Document:

comm-ex1041_1002.htm

Exhibit 10.41

CommScope

Deferred Compensation Plan

 

Amended and restated effective January 1, 2017

 

 

 

Table of Contents

 

	
ARTICLE I INTRODUCTION
	
1

	
 
	
1.1
	
 
	
Introduction and Purpose
	
1

	
ARTICLE II DEFINITIONS
	
1

	
 
	
2.1
	
 
	
Account(s)
	
1

	
 
	
2.2
	
 
	
Active Participant
	
2

	
 
	
2.3
	
 
	
Affiliated Company
	
2

	
 
	
2.4
	
 
	
Base Salary Deferral Accounts
	
2

	
 
	
2.5
	
 
	
Base Salary Deferral Credits
	
2

	
 
	
2.6
	
 
	
Benefit Distribution Date
	
2

	
 
	
2.7
	
 
	
BNS Participant
	
2

	
 
	
2.8
	
 
	
Change in Control
	
2

	
 
	
2.9
	
 
	
Closing Date
	
4

	
 
	
2.10
	
 
	
Code
	
4

	
 
	
2.11
	
 
	
Committee
	
4

	
 
	
2.12
	
 
	
Company
	
4

	
 
	
2.13
	
 
	
Compensation
	
5

	
 
	
2.14
	
 
	
Declining Balance
	
5

	
 
	
2.15
	
 
	
Deferral Election
	
5

	
 
	
2.16
	
 
	
Disability
	
5

	
 
	
2.17
	
 
	
Discretionary Bonus Award Accounts
	
5

	
 
	
2.18
	
 
	
Discretionary Bonus Award Credits
	
5

	
 
	
2.19
	
 
	
Effective Date
	
5

	
 
	
2.20
	
 
	
Eligible Individual
	
6

	
 
	
2.21
	
 
	
ERISA
	
6

i

 

 

	
 
	
2.22
	
 
	
Installment(s)
	
6

	
 
	
2.23
	
 
	
Investment Funds
	
6

	
 
	
2.24
	
 
	
Long-Term Cash Incentive Award Accounts
	
6

	
 
	
2.25
	
 
	
Long-Term Cash Incentive Award Credits
	
6

	
 
	
2.26
	
 
	
Participant
	
6

	
 
	
2.27
	
 
	
Performance-Based Compensation
	
6

	
 
	
2.28
	
 
	
Plan
	
7

	
 
	
2.29
	
 
	
Plan Year
	
7

	
 
	
2.30
	
 
	
Prior Tyco Account
	
7

	
 
	
2.31
	
 
	
Retirement
	
7

	
 
	
2.32
	
 
	
Separation from Service
	
7

	
 
	
2.33
	
 
	
Short-Term Cash Incentive Award Accounts
	
8

	
 
	
2.34
	
 
	
Short-Term Cash Incentive Award Credits
	
9

	
 
	
2.35
	
 
	
Specified Employee
	
9

	
 
	
2.36
	
 
	
Tyco Nonqualified Plan
	
9

	
 
	
2.37
	
 
	
Valuation Date
	
9

	
 
	
2.38
	
 
	
Written or “in Writing”
	
9

	
 
	
2.39
	
 
	
Years of Service
	
9

	
ARTICLE III ELIGIBILITY AND PARTICIPATION
	
9

	
 
	
3.1
	
 
	
Eligibility to Participate
	
9

	
 
	
3.2
	
 
	
Change in Status as Eligible Individual
	
9

	
 
	
3.3
	
 
	
Cessation of Participation
	
10

	
ARTICLE IV DEFERRAL ELECTIONS
	
10

	
 
	
4.1
	
 
	
Establishment of Participant Accounts
	
10

	
 
	
4.2
	
 
	
Participant Deferral Credits
	
11

ii

 

 

	
 
	
4.3
	
 
	
Deferral Election
	
11

	
 
	
4.4
	
 
	
Special Rules For Deferral of Performance-Based Compensation
	
11

	
 
	
4.5
	
 
	
Other Rules Regarding Deferral Elections
	
12

	
 
	
4.6
	
 
	
Absence of Election
	
13

	
 
	
4.7
	
 
	
Reduction of Deferral Election by Committee Action
	
13

	
 
	
4.8
	
 
	
Credits for Investment Earnings and Debits for Investment Losses
	
13

	
 
	
4.9
	
 
	
Company Contributions
	
14

	
 
	
4.10
	
 
	
Prior Tyco Account
	
14

	
ARTICLE V VESTING
	
14

	
 
	
5.1
	
 
	
Vesting of Accounts
	
14

	
ARTICLE VI PAYMENT OF BENEFITS
	
14

	
 
	
6.1
	
 
	
Distribution of Benefits and Distribution Elections
	
14

	
 
	
6.2
	
 
	
Distribution Elections
	
14

	
 
	
6.3
	
 
	
Timing of Distributions - Benefit Distribution Date
	
15

	
 
	
6.4
	
 
	
Distributions to Specified Employees
	
16

	
 
	
6.5
	
 
	
Form of Distribution
	
16

	
 
	
6.6
	
 
	
Elections to Defer Beyond Original Distribution Commencement Date
	
17

	
 
	
6.7
	
 
	
Permitted Acceleration of Payment
	
17

	
 
	
6.8
	
 
	
Payment For Unforeseeable Emergency
	
18

	
 
	
6.9
	
 
	
Payment of Disability Benefits
	
19

	
 
	
6.10
	
 
	
Payment of Death Benefits
	
19

	
 
	
6.11
	
 
	
Change of Control
	
20

	
 
	
6.12
	
 
	
Valuation of Distributions
	
20

	
 
	
6.13
	
 
	
Timing of Distributions
	
20

	
 
	
6.14
	
 
	
Prior Tyco Account
	
20

iii

 

 

	
ARTICLE VII AMENDMENT AND TERMINATION OF PLAN
	
20

	
 
	
7.1
	
 
	
Amendments Generally
	
20

	
 
	
7.2
	
 
	
Right to Terminate
	
21

	
ARTICLE VIII MISCELLANEOUS
	
22

	
 
	
8.1
	
 
	
Unfunded Plan
	
22

	
 
	
8.2
	
 
	
Nonguarantee of Employment
	
22

	
 
	
8.3
	
 
	
Nonalienation of Benefits
	
22

	
 
	
8.4
	
 
	
Taxes and Withholding
	
23

	
 
	
8.5
	
 
	
Applicable Law
	
23

	
 
	
8.6
	
 
	
Headings and Subheadings
	
23

	
 
	
8.7
	
 
	
Severability
	
23

	
 
	
8.8
	
 
	
Expenses
	
23

	
ARTICLE IX ADMINISTRATION OF THE PLAN
	
24

	
 
	
9.1
	
 
	
Powers and Duties of the Committee
	
24

	
 
	
9.2
	
 
	
Claims Procedure
	
24

	
APPENDIX A – PRIOR TYCO ACCOUNT
	
26

 

 

 

iv

 

 

ARTICLE I INTRODUCTION

1.1Introduction and Purpose

The CommScope Deferred Compensation Plan (the “Plan”) is established by CommScope Holding Company, Inc. (the “Company”) for the purpose of providing deferred compensation for a select group of management or highly compensated employees who contribute materially to the continued growth, development and future business success of the Company and its subsidiaries. This Plan is intended to enhance the long-term performance and retention of such management or highly compensated employees selected to participate in this Plan.

The Plan is intended to constitute a nonqualified, unfunded plan for federal tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended from time to time (“ERISA”). Further, this Plan is intended to comply with Code Section 409A and is to be construed in accordance Code Section 409A, the Code Section 409A Regulations, and such additional regulatory and/or other guidance as may be issued by the Internal Revenue Service (“IRS”) or the U.S. Department of Treasury (“Treasury”) from time to time with respect to Code Section 409A.

Without affecting the validity of any other provision of the Plan, to the extent that any Plan provision does not meet the requirements of Code Section 409A and the Code Section 409A Regulations (including modifications and amendments thereto), the Plan shall be construed and administered as necessary to comply with such requirements until this Plan is appropriately amended to comply with such requirements.

This Plan shall function solely as a “top-hat” plan within the meaning of Sections 201(2), 301(a)(3), and 401(a)(1) of ERISA. Distributions required or contemplated by this Plan or actions required to be taken under this Plan shall not be construed as creating a trust of any kind or a fiduciary relationship between the Company and any Participant, any Participant’s designated beneficiary, or any other person.

This Plan is to be maintained according to the terms of this document and the Committee or its designee shall have the sole authority to construe, interpret and administer the Plan.

The Plan was originally effective October 1, 2012.  The Plan was subsequently amended in 2015 in connection with the Company’s acquisition of TE Connectivity, Ltd. on August 28, 2015.  The Plan has been further amended and restated effective as of January 1, 2017.

 

ARTICLE II DEFINITIONS

Wherever used in the Plan, the following terms have the meanings set forth below, unless otherwise expressly provided:

2.1 Account(s)

Account(s) means the separate accounts established for recordkeeping purposes only for each Participant comprised of the Base Salary Deferral Accounts, the Discretionary Bonus Award 

1

 

 

Accounts, the Annual Incentive Plan Award Accounts, and the Discretionary Credit accounts as further described in Article IV of the Plan.

2.2Active Participant

Active Participant means a Participant in the Plan (or similar plan(s) maintained by the Company subject to Code Section 409A and the Code Section 409A Regulations determined under the aggregation provisions) eligible to make deferrals or receive employer credits; even if he or she has not elected to defer compensation under the Plan terms or receive an employer credit under the Plan terms, other than earnings on amounts previously deferred or credited under the Plan terms.

2.3 Affiliated Company

Affiliated Company means (i) the Company, (ii) any other corporation which is a member of the controlled group of corporations which includes the Company, provided that in applying Code Section 1563(a)(1), (2), and (3) for purposes of determining a controlled group of corporations under Code Section 414(b) and determining trades or businesses under common control for purposes of Code Section 414(c) 50 percent (50%) is substituted for 80 percent (80%) each time used, and (iii) any other entity in which the Company has a significant equity interest or owns a substantial capital or profits interest.

2.4Base Salary Deferral Accounts

Base Salary Deferral Accounts means the separate accounts established by the Committee for recordkeeping purposes only in the name of each Participant in accordance with Section 4.1 of the Plan.

2.5Base Salary Deferral Credits

Base Salary Deferral Credits means the amounts credited to a Participant’s Base Salary Deferral Accounts in accordance with the Participant’s election pursuant to Section 4.2 of the Plan. For purposes of the Plan, deferrals by outside directors shall be treated as Base Salary Deferral Credits.

2.6Benefit Distribution Date

Benefit Distribution Date means the specific distribution date elected by the Participant as described in Section 6.3 of the Plan.

2.7BNS Participant

A Participant who (i) had an account balance under the Tyco Nonqualified Plan and (ii) became an employee of the Company as a result of the Company’s acquisition of the Broadband Network Services division of TE Connectivity Ltd. on the Closing Date without experiencing a Separation from Service.

2

 

 

2.8Change in Control

Change in Control means the occurrence of any of the following events described below. Whether a Change in Control has occurred shall be objectively determinable and not subject to the discretion of the Committee, the board of directors or any other person. In all events, a transaction shall be deemed to constitute a Change in Control only to the extent consistent with the requirements of Section 409A of the Code.

(a)Change in Ownership of the Company. The acquisition by any person, entity or group of stock of the Company that, together with the stock already held by such person, entity or group, constitutes more than 50% of the total fair market value or total voting power of the stock of the Company; provided that if any one person, entity or group is considered to own more than 50% of the total fair market value or total voting power of the stock of the Company, the acquisition of additional stock by the same person, entity or group shall not be considered to cause a change in ownership of the Company under this Section, or a change in effective control of the Company under subsection (b) below. An increase in the percentage of stock owned by any person, entity or group, as a result of a transaction in which the Company acquires its stock in exchange for property shall be treated as an acquisition of stock for purposes of this Section. This Section shall only apply when there is a transfer of Company stock (or issuance of Company stock) and stock of the Company remains outstanding after the transaction.

(b)Change in Effective Control of the Company. During any 12-month period, (i) the acquisition by any person, entity or group of stock of the Company that constitutes 30% or more of the total voting power of the stock of the Company, or (ii) a majority of the members of the board of directors is replaced by directors whose appointment or election is not endorsed by a majority of the members of the board of directors as constituted prior to the date of such appointment or election; provided that if any person, entity or group is considered to effectively control the Company within the meaning of this Section, the acquisition of additional control of the Company shall not be considered to cause a change in effective control of the Company under this Section, or a change ownership of the Company under subsection (a).

(c)Change in Ownership of a Substantial Portion of the Company’s Assets. During any 12-month period, the acquisition by any person, entity or group of assets of the Company that have a total gross fair market value equal to more than 40% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition. For purposes of this Section, “gross fair market value” means the value of the Company’s total assets or the value of the assets being disposed of, determined without regard to any associated liabilities. Notwithstanding the foregoing, a Change in Control shall not occur under this Section where there is a transfer of assets to an entity that is controlled by the shareholders of the Company immediately after the transfer, including:

	
 
	
(i)
	
a shareholder of the Company (immediately before the asset transfer) in exchange for or with respect to its stock;

	
 
	
(ii)
	
an entity, 50% or more of the total value or voting power of which is owned, directly or indirectly, by the Company;

3

 

 

	
 
	
(iii)
	
a person, entity or group that owns, directly or indirectly, 50% or more of the total value or voting power of all of the outstanding stock of the Company; or

	
 
	
(iv)
	
an entity, at least 50% of the total value or voting power of which is owned, directly or indirectly, by a person, entity or group described above in subparagraph (3).

(d)For purposes of Section 2.8, the following rules shall apply:

	
 
	
(i)
	
Persons or entities shall not be considered to be acting as a group solely because they purchase or own stock of the Company at the same time, or as a result of the same public offering. However, persons or entities shall be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company. If a person or entity owns stock of the Company and stock of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company, such shareholder shall be considered to be acting as a group only with other shareholders of the Company prior to the transaction and not with respect to the shareholder’s ownership interest in the other corporation.

	
 
	
(ii)
	
Stock ownership shall be determined in accordance with Code Section 318(a). Stock underlying a vested option shall be considered to be owned by the individual who holds the vested option (and stock underlying an unvested option shall not be considered to be owned by the individual who holds the unvested option). For purposes of the preceding sentence, however, if a vested option is exercisable for stock that is not substantially vested (as defined in Treas. Reg. sections 1.83-3(b) and (j)), the stock underlying the option shall not be treated as owned by the individual who holds the option.

2.9 Closing Date

Closing Date means August 28, 2015.  

2.10 Code

Code means the Internal Revenue Code of 1986, as amended. Where reference is made to “Code Section 409A Regulations,” this is intended to refer to Treasury Regulation Sections 1.409A-1 through –6, as such regulations may be modified, amended or supplemented by the Treasury from time to time.

2.11 Committee

Committee means the Company’s Benefits Committee, which will be responsible for the administration of the Plan pursuant to Article IX.

4

 

 

2.12 Company

Company means CommScope Holding Company, Inc., a Delaware corporation, and any Affiliated Company or subsidiary.  

2.13 Compensation

Compensation means (a) with respect to Eligible Individuals who are employees, cash compensation that is compensation as defined in the CommScope, Inc. Retirement Savings Plan without regard to Code Section 401(a)(17), and (b) with respect to Eligible Individuals who are outside directors, cash compensation paid by the Company. In no event, however, shall a Participant’s Compensation include, for purposes of the Plan, any item of compensation paid or distributed to the Participant after a period of deferral, whether under this Plan or any other program of deferred compensation maintained by the Company or any Affiliated Company.

2.14 Declining Balance 

Declining Balance means the method for calculating each installment payment by dividing the value of the Participant’s Accounts on the Valuation Date of each distribution by the number of installment payments remaining to be made, in accordance with rules established by the Committee.

2.15 Deferral Election

Deferral Election means the Written or electronic salary reduction agreement entered into by an Eligible Individual and the Committee pursuant to this Plan and which is made on a form and manner described in Section 4.3 of the Plan.

2.16 Disability

A Participant shall be deemed to have a condition that constitutes a “Disability” if the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.

The determination of whether a Participant is disabled may be made by any person, at the Committee’s discretion, including the administrator of a disability insurance program and the Committee itself.

2.17 Discretionary Bonus Award Accounts

Discretionary Bonus Award Accounts means the separate accounts established by the Committee for recordkeeping purposes only in the name of each Participant in accordance with Section 4.1 of the Plan.

2.18 Discretionary Bonus Award Credits

Discretionary Bonus Award Credits means the amounts previously deferred by the Participant and credited to a Participant’s Discretionary Bonus Award Accounts.

5

 

 

2.19 Effective Date

Effective Date means January 1, 2017.  The original effective date of the Plan was October 1, 2012. 

2.20 Eligible Individual

Eligible Individual means (a) a select group of management and other highly compensated employees of the Company and its subsidiaries as determined by the Committee, and (b) outside directors of the Company. 

2.21 ERISA

ERISA means the Employee Retirement Income Security Act of 1974, as amended. 

2.22 Installment(s)

Installment(s) means an aggregate single payment for the purpose of subsequent deferral rules according to Code Section 409A and the regulations thereunder.

2.23 Investment Funds

Investment Funds means one or more notional investment alternatives made available under the Plan by the Company for designation by Participants under the Plan for purposes of determining investment earnings and losses. Unless determined otherwise by the Committee, the Investment Funds shall mirror the investment alternatives offered pursuant to the CommScope, Inc. Retirement Savings Plan from time-to-time.

2.24 Long-Term Cash Incentive Award Accounts

Long-Term Cash Incentive Award Accounts means the separate accounts established by the Committee for recordkeeping purposes only in the name of each Participant in accordance with Section 4.1 of the Plan.  

2.25 Long-Term Cash Incentive Award Credits

Long-Term Cash Incentive Award Credits means the amounts credited to a Participant’s Long-Term Cash Incentive Award Accounts in accordance with the Participant’s election pursuant to Section 4.2 of the Plan.

2.26 Participant

Participant means any present or former Eligible Individual who has become a Participant in the Plan in accordance with the provisions of Article III and who continues to have an Account balance under the Plan or whose beneficiary has such an Account balance.

2.27 Performance-Based Compensation

Performance-Based Compensation means compensation that is paid contingent on the satisfaction of pre-established objective or subjective performance criteria of at least twelve (12) 

6

 

 

months and constitutes “performance-based compensation” as that term is used in the Code Section 409A Regulations. If subjective, the criteria must relate to participant performance as an individual, or, a group of participants including the individual, and the manner in which a determination regarding satisfaction of such criteria is made is consistent with the requirements set forth in the Code Section 409A Regulations.

2.28 Plan

Plan means the CommScope Deferred Compensation Plan, as set forth in this document and as amended from time to time.

2.29 Plan Year

Plan Year means the calendar year, the twelve-month period beginning each January 1 and ending on December 31. The first Plan Year was a short Plan Year from October 1, 2012 through December 31, 2012.

2.30Prior Tyco Account

Prior Tyco Account means a Participant’s subaccount consisting of a BNS Participant’s account balance under the Tyco Nonqualified Plan, increased or decreased by credits or debits for investment earnings or losses pursuant to Section 4.8 of the Plan.  Specific provisions related to the Prior Tyco Account are found in Appendix A.

2.31 Retirement

Retirement means Separation from Service from the Company after either attainment of age 55 with at least 10 Years of Service or attainment of age 65.

2.32 Separation from Service

Separation from Service in general means a termination of an employee’s employment with his or her employer by reason of the employee’s death, retirement or otherwise. However, for purposes of the Plan, an employee’s employment relationship is treated as continuing intact while the individual is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six months, or if longer, so long as the individual retains a right to reemployment with the employer under an applicable statute or by contract. For these purposes, a leave of absence constitutes a bona fide leave of absence only if there is a reasonable expectation that the employee will return to perform services for the employer. If the period of leave exceeds six months and the individual does not retain a right to reemployment under an applicable statute or by contract, the employment relationship is deemed to terminate on the first date immediately following such six-month period. Notwithstanding the foregoing, where a leave of absence is due to any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six months, where such impairment causes the employee to be unable to perform the duties of his or her position of employment or any substantially similar position of employment, a 29-month period of absence may be substituted for such six-month period.

7

 

 

Whether a termination of employment has occurred is determined based on whether the facts and circumstances indicate that the employer and employee reasonably anticipated that no further services would be performed after a certain date or that the level of bona fide services the employee would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to no more than 20 percent of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full period of services to the employer if the employee has been providing services to the employer less than 36 months). Facts and circumstances to be considered in making this determination include, but are not limited to, whether the employee continues to be treated as an employee for other purposes (such as continuation of salary and participation in employee benefit programs), whether similarly situated employees have been treated consistently, and whether the employee is permitted, and realistically available, to perform services for other employers in the same line of business. An employee is presumed to have separated from service where the level of bona fide services performed decreases to a level equal to 20 percent or less of the average level of services performed by the employee during the immediately preceding 36-month period. An employee will be presumed not to have separated from service where the level of bona fide services performed continues at a level that is 50 percent or more of the average level of service performed by the employee during the immediately preceding 36-month period. No presumption applies to a decrease in the level of bona fide services performed to a level that is more than 20 percent and less than 50 percent of the average level of bona fide services performed during the immediately preceding 36-month period. The presumption is rebuttable by demonstrating that the employer and the employee reasonably anticipated that as of a certain date the level of bona fide services would be reduced permanently to a level less than or equal to 20 percent of the average level of bona fide services provided during the immediately preceding 36-month period or full period of services provided to the employer if the employee has been providing services to the employer for a period of less than 36 months (or that the level of bona fide services would not be so reduced). For example, an employee may demonstrate that the employer and employee reasonably anticipated that the employee would cease providing services, but that, after the original cessation of services, business circumstances such as termination of the employee’s replacement caused the employee to return to employment. Although the employee’s return to employment may cause the employee to be presumed to have continued in employment because the employee is providing services at a rate equal to the rate at which the employee was providing services before the termination of employment, the facts and circumstances in this case would demonstrate that at the time the employee originally ceased to provide services, the employee and the employer reasonably anticipated that the employee would not provide services in the future.

Notwithstanding the foregoing, with respect to a Participant who is not an employee of the Company, Separation from Service shall have the meaning specified in the Code Section 409A Regulations (which, in the case of an outside director, generally would mean the individual no longer serving as an outside director or other service provider to the Company).

The definition of Separation from Service as set forth above shall be interpreted in a manner consistent with the applicable definition as set out in the Code Section 409A Regulations, including any modifications or amendments to such regulations.

8

 

 

For clarification, the transfer of a BNS Employee to the Company on the Closing Date shall not constitute a Separation from Service under this Plan or the Tyco Nonqualified Plan.

2.33 Short-Term Cash Incentive Award Accounts

Short-Term Cash Incentive Award Accounts means the separate accounts established by the Committee for recordkeeping purposes only in the name of each Participant in accordance with Section 4.1 of the Plan.  

2.34 Short-Term Cash Incentive Award Credits

Short-Term Cash Incentive Award Credits means the amounts credited to a Participant’s Short-Term Cash Incentive Award Accounts in accordance with the Participant’s election pursuant to Section 4.2 of the Plan.

2.35 Specified Employee

Specified Employee has the meaning set forth in Code Section 409A(a)(2)(B)(i).

2.36 Tyco Nonqualified Plan

Tyco Nonqualified Plan means the Tyco Electronics Corporation Supplemental Savings and Retirement Plan.

2.37 Valuation Date

Valuation Date means each day the New York Stock Exchange is open for trading. 

2.38 Written or “in Writing”

Written or in Writing means, with respect to any documentation of an election or other action by a Participant or by the Committee, that such documentation be either in paper or, as permitted by the Committee, in electronic form; provided, however, that such documentation must be adequate to establish a right that is enforceable under applicable law.

2.39 Years of Service

Years of Service means the Participant’s consecutive whole years of service with the Company since the Participant’s most recent hire date.

 

ARTICLE III ELIGIBILITY AND PARTICIPATION

3.1Eligibility to Participate

Any Eligible Individual shall be eligible to become a Participant in this Plan, as described in Article IV, subject to the approval of the Committee (provided that such participation shall be automatic for an outside director of the Company without the need for Committee action).

9

 

 

3.2Change in Status as Eligible Individual

An Eligible Individual who ceases to satisfy the requirements of eligibility shall continue Deferral Elections only for the calendar year in which such change in status occurred. The Committee shall have complete discretion to exclude one or more individuals from Participant status for one or more Plan Years as the Committee deems appropriate.

If an Eligible Individual subsequent to a change in status as an Eligible Individual again satisfies the requirements of eligibility, such employee shall be subject to the provisions of Section 4.3(b) only if the total Account balance is zero or ceases to be an Active Participant in the Plan for twenty-four (24) months.

3.3Cessation of Participation

	
 
	
(a)
	
A Participant shall cease active participation in the Plan upon the occurrence of his or her Separation from Service, death or Disability. In addition, a Participant shall cease active participation in the Plan with respect to future Plan Years if such Participant no longer qualifies as an Eligible Individual.

	
 
	
(b)
	
A Participant who receives a hardship withdrawal from a plan that is intended to be tax-qualified under Code Section 401(k) and that is sponsored by the Company or any Affiliated Company shall, to the extent required under the terms of the plan making such distribution requires a suspension of employee contributions under this Plan, have his or her Deferral Election then in effect under this Plan cancelled immediately, consistent with the requirements of the Code Section 409A Regulations. Similarly, in the event a distribution is made to a Participant under this Plan by reason of the Participant’s unforeseeable emergency, such Participant’s Deferral Election under this Plan shall also be cancelled. A Participant whose Deferral Elections are cancelled pursuant to this subsection shall be eligible to complete a new Deferral Election for a subsequent Plan Year consistent with this Plan’s requirements regarding the timing of initial Deferral Elections; and provided, further, that any such new Deferral Election shall not become effective until the end of the required suspension period.

 

ARTICLE IV DEFERRAL ELECTIONS

4.1Establishment of Participant Accounts

The Company shall establish and maintain on its books and records an Account in the name of each Participant, with several subaccounts, which may include the following, as well as any other subaccounts and/or credits deemed appropriate by the Committee, to record:

	
 
	
(a)
	
amounts of Base Salary Deferral Credits on the Participant’s behalf pursuant Section 4.2 of the Plan;

10

 

 

	
 
	
(b)
	
amounts of Discretionary Bonus Award Credits on the Participant’s behalf previously deferred under the Plan;

	
 
	
(c)
	
amounts of Short-Term Cash Incentive Award Credits on the Participant’s behalf pursuant to Section 4.2 of the Plan;

	
 
	
(d)
	
amounts of Long-Term Cash Incentive Award Credits on the Participant’s behalf pursuant to Section 4.2 of the Plan;

	
 
	
(e)
	
amounts of Discretionary Credits on the Participant’s behalf pursuant to Section 4.9 of the Plan;

	
 
	
(f)
	
credits or debits for investment earnings or losses pursuant to Section 4.8 of the Plan; 

	
 
	
(g)
	
payments of benefits to the Participant or the Participant’s beneficiary pursuant to Article VI and Section 4.9 of the Plan, and

	
 
	
(h)
	
the balance of the Participant’s Prior Tyco Account (if any), pursuant to Section 4.10.

4.2Participant Deferral Credits

	
 
	
(a)
	
A Participant may complete separate Deferral Election agreements as described in Section 4.3 or Section 4.4 of the Plan, as applicable, to reduce up to 90% of the amount of base salary Compensation and, if applicable, designated short-term cash incentive award and/or long-term cash incentive award Compensation that the Participant would otherwise receive each Plan Year.

	
 
	
(b)
	
The Committee will credit all deferred amounts to the Participant’s
respective deferral Accounts.

4.3Deferral Election

A Participant may defer such Compensation in a given calendar year, upon the completion of a Deferral Election, based on elections made in a manner prescribed by the Committee as follows:

	
 
	
(a)
	
An Eligible Individual must, in general, complete a Deferral Election prior to the close of the preceding taxable year for which such Compensation is earned.

	
 
	
(b)
	
An Eligible Individual who is first selected for participation in the Plan after the start of a Plan Year must, in order to participate in the Plan for the initial Plan Year, make his or her Deferral Election within the thirty (30)-day period following the date he or she is so selected. Such Deferral Election will be effective on the first day of the month after becoming an Eligible Individual and only for Compensation attributable to services to 

11

 

 

	
 
		
be performed subsequent to the above referenced thirty (30)-day period and ending with the close of such Plan Year.

	
 
	
(c)
	
Notwithstanding anything in the Plan to the contrary, the Company, the Company’s Compensation Committee, and/or the Committee may specifically designate certain forms of Compensation as ineligible for deferral under the Plan, after which designation any Participant’s subsequent election to defer of such specifically-identified forms of Compensation under the Plan shall be void.  

4.4Special Rules For Deferral of Performance-Based Compensation

	
 
	
(a)
	
With respect to Compensation (including, without limitation, long-term cash incentive award Compensation and/or short-term cash incentive award Compensation) determined to be Performance-Based Compensation, an initial deferral election may be made with respect to such Compensation on or before the date that is six months before the end of the performance period for which the Performance-Based Compensation is payable, provided that the employee performs services continuously from the later of the beginning of the performance period or the date the performance criteria are established through the date an election is made as provided herein, and provided further that in no event may an election to defer Performance-Based Compensation be made after such Compensation has become readily ascertainable. For purposes of this Section, if the Performance-Based Compensation is a specified or calculable amount, the Compensation is readily ascertainable if and when the amount is first substantially certain to be paid. If the Performance-Based Compensation is not a specified or calculable amount because, for example, the amount may vary based upon the level of performance, the Compensation, or any portion of the Compensation, is readily ascertainable when the amount is first both calculable and substantially certain to be paid. For this purpose, the Performance-Based Compensation is bifurcated between the portion that is readily ascertainable and the amount that is not readily ascertainable. Accordingly, in general any minimum amount that is both calculable and substantially certain to be paid will be treated as readily ascertainable.

	
 
	
(b)
	
In the event a Participant has completed a Deferral Election with respect to any portion of his or her Performance-Based Compensation and payment of such Performance-Based Compensation is to be made without regard to actual performance as a result of the death or Disability of the Participant, or the occurrence of a Change of Control after the Deferral Election is made and has become irrevocable,  the Participant’s Deferral Election shall still be effective to the extent provided for in the Code Section 409A Regulations.

12

 

 

4.5Other Rules Regarding Deferral Elections

	
 
	
(a)
	
Subject to the provisions of Section 3.3(b), the rate of deferral elected for a Plan Year will be irrevocable for that Plan Year.

	
 
	
(b)
	
Deferral Elections must be made separately for each Plan Year for each type of Compensation.

	
 
	
(c)
	
The Participant shall also elect a separate time and form of distribution for benefits attributable to his or her Deferral Elections each time a Deferral Election for a Plan Year is filed, such election to be made at the time and in the manner established by the Committee for these purposes.

	
 
	
(d)
	
Unless specifically stated to the contrary on a Participant’s election form, in the event that a Participant’s election to defer long-term cash incentive award Compensation and/or short-term cash incentive award Compensation specifies the name of a particular bonus or cash incentive plan, the election shall nonetheless apply to all similar long-term cash incentive Compensation and/or short-term cash incentive Compensation (as applicable) earned during the year, even if earned under a differently named bonus or cash incentive plan than indicated on the Participant’s election form.  

4.6Absence of Election

In the event that a Deferral Election is not made for any Plan Year, Compensation will be paid to Eligible Individuals according to the Company’s normal payroll practices.

4.7 Reduction of Deferral Election by Committee Action

The Committee shall have the authority to limit the amount of any Participant’s deferral to the extent the Committee determines that such limitation is necessary or appropriate for purposes of complying with applicable withholding requirements, which Committee action shall be taken prior to the date the Deferral Election becomes effective, and shall be documented in Writing and notice provided to the Participant.

4.8Credits for Investment Earnings and Debits for Investment Losses

	
 
	
(a)
	
All amounts credited to a Participant’s Account shall be credited with amounts of investment earnings or debited with amounts of investment losses that correspond to the total investment return earned by the Investment Fund or combination of Investment Funds designated in advance by the Participant for these purposes.

	
 
	
(b)
	
The designation of one or more Investment Funds by a Participant under this Section of the Plan shall be used solely to measure the amounts of investment earnings or losses that will be credited or debited to the Participant’s Account on the Company’s books and records, and the Company shall not be required under the Plan to establish any account in 

13

 

 

	
 
		
the Investment Funds or to purchase any Investment Fund shares on the Participant’s behalf.

	
 
	
(c)
	
The designation by a Participant of any Investment Funds under this Section of the Plan shall be made in accordance with rules and procedures established by the Committee.

	
 
	
(d)
	
The Investment Funds are valued each day the New York Stock Exchange is open for trading.

	
 
	
(e)
	
A Participant may elect to revise the investment options with respect to existing Account allocations or future contributions pursuant to the Deferral Election at any time (subject to any Investment Fund limitation) by notification to the Committee in the prescribed manner. The Committee, however, retains the right to review and restrict transfer rights at any time.

	
 
	
(f)
	
If a Participant fails to make a proper designation, then his or her Accounts shall be deemed to be invested in the Investment Fund(s) designated by the Committee from time to time for this purpose at the Committee’s discretion. This investment option can be changed by the Committee from time to time at the Committee’s discretion.

4.9 Company Contributions

The Company may, in its sole discretion, make additional Company credits ("Discretionary Credits") on behalf of any Eligible Individual. In its sole discretion, the Company shall determine the Eligible Individuals to be credited with any Discretionary Credit, the amount of any such Discretionary Credit and the vesting schedule applicable thereto (including any accelerated vesting thereof and the events of such acceleration). In addition, the Company may permit the Participant to elect the timing and form of distribution of such Discretionary Credits, provided that any such election shall be made no later than the latest time permitted by Code Section 409A.

4.10Prior Tyco Account

BNS Participants had credited to their Accounts an amount equal to the balance of their account under the Tyco Nonqualified Plan as of Closing Date.  This credited amount is maintained in the Participant’s Prior Tyco Account.

 

ARTICLE V VESTING

5.1Vesting of Accounts

Subject to Section 4.9, a Participant shall be fully vested in the amounts credited to his or her Accounts at all times.

 

14

 

 

ARTICLE VI PAYMENT OF BENEFITS

6.1Distribution of Benefits and Distribution Elections

A Participant shall receive payment of benefits in the form and manner as described in this Article VI or as permitted pursuant to Section 4.9, taking into account such elections as are permitted hereunder.

6.2Distribution Elections

A Participant shall specify the time and form of distribution at such time or times and in such manner as may be established by the Committee, at its discretion; provided, however, that in all cases any election as to time and form of distribution must be in Writing and must be irrevocable no later than the date as of which any Deferral Election to which such election is applicable has been filed and becomes irrevocable.

6.3Timing of Distributions - Benefit Distribution Date 

I.Deferral Elections for the 2016 Plan Year or Before

(a)For Deferrals of Compensation attributable to any period on or before December 31, 2016, a Participant shall elect, at the time of each election to defer Compensation with respect to each Plan Year, to receive the benefit distribution from the portion of his or her Accounts attributable to such deferral of Compensation, in accordance with one of the following options:

	
 
	
(1)
	
As soon as administratively practical following Separation from Service from the Company, or

	
 
	
(2)
	
As soon as administratively practical following the earlier of (i) a specific date which occurs no earlier than at least two years from the end of the calendar year in which the deferred Compensation is credited, or (ii) the date of Separation from Service from the Company. However, if Separation from Service is due to the Participant’s Retirement, payments will commence as of the elected specified date.

(b)A time of distribution election shall be made separately for each type of Compensation deferred for that Plan Year.

(c)In the event a Participant fails to make a distribution election, Section 6.3-I(a)(1) of the Plan shall apply.

(d)The time of distribution elected under this Section may be revised, with the consent of the Committee pursuant to Section 6.6, below.

15

 

 

II.Deferral Elections for the 2017 Plan Year or Later

(a)For Deferrals of Compensation attributable to any period on or after January 1, 2017, a Participant shall elect, at the time of each election to defer Compensation with respect to each Plan Year, to receive the benefit distribution from the portion of his or her Accounts attributable to such deferral of Compensation, in accordance with one of the following options:

	
 
	
(1)
	
As soon as administratively practical following the first day of the seventh month after the Participant’s Separation from
Service from the Company, or

	
 
	
(2)
	
As soon as administratively practical following the earlier of (i) a specific date which occurs no earlier than at least two years, and no later than five years, from the end of the calendar year in which the deferred Compensation is credited, or (ii) the first day of the seventh month following the Participant’s Separation from Service from the Company. However, if Separation from Service is due to the Participant’s Retirement, payments will commence as of the elected specified date, or

	
 
	
(3)
	
As soon as administratively practical following a specified interval following the Participant’s Separation from Service.  The interval described in the preceding sentence shall be a number of whole years from one to five, elected at the time of the Participant’s deferral election.  This payment election is only available with respect to lump sum payments.

(b)A time of distribution election shall be made separately for each type of Compensation deferred for that Plan Year.

(c)In the event a Participant fails to make a distribution election, Section

6.3-II(b)(1) of the Plan shall apply.

(d)The time of distribution elected under this Section may be revised, with the consent of the Committee pursuant to Section 6.6, below.

6.4Distributions to Specified Employees

Notwithstanding the foregoing, in the event that, as of the date a distribution is to be made on account of a Participant’s Separation from Service, any class of the Company’s stock is publicly traded on an established securities market or otherwise, as determined under the Code Section 409A Regulations, any distribution due hereunder to such Participant on account of his or her Separation from Service shall, if such Participant is determined to be a Specified Employee, not commence earlier than the six (6) month anniversary of such Participant’s Separation from Service. In the event a distribution is delayed by reason of this Section and the affected Participant’s death occurs prior to commencement of such distribution, such distribution shall be made as soon as practicable following such Participant’s death.  For the avoidance of doubt, a Participant’s status as a Specified Employee will be determined as of the date of the Participant’s 

16

 

 

Separation from Service, without regard to the year for which Compensation is deferred, even if the application of this Section 6.4 results in the portion of the Participant’s Account payable under Section 6.3-I being paid on a different date than as the portion payable under Section 6.3-II.

6.5Form of Distribution

(a)A Participant shall elect, at the time of each election to defer Compensation with respect to each Plan Year, the form of distribution in a manner prescribed by the Committee in accordance with one of two payment options:

	
 
	
(1)
	
A single lump sum payment, or

	
 
	
(2)
	
Annual Declining Balance installments, with an installment term of between 2 and 10 years.
	
 

(b)A form of distribution election shall be made separately for each type of Compensation deferred for that Plan Year.

 

(c)In the event a Participant fails to make an election, Section 6.5(a)(1) of the Plan shall automatically apply.

 

(d)The benefit form of distribution elected under this Section may be revised, with the consent of the Committee pursuant to Section 6.6, below.

6.6 Elections to Defer Beyond Original Distribution Commencement Date.

With respect to previously deferred Compensation, a Participant may elect to change the Benefit Distribution Date otherwise elected pursuant to this Article VI and Section 4.9 and/or to modify the form of benefit elected pursuant to applicable provisions of this Article VI and Section 4.9 (a “revised election”), if the following requirements are met:

	
 
	
(a)
	
The revised election shall not take effect for at least twelve (12) months after the date of such revised election;

	
 
	
(b)
	
The first payment with respect to such revised election shall not be made until at least five (5) years after the date on which distribution would have otherwise begun; provided that earlier distribution may be made in the event of the Participant’s death or Disability;

	
 
	
(c)
	
If applicable, the revised election shall be made at least twelve (12) months prior to a scheduled Benefit Distribution Date;

17

 

 

	
 
	
(d)
	
In no event shall a Participant be permitted to change the time of any distribution in any manner that would accelerate the payment of a Plan benefit; and

	
 
	
(e)
	
In no event shall a Participant be permitted to change his or her elected form of benefit from installment payments to a single lump sum if such change would result in a material acceleration of payment for purposes of Code Section 409A and the Code Section 409A Regulations.

6.7Permitted Acceleration of Payment

Notwithstanding the Participant’s elected time and form of distribution pursuant to Article VI and Section 4.9 of the Plan, the time or schedule of a payment shall be accelerated in the following circumstances (but only to the extent permitted under the Code Section 409A Regulations):

	
 
	
(a)
	
Payment shall be made to the extent necessary to comply with a domestic relations order (as defined in Code Section 414(p)(1)(B)) that meets the requirements of the Company’s domestic relations order procedures applicable to nonqualified plans, if such payment is made to an individual other than the Participant.

	
 
	
(b)
	
Payment shall be made to the extent necessary to comply with an ethics agreement with the Federal government or to the extent reasonably necessary to avoid the violation of an applicable federal, state, local, or foreign ethics law or conflicts of interest law (including where such payment is reasonably necessary to permit the Participant to participate in activities in the normal course of his or her position in which the Participant would otherwise not be able to participate under an applicable rule).

	
 
	
(c)
	
Payment of a Participant’s entire Account may be made in the form of a lump sum payment of amounts deferred under the Plan that do not exceed a specified amount, provided any action by the Company causing such lump sum payment to be made to a Participant is evidenced in Written form and executed by an authorized officer of the Company no later than the date such lump sum payment is made, and provided that such lump sum payment results in the termination and liquidation of the entirety of the Participant’s Account under the Plan, and his or her deferred compensation benefits under all other agreements, methods, programs, or other arrangements with respect to which deferrals of compensation are treated as having been deferred under a single nonqualified deferred compensation plan under Section 1.409A-1(c)(2) of the Code Section 409A Regulations; and provided further that the total payment to the Participant (under the Plan and all other arrangements treated as a single nonqualified deferred compensation plan) is not in excess of the applicable dollar amount under Code Section 402(g)(1)(B).

18

 

 

	
 
	
(d)
	
Payment is permitted to the extent necessary to satisfy any applicable federal, state and local income tax withholding and federal payroll withholding requirements pursuant to provisions of Code Section 409A and the regulations thereunder, related to benefits provided in the Plan.

	
 
	
(e)
	
Payment of a Participant’s entire Account shall be made in the event of the failure of the Plan (or failure of any other plan required to be aggregated with the Plan pursuant to regulations published under Code Section 409A) to meet the requirements of Code Section 409A.

6.8 Payment For Unforeseeable Emergency

A Participant who incurs an unforeseeable emergency may apply to the Committee for an immediate distribution from his or her Account in an amount necessary to satisfy such financial hardship and the tax liability attributable to such distribution, subject to the rules set forth below.

	
 
	
(a)
	
An unforeseeable emergency will be deemed to have occurred if the Participant undergoes a severe financial hardship resulting from an illness or accident of the Participant or his or her spouse, the Participant’s beneficiary, or his or her dependent (as defined in Code Section 152, without regard to Code Sections 152(b)(1), (b)(2), and (d)(1)(B)); loss of the Participant’s property due to casualty (including the need to rebuild a home following damage to a home not otherwise covered by insurance, for example, not as a result of a natural disaster); or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the employee. In addition, the need to pay for the funeral expenses of a spouse, a beneficiary, or a dependent may also constitute an unforeseeable emergency.

	
 
	
(b)
	
A distribution on account of unforeseeable emergency may not be made to a Participant to the extent that such emergency is or may be relieved through reimbursement or compensation from insurance or otherwise, by liquidation of the Participant’s assets, to the extent the liquidation of such assets would not cause severe financial hardship, or by cessation of deferrals under the plan.

	
 
	
(c)
	
Distributions because of an unforeseeable emergency must be limited to the amount reasonably necessary to satisfy the emergency need (which may include amounts necessary to pay any federal, state, local, or foreign income taxes or penalties reasonably anticipated to result from the distribution). Determinations of amounts reasonably necessary to satisfy the emergency need must take into account any additional Compensation that is available by reason of the cancellation of the Participant’s deferral election upon a payment due to an unforeseeable emergency, which cancellation shall be implemented to the extent permitted or required under the Code Section 409A Regulations, and to the extent required under the Plan.

19

 

 

	
 
	
(d)
	
In the event a Participant requests, and the Committee approves, a payment pursuant to this Section, the Participant’s Deferral Election shall be cancelled. In the event that any credit is made for employer matching contributions pursuant to applicable provisions of the Plan, such credits (together with any investment results) shall be removed from the Participant’s Account.

6.9Payment of Disability Benefits

If a Participant incurs a Disability, the entire value of his or her Account shall be distributed to the Participant in a single lump sum. Any distribution pursuant to this Section will occur following the determination of the Disability as approved by the Committee.

In the event that a Participant requests, and the Committee approves, a payment pursuant to this Section, the Participant’s Deferral Election shall be cancelled.

6.10 Payment of Death Benefits

(a)Each Participant shall designate a beneficiary on the proper beneficiary form as prescribed by the Committee to receive his or her Accounts in the event of death. If a Participant dies with a balance credited to his or her Accounts, such balance shall be paid to the applicable beneficiary or beneficiaries in a single lump sum as soon as practical following the Participant’s death.  

 (b)Notwithstanding the above, if no beneficiary designation is on file with the Company at the time of death of the Participant or such designation is not effective for any reason then the designated beneficiary to receive such benefits shall be as follows:

(1)the Participant’s surviving spouse; or

(2)if there is no surviving spouse, then to the Participant’s estate.

All decisions made by the Committee in good faith and based upon affidavit or other evidence satisfactory to the Committee regarding questions of fact in the determination of the identity of such beneficiary(ies) shall be conclusive and binding upon all parties, and payment made in accordance therewith shall satisfy all liability hereunder.

6.11 Change of Control

Within ten (10) days following a Change of Control of the Company, the entire value of his or her Account shall be distributed to the Participant in a single lump sum.

6.12 Valuation of Distributions

The benefit amount of a Participant’s Account to be distributed pursuant to this Article VI and Section 4.9 shall be based on the value of such Account on any Valuation Date after instructions are received in good order by the Committee.

20

 

 

6.13 Timing of Distributions

Distributions made pursuant to this Article VI and Section 4.9 shall be made at the following times:

	
 
	
(a)
	
Specific Date - Any distribution made in accordance with a specific date shall be made as soon as administratively feasible following the elected specific date, but no later than the end of the calendar year containing the date or, if later, the 15th day of the third calendar month following the specified date.

	
 
	
(b)
	
Event – Any distribution made in accordance with an event in this Article VI and Section 4.9 shall be made as soon as administratively feasible following the event, but no later than 90 days following the date the benefit is payable under this Article VI and Section 4.9.

6.14  Prior Tyco Account

Notwithstanding the foregoing, any Participant’s Prior Tyco Account shall be paid according to the elections in place for such Participant as of the Closing Date, as described in Appendix A, unless otherwise deferred pursuant to Section 6.6.  Until a BNS Participant designates a different beneficiary under this Plan, the BNS Participant’s beneficiary designation (if any) under the Tyco Nonqualified Plan shall apply under this Plan.   

 

ARTICLE VII AMENDMENT AND TERMINATION OF PLAN

7.1 Amendments Generally

The Company reserves the right to amend the Plan at any time. No amendment, however, may reduce the amount credited to Accounts at the time of the amendment’s adoption, except as may otherwise be required by law or necessary or desirable to comply with the requirements of Code Section 409A. Without limiting the generality of the foregoing, the Committee may amend the Plan to impose such restrictions upon the timing, filing and effectiveness of Deferral Elections, the investment procedures and investment alternatives available under the Plan and the distribution provisions of Article VI and Section 4.9 which the Committee deems appropriate or advisable in order to avoid the current income taxation of amounts deferred under the Plan which might otherwise occur as a result of changes to the tax laws and regulations governing deferred compensation arrangements such as the Plan and may also, in such event, cease further deferrals under the Plan.

7.2Right to Terminate

The Company may terminate the Plan at any time in whole or in part.

	
 
	
(a)
	
Except for such modifications, limitations or restrictions as may otherwise be required to avoid current income taxation or other adverse tax consequences as a result of changes to the tax laws and regulations applicable to the Plan, no such plan amendment or plan termination 

21

 

 

	
 
		
authorized by the Committee shall adversely affect the benefits accrued to date under the Plan or otherwise reduce the then outstanding balances credited to Accounts or otherwise adversely affect the distribution provisions in effect for those Accounts, and all amounts deferred prior to the date of any such plan amendment or termination shall, subject to the foregoing exception, continue to become due and payable in accordance with the distribution provisions of Article VI and Section 4.9 as in effect immediately prior to such amendment or termination. Termination of the Plan shall not serve to reduce the amount credited to an Account at the time of termination.

	
 
	
(b)
	
Notwithstanding the above, the Company may terminate the Plan and distribute the participant’s credited accounts in the form of a single lump sum. Such a Plan termination may occur only if the conditions set forth below are met, consistent with the requirements of Code Section 409A and the Code Section 409A Regulations:

(i)The termination and liquidation does not occur proximate to a downturn in the financial health of the Company;

(ii)The Company terminates and liquidates all agreements, methods, programs, and other arrangements sponsored by the Company that would be aggregated with the Plan under applicable provisions of the Code Section 409A Regulations assuming a Participant in the Plan also had deferrals credited under all such other agreements, methods, programs;

(iii)No payments in liquidation of the plan are made within 12 months of the date the Company takes all necessary action to irrevocably terminate and liquidate the Plan (other than amounts distributed under the terms of the Plan without regard to the action to terminate and liquidate the Plan;

(iv)All payments in liquidation of the Plan are made within 24 months of the date the Company takes all necessary action to irrevocably terminate and liquidate the Plan; and

(v)The Company does not adopt a new plan that would be aggregated with the Plan under applicable provisions of the Code Section 409A Regulations if assuming a Participant participated in both plans, at any time within three years following the date the Company takes all necessary action to irrevocably terminate and liquidate the Plan.

 

ARTICLE VIII MISCELLANEOUS

8.1 Unfunded Plan

This Plan is an unfunded deferred compensation arrangement for Eligible Individuals. While it is the intention of the Company that this Plan shall be unfunded for federal tax purposes and for purposes of Title I of ERISA, the Company may establish a grantor trust to satisfy part or 

22

 

 

all of its Plan payment obligations so long as the Plan remains unfunded for federal tax purposes and for purposes of Title I of ERISA. The Company shall not establish or contribute to a trust under the prior sentence to satisfy its obligations regarding either of the following (i) any Participant’s Prior Tyco Account or (ii) credits for any Participant related to any period beginning on or after January 1, 2016.  Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any employee or other person. To the extent any person acquires a right to receive a payment from the Company under the Plan, such right shall be no greater than that of an unsecured general creditor of the Company.

8.2 Nonguarantee of Employment

Nothing contained in the Plan shall be construed as a contract of employment between the Company and any Participant, or as a right of any Participant to be continued in the employment of the Company, or as a limitation of the right of the Company to discharge any Participant with or without cause.

8.3Nonalienation of Benefits

	
 
	
(a)
	
Except as provided in Section 6.8(a) and as may be required by law, benefits payable under the Plan are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any kind, whether voluntary or involuntary. Any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any right to benefits under the Plan shall be void. The Company shall not in any manner be liable for, or subject to, the debts, contracts, liabilities, engagements or torts of any person entitled to benefits under the Plan.

	
 
	
(b)
	
Notwithstanding Section 8.3(a) of the Plan, if a Participant is indebted to the Company at any time when payments are to be made by the Company to the Participant under the provisions of the Plan, the Company shall have the right to reduce the amount of payment to be made to the Participant (or the Participant’s beneficiary) to the extent of such indebtedness. Any election by the Company not to reduce such payment shall not constitute a waiver of its claim for such indebtedness.

8.4 Taxes and Withholding

	
 
	
(a)
	
For each Plan Year in which the Participant defers a portion of Compensation under this Plan, the Company will withhold from the Participant’s non-deferred Compensation the Participant’s share of FICA and other employment taxes to the extent applicable. For the avoidance of doubt, the Company is not required to provide any “gross-up” payment to the extent the desired tax treatment of amounts deferred under the Plan is not realized.

23

 

 

	
 
	
(b) 
	
The tax treatment of any payment provided under this Plan is not warranted or guaranteed. Neither the Company nor the Committee shall be liable for or required to reimburse any Participant for any taxes, interest, penalties, or other monetary amounts owed by the Participant or any other taxpayer as a result of the Plan or the payment or non-payment of any amount thereunder.  By participating in the Plan, the Participant agrees to be solely and exclusively liable for any tax consequences (including without limitation any additional tax based on noncompliance with Code Section 409A) associated with any benefit under the Plan.  Nothing in this Plan shall be interpreted as creating in the Company, the Committee, or any other person a duty to optimize any tax treatment.

8.5 Applicable Law

This Plan shall be construed and enforced in accordance with the laws of the state of Delaware.

8.6 Headings and Subheadings

Headings and subheadings in this Plan are inserted for convenience only and are not to be considered in the construction of the provisions.

8.7Severability

The invalidity and unenforceability of any particular provision of this plan shall not affect any other provision and the Plan shall be construed in all respects as if such invalid or unenforceable provisions were omitted.

8.8 Expenses

In addition to the expenses and costs that may be charged against Participants’ Accounts pursuant to other provisions of the Plan, each Participant’s Account shall also be charged with its allocable share of all other costs and expenses incurred in the operation and administration of the Plan, except to the extent one or more Participating Employers elect in their sole discretion to pay all or a portion of those costs and expenses.

24

 

 

ARTICLE IX ADMINISTRATION OF THE PLAN

9.1Powers and Duties of the Committee

The Company, or its designee, shall appoint members of the Committee. The Committee will be responsible for the administration of the Plan. The Committee shall have full responsibility to represent the Company and the Participants in all things it may deem necessary for the proper administration of the Plan. Subject to the terms of the Plan, the decision of the Committee upon any question of fact, interpretation, definition or procedures relating to the administration of the Plan shall be conclusive. The responsibilities of the Committee shall include, but not be limited to, the following:

	
 
	
(a)
	
Verifying all procedures by which payments to Participants and their beneficiaries are authorized.

	
 
	
(b)
	
Deciding all questions relating to the eligibility of employees to become Participants in the Plan.

	
 
	
(c)
	
Interpreting the provisions of the Plan in all particulars.

	
 
	
(d)
	
Establishing and publishing rules and regulations for carrying out the Plan.

	
 
	
(e)
	
Preparing an individual record for each Participant in the Plan, which shall be available for examination by such Participant, or authorized persons.

	
 
	
(f)
	
Reviewing and answering any denied claim for benefits that has been appealed to the Committee under the provisions of this Article.

9.2Claims Procedure

	
 
	
(a)
	
Filing of Claim. Any Participant or beneficiary under the Plan may file a written claim for a Plan benefit with the Committee or with a person named by the Committee to receive claims under the Plan.

	
 
	
(b)
	
Notice of Denial of Claim. In the event of a denial or limitation of any benefit or payment due to or requested by any Participant or beneficiary under the Plan (“claimant”), the claimant shall be given a written notification, including electronic communication, containing specific reasons for the denial or limitation of the benefit. The written notification shall contain specific reference to the pertinent Plan provisions on which the denial or limitation of the benefit is based. In addition, it shall contain a description of any other material or information necessary for the claimant to perfect a claim, and an explanation of why such material or information is necessary. The notification shall further provide appropriate information as to the steps to be taken if the claimant wishes to appeal the denial or limitation of benefit and submit a claim for review. This written notification shall be given to a claimant within 90 days after receipt of the claim by the Committee unless special circumstances require an extension of time for process of the claim. If such an extension of time for processing is required, written notice of the extension shall be furnished to the claimant prior to the 

25

 

 

	
 
		
termination of said 90-day period, and such notice shall indicate the special circumstances which make the postponement appropriate.

	
 
	
(c)
	
Right of Review. In the event of a denial or limitation of the claimant’s benefit, the claimant or the claimant’s duly authorized representative shall be permitted to review pertinent documents free of charge upon request and to submit to the Committee issues and comments in writing. In addition, the claimant or the claimant’s duly authorized representative may make a written request for a full and fair review of the claim and its denial by the Committee; provided, however, that such written request must be received by the Committee within 60 days after receipt by the claimant of written notification of the denial or limitation of the claim. The 60-day requirement may be waived by the Committee in appropriate cases.

	
 
	
(d)
	
Decision on Review. A decision shall be rendered by the Committee within 60 days after the receipt of the request for review, provided that where special circumstances require an extension of time for processing the decision, it may be postponed on written notice to the claimant (prior to the expiration of the initial 60-day period) for an additional 60 days, but in no event shall the decision be rendered more than 120 days after the receipt of such request for review. Any decision by the Committee shall be furnished to the claimant in writing and shall set forth the specific reasons for the decision and the specific plan provisions on which the decision is based.

EXECUTION OF DOCUMENT

 

	
 
	
 
	
CommScope Holding Company, Inc.

	
 
	
 
	
By:
	
/s/ Frank B. Wyatt, II

	
 
	
 
	
Title:
	
Senior Vice President,

	
 
	
 
	
 
	
General Counsel & Secretary

	
 
	
 
	
Date:
	
December 29, 2016

 

26

 

 

Appendix A

 

Prior Tyco Account

 

The provisions of this Appendix A apply only to a Participant’s Prior Tyco Account.  

	
 
	
1.
	
Deferral Elections:  

	
 
	
a.
	
Retention of Existing Deferral Elections for 2015. Pursuant to Section 4.3 of the Plan, a BNS Participant who had a Deferral Election (including an election to defer base pay and/or an election to defer bonus compensation) under the Tyco Nonqualified Plan shall be deemed to have made the same Deferral Election under this Plan for the 2015 calendar year.  All deferrals made after the BNS Participant becomes a Participant shall be made to the Participant’s other sub-accounts and not to the Participant’s Prior Tyco Account.

	
 
	
b.
	
Spillover Election.  A Spillover Election was a feature of the Tyco Nonqualified Plan, involving an irrevocable commitment by a BNS Participant to defer a percentage of his periodic Compensation equal to the Participant's election under the Tyco Electronics Corporation Retirement Savings and Investment Plan (“TE 401(k)”), with such deferrals commencing at the time the Participant's tax-deferred contributions or after-tax contributions, as applicable, under the TE 401(k) were suspended for any Plan Year as the result of the imposition of any limitation under applicable law or any procedure established by the Tyco Nonqualified Plan committee in accordance with applicable law.  For purposes of calculating the Spillover Election, BNS Participants with a Spillover Election were treated as not being permitted to change their tax-deferred or after-tax contribution levels to the TE 401(k) plan.

	
 
	
c. 
	
Application of Spillover Election. BNS Participants whose Deferral Election under the Tyco Nonqualified Plan included a Spillover Election shall maintain the Spillover Election under this Plan for 2015 only.  For purposes of this Plan, a Participant’s Spillover Election shall be interpreted as an election to defer to the Plan the percentage of the Participant’s periodic Compensation specified in the election, but only to the extent such deferrals constitute an Excluded Amount.  An “Excluded Amount” shall mean pre-tax or after-tax contributions that would be excluded from the CommScope, Inc. Retirement Savings Plan because of the imposition of any limitation under applicable law or any procedure established by the Committee in accordance with applicable law.  Excluded Amounts shall be calculated as though the Participant had contributed to the CommScope, Inc. Retirement Plan on a level basis throughout the Plan Year pursuant to the Participant’s contribution elections under the TE 401(k) immediately before the Closing Date.  For the purpose of calculating the Spillover Election only, the TE 401(k) plan and the CommScope, Inc. Retirement Savings Plan shall be treated as 

27

 

 

	
 
		
a single plan. Spillover Elections shall not be available for any calendar year beginning on or after January 1, 2016.

	
 
	
2.
	
Distribution Options:  Pursuant to Section 6.14 of the Plan, the Prior Tyco Account of any Participant retains the same elections for time and form of payment as existed under the Tyco Nonqualified Plan.  The following were the timing and form of payment options that existed under the Tyco Nonqualified Plan:

	
 
	
a.
	
Time of Payment

	
 
	
•
	
Payment in a specific a future year.

	
 
	
•
	
Payment after Separation from Service.

	
 
	
•
	
Payment as of the earlier of a specific future year or Separation from Service.

If payment in a specific year is selected, the year chosen cannot be later than the year in which the BNS Participant reaches age 70.  The payment will occur (or installments will begin) in March of the year selected.

Payments made upon Separation from Service will be paid (or installments will begin) as of March of the year following the year in which Separation from Service occurs.

	
 
	
b.
	
Form of Payment

	
 
	
•
	
Lump sum payment.

	
 
	
•
	
Between 2 and 10 annual equal installments.  The installment option is only available for participants with a minimum account balance of $10,000.  BNS Participants whose account balances do not meet this threshold are treated as having elected a lump sum payment.

	
 
	
c.
	
Subsequent Deferral Elections

A Participant shall be permitted to make changes to the time and form of payment of the Participant’s Prior Tyco Account in accordance with Section 6.6 of the Plan, provided that in no event may a Participant elect to defer commencement of payment of his Prior Tyco Account past the year in which the Participant reaches age 70.  

	
 
	
3.
	
Payment on Death:  If a Participant dies before his entire Prior Tyco Account is distributed, the balance of the Participant’s Prior Tyco Account will be paid to the Participant’s designated beneficiary in lump sum.  

28Exhibit 10.1

 

FORESTAR (USA) REAL ESTATE GROUP INC.

 

AND

 

MINERAL RESOURCES PARTNERS, LLC

 

 

PURCHASE AND SALE AGREEMENT

 

 

February 17, 2017

 

 

TABLE OF CONTENTS

	
 
    	
 
    	
 
    
	
ARTICLE 1   DEFINITIONS
    	
3
    
	
 
    	
 
    	
 
    
	
Section 1.01
    	
Defined Terms
    	
3
    
	
 
    	
 
    	
 
    
	
ARTICLE 2   PURCHASE AND SALE OF THE INTERESTS
    	
15
    
	
 
    	
 
    	
 
    
	
Section 2.01
    	
Interests
    	
15
    
	
 
    	
 
    	
 
    
	
Section 2.02
    	
Excluded Assets
    	
15
    
	
 
    	
 
    	
 
    
	
Section 2.03
    	
No Transfer Fees
    	
17
    
	
 
    	
 
    	
 
    
	
ARTICLE 3   PURCHASE PRICE
    	
17
    
	
 
    	
 
    	
 
    
	
Section 3.01
    	
Purchase Price
    	
17
    
	
 
    	
 
    	
 
    
	
Section 3.02
    	
Execution Date Payment
    	
18
    
	
 
    	
 
    	
 
    
	
Section 3.03
    	
Escrow Deposits of   Holdback Amount and CL Realty Payment
    	
18
    
	
 
    	
 
    	
 
    
	
Section 3.04
    	
Interim Settlement Date   Payment
    	
18
    
	
 
    	
 
    	
 
    
	
Section 3.05
    	
CL Realty Payment; CL   Realty Delay Amount
    	
19
    
	
 
    	
 
    	
 
    
	
ARTICLE 4   PURCHASE PRICE ADJUSTMENTS
    	
20
    
	
 
    	
 
    	
 
    
	
Section 4.01
    	
Adjustments to the Base   Purchase Price
    	
20
    
	
 
    	
 
    	
 
    
	
Section 4.02
    	
Interim Settlement   Statement
    	
21
    
	
 
    	
 
    	
 
    
	
Section 4.03
    	
Final Settlement   Adjustments
    	
22
    
	
 
    	
 
    	
 
    
	
Section 4.04
    	
Allocation of Revenues   and Expenses
    	
23
    
	
 
    	
 
    	
 
    
	
ARTICLE 5   BUYER’S DUE DILIGENCE
    	
24
    
	
 
    	
 
    	
 
    
	
Section 5.01
    	
Access
    	
24
    
	
 
    	
 
    	
 
    
	
ARTICLE 6   TITLE MATTERS
    	
25
    
	
 
    	
 
    	
 
    
	
Section 6.01
    	
Defect Notices
    	
25
    
	
 
    	
 
    	
 
    
	
Section 6.02
    	
Seller’s Response to   Asserted Defects
    	
25
    
	
 
    	
 
    	
 
    
	
Section 6.03
    	
Purchase Price Adjustments   for Defects; Quitclaim by Buyer
    	
26
    
	
 
    	
 
    	
 
    
	
Section 6.04
    	
Limitations on   Adjustments for Title Defects
    	
27
    
	
 
    	
 
    	
 
    
	
Section 6.05
    	
Title Benefits
    	
28
    
	
 
    	
 
    	
 
    
	
Section 6.06
    	
Defect or Benefit   Disputes
    	
28
    
	
 
    	
 
    	
 
    
	
ARTICLE 7   REPRESENTATIONS AND WARRANTIES OF SELLER
    	
29
    
	
 
    	
 
    	
 
    
	
Section 7.01
    	
Seller’s Corporate   Representations and Warranties
    	
29
    
	
 
    	
 
    	
 
    
	
ARTICLE 8   REPRESENTATIONS AND WARRANTIES FOR ASSET COMPANIES
    	
30
    

 

i

 

	
 
    	
 
    	
 
    
	
Section 8.01
    	
Seller’s   Representations and Warranties
    	
30
    
	
 
    	
 
    	
 
    
	
ARTICLE 9   REPRESENTATIONS AND WARRANTIES OF BUYER
    	
34
    
	
 
    	
 
    	
 
    
	
Section 9.01
    	
Buyer’s Representations   and Warranties
    	
34
    
	
 
    	
 
    	
 
    
	
ARTICLE 10   SCOPE OF REPRESENTATIONS OF SELLER
    	
36
    
	
 
    	
 
    	
 
    
	
Section 10.01
    	
Information About the   Interests and the Mineral Assets
    	
36
    
	
 
    	
 
    	
 
    
	
Section 10.02
    	
Independent   Investigation
    	
37
    
	
 
    	
 
    	
 
    
	
Section 10.03
    	
“AS IS, WHERE IS”
    	
37
    
	
 
    	
 
    	
 
    
	
Section 10.04
    	
Waiver of Deceptive   Trade Practices Acts
    	
38
    
	
 
    	
 
    	
 
    
	
Section 10.05
    	
UTPCPL Waiver
    	
38
    
	
 
    	
 
    	
 
    
	
Section 10.06
    	
Disclaimers as to   Physical Condition of the Mineral Assets
    	
38
    
	
 
    	
 
    	
 
    
	
Section 10.07
    	
General Disclaimers
    	
39
    
	
 
    	
 
    	
 
    
	
ARTICLE 11   EXECUTION DATE DELIVERIES
    	
40
    
	
 
    	
 
    	
 
    
	
Section 11.01
    	
Deliveries by Seller
    	
40
    
	
 
    	
 
    	
 
    
	
Section 11.02
    	
Deliveries by Buyer
    	
41
    
	
 
    	
 
    	
 
    
	
ARTICLE 12   TAX MATTERS
    	
42
    
	
 
    	
 
    	
 
    
	
Section 12.01
    	
Tax Matters
    	
42
    
	
 
    	
 
    	
 
    
	
Section 12.02
    	
Sales or Use Tax   Recording Fees and Similar Taxes and Fees
    	
42
    
	
 
    	
 
    	
 
    
	
Section 12.03
    	
Ad Valorem and Property   Taxes
    	
42
    
	
 
    	
 
    	
 
    
	
ARTICLE 13   COVENANTS OF THE PARTIES
    	
43
    
	
 
    	
 
    	
 
    
	
Section 13.01
    	
Seller’s Logos;   Companies’ Names
    	
43
    
	
 
    	
 
    	
 
    
	
Section 13.02
    	
Records
    	
43
    
	
 
    	
 
    	
 
    
	
Section 13.03
    	
Suspended Funds
    	
43
    
	
 
    	
 
    	
 
    
	
Section 13.04
    	
Notice of Transfer
    	
43
    
	
 
    	
 
    	
 
    
	
Section 13.05
    	
Knowledge of Breach
    	
43
    
	
 
    	
 
    	
 
    
	
Section 13.06
    	
Transfer of CL Realty   Assets and Other Assets to Forestar Minerals
    	
44
    
	
 
    	
 
    	
 
    
	
Section 13.07
    	
Transfer of Primary   Term Leases to Forestar Oil & Gas
    	
44
    
	
 
    	
 
    	
 
    
	
Section 13.08
    	
Bonds
    	
44
    
	
 
    	
 
    	
 
    
	
ARTICLE 14   ASSUMED OBLIGATIONS; INDEMNIFICATION
    	
44
    
	
 
    	
 
    	
 
    
	
Section 14.01
    	
Buyer’s Assumption of   Obligations and Indemnification and Release
    	
44
    
	
 
    	
 
    	
 
    
	
Section 14.02
    	
Additional Indemnification   and Release by Buyer
    	
46
    
	
 
    	
 
    	
 
    
	
Section 14.03
    	
Indemnification by   Seller
    	
48
    

 

ii

 

	
 
    	
 
    	
 
    
	
Section 14.04
    	
Limitation and Scope on   Indemnity Obligations
    	
49
    
	
 
    	
 
    	
 
    
	
Section 14.05
    	
Survival of Provisions
    	
49
    
	
 
    	
 
    	
 
    
	
Section 14.06
    	
Notice of Claim
    	
50
    
	
 
    	
 
    	
 
    
	
Section 14.07
    	
Exclusive Remedy Except   for Fraud and Similar Matters
    	
50
    
	
 
    	
 
    	
 
    
	
Section 14.08
    	
Tax Characterization of   Indemnification Payments
    	
51
    
	
 
    	
 
    	
 
    
	
ARTICLE 15   MISCELLANEOUS
    	
51
    
	
 
    	
 
    	
 
    
	
Section 15.01
    	
Confidentiality
    	
51
    
	
 
    	
 
    	
 
    
	
Section 15.02
    	
Notice
    	
51
    
	
 
    	
 
    	
 
    
	
Section 15.01
    	
Press Releases and   Public Announcements
    	
53
    
	
 
    	
 
    	
 
    
	
Section 15.02
    	
Compliance with Express   Negligence Rule
    	
53
    
	
 
    	
 
    	
 
    
	
Section 15.03
    	
Governing Law; Venue
    	
53
    
	
 
    	
 
    	
 
    
	
Section 15.04
    	
Section 18.06   Exhibits and Schedules
    	
54
    
	
 
    	
 
    	
 
    
	
Section 15.05
    	
Fees, Expenses, and   Recording
    	
54
    
	
 
    	
 
    	
 
    
	
Section 15.06
    	
Assignment
    	
54
    
	
 
    	
 
    	
 
    
	
Section 15.07
    	
Entire Agreement
    	
54
    
	
 
    	
 
    	
 
    
	
Section 15.08
    	
Severability
    	
54
    
	
 
    	
 
    	
 
    
	
Section 15.09
    	
Captions
    	
55
    
	
 
    	
 
    	
 
    
	
Section 15.10
    	
References
    	
55
    
	
 
    	
 
    	
 
    
	
Section 15.11
    	
Counterpart Execution
    	
55
    
	
 
    	
 
    	
 
    
	
Section 15.12
    	
Waiver of Certain   Damages
    	
55
    
	
 
    	
 
    	
 
    
	
Section 15.13
    	
Construction
    	
56
    
	
 
    	
 
    	
 
    
	
Section 15.14
    	
No Third-Party   Beneficiaries
    	
56
    
	
 
    	
 
    	
 
    
	
Section 15.15
    	
Amendments and Waivers
    	
56
    
	
 
    	
 
    	
 
    
	
Section 15.16
    	
Further Assurances
    	
56
    
	
 
    	
 
    	
 
    
	
Section 15.17
    	
Conflict Waiver;   Attorney-Client Privilege
    	
56
    

 

iii

 

Schedules:

 

	
1.01(a)
    	
Net   Mineral Acres of Fee Minerals, by State
    
	
 
    	
 
    
	
 
    	
Alabama
    
	
 
    	
 
    
	
 
    	
Georgia
    
	
 
    	
 
    
	
 
    	
Colorado
    
	
 
    	
 
    
	
 
    	
Indiana
    
	
 
    	
 
    
	
 
    	
Texas
    
	
 
    	
 
    
	
 
    	
Louisiana
    
	
 
    	
 
    
	
1.01(b)(1)
    	
WI Leases, NRI and ORRI
    
	
 
    	
 
    
	
1.01(b)(2)
    	
Fee Mineral Leases and   Royalties
    
	
 
    	
 
    
	
1.01(c)(1)
    	
WI Wells
    
	
 
    	
 
    
	
1.01(c)(2)
    	
Fee Mineral Wells and   Royalties
    
	
 
    	
 
    
	
1.01(e)
    	
Other Assets
    
	
 
    	
 
    
	
7.01(d)
    	
Claims/Litigation
    
	
 
    	
 
    
	
7.01(e)
    	
Taxes
    
	
 
    	
 
    
	
8.01(h)
    	
Environmental Matters
    
	
 
    	
 
    
	
8.01(k)
    	
Dispositions
    
	
 
    	
 
    
	
8.01(l)
    	
Subsidiaries
    
	
 
    	
 
    
	
8.01(m)
    	
Material Contracts
    
	
 
    	
 
    
	
13.07
    	
CL Realty Assets
    
	
 
    	
 
    
	
13.08
    	
Primary Term Leases
    
	
 
    	
 
    
	
Exhibits
    	
 
    
	
 
    	
 
    
	
A
    	
Form of Assignment
    

 

iv

 

PURCHASE AND SALE AGREEMENT

 

This Purchase and Sale Agreement (this “Agreement”) is entered into as of February 17, 2017 (the “Execution Date”) by and between Forestar (USA) Real Estate Group Inc., a Delaware corporation (“Seller”), and Mineral Resources Partners, LLC, a Delaware limited liability company (“Buyer”). Buyer and Seller are sometimes collectively referred to herein as the “Parties” and each is sometimes individually referred to as a “Party.”

 

RECITALS

 

A.                                    Seller desires to sell to Buyer the Interests on the terms and conditions set forth in this Agreement. Buyer desires to purchase from Seller the Interests on the terms and conditions set forth in this Agreement.  All capitalized terms are used as defined in this Agreement.

 

B.                                    The Interests comprise the equity ownership of the Asset Companies, which own the Mineral Assets as well as the Equity ownership of Forestar Minerals GP Company and Forestar Minerals LP Company.

 

C.                                    The Mineral Assets are comprised of the Fee Minerals (including the Non-Producing Fee Minerals and, following the CL Realty Conveyance date, the CL Realty Assets), WI Leases, Fee Mineral Leases, WI Wells and Fee Mineral Wells.

 

D.                                    Buyer has reviewed and accepted title for all of the Mineral Assets except the Non-Producing Fee Minerals located in the States of Texas (approximately 220,000 Net Mineral Acres) and Louisiana (approximately 134,000 Net Mineral Acres), each as more specifically set forth in Schedule 1.01(a), for which Buyer intends to review title after the Execution Date in the manner set forth in the Agreement and summarized in Recital G.

 

E.                                    As of the Execution Date, the CL Realty Assets are owned by CL Realty (in which Seller owns a 50% membership interest), and the Primary Term Leases and Other Assets are owned by Affiliates of Seller.  After the Execution Date, Seller intends to (i) use commercially reasonable efforts to cause the CL Realty Assets to be transferred to Forestar Minerals, and (ii) cause the Primary Term Leases and Other Assets to be transferred to Forestar Oil & Gas.

 

F.                                     The total Base Purchase Price is $85.6 million, comprised of $75 million payable on the Execution Date (the “Execution Date Payment”), $2.4 million payable into an escrow account on the Execution Date for disbursement on the CL Realty Conveyance Date (the “CL Realty Payment”), and the balance of US$8.2 million (the “Holdback Amount”) payable into an escrow account on the Execution Date for disbursement on the Interim Settlement Date or thereafter in the manner set forth in the Agreement.

 

1

 

G.                                   The Parties intend that the Execution Date Payment and the CL Realty Payment are each fixed in amount and nonrefundable once paid, and that the Holdback Amount is subject to adjustment as follows:

 

1.                                      reduction on account of Title Defects relating to Non-Producing Fee Minerals located in the States of Texas and Louisiana, based on the Allocated Values of $101.82/Net Mineral Acre for Non-Producing Fee Minerals located in the State of Texas and $300.76/Net Mineral Acre for Non-Producing Fee Minerals located in the State of Louisiana;

 

2.                                      reduction by $600,000 (the “CL Realty Delay Amount”) if the CL Realty Conveyance Date has not occurred by the Interim Settlement Date.  If the CL Realty Conveyance Date fails to occur at all by the end of the Cure Period, then Buyer at its option may exclude the CL Realty Assets from the transaction and retain the CL Realty Delay Amount (in addition to not being required to make the CL Realty Payment) as liquidated damages.  In that event, the Base Purchase Price would be reduced by $3.0 million without regard to any other adjustments of the Holdback Amount; and

 

3.                                      other adjustments pursuant to the terms of Section 4.01 hereof.

 

H.                                   The Parties also intend that the Holdback Amount is the maximum amount that may be claimed by Buyer on account of Title Defects in the Non-Producing Fee Minerals in the States of Texas and Louisiana (and the CL Realty Delay Payment, if applicable).

 

I.                                        The Parties intend that the Interim Settlement Date schedule is as follows:

 

	
Interim Defect Notice Date
    	
Wed., April 19, 2017
    
	
 
    	
 
    
	
Interim Settlement Statement issued by Seller
    	
Mon.,   May 1, 2017
    
	
 
    	
 
    
	
Buyer’s response to Interim Settlement Statement
    	
Fri.,   May 5, 2017
    
	
 
    	
 
    
	
Agreement on Interim Settlement Statement
    	
Tue., May 9, 2017
    
	
 
    	
 
    
	
Interim Settlement Date
    	
Wed., May 10, 2017.
    

 

AGREEMENT

 

In consideration of the mutual agreements contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller agree as follows:

 

2

 

ARTICLE 1 
 DEFINITIONS

 

Section 1.01                            Defined Terms   When used in this Agreement, the following terms shall have the meanings specified:

 

“Accounting Referee” means a nationally recognized independent accounting firm mutually selected by the Parties to resolve any accounting disputes arising under this Agreement.

 

“Acquired Companies” means, collectively, Forestar Oil & Gas, Forestar Minerals LP Company and Forestar Minerals GP Company, and “Acquired Company” means any of such Acquired Companies.

 

“Additional Asserted Defect” means an Asserted Defect included in an Additional Defect Notice.

 

“Additional Defect Notice” has the meaning set forth in Section 6.01.

 

“Affiliate” means in relation to a Party or other entity, any entity which is, directly or indirectly through one or more intermediaries: a controlling company; a controlled company; or a controlled company of a controlling company, of that Party or other entity. For the purposes of this definition, one entity controls another when at the relevant time (a) it owns either directly or indirectly, or is otherwise in a position to cast or control the casting of, not less than 50% of the shares entitled to vote at general meetings of that other entity; or (b) it controls the composition of a majority of the members of the board of directors or other governing body of that other entity.

 

“Aggregate Defect Threshold” has the meaning set forth in Section 6.03.

 

“Agreement” has the meaning specified in the introduction, and includes all Schedules attached hereto and other documents, instruments and agreements delivered in connection herewith.

 

“Allocated Value” has the meaning set forth in Section 3.01.

 

“Allocation” means the allocation of the Base Purchase Price among the Mineral Assets based on the Allocated Value for each Mineral Asset.

 

“Asserted Defect” means any Title Defect included on a timely Defect Notice in accordance with Section 6.01.

 

“Asset Companies” means, collectively, Forestar Minerals and Forestar Oil & Gas, and “Asset Company” means either of such Asset Companies.

 

“Asset Taxes” means all ad valorem, property, severance, production, excise and other taxes (other than income and franchise taxes) paid or payable by the Group Companies with respect to ownership of the Mineral Assets or the production or removal of Hydrocarbons or the receipt of proceeds therefrom (including applicable escheat requirements) or attributable to the Mineral Assets.

 

3

 

“Assignment” means an assignment of the Interests to Buyer substantially in the form attached hereto as Exhibit A.

 

“Assumed Obligations” has the meaning set forth in Section 14.01.

 

“Base Purchase Price” has the meaning set forth in Section 3.01.

 

“Bonds” has the meaning set forth in the definition of Excluded Assets.

 

“Burdens” means collectively, all lessors’ royalties, overriding royalties, production payments, net profits interests, carried working interests and other similar burdens payable to third parties attributable to the Mineral Assets.

 

“Business Day” means a day, other than Saturday or Sunday, on which commercial banks are open for business with the public in Houston, Texas.

 

“Buyer” has the meaning specified in the introduction.

 

“Buyer Indemnitees” means Buyer, Buyer’s Affiliates (including Group Companies), and their respective managers, members, shareholders, officers, directors, trustees, employees, agents, representatives, successors and assigns.

 

“Buyer’s Indemnified Claim” and “Buyer’s Indemnified Claims” have the meanings set forth in Section 14.03.

 

“Buyer’s Knowledge” means the actual knowledge of one or more of the following officers of Buyer, without any duty of inquiry:  Phil E. Mulacek, David DeMarco, and Eric Urban.

 

“Claims” means collectively, all claims, demands, actions, causes of action, liabilities, damages, costs or expenses (including, without limitation, court costs and consultants’ and attorneys’ fees) of any kind or character.

 

“CL Realty” means CL Realty, L.L.C., a Delaware limited liability company.

 

“CL Realty Assets” means the Fee Minerals listed in Schedule 16.09.

 

“CL Realty Conveyance Date” means the date on which the CL Realty Assets are conveyed to Forestar Minerals in the manner required under Section 13.06.

 

“CL Realty Delay Amount” has the meaning set forth in the Recitals.

 

“CL Realty Leases” means each of the leases on CL Realty Assets indicated in Schedule 16.09.

 

“CL Realty Payment” has the meaning set forth in the Recitals.

 

4

 

“CL Realty Wells” means each of the wells on CL Realty Leases indicated in Schedule 16.09.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

 

“Confidentiality Agreement” means that certain Confidentiality Agreement between PIE Holding, LP and Forestar Group Inc., dated November 15, 2016.

 

“Consultant” means a title attorney licensed to practice in the state in which the applicable Mineral Asset is located with not less than seven (7) years of experience in oil and gas title issues selected by Seller and Buyer to resolve a dispute related to a Title Defect or Title Benefit.

 

“Contracts” has the meaning set forth in the definition of Mineral Assets.

 

“Cure Period” means a period beginning on the date of the delivery of the first Defect Notice to Seller and ending at the earlier of one hundred twenty (120) days following the Final Defect Notice Date or on such other date as Seller advises Buyer in writing that the Cure Period shall terminate.

 

“Current Tax Period” means the annual tax period in which the Effective Time occurs.

 

“Day” or “day” means a period of twenty-four (24) consecutive hours, beginning and ending at 12:00 a.m. Central Time; provided, that on the Day on which Daylight Saving Time becomes effective, the period will be twenty-three (23) consecutive hours; and on the Day on which Standard Time becomes effective, the period will be twenty-five (25) consecutive hours.

 

“Defect Notice” means a written notice, delivered to Seller prior to the Interim Defect Notice Date or, solely in the case of Non-Producing Fee Minerals underlying Lands in the State of Texas, the Final Defect Notice Date, specifying one or more defects associated with Non-Producing Fee Minerals that Buyer asserts constitutes a Title Defect, and which includes a specific description of each such defect, including any alleged variance in the Lessor’s Royalty as to any Fee Minerals Leases or Fee Minerals Wells, the basis for such assertion under the terms of this Agreement, the amount of the adjustment to the Purchase Price that Buyer asserts based on such defect and its method of calculating such adjustment, together with all data and information reasonably necessary for Seller to verify the existence and amount of the alleged defect.

 

“Defect Rejection Notice” has the meaning set forth in Section 6.02(c).

 

“Defensible Title” means, with respect to the Non-Producing Fee Minerals, good and marketable title free and clear of all Liens but subject to and except for Permitted Exceptions.

 

“Deposit” has the meaning set forth in Section 3.02.

 

“Dollars” and “$” each means the lawful currency of the United States of America;

 

5

 

“Dispute Notice” has the meaning set forth in Section 2.01.

 

“Easements” has the meaning set forth in the definition of Mineral Assets.

 

“Effective Time” has the meaning set forth in Section 2.01.

 

“Employee Benefit Plan” means an “employee benefit plan” as defined in Section 3(3) of ERISA, and any other severance, salary continuation, bonus, incentive, equity, deferred compensation or similar plan, contract, program, fund or arrangement of any kind (whether written or oral, qualified or nonqualified, funded or unfunded, currently effective or terminated).

 

“Environmental Laws” means any statute, law, ordinance, rule, regulation, code, order, judicial writ, injunction, notice to lessees or decree issued by any federal, state, or local governmental authority in effect as of the Effective Time relating to the control of any pollutant or protection of the air, water, land, or environment or the release or disposal of hazardous materials, hazardous substances or waste materials.

 

“Equipment” has the meaning set forth in the definition of Mineral Assets.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

“Escrow Agent” has the meaning set forth in Section 3.02.

 

“Excluded Assets” has the meaning set forth in Section 2.02.

 

“Execution Date” has the meaning provided in the preamble.

 

“Execution Date Payment” has the meaning set forth in the Recitals.

 

“Fee Minerals” has the meaning set forth in the definition of Mineral Assets.

 

“Fee Mineral Leases” has the meaning set forth in the definition of Mineral Assets.

 

“Fee Mineral Wells” has the meaning set forth in the definition of Mineral Assets.

 

“Final Defect Notice Date” means 5:00 p.m. Central Time on July 31, 2017.

 

“Final Settlement Statement” has the meaning set forth in Section 4.03(a).

 

“Forestar Minerals” means Forestar Minerals LP, a Delaware limited partnership.

 

“Forestar Minerals GP Company” means Forestar Minerals GP LLC, a Delaware limited liability company.

 

“Forestar Minerals GP Company Membership Interests” means all membership interests in Forestar Minerals GP Company.

 

“Forestar Minerals GP Interests” means all general partner percentage interests and partnership units in Forestar Minerals.

 

“Forestar Minerals LP Company” means Forestar Minerals Holdings LLC, a Delaware limited liability company.

 

6

 

“Forestar Minerals LP Company Membership Interests” means all membership interests in Forestar Minerals LP Company.

 

“Forestar Minerals LP Interests” means all limited partner percentage interests and partnership units in Forestar Minerals.

 

“Forestar Oil & Gas” means Forestar Oil & Gas LLC, a Delaware limited liability company.

 

“Forestar Oil & Gas Membership Interests” means all membership interests in Forestar Oil & Gas.

 

“Forestar Petroleum” means Forestar Petroleum Corporation, a Delaware corporation.

 

“GAAP” means accounting principles generally accepted in the United States, consistently applied.

 

“Governmental Authority” means any foreign, national, state, parish, local, municipal, tribal or other government or division thereof; any governmental, regulatory or administrative agency, commission, body or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power; and any court or governmental tribunal or arbitrator.

 

“Group Companies” means, collectively, the Acquired Companies and Forestar Minerals, and “Group Company” means any of the Group Companies.

 

“Holdback Amount” has the meaning set forth in the Recitals.

 

“Hydrocarbons” has the meaning set forth in the definition of Mineral Assets.

 

“Imbalance” means any Hydrocarbons production or pipeline imbalance existing as of the Effective Time with respect to any of the Mineral Assets, together with any related rights or obligations as to future cash and/or gas or oil and associated Hydrocarbons balancing, as a result of, production or pipeline delivery imbalances.

 

“Indemnitee” has the meaning set forth in Section 14.06.

 

“Indemnity Cap” has the meaning set forth in Section 14.04(b).

 

“Individual Indemnity Threshold” has the meaning set forth in Section 14.04(a).

 

“Interests” means, collectively, the Forestar Minerals GP Company Membership Interests, the Forestar Minerals LP Company Membership Interests, and the Forestar Oil & Gas Membership Interests.

 

“Interim Asserted Defect” means an Asserted Defect included in an Interim Defect Notice.

 

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“Interim Defect Notice” means a Defect Notice delivered on or before the Interim Defect Notice Date.

 

“Interim Defect Notice Date” means 5:00 p.m. Central Time on Wednesday, April 19, 2017.

 

“Interim Settlement Date” means 5:00 p.m. Central Time on Wednesday, May 10, 2017.

 

“Interim Settlement Date Payment” has the meaning set forth in Section 4.01.

 

“Interim Settlement Statement” has the meaning set forth in Section 4.02.

 

“Inventory Hydrocarbons” has the meaning set forth in Section 4.01(a)(i).

 

“Lands” has the meaning set forth in the definition of Mineral Assets.

 

“Leases” has the meaning set forth in the definition of Mineral Assets.

 

“Lessor’s Royalty” means the decimal royalty or other cost-free interest in and to all production of the Hydrocarbons produced and saved or sold from or allocated to the relevant Lease or Well, and payable to the lessor under such Lease, or otherwise owed to the person reserving or assigned such interest in production.

 

“Lien” means any lien, mortgage, security interest, pledge, charge or encumbrance of any kind.

 

“LLC Agreements” means, collectively:

 

(a)                                 that certain Certificate of Formation filed with the Secretary of State of Delaware on September 3, 2008 together with that certain Limited Liability Company Agreement dated September 3, 2008, in connection with the formation of Forestar Oil & Gas;

 

(b)                                 that certain Certificate of Formation filed with the Secretary of State of Delaware on January 19, 2012 together with that certain Limited Liability Company Agreement dated January 19, 2012, in connection with the formation of Forestar Minerals GP Company; and

 

(c)                                  that certain Certificate of Formation filed with the Secretary of State of Delaware on January 19, 2012 together with that certain Limited Liability Company Agreement dated January 19, 2012, in connection with the formation of Forestar Minerals LP Company.

 

“Louisiana Mineral Servitude” means a Mineral Asset that consists of a mineral servitude created pursuant to the Louisiana Mineral Code, namely, the right of enjoyment of land belonging to another for the purpose of exploring for and producing oil, gas, and other minerals and reducing them to possession and ownership.

 

“LP Agreement” means that certain Certificate of Limited Partnership filed with the Secretary of State of Delaware on January 19, 2012 together with that certain Limited Partnership Agreement dated January 19, 2012, in connection with the formation of Forestar Minerals.

 

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“Material Adverse Effect” means any result, consequence, condition, or matter which (a) materially adversely affects the Group Companies or the operations, rights, results of operations or the value of the Group Companies, taken as a whole, or (b) materially impairs, prevents or materially delays, in the case of Section 7.01 or Section 8.01, Seller’s ability, and in the case of Section 9.01, Buyer’s ability, to perform its obligations under this Agreement or to consummate the transactions contemplated by this Agreement; provided, however, that, in any event, the following shall not be deemed to constitute, create or cause a Material Adverse Effect: any changes, circumstances or effects (x) that affect generally the oil and gas industry, such as fluctuations in the price of oil and gas, or that result from international, national, regional, state or local economic conditions, from general developments or from other general economic conditions, facts or circumstances, including changes in tax or governmental regulatory policy or other fiscal conditions, that are not subject to the control of Group Companies or the relevant Party, as applicable, (y) that result from any of the transactions contemplated in this Agreement or the public announcement thereof, or (z) that result from conditions or events resulting from an outbreak or escalation of hostilities, or the occurrence of any other calamity or crisis, whether nationally or internationally, including the occurrence of one or more attacks, whether deemed terrorist attacks or not.

 

“Material Agreements” has the meaning set forth in Section 8.01(m).

 

“Mineral Assets” means all of Asset Companies’ right, title, and interest in and to the following assets, other than Excluded Assets:

 

(a)                                 All oil, gas, and other minerals on, in and under and that may be produced from the lands, mineral estates in the lands, fee mineral interests in the lands, and Louisiana Mineral Servitudes that cover the number of net acres of lands described on Schedule 1.01(a) (the “Lands”), and the CL Realty Assets after transfer to the Asset Companies under Section 13.06 (collectively, the “Fee Minerals”);

 

(b)                                 All lessee’s operating, and/or working interests or overriding royalty or similar interests in oil and gas leases and subleases and operating agreements identified on Schedule 1.01(b)(1) and the Primary Term Leases after transfer to the Asset Companies under Section 13.07 (the “WI Leases”), all of the lessor’s interest in the oil and gas leases and subleases affecting the Fee Minerals described on Schedule 1.01(b)(2), and the CL Realty Leases after conveyance of the CL Realty Assets to the Asset Companies under Section 13.06 (the “Fee Mineral Leases” and, together with the WI Leases, the “Leases”);

 

(c)                                  The working interest in those wells identified on Schedule 1.01(c)(1) (the “WI Wells”), together with the rights of Asset Companies, if any, in any wells located on or associated with the Fee Minerals in which Asset Companies claim no present working interest,

 

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but may have rights of reversion, as described on Schedule 1.01(c)(2), and the CL Realty Wells after transfer of the CL Realty Assets to the Asset Companies under Section 13.06 (the “Fee Mineral Wells” and, together with the WI Wells, the “Wells”);

 

(d)                                 All well equipment, pipelines, flowlines, gathering systems, plants, piping, buildings, treatment facilities, disposal facilities, injection facilities, compressors, casing, tanks, tubing, pumps, pumping units, motors, fixtures, machinery, other tangible personal property and improvements, and other equipment located in or on the Leases, Lands, Wells, or Units or are used in the operation thereof and which Asset Companies may have ownership, whether legal, equitable, or constructive, by virtue of their working interest in such Leases, Lands, Wells or Units (the “Equipment”);

 

(e)                                  All Easements, surface leases, rights of way, licenses, permits, rights-of-way, servitudes and other rights, privileges, benefits and powers to the extent used in connection with the operation of the Leases, Units, Wells, or Equipment (collectively, the “Easements”);

 

(f)                                   All rights, obligations and interests in any unit or pooled area in which the Leases are included, including all interests in any Wells within the units associated with the Leases, together with the rights in and to all existing and effective unitization, pooling and communitization agreements, declarations and orders, and the properties covered and the units created thereby, to the extent they relate to or affect any of the Leases, Fee Minerals, Wells, and Equipment (the “Units”);

 

(g)                                  All the oil and gas and associated liquid or gaseous hydrocarbons in, on and under or that is produced from or are attributable to Asset Companies’ interest in the Fee Minerals, the Leases, the Units or the Wells (“Hydrocarbons”) from and after the Effective Time;

 

(h)                                 To the extent assignable or transferrable, all seismic contracts, (including licenses to use geophysical and geological data), Hydrocarbon purchase and sale agreements, farmin agreements, farmout agreements, bottom hole agreements, acreage contribution agreements, operating agreements, unit agreements, processing agreements, options, leases of equipment or facilities, joint venture agreements, pooling agreements, transportation agreements, salt water disposal agreements, well service agreements, rights-of-way and all other contracts, agreements and rights to which any Group Company is a party, including (but for the avoidance of doubt expressly not limited to) those appurtenant to the Leases, Lands, Wells, Units or Equipment, or used in connection with the sale, distribution or disposal of Hydrocarbons from the Leases, Fee Minerals, Wells, or Units (collectively, the “Contracts”);

 

(i)                                     All governmental permits, licenses and authorizations, as well as any applications for the same, related to the Leases, Fee Minerals, Wells, Units, Equipment, or Contracts or the use thereof;

 

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(j)                                    To the extent assignable or transferrable, all of Group Companies’ files, records and data relating to the items described in subsections (a) through (i) above and all of Group Companies’ other files, records and data, whether or not relating to the items described above, all data on all computers and peripherals, hard drives and other digital data storage media owned or used by or for the Group Companies, all other information and files of whatever nature, in each case in the form that such records are maintained by the Group Companies, including, without limitation, all lease, well, division order and other title records (including title curative documents); surveys, maps and drawings; contracts; regulatory, geological and geophysical records and information, including all 2D and 3D seismic data and raw data (processed or unprocessed, including field tapes and supporting data) and, to the extent assignable or transferrable,  related licenses; reserve studies, evaluations, production records, electric logs (including open hole and closed hole logs), core data, pressure data and other well test data, and construction documents, including all of the above related to the Mineral Assets, but excluding (A) attorney-client privileged communications and work product of Group Companies’ legal counsel (other than title opinions), and (B) records relating to the negotiation and consummation of the sale of the Interests and the Mineral Assets (collectively, the “Records”); provided, however, that Seller may retain copies (paper and/or electronic) of such files and other records as Seller has determined may be required for litigation, tax, accounting, auditing or other purposes;

 

(k)                                 All other tangible and intangible assets owned by any of the Group Companies;

 

(l)                                     The CL Realty Assets from and after the CL Realty Conveyance Date; and

 

(m)                             The Other Assets and the Primary Term Leases upon transfer to the Asset Companies under Section 13.06 or Section 13.07, as applicable.

 

“MMMF” means, collectively, asbestos and other man made material fibers.

 

“Net Mineral Acres” means, as calculated separately with respect to all Fee Minerals within a state as set forth on Schedule 1.01(a), (a) the number of net acres of the Fee Minerals within such state as set forth on Schedule 1.01(a).

 

“Non-Producing Fee Minerals” means Fee Minerals underlying lands in the States of Louisiana or Texas that are either not subject to any oil, gas, and mineral lease, or that are subject to an oil, gas, and mineral lease that is in its primary term.

 

“NORM” means naturally occurring radioactive material.

 

“NRI” means the net revenue interest, expressed in decimal form, in and to all production of the Hydrocarbons produced and saved or sold from or allocated to the relevant Lease or Well, or revenue therefrom, after giving effect to all Burdens.

 

“Other Assets” means each of the items of office furniture and other equipment listed in Schedule 1.01(e).

 

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“Other Assets Salvage Value” means the salvage value of the Other Assets as reasonably determined by Seller.

 

“Party” and “Parties” each has the meaning specified in the introduction.

 

“Permitted Exceptions” means:

 

(a)                                 Leases affecting the Mineral Assets;

 

(b)                                 Rights of owners of the surface of Lands overlying the Fee Minerals;

 

(c)                                  royalties, overriding royalties, and other similar burdens or encumbrances, in each case, to the extent they do not, individually or in the aggregate, reduce Asset Companies’ NRI or Lessor’s Royalty, as the case may be, in any Lease from that shown on Schedule 1.01(b)(1) or Schedule 1.01(b)(2) or in any Well from that shown on Schedule 1.01(c)(1) or Schedule 1.01(c)(2).

 

(d)                                 Liens for Taxes for which payment is not yet due or payable;

 

(e)                                  Liens of mechanics, materialmen, warehousemen, landlords, vendors, and carriers, charges for liquidated damages, and any similar Liens arising by operation of law which, in each instance, arise in the ordinary course of business, for sums not yet due or payable;

 

(f)                                   the terms and provisions of all oil, gas and mineral leases, unitization and pooling designations and declarations, and Contracts;

 

(g)                                  Liens that arise under operating agreements to secure payment of amounts not yet delinquent;

 

(h)                                 Liens that arise as a result of pooling and unitization agreements, declarations, orders or laws to secure payment of amounts not yet delinquent;

 

(i)                                     Easements, servitudes, permits, rights-of-way, consents to location of surface facilities and operations, surface leases, and other rights in respect of surface operations, pipelines, grazing, hunting, logging, canals, ditches, reservoirs or the like, and plat restrictions, zoning and planning laws, floodplain restrictions, restrictive covenants and conditions, regulatory authority of Governmental Authorities, and building and other land use laws and similar encumbrances;

 

(j)                                    rights of co-owners or tenants-in-common in and to the Mineral Assets or other rights of a common owner of any interest in rights-of-way, permits or Easements held by the Companies and such common owner as tenants in common or through common ownership;

 

(k)                                 rights vested in or reserved to any Governmental Authority to regulate the Mineral Assets, to terminate any right, power, franchise, license or permit afforded by such Governmental Authority, or to purchase, condemn or expropriate any of the Mineral Assets;

 

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(l)                                     Intentionally omitted;

 

(m)                             any Title Defects regarding Non-Producing Fee Minerals underlying Lands in in Louisiana for which Seller has not received a Defect Notice from Buyer by the Interim Defect Notice Date; any Title Defects regarding Non-Producing Fee Minerals underlying Lands in Texas for which Seller has not received a Defect Notice from Buyer by the Final Defect Notice Date; or any Title Defects for which a Defect Notice was timely received by Seller but no downward adjustment has been made or is required to be made to the Base Purchase Price;

 

(n)                                 any matter for which a downward adjustment has been made to the Base Purchase Price with respect to Non-Producing Fee Minerals;

 

(o)                                 any matter arising solely because Asset Companies or any ancestor in title acquired any properties by an “omnibus deed” or other deed without a specific description of all properties affected thereby;

 

(p)                                 termination of any Louisiana Mineral Servitude by prescription after the Execution Date;

 

(q)                                 lack of any rights of Asset Companies or Buyer to utilize any groundwater or surface water for any purpose; and

 

(r)                                    all other defects or irregularities, if any, affecting the Mineral Assets which do not, individually or in the aggregate, adversely interfere in any material way with the present or future operation or use of the Mineral Assets subject thereto or affected thereby and which would be accepted by a reasonably prudent and sophisticated buyer engaged in the business of owning, developing and operating oil and gas properties in the same geographical location with knowledge of all the facts and appreciation of their legal significance but specifically excluding any reduction in the interest percentage of any Lessor’s Royalty on any applicable Mineral Asset.

 

For the avoidance of doubt, the Parties intend the effect of subsection “(o)” above to be that it will not be a failure of Defensible Title solely because of the presence of an “omnibus deed” in the chain of title of any Non-Producing Fee Minerals, but also reserving the possibility that such an omnibus deed may not be sufficient in and of itself to establish a necessary link in the chain of title.

 

“Final Settlement Statement” has the meaning set forth in Section 4.03.

 

“Primary Term Leases” means each of the primary term mineral leases of Forestar Petroleum as lessee and related items listed in Schedule 13.10.

 

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“Privileged Communications” has the meaning set forth in Section 15.17(b).

 

“Property Costs” means all operating and capital costs, expenses and other expenditures (whether capitalized or expensed under GAAP) attributable to the Mineral Assets in the ordinary course of business, including all Burdens; rentals and other burdens on production; transportation and other fees and expenses relating to the transportation, processing and marketing of Hydrocarbons produced; rentals and other similar charges; expenses under applicable joint operating agreements or other contracts or agreements, including without limitation, drilling, completion, reworking, deepening, sidetracking, and plugging and abandonment costs; and Asset Taxes.

 

“Purchase Price” means the sum of the Execution Date Payment, the Holdback Amount (as it may be adjusted) and the CL Realty Payment.

 

“Records” has the meaning set forth in the definition of Mineral Assets.

 

“Regulations” means the United States Treasury regulations, as amended from time to time.

 

“Seller” has the meaning specified in the introduction.

 

“Seller Group” has the meaning set forth in Section 15.17(a)(i).

 

“Seller Group Law Firm” has the meaning set forth in Section 15.17(a)(i).

 

“Seller Indemnitees” means Seller, Seller’s Affiliates (excluding, following the Execution Date, the Group Companies), CL Realty (with respect only to matters relating to the CL Realty Assets), and its and their respective managers, members, partners, shareholders, officers, directors, trustees, employees, agents, representatives, and successors and assigns.

 

“Seller’s Knowledge” means the actual knowledge of one or more of the following officers of Seller, without any duty of inquiry: Kevin Donohue, Charles D. Jehl or Phillip J. Weber.

 

“Survival Period” has the meaning set forth in Section 14.05.

 

“Title Benefit” means with respect to all of the Non-Producing Fee Minerals within any state, any entitlement of Asset Companies to more than the total Non-Producing Mineral Acres for that particular state set forth on Schedule 1.01(a) for such state;

 

“Title Defect” means, as to any Non-Producing Fee Minerals, any condition that causes Asset Companies’ title to such Non-Producing Fee Minerals to be less than Defensible Title.

 

“Transfer Taxes” has the meaning set forth in Section 12.02.

 

“Units” has the meaning set forth in the definition of Mineral Assets.

 

“Wells” has the meaning set forth in the definition of Mineral Assets.

 

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“WI Leases” has the meaning set forth in the definition of Mineral Assets.

 

“WI Wells” has the meaning set forth in the definition of Mineral Assets.

 

ARTICLE 2 
 PURCHASE AND SALE OF THE INTERESTS

 

Section 2.01                            Interests. On the terms and subject to the conditions of this Agreement, on the Execution Date Seller agrees to sell, assign and deliver to Buyer, and Buyer agrees to purchase and acquire from Seller, effective as of 12:01 a.m. (Central Time) on January 1, 2017 (the “Effective Time”), the Interests.

 

Section 2.02                            Excluded Assets. The following items (collectively, the “Excluded Assets”) shall not constitute Mineral Assets and shall be transferred from Group Companies to Seller prior to or as soon after the Execution Date as practical without any reduction of the Purchase Price:

 

(a)                                 All cash, cash equivalents, receivables, intercompany receivables and payables, bank accounts and other financial accounts, all credits, rebates, refunds, adjustments, accounts, instruments and general intangibles, and all interests therein, all bonds posted by Seller or Group Companies and all insurance claims, all to the extent attributable to the Mineral Assets with respect to any period of time prior to the Effective Time;

 

(b)                                 All claims of Seller or the Group Companies for refunds of or loss carry forwards with respect to (i) Asset Taxes or any other taxes attributable to any period prior to the Effective Time, (ii) income or franchise taxes of Seller or the Group Companies, or (iii) any taxes attributable to the Excluded Assets, and such other refunds, and rights thereto, for amounts paid in connection with the Mineral Assets and attributable to the period prior to the Effective Time, including refunds of amounts paid under any gas gathering or transportation agreement;

 

(c)                                  All proceeds, income or revenues (and any security or other deposits made) attributable to the Mineral Assets for any period prior to the Effective Time, or to any Excluded Asset;

 

(d)                                 All Hydrocarbons produced from the Mineral Assets with respect to all periods prior to the Effective Time and all proceeds from the disposition thereof;

 

(e)                                  All documents and instruments of Seller and Group Companies that are protected by an attorney-client privilege (other than title opinions) in favor of Seller or the Group Companies;

 

(f)                                   The attorney client privilege between Seller or Group Companies and attorneys who have represented or advised them;

 

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(g)                                  Any and all files, records, contracts and documents relating to Seller’s or the Group Companies’ efforts to sell the Interests or the Mineral Assets (or any other discussions or negotiations regarding the sale or other disposition of any of the Interests or the Mineral Assets), including any research, valuation or pricing information prepared by Seller or the Group Companies and/or its or their consultants in connection therewith, and any bids received for such interests and information and correspondence in connection therewith;

 

(h)                                 All audit rights arising under any of the Contracts or otherwise with respect to any period prior to the Effective Time or with respect to any of the other Excluded Assets;

 

(i)                                     All income tax records of Seller and its Affiliates;

 

(j)                                    All claims arising from acts, omissions or events, or damage to or destruction of the Mineral Assets before the Effective Time and all rights, titles, claims and interests of Seller or the Group Companies related thereto (i) under any policy or agreement of insurance or indemnity, including all rights, claims, or causes of action of the Seller and its Affiliates against third parties under any indemnities or hold harmless agreements and any indemnities received in connection with the Seller’s or any of its Affiliates’ prior acquisition of any of the Mineral Assets, (ii) under any bond or letter of credit, or (iii) to any insurance or condemnation proceeds or awards;

 

(k)                                 Claims and causes of action described in Schedule 7.01(d).

 

(l)                                     Any logo, service mark, copyright, trade name or trademark of or associated with Seller or any Seller’s Affiliate or any business of Seller or of any Seller’s Affiliate;

 

(m)                             A nonexclusive, non-transferable right to use for internal business purposes only any logs, maps, seismic data, engineering data and reports, reserve studies and evaluations, and other data and information being included within the Mineral Assets;

 

(n)                                 All obligations, liability, and benefits related to claims and/or counterclaims asserted in the litigation listed on Schedule 7.01(d)  to the extent related to production prior to the Effective Time, and the responsibility for the cost of defense thereof;

 

(o)                                 All bonds, guaranties, letters of credit, and other security posted by or for the benefit of any Group Company, including, but not limited to, that certain $25,000 letter of credit issued to the Louisiana Office of Conservation (collectively, the “Bonds”); and

 

(p)                                 That certain 45% nonparticipating royalty interest in groundwater produced or withdrawn from approximately 1.4 million acres in Texas, Louisiana, Georgia and Alabama, as more particularly described and reserved in a series of 2007 deeds from TIN Inc. to various affiliates of Crown Pine Timber, and thereafter conveyed by TIN Inc. to Forestar Minerals LLC, a predecessor of Forestar Minerals.

 

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Buyer shall reasonably cooperate with Seller to the extent required after the Execution Date to effect any transfers of the Excluded Assets to Seller or its designee.  It is understood that certain Excluded Assets may not be embraced by the term Mineral Assets.  The fact that certain properties, rights and interests are included within the definition of “Excluded Assets” is not intended to suggest that had they not been excluded they would have constituted Mineral Assets and shall not be used to interpret the meaning of any word or phrase used in describing the Mineral Assets.

 

Section 2.03                            No Transfer Fees Notwithstanding any other provision of this Agreement, the Assignment or any other document, instrument or agreement executed and delivered in connection herewith, the Parties acknowledge and agree as follows:

 

(a)                                 On the Execution Date Seller is not selling and Buyer is not acquiring or otherwise taking possession of any files, records, software or digital or other data of any Asset Company that is subject to any transfer fee or other payment to a third party upon consummation of any of the transactions contemplated by this Agreement (“Restricted Data”), and subject to Section 2.03(b) or Section 2.03(c), all (if any) of such Restricted Data are Excluded Assets and retained by Seller at the Execution Date.

 

(b)                                 For all Restricted Data, Buyer retains the right in its sole discretion to exercise its right under the applicable Contracts to pay the applicable transfer fee or other payment and obtain the right to receive and possess all or any applicable portion of the Restricted Data.  If Buyer pays such transfer fee and obtains the right to receive any or all of the Restricted Data, Seller will promptly upon Buyer’s written request and upon direction to Seller from the applicable licensor deliver the applicable Requested Data to Buyer or its designee.

 

(c)                                  If, under any seismic or other Contracts, any items are owed to any Asset Company by a third party but remain undelivered as of the Execution Date and no transfer fees are payable on such items, Buyer retains the right to enforce such delivery obligations against the third party and to retain ownership and possession of such items after delivery.

 

ARTICLE 3 
 PURCHASE PRICE

 

Section 3.01                            Purchase Price.

 

(a)                                 The base purchase price for the Interests is Eighty-Five Million Six Hundred Thousand Dollars ($85,600,000.00) (the “Base Purchase Price”), subject to the adjustments provided for herein. The Base Purchase Price is allocated to and among the Mineral Assets as provided in a separate written schedule agreed by the Parties as of the date of this Agreement (the portion of the Base Purchase Price so allocated to a Mineral Asset being referred to herein as its “Allocated Value”).

 

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(b)                                 All payments made or to be made hereunder to Seller shall be by electronic transfer of immediately available funds to a bank and account specified by Seller in writing to Buyer. All payments made or to be made hereunder to Buyer shall be by electronic transfer of immediately available funds to a bank and account specified by Buyer in writing to Seller.

 

(c)                                  The Base Purchase Price is payable on the terms and subject to the conditions set forth in this Agreement, including this ARTICLE 3.

 

Section 3.02                            Execution Date Payment. On the Execution Date, Buyer shall pay Seller the Execution Date Payment in the amount of Seventy-Five Million Dollars ($75,000,000.00), as follows:

 

(a)                                 Buyer has previously deposited the aggregate amount of Eleven Million Dollars ($11,000,000.00) in the trust account of Dossey & Jones PLLC (the “Escrow Agent”) (the “Deposit”). Buyer shall direct Escrow Agent in writing to release the Deposit to Seller on the Execution Date; and

 

(b)                                 Buyer shall pay directly to Seller the additional amount of Sixty-Four Million Dollars ($64,000,000.00).

 

Section 3.03                            Escrow Deposits of Holdback Amount and CL Realty Payment. On the Execution Date, Buyer shall deliver to Escrow Agent to hold in its client trust account pursuant to the terms of this Agreement, the Holdback Amount of Eight Million Two Hundred Thousand Dollars ($8,200,000.00) and the CL Realty Payment of Two Million Four Hundred Thousand Dollars ($2,400,000.00) for a total amount of Ten Million Six Hundred Thousand Dollars ($10,600,000.00).

 

Section 3.04                            Interim Settlement Date Payment On the Interim Settlement Date, Buyer shall pay the Interim Settlement Date Payment to Seller by directing the Escrow Agent to release to Seller the appropriate amount of Holdback Amount funds on deposit with the Escrow Agent.  If Interim Settlement Date Payment is less than the Holdback Amount, Buyer shall instruct the Escrow Agent to retain the balance on deposit with the Escrow Agent until all required payments have been made under Section 4.03 after Final Settlement.  If the Interim Settlement Date Payment is greater than the Holdback Amount, then, in addition to directing the Escrow Agent to release to Seller the entire amount of the Holdback Amount funds on deposit with Escrow Agent, Buyer shall pay the difference directly to Seller on the Interim Settlement Date.  If Escrow Agent does not release the entire amount of the Holdback Amount for any reason Buyer shall remain liable to make such payment.

 

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Section 3.05                            CL Realty Payment; CL Realty Delay Amount

 

(a)                                 On the CL Realty Conveyance Date, Buyer shall pay the CL Realty Payment to Seller in the amount of Two Million Four Hundred Thousand Dollars ($2,400,000.00) by directing the Escrow Agent to release to Seller such amount from funds on deposit with the Escrow Agent.  If Escrow Agent does not release the CL Realty Payment for any reason Buyer shall remain liable to make such payment.  Seller shall provide Buyer with at least five (5) Business Days’ advance notice of the CL Realty Conveyance Date.

 

(b)                                 If for any reason the CL Realty Conveyance Date has not occurred on or prior to the Interim Settlement Date:

 

(i)                                     The Interim Settlement Date Payment is reduced by the amount of $600,000 (the “CL Realty Delay Amount”) under Section 4.01(b)(iv);

 

(ii)                                  If the CL Realty Conveyance Date subsequently occurs before the end of the Cure Period, then on the CL Realty Conveyance Date Buyer shall instruct the Escrow Agent to release the CL Realty Delay Amount to Seller together with the CL Realty Payment under Section 3.05(a), for a total payment to Seller in the amount of $3,000,000.00.  If Escrow Agent does not release the CL Realty Payment and the CL Realty Delay Payment for any reason Buyer shall remain liable to make such payments; and

 

(iii)                               if the CL Realty Conveyance Date does not occur before the end of the Cure Period, Buyer shall have the option by notice to Seller to remove the CL Realty Assets from the transactions contemplated under this Agreement.  Upon delivery of such notice to Seller and without further action by the Parties, (A) Seller shall be thereafter released from its obligations under Section 13.06(a) regarding the CL Realty Assets, (B) the Purchase Price shall not include the CL Realty Payment, and Buyer is released from any further obligation to pay the CL Realty Payment under Section 3.05(a), and (C) Buyer shall be entitled to retain the CL Realty Delay Amount from the Holdback Amount for a total reduction of the Purchase Price in the amount of $3,000,000.00.

 

(c)                                  Seller acknowledges that Buyer’s actual losses likely to result from Seller’s failure to cause the CL Realty Assets to be conveyed to Buyer under Section 13.06(a) are difficult to estimate on the date of this Agreement and would be difficult for Buyer to prove. The Parties agree that the CL Realty Delay Amount is a reasonable pre-estimate of such losses and that Buyer’s retention of the CL Realty Delay Amount under Section 3.05(b)(iii) would serve to compensate Buyer for any such failure by Seller, and they do not intend for it to serve as penalty for any such failure by Seller.

 

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ARTICLE 4 
 PURCHASE PRICE ADJUSTMENTS

 

Section 4.01                            Adjustments to the Base Purchase Price. On the Interim Settlement Date, the Holdback Amount will be adjusted as follows (as so adjusted, the “Interim Settlement Date Payment”):

 

(a)                                 Upward Adjustments. The Holdback Amount shall be adjusted upward (without duplication) by:

 

(i)                                     An amount equal to the market value as of the Effective Time of merchantable Hydrocarbons produced from or attributable to the Mineral Assets stored in tanks or existing in pipelines or plants and upstream of the sales meter as of the Effective Time (the “Inventory Hydrocarbons”) to the extent that the proceeds thereof have not previously been distributed to Seller as provided in Section 2.02;

 

(ii)                                  An amount equal to the proceeds actually received by Asset Companies from the sale of Hydrocarbons produced from or attributable to the Mineral Assets prior to the Effective Time (other than Inventory Hydrocarbons), net of Burdens and severance taxes paid by Asset Companies to third parties with respect thereto (without duplication of any amounts included in the downward adjustment to the Base Purchase Price pursuant to Section 4.01(b)(i) to the extent that the proceeds thereof have not previously been distributed to Seller as Excluded Assets under Section 2.02;

 

(iii)                               An amount equal to the proceeds actually received by Buyer from the sale of Hydrocarbons produced from or attributable to the Mineral Assets prior the Effective Time (other than Inventory Hydrocarbons) net of Burdens and severance taxes paid by Buyer to third parties with respect thereto (without duplication of any amounts included in the downward adjustment to the Base Purchase Price pursuant to Section 4.01(b)(i));

 

(iv)                              Without duplication of any adjustment pursuant to Section 4.01(b)(ii), an amount equal to all Property Costs actually paid by Asset Companies, in compliance with this Agreement, that are consistently applied in accordance with GAAP, attributable to the ownership or operation of the Mineral Assets on or after the Effective Time;

 

(v)                                 The amount of any adjustments with respect to Title Benefits pursuant to ARTICLE 6;

 

(vi)                              The Other Assets Salvage Value, in consideration of Seller’s transfer of the Other Assets to Forestar Minerals under Section 13.06; and

 

(vii)                           Any other amount agreed upon in writing by Seller and Buyer.

 

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(b)                                 Downward Adjustments. The Holdback Amount shall be adjusted downward (without duplication) by:

 

(i)                                     An amount equal to the proceeds actually received by Asset Companies from the sale of Hydrocarbons produced from or attributable to the Mineral Assets on or after the Effective Time, net of Burdens and severance taxes paid by Asset Companies (without duplication of any amounts included in the adjustment to the Base Purchase Price pursuant to Section 4.01(a)(i) and Section 4.01(a)(ii)) to the extent that the proceeds thereof have been previously distributed to Seller as Excluded Assets under Section 2.02;

 

(ii)                                  An amount equal to all Property Costs actually paid by Buyer or Group Companies that are, in accordance with GAAP, attributable to the ownership or operation of the Mineral Assets prior to the Effective Time;

 

(iii)                               The amount of any adjustment for Asserted Defects, determined as provided in ARTICLE 6;

 

(iv)                              If the CL Realty Conveyance Date has not occurred, the CL Realty Delay Amount;

 

(v)                                 The amount of ad valorem and property taxes allocated to the Asset Companies for periods prior to the Effective Time which are unpaid as of the Interim Settlement Date, as determined under Section 12.03; and

 

(vi)                              Any other amount agreed upon in writing by Seller and Buyer.

 

Section 4.02                            Interim Settlement Statement. Seller shall prepare, in accordance with the provisions of this ARTICLE 4, a statement setting forth each adjustment to the Holdback Amount (the “Interim Settlement Statement”).

 

(a)                                 Seller shall submit the Interim Settlement Statement to Buyer, together with reasonable documentation supporting the calculation of amounts presented on the Interim Settlement Statement (including statements of all accounts receivable and payments received and related receipts from the Effective Date though the date on which the Interim Settlement Statement is delivered to Buyer), no later than 12:00 p.m. Central Daylight Time on Monday, May 1, 2017.

 

(b)                                 In the event Buyer believes that the Interim Settlement Statement does not accurately set forth the Interim Settlement Date Payment, Buyer shall communicate to Seller in writing such inaccuracies no later than 5:00 p.m. Central Daylight Time on Friday, May 5, 2017. The Parties shall cooperate in good faith to agree on the Interim Settlement Statement as soon as possible after Seller’s receipt of Buyer’s written report.

 

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(c)                                  If the Parties do not agree upon the Interim Settlement Statement by 5:00 p.m. Central Daylight Time on Tuesday, May 9, 2017, the Interim Settlement Date Payment will be calculated as set forth in Seller’s Interim Settlement Statement except as provided in Section 4.02(d).  When available, actual figures will be used for the Purchase Price adjustments at Interim Settlement. To the extent actual figures are not available, estimates shall be used. All amounts in the Interim Settlement Statement are subject to Final Settlement adjustment under Section 4.03.

 

(d)                                 Notwithstanding any other provision of this Agreement, the only items in Seller’s Interim Settlement Statement that will be based on Seller’s calculations in the event of any failure of Seller and Buyer to agree prior to the Interim Settlement Date are, in Section 4.01(a) (Upward Adjustments), subsections (i), (ii), (iii), (iv) and (vi), and in Section 4.01(b) (Downward Adjustments), subsections (i), (ii), and (v).  The calculations in Section 4.01(a)(v) and Section 4.01(b)(iii) are Title Benefits and Title Defects governed by ARTICLE 6; the CL Realty Delay Amount under Section 4.01(b)(iv) is specified; and items under Section 4.01(a)(vii) and Section 4.01(b)(vi) are those agreed by the Parties.

 

Section 4.03                            Final Settlement Adjustments.

 

(a)                                 Final Settlement Statement. A final adjustment statement based on the actual proceeds from the sale of Hydrocarbons (net of Burdens), actual Property Costs, and such additional adjustments as may be appropriate under Section 3.05(b)(ii), this ARTICLE 4 or ARTICLE 6, including any adjustments not previously accounted for at Interim Settlement on account of any Asserted Defects (the “Final Settlement Statement”), shall be prepared and delivered by Seller to Buyer, with the assistance of Buyer, within thirty (30) days after the end of the Cure Period, proposing further adjustments to the calculation of the Purchase Price based on the information then available. Seller and Buyer shall each be given access to and shall be entitled to review and audit the other Party’s records pertaining to the computation of amounts in such Final Settlement Statement.

 

(b)                                 Buyer’s Response. Within sixty (60) days after the end of the Cure Period, Buyer shall deliver to Seller a written statement describing in reasonable detail its objections (if any) to any amounts or items set forth on or omitted from the Final Settlement Statement. If Buyer does not raise objections within such period, then the Final Settlement Statement shall become final and binding upon the Parties at the end of such period.

 

(c)                                  Disputes. If Buyer raises objections, the Parties shall negotiate in good faith to resolve any such objections. If the Parties are unable to resolve any disputed item, other than any dispute with respect to an Asserted Defect or Title Benefit, within fifteen (15) days after Seller’s receipt of Buyer’s written objections to the Final Settlement Statement, any such disputed item shall be submitted to the Accounting Referee who shall be instructed to resolve such disputed item within thirty (30) days and any dispute with respect to an Asserted Defect or Title Benefit shall be resolved under Section 6.06.

 

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The resolution of disputes by the Accounting Referee shall be set forth in writing and shall be conclusive, binding upon and non-appealable by the Parties. The fees and expenses of the Accounting Referee shall be paid one-half by Buyer and one-half by Seller. If Seller and Buyer are unable to agree on an Accounting Referee within thirty (30) days after Seller’s receipt of Buyer’s written objections, then Seller and Buyer agree to have the American Arbitration Association select an Accounting Referee experienced with sale of asset accounting and closing statements. The American Arbitration Association and Accounting Referee costs will be paid fifty percent (50%) by Seller and fifty percent (50%) by Buyer.

 

(d)                                 Final Settlement Payments. Within five (5) business days after the Final Settlement Statement has become final and binding on the Parties or, if applicable, the issuance of the Accounting Referee’s decision,

 

(i)                                     in the event the total amount paid by Buyer to Seller prior to Final Settlement is greater than the Purchase Price, as finally determined in the Final Settlement Statement (following any determination by the Accounting Referee or Consultant), Seller shall repay the amount of such difference to Buyer; and

 

(ii)                                  in the event the total amount paid by Buyer to Seller prior to Final Settlement is less than the Purchase Price, as finally determined in the Final Settlement Statement (following any determination by the Accounting Referee or Consultant), Buyer shall pay the amount of such difference to Seller from amounts on deposit with the Escrow Agent and, if such amounts on deposit with the Escrow Agent are insufficient or if the Escrow Agent does not release the amounts on deposit, then from other sources of funds.

 

Section 4.04                            Allocation of Revenues and Expenses.

 

(a)                                 Allocation of Refunds and Receivables as of the Effective Time. Notwithstanding anything to the contrary in this ARTICLE 4, the Parties acknowledge that all revenues, receivables, refunds and other amounts attributable to the ownership or operation of the Mineral Assets prior to the Effective Time are Excluded Assets and so required by Section 2.02 to be distributed by Group Companies to Seller prior to or as soon after the Execution Date as practical. Except to the extent an upward adjustment of the Base Purchase Price has been made with respect thereto under Section 4.01(a), if Buyer or any of the Asset Companies collects any such revenue, receivable, refund or other amount, then from the Execution Date until eighteen (18) months after the Execution Date Buyer shall promptly remit any such amount to Seller. Notwithstanding anything to the contrary in this Article, after the Execution Date, Buyer shall own all revenues, receivables, refunds and other amounts attributable to the ownership or operation of the Interests, the Group Companies, and the Mineral Assets on and after the Effective Time.

 

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Except to the extent a downward adjustment of the Base Purchase Price has been made with respect thereto under Section 4.01(b), if Seller collects any such revenue, receivable, refund or other amount, then from the Effective Time until eighteen (18) months after the Execution Date Seller shall promptly remit any such amount to Buyer.

 

(b)                                 Audit Adjustments. The Parties acknowledge that all rights and obligations relating to adjustments resulting from any operating agreement and other audit claims asserted by or against third party operators to the extent attributable to ownership or operation of the Mineral Assets prior to the Effective Time are Excluded Assets. Any credit received by Buyer pertaining to such an audit claim shall be paid to Seller within thirty (30) days after receipt.

 

(c)                                  Refunds of Asset Taxes. Refunds of Asset Taxes shall be promptly paid as follows (or to the extent payable but not paid due to offset against other Taxes shall be promptly paid (or retained, as appropriate) by the Party receiving the benefit of the offset as follows as required under Section 2.02: (i) paid or distributed to Seller to the extent attributable to periods prior to the Effective Time; and (ii) retained by Asset Companies to the extent attributable to periods from and after the Effective Time.

 

(d)                                 Other Proceeds and Expenses. From the Effective Time until eighteen (18) months after the Execution Date, subject to and except as otherwise provided in this Agreement,

 

(i)                                     all monies, refunds, proceeds, receipts, credits, receivables, accounts and income attributable to the Mineral Assets (A) for all periods of time from and after the Effective Time shall be the sole property and entitlement of Buyer, and, to the extent received by Seller, Seller shall fully disclose and account therefor to Buyer promptly, and (B) for the period of time prior to the Effective Time shall be the sole property and entitlement of Seller and to the extent received by Buyer, Buyer shall fully disclose and account therefor to Seller promptly and, similarly,

 

(ii)                                  all Property Costs (A) attributable to periods prior to the Effective Time shall be the sole responsibility of Seller, and Seller shall promptly pay same, or if paid by Buyer, promptly reimburse Buyer for same and (B) which are attributable to periods from and after the Effective Time shall be the sole responsibility of Buyer and Buyer shall promptly pay same, or if paid by Seller, promptly reimburse Seller for same.

 

(e)                                  Cooperation. Each Party covenants and agrees to promptly inform the other with respect to amounts owing under this Section 4.04.

 

ARTICLE 5 
 BUYER’S DUE DILIGENCE

 

Section 5.01                            Access.

 

(a)                                 From the Execution Date until the earlier of 30 days after the Interim Settlement Date or the date in which Seller vacates the premises in accordance with a sublease of thereof (provided that Seller will give Buyer at least 10 days’ prior written notice of any such earlier vacation of the premises), Seller grants to Buyer and its representatives, employees, consultants, independent contractors,

 

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attorneys and other advisors reasonable access during Seller’s normal business hours to the Contracts and the Records, which shall be made available for review in Seller’s offices, through access to a virtual data room or other mutually acceptable location. Without limiting the generality of the foregoing, from the Execution Date until 30 days after the Interim Settlement Date, Buyer shall have access to during regular business hours and the right to use the offices of Seller located at 1801 Broadway, Suite 600, Denver, Colorado 80202, so that Buyer may complete transfer of all Records and administer the Mineral Assets pending relocation of the Asset Companies’ records and operations to Buyer’s offices.

 

(b)                                 After the Execution Date, Buyer agrees to provide Seller and its representatives reasonable access during Buyer’s normal business hours to the Contracts and Records and such Leases and other Mineral Assets as Seller may reasonably request during the Cure Period in connection with Seller’s efforts to cure Asserted Defects.

 

ARTICLE 6 
 TITLE MATTERS

 

Section 6.01                            Defect Notices. Subject to Section 6.04(b), Buyer may deliver to Seller one or more Defect Notices on or before the Interim Defect Notice Date with regard to Title Defects affecting any Non-Producing Fee Minerals underlying Lands in the States of Texas or Louisiana (each, an “Interim Defect Notice”) and again, but solely with regard to Title Defects affecting any Non-Producing Fee Minerals underlying Lands only in the State of Texas, between the Interim Defect Notice Date and the Final Defect Notice Date (each, an “Additional Defect Notice”). Any matters that may otherwise constitute Title Defects with regard to Title Defects affecting any Non-Producing Fee Minerals underlying Lands in the State of Texas or Louisiana, but with respect to which Seller has not received a Defect Notice from Buyer by the Interim Defect Notice Date or, solely with regard to Title Defects affecting any Non-Producing Fee Minerals underlying Lands in the State of Texas, by the Final Defect Notice Date, shall be deemed to have been conclusively waived by Buyer for all purposes and shall constitute Permitted Exceptions.

 

Section 6.02                            Seller’s Response to Asserted Defects. With respect to any Asserted Defect, Seller may elect to proceed under the following options:

 

(a)                                 Accept.  If Seller fails to make any other election under this Section 6.02 in a timely fashion, Seller shall be deemed to have agreed with the Asserted Defect based on the relevant Defect Notice.

 

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(b)                                 Cure. Seller may elect to cure such Asserted Defect during the Cure Period by notifying Buyer within ten (10) days after receiving the Defect Notice, provided that such election shall not waive or be deemed to waive Seller’s right to dispute the existence of such Asserted Defect or the adjustment to the Base Purchase Price asserted with respect thereto under Section 6.06.  To the extent Buyer’s cooperation is necessary to cure any Asserted Defect, Buyer agrees to reasonably assist Seller’s effort to cure such Asserted Defect. If Seller cures any Asserted Defect during the Cure Period, then such Asserted Defect will thereafter no longer be considered for purposes of determining whether the Aggregate Defect Threshold has been met.  If Seller cures any such Asserted Defect during the Cure Period the full amount of the Asserted Defect shall be credited to Seller without the application of any threshold.

 

(c)                                  Contest.  Seller may elect to contest the existence of a Title Defect alleged by Buyer in the Defect Notice or Buyer’s Title Defect amount set forth therein by notifying Buyer within ten (10) days after receiving the Defect Notice, provided that such notice shall state with reasonable specificity the basis of Seller’s rejection of the Title Defect alleged by Buyer or of Buyer’s Title Defect amount and shall include copies of the records, resources and additional documentation substantiating the Seller’s rejection of the Title Defects or Title Defect amount, as applicable, alleged by Buyer in a Defect Notice (a “Defect Rejection Notice”). Following Seller’s timely delivery of a Defect Rejection Notice, the Parties will in good faith negotiate the validity of the claim and the amount of any adjustment to the Purchase Price. If the Parties fail to agree, the dispute resolution provisions of Section 6.06 shall apply.

 

Section 6.03                            Purchase Price Adjustments for Defects; Quitclaim by Buyer. (a)                      For all Interim Asserted Defects that Seller has elected to cure pursuant to Section 6.02(b) but are not cured by Seller prior to 5:00 pm on Thursday, April 27, 2017, the adjustment of the Interim Settlement Date Payment under Section 4.01(b)(iii) shall be calculated in accordance with Section 6.03(b) based on the number of Net Mineral Acres specified by Buyer in the relevant Interim Defect Notices, subject to adjustment at Final Settlement under Section 4.03 upon cure or resolution of any contest.

 

(b)                                 All adjustments to the Base Purchase Price based on Title Defects will be determined as set forth below. Buyer and Seller will in good faith negotiate the validity of the claim and the amount of any adjustment to the Base Purchase Price for an Asserted Defect using the following criteria but without duplication:

 

(i)                                     Net Mineral Acre Variances; Quitclaim. For Non-Producing Fee Minerals underlying Lands in Texas and Louisiana, if the Asserted Defect is the failure of Asset Companies to have Defensible Title to the number of Net Mineral Acres represented on Schedule 1.01(a) for the applicable state, then (x) the downward adjustment shall be an amount equal to the Allocated Value per Net Mineral Acre of the affected Non-Producing Fee Minerals for such state multiplied by the shortfall in Net Mineral Acres from the amount shown on Schedule 1.01(a) for such state,

 

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and (y) upon Seller’s request following Final Settlement, Buyer will cause Forestar Minerals to quitclaim the relevant Non-Producing Fee Minerals to Seller or its designee.  For the avoidance of doubt, the Allocated Values of Non-Producing Fee Minerals underlying Lands in Texas and Louisiana to be used in the calculation of Title Defect amounts are:

 

(A)                               Texas:                                                           $101.82 / Net Mineral Acre; and

 

(B)                               Louisiana:                                      $300.76 / Net Mineral Acre.

 

(ii)                                  Liens. If the adjustment is based on a Lien upon a Mineral Asset that is liquidated in amount, then the downward adjustment is the lesser of the amount necessary to remove such Lien from the affected Mineral Asset or the Allocated Value of such Mineral Asset.

 

(iii)                               Other. If an asserted Title Defect represents an obligation, encumbrance, burden or charge upon or other defect of a type not described above, and for which the economic detriment to Buyer is unliquidated, the downward adjustment shall be determined by taking into account the following factors: (i) the Allocated Value of the applicable Non-Producing Fee Minerals; (ii) the portion of the Non-Producing Fee Minerals affected by the Title Defect; (iii) the legal effect of the Title Defect; (iv) the likelihood that the Title Defect will prevent or impair the timely receipt of any production revenues attributable to the Non-Producing Fee Minerals; (v) the likelihood that the Title Defect will increase the costs or expenses relating to the maintenance, operation or development of the Mineral Asset in the ordinary course of business; (vi) the potential discounted economic effect of the Title Defect over the life of the affected Mineral Asset; and (vii) such other reasonable factors as are necessary to make a proper evaluation. If a Title Defect is not in effect or does not adversely affect a Mineral Asset throughout the entire productive life of such Mineral Asset, such fact shall be taken into account in determining the downward adjustment. The downward adjustment for any given Title Defect shall be determined without duplication of any costs or losses included in the downward adjustment for another Title Defect.

 

Section 6.04                            Limitations on Adjustments for Title Defects.(a)                    No adjustment will be made to the Base Purchase Price for uncured Asserted Defects unless the total of all individual adjustments for Asserted Defects exceeds Two Hundred Fifty Thousand Dollars ($250,000.00) (the “Aggregate Defect Threshold”).

 

(b)                                 The aggregate reduction of the Purchase Price on account of all Title Defects shall not exceed Eight Million Two Hundred Thousand Dollars ($8,200,000) unless the CL Realty Delay Amount has been deducted from the Interim Settlement Date Payment under Section 4.01(b)(iv).  In that case, the aggregate reduction of the Purchase Price on account of all Title Defects shall not exceed Seven Million Six Hundred Thousand Dollars ($7,600,000.00).

 

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(c)                                  In no event will the aggregate amount of Title Defect adjustments exceed the Allocated Value of the applicable Mineral Asset.

 

Section 6.05                            Title Benefits.(a)  Seller shall be deemed to have conclusively waived any Title Benefits of which it fails to notify Buyer on or before the Interim Settlement Date.  The upward adjustment to the Base Purchase Price to which Seller is entitled to in respect of a Title Benefit shall be determined using the same principles as provided in Section 6.03 with respect to Title Defects; provided that no adjustment will be made to the Base Purchase Price for Title Benefits unless the total of all individual adjustments for Title Benefits exceeds Two Hundred Fifty Thousand Dollars ($250,000.00).

 

Section 6.06                            Defect or Benefit Disputes.

 

(a)                                 Dispute Notice.  If (A) Seller delivers a Defect Rejection Notice for an alleged Title Defect and following the negotiations in good faith required by Section 6.02(c), Seller and Buyer are not in agreement as to (i) the existence of or value attributable to an Asserted Defect or Title Benefit, or (ii) the amount of any adjustments to be made to the Purchase Price in respect of any Asserted Defect or Title Benefit, or (B) if Seller elects to cure an Asserted Defect, Seller and Buyer are not in agreement as to whether or to what extent an Asserted Defect has been cured, then Seller and Buyer will submit the dispute to arbitration as provided in this Section following written notice from one Party to the other Party on or before the date thirty (30) days following the end of the Cure Period that such Party is initiating dispute resolution in accordance with this Section, such notice to describe in reasonable detail the nature and specifics of the dispute (a “Dispute Notice”). Buyer, with respect to Asserted Defects, and Seller, with respect to Title Benefits, shall be deemed to have conclusively waived any unresolved Asserted Defect, or cure thereof, or any unresolved Title Benefit, with respect to which the applicable Party has not delivered a Dispute Notice to the other Party on or before the date thirty (30) days following the end of the Cure Period Dispute Procedure. Following delivery of a Dispute Notice, the applicable dispute shall be resolved through the binding dispute resolution process set forth in this Section by submission to the Consultant. If Seller and Buyer are unable to agree on a Consultant within thirty (30) days after receipt of the initiating notice, then Seller and Buyer agree to have the Consultant selected by the American Arbitration Association. The cost of the Consultant and American Arbitration Association shall be paid fifty percent (50%) by Seller and fifty percent (50%) by Buyer. Seller and Buyer shall each present to the Consultant, with a simultaneous copy to the other Party, a single written statement of its position on the disputed question, together with a copy of this Agreement and any supporting material that such Party desires to furnish, not later than the fifth (5th) Business Day after appointment of the Consultant.

 

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In making its determination, the Consultant shall be bound by the terms of this Agreement and, without any additional or supplemental submittals by either Party, may consider available legal and industry matters as in their opinion are necessary or appropriate to make a proper determination Determination. By the thirtieth (30th) day following the submission of the matter to the Consultant, applying the principles set forth in this Section, the Consultant shall make a determination. The decision of the Consultant shall be in writing with reasons, shall be final, conclusive and binding on the Parties, without right of appeal, and shall be enforceable against the Parties in any court of competent jurisdiction. The Consultant shall act as an expert for the limited purpose of determining the specific title dispute presented to it, shall be limited to the procedures set forth in this Section, may not hear or decide any matters except the specific title disputes presented to them and may not award damages, interest, costs, attorney’s fees, expenses or penalties to either Party.

 

ARTICLE 7 
 REPRESENTATIONS AND WARRANTIES OF SELLER

 

Section 7.01                            Seller’s Corporate Representations and Warranties. Seller represents and warrants to Buyer as of the date hereof as follows:

 

(a)                                 Organization and Good Standing. Seller is duly incorporated, validly existing and in good standing under the laws of the State of Delaware. Seller is duly qualified and/or licensed, as may be required, and in good standing in all states in which such qualification or license is required, except where the failure to be so qualified or licensed would not constitute a Material Adverse Effect.

 

(b)                                 Authority.  Seller has adequate power, authority and legal right to enter into, execute, deliver and perform this Agreement and the Assignment and each other agreement, instrument, or document executed or to be executed by Seller in connection with the transactions contemplated hereunder and to consummate such transactions and Seller has taken all necessary action to authorize the execution, delivery and performance of this Agreement and the Assignment. This Agreement and the Assignment are legal, valid and binding with respect to Seller and enforceable in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting creditors’ rights generally.

 

(c)                                  No Breach. The execution, delivery, and performance of this Agreement do not and will not: (i) violate any provision of any governing document of Seller; or (ii) to Seller’s Knowledge, violate any law to which Seller is subject except where such violation would not constitute a Material Adverse Effect.

 

(d)                                 Litigation. Except as disclosed in Schedule 7.01(d), there are no proceedings pending or, to Seller’s Knowledge, threatened in writing against Seller involving the ownership of the Interests or questioning the validity of or seeking to prevent the consummation of this Agreement or any other action taken or to be taken in connection herewith or which would have a Material Adverse Effect on Seller or its ability to consummate the transactions contemplated hereby.

 

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(e)                                  Taxes. Except as disclosed in Schedule 7.01(e), all income and franchise taxes based on or measured by Seller’s ownership of the Interests, to Seller’s Knowledge, have been timely paid when due.

 

(f)                                   Brokers or Finder’s Fees. Seller has not incurred any liability, contingent or otherwise, for brokers’ or finders’ fees in respect of the transactions contemplated by this Agreement for which Buyer will have any responsibility whatsoever.

 

(g)                                  Bankruptcy. There are no bankruptcy, reorganization or receivership proceedings (i) pending against or being contemplated by Seller or any of its Affiliates or (ii) to Seller’s Knowledge, threatened against Seller or any of its Affiliates.

 

(h)                                 Title to Interests.  Seller holds of record and owns beneficially all of the Interests free and clear of any encumbrance, lien, option, pledge, assessment, security interest, right of first refusal or similar right or restriction of any nature whatsoever.  The Interests have been duly authorized and validly and legally issued and were not issued in violation of any preemptive rights or other preferential rights of subscription or purchase of any Person. No contracts exist with respect to the voting or transfer of any of the Interests and no Person is obligated or entitled to redeem or otherwise acquire the Interests.  On the Execution Date, Buyer will receive good and marketable title to the Interests free and clear of any Lien.

 

(i)                                     Records; Officers.  Seller has maintained records and resolution for the Group Companies and has provided for the election or appointment of managers and officers of the Group Companies.

 

ARTICLE 8 
 REPRESENTATIONS AND WARRANTIES 
 FOR ASSET COMPANIES

 

Section 8.01                            Seller’s Representations and Warranties. The Seller represents and warrants to the Buyer as of the Execution Date as follows:

 

(a)                                 Formation.

 

(i)                                     Forestar Minerals is duly formed as a limited partnership, validly existing and in good standing under the laws of the State of Delaware.  Forestar Oil & Gas is duly formed as a limited liability company, validly existing, and in good standing under the laws of the State of Delaware.  Each of the Asset Companies is duly qualified and/or licensed, as may be required, and in good standing in all states in which such qualification or license is required except where the failure to be so qualified or licensed would not constitute a Material Adverse Effect.

 

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(ii)           Each of Forestar Minerals GP Company and Forestar Minerals LP Company is duly formed as a limited liability company, validly existing and in good standing under the laws of the State of Delaware, and duly qualified and/or licensed, as may be required, and in good standing in all states in which such qualification or license is required except where the failure to be so qualified or licensed would not constitute a Material Adverse Effect.

 

(b)           Interests.  The Interests constitute all of the equity of the Acquired Companies and are duly authorized, validly issued, fully paid, and non-assessable.  No preferred membership interests in any Acquired Company have been issued.

 

(c)           General and Limited Partnership Interests. Forestar Minerals GP Company holds of record and owns beneficially all of the Forestar Minerals GP Interests and Forestar Minerals LP Company holds of record and owns beneficially all of the Forestar Minerals LP Interests free and clear of any Lien.  The Forestar Minerals GP Interests and Forestar Minerals LP Interests have been duly authorized and validly and legally issued and were not issued in violation of any preemptive rights or other preferential rights of subscription or purchase of any Person.  No contracts exist with respect to the voting or transfer of any of the Forestar Minerals GP Interests or Forestar Minerals LP Interests and no Person is obligated or entitled to redeem or otherwise acquire any of the Forestar Minerals GP Interests or Forestar Minerals LP Interests.

 

(d)           Legal Power. The consummation of the transactions contemplated by this Agreement will not violate, nor be in conflict with any provision of the LLC Agreements or the LP Agreement or applicable laws, except where such violation or conflict would not constitute a Material Adverse Effect.

 

(e)           Brokers. No broker or finder is entitled to any brokerage or finder’s fee, or to any commission, based in any way on agreements, arrangements or understandings made by or on behalf of any of the Group Companies for which Seller or Buyer has or will have any liabilities or obligations (contingent or otherwise).

 

(f)            Bankruptcy. There are no bankruptcy, reorganization or arrangement proceedings pending, being contemplated by or to Seller’s Knowledge threatened against any of the Group Companies.

 

(g)           Litigation. Except as disclosed in Schedule 7.01(d) there is no suit, action, claim, investigation or inquiry by any Person and no legal, administrative or arbitration proceeding filed or, to Seller’s Knowledge, threatened against Seller, any Affiliate of Seller (including any of the Group Companies) or any of the Mineral Assets in connection with their business, which, if adversely determined, would have a Material Adverse Effect.

 

(h)           Environmental Matters. Seller has made available to Buyer all material environmental investigations or audits and all third party environmental reports in possession of Seller or any Group Company addressing the Mineral Assets and the operations of the Group Companies, a list of which is set forth on Schedule 8.01(h).

 

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(i)            Except as set forth in Schedule 8.01(h), there are no pending or, to Seller’s Knowledge, threatened, enforcement, clean-up, removal, remediation, mitigation or other claims or proceedings against any Group Company under any Environmental Law (including any claim resulting from off-site disposal).

 

(ii)           Except as set forth in Schedule 8.01(h), to Seller’s Knowledge, the Asset Companies have all material environmental permits for the ownership and operation (if any) of the Mineral Assets, as currently conducted, no proceeding is pending to revoke any such environmental permit and the Group Companies are each in material compliance with such environmental permits.

 

(i)            Taxes.  Each of the Group Companies is classified as a disregarded entity pursuant to section 301.7701-3 of the Treasury regulations. None of the Group Companies has made an election pursuant to section 301.7701-3 of the Treasury regulations to be classified as an association. To Seller’s Knowledge: (i) all tax returns and tax reports required by Governmental Authority with respect to the Group Companies have been filed on a timely basis (including extensions) and are true, correct and complete; (ii) all taxes shown due on tax returns filed with any Governmental Authority with respect to taxes paid by or with respect to the Group Companies have been paid; (iii) no claim has been made or is expected to be made by any Governmental Authority with respect to taxes paid by or with respect to the Group Companies on their tax returns; and (iv) there are no encumbrances on any of the Mineral Assets that have arisen in connection with any failure (or alleged failure) of the Group Companies to pay any tax to any Governmental Authority.

 

(j)            Special Warranty of Title to the Mineral Assets. From and after the date the Final Settlement Statement has become final and binding on the Parties (including following resolution of any dispute pursuant to this Agreement), Seller warrants and agrees to defend title to the Fee Minerals, Leases and Wells solely unto Buyer and the Group Companies against every person whomsoever lawfully claiming or to claim the same or any part thereof, by, through or under Seller or any Group Company, but not otherwise; subject, however, to the Permitted Exceptions, and limited in all cases to the Allocated Values of the Fee Minerals, Leases and Wells.

 

(k)           No Dispositions.  Except as set forth in Schedule 8.01(k), the Asset Companies have not sold or transferred any Fee Minerals, Leases, or Wells or any interests therein since the Effective Time.

 

(l)            Subsidiaries. No Group Company owns, directly or indirectly, any equity or other securities of any corporation, partnership, limited liability company, joint venture, association or other entity, except as set forth on Schedule 8.01(l).

 

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(m)          Material Contracts; No  Default. Schedule 8.01(m) is a complete list of all Contracts, other than the Leases, that (i) may be expected to impose on any Group Company an aggregate amount of obligations in excess of US $50,000 (including all seismic contracts and related licenses) and (ii) are in effect as of the Execution Date, and cannot be cancelled without penalty or without more than sixty (60) days’ notice .  No Group Company, Seller Affiliate or CL Realty is in in breach of or in default under any Contract to which it is a party except for such breaches and defaults as would not, individually or collectively, have a Material Adverse Effect.

 

(n)           Compliance with Law.  All material filings and notices relating to the Mineral Assets or the ownership or operation thereof, required to be made by the Asset Companies with all applicable state and federal agencies have been made by or on behalf of the Asset Companies except where the failure to file could not reasonably be expected to have a Material Adverse Effect. No Group Company is in violation of any Law, except for such violations as are not, individually or in the aggregate, reasonably expected to have a Material Adverse Effect.

 

(o)           Absence of Undisclosed Liabilities. No Group Company has incurred any liabilities, whether accrued, absolute or contingent (“Liabilities”), except for Liabilities that individually or in the aggregate (a) have not had, and would not be reasonably likely to have or result in, a Material Adverse Effect, or (b) do not exceed $250,000.00.

 

(p)           Employees and Employee Benefit Plans. No Group Company has any, or has ever had any, employees, and no Group Company does or has within the preceding six (6) years maintained, sponsored, contributed to, or had any liability with respect to an Employee Benefit Plan.  Neither any Group Company nor any entity which together with any Group Company is treated as a single employer under Section 414(t) of the Code has ever maintained, sponsored, contributed to or had any liability with respect to any Employee Benefit Plan that is subject to Title IV of ERISA (including a “multiemployer plan” within the meaning of Section 3(37) of ERISA).

 

(q)           Preferential Rights. There are no third parties with any preferential rights to purchase any of the Mineral Assets or any interest in any Mineral Assets that are triggered by the transactions contemplated in this Agreement.

 

(r)            Consents. Except with regard to conveyance of the CL Realty Assets, no consent, approval, or authorization of, or designation, or filing with, any Governmental Authority or other person or entity is required on the part of Seller or any Group Company or other Affiliate of Seller in connection with the valid execution and delivery of this Agreement or the consummation of transactions contemplated hereby.

 

(s)            Imbalances.  As of the Effective Time, there were no Imbalances pertaining to the Mineral Assets.

 

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ARTICLE 9 
 REPRESENTATIONS AND WARRANTIES OF BUYER

 

Section 9.01         Buyer’s Representations and Warranties. Buyer represents and warrants to Seller as of the date hereof and as of the Interim Settlement Date as follows:

 

(a)           Organization and Good Standing. Buyer is duly formed, validly existing and in good standing under the laws of the State of Delaware.  Buyer is duly qualified and/or licensed, as may be required, and in good standing in all states in which qualification is required. Buyer has all requisite power and authority to acquire, own and operate the Interests.

 

(b)           Powers.  Buyer is duly authorized and empowered to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby. No instrument to which the Buyer is a party or is bound, nor any court order or governmental law, rule or regulation, will be violated by the Buyer’s execution and consummation of this Agreement.

 

(c)           No Restriction. Buyer is not subject to any order, judgment or decree, or the subject of any litigation, claim or Proceeding, pending or, to Buyer’s Knowledge, threatened or any other restriction of any kind or character specific to the Buyer, which would affect the Buyer’s ability to carry out the transactions contemplated by this Agreement.

 

(d)           Authority. Buyer has adequate power, authority and legal right to enter into, execute, deliver and perform this Agreement and the Assignment and each other agreement, instrument, or document executed or to be executed by Buyer in connection with the transactions contemplated hereunder and to consummate such transactions and Buyer has taken all necessary action to authorize the execution, delivery and performance of this Agreement and the Assignment. This Agreement and the Assignment are legal, valid and binding with respect to Buyer and enforceable in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors’ rights generally.

 

(e)           No Breach. The execution, delivery, and performance of this Agreement do not and will not to Buyer’s Knowledge: (i) violate any provision of any governing document of Buyer; (ii) violate any law to which Buyer or any of its assets is subject; or (iii) violate, breach or constitute a default under, or result (with notice or lapse of time or both) in the breach, violation, acceleration or termination of, any agreement, contract, instrument, license, lease, promissory note, indenture, mortgage, deed of trust, or other arrangement to which Buyer is subject or by which any of its assets is bound or subject, except, with respect to any such violation, breach, default, acceleration or termination which would not reasonably be expected to prevent the consummation of the transactions contemplated hereby by Buyer or result in Seller incurring any loss or liability therefrom.

 

(f)            Consent. No consent, approval, or authorization of, or designation, or filing with, any Governmental Authority or any other person or entity is required on the part of Buyer in connection with the valid execution and delivery of this Agreement or the consummation of transactions contemplated hereby.

 

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(g)           Litigation. There are no proceedings pending or, to Buyer’s Knowledge, threatened in writing against Buyer questioning the validity of or seeking to prevent the consummation of this Agreement or any other action taken or to be taken in connection herewith, or which would have a Material Adverse Effect on Buyer or its ability to consummate the transactions contemplated hereby.

 

(h)           Brokers or Finder’s Fees. Buyer has not incurred any liability, contingent or otherwise, for brokers’ or finders’ fees in respect of the transactions contemplated by this Agreement for which Seller will have any responsibility whatsoever.

 

(i)            Qualifications.  Buyer is qualified with all applicable Governmental Authorities to own the Interests.

 

(j)            Funding; Investment. Buyer has available (through cash on hand or existing credit arrangements or otherwise) all funds necessary for acquisition of the Interests pursuant to this Agreement, as and when needed, and to perform its obligations hereunder. Buyer is experienced in and knowledgeable about the oil and gas business and the acquisition of oil and gas properties and Buyer is aware of the risks of such investments.

 

(k)           Knowledgeable Buyer. Buyer acknowledges that Seller has not made any representation or warranty, expressed or implied, as to the accuracy or completeness of any information regarding the Mineral Assets except as expressly set forth in this Agreement. In making its decision to enter into this Agreement and to consummate the transactions contemplated hereby, except for the express representations and warranties of Seller set forth in this Agreement, Buyer has relied solely on its own independent investigation and evaluation of the Mineral Assets and not on any comments, statements, projections or other material made or given by any representative, consultant or advisor of Seller or any Affiliate or representative of Seller. Buyer acknowledges and affirms that on or prior to Interim Settlement, Buyer will have completed its independent investigation as contemplated in Section 10.02 and made all such reviews and inspections of the Interests as it has deemed necessary or appropriate to consummate the transaction contemplated hereunder. Buyer is an “accredited investor”, as such term is defined in Regulation D of the Securities Act of 1933, as amended, and Buyer is acquiring the Interests for its own account and not with the intent to make any distribution of undivided interests thereof which would violate any applicable laws.

 

(l)            Bankruptcy. There are no bankruptcy, reorganization or receivership proceedings (i) pending against or being contemplated by Buyer or (ii) to Buyer’s Knowledge, threatened against Buyer.

 

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(m)          Non-Reliance. Except for the representations and warranties of Seller in ARTICLE 7 and ARTICLE 8 (including the related disclosure schedules, the certificate of Seller to be delivered on the Execution Date), Buyer has not relied upon any oral or written statements, representations or warranties that have been made by or on behalf of Seller or any of its representatives concerning the condition, operation, performance or prospects of the Mineral Assets, or upon any written reports, financial data, business plans, projections, or forecasts, any audits, studies, or assessments, or any other written materials, copies of which may have been furnished to Buyer or as to which Buyer may have been provided access in connection with the transactions contemplated by this Agreement. Buyer and its representatives have (i) been permitted full and complete access to all materials in Seller’s or its representatives’ possession relating to the Interests and the Mineral Assets, (ii) been afforded the opportunity to ask all questions of Seller concerning the Interests and the Mineral Assets, (iii) been afforded the opportunity to investigate the condition, including the subsurface condition, of the Mineral Assets, and (iv) had the opportunity to take such other actions and make such other independent investigations as Buyer deems necessary to evaluate the Mineral Assets and understand the merits and risks of an investment in the Interests and to verify the truth, accuracy, and completeness of the materials, documents and other information provided or made available to Buyer, whether by Seller or otherwise.

 

ARTICLE 10 
 SCOPE OF REPRESENTATIONS OF SELLER

 

Section 10.01       Information About the Interests and the Mineral Assets. The express representations and warranties of Seller contained in this Agreement, the Assignment, and the certificate delivered on the Execution Date are exclusive and are in lieu of all other representations and warranties, express, implied or statutory. Except as expressly set forth in other provisions of this Agreement or in the Assignment, Seller disclaims all liability and responsibility for any representation, warranty, statements or communications (orally or in writing) to Buyer, including any information contained in any opinion, information or advice that may have been provided to Buyer by any employee, officer, director, agent, consultant, engineer or engineering firm, trustee, representative, investment banker, financial advisor, partner, member, beneficiary, stock holder or contractor of Seller whenever and however made, including those made in any data room or internet site and any supplements or amendments thereto or during any negotiations with respect to this Agreement or any confidentiality agreement previously executed by the Parties with respect to the Interests and the Mineral Assets.

 

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FURTHER, SELLER MAKES NO WARRANTY OR REPRESENTATION, EXPRESS, STATUTORY OR IMPLIED, AS TO (i) THE ACCURACY, COMPLETENESS OR MATERIALITY OF ANY DATA, INFORMATION OR RECORDS NOW, HERETOFORE OR HEREAFTER FURNISHED TO BUYER IN CONNECTION WITH THE INTERESTS OR THE MINERAL ASSETS OR OTHERWISE CONSTITUTING A PORTION OF THE MINERAL ASSETS; (ii) THE PRESENCE, QUALITY AND QUANTITY OF OIL AND GAS RESERVES (IF ANY) ATTRIBUTABLE TO THE MINERAL ASSETS, INCLUDING WITHOUT LIMITATION, SEISMIC DATA AND SELLER’S INTERPRETATION AND OTHER ANALYSIS THEREOF; (iii) THE ABILITY OF THE MINERAL ASSETS TO PRODUCE OIL AND GAS, INCLUDING WITHOUT LIMITATION PRODUCTION RATES, DECLINE RATES AND RECOMPLETION OPPORTUNITIES; (iv) ALLOWABLES, OR OTHER REGULATORY MATTERS; (v) THE PRESENT OR FUTURE VALUE OF THE ANTICIPATED INCOME, COSTS OR PROFITS, IF ANY, TO BE DERIVED FROM THE MINERAL ASSETS; (vi) EXCEPT AS SET FORTH IN Section 8.01(h), THE ENVIRONMENTAL CONDITION OF THE MINERAL ASSETS; (vii) THE PLUGGING AND ABANDONMENT AND SURFACE RESTORATION LIABILITIES ASSOCIATED WITH THE MINERAL ASSETS; (viii) ANY PROJECTIONS AS TO EVENTS THAT COULD OR COULD NOT OCCUR; (ix) THE TAX ATTRIBUTES OF THE INTERESTS OR ANY MINERAL ASSET; (x) EXCEPT AS SET FORTH IN Section 8.01(j), TITLE TO ANY MINERAL ASSETS; (xi) ANY IMPLIED OR EXPRESS WARRANTY OF FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT; (xii) WHETHER ANY LOUISIANA MINERAL SERVITUDE OR ANY OTHER TERMINABLE INTEREST IS IN FULL FORCE AND EFFECT OR HAS PRESCRIBED OR OTHERWISE TERMINATED; AND (xiii) ANY OTHER MATTERS CONTAINED IN OR OMITTED FROM ANY INFORMATION OR MATERIAL FURNISHED TO BUYER BY SELLER OR OTHERWISE CONSTITUTING A PORTION OF THE MINERAL ASSETS.  ANY DATA, INFORMATION OR OTHER RECORDS FURNISHED BY SELLER ARE PROVIDED TO BUYER AS A CONVENIENCE AND BUYER’S RELIANCE ON OR USE OF THE SAME IS AT BUYER’S SOLE RISK.

 

Section 10.02       Independent Investigation. Buyer has made its own independent investigation, analysis and evaluation of the transactions contemplated by this Agreement (including Buyer’s own estimate and appraisal of the extent and value of Group Companies’ balance sheets and other financial records, oil and gas reserves (if any) attributable to the Mineral Assets and an independent assessment of the risks, including environmental risks, and liabilities associated with the acquisition or operation of the Mineral Assets). Buyer has had access to perform its investigation and has not relied on any representations by Seller other than those expressly set forth in this Agreement or in the Assignment.

 

Section 10.03       “AS IS, WHERE IS”.

 

(a)           Except as expressly set forth in this Agreement, the Mineral Assets are owned by the Asset Companies AS IS AND WHERE IS AND WITHOUT WARRANTY OF ANY KIND, WHETHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION,

 

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ANY WARRANTY OF TITLE, MERCHANTABILITY, CONDITION OR FITNESS FOR A PARTICULAR PURPOSE. PRIOR TO CLOSING, BUYER SHALL HAVE INSPECTED THE MINERAL ASSETS AND UPON CLOSING WILL ACCEPT THE MINERAL ASSETS IN THEIR PRESENT STATUS, CONDITION AND STATE OF REPAIR, “AS IS,” “WHERE IS,” AND “WITH ALL FAULTS”; and

 

(b)           FURTHER, EXCEPT AS SET FORTH IN Section 8.01(h), SELLER HAS NOT AND WILL NOT MAKE ANY REPRESENTATION OR WARRANTY REGARDING ANY MATTER OR CIRCUMSTANCE RELATING TO ENVIRONMENTAL LAWS, ENVIRONMENTAL LIABILITIES, THE RELEASE OF SUBSTANCE, WASTES OR MATERIALS INTO THE ENVIRONMENT OR THE PROTECTION OF HUMAN HEALTH, SAFETY, NATURAL RESOURCES OR THE ENVIRONMENT, OR ANY OTHER ENVIRONMENTAL CONDITION OF THE MINERAL ASSETS.

 

Section 10.04       Waiver of Deceptive Trade Practices Acts. BUYER WAIVES ITS RIGHTS UNDER THE DECEPTIVE TRADE PRACTICES ACT SECTION 17.41 et seq., TEXAS BUSINESS & COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS, AND UNDER SIMILAR STATUTES ADOPTED IN OTHER STATES, TO THE EXTENT THEY HAVE APPLICABILITY TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. AFTER CONSULTATION WITH AN ATTORNEY OF ITS SELECTION, BUYER CONSENTS TO THIS WAIVER.

 

Section 10.05       UTPCPL Waiver. Buyer hereby waives the provisions of the Louisiana unfair trade practices and consumer protection law (La. R.S. 51:1402, et seq.). Buyer warrants and represents that it: (i) is experienced and knowledgeable with respect to the oil and gas industry generally and with transactions of this type specifically; (ii) possesses ample knowledge, experience and expertise to evaluate independently the merits and risks of the transactions herein contemplated; and (iii) is not in a significantly disparate bargaining position.

 

Section 10.06       Disclaimers as to Physical Condition of the Mineral Assets.

 

(a)           Subject in all respects to Section 14.03, (A) the Mineral Assets have been used for oil and gas drilling and production operations and possibly for the storage and disposal of waste materials or hazardous substances related to oil field operations, and physical changes in or under the Mineral Assets or adjacent lands may have occurred as a result of such uses; (B) the Mineral Assets also may contain buried pipelines and other equipment, whether or not of a similar nature, the existence or locations of which may not be known by Seller or be readily apparent by a physical inspection of the Mineral Assets; (C) Seller does not make any representation or warranty regarding the condition of the Mineral Assets nor the effect any such use has had on the physical condition of the Mineral Assets;

 

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(D) Buyer shall assume the risk that the Mineral Assets may contain wastes or contaminants and that adverse physical conditions, including the presence of waste or contaminants, may not have been revealed by Buyer’s investigation; and (E) Buyer assumes all responsibility and liability related to or arising from the environmental condition of the Mineral Assets, including, without limitation, the disposal, spill or release of wastes or contamination on, in, under or from the Mineral Assets, regardless of whether such conditions arose before or after the Effective Time.

 

(b)           In addition, Buyer acknowledges that some oil field production equipment located on the Mineral Assets may contain MMMF or NORM. In this regard, Buyer expressly understands that NORM may affix or attach itself to the inside of wells, materials and equipment as scale or in other forms, and that wells, materials and equipment located on the Mineral Assets described herein may contain NORM and that NORM-containing materials may be buried or have been otherwise disposed of on the Leases. Buyer also expressly understands that special procedures may be required for the removal and disposal of MMMF and NORM from the Leases where they may be found, and that Buyer assumes all liability when such activities are performed.

 

Section 10.07       General Disclaimers.

 

(a)           EXCEPT AS SPECIFICALLY SET FORTH HEREIN, SELLER EXPRESSLY DISCLAIMS ALL LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION, STATEMENT OR INFORMATION MADE OR COMMUNICATED (ORALLY OR IN WRITING) TO BUYER OR ANY OF ITS AFFILIATES, EMPLOYEES, AGENTS, CONSULTANTS OR REPRESENTATIVES (INCLUDING, WITHOUT LIMITATION, ANY OPINION, INFORMATION, PROJECTION OR ADVICE THAT MAY HAVE BEEN PROVIDED TO BUYER BY ANY OFFICER, DIRECTOR, EMPLOYEE, AGENT, CONSULTANT, REPRESENTATIVE OR ADVISOR OF SELLER OR ANY OF ITS AFFILIATES).

 

(b)           SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, AS TO (A) THE CONTENTS, CHARACTER OR NATURE OF ANY DESCRIPTIVE MEMORANDUM, OR ANY REPORT OF ANY PETROLEUM ENGINEERING OR ANY GEOLOGICAL OR SEISMIC DATA OR INTERPRETATION, RELATING TO THE MINERAL ASSETS, (B) THE QUANTITY, QUALITY OR RECOVERABILITY OF PETROLEUM SUBSTANCES IN OR FROM THE MINERAL ASSETS, (C) ANY ESTIMATES OF THE VALUE OF THE MINERAL ASSETS OR FUTURE REVENUES GENERATED BY THE MINERAL ASSETS, (D) THE PRODUCTION OF HYDROCARBONS FROM THE MINERAL ASSETS, (E) THE MAINTENANCE, REPAIR, CONDITION, QUALITY, SUITABILITY, DESIGN OR MARKETABILITY OF THE MINERAL ASSETS, (F) THE CONTENT, CHARACTER OR NATURE OF ANY DESCRIPTIVE MEMORANDUM, REPORTS, BROCHURES, STATEMENTS OR MATERIALS PREPARED BY THIRD PARTIES,

 

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(G) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE AVAILABLE OR COMMUNICATED TO BUYER, ITS AGENTS, CONSULTANTS, REPRESENTATIVES OR ADVISORS IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREIN, AND FURTHER DISCLAIMS, ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, OF MERCHANTABILITY, FREEDOM FROM REDHIBITORY VICES, LATENT VICES OR DEFECTS, FITNESS FOR A PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR SAMPLES UNDER LOUISIANA LAW, INCLUDING LOUISIANA CIVIL CODE ARTICLES 2520 THROUGH 2548, AND BUYER EXPRESSLY WAIVES THE WARRANTY IMPOSED BY LOUISIANA CIVIL CODE ARTICLE 2475; WAIVES ALL RIGHTS IN REDHIBITION PURSUANT TO LOUISIANA CIVIL CODE ARTICLES 2520, ET SEQ.; OR FOR RESTITUTION OR OTHER DIMINUTION OF THE PURCHASE PRICE; ACKNOWLEDGES THAT THIS EXPRESS WAIVER SHALL BE CONSIDERED A MATERIAL AND INTEGRAL PART OF THIS SALE AND THE CONSIDERATION THEREOF; AND ACKNOWLEDGES THAT THIS WAIVER HAS BEEN BROUGHT TO BUYER’S ATTENTION AND EXPLAINED IN DETAIL AND THAT BUYER HAS VOLUNTARILY AND KNOWINGLY CONSENTED TO THIS WAIVER.

 

ARTICLE 11 
 EXECUTION DATE DELIVERIES

 

Section 11.01       Deliveries by Seller. On the Execution Date, Seller shall deliver to Buyer:

 

(a)           Assignment.  The Assignment, executed and acknowledged by Seller;

 

(b)           Officer’s Certificate.  A certificate duly executed by an authorized officer of Seller, dated as of the Execution Date attaching true and correct copies of (i) certificates of good standing of Seller and the Group Companies from the Delaware Secretary of State dated not more than five (5) days before the Execution Date, (ii) true and correct copies of the LLC Agreements and LP Agreement, and (iii) resolutions of Seller authorizing and approving this Agreement and the consummation of the transactions contemplated hereby as in full force and effect on the Execution Date;

 

(c)           Resignation Letters.  Resignation letters of all managers and officers of the Group Companies, effective as of the Execution Date;

 

(d)           FIRPTA Certificate.  An executed FIRPTA certificate certifying that Forestar (USA) Real Estate Group, Inc., as the seller of the Mineral Assets from a United States federal income tax perspective, is not a “foreign person” within the meaning of section 1445 of the Code;

 

(e)           Amendments.  Executed amendments to the LLC Agreements and the LP Agreement reflecting the transactions contemplated herein to be filed promptly after the Execution Date in the State of Delaware and in each other jurisdiction in which a Group Company is licensed or qualified;

 

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(f)            Allocated Value.  The Allocated Value schedule, initialed by Seller for identification;

 

(g)           Cross-Receipt.  An executed counterpart of a cross-receipt for the Execution Date payment received by Seller and the Interests received by Buyer (the “Cross-Receipt”); and

 

(h)           Other.  Any other agreements and instruments provided for herein or necessary or desirable to effectuate the transactions contemplated hereby, as agreed by Seller and Buyer.

 

Section 11.02       Deliveries by Buyer. On the Execution Date, Buyer shall deliver to Seller:

 

(a)           Assignment.  A counterpart of the Assignment, executed and acknowledged by Buyer;

 

(b)           Officer’s Certificate.  A certificate duly executed by an authorized officer of Buyer, dated as of the Execution Date, attaching true and correct copies of (i) a certificate of good standing of Buyer from the Delaware Secretary of State dated not more than five (5) days before the Execution Date, and (y) resolutions of Buyer authorizing and approving this Agreement and the consummation of the transactions contemplated hereby as in full force and effect on the Execution Date;

 

(c)           Amendments.  Executed amendments to the LLC Agreements and the LP Agreement reflecting the transactions contemplated herein to be filed contemporaneously with the Interim Settlement in the State of Delaware and in each other jurisdiction in which a Group Company is licensed or qualified;

 

(d)           Allocated Value Schedule.  The Allocated Value schedule, initialed by Buyer for identification;

 

(e)           Cross-Receipt.  An executed counterpart of the Cross-Receipt;

 

(f)            Execution Date Payment.  The Execution Date Payment;

 

(g)           Escrow. Evidence that the Holdback Amount has been deposited with the Escrow Agent; and

 

(h)           Other.  Any other agreements and instruments provided for herein or necessary or desirable to effectuate the transactions contemplated hereby, as agreed by Seller and Buyer.

 

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ARTICLE 12 TAX MATTERS

 

Section 12.01                     Tax Matters.

 

(a)                                 Because the Group Companies are classified as disregarded entities pursuant to section 301.7701-2 of the Treasury regulations, the Parties agree that for United States federal income tax purposes Seller’s conveyance of the Interests to Buyer shall be treated for such purposes as the purchase by Buyer and sale by Seller of the Mineral Assets.

 

(b)                                 Seller and Buyer agree that the Purchase Price shall be allocated among the Mineral Assets according to the Allocated Values and as adjusted pursuant to Section 4.01, Section 4.02 and Section 4.03, consistent with the principles of Section 1060 of the Code and the Treasury regulations thereunder.  Seller and Buyer agree that the Purchase Price as allocated shall be used by Seller and Buyer as the basis for reporting asset values and other items for purposes of all federal, state, and local tax returns, including, without limitation, Internal Revenue Service Form 8594, and that neither Seller nor Buyer nor their respective Affiliates will take positions inconsistent with such allocation in notices to Governmental Authorities, in audits or other proceedings with respect to taxes, or in other documents or notices relation to the transactions contemplated by this Agreement.

 

Section 12.02                     Sales or Use Tax Recording Fees and Similar Taxes and Fees.  Buyer shall bear any sales, use, excise, real property transfer or gain, gross receipts, goods and services, registration, capital, documentary, stamp or transfer taxes, recording fees and similar taxes and fees incurred and imposed upon, or with respect to, the property transfers or other transactions contemplated hereby (collectively, “Transfer Taxes”). Seller will use commercially reasonable efforts to determine, and Buyer agrees to cooperate with Seller in determining, the Transfer Taxes, if any, that are due in connection with the transactions contemplated by this Agreement.  Such Transfer Taxes as are identified by Interim Settlement will be shown on the Interim Settlement Statement and Buyer agrees to pay any such Transfer Taxes at Interim Settlement. Should any taxing authority impose Transfer Taxes not accounted for at Interim Settlement, Buyer shall pay such Transfer Taxes promptly upon being notified by Seller or such taxing authority of such imposition. If such transfers or transactions are exempt from any such taxes or fees upon the filing of an appropriate certificate or other evidence of exemption, Buyer will timely furnish to Seller such certificate or evidence.

 

Section 12.03                     Ad Valorem and Property Taxes. All ad valorem and property taxes of the Companies shall be prorated between Buyer and Seller as of the Effective Time for the Current Tax Period. The allocation of ad valorem and property taxes for the Current Tax Period shall, where possible, be computed based upon the tax rate and values applicable to the Current Tax Period; otherwise, allocation shall be estimated based upon ad valorem and property taxes assessed against the Mineral Assets for the immediately preceding tax period.

 

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All ad valorem and property taxes attributable to periods prior to the Current Tax Period are the obligation of, and shall be borne by, Seller. All ad valorem and property taxes attributable to periods from and after the Current Tax Period shall be borne by Buyer.

 

ARTICLE 13 
 COVENANTS OF THE PARTIES

 

Section 13.01                     Seller’s Logos; Companies’ Names. Within thirty (30) days after the Execution Date, Buyer shall replace, or cover or cause to be covered by decals or new signage, any names and marks used by Seller, and all variations and derivatives thereof and logos relating thereto, from the Mineral Assets and shall not thereafter make any use whatsoever of such names, marks and logos.  Within thirty (30) days after the Execution Date, Buyer shall file appropriate certificates in all jurisdiction and offices in which any filing with respect to Group Companies has been made to remove “Forestar” from the Group Companies’ names.

 

Section 13.02                     Records. As soon as practicable but in any event within thirty (30) days after the Execution Date, Seller shall deliver to Buyer all of the Records in the form that such records are maintained by Seller. Seller shall have the right to make and retain copies of the Records as Seller may desire prior to the delivery of the Records to Buyer. Buyer, for a period of seven (7) years after the Execution Date, shall make available to Seller (at the location of such Records in Buyer’s organization) access to the Records upon the prior written request of Seller, during normal business hours.

 

Section 13.03                     Suspended Funds. SELLER SHALL BE RESPONSIBLE FOR PROPER DISTRIBUTION OF ANY SUSPENDED PROCEEDS TO THE PARTIES LAWFULLY ENTITLED TO THEM AND SHALL BE RESPONSIBLE FOR ANY CLAIMS RELATED THERETO, AND SELLER HEREBY AGREES TO RELEASE, INDEMNIFY, DEFEND AND HOLD HARMLESS BUYER INDEMNITEES FROM AND AGAINST ANY AND ALL CLAIMS ARISING OUT OF OR RELATING TO SUCH SUSPENDED PROCEEDS.

 

Section 13.04                     Notice of Transfer.. Promptly after the Execution Date, Seller and Buyer shall jointly notify all pertinent operators, non-operators, oil or gas purchasers, governmental agencies, and royalty owners that Buyer has purchased the Interests and is the owner of the Asset Companies and the Mineral Assets and directing that from and after the date of such notice, all amounts otherwise payable to any Asset Company shall be paid to the account of Buyer as set forth in the notice.

 

Section 13.05                     Knowledge of Breach. No breach of any representation or warranty shall be deemed to be a breach of this Agreement for any purpose under this Agreement, and no Party nor any Affiliate of any Party shall have any claim or recourse against the other Party or its directors,

 

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officers, employees, partners, Affiliates, controlling persons, agents, advisors or representatives with respect to such breach, to the extent Buyer had Buyer’s Knowledge or Seller had Seller’s Knowledge, as applicable, of such breach by the other Party.

 

Section 13.06                     Transfer of CL Realty Assets and Other Assets to Forestar Minerals.

 

(a)                                 Seller shall use commercially reasonable efforts to cause CL Realty to convey prior to the Interim Settlement Date or as soon as practicable thereafter all of the CL Realty Assets to Forestar Minerals under a special warranty deed incorporating the provisions of Section 8.01(j) and otherwise in form and substance satisfactory to Buyer in its sole discretion.  The effective time of the conveyance of the CL Realty Assets shall be the same as the “Effective Time” under this Agreement (January 1, 2017). Subject to the occurrence of the CL Realty Conveyance Date, Seller shall pay to or otherwise cause Buyer to receive 100% of the sales proceeds of all Hydrocarbons produced by the CL Realty Assets since the Effective Time, less any amounts that would qualify as downward adjustments under Section 4.01(b) (excluding any downward adjustment for Asserted Defects under Section 4.01(b)(iii) or the CL Realty Delay Amount under Section 4.01(b)(iv)) with respect to the CL Realty Assets.

 

(b)                                 Promptly after the Execution Date and in any event prior to the Interim Settlement Date, Seller shall transfer and assign all of the Other Assets to Forestar Minerals free of all Liens.

 

Section 13.07                     Transfer of Primary Term Leases to Forestar Oil & Gas.  Prior to the Interim Settlement Date, Seller shall cause Forestar Petroleum to transfer and assign all Primary Term Leases to Forestar Oil & Gas under an assignment of oil and gas leases incorporating the provisions of Section 8.01(j) and otherwise in form and substance satisfactory to Buyer in its sole discretion.

 

Section 13.08                     Bonds.  After the Execution Date, Seller shall have the right to request and receive the Bonds back from the Louisiana Department of Conservation, and Buyer shall reasonably cooperate with Seller as necessary to permit Seller to do so.

 

ARTICLE 14 
 ASSUMED OBLIGATIONS; INDEMNIFICATION

 

Section 14.01                     Buyer’s Assumption of Obligations and Indemnification and Release. It is the belief of Seller that all obligations with respect to the Mineral Assets are solely obligations of the Asset Companies.  Notwithstanding the foregoing, Seller requires assurances that if any Claims are made with respect to the Mineral Assets against Forestar Minerals GP LLC, whether in its capacity as the general partner of Forestar Minerals, or against any Seller pursuant to theories of “piercing the veil” or “single business enterprise” or “agency” or “contract” or “tort” or any other legal or equitable theory whatsoever, Buyer shall release, indemnify, and defend Seller Indemnitees against all such Claims.

 

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Therefore, as part of the consideration for the transaction contemplated hereunder, and, in the absence of which Seller would not have agreed to convey the Interests to Buyer, from and after the Execution Date, Buyer shall assume, and hereby agrees to fulfill, pay, perform and discharge, and expressly releases and discharges Seller Indemnitees from and against all of the following obligations, liabilities, and duties, known or unknown, with respect to the Mineral Assets (collectively, the “Assumed Obligations”):

 

(a)                                 All obligations, liabilities and duties with respect to the ownership and operation of the Mineral Assets attributable to periods before, on and after the Effective Time, including, without limitation, REGARDLESS OF WHETHER RESULTING FROM ANY SOLE OR CONCURRENT NEGLIGENT ACTS OR OMISSIONS OR STRICT LIABILITY OF ANY SELLER INDEMNITEES, OR BUYER, OR THE CONDITION OF THE MINERAL ASSETS WHEN ACQUIRED:

 

(i)                                     Subject to Seller’s obligations arising under Section 4.04(d), the obligation to pay all Property Costs;

 

(ii)                                  The obligation to perform all express obligations and covenants under the terms of the Leases, the Easements and the Contracts and any implied obligations and covenants under the Leases;

 

(iii)                               The obligation to pay all Burdens, rentals, shut-in payments, and other burdens or encumbrances to which the Mineral Assets are subject; and

 

(iv)                              The obligation to comply with all applicable laws, ordinances, rules, orders, and regulations pertaining to the Mineral Assets.

 

(b)                                 All obligations, liabilities, and duties with respect to plugging, abandonment, surface restoration, and site clearance operations relating to the Mineral Assets, and all required remediation relating to the Mineral Assets, all in accordance with applicable laws,  whether arising before, on or after the Effective Time, REGARDLESS OF WHETHER RESULTING FROM ANY SOLE OR CONCURRENT NEGLIGENT ACTS OR OMISSIONS OR STRICT LIABILITY OF ANY SELLER INDEMNITEES, OR BUYER, OR THE CONDITION OF THE MINERAL ASSETS WHEN ACQUIRED;

 

(c)                                  All obligations, liabilities and duties with respect to the environmental condition of the Mineral Assets, the compliance of the Mineral Assets or the operation thereof with Environmental Laws or the presence, release, disposal or storage of pollution, contamination, hazardous substances, wastes, materials and products by or in connection with the Mineral Assets, whether arising before, on or after the Effective Time, and REGARDLESS OF WHETHER RESULTING FROM ANY SOLE OR CONCURRENT NEGLIGENT ACTS OR OMISSIONS OR STRICT LIABILITY OF ANY SELLER INDEMNITEES, OR BUYER,

 

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OR THE CONDITION OF THE MINERAL ASSETS WHEN THE INTERESTS WERE ACQUIRED, INCLUDING, WITHOUT LIMITATION, CLEAN-UP RESPONSES, REMEDIATION, CONTROL, ASSESSMENT, AND COMPLIANCE WITH RESPECT TO AIR, WATER, SURFACE, OR SUBSURFACE POLLUTION, AND OTHER OBLIGATIONS, LIABILITIES, AND DUTIES RELATING TO THE PRESENCE OR RELEASE OF POLLUTION OR CONTAMINATION, INCLUDING POLLUTION OR CONTAMINATION BY OIL AND GAS, BRINE, NORM OR OTHER MATERIALS OR THE RELEASE OR DISPOSAL OF ANY HAZARDOUS SUBSTANCES, WASTES, MATERIALS AND PRODUCTS GENERATED BY OR USED IN CONNECTION WITH THE OWNERSHIP OR OPERATION OF THE MINERAL ASSETS;

 

(d)                                 All third party Claims, demands, violations, actions, assessments, penalties, fines, costs, expenses, obligations or other liabilities with respect to the ownership, operation or maintenance of any of the Mineral Assets attributable to periods whether arising before, on or after the Effective Time subject to Section 4.04 (Allocation of Revenues and Expenses), REGARDLESS OF WHETHER RESULTING FROM ANY SOLE OR CONCURRENT NEGLIGENT ACTS OR OMISSIONS OR STRICT LIABILITY OF ANY SELLER INDEMNITEES, OR BUYER, OR THE CONDITION OF THE MINERAL ASSETS WHEN ACQUIRED; and

 

(e)                                  All Claims, losses, liabilities, demands, costs and expenses arising out of, incident to or in connection with the accounting for, failure to pay or the incorrect payment to any royalty owner, overriding royalty owner, working interest owner or other interest holder under the Lands and/or Units comprising a part of the Mineral Assets insofar as the same are attributable to

periods and Hydrocarbons produced and marketed with respect to the Mineral Assets whether arising before, on or after the Effective Time, REGARDLESS OF WHETHER RESULTING FROM ANY SOLE OR CONCURRENT NEGLIGENT ACTS OR OMISSIONS OR STRICT LIABILITY OF ANY SELLER INDEMNITEES, OR BUYER, OR THE CONDITION OF THE MINERAL ASSETS WHEN ACQUIRED; provided that notwithstanding anything to the contrary in this Agreement, the Assumed Obligations shall not include any liabilities, costs, expenses, duties and obligations for which the Seller is obligated to indemnify the Buyer pursuant to Section 14.03.

 

Section 14.02                     Additional Indemnification and Release by Buyer. Subject to Seller’s indemnity obligations under Section 14.03, Buyer shall assume, release, indemnify, defend and hold Seller Indemnitees harmless from and against any and all Claims arising out of:

 

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(a)                                 Any misrepresentation or breach of any representation or warranty, of Buyer contained in this Agreement or in the certificate delivered at Interim Settlement;

 

(b)                                 Any failure of Buyer to perform any of its covenants or obligations contained in this Agreement;

 

(c)                                  The Assumed Obligations; and

 

(d)                                 Any violation of Environmental Laws, whether arising out of  or relating to any release of materials into the environment or protection of human health, safety, natural resources or the environment, or any other environmental condition of the Mineral Assets.

 

IN EACH CASE, WHETHER KNOWN OR UNKNOWN, WHETHER NOW EXISTING OR ARISING IN THE FUTURE, CONTINGENT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE MINERAL ASSETS OR THIS AGREEMENT, INCLUDING WITHOUT LIMITATION CLAIMS ARISING OUT OF OR INCIDENT TO ENVIRONMENTAL LAWS, ENVIRONMENTAL LIABILITIES, THE RELEASE OF MATERIALS INTO THE ENVIRONMENT OR PROTECTION OF HUMAN HEALTH, SAFETY, NATURAL RESOURCES OR THE ENVIRONMENT, INCLUDING, WITHOUT LIMITATION, RIGHTS TO CONTRIBUTION UNDER THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION, AND LIABILITY ACT OF 1980, AS AMENDED, REGARDLESS OF THE SOLE OR CONCURRENT NEGLIGENT ACTS OR OMISSIONS OR STRICT LIABILITY OF ANY SELLER INDEMNITEES OR ANY OTHER LEGAL FAULT OF THE SELLER INDEMNITEES (INCLUDING PRE-EXISTING DEFECTS OR OTHER CONDITIONS OF THE MINERAL ASSETS).

 

SUBJECT TO SELLER’S INDEMNITY OBLIGATION SET OUT IN Section 14.03, BUYER RELEASES, REMISES AND FOREVER DISCHARGES SELLER INDEMNITEES FROM ANY AND ALL CLAIMS, KNOWN OR UNKNOWN, WHETHER NOW EXISTING OR ARISING IN THE FUTURE, CONTINGENT OR OTHERWISE, WHICH BUYER MIGHT NOW OR SUBSEQUENTLY MAY HAVE AGAINST SELLER INDEMNITEES, RELATING DIRECTLY OR INDIRECTLY TO THE MINERAL ASSETS, THIS AGREEMENT (INCLUDING WITHOUT LIMITATION CLAIMS ARISING OUT OF OR INCIDENT TO ENVIRONMENTAL LAWS), ENVIRONMENTAL LIABILITIES, THE RELEASE OF MATERIALS INTO THE ENVIRONMENT OR PROTECTION OF HUMAN HEALTH, SAFETY, NATURAL RESOURCES OR THE ENVIRONMENT (INCLUDING, WITHOUT LIMITATION, RIGHTS TO CONTRIBUTION UNDER THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION, AND LIABILITY ACT OF 1980, AS AMENDED), REGARDLESS OF THE SOLE OR CONCURRENT NEGLIGENT ACTS OR OMISSIONS OR STRICT LIABILITY OF ANY SELLER INDEMNITEES OR ANY OTHER LEGAL FAULT OF THE SELLER INDEMNITEES (INCLUDING PRE-EXISTING DEFECTS OR OTHER CONDITIONS OF THE MINERAL ASSETS).

 

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Section 14.03                     Indemnification by Seller.

 

(a)                                 Seller shall release, indemnify, defend and hold Buyer Indemnitees harmless from and against any and all Claims (individually a “Buyer’s Indemnified Claim” and collectively “Buyer’s Indemnified Claims”) arising out of:

 

(i)                                     Any misrepresentation or breach of representation or warranty of Seller contained in this Agreement or in the certificate delivered on the Execution Date;

 

(ii)                                  Any failure of Seller to perform any of its covenants or obligations contained in this Agreement; and

 

(iii)                               The Excluded Assets.

 

(b)                                 In the event of any breach by Seller of Seller’s representation and warranty in Section 8.01(h) and in addition to Buyer Indemnitees’ rights to indemnity under Section 14.03(a) or otherwise under this Agreement or applicable law:

 

(i)                                     at Buyer’s election in its sole discretion, Buyer may cause the Asset Companies to transfer and assign the Mineral Asset that is subject to the investigation or the enforcement, clean-up, removal, remediation, mitigation, or other claim or proceeding referenced in Section 8.01(h), or that is subject to the material environmental permit not held by Asset Companies or the proceeding pending to revoke an environmental permit referenced in Section 8.01(h)(ii) (the “Affected Mineral Asset”), to Seller or its designee and Seller shall accept such transfer and assignment, and

 

(ii)                                  Seller shall indemnify Buyer Indemnitees from and against any violation of Environmental Laws, whether arising out of or relating to any release of materials into the environment or protection of human health, safety, natural resources or the environment, or any other environmental condition of the Affected Mineral Asset WHETHER KNOWN OR UNKNOWN, WHETHER NOW EXISTING OR ARISING IN THE FUTURE, CONTINGENT OR OTHERWISE, WHICH BUYER MIGHT NOW OR SUBSEQUENTLY MAY HAVE AGAINST SELLER INDEMNITEES, SOLELY TO THE EXTENT ARISING DIRECTLY FROM THE BREACH OF THE SPECIFIC REPRESENTATION IN SCHEDULE 8.01(h), INCLUDING WITHOUT LIMITATION CLAIMS ARISING OUT OF OR INCIDENT TO ENVIRONMENTAL LAWS, ENVIRONMENTAL LIABILITIES, THE RELEASE OF MATERIALS INTO THE ENVIRONMENT OR PROTECTION OF HUMAN HEALTH, SAFETY, NATURAL RESOURCES OR THE ENVIRONMENT, INCLUDING, WITHOUT LIMITATION, RIGHTS TO CONTRIBUTION UNDER THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION, AND LIABILITY ACT OF 1980, AS AMENDED,

 

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REGARDLESS OF THE SOLE OR CONCURRENT NEGLIGENT ACTS OR OMISSIONS OR STRICT LIABILITY OF ANY BUYER INDEMNITEES OR ANY OTHER LEGAL FAULT OF THE BUYER INDEMNITEES (INCLUDING PRE-EXISTING DEFECTS OR OTHER CONDITIONS OF SUCH MINERAL ASSETS); PROVIDED, HOWEVER, IN THE EVENT OF THE NECESSITY TO REMEDIATE OR OTHERWISE CURE AN ENVIRONMENTAL DEFECT RELATED TO AN AFFECTED MINERAL ASSET, THE OBLIGATION OF THE SELLER SHALL BE LIMITED TO THAT AMOUNT NECESSARY TO REMEDIATE OR OTHERWISE CURE SUCH ENVIRONMENTAL DEFECT IN THE MOST COST-EFFECTIVE MANNER REASONABLY AVAILABLE AND CONSISTENT WITH COMMON INDUSTRY PRACTICES.

 

Section 14.04                     Limitation and Scope on Indemnity Obligations.

 

(a)                                 Notwithstanding anything in this Agreement to the contrary, (i) Seller shall not be obligated to indemnify Buyer Indemnitees under Section 14.03(a) or Section 14.03(b) until the aggregate of all of Buyer’s Indemnified Claims allowed under Section 14.03(a) and Section 14.03(b) exceeds TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000.00) (the “Indemnity Threshold”). If the Indemnity Threshold is exceeded, then Seller will be responsible for only the amount in excess of the Indemnity Threshold.

 

(b)                                 IN NO EVENT SHALL SELLER’S AGGREGATE LIABILITY ARISING OUT OF OR RELATED TO BUYER’S INDEMNIFIED AND RELEASED CLAIMS UNDER Section 14.03 EXCEED EIGHT MILLION FIVE HUNDRED SIXTY THOUSAND DOLLARS ($8,560,000) (THE “INDEMNITY CAP”), AND BUYER HEREBY (i) WAIVES, RELEASES AND FOREVER DISCHARGES SELLER INDEMNITEES FROM ALL CLAIMS FOR DAMAGES IN EXCESS OF THE INDEMNITY CAP, AND (ii) AGREES TO ASSUME, PERFORM, PAY AND DISCHARGE AND DEFEND, INDEMNIFY AND HOLD SELLER INDEMNITEES HARMLESS FROM AND AGAINST ALL DAMAGES IN EXCESS OF THE INDEMNITY CAP.

 

(c)                                  THE FOREGOING ASSUMPTIONS AND INDEMNIFICATIONS IN THIS Section 14.04 and throughout ARTICLE 14 SHALL APPLY WHETHER OR NOT SUCH DUTIES, OBLIGATIONS OR LIABILITIES, OR SUCH CLAIMS, ACTIONS, CAUSES OF ACTION, LIABILITIES, DAMAGES, LOSSES, COSTS OR EXPENSES ARISE OUT OF, ARE RELATED TO, OR ARE IN CONNECTION WITH THE (i) NEGLIGENCE (INCLUDING SOLE NEGLIGENCE, SIMPLE NEGLIGENCE, CONCURRENT NEGLIGENCE, ACTIVE OR PASSIVE NEGLIGENCE) OR (ii) STRICT LIABILITY OR OTHER LEGAL FAULT OF ANY SELLER INDEMNITEE BUT SUBJECT TO THE PROVISIONS OF Section 14.07 LIMITING THE REMEDIES UNDER THIS AGREEMENT.

 

Section 14.05                     Survival of Provisions. Each of the survival periods specified in this Section 14.05 is referred to as the “Survival Period”.

 

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(a)                                 Representations and Warranties; Covenants and Agreements. Except with respect to Section 7.01(e) and Section 8.01(i), which shall terminate sixty (60) days after the expiration of the applicable statute of limitations, the representations and warranties of the Parties herein shall survive the Execution Date and terminate eighteen (18) months thereafter. Representations, warranties, covenants and agreements shall be of no further force and effect after the date of their expiration, provided that there shall be no termination of any bona fide Claim asserted pursuant to this Agreement with respect to the breach of such a representation, warranty, covenant or agreement on or before its expiration date.

 

(b)                                 Indemnities. The indemnities and related obligations in Section 14.02(a) and Section 14.03(a)(i) shall terminate as of the termination date of each respective representation, warranty, covenant or agreement that is subject to indemnification, except in each case as to claims asserted pursuant to this Agreement with respect to the breach of such representation, warranty, covenant or agreement on or before such termination date. Seller’s and Buyer’s other indemnities and related obligations in Section 14.02 and Section 14.03 shall each survive the Execution Date without limitation as to time. The indemnity and related obligations for which a timely and valid notice of claims is made pursuant to Section 14.06 shall continue for so long as the basis underlying such notice continues and until all related claims have been resolved.

 

Section 14.06                     Notice of Claim. If indemnification pursuant to Section 14.02 or Section 14.03 is sought, the Party or other person or entity seeking indemnification (the “Indemnitee”) shall give written notice to the indemnifying Party during the applicable Survival Period of an event giving rise to the obligation to indemnify, describing in reasonable detail the factual basis for such claim, and shall allow the indemnifying Party to assume and conduct the defense of the claim or action with counsel reasonably satisfactory to the Indemnitee, and shall cooperate with the indemnifying Party in the defense thereof; provided, however, that the omission to give such notice to the indemnifying Party shall not relieve the indemnifying Party from any liability which it may have to the Indemnitee, except to the extent that the indemnifying Party is prejudiced by the failure to give such notice and as otherwise provided in Section 14.05. The Indemnitee shall have the right to employ separate counsel to represent the Indemnitee if the Indemnitee is advised by counsel that an actual conflict of interest makes it advisable for the Indemnitee to be represented by separate counsel and the reasonable expenses and fees of such separate counsel shall be paid by the indemnifying Party.

 

Section 14.07                     Exclusive Remedy Except for Fraud and Similar Matters. THE INDEMNITY AND OTHER OBLIGATIONS SET FORTH IN Section 14.01, Section 14.02 and Section 14.03 ARE THE EXCLUSIVE REMEDIES OF EACH PARTY AGAINST THE OTHER PARTY FOR BREACH OF ANY REPRESENTATION, WARRANTY, COVENANT OR OBLIGATION SET FORTH IN THIS AGREEMENT, OR ANY CLAIM ARISING OUT OF,

 

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RESULTING FROM OR RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AND EACH PARTY HEREBY RELEASES, WAIVES AND DISCHARGES, AND COVENANTS NOT TO SUE (AND SHALL CAUSE ITS AFFILIATES TO RELEASE, WAIVE, DISCHARGE AND COVENANT NOT TO SUE) WITH RESPECT TO ANY CLAIMS NOT EXPRESSLY PROVIDED FOR IN Section 14.01, Section 14.02 and Section 14.03, INCLUDING CLAIMS UNDER STATE OR FEDERAL SECURITIES LAWS AND CLAIMS AVAILABLE AT COMMON LAW, IN EQUITY OR BY STATUTE, BUT IN ALL CASES AND NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS AGREEMENT, EXPRESSLY NOT INCLUDING INTENTIONAL FRAUD, CRIMINAL ACTIVITY, GROSS NEGLIGENCE OR WILLFUL OR INTENTIONAL MISCONDUCT.  NOTHING IN THIS AGREEMENT SHALL LIMIT ANY PERSON’S RIGHT TO SEEK AND OBTAIN ANY EQUITABLE RELIEF OR OTHER REMEDY TO WHICH ANY PERSON SHALL BE ENTITLED ON ACCOUNT OF ANY PARTY’S INTENTIONALLY FRAUDULENT, CRIMINAL OR INTENTIONAL MISCONDUCT.

 

Section 14.08                     Tax Characterization of Indemnification Payments. Any indemnity payment made under this Agreement shall be treated for all U.S. federal and applicable state income tax purposes as an adjustment to the Purchase Price unless otherwise required by applicable laws.

 

ARTICLE 15 
 MISCELLANEOUS

 

Section 15.01                     Confidentiality. Upon the Execution Date, the Confidentiality Agreement shall be deemed terminated.

 

Section 15.02                     Notice. Any notice, request, demand, or consent required under this Agreement shall be in writing and delivered in person or by certified mail, with return receipt requested, by prepaid overnight delivery service, or by facsimile addressed to the Party for whom the notice is intended at the following addresses:

 

	
SELLER:
    	
Forestar (USA) Real Estate Group Inc.
    
	
 
    	
Attn:
    	
Charles D. Jehl
    
	
 
    	
Chief Financial Officer
    
	
 
    	
 
    
	
Address:
    	
6300 Bee Cave Road
    
	
 
    	
Building Two, Suite 500
    
	
 
    	
Austin, TX 78746-5149
    
	
Tel:
    	
(512) 433-5229
    
	
Fax:
    	
(512) 433-5203
    

 

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With a copy to:
    	
Forestar (USA) Real Estate Group Inc.
    
	
 
    	
Attn:
    	
David M. Grimm
    
	
 
    	
Executive VP, General Counsel, and Secretary
    
	
 
    	
 
    
	
Address:
    	
6300 Bee Cave Road
    
	
 
    	
Building Two, Suite 500
    
	
 
    	
Austin, TX 78746-5149
    
	
Tel:
    	
(512) 433-5223
    
	
Fax:
    	
(512) 433-5203
    

 

	
With a copy to:
    	
Liskow & Lewis
    
	
 
    	
Attn:
    	
Marilyn C. Maloney
    
	
 
    	
Shareholder
    
	
 
    	
 
    
	
Address:
    	
1001 Fannin, Suite 1800
    
	
 
    	
Houston, TX 77002
    
	
Tel:
    	
(713) 651-2938
    
	
Fax:
    	
(713) 651-2908
    

 

	
BUYER:
    	
Mineral Resources Partners, LLC
    
	
 
    	
25025 I45 North, Suite 420
    
	
 
    	
The Woodlands, TX 77380
    
	
 
    	
 
    
	
Attn:
    	
Phil Mulacek, Chief Executive Officer
    
	
 
    	
David DeMarco, Director-Business Development
    
	
Tel:
    	
(281) 364 7800
    
	
Fax:
    	
(281) 364 0060
    

 

	
With a copy to:
    	
David Z. Vance, JD, CFA
    
	
 
    	
Upstream Counsel
    
	
 
    	
 
    
	
Address:
    	
Asian Oil & Gas Pte Ltd.
    
	
 
    	
350 Orchard Road, Shaw House #15-08/10
    
	
 
    	
Singapore 238868
    
	
Tel:
    	
+65 6697 5906
    
	
Fax:
    	
+65 6735 3580
    

 

or at such other address as any of the above shall specify by like notice to the other.

 

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Section 15.01       Press Releases and Public Announcements. No Party shall issue any press release or make any public announcement relating to the subject matter of this Agreement without the prior written approval of the other Party; provided, however, that any Party may make any public disclosure it believes in good faith is required by applicable law or any listing or trading agreement concerning its or its Affiliates’ publicly-traded securities (in which case the disclosing Party shall use all reasonable efforts to advise the other Party, and give the other Party an opportunity to comment on the proposed disclosure, prior to making the disclosure).

 

Section 15.02       Compliance with Express Negligence Rule. THE PARTIES AGREE THAT, EXCEPT AS MAY OTHERWISE BE EXPRESSLY PROVIDED HEREIN, THE INDEMNIFICATION OBLIGATIONS OF THE INDEMNIFYING PARTY SHALL BE WITHOUT REGARD TO THE NEGLIGENCE OR STRICT LIABILITY OF THE INDEMNIFIED PERSON(S), WHETHER THE NEGLIGENCE OR STRICT LIABILITY IS ACTIVE, PASSIVE, JOINT, CONCURRENT OR SOLE.

 

Section 15.03       Governing Law; Venue. This Agreement, and all actions, causes of action, or claims of any kind (whether at law, in equity, in contract, in tort, or otherwise) that may be based upon, arise out of, or relate to this Agreement, or the negotiation, execution, or performance of this Agreement (including any action, cause of action, or claim of any kind based upon, arising out of, or related to any representation or warranty made in, in connection with, or as an inducement to this Agreement) shall be governed by and construed in accordance with the law of the State of Texas, including without limitation Texas laws relating to applicable statutes of limitation and burdens of proof and available remedies, excluding any conflicts-of-law rule or principle that might apply the law of another jurisdiction.

 

THE PARTIES VOLUNTARILY AND IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS LOCATED IN MONTGOMERY COUNTY AND THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA LOCATED IN HARRIS COUNTY, TEXAS, OVER ANY DISPUTE BETWEEN OR AMONG THE PARTIES RELATED TO OR ARISING OUT OF THIS AGREEMENT, AND EACH PARTY IRREVOCABLY AGREES THAT ALL SUCH CLAIMS IN RESPECT OF SUCH DISPUTE SHALL BE HEARD AND DETERMINED EXCLUSIVELY IN SUCH COURTS. THE PARTIES HEREBY IRREVOCABLY CONSENT TO THE JURISDICTION OF SUCH COURTS AND HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH DISPUTE RELATED TO OR ARISING OUT OF THIS AGREEMENT BROUGHT IN SUCH COURT OR ANY DEFENSE OF INCONVENIENT FORUM FOR THE MAINTENANCE OF SUCH DISPUTE. EACH PARTY AGREES THAT A JUDGMENT IN ANY SUCH DISPUTE MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.

 

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Section 15.04       Section 18.06  Exhibits and Schedules. The Exhibits and Schedules attached to this Agreement are incorporated into and made a part of this Agreement.

 

Section 15.05       Fees, Expenses, and Recording.

 

(a)           Except for the fees of any escrow agents serving pursuant to any provision of this Agreement which, net of any investment earnings shall be borne 50% by Seller and 50% by Buyer, and as otherwise provided in this Agreement, each Party shall be solely responsible for all costs and expenses incurred by it in connection with this transaction (including, but not limited to fees and expenses of its counsel and accountants) and shall not be entitled to any reimbursements from the other Party, except as otherwise provided in this Agreement.

 

(b)           Buyer shall, at its own cost, promptly and in any event within two (2) Business Days after the Execution Date, record amendments to the LLC Agreement and the LP Agreement executed on the Execution Date with the Office of the Secretary of State of the State of Delaware and in each other jurisdiction in which a Company is licensed or qualified and shall provide prompt evidence of such filing to Seller.

 

Section 15.06       Assignment. Neither this Agreement nor any part hereof may be assigned by either Party without the prior written consent of the other Party and any transfer in absence of such consent shall be null and void. After the Execution Date, any permitted assignment of this Agreement by a Party shall not relieve the assigning Party of any of its obligations and responsibilities to the non-assigning Party unless expressly released from same in writing by the non-assigning Party. Subject to the foregoing, this Agreement is binding upon the Parties hereto and their respective successors and assigns. The restrictions on or requirements for assignment in this Section 15.06 shall not limit or apply to Buyer’s (or its successors or assigns) ability to assign all or part of its interest in the Mineral Assets after the Execution Date.

 

Section 15.07       Entire Agreement.  This Agreement and the Assignment constitute the entire agreement reached by the Parties with respect to the subject matter hereof and thereof, superseding all prior negotiations, discussions, agreements and understandings, whether oral or written, relating to such subject matter, except the Confidentiality Agreement shall remain in full force and effect in accordance with its terms.

 

Section 15.08       Severability. In the event that any one or more covenants, clauses or provisions of this Agreement shall be held invalid, illegal or incapable of being enforced, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in a materially adverse manner with respect to either Party.

 

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Section 15.09       Captions . The captions in this Agreement are for convenience only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement.

 

Section 15.10       References. In this Agreement:

 

(a)           References to any gender includes a reference to all other genders;

 

(b)           References to the singular includes the plural, and vice versa;

 

(c)           Reference to any Article or Section means an Article or Section of this Agreement;

 

(d)           Reference to any Exhibit or Schedule means an Exhibit or Schedule to this Agreement, all of which are incorporated into and made a part of this Agreement;

 

(e)           Reference to any agreement, including this Agreement, document or instrument shall include such agreement, document or instrument as amended or modified and in effect from time to time;

 

(f)            Unless expressly provided to the contrary, “hereunder”, “hereof’, “herein” and words of similar import are references to this Agreement as a whole and not any particular Section or other provision of this Agreement; and

 

(g)           “Include” and “including” shall mean include or including without limiting the generality of the description preceding such term.

 

Section 15.11       Counterpart Execution. This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original, and all of which together shall constitute one and the same instrument.

 

Section 15.12       Waiver of Certain Damages. THE INDEMNIFICATION OBLIGATIONS OF THE PARTIES UNDER ARTICLE XVII SHALL BE LIMITED TO ACTUAL LOSSES, AND SHALL NOT INCLUDE, AND EACH OF THE PARTIES HEREBY WAIVES AND AGREES NOT TO SEEK, INCIDENTAL, CONSEQUENTIAL, INDIRECT, PUNITIVE OR EXEMPLARY DAMAGES WITH RESPECT TO ANY CLAIM, CONTROVERSY, OR DISPUTE ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE BREACH THEREOF, PROVIDED, HOWEVER, IN NO EVENT SHALL THIS Section 15.12 BE A LIMITATION ON ANY OBLIGATION OF A PARTY HEREUNDER WITH RESPECT TO DAMAGES AWARDED TO A THIRD PARTY FOR WHICH ONE PARTY HAS AGREED TO INDEMNIFY THE OTHER PARTY UNDER THIS AGREEMENT.

 

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Section 15.13       Construction. Buyer is a party capable of making such investigation, inspection, review and evaluation of the Interests and the Mineral Assets as a prudent purchaser would deem appropriate under the circumstances including with respect to all matters relating to the Mineral Assets, their value, operation and suitability. Each of Seller and Buyer has had substantial input into the drafting and preparation of this Agreement and has had the opportunity to exercise business discretion in relation to the negotiation of the details of the transactions contemplated hereby. This Agreement is the result of arm’s-length negotiations from equal bargaining positions. In the event of a dispute over the meaning or application of this Agreement, it shall be construed fairly and reasonably and neither more strongly for nor against either Party.

 

Section 15.14       No Third-Party Beneficiaries. Nothing in this Agreement shall entitle any person other than Buyer and Seller to any Claims, remedy or right of any kind, except as to those rights expressly provided to Seller Indemnitees and Buyer Indemnitees, but only in those instances where such indemnitees are expressly referenced.

 

Section 15.15       Amendments and Waivers. This Agreement may not be modified or amended except by an instrument in writing signed by both Parties. Any Party hereto may, only in writing, waive compliance by another Party with any term or provision of this Agreement on the part of such other Party hereto to be performed or complied with. The waiver by any Party hereto of a breach of any term or provision of this Agreement shall not be construed as a waiver of any subsequent breach.  No waiver of any right under this Agreement shall be binding unless executed in writing by the Party to be bound thereby.

 

Section 15.16       Further Assurances. At the Interim Settlement, and thereafter as may be necessary, Seller and Buyer shall execute and deliver such other instruments and documents and take such other actions as may be reasonably necessary to evidence and effectuate the transactions contemplated by this Agreement, including in the event that the language, Exhibits, and/or Schedules that define the Mineral Assets, in whole or in part, conflicts with or does not fully effectuate the intentions of the Parties.

 

Section 15.17       Conflict Waiver; Attorney-Client Privilege.

 

(a)           Each of the Parties hereto acknowledges and agrees, on its own behalf and on behalf of its directors, members, shareholders, partners, officers, employees and Affiliates, that:

 

(i)            Liskow & Lewis, A Professional Law Corporation has acted as counsel to Seller and its Affiliates (individually and collectively, the “Seller Group”), and the Group Companies in connection with the negotiation, preparation, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. Buyer agrees, and shall cause the Companies to agree, that,

 

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following consummation of the transactions contemplated hereby, such representation and any prior representation of the Companies by Liskow & Lewis, A Professional Law Corporation (or any successor) (the “Seller Group Law Firm”) shall not preclude Seller Group Law Firm from serving as counsel to the Seller Group or any director, member, shareholder, partner, officer or employee of the Seller Group, in connection with any litigation, claim or obligation arising out of or relating to this Agreement or the transactions contemplated hereby.

 

(ii)           Buyer shall not, and shall cause the Group Companies not to, seek or have Seller Group Law Firm disqualified from any such representation based upon the prior representation of the Companies by Seller Group Law Firm. Each of the Parties hereto hereby consents thereto and waives any conflict of interest arising from such prior representation, and each of such parties shall cause any of its Affiliates to consent to waive any conflict of interest arising from such representation. Each of the parties acknowledges that such consent and waiver is voluntary, that it has been carefully considered, and that the parties have consulted with counsel or have been advised they should do so in connection herewith. The covenants, consent and waiver contained in this Section 15.17(a) shall not be deemed exclusive of any other rights to which the Seller Group Law Firm is entitled whether pursuant to law, contract or otherwise.

 

(b)           All communications between the Seller Group or the Group Companies, on the one hand, and Seller Group Law Firm, on the other hand, relating to the negotiation, preparation, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby (the “Privileged Communications”) shall be deemed to be attorney-client privileged and the expectation of client confidence relating thereto shall belong solely to the Seller Group and shall not pass to or be claimed by Buyer or the Group Companies. Accordingly, Buyer and the Group Companies shall not have access to any Privileged Communications or to the files of Seller Group Law Firm relating to such engagement from and after the Execution Date. Without limiting the generality of the foregoing, from and after the Execution Date, (i) the Seller Group (and not Buyer or the Group Companies) shall be the sole holders of the attorney-client privilege with respect to such engagement, and none of Buyer or the Group Companies shall be a holder thereof, (ii) to the extent that files of Seller Group Law Firm in respect of such engagement constitute property of the client, only the Seller Group (and not Buyer nor the Group Companies) shall hold such property rights and (iii) Seller Group Law Firm shall have no duty whatsoever to reveal or disclose any such attorney-client communications or files to Buyer or the Group Companies by reason of any attorney-client relationship between Seller Group Law Firm and the Group Companies or otherwise. Notwithstanding the foregoing, in the event that a dispute arises between Buyer or its Affiliates (including the Group Companies), on the one hand, and a third party other than any of the Seller Group, on the other hand, Buyer and its Affiliates (including the Group Companies) may assert the attorney-client privilege to prevent disclosure of confidential communications to such third party;

 

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provided, however, that neither Buyer nor any of its Affiliates (including the Group Companies) may waive such privilege without the prior written consent of the Seller Group, which consent shall not be unreasonably withheld, conditioned or delayed. In the event that Buyer or any of its Affiliates (including the Group Companies) is legally required by Governmental Order or otherwise legally required to access or obtain a copy of all or a portion of the Privileged Communications, to the extent (x) permitted by applicable law, and (y) advisable in the opinion of Buyer’s counsel, then Buyer shall immediately (and, in any event, within five (5) Business Days) notify Seller in writing so that Seller can seek a protective order.

 

(c)           This Section is intended for the benefit of, and shall be enforceable by, the Seller Group Law Firm. This Section shall be irrevocable, and no term of this Section may be amended, waived or modified, without the prior written consent of the Seller Group Law Firm.

 

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Executed on the Execution Date.

 

	
SELLER:
    	
 
    
	
 
    	
 
    
	
FORESTAR   (USA) REAL ESTATE GROUP INC.
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/ Charles D. Jehl
    	
 
    
	
 
    	
 
    
	
Name: Charles D. Jehl
    	
 
    
	
 
    	
 
    
	
Title: CFO
    	
 
    
			

 

	
BUYER:
    	
 
    
	
 
    	
 
    
	
MINERAL   RESOURCES PARTNERS, LLC
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/ Alain Vinson
    	
 
    
	
 
    	
 
    
	
Name: Alain Vinson
    	
 
    
	
 
    	
 
    
	
Title: Manager
    	
 
    
			

 

Signature Page

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