EXHIBIT 10.4
SECOND AMENDMENT TO PURCHASE AND SALE AGREEMENT
This Second Amendment to Purchase and Sale Agreement (the "Amended
Agreement") is dated April 23, 2004 and is by and among XXXXXX XXXX XXXXX, an
unmarried man ("Xxxxx"), XXXXXX XXXX XXXXX, L.L.C., a privately-held limited
liability company organized and existing under the laws of the State of Nevada
("Xxxxx LLC") (collectively, Xxxxx and Xxxxx LLC are the "Seller"), and DELTA
PETROLEUM CORPORATION, a publicly-held corporation organized and existing
under the laws of the State of Colorado ("Buyer"). Seller and Buyer are
referred to herein individually as a "Party" and collectively as the
"Parties."
This Second Amended Agreement amends that certain existing Purchase and
Sale Agreement (the "Existing Agreement") dated effective as of the 1st day of
August, 2003, as amended by that certain First Amendment to Purchase and Sale
Agreement dated September 12, 2003, to add other areas of mutual interest and
to modify certain other terms of the Existing Agreement. Capitalized terms
utilized herein and not otherwise defined in this Amended Agreement shall have
the meanings ascribed to them in the Existing Agreement.
In consideration of the mutual promises contained herein, the benefits to
be derived by each Party hereunder and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller
agree that the Existing Agreement is hereby amended as follows:
(1) ARTICLE 1 is amended mutatis mutandis in the following respects:
(a) The North Tongue Interests (as described on Exhibit A to this Amended
Agreement) ("Revised Exhibit A") are hereby added to the Existing Agreement
and are to be sold by Seller and purchased by Buyer in accordance with the
terms and conditions set forth in this Amended Agreement. The interests in
the Colorado AMI originally conveyed pursuant to the Existing Agreement prior
to this Amended Agreement shall be called herein the "South Tongue Interests."
(b) The purchase and sale of the North Tongue Interests shall be
effective as of April 1, 2004, at 12:01 a.m., Mountain Standard Time (herein
called the "North Tongue Effective Time").
(c) The purchase and sale of the North Tongue Interests pursuant to this
Amended Agreement and receipt of the Purchase Price by Seller ("North Tongue
Closing") shall be on or before 5:00 p.m. Mountain Daylight Savings Time, on
April 23, 2004. At the North Tongue Closing, Buyer shall deliver to Seller
one or more certificates representing an aggregate of 1,525,000 shares of
Buyer's common stock as set forth in Section (2)(c) below ("North Tongue
Closing Date"), unless a different date is agreed to in writing by both
Parties and shall comply with the provisions hereof regarding the registration
for re-sale of such stock
(i) Buyer agrees that on or before the North Tongue Closing Date, it
will provide Seller with a final draft of the registration statement (the
"Registration Statement") to be filed with the U.S. Securities and Exchange
Commission (the "SEC") for review by Seller and its counsel. Buyer agrees
that it will immediately cause the Registration Statement draft to be
presented to its independent auditing firm for its review and that within one
business day after Buyer receives the written consent of its independent
auditing firm, it will cause the Registration Statement to be filed with the
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SEC under the Securities Act of 1933, as amended (the "Securities Act") all
the Section 2(c) Shares (as hereinafter defined). With respect to the
Registration Statement, the Buyer will:
1) file with the SEC the Registration Statement on the
appropriate form with respect to the Section 2(c) Shares and use its
reasonable efforts to cause the Registration Statement to become and remain
effective as soon as reasonably practicable after the filing thereof
(provided, that before filing the Registration Statement or prospectus or any
amendments or supplements thereto, Buyer will furnish copies of all such
documents proposed to be filed to Seller covered by such Registration
Statement for review by Seller, its attorney(s), accountant(s) or other
professionals retained by Seller).
2) prepare and file with the SEC such amendments and
supplements to the Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration Statement
effective until the earlier of (1) such time as all of such Section 2(c)
Shares covered by such Registration Statement have been sold (but not before
the expiration of the applicable prospectus delivery period) or (2) 180 days
after the effective date of such Registration Statement;
3) notify Seller promptly after Buyer causes the
Registration Statement to be filed with the SEC;
4) furnish to Seller, such number of copies of the
Registration Statement, each amendment and supplement thereto, the prospectus
included in the Registration Statement (including, without limitation, each
preliminary prospectus) and such other documents as Seller may reasonably
request in order to facilitate the disposition of the Section 2(c) Shares
owned by Seller (it being understood that Buyer consents to the use of the
prospectus and any amendment or supplement thereto by Seller);
5) register or qualify the Section 2(c) Shares under such
other securities or blue-sky laws of such jurisdictions within the United
States as Seller reasonably requests, to keep such registration or
qualifications in effect for so long as such Registration Statement remains in
effect, and do any and all other acts and things that may be reasonably
necessary or advisable to enable the Seller to consummate the disposition in
such jurisdictions of the Section 2(c) Shares owned by Seller;
6) notify Seller, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the happening
of any event (including those set forth herein) that requires the making of
any change in the prospectus included in such Registration Statement, so that
such document will not contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and at the request of Seller, the Buyer
will promptly prepare and furnish to Seller, a reasonable number of copies of
a supplement or amendment to such prospectus so that such prospectus will not
contain an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading;
7) notify Seller promptly, and (if requested by Seller)
confirm such notice in writing, (1) when a prospectus or any prospectus
supplement or post-effective amendment has been filed, and with respect to a
Registration Statement or any post-effective amendment, when the same has
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become effective under the Securities Act and each applicable state law, (2)
of any request by the SEC or any other federal or state governmental authority
for amendments or supplements to a Registration Statement or related
prospectus or for additional information, (3) of the issuance by the SEC of
any stop order suspending the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose, (4) if at any time the
representations or warranties of Buyer or any subsidiary contained in any
agreement (including any underwriting agreement) contemplated hereby cease to
be true and correct in any material respect, (5) of the receipt by the Buyer
of any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Section 2(c) Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, or (6) of the Buyer's reasonable determination that a post-effective
amendment to a registration statement would be appropriate;
8) use its reasonable best efforts to immediately cause all
such Section 2(c) Shares to be listed on each securities exchange or
exchanges, automated quotation system or over-the-counter market upon which
securities of the Buyer of the same class are then listed;
9) enter into such customary agreements (including, without
limitation, underwriting agreements in customary form, substance and scope)
and take all such other action as Seller reasonably requests in order to
expedite or facilitate the disposition of the Section 2(c) Shares;
10) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the SEC and applicable state
securities authorities;
11) in the event of the issuance of any stop order
suspending the effectiveness of the Registration Statement, or of any order
suspending or preventing the use of any related prospectus or suspending the
qualification of the Section 2(c) Shares included in such Registration
Statement for sale in any jurisdiction, Buyer will use its reasonable best
efforts promptly to obtain the withdrawal of such order;
12) use its reasonable best efforts to cause the Section
2(c) Shares covered by such Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable Xxxxx to consummate the disposition of the Section 2(c)
Shares;
13) deliver such documents and corporate resolutions
demonstrating the Section 2(c) Shares were duly authorized, validly issued,
fully paid and non-assessable;
14) make available for inspection by Seller and any
attorney, accountant or other professional retained by Seller (in this
subsection collectively referred to as "inspectors"), all financial and other
records, pertinent corporate documents and properties of the Buyer as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Buyer's officers, directors and employees to
supply all information reasonably requested by any such inspectors in
connection with such Registration Statement;
15) provide and cause to be maintained a transfer agent and
registrar (which, in each case, may be the Buyer) for all the Section 2(c)
Shares covered by the Registration Statement from and after a date not later
than the effective date of such registration; and
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16) pay all expenses and costs in connection with the
Registration Statement that are incident to the performance by the Buyer of
its obligation to register the Section 2(c) Shares under this Amended
Agreement, including, without limitation: (i) all SEC and NASD registration
and filing fees; (ii) all fees and expenses incurred in connection with
compliance with state securities or blue sky laws; (iii) all expenses of
printing and distributing any Registration Statement, any Prospectus, and any
amendments or supplements thereto; (iv) the fees and disbursements of counsel
for the Buyer and of the independent public accountants of the Buyer; and (v)
all expenses and costs for any and all opinions that Seller is required to
obtain in connection with the sale of the Section 2(c) Shares. Buyer shall
not, however, be obligated to pay the cost of Seller's counsel and Seller
shall bear all underwriting discounts, selling commissions, sales concessions
and similar expenses applicable to any sale of the Section 2(c) Shares sold by
Seller.
(d) Upon the North Tongue Closing, except for interests transferred to
Buyer under this Amended Agreement and the Existing Agreement, Seller shall
have no restriction of any kind and shall retain and be entitled to all rights
of ownership for all interests retained or otherwise acquired or owned by
Seller and to deal with the same in any manner.
(e) Buyer shall assume all risk of loss with respect to the Interests
from and after the North Tongue Effective Time to the North Tongue Closing and
thereafter should the North Tongue Closing occur. Seller shall retain all
risk of loss with respect to the North Tongue Interests at all times should
the North Tongue Closing not occur. However, it is understood and agreed that,
should the North Tongue Closing not occur for any reason, the Existing
Agreement shall remain in full force and effect according to its terms.
(10) ARTICLE 2 is amended mutatis mutandis in the following respects:
(a) Seller acknowledges receipt of payment in full of the Initial
Purchase Price for the South Tongue Interests by Buyer as set forth in the
Existing Agreement. As of the date of this Amended Agreement, the Existing
Agreement is in full force and effect and neither Party is in material breach
of the Existing Agreement.
(b) As the Initial Purchase Price paid at the North Tongue Closing for
the North Tongue Interests, Buyer shall pay Seller ten dollars ($10.00) and
other good and valuable consideration (including, without limitation, Buyer's
obligations under this Amended Agreement), the receipt and sufficiency of
which Buyer and Seller acknowledge.
(c) Buyer shall deliver to Seller at the North Tongue Closing Date One
Million Five Hundred Twenty-Five Thousand (1,525,000) Shares of Buyer's common
stock, as described in Article 1, (c) hereof, (the "Section 2(c) Shares") as
payment in full for Seller's agreement to decrease Seller's reversionary
interest at payout in the South Tongue Interests which include all additional
oil and gas leases purchased, but exclude any reduction for purchased
production acquired in the South Tongue after the date of this Amended
Agreement from fifty percent (37.5% NRI) to forty-two and one half percent
(31.875% NRI) as set forth below in Amendments to Section 2.5 and
relinquishment of any Bonus Prospect designation in the South Tongue area of
the Colorado AMI. The decrease in Seller's South Tongue Interests does not
include voting rights for all purposes as to said 7.5% (5.625% NRI) which
voting rights are retained by Seller.
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(d) Section 2.5 is amended mutatis mutandis by adding the following :
(1) The Colorado AMI consists of two (2) separate areas
designated as "North Tongue" and "South Tongue," as more completely described
on Revised Exhibit A.
(2) North Tongue Bonus Prospects. With regard to the North
Tongue area only, for any such prospect that is identified at any time after
drilling, coring, testing and logging to contain in combination from the
formations specified on Revised Exhibit A-2.5(2) attached hereto at least one
million barrels of recoverable oil or six billion cubic feet of recoverable
gas or a combination of oil or gas equal to or exceeding one million barrels
of oil equivalent using a 6 MCF :1 Barrel gas-to-oil ratio, as determined by
Malkewicz, Xxxxx Associates of Golden, Colorado, consulting engineers, or such
other consulting engineers as Buyer and Seller may agree upon, then such
acreage shall be designated by Buyer as a "Bonus Prospect."
Costs of the consulting engineers shall be borne by the
Buyer.
Within seven (7) days of a Bonus Prospect designation, Buyer
shall issue to Seller as additional purchase price, up to 190,000 shares of
Buyer's common stock ("Additional Shares") (or such lesser amount such that
the value of such stock based upon the average closing price of the stock for
the immediately preceding 30-day period may equal but does not exceed
$950,000.00) for each Bonus Prospect (a "Bonus"). In no event shall Buyer
ever be obligated to pay Seller a Bonus for any portion of the Colorado AMI
that is not deemed to be a Bonus Prospect. All provisions herein relating to
Bonus Prospects apply only to the North Tongue area and in no event shall
there be more than five (5) Bonus Prospects in the North Tongue area.
Notwithstanding any language to the contrary, no Bonus or Additional Shares
are payable for drillable prospects located on South Tongue regardless of
potential or ultimate production. With respect to shares to be issued under
this Section (2)(d)(3) of this Amended Agreement, Buyer hereby agrees that it
shall comply with the procedures and timing requirements as set forth in
Article 1, (1) (c)(i) hereof with respect to the filing of additional
registration statements covering each issuance of shares for each Bonus
Prospect designation. In addition, Buyer shall deliver to Seller such
documents and corporate resolutions demonstrating that any and all shares
issued under this Section 2(d)(3) will be duly authorized, validly issued,
fully paid and non-assessable.
(3) Annual Drilling. In the North Tongue AMI, after January
1, 2005, Seller may propose drilling under the Existing Agreement for the
Colorado AMI. Within the Colorado AMI, as to each prospect discovery well,
Buyer shall continuously develop each prospect discovery to the fullest extent
allowed by the rules and regulations of the Colorado Oil and Gas Conservation
Commission. In addition, as soon as a prospect discovery well is drilled,
Buyer shall take all actions necessary to obtain permission from the Colorado
Oil and Gas Conservation Commission to achieve the spacing for the productive
formation of one (1) well per twenty (20) acres, whether by increased well
density, unitization or otherwise and shall drill a minimum of two (2) xxxxx
in every forty acre tract within each prospect containing a prospect discovery
well. In the event Buyer is unsuccessful in obtaining permission from the
Colorado Oil and Gas Conservation Commission to achieve the spacing of one (1)
well per twenty (20) acres, or two (2) xxxxx in every forty (40) acre tract,
then Seller may attempt to secure such permission from the Colorado Oil and
Gas Conservation Commission to achieve the spacing of one (1) well per twenty
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(20) acres, to drill a minimum of two (2) xxxxx in every forty acre tract.
Provided that Buyer has acted and continues to act in good faith and has not
taken and does not take any action, directly or indirectly, to interfere with
its or Seller's attempts to reduce spacing and provides all necessary
assistance (execution of applications, etc.) to Seller, after one (1) year, if
Seller fails to achieve the reduced spacing, the then existing spacing or any
approved lesser spacing shall be deemed the final spacing for each such
prospect.
(a) Seismic Obligation. Buyer shall acquire 3D seismic
surveys pursuant to two Seismic Earning Agreements to be entered into by Buyer
and a third party to be designated by Seller at Seller's sole discretion no
later than April 30, 2004 (collectively, " Seismic Agreement") and within six
(6) months, unless another date is accepted in an express writing by Seller,
after the Effective Time shall acquire and complete processing and
interpretation of 3D seismic surveys on the lands set forth on Revised Exhibit
A -2.5(4) attached hereto which include but are not limited to the lands
subject to the Seismic Agreement.
Buyer shall fulfill all material obligations under the
Seismic Agreement. Buyer shall bear all related costs of seismic, permitting,
acquisition and interpretation invoiced after the Effective Time. A
termination of the Seismic Agreement caused by a default by Buyer under the
Seismic Agreement shall cause Buyer to reassign all lease acreage in the North
Tongue not held by production to Seller at time of such termination. Buyer
shall deliver to Seller: all digital media from the processor of all 3D
Seismic surveys immediately upon availability, all Buyer's interpretations as
they are made and when requested by Seller, both digitally and no less than
four (4) hard copies of all interpretations (collectively the "Seismic Data")
with full license to Seller to use all such Seismic Data.
(b) Field Obligations. Seller has applied for a
drilling permit and as soon as the permit is approved and a drilling rig is
available, Seller shall drill a well (the " Obligation Well") at the location
and in the field specified on Revised Exhibit 2.5(4)(b)(1) attached hereto
(the "Field"). Seller shall be the named operator of the first well in the
Field until it is producing, at which time all operations for that well shall
be transferred to Buyer. Any and all xxxxx that are subsequently drilled in
the Field will be drilled with the Buyer as the operator. All necessary costs
for the Obligation Well shall be invoiced directly to Buyer and Buyer shall be
obligated to timely pay all such costs, Buyer shall sign all drilling
contracts, secure all such product or services needed to drill and complete,
or plug and abandon the well including all of the equipment set forth on
Revised Exhibit 2.5(4)(b)(2) attached hereto. If Buyer does not secure all
such product or services within fifteen (15) days after execution of this
Amended Agreement, then Seller shall have the right, but not the obligation or
liability, to secure such product or services at Buyer's expense, which costs
shall be invoiced directly to Buyer. Any and all failures of title shall be
taken from and reduce Seller's ownership interest in the affected property and
not Buyer's. In addition, upon Closing of this Amended Agreement, Buyer shall
install at its sole cost and expense all compressors and gas plants necessary
to market production from two xxxxx located in the Field which are currently
shut in ("Shut-In Xxxxx"). After the compressors and gas plants are installed
and the Shut-In Xxxxx are brought back on production, ownership of the Shut-In
Xxxxx shall be shared between Buyer (50%) and Seller (50%) and all costs
attributable to the period of time after the compressors and gas plants are
installed and the Shut-In Xxxxx are brought back on production shall be
allocated fifty percent (50%) to Buyer and fifty percent (50%) to Seller.
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(b) Contingent Seismic Obligation. In the event the
Obligation Well is completed as a well capable of producing in paying
quantities of at least 10 barrels a day of oil or 60 MCF of gas per day, or a
combination thereof using a 6 MCF : 1 barrel gas to oil ratio, Buyer shall
acquire a 3D seismic survey on the lands specified on Revised Exhibit
A-2.5(4)(c) attached hereto.
Buyer shall acquire the 3D seismic survey of the Field lands
described above and shall complete processing of the seismic survey as soon as
possible after completion of the Obligation Well, subject to the availability
of a Seismic crew at competitive rates. Buyer shall deliver to Seller: all
digital media from the processor of all 3D Seismic surveys immediately upon
availability, all Buyers interpretations as they are made and when requested
by Seller, both digitally and no less than four (4) hard copies of all
interpretations (collectively the "Seismic Data") with a non-exclusive license
to Seller to use all such Seismic Data.
(c) Additional Obligation Xxxxx. In addition to paying
for the Obligation Well, Buyer shall also drill two (2) xxxxx at locations
selected by Buyer and Seller after review of the seismic surveys on any two
(2) of the four areas described in Section 2.2(a) above ("Additional
Obligation Xxxxx"). Both Additional Obligation Xxxxx shall be drilled prior
to the end of 2004. Buyer shall own one hundred percent (100%) of the working
interest in the Xxxx Gas Field Obligation Well and both Additional Obligation
Xxxxx and in any other xxxxx drilled by Buyer in the North Tongue AMI, subject
to Seller's retention of an overriding royalty interest equal to the
difference between existing leasehold burdens and twenty-five percent (25%),
if any. Seller also retains a proportionate fifty percent (50%) working
interest, based upon a seventy-five percent (75%) net revenue interest, at
Payout (as defined below) of each well, calculated on a well-by-well basis.
(d) Remedies. As to the North Tongue only, if Buyer
fails but for reasons of acts of God, availability of drilling rigs and/or is
delayed by governmental action to timely acquire the seismic surveys in this
Amended Agreement, fails to timely pay the costs of the Xxxx Gas Field
Obligation Well, or fails to drill the Additional Obligation Xxxxx, then Buyer
shall reassign to Seller all lease acreage in the North Tongue which is not
held by Production at the time of default. Buyer shall have no other
liability to Seller or any other party for failure to fulfill such obligations
under this Agreement.
(4) Reversion at Payout. After written notice from Buyer,
Buyer shall obtain from Seller a notarized writing as to Seller's election as
to Seller's option to receive a proportionate forty-two and a half percent
(42.5%) after payout working interest in each well on the South Tongue
Interests and a proportionate fifty percent (50%) after payout working
interest in each well on the North Tongue Interests. Payout (as defined on
Revised Exhibit A-2(4) attached hereto) shall be calculated on a well-by-well
basis.
(5) South Tongue Leasing. The Seller's right to acquire
leases within the South Tongue shall be amended as of the Closing Date of this
Amended Agreement to limit the acquisition of acreage as set forth on Revised
Exhibit A-2.5(5) attached hereto (the "Acreage Limitation"). The Acreage
Limitation shall be deemed to have started on April 1, 2004. Buyer shall keep
accurate land maps and advise Seller when leasing of the acreage permitted
under the Acreage Limitation is complete. If Seller's acquisition exceeds the
Acreage Limitation because of a failure of Buyer to advise Seller that the
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Acreage Limitation has been met, there shall be no liability to Seller,
however Seller shall receive their interest as set forth in the Existing
Agreement.
(6) Trailblazer Leasing. As to the Trailblazer AMI, Seller
relinquishes all rights and obligations to acquire additional lands for lease
for the account of Seller and Buyer, at and upon the closing date of the
Amended Agreement, reserving to Seller the right to buy such lease acreage for
Seller's own account. Buyer shall not be obligated to pay for the acreage of
any leasehold in the Trailblazer AMI acquired by Seller after the date of this
Amended Agreement.
(7) Drilling. With respect to all lands covered by this
Amended Agreement, including all lands within the Colorado AMI, all portions
of the Existing Agreement, including but not limited to Section 2.5(c)(v),
(vi) and (vii), apply to the Colorado AMI. When Buyer uses Seller's drilling
rigs and/or workover rigs or drilling rigs and/or workover rigs provided by
Seller, Buyer shall sign a drilling contract with Seller or drilling
contractor obtained by Seller for drilling of xxxxx at competitive rates in
the area for each well being drilled and utilizing the same form of contract
as used for Big Dog Drilling Company.
Except as set forth in this Amended Agreement, all terms and conditions
of the Existing Agreement remain in full force and effect and have not been
modified, altered or amended, nor is either Party in material default of the
Existing Agreement as of the date hereof.
In the event that there is any conflict between this Amended Agreement
and any other agreement between Buyer and Seller that pertains to this Amended
Agreement, the terms and conditions of this Amended Agreement shall prevail.
All of the Exhibits to this Amended Agreement are incorporated herein and
are hereby made a part of this Amended Agreement.
All signatures sent by facsimile shall be deemed to be the same as
original signatures.
This Amended Agreement was executed as of the date set forth above.
SELLER:
XXXXXX XXXX XXXXX, L.L.C.
By: /s/ Xxxxxx Xxxx Xxxxx
Xxxxxx Xxxx Xxxxx, Manager
XXXXXX XXXX XXXXX, an unmarried man
/s/ Xxxxxx Xxxx Xxxxx
BUYER:
DELTA PETROLEUM CORPORATION
By: /s/ Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx, President and Chief
Executive Officer
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