Exhibit 2.1
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT is made as of this 5th day of June, 2002,
by and between CROWN ENERGY DRILLING AND PRODUCTION FUND 2001-1 LIMITED
PARTNERSHIP ("Seller"), and STRATFORD AMERICAN ENERGY CORPORATION ("Buyer").
Buyer desires to purchase and Seller desires to sell Fifty Percent (50%) of
Seller's right, title and interest in and to the Assets defined herein pursuant
to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements contained herein,
the parties hereby agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 PURCHASE AND SALE OF ASSETS. Subject to the terms and conditions of
this Agreement, Seller shall sell and Buyer shall purchase, as of the Effective
Date, Fifty Percent (50%) of Seller's right, title and interest in and to the
following (the "Assets"):
(a) The oil, gas and other mineral leasehold interests, royalty
interests, overriding royalty interests, mineral interests, and fee interests
pertaining to the Wellbores of the Wells and/or Units described on Exhibit "A"
attached hereto and made a part hereof, and the right, title and interest in the
oil, gas and other mineral leasehold, royalty, reversionary, preferential
rights, net profits and similar interests held by production by the Wells
described on Exhibit "A", less and except any existing Wellbores located on the
leases or property not listed on Exhibit "A";
(b) The equipment and facilities located on the lands described in
Exhibit "A" or used directly in the operation of the interests described in
Exhibit "A", including, but not limited to, pumps, well equipment (surface and
subsurface), gas plants, saltwater disposal wells, lines and facilities, sulfur
recovery facilities, compressors, compressor stations, dehydration, treating
facilities, pipeline gathering lines, flow lines, transportation lines
(including long lines and laterals), valves, meters, separators, tanks, tank
batteries, and other fixtures;
(c) Oil, condensate, natural gas liquids produced after the Effective
Date, inventory, including "line fill" and inventory below the pipeline
connection in tanks, attributable to the interests described in Exhibit "A";
(d) Personal property located on or used in connection with the
development, operation, or maintenance of the properties described on Exhibit
"A"; including, but not limited to, cores, cuttings, geophysical and other
geologic property, supplies, and equipment;
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(e) All contracts and agreements concerning the interests described on
Exhibit "A", including but not limited to, unit agreements, pooling agreements,
areas of mutual interest, farm-out agreements, farm-in agreements, saltwater
disposal agreements, water injection agreements, line well injection agreements,
road use agreements, drilling contracts, operating agreements, well service
contracts, production sales contracts, gas contracts, gas balancing agreements,
storage or warehouse agreements, supplier contracts, service contracts,
insurance contracts, construction agreements, division orders and transfer
orders, only insofar as such relate to the interests and properties described in
Exhibit "A";
(f) All surface use agreements, easements, rights of way, licenses,
authorizations, permits, and similar rights and interests applicable to, or used
or useful in connection with, any or all of the interests and properties
described in Exhibit "A"; and
(g) All lease, land, well, production, engineering, geological,
geophysical, litigation, accounting, title, division order and tax files, copies
of relevant tax (other than income tax) files, emergency response and
environmental compliance plans, abstracts, title opinions, logs, maps and all
other books, files, records and data of Seller insofar as they relate to the
Assets described in Exhibit "A".
1.2 PURCHASE PRICE. The aggregate purchase price for the Assets shall be
$649,711.50 ("Purchase Price), which shall be subject to adjustments as provided
for herein.
1.3 EFFECTIVE DATE. Only in the event Closing occurs, the conveyance of the
Assets shall be effective as of April 1, 2002 at 7:00 a.m., local time where the
Assets are located.
ARTICLE II
REPRESENTATIONS AND WARRANTIES BY SELLER
Seller represents and warrants as to its interest in the Assets that:
1.1 ORGANIZATION, EXISTENCE AND AUTHORIZATION. Seller represents and
warrants that it has all power and authority and all authorizations, consents
and approvals necessary to execute, deliver and perform this Agreement and has
been duly authorized by all necessary action. This Agreement has been duly
executed and delivered by, and constitutes a valid and binding agreement of the
Seller enforceable in accordance with its terms.
1.2 TITLE WARRANTIES. Seller represents and warrants as to its interest in
the Assets that:
(a) TITLE. Except as specifically disclosed herein, Seller warrants
that its ownership of its interest in the Assets consists of good and marketable
title which at Closing will be free and clear of all Title Defects. Seller and
its successors and assigns shall warrant and forever defend all and singular the
Assets unto Buyer, its successors and assigns, against every person whomsoever
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lawfully claiming the Assets or any part thereof, by, through or under Seller
but not otherwise. However, all of Seller's interest in equipment and personal
property are to be sold AS IS AND WHERE IS, AND WITHOUT WARRANTY OF
MERCHANTABILITY, CONDITION OR FITNESS FOR A PARTICULAR PURPOSE, EITHER EXPRESS
OR IMPLIED. Seller acknowledges that it has or will prior to Closing, assigned a
One Percent (1%) Overriding Royalty Interest, being one percent (1%) of Seller's
total interest prior to this sale to Buyer, in the wellbores and leaseholds
shown on Exhibit "A". Buyer and Seller shall equally bear this Overriding
Royalty Interest burden.
(b) TITLE DEFECTS. The term "Title Defect", as used herein, shall mean
any material encumbrance, irregularity, defect in, or objection to Seller's
title to the Assets, which, based upon merchantable title, alone or in
combination with other defects, renders Seller's Title to the Assets
unmarketable, and which would unreasonably interfere with Buyer's enjoyment of
the Assets.
(c) PERCENTAGE INTERESTS. Seller shall assign to Buyer fifty percent
(50%) of its undivided interest in the Assets and Seller represents and warrants
that Exhibit "A" shows one hundred percent (100%) of the undivided interests
that Seller purchased from Aspen Energy Group, Inc. Seller has or will prior to
Closing convey one percent (1%) of this interest, proportionately reduced, to
E&K Oil Corporation as an overriding royalty interest which will be borne
equally by Buyer and Seller after Closing. The remaining net revenue and working
interests which are shown on Exhibit "B" are the interests that Buyer is
purchasing in the wellbores and leaseholds shown on Exhibit "A" and Seller
represents that such interest to be assigned to Buyer will not be less than the
net revenue interest and not greater than the working interest in the Assets
than those undivided percentage interests set forth in Exhibit "B".
(d) ROYALTIES. All royalties, rentals, and other payments due under
all leases relating to the Assets have been properly paid.
(e) THIRD PARTY WAIVERS. All requisite third party consents to assign
Seller's interests or third party waivers to the assignment, including any
preferential rights of purchase and waivers thereto, have been secured or will
be secured.
(f) LITIGATION, PROCEEDINGS AND CLAIMS. Except as set forth on the
attached schedule to this Agreement (the "Disclosure Schedule"), attached hereto
and made a part hereof, there are no actions, suits or arbitration proceedings
pending or threatened before any court or governmental agency, affecting the
Assets or that could result in impairment or loss of Seller's title to the
Assets or would otherwise affect the Assets.
1.3 ECONOMIC WARRANTIES. Seller represents and warrants as to its interest
in the Assets that:
(a) MORTGAGES AND OTHER INSTRUMENTS. Neither the performance of this
Agreement, nor the consummation of the transactions contemplated by this
Agreement, will cause a breach of any of the terms and conditions, or will
result in the creation or imposition of any lien upon any of the Assets, or the
production of oil, gas or other minerals from the Assets pursuant to the terms
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of any agreement or other instrument to which Seller is a party or by which it
is bound. Any indenture, mortgage, deed of trust, agreement or other instrument
which may create any such encumbrance shall be listed on the Disclosure Schedule
and shall be released to Buyer's satisfaction prior to Closing.
(b) LIENS AND ENCUMBRANCES. The Assets will be transferred free and
clear of all mortgages, security interests, liens and encumbrances, except liens
for taxes not delinquent, utility easements and encumbrances or restrictions
which do not affect materially and adversely the ownership or use of the
properties for their intended uses or for the manner in which used by Seller
prior to Closing. All mortgages, security interests, liens and encumbrances
shall be released to Buyer's satisfaction prior to or at Closing.
(c) CONTRACTS AND AGREEMENTS. Except as set forth on the Disclosure
Schedule or otherwise identified pursuant to this Agreement, there are no
contracts or agreements to which Seller is a party which materially and
adversely affect the value or marketability of Seller's interest in the Assets.
(d) PREPAYMENT OR RELATED ARRANGEMENTS. Seller's interest in the
Assets are not subject to any arrangement or obligation under which Buyer will
be obligated, by virtue of a prepayment arrangement, a "take or pay"
arrangement, a gas imbalance, a production payment, or any other arrangement, to
deliver hydrocarbons from the Assets at some future time without then or
thereafter receiving full payment therefore, or to make payment at some future
time for hydrocarbons already produced and sold from the Assets.
(e) SALES CONTRACTS. Except as set forth in the Disclosure Schedule,
there are no contracts or agreements for the sale of oil or gas from the Assets
for a term in excess of one year to which Seller is a party, and no person has
any call upon, option to purchase or similar rights with respect to the Assets
or the production therefrom, except as described in Article 4.1 of this
Agreement.
(f) BROKERS. Seller has incurred a commission fee and has tendered a
statement to Buyer in the amount of $33,753.32, which will be payable by Buyer
at Closing.
(g) TAXES. Seller has paid in full any and all taxes, assessments, or
levies of whatever kind by any governmental authority or agency, assessed
against the Assets, and has properly completed and filed in a timely manner all
material reports or returns required to be filed with respect to the Assets with
any federal, state, or local governmental body or authority or, if not so timely
filed, all appropriate penalties with respect to same have been assessed and
paid.
(h) TAX PARTNERSHIP. To the best of Seller's knowledge, no portion of
the properties: (1) have been contributed to an area currently covered by a tax
partnership; (2) are subject to any form of agreement (whether formal or
informal, written or oral) deemed by any state or federal tax statute, rule or
regulation to be or to have created a tax partnership.
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(i) PURCHASE PRICE. Seller represents that the current Purchase Price
is fifty percent (50%) of what Seller paid for the Assets, unless otherwise
disclosed.
(j) GAS IMBALANCES. Seller represents that, too the best of Seller's
knowledge, the Assets are not subject to any substantial gas imbalances,
"substantial" being defined as the net cumulative effect of any existing gas
imbalances as of the Effective Date shall not be more than two percent (2%) of
the aggregate Purchase Price. To the extent that Seller has any recourse or
rights against any other parties as to gas imbalances, Seller hereby conveys and
grants to Buyer the same.
1.4 COMPLIANCE WITH LAWS AND AGREEMENTS. Seller is in compliance with all
permits, contracts and agreements relating to the Assets. Seller is in
compliance with all laws, rules and regulations of Federal, State or local
entities which have jurisdiction over Seller or the Assets to be sold hereunder,
including but not limited to all environmental regulations and laws.
ARTICLE III
REPRESENTATIONS AND WARRANTIES BY BUYER
Buyer represents and warrants that:
1.1 ORGANIZATION, EXISTENCE AND AUTHORIZATION. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of Arizona. The
execution, delivery and performance by Buyer of this Agreement is within its
power, has been duly authorized by all necessary action and does not contravene
or constitute a default or require the further consent of any Person under any
provision of applicable law or regulation or of its bylaws or of any agreement,
judgment, injunction, order, decree or other instrument binding upon Buyer. The
execution, delivery and performance by Buyer of this Agreement requires no
consent or approval of, or filing with, any governmental body, agency or
official. This Agreement has been duly executed by, and constitutes a valid and
binding agreement of Buyer, enforceable in accordance with its terms.
1.2 INSPECTION. Buyer has had the opportunity to inspect the Assets and
satisfy itself as to the condition of the Assets.
ARTICLE IV
CONDUCT OF BUSINESS PRIOR TO CLOSING
1.1 RECORDS AND OPINIONS. Seller will use its best efforts to assist Buyer
in obtaining all title opinions, lease files, land files, well files, contracts,
division order files and decks, abstracts, engineering and geological data and
information, reports, maps, logs, well records and any and all other documents,
data and information relating to the Assets. Seller will contact at Buyer's
request the operators of the Wells to arrange access of Buyer or Buyer's
representatives to such operator's files and records and access to the property.
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1.2 CASUALTY LOSSES. If prior to the Closing Date any facility or equipment
included within the Assets is damaged or destroyed by fire, flood, storm or
other casualty (hereinafter called "Casualty Loss"), Seller shall immediately
notify Buyer and the Purchase Price shall be reduced by an amount estimated by
Buyer and as agreed to by Seller, to be equal to the repair or replacements
costs of that Asset. Any insurance proceeds payable to Seller with respect to
the Casualty Loss shall be retained by Seller. In the event Seller and Buyer are
unable to agree upon the value of the estimated damage, then either Seller or
Buyer shall have the right to terminate this Agreement.
1.3 OPERATION OF THE ASSETS. From and after the Effective Date and prior to
the Closing Date, Seller, as agent for Buyer, shall maintain and operate the
Assets in a good and workmanlike manner, shall maintain insurance with respect
to the Assets, shall pay or cause to be paid all costs and expenses incurred in
connection therewith, shall keep all leases and all agreements relating to the
Assets. Seller further agrees that:
(a) Seller shall promptly notify Buyer of any suit, action or other
proceeding affecting the Assets that arises prior to the Closing Date.
(b) Seller shall promptly notify Buyer of any development,
maintenance, operational, or other matter that might adversely affect the value
of the Assets with respect to which Seller becomes aware prior to the Closing
Date.
(c) Seller shall not convey or dispose of any material part of the
Assets other than oil, gas and other liquid products produced from the Assets in
the normal and ordinary course of business.
1.4 INSPECTION. Buyer has had the opportunity to enter upon the Assets at
its sole cost and risk for the purpose of inspection, and has had the
opportunity to satisfy itself as to the condition of the wells and equipment
operated by Seller and included within the Assets as defined in Section 2.1.
ARTICLE V
PURCHASE PRICE ADJUSTMENT
1.1 LOSS UNDER PURCHASE OPTIONS. If any third party exercises a
preferential purchase option of Seller's interests under an existing operating
or other agreement, the subject property shall be deleted from the Assets, and
the purchase price shall be reduced by an appropriate amount. If elections to
purchase are not received by Seller from third parties until after Closing,
Seller shall refund Buyer the value of Seller's interests in the purchased
property and Buyer shall reassign the property to Seller by quit claim
assignment. The Buyer and Seller shall agree upon the appropriate amount on a
well-by-well basis.
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1.2 OTHER LOSSES. On or before Closing, Buyer shall deliver to Seller
written notice of any matters which either constitute a Title Defect to the
Assets or which cause a breach of the Seller's representations and warranties as
set forth in Article II herein. Seller, at Seller's sole cost and expense, may
attempt to cure such matter. In the event Seller is unable to cure such matters,
or in the event of a Casualty Loss as set forth in Article IV herein, Buyer may
exclude the affected portion of the Assets from the Assets to be purchased and
sold hereunder, and the Purchase Price shall be adjusted downward, or at Buyer's
option the affected portion of the Asset may be included at a reduced value and
the Purchase Price adjusted downward. The amount of any downward adjustments
shall be determined based on the mutual agreement of the parties. In the event
the net revenue interest to be conveyed to Buyer in a property described in
Exhibit "A" is more or less than the interest reflected in Exhibit "B", the
Purchase Price shall be adjusted up or down as the parties agree so long as
there is no change in the ratio between the net revenue interest and the working
interest for the property as reflected in Exhibit "B" unless Buyer waives such
variance in ratio. In the event there is a ratio change, Buyer may, at its
option, exclude the affected property or the parties may negotiate a Purchase
Price adjustment.
ARTICLE VI
PROCEEDS, ROYALTY OBLIGATIONS, EXPENSES AND TAXES
1.1 ACCOUNTING FOR PRODUCTION AND PROCEEDS OF PRODUCTION. Ownership of
Fifty Percent (50%) of the production from Seller's Interests in the Assets
shall pass from Seller to Buyer as of the Effective Date (except that Seller
shall retain ownership and be entitled to all proceeds from the sale of any oil
above the pipeline connections in tanks attributable to the Assets as of the
Effective Date). If Seller should at any time subsequent to the Closing Date
receive from any purchaser of production any proceeds attributable to any sale
of production from the Assets occurring after the Effective Date (other than as
provided in the parenthetical clause of the preceding sentence), Seller shall
promptly remit all such proceeds to Buyer. Similarly, if Buyer should at any
time after the Closing Date receive any proceeds attributable to any such sale
occurring prior to the Effective Date, Buyer shall promptly remit the same to
Seller.
1.2 ROYALTY OBLIGATIONS; EXPENSES. Seller shall be responsible for the
payment of all royalty obligations, operating expenses and capital expenses
attributable to Seller's interest in the Assets prior to the Effective Date.
Buyer shall be responsible for the payment of all royalty obligations, operating
expenses and capital expenses attributable to Buyer's interest in the Assets
after the Effective Date. Any party which pays any such royalties or expenses
which are the responsibility of the other shall be entitled to prompt
reimbursement upon issuance to the responsible party of evidence of such
payment.
1.3 SALES AND OTHER TRANSFER TAXES. The Purchase Price excludes all
applicable sales taxes, real property transfer taxes and other taxes payable as
a result of the transfer of the Assets. If a determination is ever made that a
sales tax or other transfer tax applies, Buyer shall be liable for such tax as
well as any applicable conveyance, transfer and recording fees, and real estate
transfer stamps or taxes imposed on any transfer of Assets pursuant to this
Agreement. Buyer shall defend and hold Seller harmless with respect to the
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reporting and payment of all such taxes, if any, including any interest or
penalties assessed thereon.
1.4 OTHER TAXES. All other taxes on the ownership or operation of the
Assets, including real estate taxes other than transfer taxes, which are imposed
with respect to period or portions of periods prior to the Effective Date shall
be the burden of Seller and all such taxes imposed with respect to periods or
portions of periods after the Effective Date shall be the burden of Buyer. Any
party which pays any such taxes which are the responsibility of the other party
shall be entitled to prompt reimbursement upon issuance to the responsible party
of evidence of such payment.
1.5 JOINT BILLING AUDITS; CREDITS. Seller shall be responsible for the
hosting and settlement of all joint billings audits which relate to accounting
period prior to the Effective Date. Buyer shall be responsible for the hosting
and settlement of all joint billing audits which relate to the Assets purchased
by Buyer for accounting periods after the Effective Date.
1.6 INCOME AND FRANCHISE TAXES. For purposes of Federal, State and local
income and franchise taxes and other similar taxes, it is the express intent of
the parties that ownership of the Assets shall pass to Buyer as of the Effective
Date herein and that Buyer bear all such taxes attributable to the Assets
accruing on or after the Effective Date.
1.7 WITHHELDS. Any amounts withheld by Seller from royalty payments,
proceeds from production or operating expenses attributable to interests in the
Assets prior to the Effective Date shall be paid by Seller to Buyer at the
Closing Date. Seller agrees to provide a complete list of the payees' names,
addresses and applicable amounts. Buyer agrees to make all payments of such
withhelds for the account of Seller, but not to exceed the amounts paid by
Seller to Buyer, Seller agrees to indemnify and hold Buyer harmless from all
liabilities of Buyer resulting from (1) such payments made by Buyer, (2) the
insufficiency of the amounts to be paid to Buyer by Seller for distribution as
referred to in this Section; and (3) reasonable attorneys' fees and other
reasonable costs resulting from claims or litigation associated with (1) or (2).
ARTICLE VII
CLOSING
1.1 CONDITIONS TO CLOSING.
(a) Conditions to Obligations of Buyer. The obligation of Buyer to be
performed at the Closing are subject to the satisfaction of the following
conditions, any one or more of which may be waived in whole or in part by Buyer.
(i) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller set forth in this Agreement shall be true and correct in
all material respects as of the Closing Date (except as may be specifically
stated otherwise.)
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(ii) PERFORMANCE OF OBLIGATIONS OF SELLER. Seller shall have
performed in all material respects all agreements required to be performed by it
under this Agreement prior to or on the Closing Date.
(iii) NECESSARY CONSENTS AND WAIVERS OF PREFERENTIAL RIGHTS.
Seller shall have applied for all material governmental or other third party
consents or other actions necessary to the consummation of the transactions
contemplated by this Agreement.
(iv) LITIGATION. No suit or other proceeding shall be pending or
threatened before any court or governmental agency affecting the Assets or
seeking to restrain or prohibit the purchase and sale contemplated by this
Agreement.
(v) NO VIOLATIONS. The Closing shall not violate any order or
decree of any court or governmental body having competent jurisdiction.
(vi) RELEASE OF MORTGAGES. All mortgages, security interests,
liens and encumbrances affecting the Assets shall have been released of record.
(b) Conditions to Obligations of Seller. The obligations of Seller to
be performed at the Closing are subject to the satisfaction of the following
conditions, any one or more of which may be waived in whole or in part by
Seller:
(i) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer set forth in this Agreement shall be true and correct in all
material respects as of the Closing Date.
(ii) PERFORMANCE OF OBLIGATIONS OF BUYER. Buyer shall have
performed in all material respects all agreements required to be performed by it
under this Agreement prior to or on the Closing Date.
(iii) LITIGATION. No suit or other proceeding shall be pending or
threatened before any court or governmental agency seeking to restrain or
prohibit the purchase and sale contemplated by this Agreement.
(iv) NO VIOLATIONS. The Closing shall not violate any order or
decree of any court or governmental body having competent jurisdiction.
1.2 DATE AND PLACE OF CLOSING. The Closing of the purchase and sale of the
Assets shall take place by contemporaneous execution, facsimile and overnight
delivery of the documents to the other on June 5, 2002, (the "Closing Date"),
unless otherwise mutually agreed between Buyer and Seller.
1.3 CLOSING OBLIGATIONS. At the Closing the following events shall occur,
each being a condition precedent to the others and each being deemed to have
occurred simultaneously with the others:
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(a) The Seller shall execute, acknowledge and deliver to Buyer an
Assignment and Bill of Sale in conformance with this Agreement and such other
instruments of transfer and assignment necessary to convey to Buyer or its
designees all of Seller's interests in the Assets in the manner contemplated by
this Agreement. Such Assignment and Bill of Sale to be prepared and provided by
Seller in a form substantially the same as that shown as Exhibit "D".
(b) The Seller shall deliver to Buyer exclusive possession of the
Assets and Buyer shall take possession of the Assets, as of the Effective Date.
(c) Buyer shall deliver to Seller the Purchase Price as adjusted,
including any Brokerage Commissions or Fees as set forth in Article II, Section
1.3(f), by wire transfer or certified funds to the account of Seller.
(d) The Seller and Buyer shall execute, acknowledge, and deliver
transfer orders or letters in lieu thereof directing all purchasers of
production to make payments of proceeds attributable to production from Seller's
interest in the Assets of Buyer.
(e) Seller and Buyer shall execute, acknowledge and deliver such other
instruments and take such other action as may be necessary to carry out their
respective obligations under this Agreement.
(f) Seller and Buyer shall execute and deliver a Closing Statement
that shall set forth the Purchase Price, the brokerage fee, any adjustment to
the Purchase Price, and the calculations used to determine such adjustment. The
adjustments shall include but shall not be limited to costs for the additional
purchase of the Blackwolf 3-28, funds due to Helmerich & Payne for expenses on
the Blackwolf 3-28, fees for engineering services, interest, legal fees, and
commissions paid to E&K Oil Corporation. The Closing Statement shall be subject
to post-closing adjustment pursuant to Article IX to reflect actual additional
expenses.
ARTICLE VIII
TERMINATION OF AGREEMENT
This Agreement may be terminated at any time prior to the Closing Date by:
(a) Buyer or Seller, if consummation of the transactions contemplated
hereby would violate any final non-appealable order by any court or governmental
body having competent jurisdiction;
(b) Buyer or Seller, if prior to the Closing Date, the Federal Trade
Commission or the Department of Justice expresses an intent to enjoin or place
conditions upon the consummation of the transactions contemplated by this
Agreement; or
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(c) Buyer or Seller, if after the date hereof, any legislation which
would have the effect of prohibiting or making unlawful the acquisition or
ownership of the Assets by Buyer or the conveyance or sale of the Assets by
Seller, has been enacted into law.
ARTICLE IX
OBLIGATIONS AFTER CLOSING
1.1 POST-CLOSING ADJUSTMENTS. Within thirty (30) days after the Closing and
successively each month thereafter, a Settlement Statement will be prepared by
Seller and submitted to Buyer showing income and expenses for the Assets between
the Effective Date and Closing Date and other charges and credits provided in
this Agreement until such time as all such adjustments are complete.
(a) Seller shall be credited with:
(i) The value of all merchantable oil above the pipeline
connections in tanks at the Effective Date that is credited to Seller's net
revenue interest in the Assets, such value to be the actual price received by
Buyer as of the Effective Date, less any taxes withheld properly by the
purchaser of such.
(ii) The amount of all costs and expenses, including, without
limitation, royalties, rentals and other charges, ad valorem, windfall profit,
and other taxes based upon or measured by the ownership of property or the
production of hydrocarbons or the receipt of proceeds therefrom, expenses paid
under applicable operating agreements and, in the absence of an operating
agreement, expenses of the sort customarily billed under such agreements, not
including income taxes, paid by or on behalf of Seller, in connection with the
operation of the Assets during the period after the Effective Date.
(iii) An amount equal to all prepaid expenses attributable to the
Assets that are paid by or on behalf of Seller prior to the Closing Date and
that are, in accordance with generally accepted accounting principles,
attributable to the period after the Effective Date, including, without
limitation, prepaid ad valorem, property, production, severance, and similar
taxes (but not including income taxes) based upon or measured by the ownership
of property or the production of hydrocarbons or the receipt of proceeds
therefrom. Any refund of ad valorem tax attributable to the period before the
Effective Date received by Buyer shall be credited to Seller.
(iv) Adjustments to the Closing Statement as described in Article
VII, Section 1.3(f).
(b) Buyer shall be credited with:
(i) Proceeds received by Seller that are, in accordance with
generally accepted accounting principles, attributable to the Assets for the
period of time after the Effective Date.
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(ii) The amount of all costs and expenses, including, without
limitation, royalties, rentals and other charges, ad valorem, property,
production, excise, severance, windfall profit, and other taxes based upon or
measured by the ownership of property or the production of hydrocarbons or the
receipt of proceeds therefrom, expenses paid under applicable operating
agreements and, in the absence of an operating agreement, expenses of the sort
customarily billed under such agreements, not including income taxes, paid by or
on behalf of Buyer, in connection with the operation of the Assets during the
period prior to the Effective Date.
(iii) Any unpaid amount attributable to any reduction under
Article IV for a Casualty Loss which occurs prior to the Effective Date.
(c) In addition to the matters mentioned above, the final Settlement
Statement shall include any other debits and credits, either cash or accrued,
but excluding income and franchise taxes, which under generally accepted
accounting principles would reflect transfer of ownership of the Assets on the
Effective Date.
(d) The net amount to be paid by the owing party shall be paid thirty
(30) days after receipt of a Settlement Statement. Buyer shall have the right
for a period of one (1) year from the date of the final Settlement Statement in
which to audit the matters covered hereby.
(e) In the event Buyer and Seller are unable to mutually agree upon
the amount of the Settlement Statement, an audit shall be conducted by a
mutually agreeable third party. Buyer and Seller agree to be bound by the
findings of such audit, insofar as the final settlement statement amount is
concerned, and each shall bear one-half (1/2) of all expenses associated with
such audit.
1.2 FURTHER ASSURANCES. After Closing, Seller agrees to execute and deliver
to Buyer all such instruments, notices, division or transfer orders, and other
documents, and to do all such other acts not inconsistent with this Agreement as
may reasonably be necessary or advisable to carry out its obligations under this
Agreement or to more fully assure Buyer, its successors and assigns, of the
respective rights, titles, interests and estates herein provided to be sold,
assigned and conveyed by Seller to Buyer at Closing.
1.3 CONTINUED OBLIGATION TO DISCLOSE. Before and after Closing, Seller
shall provide Buyer with all information which may affect the Assets or the
transaction contemplated herein.
ARTICLE X
INDEMNIFICATION
Seller agrees to protect, defend, indemnify and hold Buyer and its
employees free and harmless from and against any and all costs, expenses,
claims, losses, liabilities, demands and causes of action of every kind and
character, including but not limited to pollution and environmental claims,
-12-
arising out of, incident to, or in connection with the Assets, or Seller's or
other parties' operations on the Assets, prior to the Closing Date. Buyer
similarly indemnifies Seller for all periods of time subsequent to the Closing
Date for its proportionate share acquired under this Agreement.
ARTICLE XI
MISCELLANEOUS
1.1 INTENT. It is the intent of the Buyer to buy and of the Seller to sell
Fifty Percent (50%) of Seller's interest in those oil, gas and other mineral
properties described in Exhibit "A" being such assets as Seller acquired from
Aspen Energy Group, Inc., less the override assigned to E&K Oil Corporation,
together with all properties associated with the operations. In the event that
any interest owned by Seller in such properties is omitted or incorrectly
described herein, the parties agree to execute the documents necessary to effect
the intent stated herein.
1.2 SURVIVAL. All obligations of Buyer and Seller, including all
representations and warranties of Seller and Buyer contained in this Agreement,
shall survive the Closing.
1.3 INTEGRATIONS; AMENDMENT AND MODIFICATION. Except as expressly set forth
herein, none of the parties makes to the other any representation or warranty,
whether expressed or implied, of any kind whatsoever. This Agreement may not be
modified, supplemented or changed in any respect except by a writing duly
executed by Seller and Buyer.
1.4 DESCRIPTIVE HEADINGS. The headings of the paragraphs and subparagraphs
of this Agreement are inserted for convenience only and shall not constitute a
part hereof.
1.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF OKLAHOMA.
1.6 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and
shall inure to the benefit of and be enforceable by each of the parties, and
their successors and assigns. This Agreement is fully assignable by Buyer or
Seller.
1.7 NOTICES. All notices, disclosures or other communications which are
required or permitted hereunder shall be in writing and shall be delivered as
follows:
If to Buyer: Stratford American Energy Corporation
2400 E. Arizona Biltmore Circle
Building 2, Suite 1270
Phoenix, AZ 85016
If to Seller: Crown Energy Drilling and Production Fund
2001-1 Limited Partnership
One North Hudson #600
Oklahoma City, OK 73102
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1.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an
original, and all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date hereof.
CROWN ENERGY DRILLING AND PRODUCTION
FUND 2001-1 LIMITED PARTNERSHIP
ONE NORTH HUDSON #600
OKLAHOMA CITY, OKLAHOMA 73102
BY: CROWN ENERGY MANAGEMENT COMPANY,
L.L.C., GENERAL PARTNER
By:
------------------------------------
R. D. Holleyman, Manager
STRATFORD AMERICAN ENERGY CORPORATION
By:
------------------------------------
Mel L. Shultz, President
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EXHIBIT "A"
Attached to and made a part of that certain Purchase and Sale Agreement dated
June 5, 2002, between STRATFORD AMERICAN ENERGY CORP. as Buyer and CROWN ENERGY
DRILLING & PRODUCTION FUND 2001-1 LIMITED PARTNERSHIP as Seller
WELL NAME SEC TWN RNG COUNTY STATE WI NRI
--------- --- --- --- ------ ----- ---------- ----------
BLACKWOLF FEDERAL 3-28 28 14N 20W CUSTER OKLAHOMA 0.01984500 0.01538000
BLANTON 7-9 9 9N 19W WASHITA OKLAHOMA 0.05309031 0.03922220
BROTHERS 1-20 20 11N 25W BECKHAM OKLAHOMA 0.00960900 0.00675900
C L O 3-36 36 13N 17W CUSTER OKLAHOMA 0.11761109 0.09196370
CLAYTON #8-9 9 9N 19W WASHITA OKLAHOMA 0.05428100 0.04013435
HINKLE #1-28 28 10N 20W WASHITA OKLAHOMA 0.00190980 0.00148996
HINKLE #2-28 28 10N 20W WASHITA OKLAHOMA 0.00191620 0.00149035
HUGHES #1-28 28 14N 20W CUSTER OKLAHOMA 0.03968846 0.02968200
HUGHES #2-28 28 14N 20W CUSTER OKLAHOMA 0.03968846 0.02968200
IRWIN #1-31 31 14N 20W CUSTER OKLAHOMA 0.01674533 0.01277500
LEWIS B #2 J. B. Callicoatte Survey A-179 LEON TEXAS 0.06352860 0.04878862
MARY B #1-3 3 3N 3W GARVIN OKLAHOMA 0.03737096 0.02802822
MENNONITE #2-31 31 14N 20W CUSTER OKLAHOMA 0.01674533 0.01270924
MENNONITE #3-31 31 14N 20W CUSTER OKLAHOMA 0.01942827 0.01563672
MENNONITE #4-31 31 14N 20W CUSTER OKLAHOMA 0.01674530 0.01276930
NAIL #1-1 1 9N 4W MCCLAIN OKLAHOMA 0.03500000 0.02668225
NEWELL "A" #2 J. B. Callicoatte Survey A-179 LEON TEXAS 0.01707180 0.01276770
NEWELL "A" #3 J. B. Callicoatte Survey A-179 LEON TEXAS 0.01707180 0.01276770
NEWELL "A" #4C J. B. Callicoatte Survey A-179 LEON TEXAS 0.01707180 0.01276770
NEWELL "A" #5 J. B. Callicoatte Survey A-179 LEON TEXAS 0.01707180 0.01276770
OLSEN #2-16 16 35S 7E COWLEY OKLAHOMA 0.10000000 0.07840625
RINGO 9-9 9 9N 19W WASHITA OKLAHOMA 0.05428124 0.04015410
ROSS #2-21 21 11N 25W BECKHAM OKLAHOMA 0.04640620 0.03201870
EXHIBIT "B"
Attached to and made a part of that certain Purchase and Sale Agreement dated
June 5, 2002, between STRATFORD AMERICAN ENERGY CORP. as Buyer and CROWN ENERGY
DRILLING & PRODUCTION FUND 2001-1 LIMITED PARTNERSHIP as Seller
WELL NAME SEC TWN RNG COUNTY STATE WI NRI
--------- --- --- --- ------ ----- ---------- ----------
BLACKWOLF FEDERAL 3-28 28 14N 20W CUSTER OKLAHOMA 0.00992250 0.00759078
BLANTON 7-9 9 9N 19W WASHITA OKLAHOMA 0.02654516 0.01934565
BROTHERS 1-20 20 11N 25W BECKHAM OKLAHOMA 0.00480450 0.00333146
C L O 3-36 36 13N 17W CUSTER OKLAHOMA 0.05880555 0.04539379
CLAYTON #8-9 9 9N 19W WASHITA OKLAHOMA 0.02714050 0.01979577
HINKLE #1-28 28 10N 20W WASHITA OKLAHOMA 0.00095490 0.00073543
HINKLE #2-28 28 10N 20W WASHITA OKLAHOMA 0.00095810 0.00073559
HUGHES #1-28 28 14N 20W CUSTER OKLAHOMA 0.01984423 0.01464256
HUGHES #2-28 28 14N 20W CUSTER OKLAHOMA 0.01984423 0.01464256
IRWIN #1-31 31 14N 20W CUSTER OKLAHOMA 0.00837267 0.00630377
LEWIS B #2 J. B. Callicoatte Survey A-179 LEON TEXAS 0.03176430 0.02407667
MARY B #1-3 3 3N 3W GARVIN OKLAHOMA 0.01868548 0.01382726
MENNONITE #2-31 31 14N 20W CUSTER OKLAHOMA 0.00837267 0.00627089
MENNONITE #3-31 31 14N 20W CUSTER OKLAHOMA 0.00971414 0.00772122
MENNONITE #4-31 31 14N 20W CUSTER OKLAHOMA 0.00837265 0.00630092
NAIL #1-1 1 9N 4W MCCLAIN OKLAHOMA 0.01750000 0.01316613
NEWELL "A" #2 J. B. Callicoatte Survey A-179 LEON TEXAS 0.00853590 0.00629849
NEWELL "A" #3 J. B. Callicoatte Survey A-179 LEON TEXAS 0.00853590 0.00629849
NEWELL "A" #4C J. B. Callicoatte Survey A-179 LEON TEXAS 0.00853590 0.00629849
NEWELL "A" #5 J. B. Callicoatte Survey A-179 LEON TEXAS 0.00853590 0.00629849
OLSEN #2-16 16 35S 7E COWLEY OKLAHOMA 0.05000000 0.03870313
RINGO 9-9 9 9N 19W WASHITA OKLAHOMA 0.02714062 0.01980564
ROSS #2-21 21 11N 25W BECKHAM OKLAHOMA 0.02320310 0.01577732