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STOCK PURCHASE AGREEMENT

Purchase and Sale Agreement

STOCK PURCHASE AGREEMENT | Document Parties: Arkanova Acquisition Corporation | Montana, LLC | Munsch, Hardt, Kopf & Harr, PC | Prism Corporation | Snell Wylie & Tibbals, PC You are currently viewing:
This Purchase and Sale Agreement involves

Arkanova Acquisition Corporation | Montana, LLC | Munsch, Hardt, Kopf & Harr, PC | Prism Corporation | Snell Wylie & Tibbals, PC

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Title: STOCK PURCHASE AGREEMENT
Governing Law: Oklahoma     Date: 8/25/2008
Industry: Gold and Silver     Law Firm: Munsch Hardt     Sector: Basic Materials

STOCK PURCHASE AGREEMENT, Parties: arkanova acquisition corporation , montana  llc , munsch  hardt  kopf & harr  pc , prism corporation , snell wylie & tibbals  pc
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Exhibit 10.1

 

STOCK PURCHASE AGREEMENT

 

THIS STOCK PURCHASE AGREEMENT (this “ Agreement ”) is made and entered into this 21st day of August, 2008, by and between Billie J. Eustice and the Gary L. Little Trust   (each a “ Seller ” and collectively “ Sellers ”), and Arkanova Acquisition Corporation (“ Buyer ”).

 

Background

 

A.                                    Sellers together, in equal proportions, are the sole record and beneficial owners of 100% of the issued and outstanding shares of the common stock (the “ Stock ”) of Prism Corporation , an Oklahoma corporation  (“ Prism ”);

 

B.                                      Prism is the sole record and beneficial owner of 100% of the membership interests of Provident Energy Associates of Montana, LLC , a Montana limited liability company (“ Provident ”);

 

C.                                      Sellers desire to sell to Buyer, and Buyer desires to purchase from Sellers, all of the Stock, upon the terms and subject to the conditions set forth herein.

 

Terms and Conditions

 

In consideration of the mutual benefits to be derived from this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto hereby agree as follows:

 

1.                                        Sale and Purchase of the Stock .  Upon the terms and subject to the conditions stated in this Agreement, at the Closing (as defined in Section 3(a) hereof), Sellers will sell, transfer, convey, assign, and deliver to Buyer, free and clear of all liens, claims, mortgages, charges, security interests, pledges or other encumbrances or adverse claims or interests of any nature (collectively, “ Liens ”), and Buyer thereupon will purchase and acquire from Sellers, all of the right, title, and interest of Sellers in and to the Stock (the “ Transaction ”).

 

2.                                        Purchase Price and Payment .

 

(a)                                   Purchase Price .  The total purchase price (“ Purchase Price ”) for the Stock will be an amount equal to the sum of:

 

(i)                                      Six Million and No/100 Dollars ($6,000,000.00) plus the amount of the expenditures by Provident to be paid as provided in Section 2(c) of this Agreement (including the Earnest Money Deposit, as such term is described in Section 2(b) hereof), payable by Buyer to Sellers at the Closing by certified check or by wire transfer of immediately available funds pursuant to wire transfer instructions which will be provided by Sellers to Buyer (the “ Cash Payment ”), and

 

(ii)                                   A deferred payment payable pursuant to Section 2(d) of this Agreement (the “ Deferred Payment ”).

 

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Each Seller will receive one-half of the Cash Payment (the entire purchase price in the aggregate) at Closing, and the Deferred Payment, when paid.

 

(b)                                  Earnest Money Deposit .  Upon execution of this Agreement by Sellers, Buyer shall pay to Sellers in equal portions, the amount of One Hundred Thousand and No/100 Dollars ($100,000.00) as a non-refundable deposit towards the Cash Payment (the “ Earnest Money Deposit ”).   In the event that the Sellers have satisfied the conditions to consummate the Transaction set forth in Sections 3(c)(i) and 3(c)(ii), as of the Closing Date (as such term is defined in Section 3(a) hereof), and the Closing does not occur, through no fault of the Sellers,  then the Earnest Money Deposit will be forfeited and, without further action, consent or notice, fully released to the Sellers (in equal proportions).   The Earnest Money Deposit will be returned to Buyer by Sellers in the event that the Sellers fail or refuse to consummate the Transaction on the Closing Date for any reason other than actions or any failure of Buyer to be ready, willing and able to consummate the Transaction on the Closing Date, including but not limited to Buyer’s having satisfied the conditions to consummate the Transaction set forth in Section 3(b)(i) and 3(b)(ii).

 

(c)                                   Well Expenditure Payment .  As part of the Purchase Price, Buyer shall pay Sellers, at the Closing as provided in Section 2(a) of this Agreement, the amount of the expenditures that Provident has made pursuant to its agreement with the Blackfoot Tribal Council with respect to the wells in the Two Medicine Cut Bank Sand Unit in Pondera and Glacier Counties, Montana (the “ Unit ”), from August 1, 2008, to the Closing Date (the “ Well Expenditure Payment ”).

 

(d)                                  Deferred Inventory Payment

 

(i)                                      At the Closing, Sellers will provide a written report to Buyer of all gas, oil and other mineral inventory of Provident or Prism, produced by the Unit and held in storage tanks or in transit, as of the Closing Date (collectively the “ Inventory ”).

 

(ii)                                   (ii)  Buyer will use its best efforts to sell the Inventory at the then current fair market value, and within a reasonable time not to exceed thirty (30) days following the Closing.   The Inventory will be sold on a first-in-first-out basis.   Within forty-five (45) days following the date Buyer sells the Inventory, Buyer will deliver to Sellers, in equal portions, the gross proceeds received from such sale (the “ Deferred Payment ”), along with written evidence of the sales price for the Inventory.

 

3.                                        Closing Matters .

 

(a)                                   The Closing .   The consummation of the Transaction (the “ Closing ”) will take place at the offices of Munsch, Hardt, Kopf & Harr, P.C., 3800 Lincoln Plaza, 500 N. Akard, Dallas, TX 75201, at 11:00 a.m. CST, on September 4, 2008 (the date of the Closing being herein referred to as the “ Closing Date ”).   The Closing shall be deemed to be effective at 12:01 a.m. on the Closing Date.

 

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(b)                                  Conditions to Sellers’ Obligation to Close  The obligations of the Sellers to consummate the Transaction are subject to the satisfaction or waiver by the Sellers (any such waiver to be evidenced in writing), at or prior to the Closing, of the following conditions:

 

(i)                                      the representations and warranties of the Buyer contained in Section 6 of this Agreement being true and correct in all material respects as of the Closing Date;

 

(ii)                                   Buyer having performed the obligations under this Agreement required to be performed by it at or prior to the Closing pursuant to the terms hereof, including but not limited to delivery of each document and item, and taking of such actions, listed in Section 3(d)(ii) of this Agreement; and

 

(iii)                                all actions to be taken by the Buyer in connection with consummation of the Transaction and all certificates, opinions, instruments, and other documents required to effect the Transaction being reasonably satisfactory in form and substance to the Sellers.

 

(c)                                   Conditions to the Buyer’s Obligation to Close .  The obligation of the Buyer to consummate the Transaction is subject to the satisfaction or waiver by the Buyer (any such waiver to be evidenced in writing), at or prior to the Closing, of the following conditions:

 

(i)                                the representations and warranties of the Sellers contained in Section 5 of this Agreement (subject to any qualifications stated therein), will be true and correct in all material respects as of the Closing Date;

 

(ii)                             Sellers shall have performed in all material respects each of Sellers’ obligations under this Agreement required to be performed by them at or prior to the Closing pursuant to the terms hereof, including but not limited to delivery of each document and item, and taking of such actions, listed in Section 3(d)(i) of this Agreement;

 

(iii)                                there having been no event or circumstance, which has or will likely have, a material adverse effect on Prism, Provident or the Transaction;

 

(iv)                               the results of Buyer’s due diligence review of the assets and liabilities of Prism and Provident being to its reasonable satisfaction, and

 

(v)                                  all actions to be taken by the Sellers in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Buyer.

 

(d)                                  Deliveries at the Closing .

 

(i)                                      Deliveries by Sellers .  Sellers shall deliver, or cause to be delivered, to Buyer at Closing (a) the original stock certificates of Prism representing the Stock, together with a stock power or endorsement duly executed by Sellers for transfer to Buyer on the records of Prism, (b) a certificate executed by each of Sellers and dated the Closing Date certifying that the

 

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conditions set forth in Sections 3(c)(i), 3(c)(ii) and 3(c)(iii) have been fulfilled and, (b) such other documents as Buyer may reasonably request to consummate the Transaction.

 

(ii)                                   Deliveries by Buyer .  Buyer shall deliver, or cause to be delivered, to Sellers at Closing (a) the Cash Payment (less the Earnest Money Deposit) in accordance with Section 2 hereof, (b) the Well Expenditure Payment, (c) a certificate executed by an officer of the Buyer and dated the Closing Date certifying, with respect to the Buyer, as to its Articles of Organization (or equivalent charter document), the incumbency and the resolutions adopted by the board of directors of Buyer with respect to this Agreement and the Transaction, and that the conditions set forth in Sections 3(b)(i) and 3(b)(ii) have been fulfilled; (d) the Releases (as such term is defined  in Section 4 of this Agreement), (e) full and complete releases of Sellers and their respective affiliates and representatives of all liabilities executed by Great Bear Consulting and Joe Loftis, and (f) such other documents as Sellers may reasonably request to consummate the Transaction

 

4.                                        Release .   In consideration of the sale of the Stock by each Seller, and other good and valuable consideration, the sufficiency of which is hereby acknowledged, effective on the Closing,  Buyer  shall cause each of Prism and Provident  to fully and unconditionally release and forever discharge and holds harmless each Seller and each Seller’s respective heirs, assigns and estates, from any and all claims, demands, losses, costs, expenses (including reasonable attorneys’ fees and expenses), obligations, liabilities and or damages of every kind and nature whatsoever, whether now existing or known, arising out of the management or operation of the respective businesses and any transaction or circumstance occurring or existing or related to the period of time prior to the Closing, relating in any way, directly or indirectly, to the respective businesses, that Prism or Provident may now have or may hereafter claim to have against any Seller; provided, however, that, the foregoing release will not affect any obligations of any Seller to Buyer under this Agreement (collectively the “ Releases ”).

 

5.                                        Representations and Warranties of Sellers .  Except as disclosed on the Schedules to this Agreement (each of which corresponds to the appropriate numbered section of this Agreement to which each such disclosure relates), Sellers individually and separately (not jointly and severally) represent and warrant to Buyer as of the date of this Agreement and the Closing Date the matters set forth below.

 

(a)                                   Authorization of the Transaction .

 

(i)                                      Each Seller has the necessary legal capacity (in the case of an individual person), or has the power and authority (if other than an individual person) to execute and deliver this Agreement and to perform that Seller’s obligations hereunder and to consummate all of the transactions contemplated hereby, including but not limited to the transfer, assignment and sale of the Stock.

 

(ii)                                   This Agreement has been duly executed and delivered by each Seller and constitutes the legal, valid and binding obligation of each Seller, enforceable against each Seller in accordance with its terms, except as such enforceability may be limited by the effect of applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally.

 

(iii)                                The execution, delivery and performance by the Sellers of this Agreement and the consummation of the transactions contemplated hereby do not breach

 

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or constitute a default under any loan or purchase agreement, indenture, mortgage, deed of trust, lease, instrument, contract or other agreement binding on or affecting either Seller or any of his property or assets, the breach of which, either individually or in the aggregate, could reasonably be expected to have a material adverse effect on a Seller.

 

(iv)                               No governmental authorization, and no consent, approval or authorization of, or notice to, or other action by, any other person, is required for the due execution, delivery, recordation, filing or performance by either Seller of this Agreement, or for the Transaction, except for any such authorization or consent which has been or will be obtained prior to the time at which it is required to be obtained.

 

(b)                                  Capitalization .   There are 15,000 shares of authorized stock of Prism, of which 1,000 is issued and outstanding.  500 shares of the Stock are held legally and beneficially by Billie J. Eustice and 500 shares of the Stock are held legally and beneficially by the Gary L. Little Trust.   There are no outstanding rights, options, warrants, conversion rights or agreements for the purchase, issuance, grant, sale, redemption, assignment, transfer or acquisition of any shares of Prism’s capital stock, or any profits interests granted or outstanding.  The Stock represents all of the issued and outstanding shares of capital stock of Prism.  All of the shares of Stock are duly authorized, validly issued, fully paid and nonassessable.  Prism is the sole owner of 100% of the membership interests of Provident.

 

(c)                                   Title to the Stock .  Sellers have good and marketable title to the Stock, free and clear of all Liens.  At the Closing and subject to delivery by Buyer of those items set forth in Section 3(d)(ii) of this Agreement, Buyer will receive good and marketable title to the Stock, free and clear of all Liens.

 

(d)                                  Financial Statements .  Sellers will deliver to Buyer as soon as reasonably practical following the execution of this Agreement, Prism’s unaudited financial statements (including balance sheets, statements of operations and statements of cash flows) for the one year period ended June 30, 2008 (the “ Financial Statements ”).    The Financial Statements (a) fairly present the assets, liabilities and financial condition and results of operations indicated thereby for the period indicated thereon, and (b) contain and reflect all necessary adjustments for a fair representation of the Financial Statements as of the date and for the periods covered thereby.

 

(e)                                   Ownership of Assets .    The principal asset of Prism is its ownership of 100% of the membership interests of Provident, and the sole assets of Provident are (i) all of the leasehold interests comprising the Two Medicine Cut Bank Sand Unit in Pondera and Glacier Counties, Montana (the “ Leasehold Interests ”), and (ii) all of Provident’s equipment, parts, machinery, fixtures and improvements located on the Leasehold (collectively the “Unit”).    All furniture fixture and equipment of Prism will be delivered to or made accessible to Buyer at Closing.

 

(f)                                     Title to Leasehold Interests .   Provident has good and marketable title to the Leasehold Interests, free of all Liens, except (i) inchoate operators’ liens attributable to unbilled joint account expenditures, and (ii) imperfections of title which do not materially interfere with the use, operation and possession or materially reduce the value of any particular Leasehold Interests or the production and sale of hydrocarbons for the account of Provident therefrom.

 

(g)                                  Environmental and Safety Requirements .   To Sellers’ knowledge, Provident is in material compliance with all applicable Environmental and Safety Requirements (as defined below) relating to the Unit.   To Sellers’ knowledge, there are no outstanding or unaddressed and resolved written communications from any party with respect to Provident’s failure to comply

 

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with Environmental and Safety Requirements relating to any of the Provident’s owned or leased facilities used in the conduct of its business in connection with the Unit.  For purposes of this Agreement, “ Environmental and Safety Requirements ” means all federal, state, foreign and local laws, rules, regulations, ordinances, orders, statutes, and requirements relating to public health and safety, worker health and safety, pollution and protection of the environment (including without limitation the handling of any polluted, toxic or hazardous materials), all as amended through the date of this Agreement.    For purposes of this Agreement, “ Knowledge ” whether capitalized or not, means the actual awareness of such fact or matter of a Seller.    On or before Closing, Sellers will cause to be delivered to Buyer any and all written correspondence received by Prism from BLM / BIA, for Buyer’s review.

 

(h)                                  No Broker’s Fee .   Buyer will not incur any liability for any financial advisory fees, brokerage fees, commissions or finders’ fees due or claimed to be due to any broker, finder, agent, representative, consultant, or similar person retained by or whose claims arise from contact with any Seller, Prism or Provident, or any affiliates of a Seller, as a result of the Closing of the Transaction.

 

(i)                                      Litigation .  Except as listed in Schedule 5(h), there is no suit, action, claim, investigation, litigation or proceeding pending, or to any Seller’s knowledge threatened, against or with respect to Prism or Provident (separately, a “ Company ” and collectively, the “ Companies ’) or any of their respective businesses or assets.   Neither Company is operating under, subject to or bound by, and none of their respective assets is subject to or bound by, any judgment, decree, injunction, writ, prohibition or order of any court or federal, state, municipal or other governmental body or agency or arbitrator.

 

(j)                                            Disclaimers .  THE EXPRESS REPRESENTATIONS AND WARRANTIES OF SELLERS CONTAINED HEREIN ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER REPRESENTATIONS AND WARRANTIES, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, AND SELLERS EXPRESSLY DISCLAIM ANY AND ALL SUCH OTHER REPRESENTATIONS AND WARRANTIES.  WITHOUT LIMITATION OF THE FOREGOING, THE STOCK AND CONSEQUENTLY THE UNIT SHALL BE CONVEYED PURSUANT HERETO WITHOUT ANY OTHER WARRANTY OR REPRESENTATION WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE RELATING TO THE CONDITION, QUANTITY, QUALITY, FITNESS FOR A PARTICULAR PURPOSE, OR MERCHANTABILITY OF ANY EQUIPMENT OR ITS FITNESS FOR ANY PURPOSE, AND, EXCEPT AS PROVIDED OTHERWISE HEREIN, WITHOUT ANY OTHER EXPRESS, IMPLIED, STATUTORY OR OTHER WARRANTY OR REPRESENTATION WHATSOEVER.  BUYER SHALL HAVE INSPECTED, OR WAIVED (AND UPON CLOSING SHALL BE DEEMED TO HAVE WAIVED) ITS RIGHT TO INSPECT, THE UNIT FOR ALL PURPOSES AND SATISFIED ITSELF AS TO ITS PHYSICAL CONDITION, BOTH SURFACE AND SUBSURFACE.  BUYER IS RELYING SOLELY UPON ITS OWN INSPECTION OF THE UNIT, AND BUYER SHALL ACCEPT ALL OF THE SAME IN ITS “AS IS”, “WHERE IS” CONDITION.  ALSO WITHOUT LIMITATION OF THE FOREGOING, BUT SUBJECT TO THE EXPRESS REPRESENTATIONS MADE IN THIS AGREEMENT ONLY, SELLERS MAKE NO ADDITIONAL WARRANTY OR REPRESENTATION, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, AS TO THE ACCURACY OR COMPLETENESS OF ANY DATA, REPORTS, RECORDS, PROJECTIONS, INFORMATION OR MATERIALS NOW, HERETOFORE OR HEREAFTER FURNISHED OR MADE AVAILABLE TO BUYER IN CONNECTION WITH THIS AGREEMENT INCLUDING, WITHOUT LIMITATION, RELATIVE TO PRICING ASSUMPTIONS, OR QUALITY OR QUANTITY OF

 

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HYDROCARBON RESERVES (IF ANY) ATTRIBUTABLE TO THE UNIT OR THE ABILITY OR POTENTIAL OF THE UNIT TO PRODUCE HYDROCARBONS OR ANY OTHER MATTERS CONTAINED IN ANY MATERIALS FURNISHED OR MADE AVAILABLE TO BUYER BY SELLERS OR BY SELLERS’ AGENTS OR REPRESENTATIVES. ANY AND ALL SUCH DATA, RECORDS, REPORTS, PROJECTIONS, INFORMATION AND OTHER MATERIALS (WRITTEN OR ORAL) FURNISHED BY SELLERS OR OTHERWISE MADE AVAILABLE OR DISCLOSED TO BUYER ARE PROVIDED BUYER AS A CONVENIENCE AND SHALL NOT CREATE OR GIVE RISE TO ANY LIABILITY OF OR AGAINST SELLERS AND ANY RELIANCE ON OR USE OF THE SAME SHALL BE AT BUYER’S SOLE RISK TO THE MAXIMUM EXTENT PERMITTED BY LAW.

 

6.                                        Representations and Warranties of Buyer .  Buyer hereby represents and warrants to Sellers that each of the following statements is true and correct as of the date of this Agreement and the Closing Date, unless as otherwise expressly stated herein:

 

(a)                                   Organization and Good Standing .  Buyer is a corporation duly formed, validly existing and in good standing under the laws of the state of Delaware with the corporate power and authority to own its properties and assets and to carry on its business as it is now being conducted, and is duly qualified to do business and is in good standing in each jurisdiction in which its ownership of property or the conduct of its business requires such qualification.

 

(b)                                  Power .  The Buyer has the requisite corporate power and authority to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby.  The execution, delivery and performance by the Buyer of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the manager of Buyer, and no other proceedings, consent or actions on the part of the Buyer are necessary to authorize the execution, delivery and performance of this Agreement by the Buyer and the consummation of the transactions contemplated hereby.

 

(c)                                   Enforcement .  This Agreement has been duly executed and delivered by Buyer and constitutes the legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except as such enforceability may be limited by the effect of applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally.

 

(d)                                  Authorization .  The execution, delivery and performance by Buyer of this Agreement and the consummation of the transactions contemplated hereby do not breach or constitute a default under any loan or purchase agreement, indenture, mortgage, deed of trust, lease, instrument, contract or other agreement binding on or affecting Buyer or any of his property or assets, the breach of which, either individually or in the aggregate, could reasonably be expected to have a material adverse effect on Buyer.

 

(e)                                   Consents and Approvals .  No governmental authorization, and no consent, approval or authorization of, or notice to, or other action by, any other person, is required for the due execution, delivery, recordation, filing or performance by Buyer of this Agreement, or for any of the other transactions contemplated hereby, except for any such authorization or consent which has been or will be obtained prior to the time at which it is required to be obtained

 

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(f)                                     Litigation .  There is no action, suit, or proceeding pending or, to the knowledge of Buyer, threatened, which in any way involves or affects the Buyer, by or before any court, governmental entity or arbitration panel or any other Person.

 

(g)                                  Available Financing .  Buyer has readily available to it adequate financing necessary to consummate the Transaction.

 

(h)                                  Investment Representations .  Buyer understands and acknowledges that:

 

(i)                                      Buyer is acquiring the Stock for its own account for the purpose of investment and not with a view to the resale or other distribution thereof.  By taking the Stock, it is prepared to continue to bear the economic risk of such investment for an indefinite period of time because the Stock has not been registered under the Securities Act of 1933, as amended (the “ Act ”) or applicable state securities laws.   As a result, the Stock must be held until they are registered under the Act and applicable state securities laws or an exemption from such registration is available.

 

(ii)                                   Sellers intend to, and Buyer agrees that Sellers may, place or cause to be placed a legend on the Stock, stating that they have not been registered under the Act or any applicable state securities laws and setting forth or refer


 
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