Exhibit 10.08
PURCHASE AGREEMENT
Earthwise Energy, Inc.
and
Energy Partners International
(collectively, the "Sellers")
and
Xxxxx Branch Exploration, L.L.C.
(the "Buyer")
January 13, 2011
PURCHASE AGREEMENT
TABLE OF CONTENTS
Article 1 DEFINITIONS..................................................... 4
Article 2 PURCHASE OF PROPERTIES.......................................... 8
2.1 Conveyance of Properties........................................ 8
2.2 Limitations.....................................................10
Article 3 CONSIDERATION...................................................10
3.1 Consideration...................................................10
3.2 Cash Consideration Payment......................................10
3.3 Delivery and Facilitation of Stock Consideration................10
3.4 Consent to Allocation/Division of Consideration.................11
Article 4 ENVIRONMENTAL MATTERS...........................................11
4.1 Presence of Wastes, NORM, Hazardous Substances and Asbestos.....11
Article 5 REPRESENTATIONS AND WARRANTIES OF SELLERS.......................11
5.1 Organization; Authority; Enforceability.........................11
5.2 No Conflict.....................................................12
5.3 Consents and Preferential Rights................................12
5.4 Litigation and Claims...........................................12
5.5 Governmental Permits............................................12
5.6 Contracts.......................................................12
5.7 No Encumbrances.................................................12
5.8 Current Commitments.............................................13
5.9 Taxes...........................................................13
5.10 Finder's Fees...................................................13
5.11 No Adverse Environmental Conditions.............................13
5.12 No Net Reduction of Interests...................................13
Article 6 REPRESENTATIONS AND WARRANTIES OF Buyer.........................14
6.1 Organization; Authority; Enforceability.........................14
6.2 No Conflicts....................................................14
6.3 Finder's Fees...................................................14
Article 7 SPECIFIC COVENANTS OF the Parties...............................14
7.1 Confidentiality.................................................14
7.2 Escrow of Work-Over Reimbursement; AFE Restrictions.............15
7.3 JV Resignation and JV Letter....................................16
7.4 Change of Operator..............................................17
7.5 Covenants of the Parties Regarding Xxxxxxx Litigation...........17
7.6 GGG Gathering Agreement.........................................18
7.7 ETC Transportation Agreement....................................18
7.8 Temco Marketing Agreement.......................................19
7.9 GTO Discussions.................................................19
Article 8 CLOSING.........................................................20
8.1 The Closing.....................................................20
8.2 Closing Deliveries..............................................20
Article 9 ACCOUNTING MATTERS..............................................21
9.1 Post-Closing Revenues and Expenses..............................21
9.2 Accounting Software.............................................21
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9.3 Bank Accounts...................................................22
9.4 Severance Taxes, Refunds, and Expense Reimbursements Due to EEI.22
9.5 Liability Exemption of Buyer....................................24
Article 10 CERTAIN POST-CLOSING COVENANTS..................................25
10.1 Further Assurances..............................................25
10.2 Delivery of Records by EEI......................................25
Article 11 INDEMNIFICATION.................................................25
11.1 Sellers' Indemnity..............................................25
11.2 Scope of Each Seller's Indemnity................................26
11.3 Survival of Sellers' Representations and Warranties.............26
11.4 Buyer's Indemnity...............................................26
11.5 Limitations of Warranties on Personal Properties................26
11.7 Convenants Running with the Land................................27
Article 12 TAXATION........................................................27
12.1 Responsible Party...............................................27
12.2 Transfer Taxes..................................................28
12.3 Tax-Deferred Exchange Option....................................28
12.4 Allocation of Values............................................28
Article 13 MISCELLANEOUS...................................................28
13.1 Joint and Severally Liability of EEI............................28
13.2 Notice..........................................................28
13.3 Governing Law...................................................28
13.4 Assignment......................................................29
13.5 Entire Agreement; Amendments....................................29
13.6 Construction....................................................29
13.7 Severability....................................................30
13.8 Binding Effect..................................................30
13.9 Counterparts....................................................30
13.10 Exercise of Rights; Waiver......................................30
13.11 Expenses and Fees...............................................30
13.12 Limitation on Damages...........................................30
13.13 Conspicuousness.................................................30
13.14 Disputes; Interpretation........................................30
13.15 Attorney's Fees.................................................31
13.16 Voluntary Agreement.............................................31
EXHIBITS:
Exhibit A Properties
Exhibit B Copy of the Lease
Exhibit C Xxxxxxx Resolution
Exhibit D Subscription, Issuance Resolution and Authorization Letter
Exhibit E GGG Gathering Agreement
Exhibit F ETC Transportation Agreement
Exhibit G - Part 1 Form of Conveyance - EPI's Portion of the Properties
Exhibit G - Part 2 Form of Conveyance - EEI's Portion of the Properties
(excluding JV Interests)
Exhibit G - Part 3 Form of Conveyance - JV Interests
Exhibit H Temco Marketing Agreement
Exhibit I Form of Stipulation, Cross-Conveyance and Correction
Assignment
Exhibit J Form of JV Letter and JV Ballot
Exhibit K Form of Ratification of JOA and Amendments and Transfer of
Operator's Lien
Exhibit L Form of Escrow Agreement
Exhibit M Form of GGG Consent
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PURCHASE AGREEMENT
This Purchase Agreement (this "AGREEMENT" or this "PA") is made and entered
into on January ____, 2011, by and between Earthwise Energy, Inc., a Nevada
corporation ("EEI") and Energy Partners International, a Texas Joint Venture
Partnership ("EPI") (collectively, EEI and EPI may be referred to herein as
"SELLERS") and Xxxxx Branch Exploration, L.L.C., a Texas limited liability
company (referred to herein as "BUYER"). Each party to this Agreement may be
referred to herein as a "PARTY" and collectively, as the "PARTIES".
WHEREAS, each Seller desires to convey to Buyer, and Buyer desires to
receive from each Seller, the "PROPERTIES" (as defined hereinafter) on the terms
and conditions set forth herein;
NOW, THEREFORE, based on and in consideration of the mutual covenants and
agreements contained herein, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
To the extent not defined elsewhere in this Agreement, the following
definitions apply:
"ADVERSE ENVIRONMENTAL CONDITION" means any contamination or condition
exceeding regulatory limits and not otherwise permitted or authorized by permit
or law, resulting from any discharge, release, production, storage, treatment,
seepage, escape, leakage, emission, emptying, leaching or any other activities
on, in or from the Lease or the Properties, of any wastes, pollutants,
contaminants, hazardous materials or other materials or substances subject to
regulation relating to the protection of the environment that require
remediation based upon the condition of the Properties at the Effective Time
pursuant to any current federal, state or local laws or statutes, including the
Environmental Laws.
"AFFILIATE" means any Person which (a) controls or is controlled by, either
directly or indirectly, a Party or (b) is directly or indirectly controlled by a
Person which directly or indirectly controls such Party, for which purpose
"control" means the right to exercise more than fifty percent (50%) of the
voting rights in the appointment of the directors or similar representation of a
Person.
"BUYER GROUP" means Buyer, its Affiliates, and its (and/or their
respective) employees, officers, directors, agents, contract operators,
consultants, members and representatives.
"CLAIM" means any and all claims, demands, suits, causes of action, losses,
damages, liabilities, fines, penalties, costs and expenses (including attorneys'
fees and costs of litigation, arbitration and settlements), whether known or
unknown.
"CLOSING" has the meaning given in Article 8 hereof.
"CLOSING DATE" means the time and date of the Closing, as set forth in this
Agreement.
"CONTRACTS" shall have the meaning given for such term, as set forth in the
form of the Conveyances attached hereto as Exhibit "G" - Part 1 and Exhibit "G"
- Part 2.
"DEBT INSTRUMENT" means any indenture, mortgage, loan, credit or
sale-leaseback or similar financial contract.
"EFFECTIVE TIME" means 11:59 p.m. CST on December 31, 2010.
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"ENVIRONMENTAL LAWS" means all applicable Laws and/or regulations of any
Governmental Authority concerning or relating to (a) prevention of pollution or
environmental damage, (b) removal or remediation of pollution or environmental
damage, or (c) protection of the environment or health or safety, including, but
not limited to, the Clean Air Act, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Federal Water Pollution Control Act,
the Safe Drinking Water Act, the Toxic Substance Control Act, the Hazardous and
Solid Waste Amendments Act of 1984, the Superfund Amendments and Reauthorization
Act of 1986, the Hazardous Materials Transportation Act, the Clean Water Act,
the National Environmental Policy Act, the Endangered Species Act, the Fish and
Wildlife Coordination Act, the National Historic Preservation Act and the Oil
Pollution Act of 1990, as such laws may be amended from time to time.
"GATHERING SYSTEM" means, generally, that certain system of pipes and
equipment owned by Xxxxxxx Gulftex Gathering, LLC ("GGG") that is commonly known
as the Copper Canyon Gathering System ("CCGS"), including (i) those certain four
gas lines that run from the gas meter at the tank battery on each of four oil
and gas xxxxx, the Xxxxxx #1-H, the XxXxxxxxx #1-H, the XxXxxxxxx #2-H, and the
Xxxxxxx #1-H xxxxx, to a common connection point ("CCP") located within the
drilling unit of the Xxxxxx #1-H well (generally referred to herein as the
"XXXXXX Lease"), (ii) certain common equipment, including, but not limited to,
an inline compressor and secondary water separator installed on the Xxxxxx Lease
after the CCP (the "COMPRESSOR AND COMMON EQUIPMENT"), and (iii) a common gas
transmission line running from the common compressor to a conduit junction at a
common delivery point ("CDP") connecting the CCGS to a separate, third party gas
line on the Xxxxxx Lease (the "ETC LINE") for continued transmission thereafter
pursuant to that certain contract dated July 1, 2007 (the "ETC TRANSPORTATION
AGREEMENT") by and between GTO and ETC Texas Pipeline, Ltd. ("ETC") under which
EEI has replaced GTO as the "shipper" therein; and specifically with regard to
the Well, "GATHERING SYSTEM" means the gas line that runs from the gas meter at
the tank battery on the Well through the Easement owned by GGG on the Lease and
which then continues off the Lease and on to its connection at the CCP on the
Xxxxxx Lease.
"GATHERING CONTRACT" means that certain gas gathering agreement, dated
September 1, 2007 and now owned by GGG, a copy of which is attached as Exhibit
"E", which designated GTO as the "shipper" of gas from the Well and Gulftex
Gathering, LP ("GTG") as the "Gatherer" therein, as differentiated from the ETC
Transportation Agreement, which designates GTO as the "Shipper" and ETC as the
"Gatherer" therein;
"GOVERNMENTAL AUTHORITY" means any federal, state, local, municipal, tribal
or other government, any governmental, regulatory or administrative agency,
commission, body or other authority exercising or entitled to exercise any
administrative, executive, judicial, legislative, police, regulatory or taxing
authority or power, or any court or government tribunal.
"GULFTEX OPERATING, INC." or "GTO" means that certain Texas corporation,
whose address is 0000 XXX Xxxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000 and which is
known by and to Buyer and each Seller as the Person that, based on information
and belief, (a) obtained the Lease from the Originators, (b) drilled the Well
and was the first operator of the Well, (c) constructed, or caused to be
constructed, the Gathering System, (d) originally formed the JV and was the
first manager of the JV, and (e) assigned the Properties to each Seller.
"HYDROCARBONS" means crude oil, natural gas, natural gas liquids,
casinghead gas, distillate, plant products, condensate, related hydrocarbons and
associated substances (including carbon dioxide) and all other minerals of every
kind and character which may be covered by, produced from, or included in
relation to the Properties.
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"JOA" means that certain Joint Operating Agreement, dated August 5, 2006,
originally executed by GTO, as operator therein, and Xxxxxx X. Xxxx and
Mid-Continent Geological, Inc., as the non-operators therein, including all
exhibits attached thereto and all subsequent modifications and/or amendments to
same (of which Buyer has received a copy or which has been manifested in the
real property records in Xxxxxx County, Texas), as made thereafter, all of which
are deemed to be incorporated into this Agreement in their entirety by
reference.
"JV" means that certain Texas Joint Venture partnership known as the
Xxxxxxx #1-H Joint Venture, which was originally formed and managed by GTO and
which is currently managed by EEI.
"JV AGREEMENT" means that certain written Xxxxxxx #1-H Joint Venture
Agreement, effective December 12, 2005, between and amongst each of the partners
acceding to ownership of a percentage of the JV partnership interests through
their admission into the JV, as a general partner therein, at any time
subsequent to the JV's original formation and organization by GTO.
"JV INTERESTS" means that certain partnership interest in the Xxxxxxx #1-H
Joint Venture owned by EEI, constituting a 2.383388% partnership interest in the
JV, which is equivalent to a 1.000% working interest (0.750% net revenue
interest) in the Well.
"LAWS" means any and all laws, statutes, codes, ordinances, permits,
licenses, authorizations, agreements, decrees, writs, orders, judgments,
principles of common law, rules or regulations (including, for the avoidance of
doubt, Environmental Laws) that are promulgated, issued or enacted by a
Governmental Authority having jurisdiction.
"LEASE" means that certain Oil and Gas Lease executed by Xxxxxxx and
Xxxxxxx Xxxxxxx (the "XXXXXXX"), as Lessors therein, and Mid-Continent
Geological, Inc., as Lessee therein, effective as of August 1, 2004, including
all extensions, amendments and ratifications thereof, a true and correct copy of
which is shown as Exhibit "B", which is attached hereto and made a part hereof,
and a memorandum of said original Lease being recorded as Instrument
#2004-124797, Official Records of Xxxxxx County, Texas, with a duplicate version
of said memorandum being subsequently recorded as Instrument #2004-146829,
Official Records of Xxxxxx County, Texas (both memoranda referring to the same
and singular Lease).
"NET REDUCTION OF INTERESTS" means (a) a reduction of either Seller's Net
Revenue Interest in one or more of the Properties described in Exhibit "A",
which is attached hereto and made a part hereof, at any time during the
productive life thereof resulting from an occurrence prior to the Effective Time
or a contractual obligation in existence prior to the Effective Time, below the
Net Revenue Interest for such Properties, as set forth in Exhibit "A", or (b) an
increase of either Seller's Working Interest in a one or more of the Properties
described in Exhibit "A" at any time during the productive life or abandonment
thereof resulting from an occurrence prior to the Effective Time or a
contractual obligation in existence prior to the Effective Time, to more than
the Working Interest for such Properties, as set forth in Exhibit "A".
"NET REVENUE INTEREST" means each Seller's interest in and to all
production of Hydrocarbons saved, produced and sold from any of the Properties,
as such interest(s) is/are described in Exhibit "A".
"NORM" means naturally occurring radioactive material.
"OPERATIVE DOCUMENTS" means those documents listed or referred to in
Section 8.2 or otherwise delivered at or after the Closing, in each case to the
extent executed and delivered by a Party.
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"ORIGINATORS" means Mid-Continent Geological, Inc., the Person that
originally acquired the Lease from the Xxxxxxx (in conjunction and/or concert
with Xxxxxx X. Xxxx who, while not a lessee under the Lease, is included in this
definition of the term "Originators", as one of the Originators of the Lease).
"PARTY" means Buyer or either Seller, as the case may be, and "PARTIES"
means all of them.
"PERMITTED ENCUMBRANCES" means:
(a) Royalties, overriding royalties, sliding scale royalties, production
payments, reversionary interests, convertible interests, net profits
interests and similar burdens if the cumulative effect of the burdens
does not operate as a Net Reduction of Interests;
(b) Division orders, natural gas marketing agreements (to the extent
disclosed and assumed hereunder), and the Contracts;
(c) Preferential rights to purchase one or more of the Properties and
similar contractual provisions and required third party consents to
assignment (of the Lease and operations of the Well) that either have
been waived or obtained prior to Closing or are customarily obtained
post-Closing;
(d) Materialman's, mechanic's, repairman's, employee's, contractor's,
operator's, tax, assessment and other similar liens or charges arising
in the ordinary course of business for pre-Closing obligations (i)
that are not delinquent or (ii) that if delinquent, are being
contested in good faith and for which each Seller hereby agrees to
indemnify Buyer subsequent to Closing;
(e) Easements, rights-of-way, servitudes, permits, surface leases, and
other rights in respect of surface operations that do not individually
or in the aggregate materially interfere with the use and operation of
any of such Properties affected thereby for the purpose for which such
Properties are currently used;
(f) Each of the Contracts (except for any terms or provisions thereof that
are not usual and customary for agreements of such nature covering
Hydrocarbon properties and operations similar to the Properties and
current operation thereof); provided, however, that the effect of any
such items does not and will not operate as a Net Reduction of
Interests;
(g) The Operator's liens (if any) as provided for under the JOA (which is
being assigned to Buyer hereunder), whether perfected by recordation
of a written notice thereof in the records of Xxxxxx County, Texas or
otherwise, either before or after Closing, or any such Operator's
lien(s) reflected or established in a replacement, amendment or new
joint operating agreement (if any) between and amongst the WI owners
of the Lease post-Closing; and
(h) Each of the liens, encumbrances, or other obligagtions of the Xxxxxxx.
"PERSON" means an individual, group, partnership, corporation, trust or
other entity, including Governmental Authorities.
"PROPERTIES" has the meaning given in Article 2 hereof and as more
specifically described in Exhibit "A" attached hereto.
"PROPERTY TAXES" means all federal, state or local taxes, assessments,
levies or other charges, which are imposed upon the Properties by any applicable
7
governing or educational body, including (but not limited to) ad valorem,
property, school, documentary or stamp, as well as any interest, penalties and
fines assessed or due in respect of any such taxes, whether disputed or not.
"RECORDS" means, to the extent in the possession of either Seller or which
either Seller has the right to obtain, copies of books and records, files,
records, data, correspondence, studies, surveys, reports, Hydrocarbon sales
contract files, gas processing files, geologic, proprietary geophysical and
seismic data (including raw data and any interpretative data or information
relating to such geologic, geophysical and seismic data) and other data (in each
case whether in written or electronic format) and relating to the operation of
the Properties, including all title records, prospect information, title
opinions, title insurance reports, abstracts, property ownership reports,
customer lists, supplier lists, sales materials, well logs, well tests, maps,
engineering data and reports, health, environmental and safety information and
records, third-party licenses, accounting and financial records, operational
records, reserve estimates and economic estimates; production and processing
records, division order, lease, land and right-of-way files, accounting files,
tax records (other than income tax), and contract files. Notwithstanding the
foregoing, "RECORDS" shall not include any of the foregoing to the extent that
such information cannot be disclosed without consent under the terms of existing
Contracts but only to the extent either Seller has requested such consent and
such consent has not been obtained.
"SELLER GROUP" means each Seller and its/their Affiliates, and its and
their respective employees, officers, directors, partners, contract operators,
agents, consultants and representatives.
"SEVERANCE TAXES" means all federal, state or local taxes, assessments,
levies or other charges, which are imposed upon production from the Properties,
including excise taxes on production, severance or gross production, as well as
any interest, penalties and fines assessed or due in respect of any such taxes,
whether disputed or not.
"TAXES" mean any and all taxes, levies or other like assessments, including
but not limited to income tax, franchise tax, profits tax, windfall profits tax,
surtax, gross receipts tax, capital gains tax, remittance tax, withholding tax,
sales tax, use tax, value added tax, goods and services tax, presumptive tax,
net worth tax, special contribution, production tax, pipeline transportation
tax, severance tax, excise tax, ad valorem tax, property tax (real, personal or
intangible), inventory tax, transfer tax, premium tax, environmental tax
(including taxes under Section 59A of the Code), customs duty, stamp tax or
duty, capital stock tax, franchise tax, margin tax, occupation tax, payroll tax,
employment tax, social security tax, unemployment tax, disability tax,
alternative or add-on minimum tax, estimated tax, and any similar tax or
assessment imposed by any Governmental Authority or other taxing authority,
together with any interest, fine or penalty, or addition thereto, whether
disputed or not.
"TRIO" means Trio Consulting and Management, LLC of Wichita Falls, Texas,
the operator-of-record heretofore engaged by contract with EEI to operate the
Well on the Lease.
"WELL" means the Xxxxxxx #1-H well (API #42-121-32726) located on the
Lease.
"WORKING INTEREST(S)" or "WI" means the percentage of costs and expenses
associated with the exploration, drilling, development, operation and
abandonment of the Well and any well on the Lease (and the associated obligation
to pay the same).
ARTICLE 2
PURCHASE OF PROPERTIES
2.1 CONVEYANCE OF PROPERTIES. Subject to the terms and conditions of this
Agreement, each Seller agrees to assign, convey, and deliver to Buyer, and Buyer
agrees to acquire and take receipt from each Seller at the Closing the
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"PROPERTIES," meaning each such Seller's respective right, title and interest in
and to the following:
2.1.1. The Lease and all of the lands covered by the Lease ("LANDS"),
together with corresponding surface and subsurface rights in and to
all the property and rights incident thereto, including all rights in
any pooled or unitized or communitized acreage by virtue of the Lands
being a part thereof ("UNITS"); all production from Units allocated to
any such Lands; and all reversionary interests, carried interests,
options, convertible interests and net profits interests attributable
thereto, together with all rights that arise by operation of Law or
otherwise in all properties and land unitized, communitized or pooled
with the Lands;
2.1.2. All easements, rights-of-way, servitudes, licenses, authorizations,
permits, and similar surface and other rights and interests applicable
to, or used or useful in connection with, any or all of the Lease, the
Lands and Units (the "EASEMENTS");
2.1.3. All producing, non-producing, shut-in and other well bores including
Hydrocarbon xxxxx, disposal xxxxx, injection xxxxx, observations
xxxxx, and co-op xxxxx located on the Lease, the Lands and Units,
including the Well and the pro-ration units associated therewith;
2.1.4. All pipelines, plants, gathering and processing systems, platforms,
buildings, compressors, machinery, tools, utility lines, all computer
and automation equipment (including rental or leasing agreements for
any of same) located on Lease, the Lands and Units, equipment,
fixtures, and improvements and other appurtenances, on or to, the
Lease, the Lands and Units, insofar as they are used or were obtained
in connection with the ownership, operation, maintenance or repair of
the Lease, the Lands and Units or relate to the production, treatment,
sale, or disposal of Hydrocarbons or water produced from the Lease,
the Lands and Units or attributable thereto, exclusive of the
Gathering System but inclusive of each Seller's connections and
connective equipment thereto (the "FACILITIES"); ----------
2.1.5. All Hydrocarbons (or the proceeds from the sale of Hydrocarbons) (a)
produced after the Effective Time or (b) located, as of the Effective
Time, in pipelines or in tanks above the pipeline sales connection, in
each case, attributable to the Lease, the Lands and Units;
2.1.6. The Contracts;
2.1.7. All unitization, communitization and pooling declarations, orders
and agreements to the extent they relate to the Lease, the Lands and
Units, or the production of Hydrocarbons therefrom;
2.1.8. All environmental and other governmental (whether federal, state,
local or tribal) certificates, consents, permits, licenses, orders,
authorizations, franchises and related instruments or rights relating
to the ownership, operation or use of the Lease, the Lands, Units and
the Facilities (the "PERMITS");
2.1.9. All royalties, sliding scale royalties, shut in royalties, rights to
royalties in kind or other interests, including Working Interests and
JV partnership interests, in production of Hydrocarbons from the
Lease, the Lands and Units;
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2.1.10. All Records of each Seller used or held for use primarily in
connection with the Lease, the Lands, Units and the Facilities and the
production of Hydrocarbons from the Lease, the Lands and Units.
2.2 LIMITATIONS. All of the rights, titles, and interests in and to the real and
personal properties described in Sections 2.1.1 through 2.1.10, subject to the
limitations and terms expressly set forth herein and in Exhibit "A", as more
particularly described in the forms of conveyance shown in Exhibit "G" - Part 1,
Exhibit "G" - Part 2, and Exhibit "G" - Part 3 attached hereto, are individually
and collectively referred to hereinafter, without distinction, as the
"PROPERTIES".
ARTICLE 3
CONSIDERATION
3.1 CONSIDERATION. Consideration for the Properties hereunder shall be in the
form of cash and third party stock, as more completely set forth herein. The
total cash consideration shall be delivered by Buyer for EPI's interests in the
Properties in the amount of Two Hundred Fifty Thousand and No/100 U.S. Dollars
($250,000.00) (the "CASH CONSIDERATION"). The stock consideration shall be
delivered by Buyer for EEI's interests in the Properties in the amount of FIVE
MILLION (5,000,000) shares (par value $0.001) of common stock of Topaz
Resources, Inc., a publicly-traded Florida corporation organized under the laws
of the State of Florida ("TOPAZ") (OTCBB: TOPZ), deliverable as set forth below
(the "STOCK CONSIDERATION").
3.2 CASH CONSIDERATION PAYMENT. The Parties agree that the Cash Consideration
will be payable in its entirety from Buyer to EPI at Closing.
3.3 DELIVERY AND FACILITATION OF STOCK CONSIDERATION. The Stock Consideration
shall be deliverable and payable to EEI at Closing as follows: Buyer warrants
and represents to EEI that Buyer has arranged for and contracted with Topaz, for
independent consideration, for the delivery to Buyer's credit (and Buyer's
subsequent delivery to EEI at Closing hereunder) of a written subscription
agreement (the "SUBSCRIPTION") for the Stock Consideration, which EEI (and
Topaz, in advance of the Closing) will execute in duplicate, original format at
Closing, accompanied by a written resolution of Topaz's board of directors (the
"ISSUANCE RESOLUTION") approving the issuance of the subject Topaz shares and,
in addition, an authorization letter (the "AUTHORIZATION LETTER"), executed by a
properly authorized Topaz officer, instructing Topaz's stock registration agent
(the "AGENT") to immediately issue and deliver the Stock Consideration shares in
EEI's name. True and correct copies of the forms of the Subscription, Issuance
Resolution, and Authorization Letter are attached hereto as Exhibit "D" and made
a part hereof. EEI's receipt of the certificate for the Stock Consideration
shares following the Closing shall be requisite for the title to EEI's ownership
or interest(s) in the Properties to vest with Buyer hereunder. The Parties agree
to communicate and cooperate to the extent possible to (a) facilitate the
certificate's delivery as soon as practicable after Closing, and (b) afford all
Parties notice of EEI's physical receipt of such certificate. EEI understands
that the subject Stock Consideration shares are not registered under the
Securities Exchange Act of 1933, as amended (the "ACT"), on the grounds that the
issuance of securities in relation to this Agreement is exempt from registration
under the Act. EEI further understands that the shares comprising the Stock
Consideration may not be sold, transferred or otherwise disposed of without
registration under the Act or an exemption therefrom, and that said shares may
not be sold pursuant to Rule 144 promulgated under the Act unless all of the
conditions of that Rule are met or established. When issued by the Agent in the
name of "Earthwise Energy, Inc." in accordance with this Agreement, the said
shares shall be validly issued, as fully paid and nonassessable and shall be
free and clear of all liens imposed by or through Buyer, the Agent, and/or
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Topaz; and neither the issuance nor the delivery of the said Stock Consideration
shares is subject to any preemptive or any similar right of any stockholder of
Topaz or of any other Person.
3.4 CONSENT TO ALLOCATION/DIVISION OF CONSIDERATION. EEI and EPI, by their
execution hereof, agree and consent to the division of the Cash Consideration
and the Stock Consideration between and amongst themselves, as set forth in this
Article 3. Such division and any net reductions of the Cash Purchase Price (a)
shall not otherwise serve to compromise or alter the effectiveness of this
Agreement, and (b) is the product of an election and division promulgated by
Sellers amongst themselves (and has not been determined by Buyer). The division
or allocation of the Cash Consideration and Stock Consideration herein between
and among EEI and EPI shall not otherwise serve in any manner to divide or
separate this Agreement into distinct transactions or agreements between Buyer
and each Seller.
ARTICLE 4
ENVIRONMENTAL MATTERS
4.1 PRESENCE OF WASTES, NORM, HAZARDOUS SUBSTANCES AND ASBESTOS. BUYER
ACKNOWLEDGES THAT THE PROPERTIES HAVE BEEN USED TO EXPLORE FOR, DEVELOP AND
PRODUCE HYDROCARBONS, AND THAT SPILLS OF WASTES, CRUDE OIL, PRODUCED WATER,
HAZARDOUS SUBSTANCES AND OTHER MATERIALS MAY HAVE OCCURRED THEREON.
ADDITIONALLY, THE PROPERTIES, INCLUDING PRODUCTION EQUIPMENT, MAY CONTAIN
ASBESTOS, HAZARDOUS SUBSTANCES OR NORM. NORM MAY AFFIX OR ATTACH ITSELF TO THE
INSIDE OF XXXXX, MATERIALS AND EQUIPMENT AS SCALE OR IN OTHER FORMS, AND
NORM-CONTAINING MATERIAL MAY HAVE BEEN BURIED OR OTHERWISE DISPOSED OF ON THE
PROPERTIES. A HEALTH HAZARD MAY EXIST IN CONNECTION WITH THE PROPERTIES BY
REASON THEREOF. SPECIAL PROCEDURES MAY BE REQUIRED FOR REMEDIATION, REMOVING,
TRANSPORTING AND DISPOSING OF ASBESTOS, NORM, HAZARDOUS SUBSTANCES AND OTHER
MATERIALS FROM THE PROPERTY. Notwithstanding the foregoing acknowledgment(s),
Buyer's purchase of the Properties hereunder does not otherwise serve to waive
or diminish (a) Sellers' representations and warranties herein concerning
Adverse Environmental Conditions, or (b) Sellers' indemnification from claims,
demands, costs and damages resulting from operations and production activities
undertaken prior to the Effective Time, in whole or in part, subject to Section
11.2 hereof.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller represents and warrants to Buyer that each statement made in
this Article 5 is true and correct as of the date of this Agreement and will be
true and correct as of the Closing Date.
5.1 ORGANIZATION; AUTHORITY; ENFORCEABILITY. EEI is a corporation, duly
organized, validly existing, and in good standing under the laws of the State of
Nevada. EPI is a Texas Joint Venture partnership managed by EEI, duly organized,
validly existing, and in good standing under the laws of the State of Texas. EEI
and EPI are duly qualified to do business in each other jurisdiction in which
the conduct of its respective business or ownership or leasing of its respective
properties makes such qualification or registration necessary. Each Seller has
all requisite power and authority to execute and deliver this Agreement and the
Operative Documents to which it is a party, to consummate the transactions
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contemplated by this Agreement and the Operative Documents to which it is a
party and to perform all of its obligations under this Agreement and the
Operative Documents to which it is a party. This Agreement and each Operative
Document have been duly executed and delivered on behalf of each Seller,
respectively, and constitute a legal, valid and binding obligation of such
Seller, enforceable against it in accordance with its and their respective
terms, except as limited by bankruptcy or other similar Laws applicable
generally to creditors' rights and as limited by general equitable principles.
5.2 NO CONFLICT. Each Seller's execution and delivery of this Agreement and the
Operative Documents to which it is a party and the consummation of the
transactions contemplated by this Agreement or such Operative Documents by it
will not (a) conflict with or result in a violation of or a default under (i)
any provision of any Laws applicable to such Seller, (except for consents and
approvals of Governmental Authorities customarily obtained subsequent to
transfer); (ii) any Debt Instrument to which such Seller is a party or by which
such Seller is bound; (iii) any order, judgment or decree of any Governmental
Authority; or (b) create any lien or encumbrance upon one or more of the
Properties other than a Permitted Encumbrance.
5.3 CONSENTS AND PREFERENTIAL RIGHTS. Other than those consents expressly
contemplated in this Agreement as being obtained at or after Closing, there are
no preferential rights to purchase, options to purchase, areas of mutual
interest agreements, or consents to assign affecting the Properties, except for
consents and approvals of Governmental Authorities customarily obtained
subsequent to transfer. Any consent(s) or third party approval(s) required under
one or more of the Contracts for a transfer or assignment from Sellers to Buyer
shall be secured in writing and provided to Buyer as a condition(s) of Closing
hereunder.
5.4 LITIGATION AND CLAIMS. Except as otherwise disclosed herein, there is no
suit, action, demand, proceeding, lawsuit or other litigation pending or, to
Sellers' knowledge, threatened against either Seller with respect to the
Properties. There are no third party claims, disputes pending or, to Sellers'
knowledge, threatened against either Seller that would prevent the consummation
of the transactions contemplated by this Agreement or the performance of its
obligations hereunder.
5.5 GOVERNMENTAL PERMITS. Each Seller has obtained and is in compliance with all
Permits of Governmental Authorities required to own or use the Properties; all
such Permits are in full force and effect; and no violations exist under such
Permits. No proceeding is pending or, to Sellers' knowledge, threatened relating
to the challenging, revocation or limitation of any such Permits.
5.6 CONTRACTS. Except as will be resolved by the Operative Documents, neither
Seller is, nor to Sellers' knowledge is any other party, in breach or default
under, or learned of the occurrence of any event that, with notice, would
constitute a breach or default under, any of the Contracts, the Lease, or the
Easements. Each of the Contracts, Lease, and Easements are in full force and
effect (except, in the case of Easements, where any failure to be in full force
and effect would not materially interfere with or prevent operations as
currently conducted on whichever Properties are related thereto) and have not
been modified or amended in any material respect. Prior to or in conjunction
with the execution of this Agreement, EEI furnished to Buyer true and complete
copies of each Contract, the Lease, and the Easements and all amendments
thereto, and has otherwise made full disclosure to Buyer of all agreements,
obligations and documents known to EEI that affect, burden or relate to the
Properties being conveyed to Buyer hereunder.
5.7 NO ENCUMBRANCES. Other than the Permitted Encumbrances, there are (i) no
liens, mortgages, security interests, or deeds of trust, or any other
encumbrances burdening the Properties arising by, through or under either Seller
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or Trio since September 1, 2008 or to either Seller's knowledge, prior to
September 1, 2008, and, (ii) to either Seller's knowledge and/or except as
related to amounts owed to EEI by the JV, none which (a) exist but remain
unperfected of record, regardless of source, and (b) constitute liens,
encumbrances or related burdens arising from any other party's actions or
inactions which impact or burden the Properties.
5.8 CURRENT COMMITMENTS. They Parties acknowledge and agree that, as of the
Closing Date, there are no authorizations for expenditures for any drilling
operations or capital expenditures applicable to the Properties that have been
proposed by any Person and that have not been completed prior to the Effective
Time.
5.9 TAXES. All Property Taxes and Severance Taxes that are due have been timely
paid or are being contested in good faith. Each Seller has timely filed or
caused to be timely filed all Tax returns, reports, statements and similar
filings required by applicable Law with respect to the Properties due on or
prior to the Closing Date. There are no extensions or waivers of any statute of
limitations with respect to such Taxes or Tax liens burdening the Properties
except for liens for current Taxes not yet due and payable. Other than the JV
Interests or as otherwise disclosed herein, none of the Properties are subject
to tax partnership reporting requirements under applicable provisions of the
Internal Revenue Code of 1986, as amended (the "CODE"). In the event any of the
Properties is the subject of tax partnership reporting requirements, each Seller
will use its commercially reasonable efforts to effect a ss.754 election with
respect any such tax partnerships. Sellers further represent and warrant that
all tax returns and/or filings attributable to or due from the JV for each tax
year prior to the Effective Time have been heretofore timely filed and an IRS
Form K-1 for each such tax year has been made and distributed to each JV
partner. Further, in the event Buyer is ultimately named as Managing Venturer of
the JV and, as such, Buyer becomes responsible for the preparation of a 2010 (or
other) tax return for the JV, Sellers have delivered (or will deliver in a
timely manner) all necessary and included information and data reasonably
required to fully and lawfully complete such return(s) (the "JV Returns").
Notwithstanding anything contained in this Agreement to the contrary, EEI agrees
to use commercially reasonable efforts to provide Buyer with support and
assistance, at the cost of the JV, to appropriately prepare any needed JV
Returns covering any or all of the periods prior to the Effective Time (upon the
reasonable request of Buyer).
5.10 FINDER'S FEES. No Seller has incurred any liability, contingent or
otherwise, for any brokers' or finders' fees with respect to any transaction or
other matter contemplated in this Agreement for which Buyer will have any
responsibility whatsoever. Neither Sellers nor Sellers' principals have entered
into any known external, additional or "side" agreement(s) with a principal or
representative of Buyer involving consideration or the sharing of considerations
arising out of transactions contemplated by this Agreement.
5.11 NO ADVERSE ENVIRONMENTAL CONDITIONS. As of the Effective Time, there are no
pending written claims, actions or proceedings by any third party or
Governmental Authority caused by or arising out of any Adverse Environmental
Condition pending with regard to the ownership or operation of the Properties
and there are no Adverse Environmental Conditions presently existing or
otherwise under remediation with respect to the Properties.
5.12 NO NET REDUCTION OF INTERESTS. As of the Effective Time, to Sellers'
reasonable knowledge, information and belief, there are no pending or imminent
Net Reduction of Interests with respect to the Properties.
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ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to each Seller that each of the statements
made in this Article 6 is true and correct as of the date of this Agreement and
will be true and correct as of the Closing Date.
6.1 ORGANIZATION; AUTHORITY; ENFORCEABILITY. Buyer is a limited liability
company, duly organized, validly existing and in good standing under the laws of
Texas. Buyer is in good standing and duly qualified to do business in each other
jurisdiction in which the conduct of its business or ownership or leasing of its
properties makes such qualification or registration necessary. Buyer has all
requisite power and authority to execute and deliver this Agreement and the
Operative Documents to which it is a party, to consummate the transactions
contemplated by this Agreement and the Operative Documents to which it is a
party and to perform all of its obligations under this Agreement and the
Operative Documents to which it is a party. This Agreement has been duly
executed and delivered on behalf of Buyer and constitutes (and the Operative
Documents to which it is a party, when executed and delivered at Closing, will
constitute) a legal, valid and binding obligation of Buyer, enforceable against
it in accordance with its and their respective terms, except as limited by
bankruptcy or other similar Laws applicable generally to creditors' rights and
as limited by general equitable principles.
6.2 NO CONFLICTS. Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, nor the compliance with
the terms hereof will result in any default under any material agreement or
instrument to which Buyer is a party (including its bylaws and governing
documents), or violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Buyer or any of its properties, except for consents and
approvals of Governmental Authorities customarily obtained subsequent to
transfer.
6.3 FINDER'S FEES. Buyer has not incurred any liability, contingent or
otherwise, for brokers' or finders' fees with respect to any transaction or
other matter contemplated in this Agreement for which either Seller will have
any responsibility whatsoever. Neither Buyer nor Buyer's principals have entered
into any known external, additional or "side" agreement(s) with a principal or
representative of Sellers (or either of them) involving consideration or the
sharing of considerations arising out of transactions contemplated by this
Agreement.
ARTICLE 7
SPECIFIC COVENANTS OF THE PARTIES
7.1 CONFIDENTIALITY. All matters in this Agreement are confidential. After the
Closing, each Party will maintain as confidential, for the benefit of each of
the other Parties, the existence of this Agreement, the matters contemplated
hereunder, and all matters related to the Properties. No Party may disclose
information regarding this Agreement or any document referenced herein to anyone
without the written consent of all Parties, subject to the following exceptions:
7.1.1. Information that becomes available to the public, other than through
the act or omission of any Party hereto or its/their respective
Affiliates or any of its/their representatives, shall not be subject
to this Section 7.1;
7.1.2. Each Party shall be entitled to disclose any information subject to
this Section 7.1 that is required to be disclosed by such Party or, in
the case of Buyer, required of any member of the Buyer Group (i) under
applicable Law, inclusive of legal requirements of publicly-traded
companies, (ii) pursuant to stock exchange regulations, or (iii) in
response to inquiry by a regulatory or governmental agency, so long as
such Party gives prompt written notice to the other Parties and only
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discloses information that, in the opinion of the disclosing Party's
legal counsel, is required to be disclosed and the disclosing Party
uses its commercially reasonable efforts to ensure further
confidential treatment of the information so disclosed; and
7.1.3. Each Party shall be entitled to disclose, without notice to any
other Party, any information subject to this Section 7.1 that is
required to be disclosed (i) to a Party's accountants or legal
advisors, (ii) by EEI in its disclosures of information to its
shareholders, principals, or employees or by EEI in its disclosures of
information to any partner in the JV or any interest owner in the
Well, (iii) by Buyer or its Affiliates in its/their disclosures of
information to its members, shareholders, principals, or employees, or
by Buyer in its disclosures of information to any partner in the JV or
any interest owner in the Well, or (iv) by either Party, after the
Closing, in order to enforce this Agreement.
7.1.4Notwithstanding anything to the contrary herein, in the absence of a
legal requirement (and as disclosed to Buyer by Sellers in advance
thereof) or a disclosure exception, as specified in this Section 7.1,
the Parties agree to maintain express confidentiality as to
considerations, in both amount and format, which Sellers are receiving
from Buyer hereunder for each and every component of the Properties.
7.2 ESCROW OF WORK-OVER REIMBURSEMENT; AFE RESTRICTIONS. The Parties acknowledge
and agree that, pursuant to that certain written agreement by and between EEI et
al and GTO et al, dated February 11, 2010 (the "2010 SETTLEMENT"), GTO is
obligated to reimburse the first $70,000 in costs to do the work-over on the
Well (the "REIMBURSEMENT"). As part and parcel to this Agreement, EEI and Buyer
are executing that certain written Escrow and Work-Over Cooperation/Disclosure
Agreement ("ESCROW AGREEMENT") and agree that the provisions therein are
integrated into this Agreement, a copy of which Escrow Agreement is attached as
Exhibit "L", in order to (among other things) partially guarantee GTO's timely
payment of the Reimbursement, wherein (among other things) EEI is escrowing
$70,000.00 with S. Xxxx Xxxxxxxx, Esquire (the "ESCROW"). In conjunction with
EEI's escrow commitment thereunder, Buyer further agrees that it shall not issue
an AFE cash call notice to any WI owners in the Well prior to the expiration of
thirty (30) calendar days after the date of the "First Reimbursement Call" (as
such term is defined in the Escrow Agreement) (the "AFE ISSUANCE DATE"). If GTO
has paid the Reimbursement (or portions thereof) as of the AFE Issuance Date,
Buyer agrees it will credit such amounts proportionately to the accounts of all
WI owners prior to the delivery of the final AFE to the subject WI owners.
However, if any portion of EEI's funds in the Escrow has been released to Buyer
as of the AFE Issuance Date, Buyer agrees it will not credit any of such
released amounts to any WI owner and will not deduct such released amounts from
the AFE prior to the delivery of the final AFE to the WI owners. Notwithstanding
the foregoing, the Parties agree that it is their intention that MBE receive the
full benefit of the Reimbursement, whether obtained as (a) funds paid by GTO,
(b) release(s) of all or portions of EEI's funds from the Escrow, or (c) some
combination thereof. However, the Parties do not intend for the Escrow to
provide the potential for a windfall to MBE above the $70,000 total of the
Reimbursement. Therefore, if MBE receives any payments at any time from GTO for
which any of EEI's funds from the Escrow have already been released to, and
received by, MBE prior to such payments or if MBE receives any AFE payments from
any WI owners related to amounts for AFE charges for which any of EEI's funds
from the Escrow have already been released to, and received by, MBE prior to
such payments, then if the total of such payments, when taken together with the
15
amount of EEI's funds released from the Escrow and received by MBE, is an
aggregate amount that is greater than $70,000, MBE agrees to promptly refund to
EEI all amounts in excess of the $70,000 Reimbursement.
7.3 JV RESIGNATION AND JV LETTER. EEI now serves as "Managing Venturer" of the
JV and agrees to resign as Managing Venturer of the JV (the "RESIGNATION")
effective upon the later of the AFE Issuance Date or the date of the proper
election and installation of a new Managing Venturer for the JV (the "EFFECTIVE
RESIGNATION DATE"), a JV vote pertaining to which shall occur as soon as
possible after the Closing (the "JV VOTE"). Further, EEI agrees to undertake
such actions as are required by the JV Agreement to facilitate such election and
installation of a new Managing Venturer, including, but not limited to, the
transmittal of a letter to all JV partners (the "JV LETTER"), accompanied by a
written ballot (the "JV BALLOT") within ten (10) calendar days after the Closing
(if not sooner), which supports and endorses Buyer's nomination as substitute
Managing Venturer, the form of such JV Letter and JV Ballot being hereby
approved by Buyer and attached hereto as Exhibit "J" and incorporated herein by
this reference. The JV Letter and JV Ballot (and all other post-Closing
correspondence and enclosures, if any) to be sent by EEI to any of the partners
in the JV relating to business matters of the JV (along with any proposed
additional enclosures, if any) shall be expressly subject to Buyer's prior
review and approval, which shall not be unreasonably withheld. The JV Letter and
JV Ballot will be processed/mailed by EEI and the costs associated with
transmittal thereof shall be the sole responsibility of EEI. If EEI's
Resignation is approved by the JV and Buyer is installed as the substitute
Managing Venturer, then after the Resignation, EEI (and its directors,
principals and Affiliates) will not approach or correspond with any of the JV
partners to compete with any offer or proposal that Buyer might make to the JV
partners pertaining to JV partners' interests in the JV ("CORRESPONDENCE
RESTRICTION"). Notwithstanding the foregoing, EEI and Buyer acknowledge and
agree that (a) nothing herein shall be interpreted as any manner of assurance or
guarantee by EEI as to the outcome of the JV Vote or the JV's acceptance of
EEI's Resignation or the installation of Buyer as the substitute Managing
Venturer after the Resignation, (b) the assignment of the JV Interests from EEI
to Buyer is subject to the approval of the JV, and (c) the Correspondence
Restriction shall not limit or restrict any communication between EEI and any JV
partner that is related to matters other than such Person's JV partnership
interests in the Xxxxxxx XX.
7.3.1Consistent with Section 9.4 hereof, EEI is accepting and applying the
Refund and monies derived from the settlement statements accompanying
the JV Letter and JV Ballot to fully and finally settle the EEI Claims
between and amongst itself and the JV partners. It is the intent of
the Parties, as part and parcel to the distribution of the JV Letter
and JV Ballot, that EEI be afforded a period of time, at least through
the Effective Resignation Date, to secure payment from the JV partners
of their respective share of the EEI Claims (net of applicable credits
for any JV monies, proceeds or assets received by EEI or otherwise
attributable to JV activities prior to the Effective Time). EEI
acknowledges and agrees that (a) post-Closing amounts invoiced to each
such JV partner for net EEI Claims will be limited to the settlement
statements accompanying the JV Letter and JV Ballot, (b) the validity
of any JV partner's participation in the JV Vote shall be contingent
on such partner's good standing in the JV; provided, however, that if
permitted under Texas law, EEI may, in its sole discretion, elect to
waive the requirement that a JV partner's payment of all settlement
statements and/or pro rata share of the EEI Claims be obligatory to
such partner's good standing in the JV, and (c) the intent of this
paragraph is to afford EEI the opportunity for collection of funds
that EEI has expended for and on behalf of the JV, in conjunction with
a proper JV Vote for the approval of EEI's conveyance of the JV
Interests and EEI's resignation as Managing Venturer of the JV.
16
7.3.2If a majority approval of EEI's conveyance of the JV Interests and
EEI's resignation as Managing Venturer of the JV is not obtained as a
result of the JV Vote, EEI and Buyer shall nonetheless continue their
respective cooperation in facilitating other actions to seek an
ultimate approval by the JV to support EEI's Resignation and its sale
of the JV Interests to Buyer. To this end, the executed Exhibit "G" -
Part 3 assignment shall be deemed suspended, pending efforts by Buyer
to independently acquire sufficient JV ownership from the present JV
partners (or in combination with proxies from sufficient JV partners)
to provide the requisite approval described hereinabove, whether in
the form of a second vote following the JV Vote or in a
modification/update thereof. EEI agrees to afford Buyer a reasonable
period following the JV Vote (the "REGROUPING PERIOD"), not to exceed
ninety (90) calendar days in the absence of a written extension of
such period from EEI, to effectuate such a majority vote by the JV.
During such Regrouping Period, EEI's communication with the JV
partners shall not be encumbered (or be subject to Buyer's approval)
as to any JV business, including, but not limited to, the work-over,
other ongoing costs of the JV's operations, and the EEI Claims.
Notwithstanding the foregoing, EEI agrees to disclose to Buyer all of
its communications with JV partners during such Regrouping Period. To
the greatest extent allowed under Texas law and the JV Agreement, EEI
agrees to disclose to Buyer the results of the Vote and the identity
to JV partners who specifically vote in the negative.
7.3.3EEI agrees to continue its endorsement and support of Buyer's efforts
to secure a majority approval in any JV voting process occurring
during the Regrouping Period. In the event the JV Vote and any similar
voting process during the Regrouping Period ultimately fail to support
the transfer of the JV Interests and/or the installation of Buyer as
the Managing Venturer of the JV, upon the expiration of the Regrouping
Period, EEI shall continue to serve in its position as Managing
Venturer of the JV and EEI's obligation to convey the JV Interests (as
contemplated by the form of assignment set forth in Exhibit "G" - Part
3 attached hereto) shall be deemed as having been waived in full by
Buyer, with no adjustment or reduction in the amount of the Stock
Consideration herein agreed.
7.4 CHANGE OF OPERATOR. EEI agrees (1) to cause Trio to resign as
operator-of-record of the Well under appropriate regulatory forms (the "CHANGE
OF OPERATOR") required by the Railroad Commission of Texas ("RRC") as of January
1, 2011, and (2) that Buyer or its designated operator shall become operator of
the Well upon RRC approval of regulatory forms required for such Change of
Operator. EEI shall coordinate with Trio in securing Trio's execution and
delivery of such executed regulatory forms (including, but not limited to, RRC
Form P-4), to be effective as of January 1, 2011, which shall facilitate the
Change of Operator as Buyer directs, as soon as such actions are practicable
after the Closing. Sellers agree to facilitate and deliver documents
satisfactory to Buyer at Closing (and as a condition thereof), in the recordable
form attached hereto as Exhibit "K", which transfer the operator's lien(s)
manifested in the JOA, unto Buyer's designated operator.
7.5 COVENANTS OF THE PARTIES REGARDING XXXXXXX LITIGATION. Buyer acknowledges,
represents and agrees that, as an explicit condition to the Closing, Buyer has
secured and has in escrow in its possession that certain settlement agreement
regarding the Litigation between EEI and the Xxxxxxx (the "XXXXXXX RESOLUTION"),
the form of which is attached hereto as Exhibit "C", pertaining to the lawsuit
referenced therein (the "LITIGATION"), which was executed by the Xxxxxxx and
delivered by the Xxxxxxx into escrow with Buyer in order for Buyer to deliver
same to EEI's legal counsel at the Closing. EEI acknowledges, represents, and
agrees that, as an explicit condition to the Closing, EEI has executed the
17
Xxxxxxx Resolution, which was executed by EEI and delivered by EEI into escrow
with EEI's legal counsel in order for EEI to deliver same to Buyer or the
Xxxxxxx' legal counsel at the Closing. By the delivery at Closing of the Xxxxxxx
Resolution, respectively executed by EEI and the Xxxxxxx, Buyer is assured that,
as of the Closing, all matters in the Litigation will have been resolved and
that all claims for amounts owed amongst the litigants will have been resolved.
EEI, acting by and through its counsel and in coordination with the Xxxxxxx'
counsel, agrees that it shall take reasonable steps to facilitate the filing
and/or presentment of the dismissal, as contemplated in the Xxxxxxx Resolution.
in and to the appropriate court and tender to Buyer a file-stamped copy/set of
all executed instruments and orders related to the dismissal. EEI acknowledges
that Buyer is not, has not, and will not be otherwise engaged or responsible for
the filing of the dismissal or for any other action related to the Litigation,
unless otherwise specifically set forth herein.
7.6 GGG GATHERING AGREEMENT. Buyer acknowledges that (1) on or about September
1, 2007, GTO and its affiliate, Gulftex Gathering, LP ("GTG") entered into that
certain gas gathering contract (the "GGG GATHERING AGREEMENT") governing matters
concerning the gathering and transporting of natural gas produced from the Well
over the CCGS, a true and correct copy of which is attached hereto as Exhibit
"E" and made a part hereof; and (2) on February 11, 2010, EEI, GTG, and GGG
entered into that certain "GATHERING RESOLUTION" pursuant to which a set fee of
$0.30 per mcf was established as (a) the amount that is due to be paid to GGG
for all gas produced from the Well and (b) a capped amount that cannot be
increased at any time. Buyer acknowledges and agrees that the Gathering
Resolution also requires GGG to assume all operational and expense
responsibilities regarding the Common Equipment on the CCGS, which are
proportionately assessable to all xxxxx that utilize the CCGS, including the
Well. Buyer agrees that it is bound by the GGG Gathering Agreement and the terms
of the agreements and authorizations related to the GGG Gathering Agreement made
by EEI, GTG, and GGG on February 11, 2010, the pertinent terms and provisions of
which are incorporated herein by reference for all purposes. EEI has represented
to Buyer that it has obtained GGG's consent to the conveyances contemplated
herein, as set forth in the Form of GGG's Consent, which is attached hereto as
Exhibit "M" and made a part hereof. Sellers acknowledge that, as a result of the
Conveyances granted in this PA, in addition to certain obligations under the GGG
Gathering Agreement that Buyer has agreed to assume pursuant to this Section
7.6, certain transportation entitlements under the GGG Gathering Agreement will
also inure to the benefit of Buyer, but only as applicable in relation to the
Properties, and as such, EEI and Buyer agree that they will reasonably cooperate
with each other in the event that any amendment(s) are proposed to the GGG
Gathering Agreement after the Effective Time.
7.7 ETC TRANSPORTATION AGREEMENT. Buyer acknowledges that (1) GTO executed and
delivered to EEI an assignment of all of GTO's rights under that certain Natural
Gas Gathering Agreement between ETC Texas Pipeline, Ltd. and GTO, dated July 1,
2007 (the "ETC TRANSPORTATION AGREEMENT"), a true and correct copy of which is
attached hereto as Exhibit "F" and made a part hereof; (2) the said assignment
was specifically limited only as to all gas produced from the XxXxxxxxx #1-H
well (API# 42-121-32796), the Xxxxxx #1-H well (API# 42-121-32759), and the
Xxxxxxx #1-H well (API# 42-121-32726) (collectively, the "OPERATED XXXXX"); (3)
as to the Operated Xxxxx only, EEI accepted the said assignment and agreed to
assume GTO's obligations under the ETC Transportation Agreement; and (4) the ETC
Transportation Agreement governs the transportation of gas from the Well after
such gas has passed through the CDP on the Xxxxxx Lease. Buyer agrees that, as
of the Closing Date, Buyer (or its designated operator) shall be bound by the
terms and conditions of the ETC Transportation Agreement, and shall be
18
responsible for all of the costs assessable to, or against production from, the
Well pursuant to the ETC Transportation Agreement. Sellers acknowledge that, as
a result of the Conveyances granted in this PA, in addition to certain
obligations under the ETC Transportation Agreement that Buyer has agreed to
assume pursuant to this Section 7.7, certain transportation entitlements under
the ETC Transportation Agreement will also inure to the benefit of Buyer, but
only as applicable in relation to the Properties, and as such, EEI and Buyer
agree that they will reasonably cooperate with each other in the event that any
amendment(s) are proposed to the ETC Transportation Agreement after the
Effective Time
7.8 TEMCO MARKETING AGREEMENT. Buyer acknowledges that (1) under that certain
Gas Purchase Contract (the "TEMCO MARKETING AGREEMENT"), a true and correct copy
of which is attached hereto as Exhibit "H" and which was originally executed by
and between GTO and Texas Energy Management Corporation ("TEMCO"), dated June 1,
2005, GTO dedicated certain lands, leaseholds and xxxxx (the "GTO DEDICATED
PROPERTIES") located in various counties in the State of Texas, including the
Lease and the Well, to Temco for the purpose of delegating to Temco all rights
and obligations to market and arrange transportation of and for the natural gas
produced from such properties; (2) effective as of January 1, 2008, EEI and
Temco ratified the Temco Marketing Agreement such that EEI replaced and
superseded GTO under the Temco Marketing Agreement for certain lands, leaseholds
and xxxxx, including the Lease, the Well, and the Properties; and (3) on
February 11, 2010, EEI, GTG, and GGG authorized Temco, for each monthly
production period after November 30, 2009, to (a) deduct the set fee of $0.30
per mcf for all gas produced from the Well (the "SET FEE") from any monthly
distribution of gas sales revenues that Temco may owe for such production before
making such distribution, (b) deduct an amount equal to a proportion of the
actual amount invoiced for the monthly rental fee due for the Common Equipment
on the CCGS, as such proportion is calculated as an amount equal to the sum of
the monthly production volume measured at the well meters on all three Operated
Xxxxx divided by the sum of the monthly production volume measured at the well
meters on ALL xxxxx on the CCGS (which includes xxxxx other than the Operated
Xxxxx) (the "PROPORTIONAL COMPRESSOR RENTAL FEE"), from any monthly distribution
of gas sales revenues that Temco may owe for production from the Well before
making such distribution, and (c) pay the total amount of the Set Fee and the
Proportional Compressor Rental Fee directly to GGG (the "GATHERING PAYMENTS").
Buyer also acknowledges that, on February 11, 2010, EEI, GTG, and GGG further
agreed that the Set Fee may never be increased by GTG, GGG, or any successor to
either of them and that EEI (and any successor to EEI) would not be liable for a
failure by Temco to pay the Gathering Payments to GGG. Buyer agrees that (1) it
is bound by the Temco Marketing Agreement, (2) it will promptly execute a
ratification thereof, if requested by EEI or Temco, and (3) it is bound by the
terms of the agreements and authorizations made by EEI and GGG on February 11,
2010, including but not limited to, Temco's authority to deduct the Gathering
Payments and pay same directly to GGG, and that the pertinent terms and
provisions of such agreements and authorizations are incorporated herein by
reference for all purposes. Notwithstanding anything to the contrary herein,
Buyer is expressly not agreeing to dedicate any natural gas or Hydrocarbons
beyond those produced from the subject Well and Lease, to any sales, commission,
fee or other obligation reflected in the Temco Marketing Agreement, regardless
of location.
7.9 GTO DISCUSSIONS. EEI agrees that it shall provide reasonable assistance
(without the expenditure of money by EEI) to Buyer in support of discussions
Buyer may elect to commence with GTO after the Closing with respect to any
matters pertaining to the Well, the Properties, the Reimbursement, and/or any
other matters generally related to the subject matter of this Agreement.
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ARTICLE 8
CLOSING
8.1 THE CLOSING. The closing of the transactions contemplated by this Agreement
(the "CLOSING") will be held on Thursday, January 13, 2011 at 1:00 P.M. CDST
(the "CLOSING DATE"), or on any earlier date to which the Parties mutually
agree, in the offices of K&L Gates, LLP at 0000 Xxxx Xxxxxx, Xxxxx 0000 in
Dallas, Texas.
8.2 CLOSING DELIVERIES. At Closing the following events will occur, each event
under the control of one Party being a condition precedent to the events under
the control of the other Parties, and the Parties will treat each event as if it
occurred simultaneously with the other events:
8.2.1. Each Seller will execute and deliver to Buyer, and Buyer will
execute and deliver, one or more instruments of assignment, in
substantially the form of the instruments shown in Exhibit "G" - Part
1, Exhibit "G" - Part 2, and Exhibit "G" - Part 3 (each being a
"CONVEYANCE" and collectively, the "CONVEYANCES"), which are attached
hereto and made a part hereof; however, the Parties acknowledge that
EEI's delivery of the Conveyance in the form of Exhibit "G" - Part 3
shall be subject to such Conveyance being approved by the JV pursuant
to the JV Vote, and Buyer will hold or return such Conveyance
accordingly based on the outcome of the JV Vote (and the results of
the Parties' efforts to secure a majority JV Vote during the
Regrouping Period);
8.2.2. Buyer will deliver via wire transfer to an EPI bank account, as
specified by EEI, in immediately available funds, the Cash
Consideration, net of any agreed credits or deductions provided
herein;
8.2.3. Buyer will deliver to EEI the completed, executed duplicate original
of the Subscription and copies of the executed Issuance Resolution and
Authorization Letter. Buyer will direct Topaz to fax or scan/email
such instruments to Topaz's transfer Agent, as reasonably directed by
such transfer Agent for similar stock transactions, and otherwise
appropriately deliver any executed originals of the Issuance
Resolution and Authorization Letter to such Agent (if required
thereby) no later than the first business day following the Closing;
8.2.4. Each Party will execute, acknowledge and deliver mutually acceptable
letters-in-lieu of transfer orders or division orders directing all
purchasers of production from the Properties to make payment of
proceeds attributable to such production occurring on or after the
Effective Time to Buyer;
8.2.5. Each Seller will execute (or as appropriate, will cause Trio to
execute) and deliver to Buyer or Buyer's designated operator, any
applicable governmental transfer form required by the Governmental
Authority with jurisdiction over the Properties, including, but not
limited to, an RRC Form P-4 from Trio and the Transfer of Operator's
Lien (see Exhibit "K") provided for herein;
8.2.6. Each Seller will execute and deliver to Buyer any other instruments
and agreements (including ratification or joinder instruments required
to transfer the Properties from each Seller to Buyer) as are necessary
or appropriate to comply with each Seller's obligations under this
Agreement;
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8.2.7. Buyer will execute and deliver an acknowledgement and ratification
of the Joint Operating Agreements and Amendments thereto affecting the
Properties, the form of which is attached hereto as Exhibit "K" and
incorporated herein by this reference;
8.2.8. Buyer and EEI will each deliver to the other a fully executed
version of the Xxxxxxx Resolution;
8.2.9. EEI will execute and deliver the agreement for the Escrow Agreement,
the form of which is attached hereto as Exhibit "L" and incorporated
herein by this reference, together with its cashier's check
representing immediately available funds in the amount of $70,000,
payable to the trust account of the escrow agent, as identified
therein;
8.2.10. EEI will deliver the fully executed and acknowledged original of
the GGG Consent, whether recorded or otherwise, the form of which is
attached hereto as Exhibit "M" and incorporated herein by this
reference; and
8.2.11. EEI will deliver the fully executed and acknowledged original of
the Stipulation, Cross-Conveyance and Correction Assignment, whether
recorded or otherwise, the form of which is attached hereto as Exhibit
"I" and incorporated herein by this reference.
ARTICLE 9
ACCOUNTING MATTERS
9.1 POST-CLOSING REVENUES AND EXPENSES. Except as expressly provided otherwise
in this Agreement, Buyer shall (i) pay to EEI any and all amounts received after
Closing by Buyer that are attributable to the ownership of the Properties prior
to the Effective Time (if any), and (ii) reimburse each Seller for any and all
costs and expenses paid after Closing by such Seller that are attributable to
their respective ownership interests in the Properties on or after the Effective
Time. Except as expressly provided otherwise in this Agreement, each Seller
shall (i) pay to Buyer any and all amounts received after Closing by such Seller
that are attributable to their respective ownership interests in the Properties
on or after the Effective Time (if any), and (ii) reimburse Buyer for any and
all costs and expenses paid after Closing by Buyer that are attributable to
their respective ownership interests in the Properties prior to the Effective
Time. Any amounts required to be paid by one Party to another Party under this
Section 9.1 shall be paid as soon as reasonably practicable.
9.2 ACCOUNTING SOFTWARE. Buyer acknowledges that EEI has maintained all books,
records, and accounting data for the Well and the JV in the form of certain oil
and gas accounting software known as "WolfePak" and agrees to accept EEI's
WolfePak files as a sufficient means of conveyance of all historical accounting
information that EEI is to deliver to Buyer hereunder. Notwithstanding the
foregoing, EEI agrees to use commercially reasonable efforts to assist with the
transition of Buyer or Buyer's designated operator into the operational
management of such data, including, but not limited to, the delivery of an MS
Excel(C) spreadsheet extraction from its WolfePak accounting software for the
books, records and accounting data for the Well, the royalty owners and WI
owners in the Well, and, if approved under the JV Vote, the JV. To the fullest
extent permissible under EEI's software license with WolfPak, Inc., EEI shall
deliver unto Buyer an electronic version of all such data in WolfePak format, so
as to allow Buyer to subsequently use the same (if so desired by Buyer) under
its own software license with WolfePak, Inc.
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9.3 BANK ACCOUNTS. Buyer acknowledges (based upon EEI's representation) that EEI
has maintained a separate bank account for the JV at Bank of America Texas, N.A.
at all times during the period in which EEI has served as Managing Venturer of
the JV. Buyer further acknowledges (based upon EEI's representation) that the
only bank records for the JV that are in EEI's possession for all periods prior
to the period in which EEI has served as Managing Venturer of the JV are those
bank records from Compass Bank that were furnished to EEI by GTO. Should the JV
Vote approve EEI's Resignation and if the JV elects to install Buyer as its
replacement or successor Managing Venturer, Buyer acknowledges that it will
accept EEI's delivery of the Bank of America statements and the copies of the
Compass Bank records as the full and complete delivery of all banking
information regarding the JV (such completeness being based solely on EEI's
representations thereof).
9.4 SEVERANCE TAXES, REFUNDS, AND EXPENSE REIMBURSEMENTS DUE TO EEI. Buyer and
EEI acknowledge and agree to the following:
9.4.1. Prior to the execution of this Agreement, EEI has commenced with
Trio and successfully concluded certain actions to (i) reduce
severance tax rates assessable against production from the Well and
(ii) obtain a reimbursement from the Texas State Comptroller (the
"COMPTROLLER") of severance taxes paid to the Comptroller by GTO and
Trio on behalf of the interest owners in the Well for all periods
prior to the Effective Time (the "REFUNDS");
9.4.2. GTO signed (1) a power of attorney to Trio, in order for Trio to
re-file prior RRC reports required to obtain the Refunds and (2) an
assignment to Trio of all rights to receive any Refunds, such that all
Refunds were to be sent to Trio;
9.4.3. As the contract operator of the Well, Trio re-filed GTO's prior RRC
filings in order obtain all Refunds from the Comptroller;
9.4.4. Buyer acknowledges EEI's representation that, prior to the Closing,
the Refunds were approved by the Comptroller, tendered to Trio and/or
EEI, and are now in EEI's possession, pending application or
distribution in accordance with existing agreements and/or the
applicable provisions of this Agreement; and Buyer agrees that it has
no right to, and will not exert any claim whatsoever against, any
portion of the Refunds;
9.4.5. Buyer agrees that Buyer or its designated operator shall be solely
responsible for (1) all severance taxes expected to be paid or payable
by Buyer (on behalf of itself and, if the Change of Operator occurs,
on behalf of the other interest owners in the Well) on Hydrocarbon
production occurring after the Effective Time, and (2) any and all
refunds of severance taxes, if any, for severance taxes paid after the
Effective Time (the "POST-CLOSING STRS"), ------------------ as
determined by the RRC and/or the Comptroller. Each Seller acknowledges
that it shall have no right or claim against such Post-Closing STRs,
if any. EEI agrees to cooperate with Buyer in the execution of any
reasonable and/or required documentation to facilitate the receipt by
Buyer of such Post-Closing STRs, if any. Should any Post-Closing STRs
of Buyer or other owners of an interest in the Well or the Lease be
delivered to any Party other than Buyer or its designated operator,
EEI agrees to assist Buyer in good faith and execute such other,
additional documentation as may be required to direct such
Post-Closing STRs to Buyer for its application and/or distribution to
the entitled parties;
9.4.6. Notwithstanding anything in this Agreement to the contrary, Buyer
will have no obligation or liability whatsoever to either of the
Sellers, to the Xxxxxxx, to the JV, to any of the JV partners, or to
22
any other WI owners in the Well regarding any Refunds or the
disposition of any Refunds, since the Refunds, as defined herein,
relate to or result from time periods before the Change of Operator
(and the Effective Time) contemplated herein. Each of the Sellers
acknowledge and agree that Buyer, its principals, affiliates and/or
Buyer's designated operator, (i) were not parties to the transactions
or pre-Closing circumstances giving rise to EEI's Claims (as defined
below), (ii) will have, if the Closing occurs, an interest with the
other owners of interests in the Well and the Lease to secure
favorable severance tax treatment on production therefrom, (iii) will
be "innocent stakeholders" in the event that any portion of the
Refunds comes into its possession or if any payment of any portion of
such Refunds is made to Buyer or its designated operator, in which
case, Buyer shall assist EEI and/or Trio in good faith by executing
such other and additional documentation as may be required to direct
such Refunds to EEI and/or Trio for application and/or distribution to
the entitled parties, and (iv) have not conspired, colluded or
otherwise acted in concert with EEI, EPI, or any other party with
respect to any entitlement to, or distribution of, any of the Refunds.
As the issuance of the Refunds by the Comptroller has occurred prior
to the Closing and as EEI has represented that it has already received
the entirety of such Refunds, EEI shall use best efforts to minimize
Buyer's role and involvement in the application of any portions of the
Refunds in a manner consistent with this Agreement;
9.4.7. EEI has represented to Buyer that certain sums are due to EEI from
the JV and/or the JV partners and/or other interest owners in the Well
for loans, legal fees and court cost reimbursements, XXX, property
taxes, and other obligations of the WI owners in the Well ("EEI
CLAIMS") and that the EEI Claims are distinct, separate and not
connected in any way with EPI. Buyer understands that EEI believes it
has certain rights, under the JV Agreement and/or the JOA, to deduct
the amounts it believes are due to it (pursuant to the EEI Claims)
from any portion of the Refunds that are due, as applicable, to the JV
and/or the JV Partners and /or the other WI owners in the Well ("EEI
CLAIM DEDUCTION"), retaining such funds for EEI's use or cost
reimbursement. EEI further represents that the sum of the EEI Claims
exceeds the total amount of the Refunds held by EEI and the
proportionate amount of the EEI Claims attributable to the JV and/or
the JV partners exceeds the proportionate amount of the Refunds
allocable to the JV. EEI hereby agrees that it will accept the Refunds
and the amounts paid by the JV partners in response to the final
settlement statements issued with the JV Letter and JV Ballot as a
sufficient aggregate EEI Claim Deduction, together with the Xxxxxxx'
execution of the Xxxxxxx Resolution (as described in Section 7.5
above), in full satisfaction of all EEI Claims. EEI further agrees
that, after the Effective Resignation Date, all amounts of the EEI
Claims that remain unpaid as of the Effective Resignation Date shall,
without further compensation becoming due to EEI, become incorporated
into, and made a part of, the Properties being assigned to Buyer
hereunder; and thereafter, EEI (as well as its officers, directors,
agents, attorneys, successors, assigns or any person acting directly
or indirectly for EEI or any such person) will take no further action,
directly or indirectly, against the JV and/or the JV partners and/or
any other interest owners in the Well with regard to any EEI Claims or
the payment thereof to EEI. EEI agrees to execute such xxxx of sale or
similar basic documentation which manifests such assignment/conveyance
of the EEI Claim balances due as MBE may reasonably request. During
the Regrouping Period (if one is required), the Parties agree that EEI
shall provide Buyer with copies of EEI's communications with the JV
partners, including, but not limited to, any invoicing, billing or
similar demand(s) or request(s) for payment to Buyer of the JV's share
23
of the AFE, any outstanding amounts due from the JV to EEI for the EEI
Claims, and any amounts due to EEI from the JV for the ongoing
business operations of the JV.
9.4.8. Buyer shall make a reasonable good faith effort to produce and/or
execute whatever written documentation is necessary and reasonable to
assist EEI to account for the EEI Claims and satisfy same through EEI
Claim Deductions, without endorsing or otherwise becoming a
participant in the transaction(s) underlying the EEI Claims and
without violating Buyer's duties, obligations and responsibilities as
Managing Venturer of the JV (if so elected). Notwithstanding the
foregoing, Buyer agrees that, if it is installed as Managing Venturer
of the JV and/or as operator of the Well, as herein contemplated, it
will not, at any time after the Closing, initiate, file and/or
represent, on behalf of itself or any interest owner in the Well, any
claim, suit or legal action whatsoever with regard to the EEI Claims,
the EEI Claim Deduction, the Refunds and/or any other matter
concerning EEI's operation or management of the JV and/or the Well at
any time whatsoever. This provision is not, however, intended as (a) a
waiver of Buyer's rights as an innocent stakeholder with respect to
the Refunds, (b) a waiver of any rights of indemnification from EEI
provided in this Agreement, and (c) a barrier or obstacle for Buyer
(but only if Buyer, through no initiation of its own, is sued or made
a party to any such claim, suit or legal action) from asserting any
available and lawful counterclaims, cross-claims and/or defenses,
involving EEI or otherwise, and to otherwise fully defend itself as
provided by law. Further, nothing in this provision shall serve as an
endorsement by Buyer, in any form or fashion, of the EEI Claims, their
merit or validity under the terms of the JV Agreement or other
relevant agreement(s), or as a waiver of any claim which the JV or the
JV partners or any other owner of an interest in the Well/Lease may
have to the subject Refunds. Any representation that Buyer will not
initiate a claim, lawsuit, or legal proceeding involving the Refunds
or the EEI Claims shall expressly not (a) act as a waiver by the JV or
any JV partner, notwithstanding its management structure or
composition post-Closing, to contest or litigate the EEI Claims
(subject, however, to the JV's express obligation under the JV
Agreement to indemnify EEI for its actions as Managing Venturer), nor
(b) mitigate or prohibit Buyer's possible resignation, withdrawal or
removal as JV Managing Venturer so as to facilitate any such contests
or litigation involving the EEI Claims, meritorious or otherwise, as
suggested or desired by any such involved Person. Any aspect of
Buyer's cooperation and concurrences as contemplated by this Section
9.4 et seq are expressly premised upon EEI's representation that the
JOA and/or JV Agreement support EEI's intended application and use of
the Refund, coupled with EEI's express agreement (if not already
herein) to (1) make any required and necessary disclosure(s) of its
intended use of the Refunds and associated ramifications thereof at a
time required by law and the relevant agreements, including, but not
limited to, the JOA and JV Agreement, and (b) to indemnify and hold
Buyer harmless from any and all claims, causes of action and costs
arising out of any such use or application of the Refunds or any
proceeds derived from the Xxxxxxx Resolution.
9.5 LIABILITY EXEMPTION OF BUYER. The Parties agree that Buyer will have no
obligation or liability whatsoever to EEI, to the JV, to the JV partners or to
any other Persons who are WI owners in the Well regarding any EEI Claims or any
EEI Claim Deduction that are the result of a time period before Effective Time
or Change of Operator.
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ARTICLE 10
CERTAIN POST-CLOSING COVENANTS
10.1 FURTHER ASSURANCES. After the Closing, each Party hereto agrees that it
will execute, acknowledge and deliver or cause to be executed, acknowledged and
delivered such instruments and take such other action(s) as may be necessary or
advisable to carry out its obligations under this Agreement and under any
exhibit, document, certificate or other instrument delivered pursuant hereto.
10.2 DELIVERY OF RECORDS BY EEI. Within fifteen (15) days after Closing, EEI
will deliver to Buyer the Records (if not already). Notwithstanding the
foregoing, the Parties acknowledge and agree that, prior to the Closing, EEI has
already delivered to Buyer, and Buyer possesses true and correct copies of all
documents necessary to examine, inspect and verify: (a) all material agreements
related to the operation of the Properties, the Well, and the JV, including but
not limited to, the JOA and JV Agreement, (b) all material accounting data; (c)
all operating reports; (d) all production facilities; (e) all technical data;
and (f) all title information related to the Lands and the Lease.
Notwithstanding the foregoing, the Parties acknowledge and agree that EEI's
obligation to deliver Records specifically relating to the JV and JV partners is
subject to the approval of the JV and IF SUCH APPROVAL IS NOT OBTAINED AS A
RESULT OF THE JV VOTE, this Agreement shall be deemed a having been amended, but
only to the limited extent that the definition and delivery of the Records shall
not include any internal materials relating to the JV and the JV partners, all
references in this Agreement describing the anticipation of, or obligation for,
any such delivery of JV Records from EEI to Buyer shall be of no consequence and
deemed void ab initio, and such amendment shall be made without any change or
adjustment in the Cash Consideration or the Stock Consideration or to any other
provision hereof, if such provision has no relation to the JV or its Records.
ARTICLE 11
INDEMNIFICATION
11.1 SELLERS' INDEMNITY. Subject to the limitations in Section 11.2 (and Article
12, which shall control with respect to tax matters covered thereby), after
Closing, and in addition to any other express indemnifications of and by
Sellers, or each of them, in this Agreement, each Seller will defend, indemnify
and hold harmless Buyer Group from and against any and all Claims brought
against or suffered by Buyer Group arising from, relating to or connected with,
directly or indirectly, any of the following:
11.1.1. any breach of the representations and warranties of either Seller
in this Agreement or a failure of Sellers, or either of them to
perform in all respects any of the covenants, agreements or
obligations in this Agreement;
11.1.2. the ownership or operation of the Properties, or any part thereof,
to the extent attributable to the period of time prior to the
Effective Time, inclusive of Adverse Environmental Conditions;
11.1.3. any personal injury (including death), property damage, fines,
penalties, or injunctions, to the extent related to the ownership or
operation of the Properties and arising from events occurring prior to
the Effective Time;
11.1.4. the payment of any Property Taxes or Severance Taxes allocable to
the period prior to the Effective Time;
25
11.1.5. any swap, derivative, hedge or Debt Instruments of either Seller or
any of its/their Affiliate(s) relating to the Properties;
11.1.6. any suit, action, proceeding, lawsuit or other litigation pending
against either Seller relating to the Properties prior to the
Effective Time;
11.1.7. any gross negligence or willful misconduct of either Seller or
its/their Affiliates, to the extent related to the ownership or
operation of the Properties and arising from events occurring prior to
the Effective Time;
11.1.8. any commissions, finder's fees or other remuneration due to any
agent, broker or finder claiming by, through or under either Seller
with respect to the transactions contemplated by this Agreement;
11.1.9 any management, operation of, or activities involving the JV and JV
business matters during the period after the date on which EEI first
became the Managing Venturer of the JV and prior to the Effective
Time, but without any diminishment of the indemnification provisions
of the JV Agreement; and
11.1.10 any application, use, retention, offset or processing of the
Refunds, or any portion thereof, or any proceeds derived from the
Xxxxxxx Resolution by any Seller.
The matters for which each Seller has the obligation to indemnify and
hold harmless Buyer Group under this Section 11.1, to the extent of
such obligation and as limited by Section 11.2, are referred to herein
as "RETAINED LIABILITIES."
11.2 SCOPE OF EACH SELLER'S INDEMNITY. Each Seller shall have no obligation to
indemnify Buyer Group for any Claims arising pursuant to Section 11.1 with
respect to which Buyer has not delivered written notice thereof to such Seller
within six (6) months after the Effective Time. Each Seller's aggregate
indemnification liability under Section 11.1 shall not exceed the total
consideration received by such Seller under this Agreement.
11.3 SURVIVAL OF SELLERS' REPRESENTATIONS AND WARRANTIES. The representations
and warranties made by each Seller in this Agreement shall survive Closing for
the period contemplated by Section 11.2, and shall be actionable during such
period (but not thereafter, excluding Claims made in good faith prior to the end
of such period) in accordance with this Article 11.
11.4 BUYER'S INDEMNITY. Except to the extent of Retained Liabilities, after
Closing, Buyer will defend, indemnify and hold harmless Seller Group, subject to
and in accordance with this Article 11 (and Article 12, which will control with
respect to tax matters covered thereby), from and against any and all Claims
brought against or suffered by any Person in the Seller Group arising from,
relating to or connected with, directly or indirectly, Buyer's ownership or
operation of the Properties following the Closing and after the Effective Time
hereunder.
11.5 LIMITATIONS OF WARRANTIES ON PERSONAL PROPERTIES. Except as otherwise set
forth in this Agreement, without diminishing the express representations and
warranties contained in this Agreement and in the Conveyances, the personalty
and personal property components of the Properties are being sold by each Seller
to Buyer without warranty of any kind, express, implied, or statutory. WITHOUT
LIMITING THE GENERALITY OF THE IMMEDIATELY PRECEDING SENTENCE AND EXCEPT AS SET
FORTH IN THIS AGREEMENT, EACH SELLER CONVEYS SUCH PERSONAL PROPERTY ELEMENTS AND
COMPONENTS OF THE PROPERTIES AS-IS, WHERE-IS AND WITH ALL FAULTS AND EXPRESSLY
26
DISCLAIMS AND NEGATES ANY IMPLIED OR EXPRESS WARRANTY OF (A) MERCHANTABILITY,
(B) FITNESS FOR A PARTICULAR PURPOSE, (C) CONFORMITY TO MODELS OR SAMPLES OF
MATERIALS AND (D) FREEDOM FROM REDHIBITORY VICES OR DEFECTS. EXCEPT AS OTHERWISE
SET FORTH IN THIS AGREEMENT, EACH SELLER ALSO EXPRESSLY DISCLAIMS AND NEGATES
ANY IMPLIED OR EXPRESS WARRANTY AT COMMON LAW, BY STATUTE OR OTHERWISE RELATING
TO THE ACCURACY OF ANY OF THE INFORMATION FURNISHED WITH RESPECT TO THE
EXISTENCE OR EXTENT OF RESERVES OR THE VALUE OF SUCH PROPERTIES BASED THEREON OR
EXCEPT AS SET FORTH IN ARTICLE 5 OF THIS AGREEMENT, THE CONDITION OR STATE OF
REPAIR OF ANY OF SUCH PROPERTIES.
11.7 COVENANTS RUNNING WITH THE LAND. Buyer and Sellers agree that the
provisions of this Article 11 shall bind and benefit each of their successors
and assigns in interest as to the Properties.
ARTICLE 12
TAXATION
12.1 RESPONSIBLE PARTY. All Taxes attributable to the ownership or operation of
the Properties prior to the Effective Time are each Seller's responsibility
respectively and all deductions, credits or refunds pertaining to the
aforementioned Taxes, no matter when received, belong to such Seller. All Taxes
attributable to the ownership or operation of the Properties on or after the
Effective Time (excluding each Seller's income taxes, franchise taxes or margin
taxes from the Effective Time through Closing, and excluding income or capital
gains taxes from the sale of the Properties) are the responsibility of Buyer,
and all deductions, credits or refunds pertaining to the aforementioned Taxes,
no matter when received, belong to Buyer. Property Taxes whether or not based on
production shall be prorated based on a percentage of the assessment period
occurring before the Effective Time. Property Taxes based on production (other
than Severance Taxes) shall be deemed by the Parties to apply to production in
the Tax period for which the Tax is levied. Notwithstanding the foregoing,
Sellers shall pay all property taxes accessed by Xxxxxx County for time periods
ending on or prior to the Effective Time, if not already.
12.2 TRANSFER TAXES. Notwithstanding anything to the contrary herein, it is
acknowledged and agreed by and among each Seller and Buyer that the Purchase
Price excludes any sales taxes or other Taxes of a similar nature in connection
with the sale of property pursuant to this Agreement. Buyer and each Seller will
use commercially reasonable efforts and cooperate in good faith to exempt the
sale, conveyance, assignments and transfers to be made to Buyer from any sales,
use, stamp, real estate transfer, documentary, registration, recording and other
similar Taxes (each a "TRANSFER TAX"). If a determination is ever made that a
Transfer Tax applies, Buyer will be liable for such Transfer Tax.
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12.3 TAX-DEFERRED EXCHANGE OPTION. Any Party may elect to effect a tax-deferred
exchange under Code Section 1031 (a "TAX DEFERRED EXCHANGE") for all or part of
the Properties at any time prior to the Closing Date. If a Party elects to
effect a Tax-Deferred Exchange ("ELECTING PARTY"), the other Parties agree to
execute escrow instructions, documents, agreements or instruments to effect the
exchange; provided, however, that the other Parties incur no additional costs,
expenses, fees or liabilities as a result of or connected with the exchange.
Each Seller and Buyer may assign any of their respective rights and delegate
performance of any of their respective duties under this Agreement in whole or
in part to a third party in order to effect such an exchange; provided, however,
that the Electing Party will remain responsible to the other Parties for the
full and prompt performance of its respective delegated duties. The Electing
Party will indemnify and hold other Parties harmless from and against all Claims
resulting from its participation in any exchange undertaken pursuant to this
Section 12.3 pursuant to the request of the Electing Party.
12.4 ALLOCATION OF VALUES. If the transactions under this Agreement constitute
an applicable asset acquisition pursuant to Code Section 1060, the Parties agree
to cooperate in the preparation of Form 8594. Buyer and each Seller will (a) be
bound by this allocation for all Tax purposes, (b) timely file all forms
(including IRS Form 8594) and Tax returns required to be filed in connection
with this allocation, (c) prepare and file all Tax returns in a manner
consistent with this allocation, and (d) take no position inconsistent with this
allocation in any Tax return, any audit or examination by, or any proceeding
before, any taxing authority or otherwise. In the event that the allocation is
disputed by any taxing authority, the Party receiving notice of such dispute
will promptly notify and consult with the other Parties and keep the other
Parties apprised of material developments concerning resolution of such dispute.
ARTICLE 13
MISCELLANEOUS
13.1 JOINT AND SEVERALLY LIABILITY OF EEI. EEI is liable for the obligations,
representations, warranties and liabilities of each Seller hereunder.
13.2 NOTICE. All notices required or permitted under this Agreement must be in
writing and delivered personally or by certified mail, postage prepaid and
return receipt requested or by facsimile or by overnight carrier to the
recipient Parties, as follows:
Sellers: Earthwise Energy, Inc. Buyer: Xxxxx Branch Exploration, L.L.C.
Energy Partners International 0000 X Xxxxx Xxxxxx Xx
0000 Xxxxx Xxxx Xxxxxx, XX 00000-0000
Xxxxxx, Xxxxx 00000 Attention: Xxxx X. Xxxxxxxxxx &
Attention: Xxxxxx X. Xxxxxx S. Xxxx Xxxxxxxx
Facsimile: 000-000-0000 Facsimile: 000-000-0000
or to such other place as either Party may designate as to itself by written
notice to the other. All notices will be effective upon the earlier of either
the recipient Party's receipt thereof or five days after the mailing date
thereof.
13.3 GOVERNING LAW. This Agreement, the obligations of the Parties under this
Agreement and all other matters arising out of or relating to this Agreement and
the transactions it contemplates, will be governed by and construed in
accordance with the Laws of the State of Texas, without giving effect to any
conflicts of law principles that would cause the laws of another jurisdiction to
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apply. Any dispute arising out of or relating to this Agreement which cannot be
amicably resolved by the Parties, shall be brought in a federal or state court
of competent jurisdiction sitting in Xxxxxx County of the State of Texas and the
Parties irrevocably submit to the jurisdiction of any such court solely for the
purpose of any such suit, action or proceeding, waiving all rights to a jury
trial for actions to enforcement hereof.
13.4 ASSIGNMENT. Neither Party may assign this Agreement or its rights under
this Agreement or delegate any performance obligations under this Agreement
without the other Party's written consent, which will not be unreasonably
withheld; provided, however Buyer may, without the prior written consent of
Seller, assign this Agreement in whole or in part to one or more Affiliates of
Buyer, but no such assignment will release or discharge Buyer from any of its
obligations hereunder. This Agreement will be binding upon and will inure to the
benefit of the Parties hereto and their permitted successors and assigns.
Nothing contained in this Agreement entitles anyone other than Buyer or either
Seller or their respective permitted successors and assigns to any rights under
this Agreement.
13.5 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with the Exhibits
hereto, the certificates, documents, instruments and writings that are delivered
pursuant hereto, constitute the entire, complete and exclusive agreement and
understanding of the Parties in respect of the subject matter hereof and thereof
and expressly supersede all prior understandings, agreements, or representations
by or among the Parties, written or oral, with respect thereto. No amendment or
modification of any provision of this Agreement will be valid, unless the same
is in writing and signed by Buyer and Seller.
13.6 CONSTRUCTION. The Parties have participated jointly in the negotiation and
drafting of this Agreement. If an ambiguity or question of intent or
interpretation arises, this Agreement will be construed as if drafted jointly by
the Parties and no presumption or burden of proof will arise favoring or
disfavoring either Party because of the authorship of any provision of this
Agreement. The Parties will treat the words "include," "includes" and
"including" as if followed by "without limitation." Pronouns in masculine,
feminine, and neuter genders will be construed to include any other gender, and
words in the singular form will be construed to include the plural and vice
versa, unless the context otherwise requires.
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13.7 SEVERABILITYa. . If any terms of this Agreement are determined by a court
to be invalid or unenforceable, the remaining provisions will remain effective
and binding, and the invalid or unenforceable term shall be deemed not to be a
part hereof.
13.8 BINDING EFFECTa. . This Agreement shall be binding upon, and shall inure to
the benefit of, the Parties and their respective representatives, officers,
directors, shareholders, affiliates, agents, attorneys, employees and assigns,
if any. Each Party shall represent and warrant that it has the authority to act
on its behalf and to bind itself to this Agreement.
13.9 COUNTERPARTS. This Agreement may be executed in multiple counterparts, each
deemed an original, as if one document was signed by all Parties, together
deemed as one final agreement binding on all Parties subscribed thereto and
multiple signature pages affixed to a single copy hereof shall be deemed as a
fully executed original.
13.10 EXERCISE OF RIGHTS; WAIVERb. . A failure or forbearance by a Party to
exercise a right or remedy for enforcement under this Agreement shall not be a
waiver of such Party's rights or remedies (except as expressly stated herein),
nor shall such failure or forbearance modify this Agreement in the absence of a
writing to such effect, as provided above. No waiver of any terms of this
Agreement shall be valid unless signed by all Parties. The waiver by any Party
of any breach of this Agreement shall not operate as a waiver of any subsequent
breach, nor shall any waiver be construed as a rescission hereof.
13.11 EXPENSES AND FEES. Unless otherwise set forth herein or hereafter agreed
in writing by the Parties, each Party will pay its own fees and expenses
incident to the negotiation and preparation of this Agreement and consummation
of the transactions contemplated hereby. Buyer will be responsible for all the
fees for the recording of transfer documents.
13.12 LIMITATION ON DAMAGES. Notwithstanding any term or provision of this
Agreement to the contrary, in no event will either Party to this Agreement be
liable to the other Party for any consequential, special, exemplary, punitive or
similar damages arising out of or relating to this Agreement; except to the
extent any such Party was required to pay such damages to a third party in
connection with a Claim, in which event such damages shall be recoverable
hereunder.
13.13 CONSPICUOUSNESS. Each of the Parties hereto specifically acknowledges and
agrees (a) that it has a duty to read this Agreement and that it is charged with
notice and knowledge of the terms hereof, and (b) that it has in fact read this
Agreement and is fully informed and has full notice and knowledge of the terms,
conditions and effects of this Agreement. Each Party hereto further agrees that
it will not contest the validity or enforceability of any such provisions of
this Agreement on the basis that the Party had no notice or knowledge of such
provisions or that such provisions are not "conspicuous". The Parties expressly
hereby acknowledge and agree that the provisions contained in this Agreement
that are set out in "BOLD" or in "ALL CAPS" satisfy the requirement of the
"express negligence rule" and any other requirement at law or in equity that
provisions contained in a contract be conspicuously marked or highlighted.
13.14 DISPUTES; INTERPRETATION. All provisions of this Agreement shall be
interpreted according to their plain meaning, as the drafting hereof was made by
mutual effort between the Parties, through their counsel, and is not to be
construed as against any one Party as the drafter, with the Parties intending to
be bound immediately hereby.
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13.15 ATTORNEY'S FEES. In any legal proceeding by which one Party either seeks
to enforce its rights hereunder (in contract and/or tort) or a declaration of
rights or obligations under any instrument referenced or contemplated hereunder,
the prevailing Party shall be awarded its reasonable attorney fees, and costs
and expenses incurred.
13.16 VOLUNTARY AGREEMENT. The Parties acknowledge and understand that this
Agreement is legally binding and that, by signing it, they are agreeing to all
its provisions, and will have read and understood each provision set forth
therein.
[SIGNATURE PAGE FOLLOWS.]
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first set forth above, to be effective as of the Effective Time.
SELLERS:
EARTHWISE ENERGY, INC.,
A Nevada corporation
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxxx
Its: President / CEO
ENERGY PARTNERS INTERNATIONAL'
A Texas Joint Venture partnership
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxxxx,
Executive Vice President of Earthwise
Energy, Inc., in its capacity as
Managing Venturer of Energy Partners
International
BUYER:
XXXXX BRANCH EXPLORATION, L.L.C.,
A Texas limited liability company
By: /s/ Xxxx X. Xxxxxxxxxx
----------------------------------------
Xxxx X. Xxxxxxxxxx, Manager
By: /s/ S. Xxxx Xxxxxxxx
----------------------------------------
S. Xxxx Xxxxxxxx, Manager
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EXHIBIT A
The Properties
The "Properties" consist of the following:
1. That certain Oil and Gas Lease (the "Lease") executed March 10, 2004,
effect as of March 1, 2004, by and between Xxxxxxx and Xxxxxxx Xxxxxxx, as
Lessors therein, and Mid-Continent Geological, Inc. ("MCG"), as Lessee
therein, covering certain lands in Xxxxxx County, Texas of 84.996 acres,
more or less, together with all properties and rights incident thereto or
derived therefrom, including without limitation, all physical lease
equipment and facilities owned used for the production of oil and gas from
said properties, all seismic, geological and engineering data and
interpretations thereof, all files and records and all agreements, leases,
permits, rights-of-way, easements, licenses, options, orders and other
agreements in any way relating thereto.
Other than the leasehold interests in the Lease that are owned or
controlled by EEI, three other parties, MCG (which owns a 5.0% leasehold
interest), Xxxxxx X. Xxxx (who owns a 5.0% leasehold interest), and Xxxxx
Xxxxxxxxxx (who owns a 1.5% leasehold interest) (collectively, the
"Minority Lessees"), are the only other persons, to the knowledge of the
Sellers, that own a leasehold interest in the Lease.
The aggregate leasehold interest of the Minority Lessees is 11.5% and
therefore, the leasehold interest in the Lease that is owned or controlled
by EEI is (a) that certain leasehold interest of Energy Partners
International ("EPI"), a Texas joint venture partnership in which EEI
serves a Managing Venturer, specifically being 50% of an undivided 33.333%
of 8/8ths of the leasehold interest in the Lease and (2) that certain
leasehold interest of EEI, specifically being 100% of 8/8ths of the
leasehold interest in the Lease, save and except the leasehold interest
owned by the Minority Lessees and the leasehold interest owned by EPI,
which calculates as being a 71 5/6 % (71.833333333%) leasehold interest
that is owned by EEI and a 16 2/3% (16.666666666%) leasehold interest that
is owned by EPI (but which is controlled by EEI).
2. That certain working interest in the Well, which (by unfiled contract
between EEI and EPI) is 50% owned by EPI and 50% owned by EEI, constituting
a total of 33.333% working interest (25% net revenue interest) in the Well.
3. That certain additional working interest in the Well owned solely by EEI,
constituting a 12.084636% working interest (9.063467% net revenue interest)
in the Well.
4. That certain partnership in the Xxxxxxx #1-H Joint Venture owned by EEI,
constituting a 2.383388% partnership interest in the JV, which is
equivalent to a 1.000% working interest (0.750% net revenue interest) in
the Well.
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