EXHIBIT 10.6
PURCHASE AND SALE AGREEMENT
SALE OF CERTAIN PROPERTIES IN NATARONA COUNTY WYOMING
BETWEEN
HOT SPRINGS RESOURCES LTD
AND
MERSCHAT MINERALS LLC (AS SELLER)
AND
TEREX ENERGY CORPORATION "PURCHASER"
(As BUYER)
Dated September 30, 2014
TABLE OF CONTENTS
PAGE
1. SALE AND PURCHASE OF ASSETS..........................................1
1.1 Assets To Be Sold....................................................1
1.2 Exclusions and Reservations..........................................3
1.3 Conveyancing Instruments.............................................4
1.4 Election to Effect IRCss.1031 Exchange...............................4
2. PURCHASE PRICE AND EFFECTIVE DATE....................................4
2.1 Purchase Price.......................................................4
2.2 Allocation of Purchase Price.........................................5
2.3 Adjustments to Purchase Price........................................5
2.4 Closing Statement....................................................6
2.5 Effective Date of Sale...............................................7
3. ALLOCATION OF REVENUES...............................................7
3.1 Allocation of Revenues...............................................7
3.2 Payment of Invoices..................................................7
4. ASSUMPTION OF LIABILITIES AND INDEMNIFICATION........................7
4.1 Abandonment Obligations..............................................7
4.2 Contract Obligations.................................................7
4.3 Buyer's General Indemnification......................................8
4.4 Seller's General Indemnification.....................................8
4.5 Assumption and Indemnification of Environmental Risk and
Environmental Liabilities by Buyer...................................9
4.6 Notice of Claims.....................................................9
4.7 Defense of Claims....................................................9
5. TAXES...............................................................10
5.1 Allocation and Payment of Taxes.....................................10
6. REPRESENTATIONS AND WARRANTIES......................................10
6.1 Seller's Representations and Warranties.............................10
6.2 Buyer's Representations and Warranties..............................13
7. DUE DILIGENCE REVIEW................................................14
7.1 Review By Buyer.....................................................14
7.2 Nature of Defects ..................................................14
7.3 Permitted Encumbrances..............................................15
7.4 Seller's Response to Notices; Fai lure to Respond...................16
7.5 Elect ion to Cure...................................................16
7.6 Arbitration.........................................................16
7.7 Arbitration Provisions..............................................16
7.8 Enforceability......................................................17
7.9 Postponement of Closing; Payment....................................18
8. ADDITIONAL COVENANTS................................................18
8.1 Access to Records...................................................18
8.2 Interim Operation...................................................18
9. CLOSING, TERMINATION AND FINAL ADJUSTMENTS..........................18
9.1 Conditions Precedent................................................18
9.2 Closing.............................................................19
9.3 Termination.........................................................19
9.4 Effect of Termination...............................................20
9.5 Final Accounting Statem ent.........................................20
10. GOVERNING LAW AND VENUE.............................................21
10.1 Governing Law.......................................................21
10.2 Venue...............................................................21
11. MISCELLANEOUS.......................................................21
11.l Casualty Loss of Assets.............................................21
11.2 Books and Records...................................................21
11.3 Publicity...........................................................21
11.4 Entire Agreement....................................................21
11.5 Notices.............................................................22
11.6 Governing Law.......................................................22
11.7 Confidentiality.....................................................23
11.8 Conflict of Interest................................................23
11.9 Survival............................................................23
11.l0Further Cooperation.................................................23
11.11Counterparts........................................................23
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11.12 Exhibits........................................................24
11.13 Severability....................................................24
11.14 Expenses and Recording..........................................24
11.15 Nominations and Accounting Responsibilities.....................24
11.16 MUTUAL WAIVER OF CONSEQUENTIAL DAMAGES..........................24
11.17 NON-SOLICITATION OF EMPLOYEES...................................24
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PURCHASE AND SALE AGREEMENT
Sale of Properties in Natrona County, Wyoming
THIS PURCHASE AND SALE AGREEMENT ("Agreement"), dated September 24, 2014,
is between Hot Springs Resources LTD, a Wyoming corporation 142 N. Lincoln
Street, Casper, WY 82601 ("Hot Springs") and Merschat Minerals LLC a Wyoming
Limited Liability company with a mailing address of PO Box 356 Casper, WY 82602
("Merschat" and together with Hot Springs, "Seller"), and Terex Energy
Corporation, a Colorado corporation with a mailing address of 520 Zang Blvd.
Broomfield, Colorado 80021 ("Buyer").
W I T N E S S E T H:
That Seller desires to sell to Buyer and Buyer desires to purchase from
Seller on the terms set forth in this Agreement those certain oil and gas rights
and interests and associated assets described herein. Accordingly, in
consideration of the mutual promises contained herein, the mutual benefits to be
derived by each party hereunder and other good and valuable considerations, the
receipt and sufficiency of which are hereby acknowledged, Buyer and Seller agree
as follows:
1. SALE AND PURCHASE OF ASSETS
1.1 Assets To Be Sold.
1.1.1 Seller shall sell, transfer, assign, and deliver to Buyer,
and Buyer shall purchase and receive all of Seller's right,
title, and interest in and to the following:
(a) the oil and gas leases, mineral executive interests,
contractual rights, rights to explore, produce and develop,
rights to drain, wellbore interests and/or properties listed
and described in any manner on Exhibit A (including any
renewals, extensions, ratifications and amendments to such
interests whether or not such renewals, extensions,
ratifications or amendments are described on Exhibit A) (any
such rights or interests individually referred to as "Lease"
or collectively, "Leases") together with all oil and gas
unitization and communitization agreements, declarations
and/or orders relating to the Leases (collectively, the
"Units");
(b) all oil and gas wells, salt water disposal wells, injection
wells and other wells located on, affecting or draining any
of the Leases, within the Units or as listed on Exhibit A
(collectively the "Wells");
(c) all structures, facilities, foundations, wellheads, tanks,
pumps, compressors, separators, heater treaters, valves,
fittings, equipment, machinery, fixtures, flowlines,
pipelines, platforms, tubular goods, materials, tools,
supplies, improvements, and any other real, personal,
immovable and mixed property located on, used
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in the operation of, or relating to the production,
treatment, non- regulated transportation, gathering,
marketing, sale, processing, handling or disposal of
hydrocarbons , water, and associated substances produced or
drained from the Leases or the Units (the "Facilities");
(d) all natural gas, casinghead gas, drip gasoline, natural
gasoline, natural gas liquids, condensate, products, crude
oil and other hydrocarbons, whether gaseous or liquid,
produced or drained from or allocable to the Assets (as
hereinafter defined) on and after the Effective Date (the
"Hydrocarbons");
(e) to the extent transferable, all contracts, permits,
rights-of- way, easements, licenses, servitudes,
transportation agreements, pooling agreements, operating
agreements, gas balancing agreements, participation and
processing agreements, confidentiality agreements, side
letter agreements and any other agreement, document or
instrument listed on Exhibit A INSOFAR ONLY as they directly
relate and are attributable to the Leases, Units, Wells,
Hydrocarbons, or Facilities or the contractual and wellbore
rights thereon or therein or the ownership or operation
thereof, or the production, treatment, non-regulated
transportation, gathering, marketing, sale, processing,
handling disposal, storage or transportation of
hydrocarbons, water, or substances associated therewith (the
"Assumed Contracts"); and
(f) records relating to the Leases, Units, Wells, Hydrocarbons,
Assumed Contracts and Facilities in the possession of Seller
(the "Records") and including as follows: all (i) lease,
mineral interest, land, and division order files (including
any abstracts of title, title opinions, certificates of
title, title curative documents, and division orders
contained therein), (ii) the Assumed Contracts; (iii) all
well, facility, operational, environmental, regulatory,
compliance and historic production files and (iv) all
geological and geophysical files relating to the Leases (the
"Geologic Data"), but not including any records which (i)
Seller is prohibited from transferring to Buyer by law or
existing contractual relationship (including Geologic Data
that is not transferable without payment of a fee or other
penalty to any third party which Buyer has not separately
agreed in writing to pay), or which (ii) constitute Excluded
Assets (as hereinafter defined in Section 1.2).
All such Leases, Units, Wells, Facilities, Hydrocarbons, Assumed
Contracts, and Records are hereinafter collectively referred to as the
"Assets."
1.1.2 The risk of loss of the Assets shall occur and be made at
Closing (as defined in Section 9.2.1), but title to the
Assets shall be made effective as of the Effective Date (as
hereinafter defined in Section 2.5). Seller and
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Buyer shall execute such additional documents as may be
necessary to transfer the rights and interests herein sold,
assigned and purchased on the records of any purchaser of
hydrocarbons produced from or allocable to the Assets.
1.2 Exclusions and Reservations. Specifically excepted and reserved from
this transaction are the following, hereinafter referred to as the
"Excluded Assets":
(a) Seller's reserve estimates, economic analyses, pricing forecasts,
legal files or opinions (except abstracts of title, title
opinions, certificateso of title, or title curative documents as
provided in Section 1.1.1 (f) above), attorney-client
communications or attorney work product, and records and
documents subject to confidentiality provisions, claims of
privilege or other restrictions on access.
(b) All corporate, financial, and tax records of Seller that relate
to Seller's business generally (including operation of the
Assets); however, Seller shall furnish Buyer with copies of any
financial and tax records which directly relate to the Assets and
which are necessary for Buyer's ownership, administration, or
operation of the Assets upon receipt of a written request from
Buyer indicating its desire to obtain copies, and the purpose for
same.
(c) All oil, gas and other liquid or gaseous hydrocarbons produced
from or attributable to Seller's interest in the Assets with
respect to all periods prior to the Effective Date, together with
all proceeds from the sale of such hydrocarbons.
(d) Claims of Seller for refund of or loss carry forwards with
respect to (i) production, windfall profit, severance, ad valorem
or any other taxes attributable to the Assets for any period
prior to the Effective Date, (ii) income or franchise taxes.
(e) All amounts due or payable to Seller as adjustments or refunds
under any contracts or agreements affecting the Assets, with
respect to periods prior to the Effective Date, specifically
including, without limitation, amounts recoverable from audits
under operating agreements and any overpayments of royalties.
(f) Suject to the terms hereof, all monies, proceeds, benefits,
receipts, credits, income or revenues (and any security or other
deposits made) attributable to the Assets or the operation
thereof prior to the Effective Date.
(g) All of Seller's patents, trade secrets, copyrights, names, marks
and logos.
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(h) Seller's master service agreements and charter party agreements,
storage or warehouse agreements, supplier contracts, service
contracts, insurance contracts, and construction agreements.
(i) All documents prepared or received by Seller or its Affiliates
with respect to (i) lists of prospective purchasers for the
Assets, (ii) bids submitted by other prospective purchasers of
the Assets, (iii) analyses by Seller or its Affiliates of any
bids submitted by any prospective purchaser, (iv) correspondence
between or among Seller, its representatives and any prospective
purchaser, and (v) correspondence between Seller or any of its
representatives with respect to any of the bids, the prospective
purchasers or the transactions contemplated by this Agreement.
(j) Any Contracts that constitute master services agreements or
similar contracts.
1.3 Conveyancing Instruments. The Assets to be conveyed by Seller to Buyer
pursuant to Section 1.1.1 shall be conveyed "AS IS, WHERE IS" with the
express conditions and limitations contained in this Agreement. The
Assets to be transferred to Buyer pursuant to Section 1.1.1 shall be
transferred pursuant to an Assignment and Bill of Sale in
substantially the form of Exhibit B (the "Assignment") which shall
contain a special warranty of title for claims by, through or under
Seller, together with full rights of subrogation in and to all prior
warranties.
1.4 Election to Effect IRC ss.1031 Exchange. In the event either Buyer or
Seller so elect, each party agrees to accommodate the other in
effecting a tax-deferred exchange under Internal Revenue Code ss.1031,
as amended. Either party shall have the right to elect this
tax-deferred exchange at any time prior to the date of Closing. If a
party elects to effect a tax deferred exchange, the other party agrees
to execute additional escrow instructions, documents, agreements, or
instruments to effect the exchange, provided that such non electing
party shall incur no additional costs, expenses, fees, obligations or
liabilities as a result of or connected with the exchange.
2. PURCHASE PRICE AND EFFECTIVE DATE
2.1 Purchase Price. As consideration for the sale of the Assets, Buyer
shall pay to Seller or its respective designee, FOUR HUNDRED THOUSAND
and No/100 Dollars ($400,000.00) and issue each Buyer warrants, as set
forth below (the "Purchase Price"). The Purchase Price as adjusted in
accordance with Section 2.3 shall be referred to as the "Adjusted
Purchase Price" and shall be paid by Buyer by completed wire transfer,
in immediately available funds, and delivery of the Warrants.
The purchase price shall be paid to Sellers as follows:
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(a) $150,000.00 paid as follows, $20,000.00 heretofore paid the
receipt of which is hereby acknowledged, $130,000.00 payable on
execution of this Agreement. Section 9.3 notwithstanding, in the
event that a title problem is discovered that would have a
material adverse effect on the Assets that cannot be cured or if
a major environmental or regulatory problem is discovered this
agreement may be terminated and Seller shall refund the
$130,000.00 payment to Purchaser. The Sellers shall retain
$20,000 as a non-refundable deposit.
(b) $250,000.00 payable at Closing as provided by Section 9.2 hereof.
(c) 400,000 warrants to be issued to Sellers at Closing granting
Sellers the right to purchase 400,000 shares of common stock of
Terex Energy Corporation (the "Warrant Shares") at an exercise
price equal to $1.00 per share (the "Exercise Price"). The
warrants shall be in substantially the form attached hereto as
Exhibit C (the "Warrants"). Buyer and Seller agree that the
Exercise Price is equal to the fair market value of the Warrant
Sharers as of the Closing Date.
2.2 Allocation of Purchase Price. The Purchase Price shall be allocated
for consent, defect and casualty loss adjustments as set forth in
Schedule 2.2. Additionally, the Purchase Price shall be allocated
among tangibles and intangibles comprising the Assets as follows: [ ]
Percent (__%) of the Purchase Price shall be attributed to the Leases
and associated agreements and [_] Percent (__%) of the Purchase Price
shall be attributed to the wells and Facilities. Buyer and Seller
agree to be bound by the allocation of the Purchase Price among
tangible and intangible Assets set forth herein for all tax purposes;
to consistently report such allocations for all federal, state and
local income tax purposes; and to timely file all reports required by
the Internal Revenue Code of 1986, as amended, concerning the Purchase
Price allocations.
2.3 Adjustments to Purchase Price. The Purchase Price shall be adjusted in
accordance with this Section 2.3.
2.3.1 The Purchase Price shall be increased by the following
amounts (without duplication):
2.3.1.1 The amount of all expenses relating to the Assets
incurred by Seller and attributable to the period
after the Effective Date, including (a) all
operating expenditures, (b) all capital
expenditures, royalty disbursements, and severance
and production tax payments, (c) all prepaid
expenses paid by Seller and attributable to the
period after the Effective Date (other than delay
rentals due prior to the Effective Date), and (d)
all other expenses under applicable operating
agreements, participation,
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production handling, production processing,
exploration and development agreements and other
similar types of agreements which cover or relate
to any of the Assets between Seller and Buyer or
any other unaffiliated third party (to the extent
not reimbursed by other parties and to the extent
not related solely to the negotiations and
consummation of this Agreement);
2.3.1.2 An amount equal to the market value of all
hydrocarbons in storage above the pipeline
connection on the Effective Date that are produced
from, attributable to, or otherwise credited to
the Assets;
2.3.1.3 The amount of any property or ad valorem taxes
assessed against or related to the Assets that
were paid by Seller prior to the Effective Date
but prorated to Buyer in accordance with Section
5;
2.3.1.4 Under-delivered Hydrocarbon Imbalances; and
2.3.1.5 Any other amount agreed upon by Seller and Buyer.
2.3.2 The Purchase Price shall be decreased by the following
amounts:
2.3.2.1 An amount equal to the gross proceeds received by
Seller from the sale of Hydrocarbons produced
from, attributable to, or otherwise credited to
the Assets after the Effective Date;
2.3.2.2 The amount of any property or ad valorem taxes
assessed against or related to the Assets that
will be paid by Buyer after the Effective Date but
prorated to Seller in accordance with Section 5;
2.3.2.3 Reductions due to Defects as provided for in
Section 7.4;
2.3.2.4 Reductions due to Casualty Loss as provided in
Section 11.1;
2.3.2.5 Any unpaid joint interest billings relating to the
Assets and attributable to the period of time
prior to the Effective Date;
2.3.2.6 Over-delivered Hydrocarbon Imbalances; and
2.3.2.7 Any other amount agreed upon by Seller and Buyer.
2.4 Closing Statement. Seller shall prepare and deliver to Buyer an
accounting statement to be executed at Closing (the "Closing
Statement") no later than two (2) business days prior to Closing that
shall set forth the adjustments to the Purchase Price made in
accordance with this Agreement (with the exception of those provided
for under 2.3.1.3 and 2.3.2.3 above), it being understood and agreed
that the Closing Statement shall contain reasonable estimates where
actual amounts are
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not known at the Closing and that as actual costs and revenues are
known, these amounts will be taken into account in the Final
Accounting Statement provided for in Section 9.5. The Closing
Statement shall be prepared in accordance with generally accepted
accounting principles used in the oil and gas industry.
2.5 Effective Date of Sale. The effective date of the sale of the Assets
described in Section 1.1, hereof, shall be September 30, 2014, as of
7:00 a.m., Mountain Time Zone (the "Effective Date").
3. ALLOCATION OF REVENUES.
3.1 Allocation of Revenues. Seller shall receive (or receive credit in the
Closing Statement or the Final Accounting Statement, as applicable,
for) all proceeds from the sale of hydrocarbons physically produced
from or allocable to the Assets prior to the Effective Date, and shall
also receive (or receive credit in the Closing Statement or the Final
Accounting Statement, as applicable, for) all other revenues and
benefits attributable to the Assets accruing or relating to any period
prior to the Effective Date. Buyer shall receive all proceeds (or
receive credit in the Closing Statement or the Final Accounting
Statement, as applicable, for) from the sale of Hydrocarbons
physically produced from or allocable to the Assets on or after the
Effective Date, and shall also receive (or receive credit in the
Closing Statement or the Final Accounting Statement, as applicable,
for) the proceeds of all other revenues and benefits attributable to
the Assets accruing or relating to any period after the Effective
Date.
3.2 Payment of Invoices. After the Closing, Seller shall be required to
pay only that portion of any invoice received that is applicable to
work performed or materials received or production handled prior to
the Effective Date; other charges and invoices shall be returned to
the vendor for rebilling to Buyer. Similarly, after the Closing, Buyer
shall pay only that portion of any invoice received that is applicable
to work performed or materials received or production handled on or
subsequent to the Effective Date; other charges and invoices shall be
returned to the vendor for rebilling to Seller.
4. ASSUMPTION OF LIABILITIES AND INDEMNIFICATION.
4.1 Abandonment Obligations. Buyer assumes and shall timely and fully
satisfy Seller's share of the Abandorunent Obligations (as defined
below) associated with the Assets. As used herein, the term
"Abandonment Obligations" shall mean and include those obligations,
defined by regulation as of the Effective Date, associated with and
liability for (i) the plugging and abandonment of the Wells, (ii) the
removal of pipelines used in connection with the Wells, and (iii) the
clearance, restoration and remediation of the surface and cleanup and
complete reclamation of the Leases associated with the Wells.
4.2 Contract Obligations. In its elections and for the operations of the
Assets, all on or after the Effective Date, Buyer shall observe and
comply with all covenants, terms, and provisions, express or implied,
contained in the Assumed Contracts and Buyer
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shall assume and be responsible for those express obligations of
Seller accruing under such Assumed Contracts on or after the Effective
Date. If any agreement or contract which is not an Assumed Contract
and which materially affects the value of the Assets is discovered by
Buyer or brought to Buyer 's attention by a third party after Closing,
Seller and Buyer shall negotiate to resolve the assignment of rights
and the assumption of obligations under such agreement or contract.
4.3 Buyer's General Indemnification . Buyer shall indemnify, defend and
hold Seller, its directors, officers, employees, agents, consultants
and representatives and affiliated or parent companies and their
directors, officers, employees, agents, consultants and
representatives (which additional parties are hereinafter collectively
referred to as the "Seller's Parties") harmless from any and all
Claims (as hereinafter defined) arising out of, related to or
connected with, directly or indirectly, Buyer's ownership or operation
of the Assets or any part thereof on or after the Effective Date (no
matter when asserted), or arising out of any of the obligations or
liabilities assumed by Buyer hereunder, including Claims relating to:
a. injury or death of any person whomsoever ;
b. damages to or loss of any property or resources;
c. breach of contract;
d. common law causes of action such as negligence, strict liability,
nuisance or trespass; or
e. fault imposed by law or otherwise.
This indemnity and defense obligations applies regardless of cause or
of any negligent acts or omissions of Seller or Seller's Parties
(including sole negligence, concurrent negligence or strict liability
of Seller or Seller's Parties).
As used in any provision of this Agreement, "Claims" shall mean all
liabilities, losses, costs, damages, fees and expenses (including,
without limitation, expenses associated with investigation of claims,
testing, assessment and remedial actions), penalties, fines,
obligations, judgments, costs of investigation, attorney's fees,
expert's fees and disbursements of any kind or of any nature
whatsoever, claims, actions, causes of action, demands, filings,
investigations, and all costs of any administrative proceedings,
arbitrations, settlements, mediations, suits or other legal
proceedings.
4.4 Seller's General Indemnification. Seller shall indemnify, defend and
hold Buyer, its directors, officers, employees, agents and
representatives and affiliated or parent companies (which additional
parties are hereinafter collectively referred to as the "Buyer's
Parties") harmless from any and all Claims arising out of, related to,
or connected with Seller's breach of any of its representations,
warranties, covenants or agreements contained in this Agreement.
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4.5 Assumption and Indemnification of Environmental Risk and Environmental
Liabilities by Buyer. At Closing, Buyer shall assume full
responsibility for, and shall comply with and perform all
environmentally-related duties and obligations with respect to the
Assets for all priods of time, after the Effective Date and shall
indemnify, defend and hold harmless Seller and the Seller's Parties
from and against any and all Claims under any Environmental Law
(hereafter defined) with respect to the Assets for such time period.
The term "Environmental Law" means all applicable federal, state and
local laws in effect as of the Closing Date, including common law,
relating to the protection of the public health, welfare and
environment, including, without limitation, those laws relating to the
generation, storage, handling, use, processing, treatment,
transportation, disposal or other management of any pollutant s,
contaminants, toxins, or extremely hazardous substances, materials,
wastes constituents, compounds or chemicals that are regulated by, or
may form the basis of any liability, and such meaning does not include
good or desirable operating practices or standards that may be
employed or adopted by other oil and gas well operators or recommended
by any governmental authority.
4.6 Notice of Claims. Ifa Claim is asserted against a party to this
Agreement for which the other party may have an obligation of
indemnity and defense (whether under this Article 4 or any other
provision of this Agreement), the party seeking indemnification
("Indemnified Party") shall give the party from which the Indemnified
Party seeks indemnification ("Indemnifying Party") prompt written
notice of the Claim, setting forth the particulars associated with the
Claim (including a copy of the written Claim, if any) as then known by
the Indemnified Party ("Claim Notice").
4.7 Defense of Claims. Within thirty (30) Days after the Indemnifying
Party receives a Claim Notice, the Indemnifying Party shall notify the
Indemnified Party whether or not the Indemnifying Party will assume
responsibility for defense and payment of the Claim. Ifthe
Indemnifying Party elects not to assume responsibility for defense and
payment of the Claim, the Indemnified Party may defend against, or
enter into any settlement with respect to, the Claim as it deems
appropriate without relieving the Indemnifying Party of any
indemnification obligations the Indemnifying Party may have with
respect to such Claim. The Indemnifying Party's failure to respond in
writing to the Claim Notice within the thirty (30) Day period shall be
deemed an election by the Indemnifying Party not to assume
responsibility for defense and payment of the Claim. Ifthe
Indemnifying Party elects to assume responsibility for defense and
payment of the Claim: (a) the Indemnifying Party shall defend the
Indemnified Party against the Claim with counsel of the Indemnifying
Party's choice (reasonably acceptable to Indemnified Party which shall
cooperate with the Indemnifying Party in all reasonable respects in
such defense), (b) the Indemnifying Party shall pay any judgment
entered or settlement with respect to such Claim, (c) the Indemnifying
Party shall not consent to entry of any judgment or enter into any
settlement with respect to the Claim that does not include a provision
whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all liability with respect to the Claim, and
(d) the Indemnified Party shall not consent to entry
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of any judgment or enter into any settlement with respect to the Claim
without the Indemnifying Party 's prior written consent. In all
instances the Indemnified Party may employ separate counsel and
participate in the defense of a Claim, but the Indemnified Party shall
bear all fees and expenses of counsel employed by the Indemnified
Party.
5. TAXES
5.1 Allocation and Payment of Taxes. All property and ad valorem taxes and
charges imposed on any of the Assets for a taxable period that
includes the Effective Date shall be prorated among Buyer and Seller
based on the number of days that each party owns such 'Assets during
such taxable period; and each party shall be responsible for its
prorated share of such taxes. Seller shall be responsible for all oil
and gas production taxes, severance taxes, windfall profits taxes, and
any other similar taxes applicable to Hydrocarbons produced or drained
from or attributable to the Leases or the Units prior to the Effective
Date, and Buyer shall be responsible for all such taxes applicable to
Hydrocarbons produced or drained from or attributable to the Leases or
the Units on and after the Effective Date. Both of the parties believe
that the sale of the Assets is one occasional sale exempt from sales
or use taxes. In the event that any such taxes would be assessed
against the transaction, both parties will cooperate in an attempt to
eliminate or reduce such taxes.
6. REPRESENTATIONS AND WARRANTIES
6.1 Seller's Representations and Warranties . Each Seller, individually
and not jointly or severally, represents and warrants to Buyer that,
through and as of Closing, the following statements are accurate
6.1.1 Formation. Seller Hot Springs Resources, LTD is a
corporation duly organized and validly existing, and in good
standing under the laws of the State of Wyoming, and
Merschat Minerals LLC is a Wyoming Limited Liability
corporation duly organized and validly existing, and each
Seller is in good standing under the laws of the State of
Wyoming and in each jurisdiction in which it conducts
business. Seller has the necessary power and authority to
own the Assets and to carry on its business as now conducted
and to enter into and to carry out the terms of this
Agreement.
6.1.2 Authorization. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary approval action
on behalf of Seller and Seller is not subject to any
charter, by-law, lien, or encumbrance of any kind,
agreement, instrument, order, or decree of any court or
governmental body (other than any governmental approval
required) which would prevent consummation of the
transactions contemplated by this Agreement.
6.1.3 No Brokers. Seller is not a party to, or in any way
obligated under any contract or outstanding claim for the
payment of any broker's or finder's
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fee in connection with the origin, negotiation , execution,
or performance of this Agreement for which Buyer will have
any liability.
6.1.4 Information. All material contracts and information
affecting the Assets are contained in Seller's records made
available for Buyer's due diligence review and the
information reported therein is correct to the best of
Seller's knowledge, in all material respects, as of the date
of such delivery, except that no representation or warranty
is made as to interpretive data included therein or to
reserve reports. From the date of this Agreement until
Closing, should Seller become aware of any material change
or adverse effect upon the material contracts of Seller,
Seller shall promptly notify Buyer of such change or effect.
6.1.5 Contracts. Every material contract affecting the Assets is
listed on Exhibit A as an Assumed Contract and each material
Assumed Contract is in full force and effect and Seller has
not received any notice of default or violation of any
Assumed Contract to which Seller is a party or any
obligation to which Seller is bound materially affecting the
Assets.
6.1.6 Leases. All royalties, overriding royalties, and other
payments applicable to Seller's interest due under the
Leases have been properly and timely paid in all material
respects, and all conditions necessary to maintain the
Leases in force and effect have been fully performed in all
material respects to the best of Seller's knowledge.
6.1.7 Imbalances. No Hydrocarbons produced from the Leases are
subject to an imbalance.
6.1.8 Marketing. The Assets are not subject to any contractual or
other arrangement for the sale, dedication, processing,
handling, gathering, production handling or transportation
of production, or otherwise relating to the marketing of
production, other than those listed on Exhibit A.
6.1.9 Operations Matters. Seller has no joint , unit or other
operating agreements relating to the Assets.
6.1.10 Litigation. Except as disclosed on Schedule 6.1.10 attached
hereto, there is no suit, action, claim, investigation or
inquiry pending or, to the best of Seller's knowledge,
threatened, arising out of or with respect to the ownership,
operation or environmental condition of the Assets.
6.1.11 Title. Except as disclosed on Schedule 6.1.11, Seller has
not previously sold, assigned, transferred, conveyed,
farmed-out, mortgaged, pledged , granted a security interest
in, or otherwise alienated or encumbered or created a
reversionary interest in all or any portion of the Assets.
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6.1.12 Encumbrances. The Assets will be transferred and assigned
free and unencumbered from any mortgage, lien, financing
arrangement, UCC filing, litigation or demand
("Encumbrances").\
6.1.13 DISCLAIMER OF WARRANTY BY SELLER. EXCEPT AS EXPRESSLY
PROVIDED IN THIS AGREEMENT, SELLER MAKES THIS SALE OF THE
ASSETS TO BUYER WITHOUT ANY WARRANTY AS TO THE CONDITION OF
THE ASSETS, INCLUDING ABSENCE OF VICES OR DEFECTS (WHETHER
APPARENT OR LATENT, KNOWN OR UNKNOWN, EASILY DISCOVERABLE OR
HIDDEN), FITNESS FOR ANY ORDINARY USE, OR FITNESS FOR ANY
INTENDED USE OR PARTICULAR PURPOSE, EVEN FOR RETURN OR
REDUCTION OF THE PURCHASE PRICE OR OTHERWISE, IT BEING
UNDERSTOOD THAT BUYER TAKES THE ASSETS "AS IS" AND "WHERE
IS". IN ADDITION, EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, BUYER ACKNOWLEDGES THAT SELLER HAS MADE NO
REPRESENTATIONS OR WARRANTIES OF ANY KIND OR CHARACTER,
EXPRESS OR IMPLIED, WITH RESPECT TO THE CONDITION OF THE
ASSETS, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES OR
REPRESENTATIONS AS TO ABSENCE OF VICES OR DEFECTS (WHETHER
APPARENT OR LATENT, KNOWN OR UNKNOWN, EASILY DISCOVERABLE OR
HIDDEN), FITNESS FOR ANY ORDINARY USE, FITNESS FOR ANY
INTENDED USE OR PARTICULAR PURPOSE, TAX CONSEQUENCES,
ENVIRONMENTAL CONDITION. IN ADDITION, EXCEPT AS EXPRESSLY
PROVIDED INTHIS AGREEMENT, SELLER MAKES NO REPRESENTATION OR
WARRANTY, EXPRESS, IMPLIED, STATUTORY 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 BUYER IN CONNECTION
WITH THIS SALE, INCLUDING WITHOUT LIMITATION,THE QUALITY,
QUANTITY OR ENVIRONMENTAL CONDITION OF THE ASSETS OR ANY
OTHER MATTERS CONTAINED IN THE DATA OR ANY OTHER MATERIALS
FURNISHED OR MADE AVAILABLE TO BUYER BY SELLER,ITS AGENTS,
REPRESENTATIVES OR EMPLOYEES. ANY AND ALL SUCH DATA,
RECORDS, REPORTS, PROJECTIONS, INFORMATOTHERMATERIALS
FURNISHED BY SELLER OR OTHERWISE MADE AVAILABLE TO BUYER ARE
PROVIDED TO BUYER AS A CONVENIENCE,AND EXCEPT AS EXPRESSLY
PROVIDED IN THIS AGREEMENT, SHALL NOT CREATE OR GIVE RISE TO
ANY LIABILITY OF OR AGAINST SELLER.
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6.2 Buyer's Representations and Warranties . Buyer represents and warrants
to Seller that through and as of Closing, the following statements are
accurate:
6.2.l Formation. Buyer is a corporation duly organized and validly
existing, in good standing, under the laws of Colorado and
is or will be prior to Closing, duly qualified to carry on
its business in each of the states in which it is required
to be qualified and has the corporate power and authority to
own its property and to carry on its business as now
conducted and to enter into and to carry out the terms of
this Agreement and the transactions contemplated by this
Agreement.
6.2.2 Qualification. Buyer is qualified to own and operate leases
in accordance with applicable laws, rules, regulations and
orders governing the ownership and operation of leases in
the State of Wyoming.
6.2.3 Authorization. The execution, delivery or performance by
Buyer of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized
by all necessary corporate action on behalf of Buyer and
Buyer is not subject to any charter, by-law, lien or
encumbrance of any kind, agreement, instrument, order or
decree of any court or governmental body which would prevent
consummation of the actions contemplated by this Agreement.
6.2.4 Capitalization. The entire authorized capital stock of Buyer
consists of 100,000,000 shares of common stock and
25,000,000 shares of preferred stock. Exhibit [_] sets forth
the issued and outstanding capital of the Buyer, including
all outstanding or authorized options, warrants, convertible
securities or other rights, agreements, arrangements or
commitments of any character relating to the capital stock
of the Buyer or obligating Buyer to issue or sell any shares
of capital stock of, or any other interest in, the Company,
and were issued in compliance with applicable laws. Buyer
has not granted any preemptive or similar rights to any
person.
6.2.5 Warrant Shares. Warrant Shares issued by Buyer, upon the
exercise of the Warrants, will, upon payment of the exercise
price or upon net exercise, be validly issued, fully paid
and non-assessable common stock of Buyer free from all
taxes, liens and charges with respect to the issue thereof.
6.2.6 Assets. Buyer has good and marketable title to, or, in the
case of property held under a lease, a valid leasehold
interest in, or valid right to use, all of its properties,
rights and assets, whether real or personal and whether
tangible or intangible, used by Buyer in connection with the
operation of its business.
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6.2.7 Compliance with Laws; Permits. Seller has complied, and is
now complying, with any statute, law, ordinance, regulation,
rule, code, order, constitution, treaty, common law,
judgment, decree, other requirement or rule of law of any
governmental authority applicable to it or its business,
properties or assets. All permits required for the Seller to
conduct its business have been obtained by it and are valid
and in full force and effect. All fees and charges with
respect to such permits as of the date hereof have been paid
in full.
6.2.8 No Brokers. Buyer is not a party to, or in any way obligated
under, nor does Buyer have any knowledge of, any contract or
outstanding claim for the payment of any broker's or
finder's fee in connection with the origin, negotiation,
execution, or performance of this Agreement for which Seller
will have any liability.
7. DUE DILIGENCE REVIEW.
7.1 Review By Buyer. Buyer shall have reasonable access to Seller's
records pertaining to the Assets and may conduct, at its sole cost,
such title examination or investigation, and other examinations and
investigations, as it may in its sole discretion choose to conduct
with respect to the Assets in order to determine whether Defects (as
below defined) exist. Should, as a result of such examinations and
investigations, or otherwise, one or more matters come to Buyer's
attention which would constitute a Defect, Buyer shall promptly, but
no later than seven (7) days prior to Closing, notify Seller in
writing (a "Notice") of any Defects.
7.2 Nature of Defects. The term "Defect" as used in this Section 7 shall
mean the following; provided, however, that Permitted Encumbrances (as
hereinafter defined) shall not constitute Defects:
(i) NRI or WI Variances. Seller's ownership of the Assets is such
that, with respect to a Well or any of the Leases listed on
Exhibit A hereto, it (A) entitles Seller to receive a decimal
share of the oil, gas and other hydrocarbons from all depths (or
if depth limitations are noted on Exhibit A, from the depths
specified), as shown on Exhibit A, which is less than the decimal
share set forth on Exhibit A in connection with any such Wells or
lease in the column headed "Net Revenue Interest" or (B) causes
Seller to be obligated to bear a decimal share of the cost of
operation of any such Wells or Lease greater than the decimal
share set forth on Exhibit A in connection with any such Wells or
lease in the column headed "Working Interest".
(ii) Liens. Seller's ownership of an Asset is subject to a lien other
than (A) a lien for truces which are not yet delinquent or (B) a
mechanic's or materialmen 's lien (or other similar lien), or a
lien under an operating agreement or similar agreement, to the
extent the same relates to expenses incurred which are not yet
delinquent or (C) liens which will be released at or before
Closing.
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(iii)Imperfections in Title. Seller's ownership of an Asset is
subject to an imperfection in title which, if asserted, would
cause a Defect, as defined in subparagraph (i) above.
7.3 Permitted Encumbrances. As used in this Section 7, the term "Permitted
Encumbrance" means:
(a) lessor's royalties, non-participating royalties, overriding
royalties, and division orders and the terms, conditions and
restrictions of any Lease or Assumed Contract covering the
Hydrocarbons, and similar burdens if the net cumulative
effect of such burdens does not operate to reduce the net
revenue interest in any Asset to an amount less than the net
revenue interest set forth on Exhibit A or increase the
working interest of any of the Assets from that set forth in
Exhibit A without a corresponding increase in the revenue
interest;
(b) subject to the provisions of Section 9.2 hereof, required
non-governmental third party consents to assignments and
similar agreements with respect to which prior to Closing
(i) waivers or consents are obtained from the appropriate
parties, or (ii) the appropriate time period for asserting
such rights has expired without an exercise of such rights;
(c) liens for taxes or assessments not yet due or delinquent;
(d) all rights to consent by, required notices to, filings with,
or other actions by governmental entities in connection with
the sale or conveyance of oil and gas leases or interests
therein, if the same are customarily obtained subsequent to
such sale or conveyance and Buyer and Seller have no reason
to believe they cannot be obtained;
(e) easements, rights-of way, rights of use, servitudes,
permits, surface leases and other rights in respect of
surface operations, provided they do not materially
interfere with the operation or use of the Assets; and
(f) defects, irregularities and deficiencies in title of or to
any rights-of-way, rights of use, easements, surface leases
or other rights which in the aggregate do not materially
impair the use of such rights-of-way, rights of use,
easements, surface leases or other rights for the purpose of
which such rights will be held by Buyer and would not have a
material adverse effect on the operation or value of any of
the Assets.
(g) any lien, privilege or encumbrance covering the Assets to be
released at or prior to Closing, which Seller has disclosed
on Schedule 7.3.
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7.4 Seller's Response to Notices; Failure to Respond. Seller shall have
seven (7) days from receipt of a Notice to respond to any Notice
timely delivered by Buyer pursuant to this Section 7. Such response
must be in writing to be effective and may include an objection to the
existence or amount of any claimed Defect or adjustment, or an
election to cure any claimed Defect. Failure to so respond by Seller
shall constitute a waiver of any rights to cure or object to Defects
timely asserted by Buyer prior to the Notice Deadline. If Seller
waives prior to Closing any rights to cure or object to a Defect, the
Purchase Price shall be adjusted by the amount of such Defect claimed
by Buyer in its Notice. The Purchase Price shall not be adjusted
unless the total adjustment is greater than $20,000 and then only to
the extent of the excess over $20,000.
7.5 Election to Cure. Whether Seller elects to cure or objects to an
asserted Defect, the Closing shall proceed if otherwise permitted by
this Agreement and the Purchase Price shall be reduced by the amount
of such asserted Defect. If Seller elects to cure (in its response or
after arbitration) an asserted Defect, Seller shall then have until
the Closing, or, if Seller disputes the asserted Defect and
arbitration of such dispute occurs, 60 days after the arbitration
proceedings set forth below are completed, to cure the underlying
asserted Defect at its sole cost, risk and expense. The deadline to
cure any underlying defect shall be extended for up to (30] days as
long as Seller works diligently toward such cure. Upon completing the
cure for any such Defect, Seller shall be entitled to payment in
immediately available funds within ten business days of the date
Seller demonstrates to Buyer's reasonable satisfaction that such
asserted Defect has been cured.
7.6 Arbitration. If Seller and Buyer cannot agree on whether an asserted
Defect exists, or (before or after the Closing) whether an asserted
Defect has been cured, or the amount of reduction in the Purchase
Price for any Defect, then such issue shall be finally settled by
binding arbitration and either party may initiate such arbitration by
giving notice to the other party. The place of arbitration is Denver,
Colorado.
7.7 Arbitration Provisions. The following provisions shall apply to any
arbitration proceedings commenced pursuant to Section 7.6:
(a) There will be one arbitrator who shall be a Wyoming licensed
title attorney with 10 years' applicable industry experience,
mutually acceptable to the parties. The arbitrator shall
establish the procedures related to the arbitration of the
dispute.
(b) The arbitrator must remain neutral, impartial and independent
regarding the Dispute and the parties. The arbitrator must be a
lawyer experienced in the resolution of disputes with experience
relating to the issues in Dispute.
(c) The arbitrator must remain neutral, impartial and independent
regarding the Dispute and the parties.
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(d) The parties waive any Claim for, and the arbitrator has no power
to award, the damages waived and released under Section 11.17.
The arbitrator has no authority to appoint or retain expert
witnesses for any purpose unless agreed to by the parties. The
arbitrator has the power to rule on objections concerning
jurisdiction, including the existence or validity of this
arbitration clause and existence or the validity of this
Agreement.
(e) All arbitration fees and costs (with the exception of translation
costs as specified above) shall be by the losing party. Each
party shall bear its own costs of legal representation and
witness expenses.
(f) The arbitrator is authorized to take any interim measures as the
arbitrator considers or arbitrators consider necessary, including
the making of interim orders or awards or partial final awards.
An interim order or award may be enforced in the same manner as a
final award using the procedures specified below. Further, the
arbitrator is authorized to make pre- or post-award interest at
applicable statutory interest rates during the relevant period.
(g) The Dispute should be resolved as quickly as possible. The
arbitrator's award must be issued within thirty days from the
completion of the hearing, or as soon as possible thereafter.
7.8 Enforceability.
(a) The parties waive irrevocably their right to any form of appeal,
review or recourse to any court or other judicial authority, to
the extent that such waiver may be validly made.
(b) Except for proceedings to preserve property pending determination
by the arbitrator or arbitrators or to enforce an award, the
mandatory exclusive venue for any judicial proceeding permitted
in this Agreement is the court of competent jurisdiction in
Houston, Texas. The parties consent to the jurisdiction of these
courts and waive any defenses they have regarding jurisdiction.
Proceedings to confirm an award may be filed as provided in this
Section 7.8(b) at any time within one year after the award is
made.
Proceedings to enforce judgment entered on an award may be brought in
any court having jurisdiction over the person or assets of the
non-prevailing party. The prevailing party may seek, in any court
having jurisdiction , judicial recognition of the award, or order of
enforcement or any other order or decree that is necessary to give
full effect to the award.
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7.9 Postponement of Closing; Payment. If the aggregate Purchase Price
reduction claimed by Buyer exceeds 10% of the Purchase Price and
neither party has terminated this Agreement pursuant to Section 9.3,
then the Closing will be postponed until the completion of the
arbitration. If the Seller prevails in such arbitration, Buyer shall
pay to Seller in immediately available funds within ten business days
from the date of the arbitration panel's decision the amount
determined by such panel to be owed Seller.
8. ADDITIONAL COVENANTS
8.1 Access to Records. Seller agrees that it will give Buyer, or Buyer's
authorized representatives, at Seller's office and at all reasonable
times before the Closing Date, access to Seller's records pertaining
to the Seller's ownership and the operation of the Assets (including,
without limitation, title files, division order files, directly
related financial and tax accounting records, well files, health,
safety and environmental records, lease files, abstracts, production
records, joint interest billing records, records relating to platform
and pipeline construction, operation and maintenance and production ,
severance and ad valorem tax records), for the purpose of conducting
due diligence reviews contemplated in Section 7. Buyer may make copies
of such records, at its expense, but shall, if Seller so requests,
return all copies so made if the Closing does not occur; all costs of
copying such items shall be borne by Buyer. Seller shall not be
obligated to provide Buyer with access to any records or data which
Seller cannot provide to Buyer without, in its opinion, breaching, or
risking a breach of, agreements with other parties, or waiving, or
risking waiving, legal privilege.
8.2 Interim Operation. Seller shall continue to operate the Assets through
and including the 61st day after the Effective Date unless Buyer
notifies Seller of its intention to take over operations prior to such
61st day. Seller covenants that for so long as it operates the Assets,
except as provided herein or otherwise consented to in writing by
Buyer, Seller will take all reasonable steps consistent with past
practice to maintain the Leases and Units in full force and effect, to
timely pay Seller expenses attributable to the operation of the Assets
and satisfy Seller royalty obligations attributable to the Leases and
Units and to maintain all Seller insurance coverage in place prior to
the Effective Date, all to the extent possible as a non- operator of
the Assets. Except as necessary in Seller's opinion in emergency
situations, Seller shall not, without Buyer's consent, voluntarily
incur any liability or enter into any commitment with respect to the
Assets which will cost in excess of $10,000 net to Buyer with respect
to an individual project; cancel any contract associated with the
Assets except in the ordinary course of business; or enter into any
hedging, forward sales or similar agreements with respect to
production from the Assets.
9. CLOSING, TERMINATION AND FINAL ADJUSTMENTS
9.1 Conditions Precedent. Each party's obligation to consummate the
transactions contemplated by this Agreement is subject to the
satisfaction or waiver by the other party of the following conditions:
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9.1.l Each party shall have performed and complied with all terms
of this Agreement required to be performed or complied with
by it at or prior to Closing.
9.1.2 No action or proceeding by or before any governmental
authority shall have been instituted or threatened (and not
subsequently dismissed, settled or otherwise terminated)
which might restrain, prohibit or invalidate any of the
transactions contemplated by this Agreement, other than an
action or proceeding instituted or threatened by a party or
any of its affiliates.
9.1.3 The representations and warranties contained in Section 6
shall be true and correct in all material respects on the
Closing Date as though made on and as of the Closing Date.
9.2 Closing.
9.2.l The Closing of the transactions contemplated herein and the
transfer of the Assets shall occur on or before October 31,
2014, at the offices of Noonan Land Services Casper,
Wyoming, at 10:00 a.m., Mountain Standard Time, or such
other date, time, and place as Seller and Buyer may agree in
writing (the "Closing").
9.2.2 At Closing, the following shall occur:
9.2.2.1 Buyer and Seller shall execute and acknowledge
Assignments in substantially the form of Exhibit
B, in form and substance sufficient to convey
title to the Assets in accordance with the terms
of this Agreement;
9.2.2.2 Buyer and Seller shall execute and acknowledge any
such other instruments as are reasonably necessary
to effectuate the conveyance of the Assets to
Buyer, including without limitation, separate
assignments of the Assets on officially approved
forms in sufficient counterparts to satisfy
applicable statutory and regulatory requirements
for the transfer of the Assets; and
9.2.2.3 At the Closing, upon and against delivery of the
documents and materials described in this Section,
Buyer shall pay to Seller the Adjusted Purchase
Price.
9.3 Termination. This Agreement and the transactions contemplated hereby
may be terminated in the following instances:
(a) By mutual consent of the parties;
(b) By either party, if the Closing shall not have occurred as
hereinabove provided, due to the failure of the other party to
meet a material condition to Closing;
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(c) By either party, if the aggregate value of all uncured Defects,
subject to Seller's representations made at Section 7.2, which
have been excluded from this sale pursuant to Section 7.3 [NTD:
CONFIRM CORRECT SECTION REFERENCE] exceeds ten percent (10%) of
the Purchase Price;
(d) By either party, if the aggregate of all Casualty Losses exceeds
ten percent (10%) of the Purchase Price.
9.4 Effect of Termination. If Buyer, through no fault of Seller, fails,
refuses, or is unable for any reason not permitted by this Agreement
to close the sale pursuant hereto, Seller may, at its option, assert
its right of specific performance or pursue any other rights or
remedies to which it may be entitled, at law or in equity. Likewise,
if Seller, through no fault of Buyer, fails, refuses, or is unable for
any reason not permitted by this Agreement to close the sale pursuant
hereto, Buyer may, at its option, assert its right of specific
performance or pursue any other rights or remedies to which it may be
entitled, at law or in equity.
9.5 Final Accounting Statement. Within ninety (90) days after the date of
Closing, Seller shall prepare a final accounting statement (the "Final
Accounting Statement") for the adjustments to the Purchase Price
provided for in Section 2.3 and any other adjustments arising pursuant
to this Agreement. Seller shall submit the Final Accounting Statement
to Buyer, along with copies of third-party vendor invoices in excess
of $2,500.00, or other evidence of expenses agreed to by Seller and
Buyer; and Buyer shall have ten (10) days to review same and confirm
the accuracy thereof. Upon agreement by Seller and Buyer as to the
accuracy of said Final Accounting Statement, or upon the expiration of
said ten (10) day period, whichever occurs first, Buyer or Seller,
whichever the case may be, shall promptly pay to the other such sum as
may be found due, after making adjustments for any payments made at
Closing in accordance with the Closing Statement.
If Seller and Buyer are unable to agree to all adjustments respecting
the Final Accounting Statement within ten (10) days after Buyer's
receipt of the Final Accounting Statement submitted by Seller,
adjustments which are not in dispute shall be made between Seller or
Buyer at the expiration of such 10-day period, and as to the
adjustments which remain in dispute, Seller and Buyer shall continue
to negotiate in good faith to reach a final agreement as to such
disputed adjustments. Provided, however, if Seller and Buyer are
unable to agree to such final adjustments within thirty (30) days
after Seller provides the Final Accounting Statement to Buyer, either
party may submit such disagreement to arbitration as provided in
Sections 7.6 and 7.7; provided that, in such instance, the arbitrator
shall be a regional independent accounting firm selected by mutual
agreement of the parties. The costs and expenses of the arbitration
shall be borne equally by the parties. Within five (5) days after the
decision of the arbitrator, the Seller or Buyer, as the case may be,
shall promptly make a cash payment to the other equal to the sum as
may be found to be due as the Final Accounting Statement.
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Nothing in this Section shall limit any right of either party to
assert a claim for revenues or reimbursement after the Final
Accounting Statement, and in this regard (i) should any party receive
revenues to which the other is entitled, such party shall pay over
such revenues to the appropriate party within 30 days of receipt
thereof, and (ii) should any party pay for costs or expenses for which
the other party is responsible, such party shall reimburse the other
party within 30 days of the date the responsible party receives an
invoice for such costs and expenses.
10. GOVERNING LAW AND VENUE
10.1 Governing Law. This Agreement is governed by and interpreted under the
laws of the State of Wyoming, without regard to its choice of law
rules.
10.2 Venue. The mandatory exclusive venue for any dispute between the
Parties is any state or federal court of competent jurisdiction in
Casper, Wyoming. Each Party consents to the exclusive jurisdiction of
these courts and waives any defenses it have regarding jurisdiction.
11. MISCELLANEOUS
11.l Casualty Loss of Assets. If prior to Closing, any of the Assets are
damaged or destroyed by fire or other casualty (a "Casualty Loss"),
Seller may repair the damage at its cost or, at its sole option,
either reduce the Purchase Price by a mutually agreed estimated cost
of the repair or replacement or withdraw the damaged Asset from the
sale and reduce the Purchase Price by the allocated value thereof. If
Buyer and Seller are unable to agree as to the amount of such price
reduction prior to Closing or if the amount of such price reduction
exceeds ten percent (10%) of the purchase Price, then either party may
elect to terminate this Agreement; provided that such terminating
party is not in default hereunder.
11.2 Books and Records. Seller shall, at the cost of Seller, deliver to
Buyer at Closing or within three (3) business days thereafter the
Records.
11.3 Publicity. Seller and Buyer shall consult with each other with regard
to all press releases or other public or private announcements made
concerning this Agreement or the transactions contemplated hereby, and
except as may be required by applicable laws or the applicable rules
and regulations of any governmental agency or stock exchange, neither
Buyer nor Seller shall issue any such press release or other publicity
without the prior written consent of the other party, which shall not
be unreasonably withheld. No press release shall ever include any
reserve estimates or the Purchase Price, unless agreed to in writing
by both parties.
11.4 Entire Agreement. This Agreement constitutes the entire agreement
between Seller and Buyer with respect to the transactions contemplated
herein, and supersedes all prior oral or written agreements,
commitments, understandings, or information otherwise furnished by
Seller to Buyer with respect to such matters. No amendment shall be
binding unless in writing and signed by both parties. Headings used in
this Agreement are only for convenience of reference and shall not be
used
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to define the meaning of any provision. This Agreement is for the
benefit of Seller and Buyer only and not for the benefit of third
parties except that this agreement may be assigned by Buyer to a
successor company.
11.5 Notices. All notices and consents to be given hereunder shall be in
writing and shall be deemed to have been duly given if delivered
either by personal delivery, telex, telecopy or similar facsimile
means, by certified or registered mail, return receipt requested, or
by courier or delivery service, addressed to the parties hereto at the
following addresses:
If to Seller:
Hot Springs Resources, LTD
142 N. Lincoln Street
Casper, WY 82601
Merschat Minerals LLC
PO Box 356
Casper, WY 82602
With copy to:
Dorsey & Whitney LLP
1400 Wewatta Street, Suite 400
Denver, CO 80202
Attention: Kenneth Sam, Esq. Email:
sam.kenneth@dorsey.com
If to Buyer:
Terex Energy Corporation 520
Zang Blvd.
Suite 250
Broomfield, CO 80021
or at such other address and number as either party shall have
previously designated by written notice given to the other party in
the manner herein above set forth. Notices shall be deemed given when
received, if sent by facsimile means (confirmation of such receipt by
confirmed facsimile transmission being deemed receipt of
communications); and when delivered and receipted for (or upon the
date of attempted delivery where delivery is refused), if
hand-delivered, sent by express courier or delivery service, or sent
by certified or registered mail, return receipt requested.
11.6 Governing Law. This Agreement shall be governed as prescribed under
Article 10.1. The validity of the conveyances affecting the title to
real property shall be governed by and construed in accordance with
the laws of the jurisdiction inwhich such property is situated. 22
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11.7 Confidentiality. Buyer acknowledges that all information furnished or
disclosed pursuant hereto by Seller but not already known to or in the
possession of Buyer must remain confidential prior to Closing. Buyer
may disclose such confidential information already known to or in the
possession of Buyer as permitted for that class of data or may
disclose Seller-provided confidential information or data only to its
subsidiaries or affiliates, agents, advisors, counsel or
representatives (herein "Representatives") who have agreed, prior to
being given access to such information, to be bound by the terms of
this Agreement as its bears upon confidential information and
requirements of confidentiality found herein. In the event that
Closing of the transactions contemplated by this Agreement does not
occur for any reason, Buyer and its Representatives shall promptly
return to Seller or destroy all non-proprietary or non-interpretive
materials and information delivered or disclosed by Seller, but
excluding any confidential information, notes, summaries,
compilations, analyses or other material derived from the inspection
or evaluation of material and information already known to or in the
possession of Buyer.
11.8 Conflict of Interest. Conflicts of interest related to this Agreement
are strictly prohibited. Except as otherwise expressly provided
herein, neither Seller nor any director, employee or agent of Seller
shall give to or receive from any director, employee or agent of Buyer
any gift, entertainment or other favor of significant value, or any
commission, fee or rebate. Likewise, neither Seller nor any director,
employee or agent of Seller shall enter into any business relationship
with any director, employee or agent of Buyer (or of any affiliate of
Buyer), unless such person is acting for and on behalf of Buyer,
without prior written notification thereof to Buyer. Each party shall
promptly notify the other party of any violation of this Section, and
any consideration received by a party as a result of such violation
shall be paid over or credited to the other party. Each party, or its
designated representative(s) , may audit any and all records of the
other party for the sole purpose of determining whether there has been
compliance with this Agreement.
11.9 Survival. Except as provided in this Section 11.9, the terms and
provisions of this Agreement shall survive the Closing and shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors, sublessees and assigns. Except for the special
warranty contained in the Assignments, the representations and
warranties of Seller contained herein shall survive Closing for one
(1) year.
11.10Further Cooperation. After the Closing, each party shall execute,
acknowledge, and deliver all documents, and take all such acts which
from time to time may be reasonably requested by the other party in
order to carry out the purposes and intent of this Agreement.
11.11Counterparts. This Agreement may be executed in one or more
counterparts with the same effect as if all signatures of the parties
hereto were on the same document, but in such event each counterpart
shall constitute an original, and all of such counterparts shall
constitute one Agreement; but in making proof of this
-23-
Agreement, it shall not be necessary to produce or account for more
than one such counterpart signed by each party.
11.12Exhibits. All of the Exhibits referred to in this Agreement are
hereby incorporated into this Agreement by reference and constitute a
part of this Agreement. Each party to this Agreement and its counsel
has received a complete set of Exhibits prior to and as a part of the
execution of this Agreement.
11.13Severability. If any term or provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law, all other
conditions and provisions of the Agreement shall nevertheless remain
in full force and effect so long as the economic or legal substance of
the transaction contemplated hereby is not affected in any materially
adverse manner to the other party.
11.14Expenses and Recording. Except as otherwise specifically provided,
all fees, costs and expenses incurred by Buyer or Seller in
negotiating this Agreement or in consummating the transactions
contemplated by this Agreement shall be paid by the party incurring
the same, including, without limitation, legal and accounting fees,
costs and expenses. Buyer shall be responsible for the filing and
recording of the Assignments and other instruments required to convey
title to the Assets to Buyer. Buyer shall bear all required
documentary, filing and recording fees and expenses incurred in
connection therewith.
11.15Nominations and Accounting Responsibilities. The parties hereto agree
that with Closing, Buyer will secure its own oil and gas marketing
arrangements for the Hydrocarbons and will perform the accounting
responsibilities and procedures, including payment of royalties, and
regulatory reporting on the Assets beginning with the first production
month that begins at least thirty (30) days after the Closing, subject
to current gas Sales Contracts and Crude sales Contracts.
11.16MUTUAL WAIVER OF CONSEQUENTIAL DAMAGES. NEITHER PARTY SHALL BE LIABLE
TO THE OTHER FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY,
SPECIAL OR INDIRECT DAMAGES, WHETHER ARISING IN TORT, CONTRACT, UNDER
ANY STATUTE, UNDER ANY INDEMNITY PROVISION OR OTHERWISE. THE PARTIES
INTEND THAT THE LIMITATIONS UNDER THIS SECTION 11.16 IMPOSED ON
REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR
CAUSES RELATED THERETO, INCLUDING, WITHOUT LIMITATION, THE NEGLIGENCE
OR STRICT LIABILITY OF ANY PARTY, WHETHER SUCH NEGLIGENCE BE SOLE,
JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE.
11.17NON-SOLICITATION OF EMPLOYEES. For a period of two (2) years after
the Closing, neither Party shall solicit or cause the solicitation of
any employee of the Party for the purposes of employment with such
Party.
IN WITNESS WHEREOF, the Parties hereto have caused their authorized
representatives to execute this Agreement effective on the date first above
written.
-24-
SELLER:
HOT SPRINGS RESOURCES LTD
By: /s/
--------------------------
Title: President
BUYER:
MERSCHAT MINERALS LLC TEREX ENERGY CORPORATION
/s/ /s/ Donald Walford
-------------------------- -------------------------
By: By:
Name: Name: Donald Walford
Title: Manager Title: CEO
-25-
EXHIBIT "A-1"
ATTACHED TO THE PURCHASE AND SALE AGREEMENT DATED SEPTEMBER 30, 2014,
BETWEEN HOT SPRINGS RESOURCES, LTD AND MERSCHAT MINERALS, LLC, AS
SELLERS AND TEREX ENERGY CORPORATION, AS BUYER
LEASES INSIDE BURKE RANCH UNIT
THE NET REVENUE INTERST (INSIDE BURKE RANCH UNIT) TO BE DELIVERED TO
TEREX ENERGY COPORATION SHALL BE 79.25%
FEDERAL LEASES
Lease Effective Lease Land Gross
Number Date Status Description Acres
------------- ---------- ------ ------------------------------------ ---------
WYW-002045 11/1/1950 HU T37N, R78W 80.00
Sec. 8: SWNW, SWSE
WYW-002046A 11/1/1950 HU T37N, R78W 80.00
Sec. 8: W/2SW
WYW-100546 11/1/1950 HU T37N, R78N 76.97
Sec. 7: Lot 3, NESW
WYC-0081317D 11/1/1950 HU T37N, R78W 273.59
Sec. 7: Lots 1, 2,E/2NW, W/2SE, NESE
WYC-0081317B 11/1/1950 HU T37N, R78W 277.08
Sec. 7: Lot 4, SESW
T37N, R79W
Sec. 12: E/2E/2, NWSE
WYW-002118C 12/1/1950 HU T37N, R78W 80.00
Sec. 17: N/2SW
WYC-0068674 3/1/1948 HU T37N, R78W 40.00
Sec. 17: NENE
WYW-0002046 11/1/1950 HU T37N, R78W 320.00
Sec. 7: NE
Sec. 8: E/2SW
Sec. 17: N/2NW
WYC-0082253A 11/1/1950 HU T37N, R78W 80.00
Sec. 18: SENE
T37N, R79W
Sec. 13: NWNE
WYC-0081316B 7/1/1950 HU T37N, R79W 40.00
Sec. 12: SWSE
WYW-0004997B 3/1/1951 HU T37N, R78W 40.00
Sec. 17: NWNE
WYVV-0002118 12/1/1950 HU T37N, R78W 80.00
Sec. 17: N/2SE
-----------
TOTAL ACRES 1,467.64
Page 1 of 2
FEE LEASES
INSIDE BURKE RANCH UNIT
Land Gross Effective
Lessor Description Acres Date
------------------------ --------------------------- ------- ------------
William J Burke, et ux T37N, R78W 80.00 3/25/1954
Sec. 7: SESE
Sec. 18: NENE
Teapot Sheep Company T37N, R78W 120.00 9/12/1950
Sec. 17: S/2NW, SWNE
Joseph M. Wimsatt T37N, R78W 197.22 2/18/1950
Sec. 18: Lot 1,NENW, W/2NE
T37N, R79W
Sec. 13: NENE
Teapot Sheep Company T37N, R78W 40.00 9/12/1950
Sec. 17: SENE
--------
TOTAL ACRES 437.22
Page 2 of 2
EXHIBIT "A-2"
LEASES OUTSIDE BURKE RANCH UNIT
THE NET REVENUE INTERST (OUTSIDE BURKE RANCH UNIT) TO BE DELIVERED TO
TEREX ENERGY COPORATION SHALL BE 80.00%
FJEDElRAL LEASES
Lease Legal Gross Expiration
Number Description Acres Date NRI
------------ ------------------------------------- ------ ---------- ----
WYW-172996 T37N, R78W 76.62 7/31/2016 80
Sec. 6: Lot 7, SESW
WYW-172997 T37N, R78W 275.30 7/31/2016 80
Sec. 18: Lots 3, 4, SESW, SE
WYW-172999 T37N, R79W 7/31/2016 80
Sec. 1: Lots 1, 2, 3, 4, S/2N/2, SW 448.70
Sec. 2: Lots 1, 2, 3, 4, S/2NE, SWNW 276.40
Sec. 12: NW 160.00
Sec. 13: NESW, SE 200.00
WYW-173000 T37N, R79W 7/31/2016 80
Sec. 14: E/2NE, W/2 400.00
WYW-174754 T37N, R78W 9/30/2017 80
Sec. 8: NWSE 40.00
WYW-174758 T37N, R79W 9/30/2017 80
Sec. 2: SENW 40.00
Sec. 12: W/2NE 80.00
WYW-176541 T37N, R78W 8/1/2020 80
Sec. 15: S/2NW,NWSW 120.00
Sec. 17: SWSE 40.00
WYW-177364 T37N, R78W 11/1/2020 80
---------------------
Sec. 17: S/2SW 80.00
--------
TOTAL ACRES 2,237.02
Page 1 of 2
FEE LEASES
OUTSIDE
BURKE RANCH UNIT
Land Gross Expiration
Lessor Description Acres Date NRI
-------------------- --------------------- -------- ------------ ----
Bantry Bay, LLC T37N, R79W 360.00 1/10/2016 80
Sec. 13: W/2SW, SESW
Sec. 14: W/2NE, SE
Buduwawi, Ltd T37N, R79W 240.00 11/12/2015 80
Sec. 14: W/2NE, SE
--------
TOTAL ACRES 600.00
STATE LEASE
OUTSIDE BURKE
RANCH UNIT
Land Gross Expiration
Lessor Description Acres Date NRI
-------------------- --------------------- -------- ------------ ----
14-00097 T37N, R78W 40.00 6/2/2019 80
Sec. 9: NESW
14-00098 T37N, R78W 40.00 6/2/2019 80
Sec. 16: NWNE
--------
TOTAL ACRES 80.00
TOTAL ACRES INSIDE UNIT: 1,904.86
TOTAL ACRES OUTSIDE UNIT: 2,917.02
--------
TOTAL ACRES: 4,821.88
Page 1 of 2
ASSIGNMENT AND BILL OF SALE
-----------------------------
THIS ASSIGNMENT AND BILL OF SALE ("Assignment ") dated , 2014, but
effective from and after 7:00 a.m., October 1, 2014 (said latter date and time
hereinafter referred to as the "Effective Date"), is by and between Hot Springs
Resources, LTD a Wyoming corporation and Marschat Minerals LLC, a Wyoming
limited liability company, both having an offices in Casper Wyoming ("Assignor")
and Terex Energy Corporation, a Colorado corporation, having an office at 520
Zang Blvd. Broomfield, Colorado 80021 ( "Assignee").
W I T N E S S E T H:
1. Conveyance. For and in consideration of the sum of One Hundred and No/100
dollars ($100.00), cash in hand paid, and other valuable consideration,
including the assumption by Assignee of certain obligations and liabilities
described in that certain Purchase and Sale Agreement dated September 30,
2014, by and between Assignor, as Seller, and Assignee, as Buyer ("Purchase
and Sale Agreement"), the receipt and sufficiency of which are hereby
acknowledged, Assignor, subject to said Purchase and Sale Agreement (which
Purchase and Sale Agreement is incorporated herein by reference for all
purposes), does hereby sell, transfer, assign, convey, set over and deliver
unto Assignee (without warranty of any kind, express or implied, except
that Assignor shall warrant title to Assignee as to the Assets (as defined
below), and in particular to the working interests and net revenue
interests shown on Exhibit A, against the claims of all persons claiming an
interest therein by, through or under Assignor, hereinafter called the
"Special Warranty"), with subrogation against Assignor's predecessors in
title, excluding Affiliates, subject to the terms hereof, all of Assignor'
s rights, title and interests in and to the following (collectively, the
"Assets"):
a. The oil and gas leases, mineral executive interests, contractual
rights, rights to explore, produce and develop, rights to drain,
wellbore interests and/or properties set forth in Exhibit A and
further including, if applicable, all renewals and extensions of those
leases and all leases issued in substitution therefore (any such
rights or interests collectively referred to as the "Leases").
b. Any unitization, pooling and/or communitization agreements,
declarations, designations or orders relating to the Leases and all of
Assignor's interest in and to the properties covered or units created
thereby to the extent attributable to the Leases (collectively, the
"Units").
c. All oil and gas wells, salt water disposal wells, injection wells and
other wells located on affecting or draining any of the Leases, within
the Units or as listed on Exhibit A (collectively, the "Wells").
d. All structures, facilities, foundations, wellheads, tanks, pumps,
compressors, separators, heater treaters, valves, fittings, equipment,
machinery, fixtures, flowlines, pipelines, tubular goods, materials,
tools, supplies, improvements, and any other real, personal, immovable
and mixed property located on, used in the operation of, or relating
to the production, treatment, non-regulated transportation, gathering,
-1-
marketing, sale, processing, handling or disposal of hydrocarbons,
water, and associated substances produced from the Leases or the Units
(the "Facilities") .
e. all natural gas, casinghead gas, drip gasoline, natural gasoline,
natural gas liquids, condensate, products, crude oil and other
hydrocarbons,whether gaseous or liquid, produced or drained from or
allocable to the Assets (as hereinafter defined) on and after the
Effective Date (the "Hydrocarbons").
f. To the extent transferable, all contracts, permits, rights-of-way,
easements, licenses, servitudes, transportation agreements, pooling
agreements, operating agreements, gas balancing agreements,
participation and processing agreements, confidentiality agreements,
side letter agreements and any other agreement, document or instrument
listed on Exhibit A INSOFAR ONLY as they directly relate and are
attributable to the Leases, Units, Wells, Hydrocarbons, or Facilities
or the contractual and wellbore rights thereon or therein or the
ownership or operation thereof, or the production, treatment,
non-regulated transportation, gathering, marketing, sale,processing,
handling disposal, storage or transportation of hydrocarbons, water,
or substances associated therewith (the "Assumed Contracts").
g. Records relating to the Leases, Units, Wells, Hydrocarbons, Assumed
Contracts and Facilities in the possession of Assignor (the "Records")
and including as follows: all (i) lease, land, and division order
files (including any abstracts of title, title opinions, certificates
of title, title curative documents, and division orders contained
therein), (ii) the Assumed Contracts; (iii) all well, facility,
operational, environmental, regulatory, compliance and historic
production files and (iv) all geological files relating to the Leases
(the "Geologic Data"), but not including any records which (A)
Assignor is prohibited from transferring to Assignee by law or
existing contractual relationship, or which (B) constitute Excluded
Assets (as hereinafter defined in Section 2)
2. Exclusions and Reservations: Specifically excepted and reserved from this
Assignment are the following, hereinafter referred to as the "Excluded
Assets":
a. Assignor's reserve estimates, economic analyses, pricing forecasts,
legal files or opinions (except abstracts of title, title opinions,
certificates of title, or title curative documents as provided in
Section l.g above), attorney-client communications or attorney work
product, and records and documents subject to confidentiality
provisions, claims of privilege or other restrictions on access.
b. All corporate, financial, and tax records of Assignor; however,
Assignor shall furnish Assignee with copies of any financial and tax
records which directly relate to the Assets, or which are necessary
for Assignee's ownership, administration, or operation of the Assets
upon receipt of a written request from Assignee indicating its desire
to obtain copies, and the purpose for same.
-2-
c. All oil, gas and other liquid or gaseous hydrocarbons produced from or
attributable to Assignor's interest in the Assets with respect to all
periods prior to the Effective Date, together with all proceeds from
the sale of such hydrocarbons.
d. Claims of Assignor for refund of or loss carry forwards with respect
to (i) production, windfall profit, severance, ad valorem or any other
taxes attributable to the Assets for _any period prior to the
Effective Date, (ii) income or franchise taxes.
e. All amounts due or payable to Assignor as adjustments or refunds under
any contracts or agreements affecting the Assets, with respect to
periods prior to the Effective Date, specifically including, without
limitation, amounts recoverable from audits under operating agreements
and any overpayments of royalties.
f. Subject to the terms hereof, all monies, proceeds, benefits, receipts,
credits, income or revenues (and any security or other deposits made)
attributable to the Assets or the operation thereof prior to the
Effective Date.
g. All Assignor' s patents, trade secrets, copyrights, names, marks and
logos.
h. Assignor's service agreements and charter party agreements, storage or
warehouse agreements, supplier contracts, service contracts, insurance
contracts, and construction agreements.
TO HAVE AND TO HOLD the Assets unto Assignee, its successors and assigns
forever, subject to the terms, conditions and reservations set forth herein, in
the Leases, the Units, the Assumed Contracts, and in the Purchase and Sale
Agreement.
3. Purchase and Sale Agreement. This Assignment is made subject to the
unrecorded Purchase and Sale Agreement. Any term used herein and not
defined in this Assignment shall have the definition or meaning given to it
in the Purchase and Sale Agreement. The Purchase and Sale Agreement shall
be binding on and inure for the benefit of the rightful successors and
pennitted assigns of the Assignor and Assignee.
4. Assumption of Obligations. Subject to the terms of the Purchase and Sale
Agreement, in its elections and for the operations of the Assets, all after
the effective date, Assignee shall observe and comply with all covenants,
terms, and provisions, express or implied, contained in the Assumed
Contracts and Assignee shall assume and be responsible for those express
obligations of Assignor accruing under such Assumed Contracts on or after
the Effective Date.
5. Abandonment Obligations. As additional consideration for the sale of the
Assets, Assignee shall assume and timely and fully satisfy Assignor's share
of the Abandonment Obligations (as defined below) associated with the
Wells. As used herein, the term "Abandonment Obligations" shall mean and
include those obligations, defined by regulation as of the Effective Date,
associated with and liability for (i) the plugging and abandonment of the
Wells, (ii) the removal of pipelines used in connection with the Assets,
and (iii) the clearance, restoration and remediation of the surface and
cleanup and complete reclamation of the Leases associated with the Wells.
-3-
6. Entire Agreement. This Assignment along with the Purchase and Sale
Agreement constitute the entire understanding between Assignor and Assignee
with regard to the subject matter hereof, superseding all prior statements,
representations, discussions, agreements and understandings.
7. Conflicts. In case of any conflict between the terms and provisions of the
Purchase and Sale Agreement and the terms and provisions of this
Assignment, the terms and provisions of the Purchase and Sale Agreement
shall prevail. Notwithstanding the foregoing, third parties may rely upon
this Assignment for the description of the Assets conveyed, which Assets
are not reduced or diminished inany manner by the terms of the Purchase and
Sale Agreement.
IN WITNESS WHEREOF, this Assignment is executed by the parties hereto
before the undersigned competent witnesses, as of the dates acknowledged below,
but effective the first day of October, 2014.
Witnesses: ASSIGNOR:
Hot Springs Resources, LTD
/s/ Jon C. Nicolaysen BY: /s/ Bob Dungan
------------------------------ ---------------------------
Signature Bob Dungan, President
Hot Springs
Merschat Minerals LLC
By: /s/
---------------------------
Managing Member
Witnesses: ASSIGNEE:
Terex Energy Corporation
W. Edward Nichols
------------------------------
Printed Name:
By: /s/ Donald Walford
---------------------------
CEO
/s/ W. Edward Nichols
------------------------------
Assignee's Address:
520 Zang Street
Broomfield, CO 80021
-4-
STATE OF WYOMING
COUNTY OF NATRONA
On this 20th day of November, 2014, before me appeared Robert Dungan, to
me, a Notary Public, personally known, who being by me duly sworn did say that
he is the President of Hot Springs Resources LTD, a Wyoming Corporation, and
that said instrument was signed on behalf of said corporation, by authority of
governing authorization, and said appearer acknowledged that he executed the
same as the free act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my official hand and seal on the
date hereinabove written.
SEAL /s/ Deborah J. May
---------------------------
Notary Public in and for the
State of Wyoming
STATE OF WYOMING
COUNTY OF NATRONA
On this 20th day of November, 2014, before me appeared Walter Merschat, to
me, a Notary Public, personally known, who being by me duly sworn did say that
he is the Managing Member of Merschat Minerals LLC, a Wyoming limited liability
corporation, and that said instrument was signed on behalf of said corporation,
by authority of governing authorization, and said appearer acknowledged that he
executed the same as the free act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my official hand and seal on the
date hereinabove written.
SEAL /s/ Deborah J. May
---------------------------
Notary Public in and for the
State of Wyoming
-5-
STATE OF COLORADO
COUNTY OF BROOMFIELD
On this 3rd day of November, 2014, before me appeared Donald Walford , to
me, a Notary Public, personally known, who being by me duly sworn did say that
he is the CEO of Terex Energy Corporation, a Colorado corporation, and that said
instrument was signed in behalf of said corporation, by authority of its
governing authorization, and said appearer acknowledged that he executed the
same as the free act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my official hand and seal on the
date hereinabove written.
SEAL /s/ Nancy Moore
------------------------------
Notary Public in and for the
State of Colorado
EXHIBIT A
-6-
EXHIBIT "A-1"
ATTACHED TO THE PURCHASE AND SALE AGREEMENT DATED SEPTEMBER 30, 2014,
BETWEEN HOT SPRINGS RESOURCES, LTD AND MERSCHAT MINERALS, LLC, AS
SELLERS AND TEREX ENERGY CORPORATION, AS BUYER
LEASES INSIDE BURKE RANCH UNIT
THE NET REVENUE INTERST (INSIDE BURKE RANCH UNIT) TO BE DELIVERED TO
TEREX ENERGY COPORATION SHALL BE 79.25%
FEDERAL LEASES
Lease Effective Lease Land Gross
Number Date Status Description Acres
------------- ---------- ------ ------------------------------------ ---------
WYW-002045 11/1/1950 HU T37N, R78W 80.00
Sec. 8: SWNW, SWSE
WYW-002046A 11/1/1950 HU T37N, R78W 80.00
Sec. 8: W/2SW
WYW-100546 11/1/1950 HU T37N, R78N 76.97
Sec. 7: Lot 3, NESW
WYC-0081317D 11/1/1950 HU T37N, R78W 273.59
Sec. 7: Lots 1, 2,E/2NW, W/2SE, NESE
WYC-0081317B 11/1/1950 HU T37N, R78W 277.08
Sec. 7: Lot 4, SESW
T37N, R79W
Sec. 12: E/2E/2, NWSE
WYW-002118C 12/1/1950 HU T37N, R78W 80.00
Sec. 17: N/2SW
WYC-0068674 3/1/1948 HU T37N, R78W 40.00
Sec. 17: NENE
WYW-0002046 11/1/1950 HU T37N, R78W 320.00
Sec. 7: NE
Sec. 8: E/2SW
Sec. 17: N/2NW
WYC-0082253A 11/1/1950 HU T37N, R78W 80.00
Sec. 18: SENE
T37N, R79W
Sec. 13: NWNE
WYC-0081316B 7/1/1950 HU T37N, R79W 40.00
Sec. 12: SWSE
WYW-0004997B 3/1/1951 HU T37N, R78W 40.00
Sec. 17: NWNE
WYVV-0002118 12/1/1950 HU T37N, R78W 80.00
Sec. 17: N/2SE
-----------
TOTAL ACRES 1,467.64
Page 1 of 2
FEE LEASES
INSIDE BURKE RANCH UNIT
Land Gross Effective
Lessor Description Acres Date
------------------------ --------------------------- ------- ------------
William J Burke, et ux T37N, R78W 80.00 3/25/1954
Sec. 7: SESE
Sec. 18: NENE
Teapot Sheep Company T37N, R78W 120.00 9/12/1950
Sec. 17: S/2NW, SWNE
Joseph M. Wimsatt T37N, R78W 197.22 2/18/1950
Sec. 18: Lot 1,NENW, W/2NE
T37N, R79W
Sec. 13: NENE
Teapot Sheep Company T37N, R78W 40.00 9/12/1950
Sec. 17: SENE
--------
TOTAL ACRES 437.22
Page 2 of 2
EXHIBIT "A-2"
LEASES OUTSIDE BURKE RANCH UNIT
THE NET REVENUE INTERST (OUTSIDE BURKE RANCH UNIT) TO BE DELIVERED TO
TEREX ENERGY COPORATION SHALL BE 80.00%
FJEDElRAL LEASES
Lease Legal Gross Expiration
Number Description Acres Date NRI
------------ ------------------------------------- ------ ---------- ----
WYW-172996 T37N, R78W 76.62 7/31/2016 80
Sec. 6: Lot 7, SESW
WYW-172997 T37N, R78W 275.30 7/31/2016 80
Sec. 18: Lots 3, 4, SESW, SE
WYW-172999 T37N, R79W 7/31/2016 80
Sec. 1: Lots 1, 2, 3, 4, S/2N/2, SW 448.70
Sec. 2: Lots 1, 2, 3, 4, S/2NE, SWNW 276.40
Sec. 12: NW 160.00
Sec. 13: NESW, SE 200.00
WYW-173000 T37N, R79W 7/31/2016 80
Sec. 14: E/2NE, W/2 400.00
WYW-174754 T37N, R78W 9/30/2017 80
Sec. 8: NWSE 40.00
WYW-174758 T37N, R79W 9/30/2017 80
Sec. 2: SENW 40.00
Sec. 12: W/2NE 80.00
WYW-176541 T37N, R78W 8/1/2020 80
Sec. 15: S/2NW,NWSW 120.00
Sec. 17: SWSE 40.00
WYW-177364 T37N, R78W 11/1/2020 80
---------------------
Sec. 17: S/2SW 80.00
--------
TOTAL ACRES 2,237.02
Page 1 of 2
FEE LEASES
OUTSIDE
BURKE RANCH UNIT
Land Gross Expiration
Lessor Description Acres Date NRI
-------------------- --------------------- -------- ------------ ----
Bantry Bay, LLC T37N, R79W 360.00 1/10/2016 80
Sec. 13: W/2SW, SESW
Sec. 14: W/2NE, SE
Buduwawi, Ltd T37N, R79W 240.00 11/12/2015 80
Sec. 14: W/2NE, SE
--------
TOTAL ACRES 600.00
STATE LEASE
OUTSIDE BURKE
RANCH UNIT
Land Gross Expiration
Lessor Description Acres Date NRI
-------------------- --------------------- -------- ------------ ----
14-00097 T37N, R78W 40.00 6/2/2019 80
Sec. 9: NESW
14-00098 T37N, R78W 40.00 6/2/2019 80
Sec. 16: NWNE
--------
TOTAL ACRES 80.00
TOTAL ACRES INSIDE UNIT: 1,904.86
TOTAL ACRES OUTSIDE UNIT: 2,917.02
--------
TOTAL ACRES: 4,821.88
Page 1 of 2
SECTION 11.12
EXHIBITS
CONTRACTS
NONE
WELLS
API # LOCATION WELL NAME
------------ ------------------------- ---------------------------------------
49-025-06187 T37N, R78W, Sec. 7: SESW Burke Ranch Unit Well 55
49-025-06181 T37N, R78W, Sec. 7: SWSE Burke Ranch Unit Well 1-W
49-025-06201 T37N, R78W, Sec. 7: NWSW Burke Ranch Well Federal C-081317C7
49-025-22441 T37N, R78W, Sec. 18: SENE Burke Ranch Well Federal 8-18
49-025-06180 T37N, R78W, Sec. 17: NWNW Burke Ranch Unit Well Federal W-02046 9
49-025-22264 T37N, R78W, Sec. 17: SWSE Burke Ranch Well Moline W-02118 9-17
BURKE RANCH UNIT EQUIPMENT INVENTORY
1EA 51'x 24'x 10' Metal building-water injection plant
1EA Ajax Triplex pump TP ABS-5150 SN 5747 w/DP Ajax engine
1EA Ajax Triplex pump TP ABS-5150 w/l00 HP electric motor
1EA Ajax Triplex pump TP ABS-5150 w/125 electric motor
1EA 1O'x 16' Insulated 224 BBL welded steel tank for pump surge storage
1EA 5 HP electric air compressor
1EA 20 HP electric Goulds 3755 centrifugal water pump
1EA 8'x 12' Metal office building
1EA Free water knockout CE Natco 6' x 15' horizontal
1EA Free water knockout National 8' x 1O' veticle
5EA 500 BBL bolted steel tanks- oil storage
1EA LACT unit Contl-Emsco SN 51-454-244-74
1EA BS&B treater-hearter 10' x 21' SCW 25# WP SN 2769 w/building
1EA National treater-heater 6' x 20' NW-P 25# SN 66620 w/building
1EA 750 bbl Galvinized bolted Storage tank w/internal heat tube
WELL #9
10-3/4" x 1O" C-18 DCT, 2000# WP csg head, 10" x 6" OCT T-16 2000# WP head,
approx. 3800' 2-7/8" OD 6.5# EUE J-55 tubing, cable and controller
WELL #5
Water injection 10-3/4" Cameron WF csg 6000#T, 10" x 6" Cameron tbg 4000#T,
approx 6500' 2-7/8" OD 6.5# J-55 EUE tubing w/Baker model "R" packer
WELL #7
10-3/4" x 10" Cameron WF csg 2000# WP, 10" x 6" Cameron tbg head 2000# Wp
approx.6080' 2-7/8" OD 6.5# J-55 EUE tubing, rod string w/2" diameter pump
w. EMSCO 160,000 Gearbox P.B 60 hp Elec motor
WELL #8-18
10" SC-22 csg head, 3000# Larkin tubing head, approx. 6000' 2-7/8" OD 6.5#
J-%% EUE tubing
WELL #9-17
10" SC-22 , 3000# Larkin tubing head, Lufkin Mark II 640-304-144 SN
D15041B- 257994 pump unit w/75 HP electric motor, approx. 6984' 2-7/8" OD
6.5# J-55 EUE tubing, rod string w/ 1-3/4" diameter pump
Green Water Truck
1965 Ford
SCHEDULE 2.2
ALLOCATION OF PURCHASE PRICE
Schedule 2.2
SCHEDULE 6.1.9
OPERATIONAL MATTERS
NONE
Schedule 6.1.9
SCHEDULE 6.1.10
LITIGATION
NONE
Schedule 6.1.10
SCHEDULE 6.1.11
TITLE EXCEPTIONS
NONE
SCHEDULE 6.2.4
OUTSTANDING COMMON STOCK
7,378,200
OUTSTANDING OPTIONS
250,000
OUTSTANDING WARRANTS
(including the warrants issued hereunder)
800,000
SCHEDULE 7.3
LIENS, PRIVILEGES OR ENCUMBRANCES
NONE