii
). Each Citizen Lease Designation Notice must provide the asserted Net Acres and Citizen Section Weighted NRI for the designated Citizen Additional Leases by Governmental Section and Target Formation. If Citizen fails to timely provide the aforesaid notice with respect to any Citizen Title Defect or Citizen Environmental Defect, Citizen shall not have the right to cure such Citizen Title Defect or Citizen Environmental Defect under this
Section 4.3(e)
. For all purposes of this
Section 4.3
, the Allocated Value of Citizen Substitute Leases shall be computed as described in
Section 4.3(e)(vii)
. If Citizen designates
Citizen Additional Leases as Citizen True-Up Leases, but the Allocated Values for such Citizen Additional Leases exceed the Citizen Delta Value, such Citizen Additional Leases (to the extent the Allocated Value thereof) will not be considered Citizen True-Up Leases and will instead be Citizen Cost Credited Leases hereunder, subject to all of the provisions herein with respect to Citizen Cost Credit Credited Leases.
(iii)
The reduction in the Citizen Title Defect Amount associated with any Citizen Title Defect that Citizen cures under this
Section 4.3(e)
by designating one or more Citizen Additional Leases as a Citizen Substitute Lease and is deemed to have successfully cured such Citizen Title Defect under
Section 4.3(e)(ii)
shall be equal to the result of such Citizen Title Defect Amount (and if the Citizen Asset in question is being retained, then the Citizen Title Defect Amount is the Allocated Value therefor)
minus
the Allocated Value of the applicable Linn Substitute Leases as computed as described in
Section 4.3(e)(vii)
.
(iv)
In the event less than the entirety of all of Citizen Additional Leases are designated either as Citizen Substitute Leases or Citizen True-Up Leases (all such Citizen Additional Leases to the extent not designated as Citizen Substitute Leases or Citizen True-Up Leases collectively, “
Citizen Cost Credited Leases
”), all such Citizen Cost Credited Leases (or remainder thereof not designated either as Citizen Substitute Leases or Citizen True-Up Leases) shall be sold and assigned to the Company by Citizen on the second (2
nd
) Business Day after both the Final Citizen Adjustment Determination Date and the Final Linn Adjustment Determination Date have occurred for a cash purchase price equal to all Citizen Cost Credited Asset Acquisition Costs for all of such Citizen Cost Credited Leases and the associated Citizen Additional Assets, in each case, adjusted in accordance with
Section 3.3(a)
as such adjustments may apply to such Citizen Cost Credited Leases and associated Citizen Additional Assets. Each member of the Company shall bear its respective Percentage Interest share (as of the time of such sale and purchase) of the purchase price for such Citizen Additional Assets.
(v)
Interim Sales
. Notwithstanding anything to the contrary in this
Section 4.3
, and without limitation of Linn’s right to indemnification under
Article 15
for breach of Citizen’s covenants in
Section 10.2
, the Citizen Aggregate Deductible shall not apply to any Citizen Title Defect resulting from the sale, trade or other disposition prior to the Closing of Citizen’s interest in any Citizen Lease and/or Citizen Well (or portion thereof).
(vi)
Citizen Additional Leases
.
(A)
Citizen has identified on
Exhibit A-5-2 (Part I)
those Citizen Additional Leases that have been acquired by Citizen from and after April 1, 2017 until the date that is five (5) Business Days prior to the Execution Date. Citizen shall use its best efforts to supplement such Exhibit and Exhibit A-5-2 (Part II) within ten (10) Business Days after the Execution Date to provide the total Raw Net Acres for each such acquired Citizen Additional Lease, the Net Acres subject to each such Citizen Additional Lease on a Governmental Section and Target Formation basis, the Citizen Section Weighted Average NRI for each such acquired Citizen Additional Lease on a Governmental Section and Target Formation basis, the lease expiration date for each acquired Citizen Additional Lease. In addition, within this same time period, Citizen shall also use its best efforts to provide Linn with the other information related to such Additional Citizen Assets as is contemplated under
Section 4.3(e)(i)
above. With regard to Citizen Additional Leases and Citizen Additional Asset acquired,
the date that is five (5) Business Days prior to the Execution Date, Citizen shall use its best efforts to supplement such Exhibit within ten (10) Business Days (but for those acquired after Closing, no later than the expiration the Title Cure Period) after any such Citizen Additional Asset acquisition, and provide to Linn such other information as is contemplated under Section 4.3(e)(i) above within this same period.
(B)
To the extent less than 100% of the Citizen Additional Leases acquired in a single acquisition are Citizen Cost Credited Leases, Citizen will further provide, with respect to any such acquisition, the Raw Net Acres included in the entire relevant acquisition as compared to the Raw Net Acres for the relevant Citizen Cost Credited Leases, together with full consideration payable for the acquisition and full costs of Third Party expenses that constitute Citizen Cost Credited Acquisition Costs (the
“
Citizen Gross Acquisition Cost
”). In such event, the Citizen Cost Credited Acquisition Costs for such Citizen Cost Credited Leases will be the (A) the Raw Net Acres included in the entire relevant acquisition
divided by
the Raw Net Acres for the relevant Citizen Cost Credited Leases,
multiplied by
(B) the Citizen Gross Acquisition Cost.
(vii)
The Allocated Value of any Citizen Additional Leases (or portions thereof) utilized as Citizen True-Up Leases or Citizen Substitute Leases shall be calculated with respect to each applicable Governmental Section and each Target Formation within each such Governmental Section as follows, and the relevant Allocated Value for a Target Formation in a Governmental Section will be the product of (a) the actual aggregate Citizen Section Net Acres subject to the Citizen Additional Leases in such Target Formation in such Governmental Section, and (b) the sum of (i) the Zone Price for such Target Formation in such Governmental Section and (ii) the product of (A) the Zone NRI Value for such Target Formation in such Governmental Section, (B) the amount (whether positive, negative or zero) obtained by subtracting the Zone Average NRI for such Target Formation in such Governmental Section from the actual Citizen Section Weighted Average NRI associated with the Citizen Additional Leases in such Target Formation in such Governmental Section; and (C) 100.
Section 4.4
Title Disputes
. If Linn and Citizen fail to agree in writing on any dispute involving or relating to the existence of a Linn Title Defect (or whether such Linn Title Defect has been cured), Linn Title Benefit, Citizen Title Defect (or whether such Citizen Title Defect has been cured) or Citizen Title Benefit or the amount of a Linn Title Defect Amount, Linn Title Benefit Amount, Citizen Title Defect Amount or Citizen Title Benefit Amount (a “
Title Dispute
”), then such Title Dispute shall be exclusively and finally resolved pursuant to arbitration in accordance with this
Section 4.4
. Linn and Citizen agree to pursue any such arbitration in good faith and with reasonable diligence, with the goal of concluding the arbitration as soon as practicable. There shall be a single arbitrator, who shall be a title attorney with at least ten (10) years’ experience in the oil and gas industry involving properties in the State of Oklahoma, as selected by mutual agreement of Linn and Citizen within ten (10) days after either Linn or Citizen have provided the other with a notice of dispute invoking this
Section 4.4
, and absent such agreement, by the Dallas, Texas office of the American Arbitration Association (the “
Title Arbitrator
”). The arbitration proceeding shall be held in Oklahoma City, Oklahoma and shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association, to the extent such rules do not conflict with the terms of this
Section 4.4
, except that each Transacting Party shall make a proposal to the Title Arbitrator as to
how to resolve each such Title Dispute, and the Title Arbitrator shall select the proposal of the Transacting Party that is more consistent with the terms of this Agreement than the proposal of the other Transacting Party. The Title Arbitrator’s determination shall be made within thirty (30) days after submission of a Title Dispute and shall be final and binding, without right of appeal. The Title Arbitrator shall act as an expert for the limited purpose of determining the specific Title Disputes presented to him or her pursuant to this
Section 4.4
, and shall not consider, hear or decide any matters except the specific Title Disputes presented. In making his or her determination, the Title Arbitrator shall be bound by the rules set forth in this
Section 4.4
and, subject to the foregoing, may consider such other matters as in the opinion of the Title Arbitrator are necessary to make a proper determination. The Title Arbitrator may not award damages, interest or penalties to any Transacting Party or other Person with respect to any matter. The Transacting Parties shall each bear their own legal fees and other costs of presenting its case. The Transacting Party whose Title Dispute proposal is not selected by the Title Arbitrator shall bear all of the costs and expenses of the Title Arbitrator that relate to such Title Dispute.
Section 4.5
Linn Preferential Purchase Rights; Linn Consents to Assign
.
(a)
With respect to each Linn Preferential Purchase Right set forth on
Schedule 7.12
, within ten (10) Business Days
after the Execution Date, Linn shall send to the holder of each such Linn Preferential Purchase Right a notice in compliance with the contractual provisions applicable to such Linn Preferential Purchase Right requesting a waiver of such right. With respect to each Linn Preferential Purchase Right that is not set forth on
Schedule 7.12
but is discovered by a Transacting Party prior to Closing, then as soon as reasonably practicable after discovery of any such Linn Preferential Purchase Right, Linn shall send to the holder of each such Linn Preferential Purchase Right a notice in compliance with the contractual provisions applicable to such Linn Preferential Purchase Right requesting a waiver of such right. Any Linn Preferential Purchase Right must be exercised subject to all terms and conditions set forth in this Agreement, and the consideration payable under this Agreement for the purposes of all Linn Preferential Purchase Right notices shall be the Allocated Value of the applicable Linn Asset (as adjusted herein).
(b)
If, prior to Closing, any holder of a Linn Preferential Purchase Right notifies Linn that it intends to consummate the acquisition of the Linn Assets to which its Linn Preferential Purchase Right applies or if the time for exercising such Linn Preferential Purchase Right has not expired (and the holder of such right has not waived such right), then the Linn Assets subject to such Linn Preferential Purchase Right shall be excluded from the Linn Assets to be assigned to the Company at Closing, and the Initial Linn Agreed Value shall be reduced for every $1.00 of the Allocated Value of the Linn Asset subject to such exercised Linn Preferential Purchase Right in full satisfaction of such exercised Linn Preferential Purchase Right. Linn shall be entitled to all consideration given by any Person exercising a Linn Preferential Purchase Right prior to Closing. If such holder of such Linn Preferential Purchase Right thereafter fails to consummate the acquisition of the Linn Assets (or portions thereof) covered by such Linn Preferential Purchase Right on or before ninety (90) days
following the Closing Date or the time for exercising such Linn Preferential Purchase Right expires without exercise by the holder thereof, (i) Linn shall so notify the Company and (ii) Linn shall assign, on the tenth (10
th
) Business Day following termination of such right without consummation or exercise, such Linn Assets that were so excluded to the Company pursuant to an instrument in substantially the same
form as the Linn Assignment, and Linn shall be entitled to the Closing Linn Consideration Units previously reduced as a result of such exercised Linn Preferential Purchase Right.
(c)
All Linn Assets for which any applicable Linn Preferential Purchase Right has been waived, or as to which the period to exercise the applicable Linn Preferential Purchase Right has expired (and such Linn Preferential Purchase Right has not been exercised), in each case, prior to Closing, shall be conveyed to the Company at Closing subject to the provisions of this Agreement.
(d)
Linn, within ten (10) Business Days
after the Execution Date, shall send to each holder of a right to consent to assignment pertaining to the Linn Assets and the transactions contemplated hereby set forth in
Schedule 7.11
, a notice seeking such holder’s consent to the transactions contemplated hereby.
(e)
If Linn fails to obtain a consent to the assignment of any Linn Asset(s) set forth in
Schedule 7.11
prior to Closing and the failure to obtain any such consent would cause (i) the assignment of the Linn Asset(s) affected thereby to the Company to be void or voidable, (ii) the termination of (or the right of a lessor or counterparty to terminate) the underlying interest or contract under the express terms thereof, (iii) the triggering of a liquidated damages provision (each, a “
Linn Hard Consent
”), then, in each such case, the affected Linn Asset(s) shall be excluded from the Linn Assets to be conveyed to the Company at Closing hereunder, and the Initial Linn Agreed Value shall be reduced for every $1.00 of the Allocated Value of the Linn Asset affected by such Linn Hard Consent in full satisfaction of such unobtained Linn Hard Consent. In the event that a Linn Hard Consent (with respect to any applicable Linn Asset(s) excluded pursuant to this
Section 4.5(e)
) that was not obtained prior to Closing is obtained within ninety (90) days following Closing, then (A) Linn shall so notify the Company and (B) Linn shall assign, on the tenth (10
th
) Business Day following the receipt of such Linn Hard Consent, such Linn Assets that were so excluded to the Company pursuant to an instrument in substantially the same form as the Linn Assignment, and Linn shall be entitled to the Closing Linn Consideration Units previously reduced as a result of such Linn Hard Consent.
Section 4.6
Citizen Preferential Purchase Rights; Citizen Consents to Assign
.
(a)
With respect to each Citizen Preferential Purchase Right set forth on
Schedule 8.12
, within ten (10) Business Days
after the Execution Date, Citizen shall send to the holder of each such Citizen Preferential Purchase Right a notice in compliance with the contractual provisions applicable to such Citizen Preferential Purchase Right requesting a waiver of such right. With respect to each Citizen Preferential Purchase Right that is not set forth on
Schedule 8.12
but is discovered by a Transacting Party prior to Closing, then as soon as reasonably practicable after discovery of any such Citizen Preferential Purchase Right, Citizen shall send to the holder of each such Citizen Preferential Purchase Right a notice in compliance with the contractual provisions applicable to such Citizen Preferential Purchase Right requesting a waiver of such right. Any Citizen Preferential Purchase Right must be exercised subject to all terms and conditions set forth in this Agreement, and the consideration payable under this Agreement for the purposes of all Citizen Preferential Purchase Right notices shall be the Allocated Value of the applicable Citizen Asset (as adjusted herein).
(b)
If, prior to Closing, any holder of a Citizen Preferential Purchase Right notifies Citizen that it intends to consummate the acquisition of the Citizen Assets to which its Citizen Preferential Purchase Right applies or if the time for exercising such Citizen Preferential Purchase Right has not expired (and the holder of such right has not waived such right), then the Citizen Assets subject to such Citizen Preferential Purchase Right shall be excluded from the Citizen Assets to be assigned to the Company at Closing, and the Initial Citizen Agreed Value shall be reduced for every $1.00 of the Allocated Value of the Citizen Asset subject to such exercised Citizen Preferential Purchase Right in full satisfaction of such exercised Citizen Preferential Purchase Right. Citizen shall be entitled to all consideration given by any Person exercising a Citizen Preferential Purchase Right prior to Closing. If such holder of such Citizen Preferential Purchase Right thereafter fails to consummate the acquisition of the Citizen Assets (or portions thereof) covered by such Citizen Preferential Purchase Right on or before ninety (90) days
following the Closing Date or the time for exercising such Citizen Preferential Purchase Right expires without exercise by the holder thereof, (i) Citizen shall so notify the Company and (ii) Citizen shall assign, on the tenth (10
th
) Business Day following termination of such right without consummation or exercise, such Citizen Assets that were so excluded to the Company pursuant to an instrument in substantially the same form as the Citizen Assignment, and Citizen shall be entitled to the Closing Citizen Consideration Units previously reduced as a result of such exercised Citizen Preferential Purchase Right.
(c)
All Citizen Assets for which any applicable Citizen Preferential Purchase Right has been waived, or as to which the period to exercise the applicable Citizen Preferential Purchase Right has expired (and such Citizen Preferential Purchase Right has not been exercised), in each case, prior to Closing, shall be conveyed to the Company at Closing subject to the provisions of this Agreement.
(d)
Citizen, within ten (10) Business Days
after the Execution Date, shall send to each holder of a right to consent to assignment pertaining to the Citizen Assets and the transactions contemplated hereby set forth in
Schedule 8.11
, a notice seeking such holder’s consent to the transactions contemplated hereby.
(e)
If Citizen fails to obtain a consent to the assignment of any Citizen Asset(s) set forth in
Schedule 8.11
prior to Closing and the failure to obtain any such consent would cause (i) the assignment of the Citizen Asset(s) affected thereby to the Company to be void or voidable, (ii) the termination of (or the right of a lessor or counterparty to terminate) the underlying interest or contract under the express terms thereof, (iii) the triggering of a liquidated damages provision (each, a “
Citizen Hard Consent
”), then, in each such case, the affected Citizen Asset(s) shall be excluded from the Citizen Assets to be conveyed to the Company at Closing hereunder, and the Initial Citizen Agreed Value shall be reduced for every $1.00 of the Allocated Value of the Citizen Asset affected by such Citizen Hard Consent in full satisfaction of such unobtained Citizen Hard Consent. In the event that a Citizen Hard Consent (with respect to any applicable Citizen Asset(s) excluded pursuant to this
Section 4.6(e)
) that was not obtained prior to Closing is obtained within ninety (90) days following Closing, then (A) Citizen shall so notify the Company and (B) Citizen shall assign, on the tenth (10
th
) Business Day following the receipt of such Citizen Hard Consent, such Citizen Assets that were so excluded to the Company pursuant to an instrument in substantially the same form as the Citizen Assignment, and Citizen
shall be entitled to the Closing Citizen Consideration Units previously reduced as a result of such Citizen Hard Consent.
Section 4.7
Casualty Loss
.
(a)
Notwithstanding anything herein to the contrary, from and after the Effective Time, if Closing occurs, the Company shall assume all risk of loss with respect to production of Hydrocarbons through normal depletion (including watering out of any Linn Well or Citizen Well, collapsed casing or sand infiltration of any Linn Well or Citizen Well) and the depreciation of the Linn Wells and Citizen Wells and all personal property due to ordinary wear and tear, in each case, with respect to the Assets.
(b)
If, after the Execution Date but prior to the Closing Date, any portion of the Linn Assets is destroyed by fire or other act of God or is taken in condemnation or under right of eminent domain (each, a “
Linn Casualty Loss
”) for which the loss resulting from such Casualty Loss exceeds $150,000, the Initial Linn Agreed Value shall be adjusted downward by the amount of such loss, unless, at Citizen’s sole election, Linn pays to the Company all sums paid to Linn by Third Parties by reason of such Linn Casualty Loss, and (y) assigns, transfers and sets over unto the Company all of the right, title and interest of Linn in and to any unpaid awards or other payments, including insurance payments, from Third Parties arising out of such Linn Casualty Loss.
(c)
If, after the Execution Date but prior to the Closing Date, any portion of the Citizen Assets is destroyed by fire or other act of God or is taken in condemnation or under right of eminent domain (each, a “
Citizen Casualty Loss
”) for which the loss resulting from such Casualty Loss exceeds $150,000, the Initial Citizen Agreed Value shall be adjusted downward by the amount of such loss, unless, at Linn’s sole election, Citizen pays to the Company all sums paid to Citizen by Third Parties by reason of such Citizen Casualty Loss, and (y) assigns, transfers and sets over unto the Company all of the right, title and interest of Citizen in and to any unpaid awards or other payments, including insurance payments, from Third Parties arising out of such Citizen Casualty Loss.
ARTICLE 5
ENVIRONMENTAL MATTERS
Section 5.1
Notice of Linn Environmental Defects.
(a)
Linn Environmental Defect Notices
. On or prior to the last day of the Review Period, Citizen shall have the right to assert claims for Linn Environmental Defects against Linn in accordance with this
Section 5.1(a)
. To assert a Linn Environmental Defect, Citizen shall give written notice prior to the end of the Review Period to Linn via email (with hardcopy sent for delivery the day after the end of the Review Period) meeting the requirements of this
Section 5.1(a)
(each, a “
Linn Environmental Defect Notice
” and collectively, the “
Linn Environmental Defect Notices
”). Without limiting any rights to indemnity pursuant to
Article 15
, any matters that may otherwise constitute Linn Environmental Defects but that are not alleged in any Linn Environmental Defect Notice prior to the expiration of the Review Period shall be deemed to have been waived by Citizen. To be effective, each Linn Environmental
Defect Notice shall be in writing, and shall include (i) a reasonable description of each alleged Linn Environmental Defect, (ii) the Linn Assets or portion thereof affected thereby (each, a “
Linn Environmental Defect Property
”), (iii) documentation, including any physical measurements or photographs, sufficient for Linn to verify the existence of the asserted Linn Environmental Defect(s), (iv) the Allocated Value of each Linn Environmental Defect Property, (v) the Remediation Amount (itemized in reasonable detail) that Citizen asserts is attributable to such Linn Environmental Defect and the computations and information upon which Citizen’s belief is based, and (vi) the specific Environmental Law that is applicable to the Environmental Defect. Citizen’s calculation of the Remediation Amount included in the Linn Environmental Defect Notice must describe in reasonable detail the Remediation proposed for the Environmental Condition that gives rise to the asserted Linn Environmental Defect and identify all assumptions used by Citizen in calculating the Remediation Amount, including the standards that Citizen asserts must be met to comply with Environmental Laws.
(b)
Right to Cure; Right to Dispute
.
(i)
Linn shall have the option, but not the obligation, to attempt to cure, or cause to be cured, at its sole cost and expense, any Linn Environmental Defects prior to the Closing (the “
Environmental Cure Period
”).
(ii)
Prior to the Scheduled Closing Date, Linn and Citizen shall attempt to agree on all disputes related to the existence of any Linn Environmental Defect the applicable Remediation Amount with respect thereto or the effect of any curative actions with respect to any Linn Environmental Defect. With regard to any Linn Asset that is subject to such an unresolved dispute as to Linn Environmental Defects as of the Closing, and the alleged Linn Remediation Amount is less than or equal to 90% of the Allocated Value of the affected Linn Asset or less than $100,000, then such Linn Asset shall nevertheless be conveyed at Closing without adjustment to the Initial Linn Agreed Value for such disputed Linn Environmental Defect. Upon resolution of such dispute under
Section 5.3
, appropriate adjustments shall be made to the Initial Linn Agreed Value in accordance with
Section 3.2
. With regard to any Linn Asset that is subject to such an unresolved dispute as to Linn Environmental Defects as of the Closing, and the alleged Remediation Amount is (A) greater than 90% of the Allocated Value of the affected Linn Asset and (B) greater than $100,000, then such Linn Asset shall be retained at Closing, and treated as a Linn Excluded Asset hereunder. If it is ultimately determined pursuant to
Section 5.3
that the actual Remediation Amount burdening such Linn Asset is less than or equal to 90% of the Allocated Value of such Linn Asset or less than or equal to $100,000, within five (5) Business Days of such determination, Linn shall convey such Linn Asset to the Company pursuant to a Linn Assignment and the Initial Linn Agreed Value shall be adjusted in accordance with
Section 3.2
to reflect the contribution of such Linn Asset to the Company.
(c)
Remedies for Linn Environmental Defects
.
(i)
Subject to
Section 5.1(c)(ii)
, upon the final determination of the existence of any uncured Linn Environmental Defect and Remediation Amount relating thereto (whether by written agreement between the Transacting Parties or under
Section 5.3
), the Initial Linn Agreed Value shall be reduced by such Remediation Amount in full satisfaction of such Linn Environmental Defect.
(ii)
Notwithstanding anything to the contrary herein, with respect to Linn Environmental Defects for which the Linn Environmental Defect Amount exceeds (A) 90% of the Allocated Value of the affected Linn Environmental Defect Property and (B) $100,000, Linn shall have the right but not the obligation to exclude, and Citizen shall have the right to require Linn to retain, the entirety of any Linn Environmental Defect Property, together with all Linn Assets associated with such Linn Environmental Defect Property, in which event the Initial Linn Agreed Value shall be reduced by the Allocated Value of such Linn Environmental Defect Property in full satisfaction of such Linn Environmental Defect, and such Linn Environmental Defect Property, together with all Linn Assets associated with such Linn Environmental Defect Property, shall be deemed Linn Excluded Assets hereunder for all purposes. Any such election must be made by a Transacting Party by notice to the other Transacting Party on or before the Closing, and failure to so make such an election shall be deemed a waiver by such Transacting Party of its rights under this
Section 5.1(c)(ii)
.
(iii)
Notwithstanding anything to the contrary in
Section 5.1(c)(i)
, (A) in no event shall there be any adjustments to the Initial Linn Agreed Value or Closing Linn Consideration Units under
Section 5.1(c)(i)
in respect of Linn Environmental Defects, Citizen shall not have the right to require Linn to retain any Linn Environmental Defect Property pursuant to
Section 5.1(c)(i)
and Linn shall not be responsible for any individual Linn Environmental Defect, for which the Remediation Amount does not exceed $100,000
(the “
Individual Environmental Threshold
”), provided, however, that the Remediation Amount shall be deemed to meet the Individual Environmental Threshold in any of the following cases: (1) if any Asset is affected by more than one Linn Environmental Defect, and the aggregate sum of the Remediation Amounts for all Linn Environmental Defects affecting such Asset exceeds the Individual Environmental Threshold, or (2) in the case of multiple violations of the same requirement of an Environmental Law, whether or not affecting the same Asset, the aggregate sum of the Remediation Amounts for all such common Linn Environmental Defects exceeds the Individual Environmental Threshold, and (B) in no event shall there be any adjustments to the Initial Linn Agreed Value or Closing Linn Consideration Units under
Section 5.1(c)(i)
in respect of Linn Environmental Defects, and Linn shall not be responsible for any Remediation Amount that exceeds the Individual Environmental Threshold unless the sum of (X) the aggregate Linn Title Defect Amounts of all Linn Title Defects after setting off all Linn Title Benefit Amounts, and excluding any Linn Title Defect Amounts attributable to Linn Title Defects cured by Linn pursuant to
Section 4.2(c)(ii)
or
Section 4.2(e)
or Linn Title Defect Properties retained by Linn pursuant to
Section 4.2(d)(ii)
(it being acknowledged and agreed that the Initial Linn Agreed Value shall be reduced at Closing for the Allocated Value of the retained or excluded Linn Title Defect Properties) and (Y) the aggregate Remediation Amounts of all Linn Environmental Defects that exceed the Individual Environmental Threshold (excluding (1) any Remediation Amounts attributable to Linn Environmental Defects cured by Linn pursuant to
Section 5.1(b)(i)
or (2) Linn Environmental Defect Properties retained by Linn pursuant to
Section 5.1(c)(ii)
) (it being acknowledged and agreed that the Initial Linn Agreed Value shall be reduced at Closing for the Allocated Value of the retained or excluded Linn Environmental Defect Properties), exceeds the Linn Aggregate Deductible, in which case, the adjustments to the Initial Linn Agreed Value or Closing Linn Consideration Units under
Section 5.1(c)(i)
shall only be for the amount by which such total exceeds the Linn Aggregate Deductible.
(d)
Exclusive Remedy
. Except as provided in
Section 15.1
for a breach of Linn’s representations and warranties set forth in
Section 7.14
(and the corresponding representations in the certificate to be delivered by Linn at the Closing pursuant to (i)
Section 12.6
and (ii)
Section 4.2(e)(i)
with respect to Linn Additional Assets), and except with respect to Citizen’s and the Company’s right to indemnity under
Section 15.1
, and without prejudice to certain rights of Citizen to exclude certain Linn Assets under
Section 6.1
, the provisions set forth in
Section 5.1(c)
shall be the exclusive right and remedy of Citizen with respect to any Linn Environmental Defect with respect to any Linn Asset.
Section 5.2
Notice of Citizen Environmental Defects.
(a)
Citizen Environmental Defect Notices
. On or prior to the last day of the Review Period, Linn shall have the right to assert claims for Citizen Environmental Defects against Citizen in accordance with this
Section 5.2(a)
. To assert a Citizen Environmental Defect, Linn shall give written notice prior to the end of the Review Period to Citizen via email (with hardcopy sent for delivery the day after the end of the Review Period) meeting the requirements of this
Section 5.2(a)
(each, a “
Citizen Environmental Defect Notice
” and collectively, the “
Citizen Environmental Defect Notices
”). Without limiting any rights to indemnity pursuant to
Article 15
, any matters that may otherwise constitute Citizen Environmental Defects but that are not alleged in any Citizen Environmental Defect Notice prior to the expiration of the Review Period shall be deemed to have been waived by Linn. To be effective, each Citizen Environmental Defect Notice shall be in writing, and shall include (i) a reasonable description of each alleged Citizen Environmental Defect, (ii) the Citizen Assets or portion thereof affected thereby (each, a “
Citizen Environmental Defect Property
”), (iii) documentation, including any physical measurements or photographs, sufficient for Citizen to verify the existence of the asserted Citizen Environmental Defect(s), (iv) the Allocated Value of each Citizen Environmental Defect Property, (v) the Remediation Amount (itemized in reasonable detail) that Linn asserts is attributable to such Citizen Environmental Defect and the computations and information upon which Linn’s belief is based, and (vi) the specific Environmental Law that is applicable to the Environmental Defect. Linn’s calculation of the Remediation Amount included in the Citizen Environmental Defect Notice must describe in reasonable detail the Remediation proposed for the Environmental Condition that gives rise to the asserted Citizen Environmental Defect and identify all assumptions used by Linn in calculating the Remediation Amount, including the standards that Linn asserts must be met to comply with Environmental Laws.
(b)
Right to Cure; Right to Dispute
.
(i)
Citizen shall have the option, but not the obligation, to attempt to cure, or cause to be cured, at its sole cost and expense, any Citizen Environmental Defects prior to the expiration of the Environmental Cure Period.
(ii)
Prior to the Scheduled Closing Date, Citizen and Linn shall attempt to agree on all disputes related to the existence of any Citizen Environmental Defect the applicable Remediation Amount with respect thereto or the effect of any curative actions with respect to any Citizen Environmental Defect. With regard to any Citizen Asset that is subject to such an unresolved dispute as to Citizen Environmental Defects as of the Closing, and the alleged Citizen Remediation Amount is less than or equal to 90% of the Allocated Value of the
affected Citizen Asset or less than $100,000, then such Citizen Asset shall nevertheless be conveyed at Closing without adjustment to the Initial Citizen Agreed Value for such disputed Citizen Environmental Defect. Upon resolution of such dispute under
Section 5.3
, appropriate adjustments shall be made to the Initial Citizen Agreed Value in accordance with
Section 3.3
. With regard to any Citizen Asset that is subject to such an unresolved dispute as to Citizen Environmental Defects as of the Closing, and the alleged Remediation Amount is (A) greater than 90% of the Allocated Value of the affected Citizen Asset and (B) greater than $100,000, then such Citizen Asset shall be retained at Closing, and treated as a Citizen Excluded Asset hereunder. If it is ultimately determined pursuant to
Section 5.3
that the actual Remediation Amount burdening such Citizen Asset is less than or equal to 90% of the Allocated Value of such Citizen Asset or less than or equal to $100,000, within five (5) Business Days of such determination, Citizen shall convey such Citizen Asset to the Company pursuant to a Citizen Assignment and the Initial Citizen Agreed Value shall be adjusted in accordance with
Section 3.3
to reflect the contribution of such Citizen Asset to the Company.
(c)
Remedies for Citizen Environmental Defects
.
(i)
Subject to
Section 5.2(c)(ii)
, upon the final determination of the existence of any uncured Citizen Environmental Defect and Remediation Amount relating thereto (whether by written agreement between the Transacting Parties or under
Section 5.3
), the Initial Citizen Agreed Value shall be reduced by such Remediation Amount in full satisfaction of such Citizen Environmental Defect.
(ii)
Notwithstanding anything to the contrary herein, with respect to Citizen Environmental Defects for which the Citizen Environmental Defect Amount exceeds (A) 90% of the Allocated Value of the affected Citizen Environmental Defect Property and (B) $100,000, Citizen shall have the right but not the obligation to exclude, and Linn shall have the right to require Citizen to retain, the entirety of any Citizen Environmental Defect Property, together with all Citizen Assets associated with such Citizen Environmental Defect Property, in which event the Initial Citizen Agreed Value shall be reduced by the Allocated Value of such Citizen Environmental Defect Property in full satisfaction of such Citizen Environmental Defect, and such Citizen Environmental Defect Property, together with all Citizen Assets associated with such Citizen Environmental Defect Property, shall be deemed Citizen Excluded Assets hereunder for all purposes. Any such election must be made by a Transacting Party by notice to the other Transacting Party on or before the Closing, and failure to so make such an election shall be deemed a waiver by such Transacting Party of its rights under this
Section 5.2(c)(ii)
.
(iii)
Notwithstanding anything to the contrary in
Section 5.2(c)(i)
, (A) in no event shall there be any adjustments to the Initial Citizen Agreed Value or Closing Citizen Consideration Units under
Section 5.2(c)(i)
in respect of Citizen Environmental Defects, Linn shall not have the right to require Citizen to retain any Citizen Environmental Defect Property pursuant to
Section 5.2(c)(i)
and Citizen shall not be responsible for any individual Citizen Environmental Defect, for which the Remediation Amount does not exceed the Individual Environmental Threshold, provided, however, that the Remediation Amount shall be deemed to meet the Individual Environmental Threshold in any of the following cases: (1) if any Asset is affected by more than one Citizen Environmental Defect, and the aggregate sum of the Remediation Amounts for all Citizen Environmental Defects affecting such Asset exceeds the
Individual Environmental Threshold, or (2) in the case of multiple violations of the same requirement of an Environmental Law, whether or not affecting the same Asset, the aggregate sum of the Remediation Amounts for all such common Citizen Environmental Defects exceeds the Individual Environmental Threshold, and (B) in no event shall there be any adjustments to the Initial Citizen Agreed Value or Closing Citizen Consideration Units under
Section 5.2(c)(i)
in respect of Citizen Environmental Defects, and Citizen shall not be responsible for any Remediation Amount that exceeds the Individual Environmental Threshold unless the sum of (X) the aggregate Citizen Title Defect Amounts of all Citizen Title Defects after setting off all Citizen Title Benefit Amounts, and excluding any Citizen Title Defect Amounts attributable to Citizen Title Defects cured by Citizen pursuant to
Section 4.3(c)(ii)
or
Section 4.3(e)
or Citizen Title Defect Properties retained by Citizen pursuant to
Section 4.3(d)(ii)
(it being acknowledged and agreed that the Initial Citizen Agreed Value shall be reduced at Closing for the Allocated Value of the retained or excluded Citizen Title Defect Properties) and (Y) the aggregate Remediation Amounts of all Citizen Environmental Defects that exceed the Individual Environmental Threshold (excluding (1) any Remediation Amounts attributable to Citizen Environmental Defects cured by Citizen pursuant to
Section 5.2(b)(i)
or (2) Citizen Environmental Defect Properties retained by Citizen pursuant to
Section 5.2(c)(ii)
) (it being acknowledged and agreed that the Initial Citizen Agreed Value shall be reduced at Closing for the Allocated Value of the retained or excluded Citizen Environmental Defect Properties), exceeds the Citizen Aggregate Deductible, in which case, the adjustments to the Initial Citizen Agreed Value or Closing Citizen Consideration Units under
Section 5.2(c)(i)
shall only be for the amount by which such total exceeds the Citizen Aggregate Deductible.
(d)
Exclusive Remedy
. Except as provided in
Section 15.1
for a breach of Citizen’s representations and warranties set forth in
Section 8.14
(and the corresponding representations in the certificate to be delivered by Citizen at the Closing pursuant to (i)
Section 11.6
and (ii)
Section 4.3(e)(i)
with respect to Citizen Additional Assets), and except with respect to Linn’s and the Company’s right to indemnity under
Section 15.1
, and without prejudice to certain rights of Linn to exclude certain Citizen Assets under
Section 6.1
, the provisions set forth in
Section 5.2(c)
shall be the exclusive right and remedy of Linn with respect to any Citizen Environmental Defect with respect to any Citizen Asset.
Section 5.3
Environmental Disputes
. If Citizen and Linn fail to agree in writing on any dispute involving or relating to the existence of a Linn Environmental Defect or Citizen Environmental Defect or the Remediation Amount of a Linn Environmental Defect or a Citizen Environmental Defect (an “
Environmental Dispute
”), then such Environmental Dispute shall be exclusively and finally resolved pursuant to arbitration in accordance with this
Section 5.3
. Citizen and Linn agree to pursue any such arbitration in good faith and with reasonable diligence, with the goal of concluding the arbitration as soon as practicable. There shall be a single arbitrator, who shall be an environmental attorney with at least ten (10) years’ experience in the oil and gas industry involving properties in the State of Oklahoma, as selected by mutual agreement of Citizen and Linn within ten (10) days after either Citizen or Linn have provided the other with a notice of dispute invoking this
Section 5.3
, and absent such agreement, by the Dallas, Texas office of the American Arbitration Association (the “
Environmental Arbitrator
”). The arbitration proceeding shall be held in Oklahoma City, Oklahoma and shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association, to the extent such rules do not conflict with the terms of this
Section 5.3
, except that each
Transacting Party shall make a proposal to the Environmental Arbitrator as to how to resolve each such Environmental Dispute, and the Environmental Arbitrator shall select the proposal of the Transacting Party that is more consistent with the terms of this Agreement than the proposal of the other Transacting Party. The Environmental Arbitrator’s determination shall be made within thirty (30) days after submission of an Environmental Dispute and shall be final and binding, without right of appeal. The Environmental Arbitrator shall act as an expert for the limited purpose of determining the specific Environmental Disputes presented to him or her pursuant to this
Section 5.3
, and shall not consider, hear or decide any matters except the specific Environmental Disputes presented. In making his or her determination, the Environmental Arbitrator shall be bound by the rules set forth in this
Section 5.3
and, subject to the foregoing, may consider such other matters as in the opinion of the Environmental Arbitrator are necessary to make a proper determination. The Environmental Arbitrator may not award damages, interest or penalties to any Transacting Party or other Person with respect to any matter. The Transacting Parties shall each bear their own legal fees and other costs of presenting its case. The Transacting Party whose Environmental Dispute proposal is not selected by the Environmental Arbitrator shall bear all of the costs and expenses of the Environmental Arbitrator that relate to such Environmental Dispute.
Section 5.4
NORM; Wastes and other Substances
. Each Party acknowledges that each Transacting Party’s Assets have been used for exploration, development, production, gathering and transportation of oil and gas and there may be petroleum, produced water, wastes or other substances or materials located in, on or under such Assets or associated with such Assets. Equipment and sites included in the Assets may contain asbestos, NORM or other Hazardous Substances. NORM may affix or attach itself to the inside of wells, pipelines, materials and equipment as scale, or in other forms. The wells, materials and equipment located on the Assets or included in the Assets may contain NORM and other wastes or Hazardous Substances. NORM containing material and/or other wastes or Hazardous Substances may have come in contact with various environmental media, including, water, soils or sediment. Special procedures may be required for the assessment, remediation, removal, transportation or disposal of environmental media, wastes, asbestos, NORM and other Hazardous Substances from the Assets. For the avoidance of doubt (a) NORM shall not constitute the basis of a breach of Linn’s representations and warranties set forth in
Section 7.14
or Citizen’s representations and warranties set forth in
Section 8.14
, and (b) no Environmental Condition involving NORM shall constitute the basis of a Linn Environmental Defect or a Citizen Environmental Defect other than with respect to NORM on out-of-service equipment.
ARTICLE 6
ACCESS; CERTAIN DISCLAIMERS
Section 6.1
Access to Assets
.
(a)
From and after the Execution Date and up to and including the Closing Date (or earlier termination of this Agreement), but subject to the other provisions of this
Section 6.1
and obtaining any required consents of Third Parties, including Third Party operators of the Assets, each Contributing Party shall afford to the Other Party and its Representatives reasonable access, during normal business hours, to (i) such Contributing Party’s and its Affiliates’ employees, (ii) such Contributing Party’s Assets and (iii) all Records in such Contributing
Party’s or any of its Affiliates’ possession. All investigations and due diligence conducted by the Other Party or its Representatives shall be conducted at such Other Party’s sole cost, risk and expense and any conclusions made from any examination done by such Other Party or such Other Party’s Representative shall result from such Other Party’s own independent review and judgment. To the extent that there are any consents of Third Parties, including Third Party operators of the Assets, which are required to be obtained in connection with the access described in this
Section 6.1(a)
, each Contributing Party shall use commercially reasonable efforts to obtain such consents, provided that the Contributing Party shall not be obligated to pay any fee or provide any other consideration to obtain any such consent.
(b)
Each Other Party shall be entitled to conduct a Phase I environmental property assessment and regulatory compliance review with respect to the Contributing Party’s Assets. Each Contributing Party or its designee shall have the right to accompany the Other Party and its Representatives whenever such Other Party and its Representatives are on site on such Contributing Party’s Assets. Notwithstanding anything herein to the contrary, neither an Other Party nor its Representatives shall have access to, and shall not be permitted to conduct, any environmental due diligence requiring physical inspection (including any Phase I environmental property assessments) with respect to any Assets owned by a Contributing Party where such Contributing Party does not have the authority to grant access for such due diligence. An Other Party shall not be entitled to conduct Phase II Environmental Site Assessments in accordance with the American Society for Testing and Materials (A.S.T.M.) Standard Practice Environmental Site Assessments: Phase II Environmental Site Assessment Process (Publication Designation: E1903-11) (“
Phase II
”), any sampling, boring, drilling or other invasive investigation activities on or with respect to any of the Assets of the Contributing Party without the prior written consent of such Contributing Party, which Contributing Party may withhold such consent in its sole discretion. In the event such Contributing Party withholds its consent for: (A) Phase II, if Other Party’s Phase I inspection revealed a Recognized Environmental Concern (as determined under A.S.T.M. Publication Designation: E1527-13), or (B) such other invasive activities described in the foregoing sentence, such Other Party shall be entitled to: (i) with respect to Assets operated by such Contributing Party only, exclude the affected Assets and reduce the applicable Initial Agreed Value by the Allocated Value of such Assets, or (ii) reserve its right to assert an Environmental Defect.
(c)
Each Other Party shall coordinate its environmental property assessments and physical inspections of the Assets of the Contributing Party with such Contributing Party and all Third Party operators to minimize any inconvenience to or interruption of the conduct of business by such Contributing Party or such Third Party operators. Each Other Party shall abide by the Contributing Party’s, and any Third Party operator’s, safety rules, regulations and operating policies while conducting its due diligence evaluation of the Contributing Party’s Assets, including any environmental or other inspection or assessment of such Assets. Each Other Party hereby defends, indemnifies and holds harmless each of the operators of the Assets and the Group of the Contributing Party from and against any and all Liabilities arising out of, resulting from or relating to any field visit, environmental property assessment, or other due diligence activity conducted by such Other Party or any of its Representatives with respect to the Contributing Party’s Assets, even if such Liabilities arise out of or result from, SOLELY OR IN PART, THE SOLE, ACTIVE, PASSIVE, CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OR
VIOLATION OF LAW OF OR BY A MEMBER OF THE CONTRIBUTING PARTY’S GROUP, EXCEPTING ONLY IN THE CASE OF THIS SECTION 6.1(C) (I) LIABILITIES TO THE EXTENT CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF A MEMBER OF THE CONTRIBUTING PARTY’S GROUP AND (II) LIABILITIES THAT WERE EXISTING PRIOR TO SUCH INSPECTIONS.
(d)
Upon completion of an Other Party’s due diligence, such Other Party shall at its sole cost and expense and without any cost or expense to the Contributing Party or its Affiliates, (i) repair all damage done to the Contributing Party’s Assets in connection with such Other Party’s due diligence, (ii) restore the Contributing Party’s Assets to at least the approximate same or better condition than they were prior to commencement of such Other Party’s due diligence and (iii) remove all equipment, tools or other property brought onto the Contributing Party’s Assets in connection with such Other Party’s due diligence. Any disturbance to the Contributing Party’s Assets (including the leasehold associated therewith) resulting from the Other Party’s due diligence will be promptly corrected by such Other Party.
(e)
During all periods that an Other Party and/or any of its Representatives are on a Contributing Party’s Assets, such Other Party shall maintain, at its sole expense and with insurers reasonably satisfactory to the Contributing Party, policies of insurance of the types and in the amounts specified on
Schedule 6.1(e)
.
Section 6.2
Confidentiality
. Each Party acknowledges that, pursuant to its right of access to the employees of the other Party or its Affiliates, the other Party’s Records and the other Party’s Assets, such Party will become privy to confidential and other information of the other Party, including the results of the due diligence conducted under this Agreement, and that such confidential information shall be held confidential by such Party and its Representatives in accordance with the terms of the Confidentiality Agreement. If Closing should occur, the foregoing confidentiality restriction on a Party, including the Confidentiality Agreement, shall terminate (except as to (a) such portion of the other Party’s Assets that are not conveyed to the Company pursuant to the provisions of this Agreement, (b) the other Party’s Excluded Assets and (c) information related to assets other than the other Party’s Assets).
Section 6.3
Certain Disclaimers
.
(a)
EXCEPT AS AND TO THE LIMITED EXTENT EXPRESSLY SET FORTH IN, IN THE CASE OF LINN,
ARTICLE 7,
THE CERTIFICATE TO BE DELIVERED BY LINN AT THE CLOSING PURSUANT TO
SECTION 12.6
OR WITH RESPECT TO THE LINN ADDITIONAL ASSETS PURSUANT TO
SECTION 4.2(E)(I)
AND THE SPECIAL WARRANTY OF TITLE IN THE LINN ASSIGNMENT, AND IN THE CASE OF CITIZEN,
ARTICLE 8
, THE CERTIFICATE TO BE DELIVERED BY CITIZEN AT THE CLOSING PURSUANT TO
SECTION 11.6
OR WITH RESPECT TO THE CITIZEN ADDITIONAL ASSETS PURSUANT TO
SECTION 4.3(E)(I)
AND THE SPECIAL WARRANTY OF TITLE IN THE CITIZEN ASSIGNMENT, (i) EACH PARTY MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS, STATUTORY OR IMPLIED, AND (ii) SUCH PARTY EXPRESSLY DISCLAIMS ALL LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, STATEMENT OR INFORMATION MADE OR COMMUNICATED (ORALLY OR IN WRITING) TO THE OTHER PARTIES’ GROUPS
(INCLUDING, ANY OPINION, INFORMATION, PROJECTION OR ADVICE THAT MAY HAVE BEEN PROVIDED BY ANY OFFICER, DIRECTOR, EMPLOYEE, AGENT, CONSULTANT, REPRESENTATIVE OR ADVISOR OF ANY SUCH PERSONS).
(b)
EXCEPT AS AND TO THE LIMITED EXTENT EXPRESSLY SET FORTH IN, IN THE CASE OF LINN,
ARTICLE 7
, THE CERTIFICATE TO BE DELIVERED BY LINN AT THE CLOSING PURSUANT TO
SECTION 12.6
OR WITH RESPECT TO THE LINN ADDITIONAL ASSETS PURSUANT TO
SECTION 4.2(E)(I)
AND THE SPECIAL WARRANTY OF TITLE IN THE LINN ASSIGNMENT, AND IN THE CASE OF CITIZEN,
ARTICLE 8
, THE CERTIFICATE TO BE DELIVERED BY CITIZEN AT THE CLOSING PURSUANT TO
SECTION 11.6
OR WITH RESPECT TO THE CITIZEN ADDITIONAL ASSETS PURSUANT TO
SECTION 4.3(E)(I)
AND THE SPECIAL WARRANTY OF TITLE IN THE CITIZEN ASSIGNMENT, AND WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EACH TRANSACTING PARTY EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, AS TO (i) TITLE TO ANY OF ITS ASSETS, (ii) THE CONTENTS, CHARACTER OR NATURE OF ANY REPORT OF ANY PETROLEUM ENGINEERING CONSULTANT OR ANY ENGINEERING, GEOLOGICAL OR SEISMIC DATA OR INTERPRETATION, RELATING TO ITS ASSETS, (iii) THE QUANTITY, QUALITY OR RECOVERABILITY OF HYDROCARBONS IN OR FROM ITS ASSETS, (iv) ANY ESTIMATES OF THE VALUE OF ITS ASSETS OR FUTURE REVENUES GENERATED BY ITS ASSETS, (v) THE PRODUCTION OF HYDROCARBONS FROM ITS ASSETS, (vi) THE MAINTENANCE, REPAIR, CONDITION, QUALITY, SUITABILITY, DESIGN OR MARKETABILITY OF ITS ASSETS, (vii) THE CONTENT, CHARACTER OR NATURE OF ANY INFORMATION MEMORANDUM, REPORTS, BROCHURES, CHARTS OR STATEMENTS PREPARED BY SUCH PARTY OR THIRD PARTIES WITH RESPECT TO ITS ASSETS, (viii) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE AVAILABLE TO THE OTHER PARTIES’ GROUPS IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY DISCUSSION OR PRESENTATION RELATING THERETO AND (ix) ANY IMPLIED OR EXPRESS WARRANTY OF FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT. EXCEPT AS AND TO THE LIMITED EXTENT EXPRESSLY SET FORTH IN, IN THE CASE OF LINN,
ARTICLE 7
, THE CERTIFICATE TO BE DELIVERED BY LINN AT THE CLOSING PURSUANT TO
SECTION 12.6
OR WITH RESPECT TO THE LINN ADDITIONAL ASSETS PURSUANT TO
SECTION 4.2(E)(I)
AND THE SPECIAL WARRANTY OF TITLE IN THE LINN ASSIGNMENT, AND IN THE CASE OF CITIZEN,
ARTICLE 8
, THE CERTIFICATE TO BE DELIVERED BY CITIZEN AT THE CLOSING PURSUANT TO
SECTION 11.6
OR WITH RESPECT TO THE CITIZEN ADDITIONAL ASSETS PURSUANT TO
SECTION 4.3(E)(I)
AND THE SPECIAL WARRANTY OF TITLE IN THE CITIZEN ASSIGNMENT, EACH TRANSACTING PARTY FURTHER DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, OF MERCHANTABILITY, FREEDOM FROM LATENT VICES OR DEFECTS, FITNESS FOR A PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS OF ANY OF ITS ASSETS, RIGHTS OF A PURCHASER UNDER APPROPRIATE STATUTES TO CLAIM DIMINUTION OF CONSIDERATION OR RETURN OF THE CONSIDERATION. IT IS EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES THAT EXCEPT AS AND TO THE LIMITED EXTENT EXPRESSLY SET FORTH IN, IN THE CASE OF LINN,
ARTICLE 7
, THE CERTIFICATE TO BE DELIVERED BY LINN AT THE CLOSING PURSUANT TO
SECTION 12.6
, AND
ARTICLE 15
OR WITH RESPECT TO THE LINN ADDITIONAL ASSETS PURSUANT TO
SECTION 4.2(E)(I)
AND THE SPECIAL WARRANTY OF TITLE IN THE LINN ASSIGNMENT, AND IN THE CASE OF CITIZEN,
ARTICLE 8
, THE CERTIFICATE TO BE DELIVERED BY CITIZEN AT THE CLOSING PURSUANT TO
SECTION 11.6
, AND
ARTICLE 15
OR WITH RESPECT TO THE CITIZEN ADDITIONAL ASSETS PURSUANT TO
SECTION 4.3(E)(I)
AND THE SPECIAL WARRANTY OF TITLE IN THE CITIZEN ASSIGNMENT, THE COMPANY SHALL BE DEEMED TO BE OBTAINING SUCH PARTY’S ASSETS IN THEIR PRESENT STATUS, CONDITION AND STATE OF REPAIR, “AS IS” AND “WHERE IS” WITH ALL FAULTS OR DEFECTS (KNOWN OR UNKNOWN, LATENT, DISCOVERABLE OR UNDISCOVERABLE), AND THAT THE OTHER PARTIES’ GROUPS HAVE MADE OR CAUSED TO BE MADE SUCH INSPECTIONS OF THE ASSETS AS SUCH PERSONS DEEM APPROPRIATE.
(c)
EXCEPT AS AND TO THE LIMITED EXTENT EXPRESSLY SET FORTH IN, IN THE CASE OF LINN,
SECTION 7.14
AND THE CORRESPONDING REPRESENTATIONS IN THE CERTIFICATE TO BE DELIVERED BY LINN AT THE CLOSING PURSUANT TO
SECTION 12.6
OR WITH RESPECT TO THE LINN ADDITIONAL ASSETS PURSUANT TO
SECTION 4.2(E)(I)
, AND IN THE CASE OF CITIZEN,
SECTION 8.14
AND THE CORRESPONDING REPRESENTATION IN THE CERTIFICATE TO BE DELIVERED BY CITIZEN AT THE CLOSING PURSUANT TO
SECTION 11.6
OR WITH RESPECT TO THE CITIZEN ADDITIONAL ASSETS PURSUANT TO
SECTION 4.3(E)(I)
, NO PARTY HAS AND WILL NOT MAKE ANY REPRESENTATION OR WARRANTY REGARDING ANY MATTER OR CIRCUMSTANCE RELATING TO ENVIRONMENTAL LAWS, THE RELEASE OF HAZARDOUS SUBSTANCES INTO THE ENVIRONMENT OR THE PROTECTION OF HUMAN HEALTH, SAFETY, NATURAL RESOURCES OR THE ENVIRONMENT, OR ANY OTHER ENVIRONMENTAL CONDITION OF ITS ASSETS, AND NOTHING IN THIS AGREEMENT OR OTHERWISE SHALL BE CONSTRUED AS SUCH A REPRESENTATION OR WARRANTY, AND SUBJECT TO THE OTHER PARTIES’ LIMITED RIGHTS AS EXPRESSLY SPECIFIED IN THIS AGREEMENT FOR A BREACH OF SUCH PARTY’S REPRESENTATION SET FORTH IN, IN THE CASE OF LINN,
SECTION 7.14
, IN THE CORRESPONDING REPRESENTATIONS IN THE CERTIFICATE TO BE DELIVERED BY LINN AT THE CLOSING PURSUANT TO
SECTION 12.6
, AND LINN’S RIGHT TO INDEMNIFICATION UNDER
ARTICLE 15
, OR WITH RESPECT TO THE LINN ADDITIONAL ASSETS PURSUANT TO
SECTION 4.2(E)(I)
, AND IN THE CASE OF CITIZEN,
SECTION 8.14
AND THE CORRESPONDING REPRESENTATION IN THE CERTIFICATE TO BE DELIVERED BY CITIZEN AT THE CLOSING PURSUANT TO
SECTION 11.6
, AND CITIZEN’S RIGHT TO INDEMNIFICATION UNDER
ARTICLE 15
, OR WITH RESPECT TO THE CITIZEN ADDITIONAL ASSETS PURSUANT TO
SECTION 4.3(E)(I)
, THE COMPANY SHALL BE DEEMED TO BE OBTAINING EACH TRANSACTING PARTY’S ASSETS “AS IS” AND “WHERE IS” WITH ALL FAULTS FOR PURPOSES OF THEIR ENVIRONMENTAL CONDITION AND THAT EACH PARTY HAS MADE OR CAUSED TO BE MADE SUCH ENVIRONMENTAL INSPECTIONS OF THE OTHER PARTY’S ASSETS AS SUCH PARTY DEEMS APPROPRIATE.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF LINN
On the Execution Date and on the Closing Date, Linn represents and warrants to Citizen and the Company as follows:
Section 7.1
Organization, Existence and Qualification
. Each of LEH and LOI is a limited liability company, duly formed, validly existing and in good standing under the Laws of the State of Delaware and is duly qualified to do business in each jurisdiction in which the nature of its business as now conducted makes such qualification necessary.
Section 7.2
Authority, Approval and Enforceability
. Linn has full power and authority to enter into and perform this Agreement, the Transaction Documents to which it is a party and the transactions contemplated herein and therein. The execution, delivery and performance by Linn of this Agreement and the Transaction Documents to which Linn is a party have been duly and validly authorized and approved by all necessary action on the part of Linn. This Agreement is, and the Transaction Documents to which Linn is a party, when executed and delivered by Linn, will be, the valid and binding obligations of Linn, and enforceable against it, in accordance with their respective terms, subject to the effects of bankruptcy, insolvency, reorganization, moratorium and similar Laws, as well as to principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
Section 7.3
No Conflicts
. Assuming the receipt of all applicable consents and approvals in connection with the transactions contemplated hereby and the waiver of, or compliance with, all Linn Preferential Purchase Rights applicable to the transactions contemplated hereby, the execution, delivery and performance by Linn of this Agreement, the Transaction Documents to which it is a party and the consummation of the transactions contemplated herein and therein will not (a) conflict with or result in a breach of any provisions of the organizational documents of Linn, (b) result in a default or the creation of any Encumbrance on the Linn Assets (other than a Linn Permitted Encumbrance) or give rise to any right of termination, cancellation or acceleration under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license or Linn Contract, or (c) violate any Law applicable to Linn or any of the Linn Assets, except, in the case of clause (b), where such default, termination, cancellation, or acceleration would not have a material adverse effect upon the Linn Assets or the ability of Linn to consummate the transactions contemplated by this Agreement.
Section 7.4
Bankruptcy
. Other than resolution of claims proceedings under the Linn Energy, LLC (the predecessor to Linn’s parent company), Chapter 11 case in the U.S. Bankruptcy Court in the Southern District of Texas (Linn Energy, LLC, et al., Case No. 16-60040), there are no bankruptcy, reorganization or receivership proceedings pending, being contemplated by or, to such Linn’s Knowledge, threatened in writing against Linn.
Section 7.5
Brokers’ Fees
. Linn has not incurred any liability, contingent or otherwise, for brokers’ or finders’ fees relating to the transactions contemplated by this Agreement for which the Company or Citizen shall have any responsibility.
Section 7.6
Litigation
. Except as set forth on
Schedule 7.6
, as of the Execution Date, there is no suit, action or litigation by any Person by or before any Governmental Body, and no legal, administrative or arbitration proceeding (in each case) pending or, to Linn’s Knowledge, threatened in writing (a) against Linn or any Affiliate of Linn, (b) that relates to Linn’s ownership of the Linn Assets or otherwise relates to the Linn Assets, or (c) that would be reasonably likely to have a material adverse effect upon the ability of Linn to consummate the transactions contemplated by this Agreement.
Section 7.7
No Violation of Laws
. As of the Execution Date and, subject to any changes acknowledged in the Linn Closing Certificate for matters occurring between the Execution Date and Closing only, as of the Closing, Linn is not in violation of any applicable material Laws with respect to its ownership and operation of the Linn Assets in any material respect. This
Section 7.7
does not include any matters with respect to Tax Laws or Environmental Laws, Linn’s representations as to such matters being addressed exclusively in
Section 7.8
and
Section 7.14
, respectively. For purposes of this
Section 7.7
, a Law is a “material Law” to the extent a breach of such Law would be likely to have material impact on Linn’s ability to own, operate or develop a Linn Asset affected by the breach of such Law.
Section 7.8
Taxes.
(a)
All Asset Taxes that have become due and payable with respect to the Linn Assets have been duly paid, and all Tax Returns relating to Asset Taxes required to be filed with respect to the Linn Assets have been duly and timely filed. All such Tax Returns are true, correct and complete in all material respects.
(b)
There are not currently in effect any extensions or waivers of any statute of limitations of any jurisdiction regarding the assessment or collection of any Asset Taxes of Linn and no request for such waiver or extension is pending.
(c)
There are no claims, assessments, demands, actions, suits, proceedings or audits asserted or now in progress, or to Linn’s Knowledge, threatened, against Linn with respect to Asset Taxes relating to the Linn Assets.
(d)
There are no liens on any of the Linn Assets attributable to Taxes except for liens for current period Taxes that are not yet due and payable.
(e)
Other than as set forth in
Schedule 7.8
, none of the Linn Assets is subject to any tax partnership agreement or is otherwise treated, or required to be treated, as held in an arrangement requiring a partnership income Tax Return to be filed under Subchapter K of Chapter 1 of Subtitle A of the Code.
(f)
All of the Linn Assets that are subject to property Tax have been properly listed and described on the property Tax rolls for all periods prior to and including the Closing Date and no portion of such assets constitutes omitted property for property Tax purposes.
(g)
Linn is not a “foreign person” within the meaning of Section 1445 of the Code.
Section 7.9
Accredited Investor
. Linn is an “accredited investor,” as such term is defined in Regulation D of the Securities Act of 1933, as amended, and will acquire its portion of the equity interests in the Company for its own account and not with a view to a sale or distribution thereof in violation of the Securities Act of 1933, as amended, and the rules and regulations thereunder, any applicable state blue sky Laws or any other applicable securities Laws.
Section 7.10
Independent Evaluation
. Linn is sophisticated in the evaluation, purchase, ownership and operation of oil and gas properties and related facilities, including equity interests of Persons operating such businesses. In making its decision to enter into this Agreement and to consummate the transactions contemplated hereby, Linn has relied or shall rely solely on the representations, warranties and covenants set forth herein and in the Transaction Documents and its own independent investigation and evaluation of the Citizen Assets and Units in the Company and the advice of its own legal, Tax, economic, environmental, engineering, geological and geophysical advisors and the express provisions of this Agreement and not on any comments, statements, projections or other materials made or given by any representatives or consultants or advisors of Citizen.
Section 7.11
Linn Consents
. Except (a) as set forth on
Schedule 7.11
, (b) for Customary Post-Closing Consents, and (c) for any Linn Preferential Purchase Rights, there are no prohibitions on assignment or requirements to obtain consents from Third Parties, in each case, that would be applicable in connection with the transfer of the Linn Assets to the Company or the consummation of the transactions contemplated by this Agreement by Linn.
Section 7.12
Linn Preferential Purchase Rights
. Except as set forth on
Schedule 7.12
, there are no preferential purchase rights, rights of first refusal or other similar rights that are applicable to the transfer of the Linn Assets to the Company in connection with the transactions contemplated hereby (each, a “
Linn
Preferential Purchase Right
”).
Section 7.13
Material Contracts
.
(a)
Schedule 7.13(a)
describes the following Linn Contracts:
(i)
all Linn Contracts that constitute farmout, farmin, development agreements, joint venture and exploration agreements, participation agreements or similar agreements where (A) the primary obligation thereunder has not been fully performed or expired
(and for purposes hereof, the term “
primary obligation
” shall mean and include any commitment to pay amounts (other than standard indemnification obligations related to actions or operations taken or conducted during the term of such agreement), any remaining period for any party thereto to elect or exercise options relating to earning, acquiring, assigning, or forfeiting interests in properties, any remaining right to participate in proposed operations, or any remaining right to alternate, assume or otherwise transfer operatorship) or (B) there are any remaining drilling or development obligations on the part of Linn (or after the Closing, the Company) for which the failure to fulfill such obligations will result in a breach of such Linn Contract or the reversion of or the obligation to transfer an interest in or operatorship of a Linn Well or Linn Lease to a counterparty under such Linn Contract;
(ii)
all Linn Contracts that include non-competition restrictions or area of mutual interest provisions or other similar restrictions on doing business, in each case, that remain in effect as of the Execution Date;
(iii)
all Linn Contracts that are Hydrocarbon production sales or purchase, gathering, transportation, marketing, supply, exchange and processing agreements relating to the Linn Assets, other than such agreements that are terminable on upon not more than ninety (90) days’ notice without penalty;
(iv)
all Linn Contracts with any Affiliate of Linn that will not be terminated as of Closing;
(v)
all Linn Contracts burdening the Linn Assets that could reasonably be expected to obligate the Company to expend in excess of $500,000 in any calendar year;
(vi)
all Linn Contracts burdening the Linn Assets that could reasonably be expected to result in aggregate revenues to the Company in excess of $500,000 in any calendar year;
(vii)
all Linn Contracts providing for a call upon, option to purchase or similar right under any agreements with respect to the Hydrocarbons produced from the Linn Assets;
(viii)
all Linn Contracts under which Linn (or, after Closing, the Company) is or may be obligated to transfer, assign or convey any right, title or interest in any Linn Asset;
(ix)
any Linn Contract that is an indenture, mortgage, loan, credit or sale-leaseback or other similar Contract;
(x)
all Linn Contracts that constitute seismic or geophysical Contracts or commitment to acquire, generate or develop seismic data;
(xi)
all Linn Contracts for the sale of gas containing a take or pay, advance payments, prepayment or similar provision or requiring gas to be gathered, delivered, processed or transported without then or thereafter receiving full payment therefore;
(xii)
all term assignments covering Linn Leases, unless such interest is held past its primary term (provided that the primary term provided in such term assignment pursuant to which Linn or its predecessor-in-interest acquired such Linn Lease shall be deemed to be the primary term for purposes of this item (xii)); and
(xiii)
all Linn Contracts that are joint operating agreements or unit operating agreements applicable to the Linn Assets.
The Linn Contracts described in
Sections 7.13(a)(i)
through
Section 7.13(a)(xiii)
above are collectively referred to herein as the “
Linn Material Contracts
”.
(b)
Except as disclosed in
Schedule 7.13(b)
, (i) Linn is not in material breach or default under any of the Linn Material Contracts, (ii) to Linn’s Knowledge, no other party to any such Linn Material Contract is in material breach or default under any such Linn Material Contract, and (iii) each Linn Material Contract is in full force and effect, in accordance with their stated terms (as such terms have been amended, to the extent the amendments are reflected
Schedule 7.13(a)
).
(c)
There are no Hedge Contracts of Linn in existence as of the Closing Date that will be binding on the Linn Assets after Closing.
(d)
None of the joint operating agreements or unit operating agreements that are Linn Material Contracts: (i) cover more than 640 acres, (ii) contain or provide for any alternating operatorship or alternating designation of operator, (iii) provide for any drilling commitments or drilling obligations that have not been satisfied, other than those relating to an AFE identified on
Schedule 7.18
, or (iv) provide for any disproportionate sharing of costs, revenues or share of production (other than to the extent relating to default provisions or non-consent elections).
Section 7.14
Environmental Matters
. Except as set forth on
Schedule 7.14
:
(a)
As of the Execution Date: (i) there is no pending notice or lawsuit, administrative action or other proceeding by a Governmental Body with respect to the Linn Assets which alleges a violation of or liability under any Environmental Laws, in each case, for which corrective actions have yet to be completed and/or any asserted fine or monetary damage has not been paid or otherwise finally resolved, and to Linn’s Knowledge, no such notice or lawsuit, administrative action or other proceeding has been threatened in writing; and (ii) there is no pending notice or lawsuit, administrative action or other proceeding by a Governmental Body asserting the need for investigation or remediation of an Environmental Condition or of any spill or release of Hazardous Substances or Hydrocarbons with respect to any of the Linn Assets, in each case, for which corrective actions have yet to be completed and/or any asserted fine or monetary damage has not been paid or otherwise finally resolved, and to Linn’s Knowledge, no such notice or lawsuit, administrative action or other proceeding has been threatened in writing. During the period between the day that is 18 months prior to the Execution Date and the Execution Date: (I) there has been no notice or lawsuit, administrative action, notice of intent to file a citizen suit or other proceeding initiated by a Person that is not a Governmental Body with respect to the Linn Assets which alleges a violation of or liability under any Environmental Laws, in each case, for which corrective actions have yet to be completed and/or any asserted fine or monetary damage has not been paid or otherwise finally resolved, and to Linn’s Knowledge, no such notice or lawsuit, administrative action, notice of intent to file a citizen suit or other proceeding has been threatened in writing; and (II) there has been no notice or lawsuit, administrative action, notice of intent to file a citizen suit or other proceeding by a Person that is not a Governmental Body asserting the need for investigation or remediation of an Environmental Condition or of any spill or release of Hazardous Substances or Hydrocarbons with respect to any of the Linn Assets, in each case, for which corrective actions have yet to be completed and/or any asserted fine or monetary damage has not been paid or otherwise finally resolved, and to Linn’s Knowledge, no such notice or lawsuit, administrative action, notice of intent to file a citizen suit or other proceeding has been threatened in writing.
(b)
Linn has made available to Citizen complete and correct copies of all final Third Party reports and studies prepared with respect to the environmental condition of the Linn Assets since January 1, 2012.
Section 7.15
Non-Consent Elections
. As of the Execution Date, except as set forth on
Schedule 7.15
, Linn has not elected (and was not deemed to have elected) not to participate in any operation or activity proposed with respect to the Linn Assets. To Linn’s Knowledge,
Schedule 7.15
contains a complete and accurate list of (i) the status of any “payout” balance, as of the Effective Time, for the Linn operated Linn Wells subject to a reversion or other adjustment at some level of cost recovery or payout (or passage of time or other event other than termination of a Linn Lease by its terms); and (ii) to the extent received by Linn from the applicable operator as of the Execution Date, the payout status of all Linn Wells which are not operated by Linn and are subject to a reversion or other adjustment at some level of cost recovery or payout.
Section 7.16
Royalties
. Except for Burdens associated with Linn Suspense Funds, all Burdens with respect to the Linn Assets have been paid in all material respects, or if not paid, are being contested in good faith in the normal course of business.
Schedule 7.16
sets forth all Burdens with respect to the Linn Assets that are being contested and all items that are being held in suspense as of the Effective Time.
Section 7.17
Imbalances
.
Schedule 7.17
sets forth all material Imbalances associated with the Linn Assets as of the dates set forth in such Schedule.
Section 7.18
Current Commitments
.
Schedule 7.18
sets forth, as of the date of this Agreement, all authorizations for expenditures (“
AFEs
”) in excess of $250,000 (net to Linn’s interest) relating to the Linn Assets to drill or rework wells or for other capital expenditures for which all of the activities anticipated in such AFEs or commitments have not been completed by the Closing Date.
Section 7.19
Wells
. Except as set forth on
Schedule 7.19
:
(a)
To Linn’s Knowledge, all of the Linn Wells have been drilled and completed in all material respects within the limits permitted by all applicable Linn Leases and Applicable Contracts.
(b)
To Linn’s Knowledge, there are not any Linn Wells that (i) Linn is currently obligated by any Laws or contract to currently plug, dismantle and/or abandon; or (ii) have been plugged, dismantled or abandoned in a manner that does not comply in all material respects with applicable Laws.
Section 7.20
No Prepayments; No Calls on Production
. Linn is not obligated by virtue of any take-or-pay payment, advance payment or other similar payment (other than gas balancing arrangements) to deliver Hydrocarbons, or proceeds from the sale thereof, attributable to the Linn Assets at some future time without receiving payment therefor at or after the time of delivery. Except as expressly described on
Schedule 7.20
, (i) Linn has not granted to any Third Party any calls on Hydrocarbons allocable to the Linn Assets, nor any optional rights to purchase
the same, and (ii) Linn has no Knowledge of any other calls on Hydrocarbons allocable to the Linn Assets, nor any optional rights to purchase the same.
Section 7.21
Compliance with Permits.
(a)
Linn or an Affiliate of Linn has obtained and is maintaining all material Permits that are necessary or required for the ownership, development and operation of that portion of the Linn Assets that are operated by Linn or an Affiliate of Linn; and
(b)
To Linn’s Knowledge, all Third Party operators of the Linn Assets have obtained and are maintaining all material Permits that are necessary or required for the ownership, development and operation of that portion of the Linn Assets that are operated by Third Parties.
Section 7.22
Condemnation
. As of the Execution Date, there is no actual or, to Linn’s Knowledge, threatened in writing taking (whether permanent, temporary, whole or partial) of any part the Linn Assets by reason of condemnation.
Section 7.23
Certain Linn Employees
.
Linn represents and warrants that, with respect to the Linn Employees providing technical, engineering, geoscience or land services with respect to the Linn Assets, (a) there are no labor agreements, collective bargaining agreements, or other labor contracts applicable to any such Linn Employees to which Linn or its Affiliate is a party or is bound; (b) no such Linn Employees are represented by any labor organization, union, or group of employees, and no labor organization or union; (c) there are no current or, to Linn’s Knowledge, threatened representational campaigns or other organizing activities by any union seeking to become the collective bargaining representative of any such Linn Employees, and there is no union or labor organization representation question or certification petition against Linn or its Affiliate pending or threatened before the NLRB or any similar Governmental Body; (d) neither Linn nor its Affiliate is currently experiencing, and has not in the previous four (4) years experienced, a labor strike, material labor dispute, work stoppage, work slowdown, lockout, or similar matter involving any Linn Employees providing technical, engineering, geoscience or land services with respect to the Linn Assets; and (e) neither Linn nor its Affiliate is currently engaged in any unfair labor practices regarding any such Linn Employees and there are no pending or threatened proceeding involving any unfair labor practices regarding such Linn Employees before the NLRB or any similar Governmental Body.
Section 7.24
Equipment; No Related Assets
. With respect to the Linn Equipment, Hydrocarbon production and other personal property included in the Linn Assets, Linn’s title as of the Execution Date is, and as of the Closing Date shall be transferred to the Company free and clear of Encumbrances other than Permitted Encumbrances. Other than with regard to the Linn Excluded Assets and the Linn Assets, neither Linn, nor any Affiliate of Linn, owns, leases or holds any other real, personal or mixed property interests that have been primarily used or held for use with the Linn Assets or would be necessary for the Company to have in order for the Company to own, operate, develop and maintain the Linn Assets immediately after Closing in a manner consistent with the ownership, operation, development and maintenance of the Linn Assets by Linn (and its Affiliate predecessors in interest) during the period immediately prior to Closing.
Section 7.25
Bonds
.
Schedule 7.25
is a complete and accurate list in all material respects of all cash deposits, guarantees, letters of credit, treasury securities, surety bonds and other forms of credit assurances or credit support provided by Linn or any Affiliate of Linn in support of the obligations of Linn or any Affiliate of Linn to any Governmental Body, contract counterparty or other Person by Linn or any Affiliate of Linn related to the ownership or operation of the Linn Assets.
Section 7.26
Midstream Dedications
. Except as set forth in
Schedule 7.26
, none of the Linn Assets is subject to a contract containing a dedication of acreage or minimum volume requirements.
Section 7.27
Area of Mutual Interest and Other Agreements
. Except as set forth in
Schedule 7.27
, no Linn Asset is subject to (or has related to it) any area of mutual interest agreements as of the Execution Date. Except as set forth in
Schedule 7.27
, no Linn Asset is subject to (or has related to it) any farm-out or farm-in agreement under which any party thereto is entitled to receive assignments not yet made, or could earn additional assignments after the Effective Time.
Section 7.28
Linn Casualty Loss
. Except as set forth in
Schedule 7.28
, during the period commencing on the Effective Time and ending on the Execution Date, there has been no Linn Casualty Loss affecting any of the Linn Assets.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES OF CITIZEN
On the Execution Date and on the Closing Date, Citizen represents and warrants to Linn and the Company as follows:
Section 8.1
Organization, Existence and Qualification
. Citizen is a limited liability company, duly formed, validly existing and in good standing under the Laws of the State of Oklahoma and is duly qualified to do business in each jurisdiction in which the nature of its business as now conducted makes such qualification necessary.
Section 8.2
Authority, Approval and Enforceability
. Citizen has full power and authority to enter into and perform this Agreement, the Transaction Documents to which it is a party and the transactions contemplated herein and therein. The execution, delivery and performance by Citizen of this Agreement and the Transaction Documents to which Citizen is a party have been duly and validly authorized and approved by all necessary action on the part of Citizen. This Agreement is, and the Transaction Documents to which Citizen is a party, when executed and delivered by Citizen, will be, the valid and binding obligations of Citizen, and enforceable against it, in accordance with their respective terms, subject to the effects of bankruptcy, insolvency, reorganization, moratorium and similar Laws, as well as to principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
Section 8.3
No Conflicts
. Assuming the receipt of all applicable consents and approvals in connection with the transactions contemplated hereby and the waiver of, or compliance with, all Citizen Preferential Purchase Rights applicable to the transactions
contemplated hereby, the execution, delivery and performance by Citizen of this Agreement, the Transaction Documents to which it is a party and the consummation of the transactions contemplated herein and therein will not (a) conflict with or result in a breach of any provisions of the organizational documents of Citizen, (b) result in a default or the creation of any Encumbrance on the Citizen Assets (other than a Citizen Permitted Encumbrance) or give rise to any right of termination, cancellation or acceleration under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license or Citizen Contract, or (c) violate any Law applicable to Citizen or any of the Citizen Assets, except, in the case of clause (b), where such default, termination, cancellation, or acceleration would not have a material adverse effect upon the Citizen Assets or the ability of Citizen to consummate the transactions contemplated by this Agreement.
Section 8.4
Bankruptcy
. There are no bankruptcy, reorganization or receivership proceedings pending, being contemplated by or, to such Citizen’s Knowledge, threatened in writing against Citizen.
Section 8.5
Brokers’ Fees
. Citizen has not incurred any liability, contingent or otherwise, for brokers’ or finders’ fees relating to the transactions contemplated by this Agreement for which the Company or Linn shall have any responsibility.
Section 8.6
Litigation
. Except as set forth on
Schedule 8.6
, as of the Execution Date, there is no suit, action or litigation by any Person by or before any Governmental Body, and no legal, administrative or arbitration proceeding (in each case) pending or, to Citizen’s Knowledge, threatened in writing (a) against Citizen or any Affiliate of Citizen, (b) that relates to Citizen’s ownership of the Citizen Assets or otherwise relates to the Citizen Assets, or (c) that would be reasonably likely to have a material adverse effect upon the ability of Citizen to consummate the transactions contemplated by this Agreement.
Section 8.7
No Violation of Laws
. As of the Execution Date and, subject to any changes acknowledged in the Citizen Closing Certificate for matters occurring between the Execution Date and Closing only, as of the Closing, Citizen is not in violation of any applicable material Laws with respect to its ownership and operation of the Citizen Assets in any material respect. This
Section 8.7
does not include any matters with respect to Tax Laws or Environmental Laws, Citizen’s representations as to such matters being addressed exclusively in
Section 8.8
and
Section 8.14
, respectively. For purposes of this
Section 8.7
, a Law is a “material Law” to the extent a breach of such Law would be likely to have material impact on Citizen’s ability to own, operate or develop a Citizen Asset affected by the breach of such Law.
Section 8.8
Taxes
.
(a)
All Asset Taxes that have become due and payable with respect to the Citizen Assets have been duly paid, and all Tax Returns relating to Asset Taxes required to be filed with respect to the Citizen Assets have been duly and timely filed. All such Tax Returns are true, correct and complete in all material respects.
(b)
There are not currently in effect any extensions or waivers of any statute of limitations of any jurisdiction regarding the assessment or collection of any Asset Taxes of Citizen and no request for such waiver or extension is pending.
(c)
There are no claims, assessments, demands, actions, suits, proceedings or audits asserted or now in progress, or to Citizen’s Knowledge, threatened, against Citizen with respect to Asset Taxes relating to the Citizen Assets.
(d)
There are no liens on any of the Citizen Assets attributable to Taxes except for liens for current period Taxes that are not yet due and payable.
(e)
Other than as set forth in
Schedule 8.8
, none of the Citizen Assets is subject to any tax partnership agreement or is otherwise treated, or required to be treated, as held in an arrangement requiring a partnership income Tax Return to be filed under Subchapter K of Chapter 1 of Subtitle A of the Code.
(f)
All of the Citizen Assets that are subject to property Tax have been properly listed and described on the property Tax rolls for all periods prior to and including the Closing Date and no portion of such assets constitutes omitted property for property Tax purposes.
(g)
Citizen is not a “foreign person” within the meaning of Section 1445 of the Code.
Section 8.9
Accredited Investor
. Citizen is an “accredited investor,” as such term is defined in Regulation D of the Securities Act of 1933, as amended, and will acquire its portion of the equity interests in the Company for its own account and not with a view to a sale or distribution thereof in violation of the Securities Act of 1933, as amended, and the rules and regulations thereunder, any applicable state blue sky Laws or any other applicable securities Laws.
Section 8.10
Independent Evaluation
. Citizen is sophisticated in the evaluation, purchase, ownership and operation of oil and gas properties and related facilities, including equity interests of Persons operating such businesses. In making its decision to enter into this Agreement and to consummate the transactions contemplated hereby, Citizen has relied or shall rely solely on the representations, warranties and covenants set forth herein and in the Transaction Documents and its own independent investigation and evaluation of the Linn Assets and Units in the Company and the advice of its own legal, Tax, economic, environmental, engineering, geological and geophysical advisors and the express provisions of this Agreement and not on any comments, statements, projections or other materials made or given by any representatives or consultants or advisors of Linn.
Section 8.11
Citizen Consents
. Except (a) as set forth on
Schedule 8.11
, (b) for Customary Post-Closing Consents, and (c) for any Citizen Preferential Purchase Rights, there are no prohibitions on assignment or requirements to obtain consents from Third Parties, in each case, that would be applicable in connection with the transfer of the Citizen Assets to the Company or the consummation of the transactions contemplated by this Agreement by Citizen.
Section 8.12
Citizen Preferential Purchase Rights
. Except as set forth on
Schedule 8.12
, there are no preferential purchase rights, rights of first refusal or other similar rights that are applicable to the transfer of the Citizen Assets to the Company in connection with the transactions contemplated hereby (each, a “
Citizen
Preferential Purchase Right
”).
Section 8.13
Material Contracts
.
(a)
Schedule 8.13(a)
describes the following Citizen Contracts:
(i)
all Citizen Contracts that constitute farmout, farmin, development agreements, joint venture and exploration agreements, participation agreements or similar agreements where (A) the primary obligation thereunder has not been fully performed or expired
(and for purposes hereof, the term “
primary obligation
” shall mean and include any commitment to pay amounts (other than standard indemnification obligations related to actions or operations taken or conducted during the term of such agreement), any remaining period for any party thereto to elect or exercise options relating to earning, acquiring, assigning, or forfeiting interests in properties, any remaining right to participate in proposed operations, or any remaining right to alternate, assume or otherwise transfer operatorship) or (B) there are any remaining drilling or development obligations on the part of Citizen (or after the Closing, the Company) for which the failure to fulfill such obligations will result in a breach of such Citizen Contract or the reversion of or the obligation to transfer an interest in or operatorship of a Citizen Well or Citizen Lease to a counterparty under such Citizen Contract;
(ii)
all Citizen Contracts that include non-competition restrictions or area of mutual interest provisions or other similar restrictions on doing business, in each case, that remain in effect as of the Execution Date;
(iii)
all Citizen Contracts that are Hydrocarbon production sales or purchase, gathering, transportation, marketing, supply, exchange and processing agreements relating to the Citizen Assets, other than such agreements that are terminable on upon not more than ninety (90) days’ notice without penalty;
(iv)
all Citizen Contracts with any Affiliate of Citizen that will not be terminated as of Closing;
(v)
all Citizen Contracts burdening the Citizen Assets that could reasonably be expected to obligate the Company to expend in excess of $500,000 in any calendar year;
(vi)
all Citizen Contracts burdening the Citizen Assets that could reasonably be expected to result in aggregate revenues to the Company in excess of $500,000 in any calendar year;
(vii)
all Citizen Contracts providing for a call upon, option to purchase or similar right under any agreements with respect to the Hydrocarbons produced from the Citizen Assets;
(viii)
all Citizen Contracts under which Citizen (or, after Closing, the Company) is or may be obligated to transfer, assign or convey any right, title or interest in any Citizen Asset;
(ix)
any Citizen Contract that is an indenture, mortgage, loan, credit or sale-leaseback or other similar Contract;
(x)
all Citizen Contracts that constitute seismic or geophysical Contracts or commitment to acquire, generate or develop seismic data;
(xi)
all Citizen Contracts for the sale of gas containing a take or pay, advance payments, prepayment or similar provision or requiring gas to be gathered, delivered, processed or transported without then or thereafter receiving full payment therefore;
(xii)
all term assignments covering Citizen Leases, unless such interest is held past its primary term (provided that the primary term provided in such term assignment pursuant to which Citizen or its predecessor-in-interest acquired such Citizen Lease shall be deemed to be the primary term for purposes of this item (xii)); and
(xiii)
all Citizen Contracts that are joint operating agreements or unit operating agreements applicable to the Citizen Assets.
The Citizen Contracts described in
Sections 8.13(a)(i)
through
Section 8.13(a)(xiii)
above are collectively referred to herein as the “
Citizen Material Contracts
”.
(b)
Except as disclosed in
Schedule 8.13(b)
, (i) Citizen is not in material breach or default under any of the Citizen Material Contracts, (ii) to Citizen’s Knowledge, no other party to any such Citizen Material Contract is in material breach or default under any such Citizen Material Contract, and (iii) each Citizen Material Contract is in full force and effect, in accordance with their stated terms (as such terms have been amended, to the extent the amendments are reflected
Schedule 7.13(a)
).
(c)
There are no Hedge Contracts of Citizen in existence as of the Closing Date that will be binding on the Citizen Assets after Closing.
(d)
None of the joint operating agreements or unit operating agreements that are Citizen Material Contracts: (i) cover more than 640 acres, (ii) contain or provide for any alternating operatorship or alternating designation of operator, (iii) provide for any drilling commitments or drilling obligations that have not been satisfied, other than those relating to an AFE identified on
Schedule 8.18
, or (iv) provide for any disproportionate sharing of costs, revenues or share of production (other than to the extent relating to default provisions or non-consent elections).
Section 8.14
Environmental Matters
. Except as set forth on
Schedule 8.14
:
(a)
As of the Execution Date: (i) there is no pending notice or lawsuit, administrative action or other proceeding by a Governmental Body with respect to the Citizen Assets which alleges a violation of or liability under any Environmental Laws, in each case, for
which corrective actions have yet to be completed and/or any asserted fine or monetary damage has not been paid or otherwise finally resolved, and to Citizen’s Knowledge, no such notice or lawsuit, administrative action or other proceeding has been threatened in writing; and (ii) there is no pending notice or lawsuit, administrative action or other proceeding by a Governmental Body asserting the need for investigation or remediation of an Environmental Condition or of any spill or release of Hazardous Substances or Hydrocarbons with respect to any of the Citizen Assets, in each case, for which corrective actions have yet to be completed and/or any asserted fine or monetary damage has not been paid or otherwise finally resolved, and to Citizen’s Knowledge, no such notice or lawsuit, administrative action or other proceeding has been threatened in writing. During the period between the day that is 18 months prior to the Execution Date and the Execution Date: (I) there has been no notice or lawsuit, administrative action, notice of intent to file a citizen suit or other proceeding initiated by a Person that is not a Governmental Body with respect to the Citizen Assets which alleges a violation of or liability under any Environmental Laws, in each case, for which corrective actions have yet to be completed and/or any asserted fine or monetary damage has not been paid or otherwise finally resolved, and to Citizen’s Knowledge, no such notice or lawsuit, administrative action, notice of intent to file a citizen suit or other proceeding has been threatened in writing; and (II) there has been no notice or lawsuit, administrative action, notice of intent to file a citizen suit or other proceeding by a Person that is not a Governmental Body asserting the need for investigation or remediation of an Environmental Condition or of any spill or release of Hazardous Substances or Hydrocarbons with respect to any of the Citizen Assets, in each case, for which corrective actions have yet to be completed and/or any asserted fine or monetary damage has not been paid or otherwise finally resolved, and to Citizen’s Knowledge, no such notice or lawsuit, administrative action, notice of intent to file a citizen suit or other proceeding has been threatened in writing.
(b)
Citizen has made available to Linn complete and correct copies of all final Third Party reports and studies prepared with respect to the environmental condition of the Citizen Assets since January 1, 2012.
Section 8.15
Non-Consent Elections
. As of the Execution Date, except as set forth on
Schedule 8.15
, Citizen has not elected (and was not deemed to have elected) not to participate in any operation or activity proposed with respect to the Citizen Assets. To Citizen’s Knowledge,
Schedule 8.15
contains a complete and accurate list of (i) the status of any “payout” balance, as of the Effective Time, for the Citizen operated Citizen Wells subject to a reversion or other adjustment at some level of cost recovery or payout (or passage of time or other event other than termination of a Citizen Lease by its terms); and (ii) to the extent received by Citizen from the applicable operator as of the Execution Date, the payout status of all Citizen Wells which are not operated by Citizen and are subject to a reversion or other adjustment at some level of cost recovery or payout.
Section 8.16
Royalties
. Except for Burdens associated with Citizen Suspense Funds, all Burdens with respect to the Citizen Assets have been paid in all material respects, or if not paid, are being contested in good faith in the normal course of business.
Schedule 8.16
sets forth all Burdens with respect to the Citizen Assets that are being contested and all items that are being held in suspense as of the Effective Time.
Section 8.17
Imbalances
.
Schedule 8.17
sets forth all material Imbalances associated with the Citizen Assets as of the dates set forth in such Schedule.
Section 8.18
Current Commitments
.
Schedule 8.18
sets forth, as of the date of this Agreement, all AFEs in excess of $250,000 (net to Citizen’s interest) relating to the Citizen Assets to drill or rework wells or for other capital expenditures for which all of the activities anticipated in such AFEs or commitments have not been completed by the Closing Date.
Section 8.19
Wells
. Except as set forth on
Schedule 8.19
:
(a)
To Citizen’s Knowledge, all of the Citizen Wells have been drilled and completed in all material respects within the limits permitted by all applicable Citizen Leases and Applicable Contracts.
(b)
To Citizen’s Knowledge, there are not any Citizen Wells that (i) Citizen is currently obligated by any Laws or contract to currently plug, dismantle and/or abandon; or (ii) have been plugged, dismantled or abandoned in a manner that does not comply in all material respects with applicable Laws.
Section 8.20
No Prepayments; No Calls on Production
. Citizen is not obligated by virtue of any take-or-pay payment, advance payment or other similar payment (other than gas balancing arrangements) to deliver Hydrocarbons, or proceeds from the sale thereof, attributable to the Citizen Assets at some future time without receiving payment therefor at or after the time of delivery. Except as expressly described on
Schedule 8.20
, (i) Citizen has not granted to any Third Party any calls on Hydrocarbons allocable to the Citizen Assets, nor any optional rights to purchase the same, and (ii) Citizen has no Knowledge of any other calls on Hydrocarbons allocable to the Citizen Assets, nor any optional rights to purchase the same.
Section 8.21
Compliance with Permits
.
(a)
Citizen or an Affiliate of Citizen has obtained and is maintaining all material Permits that are necessary or required for the ownership, development and operation of that portion of the Citizen Assets that are operated by Citizen or an Affiliate of Citizen; and
(b)
To Citizen’s Knowledge, all Third Party operators of the Citizen Assets have obtained and are maintaining all material Permits that are necessary or required for the ownership, development and operation of that portion of the Citizen Assets that are operated by Third Parties.
Section 8.22
Condemnation
. As of the Execution Date, there is no actual or, to Citizen’s Knowledge, threatened in writing taking (whether permanent, temporary, whole or partial) of any part the Citizen Assets by reason of condemnation.
Section 8.23
Certain Citizen Employees
.
Citizen represents and warrants that, with respect to the Citizen Employees providing technical, engineering, geoscience or land services with respect to the Citizen Assets, (a) there are no labor agreements, collective bargaining agreements, or other labor contracts applicable to any such Citizen Employees to which Citizen or its Affiliate is a party or is bound; (b) no such Citizen Employees are represented by any labor
organization, union, or group of employees, and no labor organization or union; (c) there are no current or, to Citizen’s Knowledge, threatened representational campaigns or other organizing activities by any union seeking to become the collective bargaining representative of any such Citizen Employees, and there is no union or labor organization representation question or certification petition against Citizen or its Affiliate pending or threatened before the NLRB or any similar Governmental Body; (d) neither Citizen nor its Affiliate is currently experiencing, and has not in the previous four (4) years experienced, a labor strike, material labor dispute, work stoppage, work slowdown, lockout, or similar matter involving any Citizen Employees providing technical, engineering, geoscience or land services with respect to the Citizen Assets; and (e) neither Citizen nor its Affiliate is currently engaged in any unfair labor practices regarding any such Citizen Employees and there are no pending or threatened proceeding involving any unfair labor practices regarding such Citizen Employees before the NLRB or any similar Governmental Body.
Section 8.24
Equipment; No Related Assets
. With respect to the Citizen Equipment, Hydrocarbon production and other personal property included in the Citizen Assets, Citizen’s title as of the Execution Date is, and as of the Closing Date shall be transferred to the Company free and clear of Encumbrances other than Permitted Encumbrances. Other than with regard to the Citizen Excluded Assets and the Citizen Assets, neither Citizen, nor any Affiliate of Citizen, owns, leases or holds any other real, personal or mixed property interests that have been primarily used or held for use with the Citizen Assets or would be necessary for the Company to have in order for the Company to own, operate, develop and maintain the Citizen Assets immediately after Closing in a manner consistent with the ownership, operation, development and maintenance of the Citizen Assets by Citizen (and its Affiliate predecessors in interest) during the period immediately prior to Closing.
Section 8.25
Bonds
.
Schedule 8.25
is a complete and accurate list in all material respects of all cash deposits, guarantees, letters of credit, treasury securities, surety bonds and other forms of credit assurances or credit support provided by Citizen or any Affiliate of Citizen in support of the obligations of Citizen or any Affiliate of Citizen to any Governmental Body, contract counterparty or other Person by Citizen or any Affiliate of Citizen related to the ownership or operation of the Citizen Assets.
Section 8.26
Midstream Dedications
. Except as set forth in
Schedule 8.26
, none of the Citizen Assets is subject to a contract containing a dedication of acreage or minimum volume requirements.
Section 8.27
Area of Mutual Interest and Other Agreements
. Except as set forth in
Schedule 8.27
, no Citizen Asset is subject to (or has related to it) any area of mutual interest agreements as of the Execution Date. Except as set forth in
Schedule 8.27
, no Citizen Asset is subject to (or has related to it) any farm-out or farm-in agreement under which any party thereto is entitled to receive assignments not yet made, or could earn additional assignments after the Effective Time.
Section 8.28
Citizen Casualty Loss
. Except as set forth in
Schedule 8.28
, during the period commencing on the Effective Time and ending on the Execution Date, there has been no Citizen Casualty Loss affecting any of the Citizen Assets.
ARTICLE 9
REPRESENTATIONS AND WARRANTIES OF Company
On the Execution Date and on the Closing Date, the Company represents and warrants to Linn and Citizen as follows:
Section 9.1
Organization, Existence and Qualification
. The Company is a limited liability company, duly formed, validly existing and in good standing under the Laws of the State of Delaware and at Closing will be duly qualified to do business in each jurisdiction in which the nature of its business makes such qualification necessary.
Section 9.2
Authority, Approval and Enforceability
. The Company has full power and authority to enter into and perform this Agreement, the Transaction Documents to which it is a party and the transactions contemplated herein and therein. The execution, delivery and performance by the Company of this Agreement and the Transaction Documents to which the Company is a party have been duly and validly authorized and approved by all necessary action on the part of the Company. This Agreement is, and the Transaction Documents to which the Company is a party, when executed and delivered by the Company, will be, the valid and binding obligations of the Company, and enforceable against it, in accordance with their respective terms, subject to the effects of bankruptcy, insolvency, reorganization, moratorium and similar Laws, as well as to principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
Section 9.3
No Conflicts
. Assuming the receipt of all applicable consents and approvals in connection with the transactions contemplated hereby, the execution, delivery and performance by the Company of this Agreement, the Transaction Documents to which it is a party and the consummation of the transactions contemplated herein and therein will not (a) conflict with or result in a breach of any provisions of the organizational documents of the Company, (b) result in a default or the creation of any Encumbrance on the Units (other than as specified herein or in the LLC Agreement), or (c) violate any Law applicable to the Company or the Units.
Section 9.4
Bankruptcy
. There are no bankruptcy, reorganization or receivership proceedings pending, being contemplated by or, to the Company’s knowledge, threatened in writing against the Company.
Section 9.5
Brokers’ Fees
. The Company has not incurred any liability, contingent or otherwise, for brokers’ or finders’ fees relating to the transactions contemplated by this Agreement for which Citizen or Linn shall have any responsibility.
Section 9.6
Litigation
. As of the Execution Date, there is no suit, action or litigation by any Person by or before any Governmental Body, and no legal, administrative or arbitration proceeding (in each case) pending or, to the Company’s knowledge, threatened in writing (a) against the Company or (b) that would be reasonably likely to have a material adverse effect upon the ability of the Company to consummate the transactions contemplated by this Agreement.
Section 9.7
Independent Evaluation
. The Company is sophisticated in the evaluation, purchase, ownership and operation of oil and gas properties and related facilities. In making its decision to enter into this Agreement and to consummate the transactions contemplated hereby, the Company has relied or shall rely solely on the representations, warranties and covenants set forth herein and in the Transaction Documents to which it is a party and its own independent investigation and evaluation of the Assets and the advice of its own legal, Tax, economic, environmental, engineering, geological and geophysical advisors and the express provisions of this Agreement and not on any comments, statements, projections or other materials made or given by any representatives or consultants or advisors of Citizen or Linn.
ARTICLE 10
COVENANTS OF THE PARTIES
Section 10.1
Linn Conduct of Business
.
(a)
Except (w) as set forth in
Schedule 10.1(a)
, (x) for the operations covered by the AFEs described in
Schedule 7.18
or such operations required pursuant to any applicable Law, (y) as required in the event of an emergency to protect life, property or the environment, and (z) as expressly contemplated by this Agreement or as expressly consented to in writing by Citizen (which consent shall not be unreasonably delayed, withheld or conditioned), Linn shall, during the Interim Period:
(i)
subject to interruptions resulting from force majeure, mechanical breakdown and planned maintenance, in each case, operate or, in the case of those Linn Assets not operated by Linn, use its commercially reasonable efforts to cause to be operated, the Linn Assets in the usual, regular and ordinary manner consistent with past practice and as a reasonably prudent operator;
(ii)
maintain, or cause to be maintained, the books of account and Linn Records relating to the Linn Assets in the usual, regular and ordinary manner and in accordance with generally accepted accounting principles; and
(iii)
promptly notify Citizen in writing of any operations proposed after the Execution Date which would reasonably be estimated to require expenditures in excess of $250,000, as well as any amendments or supplements to any previously proposed operations which could reasonably be estimated to require expenditures in excess of $250,000, to the extent such operations could require the approval the co-interest owners of the Linn Assets or would result in any elections to participate or be deemed a non-consenting interest owner regarding the Linn Assets, and Linn shall consult with Citizen prior to (A) providing any such approval or consent, (B) allowing the election period to pass or (C) otherwise being deemed to be a non-consenting co-interest owner with regard to such proposed operation;
Except (w) as set forth in
Schedule 10.1(a)
, (x) for the operations covered by the AFEs described in
Schedule 7.18
or such operations required pursuant to any applicable Law, (y) as required in the event of an emergency to protect life, property or the environment, and (z) as expressly contemplated by this Agreement or as expressly consented to in writing by Citizen
(which consent shall not be unreasonably delayed, withheld or conditioned), Linn shall not, during the Interim Period:
(iv)
(A) enter into a Linn Contract that, if entered into on or prior to the Execution Date, would have been required to be listed on
Schedule 7.13(a)
, or (B) terminate (unless the term thereof expires pursuant to the provisions existing therein) or materially amend the terms of any Material Linn Contract;
(v)
enter into any Linn Contract that contains an area of mutual interest, a non-competition obligation, right of first refusal, a right of first offer, or any similar options or restrictions;
(vi)
terminate (unless the term thereof expires pursuant to the provisions existing therein), materially amend, extend or surrender any rights under any Linn Lease or Linn Right-of-Way;
(vii)
without limitation of
Section 10.1(a)(iii)
and subject to
Section 10.1(e)
, propose or approve any individual AFE or similar request under any Linn Contract which would reasonably be estimated to require expenditures in excess of $250,000.
(viii)
transfer, sell, mortgage, pledge or dispose of any material portion of the Linn Assets other than the (A) sale and/or disposal of Hydrocarbons in the ordinary course of business, (B) sales of equipment that is no longer necessary in the operation of the Linn Assets or for which replacement equipment has been obtained and (C) transfer of Linn Assets between LEH and LOI;
(ix)
(A) make, change or revoke any Tax election; (B) adopt or change any accounting method with respect to Asset Taxes; (C) file any amended Tax Return with respect to Asset Taxes that the Company is responsible for hereunder after Closing; (D) enter into any closing agreement with respect to Asset Taxes; (E) settle or compromise any Asset Tax claim or assessment that Company is responsible for hereunder after Closing; or (F) consent to any extension or waiver of the limitation period applicable to any claim or assessment with respect to Taxes related to or attributable to the Linn Assets that the Company will be responsible for after Closing; or
(x)
commit to do any of the foregoing.
(b)
Without expanding any obligations which Linn may have to Citizen or the Company, it is expressly agreed that Linn shall never have any liability to Citizen or the Company with respect to any breach or failure of
Section 10.1(a)(i)
greater than that which it might have as the operator to a non-operator under the applicable operating agreement (or, in the absence of such an agreement, under the AAPL 610 (1989 Revision) form Operating Agreement), IT BEING RECOGNIZED THAT, UNDER SUCH AGREEMENTS AND SUCH FORM, THE OPERATOR IS NOT RESPONSIBLE FOR ITS OWN NEGLIGENCE, AND HAS NO RESPONSIBILITY OTHER THAN FOR GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. Notwithstanding anything to the contrary herein, nothing in this
Section 10.1(b)
shall be construed to limit Linn’s liability for breaches of
Section 10.1(a)(i)
to the extent such breaches are not related to the physical operation of the Linn Assets, nor shall anything in
this
Section 10.1(b)
be construed to limit Linn’s liability for breaches of any of the other provisions of
Section 10.1(a)
(other than as described above with regard to
Section 10.1(a)(i))
.
(c)
Citizen acknowledges that Linn owns undivided interests in certain of the properties comprising the Linn Assets that it is not the operator thereof, and Citizen agrees that the acts or omissions of the other Working Interest owners (including the operators) who are not Linn or any of its Affiliates shall not constitute a breach of the provisions of this
Section 10.1
, nor shall any action required by a vote of Working Interest owners constitute such a breach so long as Linn (or its Affiliate, as applicable) has voted its interest in a manner that complies with the provisions of this
Section 10.1
and has provided Citizen notice of any actions or omissions of a Third Party operator which do not conform to any elections of Citizen under this
Section 10.1
.
(d)
With respect to any AFE received by Linn that is estimated to cost in excess of $250,000 and for which the relevant activity is not described in
Schedule 10.1(a)
, Linn shall forward such AFE to Citizen as soon as is reasonably practicable and thereafter the Transacting Parties shall consult with each other regarding whether or not Linn should elect to participate in such operation. Citizen agrees that it will (i) respond as soon as is reasonably practicable to any written request for consent pursuant to this
Section 10.1(d) and Section 10.1(a)(iii)
, and (ii) consent to any written request for approval of any AFE or similar request unless Citizen reasonably considers such request not to be economically prudent. In the event the Transacting Parties are unable to agree within ten (10) Business Days (unless a shorter time, not to be less than 48 hours, is reasonably required by the circumstances and the applicable joint operating agreement and such shorter time is specified in Linn’s request for consent) of Citizen’s receipt of any consent request as to whether or not Linn should elect to participate in such operation, Linn’s decision shall control and such operation shall be deemed to have been consented to by Citizen.
Section 10.2
Citizen Conduct of Business
.
(a)
Except (w) as set forth in
Schedule 10.2(a)
, (x) for the operations covered by the AFEs described in
Schedule 8.18
or such operations required pursuant to any applicable Law, (y) as required in the event of an emergency to protect life, property or the environment, and (z) as expressly contemplated by this Agreement or as expressly consented to in writing by Linn (which consent shall not be unreasonably delayed, withheld or conditioned), Citizen shall, during the Interim Period:
(i)
subject to interruptions resulting from force majeure, mechanical breakdown and planned maintenance, in each case, operate or, in the case of those Citizen Assets not operated by Citizen, use its commercially reasonable efforts to cause to be operated, the Citizen Assets in the usual, regular and ordinary manner consistent with past practice and as a reasonably prudent operator;
(ii)
maintain, or cause to be maintained, the books of account and Citizen Records relating to the Citizen Assets in the usual, regular and ordinary manner and in accordance with generally accepted accounting principles; and
(iii)
promptly notify Linn in writing of any operations proposed after the Execution Date which would reasonably be estimated to require expenditures in excess of $250,000, as well as any amendments or supplements to any previously proposed operations which could reasonably be estimated to require expenditures in excess of $250,000, to the extent such operations could require the approval the co-interest owners of the Citizen Assets or would result in any elections to participate or be deemed a non-consenting interest owner regarding the Citizen Assets, and Citizen shall consult with Linn prior to (A) providing any such approval or consent, (B) allowing the election period to pass or (C) otherwise being deemed to be a non-consenting co-interest owner with regard to such proposed operation;
Except (w) as set forth in
Schedule 10.2(a)
, (x) for the operations covered by the AFEs described in
Schedule 8.18
or such operations required pursuant to any applicable Law, (y) as required in the event of an emergency to protect life, property or the environment, and (z) as expressly contemplated by this Agreement or as expressly consented to in writing by Linn (which consent shall not be unreasonably delayed, withheld or conditioned), Citizen shall not, during the Interim Period:
(iv)
(A) enter into a Citizen Contract that, if entered into on or prior to the Execution Date, would have been required to be listed on
Schedule 8.13(a)
, or (B) terminate (unless the term thereof expires pursuant to the provisions existing therein) or materially amend the terms of any Material Citizen Contract;
(v)
enter into any Citizen Contract that contains an area of mutual interest, a non-competition obligation, right of first refusal, a right of first offer, or any similar options or restrictions;
(vi)
terminate (unless the term thereof expires pursuant to the provisions existing therein), materially amend, extend or surrender any rights under any Citizen Lease or Citizen Right-of-Way;
(vii)
without limitation of
Section 10.2(a)(iii)
and subject to
Section 10.2(e)
, propose or approve any individual AFE or similar request under any Citizen Contract which would reasonably be estimated to require expenditures in excess of $250,000.
(viii)
transfer, sell, mortgage, pledge or dispose of any material portion of the Citizen Assets other than the (A) sale and/or disposal of Hydrocarbons in the ordinary course of business, and (B) sales of equipment that is no longer necessary in the operation of the Citizen Assets or for which replacement equipment has been obtained;
(ix)
(A) make, change or revoke any Tax election; (B) adopt or change any accounting method with respect to Asset Taxes; (C) file any amended Tax Return with respect to Asset Taxes that the Company is responsible for hereunder after Closing; (D) enter into any closing agreement with respect to Asset Taxes; (E) settle or compromise any Asset Tax claim or assessment that Company is responsible for hereunder after Closing; or (F) consent to any extension or waiver of the limitation period applicable to any claim or assessment with respect to Taxes related to or attributable to the Citizen Assets that the Company will be responsible for after Closing; or
(x)
commit to do any of the foregoing.
(b)
Without expanding any obligations which Citizen may have to Linn or the Company, it is expressly agreed that Citizen shall never have any liability to Linn or the Company with respect to any breach or failure of
Section 10.2(a)(i)
greater than that which it might have as the operator to a non-operator under the applicable operating agreement (or, in the absence of such an agreement, under the AAPL 610 (1989 Revision) form Operating Agreement), IT BEING RECOGNIZED THAT, UNDER SUCH AGREEMENTS AND SUCH FORM, THE OPERATOR IS NOT RESPONSIBLE FOR ITS OWN NEGLIGENCE, AND HAS NO RESPONSIBILITY OTHER THAN FOR GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. Notwithstanding anything to the contrary herein, nothing in this
Section 10.2(b)
shall be construed to limit Citizen’s liability for breaches of
Section 10.2(a)(i)
to the extent such breaches are not related to the physical operation of the Citizen Assets, nor shall anything in this
Section 10.2(b)
be construed to limit Citizen’s liability for breaches of any of the other provisions of
Section 10.2(a)
(other than as described above with regard to
Section 10.2(a)(i))
.
(c)
Linn acknowledges that Citizen owns undivided interests in certain of the properties comprising the Citizen Assets that it is not the operator thereof, and Linn agrees that the acts or omissions of the other Working Interest owners (including the operators) who are not Citizen or any of its Affiliates shall not constitute a breach of the provisions of this
Section 10.2
, nor shall any action required by a vote of Working Interest owners constitute such a breach so long as Citizen (or its Affiliate, as applicable) has voted its interest in a manner that complies with the provisions of this
Section 10.2
and has provided Linn notice of any actions or omissions of a Third Party operator which do not conform to any elections of Linn under this
Section 10.2
.
(d)
With respect to any AFE received by Citizen that is estimated to cost in excess of $250,000 and for which the relevant activity is not described in
Schedule 10.2(a)
, Citizen shall forward such AFE to Linn as soon as is reasonably practicable and thereafter the Transacting Parties shall consult with each other regarding whether or not Citizen should elect to participate in such operation. Linn agrees that it will (i) respond as soon as is reasonably practicable to any written request for consent pursuant to this
Section 10.2(d)
and
Section 10.2(a)(iii)
, and (ii) consent to any written request for approval of any AFE or similar request unless Linn reasonably considers such request not to be economically prudent. In the event the Transacting Parties are unable to agree within ten (10) Business Days (unless a shorter time, not to be less than 48 hours, is reasonably required by the circumstances and the applicable joint operating agreement and such shorter time is specified in Citizen’s request for consent) of Linn’s receipt of any consent request as to whether or not Citizen should elect to participate in such operation, Citizen’s decision shall control and such operation shall be deemed to have been consented to by Linn.
Section 10.3
Public Announcements; Confidentiality
. During the Interim Period,
no Party shall make any press release or other public announcement regarding the existence of this Agreement, the contents hereof or the transactions contemplated hereby without the prior written consent of the other Parties (collectively, the “
Public Announcement Restrictions
”). The Public Announcement Restrictions shall not restrict disclosures to the extent (a) necessary for a Party to perform this Agreement (including disclosures to Governmental Bodies or Third Parties holding
rights of consent, Linn Preferential Purchase Rights, Citizen Preferential Purchase Rights or other rights that may be applicable to the transaction contemplated by this Agreement, as reasonably necessary to provide notices, seek waivers, amendments or termination of such rights, or seek such consents) or (b) required (upon advice of counsel) by applicable securities or other Laws or regulations or the applicable rules of any stock exchange having jurisdiction over the Parties or their respective Affiliates. In the case of the disclosures described under
clause
(b)
of this
Section 10.3
, each Party shall provide the other Parties not less than one (1) Business Day to review and comment on the contents of any such release or announcement prior to making such release or announcement. Following the Interim Period, any restrictions on press releases or other public announcements shall be governed by the LLC Agreement.
Section 10.4
Further Assurances
. After the Closing, each Party agrees to take such further actions and to execute, acknowledge and deliver all such further documents as are reasonably requested by the other Party for carrying out the purposes of this Agreement or of any document delivered pursuant to this Agreement.
Section 10.5
Linn and Citizen Bonds
. The Parties acknowledge and agree that each of Linn and Citizen has the right to terminate any bonds, letters of credit and guarantees provided by it or its Affiliates for the benefit of Linn or Citizen, and the Company shall be responsible, at the Company’s sole cost and expense, to cause the same to be released and, if applicable, replaced, promptly after the Closing.
Section 10.6
Amendment to Schedules
.
(a)
Linn shall have the continuing right until the Closing Date to add, supplement or amend the schedules to its representations and warranties attached hereto with respect to any matter hereafter arising or discovered which, if existing or known on the Execution Date or thereafter, would have been required to be set forth or described in such schedules. Notwithstanding the foregoing, for all purposes of this Agreement, including for purposes of determining whether the conditions set forth in
Article 12
have been fulfilled and whether Linn owes Citizen any indemnity under
Section 15.1
, the schedules to Linn’s representations and warranties contained in this Agreement shall be deemed to include only that information contained therein on the Execution Date and shall be deemed to exclude all information contained in any addition, supplement or amendment thereto;
provided
,
however
, that if Closing shall occur, then all matters disclosed pursuant to any such addition, supplement or amendment at or prior to the Closing Date that: (i) arose in the ordinary course of business
and
(ii) do not exceed $2,000,000 in aggregate value or liability shall be waived and Citizen shall not be entitled to make a claim with respect thereto pursuant to the terms of this Agreement or otherwise.
Citizen shall have the continuing right until the Closing Date to add, supplement or amend the schedules to its representations and warranties attached hereto with respect to any matter hereafter arising or discovered which, if existing or known on the Execution Date or thereafter, would have been required to be set forth or described in such schedules. Notwithstanding the foregoing, for all purposes of this Agreement, including for purposes of determining whether the conditions set forth in
Article 11
have been fulfilled and whether Citizen owes Linn any indemnity under
Section 15.2
, the schedules to Citizen’s representations
and warranties contained in this Agreement shall be deemed to include only that information contained therein on the Execution Date and shall be deemed to exclude all information contained in any addition, supplement or amendment thereto;
provided
,
however
, that if Closing shall occur, then all matters disclosed pursuant to any such addition, supplement or amendment at or prior to the Closing Date that: (i) arose in the ordinary course of business
and
(ii) do not exceed $2,000,000 in aggregate value or liability shall be waived and Linn shall not be entitled to make a claim with respect thereto pursuant to the terms of this Agreement or otherwise.
Section 10.7
Letters-in-Lieu; Change of Operator; Qualification of Company
. Upon the earlier of the termination or expiration of the Master Services Agreement or earlier if so provided in the Master Services Agreement, Linn and Citizen shall execute and deliver to the Company: (i) such letter-in-lieu of division or transfer orders, directing purchasers of production attributable to the Linn Assets and Citizen Assets to pay the Company for the same, in such form as are reasonably satisfactory to Company; (ii) change of operator forms as required to transfer operatorship of any Linn Assets and Citizen Assets to the Company or to Company’s designated operator, and (iii) all books, records, contracts, receipts for deposits and all other papers, documents, electronic data or files created and maintained by Linn or its Affiliate (or by Citizen or its Affiliate) after the Closing and prior to the termination of the Master Services Agreement (other than any such items subject to attorney-client privilege) in connection with performing the Services under the applicable Master Services Agreement. In addition, the Parties shall use their commercially reasonable efforts to cause the Company, as of the Closing (or as soon thereafter as is reasonably practicable), to be qualified as an operator with, and have the bonding and insurance in place that may be required from, the applicable Governmental Bodies sufficient to assume operations of the Linn Assets and the Citizen Assets upon the termination of the Master Service Agreement.
Section 10.8
Rights Associated with Linn Waterflood Assets
. By written notice from Citizen to Linn at any time prior to the day that is ten Business Days after the Execution Date, Citizen may elect to cause all depths subject to those Linn Leases that include interests in the Linn Waterflood Assets that are not included in the Target Formations in such Linn Leases to be Linn Excluded Assets hereunder. Failure of Citizen to make such an election in accordance with the terms of the preceding sentence shall be deemed a waiver of the right to make such an election. In the event of such an election, the Parties shall amend the definition of “Linn Excluded Assets” and the Linn Assignment to effect such election.
Section 10.9
Reserve-Based Loan
. In order to finance the operating and capital budgets of the Company, the Transacting Parties shall use their respective commercially reasonable efforts to cause the Company to secure, at or prior to the Closing, a reserve-based loan from a mutually-agreed lender on such terms and conditions as the Transacting Parties mutually agree. For the avoidance of doubt, securing such a reserve-based loan is not a condition to Closing.
Section 10.10
Certain Citizen Excluded Assets
. Notwithstanding anything to the contrary herein, to the extent any oil and gas leases expressly identified on
Exhibit E (Part II)
are within the AMI, such oil and gas leases (but only to extent within the AMI) shall be deemed to be Citizen Leases, and shall not be Citizen Excluded Assets for any purpose hereunder.
ARTICLE 11
LINN CONDITIONS TO CLOSING
The obligations of Linn to consummate the transactions provided for herein are subject, at the option of Linn, to the fulfillment by Citizen or waiver by Linn, on or prior to Closing, of each of the following conditions:
Section 11.1
Citizen Representations
. The representations and warranties of Citizen set forth in
Article 8
shall be true and correct on and as of the Closing Date, with the same force and without giving effect to any qualifiers as to materiality, as though such representations and warranties had been made or given on and as of the Closing Date (other than representations and warranties that refer to a specified date, which need only be true and correct on and as of such specified date), except for those breaches, if any, of such representations and warranties as would not have a Material Adverse Effect.
Section 11.2
Citizen Covenants
. Citizen shall have performed or complied in all material respects with all obligations, agreements and covenants contained in this Agreement as to which performance or compliance by Citizen is required prior to or at the Closing Date.
Section 11.3
No Legal Proceedings
. No material suit, action or other proceeding by any Third Party shall be pending before any Governmental Body (a) seeking to restrain, prohibit, enjoin or declare illegal, or (b) seeking substantial damages in connection with, the transactions contemplated by this Agreement.
Section 11.4
Citizen Title Defects and Citizen Environmental Defects
. The sum of (a) all Citizen Title Defect Amounts, less the sum (i) of all Citizen Title Benefit Amounts and (ii) all Citizen Title Defect Amounts associated with Citizen Title Defects that Citizen has elected to cure, (b) all Citizen Remediation Amounts for Citizen Environmental Defects, (c) the alleged Citizen Title Defect Amounts of all Title Disputes regarding Citizen Assets and the alleged Remediation Amounts of all Environmental Disputes regarding Citizen Assets, (d) the Allocated Values of all Citizen Assets excluded from Closing in accordance with
Article 4
and
Article 5
, and (e) the amount of Liabilities associated with Citizen Casualty Losses, in each case, for which the Initial Citizen Agreed Value is adjusted downward pursuant to
Section 3.3(a)
shall be less than 20% of the Initial Citizen Agreed Value.
Section 11.5
Linn Title Defects and Linn Environmental Defects
. The sum of (a) all Linn Title Defect Amounts, less the sum
(i) of all Linn Title Benefit Amounts and (ii) all Linn Title Defect Amounts associated with Linn Title Defects that Linn has elected to cure, (b) all Remediation Amounts for Linn Environmental Defects, (c) the alleged Linn Title Defect Amounts of all Title Disputes regarding Linn Assets and the alleged Remediation Amounts of all Environmental Disputes regarding Linn Assets, (d) the Allocated Values of all Linn Assets excluded from Closing in accordance with
Article 4
and
Article 5
, and (e) the amount of Liabilities associated with Linn Casualty Losses, in each case, for which the Initial Linn Agreed Value is adjusted downward pursuant to
Section 3.2(a)
shall be less than 20% of the Initial Linn Agreed Value.
Section 11.6
Citizen Closing Certificate
. Citizen shall have executed and delivered to Linn an officer’s certificate, dated as of the Closing Date and substantially in the form of
Exhibit B (Part II)
, certifying that the conditions set forth in
Section 11.1
and
Section 11.2
have been fulfilled and, if applicable, any exceptions to such conditions that have been waived by Linn.
Section 11.7
Citizen Closing Deliverables
. Citizen shall be ready, willing and able to deliver to Linn at the Closing the documents and items required to be delivered by Citizen under
Section 13.3
.
Section 11.8
Company Representations
. The representations and warranties of the Company set forth in
Article 9
shall be true and correct on and as of the Closing Date, with the same force and without giving effect to any qualifiers as to materiality, as though such representations and warranties had been made or given on and as of the Closing Date (other than representations and warranties that refer to a specified date, which need only be true and correct on and as of such specified date), except for those breaches, if any, of such representations and warranties as would not have a Material Adverse Effect.
Section 11.9
Company Covenants
. The Company shall have performed or complied in all material respects with all obligations, agreements and covenants contained in this Agreement as to which performance or compliance by the Company is required prior to or at the Closing Date.
Section 11.10
Company Closing Certificate
. The Company shall have executed and delivered to Linn an officer’s certificate, dated as of the Closing Date and substantially in the form of Exhibit B (Part III), certifying that the conditions set forth in
Section 11.8
and
Section 11.9
have been fulfilled and, if applicable, any exceptions to such conditions that have been waived by Linn.
Section 11.11
Company Closing Deliverables
. The Company shall be ready, willing and able to deliver to Linn at the Closing the documents and items required to be delivered by the Company under
Section 13.4
.
ARTICLE 12
CITIZEN CONDITIONS TO CLOSING
The obligations of Citizen to consummate the transactions provided for herein are subject, at the option of Citizen, to the fulfillment by Linn or waiver by Citizen, on or prior to Closing, of each of the following conditions:
Section 12.1
Linn Representations
. The representations and warranties of Linn set forth in
Article 7
shall be true and correct on and as of the Closing Date, with the same force and without giving effect to any qualifiers as to materiality, as though such representations and warranties had been made or given on and as of the Closing Date (other than representations and warranties that refer to a specified date, which need only be true and correct on and as of such specified date), except for those breaches, if any, of such representations and warranties as would not have a Material Adverse Effect.
Section 12.2
Linn Covenants
. Linn shall have performed or complied in all material respects with all obligations, agreements and covenants contained in this Agreement as to which performance or compliance by Linn is required prior to or at the Closing Date.
Section 12.3
No Legal Proceedings
. No material suit, action or other proceeding by any Third Party shall be pending before any Governmental Body (a) seeking to restrain, prohibit, enjoin or declare illegal, or (b) seeking substantial damages in connection with, the transactions contemplated by this Agreement.
Section 12.4
Linn Title Defects and Linn Environmental Defects
. The sum of (a) all Linn Title Defect Amounts, less the sum (i) of all Linn Title Benefit Amounts and (ii) all Linn Title Defect Amounts associated with Linn Title Defects that Linn has elected to cure, (b) all Linn Remediation Amounts for Linn Environmental Defects, (c) the alleged Linn Title Defect Amounts of all Title Disputes regarding Linn Assets and the alleged Remediation Amounts of all Environmental Disputes regarding Linn Assets, (d) the Allocated Values of all Linn Assets excluded from Closing in accordance with
Article 4
and
Article 5
, and (e) the amount of Liabilities associated with Linn Casualty Losses, in each case, for which the Initial Linn Agreed Value is adjusted downward pursuant to
Section 3.2(a)
shall be less than 20% of the Initial Linn Agreed Value.
Section 12.5
Citizen Title Defects and Citizen Environmental Defects
. The sum of (a) all Citizen Title Defect Amounts, less the sum
(i) of all Citizen Title Benefit Amounts and (ii) all Citizen Title Defect Amounts associated with Citizen Title Defects that Citizen has elected to cure, (b) all Remediation Amounts for Citizen Environmental Defects, (c) the alleged Citizen Title Defect Amounts of all Title Disputes regarding Citizen Assets and the alleged Remediation Amounts of all Environmental Disputes regarding Citizen Assets, (d) the Allocated Values of all Citizen Assets excluded from Closing in accordance with
Article 4
and
Article 5
, and (e) the amount of Liabilities associated with Citizen Casualty Losses, in each case, for which the Initial Citizen Agreed Value is adjusted downward pursuant to
Section 3.3(a)
shall be less than 20% of the Initial Citizen Agreed Value.
Section 12.6
Linn Closing Certificate
. Linn shall have executed and delivered to Citizen an officer’s certificate, dated as of the Closing Date and substantially in the form of
Exhibit B (Part I)
, certifying that the conditions set forth in
Section 12.1
and
Section 12.2
have been fulfilled and, if applicable, any exceptions to such conditions that have been waived by Citizen.
Section 12.7
Linn Closing Deliverables
. Linn shall be ready, willing and able to deliver to Citizen at the Closing the documents and items required to be delivered by Linn under
Section 13.2
.
Section 12.8
Company Representations
. The representations and warranties of the Company set forth in
Article 9
shall be true and correct on and as of the Closing Date, with the same force and without giving effect to any qualifiers as to materiality, as though such representations and warranties had been made or given on and as of the Closing Date (other than representations and warranties that refer to a specified date, which need only be true and correct
on and as of such specified date), except for those breaches, if any, of such representations and warranties as would not have a Material Adverse Effect.
Section 12.9
Company Covenants
. The Company shall have performed or complied in all material respects with all obligations, agreements and covenants contained in this Agreement as to which performance or compliance by the Company is required prior to or at the Closing Date.
Section 12.10
Company Closing Certificate
. The Company shall have executed and delivered to Citizen an officer’s certificate, dated as of the Closing Date and substantially in the form of Exhibit B (Part III), certifying that the conditions set forth in
Section 12.8
and
Section 12.9
have been fulfilled and, if applicable, any exceptions to such conditions that have been waived by Citizen.
Section 12.11
Company Closing Deliverables
. The Company shall be ready, willing and able to deliver to Citizen at the Closing the documents and items required to be delivered by the Company under
Section 13.4
.
ARTICLE 13
CLOSING
Section 13.1
Time and Place of Closing
. Subject to the conditions set forth in this Agreement, the consummation of the transactions contemplated by this Agreement (the “
Closing
”) shall occur at the offices of Latham & Watkins LLP located at 811 Main Street, Suite 3700, Houston, Texas 77002, on or before 9:00 a.m. (Central Prevailing Time) on August 31, 2017 (the “
Scheduled Closing Date
”), or such other date as the Transacting Parties may agree upon in writing;
provided
that if the conditions to Closing in
Article 11
and
Article 12
have not yet been satisfied or waived by the Scheduled Closing Date, then Closing shall occur five (5) Business Days after such conditions have been satisfied or waived. The date Closing actually occurs shall be the “
Closing
Date
”.
Section 13.2
Obligations of Linn at Closing
. At the Closing, subject to the terms and conditions of this Agreement, and subject to the simultaneous performance by Citizen of its obligations pursuant to
Section 13.3
and the Company of its obligations in
Section 13.4
, Linn shall deliver or cause to be delivered to Citizen and the Company the following:
(a)
counterparts of the Linn Assignment, duly executed by Linn;
(b)
counterparts of the LLC Agreement, duly executed by Linn;
(c)
counterparts of the Master Services Agreement, duly executed by Linn;
(d)
full releases of all liens granted by any member of the Linn Group that burden the Linn Assets (other than Linn Permitted Encumbrances) in form reasonably satisfactory to Citizen;
(e)
assignments in the forms required by Governmental Bodies for the assignment of any federal, state or tribal Linn Assets, duly executed by Linn, in sufficient duplicate originals to allow recording in all appropriate offices; and
(f)
an executed statement described in Treasury Regulation Section 1.1445-2(b)(2) from Linn certifying that Linn is not a foreign person within the meaning of the Code.
Section 13.3
Obligations of Citizen at Closing
. At the Closing, subject to the terms and conditions of this Agreement, and subject to the simultaneous performance by Linn of its obligations pursuant to
Section 13.2
and the Company of its obligations in
Section 13.4
, Citizen shall deliver or cause to be delivered to Linn and the Company the following:
(a)
evidence reasonably satisfactory to Linn that the Company has been formed by the filing of the Company Certificate and a certificate of name change changing the name of the Company to “Roan Resources LLC”;
(b)
counterparts of the Citizen Assignment, duly executed by Citizen;
(c)
counterparts of the LLC Agreement, duly executed by Citizen;
(d)
counterparts of the Master Services Agreement, duly executed by Citizen;
(e)
full releases of all liens granted by any member of the Citizen Group that burden the Citizen Assets (other than Citizen Permitted Encumbrances) in form reasonably satisfactory to Linn;
(f)
assignments in the forms required by Governmental Bodies for the assignment of any federal, state or tribal Citizen Assets, duly executed by Citizen, in sufficient duplicate originals to allow recording in all appropriate offices; and
(g)
an executed statement described in Treasury Regulation Section 1.1445-2(b)(2) from Citizen certifying that Citizen is not a foreign person within the meaning of the Code.
Section 13.4
Obligations of the Company at Closing
. At the Closing, subject to the terms and conditions of this Agreement, and subject to the simultaneous performance by Linn of its obligations pursuant to
Section 13.2
and Citizen of its obligations pursuant to
Section 13.3
, the Company shall deliver or cause to be delivered to the Transacting Parties the following:
(a)
counterparts of the Linn Assignment, duly executed by the Company;
(b)
counterparts of the Citizen Assignment, duly executed by the Company;
(c)
counterparts of the LLC Agreement, duly executed by the Company; and
(d)
counterparts of the Master Services Agreement, duly executed by Company.
ARTICLE 14
TERMINATION; DEFAULT AND REMEDIES
Section 14.1
Right of Termination
. This Agreement and the transactions contemplated herein may be terminated at any time prior to Closing:
(a)
by the mutual written agreement of the Transacting Parties;
(b)
by delivery of written notice from Linn to Citizen if any of the conditions set forth in
Article 11
(other than the conditions set forth in
Section 11.3
,
Section 11.4
or
Section 11.5
) have not been satisfied by Citizen or the Company, as applicable (or waived by Linn), by the Outside Date;
(c)
by delivery of written notice from Linn to Citizen if any of the conditions set forth in
Section 11.4
or
Section 11.5
have not been satisfied (or waived by Linn) by the Outside Date;
(d)
by delivery of written notice from Citizen to Linn if any of the conditions set forth in
Article 12
(other than the conditions set forth in
Section 12.3
,
Section 12.4
or
Section 12.5
) have not been satisfied by Linn (or waived by Citizen) by the Outside Date;
(e)
by delivery of written notice from Citizen to Linn if any of the conditions set forth in
Section 12.4
or
Section 12.5
have not been satisfied (or waived by Citizen) by the Outside Date;
(f)
by either Transacting Party delivering written notice to the other Transacting Party if any of the conditions set forth in
Section 11.3
or
Section 12.3
are not satisfied or waived by the applicable Party on or before the Outside Date; or
(g)
by either Transacting Party delivering written notice to the other Transacting Party if Closing has not occurred on or before the Outside Date;
provided
,
however
, that no Transacting Party shall have the right to terminate this Agreement pursuant to clause (b), (d) or (f) above if such Transacting Party or its Affiliates are at such time in material breach of any provision of this Agreement.
Section 14.2
Effect of Termination
. If this Agreement is terminated pursuant to any provision of
Section 14.1
, then, except as provided in this
Section 14.2
and except for the provisions of
Article 1
,
Sections 6.1
(other than the access rights granted under
Sections 6.1(a)
and
6.1(b))
,
6.2
,
6.3
,
7.5
,
8.5
,
9.5
,
10.3
,
14.3
and
Article 17
, this Agreement shall forthwith become void and of no further force or effect and the Parties shall have no liability or obligation hereunder.
(a)
If Linn has the right to terminate this Agreement pursuant to
Section 14.1(b)
because of the failure of Citizen to close the transactions contemplated by this Agreement in the instance where, as of the Outside Date, (i) all of the conditions in
Article 12
(excluding conditions that, by their terms, cannot be satisfied until Closing) have been satisfied (or waived by Citizen), (ii) Linn is ready, willing and able to perform its obligations under
Section 13.2
, and (iii) Citizen nevertheless elects not to close the transactions contemplated by this Agreement, then Linn, as Linn’s sole and exclusive remedy, shall be entitled to either: (A) terminate this Agreement pursuant to
Section 14.1(b)
, and within two (2) Business Days after such termination, Citizen shall deliver by wire transfer of immediately available funds to an account designated in writing by Linn an amount equal to 10% of the Initial Linn Agreed Value, or (B) seek the specific performance of Citizen hereunder. If Linn is entitled to make an election pursuant to the preceding sentence, Linn shall select the remedy in
clause (A)
or
(B)
above within five (5) Business Days after the Outside Date by written notice to Citizen and the Company. Failure to make such an election within such period shall be deemed to be an election by Linn to select
clause (A)
.
Nothing herein shall be construed to preclude Linn from first seeking specific performance hereunder, and thereafter terminating this Agreement (and being entitled to the remedy described in
clause (A)
above).
(b)
If Citizen has the right to terminate this Agreement pursuant to
Section 14.1(d)
because of the failure of Linn to close the transactions contemplated by this Agreement in the instance where, as of the Outside Date, (i) all of the conditions in
Article 11
(excluding conditions that, by their terms, cannot be satisfied until Closing) have been satisfied (or waived by Linn), (ii) Citizen is ready, willing and able to perform its obligations under
Section 13.3
, and (iii) Linn nevertheless elects not to close the transactions contemplated by this Agreement, then Citizen, as Citizen’s sole and exclusive remedy, shall be entitled to either: (A) terminate this Agreement pursuant to
Section 14.1(d)
, and within two (2) Business Days after such termination, Linn shall deliver by wire transfer of immediately available funds to an account designated in writing by Citizen an amount equal to 10% of the Initial Citizen Agreed Value, or (B) seek the specific performance of Linn hereunder. If Citizen is entitled to make an election pursuant to the preceding sentence, Citizen shall select the remedy in
clause (A)
or
(B)
above within five (5) Business Days after the Outside Date by written notice to Linn and the Company. Failure to make such an election within such period shall be deemed to be an election to select
clause (A)
. Nothing herein shall be construed to preclude Citizen from first seeking specific performance hereunder, and thereafter terminating this Agreement (and being entitled to the remedy described in
clause (A)
above).
Section 14.3
Return of Documentation and Confidentiality
. In addition to any obligations under the Confidentiality Agreement, upon termination of this Agreement, each Transacting Party shall promptly return to the other Transacting Party or destroy (and provide written certification of such destruction) all title, engineering, geological and geophysical data, environmental assessments and/or reports, maps, documents and other information furnished by such other Transacting Party to such Transacting Party or prepared by or on behalf of such Transacting Party in connection with its due diligence investigation of the other Transacting Party’s Assets and such Transacting Party shall not retain any copies, extracts or other reproductions in whole or in part of such documents and information; provided, however, any of the foregoing (a) found in drafts, notes, studies and other documents prepared by or for such Transacting Party, (b) found in presentation materials that are included in materials presented to the executive committee or board of directors of such Transacting Party (or its Affiliate) in connection with this Agreement, together with any notes or minutes from any such presentations, or (c) found in electronic format as part of such Transacting Party or its Affiliate’s off-site or on-site data storage/archival process system, will be held by such Transacting Party and kept
confidential subject to the terms of the Confidentiality Agreement or destroyed at the retaining Transacting Party’s option.
ARTICLE 15
INDEMNIFICATION; ASSUMPTION OF LIABILITIES
Section 15.1
Indemnification by Linn
. From and after Closing, Linn shall indemnify, defend and hold harmless the Citizen Group and the Company Group (and any member of either such Group) from and against all Liabilities suffered or incurred by the Citizen Group and/or the Company Group (and any member of either such Group) that are caused by or arise out of or result from:
(a)
the Linn Retained Liabilities;
(b)
any breach of any of Linn’s covenants or agreements under this Agreement; or
(c)
any breach of any representation or warranty made by Linn contained in this Agreement or any certification delivered in connection herewith; or
(d)
the Linn Indemnity Liabilities,
EVEN IF SUCH LIABILITIES ARE CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), STRICT LIABILITY OR OTHER LEGAL FAULT OF A MEMBER OF THE LINN GROUP, OR THE CITIZEN GROUP, BUT NOT TO THE EXTENT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY OF THE CITIZEN GROUP.
Section 15.2
Indemnification by Citizen
. From and after Closing, Citizen shall indemnify, defend and hold harmless the Linn Group and
the Company Group (and any member of either such Group) from and against all Liabilities suffered or incurred by the Linn Group and/or
the Company Group (and any member of either such Group) that are caused by or arise out of or result from:
(a)
the Citizen Retained Liabilities;
(b)
any breach of any of Citizen’s covenants or agreements under this Agreement;
(c)
any breach of any representation or warranty made by Citizen contained in this Agreement or any certification delivered in connection herewith; or
(d)
the Citizen Indemnity Liabilities,
EVEN IF SUCH LIABILITIES ARE CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), STRICT LIABILITY OR OTHER LEGAL FAULT OF A MEMBER OF THE CITIZEN GROUP, OR THE LINN
GROUP, BUT NOT TO THE EXTENT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY OF THE LINN GROUP.
Section 15.3
Indemnification by the Company
. From and after Closing, the Company shall indemnify, defend and hold harmless the Linn Group and
the Citizen Group (and any member of either such Group) from and against all Liabilities suffered or incurred by the Linn Group and/or
the Citizen Group (and any member of either such Group) that are caused by or arise out of or result from:
(a)
the Company Assumed Obligations;
(b)
any breach of the Company’s covenants or agreements under this Agreement; or
(c)
any breach of any representation or warranty made by the Company contained in this Agreement or any certification delivered in connection herewith,
EVEN IF SUCH LIABILITIES ARE CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), STRICT LIABILITY OR OTHER LEGAL FAULT OF A PERSON ENTITLED TO INDEMNITY HEREUNDER, BUT NOT TO THE EXTENT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY SUCH INDEMNIFIED PERSON.
Section 15.4
Exclusive Remedy
. Notwithstanding anything to the contrary contained in this Agreement, except as provided in
Section 3.5
,
Article 6
and with respect to Fraud (or, for the avoidance of doubt, any special warranty of title in the Linn Assignment or the Citizen Assignment), this
Article 15
contains the exclusive remedies of the Group of each Party against the other Parties after the Closing with respect to breaches of the representations, warranties, covenants and agreements of the Parties contained in this Agreement.
Section 15.5
Indemnification Rights
. The indemnity of each Party provided in this
Article 15
shall be for the benefit of and extend to each Person included in each of the Linn Group, the Citizen Group or the Company Group as applicable;
provided
,
however
, that any claim for indemnity under this
Article 15
by any such Person must be brought and administered by a Party to this Agreement. No Indemnified Person (including any Person within the Linn Group, the Citizen Group or the Company Group) other than the Parties shall have any rights against another Party under the terms of this
Article 15
except as may be exercised on its behalf by a Party pursuant to this
Section 15.4
. Each Party may elect to exercise or not exercise indemnification rights under this
Article 15
on behalf of the other Indemnified Persons affiliated with it in its sole discretion and shall have no liability to any such other Indemnified Person for any action or inaction under this
Article 15
.
Section 15.6
Assumption of Liabilities
. Without limiting the Company Group’s rights to indemnity under this
Article 15
and except with respect to (1) the Linn Retained Liabilities or Citizen Retained Liabilities (it being acknowledged that no Linn Retained Liabilities or Citizen Retained Liabilities shall ever be deemed to be Company Assumed Obligations), or (2) the Linn Indemnity Liabilities that arise prior to the second anniversary of Closing and Citizen Indemnity Liabilities that arise prior to the second anniversary of Closing (it being acknowledged that no
Linn Indemnity Liabilities that arise prior to the second anniversary of Closing or Citizen Indemnity Liabilities that arise prior to the second anniversary of Closing shall be deemed to be Company Assumed Obligations, provided, however, that if a Company Break-Up occurs prior to the second anniversary of Closing, then the Linn Indemnity Liabilities and Citizen Indemnity Liabilities shall remain with the respective Parties indefinitely, regardless of when they arise and shall never become Company Assumed Obligations), from and after Closing, the Company assumes and hereby agrees to fulfill, perform, pay and discharge (or cause to be fulfilled, performed, paid and discharged) all obligations and Liabilities, known or unknown, with respect to the Assets, regardless of whether such obligations or Liabilities arose prior to, on or after the Effective Time, including obligations and Liabilities relating in any manner to the use, ownership or operation of the Assets, including obligations and Liabilities (a) to furnish makeup gas and/or settle Imbalances according to the terms of applicable gas sales, processing, gathering or transportation Contracts included in the Assets, (b) to pay Working Interests, royalties, overriding royalties and other interests, owners’ revenues or proceeds attributable to sales of Hydrocarbons, including those held in suspense (including the Linn Suspense Funds and Citizen Suspense Funds) to the extent attributable to the Assets, (c) to properly plug and abandon any and all wells and pipelines, including future wells, inactive wells or temporarily abandoned wells, drilled on the Assets, (d) to re-plug any well, wellbore or previously plugged well on the Assets to the extent required or necessary under applicable Laws or under Contracts, (e) to dismantle or decommission and remove any personal property and other property of whatever kind located on the Assets related to or associated with operations and activities conducted by whomever on the Assets, (f) to clean up and/or remediate the Assets in accordance with any applicable Contracts and applicable Laws, including all Environmental Laws, (g) relating to assumption and defense of those matters identified on
part II
of
Schedule 7.6
, and matters identified on
part II
of
Schedule 8.6
, (h) to perform all obligations applicable to or imposed on the lessee, owner, or operator under the Leases and all applicable Contracts, or as required by applicable Laws, and (i) assuming no Company Break-Up has occurred prior to the second anniversary of the Closing, those relating to the Linn Indemnity Liabilities arising at and/or after the second anniversary of the Closing or the Citizen Indemnity Liabilities arising at and/or after the second anniversary of the Closing (all of said obligations and Liabilities herein being referred to as the “
Company
Assumed Obligations
”); and for the sake of clarity, when used in this Section 15.6 in connection with the Linn Indemnity Liabilities or Citizen Indemnity Liabilities, the phrases “that arise” or “arising at and/or after” shall mean that such Liabilities have been asserted, alleged, or otherwise made the subject of a written notice, claim, action, judgment or charge directed at a Party, whether liquidated or unliquidated.
Section 15.7
Indemnification Actions
. All claims for indemnification under
Article 15
shall be asserted and resolved as follows:
(a)
For purposes hereof, (i) the term “
Indemnifying Person
” when used in connection with particular Liabilities shall mean the Party having an obligation to indemnify another Person or Persons with respect to such Liabilities pursuant to this
Article 15
and (ii) the term “
Indemnified Person
” when used in connection with particular Liabilities shall mean the Person or Persons having the right to be indemnified with respect to such Liabilities by another Person or Persons pursuant to this
Article 15
.
(b)
To make a claim for indemnification under
Article 15
, an Indemnified Person shall notify in writing the Indemnifying Person of its claim, including the specific details of and specific basis under this Agreement for its claim (the “
Claim Notice
”). In the event that the claim for indemnification is based upon a claim by a Third Party against the Indemnified Person (a “
Third Person Claim
”), the Party that is an Indemnified Person shall provide its Claim Notice promptly after such Indemnified Person has actual knowledge of the Third Person Claim and shall enclose a copy of all papers (if any) served with respect to the Third Person Claim;
provided
that the failure of any Party to give notice of a Third Person Claim as provided in this
Section 15.7
shall not relieve the Indemnifying Person of its obligations under this
Article 15
except to the extent such failure results in insufficient time being available to permit the Indemnifying Person to effectively defend against the Third Person Claim or otherwise materially prejudices the Indemnifying Person’s ability to defend against the Third Person Claim. In the event that the claim for indemnification is based upon an inaccuracy or breach of a representation, warranty, covenant or agreement, the Claim Notice shall specify the representation, warranty, covenant or agreement which was inaccurate or breached.
(c)
In the case of a claim for indemnification based upon a Third Person Claim, the putative Indemnifying Person shall have thirty (30) days from its receipt of the Claim Notice to notify the Party that is an Indemnified Person whether it admits or denies its obligation to defend such Indemnified Person against such Third Person Claim under this
Article 15
. If the Indemnifying Person does not notify such Indemnified Person within such thirty (30)-day period whether the Indemnifying Person admits or denies its obligation to defend such Indemnified Person, it shall be conclusively deemed to have denied such indemnification obligation hereunder. The Indemnified Person (or its designee) is authorized, prior to and during such thirty (30)-day period, to file any motion, answer or other pleading that it shall deem necessary or appropriate to protect its interests or those of the Indemnifying Person and that is not materially prejudicial to the Indemnifying Person.
(d)
If the Indemnifying Person admits its obligation, it shall have the right and obligation to diligently defend, at its sole cost and expense, the Third Person Claim. Subject to the remainder of this
Section 15.7(d)
the Indemnifying Person shall have full control of such defense and proceedings, including any compromise or settlement thereof. If requested by the Indemnifying Person, the Indemnified Person agrees to cooperate in contesting any Third Person Claim which the Indemnifying Person elects to contest (
provided
,
however
, that the Indemnified Person shall not be required to bring any counterclaim or cross-complaint against any Person). The Indemnified Person may at its own expense participate in, but not control, any defense or settlement of any Third Person Claim controlled by the Indemnifying Person pursuant to this
Section 15.5
. An Indemnifying Person shall not, without the written consent of the Indemnified Person, settle any Third Person Claim or consent to the entry of any judgment with respect thereto unless such settlement or judgment (i) provides for the payment by the Indemnifying Person of money as sole relief for the claimant, (ii) involves no finding or admission of any violation of Law or breach of contract or the rights of any Indemnified Person, (iii) does not encumber any of the assets of any Indemnified Person or agree to any restriction or condition that would apply to or adversely affect any Indemnified Person or the conduct of any Indemnified Person’s business and (iv) includes a complete and unconditional release of each Indemnified Person subject thereto from any and all liabilities in respect of such Third Person Claim. Notwithstanding anything to the contrary herein, if the Third Person Claim (I) seeks
injunctive or equitable relief as the primary remedy for such Third Person Claim, (II) arises in connection with a criminal proceeding, or (III) is reasonably anticipated by, in the case of Third Person Claims for which Linn is the Indemnifying Party, to cause aggregate Liabilities subject to the Linn Indemnity Cap (whether pursuant to the current Third Party Claim and/or other previous Third Party Claims) for which Linn has provided indemnity hereunder to be exceeded, or, in the case of Third Person Claims for which Citizen is the Indemnifying Party, to cause aggregate Liabilities subject to the Citizen Indemnity Cap (whether pursuant to the current Third Party Claim and/or other previous Third Party Claims) for which Citizen has provided indemnity hereunder to be exceeded, then, at the Indemnified Person’s election, such Indemnified Person shall have full control of such defense and proceedings, including any compromise or settlement thereof.
(e)
If the Indemnifying Person does not admit its obligation or admits its obligation but fails to diligently defend or settle the Third Person Claim, then the Indemnified Person shall have the right to defend against the Third Person Claim (at the sole cost and expense of the Indemnifying Person, if the Indemnified Person is entitled to indemnification hereunder), with counsel of the Indemnified Person’s choosing, subject to the right of the Indemnifying Person to admit its obligation and assume the defense of the Third Person Claim at any time prior to settlement or final determination thereof. If the Indemnifying Person has not yet admitted its obligation to provide indemnification with respect to a Third Person Claim, the Indemnified Person shall send written notice to the Indemnifying Person of any proposed settlement and the Indemnifying Person shall have the option for ten (10) Business Days following receipt of such notice to (i) admit in writing its obligation to provide indemnification with respect to the Third Person Claim and (ii) if its obligation is so admitted, reject, in its reasonable judgment, the proposed settlement. If the Indemnified Person settles any Third Person Claim over the objection of the Indemnifying Person after the Indemnifying Person has timely admitted its obligation in writing and assumed the defense of a Third Person Claim, the Indemnified Person shall be deemed to have waived any right to indemnity therefor.
(f)
In the case of a claim for indemnification not based upon a Third Person Claim, the Indemnifying Person shall have twenty (20) days from its receipt of the Claim Notice to (i) cure the Liabilities complained of, (ii) admit its obligation to provide indemnification with respect to such Liabilities, or (iii) dispute the claim for such indemnification. If the Indemnifying Person does not notify the Indemnified Person within such ten (10) day period that it has cured the Liabilities or that it disputes the claim for such indemnification, the Indemnifying Person shall be conclusively deemed to have denied its indemnification obligation hereunder.
Section 15.8
Limitation on Actions.
(a)
Subject to
Section 15.8(c)
the representations and warranties of the Transacting Parties in this Agreement and the covenants set forth in this Agreement that by their nature are to be performed at or prior to the Closing shall survive the Closing until the first anniversary of the Closing, except that:
(i)
the representations and warranties in
Section 7.1
through
Section 7.5
,
Section 7.9
,
Section 7.10
,
Section 8.1
through
Section 8.5
,
Section 8.9
, and
Section 8.10
(such representations and warranties collectively, the “
Fundamental Representations
”) shall survive indefinitely; and
(ii)
the representation and warranties in
Section 7.8
and
Section 8.8
shall survive Closing until ninety (90) days after the expiration the applicable statute of limitations closes the taxable period to which the subject Taxes relate.
All of the remainder of this Agreement shall survive the Closing indefinitely, except (A) as may otherwise be expressly provided in this Agreement or (B) for the provisions of
Article 16
, which shall survive Closing until ninety (90) days after the expiration of the applicable statute of limitations to which the subject Taxes relate. Representations, warranties, covenants and other agreements shall be of no further force and effect after the date of their expiration (if any), after which time no claim may be made thereunder,
provided
that there shall be no termination of any bona fide claim asserted in writing pursuant to this Agreement with respect to such a representation, warranty, covenant or other agreement prior to its expiration date.
(b)
The indemnity obligations in
Section 15.1(b)
,
Section 15.1(c)
,
Section 15.2(b)
and
Section 15.2(c)
shall terminate as of the termination date of each respective covenant, agreement, representation or warranty that is subject to indemnification thereunder, except in each case as to matters for which a specific written claim for indemnity has been delivered in good faith to the Indemnifying Person on or before such termination date. The indemnity obligations in
Section 15.1(a)
and
Section 15.2(a)
shall survive the Closing indefinitely. The indemnity obligations in
Section 15.1(d)
and
Section 15.2(d)
shall survive the Closing until the second (2nd) anniversary of the Closing Date. Notwithstanding anything stated in this Agreement to the contrary, any indemnifiable claims or Liabilities asserted prior to the expiration of any stated survival period shall remain (and the indemnity therefor shall continue to survive) until such claims and Liabilities are fully resolved.
(c)
Notwithstanding anything to the contrary in this Agreement (including the foregoing provisions of this
Section 15.8
), all indemnity obligations under
Sections 15.1
and
15.2
of this Agreement shall terminate for all purposes (including in respect of indemnity obligations that have been previously asserted but not finally determined or satisfied) upon the occurrence of an IPO (as defined in the LLC Agreement);
provided
, however that this
Section 15.8(c)
shall not apply to indemnity obligations under (i)
Section 15.1(a)
or
Section 15.2(a)
or (ii)
Section 15.1(b)
and
15.2(b),
or (iii)
Section 15.1(c)
or
15.2(c)
of this Agreement for breach of either Transacting Party’s Fundamental Representations or the representations in
Section 7.8
and
Section 8.8
, respectively, or (iv)
Section 15.1(d)
or
15.2(d)
.
(d)
(i)
Linn shall not be required to indemnify Citizen and/or any other Person under
Section 15.1(c)
for Liabilities arising from a single event or series of related events unless the amount of such Liabilities exceeds $500,000 (the “
Individual Indemnity Threshold
”) and until and unless the aggregate amount of all such Liabilities exceeding the Linn Individual Indemnity Threshold exceeds 2.0% of the Initial Linn Agreed Value prior to any adjustments to the Initial Linn Agreed Value under this Agreement (the “
Linn Indemnity Deductible
”), and then only to the extent such Liabilities exceed the Linn Indemnity Deductible;
provided
that the
Individual Indemnity Threshold and the Linn Indemnity Deductible shall not apply with respect to any Liabilities relating to or arising from breaches of the Fundamental Representations of Linn,
Section 7.8
, breaches of Linn’s covenants, Linn’s indemnification obligations under
Section 15.1(a)
,
Section 15.1(b)
, or
Section 15.1(c)
(arising from breaches of the Fundamental Representations of Linn or for breaches of
Section 7.8
), or with respect to any Tax Claims, nor for Linn’s indemnification obligations under
Section 15.1(d)
.
(ii)
Citizen shall not be required to indemnify Linn or any other Person under
Section 15.2(c)
for Liabilities arising from a single event or series of related events unless the amount of such Liabilities exceeds the
Individual Indemnity Threshold and until and unless the aggregate amount of all such Liabilities exceeding the Citizen Individual Indemnity Threshold exceeds 2.0% of the Initial Citizen Agreed Value prior to any adjustments to the Initial Citizen Agreed Value under this Agreement (the “
Citizen Indemnity Deductible
”), and then only to the extent such Liabilities exceed the Citizen Indemnity Deductible;
provided
that the Individual Indemnity Threshold and the Citizen Indemnity Deductible shall not apply with respect to any Liabilities relating to or arising from breaches of Fundamental Representations of Citizen,
Section 8.8
, breaches of Citizen’s covenants, Citizen’s indemnification obligations under
Section 15.2(a)
,
Section 15.2(b)
, or
Section 15.2(c)
(arising from breaches of the Fundamental Representations of Citizen or for breaches of
Section 8.8
) or with respect to any Tax Claims, nor for Citizen’s indemnification obligations under
Section 15.2(d)
.
(e)
(i)
Linn shall not be required to indemnify Citizen or any other Person under
Section 15.1(c)
for Liabilities in excess of $250,000,000 (the “
Linn Indemnity Cap
”) in the aggregate;
provided
that the Linn Indemnity Cap shall not apply with respect to any Liabilities relating to or arising from breaches of the Fundamental Representations of Linn or with respect to any Tax Claims. Notwithstanding anything to the contrary, in no event shall Linn’s maximum aggregate liability arising out of or relating to this Agreement other than its liability under
Section 15.1(a)
(and it is agreed that this Section does not limit the indemnity obligations or Liabilities under
Section 15.1(a)
) exceed the Initial Linn Agreed Value prior to any adjustments to the Initial Linn Agreed Value under this Agreement.
(ii)
Citizen shall not be required to indemnify Linn and/or any other Person under
Section 15.2(c)
for Liabilities in excess of $250,000,000 (the “
Citizen Indemnity Cap
”) in the aggregate;
provided
that the Citizen Indemnity Cap shall not apply with respect to any Liabilities relating to or arising from breaches of the Fundamental Representations of Citizen or with respect to any Tax Claims. Notwithstanding anything to the contrary, in no event shall Citizen’s maximum aggregate liability arising out of or relating to this Agreement other than its liability under
Section 15.2(a)
(and it is agreed that this Section does not limit the indemnity obligations or Liabilities under
Section 15.2(a)
) exceed the Initial Citizen Agreed Value prior to any adjustments to the Initial Citizen Agreed Value under this Agreement.
(f)
In no event shall any Indemnified Person be entitled to duplicate compensation with respect to the same Liabilities under more than one provision of this Agreement (and no Indemnified Person shall have the right to recover under this
Article 15
with respect to any matter to the extent such Indemnified Person received appropriate adjustments to
the Initial Linn Agreed Value under
Section 3.2
or the Initial Citizen Agreed Value under
Section 3.3
, as applicable, in satisfaction of such indemnifiable matter) and the various documents delivered in connection with the Closing.
ARTICLE 16
TAX MATTERS
Section 16.1
Allocation of Asset Taxes
. Each of Linn and Citizen shall retain responsibility for all Asset Taxes assessed with respect to the ownership and operation of the Linn Assets or the Citizen Assets, as applicable, for (i) any period ending prior to the Effective Time, and (ii) the portion of any Straddle Period ending immediately prior to the Effective Time. All Asset Taxes with respect to the ownership or operation of the Assets arising on or after the Effective Time (including all Asset Taxes for any Straddle Period not apportioned to Linn or Citizen) shall be allocated to and borne by the Company. For purposes of determining whether and to what extent a liability for Asset Taxes for a Straddle Period is allocable to a taxable period (or portion thereof) ending before the Effective Time or from and after the Effective Time: (a) Asset Taxes imposed in connection with any sale or other transfer or assignment of property (real or personal, tangible or intangible) shall be allocated to the taxable period or portion thereof based on an interim closing of the books, (b) Asset Taxes that are attributable to the severance or production of Hydrocarbons shall be allocated to the period in which the severance or production giving rise to such Taxes occurred, and (c) Asset Taxes imposed on a periodic basis shall be allocated based on the number of days in the relevant taxable period that occur before the Effective Time, on the one hand, and the number of days in such taxable period that occur from and after the Effective Time, on the other hand.
Section 16.2
Tax Returns
. Each of Linn or Citizen, as applicable, shall timely file any Tax Return with respect to Asset Taxes due on or before the Closing Date or that otherwise relates solely to periods before the Closing Date and shall pay any Asset Taxes shown due and owing on such Tax Return, subject to the Contributors’ right to adjustment of the Linn Consideration Units or the Citizen Consideration Units, as applicable, for any Asset Taxes for which the Company is responsible under
Section 16.1
. From and after the Closing Date, the Company shall timely file any Tax Returns with respect to Asset Taxes required to be filed after the Closing Date, including such Tax Returns for any Straddle Period that are due after the Closing Date, and shall pay any Asset Taxes shown due and owing on such Tax Return, subject to the Company’s right to adjustment of the Linn Consideration Units or the Citizen Consideration Units, as applicable, for any Asset Taxes for which Linn or Citizen, as applicable, is responsible under
Section 16.1
. To the extent the actual amount of an Asset Tax is not known at the time an adjustment is to be made with respect to such Asset Tax pursuant to
Section 3.2
or
Section 3.3
, as applicable, the Parties shall utilize the most recent information available in estimating the amount of such Asset Tax for purposes of such adjustment. To the extent the actual amount of an Asset Tax (or the amount thereof paid or economically borne by a Transacting Party) is ultimately determined to be different than the amount (if any) that was taken into account in determining the Final Linn Adjustment Amount or the Final Citizen Adjustment Amount, as applicable, the Linn Consideration Units or the Citizen Consideration Units, as applicable, shall be adjusted to the extent necessary to cause each Transacting Party to bear the amount of such Asset Tax that is allocable to such Transacting Party under
Section 16.1
.
Section 16.3
Tax Cooperation
. Each of the Company, Linn and Citizen agrees to furnish to each other, upon request, as promptly as practicable, such information and assistance relating to the Linn Assets and the Linn Additional Assets or the Citizen Assets and the Citizen Additional Assets, as applicable, as is reasonably necessary for the filing of all Tax Returns, and making of any election related to Taxes, the preparation for any audit by any Governmental Body, and the prosecution or defense of any action, suit or proceeding related to Taxes involving the Linn Assets and the Linn Additional Assets or the Citizen Assets and the Citizen Additional Assets, as applicable, and each shall execute and deliver such documents as are reasonably necessary to carry out the intent of this
Section 16.3
. Linn and Citizen agree to retain all books and records with respect to Tax matters pertinent to the Linn Assets and the Linn Additional Assets or the Citizen Assets and the Citizen Additional Assets, as applicable, relating to any taxable period beginning on or before the Effective Time until the expiration of the statute of limitations of the respective taxable periods and to abide by all record retention agreements entered into with any Governmental Body.
Section 16.4
Transfer Taxes
. In the event any Transfer Taxes are due as a result of the transfer by Linn of the Linn Assets and the Linn Additional Assets to the Company or by Citizen of the Citizen Assets and the Citizen Additional Assets to the Company, the Company shall be responsible for timely filing any Tax Return relating to such Transfer Taxes and paying such Transfer Taxes. The Parties shall reasonably cooperate in good faith to minimize, to the extent permissible under applicable Law, the amount of any such Transfer Taxes.
Section 16.5
Tax Refunds
. The amount of any refunds of Asset Taxes of Linn or Citizen, as applicable, for any period prior to the Effective Time shall be for the account of Linn or Citizen, respectively. The amount of any refunds of Asset Taxes of Linn or Citizen, as applicable, for any Tax period beginning after the Effective Time shall be for the account of the Company. The amount of any refund of Asset Taxes for any Straddle Period shall be equitably apportioned between the Company and Linn or Citizen, respectively, in accordance with the principles set forth in
Section 16.1
. Each Party shall forward, and shall cause its Affiliates to forward, to the Party entitled to receive a refund of Tax pursuant to this
Section 16.5
the amount of such refund within thirty (30) days after such refund is received, net of any costs or expenses incurred by such Party or its Affiliates in procuring such refund.
ARTICLE 17
MISCELLANEOUS
Section 17.1
Governing Law
. THIS AGREEMENT AND THE LEGAL RELATIONS AMONG THE PARTIES SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, EXCLUDING ANY CONFLICTS OF LAW RULE OR PRINCIPLE THAT MIGHT REFER CONSTRUCTION OF SUCH PROVISIONS TO THE LAWS OF ANOTHER JURISDICTION, EXCEPT TO THE EXTENT THAT THE LAW OF A STATE IN WHICH THE ASSETS ARE LOCATED NECESSARILY GOVERNS, IN WHICH EVENT OKLAHOMA LAW SHALL GOVERN. SUBJECT TO
SECTION 17.3
, IN RESPECT OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, EACH OF THE PARTIES HERETO CONSENTS TO THE EXCLUSIVE JURISDICTION AND VENUE OF ANY FEDERAL OR STATE COURT LOCATED WITHIN HARRIS COUNTY, TEXAS, AND WAIVES ANY OBJECTION TO
JURISDICTION OR VENUE OF, AND WAIVES ANY MOTION TO TRANSFER VENUE FROM, ANY OF THE AFORESAID COURTS. EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY DISPUTE.
Section 17.2
Conspicuous Language
. THE PARTIES AGREE THAT, TO THE EXTENT REQUIRED BY LAW TO BE EFFECTIVE, THE PROVISIONS IN THIS AGREEMENT IN ALL CAPS ARE “CONSPICUOUS” FOR THE PURPOSE OF ANY LAW.
Section 17.3
Dispute Resolution
. Except as provided in
Articles 3
,
4
and
5
, all disputes and controversies, in each case, arising out of or relating to this Agreement, shall be determined and resolved in accordance with the following procedures:
(a)
Covered Disputes
. Any Claim among the Parties or their respective Affiliates arising out of or relating to this Agreement, including the meaning of its provisions, or the proper performance of any of its terms, its breach, termination or invalidity (each, a “
Dispute
”) shall be resolved in accordance with the procedures specified in this
Section 17.3
, which shall be the sole and exclusive procedure for the resolution of any such Dispute, except that any Party, without prejudice to the following procedures, may file a complaint to seek preliminary injunctive or other provisional judicial relief, if in its sole judgment, that action is necessary to avoid irreparable damage or to preserve the status quo. Despite that action the Parties will continue to participate in good faith in the procedures specified in this
Section 17.3
.
(b)
Initial Mediation
. In the event of a Dispute, and prior to proceeding to arbitration pursuant to
Section 17.3
, the Parties must submit the Dispute to any mutually agreed mediation service for mediation by providing to the mediation service a joint, written request for mediation, setting forth the subject of the Dispute and the relief requested. The Dispute shall be mediated in Oklahoma City, Oklahoma within thirty (30) days from the date that a written request for mediation is made by any Party, and the mediation shall be conducted before a single mediator to be agreed upon by the Parties. If the Parties cannot agree on the mediator, each Party shall select a mediator and the mediators so selected shall together unanimously select a neutral mediator who will conduct the mediation. The Parties shall cooperate with the mediation service and with one another in scheduling the mediation proceedings. The Parties covenant that they will use commercially reasonable efforts in participating in the mediation. The Parties agree that the mediator’s fees and expenses and the costs incidental to the mediation will be shared equally by the Parties. The Parties further agree that all offers, promises, conduct, and statements, whether oral or written, made in the course of the mediation by any of the Parties, their agents, employees, experts, and attorneys, and by the mediator and any employees of the mediation service, are confidential, privileged, and inadmissible for any purpose, including impeachment, in any litigation, arbitration or other proceeding involving the Parties, provided that evidence that is otherwise admissible or discoverable shall not be rendered inadmissible or non-discoverable as a result of its use in the mediation. The decision of the mediator shall be non-binding on the Parties.
(c)
Arbitration as a Final Resort
. Any Dispute that is not resolved by mediation pursuant to
Section 17.3
must be resolved through the use of binding arbitration in accordance with the AAA Rules, as supplemented to the extent necessary to determine any
procedural appeal question by the Federal Arbitration Act (Title IX of the United States Code). If there is any inconsistency between this
Section 17.3
and the Commercial Arbitration Rules of the Federal Arbitration Act, the terms of this
Section 17.3
shall control the rights and obligations of the Parties. Such arbitration shall be conducted as follows:
(i)
If there is more than one Dispute that involves the same facts and parties as the facts and parties with respect to which arbitration has been initiated pursuant to this Agreement, such Disputes shall be consolidated into the first arbitration initiated pursuant to this Agreement.
(ii)
Arbitration may be initiated by a Party (“
Claimant
”) serving written notice on another Party (“
Respondent
”) that the Claimant has referred the Dispute to binding arbitration pursuant to this
Section 17.3(c)
. Claimant’s notice initiating binding arbitration must describe in reasonable detail the nature of the Dispute and the facts and circumstances relating thereto and identify the arbitrator Claimant has appointed. Respondent shall respond to Claimant within thirty (30) days after receipt of Claimant’s notice, identifying the arbitrator Respondent has appointed. All arbitrators must be neutral parties who have never been officers, directors or employees of or performed material work for the Parties or any of their Affiliates within the preceding five (5) year period and must agree in writing to keep strictly confidential the specifics and existence of the dispute as well as all proprietary records of the Parties reviewed by the arbitrators in the process of resolving such dispute. Arbitrators must have a formal education or training in the area of dispute resolution and must have not less than seven (7) years of experience as a lawyer in the energy industry with experience in upstream or transactional issues. The two (2) arbitrators so chosen by the parties to the Dispute shall select a third arbitrator within thirty (30) days after the second arbitrator has been appointed. If either (A) the Respondent fails to name its party-appointed arbitrator within the time permitted, or (B) the two (2) arbitrators are unable to agree on a third arbitrator within thirty (30) days from the date the second arbitrator has been appointed, then, in either case, the missing arbitrator(s) shall be selected by the AAA with due regard given to the selection criteria above and input from the parties to the Dispute and other arbitrators. The AAA shall select the missing arbitrator(s) not later than ninety (90) days from initiation of arbitration. In the event the AAA should fail to select the third arbitrator within ninety (90) days from initiation of arbitration, then either party to the Dispute may petition the Chief United States District Judge for the Northern District of Oklahoma to select the third arbitrator. Due regard shall be given to the selection criteria above and input from the parties to the arbitrable Dispute and other arbitrators.
(iii)
Claimant and Respondent shall each pay one-half of the compensation and expenses of the AAA and the arbitrator(s).
(iv)
The hearing shall be conducted in Oklahoma City, Oklahoma and commence within sixty (60) days after the selection of the third arbitrator, unless delayed by order of the arbitrators. The hearing shall be based upon written position papers submitted by Claimant and Respondent within thirty (30) days after the selection of the third arbitrator, stating such Person’s proposed resolution of the dispute. The parties to the Dispute and the arbitrators shall proceed diligently and in good faith in order that the award may be made as promptly as possible. The arbitrators shall determine the Disputes and render a final award on or before thirty (30) days following the completion of the hearing. The arbitrators’ decision shall be in writing
and set forth the reasons for the award. In rendering the award, the arbitrators shall abide by (A) the terms and conditions of this Agreement including, without limitation, any and all restrictions, prohibitions or limitations on damages or remedies set forth in this Agreement and (B) the Law of the State of Delaware. The arbitrators shall not have jurisdiction or authority to add to, detract from or alter in any way the provisions of this Agreement.
(v)
Notwithstanding any other provision of this Agreement, any party to the Dispute may, prior to the appointment of the third arbitrator, seek temporary injunctive relief from any court of competent jurisdiction;
provided
that the party seeking such relief shall (if arbitration has not already been commenced) simultaneously commence arbitration. Such court-ordered relief shall not continue more than ten (10) days after the appointment of the arbitrators and in no event for longer than ninety (90) days. In order to prevent irreparable harm, the arbitrators shall have the power to grant temporary or permanent injunctive or other equitable relief. Except as provided in the Federal Arbitration Act, the decision of the arbitrators shall be final, binding on and non-appealable by the parties to the Dispute. Each party to the Dispute agrees that any arbitration award against it may be enforced in any court of competent jurisdiction and that either party to the Dispute may authorize any such court to enter judgment on the arbitrators’ decisions. The arbitrators may not grant or award indirect, consequential, punitive or exemplary damages or damages for lost profits.
(vi)
In any Dispute under this Agreement, the prevailing party to the Dispute shall be entitled to recover arbitration and court costs and attorneys’ fees in addition to any other relief to which such Person is entitled.
(d)
Tolling and Performance
. All applicable statutes of limitation and defenses based upon the passage of time shall be tolled while the procedures specified in
Section 17.3(c)
are pending. The Parties shall take any action required to effectuate that tolling. Each Party is required to continue to perform its obligations under this Agreement pending completion of the procedures set forth in
Section 17.3(c)
, unless to do so would be impossible or impracticable under the circumstances.
Section 17.4
Counterparts
. This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all of such counterparts shall constitute for all purposes one agreement. Any signature hereto delivered by a Party by facsimile or other electronic transmission shall be deemed an original signature hereto.
Section 17.5
Notices
. All notices and communications required or permitted to be given hereunder, but excluding service of process shall be sufficient in all respects (a) if given in writing and delivered personally, (b) if sent by overnight courier, (c) if mailed by U.S. Express Mail or by certified or registered U.S. Mail with all postage fully prepaid, (d) sent by facsimile transmission (
provided
any such facsimile transmission is confirmed either orally or by written confirmation), or (e) sent by electronic mail transmission (
provided
any such electronic mail transmission is supplemented by a written notice delivered pursuant to one of the methods specified in items (a) through (d) above within two (2) Business Days after delivery of such electronic mail transmission;
provided
that electronic mail transmitted on or before any deadline regardless of whether such supplemental written notice is delivered prior to such deadline shall
be deemed adequate notice hereunder) and, in each case, addressed to the appropriate Party at the address for such party shown below:
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If to Linn:
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Linn Operating, LLC
600 Travis Street, Suite 1400
Houston, Texas 77002
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Attention:
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David Rottino, Chief Financial Officer
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Email:
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DRottino@linnenergy.com
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with a copy (which shall not constitute notice) to:
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Linn Operating, LLC
600 Travis Street, Suite 1400
Houston, Texas 77002
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Attention:
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Candice Wells, General Counsel
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Email:
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CWells@linnenergy.com
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and
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Latham & Watkins LLP
811 Main Street, Suite 3700
Houston, Texas 77002
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Attention:
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Michael Dillard
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Email:
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michael.dillard@lw.com
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If to Citizen:
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Citizen Energy II, LLC
320 S. Boston Ave., Suite 1300
Tulsa, OK 74103
Attn: James Woods
Email: james@ce2ok.com
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JVL Advisors, LLC
SPQR Energy, LP
Lobo Baya LLC
10000 Memorial Dr., Suite 550
Houston, TX 77024
Attn: John V. Lovoi; Paul Loyd
Email: jlovoi@jvladvisors.com and pbl@loydhouse.com
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with a copy (which shall not constitute notice) to:
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Thompson & Knight LLP
333 Clay Street, Suite 3300
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Houston, Texas 77002
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Attention: Timothy L. Samson; Hunter White
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Email: tim.samson@tklaw.com; hunter.white@tklaw.com
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If to the Company:
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Linn Operating, LLC
600 Travis Street, Suite 1400
Houston, Texas 77002
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Attention:
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David Rottino, Chief Financial Officer
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Email:
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DRottino@linnenergy.com
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Citizen Energy II, LLC
320 S. Boston Ave., Suite 1300
Tulsa, OK 74103
Attn: James Woods
Email: james@ce2ok.com
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JVL Advisors, LLC
SPQR Energy, LP
Lobo Baya LLC
10000 Memorial Dr., Suite 550
Houston, TX 77024
Attn: John V. Lovoi and Paul Loyd
Email: jlovoi@jvladvisors.com and pbl@loydhouse.com
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with a copy (which shall not constitute notice) to:
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Linn Operating, LLC
600 Travis Street, Suite 1400
Houston, Texas 77002
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Attention:
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Candice Wells, General Counsel
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Email:
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CWells@linnenergy.com
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Latham & Watkins LLP
811 Main Street, Suite 3700
Houston, Texas 77002
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Attention:
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Michael Dillard
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Email:
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michael.dillard@lw.com
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and
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Thompson & Knight LLP
333 Clay Street, Suite 3300
Houston, Texas 77002
Attention: Timothy T. Samson and Hunter White
Email: tim.samson@tklaw.com; hunter.white@tklaw.com
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Any notice given in accordance herewith shall be deemed to have been given (i) when delivered to the addressee in person, or by courier, during normal business hours, or on the next Business Day if delivered after business hours, (ii) when received by the addressee via facsimile or electronic mail transmission during normal business hours, or on the next Business Day if received after business hours, or (iii) upon actual receipt by the addressee after such notice has either been delivered to an overnight courier or deposited in the U.S. Mail, as the case may be. The Parties may change the address, telephone number, facsimile number, electronic mail address and individuals to which such communications to be addressed by giving written notice to the other Parties in the manner provided in this
Section 17.5
. Notwithstanding anything in this
Section 17.5
to the contrary, documents and other information to be delivered to the Parties hereunder may be transmitted to such Parties by electronic means other than electronic mail transmission;
provided
confirmation of the delivery of such documents and other information is confirmed orally or by written confirmation (including by automated electronic means).
Section 17.6
Expenses
. Except as otherwise specifically provided, all fees, costs and expenses incurred by the Parties in negotiating this Agreement shall be paid by the Party incurring the same, including legal and accounting fees, costs and expenses.
Section 17.7
Waiver; Rights Cumulative
. Any of the terms, covenants, or conditions hereof may be waived only by a written instrument executed by or on behalf of the Party or Parties waiving compliance. No course of dealing on the part of any Party, or its respective officers, employees, agents, accountants, attorneys, investment bankers, consultants or other authorized representatives, nor any failure by a Party to exercise any of its rights under this Agreement shall operate as a waiver thereof or affect in any way the right of such Party at a later time to enforce the performance of such provision. No waiver by any Party of any condition, or any breach of any term or covenant contained in this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such condition or breach or a waiver of any other condition or of any breach of any other term or covenant. The rights of the Parties under this Agreement shall be cumulative, and the exercise or partial exercise of any such right shall not preclude the exercise of any other right.
Section 17.8
Entire Agreement; Conflicts
. THIS AGREEMENT AND EACH OTHER AGREEMENT EXECUTED BY THE PARTIES OR THEIR RESPECTIVE AFFILIATES IN CONNECTION HEREWITH (INCLUDING THE LLC AGREEMENT, THE CONFIDENTIALITY AGREEMENT AND THE MASTER SERVICES AGREEMENT), AND THE EXHIBITS AND APPENDICES HERETO AND THERETO, COLLECTIVELY CONSTITUTE THE ENTIRE AGREEMENT AMONG THE PARTIES PERTAINING TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ALL PRIOR AGREEMENTS, UNDERSTANDINGS, NEGOTIATIONS AND DISCUSSIONS, WHETHER ORAL OR
WRITTEN, OF SUCH PARTIES AND THEIR RESPECTIVE AFFILIATES PERTAINING TO THE SUBJECT MATTER OF THIS AGREEMENT. THERE ARE NO WARRANTIES, REPRESENTATIONS OR OTHER AGREEMENTS AMONG THE PARTIES OR THEIR RESPECTIVE AFFILIATES RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT or THE TRANSACTION DOCUMENTS, AND NO PARTY OR SUCH PARTY’S AFFILIATES SHALL BE BOUND BY OR LIABLE FOR ANY ALLEGED REPRESENTATION, PROMISE, INDUCEMENT OR STATEMENTS OF INTENTION NOT SO SET FORTH. IN THE EVENT OF A CONFLICT BETWEEN (A) THE TERMS AND PROVISIONS OF THIS AGREEMENT AND THE TERMS AND PROVISIONS OF ANY EXHIBIT OR APPENDIX HERETO, OR (B) THE TERMS AND PROVISIONS OF THIS AGREEMENT AND THE TERMS AND PROVISIONS OF ANY OTHER AGREEMENT EXECUTED IN CONNECTION HEREWITH, IN EACH CASE, THE TERMS AND PROVISIONS OF THIS AGREEMENT SHALL GOVERN AND CONTROL;
PROVIDED
,
HOWEVER
, THAT THE INCLUSION IN ANY OF THE EXHIBITS OR APPENDICES HERETO OR THE AGREEMENTS SET FORTH IN CLAUSE (B) ABOVE OF TERMS AND PROVISIONS NOT ADDRESSED IN THIS AGREEMENT SHALL NOT BE DEEMED A CONFLICT, AND ALL SUCH ADDITIONAL PROVISIONS SHALL BE GIVEN FULL FORCE AND EFFECT, SUBJECT TO THE PROVISIONS OF THIS
SECTION 17.8
AND
pROVIDED
FURTHER THAT IN THE EVENT OF A CONFLICT BETWEEN THE TERMS AND PROVISIONS OF THIS AGREEMENT AND THE TERMS AND PROVISIONS OF THE LLC AGREEMENT, THE TERMS AND PROVISIONS OF THE LLC AGREEMENT SHALL GOVERN AND CONTROL.
Section 17.9
Amendment
. This Agreement may be amended only by an instrument in writing executed by Linn and Citizen and expressly identified as an amendment or modification.
Section 17.10
Parties in Interest
. Except as provided in
Section 6.1(c)
and
Article 15
nothing in this Agreement, express or implied, shall entitle any Person other than the Parties or their respective successors and permitted assigns to any Claim, remedy or right of any kind.
Section 17.11
Binding Effect
. The provisions of this Agreement shall be binding upon, and inure to the benefit of, the Parties and their respective successors and permitted assigns.
Section 17.12
Preparation of Agreement
. Each of the Parties and their respective counsels 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.
Section 17.13
Severability
. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not materially affected in any manner adverse to any Party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.
Section 17.14
Limitation on Damages
. NONE OF THE PARTIES SHALL BE ENTITLED TO RECOVER FROM ANY OTHER PARTY, OR ANY OTHER PARTY’S RESPECTIVE AFFILIATES, ANY INDIRECT, CONSEQUENTIAL, PUNITIVE, SPECIAL OR EXEMPLARY DAMAGES OR DAMAGES FOR LOST PROFITS OF ANY KIND, IN EACH CASE, ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, EXCEPT TO THE EXTENT ANY SUCH PARTY SUFFERS SUCH DAMAGES TO A THIRD PARTY, WHICH DAMAGES (INCLUDING COSTS OF DEFENSE AND REASONABLE ATTORNEYS’ FEES INCURRED IN CONNECTION WITH DEFENDING AGAINST SUCH DAMAGES) SHALL NOT BE EXCLUDED BY THIS PROVISION AS TO RECOVERY HEREUNDER. SUBJECT TO THE PRECEDING SENTENCE, EACH PARTY, ON BEHALF OF ITSELF AND EACH OF ITS AFFILIATES, WAIVES ANY RIGHT TO RECOVER ANY INDIRECT, CONSEQUENTIAL, PUNITIVE, SPECIAL OR EXEMPLARY DAMAGES OR DAMAGES FOR LOST PROFITS OF ANY KIND, IN EACH CASE, ARISING IN CONNECTION WITH OR WITH RESPECT TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 17.15
Assignment
. No Party shall assign all or any part of this Agreement, nor shall any Party assign or delegate any of its rights or duties hereunder, without the prior written consent of the other Parties (which consent may be withheld for any reason) and any assignment or delegation made without such consent shall be void. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and assigns.
Section 17.16
Time is of the Essence
. This Agreement contains a number of dates and times by which performance or the exercise of rights is due, and the Parties intend that each and every such date and time be the firm and final date and time, as agreed. For this reason, each Party hereby waives and relinquishes any right it might otherwise have to challenge its failure to meet any performance or rights election date applicable to it on the basis that its late action constitutes substantial performance, to require the other Parties to show prejudice, or on any equitable grounds. Without limiting the foregoing, time is of the essence in this Agreement. If the date specified in this Agreement for giving any notice or taking any action is not a Business Day (or if the period during which any notice is required to be given or any action taken expires on a date which is not a Business Day), then the date for giving such notice or taking such action (and the expiration date of such period during which notice is required to be given or action taken) shall be the next day which is a Business Day.
Section 17.17
Employee Issues
.
(a)
From and after Closing, each of Linn and Citizen shall use commercially reasonable efforts to cooperate with the Company to determine mutually acceptable methods of Linn and Citizen making available certain of their employees and their Affiliates’ employees for hire by the Company.
(b)
Subject to
Section 17.17(a)
, from and after the Execution Date until the nine month anniversary of Closing, unless Linn otherwise consents in writing, none of Citizen and its Affiliates and the Company and its Affiliates shall solicit, induce, or recruit any employee
of Linn or its Affiliates (“
Linn Employees
”). The foregoing provision shall not prohibit the Company and its Affiliates from making offers of employment to the personnel made available by Linn for hire by the Company pursuant to
Section 17.17(a)
or who contact Citizen or its Affiliates or the Company or its Affiliates directly without solicitation, inducement or recruitment by the hiring party or its Affiliates, nor shall it prohibit solicitations by Citizen and its Affiliates and the Company and its Affiliates by general advertisement in periodicals or other advertisement media or through the use of search firms that are not directed specifically at Linn Employees.
(c)
Subject to
Section 17.17(a)
, from and after the Execution Date until the nine month anniversary of Closing, unless Citizen otherwise consents in writing, none of Linn and its Affiliates and the Company and its Affiliates shall solicit, induce, or recruit any employee of Citizen or its Affiliates (“
Citizen Employees
”). The foregoing provision shall not prohibit the Company and its Affiliates from making offers of employment to the personnel made available by Citizen for hire by the Company pursuant to
Section 17.17(a)
or who contact Linn or its Affiliates or the Company or its Affiliates directly without solicitation, inducement or recruitment by the hiring party or its Affiliates, nor shall it prohibit solicitations by Linn and its Affiliates and the Company and its Affiliates by general advertisement in periodicals or other advertisement media or through the use of search firms that are not directed specifically at Citizen Employees.
Section 17.18
Retained Litigation.
(a)
With regard to the matters set forth described in
Part I of
Schedule 7.6
, or any related royalty lawsuits regarding the Linn Assets, Linn may not settle or compromise such claims or lawsuit without the written consent of Company if any settlement or compromise (a) requires Company to admit (or is a deemed admission by Company of) fault or wrongdoing, or (b) or requires Company to part with any property right or interest, assume any obligation or make any payment for which Linn is not providing the Company indemnity hereunder.
(b)
With regard to the matters set forth described in
Part I of
Schedule 8.6
, or any related royalty lawsuits regarding the Citizen Assets, Citizen may not settle or compromise such claims or lawsuit without the written consent of Company if any settlement or compromise (a) requires Company to admit (or is a deemed admission by Company of) fault or wrongdoing, or (b) or requires Company to part with any property right or interest, assume any obligation or make any payment for which Citizen is not providing the Company indemnity hereunder.
[Signature Pages Follow]
IN WITNESS WHEREOF
, this Agreement has been signed by each of the Parties on the Execution Date.
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PARTIES
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LINN ENERGY HOLDINGS, LLC
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By:
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/s/ Mark E. Ellis
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Name:
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Mark E. Ellis
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Title:
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President & CEO
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LINN OPERATING, LLC
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By:
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/s/ Mark E. Ellis
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Name:
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Mark E. Ellis
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Title:
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President & CEO
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CITIZEN ENERGY II, LLC
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By:
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Name:
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Title:
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ROAN RESOURCES LLC
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By: CITIZEN ENERGY II, LLC
Its sole member
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By:
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Name:
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Title:
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[
Signature Page to Contribution Agreement
]
US-DOCS\83219354.25
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CITIZEN ENERGY II, LLC
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By:
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/s/ Robbie Woodard
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Name:
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Robbie Woodard
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Title:
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Chief Operating Officer
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SIGNATURE PAGE TO CONTRIBUTION AGREEMENT
US-DOCS\70625456.12
Error! Unknown document property name.
US-DOCS\83219354.25
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ROAN RESOURCES LLC
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By: Citizen Energy II, LLC, iIts sole member
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By:
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/s/ James R. Woods
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Name:
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James R. Woods
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Title:
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Manager
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SIGNATURE PAGE TO CONTRIBUTION AGREEMENT
US-DOCS\70625456.12
Error! Unknown document property name.
US-DOCS\83219354.25
APPENDIX A
DEFINITIONS
“
AAA
” means the American Arbitration Association.
“
AAA Rules
” means the Commercial Arbitration Rules of the AAA.
“
AFE
” has the meaning set forth in
Section 7.18
.
“
Affiliate
” means with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by or is under common Control with, such Person;
provided
,
however
, after the Closing, the Company and its subsidiaries shall not, for purposes of this Agreement, constitute a current or former Affiliate of either Transacting Party or any of its Affiliates; and
provided
further
, that Citizen’s “
Affiliates
” shall not include (a) JVL Advisors, L.L.C. (“
JVL
”), (b) any investment vehicles or investment funds for which JVL serves as adviser or manager, or (c) the portfolio investments of any such investment vehicle or investment fund (other than Citizen and its subsidiaries).
“
Agreement
” has the meaning set forth in Preamble of this Agreement.
“
Allocated Values
” has the meaning set forth in
Section 3.4(a)
.
“
Allocation Schedule
” has the meaning set forth in
Section 3.4(b)
.
“
Amended and Restated Linn Midstream Agreement
” means the Amended and Restated Gas Gathering and Processing Agreement by and between LEH and Linn Midstream, LLC, dated effective April 1, 2017.
“
Asset Taxes
” shall mean ad valorem, property, excise, severance, production, sales, use, or similar Taxes based upon or measured by the ownership or operation of the Assets or the production of Hydrocarbons or the receipt of proceeds therefrom, but excluding, for the avoidance of doubt, Income Taxes and Transfer Taxes.
“
Assets
” means, when used in reference to Linn, the Linn Assets and the Linn Additional Assets, and when used in reference to Citizen, the Citizen Assets and the Citizen Additional Assets.
“
Assignment
” means any Linn Assignment or Citizen Assignment executed pursuant to this Agreement, as applicable.
“
Burdens
” means any royalty, overriding royalty, production payment, carried interest, net profits interest, reversionary interest or other burden upon, measured by or payable out of production.
“
Business Day
” means a day (other than a Saturday or Sunday) on which commercial banks in Oklahoma, Texas and New York are generally open for business.
“
Citizen
” has the meaning set forth in the Preamble.
“
Citizen Actual Section Value
” means, in the case of any Target Formation in any Governmental Section, the product of (a) the actual aggregate Citizen Section Net Acres subject to the Citizen Section Leases in such Target Formation in such Governmental Section, and (b) the sum of (i) the Zone Price for such Target Formation in such Governmental Section and (ii) the product of (A) the Zone NRI Value for such Target Formation in such Governmental Section, (B) the amount (whether positive, negative or zero) obtained by subtracting the Zone Average NRI for such Target Formation in such Governmental Section from the actual Citizen Section Weighted Average NRI associated with the Citizen Section Leases in such Target Formation in such Governmental Section; and (C) 100.
“
Citizen Additional Assets
” means the Citizen Additional Leases and any other items acquired by Citizen with the Citizen Additional Leases that would constitute “Citizen Assets” to the extent the Citizen Additional Leases were Citizen Leases.
“
Citizen Additional Leases
” means all oil and gas leases, oil, gas and mineral leases, subleases and other leaseholds, mineral interests, mineral fee interests, royalty interests, overriding royalty interests, net profit interests, payments out of production, carried interests, reversionary rights, contractual rights to production or other interests in Hydrocarbons acquired by Citizen either (i) after April 1, 2017 and prior to Closing, (ii) after April 1, 2017 and prior to the expiration of thirty (30) days after Closing as long as Citizen has entered into a definitive agreement to acquire such interest prior to the Closing (for which written notice of such definitive agreement and a list of the oil and gas leases covered thereby has been provided to Linn prior to Closing), (iii) prior to April 1, 2017 (and are still owned by Citizen as of the Execution Date) but which are not listed on
Exhibit A-1 (Part II)
and are listed on
Exhibit A-5-2 (Part II)
, or (iv) that are acquired by Citizen after Closing and prior to the expiration of the Title Cure Period, insofar and only insofar as such acquisitions under this subpart (iii) are made via acreage trades, pursuant to which Citizen has traded acreage that is outside of the areas identified in
Exhibit H
for such interests) and with regard to all acquisitions described in subparts (i)-(iv) above, insofar and only insofar that such acquired interests: (a) are within the areas identified in
Exhibit H
, (b) with respect to each oil and gas lease and oil, gas and mineral lease, subleases and other leaseholds, to the extent the same is not held beyond its primary term by production, the same has a remaining primary term that expires no less than two (2) years after the Effective Time (other than those described in
Exhibit A-5-2 (Part II
), which to the extent the same is not held beyond its primary term by production or operations, the same has a primary term (whether such primary term relates to the primary term under such Citizen Lease or, if applicable and the Citizen Lease is subject to a term assignment, the primary term provided in such term assignment pursuant to which Citizen or its predecessor-in-interest acquired such Citizen Lease and such primary term identified in such term assignment shall be deemed to be the primary term of such Citizen Lease for purposes of this provision) that is not earlier than the primary term expiration date identified for such Citizen Lease in
Exhibit A-5-2 (Part II)
), (c) includes Qualifying Depths of one or more of the applicable Section Target Formations, and (d) entitles Citizen (and following the assignment of such Citizen Additional Lease, the Company) to receive not less than a 75% Net Revenue Interest therein with respect to the applicable Target Formation(s). Notwithstanding anything to the contrary herein, any Hydrocarbon interest
Appendix A-2
US-DOCS\83219354.25
identified on
Exhibit A-1 (Part II)
as a Citizen Lease shall not be a Citizen Additional Lease for any purpose hereunder.
“
Citizen Adjustment Notice
” has the meaning set forth in
Section 3.3(b)(ii)
.
“
Citizen Aggregate Deductible
” has the meaning set forth in
Section 4.3(d)(iii)
.
“
Citizen Assets
” means all of Citizen’s right, title and interest in and to the following, less and except the Citizen Excluded Assets:
(a)
all oil and gas leases, oil, gas and mineral leases, subleases and other leaseholds,, overriding royalty interests, net profit interests, payments out of production, carried interests, reversionary rights, contractual rights to production or other interests in Hydrocarbons, in each case, described in
Exhibit A-1 (Part II)
, together with any and all other right, title and interest of Citizen in and to the leasehold estates or other rights and interests created by any of the foregoing, subject to the terms, conditions, covenants and obligations set forth in such interests and/or
Exhibit A-1 (Part II)
(all such interests, the “
Citizen Leases
”);
(b)
all oil and gas wells, water wells, carbon dioxide wells, salt water disposal wells, injection wells, observation wells, and other wells and wellbores located on or allocable to the Citizen Leases and Citizen Units, including those described on
Exhibit A-2 (Part II)
, whether producing, shut in, or abandoned (all such interests, the “
Citizen Wells
”);
(c)
all rights and interests in, under or derived from all unitization, communitization, and pooling agreements or compulsory pooling orders in effect with respect to any of the Citizen Leases, or Citizen Wells and the units created thereby (all such interests, the “
Citizen Units
”);
(d)
to the extent transferable after the exercise of commercially reasonable efforts (which shall not require the payment of a fee or the provision of any other consideration), all Contracts (i) to which Citizen is a party (or is a successor or assign of a party), (ii) that pertain primarily to any of the Citizen Assets and (iii) that will be binding on the Company after Closing, but exclusive of any master service agreements, blanket agreements or similar Contracts (all such contracts, “
Citizen Contracts
”);
(e)
all Rights-of-Way to the extent used in connection with the ownership or operation of any of the Citizen Leases, Citizen Wells, Citizen Units or other Citizen Assets, including the Rights-of-Way set forth in
Exhibit A-3 (Part II)
(all such interests, collectively, the “
Citizen Rights-of-Way
”);
(f)
all flowlines, pipelines and appurtenances thereto that are located on the Citizen Leases or Citizen Units or used, or held for use, in connection with the operation of the Citizen Wells, but excluding all Citizen Excluded Midstream Assets (all such interests (subject to such exclusions), the “
Citizen Gathering Systems
”, and together with the Citizen Leases, Citizen Units, and Citizen Wells, collectively, the “
Citizen Oil and Gas Properties
”);
(g)
all personal property, equipment, machinery, tools, compressors, meters, tanks, pumps, platforms, pulling machines, boilers, buildings, pipe yards, salt water disposal facilities, utility lines, computer and automation equipment, telecommunications equipment, field radio
Appendix A-3
US-DOCS\83219354.25
telemetry, and associated frequencies and licenses, pressure transmitters, central processing equipment, fixtures, improvements, facilities and other tangible personal property located on the Citizen Oil and Gas Properties, including such equipment described on
Exhibit A-4 (Part II)
(all such interests, the “
Citizen Equipment
”);
(h)
all of the files, records, information and data, whether written or electronically stored, primarily relating to the Citizen Assets and in the possession of Citizen or its Affiliates, including: (i) land and title records (including abstracts of title, title opinions and title curative documents); (ii) Citizen Contract files; (iii) correspondence; (iv) operations, environmental (including environmental assessments and studies), production and accounting records; (v) facility and well records; and (vi) to the extent transferable, seismic, geologic and technical data including logs and maps (all such interests, the “
Citizen
Records
”);
(i)
all Hydrocarbons (or the proceeds from the sale of Hydrocarbons) (i) produced from or attributable to the Citizen Leases, Citizen Units, and Citizen Wells at and after the Effective Time, (ii) located in pipelines or in tanks above the pipeline sales connection attributable to the Citizen Leases, Citizen Units, and Citizen Wells at and after the Effective Time, or (iii) in storage or existing in stock tanks, pipelines and/or plants (including inventory) as of the Effective Time;
(j)
all claims and causes of action to the extent attributable to the Company Assumed Obligations;
(k)
to the extent that they may be assigned, all Permits that are primarily used in connection with the ownership or operation of the Citizen Assets;
(l)
all Imbalances relating to the other Citizen Assets;
(m)
to the extent transferable, all Seismic Contracts and Seismic Data and any related interpretive geophysical and geological data relating to the Citizen Oil and Gas Properties, but only to the extent such Seismic Contracts and Seismic Data may be assigned without payment of fees or other penalties to a Third Party;
(n)
any refunds, claims for refunds or rights to receive refunds from any Governmental Body with respect to Taxes attributable to the Citizen Assets and periods of time from and after the Effective Time; and
(o)
all radio equipment, SCADA and measurement technology, and other production related mobility devices (such as SCADA controllers), well communication devices, and any other information technology systems and licenses associated with the foregoing, in each case only to the extent such assets and licenses are (i) used or held for use solely in connection with the operation of the Citizen Oil and Gas Properties, and (ii) to the extent assignable (with consent, if applicable, but without the payment of any fee or the provision of any other consideration; provided Citizen shall use commercially reasonable efforts to cause the transfer of all such rights and interests to Company) (the “
Citizen Production-Related IT Equipment
”).
“
Citizen Assignment
” means an assignment to be executed and delivered by Citizen at the Closing in substantially the form of
Exhibit C (Part II)
attached hereto.
Appendix A-4
US-DOCS\83219354.25
“
Citizen Casualty Loss
” has the meaning set forth in
Section 4.7(c)
.
“
Citizen Closing Settlement Statement
” has the meaning set forth in
Section 3.3(a)(iii)
.
“
Citizen Consideration Units
” has the meaning set forth in
Section 3.1(b)
.
“
Citizen Cost Credited Asset Acquisition Costs
” means, in the case of any Citizen Cost Credited Lease and associated Citizen Additional Assets, the consideration payable in connection with the acquisition of such Citizen Cost Credited Lease and associated Citizen Additional Assets, together with any reasonable Third Party expenses, including reasonable attorneys’ fees, lease bonuses, broker fees, abstract costs, title opinion costs, title curative costs, and other reasonable Third Party costs of due diligence incurred by Citizen in acquiring such Citizen Cost Credited Lease and associated Citizen Additional Assets,
provided
that the Citizen Cost Credited Asset Acquisition Costs for any Citizen Cost Credited Lease and associated Citizen Additional Assets shall never exceed $7,000 per Net Acre subject to such Citizen Cost Credited Lease,
provided
,
further
, that any Citizen Cost Credited Leases that are acquired pursuant to a permitted acreage trade or similar transaction shall be deemed to have a Citizen Cost Credited Asset Acquisition Cost of $7,000 per Raw Net Acre.
“
Citizen Cost Credited Lease
” has the meaning set forth in
Section 4.3(e)(iv)
.
“
Citizen Contracts
” has the meaning set forth in the definition of “Citizen Assets”.
“
Citizen Delta Value
” has the meaning set forth in
Section 3.3(b)(vi)(C)
.
“
Citizen Defensible Title
” shall mean such title of Citizen Assets, as of the Effective Time and immediately prior to the expiration of the Review Period (but for purposes of the Citizen Assignment, it shall mean as of the Closing Date, and for purposes of the Citizen Assignment covering any Citizen Additional Assets as of the date that such Citizen Additional Assets are conveyed to the Company as permitted by this Agreement), subject to Citizen Permitted Encumbrances, that:
(a)
for each Citizen Well, entitles Citizen to receive during the entirety of the productive life of each Citizen Well (as applicable) not less than the Net Revenue Interest for such Citizen Well as set forth in
Exhibit A-2 (Part II)
and
Schedule 3.4B (Part II)
, except, in each case, (subject always to
Section 10.2
) for: (i) decreases in connection with those operations in which Citizen or its successors or assigns may from and after the Execution Date be a non-consenting co-owner, (ii) decreases resulting from the establishment or amendment from and after the Execution Date of pools or units to the extent such establishment or amendment is not restricted under
Section 10.2
, (iii) decreases required to allow other Working Interest owners to make up past underproduction or pipelines to make up past under deliveries, and (iv) as otherwise expressly set forth in
Exhibit A-2 (Part II)
and/or
Schedule 3.4B (Part II)
, as applicable;
(b)
for each Citizen Section, entitles Citizen, to receive not less than the Citizen Section Weighted Average NRI for such Citizen Section for each Target Formation as set forth in
Schedule 3.4A
(free and clear of any reversionary interest or back-in interest, for the entirety of the productive life of each applicable Citizen Section Lease with regard to the applicable Net
Appendix A-5
US-DOCS\83219354.25
Revenue Interest for such Citizen Section Lease necessary for Citizen to retain not less than this Citizen Section Weighted Average NRI for such Citizen Section for each Target Formation as set forth in
Schedule 3.4A
), except, in each case, for (subject always to
Section 10.2
): (i) decreases in connection with those operations in which Citizen or its successors or assigns may from and after the Execution Date be a non-consenting party, (ii) decreases resulting from the establishment or amendment from and after the Execution Date of pools or units to the extent such establishment or amendment is not restricted under
Section 10.2
, (iii) decreases required to allow other Working Interests owners to make up past underproduction or pipelines to make us past underdeliveries, (iv) reversionary interests triggered by Citizen Lease expiration or termination occurring after Closing (and subject to the provisions of subpart (e) below, defaults occurring after Closing under the term of a Citizen Lease which results in a termination thereof, Pugh clauses that are triggered and implemented after Closing, continuous drilling clauses effective as of the expiration of a primary term or the drilling of a well which are triggered after Closing as a result of Company’s failure to continue such drilling operations), and (v) as otherwise expressly set forth in
Exhibit A-1 (Part II)
and/or
Schedule 3.4A
;
(c)
for each Citizen Section, entitles Citizen to not less than the Citizen Section Net Acres for each Target Formation in such Governmental Section as set forth on
Schedule 3.4A
(free and clear of any reversionary interest or back-in interest, for the entirety of the productive life of each applicable Citizen Section Lease with regard to the applicable Net Acres allocable to such Citizen Section Lease necessary for Citizen to retain not less than the Citizen Section Net Acres for such Citizen Section for each Target Formation as set forth in
Schedule 3.4A
), except for (subject always to
Section 10.1
): (i) decreases in connection with those operations in which Citizen or its successors or assigns may from and after the Execution Date be a non-consenting co-owner, (ii) decreases resulting from the establishment or amendment from and after the Execution Date of pools or units to the extent such establishment or amendment is not restricted under
Section 10.2
, (iii) reversionary interests triggered by Citizen Lease expiration or termination occurring after Closing (and subject to the provisions of subpart (e) below, defaults occurring after Closing under the term of a Citizen Lease which results in a termination thereof, Pugh clauses that are triggered and implemented after Closing, continuous drilling clauses effective as of the expiration of a primary term or the drilling of a well which are triggered after Closing as a result of Company’s failure to continue such drilling operations), and (iv) as otherwise expressly set forth in
Schedule 3.4A
;
(d)
obligates Citizen to bear during the entirety of the productive life of such Citizen Well not more than the Working Interest for such Citizen Well as set forth in
Exhibit A-2 (Part II)
and
Schedule 3.4B (Part II)
, except (subject always to
Section 10.2
) for: (i) increases resulting from contribution requirements with respect to defaulting co-owners under applicable operating agreements, (ii) increases to the extent that they are accompanied by a proportionate increase in Citizen’s Net Revenue Interest in such Citizen Well, (iii) increases resulting from the establishment or amendment from and after the Execution Date of pools or units to the extent such establishment or amendment is not restricted under
Section 10.2
, and (iv) as otherwise expressly set forth in
Exhibit A-2 (Part II)
and/or
Schedule 3.4B (Part II)
;
(e)
for each Citizen Lease, is either held by continuous production in paying quantities (as designated on
Exhibit A-1 (Part II)
by “HBP” or “hbp” (a “
Citizen HBP Lease
”) or has a primary term expiration date (whether such primary term relates to the primary term under
Appendix A-6
US-DOCS\83219354.25
such Citizen Lease or, if applicable and the Citizen Lease is subject to a term assignment, the primary term provided in such term assignment pursuant to which Citizen or its predecessor-in-interest acquired such Citizen Lease and such primary term identified in such term assignment shall be deemed to be the primary term of such Citizen Lease for purposes of this provision unless the primary term in such Citizen Lease is earlier than the primary term provided in such term assignment, in which case the primary term will be the primary term provided in such Citizen Lease) that is not earlier than the primary term expiration date identified for such Citizen Lease on
Exhibit A-1 (Part II
), provided that if no primary term expiration date is provided for such Citizen Lease, such Citizen Lease will be deemed to be designated “HBP” on Exhibit A-1 (Part II)
for all purposes hereof; and if the Citizen Lease is not a Citizen HBP Lease and the primary term expiration date thereof is a date that has expired prior to the Execution Date, then, for purposes hereof, such Citizen Lease shall be deemed to have terminated and Citizen shall be deemed to not have Citizen Defensible Title with regard thereto;
(f)
For Citizen Additional Leases acquired by Citizen in accordance with the terms of this Agreement, such Citizen Additional Leases meets all of the geographic location, minimum remaining primary term, inclusion of Qualifying Depths of the Target Formation, and minimum Net Revenue Interests requirements described in the definition for “Citizen Additional Leases”, and with regard to such Citizen Additional Leases that are designated as Citizen Substitute Leases or Citizen True-Up Leases, also entitles Citizen to not less than the Net Acres and Citizen Section Weighted Average NRIs for the applicable Governmental Sections and Target Formations set forth on
Exhibit A-5-2 (Part I) and Exhibit A-5-2 (Part II)
, as amended and supplemented in accordance with the terms hereof and any Citizen Lease Designation Notice; and
(g)
is free and clear of all Encumbrances.
“
Citizen Employees
” has the meaning set forth in
Section 17.17(c)
.
“
Citizen Environmental Defect
” shall mean any Environmental Condition with respect to a Citizen Asset or Citizen Additional Asset that is not set forth in
Schedule 8.14
.
“
Citizen Environmental Defect Notice
” has the meaning set forth in
Section 5.2(a)
.
“
Citizen Environmental Defect Property
” has the meaning set forth in
Section 5.2(a)
.
“
Citizen Equipment
” has the meaning set forth in the definition of “Citizen Assets”.
“
Citizen Excluded Assets
” means:
(d)
all of Citizen’s corporate minute books, financial and Tax records and other business records that relate to Citizen’s and its Affiliates’ businesses generally (including the ownership and operation of the Citizen Assets);
(e)
all trade credits, all accounts, receivables and all other proceeds, income or revenues attributable to the Citizen Assets with respect to any period of time prior to the Effective Time;
Appendix A-7
US-DOCS\83219354.25
(f)
all claims and causes of action of Citizen arising under or with respect to any Citizen Contracts that are attributable to periods of time prior to the Effective Time (including claims for adjustments or refunds);
(g)
all rights and interests relating to the Citizen Assets (i) under any existing policy or agreement of insurance, (ii) under any bond or (iii) to any insurance or condemnation proceeds or awards arising, in each case, from acts, omissions or events, or damage to or destruction of property;
(h)
all Hydrocarbons produced and sold from the Citizen Assets with respect to all periods prior to the Effective Time, other than Hydrocarbons in storage or existing in stock tanks, pipelines and/or plants (including inventory) as of the Effective Time;
(i)
all claims of Citizen or its Affiliates for refunds of or loss carry forwards with respect to (i) Asset Taxes or any other Taxes paid by Citizen or its Affiliates attributable to any period prior to the Effective Time, (ii) income Taxes paid by Citizen or its Affiliates or (iii) any Taxes attributable to the Citizen Excluded Assets;
(j)
all information technology assets, other than the Citizen Production-Related IT Equipment, including all desktop computers, laptop computers, servers, networking equipment and any associated peripherals and other computer hardware, or computer software and telephone equipment;
(k)
all of Citizen’s proprietary computer software, patents, trade secrets, copyrights, names, trademarks, logos and other intellectual property;
(l)
all documents and instruments of Citizen that are reasonably believed to be protected by an attorney-client privilege (other than title opinions);
(m)
all data that cannot be disclosed to Citizen or the Company as a result of confidentiality arrangements under agreements with Third Parties which cannot be waived after the exercise of commercially reasonable efforts, provided that Citizen shall have no obligation to pay any fee or provide any other consideration to obtain any such required consent;
(n)
all audit rights arising under any of the (i) Citizen Contracts or otherwise with respect to any period prior to the Effective Time or (ii) Citizen Excluded Assets, except for any Imbalances;
(o)
all geophysical and other seismic and related technical data and information relating to the Citizen Assets to the extent that such geophysical and other seismic and related technical data and information is not transferable without payment of a fee or other penalty to any Third Party under any Citizen Contract (unless Linn or the Company has separately agreed in writing to pay such fee or other penalty);
(p)
documents prepared or received by Citizen or its Affiliates or their representatives with respect to (i) lists of prospective purchasers for the Citizen Assets, (ii) bids submitted by other prospective purchasers of the Citizen Assets, (iii) analyses by Citizen or its Affiliates of any bids submitted by any prospective purchaser, (iv) correspondence between or among Citizen,
Appendix A-8
US-DOCS\83219354.25
its representatives, and/or any prospective purchaser other than Linn, and (v) correspondence between Citizen and/or any of its respective representatives with respect to any of the bids, the prospective purchasers or the transactions contemplated by this Agreement;
(q)
any offices and office leases, office furniture or office supplies located in or on such offices excluded and/or office leases belonging to Citizen;
(r)
all vehicles and rolling stock;
(s)
any assets that are excluded pursuant to the provisions of
Sections 4.6(b)
and
4.6(e)
;
(t)
any master service agreements, blanket agreements or similar Contracts to which Citizen is a party;
(u)
any Hedge Contracts related to the Citizen Assets to which Citizen or any of its Affiliates is a party;
(v)
any loan agreement, credit agreement, promissory note, or other similar instrument for borrowed money, and any mortgage, deed of trust, pledge, security agreement, guaranty or similar instrument securing such obligations;
(w)
all overhead costs and expenses paid by Third Party non-operators to Citizen or any of its Affiliates pursuant to any applicable joint operating agreement regarding operations occurring prior to Closing;
(x)
[RESERVED]
(y)
[RESERVED]
(z)
the assets set forth on
Exhibit E (Part II)
;
(aa)
any mineral fee interests and lessor royalty interests (and other rights and interests as a lessor) under oil, gas and mineral leases; and
(bb)
the litigation matters identified on
part I of
Schedule 8.6
, and all claims and causes of action of Citizen with respect thereto.
“
Citizen Gross Acquisition Cost
” has the meaning set forth in
Section 4.3(e)(vi)(B)
.
“
Citizen Group
” means Citizen, its Affiliates, and each of its and their respective officers, directors, members, managers, employees, agents, advisors, other representatives and current and former direct and indirect owners, and the permitted successors and assigns of all of the foregoing persons.
“
Citizen Hard Consent
” has the meaning set forth in
Section 4.6(e)
.
Appendix A-9
US-DOCS\83219354.25
“
Citizen HBP Lease
” has the meaning set forth in the definition of “Citizen Defensible Title”.
“
Citizen Indemnity Cap
” has the meaning set forth in
Section 15.8(e)(ii)
.
“
Citizen Indemnity Deductible
” has the meaning set forth in
Section 15.8(d)(ii)
.
“
Citizen Indemnity Liabilities
” means Liabilities, known or unknown, caused by, arising out of or resulting from: (a) the failure to pay, or the underpayment of, any Burdens owed with respect to production from the Citizen Leases or Citizen Wells prior to the Effective Time (other than with respect to the Citizen Suspense Funds, unless such Citizen Suspense Funds were unlawfully suspended; or (b) any Hazardous Substances related to or arising out of the ownership or operation of the Citizen Assets that, prior to the Closing Date, were transported and/or disposed of at off-site disposal facilities.
“
Citizen Lease Dedication Notice
” has the meaning set forth in
Section 4.3(e)(ii)
.
“
Citizen Leases
” has the meaning set forth in the definition of “Citizen Assets”.
“
Citizen Material Contracts
” has the meaning set forth in
Section 8.13(a)
.
“
Citizen Oil and Gas Properties
” has the meaning set forth in the definition of “Citizen Assets”.
“
Citizen Permitted Encumbrances
” means:
(d)
all Burdens upon, measured by or payable out of production if the net cumulative effect of such Burdens (i) does not operate to reduce the Net Revenue Interest of Citizen with respect to Citizen Well to an amount less than the Net Revenue Interest for such Citizen Well as set forth in
Schedule 3.4B (Part II)
, (ii) does not operate to reduce the Citizen Section Weighted Average NRI of Citizen with respect to the applicable Citizen Section and Target Formation to an amount less than the Citizen Section Weighted Average NRI for such Citizen Section and Target Formation as set forth in
Schedule 3.4A
, (iii) does not operate to reduce the Citizen Section Net Acres of Citizen in any Citizen Section and Target Formation to an amount less than the Citizen Section Net Acres for such Citizen Section and Target Formation as set forth in
Schedule 3.4A
, and (iii) does not obligate Citizen to bear a Working Interest in any Citizen Well (to the extent the same covers the Target Formation(s)) in any amount greater than the Working Interest for such Citizen Well as set forth in
Schedule 3.4B (Part II)
, as the case may be (unless, in the case of a Citizen Well, the Net Revenue Interest for such Citizen Well is greater than the Net Revenue Interest for such Citizen Well as set forth in
Schedule 3.4B (Part II)
in the same proportion as any increase in such Working Interest);
(e)
the terms and conditions of the Citizen Rights-of-Way included in the Citizen Assets to the extent they do not materially affect the development and operations of the Citizen Assets as the same are currently operated and being developed;
Appendix A-10
US-DOCS\83219354.25
(f)
preferential rights to purchase, consents to assignment and other similar restrictions to the extent same have been complied with both in connection with the prior sale, assignment or transfer of such Citizen Asset;
(g)
liens for Taxes or assessments not yet due or delinquent or, if delinquent, which are being contested in good faith;
(h)
Customary Post-Closing Consents and any required notices to, or filings with, Governmental Bodies in connection with the consummation of the transactions contemplated by this Agreement;
(i)
conventional rights of reassignment upon final intention to abandon or release any of the Citizen Assets;
(j)
such Citizen Title Defects as Linn may have waived (whether in writing or pursuant to
Section 4.2(a)
);
(k)
all applicable Citizen Permits and Laws and all rights reserved to or vested in any Governmental Body: (i) to control or regulate any Citizen Asset in any manner; (ii) by the terms of any right, power, franchise, grant, license or permit, or by any provision of Law, to terminate such right, power, franchise, grant, license or permit or to purchase, condemn, expropriate or recapture or to designate a purchaser of any of the Citizen Assets; (iii) to use such property in a manner which would not reasonably be expected to materially impair the use of such property for the purposes for which it is currently owned and operated; or (iv) to enforce any obligations or duties affecting the Citizen Assets to any Governmental Body with respect to any franchise, grant, license or permit;
(l)
easements, conditions, covenants, restrictions, servitudes, permits, rights-of-way, surface leases and other rights in the Citizen Assets for the purpose of operations, facilities, pipelines, transmission lines, transportation lines, distribution lines and other like purposes, or for the joint or common use of rights-of-way, facilities and equipment, to the extent, individually or in the aggregate, such rights would not reasonably be expected to materially impair the operation, development, value or use of any of the Citizen Assets as currently operated and used;
(m)
vendors, carriers, warehousemen’s, repairmen’s, mechanics’, workmen’s, materialmen’s, construction or other like Encumbrances 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 delinquent or, if delinquent, which are being contested in good faith;
(n)
any calls on production under existing Citizen Contracts, insofar as they provide for the payment of the then current applicable index-based market price for such production, and only insofar as they are described on
Schedule 8.20
;
(o)
Liens created under Citizen Leases, Citizen Units or Citizen Rights-of-Way included in the Citizen Assets and/or operating agreements or production sales contracts or by operation of Law in respect of obligations that are not yet due or delinquent or, if delinquent,
Appendix A-11
US-DOCS\83219354.25
which (i) are being contested in good faith and (ii) have been disclosed to Linn in the schedules attached to this Agreement;
(p)
any Encumbrance affecting the Citizen Assets that is discharged by Citizen at or prior to Closing;
(q)
any matters referenced in
Exhibit A-1 (Part II)
,
Exhibit A-2 (Part II)
,
Schedule 3.4A
or
Schedule 3.4B (Part II)
;
(r)
failure of Citizen Leases to contain pooling provisions, unless a Citizen Well has been drilled thereon (and the unit for the same includes any pooled acreage), or a pooled unit has been formed for a Citizen Well which includes a portion of such Citizen Leases, and in either case, the consent of the lessor to permit pooling has not been obtained;
(s)
the litigation, suits and proceedings for all items of
Part II of
Schedule 8.6
;
(t)
any liens, obligations, defects, irregularities or other Encumbrances affecting the Citizen Assets that would be customarily waived or accepted by an reasonable and prudent title examiner experienced in the review of title to oil and gas properties in Oklahoma;
(u)
the terms and conditions of the Citizen Material Contracts if the net cumulative effect of such Citizen Material Contracts (i) does not operate to reduce the Net Revenue Interest of Citizen with respect to Citizen Well to an amount less than the Net Revenue Interest for such Citizen Well as set forth in
Schedule 3.4B (Part II)
, (ii) does not operate to reduce the Citizen Section Weighted Average NRI of Citizen with respect to the applicable Citizen Section and Target Formation to an amount less than the Citizen Section Weighted Average NRI for such Citizen Section and Target Formation as set forth in
Schedule 3.4A
, (iii) does not operate to reduce the Citizen Section Net Acres of Citizen in any Citizen Section and Target Formation to an amount less than the Citizen Section Net Acres for such Citizen Section and Target Formation as set forth in
Schedule 3.4A
, and (iv) does not obligate Citizen to bear a Working Interest in any Citizen Well (to the extent the same covers the Target Formation(s)) in any amount greater than the Working Interest for such Citizen Well as set forth in
Schedule 3.4B (Part II)
, as the case may be (unless, in the case of a Citizen Well, the Net Revenue Interest for such Citizen Well is greater than the Net Revenue Interest for such Citizen Well as set forth in
Schedule 3.4B (Part II)
in the same proportion as any increase in such Working Interest); (v) does not operate to cause the primary term expiration date for a Citizen Lease to be earlier than the primary term expiration date identified for such Citizen Lease on
Exhibit A-1 (Part II)
; (vi) does not grant or impose a lien or other Encumbrance (other than a Citizen Permitted Encumbrance) on any Citizen Assets, (vii) does not provide for any disproportionate sharing of costs, revenues or share of production (other than to the extent relating to default provisions or un-triggered non-consent elections or triggered non-consent elections for which the adjusted interests are identified on
Schedule 3.4B (Part II)
), and (viii) does not contain or provide for any alternating operatorship or alternating designation of operator; and
(v)
the terms and conditions of this Agreement.
“
Citizen Preferential Purchase Right
” has the meaning set forth in
Section 8.12
.
Appendix A-12
US-DOCS\83219354.25
“
Citizen Production-Related IT Equipment
” has the meaning set forth in the definition of “Citizen Assets”.
“
Citizen Records
” has the meaning set forth in the definition of “Citizen Assets”.
“
Citizen Retained Liabilities
” means Liabilities, known or unknown, caused by, arising out of or resulting from: (a) Citizen’s expenses related to the transactions contemplated by this Agreement; (b) any and all Citizen Taxes; (c) the matters set forth on
Part I of
Schedule 8.6
,; (d) the employment relationship between Citizen or any of its Affiliates and any of Citizen’s or any of Citizen’s Affiliates’ present or former employees or the termination of any such employment relationship; (e) any Citizen Excluded Assets; (f) personal injury or death relating to the use, ownership or operation of the Linn Assets prior to the Closing; (g) any acts or omissions that arise to gross negligence or willful misconduct of any member of the Citizen Group related to or arising out of the ownership or operation of the Citizen Assets; (h) any fines or penalties imposed or assessed by a Governmental Body related to or arising out of the ownership or operation of the Citizen Assets prior to the Closing Date, and (i) Citizen’s obligations or Liabilities owed to an Affiliate of Citizen.
“
Citizen Rights-of-Way
” has the meaning set forth in the definition of “Citizen Assets”.
“
Citizen
Section
” means each Governmental Section set forth on
Schedule 3.4A
.
“Citizen Section Leases
” means, with respect to a Governmental Section, those (or that portion of those) Citizen Leases covering lands that are located within the boundaries of such Governmental Section, but only to the extent such Citizen Leases (a) are included within the boundaries such Governmental Section, and (b) includes Qualifying Depths for at least one of the Target Formations.
“
Citizen Section Net Acres
” means, with regard to a Governmental Section, the aggregate Net Acres attributable to the Citizen Section Leases for such Governmental Section, such calculation being made separately as to each Target Formation. Notwithstanding the above, to the extent the term Citizen Section Net Acres is used in connection with a Citizen Additional Lease, this term shall mean the Net Acres for the relevant Citizen Additional Lease only, instead of the Citizen Section Leases.
“
Citizen Section Weighted Average NRI
” means, as to a Governmental Section, and calculated separately as to each Target Formation: (i) first, take Citizen’s Net Revenue Interest in and to each Citizen Section Lease for such Governmental Section, and then
multiply the same by
the Citizen Section Net Acres covered by such Citizen Section Lease for such Target Formation (again, limited solely to those Net Acres thereof that are both included within the applicable Governmental Section, and which includes Qualifying Depths of the Target Formation for such Target Formation), and not counting any Net Acres covered by such Citizen Section Lease that are located outside the boundaries of such Governmental Section, nor counting any Net Acres covering depths outside of a Target Formation for which Citizen’s Leases includes Qualifying Depths of the Target Formation; and (ii) then, the calculated product obtained for each Citizen Section Lease under subpart (i) above shall then be added together, and the sum thereof shall then be divided by the sum of the Citizen Section Net Acres covered by ALL of the Citizen
Appendix A-13
US-DOCS\83219354.25
Section Leases included within such Governmental Section, solely to the extent such Net Acres are included within the boundaries of such Governmental Section and include Qualifying Depths of the Target Formation for such Target Formation (the result of the calculation in this subpart (ii) shall be referred to as the “
Citizen
Section
Weighted Average NRI
” for such Governmental Section and Target Formation), and such calculation shall be made with regard to each Target Formation for the applicable Governmental Section.
Notwithstanding the above, to the extent the term Citizen Section Weighted Average NRI is used in connection with a Citizen Additional Lease, this term shall mean the Net Revenue Interest for the relevant Citizen Additional Lease only, instead of the Citizen Section Leases.
“
Citizen Substitute Leases
” has the meaning set forth in
Section 4.3(e)(ii)
.
“
Citizen Suspense Funds
” means funds held in suspense (including funds held in suspense for unleased interests and penalties and interest) that are attributable to the Citizen Assets or Citizen Additional Assets or any interests pooled, unitized or communitized therewith.
“
Citizen Taxes
” means any Liability of Citizen, or otherwise imposed on the Citizen Assets or Citizen Additional Assets, in respect of any Tax, including without limitation any Liability of Citizen for the Taxes of any other Person under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract or otherwise, but excluding any Asset Taxes to the extent specifically allocated to the Company pursuant to
Section 16.1
.
“
Citizen
Title Benefit
” means with respect to the Target Formation(s) for the Citizen Section Leases, Citizen Section Net Acres or Citizen Wells, any right, circumstance or condition existing as of the Effective Time and also immediately prior to the end of the Review Period that operates to (a) increase the Citizen Section Weighted Average NRI of Citizen with respect to a Citizen Section and Target Formation or the Net Revenue Interest of Citizen with respect to a Citizen Well above that shown for such Citizen Section or Citizen Well in
Schedule 3.4A
or
Schedule 3.4B (Part II)
, as applicable, to the extent the same does not, with respect to Citizen’s interest in any Citizen Well, cause an equal or greater than proportionate increase in Citizen’s Working Interest with respect to the Target Formation(s) in such Citizen Well above that shown in
Schedule 3.4B (Part II)
, as applicable, or (b) increase the Citizen Section Net Acres with respect to a Section and the Target Formation(s) in any Citizen Section and Target Formation above the Citizen Section Net Acres for such Citizen Section and Target Formation as shown in
Schedule 3.4A
.
“
Citizen Title Benefit Amount
” means, with respect to a Citizen Title Benefit:
(d)
if the Transacting Parties agree on the Citizen Title Benefit Amount, then that amount shall be the Title Benefit Amount;
(e)
if the Citizen Title Benefit represents a discrepancy between either or both:
(i) (1) Citizen’s actual Net Acres for any Target Formation in any Citizen Section, and (2) the Citizen Section Net Acres for such Target Formation in such Citizen Section as set forth in
Schedule 3.4A
, or
Appendix A-14
US-DOCS\83219354.25
(ii) (1) Citizen’s actual Citizen Section Weighted Average NRI in any Target Formation in any Citizen Section and (2) the Citizen Section Weighted Average NRI for such Target Formation in such Citizen Section as set forth in
Schedule 3.4A
,
then the Citizen Title Benefit Amount for such Target Formation in such Governmental Section shall be the greater of zero and the amount obtained by subtracting the Allocated Value for such Target Formation in such Governmental Section from the Citizen Actual Section Value for such Target Formation in such Governmental Section.
(c)
if (i) the Citizen Title Benefit represents a discrepancy between (1) Citizen’s actual Net Revenue Interest for any Citizen Well, and (2) Citizen’s Net Revenue Interest for such Citizen Well as set forth in
Schedule 3.4B (Part II)
, and (ii) Citizen’s Working Interest in such Citizen Well is increased by less than the same proportion as such Net Revenue Interest increase, then the Citizen Title Benefit Amount shall be the product of (1) the Allocated Value of the affected Citizen Well multiplied by (2) a fraction, the numerator of which is the Net Revenue Interest increase in such Citizen Well, and the denominator of which is the Net Revenue Interest for such Citizen Well as set forth in
Schedule 3.4B (Part II)
;
(d)
if the Citizen Title Benefit is of a type not described above, then the Citizen Title Benefit Amounts shall be determined by taking into account the Allocated Value of the Citizen Asset affected by such Citizen Title Benefit, the portion of such Citizen Asset affected by such Citizen Title Benefit, the legal effect of the Citizen Title Benefit, the potential economic effect of the Citizen Title Benefit over the life of such Asset, the values placed upon the Title Benefit by the Transacting Parties and such other reasonable factors as are necessary to make a proper evaluation.
“
Citizen Title Benefit Notice
” has the meaning set forth in
Section 4.3(b)
.
“
Citizen Title Defect
” shall mean any Encumbrance, defect or other condition or matter that causes Citizen not to have Citizen Defensible Title;
provided
that the following shall not be considered Citizen Title Defects:
(d)
defects arising out of lack of corporate or other entity authorization, unless Linn provides conclusive evidence that such corporate or other entity action was not authorized and has resulted in another Person’s superior claim of title to the relevant Citizen Asset;
(e)
defects arising from any prior oil and gas lease relating to the lands covered by the Citizen Leases or Citizen Units not being surrendered of record, unless Linn provides reasonable evidence that such prior oil and gas lease is still in effect and has resulted in another Person’s actual and superior claim of title to the relevant Citizen Lease or Citizen Well;
(f)
defects that affect only which Person has the right to receive royalty payments (rather than the amount of the proper payment of such royalty payment) and that do not affect the validity of or title to the underlying Citizen Lease;
(g)
defects based solely on: (i) lack of information in Citizen’s files; (ii) references to an unrecorded document to which neither Citizen nor any Affiliate of Citizen is a party and
Appendix A-15
US-DOCS\83219354.25
which document is dated earlier than January 1, 1960; or (iii) any Tax assessment, Tax payment or similar records or the absence of such activities or records;
(h)
any Encumbrance or loss of title resulting from Citizen’s conduct of business in compliance with this Agreement;
(i)
defects as a consequence of cessation of production, insufficient production or failure to conduct operations during any period after the completion of a well capable of production in paying quantities on any of the Citizen Leases held by production, or lands pooled or unitized therewith, except to the extent the cessation of production is shown to exist for a period that, under the terms of the Lease, would (or would reasonably be believed to) result in the termination or expiration of the underlying Citizen Lease, which documentation shall be provided by Linn to Citizen in support thereof;
(j)
liens arising from any Encumbrance created by a mineral owner which has not been subordinated to the applicable lessee’s interest, solely to the extent that the Citizen Lease in question does not have a Citizen Well on it, and no portion thereof has been included in a Citizen Unit;
(k)
all defects or irregularities that have been adjudicated to be cured or remedied by applicable statutes of limitation or statutes of prescription;
(l)
all defects or irregularities resulting from the failure to record releases of liens, production payments or mortgages that have expired on their own terms or the enforcement of which are barred by applicable statute of limitations;
(m)
all defects in the chain of title consisting of the failure to recite marital status in a document or omissions of successions of heirship or estate proceedings, unless Linn provides conclusive evidence that such failure results in another Person’s superior claim of title to the relevant Citizen Asset;
(n)
all defects arising from any change in Laws following the Execution Date;
(o)
any Encumbrance or loss of title affecting ownership interests in formations other than the Target Formation(s) for the relevant Citizen Asset (excluding any circumstances or conditions that have resulted in title or rights relative to ownership interests in the Citizen Assets (but expressly excluding the Citizen Excluded Assets) related to formations other than Target Formations being held by an Citizen Affiliate other than Citizen itself);
(p)
defects arising from failure to comply with any maintenance of uniform interest provision in any Citizen Lease or Citizen Contract; and
(q)
any Title Defect affecting a Citizen Well for which the Title Defect Amount does not exceed $25,000; provided, however, that the Title Defect Amount shall be deemed to meet such $25,000 threshold in any of the following cases: (1) if any Citizen Well is affected by more than one Citizen Title Defect, and the aggregate sum of the Title Defect Amounts for all Citizen Title Defects affecting such Citizen Well exceeds such $25,000 threshold, or (2) in the case of a failure to hold Citizen Defensible Title to multiple Citizen Wells due to the same specific set of
Appendix A-16
US-DOCS\83219354.25
facts, and aggregate sum of the Title Defect Amounts for such Citizen Title Defects affecting multiple Citizen Wells exceeds such $25,000 threshold.
“
Citizen
Title Defect Amount
” means, with respect to a Citizen Title Defect:
(a)
if the Transacting Parties agree on the Citizen Title Defect Amount, then that amount shall be the Citizen Title Defect Amount;
(b)
if the Citizen Title Defect is an Encumbrance that is undisputed and liquidated in amount, then the Citizen Title Defect Amount shall be the amount necessary to be paid to remove the Citizen Title Defect from the Citizen Title Defect Property;
(c)
if the Citizen Title Defect represents a discrepancy between either or both:
(i) (1) Citizen’s actual Net Acres for any Target Formation in any Citizen Section, and (2) the Citizen Section Net Acres for such Target Formation in such Citizen Section as set forth in
Schedule 3.4A
, or
(ii) (1) Citizen’s actual Citizen Section Weighted Average NRI in any Target Formation in any Citizen Section and (2) the Citizen Section Weighted Average NRI for such Target Formation in such Citizen Section as set forth in
Schedule 3.4A
,
and in each case, there is no intermediate reversionary interest prior to the end of the productive life of any relevant Citizen Section Lease,
then the Citizen Title Defect Amount for such Target Formation in such Governmental Section shall be the greater of zero and the amount obtained by subtracting the Citizen Actual Section Value for such Target Formation in such Governmental Section from the Allocated Value for such Target Formation in such Governmental Section.
(d)
if (i) the Citizen Title Defect represents a discrepancy between (A) Citizen’s actual NRI in any Citizen Well and (B) Citizen’s Net Revenue Interest for such Citizen Well as set forth in
Schedule 3.4B (Part II)
and (ii) Citizen’s Working Interest in such Citizen Well is decreased in the same proportion as such Net Revenue Interest decrease,
then the Citizen Title Defect Amount shall be the product of (A) the Allocated Value of such Citizen Well multiplied by (B) a fraction, the numerator of which is the Net Revenue Interest decrease in such Citizen Well, and the denominator of which is the Net Revenue Interest for such Citizen Well as set forth in
Schedule 3.4B (Part II)
;
(e)
if the Citizen Title Defect results from failure of a Citizen Section Lease to possess Qualifying Depths for any Majority Target Formation in any Governmental Section and Citizen possesses less than or equal to 10% of applicable Target Formation for such Qualifying Depths in such Majority Target Formation in such Governmental Section, then the Citizen Title Defect Amount shall be calculated by first reducing the number of Net Acres allocable to such Citizen Section Lease to zero (0), and then calculating the associated Citizen Title Defect Amount as provided in clause (c) above;
Appendix A-17
US-DOCS\83219354.25
(f)
if the Citizen Title Defect results from failure of a Citizen Section Lease to possess Qualifying Depths as described in subpart (a) of that definition, then the Citizen Title Defect Amount shall be calculated by first reducing the number of Net Acres allocable to such Citizen Section Lease to zero (0), and then calculating the associated Citizen Title Defect Amount as provided in clause (c) above;
(g)
if the Citizen Title Defect results from failure of a Citizen Section Lease to possess Qualifying Depths for any Majority Target Formation in any Governmental Section and Citizen possesses more than 10% of such applicable Target Formation for such Qualifying Depths, then the Citizen Title Defect Amount shall be calculated by first reducing the number of Citizen Section Net Acres allocable to such Citizen Section Lease by the product of (i) the number of Net Acres that would have been allocable to Citizen Section Lease if it possessed the Qualifying Depths and (ii) the amount obtained by subtracting (A) (1.0 - (the product of (I) 2.5 and (II) the difference obtained by subtracting the percentage of the applicable Target Formation for such Qualifying Depths actually possessed by Citizen with regard to such Citizen Section Lease in such Majority Target Formation in such Governmental Section from 50.0%) from (B) 1.0, and then calculating the associated Citizen Title Defect Amount as provided in clause (c) above;
(h)
if the Citizen Title Defect represents an obligation, Encumbrance upon or other defect in title to the Citizen Title Defect Property of a type not described above, then the Citizen Title Defect Amount shall be determined by taking into account the Allocated Value of the Citizen Title Defect Property, the portion of the Citizen Title Defect Property affected by the Citizen Title Defect, the legal effect of the Citizen Title Defect, the potential economic effect of the Citizen Title Defect, the values placed upon the Citizen Title Defect by each Transacting Party and such other reasonable factors as are necessary to make a proper evaluation;
(i)
the Citizen Title Defect Amount with respect to a Citizen Title Defect Property shall be determined without duplication of any costs or losses included in another Citizen Title Defect Amount hereunder;
(j)
if a Citizen Title Defect does not affect a Citizen Title Defect Property throughout the entire remaining productive life of such Citizen Title Defect Property or across all Target Formations for such Citizen Title Defect Property, such fact shall be taken into account in determining the Citizen Title Defect Amount; and
(k)
notwithstanding anything to the contrary in this Agreement, the aggregate Citizen Title Defect Amounts attributable to the effects of all Citizen Title Defects upon any single Citizen Title Defect Property shall not exceed the Allocated Value of such Citizen Title Defect Property.
“
Citizen Title Defect Notice
” has the meaning set forth in
Section 4.3(a)
.
“
Citizen Title Defect Property
” has the meaning set forth in
Section 4.3(a)
.
Citizen True-Up Leases
” has the meaning set forth in
Section 3.3(b)(vi)(C)
.
“
Citizen Units
” has the meaning set forth in the definition of “Citizen Assets”.
Appendix A-18
US-DOCS\83219354.25
“
Citizen Wells
” has the meaning set forth in the definition of “Citizen Assets”.
“
Claim Notice
” has the meaning set forth in
Section 15.7(b)
.
“
Claimant
” has the meaning set forth in
Section 17.3(c)(ii)
.
“
Closing
” has the meaning set forth in
Section 13.1
.
“
Closing Citizen Consideration Units
” has the meaning set forth in
Section 3.3(b)(i)
.
“
Closing Date
” has the meaning set forth in
Section 13.1
.
“
Closing Linn Consideration Units
” has the meaning set forth in
Section 3.2(b)(i)
.
“
Code
” means the United States Internal Revenue Code of 1986, as amended.
“
Company
” has the meaning set forth in the Preamble.
“
Company Assumed Obligations
” has the meaning set forth in
Section 15.6
.
“Company Break-Up”
means Breakup, as defined in the LLC Agreement.
“
Company Certificate
” means a Certificate of Formation substantially in the form of
Exhibit D
attached hereto.
“
Company Group
” means the Company, its current subsidiaries and each of their respective officers, directors, members, managers, employees, agents, advisors, other representatives and current and former direct and indirect owners, and the permitted successors and assigns of all of the foregoing persons.
“
Confidentiality Agreement
” means that certain non-disclosure letter agreement between Linn Energy, Inc. and Citizen dated March 29, 2017.
“
Contract
” means any written or oral contract or agreement or other legally binding arrangement, but in each case specifically excluding, however, any Linn Lease, Citizen Lease, Linn Right-of-Way, Citizen Right-of-Way, Linn Permit, Citizen Permit. For the avoidance of doubt, term assignments of Linn Leases or Citizen Leases shall be considered Contracts hereunder, provided that the Linn Leases and Citizen Leases subject to such term assignments shall not be Contracts for any purpose hereunder, and any Linn Leases or Citizen Leases covered by a term assignment would be subject to the provisions of
Article 4
, and the possibility of Linn Title Defects or Citizen Title Defects applicable thereto, and if the terms and provisions of a term assignment adversely impact the ability of Linn or Citizen to deliver Linn Defensible Title or Citizen Defensible Title to the Linn Leases or Citizen Leases covered thereby, then this also would be subject to the provisions of
Article 4
, and the possibility of Linn Title Defects or Citizen Title Defects applicable thereto.
“
Contributing Party
” means, in the case of the Linn Assets and Linn Additional Assets, Linn, and in the case of the Citizen Assets and the Citizen Additional Assets, Citizen.
Appendix A-19
US-DOCS\83219354.25
“
Control
” and its derivatives mean, with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.
“
COPAS
” means the Council of Petroleum Accountants Societies.
“
Customary Post-Closing Consents
” shall mean the consents and approvals from Governmental Bodies for the assignment of the Assets to the Company that are customarily obtained after such assignment of properties similar to the Assets. It is acknowledged and agreed that any consents or approvals required to assign Native American oil and gas leases, rights-of-way, or other interests granted by or on behalf of any Native American tribes, regardless of whether the administration of such leases and interests is handled by the applicable tribe, itself, the Bureau of Indian Affairs, or other authority, shall be considered Customary Post-Closing Consents.
“
Decreased Citizen Amount
” has the meaning set forth in
Section 3.3(b)(vi)(B)
.
“
Decreased Linn Amount
” has the meaning set forth in
Section 3.2(b)(vi)(B)
.
“
Dispute
” has the meaning set forth in
Section 17.3(a)
.
“
Dispute Auditor
” has the meaning set forth in
Section 3.2(b)(iv)
.
“
Effective Time
” means 12:01 a.m. Central Prevailing Time on April 1, 2017.
“
Encumbrance
” shall mean any lien, deed of trust, mortgage, security interest, pledge, charge, defect, encumbrance, any financing lease having substantially the same economic effect as any of the foregoing, any assignment of the right to receive income, or any other type of preferential arrangement.
“
Environmental Arbitrator
” has the meaning set forth in
Section 5.3
.
“
Environmental Condition
” means (a) a condition with respect to the air, soil, subsurface, surface waters, ground waters and/or sediments that causes Linn or Citizen with respect to any Linn Asset, Linn Additional Asset, Citizen Asset or Citizen Additional Asset, as applicable, not to be in compliance with any Environmental Law, or (b) the existence, with respect to the Linn Assets, Linn Additional Assets, Citizen Assets or Citizen Additional Assets, as applicable, or the operation thereof, of any environmental pollution, contamination or degradation where Remediation by Linn or Citizen, as applicable, is presently required (or, if known, would be presently required) under Environmental Laws. For the avoidance of doubt, (A) the fact that a Linn Well or Citizen Well, as applicable, is no longer capable of producing sufficient quantities of oil or gas to continue to be classified as a “producing well” or that such a Linn Well or Citizen Well, as applicable, should be temporarily abandoned or permanently plugged and abandoned shall not, in each case, form the basis of an Environmental Condition, (B) the fact that a pipe is temporarily not in use shall not form the basis of an Environmental Condition unless such fact requires Remediation other than removal or reuse of the pipe, and (C) except with respect to equipment (1) that causes or has caused any environmental pollution, contamination or degradation where Remediation is presently required (or, if known, would be
Appendix A-20
US-DOCS\83219354.25
presently required) under Environmental Laws or (2) the use or condition of which is a violation of Environmental Law, the physical condition of any surface or subsurface production equipment, including water or oil tanks, separators or other ancillary equipment, shall not form the basis of an Environmental Condition.
“
Environmental Cure Period
” has the meaning set forth in
Section 5.1(b)(i)
.
“
Environmental Dispute
” has the meaning set forth in
Section 5.3
.
“
Environmental Laws
” means, as the same have been amended to the date hereof, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq.; the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq.; the Clean Air Act, 42 U.S.C. § 7401 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. § 1471 et seq.; the Toxic Substances Control Act, 15 U.S.C. §§ 2601 through 2629; the Oil Pollution Act, 33 U.S.C. § 2701 et seq.; the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. § 11001 et seq.; and the Safe Drinking Water Act, 42 U.S.C. §§ 300f through 300j; state and local analogs to the aforementioned statutes; and all other Laws as of the date hereof of any Governmental Body having jurisdiction over the property in question addressing pollution or protection of the environment (including natural resources) and all regulations implementing the foregoing that are applicable to the operation and maintenance of the Assets.
“
Execution Date
” has the meaning set forth in Preamble of this Agreement.
“
Final Allocation Schedule
” has the meaning set forth in
Section 3.4(b)
.
“
Final Citizen Adjustment Amount
” has the meaning set forth in
Section 3.3(b)
.
“
Final Citizen Adjustment Determination Date
” has the meaning set forth in
Section 3.3(b)(v)
.
“
Final Linn Adjustment Amount
” has the meaning set forth in
Section 3.2(b)
.
“
Final Linn Adjustment Determination Date
” has the meaning set forth in
Section 3.2(b)(v)
.
“
Fraud
” means (and must include all of) the following: (1) a false statement of a material fact, (2) with the actual and present knowledge on the part of the Person making the statement that the statement is untrue, (3) actual and deliberate intent on the part of the Person making such statement to deceive the Person that is claiming fraud (4) justifiable reliance on the statement by the Person to whom such statement is made, and (5) injury to the Person to whom such statement is made as a direct result of such false statement.
“
Fundamental Representations
” has the meaning set forth in
Section 15.8(a)(i)
.
“
GAAP
” means generally accepted accounting principles, consistently applied.
Appendix A-21
US-DOCS\83219354.25
“
Governmental Body
” means any Federal, State, local, municipal, tribal or other government; any governmental, regulatory or administrative agency, commission, body or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, regulatory or taxing authority or power; and any court or governmental tribunal, including any tribal authority having or asserting jurisdiction.
“
Governmental Section
” shall mean the sections of land established by the Public Land Survey System of the United States as customarily referenced by Section, Township, and Range and consisting of 640 acres, more or less.
“
Group
” means, in the case of Linn, the Linn Group, and in the case of Citizen, the Citizen Group, and in the case of the Company, the Company Group.
“
Hazardous Substances
” means any pollutants, contaminants, toxic or hazardous substances, materials, wastes, constituents, compounds or chemicals that are regulated by, or may form the basis of liability under any Environmental Laws, including asbestos-containing materials.
“
Hedge Contract
” shall mean any swap, forward, future or derivatives transaction or option or other similar hedge Contract.
“
Hydrocarbons
” means oil, gas, condensate and other gaseous and liquid hydrocarbons or any combination thereof.
“
Imbalances
” means all Well Imbalances and Pipeline Imbalances.
“
Income Tax
” shall mean any income, franchise and similar Taxes.
“
Increased Citizen Amount
” has the meaning set forth in
Section 3.3(b)(vi)(A)
.
“
Increased Linn Amount
” has the meaning set forth in
Section 3.2(b)(vi)(A)
.
“
Indemnified Person
” has the meaning set forth in
Section 15.7(a)
.
“
Indemnifying Person
” has the meaning set forth in
Section 15.7(a)
.
“
Individual Environmental Threshold
” has the meaning set forth in
Section 5.1(c)(iii)
.
“
Individual Indemnity Threshold
” has the meaning set forth in
Section 15.8(d)(i)
.
“
Initial Citizen Agreed Value
” has the meaning set forth in
Section 3.1(b)
.
“
Initial Linn Agreed Value
” has the meaning set forth in
Section 3.1(a)
.
“
Interim Period
” means the period beginning upon the Execution Date and ending upon the Closing.
“
JVL
” has the meaning set forth in the definition of “Affiliate”.
Appendix A-22
US-DOCS\83219354.25
“
Knowledge
” means all information actually known to, in the case of Linn, Mark Ellis, David B. Rottino, Arden L. Walker, Jr., Don Davis, Justin Vick, or Thomas Emmons, and in the case of Citizen, Robbie Woodard, James Woods, Greg Augsburger and Mike Hofstrom, in each case without any duty of investigation or inquiry.
“
Law
” means any constitution, decree, resolution, law, statute, act, ordinance, rule, directive, order, treaty, code or regulation and any injunction or final non-appealable judgment or any interpretation of the foregoing, as enacted, issued or promulgated by any Governmental Body.
“
Lease
” means a Linn Lease or Citizen Lease, as applicable.
“
LEH
” has the meaning set forth in the Preamble.
“
Liabilities
” means any and all claims, payments, charges, judgments, assessments, liabilities, losses, damages, penalties, fines or costs and expenses, including any reasonable fees of attorneys, experts, consultants, accountants, and other professional representatives and legal or other expenses incurred in connection therewith and including liabilities, costs, losses and damages for personal injury, illness or death, property damage, Contract claims, torts or otherwise.
“
Linn
” has the meaning set forth in the Preamble.
“
Linn Actual Section Value
” means, in the case of any Target Formation in any Governmental Section, the product of (a) the actual aggregate Linn Section Net Acres subject to the Linn Section Leases in such Target Formation in such Governmental Section, and (b) the sum of (i) the Zone Price for such Target Formation in such Governmental Section and (ii) the product of (A) the Zone NRI Value for such Target Formation in such Governmental Section, (B) the amount (whether positive, negative or zero) obtained by subtracting the Zone Average NRI for such Target Formation in such Governmental Section from the actual Linn Section Weighted Average NRI associated with the Linn Section Leases in such Target Formation in such Governmental Section; and (C) 100.
“
Linn Additional Assets
” means the Linn Additional Leases and any other items acquired by Linn with the Linn Additional Leases that would constitute “Linn Assets” to the extent the Linn Additional Leases were Linn Leases.
“
Linn Additional Leases
” means all oil and gas leases, oil, gas and mineral leases, subleases and other leaseholds, mineral interests, mineral fee interests, royalty interests, overriding royalty interests, net profit interests, payments out of production, carried interests, reversionary rights, contractual rights to production or other interests in Hydrocarbons acquired by Linn either (i) after April 1, 2017 and prior to Closing, (ii) after April 1, 2017 and prior to the expiration of thirty (30) days after Closing as long as Linn has entered into a definitive agreement to acquire such interest prior to the Closing (for which written notice of such definitive agreement and a list of the oil and gas leases covered thereby has been provided to Citizen prior to Closing), (iii) prior to April 1, 2017 (and are still owned by Linn as of the Execution Date) but which are not listed on
Exhibit A-1 (Part I)
and are listed on
Exhibit A-5
Appendix A-23
US-DOCS\83219354.25
(Part I)
, or (iv) that are acquired by Linn after Closing and prior to the expiration of the Title Cure Period, insofar and only insofar as such acquisitions under this subpart (iv) are made via acreage trades, pursuant to which Linn has traded acreage that is outside of the areas identified in
Exhibit H
for such interests) and with regard to all acquisitions described in subparts (i)-(iv) above, insofar and only insofar that such acquired interests: (a) are within the areas identified in
Exhibit H
, (b) with respect to each oil and gas lease and oil, gas and mineral lease, subleases and other leaseholds, to the extent the same is not held beyond its primary term by production, the same has a remaining primary term that expires no less than two (2) years after the Effective Time, (c) includes Qualifying Depths of one or more of the applicable Section Target Formations, and (d) entitles Linn (and following the assignment of such Linn Additional Lease, the Company) to receive not less than a 75% Net Revenue Interest therein with respect to the applicable Target Formation(s). Notwithstanding anything to the contrary herein, any Hydrocarbon interest identified on
Exhibit A-1 (Part I)
as a Linn Lease shall not be a Linn Additional Lease for any purpose hereunder.
“
Linn Adjustment Notice
” has the meaning set forth in
Section 3.2(b)(ii)
.
“
Linn Aggregate Deductible
” has the meaning set forth in
Section 4.2(d)(iii)
.
“
Linn Assets
” means all of Linn’s right, title and interest in and to the following, less and except the Linn Excluded Assets:
(d)
all oil and gas leases, oil, gas and mineral leases, subleases and other leaseholds,, overriding royalty interests, net profit interests, payments out of production, carried interests, reversionary rights, contractual rights to production or other interests in Hydrocarbons, in each case, described in
Exhibit A-1 (Part I)
, together with any and all other right, title and interest of Linn in and to the leasehold estates or other rights and interests created by any of the foregoing, subject to the terms, conditions, covenants and obligations set forth in such interests and/or
Exhibit A-1 (Part I)
(all such interests, the “
Linn Leases
”);
(e)
all oil and gas wells, water wells, carbon dioxide wells, salt water disposal wells, injection wells, observation wells, and other wells and wellbores located on or allocable to the Linn Leases and Linn Units, including those described on
Exhibit A-2 (Part I)
, whether producing, shut in, or abandoned (all such interests, the “
Linn Wells
”);
(f)
all rights and interests in, under or derived from all unitization, communitization, and pooling agreements or compulsory pooling orders in effect with respect to any of the Linn Leases, or Linn Wells and the units created thereby (all such interests, the “
Linn Units
”);
(g)
to the extent transferable after the exercise of commercially reasonable efforts (which shall not require the payment of a fee or the provision of any other consideration), all Contracts (i) to which Linn is a party (or is a successor or assign of a party), (ii) that pertain primarily to any of the Linn Assets and (iii) that will be binding on the Company after Closing, but exclusive of any master service agreements, blanket agreements or similar Contracts (all such contracts, “
Linn Contracts
”);
Appendix A-24
US-DOCS\83219354.25
(h)
all Rights-of-Way to the extent used in connection with the ownership or operation of any of the Linn Leases, Linn Wells, Linn Units or other Linn Assets, including the Rights-of-Way set forth in
Exhibit A-3 (Part I)
(all such interests, collectively, the “
Linn Rights-of-Way
”);
(i)
all flowlines, pipelines and appurtenances thereto that are located on the Linn Leases or Linn Units or used, or held for use, in connection with the operation of the Linn Wells, but excluding all Linn Excluded Midstream Assets (all such interests (subject to such exclusions) together with the Linn Leases, Linn Units, and Linn Wells, collectively, the “
Linn Oil and Gas Properties
”);
(j)
all personal property, equipment, machinery, tools, compressors, meters, tanks, pumps, platforms, pulling machines, boilers, buildings, pipe yards, salt water disposal facilities, utility lines, computer and automation equipment, telecommunications equipment, field radio telemetry, and associated frequencies and licenses, pressure transmitters, central processing equipment, fixtures, improvements, facilities and other tangible personal property located on the Linn Oil and Gas Properties, including such equipment described on
Exhibit A-4 (Part I)
(all such interests, the “
Linn Equipment
”);
(k)
all of the files, records, information and data, whether written or electronically stored, primarily relating to the Linn Assets and in the possession of Linn or its Affiliates, including: (i) land and title records (including abstracts of title, title opinions and title curative documents); (ii) Linn Contract files; (iii) correspondence; (iv) operations, environmental (including environmental assessments and studies), production and accounting records; (v) facility and well records; and (vi) to the extent transferable, seismic, geologic and technical data including logs and maps (all such interests, the “
Linn
Records
”);
(l)
all Hydrocarbons (or the proceeds from the sale of Hydrocarbons) (i) produced from or attributable to the Linn Leases, Linn Units, and Linn Wells at and after the Effective Time, (ii) located in pipelines or in tanks above the pipeline sales connection attributable to the Linn Leases, Linn Units, and Linn Wells at and after the Effective Time, or (iii) in storage or existing in stock tanks, pipelines and/or plants (including inventory) as of the Effective Time;
(m)
all claims and causes of action to the extent attributable to the Company Assumed Obligations;
(n)
to the extent that they may be assigned, all Permits that are primarily used in connection with the ownership or operation of the Linn Assets;
(o)
all Imbalances relating to the other Linn Assets;
(p)
to the extent transferable, all Seismic Contracts and Seismic Data and any related interpretive geophysical and geological data relating to the Linn Oil and Gas Properties, but only to the extent such Seismic Contracts and Seismic Data may be assigned without payment of fees or other penalties to a Third Party;
Appendix A-25
US-DOCS\83219354.25
(q)
any refunds, claims for refunds or rights to receive refunds from any Governmental Body with respect to Taxes attributable to the Linn Assets and periods of time from and after the Effective Time; and
(r)
all radio equipment, SCADA and measurement technology, and other production related mobility devices (such as SCADA controllers), well communication devices, and any other information technology systems and licenses associated with the foregoing, in each case only to the extent such assets and licenses are (i) used or held for use solely in connection with the operation of the Linn Oil and Gas Properties, and (ii) to the extent assignable (with consent, if applicable, but without the payment of any fee or the provision of any other consideration; provided Linn shall use commercially reasonable efforts to cause the transfer of all such rights and interests to Company) (the “
Linn Production-Related IT Equipment
”).
“
Linn Assignment
” means an assignment to be executed and delivered by Linn at the Closing in substantially the form of
Exhibit C (Part I)
attached hereto.
“
Linn Casualty Loss
” has the meaning set forth in
Section 4.7(b)
.
“
Linn Closing Settlement Statement
” has the meaning set forth in
Section 3.2(a)(iii)
.
“
Linn Consideration Units
” has the meaning set forth in
Section 3.1(a)
.
“
Linn Contracts
” has the meaning set forth in the definition of “Linn Assets”.
“
Linn Cost Credited Asset Acquisition Costs
” means, in the case of any Linn Cost Credited Lease and associated Linn Additional Assets, the consideration payable in connection with the acquisition of such Linn Cost Credited Lease and associated Linn Additional Assets, together with any reasonable Third Party expenses, including reasonable attorneys’ fees, lease bonuses, broker fees, abstract costs, title opinion costs, title curative costs, and other reasonable Third Party costs of due diligence incurred by Linn in acquiring such Linn Cost Credited Lease and associated Linn Additional Assets,
provided
that the Linn Cost Credited Asset Acquisition Costs for any Linn Cost Credited Lease and associated Linn Additional Assets shall never exceed $7,000 per Net Acre subject to such Linn Cost Credited Lease,
provided
,
further
, that any Linn Cost Credited Leases that are acquired pursuant to a permitted acreage trade or similar transaction shall be deemed to have a Linn Cost Credited Asset Acquisition Cost of $7,000 per Raw Net Acre.
“
Linn Cost Credited Lease
” has the meaning set forth in
Section 4.2(e)(iv)
.
“
Linn Defensible Title
” shall mean such title of Linn Assets, as of the Effective Time and immediately prior to the expiration of the Review Period (but for purposes of the Linn Assignment, it shall mean as of the Closing Date, and for purposes of the Linn Assignment covering any Linn Additional Assets as of the date that such Linn Additional Assets are conveyed to the Company as permitted by this Agreement), subject to Linn Permitted Encumbrances, that:
(d)
for each Linn Well, entitles Linn to receive during the entirety of the productive life of each Linn Well (as applicable) not less than the Net Revenue Interest for such Linn Well
Appendix A-26
US-DOCS\83219354.25
as set forth in
Exhibit A-2 (Part I)
and
Schedule 3.4B (Part I)
, except, in each case, (subject always to
Section 10.1
) for: (i) decreases in connection with those operations in which Linn or its successors or assigns may from and after the Execution Date be a non-consenting co-owner, (ii) decreases resulting from the establishment or amendment from and after the Execution Date of pools or units to the extent such establishment or amendment is not restricted under
Section 10.1
, (iii) decreases required to allow other Working Interest owners to make up past underproduction or pipelines to make up past under deliveries, and (iv) as otherwise expressly set forth in
Exhibit A-2 (Part I)
and/or
Schedule 3.4B (Part I)
, as applicable;
(e)
for each Linn Section, entitles Linn, to receive not less than the Linn Section Weighted Average NRI for such Linn Section for each Target Formation as set forth in
Schedule 3.4A
(free and clear of any reversionary interest or back-in interest, for the entirety of the productive life of each applicable Linn Section Lease with regard to the applicable Net Revenue Interest for such Linn Section Lease necessary for Linn to retain not less than this Linn Section Weighted Average NRI for such Linn Section for each Target Formation as set forth in
Schedule 3.4A
), except, in each case, for (subject always to
Section 10.1
): (i) decreases in connection with those operations in which Linn or its successors or assigns may from and after the Execution Date be a non-consenting party, (ii) decreases resulting from the establishment or amendment from and after the Execution Date of pools or units to the extent such establishment or amendment is not restricted under
Section 10.1
, (iii) decreases required to allow other Working Interests owners to make up past underproduction or pipelines to make us past underdeliveries, (iv) reversionary interests triggered by Linn Lease expiration or termination occurring after Closing (and subject to the provisions of subpart (e) below, defaults occurring after Closing under the term of a Linn Lease which results in a termination thereof, Pugh clauses that are triggered and implemented after Closing, continuous drilling clauses effective as of the expiration of a primary term or the drilling of a well which are triggered after Closing as a result of Company’s failure to continue such drilling operations), and (v) as otherwise expressly set forth in
Exhibit A-1 (Part I)
and/or
Schedule 3.4A
;
(f)
for each Linn Section, entitles Linn to not less than the Linn Section Net Acres for each Target Formation in such Governmental Section as set forth on
Schedule 3.4A
(free and clear of any reversionary interest or back-in interest, for the entirety of the productive life of each applicable Linn Section Lease with regard to the applicable Net Acres allocable to such Linn Section Lease necessary for Linn to retain not less than the Linn Section Net Acres for such Linn Section for each Target Formation as set forth in
Schedule 3.4A
), except for (subject always to
Section 10.1
): (i) decreases in connection with those operations in which Linn or its successors or assigns may from and after the Execution Date be a non-consenting co-owner, (ii) decreases resulting from the establishment or amendment from and after the Execution Date of pools or units to the extent such establishment or amendment is not restricted under
Section 10.1
, (iii) reversionary interests triggered by Linn Lease expiration or termination occurring after Closing (and subject to the provisions of subpart (e) below, defaults occurring after Closing under the term of a Linn Lease which results in a termination thereof, Pugh clauses that are triggered and implemented after Closing, continuous drilling clauses effective as of the expiration of a primary term or the drilling of a well which are triggered after Closing as a result of Company’s failure to continue such drilling operations), and (iv) as otherwise expressly set forth in
Schedule 3.4A
;
Appendix A-27
US-DOCS\83219354.25
(g)
obligates Linn to bear during the entirety of the productive life of such Linn Well not more than the Working Interest for such Linn Well as set forth in
Exhibit A-2 (Part I)
and
Schedule 3.4B (Part I)
, except (subject always to
Section 10.1
) for: (i) increases resulting from contribution requirements with respect to defaulting co-owners under applicable operating agreements, (ii) increases to the extent that they are accompanied by a proportionate increase in Linn’s Net Revenue Interest in such Linn Well, (iii) increases resulting from the establishment or amendment from and after the Execution Date of pools or units to the extent such establishment or amendment is not restricted under
Section 10.1
, and (iv) as otherwise expressly set forth in
Exhibit A-2 (Part I)
and/or
Schedule 3.4B (Part I)
;
(h)
for each Linn Lease, is either held by continuous production in paying quantities (as designated on
Exhibit A-1 (Part I)
by “HBP” or “hbp” (a “
Linn HBP Lease
”) or has a primary term expiration date (whether such primary term relates to the primary term under such Linn Lease or, if applicable and the Linn Lease is subject to a term assignment, the primary term provided in such term assignment pursuant to which Linn or its predecessor-in-interest acquired such Linn Lease and such primary term identified in such term assignment shall be deemed to be the primary term of such Linn Lease for purposes of this provision unless the primary term in such Linn Lease is earlier than the primary term provided in such term assignment, in which case the primary term will be the primary term provided in such Linn Lease) that is not earlier than the primary term expiration date identified for such Linn Lease on
Exhibit A-1 (Part I
), provided that if no primary term expiration date is provided for such Linn Lease, such Linn Lease will be deemed to be designated “HBP” on Exhibit A-1 (Part I)
for all purposes hereof; and if the Linn Lease is not a Linn HBP Lease and the primary term expiration date thereof is a date that has expired prior to the Execution Date, then, for purposes hereof, such Linn Lease shall be deemed to have terminated and Linn shall be deemed to not have Linn Defensible Title with regard thereto;
(i)
For Linn Additional Leases acquired by Linn in accordance with the terms of this Agreement, such Linn Additional Leases meets all of the geographic location, minimum remaining primary term, inclusion of Qualifying Depths of the Target Formation, and minimum Net Revenue Interests requirements described in the definition for “Linn Additional Leases”, and with regard to such Linn Additional Leases that are designated as Linn Substitute Leases or Linn True-Up Leases, also entitles Linn to not less than the Net Acres and Linn Section Weighted Average NRIs for the applicable Governmental Sections and Target Formations set forth on
Exhibit A-5-1
, as amended and supplemented in accordance with the terms hereof and any Linn Lease Designation Notice; and
(j)
is free and clear of all Encumbrances.
“
Linn Delta Value
” has the meaning set forth in
Section 3.2(b)(vi)(C)
.
“
Linn Employees
” has the meaning set forth in
Section 17.17(b)
.
“
Linn Environmental Defect
” shall mean any Environmental Condition with respect to a Linn Asset or Linn Additional Asset that is not set forth in
Schedule 7.14
.
“
Linn Environmental Defect Notice
” has the meaning set forth in
Section 5.1(a)
.
Appendix A-28
US-DOCS\83219354.25
“
Linn Environmental Defect Property
” has the meaning set forth in
Section 5.1(a)
.
“
Linn Equipment
” has the meaning set forth in the definition of “Linn Assets”.
“
Linn Excluded Assets
” means:
(d)
all of Linn’s corporate minute books, financial and Tax records and other business records that relate to Linn’s and its Affiliates’ businesses generally (including the ownership and operation of the Linn Assets);
(e)
all trade credits, all accounts, receivables and all other proceeds, income or revenues attributable to the Linn Assets with respect to any period of time prior to the Effective Time;
(f)
all claims and causes of action of Linn arising under or with respect to any Linn Contracts that are attributable to periods of time prior to the Effective Time (including claims for adjustments or refunds);
(g)
all rights and interests relating to the Linn Assets (i) under any existing policy or agreement of insurance, (ii) under any bond or (iii) to any insurance or condemnation proceeds or awards arising, in each case, from acts, omissions or events, or damage to or destruction of property;
(h)
all Hydrocarbons produced and sold from the Linn Assets with respect to all periods prior to the Effective Time, other than Hydrocarbons in storage or existing in stock tanks, pipelines and/or plants (including inventory) as of the Effective Time;
(i)
all claims of Linn or its Affiliates for refunds of or loss carry forwards with respect to (i) Asset Taxes or any other Taxes paid by Linn or its Affiliates attributable to any period prior to the Effective Time, (ii) income Taxes paid by Linn or its Affiliates or (iii) any Taxes attributable to the Linn Excluded Assets;
(j)
all information technology assets, other than the Linn Production-Related IT Equipment, including all desktop computers, laptop computers, servers, networking equipment and any associated peripherals and other computer hardware, or computer software and telephone equipment;
(k)
all of Linn’s proprietary computer software, patents, trade secrets, copyrights, names, trademarks, logos and other intellectual property;
(l)
all documents and instruments of Linn that are reasonably believed to be protected by an attorney-client privilege (other than title opinions);
(m)
all data that cannot be disclosed to Citizen or the Company as a result of confidentiality arrangements under agreements with Third Parties which cannot be waived after the exercise of commercially reasonable efforts, provided that Linn shall have no obligation to pay any fee or provide any other consideration to obtain any such required consent;
Appendix A-29
US-DOCS\83219354.25
(n)
all audit rights arising under any of the (i) Linn Contracts or otherwise with respect to any period prior to the Effective Time or (ii) Linn Excluded Assets, except for any Imbalances;
(o)
all geophysical and other seismic and related technical data and information relating to the Linn Assets to the extent that such geophysical and other seismic and related technical data and information is not transferable without payment of a fee or other penalty to any Third Party under any Linn Contract (unless Citizen or the Company has separately agreed in writing to pay such fee or other penalty);
(p)
documents prepared or received by Linn or its Affiliates or their representatives with respect to (i) lists of prospective purchasers for the Linn Assets, (ii) bids submitted by other prospective purchasers of the Linn Assets, (iii) analyses by Linn or its Affiliates of any bids submitted by any prospective purchaser, (iv) correspondence between or among Linn, its representatives, and/or any prospective purchaser other than Citizen, and (v) correspondence between Linn and/or any of its respective representatives with respect to any of the bids, the prospective purchasers or the transactions contemplated by this Agreement;
(q)
any offices and office leases, office furniture or office supplies located in or on such offices excluded and/or office leases belonging to Linn;
(r)
all vehicles and rolling stock;
(s)
any assets that are excluded pursuant to the provisions of
Sections 4.5(b)
and
4.5(e)
;
(t)
any master service agreements, blanket agreements or similar Contracts to which Linn is a party;
(u)
any Hedge Contracts related to the Linn Assets to which Linn or any of its Affiliates is a party;
(v)
any loan agreement, credit agreement, promissory note, or other similar instrument for borrowed money, and any mortgage, deed of trust, pledge, security agreement, guaranty or similar instrument securing such obligations;
(w)
all overhead costs and expenses paid by Third Party non-operators to Linn or any of its Affiliates pursuant to any applicable joint operating agreement regarding operations occurring prior to Closing;
(x)
the Linn Waterflood Assets;
(y)
the Linn Excluded Midstream Assets;
(z)
the assets set forth on
Exhibit E (Part I)
;
(aa)
any mineral fee interests and lessor royalty interests (and other rights and interests as a lessor) under oil, gas and mineral leases; and
Appendix A-30
US-DOCS\83219354.25
(bb)
the litigation matters identified on
part I of
Schedule 7.6
, and all claims and causes of action of Linn with respect thereto.
“
Linn Excluded Midstream Assets
” means (a) assets generally considered “midstream” in nature in accordance with generally accepted U.S. oil and gas industry practices and customs, including facilities and other assets relating to (i) natural gas gathering, storage, treating, compression, processing, and fractionation, (ii) oil and natural gas liquids gathering, storage and transmission, (iii) water handling and disposal, and (iv) CO
2
gathering, transportation and sequestration; (b) contracts and other agreements related to or in respect of the assets described in clause (a) above, including transportation, gathering, processing and treating contracts, saltwater disposal agreements, water injection agreements, produced water gathering and treating agreements, surface use agreements, right of way agreements, easements, joint use surface agreements, operating agreements, licenses and permits; and (c) all real property interests used or held for use in connection with the assets described in clause (a) above or granted pursuant to a contract or other agreement described in clause (b) above.
“
Linn Gross Acquisition Cost
” has the meaning set forth in
Section 4.2(e)(vi)(B)
.
“
Linn Group
” means Linn, its Affiliates, and each of its and their respective officers, directors, members, managers, employees, agents, advisors, other representatives and current and former direct and indirect owners, and the permitted successors and assigns of all of the foregoing persons.
“
Linn Hard Consent
” has the meaning set forth in
Section 4.5(e)
.
“
Linn HBP Lease
” has the meaning set forth in the definition of “Linn Defensible Title”.
“
Linn Indemnity Cap
” has the meaning set forth in
Section 15.8(e)(i)
.
“
Linn Indemnity Deductible
” has the meaning set forth in
Section 15.8(d)(i)
.
“
Linn Indemnity Liabilities
” means Liabilities, known or unknown, caused by, arising out of or resulting from: (a) the failure to pay, or the underpayment of, any Burdens owed with respect to production from the Linn Leases or Linn Wells prior to the Effective Time (other than with respect to (i) the Linn Suspense Funds, unless such Linn Suspense Funds were unlawfully suspended, (ii) the claims and lawsuit described in
Part I of Schedule 7.6
, and (iii) any claims or Liabilities asserted by royalty owners or other Burden beneficiaries who are similarly situated to the claimants in the lawsuit described in
Part I of Schedule 7.6
with respect to such lawsuit); or (b) any Hazardous Substances related to or arising out of the ownership or operation of the Linn Assets that, prior to the Closing Date, were transported and/or disposed of at off-site disposal facilities.
“
Linn Lease Dedication Notice
” has the meaning set forth in
Section 4.2(e)(ii)
.
“
Linn
Leases
” has the meaning set forth in definition of “Linn Assets”.
“
Linn Material Contracts
” has the meaning set forth in
Section 7.13(a)
.
Appendix A-31
US-DOCS\83219354.25
“
Linn
Oil and Gas Properties
” has the meaning set forth in definition of “Linn Assets”.
“
Linn Permitted Encumbrances
” means:
(d)
all Burdens upon, measured by or payable out of production if the net cumulative effect of such Burdens (i) does not operate to reduce the Net Revenue Interest of Linn with respect to Linn Well to an amount less than the Net Revenue Interest for such Linn Well as set forth in
Schedule 3.4B (Part I)
, (ii) does not operate to reduce the Linn Section Weighted Average NRI of Linn with respect to the applicable Linn Section and Target Formation to an amount less than the Linn Section Weighted Average NRI for such Linn Section and Target Formation as set forth in
Schedule 3.4A
, (iii) does not operate to reduce the Linn Section Net Acres of Linn in any Linn Section and Target Formation to an amount less than the Linn Section Net Acres for such Linn Section and Target Formation as set forth in
Schedule 3.4A
, and (iii) does not obligate Linn to bear a Working Interest in any Linn Well (to the extent the same covers the Target Formation(s)) in any amount greater than the Working Interest for such Linn Well as set forth in
Schedule 3.4B (Part I)
, as the case may be (unless, in the case of a Linn Well, the Net Revenue Interest for such Linn Well is greater than the Net Revenue Interest for such Linn Well as set forth in
Schedule 3.4B (Part I)
in the same proportion as any increase in such Working Interest);
(e)
the terms and conditions of the Linn Rights-of-Way included in the Linn Assets to the extent they do not materially affect the development and operations of the Linn Assets as the same are currently operated and being developed;
(f)
preferential rights to purchase, consents to assignment and other similar restrictions to the extent same have been complied with both in connection with the prior sale, assignment or transfer of such Linn Asset;
(g)
liens for Taxes or assessments not yet due or delinquent or, if delinquent, which are being contested in good faith;
(h)
Customary Post-Closing Consents and any required notices to, or filings with, Governmental Bodies in connection with the consummation of the transactions contemplated by this Agreement;
(i)
conventional rights of reassignment upon final intention to abandon or release any of the Linn Assets;
(j)
such Linn Title Defects as Citizen may have waived (whether in writing or pursuant to
Section 4.3(a)
);
(k)
all applicable Linn Permits and Laws and all rights reserved to or vested in any Governmental Body: (i) to control or regulate any Linn Asset in any manner; (ii) by the terms of any right, power, franchise, grant, license or permit, or by any provision of Law, to terminate such right, power, franchise, grant, license or permit or to purchase, condemn, expropriate or recapture or to designate a purchaser of any of the Linn Assets; (iii) to use such property in a manner which would not reasonably be expected to materially impair the use of such property for the purposes for which it is currently owned and operated; or (iv) to enforce any obligations
Appendix A-32
US-DOCS\83219354.25
or duties affecting the Linn Assets to any Governmental Body with respect to any franchise, grant, license or permit;
(l)
easements, conditions, covenants, restrictions, servitudes, permits, rights-of-way, surface leases and other rights in the Linn Assets for the purpose of operations, facilities, pipelines, transmission lines, transportation lines, distribution lines and other like purposes, or for the joint or common use of rights-of-way, facilities and equipment, to the extent, individually or in the aggregate, such rights would not reasonably be expected to materially impair the operation, development, value or use of any of the Linn Assets as currently operated and used;
(m)
vendors, carriers, warehousemen’s, repairmen’s, mechanics’, workmen’s, materialmen’s, construction or other like Encumbrances 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 delinquent or, if delinquent, which are being contested in good faith;
(n)
any calls on production under existing Linn Contracts, insofar as they provide for the payment of the then current applicable index-based market price for such production, and only insofar as they are described on
Schedule 7.20
;
(o)
Liens created under Linn Leases, Linn Units or Linn Rights-of-Way included in the Linn Assets and/or operating agreements or production sales contracts or by operation of Law in respect of obligations that are not yet due or delinquent or, if delinquent, which (i) are being contested in good faith and (ii) have been disclosed to Citizen in the schedules attached to this Agreement;
(p)
any Encumbrance affecting the Linn Assets that is discharged by Linn at or prior to Closing;
(q)
any matters referenced in
Exhibit A-1 (Part I)
,
Exhibit A-2 (Part I)
,
Schedule 3.4A
or
Schedule 3.4B (Part I)
;
(r)
failure of Linn Leases to contain pooling provisions, unless a Linn Well has been drilled thereon (and the unit for the same includes any pooled acreage), or a pooled unit has been formed for a Linn Well which includes a portion of such Linn Leases, and in either case, the consent of the lessor to permit pooling has not been obtained;
(s)
the litigation, suits and proceedings for all items of
Part II of
Schedule 7.6
;
(t)
any liens, obligations, defects, irregularities or other Encumbrances affecting the Linn Assets that would be customarily waived or accepted by an reasonable and prudent title examiner experienced in the review of title to oil and gas properties in Oklahoma;
(u)
the terms and conditions of the Linn Material Contracts if the net cumulative effect of such Linn Material Contracts (i) does not operate to reduce the Net Revenue Interest of Linn with respect to Linn Well to an amount less than the Net Revenue Interest for such Linn Well as set forth in
Schedule 3.4B (Part I)
, (ii) does not operate to reduce the Linn Section Weighted Average NRI of Linn with respect to the applicable Linn Section and Target
Appendix A-33
US-DOCS\83219354.25
Formation to an amount less than the Linn Section Weighted Average NRI for such Linn Section and Target Formation as set forth in
Schedule 3.4A
, (iii) does not operate to reduce the Linn Section Net Acres of Linn in any Linn Section and Target Formation to an amount less than the Linn Section Net Acres for such Linn Section and Target Formation as set forth in
Schedule 3.4A
, and (iv) does not obligate Linn to bear a Working Interest in any Linn Well (to the extent the same covers the Target Formation(s)) in any amount greater than the Working Interest for such Linn Well as set forth in
Schedule 3.4B (Part I)
, as the case may be (unless, in the case of a Linn Well, the Net Revenue Interest for such Linn Well is greater than the Net Revenue Interest for such Linn Well as set forth in
Schedule 3.4B (Part I)
in the same proportion as any increase in such Working Interest); (v) does not operate to cause the primary term expiration date for a Linn Lease to be earlier than the primary term expiration date identified for such Linn Lease on
Exhibit A-1 (Part I)
; (vi) does not grant or impose a lien or other Encumbrance (other than a Linn Permitted Encumbrance) on any Linn Assets, (vii) does not provide for any disproportionate sharing of costs, revenues or share of production (other than to the extent relating to default provisions or un-triggered non-consent elections or triggered non-consent elections for which the adjusted interests are identified on
Schedule 3.4B (Part I)
), and (viii) does not contain or provide for any alternating operatorship or alternating designation of operator; and
(v)
the terms and conditions of this Agreement.
“
Linn Preferential Purchase Right
” has the meaning set forth in
Section 7.12
.
“
Linn Production-Related IT Equipment
” has the meaning set forth in the definition of “Linn Assets”.
“
Linn
Records
” has the meaning set forth in definition of “Linn Assets”.
“
Linn Retained Liabilities
” means Liabilities, known or unknown, caused by, arising out of or resulting from: (a) Linn’s expenses related to the transactions contemplated by this Agreement; (b) any and all Linn Taxes; (c) the matters set forth on
Part I of
Schedule 7.6
, and any claims or Liabilities asserted by royalty owners or other Burden beneficiaries who are similarly situated to the claimants in lawsuit described in
Part I of Schedule 7.6
with respect to such lawsuit; (d) the employment relationship between Linn or any of its Affiliates and any of Linn’s or any of Linn’s Affiliates’ present or former employees or the termination of any such employment relationship; (e) any Linn Excluded Assets; (f) personal injury or death relating to the use, ownership or operation of the Linn Assets prior to the Closing; (g) any acts or omissions that arise to gross negligence or willful misconduct of any member of the Linn Group related to or arising out of the ownership or operation of the Linn Assets; (h) any fines or penalties imposed or assessed by a Governmental Body related to or arising out of the ownership or operation of the Linn Assets prior to the Closing Date, and (i) Linn’s obligations or Liabilities owed to an Affiliate of Linn (excluding those adjustments contemplated in
Section 3.2(a)(i)(B)
regarding certain payments to be made to Linn Midstream, LLC).
“
Linn
Rights-of-Way
” has the meaning set forth in definition of “Linn Assets”.
“
Linn
Section
” means each Section set forth on
Schedule 3.4A
.
Appendix A-34
US-DOCS\83219354.25
“Linn Section Leases
” means, with respect to a Governmental Section, those (or that portion of those) Linn Leases covering lands that are located within the boundaries of such Governmental Section, but only to the extent such Linn Leases (a) are included within the boundaries such Governmental Section, and (b) includes Qualifying Depths of the Target Formation for at least one of the Target Formations.
“
Linn Section Net Acres
” means with regard to a Governmental Section, the aggregate Net Acres attributable to the Linn Section Leases for such Governmental Section, such calculation being made separately as to each Target Formation. Notwithstanding the above, to the extent the term Linn Section Net Acres is used in connection with a Linn Additional Lease, this term shall mean the Net Acres for the relevant Linn Additional Lease only, instead of the Linn Section Leases.
“Linn Section Weighted Average NRI”
means, as to a Governmental Section, and calculated separately as to each Target Formation: (i) first, take Linn’s Net Revenue Interest in and to each Linn Section Lease for such Governmental Section, and then
multiply the same by
the Linn Section Net Acres covered by such Linn Section Lease for such Target Formation (again, limited solely to those Net Acres thereof that are both included within the applicable Governmental Section, and which include Qualifying Depths of the Target Formation for such Target Formation), and not counting any Net Acres covered by such Linn Section Lease that are located outside the boundaries of such Governmental Section, nor counting any Net Acres covering depths outside of a Target Formation for which Linn’s Leases include Qualifying Depths of the Target Formation; and (ii) then, the calculated product obtained for each Linn Section Lease under subpart (i) above shall then be added together, and the sum thereof shall then be divided by the sum of the Linn Section Net Acres covered by ALL of the Linn Section Leases included within such Governmental Section, solely to the extent such Net Acres are included within the boundaries of such Governmental Section and include Qualifying Depths of the Target Formation for such Target Formation (the result of the calculation in this subpart (ii) shall be referred to as the “
Linn
Section
Weighted Average NRI
” for such Governmental Section and Target Formation), and such calculation shall be made with regard to each Target Formation for the applicable Governmental Section. Notwithstanding the above, to the extent the term Linn Section Weighted Average NRI is used in connection with a Linn Additional Lease, this term shall mean the Net Revenue Interest for the relevant Linn Additional Lease only, instead of the Linn Section Leases.
“
Linn Substitute Leases
” has the meaning set forth in
Section 4.2(e)(ii)
.
“
Linn Suspense Funds
” means funds held in suspense (including funds held in suspense for unleased interests and penalties and interest) that are attributable to the Linn Assets or Linn Additional Assets or any interests pooled, unitized or communitized therewith.
“
Linn Taxes
” means any Liability of Linn, or otherwise imposed on the Linn Assets or Linn Additional Assets, in respect of any Tax, including without limitation any Liability of Linn for the Taxes of any other Person under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract or otherwise, but excluding any Asset Taxes to the extent specifically allocated to the Company pursuant to
Section 16.1
.
Appendix A-35
US-DOCS\83219354.25
“
Linn
Title Benefit
” means with respect to the Target Formation(s) for the Linn Section Leases, Linn Section Net Acres or Linn Wells, any right, circumstance or condition existing as of the Effective Time and also immediately prior to the end of the Review Period that operates to (a) increase the Linn Section Weighted Average NRI of Linn with respect to a Linn Section and Target Formation or the Net Revenue Interest of Linn with respect to a Linn Well above that shown for such Linn Section or Linn Well in
Schedule 3.4A
or
Schedule 3.4B (Part I)
, as applicable, to the extent the same does not, with respect to Linn’s interest in any Linn Well, cause an equal or greater than proportionate increase in Linn’s Working Interest with respect to the Target Formation(s) in such Linn Well above that shown in
Schedule 3.4B (Part I)
, as applicable, or (b) increase the Linn Section Net Acres with respect to a Section and the Target Formation(s) in any Linn Section and Target Formation above the Linn Section Net Acres for such Linn Section and Target Formation as shown in
Schedule 3.4A
.
“
Linn Title Benefit Amount
” means, with respect to a Linn Title Benefit:
(d)
if the Transacting Parties agree on the Linn Title Benefit Amount, then that amount shall be the Title Benefit Amount;
(e)
if the Linn Title Benefit represents a discrepancy between either or both:
(i) (1) Linn’s actual Net Acres for any Target Formation in any Linn Section, and (2) the Linn Section Net Acres for such Target Formation in such Linn Section as set forth in
Schedule 3.4A
, or
(ii) (1) Linn’s actual Linn Section Weighted Average NRI in any Target Formation in any Linn Section and (2) the Linn Section Weighted Average NRI for such Target Formation in such Linn Section as set forth in
Schedule 3.4A
,
then the Linn Title Benefit Amount for such Target Formation in such Governmental Section shall be the greater of zero and the amount obtained by subtracting the Allocated Value for such Target Formation in such Governmental Section from the Linn Actual Section Value for such Target Formation in such Governmental Section.
(d)
if (i) the Linn Title Benefit represents a discrepancy between (1) Linn’s actual Net Revenue Interest for any Linn Well, and (2) Linn’s Net Revenue Interest for such Linn Well as set forth in
Schedule 3.4B (Part I)
, and (ii) Linn’s Working Interest in such Linn Well is increased by less than the same proportion as such Net Revenue Interest increase, then the Linn Title Benefit Amount shall be the product of (1) the Allocated Value of the affected Linn Well multiplied by (2) a fraction, the numerator of which is the Net Revenue Interest increase in such Linn Well, and the denominator of which is the Net Revenue Interest for such Linn Well as set forth in
Schedule 3.4B (Part I)
;
(e)
if the Linn Title Benefit is of a type not described above, then the Linn Title Benefit Amounts shall be determined by taking into account the Allocated Value of the Linn Asset affected by such Linn Title Benefit, the portion of such Linn Asset affected by such Linn Title Benefit, the legal effect of the Linn Title Benefit, the potential economic effect of the Linn Title Benefit over the life of such Asset, the values placed upon the Title Benefit by the
Appendix A-36
US-DOCS\83219354.25
Transacting Parties and such other reasonable factors as are necessary to make a proper evaluation.
“
Linn
Title Benefit Notice
” has the meaning set forth in
Section 4.2(b)
.
“
Linn Title Defect
” shall mean any Encumbrance, defect or other condition or matter that causes Linn not to have Linn Defensible Title;
provided
that the following shall not be considered Linn Title Defects:
(a)
defects arising out of lack of corporate or other entity authorization (other than any such defects relating to Linn or its Affiliates or any prior Affiliates of Linn, whether pre-bankruptcy or post-bankruptcy of Linn Energy, LLC) unless Citizen provides conclusive evidence that such corporate or other entity action was not authorized and has resulted in another Person’s superior claim of title to the relevant Linn Asset;
(b)
defects arising from any prior oil and gas lease relating to the lands covered by the Linn Leases or Linn Units not being surrendered of record, unless Citizen provides reasonable evidence that such prior oil and gas lease is still in effect and has resulted in another Person’s actual and superior claim of title to the relevant Linn Lease or Linn Well;
(c)
defects that affect only which Person has the right to receive royalty payments (rather than the amount of the proper payment of such royalty payment) and that do not affect the validity of or title to the underlying Linn Lease;
(d)
defects based solely on: (i) lack of information in Linn’s files; (ii) references to an unrecorded document to which neither Linn nor any Affiliate of Linn is a party and which document is dated earlier than January 1, 1960; or (iii) any Tax assessment, Tax payment or similar records or the absence of such activities or records;
(e)
any Encumbrance or loss of title resulting from Linn’s conduct of business in compliance with this Agreement;
(f)
defects as a consequence of cessation of production, insufficient production or failure to conduct operations during any period after the completion of a well capable of production in paying quantities on any of the Linn Leases held by production, or lands pooled or unitized therewith, except to the extent the cessation of production is shown to exist for a period that, under the terms of the Lease, would (or would reasonably be believed to) result in the termination or expiration of the underlying Linn Lease, which documentation shall be provided by Citizen to Linn in support thereof;
(g)
liens arising from any Encumbrance created by a mineral owner which has not been subordinated to the applicable lessee’s interest, solely to the extent that the Linn Lease in question does not have a Linn Well on it, and no portion thereof has been included in a Linn Unit;
(h)
all defects or irregularities that have been adjudicated to be cured or remedied by applicable statutes of limitation or statutes of prescription;
Appendix A-37
US-DOCS\83219354.25
(i)
all defects or irregularities resulting from the failure to record releases of liens, production payments or mortgages that have expired on their own terms or the enforcement of which are barred by applicable statute of limitations;
(j)
all defects in the chain of title consisting of the failure to recite marital status in a document or omissions of successions of heirship or estate proceedings, unless Citizen provides conclusive evidence that such failure results in another Person’s superior claim of title to the relevant Linn Asset;
(k)
all defects arising from any change in Laws following the Execution Date;
(l)
any Encumbrance or loss of title affecting ownership interests in formations other than the Target Formation(s) for the relevant Linn Asset (excluding any circumstances or conditions that have resulted in title or rights relative to ownership interests in the Linn Assets (but expressly excluding the Linn Excluded Assets) related to formations other than Target Formations being held by an Linn Affiliate other than Linn itself);
(m)
defects arising from failure to comply with any maintenance of uniform interest provision in any Linn Lease or Linn Contract; and
(n)
any Title Defect affecting a Linn Well for which the Title Defect Amount does not exceed $25,000; provided, however, that the Title Defect Amount shall be deemed to meet such $25,000 threshold in any of the following cases: (1) if any Linn Well is affected by more than one Linn Title Defect, and the aggregate sum of the Title Defect Amounts for all Linn Title Defects affecting such Linn Well exceeds such $25,000 threshold, or (2) in the case of a failure to hold Linn Defensible Title to multiple Linn Wells due to the same specific set of facts, and aggregate sum of the Title Defect Amounts for such Linn Title Defects affecting multiple Linn Wells exceeds such $25,000 threshold.
“
Linn
Title Defect Amount
” means, with respect to a Linn Title Defect:
(a)
if the Transacting Parties agree on the Linn Title Defect Amount, then that amount shall be the Linn Title Defect Amount;
(b)
if the Linn Title Defect is an Encumbrance that is undisputed and liquidated in amount, then the Linn Title Defect Amount shall be the amount necessary to be paid to remove the Linn Title Defect from the Linn Title Defect Property;
(c)
if the Linn Title Defect represents a discrepancy between either or both:
(i) (1) Linn’s actual Net Acres for any Target Formation in any Linn Section, and (2) the Linn Section Net Acres for such Target Formation in such Linn Section as set forth in
Schedule 3.4A
, or
(ii) (1) Linn’s actual Linn Section Weighted Average NRI in any Target Formation in any Linn Section and (2) the Linn Section Weighted Average NRI for such Target Formation in such Linn Section as set forth in
Schedule 3.4A
,
Appendix A-38
US-DOCS\83219354.25
and in each case, there is no intermediate reversionary interest prior to the end of the productive life of any relevant Linn Section Lease, then the Linn Title Defect Amount for such Target Formation in such Governmental Section shall be the greater of zero and the amount obtained by subtracting the Linn Actual Section Value for such Target Formation in such Governmental Section from the Allocated Value for such Target Formation in such Governmental Section.
(d)
if (i) the Linn Title Defect represents a discrepancy between (A) Linn’s actual NRI in any Linn Well and (B) Linn’s Net Revenue Interest for such Linn Well as set forth in
Schedule 3.4B (Part I)
and (ii) Linn’s Working Interest in such Linn Well is decreased in the same proportion as such Net Revenue Interest decrease,
then the Linn Title Defect Amount shall be the product of (A) the Allocated Value of such Linn Well multiplied by (B) a fraction, the numerator of which is the Net Revenue Interest decrease in such Linn Well, and the denominator of which is the Net Revenue Interest for such Linn Well as set forth in
Schedule 3.4B (Part I)
;
(e)
if the Linn Title Defect results from failure of a Linn Section Lease to possess Qualifying Depths for any Majority Target Formation in any Governmental Section and Linn possesses less than or equal to 10% of applicable Target Formation for such Qualifying Depths in such Majority Target Formation in such Governmental Section, then the Linn Title Defect Amount shall be calculated by first reducing the number of Net Acres allocable to such Linn Section Lease to zero (0), and then calculating the associated Linn Title Defect Amount as provided in clause (c) above;
(f)
if the Linn Title Defect results from failure of a Linn Section Lease to possess Qualifying Depths as described in subpart (a) of that definition, then the Linn Title Defect Amount shall be calculated by first reducing the number of Net Acres allocable to such Linn Section Lease to zero (0), and then calculating the associated Linn Title Defect Amount as provided in clause (c) above;
(g)
if the Linn Title Defect results from failure of a Linn Section Lease to possess Qualifying Depths for any Majority Target Formation in any Governmental Section and Linn possesses more than 10% of such applicable Target Formation for such Qualifying Depths, then the Linn Title Defect Amount shall be calculated by reducing the number of Linn Section Net Acres allocable to such Linn Section Lease by the product of (i) the number of Net Acres that would have been allocable to Linn Section Lease if it possessed the Qualifying Depths and (ii) the amount obtained by subtracting (A) (1.0 - (the product of (I) 2.5 and (II) the difference obtained by subtracting the percentage of the applicable Target Formation for such Qualifying Depths actually possessed by Linn with regard to such Linn Section Lease in such Majority Target Formation in such Governmental Section from 50.0%) from (B) 1.0, and then calculating the associated Linn Title Defect Amount as provided in clause (c) above;
(h)
if the Linn Title Defect represents an obligation, Encumbrance upon or other defect in title to the Linn Title Defect Property of a type not described above, then the Linn Title Defect Amount shall be determined by taking into account the Allocated Value of the Linn Title Defect Property, the portion of the Linn Title Defect Property affected by the Linn Title Defect, the legal effect of the Linn Title Defect, the potential economic effect of the Linn Title Defect,
Appendix A-39
US-DOCS\83219354.25
the values placed upon the Linn Title Defect by each Transacting Party and such other reasonable factors as are necessary to make a proper evaluation;
(i)
the Linn Title Defect Amount with respect to a Linn Title Defect Property shall be determined without duplication of any costs or losses included in another Linn Title Defect Amount hereunder;
(j)
if a Linn Title Defect does not affect a Linn Title Defect Property throughout the entire remaining productive life of such Linn Title Defect Property or across all Target Formations for such Linn Title Defect Property, such fact shall be taken into account in determining the Linn Title Defect Amount; and
(k)
notwithstanding anything to the contrary in this Agreement, the aggregate Linn Title Defect Amounts attributable to the effects of all Linn Title Defects upon any single Linn Title Defect Property shall not exceed the Allocated Value of such Linn Title Defect Property.
“
Linn Title Defect Notice
” has the meaning set forth in
Section 4.2(a)
.
“
Linn
Title Defect Property
” has the meaning set forth in
Section 4.2(a)
.
“
Linn True-Up Leases
” has the meaning set forth in
Section 3.2(b)(vi)(C)
.
“
Linn
Units
” has the meaning set forth in the definition of “Linn Assets”.
“
Linn Waterflood Assets
” means the waterflood assets described on
Exhibit. I
.
“
Linn
Wells
” has the meaning set forth in the definition of “Linn Assets”.
“
LLC Agreement
” means the Amended and Restated Limited Liability Company Agreement of the Company in the form attached hereto as
Exhibit F
.
“
LOI
” has the meaning set forth in the Preamble.
“
Majority Target Formation
” means any of the Target Formations not located within the Merge Area.
“
Master Services Agreement
” means, collectively, the Master Services Agreements to be executed by and between Linn, Citizen and the Company in substantially the forms attached hereto as
Exhibit G
.
“
Material Adverse Effect
” means any change, inaccuracy, effect, event, result, occurrence, condition or fact (for the purposes of this definition, each, an “event”) that has had or would be reasonably likely to have, individually or in the aggregate with any other event or events, a material adverse effect on the ownership, operation or financial condition of the Assets, taken as a whole as currently operated as of the Execution Date;
provided
,
however
, that Material Adverse Effect shall not include such material adverse effects resulting from: (a) the announcement of the transactions contemplated by this Agreement; (b) changes in general market, economic, financial or political conditions (including changes in commodity prices, fuel
Appendix A-40
US-DOCS\83219354.25
supply or transportation markets, interest or rates) in the area in which the Assets are located, the United States or worldwide;
provided
that such changes do not disproportionately affect the area in which the Assets are located; (c) changes in conditions or developments generally applicable to the oil and gas industry in the area in which the Assets are located, the United States or worldwide;
provided
that such changes do not disproportionately affect the area in which the Assets are located; (d) acts of God, including hurricanes, storms or other naturally occurring events; (e) acts or failures to act of Governmental Bodies; (f) civil unrest, any outbreak of disease or hostilities, terrorist activities or war or any similar disorder; (g) matters that are cured or no longer exist by the earlier of Closing and the termination of this Agreement; (h) any reclassification or recalculation of reserves in the ordinary course of business; (i) changes in the prices of Hydrocarbons; and (j) natural declines in well performance.
“
Merge Area
” has the meaning set forth on Exhibit H.
“
Mississippian/Springer Formation
” means:
(a)
as to Leases within the Merge Area, means the interval from the stratigraphic equivalent of the top of the Mississippi Formation, as defined at 9,857’ measured depth on the Array Induction Shallow Focused Electric Log taken on July 11, 2002 in the Dominion Exploration and Production, Inc. Braum #3-17 well located in the S/2 SW NE SW of Section 17-10N-6W in Grady County, Oklahoma to the stratigraphic equivalent of the top of the Woodford Formation, as defined at 10,338’ measured depth on the same log. Furthermore, the “Sycamore”, determined as the valued formation, shall be defined as the interval from the stratigraphic equivalent of the top of the Sycamore Formation, as defined at 10,163’ measured depth to the stratigraphic equivalent of the top of the Woodford Formation, as defined at 10,338’ measured depth on the same log;
(b)
as to Leases within the STACK Area, means the interval from the stratigraphic equivalent of the top of the Mississippi Formation, as defined at 7,381’ measured depth on the Dual Induction Laterolog taken on June 5, 1973 in the Marlin Oil Corporation Zalabak #1 well located in the SW SW of Section 23-16N-7W in Kingfisher County, Oklahoma to the stratigraphic equivalent of the top of the Woodford Formation, as defined at 8,078’ measured depth on the same log. Furthermore the valued formation for such Target Formation shall be defined as the interval from the stratigraphic equivalent of the top of the Mississippi-Meramec Formation, as defined at 7,598’ measured depth to the base of the Mississippi-Osage Formation, as defined at 8,078’ measured depth on the same log; and
(c)
as to Leases within the SCOOP Area, means the interval from the stratigraphic equivalent of the top of the Springer Formation, as defined at 12,081’ measured depth on the Dual Induction Focused Log taken on August 21, 1981 in the Andover Oil Company Parnell #1-167 well located in the C NW of Section 16-7N-6W in Grady County, Oklahoma to the stratigraphic equivalent of the Base of the Goddard Formation, as defined at 12,296’ measured depth on the same log.
“
Negative Citizen Adjustment Amount
” has the meaning set forth in
Section 3.3(b)(i)
.
“
Negative Linn Adjustment Amount
” has the meaning set forth in
Section 3.2(b)(i)
.
Appendix A-41
US-DOCS\83219354.25
“
Net Acre
” means, as computed separately with respect to each Linn Lease or Citizen Lease, as applicable, and computed separately as to each Target Formation: (a) the number of gross acres of land covered by the Linn Lease or the Citizen Lease, as applicable,
multiplied by
(b) the undivided mineral fee percentage interest (stated as a decimal) in Hydrocarbons granted by such Linn Lease or Citizen Lease, as applicable, insofar and only insofar as such interest includes Qualifying Depths of the Target Formation for the Target Formation in question
multiplied by
(c) Linn’s or Citizen’s, as applicable, Working Interest in such Linn Lease or Citizen Lease;
provided
that if
clauses
(a)
and/or
(b)
and/or
(c)
vary as to different areas , a separate calculation shall be done for each such area and depth.
“
Net Revenue Interest
” means: with respect to any Linn Lease or Linn Well, or any Citizen Lease or Citizen Well, as applicable, the percentage interest in and to all Hydrocarbons produced, saved and sold from or allocated to such Linn Lease, Linn Well, Citizen Lease or Citizen Well, after giving effect to all Burdens;
provided
that if any item above varies as to different areas (including tracts) or formations covered thereby, a separate calculation shall be done for each such area or formation as if it were a separate Linn Lease or Citizen Lease, as applicable, and separate calculations shall be made as to each Target Formation for which a Party’s interest in a Lease covers and includes Qualifying Depths of the Target Formation for such Target Formation.
“
NLRB
” means the National Labor Relations Board.
“
NORM
” means naturally occurring radioactive material.
“
Other Party
” means, in the case of the Linn Assets and Linn Additional Assets, Citizen, and in the case of the Citizen Assets and Citizen Additional Assets, Linn.
“
Outside Date
” means the date that is six (6) months after the Scheduled Closing Date.
“
Parties
” and “
Party
” have the meanings set forth in the Preamble.
“
Percentage Interest
” means, in the case of a Party as of such time, the “Percentage Interest” (which term has the meaning provided in the LLC Agreement) of such Party as of such time.
“
Permits
” means any permit, water right (including water withdrawal, storage, discharge, treatment, injection and disposal rights), license, registration, consent, order, approval, variance, exemption, waiver, franchise, right or other authorization required by or obtained from any Governmental Body.
“
Person
” means any individual, corporation, company, partnership, limited partnership, limited liability company, trust, estate, Governmental Body or any other entity.
“
Phase II
” has the meaning set forth in
Section 6.1(b)
.
“
Pipeline Imbalance
” shall mean any marketing imbalance between the quantity of Hydrocarbons attributable to the Linn Assets, Linn Additional Assets, Citizen Assets or Citizen Additional Assets required to be delivered by Linn or Citizen, as applicable, under any Linn
Appendix A-42
US-DOCS\83219354.25
Contract or Citizen Contract, as applicable, or Law relating to the purchase and sale, gathering, transportation, storage, processing or marketing of such Hydrocarbons and the quantity of Hydrocarbons attributable to the Linn Assets, Linn Additional Assets, Citizen Assets or Citizen Additional Assets actually delivered by Linn or Citizen, as applicable, pursuant to the relevant Linn Contract or Citizen Contract, as applicable, or at Law, together with any appurtenant rights and obligations concerning production balancing at the delivery point into the relevant sale, gathering, transportation, storage or processing facility.
“
Positive Citizen Adjustment Amount
” has the meaning set forth in
Section 3.3(b)(i)
.
“
Positive Linn Adjustment Amount
” has the meaning set forth in
Section 3.2(b)(i)
.
“
Post-Closing Citizen Statement
” has the meaning set forth in
Section 3.2(b)(ii)
.
“
Post-Closing Linn Statement
” has the meaning set forth in
Section 3.3(b)(ii)
.
“
Preliminary Citizen Adjustment Amount
” has the meaning set forth in
Section 3.3(a)(iii)
.
“
Preliminary Linn Adjustment Amount
” has the meaning set forth in
Section 3.2(a)(iii)
.
“
Property Expenses
” means, in the case of a Transacting Party’s Assets, all operating expenses (including all insurance premiums or any other costs of insurance attributable to such Transacting Party’s and/or its Affiliates’ insurance and to coverage periods from and after the Effective Time but excluding in all cases, Asset Taxes and all costs and expenses of bonds, letters of credit or other surety instruments) and capital expenditures incurred in the ownership and operation of such Assets in the ordinary course of business and, where applicable, in accordance with the relevant operating or unit agreement, if any, and overhead costs charged to such Assets under the relevant operating agreement or unit agreement, if any, including costs of title examination, costs of surface preparation for drilling and costs of drilling wells,
but excluding Liabilities attributable to
: (a) personal injury or death, property damage or violation of any Law, (b) obligations to plug wells and dismantle or decommission facilities, (c) the Remediation of any Environmental Condition under applicable Environmental Laws or the cure of any Linn Title Defect or Citizen Title Defect, (d) obligations with respect to Imbalances, (e) in the case of Linn, any Linn Retained Liability, and in the case of Citizen, any Citizen Retained Liability, (f) any expense or payment incurred in breach of this Agreement, (g) obligations to pay Working Interests, royalties, overriding royalties or other interest owners revenues or proceeds attributable to sales of Hydrocarbons relating to such Assets, including those held in suspense, (h) efforts to cure any asserted Linn Title Defects or Citizen Title Defects or Environmental Conditions, (i) any consideration payable in connection with the acquisition of any Linn Leases, Linn Additional Leases and associated Linn Additional Assets, Linn Leases and Citizen Additional Leases and associated Citizen Additional Assets, together with any reasonable Third Party expenses, including reasonable attorneys’ fees, lease bonuses, broker fees, abstract costs, title opinion costs, title curative costs, and other reasonable Third Party costs of due diligence incurred in connection with acquiring such Linn Leases, Linn Additional Leases and associated Linn Additional Assets, Linn Leases and Citizen Additional Leases and associated Citizen Additional Assets; or (j) Taxes.
Appendix A-43
US-DOCS\83219354.25
“
Public Announcement Restrictions
” has the meaning set forth in
Section 10.3
.
“
Qualifying Depths
” means:
(a)
as to the Woodford Formation within the Merge Area, vertical subsurface depths of not less than 30 feet within such Target Formation;
(b)
as to the Woodford Formation within the SCOOP Area, more than 50% of the total vertical subsurface depths of such Target Formation;
(c)
as to the Mississippian/Springer Formation within the Merge Area, more than 50% of the total vertical subsurface depths of the “valued formation” (as defined in clause (a) of the definition of “Mississippian/Springer Formation”) of such Target Formation;
(d)
as to the Mississippian/Springer Formation within the STACK Area, more than 50% of the total vertical subsurface depths of the “valued formation” (as defined in clause (b) of the definition of “Mississippian/Springer Formation”) of such Target Formation; and
(e)
as to the Mississippian/Springer Formation within the SCOOP Area, more than 50% of the total vertical subsurface depths of such Target Formation.
“
Raw Net Acres
” means, as computed separately for each acquisition of Linn Additional Lease or Citizen Additional Lease: (a) the number of gross acres of land covered by the Linn Additional Lease or the Citizen Additional Lease, as applicable, within the AMI
multiplied by
(b) the undivided mineral fee percentage interest (stated as a decimal) in Hydrocarbons granted by such Linn Additional Lease or Citizen Additional Lease, as applicable, for the areas within the AMI
multiplied by
(c) Linn’s or Citizen’s, as applicable, Working Interest in such Linn Additional Lease or Citizen Additional Lease;
provided
that if
clauses
(a)
and/or
(b)
and/or
(c)
vary as to different surface areas, a separate calculation shall be done for each such area (but only such areas within the AMI will be included; and provided further that any gross acres of land covered by a Linn Additional Lease does not include Qualifying Depths of at least one of the relevant Section Target Formations, such gross acres will not be included in clause (a). Separate calculations as to Target Formations will not be made for the purposes of Raw Net Acres.
“
Records
” means the Linn Records and the Citizen Records, as applicable.
“
Relevant Citizen Value
” has the meaning set forth in
Section 3.2(b)(vi)(C)
.
“
Relevant Linn Value
” has the meaning set forth in
Section 3.2(b)(vi)(C)
.
“
Remediation
” shall mean, with respect to an Environmental Condition, the response required or allowed under Environmental Laws that addresses and resolves (for current and future use in the same manner as being currently used) the identified Environmental Condition in its entirety in the most cost-effective manner (considered as a whole) as compared to any other response that is required or allowed under Environmental Laws. “
Remediation
” may consist of or include taking no action, leaving the condition unaddressed, periodic monitoring, the use of institutional controls or the recording of notices in lieu of remediation, in each case, if such
Appendix A-44
US-DOCS\83219354.25
response is allowed under Environmental Laws and completely addresses and resolves (for current and future use in the same manner as being currently used) the identified Environmental Condition in its entirety.
“
Remediation Amount
” shall mean, with respect to an Environmental Condition, the present value as of the Closing Date (using an annual discount rate of 10% for Remediation activities that cannot be completed within one year of the Closing Date) of the cost (net to the affected Transacting Party’s interest) of the Remediation of such Environmental Condition;
provided
,
however
, that “
Remediation Amount
” shall not include (a) the costs of the project manager of the Company while conducting the Remediation, (b) expenses for matters that are ordinary costs of doing business regardless of the presence of an Environmental Condition (e.g., those costs that would ordinarily be incurred in the day-to-day operations of the Assets or in connection with Permit renewal/amendment activities), (c) overhead costs of the Company, (d) costs and expenses that would not have been required under Environmental Laws as they exist on the Closing Date or, if prior to the Closing Date, the date on which the Remediation action is being undertaken, or (e) any costs or expenses relating to the assessment, remediation, removal, abatement, transportation and disposal of any asbestos, asbestos-containing materials or NORM unless required to address a violation of Environmental Law.
“
Representatives
” means, with respect to a given entity, its officers, directors, members, managers, employees, agents, advisors and other representatives.
“
Respondent
” has the meaning set forth in
Section 17.3(c)(ii)
.
“
Review Period
” means, except as expressly provided herein, the period commencing upon the Execution Date and ending at 11:59 p.m. Central Prevailing Time on the first (1
st
) Business Day that is sixty (60) days after the Execution Date.
“
Rights-of-Way
” shall mean all permits, licenses, servitudes, easements, fee surface, surface leases, surface use agreements and rights-of-way primarily used or held for use in connection with the ownership or operation of the Assets, other than Permits.
“
Scheduled Closing Date
” has the meaning set forth in
Section 13.1
.
“
SCOOP Area
” has the meaning set forth on Exhibit H.
“
Section Target Formation
” means, with respect to a Governmental Section, the Target Formation or Target Formations described with respect to such Governmental Section in
Exhibit H
.
“
Seismic Contract
” means any contract or agreement related to the acquisition, licensing, sale, modification or other use or ownership of geological, geophysical or seismic data or records, whether or not proprietary and whether or not processed, re-processed, migrated, stacked or otherwise modified (“
Seismic Data
”), and any similar contract, including seismic data licenses or other contracts, providing for the exclusive or non-exclusive use, modification or disclosure of proprietary seismic data.
“
STACK Area
” has the meaning set forth on Exhibit H.
Appendix A-45
US-DOCS\83219354.25
“
Straddle Period
” means any taxable period beginning before and ending after the Effective Date.
“
Target Formation
” means the Mississippian/Springer Formation and Woodford Formation (and reference to a “Target Formation” shall mean any of them, applicable).
“
Tax
” or “
Taxes
” means any federal, state, local or foreign income, gross receipts, branch profits, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, escheat, environmental, customs duties, capital stock, franchise, profits, withholding, social security, unemployment, disability, real property, personal property, sales, use, transfer, registration, ad valorem, value added, alternative or add-on minimum or estimated tax or other charge in the nature of tax imposed by a Governmental Body, including any interest, penalty or addition thereto, whether disputed or not, and any liability in respect of any of the foregoing that arises by reason of a contract, assumption or transferee or successor liability.
“
Tax Claims
” means any claims under
Section 15.1(a)
for Linn Taxes,
Section 15.1(b)
for breach of Linn’s obligations under
Article 16
,
Section 15.1(c)
for breach of the representations and warranties in
Section 7.8
,
Section 15.2(a)
for Citizen Taxes,
Section 15.2(b)
for breach of Citizen’s obligations under
Article 16
, or
Section 15.2(c)
for breach of the representations and warranties in
Section 8.8
.
“
Tax Return
” means all returns, declarations, claims for refunds, reports, forms, estimates, information returns and statements required to be filed in respect of any Taxes to be supplied to a taxing authority in connection with any Taxes, including any schedule or attachment thereto, including any amendment thereof.
“
Third Party
” means any Person other than a Party to this Agreement or an Affiliate of a Party to this Agreement.
“
Third Person Claim
” has the meaning set forth in
Section 15.7(b)
.
“
Title Arbitrator
” has the meaning set forth in
Section 4.4
.
“
Title Cure Period
” has the meaning set forth in
Section 4.2(c)(i)
.
“
Title Dispute
” has the meaning set forth in
Section 4.4
.
“
Total Consideration
” has the meaning set forth in
Section 3.1(a)
.
“
Transacting Parties
” and “
Transacting Party
” have the meanings set forth in the Preamble.
“
Transaction Documents
” shall mean those documents executed and delivered pursuant to or in connection with this Agreement.
“
Transfer Tax
” means any sales, use, excise, real property transfer, registration, documentary, stamp, recording fees and similar Taxes or fees arising from the transactions contemplated by this Agreement.
Appendix A-46
US-DOCS\83219354.25
“
Treasury Regulations
” means the regulations promulgated by the United States Department of the Treasury pursuant to and in respect of provisions of the Code. All references herein to sections of Treasury Regulations shall include any corresponding provision or provisions of succeeding, similar, substitute, proposed or final Treasury Regulations.
“
Units
” has the meaning given to such term in the LLC Agreement.
“
Well
Imbalance
” shall mean any imbalance at the wellhead between the amount of Hydrocarbons produced from a Linn Well or Citizen Well and allocable to the interests of Linn or Citizen, as applicable, therein and the shares of production from the relevant Linn Well or Citizen Well to which Linn or Citizen, as applicable, is entitled, together with any appurtenant rights and obligations concerning future in kind and/or cash balancing at the wellhead.
“
Woodford Formation
” means:
(a)
as to Leases within the Merge Area, means the interval from the stratigraphic equivalent of the top of the Woodford Formation, as defined at 10,338’ measured depth on the Array Induction Shallow Focused Electric Log taken on July 11, 2002 in the Dominion Exploration and Production, Inc. Braum #3-17 well located in the S/2 SW NE SW of Section 17-10N-6W in Grady County, Oklahoma to the stratigraphic equivalent of the base of the Woodford Formation, as defined at 10,486’ measured depth on the same log; and
(b)
as to Leases within the SCOOP Area, means the interval from the stratigraphic equivalent of the top of the Woodford Formation, as defined at 10,232’ measured depth on the Array Induction Shallow Focused Electric Log taken on September 29, 1998 in the Lance Ruffel Oil & Gas Simpson #1-14 well located in the E/2 W/2 NW of Section 14-5N-4W in McClain County, Oklahoma to the stratigraphic equivalent of the base of the Woodford Formation, as defined at 10,440’ measured depth on the same log.
“
Working Interest
” means, with respect to any (i) Linn Well (subject to any reservations, limitations or depth restrictions set forth on
Schedule 3.4B (Part I)
) or Citizen Well (subject to any reservations, limitations or depth restrictions set forth on
Schedule 3.4B (Part II)
), the percentage interest in and to such Linn Well (subject to any reservations, limitations or depth restrictions set forth on
Schedule 3.4B (Part I)
) or Citizen Well (subject to any reservations, limitations or depth restrictions set forth on
Schedule 3.4B (Part II)
), or (ii) any Linn Lease (subject to any reservations, limitations or depth restrictions set forth on
Exhibit A-1 (Part I)
and/or
Schedule 3.4A
) or Citizen Lease (subject to any reservations, limitations or depth restrictions set forth on
Exhibit A-1 (Part II)
and/or
Schedule 3.4A
), as applicable, that is burdened with the obligation to bear and pay costs and expenses of maintenance, development and operations on or in connection with such Linn Well or Citizen Well or Linn Lease or Citizen Lease, as applicable, but without regard to the effect of any Burdens.
“
Zone Average NRI
” means, in the case of any Target Formation in any Governmental Section, the Zone Average NRI for such Target Formation in such Governmental Section set forth on
Exhibit H
attached hereto.
Appendix A-47
US-DOCS\83219354.25
“
Zone NRI Value
” means, in the case of any Target Formation in any Governmental Section, the Zone NRI Value for such Target Formation in such Governmental Section set forth on
Exhibit H
attached hereto.
“
Zone Price
” means, in the case of any Governmental Section, the price per Net Acre for any Lease within such Governmental Section (on a Target Formation basis), in each case, as set forth on
Exhibit H
attached hereto.
Appendix A-48
US-DOCS\83219354.25