EXHIBIT 10.2
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT made and entered into this 11th day of August, 2008, between
Pinnacle Energy Corp. ("PEC") and Futures Investment Corp. ("Futures").
W I T N E S S E T H:
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1. PURCHASE AND SALE.
On the Closing Date (as hereinafter defined), but effective for all
purposes as of 12:01 a.m. Mountain Time September 1, 2008 (the "Effective Date")
subject to the terms and conditions of this Agreement, Futures hereby agrees to
sell, convey, and deliver to PEC, and PEC hereby agrees to purchase and accept
delivery from Futures, the following:
(a) The oil, gas, and leasehold interests described in Exhibit A,
which are attached hereto and incorporated by reference;
(b) all of Futures rights under the operating agreements,
unitization agreements, pooling agreements, declarations of pooling or
unitization, farmout agreements, assignments, gas sale contracts, gas processing
contracts, and other instruments and agreements described or referred to in
Exhibit A (all of which are hereinafter collectively referred to as the
"Existing Contracts");
(c) All right, title and interest of Futures in all equipment,
pipelines, accounts, wells, tanks, pipeline easements, surface easements,
production in tanks, and appurtenances used or held for use or related to the
aforesaid interests described in Exhibit A or operations conducted in connection
therewith;
(d) All right, title, and interest of Futures in or derived from
all unitization and pooling agreements concerning the properties covered and the
units created thereby which accrue or are attributable to the interests
described in Exhibit A, and including not less than those percentages of
interests in the units set forth in Exhibit A;
(e) Without limitation by the foregoing, all of Futures right,
title, and interest in and to oil, gas, and mineral interests and oil, gas, and
mineral leasehold interests and overriding royalty interests in the lands
described or referred to in Exhibit A or to which the interests in Exhibit A
relate;
(f) without limitation all of Futures interest in and to the wells
described in Exhibit A (the "Wells");
all of which interests, are hereinafter collectively referred to as the
"Subject Interests".
2. PURCHASE PRICE.
The total purchase price (the "Purchase Price") to be paid by PEC to
Futures for the Subject Interests is $1,000,000 in the form of a Promissory Note
bearing interest at 8% per annum. The Purchase Price shall be paid by monthly
interest only payments for a period of 5 years from the Closing Date, with the
entire principal due and payable on September 1, 2013, pending the adjustments
for title matters described in Article 7 and the adjustments for taxes,
production, and operating costs described in Article 8.
3. DISTRIBUTION OF BENEFITS AND ASSUMPTION OF CERTAIN OBLIGATIONS.
PEC shall be entitled to any amount realized from and accruing to the
Subject Interests subsequent to the Effective Date and shall be responsible for
all expenses for the development and operation of the Subject Interests
subsequent to that date. Futures shall be entitled to all the amounts realized
from and accruing to the Subject Interests prior to the Effective Date and shall
be responsible for and hold PEC harmless from any liability arising out of all
expenses for the development and operation of the Subject Interests incurred
prior to the Effective Date and also, any litigation expenses incurred by
Futures prior to the Closing Date.
4. REPRESENTATIONS AND WARRANTIES OF SELLER.
Futures represents and warrants to PEC that:
4.1 Due Organization. Futures is a duly organized and validly existing
corporation under the laws of the State of Nevada and has the corporate power to
carry on its business as it is now being conducted and is duly qualified to do
business in Oklahoma.
4.2 Power and Authority; No Conflict. Futures has full legal power and
authority to enter into and perform this Agreement, and the consummation of the
transactions contemplated herein will not result in the breach of any provision
of, or constitute a default under, Futures' articles of incorporation or bylaws
or, as of the Closing Date, any indenture, mortgage, deed of trust, credit
agreement or any other agreement or instrument by which Futures is bound or to
which the Subject Interests are subject, except for agreements or instruments
with respect to which Futures will have obtained by the Closing Date the
consents set forth in Exhibit A. This Agreement has been duly authorized by all
necessary corporate action of Futures and its shareholders and this Agreement
constitutes a legal, valid and binding agreement of Futures enforceable against
Futures in accordance with its terms.
4.3 No Defaults. Futures has not received any notice of default and is not
in default under any lease or extension thereof, operating agreement or other
agreement or obligation to which it is a party or by which it is bound or to
which it may be subject affecting the Subject Interests or Futures' right to
enter into this Agreement and carry out the transactions contemplated hereby,
and Futures is not subject to any order, writ, injunction, or decree of any
court or commission or other administrative agency affecting the Subject
Interests or its right to enter into this Agreement and carry out the
transactions contemplated hereby.
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4.4 No Finders Fee. Futures has not incurred any obligation or liability,
contingent or otherwise, for brokers' or finders' fee in respect to the matters
provided for in this Agreement.
4.5 No Encumbrances. Futures has good and marketable title to the Subject
Interests and, except for the obligations, encumbrances, depth limitations, and
burdens set forth on Exhibit A the Subject Interests are free and clear of all
liens, claims, clouds, burdens, depth limitations, or encumbrances. In addition,
Exhibit A reflects the names, addresses, and phone numbers of all contractors,
service companies, materialmen, and vendors that have provided services or
material on the Subject Interests within the last six months or who could claim
a lien for services or materials provided to the Subject Interests under
applicable law in a cumulative amount of $500.00 or more. The oil, gas, and
leasehold interests described in Exhibit A, are not subject to being reduced by
virtue of any reversionary or back-in interests or reassignments or payments
required of Futures. The oil, gas, and leasehold interests described in Exhibit
A, are not subject to any joint venture agreements, farmout agreements,
operating agreements, oil and or gas sales or processing contracts, preferential
rights of purchase, consents to assignment, drilling and or development
obligations or other burden, restriction or limitation with respect to the
ownership interest of Futures, the operation thereof, or the disposition and
processing of production attributable thereto which are not ordinary and
customary in the oil and gas industry, or which contain any terms, provisions,
conditions or agreements which are not ordinary and customary in the oil and gas
industry.
4.6 No Litigation. There is no action at law or equity and no proceeding
before any governmental agency, pending or threatened, that in any way relates
to or affects the Subject Interests or Futures' ability to enter into, and
perform its obligations under, this Agreement.
4.7 Subject Interests. Exhibit A contains a correct and complete
description of the Subject Interests owned by Futures and to be conveyed to PEC
hereunder, and the Subject Interests are correctly described in Exhibit A. The
only operating agreements or other agreements affecting the Subject Interests
are those set forth and described in Exhibit A. The Subject Interests entitle
Futures to receive not less than the undivided interests set forth in Exhibit A
as "Net Revenue Interests" of all indicated hydrocarbons produced, saved, and
marketed from the lands covered thereby and all wells located thereon through
the plugging, abandonment, and salvage of such wells. Futures' proportionate
obligation to bear costs and expenses relating to the development of and
operations on the leases, land, and wells thereon is not, and, through the
plugging, abandonment, and salvage of such wells, will not be, greater than the
"Working Interests" set forth in Exhibit A. Exhibit A contains a correct and
complete list of each person or entity who owns a working interest in any of the
property covered by the Subject Interests, the extent of such working interest,
the net revenue interest of such person or entity, each person who holds a
royalty interest in such property, and the extent of such royalty interest.
4.8 Environmental Matters.
As used in this Section 4.8:
"CERCLA" means the Comprehensive Environmental Response, Compensation a
Liability Act of 1980, as amended.
"CERCUS" means the Comprehensive Environmental Response, Compensation an
Liability Information System List.
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"Environmental Laws" means any federal, state, local, or foreign
statute, code, ordinance, rule, regulation, policy, guidelines, permit, consent,
approval, license, judgment, order, writ, decree, injunction, or other
authorization, including the requirement to register underground storage tanks,
relating to (a) emissions, discharges, releases, or threatened releases of
Hazardous Materials into the natural environment, including into ambient air,
soil, sediments, land surface or subsurface, buildings or facilities, surface
water, groundwater, pub1icly~~wned treatment works, septic systems, or land, (b)
the generation, treatment, storage, disposal, use, handling, manufacturing,
transportation, or shipment of Hazardous Materials, or (c) otherwise relating to
the pollution of the environment, solid waste handling treatment, or disposal,
or operation or reclamation of mines or oil and gas wells.
"Hazardous Material" means (a) any "hazardous substance", as defined
by CERCLA, (b) any "hazardous waste," as defined by the Resource Conservation
and Recovery Act, as amended, (c) any hazardous, dangerous, or toxic chemical,
material, waste, or substance within the meaning of and regulated by any
Environmental Law, (d) any radioactive material, including any naturally
occurring radioactive material, and any source, special, or byproduct material
as defined in 42 U.S.C. ss.2011 et seq. and any amendments or authorizations
thereof, (e) any asbestos-containing materials in any form or condition, or (f)
any polychlorinated biphenyls in any form or condition.
(a) Futures has conducted its business and operated the
Subject Interests, and is conducting its business and operating the Subject
Interests, in material compliance with all Environmental Laws;
(b) Neither Futures nor the Subject Interests are the subject
of any investigation or inquiry by any governmental authority evaluating whether
any material remedial action is needed to respond to a release of any Hazardous
Material or to the improper storage or disposal (including storage or disposal
at offsite locations) of any Hazardous Material;
(c) Futures (and to the best knowledge, information, and
belief of Futures, no other person) has filed any notice under any federal,
state, or local law indicating that it is responsible for the improper release
into the environment, or the improper storage or disposal, of any Hazardous
Material or that any Hazardous Material is improperly stored or disposed of upon
any of the Subject Interests;
(d) Futures does not have any material contingent liability in
connection with the release into the environment or at or on any property now or
previously owned or leased by Futures or the storage or disposal of any
Hazardous Material;
(e) Futures has not received any claim, complaint, notice,
inquiry, or request for information, which remains unresolved as of the date
hereof, with respect to any alleged violation of any Environmental Law or
regarding potential liability under any Environmental Law or under any common
law theories relating to operations or conditions of any facilities or property
owned, leased, or operated by Futures;
(f) No property now or previously owned, leased, or operated
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by Futures is listed on the National Priorities List pursuant to CERCLA or on
the CERCUS or on any other federal or state list as sites requiring
investigation or cleanup;
(g) Futures is not directly transporting, has directly
transported or, is directly arranging for the transportation of any Hazardous
Material to any location which is listed on the National Priorities List
pursuant to CERCLA, on the CERCUS, or on any similar federal or state list or
which is the subject of federal, state, or local enforcement actions or other
investigations that may lead to material claims against Futures for remedial
work, damage to natural resources, or personal injury, including claims under
CERCLA;
(h) There are no sites, locations, or operations at which
Futures is currently undertaking, or has completed, any remedial or response
action relating to any such disposal or release, as required by Environmental
Laws; and
(i) All underground storage tanks and solid waste disposal
facilities owned or operated by Futures are used and operated in material
compliance with Environmental Laws.
4.9 Consents and Approvals. Except as set forth in Exhibit A, no
governmental, regulatory, or other third party approvals, waivers, consents, or
waivers of preferential or similar rights of third parties to purchase any part
of the Subject Interests are required to consummate the transactions
contemplated by this Agreement and to fully vest in PEC all rights, title, and
interests of Futures in and to the Subject Interests, and none of the leases,
contracts or other agreements listed in Exhibit A and being assigned to PEC
hereunder require the consent of another party to such assignment. Consummation
of the transaction contemplated hereby by Futures will not violate any statute,
ordinance, or regulation of any governmental or regulatory body.
4.10 Validity of Leases and Contracts. Each of the leases, operating
agreements, and other agreements described in Exhibit A hereto relating to the
Subject Interests is valid and subsisting; such leases will be maintained in
effect as to the lands covered thereby by production from the Wells located on
such leases or by timely meeting the drilling obligations thereunder; there is
not under any such leases or contracts any existing breach or default or event
that with notice or lapse of time, or both, would constitute a breach or
default. Futures has fulfilled all requirements for filings, certificates,
disclosures of parties in interest, and other similar matters contained in (or
otherwise applicable thereto by law, rule or regulation) the leases or other
documents applicable to Futures and is fully qualified to own and hold all such
leases or other interests relating to the Subject Interests. There are no
obligations (excluding implied covenants, if any) to engage in continuous
development operations in order to maintain any such lease relating to the
Subject Interests or other interest in force and effect for the areas and depths
covered thereby; there are no provisions applicable to such leases or other
documents which increase the royalty share of the lessor thereunder. Upon the
establishment of production in commercial quantities, the leases and other
interests will be in full force and effect over the economic life of the
property involved and do not have terms fixed by a certain number of years. With
respect to tangible personal property held by Futures under lease, all such
agreements are valid, binding and in full force and effect and Futures is not in
default under any such lease. The copies of the leases and agreements described
in Exhibit A to this Agreement which have been heretofore delivered to PEC are
true and complete copies thereof, with all amendments to date.
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4.11 Compliance with Laws. To the best of Futures' knowledge, all of the
Wells have been drilled, completed, and operated in compliance with all
applicable laws and regulations. Futures holds (and is in compliance with the
terns of) all permits, licenses, variances, exemptions, orders, franchises,
approvals, and authorizations of all governmental agencies necessary for the
lawful conduct of its business or the lawful ownership, use, and operation of
its assets. As of the date of this Agreement, no investigation or review by any
governmental agency with respect to Futures or its Subject Interests is pending
or, to the best knowledge, information, and belief of Futures, is threatened.
Futures is not subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act, the Interstate Commerce Act, the Investment
Company Act of 1940, or any state public utilities code.
4.12 Obligation Wells. A complete and accurate description of all drilling
obligations and other material development obligations (and the penalties for
the breach thereof) affecting the Subject Interests is set forth in Exhibit A.
4.13 Taxes. All ad valorem, property, production, severance, and similar
taxes and assessments based on or measured by the ownership of property or the
production of hydrocarbons or the receipt of proceeds therefrom with respect to
the Subject Interests for all years prior to the year in which this Agreement is
executed have been properly paid, and all such taxes and assessments which
become due and payable prior to the Closing Date shall be paid in full by
Futures, subject, however, to proration pursuant to Section 8.2.
4.14 Oil and Gas Reserve Information. All information in any reserve
reports furnished to PEC and relating to the Subject Interests was (as of the
date of the reserve report) true and correct in all material respects. Except
for changes in classification or values of oil and gas reserve or property
interests that occurred in the ordinary course of business since the date of
such report and except for changes (including changes in commodity prices)
generally affecting the oil and gas industry, there has been no material adverse
change with respect to the matters addressed in the Reserve Report.
4.15 Oil and Gas Operations. Except as otherwise set forth in Exhibit A:
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(a) None of the Wells has been overproduced such that it is subject
or liable to being shut-in or to any other overproduction penalty;
(b) There have been no changes proposed in the production allowables
for any Wells;
(c) All Wells have been drilled and (if completed) completed,
operated and produced in accordance with good oil and gas field practices and in
compliance in all material respects with applicable oil and gas leases and
applicable laws, rules, and regulations;
(d) Futures has not agreed to, and is not obligated to, abandon any
Well;
(e) Proceeds from the sale of oil or gas produced from the Wells are
being received by Futures in a timely manner and are not being held in suspense
for any reason (except for amounts, individually or in the aggregate, not in
excess of $100.00 and held in suspense in the ordinary course of business); and
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(f) No person has any call on, option to purchase, or similar rights
with respect any of the Subject Interests or any or to the production
attributable thereto, and upon consummation of the transactions contemplated by
this Agreement, PEC will have the right to market production from the Subject
Interests on terms no less favorable than the terms upon which Futures is
currently marketing such production.
(g) Except as disclosed on Exhibit A no agreements relating to the
Subject Interests will require as of or after the Closing Date, PEC to sell or
deliver, oil or gas for a price materially less than the market value price that
would have been, or would be, received pursuant to any arm's-length contract for
a term of one month with an unaffiliated third party purchaser.
(h) Each agreement relating to the Subject Interests is valid,
binding, and in full force and effect, and no party is in material breach or
default of any such agreement, and to the best knowledge, information, and
belief of Futures, no event has occurred that with notice or lapse of time (or
both) would constitute a material breach or default or permit termination,
modification, or acceleration under any such agreement;
(i) There have been no claims from any third party for any price
reduction or increase or volume reduction or increase under any agreement
relating to the Subject Interests and Futures has not made any claims for any
price reduction or increase or volume reduction or increase under any such
agreements;
(j) Payments for oil or gas produced from the Wells have been made
materially in accordance with prices or price setting mechanisms set forth in
the agreement pertaining to the Wells;
(k) No purchaser under any agreement has notified Futures (or, to
the best knowledge, information, and belief of Futures, the operator of any
property) of its intent to cancel, terminate, or renegotiate any agreement or
otherwise to fail and refuse to take and pay for oil or gas in the quantities
and at the price set out in any agreement, whether such failure or refusal was
pursuant to any force majeure, market out, or similar provisions contained in
the agreement or otherwise;
(l) Futures is not obligated by any prepayment arrangement,
"take-or-pay" or similar provision, production payment, or any other
arrangements to deliver oil or gas produced from a Well at some future time
without then or thereafter receiving payment therefor;
(m) There are no gas balancing agreements or arrangements or similar
situations by which Futures is required to allow another party or parties to
produce quantities of gas with an aggregate market value of more than $1.00
which, in the absence of such balancing agreements, arrangements or similar
situations, would have been produced by Futures, and
(n) The agreements pertaining to the Subject Interests are of the
type generally found in the oil and gas industry, do not (individually or in the
aggregate) contain unusual or unduly burdensome provisions that may have a
material adverse effect on Futures, and are in form and substance considered
normal within the oil and gas industry.
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5. CERTAIN AGREEMENTS OF SELLER.
5.1 Access to Information. From and after the date of this Agreement until
the Closing Date, Futures shall give to PEC and to its representatives full
access at any time at a place reasonably convenient to PEC to all records,
contracts, leases, documents, seismic, geological and geophysical data, and
other information in Futures's possession or subject to its control pertaining
to the Subject Interests and shall permit PEC and its representatives to examine
all abstracts of title, title opinions, title files, ownership maps, division
orders, records, surveys, reports filed with any federal or state agency as well
as any Windfall Profit Tax returns which Futures may have relating to the
Subject Interests. Until the Closing Date PEC shall hold confidential all such
information not otherwise available to it and will return all such information
to Futures in the event that the transaction contemplated hereby is not
consummated.
5.2 Affirmative Covenants. From and after the date of this Agreement until
Closing Date, Futures shall, except as otherwise agreed to in writing by PEC:
(a) Use its best efforts to maintain and keep, or cause to be
maintained and kept, the personal property which is a part of the Subject
Interests in good condition and working order;
(b) Preserve in full force and effect all of the oil and gas leases
and other agreements which relate to the Subject Interests and perform all
covenants and conditions imposed upon Futures thereunder;
(c) Use its best efforts to operate or cause to be operated the
Wells in a good and workmanlike manner and in compliance with all applicable
laws and regulations;
(d) Pay its share of all valid operating charges applicable to the
Subject Interests and receive its share of all proceeds from the sale of
production related thereto; and
(e) Use its best efforts to assure that the conditions to closing
set forth in Section 10 will be satisfied at the Closing Date.
5.3 Negative Covenants. From and after the date of this Agreement until
Closing Date, Futures shall not, without the prior written consent of PEC:
(a) Enter into any agreement or arrangement granting any
preferential or other right to purchase any of the Subject Interests or any
interest therein requiring the consent of any party to the transfer and
assignment of same to PEC;
(b) Enter into any sales or supply contract affecting the Subject
Interests;
(c) Waive any right or claim having material value affecting the
Subject Interests;
(d) Enter into any new agreements or commitments with respect to the
Subject Interests which extend beyond the Closing Date make or authorize the
operators to make any expenditures with respect to any of the Subject Interest
in excess of $5,000, abandon any well located on the Subject Interests nor
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release or abandon all or any portion of any of the leases covering the Lands,
modify or terminate any of the agreements relating to the Subject Interests,
apply for or otherwise seek any modification to the spacing requirements
applicable to the Lands or encumber, sell, or otherwise dispose of any of the
Subject Interests other than personal property which is replaced by equivalent
property or consumed in the operation of the Subject Interests; or
(e) Except as provided for herein, amend any oil and gas leases,
operating agreements, gas purchase agreements, or other agreements which affect
the Subject Interests.
5.4 Consents and Approvals. From and after the date of this Agreement
until Closing Date, Futures shall use its best efforts to obtain all such
permissions, approvals, waivers, and consents by governmental authorities and
others as, in the opinion of PEC, may be required of Futures in connection with
the sale and transfer of the Subject Interests, and the acquisition, use, and
operation thereof by PEC.
5.5 Notice of Default. Futures shall give prompt notice to PEC of any
notice of default received by Futures subsequent to the date of this Agreement
under any instrument or agreement to which Futures is a party and relating to
the Subject Interests or by which the Subject Interests may be affected.
6. REPRESENTATIONS AND WARRANTIES OF PEC
PEC represents and warrants to Futures that;
6.1 Due Incorporation and Qualification. PEC is a corporation duly
organized and validly existing under the laws of the State of Nevada, has
corporate power to carry on its business as it is now being conducted, and is
duly qualified to do business in Oklahoma.
6.2 Power and Authority. PEC has the full legal power and authority to
enter into and perform this Agreement. The consummation of the transactions
contemplated hereby will not result in the breach of, or constitute a default
under, PEC's articles of incorporation or bylaws or any indenture, mortgage,
deed of trust or other agreement or instrument to which PEC is a party or by
which it or its properties may be bound. This Agreement has been duly authorized
by all necessary corporate action of PEC and this Agreement constitutes a legal,
valid, and binding agreement of PEC, enforceable against PEC in accordance with
its terms.
6.3 Finders Fee. PEC has not incurred any obligation or liability,
contingent or otherwise, for brokers' or finders' fee in respect to the matters
provided for in this Agreement.
7. TITLES.
7.1 Title Opinion. Futures shall deliver to PEC, within five days of
execution of this Agreement, such copies of oil and gas leases, rental receipts,
agreements, contracts, assignments, attorneys' title opinions, current division
order, abstracts, and all such other title information as Futures may have in
its possession or subject to its control pertaining to the Subject Interests.
There have been no changes to the Title Opinion dated January 31, 2007 which
would adversely affect the Subject Interests.
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8. ACCOUNTING FOR PRODUCTION AND OPERATING COSTS AND TAXES.
8.1 Production, Costs, and Expenses. As soon as practicable, and in any
event not later than 10 days from the Closing Date, the parties agree to account
for proceeds of production, costs, and expenses relating to the Subject
Interests for the period from and after the Effective Date so that the benefit
of production from and after the Effective Date and the obligation for all costs
and expenses from and after the Effective Date with respect to the Subject
Interests shall inure to PEC. To effect the foregoing: (i) Futures shall pay to
PEC all proceeds of production which are received by Futures and attributable to
production collected from the Subject Interests on or after the Effective Date,
net of ad valorem, production, and excise taxes actually withheld (including,
but not limited to, the Crude Oil Windfall Profits Tax) and all other taxes
withheld against production, and (ii) PEC shall reimburse Futures for all costs
and expenses paid by Futures on or after the Effective Date which are
attributable to the Subject Interests for the period from and after the
Effective Date. As used herein, costs and expenses (including capital
expenditures) shall be limited to those billed by the Operators under the
operating agreements set forth in Exhibit A and attributable to the Subject
Interests for the period from and after the Effective Date in accordance with
the terms of such operating agreements.
8.2 Proration of Taxes. To the extent not accounted for by the procedure
set forth in Section 8.1, all ad valorem, property, production, severance, and
similar taxes and assessments based upon or measured by the ownership of
property or the production of hydrocarbons or the receipt of proceeds therefrom
on the Subject Interests shall be prorated between Futures and PEC as of the
Effective Date as soon as practicable after the necessary tax bills and other
information become available so that Futures shall be responsible for all such
taxes for the period prior to the Effective Date, and PEC shall be responsible
for all such taxes for the period beginning on the Effective Date. If such taxes
are not specifically identified as to one period or another, they shall be
prorated on the basis of a year of 365 days. The proration shall be adjusted
from time to time to rectify any errors and to reflect any modifications that
are hereafter discovered or determined.
8.3 Expenses Prior to the Effective Date. Futures shall be responsible for
the payment of all operating and development costs and expenses attributable to
the Subject Interests for the period prior to the Effective Date.
8.4 Final Accounting Statement. Subsequent to the Closing Date, a final
accounting statement will be prepared by PEC, subject to verification by
Futures, based upon the actual income and expenses between the Effective Date
and the Closing Date. PEC or Futures, as the case may be, shall pay to the other
such sums as may be found to be due in said final account (the "Final Account
Adjustment").
9. CLOSING.
9.1 Closing Date. The closing of the transaction provided for herein shall
take place at the offices of Futures Investment Corp., at 10:00 a.m., local
time, on August 27, 2008, or on such earlier or later date or at such other
place as shall be fixed by mutual written agreement of the parties hereto (such
time being referred to in this Agreement as the "Closing Date").
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9.2 Assignments. On the Closing Date, Futures shall execute, acknowledge,
and deliver to PEC appropriate conveyances, assignments, transfers, bills of
sale, and other instruments conveying marketable title to the Subject Interests
and the contracts set forth in Exhibit A to PEC, free and clear of all liens,
encumbrances, and burdens except as specifically set forth in Exhibit A, or
waived by PEC hereunder, which instruments shall be in proper and recordable
form satisfactory to PEC, shall be effective as of the Effective Date, shall
contain special warranties of title, by, through and under Futures, and shall
include Futures assignment to PEC of all rights held by Futures by virtue of
warranties with respect to the Subject Interests given by Futures predecessors
in title. In addition, the parties shall execute and deliver good and sufficient
transfer orders and division orders, and other documents and further assurances
of title as may be reasonably required by PEC so as to fully effectuate the
transfer and conveyance of the Subject Interests and the payment of the proceeds
of production attributable thereto for the period from and after the Effective
Date to PEC.
9.3 Geological Information. To the extent not heretofore delivered to PEC,
Futures shall on the Closing Date deliver to PEC any and all files, geological
and geophysical information and data, survey maps, drill hole logs, lease and
production records, and all other reports or information in its possession or to
which it has access pertaining to the Subject Interests.
10. CONDITIONS TO PEC'S CLOSING.
The obligations of PEC under this Agreement are subject, at PEC's option,
to the satisfaction on or prior to Closing Date of the following conditions:
10.1 Representations and Warranties True. All representations and
warranties of Futures contained in this Agreement shall be true in all material
respects at and as of the Closing Date as though such representations and
warranties were made at and as of the Closing Date, and Futures shall have
performed and satisfied all agreements, covenants, and conditions required by
this Agreement to be performed and satisfied by it prior to or at the Closing
Date; and PEC shall have received a certificate signed by the President or the
Vice President of Futures dated as of the Closing Date to the foregoing effect.
10.2 No Restraint. At the Closing Date, no suit, action, or other
proceeding shall be pending or threatened before any court or governmental
agency seeking to restrain or prohibit the consummation of the transactions
contemplated by this Agreement or to obtain damages in connection with this
Agreement or the consummation of the transactions contemplated hereby.
10.3 Evidence of Authority. PEC shall have received a copy of resolutions
of the Board of Directors of Futures and such other necessary documents which,
in the opinion of PEC's counsel, indicate the authority of Futures to enter into
and perform this Agreement and that the person executing this Agreement and the
assignments and conveyances herein contemplated are fully authorized and
directed to execute and deliver same unto PEC.
10.4 Consents. Futures shall have furnished to PEC copies of all consents,
approvals, and waivers by third parties necessary to consummate the transactions
contemplated hereby including, but not limited to, consents, waivers, and
approvals described in Exhibit A.
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10.5 Title Opinion. There will have been no changes to the Title Opinions
which would adversely affect the Subject Interests.
10.6 No Casualty Loss. There shall not have occurred any casualty loss
with respect to the Subject Interests for which PEC has not received proceeds of
insurance in the amount of full replacement value of the property affected by
such casualty loss, or with respect to which an appropriate deduction has not
been made from the Purchase Price.
10.7 Operating Agreements and Tax Partnerships. Futures shall have caused
the termination of any tax partnership associated with any agreement affecting
the Subject Interests. Futures shall have obtained written approval from all of
the working interest owners owning an interest in the leases described in
Exhibit A of Futures resignation as operator and PEC's appointment as successor
operator.
10.8 Inspection and Wells Tests. PEC shall have completed an inspection of
the Producing Wells and shall have performed such well tests as it may determine
necessary or appropriate and such test results shah be acceptable to PEC;
provided, however, that PEC shall have completed such inspection and tests
within three business days prior to the Closing Date hereof by PEC and Futures
and, unless PEC shall have notified Futures on or before such date that such
tests are not acceptable to PEC, this condition shall be deemed waived by PEC.
All such tests shall be performed at PEC's sole risk and expense.
10.9 Contracts and Leases. The leases, contracts, and agreements listed on
Exhibit A to this Agreement shall be in form and substance satisfactory to PEC.
10.10 Releases. PEC shall have received duly executed releases of the
liens of all lien claimants holding liens, encumbrances, and burdens upon the
Subject Interests.
10.11 Marketing of Hydrocarbons. At and as of the Closing Date, PEC shall
be legally entitled to market all hydrocarbons produced from the Subject
Interests upon price and other sale conditions no less favorable than those upon
which Futures could market such production on the last sale day immediately
preceding the Effective Date. No governmental order or regulation (whether final
or proposed) shall have been published which PEC reasonably deems to materially
and adversely affect the price at which production from the Subject Interests
can be legally marketed at or after the Closing Date as compared to the price
that Futures could receive for production on said last sale day.
10.12 Windfall Profits Tax. With respect to each producing oil and gas
reservoir which constitutes part of the Subject Interests to be transferred to
PEC pursuant to this Agreement, Futures shall have furnished to PEC a written
statement, that Futures has complied with all provisions relating to the
Windfall Profits tax.
11. CONDITIONS TO FUTURES'S CLOSING.
The obligations of Futures under this Agreement are subject, at Futures
option, to the satisfaction at or prior to the Closing Date of the following
conditions:
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11.1 Representations and Warranties True. All representations and
warranties of PEC contained in this Agreement shall be true in all material
respects at and as of the Closing Date as though such representations and
warranties were made at and as of the Closing Date, and PEC shall have performed
and satisfied all agreements, covenants, and conditions required by this
Agreement to be performed and satisfied by it prior to or at the Closing Date;
and Futures shall have received a certificate signed by the President or a vice
president of PEC dated as of the Closing Date to the foregoing effect.
11.2 No Restraint. At the Closing Date, no suit, action, or other
proceeding shall be pending or threatened before any court or governmental
agency seeking to restrain or prohibit the consummation of the transactions
contemplated by this Agreement or to obtain damages in connection with this
Agreement or the consummation of the transactions contemplated hereby.
11.3 Evidence of Authority. Futures shall have received a certified copy
of the resolutions of the Board of Directors of PEC and such other necessary
documents which, in the opinion of Futures counsel, indicate the authority of
PEC to enter into this Agreement and that the officers executing any of the
documents herein contemplated are fully authorized and directed to execute and
deliver same unto Futures.
12. TERMINATION OF AGREEMENT.
In addition to the rights of termination by PEC as provided in Article 7
the parties hereto shall have further rights of termination of this Agreement as
follows:
12.1 Termination by PEC. If all conditions set forth in Article 11 hereof
are satisfied and Futures refuses to close this transaction, or if Futures fails
to fully perform and satisfy all those conditions to PEC's closing set forth in
Article 10 hereof, then, in either of such events, PEC shall have the right to
terminate this Agreement without limitation upon or prejudice to the enforcement
of any other legal remedy it may have against Futures for breach of this
Agreement; or at PEC's option it may seek the remedy of specific performance of
this Agreement, which remedy Futures agrees shall be available to PEC in such
event.
12.2 Termination by Futures. If all conditions set forth in Article 10
hereof are satisfied and PEC refuses to close this transaction or if PEC fails
to perform and satisfy all those conditions to Futures closing as set forth in
Article 11 hereof, then, in either of such events, Futures shall have the right
to terminate this Agreement without limitation upon or prejudice to the
enforcement of any other legal remedy it may have against PEC for breach of this
Agreement; or at Futures option, it may seek the remedy of specific performance
of this Agreement, which remedy PEC agrees shall be available to Futures in such
event.
12.3 Effectiveness. Termination of this Agreement by either party hereto
pursuant to Article 7 or pursuant to Section 12.1 or 12.2 shall be effective
upon the giving of written notice thereof to the other party hereto.
13. POST CLOSING COVENANTS.
13.1 Further Assurances. After the Closing Date Futures shall at any time
upon request of PEC execute, acknowledge, and deliver to PEC such further
instruments of conveyance, assignment, and transfer and take such other action
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as the other party may reasonably request in order more effectively to perfect
and cure, convey, assign, transfer, and deliver title to the Subject Interests,
the proceeds of production attributable thereto, and personal property and well
equipment in connection therewith, all as contemplated by this Agreement.
Futures shall furnish to PEC (or cooperate in securing from any prior owners)
all support information and documents required for PEC to compute and to make
necessary returns pursuant to the Crude Oil Windfall Profit Tax Act and shall
cooperate with PEC in furnishing such additional information as may be required
to enable PEC to use Futures's base price in computing PEC's liability for
Windfall Profit Tax on crude oil produced from the producing oil and gas
reservoirs transferred to PEC pursuant to this Agreement.
14. SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND AGREEMENTS;
INDEMNIFICATION.
14.1 Survival of Representations, Warranties, and Agreements. The
representations, warranties, covenants, and agreements made by Futures and PEC
hereunder shall survive the execution and delivery of the transfers,
conveyances, and assignments to be executed and delivered hereunder upon
closing.
14.2 Indemnification. Futures hereby agrees to indemnify and hold PEC
harmless from and against any and all losses, costs, expenses, damages, or
liabilities (including, among other things, court costs and attorney's fees)
incurred or suffered from time to time by PEC, arising out of, resulting from,
or attributable to any breach of any covenant, representation, or warranty by
Futures contained in or given pursuant to this Agreement, irrespective of the
nature of claims or liabilities respecting any of the foregoing, or the manner
in which any such claims or liabilities arise, whether the same are meritorious
or not, and whether any such losses, costs, expenses, damages, or liabilities
are incurred or suffered by PEC as a result of any investigation, proceeding,
settlement, or otherwise. In case any claim is made, or any suit or action is
commenced, against PEC in respect of which indemnity may be sought by PEC
pursuant to this Section 14.2, Futures shall be given notice thereof promptly by
PEC and shall be entitled to participate in (or if PEC does not desire to
defend, to conduct) the defense thereof at its own expense. PEC may (but need
not) defend or participate in the defense of any such claim, suit, or action,
but PEC shall promptly notify Futures if PEC shall not desire to defend or
participate in the defense of any of such claims, suits, or actions. PEC may
settle or compromise any claim, suit, or action against PEC in respect of which
payments may be sought by PEC pursuant to this Section 14.2, provided that
Futures does not notify PEC in writing (within (15) days after PEC has given
Futures written notice that it does not desire to defend or participate in the
defense of any such claim, suit, or action) that Futures intends to conduct the
defense of such claim, suit, or action. Any settlement or compromise made by PEC
in accordance with this Section 14.2 or any final judgment or decree entered in
any claim, suit, or action defended only by PEC (or with respect of which PEC
participated in the defense), in accordance with this Section 14.2 shall be
deemed to have been consented to by, and shall be obligatory and binding upon,
Futures as fully as if Futures alone had assumed the defense thereof and a final
judgment or decree had been entered in such suit or action, or with regard to
such claim, by a court of competent jurisdiction of the amount of such
settlement or compromise, satisfaction, judgment, or decree. The provisions of
this Section 14.2 shall be effective only with respect to those losses, costs,
expenses, damages, and liabilities set forth in the first sentence of this
Section 14.2 of which PEC has notified Futures prior to the expiration of three
years from the Closing Date; provided, however, that such limitation shall not
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apply to Futures's indemnity with respect to the special warranty of title set
forth in Section 4.5 or in any instrument of transfer delivered pursuant to
Section 9.2 or to the indemnities provided for in Sections 7.1(c) and 7.2(d).
15. NOTICES.
All notices that are required or authorized to be given herein,
except as otherwise specifically provided, shall be given in writing by hand
delivery, United States Certified Mail, postage and charges prepaid, and
addressed to the party to whom such notice is to be given as follows:
If to PEC: Pinnacle Energy Corp.
President: Nolan Weir
Suite 153, 333 Riverfront Ave, SE
Calgary, Alberta
Canada T2G 5R1
(866) 822-0325
(866) 822-0325 (fax)
If to Futures: Futures Investment Corp.
President: Cory Dosdall
31 Tusslewood View, NW
Calgary, Alberta
Canada T3L 2Y3
(403) 831-4565
(866) 566-5444 (fax)
(or at such other address or in care of such other person as hereafter shall be
designated in writing by either party to the other). Notices to be given under
any provision hereof will be deemed given (i) 4 days after the date deposited
with the United States post office postage prepaid, or (ii) on the date
delivered and confirmed by an executed receipt.
16. MISCELLANEOUS.
16.1 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of the parties
hereto. Prior to closing, neither party hereto shall assign its rights and
obligations under this Agreement without the prior written consent of the other
party hereto.
16.2 Entire Agreement. This Agreement contains the entire agreement of the
parties hereto and there are no additional oral representations or conditions
relating to this Agreement. Further, this Agreement supercedes and replaces all
prior written contracts and memoranda relating to the transaction which is the
subject of this Agreement.
16.3 Recordation. The parties hereto agree that memorandum of this
Agreement in the form set forth on Exhibit B shall be filed in the real property
records of the counties where the Subject Interests are located. Such memorandum
shall not contain a recitation of the consideration paid by PEC to Futures
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without the mutual agreement of the parties, except where such recitation is
required by law or regulation of the United States or that of the States of
Oklahoma.
16.4 Expenses of Transaction. The expenses (including, without
limitation, fees and expenses of attorneys and consultants) incurred by the
parties in connection with this Agreement or the consummation of the
transactions contemplated herein shall be borne by the parties incurring the
same.
16.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada.
PINNACLE ENERGY CORP.
By: /s/ Nolan Weir
------------------------------------
Nolan Weir, President
FUTURES INVESTMENT CORP.
By: /s/ Cory Dosdall
------------------------------------
Cory Dosdall, President
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"Exhibit A"
Description of Futures Investment Corp. Interest in the Glencoe Wells, Pawnee
County, Oklahoma.
Glencoe # 1-31 and 5-31, The SE/4 of NE/4 of section 31-T21N-R4E, containing 40
acres more or less, Pawnee, County Oklahoma
Recorded: December 29, 2005, Book 610 at Page 135 in the Office of the County
Clerk, Pawnee County, Oklahoma
Twenty Five and a Half percent (25.5%) Working Interest/ Twenty and Four tenths
percent (20.40%) Net Revenue Interest in the Glencoe #1-31 and # 5-31 well as
described on the "Division Order Title Opinion" dated January 31, 2006, and
which is located on the above described lands.
Glencoe # 2-31 The SE/4 of Section 31-T21N-R4E, Pawnee County, Oklahoma Glencoe
# 3-31 The E/2 SE/4 of Section 31-T21N-R4E, Pawnee County, Oklahoma Glencoe #
1-32 The N/2 NW/4 of Section 32-T21N-R4E, Pawnee County, Oklahoma
Twenty percent (20.0%) Working Interest/ Sixteen percent (16.0%) Net Revenue
Interest in the Glencoe #2-31, # 3-31 and # 1-32 well as described on the
"Division Order Title Opinion" dated January 31, 2006, and which is located on
the above described lands.
Glencoe # 4-31 The W/2 NW/4 & the NW/4 SW/4 of Section 31-T21N-R4E, Pawnee
County, Oklahoma
Twenty percent (17.0%) Working Interest/ Thirteen and Six tenths percent (13.6%)
Net Revenue Interest in the Glencoe #4-31 well as described on the "Division
Order Title Opinion" dated January 31, 2006, and which is located on the above
described lands.
Operating Agreement pertaining to Glencoe #1-31, 2-31, 3-31, 4-31, 5-31 and
1-32.
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