PURCHASE AND SALES AGREEMENT
THIS AGREEMENT, dated as of January 1, 2003, is between Regent Energy
Corporation ("Seller"), with offices at 10777 Westheimer, Suite 1100, Houston,
Texas 77042 and Rocky Mountain Energy Corporation ("Buyer") with offices at 333
North Sam Houston Parkway East, Suite 910, Houston, Texas 77060.
Subject to the terms and conditions of this Purchase and Sales Agreement, Seller
desires to sell, assign, transfer and convey to Buyer and Buyer desires to
purchase from Seller all of Seller's right, title and interest in, to and under
or derived from the oil and gas leases, oil, gas and mineral leases and other
interests therein referred to in Exhibit "A", attached hereto and made a part
hereof for all purposes, insofar and only insofar as said Leases apply to the
lands, depths, formations, wellbore rights and/or other rights specified on
Exhibit "A" together with identical interests in and to all property and rights
incident thereto, including without limitation, all materials, equipment,
personal property and fixtures located thereon or used in connection therewith
(the "Equipment") on the lease and all of Seller's rights in, to and under all
agreements, leases, permits, rights-of-way, easements, licenses, options and
orders in any way relating thereto as of 7:00 A.M. local time, January 1, 2003
(the "Effective Time"), all of the foregoing properties, rights and interests
being hereinafter sometimes called the "Interests".
THEREFORE, In consideration of the above recitals and of the covenants and
agreements herein contained, Seller and Buyer agree as follows:
1. SALE AND PURCHASE: Subject to and upon all of the terms and
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conditions hereinafter set forth, Seller shall sell, transfer, assign, convey
and deliver unto Buyer all of Seller's right, title and interest in and to the
Interests, and Buyer shall purchase, receive, pay for and accept the Interests
from Seller, as of the Effective Time.
2. SALE PRICE: The sale price for the Interests shall be the
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approximate amount of Five Million Five Hundred Thousand and No/100 Dollars
($5,500,000), subject only to any applicable price adjustment as provided for
herein below. At Closing Buyer shall pay and deliver to Seller the total sale
price after any applicable price adjustment as provided for herein below as
follow, to wit:
(a) The Buyer shall deliver the sum of $5,500,000 paid over at
closing per the directions of current mortgage holders of record, less any
deposits paid by Buyer to mortgage holders.
(b) The Purchase Price shall be adjusted as follows (to the extent
such items are known or can be reasonably estimated at Closing), and the
resulting amount (the "Closing Amount") shall be paid to Seller.
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(i) The Purchase Price shall be decreased by the following
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amounts:
x. The amount of revenues actually received by Seller
for oil, gas, condensate, natural gas liquids and other petroleum product sales
attributable to production from the Subject Properties from and after the
Effective Date (it being agreed that all oil which was produced from the Subject
Properties prior to the Effective Date and which was, on the Effective Date,
stored in tanks located on the Subject Lease, or located elsewhere but used by
Seller to store oil produced from the Subject Properties prior to delivery to
oil Buyer, and above pipeline connections shall be deemed to have been produced
before the Effective Date);
y. Notwithstanding the above, any sums expended by Buyer
in order to extinguish a debt of Seller in order to facilitate the closing shall
be taken as a credit at closing by Buyer.
z. Special Consideration. At closing, seller shall
settle the invoices of Jenkens & Gilchrist, attorneys at law, out of sales
proceeds.
(ii) The Purchase Price shall be increased by the following
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amounts:
x. The amount of all reasonable costs and expenses
incurred and paid by Seller in connection with the ownership or operation of the
Assets and attributable to the period from and after the Effective Date,
including without limitation any lease operating expenses and customary and
reasonable overhead charges;
y. An amount equal to all prepaid expenses attributable
to the Assets paid by Seller and attributable to the period from and after the
Effective Date, including without limitation prepaid ad valorem, property,
production and other taxes and payments for insurance coverage accruing to the
benefit of Buyer subsequent to the Effective Date.
3. INFORMATION AND ACCESS: Seller shall make a good-faith effort to
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give Buyer and Buyer's authorized representatives, at any reasonable time(s)
before Closing, (i) physical access to the wells and other Equipment included in
the Interests, at Buyer's sole risk, cost and expense, for the purpose of
inspecting the same, conducting witnessed tests of production from the wells,
and (ii) access to all production, engineering and other technical data and
records, and to all contract, land and lease records, to the extent such data
and records are in Seller's possession and relate to the Interests; provided,
however, Seller shall have no obligation to provide Buyer such access to any
data or information which Seller considers proprietary or confidential to it or
which access Seller cannot legally provide Buyer because of third-party
restrictions on Seller.
4. TITLE DEFECTS: For the purpose of this Agreement, a "Title Defect"
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shall mean a material deficiency in one (or more) of the following respects,
to-wit:
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(a) Seller's title at the Effective Time, as to one or more
properties, is subject to an outstanding mortgage, deed of trust, lien or
encumbrance or other adverse claim which would induce a pipeline Buyer to
suspend payment of proceeds as to Seller's interest or require the furnishing of
security or indemnity. Evidence that Seller is currently receiving its full
share of proceeds from a pipeline Buyer or third-party operator (not under a
100% or other division order requiring Seller to further distribute proceeds to
third parties) for the Interests shall be considered a presumption that no
defect exists with respect to this interest;
(b) Seller owns less than the net revenue interest described on
Exhibit "A" or more than the working interest described on Exhibit "A" without a
corresponding increase in net revenue interest;
(c) Seller's rights and interests are subject to being reduced by
virtue of the exercise by a third party of reversionary, back-in or other
similar right not reflected on Exhibit "A"; and,
(d) Seller Is In default under some material provision of a lease,
farmout agreement or agreement affecting the Interests.
5. SALE PRICE ADJUSTMENTS: Buyer may, by delivery of written notice to
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Seller of the existence of a Title Defect, request reduction of the sale price
for the property affected. Seller may request an increase in the sale price of a
property by delivery to Buyer of written notice that the net revenue interest
actually owned by Seller therein is greater than that shown on Exhibit "A".
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Any such notice by Buyer or Seller shall include appropriate evidence to
substantiate its position and shall be delivered to the other party on or before
twenty (20) days after closing. In the event any such notice is not timely
delivered, the claimant shall thereafter have no right to claim a Title Defect
or different revenue interest.
Upon timely delivery of a notice either by Buyer of a Title Defect or by
Seller of an increase or decrease in net revenue interest, Buyer and Seller
shall meet and use their best efforts to agree on the validity of the claim and
the amount of any required price adjustment based on the following formula:
(i) If both the Working Interest and the Net Revenue Interest for
any property are incorrectly stated on Exhibit "A", but the ratio of Net Revenue
Interest to Working Interest is correctly stated, then the adjustment to the
Purchase Price shall be the product of the value listed on Exhibit "A"
multiplied by a fraction, the numerator of which is the Net Revenue Interest
increase or decrease and the denominator of which is the Net Revenue Interest
listed on Exhibit "A".
(ii) If either the Working Interest or the Net Revenue Interest
for any property is incorrectly stated on Exhibit "A" and the ratio of Net
Revenue Interest to Working Interest is incorrectly stated, then the Purchase
Price shall be adjusted as follows: Buyer shall recalculate the value of the
property affected using precisely the same economic model, formula and
assumptions used by it in calculating its values shown on Exhibit "A" but
inserting the correct Working Interest and Net Revenue Interest percentage for
the incorrect percentages. The difference between the recalculated value and
the value shown on Exhibit "A" shall be the dollar value of the adjustment to
the Purchase Price.
6. SELLER REPRESENTATIONS AND WARRANTIES: Seller represents and
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warrants to that as of the Effective Date and the date Seller executes this
Agreement that to the best of Seller's knowledge:
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(a) Is duly qualified to carry on its business in the state where
the Interests are located, and has all the requisite power and authority to
enter into and perform this Agreement.
(b) It has taken all necessary actions pursuant to Its Articles of
Incorporation, By-laws and other governing documents to fully authorize it to
consummate the transaction contemplated by this Agreement.
(c) This Agreement and the consummation of the transactions
contemplated by this Agreement will not violate, constitute a default under, or
be in conflict with (i) any provision of Seller's Articles of Incorporation or
Bylaws, (ii) any material contract, agreement or instrument to which Seller is a
party or by which Seller is bound or, (iii) any judgment, decree, order,
statute, rule, permit or regulation applicable to Seller or the Assets.
(d) The execution, delivery and performance of this Agreement and
the transactions contemplated by this Agreement have been duly and validly
authorized by all necessary corporate action on the part of Seller. This
Agreement has been duly executed and delivered on behalf of Seller and at
Closing all documents and instruments required hereunder to be executed and
delivered by Seller shall have been duly executed and delivered. This Agreement
and such documents and instruments will constitute legal, valid and binding
obligations of Seller, enforceable against Seller in accordance with their
terms, subject, however, to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting the rights and remedies of creditors, and
to general principles of equity.
(e) SELLER MAKES NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE
WARRANTY OF MERCHANTABILITY AND THE IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE, REGARDING THE SUBJECT PROPERTIES, FIXTURES, FACILITIES, EQUIPMENT,
IMPROVEMENTS, MATERIALS AND OTHER PERSONAL PROPERTY LOCATED ON OR INCLUDED IN
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THE ASSETS, AND THE SAME ARE TO BE SOLD ON AN "AS IS, WHERE IS" BASIS AND
CONDITION. IT IS UNDERSTOOD BETWEEN THE PARTIES THAT SELLER HAS RECORD TITLE
SUBJECT TO CLAIMS OF VARIOUS PARTICIPANTS THAT WILL BE SATISFIED OUT OF SELLER'S
POSITION IN THE SALE.
(f) To the best of Seller's knowledge, all ad valorem, property
and similar taxes and assessments based on or measured by the ownership of the
Assets or the production of hydrocarbons or the receipt of proceeds there from
on account of the Assets for all years prior to 2001 have been properly paid.
(g) To the best of Seller's knowledge, there are no bankruptcy,
reorganization or arrangement proceedings pending, being contemplated by or to
the best of Seller's knowledge threatened against Seller.
(h) Except as expressly set forth in attached Schedule "B", no
suit, M&M lien, action or other proceeding (including, without limitation, tax,
environmental or development demands proceedings) is pending, or to the best of
Seller's knowledge threatened, which might result in impairment or loss of title
to any of the Assets or the value thereof. Seller shall promptly notify Buyer
of any such proceeding which may arise or be threatened prior to Closing
hereunder.
(i) To the best of Seller's knowledge, there exists no adverse
claim or claimed default (or any event which, with the giving of notice or the
passage of time, or both, would constitute a default) under (i) any of the
Subject Agreements or (ii) any order, writ, injunction or decree of any court,
commission or administrative agency affecting any of the Assets. Seller shall
promptly notify Buyer of any notice hereafter received by Seller of any such
claim or default and the occurrence of any such event of which Seller becomes
aware prior to Closing.
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(j) To the best of Seller's knowledge, there are no unpaid bills
or past due charges for any labor or materials incurred by or on behalf of
Seller incident to the exploration, development or operation of the Assets which
could be the basis for the existence or the filing of any claims against the
Assets or any part thereof, other than as set forth in Exhibit B and Exhibit
B-1.
(k) To the best of Seller's knowledge, the Assets have been
operated in compliance in all material respects with all valid laws, rules,
regulations, ordinances and orders of governmental authorities having
jurisdiction (including environmental laws) and in compliance in all material
respects with all permits, approvals, contracts and agreements relating to the
Assets.
(l) None of the Assets are subject to any preferential rights to
purchase or restrictions on assignment that would be applicable to the
transactions contemplated hereby, or which have not already expired.
(m) To the best of Seller's knowledge, there are no approvals,
consents or filings required to be made or obtained to an assignment or transfer
of any of the Assets.
(n) To the best of Seller's knowledge, there are no operations
involving any of the Assets to which Seller has become a non-consenting party.
(o) To the best of Seller's knowledge, except as expressly set
forth on Schedule "F", there are no prepayments, advance payments, take-or-pay
payments or similar payments requiring the delivery of gas from the Assets
without then or thereafter receiving payment at current prices.
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(p) To the best of Seller's knowledge, all of the Subject
Properties have been drilled and completed within the boundaries of the Subject
Lease or within the limits otherwise permitted by contract, pooling or unit
agreement, and by law; and all drilling and completion of the Subject Properties
and all development and operations on the Subject Lease have been conducted in
all material respects in compliance with all applicable laws, ordinances, rules,
regulations and permits, and judgments, orders and decrees of any court or
governmental body or agency, except failures which individually and in the
aggregate would not have a material adverse effect on the use, value or
operation of the Assets.
(q) To the best of Seller's knowledge, except as expressly set
forth in Schedule "G", all proceeds from the sale of hydrocarbons produced from
the Subject Properties are currently being paid to Seller or such proceeds are
currently being held in suspense by any Buyer thereof or any other party by whom
proceeds are paid except for immaterial amounts.
(r) On the Closing Date, no mortgage lien, security interest or
similar lien created by Seller will exist with respect to the Assets.
(s) To the best of Seller's knowledge, the Subject Lease is
burdened by no royalty, overriding royalty interests, production payments or
other burdens on production in excess of those shown on Exhibit A. Otherwise,
the Assignment shall be made without warranty of title, either express or
implied, except for acts by, through and under Seller, and shall be subject to
all validly existing burdens on production which pertain to the Subject Lease.
(t) SELLER DOES NOT WARRANT, EITHER EXPRESSLY OR IMPLIEDLY, THE
RESERVOIR PERFORMANCE OR THE MERCHANTABILITY, SUITABILITY, CONDITION OR FITNESS
FOR ANY PARTICULAR PURPOSE OR USE OF ANY OF THE AFORESAID LEASEHOLD EQUIPMENT,
MATERIAL OR PERSONAL PROPERTY, ANY SUCH WARRANTY BEING EXPRESSLY DENIED. BUYER,
BY ACCEPTANCE OF THIS AGREEMENT, HEREBY AGREES TO ACCEPT THE SAME "WHERE IS, AS
IS" AND WITH ALL FAULTS OR DEFECTS, IF ANY, IN THEIR PRESENT CONDITION AND STATE
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OF REPAIR. BUYER EXPRESSLY WAIVES ALL OF THE EXPRESS AND IMPLIED WARRANTIES
PROVIDED BY NEW MEXICO LAW, INCLUDING PARTICULARLY (BUT NOT LIMITED TO) (1) THE
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE; (2) THE WARRANTY AGAINST
REDHIBITORY VICES AND (3) ANY RIGHT TO CLAIM RESCISSION OR REDUCTION IN THE
PURCHASE PRICE ON ACCOUNT OF ANY DEFECT OR CONDITION OF THE AFORESAID LEASEHOLD
EQUIPMENT, MATERIAL OR PERSONAL PROPERTY WHICH MAY NOW OR HEREAFTER EXIST,
WHETHER KNOWN OR UNKNOWN ON THIS DATE.
7. BUYER'S REPRESENTATIONS AND WARRANTIES
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Buyer represents and warrants to and with Seller that:
(a) Buyer is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Nevada and Buyer is duly
qualified to carry on its business in the state in which the Assets lie.
(b) Buyer has all requisite power and authority to carry on its
business as presently conducted; to enter into this Agreement; to purchase the
Assets on the terms described in this Agreement and to perform its obligations
hereunder.
(c) This Agreement and the consummation of the transactions
contemplated by this Agreement will not violate, constitute a default under, or
be in conflict with, (i) any provision of Buyer's Articles of Incorporation or
Bylaws, (ii) any material contract, agreement or instrument to which Buyer is a
party or by which Buyer is bound, or (iii) any judgment, decree, order, statute,
rule or regulation applicable to Buyer.
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(d) The execution, delivery and performance of this Agreement and
the transactions contemplated by this Agreement have been duly and validly
authorized by all necessary corporate action on the part of Buyer. This
Agreement has been duly executed and delivered on behalf of Buyer and at Closing
all documents and instruments required hereunder to be executed and delivered by
Buyer shall have been duly executed and delivered. This Agreement and such
documents and instruments will constitute legal, valid and binding obligations
of Buyer, enforceable against Buyer in accordance with their terms, subject,
however, to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting the rights and remedies of creditors, and to general
principles of equity.
(e) Buyer is now, and hereafter shall continue to be, qualified to
own State and/or Federal oil, gas and mineral leases in the State of New Mexico
and with all other applicable regulatory bodies.
(f) Buyer is acquiring the Assets for Buyer's own account or
investment, and not with a view to, or for resale in connection with, any
distribution thereof within the meaning of the Securities Act of 1933, and shall
not resell any or all of the Assets except in compliance with all applicable
securities laws.
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8. OBLIGATIONS OF SELLER AND BUYER
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(a) For purposes of determining adjustments to the Purchase Price
under Article 1(d) hereof, Buyer agrees to accept the gas sales and oil and
condensate sales meter readings taken in good faith by Seller as of 7:00 o'clock
A.M. on the Effective Date hereof.
(b) At the Closing, Buyer shall expressly assume and agree to be
bound by the Contracts insofar as they relate to periods of time from and after
the Effective Date and will protect, indemnify and hold Seller harmless from and
against any claims or demands arising out of the failure of Buyer to do so.
(c) Except as provided for in Articles 8(d), and 9, Seller shall
retain all risk and liability of whatsoever nature connected with operations
conducted on the Assets prior to the Closing Date and agrees to protect,
indemnify, defend and hold Buyer free and harmless from all liabilities,
penalties, claims, causes of action, demands, lawsuits and expenses associated
with the operations prior to the Closing Date. Buyer shall assume all risk and
liability of whatsoever nature connected with operations conducted on the Assets
from and after the Closing Date, and agrees to protect, indemnify, defend and
hold Seller free and harmless from all liabilities, penalties, claims, causes of
action, demands, lawsuits and expenses associated with the Contracts and the
operations from and after the Closing Date.
(d) Except as provided for in Article 6, 9(b) and (f) hereof,
Buyer assumes full responsibility for, and agrees to protect, indemnify, defend
and hold Seller, its agents, directors, officers, shareholders and employees,
free and harmless from and against all loss, liability, claims, fines, expenses,
costs (including attorney's fees and expenses) and causes of action caused by or
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arising out of any federal, state or local laws, rules, orders and regulations
applicable to any waste material or hazardous substances on or included with the
Assets or the presence, disposal, release or threatened release of all waste
material or hazardous substance from the Assets into the atmosphere or into or
upon land or any water course or body of water, including ground water
(collectively, "Environmental Liabilities"), whether or not attributable to
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Seller's activities or the activities of Seller's agents, directors, officers,
shareholders and employees, or to the activities of third parties (regardless of
whether or not Seller was or is aware of such activities) prior to, during or
after the period of Seller's ownership of the Assets. This indemnification and
assumption shall apply to liability for voluntary environmental response actions
undertaken pursuant either to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (42 U.S.C.A. Sec. 9601, et seq.), as
from time to time amended or revised, or to any other federal, state or local
law.
(e) Buyer agrees to comply with all laws and governmental
regulations with respect to abandonment of wells and/or abandonment of the
leasehold property including, where applicable, the plugging of wells, the
compliance with law or rules regarding inactive or unplugged wells, including
bonding requirements and restoration as specified in the Subject Lease. Buyer
agrees to protect, defend, indemnify and hold Seller, its agents, directors,
officers, shareholders and employees, free and harmless from and against any and
all costs, expenses, claims, demands and causes of action of every kind and
character arising out of, incident to, or in connection with the abandonment of
wells and/or abandonment of and proper disposition of any leasehold property,
including, without limitation, the leases, any structures, materials, land,
wells, casing, leasehold equipment and other personal property, plugging
requirements or exceptions thereto, including bonding requirements, regardless
of whether the liability therefore is based upon some alleged act or omission of
Seller, or of the Buyer, or of some other party.
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(f) All accounts payable and other costs and expenses with respect
to the Seller's interest in the Assets which relate to the period prior to the
Effective Date shall be the obligation of and be paid by Seller and those which
relate to the period commencing with the Effective Date shall be the obligation
of and be paid by Buyer.
(g) All prepaid utility charges applicable to periods following
the Effective Date relating to the Assets shall be prorated as of the Effective
Date.
(h) If monies are received by either party hereto which, under the
terms of this Article, belong to the other party, the same shall immediately be
paid over to the proper party. If an invoice or other evidence of an obligation
is received which is applicable to periods both prior to and after the Effective
Date and is, thus, under the terms of the preceding paragraphs, partially the
obligation of Seller and partially the obligation of Buyer, then the parties
shall consult with each other and each shall promptly pay its portion of such
obligation to the obligee.
(i) Seller will pay all ad valorem, property taxes and other taxes
assessed on, based on, or attributable to production and other equipment that
occurred prior to the Effective Date. Buyer will pay all taxes assessed on,
based on, or attributable to production that occurred after the Effective Date.
It is agreed that whichever party receives said tax statements shall pay such
taxes prior to delinquency and the other party hereto agrees to reimburse the
paying party its pro rata share thereof promptly upon receipt of an invoice
accompanied by evidence of such payment. It is further agreed that, should
Seller pay the taxes, then Buyer also shall reimburse Seller for any portion of
the aforementioned taxes that are assessable against other working interest and
non-working interest owners and Buyer shall recoup from them accordingly. Buyer
shall pay all applicable state, parish, municipality or government sales or use
taxes on the leasehold, equipment, material or personal property located thereon
for periods subsequent to the Effective Date.
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(j) Seller and Buyer shall each bear their own costs and expenses,
including, but not limited to, attorney's fees incurred in connection with the
transactions contemplated in this Agreement.
(k) The sale of the Assets shall be subject to, and Buyer shall
assume, pay for and perform, the duties, liabilities and obligations relating to
the Assets, including, but not limited to, all applicable and validly recorded
and unrecorded agreements, contracts and instruments (including, but not limited
to, royalties, overriding royalty interests, production payments, net profits
interest, carried working interest or similar burdens), from and after the
Effective Date.
9. ENVIRONMENTAL CONDITIONS
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(a) The Assets which have been identified herein and are the
subject of this Agreement have been utilized by Seller and its
predecessors-in-title for the purpose of exploration, development and production
of oil and gas. Information, to the best of Seller's knowledge, regarding any
substantial quantity of crude oil and produced water which may have been spilled
or disposed of onsite and the locations thereof, including pit closures, burial,
land farming, land spreading and underground injection, will be made available
to Buyer as soon as practicable after the execution of this Agreement, but in no
event less than thirty (30) days after the Closing Date. Buyer acknowledges
that there may have been spills of these materials in the past onto the Assets
described herein. In addition, some oil field production equipment may contain
asbestos and/or Naturally Occurring Radioactive Material ("NORM"). In this
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regard, Buyer expressly understands that NORM may affix or attach itself to the
inside of wells, materials and equipment as scale, or in other forms, and that
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said wells, material and equipment located on the property described herein may
contain NORM and that NORM-containing material may be buried or otherwise
disposed of on the Assets. Buyer also expressly understands that special
procedures may be required for the removal and disposal of asbestos and NORM
from the equipment and Assets where it may be found and Buyer agrees to assume
all liability for such asbestos and NORM and for use of appropriate procedures
and activities required to handle and dispose of same.
(b) Promptly after execution of this Agreement by both parties,
Buyer shall have the right, at its own cost, risk and expense, to conduct or
have conducted an environmental assessment of the Assets. Seller will provide
Buyer (or its contractor) as may be requested with reasonable access to the
Assets operated by Seller in order to conduct the environmental assessment.
Buyer shall release, protect, indemnify, defend and hold Seller, its agents,
directors, officers, shareholders and employees, free and harmless against any
liability or damage to persons or property arising out of such environmental
assessment. Such indemnity shall also apply regardless of whether the liability
or damage arises in whole or in part from the negligence of Seller. Buyer shall
advise Seller of any material adverse environmental conditions of the Assets
which it finds unacceptable ("Unacceptable Environmental Conditions") and
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provide evidence thereof on or before Closing. For the purpose of this
paragraph, such conditions shall be "material" only if they will cost in excess
of $250,000 to cure or remedy, and were not specifically disclosed on or before
the execution of this Agreement. Within thirty (30) days after receipt of such
notice, Seller may either (1) remedy or agree to remedy such Unacceptable
Environmental Conditions within a period of time not to exceed 90 days following
the receipt of Unacceptable Environmental Conditions Notice; (2) negotiate with
Buyer in a good faith effort to agree upon an adjustment to the Purchase Price
which adjustment shall reflect Buyer's cost to remedy such conditions ("Buyer's
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Remediation Costs") or (3) remove the asset or assets from the Assets being
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conveyed and assigned and adjust the Purchase Price by the amount of Buyer's
Remediation Costs.
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SUBJECT TO THE FOREGOING AND EXCEPT AS EXPRESSLY PROVIDED FOR IN THIS
AGREEMENT, BUYER UNDERSTANDS AND AGREES THAT THIS SALE IS MADE ON AN "WHERE IS,
AS IS" BASIS AND BUYER RELEASES SELLER FROM ANY LIABILITY WITH RESPECT THERETO
WHETHER OR NOT CAUSED BY OR ATTRIBUTABLE TO SELLER'S NEGLIGENCE EXCEPT AS
OTHERWISE EXPRESSLY AGREED UPON IN WRITING BY SELLER AS PROVIDED HEREIN.
(c) From and after the Closing Date, Buyer shall dispose of or
discharge any waste from the Assets (including, but not limited to, produced
water, drilling fluids and other associated wastes) in accordance with
applicable federal, state or local regulations. When and if any lease, an
interest in which has been conveyed and assigned hereunder, is terminated, Buyer
shall take at its sole expense whatever remedial action on the Assets is
necessary to meet any federal, state or local requirements directed at
protecting human health and the environment in effect at that time.
(d) Except as provided for in Article 9(b) hereof, Buyer, its
successors and assigns, hereby agree to protect, indemnify, defend and hold
Seller, its agents, directors, officers, shareholders and employees, free and
harmless from and against all claims, demands and causes of action, including
any civil fines, penalties, costs of clean-up or plugging liabilities for any
and all wells, brought by any and all persons, including (without limitation)
Buyer's agents, directors, officers, shareholders and employees and also
including (without limitation) any private citizens, persons, organizations and
any agency, branch or representative of federal, state or local government, on
account of any personal injury or death or damage, destruction or loss of
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property, contamination of natural resources (including soil, surface water or
ground water) resulting from or arising out of any liability caused by or
connected with the presence, disposal or release of any material of any kind,
including, without limitation, asbestos and/or NORM, in, under or on the Assets
at the time the Assets are conveyed and assigned to Buyer, or thereafter caused
by acts of Buyer, its agents, directors, officers, shareholders and employees,
with regard to its use of the described Assets subsequent to the conveyance and
assignment of the described Assets pursuant to this Agreement without regard to
whether such liability, injury, death, damage, destruction, loss or
contamination is caused in whole or in part by any claimed negligence, active or
passive, on the part of Seller or other indemnified party. This indemnification
shall be in addition to any other indemnity provisions contained in this
Agreement.
10. CONDITIONS OF CLOSING BY BUYER: The obligation of Buyer to close is
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subject to the satisfaction of the following conditions:
(a) Buyer shall have had reasonable access during normal business
hours to all data and records obligated to be provided Buyer in Section 3
hereof.
(b) That all representations and warranties of Seller contained in
this Agreement shall be true and correct in all material respects at and as of
Closing as if such representations and warranties were made at and as of
Closing;
(c) Buyer shall have received Seller's assurance that (i) the
consummation of the transaction contemplated hereby will not violate the
provisions of Seller's corporate charter and by-laws or any agreement,
instrument, order, judgment or law by which it is bound, and (ii) all title
documents delivered hereunder are validly executed on behalf of Seller.
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(d) Seller shall have obtained and delivered to Buyer (i) all
prerequisite waivers of preferential rights of purchase, and (ii) all necessary
consents for transfer of the Interests, except those which by their nature
cannot be requested or obtained until after Closing, or Buyer and Seller shall
have adjusted the sale price in accordance with the provisions of Section 2 and
5.
(e) That all representations and warranties of Seller contained in
this Agreement shall be true and correct in all material respects at and as of
Closing as if such representations and warranties were made at and as of
Closing;
(f) Seller shall have performed and satisfied in all material
respects all covenants and agreements required by this Agreement to be performed
or satisfied by Buyer at or prior to Closing; and
(g) at the Closing Date, no suit, action or other proceeding shall
be pending or threatened in which it is sought to restrain or prohibit the
performance of or to obtain damages or other relief in connection with this
Agreement or the transactions contemplated hereby.
(h) Since the date of this Agreement, there shall have been no
material adverse change in the condition of the Assets, except depreciation of
personal property through ordinary wear and tear, depletion resulting from
production and economic, political or legal changes affecting the oil and gas
industry in general; provided, however, that no change in the conditions of the
-------- -------
Assets shall be deemed material unless the aggregate value thereof exceeds five
(5%) of the Purchase Price
11. CONDITIONS OF CLOSING BY SELLER: The obligation of Seller to close
--------------------------------
is subject to:
(a) Seller receiving evidence satisfactory to Seller that Buyer
has all requisite corporate, partnership or other power and authority to
purchase the Interests on the terms described in this Agreement and to perform
its other obligations hereunder and that all corporate, partnership and/or other
prerequisites of whatsoever nature have been fulfilled.
19
(b) That Seller shall have performed and satisfied in all material
respects all covenants and agreements required by this Agreement to be performed
or satisfied by Seller at or prior to Closing;
(c) At the Closing Date, no suit, action or other proceeding shall
be pending or threatened in which it is sought to restrain or prohibit the
performance of or to obtain damages or other relief in connection with this
Agreement or the transactions contemplated hereby.
12. CLOSING: The Closing shall be held on or before March 31, 2003, at
-------
2:00 P.M., at the offices of Buyer or at such other place as Seller and Buyer
may mutually agree in writing. At Closing the following will occur:
(a) Seller and Buyer shall execute, acknowledge and deliver an
Assignment and Bill of Sale substantially in the form of Exhibit "D" attached
hereto.
(b) Buyer shall deliver to Seller by either wire transfer or
certified funds the remaining balance of the total sale price as adjusted
hereunder, subject to further adjustment after Closing as provided for herein,
and shall cause to be delivered to Seller a certificate representing the shares
of Buyer required to be transferred to Seller pursuant to Article 2(b) above.
(c) Seller and Buyer shall execute any necessary forms required by
governmental agencies for the transfer of the Interests and Buyer shall file
same immediately following Closing.
(d) Seller shall (subject to the terms of any applicable
agreements and to the other provisions hereof) deliver to Buyer exclusive
possession of the Interests, effective as of the Effective Time.
20
(e) All books, records and files in the possession of Seller
pertaining to the Interests, including, without limitation, all well files,
correspondence, geological and engineering information, shall be made available
for delivery to Buyer at Seller's offices where currently maintained, within
five (5) days after the Closing. Seller shall have the right to retain copies of
any or all of such books, records and files and to retain canceled checks and
general ledger, purchasing and other general accounting records of Seller.
Seller reserves the right to later examine the records and information delivered
to Buyer pursuant to this paragraph (e) to the extent such examination is
necessary for any relevant business purpose. All information and data shall be
furnished as a matter of convenience only to Buyer and Buyer's reliance on same
shall be at Buyer's sole risk.
13. RESERVATIONS AND EXCEPTIONS: Sale and purchase of the Interests is
----------------------------
made subject to all reservations, exceptions, limitations, contracts and other
burdens or instruments which are of record or of which Buyer has actual or
constructive notice, including any matter included or referenced in the
materials made available by Seller to Buyer.
14. CLOSING ADJUSTMENTS: All ad valorem taxes, real property taxes and
--------------------
similar obligations ("Property Taxes") for the year 2002 shall be prorated and
paid by Seller.
All proceeds (including proceeds held in suspense or escrow) from the sale
of production actually sold and delivered by Seller prior to the Effective Time
and attributable to the Interests shall belong to Seller and all proceeds from
the sale of production actually sold and delivered after the Effective Time
attributable to the Interests shall belong to Buyer. In addition, all oil,
condensate or liquid hydrocarbons (hereinafter in this paragraph called "oil")
in storage above the pipeline connection shall be gauged and all gas meter
charts shall be replaced at the Effective Time. Buyer shall pay Seller for such
oil at the highest posted field price prevailing at the Effective Time for oil
of like grade and gravity for the particular field.
21
Except as otherwise specifically provided in this Agreement, all costs,
expenses and obligations relating to the Interests which accrue prior to the
Effective Time shall be paid and discharged by Seller; and all costs, expenses
and obligations relating to the Interests which accrue after the Effective Time
shall be paid and discharged by Buyer.
Within 5 days prior to closing, Seller will prepare and deliver to Buyer a
closing settlement statement that details the adjustments in Articles 2(d), 5,
6, 9 and 14.
15. POST CLOSING ACCOUNTING:
-------------------------
(a) As soon as practicable after the Closing, Seller shall prepare
and deliver to Buyer, in accordance with this Agreement and generally accepted
accounting principles, a statement (the "Intermediate Settlement Statement")
setting forth each adjustment or payment that was not finally determined as of
the Closing and showing the calculation of such adjustments to the sale price
including adjustments related to title defects of Article 5, Buyer Remediation
costs of Articles 9(b), and any adjustments related to Article 15(c). As soon
as practicable after receipt of the Intermediate Settlement Statement, Buyer
shall deliver to Seller a written report containing any changes that Buyer
proposes be made to the Intermediate Settlement Statement. The parties undertake
to agree with respect to the Intermediate Settlement Statement no later than 180
days after closing, such agreement constituting and to be embodied in the "Final
Settlement Statement" and to establish the "Final Sale Price", and the date upon
which the Final Sale Price is established to be the "Final Settlement Date'.
However, the "Final Sale Price" shall not include any additional consideration
which may be earned upon performance level of the assets reaching stated targets
per Exhibit "C", until such time as they are achieved or agreement is reached
22
that they shall not be achieved. Such additional payments are considered
additional consideration for the purchase of these assets. In the event Buyer
and Seller are unable to mutually agree upon the amount of the Final Settlement
Statement, an audit shall be conducted by a mutually agreed upon accounting
firm. 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 of all expenses associated with such audit. In the event that (i) the Final
Sale Price is more than the amount paid at Closing, Buyer shall pay to Seller
the amount of such difference, or (ii) the Final Sale Price is less than the
amount paid at Closing, Seller shall pay Buyer in immediately available funds
the amount of such difference within 10 days of noticification. Seller shall be
responsible for the settlement of all joint billing audits which relate to
accounting periods prior to the Effective Time. Buyer shall be responsible for
the settlement of all joint billing audits which relate to accounting periods
after the Effective Time. Any credits received by Buyer after the Effective Time
Attributable to expenses paid prior to the Effective Time shall be promptly
reimbursed to Seller by Buyer.
(b) Any additional consideration earned pursuant to 2(c) connected
with production levels achieved shall be considered an upward post closing
adjustment regardless of when earned.
16. TAXES: The sale price provided for hereunder excludes any sales
-----
taxes or other taxes in connection with the sale of property pursuant to this
Agreement because the parties believe that this sale is exempt from sales tax.
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 property pursuant to this Agreement. Buyer shall defend and hold
Seller harmless with respect to the payment of all such taxes, if any, including
any interest or penalties assessed thereon.
23
All taxes (other than ad valorem and income taxes) which are imposed on or
with respect to the production of oil, natural gas or other hydrocarbons or
minerals or equipment or the receipt of proceeds therefrom (including but not
limited to severance, production, excise and windfall profit taxes) shall be
apportioned between the parties based upon the respective shares of production
taken by the parties. Payment or withholding of all such taxes which have
accrued prior to the Effective Time and filing of all statements, returns and
documents pertinent thereto shall be the responsibility of Seller. Payment or
withholding of all such taxes which have accrued from and after the Effective
Time and the filing of all statements, returns and documents incident thereto
shall be the responsibility of Buyer.
17. FURTHER OPERATION OF SELLER-OPERATED INTERESTS: Seller shall, as to
----------------------------------------------
the Interests it now operates, continue to operate the same until the Effective
Time, when such operation shall be turned over to, and become the responsibility
of Buyer. In the event Closing occurs after the Effective Time, however, Seller
shall, unless Buyer and Seller otherwise agree, continue the physical operation
of such Interests until Closing: such operation from and after the Effective
Time shall be conducted by Seller for and on behalf of Buyer; and for any such
services performed by Seller from and after the Effective Time, Buyer shall pay
Seller for all reasonable and necessary expenses incurred by Seller in such
operation, protection or maintenance of the Interests. Such expenses may be
recovered by Seller as part of the closing or post-closing adjustments, as
appropriate.
In all of its operations after full execution of this Agreement, Seller
shall exercise the same standard of care as an ordinary prudent operator under
the same or similar circumstances and shall notify Buyer of any material adverse
change in the productive capability of any well Included in the Interests.
Effective with closing, the revised Operating Agreement with attached Accounting
Procedure, Exhibit "G", shall be in effect for the properties.
24
18. BROKER'S FEE: Seller represents and warrants to Buyer that Seller
-------------
has incurred no liability, contingent or otherwise, for broker's or finder's
fees in respect of this Agreement or the transactions contemplated hereby for
which Buyer shall have any responsibility whatsoever; and Buyer represents and
warrants to Seller that Buyer has incurred no fees in respect of this Agreement
or the transactions contemplated hereby for which Seller shall have any
responsibility whatsoever.
19. NOTICES: All communications required or permitted under this
-------
Agreement shall be in writing and any communication or delivery hereunder shall
be deemed to have been fully made if actually delivered, or if mailed by
registered or certified mail, postage prepaid, to the address as set forth
below:
SELLER
------
Regent Energy Corporation
10777 Westheimer, Suite 1100
Houston, TX 77042
Attn: Andrew Levy
BUYER
-----
Rocky Mountain Energy Corporation
333 N. Sam Houston Parkway East, Suite 910
Houston, Texas 77060
Attn: John N. Ehrman
20. FURTHER ASSURANCE: After Closing each of the parties shall execute,
-----------------
acknowledge and deliver to the other such further instruments, and take such
other actions as may be reasonably necessary to carry out the provisions of this
Agreement. Certain forms of the Bureau of Land Management will have to be
prepared, executed and filed at a later date. Seller acknowledges that Buyer is
making this concession to speed closing. However, Buyer shall assume all
25
responsibility for notifying the Buyer of oil and gas production from the
Interests, and such other designated persons who may be responsible for
disbursing payments for the purchase of such production, of the change of
ownership of the Interests. Buyer shall take all actions necessary to effectuate
the transfer of such payments to Buyer as of the Effective Time. Seller shall
have no responsibility or liability for the proper distribution of proceeds from
and after the Effective Time.
21. PRESS RELEASE: There shall be no press release or public
--------------
communication concerning this purchase and sale by either party except with the
written consent of the party not originating said release or communication, with
the exception being those reports reasonably required by applicable state or
federal law or regulations.
22. ENTIRE AGREEMENT: This Instrument states the entire agreement
-----------------
between the parties and may be supplemented, altered, amended, modified or
revoked by writing only, signed by both parties.
23. SURVIVAL: The representations, warranties and agreements contained
--------
in this Purchase and Sales Agreement and in any certificate or other instrument
delivered by or on behalf of either party pursuant to this Purchase and Sales
Agreement shall survive the Closing and shall be unaffected by any investigation
made by the other party.
24. HEADINGS: The headings are for guidance only and shall have no
--------
significance in the interpretations of this Agreement.
26
25. GOVERNING LAW: THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
-------------
PARTIES HERETO SHALL BE GOVERNED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW MEXICO THE PARTIES AGREE THAT ANY LITIGATION RELATING
DIRECTLY OR INDIRECTLY TO THIS AGREEMENT MUST BE BROUGHT BEFORE AND DETERMINED
BY A COURT OF COMPETENT JURISDICTION WITHIN THE STATE OF NEW MEXICO.
SELLER:
REGENT ENERGY CORPORATION
By:________________________________________
Andrew Levy, Director for Regent Energy Corporation
BUYER:
ROCKY MOUNTAIN ENERGY CORPORATION
By:________________________________________
John N. Ehrman, President and CEO
27
STATE OF NEW YORK Sec.
Sec.
COUNTY OF NEW YORK Sec.
BEFORE ME, the undersigned authority, on this day personally appeared
Andrew Levy, known to me to be the person whose name is subscribed to in the
foregoing instrument, and known to me to be a Director of Regent Energy
Corporation, a New Mexico corporation, and acknowledged to me that he executed
said instrument for the purposes and consideration therein express, and as the
act of said corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this _______ day of _________ 2003.
_______________________________________
Notary Public, State of New York
STATE OF TEXAS Sec.
Sec.
COUNTY OF HARRIS Sec.
BEFORE ME, the undersigned authority, on this day personally appeared John
N. Ehrman, known to me to be the person whose name is subscribed to in the
foregoing instrument, and known to me to the President of Rocky Mountain Energy
Corporation, a Nevada corporation, and acknowledged to me that he executed said
instrument for the purposes and consideration therein express, and as the act of
said corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this _______ day of _________ 2003.
_______________________________________
Notary Public, State of Texas
28
EXHIBIT "A"
The Participating Area of the Horseshoe-Gallup Unit, covering 90% working
interest and full net revenue interest as attached:
Township 30 North, Range 16 West, N.M.P.M.
------------------------------------------
Section 2: N 1/2 SW 1/4
Sections 3 & 4: All
Section 5: N 1/2, N 1/2 SW 1/4, SE 1/4 SW 1/4, SE 1/4
Section 6: N 1/2 NE 1/4, SE 1/4 NE 1/4
Section 8: N 1/2 NE 1/4, SE 1/4 NE 1/4
Section 9: N 1/2, N 1/2 SW 1/4, SE 1/4 SW 1/4, W 1/2 SE 1/4
Section 10: NW 1/4
Township 31 North, Range 16 West, N.M.P.M.
------------------------------------------
Section 19: S 1/2 NE 1/4, NW 1/4, S 1/2
Section 20: S 1/2
Section 21: S 1/2
Section 22: S 1/2 SW 1/4
Section 26: S 1/2
Section 27: W 1/2 NE 1/4, SE 1/4 NE 1/4, NW 1/4, S 1/2
Sections 28-30: All
Section 31: N 1/2, N 1/2 SW 1/4, SE 1/4 SW 1/4, SE 1/4
Sections 32-35: All
Section 36: W 1/2 SW 1/4
Township 31 North, Range 17 West, N.M.P.M.
------------------------------------------
Section 13: SW 1/4 NW 1/4, SW 1/4, W 1/2 SE 1/4, SE 1/4 SE 1/4
Section 14: All
Section 15: NE 1/4, N 1/2 NW 1/4, SE 1/4 NW 1/4, N 1/2 SE 1/4,
SE 1/4 SE 1/4
Section 23: NE 1/4, N 1/2 NW 1/4, SE 1/4 NW 1/4, N 1/2 SE 1/4,
SE 1/4 SE 1/4
Section 24: All
Section 25 N 1/2, NE 1/4 SW 1/4, SE 1/4
Section 36: NE 1/4 NE 1/4
containing 13,527.80 acres, more or less, San Juan County, New Mexico.
OIL AND GAS LEASES:
- ------------------
LEASE A:
- -------
Serial No.: I-149-IND-7652
Date: October 29, 1947, effective December 15, 1947
Recorded: Book 321, Page 2
Lessor: J. M. Stewart, General Superintendent of the Navajo
Service, on behalf of the Navajo Tribe Indians
Original Lessee: Byrd-Frost, Inc.
29
Tracts: 1, 1-A, 1-B and 1-C
Royalty: 1/8
1. Unit Tract 1: Township 31 North, Range 17 West, N.M.P.M.
------------ ------------------------------------------
Sec. 15: E 1/2 NW 1/4, NW 1/4 NW 1/4, E 1/2 SE
1/4, NW 1/4 SE 1/4
Navajo Tribal Contract I-149-IND-7652
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 83.398437% 4.101563%
2. Unit Tract 1-A: Township 31 North, Range 17 West, N.M.P.M.
-------------- ------------------------------------------
Sec. 23: E 1/2 NW 1/4, NW 1/4 NW 1/4
Navajo Tribal Contract I-149-IND-7652
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 83.398437% 4.101563%
3. Unit Tract 1-B: Township 31 North, Range 17 West, N.M.P.M.
-------------- ------------------------------------------
Sec.15: NE 1/4
Navajo Tribal Contract I-149-IND-7652
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 83.398437% 4.101563%*
Overriding Royalties:
---------------------
*i. All Depths
----------
ii. Surface to 1900 feet subsurface
-------------------------------
100% interest in sliding scale overriding royalty
of (1) 1/16 x 7/8 when monthly production averages
40 BOPD or less, (2) 3/32 x 7/8 when monthly
production averages 41-100 BOPD, and (3) 1/8 x 7/8
when monthly production averages more than 100
BOPD
4. Unit Tract 1-C: Township 31 North, Range 17 West, N.M.P.M.
-------------- ------------------------------------------
Sec. 23: E 1/2 SE 1/4, NW 1/4 SE 1/4
Navajo Tribal Contract I-149-IND-7652
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 83.398437% 4.101563%*
Overriding Royalties:
---------------------
*i. All Depths
----------
ii. Surface to 1900 feet subsurface
-------------------------------
100% interest in sliding scale overriding royalty
of (1) 1/16 x 7/8 when monthly production averages
40 BOPD or less, (2) 3/32 x 7/8 when monthly
production averages 41-100 BOPD, and (3) 1/8 x 7/8
when monthly production averages more than 100
BOPD
30
LEASE B:
- -------
Serial No.: 14-20-603-733
Date: October 11, 1954, effective December 22, 1954
Recorded: Book 325, Page 147
Lessor: Sam Ahkech, Chairman of the Navajo Tribal Council, on
behalf of the Navajo Tribe of Indians
Original Lessee: Bolack Oil & Gas Co.
Tracts: 4, 5, 6, 6-A, 7, 8, 9, 10 and 11
Royalty: 1/8
1. Unit Tract 4: Township 30 North, Range 16 West, N.M.P.M.
------------ ------------------------------------------
Sec.6: E 1/2 NE 1/4, NW 1/4 NE 1/4
Navajo Tribal Contract No. 14-20-603-733
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 87.5% 0%
2. Unit Tract 5: Township 30 North, Range 16 West, N.M.P.M.
------------ ------------------------------------------
Sec. 5: NW 1/4, SE 1/4
Navajo Tribal Contract No. 14-20-603-733
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 82.03125% 5.46875%
3. Unit Tract 6: Township 30 North, Range 16 West, N.M.P.M.
------------ ------------------------------------------
Sec. 5: NE 1/4, E 1/2 SW 1/4, NW 1/4 SW 1/4
Sec. 8: NE 1/4 NE 1/4
Navajo Tribal Contract No. 14-20-603-733
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 87.5% 0%
4. Unit Tract 6-A: Township 30 North, Range 16 West, N.M.P.M.
-------------- ------------------------------------------
Sec.8: SE 1/4 NE 1/4, NW 1/4 NE 1/4
Sec.9: That part of the SW 1/4 NW 1/4 and NW 1/4
SW 1/4 lying within the Navajo Indian Reservation
Navajo Tribal Contract No. 14-20-603-733
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 87.5% 0%
5. Unit Tract 7: Township 30 North, Range 16 West, N.M.P.M.
------------ ------------------------------------------
Sec.4: That part of the NW 1/4 NW 1/4 lying within
the Navajo Indian Reservation
Navajo Tribal Contract No. 14-20-603-733
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 82.03125% 5.46875%
31
6. Unit Tract 8: Township 30 North, Range 16 West, N.M.P.M.
------------ ------------------------------------------
Sec.4: That part of the SW 1/4 NW 1/4 lying within
the Navajo Indian Reservation
Navajo Tribal Contract No. 14-20-603-733
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 82.03125% 5.46875%
7. Unit Tract 9: Township 30 North, Range 16 West, N.M.P.M.
------------ ------------------------------------------
Sec.4: That part of the NW 1/4 SW 1/4 lying within
the Navajo Indian Reservation
Navajo Tribal Contract No. 14-20-603-733
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 82.03125% 5.46875%
8. Unit Tract 10: Township 30 North, Range 16 West, N.M.P.M.
------------- ------------------------------------------
Sec.4: That part of the SW 1/4 SW 1/4 lying within
the Navajo Indian Reservation
Navajo Tribal Contract No. 14-20-603-733
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 82.03125% 5.46875%
9. Unit Tract 11: Township 30 North, Range 16 West, N.M.P.M.
------------- ------------------------------------------
Sec.9: That part of the NW 1/4 NW 1/4 lying within
the Navajo Indian Reservation
Navajo Tribal Contract No. 14-20-603-733
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 87.5% 0%
LEASE C:
- -------
Serial No. 14-20-603-734
Date: October 5, 1954, effective December 22, 1954
Recorded: Book 270, Page 10
Lessor: Sam Ahkech, Chairman of the Navajo Tribal Council, on
behalf of the Navajo Tribe of Indians
Original Lessee: The Atlantic Refining Company
Tract: 12
Royalty: 1/8
1. Unit Tract 12: Township 31 North, Range 16 West, N.M.P.M.
------------- ------------------------------------------
Sec. 28: That portion lying within the Navajo
Indian Reservation
Sec. 29: All
Sec. 30: All
Sec. 31: E 1/2, NW 1/4, E 1/2 SW 1/4, NW 1/4 SW
1/4
Sec. 32: All
Sec. 33: That portion lying within the Navajo
Indian Reservation Navajo Tribal Contract No.
14-20-603-734
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 87.5% 0%
32
LEASE D:
- -------
Serial No.: 14-20-603-2022
Date: December 4, 1956, effective February 1, 1957
Recorded: Book 321, Page 210
Lessor: Acting Chairman of Navajo Tribal Council, on behalf of
the Navajo Tribe of Indians
Original Lessee: Magnolia Petroleum Company
Tract: 13
Royalty: 1/8
1. Unit Tract 13: Township 31 North, Range 17 West, N.M.P.M.
------------- ------------------------------------------
Sec. 13: SW 1/4, SE 1/4 SE 1/4, W 1/2 SE 1/4, SW
1/4 NW 1/4
Sec. 14: All
Sec. 23: NE 1/4
Sec. 24: N 1/2
Navajo Tribal Contract No. 14-20-603-2022
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 87.5% 0%
LEASE E:
- -------
Serial No. 14-20-600-3531
Date: September 19, 1957, effective October 31, 1957
Recorded: Book 355, Page 130
Lessor: Paul Jones, Chairman of the Navajo Tribal Council, on
behalf of the Navajo Tribe of Indians; and Albert Wing,
Chairman of the Ute Mountain Tribal Council and the Ute
Mountain Tribe of the Ute Mountain
Reservation
Original Lessee: The Atlantic Refining Company
Tract: 3
Royalty: 1/8
1. Unit Tract 3: Township 31 North, Range 16 West, N.M.P.M.
------------ ------------------------------------------
Sec.19: W 1/2, SE 1/4, S 1/2 NE 1/4
Sec. 20: S 1/2
Navajo Tribal Contract No. 14-20-600-3531
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 87.5% 0%
33
LEASE F:
- -------
Serial No. 14-20-603-4908
Date: December 5, 1958, effective December 22, 1958
Recorded: Book 401, Page 71
Lessor: Ah kay na pah or heirs, as the case may be, as Allottee
No. 048277 of the Navajo Tribe of Indians
Original Lessee: Ralph Lowe
Tract: 24
Royalty: 1/8
1. Unit Tract 24: Township 30 North, Range 16 West, N.M.P.M.
------------- ------------------------------------------
Sec. 2: Lots 1, 2, 5, 6
Navajo Allotted Contract No. 14-20-603-4908
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 75% 12.5%
LEASE G:
- -------
Serial No. 14-20-603-4909
Date: December 10, 1958, effective January 22, 1959
Recorded: Book 457, Page 2
Lessor: Ushkee nah yah, or Louie Jim, Allottee No. 048280 of the
Navajo Tribe of Indians
Original Lessee: J. Felix Hickman; and Helbing and Podpechan, a
partnership
Tract: 25
Royalty: 1/8
1. Unit Tract 25: Township 30 North, Range 16 West, N.M.P.M.
------------- ------------------------------------------
Sec. 2: SW 1/4
Navajo Allotted Contract No. 14-20-603-4909
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 87.5% 0%
LEASE H:
- -------
Serial No.: SF 079439 (and SF 079439-A, segregated from SF 079439)
Date: September 1, 1948
Recorded: Book 355, Page 125
Lessor: United States of America
Original Lessee: A. L. Duff, Jr.
Tracts: 26, 27, 28, 29, 30, 31 and 32
Royalty: 1/8
1. Unit Tract 26: Township 30 North, Range 16 West, N.M.P.M.
------------- ------------------------------------------
Sec. 3: Lots 3 and 4
Sec. 4: Lot 3
United States Lease SF 079439
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 80.8125% 6.6875%
34
2. Unit Tract 27: Township 30 North, Range 16 West, N.M.P.M.
------------- ------------------------------------------
Sec. 3: Lots 1 and 2
United States Lease SF 079439
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 85.5% 2%
3. Unit Tract 28: Township 30 North, Range 16 West, N.M.P.M.
------------- ------------------------------------------
Sec. 4: Lot 4
United States Lease SF 079439
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 80.8125% 6.6875%
4. Unit Tract 29: Township 30 North, Range 16 West, N.M.P.M.
------------- ------------------------------------------
Sec. 4: Lot 5
United States Lease SF 079439
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 80.8125% 6.6875%
5. Unit Tract 30: Township 30 North, Range 16 West, N.M.P.M.
------------- ------------------------------------------
Sec. 4: Lot 6
United States Lease SF 079439
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 85% 2.5%
6. Unit Tract 31: Township 30 North, Range 16 West, N.M.P.M.
------------- ------------------------------------------
Sec. 4: Lot 7
United States Lease SF 079439
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 85.5% 2%
7. Unit Tract 32: Township 30 North, Range 16 West, N.M.P.M.
------------- ------------------------------------------
Sec. 4: Lots 1 and 2
United States Lease SF 079439-A
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 85.5% 2%
LEASE I:
- -------
Serial No.: SF 081226 (and SF 081226-A, SF 081226-B, and SF 081226-C,
segregated from SF 081226)
Date: October 1, 1951
Recorded: Book 355, Page 126
Lessor: United States of America
Original Lessee: Hazel Bolack
Tracts: 33, 34, 34-A, 35, 36, 37, 38 and 39
Royalty: 1/8
35
1. Unit Tract 33: Township 30 North, Range 16 West, N.M.P.M.
------------- ------------------------------------------
Sec. 3: Lots 5, 6, 9, 11, 14 and 16
Sec. 4: E 1/2 SW 1/4, SE 1/4 NE 1/4, E 1/2 SE 1/4
Sec. 10: Lots 1 and 2
United States Lease SF 081226
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 82.8125% 4.6875%
2. Unit Tract 34: Township 30 North, Range 16 West, N.M.P.M.
------------- ------------------------------------------
Sec. 9: NW 1/4 SE 1/4
United States Lease SF 081226
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
93.75% 75.515625% 5.734375%
3. Unit Tract 34-A: Township 30 North, Range 16 West, N.M.P.M.
--------------- ------------------------------------------
Sec. 9: SW 1/4 SE 1/4
United States Lease SF 081226
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
93.75% 75.515625% 5.734375%
4. Unit Tract 35: Township 30 North, Range 16 West, N.M.P.M.
------------- ------------------------------------------
Sec. 9: Lot 1
United States Lease SF 081226-A
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 84.765625% 2.734375%
5. Unit Tract 36: Township 30 North, Range 16 West, N.M.P.M.
------------- ------------------------------------------
Sec. 9: Lots 2, 3 and E 1/2 SW 1/4
United States Lease SF 081226-A
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 82.03125% 5.46875%
6. Unit Tract 37: Township 30 North, Range 16 West, N.M.P.M.
------------- ------------------------------------------
Sec. 9: E 1/2 NW 1/4
United States Lease SF 081226-A
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 87.5% 0%
7. Unit Tract 38: Township 30 North, Range 16 West, N.M.P.M.
------------- ------------------------------------------
Sec. 4: W 1/2 SE 1/4, SW 1/4 NE 1/4, SE 1/4 NW 1/4
Sec. 3: Lots 7, 8, 10, 12, 13 and 15
Sec. 9: W 1/2 NE 1/4
36
Sec. 10: E 1/2 NW 1/4
United States Lease SF 081226-B
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 87.5% 0%
*(unitized (Gallup) interval only)
8. Unit Tract 39: Township 30 North, Range 16 West, N.M.P.M.
------------- ------------------------------------------
Sec. 9: E 1/2 NE 1/4
United States Lease SF 081226-C
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 87.5% 0%
LEASE J:
- -------
Serial No.: 14-20-604-1950
Date: November 21, 1956, effective February 25, 1957
Recorded: Book 328, Page 86
Lessor: Scott Jacket, Chairman of the Ute Mountain Tribal Council,
on behalf of the Ute Mountain Tribe of the Ute Mountain
Reservation
Original Lessee: The Atlantic Refining Company
Tracts: 17 and 18
Royalty: 1/8
1. Unit Tract 17: Township 31 North, Range 16 West, N.M.P.M.
------------- ------------------------------------------
Sec. 26: S 1/2
Sec. 35: W 1/2, NE 1/4, N 1/2 SE 1/4
Sec. 36: W 1/2 SW 1/4
Ute Mountain Ute Tribal Contract No.
14-20-604-1950
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 87.5% 0%
2. Unit Tract 18: Township 31 North, Range 16 West, N.M.P.M.
------------- ------------------------------------------
Sec. 35: S 1/2 SE 1/4
Ute Mountain Ute Tribal Contract No. 14-20-604-
1950
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 87.5% 0%
LEASE K:
- -------
Serial No.: 14-20-604-1951
Date: June 28, 1957, effective September 23, 1957
Recorded: Book 359, Page 77
Lessor: Paul Jones, Chairman of the Navajo Tribal Council, on
behalf of the Navajo Tribe of Indians; and Albert Wing,
Chairman of the Ute Mountain Tribal Council and Ute
Mountain Tribe of the Ute Mountain Reservation
Original Lessee: El Paso Natural Gas Company
Tracts: 19, 20 and 21
Royalty: 1/8
37
1. Unit Tract 19: Township 31 North, Range 16 West, N.M.P.M.
------------- ------------------------------------------
Sec. 27: SE 1/4, NW 1/4, E 1/2 SW 1/4, W 1/2 NE
1/4, SE 1/4 NE 1/4
Sec. 28: E 1/2 SE 1/4, W 1/2 E 1/2, and that part
of W 1/2 lying within the Ute Mountain Indian
Reservation
Sec. 33: W 1/2 NE 1/4, E 1/2 SE 1/4, and that part
of W 1/2 lying within the Ute Mountain Indian
Reservation
Sec. 34: NE 1/4, W 1/2 SE 1/4, NE 1/4 SE 1/4, W
1/2 NW 1/4, E 1/2 SW 1/4 Ute Mountain Ute Tribal
Contract No. 14-20-604-1951
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 87.5% 0%
2. Unit Tract 20: Township 31 North, Range 16 West, N.M.P.M.
------------- ------------------------------------------
Sec. 28: E 1/2 NE 1/4
Sec. 33: E 1/2 NE 1/4
Sec. 34: E 1/2 NW 1/4, W 1/2 SW 1/4
Ute Mountain Ute Tribal Contract No.
14-20-604-1951
i. Surface to base of Gallup formation (except unitized interval):
-------------------------------------------------------------
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
90.9340% 72.2925% 8%
ii. Unitized (Gallup) interval:
--------------------------
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
99.7674% 79.3151% 8%
3. Unit Tract 21: Township 31 North, Range 16 West, N.M.P.M.
------------- ------------------------------------------
Sec. 27: W 1/2 SW 1/4
Sec. 33: W 1/2 SE 1/4
Sec. 34: SE 1/4 SE 1/4
Ute Mountain Ute Tribal Contract No.
14-20-604-1951
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 87.5% 0%
LEASE L:
- -------
Serial No. NOO-C-14-20-1948 (Formerly 14-20-604-1948A(N))
Date: May 21, 1981, effective May 26, 1981
Recorded: Book 1147, Page 929
Lessor: Chairman of the Navajo Tribal Council, on behalf of the
Navajo Tribe of Indians
Original Lessee: Texaco Inc.
Tract: 16-A
Royalty: 1/8
1. Unit Tract 16-A: Township 31 North, Range 16 West, N.M.P.M.
--------------- ------------------------------------------
Sec. 21: That portion of the SW 1/4 that lies West
of the Burt Survey; being 486.10 feet wide and
within the Navajo Indian Reservation Navajo Tribal
Contract No. NOO-C-14-20-1948A
38
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 87.5% 0%
LEASE M:
- -------
Serial No.: 14-20-604-1948A(U)
Date: August 7, 1981, effective August 7, 1981
Recorded: Book 1144, Page 793
Lessor: Judy M. Knight, Chairperson of the Ute Mountain Tribal
Council, on behalf of the Ute Mountain Indian Tribe
Original Lessee: Texaco Inc.
Tract: 16
Royalty: 1/8
1. Unit Tract 16: Township 31 North, Range 16 West, N.M.P.M.
------------- ------------------------------------------
Sec. 21: SE 1/4, and that portion of the SW 1/4
that lies East of the Burt Survey, and within the
Ute Mountain Indian Reservation
Sec. 22: S 1/2 SW 1/4 Ute Mountain Ute Tribal
Contract No. 14-20-604-1948A(U)
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 87.5% 0%
LEASE N:
- -------
Serial No.: E-3150-12
Date: December 10, 1949
Recorded: Unrecorded, but there is no need to do so
Lessor: State of New Mexico
Original Lessee: John Burroughs
Tract: 41
Royalty: 1/8
1. Unit Tract 41: Township 30 North, Range 16 West, N.M.P.M.
------------- ------------------------------------------
Sec. 2: Lots 3 and 4
State of New Mexico Lease E-3150-12
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 87.5% 0%
LEASE O:
- -------
Serial No.: E-9896-7
Date: March 20, 1956
Recorded: Book 1148, Page 245
Lessor: State of New Mexico
Original Lessee: Monsanto Chemical Company
Tract: 42
Royalty 1/8
1. Unit Tract 42: Township 30 North, Range 16 West, N.M.P.M.
------------- ------------------------------------------
Sec. 2: S 1/2 NW 1/4
State of New Mexico Lease E-9896-7
39
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 76.5625% 10.9375%
LEASE P:
- -------
Serial No.: 14-20-603-2037
Date: Unknown
Recorded: Apparently unrecorded
Lessor: Navajo Tribe of Indians
Original Lessee: Unknown
Tract: 15
Royalty: 1/8
1. Unit Tract 15: Township 31 North, Range 17 West, N.M.P.M.
------------- ------------------------------------------
Sec. 24: S 1/2
Sec. 25: E 1/2, NW 1/4, NE 1/4 SW 1/4
Sec. 36: NE 1/4 NE 1/4
Navajo Tribal Contract No. 14-20-603-2037
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
100% 87.5% 0%
LEASE Q:
- -------
Serial No.: NM 0444-A
Date: May 1, 1952
Recorded: Unknown
Lessor: United States of America
Original Lessee: J. R. Abraham
Tract: 40
Royalty: 1/8
1. Unit Tract 40: Township 30 North, Range 16 West, N.M.P.M.
------------- ------------------------------------------
Sec. 9: E 1/2 SE 1/4
United States Lease NM 04444-A
Operating Rights Net Revenue Interest Overriding Royalty Interest
---------------- -------------------- ---------------------------
0% 0% 5%
Assignment of all accounts receivable (if any) whether collectable or
uncollectable, associated with the leases since inception to date.
40
EXHIBIT "B"
LAWSUITS
--------
Hart Oil & Gas vs. Regent Energy Corporation et al. No. CV 2002-345-3, in the
- --------------------------------------------------
Eleventh Judicial District Court, San Juan County, New Mexico.
Steve Szumlinski vs. Regent Energy Corporation No. CV 2002-373-4, in the
- ----------------------------------------------
Eleventh Judicial District Court, San Juan County, New Mexico.
JP Machine Services, Inc. vs. Regent Energy Corporation No. CV 2002-331-3, in
- -------------------------------------------------------
the Eleventh Judicial District Court of San Juan County, New Mexico.
Parawon et al vs. Regent Energy Corporation, foreclosure action.
- -------------------------------------------
41
EXHIBIT "B-1"
HGU/NEHU LIEN CLAIMS AS OF JUNE 4, 2002
---------------------------------------
SAN JUAN COUNTY RECORDS
-----------------------
APPROX $ VENDOR BOOK/PAGE DATE
- ----------- ---------------------------------- --------- --------
$ 39,800.00 American Energy Services 1333/405 12/05/01
-0- American Energy Services (amended) 1334/845 01/03/02
62,739.29 Baker Petrolite Corp. 1337/714 02/26/02
33,596.18 Steven R. Szumlinski 1338/247 03/07/02
1,723.56 J.C. Well Service 1338/507 03/12/02
14,302.53 Hart Oil & Gas 1338/699 03/14/02
9,283.11 Rig Equipment and Supply 1341/273 04/29/02
44,086.12 Key Four Corners 1330/988 10/23/01
- -----------
$205,530.79 Total
TO BE CLEARED BY REGENT AT CLOSING.
42
EXHIBIT "F"
PRE-PAYMENTS
------------
None.
43