Exhibit 2.4
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Quest Cherokee, LLC
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CONTRIBUTION, CONVEYANCE, ASSIGNMENT
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AND ASSUMPTION AGREEMENT
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THIS AGREEMENT ("Agreement") is made effective this 22nd day of December
2003 ("Effective Date"), by and among the following parties:
QuestCherokee, LLC, a Delaware limited liability company ("Quest
Cherokee"); and
Bluestem Pipeline, LLC, a Delaware limited liability company ("Bluestem");
and the following entities (jointly "Quest Subsidiaries")
Quest Oil & Gas Corporation, a Kansas corporation ("QOGC");
Quest Energy Service, Inc., a Kansas corporation ("QES");
STP Cherokee, Inc., an Oklahoma corporation ("STP Cherokee");
Ponderosa Gas Pipeline Company, Inc., a Kansas corporation ("PGPC");
Producers Service, Incorporated, a Kansas corporation ("PSI"); and
X-X Gas Gathering, LLC, a Kansas limited liability company ("X-X");
WITNESSETH:
WHEREAS, the Quest Subsidiaries have caused Quest Cherokee to be organized
as a Delaware limited liability company and have acquired all of the membership
interests in Quest Cherokee; and
WHEREAS, QOGC has agreed to assign and transfer all of its interests in
oil and gas leases and all tangible and intangible personal property located on,
used in connection with, or relating to such leases including the oil and gas
leases and other personal property set forth on Exhibit "A" to this Agreement to
Quest Cherokee in return for a membership interest representing a 47.90%
Percentage Interest (as defined in Quest Cherokee's limited liability company
agreement dated December 12, 2003) in Quest Cherokee;
WHEREAS, QES has agreed to transfer all of its interests in real estate it
owns in fee simple and all of its interest in vehicles, well service equipment,
construction equipment, and other tangible and intangible personal property
including the real and personal property set forth on Exhibit "B" to this
Agreement but excluding office
furnishings to Quest Cherokee in return for a membership interest
representing a 1.96% Percentage Interest in Quest Cherokee;
WHEREAS, STP Cherokee has agreed to assign and transfer all of its
interests in real estate it owns in fee simple, all of its interests in oil and
gas leases in the Cherokee Basin area of Kansas and Oklahoma, in pipelines and
gathering systems and appurtenant easements, rights-of-way, permits, licenses in
the Cherokee Basin area, in all equipment, storage facilities, loading
terminals, tanks and other equipment, fixtures and improvements located on, used
in connection with, or relating to the leases and pipelines in the Cherokee
Basin area, and in all other tangible and intangible personal property located
on, used in connection with, or relating to such leases, and pipelines
(including the real and personal property set forth on Exhibit "C" to this
Agreement) to Quest Cherokee in return for a membership interest representing a
37.26% Percentage Interest in Quest Cherokee;
WHEREAS, PGPC has agreed to assign and transfer all of its interests in
pipelines and gathering systems and appurtenant easements, rights-of-way,
permits, and licenses, and in all equipment, storage facilities, loading
terminals, tanks and other equipment, fixtures and improvements located on, used
in connection with, or relating to its pipelines and gathering systems, and in
all other tangible and intangible personal property used in connection with such
pipelines and gathering systems, and in all other real and personal property
(including the real and personal property set forth on Exhibit "D" to this
Agreement) to Quest Cherokee in return for a membership interest representing a
3.35% Percentage Interest in Quest Cherokee;
WHEREAS, PSI has agreed to assign and transfer all of its interests in
pipeline leases, rights of way and easements and personal property used in
connection therewith or relating thereto (including the personal property set
forth on Exhibit "E" to this Agreement) to Quest Cherokee in return for a
membership interest representing a .71% Percentage Interest in Quest Cherokee;
WHEREAS, X-X has agreed to assign and transfer all of its interests in
pipelines and gathering systems and appurtenant easements, rights-of-way,
permits, and licenses, and in all equipment, storage facilities, loading
terminals, tanks and other equipment, fixtures and improvements located on, used
in connection with, or relating to such pipelines and gathering systems, and in
all other tangible and intangible personal property used in connection with such
pipelines and gathering systems, and in all other real and personal property
(including the real and personal property set forth on Exhibit "F" to this
Agreement) to Quest Cherokee in return for a membership interest representing a
8.82% Percentage Interest in Quest Cherokee;
WHEREAS, Quest Cherokee has agreed to accept such assignments and
transfers and to assume the liabilities set forth in Article III;
NOW, THEREFORE, the parties hereto do hereby agree as follows:
ARTICLE I
CONTRIBUTIONS OF ASSETS AND MEMBERSHIP INTERESTS
1. Contribution of Assets by Quest Subsidiaries to Quest Cherokee. As a
capital contribution to Quest Cherokee, the Quest Subsidiaries hereby agree to
execute, acknowledge and deliver to Quest Cherokee valid conveyances of all of
the Quest Subsidiaries' right, title and interest in and to the assets described
in the recitals above, including the assets described on Exhibits A, B, C, D, E
and F (collectively, the "Assets"). Quest Cherokee hereby agrees to accept the
Assets as a capital contribution. The Quest Subsidiaries and Quest Cherokee
hereby acknowledge and agree that the net agreed value of the Assets contributed
by the Quest Subsidiaries is FIFTY ONE MILLION AND NO/100 DOLLARS ($51,000,000),
which is allocated among the respective Assets as set forth on Exhibit G.
2. Execution of Assignment and Transfer Instruments. Upon the Effective
Date and from time to time after the Effective Date, each of the Quest
Subsidiaries agrees to execute such assignment and transfer instruments as is
reasonably requested by Quest Cherokee to carry out the contribution of the
Assets to Quest Cherokee. No such assignment will contain a warranty as to
condition of or as to title to the subject Assets, except for a warranty of
title to the respective net revenue interests in and to the Assets specified in
such assignment (and to a working interest no greater than the respective
working interests in and to the Assets specified in such assignment, unless
there is a corresponding increase in net revenue interest) against any claims to
any right, interest or title through the assignor or transferor and except that
any deed of fee simple interest in real estate owned by a Quest Subsidiary shall
be in the form of a general warranty deed.
3. Bluestem Pipeline, LLC. Quest Cherokee owns all of the membership
interest of Bluestem. Quest Cherokee hereby designates Bluestem as the assignee
of any of the Assets that are pipelines, gathering systems, or appurtenant
pipeline easements, rights-of-way, permits, licenses, or contracts or equipment,
storage facilities, loading terminals, tanks and other equipment, fixtures and
improvements located on, used in connection with, or relating to such pipelines
and gathering systems, and all other tangible and intangible personal property
used in connection with or related to such pipelines and gathering systems
(collectively, the "Gathering System Assets"). Quest Cherokee directs the Quest
Subsidiaries, and the Quest Subsidiaries hereby agree, to transfer and assign
the Gathering System Assets directly to Bluestem. Notwithstanding such direct
transfer and assignment, the Quest Subsidiaries shall be deemed to have
contributed the Gathering System Assets to Quest Cherokee and Quest Cherokee
shall be deemed to have contributed such Gathering System Assets to Bluestem.
All such transfers and assignments to Bluestem shall be made under the same
terms and conditions as the transfers and assignments to Quest Cherokee
described herein. Bluestem shall assume all liabilities and be entitled to all
rights in connection with the Gathering System Assets, to the extent
attributable to periods from and after the Effective Date.
4. Percentage Interests. In return for the contribution of the Assets to
Quest Cherokee, the Quest Subsidiaries shall become members of Quest Cherokee.
Effective on the Effective Date, the Quest Subsidiaries shall be issued
certificates of ownership interest evidencing the following Percentage
Interests:
QOGC 47.90%
QES 1.96%
STP Cherokee 37.26%
PGPC 3.35%
PSI .71%
X-X 8.82%
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TOTAL: 100%
For all purposes, including determining distributions and allocations of
income and tax items, the parties hereto agree that any Percentage Interests of
the Quest Subsidiaries shall be effective on the Effective Date.
ARTICLE II
ALLOCATIONS AND OPERATING AGREEMENTS FOR
OIL AND GAS PROPERTIES AND PIPELINES
1. Allocations. All receipts and disbursements with respect to the Assets
will be prorated as of the Effective Date as follows:
(a) gross proceeds from production or transportation of hydrocarbons
prior to the Effective Date attributable to the Assets will be the
property of and payable to the respective Quest Subsidiary that
contributed the associated Asset;
(b) gross proceeds from production or transportation of hydrocarbons
from and after the Effective Date attributable to the Assets will be the
property of and payable to Quest Cherokee (with respect to the Assets
assigned to it) or Bluestem (with respect to the Gathering System Assets);
(c) all costs, expenses and expenditures attributable to the
ownership or operation of the Assets prior to the Effective Date will be
the obligation of the respective Quest Subsidiary that contributed the
Asset, except as otherwise provided herein;
(d) all costs, expenses and expenditures attributable to the
ownership or operation of the Assets from and after the Effective Date
will be the obligation of
Quest Cherokee (with respect to the Assets assigned to it) or Bluestem
(with respect to the Gathering System Assets); and
(e) production, excise, severance and similar taxes attributable to
the ownership of the Assets shall be prorated between the Quest
Subsidiaries, on the one hand, and Quest Cherokee or Bluestem, on the
other hand, as of the Effective Date, with the Quest Subsidiaries being
responsible for payment of all such taxes attributable to periods prior to
the Effective Date and Quest Cherokee (with respect to the Assets assigned
to it) or Bluestem (with respect to the Gathering System Assets) being
responsible for payment of all such taxes attributable to periods from and
after the Effective Date.
2. Operator of Record. Subject to the terms and provisions of applicable
operating agreements, Quest Cherokee shall become the operator of record for all
oil and gas leases comprising a part of the Assets which were operated by a
Quest Subsidiary immediately prior to the contribution. The Quest Subsidiaries
will reasonably cooperate with Quest Cherokee to effect a change of operator
from any Quest Subsidiary to Quest Cherokee pursuant to the applicable operating
agreement, including signing and delivering letters of resignation.
ARTICLE III
ASSUMPTION OF CERTAIN LIABILITIES
1. Operating Liabilities. Quest Cherokee agrees to assume and pay or
perform all duties, liabilities and expenses in connection with operation and
maintenance of the Assets, except for the Gathering System Assets that are to be
conveyed to Bluestem, to the extent such duties, liabilities and expenses are
either (a) incurred or arise on or after the Effective Date; or (b) are unpaid
on the Effective Date and were incurred on or after 90 days prior to the
Effective Date in connection with the drilling or completion of any well.
Bluestem agrees to assume and pay all duties, liabilities and expenses in
connection with construction, operation and maintenance of the Gathering System
Assets, to the extent such duties, liabilities and expenses are either (a)
incurred or arise on or after the Effective Date; or (b) are unpaid on the
Effective Date and were incurred on or after 90 days prior to the Effective Date
in connection with the construction of any pipeline. The liability of Quest
Cherokee and Bluestem for drilling or completion or construction costs and
expenses that are incurred prior to the Effective Date shall not exceed $2
million in the aggregate.
The liabilities assumed severally, not jointly, by Quest Cherokee and
Bluestem, each with respect to the Assets assigned to it, shall include the
following obligations: (a) to pay all lessors' royalties and overriding
royalties for production on or after the Effective Date; (b) to perform all
express or implied covenants and obligations relating to the ownership or
operation of the Assets on or after the Effective Date; and (c) the expense and
cost of plugging and abandoning xxxxx and restoration of xxxxx or operation
sites, all in accordance with applicable laws, regulations and contractual
provisions.
2. Contractual Liabilities. The Assets are assigned and transferred
subject to all existing operating agreements, unit operating agreements,
unitization agreements, pooling agreements, gas sales agreements, and other
contracts or obligations relating to the Assets. Quest Cherokee shall assume and
be responsible for all obligations of the Quest Subsidiaries under such
agreements, to the extent such obligations relate to periods from and after the
Effective Date.
3. Assumption of Certain Financing Obligations. In connection with the
contribution of the Assets by the Quest Subsidiaries to Quest Cherokee, Quest
Cherokee hereby assumes and agrees to duly and timely pay, perform and discharge
the liabilities listed on Exhibit H.
4. Attorneys' Fees. Quest Cherokee shall pay all reasonable legal fees
incurred by the Quest Subsidiaries and their parent, Quest Resource Corporation,
in connection with (a) the formation of Quest Cherokee and Bluestem; (b) the
transfers and assignments of the Assets; (c) the acquisition (including
financing of such acquisition) of assets from Devon Energy Production Company,
L.P. and Tall Grass Gas Services, L.L.C. pursuant to the Purchase and Sale
Agreement dated as of December 10, 2003.
5. Costs and Fees. Quest Cherokee shall pay all sales, use and similar
taxes, if any, arising out of the contributions, conveyances and deliveries to
be made pursuant to this Agreement, and shall pay all documentary, filing,
recording, transfer, deed, and conveyance taxes and fees required in connection
with this Agreement.
6. Limitation on Assumption of Liabilities. Notwithstanding any other
provision of this Article IV, neither Quest Cherokee nor Bluestem shall have any
liability to any of the Quest Subsidiaries with respect to matters as to which
any of the Quest Subsidiaries are obligated to indemnify Cherokee Partners, LLC
("Investor") under that certain Membership Interest Purchase Agreement of even
date herewith, between Quest Cherokee, the Quest Subsidiaries, and Investor, and
the Quest Subsidiaries hereby waive any right of contribution from Quest
Cherokee and Bluestem with respect to such indemnity obligations.
ARTICLE IV
MISCELLANEOUS
1. Amendments to Organizational Documents. The limited liability company
agreement of Quest Cherokee shall be amended upon execution of this Agreement to
reflect the respective Percentage Interests of the Quest Subsidiaries.
2. Representations and Warranties. Each party hereto represents and
warrants to each of the other parties hereto as follows:
(a) Such party has all requisite right, power and authority for, and
has taken all necessary corporate, limited liability company, and other
action to authorize, the execution, delivery and performance of this
Agreement; and
(b) This Agreement and each other agreement or instrument executed
and delivered by such party pursuant hereto or in connection herewith has
been duly executed and delivered by the duly authorized officers of such
party and constitutes the legal, valid and binding obligation of such
party, enforceable in accordance with its terms; and
(c) The execution, delivery and performance by such party of this
Agreement and the consummation by such party of the transactions
contemplated herein will not (i) violate any provision of law, statute,
rule, or regulation to which such party is subject, (ii) violate any
order, judgment, or decree applicable to such party, or (iii) conflict
with, or result in a breach or default under, any term or condition of its
by-laws, articles of incorporation, certificate of limited liability
company or other organizational or governing document.
3. Headings. All article and section headings in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any of the provisions hereof.
4. Successors and Assigns. The Agreement shall be binding upon and inure
to the benefit of the parties signatory hereto and their respective successors
and assigns.
5. No Third Party Rights. The provisions of this Agreement are intended to
bind the parties signatory hereto as to each other and are not intended to and
do not create rights in any other person or confer upon any other person any
benefits, rights or remedies and no person is or is intended to be a third party
beneficiary of any of the provisions of this Agreement.
6. Counterparts. This Agreement may be executed in any number of
counterparts, all of which together shall constitute one agreement binding on
the parties hereto.
7. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Kansas applicable to contracts made
and to be performed wholly within such state without giving effect to conflict
of law principles thereof.
9. Severability. If any of the provisions of this Agreement are held by
any court of competent jurisdiction to contravene, or to be invalid under, the
laws of any political body having jurisdiction over the subject matter hereof,
such contravention or invalidity shall not invalidate the entire Agreement.
Instead, this Agreement shall be construed as if it did not contain the
particular provision or provisions held to be invalid, and an equitable
adjustment shall be made and necessary provision added so as to give
effect to the intention of the parties as expressed in this Agreement at the
time of the Effective Date.
10. Amendment or Modification. This Agreement may be amended or modified
from time to time only by the written agreement of all the parties hereto.
11. Integration. This Agreement supersedes all previous understandings or
agreements between the parties, whether oral or written, with respect to its
subject matter. This document is an integrated agreement which contains the
entire understanding of the parties. No understanding, representation, promise
or agreement, whether oral or written, is intended to be or shall be included in
or form part of this Agreement unless it is contained in a written amendment
hereto executed by the parties hereto after the date of this Agreement.
12. "Including." As used herein, "including" means "including, without
limitation."
13. Further Assurances. Each party hereto agrees to execute and deliver
such additional instruments, documents and certifications and to take such other
action as is necessary or appropriate to carry out the purpose and intent of
this Agreement and the transactions contemplated herein.
IN WITNESS WHEREOF, the undersigned have executed the foregoing Agreement
as of the day and year first above written.
QUEST CHEROKEE, LLC QUEST OIL & GAS CORPORATION
By:/s/ Xxxxx Xxxx By:/s/ Xxxxx Xxxx
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Xxxxx X. Xxxx, Manager Xxxxx X. Xxxx, Co-Chief Executive Officer
BLUESTEM PIPELINE, LLC QUEST ENERGY SERVICE, INC.
By: Quest Cherokee, LLC
By:/s/ Xxxxx Xxxx
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Xxxxx X. Xxxx, Co-Chief Executive Officer
By:/s/ Xxxxx Xxxx
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Xxxxx X. Xxxx, Manager
PONDEROSA GAS PIPELINE COMPANY, INC.
By:/s/ Xxxxx Xxxx
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Xxxxx X. Xxxx, Co-Chief Executive Officer
STP CHEROKEE, INC.
By:/s/ Xxxxx Xxxx
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Xxxxx X. Xxxx, Co-Chief Executive Officer
PRODUCERS SERVICE, INC.
By:/s/ Xxxxx Xxxx
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Xxxxx X. Xxxx, Co-Chief Executive Officer
X-X GAS GATHERING, , LLC
By:/s/ Xxxxx Xxxx
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Xxxxx X. Xxxx, Manager
Exhibit "A"
QOGC Assets
Exhibit "B"
QES Assets
Exhibit "C"
STP Assets
Exhibit "D"
PGPC Assets
Exhibit "E"
PSI Assets
Exhibit "F"
X-X Assets
Exhibit "G"
Net Agreed Value of Capital Contributions
QES Assets $ 1.00 million
STP Assets $19 million
PGPC Assets $ 1.71 million
QOGC Assets $24.43 million
PSI Assets $ 0.36 million
X-X Assets $ 4.50 million
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TOTAL $51.00 million
Exhibit "H"
Assumed Liabilities
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LENDER SECURITY LOAN BALANCE MATURITY DATE
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Xxxxx Center Inventory $67,332.54 11/04/2004
Branch Bank
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Xxxxx Center Equipment $417,799.76 02/19/2008
Branch Bank
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Bank of Commerce Building - $49,661.24 10/15/2013
Chanute, 125 &
127 W. Main
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Caterpillar Equipment $171,949.39 01/2006,
Financial 03/2006,
08/2005,
10/2006,
11/2007
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Case Credit Equipment $2,245.94 08/18/2004
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DC Financial Equipment $34,983.78 07/25/2005,
Services 12/27/2005
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Ford Motor Credit Trucks $141,935.07 03/24/2006,
01/14/2006,
01/18/2005,
04/08/2007,
07/23/2007,
11/23/2007
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Xxxxxxx Xxxx Trucks $8,725.00 None
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Chrysler Financial Trucks $60,885.44 06/23/2005,
07/13/2005,
07/22/2007
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BEC of Kansas None $43,316.85 None
(entity owned by
Xxxx Xxxx)
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Xxxxx Fargo Bank, NA All Property $14,119,312.50 Various
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Xxxxx Fargo Energy All Property $10,000,000.00 10/07/2005
Capital, Inc.
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Total $25,118,147.51
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