EXHIBIT 10.12
OPTION AND ASSET
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT (this "Agreement"), dated as of February 28,
2005, is
entered into by and between Thornton Drilling Company, a Colorado
corporation
with a mailing address of P.O. Box 811, Pocola, Oklahoma 74902
(hereinafter
called "Buyer"), and SPA Drilling, L.P., a limited partnership
organized under
the laws of the State of Texas, with a mailing address of P.O. Box
6747,
Abilene, Texas (hereinafter called "Seller"),
WITNESSETH:
That Seller desires to sell to Buyer and Buyer desires to
purchase from
Seller, on the terms set forth in this Agreement, those certain
assets
identified in Exhibits "A" and "B" attached hereto and made a part
hereof.
Accordingly, Seller and Buyer agree as follows:
1. SALE AND PURCHASE OF ASSETS
1.1 Assets To Be Sold. Seller shall sell, transfer and assign
to Buyer, and
Buyer shall purchase and receive, all right, title and interest in
and to the
following described assets hereinafter collectively referred to as
the Assets,"
to-wit:
1.1.1 The personal property, machinery and equipment
described on
Exhibit "A" attached hereto and made a part hereof.
1.1.2 Those certain agreements described in Exhibit "B"
attached
hereto and made a part hereof
1.2 Assets Excluded. The Assets do not include:
1.2.1 Cash, accounts receivable and work in progress
associated with
the agreements described in Exhibit "B" attached hereto and
made a part
hereof and relating to operations prior to the Effective Date
of Sale, and
prepaid items.
1.3 Conveyancing Instruments. The Assets to be conveyed by
Seller to Buyer
pursuant to Section 1.1 shall be conveyed "as is" with the express
conditions
and limitations noted in Section 4.1. The Assets to be transferred
to Buyer
pursuant to Section 1.1 shall be transferred pursuant to a form of
sale and
assignment as provided in Sections 6.1.3 and 6.2.6.
2. PURCHASE PRICE
2.1. Price. As consideration for the sale of the Assets, Buyer
shall pay to
Seller or its designee, Nineteen Million Six Hundred Thousand
United States
dollars ($19,600,000.00) (the "Purchase Price"), as follows:
2.1.1 Upon signing this Agreement, Buyer shall pay to
Seller the sum
of Five Hundred Thousand Dollars ($500,000.00), which shall be
an option
fee, by wire transfer,
in immediately available funds, to a bank account to be
designated by
Seller. In the event this transaction is closed, said option
fee shall be
credited against the purchase price of the Assets.
2.1.2 Balance shall be paid at Closing by wire transfer,
in
immediately available funds, to a bank account to be
designated by Seller.
2.1.3 The payment provided for in Section 2.1.1 shall be
considered an
option fee. Accordingly, either Buyer or Seller may recede
from this
Agreement at any time prior to Closing by giving written
notice of such
action to the other party prior to Closing. Should Buyer
recede from this
Agreement, then Buyer shall forfeit the option fee to Seller
and Buyer
shall have no other liability whatsoever to Seller for
receding from this
Agreement. Should Seller recede from this Agreement, then
Seller shall,
with the written notice of Seller's receding from the
Agreement, return the
option fee to Buyer and pay to Buyer the additional sum of
$500,000.00, and
Seller shall have no other liability whatsoever to Buyer for
receding from
this Agreement.
2.1.4 Notwithstanding the provisions of Section 2.1.3,
(i) Seller may
recede from this Agreement without liability to Buyer for
return of Buyer's
option fee or payment of an additional $500,000 if Seller
recedes because
Buyer has materially breached this Agreement, and (ii) Buyer
may recede
from this Agreement and be entitled to the return of its
option fee if
Buyer recedes because Seller has materially breached this
Agreement or
because Seller has, pursuant to the provisions of Section 5.2,
5.3 and/or
Section 8.2, withdrawn or deleted from the Assets having a
value equal to
or greater than $3,000,000.
After the Effective Date of Sale, Seller will pay only that
portion of
invoices received with respect to any of the agreements described
in attached
Exhibit "B" that are applicable to work performed or material
received in the
period prior to the Effective Date of Sale; other charges and
invoices under
said agreements will be returned to the vendor for rebilling to
Buyer.
Similarly, after the Effective Date of Sale, Buyer will pay only
that portion of
invoices received with respect to any of the agreements described
in attached
Exhibit "B" that are applicable to work performed or material
received in the
period subsequent to the Effective Date of Sale; other charges and
invoices
under said agreements will be returned to the vendor for rebilIing
to Seller.
2.2 Assumption of Liabilities. Buyer shall assume and be
responsible for
all obligations of Seller accruing after the Effective Date of Sale
under the
agreements listed in Exhibit B hereto (except that lease rentals
shall be
prorated as of the Effective Date of Sale, and any obligation
associated with an
agreement listed in Exhibit B shall be assumed only to the extent
that the
material or service with respect to which such payment is due is
received by
Buyer after the Effective Date of Sale).
2.3 Non-Competition and Non-Solicitation. In consideration of
the Purchase
Price, Seller and the partners in Seller (said partners being
signatory parties
hereto), agree that, for a period of two (2) years commencing on
the Closing
Date, neither Seller nor any of the partners in Seller shall:
2
(a) engage in any way, directly or indirectly, in the
business of
drilling, completing or workover of oil and gas
wells within a
200 mile radius of the city limits of Abilene,
Texas;
(b) solicit or assist in soliciting, directly or
indirectly, any
current, future or former customer of the Seller or
Buyer,
wherever situated, in connection with their needs
for drilling,
competition, workover or related rigs; or
(c) induce, advise or counsel any employee or agent, of
the Buyer to
leave the employ of the Buyer, solicit or employ the
services of
employees or agents of the Buyer, or otherwise
interfere with the
relationship between the Buyer and its employees or
agents.
2.4 Effective Date of Sale. The Effective Date of Sale of the
Assets
described in Section 1.1 shall be at the close of business by
Seller on April
29, 2005.
2.5 Closing. The Closing of the transactions contemplated
herein and the
transfer of the Assets shall occur on April 29, 2005, at Seller's
office at
10:00 A.M. local time, or such other date, time and place as Seller
and Buyer
may agree in writing.
2.6 Purchase Price Allocation. The Purchase Price shall be
allocated in
accordance with Exhibit C hereto. Seller and Buyer further agree to
file all tax
returns or reports, including, without limitation, IRS From 8594,
for their
respective taxable years in which the Closing occurs and to reflect
the
allocation of the Purchase Price described in Exhibit C on any such
tax returns
or reports and agree not to take any position inconsistent
therewith before any
governmental authority or in the course of any tax audit, tax
review or tax
litigation matter relating thereto.
3. TAXES
3.1 Payment of Taxes. All ad valorem, property and other
similar forms of
taxes, which have been paid by Seller or which have accrued on or
before the
Effective Date of Sale, shall be prorated between Seller and Buyer
as of the
Effective Date of Sale. Buyer shall be responsible for all sales,
use and
similar taxes arising out of the sale of the Assets, but not any
income taxes
for which Seller and its partners are liable as a consequence of
the Sale. At
the Closing, Buyer shall pay Seller all state and local sales or
use taxes
applicable to that portion of the Assets which is tangible personal
property,
and Seller shall remit such amount to the appropriate taxing
authority in
accordance with applicable law. Buyer shall hold harmless and shall
indemnify
Seller for any sales or use taxes assessed against Seller by any
taxing
authority in respect to this sale, including the amounts of any
penalties,
interest and attorneys' fee.
Should this purchase and sale constitute an isolated or
occasional sale and
not be subject to sales or use tax with any of the taxing
authorities having
jurisdiction over this transaction, no sales tax will be collected
by Seller
from Buyer at the date of Closing. Seller agrees to cooperate with
Buyer in
demonstrating that the requirements for an isolated or occasional
sale or any
other sales tax exemption have been met.
3
4. REPRESENTATIONS AND WARRANTIES
4.1 Seller's Representations and Warranties. Seller represents
and warrants
to Buyer:
4.1.1 Seller is a limited partnership duly organized and
validly
existing, in good standing, under the laws of the State of
Texas. Seller
has the power and authority to own the Assets and to carry on
its business
as now conducted and to enter into and to carry out the terms
of this
Agreement.
4.1.2 Spud, Inc., a Texas corporation and the general
partner of
Seller, and EFO OILERS, L.P., BRH 2002, L.P. and Jim D.
Mayfield, the only
limited partners of Seller, are the only persons having
partnership
interests in Seller.
4.1.3 The execution and delivery of this Agreement and
the
consummation of the transactions contemplated hereby have been
duly
authorized and Seller is not subject to any charter, by-law,
lien or
encumbrance of any kind, agreement, instrument, order or
decree of any
court or governmental body which would prevent consummation of
the
transactions contemplated by this Agreement.
4.1.4 Seller will at the Closing be the owner of 100% of
the right,
title and interest in the Assets, and the transfer of the
Assets to Buyer
pursuant to this Agreement will vest in Buyer all right, title
and interest
in and to all of the Assets, free and clear of all security
interests,
mortgages, liens, tax liens, leases and other encumbrances.
4.1.5 Seller has made available to Buyer for inspection
and copying
all books and records maintained by or on behalf of Seller
concerning the
Assets and, to the best of Seller's knowledge, none of the
information so
made available contains or will contain any untrue statement
of a material
factor omits or will omit to state a material fact necessary
to make the
statements contained therein not misleading.
4.1.6 No employee of Seller has or will on the date of
Closing have
any contract of employment with Seller.
4.1.7 With respect to each of the agreements described in
Exhibit "B"
attached hereto and made a part hereof: (a) each has been duly
authorized,
executed and delivered by Seller; (b) each is in full force
and effect; (c)
neither Seller nor, to the knowledge of Seller, any other
party to such
agreements (i) is, or as a result of the transactions
contemplated herein
will be, in breach of or default, or with the lapse of time or
the giving
of notice, or both, would be in breach or default, with
respect to any of
its obligations thereunder; or (ii) has given or threatened to
give notice
of any default under or inquiry into any possible default
under, or action
to alter, terminate, rescind or procure a judicial reformation
of any such
agreement; and (d) Seller ,does not anticipate that any other
party to any
such agreement will be in breach of or default under or
repudiate any of
its obligations thereunder.
4
4.1.8 There are no preferential purchase rights, consents
and
approvals required to be obtained for the transfer of the
Assets to Buyer.
4.1.9 There is no claim, demand, filing, cause of action,
administrative proceeding, lawsuit or other litigation pending
or
threatened that could now or hereafter materially affect the
ownership,
operation or value of any of the Assets.
4.1.10 The Assets have been used by. Seller in compliance
with all
laws, orders, regulations, rules and ordinances issued or
promulgated by
all governmental authorities having jurisdiction with respect
to the
Assets, including, but not limited to, laws, regulations and
ordinances
relating to environmental protection, health and safety; and
all necessary
governmental certificates, consents, permits, licenses or
other
authorizations with regard to the ownership or operation of
the Assets have
been obtained and Seller has received no notices of violations
in respect
of such licenses, permits or authorizations.
EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, THE ASSETS
DESCRIBED ON EXHIBIT
"A" ARE TO BE SOLD "AS IS," AND SELLER MAKES NO WARRANTY, EXPRESS
OR IMPLIED IN
FACT OR BY LAW, WHETHER OF OPERATING CONDITION, SAFETY, COMPLIANCE
WITH
GOVERNMENT REGULATIONS, MERCHANTABILITY, FITNESS FOR ANY PARTICULAR
PURPOSES,
CONDITION OR OTHERWISE, CONCERNING ANY OF SAID ASSETS. ALL PERSONAL
PROPERTY,
MACHINERY AND EQUIPMENT ARE TO BE CONVEYED BY SELLER AND ACCEPTED
BY BUYER
PRECISELY AND ONLY "AS IS, WHERE IS." SELLER DOES NOT WARRANT THE
ASSETS FREE
FROM REDHIBITORY VICES OR DEFECTS.
4.2 Buyer's Representations and Warranties. Buyer represents
and warrants:
4.2.1 Buyer is a corporation duly organized and validly
existing, in
good standing, under the laws of the State of Colorado and has
the power
and authority to own its property and to carry on its business
as now
conducted and to enter into and to carry out the terms of this
Agreement.
4.2.2 The execution and delivery of this Agreement and
the
consummation of the transactions contemplated hereby have been
duly
authorized and Buyer is not subject to any charter, by-law,
lien or
encumbrance of any kind, agreement, instrument, order or
decree of any
court or governmental body which would prevent consummation of
the actions
contemplated by this Agreement.
4.2.3 Buyer shall comply with all applicable laws,
ordinances, rules
and regulations and shall promptly obtain and maintain all
permits required
by public authorities in connection with the Assets purchased.
4.2.4 Buyer acknowledges that the Assets have been used
for oil and
gas drilling operations and related oilfield operations and
possibly the
storage and
5
disposal of waste materials incidental to or occurring in
connection with
such operations, and Buyer has entered into this Asset Sale
Agreement on
the basis of Buyer's own investigation of the physical
condition of the
Assets. Buyer is acquiring the Assets precisely and only in an
"as is and
where is" condition.
5. ADDITIONAL COVENANTS
5.1 Seller shall afford to Buyer, and/or Buyer's designated
representatives, reasonable access to the Assets, from the date
hereof until the
Closing, for the purpose of inspecting the Assets and conducting
such tests
thereon (at the expense of Buyer) as Buyer may deem necessary to
satisfy itself
as to the condition of the Assets.
5.2 Asset Title Review. From the date hereof until the
Closing, "Seller
shall make available to Buyer without express or implied warranty
of any kind
regarding the accuracy of such information, copies of information
in Seller's
possession regarding Seller's title to the Assets. Buyer shall
review the
information at Seller's office Buyer specifically agrees that any
conclusions
made from any examination done or caused to be done shall result
from its own
independent review and judgment only. In the event of a title
defect which would
prevent Buyer from enjoyment of the Assets in the same manner
enjoyed by Seller
immediately prior to the date of this agreement, Buyer shall notify
Seller of
such. defect within fifteen (15) days
|
