Farm exit agreements do not usually exist in a contractual vacuum. If there is more than one owner of an asset, they will usually settle their relationship with that asset under a joint operating agreement. Farm exit agreements should take into account these joint farm agreements (as well as applicable law and any other relevant contracts) and interact appropriately with them in order to avoid inconsistencies and minimise the likelihood of litigation. The foA 2019 model provides that the transfer of agricultural interests will take place after the execution or waiver of the conditions precedent and that the “closing” will take place five working days after the execution or waiver of all conditions precedent. One of the conditions precedent of the 2019 foA model is “obtaining the approval of the government of [●] [in accordance with Article [●] of the Treaty]”[2] – Article 2.3.2(a). Therefore, the timing of the application for regulatory approval should be carefully considered. If the seller or farmer seeks regulatory approval before meeting the other conditions precedent, there is a risk in some jurisdictions that the government will give consent to the assignment, which affects the transfer from the government`s perspective before the other conditions precedent are met; However, in many jurisdictions, the time it takes for a government to approve a transfer can be quite long, so it may not be practical to wait until all other conditions precedent are met. A farmout agreement (also known as a farm agreement or participation agreement) is an agreement to transfer part of the seller`s stake (often referred to as a “farmor” [1]) into an upstream oil and gas granting instrument (for example. B an oil and gas concession, a licence or production sharing agreement, the grant instrument). A farm withdrawal agreement typically provides for consideration consisting of a combination of cash payments and the performance of work obligations. The return on the counterparty`s work aspect makes this type of agreement unique and clearly distinguishes it from a standard purchase agreement where the price is entirely based on cash. In addition, the farm generally presents challenges related to the assessment of historical costs, government approvals for transfers and allocations, the risks of reallocation arising from a buyer`s or farmer`s default, and a wide range of conditions and schedules limited solely by the imagination and creativity of the parties` negotiating teams. Nevertheless, the FOA 2019 model is just a model – a starting point from which the parties can start crafting their agreement.
The sample forms must be commercially and legally adapted for each project and jurisdiction in which the form is used. In June 2019, the appointing authority published the 2019 International Model Agricultural Agreement (the 2019 FOA Model). The FOA 2019 model is a major revision of the 2004 model international agreement on agricultural holdings. I had the honor of being in the front row as co-chair of the 2019 FOA Model Review Committee with Frank Cascio (Barnes & Cascio, retired). Leading the work of a standard contract drafted by a committee is not for the faint of heart; from start to finish, the review took about nine years. The perseverance of the committee has, in my view, provided a much better starting point for negotiators working on a farm trip program. [2] “Contract” is the term defined for the approval instrument in the 2019 FOA model. While reassignment has been discussed and drafted in a variety of ways over the years, including the reallocation of withering interest, escrow agreements and/or termination indemnity, lump sum damages, or a penalty, the 2019 OFA Model Audit Committee decided, for the purposes of the Model Form, to include only provisions for full reassignment.
This appeared to be the standard approach based on the survey of appointing authority members and other discussions at workshops on model granting instruments and meetings of the appointing authority audit committee. Farm exit agreements are used in the oil and gas industry around the world. They reject their name from historical practices in the agricultural sector, where carrying out work on agricultural land would entitle a person to a legal or economic interest in that land. Farm-out agreements are often governed by English law, New York law, or the laws of the jurisdiction in which the assets are located. Darren is a corporate lawyer dedicated to the energy sector. He advises clients on oil and gas M&A transactions throughout the upstream, midstream and downstream value chain, with a particular focus on cross-border transactions, having advised on transactions involving assets in more than 30 jurisdictions. Darren also has experience with commercial agreements related to the oil and gas industry, including production sharing agreements, joint operating agreements, sales and transportation agreements, and joint venture matters. With the release of the 2019 Model International Farmout Agreement, significant industry-wide efforts are being made. Co-chairs Jennifer Josefson (King & Spalding LLP) and Frank Cascio (Barnes & Cascio, retired) and their editorial board have held numerous meetings over the years to prepare for the 2019 review. The editorial board included broad industry participation with over 200 representatives from several continents. A limitation period or a long shutdown date has been included in the FOA 2019 model, which stipulates that all conditions precedent must be met or lifted by the parties on that date and after which, if a condition precedent is not met or is lifted, each party has the right to terminate the agreement.
The parties may wish to limit this right of termination to the extent that the party whose acts or omissions have resulted in non-compliance with a condition precedent does not have the right to terminate the contract for non-performance of that condition precedent. If such approval is not granted before the transfer of farmout shares, the transfer will generally become invalid and, in many cases, the grant instrument will also be terminated. The requirement to obtain government approval for a transfer should be carefully considered by the parties. In some jurisdictions, such as . B Nigeria, even the conditional transfer agreement under an agricultural exit programme could be seen as a violation of the government`s right to grant the permit and compromise the instrument of granting. Model agreements such as the new appointing aisle model for international farm exit agreements can be a very useful tool and a useful starting point to assist the parties in efficient and effective negotiations. In our experience, farm agreements and other types of sales and purchase agreements can become tailor-made and highly customized agreements that are carefully designed to adapt to the particular circumstances of each transaction. .
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