Document:

cogo_ex1002.htm

Exhibit 10.2

 

 

Date:22nd February 2010

 

Our Ref: OCC/LC/TEAM3/BKG

 

CONFIDENTIAL

 

Comtech International (Hong Kong) Limited 

Room 514, 5/F., Manhattan Centre,

8 Kwai Cheong Road,

Kwai Chung,

New Territories.

 

 

Attn: Mr. Frank Zheng, Chief Financial Officer /

          Mr. Allen Wu, Financial Controller      

 

 

Dear Sirs,

 

BANKING FACILITIES

 

Standard Chartered Bank (Hong Kong) Limited (Chinese characters) (the "Bank") is pleased to offer certain banking facilities including, amongst other facilities, those terms set out in this facility letter (the "Facilities") to the Customer(s) below for the purpose(s) of general working capital, trade finance and treasury requirement, subject to the Bank's Standard Terms and Conditions for Banking Facilities and Services (including the Trade Finance Supplement) and Terms and Conditions for Foreign Exchange Business attached and the terms and conditions set out in this facility letter.

 

A.    CUSTOMER(S):

 

Comtech International (Hong Kong) Limited

Keen Awards Limited

Comtech Broadband Corporation Limited

 

B.    FACILITY LIMITS: General Banking Facilities

 

	
Type(s) of Facility

	
Facility Limit(s)

	
Designated Customer(s) and Sub­limit(s), if applicable

	
1.     Current Account Overdraft

	
USD1,000,000.-

	
• All Customers

	
2.     Trade Finance

(Please refer to Appendix 1 for product  details.)

	
USD14,000,000.-

 

(Of which USD5,000,000.- is theseasonallimit, only

available during April to September and December of each calendar year)

	
-

 

  

1

  

 

 

	
Comtech International (Hong Kong) Limited

	
Page 2

	  

 

	
(a) Trade Finance Group All

	  	
·     All Customers (USD14,000,000.-)

 

(Of which USD5,000,000.- is the seasonal limit, only available during April to September and December of each calendar year)

	
(b) Trade Finance Group 1

	  	
·     All Customers (USD14,000,000.-)

 

(Of which USD5,000,000.- is the seasonal limit, only available during April to September and December of each calendar year)

	
(c) Trade Finance Group 2

	  	
·     All Customers (USD14,000,000.-)

 

(Of which USD5,000,000.- is the seasonal limit, only available during April to September and December of each calendar year)

	
(d) Trade Finance Group 3

	  	
·     All Customers (USD14,000,000.-)

 

(Of which USD5,000,000.- is the seasonal limit, only available during April to September and December of each calendar year)

 

	
3. Guarantees or Standby Letters of Credit

	
(USD7,000,000.-)

	
·      All Customers

	
Total Facility Limit:

	
USD15,000,000.-

Notes:-

·       The aggregate outstanding of Facilities 2 and 3 shall not at any time exceed USD14,000,000.

	
·

	
The aggregate amounts outstanding under all Sub-limits shall not at any time exceed the Facility Limit to which the Sub-limits relate and the aggregate amounts outstanding under all Facilities shall not at any time exceed the Total Facility Limit.

 

C.     PRICING AND CONDITIONS:

 

	
1. Current Account Overdraft

	
Availability:

This facility is available in both USD and HKD.

 

Interest: the higher of 0.5% per annum over HKD Prime or 0.5% per annum over HIBOR for HKD overdraft and 0.5% per annum over USD Prime for USD overdraft, payable monthly in arrears.

	  	  

 

  

2

  

 

 

	
Comtech International (Hong Kong) Limited

	
Page 3

	  

 

	
2.

	
Trade Finance

	
Interest:

	
HKD import/export facilities: 2% per annum over HIBOR.

 

Foreign currency import/export facilities: 2% per annum over the Bank's cost of funds.

 

Commission:

	
Standard rates unless otherwise stipulated.

 

Letters of Credit Opening / Amendment Commission / 

Commission in lieu of Exchange:      

	
First USD50,000.-                                          1/4%

USD50,001.- to USD500,000.-                      1/16%

Balance                                                           1/24%

 

Commission for Import Invoice Financing:

	
First USD50,000.-                                          1/8%

USD50,001.- to USD500,000.-                      1/16%

Balance                                                           1/24%

 

Maximum tenor/advance percentage for:

	
Import facilities: Combined usance and import loan period of any transaction is not to exceed 90 days.

 

Export facilities: Not to exceed 90 days.

 

Packing credit: Up to 90 days or expiry of the letter of credit, whichever is earlier, and up to 70% of the letter of credit amount.

 

Export invoice discounting: Up to 90 days, and up to 100% of the invoice amount.

 

Import invoice financing: Up to 90 days, and up to 100% of the invoice amount. Proceeds from import invoice financing must be directly transferred to the supplier's accounts.

 

Drawing on invoice discounting must be accompanied with confirmed purchasing order from buyers.

 

	
3.

	
Guarantees or Standby Letters of Credit

	
Purpose: To facilities credit purchase from supplier(s) with beneficiary(ies) acceptable to the Bank. Tenor: Up to 1 year.

Commissions: Standard rates.

 

Tenor: Up to 1 year.

 

Commissions: Standard rates.

 

	
Handling Fee of Facilities:

	
HKD150,000.-, payable upon your signing of this letter, and other handling fee to be mutually agreed and payable on each anniversary of the date of this letter if the Facilities are continuing.

	  	  
	  	  

 

  

3

  

 

 

 

	
Comtech International (Hong Kong) Limited

	
Page 4

	  

 

D.    SECURITY AND CONDITIONS PRECEDENT:

 

The availability of the Facilities is conditional upon the Bank's receipt of the following documents, items and evidence (both in form and substance) satisfactory to the Bank:

 

	
1.

	
This letter duly executed by the Customer.

 

	
2.

	
A Security Agreement over Bank Account (All Monies) executed by Comtech International (Hong Kong) Limited in favour of the Bank in respect of the obligations of all Customers.

 

	
3.

	
A corporate guarantee dated 22nd April 2008 (as amended from time to time) executed by Comtech International (Hong Kong) Limited for USD15,000,000.- plus interest and other charges to secure the liabilities of Keen Awards Limited and Comtech Broadband Corporation Limited.

 

	
4.

	
A corporate guarantee dated 22nd April 2008 (as amended from time to time) executed by Keen Awards Limited for USD15,000,000.- plus interest and other charges to secure the liabilities of Comtech International (Hong Kong) Limited and Comtech Broadband Corporation Limited.

 

	
5.

	
A corporate guarantee executed by Comtech Broadband Corporation Limited for USD15,000,000.­plus interest and other charges to secure the liabilities of Comtech International (Hong Kong) Limited and Keen Awards Limited.

 

	
6.

	
A corporate guarantee executed by Cogo Group, Inc. (previously known as Comtech Group, Inc.) for USD15,000,000.- plus interest and other charges to secure the liabilities of Comtech International (Hong Kong) Limited, Keen Awards Limited and Comtech Broadband Corporation Limited.

 

	
7.

	
A letter of undertaking issued by Cogo Group, Inc. agreeing to maintain its minimum tangible net worth at not less than USD120,000,000.- at all times.

 

	
8.

	
Certified true copies of the certificate of incorporation, memorandum and articles of association or equivalent constitutional documents of Comtech Broadband Corporation Limited.

 

	
9.

	
Original/Certified copies of all necessary consents, approvals and other authorisations (including board resolutions) in connection with the execution, delivery and performance of this letter and all other documents mentioned above, if applicable.

 

	
10.

	
(if any of the facilities referred to in this letter are to be made available by Standard Chartered Bank or other members of the Standard Chartered Group) All such documents, items or evidence with, in favour of or to Standard Chartered Bank or, as the case may be, such member of the Standard Chartered Group as the Bank may request.

 

	
11.

	
Such other documents, items or evidence that the Bank may request from time to time.

 

E.     COVENANTS AND UNDERTAKINGS:

 

The Customer undertakes to the Bank that it will:

 

1.    promptly submit to the Bank:

 

	
  

	
·

	
certified copies of the annual audited financial statements of the Customers within 9 months after their financial year end;

	
  

	
·

	
a certified copy of the annual audited financial statements of Cogo Group, Inc. within 120 days after its financial year end;

	
  

	
·

	
certified copies of the quarterly management accounts of the Customers and Cogo Group-, Inc. within 60 days after the end of the relevant accounting period; and

	
  

	
·

	
other information that the Bank may request from time to time.

 

 

  

4

  

 

 

 

	
Comtech International (Hong Kong) Limited

	
Page 4

	  

 

 

2.   immediately inform the Bank:

 

	
  

	
·

	
of any change of the Customer's directors or beneficial shareholders or amendment to its memorandum or articles of association or equivalent constitutional documents;

	
  

	
·

	
of any substantial change to the general nature of the Customer's existing business; or

	
  

	
·

	
if it becomes, or is aware that any of its directors, shareholders, partners or managers becomes, a Related Person (as defined in paragraph 6 of section G of this letter).

 

	
3.

	
procure Mr. Jeffery Kang shall remain as the Chief Executive Officer / Chairman / Director of Cogo Group, Inc. and actively involving in the management and business of the Group.

 

	
4.

	
Each Customer agrees to procure Comtech International (Hong Kong) Limited to deposit the sum of USD5,000,000.- (the "Minimum Deposit") pursuant to the security document(s) set out in paragraph(s) 2 of Section D of this letter before availability of the Facilities. Each Customer agrees that the Bank may change the amount of the Minimum Deposit at the Bank's absolute discretion. Each Customer undertakes to procure Comtech International (Hong Kong) Limited to maintain the Minimum Deposit for so long as the Facility/Facilities under this letter remain outstanding.

 

G.     OTHER TERMS AND CONDITIONS:

 

	
1.

	
The Facilities are available at the sole discretion of the Bank. The Bank may at any time immediately terminate, cancel or suspend the Facilities or otherwise modify the Facilities without the consent of any party.

 

	
2.

	
Notwithstanding any provisions stated in this letter, the Facilities are repayable on demand by the Bank. The Bank has the overriding right at any time to require immediate payment and/or cash collateralisation of all or any sums actually or contingently owing to it under the Facilities. This clause 2 does not apply to any factoring facility(ies).

 

	
3.

	
If there are more than one Customer, each Customer accepting the terms and conditions set out in this letter is jointly and severally liable with the other Customer(s) for all sums payable or owing to the Bank under the Facilities (whether incurred by that Customer or not). The obligations and liabilities of each Customer shall take effect immediately upon its acceptance of the terms and conditions set out or referred to in this letter. Each Customer further agrees that the Bank is not required to make any reference to the other Customer(s) in relation to the utilisation of the Facilities by any Customer(s).

 

The obligations and liabilities of each Customer shall not be affected by (i) any time or indulgence granted to or composition with any other Customer(s) or any other person; (ii) any change, variation or termination of any agreement or arrangement with any other Customer(s) or any other person; (iii) any release of, or any neglect to obtain, perfect or enforce, any rights or securities against any Customer(s) or any other person; or (iv) any unenforceability or invalidity of any obligations of any Customer(s) or any other persons.

 

	
4.

	
The Bank's Standard Terms and Conditions for Banking Facilities and Services (including the Trade Finance Supplement) and Terms and Conditions for Foreign Exchange Business ("Standard Terms and Conditions") attached and/or referred to in this letter forms an integral part of this letter and the Customer agrees to observe and be bound by such Standard Terms and Conditions.

 

	
5.

	
The terms and conditions set out or referred to in this letter supersede and replace those set out in our letter (if any) previously sent to the Customer(s).

 

 

  

5

  

 

 

 

	
Comtech International (Hong Kong) Limited

	
Page 6

	  

 

 

	
6.

	
Please note that section 83 of the Banking Ordinance imposes on the Bank certain limitations on advances to persons (including firms, partnerships and companies) related to its directors, employees with lending authority or controllers (each person so related shall be referred to as a"Related Person"). When acknowledging and accepting this facility letter, you should advise us if you are, or any of your directors, shareholders, partners or managers is, a Related Person within the meaning of the Banking Ordinance. If subsequent to your acceptance of this facility letter, you become, or are aware that any of your directors, shareholders, partners or managers is or becomes, a Related Person, you should immediately advise us in writing.

 

	
7.

	
The Customer acknowledges the following:

 

	
  

	
(a)

	
The Customer has received and read the Bank's Notice to Customers and Other Individuals relating to the Personal Data (Privacy) Ordinance and the Code of Practice on Consumer Credit Data; and

	
  

	
(b)

	
The Customer has, or will, notify each of its Relevant Individuals, the Bank may, in the course of providing banking services to the Customer, receive Customer information in respect of that Relevant Individual.

 

For the purpose of the above, a "Relevant Individual" is defined as being one of the following (but not limited to) Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, department heads, corporate officers (e.g. authorized signatories, company secretary etc.), directors, major shareholders, beneficial owners, and guarantors (where applicable).

 

	
8.

	
This letter shall be governed by and construed in accordance with the laws of Hong Kong SAR.

 

Please sign and return to us the enclosed copy of this letter together with the attached Standard Terms and Conditions for Banking Facilities and Services (including the Trade Finance Supplement) and Terms and Conditions for Foreign Exchange Business to the Bank's Credit Risk Control at 11th Floor, Standard Chartered Tower, 388 Kwun Tong Road, Kwun Tong, Kowloon within one month after the date of this letter, failing which this offer shall lapse.

 

If you have any queries, please feel free to contact any of the following persons:-

 

	
Queries on

	
Name

	
Telephone No.

	
Banking arrangements

	
Mr. Alan Lam, Relationship Manager

	
2821-1804

 

Yours faithfully,

For and on behalf of

 

STANDARD CHARTERED BANK (HONG KONG) LIMITED

 

/s/ Chan Kin Man

Chan Kin Man

Senior Credit Documentation Manager

 

  

6

  

 

 

 

 

	
Comtech International (Hong Kong) Limited

	
Page 7

	  

 

 

We agree and accept all the terms and conditions set out above and the Bank's Standard Terms and Conditions for Banking Facilities and Services (including the Trade Finance Supplement) and Terms and Conditions for Foreign Exchange Business attached and/or referred to in this letter, which we have read and understood.

 

 

For and on behalf of

COMTECH INTERNATIONAL (HONG KONG) LIMITED

 

 

For and on behalf of 

KEEN AWARDS LIMITED

 

 

For and on behalf of

COMTECH BROADBAND CORPORATION LIMITED

 

 

 

Each of the undersigned hereby acknowledge the terms of this facility letter and confirm that their respective obligations under each guarantee and security document (as applicable) that they have executed in favour of the Bank will continue in full force and are not and will not be affected, discharged or varied by the execution of this facility letter.

 

For and on behalf of 

COGO GROUP, INC.

 

 

 

 

 

  

7

  

 

 

 

	
Comtech International (Hong Kong) Limited

	
Page 8

	  

 

 

 

 

Appendix 1

 

TRADE FINANCE FACILITY

 

Trade Finance Group All

 

	
·

	
Negotiation of export credit documents with discrepancies on a with recourse basis

 

Trade Finance Group 1

 

	
·

	
Purchase of documents against payment bills with title documents on parties acceptable to the Bank on a with recourse basis

	
·

	
Purchase of documents against acceptance bills with ECA/approved insurance cover on a with recourse basis

	
·

	
Issuance of back-to-back letters of credit

	
·

	
Issuance of import letters of credit - sight and usance

                                                               - with title documents

 

Trade Finance Group 2

 

	
·

	
Purchase of documents against acceptance bills without ECA/approved insurance cover on a with recourse basis

	
·

	
Purchase of documents against payment bills without title documents on parties acceptable to the Bank on a with recourse basis

	
·

	
Issuance of quasi back-to-back letters of credit - without title documents

(i.e. Import letter of credit supported by export letter of credit acceptable to the Bank)

	
·

	
Issuance of import letters of credit - sight and usance

                                                             - without title documents

	
·

	
Shipping guarantees

      

      

Trade Finance Group 3

 

	
·

	
 Pre-shipment loan - i.e. packing credit

	
·

	
 Acceptance of drafts under import letters of credit

	
·

	
 Release of documents against acceptance supported by trust receipts

	
·

	
 Loans against trust receipts

	
·

	
 Import loans

	
·

	
 Import invoice financing

	
·

	
 Export invoice discounting

 

 

 

8reeffund3_8k-ex1001.htm

Exhibit 10.1

 

PURCHASE AND SALE AGREEMENT

 

by and between

 

LETT OIL & GAS, L.P.

 

As Seller

 

and

 

RCWI, L.P.

 

As Buyer

 

DATED AS OF

 

 

June 23, 2010

 

 

  

  

  

 

Exhibits

 

 

	
A

	
Leases

	
B

	
Wells

	
C

	
List of Contracts

	
D

	
Assignment

	
E

	
Deed

 

 

 

 

  

1

  

PURCHASE AND SALE AGREEMENT

 

This PURCHASE and SALE AGREEMENT (the "Agreement") is made this 23rd day of June, 2010, by and between LETT OIL & GAS, L.P., a Texas limited partnership whose address is 301 Commerce Street, Suite 1830, Ft. Worth, Texas 76102 ("Seller"), and RCWI, L.P., a Texas limited partnership located at 1901 North Central Expressway, Suite 300, Richardson, Texas 75080 (the "Buyer"). The Buyer and Seller may be collectively referred to herein as the "Parties" and individually as a "Party."

 

RECITALS

 

A.            WHEREAS, Seller owns certain oil and gas properties described herein and desires to sell such properties; and

 

B.            WHEREAS, Buyer desires to purchase such properties.

 

NOW, THEREFORE, in consideration of their mutual promises contained herein, the benefits to be derived by each party hereunder and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller agree to the purchase and sale of the oil and gas properties described below, in accordance with the following terms and conditions:

 

AGREEMENT

 

1.     Purchase and Sale.

 

Property Being Sold. Subject to the terms and conditions of this Agreement, Seller agrees to sell and convey and Buyer agrees to purchase and accept the Subject Property for the Purchase Price as defined hereinafter. The term "Subject Property" or, where the context so requires, "Subject Properties," shall mean:

 

(a)   Leaseholds. All of Seller's right, title and interest in and to all oil and gas leaseholds, oil, gas and other minerals, including working interests, carried working interests, rights of assignment and reassignment, net revenue interests, record title interests, undeveloped locations and all other interests under or in oil, gas or mineral leases, and interests in rights to explore for and produce oil, gas or other minerals which are described in Exhibit "A" (the "Leases");

 

(b)   Rights in Production. All of Seller's right, title and interest in and to all reversionary interests, backin interests, overriding royalties, production payments, net profits interests, mineral and royalty interests in production of oil, gas or other minerals attributable or allocable to the Leases, to the extent produced on or after the Effective Date;

 

(c)   Fee Interests. All of Seller's right, title and interest in the fee, fee mineral and fee royalty interests described in Exhibit "A" (the "Fee Interests");

 

 

  

2

  

 

(d)  Wells. All of Seller's right, title and interest in and to producing, non-producing and shut-in oil and gas wells and saltwater disposal or injection wells located upon the lands to which the Leases apply (hereinafter "Wells");

 

(e)   Units. All of Sellers right, title and interest in and to the production from the pools or units set forth on Exhibit "B";

 

(f)   Contract Rights. All of Seller's right, title and interest in or derived from pooling, unitization, and other contracts and agreements, orders and decisions of regulatory authorities establishing or relating to units, unit operating agreements, operating agreements, gas purchase agreements, oil purchase agreements, gathering agreements, transportation agreements, processing or treating agreements, farmout agreements and farmin agreements and any other agreements described in Exhibit "C", which relate to any of the Leases, Wells or Units to the extent such contracts are assignable (hereinafter the "Contracts"). In the event there are other agreements or contracts necessary or desirable with respect to the operations being conducted on the Units, at its option, Buyer shall be entitled to the benefits of such contracts or agreements;

 

(g)   Easements. All of Seller's right, title and interest in and to all rights-of­way, easements, licenses, and servitudes appurtenant to or used in connection with the Leases, Wells or Units (hereinafter "Easements");

 

(h)   Permits. All of Seller's right, title and interest in and to all permits and licenses of any nature owned, held or operated in connection with operations for the exploration and production of oil, gas or other minerals to the extent the same are used or obtained in connection with any of the Leases, Contracts, Easements, Equipment (as hereinafter defined), Wells or Units (hereinafter "Permits");

 

(i)   Equipment. All of Seller's right, title and interest in and to all personal property, surface equipment, down-hole equipment and pipelines, buildings and inventory used or obtained in connection with the Leases, Easements, Wells, Permits or Units (hereinafter "Equipment");

 

(j)   Remaining Interests. All other rights and interests in, to or under or derived from the Subject Property, even though the same may be improperly described in or omitted from the Exhibits. It is the express intent of the parties that all of Seller's right, title and interest in and to the Leases, Contracts, Easements, Equipment, Permits, Wells or Units , and interests appurtenant thereto, be assigned to Buyer hereunder; and

 

(k)   Records. Copies of all geological and geophysical maps, records, land records, division orders, Well logs, production files and other records and files relating to the Leases, Wells, Contracts, Easements, Permits, Equipment or Units.

 

Notwithstanding anything to the contrary contained herein, there is hereby excluded from this purchase and sale, and the Subject Properties do not cover or include any of the following:

 

 

  

3

  

(a)   Proprietary seismic, geological, geochemical, and geophysical data or interpretations of data relating to the Leases, whether belonging to Seller or licensed from third parties but only to the extent they are restricted from transfer or distribution by any legal constraints, obligations of confidence or prior agreements with third parties, if any;

 

(b)  Trade credits, accounts, deposits with utilities, causes of action, and notes receivable and adjustments or refunds (including without limitation transportation tariff refunds, take-or-pay claims, audit adjustments claims for under-or-non-payment and over, inaccurate or excessive billings, and claims with respect to breach of contract) arising under contracts and agreements and attributable to the Subject Properties with respect to any period before the Effective Date, including, without limitation, any claim Seller may have for refunds or reimbursement of money that may have been paid by Seller to any current or prior operator of the Subject Properties on account of over-billings, excessive billings and inaccurate billings or otherwise made by such operator as a result of Seller's interest in the Properties;

 

(c)   Oil, gas and associated hydrocarbon products produced from the Subject Properties prior to the Effective Date;

 

(d)   All claims and causes of action Seller may have, as of the Effective Date, against any purchaser or purchasers of oil or gas produced from the Subject Properties or parties to any Contracts applicable to the Subject Properties; and

 

(e)  Photocopies of any of the books and records pertaining to the Subject Properties made by Seller.

 

2.           Purchase Price. Buyer agrees to pay to Seller for the Subject Property the sum of Six Million Dollars ($6,000,000.00) (the "Purchase Price"), adjusted in accordance with the terms of this Agreement. The Purchase Price shall be payable at Closing to Seller in immediately available funds. Buyer has previously paid to Seller the sum of Five Hundred Thousand dollars ($500,000.00) which shall serve as a performance deposit (the "Performance Deposit"), which Performance Deposit shall be credited to the Purchase Price at Closing. The Performance Deposit shall be refunded to Buyer only upon termination of this Agreement by either party pursuant to Section 6(d) hereof. Buyer has also previously paid an additional deposit of Five Hundred Thousand dollars ($500,000.00) ("Additional Deposit"), which Additional Deposit shall be refunded by Seller to Buyer if the transaction contemplated by this Agreement (i.e., Closing) does not take place on or before June 30, 2010. Such refund of the Additional Deposit shall take place on July 1, 2010, unless the Closing Date is extended by mutual written agreement of the Parties.

 

3.           Effective Date and Closing. The conveyance of the Subject Property to Buyer shall be effective as of June 1, 2010 at 7:00 a.m. where the Subject Properties are located (the "Effective Date"), but title thereof shall be delivered at the "Closing", which shall take place on or before June 30, 2010 (the "Closing Date") unless extended by written agreement of the Parties. If Closing does not occur on or before June 30, 2010, and is not extended by the parties, this Agreement shall ipso facto terminate and Seller shall have the remedy therefor as provided in Section 2.

 

4.           Representations and Warranties of Seller. Seller represents and warrants to Buyer as of the date hereof and will represent and warrant at the Closing, as follows:

 

 

  

4

  

(a)   Authority. Seller is a limited partnership duly organized and in good standing under the laws of the State of Texas, is duly qualified and in good standing to carry on its business in the states where the Subject Properties are located, and has all the requisite power and authority to enter into, deliver and perform this Agreement and carry out the transactions contemplated under this Agreement.

 

(b)  Valid Agreement. This Agreement constitutes the legal, valid and binding Agreement of Seller. At the Closing, all instruments required hereunder to be executed and delivered by Seller shall be duly executed and delivered to Buyer and shall constitute legal, valid and binding obligations of Seller. The execution and delivery by Seller of this Agreement, the consummation of the transactions set forth herein and the performance by Seller of Seller's obligations hereunder have been duly and validly authorized by all requisite limited partnership action on the part of Seller and will not violate, conflict with or result in any violation or breach of any provision of (i) any agreement, contract, mortgage, lease, license or other instrument to which Seller or the Subject Property is a party or by which Seller or the Subject Property is bound; (ii) any governmental franchise, license, permit or authorization or any judgment or order of judicial or governmental body applicable to Seller or Subject Property, or (iii) any law, statute, decree, rule or regulation of any jurisdiction in the United States to which Seller or the Subject Property is subject.

 

(c)   Authorization. This Agreement has been duly authorized, executed and delivered by Seller. All instruments required to be delivered by Seller at the Closing shall be duly authorized, executed and delivered by Seller. This Agreement and all documents executed by Seller in connection with this Agreement shall constitute legal, valid and binding obligations of Seller, enforceable against Seller in accordance with their terms, subject to the effects of bankruptcy, insolvency, reorganization, moratorium and similar laws from time to time in effect, as well as general principles of equity.

 

(d)   Agreements. To Seller's best knowledge, the Leases, Permits, Easements and Contracts are in full force and effect and are valid and subsisting documents covering the entire estates which they purport to cover; and all royalties, rentals and other payments due under the Leases, Permits, Easements and Contracts have been fully, properly and timely paid. Seller will use its commercially reasonable efforts to take all action necessary to keep the Leases, Permits, Easements and Contracts in force and effect until the Closing.

 

(e)   Prepayments and Wellhead Imbalances. Seller is not obligated, by virtue of a production payment, prepayment arrangement under any contract for the sale of hydrocarbons and containing a "take or pay", advance payment or similar provision, gas balancing agreement, hedging contract or any other arrangement to deliver hydrocarbons produced from the Subject Property at any time after the Effective Date without then or thereafter receiving full payment therefor.

 

(f)  Taxes. All due and payable ad valorem, property, production, severance and similar taxes and assessments based on or measured by the ownership of property or the production of hydrocarbons or the receipt of proceeds therefrom on the Subject Property, which are due or become due prior to the Closing Date for any periods prior to the Effective Date, have been properly paid.

 

 

  

5

  

 

(g)   Brokers. Seller has incurred no obligation or liability, contingent or otherwise for brokers' or finders' fees with respect to this transaction for which Buyer shall have any obligation or liability.

 

(h)  Maintenance of Interests. To Seller's knowledge, the Subject Properties have been maintained and operated by the operator of the Subject Properties in a reasonable and prudent manner, and Seller will use its best efforts to cause such operator from the date of this Agreement until the Closing to maintain and operate the Subject Properties in full compliance with applicable law and orders of any governmental authority, to maintain insurance and bonds now in force with respect to the Subject Property, to pay when due all costs and expenses coming due and payable in connection with the Subject Property, and to perform all of the covenants and conditions contained in the Leases, Permits, Deeds, Easements and Contracts and all related agreements.

 

(i)   Suits and Claims. No suit, action, claim, or other proceeding is now pending or, to Seller's best knowledge, threatened before any court or governmental agency against the Subject Property, and Seller shall promptly notify Buyer in writing of any such proceeding which arises or is threatened prior to the Closing.

 

(j)   Access. To the same extent Seller has such right, if any, and subject to Section 7(a) of this Agreement, prior to the Closing, Buyer and the employees and agents of Buyer shall have access to the Subject Property at Buyer's sole risk, cost and expense at all reasonable times, and shall have the right to conduct equipment inspections, environmental audits, and any other investigation of the Subject Property on one day's prior notice to Seller and upon agreement with Seller as to time and place of such actions.

 

(k)   Environmental Matters. To Seller's best knowledge, Seller is not in material violation of any Environmental Laws (as such term is defined in Section 7(f)) applicable to the Subject Properties, or any material limitations, restrictions, conditions, standards, obligations or timetables contained in any Environmental Laws. No notice or action alleging such violation is pending or, to Seller's best knowledge, threatened against the Subject Property.

 

(l)    Obligation to Close. Seller shall take or cause to be taken all actions necessary or reasonable to consummate the transactions contemplated by this Agreement and to assure that as of the Closing it will not be under any material corporate, legal, governmental or contractual restriction that would prohibit or delay the timely consummation of such transactions.

 

(m)   No Third Party Options. To Seller's knowledge, no existing agreements, options, or commitments with, of or to any person to acquire the Subject Property are in effect.

 

(n)  Existing Condition. Seller will cause the operator of the Subject Properties to continue to manage and operate the Subject Property in the ordinary course of business and in substantially the same manner as it was managed and operated prior to the Effective Date. To Seller's knowledge, no material adverse changes in the condition of the Subject Property from the Effective Date to the Closing Date have occurred.

 

  

6

  

 

(o)  Bankruptcy. There are no bankruptcy, reorganization, or similar arrangement proceedings pending, being contemplated by or, to Seller's knowledge, threatened against it.

 

(p)  Special Warranty. Seller shall warrant title to and defend all and singular the Subject Property to be conveyed to Buyer against every person whomsoever lawfully claiming the Subject Property or any part thereof, by, through and under Seller, but not otherwise, subject to Permitted Encumbrances and Section 14 of this Agreement.

 

(q)   Outstanding Capital Commitments. To Seller's knowledge, there are no outstanding authorities for expenditure or other commitments of Seller related to the Wells or for capital expenditures for which all of the activities anticipated in such AFE's or commitments have not been completed by the date of this Agreement.

 

(r)    Independent Evaluation. Seller is an experienced and knowledgeable investor in the oil and gas business. Seller has been advised by and has relied solely on its own expertise and legal, tax, reservoir engineering, environmental and other professional counsel concerning this transaction, the Subject Property and value thereof.

 

(s)   Liens. The Subject Property will be conveyed free and clear of all liens, mortgages, pledges and encumbrances.

 

5.    Representations and Warranties of Buyer. Buyer represents and warrants to Seller as of the date hereof and will represent and warrant at the Closing, as follows:

 

(a)   Authority. Buyer is a limited partnership duly organized and in good standing under the laws of the State of Texas, is duly qualified and in good standing to carry on its business in the states where the Subject Property is located, and has all the requisite power and authority to enter into and perform this Agreement and carry out the transactions contemplated under this Agreement.

 

(b)  Valid Agreement. This Agreement constitutes the legal, valid and binding Agreement of Buyer. At the Closing, all instruments required hereunder to be executed and delivered by Buyer shall be duly executed and delivered to Seller and shall constitute legal, valid and binding obligations of Buyer. The execution and delivery by Buyer of this Agreement, the consummation of the transactions set forth herein and the performance by Buyer of Buyer's obligations hereunder have been duly and validly authorized by all requisite partnership action on the part of Buyer and will not conflict with or result in any violation of any provision of (i) any agreement, contract, mortgage, lease, license or other instrument to which Buyer is a party or by which Buyer is bound; (ii) any governmental franchise, license, permit or authorization or any judgment or order of judicial or governmental body applicable to Buyer, or (iii) any law, statute, decree, rule or regulation of any jurisdiction in the United States to which Buyer is subject.

 

  

7

  

 

(c)  Independent Evaluation. Buyer is an experienced and knowledgeable investor in the oil and gas business. Buyer has been advised by and has relied solely on its own expertise and legal, tax, reservoir engineering, environmental and other professional counsel concerning this transaction, the Subject Property and value thereof.

 

(d)  Brokers. Buyer has incurred no obligation or liability, contingent or otherwise for brokers' or finders' fees with respect to this transaction for which Seller shall have any obligation or liability.

 

6.    Title Matters.

 

(a)  Examination of Files and Records. Upon execution of and pursuant to the terms of this Agreement, Buyer shall have the right to conduct its investigation of the status of title to the Subject Properties. Seller will make available to Buyer all existing Lease, Well and title files, production records, Permits, Easements, Contracts, division orders and other information, to the extent not subject to confidentiality agreements, in Seller's possession, custody or control relating to the Subject Property (collectively "Data"). Existing abstracts and title opinions will not be updated by Seller. Upon reasonable advanced notice from Buyer, all such Data shall be made available at Seller's office during normal working hours. Seller will also permit Buyer to examine and copy at Buyer's expense such Data. If Closing does not occur, Buyer shall promptly return all such Data and other materials provided by Seller to Buyer hereunder. Seller shall not be obligated to furnish any updated abstracts, title opinions or additional title information, but shall cooperate with Buyer in Buyer's efforts to obtain, at Buyer's expense, such additional title information as Buyer may reasonably deem prudent. The Data and other information concerning the Subject Properties are files or copies thereof that Seller has used or generated in its normal course of business. SELLER MAKES NO WARRANTY OR REPRESENTATION OF ANY KIND, EITHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, AS TO THE DATA, INCLUDING ANY REPRESENTATION OR WARRANTY AS TO THE ACCURACY AND COMPLETENESS OF THE RECORDS. Buyer acknowledges that any conclusions drawn from the Data and other information concerning the Properties are the result of its own independent review and judgment.

 

(b)   Notice of Title Defect. Buyer will review title to the Subject Property prior to Closing and notify Seller in writing of any Title Defect (defined below) it discovers as soon as reasonably practicable after its discovery, but in no event less than five (5) business days prior to the Closing Date (hereinafter "Title Notice Date"). Any notice provided hereunder shall include appropriate evidence to substantiate the Buyer's position, including a description of the Title Defect, the basis for the Title Defect, the portion of the Subject Property affected by the Title Defect, the amount by which Buyer believes the value of the Subject Property has been reduced because of the Title Defect and the computations and information upon which Buyer's belief is based. Buyer will be deemed to have conclusively waived any Title Defect about which it fails to notify Seller in writing within the applicable period specified in the preceding sentence except as otherwise provided herein.

 

 

  

8

  

 

(c)   Procedure. If Buyer properly notifies Seller of a Title Defect, Buyer and Seller shall promptly meet and, in good faith, negotiate in an effort to agree upon the validity of each claimed Title Defect and the resolution of such claimed Title Defects. Absent an agreement on the claimed Title Defect, Buyer shall have the option to either (i) waive the Title Defect and proceed to Closing, or (ii) request that Seller cure the Title Defect, but Seller shall have no obligation to cure any Title Defect. If Seller elects not to cure a Title Defect, Seller may, at its sole option, either (i) reduce the Purchase Price to account for such Title Defect in an amount not to exceed the Allocated Value (as defined below) of the affected portion of the Subject Property and convey such affected Subject Property to Buyer or (ii) retain title to the affected Subject Property and refund the Allocated Value (defined below) of the affected Subject Property. If Seller elects to attempt to cure the Title Defect, Seller will have until June 29, 2010 to attempt to cure the Title Defect. With respect to a Title Defect that Seller is unable to cure within such period, Seller may, at its sole option, (i) refund to Buyer a portion of the Purchase Price to account for such Title Defect in an amount not to exceed the Allocated Value (defined below) of the affected Subject Property and convey title to the affected Subject Property to Buyer, or (ii) retain title to the affected Subject Property and refund the Allocated Value (defined below) of the affected Subject Property.

 

(d)  Right to Terminate Agreement. Notwithstanding anything in this Section 6 or Section 7 that follows, in the event the sum of the Title Defects and Environmental Defects (defined below) equals or exceeds twenty percent (20%) of the Purchase Price and Seller elects not to cure such Title Defects or Environmental Defects or if Seller elects to cure the Title Defects and correct the Environmental Defects and on June 29, 2010 the sum of the uncured Title Defects and uncorrected Environmental Defects exceeds twenty percent (20%) of the Purchase Price, either party may elect to terminate this Agreement without liability to the other party, in which case Buyer shall be entitled to a refund of the Performance Deposit.

 

(e)  Definition of Title Defect. For purposes of this Agreement, the term "Title Defect" shall mean any separate matter in excess of fifty thousand dollars ($50,000.00), positive or negative, that would cause the title to the Subject Property to fail to qualify as Good and Defensible Title (defined below) or which would otherwise reduce the net revenue interest to be conveyed to Buyer as set forth in Exhibit "B". As used herein, the term "Good and Defensible Title" shall mean, as to each of the Subject Properties, title to the Subject Properties by virtue of which Seller can successfully defend against a claim to the contrary made by a third party, based upon industry standards in the acquisition of oil and gas properties, and in the exercise of reasonable judgment and in good faith, such that (i) Seller (and upon Closing, Buyer), by virtue of its ownership interests in the Subject Property described in Exhibit "B", is entitled to receive a fractional decimal interest of not less than the Net Revenue Interest set forth in Exhibit "B", in and to the income, including but not limited to payments for production from the Subject Properties without reduction, suspension, or termination throughout the productive life of each such Subject Property (the "Net Revenue Interest"); (ii) Seller is obligated to bear (and after Closing shall obligate Buyer to bear) a fractional decimal interest of not more than the Working Interest set forth on Exhibit "B" ("Working Interest") of the costs and expenses related to the maintenance, development, drilling, equipping, testing, completing, sidetracking, reworking and operation of each Subject Property without increase throughout the productive life of each Subject Property; and (iii) the Subject Properties are subject to no liens, encumbrances, obligations or defects except those which are Permitted Encumbrances.

 

As used herein, the term "Permitted Encumbrances" shall mean:

 

 

  

9

  

 

(1)  Lessors' royalties, overriding royalties, payments out of production, reversionary interests and other burdens affecting Seller's Net Revenue Interest if the net cumulative effect of such burdens does not operate to (i) reduce the Net Revenue Interest of Seller in any Unit to less than the Net Revenue Interest for such Unit as set forth in Exhibit "B"; or (ii) increase the Working Interest of Seller in any such Unit to greater than the Working Interest therefore as set forth in Exhibit "B" (unless Seller's Net Revenue Interest therein is increased in the same proportion);

 

(2)   Preferential rights to purchase and required third party consents to assignments and similar agreements with respect to which (i) waivers or consents are obtained from the appropriate parties prior to the Title Notice Date; or (ii) the appropriate time period for asserting such rights has expired prior to the Title Notice Date, following notice to such parties in compliance with the applicable agreements, without an exercise of such rights;

 

(3)  Non-consent penalties applied against the interest of Seller arising under applicable operating agreements, which are scheduled on Exhibit "B" (including non-consent balances) and taken into account in the calculation of the interests shown on Exhibit "B";

 

(4)   Easements, rights-of-way, servitudes, permits, surface leases and other rights in respect of surface operations which do not interfere with or detract from the operations, value or use of the Subject Properties by Buyer;

 

(5)    Such Title Defects as Buyer has waived or released or is deemed to have waived pursuant to the terms of this Agreement;

 

(6)   The terms and conditions of all Leases and contracts, provided the same do not result in a decrease in the Net Revenue Interest or an increase of the Working Interest in any of the Units (unless Seller's Net Revenue Interest therein is increased in the same proportion) or that do not interfere with or detract from the operations, value or use of the Subject Properties by Buyer;

 

(7)   Rights of reassignment, to the extent any exist as of the date of this Agreement, upon the surrender or expiration of any lease;

 

(8)   Liens for taxes or assessments not yet due or not yet delinquent; and

 

(9)   Liens, if any, to be released at Closing in a form acceptable to Buyer.

 

(f)   Definition of Allocated Value. The term "Allocated Value" shall be the value agreed upon by the Parties for the Units as set forth in Exhibit "B".

 

(g)   Increase in Net Revenue Interest/Decrease in Working Interest. Subject to the rights of Buyer and Seller under Section 6(d) to terminate this Agreement, should Buyer and Seller determine after the execution hereof and prior to Closing that Seller's Net Revenue Interest is greater than as shown on Exhibit "B" or that Seller's Working Interest is lesser than as shown on Exhibit "B" and such change exceeds the threshold amount in Section 6(e), Buyer and Seller agree to adjust the Purchase Price to reflect such change(s) in interest and Seller shall correct such Exhibit "B" and convey such interests to Buyer.

 

 

  

10

  

 

7.      Environmental Matters.

 

(a)  Inspection. Prior to Closing and upon reasonable prior notice to Seller, Buyer will have access to and the opportunity to inspect the Subject Property for all purposes, including without limitation, for the purposes of detecting the presence of hazardous or toxic substances, pollutants or other contaminants, environmental hazards, naturally occurring radioactive materials (NORM), produced water, air emissions, contamination of the surface and subsurface and any other Environmental Defect (defined below). Prior to the Closing and subject to the provisions of this Section, Buyer will have satisfied itself as to the physical and environmental surface and subsurface condition of the Subject Property and method of operation and, except as set forth herein and in Seller's representations, warranties or indemnities, to accept an assignment of the Subject Property at Closing on an "AS IS, WHERE IS" basis, "WITH ALL FAULTS" _Buyer recognizes that the Subject Properties are operated by party other than Seller and that Seller's ability to obtain access to the Subject Properties, and the manner and extent of such access, is subject to such third party operator. Buyer agrees to comply fully with the rules, regulations and instructions issued by the operator of the Subject Properties regarding the actions of Buyer while upon, entering or leaving the Subject Properties, and Buyer agrees to not unreasonably interfere with the normal operation of the Subject Properties. All environmental reports prepared or obtained by Buyer or its representatives shall be maintained in strict confidence and for use solely in connection with its evaluation of the Subject Properties. Such reports shall not be disclosed to any other party except for Buyer's affiliates and partners without Seller's prior written consent. Buyer shall maintain in strict confidence the results of any environmental report if Closing does not occur. If Buyer exercises rights of access under this Section or otherwise, or conducts examinations or inspections under this Section or otherwise, then (a) such access, examination and inspection shall be at Buyer's sole risk, cost and expense and Buyer waives and releases all claims against Seller (and its affiliates and the respective partners. directors, officers, employees, attorneys, contractors and agents of such parties) arising in any way therefrom or in any way connected therewith or arising in connection with the conduct of its directors, officers, employees, attorneys, contractors and agents in connection therewith and (b) Buyer shall indemnify, defend and hold harmless Seller (and its affiliates and the respective partners, officers, directors, employees, attorneys, contractors and agents of such parties) from any and all claims, actions, causes of action liabilities, damages, losses, costs or expenses (including, without limitation, court costs and attorneys fees), or liens or encumbrances for labor or materials, arising out of or in any way connected with such matters.

 

(b)  Notice of Environmental Defect. Buyer will notify Seller in writing of any Environmental Defect (defined below) it discovers as soon as reasonably practicable after its discovery, but in no event less than five (5) business days prior to the Closing Date. Any notice provided hereunder shall include appropriate evidence to substantiate the Buyer's position, including a description of the Environmental Defect, the Environmental Law applicable to the Environmental Defect and Buyer's basis for believing that Seller is subject to liability pursuant to such Environmental Law, the portion of the Subject Property affected by the Environmental Defect, the amount by which Buyer believes the value of the Subject Property has been reduced because of the Environmental Defect and the evidence, computations and information upon which Buyer's belief is based. Buyer will be deemed to have conclusively waived any Environmental Defect about which it fails to notify Seller in writing within the applicable period specified in the preceding sentence.

 

  

11

  

 

 

(c)  Procedure. If Buyer properly notifies Seller of an Environmental Defect, Buyer shall have the option to either (i) waive the Environmental Defect and proceed to Closing, or (ii) request that Seller correct the Environmental Defect, but Seller shall have no obligation to correct any Environmental Defect. If Seller elects not to correct an Environmental Defect, Seller may, at its sole option, either (i) reduce the Purchase Price to account for such Environmental Defect in an amount not to exceed the Allocated Value (defined above) of the affected portion of the Subject Property and convey such affected Subject Property to Buyer or (ii) retain title to the affected Subject Property and refund the Allocated Value (defined above) of the affected Subject Property. If Seller elects to attempt to correct the Environmental Defect, Seller will have ninety (90) days following the Closing Date to attempt to correct the Environmental Defect. With respect to an Environmental Defect that Seller is unable to correct within such ninety (90) day period following the Closing Date, Seller may, at its sole option, (i) refund to Buyer a portion of the Purchase Price to account for such Environmental Defect in an amount not to exceed the Allocated Value (defined above) of the affected Subject Property and require Buyer to retain title to the affected Subject Property, or (ii) refund the Allocated Value (defined below) of the affected Subject Property and require Buyer to immediately reassign the affected Subject Property to Seller if such property had been previously assigned to Buyer.

 

(d)  Definition of Environmental Defect. As used herein, an "Environmental Defect" shall mean a condition affecting a Subject Property that is a violation of Environmental Law and which would cost, on an individual Well basis, in excess of five thousand dollars ($5,000.00) to remediate or, in the aggregate for all Wells, in excess of fifteen thousand dollars ($15,000.00) to remediate.

 

(e)  Definition of Environmental Laws. As used herein, the term "Environmental Laws" shall mean (i) the common law, and (ii) any and all federal, state and local statutes, regulations, rules, orders, ordinances or permits of any governmental authority which pertain to health, the environment, wildlife and natural resources in effect in any and all jurisdictions in which the Subject Property is located, including without limitation, the Clean Air Act, as amended, and the Federal Water Pollution Control Act, as amended, the Oil Pollution Act of 1990 ("OPA90"), as amended, the Rivers and Harbors Act of 1899, as amended, the Safe Drinking Water Act, as amended, the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), as amended, the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), as amended, the Resource Conservation and Recovery Act ("RCRA"), as amended, the Hazardous and Solid Waste Amendments Act of 1984, as amended, the Toxic Substances Control Act, as amended, and the Hazardous Materials Transportation Act, as amended.

 

8.   Covenants of Seller Prior to Closing.

 

(a)   Operations. Until Closing, Seller shall do the following:

 

 

  

12

  

 

(i)   Use its best efforts to cause the operator of the Subject Properties to manage and operate the Subject Property in a good and workmanlike manner in accordance with good oilfield practices, in substantially the same manner as it previously managed and operated the Subject Property, and in compliance in all material respects with all applicable laws, rules, regulations, permits and approvals;

 

(ii)   Maintain insurance now in force with respect to the Subject Property;

 

(iii)  Notify Buyer in writing of any claim or demand which might materially adversely affect title to or operation of the Subject Property;

 

(iv)  Pay costs and expenses attributable to the Subject Property as they become due.

 

(b)   Negative Covenants. Until Closing, Seller shall not do any of the following with regard to the Subject Property without first notifying Buyer in writing:

 

(i)   Consent to abandon any Well unless required to by a regulatory agency;

 

(ii)   Release all or any portion of a Lease, Permit, Contract or Easement;

 

(iii)   Agree to commence or consent to an operation if the estimated cost of the operation exceeds seven thousand five hundred dollars ($7,500) net to the Seller's interest except for those operations for which Buyer provides its written consent;

 

(iv)   Create a lien, security interest or other encumbrance on the Subject Property;

 

(v)   Remove or dispose of any of the Subject Property;

 

(vi)   Amend a Lease, Permit, Contract or Easement or enter into any new contracts affecting the Subject Property; or

 

(vii)  Waive, compromise or settle any claim that would materially affect ownership, operation or value of any of the Subject Property exceeding three thousand five hundred dollars ($3,500) net to the Seller's interest.

 

(c)   Seller shall cooperate with Buyer in attempting to obtain all permissions, approvals and consents as may be required to consummate the transactions contemplated in this Agreement.

 

9.    Conditions to Closing.

 

(a)   Seller's Conditions The obligations of Seller at Closing are subject, at the option of Seller, to the following conditions, any one or more of which may be waived, in whole or in party, by Seller:

 

 

  

13

  

 

(i)  that all representations and warranties of Buyer contained in this Agreement shall be true and correct in all material respects at and as a Closing as if such representations and warranties were made at and as of Closing;

 

(ii)  that Buyer shall have performed and satisfied in all material respects all covenants and agreements required by this Agreement to be performed or satisfied by Buyer at or prior to Closing; and

 

(iii)  at the Closing Date, no suit, action or other proceeding shall be pending or threatened in which it is sought to restrain or prohibit the performance of or to obtain damages or other relief in connection with this Agreement or the transactions contemplated hereby;

 

(b)   Buyer's Conditions The obligations of Buyer at Closing are subject, at the option of Buyer, to the following conditions, any one or more of which may be waived, in whole or in part, by Buyer:

 

(i)  that all representations and warranties of Seller contained in this Agreement and in any agreements or documents delivered in connection herewith shall be true and correct in all material respects at and as of Closing as if such representations and warranties were made at and as of Closings;

 

(ii)  that Seller shall have performed and satisfied in all material respects all covenants and agreements required by this Agreement to be performed or satisfied by Seller at or prior to Closing;

 

(iii)  since the date of this Agreement, there shall have been no material adverse change in the condition of the Leases or Wells, except depreciation of personal property through ordinary wear and tear and depletion resulting from production; and

 

(iv)  at the Closing Date, no suit, action or other proceeding shall be pending or threatened in which it is sought to restrain or prohibit the performance of or to obtain damages or other relief in connection with this Agreement or the transactions contemplated hereby.

 

10.   Closing. This Agreement may be executed by either party and transmitted to the other party by facsimile transmission, and the facsimile transmission shall be deemed to be an original. Seller and Buyer shall negotiate a "Preliminary Closing Settlement Statement" three (3) business days prior to Closing respecting adjustments to the Purchase Price. At the Closing, the following shall occur:

 

(a)    Buyer and Seller shall agree upon a "Closing Settlement Statement," which shall include adjustments to the Purchase Price, which are known as of the Closing Date, as follows:

 

  

14

  

 

(i)  The estimated amount to be received by Buyer, including any applicable bonuses, for Seller's interest in the quantity of saleable oil in storage on the Effective Date, net of all applicable taxes and net of any charges attributable to such oil that are deducted under the Contract by the purchaser before remitting payment, which estimated amount shall be corrected to the actual amount received in the Final Settlement Statement (defined below);

 

(ii)  The amount of all operating and capital expenditures that are attributable to the Leases, Wells, Units or Equipment for the period from the Effective Date to the Closing Date;

 

(iii)  The amount received by Sellers for the sale or other disposition of produced natural gas and crude oil, net of all taxes for which Seller was not reimbursed, for the period from the Effective Date to the Closing Date;

 

(iv)  The amount of proceeds (other than accounts receivable) received by Seller for disposition, after the Effective Date, of any substances produced from the Subject Property; and

 

(v)  Any ad valorem, property, production, severance and similar taxes and assessments on the Subject Property for the calendar year 2010 which have been paid by the Seller. Upon receipt of an invoice for ad valorem taxes for 2010, Buyer shall forward a copy of same to Seller and Seller shall be responsible for payment to Buyer of 6/12ths of the same within thirty (30) days of receipt of such statement. In the event Seller receives such ad valorem tax statement, Seller shall forward such statement to Buyer and Seller shall deliver 6/12ths of the ad valorem tax to Buyer prior to the date on which such taxes are due and payable. It is the intent of this provision that Seller shall bear its proportionate part of ad valorem taxes for tax year 2010 only.

 

(b)   Seller shall execute, acknowledge and deliver the following:

 

(i)    an Assignment, Conveyance and Bill of Sale in a mutually satisfactory and recordable form containing a special warranty of title, the form of which is attached hereto as Exhibit "D" (the "Assignment");

 

(ii)  counterpart assignments of operating rights and of record title to the Leases on officially approved forms to satisfy applicable governmental requirements;

 

(iii)  a Deed conveying any Fee Interests in a mutually satisfactory and recordable form containing a special warranty of title the form of which is attached hereto as Exhibit "E" (the "Deed"); and

 

(iv)  letters-in-lieu of transfer orders, and other instruments conveying title to the Subject Property and the production therefrom to Buyer. Buyer shall record and file the Assignment and Deed in a timely manner.

 

 

  

15

  

(c)  Buyer shall deliver the remaining amount due of the Purchase Price, as adjusted pursuant to this Section 10 and Sections 6 and 7, to Seller by allocating it as follows:

(i)   Five Million Dollars ($5,000,000.00) to BANK OF SCOTLAND;

 

The Final Purchase Price provided for under this Agreement excludes any sales taxes or other taxes in connection with the sale of property pursuant to this Agreement. If a determination is ever made that a sales tax or other transfer tax applies, Buyer and Seller shall be liable for such tax equally. Buyer and Seller shall also be equally liable for any applicable conveyance, transfer and recording fees, and real estate transfer stamps or taxes imposed on any transfer of property pursuant to this Agreement.

 

(d)  Seller shall deliver the Records to Buyer.

 

(e)   Seller shall deliver exclusive possession of the Subject Property to Buyer.

 

(f)   Seller shall deliver a full and complete release of the following: 1.) that certain mortgage executed and effective on June 30, 2008 and recorded under Document No. 20081598126 and 2.) that certain mortgage executed on December 22, 2009 but effective on December 30, 2009 and recorded under Document No. 20100417682.

 

(g)   The Parties shall execute and deliver any necessary side letter agreements to fulfill the purpose of this Agreement.

 

11.   Post-Closing Covenants.

 

(a)  Final Settlement Statement. Not more than ninety (90) days after the Closing, Seller shall prepare and deliver to Buyer, in accordance with this Agreement, a Final Settlement Statement setting forth each adjustment or payment which was not fmally determined as of the Closing and showing the calculation of such adjustments. As soon as practicable after receipt of the Final Settlement Statement, Buyer shall deliver to Seller a written report containing any changes which Buyer proposes be made to the Final Settlement Statement. The parties shall undertake with diligence to agree with respect to the amounts due pursuant to such post-Closing adjustments no later than one hundred twenty (120) days after the Closing. The date upon which such agreement is reached or upon which the Final Purchase Price is established shall be called the "Final Settlement Date". In the event that (1) the Final Purchase Price is more than the amount paid to Seller at Closing, Buyer shall pay to Seller in immediately available funds the amount of such difference, or (2) the Final Purchase Price is less than the amount paid to Seller at Closing, Seller shall pay to Buyer in immediately available funds the amount of such difference. Payment by Buyer or Seller shall be made within ten (10) business days of the Final Settlement Date.

 

(b)Additional Payments Received. After the Final Settlement Date, Seller covenants and agrees that it will hold and promptly transfer and deliver to Buyer, from time to time as and when received by it, any cash, checks with appropriate endorsements (using its reasonable efforts not to convert such checks into cash), or other property that it may receive which belongs to Buyer, and will account to Buyer for all such receipts.

 

  

16

  

 

(c)   Assumption of Obligations. From and after the Effective Date, Buyer assumes, will be bound by, and agrees to perform all express and implied covenants and obligations of Seller relating to the Subject Property, whether arising under (i) the Leases, prior assignments of the Leases, the Contracts, the Easements, the Permits or any other contractually-binding arrangements to which the Subject Property (or any component thereof) may be subject and which will be binding on Buyer and/or the Subject Property (or any component thereof) after the Closing or (ii) any applicable laws, ordinances, rules and regulations of any governmental or quasi-governmental authority having jurisdiction over the Subject Property. Buyer also assumes Seller's proportionate part of the expenses and costs of plugging and abandoning the Wells and restoration of operation sites, all in accordance with the applicable laws, regulations and contractual provisions.

 

(d)  Buyer understands and agrees that the Subject Property is subject to all existing Contracts relating to the Subject Property. Buyer shall assume and be responsible for all such obligations of Seller as of the Effective Date.

 

(e)  Buyer and Seller agree to execute and deliver from time to time such further instruments and do such other acts as may be reasonably necessary to effectuate the purposes of this Agreement.

 

12.   Costs and Revenues After Effective Date. Seller shall be responsible for the payment of all costs, liabilities and expenses incurred in the ownership and operation of the Subject Property prior to the Effective Date and not yet paid or satisfied. All payments for hydrocarbons produced prior to the Effective Date shall be the property of Seller. Buyer shall remit production proceeds for production prior to the Effective Date, if any, received by Buyer from the sale of hydrocarbons belonging to Seller. Buyer shall be responsible for payment (at Closing or thereafter if not reflected on the Preliminary Closing Settlement Statement) of all costs, liabilities and expenses incurred in the ownership and operation of the Subject Property after the Effective Date to the Closing Date. Such costs and expenses shall include any necessary and reasonable expenses incurred by Seller in the operation, protection or maintenance of the Subject Property. All payments for hydrocarbons produced on or after the Effective Date shall be the property of Buyer. Seller shall remit production proceeds for production on or after the Effective Date, if any, received by Seller from sale of hydrocarbons belonging to Buyer, less expenses which Buyer is responsible for paying pursuant to this section, to Buyer immediately upon receipt. To the extent possible, adjustments shall be made to the Purchase Price to account for such costs and revenues in the Preliminary Closing Settlement Statement or if not liquidated by such date, they shall be addressed in the Final Settlement Statement.

 

13.  Casualty Loss. If, prior to the Closing Date, any portion of the Subject Property shall be destroyed by fire or other casualty, Buyer shall have the right to treat any resulting loss affecting such property as a Title Defect under Section 6 above. Should the portion of Subject Property affected be material in Buyer's reasonable opinion, Buyer shall have the right to exclude the affected Subject Property from this Agreement by giving notice thereof to Seller, in which event both parties shall negotiate in good faith any adjustment to the Purchase Price to account for the casualty loss.

 

  

17

  

 

14.  Independent Investigation and Disclaimer. The express representations of Seller set forth in this Agreement are exclusive and in lieu of any and all other representations. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE ASSIGNMENT OR THE DEED SELLER DISCLAIMS ALL LIABILITY AND RESPONSIBILITY FOR ANY OTHER REPRESENTATION, WARRANTY, STATEMENT OR INFORMATION MADE OR COMMUNICATED (ORALLY OR IN WRITING) TO BUYER, INCLUDING ANY STATEMENTS, REPRESENTATIONS, OPINIONS, INFORMATION OR ADVICE WHICH MAY HAVE BEEN PROVIDED AS AN ACCOMMODATION TO THE BUYER BY AN OFFICER, SHAREHOLDER, DIRECTOR, EMPLOYEE, AGENT, CONSULTANT OR REPRESENTATIVE OF SELLER, OR ANY ENGINEER OR ENGINEERING FIRM, OR ANY OTHER AGENT, CONSULTANT, OR REPRESENTATIVE. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE ASSIGNMENT OR THE DEED, SELLER MAKES ABSOLUTELY NO REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED OR STATUTORY, AS TO (a) TITLE TO ANY OF THE SUBJECT PROPERTY, (b) THE ABILITY OF ANY COMPONENT OF THE SUBJECT PROPERTY TO PRODUCE ANY HYDROCARBONS, (c) THE AMOUNTS, QUALITY OR DELIVERABILITY OF HYDROCARBON RESERVES ATTRIBUTABLE TO THE SUBJECT PROPERTY, OR ANY PART THEREOF, (d) GEOLOGICAL, GEOPHYSICAL OR OTHER INTERPRETATION OR ANY ECONOMIC EVALUATION, (e) PRESENT OR FUTURE SALES PRICES, OPERATING COSTS, OR OTHER ECONOMIC FACTORS, OR (f) THE CONDITION OR STATE OF REPAIR OF ANY WELL OR EQUIPMENT RELATING TO THE SUBJECT PROPERTY. BUYER ACKNOWLEDGES AND AFFIRMS THAT IT HAS EXERCISED ITS RIGHT TO INSPECT THE SUBJECT PROPERTY, AND EACH COMPONENT THEREOF; HAS SATISFIED ITSELF AS TO ITS PHYSICAL AND ENVIRONMENTAL CONDITIONS, BOTH SURFACE AND SUBSURFACE; AND FURTHER THAT BUYER HAS MADE ITS OWN INDEPENDENT INVESTIGATION, ANALYSIS AND EVALUATION OF THE SUBJECT PROPERTY, AND EACH COMPONENT THEREOF (INCLUDING BUYER'S OWN ESTIMATE AND APPRAISAL OF THE EXTENT AND VALUE OF THE PETROLEUM, NATURAL GAS AND OTHER HYDROCARBON RESERVES RESPECTING EACH COMPONENT OF THE SUBJECT PROPERTY). THE PERSONAL PROPERTY (SURFACE AND SUBSURFACE) CONVEYED AS PART OF THE SUBJECT PROPERTY ARE SOLD HEREUNDER "WHERE IS, AS IS, WITH ALL FAULTS", AND WITHOUT ANY WARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED OR STATUTORY, REGARDING THE CONDITION OR STATE OF REPAIR OF ANY OF THE EQUIPMENT COMPRISING PART OF THE SUBJECT PROPERTY.

 

15.  Indemnification.

 

(a) BY SELLER. EXCEPT AS SPECIFICALLY PROVIDED HEREIN, SELLER AGREES TO INDEMNIFY AND HOLD HARMLESS BUYER, ITS OFFICERS, D IRECTORS, EMPLOYEES AND AGENTS, FROM ALL CLAIMS, LOSSES, COSTS, LIABILITIES AND EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES AND COSTS) ARISING OUT OF OR RESULTING FROM SELLER'S OWNERSHIP OR OPERATION OF THE SUBJECT PROPERTY PRIOR TO THE EFFECTIVE DATE. PROVIDED, HOWEVER, THE FOREGOING INDEMNITY DOES NOT COVER OR INCLUDE ANY ENVIRONMENTAL DEFECT THAT AROSE OR OCCURRED PRIOR TO THE EFFECTIVE DATE IF (A) THE ENVIRONMENTAL DEFECT DOES NOT OTHERWISE QUALIFY AS AN ENVIRONMENTAL DEFECT AS DEFINED IN SECION 7(d) OF THIS AGREEMENT, (B)

 

  

18

  

BUYER DISCLOSED SUCH ENVIORNMENTAL DEFECT TO SELLER UNDER SECTION 7 OF THIS AGREEMENT OR (C) SUCH ENVORNMENTAL DEFECT WAS DISCLOSED UNDER ANY ENVIRONMENTAL REPORT OBTAINED BY BUYER UNDER SECTIO 7(a) OF THIS AGREEMENT. FURTHER, SELLER SHALL NOT HAVE ANY LIABILITY FOR INDEMNIFICATION UNDER THIS SECTION 15(A) FOR ENVIRONMENTAL DEFECTS THAT AROSE OR OCCURRED PRIOR TO THE EFFECTIVE DATE UNLESS PURCHASER HAS PROVIDED WRITTEN NOTICE OF SUCH ENVIRONMENTAL DEFECT SPECIFYING THE LOCATION AND NATURE OF SUCH ENVIRONMENTAL OBLIGATIONS WITHIN SIX (6) MONTHS FROM THE CLOSING. SELLER'S LIABILITY UNDER SECTION 15(a) FOR ENVIRONMENTAL DEFECTS SHALL NOT EXCEED TEN PERCENT (10%) OF THE PURCHASE PRICE.

 

(b)  BY BUYER. EXCEPT AS SPECIFICALLY PROVIDED HEREIN, BUYER AGREES TO INDEMNIFY AND HOLD HARMLESS SELLER, ITS OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS, FROM ALL CLAIMS, LOSSES, COSTS, LIABILITIES AND EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES AND COSTS) ARISING OUT OF OR RESULTING FROM BUYER'S OWNERSHIP OR OPERATION OF THE SUBJECT PROPERTY AFTER THE CLOSING DATE.

 

16.   Miscellaneous.

 

(a)   Further Assurances. Seller agrees to execute any documents which it has the authority to execute, whether before or after the Closing, to aid Buyer in clearing or perfecting title and ownership to the Subject Property, and to facilitate the receipt of the proceeds of the sale of the production therefrom and attributable thereto. Buyer shall make any request for execution of such document in writing and shall provide Seller with a copy of the document.

 

(b)  Entire Agreement. This Agreement together with the Exhibits attached hereto, shall constitute the complete agreement between the parties hereto and shall supersede all prior agreements, whether written or oral, including but not limited to that certain Letter of Intent, dated June 2, 2010, and any representations or conversations with respect to the Subject Property.

 

(c)  Confidentiality. If the Closing does not occur, Buyer will use its best efforts to keep all the information furnished by Seller to Buyer hereunder or in contemplation hereof strictly confidential, and will not use any of such information to Buyer's advantage or in competition with Seller, except to the extent such information (i) was already in the public domain, not as a result of disclosure by Buyer, (ii) was already known to Buyer, (iii) is developed by Buyer independently from the information supplied by Seller, or (iv) is furnished to Buyer by a third party independently of Buyer's investigation pursuant to the transaction contemplated by this Agreement.

 

(d)  Notices. All communications required or permitted under this Agreement shall be in writing and may be sent by facsimile. Such communication shall be deemed made when actually received, or if mailed by registered or certified mail, postage prepaid, addressed as set forth below, shall be deemed made three days after such mailing. Faxes will be deemed to be received when reflected in the fax confirmation sheet. Either party may, by written notice to the other, change the address for mailing such notices.

 

 

  

19

  

	
Notices to Seller:

 

	
LETT OIL & GAS, L.P. 

301 Commerce Street 

Suite 1830

Ft. Worth, Texas 76102 

Telephone: (817) 335-3338 

Fax: (817) 288-3373 

Attention: Roy Guinnup

 

	  

Notices to Buyer:

	  

RCWI, L.P.

1901 North Central Expressway 

Suite 300

Richardson, Texas 75080

Telephone: (972) 437-6792 

Fax: (972) 994-0369

Attention: H. Walt Dunagin

 

(e)  Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, and their successors and assigns; provided, no assignment of this Agreement by either party shall be made without the express written consent of the other party.

 

(f)  Counterparts. This Agreement may be executed in any number of counterparts, which taken together shall constitute one instrument and each of which shall be considered an original.

 

(g)  Law Applicable. This Agreement, other documents delivered pursuant hereto all disputes and the legal relations between the Parties shall be governed and construed in accordance with the laws of the State of Texas, without giving effect to principles of conflicts of laws that would result in the application of the laws of anther jurisdiction. The Parties agree to venue in Dallas County, Texas for all disagreements, differences or claims made by the Buyer and/or the Seller.

 

(h)  Incorporation of Exhibits. All exhibits and schedules referred to herein are attached hereto and are made a part hereof by this reference.

 

(i)  Survival. Except for the special warranty of title which is incorporated in the Assignment, all other indemnities, representations, warranties and provisions of this Agreement shall survive the Closing for a period of one (1) year after the Effective Date at which time all such indemnities, representations, warranties and other provisions hereof shall expire, except with respect to any claims which have been asserted in a written notice delivered to the party against whom such claim is made within said one (1) year time period, which claims shall then survive for their applicable statute of limitations.

 

(j)   Assignment Neither Party may assign its rights or delegate its duties hereunder except with the prior, written consent of the other Party.

 

  

20

  

 

(k)  Headings. The headings of the articles and sections of this Agreement are for guidance and convenience of reference only and shall not limit or otherwise affect any of the terms and provisions of this Agreement.

 

(l)  Timing. Time is of the essence in this Agreement.

 

(m)  Attorneys' Fees. The prevailing party in any dispute hereunder shall be entitled to recover its attorneys' fees and costs.

 

(n)  Expenses. All fees, costs and expenses incurred by the Parties in negotiating this Agreement and in consummating the transactions contemplated by this Agreement shall be paid by the Party that incurred such fees, costs and expenses.

 

(o)  Amendment and Waiver. This Agreement may be altered, amended or waived only by a written agreement executed by the Party to be charged. No waiver of any provision of this Agreement shall be construed as a continuing waiver of the provision.

 

(p)  Successors and Assigns. This Agreement is binding upon and shall inure to the benefit of the Parties and, except where prohibited, their successors, representatives or assigns.

 

(q)  Third-Party Beneficiaries. Unless expressly stated to the contrary, no third party is intended to have any rights, benefits or remedies under this Agreement.

 

(r)  Severance. If any provision of this Agreement is found to be illegal or unenforceable, the other terms of this Agreement shall remain in effect and this Agreement shall be construed as if the illegal or unenforceable provision had not been included.

 

[SIGNATURES ON THE FOLLOWING PAGES]

 

  

21

  

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed below by their duly authorized representatives.

 

SELLER

 

LETT OIL & GAS, L.P.

By: Duer Wagner III & Partners, L.L.C.,

its General Partner

 

 

By: 

Rex McSwain, Manager and Chief Operating Officer

 

 

 

BUYER

 

RCWI, L.P.

 

By: RCWI, GP, LLC

 

 

  

22

  

 

 

LIST OF EXHIBITS

 

 

	
Exhibit

	
Description

	 	 
	
A.

	
Leases

	 	 
	
B.

	
Unit

	 	 
	
C.

	
List of Contracts

	 	 
	
D.

	
Assignment, Conveyance and Bill of Sale

	 	 
	
E.

	
Deed

 

 

 

  

23

  

 

EXHIBIT "A"

 

 

Leases

 

 

  

24

  

 

 

  

25

  

 

  

26

  

 

 

  

27

  

 

 

  

28

  

 

 

  

29

  

 

 

  

30

  

 

 

  

31

  

 

 

  

32

  

 

 

  

33

  

 

 

  

34

  

 

 

  

35

  

 

 

  

36

  

 

 

  

37

  

 

 

  

38

  

 

 

  

39

  

 

 

  

40

  

 

 

  

41

  

 

 

  

42

  

 

 

  

43

  

 

 

  

44

  

 

 

  

45

  

 

 

  

46

  

 

 

  

47

  

 

 

  

48

  

 

 

  

49

  

 

 

  

50

  

 

 

  

51

  

 

 

  

52

  

 

 

  

53

  

 

 

  

54

  

 

 

  

55

  

 

 

 

EXHIBIT "B"

 

Units

 

 

	
Subject Property:

	
Working

	
Net Revenue

	
Allocated

	  	
Interest:

	
Interest:

	
Value:

	 	 	 	 
	
THUMS Long Beach Unit

	
. 00121348

	
.00121348

	
$6,000,000

	
Wilmington Oil Field

	  	  	  
	
Los Angeles County, California

	  	  	  

 

 

The THUMS Long Beach Unit, Wilmington Oil Field, Los Angeles County, California is dated November 1, 1964 and recorded in the official records of Los Angeles County, California in Book M1799, Pages 559, et seq.

 

 

 

  

56

  

 

 

EXHIBIT "C"

 

ATTACHED TO AND MADE PART OF THAT CERTAIN PURCHASE AND SALE AGREEMENT DATED JUNE 23, 2010 BY AND BETWEEN LETT OIL & GAS, L.P. AND RCWI, L.P.

 

	
  

	
1.

	
Unit Agreement — Long Beach Unit, Wilmington Oil Field, California — Dated November 1, 1964 by and between City of Long Beach, a Municipal Corporation, as Unit Operator and as to the City's Portion of the Offshore Area, and Richfield Oil Corporation, et al as Working Interest Owners.

 

	
  

	
2.

	
Unit Operating Agreement — Long Beach Unit, Wilmington Oil Field, California — Dated November 1, 1964 by and between City of Long Beach, a Municipal Corporation, as Unit Operator and as to the City's Portion of the Offshore Area, and Richfield Oil Corporation, et al as working interest owners.

 

 

 

  

57

  

 

EXHIBIT D

 

ASSIGNMENT, CONVEYANCE AND BILL OF SALE

 

	
STATE OF

	 ________________	
§

	
 

	
PRESENTS:

	 	§	KNOW ALL MEN BY THESE PRESENTS:
	  	 	§	  
	
COUNTY OF

	 ________________	§	  

 

THAT, subject to the terms, reservations and conditions hereinafter set forth, Lett Oil & Gas, L.P. (hereinafter referred to as "Assignor"), for and in consideration of Ten and No/100 Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, does hereby GRANT, BARGAIN, SELL, CONVEY and ASSIGN unto RCWI, L.P. (hereinafter referred to as "Assignee"), all of Assignor's right, title and interest in and to the following:

 

(a)           The entire estates created by the leases, licenses, permits and other agreements described in Exhibit A (the "Leases") insofar as the Leases cover and relate to the lands described in Exhibit A (the "Lands"), together with (i) all rights, privileges, benefits and powers conferred upon the holder of the Leases with respect to the use and occupation of the surface of the Lands that may be necessary, convenient or incidental to the possession and enjoyment of the Leases, (ii) all rights in respect of any pooled or unitized acreage located in whole or in part within the Lands by virtue of the Leases, including rights to production from the pool or unit allocated to any Lease being a part thereof, regardless of whether such production is from the Lands, (iii) all rights, options, titles and interests of Assignor granting Assignor the right to obtain, or otherwise earn interests within the Lands no matter how earned, and (iv) all tenements, hereditaments and appurtenances belonging to any of the foregoing.

 

(b)           The oil and gas wells, saltwater disposal and water wells and injection wells (whether or not current by producing) (the "Wells"), all pipelines, flowlines, plants, gathering and processing systems, platforms, buildings, compressors, meters, tanks, machinery, tools, pulling machines, utility lines, and all of the personal property, equipment, fixtures and improvements now or as of the Effective Time (as defined below) in or on the Lands, appurtenant thereto or used in connection therewith or with the production, treatment, sale or disposal of hydrocarbons or water produced therefrom or attributable thereto and all other appurtenances thereunto belonging, whether or not located on the Leases.

 

(c)           The Fee, Fee Mineral and Fee Royalty Interests described in Exhibit A.

 

 

  

58

  

 

(d)           The contracts and contractual rights, obligations and interest, including all farmout agreements, farmin agreements, drilling contracts, operating agreements, sales contracts, saltwater disposal agreements, division orders and transfer orders and other contracts or agreements covering or affecting any or all of the Leases and/or Lands.

 

(e)           The easements, licenses, authorizations, permits and similar rights and interests applicable to, or pertinent to, the ownership and operation of the Wells.

 

(f)            All inventories, oil, gas and production in tanks, in storage below the pipeline connection in tanks or upstream of the sales meter ("line fill") and inventory attributable to the Leases.

 

(g)            All original files, records, documentation and data of Assignor relating to (or evidencing) Assignor's ownership or rights in the Leases and the Wells, production, rights-of­way or other rights and interests described herein, including but not limited to lease files, land files, well files, accounting files, production sales agreements files, division and transfer order files, written contracts, title opinions and abstracts, legal records, governmental filings, geological data, seismic data, information and analysis, production reports, production logs, core sample reports and maps as such data is assembled in the normal course of business.

 

Assignee shall assume all of Assignor's plugging, replugging, abandonment, removal, disposal and restoration obligations associated with the Interests acquired hereunder. Such obligations being assumed shall include, but not be limited to, all necessary and proper plugging and abandonment and/or removal and disposal of all of the wells, whether pre-existing or drilled by Assignor, and all structures, personal property, and equipment located on or associated with the Leases listed on Exhibit A, the necessary and proper capping and burying of all associated flow lines, and any necessary disposal of naturally occurring radioactive material (NORM) or asbestos. All plugging, replugging, abandonment, removal, disposal and restoration operations shall be in compliance with applicable laws and regulations and conducted in a good and workmanlike manner

 

Assignor and Assignee shall indemnify each other as follows:

 

(1)           Including any "Environmental Claim" as defined herein, Assignee shall defend, indemnify and save and hold harmless Assignor against any and all costs, expenses, claims, demands and causes of action of whatsoever kind or character, including court costs and attorneys' fees, arising out of any operations conducted, commitment made or any action taken or omitted with respect to the Interests, which accrue or relate to times on and after the Closing Date. "Environmental Claim" shall mean any claim, demand or cause of action asserted by any governmental agency or any person, corporation or other entity for personal injury (including sickness, disease or death), property damage or damage to the environment resulting from the discharge or release of any chemical, material or emission into one or more of the environmental media at or in the vicinity of the Interests.

 

(2)           Excluding any Environmental Claim, Assignor shall defend, indemnify and save

 

and hold harmless Assignee against any and all costs, expenses, claims, demands and causes of action of whatsoever kind or character, including court costs and attorneys' fees, arising out of any operations conducted, commitment made or any action taken or omitted with respect to the Interests, which accrue or relate to times prior to the Closing Date.

 

(3)           THE INDEMNIFICATION, RELEASE AND ASSUMPTION PROVISIONS PROVIDED FOR IN THIS AGREEMENT SHALL BE APPLICABLE WHETHER OR NOT THE LOSSES, COSTS, EXPENSES AND DAMAGES IN QUESTION AROSE SOLELY OR IN PART FROM THE ACTIVE, PASSIVE OR CONCURRENT NEGLIGENCE, STRICT LIABILITY, BREACH OF DUTY (STATUTORY OR OTHERWISE), OR OTHER FAULT

 

 

  

59

  

 

OF ANY INDEMNIFIED PARTY, PROVIDED THAT NO SUCH INDEMNIFICATION SHALL BE APPLICABLE TO THE EXTENT OF ANY GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE INDEMNIFIED PARTY. ASSIGNEE AND ASSIGNOR ACKNOWLEDGE THAT THIS STATEMENT COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND IS CONSPICUOUS.

 

SUBJECT TO THE SPECIAL WARRANTY SET FORTH BELOW AND THE WARRANTIES SET FORTH IN THE PURCHASE AND SALE AGREEMENT, THE INTERESTS SHALL BE CONVEYED PURSUANT HERETO WITHOUT ANY WARRANTY OR REPRESENTATION, WHETHER EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE RELATING TO THE CONDITION, QUANTITY, QUALITY, FITNESS FOR A PARTICULAR PURPOSE, CONFORMITY TO THE MODELS OR SAMPLES OF MATERIALS, OR MERCHANTABILITY OF ANY EQUIPMENT OR ITS FITNESS FOR ANY PURPOSE, AND WITHOUT ANY OTHER EXPRESS, IMPLIED, STATUTORY, OR OTHER WARRANTY OR REPRESENTATION WHATSOEVER. ASSIGNEE SHALL, EXCEPT AS PROVIDED OTHERWISE HEREIN, ACCEPT ALL OF THE SAME "AS IS, WHERE IS". WITHOUT LIMITATION OF THE FOREGOING, EXCEPT TO THE EXTENT EXPRESSLY PROVIDED IN THE PURCHASE AND SALE AGREEMENT, ASSIGNOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, AS TO THE ACCURACY OR COMPLETENESS OF ANY DATA, REPORTS, RECORDS, PROJECTIONS, INFORMATION, OR MATERIALS NOW HERETOFORE, OR HEREAFTER FURNISHED OR MADE AVAILABLE TO ASSIGNEE IN CONNECTION WITH THIS ASSIGNMENT, INCLUDING, WITHOUT LIMITATION, PRICING ASSUMPTIONS OR QUALITY OR QUANTITY OF HYDROCARBON RESERVES (IF ANY) ATTRIBUTABLE TO THE INTERESTS OR THE ABILITY OR POTENTIAL OF THE INTERESTS TO PRODUCE HYDROCARBONS OR THE ENVIRONMENTAL CONDITION OF THE INTERESTS OR ANY OTHER MATERIALS FURNISHED OR MADE AVAILABLE TO ASSIGNEE BY ASSIGNOR, OR BY ASSIGNOR'S AGENTS OR REPRESENTATIVES. EXCEPT TO THE EXTENT EXPRESSLY PROVIDED IN THE PURCHASE AND SALE AGREEMENT, ANY AND ALL SUCH DATA, RECORDS, REPORTS, PROJECTIONS, INFORMATION, AND OTHER MATERIALS (WRITTEN OR ORAL) FURNISHED BY ASSIGNOR OR OTHERWISE MADE AVAILABLE OR DISCLOSED TO ASSIGNEE ARE PROVIDED TO ASSIGNEE AS A CONVENIENCE AND SHALL NOT CREATE OR GIVE RISE TO ANY LIABILITY OF OR AGAINST ASSIGNOR, AND ANY RELIANCE ON OR USE OF THE SAME SHALL BE AT ASSIGNEE'S SOLE RISK TO THE MAXIMUM EXTENT PERMITTED BY LAW.

 

This instrument is with special warranty of title by, through and under Assignor, but use otherwise.

 

This instrument is made expressly subject to that certain Purchase and Sale Agreement (the "Purchase and Sale Agreement") dated June 23, 2010, by and between Assignor and Assignee.

 

All capitalized terms not defined in this document are defined in the Purchase and Sale Agreement.

 

  

60

  

 

This instrument shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, and all terms, provisions and reservations contained in this Assignment shall be deemed as covenants running with the land.

 

EXECUTED this ____ day of ________, 2010, but EFFECTIVE as of June 1, 2010 (the "Effective Time").

 

ASSIGNOR:

 

ASSIGNEE:

 

	
STATE OF TEXAS

	
§

	  	§ 
	
COUNTY OF HARRIS

	§

 

 

This instrument was acknowledged before me on the ____ day of _______________, a ______________ on behalf of said _______.

 

 

___________________________________

Notary Public in and for

the State of Texas

 

 

	
STATE OF TEXAS

	
§

	  	§ 
	
COUNTY OF HARRIS

	§

 

This instrument was acknowledged before me on the ____ day of _______________, 200_,  by _________________,  _____________ of, a ______________ on behalf of said __________________.

 

 

 

 

___________________________________

Notary Public in and for

the State of Texas

 

 

  

61

  

 

EXHIBIT "E"

 

 

 

DEED

)

 

 

 

 

 

 

 

 

 

62

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00175-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00175-of-00352.parquet"}]]