EXHIBIT 9.01
PURCHASE AND SALE AGREEMENT
In consideration of the mutual promises contained herein and other good and
valuable consideration, MONUMENT RESOURCES, INC. a Colorado corporation, of ▇▇▇▇
▇. ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "SELLER"), and TEG-MID
CONTINENT, INC., a Colorado corporation, a subsidiary of Sefton Resources, Inc.
a B.V.I company, of ▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the
"PURCHASER") enter into this Purchase and Sale Agreement dated May 10, 2005,
called the "AGREEMENT". SELLER and PURCHASER may also be referred to
individually as a "Party" or, collectively, as the "Parties".
1. PROPERTY BEING SOLD. Subject to the terms and conditions set forth
hereinafter, SELLER agrees to convey to PURCHASER all of SELLER's right, title
and interest in the PROPERTY (as defined below) and PURCHASER agrees to accept
the PROPERTY, and tender consideration therefore, in the manner and of the type
and amount as required below.
A. Property: For purposes of this AGREEMENT, PROPERTY shall mean all of
SELLER's right, title and interest in and to: (i) the leases and mineral
interests described in EXHIBIT A hereto and subject to restrictions as set forth
therein (the "Leases") and in and to the lands covered by the Leases described
on Exhibit "A" (collectively, the "Lands") and to all of the hydrocarbons
produced from the Leases and the Lands and all of its interest in and to all the
property and rights incident thereto, (ii) the ▇▇▇▇▇, equipment, materials and
other personal property used or useful in connection with the exploration,
production, gathering, storing, measuring, treating, processing, operating,
maintaining or marketing of production from any of the Leases described on
Exhibit "B", "B1" and "B2" (the "Equipment"); (iii) COG Transmission Corporation
and all its assets (evidenced by acquisition of all outstanding shares of COG)
and the right-of ways and easements, equipment, materials and other personal
property used or useful in connection with the gathering, storing, measuring,
treating, processing, operating, maintaining or marketing of production from any
of the Leases (the "Pipeline Equipment") and (iv) the contracts and contractual
rights related to the Leases, Lands, Equipment and Pipeline Equipment, including
without limitation, Operating Agreements, all rights to receive production
including overriding royalty interests, Area of Mutual Interest Agreements,
processing, gathering, compression and transportation agreements; product
purchase and gas sales contracts, farmouts and farmins, rights-of-way, easements
and licenses; surface leases or agreements; and all other contracts and
Agreements and files, records, information and data related thereto, including
geological and geophysical data (the "Contracts").
B. Excluded Assets: None.
C. Reservations and/or exceptions: None
2. PURCHASE PRICE. The gross purchase price for the PROPERTY shall be
$1,775,000.00 (One Million Seven Hundred and Seventy Five Thousand Dollars) the
"Purchase Price". The Purchase Price is payable as follows.
A. PURCHASER, on or before May 10, 2005 shall deliver to a mutually agreed
upon escrow agent, pursuant to the terms of an escrow agreement in the form
attached hereto as Exhibit C, the sum of $150,000.00, such sum herein called the
"Deposit". At Closing, the Deposit, together with interest (if any) thereon,
shall be applied against the Purchase Price.
B. PURCHASER shall pay SELLER, by Cashier's or Certified Check or other
immediately available funds, the Closing Amount, as defined herein, subject to
adjustments, additions, corrections and subtractions outlined and/or detailed
herein.
3. CLOSING.
A. Closing Statement. SELLER shall deliver to PURCHASER five (5) days prior
to the Closing a statement (the "Closing Statement") reflecting the net purchase
price ("Net Purchase Price") after making the adjustments for income and
expenses subsequent to the Effective Date or as agreed to by the Parties herein,
as set forth below.
The Closing Statement shall be prepared in accordance with customary
accounting principles used in the oil and gas industry and SELLER shall
immediately afford PURCHASER access to SELLER's records pertaining to the
computation of said Statement. As soon as practicable after receipt of the
Statement, but in any event prior to Closing, Purchaser shall deliver to
SELLER a written report containing any changes which PURCHASER proposes be
made to the Statement. In calculating adjustments to the Purchase Price the
parties agree:
(1) All income from operations and sales of production from the
PROPERTY occurring prior to the Effective Date shall belong to the SELLER
and all costs attributable to services rendered and operations undertaken
prior to Effective Date shall be borne and paid in full by SELLER. On and
after the Effective Date all income from operations and sales of production
from the PROPERTY shall belong to PURCHASER and all costs attributable to
services rendered and operations undertaken subsequent to Effective Date
shall be borne and paid in full by PURCHASER.
(2) The "Net Purchase Price" which PURCHASER shall pay at Closing for
the interests shall be:
(a) The Purchase Price set forth in Section 2 above less the Deposit
and interest, if any.
(b) Plus reimbursement for any pre-paid expenses attributable to
operating and maintaining the PROPERTY subsequent to the Effective
Date but incurred by SELLER prior to the Closing Date under or
pursuant to applicable operating agreements, leases and other
agreements pertaining to the PROPERTY.
(c) Plus reimbursement for any costs or expenses attributable to the
PROPERTY for liabilities that occurred after the Effective Date, but
were paid for by SELLER.
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(d) Less any unpaid ad valorem, property, production, severance, and
similar taxes and assessments based upon or measured by the ownership
of property or the production of hydrocarbons or the receipt of
proceeds there from attributable to the PROPERTY (prorated to the
Effective Date, on an estimated basis, if necessary) prior to the
Effective Date.
(e) Less revenues received from mutually agreed upon sales of oil and
gas attributable to SELLER's Interest after the Effective Date. (f)
Less any outstanding costs attributable to the PROPERTY accruing prior
to the Effective Date and which have not been paid by SELLER prior to
Closing.
(g) Less or Plus any other amounts mutually agreed upon in writing by
SELLER and PURCHASER, to include the reimbursement to the Seller of
certain "Capital Expenditures" detailed in the Letter of Intent dated
March 10, 2005 and described in Section 15A(1)(a).
B. Closing Date. Closing shall occur on or before July 31, 2005 (the
"Closing Date"), at SELLER's office or as agreed to by the Parties.
C. Closing Events. At Closing, the following shall occur, each being a
condition precedent to the others and each being deemed to have occurred
simultaneously with the others:
(1) SELLER shall execute, acknowledge and deliver, in substantially the
form attached hereto as Exhibit "B", a separate Assignment of and ▇▇▇▇ of Sale
(the "Assignment") conveying all of SELLER's right title and interest in and to
the PROPERTY. The Assignment shall be effective as of June 1, 2005, or the first
day of the month of Closing (the "Effective Date"). All conveyances shall be
without warranty of title except as to claims by, through and under Seller but
not otherwise. PURCHASER shall place the Assignment instrument of record in the
Recorder's Office in the respective County in which the PROPERTY is located,
immediately after Closing and shall furnish SELLER with a recorded copy as soon
as practical thereafter.
(2) SELLER and PURCHASER shall execute the Closing Statement prepared by
SELLER and approved by PURCHASER that shall set forth the Closing Amount (as
hereinafter defined). The term "Closing Amount" shall be the Net Purchase Price
calculated and or adjusted as provided in Section 3(a), using for such
adjustments the best information available.
(3) SELLER and PURCHASER shall execute, acknowledge and deliver transfer
orders, or letters in lieu thereof, directing all Purchasers of production to
make payment to PURCHASER of the proceeds attributable to production after the
Effective Date from the PROPERTIES assigned.
(4) SELLER shall execute, acknowledge and deliver a separate ▇▇▇▇ of Sale
and other documents (Vehicle Titles) necessary to convey all of SELLER's right
title and interest in and to all vehicles.
(5) SELLER and PURCHASER shall execute the State of Kansas form T-1,
prepared by PURCHASER and approved by SELLER that shall, pending approval by the
State of Kansas, evidence transfer of operations.
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(6) SELLER shall execute, acknowledge and deliver a separate Warranty Deed
(the "Deed") conveying all of SELLER's right title and interest in and to the
"Fee Interest/Lands" owned in and to any PROPERTY.
(7) SELLER and PURCHASER shall deliver and exchange certified extracts of
the corporate minutes authorizing the transaction contemplated in this AGREEMENT
and evidencing the authority of individuals to execute all documents
contemplated by this AGREEMENT.
(8) PURCHASER shall pay SELLER, by immediately available funds to SELLER'S
designated account, the Closing Amount. If, for any reason, PURCHASER fails to
pay the Purchase Price at Closing, SELLER shall have the option, in addition to
any other remedy, to terminate this AGREEMENT. (9) At Closing and thereafter as
may be necessary the parties shall execute, acknowledge and deliver transfer
orders and such other instruments, and shall take such other action, as may be
necessary to carry out their obligations under this Agreement. (10) At Closing,
SELLER shall deliver to PURCHASER copies of all lease files, well files, title
material and other pertinent data (the "Records") concerning the Property.
SELLER makes no warranty as to the accuracy thereof, and PURCHASER shall not
hold SELLER liable for the consequences of their reliance on objective data or
subjective evaluation to which they have access to under the terms of this
paragraph. SELLER shall not be obligated to deliver Records that are subject to
restrictions on disclosure. PURCHASER agrees to pay for reasonable costs of
transportation of subject files and documents.
D. Manner of Payment. PURCHASER shall make payment of the Purchase Price
adjusted to reflect the terms of the Closing Statement, to SELLER by Cashier's
or Certified Check or other immediately available funds.
E. Expenses and Liquidated Damages
(1) If "Closing" fails to occur because PURCHASER has not secured the
financing necessary to consummate the anticipated transaction on or before the
Closing Date, the Deposit, in its entirety, shall be released to SELLER as
Liquidated Damages.
(2) After this AGREEMENT is executed and the "Due Diligence" period has
ended (i.e. May 1, 2005) PURCHASER is obligated to Close or forfeit the Deposit
unless:
(a) SELLER has intentionally misrepresented the status of title to a
material portion of the PROPERTY or previously unknown information
becomes known which creates a Significant Title Defect (defined below)
to the title to the PROPERTY.
(b) SELLER fails to obtain shareholder approval for the transaction.
(c) A lawsuit is brought by a third party to enjoin or prevent the
transaction.
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(3) If Closing fails to occur because SELLER has received and accepted an
unsolicited superior offer, the Deposit, in its entirety, shall be released to
PURCHASER and SELLER shall pay to PURCHASER an additional $100,000.00 as
reimbursement for costs and expenses incurred by PURCHASER in undertaking the
transaction contemplated by this AGREEMENT.
4. ALL ACREAGE. The interests to be assigned by SELLER shall include all
acreage whether producing or held by production, covered by the operative leases
set forth on said Exhibit "A" attached hereto, whether or not specifically
described on said Exhibit "A".
5. TITLE.
A. Title Examination. Under this AGREEMENT, PURCHASER shall be afforded the
rights and privileges, at its sole cost, risk and expense to physically inspect
the properties and have access to SELLER's records during normal business hours
to review the contracts and Agreements relating to the PROPERTY.
B. Adjustments for Title Defects. Subject to the provisions of Section
3E(2)(a) above and Section 5C below, interests which have "Significant Title
Defects", as hereafter defined, shall be excluded from the PROPERTY and the
Purchase Price shall be reduced by an amount to be agreed upon by SELLER and
PURCHASER. If no value has been reached and no Agreement can otherwise be
reached as to the disposition of an interest burdened by a Significant Title
Defect, either Party may give written notice to the other Party to terminate
this AGREEMENT and upon the giving of such notice, neither Party shall have any
further rights or obligations hereunder.
C. Significant Title Defect. As used in this AGREEMENT, the term
"Significant Title Defect" shall mean a defect in title wherein SELLER has
intentionally misrepresented the status of title to the PROPERTY or previously
unknown information becomes known which creates a material defect to the title
to the PROPERTY and PURCHASER provides written notice to SELLER on or before
June 20, 2005,("Notice Date") and shall include any defect in one (or more) of
the following respects:
(1) SELLER's title on the Notice Date, as to one or more leases, is subject
to an outstanding mortgage, deed of trust, lien, encumbrance, preferential right
to purchase affecting the PROPERTY; or
(2) if there is any other defect or adverse claim which would induce a
reasonably prudent purchaser of production to suspend payment of proceeds as to
a SELLER's interest or require the furnishing of security or indemnity.
(3) SELLER as of the Notice Date, the Effective Date, and/or at Closing is
in Breach of any material representations or warranties made herein.
D. Defects and Uncured Defects. Not later than the Notice Date, PURCHASER
shall notify SELLER in writing, specifying with reasonably full particulars, of
any Significant Title Defects or material objections to the physical condition
of the PROPERTY ("Defect"). SELLER will have five (5) days from receipt of
notice to cure the Defect. If after this period SELLER is unable or has not
cured the Defect, PURCHASER will have the option of (1) accepting the PROPERTY
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and/or title as is, (2) reject the affected PROPERTY, in which event the
Purchase Price shall be decreased by that portion of the Purchase Price as the
Parties mutually agree; provided that, in the event that the sole result of the
uncured Defect is that SELLER's net revenue in any particular Lease described on
Exhibit A is reduced by less than 5%, PURCHASER shall accept the PROPERTY with
the Defect or (3) if the cumulative sum of all defects is greater than 15% of
the Purchase Price, PURCHASER may terminate the contract, whereupon PURCHASER
and SELLER will be released from all further obligations under the contract.
PURCHASER shall be deemed to have waived all Defects of which SELLER has not
been given written notice on or before the Notice Date.
E. Materiality Threshold. Notwithstanding anything to the contrary in this
Section 5, if the total diminution in the value of the PROPERTY attributable to
all Significant Title Defects is, in PURCHASER' reasonable opinion, less than
$50,000, no adjustments to the Purchase Price shall be made and neither Party
shall have the right to terminate this AGREEMENT for any reason related to
title.
6. SELLER's REPRESENTATIONS AND WARRANTIES. SELLER represents and warrants
that as of the date of this AGREEMENT and as of Closing:
A. Duly Organized. SELLER is a corporation duly formed, validly existing,
and in good standing under the laws of the State of Colorado and is duly
authorized to do business in the State of Kansas.
B. Company Power. SELLER has all requisite power and authority to carry on
its business as presently conducted, to enter into the AGREEMENT, to own and
operate oil and gas properties in the State of Kansas and to perform its
obligations under this AGREEMENT. The consummation of the transactions
contemplated by the AGREEMENT will not violate, nor be in conflict with, (i) any
provision of its Articles of Incorporation or bylaws or (ii) any agreement or
instrument to which they are a party or they are bound.
C. Duly Executed. This Agreement and the transaction contemplated herein
have been approved and adopted by the Board of Directors of SELLER, and subject
to the SELLER's stockholders' approval, which has authorized the execution and
delivery of this AGREEMENT. This AGREEMENT has been duly executed and delivered,
and at Closing, all documents and instruments required hereunder to be executed
and delivered shall have been duly authorized, executed and delivered. SELLER
shall as promptly as practicable after the date of this AGREEMENT take all
action necessary in accordance with the Colorado Business Corporation Act and
its Articles of Incorporation and bylaws to convene a meeting of its
stockholders to act on this AGREEMENT. The Board of Directors of SELLER shall
recommend that SELLER's stockholders approve this transaction and adopt this
Agreement.
D. Limited Warranty. To the best of SELLER's knowledge and belief there
exists no claim or encumbrance by, through or under Seller that materially
adversely affects SELLER's title to the PROPERTY.
E. Personal Property. Except as set out in subparagraph (d) above, SELLER
warrants title only to the personal property interests assigned hereby. SELLER
makes no representations about the condition, performance, or safety of the
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personal property. All fixtures, facilities, improvements, pipelines, and
equipment appurtenant to the Leases ("Equipment") is sold without any express or
implied warranties, provided; however, SELLER grants PURCHASER the benefit of
all previous warranties in SELLER's chain of title. SELLER makes no
representations about the condition, performance, or safety of the Equipment.
SELLER MAKES NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE,
AND HEREBY DISCLAIMS AND NEGATES ANY WARRANTY, EXPRESS OR IMPLIED, RELATING TO
THE CONDITION OF THE EQUIPMENT AND SELLER SHALL NOT BE LIABLE FOR ANY SPECIAL,
INDIRECT, OR CONSEQUENTIAL DAMAGES. THE EQUIPMENT IS SOLD "AS IS" "WHERE IS"
WITH ALL FAULTS.
F. Litigation. To the best of SELLER's knowledge and belief, (i) there is
no suit, action, investigation, or other proceeding pending or threatened
against SELLER that could reasonably be expected to adversely affect, in any
material way any of the PROPERTY, including, without limitation, SELLER's title
thereto, or the value thereof; (ii) there is no suit, action, investigation, or
other proceeding pending or threatened against SELLER that could reasonably be
expected to adversely affect the ability of SELLER to perform its obligations
under this AGREEMENT or that could reasonably be expected to prevent, delay or
hinder the consummation of the transactions contemplated hereby; and (iii) no
basis exists for a person or entity to make a claim, or file a suit, action,
investigation or other proceeding, that could reasonably be expected to
adversely affect, in any material way, any of the PROPERTY, including, without
limitation, SELLER's title thereto.
G. Environmental Matters. The following representations are true in all
respects to the best of SELLER's knowledge and belief:
(1) the PROPERTY does not violate, in any material way, any order or
requirement of any governmental authority or any Environmental Laws (as
hereinafter defined), nor are there any conditions (except as set forth in any
Lease) existing on or resulting from the operations of the PROPERTY that may
give rise to any on-site or off-site remedial obligations under any
Environmental Laws;
(2) the PROPERTY is not in violation of or subject to any existing, pending
or threatened action, suit, investigation, inquiry or proceeding by or before
any court, or any other governmental authority;
(3) all notices, permits, licenses or similar authorizations, if any,
required to be obtained or filed in connection with the PROPERTY, (including,
without limitation, those relating to the past or present treatment, storage,
disposal or release of a hazardous substance or solid waste into the
environment), have been duly obtained or filed, and SELLER is in compliance with
the terms and conditions of all such notices, permits, licenses and similar
authorizations;
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(4) since the effective date of the relevant requirements of RCRA (as
hereinafter defined) all hazardous substances or solid waste generated at or as
a result of the PROPERTY has been transported, treated and disposed of only by
carriers maintaining valid authorizations under RCRA and any other Environmental
Laws and only at treatment, storage and disposal facilities maintaining valid
authorizations under RCRA and other Environmental Law, which carriers and
facilities have been and are operating in compliance with such authorizations
and are not the subject of any existing, pending or overtly threatened action,
investigation or inquiry by any governmental authority in connection with any
Environmental Laws;
(5) there is no material liability (contingent or otherwise) in connection
with any release or threatened release of any hazardous substance or solid waste
into the environment as a result of or with respect to the PROPERTY.
For purposes of this AGREEMENT, the following environmental terms are
defined:
(a). "Environmental Laws" shall mean any and all laws, statutes,
ordinances, rules, regulations, orders or determinations of any tribal
authority or other governmental authority pertaining to health or the
environment, including, without limitation, the Clean Air Act, as
amended, the Comprehensive Environmental, Response, Compensation, and
Liability Act of 1980 ("CERCLA"), as amended, the Federal Water
Pollution Control Act, as amended, the Occupational Safety and Health
Act of 1970, as amended, the Safe Drinking water Act, as amended, the
Toxic Substances Control Act, as amended, the Hazardous & Solid Waste
Amendments Act of 1984, as amended, the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Hazardous Materials
Transportation Act, as amended, any state laws pertaining to the
handling of oil and gas exploration or production wasted or the use,
maintenance and closure of pits and impoundments, and other
environmental conservation or protection laws.
(b). "Hazardous Substances" and "Release" (or "threatened release")
shall have the meanings specified in CERCLA; "Solid Waste" and
"Disposal" (or "Disposed") shall have the meanings specified in RCRA;
provided, however, that (i) to the extent the laws of the State of
Kansas establish a meaning for "hazardous substance", "release",
"solid waste" or "disposal" that is broader than specified in either
CERCLA or RCRA, such broader meaning shall apply, and (ii) the terms
"Hazardous Substances" and "Solid Waste" shall include all oil and gas
exploration and production wastes that may present an endangerment to
public health or welfare of the environment, even if such wastes are
specifically exempt from classification as hazardous substances or
solid wastes pursuant to CERCLA or RCRA of the state analogues to
those statutes.
(c). "Governmental Authority" shall include the United States, the
state, the county, city, and political subdivisions in which the
PROPERTY is located or which exercised jurisdiction over the PROPERTY,
and any agency, department, commission, board, bureau or
instrumentality, or any of them, that exercises jurisdiction over any
of the PROPERTY.
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H. Marketing of Production. SELLER, as of the date of the AGREEMENT, has
received no advance, "take-or-pay" or other similar payments under production
sales contracts that entitle the Purchasers to "make-up" or otherwise receive
deliveries of hydrocarbons at any time after the date of this AGREEMENT without
payment at such time the full market price therefore, nor has SELLER received
any payments with respect to, or in lieu of or in satisfaction for any
take-or-pay obligations of Purchasers of such SELLER's hydrocarbons deliverable
under any contracts covering any of the ▇▇▇▇▇ and leasehold included in this
AGREEMENT on or after the date of the AGREEMENT.
▇. ▇▇▇▇▇. No well comprising part of the PROPERTY is subject to penalties
on allowables because of any over-production or any other violation of
applicable statute, regulation or order that would prevent such well from being
entitled to its full legal and regular allowable from and after the Effective
Date as prescribed by any governmental authority.
J. Taxes. To the best of SELLER's knowledge and belief, all ad valorem
property, production, severance, sales, use and similar taxes and assessments
based on or measured by the ownership of the PROPERTY or the production of
hydrocarbons or the receipt of proceeds therefrom that have become due and
payable with respect to the PROPERTY has been, or will be, paid timely and all
tax and information returns (renditions) to tax authorities required to be filed
with respect to the PROPERTY has been, or will be, filed timely.
K. Casualties. Prior to the Closing Date, there have been no fires,
blow-outs or other casualties (above or below the surface of the ground) which
materially and adversely affected the PROPERTY.
L. Lease Obligations. With respect to the Leases and to the best of
SELLER's knowledge and belief, (1) the Leases are in full force and effect and
are valid and existing documents covering the entire estates which they purport
to cover, (2) there are no unrecorded royalty or overriding royalty agreements
or provisions, except a Letter Agreement dated July10, 2001, between Monument
Resources, Inc and ▇▇▇▇ ▇▇▇▇, requiring the payment of royalty on any basis
other than proceeds actually received by the Lessee, (3) there are no unrecorded
Leases which are subject to a fixed term of duration, (4) there are no
unfulfilled drilling obligations affecting the Leases, other than provisions
requiring optional drilling as a condition of maintaining or earning all or a
portion of a lease, (5) all Lease royalties, rentals and other payments due have
been fully, properly and timely paid (6) all other conditions necessary to keep
such properties and interest in full force and effect during their primary term
(and thereafter, if commercial production has been established thereon or on
lands pooled therewith), have been fully performed
M. Gas Imbalances. To the best of SELLER's knowledge and belief, there are
no gas imbalances (including production, sales, processing and transportation
imbalances) currently existing for the PROPERTY.
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N. Governmental Licenses. To the best of SELLER's knowledge and belief, all
governmental licenses and other authorizations required to own and operate the
PROPERTY have been obtained, are in full force and effect, and no violations
exist thereunder. No proceeding is pending or, to the best of SELLER's knowledge
threatened, relating to the challenging, revocation or limitation of any such
license of authorization.
O. Obligations Relating to Operations. Except as set forth in Section 15A1,
to the best of SELLER's knowledge and belief, there are no binding commitments
with respect to the PROPERTY, except for those allowed without SELLER's approval
under Joint Operating Agreements, that will result in PURCHASER incurring after
the Effective Date capital expenditures with respect to any one unit or well in
excess of $20,000.00 or $150,000.00 with respect to the PROPERTY in the
aggregate.
P. Operations After the Notice Date and Effective Date.
(1) SELLER has caused the PROPERTY to be developed, maintained and operated
in a good and prudent manner and in substantially the same manner as the
PROPERTY was developed, maintained and operated prior to the Notice Date;
(2) SELLER has made no sale, assignment, transfer, farm-out, conveyance or
other disposal of any of the PROPERTY, except for the sale of hydrocarbons in
the ordinary course of business;
(3) SELLER, to the extent related to the PROPERTY, has made no major change
in the character of its business of operations or otherwise conducted its
business and operations other than in accordance with standard industry
practices;
(4) SELLER has permitted no Leases or material rights with respect to the
PROPERTY to expire, or waived any material rights with respect to the PROPERTY;
and
(5) SELLER has entered into no agreement or made no commitment (other than
this AGREEMENT) to take any of the actions referred to in clauses (1) thru (4)
above.
Q. Limits of Representations:
THE EXPRESS REPRESENTATIONS OF SELLER CONTAINED IN THIS AGREEMENT ARE
EXCLUSIVE AND ARE IN LIEU OF ANY OTHER REPRESENTATION OR WARRANTY WITH
RESPECT TO THE ENVIRONMENTAL CONDITION, BOTH SURFACE AND SUBSURFACE, OR
OTHER CONDITION OF THE PROPERTIES; OR THE
OWNERSHIP OR OPERATION OF THE PROPERTIES OR ANY PART THEREOF. THE SELLER
EXPRESSLY DISCLAIMS AND NEGATES AND PURCHASER WAIVES, ANY REPRESENTATION OR
WARRANTY WITH RESPECT TO THE QUALITY, QUANTITY OR VOLUME OF THE RESERVES,
IF ANY, OF OIL, GAS OR OTHER HYDROCARBONS IN OR UNDER THE PROPERTY. THERE
ARE NO WARRANTIES THAT EXTEND BEYOND THE FACE OF THIS AGREEMENT.
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7. PURCHASER's REPRESENTATIONS AND WARRANTIES. PURCHASER represents and
warrants, that as of the date of this AGREEMENT and as of Closing:
A. Duly Organized. PURCHASER is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Colorado and is
registered to do business in the State of Kansas and is in compliance with any
and all governmental regulations, including without limitation, the
necessary/minimum required operating/plugging bonds.
B. Qualified. PURCHASER has previous experience in business and financial
matters; is specifically experienced in the business of conducting oil and gas
exploration and production operations, and as such is fully capable of
evaluating the risks and merits of the transaction contemplated by this
Agreement, and can bear the financial risks associated therewith.
C. Corporate Power. PURCHASER has all requisite corporate power and
authority to carry on its business as presently conducted, to enter into this
AGREEMENT, to own and operate oil and gas properties in the state of Kansas and
to perform its obligations under this AGREEMENT. The consummation of the
transactions contemplated by the AGREEMENT will not violate, nor be in conflict
with, (i) any provision of its corporate charters or bylaws or (ii) any
agreement or instrument to which it is a party or it is bound.
D. Duly Executed. This AGREEMENT has been duly executed and delivered, and
at Closing, all documents and instruments required hereunder to be executed and
delivered shall have been duly executed and delivered.
E. Purchaser's Due Diligence. PURCHASER or its representatives have had the
opportunity to inspect the PROPERTY, ▇▇▇▇▇ and equipment, conduct an
environmental review and has had the opportunity to review SELLER's files and
talk to SELLER's personnel concerning the Interests; and that the execution,
delivery and performance of this AGREEMENT and the transactions contemplated
hereby have been preceded by independent inspection, investigation, verification
and due diligence regarding the existence and extent of oil, gas or mineral
reserves; the recoverability of and cost of recovering any such reserves; the
value of the reserves; any product pricing assumptions; and/or the ability to
sell production after Closing.
8. OPERATIONS AND PRODUCTION AFTER THE EFFECTIVE DATE.
A. Expenses. SELLER shall be responsible for payment of all Expenses (as
defined below) related to the PROPERTY prior to the Effective Date. PURCHASER
shall, at Closing, assume and be responsible for the payment of all Expenses
related to the PROPERTY incurred or accrued from and after the Effective Date.
"Expenses" as used in this Section shall mean any expenses incurred or accrued
in connection with the operation or ownership of the PROPERTY, except expenses
incurred incidental to this AGREEMENT.
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B. Allocation of Production. All production from the ▇▇▇▇▇ and all
proceeds from the sale thereof prior to the Effective Date and all other
monetary payments attributable to the ownership, use or operation of the
PROPERTY prior to the Effective Date shall be the property of SELLER. All of
such production and production proceeds and monetary payments attributable to
the PROPERTY on and after the Effective Date shall be the property of PURCHASER.
C. Post Closing Settlement. Within thirty (30) days after Closing, SELLER
shall prepare for PURCHASER's review a final post-closing settlement statement
to account for all production proceeds and all Expenses, other costs and
expenses and taxes (other than income taxes) attributable to SELLER's interest
in the PROPERTY that were not finally determined as of the Closing Date, and
showing the calculation of the final Purchase Price based on such Statement.
(1) SELLER shall submit the statement to PURCHASER and shall afford
PURCHASER access to SELLER's records pertaining to the computation of the
statement.
(2) As soon as practicable after receipt of the statement, PURCHASER shall
deliver to SELLER a written report containing any changes which PURCHASER
proposes be made to the Statement.
(3) The parties shall agree with respect to the amounts due pursuant to
such post-Closing adjustment no later than 40 days after the Closing.
(4) In the event that (i) the final Purchase Price is more than the amount
delivered to SELLER at the Closing, PURCHASER shall pay to SELLER in immediately
available Federal funds the amount of such difference to SELLER's account, or
(ii) the final Purchase Price is less than the amount delivered to SELLER at
Closing, SELLER shall pay to PURCHASER in immediately available Federal funds
the amount of such overpayment to PURCHASER's account.
9. TAXES AND FEES. Ad Valorem Taxes shall be prorated as of the Effective
Date. PURCHASER shall pay all sales taxes occasioned by the purchase and sale of
the PROPERTY and shall pay all documentary, filing and recording fees required
in connection with this transactions. PURCHASER shall be responsible for the
economic burden and payment of all taxes and royalties or overriding royalties
(other than taxes determined upon income attributable to SELLER) relating to the
PROPERTY from and after the Effective Date, regardless of when they are actually
assessed. SELLER shall be responsible for the economic burden and payment of all
taxes and royalties or overriding royalties relating to the PROPERTY prior to
the Effective Date, regardless of when they are actually assessed.
10. PURCHASER'S CONDITIONS OF CLOSING. PURCHASER's obligation to consummate
the transactions provided for herein is subject to the satisfaction or waiver
(except as to subsection 10D) on or before the Closing Date of the following
conditions:
A. Representations and Warranties. The representations and warranties of
SELLER contained in Section 6 shall be true and correct in all material respects
on the date of Closing as though made on and as of that date.
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B. Performance. SELLER shall have, to the best of SELLER's knowledge,
performed in all respects, the obligations, covenants and agreements required
hereunder to be performed by it at or prior to Closing.
C. Pending Matters. No suit, action or other proceeding by a third party or
a governmental authority shall be pending or threatened which seeks substantial
damages from SELLER in connection with, or seeks to restrain, enjoin or
otherwise prohibit, the consummation of the transactions contemplated by this
AGREEMENT.
D. Stockholder Approval. SELLER's stockholders shall have approved this
AGREEMENT and the transaction contemplated hereunder in accordance with
applicable provisions of the Colorado Business Corporation Act and the holders
of not more than 10% of Seller's outstanding shares shall have exercised their
dissenter's rights under that Act.
11. SELLER's CONDITIONS OF CLOSING. SELLER's obligation to consummate the
transactions provided for herein is subject to the satisfaction or waiver
(except as to subsection D) on or before the Closing Date of the following
conditions:
A. Representations and Warranties. The representations and warranties of
PURCHASER contained in Section 7 shall be true and correct in all material
respects on the date of Closing as though made on and as of that date.
B. Performance. PURCHASER shall have performed in all respects the
obligations, covenants and agreements required hereunder to be performed by it
at or prior to Closing.
C. Pending Matters. No suit, action or other proceeding by a third party or
a governmental authority shall be pending or threatened which seeks substantial
damages from PURCHASER in connection with, or seeks to restrain, enjoin or
otherwise prohibit the consummation of the transactions contemplated by this
AGREEMENT.
D. Stockholder Approval. SELLER's stockholders shall have approved this
AGREEMENT and the transaction contemplated hereunder in accordance with
applicable provisions of the Colorado Business Corporation Act and the holders
of not more than 10% of Seller's outstanding shares shall have exercised their
dissenter's rights under that Act.
12. FILES. At Closing, SELLER shall deliver to PURCHASER copies of all
lease files, well files, title material and other pertinent data (the "Records")
concerning the Property. SELLER makes no warranty as to the accuracy thereof,
and PURCHASER shall not hold SELLER liable for the consequences of their
reliance on objective data or subjective evaluation to which they have access to
under the terms of this paragraph. SELLER shall not be obligated to deliver
Records that are subject to restrictions on disclosure. PURCHASER agrees to pay
for reasonable costs of transportation of subject files and documents.
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13. INDEMNIFICATIONS AND ASSUMPTION OF OBLIGATIONS.
A. PURCHASER's Indemnity. PURCHASER agrees to release, defend, indemnify,
and hold SELLER and its stockholders, members, directors, officers, employees,
agents and representatives harmless from any and all payments, charges,
judgments, assessments, damages, expenses (including court costs and attorneys'
fees), civil fines, penalties, and other costs and liabilities incurred as a
result of claims, demands, and causes of actions arising on or after the
Effective Date:
(1) as a result of the ownership or the operation of, or for any act or
omission in connection with the PROPERTY, subsequent to the Effective Date; or
(2) for any act or omission by PURCHASER under any agreement assumed by
PURCHASER pursuant to Section 1 of this AGREEMENT; or
(3) for any act or omission by PURCHASER under this AGREEMENT; including,
but not limited to claims, demands, and causes of actions asserted by third
parties (including, but not limited to, any local, state or federal government,
agency or body thereof, and persons holding rights under any agreement assumed
by PURCHASER pursuant to Section 1 of this AGREEMENT), for death injury, damage
to property or the environment, or for failure to comply with express or implied
terms of a mineral lease; or
(4) for any act, omission, event, condition or circumstance involving or
relating to the PROPERTY occurring or existing before the Effective Date that
was not properly asserted by PURCHASER before the date specified in Section 5C;
or
(5) for any obligation and liability assumed by PURCHASER pursuant to
Section 13B.
B. Assumption of ▇▇▇▇▇▇▇▇▇▇▇.▇▇ of the Closing Date, PURCHASER shall assume
and thereafter be responsible for all costs and expenses arising out of, or in
connection with, the plugging and abandoning of any ▇▇▇▇▇, removal or
modification of facilities (including pipelines), closure of pits, restoration
of the surface, and disposal of Naturally Occurring Radioactive Material or
"NORM", and all other pollutants, wastes, contaminants or hazardous or toxic
materials, substances or chemicals now or in the future located on the PROPERTY
in accordance with all applicable leases, laws and regulations, and regardless
of whether the obligation to plug, remove, modify, close or restore arose prior
to or subsequent to the Effective Date. By Closing the transaction provided for
in this AGREEMENT, PURCHASER shall be deemed to have acknowledged and does
acknowledge and admit that:
(1) PURCHASER has been given the opportunity to adequately inspect the
PROPERTY for all purposes prior to Closing;
(2) PURCHASER is aware that the PROPERTY has been used for the exploration,
development, production, treating and transporting of oil and gas and that
physical changes may have occurred as a result of such use, and that SELLER has
disclosed, and PURCHASER is further aware, that there exists the possibility
that there could have occurred from such use one or more releases of chemicals
or hazardous substances (including, Naturally Occurring Radioactive Material or
"NORM"), into, or other pollution or contamination of or into, the ambient air,
surface water, ground water, of land surface and subsurface strata of any real
property include in the PROPERTY.
(3) PURCHASER has entered into this AGREEMENT on the basis of its own
investigation of the physical condition of the PROPERTY and the land related
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thereto (including the environmental condition of the PROPERTY); and (4)
PURCHASER, with full knowledge of the foregoing, and after conducting the above
described investigation and evaluation IS ACQUIRING THE PROPERTY ON A "WHERE IS"
AND "AS IS" BASIS.
C. Applicability. THE INDEMNIFICATION, RELEASE AND ASSUMPTION PROVISIONS
PROVIDED FOR IN THIS AGREEMENT SHALL BE APPLICABLE WHETHER OR NOT THE LOSSES,
COSTS, EXPENSES AND DAMAGES IN QUESTION AROSE SOLELY OR IN PART FROM (1) THE
ACTIVE, PASSIVE OR CONCURRENT NEGLIGENCE, OR OTHER FAULT OF THE INDEMNIFIED
PARTY OR (2) ANY ACTION THAT SUBJECTS THE INDEMNIFIED PARTY TO CLAIMS PREMISED
IN WHOLE OR IN PART IN STRICT LIABILITY.
14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
A. Survival of Representations. The representations and warranties of the
parties under this AGREEMENT shall not survive the Closing.
B. Survival. The covenants and obligations of the parties under Sections
3A, 8, 9, 12, 13 and 16 of this AGREEMENT shall survive the Closing until July
1, 2006 or such date as SELLER ceases to exist as a legal business entity,
whichever occurs first.
15. OPERATIONS. The operating rights to the Leases and PROPERTY will be
transferred by SELLER at Closing to PURCHASER. At that time, PURCHASER shall
take control of the physical operations of the PROPERTY pending the approval of
transfers of well permits from SELLER to the PURCHASER by the State of Kansas.
PURCHASER agrees to indemnify and hold SELLER, its successors and assigns,
harmless from and against any loss, claim, or cause of action asserted, directly
or indirectly, against SELLER, which arises or is alleged to arise out of
PURCHASER's operation of the ▇▇▇▇▇ purchased hereunder.
A. From the date of execution of this AGREEMENT until Closing or
termination of this AGREEMENT, without the prior written consent of PURCHASER,
which consent shall not be unreasonably withheld, SELLER will not: (1) Enter
into any contracts or incur any liabilities other than in the ordinary course
for normal operating expenses associated with individual ▇▇▇▇▇, equipment,
pipeline operations or pipeline equipment. SELLER shall secure PURCHASER's
consent for any expenditure in excess of twenty thousand dollars ($20,000.00),
if SELLER plans to be reimbursed at Closing for the expenses as a "Capital
Expenditure".
(a) "Capital Expenditures" heretofore approved by both Parties, will
be reimbursed to SELLER at Closing. Capital projects or "Capital
Expenditures" which are underway or contemplated prior to Closing are:
(i) ▇▇▇▇▇▇▇ Pipeline estimated to cost approximately $75,000.00
(ii) Atmos pipeline hook up to sales line estimated to cost
approximately $70,000.00;
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(2) Abandon, or consent to abandonment of, any producing or shut-in well or
any injection well located on the premises associated with the Interests, nor
release or abandon all or any portion of any leases;
(3) Modify or terminate any of the agreements relating to the Interests or
waive any right thereunder;
(4) Encumber, sell or otherwise dispose of any of the PROPERTY other than
personal property which is replaced with equivalent property or consumed in the
ordinary course of operation of the PROPERTY and other than hydrocarbons sold in
the ordinary course of business; and;
B. The Parties recognize that PURCHASER may acquire leases and leasehold in
addition to those Leases covered by this AGREEMENT and the transaction
contemplated herein. Leases acquired by PURCHASER shall be acquired in the name
of a third party broker and the appropriate assignment made pursuant to this
AGREEMENT. The Parties hereby establish an Area of Mutual Interest ("AMI")
consisting of any lands located within an area coincident with the area depicted
on Exhibit "A" to that certain Non-Disclosure Agreement dated March 18, 2004 by
and between SELLER and PURCHASER.
16. MISCELLANEOUS PROVISIONS.
A. Notices. All notices and other communications required or permitted
under this AGREEMENT shall be in writing and be delivered personally, by
recognized commercial courier or delivery service which provides a receipt, by
fax (with receipt acknowledged), or by registered or certified mail (postage
prepaid) at the following addresses:
If to SELLER: Monument Resources, Inc.
Attn: ▇▇. ▇. ▇. ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
If to PURCHASER: TEG Mid-Continent, Inc.
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
All notices shall be considered delivered (i) if actually delivered on the date
of delivery, or (ii) if faxed, on the business day following the date of the
facsimile transmission and receipt, or (iii) if mailed by registered or
certified mail, on the date received by addressee. Either party may specify as
its proper address any other post office address within the continental limits
of the United States by giving notice to the other party, in the manner provided
in this paragraph, at least ten (10) days prior to the effective date of such
change of address.
B. Confidentiality. During the term of this AGREEMENT, the Parties shall
use their best efforts to keep all information, data, analyses, interpretations,
concepts, compilations, studies or other documents that are exchanged between
16
them or become known to each other as a result of this Agreement strictly
confidential, unless the written consent of all Parties has been obtained prior
to such disclosure.
C. Announcement. The Parties shall make no press release or other public
announcement or public disclosure relating to this Agreement or the subject
matter hereof, except as necessary to meet legal or regulatory requirements, or
as mutually agreed to by all Parties. Any press release or public announcement
or public disclosure so made shall not identify any other Party hereto without
such Party's prior approval, unless required to meet legal or regulatory
requirements.
D. Further Assurance. SELLER and PURCHASER each agree from time to time to
execute and deliver to the other party all assignments, division orders,
transfer orders, letters-in-lieu and other instruments necessary to fully vest
in PURCHASER the rights and benefits acquired pursuant to this AGREEMENT.
E. Expenses. Except as otherwise specifically provided, all fees, costs and
expenses incurred by PURCHASER and SELLER in negotiating this AGREEMENT or in
consummating the transactions contemplated by this AGREEMENT shall be paid by
the Party incurring the same, without limitation, legal and accounting fees,
costs and expenses. Further the Parties hereto represent and warrant to the
other that there exists no liability, contingent or otherwise, for broker's or
finder's fees in respect to this AGREEMENT or the transactions contemplated
hereby for which the other party shall have any responsibility whatsoever.
F. Parties in Interest. This AGREEMENT shall be binding upon, and shall
inure to the benefit of the Parties hereto and , except as otherwise prohibited,
their respective successors and assigns; and nothing contained in this
Agreement, express or implied, is intended to confer upon any other person or
entity any benefits, rights or remedies.
G. Governing Law. This AGREEMENT and matters pertaining hereto, including
but not limited to matters of performance, nonperformance, breach, remedies,
procedures, rights, duties and interpretation or construction, shall be governed
and determined by the laws of the State of Colorado.
H. Entire Agreement. This AGREEMENT and the Exhibits attached hereto,
constitute the entire agreement between the Parties and except for the
Non-Disclosure Non-Compete Agreement dated March 18, 2004 by and between SELLER
and PURCHASER, which Non-Disclosure Agreement shall apply to the Parties and
shall survive the termination of this AGREEMENT, supersedes all previous
agreements affecting the subject matter addressed herein between the Parties,
whether written or verbal.
No variations, modifications or changes shall be binding on any Party
unless set forth in a document duly executed by all Parties. All headings used
in this AGREEMENT are for convenience only and shall not be construed as having
any contractual or legal significance.
17
EXECUTED ON THE DATES OPPOSITE THE SIGNATURES OF THE SELLER AND PURCHASER.
SELLER
MONUMENT RESOURCES, INC.
Dated:
May 10, 2005 /s/ ▇. ▇. ▇▇▇▇▇
---------------------------- ---------------
▇. ▇. ▇▇▇▇▇
President
PURCHASER
TEG- MID CONTINENT, INC.
Dated:
May 10, 2005 /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------- ---------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Chairman
EXHIBITS:
Exhibit A: Leases and Lands
Exhibit B: Assignment Form
Exhibit C: Form of Escrow Agreement
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