MUTUAL TERMINATION AGREEMENT
THIS MUTUAL TERMINATION AGREEMENT (the "Agreement") is entered into this
8th day of June, 2006 by and among (A) ▇▇▇ Energy Royalties Limited Partnership,
a Delaware limited partnership ("▇▇▇ Royalties"), PennTex Resources, L.P., a
Texas limited partnership ("PennTex Resources"), PennTex Resources Illinois,
Inc., a Delaware corporation ("PennTex Illinois"), ▇▇▇▇▇▇▇ Oil & Gas Limited
Partnership, a Delaware limited partnership ("▇▇▇▇▇▇▇ O&G"), ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇ Limited Partnership, a Delaware limited partnership ("▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇"), Midland Exploration Limited Partnership, a Delaware limited
partnership ("Midland"), ▇▇▇ Energy Operating Corp., a Delaware corporation
("▇▇▇ Energy"), ▇▇▇ Energy Wabash, LLC, a Delaware limited liability company
("▇▇▇ Wabash"), ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, an individual residing in the Commonwealth of
Pennsylvania ("▇▇▇▇▇▇"), and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, an individual residing in the
Commonwealth of Pennsylvania ("▇▇▇▇▇▇▇") (▇▇▇ Royalties, PennTex Resources,
PennTex Illinois, ▇▇▇▇▇▇▇ O&G, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, Midland, ▇▇▇ Energy, ▇▇▇
Wabash, ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ being sometimes referred to hereinafter individually
as a "Seller" and in the aggregate as "Sellers"), (B) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, all individuals
residing in the Commonwealth of Pennsylvania (such individuals, together with
▇▇▇▇▇▇ and ▇▇▇▇▇▇▇, being referred to hereinafter in the aggregate as the
"Acquirers"), (C) Baseline Oil & Gas Corp. (formerly known as College Oak
Investments, Inc.), a Nevada corporation (the "Buyer"), and (D) ▇▇▇▇▇▇ ▇▇▇▇▇▇
("Damson") and ▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇"), both individuals residing in the State of
Connecticut. The Sellers, the Acquirers, the Buyer, Damson and ▇▇▇▇▇▇ are
referred to herein individually as a "Party" and collectively as the "Parties."
WHEREAS, the Sellers and the Buyer entered into a Purchase Agreement dated
January 16, 2006 (the "Purchase Agreement") wherein the Sellers agreed to sell
their assets (and in the case of ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ their shares in certain
entities) to Buyer for the cash and consideration described therein;
WHEREAS, the Acquirers, on the one hand, and the Buyer, Damson and ▇▇▇▇▇▇,
on the other hand, entered into a Stock Agreement dated January 16, 2006 whereby
the parties agreed, among other things, that the Buyer would issue 12,069,250
shares of the Buyer's Common Stock to the Acquirers (the "Acquirers' Shares")
and that certain of the Acquirers would purchase additional shares of Buyer's
Common Stock simultaneously with the closing of the transactions contemplated by
the Purchase Agreement;
WHEREAS, the Acquirers, on the one hand, and the Buyer, Damson and ▇▇▇▇▇▇,
on the other hand, entered into an Amendment to the Stock Agreement dated March
10, 2006 (the Stock Agreement dated January 16, 2006, as amended by the
Amendment to the Stock Agreement dated March 10, 2006, is hereinafter referred
to as the "Stock Agreement"); and
WHEREAS, the Parties to this Agreement desire to terminate the Purchase
Agreement and the Stock Agreement and all obligations of the Parties thereunder
upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, and the receipt of such other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Parties hereto
agree as follows:
1. Definitions. Unless otherwise stated herein or dictated by the context,
capitalized terms used herein that are not defined herein shall have the
respective meanings assigned thereto in the Purchase Agreement.
2. Termination; Return of Confidential Information.
(a) Subject to the satisfaction by the Parties of all of the terms
and conditions set forth in Section 3 of this Agreement and pursuant to Section
7(a)(i) of the Purchase Agreement, the Purchase Agreement is hereby terminated
effective as of the date hereof and any and all rights, duties and obligations
of the Parties arising thereunder or in connection with the Purchase Agreement
are now and hereinafter fully and finally terminated. Subject to the
satisfaction by the Parties of all of the terms and conditions set forth in
Section 3 of this Agreement, the Stock Agreement is hereby terminated effective
as of the date hereof and any and all rights, duties and obligations of the
Parties arising thereunder or in connection with the Stock Agreement are now and
hereinafter fully and finally terminated.
(b) Buyer acknowledges and agrees that, in accordance with Section
5(d)(i) of the Purchase Agreement, Buyer will treat and hold as such any
Confidential Information it has received from any of the Sellers in the course
of the reviews contemplated by Section 2(f) and Section 5(d)(i) of the Purchase
Agreement, will not use any of the Confidential Information thereof, and will
promptly return to the Sellers all tangible embodiments (and all copies) of the
Confidential Information which are in its possession. Sellers acknowledge and
agree that, in accordance with Section 5(d)(ii) of the Purchase Agreement,
Sellers will treat and hold as such any Confidential Information Sellers have
received from the Buyer in the course of the reviews contemplated by Section
5(d)(ii) of the Purchase Agreement (except to the extent such Confidential
Information is disclosed by the Buyer to the public), will not use any of the
Confidential Information of the Buyer, and will return to the Buyer all tangible
embodiments (and all copies) of the Confidential Information which are in
Sellers' possession.
3. Agreements of the Parties.
(a) Mutual Releases and Non-Disparagement Agreements. Incident to
the full execution and delivery of this Agreement, and in consideration of the
agreements of the Parties set out or described in this Agreement and in the
agreements attached as exhibits hereto, the Parties have agreed to and are
executing and delivering the following agreements:
(i) a Mutual Release Agreement in the form attached to and
incorporated in this Agreement as Exhibit A; and
(ii) a Mutual Non-Disparagement Agreement in the form attached
to and incorporated in this Agreement as Exhibit B;
(b) Surrender of the Acquirers' Shares. Incident to the full
execution and delivery of this Agreement, and in consideration of the agreements
of the Parties set out or described in this Agreement and in the agreements
attached to and incorporated in this Agreement, the Acquirers agree to surrender
and transfer the Acquirers' Shares to the Buyer. In furtherance thereof, each of
the Acquirers agrees to transfer to Buyer all stock certificates evidencing the
Acquirers' Shares registered in their name on the books and records of Buyer by
executing and delivering on the date hereof an Assignment Separate from the
Certificate (Stock Power) in the form attached to this Agreement as Exhibit C.
In the event any Acquirer has previously directed the Buyer's transfer agent to
issue any amount of the Acquirers' Shares in the name of any other Person, such
Acquirer agrees to cause such Person to transfer his/her/its Acquirers' Shares
to Buyer by executing and delivering on the date hereof an Assignment Separate
from the Certificate (Stock Power) in the form set forth in Exhibit C. In the
- 2 -
event that the original common stock certificate representing any amount of the
Acquirers' Shares is not available for delivery to Buyer on the date of the full
execution and delivery of this Agreement, the Acquirers agree to promptly
deliver the original stock certificate representing the Acquirers' Shares to
Buyer as soon as reasonably possible, but in no event shall such delivery occur
more that seven (7) Business Days following the date of this Agreement.
(c) Filing of Buyer's Form 8-K. Within four (4) Business Days of the
full execution and delivery of this Agreement, Buyer shall publicly announce the
termination of the Purchase Agreement and the Stock Agreement and shall describe
the transactions contemplated by this Agreement and the exhibits attached hereto
by filing with the SEC a Current Report on Form 8-K substantially in the form
attached to this Agreement as Exhibit D.
(d) Expenses. Except as provided below in this Section 3(d), the
Buyer, Damson, and ▇▇▇▇▇▇, on the one hand, and the Sellers and the Acquirers,
on the other hand, will bear their own costs and expenses (including legal fees
and expenses) incurred in connection with the Purchase Agreement, the Stock
Agreement and the transactions contemplated thereby. As such, (I) Buyer, Damson
and ▇▇▇▇▇▇ acknowledge and agree that any and all fees and expenses of ▇▇▇▇▇ &
▇▇▇ ▇▇▇▇▇▇ LLP in reference to the transactions contemplated by the Purchase
Agreement and the Stock Agreement, including, without limitation, the Wachovia
Loan (as defined below) and the Closing Placements, shall be the sole
responsibility of the Buyer, and any and all fees, costs and expenses which may
be owed to ▇.▇. ▇▇▇▇▇▇ & Company, Inc. and/or Gilford Securities, Inc. with
respect to the Closing Placements (if any) shall be the sole responsibility of
the Buyer, and (II) Sellers and the Acquirers acknowledge and agree that any and
all fees and expenses of Fulbright & ▇▇▇▇▇▇▇▇ L.L.P., Mayer, Brown, ▇▇▇▇ and Maw
LLP, ▇▇▇▇▇▇▇ ▇▇▇▇ LLP and Malin, ▇▇▇▇▇▇▇▇▇ & Company, LLP in reference to the
transactions contemplated by the Purchase Agreement and the Stock Agreement,
including, without limitation, the Wachovia Loan, shall be the sole
responsibility of the Sellers. Notwithstanding the above, the Parties agree as
follows:
(i) With respect to the fees and expenses of Wachovia Bank,
National Association ("Wachovia Bank") and Manufacturers and Traders Trust
Company ("M&T Bank") incurred in connection with the loan transaction
contemplated by the Fee Letter and Commitment Letter each entered into on March
22, 2006 by the Buyer and Wachovia Bank (the "Wachovia Loan"), Buyer, on the one
hand, and Sellers, on the other, each agree to pay one-half of such costs and
expenses. Buyer and Sellers each acknowledge and agree that such costs and
expenses of Wachovia Bank and M&T Bank may include, without limitation, the fees
and expenses of legal counsel (including, without limitation, ▇▇▇▇▇▇ & ▇▇▇▇▇▇
LLP, the Parties acknowledging and agreeing that the total amount of fees and
expenses of ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP as of May 3, 2006 is $141,898.49), accounting
fees, engineering fees and other professional fees.
(ii) With respect to the fees and expenses of local legal
counsel engaged by the Parties in connection with Wachovia Loan, including,
without limitation, those engaged for purposes of investigating title to the
Acquired Assets or for rendering opinion letters as to local enforceability of
the Wachovia Loan documents, Buyer, on the one hand, and Sellers, on the other,
each agree to pay one-half of such costs and expenses.
(iii) With respect to the travel fees and expenses incurred by
Sellers in connection with Buyer's common stock private placement "road show"
presentations conducted in March and April, 2006, as calculated on the attached
Schedule 3(d)(iii), Buyer agrees to pay one-half of such costs and expenses (the
Parties acknowledging and agreeing that the amount payable by Buyer to Sellers
pursuant to this sub-section (iii) shall be $23,698.33).
- 3 -
The Parties acknowledge and agree that the provisions of this Section 3(d)
supersede and replace any provisions regarding the allocation of fees and
expenses as between Buyer and Sellers associated with the Wachovia Loan that are
contained in that certain Cost Sharing Agreement dated March 22, 2006 by and
among the Sellers and the Buyer.
4. Representations and Warranties of the Sellers. It is understood and
agreed that neither ▇▇▇▇▇▇ nor ▇▇▇▇▇▇▇ shall be considered to be a "Seller" for
the purposes of Section 4 and neither of them join in or shall have any
liability or responsibility for or in connection with the representations and
warranties made by the other Sellers that are contained in this Section 4.
Subject in all respects to the foregoing, the respective Sellers, each severally
and with respect only to itself, represent and warrant to the Buyer, Damson and
▇▇▇▇▇▇ that the statements contained in this Section 4 are correct and complete
as of the date of this Agreement.
(a) Organization of the Sellers. Each Seller is a corporation,
limited partnership or limited liability company, as the case may be, duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its organization. Each Seller is duly qualified to do business
and is in good standing in each jurisdiction in which the ownership of its
properties and the operation of its business make such qualification necessary.
(b) Authorization of Transactions. The Sellers have full power and
authority (including full entity power and authority) to execute and deliver
this Agreement and to perform their obligations hereunder. Without limiting the
generality of the foregoing, the board of directors, general partners,
shareholders or managers of the Sellers, as the case may be, have duly
authorized the execution, delivery, and performance of this Agreement by the
Sellers. This Agreement constitutes a valid and binding agreement of each of the
Sellers enforceable against each of the Sellers (wherever applicable) in
accordance with its terms, subject to (i) applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general application with
respect to creditors, (ii) general principles of equity and (iii) the power of a
court to deny enforcement of remedies generally based upon public policy.
(c) No Conflict or Violation. Neither the execution and delivery of
this Agreement nor the consummation of the transactions and performance of the
terms and conditions contemplated hereby by any Seller will (i) conflict with or
result in a violation or breach of or default under any provision of the
certificate of incorporation, by-laws, limited partnership agreement, members'
agreement, limited liability company agreement or other similar governing
documents of any Seller, as the case may be, (ii) conflict with or result in a
violation or breach of or default under any agreement, indenture or other
instrument under which such Seller is bound, other than such conflicts,
breaches, violations or defaults that would not have a material adverse effect
on the financial condition or operations of the Sellers taken as a whole or on
the ability of the Parties to consummate the transactions contemplated by this
Agreement, or (iii) violate or conflict with any law, rule or regulation
applicable to any Seller except where such violation or conflict would not have
a material adverse effect on the financial condition of the Sellers taken as a
whole or on the ability of the Parties to consummate the transactions
contemplated by this Agreement.
(d) Consents. Except for consents, approvals, authorizations,
permits, filings or notices, the failure of which to obtain or with which to
comply will not have a material adverse effect on the financial condition of the
Sellers taken as a whole or on the ability of the Parties to consummate the
transactions contemplated by this Agreement, no consent, approval, authorization
or permit of, or filing with or notification to, any Person is required for or
in connection with the execution and delivery of this Agreement by the Sellers
or for or in connection with the consummation of the transactions and the
performance of the terms and conditions contemplated hereunder by the Sellers.
- 4 -
(e) Litigation. There is no litigation, suit, claim, action,
proceeding or investigation pending or, to the Knowledge of the Sellers,
threatened against any Seller before any Governmental Authority that, as of the
date hereof, seeks to materially delay or prevent the consummation of the
transactions contemplated hereunder.
5. Representations and Warranties of the Buyer. The Buyer represents and
warrants to the Sellers and the Acquirers that the statements contained in this
Section 5 are correct and complete as of the date of this Agreement.
(a) Organization of Buyer. Buyer is a corporation, duly organized,
validly existing, and in good standing under the laws of the state of Nevada.
The Buyer is duly qualified to do business and is in good standing in each
jurisdiction in which the ownership of its properties and the operation of its
business make such qualification necessary.
(b) Authorization of Transactions. The Buyer has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. Without limiting the
generality of the foregoing, the Board of Directors of the Buyer have duly
authorized the execution, delivery, and performance of this Agreement by the
Buyer, and no authorizations or approvals from the shareholders of the Buyer
with respect to the transaction contemplated under this Agreement are required
by law, the Buyer's articles of incorporation or bylaws or any agreement to
which the Buyer is a party. This Agreement constitutes a valid and binding
agreement of the Buyer enforceable against the Buyer in accordance with its
terms, subject to (i) applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws of general application with respect to
creditors, (ii) general principles of equity and (iii) the power of a court to
deny enforcement of remedies generally based upon public policy.
(c) No Conflict or Violation. Neither the execution and delivery of
this Agreement nor the consummation of the transactions and performance of the
terms and conditions contemplated hereby by the Buyer will (i) conflict with or
result in a violation or breach of or default under any provision of its
articles of incorporation or by-laws, (ii) conflict with or result in a
violation or breach of or default under any agreement, indenture or other
instrument under which the Buyer is bound or any of its properties is subject,
other than such conflicts, breaches, violations or defaults that would not have
a material adverse effect on the financial condition of the Buyer or on the
ability of the Parties to consummate the transactions contemplated by this
Agreement, or (iii) violate or conflict with any law, rule or regulation
applicable to the Buyer except where such violation or conflict would not have a
material adverse effect on the financial condition of the Buyer or on the
ability of the Parties to consummate the transactions contemplated by this
Agreement.
(d) Consents. Except for consents, approvals, authorizations,
permits, filings or notices, the failure of which to obtain or with which to
comply will not have a material adverse effect on the financial condition of the
Buyer or on the ability of the Parties to consummate the transactions
contemplated by this Agreement, no consent, approval, authorization or permit
of, or filing with or notification to, any Person is required for or in
connection with the execution and delivery of this Agreement by the Buyer or for
or in connection with the consummation of the transactions and performance of
the terms and conditions contemplated hereby by the Buyer.
(e) Absence of Litigation. There is no litigation, suit, claim,
action, proceeding or investigation pending or, to the Knowledge of the Buyer,
threatened against the Buyer, or any property or asset of the Buyer, before any
Governmental Authority that (a) has had, or would reasonably be expected to
have, a material adverse effect on the financial condition of the Buyer or on
the ability of the Parties to consummate the transactions contemplated by this
Agreement or (b) as of the date hereof seeks to materially delay or prevent the
- 5 -
consummation of the transactions contemplated hereunder. Neither the Buyer nor
any property or asset of the Buyer is subject to any continuing order, consent
decree, settlement agreement or other similar written agreement with, or, to the
Knowledge of the Buyer, continuing investigation by, any Governmental Authority,
or any order, writ, judgment, injunction, decree, determination or award of any
Governmental Authority, that would reasonably be expected, individually or in
the aggregate, to prevent or materially delay consummation of the transactions
contemplated hereunder or otherwise prevent or materially delay the Buyer from
performing its obligations under this Agreement or would reasonably be expected
to have a material adverse effect on the financial condition of the Buyer or on
the ability of the Parties to consummate the transactions contemplated by this
Agreement.
6. Further Assurances. The Sellers and the Acquirers, on the one hand, and
the Buyer, Damson, and ▇▇▇▇▇▇, on the other hand, each agree that, from time to
time each of them will execute and deliver or cause their respective Affiliates
to execute and deliver such other agreements, documents and instruments, and
take such other action as may be necessary to carry out the purposes and intents
of this Agreement.
7. Indemnification.
(a) Indemnification by the Sellers. The Sellers (except for ▇▇▇▇▇▇
and ▇▇▇▇▇▇▇, who shall have no liability or obligation to the Buyer or any Buyer
Indemnified Party hereunder and shall not, for purposes of the Sellers'
obligations to indemnify hereunder, be deemed "Sellers") shall indemnify (i)
Buyer and each of the directors, officers, employees and Affiliates of Buyer,
and each of their successors and assigns, (ii) Damson and (iii) ▇▇▇▇▇▇
(individually, a "Buyer Indemnified Party"), and hold them, and each of them,
harmless from, against and in respect of any and all costs, losses, claims,
liabilities (including for Taxes), fines, penalties, damages (other than
special, consequential or punitive damages) and expenses (including interest, if
any, imposed in connection therewith, court costs and reasonable fees and
disbursements of counsel) (collectively, "Damages") incurred by any of them
resulting from any breach of any representation or warranty in this Agreement or
the non-fulfillment in any material respect of any agreement, covenant or
obligation by the Sellers made in this Agreement. As more fully provided in
Section 8(a) of this Agreement, the indemnification obligations of the
respective Sellers hereunder shall be several and not joint, and shall obligate
each Seller with respect only to itself or its own actions or omissions or
representations or warranties.
(b) Indemnification by the Buyer. The Buyer shall indemnify (i) each
Seller and each of the shareholders, directors, partners, employees, Affiliates
and "associates" (as that term is defined in Rule 405 promulgated by the SEC
under the Securities Act) of the Sellers and (ii) the Acquirers (individually a
"Seller Indemnified Party") and hold them, and each of them, harmless from,
against and in respect of any and all Damages incurred by such Seller
Indemnified Party resulting from any misrepresentation, breach of any
representation or warranty in this Agreement or the non-fulfillment in any
material respect of any agreement, covenant or obligation by Buyer made in this
Agreement.
(c) Sole and Exclusive Remedy. Subject to the last sentence of this
Section 7(c), the sole and exclusive remedy and recourse of the Buyer
Indemnified Parties against the Sellers with respect to or directly relating to
the matters set forth in Section 7(a) hereof shall be pursuant to this Section
7, and the sole and exclusive remedy and recourse of the Seller Indemnified
Parties against the Buyer with respect to or directly relating to the matters
set forth in Section 7(b) hereof shall be pursuant to this Section 7. The
foregoing shall not be construed to be a limitation of or in restriction of any
rights of the Parties that may exist with respect to indemnification,
contribution or other remedies pursuant to the terms of the Mutual Release
Agreement and the Mutual Non-Disparagement Agreement entered into
contemporaneously herewith.
- 6 -
(d) Right to Defend. If the facts giving rise to any such
indemnification shall involve any actual claim or demand by any third party
against a Buyer Indemnified Party or Seller Indemnified Party (referred to
herein as an "Indemnified Party"), then the Indemnified Party will give prompt
written notice of any such claim to the indemnifying party, which notice shall
set forth in reasonable detail the nature, basis and amount of such claim (the
"Notice of Third Party Claim"). It is a condition precedent to the applicable
indemnifying party's obligation to indemnify the applicable Indemnified Party
for such claim that such Indemnified Party timely provide to such indemnifying
party the applicable Notice of Third Party Claim, provided that the failure to
provide such Notice of Third Party Claim shall only relieve such indemnifying
party of its or his obligation to indemnify for such claim only to the extent
that such indemnifying party has been prejudiced by such Indemnified Party's
failure to give the Notice of Third Party Claim as required. The indemnifying
party receiving such Notice of Third Party Claim may (without prejudice to the
right of any Indemnified Party to participate at its own expense through counsel
of its own choosing) undertake the defense of such claims or actions at its
expense with counsel chosen and paid by its giving written notice (the "Election
to Defend") to the Indemnified Party within thirty (30) days after the date the
Notice of Third Party Claim is deemed received; provided, however, that the
indemnifying party receiving the Notice of Third Party Claim may not settle such
claims or actions without the consent of the Indemnified Party, which consent
will not be unreasonably withheld or delayed, except if the sole relief provided
is monetary damages to be borne solely by the indemnifying party; and, provided
further, if the defendants in any action include both the indemnifying party and
the Indemnified Party, and the Indemnified Party shall have reasonably concluded
that counsel selected by the indemnifying party has a conflict of interest
because of the availability of different or additional defenses to the Parties,
the Indemnified Party shall cooperate in the defense of such claim and shall
make available to the indemnifying party pertinent information under its control
relating thereto, but the Indemnified Party shall have the right to its own
counsel and to control its defense and shall be entitled to be reimbursed for
all reasonable costs and expenses incurred in such separate defense. In no event
will the provisions of this Section reduce or lessen the obligations of the
Parties under this Section, if prior to the expiration of the foregoing thirty
(30) day notice period, the Indemnified Party furnishing the Notice of Third
Party Claim responds to a third party claim if such action is reasonably
required to minimize damages or avoid a forfeiture or penalty or because of any
requirements imposed by law. If the indemnifying party receiving the Notice of
Third Party Claim does not duly give the Election to Defend as provided above,
then it will be deemed to have irrevocably waived its right to defend or settle
such claims, but it will have the right, at its expense, to attend, but not
otherwise to participate in, proceedings with such third parties; and if the
indemnifying party does duly give the Election to Defend, then the Indemnified
Party giving the Notice of Third Party Claim will have the right at its expense,
to attend, but not otherwise to participate in, such proceedings. The Parties to
this Agreement will not be entitled to dispute the amount of any damages
(including reasonable attorney's fees and expenses) related to such third party
claim resolved as provided above.
(e) Subrogation. If the Indemnified Party receives payment or other
indemnification from the indemnifying party hereunder, the indemnifying party
shall be subrogated to the extent of such payment or indemnification to all
rights in respect of the subject matter of such claim to which the Indemnified
Party may be entitled, to institute appropriate action against third parties for
the recovery thereof, including under any insurance policies, and the
Indemnified Party agrees to assist and cooperate in good faith with the
indemnifying party and to take any action reasonably required by such
indemnifying party, at the expense of such indemnifying party, in enforcing such
rights.
8. Miscellaneous.
(a) Nature of Certain Obligations. The covenants of each of the
Sellers to the Buyer, Damson and ▇▇▇▇▇▇ contained in this Agreement and the
representations and warranties of each of the Sellers in Section 4 above
(excluding as to ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇, who shall have no liability therefor) are
- 7 -
several obligations, representations and warranties and are made by each Seller
with respect only to that Seller and its business and affairs. This means that
such particular Seller making the representation, warranty, or covenant (and no
other Seller) will be solely responsible to the extent provided in Section 7
above for any actions, suits, proceedings, hearings, investigations, charges,
complaints, claims, demands, injunctions, judgments, orders, decrees, rulings,
damages, dues, penalties, fines, costs, amounts paid in settlement, liabilities,
obligations, taxes, liens, losses, expenses, and fees, including court costs and
reasonable attorneys' fees and expenses that the Buyer may suffer as a result of
any breach thereof.
(b) Press Releases and Public Announcements. Except as provided in
Section 3(c) of this Agreement, no Party shall issue any press release or make
any public announcement relating to the subject matter of this Agreement without
the prior written approval of the other Parties; provided, however, that any
Party may make any public disclosure it believes in good faith is required by
applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will use its
reasonable best efforts to advise the other Parties prior to making such
disclosure).
(c) Remedies. The Parties hereto agree that irreparable damage would
occur in the event any provision of this Agreement were not performed in
accordance with the terms hereof and that the Parties shall be entitled to
equitable relief, including injunction and specific performance (and attorneys'
fees in connection with seeking such relief), as a remedy for any such breach.
Such remedies shall not be deemed to be the exclusive remedies for a breach by
the Board but shall be in addition to all other remedies available at law or
equity to the Parties.
(d) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they relate in any way to the
subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Parties.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
Business Days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Sellers or
the Acquirers: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
- 8 -
Copy to: Fulbright & ▇▇▇▇▇▇▇▇ L.L.P.
Attention: J. ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
If to the Buyer,
Damson or ▇▇▇▇▇▇: Baseline Oil & Gas Corp.
▇ ▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Copy to: ▇▇▇▇▇ & ▇▇▇ ▇▇▇▇▇▇ LLP
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇ ▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it is actually received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the Commonwealth of Pennsylvania without
giving effect to any choice or conflict of law provision or rule (whether of the
Commonwealth of Pennsylvania or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the Commonwealth of
Pennsylvania.
(j) Consent to Jurisdiction. Each of the Parties to this Agreement
hereby (a) consents to the jurisdiction of any United States District Court for
the Western District of Pennsylvania or, if such court does not have
jurisdiction over such matter, the Court of Common Pleas of the Commonwealth of
Pennsylvania of Centre County and (b) irrevocably agrees that all actions or
proceedings arising out of or relating to this Agreement shall be litigated in
such court. Each party accepts for itself and in connection with its properties,
generally and unconditionally, the exclusive jurisdiction and venue of the
aforesaid courts and waives any defense of forum nonconveniens or any similar
defense, and irrevocably agrees to be bound by any non-appealable judgment
rendered thereby in connection with this Agreement.
(k) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by all
Parties to this Agreement. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(l) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
- 9 -
(m) Expenses. Except as provided in Section 3(d) of this Agreement,
the Buyer, Damson, and ▇▇▇▇▇▇, on the one hand, and the Sellers and the
Acquirers, on the other hand, will bear their own costs and expenses (including
legal fees and expenses) incurred in connection with the negotiation and
preparation of this Agreement and the transactions contemplated hereby.
(n) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. All references in this
Agreement to a "Section," "subsection," "Exhibit" or "Schedule" shall be to a
Section, subsection, Exhibit or Schedule of this Agreement, as the case may be,
unless the context requires otherwise. Unless the context otherwise requires,
the words "this Agreement," "hereof," "hereunder," "herein," "hereby," or words
of similar import shall refer to this Agreement as a whole and not to a
particular Section, subsection, clause or other subdivision hereof. Whenever the
context requires, the words used herein shall include the masculine, feminine
and neuter gender, and the singular and the plural.
(o) Incorporation of Exhibits. The exhibits and schedules identified
in this Agreement are incorporated herein by reference and made a part hereof.
(p) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the Parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
(q) Counterpart Signatures. This Agreement is being executed in
multiple counterparts, and each counterpart that is executed by any Party shall
be deemed an original, with all such counterparts to constitute one Agreement.
It shall not be necessary that any single counterpart hereof be executed by all
the Parties, and this Agreement shall be and become effective when each Party
has executed some counterpart hereof, whether the same or different than any
counterpart executed by any other Party or Parties.
[Signatures Follow.]
- 10 -
IN WITNESS WHEREOF, the Parties hereto have executed this Mutual
Termination Agreement as of the date first above written.
BUYER:
BASELINE OIL & GAS CORP.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman and Chief Executive Officer
▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------
▇▇▇▇ ▇▇▇▇▇▇
SELLERS:
▇▇▇ ENERGY ROYALTIES LIMITED PARTNERSHIP
By: ▇▇▇▇▇▇▇ Oil & Gas Limited Partnership, its general partner
By: ▇▇▇ Energy LLC, its general partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman
PENNTEX RESOURCES, L.P.
By: Penn Tex Energy, Inc., its general partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman
PENNTEX RESOURCES ILLINOIS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman
▇▇▇▇▇▇▇ OIL & GAS LIMITED PARTNERSHIP
By: ▇▇▇ Energy LLC, its general partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ LIMITED PARTNERSHIP
By: ▇▇▇ Energy LLC, its general partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman
MIDLAND EXPLORATION LIMITED PARTNERSHIP
By: ▇▇▇▇▇▇▇ Oil & Gas Limited Partnership, its general partner
By: ▇▇▇ Energy LLC, its general partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman
▇▇▇ ENERGY OPERATING CORP.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman
▇▇▇ ENERGY WABASH, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
THE ACQUIRERS:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Exhibit A
Form of Mutual Release Agreement
Exhibit B
Form of Mutual Non-Disparagement Agreement
Exhibit C
ASSIGNMENT SEPARATE FROM CERTIFICATE
(STOCK POWER)
FOR VALUE RECEIVED, the undersigned, _____________, [a ____________
/ an individual] with an address at _________________________, does hereby
assign and transfer unto Baseline Oil & Gas Corp., a Nevada corporation,
______________ shares of Common Stock, par value $.001 per share, of Baseline
Oil & Gas Corp., a Nevada corporation (the "Corporation"), standing in the
undersigned's name on the books and records of the Corporation represented by
Certificate No. ____ herewith, and does hereby irrevocably constitute and
appoint the Secretary of the Corporation as the undersigned's attorney to
transfer the said stock on the books and records of the Corporation with full
power of substitution in the premises.
Dated _________________, 2006
_________________________________
Exhibit D
Form 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported):
June 8, 2006
BASELINE OIL & GAS CORP.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Nevada 333-116890 ▇▇-▇▇▇▇▇▇▇
------------- ----------- ------------
State of Commission IRS Employer
Incorporation File Number I.D. Number
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
------------------------------------------
Address of principal executive offices
Registrant's telephone number: (▇▇▇) ▇▇▇-▇▇▇▇
-------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.02 Termination of a Material Definitive Agreement
On June __, 2006, Baseline Oil & Gas Corp. ("we" or the "Company") entered
into a Mutual Termination Agreement (the "Termination Agreement") with ▇▇▇
Energy Operating Corp. ("▇▇▇ Energy") and certain of its affiliates
(collectively, the "▇▇▇ Parties"), pursuant to which we and the ▇▇▇ Parties
mutually terminated (i) that certain purchase agreement between us dated January
16, 2006 (the "Purchase Agreement") and (ii) that certain stock agreement dated
January 16, 2006 (as amended on March 10, 2006, the "Stock Agreement"). For a
summary of the transactions previously contemplated by the Purchase Agreement
and the Stock Agreement, reference is made to our Report on Form 8-K, filed with
the SEC on January 17, 2006 and our Annual Report on Form 10-KSB filed on March
31, 2006.
Pursuant to the Termination Agreement, a copy of which is filed as Exhibit
99.1 hereto, we have also entered into a Mutual Release Agreement (the "Release
Agreement") and a Mutual Non-Disparagement Agreement (the "Non-Disparagement
Agreement") with the ▇▇▇ Parties, copies of which are filed as Exhibits 99.2 and
99.3, respectively, hereto.
Pursuant to the Termination Agreement, the ▇▇▇ Parties surrendered for
cancellation, 12,069,250 shares of our common stock, previously issued to them
pursuant to the Stock Agreement. After giving effect to the cancellation of such
shares, we have 30,271,818 shares of common stock outstanding as of the date
hereof and options, warrants and convertible promissory notes to purchase up to
an additional 19,871,590 shares of our common stock. Pursuant to the Release
Agreement, we and the ▇▇▇ Parties have agreed to release and hold each other
harmless from all Claims stemming from Controversies (each as defined in the
Release Agreement) arising out of our dealings with one another.
Nothing in the Termination Agreement, the Release Agreement or the
Non-Disparagement Agreement effects our rights with respect to the New
Albany-Indiana, LLC, a Delaware limited liability company in which we own a 50%
non-managed membership interest ("New Albany"). As previously disclosed, New
Albany holds an undivided 48.75% working interest (40.7% net revenue interest)
in (i) certain oil, gas and mineral leases covering approximately 80,000 acres
in the State of Indiana and (ii) all of the rights of Aurora Energy Ltd.
("Aurora") under a certain Farmout Agreement with a third party. In addition,
New Albany holds an option from Aurora, exercisable by New Albany until August
1, 2007, to acquire a fifty percent (50%) working interest in any and all
acreage leased or acquired by Aurora or its affiliates in additional counties in
Indiana (currently estimated to be 50,000 acres), at a fixed price of $25 per
acre. New Albany also holds a 45% working interest in certain oil, gas and
mineral leases acquired from Source Rock Resources, Inc., covering approximately
21,000 acres in ▇▇▇▇ and ▇▇▇▇▇▇▇▇ Counties in Indiana, which the Company
believes contain New Albany Shale formation stratum. The ▇▇▇ Parties continue to
own the other 50% membership interest in New Albany, and ▇▇▇ Energy Wabash, LLC
is the managing member of New Albany and manages its day-to-day operations.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
Exhibit No. Description
----------- -----------
99.1 Mutual Termination Agreement dated June __, 2006
99.2 Mutual Release Agreement dated June __, 2006
99.3 Mutual Non-Disparagement Agreement dated June __, 2006
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Current Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: June __, 2006
BASELINE OIL & GAS CORP.
By: _____________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chairman & CEO
Exhibit Index
Exhibit No. Description
----------- -----------
99.1 Mutual Termination Agreement dated June __, 2006
99.2 Mutual Release Agreement dated June __, 2006
99.3 Mutual Non-Disparagement Agreement dated June __, 2006
Schedule 3(d)(iii)
Expenses
▇▇▇▇▇▇▇ ▇▇▇▇▇ Air Corp. $24,380.00
▇▇▇▇▇▇▇ ▇▇▇▇▇ Air Corp. $ 6,890.00
M & T Corp Card $ 1,735.89
M & T Corp Card $ 1,359.22
M & T Corp Card $ 7,417.17
M & T Corp Card $ 1,742.89
M & T Corp Card $ 2,401.78
M & T Corp Card $ 1,469.70
----------
TOTAL $47,396.65
