EXHIBIT 10.17
SECOND AMENDMENT TO PURCHASE AND SALE AGREEMENT
This Amendment is entered into this 15th day of January, 1999, by and
between Pennaco Energy, Inc., a Nevada corporation, whose address is 0000 00xx
Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx 00000 ("SELLER") and CMS Oil and Gas
Company, a Michigan corporation, whose address is 0000 Xxxx Xxxxxx, Xxxxx 0000,
Xxxxxxx, Xxxxx 00000-0000 ("BUYER").
WHEREAS, Seller and Buyer are parties to that certain Purchase and Sale
Agreement dated October 23, 1998, concerning the sale of an undivided 50% of
Seller's right, title and interest in certain Assets located in Xxxxxxxx,
Xxxxxxxx and Xxxxxxx Counties, Wyoming, and Big Horn, Rosebud and Powder River
Counties, Montana as more fully described in the Agreement, as amended by that
certain First Amendment dated November 20, 1998 (the "AGREEMENT"), and
WHEREAS, the Parties desire to further amend the Agreement as hereinafter
provided.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Parties agree as follows:
1. The Parties hereby elect under Paragraph 4.4(c)(ii) to give Seller the
option of attempting to cure Title Defects 13, 20, 26, 27, 28, and 35 described
in Buyer's December 15, 1998, Notice of Title Defects to the satisfaction of
Buyer after the Second Closing Date through and including April 15, 1999,
provided, however, that One Million Eight Hundred Six Thousand Three Hundred
Seventy-Seven Dollars ($1,806,377.00) is deposited in escrow at the Second
Closing pending such cure (the "Deposit") pursuant to the Escrow Agreement of
even date between Seller, Buyer and Norwest Bank Colorado, National Association,
a copy of which is attached as Exhibit I hereto. The Deposit shall be allocated
as follows:
Defect Number Deposit Amount
------------- --------------
13 $ 833,525
20 194,333
26 248,332
27 147,375
28 254,689
35 128,123
-----------
$ 1,806,377
Upon the cure of each Defect to the satisfaction of the Buyer or the mutual
agreement of the parties that the claimed Defect is not a Defect under the
Agreement, Seller shall, if the associated Leases were not included in the
Assignment and Conveyance delivered at the First Closing, tender an
Assignment and Conveyance of the associated Interests in the form of Exhibit F
to the Agreement (together with any governmental forms of assignment, if
applicable) and the parties shall execute joint written instructions to the
Escrow Agent requesting that the Deposit Amount attributable to such Defect
be withdrawn from escrow and paid to Seller. If Seller is unable to cure a
Defect to the satisfaction of Buyer on or before April 15, 1999, the
provisions of Paragraph 4.4(c)(iii) shall apply. If Buyer elects not to
accept assignment of the Leases affected by such Defect and such Leases were
included in the Assignment and Conveyance delivered at the First Closing,
Buyer shall reassign such leases to Seller by an Assignment in the form of
Exhibit F to the Agreement. The parties acknowledge that as to Title Defect
13, the portion pertaining to the Federal Tax Lien is waived and, in the
event a Release is not obtained, Seller reserves the right to argue that the
Affidavit does not constitute a title defect. Buyer hereby elects under
paragraph 4.4(c)(iii)(3) to accept assignment of the Leases covered by the
Title Defects asserted by Buyer but not set forth above.
2. Paragraph 2.4 is hereby amended to provide that the payment by Buyer
to Seller for Excess Net Mineral Acres shall not be made at the Second Closing
but shall be included in the Final Settlement Statement pursuant to Paragraph
12.2 of the Agreement, subject to completion of the procedure contemplated by
paragraph 2.4 and upon assignment to Buyer by Seller of the Leases for such
Excess Net Mineral Acres which are required to be assigned to Buyer or which
Buyer elects to receive pursuant to paragraph 2.4.
3. The parties acknowledge that the determinations required under
paragraph 4.4(a)(ii) and (iii) cannot be made until after the Second Closing
Date and, therefore, any adjustments required under Sections 4.4(c)(iii)(1) and
(2) and 4.5 shall be made in the Final Settlement Statement pursuant to
Paragraph 12.2 of the Agreement.
4. The Parties acknowledge that Exhibit A to the Assignment and
Conveyance delivered by Seller to Buyer at the Second Closing differs from
Exhibit A - Part II to the Agreement and hereby confirm that Exhibit A - Part II
is hereby deemed amended to conform to Exhibit A to the Assignment and
Conveyance delivered by Seller to Buyer at the Second Closing.
5. Paragraph 18.3e of the Agreement and Article XVI.C of the Interim
Joint Operating Agreement are hereby amended to provide that during the term of
the Interim Joint Operating Agreement, or until Buyer gives written notice to
the contrary, the following shall apply in lieu of the provisions of those
paragraph:
Seller as Operator will call for advance payment of estimated capital costs
in accordance with the provisions of the Interim Operating Agreement and
Accounting Procedure ("JOA"). Seller and Buyer will contribute the
respective shares of such advance into the escrow account established at
the first closing. Upon joint instruction of Seller and Buyer, escrow
agent will deposit amounts required for payment to vendors and service
providers into Seller's operating account. Upon payment of any invoice
with funds drawn down from the escrow account, Seller will immediately
submit a copy of the check and the invoice to Buyer in accordance with the
notice provisions of the Interim Joint Operating Agreement. In the
-2-
event either Party fails to fund its share of any Capital Costs, the
other Party may send a Notice of Default. If the default is not cured
within 30 days of the receipt of such Notice of Default, the defaulting
Party, if the Operator of such operation, shall automatically be removed
as operator of such operation without the necessity of a vote under
Article V of the JOA and, whether or not Operator, the defaulting Party
shall assign all of its interest in such operation and the affected
Leases to the other Party. As to Capital Costs, the foregoing remedies
shall be the exclusive remedies of the Parties for the failure of a
Party to fund such Capital Costs and the Non-Defaulting Party shall not
be entitled to also pursue the remedies set forth in Article VII.D of
the JOA. The Parties will confer in good faith no less frequently than
annually to consider the ongoing need for the Escrow Account
arrangement, taking into account the prior performance of Seller in
fulfilling its financial obligations, the most current financial
condition of Seller and the availability of other measures, if
appropriate, to secure the financial performance of Seller. The Parties
will confer regarding the necessity of the escrow arrangement and act in
a commercially reasonable manner.
Except as provided above, the Agreement remains in full force and effect
according to its terms.
Seller:
PENNACO ENERGY, INC.
By: /s/ XXXX X. XXXX
-----------------------------------
Xxxx X. Xxxx
President
Buyer:
CMS OIL AND GAS COMPANY
By: /s/ XXXXXX X. XXXX
-----------------------------------
Xxxxxx X. Xxxx
Manager, Land and International Contracts
-3-
