Exhibit 10.2
PURCHASE AND SALE AGREEMENT
This PURCHASE AND SALE AGREEMENT (the "Agreement") is entered into
effective as of the 9th day of September, 2002 (the "Effective Date"), between
Hegco, Inc., a Texas Corporation, and Hegco Canada, Inc., an Alberta Canada
Corporation, (collectively referred to as "Hegco"), Freedom Oil & Gas, Inc., a
Nevada Corporation (hereinafter referred to as "Freedom") and Xxxxxx Energy
Group, LLC., a Utah limited liability company (hereinafter referred to as
"HEG").
WITNESSETH:
WHEREAS, Hegco is the owner of certain oil and gas interest in the El
Grande Prospect, located in Xxxxxxxx County, Arkansas;
WHEREAS, Hegco desires to sell, assign, convey and set over its entire
right, title and interest in the El Grande Prospect;
WHEREAS, Freedom and HEG desire to purchase the entire right, title and
interest held by Hegco in the El Grande Prospect;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
1. Definitions. The following terms shall be defined as follows in this
Agreement:
1.1 El Grande Prospect. El Grande Prospect shall mean any and all
interests which Hegco now owns, has owned, or hereafter
acquires in the El Grande Prospect as listed on Exhibit A
attached hereto and made part of this Agreement, including
without limitation the Hegco Xxxxx X. Xxxxxx lA well located
1650' FNL and 1650'FEL Section 6-7N-12W, Xxxxxxxx County,
Arkansas ("Xxxxxx Well").
1.2 Closing Date. The Closing shall take place at the offices of
the XxXxxxxx and Xxxxxxxx, P.C. 000 X. Xxxxxxxx, Xxxxx 0000,
Xxxxxxxx Xxxx, Xxxxxxxx, commencing at 2:00 P.M. Oklahoma City
time, on September 11, 2002, or at such other place and at
such other time and date as may be mutually agreed upon by the
parties.
1.3 Assumed Liabilities. The liabilities incurred by Hegco with
regards to the El Grande Prospect listed on Exhibit B attached
hereto and made part of this Agreement.
2. Sale and Purchase of Oil and Gas Leases and Equipment. Subject to the
terms of this Agreement, Hegco agrees to sell, convey, and assign, and
Freedom and HEG agree to purchase, any and all interest held by Hegco
in oil and leases, equipment, and all other real and personal property
in, associated with or related to the El Grande Prospect.
PURCHASE AGREEMENT
PAGE 1 OF 7 PAGES
3. Purchase Price. The aggregate purchase price shall consist of the
accumulated values of the various forms of consideration, as expressed
within the terms and conditions of this Agreement (the "Purchase
Price").
4. Terms and Conditions. The sale and purchase of the El Grande Prospect
shall include the following terms and conditions:
4.1 Freedom agrees to assume the unpaid liabilities incurred and
associated with the El Grande Prospect listed on Exhibit B
attached hereto and made part of this Agreement. Freedom
further agrees to indemnify, defend and hold Hegco harmless
from such liabilities. Hegco agrees to indemnify, defend and
hold Freedom harmless from all other liabilities associated
with or relating to the El Grande Prospect not expressly
assumed by Freedom.
4.2 Promptly after the Closing Date Freedom will provide Hegco
with written documentation demonstrating that Freedom or its
designee is in compliance with all requirements of the various
State authorities of Arkansas needed in order to act as an
operator of the El Grande Prospect.
4.3 Freedom agrees to accept and acknowledge the Carried Working
Interest in and to Xxxxxx Well as stated on the "Partial
Assignment of Oil & Gas Leases, Xxxx of Sale and Agreement"
attached hereto as Exhibit C and made a part of this
Agreement.
4.4 Freedom agrees to assume all expenses associated with
recompleting or plugging and abandoning the Xxxxxx Well, as
well as any renewal fees, minimum royalties and reacquisition
expenses it elects to incur with regard to the ongoing lease
rentals.
4.5 At the Closing, HEG agrees to deliver the Assignment of Oil
and Gas Lease, Xxxx of Sale, and Agreement, executed by the
appropriate parties, wherein Xxxxxx Energy Group, Inc. (Texas)
transfers all of its right, title and interest in the oil and
gas leases, lands, salt water disposal xxxxx and other
properties described in the attachments thereto in accordance
with the terms and conditions set forth therein. Such
Assignments are attached hereto as Exhibits D and E and made
part of this Agreement.
4.6 At the Closing, HEG agrees to surrender anti assign to Hegco
all shares of Hegco Canada stock held by Xxxx Xxxx as an
individual (approximately 350,000 shares), by Xxxxxx Energy
Group, Inc. (approximately 1,100,000 shares), or held in
escrow by Hegco for the benefit of the X. Xxxxxx Trust
(approximately 1,900,000 shares). For purposes of this
Agreement, the stock shall be assigned a value of $.10 Cdn per
share.
4.7 At the Closing, HEG agrees to deliver releases executed by
Xxxxxxx X. Xxxxxx and Xxxx X. Xxxxxx of the unsecured notes
owed to them by Hegco. Such releases are attached hereto as
Exhibits F and G and made part of this Agreement.
PURCHASE AGREEMENT
PAGE 2 OF 7 PAGES
4.8 At the Closing, HEG agrees to deliver full and unconditional
releases executed by by Xxxxxxx X. Xxxxxx and Xxxx X. Xxxxxx
with respect to any and all claims against Hegco, its
officers, directors, employees and agents. Such releases are
attached hereto as Exhibits H and I and made part of this
Agreement.
4.9 At the Closing, Freedom agrees to instruct its parent, The
Majestic Companies, LTD., a Nevada corporation ("Majestic") to
issue and deliver to Hegco, or its designees, 60,000 shares of
its Preferred Series A stock. Such shares shall have a
conversion right of one share of preferred stock for five
shares of common stock (for a total of 300,000 shares of
common stock). These shares will initially be "restricted"
shares, but shall be included under the filing Majestic has
committed to make with the Securities and Exchange Commission
("SEC") to register these shares so that they may become "free
trading." Freedom further agrees to support the value of these
shares, either through the payment of cash or additional
shares, based on the difference, if any, between a price of
$0.50 per share of common stock and the average per share
market trading price for common stock during the two weeks
immediately preceding the trading date nearest to the date one
month after the registration of Hegco's shares becomes
effective.
For example, if the average share price were $0.40 per common
share as of the valuation date (for a total of $120,000),
Freedom would either pay Hegco an additional $30,000 in cash
or instruct Majestic to issue to Hegco or its designee 75,000
additional shares of its common stock. If the average price
per share of common stock on or before the valuation date
equals or exceeds $0.50, Freedom would be released from its
support obligation. Freedom further agrees that if such stock
continues to be restricted more than 180 days after the
execution date of this Agreement, Freedom or its designee will
purchase from Hegco the above referenced stock as follows: If
Hegco holds the 60,000 shares of preferred stock, then such
stock shall be purchased by Freedom or its designee at $2.50
per share; if Hegco owns the 300,000 shares of common stock,
then such stock shall be purchased by Freedom or its designee
at $.50 a share. Such purchase shall be made within thirty
(30) business days after notification by Hegco of its intent
to sell such stock.
Freedom further agrees to instruct Majestic to issue to Hegco
or its designees 50,000 restricted shares of its Preferred
Series A stock, with a conversion right of one share of
preferred stock for fire shares of common stock (for a total
of 250,000 shares of common stock).
Freedom also agrees to instruct Majestic to include Hegco's
share under the SB2 application, or other registration
statement, that Majestic has committed to file with the SEC by
October 15, 2002. Hegco may make written demand immediately
following Majestic's failure to timely file this application
that Freedom or its designee repurchase from Hegco the
equivalent of 300,000 shares of the Majestic common stock from
Hegco within thirty (30) days after such demand for a price of
$150,000 in cash, provided, however, that if Freedom can
demonstrate that Majestic has substantially completed such
application by
PURCHASE AGREEMENT
PAGE 3 OF 7 PAGES
October 15, 2002, the date for filing the application will be
extended to October 31, 2002.
4.10 At the Closing, Hegco agrees to deliver to Freedom and HEG an
Assignment of Oil and Gas Interest Xxxx of Sale, executed, by
the appropriate parties, wherein Hegco transfers all of its
right, title and interest in all oil and gas leases, lands,
salt water disposal xxxxx and other properties in the El
Grande Prospect, in accordance to the terms and conditions set
forth therein. Such Assignment is attached hereto as Exhibit J
and made part of this Agreement.
4.11 At the Closing, Hegco agrees to deliver to Freedom or its
designees all land and lease files, geological or well logs,
completion reports, maps and all other files, in its
possession that relate to the El Grande Prospect. Such
documentation will be made available to Freedom or its
designees at Closing and may be picked up by Freedom at
Hegco's Oklahoma office.
4.12 At the Closing, Hegco will deliver full and unconditional
releases to Xxxxxxx X. Xxxxxx and Xxxx X. Xxxxxx with respect
to any and all claims related to their association with Hegco,
its officers, directors, employees or shareholders, or to the
lands, leases or other properties that are the subject of the
curative conveyances from Xxxxxxx X. Xxxxxx or Xxxxxx Energy
Group, Inc. (Texas) to Hegco, together with an indemnification
of Xxxxxxx X. Xxxxxx and Xxxxxx Energy Group, Inc. (Texas),
approved by the Receiver for Hegco, against all existing or
future claims by third parties with respect any liabilities
associated with such properties. Such releases and
indemnification are attached hereto as Exhibits K and L and
made part of this Agreement.
4.13 At the Closing, Hegco will deliver releases of the Receiver's
mortgage liens against Xxxxxxx X. Xxxxxx'x interest in the
Xxxxxxxx properties near the Three Sands Field in Oklahoma.
Such releases are attached hereto as Exhibits M and N and made
part of this Agreement. Hegco represents and warrants to
Xxxxxxx X. his interests in the XxXxxxxx and Stone properties
near the Three Sands Field in Oklahoma.
4.14 Hegco will make every effort to quickly resolve its pending
litigation on the various leaseholds that affect the working
and overriding royalty interests held by X. Xxxxxx, Xxxxxx
Energy Group, Inc. (Texas), HEG or the X. Xxxxxx Trust, and,
once resolved, to subsequently release, and thereafter pay on
a current basis, all amounts attributable to such overriding
royalties or working interests.
4.15 At the Closing, HEG will deliver an acknowledgment executed by
Xxxxxxx X. Xxxxxx that the confidential proprietary
information used in Hegco business is secret, confidential,
unique, and valuable, that is was developed by Hegco over a
long period of time, at great cost and that disclosure of any
item of confidential proprietary information to anyone other
than Hegco officers, agents or authorized employees will cause
Hegco irreparable injury. The acknowledgment will also
PURCHASE AGREEMENT
PAGE 4 OF 7 PAGES
contain the agreement by Xxxxxxx X. Xxxxxx that he has not and
will not disclose to any person or entity not authorized in
writing by Hegco, directly or indirectly, during a period of
one year after the Closing Date any of the confidential
proprietary information, provided that this non-disclosure
agreement will apply only to properties owned by Hegco as of
the Effective Date and shall not apply to the El Grande
Prospect. Such Acknowledgment and Non-Disclosure Agreement is
attached hereto as Exhibit O and made a part hereof.
5. Warranties.
5.1 Each party represents and warrants that it has the authority
and legal capacity to enter into this Agreement.
5.2 Each party represents and warrants that the execution and
delivery of this Agreement and the consummation of the
transactions contemplated by the parties hereunder have been
duly and validly authorized by all necessary corporate action
on the part of such party, and that this Agreement is a valid
and binding obligation of such party, enforceable in
accordance with its terms.
5.3 Each party represents and warrants that entry into and
performance of its obligations under this Agreement will not
violate or constitute a breach of any other agreement to which
it is a party or by which it is bound.
5.4 No party shall be responsible to any other party for any
alleged consequential damages arising with respect to this
Agreement; by way of example, Hegco shall not be responsible
for any damages to Freedom as a result of Freedom's operations
of the El Grande Prospect after the Effective Date.
6. Waiver. No waiver by any Party of any breach or failure to enforce any
of the terms and conditions of this Agreement shall in any way shall
affect, limit or waive such party's right thereafter to enforce and
compel compliance with each and every term and condition of this
Agreement.
7. Prior Agreement and Amendment. This Agreement supersedes any and all
prior oral or written negotiations, communications and agreements by or
between the parties. This Agreement may be amended only by a subsequent
written agreement signed by all parties.
8. Enforceability. In the event any provision of this Agreement shall be
held invalid or unenforeceable by any court of competent jurisdiction,
such ruling shall not invalidate or render unenforceable the other
provisions of this Agreement.
9. Dispute Resolution. The parties agree to attempt to resolve any
disputes, controversies or claims arising out of or relating to this
Agreement by face-to-face negotiation with the other parties. In the
event that such controversies or claims cannot be resolved solely
between the parties, any party may initiate a mediation process under
the Mediation Procedure of Judicial Arbitration and Mediation Services,
Inc. ("JAMS'). Any controversy or claim that cannot be successfully
mediated through such procedures may
PURCHASE AGREEMENT
PAGE 5 OF 7 PAGES
be resolved by any party bringing an action in a court of competent
jurisdiction in Oklahoma City, Oklahoma.
10. Notices. All communications and notices provided for hereunder shall be
in writing, and may be given by delivery to a recognized overnight
courier service for next day delivery. Notice shall be deemed to have
been properly given when delivered, as evidenced by the signed delivery
receipt (including an electronic copy thereof), provided the notice is
addressed to the appropriate party, as follows:
If to Hegco: If to Freedom: If to HEG:
Hegco, Inc. Freedom Oil & Gas, Inc. Xxxxxx Energy Group, LLC
Xxxxxxx, Xxxxx & Xxxxxx, Inc. 00 Xxxx X. Xxxxxx, Xxx. 000 00 Xxxx X. Xxxxxx, Xxx. 000
X0000, 000 - 0xX Xxxxxx XX Xxxx Xxxx Xxxx, Xxxx 00000 Salt Lake City, Utah 84101
Xxxxxxx, Xxxxxxx X0X 0X0 Attn: J. Xxxxx Xxxxx, President Attn: Xxxxxxx X. Xxxxxx,
Attn: J. Xxxxxxx Xxxxx, Manager
Receiver/Manager
11. Cooperation. The parties shall use their reasonable commercial best
efforts to cause the consummation of the transactions described herein
in accordance with the terms and conditions hereof, and to execute such
additional documents as may be reasonably requested by any other party
to evidence these transactions
12. Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the State of Oklahoma, other than the
provisions relating to the choice of law.
13. Court Approval. Hegco is in Receivership in the Court of the Queen's
Bench of Alberta, Judicial District of Calgary, and the terms and
conditions of this Agreement have boon approved by such Court, Such
Court approval is attached hereto as Exhibit P and made a part hereof
14. Counterparts. This agreement may be executed in multiple counterparts,
all of which shall constitute one agreement, and shall become effective
as of the Effective Date when executed signature pages, including
facsimile or other electronics copies thereof, have been received by
Xxxxx Xxxxx of XxXxxxxx and Xxxxxxxx, P.C.
IN WITNESS WHEREOF, the parties have caused this Purchase and Sale
Agreement to be executed by their duly authorized representatives effective as
of the date first above written.
[NEXT PAGE IS SIGNATURE PAGE]
PURCHASE AGREEMENT
PAGE 6 OF 7 PAGES
Hegco
By: /s/ J. Xxxxxxx Xxxxx
--------------------------------------------
J. Xxxxxxx Xxxxx, of Xxxxxxx, Xxxxx & Xxxxxx
Inc. Court appointed Receiver and Manger
of Hegco
Freedom Oil & Gas, Inc.
By: /s/ J. Xxxxx Xxxxx
--------------------------------------------
J. Xxxxx Xxxxx, President of
Freedom Oil & Gas, Inc.
Xxxxxx Energy Group, LLC (Utah)
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------------------
Xxxxxxx X. Xxxxxx, Manager
PURCHASE AGREEMENT
PAGE 7 OF 7 PAGES
