AGREEMENT FOR ACUIQSITION OF OIL AND GAS LEASEHOLDS
Exhibit
10.1
AGREEMENT
FOR ACUIQSITION OF OIL AND GAS LEASEHOLDS
THIS
AGREEMENT is executed this 10th
day of
November, 2004 by CONQUEST EXPLORATION COMPANY, LLC (“Conquest”), an Oklahoma
limited liability company, whose mailing address is ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and ▇▇▇▇▇ ▇▇▇▇▇▇ (“▇▇▇▇▇▇”) whose
mailing address is ▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇
▇▇▇▇,
▇▇. (“▇▇▇▇”) whose mailing address is ▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
and OSAGE ENERGY CO., LLC, an Oklahoma limited liability company whose mailing
address is ▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
Recitals
| (a) |
The
oil and gas leasehold working interests which are the subject of
this
Agreement (“the Subject Interests”) are described as follows, with all
lands being located in Township 21 North, Range 10 East, Osage County,
Oklahoma, to wit:
|
Osage
Lease dated July 21, 1999 covering SE/4 of Section 30 being B.I.A. Contract
No.
17700
Osage
Lease dated July 21, 1999 covering NE/4 of Section 31 being B.I.A. Contract
No.
17701
Osage
Lease dated July 21, 1999 covering NW/4 of Section 31 being B.I.A. Contract
No.
17702
The
working interest owned by Conquest in the above described oil and gas leases
entitled it to a proportionate 81.25% of net interest in production from the
leased premises.
In
addition to the oil and gas leases described above, the Subject Interests
include the following oil and gas ▇▇▇▇▇ together with all surface and
sub-surface, personal property, equipment and fixtures located thereon,
appurtenant thereto or used or obtained in connection therewith, said ▇▇▇▇▇
being described as follows:
Osage
Nos. 1,2,3,4,5,6,7,8 and 10 ▇▇▇▇▇, located in the SE/4 of Section
30
▇▇▇▇▇▇
Nos. 1,2,3,4,5,6,7,8,9,10,11,12,13,14,15,16,17,18 and 19 ▇▇▇▇▇,
located
in the N/2 of Section 31
| (b) |
Prior
to the acquisition of any portion of the Subject Interest by ▇▇▇▇▇▇
and
▇▇▇▇, Conquest owned an undivided 93.75% of the Subject Interest.
(The
remaining 6.25% of the Subject Interests is owned by Esso Oil of
Oklahoma,
Inc.)
|
| (c) |
Heretofore,
Conquest, for good and valuable consideration, sold to ▇▇▇▇▇▇ an
undivided
12.5% interest in the Subject Interests. Conquest, however, has not
executed and delivered to ▇▇▇▇▇▇ an assignment of his 12.5% interest
in
the Subject Interests.
|
| (d) |
Heretofore,
Conquest, for good and valuable consideration, sold to ▇▇▇▇ an undivided
1.5% interest in the Subject Interests. Conquest, however, has not
executed and delivered to ▇▇▇▇ an assignment of his 1.5% interest
in the
Subject Interests.
|
| (e) |
Osage
desires to purchase from Conquest and Conquest desires to sell to
Osage
the remaining undivided 79.75% of the Subject
Interests.
|
| (f) |
The
purpose of this Agreement is to provide for the manner and method
and
terms and conditions by which (i) Conquest will assign the 12.5%
interest
in the Subject Interests heretofore sold to ▇▇▇▇▇▇, (ii) Conquest
will
assign the 1.5% interest in the Subject Interests heretofore sold
to ▇▇▇▇,
and (iii) Conquest will sell and assign to Osage an undivided 79.75%
of
the Subject Interests.
|
| (g) |
It
is the intent of the parties that following the consummation of this
Agreement, Osage will own 93.75% of the Subject Interests, as of
the
Effective Date.
|
Agreement
| 1. |
Effective
Dates of Transfers.
|
| a. |
As
record title to an undivided 93.75% of the Subject Interests is vested
in
Conquest, and as ▇▇▇▇▇▇ and ▇▇▇▇ are entitled to a specific undivided
interests in the Subject Interests, ▇▇▇▇▇▇ and ▇▇▇▇ hereby nominates
and
appoint Osage to be the assignee of their interests from and after
October
1, 2004 (“the Effective Date”) but with Conquest’s assignment to ▇▇▇▇▇▇
and ▇▇▇▇ to be for a limited term beginning January 1, 2004 and ending
on
October 1, 2004.
|
| b. |
The
remaining interests owned by Conquest in the Subject Interests, being
an
undivided 88% shall be assigned by Conquest to Osage as of the Effective
Date.
|
| 2. |
Purchase
Price.
|
| a. |
The
purchase prices for the transfer by Conquest to ▇▇▇▇▇▇ and ▇▇▇▇ have
been
paid in full to Conquest. The total purchase price for the transfer
by
Conquest to Osage shall be $51,000.00 (“Purchase Price”), payable by Osage
to Conquest as follows:
|
| i. |
At
Closing (as that term is defined below), Osage shall pay Conquest
the sum
of $25,000.00 (“Initial
Installment”).
|
| ii. |
The
balance of $26,000.00 shall be paid by Osage to Conquest in thirteen
(13)
monthly installments of $2,000.00 each, with the first monthly installment
to be paid on or before the 1st
day of the calendar month next following Closing, and with the remaining
twelve (12) installments to be paid on or before the 1st
day of each calendar month thereafter, with the final installment
to be
paid on or before the 1st
day of the 13th
calendar month next following
Closing.
|
| 3. |
Representations
and Warranties of Conquest.
|
| a. |
Organization
and Authorization.
Conquest represents that it is a duly qualified limited liability
company
organized and in good standing under the laws of the State of Oklahoma;
that the sale of the Subject Interests by Conquest to Osage will
not
violate any organizational documents or other agreements to which
Conquest
is subject; that the execution of this Agreement and consummation
of the
sale is property authorized by all required company, owner and member
action; and this Agreement and the closing documents are being and
will be
duly executed and will constitute valid and binding obligations of
Conquest.
|
| b. |
Title
Warranties.
Conquest covenants and warrants to Osage as
follows:
|
|
i.
|
Conquest
has good and marketable title to an undivided 79.75% of the Subject
Interests, free and clear of all liens (including tax liens), claims,
mortgages and encumbrances;
|
|
ii.
|
That
the oil and gas leases which created Conquest’s working interest in the
Subject Interests are valid and
subsisting;
|
|
iii.
|
That
none of Conquest’s oil and gas leases contain express provisions for
drilling additional ▇▇▇▇▇ and that Conquest has not been advised
by any
lessor or other party of any default under a lease or of requirements
or
demands to drill additional ▇▇▇▇▇;
|
|
iv.
|
That
all royalties, rentals and other payments under the leases have
been
property and timely paid and that all conditions necessary to keep
the
leases in force have been fully
performed;
|
|
v.
|
That
the interest being purchased with entitle Osage to receive an undivided
93.75% of the working interest in the lands covered by the Subject
Interests and that said working interest will entitle Osage to
an
undivided 76.17187% net revenue interest in said land;
and
|
| vi. | That there is no pending or threatened litigation or any causes of action or defaults under agreements that could result in impairment or loss of title or hinder operation of the Subject Interests. |
| c. |
Economic
Warranties.
Conquest covenants and warrants to Osage as
follows:
|
| i. |
That
the Subject Interests are not subject to any gas sales contracts
or
processing agreements or calls on
production;
|
| ii. |
That
there are no brokers’ or finders’ fee arrangements connected with the sale
of the Subject Interests by Conquest to Osage for which Osage could
have
liability;
|
| iii. |
That
Conquest is being paid for production from the Subject Interests
in
accordance with the normal practice of the production purchaser and
that
the production proceeds are not being held in suspense or being paid
pursuant to an unusual type of
indemnity;
|
| iv. |
That
all costs and expenses incurred in connection with the development
and
operation of the Subject Interest have been paid and that there are
no
liens of any nature encumbering the Subject
Interests;
|
| v. |
That
all surfaces and sub-surfaces, personal property, equipment and fixtures
in or on the Subjects Interests and used in connection with the producing
and operating of the Subject Interests have been maintained in good
state
or repair adequate for all normal operations and they are in good
working
order in all material respects.
|
| d. |
Governmental
Compliance Warranties.
|
| i. |
Conquest
is in compliance with all applicable tribal, state and federal laws,
rules, orders and regulations governing the ownership, production
and
operation of the Subject Interests.
|
| ii. |
Conquest
knows of no environmental or pollution claims or potential claims
related
to the Subject Interests nor is Conquest the subject of any complaints
or
demands voiced by tribal, state or federal authorities having jurisdiction
over the Subject Interests.
|
| 4. |
Representations
and Warranties of Osage.
|
| a. |
Organization
and Authorization.
Osage represents that it is a duly qualified limited liability company
organized and in good standing under the laws of the State of Oklahoma;
that the purchase of the Subject Interests by Osage from Conquest
will not
violate any organizational documents or other agreements to which
Conquest
is subject; that the execution of this Agreement and consummation
of the
purchase is property authorized by all required company, owner and
member
action; and this Agreement and the closing documents are being and
will be
duly executed and will constitute valid and binding obligations of
Osage.
|
| b. |
No
Public Distribution.
Osage is purchasing the Subject Interests for investment purposes
only and
not with a view to further
distribution.
|
| c. |
Broker
and Finders Fees.
There are no brokers’ or finders’ fees arrangements connected with the
sale of the Subject Interests by Conquest to Osage for which Conquest
could have liability.
|
| 5. |
Covenants.
|
| a. |
Access
to Conquest Files. Conquest
shall give Osage full access to all of Conquest’s files that might be
relevant to a due diligence review. Such access shall include, but
shall
not be limited to, all land, title, geological, engineering, production
and operating files, reports, maps and
data.
|
| b. |
Interim
Operations.
Conquest, at its expense and risk, shall continue to produce and
operate
the Subject interests in accordance with applicable laws, rules and
regulations and in a good and workmanlike manner through Closing,
notwithstanding the fact that the Effective Date of the sale precedes
the
Closing. Provided, however, if the sale closes and Osage becomes
the owner
of the Subject Interests, Osage shall reimburse Conquest for all
actual
and reasonable costs and expenses incurred by Conquest in producing
and
operating the Subject Interests between the Effective Date and Closing.
Provided, further, Conquest shall advise Osage of any material operations
which are proposed by Conquest between the Effective Date and Closing
and
Osage must give its consent before any such operations are conducted.
Provided, further, Conquest may conduct emergency operations without
the
consent of Osage.
|
| c. |
Preferential
Rights and Non-Government Consents. Conquest covenants that to its
knowledge non non-governmental or non-tribal entity or individual
owns a
preferential right to purchase all or any portion of the Subject
Interests
as a result of the sale covered by this Agreement. And, Conquest,
covenants that to its knowledge, the written consent of the sale
covered
by this Agreement is not required by any non-governmental or non-tribal
entity or individual. If, as a result of Osage’s title review, as set for
the below, it is discovered that a non-governmental or non-tribal
entity
or individual does own a preferential right to purchase or is required
to
give its consent to all or any portion of the sale covered by this
Agreement, both Conquest and Osage shall use due diligence to obtain
waivers of any preferential right to purchase and consents to the
sale as
required. Osage shall assume direct responsibility for sending out
notices
and following up with the parties involved to obtain such waivers
and
consents as may be required. The exercise of any preferential right
to
purchase or the failure to obtain a required consent, shall be considered
a title defect and dealt with under the title review procedures set
for
the below.
|
| 6. |
Title
Review Procedures.
|
| a. |
Title
Opinions.
In
addition to affording Osage full access to Conquest’s title materials and
files, as required in Paragraph 5(a) above, Conquest shall furnish
Osage
with copies of all attorneys’ title opinions which Conquest has in its
possession, including drilling opinions and division order opinions
covering all or any portions of the lands included in the Subject
Interests. Osage, at its expense, shall be responsible for obtaining
all
supplemental abstracts which it deems pertinent for its attorneys
to
render its current title opinions covering said lands. In lieu of
supplemental abstracts, Osage may cause its attorneys to examine
the land
records maintained in the office of the County Clerk of Osage County
as
well as the records of the Osage Tribe and United State Secretary
of
Interior relating to the same lands in order to render Osage the
necessary
current title opinions.
|
| b. |
Osage
to Submit Summary of Title Defects.
On or before 30 days from the date that the last party to this Agreement
has executed this Agreement, as evidenced by the dates preceding
their
signatures, Osage shall furnish Conquest with a written summary of
all
title defects which Osage’s examination of Conquest’s files and title has
reflected. No matter shall be considered a title defect unless it
would
constitute a breach of Conquest’s warranties and covenants set for the in
Paragraphs 3(a), 3(b), 3(c), 3(d) or 5(c) above. Separate written
title
defects may be furnished by Osage to Conquest so long as all have
been
submitted on or before the expiration of said 30 day period.
|
| c. |
Curing
of Title by Conquest.
Conquest shall have 760 days following the date that the last party
has
executed this Agreement to cure all title defects contained in the
written
summaries of title defects submitted by Osage to
Conquest.
|
| d. |
Consequence
of Failure to Cure Title Defects.
In the event all title defects have not been cured pursuant to the
procedures outlined in Paragraphs 6(a), 6(b) and 6(c) and, in that
connection, time shall be of the essence - Osage shall advise Conquest,
in
writing, on or before 65 days following the date that the last party
has
executed this Agreement that either (a) Osage is voiding this Agreement
in
which case neither Osage nor Conquest shall have any further obligation
to
the other or (b) Osage is accepting Conquest’s title to the Subject
Interests in which case it will rely upon Conquest’s warranties and
covenants as set forth in Paragraph 3(a) through 3(d) and 5(c), which
warranties and covenants, in every event, shall survive the Closing. In
the event Osage fails to advise Conquest, within the time provided,
that
Osage is voiding the Agreement - and time shall be of the essence
- Osage
shall be deemed to have elected option (b) and the parties shall
proceed
to Closing.
|
| 7. |
Preclosing
Adjustments.
Prior to Closing, conquest and Osage shall make every reasonable
effort to
agree on the following adjustments which, at closing, will be made
to the
initial installment.
|
| a. |
Post
Effective Date Operating Costs.
Immediately prior to Closing, Conquest shall furnish Osage with a
written
accounting of all reasonable and actual costs expended by Conquest
in
operating and producing the Subject Interests between the Effective
Date
and the date of Closing (“Post Effective Date Operating Costs”). An
undivided 93.75% of such costs, at Closing, shall be added to the
Initial
Installment. If the parties cannot reach agreement as to such costs,
at
Closing, such costs shall be estimated, but in every event, Conquest
and
Osage shall agree and account to each other for such costs no later
than
60 days following Closing.
|
| b. |
Post
Effective Date Oil in Storage.
Conquest and Osage shall estimate and agree upon the amount of any
crude
oil in storage which was produced prior to the Effective Date and
which
was attributable to the net interest in production which Osage is
acquiring from Conquest (“Post Effective Date Oil in Storage”). At
Closing, the amount of the Initial Installment shall be increased
by
76.17187% of the market value of the amount of the Post Effective
Date Oil
in Storage. (In the event conquest and Osage cannot agree as to the
Post
Effective Date Oil in Storage, the dispute shall be resolved by the
majority vote of the three disinterested parties, one party to be
a
representative of the purchaser of production, one to be Conquest’s pumper
for the ▇▇▇▇▇ in question, and one to be a petroleum engineer to
be agreed
upon by Conquest and Osage.)
|
| c. |
Post
Effective Date Revenues.
Immediately prior to Closing, Conquest shall furnish Osage with a
written
accounting of all revenues received by Conquest attributable to oil
and
gas produced between the Effective Date and the date of Closing.
At
Closing, the Initial Installment shall be reduced by 76.17187% of
the
amount of such revenues which are attributable to the net revenue
interest
in the Subject Interests which Osage is purchasing from Conquest
(“Post
Effective Date Revenues”).
|
| 8. |
Closing.
If
all title defects are timely cured or is Osage has accepted Conquest’s
title to the Subject Interests, or is deemed to have accepted Conquest’s
title, all pursuant to Paragraph 6(d) above, Closing shall take place
at a
mutually agreed time and place on or before 70 days after the last
party
has executed this Agreement. At Closing, the following shall
occur:
|
| a. |
Purchase
Price and Adjustment.
Osage shall deliver to Conquest Osage’s valid check in the amount of the
Initial Installment ($25,000) plus the Post Effect Date Operating
Costs,
plus the market value of the Post Effective Date Oil in Storage,
less the
Post Effective Date Revenues. (In the event the State of Oklahoma
gross
production taxes were not deducted by the purchaser of production
in its
payment to Conquest, Conquest shall be responsible for all state
gross
production taxes levied against the Post Effective Date Revenues.
Conquest
hereby holds Osage harmless from any liability for such taxes. In
this
connection, Conquest hereby holds Osage harmless from any liability
for
state gross production taxes levied on production occurring prior
to the
Effective Date.)
|
| b. |
Assignment
to Osage, ▇▇▇▇▇▇ and ▇▇▇▇.
Conquest shall execute and deliver to Osage, in forms acceptable
to both
parties and to the Osage Nation and to the United States Secretary
of
Interior, assignments of oil and gas leases and bills of sale whereby
Conquest assigns and conveys to Osage an undivided 93.75% of the
Subject
Interests, as of the Effective Date. Also, Conquest shall execute
and
deliver to ▇▇▇▇▇▇ (undivided 12.5%) and to ▇▇▇▇ (undivided 1.5%),
in forms
acceptable to Conquest, ▇▇▇▇▇▇ and ▇▇▇▇ and to the Osage Nation and
to the
United States Secretary of Interior, assignments covering the undivided
percentages in the Subject Interests set out after their names above,
said
assignments to be for a limited term beginning January 1, 2004, and
ending
October 1, 2004.
|
| c. |
Transfer
Orders or letters in Lieu.
Conquest and Osage shall execute such transfer orders or letters
in lieu
in form acceptable to all purchasers of production from the Subject
Interests, transferring all rights in future production attributable
to
the Subject Interests to Osage as of the Effective Date. (Osage is
advised
that income attributable to Conquest’s interest in the Subject Interests
is being paid to Conquest’s predecessor in interest, Esso Oil of Oklahoma
(“Esso”). If this is the case, Conquest will be responsible for obtaining
transfer orders or letters in lieu signed by Esso so that all income
attributable to the 93.75% interest in the Subject Interests is
transferred to Osage as of the Effective
Date.
|
| d. |
Regulatory
Forms.
Conquest and Osage shall execute such forms required by the Oklahoma
Corporation Commission, the Osage Nation and the United States Secretary
of Interior transferring to Osage all rights and obligations as the
designated operator of the Subject Interests. Osage is also advised
that
the record operator may still be Esso. If this is the case, Conquest
shall
be responsible for obtaining the signature of Esso on all required
forms,
to the end that Osage shall become the record operator as of the
Effective
Date.
|
| e. |
Sales
Taxes.
Osage shall pay to Conquest and Conquest agrees, then, to pay same
over to
the Oklahoma Tax Commission the sales tax property due and owing
on the
sale by Conquest to Osage. In this connection, of the total purchase
price, Conquest and Osage agree that the amount attributable to the
tangible personal property, i.e. the surface and the sub-surface,
personal
property and equipment included in the sale of the Subject Interest
to
Osage is $10,000.00 and it is that amount upon which the sales tax
is
properly levied. Conquest agrees that it shall pay said collected
sales
tax to the Oklahoma Tax Commission. Should the Oklahoma Tax Commission,
ultimately, dispute the allocation made herein of the total sales
price to
the personal property and equipment, and should such dispute result
in a
larger assessment of sales tax, Osage agrees to pay over any amount
of
such additional sales tax levied.
|
| 9. |
Post
Closing Obligations.
|
| a. |
Mutual
Environmental Indemnities.
Following Closing, Conquest shall be deemed to have indemnified Osage
and
hold Osage harmless against all claims, costs and liabilities relating
to
asserted environmental damages that arise prior to the Effective
Date.
Osage shall be deemed to have indemnified Conquest and to hold Conquest
harmless against all claims, costs and liabilities relating to asserted
environmental damages that arise after the Effective
Date.
|
| b. |
Representation
and Warranties.
The representations, warranties and covenants of Conquest set out
in
Paragraph 3(a), 3(b) 3(c) 3(d) and 5(c) and the representation and
warranties of Osage set out in Paragraphs 4(a), 4(b) and 4(c) shall
survive Closing and shall be binding upon and shall inure to the
benefit
of Conquest and Osage, their successors and
assigns.
|
| c. |
Post
Closing Receipt of Revenues.
In the event Conquest receives any proceeds after Closing which are
attributable to Post Effective Date Production, said proceeds shall
be
paid, immediately, by Conquest to
Osage.
|
| d. |
Tribal
and Governmental Approvals of Assignments.
Conquest and Osage - with Osage taking the lead - shall cooperate
fully in
obtaining all required approvals from the United States Secretary
of
Interior and from the Osage Nation to the assignments by Conquest
to
Osage. Until such approval is obtained, Conquest may continue to
receive
notices from the Osage Nation or the Secretary of the Interior on
such
matters as rentals due and lease terminations. Accordingly, Conquest
immediately shall forward all notices or other communications which
it
receives relating to the Subject Interests to Osage. Conquest agrees
to
cooperate fully with Osage in taking all actions necessary to keep
the oil
and gas leases in full force and effect. In the event prior assignments
of
the Subjects Interest have not been approved, including the Assignment
and
▇▇▇▇ of Sale dated February 1, 2003, by Esso to Conquest, Conquest
shall
be responsible for obtaining all required approvals from the United
States
Secretary of Interior and from the Osage Nation to all such prior
assignments.
|
| 10. |
Successors
and Assigns.
This Agreement shall be binding upon and shall inure to the benefit
of the
respective heirs, devisees, personal representatives, trustees, successors
and assigns, immediate and remote, of Conquest, Farmer, ▇▇▇▇ and
Osage.
|
| 11. |
Counterpart
Copies. This
Agreement may be executed by each signatory party in individual
counterpart copies and the Agreement shall be binding upon the signatory
parties to the same effect as if each one has signed the same, original
copy. Provided, however, this Agreement shall not be binding upon
the
parties unless and until all four parties have executed a counterpart
copy
and unless and until individually signed counterpart copies have
been
delivered to all of the
parties.
|
DATED
as
of the day, month and year first shown above, but executed by each party on
the
date shown over its or his signature below.
Signed
this ___ day of _____, 2004
CONQUEST
EXPLORATION COMPANY, LLC
By:
Owner
and
Manager
Signed
this ___ day of _____, 2004
By:
▇▇▇▇▇
▇▇▇▇▇▇
Signed
this ___ day of _____, 2004
By:
▇▇▇▇▇▇▇
▇▇▇▇, ▇▇.
Signed
this ___ day of _____, 2004
OSAGE
ENERGY CO., LLC
By:
Owner
and
Manager