UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): March 29, 2019

 

 

DORCHESTER MINERALS, L.P.

(Exact name of Registrant as specified in its charter)

 

 

Delaware

 

000-50175

 

81-0551518

 

(State or other jurisdiction of

 

Commission

 

(I.R.S. Employer

 

incorporation or organization

 

File Number

 

Identification No.)

 

 

3838 Oak Lawn, Suite 300, Dallas, Texas  75219

(Address of principal executive offices)   (Zip Code)

 

Registrant's telephone number, including area code:  ( 214) 559-0300

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

 

[ ]   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

[ ]   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

[ ]   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

[ ]   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

 

                Emerging growth company                              [  ]                                                          

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.                                         [  ]

 

 

 

 

 

Item 1.01              Entry into a Material Definitive Agreement

Item 2.01              Completion of Acquisition or Disposition of Assets

 

On March 29, 2019, Dorchester Minerals, L.P. (the “ Partnership ”) entered into a Contribution, and Exchange Agreement with H. Huffman & Co., A Limited Partnership, an Oklahoma limited partnership (“ HHC ”), The Buffalo Co., A Limited Partnership, an Oklahoma limited partnership (“ TBC ” and together with HHC, the “ Acquired Entities ”), Huffman Oil Co., L.L.C., an Oklahoma limited liability company (“ HOC ”), and the equity holders of the Acquired Entities (the “ Contributors ”), the terms and conditions of which provide for (a) HHC to contribute and convey to the Partnership (i) a 96.97% net profits interest in certain working interests in various oil and gas properties owned by HHC (the “ HHC Working Interests ”) and (ii) all of the minerals and royalty interests held by HHC in exchange for 1,968,000 common units representing limited partner interests in the Partnership (“ Common Units ”) and (b) TBC to contribute and convey to the Partnership all of the minerals and royalty interests held by TBC in exchange for 432,000 Common Units (the transactions described in the foregoing clauses (a) and (b) referred to herein as the “ Contribution and Exchange ” and the Contribution and Exchange Agreement referred to herein, as amended, as the “ Contribution and Exchange Agreement ”).

 

The Contribution and Exchange Agreement also provides for the Acquired Entities to pay the Partnership at closing an amount of cash equal to the aggregate amount of net cash receipts (i) received by the Acquired Entities, (ii) attributable to certain subject properties, and (iii) received as proceeds of any asset sales (other than certain excluded assets) of the Acquired Entities (less reasonable and customary expenses related to selling such assets), in each case during the period beginning on January 1, 2019 and ending on the date of closing (the “ Contributed Cash ”). 

 

No material relationships exist between the Partnership and the other parties to the Contribution and Exchange Agreement.

 

The transactions contemplated by the Contribution and Exchange Agreement were consummated on March 29, 2019, at which time, among other things, the Contribution and Exchange was consummated, the Acquired Entities paid approximately $1,170,000 in Contributed Cash (subject to adjustment pursuant to the Contribution and Exchange Agreement) to the Partnership, and the Partnership issued to the Contributors an aggregate of 2,400,000 Common Units pursuant to the Partnership’s registration statement on Form S-4 (SEC File No. 333-202918).

 

The foregoing description of the Contribution and Exchange Agreement is not complete and is qualified in its entirety by reference to the full text of such agreement, which is filed as Exhibit 2.1 to this Current Report on Form 8-K, and is incorporated into Items 1.01 and 2.01 by reference. The Contribution and Exchange Agreement has been included to provide unitholders with information regarding its terms. It is not intended to provide any other factual information about the Partnership, the Acquired Entities, the Contributors or their respective affiliates. The representations, warranties, and covenants contained in the Contribution and Exchange Agreement were made only for purposes of the Contribution and Exchange Agreement and as of the specific dates set forth therein, were solely for the benefit of the parties thereto, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties thereto instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to unitholders. Unitholders are not third-party beneficiaries under the Contribution and Exchange Agreement and should not rely on the representations, warranties, and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the parties thereto or any of their respective affiliates. Moreover, information concerning the subject matter of representations and warranties may change after the date of the Contribution and Exchange Agreement, which subsequent information may or may not be fully reflected in the Partnership’s public disclosures.

 

    Item 7.01.             Regulation FD Disclosure.

 

On April 2, 2019, the Partnership issued a press release announcing the consummation of the transactions contemplated by the Contribution and Exchange Agreement. The press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.

 

Limitation on Incorporation by Reference

 

In accordance with general instructions B.2 and B.6 of Form 8-K, the information disclosed in this report under Item 7.01, including Exhibit 99.1, is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, and shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended.

 

Item 9.01.             Financial Statements and Exhibits.

 

(a) Financial statements of businesses acquired .

 

The required financial statements of businesses acquired will be filed as an amendment to this Current Report on Form 8-K no later than June 14, 2019, which is 71 days after the date that this Current Report on Form 8-K is required to be filed.

 

(b) Pro forma financial information

 

The required pro forma financial information will be filed as an amendment to this Current Report on Form 8-K no later than June 14, 2019, which is 71 days after the date that this Current Report on Form 8-K is required to be filed.

 

(d)  Exhibits

 

Exhibit No.

 

Description

2.1

 

Contribution and Exchange Agreement, dated March 29, 2019, by and among the Partnership, the Acquired Entities and the Contributors.

99.1

 

Press Release

 

 

 

SIGNATURE

 

                Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

                                                                                                DORCHESTER MINERALS, L.P.

 

                                                                                                By:   Dorchester Minerals Management LP,

                                                                                                          its General Partner

 

                                                                                                By:   Dorchester Minerals Management GP LLC,

                                                                                                          its General Partner

                                                                                               

Date: April 3, 2019                                                             By:     /s/  William Casey McManemin         

                                                                                                          William Casey McManemin

                                                                                                          Chief Executive Officer

                                                                               

 

 

Exhibit 2.1

 

 

CONTRIBUTION AND EXCHANGE AGREEMENT

 

by and among

 

DORCHESTER MINERALS, L.P.,

 

H. HUFFMAN & CO., A LIMITED PARTNERSHIP,

 

THE BUFFALO CO., A LIMITED PARTNERSHIP,

 

HUFFMAN OIL CO., L.L.C.

 

and

 

THE CONTRIBUTORS SET FORTH ON THE SIGNATURE PAGES HERETO

 

 

 

March 29, 2019

 

 

 

 

TABLE OF CONTENTS

 

 

    Page
     

ARTICLE 1 CLOSING; CONTRIBUTION

2
     

1.1

Closing

2

1.2

Contribution and Exchange

2

1.3

Consideration for the Contribution and Exchange

3

1.4

Assignments of Acquired Subject Interests

3

1.5

Excluded Assets

3

1.6

Indebtedness and Transaction Costs

3

1.7

Contributed Cash

3

1.8

Post-Closing Contributed Cash Adjustment

4

1.9

Tax Treatment

5
     

ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP

5
     

2.1

Organization and Existence

5

2.2

Governing Documents

6

2.3

Capitalization of the Partnership

6

2.4

Authority Relative to this Agreement

7

2.5

Noncontravention

7

2.6

Governmental Approvals

8

2.7

Partnership Financial Statements

8

2.8

Absence of Undisclosed Liabilities

8

2.9

Absence of Certain Changes

8

2.10

Compliance With Laws

9

2.11

Brokerage Fees

9

2.12

Listing

9

2.13

SEC Filings

9
     

ARTICLE 3 REPRESENTATIONS AND WARRANTIES  OF THE CONTRIBUTORS

10
     

3.1

Organization and Existence

10

3.2

Authority Relative to this Agreement; Ownership of Acquired Subject Interests

10

3.3

Noncontravention

10

3.4

Governmental Approvals

11

3.5

Legal Proceedings

11

3.6

Brokerage Fees

11

3.7

Investment Intent

11

3.8

Allocation of Subject Partnership Common Units to the Acquired Entities

12
     

ARTICLE 4 REPRESENTATIONS AND WARRANTIES RELATING TO THE ACQUIRED ENTITIES

12
     

4.1

Organization and Existence

12

4.2

Authority Relative to this Agreement

13

4.3

Noncontravention

13

4.4

Governmental Approvals

13

4.5

Title to the Properties; Capitalization

13

 

 

 

 

4.6

Absence of Undisclosed Liabilities

14

4.7

Absence of Certain Changes

14

4.8

Compliance with Laws

15

4.9

Legal Proceedings

15

4.10

Permits

15

4.11

Financial Statements

15

4.12

Environmental Matters

16

4.13

Employment Matters

16

4.14

Employee Benefit Matters

18

4.15

Tax Matters

19

4.16

Commitments

20

4.17

No Alienation

20

4.18

Basic Documents

20

4.19

Material Contracts

20

4.20

Area of Mutual Interest and Other Agreements; Tax Partnerships

21

4.21

Commitments, Abandonments or Proposals

21

4.22

Production Sales Contracts

22

4.23

Payment of Expenses

22

4.24

Preferential Rights and Consents to Assign

22

4.25

No Participating Minerals

22

4.26

Make-Up Rights

22

4.27

Imbalances

22

4.28

Insurance

22

4.29

Intellectual Property

23

4.30

Brokerage Fees

23

4.31

Records

23
     

ARTICLE 5 CONDUCT OF THE ACQUIRED ENTITIES PENDING CLOSING;  CERTAIN ACTIONS RELATING TO CLOSING

23
     

5.1

Conduct and Preservation of the Business of the Acquired Entities

23

5.2

Restrictions on Certain Actions of the Contributors

23
     

ARTICLE 6 ADDITIONAL AGREEMENTS

24
     

6.1

Access to Information

24

6.2

Notification of Certain Matters

26

6.3

Reasonable Best Efforts

26

6.4

Public Announcements

26

6.5

Amendment of Schedules

26

6.6

Fees and Expenses

27

6.7

Tax Disclosure

27

6.8

Post-Closing Assurances and Access to Records

27

6.9

NASDAQ Listing

27

6.10

Employee Benefit Matters

27

6.11

Employment Matters

28

6.12

Assistance with Form 8-K Reporting Obligations

28

6.13

Retention of Funds

29

6.14

Insurance

29

 

 

 

 

6.15

Lease Termination

29
     

ARTICLE 7 CONDITIONS

30
     

7.1

Conditions to Obligations of the Parties

30

7.2

Conditions to Obligation of the Contributors

30

7.3

Conditions to Obligation of the Partnership

31
     

ARTICLE 8 PRODUCTION, PROCEEDS, EXPENSES AND TAX MATTERS

33
     

8.1

Division of Ownership

33

8.2

Division of Expenses

33

8.3

Taxes

33
     

ARTICLE 9 TERMINATION, AMENDMENT AND WAIVER

36
     

9.1

Termination

36

9.2

Effect of Termination

37

9.3

Amendment

37

9.4

Waiver

37
     

ARTICLE 10 INDEMNIFICATION

38
     

10.1

Survival of Representations, Warranties, Covenants and Agreements

38

10.2

Indemnification

38

10.3

Indemnification Procedures

41

10.4

Other Indemnification Matters

42
     

ARTICLE 11 MISCELLANEOUS

42
     

11.1

Notices

42

11.2

Contributors’ Representative

43

11.3

Entire Agreement

45

11.4

Binding Effect; Assignment; Third Party Benefit

45

11.5

Severability

45

11.6

Governing Law; Consent to Jurisdiction

45

11.7

Descriptive Headings

46

11.8

Gender

46

11.9

References

46

11.10

Counterparts

46

11.11

Injunctive Relief

47

11.12

Amendment

47

11.13

Waiver

47
     

ARTICLE 12 DEFINITIONS

47
     

12.1

Certain Defined Terms

47

12.2

Certain Additional Defined Terms

56

 

 

 

 

INDEX TO EXHIBITS AND SCHEDULES

 

Exhibits

 
   

Exhibit A 

Subject Interests

Exhibit B

HHC Working Interests

Exhibit C

Subject Partnership Common Unit Allocation

Exhibit D-1

Form of Assignment of Acquired HHC GP Interests

Exhibit D-2

Form of Assignment of Acquired HHC LP Interests

Exhibit D-3

Form of Assignment of Acquired TBC GP Interests

Exhibit D-4

Form of Assignment of Acquired TBC LP Interests

Exhibit E

Excluded Assets

Exhibit F

Form of Assignment and Assumption of Excluded Assets

Exhibit G

Minerals and Royalties

Exhibit H

Form of HHC Conveyance

Exhibit I

Calculation of Contributed Cash

Exhibit J

Form of TBC Conveyance

Exhibit K

Form of NPI Conveyance

   

Schedules

 
   

Schedule 2.6

Governmental Approvals

Schedule 2.8

Absence of Undisclosed Liabilities

Schedule 3.7

Non-Accredited Investors

Schedule 4.5(b)

Subsidiaries

Schedule 4.7

Absence of Certain Changes

Schedule 4.9

Legal Proceedings

Schedule 4.11(a)

Financial Statements

Schedule 4.11(c)

Indebtedness of each Acquired Entity

Schedule 4.12

Environmental Matters

Schedule 4.13(a)

Employment Matters

Schedule 4.13(i)

Employment-Related Liabilities for Employees

Schedule 4.13(n)

Employment Agreements

Schedule 4.14(a)

Benefit Plans

Schedule 4.14(d)

Nonqualified Deferred Compensation Liabilities

Schedule 4.15

Tax Basis Schedule

Schedule 4.16

Commitments

Schedule 4.17

No Alienation

Schedule 4.19(a)

Material Contracts Related to the Active Prospects

Schedule 4.20

Area of Mutual Interest and Other Agreements; Tax Partnerships

Schedule 4.21

Commitments, Abandonments or Proposals

Schedule 4.22

Production Sales Contracts

Schedule 4.24

Preferential Rights and Consents to Assign

Schedule 4.25

No Participating Minerals

Schedule 4.26

Make-Up Rights

Schedule 4.27

Imbalances

Schedule 4.28

Insurance

 

 

 

 

Schedule 4.29

Intellectual Property

Schedule 5.2

Restrictions on Certain Actions of the Contributors

Schedule 7.3(i)

Due Diligence Matters

Schedule 12.1

Active Prospects

 

 

 

 

CONTRIBUTION AND EXCHANGE AGREEMENT

 

THIS CONTRIBUTION AND EXCHANGE AGREEMENT (“ Agreement ”) is executed as of March 29, 2019 by and among Dorchester Minerals, L.P., a Delaware limited partnership (the “ Partnership ”), H. Huffman & Co., A Limited Partnership, an Oklahoma limited partnership (“ HHC ”), The Buffalo Co., A Limited Partnership, an Oklahoma limited partnership (“ TBC ” and together with HHC, the “ Acquired Entities ”), Huffman Oil Co., L.L.C., an Oklahoma limited liability company (“ HOC ”), and the persons set forth on the signature pages hereto as “Contributors” (collectively, the “ Contributors ” and individually, a “ Contributor ”).   

 

W I T N E S S E T H:

 

WHEREAS, each Contributor owns the issued and outstanding partnership interests in HHC set forth opposite such Contributor’s name on Exhibit A hereto (such limited partner interests collectively, the “ Acquired HHC LP Interests ”; and such general partner interest, the “ Acquired HHC GP Interest ”; the Acquired HHC LP Interests and the Acquired HHC GP Interest, collectively, the “ Acquired HHC Interests ”), which constitute all of the issued and outstanding partnership interests in HHC;

 

WHEREAS, each Contributor owns the issued and outstanding partnership interests in TBC set forth opposite such Contributor’s name on Exhibit A hereto (such limited partner interests collectively, the “ Acquired TBC LP Interests ”) and such general partner interests (the “ Acquired TBC GP Interest s ” and collectively with the Acquired TBC LP Interests, the “ Acquired TBC Interests ”; the Acquired HHC Interests and the Acquired TBC Interests, collectively, the “ Acquired Subject Interests ”), which constitute all of the issued and outstanding partnership interests in TBC;

 

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

 

WHEREAS, the parties hereto desire for:

 

  (a) HHC to contribute and convey to the Partnership (i) a 96.97% net profits interest in the HHC Working Interests and (ii) all of the minerals and royalty interests held by HHC, in each case, free and clear of any and all Encumbrances, in exchange for the number of common units representing limited partner interests in the Partnership (“ Partnership Common Units and such Partnership Common Units, collectively, the “ HHC Partnership Common Units “) set forth opposite HHC on Exhibit C hereto (the “ Subject Partnership Common Unit Allocation ”), which for the sake of administrative convenience shall be issued to the Contributors owning the Acquired HHC Interests in the amounts set forth opposite such Contributors’ names on the Subject Partnership Common Unit Allocation, but shall be deemed to have been issued to HHC and further distributed in-kind and pro rata to such Contributors;

 

1

 

 

  (b) the Contributors holding the Acquired TBC Interests to contribute (i) the TBC GP Interests to DMLPTBC GP LLC, a Delaware limited liability company, and (ii) the Acquired TBC LP Interests to the Partnership, in exchange for the number of Partnership Common Units (the “ TBC Partnership Common Units ” and collectively with the HHC Partnership Common Units, the “ Subject Partnership Common Units ”) set forth opposite such Contributors’ names on the Subject Partnership Common Unit Allocation; and
     
  (c) the Contributors holding the Acquired HHC Interests to contribute (i) the Acquired HHC GP Interests to DMOHHC GP LLC, a Delaware limited liability company, and (ii) the Acquired HHC LP Interests to Dorchester Minerals Operating LP, a Delaware limited partnership (“ DMOLP ”), in consideration of the foregoing transactions (the transactions described in subsections (a), (b) and (c), the “ Contribution and Exchange ”).

 

WHEREAS, for federal income tax purposes, the parties intend (i) for HHC’s contribution of assets to the Partnership, and the Contributors’ subsequent related contribution of the Acquired HHC Interests to DMOLP and its affiliates, in exchange for the HHC Partnership Common Units to qualify as a tax-free exchange under Section 721(a) of the Code and (ii) for the contribution of the Acquired TBC LP Interests to the Partnership and its affiliates in exchange for the TBC Partnership Common Units to qualify as a tax-free “assets-over” merger of TBC into the Partnership with the Partnership surviving as the continuing partnership as more specifically provided herein; and

 

WHEREAS, it is the desire of the parties hereto to set forth the specific terms and conditions of the foregoing.

 

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

 

ARTICLE 1

CLOSING; CONTRIBUTION

 

1.1  Closing . The closing of the transactions contemplated by this Agreement (the “ Closing ”) shall take place at the offices of Thompson & Knight LLP, One Arts Plaza, 1722 Routh Street, Suite 1500, Dallas, Texas 75201, at 9:00 a.m., local time, on March 29, 2019, provided that within two Business Days immediately prior thereto all conditions to the Closing set forth in ARTICLE 7 have been satisfied or waived (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the fulfillment or waiver of those conditions), or at such other time or place or on such other date as the parties hereto shall agree (the “ Closing Date ”).

 

1.2  Contribution and Exchange . At the Closing and effective as of 12:00 a.m. local time on the Reference Date, and on the terms and subject to the conditions set forth in this Agreement, the parties will effect the Contribution and Exchange, with such Acquired Subject Interests, Subject Partnership Common Units and Contributed Cash being transferred free and clear of any and all Encumbrances.

 

2

 

 

1.3  Consideration for the Contribution and Exchange . The aggregate consideration paid to the Contributors for the consummation of the Contribution and Exchange shall be the Subject Partnership Common Units. Prior to the Closing, the Partnership shall designate American Stock Transfer & Trust Company, LLC (the “ Exchange Agent ”) for the purpose of issuing and delivering to the Contributors the Acquired Subject Interests allocated as set forth herein. Promptly after the Closing, the Partnership will send, or will cause the Exchange Agent to send, to each of the Contributors (a) an account statement evidencing such Contributor’s book entry ownership of the number of whole Subject Partnership Common Units that each Contributor has a right to receive pursuant to this Section 1.3 and (b) a Transfer Application for use in admission of each of the Contributors as a limited partner in the Partnership. Each Contributor, upon delivery to the Partnership of a properly completed Transfer Application, will be admitted into the Partnership as a limited partner in accordance with the Partnership Agreement. Prior to such time, each such party shall have the rights of an “Assignee” under the Partnership Agreement.

 

1.4  Assignments of Acquired Subject Interests . In order to effectuate the transfer of the Acquired Subject Interests contemplated by Section 1.2 , at the Closing, the Contributors and the Partnership shall execute and deliver, or cause to be executed and delivered, dated as of the Closing Date, the assignments of the Acquired HHC GP Interest, the Acquired HHC LP Interests, the Acquired TBC GP Interest and the Acquired TBC LP Interests substantially in the forms attached hereto as Exhibit D -1 , Exhibit D-2 , Exhibit D-3 and Exhibit D-4 , respectively (collectively, the “ Assignments ”).

 

1.5  Excluded Assets . Each of the Acquired Entities shall, at the Closing, execute and deliver, or cause to be executed and delivered an assignment and assumption agreement with respect to the Excluded Assets in the form attached as Exhibit F hereto (“ Assignment and Assumption of Excluded Assets ”). “ Excluded Assets ” shall mean (a) subject to the Acquired Entities’ obligation to pay to the Partnership the Contributed Cash, all of the cash and cash equivalents of the Acquired Entities, and (b) all of the assets set forth on Exhibit E .

 

1.6  Indebtedness and Transaction Costs . As of the Closing, the Contributors’ Representative shall provide evidence that each of the Acquired Entities have paid, or have caused to be paid, all Indebtedness of the Acquired Entities existing as of the Closing Date and Transaction Costs.

 

1.7  Contributed Cash . No less than two Business Days prior to the Closing, the Contributors’ Representative shall prepare and deliver, or cause to be prepared and delivered, to the Partnership, showing reasonable detail (and supported by third party documentation provided to the Partnership), using and based upon the best information available to the Contributors’ Representative, a preliminary statement estimating the Contributed Cash as of the Closing in the form and using the calculations and methodologies set forth on Exhibit I (such preliminary statement as agreed to by the Partnership, the “ Preliminary Statement ”; the amount of the estimated Contributed Cash, the “ Estimated Contributed Cash ”). The Preliminary Statement shall be prepared, calculated and determined in accordance with GAAP as in effect at such date, except where there is an inconsistency between GAAP and this Agreement, in which case this Agreement shall be controlling, and in accordance with the policies, practices and methods set forth on Exhibit I . The Contributors shall contribute, or cause the Acquired Entities to contribute, to the Partnership at the Closing the Estimated Contributed Cash as set forth in the Preliminary Statement, to an account specified by the Partnership.

 

3

 

 

1.8  Post-Closing Contributed Cash Adjustment .

 

(a) As soon as reasonably practicable after the Closing, but not later than sixty (60) days after the Closing, the Partnership shall prepare and deliver, or cause to be prepared and delivered, to the Contributors’ Representative a statement setting forth the Contributed Cash as of the Closing based upon the accounting books and records of the Acquired Entities and in the form and using the calculations and methodologies set forth on Exhibit   I (the “ Post-Closing Statement ”). The Post-Closing Statement shall be prepared, calculated and determined in accordance with GAAP as in effect at such date, except where there is an inconsistency between GAAP and this Agreement, in which case this Agreement shall be controlling, and in accordance with the policies, practices and methods set forth on Exhibit I .

 

(b) If the Contributors’ Representative disagrees with the Partnership’s preparation of, or any of the items set forth in the Post-Closing Statement delivered pursuant to Section 1.8(a) , the Contributors’ Representative may within thirty (30) days after the Contributors’ Representative’s commercially reasonable receipt of the Post-Closing Statement, deliver a written notice to the Partnership (a “ Notice of Disagreement ”) disagreeing with the Post-Closing Statement and setting forth those items or amounts as to which the Contributors’ Representative disagrees. If the Contributors’ Representative fails to deliver a Notice of Disagreement within such 30 day period, the Post-Closing Statement delivered pursuant to Section 1.8(a) shall be final, conclusive and binding on the Partnership and the Contributors.

 

(c) If a Notice of Disagreement is duly delivered pursuant to Section  1.8(b) , the Partnership and the Contributors’ Representative shall, during the forty-five (45) days following such delivery, use their commercially reasonable efforts to reach agreement on the disputed items. If during such period, the Contributors’ Representative and the Partnership are unable to reach such agreement, upon a request by either the Contributors’ Representative or the Partnership, the Contributors’ Representative and the Partnership shall engage an independent accounting firm of recognized national standing in the United States as may be mutually selected by the Partnership and the Contributors’ Representative) (the “ Independent Firm ”), as an expert and not an arbitrator, to review this Agreement and the disputed items.

 

(d) The Independent Firm shall (x) make its determination based solely on the provisions of this Agreement, and written presentations by the Partnership and the Contributors’ Representative, and not on an independent review, whether and to what extent (if any) the calculations set forth in the Post-Closing Statement require adjustment, (y) consider only those items or amounts in the Post-Closing Statement as to which the Contributors’ Representative has disagreed as set forth in the Notice of Disagreement and disagreements based on mathematical errors or either party’s failure to follow GAAP and Exhibit I in its calculation of the Contributed Cash. The Independent Firm shall deliver to the Partnership and the Contributors’ Representative, as promptly as practicable (but in any case no later than sixty (60) days from the date of engagement of the Independent Firm), a written report setting forth a calculation the Contributed Cash. Such report shall be final and binding upon all Parties. The fees and expenses of the Independent Firm shall be paid one-half by the Contributors, on the one hand, and one-half by the Partnership, on the other hand.

 

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(e) If the Contributed Cash, as finally agreed by the Contributors’ Representative and the Partnership or determined in accordance with Section  1.8(b) or Section  1.8(d) , as applicable (the “ Final Contributed Cash ”), is higher than the Estimated Contributed Cash, then the Contributors’ Representative shall pay, or cause to be paid, to the Partnership to the Partnership’s designated account, in readily available funds, the amount by which the Final Contributed Cash exceeds the Estimated Contributed Cash. If the Final Contributed Cash is less than the Estimated Contributed Cash, then the Partnership shall pay to the Contributors’ Representative to the Contributors’ Representative designated account, on behalf of the Contributors, in readily available funds, the amount by which the Estimated Contributed Cash exceeds the Final Contributed Cash.

 

1.9  Tax Treatment . The Contributors and the Partnership agree that the transactions contemplated by this Agreement shall be treated for all U.S. federal income and applicable state and local income Tax purposes as follows: (a) HHC’s contribution of assets to the Partnership, and the Contributors’ subsequent related contribution of the Acquired HHC Interests to DMOLP and its affiliates, in exchange for the HHC Partnership Common Units issued directly to the Contributors, shall be treated as a tax-free exchange under Section 721(a) of the Code and (b) the Contributors’ contribution of the Acquired TBC LP Interests to the Partnership and its affiliates, in exchange for the TBC Partnership Common Units issued directly to the Contributors, shall be treated as an “assets-over” partnership merger transaction under Treasury Regulation Sections 1.708-1(c)(1) and 1.708-1(c)(3)(i), whereby the Partnership shall be the resulting partnership and TBC will be the terminating partnership ((a) and (b) above herein the “ Tax Treatment “). The taxable years of the Acquired Entities shall be closed as of the Closing Date and the Acquired Entities each shall file a final IRS Form 1065 for the taxable period ending on the Closing Date. The parties hereto agree to file all Tax Returns in a manner consistent with the Tax Treatment, and no party hereto shall take, or shall permit any Affiliate to take, any position inconsistent with such Tax Treatment on any Tax Return or otherwise, unless required to do so by applicable law or a “determination“ within the meaning of Code Section 1313(a)(1).

 

ARTICLE 2

REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP

 

Except as set forth in the section and subsection of the Disclosure Schedules corresponding to the section and subsection of a given representation and warranty and subject to the matters disclosed in the SEC Filings, as of the date hereof and as of the Closing Date, the Partnership represents and warrants to the Contributors that:

 

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

 

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

 

2.3  Capitalization of the Partnership .

 

(a) All of the outstanding Partnership Common Units have been duly authorized and validly issued in accordance with the Partnership Agreement, and are fully paid and nonassessable. Dorchester Minerals Management LP, a Delaware limited partnership (the “ Partnership GP ”), is the sole general partner of the Partnership. On the date hereof, the issued and outstanding common units representing limited partner interests of the Partnership consist of 32,279,744 Partnership Common Units.

 

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

 

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

 

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

 

2.4  Authority Relative to this Agreement . The Partnership has full partnership power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance by the Partnership of this Agreement, and the consummation by it of the transactions contemplated hereby, have been duly authorized by the Partnership GP, and no other partnership proceedings on the part of the Partnership are necessary to authorize the execution, delivery and performance by the Partnership of this Agreement and the consummation by it of the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Partnership and constitutes, and each other agreement, instrument or document executed or to be executed by the Partnership in connection with the transactions contemplated hereby has been, or when executed will be, duly executed and delivered by the Partnership and constitutes, or when executed and delivered will constitute, a valid and legally binding obligation of the Partnership enforceable against the Partnership in accordance with their respective terms, except that such enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights generally and (b) equitable principles which may limit the availability of certain equitable remedies (such as specific performance) in certain instances.

 

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

 

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

 

2.7  Partnership Financial Statements . Filed with the SEC Filings are copies of the Partnership’s audited consolidated balance sheet as of December 31, 2018 (the “ Partnership Latest Balance Sheet ”), and the related audited consolidated statements of income, partnership capital and cash flows for the year then ended, and the notes and schedules thereto, together with the report thereon of Grant Thornton LLP, independent certified public accountants (the “ Partnership Financial Statements “). The Partnership Financial Statements (a) have been prepared from the books and records of the Partnership in conformity with generally accepted accounting principles applied on a basis consistent with preceding years throughout the periods involved, and (b) accurately and fairly present the Partnership’s consolidated financial position as of the respective dates thereof and its consolidated results of operations and cash flows for the periods then ended.

 

2.8  Absence of Undisclosed Liabilities . To the Knowledge of the Partnership, as of the date of this Agreement, the Partnership has no liability or obligation with respect to the property held by the Partnership (whether accrued, absolute, contingent, unliquidated or otherwise), except (a) liabilities reflected on the Partnership Latest Balance Sheet, (b) liabilities described in the notes accompanying the Partnership Financial Statements, (c) liabilities which have arisen since the date of the Partnership Latest Balance Sheet in the ordinary course of business (none of which is a material liability for breach of contract, tort or infringement), (d) liabilities arising under executory provisions of contracts entered into in the ordinary course of business (none of which is a material liability for breach of contract), (e) liabilities disclosed on Schedule 2.8 , (f) liabilities resulting from a change in an accounting standard applicable to the Partnership and (g) other liabilities which, in the aggregate, are not material to the Partnership.

 

2.9  Absence of Certain Changes . Since the date of the Partnership Financial Statements, (a) to the Knowledge of the Partnership there has not been any Material Adverse Effect on the Partnership or any event or condition that might reasonably be expected to result in any Material Adverse Effect on the Partnership, (b) the business of the Partnership has been conducted only in its ordinary course of business, (c) the Partnership has not incurred any material liability, engaged in any material transaction or entered into any material agreement outside the ordinary course of business, (d) the Partnership has not suffered any material loss, damage, destruction or other casualty to any of its assets (whether or not covered by insurance), and (e) the Partnership has not authorized, declared, made, or paid any dividend or other distribution of any kind since January 1, 2019, other than the distribution paid on February 7, 2019 to common unitholders of record as of January 28, 2019.

 

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

 

2.11  Brokerage Fees . Other than Anderson King Energy Consultants, LLC, the Partnership has not retained any financial advisor, broker, agent or finder or paid or agreed to pay any financial advisor, broker, agent or finder on account of this Agreement or any transaction contemplated hereby.

 

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

 

2.13  SEC Filings . Since January 1, 2017, the Partnership has filed with the Securities and Exchange Commission (the “ SEC ”) all forms, reports, schedules, statements, and other documents required to be filed by it under the Securities Act of 1933, as amended (the “ Securities Act ”), and the rules and regulations promulgated thereunder, the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, and all other federal securities laws. All forms, reports, schedules, statements, and other documents (including all amendments thereto) filed by the Partnership with the SEC since such date are herein collectively referred to as the “ SEC Filings .” The Partnership has delivered or made available to the Contributors accurate and complete copies of all the SEC Filings in the form filed by the Partnership with the Securities and Exchange Commission. The SEC Filings, at the time filed, complied in all material respects with all applicable requirements of federal securities laws. To the Knowledge of the Partnership, none of the SEC Filings, including, without limitation, any financial statements or schedules included therein, at the time filed, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading. All material contracts of the Partnership have been included in the SEC Filings, except for those contracts not required to be filed pursuant to the rules and regulations of the SEC. The Partnership shall deliver or make available to the Contributors as soon as they become available accurate and complete copies of all forms, reports, and other documents furnished by it to its limited partners generally or filed by it with the SEC subsequent to the date hereof and prior to the Closing Date.

 

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ARTICLE 3

REPRESENTATIONS AND WARRANTIES
OF THE CONTRIBUTORS

 

Except as set forth in the section and subsection of the Disclosure Schedules corresponding to the section and subsection of a given representation and warranty, as of the date hereof and as of the Closing Date, the Contributors hereby severally represent and warrant to the Partnership as follows:

 

3.1  Organization and Existence . Such Contributor (if the Contributor is a natural person or is acting in such person’s capacity as trustee of a trust) has the requisite capacity required to enter into this Agreement and consummate the transactions contemplated hereby. Such Contributor (if the Contributor is not a natural Person or a trustee acting in its capacity as trustee of a trust) is duly organized, validly existing and in good standing under the laws of the state of its formation or incorporation, as applicable, and has all requisite power or authority to conduct its business as authorized. Such Contributor has full power and authority to own, lease or otherwise hold and operate its properties and assets and to carry on its businesses as presently conducted. Such Contributor is duly qualified and in good standing to do business in each jurisdiction in which the conduct or nature of its businesses or the ownership, leasing or holding of its properties makes such qualification necessary, except such jurisdictions where the failure to be so qualified or in good standing, individually or in the aggregate, would not have a Material Adverse Effect on such Contributor, the Acquired Subject Interests or the Business.

 

3.2  Authority Relative to this Agreement ; Ownership of Acquired Subject Interests .

 

(a) Such Contributor has full power and authority to execute and deliver this Agreement and the Transaction Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by such Contributor of this Agreement and the other Transaction Documents to which it is a party, and the consummation by it of the transactions contemplated hereby and thereby, have been duly authorized by all necessary action, and no other proceedings are necessary to authorize the execution, delivery and performance by such Contributor, as applicable, of this Agreement and the other Transaction Documents to which it is a party and the consummation by it of the transactions contemplated hereby and thereby. This Agreement and each of the other Transaction Documents to which it is a party has been duly executed and delivered by such Contributor and constitutes, or when executed will be, duly executed and delivered by such Contributor, as applicable, and constitutes, or when executed and delivered will constitute, a valid and legally binding obligation of such Contributor enforceable against such Contributor in accordance with its respective terms, except that such enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights generally and (b) equitable principles which may limit the availability of certain equitable remedies (such as specific performance) in certain instances.

 

(b) Such Contributor is the record and beneficial owner and holder of, and has good title to, the Acquired Subject Interests set forth opposite such Contributor’s name on Exhibit   A , free and clear of any Encumbrances.

 

3.3  Noncontravention . The execution, delivery and performance by such Contributor of this Agreement and the other Transaction Documents to which it is a party and the consummation by it of the transactions contemplated hereby and thereby, do not and will not (i) conflict with or result in a violation of any provision of the governing instruments of such Contributor, (ii) conflict with or result in a violation of any provision of, or constitute (with or without the giving of notice or the passage of time or both) a default under, or give rise (with or without the giving of notice or the passage of time or both) to any right of termination, cancellation or acceleration under, any bond, debenture, note, mortgage, indenture, lease, contract, agreement or other instrument or obligation to which such Contributor is a party or by which such Contributor may be bound, (iii) result in the creation or imposition of any Encumbrance upon the Acquired Subject Interests or (iv) assuming compliance with the matters referred to in Section 3.4 , violate any Applicable Law binding upon such Contributor.

 

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3.4  Governmental Approvals . No consent, approval, order or authorization of, or declaration, filing or registration with, any Governmental Entity is required to be obtained or made by such Contributor in connection with the execution, delivery or performance by such Contributor of this Agreement or the other Transaction Documents to which it is a party or the consummation by it of the transactions contemplated hereby or thereby.

 

3.5  Legal Proceedings . There is no Proceeding pending or, to the Knowledge of such Contributor, threatened against such Contributor seeking to restrain, prohibit, or obtain damages or other relief in connection with this Agreement, the other Transaction Documents or the transactions contemplated hereby or thereby or which could reasonably be expected to affect such Contributor’s ability to consummate the transactions contemplated hereby.

 

3.6  Brokerage Fees . Other than TenOaks Energy Advisors, LLC, such Contributor has not retained any financial advisor, broker, agent or finder or paid or agreed to pay any financial advisor, broker, agent or finder on account of this Agreement, the other Transaction Documents or any transaction contemplated hereby or thereby.

 

3.7  Investment Intent . Unless such Contributor’s name is set forth on Schedule 3.7, such Contributor is an “accredited investor” within the meaning of SEC Rule 501 of Regulation D, as presently in effect.

 

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

 

(b) Such Contributor has carefully reviewed this Agreement, the SEC Filings, the Partnership Agreement and other documentation relating to the Partnership and has had such opportunity as deemed necessary by each Contributor and its advisors and affiliates to ask questions of the Partnership and their affiliates, officers and employees to enable each Contributor to make an informed investment decision concerning the receipt of the Subject Partnership Common Units pursuant to the transactions contemplated by this Agreement, the operation of the Partnership, and the investment risks associated with each Contributor’s investment in the Partnership.

 

(c) Such Contributor, by entering into this Agreement, (i) requests admission as limited partner of the Partnership and agrees to comply with, and be bound by, and hereby executes, the Partnership Agreement, (ii) represents and warrants that such Contributor has all right, power and authority and the capacity necessary to enter into the Partnership Agreement, (iii) appoints the general partner of the Partnership and, if a liquidator shall be appointed, the liquidator of the Partnership as such Contributor’s attorney-in-fact to execute, swear to, acknowledge and file any document, including, without limitation, the Partnership Agreement and any amendment thereto necessary or appropriate for such Contributor’s admission as a limited partner and as a party to the Partnership Agreement, (iv) gives the power of attorney provided for in the Partnership Agreement and (v) makes the waivers and gives the consents and approvals contained in the Partnership Agreement.

 

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3.8  Allocation of Subject Partnership Common Units to the Acquired Entities . Such Contributor acknowledges that (a) TenOaks Advisors provided the Partnership information regarding the value of the Acquired Entities, (b) the Partnership relied on such information in preparing the Partnership’s proposed allocation of the Subject Partnership Common Units between the Acquired Entities (the “ Proposed Allocation ”), (c) the Contributors and the Partnership are agreeing upon the Subject Partnership Common Unit Allocation based upon the Proposed Allocation, and (d) neither the Proposed Allocation nor the Subject Partnership Common Unit Allocation constitutes investment advice by the Partnership or its representatives, auditors, financial advisors, or counsel. For clarity, the Partnership acknowledges and agrees that nothing in this Section 3.8 shall be construed as a representation or warranty by such Contributor or HOC as to either Acquired Entity (other than with respect to the allocation of the Subject Partnership Common Units) or any of the Properties and, as to such matters, the Partnership is relying solely on those representations and warranties contained in ARTICLE 4 .

 

ARTICLE 4

REPRESENTATIONS AND WARRANTIES RELATING TO THE ACQUIRED ENTITIES

 

Except as set forth in the section and subsection of the Disclosure Schedules corresponding to the section and subsection of a given representation and warranty, as of the date hereof and the Closing Date, HOC hereby represents and warrants to the Partnership as follows:

 

4.1  Organization and Existence . Each Acquired Entity is duly organized, validly existing and in good standing under the laws of the State of Oklahoma. Each Acquired Entity has full power and authority to own, lease or otherwise hold and operate its properties and assets and to carry on its businesses as presently conducted. Each Acquired Entity is duly qualified and in good standing to do business in each jurisdiction in which the conduct or nature of its businesses or the ownership, leasing or holding of its properties makes such qualification necessary, except such jurisdictions where the failure to be so qualified or in good standing, individually or in the aggregate, would not have a Material Adverse Effect on either Acquired Entity, the Acquired Subject Interests, the Business (as presently conducted), the Properties or any Oil and Gas Lease.

 

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4.2  Authority Relative to this Agreement . Each Acquired Entity has full power and authority to execute and deliver this Agreement and the Transaction Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by each Acquired Entity of this Agreement and the other Transaction Documents to which it is a party, and the consummation by it of the transactions contemplated hereby and thereby, have been duly authorized by all necessary action, and no other proceedings are necessary to authorize the execution, delivery and performance by either Acquired Entity, as applicable, of this Agreement and the other Transaction Documents to which it is a party and the consummation by it of the transactions contemplated hereby and thereby. This Agreement and each of the other Transaction Documents to which it is a party has been duly executed and delivered by each Acquired Entity, as applicable, and constitutes, or when executed will be, duly executed and delivered by each Acquired Entity, as applicable, and constitutes, or when executed and delivered will constitute, a valid and legally binding obligation of each Acquired Entity enforceable against each Acquired Entity in accordance with its respective terms, except that such enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights generally and (b) equitable principles which may limit the availability of certain equitable remedies (such as specific performance) in certain instances.

 

4.3  Noncontravention . The execution, delivery and performance by each Acquired Entity of this Agreement and the other Transaction Documents to which it is a party and the consummation by it of the transactions contemplated hereby and thereby, do not and will not (i) conflict with or result in a violation of any provision of the governing instruments of either Acquired Entity, (ii) conflict with or result in a violation of any provision of, or constitute (with or without the giving of notice or the passage of time or both) a default under, or give rise (with or without the giving of notice or the passage of time or both) to any right of termination, cancellation or acceleration under, any bond, debenture, note, mortgage, indenture, lease, contract, agreement or other instrument or obligation to which each Acquired Entity is a party or by which either Acquired Entity or any of the Acquired Subject Interests or Properties may be bound, (iii) result in the creation or imposition of any Encumbrance upon the Acquired Subject Interests or the Properties or (iv) assuming compliance with the matters referred to in Section 4.4 , violate any Applicable Law binding upon such Acquired Entity.

 

4.4  Governmental Approvals . No consent, approval, order or authorization of, or declaration, filing or registration with, any Governmental Entity is required to be obtained or made by either Acquired Entity in connection with the execution, delivery or performance by either Acquired Entity of this Agreement or the other Transaction Documents to which it is a party or the consummation by it of the transactions contemplated hereby or thereby and (b) filings with Governmental Entities to occur in the ordinary course following the consummation of the transactions contemplated hereby.

 

4.5  Title to the Properties ; Capitalization .

 

(a) The Acquired Entities have Defensible Title to all of the Properties, free and clear of all Encumbrances.

 

(b) The Acquired Subject Interests held by the Contributors constitute all of the issued and outstanding equity interests of the Acquired Entities. The Acquired Subject Interests are duly authorized, validly issued and (to the extent applicable) fully paid and nonassessable and were not issued in violation of any preemptive rights. The number and type of authorized equity interests of each Acquired Entity and the holders thereof are set forth on Exhibit A . There are no transfer restrictions, rights of first refusal, or other rights or obligations triggered upon a change of control of either Acquired Entity (whether direct or indirect). Schedule 4.5(b) sets forth a complete and accurate list of each Acquired Entity’s ownership, directly or indirectly, of any capital stock or other equity or ownership interests of any Person.

 

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(c) There are no: (i) outstanding securities of either Acquired Entity convertible into, exchangeable or exerciseable for any equity interests of such Acquired Entity; (ii) authorized or outstanding options, warrants, calls, subscriptions, conversion rights or other rights, commitments, agreements, arrangements or undertakings of any kind to which either Acquired Entity is a party or by which it is bound obligating such Acquired Entity to issue, deliver or sell, or cause to be issued, delivered or sold, additional equity interests of such Acquired Entity or obligating such Acquired Entity to issue, grant, extend or enter into such security, option, warrant, call, right, commitment, agreement, arrangement or undertaking; (iii) outstanding obligations of any Acquired Entity to repurchase, redeem or otherwise acquire any equity interests of such Acquired Entity, (iv) voting trusts or other agreements or understandings to which any Acquired Entity is a party or is bound with respect to the voting of the equity interests of such Acquired Entity; or (v) authorized or outstanding bonds, debentures, notes, or other indebtedness that entitles the holders to vote (or convertible or exercisable for or exchangeable into securities that entitle the holders to vote) with holders of any equity interests of either Acquired Entity on any matter.

 

4.6  Absence of Undisclosed Liabilities . As of the date of this Agreement, neither Acquired Entity has any debts, liabilities or obligations (whether accrued, absolute, contingent, unliquidated or otherwise), in each such case, in which HOC reasonably anticipates to exceed Twenty Five Thousand Dollars ($25,000.00) on an aggregate basis, other than (a) as set forth on Schedule 4.11(c) or Schedule 4.16 , (b) expenses set forth in joint interest billings to the Acquired Entities related to the oil and gas business, the payment of which is not delinquent, that were incurred in the ordinary course of business and consistent with the Acquired Entities’ past practice, and (c) payroll expenses incurred by the Acquired Entities in the ordinary course of business and consistent with the Acquired Entities’ past practice.

 

4.7  Absence of Certain Changes . Except as set forth on Schedule 4.7 , as of the date of this Agreement, since the Reference Date, (a) there has not been any Material Adverse Effect on either Acquired Entity, the Acquired Subject Interests, the Properties or, to the Knowledge of HOC, on any Oil and Gas Lease, or any event or condition that might reasonably be expected to result in any Material Adverse Effect on either Acquired Entity, the Acquired Subject Interests, the Properties or, to the Knowledge of HOC, on any Oil and Gas Lease, (b) the businesses of each Acquired Entity has been conducted only in its ordinary course of business and consistent with its historic practice, (c) neither Acquired Entity has incurred any material liability, engaged in any material transaction or entered into any material agreement outside the ordinary course of business and consistent with its historic practice with respect to the Properties, (d) neither Acquired Entity has suffered any material loss, damage, destruction or other casualty to any of the Properties (whether or not covered by insurance), and (e) neither Acquired Entity has taken any of the actions set forth in Section 5.2 except as permitted thereunder.

 

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4.8  Compliance with Laws . Each Acquired Entity has complied in all material respects with all Applicable Laws relating to the operation of the Business and the Properties. Neither HOC nor the Acquired Entities has received any written notice that an Acquired Entity has not complied with any Applicable Law from any Governmental Entity, which has not been dismissed or otherwise resolved. The Acquired Entities have not, and to the Knowledge of HOC, the Lessees have not, been charged or, to the Knowledge of HOC, threatened with, or under investigation with respect to, any material violation of any Applicable Law relating to any aspect of the ownership or operation of the Properties.

 

4.9  Legal Proceedings . Except as set forth on Schedule 4.9 , there are no Proceedings pending or, to the Knowledge of HOC, threatened against or involving the Acquired Entities, the Business, the Properties, the Oil and Gas Leases or the rights of the Acquired Entities with respect to the Properties. The Acquired Entities are not subject to any judgment, order, writ, injunction, or decree of any Governmental Entity which has had or is reasonably likely to materially affect title to or the value of the Acquired Subject Interests or any of the Properties. There are no Proceedings pending or, to the Knowledge of HOC, threatened against the Acquired Entities or the Properties (or any Oil and Gas Lease), seeking to restrain, prohibit, or obtain damages or other relief in connection with this Agreement, the other Transaction Documents or the transactions contemplated hereby or thereby or which could reasonably be expected to affect either Acquired Entity’s ability to consummate the transactions contemplated hereby.

 

4.10  Permits . To the Knowledge of HOC, all Lessees hold all Permits necessary or required for the conduct of their business as currently conducted, except for Permits the absence of which do not and will not have a Material Adverse Effect on the Acquired Entities, the Acquired Subject Interests, the Properties or any Oil and Gas Lease. To the Knowledge of HOC, each of such Permits is in full force and effect and the Acquired Entities and such Lessees are in compliance with each such Permit, except in such respects as would not reasonably be expected to have a Material Adverse Effect on the Acquired Entities, the Acquired Subject Interests, the Properties or any Oil and Gas Lease.

 

4.11  Financial Statements .

 

(a) Attached as Schedule 4.11(a) are the unaudited balance sheet of TBC as of December 31, 2018, together with the related unaudited consolidated income statements of TBC for the year ended December 31, 2018, and the preliminary trial balance sheets of HHC as of December 31, 2018 (collectively, the “ 2018 Acquired Entities Financial Statements ”) and at least two Business Days prior to the Closing Date, the Acquired Entities will have delivered to the Partnership interim unaudited preliminary trial balance sheets and related unaudited consolidated income statements of each Acquired Entity as of a date within ten (10) Business Days of the Closing (the “ 2019 Interim Acquired Entities Financial Statements ” and collectively with the 2018 Acquired Entities Financial Statements, the “ Acquired Entities Financial Statements ”).

 

(b) The 2018 Acquired Entities Financial Statements have been prepared and, when prepared and delivered, the 2019 Interim Acquired Entities Financial Statements will be prepared, in good faith in accordance with the books and records of the Acquired Entities and present fairly, in all material respects, the consolidated financial position and the consolidated results of operations of the Acquired Entities and their Subsidiaries as of, and for the periods covered by such Acquired Entities Financial Statements, subject to immaterial adjustments upon the completion of review by HHC’s outside accounting firm.

 

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(c) All Indebtedness of each Acquired Entity, in each such case, in an amount in which such Person reasonably anticipates to exceed, in the aggregate, Twenty Five Thousand Dollars ($25,000.00) payable to such third party, is described on Schedule   4.11(c) .

 

4.12  Environmental Matters . Except as set forth on Schedule 4.12 :

 

(a) No Acquired Entity has received any written notifications of any Proceedings against the Acquired Entities or any of the Real Properties or the Properties, alleging that the Acquired Entities or any of the Real Properties or the Properties are in violation of, or otherwise subject to liability under, any Applicable Environmental Law and to the Knowledge of HOC no such Proceedings are threatened, other than any such Proceedings that the Acquired Entities have resolved in accordance with Applicable Environmental Laws.

 

(b) The Acquired Entities have not received any written notice of any investigation or inquiry or written request for information regarding the Real Properties, the Properties, any other property, or the operations under any Oil and Gas Lease from any Governmental Entity under any Applicable Environmental Law and to the Knowledge of HOC, no such investigation, inquiry or request is threatened.

 

(c) The Acquired Entities either have made, or will, immediately after the execution of this Agreement, make available to the Partnership all environmental assessment, investigatory, and audit reports, studies, analyses, and correspondence relating to the Properties or the Real Properties that are in actual or constructive control of the Acquired Entities and addressing Releases, threatened Releases, Remediations, Environmental Liabilities and Environmental Conditions, or address compliance with or violations of Applicable Environmental Laws.

 

4.13  Employment Matters .

 

(a)  Schedule 4.13 (a) contains a complete and accurate list of all of the following information for all employees of the Acquired Entities (the “ Employees ”): name, identity of employer, location or office, job title or position, current compensation (including bonus and commissions, if any), hire date or seniority date (if different), and status (either active or on leave).

 

(b) The Acquired Entities are, and have been in the past four years, in material compliance with all Applicable Laws respecting employment and employment practices, including, without limitation, equal employment opportunity, non-discrimination, non-harassment, non-retaliation, terms and conditions of employment, wages, employment benefits, hours of work and overtime, labor relations, worker classification as employee rather than independent contractor, occupational safety and health, employment-related immigration and authorization to work in the United States, notice of plant closings or mass layoffs, and employee waivers of liability.

 

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(c) There are no pending or, to the Knowledge of HOC, threatened Proceedings of any kind and in any forum by or on behalf of any Employee or former employee of the Acquired Entities, applicant for employment, Person claiming to be an employee, or any classes of the foregoing, against either Acquired Entity alleging a violation of, or non-compliance with, any express or implied contract of employment or any of the above-referenced Applicable Laws respecting employment and employment practices, and no such Proceedings.

 

(d) There are no labor agreements, collective bargaining agreements, or other labor contracts applicable to any Employees or by which either Acquired Entity is a party or is bound, no such agreements have existed in the past four years, and no discussions or negotiations have occurred with respect thereto by either Acquired Entity with any labor organizations, unions, or group of employees within the prior four years.

 

(e) No Employees are represented by any labor organization, union, or group of employees; no such labor organization, union, or group has represented or claimed to represent any employees of the Acquired Entities in the past four years; and no such labor organization, union, or group claims to represent a majority of any Employees in a bargaining unit of either Acquired Entity.

 

(f) There are no current or, to the Knowledge of HOC, threatened representational campaigns or other organizing activities by any union or other labor organization or group seeking to become the collective bargaining representative of any Employees; no such campaigns or activities have occurred in the past four years; there is no union or labor organization representation question or certification petition involving the Employees pending or, to the Knowledge of HOC, threatened before the National Labor Relations Board (“ NLRB ”) or any similar Governmental Entity; and no such question or petition has existed in the past four year.

 

(g) Neither Acquired Entity is currently experiencing, and has not in the past four years experienced, a labor strike, labor dispute, work stoppage, work slowdown, lockout, or similar matter.

 

(h) Neither Acquired Entity is currently engaged in, and has not engaged within the past four years, any unfair labor practices regarding any employees and there is no pending or, to the Knowledge of HOC, threatened Proceeding involving any unfair labor practices regarding any Employees before the NLRB or any similar Governmental Entity, nor are there any actual or, to the Knowledge of HOC, threatened grievances or arbitration proceedings arising out of or under any collective bargaining agreement pending either Acquired Entity.

 

(i)  Schedule 4.13(i) sets forth all employment-related liabilities that have not been paid, including any unpaid vacation pay, premiums for employment insurance, premiums for workers’ compensation insurance, accrued wages, overtime, salaries, commissions, bonuses and any employment benefits (including, without limitation, 401(k) benefits) provided by any Acquired Entity to Employees are accurately reflected in the books and records of the Acquired Entities.

 

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(j) The Acquired Entities have timely paid or properly accrued for all wages, salaries, commissions, bonuses, severance pay, vacation pay, benefits, and any other compensation or remuneration owed to Employees for or on account of employment.

 

(k) Neither Acquired Entity has, nor is it required to have, any affirmative action plans.

 

(l) Neither Acquired Entity has had a “plant closing” or “mass layoff” as defined by the Worker Adjustment and Retraining Notification Act (“ WARN ”) within the past four years and, with respect to any such “plant closing” or “mass layoff,” the Acquired Entities have complied with the notice requirements of WARN and Applicable Law.

 

(m) No Employee, former employee, or Person claiming to have been or be an employee of either Acquired Entity has the right to be recalled, reinstated, or restored to employment.

 

(n)  Schedule 4.13(n) lists all employment, confidentiality, non-disclosure, non-competition, non-solicitation, compensation, commission, bonus, loan, or severance arrangements, agreements or contracts with any Employees in excess of Twenty Five Thousand Dollars ($25,000) per annum in salary not terminable upon convenience and without penalty upon less than sixty (60) days notice to which either Acquired Entity is a party or by which either Acquired Entity is bound.

 

(o) Except as provided in Schedule 4.13(n) , no severance payment, stay-on or incentive payment, change-in-control payment, vacation or other paid leave payment, or similar payment or obligation will be owed by either Acquired Entity to any of its Employees, directors, officers, non-employee service providers, agents or consultants upon consummation of, or as a result of, the transactions contemplated by this Agreement, nor will any such Employee, director, officer, non-employee service provider, agent or consultant be entitled to any such payments a result of the transactions contemplated by this Agreement in the event of the subsequent termination of his or her employment or relationship.

 

4.14  Employee Benefit Matters .

 

(a) Schedule 4.14 (a) sets forth a list of all Benefit Plans. The Acquired Entities have delivered or made available to the Partnership true, correct and complete copies of the following with respect to the Benefit Plans: (i) all plan documents and all amendments thereto, including summary plan descriptions; (ii) Forms 5500, and all attachments thereto, for the past three years; and (iii) the latest IRS opinion, advisory, or determination letter issued with respect to each Benefit Plan intended to be qualified under Code Section 401(a).

 

(b) Neither the Acquired Entities nor any ERISA Affiliate sponsors, maintains, contributes to, is required to contribute to, or has any actual or contingent liability with respect to, (i) any “employee pension benefit plan” (within the meaning of Section 3(2) of ERISA) that is subject to Title IV or Section 302 of ERISA or Section 412 of the Code, (ii) any “multiemployer plan” (within the meaning of Section 3(37) of ERISA), (iii) any “multiple employer plan” (as described in Section 413(c) of the Code) or (iv) any “multiple employer welfare arrangement” (within the meaning of Section 3(40) of ERISA). No Benefit Plan provides for retiree medical or retiree life insurance benefits to any Person and no Benefit Plan is subject to the requirements of Section 4980B of the Code and part 6 of subtitle B of Title I of ERISA.

 

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(c) Each Benefit Plan has been maintained, administered and operated in compliance in all material respects with all Applicable Laws, including ERISA and the Code, and has been maintained, administered and operated in compliance in all materials respects with its terms. There are no pending investigations, claims or lawsuits which have been asserted or instituted by or against any Benefit Plan, against the assets of any of the trusts under such Benefit Plans or by or against the plan sponsor, plan administrator, or any fiduciary of any Benefit Plan (other than routine benefit claims), and to the Knowledge of HOC, there are no facts which could form the basis for any such investigation, claim or lawsuit.

 

(d) Except as provided in Schedule 4.14(d) , neither the Acquired Entities nor any current or former employee or consultant thereof has incurred any liability (including as a result of any indemnification obligation) arising out of or related to Section 409A of the Code, and no condition exists that could reasonably be expected to subject such Person to any liability (including as a result of any indemnification obligation) arising out of or related to Section 409A of the Code.

 

4.15  Tax Matters . As of the Closing Date, all Tax Returns required to be filed relating to the Acquired Entities, or with respect to the Properties, including IRS Form 1065 and those relating to Property Taxes, severance, sales, or production Taxes and any other Taxes imposed on or with respect to the Acquired Entities or the Properties and any production therefrom, have been timely filed with the applicable Taxing authorities, all such Tax Returns are true, correct and complete, and all Taxes required to be shown thereon have been timely paid in full. The Acquired Entities have complied with all Applicable Laws relating to the payment and withholding of Taxes, and have duly and timely withheld and paid over to the appropriate Taxing authorities all amounts required to be so withheld and paid under all Applicable Laws. The Acquired Entities have made all deposits required with respect to Taxes due and payable with respect to the Acquired Entities or the Properties. There are no liens for Taxes (other than for Taxes not yet due and payable) upon the Acquired Entities or any of the Properties. There has been no issue raised or adjustment proposed (and to the Knowledge of HOC, none is pending) by the IRS or any other Taxing authority in connection with any Tax Returns of the Acquired Entities, nor have the Acquired Entities received any written notice from the IRS or any such other Taxing authority that any Tax Return of the Acquired Entities is being audited or may be audited or examined. None of the Acquired Entities has agreed to the extension or waiver of any statute of limitations on the assessment or collection of any Tax or with respect to any Tax Return. None of the Acquired Entities is a “foreign person” within the meaning of Section 1445 (or similar provisions) of the Code. No assets comprising the Properties is an interest in any joint venture, partnership, or other entity, arrangement, or contract treated as a “partnership” for U.S. federal tax purposes, as defined in Section 761 of the Code. None of the the Acquired Entities is a party to any Tax allocation or sharing agreement. Each of the Acquired Entities has always been treated as a partnership for U.S. federal income Tax purposes, and none of the Acquired Entities has made (or will make) any election to be treated as an association taxable as a corporation for U.S. federal income Tax purposes. Each of the Acquired Entities has properly identified all hedging transactions as required by Treasury Regulation Section 1.1221-2(f). None of the Acquired Entities has participated in any “reportable transaction” within the meaning of Treasury Regulation Section 1.6011-4. Neither of the Acquired Entities is a part of a consolidated or combined or unitary group for Tax purposes. All income derived from the Properties conveyed to the Partnership constitutes “royalty” or “overriding royalty” income (within the meaning of Section 512(b)(2) of the Code) and is “qualifying income” (within the meaning of Section 7704(d) of the Code). The information provided in the Tax Basis Schedule attached hereto as Schedule 4.15 is true, complete and correct in all material respects. To the Knowledge of HOC, all of the Properties have been properly listed and described on the ad valorem and property Tax rolls of the appropriate Taxing authority. The acquisition of the Properties and Acquired Entities will not cause the Partnership or DMOLP to be liable as a successor or transferee by statute, contract or otherwise for any Taxes for which the Contributors are responsible.

 

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4.16  Commitments . Except as set forth on Schedule 4.16 , the Acquired Entities have incurred no individual expenses, and have made no individual commitments to make expenditures (and no Acquired Entity has entered into any agreements that would obligate the Partnership to make such expenditures), in connection with (and no other similar obligations or liabilities have been incurred which would adversely affect) the ownership or operation of the Properties after the Closing Date, in each such case, in which HOC reasonably anticipates to exceed Twenty Thousand Dollars ($20,000.00) on an individual basis.

 

4.17  No Alienation . Since the Reference Date, except as set forth on Schedule 4.17 , neither Acquired Entity has sold, assigned, conveyed, or transferred or contracted to sell, assign, convey or transfer any right or title to, or interest in, the Properties, except in the ordinary course of business and consistent with the Acquired Entities’ historic practice.

 

4.18  Basic Documents . To the Knowledge of HOC:

 

(a) (i) Neither Acquired Entity is in breach or default (and no situation exists which with the passing of time or giving of notice would create a breach or default) of its obligations under any Basic Documents, and (ii) no breach or default by any third party (or situation which with the passage of time or giving of notice would create a breach or default) exists under any Basic Documents, to the extent such breach or default (whether by the Acquired Entity or such third party) could reasonably be expected to have a Material Adverse Effect on the Acquired Entities or the Properties after the Closing Date; and

 

(b) All payments (including all delay rentals, royalties and shut-in royalties) owing under Basic Documents have been and are being made (timely, and before the same became delinquent) by third parties where the non-payment of same by a third party could materially and adversely affect the ownership, exploration, development, operation, maintenance, value or use of any of the Properties after the Closing Date. For the purposes of the representations contained in this Section 4.18 (and without limitation of such representations), the non-payment of an amount, or non-performance of an obligation, where such non-payment, or non-performance, could result in the forfeiture or termination of rights of either Acquired Entity or any Lessee under a Basic Document, shall be considered material.

 

4.19  Material Contracts .

 

(a)  Schedule 4.19 (a) sets forth a complete and accurate list of all Material Contracts related to the Active Prospects.

 

(b) (i) Each Material Contract is in full force and effect and constitutes a legal, valid and binding obligation of the Acquired Entity that is party thereto and, to the Knowledge of HOC, each other party thereto; (ii) neither Acquired Entity nor any Affiliate thereof has received from any other party to a Material Contract any written notice of termination or intention to terminate any Material Contract that remains unresolved and, to the Knowledge of HOC, no event has occurred which (with notice or lapse of time, or both) would constitute a material default under any Material Contract or give either Acquired Entity or any other party to any Material Contract the right to terminate any Material Contract; and (iii) Neither Acquired Entity is and, to the Knowledge of HOC, no other party to any Material Contract is, in material breach of the terms, provisions or conditions of the Material Contracts.

 

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(c) HOC has provided access and directed representatives of the Partnership to the actual location of complete and accurate copies of all Material Contracts (including any and all amendments and supplements thereto).

 

(d) None of the Material Contracts are oral contracts or agreements.

 

4.20  Area of Mutual Interest and Other Agreements; Tax Partnerships . Except as set forth on Schedule 4.2 0 , as it relates to the Active Prospects, (a) no Property is subject to any area of mutual interest agreements, (b) no Property is subject to 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 Closing Date, and (c) no Property is subject to (or has related to it) any tax partnership.

 

4.21  Commitments, Abandonments or Proposals . Except as set forth on Schedule 4.21 :

 

(a) The Acquired Entities have not incurred expenses, and have made no commitments to make expenditures in connection with (and no other obligations or liabilities have been incurred which would adversely affect) the ownership or operation of the Properties by the Acquired Entities on or after the Reference Date, other than routine expenses incurred in the normal operation of existing wells on the Properties.

 

(b) No proposals to the Acquired Entities in excess of Twenty Thousand Dollars ($20,000) are currently outstanding to drill additional wells, or to deepen, plug back, or rework existing wells, or to conduct other operations for which consent is required under the applicable operating agreement, or to conduct any other operations, or to abandon any wells, on the Properties.

 

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4.22  Production Sales Contracts . To the Knowledge of HOC, except as set forth on Schedule 4.22 , there exist no agreements or arrangements for the sale of production from the Properties (including calls on, or other rights to purchase, production, whether or not the same are currently being exercised) other than agreements or arrangements which are cancelable on ninety (90) days notice or less without penalty or detriment.

 

4.23  Payment of Expenses . All expenses relating to the ownership or, to the Knowledge of HOC, the operation of the Properties, have been, and are being, paid (timely, and before the same become delinquent) by the Acquired Entities, except such expenses and taxes as are disputed in good faith by the Acquired Entities and for which an adequate accounting reserve has been established by the Acquired Entities.

 

4.24  Preferential Rights and Consents to Assign . Except as set forth on Schedule 4.2 4 , as it relates to the Active Prospects, there are no consents to assignment or waivers of preferential rights to purchase that must be obtained from third parties in order for the Acquired Entities to consummate the transactions contemplated by this Agreement or the other Transaction Documents without violating or breaching a duty or obligation of any of the Acquired Entities.

 

4.25  No Participating Minerals . Except as set forth on Schedule 4.25 , the Properties do not include any unleased or other mineral interest where either Acquired Entity has agreed to bear a share of drilling, operating or other costs as a participating mineral owner.

 

4.26  Make-Up Rights . Except as set forth on Schedule 4.26 , neither of the Acquired Entities has received prepayments (including, but not limited to, payments for gas not taken pursuant to “take-or-pay” or similar arrangements) for any oil or gas produced from the Properties as a result of which the obligation does or may exist to deliver oil or gas produced from the Properties after the Reference Date without then receiving payment (or without then receiving full payment) therefore or to make repayments in cash (and the Acquired Entities have not, since the Reference Date, so delivered any oil or gas from the Properties or so made any such repayment in cash).

 

4.27  Imbalances . Except as set forth on Schedule 4.2 7 , there are no imbalances among the owners of the interests in any wells and units included in the Properties that could have a Material Adverse Effect on the net revenues that the Acquired Entities will be entitled to receive from the Properties from the then current month’s production.

 

4.28  Insurance . Schedule 4.28 lists and contains a summary description of all material current policies of property, fire and casualty, general liability, title, workers’ compensation and other forms of insurance held by or for the benefit of either Acquired Entity as of the date hereof. As of the date hereof, all such material policies held by or for the benefit of the Acquired Entities are in full force and effect, all premiums with respect thereto covering all periods up to and including the date hereof, have been paid, and no written notice of cancellation or termination has been received with respect to any such policy which was not replaced on substantially similar terms prior to the date of such cancellation.

 

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4.29  Intellectual Property . Schedule 4.29 sets forth a true and complete list of all of the patents, registered trademarks, registered copyrights, and domain names, and pending applications for any of the foregoing, owned by either Acquired Entity as of the date hereof.

 

4.30  Brokerage Fees . Other than TenOaks Energy Advisors, LLC, neither Acquired Entity has retained any financial advisor, broker, agent or finder or paid or agreed to pay any financial advisor, broker, agent or finder on account of this Agreement or any transaction contemplated hereby.

 

4.31  Records . The Acquired Entities are in possession of all Records.

 

ARTICLE 5

CONDUCT OF THE ACQUIRED ENTITIES PENDING CLOSING;
CERTAIN ACTIONS RELATING TO CLOSING

 

5.1  Conduct and Preservation of the Business of the Acquired Entities . HOC covenants and agrees with the Partnership that, except as contemplated by this Agreement, during the period from the date hereof to the Closing Date, HOC (a) shall cause the Acquired Entities to conduct their operations according to the ordinary course of business and consistent with their historic practice and in material compliance with all Applicable Laws and (b) shall use its reasonable best efforts to preserve, maintain and protect the Properties.

 

5.2  Restrictions on Certain Actions of the Contributor s . Except as set forth on Schedule 5.2 or as otherwise expressly provided in this Agreement, prior to the Closing Date, the Contributors shall not, without the consent of the Partnership cause the Acquired Entities to:

 

(a) mortgage or pledge any of the Properties or create or suffer to exist any Encumbrance thereupon;

 

(b) sell, lease, transfer or otherwise dispose of, directly or indirectly, any of the Properties, except in the ordinary course of business and consistent with their historic practice;

 

(c) issue, create, incur, assume, guarantee, endorse or otherwise become liable or responsible with respect to (whether directly, contingently or otherwise) any liability, obligation or Indebtedness;

 

(d) amend, modify or change any (i) existing lease or contract with respect to the Properties, except in the ordinary course of business and consistent with their historic practice, or (ii) limited partnership agreements of the Acquired Entities;

 

(e) waive, release, grant or transfer any rights of value relating to the Properties, except in the ordinary course of business and consistent with their historic practice;

 

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

 

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

 

(h) take any action that would make any of the representations or warranties of the Contributor untrue as of any time from the date of this Agreement to the Closing Date, or would result in any of the conditions set forth in this Agreement not being satisfied;

 

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

 

(j) except for the distribution of the Excluded Assets, declare, set aside, make or pay any distribution in respect of the Acquired Subject Interests;

 

(k) enter into any commitment for capital expenditures of the Acquired Entities in excess of Twenty Thousand Dollars ($20,000);

 

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

 

(m) agree in writing or otherwise to take any of the actions (i) described in this Section 5.2 , or (ii) that would be reasonably expected to cause a Material Adverse Effect on the Contributors, the Acquired Subject Interests, the Acquired Entities or the Properties.

 

ARTICLE 6

ADDITIONAL AGREEMENTS

 

6.1  Access to Information .

 

(a) HOC and the Acquired Entities hereby agree to provide the Partnership and direct representatives of the Partnership access to the actual location of the Records: (i) in their possession or control, or (ii) received by them subsequently to the date hereof and prior to the Closing Date as soon as reasonably practicable. From the date hereof through the Closing, HOC and the Acquired Entities shall afford the Partnership and their representatives, counsel, financial advisors and auditors full access to the offices and personnel of the Acquired Entities, and to the Properties and the Records during normal business hours, upon reasonable notice throughout the period prior to the Closing, to the Properties and Records. Prior to the Closing, HOC and the Acquired Entities shall furnish promptly such information concerning the Properties and the business of the Acquired Entities as the Partnership shall reasonably request in order that the Partnership may have a full opportunity to make such investigations as it desires with respect to the Properties and the Records; provided that such investigation shall be upon reasonable notice and shall not unreasonably disrupt the personnel and operations of HOC or the Acquired Entities or impede the efforts of HOC or the Acquired Entities to comply with their other obligations under this Agreement. Prior to the Closing, HOC shall cause the Acquired Entities to generally keep the Partnership informed as to all material matters involving the operations and business of the Acquired Entities. HOC shall discuss matters involving the operations and business of the Acquired Entities with representatives of the Partnership.

 

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(b) The Partnership may perform a physical inspection of the Properties subject to the HHC Working Interests (“ HHC WI Properties ”), subject to this Section 6.1(b) . Upon request by the Partnership, HOC will use its reasonable commercial efforts to obtain access from the third party operator of the HHC WI Properties for the Partnership’s physical and environmental inspection and the Partnership agrees to abide by the Acquired Entities’ and such third party operator’s safety rules, regulations and operating policies while conducting its assessment. Such assessment shall be conducted at the Partnership’s sole cost, risk and expense. The Partnership right of access shall not, without the prior written consent of the Acquired Entity and the applicable third party operator, entitle the Partnership to operate equipment or conduct testing or sampling. HOC or its representatives, at HOC’s option, shall have the right to be present during testing or on-site investigation by Partnership (or its agents or representatives). All information (including all reports, results and documentation containing such information) acquired or prepared by or for the Partnership or its agents, employees or representatives, in conducting the assessment under this Section 6.1(b) shall be subject to the Confidentiality Agreement.

 

(c) The Partnership, on behalf of itself the Partnership Indemnified Parties, hereby releases and agrees to indemnify, defend and hold harmless the Acquired Entities and all Contributors’ Indemnified Parties and the other owners of interests in the HHC WI Properties from and against any and all Losses, including claims, liabilities, losses, costs and expenses attributable to personal injuries, death, or property damage, arising out of or relating to any and all access by the Partnership Indemnified Parties to the HHC WI Properties, or any related activities of the Partnership Indemnified Parties prior to Closing, EVEN IF CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), STRICT LIABILITY OR OTHER LEGAL FAULT OF ANY INDEMNIFIED PARTY EXCLUDING, HOWEVER, ANY CLAIMS, LIABILITIES, LOSSES, COSTS OR EXPENSES CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY INDEMNIFIED PARTY AND PROVIDED THIS INDEMNITY DOES NOT INCLUDE INDEMNIFICATION FOR DAMAGES INCURRED BY CONTRIBUTORS’ INDEMNIFIED PARTIES AS A CONSEQUENCE OF THE DISCOVERY OF AN ENVIRONMENTAL CONDITION DURING THE COURSE OF THE DUE DILIGENCE. The Partnership and any of its respective agents, employees or representatives accessing any of the HHC WI Properties shall maintain, at their sole expense and with reputable insurers, such insurance as is reasonably sufficient to support the Partnership’s indemnity obligations under this Section 6.1(c) .

 

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6.2  Notification of Certain Matters . Upon actual discovery thereof, each party shall give reasonably prompt notice to the other parties of (a) any fact or circumstance that would be likely to cause any representation or warranty of such party contained in this Agreement to be untrue or inaccurate in any material respect, and (b) any material failure of such party to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder. The delivery of any notice pursuant to this Section 6.2 shall not be deemed to (i) modify the representations or warranties hereunder of the party delivering such notice, (ii) modify the conditions set forth in ARTICLE 7 or (iii) limit or otherwise affect the remedies available hereunder to any party receiving such notice.

 

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

 

6.4  Public Announcements . The Partnership may from time to time make such press releases or otherwise make public statements with respect to this Agreement of the transactions contemplated hereby as the Partnership deems appropriate, in its sole discretion; provided, however, the Partnership shall provide advance notice of any such contemplated press release to HOC. Neither the Acquired Entities nor the Contributors shall issue any press release or otherwise make any public statement with respect to this Agreement or the transactions contemplated hereby without the prior written consent of the Partnership, such consent not to be unreasonably withheld, conditioned, or delayed.

 

6.5  Amendment of Schedules . Each party hereto agrees that, with respect to the representations and warranties of such party contained in this Agreement, such party shall have the continuing obligation until the Closing to supplement or amend the Schedules hereto with respect to any matter hereafter discovered which, if known at the date of this Agreement, would have been required to be set forth or described in the Schedules. For all purposes of this Agreement, including without limitation for purposes of determining whether the conditions set forth in Section 7.2(a) and Section 7.3(a) have been fulfilled, the Schedules hereto shall be deemed to include only that information contained therein on the date of this Agreement and shall be deemed to exclude all information contained in any supplement or amendment thereto.

 

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6.6  Fees and Expenses . Except as provided in Section 6.15 and Section 8.3(b) , all fees and expenses, including fees and expenses of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such fee or expense, whether or not the Closing shall have occurred.

 

6.7  Tax Disclosure . Except as reasonably necessary to comply with applicable securities laws and notwithstanding anything in this Agreement to the contrary or in any other agreement to which the Partnership, any Acquired Entity, or any Contributor is bound, the parties hereto (and each employee, representative, or other agent of any of the parties) are expressly authorized to disclose to any and all persons, without limitation of any kind, the U.S. federal income “tax treatment” and “tax structure” (as those terms are defined in Sections 1.6011-4(c)(8) and (9) of the Treasury Regulations, respectively) of the transactions contemplated by this Agreement and all materials of any kind (including opinions or other tax analyses) that are provided to such parties relating to such “tax treatment” and “tax structure” of the transactions contemplated by this Agreement. For these purposes, “tax structure” is limited to facts relevant to the U.S. federal income tax treatment of the transaction described herein.

 

6.8  Post-Closing Assurances and Access to Records . After the Closing, the Contributors, the Acquired Entities, and the Partnership shall execute, acknowledge and deliver or cause to be executed, acknowledged and delivered such instruments and take such other action as may be necessary or advisable to carry out their obligations under this Agreement and under any exhibit, document, certificate or other instrument delivered pursuant hereunto. After the Closing, HOC shall grant the Partnership, and the Partnership shall grant to HOC, and each of their respective authorized representatives reasonable access (including copying privileges at the requesting party’s sole cost and expense) during the other party’s normal business hours to all Records of the other party pertaining to the Acquired Subject Interests and the Business, where such Records may be located for the purpose of prosecuting or defending claims, lawsuits or other proceedings, for Tax or audit purposes or to comply with legal process, rules, regulations or orders of any board, agency, tribunal or government.

 

6.9  NASDAQ Listing . The Partnership shall use its reasonable efforts to cause the Subject Partnership Common Units to be approved for listing on the NASDAQ Global Select Market.

 

6.10  Employee Benefit Matters . Subject to Closing, the Acquired Entities shall terminate all Benefit Plans sponsored or maintained by the Acquired Entities effective immediately prior to the Closing Date. Not later than three days preceding the Closing Date, the Acquired Entities shall provide the Partnership with evidence that such Benefit Plans will be terminated (the form and substance of which shall be subject to review and approval by the Partnership) effective immediately prior to the Closing Date. Following Closing, and except as otherwise stated herein, (i) HOC shall assume all liabilities and responsibilities relating to the Benefit Plans, and (ii) none of the Partnership, the Acquired Entities or their post-Closing Affiliates shall be liable or responsible for any liabilities, costs or expenses relating to the Benefit Plans, including any such liabilities arising in connection with Section 409A of the Code.

 

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6.11  Employment Matters . Immediately prior to Closing, the Acquired Entities shall terminate the employment of all Employees and pay all Employees all compensation and benefits, including any applicable severance arrangements, due in connection with the termination of their employment relationships, including without limitation pay for any accrued but unused vacation and/or paid time off benefits, and shall provide evidence of such terminations to the Partnership (the form and substance of which shall be subject to review and approval by the Partnership). HOC shall be solely responsible for and, where applicable, shall pay or reimburse the Partnership, the Acquired Entities, or their post-Closing Affiliates, and shall indemnify, defend, and hold the Partnership, the Acquired Entities, and their post-Closing Affiliates harmless, for any Losses relating to Employees, former employees, or Persons claiming to be employees, in each case arising out of or relating to any action of either Acquired Entity before Closing, including but not limited to any Losses arising out of or relating to (i) the employment of the Employees by the Acquired Entities before the Closing, (ii) the termination of such employment relationships by the Acquired Entities and the payment of all compensation and benefits due in connection with the termination of their employment relationships, and (iii) compliance with the above-referenced Applicable Laws respecting employment and employment practices. The Partnership, the Acquired Entities, or their post-Closing Affiliates, may, but shall not be required to, offer employment effective on or after the Closing to any Employees on such terms and conditions as the Partnership, the Acquired Entities, or their post-Closing Affiliates may determine in their sole discretion.

 

6.12  Assistance with Form 8-K Reporting Obligation s .

 

(a) HOC and the Acquired Entities shall use reasonable best efforts to provide the Partnership with all historical financial statements (including the related notes and supporting schedules) of the Acquired Entities (the “ Acquired Entity Historical Financial Statements ”) for the period(s) required by Rule 3-05(b) of Regulation S-X to be filed by the Partnership under Item 9.01 of Form 8-K following the Closing (such Form 8-K, the “ Financial Statement 8-K ”), in form and substance necessary for the Partnership to comply with any and all obligations that may be applicable to it under Item 9.01 of Form 8-K, as soon as commercially practicable following the Closing, but in no event later than forty-five (45) days after the Closing. All Acquired Entity Historical Financial Statements shall be derived from the books and records of the Acquired Entities, comprise all of the historical financial statements required to be filed with the SEC pursuant to Regulation S-X and the Exchange Act and the rules and regulations promulgated thereunder and shall comply in all respects with the requirements of Regulation S-X. HOC and the Acquired Entities shall instruct the auditors of the Acquired Entities to commence all requisite work and processes required to give effect to this provision as soon as reasonably practicable following the date hereof. HOC and the Acquired Entities shall cooperate in good faith with the Partnership in connection with any discussions with the staff of the SEC with respect to the required content of the Acquired Entity Historical Financial Statements. HOC and the Acquired Entities shall use commercially reasonable efforts to (i) obtain an unqualified audit opinion in accordance with United States generally accepted auditing standards from the auditors of the Acquired Entities with respect to the audited Acquired Entity Historical Financial Statements and effectiveness of internal control over financial reporting and (ii) cause and enable the auditors of the Acquired Entities to provide to the Partnership (and not withdraw) its consent to incorporation by reference into the registration statements filed by the Partnership under the Securities Act of its audit reports with respect to the Acquired Entity Historical Financial Statements. The cost of the Acquired Entity Historical Financial Statements and obtaining an opinion letter from the auditors of the Acquired Entities shall be borne by the Partnership.

 

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(b) Upon request by the Partnership therefor, in connection with the Partnership’s obligation to file the Financial Statement 8-K, HOC and the Acquired Entities shall promptly furnish, and shall use reasonable efforts to cause pre-Closing management and employees of the Acquired Entities, to furnish, to the Partnership, and its respective representatives, and reasonably cooperate with, and use reasonable efforts to cause pre-Closing management and employees of the Acquired Entities to reasonably cooperate with, the Partnership with respect to its preparation of pro forma financial statements, all necessary management representation letters in connection with any audits described herein, historical financial data relating to the Acquired Entities to enable the Partnership to produce (or cause to be produced) the pro forma financial statements and other pro forma financial data and financial information for the period(s) that will be required by Article 11 of Regulation S-X to be filed by the Partnership in the Financial Statement 8-K.

 

6.13  Retention of Funds . On and after the Closing and until the fourth anniversary of the Closing Date, HOC shall (a) maintain at all times cash on hand of an amount equal to at least (i) during the eighteen (18) months following the Closing Date, Four Million Dollars ($4,000,000.00), (ii) after eighteen (18) months following the Closing Date and before thirty-six (36) months following the Closing Date, Two Million Dollars ($2,000,000.00), and (iii) after thirty-six (36) months following the Closing Date and before forty-eight (48) months following the Closing Date, One Million Dollars ($1,000,000.00), in each case, exclusive and in addition to the amount of any Indebtedness or other liabilities accrued by HOC (the “ Holdback Amount ”) for the purpose of satisfying its post-Closing indemnification obligations hereunder, and (b) prohibit and prevent any Lien on the Holdback Amount.

 

6.14  I nsurance Matters . For a period of four years following the Closing, HHC shall maintain in effect at all times insurance policies and coverage of the types and amounts customarily held by parties in the Business.

 

6.15  Lease Termination . From and after the Closing, HOC agrees to reasonably cooperate with HHC and the Partnership to negotiate an early termination of the Office Lease on the terms and subject to the conditions reasonably acceptable to HHC and the Partnership. After the Closing, HOC shall upon receipt of a written request therefore promptly reimburse HHC for one-half of all rent and other costs and expenses incurred by HHC or the Partnership under the Office Lease if and to the extent related to a period (or portion thereof) occurring after the Closing Date; provided, however, HOC shall have no obligation to reimburse HHC or the Partnership for any costs or expenses under the Office Lease to the extent related to any period occurring after July 31, 2021.

 

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ARTICLE 7

CONDITIONS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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(d)  Certificates . The Contributors’ Representative shall have received a certificate from the Partnership, dated the Closing Date, representing and certifying that the conditions set forth in Section 7.1 and Section 7.2 have been fulfilled and a certificate as to the incumbency of the officer(s) executing this Agreement on behalf of the Partnership.

 

(e)  Exchange Agent Certificate . The Contributors’ Representative shall have received a certificate from the Exchange Agent, dated the Closing Date, certifying that the Subject Partnership Common Units have been issued to the Contributors in the amount set forth for such Contributor on Exhibit C as of the Closing Date.

 

(f)  Mineral and Royalty Deeds ; NPI Conveyance . The Partnership shall have executed and delivered to the Contributors’ Representative its signature pages to (i) the Mineral and Royalty Deed by and between HHC and the Partnership in the form attached hereto as Exhibit H (the “ HHC Conveyance ”), (ii) the Mineral and Royalty Deed by and between TBC and the Partnership in the form attached hereto as Exhibit J (the “ TBC Conveyance ”) and (iii) the Conveyance of Net Profits Overriding Royalty Interest by and between HHC and the Partnership in the form attached hereto as Exhibit K (the “ NPI Conveyance ”).

 

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

 

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

 

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

 

(c)  No Material Adverse Effect . Since the date of this Agreement, there shall not have occurred any Material Adverse Effect with respect to the Acquired Entities, the Business, the Properties or the Acquired Subject Interests.

 

(d)  Certificates . The Partnership shall have received a certificate from the Contributors’ Representative, on behalf of the Contributors, dated the Closing Date, representing and certifying that the conditions set forth in Section 7.1 and Section 7.3 have been fulfilled and a certificate as to the incumbency of the officer(s) executing this Agreement on behalf of the Acquired Entities.

 

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(e)  Good Standings . The Contributors’ Representative, on behalf of the Contributors, shall have delivered to the Partnership certified copies of the Acquired Entities’ certificates of limited partnership, as of the most recent practicable date, and a certificate of existence and good standing for each of the Acquired Entities, as of the Closing Date, issued by the Secretary of State of Oklahoma.

 

(f)  FIRPTA Certificates . A certificate for each Contributor in the form specified in Treasury Regulation Section 1.445-2(b)(2)(iv) that each Contributor is not a “foreign person” within the meaning of Section 1445 of the Code.

 

(g)  Transaction Documents . The Contributors shall have executed and delivered to the Partnership their signature pages to each of the Assignment and Assumption of Excluded Assets and the Assignments.

 

(h)  Mineral and Royalty Deeds; NPI Conveyance . The Contributors’ Representative shall have delivered to the Partnership signature pages (i) executed by HHC to the HHC Conveyance, (ii) executed by TBC to the TBC Conveyance and (iii) executed by HHC to the NPI Conveyance.

 

(i)  Due Diligence . In consideration of the time and expense to be incurred by the Partnership in connection with the transactions contemplated hereby, the due diligence investigation of the Partnership with respect to the Subject Interests, the Acquired Entities and Properties, in each such case, solely as it relates to those matters specifically identified and described on Schedule 7.3(i ) , shall have been completed to the satisfaction of the Partnership, in its sole discretion, including but not limited to confirmation of the accuracy of the representations and warranties contained in ARTICLE 3 and ARTICLE 4 of this Agreement; provided that this condition shall be deemed satisfied to the extent that the Contributors’ Representative, on behalf of the Contributors, agrees that the matters of due diligence with respect to which the Partnership is not satisfied are included in the definition of Retained Liabilities, so long as the Partnership does not reasonably expect, based on the circumstances known to the Partnership at the time of such deemed satisfaction of this Section 7.3(i ) , that aggregate Losses arising from or resulting from such matters could exceed the Holdback Amount.

 

(j)  Office Lease . The Partnership shall have received an executed amendment to the Office Lease deleting Section 19.1 and 19.2 of the current Office Lease, and otherwise in the form and substance reasonably acceptable to the Partnership.

 

(k)  Termination of Employment Agreements . The Partnership shall have received evidence of termination of the Contracts set forth on Schedule 4.13(n) in a form acceptable to the Partnership in its sole discretion, and the Partnership shall have received releases in favor of HHC from the employees that are party to such Contracts, in a form acceptable to the Partnership in its sole discretion.

 

(l)  Amendment of TBC Partnership Agreement . The TBC Partnership Agreement shall be amended by an amendment in form and substance reasonably satisfactory to the Partnership.

 

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(m)  Amendment of HHC Partnership Agreement . The HHC Partnership Agreement shall be amended by an amendment in form and substance reasonably satisfactory to the Partnership.

 

(n)  Contributed Cash . The Partnership shall have received payment of the Contributed Cash.

 

(o)  Bank Signatories . The Partnership shall have received evidence satisfactory to it that the bank accounts held by the Acquired Entities and into which all cash proceeds arising from or attributable to the Properties have been historically deposited have been transferred under the control of the Partnership or the Acquired Entities, as directed by the Partnership, with new signature authorities, as directed by the Partnership.

 

ARTICLE 8

PRODUCTION, PROCEEDS, EXPENSES AND TAX MATTERS

 

8.1  Division of Ownership . After the Closing, any proceeds received by the Contributors attributable to the Business, from whatever source, including, without limitation, any bonuses, delay rentals, royalty payments, overriding royalty payments and shut-in royalty payments (collectively herein called the “ Partnership-Entitled Production and Proceeds ”), shall, subject to Section 1.7 and Section 1.8 , be owned by the Partnership, and should the Contributors receive payment for any such Partnership-Entitled Production and Proceeds, the Contributors shall within five Business Days after the end of each calendar month during which any such payments are received, either endorse and deliver to the Partnership any checks received by the Contributors attributable to such Partnership-Entitled Production and Proceeds or transfer any cash proceeds by wire transfer to an account designated by the Partnership.

 

8.2  Division of Expenses . Except as otherwise provided in Section 8.3 and as set forth in this Agreement, all costs and expenses incurred in connection with the Properties prior to the Reference Date shall be borne and timely paid by HOC pursuant to this Agreement.

 

8.3  Taxes .

 

(a)  Tax Related Indemnity Payments . HOC or the Contributors, as applicable, shall timely pay all of the Excluded Taxes under subsection (a) of the “Excluded Taxes” definition, and shall indemnify and hold the Partnership and its Affiliates harmless from all Excluded Taxes (including any applicable costs incurred in connection with such Excluded Taxes).

 

(b)  Transfer Taxes . The Partnership shall be responsible for and shall pay 100% of all Transfer Taxes when due. The Partnership and its Affiliates, the Acquired Entities, and HOC shall cooperate to obtain all available exemptions from the foregoing Transfer Taxes.

 

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(c)  Apportionment of Taxes . With respect to Taxes (other than income Taxes) of the Acquired Entities (including Taxes attributable to the Properties), HOC or the Contributors, as applicable, shall bear all Taxes for any Pre-Effective Tax Period, and the Partnership and its Affiliates shall bear all Taxes (other than Excluded Taxes) for any Post-Effective Tax Period. If any Tax (other than an Excluded Tax) or Tax refund relates to a period that begins before and ends after the Reference Date, HOC and the Partnership and its Affiliates shall use the following conventions for determining the portion of such Tax (or Tax refund) that relates to a Pre-Effective Tax Period and which relates to a Post-Effective Tax Period: (A) production or severance Taxes that are attributable to the severance or production of hydrocarbons shall be deemed allocated to the period in which the relevant severance or production occurred; (B) in the case of Property Taxes and other similar Taxes imposed on a periodic basis, the amount of such Taxes (or Tax refunds) attributable to the Pre-Effective Tax Period shall be determined by multiplying such Taxes for the entire period by a fraction, the numerator of which is the number of calendar days in the portion of the period ending on the Reference Date and the denominator of which is the number of calendar days in the entire period, and the remaining amount of such Taxes (or Tax refunds) shall be attributable to the Post-Effective Tax Period; and (C) in the case of all other Taxes, the amount of Taxes (or Tax refunds) attributable to the Pre-Effective Tax Period shall be determined as if a separate return was filed for the period ending as of the end of the day on the Reference Date using a “closing of the books methodology,” and the remaining amount of the Taxes (or Tax refunds) for such period shall be attributable to the Post-Effective Tax Period; provided, however, that for purposes of clause (C), exemptions, allowances, or deductions that are calculated on an annual basis (including depreciation and amortization deductions) shall be apportioned between the Pre-Effective Tax Period and the Post-Effective Tax Period in proportion to the number of days in each such period. For the avoidance of doubt, and notwithstanding any other provision of this Agreement to the Contrary: (X) the Contributors shall bear (i) all income Taxes attributable to the Acquired Entities or the Properties or allocable to the Contributors from the Acquired Entities for all periods ending on or prior to the Closing Date (including such income Taxes allocable to the Contributors on the final IRS Form 1065 for the period ending on the Closing Date filed by the Acquired Entities) and (ii) all income Taxes imposed by applicable Law on the Contributors or their direct or indirect owners resulting from the transactions contemplated by this Agreement; and (Y) each party to this Agreement shall be responsible for their own federal, state and local income Tax liabilities (including any party’s allocable share of any “imputed underpayment” as defined in Section 6225 of the Code).

 

(d)  Tax Returns . HOC shall be responsible for the preparation and timely filing of any Tax Returns with respect to Taxes required to be filed before the Closing Date. The Partnership and its Affiliates shall be responsible for the preparation and timely filing of any Tax Returns with respect to Taxes required to be filed on or after the Closing Date. Each of the Acquired Entities shall timely file a final IRS Form 1065 for the Tax year ending on the Closing Date reporting and allocating all items of income, gain, credit, deduction, and loss for such Tax year thereon and report each partner’s allocable share of such items on IRS Schedule K-1.

 

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(e)  Tax Refunds . All refunds or credits for Taxes for any Excluded Tax and for any Transfer Tax shall be for the sole benefit of the Contributors; provided, however, that to the extent the Partnership or any of its Affiliates incurs an Excluded Tax or Transfer Tax and is not indemnified for such Excluded Tax or Transfer Tax, refunds or credits of such Excluded Tax or Transfer Tax shall be for the sole benefit of the Partnership and its Affiliates. To the extent that the Partnership or any of its Affiliates receives a refund or credit that is for the benefit of the Contributors, the Partnership or the applicable Affiliate shall pay such refund or the value of the credit (net of all out of pocket expenses and costs and Taxes incurred in obtaining such refund) to HOC (on behalf of the Contributors) within five Business Days. All refunds or credits for Taxes relating to the Properties for a Post-Effective Tax Period that are not Excluded Taxes shall be for the sole benefit of the Partnership and its Affiliates. To the extent that the Contributors receive a refund or credit for a Tax that is for the benefit of the Partnership or any of its Affiliates, the Contributors shall pay such refund or the value of the credit (net of all reasonable out of pocket expenses and costs and Taxes incurred in obtaining such refund) to the Partnership or the applicable Affiliate within five Business Days.

 

(f)  Tax Cooperation ; Tax Audits . The Partnership, its Affiliates, and HOC shall: (i) assist in the preparation and timely filing of any Tax Return (including any claim for a Tax refund) relating to the Acquired Entities or the Properties; (ii) assist in any audit or other proceeding with respect to Taxes or Tax Returns relating to the Acquired Entities or the Properties; (iii) make available any information, records, or other documents relating to any Taxes or Tax Returns relating to the Acquired Entities or the Properties; (iv) provide any information required to allow the other party to comply with any information reporting or withholding requirements contained in the Code or other applicable Tax Laws; and (v) provide certificates or forms, and timely execute any Tax Return that are necessary or appropriate to establish an exemption for (or reduction in) any Transfer Tax. Without limiting the foregoing, on or prior to the Closing, HOC shall provide to the Partnership a schedule that sets forth the estimated adjusted tax basis in each Contributed Asset (as determined immediately prior to Closing) (the “ Tax Basis Schedule “), which HOC and the Partnership shall work in good faith to finalize as soon as reasonably practicable following the Closing. HOC shall control and bear the cost of any audit or contest relating to any of the Acquired Entities or the Properties with respect to a Tax period (or portion thereof) ending on or before the Reference Date, and the Partnership shall control and bear the cost of any other Tax audit or contest. The party in control of an audit or controversy shall keep the other party informed of the status of the audit or controversy (including providing copies of correspondence and pleadings). Neither the Partnership nor HOC shall settle any audit or contest in a way that would in such party’s reasonable judgment adversely affect the other party without the other party’s written consent, which the other party shall not reasonably withhold. The Partnership and HOC shall each provide the other with all information reasonably necessary to conduct an audit or contest with respect to Taxes.

 

(g)  Allocation for Tax Purposes . The parties shall agree to the value of the Subject Common Units and agree to an allocation of such agreed value among the Properties prior to the Closing Date (the “ Allocation ”). HOC, the Contributors and the Partnership shall report the transactions contemplated hereby on all Tax Returns, including, but not limited to, for purposes of future allocations under Section 704(c) of the Code, in a manner consistent with the Allocation. If, contrary to the intent of the parties hereto as expressed in this Section 8.3(g) , any Taxing authority makes or proposes an allocation different from the Allocation, HOC, the Contributors and the Partnership shall cooperate with each other in good faith to contest such Taxing authority’s allocation (or proposed allocation); provided, however, that, after consultation with the party (or parties) adversely affected by such allocation (or proposed allocation), the other party (or parties) hereto may file such protective claims or Tax Returns as may be reasonably required to protect its (or their) interests.

 

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(h)  Section 754 Election . HOC shall cause the Acquired Entities to make an election under Section 754 of the Code for the taxable year of the Acquired Entities ending on the Closing Date.

 

ARTICLE 9

TERMINATION, AMENDMENT AND WAIVER

 

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

 

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

 

(b) By the Contributors (as elected by the Contributors’ Representative) or the Partnership, if:

 

(i) The Closing shall not have occurred on or before March 29, 2019, unless such failure to close shall be due to a material breach of this Agreement by the party seeking to terminate this Agreement pursuant to this Section 9.1(b) (i) ;

 

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

 

(iii) On or before March 22, 2019, the Contributors’ Representative pays, in readily available funds, a Five Hundred Thousand Dollars ($500,000) termination fee to the Partnership.

 

(c) By the Contributors (as elected by the Contributors’ Representative), if (i) any of the representations and warranties of the Partnership contained in this Agreement shall not be true and correct such that the condition set forth in Section 7.2(a) would not be satisfied, or (ii) the Partnership shall have failed to fulfill in any material respect any of its material obligations under this Agreement, which failure is material to the obligations of such party under this Agreement, and, in the case of each of clauses (i) and (ii) of this Section 9.1(c) , such misrepresentation, breach of warranty or failure (provided it can be cured) has not been cured within thirty (30) days of notice thereof by the Contributors.

 

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(d) By the Partnership, if

 

(i) any of the representations and warranties of the Contributors contained in this Agreement shall not be true and correct such that the condition set forth in Section 7.3(a) would not be satisfied;

 

(ii) the Contributors shall have failed to fulfill in any material respect any of their material obligations under this Agreement, which failure is material to the obligations of such party under this Agreement, and, in the case of each of clauses (i) and (ii) of this Section 9.1(d) , such misrepresentation, breach of warranty or failure (provided it can be cured) has not been cured within thirty (30) days of notice thereof by the Partnership; or

 

(iii) On or before March 22, 2019, the Partnership pays to the Contributors’ Representative in readily available funds, a Five Hundred Thousand Dollars ($500,000) termination fee.

 

9.2  Effect of Termination . In the event of the termination of this Agreement pursuant to Section 9.1 by the Partnership or the Contributors (as elected by the Contributors’ Representative), (a) written notice thereof shall forthwith be given to the Partnership or the Contributors, as applicable, specifying the provision hereof pursuant to which such termination is made, and this Agreement shall become void and have no effect, (b) in the case the Agreement is terminated pursuant to either Section 9.1(b)(iii) or 9.1( d )(iii) , such terminating party’s delivery to the non-terminating party of Five Hundred Thousand Dollars ($500,000) in readily available funds shall be deemed liquidated damages hereunder; provided that the parties hereto agree that (i) a non-terminating party’s actual damages upon the event of any termination are difficult to ascertain with any certainty, (ii) the foregoing amount of damages is fair and reasonable estimate by the parties hereto of such aggregate damages of a non-terminating party and (iii) such liquidated damages do not constitute a penalty and (c) there shall be no liability hereunder on the part of any party hereto or the general partner of the Partnership, or any of their respective directors, managers, officers, employees, shareholders, unitholders, partners or representatives, except that the agreements contained in this ARTICLE 9 and ARTICLE 11 shall survive the termination hereof. Nothing contained in this Section 9.2 shall otherwise relieve any party from liability for damages actually incurred as a result of any breach of this Agreement.

 

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

 

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

 

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ARTICLE 10

INDEMNIFICATION

 

10.1  Survival of Representations, Warranties, Covenants and Agreements . All of the representations and warranties of the Partnership in ARTICLE 2 and the Contributors in ARTICLE 3 and ARTICLE 4 shall survive the Closing and continue in full force and effect through and including the date that is eighteen (18) months immediately following the Closing Date; provided, that the representations and warranties in (a) Section 2.1 (Organization and Existence), Section 2.4 (Authority), Section 2.5 (Noncontravention) and Section 2.11 (Brokerage Fees) (collectively, the “ Partnership Fundamental Reps ”), Section 3.1 (Organization and Existence), Section 3.2 (Authority Relative to this Agreement; Ownership of the Subject Interests), Section 3.3 (Noncontravention), Section 3.4 (Governmental Approvals), and Section   3.6 (Brokerage Fees), Section 4.1 (Organization and Existence), Section 4.2 (Authority Relative to this Agreement), Section 4.3 (Noncontravention), Section 4.5(b) (Capitalization), Section 4 .6 (Absence of Undisclosed Liabilities) and Section 4.30 (Brokerage Fees) (collectively, the “ Contributors’ Fundamental Reps ”) shall survive until the twentieth anniversary of the Closing Date, and (ii) Section  4.15 (Tax Matters) and Section 4.12 (Environmental Matters), Section 4.13 (Employment Matters) and Section 4.14 (Employee Benefit Matters) shall survive for the full period of all applicable statutes of limitations (giving effect to any waiver, mitigation or extension thereof) plus sixty (60) days. All covenants and agreements contained in this Agreement shall survive the Closing until the twentieth anniversary of the Closing Date. Notwithstanding the foregoing, any claims asserted in good faith with reasonable specificity (to the extent known at such time) and in writing by notice from the non-breaching party to the breaching party prior to the expiration date of the applicable survival period shall not thereafter be barred by the expiration of the relevant representation or warranty and such claims shall survive until finally resolved.

 

10.2  Indemnification .

 

(a) Subject to Section 10.1 and Section 10.2(e) , each Contributor hereby agrees to severally and not jointly indemnify, defend and hold the Partnership and its Affiliates and their respective directors, managers, officers, employees, stockholders, unitholders, members, partners, agents, attorneys, representatives, successors and assigns (collectively, the “ Partnership Indemnified Parties ”) harmless from and against, and pay to the applicable Partnership Indemnified Parties the amount of, any and all losses, liabilities, claims, obligations, deficiencies, demands, judgments, damages, interest, fines, penalties, claims, suits, actions, causes of action, assessments, awards, costs and expenses (including costs of investigation and defense and attorneys’ and other professionals’ fees and the cost of enforcing any right to indemnification hereunder), or any diminution in value, whether or not involving a third party claim (individually, a “ Loss ” and, collectively, “ Losses ”):

 

(i) based upon, attributable to or resulting from the failure of any of the representations or warranties made by such Contributor in ARTICLE 3 of this Agreement to be true and correct in all respects at and as of the date hereof and at and as of the Closing Date; and

 

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

 

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(b) Subject to Section 10.1 and Section 10.2(e) , HOC hereby agrees to indemnify, defend and hold the Partnership Indemnified Parties harmless from and against, and pay to the applicable Partnership Indemnified Parties the amount of, any and all Losses:

 

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

 

(ii) based upon, attributable to or resulting from the breach of any covenant or other agreement on the part of HOC under this Agreement or any Transaction Document; and

 

(iii) based upon, attributable to or resulting from the Retained Liabilities.

 

(c) Subject to Section 10.1 and Section 10.2(f) , the Partnership hereby agrees to indemnify, defend and hold the Contributors and their Affiliates and their respective stockholders, members, partners, directors, managers, employees, agents, attorneys, representatives, successors and permitted assigns (collectively, the “ Contributor s Indemnified Parties “) harmless from and against, and pay to the applicable Contributors’ Indemnified Parties the amount of, any and all Losses:

 

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

 

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

 

(d) The right to indemnification or any other remedy based on representations, warranties, covenants and agreements in the Agreement or the Transaction Documents shall not be affected by any investigation conducted at any time, or any Knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement or the Closing Date, with respect to the accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant or agreement. The waiver of any condition based on the accuracy of any representation or warranty, or on the performance of or compliance with any such covenant or agreements, will not affect the right to indemnification or any other remedy based on such representations, warranties, covenants and agreements. The remedy of indemnification set forth in this ARTICLE 10 shall be in addition to any other remedies that any indemnified party may have under Applicable Laws (whether asserted in a proceeding at law or in equity).

 

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(e) Notwithstanding anything to the contrary contained elsewhere in this Agreement, except for (i) claims for breaches of any of Contributor’s covenants contained in this Agreement, (ii) claims based on a breach of any Contributor Fundamental Reps, (iii) claims for indemnification for Excluded Taxes pursuant to Section 8.3(a) or claims for indemnification pursuant to Section 10.2(b)( iii ) , and (iv) claims for Fraud, it being acknowledged and agreed by the parties that the foregoing are not subject to the limitations contained in this Section 10.2(e) :

 

(i) No Contributor (including HOC) shall be required to indemnify any Person under Section 10.2 for any individual Loss that does not exceed Twenty Thousand Dollars ($20,000), and such individual Loss may not be applied towards the Indemnity Deductible;

 

(ii) No Contributor (including HOC) shall have any liability for indemnification under Section 10.2 until and unless the aggregate amount of the liability for all Losses that are timely asserted by the Partnership exceeds a deductible amount equal to Two Hundred and Fifty Thousand Dollars ($250,000.00) (the “ Indemnity Deductible ”), after which point the Partnership (or the Partnership Indemnified Parties) shall be entitled to claim Losses in excess of the Indemnity Deductible; and

 

(iii) No Contributor (including HOC) shall be required to indemnify the Partnership (or the Partnership Indemnified Parties) for aggregate Losses in excess of Four Million Dollars ($4,000,000.00) (collectively, the “ Cap ”).

 

(f) Notwithstanding anything to the contrary contained elsewhere in this Agreement, except for (i) claims for breaches of any of the Partnership’s covenants contained in this Agreement, (ii) claims based on a breach of any Partnership Fundamental Reps and (iii) claims for Fraud, it being acknowledged and agreed by the parties that the foregoing are not subject to the limitations contained in this Section 10.2(f) :

 

(i) The Partnership shall not be required to indemnify any Person under Section 10.2 for any individual Loss that does not exceed Twenty Thousand Dollars ($20,000), and such individual Loss may not be applied towards the Indemnity Deductible;

 

(ii) The Partnership shall not have any liability for indemnification under Section 10.2 until and unless the aggregate amount of the liability for all Losses that are timely asserted by the Contributors exceeds a deductible amount equal to the Indemnity Deductible, after which point the Contributors (or the Contributors’ Indemnified Parties) shall be entitled to claim Losses in excess of the Indemnity Deductible; and

 

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(iii) The Partnership shall not be required to indemnify the Contributors (or the Contributors’ Indemnified Parties) for aggregate Losses in excess of the Cap.

 

10.3  Indemnification Procedures .

 

(a) 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; provided that failure to so notify the indemnifying party shall not preclude the indemnified party from any indemnification which it may claim in accordance with this ARTICLE 10 .

 

(b) In the event that any Proceedings shall be instituted or that any claim or demand shall be asserted by any third party in respect of which indemnification may be sought under Section 10.2 (“ Third Party Claim ”), the indemnified party shall promptly cause written notice of the assertion of any Third Party Claim of which it has knowledge which is covered by this indemnity to be forwarded to the indemnifying party. The failure of the indemnified party to give reasonably prompt notice of any Third Party Claim shall not release, waive or otherwise affect the indemnifying party’s obligations with respect thereto unless the indemnifying party can demonstrate actual loss and prejudice as a result of such failure. Subject to the provisions of this Section 10.3 , the indemnifying party shall have the right, at its sole expense, to be represented by counsel of its choice and to defend against, negotiate, settle or otherwise deal with any Third Party Claim which relates to any Losses indemnified against by it hereunder; provided that the indemnifying party shall have acknowledged in writing to the indemnified party its unqualified obligation to indemnify the indemnified party as provided hereunder. If the indemnifying party elects to defend against, negotiate, settle or otherwise deal with any Third Party Claim which relates to any Losses indemnified against by it hereunder, it shall within ten (10) days of the indemnified party’s written notice of the assertion of such Third Party Claim (or sooner, if the nature of the Third Party Claim so requires) notify the indemnified party of its intent to do so; provided that the indemnifying party must conduct its defense of the Third Party Claim actively and diligently thereafter in order to preserve its rights in this regard. If the indemnifying party elects not to defend against, negotiate, settle or otherwise deal with any Third Party Claim which relates to any Losses indemnified against by it hereunder, fails to notify the indemnified party of its election as herein provided or contests its obligation to indemnify the indemnified party for such Losses under this Agreement, the indemnified party may defend against, negotiate, settle or otherwise deal with such Third Party Claim. If the indemnified party defends any Third Party Claim, then the indemnifying party shall reimburse the indemnified party for the expenses of defending such Third Party Claim upon submission of periodic bills. If the indemnifying party shall assume the defense of any Third Party Claim, the indemnified party may participate, at his or its own expense, in the defense of such Third Party Claim; provided that such indemnified party shall be entitled to participate in any such defense with separate counsel at the expense of the indemnifying party if (i) so requested by the indemnifying party to participate or (ii) in the reasonable opinion of counsel to the indemnified party a conflict or potential conflict exists between the indemnified party and the indemnifying party that would make such separate representation advisable; and provided, further, that the indemnifying party shall not be required to pay for more than one such counsel (plus any appropriate local counsel) for all indemnified parties in connection with any Third Party Claim. Each party hereto agrees to provide each other party with reasonable access to such documents and information as may reasonably be requested in connection with the defense, negotiation or settlement of any such Third Party Claim. Notwithstanding anything in this Section 10.3 to the contrary, neither the indemnifying party nor the indemnified party shall, without the written consent of the other party, which shall not be unreasonably withheld, settle or compromise any Third Party Claim or permit a default or consent to entry of any judgment unless the claimant (or claimants) and such party provide to such other party an unqualified release from all liability in respect of the Third Party Claim. If the indemnifying party makes any payment on any Third Party Claim, the indemnifying party shall be subrogated, to the extent of such payment, to all rights and remedies of the indemnified party to any insurance benefits or other claims of the indemnified party with respect to such Third Party Claim.

 

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

 

10.4  Other I ndemnification M atters .

 

(a)  Mitigation . In all situations arising out of this Agreement, the indemnified party shall use commercially reasonable efforts to avoid and minimize the Losses, and the indemnifying party shall not be required to indemnify, defend or hold harmless any indemnified party for any Losses that would reasonably be expected to have been avoided if such required efforts had been made. The indemnifying party shall reimburse the indemnified party for any costs and expenses incurred by the indemnified party in connection with avoiding or minimizing such Losses.

 

(b)  Subrogation . To the extent any Contributor (including HOC) fully discharges any claim for indemnification by any Partnership Indemnified Parties for any matter for which an Acquired Entity would have a right to indemnification from a third party, such Contributor shall be subrogated to all rights of such Acquired Entity with respect to such matter.

 

(c)  Insurance . Notwithstanding anything to the contrary contained herein, the amount of any Losses for which indemnification is provided under this ARTICLE 10 shall be reduced by any amounts actually recovered by the indemnified party seeking indemnification under this ARTICLE 10 under insurance policies (other than self-insurance arrangements) with respect to such Losses, net of the costs of collection of such insurance proceeds, any deductibles, retrospective premium adjustments and similar charges. Subject to the indemnified party’s commercially reasonable judgment, the indemnified party shall use its commercially reasonable efforts to recover under insurance policies or indemnity, contribution or other similar agreements for any Losses prior to seeking indemnification under this Agreement; provided that the indemnified party shall have no obligation to initiate any Proceeding against a third party in connection therewith.

 

(d)  Exclusive Remedy . From and after the Closing, and without limiting the liability or obligation of any party rights or remedies in the event of Fraud, the remedies of the parties specifically provided for by this Agreement shall be the sole and exclusive remedies of the parties for any breach of the terms and provisions of this Agreement (including any representations and warranties set forth herein).

 

(e)  Special Damages . NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, NO PARTY SHALL, UNDER ANY CIRCUMSTANCE, HAVE ANY LIABILITY TO ANY OTHER PARTY FOR ANY CONSEQUENTIAL (EXCEPT IN CONNECTION WITH A BREACH OF SECTION 6.4 ), EXEMPLARY OR PUNITIVE DAMAGES CLAIMED BY SUCH OTHER PARTY UNDER THE TERMS OF OR DUE TO ANY BREACH OR NON PERFORMANCE OF THIS AGREEMENT BY SUCH PARTY UNLESS (I) SUCH DAMAGES ARE INCLUDED IN A THIRD PARTY CLAIM OR (II) SUCH DAMAGES ARE INCURRED BY AN INDEMNIFIED PARTY AS A RESULT OF OR IN CONNECTION WITH THE FRAUD OF THE INDEMNIFYING PARTY.

 

ARTICLE 11

MISCELLANEOUS

 

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

 

(i) If to the Contributors, to the Contributors’ Representative:

 

Huffman Oil Company, L.L.C.

Attn: Huston Huffman, Jr.

6619 Hillcrest

Nichols Hills, Oklahoma 73116

 

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with a copy to (which shall not constitute notice):

 

McAfee & Taft A Professional Corporation

10 th Floor, Two Leadership Square

211 North Robinson

Oklahoma City, Oklahoma 73102-7103

Attention: Jeremy M. Black

Fax:      405.228.7489

 

(ii) If to the Partnership:

 

Dorchester Minerals, L.P.

3838 Oak Lawn Avenue, Suite 300

Dallas, Texas 75219

Attention: William Casey McManemin

Fax: 214.559.0933

 

with a copy to (which shall not constitute notice):

 

Thompson & Knight LLP

One Arts Plaza

1722 Routh Street, Suite 1500

Dallas, Texas 75201

Attention: Jesse E. Betts

Fax: 214.999.9240

 

Such notices, requests, demands and other communications shall be effective (x) if delivered personally or sent by courier service, upon actual receipt by the intended recipient, (y) if mailed, the date of delivery as shown by the return receipt therefor or (z) if sent by telecopy or facsimile transmission, when the answer back is received.

 

11.2  Contributors’ Representative .

 

(a) HOC is hereby appointed, authorized and empowered to act as the Contributors’ Representative for the benefit of the Contributors and the Acquired Entities, as the exclusive agent and attorney-in-fact, with power of substitution, to act on behalf of each of the Contributors, in connection with and to facilitate the consummation of the transactions by this Agreement and the other Transaction Documents, which shall include the power, authority and discretion:

 

(i) on behalf of such Contributor, to enter into amendments to this Agreement and to execute and deliver any other Transaction Documents (with such modifications or changes therein as to which the Contributors’ Representative, in his sole discretion, shall have consented), and to agree to such amendments or modifications thereto as the Contributors’ Representative, in its sole discretion, determines to be desirable, in each case, whether before or after the Closing;

 

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(ii) on behalf of such Contributor, to execute and deliver such waivers and consents in connection with this Agreement and any Transaction Documents and to perform the consummation of the transactions contemplated hereby and thereby as the Contributors’ Representative, on behalf of the Contributors, in his sole discretion, as he may deem necessary or desirable; and

 

(iii) on behalf of such Contributor, to make, execute, acknowledge and deliver all such other agreements, guarantees, orders, receipts, endorsements, notices, requests, instructions, certificates, stock powers, letters and other writings, and, in general, to do any and all things and to take any and all action that the Contributors’ Representative, in his sole and absolute discretion, may consider necessary or proper or convenient in connection with or to carry out the transactions contemplated by this Agreement and the other Transaction Documents, and all other agreements, documents or instruments referred to herein or therein or executed in connection herewith and therewith.

 

(b) All of the powers granted to the Contributors’ Representative under this Agreement shall survive the Closing Date and/or any termination of this Agreement.

 

(c) The Partnership, the Acquired Entities and the Partnership Indemnified Parties shall have the right to rely upon all actions taken or omitted to be taken by the Contributors’ Representative pursuant to this Agreement, all of which actions or omissions shall be legally binding upon the Contributors. The Partnership, the Acquired Entities and the Partnership Indemnified Parties are entitled to deal exclusively with the Contributors’ Representative on all matters relating to this Agreement and the other Transaction Documents. Any action taken or not taken or decisions, communications or writings made, given or executed by the Contributors’ Representative, for or on behalf of any Contributor, shall be deemed an action taken or not taken or decisions, communications or writings made, given or executed by such Contributor. Any notice or communication delivered by the Partnership to the Contributors’ Representative shall be deemed to have been delivered to all Contributors.

 

(d) Notwithstanding anything to the contrary set forth herein, no Partnership Indemnified Party shall be liable for any Loss to any Contributor, for any action taken or not taken by the Contributors’ Representative or for any act or omission taken or not taken in reliance upon the actions taken or not taken or decisions, communications or writings made, given or executed by the Contributors’ Representative, including any failure of the Contributors’ Representative to distribute, or to distribute or subdivide in the correct amounts, any payments made to the Contributors’ Representative by the Partnership for distribution to any Contributor, among the Contributors or any other Person; it being understood that once the Partnership has made such a payment to the Contributors’ Representative for distribution to any Contributor, among the Contributors or to such other Person, such payment shall constitute a complete discharge of the relevant payment obligation of the Partnership.

 

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(e) The grant of authority provided for herein (i) is coupled with an interest and shall be irrevocable and survive the death, incompetency, bankruptcy or liquidation of any Contributor, and (ii) shall survive the consummation of the transactions contemplated by this Agreement and the other Transaction Documents.

 

11.3  Entire Agreement . This Agreement, together with the schedules, exhibits, the other Transaction Documents and other writings referred to herein or delivered pursuant hereto, constitute the entire agreement between the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof.

 

11.4  Binding Effect; Assignment; Third Party Benefit . This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns; provided that neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (by operation of law or otherwise) without the prior written consent of the other parties. Nothing in this Agreement, express or implied, is intended to or shall confer upon any person other than the parties hereto and their respective successors and permitted assigns any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement.

 

11.5  Severability . If any provision of this Agreement is held to be unenforceable, this Agreement shall be considered divisible and such provision shall be deemed inoperative to the extent it is deemed unenforceable, and in all other respects this Agreement shall remain in full force and effect; provided that if any such provision may be made enforceable by limitation thereof, then such provision shall be deemed to be so limited and shall be enforceable to the maximum extent permitted by Applicable Law.

 

11.6  Governing Law; Consent to Jurisdiction .

 

(a) This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Texas, without regard to principles of conflicts of laws that would direct the application of the laws of another jurisdiction.

 

(b) ANY LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY MAY BE INSTITUTED IN THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA OR THE COURTS OF THE STATE OF TEXAS IN EACH CASE LOCATED IN THE CITY OF DALLAS, TEXAS AND COUNTY OF DALLAS, AND EACH PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING. SERVICE OF PROCESS, SUMMONS, NOTICE OR OTHER DOCUMENT BY MAIL TO SUCH PARTY'S ADDRESS SET FORTH HEREIN SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT IN ANY SUCH COURT. THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR ANY PROCEEDING IN SUCH COURTS AND IRREVOCABLY WAIVE AND AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

 

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(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.6(c) .

 

11.7  Descriptive Headings . The descriptive headings herein are inserted for convenience of reference only, do not constitute a part of this Agreement and shall not affect in any manner the meaning or interpretation of this Agreement.

 

11.8  Gender . Pronouns in 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, unless the context otherwise requires.

 

11.9  References . All references in this Agreement to Articles, Sections and other subdivisions refer to the Articles, Sections and other subdivisions of this Agreement unless expressly provided otherwise. The words “this Agreement,” “herein,” “hereof,” “hereby,” “hereunder” and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. Whenever the words “include,” “includes” and “including” are used in this Agreement, such words shall be deemed to be followed by the words “without limitation.” Each reference herein to a schedule or exhibit refers to the item identified separately in writing by the parties hereto as the described schedule or exhibit to this Agreement. All schedules and exhibits are hereby incorporated in and made a part of this Agreement as if set forth in full herein.

 

11.10  Counterparts . This Agreement may be executed by the parties hereto in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same agreement. Each counterpart may consist of a number of copies hereof each signed by less than all, but together signed by all, the parties hereto. Facsimile, .pdf or other electronic transmission of copies of signatures shall constitute original signatures for all purposes of this Agreement and any enforcement hereof. Notwithstanding anything to the contrary, this Agreement shall not be deemed executed by, or enforceable against, any Person executing this Agreement until all Persons set forth on the signature pages hereto have executed this Agreement.

 

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11.11  Injunctive Relief . The parties hereto acknowledge and agree that irreparable damage would occur in the event any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to seek an injunction or injunctions to prevent breaches of the provisions of this Agreement, and shall be entitled to seek specific performance of the provisions of this Agreement.

 

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

 

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

 

ARTICLE 12

DEFINITIONS

 

12.1  Certain Defined Terms . As used in this Agreement, each of the following terms has the meaning given it below:

 

Active Prospects ” shall mean those oil and gas prospects of the Acquired Entities described on Schedule 12.1 .

 

Affiliate ” shall mean, 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.

 

Applicable Environmental Law “ shall mean all Applicable Laws pertaining to the protection of the environment (e.g., prevention of pollution and remediation of contamination) and human health and safety, including, without limitation, the Clean Air Act, 42 U.S.C. § 7401 et seq.; the Clean Water Act, 33 U.S.C. § 1251 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. § 2702 et seq.; the Marine Protection, Research, and Sanctuaries Act, 33 U.S.C. § 1401 et seq.; the National Environmental Policy Act, 42 U.S.C. § 4321 et seq.; the Noise Control Act, 42. U.S.C. § 4901 et seq.; the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq.; the Resource Conservation and Recovery Act (“ RCRA ”), 42 U.S.C. § 6901 et seq., as amended by the Hazardous and Solid Waste Amendments of 1984; the Safe Drinking Water Act, 42 U.S.C. § 300f et seq.; the Comprehensive Environmental Response, Compensation and Liability Act (“ CERCLA ”), 42 U.S.C. § 9601 et seq., as amended by the Superfund Amendments and Reauthorization Act; the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. § 11001 et seq.; the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. § 1801 et seq.; the Atomic Energy Act, 42 U.S.C. § 2011 et seq.; and the Nuclear Waste Policy Act of 1982, 42 U.S.C. § 10101 et seq.; and all analogous applicable state and local Applicable Laws, including, without limitation, Tex. Nat. Res. Code, Title 3 (Oil and Gas) and 16 Tex. Admin. Code. pt. 1 (Railroad Commission of Texas).

 

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Applicable Law ” shall mean any federal, state, local, or municipal statute, law, common law, constitution, ordinance, rule or regulation or any judgment, order, writ, injunction or decree of any Governmental Entity, or any treaty or other legally enforceable directive or requirement, to which a specified person or property is subject.

 

Basic Documents ” shall mean (a) all Oil and Gas Leases, and (b) all contracts and agreements that are reasonably necessary to own, explore, develop, operate, maintain or use the Properties in the manner in which they are currently being owned, explored, developed, operated, maintained or used and in accordance with the prudent practices of the oil and gas industry; provided however that “Basic Documents” shall not include that portion of contracts or agreements which relate to the ownership and operation of the surface of the Properties.

 

Benefit Plan ” means each (i) “employee benefit plan,” as defined in Section 3(3) of ERISA, and (ii) other pension, retirement, deferred compensation, excess benefit, profit sharing, bonus, incentive, equity or equity-based, phantom equity, employment, consulting, severance, change-of-control, retention, health, life, disability, group insurance, paid-time off, holiday, welfare and fringe benefit plan, program, contract, or arrangement (whether written or unwritten, qualified or nonqualified, funded or unfunded and including any that have been frozen or terminated), in any case, sponsored, maintained, contributed to, or required to be contributed to, by the Acquired Entities or any ERISA Affiliate or under which the Acquired Entities or any ERISA Affiliate has any actual or contingent liability.

 

Business ” shall mean the businesses conducted by HHC and TBC.

 

Business Day ” shall mean a day on which banks are open for the transaction of business in Dallas, Texas.

 

Code ” shall mean the Internal Revenue Code of 1986, as amended.

 

Common Unit ” shall mean a Common Unit, as defined in the Partnership Agreement.

 

Confidentiality Agreement ” shall mean that certain Mutual Nondisclosure Agreement dated November 5, 2018 between the Partnership and HHC.

 

Contract ” shall mean any legally binding oral or written agreement, commitment, lease guaranty, license or contract.

 

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Contributors’ Fundamental Reps ” shall have the meaning set forth in Section 10.1 .

 

Contributed Cash ” shall mean the aggregate amount of net cash receipts (i) received by the Acquired Entities, (ii) attributable to the Properties (and not the Excluded Assets), and (iii) received as proceeds of any asset sales (other than the Excluded Assets) of the Acquired Entities (less reasonable and customary expenses related to selling such assets), in each case during the period beginning on the Reference Date and ending on the Closing Date.

 

Defensible Title ” shall mean title of an Acquired Entity to a Property that is deducible of record either from the records of the applicable county clerk and recorder or, the applicable office of Bureau of Land Management, or from the records of the applicable state land office, or from some combination of the foregoing official records, subject to and except for Permitted Encumbrances.

 

Disclosure Schedules ” shall mean the schedules attached hereto.

 

Disposal ” shall mean disposal as defined under RCRA § 103(3), 42 U.S.C. § 6903(3).

 

Encumbrances ” shall mean liens, charges, pledges, options, mortgages, deeds of trust, security interests, claims, restrictions (whether on voting, sale, transfer, disposition or otherwise), easements and other encumbrances of every type and description, whether imposed by law, agreement, understanding or otherwise, but specifically excluding the Permitted Encumbrances.

 

Environmental Condition ” shall mean any event occurring or condition existing prior to the Closing Date with respect to the Real Properties or the Properties, or a Hazardous Materials Release or Disposal on or to the environment at or from any Real Properties or the Properties, any of which has caused or may later cause any Property to be subject to Remediation under, or not to be in compliance with, any Applicable Environmental Law.

 

Environmental Liability ” shall mean any cost, damage, expense, liability, obligation, or other responsibility arising from or under either an Applicable Environmental Law or relating to an Environmental Condition or Remediation of an Environmental Condition.

 

ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time.

 

ERISA Affiliate ” shall mean any corporation, trade, business or entity under common control with either HHC or TBC, within the meaning of Section 414(b), (c) or (m) of the Code or Section 4001 of ERISA.

 

Excluded Taxes ” shall mean (a) the following Taxes: (i) all income Taxes that relate to the Properties, the Acquired Entities or any employee of the Contributors or the Acquired Entities for any Pre-Effective Tax Period; (ii) all Taxes of, or imposed on, the Contributors that are unrelated to the Acquired Entities or the Properties; (iii) all income, franchise, net worth or similar Taxes of, allocable to, or imposed on, the Contributors (including to the extent related to the Properties, the Acquired Entities, the General Partner, the Business or any employees or independent contractors of the Acquired Entities, the General Partner, or the Contributors); and (iv) any “imputed underpayment” within the meaning of Section 6225 of the Code imposed on the Acquired Entities or the General Partner for any taxable year (or portion thereof) ending on or prior to the Closing Date; and (b) any Liability of the Partnership for any Taxes referred to in clause (a) whether imposed directly, as a transferee or successor, pursuant to joint and/or several liability, pursuant to a Contract, by an obligation to withhold or otherwise.

 

49

 

 

Fraud ” shall mean a misrepresentation made with knowledge that such misrepresentation was false when made or shall mean a failure to state a material fact to make statements made not misleading. Fraud does not include a negligent misrepresentation or omission, or knowledge of the fact that the Person making such misrepresentation does not have sufficient information to make the statement contained in the misrepresentation, but which is nevertheless made as a matter of contractual risk allocation between the Parties.

 

General Partner ” shall mean, as to HHC, HOC, and as to TBC, the TBC GPs.

 

Governmental Entity ” shall mean any court or tribunal in any jurisdiction (domestic or foreign) or any public, governmental, or regulatory body, agency, department, commission, board, bureau or other authority or instrumentality (domestic or foreign).

 

Hazardous Materials ” shall mean any (i) chemical, constituents, material, pollutant, contaminant, substance or waste that is regulated by any Governmental Entity or may form the basis of liability under any Applicable Environmental Law; (ii) asbestos containing material, lead-based paint, polychlorinated biphenyls, or radon; and (iii) petroleum, Oil and Gas, or petroleum products.

 

HHC Partnership Agreement ” shall mean that certain Amended and Restated Limited Partnership Agreement of HHC dated January 1, 2002, by and among the persons on the signature pages thereto.

 

Indebtedness ” means all (a) indebtedness for money borrowed, (b) indebtedness that is guaranteed, directly or indirectly, in any manner by such Person or for which such Person may be liable, (c) interest expense accrued but unpaid on or relating to any indebtedness, (d) indebtedness evidenced by any note, bond, debenture or other debt security, (e) liabilities or obligations payable to a third party for the property or services provided by or performed by such third party, in each such case and with respect to which such Person is liable, as obligor or otherwise, including any earnout or other deferred purchase price liabilities, other than liabilities set forth on an oil and gas joint interest billing invoice received by the Acquired Entities after the Closing Date, (f) capital leases as determined under GAAP, and any accrued interest, prepayment premiums or penalties related thereto, (g) unfunded obligations for deferred compensation (including arising from a Benefit Plan) for any officer, director or employee of such Person that are required to be accrued for as a pension liability in accordance with GAAP, and (h) arranging fees, administrative fees, interest payments, repayment premiums or penalties, late fees, default fees, related expenses, commitment and other fees, sale or liquidity participation amounts, reimbursements, costs of collection, indemnities and other amounts which would be payable in connection with or relating to any other indebtedness described in this definition.

 

IRS ” shall mean the Internal Revenue Service of the United States.

 

50

 

 

Knowledge of such Contributor ” shall be, as to such Contributor, the knowledge, upon reasonable due inquiry, of (i) if such Contributor is an individual, such individual, and (ii) if such Contributor is a trust, such Contributor’s trustee(s), and (iii) if such Contributor is an entity, such Contributor’s governing body.

 

Knowledge of HOC ” or similar language referencing the “Knowledge” of HOC, shall be the knowledge, upon reasonable due inquiry, of Huston Huffman, Jr., David Eckart and Rick Clark.

 

Knowledge of the Partnership ” shall be the knowledge, upon reasonable due inquiry, of William Casey McManemin, Bradley J. Ehrman and Leslie A. Moriyama.

 

Lessee ” shall mean any lessee under any Oil and Gas Lease.

 

Material Adverse Effect “ shall mean with respect to any person, property or asset any adverse change or adverse condition in or relating to the financial condition of such person, including its subsidiaries, property, business or assets that is material to such person, its subsidiaries, property or asset; provided that any prospective change or changes in the conditions listed above or relating to or resulting from (i) the transactions contemplated by this Agreement (or the announcement of such transactions), (ii) any change or changes in the prices of oil, gas, natural gas liquids or other hydrocarbon products or (iii) general economic conditions or local, regional, national or international oil and gas industry conditions, shall not be deemed to constitute a Material Adverse Effect.

 

Material Contract ” means any Contract which is one or more of the following types:

 

(a) Contracts that can reasonably be expected to result in gross revenue to either Acquired Entity per fiscal year in excess of One Hundred Thousand Dollars ($100,000.00);

 

(b) Contracts that can reasonably be expected to result in expenditures from Company per fiscal year in excess of Fifty Thousand Dollars ($50,000.00);

 

(c) Contracts with any Affiliate of any of Contributor or Acquired Entity that will not be terminated at or prior to Closing;

 

(d) Contracts that are participation agreements, exploration agreements, development agreements, joint operating agreements, unitization agreements, pooling agreements, communitization agreements or similar agreements;

 

(e) To the extent any obligations are currently pending, Contracts of either Acquired Entity to sell, lease, farmout, exchange or otherwise dispose of all or any part of the Properties;

 

(f) Contracts with any remaining drilling or development obligations on the part of either Acquired Entity;

 

(g) Contracts containing any area of mutual interest agreements or similar provisions;

 

51

 

 

(h) Contracts for the gathering, treatment, processing, storage or transportation of Hydrocarbons;

 

(i) Contracts that are seismic agreements or commitments to acquire, generate or develop seismic, or similar agreements;

 

(j) Contracts for the lease or rental to either Acquired Entity of personal property that are not cancellable without penalty on ninety (90) days or less prior written notice;

 

(k) Contracts that contain a non-compete agreement or otherwise purport to limit or prohibit the manner in which, or the locations in which, either Acquired Entity may conduct the Business or any activities;

 

(l) Contracts providing for any call upon, option to purchase or similar rights with respect to the Properties or to the production therefrom or the processing thereof;

 

(m) Contracts under which any Indebtedness has been directly or indirectly created, incurred, assumed or guaranteed, guarantees, loan or credit agreements, sale and leaseback agreements, purchase money obligations incurred in connection with the acquisition of property, mortgages, pledge agreements or security agreements;

 

(n) Contracts requiring or accelerating a payment thereunder upon the consummation of the transactions evidenced by this Agreement for which either Acquired Entity will have any liability, obligation or responsibility;

 

(o) To the extent any obligations are currently pending, Contracts with any current or former officer, director, stockholder, employee or contractor of either Acquired Entity;

 

(p) Contracts with a Governmental Entity;

 

(q) Contracts in which the primary purpose relates to indemnity obligations (including material environmental indemnity obligations) in favor of a third party;

 

(r) Employment agreements, offer letters or similar Contracts that provide for annual payments or annualized base compensation in excess of Fifty Thousand Dollars ($50,000), any collective bargaining agreement or Contracts with any labor union, association or other employee representative organization relating to any employee of either Acquired Entity;

 

(s) any partnership, joint venture, limited liability company agreement or substantially similar Contract to which either Acquired Entity is a party; and

 

(t) Contracts that are an operations and management agreement or similar Contracts related to the Assets.

 

Office Lease ” shall mean that certain Commercial Lease dated January 5, 1993, by and between North Robinson Investments, LLC, as landlord, and HHC, as tenant, as amended by that certain First Amendment to Lease dated April 13, 1998, as further amended by that certain Second Amendment to Lease dated July 9, 2003, as further amended by that certain Third Amendment to Lease dated December 23, 2005, as further amended by that certain Fourth Amendment to Lease dated May 3, 2006, and as further amended by that certain Fifth Amendment to Office Lease dated May 1, 2016.

 

52

 

 

Oil and Gas ” shall mean oil, gas, casinghead gas, drip gasoline, natural gasoline, condensate, distillate and all other liquid hydrocarbons, associated gases, vaporous substances or minerals.

 

Oil and Gas Lease ” shall mean an Oil and Gas lease relating to the Properties and the real and personal property related thereto.

 

Other Minerals ” shall mean sulphur, lignite, coal, uranium, thorium, iron, geothermal steam, water, carbon dioxide, helium and all other minerals, ores or substances of value whether or not generally produced from a wellbore in conjunction with the production of Oil and Gas.

 

Partnership Agreement ” shall mean the Amended and Restated Partnership Agreement of the Partnership, as currently in effect.

 

Partnership-Entitled Production and Proceeds “ shall mean any bonuses, delay rentals, royalty payments, overriding royalty payments and shut-in royalty payments, other than Production attributable to periods prior to the Reference Date and for which the Contributors have received payment after the Reference Date.

 

Partnership Fundamental Reps ” shall have the meaning set forth in Section 10.1 .

 

Partnership GP ” shall mean Dorchester Minerals Management LP, a Delaware limited partnership.

 

Permits ” shall mean licenses, permits, franchises, consents, approvals, variances, exemptions, waivers and other authorizations of or from Governmental Entities or pursuant to any Applicable Law or Environmental Applicable Law.

 

Permitted Encumbrances “ shall mean (i) liens for Taxes not yet due and payable, (ii) statutory liens (including materialmen’s, mechanic’s, repairmen’s landlord’s, and other similar liens) arising in connection with the ordinary course of business securing payments not yet due and payable, and (iii) any lien, encumbrance, defect, or other matter that would not result in an Acquired Entity holding good title thereto, in each case, related to a Property in which revenue has regularly been paid to such Acquired Entity with respect thereto without written complaint for a period in excess of ten (10) years prior to the Closing Date.

 

Person ” (whether or not capitalized) shall mean any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, enterprise, unincorporated organization or Governmental Entity.

 

Post- Effective Tax Period ” means any Tax period (or portion of a Tax period) beginning on or after the day immediately following the Reference Date.

 

53

 

 

Pre- Effective Tax Period ” means any Tax period (or portion of a Tax period) ending on or before the Reference Date.

 

Proceedings ” shall mean all proceedings, actions, claims, suits, investigations and inquiries by or before any arbitrator or Governmental Entity.

 

Properties ” shall mean all of the right, title and interest of each Acquired Entity in and to all assets and properties of every kind, nature, character and description (whether real, personal or mixed, whether tangible or intangible and wherever situated), including, without limitation, the minerals and royalties set forth on Exhibit G and the HHC Working Interests.

 

Property Tax ” shall mean any ad valorem, property (real, personal or mixed) or similar Tax.

 

reasonable best efforts “ shall mean a party’s best efforts in accordance with reasonable commercial practice and without the incurrence of unreasonable expense.

 

Records ” shall mean all data, files or records in the control or possession of the Contributors pertaining to the ownership of the Business, including but not limited to all abstracts of title, accounting records, Property Tax records or other Tax records relating to the Properties, financial reports and projections, escrow reports, books, contract files, division order files, documents evidencing the prices currently being paid for production, engineering data, geological and geophysical reports, lease files, logs, maps, pressure data, production records, supplemental abstracts of title, title curative materials, title opinions, title reports, notices, evidence of payment, correspondence, banking and cash receipts, invoices, check receipt detail and other data related to the Properties; provided, however, that “Records” shall not include any of the foregoing to the extent that portion of such records relate to the ownership and operation of the surface of the Properties.

 

Reference Date shall mean January 1, 2019.

 

Release ” shall mean release as defined under CERCLA § 101(22), 42 U.S.C. § 9601(22).

 

Remediate ” or “ Remediation ” shall mean any action or work taken to remove or otherwise remedy any Environmental Condition, including (i) any survey, site assessment, audit, investigation, inspection, sampling, analysis, removal, excavation, pump and treat, cleanup, abatement, corrective action, remediation, Disposal, storage, handling, or treatment required under any Applicable Environmental Law and (ii) any action required to bring any Real Properties or Properties into compliance with any Applicable Environmental Law.

 

Retained Liabilities ” mean all of the obligations and liabilities of each Acquired Entity, known or unknown, to the extent directly arising out of or resulting from (a) any Indebtedness of such Acquired Entity, (b) the Excluded Assets or the ownership or disposition thereof, (c) an ownership interest in any other Person, (d) actions or omissions of an Acquired Entity prior to the Closing pursuant to any Material Contract required to be disclosed to the Partnership by HOC pursuant to the terms of this Agreement and that HOC failed to specifically disclose to the Partnership, (e) any third party written claim or Proceeding existing as of the Closing and to which HOC had Knowledge and that HOC failed to specifically disclose to the Partnership, (f) any business conducted by either Acquired Entity other than the business of owning royalties, minerals, or working interests in oil and gas properties or infrastructure related thereto or (g) Transaction Costs.

 

54

 

 

Tax ” shall mean (a) any and all taxes, assessments, charges, duties, fees, levies, imposts or other similar charges imposed by a Governmental Entity, including all income, franchise, profits, margins, capital gains, capital stock, transfer, gross receipts, sales, use, transfer, service, occupation, ad valorem, real or personal property, excise, severance, windfall profits, customs, premium, stamp, license, payroll, employment, social security, unemployment, disability, environmental, alternative minimum, add-on, value-added, withholding and other taxes, assessments, charges, duties, fees, levies, imposts or other similar charges of any kind, and all estimated taxes, deficiency assessments, additions to tax, penalties and interest, whether disputed or otherwise, and (b) any liability of the Contributors, the Acquired Entities, or the General Partner for the payment of any amounts of the type described in clause (a) as a result of any express or implied obligation to indemnify or otherwise assume or succeed to the liability of any other Person as a successor, transferee, by contract, or otherwise.

 

Tax Return ” shall mean any report, return, election, document, estimated tax filing, declaration, claim for refund, extensions, information returns, or other filing with respect to any Taxes provided to any Governmental Entity including any schedules or attachments thereto and any amendment thereof.

 

TBC GPs ” shall mean HOC and Paul Malloy.

 

TBC Partnership Agreement ” means that certain Limited Partnership Agreement and Certificate of Formation of TBC, dated as of July 21, 1966, as amended by that certain Amended Limited Partnership Agreement and Certificate of Formation of TBC, dated September 7, 1977, as amended by that certain Second Amendment to Limited Partnership Agreement and Certificate of Formation of TBC, effective as of August 10, 1979, as amended by that certain Third Amendment to Limited Partnership Agreement and Certificate of Formation of TBC, effective as of April 1, 1980, as amended by that certain Fourth Amendment of Limited Partnership and Certificate of Formation of TBC, dated as of June 25, 2009.

 

Transaction Costs ” means the amounts paid or payable by either Acquired Entity for all out-of-pocket costs and expenses incurred in connection with the transactions contemplated by this Agreement, including (a) all fees and expenses for legal counsel, investment bankers, brokers, accounting firms, and other professional advisors, (b) any retention, bonus or similar compensatory amounts payable to any employees or service providers of either Acquired Entity that become payable by an Acquired Entity pursuant to an agreement with such Acquired Entity, a Contributor or any of their respective Affiliates solely as a result of the consummation of the transactions contemplated hereby and (c) any and all fees or payments (including transfer payments, make-whole payments, and other similar payments) that become payable by any Acquired Entity under any Contract, lease or other assets as a result of the consummation of the transactions contemplated hereby (including upon change of control of the Acquired Entities).

 

55

 

 

Transaction Documents ” shall mean this Agreement, the Assignments, the HHC Conveyance, the Assignment and Assumption of Excluded Assets and any document, agreement, instrument or certificate delivered pursuant hereto or in connection herewith.

 

Treasury Regulations ” shall mean the regulations promulgated by the United States Treasury Department under the Code.

 

Transfer Application ” shall have the meaning assigned to it in the Partnership Agreement.

 

Transfer Tax ” means all transfer, documentary, sales, use, stamp, registration, value added and other such Taxes and fees (including any penalties and interest) incurred in connection with the transactions contemplated under this Agreement.

 

Unit ” shall mean, collectively, a drilling, spacing, proration, production or enhanced recovery unit formed pursuant to a voluntary unitization, communitization or pooling agreement, or a drilling, spacing, proration, production or enhanced recovery unit formed under or pursuant to law, rule or regulation or other action of a regulatory body having jurisdiction.

 

12.2  Certain Additional Defined Terms . In addition to such terms as are defined in Section 12.1 , the following terms are used in this Agreement as defined in the Sections set forth opposite such terms:

 

Defined Term

Section Reference

   

2018 Acquired Entities Financial Statements

Section 4.11(a)

2019 Interim Acquired Entities Financial Statements

Section 4.11(a)

Acquired Entities Financial Statements

Section 4.11(a)

Acquired Entity Historical Financial Statements

Section 6.12(a)

Acquired Entities

Introduction

Acquired HHC GP Interests

Introduction

Acquired HHC Interests

Introduction

Acquired HHC LP Interests

Introduction

Acquired Subject Interests

Introduction

Acquired TBC Interests

Introduction

Acquired TBC GP Interests

Introduction

Acquired TBC LP Interests

Introduction

Allocation

Section 8.3(g)

Agreement

Introduction

Assignment and Assumption of Excluded Assets

Section 1.5

Assignments

Section 1.4

Cap

Section 10.2(e)(iii)

Closing Section 1.1

Closing Date

Section 1.1

Contribution and Exchange

Introduction

Contributor

Introduction

Contributors’ Indemnified Parties

Section 10.2(b)

DMOLP

Introduction

 

56

 

 

Defined Term Section Reference
   

Employees

Section 4.13(a)

Estimated Contributed Cash

Section 1.7

Exchange Agent

Section 1.3

Excluded Assets

Section 1.5

Final Contributed Cash

Section 1.8(e) 

Financial Statement 8-K

Section 6.12(a)

HHC

Introduction

HHC Conveyance

Section 7.2(e)

HHC Partnership Common Units

Introduction

HHC Working Interests

Introduction

HHC WI Properties

Section 6.1(b)

HOC

Introduction

Loss

Section 10.2(a)

NLRB

Section 4.13(f)

Notice of Disagreement

Section 1.8(b)

Partnership Introduction

Partnership Common Units

Introduction

Partnership-Entitled Production and Proceeds

Section 8.1

Partnership Financial Statements

Section 2.7

Partnership GP

Section 2.3(a)

Partnership Indemnified Parties

Section 10.2(a)

Partnership Latest Balance Sheet

Section 2.7

Post-Closing Statement

Section 1.8(a)

Preliminary Statement

Section 1.7

Proposed Allocation Section 3.8
SEC Section 2.13

Securities Act

Section 2.13

Subject Partnership Common Units

Introduction

Subject Partnership Common Unit Allocation

Introduction

Tax Basis Schedule Section 8.3(f)

Tax Treatment

Section 1.9

TBC

Introduction

TBC Partnership Common Units Introduction
Third Party Claim Section 10.3(b)

WARN

Section 4.13(l)

 

 

 

[Signature Page Follows]

 

57

 

 

IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its representative thereunto duly authorized, as of the date first above written.

 

 

 

THE PARTNERSHIP:

 

     
  DORCHESTER MINERALS, L.P.  

 

 

   

 

 

  By: Dorchester Minerals Management LP,  
    its general partner  

 

 

   

 

 

    By: Dorchester Minerals Management GP LLC,  
      its general partner  
           

 

 

  By:

/s/ William Casey McManemin

 

 

 

   

William Casey McManemin,

 

 

 

   

Chief Executive Officer and Manager

 

 

 

SIGNATURE PAGE TO

CONTRIBUTION AND EXCHANGE AGREEMENT

 

 

 

 

HHC:

 

     
  H. HUFFMAN & CO., A LIMITED PARTNERSHIP  

 

 

 

 

  By: Huffman Oil Co., L.L.C.,  
    its general partner  

 

 

 

 

 

By:

/s/ Huston Huffman, Jr.

 

 

Name:

Huston Huffman, Jr.

 

 

Title:

Manager

 

       
     
  TBC:  
     
  THE BUFFALO CO., A LIMITED PARTNERSHIP  
       
  By: Huffman Oil Co., L.L.C.,  
    its general partner  
       
  By: /s/ Huston Huffman, Jr.  
  Name: Huston Huffman, Jr.  
  Title: Manager  
       
  By: /s/ Paul Malloy  
    Paul Malloy,  
    its general partner  
       
     
  HOC:  
     
  HUFFMAN OIL CO., L.L.C.  
       
  By: /s/ Huston Huffman, Jr.  
    Huston Huffman, Jr.,  
    Manager  

 

 

SIGNATURE PAGE TO

CONTRIBUTION AND EXCHANGE AGREEMENT

 
 

 

 

EXHIBIT B

HHC Working Interests

 

Attached to and made a part of that certain Contribution and Exchange Agreement dated March 29, 2019, by and among Dorchester Minerals, L.P., H. Huffman & Co., A Limited Partnership, The Buffalo Co., A Limited Partnership and et al.

 

Prospect/Tract

Well Name

Section

Township

Range

County

St

Interest Type

Mon-Dak

3R #1-34H1

34

3N

4W

Garvin

OK

O

Morey

Addison 15-1

15

13N

7W

Canadian

OK

O

Long Canyon

Agate 11-11

11

34S

65W

Las Animas

CO

O, WI

Eureka

Albert 23-28-18 1H

23

28N

18W

Woods

OK

O

Eureka

Albert 23-28-18 2H

23

28N

18W

Woods

OK

O

Crawford

Alcatraz 1-5

5

6N

2W

McClain

OK

O, WI

Long Canyon

Aldo M 21-11

11

34S

65W

Las Animas

CO

O, WI

Long Canyon

Alf 13-33

33

34S

65W

Las Animas

CO

RI, O, WI

Morey

Alice Trickey 1

7

24N

5W

Garfield

OK

Long Canyon

Alidade 34-16

16

34S

65W

Las Animas

CO

RI, WI

Long Canyon

Alien 23-34

34

34S

65W

Las Animas

CO

RI, O, WI

Morey

Andover 1-C & 4-C

16

23N

9E

Osage

OK

WI

Morey

Andover 1D

16

23N

9E

Osage

OK

WI

East Marshall

Andrea 1-35CH

35

20N

4W

Garfield & Logan

OK

WI

Long Canyon

Angel 44-7

7

34S

64W

Las Animas

CO

RI, O, WI

Springer

Ann 1-13H

13

3S

1E

Carter

OK

O

Indian Creek

Ann 1-30 SWD

30

22N

19W

Woodward

OK

SWD

Springer

Ann 2-13H

13

3S

1E

Carter

OK

O

MDRC

Anna Wright 1-2

2

2N

4W

Stephens

OK

WI

HH Mineral

Annie Schmidt Gas Unit 

35

8N

17W

Washita

OK

RI, O, WI

Long Canyon

Antler 44-10

10

34S

65W

Las Animas

CO

RI, O, WI

Eureka

Appaloosa 1-3 (fka Fan 1-3)

3

27N

18W

Woods

OK

WI

Eureka

Appaloosa 2-3H

3

27N

18W

Woods

OK

WI

Long Canyon

April 32-21

21

34S

65W

Las Animas

CO

RI, WI

Long Canyon

Argon 43-31

31

33S

65W

Las Animas

CO

WI

Long Canyon

Arrowhead 41-9

9

34S

65W

Las Animas

CO

RI, O, WI

Long Canyon

Arrowwood 12-6

6

35S

64W

Las Animas

CO

RI, O, WI

Long Canyon

Athena 43-8

8

34S

65W

Las Animas

CO

RI, O, WI

Long Canyon

Atlas 32-18

18

34S

64W

Las Animas

CO

RI, O, WI

Alf

Avard 1H-31

31

26N

12W

Alfalfa

OK

WI

Alf

Avard 2612 3H-31

31

26N

12W

Alfalfa

OK

WI

Alf

Avard 2612 4H-31

31

26N

12W

Alfalfa

OK

WI

Long Canyon

Babe 44-36

36

34S

65W

Las Animas

CO

RI, O, WI

Morey

Baker 1-20

20

12N

21W

Beckham

OK

O

Morey

Baker 1-22 ST-1

22

4N

7W

Grady

OK

O, WI

Long Canyon

Bambino 34-36

36

34S

65W

Las Animas

CO

RI, O, WI

N/A

Banks Unit Battery

6, 7, 8

6S

1W

Love

OK

WI

Long Canyon

Bar Ranch 31-21

21

34S

65W

Las Animas

CO

RI, WI

Matthiesen

Barbara 26-2

26

24N

2W

Noble

OK

WI

Matthiesen

Barbara 26-3

26

24N

2W

Noble

OK

WI

HH Mineral

Barber Gas Unit #1

6

28N

1E

Kay

OK

RI, WI

Morey

Barr 1-5H

5

24N

5W

Garfield

OK

O

Eureka

Bates 9-27-17 1H

9

27N

17W

Woods

OK

RI

Long Canyon

Batman 14-8

8

34S

64W

Las Animas

CO

RI, O, WI

Road Runner

Bayless #1 Re-Entry

1

5N

2W

McClain

OK

O, WI

Bonanza II

Beachner 1-12

12

8S

36W

Thomas

KS

WI

Bonanza II

Beachner 1-7

7

8S

35W

Thomas

KS

WI

Long Canyon

Bear Paw 32-19

19

34S

64W

Las Animas

CO

RI, O, WI

Long Canyon

Beardslee 31-4

4

34S

65W

Las Animas

CO

WI

East Marshall

Beeby 1-34CH

34

20N

4W

Garfield & Logan

OK

WI

Eureka

Beehive 1-13

13

28N

18W

Woods

OK

WI

Eureka

Beehive 1-18 SWD

18

28N

17W

Woods

OK

SWD

Eureka

Beehive 1-24

24

28N

18W

Woods

OK

RI, WI

Road Runner

Beep Beep 1-7

7

5N

1W

McClain

OK

WI

Crawford

Bella 1-35

35

7N

3W

McClain

OK

WI

Bonanza II

Bellemy Farms 1-9

9

8S

35W

Thomas

KS

WI

Long Canyon

Belvedere 14-7

7

34S

64W

Las Animas

CO

RI, O, WI

Long Canyon

Beringer 33-18

18

34S

64W

Las Animas

CO

RI, O, WI

Alf

Berry 2H-31 (fka Avard 2H-31)

31

26N

12W

Alfalfa

OK

WI

Long Canyon

BGR 12-11

11

34S

65W

Las Animas

CO

O, WI

Long Canyon

BGR 14-2

2

34S

65W

Las Animas

CO

RI, O, WI

Long Canyon

BGR 22-14

14

34S

65W

Las Animas

CO

RI, O, WI

Long Canyon

BGR 23-11

11

34S

65W

Las Animas

CO

RI, O, WI

Long Canyon

BGR 32-10

10

34S

65W

Las Animas

CO

O, WI

Long Canyon

BGR 41-16

16

34S

65W

Las Animas

CO

RI, O, WI

Long Canyon

BGR 43-3

3

34S

65W

Las Animas

CO

RI, O, WI

Long Canyon

Big Cat Federal 44-1

1

34S

66W

Las Animas

CO

WI

Crawford

Big Mac 1-8

8

6N

2W

McClain

OK

O, WI

Long Canyon

Big Papi 34-26

26

34S

65W

Las Animas

CO

RI, O, WI

Bonanza II

Biggs 1-2

2

8S

36W

Thomas

KS

WI

Eureka

Bingo 1-2

2

27N

18W

Woods

OK

WI

Morey

Blanchard-Rizley 1-15

15

28N

25W

Harper

OK

WI

Morey

Blanchard-Rizley 2-15

15

28N

25W

Harper

OK

WI

Long Canyon

Blarney 21-27

27

34S

65W

Las Animas

CO

RI, O, WI

Eureka

Bliss 19-28-18 1H

19

28N

18W

Woods

OK

O

Long Canyon

Bloop 32-8 

8

34S

65W

Las Animas

CO

RI, O, WI

Long Canyon

Blossom 33-8

8

34S

64W

Las Animas

CO

RI, O, WI

Morey

Bolch 1-35H

35

12N

10W

Canadian

OK

O

Long Canyon

Bonanza 21-35

35

34S

65W

Las Animas

CO

RI, O, WI

Long Canyon

Bordeaux 42-2 

2

35S

65W

Las Animas

CO

RI, O, WI

Long Canyon

Border 21-3

3

35S

65W

Las Animas

CO

RI, O, WI

Eureka

Bouziden Trust 31-28-18 1H

31

28N

18W

Woods

OK

O

Otter

Box 1-5H

5

19N

3W

Logan

OK

WI

Morey

Brandon Dunes 36-1H

36

25N

6W

Grant

OK

O

Morey

Breckenridge 1

36

25N

6W

Grant

OK

O

Long Canyon

Brian Baru 42-5

5

35S

65W

Las Animas

CO

RI, O, WI

MDRC

Briar 1H-35X

2

2N

4W

Stephens

OK

O

MDRC

Briar 2H-35X

2

2N

4W

Stephens

OK

O

MDRC

Briar 3H-35XR

2

2N

4W

Stephens

OK

O

MDRC

Briar 4H-35X

2

2N

4W

Stephens

OK

O

Morey

Brogden "C" 1-35

35

12N

10W

Canadian

OK

WI

Morey

Brogden 3-35

35

12N

10W

Canadian

OK

O

Long Canyon

Brown 24-23 

23

34S

65W

Las Animas

CO

RI, O, WI

Long Canyon

Buena Vista 31-3

3

35S

65W

Las Animas

CO

RI, O, WI

Creekside

Bullfrog 1-18

18

5N

1W

McClain

OK

WI

Long Canyon

Bumble Bee 11-13

13

34S

65W

Las Animas

CO

O, WI

Springer

Burche 1-12

12

3S

1E

Carter

OK

O

DeAgua

Busse 1H-31

31

27N

14W

Woods

Ok

WI

Long Canyon

Cabernet 42-4

4

34S

65W

Las Animas

CO

WI

MDRC

Calls Him George 1-A

19

25N

2E

Kay

OK

O

Long Canyon

Cancer League 43-20

20

34S

65W

Las Animas

CO

RI, O, WI

Springer

Caperton 1-7

7

3S

2E

Carter

OK

O

Long Canyon

Caribou 42-32

32

34S

65W

Las Animas

CO

RI, O, WI

Morey

Carlisle 1-36

36

26N

25W

Harper

OK

WI

NW Keota

Carson 1-30

30

10N

23E

Haskell

OK

O

Morey

Carter 1-27

27

19N

12W

Blaine

OK

O

Eureka

Casey 1-2

2

28N

18W

Woods

OK

WI

Long Canyon

Catalina 32-27

27

34S

65W

Las Animas

CO

RI, O, WI

Eureka

Cattle 13-28-18 1H 

13

28N

18W

Woods

OK

O, WI

HH Mineral

Cernan Federal 24-10H 

3 & 10

21N

3E

Harding 

SD

RI, WI

Featherston

Chadwell-Nelson 2-6

6

7N

18E

Pittsburg

OK

RI

S Clearbrook

Champeau 1-5

5

8N

1W

Cleveland

OK

WI

S Clearbrook

Champeau 1A

5

8N

1W

Cleveland

OK

WI

Wilbo

Chance 7-1

7

12B

2E

Lincoln 

OK

WI

Morey

Chapman 1-9

9

17N

15W

Dewey

OK

O, WI

Long Canyon

Chateau 34-14

14

34S

65W

Las Animas

CO

RI, WI

Morey

Chelf 1

6

24N

5W

Garfield

OK

O

Crawford

Cheyenne 1-18R

18

6N

2W

McClain

OK

WI

Lake Stroud

Chicken Joe 1 

5

15N

7E

Creek

OK

WI

Long Canyon

Chickenhawk 32-13

13

34S

65W

Las Animas

CO

O

Long Canyon

Chinchaga 42-03

3

35S

65W

Las Animas

CO

RI, O, WI

Long Canyon

Chips 43-12

12

34S

65W

Las Animas

CO

O, WI

Springer

City of Ardmore 1-13

13

3S

1E

Carter

OK

O

Hennessey

City of Hennessey 1-24

24

19N

7W

Kingfisher

OK

WI

Sarkeys JV

Clem 1-14

14

17N

21W

Roger Mills

OK

WI

Long Canyon

Coach 21-34

34

34S

65W

Las Animas

CO

RI, O, WI

Springer

Coffey 2-1

2

3S

1E

Carter

OK

O

Long Canyon

Coke Oven 13-31

31

33S

65W

Las Animas

CO

WI

Long Canyon

Colleen 44-6

6

34S

65W

Las Animas

CO

RI, O, WI

Long Canyon

Colorow 21-24

24

34S

65W

Las Animas

CO

RI, WI

Lyle Church

Cook 24-14

14

1S

26W

Decatur

KS

WI

DeAgua

Cook 26151H-12 

12

26N

15W

Woods

OK

WI

Crawford

Cooley 1-31

31

7N

2W

McClain

OK

WI

Morey

Cooper 1-20

20

12N

21W

Beckham

OK

O

Keechi Creek

Cornelius 1-22

22

9N

11W

Caddo

OK

WI

Morey

Corwin "B" 2-29

29

21N

14W

Major

OK

WI

Morey

Corwin "B" 3-29

29

21N

14W

Major

OK

WI

Morey

Corwin "B" 4-29

29

21N

14W

Major

OK

WI

Morey

Corwin "B" 5-29

29

21N

14W

Major

OK

WI

N/A

County Line PSU

22

1S

4W

Stephens

OK

WI

Long Canyon

Cow Camp 41-5

5

35S

65W

Las Animas

CO

RI, O, WI

Morey

Cowan Federal 1-33

33

15N

13W

Blaine

OK

WI

Morey

Cravens Estate 1-27

27

19N

12W

Blaine

OK

O

Morey

Crissman 27-A

27

11N

13W

Caddo

OK

O, WI

Long Canyon

Crosscut 24-35

35

34S

65W

Las Animas

CO

RI, O, WI

Long Canyon

Crowsnest 21-33

33

34S

65W

Las Animas

CO

RI, O, WI

Waldron

Cynthia 1-23

23

29N

10W

Alfalfa

OK

WI

Eureka

Daisy 1-25

25

28N

18W

Woods

OK

WI

Eureka

Daisy 1-31

31

28N

17W

Woods

OK

WI

Eureka

Dale Bliss 30-28-18 1H

30

28N

18W

Woods

OK

O

Long Canyon

Dateline 22-22

22

34S

65W

Las Animas

CO

RI, WI

Eureka

De Anna 33-28-18 1H

33

28N

18W

Woods

OK

O

HH Mineral

DE Board 1

6

28N

1E

Kay

OK

RI, WI

Long Canyon

Dean 12-6

6

34S

65W

Las Animas

CO

RI, O, WI

MDRC

Degood 1-22

22

1S

4W

Stephens

OK

O

Long Canyon

Derrick 12-23

23

34S

65W

Las Animas

CO

RI, WI

Morey

DeSpain 1-33

33

12N

10W

Canadian

OK

WI

Long Canyon

Dixon 43-11

11

34S

65W

Las Animas

CO

O, WI

N/A

Doc Cole (1,2&3)

8

1N

3W

Garvin

OK

O

N/A

Doc Cole (5&6)

8

1N

3W

Garvin

OK

O

Long Canyon

Donahue 43-14

14

34S

65W

Las Animas

CO

WI

Springer

Dora 1-2

2

3S

1E

Carter

OK

O

Eureka

Dorothy 1-23

23

28N

18W

Woods

OK

WI

SE Joiner

Douglas Cude 1-28 (fka Douglas McArthur #1-28)

28

5S

2W

Carter

OK

WI

Springer

Downs 1-7

7

3S

2E

Carter

OK

O

Crawford

Drain 1-36

36

7N

3W

McClain

Ok

WI

Crawford

Drain 6N 3W 1 1HX

1 & 12

6N

3W

McClain

OK

O

Long Canyon

Dublin 14-13

13

34S

65W

Las Animas

CO

RI, WI

Garty Hart

Dunn 1-19H

19

5N

11E

Hughes

OK

WI

Long Canyon

Dylan 42-25

25

34S

65W

Las Animas

CO

RI, O, WI

Morey

E Kremlin Misener Unit

13

24N

6W

Garfield

OK

O

Morey

E Lookeba Marchand A Sand Unit

17

10N

10W

Caddo

OK

WI

Eureka

E.F. Wise 23-28-18

23

28N

18W

Woods

OK

O

Fath Sand

Eagles Nest 35-7N

35

25N

2W

Kay

OK

WI

Morey

Edwards "D" 1

29

21N

14W

Major

OK

WI

Morey

Ehrnstein 1-22

22

4N

7W

Grady

OK

O, WI

Long Canyon

Ellen 43-13

13

34S

65W

Las Animas

CO

WI

Crawford

Emerson #1-22

22

7N

3W

McClain

OK

RI, O, WI

Runway -Timber Creek

Emily E. 1-19 (fka Whitehouse & Hunter 1-19)

19

3N

1E

Garvin

OK

WI

Runway -Timber Creek

Emily E. 2-19 

19

3N

1E

Garvin

OK

WI

Bonanza II

Engelhardt 1-11

11

8S

37W

Sherman

KS

WI

Long Canyon

Engineer 12-3, aka Leef 12-3

3

34S

65W

Las Animas

CO

WI

Long Canyon

Erin B 12-34

34

34S

65W

Las Animas

CO

RI, O, WI

Long Canyon

Ernest 21-7

7

34S

65W

Las Animas

CO

O, WI

Springer

Ernestine 1-11

11

3S

1E

Carter

OK

O

Springer

Ernestine 2-11

11

3S

1E

Carter

OK

O

Springer

Ernestine 3-11

11

3S

1E

Carter

OK

O

Kim

Ernie 1-25

25

9N

13E

Mcintosh

OK

WI

Long Canyon

Ernie 31-6

6

34S

65W

Las Animas

CO

RI, O, WI

Springer

Erpal 1-13

13

3S

1E

Carter

OK

O

Springer

Erpal 2-13

13

3S

1E

Carter

OK

O

Long Canyon

Escape 13-21

21

34S

65W

Las Animas

CO

RI, O, WI

Eureka

Eskridge 1-3

3

28N

18W

Woods

OK

WI

Eureka

Eureka 1-7

7

27N

17W

Woods

OK

WI

Long Canyon

Explorer 33-16

16

34S

65W

Las Animas

CO

RI, WI

Fairleigh Ranch

Fairleigh 1-13

13

15S

33W

Logan

KS

WI

Fairleigh Ranch

Fairleigh D 1-7

7

15S

32W

Logan

KS

WI

Springer

Family trust 1-1

1

3S

1E

Carter

OK

O

Long Canyon

Fenway Park 41-25

25

34S

65W

Las Animas

CO

RI, O, WI

Eureka

Ferguson 11-28-18 1H

11

28N

18W

Woods

OK

O, WI

Fairleigh Ranch

F-G Unit 1-7

7

15S

32W

Logan

KS

WI

Long Canyon

Fierozzo 42-1

1

34S

66W

Las Animas

CO

RI, O, WI

Gooch

Fisher 1-3 

3

35S

35W

Stevens

KS

WI

Indian Creek

Fisher 1-30R

30

22N

19W

Woodward

OK

WI

Indian Creek

Fisher 2-30

30

22N

19W

Woodward

OK

WI

Long Canyon

Flat Rock 11-19

19

34S

64W

Las Animas

CO

RI, O, WI

Long Canyon

Fleetwood 21-36

36

34S

65W

Las Animas

CO

RI, O, WI

Springer

Fleming 1 & 2

13

4S

2W

Carter

OK

O, WI

NE Blanchard

Floyd 1-17

17

8N

4W

McClain

OK

WI

Amethyst

Fluorite 1-7

7

9N

4W

McClain

OK

WI

Crawford

Folsom 1-6

6

6N

2W

McClain

OK

O, WI

Long Canyon

Forefathers 21-19

19

34S

64W

Las Animas

CO

RI, O, WI

Long Canyon

Fortune 42-22

22

34S

65W

Las Animas

CO

RI, WI

Ward -HH mineral

Foster 1-22

22

22N

14W

Major

OK

RI, WI

Morey

Fowler 1-20

20

12N

21W

Beckham

OK

O

Springer

Fox Deese Springer Unit (FDSU)

29

2S

3W

Carter

Ok

O

Bonanza II

Frahm Unit 1-16

16

8S

35W

Thomas

KS

WI

Springer

Frances 1-12H

12

3S

1E

Carter

OK

O

Springer

Frances 2-12H

12

3S

1E

Carter

OK

O

Long Canyon

Frasier 31-17

17

34S

64W

Las Animas

CO

RI, O, WI

Long Canyon

Fredrick 42-9

9

34S

65W

Las Animas

CO

RI, O, WI

Eureka

Frei Family Trust 6-27-18 1H

6

27N

18W

Woods

OK

O

East Marshall

Friend 3-19N-4W 1WH

3

19N

4W

Logan

OK

O

Long Canyon

Frisco 34-33

33

34S

65W

Las Animas