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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