EXECUTION VERSION
PURCHASE AGREEMENT
AMONG
GASCO ENERGY, INC.
PANNONIAN ENERGY INC.
SAN JOAQUIN OIL & GAS LTD.
BREK ENERGY CORPORATION
BREK PETROLEUM INC.
BREK PETROLEUM (CALIFORNIA), INC.
AND
CERTAIN STOCKHOLDERS
Dated as of July 16, 2002
TABLE OF CONTENTS
Page
ARTICLE I
THE SALE AND PURCHASE
Section 1.01 Sale and Purchase of Initial Interest...............1
Section 1.02 Transfer of Shares..................................3
Section 1.03 Right to Additional Interest........................3
Section 1.04 Special Phillips Leases.............................7
Section 1.05 Closing.............................................8
Section 1.06 Subsidiaries........................................8
Section 1.07 Romanian License Excluded...........................8
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF BREK AND BREK PETROLEUM
Section 2.01 Organization and Qualification......................9
Section 2.02 Authorization of Agreement..........................9
Section 2.03 Title to Brek Shares................................9
Section 2.04 Absence of Further Requirements....................10
Section 2.05 No Bankruptcy......................................10
Section 2.06 No Broker Fees.....................................10
Section 2.07 Litigation.........................................10
Section 2.08 Access to Information..............................10
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Section 3.01 Authorization of Agreement.........................10
Section 3.02 Title to Stockholder Shares........................11
Section 3.03 Absence of Further Requirements....................11
Section 3.04 No Bankruptcy......................................11
Section 3.05 No Broker Fees.....................................11
Section 3.06 Litigation.........................................11
Section 3.07 Access to Information..............................11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY PARTIES
Section 4.01 Organization and Qualification.....................12
Section 4.02 Authorization of Agreement.........................12
Section 4.03 Title to the Properties............................12
Section 4.04 Absence of Further Requirements....................15
Section 4.05 No Bankruptcy......................................15
Section 4.06 No Broker Fees.....................................15
Section 4.07 Compliance with Law................................15
Section 4.08 Litigation.........................................16
Section 4.09 Access to Information..............................16
Section 4.10 Interests being Conveyed...........................16
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
Section 5.01 Conditions Precedent to the Purchasers'
Obligations....................................16
Section 5.02 Conditions Precedent to the Company Parties'
Obligations..............................17
ARTICLE VI
COVENANTS
Section 6.01 Data Sharing by the Company Parties of Information
Obtained Prior to Closing............
17
Section 6.02 Assignment Following Cessation of Production:
Wyoming Developed Properties.............. 18
Section 6.03 Well Bore Agreements...............................19
Section 6.04 Wyoming Operatorship...............................19
Section 6.05 Termination of Share Exchange Agreements...........20
Section 6.06 Commercially Reasonable Efforts....................20
Section 6.07 Significant Transaction with the Company...........20
Section 6.08 Transfer Taxes.....................................20
Section 6.09 Ad Valorem and Similar Taxes.......................20
Section 6.10 Further Cooperation................................20
Section 6.11 Assumption.........................................21
Section 6.12 Confidentiality....................................21
Section 6.13 Mutual Release.....................................22
Section 6.14 Standstill.........................................22
Section 6.15 Unobtained Consents................................23
Section 6.16 New Areas of Mutual Interest.......................24
Section 6.17 Delay Rentals and Minimum Royalties................27
Section 6.18 Protested BLM Leases...............................27
Section 6.19 Financial Information..............................27
ARTICLE VII
TERMINATION; SURVIVAL
Section 7.01 Termination........................................28
Section 7.02 Effect of Termination..............................28
Section 7.03 Survival...........................................29
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Appointment of Stockholder Representative..........29
Section 8.02 Notices............................................29
Section 8.03 Knowledge..........................................30
Section 8.04 Assignment.........................................31
Section 8.05 Disclaimers of Representations and Warranties......31
Section 8.06 Governing Law......................................31
Section 8.07 Entire Agreement...................................31
Section 8.08 Amendments and Waivers.............................31
Section 8.09 Severability.......................................32
Section 8.10 Counterparts.......................................32
Section 8.11 Interpretation of Agreement........................32
Section 8.12 Expenses...........................................32
Section 8.13 Specific Performance...............................32
Section 8.14 Attorneys' Fees....................................32
Section 8.15 Publicity..........................................33
Section 8.16 Binding Effect.....................................33
Section 8.17 Third Parties......................................33
Section 8.18 Tax Treatment......................................33
Exhibits and Schedules:
Exhibit A .........Leases
Exhibit B-1 .........Developed Properties
Exhibit B-2 .........Special Phillips Leases
Exhibit C-1 .........Form of Assignment, Bill of Sale and Conveyance
Exhibit C-2 .........Form of Assignment of Contract Rights and Obligations
Exhibit C-3 .........Form of Assignment of Contract Rights and Obligations
Exhibit D .........Joint Operating Agreement
Exhibit E .........Brek/Gasco Areas of Mutual Interest
Schedule A .........List of Stockholders
Schedule 4.03(a) Material Contracts
Schedule 4.03(e) Required Consents
PURCHASE AGREEMENT
This Purchase Agreement (this "Agreement") is entered into as of July 16,
2002, by and among Gasco Energy, Inc., a Nevada corporation (the "Company"),
Pannonian Energy Inc., a Delaware corporation and wholly-owned subsidiary of the
Company ("Pannonian"), San Joaquin Oil & Gas Ltd., a Nevada corporation and
wholly-owned subsidiary of the Company ("San Joaquin"), Brek Energy Corporation,
a Nevada corporation ("Brek"), Brek Petroleum Inc., a Nevada corporation and
wholly-owned subsidiary of Brek ("Brek Nevada"), Brek Petroleum (California),
Inc., a California corporation and wholly-owned subsidiary of Brek ("Brek
California" and, together with Brek Nevada, collectively "Brek Petroleum") and
the persons listed in Schedule A hereto (the "Stockholders"). The Company,
Pannonian and San Joaquin are collectively referred to herein as the "Company
Parties." Brek, Brek Petroleum and the Stockholders are collectively referred to
herein as the "Purchasers." The Company, Pannonian, San Joaquin, Brek, Brek
Petroleum and the Stockholders are collectively referred to herein as the
"Parties" and, individually, each a "Party".
W I T N E S S E T H:
WHEREAS, Brek owns 500 shares of Series A Convertible Redeemable Preferred
Stock, $.001 par value, of the Company ("Preferred Stock") and 4,750,000 shares
of common stock, $.0001 par value, of the Company ("Common Stock") (all such
shares being collectively referred to herein as the "Brek Shares"); and
WHEREAS, the Stockholders collectively own a total of 1,500,000 shares of
Common Stock (the "Stockholder ------------ Shares"); and ------
WHEREAS, the Purchasers desire to purchase from the Company Parties, and
the Company Parties desire to sell to the Purchasers, an undivided 25% interest
in all undeveloped oil and gas leases and rights to acquire interests in
undeveloped oil and gas leases held by the Company Parties at the date of this
Agreement in exchange for all of the Brek Shares and the Stockholder Shares,
having an aggregate agreed fair market value of $22,000,000 (all such shares
being collectively referred to herein as the "Shares") plus an option to acquire
up to an additional 5% undivided interest in such properties for $10,500,000.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE SALE AND PURCHASE
Section 1.01 Sale and Purchase of Initial Interest. At the Closing (defined
below), subject to the terms and conditions of this Agreement and in reliance
upon the representations and warranties contained herein, the Company Parties
will sell, transfer and deliver to the Purchasers and the Purchasers will
purchase from the Company Parties:
(i) an initial undivided 25% of the Company Parties' right, title and interest
in all of the oil and gas leases owned by the Company Parties at the date of
this Agreement (except for Developed Properties and the Special Phillips Leases,
as defined below), which oil and gas leases are identified in Exhibit A, but
only insofar as such leases cover the lands that are not Developed Properties
(the "Leases"); and
(ii) an initial undivided 25% of all rights held by the Company Parties at the
date of this Agreement to earn interests in oil and gas leases by drilling wells
or by any other means (the "Earning Wells") on such leases after the Closing
Date pursuant to those certain agreements set forth in Part II of Schedule
4.03(a) ("Earning Agreements"), together with an initial undivided 25% of all
obligations of the Company Parties at the date of this Agreement under the
Earning Agreements, exclusive however of any rights or obligations with respect
to the Developed Properties (all of such rights and obligations of the Company
Parties, subject to such exclusion, being herein collectively called the
"Earning Rights").
The above described interests in the Leases, the Earning Rights and the
Earning Agreements (collectively referred to herein as the "Initial Interest")
will be conveyed from the Company Parties to the Purchasers at the Closing and
have an agreed aggregate fair market value of $22,000,000.
All of the Company Parties' existing wells and related facilities and
leasehold interests in the Designated Wellbore Areas shall be retained by the
Company Parties. These wells and facilities and, to the extent they cover the
Designated Wellbore Areas, the concerned leases are identified on Exhibit B-1
and are referred to as the "Developed Properties." As used throughout this
Agreement, the term "Designated Wellbore Area" means the 40-acre quarter-quarter
section of the public land survey in which a concerned well is located, other
than in the CD, Gamma Ray and Muddy Creek Federal Exploratory Units in Wyoming.
In the CD, Gamma Ray and Muddy Creek Federal Exploratory Units, the term
"Designated Wellbore Area" means the 160-acre quarter section of the public land
survey in which a concerned well is located.
The oil and gas leases identified on Exhibit B-2 (the "Special Phillips
Leases") are leases in which the Company Parties own an interest and are subject
to existing agreements with Phillips Petroleum Company ("Phillips") pursuant to
which the Company has the right to earn additional interests by drilling certain
wells. No interests in these leases will be assigned to the Purchasers on the
Closing Date; however, the Purchasers will have the right to participate in the
drilling of these wells and earn interests in the Special Phillips Leases
pursuant to Section 1.04.
Section 1.02 Transfer of Shares. At the Closing, the Company Parties will
execute and deliver to the Purchasers an Assignment, Bill of Sale and Conveyance
and Assignments of Contract Rights and Obligations, substantially in the forms
attached hereto as Exhibits C-1, C-2 and C-3, covering the Initial Interest
(except for those Earning Rights for which Required Consents have not been
obtained as of such date, which will become subject to Section 6.15) effective
as of the Closing Date (the "Closing Assignments") against (i) the sale,
transfer and delivery by Brek to the Company of the Brek Shares, free and clear
of all taxes, liens, security interests, pledges, restrictions on transfer,
encumbrances and adverse claims, and (ii) the sale, transfer and delivery by the
Stockholders to the Company of the Stockholder Shares, free and clear of all
taxes, liens, security interests, pledges, restrictions on transfer,
encumbrances and adverse claims.
At the Closing, the Company Parties shall also execute and deliver separate
assignments of the leasehold interests to be assigned at the Closing, as
necessary, on officially approved forms in sufficient counterparts to satisfy
applicable statutory and regulatory requirements. Such assignments shall be
deemed to contain all of the provisions set forth in the Closing Assignment set
forth in Exhibit C-1. The interests conveyed by such separate assignments are
the same, and not in addition to, the interests conveyed in the Closing
Assignment set forth in Exhibit C-1.
At the Closing, the Purchasers shall ratify, confirm and join in all
operating agreements (whether a joint operating agreement or a unit operating
agreement) to which a Company Party or any of its subsidiaries is bound that
relate to the leases in which interests are then being assigned. All such
operating agreements are listed or otherwise referred to on Schedule 4.03(a). If
a Company Party or any of its subsidiaries are then contractually bound to enter
into an operating agreement at a later date or upon satisfaction of a condition,
then the Purchasers shall be similarly bound to enter into such operating
agreement at the same time as such Company Party or its subsidiary. The
contracts containing all such obligations are listed or otherwise referred to on
Schedule 4.03(a). If a Company Party is assigning interests in any leases that
are not then subject to an operating agreement or a contractual promise to enter
into an operating agreement, then such Company Party, and the Purchasers will
enter into joint operating agreements each in the form attached as Exhibit D. In
the event of any conflict between this Agreement and the terms of any such
operating agreement (whether a joint operating agreement or a unit operating
agreement), the terms of this Agreement shall control.
At the Closing, (i) Brek shall deliver to the Company all certificates
representing the Brek Shares, duly endorsed to the Company and (ii) the
Stockholders shall deliver to the Company all certificates representing the
Stockholder Shares, duly endorsed to the Company. All signatures of endorsement
on certificates (or on stock powers accompanying the certificates) representing
shares of Common Stock or Preferred Stock delivered at the Closing must be
guaranteed by a firm which is a member of a registered United States national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States, or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Securities Exchange Act of 1934 (the "Exchange Act").
Section 1.03 Right to Additional Interest.
(a) The Purchasers shall have the right but not the obligation to purchase at
their sole option an additional 5% undivided interest in the Company Parties'
right, title and interest in the leases and rights conveyed to the Purchasers
pursuant to Section 1.01, more particularly defined as the "Additional Interest"
in Section 1.03(g) below, by paying additional consideration to the Company in
the amount of $10,500,000 in the manner and under the terms described in (b)
below.
(b) Upon receipt by the Company of a payment in the amount of $5,250,000 (the
"First Option Payment") on or before January 1, 2004, then the Company will
execute and deliver to the Purchasers an assignment of one-half of the
Additional Interest (the "First One-Half Interest") substantially in the form
(except for the amount of the interest being conveyed and the effective date) as
the Closing Assignment set forth in Exhibit C-1. Upon receipt by the Company of
the remaining payment of $5,250,000 (the "Second Option Payment") on or before
January 1, 2005, the Company will execute and deliver to the Purchasers an
assignment of the second one-half of the Additional Interest (the "Second
One-Half Interest") substantially in the form (except for the interest being
conveyed and the effective date) as the Closing Assignment set forth in Exhibit
C-1. If the Purchasers fail to pay the First Option Payment on the due date
thereof, the Purchasers shall forfeit their right to acquire any Additional
Interest hereunder. If the Purchasers timely pay the First Option Payment but
fail to pay the Second Option Payment on or before the due date thereof, the
Purchasers shall forfeit their right to acquire the Second One-Half Interest.
The obligations of the Purchasers to timely pay the First Option Payment and the
Second Option Payment (collectively, the "Option Payments") hereunder in order
to exercise their right to acquire the Additional Interest shall be absolute and
unconditional and shall not be affected or reduced by any circumstances,
including, without limitation, (i) any setoff (except for the reduction
described in Section 6.18, if applicable), counterclaim, recoupment, defense or
other right which a Purchaser may have against a Company Party or any other
third party; (ii) any defect in title to the Properties to which the Purchasers
will receive an interest hereunder; (iii) any disputes arising under or rights
asserted by the Purchasers under any lease, operating agreement, farm-out
agreement or similar agreement relating to the Properties; or (iv) any other
circumstance or happening of any nature whatsoever, similar to any of the
foregoing; it being the express intention of the Parties that failure to make
any Option Payment on or before the due date thereof for any reason will result
in the forfeitures set forth in this Section 1.03.
(c) If the due date for any Option Payment falls on a date that is a holiday for
banks located in Denver, Colorado, such Option Payment shall become due on the
next date that such banks are open for business. Each Option Payment shall be
made by wire transfer to the Company's account pursuant to instructions
delivered by the Company to Brek in accordance with Section 8.02.
(d) At the time of assignment by the Company of the First One-Half Interest and
the Second One-Half Interest (if such interests are assigned to the Purchasers
in compliance with Section 1.03(b)), the Company Parties shall also execute and
deliver separate assignments of the leasehold interests to be assigned, as
necessary, on officially approved forms in sufficient counterparts to satisfy
applicable statutory and regulatory requirements. Such assignments shall be
deemed to contain all of the provisions set forth in the corresponding
assignment described in Section 1.03(b). The interests conveyed by such separate
assignments are the same, and not in addition to, the interests conveyed in the
assignments described in Section 1.03(b).
(e) Before January 1, 2004, and thereafter, if the Purchasers have paid to the
Company on or before their respective due dates all Option Payments to be paid
to the Company through the then current date as required by the provisions of
Section 1.03(b), the Purchasers shall have the right to participate in any well
drilled on the Leases or any Earning Well for the Full Purchaser Interest (as
defined in (g) below) therein. If the Purchasers participate or fail to
participate on such terms, the following provisions shall apply:
(1) If the Purchasers participate for the Full Purchaser Interest in
the drillingof a well drilled on the Leases, (A) the Company Parties will
assign or cause to be assigned to the Purchasers the additional interest
they would have acquired in the well and the acreage within the Designated
Wellbore Area in which such well is located pursuant to Section 1.03(b) as
if all Option Payments had been timely made, and (B) such well and acreage
shall be excepted from any Additional Interest subsequently assigned to the
Purchasers.
(2) If the Purchasers fail to participate for the Full Purchaser
Interest in any such well located on a Lease, then such well and the
Designated Wellbore Area in which such well is located shall be excepted
from any Additional Interest subsequently assigned by the Company Parties
to the Purchasers and reserved by the Company Parties.
(3) If the Purchasers participate for the Full Purchaser Interest in
the drilling of an Earning Well, (A) the Company Parties will assign or
cause to be assigned to the Purchasers (i) the full interest the Purchasers
would have acquired in the Earning Well and the Designated Wellbore Area in
which the Earning Well is located pursuant to Section 1.03(b) as if all
Option Payments had been timely made and (ii) an undivided 25% of the
interests earned by the Company Parties in any additional acreage pursuant
to the provisions of the applicable Earning Agreement, and (B) such Earning
Well and Designated Wellbore Area (but not the additional acreage referred
to in subclause (A)(ii) above) shall be excepted from any Additional
Interest subsequently assigned to the Purchasers and reserved by the
Company Parties.
(4) If the Purchasers fail to participate or the Full Purchaser
Interest in any Earning Well, then there shall be excepted from any
Additional Interest subsequently assigned to the Purchasers and reserved by
the Company Parties (i) such Earning Well, (ii) all acreage earned by the
Company Parties through the drilling of such Earning Well, and (iii) all
other acreage that the Company Parties may earn through the drilling of
subsequent wells under the terms of the applicable Earning Agreement (but
only if the Company Parties would have lost all such other acreage if they
would have failed to participate for their full interest in such Earning
Well).
(5) The Purchasers' rights under this Section 1.03(e) shall terminate
on the date on which the Purchasers receive an assignment of the Second
One-Half Interest pursuant to Section 1.03(b) or, if earlier, the date on
which the Purchasers have forfeited their right to acquire the Additional
Interest pursuant to this Section 1.03.
(f) If the Purchasers acquire 25% of any Remaining Interest pursuant to the
provisions of Section 6.16(b), they shall have the option to purchase an
additional portion of such Remaining Interest aggregating 5% thereof, upon the
following terms and conditions:
(1) The Purchasers may purchase an additional 2.5% of such Remaining
Interest ("First Option Interest") if the Purchasers receive or have
received an assignment of the First One-Half Interest pursuant to Section
1.03(b). Provided it timely exercises its option to purchase the First
Option Interest, the Purchasers may also purchase another 2.5% of such
Remaining Interest ("Second Option Interest") if the Purchasers receive or
have already received an assignment of the Second One-Half Interest
pursuant to Section 1.03(b). Any election by the Purchasers to exercise
their option to purchase either of such interests shall be made in writing
and received by the Company not later than five (5) days after the later of
(i) the date on which the Purchasers receive the assignment of the First
One-Half Interest or the Second One-Half Interest, as applicable, and (ii)
the date on which the Purchasers receive notice that they may acquire a
portion of the Remaining Interest. If the Purchasers fail to exercise the
option, they shall be deemed conclusively to have elected not to purchase
the above described interest.
(2) The purchase price for the First Option Interest or the Second
Option Interest (either, an "Option Interest") shall be an amount equal to
2.5% of the aggregate out-of-pocket costs incurred by the Company Parties
to acquire and maintain the Remaining Interest (including, without
limitation, all rentals, delay rentals and minimum royalties paid by the
Company Parties attributable to the Remaining Interest).
(3) At the closing of the sale of an Option Interest, the Purchasers
shall pay the purchase price for the Option Interest in same-day funds to
the Company Parties and the Company Parties shall execute and deliver to
the Purchasers an assignment of the Option Interest. Such assignment shall
warrant title to the Option Interest against all liens, restrictions and
encumbrances created by, through or under the Company Parties, but not
otherwise and subject to the Permitted Encumbrances.
(4) If (i) the Remaining Interest is acquired under Section 6.16(b) in
the form of a farmout agreement, exploration agreement or any other
agreement that requires one or more wells to be drilled in order to earn a
leasehold interest ("Farmout Agreement"), (ii) the Purchasers receive an
assignment of an interest in the additional acreage described in clause
(ii) of the first grammatical paragraph of Section 6.16(e), and (iii) the
Purchasers subsequently receive an assignment of the First One-Half
Interest pursuant to Section 1.03(b), then, if the Purchasers so elect in
the manner set forth in Section 1.03(f)(1) with respect to the First Option
Interest, the Company Parties shall assign to the Purchasers an additional
interest in the acreage described in such clause (ii) being the difference
between 27.5% and 25% of the interests earned by the Company Parties in
such acreage and the Purchasers shall pay the Company Parties an additional
amount equal to 2.5% of the Company Parties' acquisition costs for that
Interest as described in clause (c) of Section 6.16(b).
(5) If (i) the Remaining Interest is acquired under Section 6.16(b) in
the form of a Farmout Agreement, (ii) the Purchasers receive an assignment
of an interest in the additional acreage described in clause (ii) of the
first grammatical paragraph of Section 6.16(e), and (iii) the Purchasers
subsequently receive an assignment of the Second One-Half Interest pursuant
to Section 1.03(b), then, if the Purchasers so elect in the manner set
forth in Section 1.03(f)(1) with respect to the Second Option Interest, the
Company Parties shall assign to the Purchasers an additional interest in
the acreage described in such clause (ii) being the difference between 30%
and 27.5% of the interests earned by the Company Parties in such acreage
and the Purchasers shall pay the Company Parties an additional amount equal
to 2.5% of the Company Party's acquisition costs for that Interest as
described in clause (c) of Section 6.16(b).
(6) the Purchasers' rights under this Section 1.03(f) shall terminate
on the date on which the Purchasers receive an assignment of the Second
One-Half Interest pursuant to Section 1.03(b) or, if earlier, the date on
which the Purchasers have forfeited their right to acquire Additional
Interest pursuant to this Section 1.03.
(g) As used herein, the following terms shall have the meaning given them as
follows:
"Additional Interest" means, subject to the provisions of Section
1.03(e), (i) an undivided 5% of the Company Parties' right, title and
interest in the Leases at the date of this Agreement (except for the
Developed Properties), (ii) an undivided 5% of the interests earned by the
Parties through the exercise of the Earning Rights on or before the date on
which the Purchasers are entitled to an assignment of the First One-Half
Interest or the Second One-Half Interest pursuant to Section 1.03(b), less
and except, however, (A) the Earning Wells and the Designated Wellbore
Areas in which such Earning Wells are located and (B) if the Purchasers
fail to participate in the drilling of an Earning Well for the Full
Purchaser Interest, (y) any acreage earned through the drilling of such
Earning Well and (z) all other acreage that the Company Parties earn
through the drilling of subsequent Earning Wells under the terms of the
applicable Earning Agreement (but only if the Company Parties would have
lost all such other acreage if the Company Parties would have failed to
participate for their full interest in such Earning Well) and (iii) an
undivided 5% interest in all Earning Rights, to the extent such Earning
Rights remain in effect at the date on which the Purchasers are entitled to
an assignment of the First One-Half Interest or the Second One-Half
Interest pursuant to Section 1.03(b) (as applicable), provided that, if the
Purchasers fail to participate in the drilling of an Earning Well for the
Full Purchaser Interest, there shall be excluded from this clause (iii) all
Earning Rights under the applicable Earning Agreement (but only if the
Company Parties would have lost all such Earning Rights if the Company
Parties would have failed to participate for their full interest in such
Earning Well).
"Full Purchaser Interest" means (i) with respect to a well drilled on
the Leases, the sum of (A) the full amount of the interest in the
applicable Leases assigned to the Purchasers at the Closing pursuant to
Section 1.02 and (B) the additional interest in the applicable Leases the
Purchasers would acquire pursuant to Section 1.03(a) if all of the
Additional Interests were conveyed to them, and (ii) with respect to an
Earning Well, a full 30% participation share in the Earning Well or, if
there are multiple farmee parties under the applicable farmout agreement,
30% of the Company Parties' participation share as one of the farmee
parties with respect to the drilling of the Earning Well and earning
leasehold interests as held by the Company Parties at the date of this
Agreement.
Section 1.04 Special Phillips Leases.
(a) Southern Leases. Pannonian currently owns different leasehold interests in
different depths in the lands covered by Federal Leases UTU-018260-A and
UTU-058148 (the "Southern Leases"). Phillips has granted Pannonian a farmout by
which if Pannonian drills a test well to a certain depth by December 31, 2002
and completes such well as a producer, then Phillips and Pannonian will enter
into a cross conveyance that would result in (i) Pannonian having 100% of the
leasehold interest as to all depths in the 80-acre tract in which the well is
located before payout (70% after payout), and (ii) Pannonian and Phillips having
70% and 30% leasehold interests, respectively, in the other lands covered by the
Southern Leases. The Purchasers will have the right to participate for the Full
Purchaser Interest in such test well, and if the well is completed as a producer
in accordance with the terms of the farmout, the Purchasers will receive an
assignment of 30% of Pannonian's interests in the Southern Leases after the
above cross conveyance has been executed and delivered. In such case, no
interest in the Southern Leases will be included in any Additional Interest
subsequently assigned to the Purchasers. If the well is abandoned as a dry hole,
the Purchasers will receive an assignment of 25% of Pannonian's interest in the
Southern Leases. If Pannonian decides not to drill the well in accordance with
the terms of the farmout, Pannonian will assign to the Purchasers 25% of
Pannonian's interest in the Southern Leases as soon as Pannonian makes such
decision and an additional 5% of Pannonian's interest in the Southern Leases
will become a part of the Additional Interest.
(b) Nonconsent Tracts. Phillips has elected not to participate in the drilling
of four wells proposed by Pannonian to be commenced prior to December 31, 2002
on four 320-acre tracts identified on Exhibit B-2 (the "Nonconsent Tracts"). For
each such well on which drilling is commenced prior to December 31, 2002,
Phillips has agreed to assign to Pannonian its entire interest in the Nonconsent
Tract on which such well is drilled. The Purchasers will have the right to
participate for the Full Purchaser Interest in each such well, and if the
Purchasers do so participate, then in each such case the Purchasers will receive
an assignment of 30% of Pannonian's entire interest in the corresponding
Nonconsent Tract following the assignment by Phillips to Pannonian of its
interest in such Nonconsent Tract. In such case, no interest in the
corresponding Nonconsent Tract will be included in any Additional Interest
subsequently assigned to the Purchasers. If the drilling of any such well is not
commenced prior to December 31, 2002, such that Phillips does not assign its
interest in the corresponding Nonconsent Tract to Pannonian, Pannonian will
assign to the Purchasers 25% of Pannonian's interest in such Nonconsent Tract as
soon as Pannonian decides not to commence such drilling prior to such date and
such Nonconsent Tract shall be deemed to be a part of the Initial Interest and
an additional 5% of Pannonian's interest in such Nonconsent Tract will become a
part of the Additional Interest.
Section 1.05 Closing. The closing (the "Closing" of the sale and purchase of the
Shares shall take place at the offices of the Company in Denver, Colorado, at
10:00 a.m. on July 16, 2002, or at such other place, date and time as the
parties hereto may agree (the "Closing Date").
Section 1.06 Subsidiaries. The Company holds title to the Properties through its
wholly owned subsidiaries, Pannonian and San Joaquin. The Company shall cause
Pannonian or San Joaquin, as applicable, to execute all assignments and
conveyances relating to the Properties and otherwise to perform the obligations
of the Company relating to the Properties under this Agreement.
Section 1.07 Romanian License Excluded. Pannonian currently holds an oil and gas
concession (the "Concession") issued by the country of Romania that it intends
to assign to Pannonian International Ltd. For purposes of this Agreement, the
Concession shall be deemed not to be owned by a Company Party or any Affiliate
thereof, and Purchasers shall acquire no interest in the Concession hereunder.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF BREK AND BREK PETROLEUM
Brek and Brek Petroleum hereby jointly and severally represent and warrant
to the Company Parties as follows:
Section 2.01 Organization and Qualification. Brek and Brek Petroleum are
corporations duly organized, validly existing and in good standing under the
laws of their respective jurisdictions, and have the requisite corporate power
and authority to own or lease all material property that they purport to own or
lease and to carry on their business as now being conducted. Brek and Brek
Petroleum are, and following the Closing will be, duly qualified as foreign
corporations, and are in good standing in each jurisdiction where the character
of their properties owned or held under lease or the nature of their activities
makes such qualification necessary, except to the extent that the failure to so
qualify would not have a material adverse effect on the business or financial
condition of Brek or Brek Petroleum.
Section 2.02 Authorization of Agreement. Brek has full right, power and
authority to enter into this Agreement and to sell, transfer and deliver the
Brek Shares to the Company. Brek Petroleum has full right, power and authority
to enter into this Agreement. The execution and delivery of this Agreement and
the performance of the transactions contemplated hereby by Brek and Brek
Petroleum have been duly authorized by the Boards of Directors of Brek and Brek
Petroleum. This Agreement has been executed and delivered by Brek and Brek
Petroleum. The consummation of the transactions contemplated herein do not and
will not, whether with or without the giving of notice or passage of time or
both, conflict with or constitute a breach of, or default under, or result in
the creation or imposition of any tax, lien, charge or encumbrance upon the Brek
Shares pursuant to any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, license, lease or other agreement or instrument to which
Brek or Brek Petroleum is a party or by which Brek or Brek Petroleum may be
bound, or to which any of the property or assets of Brek or Brek Petroleum is
subject, nor will such action result in any violation of the provisions of the
articles of incorporation or bylaws of Brek or Brek Petroleum or any applicable
treaty, law, statute, rule, regulation, judgment, order, writ or decree of any
government, governmental instrumentality or court, domestic or foreign, having
jurisdiction over Brek, Brek Petroleum or any of their properties.
Section 2.03 Title to Brek Shares. Brek has and will have at the Closing Date
good and valid title to the Brek Shares, free and clear of all taxes, liens,
security interests, pledges, restrictions on transfer, encumbrances and adverse
claims of any kind whatsoever, other than pursuant to this Agreement; and upon
delivery of the Brek Shares to the Company and delivery by the Company Parties
of the Closing Assignments as herein contemplated, the Company will receive good
and valid title to the Brek Shares, free and clear of all taxes, liens, security
interests, pledges, encumbrances and adverse claims of any kind whatsoever.
Since the original acquisition by Brek of the Brek Shares, Brek has not (i) sold
or securitized all or any portion of the Brek Shares; (ii) used any of the Brek
Shares as collateral for a loan or other credit; or (iii) engaged in a short
sale of any portion of the Brek Shares.
Section 2.04 Absence of Further Requirements. Except for applicable reporting
requirements under the Securities Exchange Act of 1934 (the "Exchange Act"), no
filing with, or consent, approval, authorization, order, registration,
notification or decree of, any court or governmental authority or agency,
domestic or foreign, is necessary or required for the performance by Brek or
Brek Petroleum of their respective obligations hereunder or in connection with
the sale and delivery of the Brek Shares hereunder or the consummation of the
transactions contemplated by this Agreement.
Section 2.05 No Bankruptcy. There are no bankruptcy proceedings pending, being
contemplated by or, to Brek's or Brek Petroleum's Knowledge, threatened against
Brek or Brek Petroleum.
Section 2.06 No Broker Fees. Brek and Brek Petroleum have not engaged any
broker, finder or investment banker for which any Company Party could be liable
for any fees or commissions in connection with the transactions contemplated
hereby.
Section 2.07 Litigation. There is no action, suit, proceeding, claim or
investigation by any person, entity, administrative agency or governmental body
pending or, to Brek's or Brek Petroleum's Knowledge, threatened against Brek or
Brek Petroleum before any governmental authority that impedes or is likely to
impede its ability to consummate the transactions contemplated by this
Agreement.
Section 2.08 Access to Information. Brek and Brek Petroleum have had access to,
and the opportunity to review, all data and other information requested by them
regarding the Properties and have had the opportunity to question the officers
and employees of the Company Parties for the purposes of completing their due
diligence investigation of the Properties.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each Stockholder severally, but not jointly, hereby represents and warrants
to the Company Parties as follows:
Section 3.01 Authorization of Agreement. Such Stockholder has full right, power
and authority to enter into this Agreement and to sell, transfer and deliver its
Stockholder Shares to the Company. The execution and delivery of this Agreement
and the performance of the transactions contemplated hereby by such Stockholder
have been duly authorized by all necessary corporate or other action on behalf
of such Stockholder. The consummation of the transactions contemplated herein do
not and will not, whether with or without the giving of notice or passage of
time or both, conflict with or constitute a breach of, or default under, or
result in the creation or imposition of any tax, lien, charge or encumbrance
upon the Stockholder Shares owned by such Stockholder pursuant to any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note, license,
lease or other agreement or instrument to which such Stockholder is a party or
by which such Stockholder may be bound, or to which any of the property or
assets of such Stockholder is subject, nor will such action result in any
violation of the provisions of the articles of incorporation or bylaws or other
organizational document, if any, of such Stockholder or any applicable treaty,
law, statute, rule, regulation, judgment, order, writ or decree of any
government, governmental instrumentality or court, domestic or foreign, having
jurisdiction over such Stockholder or any of its properties. This Agreement has
been duly authorized, executed and delivered by such Stockholder and constitutes
a legal, valid and binding obligation of such Stockholder, enforceable against
such Stockholder in accordance with its terms (except as may be limited by
bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the
rights of creditors generally and the availability of equitable remedies).
Section 3.02 Title to Stockholder Shares. Such Stockholder has and will have at
the Closing Date good and valid title to the shares of Common Stock set forth on
Schedule A to be delivered by such Stockholder to the Company at the Closing,
free and clear of all taxes, liens, security interests, pledges, restrictions on
transfer, encumbrances and adverse claims of any kind whatsoever, other than
pursuant to this Agreement; and upon delivery of such shares of Common Stock and
delivery by the Company Parties of the Closing Assignments as herein
contemplated, the Company will receive good and valid title to such shares of
Common Stock, free and clear of all taxes, liens, security interests, pledges,
encumbrances and adverse claims of any kind whatsoever.
Section 3.03 Absence of Further Requirements. No filing with, or consent,
approval, authorization, order, registration, notification or decree of, any
court or governmental authority or agency, domestic or foreign, is necessary or
required for the performance by such Stockholder of its obligations hereunder or
in connection with the sale and delivery of its Stockholder Shares hereunder or
the consummation of the transactions contemplated by this Agreement.
Section 3.04 No Bankruptcy. There are no bankruptcy proceedings pending, being
contemplated by or, to such
Stockholder's Knowledge, threatened against such Stockholder.
Section 3.05 No Broker Fees. Such Stockholder has not engaged any broker, finder
or investment banker for which any Company Party could be liable for any fees or
commissions in connection with the transactions contemplated hereby.
Section 3.06 Litigation. There is no action, suit, proceeding, claim or
investigation by any person, entity, administrative agency or governmental body
pending or, to such Stockholder's Knowledge, threatened against it before any
governmental authority that impedes or is likely to impede its ability to
consummate the transactions contemplated by this Agreement.
Section 3.07 Access to Information. Such Stockholder has had access to, and the
opportunity to review, all data and other information requested by such
Stockholder regarding the Properties and has had the opportunity to question the
officers and employees of the Company Parties for the purposes of completing
such Stockholder's due diligence investigation of the Properties.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY PARTIES
The Company Parties hereby jointly and severally represent and warrant to
each of the Purchasers as follows:
Section 4.01 Organization and Qualification. Each Company Party is a corporation
duly organized, validly existing and in good standing under the laws of its
organization, and has the requisite corporate power and authority to own or
lease all material property that it purports to own or lease and to carry on its
business as now being conducted. Each Company Party is duly qualified as a
foreign corporation, and is in good standing in each jurisdiction where the
character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except to the extent that the
failure to so qualify would not have a material adverse effect on the business
or financial condition of such Company Party. Each Company Party is qualified
with all applicable governmental authorities to own and operate the Properties
and the Developed Properties.
Section 4.02 Authorization of Agreement. Each Company Party has full right,
power and authority to enter into this Agreement and to sell, transfer and
deliver the Properties to the Purchasers. The execution and delivery of this
Agreement and the performance of the transactions contemplated hereby by the
Company Parties have been duly authorized by the respective Boards of Directors
of the Company Parties. This Agreement has been executed and delivered by each
Company Party. Subject to the preferential rights and consent referenced in
Section 4.03(e) below, the consummation of the transactions contemplated herein
do not and will not, whether with or without the giving of notice or passage of
time or both, conflict with or constitute a breach of, or default under, or
result in the creation or imposition of any tax, lien, charge or encumbrance
upon the Properties pursuant to any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, license, lease or other agreement or
instrument to which a Company Party is a party or by which a Company Party may
be bound, or to which any of the property or assets of the Company Parties is
subject, nor will such action result in any violation of the provisions of the
articles of incorporation or bylaws of any Company Party or any applicable
treaty, law, statute, rule, regulation, judgment, order, writ or decree of any
government, governmental instrumentality or court, domestic or foreign, having
jurisdiction over such Company Party or any of its properties.
Section 4.03 Title to the Properties. The Company Parties make the following
representations and warranties regarding the Initial Interest, the Additional
Interest and the Special Phillips Leases (collectively referred to herein as the
"Properties"):
(a) No Liens. Except for the Permitted Encumbrances or as otherwise agreed to in
writing by Brek and the Stockholder Representative (as defined in Section 8.01),
(i) the Initial Interest will be conveyed to the Purchasers at the Closing free
and clear of all liens, restrictions and encumbrances created by, through or
under a Company Party or an Affiliate thereof, and (ii) the Additional Interest,
if conveyed to the Purchasers, will be conveyed free and clear of all liens,
restrictions and encumbrances created by, through or under a Company Party or an
affiliate thereof. As used in this Agreement, "Affiliate" means, with respect to
a specific person or entity, another person or entity that directly, or
indirectly through one or more intermediaries, Controls or Controlled by or is
under common Control with the specified person or entity; and "Control", and its
correlative forms, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a person or
entity, whether through the ability to exercise voting power, by contract or
otherwise. As used in this Agreement, "Permitted Encumbrances" means any of the
following matters to the extent the same are valid and subsisting and affect the
Properties:
(1) all matters not created by, through or under a Company Party
or an affiliate thereof including, without limitation, any matters
created by, through or under any such party's predecessors in title;
(2) the contracts, agreements, instruments and other matters set
forth on Schedule 4.03(a) (the "Material Contracts");
(3) any liens for taxes and assessments not yet delinquent or, if
delinquent, that are being contested in good faith in the ordinary
course of business and for which a Company Party has agreed to pay
pursuant to the terms hereof or which have been prorated pursuant to
the terms hereof;
(4) the terms, conditions, restrictions, exceptions,
reservations, limitations and other matters contained in (including
any liens or security interests created by law or reserved in oil and
gas leases for royalty, bonus or rental, or created to secure
compliance with the terms of) the agreements, instruments and
documents that create or reserve to the Company Parties their
interests in the Properties (including, without limitation, farmout
agreements and exploration agreements);
(5) any obligations or duties affecting the Properties to any
municipality or public authority with respect to any franchise, grant,
license or permit and all applicable laws, rules, regulations and
orders of the United States and the state, county, city and political
subdivisions in which the Properties are located and that exercises
jurisdiction over such Properties, and any agency, department, board
or other instrumentality thereof that exercises jurisdiction over such
Properties (collectively, "Governmental Authority");
(6) any (i) easements, rights-of-way, servitudes, permits,
surface leases and other rights in respect of surface operations,
pipelines, grazing, hunting, logging, canals, ditches, reservoirs or
the like and (ii) easements for streets, alleys, highways, pipelines,
telephone lines, power lines, railways and other similar rights-of-way
on, over or in respect of property owned or leased by a Company Party
or over which a Company Party owns rights-of-way, easements, permits
or licenses;
(7) all lessors' royalties, overriding royalties, net profits
interests, carried interests, production payments, reversionary
interests and other burdens on or deductions from the proceeds of
production relating to the Leases or the leases in which the Company
Parties may earn interests pursuant to Earning Rights (the "Earning
Leases") (i) created or in existence as of the date of this Agreement
or (ii) created pursuant to the documents or matters listed on
Schedule 4.03(a);
(8) preferential rights to purchase or similar agreements with
respect to which (i) waivers or consents are obtained from the
appropriate parties for the transaction contemplated hereby or (ii)
required notices have been given for the transaction contemplated
hereby to the holders of such rights and the appropriate period for
asserting such rights has expired without an exercise of such rights;
(9) required third party consents to assignments or similar
agreements with respect to which (i) waivers or consents are obtained
from the appropriate parties for the transaction contemplated hereby
or (ii) required notices have been given for the transaction
contemplated hereby to the holders of such rights and the appropriate
period for asserting such rights has expired without an exercise of
such rights;
(10) all rights to consent by, required notices to, filings with,
or other actions by Governmental Authorities in connection with the
sale or conveyance of oil and gas leases or interests therein that are
customarily obtained subsequent to such sale or conveyance;
(11) all defects and irregularities affecting the Properties
which individually or in the aggregate do not or could not operate to
reduce the net revenue interests of the Company Parties, increase the
proportionate share of costs and expenses of leasehold operations
attributable to or to be borne by the working interests of the Company
Parties, or otherwise interfere materially with the operation, value
or use of the Properties; and
(12) with respect to the Leases or the Earning Leases, any depth
limitations in the Company Parties' ownership.
(b) Judgments. There are no unsatisfied judgments or injunctions issued by a
court of competent jurisdiction or other governmental agency outstanding against
a Company Party that would be reasonably expected to materially interfere with
the operation of the Properties or impair the ability of the Company Parties to
consummate the transactions contemplated hereby.
(c) No Notice of Violation. With respect to the Properties, no Company Party has
received notice (i) of a material violation of any statute, law, ordinance,
regulation, permit, rule or order of any federal, state or local government or
any other governmental department or agency, or any judgment, decree or order of
any court, applicable to its business or operations which remains uncured, and
which would have a material adverse effect on any of the Properties or (ii) from
any government authority with jurisdiction over the Properties that any portion
of the Properties is not in substantial compliance with applicable laws.
(d) Calls on Production. There are no calls on or preferential rights to
purchase natural gas production from any of the Properties.
(e) Preferential Rights and Consents. There are no preferential rights to
purchase the Properties. The Required Consents are required to be obtained only
from the parties named on Schedule 4.03(e). The term "Required Consent" means a
consent that if not obtained by Closing would invalidate the conveyance of the
Properties; provided, however, that consents and approvals that are customarily
obtained after Closing (such as federal and state approvals of assignments), and
other consents that do not specifically invalidate the conveyance if not
obtained are not "Required Consents". The Company Parties shall use commercially
reasonable efforts to obtain all Required Consents.
Section 4.04 Absence of Further Requirements. Except for applicable reporting
requirements under the Exchange Act and Permitted Encumbrances, no filing with,
or consent, approval, authorization, order, registration, notification or decree
of, any court or governmental authority or agency, domestic or foreign, is
necessary or required for the performance by the Company Parties of their
obligations hereunder or in connection with the sale and delivery of the
Properties hereunder or the consummation of the transactions contemplated by
this Agreement.
Section 4.05 No Bankruptcy. There are no bankruptcy proceedings pending, being
contemplated by or, to the
Company Parties' Knowledge, threatened against a Company Party.
Section 4.06 No Broker Fees. No Company Party has engaged any broker, finder or
investment banker for which any of the Purchasers could be liable for any fees
or commissions in connection with the transactions contemplated hereby.
Section 4.07 Compliance with Law. All of the Properties operated by the Company
Parties are so operated in compliance with applicable laws and regulations
(including, without limitation, Environmental Laws) in all material respects.
With respect to Environmental Laws, compliance therewith is deemed to include,
without limitation that, to the Company Parties' Knowledge:
(a) With respect to the Properties operated by the Company Parties, the
applicable Company Party has acquired all material permits, licenses and
authorization required under any Environmental Laws in order to conduct its
business as it has been historically conducted and such Company Party is in
compliance with all such permits, licenses and authorizations;
(b) With respect to the Properties operated by the Company Parties, there has
been no material Release by the Company Parties or by any other person of any
Hazardous Substances, Oils, Pollutants or Contaminants or any other wastes
produced by, or resulting from, any business, commercial, or industrial
activities operations, or processes, on, beneath, or adjacent to any of the
Properties for which a Company Party may be held liable under any Environmental
Laws; and
(c) There exists no written or tangible report, synopsis or summary of any
asbestos, toxic waste or Hazardous Substances, Oils, Pollutants or Contaminants
investigation made with respect to all or any portion of the Properties operated
by the Company Parties.
The following definitions apply to the foregoing provisions regarding
Environmental Laws:
(1) "Environmental Laws" means all federal, state and local laws,
regulations, rules and ordinances relating to pollution or protection of
the environment, including, without limitation, laws relating to Releases
or threatened Releases of Hazardous Substances, Oils, Pollutants or
Contaminants into the indoor or outdoor environment (including, without
limitation, ambient air, surface water, groundwater, land, surface and
subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, Release, transport or handling of
Hazardous Substances, Oils, Pollutants or Contaminants.
(2) "Hazardous Substances, Oils, Pollutants or Contaminants" means all
substances defined as such in the National Oil and Hazardous Substances
Pollutant Contingency Plan, 40 C.F.R.ss.300.6, or defined as such under any
Environmental Laws.
(3) "Release" means any release, spill, emission, discharge, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environmental (including, without
limitation, ambient air, surface water, groundwater and surface or
subsurface strata) or into or out of any property, including the movement
of Hazardous Substances, Oils, Pollutants or Contaminants through or in the
air, soil, surface water, groundwater or any property.
Section 4.08 Litigation. There is no action, suit, proceeding, claim or
investigation by any person, entity, administrative agency or governmental body
pending or, to the Company Parties' Knowledge, threatened against a Company
Party before any governmental authority that impedes or is likely to impede its
ability to consummate the transactions contemplated by this Agreement.
Section 4.09 Access to Information. The Company Parties have given Brek, Brek
Petroleum and the Stockholder Representative full access to all data, maps and
other information owned or licensed by the Company Parties with respect to the
Properties.
Section 4.10 Interests being Conveyed. The Leases, the Special Phillips Leases
and the Developed Properties represent all of the oil and gas leases owned by
the Company Parties as of the date of this Agreement. The agreements set forth
in Part II of Schedule 4.03(a) are all of the agreements containing Earning
Rights owned by the Company Parties as of the date of this Agreement.
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
Section 5.01 Conditions Precedent to the Purchasers' Obligations. The
obligations of the Purchasers to consummate the transactions provided for by
this Agreement are subject, at the option of Brek and the Stockholder
Representative, to the satisfaction or waiver at or prior to the Closing of the
following conditions precedent:
(a) All representations and warranties of the Company Parties contained in this
Agreement shall be true in all material respects (considering the transaction as
a whole) at and as of the Closing in accordance with their terms as if such
representations and warranties were remade at and as of the Closing; and
(b) No order shall have been entered by any court or governmental agency having
jurisdiction over the parties or the subject matter of this Agreement that
restrains or prohibits the purchase and sale contemplated by this Agreement and
that remains in effect at the time of the Closing.
(c) The Company shall have delivered to the Purchasers prior to the Closing a
certificate of non-foreign status which meets the requirements of Treasury
Regulation Section 1.1445-2(b)(2).
Section 5.02 Conditions Precedent to the Company Parties' Obligations. The
obligations of the Company Parties to consummate the transactions provided for
by this Agreement are subject, at the option of the Company, to the satisfaction
or waiver at or prior to the Closing of the following conditions precedent:
(a) All representations and warranties of the Purchasers contained in this
Agreement shall be true in all material respects (considering the transactions
as a whole) at and as of the Closing in accordance with their terms as if such
representations were remade at and as of the Closing;
(b) No order shall have been entered by any court or governmental agency having
jurisdiction over the parties or the subject matter of this Agreement that
restrains or prohibits the purchase and sale contemplated by this Agreement and
that remains in effect at the time of the Closing; and
(c) Gregory Pek shall have tendered to the Company (i) his resignation as a
member of the Executive Committee of the Company's Board of Directors, and (ii)
his resignation as a Director of the Company.
(d) Each Purchaser shall have delivered to the Company prior to Closing either
(i) a certificate of non-foreign status which meets the requirements of Treasury
Regulation Section 1.1445-2(b)(2), or (ii) a certificate certifying the number
of shares of Preferred Stock and the number of shares of Common Stock (including
any shares of stock of a predecessor of the Company) owned by such Purchaser
during the five-year period preceding the date of Closing, which evidences that
at no time during such five-year period has such Purchaser owned or been treated
as owning under rules prescribed by Sections 318 and 897 of the Code more than
five percent of the value of the stock of the Company (or any predecessor of the
Company).
(e) Brek shall have delivered to the Company copies of agreements terminating
the Share Exchange Agreements dated as of January 16, 2002 between Brek and the
holders of an aggregate of 7,000,000 shares of the Company's common stock.
ARTICLE VI
COVENANTS
Section 6.01 Data Sharing by the Company Parties of Information Obtained Prior
to Closing.
(a) Upon request after the Closing and continuing until there has been a Change
of Control (as hereafter defined) of the Company, Brek or Brek Petroleum,
whichever shall first occur, the Company Parties will give Brek and Brek
Petroleum timely access to and the ability to copy, at such party's expense, all
raw data obtained prior to the Closing and interpretations or analyses of such
data prepared prior to the Closing (but expressly excluding interpretations or
analyses of such data prepared after the Closing) in the Company Parties'
possession and produced from drilling or other work conducted before the Closing
on the Properties and the Developed Properties; provided, however, that if such
data is protected by confidentiality or non-disclosure restrictions in favor of
third parties and such third parties do not consent to the disclosure of such
data to Brek or Brek Petroleum or giving copies of such data to Brek or Brek
Petroleum, then the Company Parties shall have no obligation to Brek or Brek
Petroleum under this Section 6.01 with respect to such data other than to
provide Brek or Brek Petroleum with a description of such data and a copy of
such non-disclosure restrictions, and to cooperate with and assist Brek and Brek
Petroleum in attempting to obtain any such third party consents, provided that
the Company Parties shall not be required to incur any out of pocket costs or
expenses in doing so.
(b) For purposes of this Agreement, a "Change of Control" in an entity shall
have occurred upon the happening of any of the following events:
(i) the entity is merged, consolidated or reorganized into or with or sells all
or substantially all of its assets to another corporation or other legal person
(other than an Affiliate of such entity), and as a result of such merger,
consolidation, reorganization or sale (A) less than a majority of the combined
voting power of the then-outstanding securities of the surviving corporation or
person (in the case of a merger, consolidation or reorganization) or the buyer
(in the case of a sale of assets) immediately after such transaction are held in
the aggregate by the holders of voting stock of the entity immediately prior to
such transaction and (B) persons serving as Directors of the entity immediately
prior to the transaction constitute less than a majority of the Directors of the
surviving corporation or legal person immediately after consummation of the
transaction; or
(ii) if during any one (1) year period, individuals who at the beginning of any
such period constituted the Directors of the entity cease for any reason to
constitute at least a majority thereof, unless the election, or the nomination
for election by the entity's shareholders, of each Director of the entity first
elected during such period was approved by a vote of at least two-thirds of the
Directors of the entity then still in office who were Directors of the entity at
the beginning of any such period.
(c) For the avoidance of doubt, the Parties specifically acknowledge that the
Company Parties and their subsidiaries shall have the free and unrestricted
right to transfer, encumber, drill, and deal in all of their properties;
provided, however, that the Company Parties shall not transfer, encumber (except
for Permitted Encumbrances) or deal in, until the last of the Additional
Interest is assigned to the Purchasers or April 1, 2005, whichever shall first
occur, the quantum of interest to which the Purchasers may be entitled under the
terms of this Agreement, and shall leave unassigned and unencumbered (except for
Permitted Encumbrances) at least such quantum of interest as the Purchasers may
be entitled under the terms of this Agreement.
Section 6.02 Assignment Following Cessation of Production: Wyoming Developed
Properties. If any of the six Wyoming wells identified in Exhibit B-1 are ever
plugged and abandoned, and if no new well is spudded in the corresponding
Designated Wellbore Area within 90 days after the plugging date of that
abandoned well, then Pannonian shall promptly assign to Brek an undivided 25%
(or such greater interest as may be required as a result of Brek's prior
exercise of the option set forth in Section 1.03) of Pannonian's right, title
and interest in the leases covering the Designated Wellbore Area at that date,
but only to the extent such leases cover the Designated Wellbore Area. Following
any such assignment, the leasehold interests will be deemed to be leases
conveyed to the Purchasers pursuant to Section 1.01, so that the leasehold
interests, to the extent they cover the Designated Wellbore Area, will be
included in the interests to be conveyed upon any subsequent exercise by Brek of
its option in Section 1.03.
Section 6.03 Well Bore Agreements. This Agreement contemplates two situations in
which a Party may have a greater interest in a particular well and the
Designated Wellbore Area in which the well is located than the Party has in
adjoining lands: first, in Section 1.01, where the Company Parties are retaining
100% of their interest in Developed Properties and, second, in Section 1.03(e),
where the Purchasers may under certain circumstances participate in new drilling
at the level they would own if all of the Additional Interest had been conveyed
to them, retaining such interest in the newly-drilled well and the Designated
Wellbore Area in which the well is located even if they do not later receive all
of the Additional Interest. In these situations, the Parties specifically intend
that each Party shall bear its share of costs and receive its share of revenue
from the concerned well and Designated Wellbore Area (as to all depths in which
the Parties have an interest) without regard to any different result that would
be required based upon the applicable spacing unit or participating area. The
Parties irrevocably commit to enter into and to record and file in the relevant
governmental offices appropriate wellbore agreements stating that,
notwithstanding any larger or different spacing units or participating areas
that may be established from time to time, the Company Parties, on the one side,
and the Purchasers, on the other side, agree that all working interest costs and
the burden of all overriding royalties created after the date of this Agreement
shall, as to the concerned wells, be borne by the Parties in the same
proportions that they own interests in such wells, and that all working interest
production and working interest net revenue from these wells shall be owned
solely by the Parties in the same proportions that they own interests in these
wells. By way of illustration, the Parties agree, as between themselves, that
the Company Parties will own 100% of the Developed Properties and be entitled to
100% of the revenues from the wells shown on Exhibit B-1, even if another result
would be dictated by applicable spacing orders or unit agreements. Similarly,
the Parties agree, as between themselves, that, so long as the Purchasers paid
30% of the costs of a newly-drilled well where permitted under Section 1.03(e),
the Purchasers will own 30% of such newly-drilled wells and be entitled to 30%
of the revenues from such wells, even if another result would be dictated by
applicable spacing orders or unit agreements. From and after the date of this
Agreement, each Party covenants not to create any overriding royalty that would
have the effect of burdening production attributable to any other Party obtained
from wells physically located on the concerned Designated Wellbore Areas. The
Parties recognize that landowner royalties and overriding royalties in existence
at the date of this Agreement must be paid in accordance with relevant spacing
orders or unit agreements and that third-party working interest owners may have
rights that are not affected by the wellbore agreements described above, but the
Parties intend, as between themselves, to ensure that working interest costs,
subsequently created overriding royalty interests, and revenues associated with
these particular wells, even if recompleted, deepened or twinned within the
Designated Wellbore Area, shall be the burdens and benefits of the Parties in
accordance with their interests in the concerned wells themselves, rather than
in the spacing units or participating areas. In addition to the wellbore
agreements described above, the Parties specifically undertake to execute such
other or additional instruments as may reasonably be necessary to fulfill this
intention.
Section 6.04 Wyoming Operatorship. As additional consideration for the
conveyance of the Initial Interest by the Company Parties to the Purchasers, the
Purchasers hereby irrevocably commit and agree to support and to vote their
interests in favor of Pannonian in the event any new or successor operator is at
any time to be designated or elected for the CD federal unit in Sublette County,
Wyoming.
Section 6.05 Termination of Share Exchange Agreements. Brek shall deliver to the
Company the agreements described in Section 5.02(e) on or before the Closing
Date.
Section 6.06 Commercially Reasonable Efforts. Subject to the terms and
conditions herein provided, each of the parties hereto covenants and agrees to
use commercially reasonable efforts to take or cause to be taken, all action or
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement. Nothing herein shall obligate any
Party to incur any expense or obligation with respect to obtaining or attempting
to obtain any third party consent or authorization contemplated or required by
Section 6.01, 6.02 or 6.04.
Section 6.07 Significant Transaction with the Company. Each Party hereby
represents to the other Parties that it has had no discussions with any person
regarding a tender offer for the Company's outstanding common stock, a merger
with the Company (regardless of whether the Company would have been the
surviving entity) or a sale by the Company of all or substantially all of the
Company's assets (each, a "Significant Transaction"), and it has no first hand
Knowledge of any such Significant Transaction.
Section 6.08 Transfer Taxes. All sales, use or other taxes (other than taxes on
gross income, net income or gross receipts), duties, levies or other
governmental charges and recording or filing fees or expenses incurred by or
imposed with respect to the property transfers undertaken pursuant to this
Agreement shall be the responsibility of, and shall be paid by, the Purchasers.
Section 6.09 Ad Valorem and Similar Taxes. All ad valorem, gross products,
production, excise, severance and similar taxes that are payable with respect to
ownership or operation of the Properties to be assigned pursuant to this
Agreement or production therefrom prior to the effective date of such assignment
shall be paid by the Company Parties when due. The Purchasers shall pay when due
all such taxes payable after the effective date of such assignment.
Section 6.10 Further Cooperation.
(a) After the Closing and the date of the assignment of any Additional Interest
pursuant to this Agreement, each Party at the request of the other and without
additional consideration, shall execute and deliver, or shall cause to be
executed and delivered, from time to time such further instruments of conveyance
and transfer and shall take such other action as the other Party may reasonably
request to convey and deliver the applicable Initial Interest and (to the extent
earned) the Additional Interest to the Purchasers and to accomplish the orderly
transfer of such properties to the Purchasers in the manner contemplated by this
Agreement. After the Closing and the date of the assignment of any Additional
Interest pursuant to this Agreement, the Parties will cooperate to have all
proceeds received attributable to the applicable properties to be transferred to
the Purchasers to be paid to the proper Party hereunder and to have all
expenditures to be made with respect to such properties to be made by the proper
Party hereunder.
(b) Promptly following the Closing, the Purchasers shall record or file in the
appropriate real property records or with the appropriate Governmental
Authorities, as applicable, the assignment instruments delivered pursuant to
Sections 1.02 and 1.03. The Purchasers shall send copies of these recorded or
filed copies showing the recording and filing information to the Company
promptly following the return of the assignment instruments by the county
recorders and Governmental Authorities.
(c) If, following the Closing, the Company or the Purchasers discover that any
oil or gas leases or rights to acquire an interest in an oil or gas lease by
drilling wells or by any other means owned by the Company as of the date of this
Agreement other than the Developed Properties ("Missed Leases and Earning
Rights") were not assigned to the Purchasers pursuant to the terms of this
Agreement, the Company shall forthwith assign the appropriate interest in such
Missed Leases and Earning Rights to the Purchasers that would have been assigned
but for such oversight.
(d) The Parties will cooperate with each other in good faith with respect to the
timing of the drilling of the Earning Wells in order to provide for an orderly
drilling program of the wells on such leases within the permitted time periods
and the avoidance of several material expenditures being required to be made
within an unreasonably short time period.
Section 6.11 Assumption. Subject to Section 6.09, as of the Closing and the date
of the assignment of any Additional Interest pursuant to this Agreement, the
Purchasers shall assume all obligations that are attributable to the ownership
of the Properties to be transferred at such date, whether or not attributable to
periods before or after the effective date of the assignments made pursuant to
this Agreement, including without limitation (i) all obligations (whether
arising by statute, regulation, court order or by contract) to properly plug and
abandon all wells and remove all related equipment now located on such
Properties or hereafter placed on such Properties, and all such obligations to
cleanup and restore the lands constituting or related to such Properties, (ii)
all taxes, including ad valorem taxes, attributable to such Properties or
Hydrocarbons produced therefrom, and (iii) all liabilities attributable to such
Properties arising under any Environmental Laws (such assumed obligations and
liabilities being hereinafter collectively referred to as the "Assumed
Obligations"); provided, however, that this Section 6.11 shall not affect the
obligations of the Company Parties for their representations and warranties
contained in this Agreement.
Section 6.12 Confidentiality. All information or documents furnished hereunder
by any Party hereto or any other party shall be kept confidential by the Party
to whom it is furnished (and such Party shall use its best efforts to cause its
agents and representatives to maintain the confidentiality of such documents)
and will not be used by such Party to the detriment of the other Party. In
addition, for a period of five years following the Closing, the interpretations
and analyses of raw data on the Company Properties provided by the Company to
Brek or Brek Petroleum under Section 6.01 may be disclosed by Brek or Brek
Petroleum only to employees, agents or representatives of Brek or Brek Petroleum
who execute and deliver to the Company a Confidentiality Agreement substantially
in the form previously delivered by the Company to Brek. In the event the
transactions contemplated by this Agreement are not consummated, each Party
shall return to the other Party or destroy all information furnished hereunder
and shall not thereafter use the same for any purpose until such time as such
information becomes publicly available, except to the extent (i) it was known by
such other Party prior to being received other than through the violation or
breach of such Party or any other Party of any duty of confidentiality, (ii) it
is or thereafter becomes lawfully obtainable from other sources, (iii) it is
necessary or appropriate to disclose the same to any governmental authority
having jurisdiction over the Parties or as otherwise may be required by
applicable laws (to the extent permitted by law, the Party intending to make
disclosure in such circumstances shall give the other Parties hereto prompt
notice prior to making such disclosures so that such other Parties may seek a
protective order or other appropriate remedy prior to such disclosure), or (iv)
such duty of confidentiality is waived in writing by the other Party, and that
none of this information shall be used for competitive purposes.
Section 6.13 Mutual Release.
(a) Each of the Purchasers hereby releases and discharges the Company Parties
and their respective officers, directors, agents and controlling persons, and
their respective successors, assigns, heirs, executors and representatives, of
and from all liability, actions, causes of action, claims, demands, suits,
damages and expenses (including attorneys' fees) of whatsoever nature which such
Party may now or hereafter have or claim to have (whether known or unknown) on
account of or in any way arising out of all transactions or actions occurring
prior to the date hereof, excluding, however, all transactions and actions
arising out of this Agreement.
(b) Each Company Party hereby releases and discharges each of the Purchasers and
their respective officers, directors, agents and controlling persons, and their
respective successors, assigns, heirs, executors and representatives, of and
from all liability, actions, causes of action, claims, demands, suits, damages
and expenses (including attorneys' fees) of whatsoever nature which a Company
Party may now or hereafter have or claim to have (whether known or unknown) on
account of or in any way arising out of all transactions or actions occurring
prior to the date hereof, excluding, however, all transactions and actions
arising out of this Agreement.
(c) The releases contained in subparagraphs (a) and (b), above, shall become
null and void and of no further effect if the transactions contemplated
hereunder are terminated prior to the consummation thereof.
Section 6.14 Standstill. For a period of two years following the date of this
Agreement, except as expressly contemplated by the terms of this Agreement,
(a) each Company Party and each of the Purchasers agrees that it shall not, and
shall not permit any of its Affiliates to file, and each such party shall cause
its officers and directors not to file, any lawsuit against any other such party
or any officer or director of any other such party that alleges a cause of
action that arose before the date of this Agreement;
(b) each of the Purchasers shall not, and shall not permit any of its Affiliates
to, (i) in any manner acquire, agree to acquire or make any proposal to acquire,
directly or indirectly, any securities or property of the Company or any of its
Affiliates, (ii) except at the specific written request of the Company, propose
to enter into, directly or indirectly, any merger or business combination
involving the Company or any of its subsidiaries or to purchase, directly or
indirectly, a material portion of the assets of the Company or any of its
subsidiaries, (iii) make, or in any way participate, directly or indirectly, in
any "solicitation" of "proxies" (as such terms are used in the proxy rules of
the SEC) to vote, or seek to advise or influence any person with respect to the
voting of, any voting securities of the Company or any of its Affiliates, (iv)
form, join or in any way participate in a "group" (within the meaning of Section
13(d)(3) of the Exchange Act) with respect to any voting security of the Company
or any of its Affiliates, (v) otherwise act, alone or in concert with others, to
seek to control, remove or influence the management or Board of Directors of the
Company or to seek to influence the policies of the Company, (vi) disclose any
intention, plan or arrangement inconsistent with the foregoing, or (vii) advise,
assist or encourage any other persons in connection with any of the foregoing;
and
(c) each Company Party shall not, and shall not permit any of its subsidiaries
to, (i) in any manner acquire, agree to acquire or make any proposal to acquire,
directly or indirectly, any securities or property of Brek or any of its
subsidiaries, (ii) except at the specific written request of Brek, propose to
enter into, directly or indirectly, any merger or business combination involving
Brek or any of its subsidiaries or to purchase, directly or indirectly, a
material portion of the assets of Brek or any of its subsidiaries, (iii) make,
or in any way participate, directly or indirectly, in any "solicitation" of
"proxies" (as such terms are used in the proxy rules of the SEC) to vote, or
seek to advise or influence any person with respect to the voting of, any voting
securities of Brek or any of its subsidiaries, (iv) form, join or in any way
participate in a "group" (within the meaning of Section 13(d)(3) of the Exchange
Act) with respect to any voting security of Brek or any of its subsidiaries, (v)
otherwise act, alone or in concert with others, to seek to control, remove or
influence the management or Board of Directors of Brek or to seek to influence
the policies of Brek, (vi) disclose any intention, plan or arrangement
inconsistent with the foregoing, or (vii) advise, assist or encourage any other
persons in connection with any of the foregoing.
None of the agreements contained in this Section 6.14 are intended to
restrict the voting of Gregory Pek as a director of the Company at any Company
Board of Directors meeting or the voting by Brek of the Brek Shares at any
Company stockholders meeting. Nothing in this Section 6.14 shall prohibit a
Party from proposing or participating in a transaction that would lead to a
Change of Control of another Party, provided that such transaction is approved
by the Board of Directors of such other Party prior to such Change of Control.
Section 6.15 Unobtained Consents. With respect to any of the Properties that
would have been assigned to the Purchasers at the Closing (or a later date) but
for the existence of prohibitions against or conditions to such transfer that,
if not satisfied, would result in the breach by a Company Party of a third party
agreement or would terminate or give a third party the right to terminate any
rights of a Company Party in and to such Property (any such Property being
herein referred to as a "Retained Property" and any such prohibition or
condition being herein referred to as a "Restriction"), the Company Parties
agree to (a) use commercially reasonable efforts to cause such Restriction to be
satisfied or waived, (b) transfer such Retained Property to the Purchasers when
and if such Restriction is satisfied or waived, and (c) pending the satisfaction
or waiver of such Restriction and to the extent permitted by applicable law and
the terms of any applicable contracts or agreements, and subject to any written
agreements between the Company Parties and the Purchasers regarding specific
Retained Properties, hold the Retained Properties for the benefit of and use by
the Purchasers in order to permit the Purchasers to realize, receive, and enjoy
rights and benefits, and bear burdens and obligations of the Retained Properties
in each case that are substantially similar to those that the Purchasers would
have been able to realize, receive and enjoy, or bear, as applicable, had such
Restriction been satisfied or waived. The Parties shall enter into an agreement
relating to the Retained Properties containing the same terms and conditions as
contained in the underlying agreements to which the Company is bound.
Section 6.16 New Areas of Mutual Interest.
(a) Establishment. The Parties hereby establish Areas of Mutual Interest
(individually, an "AMI" and, collectively, the "AMIs") consisting of all lands
within the boundaries indicated on the plats attached as Exhibit E. The Parties
intend that these AMIs shall extend one mile beyond the exterior boundaries of
any oil and gas lease located within an AMI in which at least one of the Company
Parties and at least one of the Purchasers both have an interest, and
accordingly agree that the boundaries of these AMIs shall automatically be
enlarged as new oil and gas leases within existing AMIs are acquired in which at
least one of the Company Parties and one of the Purchasers both have an
interest, so that this intention is continuously fulfilled. All AMIs hereby
established shall terminate on the fourth anniversary of the Closing Date.
Notwithstanding anything to the contrary, if at any time the Purchasers
become bound by the provisions of the AMI Covenant of any Material Contract or
any agreement entered into after the Closing Date by and among one or more of
the Purchasers, one or more of the Company Parties and one or more third parties
(the "Applicable Third Party AMI Covenant"), then the AMIs created by this
Section 6.16(a) shall thereupon exclude all lands that are subject to the
Applicable Third Party AMI Covenant. The areas that are subject to Applicable
Third Party AMI Covenants at the date of this Agreement have been blacked out in
the plats attached as Exhibit E to indicate that the AMIs established by Section
6.16(a) do not apply to such lands.
(b) Procedure if Company Parties Acquire an Interest. If a Company Party
(including, for purposes of this Section 6.16(b), any Affiliate of a Company
Party) should acquire any interest (an "Interest") in any oil and gas lease or
other agreement authorizing the owner thereof to explore for, produce, save and
market oil and gas covering land within an AMI (including, without limitation,
farmout or other agreements by which oil and gas leasehold interests may be
earned), the Company Party shall first notify any person having a right to
acquire any portion of such Interest under an agreement identified in Schedule
4.03(a) and, after learning whether such person will be acquiring a portion of
such Interest, shall notify the Purchasers in writing of the acquisition of such
Interest. The notice shall set forth (a) the description of the Interest
acquired, (b) the pertinent terms of such acquisition, including copies of
leases, assignments, title data and any other agreement relating to the
acquisition of the Interest and the rights and obligations associated therewith,
(c) the Company Party's acquisition costs for that Interest, including, but not
limited to, lease brokerage fees, lease bonus, attorneys' fees for title
examination, and title curative costs, and (d) the portion of such Interest
being acquired by a person under an agreement identified in Schedule 4.03(a).
The Purchasers shall have the option to acquire 25% of the Interest that remains
(the "Remaining Interest") after a person has acquired (or has elected not to
acquire) a portion of that Interest under an agreement identified in Schedule
4.03(a), by paying its 25% share of the Company Party's acquisition costs and,
if the Purchasers do acquire 25% of the Remaining Interest, the Remaining
Interest will then be owned 75% by Pannonian (if in Utah or Wyoming) or San
Joaquin (if in California) and 25% by the Purchasers. In accordance with the
provisions of Section 1.03(f), the Purchasers may acquire up to an additional 5%
undivided interest in the Remaining Interest.
The Purchasers shall have a period of thirty (30) days from receipt of such
notice to exercise such option by (a) giving the concerned Company Party notice
in writing and (b) paying to the concerned Company Party, contemporaneously with
the notice, their 25% share of the acquisition costs described in the notice.
Failure by the Purchasers to respond within the above-specified 30-day period
shall be deemed an election by the Purchasers not to acquire their 25% share of
the Remaining Interest described in the said notice. Should the Purchasers elect
to acquire its interest, such interest shall be assigned free and clear of any
liens or burdens on production in excess of those burdening the Interest on the
date it was acquired by the Company Party. Assignments of working interests and
operating rights in federal and state leases will be made on the appropriate
government assignment of operating rights, while assignments of fee leases will
be made on a form substantially similar to the form attached as Exhibit C-1. The
Purchasers shall pay, within thirty (30) days from receipt of an invoice, its
25% share of the Company Party's acquisition costs for that Interest.
(c) Procedure if Purchasers Acquire an Interest. If a Purchaser (including, for
purposes of this Section 6.16(c), any Affiliate of a Purchaser) should acquire
an Interest, the Purchaser shall promptly notify Pannonian (as to Interests in
Utah and Wyoming) or San Joaquin (as to Interests in California) in writing of
the acquisition of such Interest. The notice shall set forth (a) the description
of the Interest acquired, (b) the pertinent terms of such acquisition, including
copies of leases, assignments, title data and any other agreement relating to
the acquisition of the Interest and the rights and obligations associated
therewith, and (c) the Purchaser's acquisition costs for that Interest,
including, but not limited to, lease brokerage fees, lease bonus, attorneys'
fees for title examination, and title curative costs. Pannonian or San Joaquin
shall have the option to acquire 70% of the Interest acquired by the Purchaser,
proportionately reduced to the Interest acquired, by paying its 70% share of the
Purchaser's acquisition costs for that Interest, including, but not limited to,
lease brokerage fees, lease bonus, attorneys' fees for title examination, and
title curative costs.
Pannonian or San Joaquin shall have a period of thirty (30) days from
receipt of such notice to exercise such option by (a) giving the concerned
Purchaser notice in writing and (b) paying to the Purchaser, contemporaneously
with the notice, its 70% share of the acquisition costs described in the notice.
Failure by Pannonian or San Joaquin to respond within the above-specified 30-day
period shall be deemed an election by Pannonian or San Joaquin not to acquire
its proportionate part of the Interest described in the said notice. Should
Pannonian or San Joaquin elect to acquire its interest, such interest shall be
assigned free and clear of any liens or burdens on production in excess of those
burdening the Interest on the date it was acquired by the Purchaser. Assignments
of working interest and operating rights in federal and state leases will be
made on the appropriate government assignment of operating rights, while
assignments of fee leases will be made on a form substantially similar to the
form attached as Exhibit C-1. Pannonian or San Joaquin shall pay, within thirty
(30) days from receipt of an invoice, its 70% share of the Purchaser's
acquisition costs for that Interest.
(d) Operating Agreement. If the Purchasers and either Pannonian (in the case of
Utah and Wyoming properties) or San Joaquin (in the case of California
properties) both elect to participate in the acquisition of an Interest, then
they will be bound by any Operating Agreement to which the Interest is subject
or, if there is no Operating Agreement to which the Interest is subject, then to
the Operating Agreement attached hereto as Exhibit D; provided, however, that if
the Interest to be earned under a farmout or other earning agreement will,
pursuant to the terms of that farmout or earning agreement, become subject to a
specified Operating Agreement at some later date (for example, where a farmout
agreement appends a form of operating agreement that will become effective upon
payout of the earning well), then the Purchasers and Pannonian or San Joaquin
hereby agree that they, as between themselves, will be subject to the terms of
the specified Operating Agreement from and after the date that both elect to
participate in the acquisition of the concerned Interest under that farmout or
earning agreement.
(e) Farmout and Earning Obligations. If any Remaining Interest is acquired under
Section 6.16(b) in the form of a farmout agreement, exploration agreement or any
other agreement that requires one or more wells to be drilled in order to earn a
leasehold interest, and if the Purchasers elect not to participate in an earning
well provided by such agreement through completion (whether as a producer or as
a dry hole) for a full 30% of the Parties' aggregate cost share, then the
Purchasers will forfeit any and all rights to receive any portion of the earning
well and leasehold interests acquired as a result of drilling that earning well
(including, without limitation, rights to purchase additional interests in the
concerned land under Section 1.03(f)), and will also forfeit all rights to
participate in subsequent earning wells under that agreement. If the Purchasers
do participate in the drilling of an earning well for a full 30% of the Parties'
aggregate cost share, then the Purchasers shall receive (i) 30% of the Parties'
aggregate interest in the earning well and 30% of the aggregate leasehold
interest earned by the Parties in the Designated Wellbore Area in which the
earning well is located and (ii) an undivided 25% of the leasehold interest
earned by the Parties in any additional acreage by virtue of drilling the
earning well pursuant to the terms of the farmout or other earning agreement.
Similarly, if any Interest is acquired under Section 6.16(c) in the form of
a farmout agreement, exploration agreement or any other agreement that requires
one or more wells to be drilled in order to earn a leasehold interest, and if
Pannonian (if in Utah or Wyoming) or San Joaquin elects not to participate in an
earning well provided by such agreement through completion (whether as a
producer or as a dry hole) for a full 70% of the Parties' aggregate cost share,
then Pannonian or San Joaquin, as applicable, will forfeit any and all rights to
receive any portion of the earning well and leasehold interests acquired as a
result of drilling that earning well, and will also forfeit all rights to
participate in subsequent earning wells under that agreement. If Pannonian or
San Joaquin does participate in the drilling of an earning well for a full 70%
of the Parties' aggregate cost share, then Pannonian or San Joaquin, as
applicable, shall receive 70% of the Parties' aggregate interest in the earning
well and 70% of the aggregate leasehold interest earned by the Parties by virtue
of drilling the earning well pursuant to the terms of the farmout or other
earning agreement.
(f) Not Binding on Non-Affiliates. The benefits and burdens of this Section 6.16
are personal to the Company Parties and the Purchasers, as well as to their
respective Affiliates, and consequently shall not run with the land. If a Party
participates in a merger or other corporate reorganization in which the survivor
is not an Affiliate of a Party, then the provisions of this Section 6.16 shall
not bind the non-Affiliated survivor. Similarly, if a Party sells one or more
Interests to a third party who is not an Affiliate of a Party, then the
provisions of this Section 6.16 shall not bind the non-Affiliated third party.
Section 6.17 Delay Rentals and Minimum Royalties. Each Party shall be
responsible for maintaining and monitoring its own records concerning the
Leases, Earning Agreements, and Interests (defined in Section 6.16), and each
Party will communicate with all other concerned Parties concerning the payment
status of delay rentals and minimum royalties. In no event will any Party be
liable for damages to any other Party if a Party fails to make a timely payment
of any necessary delay rental or minimum royalty payment. Subject to the
foregoing limitation of liability, the Company Parties shall pay all delay
rentals and minimum royalties on all Additional Interests and Remaining
Interests the Purchasers may have a right to purchase until such right has
extinguished or legal title to such Additional Interest or Remaining Interest
has been conveyed to the Purchasers. If the Company intends to cease payments of
delay rentals and minimum royalties on an Additional Interest or a Remaining
Interest that the Purchasers may have a right to purchase, the Company shall
provide the Purchasers with 30 days' prior notice of such intention, upon
receipt of which the Purchasers shall have the right, subject to the rights of
third parties to make such payments and acquire interests thereby, to assume
such payments and require the Company to transfer such interests, without
warranty of title of any kind, by providing notice to the Company. If a Party
does make a necessary delay rental or minimum royalty payment on behalf of
another Party, it will furnish the other concerned Party with an invoice
detailing such other Party's share of such payment, and the other Party shall
pay such invoice within 30 days following receipt. If the invoice is not timely
paid, the Party seeking payment shall send a second invoice to the other Party
and, if the other Party fails to pay the full amount of the invoice within 14
days after the date of the second invoice, then the other Party shall
conclusively be deemed to have surrendered its interest in the concerned leases
and shall reassign its entire interest in those leases to the first Party, free
and clear of all liens, encumbrances and burdens, other than those in existence
at the date of this Agreement.
Section 6.18 Protested BLM Leases. In February 2002, the Company Parties paid
$1,428,436.75 (the "BLM Lease Price") to the Bureau of Land Management (the
"BLM") to purchase certain federal leases (the "BLM Leases"). Prior to the
issuance of the BLM Leases, a formal protest of such issuance (the "Protest")
was filed by one or more third parties, and as of the date of this Agreement,
the BLM has not issued the BLM Leases and has not refunded the BLM Lease Price
to the Company Parties, pending resolution of the Protest. The BLM Leases are
noted on Exhibit A as not issued and under protest. If the Protest is upheld and
the BLM Lease Price is refunded to the Company Parties, the Company Parties will
promptly remit to the Purchasers by wire transfer (pursuant to instructions
provided by the Purchasers) 25% of the amount so refunded by the BLM (or 27 1/2%
or 30% of such amount if the Purchasers have acquired part or all of the
Additional Interest). If the Purchasers make one or both Option Payments to the
Company after the BLM Lease Price is refunded to the Company Parties, and the
foregoing payment is made to the Purchasers, the Purchasers will be entitled to
deduct 2 1/2% of the amount of the BLM Lease Price refunded to the Company
Parties from each such Option Payment. If the Protest is denied and the BLM
Leases are issued by the BLM, the Company Parties will promptly execute and
deliver to the Purchasers assignments, substantially in the form of the Closing
Assignment set forth in Exhibit C-1, of an undivided 25% of the Company Parties'
interest in the BLM Leases (or an undivided 27 1/2% or 30% of the Company
Parties' interest, as appropriate, if the Purchasers have acquired part or all
of the Additional Interest).
Section 6.19 Financial Information. The Company shall deliver to Brek financial
information of the Company through the Closing sufficiently ahead of the
deadline for filing reports with the SEC to permit Brek to prepare and file such
reports on a timely basis. The Company shall cooperate, and use commercially
reasonable efforts to cause its independent auditor to cooperate, with Brek and
its independent auditor to allow Brek's independent auditor to review Brek's SEC
filings and to audit Brek's year-end financial statements. Should Brek wish to
make a filing with the SEC that requires the consent of the Company's present or
past independent auditor, the Company shall cooperate with such auditor for that
purpose and shall use commercially reasonable efforts to cause such consent to
be given.
ARTICLE VII
TERMINATION; SURVIVAL
Section 7.01 Termination. This Agreement and the obligations of the
parties hereunder may be terminated:
(a) by mutual written consent of the Company, Brek and the Stockholder
Representative at any time;
(b) by the Company immediately upon the expiration of 10 days from the date that
the Company has given notice to Brek and the Stockholder Representative of the
material failure by a Purchaser to satisfy any covenant or agreement herein, or
of material breach by either of any warranties or representations contained
herein; provided, however, that no termination under this Section 7.1(b) shall
take effect if such Purchaser, as the case may be, shall have fully and
completely corrected the grounds for termination as specified in the
aforementioned notice within the earlier to occur of (i) 10 days after the date
of receipt of such notice and (ii) the date specified in paragraph (d) below;
(c) by Brek and the Stockholder Representative immediately upon the expiration
of 10 days from the date that Brek and the Stockholder Representative have given
notice to the Company of a Company Parties' material failure to satisfy any
covenant or agreement contained herein, or of a Company Parties' material breach
of any warranties or representations contained herein; provided, however, that
no termination under this Section 7.1(c) shall take effect if such Company Party
shall have fully and completely corrected the grounds for termination as
specified in the aforementioned notice within the earlier to occur of (i) 10
days after the date of receipt of such notice and (ii) the date specified in
paragraph (d) below;
(d) immediately by either party hereto that is not in default hereunder, if the
Closing has not occurred on or before July 22, 2002.
(e) by Brek and the Stockholder Representative immediately upon the public
announcement of, agreement to or commencement of negotiations of a Significant
Transaction by the Company.
Section 7.02 Effect of Termination. In the event of a termination under Section
7.01, this Agreement shall become void, and there shall be no liability on the
part of any Party or any of such Party's directors, officers, employees, agents
or shareholders to the other parties or such other Parties' directors, officers,
employees, agents or shareholders; provided, however, that the obligations of
any Party under Sections 8.12 and 8.14 shall survive the termination of this
Agreement; and provided further that a termination under Section 7.1(b) or (c)
shall not relieve any Party of any liability for breach of this Agreement or for
any misrepresentation hereunder as of the date of this Agreement or be deemed to
constitute a waiver of any remedy available for such breach or
misrepresentation.
Section 7.03 Survival. The representations and warranties of the Parties hereto
contained in Sections 2.01, 2.02, 2.03, 2.06, 3.01, 3.02, 3.05, 4.01, 4.02, 4.03
and 4.06 and all claims, causes of action and damages with respect thereto shall
survive the Closing indefinitely. All the representations and warranties of the
Parties hereto contained in this Agreement and not referenced in the preceding
sentence and all claims, causes of action and damages with respect thereto shall
survive the Closing for a period of one year thereafter.
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Appointment of Stockholder Representative. Each Stockholder hereby
irrevocably constitutes and appoints Richard N. Jeffs (the "Stockholder
Representative"), his agent and attorney-in-fact, with full power of
substitution, with respect to all matters arising out of this Agreement,
including, but not limited to, the power and authority in the name and on behalf
of such Stockholder to do or cause to be done any of the following things:
(a) negotiate, determine and agree upon (i) any amendment to this Agreement or
any Exhibit hereto, (ii) any waiver of any conditions precedent to such
Stockholder's obligations to consummate the transactions provided for by this
Agreement, (iii) any consent that may be given by the Stockholder hereunder, and
(iv) any substitution of or change in the Properties;
(b) make and receive all communications with the Company Parties and Brek and
Brek Petroleum on behalf of such Stockholder;
(c) take all such actions on behalf of such Stockholder that are referred to
herein as actions that may be taken by the Stockholder Representative; and
(d) otherwise take all actions and do all things necessary or proper, required,
contemplated or deemed advisable or desirable by the Stockholder Representative
in his discretion, and generally act for and in the name of such Stockholder in
connection with the transactions contemplated hereunder.
Section 8.02 Notices. Any notice or communication required or permitted
hereunder shall be sufficiently given if in writing and (i) delivered in person
or by overnight delivery or courier service or (ii) sent by facsimile or
electronic transmission (provided that any notice given pursuant to clause (ii)
is also confirmed by the means described in clause (i), as follows:
To a Company Party:
Gasco Energy, Inc.
14 Inverness Drive East, Building H, Suite 236
Englewood, Colorado 80112
Attention: Mark Erickson
President and Chief Executive Officer
Fax: (303) 483-0011
E-mail: merickson@gascoenergy.com
With a copy to:
Vinson & Elkins, L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, Texas 77002-6760
Attention: Michael P. Finch, Esq.
Fax: (713) 615-5282
E-mail: mfinch@velaw.com
To Brek or Brek Petroleum:
Brek Energy Corporation
19th Floor, 80 Gloucester Road
Wan Chai
Hong Kong
Fax: 011-852-2804-6291
E-mail: ken.telford@brekenergy.com
With a copy to:
Edwards & Angell, L.L.P.
750 Lexington Avenue
New York, New York 10022
Attention: D. Roger Glenn
Fax: (212) 308-4844
E-mail: drglenn@ealaw.com
To the Stockholder Representative:
Richard N. Jeffs
8 Relton Mews
London SW7 1ET
Fax: 44-207-838-0555
E-mail: rick@wetcoast.com
Such notice or other communication shall be deemed given when so delivered
personally, or sent by facsimile or electronic transmission (or, if it is
transmitted during non-business hours at the recipient's location, at the
opening of business on the next business day), or, if sent by overnight delivery
or courier service, when delivered.
Section 8.03 Knowledge. As used herein, the term "Knowledge" means (i) with
respect to a Company Party, the actual knowledge of officers and employees of
the Company Party involved in the transactions contemplated by this Agreement or
in the ownership or operation of the Properties, and (ii) with respect to a
Purchaser, the actual knowledge of officers and employees of such Purchaser
involved in the transactions contemplated by this Agreement. "Known" shall have
a correlative meaning.
Section 8.04 Assignment. No Party may assign or delegate any of its rights or
obligations hereunder, without the prior written consent of the other Parties
and any assignment made without such consent shall be void. Notwithstanding the
foregoing, the Stockholders may, in one or more instruments, assign their rights
and obligations (other than their obligations under Article III, subclause (ii)
of the first paragraph of Section 1.02, the final paragraph of Section 1.02 and
Sections 5.02(d), 6.06, 6.12, 6.13, 6.14 and 8.01) hereunder to Brek or Brek
Petroleum. Except as otherwise provided herein, this Agreement shall be binding
upon and inure to the benefit of the Parties hereto and their respective
successors, permitted assigns and legal representatives.
Section 8.05 Disclaimers of Representations and Warranties. The express
representations and warranties of the Company Parties contained in this
Agreement are exclusive and are in lieu of all other representations and
warranties, express, implied or statutory. EXCEPT FOR THE EXPRESS
REPRESENTATIONS AND WARRANTIES OF THE COMPANY PARTIES MADE IN THIS AGREEMENT,
THE PURCHASERS ACKNOWLEDGE THAT THE COMPANY PARTIES HAVE NOT MADE, AND THE
COMPANY PARTIES HEREBY EXPRESSLY DISCLAIM AND NEGATE, AND THE PURCHASERS HEREBY
EXPRESSLY WAIVE, ANY REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT COMMON
LAW, BY STATUTE OR OTHERWISE RELATING TO (a) THE QUALITY, QUANTITY OR VOLUME OF
THE RESERVES OF OIL AND GAS, IF ANY, ATTRIBUTABLE TO THE PROPERTIES, (b) THE
ACCURACY, COMPLETENESS OR MATERIALITY OF ANY INFORMATION, DATA OR OTHER
MATERIALS (WRITTEN OR ORAL) NOW, HERETOFORE OR HEREAFTER FURNISHED TO THE
PURCHASERS BY OR ON BEHALF OF THE COMPANY PARTIES, AND (c) THE ENVIRONMENTAL
CONDITION OF THE PROPERTIES. THE COMPANY PARTIES AND THE PURCHASERS AGREE THAT,
TO THE EXTENT REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE, THE DISCLAIMERS OF
CERTAIN WARRANTIES CONTAINED IN THIS SECTION ARE "CONSPICUOUS" DISCLAIMERS FOR
THE PURPOSES OF ANY APPLICABLE LAW, RULE OR ORDER.
Section 8.06 Governing Law. Except as otherwise provided in any Exhibit hereto,
this Agreement and the legal relations between the Parties shall be governed by
and construed in accordance with the internal laws of the State of Colorado
without taking into account provisions regarding choice of law.
Section 8.07 Entire Agreement. All exhibits and schedules referred to in this
Agreement are integral parts hereof, and this Agreement, together with such
exhibits and schedules constitutes the entire agreement among the Parties hereto
with respect to the matters herein and therein and supersedes all prior
agreements and understandings between the Parties with respect thereto.
Section 8.08 Amendments and Waivers. This Agreement may not be amended except
upon a written consent authorized and approved by each Party hereto. By an
instrument in writing, the Company may waive compliance by the Purchasers and
Brek and the Stockholder Representative may waive compliance by the Company
Parties with any term or provisions of this Agreement that such Party was or is
obligated to comply with or perform; provided, however, that such waiver shall
not operate as a waiver of, or estoppel with respect to, any other or subsequent
failure. No failure to exercise and no delay in exercising any right, remedy or
power hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy or power hereunder preclude any other or
further exercise thereof or the exercise of any right, remedy or power hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, remedy or power hereunder preclude any other or further exercise
thereof or the exercise of any other right, remedy or power provided herein or
by law or in equity. The waiver by any Party of the time for performance of any
act or condition hereunder shall not constitute a waiver of the act or condition
itself.
Section 8.09 Severability. If any provision of this Agreement, or the
application thereof to any Party, place or circumstance, shall be held by a
court of competent jurisdiction to be invalid, unenforceable or void, the
remainder of this Agreement and such provisions as applied to other parties,
places and circumstances shall remain in full force and effect only if, after
excluding the portion deemed to be unenforceable, the remaining terms shall
provide for the consummation of the transactions contemplated hereby is
substantially the same manner as originally set forth at the later of the date
this Agreement was executed or last amended.
Section 8.10 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall constitute one and the same instrument.
Section 8.11 Interpretation of Agreement. The article, section and other
headings used in this Agreement are for reference purposes only and shall not
constitute a part hereof or affect the meaning or interpretation of this
Agreement.
Section 8.12 Expenses. Whether or not the transactions contemplated by this
Agreement are consummated, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby, will be paid by the
Party incurring such costs and expenses, including but not limited to the cost
of legal counsel, accountants and any other professionals.
Section 8.13 Specific Performance. The Parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the Parties hereto shall be entitled to
an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
Section 8.14 Attorneys' Fees. If any legal action is brought for the enforcement
of this Agreement or because of an alleged dispute, breach or default in
connection with this Agreement, the prevailing Party shall be entitled to
recover reasonable attorneys' fees and other costs incurred in such action or
proceeding, in addition to any other relief to which it may be entitled.
Section 8.15 Publicity. The Parties will consult with each other with regard to
the terms and substance of any and all press releases, announcements or other
public statements with respect to the transactions contemplated hereby. The
Parties agree further that neither of them will release any such press release,
announcement or other public statement without the prior approval of the other
Party, unless such release is required by law and the Parties cannot reach
agreement upon a mutually acceptable form of release, in which event the Party
releasing the information, announcement or public statement shall not be deemed
to be in breach of this Agreement. The Parties agree further that such approval
will not be unreasonably withheld, and they pledge to make a good faith effort
to reach agreement expeditiously on the terms of any such press release,
announcement or other public statement.
Section 8.16 Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the Parties and their respective successors and assigns.
Section 8.17 Third Parties. Except as otherwise provided herein, each party
intends that this Agreement shall not benefit or create any right or cause of
action or remedy of any nature whatsoever in any person or entity other than the
parties to this Agreement.
Section 8.18 Tax Treatment. The Parties agree that for tax purposes, the
exchange of the Preferred Stock and the Common Stock owned by the Purchasers for
the Initial Interest, and the conveyance of the Initial Interest, at the
direction of the Purchasers, to Brek, constitutes a distribution of the Initial
Interest by the Company to the Purchasers in redemption of their shares of
Preferred Stock and Common Stock. The Parties agree that they shall not, and
shall not permit any of their Affiliates to, take a position for tax purposes
that is inconsistent with such treatment.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
GASCO ENERGY, INC.
By: _________________________________
Michael K. Decker
Executive Vice President and
Chief Operating Officer
PANNONIAN ENERGY INC.
By: _________________________________
Michael K. Decker
Executive Vice President and
Chief Operating Officer
SAN JOAQUIN OIL & GAS LTD.
By: _________________________________
Michael K. Decker
President
BREK ENERGY CORPORATION
By: _________________________________
Kenneth G. C. Telford
Chief Financial Officer
BREK PETROLEUM INC.
By: _________________________________
Kenneth G. C. Telford
President
BREK PETROLEUM (CALIFORNIA), INC.
By: ________________________________
Kenneth G. C. Telford
President
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
WET COAST MANAGEMENT CORP.
By: _________________________________
Richard N. Jeffs
President
-------------------------------------
Richard N. Jeffs (As a Stockholder
and Stockholder Representative)
-------------------------------------
Nicolas Mathys
Stockholder
-------------------------------------
Ralph Ruoss
Stockholder
Exhibit B-1
Developed Properties
This Exhibit lists those existing wells and the Designated Wellbore Areas that,
together with all related flow lines and gathering lines from the well-head to
the point of custody transfer, shall be retained by the Company. This includes
all separation, metering, storage, compression, dehydration and all ancillary
equipment used to process oil, gas, and water prior to the point of custody
transfer.
UTAH
1. Alger Pass #1 (SWNE Sec. 2 T11S-R19E) Uintah County
API # 43047311780000.
2. Lafkas Federal 1-3 (SWSW Sec. 3, T11S-R20E) Uintah County
API# 43047311780000.
3. Willow Creek #2 (SESW Section 5, T11S-R20E) Uintah County
API # 43047318180000.
4. Hill Federal 1-10 (NESW Section 10, T11S-R20E) Uintah County
API # 43047310260000.
5. Petes Wash Federal 23-12 #1 (NESW Section 12, T10S-R17W) Uintah
County API # 43047342860000.
6. Federal 23-29#1 (NESW Section 29, T9S-R19E) Uintah County
API # 04304734110000.
7. Federal 24-7 #1 (SESW Section 7, T10S-R18E) Uintah County
API # 43047339830000.
8. Federal 31-29 (NWNE Section 29, T9S-R19E) Uintah County
API # 43047336530000.
9. Federal 34-29 #1 (SWSE Section 29, T9S-R19E) Uintah County
API # 43047337500000.
10. Federal 42-29-9-19 (SENE Section 29, T9S-R19E) Uintah County
API# 43047342020000.
11. Federal 14-18-2 #1 ( SWSW Section 18, T10S-R18E) Uintah County
API # 4304734539000.
WYOMING
1. Daniel 2-16 (NE Section 16 T33N-R111W) Sublette County
API# 49035216290000.
2. Piney 10-16 (SE Section 16, T30N-R111W) Sublette County
State Lease # 89-00645.
3. Daniel 11-36 (SW Section 36, T33N-R111W) Sublette County
API #04935223240000.
4. Luman 13-22 (SW Section 22, T32N-R110W) Sublette County
API # 49035217320000.
5. Ross 33-7 (SE Section 7, T30N-R110W) Sublette County
API #49035213360000.
6. Billy 33-16 (SE Section 16, T31N-R111W) Sublette County
API # 49035213420000.
Exhibit B-2
Special Phillips Leases
SOUTHERN LEASES
UTU-018260-A 6/1/1956 T10S-R18E 480.00 100.00%
---------
SECTION 20: NE
SECTION 21: N2
LIMITED TO THE WASATCH FORMATION
UINTAH COUNTY, UT
T10S-R18E 480.00 20.00%
---------
SECTION 20: NE
SECTION 21: N2
ALL DEPTHS LESS AND EXCEPT THE WASATCH
FORMATION AND FROM THE SURFACE TO THE BASE OF
THE GREEN RIVER
UINTAH COUNTY, UT
T10S-R18E 1098.95 100.00%
---------
SECTION 22: NW, NE, SE
SECTION 23: LOTS 1, 2, N2, N2S2, SWSW, SESE
LIMITED TO THE WASATCH FORMATION
UINTAH COUNTY, UT
T10S-R18E 1098.95 20.00%
---------
SECTION 22: NW, NE, SE
SECTION 23: LOTS 1, 2, N2, N2S2, SWSW, SESE
ALL DEPTHS, LESS AND EXCEPT THE WASATCH
FORMATION
UINTAH COUNTY, UT
UTU-058148 1/1/1956 T10S-R18E 240.00 100.00%
---------
SECTION 24: NW, NWNE, NWSW
LIMITED TO THE WASATCH FORMATION
UINTAH C0UNTY, UT
T10S-R18E 240.00 20.00%
---------
SECTION 24: NW, NWNE, NWSW
ALL DEPTHS LESS AND EXCEPT THE WASATCH
FORMATION
UINTAH COUNTY, UT
NONCONSENT TRACTS
UTU-78433 7/1/1999 T9S-R19E 320.00 100.00%
--------
SECTION 21: S2N2, N2S2
UINTAH COUNTY, UT
UTU-78433 7/1/1999 T9S-R19E 320.00 100.00%
--------
SECTION 22: NW, N2SW, SWNE, NWSE
UINTAH COUNTY, UT
UTU-76489 7/1/1997 T9S-R19E 320.00 100.00%
--------
SECTION 31: E2
UINTAH COUNTY, UT
UTU-76490 7/1/1997 T10S-R19E 312.82 100.00%
---------
SECTION 6: LOTS 3, 4, NW, N2SW
UINTAH COUNTY, UT
Exhibit C-1
ASSIGNMENT, BILL OF SALE AND CONVEYANCE
THIS ASSIGNMENT, BILL OF SALE AND CONVEYANCE (this "Assignment") is made as
of 7 a.m., local time, on July 16, 2002 (the "Effective Time") from Pannonian
Energy Inc., a Delaware corporation, and San Joaquin Oil & Gas Ltd., a Nevada
corporation, both having an address of 14 Inverness Drive East, Suite H-236,
Englewood, CO 80112, as "Assignors", to Brek Petroleum Inc., a Nevada
corporation, and Brek Petroleum (California), Inc. whose addresses are 19th
Floor, 80 Gloucester Road, Wan Chai, Hong Kong, as "Assignee". This Assignment
is executed pursuant to the terms of that certain Purchase Agreement by and
among Gasco Energy, Inc., Pannonian Energy Inc., San Joaquin Oil & Gas Ltd.,
Brek Energy Corporation, Brek Petroleum Inc., Brek Petroleum (California), Inc.
and certain selling stockholders, dated as of July 16, 2002 (the "Purchase
Agreement").
For $10.00 and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Assignors hereby sell, assign, and
convey to Assignee, its successors and assigns, the following (collectively, the
"Assets"):
An undivided 25% of Assignors' right, obligations, title and interest
at the date of this Assignment in (i) the oil and gas leases described
in Exhibit A, but only insofar as such leases cover the lands
specifically described in Exhibit A (the "Leases"), and (ii) the rights
and obligations of assignors, to the extent transferable, in and to all
agreements described in Exhibit B (the "Contracts") and rights-of-way,
easements and licenses, if any, that are appurtenant to or used in
connection with the ownership or operation of the Leases, but only
insofar as the Contracts and such rights-of-way, easements and licenses
cover and pertain to the Leases.
TO HAVE AND TO HOLD the Assets unto Assignee and its successors and
assigns forever, subject to the terms and conditions hereof.
This Assignment is made and accepted expressly subject to the following
terms and conditions:
(a) Assignors hereby reserve unto themselves, their successors and
assigns, the overriding royalty interest of production in the aggregate
described in the column headed "Reserved Overriding Royalty Interest" of Exhibit
A. If Assignors are assigning less than the full leasehold interest in a Lease
or if a Lease covers less than the full fee interest in the oil and gas estate,
then the overriding royalty interest herein reserved in the Lease shall be
reduced proportionately.
(b) Subject to the Permitted Encumbrances (as such term is defined in
the Purchase Agreement), Assignors warrant title to the Assets only against the
claims of persons claiming by, through or under Assignors, but not otherwise.
(c) Except as provided in subsection (a) above, the Assets are hereby
assigned by Assignors to Assignee without recourse, covenant or warranty of
title of any kind, express, implied or statutory. Any covenants or warranties
implied by statute or law by the use herein of the words "grant", "convey" or
other similar words are hereby expressly restrained, disclaimed, waived and
negated. The express representations and warranties of Assignors contained in
this Assignment are exclusive and are in lieu of all other representations and
warranties, express, implied or statutory. EXCEPT FOR THE EXPRESS
REPRESENTATIONS AND WARRANTIES OF ASSIGNORS MADE IN THE PURCHASE AGREEMENT,
ASSIGNEE ACKNOWLEDGES THAT ASSIGNORS HAVE NOT MADE, AND ASSIGNORS HEREBY
EXPRESSLY DISCLAIM AND NEGATE, AND ASSIGNEE HEREBY EXPRESSLY WAIVES, ANY
REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT COMMON LAW, BY STATUTE OR
OTHERWISE RELATING TO (a) THE QUALITY, QUANTITY OR VOLUME OF THE RESERVES OF
HYDROCARBONS, IF ANY, ATTRIBUTABLE TO THE ASSETS, (b) THE ACCURACY, COMPLETENESS
OR MATERIALITY OF ANY INFORMATION, DATA OR OTHER MATERIALS (WRITTEN OR ORAL)
NOW, HERETOFORE OR HEREAFTER FURNISHED TO ASSIGNEE BY OR ON BEHALF OF ASSIGNORS,
OR (c) THE ENVIRONMENTAL CONDITION OF THE ASSETS. ASSIGNORS AND ASSIGNEE AGREE
THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE, THE DISCLAIMERS
OF CERTAIN WARRANTIES CONTAINED IN THIS SECTION ARE "CONSPICUOUS" DISCLAIMERS
FOR THE PURPOSES OF ANY APPLICABLE LAW, RULE OR ORDER.
(d) Assignee hereby assumes and agrees to pay, perform, fulfill and
discharge all claims, liabilities and obligations under the Leases and the
Contracts and under all Permitted Encumbrances, but only to the extent that any
of the foregoing are valid and enforceable, relate to the Assets and are
attributable to the period after the Effective Time.
(e) Separate assignments of the Leases shall, as necessary, be executed
on officially approved forms (assignment of operating rights) by Assignors to
Assignee in sufficient counterparts to satisfy applicable statutory and
regulatory requirements. Those assignments shall be deemed to contain all of the
exceptions, reservations, rights, titles, powers, and privileges set forth
herein as fully as though they were set forth in each assignment. The interests
conveyed by such separate assignments are the same, and not in addition to, the
interest in the Leases conveyed herein. This Assignment, insofar as it affects
any interest in Leases the transfer of which must be approved by the Bureau of
Land Management or any state regulatory authority, is made and accepted subject
to the approval of the appropriate governmental agency and to the terms of such
approval, if and to the extent required by applicable law.
(f) To facilitate recording or filing of this Assignment, the
counterpart to be recorded in a given county may contain only that portion
of the exhibits that describes Assets located in that county. Assignors and
Assignee have each retained a counterpart of this Assignment with complete
exhibits.
(g) Any indivisible right-of-way or easement is excluded from the
conveyance and grant made by this Assignment.
(h) This Assignment binds and inures to the benefit of Assignors and
Assignee and their respective successors and assigns.
(i) This Assignment may be executed in any number of counterparts, and
by different parties in separate counterparts, each of which shall be
deemed to be an original instrument, but all of which together shall
constitute but one instrument.
EXECUTED on the dates contained in the acknowledgment of this
instrument, but to be effective for all purposes as of the Effective Time.
PANNONIAN ENERGY INC., BREK PETROLEUM INC.,
a Delaware corporation a Nevada corporation
By: __________________________ By:__________________________
Michael K. Decker, Executive Vice Kenneth G. C. Telford
President and Chief Operating Officer, President
General Partner
SAN JOAQUIN OIL AND GAS LTD.,
a Nevada corporation
By:______________________________
Michael K. Decker
President
STATE OF COLORADO )
) ss.
COUNTY OF ARAPAHOE )
The foregoing instrument was acknowledged before me this ____
day of __________, 2002, by
____________________ as ___________________ of Pannonian Energy Inc., a Delaware
corporation.
Witness my hand and official seal.
My commission expires: ____________________________________________
Notary Public
- -------------------
STATE OF )
) ss.
COUNTY OF )
The foregoing instrument was acknowledged before me this ____ day of
___________, 2002, by _____________________ as _____________________ of San
Joaquin Oil & Gas Ltd., a Nevada corporation.
Witness my hand and official seal.
My commission expires: ______________________________
Notary Public
- -------------------
STATE OF )
) ss.
COUNTY OF )
The foregoing instrument was acknowledged before me this ____
day of ___________, 2002, by
_____________________ as __________________ of Brek Petroleum Inc., a Nevada
corporation.
Witness my hand and official seal.
My commission expires: _______________________________
Notary Public
- -------------------
Exhibit B to Assignment, Bill of Sale and Conveyance
Material Contracts
Reference to any agreement listed in this Exhibit shall include all exhibits,
addendums and amendments thereto.
1. Muddy Creek Exploration Agreement, dated August 15, 2001, between Pannonian
Energy Inc., Shama Zoe Limited Partnership and Burlington Resources Oil & Gas
Company LP.
2. CD Exploration Agreement, dated August 15, 2001, between Pannonian Energy
Inc., Shama Zoe Limited Partnership and Burlington Resources Oil & Gas Company
LP.
3. Gamma Ray Exploration Agreement, dated August 15, 2001, between Pannonian
Energy Inc., Shama Zoe Limited Partnership and Burlington Resources Oil & Gas
Company LP.
4. Letter agreement, dated August 22, 2001, between Pannonian Energy Inc.,
Alpine Gas Company and Burlington Resources Oil & Gas Company LP.
5. Acquisition Agreement, dated December 18, 2000, between Pannonian Energy Inc.
and Phillips Petroleum Company (including all exhibits and amending letters).
Letter agreement, dated October 17, 2001, between Gasco Energy, Inc. and
Phillips Petroleum Company, extending the election date for the next Option
Well as provided in the Acquisition Agreement.
Letter agreement, dated November 7, 2001, between Gasco Energy, Inc. and
Phillips Petroleum Company, being a Supplemental Agreement and Amendment to
the Acquisition Agreement.
Second Supplemental Agreement and Amendment to Acquisition Agreement, dated
April 10, 2002, among Pannonian Energy Inc, Gasco Energy, Inc. and Phillips
Petroleum Company.
6. Property Purchase Agreement, dated April 23, 2002, between Gasco Energy, Inc.
and Shama Zoe Limited Partnership.
7. Agreement and Plan of Merger dated June 29, 2001, by and among Gasco Energy,
Inc. Pannonian Energy Inc. and LTM Energy Corporation.
8. The J. Winston Williams Acquisition Agreement, dated May 1, 2001, between
Pannonian Energy Inc. and J. Winston Williams.
The J. Winston Williams Modification of Acquisition Agreement, dated
November 20, 2001, between Pannonian Energy Inc. and J. Winston Williams.
9. Consulting and Overriding Royalty Agreement, dated September 20, 1999,
between San Joaquin Oil & Gas Ltd. and Davis & Namson Consulting Geologists.
10. Farmout Agreement, dated November 1, 2001, between San Joaquin Oil & Gas
Ltd. and OXY Resources California LLC.
11. Joint Operating Agreements and the Unit Operating Agreements for the Prickly
Pear Unit, the Alger Pass Unit and the Island Unit. These Units are located in
Uintah and Carbon Counties, Utah.
12. Purchase and Sale Agreement (Uintah County, Utah), dated January 26, 2001,
between Pannonian Energy Inc. and Gilman A. Hill.
13. Aspen Ridge Exploration Agreement, dated August 15, 2001, between Pannonian
Energy, Inc., Shama Zoe Limited Partnership and Burlington Resources Oil & Gas
Company LP.
14. Rio Verde Exploration Agreement, dated August 15, 2001, between Pannonian
Energy, Inc., Shama Zoe Limited Partnership and Burlington Resources Oil & Gas
Company LP.
15. East Piney Exploration Agreement, dated August 15, 2001, between Pannonian
Energy, Inc., Shama Zoe Limited Partnership and Burlington Resources Oil & Gas
Company LP.
16. Billy Canyon Exploration Agreement, dated August 15, 2001, between Pannonian
Energy, Inc., Shama Zoe Limited Partnership and Burlington Resources Oil & Gas
Company LP.
Exhibit C-2
ASSIGNMENT OF CONTRACT RIGHTS AND OBLIGATIONS
THIS ASSIGNMENT OF CONTRACT RIGHTS AND OBLIGATIONS (this "Assignment")
is made as of July 16, 2002 (the ---------- "Effective Date") from
Pannonian Energy Inc., a Delaware corporation ("Assignor"), to Brek
Petroleum Inc., a Nevada corporation ("Assignee").
Recitals:
- --------
A. Reference is made to that certain Farmout Agreement, dated September 12,
2000, between Shenandoah Operating Company, LLC ("Shenandoah"), Pendragon Energy
Partners ("Pendragon"), collectively as Farmor, and Pannonian Energy Inc., as
amended by letter dated October 17, 2000 and Supplemental Agreement and
Amendment, dated February 19, 2001, between Shenandoah, Pendragon, Pannonian
Energy, Inc. and Phillips Petroleum Company ("Phillips"), as further amended by
Second Amendment to Farmout Agreement, dated April 15, 2002, between Shenandoah,
Pendragon, Gasco Energy, Inc. and Phillips (the "Farmout Agreement").
B. Subject to and upon the terms of this Assignment, Assignor desires to
transfer to Assignee an undivided 25% of all rights held by Assignor on the
Effective Date to earn interests in oil and gas leases by drilling wells or by
any other means on such leases after the Effective Date pursuant to the Farmout
Agreement, together with an undivided 25% of all obligations of Assignor at the
date of this Agreement under the Farmout Agreement, exclusive however of any
rights or obligations with respect to any wells drilled on or prior to the
Effective Date (all of such rights and obligations of Assignor, subject to such
exclusion, being herein collectively called the "Assigned Interest"). This
Assignment is made pursuant to the provisions of that certain
Purchase Agreement by and among Gasco Energy, Inc., Pannonian Energy Inc., San
Joaquin Oil & Gas Ltd., Brek Energy Corporation, Brek Petroleum Inc., Brek
Petroleum (California), Inc. and certain stockholders, dated as of July 16, 2002
(the "Purchase Agreement").
Agreements:
- ----------
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Assignor and Assignee hereby agree
as follows:
1. Assignment. For $10.00 and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Assignor hereby sells,
assigns, and conveys the Assigned Interest to Assignee, its successors and
assigns. This Assignment is subject to the provisions of those certain
agreements by and among Assignor, its parent Gasco Energy, Inc. and Phillips as
listed on Exhibit A attached hereto, to the extent such agreements relate to the
Farmout Agreement, and the operating agreement listed on Exhibit A.
TO HAVE AND TO HOLD the Assigned Interest unto Assignee, its successors
and assigns, forever.
2. Representations and Warranties. Subject to the Permitted Encumbrances
(as such term is defined in the Purchase Agreement), Assignor hereby warrants
title to the Assigned Interest only against the claims of persons claiming by,
through or under Assignor, but not otherwise. EXCEPT AS SET FORTH IN THIS
SECTION 2 OR AS OTHERWISE EXPRESSLY STATED IN THE PURCHASE AGREEMENT, THE
ASSIGNED INTEREST IS BEING ASSIGNED TO ASSIGNEE "AS IS," WITHOUT ANY
REPRESENTATIONS OR WARRANTIES WHATSOEVER, WHETHER EXPRESSED, IMPLIED OR
STATUTORY.
3. Ratification of Farmout Agreement. Assignee hereby ratifies the Farmout
Agreement and agrees to be bound by it in respect of the Assigned Interest being
acquired.
4. Assumption. Assignee hereby assumes and agrees to pay, perform, fulfill
and discharge all claims, liabilities and obligations under the Farmout
Agreement, but only to the extent that any of the foregoing are valid and
enforceable, relate to the Assigned Interest and are attributable to the period
after the Effective Date. Assignee further hereby assumes and agrees to perform
its proportionate share of all obligations under that certain Operating
Agreement dated April 1, 1997, as amended, between Chandler & Associates, Inc.
and MCNIC Oil & Gas Properties, Inc. referenced in the Farmout Agreement, from
and after the Effective Date.
5. Notice Address. The notice address of Assignee, is as follows:
Brek Petroleum Inc.
19th Floor, 80 Gloucester Road
Wan Chai
Hong Kong
Fax: 011-852-2804-6291
E-mail: ken.telford@brekenergy.com
6. Further Assurances. The Assignor and Assignee shall execute and
deliver any additional documents and instruments and perform any additional
acts that may be necessary or appropriate to effectuate and perform the
provisions of this Assignment.
7. Governing Law. This Assignment and the legal relations between the
parties shall be governed by and shall be construed in accordance with the
internal laws of the state of Colorado without taking into account
provisions regarding choice of law.
8. Consent. Notwithstanding anything herein to the contrary, this
Assignment is made and accepted subject to obtaining the written consent of
Shenandoah and Pendragon; and this Assignment shall have no effect unless
and until such consent is obtained.
9. Counterparts. This Assignment may be executed in counterparts
(including by facsimile transmission). All counterparts shall be construed
together and constitute the same instrument.
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment
as of the Effective Date.
PANNONIAN ENERGY INC.
By: __________________________________
Michael K. Decker
Executive Vice President and
Chief Operating Officer
BREK PETROLEUM INC.
By: __________________________________
Kenneth G. C. Telford
President
Exhibit A to Assignment of Contract Rights and Obligations
Reference to any agreement listed in this Exhibit shall include all
exhibits, addendums and amendments thereto.
Acquisition Agreement, dated December 18, 2000, between Pannonian
Energy Inc. and Phillips Petroleum Company (including all amending
letters).
Letter agreement, dated October 17, 2001, between Gasco Energy, Inc.
and Phillips Petroleum Company, extending the election date for the
next Option Well as provided in the Acquisition Agreement.
Letter agreement, dated November 7, 2001, between Gasco Energy, Inc.
and Phillips Petroleum Company, being a Supplemental Agreement and
Amendment to the Acquisition Agreement.
Second Supplemental Agreement and Amendment to Acquisition Agreement,
dated April 10, 2002, among Pannonian Energy Inc, Gasco Energy, Inc.
and Phillips Petroleum Company.
Operating Agreement dated April 1, 1997, as amended, between Chandler
& Associates, Inc. and MCNIC Oil & Gas Properties, Inc., as referenced
in the Farmout Agreement.
Exhibit C-3
ASSIGNMENT OF CONTRACT RIGHTS AND OBLIGATIONS
THIS ASSIGNMENT OF CONTRACT RIGHTS AND OBLIGATIONS (this "Assignment") is
made as of July 16, 2002 (the"Effective Date") from Pannonian Energy Inc., a
Delaware corporation ("Assignor"), to Brek Petroleum Inc., a Nevada corporation
("Assignee"). Recitals:
A. Reference is made to:
(i) that certain Acquisition Agreement, dated December 18, 2000,
between Pannonian Energy Inc. and Phillips Petroleum Company
(including all amending letters) (the "Acquisition Agreement"); that
certain Letter agreement, dated October 17, 2001, between Gasco
Energy, Inc. and Phillips Petroleum Company, extending the election
date for the next Option Well as provided in the Acquisition
Agreement; that certain Letter agreement, dated November 7, 2001,
between Gasco Energy, Inc. and Phillips Petroleum Company, being a
Supplemental Agreement and Amendment to the Acquisition Agreement; and
that certain Second Supplemental Agreement and Amendment to
Acquisition Agreement, dated April 10, 2002, among Pannonian Energy
Inc, Gasco Energy, Inc. and Phillips Petroleum Company (collectively,
the "Phillips Agreement"); and
(ii) that certain Exploration and Development Agreement, dated
April 17, 2001, between The State of Utah, acting by and through the
School and Institutional Trust Lands Administration, and Pannonian
Energy Inc., designated by the Trust Lands Administration as ML 90001
- OBA, as amended by First Amendment to Exploration and Development
Agreement, dated March __, 2002, between the State of Utah, acting by
and through the School and Institutional Trust Lands Administration,
and Pannonian Energy Inc (the "Gate Canyon Agreement" and, together
with the Phillips Agreement, collectively the "Assigned Agreements").
B. Subject to and upon the terms of this Assignment, Assignor
desires to transfer to Assignee an undivided 25% of all rights held by
Assignor on the Effective Date to earn interests in oil and gas leases
by drilling wells or by any other means on such leases after the
Effective Date pursuant to the Assigned Agreements, together with an
undivided 25% of all obligations of Assignor at the date of this
Agreement under the Assigned Agreements, exclusive however of any
rights or obligations with respect to any wells drilled on or prior to
the Effective Date (all of such rights and obligations of Assignor,
subject to such exclusion, being herein collectively called the
"Assigned Interest"). This Assignment is made pursuant to the
provisions of that certain ------------------ Purchase Agreement by
and among Gasco Energy, Inc., Pannonian Energy Inc., San Joaquin Oil &
Gas Ltd., Brek Energy Corporation, Brek Petroleum Inc., Brek Petroleum
(California), Inc. and certain stockholders, dated as of July 16, 2002
(the "Purchase Agreement").
Agreements:
- ----------
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Assignor and Assignee hereby agree
as follows:
1. Assignment. For $10.00 and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Assignor hereby sells,
assigns, and conveys the Assigned Interest to Assignee, its successors and
assigns.
TO HAVE AND TO HOLD the Assigned Interest unto Assignee, its successors
and assigns, forever.
2. Representations and Warranties. Subject to the Permitted Encumbrances
(as such term is defined in the Purchase Agreement), Assignor hereby warrants
title to the Assigned Interest only against the claims of persons claiming by,
through or under Assignor, but not otherwise. EXCEPT AS SET FORTH IN THIS
SECTION 2 OR AS OTHERWISE EXPRESSLY STATED IN THE PURCHASE AGREEMENT, THE
ASSIGNED INTEREST IS BEING ASSIGNED TO ASSIGNEE "AS IS," WITHOUT ANY
REPRESENTATIONS OR WARRANTIES WHATSOEVER, WHETHER EXPRESSED, IMPLIED OR
STATUTORY.
3. Ratification of Farmout Agreement. Assignee hereby ratifies each
Assigned Agreement and agrees to be bound by each of them in respect of the
Assigned Interest being acquired.
4. Assumption. Assignee hereby assumes and agrees to pay, perform, fulfill
and discharge all claims, liabilities and obligations under the Assigned
Agreements, but only to the extent that any of the foregoing are valid and
enforceable, relate to the Assigned Interest and are attributable to the period
after the Effective Date.
5. Notice Address. The notice address of Assignee, is as follows:
Brek Petroleum Inc.
19th Floor, 80 Gloucester Road
Wan Chai
Hong Kong
Fax: 011-852-2804-6291
E-mail: ken.telford@brekenergy.com
6. Further Assurances. The Assignor and Assignee shall execute and deliver
any additional documents and instruments and perform any additional acts that
may be necessary or appropriate to effectuate and perform the provisions of this
Assignment.
7. Governing Law. This Assignment and the legal relations between the
parties shall be governed by and shall be construed in accordance with the
internal laws of the state of Colorado without taking into account provisions
regarding choice of law.
8. Consent. Notwithstanding anything herein to the contrary, the provisions
of this Assignment that relate to the Gate Canyon Agreement are made and
accepted subject to obtaining the written consent of State of Utah, School and
Institutional Trust Lands Administration; and the provisions of this Assignment,
to the extent and only to the extent they relate to the Gate Canyon Agreement,
shall have no effect unless and until such consent is obtained.
9. Counterparts. This Assignment may be executed in counterparts (including
by facsimile transmission). All counterparts shall be construed together and
constitute the same instrument.
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment
as of the Effective Date.
PANNONIAN ENERGY INC.
By: _______________________________
Michael K. Decker
Executive Vice President and
Chief Operating Officer
BREK PETROLEUM INC.
By: _______________________________
Kenneth G. C. Telford
President
Exhibit E
Brek/Gasco Areas of Mutual Interest
Schedule A
Stockholders
Name Shares of Company Common Stock
1. Wet Coast Management Corp. 450,000
2. Richard N. Jeffs 450,000
3. Nicolas Mathys 300,000
4. Ralph Ruoss 300,000
929722_1.DOC
Schedule 4.03(a)
Material Contracts
Reference to any agreement listed in this Schedule shall include all exhibits,
addendums and amendments thereto.
Part I
1. Muddy Creek Exploration Agreement, dated August 15, 2001, between Pannonian
Energy Inc., Shama Zoe Limited Partnership and Burlington Resources Oil & Gas
Company LP.
2. CD Exploration Agreement, dated August 15, 2001, between Pannonian Energy
Inc., Shama Zoe Limited Partnership and Burlington Resources Oil & Gas Company
LP.
3. Gamma Ray Exploration Agreement, dated August 15, 2001, between Pannonian
Energy Inc., Shama Zoe Limited Partnership and Burlington Resources Oil & Gas
Company LP.
4. Letter agreement, dated August 22, 2001, between Pannonian Energy Inc.,
Alpine Gas Company and Burlington Resources Oil & Gas Company LP.
5. Property Purchase Agreement, dated April 23, 2002, between Gasco Energy, Inc.
and Shama Zoe Limited Partnership.
6. Agreement and Plan of Merger dated June 29, 2001, by and among Gasco Energy,
Inc. Pannonian Energy Inc. and LTM Energy Corporation.
7. The J. Winston Williams Acquisition Agreement, dated May 1, 2001, between
Pannonian Energy Inc. and J. Winston Williams.
The J. Winston Williams Modification of Acquisition Agreement, dated November
20, 2001, between Pannonian Energy Inc. and J. Winston Williams.
8. Consulting and Overriding Royalty Agreement, dated September 20, 1999,
between San Joaquin Oil & Gas Ltd. and Davis & Namson Consulting Geologists.
9. Farmout Agreement, dated November 1, 2001, between San Joaquin Oil & Gas Ltd.
and OXY Resources California LLC.
10. Joint Operating Agreements and the Unit Operating Agreements for the Prickly
Pear Unit, the Alger Pass Unit and the Island Unit. These Units are located in
Uintah and Carbon Counties, Utah.
11. Overriding Royalty Interests (ORRIs) conveyed or to be conveyed to employees
and founding directors of Pannonian Energy Inc. The ORRI will be a minimum of
one half of one percent of 8/8ths (.5%) of production in the aggregate with
respect to any lease that has a net revenue interest (NRI) of 80% or less and
will not exceed 2-1/2 % of 8/8ths of production in the aggregate with respect to
any lease with a NRI greater than 80%, as approved by the Board of Directors of
Pannonian Energy Inc. Notwithstanding the foregoing, however, the ORRI will be
5.0% of 8/8ths of production with respect to Utah State Lease No. ML48266 and
USA Lease No. UTU78433.
12. Purchase and Sale Agreement (Uintah County, Utah), dated January 26, 2001,
between Pannonian Energy Inc. and Gilman A. Hill.
13. Aspen Ridge Exploration Agreement, dated August 15, 2001, between Pannonian
Energy, Inc., Shama Zoe Limited Partnership and Burlington Resources Oil & Gas
Company LP.
14. Rio Verde Exploration Agreement, dated August 15, 2001, between Pannonian
Energy, Inc., Shama Zoe Limited Partnership and Burlington Resources Oil & Gas
Company LP.
15. East Piney Exploration Agreement, dated August 15, 2001, between Pannonian
Energy, Inc., Shama Zoe Limited Partnership and Burlington Resources Oil & Gas
Company LP.
16. Billy Canyon Exploration Agreement, dated August 15, 2001, between Pannonian
Energy, Inc., Shama Zoe Limited Partnership and Burlington Resources Oil & Gas
Company LP.
17. Letter Agreement, dated July 16, 2002, between Pannonian Energy, Inc. and
Brek Petroleum Inc. regarding Pending Well Procedure.
Part II
1. Acquisition Agreement, dated December 18, 2000, between Pannonian Energy Inc.
and Phillips Petroleum Company (including all amending letters).
Letter agreement, dated October 17, 2001, between Gasco Energy, Inc. and
Phillips Petroleum Company, extending the election date for the next Option
Well as provided in the Acquisition Agreement.
Letter agreement, dated November 7, 2001, between Gasco Energy, Inc. and
Phillips Petroleum Company, being a Supplemental Agreement and Amendment to
the Acquisition Agreement.
Second Supplemental Agreement and Amendment to Acquisition Agreement, dated
April 10, 2002, among Pannonian Energy Inc, Gasco Energy, Inc. and Phillips
Petroleum Company.
Farmout Agreement, dated September 12, 2000, between Shenandoah Operating
Company, LLC, Pendragon Energy Partners, collectively as Farmor, and
Pannonian Energy Inc., as amended by letter dated October 17, 2000 and
Supplemental Agreement and Amendment, dated February 19, 2001, between
Shenandoah Operating Company, LLC, Pendragon Energy Partners and Pannonian
Energy, Inc. and Phillips Petroleum Company, as further amended by Second
Amendment to Farmout Agreement, dated April 15, 2002, between Shenandoah
Operating Company, LLC, Pendragon Energy Partners, Gasco Energy, Inc. and
Phillips Petroleum Company.
2. Exploration and Development Agreement, dated April 17, 2001, between The
State of Utah, acting by and through the School and Institutional Trust Lands
Administration, and Pannonian Energy Inc., designated by the Trust Lands
Administration as ML 90001 - OBA, as amended by First Amendment to Exploration
and Development Agreement, dated March __, 2002, between the State of Utah,
acting by and through the School and Institutional Trust Lands Administration,
and Pannonian Energy Inc. (Gate Canyon)
Schedule 4.03(e)
Required Consents
1. Farmout Agreement, dated September 12, 2000, between Shenandoah Operating
Company, LLC, Pendragon Energy Partners, collectively as Farmor, and Pannonian
Energy Inc., as amended by letter dated October 17, 2000 and Supplemental
Agreement and Amendment, dated February 19, 2001, between Shenandoah Operating
Company, LLC, Pendragon Energy Partners and Pannonian Energy, Inc. and Phillips
Petroleum Company, as further amended by Second Amendment to Farmout Agreement,
dated April 15, 2002, between Shenandoah Operating Company, LLC, Pendragon
Energy Partners, Gasco Energy, Inc. and Phillips Petroleum Company.
Consent required from the following parties:
Shenandoah Energy Inc.
475 Seventeenth Street, Suite 1000
Denver, Colorado 80202
Pendragon Energy Partners
621 Seventeenth Street, Suite 621
Denver, Colorado 80293
2. Exploration and Development Agreement, dated April 17, 2001, between The
State of Utah, acting by and through the School and Institutional Trust Lands
Administration, and Pannonian Energy Inc., designated by the Trust Lands
Administration as ML 90001 - OBA, as amended by First Amendment to Exploration
and Development Agreement, dated March __, 2002, between the State of Utah,
acting by and through the School and Institutional Trust Lands Administration,
and Pannonian Energy Inc. (Gate Canyon)
Consent required from the following party:
State of Utah
School and Institutional Trust Lands Administration
675 East 500 South, Suite 500
Salt Lake City, Utah 84102
Attention: Assistant Director/Oil & Gas