AGREEMENT OF SALE AND PURCHASEPurchase and Sale Agreement |
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ENVIRONMENTAL ENERGY SERVICES INC | EESV Fayetteville, Inc | Petrohawk Properties, LP | P-H Energy, LLC. RealDealDocs™ contains millions of easily searchable legal documents and clauses from top law firms. Search for free - click here. |
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Exhibit 10.1
AGREEMENT OF SALE AND PURCHASE
Dated August 24, 2009
By and Between
EESV FAYETTEVILLE, INC.,
a Georgia corporation,
as Seller,
and
PETROHAWK PROPERTIES, LP
a Texas limited partnership,
as Buyer.
Table of Contents
1. Property to be Sold and Purchased 2. Purchase Price; Allocated Values (a) Organization and Qualification (d) Valid, Binding and Enforceable (o) Disclosure and Investigation (a) Organization and Qualification (d) Valid, Binding and Enforceable (f) Knowledgeable Buyer, No Distribution 5. Certain Covenants of Seller Pending Closing (c) Certain Actions and Omissions 6. Due Diligence Reviews; Defects (c) Permitted Matters and Encumbrances (d) Seller’s Response to Asserted Defects (a) Resolution of Uncured Defects; Casualty Losses
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(b) Limitations on Adjustments 8. Conditions Precedent to the Obligations of Buyer (a) Representations True and Correct (b) Compliance with Covenants and Agreements (c) Price Adjustment Limitations (d) Consents to Assign and Preferential Rights to Purchase 9. Conditions Precedent to the Obligations of Seller (a) Representations True and Correct (b) Compliance With Covenants and Agreements (c) Price Adjustment Limitations (ii) Payment in Cash to Seller (iv) Non-Foreign Status Tax Affidavit and Form W-9 (v) Recording and Transfer/Stamp Taxes (vi) Certificates of Good Standing (vii) Consents, Waivers and Approvals (ix) Guarantees and Unrecorded Assignments (xi) Other Deliverables Reasonably Requested 11. Certain Accounting Adjustments (a) Adjustments for Revenues, Expenses and Imbalances (b) Initial Adjustment at Closing 12. Assumption and Indemnification (g) Headings, Time of Essence, etc
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AGREEMENT OF SALE AND PURCHASE
This Agreement of Sale and Purchase (the “ Agreement ”) dated this 24th day of August, 2009, is by and between Petrohawk Properties, LP, a Texas limited partnership (herein called “Buyer ” ) , and EESV Fayetteville, Inc., a Georgia corporation (herein called “ Seller ”).
WHEREAS, Seller is the assignee of the rights of Environmental Energy Services, Inc. under the Participation Agreements (defined below); WHEREAS, Seller has previously assigned and conveyed to Buyer a 75% undivided interest in its rights under the Participation Agreements pursuant to the Agreement of Sale and Purchase dated July 24, 2007; WHEREAS, Seller desires to sell and assign to Buyer, and Buyer desires to purchase and receive from Seller, all of Seller’s remaining right, title and interest under the Participation Agreements and all of Seller’s right, title and interest to the other Properties (defined below). NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, the parties hereto agree as follows:
1. Property to be Sold and Purchased . Seller agrees to sell and Buyer agrees to purchase, for the consideration herein set forth, and subject to the terms and provisions herein contained, all of Seller’s right, title and interest in and to the following described properties, rights and interests:
(a) The entire estates created by the oil, gas and/or mineral leases set forth on Exhibit A (as amended and/or ratified from time to time, the “ Leases ”), and the lands described in Exhibit A (the “ Land ” or “ Lands ”), together with all the property and rights incident thereto, including without limitation surface, fee mineral, overriding royalty, reversionary, net profits, production payment, working and royalty interests attributable thereto, and the contracts and agreements relating to the Leases and Land, including without limitation, all operating agreements, exploration agreements, area of mutual interest agreements, surface use agreements, product purchase and sale contracts, transportation, processing, leases, permits, rights-of-way, servitudes, easements, licenses, declarations, orders, contracts, and instruments in any way relating to the Leases;
(b) The oil and gas wells specifically described in Exhibit B (the “ Wells ”), together with all injection and disposal wells on the Leases or Lands or on lands pooled or unitized therewith, and all personal property, equipment (including, but not limited to, all wells, wellhead equipment, pumping units, flowlines, tanks, buildings, injection facilities, compression facilities, and other facilities), pipe, fixtures, improvements, permits, rights-of-way and easements used in connection with the production, gathering, treatment, processing, storing, sale or disposal of
Hydrocarbons (defined below) or water produced from the properties and interests described in subsection (a);
(c) The pooling, integration, communitization and unitization agreements, declarations and orders, and all other such agreements relating to the properties and interests described in subsections (a) and (b) and to the production of Hydrocarbons, if any, attributable to said properties and interests;
(d) The Hydrocarbon and water gathering, pipeline and transportation systems and all personal property, equipment, fixtures, improvements, permits, rights-of-way, surface lands, surface leases and easements used in connection therewith and all contracts and agreements relating to the Properties (defined below);
(e) All oil, gas, casinghead gas, condensate, sulfur, natural gas liquids, and other liquid or gaseous hydrocarbons or any combination thereof and sulphur and other minerals of every kind and character extracted from or produced from the foregoing (collectively, “ Hydrocarbons ”) which may be produced from or allocable to the Leases on or after the Effective Date and all merchantable oil and condensate produced from or attributable to the Leases prior to the Effective Date in storage on the Leases and above pipeline connections as of May 1, 2009;
(f) All funds contained in the escrow accounts which are for plugging and abandonment of wells relating to the Properties; and
(g) The agreements identified on Exhibit C and all assignments relating thereto (the “ Participation Agreements ”).
The properties, rights and interests relating to the Leases and the Wells are herein sometimes collectively called the “Oil and Gas Properties” , and the properties, rights and interests specified in the foregoing subsections (a) through (g), inclusive, are herein sometimes collectively called the “Properties” . It is the intention of the parties to include in this transaction all of Seller’s right, title and interest in any and all real and personal property (which are considered part of the Properties) located in Cleburne, Van Buren, Stone, Pope, Conway and Faulkner Counties, Arkansas, whether or not listed on Exhibits A and/or B, and whether or not accurately or completely described. If Exhibits A and/or B fail to list any such property, or if the legal description of any property listed is deficient, the parties agree to correct such exhibits to reflect the same, and to execute any further assignments or other instruments necessary or desirable to effectuate the intent to convey all of Seller’s right, title and interest as described above.
2. Purchase Price; Allocated Values .
(a) The purchase price for the Properties shall be Three Million Eight Hundred Thousand Dollars ($3,800,000) (such amount unadjusted by any other adjustments provided for in this Agreement or agreed to by the parties, being herein called the “Base Purchase Price” ). Such Base Purchase Price may be adjusted as
provided in Sections 7 and 11 hereof (the Base Purchase Price, as so adjusted, and as the same may otherwise be adjusted by mutual agreement of the parties, being herein called the “Purchase Price” ). Except as may be provided in Sections 6(d), 11(b) and 11(c), the Purchase Price shall be paid at the Closing (defined herein), as hereinafter provided.
(b) If this Agreement is terminated by the mutual agreement of Seller and Buyer and not as the result of the failure of either party to perform its obligations hereunder, or if this Agreement fails to close on or before the Closing Date (as defined below) because any of the conditions set forth in Sections 8 or 9 have not been satisfied for reasons other than as set forth below in this Section 2(b) and either party is unwilling to agree to extend the Closing Date, then such termination shall be without liability of either party to this Agreement or any shareholder, director, partner, member, officer, employee, agent or representative of such party. If this Agreement fails to close on or before the Closing Date as a result of: (i) Seller’s failure to perform in any material respect any of its covenants under this Agreement, or (ii) any material breach by Seller of any representation or warranty contained herein (provided, however, for purposes of determining whether there has been a material breach of a representation or warranty, any “materiality” qualifier contained in such representation or warranty shall be disregarded), or (iii) Seller taking deliberate action to prevent the satisfaction of any of the conditions expressed in Sections 8 or 9 hereof, and if Buyer is not then in default in any material respect under this Agreement, then Buyer shall be entitled to liquidated damages in the amount of Twenty Thousand Dollars ($20,000) (“ Liquidated Damages ”), as Buyer’s sole and exclusive remedy and declare this Agreement terminated with neither party having any further rights, remedies, or obligations hereunder, except with respect to the provisions of Sections 2(b), 13, 18(b) and 18(k) which shall survive termination. If this Agreement fails to close on or before the Closing Date as a result of: (x) Buyer’s failure to perform in any material respect any of its covenants under this Agreement, or (y) any material breach by Buyer of any representation or warranty contained herein (provided, however, for purposes of determining whether there has been a material breach of a representation or warranty, any “materiality” qualifier contained in such representation or warranty shall be disregarded), or (z) Buyer taking deliberate action to prevent the satisfaction of any of the conditions expressed in Sections 8 or 9 hereof, and if Seller is not then in default in any material respect under this Agreement, then Seller shall be entitled to the Liquidated Damages, as Seller’s sole and exclusive remedy and declare this Agreement terminated with neither party having any further rights, remedies, or obligations hereunder, except with respect to the provisions of Sections 2(b), 13, 18(b) and 18(k) which shall survive termination. Buyer and Seller each agree that if the transactions contemplated in this Agreement fail to close on or before the Closing Date for any of the reasons specified in Section 2(b)(i), (ii), (iii), (x), (y) or (z), then the resulting damages suffered and/or incurred by Buyer or Seller would be incapable of being ascertained with precision by any certain calculation or known rule, and accordingly, the parties have determined in good faith the Liquidated Damages constitute a reasonable estimate of the damages Buyer or Seller would incur as the result of such a breach by Seller or Buyer, respectively, and not a penalty.
(c) Buyer and Seller hereby agree upon the allocation of the Base Purchase Price among the Properties (the “ Allocated Values ”). The Allocated Values are made a part of this Agreement and are shown on Exhibit B which is attached hereto.
3. Representations of Seller . Seller represents and warrants to Buyer that:
(a) Organization and Qualification . Seller is a corporation organized and in good standing under the Laws (defined below) of the state of Georgia and is qualified to do business in the state of Arkansas.
(b) Due Authorization . Seller has full power to enter into and perform its obligations under this Agreement and has taken all proper action to authorize entering into this Agreement and performance of its obligations hereunder. There are no partners, co-owners, joint venturers, lenders or any other individuals or entities other than Seller whose authorization, consent and/or approval is required to consummate the transactions contemplated by this Agreement and there are no other proceedings involving Seller, whether internally or with any other individual or entity, that are necessary to authorize the execution, delivery and performance of this Agreement by Seller and the consummation of the transactions contemplated hereby.
(c) Approvals . Other than requirements (if any) that there be obtained consents to assignment from third parties as identified on Schedule 3(f) and except for approvals (“ Routine Governmental Approvals” ) required to be obtained from Governmental Entities (defined below) who are lessors under leases forming a part of the Oil and Gas Properties (or who administer such leases on behalf of such lessors) which are customarily obtained post-closing, neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, nor the compliance with the terms hereof, will result in any material default under any agreement or instrument to which Seller is a party, give rise to any approval right of a third party, or violate any order, writ, injunction, decree, statute, rule or regulation applicable to Seller or to the Properties.
(d) Valid, Binding and Enforceable . This Agreement constitutes (and the Conveyance (defined below) to be delivered at Closing will, when executed and delivered, constitute) the legal, valid and binding obligation of Seller, enforceable in accordance with its terms, except as limited by bankruptcy or other any applicable federal, state, municipal or local statute, law, ordinance, rule, regulation, order, judgment, writ, injunction or decree enacted, adopted, issued or promulgated (collectively “ Laws ”) applicable generally to creditor’s rights and as limited by general equitable principles.
(e) Litigation . Except as set forth on Schedule 3(e), there are no pending suits, actions, or other proceedings in which
Seller is a party (or to Seller’s knowledge, which have been threatened to be instituted) which affect the Properties (including, without limitation, any actions challenging or pertaining to Seller’s title to any of the Properties), or affect the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby. Seller’s “knowledge” or “received” by Seller (except as used in connection with payment receipts), as used in this Agreement, shall mean to the best knowledge after reasonable inquiry of one or more of Seller’s or its affiliates’ officers, managers or directors.
(f) Consents and Preferences . Except as listed on Schedule 3(f), none of the Properties is subject to the terms of any preferential right for a third party to purchase such Property or requires the consent of any third party to the valid assignment of such Property to Buyer.
(g)
(i) Seller has timely filed all tax returns required to be filed through the Closing with respect to the Properties, and all such tax returns are true, complete and correct. All taxes due with respect to the Properties have been timely paid.
(ii) There are no agreements, waivers or other arrangements providing for an extension of time with respect to the filing of any tax returns or reports, or extending the statutory period of limitations applicable to the payment of, or assessment of any tax with respect to the Properties.
(iii) There are no liens for taxes upon any of the Properties, except for liens for current taxes which are not yet delinquent and no notice has been given of any event that could lead to any such lien.
(iv) For purposes of this Agreement, “tax” (including, with correlative meaning, “taxes”) means (A) any net income, gross income, business and occupation, admissions, gross receipts, sales, use, value added, ad valorem, transfer, transfer gains, franchise, profits, license, withholding, payroll, employment, excise, severance, stamp, rent, recording, occupation, premium, real or personal property, intangibles, environmental or windfall profits tax, alternative or add-on minimum tax, customs duty or other tax, fee, duty, levy, impost, assessment or charge of any kind whatsoever, together with (B) any interest and any penalty, addition to tax or additional amount imposed by any Governmental Entity (defined below) responsible for the imposition of any such tax.
(h) Bankruptcy . There are no bankruptcy, reorganization or arrangement proceedings pending, being contemplated by or threatened against (a) Seller, (b) an affiliate of Seller (including, but not limited to, Blaze Energy Corporation, Environmental Energy Services, Inc., Appalachia Environmental Recovery, Inc., EESV Drilling, LLC and Duke Oil & Gas Alaska, LLC), or (c) any officer or director of Seller or any of its affiliates.
(i) Title to Assets . Except for any pre-Closing Asserted Defects identified by Buyer in a defect notice delivered by Buyer pursuant to Section 6, Seller’s title to the Properties is free of any title defects, claims or other burdens and encumbrances arising from or relating to Seller’s or any of its affiliates’ actions or omissions. Except as disclosed on Schedule 3(i) and to Sellers’ knowledge, there are no unrecorded production payments, reversionary interest agreements, overriding royalty interest assignments, farm-out interests or other burdens, liens, obligations or encumbrances associated with the Properties, contingent or otherwise.
(j) Prepayments; Hedging . Seller does not have any outstanding obligations for the delivery of natural gas, natural gas liquids or other Hydrocarbons attributable to the Properties in the future on account of prepayments, advance payments, take or pay or similar obligations without then or thereafter being entitled to receive full value therefor. Seller has not entered into any options, swaps, floors, caps, collars, forward sales or forward purchases involving commodities or commodity prices, or indices based on any of the foregoing, which relate to or are intended to reduce or eliminate the risk of fluctuations in the price of commodities, including Hydrocarbons, to which any portion of the Properties are bound or for which the Buyer shall have any liability whatsoever after Closing.
(k) Operatorship . There are no agreements binding Seller to vote its interests in favor of any other person or entity to become operator with respect to any wells drilled on the Oil and Gas Properties.
(l) Foreign Person . Seller is not a “foreign person” within the meaning of Section 1445 of the Code (defined below). (m) Participation Agreements . Environmental Energy Services, Inc. has validly assigned and transferred all of its right, title and interest, whether direct or indirect, in the Participation Agreements to Seller and Seller is transferring, and at Closing shall transfer, all of such interests in the Participation Agreements to Buyer. The Participation Agreements are still in full force and effect, except to the extent a Participation Agreement was modified, compromised, terminated or an interest therein conveyed in part by another Participation Agreement.
(n) Guarantees . Blaze Energy Corp. and Environmental Energy Services, Inc. have agreed to execute the Guarantees (defined below) and cause them to be delivered to Buyer at Closing.
(o) Disclosure and Investigation . No representation or warranty of Seller set forth in this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein not misleading.
4. Representations of Buyer . Buyer represents to Seller that:
(a) Organization and Qualification . Buyer is a limited partnership organized and legally existing and in good standing under the Laws of the state of Texas and is qualified to do business in the state of Arkansas.
(b) Due Authorization . Buyer has full power to enter into and perform its obligations under this Agreement and has taken all proper action to authorize entering into this Agreement and performance of its obligations hereunder.
(c) Approvals . Other than requirements (if any) that there be obtained consents to assignment (or waivers of preferential rights to purchase) from third parties, neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, nor the compliance with the terms hereof, will result in any default under any agreement or instrument to which Buyer is a party, or violate any order, writ, injunction, decree, statute, rule or regulation applicable to Buyer.
(d) Valid, Binding and Enforceable . This Agreement 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.
(e) No Litigation . There are no pending suits, actions, or other proceedings in which Buyer is a party (or, to Buyer’s knowledge, which have been threatened to be instituted against Buyer) which affect the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby. Buyer’s “knowledge” or “received” by Buyer (except as used in connection with payment receipts), as used in this Agreement, shall mean to the best knowledge after reasonable inquiry of one or more of Buyer’s or its affiliates’ officers, managers or directors.
(f) Knowledgeable Buyer, No Distribution . Buyer is an accredited investor as defined in Regulation D of the Securities Act of 1933, as amended (the “ Securities Act ”), and is acquiring the Properties for its own account, for investment and not with a view to, or for offer or resale in connection with, a distribution thereof within the meaning of the Securities Act or a distribution thereof in violation of any applicable securities Laws.
(g) Financial Resources . Buyer has sufficient financial resources available to it to enable Buyer to pay the Purchase Price at Closing, and Buyer is not aware of any event or condition that is reasonably likely to result in such consideration not being available at Closing.
5. Certain Covenants of Seller Pending Closing . Between the date of this Agreement and the Closing Date, Seller will:
(a) Access by Buyer . Give Buyer, or Buyer’s authorized representatives, at Seller’s office (or Seller’s consultants and agents offices) and at all reasonable times before the Closing Date (defined below), access to Seller’s records pertaining to the ownership of the Properties, for the purpose of conducting due diligence reviews contemplated by Section 6 below. Buyer may make copies of such records, but shall, if Seller so requests, return all copies so made if the Closing does not occur. All costs of copying such items shall be borne by Buyer. Seller shall not be obligated to provide Buyer with access to any records or data which Seller believes that Seller cannot provide to Buyer without, in Seller’s reasonable opinion, breaching, or risking a breach of, agreements with other parties, or waiving, or risking waiving, legal privilege; provided, however, a list of such documents, records or data shall be provided to Buyer which list will provide basic information concerning the document, record or data, the Lease to which such document, record or data pertains, the individuals or entities who prepared and received such document, record or data and the basis for Seller’s belief that production of such document, record or data would breach or risk a breach of any other agreement and the name and address of the party who has the right to enforce the agreement against the Seller;
(b) Interim Actions . Not encumber, mortgage, sell or otherwise dispose of any of the Properties or any interest therein;
(c) Certain Actions and Omissions . Take or cause to be taken all such actions as may be reasonably necessary or advisable to consummate and make effective the sale of the Properties and the transactions contemplated by this Agreement and to assure that as of the Closing that it will not be under any material organizational, legal or contractual restriction that would prohibit or delay the timely consummation of such transactions;
(d) Notification of Breach . Promptly notify Buyer (i) if any representation or warranty of Seller contained in this Agreement is discovered to be or become untrue, or (ii) if Seller fails to perform or comply with any covenant or agreement contained in this Agreement or it is reasonably anticipated that Seller will be unable to perform or comply with any covenant or agreement contained in this Agreement;
(e) Material Adverse Effect . Promptly notify Buyer if any Material Adverse Effect (defined below) occurs with respect to the Properties;
6. Due Diligence Reviews; Defects .
(a) Review By Buyer . Should, as a result of Buyer’s examinations and investigations, or otherwise, one or more matters come to Buyer’s attention which would constitute a Defect (as below defined), and should there be one or more of such Defects which Buyer is unwilling to waive and close the transaction contemplated hereby notwithstanding the fact that such Defects exist, Buyer shall notify Seller in writing of such Defects (such Defects of which Buyer so provides notice are herein called “ Asserted Defects ”) as soon as reasonably possible, but in no event later than seven (7) days (“ Defect Deadline ”) before the Closing Date. Such notification shall include, for each Asserted Defect, (a) a description of the Asserted Defect, and supporting documentation reasonably necessary to describe the basis for the Defect, or if the supporting documentation is contained in Seller’s files, sufficient information to enable Seller to locate such supporting documentation, (b) for each applicable Well or unit, the size of any variance from “Net Revenue Interest” or “Working Interest” which is claimed as a Defect, and (c) the amount by which Buyer would propose to adjust the Base Purchase Price. It is the express intent of the parties hereto that failure of Buyer to provide notice of any Defect by the Defect Deadline shall not constitute a waiver and shall not preclude Buyer from making a claim against Seller pursuant to Section 16. (b) Nature of Defects . The term “ Defect ” as used in this Agreement shall mean the following: (i) NRI Variances . Pursuant to an action or omission of Seller or one or more of its affiliates, Seller's ownership of a Well is such that it entitles Seller to receive a decimal share of the Hydrocarbons produced from such Well which is less than the decimal share set forth on Exhibit B in the column headed "Net Revenue Interest" or “NRI”.
(ii) WI Variances . Pursuant to an action or omission of Seller or one or more of its affiliates, Seller’s ownership of a Well is such that it causes Seller to be obligated to bear a decimal share of the costs greater than the decimal share set forth on Exhibit B in the column headed “Working Interest” or “WI” (without at least a proportionate increase in the share of production to which Seller is entitled to receive).
Liens . Seller’s ownership of Property is subject to liens, mortgages, rights of reassignment, reversionary rights, calls on production, taxes, obligations, claims, suits, or any other encumbrances other than (i) a lien for taxes which are not yet delinquent, (ii) liens which are to be released at or before Closing, (iii) a lien encumbering properties or assets of Buyer (i.e. properties or assets other than the Properties) arising from an action of Buyer, or (iv) delinquent operating expenses owed to an affiliate of Buyer .
Consents . Pursuant to an action or omission of Seller or one or more of its affiliates, Seller’s ownership of a Property is subject to a requirement that consent be obtained or preferential right to purchase be waived in order to |
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