Exhibit 10.1
MINERALS PURCHASE AGREEMENT
This Agreement is dated effective July 1, 2005, and entered into this 24th
Day of June, 2005, by and between Zephyr Bay Sports Partners, LLC., a Colorado
Limited Liability Company (the "Seller") and Colorado Oil and Gas, Inc., a
Colorado Corporation (the "Buyer").
RECITALS
I. Seller is owned by William W. Stewart, President, Director and Shareholder
of Buyer. Seller owns a pool of minority mineral interests in certain oil
and gas leases located in Colorado, Wyoming, Texas and Oklahoma and has
offered to sell these interests to the Buyer for $200,000 (the "Purchase
Price") in the form of a Secured Promissory Note. The leases and interests
are set forth in detail in Schedule A, attached hereto and incorporated
herein by reference (the "Mineral Interests.")
II. Buyer is a majority owned subsidiary of Arete Industries, Inc., a Colorado
corporation that is publicly traded on the NASDAQ over the counter market.
Buyer is a development stage company seeking to acquire small interests in
oil and gas leases including passive investments as well as developmental
properties. Buyer's board of directors has authorized the Buyer to engage
in the proposed transaction set forth in this Agreement, as follows:
AGREEMENT
1. Seller agrees to sell to Buyer and the Buyer agrees to buy the Mineral
Interests for the Purchase Price on the terms set forth below.
2. Seller grants, bargains and conveys the Mineral Interests described in
Schedule A to Buyer free and clear of any and all encumbrances, liens,
claims and judgments, for consideration payment of the Purchase Price of
$200,000 subject to adjustment, as provided in Paragraph 4, below.
3. The Purchase Price will be paid with a Secured Promissory Note in favor of
Seller in the amount of the Purchase Price, plus 12% simple interest,
payable interest only on a monthly basis for 12 months beginning one month
following the Effective Date. Interest payments may deferred if the Buyer
does not have sufficient revenue to make payments for up to 120 days before
the Secured Promissory Note will be deemed in default. There will be a
balloon payment of all principal amounts and accrued interest due 12 months
from the Effective Date (the "Due Date.") There will be no prepayment
penalty in the event of partial payments of principal during the term of
the Note. The Secured Promissory Note shall be secured exclusively by a
first lien or mortgage on the Mineral Rights themselves. In the event of
dissolution or liquidation of the Buyer during the term of the Note, such
event would be deemed an event of default and the Mineral Interests would
be reconveyed to Seller in cancellation of the indebtedness,
Minerals Purchase Agreement
June 27, 2005
Page 2 of 4
EXCEPT, that in the event the Buyer makes any principal payments in excess
of 30% of the Purchase Price during the term of the Secured Promissory
Note, the Buyer shall have the option, upon such event of default, to sell
the Mineral Interests to a third party or to the Seller (who shall have a
first right of refusal to match any bona-fide third-party offer). If Buyer
has made such principal payments and elects not to sell the Mineral
Interests as provided in the preceding sentence, then Seller shall repay
Buyer any amount of such principal payments, less any accrued and unpaid
interest on the Secured Promissory Note as of the date of default.
4. The Purchase Price shall be subject to adjustment to actual market value as
determined by a third party appraiser selected by mutual agreement of the
Seller and Buyer (with Mr. Stewart abstaining from any board of directors'
vote in making such selection.) The appraisers' valuation shall be binding
on both Parties hereto. Such adjustment shall be to not less than $150,000
nor more than $250,000 and the original principal amount of the Secured
Promissory Note and Purchase Price shall be retroactively restated to such
amount. In the event that the appraised value is less than $150,000, the
Buyer may reject the purchase without penalty or obligation to the Seller
whatsoever. In the event that the appraised value is greater than $250,000,
the Purchase Price shall be reset to $250,000 without any further or other
obligation arising from such circumstance to the Seller other than the
referenced interest only payments of the Secured Promissory Note, and the
principal amount on the Due Date.
5. Buyer may sell all or any portion of the Mineral Interests to a third party
for cash consideration at any time, PROVIDED that, Seller shall have a
first right to match any bona-fide third party offer within 15 days of
receipt of written notice from Buyer of such bona-fide third party offer.
Buyer may also refinance the Mineral Interests at any time provided that
Seller receives full payment of all outstanding principal and accrued
interest at the time of closing of such refinance. Buyer may not pledge any
or all its right title and interest in the Mineral Interests except subject
to the lien of the Seller evidenced by this Agreement, and any subsequent
security interests recorded subsequent to the date of this Agreement, nor
without first obtaining a written subordination agreement, subordinating
the lien of the Seller to the Pledgee, from the Seller.
6. Seller shall provide Buyer with Assignment Agreements for the Mineral
Interests in such form as is required to properly record such Assignment of
the Mineral Interests in the proper county office in each county and state
in which the Mineral Interests are located on or before the Effective Date,
or within a reasonable time thereafter, with the consent of the Buyer,
which consent shall not be unreasonably withheld. Buyer shall execute and
deliver any security agreements and financing statements, or Mineral
Interest Mortgages, necessary to perfect Seller's security interest in the
Mineral Interests, through proper recording in appropriate county offices
where the Mineral Interests are located. In the event that circumstances
prevent the proper recording of Mineral Interest Assignments or perfection
of security interests as the means for carrying out the provisions of this
Agreement, Seller shall provide the Parties with appropriate legal
agreements binding the operator or manager of the total pool of mineral
interests in which the Mineral Interests are included, sufficient to
transfer title to the Mineral Interests to the Buyer and perfect the
Seller's security interest under the Secured Promissory Note.
Minerals Purchase Agreement
June 27, 2005
Page 3 of 4
7. In no event shall either Party cause any liens or encumbrances to attach to
the Mineral Interests prior to or subsequent to the Effective Date of this
Agreement except with the knowledge and consent of the other Party, and the
Parties hereto agree to indemnify and hold harmless, the other from and
against any such claims, liens, encumbrances, and agree to sue and defend
any claim or cause of action which may give rise to an encumbrance or
imposition of the lien of any judgment, claim, assessment or encumbrance
upon the Mineral Interests at their sole cost and expense.
8. This Agreement shall be binding upon the Parties, their respective
officers, directors, managers, members, shareholders, and their successors,
trustees, receivers and permitted assigns. Seller may not assign the
Secured Promissory Note, nor any security interest arising therefrom in
whole or in part without the express written permission of the Buyer. This
Agreement will survive and be deemed not to have merged into any Assignment
Agreements as to the Mineral Interests, as well as any Mortgage or
Collateral Agreement providing security to the Secured Promissory Note. In
the event of any real or apparent conflict of terms between the various
agreements and undertakings described herein, the more specific term of one
such document will govern over a general term in any of the others. If any
of the terms and conditions of this Agreement shall be deemed unenforceable
by operation of statute, by the common law, or by any judgment or decree of
court, such event shall not affect the enforceability of any other term of
provision herein, or in any of the collateral documents described herein.
9. Each Party agrees to execute such other and further documents to carry out
the purpose and intent of this Agreement and of the collateral agreements
and undertakings contemplated herein, including any documents required by
way of further assurances of any Party reasonably required in furtherance
of the purposes stated herein.
10. Notices: Any notices required to be given, shall be given for any purpose
to the last known address of the Party to receive the notice: if by first
class mail, three days after posting in the US Mail shall be the effective
date of the notice, or by courier if a delivery receipt is provided, the
date delivered by the courier to the office address of the recipient; or if
by facsimile, the latter of the date of the facsimile or the date that a
confirmed copy was posted in the US Mail. No notices by email shall be
deemed given unless followed with a conformed copy, and then shall be
effective three days after posting the conformed copy in the US Mail.
Minerals Purchase Agreement
June 27, 2005
Page 4 of 4
11. By their signatures below, the Parties hereby acknowledge and represent
that the signatory has full legal authority to execute this Agreement and
the collateral agreements and undertakings contemplated herein on behalf of
the Parties who are entities and thereby to bind the Parties fully to the
terms, conditions, agreements and undertakings, herein.
Dated as of the day first above written to be effective as of the Effective
Date.
SIGNATURES
BUYER:
COLORADO OIL AND GAS, INC.
BY: /s/ John R. Herzog
----------------------------------------
John R. Herzog, Exec. VP
7260 Osceola St.
Westminster, Colorado 80030
SELLER:
Zephyr Bay Sports Partners, LLC.
BY: /s/ William W. Stewart
----------------------------------------
William W. Stewart, Manager
9544 So. Chesapeake St
Highlands Ranch, CO 80126
Page 1 of 4
Schedule A to
Mineral Purchase Agreement
Dated June 27, 2005
SECURED PROMISSORY NOTE
AMOUNT: $200,000 Douglas County, Colorado
-------- July 1, 2005
1. For value received, the undersigned, Colorado Oil & Gas, Inc., a Colorado
Corporation, its successors or assigns (collectively the "borrower")
promises to pay Zephyr Bay Sports Partners, LLC, a Colorado Limited
Liability Company, or order (the "Note Holder") the principal sum of Two
Hundred Thousand and 00/100ths Dollars ($200,000), with interest on the
unpaid principal balance from the July 1, 2005 until paid in full at the
rate of twelve percent (12%) per annum.
Interest only shall be payable on a monthly basis for twelve (12) months
beginning August 1, 2005. Interest payments may be deferred if the Buyer
does not have sufficient revenue to make payments for up to 120 days before
this Secured Promissory Note is deemed in default. The entire principal
amount and all unpaid and accrued interest shall be due and payable on
August 1, 2006.
2. Payments received for application to this Note shall be applied first to
the payment of accrued interest at the rate specified above, and the
balance applied in reduction of the principal amount hereof.
3. Borrower may prepay the principal amount outstanding under this Note, in
whole or in part, without penalty. Any partial prepayment shall be applied
against the principal amount outstanding and shall not postpone the due
date of any subsequent payments.
4. This Note shall be senior secured to all indebtedness and obligations of
Colorado Oil and Gas, Inc.
5. Collateral. The Borrower grants to Note Holder a first priority interest in
the Borrower's mineral rights and override royalties in the properties
described in Exhibit "A" to this Note. The Borrower grants a first priority
interest in the principal amount no greater than Two Hundred Thousand and
00/100ths Dollars ($200,000.00). The Borrower shall take all reasonable
steps to assist the Note Holder's perfection of the interest in the
collateral described in this paragraph and in Exhibit "A", attached and
incorporated herein.
6. The Borrower represents that no secured indebtedness or obligations exist
against it and promises not to secure indebtedness or obligations in the
future without the written consent of the Note Holder.
Page 2 of 4
Schedule A to
Mineral Purchase Agreement
Dated June 27, 2005
7. Due On Sale. The outstanding and unpaid proceeds to the Borrower received
pursuant to this Promissory Note shall become due and payable to the Note
Holder, along with any accrued interest in the event that: (a) the Borrower
sells any or all interest in the mineral rights and override royalties in
the properties described in Exhibit "A", (b) there is a sale or other
transfer of a majority of the ownership interests of the Borrower.
8. This Note shall not be assigned, sold, or otherwise transferred without the
written consent of the Borrower. Said consent shall not be unreasonably
withheld.
9. The Borrower and all other parties to this Note, whether as endorsers,
guarantors or sureties, agree to remain fully bound hereunder until this
Note shall be fully paid and waive demand, presentment and protest and all
notices thereto and further agree to remain bound, notwithstanding any
extension, renewal, modification, waiver, or other indulgence by any holder
or upon the discharge or release of any obligor hereunder or to this Note.
No modification or indulgence by any holder hereof shall be binding unless
in writing; and any indulgence on any one occasion shall not be an
indulgence for any other or future occasion. The rights of any holder shall
be cumulative and not necessarily successive. This Note shall take effect
as a sealed instrument and shall be construed, governed and enforced in
accordance with the laws of the Colorado.
10. Venue for any and all disagreements arising from this Secured Promissory
Note shall be placed in the County of Douglas, State of Colorado.
COLORADO OIL AND GAS, INC. Secured Party Name and Address
7260 Osceola Zephyr Bay Sports Partners, LLC.
Westminster, Co 80030 9544 South Chesapeake Street
Highlands Ranch, Colorado 80126
By: /s/ John R. Herzog
----------------------------------
John R. Herzog
Its Executive Vice President
Page 3 of 4
Schedule A to
Mineral Purchase Agreement
Dated June 27, 2005
EXHIBIT "A"
Well Legal Description
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1. Ray #1-22 Sec. 22, T20N, R23W, Ellis County, OK
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2. Ruthie#1-22 Sec. 22, T20N, R23W, Ellis County, OK
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3. Danny Scott #2-25 Sec. 25, T12N, R20W, Custer County, OK
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4. Danny Scott #3-25 Sec. 25, T12N, R20W, Custer County, OK
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5. Sherry-Beth #2-26 Sec. 26, T12N, R20W, Custer County, OK
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6. Sherry-Beth #4-26 Sec. 26, T12N, R20W, Custer County, OK
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7. Sherry Beth #5-26 Sec. 26, T12N, R20W, Custer County, OK
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8. Sherry-Beth #7-26 Sec. 26, T12N, R20W, Custer County, OK
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9. Sherry-Beth #9-26 Sec. 26, T12N, R20W, Custer County, OK
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10. Hagar #3-8 Sec. 8, T11N, R20W, Washita County, OK
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11. Thompson #2-9 Sec. 9, T11N, R20W, Washita County, OK
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12. Buck 1-13 Sec. 1, T2N, R11ECM, Texas County, OK
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13. Campbell Farms 1-25 Sec. 25, T9N, R6W, Grady County, OK
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14. Pickering 1-18 Sec. 18, T10N, R25W, Beckham County, OK
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15. Goodwin #1-27 Sec. 27, T14N, R20W, Custer County, OK
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16. Combs #1-28 Sec. 28, T8N, R17W, Washita, OK
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17. Harden #3-29 Sec. 29, T14N, R21W, Roger Mills, OK
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18. Arapahoe Unit Cheyenne County, CO
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19. Shaw E Unit #1 Adams County, CO
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20. Shaw #2 Adams County, CO
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21. Peoria 24 Arapahoe County, CO
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22. Peoria J Sand Unit Arapahoe County, CO
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23. Lutz #1 Weld County, CO
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Page 4 of 4
Schedule A to
Mineral Purchase Agreement
Dated June 27, 2005
24. Sack Dreyer #1 Weld County, CO
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25. Jankowsky 1-9 Sec. 9, T6N, R20E, Latimer County, OK
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26. Wade #1-17 Sec. 17, T13N, R17W, Custer County, OK
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27. DL Sanders 1-24 Sec. 24, T10N, R24W, Beckham County, OK
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28. Aderholt #1 Sec. 9, T15N, R23W, Roger lls County, OK
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29. John G #1-11 Sec. 11, T10N, R26W, Beckham County, OK
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30. Bass #1-34 Sec. 34, T8N, R17W, Washita County, OK
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31. Fulton #2-8 Sec 8, T5N, R11W, Caddo County, OK
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32. Hill #1-28 Sec. 28, T10N, R25W, Beckham County, OK
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33. Lister #1-32 Sec. 32, T10N, R24W, Beckham County, OK
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34. Maxine #1-22 Sec. 22, T11N, R26W, Beckham County, OK
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35. Blevins #1-22 Sec. 22, T11N, R26W, Beckham County, OK
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36. Biggers "A" #1 Sec. 8, T3N, R14E, Pittsburg County, OK
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37. Lambert #1-10 Sec. 10, T5N, R12E, Pittsburg County, OK
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38. Lambert #2-10 Sec. 10, T5N, R12E, Pittsburg County, OK
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39. Brown #1-5 Sec. 59, H&GN Survey, Block A7, Wheeler County,
TX
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40. Boeckman #1 Sec. 20, T18N, R11W, Blaine County, OK
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41. Boeckman #2-20 Sec. 20, T18N, R11W, Blaine County, OK
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42. The Federal 44-22 Sec. 22, T56N, R73W, Campbell County, WY
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