ITEM 1.01. Entry into a Material Definitive Agreement
On February 1, 2013, Constellation Energy Partners LLC (the Company) entered into a Membership Interest Purchase and Sale
Agreement (the Agreement) with Castleton Commodities Upstream LLC (CCI). Pursuant to the Agreement, the Company has agreed to sell to CCI all of its equity interests in Robinsons Bend Production II, LLC and
Robinsons Bend Operating II, LLC, which entities own all of the Companys operating assets in the Robinsons Bend field. The purchase price is $63,000,000 plus adjustments for income and expenses relating to operating the
Robinsons Bend assets since December 1, 2012 (the Effective Time), assumed obligations relating to the entities assets (including plugging and abandonment expenses, certain environmental costs, royalty obligations, lease
obligations and liabilities under certain leases and contracts), certain post-closing environmental costs anticipated to be incurred by CCI, and any title defects and benefits. CCI is required to place into escrow a deposit in the amount of
$3,150,000.
The Agreement contains customary representations and warranties of the parties, including those relating to due
authorization, ownership of the equity interests, conflicts, litigation, financial statements, liabilities, absence of changes, taxes, material contracts, employee matters, compliance with laws, insurance, bonds, environmental matters, payment of
royalties, capital commitments, hydrocarbons and wells. Prior to closing, the Company is generally required to operate the Robinson Bend assets in the ordinary course of business, subject to certain customary limitations.
The closing is anticipated to occur on February 28, 2013, subject to satisfaction of the conditions precedent, which include
accuracy of representations and warranties, material compliance with all covenants in the Agreement, no legal proceedings prohibiting consummation of the transaction, and all consents and approvals having been obtained. The Agreement can be
terminated by (a) mutual consent of the parties, (b) CCI if the Company has materially breached the Agreement, (c) the Company if CCI has materially breached the Agreement, (d) either party if a final order has been entered by a
governmental entity prohibiting consummation of the transaction, (e) either party if the closing has not occurred by March 15, 2013, (f) either party if the net value of the title defects and benefits is greater than $9,450,000, or
(g) the Company if the deposit has not been delivered to the escrow agent. If the Agreement is terminated pursuant to clause (a), (b), (d), (e) (if the Company could not then terminate the Agreement under clause (c)) or (f), then the
deposit will be returned to CCI; if the Agreement is terminated pursuant to clause (c) or (e) (if the Company could have terminated the Agreement under clause (c)), then the deposit will be delivered to the Company.
Pursuant to the Agreement, the Company has agreed to indemnify CCI for losses arising from breaches of representations, warranties and
covenants; certain specified legal proceedings; hazardous substances disposed off-site prior to closing; excluded assets; operational costs incurred prior to the Effective Time; underpayments of royalties attributable to sales of hydrocarbons prior
to the closing. CCI has agreed to indemnity the Company for losses arising from breaches of representations, warranties and covenants; the assumed obligations; and the ownership and operation of the Robinson Bend assets (except to the extent
indemnified by the Company). Subject to certain exceptions, the maximum indemnification amount is generally $9,450,000 after a $945,000 deductible.
The foregoing description of the Agreement is a summary and is qualified in its entirety by the actual Agreement.