ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (the "Agreement"), made this 17th day of
November, 2004, by and among Source Energy Corporation, a Utah corporation
("Buyer") and Energytec, Inc., a Nevada corporation ("Seller"). Capitalized
terms used in this Agreement that are not otherwise defined shall have the
meaning ascribed to such terms under Section 7.12, below.
BACKGROUND
WHEREAS, Seller owns certain interests in oil and gas properties and owns
and operates pipelines and other assets related to the production of oil and
gas (the "Business"); and
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to acquire
from Seller, the assets related to the Business, all on the terms and subject
to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and intending to be legally bound, the parties hereto agree as follows:
ARTICLE I.
THE TRANSACTION
1.1 Sale and Purchase of Seller's Assets. Subject to the terms and
conditions of this Agreement, at the Closing referred to in Section 1.5
hereof, Seller shall cause to be sold, transferred and conveyed to Buyer, and
Buyer shall purchase and accept from Seller, all of Seller's right, title and
interest in and to all the assets and properties of the Business (but only to
the extent they are not Excluded Assets) including, without limitation, the
following assets and properties owned by Seller and used in the Business
(collectively, the "Purchased Assets"):
(a) except as set forth in Section 1.2(a), all cash and cash equivalents
on hand related to the Business, wherever located, including without
limitation, in accounts, lock boxes and other similar accounts (whether
maintained at a bank, savings and loan or other similar financial
institution);
(b) all pipe, transmission lines, equipment, machinery, furniture, and
fixtures owned by Seller and used by Seller in the conduct of the Business;
(c) accounts receivable arising in respect of pipeline revenue and oil
and gas produced from the Business (the "Accounts Receivable");
(d) all working interests and overriding royalty interests in oil and gas
properties set forth on Schedule 1.1(d) of the Disclosure Schedule (the
"Production Interests");
(e) all rights of way, easements, and leasehold and other ownership
rights in oil and gas interests set forth on Schedule 1.1(e) of the Disclosure
Schedule (the "Property Interests");
(f) all contracts, agreements and undertakings (whether oral or written)
which relate to the Business and to which Seller is a party which are
assignable in accordance with their terms, and which are set forth on Schedule
1.1(f) of the Disclosure Schedule (the "Assignable Contracts");
(g) all contracts, agreements and undertakings (whether oral or written)
which relate to the Business and to which Seller is a party which are not
assignable in accordance with their terms but for which Buyer receives the
economic benefit of pursuant to Section 1.3(b) (the "Contracts");
(h) to the extent legally transferable, all licenses, permits and other
like authorizations possessed by Seller and necessary to the operation of the
Business as currently conducted as set forth on Schedule 1.1(h) of the
Disclosure Schedule (the "Permits");
(i) all registered, licensed, used and/or owned intellectual property,
including, without limitation, (i) all such trademarks, trade names (including
the name "Energytec"), trade styles, logos, service marks, Internet domain
names and websites and all applications and registrations therefor and
licenses thereof; and (ii) all such technical, processing, or production
information, including new developments, inventions, know-how, processes,
ideas and trade secrets and documentation thereof (including related papers,
logs, production data, diaries, notebooks, specifications, methods, and data
processing software) and all claims and rights related thereto;
(j) all customer files and all lists of customers, suppliers,
distributors and vendors which are assignable in accordance with their terms;
(k) all performance and other bonds (the "Bonds"), letters of credit,
security and other deposits, and advances maintained for use in the conduct of
the Business;
(l) all claims, causes of action and other rights related to the
Purchased Assets, other than those relating to Taxes (as hereinafter defined)
for the period prior to the Closing;
(m) all documents and records relating to the Purchased Assets, or the
operations of the Business (including historical production data, research and
geological reports and studies, reserve reports, engineering reports and
studies, and cost or operating studies and reports);
(n) except as set forth in Section 1.2(b), all accounting books, records,
ledgers and electronic data processing materials or copies thereof;
(o) all information contained in all databases, which are used or
intended to be used in the conduct of the Business;
(p) except as set forth in Section 1.2(a), all bank accounts, lock boxes,
safe deposit boxes and the contents thereof which are maintained for use in
the conduct of the Business or which contain any assets of the Business;
(q) all prepaid expenses and deferred charges to the extent the
corresponding obligations constitute Assumed Liabilities; and
(r) all other assets, properties, rights and claims related to the
operations of the Business or which arise in or from the conduct thereof;
provided, however, that the Purchased Assets shall not include any of the
assets rights and claims defined as Excluded Assets in Section 1.2 below.
1.2 Excluded Assets. The Purchased Assets shall not include the
following assets and properties (the "Excluded Assets"):
(a) $3,000,000 in cash of Seller;
(b) all accounts receivable accrued through and including the end of the
calendar month immediately preceding the calendar month in which the Closing
is held;
(c) books and records that Seller is required to retain pursuant to any
statute, rule, regulation or ordinance (except that Buyer shall be given
copies of and access to such books and records as reasonably necessary or
desirable for the conduct by Buyer of the Business);
(d) all pipe, transmission lines, equipment, machinery, furniture, and
fixtures owned by Seller and not used by Seller in the conduct of the
Business, including those items set forth on Schedule 1.2(d) of the Disclosure
Schedule;
(e) all working interests and overriding royalty interests in oil and gas
properties, rights of way, easements, and leasehold and other ownership rights
in oil and gas interests set forth on Schedule 1.2(e) of the Disclosure
Schedule;
(f) all of the capital stock of Comanche Well Service Corporation, a
Texas corporation and subsidiary of the Seller;
(g) Seller's licenses, permits and other governmental authorizations and
deposits that are not transferable and not required by Buyer for the conduct
of the Business;
(h) all insurance policies not related to the Business or the Purchased
Assets, and any and all amounts which may be payable or recoverable there
under (including any such amounts payable in respect of any liabilities or
claims which are asserted on or after the Closing Date and relate to events
which occurred or circumstances which existed on or prior to the Closing
Date);
(i) any and all receivable and future refunds and credits of income
Taxes, value-added Taxes, and other Taxes or governmental charges of fees
relating to periods ending on or before the Closing Date;
(j) any shares of Buyer common stock acquired by Seller from Xxxxx
Xxxxxxxxx; and
(k) any other right or asset listed or described on Schedule 1.2(k) of
the Disclosure Schedule.
1.3 Assumed Liabilities.
(a) Subject to the terms and conditions of this Agreement, at Closing,
Seller will assign and transfer to Buyer the Assignable Contracts and such of
the Permits as are transferable under applicable law and in accordance with
the terms thereof, and, except as excluded in Section 1.4, Buyer shall assume
and agree to discharge and satisfy in full when due and/or perform in a timely
manner the obligations of Seller arising after the Closing Date under: (a)
such Assignable Contracts set forth on Schedule 1.1(f) of the Disclosure
Schedule and Permits included in the Purchased Assets, together with such
Contracts and Permits Buyer receives the economic benefits of in accordance
with Section 1.3(b); and (b) the liabilities and obligations set forth on
Schedule 1.3 of the Disclosure Schedule (the "Assumed Liabilities").
(b) Neither this Agreement nor any agreement or document delivered in
connection herewith shall be deemed an assignment of any Contract, right or
Permit not authorized to be transferred or assigned in accordance with their
terms or applicable law. The parties agree that, upon the request of Buyer,
they will use their Reasonable Efforts to obtain any required consents to any
such prohibited transfers not obtained prior to Closing, including, the
providing to Buyer of the economic benefits (with Buyer's agreement to satisfy
the corresponding liabilities) of such Contracts, rights and Permits to the
maximum extent permitted in accordance with their respective terms and
applicable law.
1.4 Excluded Liabilities and Obligations. Except as expressly set forth
in Section 1.3 above, Buyer shall not assume and shall not be liable or
responsible for any debt, obligation or liability of the Business, Seller or
any Affiliate of Seller, or any claim against any of the foregoing, of any
kind, whether known or unknown, fixed, contingent, absolute or otherwise (the
"Excluded Liabilities and Obligations"). After the Closing, Seller shall
discharge and satisfy in full when due all Excluded Liabilities and
Obligations.
1.5 Closing and Deliveries.
(a) Closing. Subject to the terms and conditions of this Agreement, the
closing of the sale and purchase of the Purchased Assets (the "Closing") shall
take place at the offices of Xxxxxxx Xxxxx & Xxxxxxx, Xxx Xxxx Xxxxxx, Xxxxx
0000, 000 Xxxxx Xxxx Street, Salt lake City, Utah, on the second business day
after the satisfaction or waiver of each of the conditions set forth in
Section 5.1 and Section 5.2, or such other time as the parties agree in
writing. The date on which Closing shall occur is hereinafter referred to as
the ("Closing Date"). The effective time of the Closing shall be 12:01 a.m.
on the Closing Date.
(b) Deliveries of Seller. Subject to the terms and conditions of this
Agreement, Seller shall deliver to Buyer at Closing:
(i) a general assignment and xxxx of sale for the Purchased Assets
in substantially the form of Exhibit A attached hereto, executed by Seller;
(ii) an Assignment and Assumption Agreement with respect to the
Assumed Liabilities in substantially the form of Exhibit B attached hereto
(the "Assumption Agreement"), executed by Seller;
(iii) assignments and other documents of transfer for the Production
Interests, Property Interests, and Permits;
(iv) a Well Service Agreement between Buyer and Comanche Well
Service Corporation, in substantially the form of Exhibit C attached hereto
(the "Well Service Agreement"), executed by Comanche Well Service Corporation;
(v) duly executed articles of amendment to the articles of
incorporation of Seller changing its name;
(vi) the certificate referred to in Section 5.1(a);
(vii) a certificate of the Secretary of Seller certifying the names
of the officers of Seller authorized to sign this Agreement and the other
documents to be delivered by Seller hereunder and attaching (i) Articles of
Incorporation of Seller as of a recent date certified by the Nevada Secretary
of State, (ii) a copy of the Bylaws of Seller, (iii) a certificate of
existence of Seller as of recent date certified by the Nevada Secretary of
State, and (iv) certified resolutions of the board of directors of Seller
providing authority for the execution, delivery and performance of this
Agreement and the transactions contemplated herein; and
(viii) such other instruments as may be necessary to convey the
Purchased Assets to Buyer.
(c) Buyer's Deliveries to Seller. Subject to the terms and conditions of
this Agreement, at the Closing Buyer shall deliver to Seller:
(i) the Payment Shares;
(ii) the Assumption Agreement, executed by Buyer;
(iii) the Well Service Agreement, executed by Buyer
(iv) a certificate of the Secretary of Buyer certifying the names of
the officers of Buyer authorized to sign this Agreement and the other
documents to be delivered by Buyer and attaching (i) Articles of Incorporation
of Buyer as of a recent date certified by the Utah Department of Commerce,
(ii) a copy of the Bylaws of Buyer, (iii) a certificate of existence of Buyer
as of recent date certified by the Utah Department of Commerce, and (iv)
certified resolutions of the board of directors of Buyer providing authority
for the execution, delivery and performance of this Agreement and the
transactions contemplated herein;
(v) the certificate referred to in Section 5.2(a);
(vi) instruments of transfer, cancellation of indebtedness, and
assumption of liability in form acceptable to Seller pursuant to which the
assets of Buyer existing immediately prior to the Closing are sold and
transferred to Xxxxx Xxxxxxxxx in exchange for cancellation of all debts and
other obligation owing by Buyer to Xxxxx Xxxxxxxxx and a warrant to purchase
875,000 shares of common stock of Buyer at an exercise price of $0.70 per
share exercisable over a term of two years from the Closing Date with cashless
exercise option but no registration rights;
(vii) cause delivery to Seller of certificates for 75,000 shares of
Buyer common stock registered in the name of Xxxxx Xxxxxxxxx duly endorsed for
transfer (for which Xxxxx Xxxxxxxxx shall have received $300,000 in cash from
Seller);
(viii) duly executed articles of amendment to the articles of
incorporation of Buyer changing its name to "Energytec" and effecting such
other changes as Seller may reasonably request;
(ix) resignations of the officers and directors of Buyer together
with written consents of the board of directors appointing the designees of
Seller to the board of directors of Buyer; and
(x) such other documents and instruments as may be reasonably
requested by Seller.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as of the date hereof (except as
described in the Disclosure Schedules delivered herewith), as follows:
2.1 Organization and Good Standing. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the state
of Nevada and has all requisite power and authority and legal right to own,
lease and operate the Purchased Assets and to carry on the Business as and
where presently being conducted. Seller is duly licensed and qualified to do
business as a foreign corporation and is in good standing in every
jurisdiction where the ownership, leasing or operating of the Purchased Assets
or the conduct of the Business requires such qualification, except in such
jurisdictions where the failure to so qualify would not have a Material
Adverse Effect.
2.2 Authorization and Enforceability.
(a) Seller has full power and authority to make, execute, deliver and
perform this Agreement, and the execution, delivery and performance of this
Agreement by Seller have been duly authorized by all necessary action on the
part of Seller.
(b) This Agreement has been, and the documents to be delivered by Seller
at Closing in connection herewith will be, duly executed and delivered by
Seller and constitute the legal, valid and binding obligation of Seller
enforceable against Seller in accordance with their respective terms.
2.3 No Violation of Laws or Agreements. The execution, delivery and
performance of this Agreement by Seller do not (a) violate any provision of
applicable law, rule, regulation or ordinance, (b) violate any judgment,
order, writ, injunction or decree of any court, governmental,
quasi-governmental or regulatory department or authority or other tribunal
applicable to Seller, (c) violate any of the provisions of the Articles of
Incorporation or Bylaws of Seller, or (d) violate, conflict with or result in
a violation or breach of, or otherwise constitute a default (with or without
the giving of notice or the lapse of time or both) under, or permit the
termination of, or require the consent of any other party to, or result in the
acceleration of, or entitle any party to accelerate any obligation under, or
result in the loss of any benefit under, or give rise to the creation of any
Lien upon any of the Purchased Assets under the terms, conditions or
provisions of any agreement, bond, note or indenture to which Seller is a
party or by which Seller or any of the Purchased Assets is bound.
2.4 Material Contracts; Compliance.
(a) Schedule 1.1(f) of the Disclosure Schedule sets forth a list of all
the material contracts, agreements and arrangements, whether written or oral,
formal or informal, to which Seller is a party or by which Seller and its
properties or assets are bound (collectively, the "Material Contracts"), which
contracts include, without limitation, any contract or agreement with respect
to the Business which by its terms has an aggregate future liability in excess
of $50,000 and which is not terminable by Seller on (a) not more than 60 days'
notice without penalty or premium or (b) for a cost of less than $10,000. The
Material Contracts were negotiated at arms' length and in good faith on the
part of Seller and constitute all contracts, agreements and arrangements that
are material to the conduct of the Business.
(b) All Material Contracts that are included in the Purchased Assets are
in full force and effect and Seller is not in breach or default there under.
Seller has no knowledge of any default by any third party under any Material
Contract which is a Purchased Asset.
(c) There has not occurred, nor are there any ongoing, events, acts,
omissions, conditions, claims, liabilities or obligations (collectively, the
"Events") of any kind whatsoever that would have a Material Adverse Effect on
the Business or the Purchased Assets taken as a whole. Seller is not aware of
any such Events that may occur post-Closing.
2.5 Title. Seller owns all the Purchased Assets free and clear of all
Liens, other than Permitted Liens. The Purchased Assets are all the
properties and assets that are individually or in the aggregate material to
the Business other than the Excluded Assets. All of the properties and assets
used in the conduct of the Business are in good operating condition and repair
in accordance with industry practice (ordinary wear and tear excepted). With
respect to those Production Interests and Property Interests in which Seller
holds an interest under leases or other contracts: (i) Seller is in exclusive
possession of such Properties; (ii) Seller has not received any notice of
default of any of the terms or provisions of such leases or contracts; (iii)
Seller has the authority under such leases or contracts to perform fully its
obligations under this Agreement; (iv) to the best of Seller's knowledge, such
leases and contracts are valid and are in good standing; and (v) to the best
of Seller's knowledge, the properties covered thereby are free and clear of
all defects, liens and encumbrances and third party rights except for those
listed in Schedule 1.2(d). Seller has delivered to Buyer all information
concerning title to the Production Interests and Property Interests in
Seller's possession or control, including, but not limited to, true and
correct copies of all leases or other contracts relating to such interests of
which Seller has knowledge.
2.6 Litigation or Proceedings. There are no actions, suits, inquiries,
investigations, arbitrations or proceedings pending or, to Seller's knowledge,
threatened before any court or arbitrator or Authority in respect of the
Business or the Purchased Assets. Seller does not know of any fact, event, or
condition which could reasonably be expected to serve as a basis for the
non-frivolous assertion of any such action, suit, inquiry, investigation,
arbitration or proceeding. As of the date hereof there are no outstanding
judgments, decrees, injunctions, rulings or orders of any court or Authority
against Seller in respect of the Business or the Purchased Assets.
2.7 Consents. Except as provided for in Section 4.8, no consent,
approval or authorization of, or registration or filing with, any Person is
required in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby by Seller.
2.8 Compliance with Applicable Law; Permits and Licenses.
(a) Seller holds all licenses, franchises, permits, consents and
authorizations necessary for the lawful conduct of the Business, and the
Business is not being and has not been conducted in violation of any provision
of any federal, state, local or foreign statute, law, ordinance, rule,
regulation, judgment, decree, order, concession, grant, franchise, permit,
consent or license or other governmental authorization or approval.
(b) Seller has not received any notification of any failure by Seller to
comply with any such federal, state, local or foreign statute, law, ordinance,
rule, regulation, judgment, decree, order, concession, grant, franchise,
permit, consent or license or other governmental authorization or approval
applicable to the Business or the Purchased Assets.
2.9 Environmental Matters.
(a) Except as set forth in Schedule 2.9(a) of the Disclosure Schedule,
Seller is in compliance with all applicable Environmental Laws, which
compliance includes, but is not limited to, the possession by Seller of all
permits and other governmental authorizations and approvals required under all
Environmental Laws, and compliance with the terms and conditions thereof, and
the proper handling and disposal of all Materials of Environmental Concern (as
hereinafter defined). Neither Seller nor, to its knowledge, any predecessor
to Seller has, within the past ten (10) years, received any written
communication from a governmental, quasi-governmental or regulatory department
or authority, citizens group, or director, officer, employee or agent,
alleging the noncompliance with or the violation of any Environmental Laws.
All permits and other governmental authorizations and approvals currently held
by Seller pursuant to the Environmental Laws are identified in Schedule
2.9(a).
(b) There is no Environmental Claim (as hereinafter defined) pending or
threatened against Seller or pending or threatened against any Person or
entity whose liability for any Environmental Claim Seller has or may have
retained or assumed either contractually, by operation of law or otherwise.
(c) Except as set forth in Schedule 2.9(c) of the Disclosure Schedule,
there are no past or present actions, activities, circumstances, conditions,
events or incidents, including, without limitation, the handling, manufacture,
treatment, storage, use, generation, release, emission, discharge, presence or
disposal of any Materials of Environmental Concern (as hereinafter defined),
that could form the basis of any Environmental Claim against Seller or against
any Person or entity whose liability for any Environmental Claim Seller has or
may have retained or assumed either contractually, by operation of law or
otherwise.
2.10 Employee Benefit Plans. Seller has no Employee Benefit Plans.
2.11 Labor Relations. Seller is not subject to any labor strikes,
stoppages or lockouts and is not a party to any contract or agreement with any
labor organization or other representative of its employees. No labor
organization or group of employees: (i) has been recognized or certified as
representatives to Seller for any current or former employees of Seller; (ii)
has made any demand for recognition or certification, and there are no
representation or certification proceedings or petitions seeking a
representation proceeding presently pending or threatened to be brought or
filed with the National Labor Board or any other labor relations tribunal or
authority. There are no organizing activities involving Seller pending with
any labor organization or group of employees of Seller.
2.12 Insurance. Set forth on Schedule 2.12 of the Disclosure Schedule is
a list of the insurance policies maintained by Seller and effective on the
date hereof. Seller has paid all premiums due with respect to each such
insurance policy and, except as set forth in Schedule 2.12 of the Disclosure
Schedule, since December 31, 2003 Seller has not had, with respect to the
Business or Purchased Assets, any casualty loss which would give rise to any
claim of any kind not covered by insurance.
2.13 Financial Statements. Seller has delivered to Buyer copies of
Seller's audited balance sheets and statements of income, shareholders' equity
and cash flow as of and for the fiscal years ended December 31, 2003 and
December 31, 2002 (the "Seller Year-end Financial Statements") and Seller's
interim balance sheet and statements of income and cash flow for the
nine-month period ended September 30, 2004, including the notes thereto (the
"Seller Interim Financial Statements"; together with the Seller Year-end
Financial Statements, the "Seller Financial Statements"). The Seller
Financial Statements, including, without limitation, the notes thereto, are
true and correct in all material respects and have been prepared in accordance
with GAAP, consistently followed throughout the periods indicated, except that
the Seller Interim Financial Statements are subject to year-end audit
adjustments. The Seller Financial Statements fairly present the financial
condition of Seller as of the dates thereof and the results of operations and
cash flow of Seller for the periods indicated.
2.14 Absence of Undisclosed Liabilities. Except as set forth in Schedule
2.14 of the Disclosure Schedule, at September 30, 2004, Seller has no
liability (whether accrued, absolute, contingent or otherwise, and whether
then due or to become due), and no loss contingency, except as reflected on
the balance sheet included in the Seller Interim Financial Statements, which
would be required to be included therein in accordance with GAAP, consistently
applied with prior periods.
2.15 Absence of Certain Changes. Except as disclosed in Schedule 2.15 of
the Disclosure Schedule, since September 30, 2004, Seller has conducted the
Business only in the ordinary and usual course, and, without limiting the
generality of the foregoing, since September 30, 2004 there has not been:
(a) Any event, change or condition of any character in or on the
Business, Purchased Assets, financial condition, results of operations or
prospects of Seller which, individually or in the aggregate, have had or could
reasonably be expected to have a Material Adverse Effect;
(b) Any sale, lease, license, Lien or other transfer or disposition of
any assets or properties of Seller material to the Business;
(c) Any entry into any Material Contract by Seller;
(d) Any material damage, destruction or loss to the Purchased Assets,
whether or not covered by insurance, which may have a Material Adverse Effect;
(e) Any material change by Seller in its financial or tax accounting
principles or methods; or
(f) Any failure by Seller to take Reasonable Efforts to preserve its
goodwill with suppliers and customers.
2.16 Taxes. Except as set forth in Schedule 2.16 of the Disclosure
Schedule, Seller has:
(a) timely filed or caused to be filed with appropriate governmental
agencies or departments all Federal, state, local and foreign returns (the
"Tax Returns") for Taxes required to be filed by it (including, without
limitation, estimated tax returns, employer's withholding tax returns, other
withholding tax returns and Federal Unemployment Tax Act returns);
(b) made available to Buyer complete and accurate copies of such Tax
Returns;
(c) paid or caused to be paid, or have made adequate provision or set up
an adequate accrual or reserve for the payment of, all Taxes required to be
paid in respect of the periods for which such Tax Returns are due, and will
establish an adequate accrual or reserve for the payment of all Taxes payable
in respect of the period, including portions thereof, subsequent to the last
of said periods required to be so accrued or reserved, up to and including the
Closing Date; and
(d) The Tax Returns are complete and accurate in all material respects
and the calculations and deductions set forth therein have been made, in all
respects, in compliance with all applicable Tax statutes, laws, rules and
regulations.
2.17 Regulatory Reports. Seller has filed all reports, registrations and
statements, together with any amendments required to be made with respect
thereto, that it was required to file in respect of the Business and the
Purchased Assets with any federal, state, local or foreign governmental,
quasi-governmental or regulatory department, authority or agency (hereinafter
sometimes collectively referred to as the "Regulatory Agencies"), and has paid
all fees or assessments due and payable in connection therewith. No
Regulatory Agency has initiated any proceeding or investigation into the
Business, nor has Seller initiated any such proceeding.
2.18 Agreements with Regulatory Agencies. Seller is not subject to any
cease-and-desist or other order issued by, or a party to any written agreement
or memorandum of understanding with, any Regulatory Agency that restricts or
may adversely impact the Business or the Purchased Assets.
2.19 Transactions with Insiders. Except as set forth in Schedule 2.19 of
the Disclosure Schedule, and except with respect to equity interests
constituting less than 5% of the outstanding capital stock of any publicly
traded corporation and those items and activities of Seller that are not
included in the Business or the Purchased Assets, no Insider: (a) owns,
directly or indirectly, any debt, equity or other interest or investment in
any corporation, association or other entity which is a competitor, lessor,
lessee, customer, or supplier of Seller, or otherwise has a business
relationship with Seller; (b) has pending or threatened any action, suit,
proceeding or other claim against or owes any amount to, or is owed any amount
by, Seller, other than for amounts accrued in the ordinary course of
employment; (c) has any interest in or owns any property or right used in the
conduct of the operations of the Business; (d) has lent or advanced any money
to, or borrowed any money from, or guaranteed or otherwise become liable for
any indebtedness or other obligations of Seller, which loans, debts or
guarantees are now outstanding or will be outstanding on the Closing Date; or
(e) is a party to any contract, lease, agreement, arrangement or commitment,
whether oral or written, express or implied, concerning the operations of the
Business.
2.20 Absence of Questionable Payments. Neither Seller, nor any
directors, officers, employees or agents thereof, nor any other Person acting
on their behalf (a) has made any unlawful political contributions; (b) has
received any payments, services or gratuities which were not legal to receive
or which Seller or such Persons should have known were not legal for the payor
or the provider to make or provide; or (c) has made any unlawful payments or
given or agreed to give any gift or similar benefit of more than nominal value
to governmental officials in their individual capacities for the purpose of
assisting Seller in securing or retaining any business opportunity, contract,
permit or license or in conducting its usual and customary operations.
2.21 Disclosure. No representation or warranty as to Seller, the
Purchased Assets or the Business contained in this Agreement and no statement
contained in the Schedules contains any untrue or incomplete statement of a
material fact that could reasonably be expected to have a Material Adverse
Effect.
2.22 Brokerage. Neither Seller nor any of its directors, shareholders,
officers, employees or agents has made any agreement or taken any other action
with a broker, investment banker, finder or intermediary which would cause
Buyer or its Affiliates to become liable for a broker's fee or commission as a
result of the transactions contemplated hereunder.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
3.1 Organization and Good Standing. Buyer is a corporation validly
existing and in good standing under the laws of the state of Utah and has all
requisite power and authority and legal right to own, lease and operate its
assets and to carry on its business as and where presently being conducted.
Buyer does not own or lease any assets or engage in any business outside the
state of Utah.
3.2 Authorization and Enforceability.
(a) Buyer has full power and authority to make, execute, deliver and
perform this Agreement, and the execution, delivery and performance of this
Agreement by Buyer have been duly authorized by all necessary action on the
part of Buyer.
(b) This Agreement has been, and the documents to be delivered by Buyer
at Closing in connection herewith will be, duly executed and delivered by
Buyer and constitute the legal, valid and binding obligation of Buyer
enforceable against Buyer in accordance with their respective terms.
3.3 No Violation of Laws or Agreements. The execution, delivery and
performance of this Agreement by Buyer do not (a) violate any provision of
applicable law, rule, regulation or ordinance, (b) violate any judgment,
order, writ, injunction or decree of any court, governmental,
quasi-governmental or regulatory department or authority or other tribunal
applicable to Buyer, (c) violate any of the provisions of the Articles of
Incorporation or Bylaws of Buyer, or (d) violate, conflict with or result in a
violation or breach of, or otherwise constitute a default (with or without the
giving of notice or the lapse of time or both) under, or permit the
termination of, or require the consent of any other party to, or result in the
acceleration of, or entitle any party to accelerate any obligation under, or
result in the loss of any benefit under, or give rise to the creation of any
Lien upon any of the Purchased Assets under the terms, conditions or
provisions of any agreement, bond, note or indenture to which Buyer is a party
or by which Buyer or any of the Purchased Assets is bound.
3.4 Material Contracts; Compliance.
(a) Schedule 3.4 of the Disclosure Schedule sets forth a list of all the
material contracts, agreements and arrangements, whether written or oral,
formal or informal, to which Buyer is a party or by which Buyer and its
properties or assets are bound, which contracts include, without limitation,
any contract or agreement with respect to the business of Buyer that by its
terms has an aggregate future liability in excess of $5,000 and that is not
terminable by Buyer on (a) not more than 60 days' notice without penalty or
premium or (b) for a cost of less than $1,000.
(b) There has not occurred, nor are there any ongoing, events, acts,
omissions, conditions, claims, liabilities or obligations (collectively, the
"Events") of any kind whatsoever that would have a Material Adverse Effect on
the Buyer or its assets taken as a whole. Buyer is not aware of any such
Events that may occur post-Closing.
3.5 Title. Buyer owns all of its assets free and clear of all Liens,
other than Permitted Liens.
3.6 Litigation or Proceedings. There are no actions, suits, inquiries,
investigations, arbitrations or proceedings pending or, to Buyer's knowledge,
threatened before any court or arbitrator or Authority in respect of the
business or assets of Buyer. Buyer does not know of any fact, event, or
condition that could reasonably be expected to serve as a basis for the
non-frivolous assertion of any such action, suit, inquiry, investigation,
arbitration or proceeding. As of the date hereof there are no outstanding
judgments, decrees, injunctions, rulings or orders of any court or Authority
against Buyer or in respect of the business or any of the assets of Buyer.
3.7 Consents. Except as provided for in Section 4.8, no consent,
approval or authorization of, or registration or filing with, any Person is
required in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby by Buyer.
3.8 Compliance with Applicable Law; Permits and Licenses.
(a) Buyer holds all licenses, franchises, permits, consents and
authorizations necessary for the lawful conduct of its business and the
operation of its assets, and the business of Buyer is not being and has not
been conducted in violation of any provision of any federal, state, local or
foreign statute, law, ordinance, rule, regulation, judgment, decree, order,
concession, grant, franchise, permit, consent or license or other governmental
authorization or approval.
(b) Buyer has not received any notification of any failure by Buyer to
comply with any such federal, state, local or foreign statute, law, ordinance,
rule, regulation, judgment, decree, order, concession, grant, franchise,
permit, consent or license or other governmental authorization or approval
applicable to its assets and business.
3.9 Environmental Matters.
(a) Except as set forth in Schedule 3.9(a) of the Disclosure Schedule,
Buyer is in compliance with all applicable Environmental Laws, which
compliance includes, but is not limited to, the possession by Buyer of all
permits and other governmental authorizations and approvals required under all
Environmental Laws, and compliance with the terms and conditions thereof, and
the proper handling and disposal of all Materials of Environmental Concern (as
hereinafter defined). Buyer has not, within the past ten (10) years, received
any written communication from a governmental, quasi-governmental or
regulatory department or authority, citizens group, or director, officer,
employee or agent, alleging the noncompliance with or the violation of any
Environmental Laws.
(b) There is no Environmental Claim (as hereinafter defined) pending or
threatened against Buyer or pending or threatened against any Person or entity
whose liability for any Environmental Claim Buyer has or may have retained or
assumed either contractually, by operation of law or otherwise.
(c) Except as set forth in Schedule 3.9(c) of the Disclosure Schedule,
there are no past or present actions, activities, circumstances, conditions,
events or incidents, including, without limitation, the handling, manufacture,
treatment, storage, use, generation, release, emission, discharge, presence or
disposal of any Materials of Environmental Concern (as hereinafter defined),
that could form the basis of any Environmental Claim against Buyer or against
any Person or entity whose liability for any Environmental Claim Buyer has or
may have retained or assumed either contractually, by operation of law or
otherwise.
3.10 Employee Benefit Plans. Buyer has no Employee Benefit Plans.
3.11 Labor Relations. Buyer is not subject to any labor strikes,
stoppages or lockouts and is not a party to any contract or agreement with any
labor organization or other representative of its employees. No labor
organization or group of employees: (i) has been recognized or certified as
representatives to Buyer for any current or former employees of Buyer; (ii)
has made any demand for recognition or certification, and there are no
representation or certification proceedings or petitions seeking a
representation proceeding presently pending or threatened to be brought or
filed with the National Labor Board or any other labor relations tribunal or
authority. There are no organizing activities involving Buyer pending with
any labor organization or group of employees of Buyer.
3.12 Insurance. Set forth on Schedule 3.12 of the Disclosure Schedule is
a list of the insurance policies maintained by Buyer and effective on the date
hereof. Buyer has paid all premiums due with respect to each such insurance
policy and, except as set forth in Schedule 3.12 of the Disclosure Schedule,
since December 31, 2003 Buyer has not had any casualty loss which would give
rise to any claim of any kind not covered by insurance.
3.13 Financial Statements. Buyer has delivered to Seller copies of
Buyer's annual report on Form 10-KSB for the year ended December 31, 2003 and
quarterly report on Form 10-QSB for the period ended September 30, 2004, which
include Buyer's audited balance sheet as of December 31, 2003 and statements
of income, shareholders' equity and cash flow as of and for the fiscal years
ended December 31, 2003 and December 31, 2002 (the "Buyer Year-end Financial
Statements") and Buyer's interim balance sheet and statements of income and
cash flow for the nine-month period ended September 30, 2004 (the "Buyer
Interim Financial Statements"; together with the Buyer Year-end Financial
Statements, the "Buyer Financial Statements"). The Buyer Financial
Statements, including, without limitation, the notes thereto, are true and
correct in all material respects and have been prepared in accordance with
GAAP, consistently followed throughout the periods indicated, except that the
Buyer Interim Financial Statements are subject to year-end audit adjustments.
The Buyer Financial Statements fairly present the financial condition of Buyer
as of the dates thereof and the results of operations and cash flow of Buyer
for the periods indicated.
3.14 Absence of Undisclosed Liabilities. Except as set forth in Schedule
3.14 of the Disclosure Schedule, at September 30, 2004, Buyer has no liability
(whether accrued, absolute, contingent or otherwise, and whether then due or
to become due), and no loss contingency, except as reflected on the balance
sheet included in the Buyer Interim Financial Statements, which would be
required to be included therein in accordance with GAAP, consistently applied
with prior periods.
3.15 SEC Reports. Buyer has made all filings with SEC that it has been
required to make within the past three years under the Securities Act and the
Exchange Act (collectively the "SEC Reports"). Each of the SEC Reports has
complied with the Securities Act and the Securities Exchange Act in all
material respects. None of the SEC Reports, as of their respective dates,
contained any untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading. Buyer has
delivered to Seller a correct and complete copy of each SEC Report filed with
the SEC since October 1, 2003, together with all exhibits and schedules
thereto and as amended to date.
3.16 Xxxxxxxx-Xxxxx Compliance. Buyer has, since July 30, 2002, included
in its SEC Reports the disclosure required by Item 307 of Regulation S-B and
the certifications required by Section 302 and 906 of the Xxxxxxxx-Xxxxx Act
of 2002, and has not extended or maintained credit, arranged for the extension
of credit, or renewed an extension of credit, in the form of a personal loan
to or for any director or executive officer of Buyer that is prohibited by
Section 402 of the Xxxxxxxx-Xxxxx Act of 2002.
3.17 Capitalization. The entire authorized capital stock of Buyer
consists of 200,000,000 shares common stock, par value $0.00025 per share, of
which 404,451 shares are issued and outstanding. All of the issued and
outstanding common shares of Buyer have been duly authorized and are validly
issued, fully paid, and non-assessable. There are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that could require
Buyer to issue, sell, or otherwise cause to become outstanding any of its
capital stock. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to Buyer.
3.18 Absence of Certain Changes. Except as disclosed in Schedule 3.18 of
the Disclosure Schedule, since September 30, 2004, Buyer has conducted its
business and operated its assets only in the ordinary and usual course, and,
without limiting the generality of the foregoing, since September 30, 2004
there has not been:
(a) Any material change by Buyer in its financial or tax accounting
principles or methods;
(b) Any capital investment in, any loan to, or any acquisition of the
securities or assets of, any other Person;
(c) Issuance of any note, bond, or other debt security, or the creation,
assumption, or guaranty of any indebtedness for borrowed money or capitalized
lease obligation;
(d) Any delay or postponement of the payment of accounts payable;
(e) Any change made or authorized in the Articles of Incorporation or
Bylaws of Buyer;
(f) Declaration, setting aside, or payment of any dividend or
distribution with respect to Buyer's capital stock (whether in cash or in
kind) or redemption, purchase, or acquisition by Buyer any of its capital
stock;
(g) Any loan to or any other transaction with any of Buyer's directors,
officers, and employees, except as contemplated by this Agreement;
(h) Adoption or approval of any employment contract or compensation
arrangement, written or oral; or
(i) Commitment to do any of the foregoing.
3.19 Taxes. Except as set forth in Schedule 3.17 of the Disclosure
Schedule, Buyer has:
(a) timely filed or caused to be filed with appropriate governmental
agencies or departments all Federal, state, local and foreign returns (the
"Tax Returns") for Taxes required to be filed by it (including, without
limitation, estimated tax returns, employer's withholding tax returns, other
withholding tax returns and Federal Unemployment Tax Act returns);
(b) made available to Seller complete and accurate copies of such Tax
Returns;
(c) paid or caused to be paid, or have made adequate provision or set up
an adequate accrual or reserve for the payment of, all Taxes required to be
paid in respect of the periods for which such Tax Returns are due, and will
establish an adequate accrual or reserve for the payment of all Taxes payable
in respect of the period, including portions thereof, subsequent to the last
of said periods required to be so accrued or reserved, up to and including the
Closing Date; and
(d) The Tax Returns are complete and accurate in all material respects
and the calculations and deductions set forth therein have been made, in all
respects, in compliance with all applicable Tax statutes, laws, rules and
regulations.
3.20 Regulatory Reports. Buyer has filed all reports, registrations and
statements, together with any amendments required to be made with respect
thereto, that it was required to file in respect of its business and assets
with any federal, state, local or foreign governmental, quasi-governmental or
regulatory department, authority or agency (hereinafter sometimes collectively
referred to as the "Regulatory Agencies"), and has paid all fees or
assessments due and payable in connection therewith. No Regulatory Agency has
initiated any proceeding or investigation into the business or assets of
Buyer, nor has Buyer initiated any such proceeding.
3.21 Agreements with Regulatory Agencies. Buyer is not subject to any
cease-and-desist or other order issued by, or a party to any written agreement
or memorandum of understanding with, any Regulatory Agency that restricts or
may adversely impact the Buyer.
3.22 Transactions with Insiders. Except with respect to equity interests
constituting less than 5% of the outstanding capital stock of any publicly
traded corporation, no Insider: (a) owns, directly or indirectly, any debt,
equity or other interest or investment in any corporation, association or
other entity which is a competitor, lessor, lessee, customer, or supplier of
Buyer, or otherwise has a business relationship with Buyer; (b) has pending or
threatened any action, suit, proceeding or other claim against or owes any
amount to, or is owed any amount by, Buyer; (c) has lent or advanced any money
to, or borrowed any money from, or guaranteed or otherwise become liable for
any indebtedness or other obligations of Buyer; or (d) is a party to any
contract, lease, agreement, arrangement or commitment, whether oral or
written, express or implied, concerning the Buyer or any of its assets or
operations.
3.23 Absence of Questionable Payments. Neither Buyer, nor any directors,
officers, employees or agents thereof, nor any other Person acting on their
behalf (a) has made any unlawful political contributions; (b) has received any
payments, services or gratuities which were not legal to receive or which
Buyer or such Persons should have known were not legal for the payor or the
provider to make or provide; or (c) has made any unlawful payments or given or
agreed to give any gift or similar benefit of more than nominal value to
governmental officials in their individual capacities for the purpose of
assisting Buyer in securing or retaining any business opportunity, contract,
permit or license or in conducting its usual and customary operations.
3.24 Disclosure. No representation or warranty as to Buyer contained in
this Agreement and no statement contained in the Schedules of Buyer contains
any untrue or incomplete statement of a material fact that could reasonably be
expected to have a Material Adverse Effect.
3.25 Brokerage. Neither Buyer nor any of its directors, shareholders,
officers, employees or agents has made any agreement or taken any other action
with a broker, investment banker, finder or intermediary which would cause
Seller or its Affiliates to become liable for a broker's fee or commission as
a result of the transactions contemplated hereunder.
ARTICLE IV.
CERTAIN COVENANTS
4.1 Interim Conduct of Business. From the date hereof until the Closing,
Seller shall preserve, protect and maintain the Business and the Purchased
Assets and shall operate the Business consistent with prior practice and in
the ordinary course of business.
4.2 Interim Conduct of Buyer. From the date hereof until the Closing,
Buyer shall operate its business consistent with prior practice and in the
ordinary course of business. Without limiting the generality of the
foregoing, from the date hereof until the Closing, except for transactions
expressly approved in writing by Seller, Buyer shall not take any action that
would be required to be disclosed under the terms of Section 3.18 (Absence of
Certain Changes).
4.3 Access, Information and Documents. Each of the parties hereto shall
give to the other party and its representatives (including accountants,
counsel and employees), upon reasonable notice and during normal business
hours, full access to the properties, contracts, books, records and affairs of
the other party (but in the case of Seller relating only to the Business and
the Purchased Assets) and shall cause their officers, employees and/or
representatives to furnish all documents, records and information (and copies
thereof) as the other party may reasonably request. In the event this
Agreement is terminated pursuant to its terms, each of the parties will keep
confidential any confidential information obtained from the other party
(except as may be specifically required to be disclosed by applicable law or
administrative or legal process or pursuant to any securities exchange rules).
4.4 No Solicitation. The parties hereto shall not, and shall cause their
respective officers, directors, or employees or any investment banker,
financial advisor, representative, advisor, attorney, or accountant retained
by or on behalf of them to not, initiate, solicit, or encourage (including,
without limitation, by way of furnishing non-public information), or take any
other action to facilitate, any inquiries or the making of any proposal to
effect an Alternative Transaction, or enter into discussions, negotiate, or
enter into any agreement with any Person regarding an Alternative Transaction.
For purposes of this Agreement, "Alternative Transaction" means any (A) direct
or indirect acquisition or purchase of any assets of Seller other than in the
ordinary course of business, (B) direct or indirect acquisition or purchase of
any equity securities of Seller or (C) merger, consolidation, business
combination, capitalization, joint venture, purchase of assets, liquidation,
dissolution or similar transaction involving Buyer or Seller, other than the
transactions contemplated by this Agreement.
4.5 Public Announcement. No party hereto shall make or issue, or cause
to be made or issued, any announcement or written statement concerning this
Agreement or the transactions contemplated hereby for dissemination to the
general public without the prior written consent of the other party (except to
the respective directors, officers and creditors of Buyer and Seller or as may
be specifically required by applicable law or administrative or legal
process).
4.6 Confidential Information. After the Closing, Seller shall not use,
publish or disclose to any third Person any confidential or proprietary
information comprising part of the Purchased Assets or relating to the
Business; provided, however that the foregoing restrictions shall not apply to
information: (i) that is necessary to enforce their rights under or defend
against a claim asserted under this or any other agreement with Buyer, (ii)
that is necessary or appropriate to disclose to any regulatory authority or
governmental agency having jurisdiction over Seller or as otherwise required
by law or (iii) that becomes generally known other than through a breach of
this Agreement by Seller.
4.7 Mutual Covenants. The parties mutually covenant and agree, as
applicable, to use reasonable best efforts to obtain promptly the satisfaction
of the conditions to the Closing of the transactions contemplated herein. In
furtherance of the foregoing, the parties hereto agree to use their reasonable
best efforts to (a) file all necessary documentation with the appropriate
Authorities as soon as practicable to obtain as soon as possible all consents,
approvals or authorizations required by any Authority in order to consummate
the transactions contemplated by this Agreement, (b) take any action
reasonably requested or accept any condition reasonably imposed by any
Authority in connection with any such consent, approval or authorization, (c)
resolve any objection asserted with respect to the transactions contemplated
hereby under any federal or state statute, rule or regulation. Each party
hereto shall furnish to the other and to the other's counsel all such
information as may be reasonably required in order to effectuate the foregoing
action.
4.8 Stockholder Vote; Registration.
(a) Buyer shall upon effectiveness of the Registration Statement provided
for in the next paragraph take all action required to submit to the
stockholders of Buyer for approval in accordance with the laws of the state of
Utah the sale of the Buyer's assets to Xxxxx Xxxxxxxxx as contemplated hereby,
an amendment to the articles of incorporation of Buyer to change its name to
Energytec, and affect such other changes as Seller may reasonably request.
(b) As soon as practicable following the signing of this Agreement the
Buyer shall prepare and file with the SEC the Registration Statement covering
the distribution of the Purchase Shares on a pro rata basis to the to the
stockholders of Seller and approval of the matters provided for in the
preceding paragraph by the stockholders of Buyer. The Registration Statement
required hereunder shall be on Form S-4 or other applicable form. The Buyer
shall use its best efforts to cause the Registration Statement to be declared
effective under the Securities Act as promptly as possible after the filing
thereof, and shall use its best efforts to keep the Registration Statement
continuously effective under the Securities Act until the distribution of the
Purchase Shares has been completed. In connection with such registration, the
Buyer covenants and agrees that:
(i) Buyer shall not file a Registration Statement or any amendments
or supplements thereto without the prior written consent of the Seller. The
Buyer shall respond as promptly as reasonably possible to any comments
received from the SEC with respect to the Registration Statement or any
amendment thereto (including the preparation and filing of an amendment to the
Registration Statement) and, as promptly as reasonably possible, provide the
Seller true and complete copies of all correspondence from and to the SEC
relating to the Registration Statement and all amendments thereto. The
Registration Statement and related prospectus shall comply in all material
respects with the provisions of the Securities Act with respect to the
distribution of the Purchase Shares.
(ii) Buyer shall notify the Seller of the issuance by the SEC or any
other federal or state governmental authority of any stop order suspending the
effectiveness of the Registration Statement covering any or all of the
Purchase Shares or the initiation of any Proceedings for that purpose; or
receipt by Buyer of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Purchase Shares
for distribution in any jurisdiction, or the initiation or threatening of any
proceeding for such purpose; or the occurrence of any event or passage of time
that makes the financial statements included in the Registration Statement
ineligible for inclusion therein or any statement made in the Registration
Statement or prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, prospectus or other
documents so that, in the case of the Registration Statement or the
prospectus, as the case may be, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(iii) Use commercially reasonable efforts to avoid the issuance of,
or, if issued, obtain the withdrawal of (A) any order suspending the
effectiveness of the Registration Statement, or (B) any suspension of the
qualification (or exemption from qualification) of any of the Purchase Shares
for sale in any jurisdiction, at the earliest practicable moment.
(iv) Furnish to Seller at least one conformed copy of the
Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference to the extent requested by Seller, and all
exhibits to the extent requested by Seller (including those previously
furnished or incorporated by reference) promptly after the filing of such
documents with the SEC.
(v) Promptly deliver to Seller as many copies of the prospectus or
prospectuses (including each form of prospectus) and each amendment or
supplement thereto as Seller may reasonably request.
(vi) Prior to distribution of the Purchase Shares by Seller, Buyer
shall use its commercially reasonable efforts to register or qualify or
cooperate with the Seller in connection with the registration or qualification
(or exemption from the registration or qualification) of the Purchase Shares
for distribution to the Seller's stockholders under the securities or Blue Sky
laws of such jurisdictions within the United States as Seller reasonably
requests and to do any and all other acts or things reasonably necessary to
enable the disposition in such jurisdictions of the Purchase Shares covered by
the Registration Statement.
4.9 Certain Taxes and Expenses.
(a) Seller shall pay all sales, use, transfer, documentary stamp and
other similar taxes and all recording, filing and other fees and costs with
respect to the sale and purchase of the Purchased Assets.
(b) Whether or not the transactions contemplated by this Agreement are
consummated, and except as otherwise provided herein, Seller and Buyer shall
each bear their respective accounting, legal, financial advisory and other
expenses incurred in connection with the transactions contemplated by this
Agreement; provided, however, that all costs and expenses of effecting
registration of the Purchase Shares contemplated by Section 4.8, including,
(i) all registration and filing fees (including, without limitation, fees and
expenses in compliance with applicable state securities or Blue Sky laws),
(ii) printing expenses (including, without limitation, expenses of printing
certificates for the Purchase Securities distributed to the stockholders of
Seller and of printing prospectuses included in the Registration Statement),
(iii) messenger, telephone and delivery expenses, and (iv) fees and
disbursements of counsel and accountants for the Buyer, shall be xxxxx by
Seller. In addition, Seller shall be responsible for all of its internal
expenses incurred in connection with the registration.
4.10 Post-Closing Access to Information. Seller and Buyer shall
reasonably cooperate with each other after the Closing so that (subject to any
limitations that are reasonably required to preserve any applicable
attorney-client privilege) each party has access to the business records,
contracts and other information existing at the Closing Date and relating to
the Purchased Assets, the Assumed Liabilities or the conduct of the Business
(whether in the possession of Seller or Buyer) as is reasonably necessary for
(a) the preparation for or the prosecution or defense of any suit, action,
litigation or administrative, arbitration or other proceeding or investigation
(other than one by or on behalf of a party to this Agreement) by or against
Seller or Buyer, (b) the preparation and filing of any tax return or election
relating the Purchased Assets, the Assumed Liabilities or the conduct of the
Business and any audit by any taxing authority of any returns of Buyer or
Seller relating thereto, and (c) the preparation and filing of any other
documents required by any Authority. The party requesting such information
and assistance shall reimburse the other party for all out-of-pocket costs and
expenses incurred by such party in providing such information and in rendering
such assistance. The access to files, books and records contemplated by this
Section 4.10 shall be during normal business hours and upon not less than two
business days' prior written request, shall be subject to such reasonable
limitations as the party having custody or control thereof may impose to
preserve the confidentiality of information contained therein, and shall not
extend to material subject to a claim of privilege unless expressly waived by
the party entitled to claim the same.
ARTICLE V.
CONDITIONS PRECEDENT; TERMINATION
5.1 Conditions Precedent to Obligations of Buyer. The obligations of
Buyer to purchase the Purchased Assets, assume the Assumed Liabilities and
consummate the other transactions contemplated hereunder are subject to the
satisfaction, as of the Closing Date, of each of the following conditions (any
one or more of which may be waived in whole or in part by Buyer in its sole
discretion to the extent permitted by law):
(a) Performance of Agreements; Representations and Warranties. Seller
shall have performed or complied in all material respects with all agreements,
covenants and conditions required by this Agreement to be performed or
complied with by it at or prior to the Closing; the representations and
warranties set forth in this Agreement made by Seller shall have been true and
correct in all material respects when made and on and as of the Closing Date,
except for (i) changes contemplated by this Agreement, and (ii) those
representations and warranties that address matters only as of a particular
date; and Buyer shall have been furnished with a certificate of the President
of Seller, dated the Closing Date, certifying to the foregoing.
(b) Closing Instruments. Seller shall have caused the cash, documents,
and instruments required by Section 1.5(b) to be delivered (or tendered
subject only to Closing) to Buyer.
(c) Required Consents. All material consents, approvals, authorizations,
registrations or filings by Seller (including the issuance of an order of
effectiveness by the SEC with respect to the Registration Statement) that are
required to be received by Seller under the laws or regulations of the United
States and any other Authority in order to consummate the transactions
contemplated by this Agreement shall have been obtained.
(d) Injunction; Litigation. No statute, rule or regulation or order of
any court or Authority shall be in effect which prohibits the transactions
contemplated by this Agreement.
(e) Condition of Business and Assets. The Business and the Purchased
Assets shall not have been materially adversely affected in any way by any act
of God, fire, flood, war, labor disturbance, legislation (proposed or enacted)
or other event or occurrence, and there shall have been no change in the
prospects of the Business or the Purchased Assets since September 30, 2004
that would have an adverse effect thereon.
5.2 Conditions Precedent to Obligations of Seller. The obligations of
Seller to consummate the transactions contemplated hereunder are subject to
the satisfaction, as of the Closing Date, of each of the following conditions
(any one or more of which may be waived in whole or in part by Seller in its
sole discretion, to the extent permitted by law):
(a) Performance of Agreements; Representations and Warranties. Buyer
shall have performed or complied in all material respects with all agreements,
covenants and conditions required by this Agreement to be performed or
complied with by it at or prior to Closing; the representations and warranties
set forth in this Agreement made by Buyer shall have been true and correct in
all material respects when made and on and as the Closing Date; and Seller
shall have been furnished with a certificate of the President of Buyer, dated
as of the Closing Date, certifying to the foregoing.
(b) Closing Instruments. Buyer shall have caused the documents and
instruments required by Section 1.5(c) to be delivered (or tendered subject
only to Closing) to Seller.
(c) Required Consents. All material consents, approvals, authorizations,
registrations or filings by Buyer (including the issuance of an order of
effectiveness by the SEC with respect to the Registration Statement) that are
required to be received by Buyer under the laws or regulations of the United
States and any other Authority in order to consummate the transactions
contemplated by this Agreement shall have been obtained.
(d) Injunction; Litigation. No statute, rule or regulation or order of
any court or Authority shall be in effect which prohibits the transactions
contemplated by this Agreement.
5.3 Termination. This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned:
(a) By mutual written consent of Buyer and Seller at any time prior to
Closing;
(b) By Buyer by written notice to Seller if the Closing does not occur on
or before June 30, 2005 unless the failure to close is the result of a breach
of this Agreement by Buyer;
(c) By Seller by written notice to Buyer if the Closing does not occur on
or before June 30, 2005 unless the failure to close is the result of a breach
of this Agreement by Seller;
(d) By Buyer by written notice to Seller (i) if there is a material
breach of any representation or warranty of Seller set forth in this Agreement
or any covenant or agreement to be complied with or performed by Seller
pursuant to this Agreement which material breach has not been cured within 10
days following Seller's receipt of written notice of such breach, or (ii) in
the event that all of the conditions to Buyer's obligations to Closing under
this Agreement have not been satisfied by the Closing Date or waived by Buyer;
(e) By Seller by written notice to Buyer (i) if there is a material
breach of any representation or warranty of Buyer set forth in this Agreement
or any covenant or agreement to be complied with or performed by Buyer
pursuant to this Agreement which material breach has not been cured by Buyer
or waived by Seller within 10 days following receipt of written notice of such
breach, or (ii) in the event that all of the conditions to Seller's
obligations to Closing under this Agreement have not been satisfied by the
Closing Date or waived by Seller; or
(f) By Seller or Buyer by written notice to each other, at any time
before the Closing, in the event that any order or law becomes effective (and
final and non-appealable) restraining, enjoining, or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by
this Agreement.
If this Agreement is validly terminated pursuant to this Section 5.3, this
Agreement shall forthwith become null and void, and there shall be no
liability or obligation on the part of the Seller or Buyer or any of their
respective officers, directors, employees, agents, shareholders, members,
managers or other representatives or affiliates, except that such termination
shall not relieve any party hereto of any liability for any breach of this
Agreement or for fraud, and except that the non-breaching party shall be
entitled to reimbursement of its out of pocket costs incurred in connection
with the transaction (including legal, accounting, travel costs, and costs
contemplated by Section 4.9 of this Agreement).
ARTICLE VI.
INDEMNIFICATION
6.1 Survival. All representations, warranties, covenants and agreements
contained in this Agreement, and in any certificate, schedule, document or
other writing delivered pursuant hereto or in connection with the transactions
contemplated herein shall be in all cases deemed to have been relied upon by
the parties hereto, and shall survive the Closing; provided that the
representations and warranties shall be fully effective and enforceable only
for a period of 12 months after the Closing Date, and shall thereafter be of
no further force or effect, except that (i) the indemnification obligations in
respect of the Excluded Liabilities and Obligations shall survive
indefinitely, and (ii) any misrepresentation or related warranty of which the
party making such representation had actual knowledge of its falsity or
incorrectness as of the Closing Date shall survive indefinitely.
Additionally, the parties agree that the indemnification obligations set forth
in this Article VI shall survive with respect to any claims made within the
applicable survival period until finally resolved or judicially determined,
including any appeal thereof. The representations, warranties, covenants and
agreements contained in this Agreement or any certificate, schedule, document
or other writing delivered pursuant hereto, including any information
regarding the party provided by it in writing for inclusion in the
Registration Statement, shall not be affected by any investigation,
verification or examination by any party hereto or by any Person acting on
behalf of any such party.
6.2 Indemnification of Buyer. From and after the Closing, Seller agrees
to indemnify, defend and save Buyer and its directors, officers, employees,
owners, agents and Affiliates and their successors and assigns or heirs and
personal representatives, as the case may be (each a "Buyer Indemnified
Party"), harmless from and against, and to promptly pay to a Buyer Indemnified
Party or reimburse a Buyer Indemnified Party for any and all losses, damages,
expenses (including, without limitation, court costs, amounts paid in
settlement, judgments, reasonable attorneys' fees or other expenses for
investigating and defending, including, without limitation, those arising out
of the enforcement of this Agreement), suits, actions, claims, deficiencies,
liabilities or obligations (collectively, the "Losses") sustained or incurred
by such Buyer Indemnified Party relating to, caused by or resulting from:
(a) Any breach or inaccuracy of any representation or warranty made by
Seller contained herein or in any certificate, schedule, document or other
writing delivered by Seller pursuant hereto;
(b) Any breach of, or failure to fulfill or satisfy, any covenant or
agreement made by Seller contained herein or in any certificate, schedule,
document or other writing delivered by Seller pursuant hereto;
(c) Any liability of Buyer for third-party causes of action arising in
connection with the Business, the Purchased Assets or the Assumed Liabilities
based upon actions or omissions which occurred prior to the Closing, or
relating to the period prior to the Closing;
(d) The Excluded Liabilities and Obligations;
(e) The non-compliance of Seller with the provisions of any applicable
bulk sales act governing the purchase and sale of the Purchased Assets; or
(f) Arising out of or relating to any untrue or alleged untrue statement
of a material fact contained in the Registration Statement, any prospectus or
any form of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein (in the case of any prospectus or form of
prospectus or supplement thereto, in light of the circumstances under which
they were made) not misleading, except to the extent, but only to the extent,
that such untrue statements or omissions are based solely upon information
regarding the Buyer included by Buyer therein.
6.3 Indemnification of Seller. From and after the Closing, Buyer agrees
to indemnify, defend and save Seller and its directors, officers, employees,
owners, agents and Affiliates and their successors and assigns or heirs and
personal representatives, as the case may be (each, a "Seller Indemnified
Party") harmless from and against, and to promptly pay to a Seller Indemnified
Party or reimburse a Seller Indemnified Party for, any and all Losses
sustained or incurred by such Seller Indemnified Party relating to, caused by
or resulting from:
(a) Any breach or inaccuracy of any representation or warranty made by
Buyer contained herein or in any certificate, schedule, document or other
writing delivered by Buyer pursuant hereto;
(b) Any breach of, or failure to fulfill or satisfy, any covenant or
agreement made by Buyer contained herein or in any certificate, schedule,
document or other writing delivered by Buyer pursuant hereto; and
(c) Arising out of or relating to any untrue or alleged untrue statement
of a material fact contained in the Registration Statement, any prospectus or
any form of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein (in the case of any prospectus or form of
prospectus or supplement thereto, in light of the circumstances under which
they were made) not misleading, except to the extent, but only to the extent,
that such untrue statements or omissions are based solely upon information
regarding the Seller provided in writing by Seller to Buyer for inclusion
therein.
6.4 Indemnification Procedure. In the event that subsequent to the
Closing any Buyer Indemnified Party or Seller Indemnified Party (each, an
"Indemnified Party") has a claim with respect to which Buyer or Seller (the
"Indemnifying Party"), as the case may be, is required to provide
indemnification under this Agreement, the Indemnified Party shall promptly
give written notice, together with a statement of any available information
regarding such claim, to the Indemnifying Party. In the event that the claim
for indemnification is based on the assertion of a claim by a third party, the
Indemnifying Party shall have the right to assume responsibility for the
defense of such claim, provided it promptly agrees that it has responsibility
to indemnify the Indemnified Party with respect to such claim. In such event,
the Indemnifying Party shall have full authority to defend or settle such
claim, provided that any settlement shall require the consent of the
Indemnified Party, which consent shall not be withheld unreasonably.
ARTICLE VII.
MISCELLANEOUS
7.1 Schedules and Exhibits. All Schedules and Exhibits attached hereto
are incorporated herein and made a part hereof for all purposes.
7.2 Notices. Any notice, request, demand, waiver, consent, approval or
other communication which is required or permitted to be given to any party
hereunder shall be in writing and shall be deemed given only if delivered to
the party personally or sent to the party by telecopy, telegram (followed by
hard copy sent by registered or certified mail) or by registered or certified
mail (return receipt requested) with postage and registration or certification
fees thereon prepaid, addressed to the party at its address set forth below:
If to Seller:
Energytec, Inc.
Attn: Xxxxx X Xxxx, President
00000 Xxxxxxx Xxxx, Xxxxx 000
Xxxxxx, XX 00000
Fax: (000) 000-0000
with a copy to (which shall not constitute notice):
Xxxxxxx Xxxxx & Xxxxxxx
Attn: Xxxx X. Xxxxxx
000 Xxxxx Xxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxx Xxxx, XX 00000
Fax: (000) 000-0000
If to Buyer:
Source Energy Corporation
Attn: Xxxxx Xxxxxxxxx, President
0000 Xxxxxxx Xxxxxx Xxxx
Xxxxx, XX 00000
Fax: (000) 000-0000
with a copy to (which shall not constitute notice):
Xxxxxxx X. Xxxxxxxxxx, Esq.
000 Xxxx 000 Xxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, XX 00000
Fax: (000) 000-0000
7.3 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that Seller may not
assign, delegate or otherwise transfer any of its rights or obligations under
this Agreement without the prior written consent of Buyer.
7.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the state of Utah, without giving effect to the
conflict of laws provisions thereof.
7.5 Entire Agreement; Time of Essence. This Agreement constitutes the
entire understanding of the parties and supersedes any prior agreements or
understandings, written or oral, between the parties with respect to the
subject matter hereof. Time is of the essence with respect to all dates and
time periods set forth in this Agreement.
7.6 Construction; Interpretation; Severability. The parties hereby agree
that any rule of law or any legal decision that would require interpretation
of any claimed ambiguities in this Agreement against the party that drafted it
has no application and is expressly waived. References in this Agreement to
dollar amount thresholds shall not, for purposes of this Agreement be deemed
to be evidence of materiality or a Material Adverse Effect. If any provision,
clause or part of this Agreement, or the application thereof under certain
circumstances, is held invalid, the remainder of this Agreement, or the
application of such provision, clause or part under other circumstances, shall
not be affected thereby.
7.7 Further Assurances. Each party shall cooperate and take such action
as may be reasonably requested by the other party in order to carry out the
provisions and purposes of this Agreement and the transactions contemplated
hereby.
7.8 No Third Party Beneficiaries. This Agreement is for the sole benefit
of the parties hereto and their permitted assigns and nothing herein expressed
or implied shall give or be construed to give to any Person, other than the
parties hereto and such assigns, any legal or equitable rights hereunder.
7.9 Amendment and Waiver. The parties may, by mutual agreement, amend
this Agreement in any respect, and any party, as to such party, may (a) extend
the time for the performance of any of the obligations of the other party; (b)
waive any inaccuracies in representations and warranties by the other party;
(c) waive compliance by the other party with any of the agreements contained
herein and performance of any obligations by the other party; and (d) waive
the fulfillment of any condition that is precedent to the performance by such
party of any of its obligations under this Agreement. To be effective, any
such amendment or waiver must be in writing and be signed by the party against
whom enforcement of the same is sought.
7.10 Counterparts and Headings. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but which
together shall constitute one and the same instrument. The headings preceding
the text of the sections and subsections hereof are inserted solely for
convenience of reference, and shall not constitute a part of this Agreement
nor shall they affect its meaning, construction or effect. Section,
subsection and clause references contained herein refer to those contained in
this Agreement unless otherwise specified.
7.11 Facsimile Signature. A signature sent by telecopy or facsimile
transmission shall be as valid and binding upon the party as an original
signature of such party.
7.12 Certain Definitions. In addition to terms defined in the body of
the Agreement, for purposes of the Agreement the term:
"Affiliate" has the meaning ascribed to such term under Rule 12b-2
adopted under the Exchange Act.
"Associate" has the meaning ascribed to such term under Rule 12b-2
adopted under the Exchange Act.
"Authority" means any federal, state, local or foreign governmental or
regulatory agency or authority.
"Business Day" means any day other than a Saturday, Sunday, or a day on
which banking institutions in the State of Utah are authorized or obligated by
law or executive order to close.
"Code" means the Internal Revenue Code of 1986, as amended.
"Disclosure Schedule" means the disclosure schedules delivered by the
parties pursuant to this Agreement. The parties acknowledge and agree that
(i) the Disclosure Schedules may include certain items and information solely
for informational purposes for the convenience of the parties hereto, (ii) the
disclosure of any matter in a Disclosure Schedule shall not be deemed to
constitute an acknowledgment by the party delivering the Disclosure Schedule
that the matter is material or is required to be disclosed pursuant to the
provisions of this Agreement, (iii) any fact or item disclosed in a Disclosure
Schedule and referenced by a particular section in this Agreement shall,
should the existence of the fact or item or its contents be relevant to any
section in this Agreement, be deemed to be disclosed with respect to such
section whether or not a specific cross-reference appears (provided that the
relevance of such fact or item shall be reasonably evident from such
disclosure), (iv) the disclosure of any fact or item in a Disclosure Schedule
shall not represent an admission by the party delivering the disclosure
schedule that such fact or item actually constitutes noncompliance with, or a
violation of, any law, regulation or statute to which such disclosure is
applicable as such disclosure has been made for purposes of creating
exceptions to the representations and warranties made by the party, and (v)
each attachment referenced in a Disclosure Schedule shall be deemed
incorporated into and a part of such Disclosure Schedule.
"Employee Benefit Plan" means any (i) "employee benefit plan" as defined
in Section 3(3) of Employee Retirement Income Security Act of 1974, as
amended, and (ii) bonus, equity option, equity purchase, deferred
compensation, severance, incentive plan or arrangement or other employee
fringe benefit plan.
"Environmental Claim" means any claim, order, investigation, action,
suit, proceeding, injunction, demand or violation of any Environmental Laws,
including, without limitation, any claim, order, investigation, action, suit,
proceeding, injunction, demand or violation for health effects to persons,
property damage and/or damage to natural resources brought by any Authority,
or from any director, officer, employee, agent, contractor or any other
private or third party, and any notice, whether oral or written, advising
Seller of any of the foregoing or of any fact, event or condition which could
reasonably be the basis for the assertion of any of the foregoing.
"Environmental Laws" means:
The Comprehensive Environmental Response, Compensation and Liability Act,
as amended by the Superfund Amendments and Reauthorization Act (42 U.S.C.
Section 9601 et seq.) ("CERCLA") and/or the Solid Waste Disposal Act, as
amended by the Resource Conservation and Recovery Act (42 U.S.C. Section 6901
et seq.) ("RCRA") and/or the Toxic Substances Control Act (15 U.S.C. Section
2601 et seq.) ("TSCA") and/or the Federal Insecticide, Fungicide and
Rodenticide Act (7 U.S.C. Section 136 et seq.) ("FIFRA") and/or the Clean Air
Act (42 U.S.C. Section 7401 et seq.) ("CAA") and/or the Federal Water
Pollution Control Act (33 U.S.C. Section 1251 et seq.) ("FWPCA") and/or the
Safe Drinking Water Act (42 U.S.C. Section 300f et seq.) ("SDWA") including
any amendments or extensions thereof; and
All applicable statutes, laws, regulations, rules, ordinances, codes,
licenses, permits, guidelines, standards, orders, requirements, approvals,
plans, authorizations, concessions, franchises, and similar items of all
governmental agencies, departments, commissions, boards, bureaus and
instrumentalities of the United States, any foreign country, or any state and
political subdivision thereof, and all applicable judicial, administrative,
and regulatory decrees, judgments, and orders relating to pollution and/or the
protection of human health and/or the environment, including, without
limitation, those pertaining to reporting, licensing, permitting,
investigating, and remediating emissions, discharges, releases, or threatened
releases of Materials of Environmental Concern, (as hereinafter defined)
whether solid, liquid, or gaseous in nature, into the air, surface water,
groundwater, or land, or relating to the production, manufacture, processing,
distribution, use, generation, treatment, removal, storage, disposal,
transport, or handling of Materials of Environmental Concern, whether solid,
liquid or gaseous in nature.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Insider" shall mean, with respect to the applicable party, the party,
any Person that is the direct or indirect beneficial holder of 5% or more of
the common stock of the party, a director, an executive officer, or any
Associate or Affiliate of the foregoing.
"Lien" means any lien, charge, pledge, security interest, option,
mortgage, claim, debt or other encumbrances or restrictions of any kind.
"Material Adverse Effect" means any change or effect that individually or
in the aggregate, is materially adverse to the business, assets (including
intangible assets), financial condition or results of operation, other than an
occurrence or event generally affecting the economy or the industry in which
it competes or resulting from the announcement and consummation of the
transaction contemplated pursuant to this Agreement.
"Materials of Environmental Concern" means any substance:
the presence of which requires investigation or remediation under any
Environmental Laws; or
which is defined as a "hazardous waste," "hazardous substance,"
"hazardous material," toxic substance, pollutant or contaminant under any
Environmental Laws; or
which is identified under any Environmental Laws as toxic, explosive,
corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic, or
otherwise hazardous and is or becomes restricted or regulated by any
governmental, quasi-governmental or regulatory authority, agency, department,
commission, board, agency or instrumentality of the United States, any foreign
country or any state or any political subdivision thereof; or
without limitation which includes or contains gasoline, diesel fuel or
other petroleum hydrocarbons or related byproducts.
"Permitted Liens" means (i) any and all Liens accepted and assumed by
Buyer and set forth on the Disclosure Schedules; (ii) Liens related to the
Assumed Liabilities which are set forth on Schedule 1.3 of the Disclosure
Schedule; and (iii) Liens for current Taxes not yet due and payable or of
Taxes the validity of which is contested in good faith by appropriate
proceedings; provided, however, that any such Liens will not materially
interfere with the current use of the Purchased Assets or have a Material
Adverse Effect.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, an Authority, a trust or other entity or
organization.
"Purchase Shares" means approximately 30,992,117 shares of the common
stock, par value $0.00025, of Buyer to be issued to Seller in partial payment
of the Purchase Price for the Purchased Assets at Closing and immediately
thereafter distributed pro rata to the stockholders of Seller as adjusted to
round up the number of shares distributed to the Seller's stockholders so that
no fractional Buyer shares are distributed.
"Reasonable Efforts" means the efforts a prudent business Person who
wanted to achieve a result would use in similar circumstances to see that the
result was achieved as quickly as possible; but an obligation to use
Reasonable Efforts under this Agreement does not require the Person subject to
that obligation to take actions that would result in material liabilities or
risks thereof.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Tax" means all taxes, charges, withholdings, fees, levies, penalties,
additions, interest or other assessments imposed by any United States Federal,
state or local and foreign or other taxing department or authority (including,
without limitation, as a result of being a member of an affiliated, combined
or unitary group or as a result of any obligation arising out of an agreement
to indemnify any other Person), and including, but not limited to, those
related to income, gross receipts, gross income, sales, use, excise,
occupation, services, leasing, valuation, transfer, license, severance,
production, or franchise.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Buyer and Seller have caused this Agreement to be
executed by their duly authorized representatives on the day and year first
written above.
BUYER:
SOURCE ENERGY CORPORATION
By:/s/ Xxxxx Xxxxxxxxx
Xxxxx Xxxxxxxxx, President
SELLER:
ENERGYTEC, INC.
By:/s/ Xxxxx X. Cole_______________________________________
Xxxxx X. Xxxx, President
Exhibit A to
Asset Purchase Agreement
XXXX OF SALE, ASSIGNMENT
AND GENERAL CONVEYANCE
STATE OF }
: ss
COUNTY OF }
KNOW ALL MEN BY THESE PRESENTS:
This Xxxx of Sale, Assignment and General Conveyance ("Assignment") is
executed and delivered on ____________________, 2005 from Energytec, Inc., a
Nevada corporation, ("Seller") to Source Energy Corporation ("Buyer").
W I T N E S S E T H:
WHEREAS, Pursuant to the terms and conditions of the Asset Purchase
Agreement between the parties dated ___________, 2004 ("Agreement") Seller is
selling to Buyer, and Buyer is purchasing from Seller, certain assets of
Seller listed on Exhibit "A" hereto (which represents the "Acquired Assets" as
defined in the Agreement);
NOW, THEREFORE, for good and valuable consideration described in the
Agreement, the receipt, adequacy and sufficiency of which are hereby
acknowledged, and of the premises, mutual covenants, and agreements of the
Parties:
1. Conveyance and Delivery. Effective as of the Closing, Seller does
hereby convey, grant, bargain, sell, transfer, set over, assign, deliver, and
release unto Buyer and Buyer's successors and assigns to have and hold
forever, good and marketable title to the Acquired Assets, all as listed and
described in the Agreement and Exhibit "A" hereto.
2. Title to the Acquired Assets. Seller hereby represents and
warrants that:
(a) Seller has as of the Closing good and marketable title to each and
every item of the Acquired Assets free and clear of all liens, claims,
charges, encumbrances, mortgages, options, restrictions, security agreements,
or any other encumbrance of any kind, character, or description whatsoever,
except as set forth in the Agreement and the schedules and exhibits thereto;
(b) Seller has all requisite power and authority to sell, transfer,
convey, and deliver the Acquired Assets to Buyer pursuant to this instrument
of conveyance; and
(c) Seller will defend good and marketable title to the Acquired
Assets against any and all adverse claims whatsoever.
3. Condition of the Acquired Assets. The Acquired Assets are being
sold pursuant to this Assignment in their respective "as is, where is"
condition without any representation, warranty, whether express or implied,
except as set forth in paragraph 2, above, and the Agreement.
4. Further Assurances. Seller agrees to execute and deliver to Buyer
any certificates, instruments, releases, and other documents reasonably
required to further assure Buyer with respect to, and provide Buyer evidence
of its full right, title, and interest in and to, the Acquired Assets.
5. Definitions. This Assignment is subject to all the terms and
conditions of the Agreement. All defined terms in the Agreement have the same
meaning herein as set forth in the Agreement.
IN WITNESS WHEREOF, this Assignment and General Conveyance has been duly
executed and delivered on the ____ day of _________________ 2005.
ENERGYTEC, INC.
By_________________________________
Duly Authorized Officer
Before me, the undersigned, a Notary Public, in and for said County and
State, on this ___ day of _______________ 2005, personally appeared
________________________________, to me known to be the identical person who
subscribed the name of Energytec, Inc. to the foregoing instrument by
authority of its board of directors and acknowledged to me that he/she
executed the same as the act and deed of each said corporation by authority of
its board of directors.
____________________________________
Notary Public
Exhibit "A" to
Xxxx of Sale, Assignment
and General Conveyance
1.1 Acquired Assets
All of Seller's right, title and interest in and to all the assets and
properties of the Business (but only to the extent they are not Excluded
Assets) including, without limitation, the following assets and properties
owned by Seller and used in the Business:
(s) all cash and cash equivalents on hand related to the Business, wherever
located, including without limitation, in accounts, lock boxes and other
similar accounts (whether maintained at a bank, savings and loan or other
similar financial institution);
(t) all pipe, transmission lines, equipment, machinery, furniture, and
fixtures owned by Seller and used by Seller in the conduct of the Business;
(u) all of the Accounts Receivable;
(v) all of the Production Interests;
(w) all of the Property Interests;
(x) all of the Assignable contracts;
(y) all of the Contracts;
(z) all of the Permits;
(aa) all registered, licensed, used and/or owned intellectual property,
including, without limitation, (i) all such trademarks, trade names (including
the name "Energytec"), trade styles, logos, service marks, Internet domain
names and websites and all applications and registrations therefor and
licenses thereof; and (ii) all such technical, processing, or production
information, including new developments, inventions, know-how, processes,
ideas and trade secrets and documentation thereof (including related papers,
logs, production data, diaries, notebooks, specifications, methods, and data
processing software) and all claims and rights related thereto;
(bb) all customer files and all lists of customers, suppliers, distributors
and vendors which are assignable in accordance with their terms;
(cc) all of the Bonds;
(dd) all claims, causes of action and other rights related to the Purchased
Assets, other than those relating to Taxes for the period prior to the date of
Closing;
(ee) all documents and records relating to the Purchased Assets, or the
operations of the Business (including historical production data, research and
geological reports and studies, reserve reports, engineering reports and
studies, and cost or operating studies and reports);
(ff) all accounting books, records, ledgers and electronic data processing
materials or copies thereof;
(gg) all information contained in all databases, which are used or intended to
be used in the conduct of the Business;
(hh) all bank accounts, lock boxes, safe deposit boxes and the contents
thereof which are maintained for use in the conduct of the Business or which
contain any assets of the Business;
(ii) all prepaid expenses and deferred charges to the extent the corresponding
obligations constitute Assumed Liabilities; and
(jj) all other assets, properties, rights and claims related to the operations
of the Business or which arise in or from the conduct thereof;
provided, however, that the Purchased Assets shall not include any of the
Excluded Assets.
Exhibit B to
Asset Purchase Agreement
ASSUMPTION OF LIABILITIES
KNOW ALL MEN BY THESE PRESENTS:
This Assumption of Liabilities is executed and delivered on
_____________, 2005, from Source Energy Corporation, a Utah corporation
("Buyer") to Energytec Inc., a Nevada corporation ("Seller").
W I T N E S S E T H:
WHEREAS, Seller is selling to Buyer, and Buyer is purchasing from
Seller, certain assets of Seller pursuant to the terms and conditions of the
Asset Purchase Agreement between the parties dated __________________, 2004
("Agreement"), and Buyer has agreed to assume certain liabilities of Seller in
connection therewith ("Assumed Liabilities");
NOW, THEREFORE, in consideration of the premises, mutual covenants and
agreements of the parties herein contained, and for other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged:
1. Assumption. Seller hereby assigns and transfers to Buyer, and
Buyer hereby assumes from Seller, the Assignable Contracts and such of the
Permits as are transferable under applicable law and in accordance with the
terms thereof and, except for the Excluded Liabilities and Obligations, Buyer
assumes and agrees to discharge and satisfy in full when due and/or perform in
a timely manner the obligations of Seller arising after the Closing Date
under: (a) the Assignable Contracts set forth on Schedule 1.1(f) of the
Disclosure Schedule and Permits included in the Purchased Assets, together
with such Contracts and Permits Buyer receives the economic benefits of; and
(b) the Assumed Liabilities.
2. Further Assurances. Buyer agrees to execute and deliver to Seller
any certificates, instruments, and other documents reasonably required to
further assure Seller with respect to, and provide Seller evidence of, Buyer's
assumption of the liabilities and obligations provided for herein and in the
Agreement.
3. Authority. Buyer has all requisite power and authority to assume
the Assumed Liabilities pursuant to this instrument.
4. Definitions. This Assumption of Liabilities is subject to all the
terms and conditions of the Agreement. All defined terms in the Agreement
have the same meaning herein as set forth in the Agreement.
IN WITNESS WHEREOF, this Assumption of Liabilities has been duly
executed and delivered on the ___ day of _______________ 2005.
SOURCE ENERGY CORPORATION
By:_________________________________
Duly Authorized Officer
Exhibit C to
Asset Purchase Agreement
COMANCHE WELL SERVICE CORPORATION
00000 Xxxxxxx Xxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
November 17, 2004
Source Energy Corporation
Xxxxx Xxxxxxxxx, President
0000 Xxxxxxx Xxxxxx Xxxx
Xxxxx, XX 00000
RE: Well Service Agreement
Dear Xx. Xxxxxxxxx:
Comanche Well Service Corporation, a Texas corporation in good standing
("Comanche"), herein proposes to enter into this Well Service Agreement
("Agreement") with Source Energy Corporation ("Source") in contemplation of
that Asset Purchase Agreement of even date between Source and Energytec, Inc.
of Dallas, Texas. Pursuant to the Asset Purchase Agreement, Source agrees to
acquire oil and gas properties and other assets from Energytec in exchange for
certain common stock consideration. Comanche is familiar with those
properties inasmuch as Comanche has provided a complete array of well services
on those properties since the acquisition of those properties by Energytec.
The purpose of this Agreement is to set forth the terms and conditions under
which Comanche would continue to provide its services on those properties
acquired by Source upon the closing of the Asset Purchase Agreement in 2005.
TERM OF AGREEMENT
-----------------
This Agreement will be effective from the closing date of the Asset Purchase
Agreement and for three (3) years thereafter. Either party may cancel this
Agreement upon the giving of written notice sixty (60) days in advance of the
termination date to the other party.
SERVICE FEES
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Source shall pay a service fee to Comanche for service work performed at a
rate of 75% of the standard contracting rate for such services as if performed
by an independent vendor. Comanche shall provide a schedule of such
independent contracting rates at the beginning of each calendar quarter.
There will be no separate fees for mobilization in or out of a site or other
fees. Therefore, the Service Fee shall be the exclusive fee arrangement
between the parties.
REIMBURSABLE COSTS
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Source, as the operator of the oil and gas properties in Texas, shall
reimburse Comanche the costs of material, equipment, work or services which
would otherwise be performed by Source but which may, at the convenience of
Source, be paid for by Comanche at Source's request. These costs shall be
reimbursed to Comanche upon invoicing to Source plus an addition of 10% of
invoice amount for handling by Comanche.
TIME OF PAYMENT
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Subject to Source's right to require Comanche to furnish it with satisfactory
evidence that Comanche has paid all labor and material claims chargeable to
Comanche that might give rise to lien rights against Source, payment becomes
due thirty (30) days after presentation of an invoice by Comanche.
Any sums not paid accordingly, will bear interest at the maximum lawful rate
under Texas law from such date until paid.
WORK PRIORITY AND SCHEDULING
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Comanche will accord the service work requested by Source with the highest
priority notwithstanding that Comanche will be available to work for other
operators without limitation.
To that end, Source and Comanche will meet at the beginning of each quarter to
set forth and detail a work plan for that quarter. Further, Source and
Comanche will monitor that work plan by weekly meetings, telephone
conferences, daily reports, or such other mechanisms to insure that both
parties are in coordination of any and all projects underway for that quarter.
INSURANCE
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During the term of this Agreement, Comanche shall maintain insurance coverages
of the kind and in the amounts set by independent contractors who perform the
same types of services performed by Comanche, to include, general liability,
casualty, equipment, environmental and workmen's compensation (or a comparable
self-insurance program). Comanche shall furnish such proof of coverage and
limits as Source may require from time to time.
ADDITIONAL TERMS AND CONDITIONS
-------------------------------
At such time as this Agreement becomes effective, the parties may substitute a
more expansive agreement to extend to other additional terms and conditions,
to include, for example only, (i) Ingress, Egress and Location, (ii) Force
Majeure, (iii) Assignment, (iv) Pollution and Contamination, (v)
Indemnification, and (vi) Waiver and Amendment. However, nothing in such
definitive agreement shall make any change as to compensation or priority work
commitments as written above in this Agreement.
If the above comports with your understanding of our agreement, please sign
below where indicated and return a copy of this Agreement to us at your
earliest convenience.
Very truly yours,
Xxxxx X Xxxx
President
Agreed and accepted this ____ day of November 2004.
Source Energy Corporation
By:____________________________
Xxxxx Xxxxxxxxx, President
