APOLLO PRODUCTION AS OF SEPTEMBER 30, 2005, AND THE RELATED
STATEMENTS OF INCOME, STOCKHOLDERS' EQUITY AND CASH FLOW FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2005, TOGETHER WITH THE NOTES THERETO (THE "APOLLO FINANCIAL
STATEMENTS").
(II)
THE APOLLO FINANCIAL STATEMENTS HAVE BEEN
PREPARED IN ACCORDANCE WITH AND ARE CONSISTENT WITH THE BOOKS AND RECORDS OF
APOLLO AND APOLLO PRODUCTION RESPECTIVELY, FAIRLY PRESENT THE CONSOLIDATED
FINANCIAL POSITIONS AND RESULTS OF OPERATIONS OF APOLLO AND APOLLO PRODUCTION AS
OF THE DATES AND FOR THE PERIODS INDICATED, ARE STATED IN CONFORMITY WITH GAAP,
CONSISTENTLY APPLIED, EXCEPT AS OTHERWISE CLEARLY AND CONSPICUOUSLY STATED, AND
EXCEPT THAT THE UNAUDITED FINANCIAL STATEMENTS OF APOLLO AND APOLLO PRODUCTION
DO NOT CONTAIN A
21
FULL SET OF FOOTNOTES, AND CAN BE LEGITIMATELY RECONCILED WITH THE FINANCIAL
STATEMENTS AND WITH THE FINANCIAL RECORDS MAINTAINED AND THE ACCOUNTING METHODS
APPLIED BY APOLLO AND APOLLO PRODUCTION FOR FEDERAL INCOME TAX PURPOSES. THE
STATEMENTS OF INCOME INCLUDED IN THE APOLLO FINANCIAL STATEMENTS DO NOT CONTAIN
ANY MATERIAL ITEMS OF SPECIAL OR NON-RECURRING INCOME EXCEPT AS EXPRESSLY
SPECIFIED THEREIN, AND THE BALANCE SHEETS INCLUDED IN THE APOLLO FINANCIAL
STATEMENTS DO NOT REFLECT ANY WRITE-UP OR REVALUATION INCREASING THE BOOK VALUE
OF ANY ASSETS EXCEPT AS OTHERWISE CLEARLY AND CONSPICUOUSLY STATED THEREIN. THE
BOOKS AND ACCOUNTS OF APOLLO AND APOLLO PRODUCTION ARE COMPLETE AND CORRECT IN
ALL MATERIAL RESPECTS AND FAIRLY REFLECT, TO THE EXTENT REQUIRED OR PERMITTED BY
GAAP, ALL OF THE TRANSACTIONS, ITEMS OF INCOME AND EXPENSE AND ALL ASSETS AND
LIABILITIES OF THE BUSINESSES OF APOLLO AND APOLLO PRODUCTION CONSISTENT WITH
PRIOR PRACTICES OF APOLLO AND APOLLO PRODUCTION, INCLUDING PAST ACCOUNTING
TREATMENTS UTILIZED BY APOLLO AND APOLLO PRODUCTION.
(D)
ABSENCE OF UNDISCLOSED LIABILITIES.
TO
THEIR KNOWLEDGE, NEITHER APOLLO NOR APOLLO PRODUCTION HAS ANY LIABILITY (WHETHER
KNOWN OR UNKNOWN, DUE OR TO BECOME DUE, ACCRUED, ABSOLUTE, CONTINGENT OR
OTHERWISE), FOR TAXES (AS DEFINED IN SECTION 6.2(H) HEREOF), EXCEPT FOR (I) TAX
LIABILITIES REFLECTED OR RESERVED AGAINST IN THE MOST RECENT FINANCIAL
STATEMENTS PROVIDED TO SELLER BY APOLLO OR APOLLO PRODUCTION, AS APPLICABLE;
(II) TAX LIABILITIES INCURRED IN THE ORDINARY COURSE OF BUSINESS AND CONSISTENT
WITH PAST PRACTICE AFTER THE DATE OF THE LAST APOLLO BALANCE SHEETS AS SUPPLIED
TO SELLER OR WHICH, INDIVIDUALLY AND IN THE AGGREGATE, DO NOT HAVE AND CANNOT
REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT; AND (III) LIABILITIES
DISCLOSED IN SCHEDULE 6.2(D) OR SCHEDULE 6.2(H).
(E)
ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT
OF BUSINESS.
(I)
SINCE SEPTEMBER 30, 2005, EXCEPT AS SET
FORTH ON SCHEDULE 6.2(E) HERETO, APOLLO AND APOLLO PRODUCTION HAVE EACH OPERATED
IN THE ORDINARY COURSE OF BUSINESS AND THERE HAS NOT BEEN:
(1)
ANY MATERIAL ADVERSE CHANGE IN THE ASSETS,
PROPERTIES, BUSINESS, OPERATIONS, PROSPECTS, NET INCOME OR FINANCIAL CONDITION
OF APOLLO OR APOLLO PRODUCTION AND NO FACTOR, EVENT, CONDITION, CIRCUMSTANCE OR
PROSPECTIVE DEVELOPMENT EXISTS WHICH COULD REASONABLY BE EXPECTED TO HAVE A
MATERIAL ADVERSE EFFECT;
(2)
ANY MATERIAL LOSS, DAMAGE, DESTRUCTION OR
OTHER CASUALTY TO THE PROPERTY OR OTHER ASSETS OF APOLLO