DEFINIITIVE PURCHASE AGREEMENT
Exhibit
2.1
DEFINIITIVE
PURCHASE AGREEMENT
THIS
DEFINITIVE PURCHASE AGREEMENT
(this
“Agreement”),
dated
as of June 28TH, 2006, (“Effective
Date”)
is
entered into by and between the Members of Eagle Domestic Drilling Operations
LLC, a Texas limited liability company (“Eagle”)
(the
Members of Eagle are referred to herein as the “Sellers”),
and
Blast Energy Services, Inc., a California corporation, (the “Buyer”),
(each
of the Buyer and the Sellers, being sometimes referred to herein as a
“Party”
and
collectively as the “Parties”).
WITNESSETH
WHEREAS,
the
Sellers are the Members of Eagle; and
WHEREAS,
the
Sellers desire to sell their membership interests in Eagle (the “Membership
Interests”)
to the
Buyer complete with Eagle’s assets and liabilities as of the Closing Date upon
the terms and conditions set forth herein. Eagle Financial Statements are set
forth in Exhibit
B
attached
hereto;
NOW
THEREFORE,
in
consideration of the mutual promises and covenants contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the Buyer and the Sellers hereby agree as follows:
ARTICLE
1
SALE
AND PURCHASE OF THE MEMBERSHIP INTERESTS IN EAGLE
Section
1.1 Sale
and Purchase of the Membership Interests.
Upon
the terms and subject to the conditions of this Agreement, the Sellers hereby
agree to sell to the Buyer, and the Buyer hereby agrees to purchase from the
Sellers, 100% of their Membership Interest in Eagle for the consideration of
Buyer paying the following: (a) the cash sum of Forty Nine Million U.S. Dollars
(US$49,000,000.00) delivered to the Sellers as provided on Exhibit C which
is
attached to this Agreement on or before the Closing Date; (b) the cash sum
of
One Million U.S. Dollars (US$1,000,000.00) paid into Escrow as provided on
Exhibit C which is attached to this Agreement on or before the Closing Date;
and
(c) to the Sellers five hundred thousand shares (500,000) of common stock in
Buyer at a valuation price calculated as follows: the five (5) day rolling
average hi/lo mean price of the Buyer’s common stock for the five (5) Business
Days preceding the Closing Date distributed as provided on Exhibit C which
is
attached to this Agreement on or before the Closing Date (altogether referred
to
herein as the “Purchase
Price”).
Section
1.2 Closing.
(a) The
Closing.
The
closing of the purchase and sale of the Membership Interests in Eagle to the
Buyer (the “Closing”)
shall
take place in accordance with the terms of this Agreement in the general area
of
Dallas/Fort Worth, Texas at a location to be mutually agreed upon by the Parties
prior to Closing and on a Business Day to be mutually agreed upon by the Buyer
and the Sellers (the “Closing
Date”).
The
Closing must occur on or before August 4, 2006, or this Agreement may be
terminated by either Party by delivering written notice to the other Party.
On
or before the Closing Date, the Buyer and the Sellers agree to comply with
their
respective obligations set out in this Agreement.
(b) Payment
of the Purchase Price.
Upon
Closing of this transaction between the Buyer and the Sellers, Buyer shall
deliver to Sellers the Purchase Price. The Purchase Price shall be delivered
to
each Seller pro rata based on the relative percentage interest in Eagle
represented by such Seller’s Membership Interests as set forth in Exhibit C. The
cash payment portion of the Purchase Price shall be made at or prior to Closing
by wire transfer of same day funds in accordance with the wire transfer
instructions which shall be attached as an “Exhibit C” to this Agreement on or
after the Effective Date and signed by the Parties. The common stock portion
of
the Purchase Price shall be made at or prior to the Closing by executing and
delivering the award of unregistered common stock evidenced by the form with
restrictive legend attached as Exhibit D to this Agreement on or after the
Effective Date and signed by the Parties.
(c) Closing
Conditions of the Buyer.
The
obligation of the Buyer to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment or waiver, at or prior to the
Closing, of the following closing conditions:
(i)
Buyer
obtains financing necessary to pay the Purchase Price;
(ii)
the
Sellers complete the closing deliveries set out in Section
1.2(f);
(iii)
the
representations and warranties of the Sellers shall have been true and correct
when made and shall be true and correct as of the Closing with the same force
and effect as if made as of the Closing;
(iv)
any
notice or approvals to or of any federal, state or foreign governmental
authority with respect to the transactions contemplated hereby shall have been
either filed or received;
(v)
no
preliminary or permanent injunction or statute, rule, regulation or order that
would prohibit or restrain the consummation of the transactions contemplated
hereunder shall be in effect and no Governmental Authority or other person
or
entity shall have commenced or threatened to commence an action or proceeding
seeking to enjoin the consummation of such transactions or to impose liability
on any of the Parties hereto in connection therewith; and.
(vi)
the
approval of the board of directors and, if necessary as determined by Buyer,
the
shareholders of the Buyer
(d) Closing
Conditions of the Sellers.
The
obligation of the Seller to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment or waiver, at or prior to the
Closing, of the following closing conditions:
(i)
the Buyer
completes the closing deliveries set out in Section
1.2(e);
(ii)
the
representations and warranties of the Buyer shall have been true and correct
when made and shall be true and correct as of the Closing with the same force
and effect as if made as of the Closing; and
(iii)
any
notice or approvals to or of any federal, state or foreign governmental
authority with respect to the transactions contemplated hereby shall have been
either filed or received;
(iv)
no
preliminary or permanent injunction or statute, rule, regulation or order that
would prohibit or restrain the consummation of the transactions contemplated
hereunder shall be in effect and no Governmental Authority or other person
or
entity shall have commenced or threatened to commence an action or proceeding
seeking to enjoin the consummation of such transactions or to impose liability
on any of the Parties hereto in connection therewith; and
(v)
the
approval of the members of the Company
(e) Closing
Deliveries of the Buyer.
At the
Closing, the Buyer shall deliver, or shall cause to be delivered:
(i)
the
Purchase Price;
(iii)
Employment or Consulting Agreements between Buyer and Xxxxxxx X. Xxxxxxxx and
two rig managers in form and substance acceptable to Sellers and duly executed
by Buyer;
(iv)
good
standing certificates for Buyer from the Secretary of State for the States
of
California dated on or within twenty-five (25) days of the Closing Date;
and
(vi)
a
certificate from the Buyer dated the Closing Date and signed by a duly
authorized officer thereof certifying that: (1) the representations and
warranties of the Buyer were true and correct when made and are true and correct
as of the Closing Date; and (2) the Buyer has and will comply with all of its
covenants and agreements contained in this Agreement.
(f) Closing
Deliveries of the Sellers.
At the
Closing, the Sellers shall deliver, or shall cause to be delivered:
(i) An
assignment signed by all the Members of Eagle transferring 100% of their
Membership Interests to the Buyer free and clear of all Encumbrances in form
and
substance acceptable to the Buyer;
(ii)
A good
standing certificate for Eagle from the Secretary of State for the State of
Texas dated on or within twenty-five (25) days of the Closing Date;
(iii) A
receipt
signed by the Sellers for the Purchase Price;
(iv) An
agreement that will provide for the completion of five working drilling rigs,
understanding that, as of the Effective Date, as disclosed on Exhibit B, that
two drilling rigs that are a part of the Inventory of the Company remain to
be
completed with estimated delivery dates of August 30, 2006 for one and October
1, 2006 for the other. At such time as the final two drilling rigs disclosed
on
Exhibit B become working rigs, the Escrowed Funds shall be paid to the Sellers
as set forth on Exhibit C.
(v)
Provide
an agreement that, for a period of forty-five (45) days after the Closing
Date,if required, Transition Services, consisting of billing, collection,
accounting, administrative, and clerical services, shall be supplied to the
Buyer;
(v) An
Assignment Agreement substantially in the form attached marked Exhibit
F.
(vi) A
certificate from the Sellers to be signed by the Sellers certifying that: (A)
the representations and warranties of the Sellers were true and correct when
made and are true and correct as of the Closing Date; and (B) the Sellers
complied in all material respects with all of its covenants and agreements
contained in this Agreement.
ARTICLE
2
REPRESENTATIONS
AND WARRANTIES OF SELLERS
As
an
inducement to the Buyer to enter into this Agreement, the Sellers, including
such individuals, entities, or trusts represent and warrant to the Buyer as
of
the date hereof and as of the Closing Date that:
Section
2.1 Organization,
Existence and Corporate Power.
Eagle
is a limited liability company duly organized and validly existing under the
laws of the State of Texas, and the Sellers are the record and beneficial
members of Eagle and have all requisite power and authority to execute, deliver
and perform their obligations under this Agreement and the other documents,
certificates and instruments contemplated hereby.
Section
2.2 Authorization
and Execution.
The
execution, delivery and performance of this Agreement and the other documents,
certificates and instruments contemplated hereby and the consummation of the
transactions contemplated hereby have been duly and fully authorized and
approved by all requisite action on the part of the Sellers whether individuals,
entities, or trusts. This Agreement has been, and when executed and delivered,
each other document, certificate and instrument required to be executed will
have been, duly executed and delivered by the Sellers and constitutes the legal,
valid and binding obligation of the Sellers enforceable against them in
accordance with the terms hereof and thereof.
Section
2.3 No
Conflict.
Neither
the execution, delivery or performance by the Sellers of this Agreement, nor
the
consummation of the transactions contemplated hereby will violate or contravene
any judgment, decree, order or award of any court or other Governmental
Authority or any law, rule or regulation applicable to the Sellers or conflict
with result in a breach of, or constitute a default under, any agreement,
instrument or contractual obligation to which the Sellers as a party are bound.
Section
2.4 Title;
No Encumbrances.
The
Sellers have good, valid, indefeasible and merchantable title to the Membership
Interests which are free and clear of all outstanding options, outstanding
warrants, mortgages, security interests, debts, claims, liens, libels and
encumbrances of any kind whatsoever, including, without limitations, any sale
agreements or similar agreements whether recorded or unrecorded (collectively,
the “Encumbrances”)
.The
Sellers hereby agree to defend, protect, indemnify and hold harmless the Buyer
against any and all costs, expenses, losses, damages, suits, claims or
proceedings arising from Encumbrances on the Membership Interests that (i)
exist
prior to the Closing; or (ii) exist prior to the Closing and, notwithstanding
the Sellers’ covenants, representations and warranties herein, still exist after
the Closing, in both instances, irrespective of when such costs, expenses,
losses, damages, suits, claims or proceedings are incurred or raised, as
applicable.
Section
2.5 Litigation.
There
is no known legal action, suit, arbitration, government investigation or other
legal or administrative proceedings, nor any order, decree or judgment pending,
in effect, or threatened against or relating to the Sellers, which in any manner
would impair or impede or conflict with any of the transactions contemplated
by
this Agreement.
Section
2.6 Taxes.
Sellers
have duly and timely prepared and filed with the appropriate Governmental
Authorities all returns, reports, information returns, or other documents filed
or required to be filed by the Sellers with such Governmental Authorities and
paid any taxes or other amounts due upon the Effective Date in respect thereof
that if unpaid could result in a claim by any Governmental Authority against
the
Buyer.
Section
2.7 No
Brokers.
Sellers
have not employed or contracted with any agents, brokers, or other persons
to
receive any commission or compensation related to the consummation of the
transaction contemplated by this Agreement and Buyer shall not be liable for
any
such payments.
Section
2.8 Securities
Representations.
Each of
the Sellers are an “accredited investor” as defined in Rule 501 under the
Securities Act of 1933, as amended (the “Securities
Act”).
The
common stock in the Buyer which is a part of the Purchase Price will be acquired
for investment for Seller’s own account, not as a nominee or agent, and not with
a view to the resale or distribution of any part thereof, and Sellers have
no
present intention of selling, granting any participation in, or otherwise
distributing the same. Each Seller further represents that it does not presently
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person
with respect to any of the common stock in the Buyer. Each Seller acknowledges
that neither Buyer nor any of their respective officers, directors, employees,
owners, affiliates, attorneys, agents or advisors has offered or sold the common
stock in Buyer which is a part of the Purchase Price by any form of general
solicitation or general advertising, including, but not limited to, (a) any
advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media or broadcast over television or radio
or
(b) any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
Section
2.9 Exemption
from Registration; Restricted Securities.
Sellers
understand that the delivery of the common stock may not as of the Closing
Date
be registered under the Securities Act on the basis that such transfer provided
for in this Agreement is exempt from registration under the Securities Act,
and
that the reliance of Buyers on such exemption is predicated in part on Seller’s
representations set forth in this Agreement. Buyer understands that the common
stock may be “restricted securities” within the meaning of Rule 144 under
the Securities Act, and may be held pursuant to the requirements of
Rule 144 unless they are subsequently registered or an exemption from such
registration is available.
ARTICLE
3
REPRESENTATIONS
AND WARRANTIES OF THE BUYER
As
an
inducement to the Sellers to enter into this Agreement, the Buyer represents
and
warrants to the Sellers, except as otherwise specifically indicated in a
representation or warranty below, as of the date hereof and as of the Closing
Date that:
Section
3.1 Organization,
Existence and Corporate Power.
The
Buyer is a corporation duly organized and validly existing under the laws of
the
State of California, and has all requisite power and authority to execute,
deliver and perform its obligation under this Agreement and the other documents,
certificates and instruments contemplated hereby.
Section
3.2 Authorization
and Execution.
The
execution, delivery and performance of this Agreement and the other documents,
certificates and instruments contemplated hereby and the consummation of the
transactions contemplated hereby have been duly authorized and approved by
all
requisite actions of the Buyer. This Agreement has been, and when executed
and
delivered, each other document, certificate and instrument required to be
executed will have been, duly executed and delivered by the Buyer and
constitutes the legal, valid and binding obligation of the Buyer enforceable
against it in accordance with its terms.
Section
3.3 No
Conflict.
Neither
the execution, delivery or performance by the Buyer of this Agreement and the
other documents, certificates and instruments contemplated hereby, nor the
consummation of the transactions contemplated on behalf of the Buyer hereby,
will violate or contravene the Certificate of Formation or by-laws, articles,
or
filings of the Buyer with any Governmental Authority including, but not limited
to, the U.S. Securities and Exchange Commission (“SEC”),
or
violate or contravene any judgment, decree, order or award of any court or
other
Governmental Authority or any law, rule or regulation applicable to the Buyer
or
any of its property or assets, or conflict with, result in a breach of, or
constitute a default under, any agreement, instrument or contractual obligation
to which the Buyer is a party or by which it or its common stock shares are
bound.
Section
3.4 No
Brokers. Buyers
have not employed or contracted with any agents, brokers, or other persons
to
receive any commission or compensation related to the consummation of the
transaction contemplated by this Agreement and Sellers shall not be liable
for
any such payments.
Section
3.5 Litigation.
There
are no undisclosed material legal actions, suits, arbitrations, Governmental
Authority investigations, SEC filings, or order on the Buyer or other legal
or
administrative proceedings, nor any order, decree or judgment pending, in
effect, or threatened against the Buyer, which in any manner would impair or
impede the transactions contemplated by the Agreement.
Section
3.6 Capital
Stock.
The
authorized capitalcapital
stock of
Buyer consists of 100,000,000 shares of Common Stock, no par value, 44,000,000
shares (approximately)of which are issued and outstanding as of the Effective
Date, and 8,000,000 shares are reserved for issuance under outstanding stock
options and warrants. Except as described in the preceding sentence, there
are
no other outstanding stock options, warrants, phantom stock rights, convertible
or exchangeable securities or other commitments (other than this Agreement
and
the other agreements related hereto) pursuant to which Buyer is or may become
obligated to issue, sell, purchase or redeem any shares of capital stock or
other securities of Buyer as of the Effective Date but subject to the possible
issuance of additional securities by the Buyer in connection with obtaining
financing for the transactions contemplated by this Agreement.
Section
3.7 Securities
Filings.
Buyer
has furnished to the Sellers for their examination all information filed with
the SEC by Buyer, or otherwise required to be provided to the SEC by Buyer
in
accordance with the rules and regulations of the SEC, since January 1, 2005
(the
“SEC
Filings”).
Section
3.8 Compliance
with Securities Laws.
All of
the outstanding shares of Buyer’s capital stock have been issued in compliance
with all applicable state and federal securities laws and are duly authorized,
validly issued, fully paid and nonassessable and free of preemptive rights,
contractual rights to purchase and similar rights except as set forth in the
SEC
Filings. The shares of Buyer’s Common Stock to be issued and sold by Buyer
pursuant to the Warrant Agreement have been duly authorized and, upon exercise
of the Warrant Agreement in accordance with the terms thereof, will have been
validly issued, fully paid and nonassessable.
Section
3.9 Investigation.
Buyer
has performed its own due diligence review of Eagle and has had access to such
financial and other information concerning Eagle and the Membership Interests
it
has deemed necessary in connection with its decision to purchase the Membership
Interests. Buyer acknowledges that the information provided or to be provided
to
it by or on behalf of Eagle or the Sellers is confidential and shall remain
and
be held as confidential along with any and all information provided pursuant
to
this Agreement and during due diligence all of which shall remain confidential
after Closing. The Buyer agrees to be bound by this confidentiality agreement
during the period after the Effective Date and beyond the Closing which
agreement would also survive Termination of this Agreement.
Section
3.10 Securities
Representations.
Buyer is
an “accredited investor” as defined in Rule 501 under the Securities Act of
1933, as amended (the “Securities
Act”).
The
Membership Interests will be acquired for investment for Buyer’s own account,
not as a nominee or agent, and not with a view to the resale or distribution
of
any part thereof, and Buyer has no present intention of selling, granting any
participation in, or otherwise distributing the same. Buyer further represents
that it does not presently have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to such
person or to any third person with respect to any of the Membership Interests.
Buyer acknowledges that neither Eagle nor Sellers nor any of their respective
officers, directors, employees, owners, affiliates, attorneys, agents or
advisors has offered or sold the Membership Interests to Buyer by any form
of
general solicitation or general advertising, including, but not limited to,
(a) any advertisement, article, notice or other communication published in
any newspaper, magazine, or similar media or broadcast over television or radio
or (b) any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising.
Section
3.11 Exemption
from Registration; Restricted Securities.
Buyer
understands that the sale of the Membership Interests will not be registered
under the Securities Act on the basis that such sale provided for in this
Agreement is exempt from registration under the Securities Act, and that the
reliance of Sellers on such exemption is predicated in part on Buyer’s
representations set forth in this Agreement. Buyer understands that the
Membership Interests are “restricted securities” within the meaning of
Rule 144 under the Securities Act, and must be held pursuant to the
requirements of Rule 144 unless they are subsequently registered or an
exemption from such registration is available.
Section
3.12 Registration
Rights.
Buyer is
obligated to register the shares of its Common Stock underlying the Purchase
Price transferred to the Sellers who shall become Holders, as used herein,
in
any subsequent registration statement filed by Buyer for its own account or
the
account of any other shareholders with the SEC, so that holders of such Common
Stock shall be entitled to sell the same simultaneously with and upon the terms
and conditions as the securities sold for the account of Buyer or any other
shareholders are being sold pursuant to any such registration statement, subject
to reasonable and customary lock-up provisions as may be proposed by the
underwriter of said registration statement and agreed to by the investors
("Piggyback Registration Right"). In Addition, upon the receipt by Buyer of
a
written Request from a Holder for the registration of all or any portion of
the
Shares of Common Stock underlying the Purchase Price, at any time that is at
least 30 days after the date of this Agreement, Buyer shall prepare and file,
within 90 days after receipt of such Request, a registration statement under
the
Act covering the Shares which are subject to such Request and shall use its
best
commercial efforts to cause such registration statement to become effective
within 90 days following the Request (a “Demand Registration”). In connection
with any Registration hereunder, Buyer shall indemnify, defend and hold harmless
any Holder, any underwriter, dealer or broker for Holder, and their respective
affiliates, directors, officers, partners, employees, agents and representatives
from and against any and all losses, claims, damages, liabilities, costs and
expenses arising out of or based upon any untrue or alleged untrue statement
of
any material fact contained in a registration statement filed with the SEC
pursuant thereto, any prospectus contained therein, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading.
ARTICLE
4
REPRESENTATIONS
AND WARRANTIES ABOUT THE COMPANY
As
an
inducement to Buyer to enter into the Agreement and to consummate the
transactions contemplated thereby, and with the knowledge that Buyer shall
rely
thereon, the Company represents and warrants to Buyer the following concerning
the Company, and the representations and warranties set forth below as of the
Closing Date are true and correct.
Section
4.1 Duly
Organized.
(a) The
Company (i) is a limited liability company duly organized, validly existing
and
in good standing under the laws of its Organization State, (ii) has all
requisite corporate power and authority under those laws and its Charter
Documents to own or lease and to operate its properties and to carry on its
business as now conducted and (iii) is duly qualified and in good standing
as a
foreign limited liability company in all jurisdictions including, but not
limited to, the State of Texas, in which it owns or leases property or in which
the carrying on of its business as now conducted so requires except where the
failure to be so qualified, singly or in the aggregate, would not have a
material adverse effect;
100%
of
the Membership Interests of the Company are held by the individuals, trusts,
and/or entities set forth on the Disclosure Statement attached as Exhibit E,
which shall be attached to this Agreement at or prior to Closing and signed
by
the Parties, in the percentages set forth next to such individual or entity’s
name thereon, (ii) no outstanding derivative securities of the Company exist,
and (iii) the interests described above represent all of the Membership
Interests of the Company.
Section
4.2 Charter
Documents.
The
Company has heretofore delivered to Buyer true and complete copies of its
Charter Documents of the Company as in effect on the Effective Date
hereof.
Section
4.3 Books
and Records.
The
Company has caused true, complete, and correct copies of the Charter Documents,
as in effect on the date hereof to be delivered to Buyer, and
such
records of the Company are correct and complete in all material respects, and
the signatures appearing on all documents contained therein are the true
signatures of the persons purporting to have signed the same. All actions
reflected in said books and records were duly and validly taken in compliance
with the laws of the jurisdiction of organization. All of the business records
of the Company are under the Company’s exclusive ownership and direct control,
as applicable.
Section
4.4 Authority
of the Company. The
Company has the right, power and authority to enter into this Agreement and
all
of the transaction documents to which it is a party and the Sellers agreed
to
take any and all actions necessary or desirable under the laws of the State
of
Texas to complete the transactions contemplated by this Agreement. Except as
set
forth in Schedule 4.4 of the Disclosure Statement, or otherwise waived by the
Buyer, neither the execution nor delivery of this Agreement nor the consummation
of the transactions contemplated hereby will:
(a) be
in
violation of the Charter Documents of the Company or any other constituent
document relating to the Company which constitutes a breach of any evidence
of
indebtedness or agreement to which the Company is a party;
(b) cause
a
default under any agreement, or any security agreement, mortgage or deed of
trust or other lien, charge or encumbrance to which any property of the Company
is subject, under any lease agreement or any other contract to which the Company
is a party, or permit the improper termination of any such contract by another
person;
(c) accelerate,
or constitute an event entitling, or which would, on notice or lapse of time
or
both, entitle the holder of any indebtedness of the Company to accelerate the
maturity of any such indebtedness; or
(d) violate,
or cause any revocation of or limitation on any Permit of the
Company.
Section
4.5 Financial
Statements.
The
Company has furnished to the Buyer the financial statements of the Company.
The
Financial Statements fairly present the financial condition of the Company
at
the date thereof, and the related statements of income fairly present the
results of operations of the Company for the period then ended and are complete
and correct in all material respects, all in accordance with sound accounting
practices consistently applied, except as may be expressly disclosed on the
Disclosure Statement. Since the financial statements in Exhibit B were
furnished, there has been (i) no material adverse effect in the assets or
liabilities, or in the business or condition, financial or otherwise, or in
the
results of operations, or, if applicable, any loss of customers or suppliers,
of
the Company, and (ii) to the best knowledge, information and belief of the
Company, no fact or condition exists or is contemplated or threatened which
might cause such a change in the future.
Section
4.6 Title
to Properties; Encumbrances.
The
Company has good, valid and marketable title to all its assets (personal,
tangible and intangible), including, without limitation, all the assets
reflected in the financial statements in Exhibit B, and all the properties
and
assets purchased by the Company since the date of those statements, in each
case
subject to no liens of any kind or character, except in the ordinary course
of
business.
Section
4.7 Tax
Matters.
Except
as set forth on the Disclosure Statement, the Company has paid all Taxes which
are due and billed to the Company as of the Closing Date and all deficiencies
or
other additions to any tax, interest and penalties owed in connection with
any
such Taxes, and shall have timely paid the same, prior to the Closing
Date.
Section
4.8 Compliance
with Laws.
Except
as set forth on the Disclosure Statement, the Company is not in material
violation of any Governmental Requirements or Governmental Approvals applicable
to the business of the Company.
Section
4.9 Litigation.
Except
as set forth on Schedule 4.9 of the Disclosure Statement, there is no litigation
or, to the knowledge of the Company, investigations (whether or not the defense
thereof or liabilities in respect thereof are covered by insurance) pending
or
threatened against or involving the Company, or any of its assets. All notices
required to have been given to any insurance company listed as insuring against
any litigation have been timely and duly given and no insurance company has
asserted, orally or in writing that such claim is not covered by the applicable
policy relating to such claim.
Section
4.10 Contracts
and Other Agreements.
Except
as set forth on Schedule 4.10 of the Disclosure Statement (the “Scheduled
Agreements”),
there
are no oral or written contracts or other agreements to which the Company is
a
party or by or to which it or its assets or properties are bound or subject.
There have been delivered or made available to Buyer true and complete copies
of
all of the Scheduled Agreements set forth on Schedule 4.10 of the Disclosure
Statement or on any other Schedule annexed thereto.
Section
4.11 Real
Estate.
The
Company does not own or lease any real estate.
Section
4.12 Accounts
and Notes Receivable; Accounts Payable.
All
accounts and notes receivable, unbilled invoices and accounts payable reflected
on the Financial Statements in Exhibit B, and all accounts and notes receivable,
unbilled invoices and accounts payable arising subsequent to the date of the
Financial Statements in Exhibit B, have arisen in the ordinary course of
business of the Company, represent valid obligations due to or due from the
Company, as applicable, and, the Company’s accounts receivable have been
collected or are collectible in the ordinary course of business of the Company
in the aggregate recorded amounts thereof in accordance with their terms; and
none of such accounts receivable or other debts is or will at the Closing Date
be subject to any counterclaim or set off. Accounts payable of the Company
shall
be paid using proceeds from the Purchase Price.
Section
4.13 Inventory. The
inventory reflected in the Financial Statements in Exhibit B or acquired since
the date of the Financial Statements by the Company represents raw materials,
parts, assemblies, work-in-process and certain finished goods, and, except
as
already provided in the Financial Statements, no additional allowance or
provision is necessary in the Financial Statements to reduce the carrying value
of excess, damaged or obsolete inventory to its estimated net realizable value.
The Parties, prior to or at Closing, shall sign a final Exhibit B.
Section
4.14 Tangible
Property.
The
Inventory reflected in the Financial Statements or acquired since the date
of
the Financial Statements in Exhibit B by the Company, are in an “As Is, Where
Is” condition and repair, subject to additional normal wear and tear and
considering the age thereof, and the Company has no knowledge that any of the
Inventory is in violation of any existing law. There has not been any material
interruption of the operations of the Company.
Section
4.15 Proprietary
Rights.
The
Company holds no proprietary rights other than as set forth in Schedule 4.15
of
the Disclosure Statement.
Section
4.16 Liabilities.
To the
best knowledge of the Company, it has no direct or indirect, pending or
threatened damage claims, known or unknown, fixed or unfixed, liquidated or
unliquidated, secured or unsecured, accrued, absolute, contingent or otherwise,
other than (i) damage claims fully and adequately recorded in the Financial
Statements and (ii) damage claims incurred since the date of the Financial
Statements in Exhibit B in the ordinary course of business that would not have
a
material adverse effect on the business and operation of the
Company.
Section
4.17 Suppliers
and Customers.
The
Company has no knowledge of any event, happening or fact which would reasonably
lead it to believe, that any present supplier or customer of the Company would
terminate or materially diminish in scope the volume of its relationship with
the Company.
Section
4.18 Employee
Matters.
The
Company does not have any Employees and there are no past or current claims
or
liabilities for its employees.
Section
4.19 Insurance. As
set
forth on Schedule 4.19 of the Disclosure Statement, the Company is an additional
insured only on insurance policies held by other entities with which it works.
To the knowledge of the Company, such policies and binders are valid and
enforceable in accordance with their terms, are in full force and effect, and
insure against risks and liabilities to the extent and in the manner deemed
appropriate and sufficient by the Company. The Company is not in default with
respect to any provision contained in any such policy or binder and has not
failed to give any notice or present any claim under any such policy or binder
in due and timely fashion. There are no outstanding unpaid claims under any
such
policy or binder. The Company has received no notice of cancellation or
non-renewal of any such policy or binder.
Section
4.20 Environmental
Matters.
The
Company has no knowledge of any environmental claims filed as of the date of
the
Financial Statements in Exhibit B or since that date and will notify the Buyer
if any filed claims are received.
Section
4.21 Bank
Accounts, Powers of Attorney.
Upon
request by the Buyers, the Company will supply the name and address of each
bank
in which the Company has an account or safe deposit box, the number of any
such
account or any such box and the names of all persons authorized to draw thereon
or to have access thereto, and (ii) the names of all persons, if any, holding
powers of attorney from the Company and a summary statement of the terms
thereof.
Section
4.22 Company
Permits.
The
Company holds no permits that are material to or necessary for the conduct
of
the business of the Company as it is presently being conducted.
Section
4.23 Disclosure.
To the
knowledge of the Company, neither this Agreement nor any Schedule, or
certificate delivered in accordance with the terms hereof or any document or
statement in writing which has been supplied by or on behalf of the Company
in
connection with the this Agreement, contains any untrue statement of a material
fact, or omits any statement of a material fact necessary in order to make
the
statements contained herein or therein not misleading. There is no fact within
the knowledge of the Company which has or will have a material adverse effect
on
the business or financial condition of the Company or its assets, which has
not
been set forth in this Agreement or in the Schedules or certificates or
statements in writing furnished in connection with the transactions contemplated
by this Agreement.
Section
4.24 Broker’s
or Finder’s Fees.
No
agent, broker or firm acting on behalf of the Company is, or will be, entitled
to any commission or broker’s or finder’s fees from any of the parties hereto,
or from any person controlling, controlled by or under common control with
any
of the parties hereto, in connection with any of the transactions contemplated
herein.
Section
4.25 Copies
of Documents.
The
Company has caused to be made available for inspection and copying by Buyer
and
its advisors, true, complete and correct copies of all documents referred to
in
this Agreement or in any Schedule furnished by the Company to
Buyer.
ARTICLE
5
TERMINATION
Section
5.1 Termination.
This
Agreement may, by written notice given at or prior to the Closing, be
terminated: (a) by mutual consent of the Parties; or (b) by either Party in
the
event there has been a breach by the other Party of any representation,
warranty, covenant or agreement contained in this Agreement, that shall not
have
been cured by the breaching party or waived by the non-breaching Party on or
before the Closing Date.
Section
5.2 Effect
of Termination;.
(a) Upon
the
termination of this Agreement pursuant to Section
5.1(a)
hereof
without a breach of this Agreement by a Party, this Agreement shall be void
and
of no effect and there shall be no liability (other than as set forth in
Section
5.2(b),
below)
by reason of this Agreement or the termination thereof on either Party except
for any liability arising out of a breach of any provision of this Agreement,
representation, warranty, agreement or covenant of this Agreement prior to
the
date of termination or any representation warranty, agreement or covenant which
survives the termination of this Agreement.
(b) In
case
of a breach of this Agreement, that is not cured as provided in Section 5.1(b),
in any manner by a Party causing the other Party to Terminate this Agreement
at
or prior to the Closing Date, the breaching Party shall be liable to the
non-breaching Party to pay, within thirty (30) Days of Notice (delivered by
the
non-breaching Party to the breaching Party), the sum of five hundred thousand
United States Dollars (US$500,000.00) (“Liquidated
Damages”)
in cash
by wire transfer in accordance with the non-breaching Party’s wire transfer
instructions to the breaching Party as contained in its Notice. The provisions
of Subsection
5.2 (b)
and its
obligations shall survive any termination of this Agreement.
ARTICLE
6
MISCELLANEOUS
Section
6.1 Due
Diligence.
The
Sellers, if necessary, shall cause Eagle’s officers, employees, agents,
accountants and counsel to (i) afford the officers, employees, agents, counsel,
other representatives of the Buyer full access to the assets and liabilities
and
related books and records of Eagle; and (ii) furnish to the officers, employees,
agents, counsel of the Buyer such additional information regarding the assets
and liabilities of Eagle and the transactions contemplated by this Agreement
as
the Buyer may from time to time reasonably request on or prior to the Closing
Date. After
the
Closing Date, and for thirty (30) days thereafter, Sellers will comply with
reasonable requests by Buyer to complete necessary audited financial statements
for Eagle to meet the Buyer’s obligations to Governmental Authorities. Such
audit shall be completed at reasonable cost and at the Buyer’s
expense.
Section
6.2 Expenses.
The
Buyer and the Sellers shall each be responsible for payment of their own
out-of-pocket fees and expenses, including, without limitation, all legal,
advisory or other fees and expenses, arising in connection with any transactions
contemplated by this Agreement.
Section
6.3 Amendments
and Waivers.
No
Modification, waiver or amendment of this Agreement shall be effective unless
such modification, waiver or amendment is in writing and executed by the Parties
hereto.
Section
6.4 Notices.
Any
Notice provided for by the terms and conditions of this Agreement shall be
in
writing and shall be deemed effective as follows: (a) if delivered personally,
upon delivery; (b) if sent by post, upon certified receipt; or (c) if sent
by a
courier service, upon confirmed receipt. Notices shall be addressed to the
relevant Party’s signatory at the address of such Party set forth on the
signature page hereof (until notice of a change thereof is delivered as provided
in this Section
5.4)
Section
6.5 Survival.
All
agreements, indemnities, covenants, representations and warranties made herein
shall survive the execution and delivery of this Agreement and the Closing
as
specifically provided in this Agreement.
Section
6.6 Severability;
Counterparts.
In case
any provision of or obligation under this Agreement shall be declared invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction shall not in any way be affected or
impaired thereby. This Agreement may be executed by the Parties hereto in
separate counterparts, including as received by facsimile, each of which when
so
executed and delivered shall be an original, but all of such counterparts shall
together constitute one and the same instrument.
Section
6.7 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
United States and the laws of the State of Texas without regard to any laws,
rules or regulation concerning conflict of laws that might result in the
application of the laws of any other jurisdiction.
Section
6.8 Successors
and Assigns.
This
Agreement shall be binding upon and shall inure to the Parties hereto and their
respective successors and assigns; provided,
however,
that
neither the Buyer nor the Sellers shall be permitted to assign its rights under
this Agreement without the prior written consent of the other Party, except
that
either Party may assign its rights and interests under this Agreement to one
or
more of its subsidiaries without the consent of the other.
Section
6.9 Entire
Agreement and Cancellation of Prior Agreements.
This
Agreement contains the entire agreement between the Parties. As of the Effective
Date, all prior proposals, oral or written, negotiations and agreements, oral
or
written, prior to the execution of this Agreement are superseded by this
Agreement, including, but not limited to, the document entitled Letter of Intent
to Acquire Eagle Domestic Drilling Operations, LLC, dated June 5, 2006, and
are
hereby voided by the Buyer and the Sellers by their signature to this Agreement
and are of no further effect.
Section
6.10 Liability.
The
liability of each of the Sellers under this Agreement shall be several, not
joint and several. In no event shall the aggregate liability of the Sellers
hereunder exceed US$500,000.00, or for any Seller, its proportionate share
thereof as determined by the proportion of the Purchase Price received by or
for
the benefit of such Seller. This liability provision shall not
be in
addition to the Liquidated Damages in Section 4(b), above, or in lieu thereof,
but shall only relate to Seller’s representations and warranties herein. The
threshold for any such liability of the Sellers is US$25,000.00 aggregate
liability.
Section
6.11 Publicity.
The
Parties agree
that, from the date of this Agreement through the Closing Date, no public
release or announcement concerning the transactions contemplated hereby shall
be
issued by any Party without the prior consent of each of the other Parties,
except as such release or announcement may be required by law or the rules
or
regulations of the SEC, in which case the party required to make the release
or
announcement shall allow each other Parties reasonable time to comment on such
release or announcement in advance of such issuance.
Section
6.12 Exhibits
to be Signed by Parties.
At or
prior to Closing Exhibits B through E of this Agreement will be completed and
signed by Buyer and Sellers.
Section
6.13 Post-Closing
Access.
After
the Closing, Buyer and Sellers shall cooperate, and shall cause Eagle to
cooperate, with the Sellers and Sellers with Buyer to the extent reasonably
requested by any of the Sellers or Buyer, and to make available to Sellers
or
Buyer all financial, insurance, tax and other information (including reasonable
access to books and records) of Eagle with respect to any fiscal period of
Eagle
ending on or prior to the Closing Date to the extent reasonably required by
any
of the Sellers or Buyer in connection with (a) any audit or other investigation
by an Governmental Authority, or (b) the prosecution or defense of any tax
claims or other litigation relating to Eagle, or (c) the preparation by any
of
the Sellers or Buyer of tax returns or any other reports or submissions to
any
Governmental Authority required to be made by any of the Sellers or Buyer with
respect to Eagle.
The
rest of this page is intentionally blank.
IN
WITNESS WHEREOF, the Sellers have executed this Agreement and the Buyer have
executed this Agreement through their duly authorized officers, both as of
the
Effective Date set forth in the preamble to this Agreement.
SELLERS:
/s/
Xxxxx X. Xxxxxx, Xx.
Name:
Xxxxx X. Xxxxxx, Xx.
Title:
Member
/s/
Xxxxxxx Xxxxxxxx
Name:
Xxxxxxx Xxxxxxxx
Title:
Member
/s/
Xxxxxx Xxxxxxx
Name:
Xxxxxx Xxxxxxx
Title:
Member
/s/Xxxx
X'Xxxx
Name:
Xxxxxxxx Family Irrevocable Trust
Xxxx
X’Xxxx, Trustee
Title:
Member
/s/
Xxxxxxx Xxxxx
Name:
Xxxxxxxx Business Security Trust
Xxxxxxx
Xxxxx, Trustee
Title:
Member
Address
for Notice to All Sellers:
0000
Xxxxx Xxxx Xx.
Xx.
Xxxxx, Xxxxx 00000.
Facsimile:
000-000-0000
BUYER:
By:
/s/ Xxxxx X. Xxxxx
Name:
Xxxxx X. Xxxxx
Title:
President and Co-CEO
Address
for Notice: 00000 Xxxxxx Xxxxx Xxxx, Xxxxx 000
Xxxxxxx,
Xxxxx, 00000
Facsimile:
000-000-0000
EXHIBIT
A
DEFINITIONS
“Agreement”
has the
meaning specified in the Recitals.
“Buyer”
means
Blast Energy Services, Inc.
“Business
Day”
means a
day on which banks are open for business in Houston, Texas.
“Charter
Documents” means articles of organization and operating agreement.
“Closing”
has the
meaning specified in Section
1.2(a).
“Closing
Date”
has the
meaning specified in Section
1.2(a).
“Disclosure
Statement” means disclosures by Seller set forth on Exhibit E.
“
Eagle”
has
the
meaning specified in the Recitals.
“Effective
Date”
has the
meaning specified in the Recitals.
“Encumbrances”
has
the
meaning specified in Section
2.4.
“Financial
Statements”
means
profit and loss statement, balance sheet, and other documents attached as
Exhibit B and signed by the Parties to this Agreement prior to or at
Closing.
“Governmental
Authority”
means
any local, national or state agency or institution, authority, department,
directorate, inspectorate, minister, ministry, municipality, official or public
statutory persons of, any judicial body of or the government or legislature
of,
the USA.
“Liquidated
Damages” has
the
meaning specified in Section
4.2(b).
“Membership
Interests”
means
the Members of Eagle Domestic Drilling Operations LLC ownership in the
Company.
“Party”
and
“Parties”
has the
meaning specified in the Recitals.
“Purchase
Price”
has the
meaning specified in Section
1.1.
“SEC”
means
the
Federal Securities and Exchange Commission which requires filings by publicly
traded companies.
“Sellers”
means
the Members of Eagle Domestic Drilling Operations LLC
EXHIBIT
B
Eagle
Domestic Drilling Operations, LLC (“Eagle”)’s Financial Statements are Attached
and shall be finalized at or Prior to Closing including an agreed upon inventory
of equipment prepared by Superior Assets Management who has been retained by
the
Buyers to confirm the Company Inventory along with any other assets of Eagleas
set forth in the Financial Statements of Eagle disclosed in Due Diligence and
through the date of Closing and signed by the Parties.
Note:
reflected on the final Financial Statements shall be completed assignments
of 5
IADC Daywork Drilling Contracts (i) with Hallwood Petroleum LLC and Hallwood
Energy, Inc. and (ii) with Quicksilver Resources Inc. which are the subject
of
the Assignment Agreement attached to be executed.
Extension
of Definitive Purchase Agreement
Dated
June 28, 2006
by
and
between the Members of
Eagle
Domestic Drilling Operations LLC
And
Whereas;
the
Definitive Purchase Agreement dated June 28, 2006 by and between the Members
of
Eagle Domestic Drilling Operations LLC and Blast Energy Services, Inc. provides
in Section 1.2 (a) that …”The Closing must occur on or before August 4, 2006, or
this Agreement may be terminated by either Party by delivering notice to
the
other Party.”
Whereas;
Blast
Energy Services, Inc (hereinafter “Blast”) has informed the Members of Eagle
Domestic Drilling Operations LLC (hereinafter sometimes referred to as “Eagle”)
that Blast requires an extension of the August 4, 2006 Closing Date up to
and
including August 18, 2006.
Whereas;
the
Members of Eagle Domestic Drilling Operations LLC have agreed to not terminate
the agreement but only in the event Blast agrees to increase the Purchase
Price
and pay such increase in the Purchase Price at Closing of the Definitive
Purchase Agreement as set forth herein;
Whereas;
Blast
has agreed to increase the Purchase Price in exchange for non-cancellation
of
the Definitive Purchase Agreement;
Now
Therefore,
the
Parties to the Definitive Purchase Agreement for the consideration, mutual
promises and forbearances set forth herein set forth their
agreement;
| 1. |
All
the above recitals are incorporated herein by this reference, as
if fully
set forth.
|
| 2. |
The
capitalized terms that appear as a part of the Definitive Purchase
Agreement dated June 28, 2006 by and between the Members of Eagle
Domestic
Drilling Operations LLC and Blast Energy Services, Inc. (“Definitive
Purchase Agreement”) shall retain the same definitions used in the
Definitive Purchase Agreement in this Extension of the Definitive
Purchase
Agreement (“Extension”).
|
| 3. |
Together,
the Definitive Purchase Agreement and this Extension shall make up
the
Agreement of the Parties.
|
| 4. |
Section
1.1 on page 5 of the Definitive Purchase Agreement shall be amended
to
read as follows: “Sale
and Purchase of the Membership Interests.
Upon the terms and subject to the conditions of this Agreement, the
Sellers hereby agree to sell to the Buyer, and the Buyer hereby agrees
to
purchase from the Sellers, 100% of their Membership Interest in Eagle
for
the consideration of Buyer paying all of the following: (a) the cash
sum
of Forty Nine Million U.S. Dollars (US$49,000,000.00) delivered to
the
Sellers as provided on Exhibit C which is attached to this Agreement
on or
before the Closing Date; (b) the cash sum of One Million U.S. Dollars
(US$1,000,000.00) paid into Escrow as provided on Exhibit C which
is
attached to this Agreement on or before the Closing Date; and (c)
to the
Sellers five hundred thousand (500,000) shares of Common Stock and
Warrants for the Sellers to acquire three million (3,000,000) shares
of
Common Stock at $0.90 per share to be awarded and paid as follows:
(i) at
Closing, Buyer shall execute and transfer to the Sellers Warrants
for
three million (3,000,000) shares at ninety cents US ($0.90) per share
of
issued, fully-paid and non-assessable shares of common stock of Blast
Energy Services, Inc. subject to the Warrant Agreement and in the
form set
forth in Exhibit G and its Exhibit A I-V attached to this Extension.
(ii)
at Closing, Buyer shall transfer to Sellers five hundred thousand
(500,000) shares of common stock in Buyer with the same registration
rights as described and set forth in the Warrant Agreement in Exhibit
G
and its Exhibit A I-V and at a valuation price as of the date of
Closing
(altogether the provisions of this Section 1.1 (a), (b) and (c) shall
be
referred to herein as the “Purchase
Price”).”
|
| 5. |
In
the Definitive Purchase Agreement, Section 1.2 (a), the second sentence
shall be replaced and now reads as follows: ”The Closing must occur on or
before August 18, 2006, or this Agreement may be terminated by either
Party by delivering notice to the other
Party.”
|
| 6. |
In
the event the Agreement is terminated after the date of this Extension,
any portion of the Purchase Price already delivered to the Sellers
shall
be retained by the Sellers including any and all rights therein without
re-payment to Buyer and without cancellation rights or any right
to
rescind being retained by the Buyer other than as set forth in Exhibit
G.
|
| 7. |
In
the event the Buyer does not deliver the attached Warrant Agreement,
Exhibit G and its Exhibit A I-V, at Closing, then the Agreement is
hereby
automatically terminated without further action by the Sellers and
the
terms of this Extension hereby provide Notice to Buyer that the Agreement,
as defined herein, is hereby terminated by the Sellers due to the
Buyers
not Closing as provided in the Definitive Purchase
Agreement.
|
| 8. |
The
Parties will use their best efforts to complete the Exhibits B through
G
to the Agreement one week prior to Closing. This Extension may be
executed
in any number of counterparts and each of such counterparts shall,
for all
purposes, be deemed to be an original, and such counterparts shall
together constitute one and the same
instrument
|
| 9. |
All
other terms of the Agreement are hereby ratified and in full force
and
effect as amended hereby.
|
(The
rest
of this page is intentionally blank)
IN
WITNESS WHEREOF, the Sellers the Buyer have executed this Extension of
Definitive Purchase Agreement Dated June 28, 2006 by and between the Members
of
Eagle Domestic Drilling Operations LLC and Blast Energy Services, Inc. by
the
Sellers, as set forth below, and by the Buyer, through their duly authorized
officer(s), both as of this ___ day of August, 2006.
SELLERS:
Xxxxx
X. Xxxxxx, Xx.
Name:
Xxxxx X. Xxxxxx, Xx.
Title:
Member
Xxxxxxx
Xxxxxxxx
Name:
Xxxxxxx Xxxxxxxx
Title:
Member
Xxxxxx
Xxxxxxx
Name:
Xxxxxx Xxxxxxx
Title:
Member
Xxxx
X'Xxxx
Name:
Xxxxxxxx Family Irrevocable Trust
Xxxx
X’Xxxx, Trustee
Title:
Member
Xxxxxxx
Xxxxx
Name:
Xxxxxxxx Business Security Trust
Xxxxxxx
Xxxxx, Trustee
Title:
Member
Address
for Notice to All Sellers:
0000
Xxxxx Xxxx Xx.
Xx.
Xxxxx, Xxxxx 00000.
Facsimile:
000-000-0000
BUYER:
By:
Xxxxx X. Xxxxx
Name:
Xxxxx X. Xxxxx
Title:
President and Co-CEO
Address
for Notice: 00000 Xxxxxx Xxxxx Xxxx, Xxxxx 000
Xxxxxxx,
Xxxxx, 00000
Facsimile:
000-000-0000
This
Amendment Agreement ("Amendment
Agreement"),
is
entered into as of the 25 day of August, 2006, by and among Eagle Domestic
Drilling Operations LLC, a Texas limited liability company (“Eagle”
or
the
"Company"),
all
of the Members of the Company as set forth on the signature page hereto (the
"Sellers”)
and
Blast Energy Services, Inc., a California corporation ("Buyer").
Reference is made to that certain Definitive Purchase Agreement dated as
of June
28, 2006 by that certain Extension of Definitive Purchase Agreement dated
August
3, 2006 by and between the Members of the Company and Buyer ("Agreement").
Unless otherwise defined herein, capitalized terms shall have the meanings
assigned to them in the Agreement.
R
E C I T
A L S:
WHEREAS,
in
order
to consummate the transactions contemplated by the Agreement and the agreements
required by Buyer to finance the acquisition of the transactions contemplated
by
the Agreement, the parties desire to amend and supplement the Agreement as
herein set forth;
NOW,
THEREFORE, for and in consideration of the mutual covenants, agreements set
forth in the Agreement and the agreements set forth herein, and for other
good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, each Seller and Buyer agree as follows:
1. Amendment
to Section 2.4 of the Agreement. (a) Section 2.4 Title;
No Encumbrances
is
hereby amended and restated as follows:
“The
Sellers have, and upon Closing Buyer will have, good, valid, indefeasible
and
marketable title to the Membership Interests which are free and clear of
all
options, warrants, mortgages, security interests, debts, claims, liens, libels
and encumbrances of any kind whatsoever, including without limitation any
sale
agreement or similar agreements whether recorded or unrecorded (collectively
the
“Encumbrances”). In addition, the Sellers confirm each of the representations
and warranties made in Section 4.1. The Sellers agree to defend, protect,
indemnify and hold harmless the Buyer from and against any and all costs,
expenses, losses, damages, suits, claims or proceeding arising from Encumbrances
on the Membership Interest or from any breach of the representations or
warranties set forth in this Section 2.4 or Section 4.1 without regard to
the
limitations in Section 6.10 or any other provision of this
Agreement.”
2. Amendment
to Section 2.6 of the Agreement. (a) Section 2.6 Taxes.
Is
hereby amended and restated as follows:
“Sellers
and the Company have duly and timely prepared and filed with the appropriate
Governmental Authorities all returns, reports information returns, or other
documents filed or required to be filed by the Sellers and the Company with
such
Governmental Authorities and paid any taxes or other amounts due upon the
Effective Date in respect thereof that if unpaid could result in a claim
by any
Government Authority against the
Buyer
and
the Company subject to the disclosures set forth in Section 4.7 of the
Agreement.”
3. Amendment
to Article 4 of the Agreement. (a) The first paragraph of Article 4, entitled
“REPESENTATIONS AND WARRANTIES ABOUT THE COMPANY” is hereby amended and restated
as follows:
“As
an
inducement to Buyer to enter into the Agreement and to consummate the
transactions contemplated thereby, and with the knowledge that Buyer shall
rely
thereon, the Sellers and the Company represent and warrant to Buyer the
following concerning the Company, and the representations and warranties
set
forth below as of the date hereof and as of the Closing Date are true and
correct.”
(b) The
second paragraph appearing under Section 4.1 entitled “Duly Organized” is hereby
amended and restated as follows:
“All
of
the Membership Interests in the Company are held by the persons, trust, or
entities set forth on Exhibit E hereto in the percentages set forth next
to such
person, trust, or entity’s name. Except for the Membership Interests set forth
on Attachment A, there are no other membership interests, ownership interests,
equity interests, voting interests, or economic interests of any kind or
character (whether currently in existence or otherwise) in the Company, or
any
right, warrant, option to acquire such interests.”
(c) Except
as
expressly amended by this Section 2, the provisions of Article 4 of the
Agreement, the terms, provisions, and conditions of Article 4 of the Agreement
shall remain in full force and effect and in all other respects are hereby
ratified and confirmed and remain in full force and effect.
4. Amendment
to Section 4.6 of the Agreement. Section 4.6 Title
to Properties; Encumbrances
is
hereby amended and restated as follows:
“All
of
the assets of the Company (personal, tangible and intangible), including
without
limitation all the assets reflected in the financial statements in Exhibit
B,
and all the properties and assets purchased by the Company since the date
of
such statement (the “Assets”) are set forth on Attachment B hereto and such
Assets are free and clear of all Encumbrances. The Company has good, valid,
and
marketable title to the Assets as of the date hereof and will as of, and
immediately after, the Closing, in each case free and clear of all Encumbrances.
Except for the Assets, the Company has no other rights or assets of any kind
or
character.”
5. Amendment
to Section 4.7 of the Agreement. Section 4.7 Tax
Matters
is
hereby amended and restated as follows:
“Except
as set forth on the Disclosure Statement, the Company has paid all Taxes
which
are due and billed to the Company as of the Closing Date and all deficiencies
or
other additions to any tax, interest and penalties owed in connection with
any
such Taxes, and
shall
have timely paid the same, prior to the Closing Date. Sellers will be
responsible for any and all Taxes attributable to the Company for the period
prior to the Closing Date. Any sales taxes directly attributable to the sale
of
the Company to Buyer, if any, shall be for the account of the
Buyer.”
6.
Section
6.8 of the Agreement is hereby amended to add the following sentence at the
end
of the Section:
“Provided,
that nothing herein shall restrict or otherwise prohibit the Buyer from
collaterally assigning or pledging its rights under this agreement to any
lender
or financing source of Buyer in order for Buyer to consummate the transactions
under this Agreement.”
7. Section
6.10 of the Agreement is hereby amended and restated in its entirety as
follows:
“The
Sellers shall agree to defend, protect, indemnify and hold harmless the Buyer
from and against any and all costs, expenses, losses, damages, suits, claims
or
proceeding arising from any breach of any representation, warranty or agreement
of the Sellers or the Company under this Agreement. The liability of each
of the
Sellers under this Agreement shall be several, not joint and several. With
the
exception of any breach of representation or warranty or agreement by the
Sellers or the Company set forth in Section 1.1, Sections, 2.1 through and
including 2.9, Sections 4.1, 4.4, 4.5, 4.6, 4.7, 4.8, 4.9, 4.10, 4.13, 4.16,
4.18, 4.20 or 4.25, for which the aggregate liability of Sellers shall be
US$41,500,000, the aggregate liability of the Sellers hereunder shall not
exceed
US$500,000, as determined by the proportion of the purchase price received
by or
for the benefit of such Sellers. With the exception of such provisions, the
threshold for any such liability of the Sellers is US$25,000 aggregate
liability. Each of the representations and warranties of the parties made
as of
a date shall be deemed made on and as of the Closing Date. With respect to
the
representations, warranties, and agreements of the Company, after Closing,
such
representations, warranties, and agreements of the Company shall only be
deemed
to have been made by the Sellers, notwithstanding anything to the contrary
in
the Agreement. The Company and the Sellers shall not take any actions (or
omit
to take any action) from the date hereof to the Closing which would cause
a
violation of any of its respective representations, warranties and agreements
under this Agreement.”
8.
Section 1.1 of the Agreement is hereby amended as follows:
(a)
Section 1.1(a) shall be amended and restated in its entirety as
follows:
“the
cash
sum of Forty Nine Million U.S. Dollars (US$49,000,000) less the aggregate
amount
of the subscriptions made by the Sellers and accepted by Buyer on or before
the
Closing for the purchase of restricted common stock of Buyer in the aggregate
amount of Fifteen Million U.S. Dollars (U.S. $15,000,000), such net amount
to be
delivered to the Sellers as provided in
the
disbursement letter executed by the Sellers to Buyer and accepted by Buyer
on or
before the Closing”
(b)
Section 1.1(b) shall be amended and restated in its entirety as
follows:
“the
cash
sum of One Million U.S. Dollars (US$1,000,000) shall be held back by the
Buyer
and held in escrow (the “Holdback Amount”), subject to delivery to the Sellers
under the following terms and conditions: (i) Sellers represent and warrant
to
Buyer that Second Bridge LLC, an Oklahoma limited liability company (“Second
Bridge”), is presently working on the completion of the fourth and fifth
drilling rigs which are presently under construction and are property of
the
Company, it being understood that: (i) the Holdback Amount is held by Buyer
to
secure the obligations of the Sellers and Second Bridge to complete the
construction of such rigs for the Company, (ii) as the construction on the
rigs
continues, after the Closing, Second Bridge will review and approve invoices
for
the account of Buyer and present them to Buyer for their approval, Buyer
will
release funds from the Holdback Amount to Second Bridge and the vendors on
a
weekly basis, it being understood by Sellers that such expenditures shall
be
funded from the Holdback Amount, (iii) Upon the delivery of the fifth drilling
rig in complete form, expected to be Rig#15, there will be a final
reconciliation of the expenditures between Second Bridge and Buyer and the
balance of the Holdback Amount (if any) will be paid to Second Bridge on
behalf
of Sellers, and (iv) SELLERS ACKNOWLEDGE AND AGREE THAT IN NO EVENT WILL
BUYER
OR THE COMPANY BE HELD LIABLE OR OTHERWISE RESPONSIBLE TO THE SELLERS FOR
THE
FAILURE OF SECOND BRIDGE TO PROPERLY DISTRIBUTE THE HOLDBACK AMOUNT TO THE
SELLERS, AND THE SELLERS HEREBY RELEASE THE COMPANY AND THE BUYER AS WELL
AS
SECOND BRIDGE FROM ANY SUCH CLAIMS OR DAMAGES IN THIS REGARD.”
(c)
Section 1.1(c) shall be amended and restated in it’s entirety as
follows:
“(c)
to
the Sellers (in proportion of their respect Membership Interests) an aggregate
of One Million Five hundred thousand (1,500,000) shares of fully paid and
non-assessable shares of common stock of Blast Energy Services, Inc. with
registration rights in favor of the Sellers on any subsequent registration
statement filed by Blast with the SEC for its account or the account of others,
to the extent such shares have not been registered with the SEC or cannot
be
sold under Rule 144 as promulgated by the SEC (altogether the provisions
of this
Section 1.1(a), (b) and (c) shall be referred to herein as the “Purchase
Price”).”
(d)
The
following sentence is added at the end of Section 1.1:
“In
connection with the issuance to the Sellers of the 1,500,000 of Blast Common
Stock as part of the Purchase Price, the Sellers understand and acknowledge
that
such shares will be “restricted securities” as defined under the Securities Act
of 1933, as amended
and
the
rules and regulations promulgated thereunder (the “Securities Act”) and that
such shares will contain a restrictive legend which will provide in substance:
“These securities have not been registered with the Securities and Exchange
Commission in reliance on an exemption from the registration requirements
under
the Securities Act, and may not be offered or sold except pursuant to an
effective registration statement under the Securities Act or pursuant to
an
available exemption therefrom, based on opinion of counsel acceptable to
the
Company.” Furthermore, the Sellers represent and warrant to the Buyer that the
shares will be acquired for investment purposes only and will be taken without
a
view toward distribution and that each are “accredited investors” as defined
under the Securities Act and the rules and regulations promulgated thereunder.
Each Seller represents and warrants to the Buyer that they have such knowledge,
sophistication and experience in business and financial matters so as to
be
capable of evaluate the merits and risks of the investment in the Buyers
common
stock, and each Seller confirms that it is able to bear an economic risk
of an
investment in the shares and is able to afford a complete loss of such
investment. Each Seller represents and warrants to the Buyer that it had
an
opportunity to ask questions and receive answers concerning the Buyer regarding
the Buyer’s business, management and financial affairs and to obtain information
concerning the Company. Each Seller confirms to Buyer its representations
and
warranties in this Agreement.”
(e)
As
amended hereby, the remaining provisions of Section 1.1 shall remain in full
force and effect and in all other respects are hereby ratified and confirmed
and
remain in full force and effect.
9. Exhibit
A
DEFINTIONS, the term “Membership Interests” is hereby amended as follows:
“’Membership Interests’ means a Member’s membership interest in Eagle Domestic
Drilling Operations LLC”.
10. Exhibit
E
of the Agreement is hereby amended as set forth on Attachment A
hereto.
11. Each
of
Exhibit C and Exhibit G of the Agreement is hereby deleted.
12. Additional
Agreements.
(a) The
parties acknowledge and agree that Buyer may be required to fund the Purchase
Price into escrow or take such other action as may be reasonably requested
by
the lenders in order to fund the Purchase Price and consummate the transaction.
Sellers and the Company agree to cooperate by executing and delivering documents
to effect this transaction as may be reasonably requested by the Company’s
lenders.
(b)
In
order to consummate the transactions contemplated by the Agreement, the Sellers
hereby waive the operation of the provisions of Buy-Sell Agreement dated
December 1, 2004 (as may be amended or supplemented, the “Buy-Sell Agreement”)),
and the Company and the Seller hereby agree that such Buy-Sell Agreement
will be
terminated immediately prior to the Closing. In addition, the Sellers hereby
waive the operation of Section 11 of that certain Operating Agreement and
Cross
Purchase Buy-Sell Agreement of Eagle domestic Drilling Operations,
LLC
dated
December 1, 2004 (as may be amended or supplemented), in order to consummate
the
transactions contemplated by the Agreement.
13. No
Waiver.
By
executing this Amendment Agreement, neither Seller nor any Buyer waives any
other requirement or provision of the Agreement.
14. Specific
Agreement.
Except
as expressly set forth herein, nothing in this Amendment Agreement shall
be
deemed to prejudice any right or remedy that either Seller or any Buyer may
now
have or may have in the future under or in connection with the Agreement.
Except
as expressly set forth herein, the terms, provisions, and conditions of the
Agreement shall remain in full force and effect and in all other respects
are
hereby ratified and confirmed.
15. Miscellaneous.
This
Amendment Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, and all such counterparts
together shall constitute one and the same agreement. Delivery of an executed
signature page of this Amendment Agreement by telecopier to the telecopier
number set forth in the Agreement (Notices), shall be equally effective as
delivery of a manually executed counterpart. Any party delivering an executed
counterpart of its signature page hereof by telecopier to the telecopier
number
set forth in the signature page to the Agreement (Notices,) shall also promptly
deliver a manually executed counterpart, but the failure to deliver such
manually executed counterpart shall not affect the validity, enforceability,
and
binding effect of this Amendment Agreement. Each party acknowledges that
(a)
this Amendment Agreement has been reviewed with and approved by its legal
counsel; (b) it has carefully read this Amendment Agreement and fully
understands it; and (c) each party has had the opportunity to discuss the
terms
of this Amendment Agreement internally. This Amendment Agreement cannot be
modified or rescinded without a writing signed by a duly authorized
representative of Sellers and Buyer.
16. Governing
Law.
This
Amendment Agreement shall be construed in accordance with the internal laws
of
the State of Texas. This Amendment Agreement shall become effective as of
the
date set forth above.
[SIGNATURES
APPEAR ON FOLLOWING PAGE]
IN
WITNESS WHEREOF, this Amendment Agreement is executed to be effective as
set
forth above.
SELLERS:
|
/s/
Xxxxx X. Xxxxxx, Xx.
|
|
|
Name:
Xxxxx X. Xxxxxx, Xx.
|
|
|
Title:
Member
|
|
/s/
Xxxxxxx Xxxxxxxx
|
|
|
Name:
Xxxxxxx Xxxxxxxx
|
|
|
Title:
Member
|
|
/s/
Xxxxxx Xxxxxxx
|
|
|
Name:
Xxxxxx Xxxxxxx
|
|
|
Title:
Member
|
|
/s/
Xxxx X’Xxxx
|
|
|
Name:
Xxxxxxxx Family Irrevocable Trust
|
|
|
Xxxx
X’Xxxx, Trustee
|
|
|
Title:
Member
|
|
/s/
Xxxxxxxx Business Security Trust
|
|
|
Name:
Xxxxxxxx Business Security Trust
|
|
|
Xxxxxxx
Xxxxx, Trustee
|
|
|
Title:
Member
|
Address
for Notice to All Sellers:
0000
Xxxxx Xxxx Xx.
Xx.
Xxxxx, Xxxxx 00000
Facsimile:
000-000-0000
BUYER:
Blast
Energy Services, Inc.
|
By:
|
/s/
Xxxxx X. Xxxxx
|
Name:
Xxxxx X. Xxxxx
Title:
President and Co-CEO
Address
for Notice:
00000
Xxxxxx Xxxxx Xxxx., Xxxxx 000
Xxxxxxx,
Xxxxx 00000
Facsimile:
000-000-0000
COMPANY
Eagle
Domestic Drilling Operations LLC
|
By:
|
/s/
Xxxxxxx Xxxxxxxx
|
|
|
Name:
|
Xxxxxxx
Xxxxxxxx
|
|
|
Title:
|
Managing
Member
|
Address
for Notice:
0000
Xxxxx Xxxx Xx.
Xx.
Xxxxx, Xxxxx 00000
Facsimile:
000-000-0000
Signature
for Purposes of Section 1.1:
Second
Bridge LLC
|
By:
|
/s/
Xxxx X’Xxxx
|
|
|
Name:
|
Xxxx
X’Xxxx
|
|
|
Title:
|
Manager
|
Address
for Notice:
0000
Xxxxxxxx Xxxx Xxxxx
Xxxxxx,
XX 00000
Facsimile:
000-000-0000
ATTACHMENT
A
“EXHIBIT
E
MEMBERSHIP
INTERESTS
|
Member
|
Membership
Interest
|
|
Xxxxx
X. Xxxxxx, Xx.
|
9.00%
|
|
Xxxxxxx
Xxxxxxxx
|
7.25%
|
|
Xxxxxx
Xxxxxxx
|
5.00%
|
|
Xxxxxxxx
Family Irrevocable Trust
|
28.75%
|
|
Xxxxxxxx
Business Security Trust
|
50.00%
”
|
ATTACHMENT
B
LIST
OF
ASSETS
[Attach
Partial Appraisal Report for the Drilling Rigs]
