EXHIBIT 2.1
EXCHANGE AGREEMENT
THIS AGREEMENT ("Agreement") is entered into this 15th day of July,
2003 between XXXX-XxXXX ROCKY MOUNTAIN CORPORATION, a Delaware corporation
("KMG"), with offices at 0000 Xxxxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000, and
UNITED STATES EXPLORATION, INC., a Colorado corporation ("UXP"), with offices at
0000 Xxxxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000. "Assignor" shall mean the
party hereto which is to assign its rights in the Properties as of the Effective
Time: namely, KMG is the Assignor with regard to UXP Purchase Properties and UXP
is the Assignor with regard to the KMG Purchase Properties. "Assignee" shall
mean the party hereto which is to own the Properties after the Effective Time:
namely, KMG is the Assignee with regard to KMG Purchase Properties, and UXP is
the Assignee with regard to UXP Purchase Properties. The term "Properties" shall
be used throughout this Agreement and shall generally refer to either the KMG
Purchase Properties or the UXP Purchase Properties, as the context requires. The
term "Xxxxx" shall be used throughout this Agreement and shall generally refer
to either the KMG Purchase Xxxxx or the UXP Purchase Xxxxx, as the context
requires.
1. UXP Purchase Properties. "UXP Purchase Properties," shall mean those
properties that UXP is to receive from KMG as follows:
(a) All of KMG's right, title and interest in the oil and gas
xxxxx described on Exhibit A-1 to this Agreement ("UXP
Purchase Xxxxx") and all of KMG's right, title and interest in
and to the leases described on Exhibit A-2 to this Agreement,
insofar and only insofar as such leases cover and relate to
the lands described on Exhibit A-2 ("UXP Purchase Leases").
Except for any injection or disposal xxxxx as provided in bold
at the end of this paragraph, it is the intent of KMG to
convey all of its right, title and interest in and to all
xxxxx located within the tracts containing 320 acres (more or
less) described on Exhibit A-3, whether or not such xxxxx are
described on Exhibit A-1. It is also the intent of KMG to
assign any after "payout" or other future right to a working
interest in any of the UXP Purchase Leases and UXP Purchase
Xxxxx assigned herein and created pursuant to any of the
contracts and agreements under Section 1(c) below. Any depth
limitation set forth on Exhibit A-2 is for informational
purposes only as KMG intends to assign all of the right, title
and interest it may own as to all depths insofar as such
leases cover and relate to the lands described on Exhibit A-2;
and
(b) All of KMG's right, title and interest in the personal
property and fixtures used in connection with the operation of
the UXP Purchase Xxxxx, including, but not limited to, all
lease equipment, xxxxx, tanks and all other equipment
associated with such UXP Purchase Xxxxx as of the Effective
Time; and
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(c) The rights and obligations existing under certain contracts
and agreements, insofar as such contracts and agreements
benefit or burden the UXP Purchase Xxxxx and the UXP Purchase
Leases, including, but not limited to, operating agreements,
pooling agreements, unit agreements, segregation agreements,
farmout agreements, rights of way, easements, surface
agreements, assignments, any gas gathering, processing and
marketing contracts KMG has in place with Duke Energy Field
Services, oil purchase contracts with Valero Energy Corp. and
ConocoPhillips, or purchase and sale agreements; and
(d) All of KMG's right, title and interest in the oil, gas,
casinghead gas, condensate, distillate, liquid hydrocarbons,
gaseous hydrocarbons, products refined and manufactured
therefrom, other minerals, and the accounts and proceeds from
the sale of all of the foregoing to the extent such production
is produced after the Effective Time from the UXP Purchase
Xxxxx and UXP Purchase Leases; and
(e) Copies of the files, records, data and other documentary
information ("Data") maintained by KMG pertaining to the UXP
Purchase Xxxxx and UXP Purchase Leases but excluding the
following: (i) all of KMG's internal appraisals and
interpretive data related to the UXP Purchase Leases and UXP
Purchase Xxxxx, (ii) proprietary information, including
without limitation all engineering evaluations prepared by or
on behalf of KMG, (iii) any seismic, geological or geophysical
information and data that are interpretive in nature, and (iv)
all information subject to a privilege.
The UXP Purchase Properties shall exclude a) any injection or disposal
well and/or related production equipment associated with such a well
which is located on the UXP Purchase Leases, including without
limitation the tank batteries and other equipment located in the N/2 of
Section 3, T1N-R68W which are related to certain disposal xxxxx owned
by KMG in the S/2 of Section 3, T1N-R68W as well as any surface use,
rights-of-way or other agreements related to such tank batteries and
equipment, and b) any and all assets or equipment owned by Xxxx-XxXxx
Gathering LLC or Resource Gathering Systems, Inc., including without
limitation, all gathering lines, pipe lines or gathering equipment and
facilities operated by Xxxx-XxXxx Gathering LLC or Resource Gathering
Systems, Inc.
2. KMG Purchase Properties. "KMG Purchase Properties" shall mean those
properties that KMG is to receive from UXP as follows:
(a) All of UXP's right, title and interest in the oil and gas
xxxxx described on Exhibit B-1 to this Agreement ("KMG
Purchase Xxxxx") and all of UXP's right, title and interest in
and to the leases described on Exhibit B-2 to this Agreement,
insofar and only insofar as such leases cover and relate to
the lands described on Exhibit B-2 ("KMG Purchase Leases")
Except for any injection or disposal xxxxx as provided in bold
at the end of this paragraph, it is the intent of UXP to
convey all of its right, title and interest in and to all
xxxxx located within the tracts containing 320 acres (more or
less) described on Exhibit B-3, whether or not such xxxxx are
described on Exhibit B-1.
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It is also the intent of UXP to assign any after "payout" or
other future right to a working interest in any of the KMG
Purchase Leases and KMG Purchase Xxxxx assigned herein and
created pursuant to any of the contracts and agreements under
Section 2(c) below. Any depth limitation set forth on Exhibit
B-2 is for informational purposes only as UXP intends to
assign all of the right, title and interest it may own as to
all depths insofar as such leases cover and relate to the
lands described on Exhibit B-2; and
(b) All of UXP's right, title and interest in the personal
property and fixtures used in connection with the operation of
the KMG Purchase Xxxxx, including, but not limited to, all
lease equipment, xxxxx, tanks and all other equipment
associated with such KMG Purchase Xxxxx as of the Effective
Time; and
(c) The rights and obligations existing under certain contracts
and agreements, insofar as such contracts and agreements
benefit or burden the KMG Purchase Xxxxx and KMG Purchase
Leases, including, but not limited to, operating agreements,
pooling agreements, unit agreements, segregation agreements,
farmout agreements, rights of way, easements, surface
agreements, assignments, any gas gathering, processing and
marketing contracts UXP has in place with Duke Energy Field
Services, that certain Gas Purchase and Sale Agreement dated
May 14, 1975 between Union Pacific Resources Co. and Vessels
Gas Processing, Ltd. insofar and only insofar as such contract
relates to UXP's interest in the Xxxxx 1 41-13 well, or
purchase and sale agreements, but expressly excluding that
certain Exploration Agreement dated April 9, 1998 among Union
Pacific Resources Company (now known as Anadarko E&P Company,
LLC), Union Pacific Land Resources Corporation (now known as
Anadarko Land Corp.) and UXP (the "Exploration Agreement") and
further excluding, as of August 1, 2003, any oil purchase
contracts; and
(d) All of UXP's right, title and interest in the oil, gas,
casinghead gas, condensate, distillate, liquid hydrocarbons,
gaseous hydrocarbons, products refined and manufactured
therefrom, other minerals, and the accounts and proceeds from
the sale of all of the foregoing to the extent such production
is produced from the KMG Purchase Xxxxx and KMG Purchase
Leases after the Effective Time; and
(e) Copies of the Data maintained by UXP pertaining to the KMG
Purchase Xxxxx and KMG Purchase Leases but, excluding the
following: (i) all of UXP's internal appraisals and
interpretive data related to the KMG Purchase Leases and KMG
Purchase Xxxxx, (ii) proprietary information, including
without limitation all engineering evaluations prepared by or
on behalf of UXP, (iii) any seismic, geological or geophysical
information and data that are interpretive in nature, and (iv)
all information subject to a privilege.
The KMG Purchase Properties shall exclude any interest of UXP in any
injection or disposal well and/or related production equipment
associated with such a well which is located on the
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KMG Purchase Leases, including without limitation, the Xxxxx 31-13
injection well, located in the NW/4NE/4 of Section 13, Township 1
North, Range 68 West, Weld County, Colorado.
3. Segregation Agreement. With respect to the E/2 of Section 19, T2N-R65W,
and the N/2 of Section 15, T2N-R66W, the parties hereby agree at
Closing to enter into and execute Segregation Agreements substantially
in the forms set forth on Exhibits G-1 and G-2 attached hereto.
4. Exchange of Properties. In consideration of the covenants and
conditions contained in this Agreement and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged:
(a) Subject to the provisions of this Agreement, on the Closing
Date KMG shall exchange with and assign to UXP the UXP
Purchase Properties as of the Effective Time; and
(b) Subject to the provisions of this Agreement, on the Closing
Date UXP shall exchange with and assign to KMG the KMG
Purchase Properties as of the Effective Time.
5. Reserved Interests. Assignor shall reserve and except from the exchange
of the Properties in favor of itself, its successors and assigns all
accounts receivable attributable to the Properties being assigned that
are, in accordance with generally accepted accounting principles,
attributable to the period prior to the Effective Time.
6. Allocated Values. The allocated value for the personal property that is
a part of the UXP Purchase Properties, as allocated by KMG, is set
forth on a Property-by-Property basis on Exhibit A-1 and the allocated
value for the personal property that is a part of the KMG Purchase
Properties, as allocated by UXP, is set forth on a Property-by-Property
basis on Exhibit B-1.
7. Preliminary Settlement Statement. At Closing, KMG and UXP shall execute
and deliver a settlement statement, prepared in accordance with this
Agreement and generally accepted accounting principles (the
"Preliminary Settlement Statement") that shall set forth the payments
to be made to each other as set forth in this Agreement and the
calculation used to determine such amount. Four days prior to Closing,
UXP shall provide KMG with any settlement information and calculations
available for KMG to prepare a Preliminary Settlement Statement. KMG
shall prepare and provide to UXP the Preliminary Settlement Statement
for the Properties one day prior to Closing for UXP's review and
approval.
8. Adjustments. The Preliminary Settlement Statement shall include an
upward value adjustment for UXP in the amount of $282,410.40 for
expenses attributable to the oil and gas xxxxx described on Exhibit D.
Insofar as such information is available at Closing, the Preliminary
Settlement Statement shall also include an upward value adjustment to
the Assignor for expenses attributable to its Properties after the
Effective Time which were paid by Assignor and a downward value
adjustment for the Assignor for all revenues from
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production from its Properties since the Effective Time which have been
received by and disbursed to the Assignor prior to the Closing Date.
9. Conditions to Closing.
(a) Conditions to Obligations of KMG. The obligations of KMG to
consummate the transactions contemplated by this Agreement,
are subject, at the option of KMG, to the satisfaction or
waiver of the following conditions:
(1) UXP shall have received all necessary consents,
permissions, novations and approvals by third parties
or governmental authorities in connection with the
sale and transfer of the KMG Purchase Properties and
all necessary waivers of preferential and similar
rights of third parties to purchase any portion of
the KMG Purchase Properties shall have been obtained,
including without limitation all consents and waiver
of rights-of-first refusal from Anadarko Petroleum
Corporation and its subsidiaries; excluding, however,
any consents, permissions, novations and approvals
customarily obtained after Closing.
(2) UXP shall have obtained any necessary releases from
the purchaser of the oil and condensate on the KMG
Purchase Properties.
(3) UXP shall have obtained a release of any mortgages
with liens for borrowing money which cover the KMG
Purchase Properties, including without limitation,
such liens and mortgages associated with that certain
Mortgage, Security Agreement, Assignment and
Financing Statement dated 8/20/2000 and recorded
August 31, 2000 at Reception No. 2791032 in the real
property records of Weld County, Colorado, executed
by UXP for the benefit of Bank of Oklahoma, N.A.
(4) UXP shall have obtained an amendment to the
Exploration Agreement, releasing the KMG Purchase
Properties from the Exploration Agreement.
(5) UXP shall have obtained a release of the KMG Purchase
Properties from that certain Gas Gathering Agreement
dated March 29, 1993 by and between UXP and
Xxxx-XxXxx Gathering LLC.
(6) UXP shall prepare necessary letters in lieu of
transfer orders covering the KMG Purchase Xxxxx and
provide copies to KMG for review and approval by noon
on July 11, 2003.
(b) Conditions to Obligations of UXP. The obligations of UXP to
consummate the transactions contemplated by this Agreement,
are subject, at the option of UXP, to the satisfaction or
waiver of the following conditions:
(1) KMG shall have received all necessary consents,
permissions, novations and
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approvals by third parties or governmental
authorities in connection with the sale and transfer
of the UXP Purchase Properties and all necessary
waivers of preferential and similar rights of third
parties to purchase any portion of the UXP Purchase
Properties shall have been obtained, including
without limitation all consents from Anadarko
Petroleum Corporation and its subsidiaries;
excluding, however, any consents, permissions,
novations and approvals customarily obtained after
Closing.
(2) KMG shall have obtained an amendment to that certain
Gas Processing Agreement dated August 1, 1997 between
KMG (successor to Amoco Production Company) with BP
America Production Company (successor to Amoco
Production Company), releasing the UXP Purchase
Properties from such Gas Processing Agreement.
(3) KMG shall have obtained any necessary consents from
the purchasers of the oil and condensate on the UXP
Purchase Properties.
(4) KMG shall have received and recorded instruments
evidencing satisfaction and termination of the
Wattenberg Gas Investments LLC Option Exercise
Production Payment and the Westtide Investments, LLC
Option Exercise Production Payment.
(5) KMG shall have obtained a release of the UXP
Properties from the March 15, 1993 Gas Gathering
Agreement, between Xxxx-XxXxx Gathering LLC (formerly
KN Gas Gathering Inc.) and KMG, and the July 16, 1992
Gas Gathering Agreement, KN Contract No. 25000 (as
amended) between Xxxx-XxXxx Gathering LLC (formerly
KN Gas Gathering Inc.) and KMG.
(6) KMG shall prepare necessary letters in lieu of
transfer orders covering the UXP Purchase Xxxxx and
provide copies to UXP for review and approval by noon
on July 11, 2003.
10. Closing and Closing Documents. The parties shall close the transaction
contemplated by this Agreement (the Closing) on or before July 15,
2003, or such other time which is mutually acceptable to the parties
(the "Closing Date"). At the Closing, the parties shall deliver the
following documents:
(a) Each respective Assignor shall convey to its Assignee all of
Assignor's right, title, and interest in the respective
Properties by executing, acknowledging and delivering a
recordable blanket Assignment, Xxxx of Sale and Conveyance,
substantially in the form attached hereto as Exhibit C,
modifying the name of Assignor and Assignee as appropriate. As
appropriate, Assignor shall also execute, acknowledge, and
deliver separate assignments of the Properties on officially
approved forms to satisfy applicable statutory and regulatory
requirements;
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(b) Each respective Assignor shall execute and deliver to its
Assignee a Colorado Oil and Gas Conservation Commission Form
10, Change of Operator form for each Property operated by such
Assignor.
(c) Assignor and Assignee shall execute and deliver to the other
the Preliminary Settlement Statement.
(d) KMG and UXP shall execute and deliver to the intended
recipient and the other party hereunder such letters in lieu
of transfer orders which are reasonable or necessary to
effectuate the transactions contemplated hereunder.
(e) Each Assignor shall provide evidence that all consents and
approvals prerequisite to the sale and conveyance of its
Properties (except for consents and approvals of governmental
entities or tribal authorities customarily obtained subsequent
to the transfer of title) have been obtained (including
without limitation the consents set forth and described in
Section 9), as well as evidence of waiver or lapse of any
unexercised preferential purchase rights applicable to the
Properties.
(f) KMG and UXP shall execute, acknowledge and deliver to the
other Pooling Agreements covering T2N-R65W, Section 19: E/2
and T2N-R66W, Section 15: N/2.
(g) KMG and UXP shall execute, acknowledge and deliver to the
other the Segregation Agreements, substantially in the forms
attached hereto as Exhibits G-1 and G-2.
(h) KMG or UXP, as appropriate, shall deliver to the other the net
amount of any payment owing after calculating the adjustments
set forth on the Preliminary Settlement Statement.
(i) The parties shall execute and deliver any other documents
reasonably requested by either party in order to effectuate
the rights granted herein.
11. Delivery of Data. Assignor shall deliver copies of the Data to Assignee
within thirty (30) days after the Closing Date. Each party agrees to
pay an amount equal to one-half of any outside copying charges for Data
and the Final Settlement Statement shall include an adjustment for all
such copying charges. The Data provided to Assignee shall not include
any confidential correspondence, and shall not include any information
which, if disclosed, would cause Assignor to breach any contract or
agreement. Assignor may retain originals of the Data. Assignor makes no
representations or warranties as to the accuracy or completeness of the
Data. Assignor shall not allow Assignee access to geophysical or
seismic records if by so doing it would be in breach of any contract or
agreement. If Assignee, in its reasonable opinion, desires to review or
copy information maintained by Assignor for a Property that is not
included in the Data, excluding any seismic or geological or
geophysical information and data that is interpretive in nature, and
Assignor is not precluded under obligations of confidence from
disclosing such information, upon request to
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Assignor and reasonable advance notice, Assignee may review such
information in the office of Assignor during normal business hours or
make a copy of such information at the consent of Assignor.
12. Effective Time. The ownership of the Properties shall be transferred
from Assignor to Assignee on the Closing Date, effective as of 8:00
a.m. at the location of the Properties on January 1, 2003 (the
"Effective Time"). Assignor shall be entitled to all amounts realized
from, and accruing to, the Properties prior to the Effective Time,
including the right to all production in storage (less one foot for
basic sediment and water) and not previously sold by Assignor (gauged
by the operator of the Property as of the Effective Time), with each
Assignor valuing such production in storage in accordance with its own
oil purchase contracts or the operator's oil purchase contract, if
operator was selling Assignor's oil under operator's contract;
including oil in processing and inventory; and shall be responsible for
all expenses for the development and operation of the Properties prior
to the Effective Time. Assignee shall be entitled to any amounts
realized from, and accruing to, the Properties subsequent to the
Effective Time and shall be responsible for all expenses for the
development and operation of the Properties subsequent to the Effective
Time. The Preliminary Settlement Statement and the Final Settlement
Statement shall include payments between the parties as appropriate
consistent with the above allocation of expenses and revenues, which
shall include an upward value adjustment to Assignor for Assignor's
share of oil in storage (less one foot for basic sediment and water)
using the price in effect on December 31, 2002.
13. Covenants and Agreements of Assignor. During the period from the
Effective Time to the Closing Date, Assignor agrees, unless
specifically waived by Assignee in writing, as follows:
(a) Subject to the provisions of applicable operating and other
agreements, Assignor shall continue to operate and administer
the Properties to be assigned by Assignor in a good and
workmanlike manner consistent with its past practices, and
shall carry on its business with respect to such Properties in
substantially the same manner as before execution of this
Agreement and shall file any required reports in a timely
manner, including production reports, for the time period up
to the June 30, 2003, whether such reports are due before or
after the Closing Date.
(b) Assignor has not incurred any operating or capital
expenditures or entered into any contracts and agreements
relating to the Properties to be assigned by Assignor that
involve individual commitments of more than $5,000 net to
Assignor's interest in any month.
Notwithstanding the foregoing, certain interim letter agreements dated
February 26, 2003 and February 28, 2003 have been entered into between
the parties regarding specific xxxxx and locations operated by KMG. The
parties acknowledge and agree that with respect to those specific xxxxx
and locations only, operations shall be conducted and expenditures
incurred in accordance with the terms of the interim letter agreements
entered into between the parties.
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14. Covenants and Agreements of Assignee. Assignee shall, subject to the
applicable terms of existing operating agreements, take over operations
as of 8:00 a.m. local time at the wellsites on the day following the
Closing Date, with respect to Assignor-operated Xxxxx included in the
Properties assigned to Assignee at the Closing. Assignee shall file any
required reports in timely manner, including production reports, for
the month of July. Assignor shall use its best efforts (without
expending money or extraordinary amounts to time) to recommend to the
other working interest owners that Assignee succeed Assignor as
operator, but Assignor has no obligation to assure that Assignee will
succeed Assignor as operator. Upon taking over operations, Assignee
will post all necessary state, federal and local bonds and shall assist
Assignor in having Assignor's existing bonds released, or in the
alternative, having the Xxxxx operated by Assignee released from
Assignor's existing bond.
15. Assumption of Liabilities and Indemnity. If Closing occurs, and except
for title and environmental matters which are governed exclusively
under paragraphs 20 and 21:
(a) EXCEPT TO THE EXTENT ALLOCATED TO ASSIGNOR UNDER PARAGRAPH
15(b), ASSIGNEE SHALL DEFEND, INDEMNIFY AND SAVE AND HOLD
HARMLESS ASSIGNOR, ITS OFFICERS, DIRECTORS, EMPLOYEES AND
AGENTS AGAINST ALL LOSSES, DAMAGES, CLAIMS, DEMANDS, SUITS,
COSTS, EXPENSES, LIABILITIES AND SANCTIONS OF EVERY KIND AND
CHARACTER, INCLUDING WITHOUT LIMITATION REASONABLE ATTORNEYS'
FEES, COURT COSTS AND COSTS OF INVESTIGATION, WHICH ARISE FROM
OR IN CONNECTION WITH ANY "ASSIGNEE OBLIGATIONS", WHICH SHALL
INCLUDE ALL COSTS, RISKS, LIABILITIES, AND OBLIGATIONS
ATTRIBUTABLE TO THE PROPERTIES ASSIGNED TO IT THAT RELATE TO
PERIODS BEFORE OR AFTER THE EFFECTIVE TIME.
(b) ASSIGNOR SHALL DEFEND, INDEMNIFY AND SAVE AND HOLD HARMLESS
ASSIGNEE, ITS OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS
AGAINST ALL LOSSES, DAMAGES, CLAIMS, DEMANDS, SUITS, COSTS,
EXPENSES, LIABILITIES AND SANCTIONS OF EVERY KIND AND
CHARACTER, INCLUDING WITHOUT LIMITATION REASONABLE ATTORNEYS'
FEES, COURT COSTS AND COSTS OF INVESTIGATION, WHICH ARISE FROM
OR IN CONNECTION WITH ANY CLAIMS THAT RELATE TO PERIODS BEFORE
THE EFFECTIVE TIME AND THAT ARE ASSERTED BY A THIRD PARTY
ARISING FROM OR IN CONNECTION WITH THE PROPER PAYMENT OF
ROYALTY AMOUNTS DUE (OTHER THAN ERRORS IN PAYMENT DUE TO
CLERICAL ERRORS OR TITLE OR DIVISION ORDER MISTAKES OR
VARIANCE), INCLUDING WITHOUT LIMITATION, ANY CLAIMS RELATING
TO MARKETING OR TRANSPORTATION DEDUCTIONS. For purposes of
this paragraph a "Claim" means any and all claims, demands,
suits, causes of action, losses, damages, liabilities, fines,
penalties and costs (including reasonable attorneys' fees and
costs of litigation) which are brought by or owed to a Third
Party. A "Third Party" means any person or entity,
governmental or
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otherwise, other than Assignor and Assignee, and their
respective affiliates, but regardless expressly including
Anadarko E&P Company, LLC and Anadarko Land Corp. and their
successors.
16. Contracts. Assignee shall assume and agree to perform under the
contracts and agreements that benefit and burden the Properties as of
the Effective Time, except for such contracts specifically excluded
under Section 1(c) or 2(c), as applicable. Assignor represents and
warrants that other than the gas gathering, gas processing or gas
marketing contacts or oil purchase contract described on Schedule 16,
the Properties being conveyed are undedicated. Except for the contracts
described on Schedule 16, Assignee shall be responsible to provide for
its own gas gathering, gas processing and gas marketing arrangements
and its own oil purchase arrangements and Assignee shall not be
entitled to rely on or have any rights in Assignor's other prior,
existing or future gas gathering, gas processing or gas marketing
contracts or oil purchase contracts.
17. Warranties. The assignment from Assignor to Assignee shall be made
without warranty of title to the Properties, either express or implied,
except that the Properties shall be conveyed to Assignee free and clear
of all liens and encumbrances created by, through, and under Assignor.
Assignee assumes the risk of condition of the Properties, including
compliance with all laws, rules, orders and regulations affecting the
environment, whether existing before or after the Closing Date. The
Assignment and Xxxx of Sale from Assignor to Assignee shall disclaim
any warranty of merchantability or fitness for particular purpose as to
the personal property and Assignee shall accept the personal property
"As Is," in its present location and condition.
18. Representation of Assignor.
(a) KMG, as Assignor, hereby represents that except as set forth
on the attached Schedule 18, there is no action, suit, or
proceeding (including, without limitation, takings under
condemnation or eminent domain) pending, or to the knowledge
of Assignor threatened, against the UXP Purchase Properties.
Except as set forth on the attached Schedule 18, there is no
claim or demand (including, without limitation, takings under
condemnation or eminent domain) pending, or to the knowledge
of Assignor threatened, against the UXP Purchase Properties
which would have a material adverse affect on the value,
operation or Assignor's ownership of the affected UXP Purchase
Property (measured individually and in the aggregate). KMG
further represents, as Assignor, that during the period from
March 15, 2003 to the Closing Date, to its knowledge there was
no material change in the title and environmental condition of
the UXP Purchase Properties.
(b) UXP, as Assignor, hereby represents that there is no action,
suit, or proceeding (including, without limitation, takings
under condemnation or eminent domain) pending, or to the
knowledge of Assignor threatened, against the KMG Purchase
Properties. There is no claim or demand (including, without
limitation, takings under condemnation or eminent domain)
pending, or to the knowledge of Assignor
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threatened, against the KMG Purchase Properties which would
have a material adverse affect on the value, operation or
Assignor's ownership of the affected KMG Purchase Property
(measured individually and in the aggregate). UXP further
represents, as Assignor, that during the period from March 15,
2003 to the Closing Date, to its knowledge there was no
material change in the title and environmental condition of
the KMG Purchase Properties.
19. Representation of Assignee. KMG and UXP, as Assignee, each represent
that it is experienced and knowledgeable in the oil and gas business
and is aware of its risks. Assignee acknowledges that Assignor has made
no representations or warranties whatever, express or implied, as to
the reserves attributable to the Properties or the value thereof, as to
the condition or state of repair of any of the Properties or as to the
legal, tax or other consequences of the transaction contemplated by
this Agreement. In entering into this Agreement, Assignee has relied
solely upon its independent investigation of, and judgment with respect
to, such matters. Assignee acknowledges and accepts the risks and
absence of liquidity inherent in ownership of the Properties.
20. Review Period. From and after February 19, 2003, Assignee had the
right, at reasonable times during normal business hours, to conduct its
investigation into the status of the title and environmental condition
of the Properties. All information regarding the Properties furnished
by Assignor to Assignee was furnished to Assignee solely as a courtesy,
and Assignor makes no representation or warranties concerning its
accuracy or completeness, and assumes no liability for any use by
Assignee whatsoever. Assignee agrees that any inspection it conducted
of the Properties was at its sole cost and risk and agrees to hold
harmless and indemnify Assignor for any damages or injury of any kind
incurred by any party as the result of such inspection. Assignee agrees
that during the course of conducting such investigation, Assignee did
not discover any environmental or title defects materially affecting
the Properties, and therefore, all environmental and title defects are
deemed waived. Assignor shall be released from any liability therefor,
the parties shall proceed with Closing, Assignor shall be under no
obligation to correct any defect, and Assignee shall assume the risks,
liability and obligations associated with any such defects.
21. Defect Remedies. Assignee shall have no remedy for any title or
environmental defect after the Closing Date.
22. Casualty Loss. If subsequent to the date of this Agreement and, prior
to the Closing, all or any material portion of the Properties to be
conveyed to Assignee at the Closing is destroyed by fire or other
casualty, is taken in condemnation or under the right of eminent domain
or proceedings for such purposes are pending or threatened, Assignee
shall receive such interest notwithstanding any such destruction,
taking or pending or threatened taking. Assignor shall, at the Closing,
pay to Assignee all sums paid to Assignor by third parties by reason of
the destruction or taking of such Properties to be assigned to
Assignee, and shall assign, transfer and set over unto Assignee all of
the right, title and interest of Assignor in and to any unpaid awards
or other payment from third parties arising out of the destruction,
taking or pending or threatened taking as to such interest to be
conveyed to Assignee. In addition, Assignor
11
shall pay to Assignee the amount of Assignor's deductible under the
applicable insurance policy or policies. Assignor shall not voluntarily
compromise, settle or adjust any material amount payable by reason of
any material destruction, taking or pending or threatened taking as to
the interest to be conveyed to Assignee without first obtaining the
written consent of Assignee.
23. Taxes. Severance, conservation and other production taxes attributable
to the production from the Properties shall be the obligation of the
party entitled to such production. Each party will be responsible for
the collection of the tax and the filing of any severance tax reports
attributable to the production for which they were entitled, except as
provided in Section 13(a) hereinabove.
Ad valorem and personal property taxes attributable to the Properties
shall be prorated between Assignee and Assignor as of the Effective
Time as described below. Both parties understand and agree that the
payment of ad valorem and personal property taxes is generally the
obligation of the operator. The operator typically withholds or
collects such taxes from other interest owners and remits full payment
to the proper taxing authority. Based on this understanding, (i) KMG
will be responsible for the payment of ad valorem taxes attributable to
the UXP Purchase Properties for the 2002 tax assessment year, which are
based on the value of 2001 production and payable in 2003, (ii) UXP
will be responsible for the payment of ad valorem taxes attributable to
the UXP Purchase Properties for the 2003 tax assessment year, which are
based on the value of 2002 production and payable in 2004, (iii) UXP
will be responsible for the payment of ad valorem taxes attributable to
the KMG Purchase Properties for the 2002 tax assessment year, which are
based on the value of 2001 production and payable in 2003, and (iv) KMG
will be responsible for the payment of ad valorem taxes attributable to
the KMG Purchase Properties for the 2003 tax assessment year, which are
based on the value of 2002 production and payable in 2004. These
estimates will be adjusted, if necessary on the Final Settlement
Statement at which time they will be final with no further adjustments
being made for actual ad valorem taxes paid. Notwithstanding the
foregoing, UXP and KMG agree that all monies held in escrow relating to
withholdings on 2002 and 2003 production from interest owners other
than UXP and KMG plus amounts from certain third party purchasers of
oil and gas who have remitted ad valorem tax withholding to either UXP
or KMG as non-operator of the Properties, UXP or KMG will remit the
funds to the operator through the Final Settlement Statement.
Personal property taxes assessed against the personal property and
fixtures associated with the KMG Purchase Xxxxx for the 2002 tax
assessment year will be paid by UXP, and such taxes assessed against
the personal property and fixtures associated with the UXP Purchase
Xxxxx for the 2002 tax assessment year will be paid by KMG. Any unpaid
taxes will be included in the Preliminary Settlement Statement at
Closing. These taxes will be adjusted, if necessary, on the Final
Settlement Statement at which time they will be final with no further
adjustments being made for actual personal property taxes paid.
24. Post Closing Accounting. An accounting shall be held no later than 90
days after the Closing Date. At that time Assignor shall furnish to
Assignee a complete account as to all invoices
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paid and all revenues received attributable to all operations on, and
production from, the Properties assigned to Assignee during the period
from the Effective Time to the Closing Date. Such account shall be
settled between the parties, within sixty days following expiration of
the ninety days, by the payment of cash, as appropriate, pursuant to a
Final Settlement Statement, to be prepared by Assignor and approved by
both parties. Assignor shall not charge the Assignee XXXXX or other
general and administrative overhead for the Properties assigned to
Assignee for the period between the Effective Time and the Closing
Date.
25. Gas Balancing. The estimated volume and value of such underproduction
or overproduction attributable to the KMG Purchase Properties through
December 31, 2002 is set forth on a Property-by-Property basis on
Exhibit E hereto, such value to be the weighted average cost of gas,
based on the first of the month CIG index price, for each month prior
to the Effective Time. UXP represents that Exhibit E reflects all of
the gas imbalances which UXP believes exists on the KMG Purchase
Properties as of the Effective Time. The estimated volume and value of
such underproduction or overproduction attributable to the UXP Purchase
Properties through December 31, 2002 is set forth on a
Property-by-Property basis on Exhibit F hereto, such value to be the
weighted average cost of gas, based on the first of the month CIG index
price, for each month prior to the Effective Time. KMG represents that,
except for any imbalance related to the Xxxxxxxx 1-29 well, Exhibit F
reflects all of the gas imbalances which KMG believes exists on the UXP
Purchase Properties as of the Effective Time. The Preliminary
Settlement Statement shall include an adjustment for the value of the
underproduction or overproduction of gas attributable to the Assignor's
interest in the Properties as of the Effective Time. Prior to the
completion of the Final Settlement Statement, the Parties will use
their best efforts to update (to July 31, 2003) the volume amounts
listed on Exhibits E and F with respect to any royalty imbalances and
the Final Settlement Statement shall include an adjustment for the
value of royalty payments due to overproduction of gas attributable to
the Assignor's interest in the Properties from the Effective Time
through July 31, 2003. The Final Settlement Statement shall also
include an adjustment for the value of the underproduction or
overproduction of gas attributable to UXP's interest in the Xxxxxxxx
1-29 well for all periods of time prior to the Effective Time. If
Assignor and a third party operator (other than Assignee) disagree as
to the amount of any imbalance, Assignee and Assignor shall mutually
agree to an amount for purposes of this paragraph. After the completion
of the Final Settlement Statement, there shall be no further adjustment
made as to gas imbalances on any of the Properties and the Assignee
shall be responsible for and administer all gas imbalance matters
affecting the Properties received in the exchange by Assignee.
26. Operations Liability Upon Closing. Assignee will comply with all laws
and governmental regulations with respect to all operations associated
with the Xxxxx assigned to it hereunder, including abandonment of
xxxxx, the compliance with laws or rules regarding the environment, and
regarding inactive or unplugged xxxxx, including bonding requirements,
and surface work as specified in the applicable oil and gas leases or
applicable law or regulation.
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27. Post Closing Administrative Accounting Responsibilities. To the extent
Assignor is presently involved in the administration of the Properties,
Assignor shall retain the obligation and responsibility for the
administration of the Properties for the period ending on the Closing
Date. However, Assignor and Assignee recognize that Assignee's
obligation to immediately assume administrative accounting
responsibilities for the Properties upon Closing may be impractical and
will present certain difficulties for both Assignor and Assignee in
regards to transfer of such administrative responsibilities, timely and
proper revenue distributions, payment of expenses, joint interest
xxxxxxxx and the rendition of post-closing settlement statements.
Therefore, to facilitate a convenient and proper transfer of the
administrative accounting responsibilities relating to the Properties,
Assignor and Assignee agree the administrative duties will be
transferred from the Assignor to the Assignee in the following manner:
(a) Revenue Distributions:
(1) Assignor shall transfer, assign and deliver to
Assignee all suspense funds (with the reason why such
funds are held in suspense) associated with the KMG
Purchase Properties and the UXP Purchase Properties,
as applicable, as an adjustment under the Final
Settlement Statement.
(2) Provided Assignor was responsible for disbursing
revenues prior to Closing, Assignor shall retain such
responsibility for distribution of revenues
attributable to production through the end of the
month of Closing. Such distribution shall be
conducted by Assignor for revenues received through
Assignor's cut-off date for revenue distribution
during the second month following the month of
Closing, making no changes to paydecks then in place.
(3) In the event Assignor should receive revenues
subsequent to the Assignor's cutoff for its last
revenue distribution, as described above, unless such
revenues are for production prior to the Effective
Time, Assignor shall remit such revenues to Assignee
within five (5) business days, and Assignee shall be
responsible for distributing all such amounts,
including distributions to royalty owners.
(4) In the event Assignee should receive revenues for
production from the Properties for the production
period prior to Effective Time, Assignee shall remit
such revenues, net of severance taxes and royalties,
to Assignor within five (5) business days.
(5) After Closing any information on the Properties
received by Assignor related to ownership changes and
address changes will be remitted to the Assignee as
soon as is practical.
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(b) Payment of Expenses and Joint Interest Xxxxxxxx:
(1) Assignor shall pay, in a timely manner, all invoices,
expenses and joint interest xxxxxxxx for such
expenses received prior to Closing, excepting XXXXX
or other general and administrative expenses that the
Assignor has agreed hereunder shall not be charged to
Assignee after the Effective Time, which to the
extent not reflected in the Preliminary Settlement
Statement shall cause an upward value adjustment to
Assignor on the Final Settlement Statement.
(2) In the event Assignor should receive invoices,
expenses and joint interest xxxxxxxx on and after the
Closing, unless such charges are for periods prior to
the Effective Time (which shall be paid by Assignor),
Assignor shall remit such invoices, expenses and
joint interest xxxxxxxx to Assignee within five (5)
business days, and Assignee shall be responsible for
payment thereof.
(3) Assignor shall pay all invoices, expenses and joint
interest xxxxxxxx attributable to the period prior to
the Effective Time, except to the extent such
expenses pertain to claims made by third parties that
are covered by the Assignee indemnity set forth in
paragraph 15. In the event Assignee should receive
such invoices, expenses and joint interest xxxxxxxx
attributable to the period prior to the Effective
Time, Assignee shall remit such invoices, expenses
and joint interest xxxxxxxx to Assignor within five
(5) business days and Assignor shall promptly pay the
same.
(4) Assignor shall not allow any liens to encumber the
Properties assigned, by non-payment of invoices,
expenses and joint interest xxxxxxxx associated with
such Properties.
28. Surface Access/Joint Use of Easements. To the extent Assignee may under
the KMG Purchase Leases or the UXP Purchase Leases, as appropriate, or
under any surface use agreement or rights-of-way affecting lands
covered by such leases, Assignee hereby grants to Assignor and its
affiliates a perpetual, non-exclusive, cost free right-of-way and
surface lease on, over and through the Properties (including, without
limitation, pipeline, utility and road usage rights-of-way, facility
surface leases and all necessary rights of ingress and egress), to the
extent reasonably necessary or convenient to allow Assignor and its
affiliates to continue to access and conduct operations on or across
the Properties at no cost to Assignee. Assignee agrees to execute any
and all instruments deemed reasonably necessary by Assignor or its
affiliates to further delineate the rights granted herein. Assignor
shall defend, indemnify, save and hold harmless Assignee from any loss,
damage, claim, demand, expenses (including reasonable attorneys' fees)
which arise from Assignor exercising its rights under this Section 28.
29. Separation of Certain Joint Facilities. The parties acknowledge that as
of the Closing Date, certain Xxxxx that will be assigned share
production facilities or consolidation lines with
15
other oil and gas xxxxx which are not being assigned. Therefore, the
parties agree that immediately after the Closing, the following shall
occur with respect to each of the following described Properties:
(a) Shared Facilities on Xxxxxxxx 86 Amoco "I" #1 and Xxxxxxxx 86
Amoco "O" #8. As of the Closing Date, the Xxxxxxxx 86 Amoco
"I" #1 and Xxxxxxxx 86 Amoco "O" #8 share a tank, separator,
meter run and flowline/gathering line, as well as a water tank
with another facility. The parties agree that on the day
following the Closing Date, UXP will shut in the Xxxxxxxx 86
Amoco "I" #1, and thereafter set new production facilities and
re-route the Xxxxxxxx 86 Amoco "I" #1 so that its flowline
goes to the new production facilities. UXP will permit KMG to
access this well to disconnect it from the gathering line. UXP
will also be responsible for securing a gas market to this new
facility. With respect to this well only the jointly shared
production facilities will not be assigned to UXP and from and
after the Closing Date, UXP shall have no rights to utilize
the jointly shared production facility. The costs and expenses
to set new production facilities and flowlines for the
Xxxxxxxx 86 Amoco "I" #1 shall be borne 100% by UXP.
(b) Shared Facilities on the Xxxxxxx 9-19A and the UPRR 38 PA X1
J. As of the Closing Date, the Xxxxxxx 9-19A and the UPRR 38
PA X1 J share an oil tank, water pit and separator and sell
gas through a common Xxxx-XxXxx Gathering LLC meter run. The
parties agree that on the day following the Closing Date, KMG
will shut in the Xxxxxxx 9-19A, and thereafter set new
production facilities either on the surface location currently
being used for the combined facility or on a separate location
on KMG's leasehold, and re-route the Xxxxxxx 9-19A so that
production is processed through the new production facility.
KMG will also establish a new gas market to Xxxx-XxXxx
Gathering LLC on the surface location currently being used for
the combined facility or on a separate location on KMG's
leasehold, to establish a separate gas measurement into
Xxxx-XxXxx Gathering LLC. With respect to this well only the
jointly shared production facilities will be assigned 100% to
UXP and from and after the Closing Date, KMG shall have no
rights to utilize the jointly shared production facility. The
costs and expenses to set new production facilities for the
Xxxxxxx 9-19A shall be borne 100% by KMG.
(c) Flowline for Xxxxxxx 41-1. As of the Closing Date, the Xxxxxxx
41-1 is connected to a gathering line owned by Resource
Gathering Systems, Inc. which flows into a Resource Gathering
Systems, Inc CDP. Therefore, on the day following the Closing
Date, UXP agrees to shut in the Xxxxxxx 41-1, and permit
Resource Gathering Systems, Inc. to access this well and
surface location in order to disconnect the Xxxxxxx 41-1 and
remove the allocation meter currently being used on the
production facility location. Xxxx-XxXxx Gathering LLC shall
then perform the necessary operations to tie the well directly
into Xxxx-XxXxx Gathering LLC gathering line and install a new
custody transfer meter. All costs and expenses associated with
the foregoing operations will be shared equally between KMG
and UXP, and will be included in the Final Settlement
Statement.
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30. LIABILITY AND JURY WAIVERS.
(a) LIMITATION ON LIABILITY. NO PARTY SHALL BE REQUIRED TO PAY OR
BE LIABLE FOR INCIDENTAL, CONSEQUENTIAL, EXEMPLARY, PUNITIVE,
OR INDIRECT DAMAGES (WHETHER OR NOT ARISING FROM ITS
NEGLIGENCE) TO ANY OTHER PARTY REGARDING ANY DISPUTE ARISING
OUT OF THIS AGREEMENT OR A CLAIM OF BREACH HEREOF. THIS
PROVISION SHALL NOT DIMINISH OR AFFECT IN ANY WAY THE PARTIES'
RIGHTS OR OBLIGATIONS UNDER ANY INDEMNITIES PROVIDED FOR IN
THIS AGREEMENT.
(b) WAIVER OF JURY TRIAL. EACH PARTY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT.
31. Termination Period. If the Closing has not occurred on or before the
Closing Date, this Agreement shall automatically terminate unless KMG
and UXP agree in writing to an extension.
32. Further Assurances. After Closing, KMG and UXP shall execute,
acknowledge and deliver or cause to be executed, acknowledged and
delivered such instruments, and shall take such other action as may be
necessary or advisable to carry out their obligations under this
Agreement and under any document, certificate or other instrument
delivered pursuant hereto.
33. Amendment. This Agreement may be amended only by written instrument
executed by both KMG and UXP.
34. Brokers. Each party hereto indemnifies the other against any liability
or expense for brokerage fees, finder's fees, agent's commissions or
other similar forms of compensation incurred by the indemnifying party
in connection with this Agreement or any transaction contemplated
hereby.
35. Expenses. Each party shall be solely responsible for expenses incurred
in connection with this Agreement and shall not be entitled to
reimbursement by the other party.
36. Survival. The terms of this Agreement shall survive closing and will
not merge with any conveyance. The covenants, conditions, and other
provisions of those paragraphs shall endure and, as to the Xxxxx, shall
run with the land covered by the Leases. They shall not be extinguished
by the doctrine of merger by deed or any similar doctrine and no
waiver, release, or forbearance of the application of the provisions of
those paragraphs in any given circumstance shall operate as a waiver,
release, or forbearance of the provisions of the paragraphs as to any
other circumstance.
17
37. Notices. All notices which are required or may be given pursuant to
this Agreement shall be given in writing and delivered personally or by
registered or certified mail, postage prepaid to the addresses of the
parties first set forth above. All notices shall be deemed to have been
given as of the date of receipt.
38. Entire Agreement. This Agreement constitutes the entire Agreement
between the parties hereto and supersedes all prior agreements,
negotiations, and understandings.
39. Governing Law. This Agreement shall be interpreted in accordance with
the laws of the state of Colorado.
40. Press Release. Neither party shall make any press release or other
announcement in connection with this Agreement without the prior
written consent of the other, provided that this provision shall not
apply to any filing with any governmental body or stock exchange
required by law, rule or regulation.
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first set forth above.
XXXX-XXXXX ROCKY MOUNTAIN
CORPORATION
By /s/ Xxxx X. Xxxxxxxx
-----------------------------
Name: Xxxx X. Xxxxxxxx
Title: Vice President
UNITED STATES EXPLORATION, INC.
By /s/ Xxxxx X. Xxxxxx
-----------------------------
Name: Xxxxx X. Xxxxxx
Title: President
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EXHIBITS
A-1 UXP Purchase Xxxxx and Personal Property Values
A-2 UXP Purchase Leases
A-3 320 Acre Tracts for UXP Purchase Xxxxx
B-1 KMG Purchase Xxxxx and Personal Property Values
X-0 XXX Xxxxxxxx Xxxxxx
X-0 320 Acre Tracts for KMG Purchase Xxxxx
C Form of Assignment, Xxxx of Sale and Conveyance
D Credit Adjustments
E Gas Imbalance/KMG Purchase Properties
F Gas Imbalance/UXP Purchase Properties
G-1 Form of Segregation Agreement for T2N-R65W, Section 19: E/2
G-2 Form of Segregation Agreement for T2N-R66W, Section 15: N/2
(NOT INCLUDED AS PART OF EXHIBIT 2.1 TO FORM 8-K)
SCHEDULES
Schedule 16 Gas Gathering, Gas Processing, Gas Marketing and Oil Purchase
Contracts
Schedule 18 KMG Litigation
(NOT INCLUDED AS PART OF EXHIBIT 2.1 TO FORM 8-K)
20
