ASSET PURCHASE AND SALE AGREEMENT
This Asset Purchase and Sale Agreement ("Agreement") is entered into
this 8th day of December, 2003, by and among Fellows Energy Ltd., a Nevada
corporation ("Fellows"), and Diamond Oil and Gas Corporation, a Nevada
corporation ("Diamond"). Fellows is referred to herein as "Buyer" and Diamond is
referred to herein as "Seller." Buyer and Seller are called herein collectively
the "Parties."
RECITALS
A. Seller is the owner of certain interests in certain oil and gas
leases, which Seller acquired pursuant to the Assignment Agreement
("Assignment") between Diamond and UCM Investment Corporation, a Nevada
corporation ("UCM"), dated October 22, 2003, which is attached hereto as Exhibit
"A" ; and Seller has entered into negotiations with Xxxxxxxxx Partners
Associates of Denver, Colorado for the acquisition of interests in five
additional energy projects as well as for an agreement for project generation
and an earn-in agreement with Houston Exploration with respect to an additional
six projects.
B. Seller desires to sell and assign its interests in and obligations
concerning those oil and gas leases, and to continue the negotiations with
Xxxxxxxxx Parters Associates in the name of and for the benefit of Buyer, for
the consideration and on the terms and subject to the conditions specified in
this Agreement.
C. Buyer desires to purchase those certain interests in and assume
those obligations concerning those oil and gas leases, on the terms and subject
to the conditions specified in this Agreement.
NOW, THEREFORE, IN CONSIDERATION OF THE RECITALS SPECIFIED ABOVE THAT SHALL
BE DEEMED TO BE A SUBSTANTIVE PART OF THIS AGREEMENT, AND THE MUTUAL COVENANTS,
PROMISES, UNDERTAKINGS, AGREEMENTS, REPRESENTATIONS AND WARRANTIES SPECIFIED IN
THIS AGREEMENT AND OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND
SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED, WITH THE INTENT TO BE OBLIGATED
LEGALLY AND EQUITABLY, THE PARTIES DO HEREBY COVENANT, PROMISE, AGREE, REPRESENT
AND WARRANT AS FOLLOWS:
ARTICLE 1
DEFINITIONS
Capitalized terms used in this Agreement have the meanings given such
terms in this Article 1 or elsewhere in this Agreement.
"Affiliate" means (i) with respect to the Seller, any corporation,
limited liability company, association, partnership or person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
under common control with, the Seller, and (ii) any Seller's officers, directors
and shareholders.
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"Assets" means Seller's right, title and interest in and to the oil and
gas leases which are subject of the Assignment between UCM and Seller.
"Buyer" has the meaning set forth in the preface to this Agreement.
"Buyer Indemnified Party" has the meaning provided in Article 7.03.
"Closing" has the meaning set forth in Article 3.04 hereof.
"Closing Date" has the meaning set forth in Article 3.04 hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission (or any
successor body thereto).
"Conveyance Documents" means the Conveyance in the form attached hereto
as Exhibit "B", together with those other forms of assignments, bills of sale,
deeds and other instruments the Parties agree are necessary or appropriate to
convey interest in the Assets or from Seller to Buyer as contemplated by the
Assignment.
"Effective Date" means 7:00 a.m. local time with respect to the Assets
on December 8, 2003.
"Environmental Audit" means an assessment of Seller's compliance with
Environmental Laws relative to the Assets consisting of examination of Seller's
files and public documents, interviews of personnel of Seller and of other
appropriate persons and visual inspection of the Assets.
"Examination Period" has the meaning set forth in Article 6.02.
"Governmental Approvals" has the meaning set forth in Article 14.
"Hydrocarbons" means crude oil, natural gas, casinghead gas, coalbed
methane, condensate, helium, sulphur, S02, C02, natural gas liquids and other
gaseous and liquid hydrocarbons or any combination thereof.
"Indemnifying Party" has the meaning set forth in Article 7.04(a)
hereof.
"Lands" means the lands covered by the Mineral Interests.
"Leases" means the oil and gas leases or oil, gas, and mineral leases
shown in Exhibit "A" hereto or that cover any portion of the area described in
such Exhibit.
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"Loss" or "Losses" means all damages, payments, penalties, fines,
assessments, costs, amounts paid in settlement, obligations, taxes, losses
(including reductions in the value of Assets), liabilities, expenses and fees
incurred, including court costs and attorneys' fees and expenses and costs of
investigating, preparing or defending any action or proceeding, provided,
however, that Buyer shall be deemed to have incurred a Loss or Losses only if,
and only to the extent that, the cumulative aggregate of all such Loss or Losses
attributable to or arising in connection with the portion of the Assets acquired
from Diamond exceeds $50,000 or the cumulative aggregate of all such Loss or
Losses attributable to or arising in connection with the portion of the Assets
acquired from Fellows exceeds $500,000.
"Mineral Interests" means the interests of Seller in the Leases
described in Exhibit A and any mineral interest owned by Seller in and to the
lands described in Exhibit "A".
"Parties" has the meaning set forth in the preface above.
"Permitted Encumbrances" means, with respect to the Assets, the
following:
(i) liens for taxes not yet due or, if due, being challenged in good
faith by appropriate proceedings;
(ii) materialmen's, mechanics' and other similar liens or charges
arising in the ordinary course of business for obligations that are not
delinquent and that will be paid or discharged in the ordinary course of
business or, if delinquent, that are being contested in good faith in the
ordinary course of business;
(iii) easements, rights-of-way, servitudes, permits, surface leases,
and other rights granted to or reserved for third parties in respect of surface
operations that do not materially interfere with the operation of the portion of
the Assets burdened thereby;
(iv) rights reserved to or vested in any governmental authority to
control or regulate any of Xxxxx or Units and all applicable laws, rules,
regulations and orders of such authorities.
(v) liens arising under operating agreements, unitization and pooling
agreements, orders and statutes and production sales contracts securing amounts
not yet due or, if due, being contested in good faith in the ordinary course of
business as set forth in Exhibit "A" attached hereto and made a part hereof for
all purposes;
(vi) the terms and conditions of all contracts and agreements relating
to the Leases including, without limitation, exploration agreements, gas sales
contracts, processing agreements, farmins, farmouts, operating agreements, and
right-of-way agreements, to the extent such terms and conditions are normal and
customary in the oil and gas industry in the area in which the affected Assets
are located;
(vii) royalties, overriding royalties, net profits interests,
production payments, reversionary interests, and similar interests that do not
decrease Seller's interest, except as specified in the Assignment attached
hereto as Exhibit A;
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(viii) conventional rights of reassignment requiring notice to the
holders of the rights prior to surrendering or releasing a leasehold interest;
and
(ix) the absence of Governmental Approvals other than Governmental
Approvals that were applicable to a previous transaction involving the transfer
of all or any portion of the Assets but were not complied with at the time of
the consummation of such transaction.
"Purchase Price" has the meaning given set forth in Article 3.01.
"Records" means all originals, copies, computer tapes and discs, files,
records, information or data relating to the Assets in the possession of Seller,
or in the possession of any agent for the Seller, including, without limitation,
title records (including abstracts of title, title opinions, certificates of
title and title curative documents), accounting records and files, contracts,
correspondence, production records, electric logs, core data, pressure data,
decline curves, graphical production curves, geologic and geophysical
information, drilling reports, well completion reports, drill stem test charts
and reports, engineering reports, regulatory reports, and all related materials,
insofar as the foregoing items constitute materials that may be lawfully
conveyed to Buyer (i.e. the materials are not subject to a proprietary agreement
precluding their transfer to Buyer).
"Seller" has the meaning set forth in the preface to this Agreement.
"Seller Indemnified Party" has the meaning given to it in Article 7.02.
"Shares" means shares of the common stock, $0.001 par value per share,
of Fellows.
"Survival Period" has the meaning set forth in Article 7.01 hereof.
"Taxes" has the meaning set forth in Article 9.
"Third Party Claim" has the meaning set forth in Article 7.04(a)
hereof.
"Transfer Requirements" means all consents, approvals, authorizations
or permits of, or filings with or notifications to, any third party which must
be obtained, made or complied with for or in connection with the transactions
contemplated by this Agreement in order (a) for such transactions to be
effective, (b) to prevent any termination, cancellation, default, acceleration
or change in terms (or any right arising therefrom) under any terms, conditions
or provisions of any Asset (or of any agreement, instrument or obligation
relating to or burdening any Asset or any interest therein or portion thereof)
as a result of such transactions, or (c) to prevent the creation or imposition
of any lien, charge, penalty, restriction, security interest or encumbrance on
or with respect to any Asset or any interest therein or portion thereof (or any
right arising therefrom) as a result of such transactions.
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"Units" means all unitization, communitization, pooling agreements,
working interest units created by operating agreements, and orders covering the
lands subject to the Leases, or any portion thereof, and the units and pooled or
communitized areas created thereby.
"Xxxxx" means xxxxx for the production of Hydrocarbons.
ARTICLE 2
SALE AND PURCHASE
2.01 Assets. Subject to the terms and conditions of this Agreement and
in consideration of Buyer's payment to Seller of the Purchase Price as provided
in this Agreement, the Buyer agrees to purchase from the Seller, and the Seller
agrees to sell and convey to Buyer, the Assets, consisting of Seller's interest
in and obligations concerning the oil and gas leases that are the subject of the
Assignment, attached hereto as Exhibit "A".
2.02 Negotiations with Xxxxxxxxx Partners Associates. In addition to the
conveyance of the Assets, as a part of the consideration of the Purchase Price,
Seller hereby agrees to conduct all further negotiations with Xxxxxxxxx Partners
Associates in the name and for the benefit of Buyer, including but not limited
to the acquisition of interests in the five projects being negotiated directly,
the entry into a project generation agreement, and the entry of an earn-in
agreement with Houston Exploration with respect to up to six additional
projects.
ARTICLE 3
PURCHASE PRICE
3.01 Purchase Price. In consideration for the sale and conveyance to
Buyer of the Assets, subject to the terms and conditions hereof, the Buyer
agrees to tender and deliver to the Seller in the manner hereinafter provided
Three Million Five Hundred Thousand (3,500,000) shares of Buyer's common stock
as consideration (the "Purchase Price"):
3.02 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") will take place at the offices of the Buyer in Cypress
California, simultaneously with the execution of this Agreement on December 31,
2003, or at such other place, date and time as the Buyer and the Seller may
mutually determine (the "Closing Date").
3.03 Deliveries at the Closing. At the Closing or as otherwise set
forth in Article 11, (i) the Seller will deliver to the Buyer the documents
referred to in Article 11.01 below, and (ii) the Buyer will deliver to the
Seller the documents referred to in Article 11.02 below.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.01 Representations and Warranties of Seller. Seller represents and
warrants to Buyer that the statements contained in this Article 4.01 are true
and correct as of the Closing Date:
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(a) Seller is a corporation which is duly organized, validly existing
and in good standing under the laws of the State of Nevada, and is qualified to
do business and in good standing under the laws of any jurisdiction where the
Seller conducts operations.
(b) Seller has all requisite power and authority to carry on their
respective businesses as presently conducted, to enter into this Agreement, to
perform their obligations pursuant to this Agreement.
(c) The execution and delivery of this Agreement has been, and the
execution and delivery of all certificates, documents and instruments required
to be executed and delivered by the Seller at Closing, and the consummation of
the transactions contemplated hereby and thereby as of the Closing Date shall
have been duly authorized by all necessary corporate action on the part of the
Seller. No further authorization is required by any law, statute, regulation,
court order or judgment applicable to the Seller. This Agreement constitutes the
legal, valid and binding obligations the Seller enforceable in accordance with
their respective terms, subject however, to the effects of bankruptcy,
insolvency, reorganization, moratorium and similar laws, as well as to
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law). After Closing, the Seller will have the
ability to continue in its same business without a fundamental change in the
nature or scope of its business.
(d) The execution and delivery of the Agreement and the consummation of
the transactions contemplated hereby and thereby will not (i) violate, or be in
conflict with, any provisions of the Seller's charter documents, (ii) constitute
a breach of, or any event of default under, any contract or agreement to which
the Seller is a party or by which it or its assets are bound, or constitute the
happening of an event or condition upon which any other party to such a contract
or agreement may exercise any right or option which will materially adversely
affect any of the Assets, (iii) violate any judgment, decree, order, statute,
rule or regulation applicable to Seller, or (iv) result in any material
liability to Buyer under the terms of any contracts or agreements.
(e) No suit, action or other proceeding is pending before any court or
any governmental agency as of the date of this Agreement to which the Seller is
a party or which involves the Assets and which might result in a material
impairment or loss of the Seller's title to the Assets or that might materially
hinder or impede the operation of the Assets or the ability of the Seller to
perform its obligations under this Agreement. Seller will promptly give the
Buyer notice of any such proceeding arising prior to or after the Closing with
respect to which it has notice. The Seller has received no notice of any pending
or threatened action, suit, proceeding, inquiry or investigation, at law or in
equity, before or by any court, governmental agency, public board or body
against or affecting the Seller or the Assets that questions the powers and
authority of the Seller to enter into or perform its obligations under this
Agreement or to carry out the transactions on its part described in this
Agreement to own and dispose of the Assets.
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(f) Prior to the Closing Date, all royalties, rentals and other
payments due with respect to the Mineral Interests have been properly and timely
paid as prescribed by the Leases governing them. All conditions necessary to
keep the Leases in force have been fully performed no notices have been received
by Seller of any claim to the contrary and all of the Leases are in full force
and effect.
(g) Prior to the Closing Date, except as specified in the Assignment
(i) Seller is not obligated by virtue of any prepayment arrangement under any
contract for the sale of Hydrocarbons and containing a "take or pay" or similar
provision to deliver Hydrocarbons produced from the Assets at some future time
without then or thereafter receiving full payment therefor, and (ii) Seller is
under no obligation to reduce its share of production under any balancing
agreement or similar contract.
(h) All ad valorem, property, production, severance and similar taxes
and assessments based on or measured by the ownership of property or the
production of Hydrocarbons on the Assets have been properly paid and all such
taxes and assessments which become due and payable prior to the Closing Date
shall have been properly paid by Seller.
(i) All laws, regulations and orders of all governmental agencies
having jurisdiction over the Assets or operations conducted thereon have, to
Seller's knowledge, been and shall continue to be complied with in all material
respects until the Closing Date. Seller has obtained all material necessary
permits from governmental agencies having jurisdiction in connection with all
operations currently conducted with respect to the Assets, including, without
limitation, the injection and disposal of salt water, or operations currently
conducted thereon and have timely, properly and accurately made and will
continue to timely, properly and accurately make all filings required by all
governmental agencies with respect to the Assets or operations currently
conducted thereon and through the Closing Date.
(j) Seller has not incurred liability, contingent or otherwise, for
brokers' or finders' fees relating to the transactions contemplated by this
Agreement for which Buyer shall have any responsibility whatsoever, except as
specified in the Assignment.
(k) With respect to the Basic Documents (defined below), in all
material respects (i) the Basic Documents all are in full force and effect and
are the valid and legally binding obligations of the parties thereto and are
enforceable in accordance with their respective terms; (ii) Seller is not in
breach or default with respect to any of its material obligations pursuant to
any such Basic Document or any regulations incorporated therein or governing
same; (iii) all material payments (including, without limitation, royalties,
delay rentals, shut-in royalties, or payments, fees for salt water disposal or
injection, and joint interest or other xxxxxxxx under unit or operating
agreements) due from Seller thereunder have been made by Seller; (iv) to
Seller's knowledge no other party to any Basic Document (or any successor in
interest thereto) is in breach or default with respect to any of their material
obligations thereunder; (v) neither the Seller nor, to Seller's knowledge, any
other party to any Basic Document has given or threatened to give notice of any
action to terminate, cancel, rescind or procure a judicial determination of any
Basic Document or any provision thereof; and (vi) the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby and
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thereby will not result in a breach of, constitute a default under, or result in
a violation of the material provisions of any Basic Document and none of the
Basic Documents will require, after the Effective Date, that any advance
payments be made to any party other than those required under operating
agreements. As used herein the term "Basic Documents" shall mean the Leases,
partnership, joint venture, limited partnership, farmout, dry hole, bottom hole,
operating agreements, acreage contribution, purchase and acquisition agreements,
area of mutual interest agreements and salt water disposal and/or injection
agreements, servicing contracts, casement and/or right-of-way agreements,
surface leases, surface use agreements, unitization or pooling agreements and
all other material executory contracts and agreements relating to the Assets,
including, without limitation, those contracts and agreements described in
Article 4.01(m) hereto.
(l) Seller has good and valid title to the Assets; Exhibit "A" contains
a list of all Mineral Interests and other mineral estates and interests within
the interest in the Leases owned by UCM and assigned to Seller and is true and
correct, except as otherwise noted therein; provided, however, that the
Assignment to operate the Leases shall be assigned to Buyer with warranties of
title by, through and under UCM, Seller and their Affiliates who are
predecessors to UCM's title and/or Seller's interest, but not otherwise.
(m) The Mineral Interests entitle Seller to receive not less than the
undivided interest set forth in Exhibit "A" of all indicated hydrocarbons
produced, saved and marketed from or attributable to the Leases.
(n) No portion of the Mineral Interests (1) has been contributed to and
is currently held by a tax partnership; (2) is subject to any form of agreement
(whether formal or informal, written or oral) deemed by any state or federal tax
statute, rule or regulation to be or have created a tax partnership; or (3)
otherwise constitutes "partnership property" (as that term is used in Subchapter
K of Chapter 1 of Subtitle A of the Code) of a tax partnership. For the purpose
of this Article 4.01(s) a "tax partnership" is an entity deemed to be a
partnership within the meaning of Section 761 of the Internal Revenue Code or
any similar state or federal statute, rule or regulation, by reason of elections
made not to be excluded from the application of such partnership provisions.
(o) The Seller represents that it has been furnished with such
information as Seller may have requested from the Buyer concerning the Buyer,
Fellows' common stock and the Shares being delivered hereunder. The Seller
further represents that (A) it is an "accredited investor," as defined in Rule
501(a) of the Securities Act of 1933, as amended (the "Securities Act"), and (B)
it has had the opportunity to ask questions of and receive satisfactory answers
from management of Fellows concerning Fellows, its operations, the matters set
forth in the Fellows SEC Documents and an other matters. The Seller acknowledges
and agrees that the Shares may not be sold or transferred following the Closing
unless either (a) such Shares have been registered under the Securities Act and
applicable state securities laws, or (b) the transfer is exempt from the
registration requirements of the Securities Act and applicable state securities
laws and Fellows shall have been furnished with a written opinion of legal
counsel reasonably satisfactory to Fellows to the effect that such sale or
transfer is exempt from the registration requirements of the Securities Act and
applicable state securities laws. The Seller agrees that the certificates
representing the Shares issued pursuant to this Agreement will contain the
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following restrictive legend: THE SHARES OF STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES ACT AND CANNOT BE SOLD, TRANSFERRED, OR
OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER SUCH ACTS OR EXEMPTIONS FROM
REGISTRATION ARE AVAILABLE. THE TRANSFER OF THE SHARES REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED UNDER THE PURCHASE AND SALE AGREEMENT DATED AS OF
DECEMBER 8, 2003, AMONG DIAMOND OIL AND GAS CORPORATION AND FELLOWS ENERGY LTD.
A COPY OF THE PURCHASE AND SALE AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE RECORD HOLDER OF THE CERTIFICATE TO DIAMOND OIL AND GAS
CORPORATION.
(p) Seller has provided Buyer with complete and accurate information
relating to the Leases and Assets, including without limitation, all applicable
agreements relating, appertaining or incidental to the Leases, production
history and characteristics. Seller has also provided Buyer with copies of all
land files heretofore maintained and belonging to Seller.
(q) Prior to Closing, Seller shall have made available to Buyer for
examination at Seller's office in Las Vegas, Nevada all title and other
information relating to the Assets insofar as the same are in Seller's
possession and after Closing will cooperate with Buyer in Buyer's efforts to
obtain such additional information relating to the Assets as Buyer may
reasonably require, to the extent in each case that Seller may do so without
violating legal constraints or any obligation of confidence or other contractual
commitment of Seller to a third party. After Closing, Seller shall cooperate
with Buyer in Buyer's efforts to obtain, at Buyers' expense, such additional
title information as Buyer may reasonably deem prudent.
(r) Seller has caused the Assets to be maintained in a good and
workmanlike manner consistent with good oilfield practices, has maintained
insurance now in force with respect to the Assets, has paid or caused to be paid
all costs and expenses in connection therewith, has kept the Leases in full
force and effect and has performed and, to the best knowledge of Seller,
complied with all the covenants and conditions contained in the Leases and all
agreements relating to the Assets.
(s) During the period between the Effective Date and the Closing,
Seller has not entered into any agreements or commitments with respect to the
Assets, has not modified or terminated any of the agreements relating to the
Assets, including, without limitation, the Basic Documents, has not encumbered,
sold or otherwise disposed of any of the Assets other than any personal property
which may have been replaced by equivalent property or consumed in the operation
of the Assets, and has not voluntarily compromised any amounts payable to the
Seller due to casualty loss or any pending or threatened taking related to the
Assets.
(t) Seller has exercised reasonable efforts in safeguarding and
maintaining all engineering, geological and geophysical data, reports and maps,
contract rights and like information relating to the Assets.
(u) In the event that as of the Closing Date the Assets are subject to
outstanding Governmental Approvals, Seller agrees to indemnify the Buyer
Indemnified Party against any Loss or Losses arising by reason of the failure to
obtain such Governmental Approvals. Seller represents that it will exercise
reasonable efforts to obtain such Governmental Approvals. The indemnity herein
provided shall survive the Closing until the required Governmental Approvals
have been obtained.
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(v) Seller has permitted Buyers' authorized representatives to consult
with Seller's and/or any third-party contract operator's agents and employees
during reasonable business hours and to conduct on-site inspections, reasonable
tests and inventories with respect to the Assets and inspect and examine any and
all production and related data, well logs and geological and geophysical data
relating to the Assets.
(w) Prior to the Closing Date, Seller has used reasonable efforts to
maintain its relationships with all suppliers, customers and others having
business relationships with Seller with respect to the Assets so that such
relationships will be preserved for Buyer on and after the Closing Date.
(x) There are no Xxxxx located on any of the Lands.
(y) There are no underground storage tanks located on any of Lands.
4.02 Representations and Warranties of Buyer. Fellows represents and
warrants to Seller that the statements contained in this Article 4.02 are true
and correct as of the Closing Date:
(a) Fellows is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada, and is duly qualified to do
business and in good standing in the State of California.
(b) Buyer has all requisite power and authority, corporate and
otherwise, to carry on its business as presently conducted, to enter into this
Agreement to which it is a party, and to perform its obligations under this
Agreement including undertaking the obligations provided for in the Assignment.
(c) Buyer herewith authorizes Xxxxxx X. Xxxxx to negotiate with Seller
on its behalf in regard to any matters pursuant to this Agreement at any point
prior to Closing, provided, however that Buyer reserves the right to approve any
such arrangements upon Closing, including, but not limited to, any additional
obligations arising from this Agreement not otherwise provided for in the
Assignment.
(d) The execution and delivery of this Agreement has been, and the
execution and delivery of all certificates, documents and instruments required
to be executed and delivered by Buyer at Closing, and the consummation of the
transactions contemplated hereby as of the Closing Date shall have been duly
authorized by all necessary corporate action on the part of Buyer and no further
authorization is required by any law, statute, regulation, court order or
judgment applicable to Buyer. This Agreement constitutes a legal, valid and
binding obligation of Buyer enforceable in accordance with its terms, subject
however, to the effects of bankruptcy, insolvency, reorganization, moratorium
and similar laws, as well as to principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
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(e) The execution and delivery of the Agreement and the consummation of
the transactions contemplated hereby will not (i) violate, or be in conflict
with any provisions of Buyer's certificate of incorporation, bylaws or governing
documents, (ii) constitute a material breach of, or any event of default under,
any contract or agreement to which Buyer is a party or by which it or its assets
are bound, or constitute the happening of an event or condition upon which any
other party to such a contract or agreement may exercise any right or option
which will materially adversely affect the ability of Buyer to perform its
obligations hereunder, or (iii) violate any judgment, decree, order, statute,
rule or regulation applicable to Buyer.
(f) No suit, action or other proceeding is pending before any court or
governmental agency as of the date of this Agreement to which Buyer is a party
and which might materially hinder or impede the ability of Buyer to perform its
obligations hereunder. Fellows shall promptly notify Seller of any such
proceeding arising prior to the Closing with respect to which it receives actual
notice.
(g) Buyer has not incurred any liability, contingent or otherwise, for
brokers' or finders' fees relating to the transactions contemplated by this
Agreement for which Seller shall have any responsibility whatsoever.
(h) Fellows is current with respect to all required reports, schedules,
forms, statements and other documents with the Commission. The financial
statements of Fellows filed with the Commission for the year ended December 31,
2002, comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited statements, as permitted by Form
10-QSB of the SEC) applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present the
consolidated financial position of Fellows and its consolidated subsidiaries as
of the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments and other adjustments described therein).
(i) The Shares representative of the Purchase Price to be received by
Seller (i) have been duly authorized, and (ii) at the time of their issuance,
will be validly issued, fully paid, nonassessable, and not issued in violation
of any preemptive rights or any applicable laws, rules or regulations. Such
Shares will, upon delivery thereof, be free and clear of all liens, charges,
pledges, encumbrances, equities and claims whatsoever other than those created
by Seller.
(j) Buyer will deliver to Seller, prior to the Closing Date, evidence
of cancellation of its outgoing management's shares in the amount of Fifty-two
Million Six Hundred Thousand (52,600,000) shares. Buyer will have conducted a
private placement of Two Million Five Hundred Thousand (2,500,000) shares of its
common stock at $1.00 per share, and present evidence of that sale to Seller.
Buyer, in its sole discretion, may increase the amount of the private placement
by an additional 25% above the Two Million Five Hundred Thousand (2,500,000)
shares being offered in the private placement.
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(k) Set forth on Exhibit "4.02(k)" attached hereto and made a part
hereof for all purposes is the authorized capitalization of Fellows and the
number of shares of its capital stock (or other equity interests) issued and
outstanding as of the date hereof.
ARTICLE 5
ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES
5.01 Definitions. As used in this Article 5.01:
(a) "Contaminated Site List" means any list, registry, or other compilation
established by any Governmental Entity of sites that require or potentially
require investigation, removal actions, remedial actions, or any other response
under any Environmental Laws or treaty covering environmental matters, as the
result of the Release or threatened Release of any Hazardous Materials.
(b) "Environmental Laws" means all laws, rules, regulations, statutes,
ordinances or orders of any Governmental Entity relating to (A) the control of
any potential pollutant or protection of the air, water or land, (B) solid,
gaseous or liquid waste generation, handling, treatment, storage, disposal or
transportation, and (C) exposure to hazardous, toxic or other substances alleged
to be harmful, and includes without limitation, the terms and conditions of any
license, permit, approval, or other authorization by any Governmental Entity,
and judicial, administrative, or other regulatory decrees, judgments, and orders
of any Governmental Entity. The term "Environmental Laws" shall include, but not
be limited to, the Clean Air Act, 42 U.S.C.ss.7401 et seq., the Clean Water Act,
33 U.S.C.ss.1251 et seq., the Resource Conservation Recovery Act ("RCRA"), 42
U.S.C.ss.6901 et seq., the Superfund Amendments and Reauthorization Act, 42
U.S.C.ss.11011 et seq., the Toxic Substances Control Act, 15 U.S.C.ss.2601 et
seq., the Water Pollution Control Act, 33 U.S.C.ss.1251, et seq., the Safe
Drinking Water Act, 42 U.S.C.ss.300f et seq., the Comprehensive Environment
Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C.ss.9601 et seq.,
the Oil Pollution Act of 1990, 33 U.S.C.A.ss.2701 et seq., and any applicable
statutes promulgated by the State of Utah or any counties, cities, townships or
other jurisdictions located therein.
(c) "Environmental Liabilities" shall mean any and all liabilities,
responsibilities, claims, suits, losses, costs (including remediation, removal,
response, abatement, cleanup, investigative, and/or monitoring costs and any
other related costs and expenses), damages, settlements, expenses, charges,
assessments, liens, penalties, fines, prejudgment and postjudgment interest,
attorney fees and other legal fees (A) pursuant to any agreement, order, notice,
or responsibility, (including directives embodied in Environmental Laws),
injunction, judgment, or similar documents (including settlements), or (B)
pursuant to any claim by a Governmental Entity or other person for personal
injury, property damage, damage to natural resources, remediation, or similar
costs or expenses incurred by such Governmental Entity or person pursuant to
common law, statute, rule or regulation.
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(d) "Environmental Remediation Costs" means all costs and expenses of actions or
activities to (A) cleanup or remove Hazardous Materials from the environment,
(B) to prevent or minimize the further movement, leaching or migration of
Hazardous Materials in the environment, (C) prevent, minimize or mitigate the
Release or threatened Release of Hazardous Materials into the environment, or
injury or damage from such Release, and (D) comply with the requirements of any
Environmental Laws. Environmental Remediation Costs include, without limitation,
costs and expenses payable in connection with the foregoing for legal,
engineering or other consultant services, for investigation, testing, sampling,
and monitoring, for boring, excavation, and construction, for removal,
modification or replacement of equipment or facilities, for labor and material,
and for proper storage, treatment, and disposal of Hazardous Materials.
(e) "Governmental Entity" means any court, administrative agency or commission
or other governmental authority or agency, domestic or foreign, including local
authorities.
(f) "Hazardous Materials" means any toxic or hazardous materials or substances,
or solid wastes, including asbestos, buried contaminants, chemicals, flammable
or explosive materials, radioactive, materials, petroleum and petroleum
products, and any other chemical, pollutant, contaminants substance or waste
that is regulated by any Governmental Entity under any Environmental Law.
(g) "Material" or "Material Adverse Effect" for purposes of this Article 5.01
means any matter, response, action, remediation, or other item calling for the
payment or expenditure by any Seller or Buyer after the Closing of funds in
excess of $50,000 per occurrence, or $500,000 in the aggregate.
(h) "Release" means any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, or disposing into the
environment of any Hazardous Materials.
5.02 Representations and Warranties. With respect to the Assets, the
Seller represents and warrants to Buyer that, to the best of its knowledge:
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(a) With respect to permits and licenses relating to the Assets, (A)
all Material licenses, permits, consents, or other approvals required under
Environmental Laws that are necessary to the current operations on the Assets
have been obtained and are in full force and effect, and Seller is unaware of
any basis for revocation or suspension of any such licenses, permits, consents
or other approvals, (B) no declaration, environmental impact statement, or other
filing or notice to any Governmental Entity is required under Environmental Laws
as a condition or in connection with the transactions contemplated by this
Agreement, and (C) no Environmental Laws impose any obligation upon any Seller,
as a result of any transaction contemplated hereby, requiring prior notification
to any Governmental Entity of the transfer of any permit, license, consent, or
other Approval which materially is necessary to the operations of the Assets.
(b) No Governmental Entity has given notice to the Seller of any claim
or investigation under or violation of any Environmental Law with respect to the
Assets or of any intent to encumber or place a lien under any Environmental Laws
upon the Assets. No Material notice or Material restriction has been, or is
required to be placed in any deed or other public real property record pursuant
to any Environmental Laws with respect to the Assets.
(c) Except as would not have a Material Adverse Effect and with respect
to the Assets or any of the Lands, (A) no oral or written notification of any
Release of any Hazardous Materials has been given to any Governmental Entity by
or on behalf of Seller, (B) none of the Assets is on (nor has any Seller
received any notice from any Governmental Entity that any of the Assets is being
considered or proposed for listing on) any Contaminated Site List, (C) none of
the Assets is the subject of any judgment, decree or order of any Governmental
Entity requiring any investigation, removal, remediation or similar action, or
other response under any Environmental Laws, (D) the Seller has not received any
notice from any Governmental Entity that it is liable or responsible, or
potentially liable or responsible, in any material respect for any removal,
remedial, or other similar type action under any Environmental Laws as the
result of the Release or threatened Release of Hazardous Materials with respect
to the Assets and (E) there is no claim, complaint, investigation, litigation,
or administrative proceeding threatened before any Governmental Entity (and to
the best of its information and belief, Seller knows of no threatened claim,
complaint, investigation, litigation, or administrative proceeding) in which it
is asserted by any Governmental Entity or any other person that Seller (x) has
violated or is not in compliance with any Environmental Laws with respect to the
Assets, (y) is liable for or should be ordered or compelled to undertake any
removal, remediation, or other response action as the result of the Release or
threatened Release of any Hazardous Materials with respect to the Assets or (z)
is liable for damages (including without limitation, damages to natural
resources), fines, penalties, or other relief as the result of the violation or
noncompliance of any Environmental Laws or as the result of the Release or
threatened Release of any Hazardous Materials with respect to the Assets.
(d) Except where the failure to have such permits and authorizations
would not have a Material Adverse Effect, all Hazardous Materials, garbage,
refuse, and similar waste materials with respect to the Assets have been
transported by Seller only to sites which have proper permits or other
authorization from Governmental Entities for the disposal of such materials. To
the best knowledge of Seller, no such site to which Hazardous Materials,
garbage, refuse, or similar waste materials have been transported for disposal
Seller are on any Contaminated Site List.
(e) Except as would not have a Material Adverse Effect, all operations
of Seller with respect to the Assets are in compliance with all Environmental
Laws.
(f) Except as would not have a Material Adverse Effect, no facts or
circumstances exist which could reasonably be expected to result in any
Environmental Liabilities to Seller or the Buyer following the Closing with
respect to the Assets.
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(g) Seller does not now own, lease or otherwise operate any disposal
sites on the Assets.
ARTICLE 6
ENVIRONMENTAL COVENANT
6.01 Availability of Data to Buyer; Environmental Audit. Prior to the
date hereof, Seller has made available to Buyer information which is in the
possession or control of Seller or to which Seller has access (other than
publicly available information to which Buyer has equal access) and which
relates to the environmental condition of the Assets, which information
includes, without limitation, information regarding crude oil and produced water
that may have been spilled or disposed of on-site and the locations thereof;
onsite pits and pit closures; on-site burial; land farming; land spreading;
underground injection; and on-site solid waste disposal sites. Seller has
further delivered to Buyer true and correct copies of its Environmental Reports.
No material environmental events have occurred since the dates of these reports.
6.02 Environmental Assessment. Buyer shall have the right to make an
environmental assessment of the Assets during the period beginning on the date
of execution of this Agreement and ending ninety (90) days after the Closing
Date ("Examination Period"). If during the Examination Period, Buyer determines
that operations of Seller or its affiliates with respect to the Assets are not
in compliance with all Environmental Laws, without regard to whether Seller has
been previously notified of such matter by an applicable authority, then Buyer
shall give Seller notice thereof together with an explanation of the
environmental problem. Seller shall have five (5) days following such notice to
notify Buyer whether Seller elects to (x) remediate, dispose of, restore, or
otherwise resolve such environmental problem or lack of compliance in accordance
with all applicable laws, rules, and regulations, and to Buyer's reasonable
satisfaction, or (y) reduce the consideration to be paid under Article 8.03 (b)
by $50,000. Buyer and Seller agree to cooperate with each other in connection
with all activities to be conducted hereunder.
ARTICLE 7
SURVIVAL AND INDEMNIFICATION
7.01 Survival of Representations and Warranties. The representations
and warranties of (i) the Seller contained in Article 4.01 and Article 5 hereof
shall survive the Closing for a period of one year from the Closing Date and
(ii) the representations and warranties of the Buyer contained in Article 4.02
hereof shall survive the Closing for one year from the Closing Date (the
"Survival Period").
7.02 Indemnification Provision for the Benefit of the Seller. In the
event the Buyer breaches any of its representations and warranties contained in
Article 4.02 hereof, then the Buyer agrees to indemnify and hold harmless the
Seller, any current, former, and future director, officer, manager, member,
partner, shareholder, employee and agent of Seller, and any successor, assign,
heir, and executor of any of the foregoing (the "Seller Indemnified Party"),
from and against the entirety of any Losses resulting from or related or
attributable to the breach which the Seller, or any such Affiliate (or any such
other indemnified person in such person's capacity set forth above) shall
suffer, provided such claim for indemnification is brought within the Survival
Period; and further provided that "Losses", as used in this sentence, shall not
include, and Buyer shall not be responsible or liable for, any death, personal
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injury, or consequential damages in respect of such breach. Further, subject to
the limitations of the immediately preceding sentence, the Buyer indemnifies,
defends and holds the Seller Indemnified Parties harmless from and against any
and all Losses directly or indirectly arising out of or resulting from any
Hazardous Materials being present or released in, on or around any part of the
surface of the Fee Tract, or in the soil, groundwater or soil vapor on or under
the surface of the Fee Tract subsequent to the Closing Date that is caused by
the Buyer or its agents and employees.
7.03 Indemnification Provision for the Benefit of the Buyer In the
event the Seller breaches any of its representations and warranties contained in
Article 4.01 and Article 5 hereof, then the Seller agrees to indemnify and hold
harmless the Buyer, any current, former, and future director, officer, manager,
member, partner, shareholder, employee and agent of Buyer, and any successor,
assign, heir, and executor of any of the foregoing (the "Buyer Indemnified
Party"), from and against the entirety of any Losses resulting from or related
or attributable to the breach which the Buyer, or any such Affiliate (or any
such other indemnified person in such person's capacity set forth above) shall
suffer, provided such claim for indemnification is brought within the Survival
Period; and further provided that "Losses", as used in this sentence, shall not
include, and Seller shall not be responsible or liable for, any death, personal
injury, or consequential damages in respect of such breach. Further, subject to
the limitations of the immediately preceding sentence, the Seller indemnifies,
defends and holds the Buyer Indemnified Parties harmless from and against any
and all Losses directly or indirectly arising out of or resulting from any
Hazardous Materials being present or released in, on or around any part of the
surface of the Fee Tract, or in the soil, groundwater or soil vapor on or under
the surface of the Fee Tract prior to the Closing date and thereafter, except
for the presence of such Hazardous Materials that is caused by the Buyer or its
agents and employees.
7.04 Matters Involving Third Parties.
(a) If any third party shall notify a Seller Indemnified or Buyer
Indemnified Party with respect to any matter which may give rise to a claim for
indemnification against Seller or Buyer, as the case may be (the "Indemnifying
Party") under this Article 7 or otherwise pursuant to this Agreement, then the
Indemnified Party shall promptly (and in any event within ten (10) business days
after receiving service of process in a lawsuit, administrative proceeding or
arbitration proceeding with respect to the Third Party Claim) notify each
Indemnifying Party thereof in writing. Each of the matters described in this
Article 7.04(a) shall be referred to in this Agreement as a "Third Party Claim".
(b) Any Indemnifying Party will have the right to assume and thereafter
conduct the defense of the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party; provided, however, that the
Indemnifying Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnified Party (not to be withheld unreasonably) unless the
judgment or proposed settlement involves only the payment of money damages and
does not impose an injunction or other equitable relief upon (or constitute an
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admission of guilt, liability, fault or responsibility for) the Indemnified
Party. The Indemnified Party shall have the right to employ separate counsel in
any such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of the Indemnified Party unless
(i) the employment thereof has been specifically authorized in writing by the
Indemnifying Party or (ii) the Indemnifying Party failed to assume the defense
and employ counsel.
(c) Unless and until an Indemnifying Party assumes the defense of the
Third Party Claim as provided in Article 7.04(b) above, however, the Indemnified
Party may defend against the Third Party Claim in any manner it reasonably may
deem appropriate with such reasonable costs and expenses associated therewith to
be borne for the account of the Indemnifying Party.
(d) In no event will the Indemnified Party consent to the entry of any
judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnifying Party (not to be withheld
unreasonably), unless the Indemnified Party waives indemnification with respect
to the Third Party Claim so settled and adjudicated.
(e) The indemnification obligations of Seller and Buyer, respectively
under this Agreement shall include court costs and attorney's fees and expenses
and costs of investigating, preparing or defending any action or proceeding with
respect to any Third Party Claim.
ARTICLE 8
POST CLOSING COVENANTS
8.01 Certain Obligations of Seller. Seller agrees that, with respect
to the period following the Closing:
(a) RECORDS. On or before five (5) business days after Closing, Seller
shall, at Seller's cost, deliver to Buyer, at Buyer's offices in Cypress,
California, copies of all Records.
(b) RETAINED LIABILITIES. Seller retains and shall remain liable and
responsible for, and Buyer specifically does not assume, any liabilities and
obligations of Seller not related to or arising out of the ownership, use,
maintenance and operation of the Assets, whether known or unknown, accrued or
contingent and not otherwise specifically set forth in this Agreement.
8.02 Certain Obligations of Buyer. Buyer agrees that within (30) days
following Closing, Buyer shall record those Conveyance Documents necessary to
evidence in the public record that Buyer has acquired the Assets and within a
reasonable time thereafter, Buyer shall supply Seller with a true and accurate
photocopy of the recorded and filed Conveyance Documents. In the event Buyer
fails to record any such Conveyance Document within such time period, Seller
may, but shall not be obligated to, record such Conveyance Document on Buyer's
behalf and at Buyer's cost (for which Buyer will promptly reimburse Seller upon
demand).
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8.03 Agreements Regarding the Issuance of Shares.
(a) SHARE ISSUANCE. Fellows will issue and deliver to the Seller,
within thirty (30) days of the Closing Date, Shares representative of the
Purchase Price in the amount of Three Million Five Hundred Thousand (3,500,000)
shares of its common stock (the "Control Shares").
(b) TRANSFER RESTRICTIONS. In addition to the transfer restrictions
specified in Section 4.01(o) of this Agreement, the Control Shares issued
pursuant to this Agreement, shall be subject to the following additional
transfer restrictions: (i) none of the Control Shares may be transferred within
15 months of the issuance of such stock to Seller unless registered pursuant to
Section 8.03(c) of this Agreement; (ii) during the time the Control Shares are
subject to the restrictions stated within this Section 8.03(b), the Control
Shares must be pledged with an attorney licensed to practice in the United
States until such time as the restrictions no longer apply. The holder of the
Control Shares is strictly forbidden from pledging its shares to a brokerage
house or bank.
(c) REGISTRATION OF SHARES. In the event that Buyer files any
registration statements with the SEC to conduct future offerings of its common
stock, Buyer shall use its best efforts to include the Control Shares in those
registration statements at a rate of Three Hundred Fifty Thousand (350,000)
shares per such registration statement filed with the SEC. Upon the
effectiveness of any such registration statement, any Control Shares so
registered shall be removed from the transfer restrictions contained in Section
8.03(b). Nothing in this section shall be interpreted as requiring Buyer to file
any such registration statement. Buyer shall use its best efforts to prepare and
file with the SEC all amendments and supplements to the registration statement
and the prospectus used in connection with such registration statement necessary
to comply with the provisions of the Securities Act of 1933 and to cause such
registration statement to become effective. Buyer shall pay all expenses and
fees incurred by it in registering the Control Shares. Notwithstanding the
foregoing, such holder of the Control Shares shall pay all underwriting
discounts or commissions with respect to the Control Shares sold by such holder.
ARTICLE 9
EFFECT OF CLOSING
The following terms, provisions and prorations shall be effective at
the Closing:
(a) REVENUES. All proceeds from accounts receivables, notes receivable,
income, revenues, monies and other items attributable to the Assets with respect
to any period of time prior to the Effective Date shall belong to and be
retained by or paid over to Seller and all necessary reports with respect to
such proceeds shall be filed by Seller. All proceeds from production, accounts
receivables, notes receivables, income, revenues, monies and other items
attributable to the Assets with respect to any period of time from and after the
Effective Date shall belong to and be retained by or paid over to Buyer.
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(b) EXPENSES. All accounts payable and accrued liabilities for costs
and expenses attributable to the Assets with respect to any period of time prior
to the Effective Date, including excise, severance, and similar taxes based on
production or royalties, shall be the obligation of and paid by the Seller, and
all necessary reports with respect to such costs and expenses shall be filed by
Seller. All production royalties payable to UCM and exploration and drilling
expenses as specified in the Assignment, along with any accounts payable and
accrued liabilities for direct costs and expenses attributable to the Assets
with respect to any period of time from and after the Effective Date shall be
the obligation of and be paid by the Buyer.
(c) AD VALOREM AND PROPERTY TAXES. All ad valorem taxes, real property
taxes, personal property taxes and similar obligations (the "Taxes") shall be
apportioned as of the Effective Date between Buyer and Seller. All such Taxes
allocable to periods prior to the Effective Date shall be paid by Seller, and
all such Taxes allocable to the Effective Date and after shall be paid by Buyer.
Any refunds of Taxes allocable to periods prior to the Effective Date shall be
the property of Seller. Any refunds of Taxes allocable to periods after the
Effective Date shall be the property of Buyer. Buyer shall file or cause to be
filed all required reports and returns incident to such Taxes which are due on
or after the Effective Date, and shall pay or cause to be paid to the taxing
authorities all such Taxes reflected on such reports and returns; provided,
however, Seller shall promptly reimburse Buyer for any amounts owing by Seller
with respect thereto pursuant to this paragraph.
(d) SALES TAXES, FILING FEES, ETC. Buyer shall be liable for any sales
taxes or other transfer taxes, as well as any applicable conveyance, transfer
and recording fees, and real estate, transfer, stamp or other taxes imposed upon
the sale of the Assets. Seller agrees to use its reasonable best efforts to
assist Buyer in obtaining any applicable exemptions to any applicable state
sales tax. If Seller is required by applicable state law to report and pay these
taxes or fees, Buyer shall promptly deliver a check to Seller in full payment,
and Seller shall deliver said check to the appropriate taxing authorities and
shall bear any and all penalties, costs and expenses associated with the failure
of Seller to deliver said check.
(e) OTHER TAXES. All production, severance or excise taxes,
conservation fees and other similar such taxes or fees (other than income
taxes), if any, relating to production attributable to the Assets prior to the
Effective Date shall be paid by Seller and all such taxes and fees relating to
such production attributable to the Assets on and after the Effective Date shall
be paid by Buyer.
(f) PAYMENTS; SHARED OBLIGATIONS. If amounts are received by either
Party hereto which, under the terms of this Article 9 belong to the other Party,
such amount shall immediately be paid over to the proper Party. If an invoice or
other evidence of an obligation is received which under the terms of this
Article 9 is partially the obligation of Seller and partially the obligation of
Buyer, then the Parties shall consult each other and each shall promptly pay its
portion of such obligation to the obligee.
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ARTICLE 10
CONFIDENTIALITY AGREEMENT
Each Party, its Affiliates and its and their directors, officers,
employees, agents, representatives, consultants, investors and lenders, agree to
keep the terms and conditions of this Agreement and all proprietary and
confidential information exchanged between Buyer and Seller in connection with
this Agreement, confidential, and to not disclose the existence of this
Agreement without the prior written consent of the other Party, which consent
may be withheld at either Party's sole discretion, for a period not to exceed
one year from the Closing Date. The foregoing restriction shall not apply to
disclosures and information which (i) are required to comply with applicable
statutes and regulations; (ii) are required to enforce this Agreement; (iii) are
required to obtain financing related to the transactions contemplated hereby;
(iv) enter the public domain through a third party who does not thereby breach
an obligation of confidentiality; or (v) are made in association with press
releases issued in accordance with Article 14.01 hereof.
ARTICLE 11
CLOSING
11.01 Seller's Closing Obligations. At Closing, Seller shall
deliver or cause to be delivered to Buyer the following:
(a) CONVEYANCE DOCUMENTS. The Conveyance Documents; and
(b) DIRECTOR QUESTIONNAIRES. Questionnaires submitted by each of the
individuals listed in Section 11.02(d) which shall have been submitted to
Fellows' legal counsel, no later than 15 calendar days prior to the Closing
Date, a written response to the director questionnaire previously delivered to
Diamond, and upon receipt of all such responses Fellows' legal counsel shall
prepare and file with the SEC at least 10 calendar days prior to the Closing
Date an Information Statement Notice of Change In Control and of a Majority of
Directors pursuant to Section 14(f) of the Exchange Act and Rule 14f-1
thereunder. Diamond shall have the opportunity to review and provide comments to
such Information Statement prior to its filing with the SEC.
(c) CONSENT OF UCM TO THE AGREEMENT. Prior to Closing, Seller will
obtain and cause to be attached hereto as Exhibit 11.01 (c), UCM's consent to
Buyer's purchase of Diamond's rights and obligations concerning the Assets as
set forth in the Assignment between Diamond and UCM dated October 22, 2003, as
set forth in this Agreement.
11.02 Buyer's Closing Obligations. Buyer shall deliver to Seller or
cause to be delivered to Seller at Closing:
(a) SHARES. A certificate or certificates in definitive form
representing the Shares to be issued pursuant to Article 3.01 and
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(b) EVIDENCE OF FUNDS RAISED. Bank statements or other satisfactory
evidence of Buyer having completed the placement of a minimum of Two Million
Five Hundred Thousand shares (2,500,000) of its common stock at $1.00 per share;
and
(c) CANCELLATION OF OUTGOING MANAGEMENT'S SHARES. A resolution duly
executed authorizing the cancellation of the Fifty-two Million Six Hundred
Thousand shares (52,600,000) currently held by Buyer's outgoing management in
exchange for consideration to be determined by the Seller and the Buyer's Board
of Directors. Such resolution shall be accompanied by all necessary documents to
complete the cancellation of those shares; and
(d) SECTION 14(f) COMPLIANCE. Fellows will cause to be prepared and
filed (Form 14-F-1) and will provide, subject to compliance with Section 14(f)
of the Exchange Act and Rule 14f-1 thereunder, written resignations of all
officers and directors of Fellows in office immediately prior to the Closing,
and board resolutions electing the following individuals to the positions with
Fellows listed opposite their names below:
Xxxxxx X. Xxxxx: Chairman of the Board;
Chief Executive Officer
Xxxxxx Xxxxxx: Vice President; Director
ARTICLE 12
CASUALTY LOSS AND CONDEMNATION
If, prior to the Closing Date, all or any portion of the Assets are
destroyed by fire or other casualty or are taken in condemnation or under right
of eminent domain or proceedings for such purpose are pending or threatened in
writing, Buyer may elect to purchase such Assets or portions thereof
notwithstanding any such destruction, taking or pending or threatened taking
(without reduction in the Purchase Price with respect thereto), in which case
Seller shall, at the Closing, pay to Buyer all sums paid to Seller by third
parties (including insurers) by reason of the destruction or taking of such
Assets, and shall assign, transfer and set over unto Buyer all of Seller's
right, title and interest in and to any unpaid awards or other amounts due from
third parties (including insurers) arising out of the destruction, taking or
pending or threatened taking of such Assets or portions thereof. Prior to
Closing, Seller shall not voluntarily compromise, settle or adjust any amounts
payable by reason of any destruction, taking or pending or threatened taking as
to the Assets or portions thereof without first obtaining the written consent of
Buyer.
ARTICLE 13
GOVERNMENTAL CONSENTS
At the Closing and Option Closing, if any, Seller shall execute and
deliver to Buyer such assignments of federal, state and Indian leases as require
consent to assignment, on the forms required by the governmental or tribal
agency having jurisdiction thereof. Buyer shall promptly file for and obtain the
necessary approvals for such assignments. Until such approvals (the
"Governmental Approvals") are obtained, Seller shall continue to hold
governmental title to such leases as nominee for Buyer.
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ARTICLE 14
MISCELLANEOUS
14.01 Press Releases and Public Announcements. Neither Party shall
issue any press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing or Option Closing, if any, without
the prior approval of the other Party, which approval shall not be unreasonably
withheld; provided, however, that either Party may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly traded securities (in which case the
disclosing Party will use its reasonable best efforts to advise the other Party
prior to making the disclosure).
14.02 Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior agreements, or representations by or between the Parties,
written or oral, to the extent they have related in any way to the subject
matter hereof.
14.03 Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties and their respective successors and
permitted assigns. Neither Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party, which approval shall not be unreasonably withheld.
14.04 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
14.05 Headings. The section or Article headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
14.06 Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Nevada without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Nevada or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Nevada.
14.07 Legal Fees. The prevailing party in any legal proceeding brought
under or to enforce this Agreement shall be additionally entitled to recover
court costs and reasonable attorney's fees from the nonprevailing party. Each
Party shall pay their respective legal costs associated with the negotiation and
drafting of this Agreement.
14.08 Exhibits. All exhibits and schedules hereto which are referred to
herein are hereby made a part hereof and incorporated herein by such reference.
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14.09 Waiver. Any of the terms, provisions, covenants, representations,
warranties or conditions hereof may be waived only by written instrument
executed by the Party waiving the compliance. The failure of either Party at any
time or times to require performance of any provisions hereof shall in no manner
affect such Party's right to enforce the same. No waiver by either Party of any
condition or of the breach of any term, provision, covenant, representation or
warranty contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, shall be deemed to be construed as a further or
continuing waiver of any such condition or breach, or a waiver of any other
condition or of the breach of any other term, provision, covenant,
representation or warranty.
14.10 Further Assurances. After the Closing and Option Closing, if any,
each of the Parties will execute, acknowledge, and deliver to the other such
further instruments, and take such other actions, as may be reasonably requested
in order to more effectively assure to said Party all of the respective
properties, rights, titles, interests, estates, and privileges intended to be
assigned, delivered, or inuring to the benefit of such Party in consummation of
the transactions contemplated hereby.
14.11 Resignation as Operator, etc. At the Closing, Seller shall
execute and deliver to Buyer appropriate letters resigning as the Operator of
any of the Assets that Seller is operating and other appropriate documents
concerning transfer of operations. Buyer acknowledges and agrees that Seller
cannot and does not covenant or warrant that Buyer shall become successor
operator of all or any portion of the Assets, since the Assets or portions
thereof may be subject to unit, pooling, communitization, operating or other
agreements which control the appointment of a successor operator; provided,
however, that Seller agrees to use its reasonable best efforts to assist Buyer
in becoming successor operator.
14.12 Notices. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
IF TO SELLER:
Diamond Oil and Gas Corporation
000 Xxxxxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxx 00000
Tel: 000.000.0000
IF TO BUYER:
Fellows Energy Ltd.
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Tel: 714. 220.1806
Fax: 000.000.0000
23
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
14.13 Disclaimer of Representations and Warranties. Except as expressly
set forth in this Agreement and in Conveyance Documents delivered pursuant to
Article 11.01(a), the Parties hereto make no, and disclaim any, representation
or warranty whatsoever, whether express or implied. Each Party hereto disclaims
all liability and responsibility for any other representation, warranty,
statement, or communication (orally or in writing) to the other Party
(including, but not limited to, any information contained in any opinion,
information, or advice that may have been provided to any such Party by any
officer, stockholder, director, partner, member, manager, employee, agent,
consultant, representative, or contractor of such disclaiming Party or its
Affiliates or any engineer or engineering firm, or other agent, consultant, or
representative) wherever and however made. Without limiting the generality of
the foregoing, Seller makes no representation or warranty as to (a) the amount,
value, quality, or deliverability of petroleum, natural gas, or other reserves
attributable to the Assets or any portion thereof, or (b) any geological,
engineering, or other interpretations or economic evaluations. SELLER MAKES NO,
AND DISCLAIMS ANY, REPRESENTATION OR WARRANTY, WHETHER EXPRESS OR IMPLIED, AND
WHETHER BY COMMON LAW, STATUTE, OR OTHERWISE, AS TO (I) MERCHANTABILITY, (II)
FITNESS FOR ANY PARTICULAR PURPOSE, (III) CONFORMITY TO MODELS OR SAMPLES OF
MATERIALS, AND/OR (IV) CONDITION OF THE LEASES OR ASSETS THAT ARE THE SUBJECT OF
THIS AGREEMENT. The Parties agree that the preceding disclaimers of warranty are
"conspicuous" disclaimers for purposes of any applicable law, rule, or order.
14.14 Seller's Liabilities Several and Not Joint. Notwithstanding
anything herein contained to the contrary, it is understood and agreed that the
obligations and liabilities of Seller hereunder are several, and not joint or
joint and several, with respect to that portion of the Assets owned by Diamond
and UCM, respectively. More specifically, it is understood and agreed that:
(a) The representations and warranties set forth in Article 4.01,
the environmental representations and warranties set forth in Article 5.01, the
environmental covenant set forth in Article 6.01, the indemnification provision
for the benefit of Buyer set forth in Article 7.03 and the post-closing
covenants set forth in Article 8.01 shall bind Diamond insofar and only insofar
as the same pertain to the Assets included therein; and
(b) The representations and warranties set forth in Article 4.01,
the environmental representations and warranties set forth in Article 5.01, the
environmental covenant set forth in Article 6.01, the indemnification provision
for the benefit of Buyer set forth in Article 7.03 and the post-closing
covenants set forth in Article 8.01 shall bind UCM insofar and only insofar as
the same pertains to the Assets included therein.
24
Furthermore, no default by one Seller under this Agreement shall affect in any
way the right of a non-defaulting Seller to enforce this Agreement by
appropriate proceedings at law or in equity.
14.15 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation and in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
14.16 No Third Party Beneficiaries. Except as provided for in Article 7
hereof with respect to the rights of an Indemnified Party, this Agreement shall
not confer any rights or remedies upon any person other than the Parties and
their respective successors and permitted assigns, and other persons given
rights of indemnification hereunder.
14.17 Construction. The Parties have participated jointly in the
negotiating and drafting of this Agreement. In the event ambiguity or question
of intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring either Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local or
foreign statute or law should be deemed also to refer to all rules and
regulations promulgated thereunder, unless the contexts requires otherwise. The
word "including" shall mean including, without limitation. If the date specified
in this Agreement for giving any notice or taking any action is not a business
day (or if the period during which any notices required to be given or any
action taken expires on a date which is not a business day) then the date for
giving such notice or taking such action (and the expiration date for such
period during which notice is required to be given or action taken) shall be the
next day which is a business day.
25
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written, but effective for all purposes as of the
Effective Date.
BUYER:
FELLOWS ENERGY LTD.
By: /s/ Xxxx X. Xxxxxxxxxxxx
---------------------------------------
Xxxx X. Xxxxxxxxxxxx
Its: President
SELLER:
DIAMOND OIL AND GAS CORPORATION
By: /s/ Xxxxxx X. Xxxxx
---------------------------------------
Xxxxxx X. Xxxxx
Its: President
26
LIST OF EXHIBITS
EXHIBIT A Assignment of Interest in Oil & Gas Leases between UCM and Diamond,
Description of Leases and of the Mineral Interests
EXHIBIT B Conveyance Documents
EXHIBIT 4.02(k) Capitalization of Fellows
EXHIBIT 11.01(c) Consent of UCM
EXHIBIT A
ASSIGNMENT OF INTEREST IN OIL AND GAS LEASES UNDER
EARN IN OPTION AGREEMENT
This Assignment of Interest in Oil and Gas Leases is made this 22nd
day of October 2003 by and between UCM Investment Corporation, a Nevada
corporation, as assignor ("UCM" and/or "Assignor") and Diamond Oil and Gas
Corporation, a Nevada corporation, as assignee ("Diamond" and/or "Assignee").
In consideration of the mutual promises and covenants of the parties
made herein, UCM hereby assigns all of its right, title, interest and
obligations relating to the oil and gas leases described in Exhibit A attached
hereto (the "Leases") to Diamond, on the terms and conditions described below.
1. UCM reserves to itself from the assignment made herein a 2% overriding
gross royalty from the entire oil and gas production achieved by
Diamond, Diamond's affiliates, Diamond's associates and/or any entity
under the Leases which are the subject of this Assignment. This 2%
overriding gross royalty from the entire oil and gas production
achieved by Diamond shall be calculated from a gross production number
from the Leases and shall be and remain non-dilutive in any and all of
its forms. 2. Diamond hereby covenants and agrees that:
(a) Diamond shall arrange and pay for all title work and legal due
diligence reasonably necessary to be performed prior to commencing
any drilling.
(b) Diamond shall arrange for and finance any and all permitting,
drilling and other expenditures required to develop the Leases and
take them into production, in the event they are proven to be
economically feasible. In arranging financing, Diamond may assign
any of its rights hereunder to a financially responsible assignee,
subject to the approval of UCM, with such approval not to be
unreasonably withheld.
(c) In order to maintain its interest in the Leases, Diamond must
expend the following sums in exploration drilling on or before the
dates specified. In the event Diamond fails to make any of such
expenditures by the dates specified, all rights, title and
interests assigned hereunder shall terminate and be of no further
force of effect at the option of UCM and shall immediately revert
to UCM.
June 15, 2004 $ 1,200,000
January 20, 2005 an additional $ 1,000,000
January 20, 2006 an additional $ 800,000
(d) Diamond shall make available to UCM all data and information
generated from any exploration and drilling, and shall provide
complete core analysis for coal quality, ash, BTU content, moisture
content and roof and floor conditions to allow UCM to evaluate the
coal for leasing purposes, also, including gas desorption tests to
evaluate the gas content.
(e) From and after the date hereof, the Assignee will assume, perform,
and discharge all of the obligations and liabilities of the
Assignor in respect of the Leases, and agrees to indemnify and save
harmless the Assignor from and against all claims, actions, suits,
proceedings, demands, assessments, judgments, charges, penalties,
costs, and expenses (including the full amount of any legal
expenses invoiced to the Assignor) made or claimed against or
suffered or incurred by the Assignor resulting from or arising out
of or in connection with the failure by the Assignee to assume,
perform, and discharge as aforesaid.
(f) In addition to the foregoing, Diamond shall indemnify and hold
harmless UCM from and against any and all liability relating to
operations or reclamation on the Leases.
(g) Diamond shall assume all of UCM's obligations under the Leases and
shall fully satisfy the same, and hereby pledges all of its
interest received herein from UCM to and for the benefit of UCM as
security for the full and complete performance on all of its
obligations and covenants made herein.
3. Diamond hereby represents and warrants that:
(a) The execution, delivery and performance of this Assignment is not
in contravention of or conflict with any agreement or undertaking
to which Assignee is a party.
(b) The execution and delivery of this Assignment and the performance
of the provisions of this Assignment are not in contravention of or
in conflict with any law or regulation or any term or provision of
Assignee's Articles of Incorporation or Bylaws and are duly
authorized and do not require the consent or approval of any
governmental agency or other authority; and this Assignment is the
valid and legally enforceable obligation of Assignee in accordance
with the terms of this Assignment.
4. All written notices or other written communications required under this
Agreement shall be deemed properly given when provided to the parties
entitled thereto by personal delivery (including delivery by commercial
services such as messengers and airfreight forwarders), by electronic
means (such as by electronic mail, telex or facsimile transmission) or
by mail sent registered or certified mail, postage prepaid at the
following addresses (or to such other address of a party designated in
writing by such party to the others):
If to Assignor: UCM Investments, Inc.
Suite 2101, 000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0 Xxxxxx
If to Assignee: Diamond Oil & Gas Corporation
000 Xxxxxxxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxx Xxxxx, Xxxxxx
00000 U.S.A.
All notices given by electronic means shall be confirmed by delivering to the
party entitled thereto a copy of said notice by certified or registered mail,
postage prepaid, return receipt requested. All written notices shall be deemed
delivered and properly received upon the earlier of four (4) days after mailing
the confirmation notice or upon actual receipt of the notice provided by
personal delivery or electronic means.
5. All agreements, representations and warranties made herein shall survive the
execution and delivery hereof.
6. The term "Assignment" or "this Assignment" and all reference thereto, as used
throughout this instrument, shall mean this instrument as originally executed or
if later amended or supplemented, then, as so amended or supplemented. Assignor
and the Assignee agree that this Assignment shall be modified only by a written
agreement duly executed by persons authorized to execute agreements on their
behalf.
7. This Assignment shall obligate Assignee, its successors and assigns, and
shall inure to the benefit of Assignor, its successors and assigns.
8. This Assignment has been executed in and shall be governed by the laws of the
State of Nevada.
9. The Assignee and Assignor acknowledge and agree that this Assignment is the
complete and exclusive statement of the mutual understanding of the parties and
that it supersedes and cancels all previous written and oral agreements and
communications relating to the subject matter of this Assignment.
IN WITNESS WHEREOF, Assignee and Assignor have caused this Assignment to be
signed in their names by their duly authorized representatives on the dates
specified opposite their signatures.
Dated this 22nd day of October 2003
UCM Investments Corporation Diamond Oil and Gas Corporation
Date: October 22, 2003 Date: October 22, 2003
By /s/ Xxxxx Xxx By /s/ Xxxxxx X. Xxxxx
---------------------------------- ---------------------------
Its President Its President
---------------------------------- ---------------------------
EXHIBIT A
To Assignment of Interest between UCM Investment Corporation
And Diamond Oil and Gas Corporation
Utah School and Institutional Trust Lands Administration Oil and Gas Leases
48330
48331
48332
48333
48334
48335
48336
48337
48338
48339
48340
48341
48342
48344
EXHIBIT B CONVEYANCE DOCUMENTS
The Parties agree that the following documents will be recorded with the
appropriate jurisdictions:
o The Asset Purchase and Sale Agreement between Diamond and Fellows
dated December 8, 2003;
o Assignment of Interest in Oil & Gas Leases between UCM and Diamond,
including a Description of Leases and of the Mineral Interests
("Leases"), dated October 22, 2003; and
o Any underlying leases and documents in the chain of title to the
Leases not previously recorded with the appropriate jurisdiction.
EXHIBIT 4.02(k) CAPITALIZATION OF FELLOWS
The authorized capitalization of Fellows and the number of shares of its capital
stock (or other equity interests) issued and outstanding as of December 8, 2003:
Authorized: 100,000,000 shares
Issued & Outstanding: 87,853,150 shares
EXHIBIT 11.01(c) CONSENT OF UCM
CONSENT OF ASSIGNMENT
The undersigned, Xxxxx Xxx, as President and on behalf of UCM Investment Corp.
("UCM"), hereby consents to the assignment of the rights and obligations of
Diamond Oil and Gas Corporation ("Diamond") pursuant to its Assignment Agreement
dated October 22, 2003, with Diamond to Fellows Energy Ltd., assignee
("Fellows"), as set forth in the Asset Purchase and Sale Agreement dated
December 8, 2003, between Diamond and Fellows.
UCM Investment Corp.
By: /s/ Xxxxx Xxx January 5, 2004
--------------------------
Xxxxx Xxx
Its: President
