ASSET EXCHANGE AGREEMENT
THIS ASSET EXCHANGE AGREEMENT (the "Agreement"), dated as of the 1st day of
April, 1998 by and among EUROGAS, INC., a Utah corporation ("EuroGas"), BEAVER
RIVER RESOURCES, LTD., a British Columbia corporation ("BRRL"), and XXXXXXX X.
XXXXX (the "Escrow Agent").
RECITALS
A. BRRL is the owner of an interest under Petroleum Natural Gas Lease
#15661 (the "Lease") issued by the authorities of British Columbia as held
under an agreement for a Farm Out Participation, Equalization and Royalty dated
October 15, 1997 by and between Wascana Energy Partnership, United Xxxx
Resources, Ltd., Mayan Limited Partnership and Xxxx Oil & Gas Incorporated. A
copy of the Wascana Agreement is attached hereto as Exhibit A and by reference
incorporated herein.
B. This Agreement shall provide the means by which EuroGas may acquire
ownership of all of BRRL's outstanding capital stock.
C. An Escrow is to be established hereby to complete the terms and
conditions of the Agreement.
ARTICLE I
DEFINITIONS
1.1 Definitions. In this Agreement, the following terms have the meanings
specified or referred to in this Section 1.1 and shall be equally applicable to
both the singular and plural forms. Any agreement referred to below shall mean
such agreement as amended, supplemented and modified from time to time to the
extent permitted by the applicable provisions thereof and by this Agreement.
"BRRL" shall mean Beaver River Resources, Ltd., a closely held Canadian
corporation organized under the laws of the Province of British Columbia.
"Closing" shall mean the closing of the transfer of the Exchanged Assets
and Exchange Price to the Escrow Agent.
"Closing Date" shall mean the date on which the Closing actually takes
place, as described in Section 4.1.
"Court Order" shall mean any judgment, order, aware or decree of any
foreign, federal, state, local or other court or tribunal and any award in any
arbitration proceeding.
"Escrow Agent" shall mean XXXXXXX X. XXXXX.
"Escrowed Amount" shall mean cash, shares of stock and other property
deposited with the Escrow Agent.
"Encumbrance" shall mean any lien, claim, charge, security interest,
mortgage, pledge, easement, conditional sale or other title retention agreement,
defect in title, covenant or other restrictions of any kind.
"EuroGas" shall mean EuroGas, Inc. a corporation duly organized and in good
standing under the laws of the State of Utah, United States.
"EuroGas Option" shall mean the right for EuroGas to reacquire 1,900,000
EuroGas Shares of common stock delivered hereunder as set forth in Article 4 of
this Agreement.
"EuroGas Shares" shall mean the restricted common stock of EuroGas, Inc.
par value $.001 which shall bear a restricted legend as set forth herein. The
shares of EuroGas shall be automatically adjusted to take into account any stock
split, stock or monetary dividend, consolidation, reorganization or other like
or similar event.
"Exchange Consideration" shall mean the aggregate consideration to be paid
by EuroGas for the Exchanged Assets, more particularly set forth in Section 3 1.
"Exchanged Assets" shall mean all of BRRL's issued and outstanding capital
stock.
"Governmental Body" shall mean any foreign, federal, state, local or other
governmental authority or regulatory body.
"Governmental Permits" shall mean all licenses, franchises, permits,
privileges, immunities, approvals and other authorizations from a Governmental
Body which are necessary to entitle BRRL to own or lease operate and use the
Lease.
"Person" shall mean any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization or Governmental Body.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the United States Securities Act of 1933 or any
successor law and the rules and regulations issued pursuant to that Act or any
successor law.
"Stockholders" shall mean the stockholders of BRRL.
"Tax" shall mean any federal, state, county, local or foreign income, gross
receipts, property, sales, use, transfer, gains, license, excise, import,
franchise, ad valorem, employment, payroll, withholding or minimum tax, or any
other tax custom, duty, governmental fee or other like assessment or charge of
any kind whatsoever, together with any interest or any penalty, deficiency,
addition to tax or additional amount imposed by any Governmental Body.
"Wascana" shall mean Wascana Energy Partnership and shall mean the operator
under the Wascana Agreement.
"Wascana Agreement" shall mean the agreement for a Farmout Participation,
Equalization and Royalty dated October 15, 1997 by and between Wascana Energy
Partnership, BRRL, United Xxxx Resources, Ltd., Mayan Limited Partnership and
Xxxx Oil & Gas Incorporated.
ARTICLE 2
EXCHANGE AND SALE
2.1 Exchanged Assets. Upon the terms and subject to the conditions of
this Agreement the Stockholders will exchange all of the issued and outstanding
shares of the capital stock of BRRL for shares of the capital stock of EuroGas,
as herein provided. At the time such exchange is effected, the only asset of
BRRL shall be its leasehold interest in the Lease.
2.2 Excluded Liability. EuroGas shall not assume or be obligated to pay,
perform or otherwise discharge any liability or obligation of BRRL, direct or
indirect, known or unknown, absolute or contingent, not expressly assumed by
EuroGas pursuant to this Agreement.
2.3 Permitted Encumbrances. The only Encumbrance to be permitted
hereunder is obligations imposed by the terms of the Wascana Agreement and
Governmental Bodies on the Lease.
ARTICLE 3
EXCHANGE PRICE
3.1 Exchange Price. EuroGas shall deposit with the Escrow Agent, as the
Exchange price, US$300,000 and 2,400,000 EuroGas Shares.
ARTICLE 4
EUROGAS OPTION
4.1 EuroGas Option. At any time before April 15, 1999, EuroGas can elect
to acquire 1,900,000 EuroGas Shares by delivering a notice of the exercise of
such option and a reassignment in the form set forth in Exhibit B hereunder to
the Escrow Agent.
ARTICLE 5
ESTABLISHMENT OF ESCROW
5.1 Appointment of Escrow Agent. In order to implement the terms and
conditions of this Agreement, the parties hereby agree to establish an escrow
with Xxxxxxx X. Xxxxx as Escrow Agent and close this transaction in accordance
with Article 6 set forth below.
5.2 Duties of Escrow Agent. It is understood and agreed by the parties to
this Agreement as follows:
(a) Escrow Agent is not and shall not be deemed to be an agent for
any party for any purposes and is merely acting as a depository and in a
ministerial capacity hereunder with the limited duties herein prescribed.
(b) Escrow Agent does not have and shall not be deemed to have any
responsibility in respect of any instructions, certificate, or notice
delivered to him other than to faithfully carry out the obligations
undertaken in this Agreement and to follow the directions in such
instructions or notice in accordance with the terms hereof.
(c) Escrow Agent is not and shall not be deemed to be liable for any
action taken or omitted by him in good faith and may rely on, and act in
accordance with, the advice of his counsel without liability on his part
for any action taken or omitted in accordance with such advice. In any
event, his liability hereunder shall be limited to liability for gross
negligence, willful misconduct, or bad faith on his part.
(d) Escrow Agent may conclusively rely on and act in accordance with
any certificate, instruction, notice, letter, telegram, cablegram or other
written instrument believed by him to be genuine and to have been signed by
the proper party or parties.
(e) Escrow Agent may apply for advice of counsel of his choice and
may rely upon such advice or may act or refrain from acting in accordance
with such advice.
(f) Escrow Agent shall be entitled to reimbursement from the parties
of (i) Escrow Agent's reasonable fees and reimbursement of his reasonable
expenses, including attorneys' fees in connection with duties hereunder and
(ii) the cost to save harmless, indemnify and defend Escrow Agent for,
from, and against any loss, damages, liability, judgment, costs and
expenses whatsoever, including counsel fees, suffered or incurred by him by
reason of, or on account of, any misrepresentations made to him or his
status or activities as Escrow Agent under this Agreement, except for any
loss, damages, liability, judgment, costs, or expenses resulting from gross
negligence, willful misconduct, or bad faith on the part of Escrow Agent.
(g) If any legal proceeding is instituted against him, Escrow Agent
agrees promptly to give notice of such proceeding to EuroGas and BRRL.
Escrow Agent shall not be required to institute legal proceedings of any
kind.
(h) Escrow Agent shall not, by act, delay, omission, or otherwise, be
deemed to have waived any right or remedy he may have either under this
Agreement or generally, unless such waiver be in writing, and no waiver
shall be valid unless it is in writing, signed by Escrow Agent, and then
only to the extent expressly therein set forth. A waiver by Escrow Agent
under the terms of this Agreement shall not be construed as a bar to, or
waiver of, the same or any other such right or remedy which he would
otherwise have on any other occasion.
(i) Escrow Agent may resign as such hereunder by giving 30 days
written notice thereof to EuroGas and BRRL. Within 20 days after receipt
of such notice, EuroGas and BRRL shall furnish to Escrow Agent written
instructions regarding the release of the remaining Escrowed Amount to a
substitute escrow agent designated by written instructions from EuroGas and
BRRL jointly, or, in the absence thereof, by instructions from a court of
competent jurisdiction to Escrow Agent. Such substitute Escrow Agent shall
be a title company, bank, or trust company organized and doing business
under the laws of the state of Utah and shall thereafter hold the Escrowed
Amount received by it pursuant to the terms of this Agreement and otherwise
act hereunder as if it were the Escrow Agent originally named herein.
Escrow Agent's duties and responsibilities hereunder shall terminate upon
the release of all property then held in escrow according to such written
instruction or upon such delivery as herein provided. This Agreement shall
not otherwise be assignable by Escrow Agent without the prior written
consent of EuroGas and RRRT.
(j) EuroGas and BRRL shall each pay one-half of the Escrow Agent fees
and other charges.
ARTICLE 6
CLOSING BY DELIVERY TO AND DISBURSEMENT BY ESCROW AGENT
6.1 Closing. Upon the terms and conditions set forth herein, the Closing
shall be effectuated on or before April 15, 1998 by the parties delivering to
the Escrow Agent the items set forth in Section 6.2 and Section 6.3, except such
delay as provided in Section 6.3 below with respect to the deposit of shares of
BRRL capital stock.
6.2 Delivery by EuroGas. EuroGas shall deposit with the Escrow Agent:
(a) US$300,000 cash
(b) Two certificates of EuroGas shares; one in the amount of 500,000
EuroGas shares and the other in the amount of 1,900 000 EuroGas Shares.
(c) A legal opinion from its counsel in the form set forth in Exhibit
C.
6.3 Delivery by Stockholders and BRRL.
(a) Within sixty (60) days after execution of the Agreement,
Stockholders of BRRL shall deposit with the Escrow Agent certificates
representing all of the issued and outstanding capital stock of BRRL,
separate stock powers executed in blank by Stockholders with signature
guarantees and limited powers of attorney authorizing the Escrow Agent to
deliver such shares to EuroGas within five (5) days after April 15, 1999 if
EuroGas has not exercised its option to acquire the 1,900,000 shares of
EuroGas stock from the Escrow Agent.
(b) A legal opinion from BRRL's counsel in the form attached as
Exhibit D.
6.4 Disbursement by Escrow Agent. Upon execution of the Agreement and the
establishment of the Escrow, the Escrow Agent shall hold and disburse the items
deposited as follows:
(a) Escrow Agent shall, within ten (10) days after establishment of
the Escrow, disburse the US$300,000 to BRRL; provided, however, such
disbursement of funds shall not be made to BRRL until ninety percent (90%)
of the issued and outstanding shares of capital stock of BRRL has been
deposited by the Stockholders with the Escrow Agent.
(b) Within five (5) days after December 1, 1998 or at the specific
co-signed instructions of BRRL and EuroGas prior thereto, Escrow Agent
shall deliver to BRRL 500,000 shares of EuroGas Shares.
(c) Within five (5) days after April 15, 1999, the balance of the
EuroGas Shares to Stockholders and delivery of the BRRL shares deposited by
the stockholders to EuroGas.
(d) If the Escrow Agent receives a notice of exercise of the EuroGas
Option any time prior to April 15, 1999 together with the appropriate
reassignment as set forth in Article 4, Escrow Agent shall deliver the
1,900,000 EuroGas Shares to EuroGas and he shall deliver to BRRL any
remaining EuroGas Shares or cash left in Escrow and the shares of BRRL
capital stock to the Stockholders who have deposited the shares.
6.5 Benefits and Burdens. During the Escrow EuroGas shall be entitled to
all the benefits of the BRRL's interest in the Lease. EuroGas shall comply with
the terms of the Wascana Agreement and be responsible for all of the related
costs, expenses, damages and liabilities whatsoever of carrying such interest in
the Lease to the same extent as if EuroGas were the owner of such interest.
ARTICLE 7
REPRESENTATIONS, COVENANTS AND WARRANTIES OF BRRL
As an inducement to EuroGas to enter into this Agreement and to consummate
the transactions contemplated hereby, BRRL hereby represents, covenants and
warrants to EuroGas and agrees as follows:
7.1 Organization of BRRL. BRRL is a corporation duly organized and validly
existing under the laws of the Province of British Columbia and it will be in
good standing after its Stockholders' meeting is held to authorize the execution
of this Agreement.
7.2 Authority of BRRL.
(a) The execution, delivery, and performance by BRRL of the Agreement
by BRRL of the Agreement and all agreements, documents, obligations, and
transactions contemplated by the Agreement have been duly authorized by all
necessary action on the part of the board of directors of BRRL and are not
inconsistent with BRRL's articles of incorporation or any resolution of the
directors of BRRL, and do not and will not contravene any provision of, or
constitute a default under any indenture, mortgage, contract, or other
instrument known to it to which BRRL is a party or by which it is bound.
Upon the execution and delivery of the Agreement, they will, subject to
approval of the Stockholders, constitute legal, valid, and binding
agreements and obligations of BRRL enforceable in accordance with their
respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other laws of
general application affecting the enforcement of creditors' rights,
including, without limitation, the effect of statutory or other laws
regarding fraudulent conveyance or preferential transfers, and by the
availability of equitable remedies.
(b) Subject to approval of this Agreement by the Stockholders, BRRL
and the officer signing on its behalf, have the power and legal capacity to
enter into the Agreement and to execute the Agreement and any other
documents required by the Agreement.
(c) Upon the execution of this Agreement BRRL will promptly call a
meeting of its Stockholders for the purpose of having the Stockholders
approve this Agreement and the agreeing to the deposit of the Stockholders'
BRRL stock certificates in escrow in accordance herewith.
7.3 Status of Exchanged Assets. If the stock of BRRL is delivered to
EuroGas in accordance with this Agreement, the assets of BRRL at the time of
such delivery (which shall consist only of BRRL's leasehold interest in the
Lease) shall be unencumbered except for the Permitted Encumbrance described in
Article 2.3 hereof.
7.4 Independent Investigation Access. BRRL acknowledges that BRRL has
carefully reviewed EuroGas's SEC reports and press releases furnished by EuroGas
to BRRL, including but not limited to the press release dated March 19, 1998.
BRRL further acknowledges that BRRL in making its decision to acquire EuroGas
Shares has relied upon independent investigations made by it and by BRRL's
representatives and has had an opportunity to ask questions of and to receive
answers from EuroGas and its authorized representatives concerning the business
of EuroGas.
7.5 Restriction Acknowledgment. BRRL acknowledges that the completion of
the Agreement and the issuance of the consideration constitute the offer and
sale of securities as those terms are defined under the Securities Act, as
amended, and applicable state statutes. The delivery of EuroGas Shares shall be
consummated in reliance on certain exemptions from the registration requirements
of federal and state securities laws on which BRRL shall be entitled to rely as
a basis for its determination that the issuance of the EuroGas Shares is exempt
from the registration requirements of the Securities Act and similar state laws.
Until such time as such securities shall have been registered under the
Securities Act as contemplated by this Agreement, each of the certificates
representing the EuroGas Shares shall bear a legend in substantially the
following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE SECURITIES LAWS
OF ANY STATE. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE TRANSFERRED OR SOLD IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION OR OTHER COMPLIANCE UNDER THE SECURITIES ACT OR THE LAWS
OF THE APPLICABLE STATE OR A "NO ACTION" OR INTERPRETIVE LETTER FROM
THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER AND ITS COUNSEL TO THE EFFECT
THAT THE SALE OR TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT AND SUCH STATE STATUTES.
ARTICLE 8
REPRESENTATIONS, COVENANTS AND WARRANTIES OF EUROGAS
As an inducement to BRRL to enter into this Agreement and to consummate the
transactions contemplated hereby, EuroGas hereby represents, covenants and
warrants to BRRL and agrees as follows:
8.1 Organization of EuroGas. EuroGas is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Utah, with
full corporate power and authority to own its properties and engage in its
business as contemplated.
8.2 Legality of EuroGas Shares. The EuroGas Shares are legally issued,
fully paid and non-assessable
8.3 Authority of EuroGas.
(a) The execution, delivery and performance by EuroGas of the
Agreement and all agreements, documents, obligations, and transactions
contemplated by the Agreement have been duly authorized by all necessary
action on the part of EuroGas and are not inconsistent with EuroGas's
articles of incorporation or any resolution of the directors of EuroGas,
and do not and will not contravene any provision of, or constitute a
default under any indenture, mortgage, contract or other instrument known
to it to which EuroGas is a party or by which EuroGas is a party or by
which it is bound. Upon the execution and delivery of the Agreement, it
will constitute a legal, valid and binding agreement and obligation of
EuroGas, enforceable in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, or other laws of general application affecting the enforcement
of creditors' rights, including, without limitation, the effect of
statutory or other laws regarding fraudulent conveyance or preferential
transfers, and by the availability of equitable remedies.
(b) EuroGas and the officers signing on its behalf, have the power
and legal capacity to enter into the Agreement and to execute the Agreement
and any other documents required by the Agreement.
8.4 Registration of EuroGas Shares. Commencing April 15, 1998 and
continuing thereafter, EuroGas shall use all commercially reasonable efforts to
file and pursue to effectiveness a registration statement with the Securities
and Exchange Commission covering the 2,400,000 shares of EuroGas common stock,
except to the extent that EuroGas Shares may be publicly sold pursuant to an
exemption to registration, including but not limited to Rule 144 adopted under
the Securities Act or as it may be amended or succeeded to from time to time.
ARTICLE 9
GENERAL PROVISIONS
9.1 Survival of Obligations. All representations, warranties, covenants
and obligations contained in this Agreement shall survive the consummation of
the transactions contemplated by this Agreement.
9.2 Notices. All notices or other communications required or permitted
hereunder shall be in writing and shall be deemed given or delivered when
delivered personally or when sent by registered or certified mail or by private
courier addressed as follows:
If to EuroGas Xxxx Xxxxxxxxxxxx
EuroGas, Inc.
000 Xxxx 0000 Xxxxx, #000X
Xxxxxxx, Xxxx 00000
Telephone: 801/000-0000
Facsimile: 801/255-2005
With a copy to: Xxxxxx X. Xxxxx, Esq.
Xxxxx, Xxxxx & Xxxxxxx
Xxxxxx Xxxxx, Xxxxxx Xxxxx
00 Xxxx Xxxxxxxx (300 South)
Xxxx Xxxx Xxxx, Xxxx 00000
Telephone: 801/000-0000
Facsimile: 801/531-7091
If to BRRL: Xxxx Xxxxxx
Beaver River Resources, Ltd.
0000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Telephone: 214/000-0000
Facsimile: 214/987-3776
With a copy to: Xxxxxx X. Xxxxx, Esq.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000-0000
Telephone: 214/000-0000
Facsimile: 214/691-1573
If to Escrow Agent: Xxxxxxx X. Xxxxx
Fairbanks Capital
X.X. Xxx 00000
Xxxx Xxxx Xxxx, Xxxx 00000-0000
Telephone: 801/000-0000
Facsimile: 801/293-1297
or such other address as such party may indicate by a notice delivered to the
other parties hereto.
9.3 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their successors and permitted
assigns.
9.4 Access to Records after Closing. For a period of two (2) years after
the Closing Date, EuroGas and its representatives shall have reasonable access
to all of the books and records of the Exchanged Assets transferred to EuroGas
hereunder to the extent that such access may reasonably be required by EuroGas
to meet its reporting obligations under the Securities Laws. BRRL shall afford
such access upon receipt of reasonable advance notice and during normal business
hours. EuroGas shall be solely responsible for any costs or expenses incurred by
it pursuant to this Section 9.4.
9.5 Entire Agreement; Amendments. This Agreement and the Exhibits
referred to herein and the documents delivered pursuant hereto contain the
entire understanding the parties hereto with regard to the subject matter
contained herein or therein, and supersede all prior agreements and
understandings between or among any of the parties hereto. This Agreement shall
not be amended, modified or supplemented except by a written instrument signed
by an authorized representative of each of the parties hereto.
9.6 Interpretation. Article titles and headings to sections herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of the Agreement. The Exhibits
referred to herein shall be construed with and as an integral part of this
Agreement to the same extent as if they were set forth verbatim herein.
9.7 Waivers. Any term or provision of this Agreement may be waived, or
the time for its performance may be extended, by the party or parties entitled
to the benefit thereof. Any such waiver shall be validly and sufficiently
authorized for the purposes of this Agreement if, as to any party, it is
authorized in writing by an authorized representative of such party. The failure
of any party hereto to enforce at any time any provision of this Agreement shall
not be construed to be a waiver of such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to constitute a waiver of any other or subsequent
breach.
9.8 Partial Invalidity. Whenever possible, each provision hereof shall be
interpreted in such manner as to be effective and valid under applicable law,
but in case any one or more of the provisions contained herein shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
provision shall be ineffective to the extent, but only to the extent, of such
invalidity, illegality or unenforceability without invalidating the remainder of
such invalid, illegal or unenforceable provision or provisions or any other
provisions hereof, unless such a construction would be unreasonable.
9.9 Execution in Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be considered an original instrument, but
all of which shall be considered one and the same agreement, and shall become
binding when one or more counterparts have been signed by each of the parties
hereto and delivered to BRRL and EuroGas.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
EUROGAS:
EuroGas, Inc.
By: /s/ Xxxx Xxxxxxxxxxxx
BRRL:
Beaver River Resources, Ltd.
By: /s/ Xxxx Xxxxxx
Vice President
ESCROW AGENT:
/s/ Xxxxxxx X. Xxxxx
Terrel1 X. Xxxxx
