ASSET PURCHASE AGREEMENT
DATED AUGUST 31, 2006, AND EFFECTIVE AUGUST 28, 2006
BETWEEN AND AMONG
MID-POWER RESOURCE CORPORATION,
AS SELLER,
AND
MARION ENERGY, INC.,
AS BUYER,
AND
MARION ENERGY LIMITED,
AS PARENT OF BUYER
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of
August
31, 2006, but effective as of August 28, 2006, is between and among
MID-POWER
RESOURCE CORPORATION, a Nevada corporation ("Seller"); MARION
ENERGY, INC., a
Texas corporation ("Buyer"); and MARION ENERGY LIMITED, an entity
organized
under the laws of Australia ("Parent"). Hereinafter, Buyer and
Parent are
sometimes collectively referred to as "Marion." Seller, Buyer and
Parent are
each a "Party" and collectively the "Parties" as referred to
herein.
WHEREAS, Seller owns certain oil and gas properties and related
assets
located in Carbon and Emery Counties, Utah, and known as the "Clear
Creek
Project";
WHEREAS, Buyer is a wholly-owned subsidiary of Parent;
WHEREAS, Seller and Buyer have previously entered into that
certain
Farmout and Exploration Agreement for the Clear Creek Natural Gas
Unit, Carbon
and Emery County, Utah, dated effective February 22, 2005 (the
"Farmout
Agreement"), wherein Seller granted Buyer the right to earn a
seventy-five
percent working interest (75% WI) in leases within the Clear Creek
Project upon
completion of certain earning conditions, including: (i) drilling
obligations;
(ii) completion of a Capital Expenditure Program described therein;
and (iii)
the issuance of options to purchase five million (5,000,000)
ordinary shares of
Parent, at an exercise price of forty cents Australian (AU$0.40).
Said options
were to be earned by Seller in two tranches. The parties to the
Farmout
Agreement also created an Area of Mutual Interest covering lands in
the general
vicinity of the Clear Creek Natural Gas Unit;
WHEREAS, on May 9,
2006, Buyer was legally designated as the operator
of the Clear Creek Natural Gas Unit (the "Operator Change
Date");
WHEREAS, Seller and Buyer desire to terminate the Farmout Agreement
as
between them, but keep the Farmout Agreement in place as to third
parties that
were signatory to the Farmout Agreement. Upon completion of the
asset purchase
contemplated hereunder, Buyer will assume Seller's position under
the Farmout
Agreement with respect to said third parties; and
WHEREAS, Seller
desires to sell to Buyer, and Buyer desires to purchase
from Seller, such oil and gas properties and related assets upon
the terms and
subject to the conditions set forth herein, subject to a retained
and reserved
real property interest of 12.5% of the net proceeds attributable to
100% of the
working interest based on an approximate 80% net revenue
interest.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements
hereinafter set forth, the Parties hereto agree as follows:
ARTICLE I.
SALE AND PURCHASE
Subject to the terms and conditions of this Agreement, Seller
agrees to
sell and convey to Buyer, and Buyer agrees to purchase from Seller,
effective as
of midnight, Mountain Daylight Time on May 9, 2006 (the "Effective
Time"), the
following described assets and properties (collectively, the
"Assets"). The
Closing shall take place at the offices of Buyer or such other
location
designated by the Parties on August 31, 2006 (the "Closing
Date").
(a) Interests. The undivided interests specified in Exhibit A in,
to or
under the Hydrocarbon Interests described therein and all other
interests of
Seller in, to or under or derived from the Lands and related rights
and
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property, reserving unto the Seller the Net Profits Interest as
provided herein
(collectively, the "Subject Interests"). As used in this Agreement,
the term
"Hydrocarbon Interests" shall mean (i) leases affecting, relating
to or covering
any oil, gas and other hydrocarbons and the leasehold interests and
estates in
the nature of working or operating interests under such leases, as
well as
overriding royalties, net profits interests, production payments,
carried
interests, rights of recoupment and other interests in, under or
relating to
such leases, (ii) fee interests in oil, gas or other hydrocarbons,
(iii) royalty
interests in oil, gas or other hydrocarbons, (iv) any other
interest in oil, gas
or other hydrocarbons in place, (v) any economic or contractual
rights, options
or interests in and to any of the foregoing, including, without
limitation, any
farm-out or farm-in agreement affecting any interest or estate in
oil, gas or
other hydrocarbons, and (vi) any and all rights and interests
attributable or
allocable thereto by virtue of any pooling, unitization,
communitization,
production sharing or similar agreement, order or declaration;
(b) Lands. All right, title and interest of Seller in and to the
lands
covered by or subject to the Hydrocarbon Interests (the
"Lands");
(c) Rights and Property. All right, title and interest of Seller in
and
to or derived from the following insofar as the same are
attributable to the
Subject Interests: (i) all rights with respect to the use and
occupancy of the
surface of and the subsurface depths under the Lands, (ii) all
agreements and
contracts, easements, rights-of-way, servitudes and other estates,
(iii) all
real and personal property located upon the Lands or used in
connection with the
exploration, development or operation of the Subject Interests, and
(iv) any and
all lease files, title files, land files, division order files,
marketing files,
well files, production records, seismic, geological, geophysical
and engineering
data, and all other files, maps and data (in whatever form) arising
out of or
relating to the Subject Interests or the ownership, use,
maintenance or
operation of the other Assets (the "Records"); and
(d) Hydrocarbons. All (i) oil, gas and other hydrocarbons produced
from
or attributable to the Subject Interests with respect to all
periods subsequent
to the Effective Time and (ii) proceeds from or of such oil, gas
and other
hydrocarbons.
ARTICLE II.
CONSIDERATION AND PAYMENT
Section 2.1 Consideration. The consideration for the sale and
conveyance of the Assets to Buyer is as follows:
(a) Cash. One million dollars US (US$1,000,000) in cash payable
at
Closing (the "Cash Payment");
(b) Ordinary Shares. Thirteen million one hundred thousand
(13,100,000)
ordinary shares of Parent, a public company traded on the
Australian Stock
Exchange to be issued by Parent to Seller at Closing (the "Share
Payment");
(c) Immediately Exercisable Options. Immediately exercisable
options to
purchase five million (5,000,000) of Parent's ordinary shares at an
exercise
price of forty cents Australian (AU$0.40) per share to be issued by
Parent to
Seller at Closing pursuant to that certain option agreement
attached hereto as
Exhibit B (the "Immediately Exercisable Options"); and
(d) Reserve-Based Options. Options to purchase up to eight
million
(8,000,000) of Parent's ordinary shares subject to certain vesting
requirements
that are the subject of Article III (the "Reserve-Based
Options").
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<PAGE>
The Cash Payment, Share Payment, Immediately Exercisable Options,
and the
Reserve-Based Options together shall constitute the "Purchase
Price." The
Immediately Exercisable Options and the Reserve-Based Options
together are
sometimes referred to herein as the "Options." The Share Payment,
the Options,
and the ordinary shares issuable upon the exercise of the Options
are referred
to together as the "Securities."
Section 2.2 Payment. At the Closing, Buyer shall wire transfer the
Cash
Payment in immediately available funds to the account of Seller as
it shall
separately direct or such other account specified by Seller to
Buyer on or prior
to the second business day immediately preceding the Closing
Date.
ARTICLE III.
RESERVE-BASED OPTIONS
Section 3.1 Definition of Reserves. For purposes of this Agreement,
the
following definitions adopted by the Society of Petroleum Engineers
will apply:
Proved Reserves shall mean those quantities of oil, gas and
associated
hydrocarbons that, by analysis of geological and engineering data,
can
be
estimated with reasonable certainty to be commercially
recoverable,
from a given date forward, from known reservoirs and under
economic
conditions, operating methods, and government regulations as of
the
date of the evaluation, by deterministic methods intended to
express a
high degree of confidence that the quantities will be recovered.
Proved
Reserves shall include both developed and undeveloped reserves.
Probable Reserves shall mean those reserves that analysis of
geological
and engineering data suggests are more likely than not to be
recoverable and may include (a) reserves anticipated to be proved
by
normal step-out drilling where sub-surface control is inadequate
to
classify these reserves as proved, (b) reserves in formations
that
appear to be productive based on well log characteristics but lack
core
data or definitive tests and that are not analogous to producing
or
Proved Reserves in the area, (c) incremental reserves attributable
to
infill drilling that could have been classified as proved if
closer
statutory spacing had been approved at the time of estimate,
(d)
reserves attributable to improved recovery methods that have
been
established by repeated commercially successful applications when
(i) a
project or pilot is planned but not in operation and (ii) rock,
fluid,
and reservoir characteristics appear favorable for commercial
application, (e) reserves in an area of the formation that appears
to
be separated from the proved area by faulting and the geologic
interpretation indicates the subject area is structurally higher
than
the proved area, (f) reserves attributable to a future
workover,
treatment, re-treatment, change of equipment, or other
mechanical
procedures, when such procedure has not been proved successful in
wells
that exhibit similar behavior in analogous reservoirs, and (g)
incremental reserves in proved reservoirs where an alternative
interpretation of performance or volumetric data indicates more
reserves than can be classified as proved.
Section 3.2 250 Bcf Hurdle. Parent will, at Closing, grant
Seller
options to purchase two million (2,000,000) of Parent's ordinary
shares pursuant
to that certain option agreement attached hereto as Exhibit C at an
exercise
price of eighty cents Australian (AU$0.80) per share, which options
shall become
exercisable in the event an Annual Reserve Report, as defined
below, estimates
that the aggregate of all Proved and Probable Reserves of
hydrocarbons in place,
in whatever form, attributable to Buyer's interests in any
hydrocarbons below
the surface of the Lands, at any depth and whether acquired by
Buyer pursuant to
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<PAGE>
this Agreement or otherwise, either before or after the date
hereof, plus all
hydrocarbons produced and delivered for sale from the Hydrocarbon
Interests
since the Effective Time, appropriately adjusted to avoid
duplication, are equal
to or greater than two hundred fifty billion cubic feet (250 Bcf)
(the "250 Bcf
Hurdle"). All such options granted when the 250 Bcf Hurdle is met
shall expire
unless exercised within thirty-six (36) months from the date the
250 Bcf Hurdle
is met.
Section 3.3 500 Bcf Hurdle. Parent will, at Closing, grant
Seller
incremental options to purchase two million (2,000,000) of Parent's
ordinary
shares pursuant to that certain option agreement attached hereto as
Exhibit C at
an exercise price of eighty cents Australian (AU$0.80) per share,
which options
shall become exercisable in the event an Annual Reserve Report
estimates that
the aggregate of all Proved and Probable Reserves of hydrocarbons
in place, in
whatever form, attributable to Buyer's interests in any
hydrocarbons below the
surface of the Lands, at any depth and whether acquired by Buyer
pursuant to
this Agreement or otherwise, either before or after the date
hereof, plus all
hydrocarbons produced and delivered for sale from the Hydrocarbon
Interests
since the Effective Time, appropriately adjusted to avoid
duplication, are equal
to or greater than five hundred billion cubic feet (500 Bcf) (the
"500 Bcf
Hurdle"). All such options granted when the 500 Bcf Hurdle is met
shall expire
unless exercised within thirty-six (36) months from the date the
500 Bcf Hurdle
is met.
Section 3.4 750 Bcf Hurdle. Parent will, at Closing, grant
Seller
incremental options to purchase four million (4,000,000) of
Parent's ordinary
shares pursuant to that certain option agreement attached hereto as
Exhibit C at
an exercise price of eighty cents Australian (AU$0.80) per share,
which options
shall become exercisable in the event an Annual Reserve Report,
estimates that
the aggregate of all Proved and Probable Reserves of hydrocarbons
in place, in
whatever form, attributable to Buyer's interests in any
hydrocarbons below the
surface of the Lands, at any depth and whether acquired by Buyer
pursuant to
this Agreement or otherwise, either before or after the date
hereof, plus all
hydrocarbons produced and delivered for sale from the Hydrocarbon
Interests
since the Effective Time, appropriately adjusted to avoid
duplication, are equal
to or greater than seven hundred fifty billion cubic feet (750 Bcf)
(the "750
Bcf Hurdle"). All such options granted when the 750 Bcf Hurdle is
met shall
expire unless exercised within thirty-six (36) months from the date
the 750 Bcf
Hurdle is met.
Section 3.5 Change of Control. Following the Closing, upon a Change
of
Control of Parent (as defined below) that occurs prior to any of
the reserve
hurdles set forth above (the 250 Bcf Hurdle, the 500 Bcf Hurdle, or
the 750 Bcf
Hurdle) being met, all of said reserve hurdles shall be deemed to
have been met
and all of the options described above (an aggregate of 8,000,000
options) shall
be immediately vested and be immediately exercisable for a period
of thirty-six
(36) months from the date of the event constituting a Change of
Control. For
purposes of this Agreement, Change in Control shall mean (a) an
acquisition of
any voting securities of the Buyer or Parent by any person, entity
or group
acting in concert immediately after which such person, entity or
group acting in
concert has beneficial ownership of 15% or more of the combined
voting power of
the Buyer or Parent then outstanding voting securities without the
approval of
the board; (b) a merger or consolidation that results in more than
50% of the
combined voting power of the Buyer's or Parent's then outstanding
voting
securities of the Buyer or its successor or Parent or its successor
changing
ownership (whether or not approved by the board); (c) the sale of
all or
substantially all of the Buyer's or Parent's assets in a single
transaction or
series of related transactions; (d) approval by the shareholders of
the Buyer or
the Parent of a plan of complete liquidation of the Buyer or
Parent; or (e) the
individuals constituting the board of Buyer or Parent as of the
date of this
Agreement (the "Incumbent Board") cease for any reason to
constitute at least
1/2 of the members of the board of Buyer or Parent; provided,
however, that if
the election, or nomination for election by the Buyer's or
Parent's
shareholders, of any new director was approved by a vote of the
Incumbent Board,
such new director shall be considered a member of the Incumbent
Board.
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Section 3.6 Annual Engineering Study. At Marion's expense, Marion
shall
cause Ryder Scott Company or any other independent, qualified
petroleum
engineering firm of national standing reasonably acceptable to
Seller (the
"Engineering Firm") to prepare a written engineering report
evaluating the
Proved Reserve and Probable Reserve quantities attributable to the
Hydrocarbon
Interests on an annual basis until the 750 Bcf Hurdle is met or
until December
31, 2016 (the "Annual Reserve Report") in accordance with the
following:
(a) As soon as practicable after the end of each fiscal year
(the "Reserve Study Date"), but in any event by July 31 of the
following year,
Marion shall deliver or cause to be delivered to the Engineering
Firm and upon
request to the Seller all (i) geological, geophysical and
engineering data,
including drilling logs, drillstem tests, pressure tests, delivery
and
deliverability records, geological and engineering studies or other
data
gathered prior to and as of the Reserve Study Date respecting the
Clear Creek
Natural Gas Unit; (ii) records of all hydrocarbons delivered for
sale from the
Hydrocarbon Interests for the fiscal year ending on the Reserve
Study Date;
(iii) a copy of each report, study, evaluation, estimate or other
writing
respecting the Hydrocarbon Interests prepared by or on behalf of
Marion for
internal uses or for delivery to any governmental authority,
potential funding
source, owner, investor or other third party; and (iv) such other
information
under the care, custody, or control of Marion that the Engineering
Firm or
Seller may reasonably request, to the extent that such other
information can be
obtained by or on behalf of Marion without unreasonable effort or
expense.
(b) As soon as practicable after the receipt of the
information required to be delivered by Marion pursuant to
paragraph (b) of this
section, but in any event by September 30 of the year following the
Reserve
Study Date, the Engineering Firm shall prepare and transmit to
Marion and Seller
the Engineering Firm's estimate of the Proved and Probable Reserves
attributable
to the Hydrocarbon Interests together with a calculation of the sum
of such
Proved and Probable Reserves and all hydrocarbons produced and
delivered for
sale from the Hydrocarbon Interests since the Effective Time,
appropriately
adjusted to avoid duplication, all in accordance with the
requirements of this
Agreement and, to the extent consistent with this Agreement, the
standards of
the American Society of Petroleum Engineers. In the event that
hydrocarbons
other than gas are present, such other hydrocarbons shall be
converted at their
British Thermal Unit equivalent in accordance with standard
engineering
practice, as shall be described in such report. The Engineering
Firm's study and
estimate prepared in accordance with this paragraph is hereinafter
referred to
as the "Preliminary Hurdle Calculation."
(c) Marion and Seller shall promptly review the Preliminary
Hurdle Calculation, and each shall advise the other of the
respects, if any, in
which it disputes such calculation, setting forth with reasonable
specificity
the particulars of such disagreement (the "Disagreement Notice").
If one such
Party does not provide the other Party with a Disagreement Notice
within 20 days
after delivery of the Preliminary Reserve Calculation, the amount
set forth
therein shall be deemed conclusively acceptable to such Party. If
neither such
party delivers a Disagreement Notice, such Preliminary Hurdle
Calculation shall
be deemed conclusive and determinative as to whether a specific
hurdle has been
met. If either or both such Parties provide the other with a
Disagreement Notice
within 20 days after delivery of the Preliminary Hurdle
Calculation, the Parties
shall proceed with diligence and dispatch in accordance with the
terms and
provisions of the alternative dispute resolution procedures set
forth in
Schedule 12.2 attached hereto and fully incorporated herein.
(d) In the event Marion refuses to timely deliver to the
Engineering Firm the information required to be delivered pursuant
to paragraph
(a) above and such failure continues for greater than 90 days after
written
notice and demand for cure from Seller to Marion, then the next
succeeding
hurdle shall be deemed to have been met and the Options to become
exercisable on
meeting such hurdle shall automatically be immediately vested and
become
exercisable.
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ARTICLE IV.
NET PROFITS INTEREST
Upon assignment of the Assets by Seller to Buyer, Seller shall
reserve
and retain as an interest in lands a Net Profits Interest equal to
12.5% of the
net revenue attributable to 100% of the working interest based on
an approximate
80% net revenue interest in the rights of Buyer in the Clear Creek
Unit, payable
pursuant to Exhibit D and Exhibit E attached hereto.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
Section 5.1 Representations and Warranties of Seller. To the best
of
Seller's knowledge, Seller represents and warrants to Buyer as
follows:
(a) Organization and Qualification. Seller is a corporation
duly
organized, validly existing and in good standing under the Laws of
the State of
Nevada and has the requisite power to carry on its business as it
is now being
conducted. Seller is duly qualified to do business, and is in good
standing, in
each jurisdiction in which the Assets owned or leased by it makes
such
qualification necessary.
(b) Authority. Seller has all requisite power and authority to
execute
and deliver this Agreement and to perform its obligations
hereunder. The
execution, delivery, and performance of this Agreement and the
transactions
contemplated hereby have been duly and validly authorized by all
requisite
action on the part of Seller.
(c) Consents. Except for (i) consents and approvals of assignments
by
any governmental authority that are customarily obtained after
Closing, and (ii)
the consents, approvals, authorizations, filings or notices
expressly described
and set forth in Schedule 5.1(c), no consent, approval,
authorization or permit
of, or filing with or notification to, any person or entity is
required for or
in connection with the execution and delivery of this Agreement by
Seller or for
or in connection with the consummation of the transactions and
performance of
the terms and conditions contemplated hereby by Seller.
(d) Actions. There are no actions, claims, suits, arbitrations,
inquiries, proceedings, investigations, condemnations or audits by
or before any
court or other governmental authority pending against Seller or
affecting the
Assets or, to the knowledge of Seller, threatened against Seller
that relate to
the Assets or the transactions contemplated by this Agreement.
(e) Compliance with Laws. The Seller and, as of the Operator
Change
Date, the Assets were in compliance in all material respects with
all statutes,
laws, ordinances, rules, regulations, orders, rulings,
restrictions, writs,
injunctions and decrees (collectively, "Laws") in any way affecting
or relating
to the Assets.
(f) Environmental Matters. As of the Operator Change Date, the
Seller
and the Assets were in compliance in all material respects with
all
environmental Laws affecting or relating to the Assets, and there
had been no
contamination in, on, under or from the Assets that requires any
remediation
under any environmental Law.
(g) Permits. As of the Operator Change Date, Seller had all
licenses,
permits, certificates, orders, approvals and authorizations of any
governmental
authority necessary to own, operate, use or maintain the Assets and
all of such
permits were in full force and effect and all fees and charges
relating thereto
had been paid.
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(h) Material Contracts. Set forth in Schedule 5.1(h) is a true
and
correct description of each material contract, agreement, lease, or
similar
arrangement that is included in the Assets or by which any of the
Assets were
bound as of the Operator Change Date (the "Material Contracts").
Each of the
Material Contracts was in full force and effect and there were no
material
violations or breaches thereof, or existing facts or circumstances
that upon
notice or the passage of time or both would constitute a material
violation or
breach thereof, by Seller or any affiliate of Seller or, to the
knowledge of
Seller, by any other Party thereto.
(i) Preferential Purchase Rights. None of the Assets is subject to
any
preferential purchase or similar right that would become operative
as a result
of the transactions contemplated by this Agreement.
(j) Taxes. As of the Operator Change Date, Seller had paid all
taxes on
or relating to the Assets, or any production or revenues
attributable thereto,
which were then due and payable as required by Law prior to
delinquency.
(k) Gas Contracts. With respect to the gas sales contracts, gas
product
purchase contracts, and gas processing and transportation contracts
included in
the Assets, as of the Operator Change Date, none of such contracts
warranted the
amount of the gas to be delivered.
(l) Wells. As of the Operator Change Date, each of the wells
included
in the Assets had been drilled and completed within the acreage
limits permitted
by contract, pooling, or unit agreement and by Law, and all
drilling and
completion of such wells and all related development and operations
had been
conducted in compliance in all material respects with all Laws. As
of the
Operator Change Date, no such well was subject to penalties on
allowables after
the Effective Time because of any overproduction.
(m) Well and Facility Status. There are no wells included in the
Assets
that, as of the Operator Change Date, (i) Seller was obligated by
Law or
contract to plug and abandon, or (ii) were subject to exceptions to
a
requirement to plug and abandon issued by a governmental authority.
Seller has
not installed any underground storage tanks or constructed any
unlined pits in,
on or underlying any of the Assets and, to the knowledge of Seller,
no
underground storage tanks or unlined pits have been installed or
constructed by
anyone else in, on or underlying any of the Assets.
(n) No Tax Partnership. The Assets are not subject to any tax
partnership agreement or provisions requiring a partnership income
tax return to
be filed under Subchapter K of Chapter 1 of Subtitle A of the
Internal Revenue
Code of 1986, as amended.
(o) Proposed Operations or Expenditures. Other than as set forth
in
Schedule 5.1(o), (i) Seller has not consented to, non-consented to,
issued or
received any notice of a proposed drilling, completion,
recompletion, deepening,
reworking, plugging back or plugging and abandonment with respect
to the Assets
except for any such operations heretofore commenced for which Buyer
has no
liability, and (ii) Seller has not issued or received any
authorization for
expenditure with respect to the Assets for any period after the
Effective Time,
except for delay rental or other lease payments that Seller has
paid.
(p) Royalties. As of the Operator Change Date, Seller had paid
all
royalties, overriding royalties and other burdens on production due
by the
Seller with respect to the Assets.
(q) Title. As of the Operator Change Date, Seller has
"Defensible
Title." As used in this Agreement, "Defensible Title" shall mean,
respectively
as to the Subject Interest or Subject Interests related to a
particular well,
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well location, unit or other subdivision of property described in
Exhibit A (a
"Property Subdivision"), record title to such Subject Interest or
Subject
Interests related to such Property Subdivision that: (i) entitles
Seller to
receive and retain, without suspension, reduction or termination,
not less than
the applicable net revenue interest or net revenue interests
specified for such
Property Subdivision in Exhibit A through plugging, abandonment and
salvage of
such Property Subdivision; (ii) obligates Seller to bear the costs
and expenses
attributable to the maintenance, development, and operation of such
Property
Subdivision through plugging, abandonment and salvage of such
Property
Subdivision in an amount not greater than the applicable working
interest or
working interests specified for such Property Subdivision in
Exhibit A; and
(iii) constitutes marketable record title under Utah Code Ann. ss.
57-9-1.
Defensible Title shall be subject to any exceptions identified in
the
Acquisition Title Opinion dated August 12, 2002, identified as
Exhibit A to the
Farmout Agreement, and shall not be diminished by any liens,
security interests,
or other encumbrances created by, through, or under Marion after
the date of the
Farmout Agreement.
(r) Condition of Assets. As of the Operator Change Date, the
machinery,
equipment, tangible personal property, fixtures and improvements
included in the
Assets meet industry standards concerning reasonably good working
order and
repair.
(s) Hedging. None of the Assets is subject to or are bound by
any
futures, hedge, swap, collar, put, call, option or other
commodities contract or
agreement.
(t) Brokerage Fees and Commissions. Neither Seller nor any
affiliate of
Seller has incurred any obligation or entered into any agreement
for any
investment banking, brokerage or finder's fee or commission in
respect of the
transactions contemplated by this Agreement for which Buyer shall
incur any
liability.
Section 5.2 Representations and Warranties of Buyer. To the best
of
Buyer's knowledge, Buyer represents and warrants to Seller as
follows:
(a) Organization and Qualification. Buyer is a corporation duly
organized, validly existing and in good standing under the Laws of
the State of
Texas and has the requisite corporate power to carry on its
business as it is
now being conducted. Buyer is duly qualified to do business and is
in good
standing in each jurisdiction in which the Assets to be acquired by
it makes
such qualification necessary.
(b) Authority. Buyer has all requisite corporate power and
authority to
execute and deliver this Agreement and to perform its obligations
under this
Agreement. The execution, delivery, and performance of this
Agreement and the
transactions contemplated hereby have been duly and validly
authorized by all
requisite corporate action on the part of Buyer.
(c) Actions. There are no actions pending against Buyer or, to
the
knowledge of Buyer, threatened against Buyer that relate to the
transactions
contemplated by this Agreement.
(d) Brokerage Fees and Commissions. Neither Buyer nor any affiliate
of
Buyer has incurred any obligation or entered into any agreement for
any
investment banking, brokerage or finder's fee or commission in
respect of the
transactions contemplated by this Agreement for which Seller shall
incur any
liability.
Section 5.3 Representations and Warranties of Parent. To the best
of
Parent's knowledge, Parent represents and warrants to Seller as
follows:
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(a) Subsidiaries. Parent owns, directly or indirectly, all of
the
capital stock or other equity interests of Buyer free and clear of
any liens,
and all the issued and outstanding shares of capital stock of Buyer
are validly
issued and are fully paid, non-assessable, and free of preemptive
and similar
rights to subscribe for or purchase securities. Parent has no
other
subsidiaries.
(b) Organization and Qualification. Parent and Buyer are each an
entity
duly incorporated or otherwise organized, validly existing and in
good standing
under the Laws of the jurisdiction of its incorporation or
organization (as
applicable), with the requisite power and authority to own and use
its
properties and assets and to carry on its business as currently
conducted.
Neither the Parent nor Buyer is in violation or default of any of
the provisions
of its respective certificate or articles of incorporation, bylaws
or other
organizational or charter documents. Each of the Parent and the
Buyer is duly
qualified to conduct business and is in good standing as a foreign
corporation
or other entity in each jurisdiction in which the nature of the
business
conducted or property owned by it makes such qualification
necessary, except
where the failure to be so qualified or in good standing, as the
case may be,
could not have or reasonably be expected to result in (i) a
material adverse
effect on the legality, validity or enforceability of this
Agreement or the
agreements for the Immediately Exercisable Options and the
Reserve-Based Options
(together, the "Transaction Documents"), (ii) a material adverse
effect on the
results of operations, assets, business, prospects or condition
(financial or
otherwise) of the Parent and the Buyer, taken as a whole, or (iii)
a material
adverse effect on the Parent's ability to perform in any material
respect on a
timely basis its obligations under any Transaction Document (any of
(i), (ii) or
(iii), a "Material Adverse Effect") and no proceeding has been
instituted in any
such jurisdiction revoking, limiting, curtailing or seeking to
revoke, limit or
curtail such power and authority or qualification.
(c)
Authority. Parent has the requisite corporate power and
authority
to enter into and to consummate the transactions contemplated by
each of the
Transaction Documents and otherwise to carry out its obligations
hereunder and
thereunder. The execution and delivery of each of the Transaction
Documents by
Parent and the consummation by it of the transactions contemplated
hereby and
thereby have been duly authorized by all necessary action on the
part of the
Parent and no further action is required by the Parent, its board
of directors
or its stockholders in connection therewith. Each Transaction
Document has been
(or upon delivery will have been) duly executed by the Parent and,
when
delivered in accordance with the terms hereof and thereof, will
constitute the
valid and binding obligation of the Parent enforceable against it
in accordance
with its terms except (i) as limited by general equitable
principles and
applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of
general application affecting enforcement of creditors' rights
generally, (ii)
as limited by laws relating to the availability of specific
performance,
injunctive relief or other equitable remedies and (iii) insofar
as
indemnification and contribution provisions may be limited by
applicable law.
(d) No Conflicts. The execution, delivery and performance of
the
Transaction Documents by Parent, the issuance and sale of the
Securities and the
consummation by Parent of the other transactions contemplated
hereby and thereby
do not and will not (i) conflict with or violate any provision of
the Parent's
or Buyer's certificate or articles of incorporation, bylaws or
other
organizational or charter documents, or (ii) conflict with, or
constitute a
default (or an event that with notice or lapse of time or both
would become a
default) under, result in the creation of any lien upon any of the
properties or
assets of the Parent or Buyer, or give to others any rights of
termination,
amendment, acceleration or cancellation (with or without notice,
lapse of time
or both) of, any agreement, credit facility, debt or other
instrument
(evidencing a Parent or Buyer debt or otherwise) or other
understanding to which
Parent or Buyer is a party or by which any property or asset of the
Parent or
Buyer is bound or affected, or (iii) conflict with or result in a
violation of
any law, rule, regulation, order, judgment, injunction, decree or
other
restriction of any court or governmental authority to which the
Parent or Buyer
9
<PAGE>
is subject (including federal and state securities laws and
regulations), or by
which any property or asset of Parent or Buyer is bound or
affected; except in
the case of each of clauses (ii) and (iii), such as could not have
or reasonably
be expected to result in a Material Adverse Effect.
(e) Actions. There is no action, suit, proceeding, inquiry, or
investigation before or by any court, public board, governmental
agency or
authority, or self-regulatory organization or body pending or
threatened against
or affecting Parent, Buyer, or any of their respective directors or
officers in
their capacities as such, wherein an unfavorable decision, ruling
or finding
would have a Material Adverse Effect or would adversely affect the
transactions
contemplated by this Agreement or that would adversely affect the
validity or
enforceability of, or the authority or ability of Parent to
consummate the
transactions contemplated by this Agreement. Parent and Buyer are
unaware of any
facts that could give rise to a claim or proceeding that, if
asserted or
conducted with results unfavorable to Parent or Buyer, could have a
Material
Adverse Effect.
(f) Brokerage Fees and Commissions. Neither Parent nor Buyer
has
incurred any obligation or entered into any agreement for any
investment
banking, brokerage or finder's fee or commission in respect of the
transactions
contemplated by this Agreement for which Seller shall incur any
liability.
(g) Issuance of the Securities. The Securities are duly authorized
and,
when issued and paid for in accordance with the applicable
Transaction
Documents, will be duly and validly issued, fully paid and
nonassessable, free
and clear of all liens imposed by Parent. The ordinary shares to be
issued upon
exercise of the Options, when issued in accordance with the terms
of the
Transaction Documents, will be validly issued, fully paid and
nonassessable,
free and clear of all liens imposed by Parent. Parent has reserved
from its duly
authorized capital stock the maximum number of Ordinary Shares
issuable pursuant
to this Agreement and the Options.
(h) Capitalization.
(i) The authorized capital stock of Parent consists of
192,414,201 fully paid issued ordinary shares. In addition, a total
of
88,141,201 listed and unlisted options to purchase ordinary shares
were
issued. Each of the outstanding shares of Parent is duly
authorized,
validly issued, and fully paid and nonassessable, and has not
been
issued in violation of (nor are any of the authorized shares of
Parent's capital stock subject to) any preemptive or similar
rights
created by statute, Parent's charter documents, or any agreement
to
which Parent is a party or bound, and such outstanding shares owned
by
Parent are owned free and clear of all security interests,
liens,
claims, pledges, agreements, limitations on Parent's voting
rights,
charges or other encumbrances of any nature whatsoever.
(ii) Except as identified in section 5.3(h)(i) or as set forth
in Schedule 5.3(h), there are no options, warrants, or other
rights
(including registration rights), agreements, arrangements, or
commitments of any character to which Parent is a party relating to
the
issued or unissued capital stock of Parent or obligating Parent
to
grant, issue, or sell any shares of its capital stock. Except as
set
forth in Schedule 5.3(h), Parent has no obligations, contingent
or
otherwise, to (1) repurchase, redeem, or otherwise acquire any
ordinary
shares or other capital stock of Parent; or (2) provide material
funds
to, or make any material investment in (in the form of a loan,
capital
contribution, or otherwise), or provide any guarantee with respect
to
the obligations of any other person. Except as described in
Schedule
5.3(h), Parent does not directly or indirectly own, has not agreed
to
purchase or otherwise acquire, or does not hold any interest
convertible into or exchangeable or exercisable for, 5% or more of
the
capital stock of any corporation, partnership, joint venture, or
other
business association or entity. Except as set forth in Schedule
5.3(h),
there are no agreements, arrangements, or commitments of any
character
(contingent or otherwise) pursuant to which any person is or may
be
entitled to receive any payment based on Parent's revenues or
earnings
or calculated in accordance therewith. Except as set forth in
Schedule
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5.3(h), there are no voting trusts, proxies, or other agreements
or
understanding to which Parent is a party or by which Parent is
bound
with respect to the voting of any shares of capital stock of
Parent.
(i) Required Filings and Consents. Except as set forth in
Schedule
5.3(i), the execution and delivery of this Agreement by Parent does
not, and
consummation of the transactions contemplated hereby will not,
require Parent to
obtain any consent, license, permit, approval, waiver,
authorization or order
of, or to make any filing with or notification to, any governmental
or
regulatory authority, domestic or foreign, except when the failure
to obtain
such consents, licenses, permits, approvals, waivers,
authorizations or orders,
or to make such filings or notifications, would not, either
individually or in
the aggregate, materially interfere with Parent's performance of
its obligations
under this Agreement and would not have a Material Adverse
Effect.
(j) Reports and Financial Statements.
(i) Parent has furnished to Seller complete and accurate
copies, as amended or supplemented, of (1) its annual report for
the
fiscal year ended June 30, 2005; (2) its interim financial report
for
the half-year ended December 31, 2005; and (3) its quarterly report
for
the quarter ended March 31, 2006, as filed with the Australian
Stock
Exchange ("ASX"), and all other reports filed by Parent with the
ASX
since June 30, 2005.
(ii) The audited consolidated financial statements of Parent
included in Parent's annual report for the fiscal year ended June
30,
2005 (1) comply as to form in all material respects with
applicable
accounting requirements, including the Accounting Standards,
Urgent
Issues Consensus Views, the Authoritative Pronouncements of the
Australian Accounting Standard Board, and the Corporations Act
2001;
(2) fairly present the consolidated financial condition, results
of
operations, and cash flows of Parent as of the respective date
thereof
and for the period referred to therein, and (3) are consistent
with
Parent's books and records.
(k) Absence of Certain Changes or Events. Except as set forth
in
Schedule 5.3(k), since the date of Parent's most recent balance
sheet provided
in accordance with the description in section 5.3(j), there has not
been any
material adverse change in the business, operations, properties,
level of
inventory, assets, or condition of the business or any damage,
destruction, or
loss (whether or not covered by insurance) or Parent or Buyer,
including:
(i) any change in the assets, liabilities, financial
condition, or operating results of Parent or Buyer, except changes
in
the ordinary course of business;
(ii) any damage, destruction, or loss, whether or not covered
by insurance;
(iii) any waiver by Parent or Buyer of a valuable right or of
a material debt owed to it;
(iv) any change or amendment to Parent's charter documents or
any agreement by which Parent or any of its assets or properties
is
bound or subject;
(v) any loans made by Parent or Buyer to or for the benefit of
their employees, officers, or directors, or any members of
their
immediate families, other than travel advances and other advances
made
in the ordinary course of their business;
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<PAGE>
(vi) any resignation or termination of any executive officer
or key employee of Parent or Buyer, and Parent is not aware of
any
impending resignation or termination of employment of any such
officer
or key employee;
(vii) any material change in any compensation arrangement or
agreement with any employee, director, or equity owner;
(viii) any adoption, creation, or material change in any
profit sharing,
bonus, deferred compensation, insurance, pension,
retirement, or other employee benefit plan, payment, or
arrangement
made to, for, or with the officers, directors, or employees of
Parent
or Buyer;
(ix)
any sale, assignment, or transfer of any patents,
trademarks, copyrights, trade secrets, or other intangible
assets;
(x) any satisfaction or discharge of any lien or payment of
any obligation by Parent or Buyer, except in the ordinary course
of
business and that is not material to the business, properties,
prospects, or financial condition of Parent or Buyer;
(xi) any declaration, setting aside, or payment or other
distribution in
respect of any of Parent's equity ownership, or any
direct or indirect redemption, purchase, or other acquisition of
any of
such equity ownership by Parent;
(xii) any lien created by Parent or Buyer respecting any of
their material properties or assets, except liens for taxes not yet
due
or payable;
(xiii) any other event or condition of any character that has
had a material adverse effect; or
(xiv) any agreement or commitment by Parent or Buyer to do any
of the things described or in accordance with this section 5.3.
(l) Compliance. Neither Parent nor Buyer (i) is in default under or
in
violation of (and no event has occurred that has not been waived
that, with
notice or lapse of time or both, would result in a default by
Parent or Buyer
under), nor has Parent or Buyer received notice of a claim that it
is in default
under or that it is in violation of, any indenture, loan or credit
agreement or
any other agreement or instrument to which it is a party or by
which it or any
of its properties is bound (whether or not such default or
violation has been
waived), (ii) is in violation of any order of any court, arbitrator
or
governmental body, or (iii) is or has been in violation of any
statute, rule or
regulation of any governmental authority, including without
limitation all
foreign, federal, state and local laws applicable to its business
and all such
laws that affect the environment, except in each case as could not
have or
reasonably be expected to result in a Material Adverse Effect.
(m) No Vote Required. No vote of the holders of any class or series
of
Parent's equity security is necessary to approve the transactions
contemplated
by the Transaction Documents.
(n) Labor Relations. No material labor dispute exists or is
imminent
with respect to any of the employees of Parent that could
reasonably be expected
to result in a Material Adverse Effect. None of Parent's or Buyer's
employees is
a member of a union that relates to such employee's relationship
with Parent,
and neither Parent nor Buyer is a party to a collective bargaining
agreement,
and Parent and Buyer believe that their relationships with their
employees are
good. No executive officer is, or is now expected to be, in
violation of any
material term of any employment contract, confidentiality,
disclosure or
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proprietary information agreement or non-competition agreement, or
any other
contract or agreement or any restrictive covenant, and the
continued employment
of each such executive officer does not subject Parent or Buyer to
any liability
with respect to any of the foregoing matters. Parent and Buyer are
in compliance
with all U.S. federal, state, local, and foreign laws and
regulations relating
to employment and employment practices, terms and conditions of
employment and
wages and hours, except where the failure to be in compliance could
not,
individually or in the aggregate, reasonably be expected to have a
Material
Adverse Effect.
(o) Information Supplied. Without limiting any of the
representations
and warranties contained herein, no representation or warranty of
Parent and no
statement by Parent or other information contained in or documents
referred to
in Parent's disclosure schedules, as of the date of such
representation,
warranty, statement, or document, contains or contained any untrue
statement of
material fact, or, at the date thereof, omits or omitted to state a
material
fact necessary in order to make the statements contained therein,
in light of
the circumstances under which such statements are or were made, not
misleading.
(p) Foreign Corrupt Practices. Neither Parent nor Buyer has, nor
any
director, officer, agent, employee, or other person acting on
behalf of Parent
or Buyer has in the course of his or her actions for or on behalf
of Parent,
used any corporate funds for any unlawful contribution, gift,
entertainment, or
other unlawful expenses relating to political activity; made any
direct or
indirect unlawful payment to any foreign or domestic government
official or
employee from corporate funds; violated or is in violation of any
provision of
the U.S. Foreign Corrupt Practices Act of 1977, as amended; or made
any bribe,
rebate, payoff, influence payment, kickback, or other unlawful
payment to any
foreign or domestic government official or employee. Without
limiting the
generality of the foregoing, Parent and Buyer have not directly or
indirectly
made or agreed to make (whether or not said payment is lawful) any
payment to
obtain, or with respect to, sales other than usual and regular
compensation to
its or their employees and sales representatives with respect to
such sales.
(q) Title to Assets. Parent and Buyer have good and marketable
title in
fee simple to all real property owned by them that is material to
the business
of Parent and Buyer and good and marketable title in all personal
property owned
by them that is material to the business of Parent and Buyer, in
each case free
and clear of all liens, except for liens as do not materially
affect the value
of such property and do not materially interfere with the use made
and proposed
to be made of such property by Parent and Buyer and liens for the
payment of
federal, state or other taxes, the payment of which is neither
delinquent nor
subject to penalties. All oil and gas royalty, working or operating
interests or
other rights held under lease on an oil and gas drilling location
are held by
Parent or Buyer under valid, subsisting and enforceable leases,
farmout or
participation agreements or other agreements with which Parent and
Buyer are in
compliance. Any other real property and facilities held under lease
by Parent
and Buyer are held by them under valid, subsisting, and enforceable
leases with
which Parent and Buyer are in compliance.
(r) Insurance. Parent and Buyer are insured by insurers of
recognized
financial responsibility against such losses and risks and in such
amounts as
are prudent and customary in the businesses in which Parent and
Buyer are
engaged, including, but not limited to, directors and officers
insurance
coverage. Neither Parent nor Buyer has any reason to believe that
it will not be
able to renew its existing insurance coverage as and when such
coverage expires
or to obtain similar coverage from similar insurers as may be
necessary to
continue its business without a significant increase in cost.
(s) Governmental Permits, etc. Each of Parent and Buyer has all
necessary franchises, licenses, certificates, and other
authorizations from any
foreign, federal, state, or local government or governmental
agency, department,
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or body that are currently necessary for the operation of its
business as
currently conducted, except when the failure to currently possess
could not
reasonably be expected to have a Material Adverse Effect.
(t) Proprietary Rights. Parent does not own any material
inventions,
patent applications, patents, trademarks (both registered and
unregistered),
trade names, copyrights, or trade secrets necessary for the conduct
of the
business of Parent or Buyer as currently conducted.
(u) Transactions with Affiliates and Employees. Except as set forth
on
Schedule 5.3(u), none of the officers or directors of Parent and
none of the
employees of Parent is presently a party to any transaction with
Parent or Buyer
(other than for services as employees, officers and directors),
including any
contract, agreement or other arrangement providing for the
furnishing of
services to or by, providing for rental of real or personal
property to or from,
or otherwise requiring payments to or from any officer, director or
such
employee or any entity in which any officer, director, or any such
employee has
a substantial interest or is an officer, director, trustee or
partner, in each
case in excess of $60,000 other than (i) for payment of salary or
consulting
fees for services rendered, (ii) reimbursement for expenses
incurred on behalf
of Parent and (iii) for other employee benefits, including stock
option
agreements under any stock option plan of Parent.
(v) Key Employees; Parent's Knowledge. Each Key Employee (as
defined
below) is currently serving Parent in the capacity disclosed in its
most recent
annual report. No Key Employee is, or is now expected to be, in
violation of any
material term of any employment contract, confidentiality,
disclosure or
proprietary information agreement, noncompetition agreement, or any
other
contract or agreement or any restrictive covenant, and the
continued employment
of each Key Employee does not subject Parent or Buyer to any
liability with
respect to any of the foregoing matters. No Key Employee has any
intention to
terminate or limit his employment with, or services to, the Parent
or Buyer, nor
is any such Key Employee subject to any constraints (e.g.,
litigation) that
would cause such employee to be unable to devote his full time and
attention to
such employment or services. "Key Employee" means each officer of
Buyer.
(w) Drilling Practices. The real property on which the Parent and
Buyer
have the right to explore, develop, or recover oil and gas
substances (the
"Current Properties"); all right, title, and interest of Parent and
Buyer in and
to the Current Properties; and all machinery, equipment, jigs,
drills, dies,
tools, handling equipment, furniture, furnishings and accessories
and supplies
of all kinds used on the Current Properties (collectively the
"Oilfield Assets")
have been operated in accordance with good oilfield practice, in
compliance with
the applicable law, ordinance, rule, regulation, order, judgment,
or decree of
any governmental entity, court, or arbitration tribunal, except for
possible
violations, the sanctions for which, either singly or in the
aggregate would not
have a Material Adverse Effect, and materially in accordance with
the terms and
conditions of all agreements applicable thereto.
(x)
Oil or Gas Balancing Agreements. Neither Parent nor Buyer, nor
any
other person on their behalf, have entered into any agreement or
arrangements,
commonly known as an oil or gas balancing, swaps, overproduction,
or
underlift-overlift agreements, that are among two or more persons
owning
interests in a portion of the Current Properties or pooled or
unitized
therewith; nor has there been any circumstance or case whereby one
of such
persons has taken, or may hereafter take, a share of the production
of oil or
gas substances from such Current Properties greater than it would
otherwise be
entitled to by virtue of its interest in such Current Properties,
and which
excess taking entitled the other persons to a credit in respect of
subsequent
production of Parent's oil and gas substances produced from such
Current
Properties.
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(y) Assets Subject to Obligations. The Oilfield Assets are not
affected
by any "take or pay" obligations.
(z) Allowables. None of the oil and gas wells operated by Parent
or
Buyer on the Current Properties has been produced in excess of
applicable
production allowables imposed by applicable law, ordinance, rule,
regulation,
order, judgment, or decree of any governmental entity, court, or
arbitration
tribunal, since Parent or Buyer acquired its interest therein. Such
oil and gas
wells are not subject to any production penalty and Parent is not
aware of any
impending change in statutorily imposed or sanctioned production
allowables
imposed by applicable governmental entities currently applicable to
any of the
oil and gas wells other than changes that are in the public
domain.
(aa) Environmental Matters. The terms "hazardous waste,"
"hazardous
substance," "disposal," "release," and "threatened release," as
used in this
Agreement, shall have the same meanings as set forth in the
Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as
amended, 42
U.S.C. ss. 9601, et seq., the Superfund Amendments and
Reauthorization Act of
1986, Pub. L. no. 99 499, the Hazardous Materials Transportation
Act, 49 U.S.C.
ss. 1801, et seq., the Resource Conservation and Recovery Act, 49
U.S.C. ss.
6901, et seq., or other applicable state or federal laws adopted
pursuant to any
of the foregoing. Except as set forth in Schedule 5.3(aa), during
the period of
ownership, use, or other occupancy of the properties of Parent and
Buyer,
neither Parent nor Buyer have used, generated, manufactured,
stored, treated,
disposed of, or released any hazardous waste or substance on,
under, or about
any of the properties, except in compliance with environmental
laws.
(bb) Internal Accounting Controls. Parent and Buyer maintain a
system
of internal accounting controls sufficient to provide reasonable
assurance that
(i) transactions are executed in accordance with management's
general or
specific authorizations, (ii) transactions are recorded as
necessary to permit
preparation of financial statements in conformity with generally
accepted
accounting principles and to maintain asset accountability, (iii)
access to
assets is permitted only in accordance with management's general or
specific
authorization, and (iv) the recorded accountability for assets is
compared with
the existing assets at reasonable intervals and appropriate action
is taken with
respect to any differences.
ARTICLE VI.
INVESTIGATION OF ASSETS
Buyer conducted an investigation into the Assets in connection with
the
entry into the Farmout Agreement, and since that time has had full
access to all
Records, and its personnel have had full access to the Clear Creek
Natural Gas
Unit, both before and after the Operator Change Date. Buyer hereby
acknowledges
it has had the opportunity to inspect the Assets to its full
satisfaction and
specifically disclaims reliance on any representations, statements,
or
warranties of Seller except as specifically set forth in this
Agreement.
ARTICLE VII.
COVENANTS OF SELLER, BUYER, AND PARENT
Section 7.1 Conduct of Business Pending Closing. Except as approved
by
Buyer in writing (which approval shall not be unreasonably
withheld), Seller
covenants and agrees that:
(a) Sales. Seller shall not sell, transfer, assign, convey,
farm-out,
release, abandon or otherwise dispose of any of the Assets, or
enter into any
transaction the effect of which would be to cause Seller's
ownership interest in
any of the Assets to be altered from Seller's ownership interest as
of the date
of this Agreement, other than oil, gas and other hydrocarbons
produced, saved
and sold in the ordinary course of business.
(b) Encumbrances. Seller shall not create or permit the creation of
any
lien, security interest or other encumbrance on any of the
Assets.
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(c) Contracts and Agreements. Seller shall not enter into any oil,
gas
or other hydrocarbon sales, supply, exchange, processing or
transportation
contract with respect to the Assets without written consent of
Buyer.
(d) Notice of Defaults. Seller shall give prompt written notice
to
Buyer of any written notice of default (or threat of default,
whether disputed
or denied) received or given by Seller under any material
instrument or
agreement affecting the Assets to which Seller is a party or by
which Seller or
any of the Assets are bound.
Section 7.2 Conveyance. Upon the terms and subject to the
conditions of
this Agreement, at or prior to the Closing, Seller and Buyer shall
execute and
deliver or cause the execution and delivery of the Assignment, Bill
of Sale and
Deed with Reservation of Net Profits Interest, in substantially the
form
attached hereto as Exhibit F (the "Conveyance"), together with all
special
federal or other assignment forms as may be required by Law to be
executed in
connection with the conveyance of specific Assets; provided that
the terms and
provisions of the Conveyance shall control as to any conflict
between the
Conveyance and any such special assignment forms.
Section 7.3 Public Announcements. Without the prior written
approval of
the other Party hereto, which approval shall not be unreasonably
withheld, no
Party hereto will issue, or permit any agent or affiliate of it to
issue, any
press releases or otherwise make, or cause any agent or affiliate
of it to make,
any public statements with respect to this Agreement and the
transactions
contemplated hereby, except when such release or statement is
deemed in good
faith by the releasing Party to be required by Law or any national
securities
exchange, in which case the Party will use its commercially
reasonable efforts
to provide a copy to the other Party prior to any release or
statement.
Section 7.4 Further Assurances. Seller, Buyer, and Parent each
agree,
from time to time, whether before, at or after the Closing Date, to
execute and
deliver or cause its respective affiliates to execute and deliver
such further
instruments of conveyance and transfer and take such other action
as may be
necessary to carry out the purposes and intents of this
Agreement.
Section 7.5 Post-Closing Covenants of Buyer. Buyer covenants
and
agrees:
(a) that it shall, with reasonable commercial diligence and
dispatch,
explore all geological zones and formations in which Buyer at any
time has an
interest below the surface of the Lands and, as warranted, develop
and place the
same into production with a view toward maximizing recovery of
Hydrocarbons
therefrom; and
(b) that it shall, on an annual basis, provide Seller with a
capital
budget, which shall include an approximate description of its
proposed field
activities for the following year, including estimated
expenditures.
ARTICLE VIII.
CLOSING CONDITIONS
Section 8.1 Seller's Closing Conditions. The obligation of Seller
to
consummate the transactions contemplated hereby is subject, at the
option of
Seller, to the satisfaction on or prior to the Closing Date of all
of the
following conditions:
(a) Representations, Warranties and Covenants. The (i)
representations
and warranties of Buyer and Parent contained in this Agreement
shall be true and
correct in all material respects on and as of the Closing Date, and
(ii)
16
<PAGE>
covenants and agreements of Buyer and Parent to be performed on or
before the
Closing Date in accordance with this Agreement shall have been duly
performed in
all material respects.
(b) Conveyance. Buyer shall have executed and delivered the
Conveyance
prior to or on the Closing Date.
(c) No Material Adverse Change. There has been no material
adverse
change in the financial condition of Parent.
Section 8.2 Buyer's Closing Conditions. The obligation of Buyer
to
consummate the transactions contemplated hereby is subject, at the
option of
Buyer, to the satisfaction on or prior to the Closing Date of all
of the
following conditions:
(a) Representations, Warranties and Covenants. The (i)
representations
and warranties of Seller contained in this Agreement shall be true
and correct
in all material respects on and as of the Closing Date, and (ii)
covenants and
agreements of Seller to be performed on or before the Closing Date
in accordance
with this Agreement shall have been duly performed in all material
respects.
(b) Conveyance. Seller shall have executed and delivered the
Conveyance
prior to or on the Closing Date.
(c) Material Adverse Change. There has been no material adverse
change
in the operation or condition of the Assets since the Effective
Time.
ARTICLE IX.
CLOSING
Section 9.1 Closing. The "Closing" shall be held on the Closing
Date at
10:00 a.m. (local time), at the offices of Buyer at 119 S.
Tennessee Ave., Suite
200, McKinney, Texas 75069, or at such other time or place as the
Parties may
otherwise agree in writing.
Section 9.2 Seller's Closing Obligations. At Closing, Seller
shall
execute and deliver, or cause to be executed and delivered, to
Buyer the
following:
(a) the Conveyance;
(b) the Existing Well Net Profits Interest Agreement;
(c) the Future Well Net Profits Interest Agreement;
(d) the Termination Agreement, terminating the Farmout
Agreement;
(e) letters in lieu of division and transfer orders executed by
Seller
relating to the Subject Interests in form reasonably necessary to
reflect the
conveyances contemplated hereby that have been approved by
Buyer;
(f) the Records; and
(g) any agreements, instruments, and documents that are required
by
other terms of this Agreement to be executed and/or delivered by
Seller to Buyer
at the Closing.
17
<PAGE>
Section 9.3 Buyer's Closing Obligations. At Closing, Buyer shall
(a)
deliver, or cause to be delivered, the Purchase Price to Seller in
immediately
available funds to the bank account as provided in section 2.2 and
the Share
Payment; and (b) execute and deliver, or cause to be executed and
delivered, to
Seller the following:
(i) the Conveyance;
(ii) the Existing Well Net Profits Interest Agreement;
(iii) the Future Well Net Profits Interest Agreement;
(iv) the Termination Agreement, terminating the Farmout
Agreement;
(v) the Immediately Exercisable Options and the Reserve-Based
Options;
(vi) a legal opinion in substantially the form attached hereto
as Exhibit G; and
(vii) any other agreements, instruments, and documents that
are required by other terms of this Agreement to be executed
and/or
delivered by Buyer to Seller at the Closing.
ARTICLE X.
EFFECT OF CLOSING
Section 10.1 Revenues. After Closing, all proceeds, accounts
receivable, notes receivable, income, revenues, monies and other
items included
in or attributable to the Assets with respect to any period of time
after the
Effective Time shall belong to and be paid over to Buyer.
Section 10.2 Expenses. After Closing, all accounts payable and
other
costs and expenses with respect to the Assets prior to the
Effective Time shall
be borne by Seller. Any costs and expenses with respect to the
Assets after the
Effective Time shall be borne by the Buyer.
Section 10.3 Payments and Obligations. If monies are received by
any
Party hereto that, under the terms of this Article X, belong to
another Party,
the same shall immediately be paid over to the proper Party. If an
invoice or
other evidence of an obligation is received that under the terms of
this Article
X is partially the obligation of Seller and partially the
obligation of Buyer,
then the Parties shall consult each other and each shall promptly
pay its
portion of such obligation to the obligee.
Section 10.4 Survival. The representations and warranties of
the
Parties contained in this Agreement shall survive the Closing until
twenty-four
(24) months after the Closing Date. All of the covenants and
agreements made by
each Party in this Agreement shall survive the consummation of the
transactions
contemplated herein and shall continue in full force and effect
after the
Closing indefinitely until all obligations with respect to any such
covenants
are fulfilled in their entirety.
ARTICLE XI.
INDEMNIFICATION
Section 11.1 Indemnification by Buyer. FROM AND AFTER THE CLOSING
DATE,
BUYER SHALL INDEMNIFY AND HOLD HARMLESS THE SELLER, ITS PRESENT AND
FORMER
DIRECTORS, OFFICERS/PARTNERS, EMPLOYEES AND AGENTS, AND EACH OF THE
DIRECTORS,
18
<PAGE>
OFFICERS, PARTNERS, MEMBERS, HEIRS, EXECUTORS, SUCCESSORS AND
PERMITTED ASSIGNS
OF ANY OF THE FOREGOING (COLLECTIVELY, THE "SELLER INDEMNIFIED
PARTIES") FROM
AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, FINES,
PENALTIES,
JUDGMENTS, SETTLEMENTS, AWARDS, COSTS, TAXES AND EXPENSES
(INCLUDING REASONABLE
FEES AND EXPENSES OF COUNSEL, CONSULTANTS, EXPERTS AND OTHER
PROFESSIONAL FEES)
(COLLECTIVELY, "LOSSES") ARISING OUT OF OR ATTRIBUTABLE OR RELATING
TO (a) THE
OWNERSHIP, USE, MAINTENANCE OR OPERATION OF THE ASSETS FROM AND
AFTER MAY 10,
2005, AND (b) ANY MISREPRESENTATION, BREACH OF WARRANTY OR
NONFULFILLMENT OF ANY
COVENANT OR AGREEMENT ON THE PART OF BUYER HEREUNDER.
Section 11.2 Indemnification by Parent. FROM AND AFTER THE
CLOSING
DATE, PARENT SHALL INDEMNIFY AND HOLD HARMLESS THE SELLER
INDEMNIFIED PARTIES
FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, FINES,
PENALTIES,
JUDGMENTS, SETTLEMENTS, AWARDS, COSTS, TAXES AND EXPENSES
(INCLUDING REASONABLE
FEES AND EXPENSES OF COUNSEL, CONSULTANTS, EXPERTS AND OTHER
PROFESSIONAL FEES)
ARISING OUT OF OR ATTRIBUTABLE OR RELATING TO ANY
MISREPRESENTATION, BREACH OF
WARRANTY OR NONFULFILLMENT OF ANY COVENANT OR AGREEMENT ON THE PART
OF BUYER
HEREUNDER.
Section 11.3 Indemnification by Seller. SELLER SHALL INDEMNIFY AND
HOLD
HARMLESS BUYER AND PARENT, THEIR PRESENT AND FORMER DIRECTORS,
OFFICERS,
EMPLOYEES AND AGENTS, AND EACH OF THE DIRECTORS, OFFICERS, HEIRS,
EXECUTORS,
SUCCESSORS AND ASSIGNS OF ANY OF THE FOREGOING (COLLECTIVELY, THE
"BUYER
INDEMNIFIED PARTIES") FROM AND AGAINST ANY AND ALL LOSSES ARISING
OUT OF OR
ATTRIBUTABLE OR RELATING TO (a) THE OWNERSHIP, USE, MAINTENANCE OR
OPERATION OF
THE ASSETS THAT OCCURRED PRIOR TO MAY 10, 2005, AND (b) FROM AND
AFTER THE
EFFECTIVE TIME ANY MISREPRESENTATION, BREACH OF WARRANTY OR
NONFULFILLMENT OF
ANY COVENANT OR AGREEMENT ON THE PART OF SELLER HEREUNDER.
Section 11.4 Exclusive Remedy. Seller, Buyer, and Parent
acknowledge
and agree that from and after the Closing Date the indemnification
provisions of
this Article XI are the sole and exclusive remedy of Seller, Buyer,
and Parent
for the breach of any representation or warranty or nonfulfillment
of any
covenant or agreement on the part of Seller or Buyer or Parent
under this
Agreement or any certificate delivered pursuant hereto, and Seller
does hereby
release, acquit and forever discharge all Buyer Indemnified Parties
and Buyer
and Parent do hereby release, acquit, and forever discharge all
Seller
Indemnified Parties from any such other remedies.
ARTICLE XII.
TERMINATION; DISPUTE
RESOLUTION; REMEDIES; LIMITATIONS
Section 12.1 Termination of Agreement. This Agreement and the
transactions contemplated hereby may be terminated at any time
prior to the
Closing:
(a) by the mutual consent of Seller and Buyer; or
(b) if the Closing has not occurred by the close of business on
the
Closing Date, then (i) by Seller if any condition specified in
section 8.1 has
not been satisfied on or before such close of business, and shall
not
19
<PAGE>
theretofore have been waived by Seller, or (ii) by Buyer if any
condition
specified in section 8.2 has not been satisfied on or before such
close of
business, and shall not theretofore have been waived by Buyer;
provided, in each
case, that the failure to consummate the transactions contemplated
hereby on or
before such date did not result from the failure by the Party or
Parties seeking
termination of this Agreement to fulfill any undertaking or
commitment provided
for herein on the part of such Party or Parties that is required to
be fulfilled
on or prior to Closing.
Section 12.2 Dispute Resolution. In the event of any dispute
between
the Parties relating to this Agreement and/or the Assets, the
Parties agree to
abide by the terms and provisions of the alternative dispute
resolution
procedures set forth in Schedule 12.2 attached hereto and fully
incorporated
herein.
Section 12.3 Limitations. NOTWITHSTANDING ANYTHING CONTAINED TO
THE
CONTRARY IN ANY OTHER PROVISION OF THIS AGREEMENT, SELLER, BUYER,
AND PARENT
AGREE THAT THE RECOVERY BY ANY PARTY HERETO OF ANY DAMAGES SUFFERED
OR INCURRED
BY IT AS A RESULT OF ANY BREACH BY ANOTHER PARTY OF ANY OF ITS
REPRESENTATIONS,
WARRANTIES, COVENANTS OR AGREEMENTS UNDER THIS AGREEMENT SHALL BE
LIMITED TO THE
ACTUAL DAMAGES SUFFERED OR INCURRED BY THE NON-BREACHING PARTY AS A
RESULT OF
THE BREACH BY THE BREACHING PARTY OF ITS REPRESENTATIONS,
WARRANTIES, COVENANTS
OR AGREEMENTS HEREUNDER AND IN NO EVENT SHALL THE BREACHING PARTY
BE LIABLE TO
THE NON-BREACHING PARTY FOR ANY INDIRECT, CONSEQUENTIAL, SPECIAL,
EXEMPLARY OR
PUNITIVE DAMAGES SUFFERED OR INCURRED BY THE NON-BREACHING PARTY AS
A RESULT OF
THE BREACH BY THE BREACHING PARTY OF ANY OF ITS REPRESENTATIONS,
WARRANTIES,
COVENANTS OR AGREEMENTS HEREUNDER. For purposes of the foregoing,
actual damages
may, however, include indirect, consequential, special, exemplary
or punitive
damages to the extent (a) the injuries or losses resulting in or
giving rise to
such damages are incurred or suffered by a person or entity that is
not a Seller
Indemnified Party, a Buyer Indemnified Party or an affiliate of any
of the
foregoing, and (b) such damages are recovered against an
indemnified Party
hereunder by a person or entity that is not a Seller Indemnified
Party, a Buyer
Indemnified Party or an affiliate of any of the foregoing. This
section 12.3
shall operate only to limit a Party's liability and shall not
operate to
increase or expand any contractual obligation of a Party hereunder
or cause any
contractual obligation of a Party hereunder to survive longer than
as otherwise
provided.
ARTICLE XIII.
MISCELLANEOUS
Section 13.1 Counterparts. This Agreement may be executed in one
or
more counterparts, all of which shall be considered one and the
same agreement,
and shall become effective when one or more counterparts have been
signed by
each of the Parties and delivered to the other Party.
Section 13.2 Governing Law. THIS AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED HEREBY SHALL BE GOVERNED BY AND INTERPRETED IN
ACCORDANCE WITH THE
LAWS OF THE STATE OF UTAH WITHOUT GIVING EFFECT TO PRINCIPLES
THEREOF RELATING
TO CONFLICTS OF LAW RULES THAT WOULD DIRECT THE APPLICATION OF THE
LAWS OF
ANOTHER JURISDICTION.
Section 13.3 Entire Agreement. This Agreement and the schedules
and
exhibits hereto contain the entire agreement between the Parties
with respect to
the subject matter hereof and there are no agreements,
understandings,
representations or warranties between the Parties other than those
set forth or
20
<PAGE>
referred to herein. The headings herein are for convenience only
and shall have
no significance in the interpretation hereof.
Section 13.4 Expenses. Buyer shall be responsible for all
recording
fees relating to the filing of instruments transferring title to
Buyer from
Seller. Seller shall be responsible for (a) any sales taxes that
may become due
and owing by reason of the sale of the Assets hereunder, (b) all
transfer,
stamp, documentary and similar taxes imposed on the Parties hereto
with respect
to the property transfer contemplated pursuant to this Agreement,
and (c) all
income and other taxes incurred by or imposed on Seller with
respect to the
transactions contemplated hereby. All other costs and expenses
incurred by each
Party hereto in connection with all things required to be done by
it hereunder,
including attorney's fees, accountant fees and the expense of title
examination,
shall be borne by the Party incurring same.
Section 13.5 Notices. Unless otherwise expressly provided in
this
Agreement, all notices required or permitted hereunder shall be in
writing and
deemed sufficiently given for all purposes hereof if (a) delivered
in person, by
courier, by overnight delivery service or by registered or
certified United
States Mail to the person or entity to be notified, with receipt
obtained, or
(b) sent by telecopy, telefax or other facsimile or electronic
transmission,
with "answer back" or other "advice of receipt" obtained, in each
case to the
appropriate address or number as set forth below. Each notice shall
be deemed
effective on receipt by the addressee as aforesaid; provided that,
notice
received by telex, telecopy, telefax or other facsimile or
electronic
transmission after 5:00 p.m. at the location of the addressee of
such notice
shall be deemed received on the first business day following the
date of such
electronic receipt. Notices to Seller shall be addressed as
follows:
Mid-Power Resources Corporation
8290 W. Sahara Ave., Suite 186
Las Vegas, Nevada 89117
Attention: James W. Scott, Susan Trimboli
Telephone No.: (702)
838-0716
Facsimile No.: (702)
838-5087
or at such other address or to such other telecopy, telefax or
other facsimile
or electronic transmission number and to the attention of such
other person or
entity as Seller may designate by written notice to Buyer. Notices
to Buyer
shall be addressed to:
Marion Energy, Inc.
119 S. Tennessee Ave., Suite 200
McKinney, Texas 75069
Attention: Keri Clarke, Vice President-Land
Telephone No.: (972)
540-2967
Facsimile No.: (972)
547-9499
21
<PAGE>
or at such other address or to such other telecopy, telefax or
other facsimile
or electronic transmission number and to the attention of such
other person as
Buyer may designate by written notice to Seller. Notices to Parent
shall be
addressed to:
Marion Energy Limited
Suite 3, Pacific Tower
737 Burwood Road
HAWTHORN, VIC, AUSTRALIA, 3122
Attention: Peter Collery
Telephone No.: 03 8862
6466
Facsimile No.: 03 8862
6614
Section 13.6 Successors and Assigns. This Agreement shall be
binding
upon and inure to the benefit of the Parties hereto and their
respective
successors and permitted assigns.
Section 13.7 Amendments and Waivers. This Agreement may not be
modified
or amended except by an instrument or instruments in writing signed
by the Party
against whom enforcement of any such modification or amendment is
sought. Any
Party hereto may, only by an instrument in writing, waive
compliance by another
Party hereto with any term or provision of this Agreement on the
part of such
other Party hereto to be performed or complied with. The waiver by
any Party
hereto of a breach of any term or provision of this Agreement shall
not be
construed as a waiver of any subsequent breach.
Section 13.8 Schedules and Exhibits. All schedules and exhibits
hereto
that are referred to herein are hereby made a part hereof and
incorporated
herein by such reference.
Section 13.9 Ad Valorem Tax Proration. Ad valorem taxes related to
the
Assets will be prorated as of the Effective Time. For ad valorem
taxes for a
period that the Effective Time splits that have been paid by
Seller, Buyer shall
reimburse Seller for the portion thereof equal to the percentage of
such period
represented by the portion of such period beginning at the
Effective Time. For
ad valorem taxes for a period that the Effective Time splits that
have not been
paid to Seller, Buyer shall pay such taxes and Seller shall
reimburse Buyer for
a percentage of such taxes equal to the portion of such period that
ends on the
day immediately preceding the Effective Time. Section 13.10
Agreement for the
Parties' Benefit Only. Except as specified in Article XI, which is
also intended
to benefit and to be enforceable by any of the indemnified parties,
this
Agreement is not intended to confer upon any person or entity not a
Party hereto
any rights or remedies hereunder, and no person or entity, other
than the
Parties hereto or the other Seller Indemnified Parties or the other
Buyer
Indemnified Parties, is entitled to rely on any representation,
warranty,
covenant or agreement contained herein. In each case, such third
party
beneficiary may only bring suit against the defaulting Party or
Parties.
Section 13.11 Severability. If any term or other provision of
this
Agreement is invalid, illegal or incapable of being enforced by any
rule of law
or public policy, all other conditions and provisions of this
Agreement shall
nevertheless remain in full force and effect so long as the
economic or legal
substance of the transactions contemplated hereby is not affected
in any adverse
manner to any Party. Upon such determination that any term or other
provision is
invalid, illegal or incapable of being enforced, the Parties hereto
shall
negotiate in good faith to modify this Agreement so as to effect
the original
intent of the Parties as closely as possible in an acceptable
manner to the end
that the transactions contemplated hereby are fulfilled to the
extent possible.
Section 13.12 Time of Essence. Time is of the essence in this
Agreement.
22
<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf
of
each of the Parties as of the day first above written.
SELLER:
MID-POWER RESOURCE CORPORATION
By: /s/ James W. Scott
----------------------------
Name: James W. Scott
Title: President
BUYER:
MARION ENERGY, INC.
By: /s/ Keri Clarke
----------------------------
Name: Keri Clarke
Title: Vice President-Land
PARENT:
MARION ENERGY LIMITED
By: /s/ Keri Clarke
----------------------------
Name: Keri Clarke
Title: Vice President-Land
23
<PAGE>
Schedule 5.1(c)
Required Consents
None
<PAGE>
Schedule 5.1(h)
Material Contracts
None
<PAGE>
Schedule 5.1(o)
Proposed Operations or Expenditures
None
<PAGE>
Schedule 5.3(h)
Commitments Related to Parent's Capital
None
<PAGE>
Schedule 5.3(i)
Required Filings and Consents
None
<PAGE>
Schedule 5.3(k)
Material Adverse Changes
None
<PAGE>
Schedule 5.3(u)
Transactions with Affiliates and Employees
None
<PAGE>
Schedule 5.3(aa)
Environmental Matters
None
<PAGE>
Schedule 12.2
Alternative Dispute Resolution Procedures
In the event of any dispute, the Parties shall promptly negotiate
in
good faith in attempt to resolve such dispute. Any dispute that is
not resolved
by the Parties shall be settled exclusively and finally by
arbitration in
accordance with the following procedures:
(a) Such arbitration shall be conducted pursuant to the
Federal Arbitration Act, except as expressly provided otherwise in
this
Agreement. The validity, construction, and interpretation of
these
procedures, and all procedural aspects of the arbitration
conducted
pursuant hereto, including the determination of the issues that
are
subject to arbitration (i.e., arbitrability), the scope of the
arbitrable issues, allegations of "fraud in the inducement" to
enter
into the Agreement or these arbitration procedures, allegations
of
waiver, laches, delay or other defenses to arbitrability, and the
rules
governing the conduct of the arbitration (including the time for
filing
an answer, the time for the filing of counterclaims, the times
for
amending the pleadings, the specificity of the pleadings, the
extent
and scope of discovery, the issuance of subpoenas, the times for
the
designation of experts, whether the arbitration is to be stayed
pending
resolution of related litigation involving third parties not bound
by
the Agreement,
the receipt of evidence, and the like), shall be decided
by an independent expert, who shall serve as sole arbitrator
(the
"Independent Expert"). The Independent Expert shall be appointed
by
mutual agreement of Seller and Buyer from among candidates with
experience and expertise in the area that is the subject of
such
Dispute, and failing such agreement, such Independent Expert for
such
Dispute shall be selected in accordance with the Commercial
Arbitration
Rules of the American Arbitration Association (the "Rules").
The
arbitration administered by the Independent Expert and shall be
conducted pursuant to the Rules, except as expressly provided
otherwise
in this
Agreement. The arbitration proceedings shall be subject to any
optional rules contained in the Rules for emergency measures and,
in
the case of disputes with respect to amounts in excess of
$1,000,000,
optional rules for large and complex cases.
(b) The Independent Expert shall permit and facilitate such
discovery as he/she determines is appropriate in the
circumstances,
taking into account the needs of the Parties and the desirability
of
making discovery expeditious and cost-effective. Such discovery
may
include pre-hearing depositions, particularly depositions of
witnesses
who will not appear personally to testify, if there is a
demonstrated
need therefor. The Independent Expert may issue orders to protect
the
confidentiality of proprietary information, trade secrets and
other
sensitive information disclosed in discovery.
(c) All arbitration proceedings hereunder shall be conducted
in Dallas, Texas, or such other mutually agreeable location.
(d) In deciding the substance of the dispute, the Independent
Expert shall refer to the substantive laws of the State of Utah
for
guidance (excluding
choice-of-law principles that might call for the
application of the laws of another jurisdiction). Matters relating
to
arbitration shall be governed by the Federal Arbitration Act.
(e) The Parties shall request the Independent Expert to
conduct a hearing as soon as reasonably practicable after
appointment
and to render a final decision completely disposing of the dispute
that
is the subject of such proceedings as soon as reasonably
practicable
after the final hearing. The Parties shall instruct the
Independent
Expert to impose time limitations he/she considers reasonable for
each
phase of such proceeding, including, without limitation, limits on
the
<PAGE>
time allotted to each Party for the presentation of its case
and
rebuttal. The Independent Expert shall actively manage the
proceedings
as he/she deems best so as to make the proceedings fair,
expeditious,
economical, and less burdensome than litigation. To provide for
speed
and efficiency, the Independent Expert may: (i) limit the time
allotted
to each Party for presentation of its case; and (ii) exclude
testimony
and other evidence they deem irrelevant or cumulative.
(f) Notwithstanding any other provision in this Agreement to
the contrary, the Parties expressly agree that the Independent
Expert
shall have absolutely no authority to award consequential,
incidental,
special, treble, exemplary or punitive damages of any type under
any
circumstances regardless of whether such damages may be available
under
Utah law, or any other laws, or under the Federal Arbitration Act
or
the Rules.
(g) The Parties shall request that final decision of the
Independent Expert be in writing, be as brief as possible, set
forth
the reasons for such final decision, and if the Independent
Expert
awards
monetary damages to either Party, contain a certification by
the
Independent Expert that they have not included any
consequential,
incidental, special, treble, exemplary or punitive damages. To
the
fullest extent permitted by law, the arbitration proceeding and
the
Independent Expert's decision and award shall be maintained in
confidence by the Parties and the Parties shall instruct the
Independent Expert to likewise maintain such matters in
confidence.
<PAGE>
EXHIBIT A TO
ASSET PURCHASE AGREEMENT
SCHEDULE SHOWING THE OWNERSHIP OF OIL AND GAS INTERESTS
CLEAR CREEK UNIT AREA
CARBON & EMERY COUNTIES, UTAH
Attached to and made part of that certain Asset Purchase Agreement
dated August
31, 2006, and effective as of August 28, 2006, by and between
Mid-Power Resource
Corporation, as Seller, and Marion Energy Inc., as Buyer, and
Marion Energy
Limited, as Parent of Buyer
<TABLE>
<CAPTION>
Exhibit A
============================================================================================================================
LEGAL
LESSOR
BOOK/
SEC/T/R
DESCRIPTION
Federal/State/Fee NAME & ADDRESS
DATE
PAGE
COUNTY
----------------------------------------------------------------------------------------------------------------------------
<S>
<C>
<C>
<C>
<C> <C>
<C>
13S-6E, SEC: 13
E/2SE/4NE/4, E/2E/2SE/4, SW/4SE/4SE/4 Fee/ UT 2570-
00020
Utah Fuel Company 8/4/45 3Y/359 CARBON
----------------------------------------------------------------------------------------------------------------------------
13S-6E, SEC: 24
E/2NE, S/2SWNE
----------------------------------------------------------------------------------------------------------------------------
13S-7E, SEC: 17
S/2SW
----------------------------------------------------------------------------------------------------------------------------
13S-7E, SEC: 18 LOTS
1,2,3,4, E/2SW/2, S/2SE
----------------------------------------------------------------------------------------------------------------------------
13S-7E, SEC: 19 LOTS
1,2,3,4, NENW, W/2NE, NENE, NWSE
----------------------------------------------------------------------------------------------------------------------------
13S-7E, SEC: 20
N/2NW, W/2NE, SWSENE, W/2SE, W/2E/2SE
----------------------------------------------------------------------------------------------------------------------------
13S-7E, SEC: 29
W/2NE, W2NENE, SENE, E/2SE
----------------------------------------------------------------------------------------------------------------------------
13S-7E, SEC: 30 LOTS
1,2,3,4 E/2SW, SENE
----------------------------------------------------------------------------------------------------------------------------
13S-7E, SEC: 31 LOTS
1,2,4, SENW, SESW, E/2
----------------------------------------------------------------------------------------------------------------------------
13S-7E, SEC: 32
ALL
----------------------------------------------------------------------------------------------------------------------------
14S-7E, SEC: 5
LOTS 1,2,3,4, S/2NE, SE, NWSW, S/2SW
----------------------------------------------------------------------------------------------------------------------------
14S-7E, SEC: 6
LOTS 1,2,3,4,5, AND ALL OF 6 AND 7 IN
CARBON COUNTY, E/2SW, SENW, S/2NE
----------------------------------------------------------------------------------------------------------------------------
14S-7E, SEC: 7
ALL OF NENW LYING IN CARBON COUNTY
----------------------------------------------------------------------------------------------------------------------------
13S-7E, SEC 8
E/2SW
FEE/UT 2570-00023-
AE
Therald Jensen 4/1/77
173/450 CARBON
----------------------------------------------------------------------------------------------------------------------------
13S-7E, SEC 8
E/2SW
FEE/UT 2570-00023- Mary Louise
AA
Seamons
4/1/77 173/430
CARBON
----------------------------------------------------------------------------------------------------------------------------
13S-7E, SEC 8
E/2SW
FEE/UT 2570-00023-
AB
Anthon W. Madsen
4/1/77 173/435
CARBON
----------------------------------------------------------------------------------------------------------------------------
13S-7E, SEC 8
E/2SW
FEE/UT
2570-00023-
AF
Bonnie Jensen 4/1/77
173/455 CARBON
----------------------------------------------------------------------------------------------------------------------------
13S-7E, SEC 8
E/2SW
FEE/UT 2570-00023-
AG
Johannah M. Hafen
4/1/77 173/460
CARBON
----------------------------------------------------------------------------------------------------------------------------
13S-7E, SEC 8
E/2SW
FEE/UT 2570-00023-
AC
Annie M. Anderson
4/1/77 173/440
CARBON
----------------------------------------------------------------------------------------------------------------------------
13S-7E, SEC 8
E/2SW
FEE/UT 2570-00023-
AD
Jack Thomas 4/1/77
173/445 CARBON
----------------------------------------------------------------------------------------------------------------------------
13S-7E, SEC 7
SE OF LOT 3, LOT 4, E/2SW, NWSE, SWNE,
THREE STATES NATURAL
SWSENW, E/2NWNE, SWNWNE
FEE/UT 2570-00027 GAS
CO
1/1/57 45/187
CARBON
----------------------------------------------------------------------------------------------------------------------------
13S-7E, SEC 8
W/2NW, SENW
FEE/ UT 2570-000
Louise M. Watts 7/26/50
15c/380 CARBON
----------------------------------------------------------------------------------------------------------------------------
13S-7E, SEC 17
SWNE, W/2SE
FEE/ UT 2
