SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
November 1, 1999
DELTA PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
Colorado 0-16203 84-1060803
(State of Commission (I.R.S. Employer
Incorporation) File No. Identification No.)
Suite 3310
555 17th Street
Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 293-9133
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On November 1, 1999 the Company completed the acquisition of
interests in eleven producing wells and associated acreage in New
Mexico and Texas from Whiting Petroleum Corporation for a purchase
price of $2.88 million pursuant to a negotiated sale which resulted in
a Purchase and Sale Agreement dated October 13, 1999. A copy of the
October 13, 1999 Purchase and Sale Agreement, without exhibits, is
attached hereto as Exhibit 99.1. The Company borrowed the funds used
to purchase the properties from Grandhaven, LLC under a Promissory
Note secured by the acquired properties dated November 1, 1999 in the
principal amount of $2,816,851. The Company's officers provided their
personal guarantees for the loan. The Promissory Note and Security
Agreement are attached as Exhibit 99.2. In connection with the
personal guarantee of its officers, the Company entered into an
agreement dated November 1, 1999 with its officers under which a 1%
overriding royalty interest (proportionately reduced to the interest
in each property acquired by the Company for Whiting) will be assigned
to each of the two officers. Assignments of the overrides will not be
made until appropriate consents to such assignments have been obtained
from third parties as may be required under various agreements to
which the Company is a party or until after such consents are no
longer required. The November 1, 1999 agreement between the officers
and the Company also provided that if financing in the form of equity
or debt which effectively eliminates the personal liability of each of
the officers for the $2,816,851 loan from Grandhaven, LLC to Delta is
not obtained by December 1, 1999, then the officers will have the
right to cause the properties acquired under the October 13, 1999
agreement to be assigned to the officers, subject to the remaining
balance owed upon the loan. A copy of the November 1, 1999 agreement
between the Company and its officers is attached as Exhibit 99.3.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Proforma Financial information and any exhibits required
will be filed by amendment to this Form 8-K within sixty (60) days.
99.1 Purchase and Sale Agreement dated October 13, 1999 between
Whiting Petroleum Corporation and Delta Petroleum
Corporation.
99.2 Promissory Note and Security Agreement dated November 1, 1999.
99.3 Agreement between Delta Petroleum Corporation, Roger A. Parker
and Aleron H. Larson, Jr. dated November 1, 1999.
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
DELTA PETROLEUM CORPORATION
(Registrant)
Date: November 11, 1999 By: s/Aleron H. Larson, Jr.
Aleron H. Larson, Jr.
Chairman/C.E.O.
INDEX TO EXHIBITS
(1) Underwriting Agreement. Not applicable.
(2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or
Succession. Not applicable.
(3) (i) Articles of Incorporation. Not applicable.
(ii) Bylaws. Not applicable.
(4) Instruments Defining the Rights of Security Holders, including
Indentures. Not applicable.
(5) Opinion: re: Legality. Not applicable.
(6) Opinion: Discount on Capital Shares. Not applicable.
(7) Opinion: re: Liquidation Preference. Not Applicable.
(8) Opinion: re: Tax Matters. Not Applicable.
(9) Voting Trust Agreement. Not Applicable.
(10) Material Contracts. Not Applicable.
(11) Statement re: Computation of Per Share Earnings.
Not Applicable.
(12) Statement re: Computation of Ratios. Not Applicable.
(13) Annual Report to Security Holders, etc. Not Applicable.
(14) Material Foreign Patents. Not Applicable.
(15) Letter re: Unaudited Interim Financial Information.
Not Applicable.
(16) Letter re: Change in Certifying Accountant.
Not applicable.
(17) Letter re: Director Resignation. Not applicable.
(18) Letter re: Change in Accounting Principles. Not Applicable.
(19) Report Furnished to Security Holders. Not Applicable.
(20) Other Documents or Statements to Security Holders.
Not applicable.
(21) Subsidiaries of the Registrant. Not Applicable.
(22) Published Report Regarding Matters Submitted to Vote of Security
Holders. Not Applicable.
(23) Consents of Experts and Counsel. Not applicable.
(24) Power of Attorney. Not applicable.
(25) Statement of Eligibility of Trustee. Not Applicable.
(26) Invitations for Competitive Bids. Not Applicable.
(27) Financial Data Schedule. Not Applicable.
(99) Additional Exhibits.
99.1 Purchase and Sale Agreement dated October 13, 1999 between
Whiting Petroleum Corporation and Delta Petroleum
Corporation.
99.2 Promissory Note and Security Agreement dated November 1, 1999.
99.3 Agreement between Delta Petroleum Corporation, Roger A. Parker
and Aleron H. Larson, Jr. dated November 1, 1999.
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (this "Agreement") dated as
of the 13th day of October, 1999, is between WHITING PETROLEUM
CORPORATION, a Delaware corporation ("Seller"), whose address is
1700 Broadway, Suite 2300, Denver, Colorado 80290 and DELTA
PETROLEUM CORPORATION, a Colorado corporation ("Buyer"), whose
address is 3310 Qwest Tower, 555 Seventeenth Street, Denver,
Colorado 80202. Seller and Buyer are referred to herein
individually as a "Party" and collectively as the "Parties."
In consideration of the mutual promises contained herein,
the benefits to be derived by each Party hereunder and other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Buyer and Seller agree as follows:
ARTICLE 1
PURCHASE AND SALE
1.1 Purchase and Sale. Subject to the terms and conditions
of this Agreement, Seller agrees to sell and convey and Buyer
agrees to purchase and pay for all of Seller's right, title and
interest in and to the Interests.
1.2 Interests. All of the following shall be referred to
in this Agreement collectively as the "Interests" and
individually as an "Interest":
(a) The oil and gas wells described on Exhibit "A"
attached hereto (individually, a "Well" and collectively, the
"Wells"), together with all oil, natural gas, casinghead gas,
drip gasoline, natural gas liquids, condensate and other minerals
produced from such Wells.
(b) The oil, gas and mineral leases related to the
Wells, including the leases described on Exhibit "A"
(collectively, the "Leases"), and including, without limitation,
working interests, overriding royalty interests, royalty
interests and any other interests of a similar nature affecting
the lands covered by the Leases (collectively, the "Lands").
(c) All unitization, communitization, pooling,
agreements, working interest units created by operating
agreements, partnership agreements and orders covering the Leases
and Lands, or any portion thereof, and the units and pooled or
communitized areas created thereby (collectively, the "Units").
(d) The tangible personal property, tools, machinery,
materials, pipelines, plants, gathering systems, equipment,
fixtures and improvements, which are incident or attributable to
the Leases, Lands, Wells or Units with the production, treatment,
sale or disposal of hydrocarbons or water produced therefrom or
attributable thereto, on the Effective Time (collectively, the
"Equipment").
(e) The licenses, permits, contracts, agreements and
other instruments owned by Seller (other than bonds posted by
Seller) which concern and relate to any of the Leases, Lands,
Wells, Units and/or Equipment, INSOFAR AND ONLY INSOFAR as same
concern or relate to the Leases, Lands, Wells, Units and/or
Equipment, or the operation thereof; including, without
limitation, oil, gas and condensate purchase and sale contracts;
permits; rights-of-way; easements; licenses; servitudes; estates;
surface leases; farmin and farmout agreements; division orders
and transfer orders; bottomhole agreements; dry hole agreements;
area-of-mutual interest agreements; salt water disposal
agreements; acreage contribution agreements; operating
agreements; balancing agreements and unit agreements; pooling
agreements; pooling orders; communitization agreements;
processing, gathering, compression and transportation agreements;
facilities or equipment leases relating thereto or used or held
for use in connection with the ownership or operation thereof or
with the production, treatment, sale or disposal of hydrocarbons;
and all other contracts and agreements related to the Leases,
Lands, Wells and/or Equipment.
(f) Subject to Section 1.3 below, originals or copies
of all computer tapes and discs, files, records, information or data
relating to the Interests in the possession of Seller, including, without
limitation, title records (including abstracts of title, title
opinions, certificate of title and title curative documents),
accounting records and files, contracts, correspondence,
production records, electric logs, core data, pressure data,
decline curves, graphical production curves, drilling reports,
well completion reports, drill stem test charts and reports,
regulatory reports, and all related materials, INSOFAR AND ONLY
INSOFAR as the foregoing items constitute materials that may be
lawfully conveyed to Buyer (i.e., the materials are not subject
to a proprietary agreement precluding their transfer to Buyer),
and, to the extent transferable, all other contract rights,
intangible rights (excluding Seller's trademarks and service
marks), inchoate rights, choses in action, rights under
warranties made by prior owners, manufacturers, vendors or other
third parties, and rights accruing under applicable statutes of
limitation or prescription, attributable to the Interests.
(g) All payments, and all rights to receive payments, with
respect to the ownership of the production of hydrocarbons from
or the conduct of operations on the Interests accruing after the
Effective Time.
1.3 Reserved Interests. Notwithstanding any provision of
this Agreement to the contrary, Seller reserves and retains (i)
Seller's corporate, financial, tax and legal records and its
other business records; (ii) cash, bank accounts, travel letter
accounts and prepaid insurance; (iii) the management information
systems and other intellectual property rights of Seller used by
Seller in the management and administration of its business; (iv)
all claims that Seller may have under any policy of insurance,
indemnity or bond maintained by Seller other than claims relating
to property damage or casualty loss affecting the Interests
occurring between the Effective Time and Closing (which claims
shall be included in the Interests); (v) all accounts receivable,
trade credits or notes receivable accrued before the Effective
Time; (vi) any files or records that Seller is contractually or
otherwise obligated not to disclose to Buyer; (vii) all claims
and causes of action arising from acts, omissions or events, or
damage or destruction of property occurring prior to the
Effective Time; (viii) engineering studies or reserve reports
relating to the Interests; (ix) utility deposits or utility co-op
shares; and (x) all interests and rights not specifically
included in the definition of the Interests (the "Reserved
Interests").
1.4 Effective Time. The purchase and sale of the Interests
shall be effective as of July 1, 1999, at 7:00 a.m., local time
(herein called the "Effective Time").
1.5 Ownership of the Interests. Subject to the
provisions of this Agreement, should Closing occur, Seller shall
be entitled to all of the rights of ownership (including, without
limitation, the right to all production, proceeds of production
and other proceeds), and shall be subject to the duties and
obligations of such ownership attributable to the Interests for
the period of time prior to the Effective Time and Buyer shall be
entitled to all of the rights of ownership (including, without
limitation, the right to all production, proceeds of production
and other proceeds) and shall be subject to the duties and
obligation of such ownership attributable to the Interests for
the period of time from and after the Effective Time. All
expenses and costs, including, without limitation, all ad
valorem, property, production, severance, and similar taxes and
assessments based upon or measured by the ownership of the
Interests, the production of hydrocarbons, or the receipt of
proceeds therefrom) attributable to the Interests, shall be: (i)
paid by or allocated to Seller if incurred or accruing with
respect to operations conducted prior to the Effective Time; or
(ii) paid by or allocated to Buyer if incurred or accruing with
respect to operations conducted after the Effective Time. All
hydrocarbons in storage facilities above or upstream from the
pipeline connection to each storage facility, or downstream of
delivery point sales meters on gas pipelines, as of the Effective
Time, shall belong to Seller. All of the hydrocarbons placed in
such storage facilities or upstream of the aforesaid meters on
pipelines after the Effective Time shall belong to Buyer and
shall become a part of the Interests. In order to accomplish the
foregoing allocation of production, the parties shall rely upon
the records maintained by the operator of the relevant Interest,
unless such records are demonstrated to be inaccurate.
1.6 Risk of Loss. Seller shall assume all risk of loss
with respect to the Interests prior to Closing and, subject to
the other provisions of this Agreement, Buyer shall assume all
risk of loss from and after the Closing.
ARTICLE 2
PURCHASE PRICE
2.1 Purchase Price. The purchase price for the Interests
shall be Two Million Eight Hundred Seventy-Nine Eight Hundred
Fifty Dollars ($2,879,850), herein called the "Purchase Price".
At Closing, the Purchase Price shall be adjusted as set forth in
Section 2.2 below.
2.2 Adjustments to Purchase Price. At Closing, the
Purchase Price shall be adjusted as follows and the resulting
amount shall be referred to herein as the "Adjusted Purchase
Price":
(a) The Purchase Price shall be adjusted upward by the
following:
i. The amount of all actual operating or capital
expenditures or prepaid expenses attributable
to the Interests paid by or on behalf of
Seller in connection with the operation of
the Interests and which are, according to
generally accepted accounting principles,
attributable to the period of time between
the Effective Time and the Closing Date.
Such expenditures and expenses shall include,
without limitation, royalties, rentals and
other charges; ad valorem, property, excise,
and any other taxes based upon or measured by
the ownership of the Interests, the
production of hydrocarbons or the receipt of
proceeds therefrom; and expenses payable to a
third person under applicable joint operating
agreements, including, without limitation,
overhead charges and royalty disbursement
fees payable to operator, or similar payments
to third party operators, or, in the absence
of any joint operating agreement, those items
customarily billed under such an agreement.
ii. The amount for administrative services
pursuant to Section 5.2.
iii. Any other amounts agreed upon by Seller and
Buyer.
(b) The Purchase Price shall be adjusted downward by
the following:
i. Reductions due to Title Failures as provided
in Sections 10.7.
ii. For uncured Title Defects and Contested
Defects pursuant to Section 10.8
iii. Reductions due to Environmental Defects as
provided in Section 11.3.
iv. The gross proceeds actually received by
Seller, net of applicable severance and
production taxes and compression charges, and
derived from the sale of hydrocarbons
attributable to the Interests to the extent
owned by Buyer pursuant to the provisions of
Section 1.5 above.
v. An amount equal to all unpaid ad valorem,
property, production, severance and similar
taxes and assessments (but not including
income taxes) based upon or measured by the
ownership of the Interests, the production of
hydrocarbons, or the receipt of proceeds
therefrom, which taxes or assessments become
due and payable or accrue (but have not yet
become due and payable) with respect to the
Interests prior to the Effective Time, which
amount shall, where possible, be computed
based upon the tax rate and values applicable
to the tax period in question; otherwise, the
amount of the adjustment under this paragraph
shall be computed based upon such taxes
assessed against the applicable portion of
the Interests for the immediately preceding
tax period just ended.
vi. Any other amounts agreed upon by Seller and
Buyer.
(c) If Buyer and Seller determine that gas
imbalances exist relative to the Interests, the Purchase
Price shall be adjusted upward or downward, depending upon
whether there is a net over-production or net under-production
attributable to the Interests, based upon a price of seventy cents
($0.70)/MCF.
2.3 Purchase Price Allocation. The Purchase Price shall be
allocated among the Interests as set forth in Exhibit "B"
attached hereto (the "Allocated Values").
2.4 Preliminary Settlement Statement. Seller shall prepare
and deliver to Buyer at least five (5) "Business Days" (which
term shall mean any day except a Saturday, Sunday or other day on
which commercial banks in Denver, Colorado are required or
authorized by law to be closed) prior to the Closing Date,
Seller's estimate of the Adjusted Purchase Price to be paid at
Closing, together with a statement setting forth Seller's
estimate of the amount of each adjustment to the Purchase Price
to be made pursuant to Section 2.2 (the "Preliminary Settlement
Statement"). The parties shall negotiate in good faith and
attempt to agree on such estimated adjustments prior to Closing.
In the event any estimated adjustment amounts are not agreed upon
prior to Closing, the Adjusted Purchase Price for purposes of
Closing shall be calculated based on Seller's and Buyer's agreed
upon estimated adjustments and Seller's good faith estimation of
any disputed amounts, which estimate shall be subject to
adjustment in the Final Settlement Statement pursuant to Section
9.1.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Seller. Seller
represents and warrants to Buyer the following:
(a) Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware. Seller is duly qualified to carry on its business in
the State or States in which the Interests are located and in
each State where failure to so qualify would have a material
adverse effect upon its business or the Interests.
(b) Seller has all requisite power and authority to
carry on its business as presently conducted and to enter into
this Agreement and to perform its obligations hereunder.
(c) The execution, delivery and performance of this
Agreement and the transactions contemplated herein has been duly
and validly authorized.
(d) This Agreement has been duly executed and
delivered on behalf of Seller, and all documents and instruments
required hereunder to be executed and delivered by Seller at or
prior to Closing shall have been duly executed and delivered.
This Agreement does, and such documents and instruments shall,
constitute legal, valid and binding obligations of Seller
enforceable in accordance with their terms.
(e) Seller has incurred no liability, contingent or
otherwise, for broker's or finder's fees or commissions relating
to the transactions contemplated by this Agreement for which
Buyer shall have any responsibility whatsoever.
(f) Except as set forth on Exhibit "C" attached
hereto, there are no outstanding authorizations for expenditures
("AFEs") that (i) require the drilling of wells or other material
development operations in order to earn or to continue to hold
all or any portion of the Interests, or (ii) obligate Seller to
make payments of any amounts in connection with drilling of wells
or other material capital expenditures affecting the Interests.
(g) Seller is not obligated to deliver hydrocarbons
produced from the Interests at some future time without then or
thereafter receiving full payment for the production attributable
to Seller's ownership in and to the Interests by virtue of: (i)
a prepayment arrangement under any contract for the sale of
hydrocarbons and containing a "take or pay", or similar
provisions, (ii) a production payment, or (iii) any other
arrangement.
(h) Except for those taxes and assessments for which a
Purchase Price adjustment is made under Section 2.2(b)(v), during
the period of Seller's ownership of the Interests, Seller has
properly paid all ad valorem, property, production, severance,
excise and similar taxes and assessments based on or measured by
the ownership of property or the production of hydrocarbons or
the receipt of proceeds therefrom on the Interests that have
become due and payable before the Effective Time.
(i) Except as set forth in Exhibit "D" attached
hereto, no suit, action, demand, claim, notice demand letter or
other proceeding is pending or, to the best of Seller's
knowledge, threatened before any court, arbitration panel or
governmental agency which relates to the Interests and which
might result in a loss of Seller's title to any portion of the
Interests, or a dminution of the value of any of the Interests,
or that might hinder or impede the operation of the Leases.
(j) As used in this Agreement, the term, "Existing
Documents" shall mean all of the oil, gas and other mineral
leases, assignments or other instruments or agreements that
comprise the Interests, and all contractually binding
arrangements to which the Interests may be subject and which will
be binding on the Interests or Buyer after Closing (including,
without limitation, oil, gas and other mineral leases, overriding
royalty assignments, farm-out and farm-in agreements, option
agreements, forced pooling orders, assignments of production
payments, partnership agreements, unit agreements, unit operating
agreements, joint operating agreements, balancing agreements,
unit operating agreements, production contracts, processing
contracts, gas sales contracts, marketing and transportation
contracts and division orders). To the best of Seller?s
knowledge, (i) all Existing Documents are in full force and
effect and are the valid and legally binding obligations of the
parties thereto and are enforceable in accordance with their
respective terms (subject to the effects of bankruptcy,
insolvency, reorganization, moratorium and similar laws); (ii)
Seller is not in breach or default with respect to any of its
obligations pursuant to any such Existing Documents; and (iii)
all payments (including, without limitation, royalties, delay
rentals, shut-in royalties and valid calls under unit or
operating agreements) due thereunder have been timely paid and
Seller has received no notice of default under any of the
Existing Documents.
(k) To the best of Seller's knowledge, all of the
Equipment Seller operates has been maintained in a state of
repair so as to be adequate for normal operations.
(l) To the best knowledge of Seller, all of the Wells
that have been drilled and completed have been so drilled and
completed within the boundaries and limits permitted by contract,
pooling or unit agreement, and by law; and all drilling,
completion, and other operations on or affecting the Leases have
been conducted in compliance with all applicable laws,
ordinances, rules, regulations and permits, and judgments, orders
and decrees of any court or governmental body or agency. No Well
is subject to penalties or allowables after the date hereof
because of any over-production or any other violation of
applicable laws, rules, regulations or permits or judgments,
orders of decrees of any court or governmental body or agency.
(m) Except as set forth on Exhibit "E" attached
hereto:
(i) Seller's operations and activities with
respect to the Interests comply in all
respects with all applicable governmental
laws, including, without limitation, health
and safety statutes and regulations and all
Environmental Laws.
(ii) There is no civil, criminal or administrative
action, suit, demand, claim, hearing, notice
of violation, investigation, proceeding,
notice or demand letter ("Environmental
Proceeding") known to Seller pending or, to
the best knowledge of Seller, threatened
against Seller or any of the Interests
relating in any way to the Environmental
Laws.
(iii) Neither Seller nor, to the best
knowledge of Seller, any other person has
released, placed, stored, buried or dumped
any Hazardous Substances, Oil, Pollutants or
Contaminants or any other wastes on, beneath,
or adjacent to the Leases, except for
inventories of such substances to be used in
the ordinary course of business of Seller
(which inventories and wastes, if any, were
and are stored or disposed of in accordance
with applicable laws and regulations).
(iv) To the best of Seller's knowledge, Seller has
not received any notice or order from any
governmental or other public agency or from
any other entity or individual advising it
that Seller is responsible for or potentially
responsible for Cleanup or paying for the
cost of Cleanup of any Hazardous Substances,
Oils, Pollutants, or Contaminants or any
other waste or substance affecting the
Interests. Seller is not aware of any facts
which might reasonably give rise to any such
notice or order.
(v) The term "Cleanup" shall mean all actions
required to: (1) cleanup, remove, treat or
remediate Hazardous Substances, Oils,
Pollutants or Contaminants; (2) prevent the
Release of Hazardous Substances, Oils,
Pollutants or Contaminants so that they do
not migrate, endanger or threaten to endanger
public health or welfare or the environment;
(3) perform pre-remedial studies and
investigations and post-remedial monitoring
and care; or (4) respond to any government
requests for information or documents in any
way relating to cleanup, removal, treatment
or remediation or potential cleanup, removal,
treatment or remediation of Hazardous
Substances, Oils, Pollutants or Contaminants
in the indoor or outdoor environment.
(vi) The term "Environmental Laws" shall mean all
foreign, Federal, state and local laws,
regulations, rules and ordinances relating to
polluting or protection of the environment,
including, without limitation, laws relating
to Releases or threatened Releases of
Hazardous Substances, Oil, Pollutants or
Contaminants into the indoor or outdoor
environment (including, without limitation,
ambient air, surface water, groundwater,
land, surface and subsurface strata) or
otherwise relating to the manufacture,
processing, distribution, use, treatment,
storage, Release, transport or handling of
Hazardous Substances, Oil, Pollutants or
Contaminants, and all laws and regulations
with regard to record keeping, notification,
disclosure and reporting requirements
respecting Hazardous Substances, Oils,
Pollutants or Contaminants.
(vii) The term "Hazardous Substances, Oils,
Pollutants or Contaminants" shall mean all
substances defined as such in the National
Oil and Hazardous Substances Pollution
Contingency Plan, or defined as such by, or
regulated as such under, any Environmental
Law.
(viii) The term "Release" or "Releases" means
any release, spill, emission, discharge,
leaking, pumping, injection, deposit,
disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor
environmental (including, without limitation,
ambient air, surface water, groundwater, and
surface or subsurface strata) or into or out
of any property, including the movement of
Hazardous Substances, Oils, Pollutants or
Contaminants through or in the air, soil,
surface water, groundwater or property.
3.2 Representations and Warranties of Buyer. Buyer
represents and warrants to Seller the following:
(a) Buyer is a corporation, duly organized, validly
existing and in good standing under the laws of the State of
Colorado. Buyer is or will be prior to Closing duly qualified to
conduct business in the State or States in which the Interests
are located.
(b) Buyer has all requisite power and authority to
carry on its business as presently conducted, to enter into this
Agreement, and to purchase the Interests on the terms described
in this Agreement and perform its other obligations under this
Agreement.
(c) The execution, delivery and performance of this
Agreement and the transactions contemplated hereby have been duly
and validly authorized.
(d) This Agreement has been duly executed and
delivered by or on behalf of Buyer; all documents and instruments
required hereunder to be executed and delivered by Buyer at or
prior to Closing shall have been duly executed and delivered; and
this Agreement does, and such documents and instruments shall,
constitute legal, valid and binding obligations of Buyer
enforceable in accordance with their terms.
(e) Buyer has incurred no liability, contingent or
otherwise, for broker's or finder's fees or commissions relating
to the transactions contemplated by this Agreement for which
Seller shall have any responsibility whatsoever.
(f) Prior to Closing, Buyer will have inspected the
Interests, the public records and Seller's files for all
purposes, including, but not limited to, detecting the presence
and concentration of naturally-occurring radioactive materials
and satisfying itself as to the physical condition and
environmental condition of the Interests, both surface and
subsurface. In entering into this Agreement, buyer has relied
solely on the express representations and covenants of Seller in
this Agreement, its independent investigation of, and judgment
with respect to, the Interests and the advice of its own legal,
tax, economic, environmental, engineering, geological and
geophysical advisors, and not on any comments or statements of
any representatives of, or consultants or advisors engaged by
Seller.
(g) At Closing, Buyer will meet the bonding and other
requirements required by all governmental authorities in respect
to the Interests, and, after Closing, Buyer anticipates that it
will continue to be able to meet such bonding requirements.
Buyer is, and after the Closing is expected to continue to be,
otherwise qualified to own the Interests. The consummation of
the transactions contemplated hereby will not cause Buyer to be
disqualified to be an owner of oil, gas, and mineral leases or to
exceed any acreage limitation imposed by law, statute, rule or
regulation. Buyer is not aware of any fact that could reasonably
be expected to cause the Mineral Management Service or other
governmental authorities to fail to unconditionally approve the
assignment of the Interests to Buyer.
(h) Buyer is an experienced and knowledgeable investor
and operator in the oil and gas business. Buyer is acquiring the
Interests for its own account and not with a view to, or for
offer of resale in connection with, a distribution thereof,
within the meaning of the Securities Act of 1933, as amended, or
any other rules, regulations, and laws pertaining to the
distribution of securities.
(i) Buyer has arranged or will have arranged to have
available by the Closing Date sufficient funds to enable the
payment to Seller, by wire transfer, of the Adjusted Purchase
Price in accordance with Section 2.2 and to otherwise perform
Buyer's obligations under this Agreement.
ARTICLE 4
CERTAIN AGREEMENTS OF SELLER
4.1 Agreements Between Execution of Agreement and Closing.
During the period between the execution of this Agreement and the
Closing Date, Seller shall not, without the prior written consent
of Buyer, (i) sell, convey, assign, transfer or encumber any of
the Interests; (ii) make or agree to make any expenditure in
excess of $25,000.00, net to Seller's interest, except for
obligations under existing contracts, expenditures necessary to
maintain the Interests, or in the event of any emergency as to
which Seller has notified Buyer; (iii) sell oil, gas or other
minerals from the Interests except sales made in the ordinary
course of business; (iv) enter into any agreement amending,
modifying or terminating any of the Leases; or (v) take any other
action with respect to any of the Interests that would cause a
material diminution in the value thereof or that would materially
and adversely affect the use and enjoyment thereof.
4.2 Access to Records. Following the execution of this
Agreement by the Parties, Seller shall afford to Buyer and its
authorized representatives, during normal business hours,
reasonable access to well and land files, title, contract and
legal materials and operating data and information in Seller's
possession or to which it has access affecting the Interests.
4.3 Notification of Additional Proceedings. Seller shall
promptly notify Buyer of any new suits, actions, demands, claims
notices, demand letters or other proceedings threatened or
pending before any court, arbitrator or governmental agency which
relate to the Interests.
ARTICLE 5
CERTAIN AGREEMENTS OF BUYER
5.1 Cooperation. Buyer shall cooperate with Seller to
assist Seller in carrying out the agreements of Seller hereunder.
5.2 Administrative Services. If Closing occurs, Buyer
shall pay Seller Two Thousand Dollars ($2,000.00) per month for
the accounting and other administrative services performed by
Seller with respect to the Interests from the Effective Time to
the date following Closing that Buyer assumes responsibility for
performing such services.
ARTICLE 6
BUYER'S CONDITIONS TO CLOSING
The obligations of Buyer to consummate the transactions
provided for herein are subject, at the option of Buyer, to the
fulfillment on or prior to Closing of each of the following
conditions:
6.1 Representations. The representations and warranties by
Seller set forth in Section 3.1 above shall be true and correct
in all material respects as of the date of this Agreement and as
of the Closing Date.
6.2 Changes. There shall have been no material adverse
change in the physical condition of the Interests, except
depletion through normal production within authorized allowable
and rates of production, depreciation of equipment through
ordinary wear and tear, and other transactions permitted under
this Agreement or approved in writing by Buyer.
6.3 Performance. Seller shall have timely performed and
complied with all agreements and covenants required by this
Agreement.
6.4 No Legal Proceedings. No suit, action or other
proceeding shall be pending or threatened before any court,
arbitration panel or governmental agency seeking to restrain,
prohibit or declare illegal, or seeking substantial damages in
connection with the purchase and sale contemplated by this
Agreement, or which might result in a material loss of any
portion of the Interests, a material diminution in the value of
any of the Interests, or materially interfere with the use or
enjoyment of the Interests, except (i) matters with respect to
which Buyer has been adequately indemnified by Seller or (ii) any
suit or proceeding affecting only a portion of the Interests,
which portion could be treated as subject to a Title Defect in
accordance with Article 10.
ARTICLE 7
SELLER'S CONDITIONS TO CLOSING
The obligations of Seller to consummate the transactions
provided for herein are subject, at the option of Seller, to the
fulfillment on or prior to Closing of each of the following
conditions:
7.1 Representations. The representations and warranties by
Buyer set forth in Section 3.2 above shall be true and correct in
all material respects as of the date of this Agreement and as of
the Closing Date.
7.2 Performance. Buyer shall have timely performed and
complied with all agreements and covenants required by this
Agreement.
7.3 No Legal Proceedings. No suit or other proceeding
shall be pending before any court or governmental agency seeking
to restrain prohibit or declare illegal, or seeking substantial
damages in connection with, the sale contemplated by this
Agreement, except (i) matters with respect to which Seller has
been adequately indemnified by Buyer or (ii) any suit or other
proceeding affecting only a portion of the Interests, which
portion could be treated as subject to a Title Defect in
accordance with Article 10.
ARTICLE 8
CLOSING
8.1 Date of Closing. Subject to the conditions stated in
this Agreement, the purchase and sale of the Interests pursuant
to this Agreement (the "Closing") shall occur on or before
November 1, 1999, at 10:00 a.m., Mountain Time, or on such other
date and time as Buyer and Seller may agree (the "Closing Date").
8.2 Place of Closing. The Closing shall be held at the
offices of Seller as set forth hereinabove.
8.3 Closing Obligations. At the Closing, the following
documents shall be delivered and the following events shall
occur, each event being a condition precedent to the others and
each being deemed to have occurred simultaneously with the
others:
(i) Seller shall execute and deliver: (1) an
Assignment, Bill of Sale and Conveyance in the
form attached hereto as Exhibit "F" (the
"Assignment") (in sufficient counterparts to
facilitate recording) conveying the Interests,
subject to the Permitted Encumbrances; (2) such
other instruments as may be required to convey the
Interests to Buyer and otherwise effectuate the
transactions contemplated by this Agreement.
(ii) Seller and Buyer shall execute and deliver the
Preliminary Settlement Statement.
(iii) Buyer shall deliver to Seller or to Seller's
account (at such place as may be designated by
Seller in a written notice, such notice to be
delivered to Buyer not less than two (2) Business
Days prior to Closing) by direct bank or wire
transfer the Adjusted Purchase Price.
(iv) Seller shall deliver on forms supplied by Buyer
transfer orders or letters in lieu thereof,
directing the operator or purchaser to make
payment of proceeds attributable to production
from the Interests after the Effective Time to
Buyer.
8.4 Records. In addition to the obligations set forth
under Sections 4.2 and 8.3 above, within thirty (30) days after
Closing, Seller shall deliver to Buyer all original well and land
files in its possession or to which it has access. Buyer shall
be entitled to all original records affecting the Interests
assigned to Buyer pursuant to the terms of this Agreement.
Seller shall be entitled to keep a copy of such records for its
files. Buyer agrees to preserve and maintain such records for at
least seven (7) years after the Closing Date and to provide
Seller access to such records during normal business hours during
such period.
ARTICLE 9
POST-CLOSING MATTERS
9.1 Final Settlement Statement. As soon as practicable
after the Closing, but in no event later than ninety (90) days
after Closing, Seller shall prepare and deliver to Buyer, in
accordance with this Agreement and generally accepted accounting
principles, a statement ("Final Settlement Statement") setting
forth each adjustment (other than adjustments for Title Defects)
finally determined as of Closing and showing the calculation of
such adjustments. Within thirty (30) days after receipt of the
Final Settlement Statement, Buyer shall deliver to Seller a
written report containing any changes that Buyer proposes be made
in good faith to resolve any questions with respect to the
amounts due pursuant to such Final Settlement Statement no later
than one hundred twenty (120) days after the Closing.
9.2 Unpaid Third Party Funds. At such time as Buyer
and Seller agree on a Final Settlement Statement, Seller will
transfer to Buyer all funds held by Seller in suspense for a
third party owner of royalty, overriding royalty, working
interests, mineral interest or other similar interests,
attributable to the Interests, and will deliver all records in
Seller's possession which may be useful to determine proper
disbursement. Buyer shall thereafter be responsible for
determining the proper payment of such amounts and shall
indemnify and hold harmless Seller from and against any and all
cost, loss or expense of whatever kind, including attorney's
fees, arising from or in connection with the claim or any person
with respect to the funds transferred to Buyer pursuant to this
Section 9.2.
9.3 Further Assurances. After Closing, Seller, and Buyer
shall execute, acknowledge and deliver or cause to be executed,
acknowledged and delivered such instruments and take such other
action as may be necessary or advisable to carry out their
obligations under this Agreement and under any Exhibit, document,
certificate or other instrument delivered pursuant hereto.
9.4 Survival. All representations and warranties set forth
in this Agreement in Sections 3.1 (a) - (e) and 3.2 (a) - (e)
shall survive the Closing, but no other representations and
warranties shall survive the Closing.
ARTICLE 10
TITLE MATTERS
10.1 Access to Title and Other Documents.
(a) After the date hereof, Seller will make available
to Buyer and to its representatives (such representatives to
include employees, consultants, independent contractors,
attorneys and other advisors of Buyer) for Buyer's copying and/or
inspection (at Buyer's cost and expense), at Seller's offices
during normal business hours the following documents in Seller's
possession or under its control:
(i) All abstracts of title, title opinions, title
curative materials, ownership reports, division
orders, bills of sale, other documents evidencing
transfers of title, tax receipts, and licenses and
registrations pertaining to the Interests.
(ii) All of the lease records, lease files, leases,
conveyances and assignments of interest in the
Leases; unitization, unit, pooling and operating
agreements; division orders; contracts; transfer
orders; orders of the applicable regulatory
authorities or administrative agencies; mortgages,
deeds of trust, security agreements, and financing
statements; and all other contracts, agreements
and documents affecting the Interests.
(iii) Instruments and documents concerning proper
payment of all general and special assessments, ad
valorem and property taxes, and production,
severance and similar taxes and assessments based
on or measured by the ownership of the Interests,
the production of hydrocarbons, or the receipt of
proceeds therefrom for 1999 and years prior for
which the applicable statute of limitations has
not expired.
(iv) All geological maps, geophysical surveys,
ownership maps, seismic surveys, logs, core
studies, and surveys relating to the Interests.
(v) All production records; transportation agreements;
contracts concerning the purchase of gas, oil,
casinghead gas, distillate, gas condensate or
other hydrocarbons; processing agreements; all
correspondence relating to the Interests; and data
sheets relating to the Interests and to bonuses,
rentals and royalties payable with respect
thereto.
(vi) All agreements relating to the purchase, sale,
processing, and transportation of production from
the Wells.
(vii) All bonds, leases, permits, easements,
licenses, orders, saltwater disposal agreements,
agreements with pumpers and other agreements in
any way relating to the Interests or the operation
thereof.
Reliance on such information shall be at the sole risk of the
Buyer, and Seller makes no guaranty or representation as to the
accuracy or completeness of such data, except as otherwise
provided in this Agreement.
Seller shall authorize Buyer and its representatives to
consult with attorneys, abstract companies and other consultants
or independent contractors of Seller (whether utilized in the
past or present) concerning title related matters. Reliance on
such information of such third parties shall be at the sole risk
of the Buyer, and Seller makes no guaranty or representation as
to the accuracy or completeness of such data.
10.2 No Warranty or Representation. At the Closing, Seller
shall convey to Buyer all the Interests. Such conveyance shall
be subject to the Permitted Encumbrances and WITHOUT ANY WARRANTY
OF TITLE, EITHER EXPRESS OR IMPLIED, AND WHETHER BY COMMON LAW,
STATUTE OR OTHERWISE, except for the warranty of title as to
persons claiming by, through and under Seller contained in the
Assignment. Without limiting Buyer's right to reduce the
Purchase Price in the manner provided in this Article 10, Seller
makes no warranty or representation, express or implied, with
respect to the accuracy or completeness of any information.
Records or data now, heretofore, or hereafter made available to
Buyer in connection with this Agreement, including, without
limitation, any description of the Interests, pricing
assumptions, potential for production of hydrocarbons from the
Interests, or any other matters contained in any material
furnished by Seller to Buyer or its officers, directors,
employees, agents, advisors or representatives.
10.3 Disclaimer. ALL PERSONAL PROPERTY, MACHINERY,
FIXTURES, EQUIPMENT AND MATERIALS CONVEYED HEREBY ARE SOLD AND
ASSIGNED AND ACCEPTED BY BUYER IN THEIR "WHERE IS, AS IS"
CONDITION, WITHOUT ANY WARRANTIES, EXPRESS OR IMPLIED OR
STATUTORY, OF MARKETABILITY, QUALITY, CONDITION, MERCHANTABILITY
AND/OR FITNESS FOR A PARTICULAR PURPOSE OR USE, ALL OF WHICH ARE
EXPRESSLY DISCLAIMED.
10.4 Permitted Encumbrances. As used in this Agreement, the
term "Permitted Encumbrances" shall mean the following, provided
that the same shall not operate to reduce the net revenue
interest or increase the gross working interest of an Interest
beyond that shown on Exhibit "A":
(a) Lessors' royalties, non-participating royalties,
overriding royalties, division orders, reversionary interests,
and similar burdens.
(b) Preferential rights to purchase and required third
party consents to assignments and similar agreements, with
respect to which, prior to Closing (i) waivers or consents are
obtained from the appropriate parties, (ii) the appropriate time
period for asserting such rights has expired without an exercise
of such rights, or (iii) arrangements acceptable to Buyer can be
made by Buyer and Seller to allow Buyer to receive substantially
the same economic benefits as if all such waivers and consents to
assign have been obtained.
(c) Liens for taxes or assessments not yet due or
delinquent or, if delinquent, that are being contested in good
faith in the normal course of business.
(d) All rights to consent by, required notices to,
filing with, or other actions by governmental entities in
connection with the sale or conveyance of oil and gas leases or
interests therein, if the same are customarily obtained
subsequent to such sale or conveyance and neither Seller nor
Buyer has no reason to believe they cannot be obtained.
(e) Such Title Defects as Buyer may have waived in
writing.
(f) Rights reserved to or vested in any governmental
authority.
(g) Rights of a common owner of any Interest in rights-
of-way or easements currently held by Seller and such common
owner as tenants in common or through common ownership.
(h) Easements, conditions, covenants, restrictions,
servitudes, permits, rights-of-way, surface leases and other
rights in the Interests for the purpose of surface operations,
roads, alleys, highways, railways, pipelines, transmission lines,
transportation lines, distribution lines, power lines, telephone
lines, and removal of timber, grazing, logging operations,
canals, ditches, reservoirs and other like purposes, or for the
joint or common use of real estate, rights-of-way, facilities and
equipment which do not materially impair the rights held by Buyer
or the use and enjoyment of the Interests.
(i) Defects, irregularities and deficiencies in title
to any rights-of-way, easements, surface lease or other rights
which in the aggregate do not materially impair the use of such
right-of-way, easements, surface leases or other rights for the
purpose of which such rights will be held by Buyer.
(j) Zoning, planning and environmental laws and
ordinances and municipal regulations.
(k) Vendors, carriers, warehousemen, repairmen,
mechanics, workmen, materialmen, construction or other like liens
arising by operation of law in the ordinary course of business or
incident to the construction or improvement of any property in
respect of obligations which are not yet due, or which are being
contested in good faith by appropriate proceedings by or on
behalf of Seller.
(l) Liens created under operating agreements in
respect of obligations that are not yet due or that are being
contested in good faith by appropriate proceedings by or on
behalf of Seller.
(m) The terms and provisions of the Existing
Documents.
10.5 Good and Defensible Title. For the purposes of this
Article 10, the term "Good and Defensible Title" shall mean, with
respect to each of the Interests, that title of Seller which,
subject to and except for Permitted Encumbrances:
(a) Entitles Seller, throughout the duration of the
relevant Interest, to receive from such Interest (free and clear
of all royalties, overriding royalties, non-participating
royalties, net profits interests, or other burdens on or measured
by production of hydrocarbons) not less than the interest shown
as the net revenue interest on Exhibit "A" in all hydrocarbons
produced, saved and marketed from the Interest and of all
hydrocarbons produced, saved, and marketed from any unit of which
the Interest is a part and which is allocated to such Interest;
all without reduction, suspension, or termination of the
Interest.
(b) Obligates Seller to bear the percentage of the
costs and expenses relating to the maintenance and development
of, and operations relating to, the Interest not greater than the
gross working interest shown on Exhibit "A" without increase
throughout the duration of such Interest.
(c) Is free and clear of liens, encumbrances and
defects.
(d) All irregularities of title that would not
reasonably be expected to result in claims that would materially
and adversely affect Seller's title to an Interest shall not be
considered a Title Defect, including but not limited to (i)
defects in the chain of title consisting of failure to recite
marital status or the omission of succession or heirship
proceedings; (ii) defects or irregularities arising out of prior
oil and gas leases which, on their face, expired more than three
(3) years prior to the Effective Time, and which have not been
released of record; (iii) defects or irregularities arising out
of acknowledgments, questions of identity, trusts or trustees,
executors and personal representatives, and the manner in which
they executed documents or were identified thereon; (iv) defects
or irregularities arising out of mortgages or deeds of trust
which, by their terms, matured more than three (3) years prior to
the Effective Time but which remain unreleased of record; (v)
defects or irregularities arising out of the lack of survey of
specific land or lese description; (vi) defects or irregularities
arising out of the lack of recorded powers of attorneys from
corporations, banks, trusts or personal representatives to
execute and deliver documents on their behalf or on behalf of
others; (vii) defects or irregularities arising out of the lack
of recorded documents transferring Interests by merger or name
change; and (viii) defects or irregularities cured by possession
under applicable statutes of limitation and statutes relating to
prescription.
10.6 Notice of Title Defect. Except for Permitted
Encumbrances, any defect in title, lien, encumbrance, or defect
that would cause Seller's title to any Interest not to be Good
and Defensible Title shall be a title defect ("Title Defect").
Not later than five (5) days before the Closing Date (the
"Warranty Claim Date"), Buyer must notify Seller in writing of
any matter that Buyer considers to be a Title Defect ("Notice of
Title Defect"), which notice shall include, (i) a specific
description of the matter Buyer asserts as a Title Defect, (ii) a
specific description of the Interest or the portion of the
Interest that is affected by the Title Defect, (iii) Buyer's
calculation of the amount ("Title Defect Amount") that the value
of the Interest should be reduced because of the Title Defect
based on the Allocated Value shown on Exhibit "B," and (iv)
appropriate supporting documentation.
Notwithstanding anything to the contrary in this Agreement,
the Buyer shall be deemed to have waived any Title Defect which
the Buyer has not specifically asserted in its Notice of Title
Defect presented before the Warranty Claim Date.
10.7 Title Failure. Any item that Seller acknowledges is a
Title Defect but that Seller is unwilling to cure shall be deemed
a title failure ("Title Failure") and, subject to Section 10.9
below, the Purchase Price shall be reduced for such Title Defect
pursuant to Section 2.2 unless Seller agrees to indemnify Buyer
against all losses, costs, expenses and liabilities with respect
to such Title Defect.
10.8 Defect Notice; Seller's Opportunity to Cure. To the
extent that Seller disputes that any item described in the Notice
of Title Defect actually constitutes a Title Defect or disputes
the Title Defect Amount assigned by Buyer to any such Title
Defect ("Contested Defect"), Seller shall deliver to Buyer a
notice so stating ("Defect Notice"). Subject to the provisions
of 10.9 below, the portion of the Purchase Price attributable to
Title Defects which Seller is willing to cure but which are
uncured at Closing, or which are not waived by Buyer at Closing
(including Contested Defects), shall be deposited into an escrow
account pursuant to an escrow agreement agreed to by the Parties
and the Assignment will be revised to delete all of that portion
of the Interests affected by such Title Defects (including
Contested Defects). If Seller fails to cure a Title Defect
within ninety (90) days after Closing, it shall be deemed a Title
Failure and the funds attributable to such Title Defect shall be
released from escrow to Buyer.
10.9 Title Purchase Price Adjustments. Notwithstanding any
provision hereof to the contrary, there shall be no reduction in
the Purchase Price for Title Failures and no escrow for Title
Defects or Contested Defects unless and until, and only to the
extent that, the individual value of each Title Failure, Title
Defect or Contested Defect exceeds five percent (5%) of the
Allocated Value of the applicable Interest shown on Exhibit "B,"
and the aggregate amount of such Title Defects (including Title
Failures and Contested Defects) exceeds five percent (5%) of the
Purchase Price and only for the amount in excess of such amount.
10.10 Termination Amount. Notwithstanding any provision
hereof to the contrary, in the event the aggregate adjustments
for Title Defects pursuant to this Article 10 and for
Environmental Defects pursuant to Article 11 amount to twenty
percent (20%) or more of the Adjusted Purchase Price (the
"Termination Amount"), either Party shall have the option to
terminate this Agreement, without any liability, upon written
notice to the other Party.
10.11 Preferential Rights and Consents to Assign. Some
Interests may be subject to existing preferential rights to
purchase the Interests or consents may be required in order to
assign the Interests. Seller shall make a good faith effort to
obtain waivers of any preferential rights and consents which
Seller knows must be obtained prior to Closing and are not
ordinarily obtained after Closing. Buyer shall notify Seller of
any additional consent requirement or preferential right to
purchase it discovers prior to Closing. If a preferential right
is exercised prior to Closing, the Purchase Price shall be
adjusted downward in an amount equal to the price paid to Seller
for the Interest with respect to which the preferential right has
been exercised and such Interest shall be deleted from this
Agreement. In such case Seller shall be entitled to all proceeds
paid by the third party exercising its preferential right to
purchase. As to any Interest with respect to which a required
consent to assignment has not been obtained prior to Closing,
Buyer may waive such requirements and accept an assignment
covering such Interest. If Buyer does not waive the requirement,
the allocated value of the Interest so affected shall be
deposited into the escrow account referred to in Section 10.8,
with a corresponding adjustment made to the Purchase Price, until
the consent is obtained. If a third party preferential purchase
right burdening any Interest has not been exercised or waived by
Closing, Buyer shall pay for and accept an assignment covering
such Interest and, if the preferential right is exercised after
Closing, Buyer shall be entitled to all proceeds paid for such
interest by the third party exercising such preferential purchase
right. Buyer shall be responsible for conveying title to the
Interest affected by said preferential right to the party
exercising the same and shall indemnify and hold Seller harmless
from and against any claim or liability for Buyer's failure to
make such conveyance.
ARTICLE 11
ENVIRONMENTAL
11.1 Inspection; Indemnity. Buyer and its authorized
representatives, at Buyer's sole risk and expense, shall have the
right to enter upon and inspect the real and personal properties
comprising the Interests, and to conduct such well, environmental
and other tests and assessments as Buyer shall deem appropriate,
subject to the approval of the operator in the case of non-
operated properties. Buyer shall repair any damages to the
Interests resulting from its inspection and shall defend and hold
Seller harmless from and against any and all losses, damages,
claims, obligations, liabilities, expenses (including court costs
and attorneys' fees) or causes of action arising from Buyer's
inspection of the Interests.
11.2 Environmental Assessment. As part of its inspection
of the Interests, Buyer and its authorized representatives shall
have the right to conduct soil and water tests and borings, and
generally to conduct such tests, examinations, investigations and
studies as may be necessary or appropriate in Buyer's sole
judgment to make an environmental assessment of the Interests.
Buyer shall keep any data or information acquired through such
examination and the results of all analyses of such data and
information strictly confidential and shall not disclose the same
to any person or agency without the prior written approval of
Seller unless such disclosure is required by law. Buyer shall
take all steps necessary to ensure that Buyer's authorized
representatives comply with the provisions of this Article 11.
If Buyer has discovered in its environmental assessment
circumstances which require remediation, control or other
response under environmental laws, rules or regulations then in
effect that would cost in excess of Five Thousand Dollars
($5,000) (an "Environmental Defect"), Buyer shall notify Seller
of such circumstances as soon as practicable, but in no event
less than ten (10) days prior to Closing. Any condition or
operation which complies with or has been approved by state or
federal regulation or that would cost less than Five Thousand
Dollars ($5,000) to remediate shall not be an Environmental
Defect.
11.3 Environmental Defects If Buyer properly notifies
Seller of an Environmental Defect related to an Interest, Buyer
may (i) waive the Environmental Defect and Close, or (ii) request
Seller to cure the Environmental Defect. If Buyer asks Seller to
cure an Environmental Defect, and if the aggregate amount of all
such Environmental Defects exceeds five percent (5%) of the
Purchase Price, Seller has the option (i) to cure the
Environmental Defect, or (ii) to exclude the Interest affected by
the Environmental Defect from this Agreement. If Seller elects
to cure the Environmental Defect, but the cure has not been
completed by Closing, the Interest affected by the Environmental
Defect shall not be conveyed to Buyer at Closing, the Purchase
Price shall be reduced by the amount allocated to such Interest
and such amount shall be deposited into the escrow account
referred to in Section 10.7. If the Environmental Defect is
cured within ninety (90) days after Closing, within five (5) days
after the Environmental Defect is cured, Seller will convey to
Buyer the Interest affected by the Environmental Defect and the
applicable amount shall be released from escrow to Seller. If
Seller elects to exclude the Interest affected by the
Environmental Defect from this Agreement, subject to Section 11.4
below, the Purchase Price will be reduced by the allocated value
of the Interest affected.
11.4 Environmental Purchase Price Adjustment.
Notwithstanding any provision hereof to the contrary, there shall
be no reduction in the Purchase Price for uncured Environmental
Defects unless, and only to the extent that, the aggregate amount
of such uncured Environmental Defects exceeds five percent (5%)
of the Purchase Price and then only for the amount in excess of
such amount.
ARTICLE 12
TERMINATION, DEFAULT AND REMEDIES
12.1 Right of Termination. The Agreement and the
transactions contemplated herein may be terminated at any time at
or prior to Closing:
(i) By Seller, at Seller's option, in the event any of the
conditions set forth in Article 7 have not been
satisfied as provided therein.
(ii) By Buyer, at Buyer's option, in the event any of the
conditions set forth in Article 6 have not been
satisfied as provided therein.
(iii) By either Party in the event that the adjustments
to the Purchase Price exceed the Termination Amount, as
provided for in Section 10.10.
(iv) At any time by the mutual written agreement of the
Parties.
12.2 Effect of Termination. In the event of the termination
of this Agreement by Seller pursuant to Section 12.1 (i) hereof
due to Buyer's failure to meet a condition of Closing, Seller
shall have the right to pursue its rights and remedies against
Buyer for Buyer's breach of this Agreement. In the event Buyer
terminates this Agreement pursuant to Section 12.1 (ii) hereof
due to Seller's failure to meet a condition of Closing, shall
have the right to pursue its rights and remedies against Seller
for Seller's breach of this Agreement. In the event of the
termination of this Agreement pursuant to either Section 12.1
(iii) or (iv) hereof, the termination shall be without penalty
and the Parties shall have no further obligations to, nor rights
against, one another.
12.3 Return of Documentation. Upon termination of this
Agreement, Buyer shall return to Seller all title, geological
data, reports, contracts, and maps and other information
furnished by Seller to Buyer and all copies thereof.
ARTICLE 13
ASSUMPTION OF OBLIGATIONS
13.1 Assumption of Obligations. At Closing, Buyer shall
assume (a) the obligation to (i) plug and abandon or remove and
dispose of all wells, platforms, structures, flow lines,
pipelines, and the other equipment now or hereafter located on
the Interests; (ii) cap and bury all flow lines and (iii) dispose
of other pipelines now or hereafter located on the Interests, and
all other pollutants, wastes, contaminants, or hazardous,
extremely hazardous, or toxic materials, substances, chemicals or
wastes now or hereafter located on the Interests; (b) all
obligations and liabilities arising from or in connection with
any gas production, pipeline, storage, processing or other
imbalance attributable to substances produced from the Interests
on or after the Effective Time; and (c) all other costs,
obligations and liabilities that relate to the Interests and, in
each case, arise from or relate to events occurring on or after
the Effective Time. All such plugging, replugging, abandonment,
removal, disposal, and restoration operations shall be in
compliance with applicable laws and regulations and contracts,
and shall be conducted in a good and workmanlike manner.
ARTICLE 14
MISCELLANEOUS
14.1 Fees and Taxes. Except as otherwise specifically
provided, all fees, costs and expense incurred by Buyer or Seller
in negotiating this Agreement or in consummating the transactions
contemplated by this Agreement shall be paid by the Party
incurring the same, including, without limitation, legal and
accounting fees, costs and expenses. All required documentary,
filing and recording fees for the assignments, conveyance or
other instruments required to convey title to the Interests to
Buyer shall be borne by Buyer. In addition, the liability for
any sales, use, transfer or similar tax associated with the sale
and/or transfer of the Interests shall be the liability of, and
for the account of, the Buyer and such liability shall not be
subject to proration as provided in Section 2.2.
14.2 Notices. All notices and communications required or
permitted under this Agreement shall be in writing and shall be
deemed to have been duly made when actually delivered, including
delivery by courier, facsimile, telecopy, or other electronic
medium, or if mailed by registered to certified mail, postage
prepaid, addressed as follows:
SELLER:
WHITING PETROLEUM CORPORATION
1700 Broadway, Suite 2300
Denver, Colorado 80290
Attn: John R. Hazlett, Vice President-Acquisitions/Land
Telephone: (303) 837-4230
Facsimile: (303) 837-4244
BUYER:
DELTA PETROLEUM CORPORATION
3310 Qwest Tower
555 Seventeenth Street
Denver, Colorado 80202
Attn: Roger A. Parker, President
Telephone: (303) 293-9133
Facsimile: (303) 298-8251
Either Party may, by written notice so delivered to the other,
change the address to which delivery shall thereafter be made.
14.3 Amendments. This Agreement may not be amended except
by an instrument in writing signed by Buyer and Seller.
14.4 Preparation of Agreement. Both Seller and Buyer and
their respective counsel participated in the preparation of this
Agreement. In the event of any ambiguity in this Agreement, no
presumption shall arise based on the identity of the draftsman of
this Agreement.
14.5 Headings. The headings of the articles and sections of
this Agreement are for guidance and convenience of reference only
and shall not limit or otherwise affect any of the terms or
provisions of this Agreement.
14.6 Counterparts. This Agreement may be executed by Buyer
and Seller in any number of counterparts, each of which shall be
deemed an original instrument, but all of which together shall
constitute but one and the same instrument.
14.7 References. References made in this Agreement,
including use of a pronoun, shall be deemed to include, where
applicable, masculine, feminine, singular or plural, individuals
or corporations. As used in this Agreement, "person" shall mean
any natural person, corporation, partnership, trust, estate or
other entity.
14.8 Governing Law. This Agreement and the transactions
contemplated hereby shall be construed in accordance with, and
governed by, the laws of the State of Colorado without giving
effect to the conflicts of law rules thereof. Any disputes
concerning this Agreement or the subject matter hereof shall be
brought in a court of competent jurisdiction of the State of
Colorado.
14.9 Entire Agreement. This Agreement (including the
Exhibits hereto) constitutes the entire understanding between the
Parties with respect to the subject matter hereof, superseding
all negotiations, prior discussions and prior agreements and
understanding relating to such subject matter.
14.10 Parties in Interest. This Agreement shall be
binding upon, and shall inure to the benefit of, the Parties and
their respective successors and assigns.
14.11 Further Cooperation. After the Closing, Buyer and
Seller shall execute and deliver, or shall caused to be executed
and delivered from time to time, such further instruments of
conveyance and transfer and shall take such other action as any
Party may reasonably request to convey and deliver the Interests
to Buyer, to accomplish the orderly transfer of the Interests to
Buyer, or to otherwise effectuate the transactions contemplated
by this Agreement. If either Party hereto receives monies
belonging to the other, such amount shall immediately be paid
over to the proper Party. If an invoice or other evidence of an
obligation is received by a Party, which is partially an
obligation of both Seller and Buyer, then the Parties shall
consult with each other and each shall promptly pay its portion
of such obligation to the obligee.
14.12 Press Release. Neither Party shall make any press
release or other announcement in connection with the execution of
this Agreement or the Closing without first consulting with the
other Party. Following such consultation and good faith attempt
to make reasonable accommodations, either Party may make any
announcement or press release that it believes is either required
by applicable law or the rules of any stock exchange, or is
advisable in connection with such Party's obligation to provide
public disclosure regarding its activities. This provision shall
not apply to any filing with any governmental body or stock
exchange required by law, rule or regulation.
EXECUTED as of the date first above stated, but made
effective as of the Effective Time.
SELLER:
WHITING PETROLEUM CORPORATION
By: s/John R. Hazlett
John R. Hazlett
Vice President
BUYER:
DELTA PETROLEUM CORPORATION
By: s/Roger A. Parker
Roger A. Parker
President
PROMISSORY NOTE
November 1, 1999 Denver, Colorado
$2,816,851
Delta Petroleum Corp, referred to herein as "MAKER", agrees
to pay to the Order of Grandhaven LLC referred to herein as
"HOLDER", or order, the sum of $2,816,851 (two million eight
hundred sixteen thousand eight hundred fifty one & no/100
Dollars), together with the agreed upon fee of $28,169 (twenty
eight thousand one hundred sixty nine & no/00 Dollars) at 1407
Larimer Street, Suite 300, Denver, Colorado, with interest
thereon at rate of 18% per annum, simple interest.
The full amount of principal, fee and interest due herein shall
be payable on January 31, 2000.
This note is payable in U.S. Dollars. At any time the maximum
rate of interest applicable to this transaction shall not exceed
the legal maximum rate of interest for a note of this type. Any
sums paid in excess of any lawful limitation shall be applied to
principal.
After default herein, this note will bear interest at the highest
legal rate for this type of note until paid in full. Upon any
default, MAKER agrees to pay a reasonable attorney's fee for any
and all services of an attorney, whether in or out of court, and
for appeal and post judgment collection legal services.
Dated:
s/Roger A. Parker
Roger A. Parker, President, Delta Petroleum Corp, MAKER
PERSONAL GUARANTEE
The undersigned, in consideration of the extension of credit by
HOLDER to MAKER, unconditionally personally guarantee the full
and prompt payment of principal, interest, and any collection
costs, including attorney's fees to HOLDER. The undersigned
consent to any extensions which may be made from time to time
between MAKER and HOLDER, and consents to the release or
substitution of any collateral.
READ CAREFULLY: You are executing a legally binding obligation to
pay this debt should the primary maker fail or refuse to do so.
This may mean that you might be called on to pay this debt and
collection costs.
S/Roger A. Parker
Roger A. Parker, Guarantor
s/Aleron H. Larson, Jr.
Aleron H. Larson, Jr., Guarantor
SECURITY AGREEMENT
Grandhaven LLC, referred to herein as SECURED PARTY, and Delta
Petroleum Corp., referred to as DEBTOR, agree:
Delta Petroleum Corp., DEBTOR, grants a security interest in the
following property to Grandhaven LLC, SECURED PARTY:
All wells as further described in Exhibit "All attached hereto
This security agreement is made to secure an indebtedness of
Delta Petroleum Corp. to Grandhaven LLC, described as follows:
A promissory note, in the original principal amount of $2,816,851
(two million eight hundred sixteen thousand eight
hundred fifty one & no/100 Dollars) dated November 1, 1999
This security interest is also given to secure any other debts
which may be owed by Delta Petroleum Corp. to Grandhaven LLC from time to
time.
DEBTOR warrants to SECURED PARTY that the property in which a
security interest is granted is subject to no other liens,
charges or encumbrances and that there are no financing
statements or other lien notices on file regarding debtor that
might create a lien on the property secured herein.
DEBTOR shall maintain the collateral in good repair, ordinary
wear and tear excepted, and shall insure the same for its full
value. DEBTOR shall provide to secured party certificates of
insurance. SECURED PARTY shall be named as a loss payee on a
long form standard loss payable clause. Should DEBTOR fail to
maintain such coverage, SECURED PARTY may obtain the same and
DEBTOR shall pay SECURED PARTY for the same, together with
interest at the highest legal rate on the amounts advanced by the
SECURED PARTY.
Upon default, as is defined herein, SECURED PARTY shall have all
of the rights given to a secured party under the Uniform
Commercial Code, Article 9.
Default shall be defined as:
1. Any failure to comply with any covenant of the indebtedness
secured by this agreement, including but not limited to a failure to
timely pay as provided;
2. The entry of a judgment, tax lien or other charge against the
DEBTOR which is not satisfied or superseded within thirty days of
inception;
3. Such other commercially reasonably reason that leads SECURED
PARTY to believe that its security is in peril.
DEBTOR shall execute any and all financing statements or other
documents which are requested by SECURED PARTY and which SECURED
PARTY determines is necessary to perfect SECURED PARTY'S LIEN.
DEBTOR appoints SECURED PARTY agent as its agent to file and any
all financing statements which may be necessary or required to
perfect SECURED PARTY' s security interest, and DEBTOR authorizes
SECURED PARTY to execute the same for DEBTOR.
This document represents the entire agreement between the
parties, and there are no agreements or representations which are
not stated herein. This agreement may not be modified unless it
is in writing and signed by both parties.
Dated: 11/1/99
For Grandhaven LLC, SECURED PARTY:
s/Brian Fleischmann, V. P.
For Delta Petroleum Corp., DEBTOR:
s/Roger A. Parker, President
EXHIBIT "A"
Attached to and made a part of that certain Promissory Note dated
November 1, 1999 between Grandhaven LLC and Delta Petroleum Corp.
LEASE NAME FIELD NAME WI% NRI%
Buamgartner Federal #1 Carlsbad East 43.75 35.37
Hunker Com #1 Carlsbad East 0 3.74
Reeves Federal #2 Carlsbad Morrow East 75.00 61.15
Garner, EJ Com #1 Carlsbad Wolfcamp East 75.00 61.15
Pecos Federal Com #1 Carlsbad Wolfcamp East 73.44 61.40
Reeves Federal #1 Carlsbad Wolfcamp East 75.12 62.18
Toothman Gas Com #1 Carlsbad Wolfcamp East 65.63 54.69
State #36-2 Carlsbad Morrow East 75.00 63.32
State #36-1 Carlsbad Wolfcamp East 75.00 63.32
Nix-Yates #1 Carlsbad Wolfcamp East 73.43 57.79
Steele LM Trust #1 Duncan Slough SW 41.50 33.70
AGREEMENT
Agreement is made this 1st day of November, 1999 between
Delta Petroleum Corporation ("Delta" or "Company") and Aleron H.
Larson, Jr. and Roger A. Parker ("Larson and Parker").
Whereas Larson and Parker have arranged for a loan of
$2,816,851 from Grandhaven, LLC ("Grandhaven") to Delta and
Larson and Parker have each personally guaranteed the loan as
required by Grandhaven; and
Whereas the $2,816,851 loan proceeds are to be used by Delta
to acquire interests in oil and gas properties from Whiting
Petroleum Corporation ("Whiting") under an agreement dated
October 13, 1999; and
Now therefore in consideration of the above:
1. Delta will assign a one percent (1%) overriding royalty
interest to Aleron H. Larson, Jr., or his designee(s) and a one
percent (1%) overriding royalty interest to Roger A. Parker, or
his designee(s) in the property interests ("Whiting Interests")
to be acquired by Delta under its October 13, 1999 agreement with
Whiting. Each 1% overriding royalty interest will be
proportionately reduced to the interest in each property acquired
by Delta from Whiting. Assignment will be made in a form
acceptable to Larson and Parker. Assignment will be made upon
acquisition of each property interest provided that appropriate
consents to such assignments have been obtained from third
parties as may be required under various agreements to which
Delta is a party or assignment will be made after such consents
are no longer required. Until the assignment is made an amount
equal to the net proceeds from each override will be paid to
Messrs. Larson and Parker in the form of additional salary and/or
bonuses.
2. Notwithstanding the terms of the aforementioned note,
Delta recognizes that because of the significant risk undertaken
by Messrs. Larson and Parker in connection with this loan, and
previous such loans aggregating $5,816,851 plus accrued interest,
which risk is greatly disproportionate to their relatively small
ownership interests in Delta, Messrs. Larson and Parker do not
wish to be personally liable as either guarantors or lenders
relating to these loans beyond December 1, 1999. Consequently,
if financing in the form of equity or debt which effectively
eliminates the personal liability of each of Messrs. Larson and
Parker for the $2,816,851 loan from Grandhaven to Delta is not
obtained by December 1, 1999, then Messrs. Larson and Parker will
have the right to cause the Whiting Interests acquired under the
October 13, 1999 agreement and the opportunity to acquire any
additional Whiting properties to be assigned to them without the
further consent of the board of directors of Delta or its
shareholders. The assignment will be subject to the remaining
balance owed upon the loan from Grandhaven. After such
assignment the Company will have no interest in the properties
and will not share in any revenues or expenses for the properties
and will not share in any profits or losses from any subsequent
sale or transfer of the properties.
DELTA PETROLEUM CORPORATION
BY: s/Aleron H. Larson, Jr.
Authorized Officer
s/Aleron H. Larson, Jr.
Aleron H. Larson, Jr.
s/Roger A. Parker
Roger A. Parker
