PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
STARBUCKS TRUST
AS SELLER
AND
BENZ ENERGY, LTD.
AS BUYER
AND
TEXSTAR PETROLEUM, INC.
TABLE OF CONTENTS
1. SALE AND PURCHASE OF THE ASSETS1
1.1 Acquired Assets1
1.2 Records2
2. PURCHASE PRICE2
2.1 Purchase Price2
2.2 Payment2
2.3 Advances2
2.4 Security for Advances3
2.5 Resale Restrictions3
2.6 Allocation3
2.8 Adjustments4
2.10 Share Pledge4
3. EFFECTIVE TIME AND CLOSING DATE4
3.1 Closing4
3.2 Effective Time4
3.3 Ownership Prior to Effective Time4
3.4 Ownership After Effective Time5
4. INDEMNIFICATION/ASSUMED OBLIGATIONS5
4.1 Assumed Obligations5
4.2 Seller's Indemnification5
4.3 Buyer's Indemnification6
4.4 Sole Remedy6
5. CLOSING6
5.1 Delivery by Sellers6
5.2 Delivery to Buyer6
5.3 Further Co-operation6
6. TITLE COVENANTS6
6.1 Covenants Relating to Title6
6.2 Seller's Title7
6.4 Defect Letters8
6.5 Effect of Title Failure8
6.6 Price Adjustments due to Title Failure9
7. REPRESENTATIONS AND WARRANTIES OF SELLER9
7.1 Seller's Representations and Warranties9
7.2 Disclaimer of Representations10
8. REPRESENTATIONS AND WARRANTIES OF BUYER10
8.1 Buyer's Representations and Warranties10
9. CERTAIN AGREEMENTS OF SELLER11
9.1 Maintenance of Assets11
9.2 Consents12
9.3 Co-operation12
10. CERTAIN AGREEMENTS OF BUYER12
10.1 Co-operation12
10.2 Disclosure12
11. SURVIVAL12
12. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER12
12.1 No Litigation13
12.2 Representations, Warranties and Covenants13
12.3 Consents13
13. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER13
13.1 No Litigation13
13.2 Representations and Warranties13
14. TERMINATION13
14.1 Causes of Termination13
14.2 Effect of Termination13
15. MISCELLANEOUS14
15.1 Notice14
15.2 Fees, Expenses and Taxes14
15.3 Assignment14
15.4 Entire Agreement15
15.5 Severability15
15.6 Choice of Law15
15.7 Texas Deceptive Trade Practices Act Waiver15
15.8 Exhibits15
15.9 Captions15
EXHIBITS
EXHIBIT A -- Leases
EXHIBIT B -- Properties
EXHIBIT C -- Allocated Values
EXHIBIT D -- Conveyance
EXHIBIT E -- Promissory Notes
EXHIBIT F -- Guarantee Agreement
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (this "Agreement") is entered into this
30th of June, 1998 by and between STARBUCKS TRUST, a Texas trust ("Seller") and
BENZ ENERGY, LTD., a Yukon corporation, ("Buyer") and Texstar Petroleum, Inc.
("Texstar"). Buyer and Seller are collectively referred to herein as the
"Parties" and sometimes individually referred to as a "Party."
WITNESSETH:
In consideration of the mutual agreements contained in this Agreement, Buyer,
Seller and Texstar agree as follows.
1. SALE AND PURCHASE OF THE ASSETS.
1.1 ACQUIRED ASSETS. Subject to the terms and conditions of this
Agreement, Seller agrees to sell, convey and deliver to Buyer or Texstar, as its
designee, and Buyer agrees to purchase and acquire from Seller all of Seller's
right, title and interest in and to the following (collectively, the "Assets"):
(A) All of Seller's oil and gas and associated hydrocarbons
("Oil and Gas") and related rights, titles and interests, including, but not
limited to, leasehold interests, royalty interests, overriding royalty
interests, payments out of production, reversionary rights, and contractual
rights to production, including without limitation, (i) those interests
described in the leases, subleases, assignments and other instruments described
in Exhibit A (collectively "Leases"); (ii) those properties described in Exhibit
B (the "Properties") (iii) all easements, rights of way, platform leases, and
other rights, privileges, benefits and powers with respect to the use and
occupation of the surface of, and the subsurface depths under, the land covered
by the Leases and (iv) all rights in respect of any pooled or unitized acreage
located in whole or in part within each Lease including all production
associated with such Lease, regardless of whether such unit or pool production
comes from ▇▇▇▇▇ located within or outside the Leases;
(B) All licenses, servitudes, farmin agreements, farmout
agreements, bottom hole agreements, acreage contribution agreements, operating
agreements, unit agreements, processing agreements, marketing and product sales
agreements, options, leases of equipment or facilities, joint venture
agreements, pooling agreements, transportation agreements, and other contracts,
agreements and rights, which are owned by Seller, in whole or in part, and are
(i) appurtenant to the Leases, or (ii) used or held for use in connection with
the ownership or operation of the Leases, or the sale, distribution or disposal
of oil and gas or water, (collectively, the "Contracts");
(C) All of the real, personal and mixed property and facilities
located in, on or adjacent to the Leases or used in the operation thereof
(whether located on or off such Leases), which is owned by Seller, in whole or
in part, including, without limitation, well equipment;
casing; tanks; crude oil, natural gas, condensate or products in storage severed
after the Effective Time; tubing; compressors; pumps; motors; fixtures;
machinery and other equipment; pipelines; field processing equipment; inventory
and all other improvements used or useful in the operation thereof (the "Related
Assets");
(D) All governmental permits, licenses and authorizations
including environmental permits, licenses and authorizations, as well as any
applications for the same, related to the Leases or the use thereof;
(E) To the extent specifically attributable or allocable to the
Leases and only to the extent that the same are assignable or transferable by
Seller, all of the files, records and data relating to the items described in
subsections (A), (B), (C), and (D) above, including, without limitation, title
records (title curative documents); surveys, maps and drawings; contracts;
correspondence; Federal Energy Regulation Commission files; geological,
geophysical and seismic records, data and information; production records,
electric logs, core data, pressure data, decline curves, graphical production
curves and all related matters and construction documents (except to the extent
the delivery or copying of such records may be restricted by contract with a
third party, in which event Seller shall co-operate with Buyer in efforts to
provide on site access to such records until a release from such restriction may
be obtained) (the "Records"), provided that Seller will not be obligated to pay
any costs or fees to provide such access or release; and
(F) Any and all other assets of Seller appurtenant or related to
or used in connection with the Leases.
1.2 RECORDS. Seller shall have the right to make and retain copies of
the Records as Seller may desire prior to the delivery of the Records to Buyer.
Buyer, for a period of three years after the Closing, defined below, shall make
available to Seller access to such copies of the Records as Buyer may have in
its possession (or to which it may have access) upon written request of Seller,
during normal business hours; provided, however, that Buyer shall not be liable
to Seller for the loss of any Records by reason of clerical error or inadvertent
loss or destruction of Records.
2. PURCHASE PRICE.
2.1 PURCHASE PRICE. The purchase price for the Assets is Two Million
Eight Hundred Eighty-Two Thousand Five Hundred Forty-Seven Dollars ($2,882,547)
in United States currency, subject to adjustment, which shall be comprised of
US$2,332,537 in readily available funds and 600,000 common shares in the capital
stock of Buyer (the "Shares") at a price of CDN$1.35 per share (the "Purchase
Price").
2.2 PAYMENT. The Purchase Price, shall be paid by Buyer to the Seller
on the Closing Date:
2.3 ADVANCES. Notwithstanding section 2.2 hereof, in the event that the
Closing Date:
(A) has not occurred by July 25, 1998, Texstar shall advance to
Seller by way of loan US$570,000 (the "First Advance") on
July 26, 1998; and
(B) has not occurred before August 25, 1998, Texstar shall
advance to Seller by way of loan an additional US$1,000,000
(the "Second Advance") on August 26, 1998.
(the First Advance and Second Advance are hereinafter referred to
as "Advances")
2.4 SECURITY FOR ADVANCES. Notwithstanding any other provision of this
Agreement, any Advance made by Texstar to Seller shall be evidenced by a
promissory note (a "Promissory Note") of Seller in favour of Texstar in the
amount of the Advance which shall be in the form attached as Exhibit E, and the
Promissory Note(s) and all amounts owing thereunder shall be secured by a pledge
of 1,500,000 common shares of Buyer owned by Seller in favour of Texstar on
terms satisfactory to Texstar (the "Share Pledge"). The Promissory Notes and
Share Pledge shall be executed and delivered by Seller to Texstar on the date of
each Advance, as applicable, and all amounts owing under the Promissory Note(s)
shall be repaid to Texstar by Seller on or before the earlier of the Closing
Date and December 31, 1998.
2.5 RESALE RESTRICTIONS. Seller hereby acknowledges and accepts that
the Shares to be issued hereunder may be subject to resale restrictions imposed
under applicable securities laws and rules of regulatory bodies having
jurisdiction and Seller agrees to comply with such requirements and resale
restrictions.
2.6 ALLOCATION. The Purchase Price shall be allocated to the Assets in
accordance with the values set forth in Exhibit C. Each of Buyer and Seller
covenant and agree that the values allocated to various portions of the Assets
which are set forth in Exhibit C, shall be binding on the parties.
2.7 GUARANTEE OF VALUE OF ASSETS. Seller hereby guarantees that the
Assets on January 1, 2000 or such earlier date as the Seller may request (the
"Valuation Date"), will have a value of not less than US$3,032,537 (cumulative)
(the "Guaranteed Amount") based on a valuation report ("Valuation") prepared by
an nationally recognized independent qualified engineer mutually agreed upon by
the Seller and Buyer using a discount rate of 10%, such Valuation shall be
calculated based on the following:
(A) cash proceeds received by the Buyer from the sale of any portion of
the Assets following Closing plus interest thereon calculated at an
interest rate of 10% per annum; plus
(B) the net present value (using a discount rate of 10%) attributable
to the proven developed producing reserves using oil and gas prices
described in the Wall Street Journal futures strip dated July 6,
1998 relating to that portion of the Assets which have not been
sold by Buyer following Closing; plus
(C) 70% of the proven non-producing reserves using oil and gas prices
described in the Wall Street Journal futures strip dated July 6,
1998 relating to that portion of the Assets which have not been
sold by Buyer following Closing; plus
(D) oil and gas revenues generated from the Assets after the Effective
Date; less
(E) actual expenses associated with exploring, developing and
production from the Assets.
The applicable Valuation may be delivered to the Buyer at any time prior to the
Valuation Date but shall be delivered no later than 90 days following the
Valuation Date.
2.8 ADJUSTMENTS. In the event that the value of the Assets (cumulative)
specified in the Valuation and calculated in accordance with section 2.7 hereof
is less than the Guaranteed Amount, Seller shall be obligated to pay to Buyer
within 5 days following the date that the Valuation is required to be delivered,
an amount equal to the difference between the value specified in such Valuation
and the Guaranteed Amount, and any payments under this section shall be an
considered as an adjustment to the Purchase Price under section 2.1 above. For
the purposes of calculating any other adjustments to the Purchase Price, the
Seller shall be credited with proceeds of production from the Assets prior to
the Effective Time and debited with costs, taxes and expenses of ownership
attributable to the Assets prior to the Effective Time and Buyer shall be
credited with proceeds of production from the Assets after the Effective Time
and debited with costs, taxes and expenses of ownership attributable to the
Assets after the Effective Time. In addition, appropriate reductions to the
Purchase Price will be made due to Title Failures as provided in section 6.6.
2.9 GUARANTEE. Pursuant to section 2.7 hereof, Seller shall execute and
deliver to Buyer, a guarantee of Seller in the form attached as Exhibit "F"
(the "Guarantee") on or prior to the Closing Date and any other documentation
required to be executed and delivered under the terms and conditions of the
Guarantee.
2.10 SHARE PLEDGE. On the earlier of the date of the First Advance, (if
applicable) and the Closing Date, Seller shall execute and deliver to Texstar,
the Share Pledge and any other documentation required to be executed and
delivered under the terms and conditions of the Share Pledge, as security for
the payment of any principal and interest owing to Texstar under the
Promissory Notes (if applicable).
3. EFFECTIVE TIME AND CLOSING DATE.
3.1 Closing. Subject to Conditions Precedent set forth at Articles 13
and 14 and "any termination pursuant to Article 15, the sale and purchase of the
Assets ("Closing") shall be held on or before July 25, 1998 ("Closing Date") or
such other date as Buyer and Seller may agree. The Closing will take place at
the offices of Seller at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇, or
at such other place as mutually agreed upon by Seller and Buyer.
3.2 EFFECTIVE TIME. The sale shall be effective as of 7:00 A.M., local
time of the location of the Assets on June 30, 1998 ("Effective Time").
3.3 OWNERSHIP PRIOR TO EFFECTIVE TIME. If the Closing occurs,
Seller shall be entitled to all of the rights and incidents of ownership
generated from or attributable to the Assets prior to the Effective Time. Seller
shall bear and be responsible for the duties, liabilities, costs, expenses and
obligations of ownership attributable to the Assets prior to the Effective Time,
except as may be otherwise provided herein.
3.4 OWNERSHIP AFTER EFFECTIVE TIME. If the Closing occurs, Buyer shall
be entitled to all of the rights and incidents of ownership generated from or
attributable to the Assets after the Effective Time. Buyer shall assume, bear
and be responsible for the duties, liabilities, costs, expenses and obligations
of ownership attributable to the Assets from and after the Effective Time,
including but not limited to compliance with Environmental Laws.
4. INDEMNIFICATION/ASSUMED OBLIGATIONS.
4.1 ASSUMED OBLIGATIONS. Subject to Buyer being satisfied with an
environmental assessment, at Closing, Buyer shall assume (a) the obligation to
(i) plug and abandon or remove and dispose of all ▇▇▇▇▇, structures, flow lines,
pipelines and other equipment now or hereafter located on the Assets; (ii) when
required by law or contract, cap and bury all flow lines and other pipelines now
or hereafter located on the Assets, and (iii) dispose of natural occurring
radioactive material and all other pollutants, wastes, containments, hazardous
or toxic materials or wastes caused by Buyer's actions now or hereafter located
on the Assets; (b) all other costs, obligations and liabilities that arise under
the Assets and, in each case, arises from or relates to events occurring or
conditions existing from events occurring on or after the Effective Time or
accrue after the Effective time. All such plugging, replugging, abandonment,
removal, disposal and restructure operations shall be in compliance with
applicable laws and regulations and shall be conducted in a good and workmanlike
manner.
"Environmental Laws" means all applicable local, state, and federal laws,
rules, regulations, and orders regulating or otherwise pertaining to (a) the
use, generation, migration, storage, removal, treatment, remedy, discharge,
release, transportation, disposal, or cleanup of pollutants, contamination,
hazardous wastes, hazardous substances, hazardous materials, toxic substances or
toxic pollutants, (b) surface waters, ground waters, ambient air and any other
environmental medium on any Lease or (c) the environment or health and
safety-related matters; including the following as from time to time amended and
all others whether similar or dissimilar: the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986, the Resource Conservation and
Recovery Act of 1976, as amended by the Used Oil Recycling Act of 1980, the
Solid Waste Disposal Act Amendments of 1980, and the Hazardous and Solid Waste
Amendments of 1984, the Hazardous Materials Transportation Act, as amended, the
Toxic Substance Control Act, as amended, the Clean Air Act, as amended, the
Clean Water Act, as amended, and all regulations promulgated pursuant thereto.
4.2 SELLER'S INDEMNIFICATION. Seller agrees to defend, indemnify and
hold Buyer, its affiliates, directors, officers, employees, agents and the
respective representatives of each of them harmless from and against any and all
claims, demands, losses, damages, liabilities, judgments, causes of action,
reasonable costs or expenses (including, without limitation, any and all
reasonable costs, expenses, attorneys' fees, consequential damages and other
costs incurred in defense of any claim or lawsuit arising therefrom), of
whatsoever nature arising out of or relating to Seller's ownership, operation or
administration of the Assets accruing on or prior to the Effective Time or with
respect to or relating to a material breach of any representation, warranty or
covenant of the Seller contained in this Agreement.
4.3 BUYER'S INDEMNIFICATION. Buyer agrees to defend, indemnify and hold
Seller, its affiliates, directors, officers, employees, agents and the
respective representatives of each of them harmless from and against any and all
claims, demands, losses, damages, liabilities, judgments, causes of action,
reasonable costs or expenses (including, without limitation, any and all
reasonable costs, expenses, attorneys' fees, consequential damages and other
costs incurred in defense of any claim or lawsuit arising therefrom), of
whatsoever nature arising out of or relating to Buyer's ownership, operation or
administration of the Assets accruing after the Effective Time or with respect
to or relating to a material breach of any representation, warranty or covenant
of, the Buyer contained in this Agreement.
4.4 SOLE REMEDY. If the Closing occurs, the sole and exclusive remedy
of Buyer and Seller with respect to the purchase and sale of the Assets shall be
pursuant to the express provisions of this Agreement. Any and all (a) claims
relating to the representations, warranties, covenants and agreement contained
in this Agreement, (b) other claims pursuant to or in connection with this
Agreement or (c) other claims relating to the Assets and the purchase and
sale thereof shall be subject to the provision in this Article 4.
5. CLOSING.
5.1 DELIVERY BY SELLER. At or prior to Closing, Seller shall deliver
to Buyer, in form satisfactory to Seller and Buyer and the appropriate
government agencies, a conveyance effecting the sale, transfer, conveyance
and assignment of the Assets in the form set forth as Exhibit D, the
Guarantee and Share Pledge in the forms set forth as Exhibit E and F attached
hereto.
5.2 DELIVERY TO BUYER. At Closing, Buyer shall deliver to Seller, the
Purchase Price referred to in section 2. 1.
5.3 FURTHER CO-OPERATION. At the Closing and thereafter as may be
necessary, Seller and Buyer shall execute and deliver such other instruments and
documents and take such other actions as may be reasonably necessary to evidence
and effectuate the transactions contemplated by this Agreement including all
post-Closing adjustments.
6. TITLE COVENANTS.
6.1 CONVENANTS RELATING TO TITLE. From and after the Effective Time
and prior to Closing, Seller covenants and agrees to:
(A) Obtain all consents, approvals, waivers (including
preferential rights) and agreements of all other parties and governmental
authorities (other than approvals of the assignment of the Leases which must be
obtained after the Closing) which are necessary to effect the transactions
provided for herein, including the assignment and transfer to Buyer of the
ownership of the Assets; and
(B) Make all filings which must be made and record all
instruments that may be recorded to accurately reflect Seller's current
interests in the Assets.
6.2 SELLER'S TITLE
(A) For the purpose of computing adjustments to the Purchase
Price for Title Failures under section 6.6, Seller covenants to Buyer that
Seller's title to the Assets as of the Effective Time is (and as of the Closing
Date will be) good and marketable title as defined in section 6.3; and
(B) In the documents to be executed and delivered by Seller to
Buyer transferring title to the Assets, Seller shall warrant and defend the
Assets unto Buyer or its designee against every person lawfully claiming the
Assets or any part thereof by, through or under Seller, but not otherwise.
However, all of Seller's interest in equipment and personal property are to be
sold AS IS AND WHERE IS AND WITHOUT WARRANTY OF MERCHANTABILITY, CONDITION OR
FITNESS FOR A PARTICULAR PURPOSE, EITHER EXPRESS OR IMPLIED as more specifically
set forth in Section 7.2.
6.3 GOOD AND MARKETABLE TITLE. As used herein the term "good and
marketable title" shall mean:
(A) As to each of the Leases, that record title of Seller which:
(i) entitles Seller to receive from a Lease not less than
the interests shown in Exhibit B as the "Net Revenue Interest" of
all Oil and Gas produced, saved and marketed from the Leases and of
all Oil and Gas produced, saved and marketed from any unit of
which the Lease is a part and allocated to such Lease, all without
reduction, suspension or termination of the interests in the Lease
throughout the duration of such Lease, except as stated in such
Exhibit; and
(ii) obligates Seller to bear a percentage of the costs and
expenses relating to the maintenance and development of, and
operations relating to, the Leases not greater than the "Working
Interest" shown in Exhibit B all without increase of the interests
in the Leases throughout the duration of such Lease, except as
stated in such Exhibit.
(B) That title of Seller to the Assets which:
(i) at or prior to Closing, is free and clear (except for
Permitted Encumbrances as defined in subsection (ii) below) of
liens and encumbrances and (a) with respect to real property
interests to be transferred to Seller, real property interests are
of record in the relevant counties, parishes, and environmental
offices; and (b) with respect to any Asset subject to preferential
rights, such rights have been waived and consents obtained from all
third parties, and
(ii) as used herein the term "Permitted Encumbrances" means
those encumbrances and obligations which Buyer finds would be
acceptable to a reasonable, prudent owner and operator of the
Assets and shall not include material defects that interfere with
or significantly restrict Buyer's right to use, operate, own or
benefit from the Assets as owner, holder, lessee, licensee or
permittee, including without limitation (a) Lessors' royalties,
overriding royalties, production payments and reversionary
interests if the net cumulative effect of such burdens does not
operate to cause the Net Revenue Interest of any Asset to be less
than the Net Interest set forth in Exhibit A; (b) preferential
rights to purchase and required third party consents to
assignments and similar agreements with respect to which, prior to
Closing, (i) waivers or consents are obtained from the appropriate
parties, or (ii) required notices have been given to the holders
of such rights and the appropriate time period for asserting such
rights has expired without any exercise of such rights; (c) liens
for taxes or assessments not due or not delinquent on the Closing
Date; (d) all rights to consent by, required notices to, filings
with, or other actions by governmental agencies in connection with
the sale or conveyance of oil and gas leases or interests therein
or sale of production therefrom if the same are customarily
obtained subsequent to such sale or conveyance; and (e) easements,
rights-of-way, servitudes, permits, surface leases, and other
rights in respect of surface operations in favour of a third party
on or over any of the Subject Interests which do not operate to
interfere with current or proposed operations on the Assets;
PROVIDED, HOWEVER, any encumbrance listed in this definition shall
not be a Permitted Encumbrance if it (i) operates to (x) reduce the
Net Revenue Interest, or (y) increase the Working Interest of
Seller in the Assets, except where there is a corresponding
proportional increase in the Net Revenue Interest; (ii) causes
Seller to be in material breach of any representation or warranty
contained in this Agreement or the Assignment; (iii) relates to an
agreement, document, or instrument which provides for terms,
conditions, exceptions, reservations, limitations, or other matters
contained in such agreement, document or instrument which are not
customary to currently accepted oil and gas industry standards
which materially and adversely restricts or limits Buyer's ability
to produce oil and/or gas from the Assets.
6.4 DEFECT LETTERS
(A) Buyer may from time to time, but no later than three (3)
business days prior to Closing notify Seller in writing (a "Notice") of any
liens, charges, contracts, agreements, obligations, encumbrances, defects and
irregularities of title which would cause title to all or part of the Assets not
to be good and marketable as defined in section 6.3 hereof, or which would
cause a breach of a representation or warranty of Seller ("Title Defect").
(B) A Title Defect as set forth in a Notice shall be a "Title
Failure", unless waived by Buyer. Any Title Defect waived by Buyer under this
section shall become a Permitted Encumbrance as defined in section 6.3(B)(ii).
6.5 EFFECT OF TITLE FAILURE. Any Title Failure not set forth in a
Notice prior to Closing shall be deemed to be waived by Buyer.
6.6 PRICE ADJUSTMENTS DUE TO TITLE FAILURE. The amount of any downward
adjustments due to Title Failure shall be determined as follows:
(A) The reduction of the Purchase Price shall be equal to the
Allocated Value reflected in Exhibit "C"; and
(B) As to reductions in Purchase Price caused by Seller
delivering less interest than the total net revenue interest
reflected in Exhibit "B" for any Asset, provided that the
ratio of net revenue interest to working interest has not
changed, the adjusted Purchase Price for the affected Asset
shall be determined by multiplying the Allocated Value times
a fraction which has the actual delivered net revenue
interest as its numerator and the net revenue interest for
the affected Asset reflected in Exhibit "B" as its
denominator.
7. REPRESENTATIONS AND WARRANTIES OF SELLER.
7.1 SELLER'S REPRESENTATIONS AND WARRANTIES. Seller represents and
warrants that as of the date hereof, and as of the Closing:
(A) Seller is a trust formed under the laws of the State of
Texas, validly existing and in good standing under the laws of the State listed
on the first page of this Agreement and is duly qualified to do business in the
states where the Assets are located;
(B) Seller owns the Assets and has the requisite power and
authority to enter of into this Agreement, to carry out the transactions
contemplated hereby, to transfer the Assets in the manner contemplated by this
Agreement, and to undertake all of the obligations of Seller set forth in this
Agreement;
(C) This Agreement and any documents or instruments delivered by
Seller at the Closing shall constitute legal, valid and binding obligations of
Seller, enforceable in accordance with their terms, except that such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally and
(ii) equitable principles which may limit the availability of certain equitable
remedies (such as specific performance in certain instances);
(D) To the best of Seller's knowledge, after due inquiry, Seller
is in material compliance with all permits, licenses, contracts and agreements
relating to the Assets. Seller is in material compliance with all laws, rules,
regulations and orders of federal, state or local entities which have
jurisdiction over Seller or the Assets to be sold hereunder, including but not
limited to all environmental regulations and laws, except for noncompliance with
such laws, rules and regulations which, individually or in the aggregate, do not
and will not affect materially and adversely any portion of any of the Assets;
(E) To the best of Seller's knowledge, there is no suit,
action, claim, investigation or inquiry pending or threatened arising out of
or with respect to the ownership, operation or environmental condition of the
Assets;
(F) To the best of Seller's knowledge, at Closing there are no
liens, mortgages or encumbrances which would materially impair the value of the
Assets or materially interfere with the operation of the Assets; and
(G) Seller has good and marketable title to the Leases.
7.2 DISCLAIMER OF REPRESENTATIONS. THE EXPRESS REPRESENTATIONS OF
SELLER CONTAINED IN THIS AGREEMENT ARE EXCLUSIVE AND ARE IN LIEU OF, AND
SELLER EXPRESSLY DISCLAIMS AND NEGATES AND BUYER HEREBY WAIVES, ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT COMMON LAW, BY STATUTE OR
OTHERWISE, WITH RESPECT TO THE QUALITY, QUANTITY OR VOLUME OF THE RESERVES,
IF ANY, OF OIL, GAS OR OTHER HYDROCARBONS AND ASSOCIATED PRODUCTS IN OR UNDER
THE ASSETS, THE ENVIRONMENTAL CONDITION, BOTH SURFACE AND SUBSURFACE, OR
OTHER CONDITIONS OF THE ASSETS, OR THE OWNERSHIP OR OPERATION OF THE ASSETS
OR ANY PART THEREOF OR FOR CLAIMS BY BUYER FOR DAMAGES BECAUSE OF DEFECTS,
WHETHER KNOWN OR UNKNOWN. EXCEPT AS OTHERWISE PROVIDED HEREIN, BUYER AGREES
THAT SELLER IS CONVEYING THE SUBJECT INTERESTS WITHOUT REPRESENTATION OR
WARRANTY AND SELLER DOES NOT MAKE OR PROVIDE, AND BUYER HEREBY WAIVES, ANY
WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, AT COMMON LAW, BY STATUTE OR
OTHERWISE AND SPECIFICALLY IN THE CASE OF THE PERSONAL PROPERTY WITHOUT ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, RELATING TO THE QUALITY,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, CONFORMITY TO SAMPLES, OR
CONDITIONS OF ANY OF THE ASSETS. SELLER DISCLAIMS AND NEGATES, AND BUYER
HEREBY WAIVES ALL OTHER REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED,
BY STATUTE OR OTHERWISE OR FOR CLAIMS BY BUYER FOR DAMAGES BECAUSE OF
DEFECTS, WHETHER KNOWN OR UNKNOWN. THE ITEMS OF PERSONAL PROPERTY, EQUIPMENT,
IMPROVEMENTS, FIXTURES AND APPURTENANCES CONVEYED AS PART OF THE ASSETS ARE
SOLD, AND BUYER ACCEPTS SUCH ITEMS AS IS, WITH
ALL FAULTS. THERE ARE NO WARRANTIES THAT EXTEND BEYOND THE FACE OF THIS
AGREEMENT. BUYER ACKNOWLEDGES THAT THIS WAIVER IS CONSPICUOUS.
8. REPRESENTATIONS AND WARRANTIES OF BUYER.
8.1 BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer represents and
warrants (which representations and warranties shall survive the Closing) that
at the date hereof and at Closing:
(A) Buyer is a corporation duly incorporated, validly existing
and in good standing under the laws of its jurisdiction of incorporation;
(B) Buyer has the corporate power and authority to enter into
this Agreement, to carry out the transactions contemplated hereby and to
undertake all of the obligations of Buyer set out in this Agreement;
(C) The consummation of the transactions contemplated by this
Agreement, will not in any material respect violate, nor be in conflict with,
any provision of Buyer's charter, by-laws or other governing documents, or any
material agreement or instrument to which Buyer is a party or is bound, or any
judgment, decree, order, statute, rule or regulation applicable to Buyer
(subject to governmental consents and approvals customarily obtained after the
Closing);
(D) This Agreement constitutes legal, valid and binding
obligations of Buyer, enforceable in accordance with its terms;
(E) Buyer has incurred no obligation or liability, contingent or
otherwise, for brokers' or finders' fees in respect of the matters provided for
in this Agreement, and, if any such obligation or liability exists, it shall
remain an obligation of Buyer, and Seller shall have no responsibility
therefor; and
(F) There is no suit, action, claim, investigation,
administrative proceeding or inquiry by any person, entity, administrative
agency or governmental body pending or, to Buyer's best knowledge, threatened
against Buyer or any affiliate of Buyer which has or will materially affect
Buyer's ability to consummate the transactions contemplated herein.
9. CERTAIN AGREEMENTS OF SELLER. Seller agrees and covenants that,
unless Buyer shall have otherwise agreed in writing, the following provisions
shall apply:
9.1 MAINTENANCE OF ASSETS. From the Effective Time until Closing,
Seller agrees that it will:
(A) Administer and operate the Assets in good and workmanlike
manner and, conduct its business and operations in a prudent manner, and in
substantially the same manner as prior to the date of this Agreement;
(B) Not introduce any new methods of management, operation or
accounting with respect to any or all of the Assets;
(C) Maintain and keep the Assets in good condition and working
order; preserve the Assets in full force and effect; and fulfill all contractual
or other covenants, obligations and conditions imposed upon Seller with respect
to the Assets, including, but not limited, to payment of royalties, delay
rentals, shut-in gas royalties and any and all other required payments;
(D) Not enter into agreements to drill new ▇▇▇▇▇ or to rework,
plug back, deepen, plug or abandon any existing well or ▇▇▇▇▇ on the Leases, nor
commence any drilling, reworking or completing or other operations or make or
authorize any expenditures (except for emergency operations and operations
required under presently existing contractual obligations) without obtaining the
prior written consent of Buyer; provided that such prior written consent of
Buyer shall not be required with respect to any single expenditure that does not
exceed Twenty-five Thousand Dollars ($25,000.00) or aggregate expenditures that
do not exceed Fifty Thousand Dollars ($50,000.00) (in either case, net to
Seller's working interest), and provided further that the terms of this
paragraph shall not apply to any expenditures of Seller which will not be
charged to Buyer;
(E) Not voluntarily relinquish its position as operator to
anyone other than Buyer with respect to any of the Assets or abandon any of the
Assets;
(F) Not, without the prior written consent of Buyer, (i) enter
into any agreement or arrangement transferring, selling or encumbering any of
the Assets; (ii) grant any preferential or other right to purchase or agree to
require the consent of any party to the transfer and assignment of the Assets to
Buyer; (iii) enter into any new sales contracts or supply contracts; or (iv)
incur or agree to incur any material contractual obligation or liability
(absolute or contingent) with respect to the Assets except as otherwise provided
herein; and
(G) Promptly provide Buyer with written notice of (i) any claims,
demands, suits or actions made against Seller which materially affect the
Assets; or (ii) any proposal from a third party to engage in any material
transaction (E.G., a farmout) with respect to the Assets.
9.2 CONSENTS. Except for those consents which are typically obtained
after Closing, on or before the Closing, Seller will obtain all such
permissions, approvals and consents by governmental authorities and others
which are obtainable by Closing and are required to vest good and marketable
title to the Assets in Buyer, or as may be otherwise reasonably requested by
Buyer. Seller will execute all necessary or appropriate transfer orders (or
letters in lieu thereof) designating Buyer as the appropriate party for payment
effective as of the Closing.
9.3 CO-OPERATION. Seller will co-operate with Buyer to assist Buyer in
carrying out the agreements of Buyer.
10. CERTAIN AGREEMENTS OF BUYER. Buyer agrees and covenants that unless
Seller shall have consented otherwise in writing, the following provisions shall
apply:
10.1 CO-OPERATION. Buyer will co-operate with Seller to assist Seller in
carrying out the agreements of Seller.
10.2 DISCLOSURE. Until the Closing Date and to the extent not already
public, Buyer shall exercise all due diligence in safeguarding and maintaining
secure and confidential all engineering, geological and geophysical data,
reports and maps, and other data relating to the Assets disclosed to or in the
possession of Buyer.
11. SURVIVAL. The liability of Seller under its representations,
warranties, covenants, indemnities and agreements made in this Agreement shall
survive Closing for a period of two years following Closing. Notwithstanding any
other provision of this Agreement, no party shall make any claims for the
breach of any representation or warranty or covenant, if such party had
knowledge prior to Closing of such breach and failed to notify the party making
such representation or warranty of such breach prior to Closing.
12. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. All obligations, of
Buyer under this Agreement are, at its election, subject to the fulfillment,
prior to or at the Closing, of each of the following conditions:
12.1 NO LITIGATION. At the Closing, no suit, action or other proceeding
shall be pending nor shall there be a substantial threat of such proceeding
before any court or governmental agency which attempts to prevent the occurrence
of the transactions contemplated by this Agreement.
12.2 REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations and
warranties of Seller contained in this Agreement shall be true as of the Closing
as if such representations and warranties were made as of the date of Closing in
all material respects, and Seller shall have performed and satisfied all
covenants and fulfilled all conditions required by this Agreement to be
performed and satisfied by Seller at or prior to the Closing in all material
respects.
12.3 CONSENTS. All necessary and material permissions, approvals and
consents of federal authorities required pursuant to Section 9.2 hereof which
are obtainable by the Closing shall be in full force and effect and all
necessary approvals or consents of the shareholders of Buyer, if required,
and other securities regulatory authorities shall have been obtained,
including approval of the Vancouver Stock Exchange.
13. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER. All obligations
of Seller under this Agreement are, at Seller's election, subject to the
fulfillment, prior to or at the Closing, of each of the following conditions:
13.1 NO LITIGATION. At the Closing no suit, action or other proceeding
shall be pending nor shall there be a substantial threat of such proceeding
before any court or governmental agency which attempts to prevent the
occurrence of the transactions contemplated by this Agreement.
13.2 REPRESENTATIONS AND WARRANTIES. All representations and warranties
of Buyer contained in this Agreement shall be true as of the Closing, as if such
representations and warranties were made as of the date of Closing and Buyer
shall have performed and satisfied all covenants and fulfilled all conditions
required by this Agreement to be performed and satisfied by Buyer at or prior to
the Closing in all material respects.
14. TERMINATION.
14.1 CAUSES OF TERMINATION. This Agreement and the transactions
contemplated herein shall be completely terminated:
(A) At any time by mutual consent of the Parties;
(B) By Buyer at its election if, on the Closing Date, any of the
conditions set forth in Article 13 hereof shall not have been satisfied or
waived; and
(C) By Seller at its election if, on the Closing Date, any of
the conditions set forth in Article 14 hereof shall not have been satisfied or
waived.
14.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to the provisions of this Article 14 or elsewhere in this
Agreement, this Agreement shall become void and have no further force and effect
and neither Party shall have any further right, duty or liability to the other
hereunder. Upon termination as provided in this section, each Party agrees, upon
request, to use its best efforts to return to the other or destroy, all
materials, documents and copies thereof provided, obtained or discovered in the
course of any due diligence investigations.
15. MISCELLANEOUS.
15.1 NOTICE. Any notice, request, demand, or consent required or
permitted to be given hereunder shall be in writing and delivered in person or
by certified letter, with return receipt requested, by telecopy or pre-paid
telegram addressed to the party for whom intended at the following addresses:
Seller: STARBUCKS TRUST
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Buyer and Texstar: BENZ ENERGY, LTD.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address as any of the above shall specify by like notice to the
other.
15.2 FEES, EXPENSES AND TAXES.
(A) Each Party shall be solely responsible for all expenses
incurred by it in connection with this transaction (including, but not limited
to fees and expenses of its counsel, its brokers and accountants) and shall not
be entitled to any reimbursements therefor from the other Party, except as
otherwise provided in this Agreement.
(B) Buyer shall pay any filing or recording fees required in
connection with the transactions contemplated by this Agreement.
(C) Sales, ad valorem taxes and use tax, if any, due in
connection with the transactions represented by this Agreement shall be paid by
the Buyer and any other transfer tax due in connection with the transactions
represented by this Agreement shall be paid by the Party upon which such tax is
imposed by law. Buyer shall prepare the sales tax returns, if any, and Seller
will assist Buyer in the filing of same.
15.3 ASSIGNMENT. This Agreement is binding on the Parties hereto and
their respective successors and assigns.
15.4 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
reached by the Parties with respect to the subject matter hereof, superseding
all prior negotiations, discussions, agreements and understandings, whether oral
or written, relating to such subject matter.
15.5 SEVERABILITY. In the event that any one or more covenants, clauses
or provisions of this Agreement shall be held invalid or illegal, such
invalidity or unenforceability shall not affect any other provisions of this
Agreement.
15.6 CHOICE OF LAW. This Agreement shall be construed in accordance with
and governed by the internal laws of the State of Texas without giving effect to
principles of conflict of law.
15.7 TEXAS DECEPTIVE TRADE PRACTICES ACT WAIVER. BUYER AND SELLER
CERTIFY THAT THEY ARE NOT "CONSUMERS" WITHIN THE MEANING OF THE TEXAS
DECEPTIVE TRADE PRACTICE-CONSUMER PROTECTION ACT, SUBCHAPTER E OF CHAPTER 17,
SECTIONS 17.41 ET SEQ., OF VERNON'S TEXAS CODE ANNOTATED,
BUSINESS AND COMMERCE CODE, AS AMENDED (THE "DTPA"). THE PARTIES COVENANT, FOR
THEMSELVES AND FOR AND IN BEHALF OF ANY SUCCESSORS OR ASSIGNS, THAT IF THE DTPA
IS APPLICABLE, (a) THE PARTIES ARE "BUSINESS CONSUMERS" THEREUNDER; (b) EACH
PARTY HEREBY EXPRESSLY WAIVES AND RELEASES ALL OF ITS RIGHTS AND REMEDIES
THEREUNDER (OTHER THAN SECTION 17.555, WHICH IS NOT WAIVED) AS APPLICABLE TO THE
OTHER PARTY AND ITS SUCCESSORS AND (c) EACH PARTY SHALL INDEMNIFY, DEFEND AND
HOLD THE OTHER HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS OR CAUSES
OF ACTION OF OR BY THAT PARTY OR ANY SUCCESSOR OR ANY OF ITS AFFILIATES BASED IN
WHOLE OR IN PART OF THE DTPA, ARISING OUT OF OR IN CONNECTION WITH THE
TRANSACTION CONTEMPLATED BY THIS AGREEMENT. FURTHERMORE, BUYER AND SELLER
EXPRESSLY AGREE THAT THIS WAIVER SHALL SURVIVE THE CLOSING, NOTWITHSTANDING ANY
PROVISIONS CONTAINED HEREIN TO THE CONTRARY.
15.8 EXHIBITS. Exhibits "A," "B," "C," "D," "E" and "F" attached hereto
and made a part hereof.
15.9 CAPTIONS. The captions in this Agreement are for convenience only
and shall not be considered a part of or affect the construction or
interpretation of any provision of this Agreement.
15.10 COUNTERPARTS. This Purchase and Sale Agreement may be separately
executed in any number of counterparts, all of which when so executed shall be
deemed to constitute one and the same agreement.
Executed as of the day and year first above written.
SELLER:
STARBUCKS TRUST
By:
Name:
Title:
BUYER:
BENZ ENERGY, LTD.
By:
Name:
Title:
TEXSTAR:
TEXSTAR PETROLEUM, INC.
By:
Name:
Title:
