CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (the
“Agreement”) is entered as of this 29th day of
October, 2007, by and between Capital City Petroleum, Inc., a Delaware
corporation (“Assignee”), and Zenith Fund V, LLC (d/b/a Capital City Energy Fund
V, LLC), a Colorado limited liability company (“Assignor”).
WHEREAS, Assignor desires to contribute
all of Assignor’s right, title and interest in and to the oil and gas leases
(the “Leases”) and lands (the “Lands”) described in Exhibit A attached
hereto (the “Oil and Gas Properties”) to Assignee.
NOW, THEREFORE, in consideration of the
mutual promises and covenants hereinafter set forth, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Contribution of
Assets. Assignor hereby assigns, transfers, conveys and
delivers to Assignee, and Assignee hereby accepts from Assignor, all of the Oil
and Gas Properties, which include:
(a) Assignor’s
leasehold interests in oil, gas and other minerals, including working interests,
earned working interests, net profits interests, rights of assignment and
reassignment, and all other rights and interests in the Leases;
(b) All fee
interests in oil, gas and other minerals, including rights under mineral deeds,
conveyances, options and assignments;
(c) All
royalty interests, overriding royalty interests, production payments, rights to
take royalties in kind, and all other interests in and/or payable out of
production of oil, gas, and other minerals;
(d) All rights
and interests in or derived from operating agreements, unit agreements, orders
and decisions of state and federal regulatory authorities establishing units,
joint operating agreements, enhanced recovery agreements, water flood
agreements, farmout and farming agreements, options, drilling agreements,
unitization, pooling and communitization agreements, oil and/or gas sales
agreements, processing agreements, gas gathering and transmission agreements,
gas balancing agreements, salt water disposal and injection agreements,
assignments of operating rights, subleases, and any and all other agreements to
the extent they pertain to the Leases, Lands and the xxxxx located on the
Leases;
(e) All
rights of way, casements, surface fees, surface leases, servitudes and
franchises insofar as they pertain to the Leases and the xxxxx located on the
Leases;
(f) All
permits and licenses of any nature, owned, held or operated by Assignor in
connection with the Leases, Lands and the xxxxx located on the Lands subject to
the Leases;
(g) All
producing, non-producing, and shut-in oil and gas xxxxx, salt water disposal
xxxxx, water xxxxx, injection xxxxx, and all other xxxxx on or attributable to
the Leases, whether or not identified; and
(h) All
pumping units, pumps, casing, rods, tubing, wellhead equipment, separators,
heater treaters, tanks, pipelines, gathering lines, flow lines, valves, fittings
and all other surface and downhole equipments, fixtures, related inventory,
gathering and treating facilities, personal property and equipment used in
connection with the Leases and the xxxxx located on the Leases and all other
interests described above.
Notwithstanding
the date of execution of this Agreement, Assignor is assigning to Assignee the
Oil and Gas Properties effective as of October 1, 2007. For the
avoidance of doubt, any revenue related to the Oil and Gas Properties received
on or after October 1, 2007 will be the property of Assignee.
2. Consideration. The
total consideration provided to Assignor in connection with the contribution of
the Oil and Gas Properties to Assignee (valued at $987,149) is the issuance by
Assignee to Assignor (or its designee) of (a) 26,060.73 shares of Common Stock
of Assignee (valued at $12.50 per share) and (b) 26,455.59 shares of Series A
Preferred Stock of Assignee (valued at $25.00 per share).
3. Representations and
Warranties of Assignor. Assignor represents and warrants to Assignee as
follows:
(a) Organization and
Standing. Assignor is limited liability company duly
organized, validly existing, and in good standing under the laws of its state of
organization, has the power to own, lease and operate the properties it now
owns, leases and operates, and to carry on its business as now being conducted,
and is duly qualified or licensed to do business and are in good standing in
every domestic and foreign jurisdiction in the United States and elsewhere in
which the nature of its business or their ownership or leasing of property
requires such qualification.
(b) Authorization. Assignor
has all necessary power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement has been duly approved by all
necessary actions of Assignor, and this Agreement constitutes the valid and
binding obligation of Assignor enforceable against Assignor in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws and general
principles of equity.
(c) AS-IS. Except
as specifically provided for herein, the Oil and Gas Properties are being sold
to Assignee on as “as is, where is” basis. ASSIGNOR MAKES NO
REPRESENTATION OR WARRANTY TO ASSIGNEE, EXPRESS OR IMPLIED, WITH RESPECT TO THE
OIL AND GAS PROPERTIES.
4. Representations and
Warranties of Assignee. Assignee represents and warrants to
Assignor as follows:
(a) Organization and
Standing. Assignee is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware, has the
power to own, lease, and operate the properties it now owns, leases and
operates, and to carry on its business as now being conducted, and is duly
qualified or licensed to do business and is in good standing in every domestic
and foreign jurisdiction in the United States and elsewhere in which the nature
of its business or its ownership or leasing of property requires such
qualification.
(b) Authorization. Assignee
has full power and authority and the legal right to enter into this Agreement
and to consummate the transactions contemplated hereby. The
execution, delivery, and performance of this Agreement has been duly approved by
all necessary actions, and the Agreement constitutes a valid and binding
obligation of Assignee enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws and general principles of
equity.
(c) Stock. The
authorized capital stock of the Assignee consists of 3,000,000 shares of Common
Stock, $0.001 par value per share (the “Common Stock”), and 325,000 shares of
Preferred Stock, $0.001 par value per share, all of which have been designated
“Series A Preferred Stock”). The Common Stock and Series A Preferred Stock
issued to Assignor pursuant to this Agreement are validly issued, fully paid and
nonassessable, and are free of any liens or encumbrances.
5. Issuance of
Warrant. In consideration for the efforts of Capital City
Partners, LLC in connection with the transaction contemplated by this Agreement,
Capital City Partners, LLC was issued a warrant to purchase 3587.80 shares of
Common Stock of Assignee with an exercise price of $12.50 per
share.
6. Code Section
351. Assignee and Assignor shall each use their best efforts
to cause the contribution of the Oil and Gas Properties and issuance of Common
Stock and Preferred Stock to the Assignee as an exchange described at
Sections 351(a) and (b) of the Internal Revenue Code of 1986, as amended (the
“Code”), and this Agreement should be interpreted to cause the contributions of
the Oil and Gas Properties by Assignor to Assignee in exchange for the Common
Stock and Preferred Stock of Assignee to be described at Sections 351(a) and (b)
of the Code, such that no gain or loss will be recognized by the Assignor to the
extent they receive stock within the meaning of Section 351(a) of the
Code.
7. Further Assurances;
Cooperation. Assignor agrees to execute and deliver such
further instruments of conveyance and transfer as Assignee may reasonably
request to convey and transfer effectively to Assignee the Oil and Gas
Properties.
8. Entire Agreement;
Amendment. This Agreement constitutes the entire agreement and
understanding of the parties hereto and supercede any prior written or oral
understandings of the parties. This Agreement may be amended only by
an instrument in writing executed by all parties hereto.
9. Governing
Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
[Signature
Page Follows]
IN WITNESS WHEREOF, the parties have
executed this Contribution Agreement on the day and year first above
written.
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Capital
City Petroleum, Inc.
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By
/s/ Xxxxxxx
Xxxxxxxx
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Its
CEO
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Zenith
Fund V, LLC (d/b/a Capital City Energy Fund V, LLC)
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By
Capital City Petroleum, Inc. (successor in interest to Capital City
Petroleum, LLC)
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Its Manager
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By
/s/ Xxxxxxx
Xxxxxxxx
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Its
CEO
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Exhibit
A
Oil and Gas
Properties
