EXHIBIT 10.13
PURCHASE AGREEMENT
BETWEEN
VANGUARD ENERGY CORPORATION
AND
VAST EXPLORATION, LLC
TABLE OF CONTENTS
Page
ARTICLE 1 Definitions........................................................1
ARTICLE 2 Purchase And Sale Of The Interests; Consideration..................3
ARTICLE 3 Actions of Seller Before Closing...................................3
ARTICLE 4 Actions of Purchaser Before Closing................................5
ARTICLE 5 Seller's Representations And Warranties............................5
ARTICLE 6 Purchaser's Representations And Warranties.........................9
ARTICLE 7 Conditions Precedent To The Obligations Of Purchaser...............9
ARTICLE 8 Conditions Precedent To The Obligations Of Seller.................10
ARTICLE 9 Actions Of Seller And Purchaser At The Closing....................11
ARTICLE 10 Settlement Statement; Further Actions And Assurances.............12
ARTICLE 11 Notices..........................................................14
ARTICLE 12 Termination......................................................15
ARTICLE 13 Interpreting This Agreement......................................16
ARTICLE 14 Miscellaneous Provisions.........................................17
List of Exhibits
Exhibit A ................................................Description of Lands
Exhibit B ...........................................................Inventory
Exhibit C ...........................................Purchase Price Allocation
Exhibit D ....................................Form of Instrument of Conveyance
Index of Defined Terms
Agreement..........................1 Lands..............................1
Claim..............................2 Leases.............................1
Closing Date.......................3 Noteholders........................4
Contracts..........................1 NPI Interests......................2
Earnest Money......................3 Permitted Encumbrances.............2
Effective Date.....................1 Purchase Price.....................3
Exhibit............................2 Purchaser..........................1
Gulf Fee Leases....................4 Seller.............................1
Instrument of Conveyance..........12 Settlement Statement..............13
Joint Operating Agreements.........1 Sunoco.............................7
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("Agreement") is entered into by and between VE
Corporation, doing business as Vanguard Energy Corporation ("Seller") and Vast
Exploration, LLC ("Purchaser"). In consideration of the premises, covenants and
agreements herein contained and the actions herein recited to be performed,
Seller and Purchaser agree as follows:
ARTICLE 1
Definitions
The following defined terms have the meanings set forth in this Article 1. All
Article and Section numbers used in this Agreement refer to Articles and
Sections of this Agreement unless otherwise specifically described.
1.1 "Effective Date" means 9:00 a.m., local time at the location of the
Interests, on April 1, 2014.
1.2 "Interests" means:
(a) Seller's interest in the oil and gas leases and a like undivided
interest in the estates created by the oil and gas leases described in
Exhibit A attached hereto (the "Leases"), insofar, and only insofar as
the Leases cover the lands described in Exhibit A (the "Lands");
(b) Seller's interest in and to all fixtures and personal property located
on the Leases and Lands, including oil and gas wells, injection wells,
tanks, boilers, pumps, wellheads and all other equipment used or held
for use on the Leases and the Lands, including, without limitation,
the personal property and fixtures listed on Exhibit B;
(c) Seller's interest arising from or attributable to the joint operating
agreements between Seller and any third party, as Operator, or joint
operating agreements between Seller and any third party acting for and
on behalf of Seller as a contract operator (collectively, the "Joint
Operating Agreements") as well as Seller's interest in all other
agreements, licenses, permits, easements and other contracts, whether
similar or dissimilar to the foregoing (the "Contracts"), except that
the term "Contracts" does not include any agreements, licenses,
permits, easements and other contracts less and except any of the
foregoing that pertain exclusively to any existing wells on the Leases
and Lands which are owned wholly by a third party, which do not form a
part of the Interests, and the term "Contracts" specifically includes
any seismic licenses or other rights to seismic data which Seller is
empowered to assign;
(d) Seller's interest in the claim or chose in action described in Lynette
Holmes dba C-Make Production v. Delton Drum, et al., Cause no 54443,
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pending in the 88th District Court of Hardin County, Texas (the
"Claim") as well as any funds or monies held in escrow or suspense and
attributable to the Claim;
(e) The rights and interests of Vanguard Net Profits, LLC to receive
payments or other rights in respect of production from or attributable
to any of the Leases or the Lands (the "NPI Interests");
(f) The term "Interests" does not include, and Purchaser shall not
acquire, any wells (whether producing, non-producing, salt water
injection or other equipment or fixtures, or hydrocarbons or
production owned by third parties which may be located in whole or in
part on the Leases or the Lands and which are shared with Seller, it
being the intention of Seller to sell only its rights, titles and
interests and not those of third parties.
1.3 "Permitted Encumbrances" means:
(a) Lessors' royalties;
(b) Any overriding royalty interests, net profits interests, including the
NPI Interests, production payments or other payments out of or with
respect to production which are of record on the date of this
Agreement;
(c) Sales contracts covering hydrocarbons, so long as the same may be
cancelled on 60 days notice or less, without penalty;
(d) liens for taxes or assessments not due or not delinquent on the
Closing Date; (e) Easements, rights-of-way, servitudes, permits,
surface leases, and other rights in respect of surface operations on
or over any of the Leases or Lands, which do not interfere with
current or proposed operations on the lease;
(f) Operator's, materialmen's, mechanic's, repairmen's or other similar
liens and charges arising in the ordinary course of business
incidental to construction, maintenance or operation of the Interests
that are either: do interfere with the operation, value or use of the
Interests or which are paid in the ordinary course of business, and
pursuant to which Seller is not in default.
1.4 "Exhibit" means an Exhibit to this Agreement.
1.5 Other terms are defined elsewhere in this Agreement and for the purposes of
this Agreement, those other terms have the meanings specified in those other
portions unless the context requires otherwise.
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ARTICLE 2
Purchase And Sale Of The Interests; Consideration
2.1 Contemporaneously with the execution of this Agreement, Purchaser has paid
Seller the amount of $150,000.00, as earnest money and a deposit upon the
Purchase Price (the "Earnest Money"), which shall be deposited with Charger
Title Insurance Agency, Inc., having an address of 520 East 770 North,
Orem, Utah 84097 ("Charger title"), pursuant to an escrow or like agreement
acceptable to both Seller and Purchaser.
2.2 In reliance upon the representations and warranties of Seller, Purchaser
agrees to buy the Interests, subject to the other terms and provisions
hereof, at the time, date and location specified in Section 9.1 (the
"Closing Date"), for the sum of $5,500,000.00, which sum, as adjusted in
accordance with the other provisions of this Agreement, is referred to as
the "Purchase Price." The parties have agreed that the Purchase Price will
be allocated among the Interests as set forth on Exhibit C.
2.3 The Purchase Price shall be paid or delivered to Seller at the time and in
the manner specified in Section 9.1.
ARTICLE 3
Actions of Seller Before Closing
3.1 Seller shall, or shall cause the operators under the relevant Joint
Operating Agreements to continue to operate the wells located on the Leases
on the Lands as they have heretofore, and otherwise will, or will cause,
the Interests to be developed, maintained and operated in a good and
workmanlike manner. Seller will not introduce any new method of management,
operation or accounting with respect to the Leases or Lands without the
prior approval of Purchaser.
3.2 Seller shall not execute any AFEs for any new operations on the Leases or
the Lands, without the prior approval of the Purchaser, but will pay or
cause to be paid all costs and expenses incurred in connection with the
Interests; provided, however, that nothing contained in this Section shall
prevent Seller from authorizing actions by an operator in the event life or
property is threatened.
3.3 Seller shall seek, and use its reasonable efforts, to obtain the approval
of its shareholders to the transactions contemplated by this Agreement.
3.4 Seller shall seek, and use its reasonable efforts, to obtain the approval
of any parties holding a lien against any of the Leases or the Lands on
account of one or more convertible notes (the "Noteholders"), and to obtain
a release of the same, which shall be delivered at the Closing.
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3.5 Seller shall seek, and use its reasonable efforts, to obtain a release of
any rights owned by the owners of the NPI Interests, and, if required, a
re-conveyance to Seller of any rights held by the owners of the NPI
Interests.
3.6 Seller shall seek, and use its reasonable efforts, to obtain the approval
or consent to a transfer of the rights in respect of the Leases located in
the Champion Choate Survey (the "Gulf Fee Lease").
3.7 Seller shall not offer the Interests or any part of the Interests to any
party, and shall promptly notify Purchaser of any unsolicited offer
received from any third party with respect to the Interests.
3.8 Seller shall, upon reasonable notice and during its normal working hours,
make the following records in its possession pertaining to the Interests
available to Purchaser and its authorized representatives at Seller's
offices for such inspection and copying, at Purchaser's sole expense, as
Purchaser deems necessary, and, if it has not already then done so, Seller
will deliver copies, or where available, originals, of those records to
Purchaser promptly after the Closing Date:
(a) All title materials pertaining to the Interests;
(b) All of the instruments creating the Leases and, if applicable: farmout
and farmin agreements, assignments, unitization, pooling and operating
agreements, joint venture agreements, division and transfer orders,
mortgages, deeds of trust, security agreements, financing statements
and other instruments creating encumbrances, liens or burdens and all
other contracts and documents affecting title to the Interests;
(c) Evidence relating to any rentals, royalties, shut-in gas well payments
or other payments made under or with respect to the Leases. ;
(d) Evidence relating to any 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 on the Interests for all periods during which
the Seller owned a portion of the Interests;
(e) Ownership maps and surveys relating to the Leases and the Lands; (f)
All lease records and data sheets relating to the Leases and to
bonuses, rentals and royalties payable thereunder;
(g) All agreements, leases, permits, easements, licenses and orders in any
way relating to the Interests;
(h) All bonds and other policies of insurance relating to the operation of
the Interests; and
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(i) Reproducible masters or originals of all books, records, information,
contracts and documents, engineering, geological and geophysical data,
reports and maps relating to the Interests, but only to the extent
that Seller may do so without violation of any seismic data license or
similar agreement.
If this Agreement is terminated by Purchaser, Purchaser shall return to Seller
all items which Seller has delivered to Purchaser in respect of the Interests
(or portion thereof) not purchased by Purchaser, and neither party will have any
further obligation to the other in respect thereto.
ARTICLE 4
Actions of Purchaser Before Closing
4.1 To the extent any are required, Purchaser shall, and use its reasonable
efforts to obtain, all approvals or consents which may be required for
Purchaser to consummate the transactions herein contemplated.
4.2 Purchaser shall have the right to review the records and files of Seller,
and to make copies of the same, and to conduct any reviews or due diligence
reviews that it may desire in respect of the Interests, and to request
information from Seller in respect of the same.
ARTICLE 5
Seller's Representations And Warranties
Seller represents and warrants to and agrees with Purchaser, subject in all
events to the qualifications or limitations to or on such representations and
warranties as are set out in this Article 3, that:
5.1 The execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement will not result in the breach
of any of the terms or conditions of nor result in the breach of any of the
terms or conditions of nor constitute a default under the Articles of
Incorporation nor the By-laws of Seller.
5.2 Except for the approval of the Board of Directors of Seller, the consent of
the shareholders of Seller, the approval or consent of the Noteholders, the
approval or consent of the owners of the NPI Interests, the approval or
consent of a transfer of the rights in respect of the Gulf Fee Lease, no
other approvals, consents or authorizations to the execution, delivery and
performance of this Agreement and the transactions contemplated hereby are
required for the execution and performance of this Agreement by Seller.
5.3 To the best of Seller's knowledge, except as described in Section 5.2,
there are no liens, encumbrances or mortgages covering any of the Lands and
the wells thereon, and Seller is unaware of any rights in any third parties
which, upon the passage of time, would permit the filing of any liens or
encumbrances on the Lands or wells.
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5.4 The share of costs to be borne by Seller in regard to each Lease is set
forth on Exhibit A, and is described therein as the "GWI." The share of
hydrocarbons that are allocated to Seller after the lessor's share of
royalty and any overriding royalty has been deducted is set forth on
Exhibit A, under the heading "NRI." The amount of NRI set forth on Exhibit
A does not take into account any amount which is allocated to the NPI
Interests.
5.5 Except for the Claim and the potential claims described in the
correspondence from Traton Operating Company dated March 7, 2014, copies of
which have been or will be furnished to Purchaser, Seller is unaware of any
demand letters, offset, development or drainage letters or claims asserted
by any third party (including, but not limited to, a lessor under any of
the Leases) or governmental authority against Seller in respect of the
Leases or the production therefrom or attributable thereto nor are there
any suits, actions, claims, investigations, audits, inquiries or
proceedings, threatened or pending, against Seller in respect of taxes,
governmental charges, duties or assessments, nor are there any matters
under discussion with any governmental authority relating to taxes,
governmental charges, duties, assessments or requirements for refunds or
penalties or any claims for additional taxes, governmental charges, duties,
assessments or refunds or penalties asserted by any governmental authority
affecting the Interests or the production therefrom or attributable
thereto.
5.6 Seller believes in good faith, but does not represent and warrant, that
during the time that Seller has claimed to own interests in the Leases,
Seller's purchaser of hydrocarbons from the Leases, Sunoco Partners
Marketing & Terminals, L.P. ("Sunoco"), has paid all royalties due under
the Leases or has suspended such royalty payments in Sunoco's financial
accounts under title or division order conditions determined solely by
Sunoco to justify such suspense, and during the time that Seller has
claimed to own interests in the Leases, Seller has not received any notice,
written or otherwise, from Sunoco that any party has claimed that royalties
are due and unpaid, or that there are any other working interest owners,
other than C.F.O., Inc., that are entitled to payment with respect to the
sale of Hydrocarbons. To the Seller's best information, Sunoco (or its
predecessor or predecessors) likewise paid, or justifiably suspended, all
royalties due under the Leases for the period of time before Seller
acquired any interest in the Leases, but Seller cannot and does not warrant
and represent that that is the case. Seller in good faith believes, but
does not represent and warrant to Purchaser, that the Leases are in full
force and effect.
5.7 Seller, before Seller acquired the Leases, conducted reviews of the title
to the Leases, and made its commercially reasonable efforts to verify the
quantum of interest to be acquired by it. With regard to the Lease referred
to as the "Coline Lease" on Exhibit A, Seller reviewed the division orders
currently in place, and after submitting transfer orders to Sunoco, Seller
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has received the proceeds of the sale of the quantum of interest set forth
on those division orders. Other than as disclosed in Section 5.5, Seller
has not received any notice of any suits, actions, claims, investigations,
audits, inquiries or proceedings, threatened or pending, and has no
knowledge of any suits, actions, claims, investigations, audits, inquiries
or proceedings, threatened or pending.
5.8 To the best of Seller's knowledge, none of the Interests is affected by any
agreement or arrangement (including, but not limited to, any hedging
agreement, take or pay, gas balancing, pipeline balancing or other
prepayment agreement or production payment, other than the alleged
production payments referred to in that certain Limited Title Report from
the Willyard Law Firm PLLC, dated June 24, 2010, which, as of the Effective
Date, requires Seller to deliver hydrocarbons produced from the Leases at
some future time without then or thereafter receiving full payment therefor
or at a specified price.
5.9 To the best of Seller's knowledge, except for those consents or approvals
listed in Article 3 there are no consents required for Seller to transfer
and convey all or any portion of title to the Leases, and, except for the
rights listed in Article 3, there are no rights in third parties which
would preclude Seller from transferring all or any portion of title to the
Leases.
5.10 Seller possesses all licenses, permits, certificates, orders, approvals and
authorizations necessary from any governmental entity having jurisdiction
to own and to operate the Interests and to carry on its business as now
conducted, and Seller has not received any notice from any governmental
entity having jurisdiction that Seller does not possess any licenses,
permits, certificates, orders, approvals and authorizations necessary to
own the Interests and to carry on its business as now conducted.
5.11 The information furnished to Purchaser by Seller that Seller received from
its predecessors in ownership of the Interests or from third party sources
(such information including, but not limited to maps, plats, well logs,
core analyses and sections, production data, operating expenses, net
revenue interests and working interests, gas-condensate oil ratios, seismic
and geological data, surface and subsurface maps, third party reversionary
rights, burdens and encumbrances), is comprised of either the originals of
such information or true and correct copies of such information as received
by Seller and Seller did not withhold any information which if known by
Purchaser would have caused Purchaser to credit less reserves to the Leases
and the Lands or to change the classification of such reserves, and, to
Seller's knowledge, there have been no changes subsequent to the furnishing
of such information to Purchaser that would affect the current accuracy or
completeness of the information heretofore furnished Purchaser in any
material respect. To the best of Seller's knowledge, Seller has provided
copies of all of the foregoing to Purchaser, or has provided Purchaser with
access to the foregoing.
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5.12 Except as disclosed in Section 5.5, to the knowledge of Seller, there have
been no claims, demands or allegations that the Interests, or any part
thereof, have been operated in violation of any law relating to
environmental conditions and industrial hygiene, including, without
limitation, the Resource Conservation and Recovery Act of 1976, 42 U.S.C.
ss.ss. 6901, et seq., the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. ss.ss. 9601-9657, as
amended by the Superfund Amendments and Reauthorization Act of 1986, the
Hazardous Materials Transportation Act, 49 U.S.C. ss.ss. 6901, et seq., the
Federal Water Pollution Control Act, 33 U.S.C. ss.ss. 1251, et seq., the
Clean Air Act, 42 U.S.C. ss.ss. 741, et seq., the Clean Water Act, 33
U.S.C. ss. 7401, the Toxic Substances Control Act, 15 U.S.C. ss.ss.
2601-2629, the Safe Drinking Water Act, 42 U.S.C. ss.ss. 300F - 300J, and
all similar federal, state and local environmental statutes, ordinances and
the regulations, orders and decrees now or hereafter promulgated
thereunder. Seller is not the operator of any of the Interests, but to the
knowledge of Seller, all operators have operated their respective
properties in accordance with laws relating to environmental conditions and
industrial hygiene. Purchaser acknowledges that if it acquires the
Interests, it will acquire the Interests subject to any claims or demands
that allege a breach or infraction of any of the laws involving the
environment, including, but not limited, to those listed in this Section,
whether or not the breach or infraction occurred before, on or after the
Effective Date, and that Purchaser will hold Seller harmless from any
claims, demands or liabilities arising from any alleged or actual breach of
infraction of any laws involving the environment.
5.13 Purchaser acknowledges and agrees that Seller has not made, and does not
make, any warranty or representation, express, implied or otherwise, as to
the accuracy or completeness of any data, reports, records, projections,
information or materials now, heretofore or hereafter furnished or made
available to Purchaser in connection with this Agreement including, without
limitation, pricing assumptions, or quality or quantity of hydrocarbon
reserves (if any) which Seller believes might be attributable to the
Interests or the ability or potential of the any of the Interests to
produce hydrocarbons or the environmental condition of the properties or
any other matters contained in the proprietary data or any other materials
furnished or made available to Purchaser. Any and all data, records,
reports, projections, information and other materials (written or oral)
furnished to Purchaser or otherwise made available or disclosed to
Purchaser were provided to Purchaser as a convenience and shall not create
or give rise to any liability of or against Seller and any reliance on or
use of the same shall be at Purchaser's sole risk to the maximum extent
permitted by law.
5.14 Seller is selling the Interests to Purchaser as is, where is - with all
faults and without any warranties or covenants of title, express or
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implied, and without any representations concerning title to the Interests
not specifically set forth in this Article 5, and notwithstanding any
representation of the GWI and the NRI, as set forth in Exhibit A, Seller
does not warrant any quantum of title. In addition, Purchaser will assume
all responsibility and liability for any environmental defects whether
arising before, during or after the Effective Date.
ARTICLE 6
Purchaser's Representations And Warranties
Purchaser represents and warrants to and agrees with Seller that:
6.1 By the Closing Date, the execution, delivery and performance of this
Agreement by Purchaser and the consummation of the transactions
contemplated hereby will have been duly and validly authorized by the Board
of Directors of Purchaser.
6.2 The execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement will not result in the breach
of any of the terms or conditions of nor result in the breach of any of the
terms or conditions of nor constitute a default under the Articles of
Incorporation nor the By-laws of Purchaser.
6.3 Purchaser will be, as of the Closing Date, qualified to do business in the
State of Texas, and, if Purchaser desires to operate any of the Interests
for its own account, will be properly qualified to do so by the Railroad
Commission of Texas.
6.4 Purchaser represents and acknowledges that, before entering into this
Agreement, Purchaser was advised by and has relied solely on Purchaser's
own legal, tax and other professional counsel concerning this Agreement,
the Interests and the operations conducted thereon. Purchaser represents
and acknowledges that Purchaser is able to bear the economic risk of any
oil and gas investment Purchaser is obligated to or might choose to make in
the Interests and that Purchaser is capable of evaluating the merits and
risks of investments in the Interests and the operations to be conducted
thereon. Purchaser represents and acknowledges that Purchaser is acquiring
an interest in the Interests for Purchaser's own account and not for
distribution or resale in any manner that would violate any state or
federal securities law, rule, regulation or order.
ARTICLE 7
Conditions Precedent To The Obligations Of Purchaser
7.1 All obligations of Purchaser under Article 2 and Article 9 are subject, at
Purchaser's option, to the fulfillment prior to or at the Closing Date of
each of the following conditions:
(a) Each and every representation and warranty of Seller as set forth in
Article 5 of this Agreement shall be true and accurate as of the date
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when made and shall be deemed to be made again at and as of the
Closing Date and shall then be true and accurate in all respects.
(b) Seller shall have performed and complied with each and every covenant,
agreement and condition required by this Agreement to be performed or
complied with by Seller prior to or at Closing; provided, however,
that if Seller has not obtained consents to assign in respect of the
Gulf Fee Lease as provided in Section 3.6, the failure of Seller to
obtain such consents shall not be deemed to be a breach of a covenant,
agreement or condition of this Agreement.
(c) The Interests shall not have been materially and adversely affected as
of the Closing Date in any way as a result of any casualty of
disaster, accident, labor disputes, exercise of power of eminent
domain or other governmental event or Act of God or the public enemy.
(d) No suit, action or other proceeding shall be pending or threatened
before any court or governmental agency seeking to restrain, to
prohibit or to obtain damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby,
and there shall have been no investigation or inquiry made or
commenced by any governmental agency in connection with this Agreement
or the transactions contemplated hereby.
(e) Purchaser shall have satisfied itself that no instruments have been
filed for record from and after the date Purchaser's examination of
title concluded that adversely affects the title of Seller to the
Leases and the Lands.
ARTICLE 8
Conditions Precedent To The Obligations Of Seller
All obligations of Seller under Article 9 are subject, at Seller's option, to
the fulfillment prior to or at the Closing Date of each of the following
conditions:
8.1 Each and every representation and warranty of Purchaser under this
Agreement shall be true and accurate in all respects as of the date when
made and shall be deemed to be made again and as of the Closing Date and
shall then be true and accurate in all respects, except as to changes
therein specifically contemplated by this Agreement.
8.2 Purchaser shall have performed and complied with each and every covenant,
agreement and condition required by this Agreement to be performed or
complied with by it prior to or at Closing.
8.3 No suit, action or other proceeding shall be pending or threatened by any
third party before any court or governmental agency seeking to restrain,
prohibit or obtain damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby, and
there shall have been no investigation or inquiry made or commenced by any
governmental agency in connection with this Agreement or the transactions
contemplated hereby.
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ARTICLE 9
Actions Of Seller And Purchaser At The Closing
9.1 The Closing of the purchase and sale of the Interests shall take place as
soon as reasonably practicable after the date that this Agreement becomes
effective as provided in Section 14.9, but shall not be any earlier than
the later of: (1) 30 days from the date of the execution of this Agreement,
or (2) the date that Seller obtains the consent of its shareholders, as
provided in Section 5.2. The Closing shall take place the time, date and
place as Seller and Purchaser may agree upon in writing, which the parties
shall deliver to each other no later than five days before the proposed
Closing Date.
9.2 At the Closing, Seller shall execute, acknowledge and deliver to Purchaser
an Assignment and Conveyance (the "Instrument of Conveyance") covering all
of the Interests (other than the Claim), substantially in the form as
Exhibit D, which Instrument of Conveyance is dated as of and at the
Effective Date. Purchaser shall be solely responsible for recording the
Instrument of Conveyance in the Hardin County, Texas, official records and
for the cost of the filing fees of that recordation. With regard to the
Claim, before the execution of this Agreement, Seller has communicated with
the attorney who is overseeing the defense of the Claim. At the Closing,
Seller shall provide documentation acceptable to Purchaser to the effect
that Purchaser will have an assignment of Seller's rights in regard to the
Claim, or the economic equivalent of an assignment of Seller's rights in
regard to the Claim, which will include Seller's rights to any funds held
in escrow or in suspense in regard to the Claim, irrespective of when the
funds may have been placed in escrow or in suspense, Seller agreeing that
it shall have no claim upon the amounts paid, irrespective of the date or
time when the amount was paid, or to which period of time it relates.
9.3 Purchaser recognizes that Seller is not the operator of the Interests. In
regard to the Interests described on Exhibit A as the Coline Lease, the
Gulf Fee Lease and the Black Stone Minerals Lease, the operator thereof is
C.F.O., Inc., and Purchaser will succeed to Seller's rights as a
non-operator. With regard to the Milhorn Leases, Seller is the nominal
operator, and the properties are operated pursuant to a contract operating
agreement with Traton Operating Company, which will be assigned to
Purchaser pursuant to the Instrument of Conveyance.
9.4 If requested by Purchaser, at the Closing, Seller will execute one or more
letters in lieu of transfer orders, authorizing the purchaser of production
to remit the proceeds from the sale production to Purchaser.
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9.5 At the Closing, Purchaser shall deliver to the Seller the Purchase Price,
as adjusted if necessary pursuant to Section 9.6 below by wire transfer to
an account specified by Seller, and Purchaser and Seller shall direct
Charger Title to pay the same to Seller. To the extent that any
documentation is due to the party holding the Escrow Funds, the parties
shall execute the same and transmit it to the party holding the Earnest
Money.
9.6 Ad valorem, property, production, severance, excise 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 on the
Interests (and not deducted by the purchaser of the hydrocarbon production
from the proceeds of production) shall be prorated been Seller and
Purchaser as of the Effective Date, and Seller shall be charged for all
such taxes and assessments on the Interests based upon taxes for the tax
year ending in 2013, and shall be deemed to be a final accounting with
regard to the same.
9.7 If, by the Closing Date, Seller has not obtained the consent required by
the terms of Section 3.6, then the Gulf Fee Lease shall not be included in
the Instruments of Conveyance nor in the Joint Operating Agreement. In that
event, the obligations and actions of the parties in respect of the Gulf
Fee Lease as applicable, after the Closing shall be governed by the
provisions of Section 10.4.
ARTICLE 10
Settlement Statement; Further Actions And Assurances
10.1 Seller shall prepare and deliver to Purchaser a settlement statement
("Settlement Statement") no more than 60 days after the Closing Date for
Purchaser's review and approval. The Settlement Statement shall set forth
the Purchase Price and the tax adjustment as provided in Section 9.6, and
shall include all revenues paid to Seller for the sale of hydrocarbons
which occurred after the Effective Date, but which were received by Seller
after the Effective Date. It shall also include all payments for invoices
received by Purchaser after the Closing Date, and which were attributable
to periods of time before the Effective Date.
10.2 The Settlement Statement shall contain the following adjustments, as well
as any others that have been agreed by the parties:
(a) All merchantable hydrocarbons associated with the Interests and stored
in tanks and vessels, excluding pipeline fill, will be gauged, as of
the Effective Date, to the bottom of the flange by the operator of the
Interests, and the amount of crude oil in the gun barrels on the
Leases shall be allocated to Seller and Seller shall retain the
proceeds of the sale of the merchantable hydrocarbons so gauged. With
respect to the amount of crude oil in the gun barrels, the parties
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agree that for the purposes of settlement, the same shall be equal to
635.7 barrels, and settlement for the same shall be made at the market
price prevailing for like crude oil on the Effective Date and the
value thereof shall be allocated to Seller.
(b) All monies, proceeds, receipts, credits and income attributable to the
Interests for all periods of time after the Effective Date shall be
the sole property and entitlement of Purchaser, and, to the extent
received by Seller, Seller shall fully disclose, account for and
transmit the same promptly to Purchaser, and to the extent not so
transmitted, shall be accounted for in the Settlement Statement by a
credit to Purchaser.
(c) All monies, proceeds, receipts, credits and income attributable to the
Interests for all periods of time before the Effective Date shall be
the sole property and entitlement of Seller, and, to the extent
received by Purchaser, Purchaser shall fully disclose, account for and
transmit the same promptly to Seller, and to the extent not so
transmitted, shall be accounted for in the Settlement Statement by a
credit to Seller.
(d) The Settlement Statement shall include the sum of $50,000, which shall
be the amount due to Seller in respect of the Claim, and shall be
accounted for in the Settlement Statement by a credit to Seller.
(e) All costs, expenses, disbursements, obligations and liabilities
attributable to the Interests for the period of time after to the
Effective Date, regardless of when due or payable, shall be the sole
obligation of Purchaser and if paid by Seller, Purchaser shall
promptly reimburse Seller for the same, and to the extent no so paid
by Purchaser shall be accounted for in the Settlement Statement by a
credit to Seller.
(f) All costs, expenses, disbursements, obligations and liabilities
attributable to the Interests for the period of time before to the
Effective Date, regardless of when due or payable, shall be the sole
obligation of Seller and if paid by Purchaser, Seller shall promptly
reimburse Purchaser for the same, and to the extent no so paid by
Seller shall be accounted for in the Settlement Statement by a credit
to Purchaser.
(g) After all adjustments and credits have been agreed, the party then
owing funds to the other shall make a payment to the other party as
soon as the parties have agreed upon the Settlement Statement.
(h) In addition to the Settlement Statement described above, the parties
may, if they elect, exchange Settlement Statements 180 days after the
Closing Date, if they reasonably believe that further adjustments may
then be necessary. If the parties elect to do so, the same adjustments
and payment requirements set forth in Sections 10.2(a) through 10.2(g)
shall apply as necessary.
10.3 At any time or from time to time, on and after the Closing, Seller shall
execute and deliver, or cause to be executed and delivered, to Purchaser,
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all additional assignments, consents, endorsements, documents, transfer
orders and instruments and take or cause to be taken all actions that
Purchaser may deem necessary or desirable to vest or to confirm title to
the Interests as contemplated herein and in the Instrument of Conveyance in
Purchaser and Seller shall assist Purchaser in exercising any rights with
respect to the Interests, and otherwise to carry out the intents and
purposes of this Agreement.
10.4 If, by the Closing Date, Seller has not obtained the consents required by
the terms of Section 3.6, then after such time, Seller shall diligently
continue to seek such consents. When the consents are obtained, then Seller
shall, as promptly thereafter as possible, assign the appropriate interest
in and to the Gulf Fee Lease to Purchaser. Purchaser may, but shall not be
obligated to, waive the obligation to obtain such consent, but the waiver
shall not be effective unless a written waiver is in effect and both
parties have executed counterparts thereof, and Purchaser may condition its
waiver upon such requirements as it may desire. If Purchaser does not waive
the obligation to obtain the consent, by a written instrument, delivered on
or before August 1, 2014, then Seller's obligation to seek the consents or
approvals shall be terminated, but Seller shall repay Purchaser the amount
of $50,000.00 for the Gulf Fee Lease.
ARTICLE 11
Notices
Except as specifically provided otherwise in this Agreement or an Exhibit or
Schedule hereto, any notices, claims, requests, demands and other communications
required or permitted to be given hereunder shall be in writing, and may be
given by personal delivery, by courier, by mail, by electronic mail or by
facsimile machine addressed to the party to whom such notice is directed. A
notice shall be effective as follows: if by personal delivery, upon the receipt
thereof; if by courier service, upon receipt by the receiving party from the
courier service; if by mail, three days after delivery thereof to the postal
authorities, all first class postage pre paid; if by electronic mail or
facsimile machine, upon confirmation by the transmitting party from the
receiving party that such electronic mail or facsimile was received. Each
party's proper address for the receipt of notices shall be as set forth below;
provided, that a party may change such address by giving notice thereof to the
other parties. The parties' addresses, for notice purposes, are as follows:
Seller's Address:
Vanguard Energy Corporation
1330 Post Oak Boulevard, Suite 1600
Houston, Texas 77056
14
(713) 627-2500
Fax Number: (310) 525-3511
E-mail: wdillard@vanguardenergycorp.com
Attention: Mr. Warren M. Dillard
Purchaser's Address:
Vast Exploration, LLC
160 West Canyon Crest Road
Alpine, Utah 84004
(801) 216-8850
E-mail: Justin@privatecapitalgroup.com
Attention: Mr. Justin Griffin
ARTICLE 12
Termination
12.1 This Agreement may be abandoned or terminated in writing on or before the
Closing Date, in which case, Purchaser and Seller shall direct Charger
Title to return the Earnest Money to Purchaser:
(a) by the agreement of Purchaser and Seller;
(b) by either party if the Closing has not occurred by May 15, 2014;
(c) by either party pursuant to the provisions of Section 12.2;
(d) by Purchaser pursuant to Article 7;
(e) by Purchaser, if any of Seller's representations or warranties are
materially in accurate, regardless of whether Seller had knowledge of
the inaccuracy; or
(f) by Seller pursuant to Article 8; provided that in the case of Seller's
terminating this Agreement pursuant to this Section 12.1(f), Purchaser
and Seller shall direct Charger Title to return the Earnest Money to
Seller.
12.2 In addition, either Purchaser or Seller may terminate this Agreement at any
time prior to Closing by giving the other party written notice thereof if:
(a) There is any material breach of failure to perform by the other party
or of any of the warranties, representations, commitments, covenants
and conditions under this Agreement;
(b) There exists any material error, misstatement or omission of a
material fact on the part of the other party which renders an exhibit,
15
representation of fact or document or schedule delivered in connection
herewith misleading and materially prejudicial to the party
terminating this Agreement; or
(c) The notice provided by a party pursuant to the preceding Sections of
this Section 12.2 shall clearly specify the material breach or failure
of the notified party to perform any of its warranties,
representations, commitments, covenants and conditions, or the
material error, misstatement or omission of the notified party.
12.3 If this Agreement is abandoned or terminated as provided in this Article
12, then Charger Title shall return the Earnest Money to Purchaser, unless
this Agreement is terminated by Seller pursuant to Section 12.1(f), or by
reason of an action of Purchaser as specified in Section 12.2, and, if
terminated by Seller pursuant to either or both of the specified reasons,
Charger Title shall then return the Earnest Money to Seller. Upon
termination, neither party shall have any obligations to the other, except
as provided in this Article 12 and those portions of Article 14 which
necessarily survive.
ARTICLE 13
Interpreting This Agreement
In this Agreement and the Exhibits, unless the context otherwise requires:
(a) the singular number includes the plural number and vice versa;
(b) reference to any person includes that person's successors and assigns
but, if applicable, only if successors and assigns are permitted by
this Agreement, and reference to a person in a particular capacity
excludes that person in any other capacity;
(c) reference to any gender includes each other gender;
(d) reference to any agreement (including this Agreement), document or
instrument means such agreement, document or instrument as amended or
modified (including any waiver or consent) and in effect from time to
time in accordance with the terms thereof and, if applicable, the
terms hereof;
(e) the word "including" and its derivatives means "including, but not
limited to," and corresponding derivative expressions;
(f) with regard to the determination of any period of time, "from" means
"from and including," "to" means "to but excluding" and "through"
means "through and including;"
16
(g) whenever the parties have agreed that any approval or consent shall
not be unreasonably withheld, such phrase includes the parties'
agreement that the approval or consent shall not be unreasonably
delayed or conditioned;
(h) no consideration shall be given to the fact or presumption that one
party had a greater or lesser hand in drafting this Agreement; every
covenant, term and provision of this Agreement shall be construed
simply according to its fair meaning and not strictly for or against
any party (notwithstanding any rule of law requiring an agreement to
be strictly construed against the drafting party), it being understood
that the parties are sophisticated and have had adequate opportunity
and means to retain counsel to represent their interests and to
otherwise negotiate the provisions of this Agreement;
(i) The titles and captions of the Sections provided in this Agreement are
strictly for purposes of convenience and reference and are not
intended to change, modify, or alter the substance of any provision of
this Agreement.
(j) examples shall not be construed to limit, expressly or by implication,
the matter they illustrate; (k) a defined term has its defined meaning
throughout this Agreement, and each Exhibit to this Agreement,
regardless of whether it appears before or after the place where it is
defined;
(l) all references to prices, values or monetary amounts refer to United
States dollars, unless expressly provided otherwise;
(m) each Exhibit to this Agreement is a part of this Agreement, but if
there is any conflict or inconsistency between the main body of this
Agreement and any Exhibit, the provisions of the main body of this
Agreement shall prevail; and
(n) the word "or" may not be mutually exclusive, and can be construed to
mean "and" where the context requires there to be a multiple rather
than an alternative obligation.
ARTICLE 14
Miscellaneous Provisions
14.1 The parties acknowledge that this Agreement has been negotiated and
executed in the State of Texas, and further agree that this Agreement shall
be governed, construed and enforced in accordance with the laws of the
State of Texas, excluding any conflicts-of-laws provisions thereof. Each
party, solely for the benefit of the other Party and not for the benefit of
any third person hereby irrevocably submits to the jurisdiction of any
Texas court sitting in Harris County, Texas or any Federal court sitting in
the Southern District of Texas, Houston Division, having subject matter
jurisdiction over any action or proceeding arising out of or relating to
this Agreement, and each party hereby irrevocably agrees that all claims in
respect of such actions or proceedings shall be heard and determined in
such Texas court or Federal court; provided, however, that nothing in the
17
foregoing provisions of this Article shall be construed to permit the
initiation of an action or proceeding by either party in a manner other
than as prescribed or permitted by law and provided, further, however that
the foregoing provisions of this Article are intended to govern the situs
of actions or proceedings between the parties, and are not intended to be
applicable to the bringing of actions or proceedings by a party with
respect to third persons.
14.2 This Agreement and the Exhibits set forth the entire agreement and
understanding of the parties hereto with respect to the transactions
contemplated hereby and supersede all prior agreements, arrangements and
understandings relating to the subject matter hereof. No representation,
promise, inducement or statement of intention has been made by Seller or
Purchaser which is not embodied in this Agreement or in the documents
referred to herein, and neither Seller not Purchaser shall be bound by or
liable for any alleged representation, promise, inducement or statement of
intention not so set forth.
14.3 No officer, director, employee or agent of either Seller or Purchaser may
amend, alter, supplement, change or modify this Agreement except by a
written instrument physically executed by either an officer of Purchaser or
an officer of Seller. Any attempted oral modification or written
modification, except as specifically set forth herein, shall be void, ab
initio, and shall not be construed as, nor shall it be, a modification of
this Agreement.
14.4 All of the terms, covenants, representations, warranties and conditions of
this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and their respective successors, assigns
and other legal representatives.
14.5 There are no third party beneficiaries to this Agreement, and this
Agreement is solely among the parties hereto, and the parties do not intend
to confer any benefit, right or obligation upon any party not specifically
a party to this Agreement.
14.6 No waiver by any party of any condition or of any breach of any term,
covenant, representation or warranty contained in this Agreement, in any
one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such condition or breach or waiver of any other
condition or of any breach of any other term, covenant, representation or
warranty.
14.7 This Agreement may be executed in multiple counterparts, each of which
shall be deemed an original and all of which taken together shall
constitute one instrument; provided, however, that this Agreement shall be
effective as to each party upon its execution hereof whether all
counterparts are executed by a party or not. In making proof of this
Agreement it shall not be necessary to produce nor to account for all
18
counterparts hereof, and it shall be sufficient to produce but one
counterpart original hereof executed by the party sought to be charged
thereby.
14.8 The parties specifically intend that this Agreement may be executed by
facsimile or by the exchange of documents in electronic format in
accordance with the Uniform Electronic Transactions Act (Tex. Bus. & Com.
Code ss. 43.001 et seq.), and that this Agreement shall be deemed to be
executed by the parties when a party has caused the execution hereof by a
person duly authorized to execute the same, has then forwarded the
Agreement by facsimile or electronic mail, and the other parties have
executed the counterpart of the Agreement received by them and have
returned a fully executed counterpart to the originating party. Upon the
receipt by the originating party of a fully executed counterpart, whether
the same be in facsimile or electronic form, the Agreement shall then be
deemed to be executed and effective. The parties may, but shall not be
required to, exchange counterparts bearing original signatures, but the
date of execution shall be deemed to be the date upon which the originating
party received the fully executed counterpart.
14.9 This Agreement shall become effective upon the latest date of the execution
hereof by both parties, and for the purposes of determining the date of
execution, the same shall be the date set forth below a party's signature.
[TWO SIGNATURE PAGES FOLLOW THIS PAGE]
19
The parties have executed this instrument to be effective as provided in Section
14.9.
SELLER
Vanguard Energy Corporation
By:/s/ Warren Dillard
-------------------------
Warren Dillard, President
Date: April 11, 2014
20
The parties have executed this instrument to be effective as provided in Section
14.9.
PURCHASER
Vast Exploration, LLC
By: /s/ Jared Lucero
-----------------
Name: Jared Lucero
Title: President
Date April 16, 2014
21
Exhibit A
To
Purchase and Sale Agreement
Between
Vanguard Energy Corporation
And
Vast Exploration, LLC
Description of Properties
Exhibit B
To
Purchase and Sale Agreement
Between
Vanguard Energy Corporation
And
Vast Exploration, LLC
Inventory
B-1
Exhibit C
To
Purchase and Sale Agreement
Between
Vanguard Energy Corporation
And
Vast Exploration, LLC
Purchase Price Allocation
[Follows This Page]
C-1
Exhibit D
To
Purchase and Sale Agreement
Between
Vanguard Energy Corporation
And
Vast Exploration, LLC
Instrument of Conveyance