EXHIBIT 10.17
ASSET PURCHASE AND SALE AGREEMENT
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This Asset Purchase and Sale Agreement (hereinafter "Agreement") is
effective as of the 15th day of May, 1997 ("Effective Date"), by and among
INFINITY OIL & GAS, INC., a Kansas corporation (hereinafter referred to as
"Infinity"); and PGP II, L.P., a Delaware limited partnership (hereinafter
referred to as "PGP").
WHEREAS, Infinity has entered into negotiations and signed a letter of
intent with Burlington Resources Oil & Gas Company ("Burlington") (a copy of
which is attached hereto as Exhibit A) and other owners to acquire certain oil
and gas properties known as the Raton Basin Center Coalgas Project in Huerfano
County, Colorado, as more particularly set forth in Exhibit B attached hereto,
together with related easements, rights-of-way, operating rights, and all other
incidents associated therewith;
WHEREAS, Infinity has entered into negotiations and signed letters of
intent with Industrial Gas Services, Inc., Sterling Petroleum Company, Sterling
Petroleum Operating Company, and Robert McCreery (copies of which are attached
hereto as Exhibit C) and other owners to purchase that certain gas pipeline
system known as the Spanish Peaks Gathering System, consisting of the,
pipelines, rights-of-way, easements, and a yard and building located at the
delivery point of the pipeline to the city of Walsenburg, Colorado, all set
forth more fully in Exhibit D attached hereto;
WHEREAS, Infinity desires to sell to PGP and PGP desires to purchase from
Infinity, all of its right, title and interest now owned or acquired before
Closing in and to the leases and related assets (subject to a reserved
overriding royalty interest);
WHEREAS, the parties wish for Infinity to assign all of its right, title,
and interest now owned or hereafter acquired in the pipeline and related assets
to an entity (the "Pipeline Acquisition Entity") owned jointly by PGP and
Infinity; and
WHEREAS, the parties wish to effectuate the sale on the terms and
conditions more fully set forth in this Agreement.
NOW, THEREFORE, in consideration of the covenants and promises contained
herein, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
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1.1 "Hydrocarbons" means oil, gas, coalseam gas, condensate, casinghead
gas, natural gas, liquified natural gas, natural gasoline, methanol, drip
gasoline, liquids separated from gas, helium or other components of a gas
stream, and any and all products or by-products therefrom regardless of how
obtained, manufactured or produced.
1.2 "Lease Burdens" means, as to any Lease, the lessor's royalty interest,
and all overriding royalty, net profits or production payment interests,
reversionary interests, and/or any other interests regardless of their form or
manner of calculation which burden the working interest in such Lease,
including, unless otherwise stated, the Overriding Royalty Interest (as defined
below).
1.3 "Lease Revenue Interest" or "LRI" as to any Lease means 100% (the
assumed working interest in such Lease) less the Lease Burdens.
1.4 "Net Revenue Interest" or "NRI" means the percentage of all
Hydrocarbons that may be produced, saved and sold from land covered by a Lease.
ARTICLE II
SALE OF LEASES BY INFINITY
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2.1 PURCHASE AND SALE OF LEASES. PGP agrees to purchase and Infinity
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agrees to sell (or cause the current owner to sell) all of its right, title, and
interest in and to (a) the oil and gas leases and other assets (individually a
"Lease" and collectively, the "Leases") described on Exhibit B attached hereto
(subject to the reserved Overriding Royalty Interest, hereafter defined); (b)
the federal exploratory unit or units hereafter formed containing the Leases or
any part of them; and (c) all oil and gas sales contracts, dedicated acreage,
wells, fixtures, attendant equipment, machinery, permits, franchises, licenses,
servitudes, surface leases, files, data, information, intellectual property,
seismic information, logs, core samples, and other personal property, agreements
and incidents associated therewith insofar as such items are attendant or relate
to the assets described on Exhibit A or B (the assets listed at (a), (b), and
(c) shall hereinafter be referred to collectively as the "Raton Basin Assets").
At Closing, Infinity shall execute and deliver in sufficient and recordable form
any and all assignments, conveyances, bills of sale, titles, and other documents
necessary to transfer title to all such interests (subject to the reserved
Overriding Royalty Interest) in the Raton Basin Assets to PGP.
2.2 WORKING INTERESTS AND NET REVENUE INTERESTS. Infinity shall deliver
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(or cause to be delivered) to PGP at Closing 100% of the working interest in
each Lease, which will entitle PGP to the Net Revenue Interest in and to the
Hydrocarbons produced from the lands covered by such Lease as set forth on
Exhibit B, less the Overriding Royalty Interest (as hereafter defined).
Infinity's failure to deliver the working interest and Net Revenue Interest set
forth herein shall not be a condition to Closing except as set forth in Article
7.1.
2.3 OVERRIDING ROYALTY INTEREST. Infinity shall be entitled to retain (or
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receive, if the Leases are assigned to PGP by the current owner) an overriding
royalty interest ("Overriding Royalty Interest") not to exceed 5% of 8/8 in and
to production from the Leases assigned to PGP at Closing. The size of the
Overriding Royalty Interest in each case shall be determined by subtracting .81
from the Lease Revenue Interest (before reduction by the Overriding Royalty
Interest) owned by Infinity (or the LRI (before reduction by the Overriding
Royalty Interest) which Infinity otherwise has the right to cause to be assigned
to PGP) in such Lease, proportionately reduced to the extent such Lease does not
cover 100% of the fee mineral estate in and to the lands covered by such Lease.
In the event Infinity is unable to deliver to PGP at Closing a LRI (after
reduction by the Overriding Royalty Interest) of at least .81 in any Lease,
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Infinity shall not be entitled to reserve or acquire as a part of this
transaction any Overriding Royalty Interest in and to production from such
Lease.
Any overriding royalty interest that Coltex Petroleum, Inc. may own in any
of the lands covered by the Leases, under any other oil and gas lease covering
the same mineral interest as are covered by one or more of the Leases (the
"Cortex Overrides"), which may be acquired by Infinity within 12 months after
Closing, shall be included within the definition of "Overriding Royalty
Interest."
2.4 OPTION TO PURCHASE OVERRIDING ROYALTY INTEREST. For a period of
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eighteen (18) months beginning on the date of this Agreement, PGP will have the
option to purchase from Infinity out of its Overriding Royalty Interest an
overriding royalty interest of up to 3% of 8/8 of production from the lands
covered by the Leases. PGP may elect to purchase all or any lesser percentage
of the whole 3% of 8/8 (or such lesser interest that Infinity may own), provided
that the interest PGP may elect to purchase shall be proportionately reduced in
any lands to the extent any Lease thereon does not cover 100% of the fee mineral
estate in such lands. The election to purchase shall be an election to purchase
such overriding royalty interest in all the lands covered by the Leases.
2.4.1 NET MINERAL ACRE. As used herein the term "Net Mineral Acre"
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means the total number of acres covered by any Lease times the percentage
interest of the fee mineral estate owned in such acres by the lessor or
lessors under such Lease, times the working interest owned by Infinity (or
which Infinity has the right to assign). By way of example, and not by
limitation:
a) if a Lease covers 160 acres, and the lessor owns a 25%
undivided interest in the fee mineral estate in such 160 acres,
then the Net Mineral Acres for such Lease equal 40 (160 acres x
25% interest in the mineral estate = 40 Net Mineral Acres);
b) if a Lease covers 160 acres, and the lessor owns 100% of the
fee mineral estate, and Infinity owns 25% of the working
interest in the Lease, the Net Mineral Acres for such Lease
equal 40 (160 acres x 25% working interest = 40 Net Mineral
Acres);
c) if a Lease covers 160 acres, and the lessor owns a 25%
undivided interest in the fee mineral estate in such 160 acres,
and Infinity owns 25% of the working interest in the Lease,
then the Net Mineral Acres for such Lease equal 10 (160 acres x
25% interest in the mineral estate x 25% working interest = 10
Net Mineral Acres).
2.4.2 CALCULATION OF PURCHASE PRICE. The purchase price shall be
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calculated on a Lease by Lease basis as follows:
$6.58 shall be multiplied times the percentage Overriding Royalty
Interest which PGP elects to purchase, which product shall be
multiplied times the Net Mineral Acres under such Lease.
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The products obtained by performing the above calculation for all
lands covered by the Leases shall be added together to obtain the
total purchase price for the Overriding Royalty Interest that PGP has
elected to purchase.
By way of example and not by limitation, assume that Infinity has the
following Overriding Royalty Interest that is subject to POP's purchase
option:
A. 5% of 8/8 in lands covered by Leases covering 53,000 Net Mineral
Acres.
1) If PGP elects to buy 1% of 8/8, the total purchase price will be:
$6.58 x 1 x 53,000 = $348,740
2) If PGP elects to buy 3% of 8/8, the total purchase price will be:
$6.58 x 3 x 53,000 = $1,046,220
B. 5% of 8/8 in lands covered by Leases which cover 16,000 Net Mineral
Acres; and
3% of 8/8 in lands covered by Leases which cover 10,000 Net Mineral
Acres; and
2.5% of 8/8 in lands covered by Leases which cover 15,000 Net Mineral
Acres; and
1.25% of 8/8 in lands covered by Leases which cover 11,000 Net Mineral
Acres; and
0% of 8/8 in lands covered by Leases which cover 1,000 Net Mineral
Acres.
1) If PGP elects to buy 3% of 8/8, the total purchase price will be:
$6.58 x 3 x 16,000 = $ 315,840
$6.58 x 3 x 10,000 = $ 197,400
$6.58 x 2.5 x 15,000 = $ 246,750
$6.58 x 1.25 x 11,000 = $ 90,475
$6.58 x 0 x 1000 = $ -0-
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Total purchase price $ 850.465
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2) If PGP elects to buy 1% of 8/8, the total purchase price will be:
$6.58 x 1 x 16,000 = $ 105,280
$6.58 x 1 x 10,000 = $ 65,800
$6.58 x 1 x 15,000 = $ 98,700
$6.58 x 1 x 11,000 = $ 72,380
$6.58 x 0 x 1000 = $ -0-
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Total purchase price $ 342.160
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2.5 PURCHASE PRICE OF LEASES. The purchase price of the Raton Basin
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Assets shall be Twelve Dollars ($12) per Net Mineral Acre (as defined
above) covered by the Leases, which PGP shall pay to Infinity as follows:
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a) Sixty Thousand Dollars ($60,000) ("Earnest Money") paid to
Infinity contemporaneously with the execution of this
Agreement, to be credited against the total purchase price
at Closing; and
b) the balance in cash or readily available funds by wire
transfer to an account to be designated by Infinity, such
designation to be made no later than three (3) business days
prior to Closing.
In the event PGP shall be required to pay any amount directly to Burlington
Resources or to any other owner or owners of the Raton Basin Assets as a
condition to the transfer of Marketable Title (as hereafter defined) to the
Raton Basin Assets, then in such event, such amount shall be deducted from the
amount owing to Infinity and payable hereunder.
ARTICLE III
ASSIGNMENT OF PIPELINE
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3.1 PIPELINE ACQUISITION ENTITY. Prior to Closing, PGP and Infinity shall
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establish a corporation, limited partnership, or limited liability company (the
"Pipeline Acquisition Entity") for the purposes of acquiring, holding, operating
and maintaining the pipeline and related assets as hereafter more fully
described.
3.2 OWNERSHIP INTERESTS. PGP shall own eighty percent (80%) of the equity
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and controlling interests in such Pipeline Acquisition Entity and Infinity shall
own the remaining twenty percent (20%).
3.3 ASSIGNMENT OF PIPELINE. Infinity agrees to assign to the Pipeline
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Acquisition Entity (a) the pipeline, rights-of-way, and easements described on
Exhibit C attached hereto; (b) a yard and building located at the delivery point
of the pipeline to the city of Walsenburg, Colorado, together with spare pipes,
equipment, materials, and other assets located thereon, all set forth more fully
in Exhibit D attached hereto; and (c) related contracts, attendant equipment,
operating rights, machinery, permits, franchises, licenses, servitudes, surface
leases, files, data, information, intellectual property, processing plants,
compressors, other personal property, and all other incidents associated
therewith as such items are attendant or relate to the assets described on
Exhibit C or D (the assets listed at (a), (b) and (c) shall hereafter be
referred to collectively as the "Pipeline Assets").
3.4 PURCHASE PRICE OF PIPELINE ASSETS. PGP shall pay Infinity One Hundred
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Eighty-Five Thousand Seven Hundred Twenty Dollars ($185,720) as the purchase
price for the Pipeline Assets (the "Pipeline Purchase Price"). The Pipeline
Purchase Price shall be deemed to be a capital contribution by PGP to the
Pipeline Acquisition Entity. In the event PGP shall be required to pay any
amount directly to Industrial Gas Services, Inc., Sterling Petroleum Company,
Sterling Petroleum Operating company, Robert McCreery or to any other owner or
owners of the Pipeline Assets as a condition to the transfer of Marketable Title
to the Pipeline Assets, then in such event, such amount shall be deducted from
the amount owing to Infinity and payable hereunder.
The Pipeline Purchase Price shall be payable in accordance with the terms
set forth on the letters of intent attached hereto as Exhibit C.
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3.5 ADDITIONAL PAYMENTS BY PGP. In addition to the Pipeline Purchase
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Price, PGP shall pay the outstanding ad valorem taxes currently owing to
Huerfano County on the Pipeline Assets in the approximate amount of $100,000.
Furthermore, PGP shall pay an amount not to exceed $30,000 for repairs on the
pipeline and equipment thereon, so that the pipeline will be in working
condition. These payments for ad valorem taxes and repairs shall be deemed to
be a capital contribution by PGP to the Pipeline Acquisition Entity.
3.6 NOTICE OF DEFECTS. On or before July 1, 1997, PGP shall give notice
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to Infinity of any Defect (as hereafter defined) that it may discover in the
Pipeline Assets. Infinity shall have the option to cure such Defect before
Closing or terminate this Agreement, and the Earnest Money shall be returned to
PGP. In the event PGP fails to give such notice on or before such date, PGP
agrees that it has waived any Defect and will purchase the Pipeline Assets at
Closing.
ARTICLE IV
TITLE AND CONDITION OF ASSETS
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4.1 DEFINITIONS.
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4.1.1 MARKETABLE TITLE. As used herein, the term "Marketable Title"
shall mean such title, subject to and except for the Permitted Encumbrances
(as defined below), which: (i) entitles Infinity (or Infinity's assignor)
to receive from each Lease (and wells thereon) not less than an NRI of 81%
(proportionately reduced to the extent the Lease covers less than 100% of
the mineral acres under the land covered by it) of all Hydrocarbons
produced, saved and marketed from the lands covered by a Lease; and (ii) is
free and clear of encumbrances, liens and defects that would create
evidence of material impairment of use or loss of interest in the affected
Lease or Pipeline Assets.
4.1.2 PERMITTED ENCUMBRANCE. The term "Permitted Encumbrance," as
used herein shall include:
a) Lease Burdens if the net cumulative effect of such Lease
Burdens does not operate to reduce the NRI to less than 81%
(proportionately reduced to the extent such Lease covers less
than 100% of the mineral acres in the lands covered by it) for
such land covered by a Lease;
b) liens for taxes or assessments not yet due;
c) liens, if any, to be released at Closing; and
d) such Defects (as defined below) as PGP has waived.
4.1.3 DEFECT. The term "Defect" as used herein shall mean any
material encumbrance, encroachment, irregularity, contract right, defect,
condition in or objection to Infinity's (or Infinity's assignor's) title to
the Assets, excluding Permitted Encumbrances, that alone or in combination
with other defects renders Infinity (or PGP after Closing) with less than
Marketable Title to any Asset or which exposes PGP (in the event it takes
title to such Assets) to possible liability under any federal, state or
local environmental law,
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rule, regulation or order ("Environmental Laws") for money damages,
injunction against development or operation, or cost of clean-up for
existing environmental contamination on, in, or under such Asset.
4.2 ACCESS TO RECORDS. Prior to Closing, PGP will be provided access to
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the title information, production information, and other files and information
included therein pertaining to the Leases and Pipeline Assets, including,
without limitation, accounting files, production files, land files, lease files,
well files, division order files, contract files and marketing files (including
any and all records currently in the possession of Industrial Gas Services,
Inc., or any other third person).
4.3 TITLE EXAMINATION. In addition to access to the title information
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contained in the files of Infinity (or of Infinity's assignor), PGP and its
agents may conduct such further title examinations as it deems reasonably
prudent.
4.4 DEFECTIVE LEASES. Within twelve (12) months after the Closing date,
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PGP may give written notice of any material Defect its investigation has
revealed on any of the Leases to the extent PGP did not receive the full
interest in the minerals covered thereby or the full interest in such Leases
shown on Exhibit B. Upon such written notice Infinity shall either 1) at its
own expense cure such Defect within a reasonable time not to exceed 90 days; 2)
or repay to PGP that part of the purchase price paid by PGP (including any
purchase price PGP has paid for any Overriding Royalty Interest under Section
2.4) to Infinity attributable to the Lease subject to such Defect, and at the
request of Infinity, PGP shall quitclaim all further interest in such Lease
subject to the Defect. For purposes of this section a material Defect shall
mean a Defect which in the reasonable opinion of PGP requires payment to third
parties (without consideration to the cost of title opinions or preparation of
title curative documents) in any amount of at least $1,000 to cure such Defect.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PGP
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5.1 DUE ORGANIZATION AND VALID EXISTENCE. PGP is a validly existing
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limited partnership and is duly organized under the laws of Delaware.
5.2 POWER AND AUTHORITY TO ENTER INTO AGREEMENT; FURTHER ASSURANCES. PGP
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is fully authorized to enter into and perform this Agreement, and PGP is fully
authorized to purchase the Raton Basin Assets. The consummation of this
Agreement will not violate or conflict with any governmental order, judgment or
decree applicable to PGP. This Agreement has been duly executed and delivered on
behalf of PGP, and at the Closing, all documents and instruments required
hereunder to be executed and delivered by PGP will be duly authorized, executed
and delivered. PGP shall furnish at Closing the consents of all parties whose
consents are required under POP's partnership agreement; a resolution of POP's
partners and Petroglyph Energy, Inc.'s Board of Directors authorizing the
execution of this Agreement and all documents and instruments required
hereunder, and a certificate of Petroglyph Energy, Inc.'s Secretary identifying
Petroglyph Energy, Inc.'s officers.
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ARTICLE VI
REPRESENTATIONS, WARRANTIES AND COVENANTS OF INFINITY
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6.1 DUE ORGANIZATION AND VALID EXISTENCE. Infinity is a validly existing
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corporation and is duly organized under the laws of Kansas.
6.2 POWER AND AUTHORITY TO ENTER INTO AGREEMENT; FURTHER ASSURANCES.
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Infinity is fully authorized to enter into and perform this Agreement. The
consummation of this Agreement will not violate or conflict with any
governmental order, judgment or decree applicable to Infinity. This Agreement
has been duly executed and delivered on behalf of Infinity, and at the Closing,
all documents and instruments required hereunder to be executed and delivered by
Infinity will be duly authorized, executed and delivered. Infinity shall
furnish at Closing a certificate of Infinity's Secretary identifying Infinity's
officers.
6.3 CONSENTS. Infinity has obtained, as of Closing, all necessary
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consents and authorizations to the transfer of the Raton Basin Assets and
Pipeline Assets (collectively the "Assets") and attendant rights to PGP or the
Pipeline Acquisition Entity, except for approvals required to be obtained from
governmental entities who are lessors under Leases affected by this Agreement,
or who administer such Leases on behalf of such lessors, which are customarily
obtained post-closing and which the parties hereto have no reason to believe
cannot be obtained in the ordinary course of business.
6.4 COMPLIANCE WITH GOVERNMENTAL REGULATIONS. To the best of Infinity's
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actual knowledge and belief up to the date of Closing, the operation of the
Leases and Pipeline Assets has been in conformity with all relevant state, local
and federal laws, regulations, ordinances, administrative rulings and
regulations, as well as those promulgated by any administrative or regulatory
agencies, commissions or bodies of such governmental authorities. To the best of
Infinity's actual knowledge and belief the Leases and Pipeline Assets have been
operated in compliance with all applicable Environmental Laws and to Infinity's
actual knowledge, no condition exists at the Effective Date that would violate
any Environmental Laws or subject any lessee or operator of the Leases or
Pipeline Assets to any damages, or any other liabilities, penalties, injunctive
relief or remedial or cleanup costs under any such Environmental Laws or that
requires, or is likely to require, cleanup, removal, remedial action or other
response by any lessee or operator to any such Environmental Laws. Infinity has
not investigated and has no knowledge of any oral or written notification of a
release of hazardous material, and Infinity has not investigated and has no
actual knowledge that the Leases or Pipeline Assets, or any part thereof, are
listed or proposed for listing on the National Priorities List promulgated
pursuant to CERCLA, or on any similar state list of sites requiring
investigation or cleanup.
6.5 OPERATIONS. To the best of Infinity's actual knowledge, the ownership
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and operation of the Assets, to the extent that nonconformance could adversely
affect the ownership, operation, value or use thereof after the Effective Date,
has been in conformity, in all material respects, with all applicable laws, and
all applicable rules, regulations and orders of all governmental agencies having
jurisdiction, relating to the Assets.
6.6 ACCURACY OF INFORMATION. Infinity has provided PGP access to lease
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files, abstracts and title opinions, production records, maintenance records,
specification records, accounting
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records, surveys, design drawings and maps, and other files, documents and
records of which it has knowledge or to which it has access relating to the
Assets (herein called the "Files"). To the best of Infinity's knowledge, all
information contained in the Files (herein called the "Information") is
accurate, true and correct in all material respects as acquired by Infinity;
provided, Infinity does not warrant the accuracy of information or opinions
given to it by third parties. To the best of Infinity's knowledge, there have
been no changes affecting the Information since the date furnished which would
make the Information inaccurate, untrue or incomplete in any material respect.
6.7 SHARED KNOWLEDGE. In regard to Sections 6.4, 6.5, and 6:6, Infinity
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has not sought legal counsel regarding the Environmental Laws referenced in
these Sections, and Infinity's statements herein are based upon its lay
understanding of the applicable laws. Infinity and PGP have jointly inspected
the Assets. Infinity's actual knowledge of the Assets is based upon this
inspection and other information made available to PGP, and, therefore, the
knowledge of Infinity is equivalent to that of PGP.
6.8 FEDERAL UNIT DESIGNATION. Infinity has no knowledge of any impediment
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to obtaining a federal unit designation in at least eighty-five (85%) of the
Leases.
6.9 DISCLAIMER OF WARRANTIES. Infinity sells and transfers the Pipeline
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Assets to PGP without any express, statutory or implied warranty or
representation of any kind, including warranties relating to (i) the condition
or merchantability of the property or (ii) the fitness of the property for a
particular purpose. After Closing PGP accepts the Pipeline Assets "as is,"
"where is," and "with all faults."
ARTICLE VII
CONDITIONS AND RIGHT TO TERMINATE
7.1 CONDITIONS PRECEDENT. The parties' obligations hereunder are subject
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to the following:
a) All representations and warranties of the parties shall be true and
correct as of the time of Closing;
b) Marketable Title to 100% of the Pipeline Assets shall be delivered to
the Pipeline Acquisition Entity at Closing; or in the alternative,
Marketable Title to not less than 70% of the Pipeline Assets shall be
delivered to the Pipeline Acquisition Entity at Closing and PGP shall
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be furnished with an opinion of Colorado counsel opining that
ownership of less than 100% of the Pipeline Assets will allow for the
Pipeline Acquisition Entity's use and operation of the Pipeline Assets
and that the co-owners to the Pipeline Assets will not have the legal
right to prevent the Pipeline Acquisition Entity's right to use the
Pipeline Assets to transport gas from the Leases.
c) Receipt of any and all required consents, waivers, and approvals from
third parties including any governmental, or regulatory entities, if
any, to the transfers, conveyances, and assignments necessary to
complete the transactions contemplated under this Agreement, except
for approvals required to be obtained from governmental entities who
are lessors under Leases affected by this Agreement,
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which are customarily obtained after closing and which the parties
hereto have no reason to believe cannot be obtained in the ordinary
course of business.
d) Approval of the transactions contemplated by this Agreement by all
parties whose approval is necessary under POP's partnership agreement;
e) Leases covering at least 80% of the gross acreage (approximately
80,000 acres) described on Exhibit B shall be conveyed and assigned to
PGP at Closing;
f) As of Closing, Leases covering at least eighty-five percent (85%) of
the acreage described on Exhibit B shall by their terms allow for
their inclusion in a federal unit without any further consents or
approvals, and no more than ten percent (10%) of such acreage shall be
subject to any existing unit designation or agreement or pending
application therefor already filed with any regulatory agency with
jurisdiction at the time of Closing;
g) At Closing, PGP and Infinity shall each deliver to the other
appropriate opinion of counsel letters evidencing the due
authorization and execution by such party of the Agreement and
attendant documents and instruments and the enforceability thereof.
7.2 RIGHT TO TERMINATE AGREEMENT. If PGP or Infinity has not performed
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all those acts necessary for all of the conditions precedent to have occurred
prior to Closing, then PGP or Infinity, respectively, shall have the
unconditional right to terminate this Agreement, in which case it shall be of no
force and effect as among the undersigned parties.
7.3 CLOSING. Time is of the essence of this Agreement, and Closing shall
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occur as soon as all conditions precedent have been met, at the offices of
Morris, Laing, Evans, Brock & Kennedy, Chartered in Wichita, Kansas, at a time
mutually agreed on by the parties, but in no event later than the close of
business on July 15, 1997; provided, that Closing may be extended to a later
date by the mutual agreement of both parties. If Closing does not occur by such
date, either party shall have the right, but not the obligation, to cancel this
Agreement without penalty. The following shall occur at Closing:
a) PGP shall pay to Infinity the purchase price (subject to any credit
for payments directly to third parties) as set forth in Section 2.5
above;
b) Infinity shall execute and deliver to PGP the assignments and
conveyances of the Assets, warranting title by, through, and under
Infinity (or the current record owner), subject to the Overriding
Royalty Interest (which reserved overriding royalty shall be in that
form as shown on Exhibit E); or in the alternative, Infinity shall
cause the current record-title owners at the time of Closing to
execute and deliver to PGP the assignments and conveyances of the
Assets, warranting by, through, and under such current owners, subject
to an assignment from PGP to Indemnity of the Overriding Royalty
Interest in the form of Exhibit E;
c) the parties shall execute and deliver to PGP a notice of the option to
purchase the Overriding Royalty Interest and of POP's right to lease
minerals acquired in the
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area of mutual interest (as discussed below in Section 8.4) for
recordation in the public land records;
d) The parties shall deliver to each other the opinions of counsel
required herein;
e) The parties shall execute and deliver such other instruments as are
necessary to give effect to this Agreement and to discharge their
obligations hereunder.
7.4 DISPOSITION OF EARNEST MONEY. In the event either party is excused
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from performing its obligations or terminates this Agreement under the
provisions of this Article VI, then PGP shall be entitled to a return of its
Earnest Money. Otherwise, in the event PGP fails to perform at Closing, the
Earnest Money shall be paid over to Infinity as liquidated damages and as its
sole remedy for breach of this Agreement by PGP.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
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8.1 SINGLE TRANSACTION. Acquisition of the Raton Basin Assets by PGP and
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the Pipeline Assets by the Pipeline Acquisition Entity shall be considered part
of the same transaction, and the acquisition of one is contingent upon the
acquisition of the other.
8.2 DIRECT ASSIGNMENTS/CONVEYANCES FROM OWNERS. Inasmuch as Infinity is
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not the current owner of the Assets, in closing this transaction Infinity will
use its best efforts to obtain assignments and conveyances of the Assets from
the current owners of the Assets directly to PGP or the Pipeline Acquisition
Entity, as the case may be.
8.3 MODIFICATIONS AND AMENDMENTS. Any changes in the provisions of this
-----------------------------
Agreement made subsequent to this execution shall be made by formal written and
executed amendments. It is stipulated that oral modifications and amendments
hereto shall not be binding, and that no evidence of oral amendments or
modifications shall be admissible during arbitration or adjudication.
8.4 AREA OF MUTUAL INTEREST. In the event of Closing, thereafter the
-----------------------
parties agree that in the event either party or an affiliate of either party
(the "Acquiring Party") shall acquire any oil and gas interests, whether
producing or nonproducing, farmouts or other similar contracts which affect or
pertain to lands and minerals, located within Huerfano County, Colorado (the
"Interests"), it shall notify the other party (the "Nonacquiring Party") of such
acquisition. At the time of giving the notice, the Acquiring Party shall provide
access to copies of all instruments of acquisition, including without
limitation, copies of leases, abstracts, agreements, title memos, assignments,
subleases, farmouts and other contracts affecting the Interests in possession of
the Acquiring Party. For thirty days (30) days after receipt of the notice of
acquisition, Nonacquiring Party shall have the right to acquire its
Proportionate Interest (as defined below) in the acquisition on the same terms
and conditions on which the Acquiring Party has acquired or has the right to
acquire such Interest by notifying the Acquiring Party of its desire to share in
the acquisition, and paying its Proportionate Share of the cost of acquisition,
or in the case of a farmout or other similar agreement requiring certain
performance such as drilling of a test well, agreeing to be liable for its
Proportionate Share of the cost of any performance required. For purposes of
this Section,
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the term Proportionate share shall mean:
a) when it pertains to leasehold working interests, ninety percent (90%)
in the case of PGP and ten percent (10%) in the case of Infinity; and
b) when it pertains to mineral interests and overriding royalty
interests, fifty percent (50%) in the case of PGP and fifty percent
(50%) in the case of Infinity.
Any mineral interests in Huerfano County acquired by either party shall be
subject to POP's right to acquire an oil and gas lease thereon, which lease
shall reserve to the mineral owners a royalty interest of 1/8th of production.
Notwithstanding anything to the contrary in this Section 8.4, the Coltex
Overrides shall not be subject to the terms of this Section 8.4.
8.5 FEDERAL UNIT DESIGNATION. The parties shall each use their reasonable
-------------------------
best efforts to effect the formation of a federal exploratory unit (with the
assistance of Unit Source, a Denver based company that specializes in the
formation of federal units) covering at least half of the acreage covered by the
Leases to be acquired at Closing.
8.6 GOVERNING LAWS. The laws of the State of Colorado shall govern this
---------------
Agreement in proceedings in court (law and/or equity) and proceedings in
arbitration.
8.7 WAIVER. Any party's failure or delay in protesting, taking legal
-------
action, or demanding arbitration upon the other party's breach is no waiver of
that cause of action; unless that party's delay to take action exceeds a
reasonable time under the circumstances, exceeds a time-frame limitation set
forth elsewhere herein, or exceeds the statute of limitation. Any party's
failure or delay in protesting or taking legal and/or equitable action, or
demanding arbitration upon the other party's breach is not to be considered as
being a waiver of that party's cause of action for any subsequent breach.
8.8 TITLES OF ARTICLES' SECTIONS AND SUBSECTIONS. The titles and
--------------------------------------------
subtitles of Articles, Section and Subsections of thus Agreement are for
convenience only; are not part of the terms of this Agreement; are without legal
or contractual significance; and, as such, shall not govern the terms of this
Agreement or in any way influence the interpretation of this Agreement.
8.9 NOTICES. Any and all written notices hereunder shall be delivered in
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person, via facsimile transmission (fax) or First Class U.S. Mail, postage
prepaid, or via private overnight courier service to the following individuals
at the following address:
INFINITY: INFINITY OIL & GAS, INC.
Attn: Tim Brittan
730 17th Street, Ste. 250
Denver, CO 80202 FAX: (303) 825-3342
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PGP: PETROGLYPH ENERGY, INC.
Attn: Robert C. Murdock
6209 North Highway 61
P. O. Box 1839
Hutchinson, KS 67504-1839 FAX: (316) 665-8577
Such agents and/or addresses may be unilaterally altered by either party upon
providing written notice thereof to the other party.
8.10 DUPLICATE ORIGINALS. This Agreement shall be executed in duplicate
--------------------
originals, with Infinity and PGP each receiving an original.
8.11 FURTHER ASSURANCES. The parties hereby agree to execute and to cause
-------------------
third parties to execute any and all documents, leases, affidavits, releases,
mortgage releases, transfers, change of operator forms, letters in lieu of
transfer orders, assignments, bills of sale, titles, notes or the like in
fulfillment of obligations set forth herein or in furtherance of the intent
hereof.
8.12 AGREEMENT SUBJECT TO LAWS. If any provision of this Agreement, or the
--------------------------
application thereof to any party or any circumstance, shall be found to be
contrary to or inconsistent with or unenforceable under any applicable law,
rule, regulation or order, such applicable law, rule, regulation or order shall
control and this Agreement shall be deemed modified accordingly; but the
remainder of this Agreement, and the application of such provisions to the other
parties or circumstances, shall not be affected thereby; and in all other
respects, the Agreement shall continue in full force and effect.
8.13 ASSIGNMENT. This Agreement may not be assigned by the parties without
-----------
the written consent of the other party, which consent will not be unreasonably
withheld. This Agreement shall be binding upon the parties hereto and their
respective successors and assigns.
8.14 INCIDENTAL COSTS. Each party to this Agreement shall bear its
----------------
respective expenses incurred in connection with the Closing of this transaction,
including its own consultant's and broker's fee, attorneys' fees, accountants'
fees and other similar costs and expenses.
8.15 SURVIVAL. Except as otherwise noted herein, the representations and
--------
warranties of the parties herein and all agreements herein shall survive the
Closing and delivery of any assignment, conveyance, or bill of sale, or other
instrument delivered at Closing.
8.16 FINAL AGREEMENT. This Agreement, together with other written
---------------
agreements executed at Closing, constitute the final agreement of the parties,
and supersede any and all prior agreements among the parties.
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IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the 15th day of May, 1997.
INFINITY OIL & GAS, INC.
By: /s/ Stephen D. Reynolds
------------------------------
Name: Stephen D. Reynolds
-------------------------
Title: Vice President
------------------------
"Infinity"
PETROGLYPH GAS PARTNERS, L. P.
By: PETROGLYPH ENERGY, INC.,
its general partner
By: /s/ Robert C. Murdock
------------------------------
Name: Robert C. Murdock
-------------------------
Title: President
------------------------
"PGP"
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Exhibit A
Infinity
OIL & GAS, INC.
- --------------------------------------------------------------------------------
April 3, 1997
Mr. James B. (Trey) Shepherd
Burlington Resources Oil & Gas Company
3300 N. "A" Street
Building 6
Midland, Texas 79719-1810
Re: Offer to Purchase
51536.4 Net Mineral Acre Leasehold
Raton Basin
Huerfano County, Colorado
Dear Trey Shepherd,
Pursuant to your ongoing discussions with Tim Brittan regarding the
Burlington Resources Oil & Gas Company (Burlington) leasehold interests
captioned above, please find the following offer to purchase all Burlington's
interests in and to their oil & gas leases and associated agreements covering
those lands shown in the caption above, (hereinafter called "the Properties").
Infinity Oil & Gas Inc. (Infinity) offers to purchase one hundred percent
(100%) of Burlington's interest in and to the Properties for Three Hundred Fifty
Thousand Dollars ($350,000.00). The effective date of an Assignment and Bill of
Sale would be May 1, 1997.
Infinity makes this offer contingent upon due diligence of the Properties.
The foregoing offer is in effect until April 14, 1997.
If the following offer is agreeable to Burlington, please signify by
signing below in the space provided.
Sincerely,
/s/ Stephen D. Reynolds
Stephen D. Reynolds
Vice President-Land
Burlington Resources Oil & Gas Company agrees and accepts the terms of the
foregoing Offer to Purchase the Properties.
BURLINGTON RESOURCES OIL & GAS COMPANY
By: /s/ James B. (Trey) Shepherd III
-------------------------------------
Land Advisor
Exhibit B
Schedule listing the names of lessors, effective dates, expiration dates,
gross and net acreage interests and legal descriptions of certain oil and gas
leases in the Raton Basin North Prospect, Huerfano County, Colorado.
Exhibit C
INFINITY
OIL & GAS, INC.
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April 4, 1997
Bob Oxford
Industrial Gas Services, Inc.
4501 Wadsworth Blvd.
Wheat Ridge, Colorado 80033
Re: Offer to Purchase
Spanish Peaks Gathering System
Raton Basin
Huerfano County, Colorado
Dear Bob Oxford
Pursuant to the ongoing discussions between Tim Brittan and yourself
regarding the working interests of Industrial Gas Services, Inc. (IGS) in the
Spanish Peaks Gathering System (SPGS) captioned above, please find the following
offer to purchase all IGS interests in and to said SPGS as well as any and all
associated agreements covering those lands lying within the captioned right-of-
way area above, (hereinafter called "the Properties").
Infinity Oil & Gas, Inc. (Infinity) offers to purchase one hundred percent
(100%) of IGS's interest in and to the SPGS, (illustrated by the enclosed map)
and all associated contracts and agreements thereto, net of Huerfano County tax
debts, for Fifty Five Thousand Seven Hundred Twenty Dollars ($55,720.00). The
effective date of an Assignment and Bill of sale would be June 1, 1997. Payment
of the $55,720.00 shall be paid in three annual installments to wit:
. Upon closing, Infinity shall transfer to IGS $25,000.00.
. On or before the first anniversary of the effective date shown
above, Infinity shall transfer to IGS $20,000.00.
. On or before the second anniversary of the effective date shown
above, Infinity shall transfer to IGS the remaining balance of
$10,720.00.
Infinity shall accept and take assignment to those well bores, plugging
liabilities and any remaining contractual obligations or rights of IGS with
respect to the Goemmer wells in Huerfano County, Colorado.
Infinity makes this offer contingent upon due diligence of the Properties.
The foregoing offer is in effect until April 14, 1997.
If the following offer is agreeable to IGS, please signify by signing below
in the space provided.
Sincerely,
Stephen D. Reynolds
Vice President-Land
Industrial Gas Services, Inc. agrees and accepts the terms of the foregoing
Offer to Purchase the SPGS and Properties.
INDUSTRIAL GAS SERVICES, INC.
By:
-------------------------------------
Bob Oxford
INFINITY
OIL & GAS, INC.
- --------------------------------------------------------------------------------
April 4, 1997
Robert McCreery
P.O. Box 1692
Estes Park, Colorado 80517
Re: Offer to Purchase
Spanish Peaks Gathering System
Raton Basin
Huerfano County, Colorado
Dear Robert McCreery,
Pursuant to the ongoing discussions between Tim Brittan and Bob Oxford
regarding the working interests of Robert McCreery, Sterling Petroleum Company
and/or Sterling Petroleum Operating Company (McCreery) in the Spanish Peaks
Gathering System (SPGS) captioned above, please find the following offer to
purchase all McCreery interests in and to said SPGS as well as any and all
associated agreements covering those lands lying within the captioned right-of-
way area above, (hereinafter called "the Properties").
Infinity Oil & Gas, Inc. (Infinity) offers to purchase one hundred percent
(100%) of McCreery's interest in and to the SPGS, (illustrated by the enclosed
map) and all associated contracts and agreements thereto, net of Huerfano County
tax debts, for One Hundred Thirty Thousand Dollars ($130,000.00). The effective
date of an Assignment and Bill of sale would be June 1, 1997. Payment of the
$130,000.00 shall be paid in three annual installments to wit:
. Upon closing, Infinity shall transfer to McCreery $50,000.00.
. On or before the first anniversary of the effective date shown
above, Infinity shall transfer to McCreery $50,000.00.
. On or before the second anniversary of the effective date shown
above, Infinity shall transfer to McCreery the remaining balance of
$30,000.00.
Infinity shall accept and take assignment to those well bores, plugging
liabilities and any remaining contractual obligations or rights of McCreery with
respect to the Goemmer wells in Huerfano County, Colorado.
Infinity makes this offer contingent upon due diligence of the Properties.
The foregoing offer is in effect until April 14, 1997.
If the following offer is agreeable to McCreery, please signify by signing
below in the space provided.
Sincerely,
Stephen D. Reynolds
Vice President-Land
McCreery agrees and accepts the terms of the foregoing Offer to Purchase the
SPGS and Properties.
STERLING PETROLEUM COMPANY,
STERLING PETROLEUM OPERATING COMPANY,
ROBERT McCREERY
By:
-------------------------------------
Robert McCreery
Exhibit D
Map indicating the location of the Spanish Peaks Gathering System natural
gas pipeline in Huerfano County, Colorado, including the locations of well
sites, the plant site and delivery facilities.
Schematic diagrams of (1) as-built plant site, (2) as-built delivery site
and (3) as-built tie-in of Spanish Peaks Gathering System to Walsenburg Pipe
Line.