ASSET PURCHASE AGREEMENT
------------------------
This ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of the 31st day of December, 2001, by, between and among: (1) CJS
PINNACLE PETROLEUM SERVICES, LLC, a Texas Limited Liability Company ("Pinnacle"
and the "Seller"), whose address is c/o Warren Resources, Inc., 489 Fifth
Avenue, 32nd Floor, New York, New York 10017; and (2) BASIC ENERGY SERVICES,
INC., a Delaware Corporation ("Basic" and the "Buyer"), whose address is 406
North Big Spring, Midland, Texas 79701. Pinnacle (as the Seller) and Basic (as
the Buyer) may be referred to herein individually as a "Party" and collectively
as the "Parties".
RECITALS:
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WHEREAS, the Seller owns certain Assets (as hereinafter defined), and
is engaged in the business of providing oil and gas well services, including
workover and completion services and plugging and abandoning of oil and gas
wells.
WHEREAS, the Seller has agreed to sell, convey, transfer, assign and
deliver the Assets to the Buyer, and the Buyer has agreed to purchase and
accept, as hereinafter provided, the Assets from the Seller; all subject to the
terms, conditions, limitations and provisions hereinafter set forth.
NOW, THEREFORE, for and in consideration of the mutual covenants,
agreements and undertakings contained herein, and upon the terms, conditions and
provisions set forth below, the Parties agree as follows:
ARTICLE I
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DEFINITIONS
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For purposes of this Agreement, the following defined terms shall
have the meanings set forth below:
A. "Agreement" means this ASSET PURCHASE AGREEMENT.
B. "Assets" means all of the assets, property and rights of
Seller of every kind and character, whether tangible or
intangible, save and except the Excluded Assets
(hereinafter defined), but specifically including, without
limitation: (1) all oil and gas workover, completion,
plugging, abandonment and well servicing rigs, machinery,
tools, equipment, vehicles, inventory, parts, supplies and
any and all personal property related thereto, as well as
all contracts, agreements, contract rights and work in
process related thereto, currently owned by and used in the
business of the Seller and more particularly described in
EXHIBIT "A" attached hereto and incorporated herein for all
purposes by this specific reference; (2) the Contracts
(hereinafter defined); (3) all technologies, methods,
formulations, data bases, patents, trademarks, trade
secrets, know how and other intellectual property, if any,
used in the Business and owned by the Seller; (4) all
existing and assignable guaranties and warranties (express
or implied) issued in connection the purchase, lease,
construction, alteration and/or repair of any property
included within the Assets; (5) all information, files,
records, data, plans and recorded information, including
supplier lists and customer lists, relating to the
ownership and operation of the Business, provided that the
Seller shall be entitled to keep, retain and utilize copies
of all accounting and tax records maintained by the Seller;
(6) all right, title and interest of the Seller in and to
the name "CJS Pinnacle Petroleum Services" and any trade or
assumed names used by the Seller in the operation of the
Business; and (7) all goodwill of the Seller.
C. "Basic" means BASIC ENERGY SERVICES, INC., a Delaware
Corporation (the "Buyer").
D. "Business" means the oil and gas well workover, completion,
plugging, abandonment and related oil and gas well
servicing business currently conducted by the Seller in
Artesia, New Mexico and Beeville, Texas.
E. "Buyer" means BASIC ENERGY SERVICES, INC., a Delaware
Corporation ("Basic").
F. "Closing" means the actions to be carried out on the
Closing Date as provided herein.
G. "Closing Date" means the date and time set for Closing as
provided herein.
H. "Contracts" means the verbal and written (if any)
agreements, contracts, contract rights and other evidence
of the same, including work in process associated with the
Business, subject to all liabilities, obligations and
requirements to perform and complete the same after the
Effective Date, as more particularly described in EXHIBIT
"A" attached hereto and incorporated herein for all
purposes by this specific reference; all of which to the
extent described on EXHIBIT "A" and to the extent
assignable shall be transferred to and assumed by the Buyer
as of the Effective Date.
I. "Effective Date" means December 31, 2001 at 5:00 p.m.,
Central Standard Time.
J. "Excluded Assets" means: (1) all land, real property and
buildings, as well as all fixtures, improvements and
moveable personal property attached thereto; (2) all
accounts receivable and any other rights of the Seller to
receive payment for services rendered by the Seller prior
to the Effective Date; (3) all cash, cash
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accounts, checking and savings accounts, cash equivalents
and petty cash of the Seller prior to the Effective Date;
(4) any and all other receivables, payables, prepaid
expenses, bonds, deposits and any other intangible items of
a similar nature owned by the Seller and used in the
Business; (5) any assets in the possession of the Seller
owned by third parties; (6) the membership and equity
ownership interests in and of the Seller and all limited
liability company organizational documents governing the
formation and organization of the Seller; (7) all rights
and claims in respect of any unpaid proceeds to be received
pursuant to the Contracts prior to the Effective Date; (8)
all claims or causes of action of the Seller arising at any
time prior to the Effective Date; (9) all data that cannot
be disclosed or assigned to the Buyer as a result of
confidentiality arrangements or licenses under agreements
with other persons and the Seller (provided that such data
does not affect in any material respect the use or
operation of the Assets by the Buyer); (10) all notes,
memoranda, agreements or reports of any consultant or other
professional employed by the Seller in connection with the
sale of the Assets; (11) all agreements, communications and
correspondence between the Seller and Friedman, Billings &
Ramsey, Inc. and their respective employees,
representatives or agents relating to the transactions
contemplated by this Agreement; (12) all internal
correspondence and communications of the Seller with
respect to the sale of the Assets hereunder and the
transactions contemplated herein; (13) all bids submitted
by prospective Buyers of the Assets; and (14) all files and
documents of the Seller that are subject to an
attorney-client privilege related to litigation.
K. "Party" and "Parties" mean Basic, Buyer, Pinnacle and
Seller, individually or collectively, but do not include
Pedco and Warren.
L. "Pedco" means PETROLEUM DEVELOPMENT CORPORATION, a New
Mexico Corporation, including its wholly owned subsidiary
PEDECO, INC., a Texas Corporation, which is an equity owner
and the Managing Member of Pinnacle.
M. "Pinnacle" means CJS PINNACLE PETROLEUM SERVICES, LLC, a
Texas Limited Liability Company (the "Seller").
N. "Purchase Price" shall have the meaning more particularly
set forth in Article IV hereof.
O. "Seller" means CJS PINNACLE SERVICES, LLC, a Texas Limited
Liability Company ("Pinnacle").
P. "Service Credit" shall have the meaning set forth in
Article IV hereof.
Q. "Warren" means WARREN RESOURCES, INC., a New York
Corporation, including its wholly owned entity TEXAS WARREN
RESOURCES, LLC, a
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Texas limited liability company, which is an equity owner
and non-managing member of Pinnacle.
ARTICLE II
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CONDITION OF ASSETS AND DUE DILIGENCE
-------------------------------------
The Parties agree that the Buyer has been afforded adequate
opportunity to inspect the Assets and the Business of Pinnacle during normal and
regular business hours. By accepting the Assets from the Seller, the Buyer
hereby acknowledges that it has inspected and examined the Assets and is fully
acquainted with the condition thereof. The Buyer specifically acknowledges and
agrees that it has had the opportunity to ask questions of and receive answers
from the Seller regarding the Assets and the overall operation of the Business
by the Seller, and the Buyer is fully acquainted with the same. The Buyer
accepts the Assets "as is", "where is", "with all faults" and in their present
condition; and acknowledges that, except for the express representations and
warranties of the Seller in this Agreement, the Seller has made no warranties,
representations and covenants of any kind or type, either express or implied,
with respect to the operating or useful condition thereof or the fitness for a
particular purpose thereof in connection with the Business.
ARTICLE III
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TRANSFER OF ASSETS AND CONTRACTS
--------------------------------
At the Closing, the Seller agrees to and shall execute a Bill of
Sale, Transfer and Assignment conveying all of the Seller's right, title and
interest in and to the Assets to and in favor of the Buyer, free and clear of
Liens, except for the Permitted Encumbrances, both as hereinafter defined, which
Bill of Sale, Transfer and Assignment shall be in a form substantially similar
to EXHIBIT "B" attached hereto and incorporated herein for all purposes by this
specific reference. In return for the transfer, conveyance and assignment by the
Seller to the Buyer of all the Seller's right, title and interest in and to the
Assets, the Buyer agrees to and shall pay the Purchase Price and issue the
Service Credit in the manner provided for elsewhere herein.
The Parties agree to execute any and all additional instruments,
documents or other agreements that may be deemed necessary, required or
advisable in order to fully effectuate the transfer of the Assets from the
Seller to the Buyer, as well as otherwise comply with the terms, conditions and
provisions contained herein.
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ARTICLE IV
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PURCHASE PRICE AND PAYMENT TERMS
--------------------------------
As consideration and payment for the conveyance, transfer and
assignment of all the Seller's right, title and interest in the Assets, the
Buyer agrees to and shall pay the Seller the sum of $4,200,000.00 in cash and
service credit as the Purchase Price (the "Purchase Price"), upon the following
terms and conditions:
A. The amount of $3,700,000.00 shall be paid by the Buyer
to the Seller at the Closing in immediately verifiable funds, such as
a cashier's check, bank draft or wire transfer.
B. The remaining balance of the Purchase Price in the
amount of $500,000.00, shall serve as consideration payable to the
Seller by the Buyer in the form of a credit for services to be
rendered by the Buyer for the Seller in the future (the "Service
Credit"). The Service Credit in the amount of $500,000.00 shall be
established as an account and credit on the books and records of the
Buyer for the benefit of the Seller for future oil and gas well
workovers, completions, swabbing operations, plugging and abandonment
operations or any other related well servicing operations to be
performed by Basic at the request of Pedco and/or Warren within
thirty-six (36) months after the Closing Date. The Service Credit
shall continue in effect after the Closing Date for a period of
thirty-six (36) months or until the date the Service Credit is fully
used by Pedco and Warren, whichever shall first occur. The Service
Credit shall be subject to the following terms, conditions and
provisions:
1. During the period of time the Service Credit
is in effect, Basic agrees that if Pedco and/or Warren
propose(s) to conduct any well servicing operations within
the geographical area served by any of Basic's currently
existing or future offices or service locations ("Basic's
Service Areas"), then Basic shall provide such services to
Pedco and Warren on a preferential basis at Basic's then
current rate schedule and pricing policies in effect at the
applicable local office or service location at the best
rates Basic charges its most significant customers.
2. Pedco and/or Warren may offset up to and
receive a credit for a maximum of $25,000.00 per month of
billings and invoices for services and products provided by
Basic during the preceding calendar month against the
Service Credit. During the first eighteen (18) months after
the Closing Date, the amount of the Service Credit shall be
limited to $25,000 per month. During the final eighteen
(18) months, the amount of the unused Service Credit shall
be $25,000 per month plus a 50% discount (for application
against the unused balance of the Service Credit) on any
amounts in excess of $25,000 per month until the full
amount of the Service Credit is used or the same expires,
as provided above. Any costs, expenses or charges incurred
by Basic for services, products, materials or other items
provided by third parties at the request of either Pedco or
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Warren that are included in Basic's invoices shall not be
credited against, offset or reduce the Service Credit, and
shall be paid by Pedco or Warren as provided below.
3. Basic will respond to a request for services
within Basic's Service Areas from Pedco or Warren as
quickly as possible and on a preferential basis over and
above any third parties. Basic agrees to and shall guaranty
oil and gas well services and rig availability within a
maximum of five (5) business days after receipt of a
request for any such services from Warren or Pedco at any
of Basic's Service Areas.
4. Basic agrees to and shall provide a monthly
accounting to Warren within fifteen (15) days after the end
of each calendar month reflecting the declining balance
amount of the Service Credit used by Warren or Pedco during
the preceding calendar month. Upon request by Warren or
Pedco, Basic will provide copies of all supporting
invoices, statements and billings underlying its accounting
for the Service Credit.
5. Subject to the Service Credit, Warren will pay
Basic for all services performed and materials supplied
that are not covered by the Service Credit, including
applicable third party services, within thirty (30) days
after receipt of invoices from Basic reflecting the type,
quantity and amount of such services rendered and materials
supplied, together with a photocopy of the actual invoice,
statement or other billing notice prepared by any
applicable third parties.
C. The Seller and Buyer hereby allocate the Purchase Price
among the Assets and the non-competition covenant of Seller as set
forth in EXHIBIT "C" attached hereto, and agree to be bound by such
allocation for federal income tax and all other purposes incident to
this Agreement.
ARTICLE V
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LIENS, ENCUMBRANCES AND TAXES
-----------------------------
A. Liens and Encumbrances. The Seller has previously disclosed in
writing to the Buyer and the Buyer is aware of the existence of certain liens
and encumbrances covering and security interests in certain specific items
comprising the Assets (the "Liens"). The Buyer shall, at the Closing, pay the
applicable amounts of any of the Liens directly to the applicable lienholder and
reduce the Purchase Price by such amounts. Unless otherwise described above, the
Seller represents and warrants to the Buyer that there are no other mortgages,
deeds of trust, liens, encumbrances, debts, liabilities or obligations covering,
burdening or encumbering the Assets, other than: (1) liens for taxes and other
governmental charges or levies which are not yet due and payable; (2)
mechanics', workmen's, warehousemen's, vendors' or carriers' liens arising under
applicable law in the ordinary course of business and securing sums which are
not yet due and
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payable (or deposits or pledges to obtain the release of any such liens); or (3)
rights reserved to or vested in any municipality or other governmental authority
to control or regulate the Assets (any such liens specified in clauses (1)
through (3) above being hereinafter referred to as "Permitted Encumbrances").
The Permitted Encumbrances shall not be a deduction against or reduce the
Purchase Price.
B. Liabilities. The Seller represents and warrants to the Buyer that
the Seller has not performed, caused to be performed or hired any third party to
perform any labor or work upon the Assets within the past 180 days; or if the
same has been performed, then all charges and amounts incurred in connection
therewith will be paid in full and discharged on and as of the Closing Date. The
Seller also represents and warrants that on and as of the Effective Date, no
person or entity who may have performed labor, supplied materials or rendered
services in connection with improving or maintaining the Assets, has the right
to claim a lien on the Assets pursuant to the applicable Mechanics' and
Materialmen's Lien Acts or any other provisions or laws of the States of New
Mexico and Texas.
C. Taxes. The Seller represents and warrants to the Buyer that, on
and as of the Effective Date, all ad-valorem or other taxes assessed against the
Assets have been or will be paid in full for the calendar year 2001 and all
prior years, and do not constitute a lien against the same. In addition and to
the best of its knowledge, information and belief, the Seller represents to the
Buyer that all federal and state income, gross receipts, sales, social security,
self employment, state and federal unemployment and other taxes assessed against
and payable on or with respect to all employees' wages and income of the Seller
have been paid or provided for, or that none are due. The Seller agrees to and
shall retain complete responsibility for, pay and discharge any and all taxes of
the kind and type described above that are or may in the future be assessed
against or on or with respect to any and all Business activities conducted by
the Seller prior to the Effective Date.
ARTICLE VI
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COSTS AND EXPENSES
------------------
A. Insurance. The Seller represents and warrants that the Assets are
currently insured with property damage, liability, workers compensation and
various other forms of insurance coverage. The Parties specifically acknowledge
and agree that the Seller may terminate such insurance policies maintained by
the Seller on and as of the Closing Date. In addition, the Parties specifically
acknowledge and agree that the Seller shall be entitled to receive and retain
any refunds or rebates from any of its existing insurance companies with respect
to prepaid but unused premiums. In the event any such refunds for the early
termination of existing insurance policies or coverages are received by the
Buyer from and after the Closing Date, the Buyer agrees to and shall forward all
checks representing any such refunds or rebates to the Seller.
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B. Employees Wages and Salaries. The Seller shall be responsible for
and hereby retains liability for and agrees to pay all wages, salaries and other
forms of compensation due and payable to all existing employees of the Seller,
including all federal and state income, social security, self employment,
unemployment and other taxes of any kind or type assessed against and payable on
with respect to such employees wages up to and through the Closing Date. Upon
Closing, the Buyer agrees to pay all salaries and wages accruing after the
Closing Date of any former employees that are hired by the Buyer, including all
taxes of the kind and type described above that may be assessed against the
same, and shall hold the Seller harmless from and against the same.
C. Certain Closing and Related Costs. In connection with and at the
Closing of the transactions contemplated by this Agreement, the Seller and Buyer
agree to pay their own legal document preparation or attorneys' fees incurred in
connection herewith. The Buyer also specifically agrees to and shall pay the
cost of any recording or filing fees.
ARTICLE VII
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EMPLOYEES
---------
The Seller will use its reasonable best efforts to make all of its
employees available for hire and retention by the Buyer after the Closing Date,
and the Buyer agrees and shall hire all of such employees on an "at will" basis
only (except for Julian Carrillo, as hereinafter provided) on and as of the
Closing Date, subject only to the Buyer's satisfaction, in its reasonable
discretion, of the employees qualifications for employment with the Buyer in
accordance with its standard employment practices and procedures, and the mutual
agreement between such employees and Buyer as to their future compensation
levels or benefits. The Buyer shall have no liability or incur any obligation
with respect to any employee benefits of any employees prior to the Closing
Date, except those benefits that accrue to such employees employment with the
Buyer on and after the Closing Date. The Seller shall cooperate with the Buyer
in connection with any offer of employment by the Buyer to the employees and
will use its best efforts to cause its existing employees to accept any and all
such employment offers. Any and all employees who are employed by the Buyer from
and after the Closing Date shall be eligible for all of the Buyer's current
benefit programs as of the Closing Date (subject only to any applicable periods
that cannot be waived by the benefit plan documents), and the length of service
of such employees with the Seller will be considered in their eligibility for
the benefit programs of the Buyer.
ARTICLE VIII
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CONTRACTS AND AGREEMENTS
------------------------
The Buyer acknowledges and agrees that the Seller is a party to the
Contracts (both verbal and written) that are necessary in order for the Seller
to operate the Assets and to carry on the Business in its ordinary course. As of
the Closing Date, the Buyer agrees to and shall
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assume responsibility for and continue performing in accordance with all of the
Seller's existing obligations and responsibilities under any and all of the
Contracts, save and except any such Contracts which are non-assignable or for
which the Seller is unable to procure requisite consents to assignment prior to
the Closing. The Buyer shall thereafter do any and all things and take any and
all steps required to be done and performed under the terms and conditions of
the assigned Contracts, and shall hold the Seller harmless from any and all
loss, liability or expense reasonably incurred by the Seller in connection
therewith, including attorney's fees, with respect to obligations and
responsibilities accruing from and after the Closing Date. The Seller retains
liability for all obligations and responsibilities accruing prior to the Closing
Date under the Contracts and shall indemnify and hold the Buyer harmless from
any and all loss, liability or expense reasonably incurred by the Buyer in
connection therewith, including attorney's fees.
ARTICLE IX
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CLOSING, CLOSING DATE AND EFFECTIVE DATE
----------------------------------------
A. The Closing shall take place at the offices of the Buyer, located
at 406 North Big Spring in Midland, Texas on or before February 15, 2002 at
10:00 a.m., Central Standard Time (the "Closing Date"). The Closing Date and
place of Closing may be postponed or changed by mutual written agreement of the
Parties.
B. The Effective Date of all transactions contemplated by this
Agreement and all exhibits, documents, agreements, contracts, assignments and
other instruments that shall be executed by the Parties in connection with the
Closing shall be December 31, 2001 at 5:00 p.m. Central Standard Time.
C. At the Closing, the Seller shall transfer and assign the Assets
and Contracts to the Buyer, and otherwise comply with the conveyancing
requirements contained herein, by executing the Bill of Sale, Transfer and
Assignment in a form substantially similar to EXHIBIT "B" attached hereto. Such
Bill of Sale, Transfer and Assignment shall convey the Assets free and clear of
all Liens, other than the Permitted Encumbrances. In addition or unless
otherwise provided for herein, the Seller shall cause all appropriate parties to
execute, file and deliver to the Buyer full and complete releases of all Liens.
D. At the Closing, the Buyer shall pay the sum of $3,700,000.00 and
issue the Service Credit in the amount of $500,000.00 as the Purchase Price for
the Assets in the manner provided for elsewhere herein.
E. At the Closing, the Seller and the Buyer shall execute and deliver
a non-competition agreement that is substantially identical in form and
substance to that attached hereto as Exhibit "D".
F. At the Closing, the Parties agree to and shall execute and deliver
among themselves all documents, instruments, agreements and original forms of
exhibits required by or
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attached to this Agreement, as well as any and all other instruments, documents
or agreements deemed necessary or advisable to fully effectuate the intent of
this Agreement and the transactions contemplated hereby. In addition, the Seller
and the Buyer agree to and shall pay in full and discharge their respective
portions of any and all costs and expenses arising out of or incurred in
connection with the transactions contemplated by this Agreement.
G. By their execution hereof and their respective actions taken at
the Closing, the Parties hereby verify and confirm to each other that, on and as
of the Effective Date and the Closing: (i) the transactions contemplated by this
Agreement have been duly approved by the shareholders, officers directors,
members and/or managers of each of the Parties; (ii) all representations and
warranties of the Parties are true and correct; and (iii) the Parties have
complied with all applicable covenants contained in this Agreement that are to
be performed at or prior to the Closing.
ARTICLE X
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POSSESSION AND RESPONSIBILITY
-----------------------------
On the Closing Date, the Seller shall surrender and deliver and Buyer
shall be entitled to possession of the Assets and Contracts that are more
particularly described herein; at which time the Buyer agrees to and shall
assume full and complete responsibility for and shall perform and discharge the
same in accordance with the terms, conditions and provisions of this Agreement.
ARTICLE XI
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RISK OF LOSS
------------
Prior to the Closing Date, the risk of loss or damage to the Assets
shall remain with and be on the Seller. Any loss or damage thereto which is not
covered by insurance shall be the sole responsibility of Seller, unless the same
is caused by the negligence or intentional acts of the Buyer or its agents and
employees. On and after the Closing Date, the risk of loss or damage to the
Assets shall be assumed by and upon the Buyer. The Buyer agrees to and shall
indemnify and hold the Seller harmless from any and all loss or damage to the
Assets on and after the Closing Date.
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ARTICLE XII
-----------
INDEMNIFICATION/LIABILITIES
---------------------------
Unless otherwise provided for herein, the Buyer agrees that the
Seller shall not be responsible for any debts, obligations or liabilities of any
kind or type incurred by the Buyer in connection with the ownership and
operation of the Assets from and after the Closing Date (collectively the
"Buyer's Liabilities"), including, without limitation: (1) claims for injury to
a person or property; (2) any federal, state or local income or other tax
payable with respect to the Business, Assets, properties or operations of the
Seller, including any sales or other transfer taxes resulting from the
consummation of this transaction, which will be the responsibility of the Buyer;
(3) liabilities or obligations arising after the Closing Date or as a result of
the Closing to any employees, agents or independent contractors of the Buyer,
including those previously employed by the Seller who are employed by the Buyer
following the Closing Date; and (4) any and all other obligations of the Buyer,
including those assumed by the Buyer in this Agreement. In the event any claim
is made by any person against the Seller relating to the ownership or operation
of the Assets for periods from and after the Closing Date, or regarding any of
the Buyer's Liabilities, then the Buyer shall defend the Seller against that
claim and hold the Seller harmless from any and all loss, liability and expense
reasonably incurred in connection therewith, including attorneys' fees.
Unless otherwise provided for herein, the Seller agrees that the
Buyer shall not be responsible for any debts, obligations or liabilities
incurred by the Seller in connection with the ownership and operation of the
Assets prior to the Closing Date (collectively the "Retained Liabilities"),
including, without limitation: (1) claims for injury to a person or property;
(2) any federal, state or local income or other tax payable with respect to the
Business, Assets, properties or operations of the Seller, save and except any
sales or other transfer taxes resulting from the consummation of this
transaction, which will be the responsibility of the Buyer; (3) liabilities or
obligations arising prior to the Closing Date or as a result of the Closing to
any employees, agents or independent contractors of the Seller, whether or not
employed by the Buyer following the Closing Date; and (4) any and all other
obligations of the Seller that are not expressly assumed by the Buyer in this
Agreement. In the event any claim is made by any person against the Buyer as a
result of or arising out of the Seller's ownership or operation of the Assets
prior to the Closing Date, or regarding any of the Retained Liabilities, then
the Seller shall defend the Buyer against that claim and hold the Buyer harmless
from any and all loss, liability and expense reasonably incurred in connection
therewith, including attorneys' fees.
The indemnities of the Parties under this ARTICLE XII shall survive
the Closing without time limitation.
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ARTICLE XIII
------------
ENVIRONMENTAL MATTERS AND LIMITATION OF WARRANTIES
--------------------------------------------------
A. To its best knowledge, information and belief, the Seller has
obtained all authorizations which are required in connection with the conduct of
the Business under regulations relating to pollution or protection of the
environment, including regulations relating to emissions, discharges, releases
or threatened releases of pollutants, contaminants, chemicals, petroleum
products, gases or industrial, toxic or hazardous substances or wastes into the
environment (including without limitation ambient air, surface water,
groundwater or land), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, chemicals, petroleum products, gases or industrial,
toxic or hazardous substances or wastes (collectively, "Hazardous Materials").
To its best knowledge, information and belief, the Seller is unaware of any
hazardous substance, hazardous material or toxic substance, as those terms are
more particularly defined below, that may exist on or with respect to the Assets
that are the subject matter of this Agreement. Subject to and except for the
express representations and warranties of the Seller in this Agreement, the
Buyer acknowledges and agrees that it has inspected the Assets and is accepting
the same in their present state and condition "as is", "where is" and "with all
faults". The Buyer agrees to and shall indemnify and hold the Seller harmless
from and against any and all liability including all foreseeable and enforceable
consequential damages, directly or indirectly arising out of the use,
generation, storage or disposal of Hazardous Materials on or with respect to the
Assets from and after the Closing Date, including, without limitation, the cost
of any required and necessary repair, response cost, clean-up or detoxification
costs, and preparation of any closure or other required plans to the full extent
that such action is attributable directly or indirectly to the presence or use,
generation, storage, release, threatened release or disposal of Hazardous
Materials on the Assets from and after the Closing Date. The Seller agrees to
and shall indemnify and hold the Buyer harmless from and against any and all
liability including all foreseeable and enforceable consequential damages,
directly or indirectly arising out of the use, generation, storage or disposal
of Hazardous Materials on or with respect to the Assets prior to the Closing
Date, including, without limitation, the cost of any required and necessary
repair, response cost, clean-up or detoxification costs, and preparation of any
closure or other required plans to the full extent that such action is
attributable directly or indirectly to the presence or use, generation, storage,
release, threatened release or disposal of Hazardous Materials on the Assets
prior to the Closing Date. The Parties' obligations pursuant to the foregoing
indemnification clauses shall survive the Closing without time limitation. The
term Hazardous Materials as used above, shall include, but not be limited to:
flammable explosives, asbestos, radioactive materials, hazardous wastes, toxic
substances and related injurious materials, whether injurious by themselves
alone or in combination with other materials. Hazardous Materials shall also
include, but not be limited to substances defined as "Hazardous Substances",
"Hazardous Material" or "Toxic Substances" in the: (1) Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), 42 U.S.C. Section 9601, et seq.; (2) Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801, et seq.; (3) Resource Conservation
Recovery Act ("RCRA"), 42 U.S.C. Section 6901, et seq.; (4) any applicable New
Mexico or Texas statutes; and (5) any rules or regulations adopted and
publications promulgated pursuant to
-12-
the above described federal and state laws, as well as any other laws associated
therewith or related thereto. Such indemnification shall cover and include, but
not be limited to any state or federal investigation, proceeding, administrative
action or lawsuit now existing or that may hereafter arise in the future with
respect to any or all business activities conducted on or with respect to the
Assets.
B. The Assets that are the subject matter of this Agreement and that
will be transferred by the Seller to the Buyer are being transferred without
recourse, covenant or warranty of any kind, express, implied or statutory,
unless otherwise provided for herein. To the extent required to be operative,
the disclaimers of certain warranties as to the personal property and
improvements are deemed to be "CONSPICUOUS" disclaimers for the purpose of any
applicable law, rule, regulation or order. As to the Assets and any and all
related personal property and improvements, the Seller is making no
representation or warranty whatsoever, express or implied, beyond those
expressly given in this Agreement, and the Buyer agrees that, except for the
express representations and warranties of the Seller in this Agreement, it is
acquiring the Assets, including all related personal property and improvements,
"as is", "where is" and "with all faults". WITHOUT LIMITING THE GENERALITY OF
THE IMMEDIATELY FOREGOING, EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES
OF THE SELLER IN THIS Agreement, THE SELLER HEREBY: (A) EXPRESSLY DISCLAIMS AND
NEGATES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT COMMON LAW, BY
STATUTE OR OTHERWISE, RELATING TO THE CONDITION OF THE ASSETS OR THE
ABOVE-DESCRIBED PROPERTY, AND THE SELLER HEREBY EXPRESSLY DISCLAIMS AND NEGATES
ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS; AND (B) NEGATES ANY
RIGHTS OF THE BUYER UNDER ANY STATUTES OR ANY CLAIMS BY THE BUYER FOR DAMAGES
BECAUSE OF DEFECTS, WHETHER KNOWN OR UNKNOWN AND WHETHER RESULTING FROM ANY
CAUSE; IT BEING THE INTENTION OF THE SELLER AND BUYER THAT, EXCEPT FOR THE
EXPRESS REPRESENTATIONS AND WARRANTIES OF THE SELLER IN THIS Agreement, THE
ASSETS AND THE ABOVE-DESCRIBED PROPERTY ARE BEING ACCEPTED BY THE BUYER IN THEIR
PRESENT CONDITION AND STATE OF REPAIR. WITHOUT LIMITING THE ABOVE, THE BUYER
HEREBY SPECIFICALLY WAIVES ANY AND ALL RIGHTS TO RECOVER FROM THE SELLER AND
FOREVER RELEASES AND DISCHARGES THE SELLER FROM ANY AND ALL DAMAGES, CLAIMS,
LOSSES, LIABILITIES, PENALTIES, FINES, LIENS, JUDGEMENTS, COSTS OR EXPENSES
WHATSOEVER, INCLUDING ATTORNEYS FEES AND ASSOCIATED COSTS, WHETHER DIRECT OR
INDIRECT, KNOWN OR UNKNOWN, FORESEEN OR UNFORESEEN AND WHETHER RESULTING FROM
ANY CAUSE THAT MAY ARISE ON ACCOUNT OF OR IN ANY WAY BE CONNECTED WITH THE
PHYSICAL CONDITION OF THE ASSETS OR THE ABOVE-DESCRIBED PROPERTY, OR ANY LAW OR
REGULATION APPLICABLE THERETO, SAVE AND EXCEPT TO THE EXTENT CONSTITUTING OR
ARISING FROM A BREACH OF THE SELLER'S REPRESENTATIONS AND WARRANTIES IN THIS
AGREEMENT.
-13-
C. THE BUYER'S RIGHTS AND REMEDIES WITH RESPECT TO THE TRANSACTIONS
CONTEMPLATED HEREUNDER AND WITH RESPECT TO THE SELLER'S ACTIONS OR PRACTICES
WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREUNDER SHALL BE GOVERNED BY
LEGAL PRINCIPLES OTHER THAN THE TEXAS DECEPTIVE TRADE PRACTICES - CONSUMER
PROTECTION ACT, TEX. BUS. & COM. CODE ANN. SS.17.41 ET SEQ. (THE "DTPA"). THE
BUYER HEREBY WAIVES THE APPLICABILITY OF THE DTPA TO THIS TRANSACTION AND ANY
AND ALL RIGHTS, DUTIES OR REMEDIES THAT MIGHT BE IMPOSED BY THE DTPA. THE BUYER
ACKNOWLEDGES THAT IT IS PURCHASING THE ASSETS FOR COMMERCIAL OR BUSINESS USE.
THE BUYER FURTHER ACKNOWLEDGES THAT IT: (1) HAS ASSETS OF, OR IF OWNED BY AN
ENTITY HAVING ASSETS OF $25,000,000 OR MORE ACCORDING TO ITS MOST RECENT
FINANCIAL STATEMENT PREPARED IN ACCORDANCE WITH GAAP; (2) HAS KNOWLEDGE AND
EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT ENABLE IT TO EVALUATE THE
MERITS AND THE RISKS OF A TRANSACTION SUCH AS THIS; AND (3) IS NOT IN A
SIGNIFICANTLY DISPARATE BARGAINING POSITION WITH THE SELLER.
ARTICLE XIV
-----------
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLER
-------------------------------------------------------
The Seller hereby represents, warrants and covenants to the Buyer,
which representations, warranties and covenants shall survive the Closing, as
follows:
A. Power and Authority. The Seller has full power and
authority to enter into, execute and perform this
Agreement; to make any representation, warranty, covenant
or agreement contained herein; to perform every act and
execute and deliver any and all documents, instruments or
agreements necessary or appropriate to consummate the
transactions contemplated by this Agreement. All actions on
the part of the Seller necessary to consummate the
transactions contemplated by this Agreement have been duly
taken as required by applicable law, the governing
documents of the Seller and any applicable agreements. This
Agreement has been, and other agreements, documents and
instruments required to be executed and delivered by the
Seller in accordance with the provisions hereof, have been
or will be duly executed and delivered by the Seller and
constitute (or will at Closing constitute) the legal, valid
and binding obligations of the Seller, enforceable against
the Seller in accordance with their terms.
B. Organization. The Seller represents to the Buyer that the
Seller is a duly organized and validly existing limited
liability company under the laws of the State of Texas, in
good standing in all applicable jurisdictions, with full
power and
-14-
authority to enter into this Agreement and carry out the
terms, conditions and provisions hereof.
C. Ownership of Property. The Seller has and can convey, at
the Closing, good, merchantable and marketable title to the
Assets, free and clear of all Liens, unless otherwise
provided for herein and authorized hereby; and the Seller
is duly authorized to sell, transfer and assign all of the
same to the Buyer.
D. Litigation. To the Seller's best information, knowledge and
belief, there is no litigation, proceeding or governmental
investigation pending or threatened in any court,
arbitration board, administrative agency or tribunal
against or relating to the Seller that would prevent or
impede the consummation of this Agreement by the Seller.
The Seller does not know of and has no reasonable ground to
know of any basis for any such litigation, proceeding or
investigation, and the execution and performance of this
Agreement by it will not result in a default with respect
to any judgment, order, writ, injunction, decree, rule or
regulation of any applicable court or administrative
agency.
E. Liabilities. Unless otherwise authorized hereby and to the
Seller's knowledge, information and belief, all
liabilities, trade creditors' bills, suppliers' bills,
advertising fees, vendors' charges and license fees have
been paid or provided for, or otherwise disclosed in
writing to the Buyer, and there is no threat by any person,
including any governmental body, to impose a lien upon the
Assets, or any portion thereof for any purpose.
F. Insurance. To its best knowledge, information and belief,
the Seller has had in effect and will keep in full force
and effect prior to the Closing Date of this Agreement
adequate insurance policies and bonds covering the Assets
issued by financially responsible insurers at no less than
existing levels of coverage.
G. Liens and Encumbrances. To the Seller's knowledge,
information and belief or except to the extent authorized
hereby or referred to herein and on and as of the Closing
Date, there will be no Liens, encumbrances, mortgages,
deeds of trust or security interests in and to, or
affecting title to the Assets, and no person will have a
right to claim a lien upon the same.
H. Leases, Contracts and Other Agreements. The Seller has
incurred no liability, made no contract or agreement, nor
entered into any written or oral arrangements whatsoever
which would impose or result in any obligations upon the
Buyer as a result of or at the Closing of this Agreement,
except for the Contracts which will be specifically assumed
and performed by the Buyer pursuant to this Agreement on,
as of and after the Closing Date. The Seller has not
entered into any agreement or agreements, either written or
oral, under which it is or could be obligated to sell or
transfer all or any portion of the Assets or rights under
this
-15-
Agreement, and agrees not to enter into or negotiate any
such agreement or agreements.
I. Taxes. To the Seller's best knowledge, information and
belief, all ad-valorem and other personal property taxes
for 2001 and prior years assessed against the Assets, and
all state and federal taxes assessed against the Seller's
employees' wages have been paid or provided for, or the
Seller will make sure the same will be paid and provided
for as of the Closing Date of this Agreement; and no legal,
governmental or administrative action is pending or
threatened with regard to any such taxes or assessments.
J. Absence of Violation or Conflict. The execution, delivery
and performance of the transactions contemplated by this
Agreement by the Seller do not and will not violate,
conflict with or result in the breach of any term,
condition or provision of or require the consent of any
other person under: (1) any law, ordinance or governmental
rule or regulation known to the Seller and to which the
Seller, the Assets or the Business is subject; (2) the
governing documents of or any securities issued by the
Seller; or (3) any mortgage, indenture or other instrument
to which the Seller is a party or by which any of the
Assets or the Business may be bound or effected. No
authorization, approval or consent of and no registration
or filing with any governmental or regulatory body or any
other third party is required in connection with the
execution, delivery and performance of this Agreement by
the Seller.
K. Conforming Use. To its best knowledge, information and
belief, the Seller has used the Assets for the purposes for
which such property was intended, and has abided by,
conformed to and caused others to abide by and conform to
all laws, ordinances, orders, rules, regulations and
statutes of national, state, municipal or county
governmental authorities that are now existing or may
hereinafter be enacted and that are controlling or in
manner affecting the use and operation by the Seller of
Assets.
L. Title. At the Closing and as of the Effective Date, the
Buyer will be vested absolutely with ownership of and good
and merchantable title to the Assets. Except for the
Excluded Assets, the Assets constitute all property, assets
and contractual rights necessary for the conduct of the
Business as presently conducted. Seller has no material
assets other than the Assets and the Excluded Assets.
M. Accuracy and Completeness of Information. No written
statement, representation, warranty or other information
provided or furnished by or on behalf of the Buyer to the
Seller in this Agreement or otherwise in connection with
this transaction contains, as of the date, made any untrue
statement of a material fact or omits to state any material
fact necessary to make the statements herein or therein not
misleading.
-16-
N. Financial Matters and Absence of Certain Changes.
(1) Financial Statements. The Seller has previously
furnished to the Buyer unaudited financial statements
of the Seller for the years ended December 31, 1999 and
2000 and for the interim period ended October 31, 2001
(collectively, the "Financial Statements"). The
Financial Statements have been prepared in a manner
that is consistent with the books and records of the
Seller and present fairly the information contained
therein in the same manner as such information has been
historically reported by the Seller.
(2) Liabilities. Except for the liabilities reflected on
the Financial Statements and as otherwise provided in
this Agreement, the Seller has, and, to the best of the
Seller's knowledge, on the Closing Date the Seller will
have, no other material liabilities, whether accrued or
absolute, and whether due or to become due, or arising
out of transactions entered into, or any state of facts
existing, prior to the Closing Date which will encumber
the Assets or impair the use, value or ownership
thereof by the Buyer following the Closing. There has
been no material adverse change in the Assets since
October 31, 2001.
(3) Certain Changes. Since October 31, 2001, there has not
been: (a) any amendment, termination or revocation, or
threatened termination, revocation or modification of
any license, permit or franchise required for the
continued operation of the Business; (b) any sale or
transfer of the Assets; (c) any pledge of subjection to
lien, charge or encumbrance of any kind, or, on or
affecting any of the Assets, except as otherwise
provided in this Agreement; (d) any material damage,
destruction or loss of or to the Assets, whether or not
covered by insurance; and (e) any material adverse
change in the Business.
O. Continuation of Representations. The representations,
warranties and covenants of the Seller shall be in full
force and effect as of the Closing Date, and shall, except
as otherwise provided herein, survive the Closing only for
a period of three (3) years from and after the Closing
Date, unless written notice of a claim is given to the
Seller within such three year period, in which event, the
claims identified within such notice shall survive without
time limitation (but subject to any statutes of limitation
applicable thereto under governing law).
P. Indemnification. The Seller agrees to and shall indemnify
and hold the Buyer harmless from any loss, liability or
expense, including attorneys' fees, arising out of the
breach of any representation, covenant or warranty made by
it hereunder.
-17-
ARTICLE XV
----------
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BUYER
------------------------------------------------------
The Buyer hereby represents, warrants and covenants to the Seller,
which representations, warranties and covenants shall survive the Closing, as
follows:
A. Power and Authority. The Buyer has full power and authority
to enter into, execute and perform this Agreement; to make
any representation, warranty, covenant or agreement
contained herein; to perform every act and execute and
deliver any and all documents, instruments or agreements
necessary or appropriate to consummate the transactions
contemplated by this Agreement. All actions on the part of
the Buyer necessary to consummate the transactions
contemplated by this Agreement have been duly taken as
required by applicable law, the governing documents of the
Buyer and any applicable agreements. This Agreement has
been, and other agreements, documents and instruments
required to be executed and delivered by the Buyer in
accordance with the provisions hereof, have been or will be
duly executed and delivered by the Buyer and constitute (or
will at Closing constitute) the legal, valid and binding
obligations of the Buyer, enforceable against the Buyer in
accordance with their terms.
B. Organization. The Buyer represents to the Seller that the
Buyer is a duly organized and validly existing corporation
under the laws of the State of Delaware, in good standing
in all applicable jurisdictions, with full power and
authority to enter into this Agreement and carry out the
terms, conditions and provisions hereof.
C. Litigation. There is no litigation, proceeding or
governmental investigation pending or threatened in any
court, arbitration board, administrative agency or tribunal
against or relating to the Buyer that would prevent or
impede the consummation of this Agreement by the Buyer. The
Buyer does not know of and has no reasonable ground to know
of any basis for any such litigation, proceeding or
investigation and the execution and performance of this
Agreement by it will not result in the default with respect
to any judgment, order, writ, injunction, decree, rule or
regulation of any applicable court or administrative
agency.
D. Accuracy and Completeness of Information. No written
statement, representation, warranty or other information
provided or furnished by or on behalf of the Seller to the
Buyer in this Agreement or otherwise in connection with
this transaction contains as of the date made any untrue
statement of a material fact or omits to state any material
fact necessary to make the statements herein or therein not
misleading.
-18-
E. Consent and Filings. There is no requirement applicable to
the Buyer to obtain any consent, approval or authorization
of, or to make or effect any declaration, filing or
registration with, any governmental authority for the valid
execution and delivery by the Buyer of this Agreement, the
due performance by the Buyer of its obligations hereunder
or the lawful consummation of the transactions contemplated
hereby.
F. Absence of Violation or Conflict. The execution, delivery
and performance of the transactions contemplated by this
Agreement by the Buyer do not and will not violate,
conflict with or result in the breach of any term,
condition or provision of or require the consent of any
other person under: (1) any law, ordinance or governmental
rule or regulation known to the Buyer and to which the
Buyer is subject; (2) the governing documents of or any
securities issued by the Buyer; or (3) any mortgage,
indenture or other instrument to which the Buyer is a party
or by which any of its properties or business activities
may be bound or effected. No authorization, approval or
consent of and no registration or filing with any
governmental or regulatory body or any other third party is
required in connection with the execution, delivery and
performance of this Agreement by the Buyer.
G. Accuracy and Completeness of Information. No written
statement, representation, warranty or other information
provided or furnished by or on behalf of the Seller to the
Buyer in this Agreement or otherwise in connection with
this transaction contains, as of the date, made any untrue
statement of a material fact or omits to state any material
fact necessary to make the statements herein or therein not
misleading.
H. Continuation of Representations. The representations,
warranties and covenants of the Buyer shall be in full
force and effect as of the Effective Date, and shall,
except as otherwise provided herein, survive the Closing
hereof only for a period of three (3) years from and after
the Closing Date, unless written notice of a claim is given
to the Buyer within such three year period, in which event,
the claims identified within such notice shall survive
without time limitation (but subject to any statutes of
limitation applicable thereto under governing law).
I. Indemnification. The Buyer agrees to and shall indemnify
and hold the Seller harmless from any loss, liability or
expense, including attorneys' fees, arising out of the
breach of any representation, covenant or warranty made by
it hereunder.
-19-
ARTICLE XVI
USE AND OPERATION OF THE ASSETS BETWEEN
---------------------------------------
THE EFFECTIVE DATE AND CLOSING
------------------------------
The Seller represents to the Buyer that, as of the Effective Date and
prior to the Closing, the Assets have been used and operated by the Seller and
will be used and operated as follows:
A. Property. The Seller will use commercially reasonable
efforts to use and operate the Assets in the ordinary
courses of Business and cause the Assets to be kept and
maintained in their current operating condition and repair,
with the exception of reasonable wear, tear and
obsolescence.
B. Governmental Reports. The Seller will use its best efforts
to duly and timely file all reports required to be filed
with any and all governmental authorities, and has and will
duly observe and conform to all laws, rules, regulations,
ordinances, codes, orders, licenses and permits relating to
or affecting in any material way the Assets.
C. Liens/Security Interests. Unless otherwise authorized
hereby or provided for herein, the Seller shall not enter
into, create, assume or allow to exist any new security
agreement, lien, encumbrance, mortgage, deed of trust,
pledge, conditional sale or other title retention
agreement, easement, covenant, restriction or other burden
upon the Assets.
D. Sales/Transfers. The Seller will not sell, lease, abandon,
assign, transfer, license or otherwise dispose of all or
any portion of the Assets.
E. Contracts/Agreements. The Seller will not enter, assume,
amend, change or modify any Contract or other agreement,
arrangement, commitment, instrument or obligation
materially relating to or affecting in any way the Assets
or the Seller's ownership thereof.
F. Defaults. The Seller will use its best efforts to not be in
default under or become in breach of any term or provision
of, or suffer or permit to exist any condition or event
which, after notice or lapse of time or both, would
constitute a breach of or default under any of the Seller's
agreements which would give any other party thereto the
right terminate the same, claim damages thereunder or
impose a lien upon all or any portion of the Assets.
G. Accounting Matters. Buyer and Seller acknowledge and agree
that, notwithstanding the Effective Date of this
transaction; (i) Seller shall continue to possess, operate,
maintain and utilize the Assets between the Effective Date
and the Closing Date, but shall do so in strict accordance
with this Agreement; and (ii) Seller, as compensation for
its management of the Assets during such period,
-20-
shall be entitled to receive all revenues generated by or
derived from the ownership or operation of the Assets
during the period between the Effective Date and the
Closing Date, but shall be solely responsible for any and
all obligations or liabilities arising from or in
connection with the ownership or operation of the Assets
during the period between the Effective Date and Closing
Date. As a material consideration of this Agreement to
Seller, Buyer agrees to use reasonable commercial efforts
to bill any unbilled work in process of Seller as of the
Closing Date and to collect any outstanding accounts
receivable of Seller as of the Closing Date, but Buyer
shall have no obligation to institute litigation with
respect to Seller's receivables, nor shall Buyer have any
liability of any kind to Seller for collection efforts of
Buyer upon such receivables, save and except any failure of
Buyer to remit collections of Seller's receivables to
Seller in accordance herewith. Seller may undertake to bill
and collect its work in process and receivables at any time
by written notice to Buyer, whereupon Buyer shall be
discharged from any further responsibility with respect
thereto. Buyer agrees that, during the pendancy of efforts
to collect Seller's outstanding receivables and the winding
up of Seller's business and affairs, Seller may continue to
utilize the name "CJS Pinnacle Petroleum Services" for such
limited purposes, but for no others without prior written
consent of Buyer. In light of the foregoing and the other
terms and provisions of this Agreement, any payments
received by Seller or Buyer which are in payment of
receivables arising or attributable to periods prior to the
Closing Date shall be the property of Seller. Any payments
received by Seller or Buyer which are payment of
receivables arising or attributable to periods after to the
Closing Date shall be the property of Buyer. Buyer and
Seller agree to remit any such payments which are received
by either of them and which are the property of the other
Party to the other Party promptly upon receipt of the same.
Buyer and Seller shall cooperate fully in the issuance of
notices to vendors, customers and suppliers for purposes of
effectuating the collection procedures contemplated by this
Agreement.
ARTICLE XVII
------------
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER
----------------------------------------------------
All obligations of the Buyer under this Agreement are subject to the
fulfillment, prior to or at the Closing, of each of the following conditions,
any of which may be waived by the Buyer:
A. Accuracy of Covenants. Each and every covenant,
representation and warranty of the Seller under this
Agreement shall be true and accurate as of the date when
made, shall be deemed to be made again at and as of the
time of the Closing, and shall then be true and accurate in
all respects on and as of the Effective Date.
B. Performance of Covenants. The Seller has performed and
complied with, in all respects, each and every covenant,
agreement and condition required by this
-21-
Agreement to be performed or complied with prior to or at
the Closing and will continue to perform and comply with
the same thereafter.
C. Power and Authority. The Seller has full power and
authority to enter into this Agreement and to carry out the
transactions contemplated hereby.
D. Binding Effect. This Agreement is legally binding upon the
Seller and is enforceable in accordance with its terms,
subject only to the usual exceptions thereto relating to
bankruptcy and equitable principles.
E. Statutory Requirements. All applicable and necessary
statutory and other legal requirements for the valid
consummation of the transactions contemplated by this
Agreement (including, but not limited to, compliance with
any laws protecting creditors of the Seller) shall have
been fulfilled, and any and all necessary third party and
regulatory approvals, licenses and permits shall have been
obtained.
F. Litigation. There shall not be any actual or threatened
litigation to restrain or invalidate the transactions
contemplated by this Agreement. No proceedings shall have
been instituted or been threatened against the Seller for
the protection of creditors or otherwise for the relief of
the Seller.
G. Carrillo Employment Agreement. Julian Carrillo shall have
entered into a written employment agreement with the Buyer
that is in form and substance substantially identical to
that attached hereto as Exhibit "E" (the "Carrillo
Employment Agreement").
ARTICLE XVIII
-------------
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER
-----------------------------------------------------
All obligations of the Seller under this Agreement are subject to the
fulfillment, prior to or at the Closing, of each of the following conditions,
any of which may be waived by the Seller:
A. Accuracy of Covenants. Each and every covenant,
representation and warranty of the Buyer under this
Agreement shall be true and accurate as of the date when
made, shall be deemed to be made again at and as of the
time of the Closing, and shall then be true and accurate in
all respects and shall survive the Closing.
B. Performance of Covenants. The Buyer has performed and
complied with, in all respects, each and every covenant,
agreement and condition required by this Agreement to be
performed or complied with prior to or at the Closing and
will continue to perform and comply with the same
thereafter.
-22-
C. Power and Authority. The Buyer has full power and authority
to enter into this Agreement and to carry out the
transactions contemplated hereby.
D. Binding Effect. This Agreement is legally binding upon the
Buyer and is enforceable in accordance with its terms,
subject only to the usual exceptions thereto relating to
bankruptcy and equitable principles.
E. Statutory Requirements. All statutory and other legal
requirements for the valid consummation of the transactions
contemplated by this Agreement (including, but not limited
to, compliance with any laws protecting creditors of the
Buyer) shall have been fulfilled, and any and all necessary
third party and regulatory approvals, licenses and permits
shall have been obtained.
F. Litigation. There shall not be any actual or threatened
litigation to restrain or invalidate the transactions
contemplated by this Agreement. No proceedings shall have
been instituted or been threatened against the Buyer for
the protection of creditors or otherwise for the relief of
the Buyer.
G. Carrillo Employment Agreement. Julian Carrillo shall have
entered into the Carrillo Employment Agreement with the
Buyer.
ARTICLE XIX
-----------
DEFAULT
-------
1. Each of the following events shall constitute a default or breach
of this Agreement by the Seller:
A. If the Seller fails to close and consummate the
transactions contemplated by this Agreement on or before
the Closing Date, or perform in accordance herewith, as
well as with any and all documents executed in connection
herewith or required hereby.
B. If the Seller fails to perform or comply with any of the
terms, conditions, provisions, representations, warranties
or covenants of this Agreement and if such non-performance
continues for a period of thirty (30) days after written
notice thereof is given by the Buyer to and received by the
Seller.
C. If the Seller sells, vacates or abandons the Assets, unless
the same is accomplished as provided herein.
D. If the Seller or any of its successors or assignees, while
in possession of the Assets, files a petition in bankruptcy
or insolvency, or for reorganization under any
-23-
bankruptcy act, or shall voluntarily take advantage of any
such act by answer or otherwise, or shall make an
assignment for the benefit of creditors.
E. If involuntary proceedings under any bankruptcy law or
insolvency act, or to foreclose or repossess the Assets are
instituted against the Seller or if a receiver or trustee
is appointed over all or substantially all of the property
of the Seller, and if such proceedings are not dismissed or
the receivership or trusteeship vacated within thirty (30)
days after the institution or appointment of the same.
2. Each of the followings events shall constitute a default or breach
of this Agreement by the Buyer:
A. If the Buyer fails to close and consummate the transactions
contemplated by this Agreement on or before the Closing
Date, or perform in accordance herewith, as well as with
any and all documents executed in connection herewith or
required hereby.
B. If the Buyer fails to perform or comply with any of the
terms, conditions, provisions, representations, warranties
or covenants of this Agreement and if such non-performance
continues for a period of thirty (30) days after written
notice thereof is given by the Seller to and received by
the Buyer.
C. If the Buyer, or any of its successors or assignees, files
a petition in bankruptcy or insolvency, or for
reorganization under any bankruptcy act, or shall
voluntarily take advantage of any such act by answer or
otherwise, or shall make an assignment for the benefit of
creditors.
D. If involuntary proceedings under any bankruptcy law or
insolvency act, or to foreclose or repossess any business
assets or properties are instituted against the Buyer or if
a receiver or trustee is appointed over all or
substantially all of the property of the Buyer, and if such
proceedings are not dismissed or the receivership or
trusteeship vacated within thirty (30) days after the
institution or appointment of the same.
ARTICLE XX
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DISCLOSURE, ACCESS AND INFORMATION
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A. From the date hereof until the Closing Date, the Seller shall
grant to the Buyer and its agents and other representatives, upon reasonable
notice and during normal business hours, access to the Assets and Contracts of
the Seller to the extent reasonably required to enable the Buyer to conduct its
due diligence review for purposes of the transactions contemplated by this
Agreement. All such information obtained by the Buyer and its agents and
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representatives shall be deemed confidential and maintained by the Buyer as such
until the Closing Date.
B. The Buyer agrees to indemnify the Seller and hold it harmless from
and against any and all damages, losses, liabilities, demands, claims, actions,
causes of action, proceedings, assessments, settlements, judgments, fines,
penalties, interest, costs or expenses, including legal and other expenses
incurred in investigating and defending the same (collectively "Damages") which
arise from any personal injury, death or property damage resulting from any
actions of the Buyer in the course of the Buyer's inspection of the Assets and
Contracts pursuant to paragraph A of this Article.
C. The Parties will disclose to each other and provide to each other
copies of all Contracts, commitments, records and financial information
constituting a material item concerning the subject matter of this Agreement and
which should be disclosed prior to Closing. In addition, the Parties agree to
disclose to each other during the term of this Agreement, within ten (10) days
after written notice requesting the same, any such material, information or
records of the kind referred to above pertaining to the transactions
contemplated by this Agreement, not including the specific business activities
conducted by any of the Parties that are not related to this Agreement.
ARTICLE XXI
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FEES, COMMISSIONS AND COSTS
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Unless otherwise authorized hereby, the Parties covenant and
represent to each other that if either of them has employed any broker, realtor,
commissioned agent, attorney, advisor or other outside professional incident to
the transactions contemplated by this Agreement, then the Party who employed
such professional agrees to and shall be solely responsible for the payment of
any and all costs, expenses or fees charged in connection therewith, and shall
hold the other harmless and indemnify the other with respect to the
representations and warranties contained herein, including the payment of any
and all costs and expenses that may be charged by any person of the kind or type
described above. Notwithstanding anything to the contrary set forth above, the
Seller and Buyer each agree to and shall pay their respective costs, expenses
and attorney's fees incurred in connection with the preparation of any and all
documents, instruments, agreements, conveyances, transfers, assignments or other
instruments that have been or will be prepared in connection with the Closing of
the transactions contemplated by this Agreement.
ARTICLE XXII
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ASSIGNABILITY
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Unless otherwise provided herein or authorized hereby and prior to
the Closing, this Agreement, including any amendments hereof, the Exhibits
attached hereto, and any instruments,
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agreements or documents required hereby, may not be transferred, assigned or
conveyed, in whole or in part, by any Party hereto without first obtaining the
written consent of the other Party. Notwithstanding anything to the contrary set
forth above, the Parties specifically acknowledge and agree that the Seller
shall have the right to transfer, assign or convey all or any portion of the
Purchase Price and Service Credit or its rights hereunder to Warren and/or Pedco
prior to or after the Closing of the transactions contemplated hereby.
ARTICLE XXIII
NOTICES
Any and all notices required or permitted to be given by the Parties
to any other Party pursuant to this Agreement shall be in writing and shall be
delivered to the other Party by personal delivery, telefax with written
confirmation thereof, regular mail or by sending the same by United States mail,
certified or registered, return receipt requested, with postage thereon prepaid
to the Parties at the addresses listed below. Any Party may from time to time
designate a new mailing address by written notice to any other Party in
accordance with the foregoing provisions. All notices shall be deemed to have
been delivered upon actual receipt as evidenced by return receipt or other
delivery receipt.
Pinnacle/Seller: CJS PINNACLE PETROLEUM SERVICES, LLC,
a Texas limited liability company
c/o Warren Resources, Inc.
489 Fifth Avenue, 32nd Floor
New York, New York 10014
Attn: NORMAN F. SWANTON,
Chief Executive Officer
Basic/Buyer: BASIC ENERGY SERVICES, INC.,
a Delaware Corporation
406 North Big Spring
Midland, Texas 79701
Attn: KENNETH V. HUSEMAN,
President and Chief
Executive Officer
with a copy to:
WILLIAM M. KERR, JR.
Kerr & Ward, L.L.P.
500 West Texas, Suite 1310
Midland, Texas 79701
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Warren: WARREN RESOURCES, INC.,
a New York corporation
489 Fifth Avenue, 32nd Floor
New York, New York 10017
Attn: NORMAN F. SWANTON,
Chief Executive Officer
Pedco: PETROLEUM DEVELOPMENT CORPORATION,
a New Mexico corporation
4113 Eubank, NE, Suite 400
Albuquerque, New Mexico 87112
Attn: JIM C. JOHNSON, JR.,
President
ARTICLE XXIV
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GENERAL MATTERS
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A. Additional Instruments. All Parties agree to execute any
and all additional instruments, documents and agreements
deemed necessary or advisable to fully effectuate their
intent and the purposes of this Agreement.
B. Governing Law. This Agreement and any other additional
agreements, documents and instruments entered into and
executed by the Parties shall be governed by and construed
in accordance with the laws of the State of Texas.
C. Time of The Essence. Time shall be of the essence in the
performance by the Parties of all the terms, conditions and
provisions of this Agreement.
D. Waivers. One or more waivers of any covenant, term,
condition or provision of this Agreement shall not be
construed as a waiver of a subsequent breach of the same
covenant, term, condition or provision. The consent or
approval by any one of the Parties to or of any act by the
other Party requiring such consent or approval shall not be
deemed to waive or render unnecessary the consent to or
approval of any subsequent or similar act.
E. Pronouns. All pronouns used in this Agreement shall include
the masculine, feminine and neuter genders, and shall
include the singular and plural, and the context of this
Agreement shall be read accordingly, if so required.
F. Headings/Captions. Any title, caption or heading contained
in this Agreement is used for convenience only, shall not
be deemed to be a part of the context of this Agreement,
and shall not explain, modify or interpret any of the
terms, conditions or provisions contained herein.
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G. Severability. In the event any provision of this Agreement
shall be deemed to be invalid, the same shall not affect,
in any respect, the validity of the remainder of this
Agreement.
H. Amendments. This Agreement shall not be deemed or construed
to be modified, amended, superseded, canceled, altered or
waived, in whole or in part, except by a written instrument
or amendment signed by the Parties.
I. Entire Agreement. This Agreement constitutes the entire
agreement among and between the Parties and supersedes all
prior oral and written agreements made by them; which oral
and written agreements shall be deemed null and void and of
no further force and effect.
J. Counterparts. This Agreement may be executed in multiple
counterparts by each Party and each counterpart shall be
identical and deemed to be an original for all purposes,
and all counterparts together shall constitute one (1) and
the same original document. The Seller is hereby authorized
to assemble the separate counterparts into one (1)
document.
K. Binding Effect. The terms, conditions and provisions of
this Agreement, and all amendments hereto, if any, shall be
binding upon and inure to the benefit of the Parties and
their respective heirs, successors, administrators,
personal representatives, executors and assignees.
IN WITNESS WHEREOF, the Parties have executed this Agreement this
31st day of December, 2001; however, the same shall be EFFECTIVE as more
particularly provided for herein.
Basic/Buyer: Pinnacle/Seller:
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BASIC ENERGY SERVICES, INC., CJS PINNACLE PETROLEUM
Delaware corporation SERVICES, LLC, a Texas limited
liability company
By: /s/ Kenneth V. Huseman By: /s/ Jim C. Johnson, Jr.
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KENNETH V. HUSEMAN, President JIM C. JOHNSON, JR.,
President and Chief President of PEDCO, INC.,
Executive Officer a Texas Corporation, the
Managing Member
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Warren: Pedco:
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WARREN RESOURCES, INC., a New York PETROLEUM DEVELOPMENT CORPORATION,
corporation, on behalf a New Mexico corporation, on
of itself and its wholly owned behalf of itself and its wholly
entities described herein owned entities described herein
By: /s/ Jim C. Johnson, Jr. By: /s/ Jim C. Johnson, Jr.
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JIM C. JOHNSON, JR., Executive JIM C. JOHNSON, JR.,
Vice President President
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