Exhibit 10.1
SALES AGREEMENT
This Sales Agreement
(“Agreement”) entered into this 1 st day of
July, 2005 between M D Cowan, Inc., 2600 W. 87 th
Street, Odessa, TX, 79765 (“Cowan”) and PV Exploration
Company, 1083 Sain Street, Fayetteville, Arkansas (“PV
Exploration”).
In consideration of the covenants and
agreements contained herein, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1.
Cowan agrees to sell and PV Exploration
agrees to purchase (i) five (5) drilling rigs meeting the
specifications set forth on Exhibit A attached hereto (the
“Rigs”) and (ii) spare parts and equipment meeting the
specifications set forth on Exhibit F attached hereto
(collectively, the “Spare Parts”). PV Exploration
shall have the right to make changes in the specifications for the
Rigs and the Spare Parts upon written notice to Cowan. If any
such changes affect Cowan’s cost of fabricating the Rigs or
acquiring the Spare Parts, the parties shall mutually agree in
writing to an equitable adjustment to the Purchase
Price.
2.
The total purchase price for all the Rigs
and Spare Parts (the “Purchase Price”) shall be as
follows:
PV Exploration Rig #1
$6,700,000
PV Exploration Rig #2
6,700,000
PV Exploration Rig #3
6,700,000
PV Exploration Rig #4
6,700,000
PV Exploration Rig #5
6,700,000
Spare Parts
4,242,000
TOTAL
$ 37,742,000
3.
The Purchase Price shall be paid as
follows:
a.
Eighteen Million Eight Hundred
Seventy-one Thousand Dollars ($18,871,000), representing one-half
of the Purchase Price, shall be deposited with Western National
Bank, Odessa, Texas (“Escrow Agent”) within five (5)
business days following the execution of this Agreement (the
“Down Payment”). Escrow Agent shall pay the Down
Payment to Cowan in installments in accordance with the payment
procedures described on Exhibit B attached
hereto;
b.
The remaining Eighteen Million Eight
Hundred Seventy-one Thousand Dollars ($18,871,000), representing
the remaining one-half of the Purchase Price, shall be paid to
Cowan proportionately as each Rig is delivered and accepted by PV
Exploration ( i.e . as each Rig is delivered to and accepted
by PV Exploration, PV Exploration shall pay $3,350,000 to Cowan)
and when the Spare Parts are delivered and accepted by PV
Exploration; and
c.
Any sales, use, excise or similar tax
applicable to the sale of the Rigs shall be borne and paid by PV
Exploration or, in the alternative, PV Exploration will provide
Cowan with appropriate tax exemption certificates. In this
regard, Cowan and PV Exploration contemplate that the sale of the
Rigs shall be exempt from sales taxes under Section 151.324 of the
Texas Tax Code, since the Rigs are to be promptly removed from
Texas and used for the exploration of oil and gas outside the state
of Texas.
4.
Subject to the testing procedures and
inspections by PV Exploration as provided below, PV Exploration
shall make final payment for each Rig and the Spare Parts (as
described in paragraph 3b. above) at the time and place of delivery
of each Rig and the Spare Parts upon tender by Cowan of (i) an
Assignment and Bill of Sale in the form attached hereto as
Exhibit C and (ii) any other title transfer documents (if
any) reasonably requested by PV Exploration. As a condition
to PV Exploration’s acceptance of the Rigs and the Spare
Parts, each Rig and the Spare Parts shall successfully complete the
testing procedures described on Exhibit D attached
hereto.
5.
The Rigs and the Spare Parts shall be
delivered for inspection, testing and transfer of title at
Cowan’s yard in Odessa, Texas according to the following
delivery schedule:
Rig Number
Delivery Date
PV Exploration Rig #1
November 15, 2005
PV Exploration Rig #2
December 15, 2005
PV Exploration Rig #3
January 15, 2006
PV Exploration Rig #4
February 15, 2006
PV Exploration Rig #5
March 15, 2006
The parties agree that time is of the
essence with respect to the above-described delivery schedule.
Cowan and PV Exploration shall keep in close communication
regarding the progress of construction of each of the Rigs.
Cowan shall give PV Exploration at least ten (10) days notice
prior to the actual delivery date for each Rig and the Spare Parts
so that PV Exploration shall have sufficient time to inspect each
Rig and the Spare Parts and conduct the testing procedures
described above.
6.
Cowan warrants to PV Exploration the
following:
a.
Cowan is and shall be upon delivery to PV
Exploration the legal owner of the Rigs and the Spare
Parts;
b.
The Rigs and the Spare Parts are now, and
will at transfer of title, be free and clear of any security
interests, liens and encumbrances of whatsoever nature which would
prevent Cowan from transferring good title, free and clear, to PV
Exploration;
c.
Cowan warrants title to the Rigs and the
Spare Parts against the claims of all persons or entities,
including vendors and suppliers of equipment that is incorporated
into the Rigs;
d.
Cowan is in good legal standing with full
authority to enter into this agreement, perform its obligations
hereunder and convey the Rigs and the Spare Parts to PV Exploration
as described above;
e.
The Rigs shall meet the specifications
described on Exhibit A and the Spare Parts shall meet the
specifications described on Exhibit F . Both the Rigs
and the Spare Parts shall be fit for the purposes for which they
are ordinarily intended; and
f.
The Rigs will be assembled in
Cowan’s yard in Odessa, Texas, will not be assigned to any
other customer and will be delivered to PV Exploration free of any
rightful claims by third parties arising from patent or trademark
infringement.
All manufacturer’s warranties on
the Spare Parts and on all material and equipment incorporated in
the Rigs shall either run directly to PV Exploration or shall be
assignable to PV Exploration. The installation of all such
material and equipment shall be in strict accordance with the
manufacturer’s requirements. Cowan shall be responsible
for enforcing or, at Cowan’s option, performing all such
warranties.
7.
Title to, and risk of loss with relation
to, each of the Rigs shall remain in Cowan, on a Rig by Rig basis,
until inspection, testing, payment of the remaining portion of the
Purchase Price of each such Rig and transfer of documents of title.
Likewise, title to, and risk of loss with relation to, the
Spare Parts shall remain in Cowan until inspection, testing,
payment of the remaining portion of the Purchase Price for the
Spare Parts and transfer of title documents. Prior thereto,
Cowan shall maintain the insurance described on Exhibit E
hereto. Cowan shall furnish to PV Exploration certificates of
insurance evidencing such coverage, together with evidence of the
payment of all premiums therefore. Cowan shall indemnify and
hold harmless PV Exploration, its officers, agents, employees,
affiliates, successors and assigns, from and against any and all
suits, actions, claims, demands, costs and expenses (including
attorneys’ fees) of any nature for personal injury, death,
physical damage to property or patent or trademark infringement
arising out of or resulting from Cowan’s activities under
this Agreement.
8.
PV Exploration shall have the right to
inspect and conduct the above-described testing procedures on each
Rig and the Spare Parts at Cowan’s yard in Odessa, Texas,
prior to accepting delivery. In the event any such Rig or Spare
Parts does not meet PV Exploration’s standards, PV
Exploration shall, within two (2) business days of such inspection
and/or testing notify Cowan in writing of any claimed defect. Cowan
shall have a reasonable time to cure any such defect. In the event
the parties disagree as to the existence or extent of any defect,
the parties shall attempt to resolve the issue in good faith within
ten (10) days. In the event PV Exploration fails to notify
Cowan as provided above and the Rig and/or Spare Parts shall have
passed the above-described testing procedures, PV Exploration shall
be deemed to have made unqualified acceptance of the Rig and/or
Spare Parts subject, however, to the warranties described in
paragraph 6 above.
9 . If the Parties disagree
as to any matter under this Agreement, including without limitation
any dispute as to the termination, construction, validity,
interpretation, enforceability or breach of the Agreement, they
will first attempt to resolve such disagreement through a meeting,
to be held within ten (10) days of any such dispute, of senior
executives of each party.
If
such meeting of senior executives of each party fails to resolve
the matter within thirty (30) days of the date of such meeting,
then thereafter any such dispute, controversy or claim arising out
of or in relation to or in connection with the Agreement or the
operations carried out under this Agreement shall be exclusively
and finally settled by arbitration in accordance with this
paragraph 9 and the most current commercial arbitration rules of
the American Arbitration Association. Either party may submit
such dispute, controversy or claim to arbitration by notice to the
other party.
The
arbitration shall be heard and determined by three (3)
arbitrators. Each side shall appoint an arbitrator of its
choice within thirty (30) days of the submission of a notice of
arbitration. The party-appointed arbitrators shall in turn
appoint a presiding arbitrator of the tribunal within thirty (30)
days following the appointment of both party-appointed
arbitrators. All decisions and awards by the arbitration
tribunal shall be made by majority vote.
Unless
otherwise expressly agreed in writing by the parties to the
arbitration proceedings:
(i)
The arbitration proceedings shall be held at a location in Texas as
determined by the arbitrators;
( ii)
The arbitrator(s) shall be and remain at all times
wholly independent and impartial;
(iii)
Any procedural issues and substantive law shall be
determined by the applicable laws of the State of Texas, other than
those laws which would refer the matter to another
jurisdiction;
(iv)
The costs of the arbitration proceedings (including
attorneys' fees and costs) shall be awarded to the prevailing
party unless otherwise determined by the arbitrators.
(v)
The decision of the majority of the arbitrators shall
be reduced to writing and shall be final and binding without the
right of appeal. The arbitrator’s decision shall be the
sole and exclusive remedy regarding any claims, counterclaims,
issues or accountings presented to the arbitrators and any such
award shall be promptly paid in U.S. dollars free of any deduction
or offset, as decided by the arbitrators. Any costs or fees
incident to enforcing the award shall, to the maximum extent
permitted by law, be charged against the party resisting such
enforcement;
(vi)
Consequential, punitive or other similar damages
shall not be allowed except those payable to third parties for
which liability is allocated among the parties by the arbitral
award;
(vii)
The award shall include interest at the rate of
twelve percent (12%) per annum from the date of any breach or
violation of this Agreement, as determined by the arbitral award,
and from the date of the award until paid in full;
(viii)
Judgment upon the award may be entered in any court
having jurisdiction over the person or the assets of the party
owing the judgment, or application may be made to such court for a
judicial acceptance of the award and an order of enforcement, as
the case may be;
(ix)
The arbitration shall proceed in the absence of a
party who, after due notice, fails to answer or appear. An
award shall not be made solely on the default of a party, but the
arbitrator(s) shall require the party who is present to submit such
evidence as the arbitrator(s) may determine is reasonably required
to make an award;
10.
All representations and warranties of Cowan shall
survive closing of the transactions contemplated herein.
11.
This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, Cowan shall not assign
its rights or obligations under this Agreement (directly or
indirectly) without the prior written consent of PV
Exploration.
12.
This Agreement may not be modified in any
way except in writing executed by both the parties.
13.
If any clause of this Agreement is held
to be unenforceable by a court of competent jurisdiction, such
clause will be deleted and the balance of the Agreement will remain
in full force and effect.
14.
This Agreement may be executed in
counterparts. Execution of this Agreement via facsimile shall
be effective, and signatures received via facsimile shall be
binding upon the parties hereto and shall be effective as
originals.
15.
This writing constitutes the entire
agreement of the parties and there are no outstanding
understandings or agreements, oral or written. Each party, in
entering into this Agreement has not relied upon any representation
of the other party other than contained herein.
16.
Cowan hereby grants to PV Exploration a
security interest in the Rigs (including the component parts
thereof) and the Spare Parts, to the extent of the Down Payment, to
secure the performance by Cowan of its obligations under this
Agreement. Cowan hereby authorizes PV Exploration to file
appropriate financing statements to perfect such security interest.
Cowan will cooperate with PV Exploration and agrees to execute
documentation to secure the Rigs (including the component parts
thereof) and the Spare Parts. Cowan warrants and represents
that, except for the security interest granted hereby, the Rigs
(including the component parts thereof) and the Spare Parts are and
shall continue to be free and clear of any adverse claim, security
interest or other encumbrance. If it is determined that
Cowan’s lenders have an existing lien or security interest
that could constitute an adverse claim, security interest or
encumbrance on the Rigs (including the component parts thereof) or
the Spare Parts, Cowan shall obtain an appropriate release or
subordination thereof to the security interest granted to PV
Exploration hereunder.
17.
Subject to compliance with governing laws
and applicable notification requirements of the New York Stock
Exchange, the parties agree that prior to making any announcement
or statement with respect to this Agreement or the transaction
contemplated herein, the party desiring to make such public
announcement or statement shall consult with the other party and
exercise all reasonable efforts (i) to agree on the text of a joint
public announcement or statement or (ii) to obtain approval of the
other party of the text of its own public announcement or
statement.
IN WITNESS WHEREOF, the parties have
executed this Agreement effective the 1 st day of July,
2005
