3. Preferential Rights to Purchase

Preferential Rights to Purchase

Both Buyers and Sellers should examine any rights of first refusal, tag along or other preferential rights that third parties may own with respect to the subject assets. In oil and gas related assets, these rights are often included in operating, participation and joint venture agreements. The Seller is likely in the best position to determine whether any such rights exist and, as such, is often required to represent and warrant that no such rights exist or, if they do exist, that they are disclosed to the Buyer and that the appropriate third parties received all requisite consents or notices of the current transaction pursuant to such rights. Identifying and evaluating these rights early in the negotiations will reduce the risk of a delayed closing or a significant change in the assets that may be purchased by the Buyer.

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