Exhibit 10
July 1, 2008
Mr. Harvey Bryant
Chief Executive Officer
Bedford Energy, Inc.
531 North Portland
Oklahoma City, OK 73107
RE: Lincoln County, Oklahoma
Dear Mr. Bryant:
This Letter Agreement constitutes the offer of Avalon Oil & Gas, Inc.
("Avalon"), with respect to the acquisition of all of the leasehold interests,
working interests, carried working interests, royalty interests, including all
wells, well bores, and salt water disposal wells, together with all equipment
("Bedford Assets"), used in the operation of the Leasehold free and clear of all
liens, encumbrances or claims owned by Bedford Energy, Inc., ("Bedford") located
in Lincoln County, Oklahoma, described more fully on Exhibit "A" (the "Grace
Field). This does not include any other working interest owners' interests in
the Grace Field
1. The parties hereto shall immediately proceed with the matters set
forth in Exhibit "B" attached hereto and made a part hereof by this
reference as fully as if set forth herein, and the preparation of an
Oil and Gas Assignment of the Bedford Assets. The Oil and Gas
Assignment shall contain such customary terms, representations,
warranties, and covenants typically contained in like transactions and
as are otherwise mutually agreed upon by the parties.
2. Bedford represents and warrants to Avalon that it has not entered into
any agreement with any other party with respect to the sale or other
disposition of the Bedford Assets. Bedford further represents and
warrants to the Avalon the following: (1) Bedford has the full power
and authority to convey to the Avalon title to the Bedford Assets, (2)
Bedford is duly organized, and is currently validly existing and is in
good standing, under the laws of the State of Nevada, and authorized
to do business in the State of Oklahoma, (3) this Letter Agreement,
and all documents and instruments executed in connection herewith,
when duly executed and delivered, will constitute valid and binding
obligations of Bedford, enforceable in accordance with their terms,
(4) Bedford has good and marketable title to the Bedford Assets that
will not be subject to security interests, mortgages, pledges, liens,
encumbrances, or charges, or claim at Closing, (5) neither the
execution by Bedford of this Letter Agreement, the consummation by
Bedford of the transactions contemplated herein nor the compliance by
Bedford with the provisions of this Letter Agreement conflicts with or
results in a breach of any provisions of any applicable law, judgment,
order, writ, injunction, decree, rule, regulation or agreement to
which Bedford is a party or by which Bedford is bound, or constitutes
a default under any thereof, (6) Bedford is fully compliant with all
Federal, State and Local laws concerning the operation and ownership
of the Bedford Assets, (7) no litigation or claims, asserted or
unasserted, pending or threatened, exists against Bedford concerning
the Grace Field and the Bedford Assets except those previously
disclosed to Avalon as identified fully on Exhibit "C" attached hereto
and made a part hereof, all of which will be settled, paid and
dismissed at Closing, and (8) Bedford has not intentionally engaged in
any conduct in violation of any then effective federal or state
securities or tax laws, or any other rules, laws or regulations of any
governing body having jurisdiction over Bedford.
3. Avalon represents and warrants to Bedford, the following: (1) neither
the execution of this Letter Agreement, the consummation by Avalon of
the transactions contemplated herein nor the compliance by Avalon with
the provisions of this Letter Agreement, conflicts with or results in
the breach of any provisions of any applicable law, judgment, order,
writ, injunction, decree, rule, regulation or agreement to which
Avalon is a party or by which Avalon is bound, or constitutes a
default under any thereof, (2) Avalon has no intention to engage in
any conduct which shall or may violate any federal or state securities
or tax laws, or any other rules, laws or regulations of any governing
body having jurisdiction over Avalon, (3) no litigation, pending or
threatened, exists against Avalon, and (4) Avalon was duly organized,
and is currently validly existing and is in good standing or is
registered to do business, under the laws of the State of Nevada and
is or will be qualified to do business in the State of Oklahoma by
Closing.
4. Bedford shall not be obligated to sell the Bedford Assets unless the
following provisions are satisfied on or before the Closing: (1) the
Purchase Price, less the escrow deposit, shall be paid in cash to
Bedford, (2) all representations and warranties made by Avalon in
connection herewith must be true and correct in all material respects
as of the Closing, (3) Avalon shall have fully and completely complied
with all of its covenants and agreements found herein, (4) no action
or proceeding shall have been instituted or threatened against Avalon
for the purpose or with the probable effect of enjoining, preventing
or otherwise adversely affecting the consummation of this Letter
Agreement, regardless of fault, and (5) a fully executed, original
Certificate of Secretary of Avalon shall have been delivered to
Bedford affirming the representations and warranties by Avalon at
Closing.
5. Avalon shall not be obligated to purchase the Bedford Assets unless
the following provisions are satisfied on or before the Closing: (1)
all representations and warranties made by Bedford in connection
herewith must be true and correct in all material respects as of the
Closing, (2) Bedford shall have fully and completely complied with all
of its covenants and agreements found herein, (3) no action or
proceeding shall have been instituted or threatened against the
Bedford for the purpose or with the probable effect of enjoining,
preventing or otherwise adversely affecting the consummation of this
Letter Agreement, regardless of fault, (4) Bedford's Books and Records
as they relate to the Grace Field and the Bedford Assets shall have
been made available to Avalon, (5) all contracts, agreements and other
documents constituting Bedford Assets shall have been delivered to
Avalon at or prior to Closing, (6) a fully executed, original Bill of
Sale shall have been delivered to Avalon, (7) fully executed, original
Assignments, as necessary, shall have been delivered to Avalon, and
(8) a fully executed, original Certificate of Secretary of Bedford
shall have been delivered to Avalon affirming the representations and
warranties by Bedford at Closing.
6. Bedford agrees to indemnify and hold Avalon harmless from any
liability, including without limitation any costs, expenses, damages
and fees (e.g., attorney fees), proximately caused by and directly
resulting from: (1) Bedford's failure to substantially comply with its
covenants and agreements made herein, (2) Bedford's representations
and warranties failing to be substantially true and correct; or (3)
Operation, acts and/or omissions relating to or connected with the
Bedford Assets prior to Closing. Avalon agrees to indemnify and hold
Bedford harmless from any liability, including without limitation any
costs, expenses, damages, and fees (e.g., attorney fees), proximately
caused by and directly resulting from: (1) Avalon's failure to
substantially comply with its covenants and agreements made herein,
(2) Avalon's representations and warranties failing to be
substantially true and correct, or (3) the operation of the Bedford
Assets following Closing.
7. Bedford and Avalon additionally agree that between the date of this
Letter Agreement and July 7, 2008, Bedford agrees to permit Avalon to
inspect and review the Bedford Assets as well as provide to Avalon
those items described more fully on Exhibit "B". Avalon shall have
three (3) days after such period, but before Closing, to submit any
written reasonable objections to the working condition of any
equipment currently in use in the Grace Field or the legal sufficiency
of any contracts to be transferred hereunder. Bedford shall have a
reasonable period of time after receipt of such written objections to
cure such objections to the reasonable satisfaction of Avalon, or to
otherwise agree to indemnify and hold Avalon harmless in connection
therewith. During such period, the Closing shall be appropriately
extended to a mutually agreeable time.
8. Risk of loss to the Bedford Assets shall pass to Avalon at Closing.
Except for the agreement by Bedford to pay Robert Demes or his assigns
a fee, each party to this Agreement represents and warrants that such
party has not taken any action which will result in any claim for a
brokerage fee, finder's fee, or similar fee or commission being
claimed with respect to this Agreement. The representations,
warranties, covenants, agreements, terms and conditions herein shall
survive the execution and delivery hereof and the Closing. Bedford
agrees to provide to Avalon and Avalon agrees to provide to Bedford
any and all certificates, instruments, documents or agreements
reasonably requested by the other which are necessary to consummate
the terms and provisions of this Letter Agreement. Bedford and Avalon
agree to pay their own respective costs, expenses and fees incurred in
connection herewith. This Letter Agreement shall be binding upon and
inure to the benefit of, the respective heirs, personal
representatives, successors and assigns of the parties hereto and has
been executed in and shall be governed in accordance with the laws of
the State of Oklahoma. This Letter Agreement shall only be amended in
writing, executed by both parties. Provisions of this Letter agreement
may be waived only in writing and no other action by either party
shall be construed as to waive any provision of this Letter Agreement.
9. The parties hereto agree Avalon will issue a press release which will
be reviewed by Bedford, and file a Form 8-K with the Securities and
Exchange Commission (SEC) with this Letter Agreement as an attachment.
10. This letter, provided all terms and conditions are met by Avalon and
Bedford, shall serve as our Definitive Agreement with regard to the
purchase of the Bedford Assets by Avalon.
11. Avalon shall escrow $250,000 on or before July14, 2008, and $1,500,000
with the Riggs Abney Law Firm on or before July 24, 2008. Closing will
take place at the offices of Bedford at 10:00 a.m. on August 1, 2008,
unless extended under the terms hereof, and Bedford shall deliver to
Avalon at Closing, title to the Bedford Assets, free and clear of all
liens and encumbrances, including, but not limited to the those
described on Exhibit "C" attached hereto and made a part hereof, as
well as the documents described in Exhibit "B" in exchange for the
cash purchase price, less the escrowed funds, and the Avalon shares as
set forth under Exhibit "B". Avalon shall pay any sales or use taxes
due under the sale, recording costs and its pro-rata share of the 2008
ad valorem taxes. Bedford shall pay any documentary stamps required
for the transaction and its pro-rata share of the 2008 ad valorem
taxes.
If the foregoing sets forth your understanding with respect to this matter,
please execute the enclosed copy of this letter in the space provided and return
one fully executed copy to the undersigned, whereupon this letter shall become a
binding agreement. This letter may be executed in more than one counterpart,
each of which shall be deemed to be an original, all of which shall constitute
but one instrument.
DATED this 1st day of July, 2008.
AVALON OIL & GAS, INC.
By /s/ Kent Rodriguez
------------------------------
Kent A. Rodriguez
President
The foregoing correctly sets forth our understanding of the present intent
of the parties this 1st day of July, 2008.
BEDFORD ENERGY, INC.
By /s/ Harvey Bryant
------------------------------
Harvey Bryant
Chief Executive Officer
EXHIBIT "A"
to
Letter Agreement Dated July 1, 2008
The Contract Area known as the East Chandler Prospect described as SW/4 of
Section 6, Township 14 North, Range 5 East, SW/4 of Section 31, Township 15
North, Range 5 East containing 640.00 acres, more or less, including, but not
limited to, the following:
Grace #1 (NW/4 NW/4 SW/4 Sec. 6-T14N-R5E);
Grace #2 (W/2 NW/4 SW/4 Sec. 31-T15N-R5E);
Grace #3 (E/2 W/2 SW/4 SW/4 Sec.6-T14N-R5E);
Grace #4 (50 West of E/2 NW/4 SE/4 SW/4 Sec. 6-T14N-R5E);
Grace #5A (E/2 NW/4 SE/4 SW/4 Sec. 6-T14N-R5E; and,
Grace #6 (SE/4 SE/4 SW/4 Sec. 6-T14N-R5E).
EXHIBIT "B"
to
Letter Agreement Dated July 1, 2008
RE: AVALON: AVALON OIL & GAS, INC.
BEDFORD: BEDFORD ENERGY, INC.
- --------------------------------------------------------------------------------
BEDFORD ASSETS: The Bedford Assets known as the Grace Field consists of: (i)
all right, title and interest in the two (2) quarter
sections described on Exhibit "A" of this Letter of Intent,
together with and including all Bedford's interest in wells,
well bores, salt water disposal wells, production equipment
and royalty interests, carried working interest, and working
interests in the wellbores, located thereon known as Grace
#1 (NW/4 NW/4 SW/4 Sec. 6-T14N-R5E), Grace #2 (W/2 NW/4 SW/4
Sec. 31-T15N-R5E), Grace #3 (E/2 W/2 SW/4 SW/4
Sec.6-T14N-R5E), Grace #4 (50 West of E/2 NW/4 SE/4 SW/4
Sec. 6-T14N-R5E ), Grace #5A (E/2 NW/4 SE/4 SW/4 Sec.
6-T14N-R5E, Grace #6 (SE/4 SE/4 SW/4 Sec. 6-T14N-R5E), any
salt water disposal well; (ii) all equipment in its as is
where is condition without warranty of fitness or use,
contract rights, fixtures, inventory, intellectual property
rights, drawings, plans, specifications of every kind and
nature now associated with or used in conjunction with the
operation of the aforementioned Bedford Assets. The Bedford
Assets will include all oil in the tanks on the date of
Closing but shall not include any receivables from
purchasers that are due for the sale of oil or natural gas
from the Grace Field that have not yet been paid to Bedford.
PURCHASE PRICE: The purchase price to be paid by Avalon to Bedford shall be
$1,750,000 in cash plus restricted shares of common stock of
Avalon valued at $250,000 based upon the average of the bid
and ask price on the day preceding Closing. Avalon shall
escrow $250,000 on or before July 14, 2008, and $1,500,000
with the Riggs Abney Law Firm on or before July 24, 2008.
CLOSING: Closing shall be on or before August 1, 2008 at the offices
of Bedford at 10:00 a.m., Avalon and Bedford can mutually
agree, as long as $1,750,000 is in escrow with the Riggs
Abney Law Firm, to extend this Agreement until September 1,
2008. The Riggs Abney Law Firm will retain $150,000.00 until
November 1, 2008 to insure that there are no additional
liens or encumbrances including any unpaid operating
expenses from the working interest owners in each well filed
on the Bedford Assets. Such escrowed funds will be used to
pay any such liens or encumbrances and if such funds are not
sufficient, Bedford shall immediately advance sufficient
funds to pay any excess.
ADDITIONAL REQUIREMENTS:
1. Copy of the Offering Circular used by Bedford for each of the
wellbores known as the Grace #1, Grace #2, Grace #3, Grace #5A, and
Grace #6
2. Copies of all subscription documents from each working interest owner
3. MODEL FORM 610 with a COPAS signed by at least seventy-five percent
(75%) of the of the working interest owners in each well
4. Payout Calculations for each well bore
5. All JIB statements sent to each working interest owner
6. All Royalty payments made by Bedford
7. Equipment Inventory for the Bedford Assets (wellbores and tank
battery, pumping equipment, monitoring equipment)
8. Invoices for the Salt Water disposal well
9. Agreement between Bedford and Surface owner of the Salt Water disposal
Well
10. Agreement between Bedford and City of Chandler
EXHIBIT "C"
to
Letter Agreement Dated July 1, 2008
No. Description Amount ($)
- --- ----------- ----------
1 Green Country Supply, Inc. 221,087.44
2 Oilfield Plastics, Inc. 5,380.00
3 Seminole Mud Company, Inc. 25,977.62
4 Cudd Well Control 124,736.38
5 Cudd Pumping Service 33,102.56
6 D & L Roustabout, LLC 26,205.02
7 Morgan Well Service 102,650.00
8 Oilwell Fracturing Services-Basic Energy Services, LP 72,862.25
9 Saber Industries, LP 240,359.11
10 Dean's Casing Service, Inc. 48,659.30
11 Suttee Enterprises, Inc. 11,252.54
12 WSFI, LLC 13,235.20
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TOTAL 925,507.72
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