Exhibit 10.3
ASSET PURCHASE AND SALE
AGREEMENT
This Asset
Purchase and Sale Agreement (the “Agreement”) is made
and entered into as of this 15th day of October, 2008, by and
between M-J Oil Company, Inc., an Ohio corporation
(“Seller”), and ECCO Energy Corp., a Nevada corporation
(“Buyer”).
BACKGROUND
WHEREAS, Seller
desires to sell to Buyer, and Buyer desires to purchase from
Seller, the Assets (as defined in Section 1 hereof) in accordance
with the terms and conditions set forth herein.
NOW THEREFORE,
in consideration of the premises and mutual covenants and
conditions contained herein, the parties hereto, intending to be
legally bound hereby, agree as follows:
1.
Sale and Purchase of the Assets . On the
Closing Date (as defined in Section 11 hereof), Seller shall sell,
assign, convey and deliver to Buyer, and Buyer shall purchase and
acquire from Seller, as of the Effective Date (also as defined in
Section 11(a) hereof), all of Seller’s right, title and
interest in and to the following assets (Seller’s right,
title and interest in the following is collectively called the
“Assets”):
a.
Pipeline
. That certain pipeline
more particularly described in Exhibit 1(a) attached hereto and
made a part hereof for all purposes (the
“Pipeline”);
b.
Contracts . All right, title and interest
of Seller in and to all presently existing and valid rights of
ways, easements, and other agreements and contracts which relate to
any of the Assets described above, or which relate to the
operation, or maintenance thereof or other agreements and contracts
enumerated on Schedule 1(b) hereto;
c.
Records . All books, files, records, maps,
correspondence, studies, surveys, reports and other data in the
possession of Seller and relating to the Assets or copies thereof
(the “Records”).
2.
Purchase Price . Subject to the Closing of
that certain Asset Purchase and Sale Agreement dated September 30,
2008 by and between Seller and Samurai Corp., an affiliate of
Buyer, the total purchase price for the Assets, shall be One
Million Dollars U.S. ($1,000,000.00) payable at the Closing by
delivering to Seller a Promissory Note substantially in the form of
Exhibit 2 attached hereto and made a part hereof.
3.
Representations and Warranties of Seller
. Seller represents and warrants to Buyer as
follows:
a.
Organization
. Seller is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Ohio and is qualified or registered
as a foreign entity in each jurisdiction where it is required to be
so qualified and registered except where the failure to so qualify
would not have a material adverse effect on the Seller’s
ownership, operation or value of the Assets.
b.
Authority
. Seller has full
power and authority to enter into this Agreement and to perform
Seller’s obligations under this Agreement. Neither
the execution and delivery of this Agreement nor the performance by
Seller of its obligations hereunder will (i) violate Seller’s
Articles of Organization, (ii) violate or constitute a default
under any law, regulation, contract, agreement, consent decree or
judicial order by which Seller or any of its officers, members or
partners are bound or (iii) result in the creation of any Title
Defect upon the Assets.
c.
Enforceability
. This Agreement has
been duly executed and delivered by the Seller and constitutes the
legal, valid and binding obligation of Seller enforceable in
accordance with its terms, except as limited by bankruptcy or other
laws applicable generally to creditor’s rights and as limited
by general equitable principles. At the Closing, all
documents required hereunder to be executed and delivered by Seller
and shall constitute the legal, valid and binding obligations of
Seller enforceable in accordance with their respective terms,
except as limited by bankruptcy or other laws applicable generally
to creditor’s rights and as limited by general equitable
principles.
d.
Contracts
. Schedule 1(b) contains
a list of all material contracts affecting the Assets in
Seller’s possession or to which Seller is aware the Assets
are subject. Seller has received no notice of its
material default under any of such contracts. Such
contracts are in full force and effect and have not been modified
or amended to any material extent subsequent to the date
hereof.
e.
Preferential Purchase
Rights/Consents . To the best of Seller’s
knowledge, Schedule 3(e) sets forth all consents, approvals,
waivers and authorizations (collectively, “Consents”),
and all preferential purchase rights required to be obtained
(“Pref Rights”), in connection with the sale of the
Assets to Buyer.
f.
Litigation and
Claims . Except as described on Schedule
3(f), no claim, demand, filing, cause of action, administrative
proceeding, lawsuit or other litigation is pending or, to
Seller’s knowledge, threatened with respect to Seller or the
Assets that could now or hereafter materially adversely affect the
ownership, operation or value of the Assets.
g.
Finder’s
Fees. Seller has not incurred any
liability, contingent or otherwise, for brokers’ or
finders’ fees in respect to this transaction for which Buyer
shall have any responsibility whatsoever.
h.
Compliance with
Laws. Seller has no actual knowledge, and
has not received any notice from any federal, state or municipal
authority that the Assets or Seller’s use thereof in its
business, are not in material compliance with all laws, rules,
regulations and permits relating to the Assets except for such
non-compliance and violations which, individually or in the
aggregate, would not have a material adverse effect on the
ownership, operation or value of the Assets. Seller will
promptly notify Buyer upon receipt of any such notice.
i.
Title
. Seller owns the Assets
free and clear of all liens and encumbrances (except as disclosed
in the Schedules hereto) arising by, through or under Seller. The
Transfer Documents contemplated in Section 6(d) shall be conveyed
by Seller to Buyer with covenants of limited warranty against
claims and demands of all persons lawfully claiming the same by,
through, or under Seller, but not otherwise related to the title to
the Pipeline, subject to the limitations of such warranty set forth
in Section 13, but such Transfer Documents shall be made without
any warranty of title, either express or implied, with respect to
any personal property and equipment, and with respect to such
personal property and equipment the Transfer Documents shall be
made on an “as is” “where is” basis with
all faults.
j.
Environmental
Issues . To the best of its knowledge,
Seller has complied in all material respects with all Environmental
Laws (as defined below) and with the terms of all permits,
licenses, orders, decrees and agreements
thereunder. Seller is not aware of, and has not received
notice from any person or entity asserting or alleging (i) any
non-compliance with the Environmental Laws by Seller relating to
the operation and ownership of the Assets; (ii) any liability in
connection with the release, spill, discharge, storage, disposal or
presence of any pollutants, contaminations, chemicals, industrial,
toxic or hazardous substances or wastes, petroleum, petroleum
products or wastes and natural gas by-products, liquids or wastes
(collectively, “Hazardous Materials”), including but
not limited to liability under the federal Comprehensive
Environmental Response, Compensation and Liability Act or similar
state “Superfund” laws, relating in any way to the
Assets; or (iii) the release, discharge or presence of any
Hazardous Materials at, on, under or from any of the Assets
requiring cleanup or other remedial action pursuant to the
Environmental Laws. For purposes of this agreement,
Environmental Laws shall include the Comprehensive Environmental
Response, Compensation and Liability Act of 2980, as amended (42
U.S.C. & 6091 et. seq. ). The Resource
Conservation and Recovery Act of 1976 (42 U.S.C. & 6901
et. seq. ), The Clean Water Act (33 U.S.C. & 466
et. seq. ), The Safe Drinking Water Act (14 U.S.C.
& 1401-1450), The Hazardous Materials Transportation Act (49
U.S.C. & 1401-7401 et. seq. ) as amended, The
Clean Air Act amendments of 1990, and any other applicable federal,
state or local law. Notwithstanding the foregoing, the
parties acknowledge that oil and gas assets of the nature of the
Assets routinely contain some quantities of oil, brine or other
materials and that the presence of such materials in such locations
and quantities as are routinely found on or near Appalachian Basin
oil and gas properties is not a violation of any warranty or other
provision of this Agreement.
k.
Financial Data
. To Seller’s knowledge, all
financial data provided by Seller to Buyer relating to the Assets
is true and accurate in all material respects.
l. No AFE
Items . Seller has incurred no expenses, and has
made no commitments to make expenditures, in connection with (and
no other obligations or liabilities have been incurred which would
adversely affect) the ownership or operation of the Assets since
September 1, 2008, other than routine expenses incurred in the
normal operation of the same. Seller has not abandoned
or removed any material items of equipment, except those replaced
by items of equal suitability and value since September 1,
2008.
m.
Permits. To the extent Seller is the
operator of an Asset, to the best of its knowledge Seller has all
material governmental licenses and permits necessary or appropriate
to own and operate the Asset as presently being owned and operated,
and such licenses, permits and filings are in full force and effect
(and are transferable by Seller), and Seller has not received
written notice of any material violations in respect of any such
licenses or permits. To the extent that Seller is not
the operator of an Asset, to the best of Seller’s knowledge,
the operator of the Asset has all material governmental licenses
and permits necessary or appropriate to own and operate the Asset
as presently being owned and operated, and such licenses, permits
and filings are in full force and effect, and Seller has not
received written notice of any material violations in respect of
any such licenses or permits.
n.
No Material Adverse Change . Since the date of this
Agreement, to the best of Seller’s knowledge there shall have
been no material adverse changes in the conditions of any of the
Assets except normal depreciation of equipment through ordinary
wear and tear and other events or conditions approved in writing by
Buyer on the Closing Date.
4.
Representations and Warranties of Buyer
. Buyer represents and warrants to Seller as
follows:
a.
Organization
. Buyer is a Nevada
corporation duly organized, validly existing and in good standing
under the laws of the state of Nevada and is qualified or
registered as a foreign entity in the State of Ohio and duly bonded
as a well owner in that state.
b.
Authority and
Ability . Buyer has full power and authority
and has taken all requisite action, corporate or otherwise, to
authorize Buyer to carry on Buyer’s business as presently
conducted, to enter into this Agreement, to purchase the Assets on
the terms described in this Agreement and to perform its
obligations under this Agreement. Neither the execution
and delivery of this Agreement nor the performance by Buyer of its
obligations hereunder will (i) violate Buyer’s Articles of
Incorporation or Bylaws or (ii) violate or constitute a default
under any law, regulation, contract, agreement, consent decree or
judicial order by which Buyer or any of its directors, officers or
shareholders are bound. Buyer has the financial ability and
available credit to be able to perform all of its obligations under
this Agreement.
c.
Enforceability
. This Agreement has
been duly executed and delivered on behalf of Buyer and constitutes
the legal, valid and binding obligation of Buyer enforceable in
accordance with its terms except as limited by bankruptcy or other
laws applicable generally to creditor’s rights and as limited
by general equitable principles. At the Closing, all
documents required hereunder to be executed and delivered by Buyer
shall be duly authorized, executed and delivered and shall
constitute legal, valid and binding obligations of Buyer
enforceable in accordance with their respective terms, except as
limited by bankruptcy or other laws applicable generally to
creditor’s rights and as limited by general equitable
principles. Buyer is currently solvent.
d.
Status of Buyer
. Buyer represents that
by reason of its knowledge and experience in the evaluation,
acquisition, and operation of oil and gas properties, Buyer has
performed, or will perform before Closing, a due diligence review
of the Assets and will have evaluated the merits and risks of
purchasing the Assets from Seller and has formed an opinion as to
the value and purchase of the Assets based solely on Buyer’s
knowledge and experience and not on any representations or
warranties by Seller except as otherwise provided in this
Agreement Buyer is acquiring the Assets for its own
account and without a view to the distribution thereof within the
meaning of the Securities Act of 1933, as amended.
e.
Finder’s
Fees . Buyer has not incurred any
liability, contingent or otherwise, for brokers’ or
finders’ fees in respect to this transaction for which Seller
shall have any responsibility whatsoever.
a.
Conduct of Business Pending
Closing . Seller covenants that from the date
hereof to the Closing Date, Seller will:
i.
Ordinary Course of Business,
etc . Not
(A) act in any manner with respect to the Assets other than in the
normal, usual and customary manner, consistent with prior practice;
(B) dispose of, encumber or relinquish any of the Assets (other
than in the ordinary course of business or as a result of the
expiration of Leases or other agreements or contracts that Seller
has no right or option to renew); (C) waive, compromise or settle
any material right or claim with respect to any of the Assets; (D)
commit to or make capital expenditures with respect to the Assets
in an amount which exceeds $10,000 without Buyer's consent, except
when required by an emergency when there shall have been
insufficient time to obtain advance consent.
ii.
Permits, etc
. Cooperate with Buyer
in the notification of all applicable governmental regulatory
authorities of the transactions contemplated hereby and cooperate
with Buyer in obtaining the issuance by each such authority of such
permits, licenses and authorizations as may be necessary for Buyer
to own and operate the Assets following the consummation of the
transactions contemplated by this Agreement.
iii.
Consents
. Use commercially
reasonable efforts, consistent with industry practices in
transactions of this type, to identify, with respect to all
material Assets, (i) that Consents be obtained which would be
applicable to the transactions contemplated hereby and (ii) the
names and addresses of parties holding such rights; in attempting
to identify such and Consents, and the names and addresses of such
parties holding the same, Seller shall in no event be obligated to
go beyond its own records. Seller will request from the parties so
identified (and in accordance with the documents creating such
Consents), execution of Consents and/or waivers so
identified.
b.
Access
. Seller, shall afford to
Buyer and its authorized representatives reasonable access, at
Buyer’s sole risk and expense, from the date hereof until the
Closing Date during normal business hours, to (i) the Assets
operated by Seller, provided, however, that Buyer shall indemnify
and hold harmless Seller from and against any and all Damages (as
defined in Section 14 hereof) arising from Buyer’s inspection
of the Assets, and (ii) Seller’s Records.
6.
Conditions Precedent to the Obligations of Seller
. The obligations of Seller to be performed at the
Closing are subject to the fulfillment (or waiver by Seller in its
sole discretion), before or at the Closing, of each of the
following conditions:
a.
Representations and
Warranties . The representations and warranties
by Buyer set forth in this Agreement shall be true and correct in
all material respects at and as of the Closing as though made at
and as of the Closing and Buyer shall have delivered a certificate
to such effect to Seller; and Buyer shall have performed and
complied with in all material respects all covenants and
ag
