SALE AND PURCHASE
AGREEMENT
This Sale and Purchase Agreement (“Agreement”) dated as
of the 5 th day of May, 2009, by and between Doral
Energy Corp.., (“Purchaser”), and [Flaming S, Inc.]
Lonnie Slape, Individually (“Seller”).
ARTICLE 1 SALE
Sale of Stock
1.01 Seller agrees to sell, convey, transfer, assign, and deliver
to Purchaser all of the issued and outstanding capital stock of
Flaming S Inc., a Texas Corporation, (hereinafter referred to as
“Company”), and Purchaser agrees to purchase such
stock.
ARTICLE 2
SELLER’S REPRESENTATIONS AND
WARRANTIES
Seller hereby represents and warrants to Purchaser that the
following facts and circumstances are and at all times up to the
Closing Date will be true and correct:
Organization
2.01. Company is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Texas (state of
incorporation) and is qualified to do business in the State of
Texas. Company has all requisite power and authority (corporate
and, when applicable, government) to own, operate, and carry on its
business as now being conducted. Company’s certificate of
incorporation, articles of incorporation, and bylaws as currently
in effect have heretofore been made available for inspection to
Purchaser or the agents of Purchaser.
Taxes
2.06. All federal, state, local, and foreign income, ad valorem,
excise, sales, use, payroll, unemployment, and other taxes and
assessments (“Taxes”) that are due and payable by
company or by Seller on behalf of Company have been properly
computed, duly reported, fully paid, and discharged. There are no
unpaid Taxes that are or could become a lien on the property or
assets of Company or require payment by Company, except for current
Taxes not yet due and payable. Company has not incurred any
liability for penalties, assessments, or interest under the
Internal Revenue Code. No unexpired waiver executed by or on behalf
of Company with respect to any Taxes is in effect. Seller will be
responsible for payment of any unpaid taxes at the time of the
closing hereof. In that connection, Purchaser will be given credit
at closing for the estimated
1
income
taxes owed by Company for the period of the calendar year 2009
prior to the date of closing.
Oil and Gas Properties
2.07. Exhibit A, which is attached to this Agreement, contains,
among other things, a complete and accurate legal description of
each oil and gas property owned by, leased to, or leased by
Company; All of the material oil and gas leases are valid and in
full force. There does not exist any default or event that with
notice, lapse of time, or both will constitute a default under any
of these lease agreements. All personalty used by Company in its
business are set forth on Exhibit B attached hereto. In that
connection, it is acknowledged that Purchaser has inspected the
property and premises and satisfied itself as their Physical and
Environmental condition, both surface and subsurface, and that
Purchaser accepts all interest, described in Exhibit A attached
hereto in their "as is, where is” condition.
Inventories
2.08. All inventories owned by Company (“Inventories”)
consist of items of a quality and quantity usable and saleable in
the ordinary course of business by Company. All items included in
the Inventories are the property of Company, except for sales made
in the ordinary course of business. Purchaser acknowledges and
agrees the inventory of produced crude oil on hand at the end of
the day on the day immediately preceding the closing date, as
defined in Section 7.03, hereof shall be purchased by Purchaser at
the actual prices received by the Seller for oil and gas sales
during the month of the Closing Date, and the proceeds of such
purchase shall be remitted by Purchaser to Seller at the closing
hereof.
Other Tangible Personal Property
2.09. The equipment, furniture, fixtures, and other personal
property described in Exhibit B attached to this Agreement
constitute all the items of tangible personal property owned by, in
the possession of, or used by Company in connection with
Company’s business except Inventories. Except as stated, no
personal property used by Company in connection with its business
is held under any lease, security agreement, conditional sales
contract, or other title retention or security agreement or is
located any place other than in the possession of
Company.
Other Intangible Property
2.10. Exhibit C attached to this Agreement is a true and complete
list of all intangible assets, other than those specifically
referred to elsewhere in this Agreement, and the location of
evidences of title to such intangible assets.
2
Title to Assets and
Properties
2.11. Company has good and marketable title to all of its assets
and properties, tangible and intangible, that are material to
Company’s business and future prospects. These assets and
properties constitute all of the assets and interests in assets
that are used in Company’s business. All of these assets are
free and clear of mortgages, liens, pledges, charges, encumbrances,
equities, claims, easements, rights of way, covenants, conditions,
and restrictions.
Company is in possession of all premises and oil and gas leases
leased to Company from others. Except as set forth in the
appropriate exhibit listing such assets, no officer, director, or
employee of Company, nor any spouse, child, or other relative of
any of these persons owns or has any interest, directly or
indirectly, in any of the real or personal property owned by or
leased by Company or in any copyrights, patents, trademarks, trade
names, or trade secrets licensed by Company. Company does not
occupy any real property in violation of any law, regulation, or
decree that would materially adversely affect its business or
future prospects.
Insurance Policies
2.12. Exhibit D attached to this Agreement is a list and
description of all insurance policies concerning the assets and
properties and all officers, directors, and employees of Company.
Company has maintained and now maintains insurance on all of the
assets and properties of a type customarily insured. The insurance
covers property damage by fire or other casualty, as well as
adequately protects against all normal liabilities, claims, and
risks against which it is customary to insure. Purchaser
acknowledges that Purchaser has had the opportunity to inspect and
approve such policies.
Contracts
2.13. Exhibit E attached to this Agreement contains true and
corrects lists, with copies when available, of all material oral
and written contracts or arrangements obligating Company, including
without limitation, union contracts, guarantees, bids, commitments,
join venture or partnership agreements, contract with
municipalities, pledges and other security agreements, and copies
of standard form customer contracts and operating agreements
relating to oil and gas properties. For purposes of this Paragraph
2.13, the term “material contract” means: (a) one,
that, if in the ordinary course of business, obligates Company in
an amount in excess of $5,000.00, or if the aggregate total of all
contract from like transactions exceeds such amount; and (b) one
that, if not in the ordinary course of business, obligates Company
in an amount in excess of $5,000.00, or if the aggregate total of
all such contracts for like transactions exceeds such amount.
Purchaser shall have the right to review any material or
nonmaterial contract upon request. Exhibit E also sets forth a list
of all persons or entities whose consents are required to be
obtained under any contract with respect to the consummation of
this
3
transaction
by Seller and Company. There are no other consents or approvals
required from any other third party with respect to this
transaction. Except as set forth in Exhibit E, Company is not a
party to, nor are Company’s assets and properties bound by,
any distributor’s or manufacturer’s representative,
agency agreement, output or requirements agreement, agreement not
entered into in the ordinary course of business, indenture,
mortgage, deed of trust, lease or any agreement that is unusual in
nature, duration, or amount. There is not default or event that
with notice, lapse of time, or both will constitute a default by
any party to any of the material contracts listed in Exhibit E.
Company has not received any notice that any party to any of the
contracts listed in Exhibit E intends to cancel or terminate any of
the contracts or to exercise or not exercise any options under any
of the contracts. Neither Seller nor Company is a party to, nor are
Company’s assets or properties bound by, any contract that is
materially adverse to the business, property, or financial
condition of Company.
Laws and Regulations
2.14. Company is not in default or in violation of any law;
regulation; court order; or order of any federal, state, municipal,
foreign, or other government department, board, bureau, agency, or
instrumentality, wherever located, that would materially adversely
affect its business or future prospects.
Litigation
2.15. Except as disclosed in Exhibit F attached to this Agreement,
there are no pending, outstanding, or threatened claims; legal,
administrative, or other proceedings; or suits, investigations,
inquiries, complaints, notices of violation, judgments,
injunctions, orders, directives, or restrictions against or
involving Company or any of the assets, properties, or business of
Company or any of Company’s officers, directors, employees,
or stockholders that will materially adversely affect Company, its
assets, properties, or business. To the best of Seller’s and
Company’s knowledge and belief, after conducting a due
diligence investigation, there is no basis for any of these
proceedings against any of Company’s assets, properties,
person, or entities. Seller has furnished or made available to
Purchaser copies of all relevant court papers and other documents
relating to the matters set forth in Exhibit F. Except as set forth
in Exhibit F, neither Seller nor Company is presently engages in
any legal action to recover moneys due Company or for damages
sustained by Company.
Fringe Benefit Plans; Employment
Contracts
2.16. Exhibit G attached to this Agreement contains a complete
description and copies of all employment agreements in effect with
Company and a complete description of all fringe benefits and
perquisites available to Company’s officers, directors, and
employees (and, if any, furnished to consultants, agents, and
independent contractors), whether required by law or otherwise,
including but not limited to, pension, profit sharing, life
insurance, medical, bonus, incentive and similar plans, use of
automobiles, credit cards, expense accounts and allowances, club
memberships, sharing of costs or
4
expenses,
vacation, and similar benefits, together with the approximate
annual cost of each benefit and perquisite. When available, copies
of the plans, agreements, or arrangements regarding each benefit
are also attached. The provisions and operations of all such
programs and plans are in compliance in all material respects with
all applicable material laws and government rules and regulations.
There are no unfunded pension or similar liabilities regarding any
employee of Company. All pension plans have been properly funded as
to current and past service costs, have at all times been
administered in compliance in all material respects with all
applicable requirements of ERISA and any other applicable laws, and
Company does not maintain any “pension plan” as defined
in ERISA that is unfunded, except as disclosed in Exhibit G.
Exhibit G also includes all states in which Company has employees
and the status of unemployment insurance accounts in each
state.
Receivables
2.17. Exhibit H attached to this Agreement contains a true and
correct list of all accounts receivable of Company. Purchaser shall
pay to Seller at an amount equal to the receivables of Company
related to the sale of oil and gas attributable to Company’s
interest in the oil and gas properties set forth on Exhibit A
attached hereto.
Other Liabilities and Obligations
2.18. Exhibit I attached to this Agreement contains a true and
correct list of all liabilities and obligations of Company not
disclosed elsewhere in this Agreement of any kind, character, and
description whether accrued, absolute, contingent, or otherwise,
and whether or not required to be disclosed or accrued in the
financial statements of Company, that exceed $5,000.00 to any one
creditor. In the case of liabilities that are not fixed, an
estimate of the maximum amount that may be payable is also
included.
Reserves
2.19. Exhibit J attached to this Agreement contains a true and
correct list of all reserves for contingent liabilities.
Trade Names, Trademarks, Copyrights, and
Patents
2.20. Company owns no trademarks, trademark registrations or
applications, service marks, trade names, copyrights, copyright
registrations or applications, trade secrets, patents, inventions,
industrial models, processes, designs, formulae, and applications
for patents (collectively called “Intellectual
Properties”).
Bank Accounts
2.21. Exhibit K attached to this Agreement contains a true and
correct list of the names and addresses of all banks or other
financial institutions in which Company has an account, deposit, or
safe deposit box. Also included are the names of all
persons
5
authorized
to draw on these accounts or deposits or who have access to them
and the account numbers of each account. Purchaser and Seller agree
that Seller will withdraw all cash balances from the bank accounts
of Company on the day of closing.
Business Operations
2.22. The business operations of Company are and have been for the
past five years in material compliance with all laws, treaties,
rulings, directives, and similar regulations of all government
authorities having jurisdiction over such business insofar as
failure to comply could materially adversely affect Company’s
business and future prospects.
Authority
2.23. Seller and Company each has full power and authority to
execute, deliver, and/or consummate this Agreement, subject to the
conditions to closing set forth in this Agreement. All reports and
returns required to be filed by each with any government and
regulatory agency with respect to this transaction have been
properly filed. Except as otherwise disclosed in this Agreement, no
notice to or approval by any other person, firm, or entity,
including governmental authorities, is required of Seller or
Company to consummate the transaction contemplated by this
Agreement.
Full Disclosure
2.24. No representation, warranty, or covenant made to Purchaser in
this Agreement nor any document, certificate, exhibit, or other
information given or delivered to Purchaser pursuant to this
Agreement contains or will contain any untrue statement of a
material fact, or omits or will omit a material fact necessary to
make the statements contained in this Agreement or the matters
disclosed in the related documents, certificates, information, or
exhibits not misleading.
Brokers
2.25. Neither the Individually nor any of the Company’s
officers, directors, employees, or stockholders, has retained
consented to, or authorized any broker, investment banker, or third
party, directly or indirectly, to act on Company’s behalf as
a broker or finder in connection with the transactions contemplated
by this Agreement.
ARTICLE 3
PURCHASER’S REPRESENTATIONS AND
WARRANTIES
Purchaser represents and warrants to Seller that:
Authority
6
3.01. Purchaser has full power and authority to execute, deliver,
and consummate this Agreement subject to the conditions to closing
set forth in this Agreement. All corporate acts, reports, and
returns required to be filed by Purchaser with any government or
regulatory agency with respect to this transaction have been or
will be properly filed prior to the Closing Date. No provisions
exist in any contract, document, or other instrument to which
Purchaser is a party or by which Purchaser is bound that would be
violated by consummation of the transactions contemplated by this
Agreement.
Broker
3.02. Neither Purchaser, nor any of Purchaser’s officers,
directors, or employees, has retained, consented to, or authorized
any broker, investment banker, or third party to act on its behalf,
directly or indirectly, as a broker or finder in connection with
the transactions contemplated by this Agreement.
Organization and Standing of
Purchaser
3.03. Purchaser is a corporation duly organized, validly existing,
and in good standing under the laws of the state of Nevada, with
corporate power to own property and carry on its business as it is
now being conducted.
ARTICLE 4
COVENANTS
Seller covenants with Purchaser that from and after the date of
this Agreement until the Closing Date, Seller will and will cause
Company to:
Business Operations
4.01. Operate its business and conduct its activities in the normal
course of business and not introduce any material new method of
management, operation, or accounting.
Maintenance of Assets and Properties
4.02. Maintain all tangible assets and properties of Company in as
good a state of operating condition and repair as they are on the
date of this Agreement, except for ordinary depreciation, wear, and
tear.
Absence of Liens
4.03. Not sell, pledge, lease, mortgage, encumber, dispose of, or
agree to do any of these acts regarding any of the assets or
properties of Company, other than in the normal course of business,
without the prior written approval of Purchaser.
7
Preservation of Business
4.04. Use its best efforts to preserve intact its organization and
personnel and to keep available the services of all its employees,
agents, independent contractors, and consultants commensurate with
Company’s business requirements.
Preservation of Customer Relations
&
