UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 8, 2004
PARALLEL PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-13305 75-1971716
(Commission file number) (IRS employer identification number)
1004 N. Big Spring, Suite 400, Midland, Texas 79701
(Address of principal executive offices) (Zip code)
(432) 684-3727
(Registrant's telephone number including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into Material Definitive Agreement.
On October 8, 2004, Parallel, L.P., a wholly-owned subsidiary of
Parallel Petroleum Corporation (collectively, "Parallel"), purchased from
Kaiser-Francis Oil Company producing oil and gas properties located in the
Fullerton Field of Andrews County, Texas in the Permian Basin of west Texas. The
net purchase price for the properties was approximately $5.63 million. The
effective date of the purchase was September 1, 2004.
Under terms of the Purchase and Sale Agreement among Parallel, L.P.,
Texland Petroleum, L.P., Kaiser-Francis Oil Company and KF Energy Limited
Partnership, Parallel acquired additional interests in its Lineberry and Grogan
leases covering 720 gross (349 net) acres and 21 gross (9.7 net) producing
oil and gas wells. The wells produce from the San Andres formation at a depth of
approximately 4,800 feet. Daily production from the additional interests is
approximately 100 equivalent barrels of oil per day, net to Parallel, which is
unhedged. This acquisition has increased Parallel's working and net revenue
interests in these two leases from an average 35.3% working interest and an
average 26.3% net revenue interest to an average 76.5% working interest and an
average 58.9% net revenue interest.
The additional interests acquired in this transaction represent an
estimated 540,000 equivalent barrels of proved oil and gas reserves, net to
Parallel, of which approximately 73% is proved developed producing reserves.
Parallel has no relationship with Kaiser-Francis, other than in respect
of the Purchase and Sale Agreement.
The purchase price was financed with loan proceeds drawn under
Parallel's revolving credit facility provided by First American Bank, SSB, BNP
Paribas and Western National Bank.
All of the properties acquired from Kaiser-Francis were pledged as
additional collateral to further secure the payment and performance of
Parallel's indebtedness and obligations under its revolving credit facility.
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Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
Exhibit No. Description
10.1 Purchase and Sale Agreement, dated
October 8, 2004, between Kaiser-Francis
Oil Company and KF Energy
Limited Partnership (Seller) and
Texland Petroleum, L.P. and Parallel,
L.P. (Buyer)
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SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned.
Dated: October 13, 2004
PARALLEL PETROLEUM CORPORATION
By: /s/ Larry C. Oldham
------------------------------------
Larry C. Oldham, President and Chief
Executive Officer
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Exhibit 10.1
PURCHASE AND SALE AGREEMENT
BETWEEN
KAISER-FRANCIS OIL COMPANY
AND
KF ENERGY LIMITED PARTNERSHIP
(SELLER)
AND
TEXLAND PETROLEUM, L. P.
AND
PARALLEL L. P.
(BUYER)
DATED
OCTOBER 8, 2004
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS......................................................1
1.1 Definitions.............................................................1
ARTICLE 2. PURCHASE AND SALE................................................5
2.1 Purchase and Sale.......................................................5
2.2 Transfer of Ownership...................................................5
ARTICLE 3. PURCHASE PRICE...................................................5
3.1 Purchase Price..........................................................5
3.2 Manner of Payment of Purchase Price.....................................5
3.3 Adjustments to Purchase Price...........................................5
ARTICLE 4. ASSUMPTION OF OBLIGATIONS; INDEMNITIES; COVENANTS................7
4.1 Buyer...................................................................7
4.2 Seller..................................................................7
4.3 Environmental Matters...................................................7
4.4 Title Matters............................................................8
4.5 Casualty Loss............................................................9
4.6 Limitations on Certain Purchase Price Adjustments.......................9
4.7 Due Diligence...........................................................9
4.8 Defense of Claims.......................................................9
ARTICLE 5. SELLER'S REPRESENTATIONS AND WARRANTIES.........................10
5.1 Existence..............................................................10
5.2 Authorization..........................................................10
5.3 Power..................................................................10
5.4 Conflicts..............................................................10
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5.5 Default................................................................11
5.6 Bankruptcy.............................................................11
5.7 Regulatory Violation...................................................11
5.8 Litigation.............................................................11
5.9 Unrecorded Documents...................................................11
5.10 Taxes.................................................................11
5.11 Leases................................................................11
5.12 Suspense..............................................................11
5.13 Imbalances............................................................12
5.14 Tax Partnerships......................................................12
5.15 Preferential Rights...................................................12
5.16 Tax Returns...........................................................12
5.17 Expenses Paid.........................................................12
5.18 AFEs..................................................................13
5.19 Equipment Compliance..................................................13
5.20 Environmental Consents................................................13
5.21 Licenses..............................................................13
5.22 Brokers' Fees.........................................................13
5.23 Environmental Condition...............................................13
ARTICLE 6. BUYER'S REPRESENTATIONS AND WARRANTIES..........................13
6.1 Existence..............................................................13
6.2 Authorization..........................................................14
6.3 Power..................................................................14
6.4 Conflicts..............................................................14
6.5 Default................................................................14
6.6 Brokers' Fees..........................................................14
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6.7 Further Distribution...................................................14
6.8 Licenses...............................................................14
6.9 Cash on Hand...........................................................14
ARTICLE 7. BUYER'S CONDITIONS PRECEDENT....................................15
7.1 Conditions Precedent to Obligations of Buyer...........................15
7.2 Third Party Consents...................................................15
ARTICLE 8. SELLER'S CONDITIONS PRECEDENT...................................15
8.1 Conditions Precedent to Obligations of Seller...........................15
ARTICLE 9. RIGHT OF TERMINATION............................................15
9.1 Termination............................................................15
9.2 Liabilities Upon Termination...........................................16
ARTICLE 10. TRANSACTIONS AT AND AFTER CLOSING..............................16
10.1 Closing Documents.....................................................16
10.2 Time and Place of Closing.............................................16
10.3 Closing Obligations...................................................16
10.4 Further Assurances....................................................17
10.5 Post-Closing Adjustments..............................................17
10.6 Files and Records.....................................................18
ARTICLE 11. MISCELLANEOUS..................................................18
11.1 Notices...............................................................18
11.2 Counterparts..........................................................18
11.3 Expenses..............................................................18
11.4 Article Headings......................................................19
11.5 Amendment.............................................................19
11.6 Gender................................................................19
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11.7 Entire Agreement......................................................19
11.8 Successors and Assigns................................................19
11.9 Survivability.........................................................19
11.10 Severability.........................................................19
11.11 Governing Law........................................................19
11.12 Deceptive Trade Practices Waiver.....................................20
11.13 Press Releases.......................................................20
11.14 Buyer Liability......................................................20
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EXHIBITS AND SCHEDULES
Exhibit "A" Description of Leases, Wells and Interests Being Conveyed
Exhibit "B" Assignment, Bill of Sale and Conveyance
Exhibit "C" Allocation of Values
Exhibit "D" Form of Non-Foreign Affidavit
Schedule 5.13 Gas Imbalances
Schedule 5.14 Tax Partnerships
Schedule 5.15 Preferential Rights
Schedule 5.18 AFEs
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PURCHASE AND SALE AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of this
8th day of October, 2004, between KAISER-FRANCIS OIL COMPANY, A DELAWARE
CORPORATION ("KFOC") and KF ENERGY LIMITED PARTNERSHIP, A TEXAS LIMITED
PARTNERSHIP ("KF Energy") (collectively "Seller") and TEXLAND PETROLEUM, L. P.,
A TEXAS LIMITED PARTNERSHIP ("Texland") and PARALLEL L. P., A TEXAS LIMITED
PARTNERSHIP ("Parallel") (collectively "Buyer"). RECITALS:
Seller desires to sell and assign to Buyer, and Buyer desires to
purchase from Seller, all of Seller's interest in and to certain oil and gas
properties more particularly described herein upon the terms and conditions and
for the consideration hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the benefits to be derived by each party hereunder, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Seller and Buyer agree as follows:
ARTICLE 1. DEFINITIONS
-----------
1.1 Definitions. For purposes of the Agreement, the following terms, in
addition to the other capitalized terms used in this Agreement which are defined
elsewhere herein, shall have the meanings set forth below:
"Basic Documents" - Leases; joint operating agreements; oil, gas,
liquids, casinghead gas and condensate purchase, sales, processing, gathering,
treatment, compression, and transportation agreements; farmout or farmin
agreements; joint ventures; dry hole, bottom hole, acreage contribution,
purchase and acquisition agreements; area of mutual interest agreements;
servicing contracts, easement and right-of-way agreements; easements,
rights-of-way, permits, licenses, servitudes, surface leases, saltwater disposal
agreements, or other interests appertaining to the Leases and all other
executory contracts and agreements; insofar as the foregoing relate directly to
the Properties.
"Closing" - The consummation of the purchase and sale transaction
contemplated by this Agreement as provided in Article 10.2.
"Closing Date" - on or before October 8, 2004.
"Defensible Title" - As to the Properties, such title held by Seller
that, subject to and except for the Permitted Encumbrances: (i) entitles Seller
to receive not less than the "Net Revenue Interest" set forth in Exhibit "A" of
all oil, gas and associated liquid and gaseous hydrocarbons produced, saved and
marketed from the Properties; (ii) obligates Seller to bear costs and expenses
relating to the maintenance, development and operation of wells located on or
attributable to the Properties in an amount not greater than the "Working
Interest" set forth in Exhibit "A" (unless there is a proportionate increase in
Seller's Net Revenue Interest); and (iii) is free and clear of encumbrances,
liens, defects, and any impediment other than Permitted Encumbrances, that would
impair Seller's right to receive the revenues attributable to
1
Seller's Net Revenue Interest and such impairment would be considered
unacceptable by a reasonable and prudent person engaged in the business of the
ownership, development, and operation of oil and gas properties with knowledge
of all of the facts and appreciation of their legal significance.
"Effective Time" - September 1, 2004 at 7:00 a.m., local time where the
respective Properties are located.
"Environmental Laws" - Any and all federal, state and local laws,
statutes, regulations, rules, orders, ordinances, permits, judicial decisions or
determinations of any governmental authority pertaining to health, the
environment, wildlife, or natural resources in effect in any and all
jurisdictions in which the Properties are located, including, without
limitation, the Clean Air Act, as amended, the Federal Water Pollution Control
Act, as amended, the Safe Drinking Water Act, as amended, the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), as amended,
the Superfund Amendments and Reauthorization Act ("SARA"), as amended, the
Resource Conservation and Recovery Act ("RCRA"), as amended, the Hazardous and
Solid Waste Amendments Act of 1984 ("HSWA"), as amended, the Toxic Substances
Control Act ("TSCA"), as amended, the Occupational Health and Safety Act
("OSHA"), as amended, and the Hazardous Materials Transportation Act, as
amended, in effect prior to, on, or after the Closing Date.
"Knowledge" - The actual knowledge, without independent investigation,
of any officer or manager of such entity in charge of a discrete business area
or function having responsibility for the referenced matter.
"Lease" or "Leases" - Those oil, gas and mineral leases listed and
described on Exhibit "A" and the lands covered thereby and any amendments and
ratifications thereof, subject to the reservations of Seller set forth in the
definition of Properties.
"New Development Wells" - The four (4) wells set forth and described
below which are presently being drilled or have recently been completed in which
Seller has an interest:
Cooperative Wells: Location:
------------------ --------
Scarborough San Andres Unit #2049 2001 FNL & 130 FEL, SEC 20
BLK A-31, PSL Survey
Lineberry (San Andres) Unit #815 664 FSL & 135 FWL, SEC 15
BLK A-26, PSL Survey
Lineberry Unit Wells: Location:
-------------------- --------
Lineberry (SA & CF) Unit #2C 2001 FNL & 1330 FWL, SEC 16
BLK A-26, PSL Survey
Lineberry (SA & CF) Unit #3316 1980 FSL & 1330 FWL, SEC 16
BLK A-26, PSL Survey
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"Permitted Encumbrances" - Any or all of the following: (i)
encumbrances that arise under operating agreements to secure payment of amounts
not yet delinquent and are of a type and nature customary in the oil and gas
industry; (ii) encumbrances that arise as a result of pooling and unitization
agreements, declarations, orders, or laws to secure payment of amounts not yet
delinquent; (iii) encumbrances securing payments to mechanics and materialmen
and payment of taxes or assessments that are, in either case, not yet delinquent
or, if delinquent, are being contested in good faith in the normal course of
business; (iv) lessor's royalties, overriding royalties, division orders,
reversionary interests and other similar burdens that do not operate to reduce
the Net Revenue Interest of Seller in and to the Properties to less than the
amount set forth in Exhibit "A" or increase the Working Interest of Seller in
and to the Properties to greater than the amount set forth in Exhibit "A"
(without a corresponding increase in the Net Revenue Interest); (v) easements,
rights-of-way, servitudes, permits, surface leases, surface use restrictions and
other surface uses and impediments on, over or in respect of any of the
Properties that, as of the Effective Time, appear of record in the public
records of the county wherein the Properties are located, provided that they do
not interfere materially with the ownership, operation, value, or use of the
Property affected, (vi) rights reserved to or vested in any municipality or
governmental, tribal, statutory, or public authority to control or regulate any
of the Properties in any manner, and all applicable laws, rules, and orders of
any municipality or governmental or tribal authority, (vii) sales contracts for
oil, gas or associated liquid or gaseous hydrocarbons that may be canceled with
60 days notice, (viii) preferential rights to purchase and required third party
consents to assignments and similar agreements with respect to which (a) waivers
or consents are obtained from the appropriate parties, or (b) required notices
have been given to the holders of such rights and the appropriate time period
for asserting such rights has expired without an exercise of such rights, (ix)
all rights to consent by, required notices to, filings with, or other actions by
governmental agencies in connection with the sale or conveyance of oil and gas
leases or interests therein or sale of production therefrom, if the same are
customarily obtained subsequent to such sale or conveyance, and (x) any Title
Defects waived by Buyer pursuant to the terms of this Agreement.
"Property or Properties" - All of Seller's right, title and interest
in, to and under the lands, leases, wells and agreements described on Exhibit
"A," including, but not limited to, all of Seller's leasehold interests,
operating rights, interests in cooperative well agreements, overriding royalty
interests, reversionary interests, net profits interests, surface interests,
mineral interests, royalty interests, and any other similar or dissimilar
interest in the lands, leases and wells, together with rights in any pooled or
unitized acreage by virtue of any lands covered by the Leases being a part
thereof, including, but not limited to, all of Seller's right, title and
interest in, to, under and derived from:
(a) The oil, gas and mineral leases and the royalty or mineral
deeds described in Exhibit "A" attached hereto (the "Leases"),
together with corresponding interests in and to all the
property and rights incident thereto, including all rights in
any pooled or unitized acreage by virtue of the Leases being a
part thereof, all production from the pool or unit allocated
to any such Leases, and all interests in any wells within the
pool or unit associated with the Leases;
3
(b) The equipment and other personal and mixed property,
improvements, easements, rights-of-way, permits, licenses,
servitudes and any other estates situated in or upon, or used
or useful, or held for future use in connection with the
exploration, development and production of oil, gas and other
minerals, sulfur, associated gas from any of the Leases or the
treatment, storage or transportation of such substances
therefrom, including wells, casing, tubing, derricks, tanks,
batteries, boilers, separators, rods, pumps, flow lines, water
lines, gas lines, buildings, fixtures, machinery, gas
gathering or processing systems or pipelines, power lines,
telephone and telegraph lines, and all other fixtures and
improvements, currently located on the Leases or lands pooled
therewith or located thereon as of the Effective Time;
(c) Seller's rights and obligations resulting or derived from
all Basic Documents;
(d) All easements, rights-of-way, licenses, authorizations,
permits, and similar rights and interests applicable to, or
used or useful in connection with, any or all of the
above-described interests;
(e) All Records; and
(f) All oil, gas and associated liquid and gaseous
hydrocarbons stored upon or produced from the Leases after the
Effective Time;
it being the intent hereof to convey to Buyer all of Seller's interest in and to
the Properties listed in Exhibit "A," whether the Exhibit "A" omits or
incorrectly limits or incompletely describes the lands or wells or Seller's
interests therein.
"Records" - With the exception of Seller's financial and general tax
records, such term shall include all lease files, land files, well files, gas
and oil sales contract files, gas processing files, copies of accounting records
and information directly relating to production from and expenses attributable
to the Properties which are reasonably requested by Buyer, abstracts, title
opinions, well logs, cores, production data, and all other similar books, files
and records, information, and data (including engineering and geological data,
but excluding geophysical data), and all rights thereto, of Seller insofar as
the same are directly related to any of the Properties, to the extent the
transfer thereof is not prohibited by existing contractual obligations with
third parties (Seller shall notify Buyer and provide copies of any such existing
contractual obligations). Seller shall retain the originals of any records that
pertain to both lands included within the Properties and lands reserved by
Seller. In such case Buyer shall receive copies of the affected Records. Prior
to closing, Seller may copy any portion of the original Records that it wishes
to retain. Buyer shall retain the originals of Records for a period of not less
than seven (7) years after the Closing. Seller makes no representation as to the
accuracy or completeness of any of the Records and Buyer's reliance thereon is
at its own risk.
"Title Defect" - Any encumbrance, encroachment, irregularity, defect
in, or objection to Seller's title to the Properties (excluding Permitted
Encumbrances), that alone or in combination with other defects renders Seller's
title to the Properties or part thereof less than Defensible Title.
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ARTICLE 2. PURCHASE AND SALE
-----------------
2.1 Purchase and Sale. Subject to the terms of this Agreement, Seller
agrees to sell and Buyer agrees to purchase at the Closing, but effective as of
the Effective Time, all of Seller's right, title and interest in the Properties.
The Properties will be sold and conveyed to Buyer in the proportions of 25% to
Texland and 75% to Parallel ("Buyers' Acquisition Percentages").
2.2 Transfer of Ownership. At the Closing, ownership of all production
attributable to the Properties conveyed to Buyer shall pass as of the Effective
Time and all other attributes of ownership shall pass as of the Closing Date,
subject to the adjustments to the Purchase Price provided below.
ARTICLE 3. PURCHASE PRICE
--------------
3.1 Purchase Price. The purchase price payable by Buyer to Seller for
the Properties shall be SEVEN MILLION FIVE-HUNDRED THOUSAND DOLLARS AND
NO/100THS ($7,500,000.00) ("Purchase Price"), payable by Buyer in Buyers'
Acquisition Percentages or ONE-MILLION EIGHT-HUNDRED SEVENTY-FIVE THOUSAND
DOLLARS AND NO/100THS ($1,875,000.00) by Texland and FIVE-MILLION SIX-HUNDRED
TWENTY-FIVE THOUSAND DOLLARS AND NO/100THS ($5,625,000.00) by Parallel.
3.2 Manner of Payment of Purchase Price. The Purchase Price, as
adjusted pursuant to Article 3.3, shall be paid at the Closing by Buyer to
Seller or its designee(s) by wire transfer of immediately available funds or by
such other method as may be agreed to by the parties hereto.
3.3 Adjustments to Purchase Price. The Purchase Price shall be adjusted
at the Closing Date and at the Final Settlement Date (as hereinafter defined) as
follows:
(a) The Purchase Price shall be adjusted upward by the following:
(i) The value of all merchantable allowable oil or other
liquids in storage owned by Seller above the pipeline
connection at the Effective Time, and not previously sold by
Seller, that is credited to the Properties, such value to be
the contract price, or if no contract is in effect, the actual
sales price, less taxes or gravity adjustments deducted by the
purchaser of such oil or other liquids;
(ii) The amount of all expenditures made in compliance with
this Agreement (including royalties, rentals and other charges
and expenses billed under applicable operating agreements, or
in the absence of an operating agreement, expenses of the sort
customarily billed under such agreements) with respect to the
Properties which relate to the period after the Effective Time
and are paid by or on behalf of Seller in connection with the
operation and development of the Properties after the
Effective Time;
5
(iii) An amount equal to all prepaid expenses made in
compliance with this Agreement attributable to the Properties
that are paid by or on behalf of Seller that are, in
accordance with generally accepted accounting principles,
attributable to the period after the Effective Time including,
without limitation, prepaid utility charges, prepaid ad
valorem, property, production, severance and similar taxes
(but not including income taxes) based upon or measured by the
ownership of property or the production of hydrocarbons or the
receipt of proceeds therefrom;
(iv) The amount of all expenditures paid by Seller for
Seller's proportionate share of the costs of drilling,
completing and operating the New Development Wells, regardless
of whether such expenditure was paid before or after the
Effective Date; provided however, the Seller shall be
responsible for all remedial costs on the Lineberry (SA & CF)
Unit #2C Well necessary to obtain, to the reasonable
satisfaction of Buyer, a cement bond log across the San Andres
formation with sufficient cement height above and below to
permit a fracture treatment . After the Buyer is satisfied
with the cement bond log, the Buyer will assume operations of
the well and Seller shall be relieved of all liabilities,
except the cost, negotiated in good faith, necessary to
satisfy the cementing requirements of the Railroad Commission
of Texas for fresh water protection, which costs will be a
downward adjustment to the Purchase Price accounted for at the
post closing. In the event, the well can not be remediated as
described above, then the parties will share all costs
associated with the well at their ownership interests which
existed prior to the sale contemplated by this agreement; and
(v) Any other amount required under this Agreement or
otherwise agreed upon by Buyer and Seller.
(b) The Purchase Price shall be adjusted downward by the following:
(i) The amount of all proceeds actually received or accrued
and receivable by or on behalf of Seller attributable to
production from the Properties after the Effective Time;
(ii) The amount of all proceeds actually received or accrued
and receivable by or on behalf of Seller attributable to
Seller's proportionate interest in the New Development Wells,
regardless of whether such proceeds are attributable to
production before or after the Effective Time; and
(iii) An amount equal to all unpaid ad valorem, property,
production, severance, and similar taxes and assessments (but
not including income taxes) based upon or measured by the
ownership of the Properties or the production of hydrocarbons
or the receipt of proceeds therefrom accruing to the
Properties in accordance with generally accepted accounting
principles prior to the Effective Time, which amount shall, to
the extent not actually assessed, be computed based upon such
taxes and assessments for the preceding calendar year or, if
such taxes or
6
assessments are assessed on other than a calendar year basis,
for the tax related year last ended; and
(iv) Any other amounts required under this Agreement or
otherwise agreed upon by Buyer and Seller.
ARTICLE 4. ASSUMPTION OF OBLIGATIONS; INDEMNITIES; COVENANTS
-------------------------------------------------
4.1 Buyer. Buyer, as owner of the Properties acquired under the terms
of this Agreement, shall, by the consummation of the transactions contemplated
by this Agreement, obligate itself to assume and timely discharge all duties and
obligations of the Seller as owner of the Properties and in connection with the
Basic Documents provided by Seller to Buyer, and obligations under applicable
local, state, or federal law relating to the Properties which accrue or arise
from and after the Effective Time, except those arising out of any actions,
suits, claims, or demands incurred or arising from acts or omissions of Seller
as owner of the Properties prior to the Effective Time and those accruing or
arising from a breach by Seller of any representation, warranty, covenant, or
agreement contained herein. Except as otherwise provided herein, Buyer does
hereby agree to defend, save harmless, and indemnify Seller, its officers,
directors, and stockholders, from all loss, cost, expense (including attorney's
fees and expenses), penalties and liabilities (i) arising out of any actions,
suits, claims, or demands incurred as a result of or arising from acts or
omissions of Buyer as owner of the Properties after the Effective Time or
arising in any other manner from the ownership and operation of the Properties
after the Effective Time, or (ii) resulting from or related to any
representation or warranty of Buyer contained herein being untrue or any
warranty, agreement, or covenant of Buyer contained herein being breached.
4.2 Seller. Seller shall be responsible for any obligation, claim,
demand, or cause of action related to the Properties which accrues or arises
prior to the Effective Time, except those attributable to the negligent acts or
omissions of Buyer prior to the Effective Time. Seller shall defend, save
harmless, and indemnify Buyer, its officers, directors, and shareholders from
all loss, cost, expense (including attorney's fees and expenses), penalties and
liabilities (i) arising out of any actions, suits, claims, or demands incurred
as a result of or arising from acts or omissions of Seller prior to the
Effective Time, (ii) resulting from or relating to any representation or
warranty of Seller contained herein being untrue or any warranty, agreement, or
covenant of Seller contained herein being breached, and (iii) attributable or
related to or arising out of any litigation, claims, or demands which may be
instituted by Seller's security holders, creditors, or employees arising out of
or related to the transactions contemplated herein.
4.3 Environmental Matters.
(a) Pre-Acquisition Review. Buyer shall have the right to perform an
investigation of the environmental condition of the Properties (the
"Pre-Acquisition Review"). To the extent Seller may do so as a
non-operator, Seller agrees to grant to Buyer or its agents access to
and the opportunity to inspect the Properties, interview employees, and
review all of Seller's Records relevant to the Properties for the
purposes of detecting the presence of hazardous or
7
toxic substances, pollutants or other contaminants, environmental
hazards, naturally occurring radioactive material (NORM), and produced
water or hydrocarbons contamination of the surface or subsurface. Buyer
shall indemnify Seller against any loss to the Properties or to persons
or other property as a result of Buyer's inspections.
(b) Review Results. If, as a result of the Pre-Acquisition Review,
Buyer determines that the environmental condition of any portion of the
Properties is unacceptable for Buyer's purposes by reason of a
condition resulting from a violation of an Environmental Law having
occurred (an "Environmental Defect"), Buyer shall notify Seller of the
Environmental Defect prior to the Closing Date. Buyer or Seller shall
have the right to (i) allow Seller a mutually agreeable time to cure
the Environmental Defect, (ii) terminate this Agreement, if the cost to
remedy the Environmental Defect exceeds the allocated value indicated
on Exhibit "C," (iii) adjust the Purchase Price to reflect the
estimated cost of remedying the Environmental Defect, or (iv) exclude
the affected portion of the Properties and adjust the Purchase Price
based on the Allocated Values shown on Exhibit "C." In the event Seller
notifies Buyer prior to Closing that it does not agree that the
condition constitutes an Environmental Defect or that the Purchase
Price reduction amount is incorrect, the parties agree to negotiate in
good faith to resolve such discrepancies.
(c) Indemnification. Notwithstanding anything to the contrary contained
herein, from and after the Closing, Buyer shall indemnify, defend, and
hold harmless Seller against (A) any and all claims, costs, expenses,
and liabilities attributable to damage to property, injury to or death
of persons or other living things, natural resource damages,
environmental remediation and restoration costs, or fines and penalties
insofar as and only insofar as any of the foregoing results from a
violation under Environmental Laws (collectively, "Claims") resulting
from or attributable to, in whole or in part, either directly or
indirectly, Seller's or Buyer's ownership or the operation or condition
of the Properties, whether accruing or occurring before, on or after
the Effective Time, and (B) Seller's and Buyer's obligations and
responsibilities under CERCLA response costs incurred as a result of
hazardous substances generated from the Properties before, on or after
the Effective Time.
4.4 Title Matters. Buyer shall have the right to conduct such title
examination of the Properties as Buyer deems necessary or appropriate, and in
the event Buyer determines that any Title Defect exists, Buyer may give Seller
written notice prior to the Closing Date, of any claimed Title Defect. Each such
notice shall set forth (i) a description of the matter constituting the claimed
Title Defect, and (ii) the Purchase Price reduction calculated by Buyer based on
the Purchase Price allocation set forth on Exhibit "C" including a detailed
description of the calculation thereof. Seller shall have the right, but not the
obligation, to cure any claimed Title Defect on or before the Closing. If any
Title Defect shall not be cured or objected to prior to Closing, Buyer may (i)
agree with Seller to extend the Closing Date for a sufficient time to cure the
claimed Title Defect, (ii) waive such Title Defect, or (iii) reduce the Purchase
Price by the amount set forth in the notice, and the Purchase
8
Price shall be adjusted in accordance with Article 3.3. In the event Seller
notifies Buyer prior to Closing that it does not agree that the matter that
constitutes a Title Defect or that the Purchase Price reduction amount is
incorrect, the parties agree to negotiate in good faith to resolve such
discrepancy.
In the event Seller or Buyer determines that Seller's net revenue
interests in any of the Properties is greater than represented on Exhibit "A,"
the discovering Party shall notify the other in writing and Seller shall be
entitled to an upward adjustment in a mutually agreeable amount based upon the
Allocated Value of the affected Property as shown on Exhibit "C."
In the event no Purchase Price adjustment, either upward or downward as
appropriate, can be agreed upon after such negotiations, the affected Property
shall be removed from the sale and Buyer shall receive a downward Purchase Price
adjustment equal to the allocated value of the Property as shown on Exhibit "C."
4.5 Casualty Loss. If, prior to the Closing, all or any portion of the
Properties are destroyed by fire or other casualty, are taken in condemnation or
under the right of eminent domain, or proceedings for such purposes are pending
or threatened (herein "Condemnation"), Buyer may elect (i) to treat the
Properties affected by such Condemnation as a Title Defect in accordance with
Section 4.4, or (ii) to purchase such Properties notwithstanding any such
Condemnation (without reduction of the Purchase Price therefore), in which case
Seller shall, at the Closing, pay to Buyer all sums paid to Seller by third
parties by reason of the Condemnation of such Properties to be assigned to Buyer
and shall assign to Buyer all of the right, title and interest of Seller in and
to any unpaid awards or other payments from third parties arising out of the
Condemnation as to such Properties. Prior to Closing, Seller shall not
voluntarily compromise, settle, or adjust any amounts payable by reason of any
Condemnation as to such interest to be assigned to Buyer without first obtaining
the written consent of Buyer.
4.6 Limitations on Certain Purchase Price Adjustments. Buyer may not
assert any claim for adjustments to the Purchase Price for Title Defects or
Environmental Defects unless and until the aggregate amount of such claims shall
exceed a threshold of FIFTY-THOUSAND DOLLARS AND NO/100THS ($50,000.00) at which
point the aggregate of all such claims shall be considered for adjustment.
4.7 Due Diligence. Prior to Closing, Seller will make available the
Records to Buyer and Buyer's authorized representatives for examination. Prior
to Closing, Buyer at its sole cost may copy any portion of the Records as Buyer
may reasonably request. Seller shall permit Buyer and Buyer's authorized
representatives to consult with Seller's employees during reasonable business
hours and to conduct, at Buyer's sole risk and expense, inspections and
inventories of the Properties.
4.8 Defense of Claims. If a claim arises for which either party intends
to seek indemnity with respect thereto under this Agreement, such party (the
"Claiming Party") shall notify the other in writing (the "Indemnifying Party")
of such claim within thirty days of the date the Claiming Party becomes aware of
such claim. The Indemnifying Party will promptly undertake, conduct and control,
through counsel of its own choosing and at its own expense, the settlement or
defense thereof, and the Claiming Party shall cooperate with the Indemnifying
Party in connection therewith. The Indemnifying Party will keep the Claiming
Party advised of the progress of the claim, shall consult with the Claiming
Party prior to the settlement of any such claim,
9
and will not settle any such claim that affects the Claiming Party or its
interest in the Properties without its prior written consent. The Claiming
Party's counsel may be present in all proceedings and conferences at the
Claiming Party's expense. If the Indemnifying Party does not notify the Claiming
Party in writing within 15 days after the receipt of the Claiming Party's notice
of a claim of indemnity hereunder that it will undertake the defense thereof, or
otherwise fails to undertake such defense, then the Claiming Party shall have
the right to contest, settle or compromise the claim, but shall not thereby
waive any right to indemnity (including any costs and expenses incurred by such
activities). Any obligation to indemnify under this Agreement carries with it
the obligation to indemnify against associated attorney fees, court costs and
costs of litigation.
ARTICLE 5. SELLER'S REPRESENTATIONS AND WARRANTIES
---------------------------------------
Seller represents and warrants to Buyer as of the date hereof and by
the terms hereof will so represent and warrant to Buyer on the Closing Date as
follows:
5.1 Existence. KFOC is a corporation duly organized, validly existing,
and in good standing under the laws of the state of its incorporation, and is
duly qualified to do business in the states in which the Properties are located.
KF Energy is a Texas limited partnership duly organized, validly existing, and
in good standing under the laws of the state of formation, and is duly qualified
to do business in the states in which the Properties are located.
5.2 Authorization. Seller has all authority necessary to enter into
this Agreement and to perform all its obligations hereunder. This Agreement has
been duly executed and delivered on its behalf, and at the Closing all documents
and instruments required hereunder will have been duly executed and delivered.
This Agreement, and all such documents and instruments shall constitute legal,
valid, and binding obligations enforceable in accordance with their respective
terms, except to the extent enforceability may be affected by bankruptcy,
reorganization, insolvency, or similar laws affecting creditors' rights
generally.
5.3 Power. Subject to preferential purchase rights and restrictions on
assignment of the type typically found in the oil and gas industry, and to
rights to consent by, required notices to, and filings with or actions by other
governmental entities, Seller's execution, delivery, and performance of this
Agreement and the transactions contemplated hereby will not: (i) violate or
conflict with any provision of its certificate of incorporation, by-laws, or
other governing documents; (ii) result in the breach of any term or condition
of, or constitute a default or cause the acceleration of any obligation under
any agreement or instrument to which it is a party or by which it is bound; or
(iii) violate or conflict with any applicable judgment, decree, order, permit,
law, rule, or regulation.
5.4 Conflicts. Seller's execution, delivery, and performance of this
Agreement does not and will not conflict with or violate any agreement governing
Seller's business or affairs, or any agreements or instruments to which Seller
may be a party or by which Seller or any of Seller's properties are bound, or
any law, administrative regulation or rule or court order, judgment, or decree
applicable to Seller or to the Properties.
10
5.5 Default. Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby does or will constitute
a breach of, or an event of default under, any contract or agreement to which
Seller is a party or by which Seller or Seller's assets are bound, or constitute
the happening of an event or condition upon which any other party to such a
contract or agreement may exercise any right or option which will materially
adversely affect any of the Properties or the transfer of the same to Buyer; nor
will the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby result in any liability to Buyer under the
terms of any contracts or agreements, including any Basic Documents, contracts
of employment, consultancy or for services of any kind, except insofar as Buyer
may fail to comply with the terms and conditions of any such contracts or
agreements.
5.6 Bankruptcy. There are no bankruptcy, reorganization, or arrangement
proceedings pending, being contemplated by, or threatened against Seller.
5.7 Regulatory Violation. Seller is not aware of any violations,
whether alleged or acknowledged, of any applicable regulations, rules or orders
promulgated by the Federal Energy Regulatory Commission, the Department of
Energy, or any other federal or state regulatory agency, or any of their
predecessor agencies, which affect in any respect the value of the Properties or
the production therefrom.
5.8 Litigation. To the best of Seller's knowledge, there is neither any
claim, dispute, suit, action, investigation or other proceeding pending before
any court or governmental agency, nor threatened, against Seller or any
affiliate of Seller or any of the Properties which has or might result in the
impairment or loss of Seller's title to any of the Properties or the value
therefore or impede the operation of the Properties.
5.9 Unrecorded Documents. To the best of Seller's knowledge, there
exists no unrecorded document or agreement which would result in the impairment
or loss of Seller's title to the Properties or the value therefore or impede the
operations thereof by Buyer.
5.10 Taxes. To the extent that Seller is charged with remitting same.
All ad valorem, property, production, excise, severance, and similar taxes and
assessments based on or measured by the ownership of property or the production
or removal of hydrocarbons or the receipt of proceeds therefrom on the
Properties since the derivation of each interest in the Properties by Seller
until the Closing Date (the "Ownership Period") have been paid timely.
5.11 Leases. To the best of Seller's knowledge, Seller has not received
notice of and does not have knowledge of any default under the terms and
provisions of the Leases.
5.12 Suspense. To the best of Seller's knowledge, proceeds from the
sale of oil, condensate and gas from the Properties attributable to Seller's
interest are being received in all respects by Seller in a timely manner and are
not being held in suspense for any reason. To the best of Seller's knowledge,
proceeds from the sale of oil, condensate and gas from the Properties
attributable to mineral or royalty interests are being received in all respects
by such mineral and/or royalty interest owners in a
11
timely manner and are not being held in suspense for any reason, except amounts
validly held in suspense accounts.
5.13 Imbalances. Except as disclosed on Schedule 5.13, there exists no
imbalance regarding production taken or marketed from any Lease which could
result in (i) a portion of Seller's interest in production therefrom to be taken
or delivered after the Closing Date without Buyer receiving payment therefore
and at the price it would have received absent such imbalance; (ii) Buyer being
obligated to make payment to any person or entity as a result of such imbalance;
or (iii) production being shut-in or curtailed after the Closing Date due to
non-compliance with allowables, production quotas, proration rules, or similar
orders or regulations of governmental authorities; and Buyer will not be
obligated, by virtue of any prepayment arrangement, take-or-pay agreement, or
similar arrangement, to deliver hydrocarbons produced from the Properties at
some future time without then receiving full payment therefore. In the event
that the Seller or Buyer determines that an additional gas imbalance exists as
to Seller's interest in the Properties as of the Effective Time other than as
disclosed on Schedule 5.13, then the Purchase Price will be adjusted upwards or
downward as appropriate. Such adjustment shall be calculated by multiplying the
amount of the volume difference by $5.65 per mcf. Adjustments as provided in
this section discovered before Closing will be made at Closing, and adjustments
as provided in this section discovered after Closing will be made on the Final
Settlement Statement after which no further imbalance adjustments will be made.
5.14 Tax Partnerships. Except as disclosed in writing to Buyer in a
schedule to this section, the Properties are not subject to any tax
partnerships, and as to any such tax partnership, the election provided under
Article 754 of the Internal Revenue Code of 1954, as amended, has been made.
5.15 Preferential Rights. There are no preferential rights of purchase
or consents to assign in favor of third parties with respect to any of the
Properties and no consents to transfers thereof are required, except to the
extent described in the schedule to this section. Seller shall use its best
efforts to obtain a waiver of such rights prior to the Closing Date.
5.16 Tax Returns. Seller has filed or will file all federal, state and
other reports or returns, if any, required to be filed by Seller in connection
with its ownership or operation of the Properties, and further, Seller has
either discharged, caused to be discharged, or will discharge, all costs,
expenses, charges, debts, and taxes of every kind and character, including,
without limitation, severance taxes attributable or relating to Seller's
ownership or operation of the Properties or revenues or income therefrom, to the
extent that Seller as non-operator is responsible for paying or remitting same.
5.17 Expenses Paid. All material expenses and liabilities relating to
the ownership or operation of the Properties by Seller have been and are being
timely paid by Seller, and as to the Properties operated by third parties, to
the best of Seller's knowledge, all material expenses and liabilities have been
and are being timely paid.
12
5.18 AFEs. Except as disclosed in Schedule 5.18, other than those
attributable to the Development Wells, to the best of Seller's knowledge, there
are no currently outstanding AFEs as of the Closing Date that are in excess of
$25,000.
5.19 Equipment Compliance. To the best of Seller's knowledge, all of
the personal property, fixtures, equipment, and improvements on the Leases are
in compliance with all applicable laws and regulations.
5.20 Environmental Consents. With respect to the Properties, Seller has
not entered into, and, to the best of Seller's knowledge, no predecessor to
Seller or operator of any Property has entered into, or is subject to, any
agreements, consents, orders, decrees, judgments, license or permit conditions,
or other directives of governmental authorities in existence at the date of this
Agreement based on any Environmental Laws that relate to the future use of any
of the Property or that require any change in the present conditions of any of
the Property. Neither the execution of this Agreement nor the consummation of
the transactions contemplated by this Agreement will violate any agreements,
consents, orders, decrees, judgments, license or permit conditions, or, to the
best of Seller's knowledge, require the consent or approval of any agency
charged with enforcing any Environmental Law.
5.21 Licenses. Except in instances where Buyer is operator of a
Property, Seller, or to the best of Seller's knowledge, the operator of the
Properties, has obtained and holds, or has caused to be obtained and to be held,
in good standing, all licenses, permits, or other authorizations necessary to
carry on business connected with the Properties as currently conducted where
failure to obtain such licenses, permits, or other authorizations would have an
adverse effect on the Properties or operations thereof by Buyer.
5.22 Brokers' Fees. Seller has incurred no liability, contingent or
otherwise, for brokers' or finders' fees in respect of this transaction for
which Buyer shall have any responsibility whatsoever.
5.23 Environmental Condition. To the best of Seller's knowledge, Seller
is not aware of any Claims, as described in Section 4.3(c), which have been
asserted or could be asserted, and has not received a written notice of a
violation of an Environmental Law with respect to the Properties that has not
been finally resolved and closed.
ARTICLE 6. BUYER'S REPRESENTATIONS AND WARRANTIES
--------------------------------------
Texland and Parallel, each as to itself only, represent and warrant to
Seller as follows:
6.1 Existence. Texland is a Texas limited partnership duly organized,
validly existing, and in good standing under the laws of the state of its
formation, and is duly qualified to do business in the states in which the
Properties are located. Parallel is a limited partnership duly organized,
validly existing, and in good standing under the laws of the state of its
formation, and is duly qualified to do business in the states in which the
Properties are located.
13
6.2 Authorization. Buyer has all authority necessary to enter into this
Agreement and to perform all its obligations hereunder. This Agreement has been
duly executed and delivered on its behalf, and at the Closing all documents and
instruments required hereunder will have been duly executed and delivered. This
Agreement, and all such documents and instruments shall constitute legal, valid,
and binding obligations enforceable in accordance with their respective terms,
except to the extent enforceability may be affected by bankruptcy,
reorganization, insolvency, or similar laws affecting creditors' rights
generally.
6.3 Power. Subject to rights to consents by, required notices to, and
filings with or other actions by governmental entities, Buyer's execution,
delivery, and performance of this Agreement and the transactions contemplated
hereby will not: (i) violate or conflict with any provision of its certificate
of incorporation, by-laws, or other governing documents; (ii) result in the
breach of any term or condition of, or constitute a default or cause the
acceleration of any obligation under any agreement or instrument to which it is
a party or by which it is bound; or (iii) violate or conflict with any
applicable judgment, decree, order, permit, law, rule, or regulation.
6.4 Conflicts. Buyer's execution, delivery, and performance of this
Agreement will not conflict with or violate any material agreement governing
Buyer's organization, management, business or affairs, including Buyer's
certificate, articles, or, in any material respect, any agreement or instrument
to which Buyer may be a party or by which Buyer is bound, or any material law,
administrative regulation or rule, court order, judgment, or decree applicable
to Buyer.
6.5 Default. Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will constitute a
material breach of, or an event of default under, any material contract or
agreement to which Buyer is bound, or by which Buyer may be bound or affected;
nor will the execution of this Agreement or the consummation of the transactions
contemplated hereby by Buyer result in any liability to Seller under the terms
of any contracts or agreements, including contracts of employment, consultancy,
or for services of any kind except as otherwise provided herein.
6.6 Brokers' Fees. Buyer has incurred no liability, contingent or
otherwise, for brokers' or finders' fees in respect of this transaction for
which Seller shall have any responsibility whatsoever.
6.7 Further Distribution. Buyer is purchasing the Properties for its
own account and does not currently intend to offer any of the Properties for
resale in such a manner that would subject the sale of such Properties to the
jurisdiction of the Securities and Exchange Commission or any applicable state
security law.
6.8 Licenses. Buyer possesses all required governmental licenses,
permits, bonds, certificates, orders and authorizations necessary to own or
operate the Properties.
6.9 Cash on Hand. Buyer shall have on the Closing Date and thereafter,
sufficient cash to enable it to make payment in immediately available funds of
the Purchase Price when due and any other amounts to be paid by it hereunder.
14
ARTICLE 7. BUYER'S CONDITIONS PRECEDENT
----------------------------
7.1 Conditions Precedent to Obligations of Buyer. Unless otherwise
specifically provided herein, Buyer may, at its option and in its sole
discretion, terminate its obligations hereunder if the following conditions have
not been fulfilled at the Closing: (i) the condition that Buyer have an
opportunity to conduct a due diligence review of Seller's Records and files
relative to the Properties and Leases and Pre-Acquisition Review; (ii) the
condition that Seller shall have performed all of its material obligations
hereunder to be performed at or prior to the Closing; (iii) the condition that
no suit, action or other proceeding shall be pending or threatened before any
court or governmental agency seeking to restrain or prohibit the Closing or
seeking damages against Buyer as a result of the consummation of the
transactions contemplated by this Agreement; and, (iv) the condition that
operations on all Properties currently operated by Seller shall be transferred
to Texland effective as of the Closing Date, or such other date mutually agreed
to by Buyer and Seller.
7.2 Third Party Consents. Prior to the Closing, Seller shall have
received all material consents, permissions, and approvals by third parties in
connection with the sale and transfer of the Properties including consents and
approvals of lessors, lending institutions, creditors, and appropriate
regulatory agencies, and all necessary waivers of any preferential and similar
rights of third parties to purchase any part of the Properties ("Third Party
Consents"). In the event Seller has not received all of the Third Party Consents
by the Closing Date, then, at Buyer's option and with the agreement of Seller,
Buyer may either (i) proceed to close on such Property or Properties that are
still subject to Third Party Consents, in which event Buyer shall be responsible
for compliance with such rights, or (ii) delete such Property or Properties that
are still subject to Third Party Consents from the Closing and reduce the
Purchase Price based on the Purchase Price allocation set forth on Exhibit "C,"
and upon Seller either obtaining the necessary Third Party Consents or failing
to have obtained them within six (6) months following the Closing Date, Seller
and Buyer shall either close on such Property or Properties or Buyer shall
release any and all rights that it owns to acquire such Property or Properties.
ARTICLE 8. SELLER'S CONDITIONS PRECEDENT
-----------------------------
8.1 Conditions Precedent to Obligations of Seller. Unless otherwise
specifically provided herein, Seller may, at its option and in its sole
discretion, terminate its obligations hereunder if the following conditions have
not been fulfilled at the Closing: (i) the condition that Buyer performs all of
its material obligations hereunder to be performed at or prior to the Closing;
and (ii) the condition that no suit, action or other proceeding shall be pending
or threatened before any court or governmental agency seeking to restrain or
prohibit the Closing or seeking damages against Seller as a result of the
consummation of the transactions contemplated by this Agreement.
ARTICLE 9. RIGHT OF TERMINATION
--------------------
9.1 Termination. This Agreement and the transactions contemplated
hereby may be terminated in the following instances: (i) by Seller, if the
conditions set forth in Article 8 are not satisfied or waived as of the Closing;
(ii) by Buyer, if the conditions
15
set forth in Article 7 are not satisfied or waived as of the Closing; (iii) by
Buyer or Seller, if Buyer's due diligence review should uncover any matter which
impairs the value of the Properties by FIVE-HUNDRED THOUSAND DOLLARS AND
NO/100THS ($500,000.00) or more (including, but not limited to, a Title Defect
or Environmental Defect); (iv) by either party, if, through no fault of its own,
the Closing does not occur on or before October 31, 2004; (v) by either Seller
or Buyer if there has been a material breach of the representations and
warranties made by Seller in Article 5 and by Buyer in Article 6; and (vi) at
any time by the mutual written agreement of Buyer and Seller.
9.2 Liabilities Upon Termination. If this Agreement is terminated for
any reason or is breached, nothing contained in this Agreement shall be
construed to limit Buyer's or Seller's legal or equitable remedies including,
without limitation, damages for the breach or failure of any representation,
warranty, covenant, or agreement contained herein and the right to enforce
specific performance of this Agreement.
ARTICLE 10. TRANSACTIONS AT AND AFTER CLOSING
---------------------------------
10.1 Closing Documents. On or before the Closing, each of the parties
shall deliver to the other such instruments and documents as are reasonably
necessary or desirable in order to carry out the purposes of this Agreement,
such instruments and documents to be in form and substance reasonably
satisfactory to counsel to the other.
10.2 Time and Place of Closing. The Closing shall be held in Seller's
offices in Tulsa, Oklahoma (or at such time and place as Buyer and Seller may
agree upon in writing).
10.3 Closing Obligations. At the Closing, the following events shall
occur, each being a condition precedent to the others and each being deemed to
have occurred simultaneously with the others ("Closing Obligations"):
(a) Seller shall execute, acknowledge and deliver to Buyer assignments,
bills of sale and conveyances in the form attached as Exhibit "B" (the
"Assignment") conveying the Properties effective as of the Effective
Time to Buyer.
(b) Seller and Buyer shall execute and deliver a settlement statement that
shall set forth the Purchase Price, each adjustment pursuant to Article
3.3, as applied at the Closing Date, each of which shall be calculated
using the best information available as of a date or dates immediately
preceding the Closing, and the resulting adjusted Purchase Price (the
"Closing Amount");
(c) Seller shall deliver to Buyer possession of the Properties and
transfer operations to Texland on any of the Properties currently
operated by Seller;
(d) A non-foreign affidavit in the form of Exhibit "D" attached hereto;
(e) Seller and Buyer shall execute, acknowledge, and deliver (i) P-4s
and all other necessary documentation necessary to transfer operations
on the Properties currently operated by Seller [except for the
Lineberry (SA & CF) Unit
16
#2 Well, which shall continue to be operated by Seller until it is
remediated pursuant to the terms of Section 3.3(a)(iv). ] and (ii)
transfer orders or letters in lieu, directing all purchasers of
production to make payment to Buyer of proceeds attributable to
production from the Properties;
(f) The Records shall be delivered to Buyer;
(g) Seller shall deliver to Buyer a certified copy of a resolution from
Seller's Board of Directors, authorizing the sale of the Properties;
(h) Seller and Buyer shall each execute such other documents as may be
reasonably required by each other, consistent with the provisions of
this Agreement;
(i) Buyer shall deliver to Seller, by wire transfer, the amount due at
Closing.
10.4 Further Assurances.
(a) From time to time after Closing, Seller and Buyer shall execute,
acknowledge, and deliver to the other such further instruments, and
take such other action as may be reasonably requested to more
effectively assure to said party all of the respective properties,
rights, titles, interests, and estates intended to be assigned and
delivered in consummation of the transactions contemplated by this
Agreement.
(b) From and after Closing, promptly after their receipt thereof, but
only to the extent that such proceeds shall not have been the subject
of an adjustment to the Purchase Price, (i) Seller agrees to pay
promptly to Buyer any and all proceeds received by Seller that are
attributable to the production of hydrocarbons from the Properties on
or after the Effective Time, and (ii) Buyer agrees to pay to Seller any
and all proceeds received by Buyer that are attributable to the
production of hydrocarbons from the Properties prior to the Effective
Time. Both Seller and Buyer may deduct from the proceeds applicable
expenses paid that have not been previously accounted for as an
adjustment to the Purchase Price.
10.5 Post-Closing Adjustments. If necessary and within 90 days after
the Closing, Seller will prepare and deliver to Buyer, in accordance with this
Agreement and generally accepted accounting principles, a proposed statement
(the "Final Settlement Statement") setting forth each adjustment or payment that
was not finally determined as of the Closing Date (including the payments and
deductions made under Article 10.4 (b) above) and showing the calculation of
such adjustments and the resulting final Purchase Price (as set forth in the
Final Settlement Statement, the "Final Purchase Price"). As soon as practicable
after receipt of the preliminary Final Settlement Statement, Buyer shall return
a written report containing any proposed changes to the preliminary Final
Settlement Statement. The parties undertake to agree with respect to the amounts
due pursuant to such post-Closing adjustments no later than 120 days after the
Closing. In the event that (a) the Purchase Price is more than the Final
Purchase Price, Seller shall pay to Buyer the amount of such difference, or (b)
the Purchase Price is less than the Final Purchase Price, Buyer shall
17
pay to Seller the amount of such difference, in either event by wire transfer or
other immediately available funds.
10.6 Files and Records Seller shall have reasonable access to, and
right to copy any of, the Records delivered to Buyer after the Closing, to the
extent Buyer has retained the Records. Seller shall reimburse Buyer for Buyer's
out-of-pocket costs incurred in providing Seller such access or copies.
ARTICLE 11. MISCELLANEOUS
-------------
11.1 Notices. All communications required or permitted under this
Agreement shall be in writing and any communication or delivery hereunder shall
be deemed to have been duly made if actually delivered or if mailed by
registered or certified mail, postage prepaid, addressed to the party being
notified as set forth below. Any party may, by written notice so delivered to
the other, change the address to which delivery shall thereafter be made.
Notices to Seller and Buyer shall be made at the addresses set forth below:
Seller: .........Kaiser-Francis Oil Company
and
.........KF Energy Limited Partnership
.........6733 South Yale Ave.
.........Tulsa, Oklahoma 74136
.........ATTN: Jim Sullivan
.........Fax: (918) 491-4694
Buyer: Texland Petroleum, L. P.
777 Main Street, Suite 3200
Fort Worth, Texas 76102
ATTN: Mr. R. J. Schumacher
Tel: (817) 336-2751
Fax: (817) 900-1291
Parallel L. P.
1004 North Big Spring Street, Suite 400
Midland, Texas 79701
ATTN: Mr. John Rutherford
Tel: (432) 684-3727
Fax: (432) 684-3905
11.2 Counterparts. This Agreement may be executed in any number of
counterparts, which taken together shall constitute one and the same instrument
and each of which shall be considered an original for all purposes.
11.3 Expenses. Each party hereto will bear and pay its own expenses of
negotiating and consummating the transactions contemplated hereby. Buyer shall
pay to Seller and Seller shall remit, upon concurrence of Buyer, all sales and
other transfer taxes, if any, incurred in connection with this transaction
contemplated by this Agreement. Buyer shall pay all documentary, filing, and
recording fees.
18
11.4 Article Headings. The Article headings contained in this Agreement
are for convenient reference only and shall not in any way affect the meaning or
interpretation of this Agreement.
11.5 Amendment. This Agreement may not be amended nor any rights
hereunder waived except by an instrument in writing signed by the party to be
charged with such amendment or waiver and delivered by such party to the party
claiming the benefit of such amendment or waiver.
11.6 Gender. References made in this Agreement, including use of a
pronoun, shall be deemed to include where applicable, masculine, feminine,
singular or plural, individuals, partnerships, or corporations. As used in this
Agreement, "person" shall mean any natural person, corporation, partnership,
trust, estate, or other entity.
11.7 Entire Agreement. This Agreement constitutes the entire
understanding among the parties with respect to the subject matter hereof,
superseding all negotiations, prior discussions, and prior agreements and
understandings relating to such subject matter.
11.8 Successors and Assigns. 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 except as otherwise
stated herein, nothing contained in this Agreement, or implied herefrom, is
intended to confer upon any other person or entity any benefits, rights, or
remedies.
11.9 Survivability. Except as otherwise specifically provided in this
Agreement and except to the extent fully performed or waived prior to Closing,
all indemnifications, covenants, agreements, representations, guaranties, and
warranties shall survive the execution of the Agreement, the Closing, and the
delivery and recordation of any deeds, assignments, or bills of sale which
convey the Properties from Seller to Buyer; however, the representations and
warranties of Seller contained in Article 5 hereof shall expire twelve months
after the Closing Date, and no claim or action may brought against Seller with
respect to a breach thereof unless written notice is given to Seller on or
before twelve months after of the Closing Date. In the event of an inconsistency
between the terms of any document delivered at Closing and this Agreement, the
terms of this Agreement shall govern.
11.10 Severability. If a court of competent jurisdiction determines
that any clause or provision of this Agreement is void, illegal, or
unenforceable, the other clauses and provisions of the Agreement shall remain in
full force and effect and the clauses and provisions which are determined to be
void, illegal, or unenforceable shall be limited so that they shall remain in
effect to the extent permissible by law.
11.11 Governing Law. This Agreement and the legal relations between the
Parties shall be governed by and construed under the laws of the State of Texas
(excluding any conflict of laws provision that would require the application of
the law of any other jurisdiction). Any claims, disputes or causes of action
resulting from or arising out of this Agreement shall be brought, heard and
resolved exclusively in a Federal or state court having jurisdiction covering or
located in Andrews County, Texas.
19
11.12 Deceptive Trade Practices Waiver. To the extent applicable, Buyer
waives Buyer's rights under the provisions of the Texas Deceptive Trade
Practices - Consumer Protection Act, Sections 17.41 et seq. of the Texas
Business and Commerce Code.
11.13 Press Releases. Seller and Buyer shall consult with each other
prior to the issuance of any press releases or other public announcements
concerning this transaction.
11.14 Buyer Liability. Texland and Parallel are proportionately liable
and responsible for the obligations of Buyer under this Agreement in accordance
with Buyers' Acquisition Percentages, and it is agreed and understood that the
liability of Texland and Parallel hereunder is several and not joint liability.
20
IN WITNESS WHEREOF, the parties have executed or caused this Agreement to be
executed as of the day and year first above written.
SELLER:
KAISER-FRANCIS OIL COMPANY, A DELAWARE
CORPORATION
By: /s/ James A. Willis
-----------------------------------------
James A. Willis, Executive Vice President
KF ENERGY LIMITED PARTNERSHIP
By: KF Energy, L.L.C., its General Partner
By: /s/ Brent Meadows
-----------------------------------------
Brent Meadows, President
21
BUYER:
TEXLAND PETROLEUM, L. P., A TEXAS LIMITED
PARTNERSHIP
By: Texpet Mgt. L.L.C., its General Partner
By: /s/ James H. Wilkes
-----------------------------------------
James H. Wilkes, President and COO
22
BUYER:
PARALLEL L. P., A TEXAS LIMITED PARTNERSHIP
By: Parallel Petroleum Corporation, its
General Partner
By: /s/ John Rutherford
-----------------------------------------
John Rutherford, Vice President
23
EXHIBIT "A"
Attached to and made a part of that certain Purchase and Sale
Agreement between KAISER-FRANCIS OIL COMPANY and KF Energy Limited
Partnership, as Seller and, TEXLAND PETROLEUM, L.P., and PARALLEL,
L.P., as Buyer, dated October 8, 2004.
Lineberry Unit
--------------
LEASE DATE: 6/10/57
LESSOR: General American Oil Company of Texas
LESSEE: Oscar Bourg
RECORDED: Book 203, Page 244
DESCRIPTION: Insofar and only insofar as said lease covers the SW/4 and the
W/2 NW/4 of Section 15, Block A-26, Public School Lands,
Andrews County, Texas
LEASE DATE: 6/10/57
LESSOR: Richard H. Knox, W. W. West and G. D. Putnam
LESSEE: Oscar Bourg
RECORDED: Book 203, Page 247
DESCRIPTION: Insofar and only insofar as said lease covers the
SW/4 and the W/2 NW/4 of Section 15, Block A-26,
Public School Lands, Andrews County, Texas
LEASE DATE: 6/10/57
LESSOR: Lario Oil and Gas Company and H. E. Miller
LESSEE: Oscar Bourg
RECORDED: Book 203, Page 249
DESCRIPTION: Insofar and only insofar as said lease covers the SW/4 and the
W/2 NW/4 of Section 15, Block A-26, Public School Lands,
Andrews County, Texas
LEASE DATE: 9/12/90
LESSOR: Shell Western E & P Inc.
LESSEE: Marshall Petroleum, Inc.
RECORDED:
DESCRIPTION: Salt Water Disposal Agreement
LEASE DATE: 2/25/57
LESSOR: Lario Oil and Gas Company
LESSEE: Oscar Bourg
RECORDED: Book 195, Page 544
DESCRIPTION: W/2 of Section 16, Block A-26, Public School Land,
Andrews County, Texas
1
LEASE DATE: 2/1/52
LESSOR: Richard H. Knox, W. W. West and G. D. Putnam
LESSEE: F. M. Jackson, L. W. Douglas, Jr., Robert C. Whitaker,
a partnership of Jackson, Douglas & Whitaker
RECORDED: Book 108, Page 582
DESCRIPTION: Insofar as said lease covers the W/2 of Section 16, Block
A-26, PSL, Andrews County, Texas
LEASE DATE: 2/1/52
LESSOR: Evelyn Lineberry, Independent Executrix and Trustee of the
Estate of W. F. Scarborough, dec/d
LESSEE: F. M. Jackson, et al
RECORDED: Book 109, Page 297
DESCRIPTION: Insofar as said lease covers the W/2 of Section 16, Block
A-26, PSL, Andrews County, Texas
LEASE DATE: 2/1/52
LESSOR: General American Oil Company
LESSEE: F. M. Jackson, et al
RECORDED: Book 108, Page 586
DESCRIPTION: Insofar as said lease covers the W/2 of Section 16, Block
A-26, PSL, Andrews County, Texas
LEASE DATE: 2/1/52
LESSOR: H. E. Miller
LESSEE: F. M. Jackson, et al
RECORDED: Book 114, Page 161
DESCRIPTION: Insofar as said lease covers the W/2 of Section 16, Block
A-26, PSL, Andrews County, Texas
LEASE DATE: Effective 4/1/96
GRANTOR: Texland Petroleum, Inc.
GRANTEE: JMC Exploration, Inc., Arkoma Star L.L.C. and Kaiser-Francis
Oil Company
RECORDED: Book 697, Book 871
DESCRIPTION: Special Surface Deed
2
Grogan Unit
-----------
LEASE DATE: 4/15/65
LESSOR: D. S. (Jack) Grogan, Individually and Agent and as AIF for
Beatrice Cochran Benge, a widow, et al
LESSEE: Rusk Oil Corporation
RECORDED: Book 320, Page 317
DESCRIPTION: NW/4 SW/4, Section 21, Block A-31, PSL, Andrews County, Texas
LEASE DATE: 4/15/65
LESSOR: Louise Hill Rogers, a widow
LESSEE: Rusk Oil Corporation
RECORDED: Book 320, Page 417
DESCRIPTION: NW/4 SW/4, Section 21, Block A-31, PSL, Andrews County, Texas
LEASE DATE: 4/15/65
LESSOR: Beverly Grogan Blake
LESSEE: Rusk Oil Corporation
RECORDED: Book 320, Page 418
DESCRIPTION: NW/4 SW/4, Section 21, Block A-31, PSL, Andrews County, Texas
LEASE DATE: 4/15/65
LESSOR: Mildred Von Baden
LESSEE: Rusk Oil Corporation
RECORDED: Book 320, Page 421
DESCRIPTION: NW/4 SW/4, Section 21, Block A-31, PSL, Andrews County, Texas
LEASE DATE: 4/15/65
LESSOR: Nauvaree Grogan Feille
LESSEE: Rusk Oil Corporation
RECORDED: Book 320, Page 420
DESCRIPTION: NW/4 SW/4, Section 21, Block A-31, PSL, Andrews County, Texas
LEASE DATE: 4/15/65
LESSOR: Geo. L. Grogan, Jr., et al
LESSEE: Rusk Oil Corporation
RECORDED: Book 320, Page 424
DESCRIPTION: NW/4 SW/4, Section 21, Block A-31, PSL, Andrews County, Texas
LEASE DATE: 4/15/65
LESSOR: C. M. Grogan, Indiv. And Agent and AIF for Evelyn Grogan
Anderson, a widow, et al
LESSEE: Rusk Oil Corporation
RECORDED: Book 320, Page 426
DESCRIPTION: NW/4 SW/4, Section 21, Block A-31, PSL, Andrews County, Texas
3
LEASE DATE: 4/15/65
LESSOR: Clarence E. Grogan
LESSEE: Rusk Oil Corporation
RECORDED: Book 321, Page 93
DESCRIPTION: NW/4 SW/4, Section 21, Block A-31, PSL, Andrews County, Texas
LEASE DATE: 4/15/65
LESSOR: Shirley M. Few, a widow
LESSEE: Rusk Oil Corporation
RECORDED: Book 320, Page 485
DESCRIPTION: NW/4 SW/4, Section 21, Block A-31, PSL, Andrews County, Texas
LEASE DATE: 4/15/65
LESSOR: Susie Grogan, a widow
LESSEE: Rusk Oil Corporation
RECORDED: Book 320, Page 471 and/or Book 324, Page 471
DESCRIPTION: NW/4 SW/4, Section 21, Block A-31, PSL, Andrews County, Texas
LEASE DATE: 4/15/65
LESSOR: Y'delle Grogan Lamm
LESSEE: Rusk Oil Corporation
RECORDED: Book 320, Page 500
DESCRIPTION: NW/4 SW/4, Section 21, Block A-31, PSL, Andrews County, Texas
LEASE DATE: 4/15/65
LESSOR: May Cobb Grogan and H. N. Grogan Trust
LESSEE: Rusk Oil Corporation
RECORDED: Book 320, Page 499
DESCRIPTION: NW/4 SW/4, Section 21, Block A-31, PSL, Andrews County, Texas
LEASE DATE: 2/3/57
LESSOR: Clarence E. Grogan, et al
LESSEE: D. L. Dorland
RECORDED: Book 197, Page 202
DESCRIPTION: SW/4, Section 21, Block A-31, PSL, Andrews County, Texas
LEASE DATE: 2/3/57
LESSOR: May Cobb Grogan, et al
LESSEE: D. L. Dorland
RECORDED: Book 197, Page 215
DESCRIPTION: SW/4, Section 21, Block A-31, PSL, Andrews County, Texas
LEASE DATE: 2/3/57
LESSOR: D. S. (Jack) Grogan, et al
LESSEE: D. L. Dorland
RECORDED: Book 201, Page 257
DESCRIPTION: Correction to Oil, Gas and Mineral Lease: SW/4 Section 21,
Block A-31, PSL, Andrews County, Texas
4
EXHIBIT "A" (CONTINUED)
Attached to and made a part of that certain Purchase and Sale Agreement between
KAISER-FRANCIS OIL COMPANY and KF Energy Limited Partnership, as Seller and,
TEXLAND PETROLEUM, L.P., and PARALLEL, L.P., as Buyer, dated October 7, 2004.
DESCRIPTION OF FULLERTON FIELD
COOPERATIVE AGREEMENTS INVOLVING
KAISER FRANCIS OIL COMPANY
ANDREWS COUNTY, TEXAS
Scarborough Unit & Lineberry Unit
Cooperative Development Agreement
Dated December 1, 1995
Between Texland/JMC Joint Venture
Kaiser Francis Oil Company
(Including all Cooperative Wells subject to the agreement))
Logsdon-Grogan
Cooperative Development Agreement
Dated February 23, 1996
Between Texland/JMC Joint Venture
Kaiser Francis Oil Company
(Including all Cooperative Wells subject to the agreement)
Cooperative Injection Agreement
Scarborough - Lineberry Leases
Andrews County, Texas
Dated May 6, 1996
Between Kaiser Francis Oil Company
Sage Energy Company
Texland/JMC Joint Venture
(Including all Cooperative Wells subject to the agreement)
Cooperative Injection Agreement
Shelton - Redus - Redus A - Logsdon E
Dated April 1, 2001
Between Kaiser Francis Oil Company
Sage Energy Company
Texland/JMC Joint Venture
(Including all Cooperative Wells subject to the agreement)
5
EXHIBIT "A" (CONTINUED)
Attached to and made a part of that certain Purchase and Sale Agreement Between
KAISER-FRANCIS OIL COMPANY, and KF Energy Limited Partnership as Seller, and
TEXLAND PETROLEUM, L. P., and PARALLEL L. P., as Buyer, dated October 8, 2004.
DESCRIPTION OF UNITS AND INTERESTS BEING CONVEYED
WORKING NET REVENUE
UNIT NAME LOCATION COUNTY STATE INTEREST INTEREST
GROGAN UNIT SEC 21, BLOCK A-31, PSL ANDREWS TEXAS 0.5000000 0.3689394
LINEBERRY UNIT SEC 15&16, BLOCK A-26 PSL ANDREWS TEXAS 0.6736497 0.5218499
6
EXHIBIT "B"
Attached to and made a part of that certain Purchase and Sale Agreement between
KAISER-FRANCIS OIL COMPANY and KF Energy Limited Partnership, as Seller, and
TEXLAND PETROLEUM, L. P., and PARALLEL L. P., as Buyer, dated October 8, 2004.
ASSIGNMENT, BILL OF SALE AND CONVEYANCE
STATE OF TEXAS ss.
ss. KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF ANDREWS ss.
THAT, KAISER-FRANCIS OIL COMPANY, a Delaware corporation, and KF ENERGY
LIMITED PARTNERSHIP, a Texas limited partnership, both whose mailing address is
6733 S. Yale, Tulsa, Oklahoma 74136 (herein referred to as "Assignor"), for and
in consideration of the sum of Ten Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, does
hereby bargain, sell, transfer, assign, convey and deliver (i) an undivided 25%
unto TEXLAND PETROLEUM, L. P., a Texas limited partnership ("Texland"), whose
mailing address is 777 Main Street, Suite 3200, Fort Worth, Texas 76102, and
(ii) an undivided 75% unto PARALLEL L. P., A TEXAS LIMITED PARTNERSHIP
("Parallel"), whose mailing address is 1004 North Big Spring Street, Suite 400,
Midland, Texas 79701, herein collectively referred to as "Assignee," of all
Assignor's undivided interests in, to and under the lands, leases, wells and
agreements described on Exhibit "A," including, but not limited to, all of
Assignor's leasehold interests, operating rights, interests in cooperative well
agreements, overriding royalty interests, reversionary interests, net profits
interests, surface interests, mineral interests, royalty interests, and any
other similar or dissimilar interest in the lands, leases and wells, together
with rights in any pooled or unitized acreage by virtue of any lands covered by
the Leases being a part thereof, including, but not limited to, all of
Assignor's right, title and interest in, to, under and derived from:
(A) The oil, gas and mineral leases, lands and wells described
in Exhibit "A" attached hereto (the "Leases"), including all
of Assignor's leasehold interests, mineral interests, royalty
interests, operating rights, reversionary interests, net
profits interests, net revenue interests, and any other
similar or dissimilar interest in the lands, leases and wells,
together with rights in any pooled or unitized acreage by
virtue of any lands covered by the Leases being a part
thereof, all production from the pool or unit allocated to any
such Leases, and all interests in any wells within the pool or
unit associated with the Leases;
(B) The equipment and other personal and mixed property,
improvements, easements, rights-of-way, permits, licenses,
servitudes and any other estates situated in or upon, or used
or useful, or held for
i
future use in connection with the exploration, development and
production of oil, gas and other minerals, sulfur, associated
gas from any of the Leases or the treatment, storage or
transportation of such substances therefrom, including wells,
casing, tubing, derricks, tanks, batteries, boilers,
separators, rods, pumps, flow lines, water lines, gas lines,
buildings, fixtures, machinery, gas gathering or processing
systems or pipelines, power lines, telephone and telegraph
lines, and all other fixtures and improvements, currently
located on the Leases or lands pooled therewith or located
thereon as of the Effective Time;
(C) All contracts and contractual rights, including, but not
limited to, operating rights, joint operating agreements; oil,
gas, liquids, casinghead gas and condensate purchase, sales,
processing, gathering, treatment, compression and
transportation agreements; farmout or farmin agreements; joint
ventures; dry hole, bottom hole, acreage contribution,
purchase and acquisition agreements; area of mutual interest
agreements; servicing contracts, easement and/or right-of-way
agreements; easements, rights-of-way, permits, licenses,
servitudes, surface leases, saltwater disposal agreements or
other interests appertaining to the Leases or the interests
described above; and all other executory contracts and
agreements insofar as the same relate directly to the above
described interests;
(D) All easements, rights-of-way, licenses, authorizations,
permits, and similar rights and interests applicable to, or
used or useful in connection with, any or all of the
above-described interests;
(E) With the exception of Assignor's financial and general tax
records, all lease files, land files, well files, gas and oil
sales contract files, gas processing files, copies of
accounting records and information relating directly to
production from and expenses attributable to the above
described interests which are reasonably requested by Buyer,
abstracts, title opinions, well logs, cores, production data,
and all other similar books, files and records, information,
and data (including engineering and geological data, but
excluding geophysical data), and all rights thereto, of
Assignor insofar as the same are directly related to any of
the above described interests, to the extent the transfer
thereof is not prohibited by existing contractual obligations
with third parties; and
(F) All oil, gas and associated liquid and gaseous
hydrocarbons stored upon or produced from the Leases after the
Effective Time;
the properties and rights described in (A) through (E) above being collectively
referred to herein as the "Properties"; it being the intent hereof to convey to
Assignee all of Assignor's interest in and to the Properties listed in Exhibit
"A."
This Assignment is made and accepted upon the following terms and
conditions:
ii
1. This Assignment shall be effective as of the 1st day of September,
2004, at 7:00 a.m., local time, where the Properties are located (the "Effective
Time"), regardless of the date of execution.
2. Assignor will execute and deliver all such other and additional
instruments, notices, releases, and other documents and will do all such other
acts as may be necessary to more fully assign to Assignee or its successors or
assigns all of the respective rights and interests herein and hereby granted or
intended to be granted.
3. As part of the consideration for the execution and delivery of this
instrument by Assignor, Assignee agrees to all of the terms and provisions
hereof and joins in the execution of this instrument to evidence this agreement.
TO HAVE AND TO HOLD the Properties together with all and singular the
rights and privileges pertaining thereto, without warranty of title, either
express or implied, as to the Oil and Gas Leases described on Exhibit "A,"
subject to the matters set forth herein; PROVIDED, HOWEVER, THIS ASSIGNMENT AND
BILL OF SALE IS MADE AND ACCEPTED WITHOUT WARRANTIES OF ANY KIND, EXPRESS OR
IMPLIED IN FACT OR BY LAW, WITH RESPECT TO ORIGIN, QUANTITY, QUALITY, OPERATING
CONDITION, SAFETY OF EQUIPMENT, COMPLIANCE WITH GOVERNMENT REGULATIONS,
MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSE OR PURPOSES, CONDITION, THE
QUANTITY, VALUE OR EXISTENCE OF RESERVES OF OIL, GAS OR OTHER MINERALS
PRODUCIBLE OR RECOVERABLE FROM THE LEASES OR WELLS, OR OTHERWISE, CONCERNING THE
SUBJECT PROPERTY. ASSIGNEE HAS INSPECTED THE SUBJECT MATERIAL, EQUIPMENT AND
PERSONAL PROPERTY AND ACCEPTS THE SAME "AS IS, WHERE IS AND WITH ALL FAULTS",
provided, further, this Assignment and Bill of Sale is made with full
substitution and subrogation of Assignee in and to all covenants and warranties
by others heretofore given or made in respect to the Properties or any part
thereof insofar as such covenants and warranties extend beyond the Effective
Time hereof.
This Assignment and Bill of Sale is made subject to that certain
Purchase and Sale Agreement between Assignor and Assignee dated the 8th day of
October, 2004, (the "Purchase and Sale Agreement") the terms of which are
incorporated herein by this reference.
IN WITNESS WHEREOF, this instrument is executed on the respective dates
indicated in the acknowledgments of the signatory parties hereto (the last of
such dates being herein referred to as the "Execution Date"), but effective for
all purposes as of the Effective Time.
iii
ASSIGNOR:
KAISER-FRANCIS OIL COMPANY, A DELAWARE
CORPORATION
By:
-----------------------------------------
James A. Willis, Executive Vice President
KF ENERGY LIMITED PARTNERSHIP
By: KF Energy L.L.C., its General Partner
By:
----------------------------------------
Brent Meadows, President
ASSIGNEE:
TEXLAND PETROLEUM, L. P., A TEXAS LIMITED
PARTNERSHIP
By: Texpet Mgt, L.L.C., its General Partner
By:
----------------------------------------
James H. Wilkes, President and COO
PARALLEL L. P., A TEXAS LIMITED PARTNERSHIP
By: Parallel Petroleum Corporation,
its General Partner
By:
----------------------------------------
John Rutherford, Vice President
iv
EXHIBIT "C"
Attached to and made a part of that certain Purchase and Sale Agreement between
KAISER-FRANCIS OIL COMPANY and KF Energy Limited Partnership, as Seller, and
TEXLAND PETROLEUM, L. P., and PARALLEL L. P., as Buyer, dated October 8, 2004.
Allocation of Values
Grogan Unit $1,330,000
Lineberry Unit $6,170,000
----------
Total $7,500,000
==========
Note: The allocation above is only for purposes of adjusting the Purchase Price
in the event of a title or environmental defect pursuant to this Agreement and
is not to be considered binding for income tax purposes.
EXHIBIT "D"
Attached to and made a part of that certain Purchase and Sale Agreement between
KAISER-FRANCIS OIL COMPANY and KF Energy Limited Partnership, as Seller, and
TEXLAND PETROLEUM, L. P., and PARALLEL L. P., as Buyer, dated October 8, 2004.
FORM OF NON-FOREIGN AFFIDAVIT
EXEMPTION FROM WITHHOLDING OF TAX FOR
DISPOSITIONS OF U.S. REAL PROPERTY INTERESTS
Section 1445 of the Internal Revenue Code provides that a transferee of a U.S.
real property Interest must withhold tax if the transferor is a foreign person.
To inform _________________________ that withholding of tax is not required upon
the disposition of a real property interest by Kaiser-Francis Oil Company, the
undersigned hereby certifies the following:
1. Kaiser-Francis Oil Company is not a nonresident alien, foreign
corporation, foreign partnership, foreign trust, or foreign estate for
purposes of U.S. income taxation.
2. Kaiser-Francis Oil Company's taxpayer identification number is
73-1006655.
3. Kaiser-Francis Oil Company's office address is 6733 S. Yale, Tulsa,
Oklahoma 74136.
Kaiser-Francis Oil Company understands that this certification may be disclosed
to the Internal Revenue Service by _____________________________________ and
that any false statement contained herein could be punished by fine,
imprisonment, or both.
Under penalties of perjury, I declare that I have examined this certification
and to the best of my knowledge and belief, it is true, correct, and complete,
and I further declare that I have authority to sign this document.
KAISER-FRANCIS OIL COMPANY
By:
-----------------------------------
Printed Name:
-------------------------
Title:
--------------------------------
i
EXHIBIT "D"
Attached to and made a part of that certain Purchase and Sale Agreement between
KAISER-FRANCIS OIL COMPANY and KF Energy Limited Partnership, as Seller, and
TEXLAND PETROLEUM, L. P., and PARALLEL L. P., as Buyer, dated October 8, 2004.
FORM OF NON-FOREIGN AFFIDAVIT
EXEMPTION FROM WITHHOLDING OF TAX FOR
DISPOSITIONS OF U.S. REAL PROPERTY INTERESTS
Section 1445 of the Internal Revenue Code provides that a transferee of a U.S.
real property Interest must withhold tax if the transferor is a foreign person.
To inform _________________________ that withholding of tax is not required upon
the disposition of a real property interest by KF Energy Limited Partnership,
the undersigned hereby certifies the following:
1. KF Energy Limited Partnership is not a nonresident alien, foreign
corporation, foreign partnership, foreign trust, or foreign estate for
purposes of U.S. income taxation.
2. KF Energy Limited Partnership's taxpayer identification number is
20-1008850.
3. KF Energy Limited Partnership's office address is 6733 S. Yale, Tulsa,
Oklahoma 74136.
KF Energy Limited Partnership understands that this certification may be
disclosed to the Internal Revenue Service by
_____________________________________ and that any false statement contained
herein could be punished by fine, imprisonment, or both.
Under penalties of perjury, I declare that I have examined this certification
and to the best of my knowledge and belief, it is true, correct, and complete,
and I further declare that I have authority to sign this document.
KF ENERGY LIMITED PARTNERSHIP
By: KF Energy, L.L.C.,
its General Partner
By:
-----------------------------------
Printed Name:
-------------------------
Title:
--------------------------------
ii
Schedule 5.13
Attached to and made a part of that certain Purchase and Sale Agreement between
KAISER-FRANCIS OIL COMPANY and KF Energy Limited Partnership, as Seller, and
TEXLAND PETROLEUM, L.P., and PARALLEL L.P., as Buyer, dated October 8, 2004.
Gas Imbalances
(None)
Schedule 5.14
Attached to and made a part of that certain Purchase and Sale Agreement between
KAISER-FRANCIS OIL COMPANY and KF Energy Limited Partnership, as Seller, and
TEXLAND PETROLEUM, L.P., and PARALLEL L.P., as Buyer, dated October 8, 2004.
Tax Partnerships
(None)
Schedule 5.15
Attached to and made a part of that certain Purchase and Sale Agreement between
KAISER-FRANCIS OIL COMPANY and KF Energy Limited Partnership, as Seller, and
TEXLAND PETROLEUM, L.P., and PARALLEL L.P., as Buyer, dated October 8, 2004.
Preferential Rights
(None)
Schedule 5.18
Attached to and made a part of that certain Purchase and Sale Agreement between
KAISER-FRANCIS OIL COMPANY and KF Energy Limited Partnership, as Seller, and
TEXLAND PETROLEUM, L.P., and PARALLEL L.P., as Buyer, dated October 8, 2004.
AFE's
(None, other than those attributable to the New Developments Wells, which Buyer
has full knowledge of and therefore are not listed here)