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Exhibit 1
AGREEMENT FOR PURCHASE AND SALE
DATED AS OF JANUARY 26, 1999
BY AND BETWEEN
ENVIRONMENTAL ENERGY PARTNERS I, LTD.,
ENVIRONMENTAL ENERGY PARTNERS II, LTD.,
ENVIRONMENTAL OPERATING PARTNERS, LTD.,
ENVIRONMENTAL HOLDING COMPANY, LLC
ENVIRONMENTAL PROCESSING PARTNERS, LTD.
ENVIRONMENTAL ENERGY, INC., AND
ENVIRONMENTAL OPERATING, INC.
AS SELLERS
AND
▇▇▇▇▇▇▇▇▇ PETROLEUM, INC.
AS BUYER
▇▇▇▇▇▇▇▇▇ RESOURCES, INC.
AS ACCOMMODATION PARTY
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TABLE OF CONTENTS
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Article Page
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I. Definitions 1
II. Sale and Purchase 11
III. Purchase Price and Payment 12
IV. Sellers' Representations 20
V. Buyer's Representations 22
VI. Access to Information and Inspection 23
VII. Title and Other Matters 25
VIII. Rights and Consents 29
IX. Covenants of Sellers 29
X. Closing Conditions 31
XI. Closing 34
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XII. Effect of Closing 36
XIII. Settlement of Prorations 39
XIV. Limitations on Warranties and Remedies 39
XV. Casualty Loss and Condemnation 40
XVI. Default and Remedies 41
XVII. Miscellaneous 44
EXHIBITS
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A. Subject Interests
Part One - Producing Properties (includes Non-Producing)
Part Two - Compressor Station
Part Three - Utility Project
Part Four - Other Properties
B. Limited Partnerships
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C. Preferential Rights and Consents
D. Production Payments and Certain Agreements
E. Litigation and Other Liabilities
E-1. AFE's Outstanding as of Execution
F. Oil and Gas Assignment
G. Overproduction and Underproduction
H. Attorney's Opinions
Part One - Sellers' Counsel's Opinion
Part Two - Buyer's Counsel's Opinion
I. Oil and Gas Purchasing and Processing Agreements
and Contracts with Affiliates
J. Form of Escrow Agreement
K. Form of Voting Trust
▇. ▇▇▇▇▇▇▇' Allocation Schedule
M. Example of Acquisition Warrant
N. Example of Preferred Stock Certificate
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AGREEMENT FOR PURCHASE AND SALE
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THIS AGREEMENT dated as of the 26th day of January, 1999, between
ENVIRONMENTAL ENERGY PARTNERS I, LTD., ENVIRONMENTAL ENERGY PARTNERS II, LTD.,
ENVIRONMENTAL OPERATING PARTNERS, LTD., and ENVIRONMENTAL PROCESSING PARTNERS,
LTD., California limited partnerships; ENVIRONMENTAL HOLDING COMPANY, LLC, a
California limited liability company; and ENVIRONMENTAL ENERGY, INC., a Delaware
corporation, and ENVIRONMENTAL OPERATING, INC., a Tennessee corporation, of ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (hereinafter referred
to as "Sellers"), on behalf of themselves and in their capacity as managing
general partners of the Limited Partnerships above and set forth in Exhibit "B"
attached hereto, and ▇▇▇▇▇▇▇▇▇ PETROLEUM, INC., a Kentucky corporation
(hereinafter referred to as "Buyer") and ▇▇▇▇▇▇▇▇▇ RESOURCES, INC., both of ▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
WITNESSETH:
WHEREAS, Sellers own or manage certain producing and non-producing oil
and gas leasehold interests, and manage certain Limited Partnerships (references
herein to "Limited Partnerships" shall also include a reference to Environmental
Holding Company, LLC, a California limited liability company) which own certain
producing and non-producing oil and gas leasehold interests, all of which are
situated in certain areas of the Commonwealth of Kentucky, and the States of
Tennessee and Louisiana; and
WHEREAS, Sellers desires to sell and Buyer desires to acquire the
interests and related assets owned by Sellers on the terms and conditions
hereinafter provided;
NOW, THEREFORE, in consideration of the mutual covenants and agreement
hereinafter set forth, the parties hereby agree as follows:
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ARTICLE I
DEFINITIONS
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The following terms, as used herein, shall have the following meanings:
1.1 "Agreement" shall mean this Agreement for Purchase and Sale between
Sellers and Buyer.
1.2 "Assets" shall mean the following described assets and properties
(except to the extent constituting Excluded Assets):
(a) the Subject Interests;
(b) the Lands;
(c) the Incidental Rights;
(d) the Claims;
(e) the Royalty Accounts; and
(f) all Hydrocarbons produced from or attributable to the
Assets with respect to all periods subsequent to the
Effective Date, together with all proceeds from or of
such Hydrocarbons.
(g) all proceeds from the claims against ▇▇▇▇▇ ▇▇▇▇▇.
1.3 "Assumed Obligations" shall mean: (i) all liabilities and
obligations of Sellers with respect to the Royalty Accounts, (ii) all
liabilities and obligations of Sellers arising or accruing under or with respect
to the Assets after the Effective Date, (iii) ad valorem and property taxes with
respect to the Assets for the Calendar Year in which Closing occurs, (iv) all
liabilities and obligations of Sellers arising or accruing under or with respect
to the Oil and Gas Purchase and Processing Agreements after the Effective Date,
and (v) all other liabilities and obligations expressly assumed by Buyer by the
terms of this Agreement including but not limited to those set
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out on Exhibit "E" attached hereto.
1.4 "Basic Documents" shall mean: all material contracts, agreements,
and other legally binding rights and obligations to which the Assets may be
subject, or that may relate to the Assets including, without limitation, the
Limited Partnership agreements, leases, assignments in the chain of title,
overriding royalty assignments, farm-out and farm-in agreements, option
agreements, pooling and unitization agreements, operating agreements, production
sales and marketing agreements, processing agreements, transportation
agreements, production purchase agreements, permits, licenses and orders,
including but not limited to those set out on Exhibit "E" attached hereto.
1.5 "Claims" shall mean: (i) all claims of Sellers against gas
purchasers or transporters with respect to the Assets to the extent such claims
have not been paid to or settled by Sellers as of the Effective Date, and (ii)
all obligations and benefits with respect to oil or gas production or processing
imbalances which are to be assumed or received by Buyer, and (iii) all claims
against ▇▇. ▇▇▇▇▇ ▇▇▇▇▇ including but not limited to the claims made by lawsuit
pending in the United States District Court for the Central District of
Tennessee at Nashville.
1.6 "Closing" shall be as defined in Section 11.1.
1.7 "Closing Date" shall be as defined in Section 11.1.
1.8 "Defensible Title" shall mean such title to a Subject Interest
that, subject to and except for Permitted Encumbrances, (a) entitles Sellers to
receive not less than the net revenue interest of Sellers for the well or unit
set forth in Exhibit "A" of all oil and gas produced, saved and marketed from or
attributable to such well or unit and (b) obligates Sellers to bear the costs
and expenses relating to the maintenance, development and operation of such well
or unit in an amount not greater than the working interest of Sellers for such
well or unit set forth in Exhibit "A", unless
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Sellers' net revenue interest therein is proportionately increased, it being
understood that the existence of Permitted Encumbrances affecting any property
shall not form the basis for a claim that Sellers do not have Defensible Title
to such property.
1.9 "Effective Date" shall mean 12:01 a.m., Eastern Standard Time on
the date 35 days after which this Agreement is executed.
1.10 "Excluded Assets" shall mean the following:
(a) All rights, interests, assets and properties of Sellers or
of any Limited Partnerships which are expressly excluded from this sale under
other provisions of this Agreement;
(b) (i) Except to the extent constituting or attributable to
Claims, all trade credits, accounts receivable, notes receivable and other
receivables attributable to Sellers' interest in the Assets with respect to any
period of time prior to the Effective Date, and
(ii) except to the extent constituting the Royalty
Accounts, all deposits, cash, checks in process of collection, cash equivalents
and funds attributable to Sellers' interest in the Assets with respect to any
period of time prior to the Effective Date or which were received by Sellers
prior to the Effective Date (except, in the latter case, proceeds of production
delivered after the Effective Date);
(c) All corporate, financial, tax and legal (other than title)
records of Sellers, however, Buyer shall be entitled to receive copies of any
financial, tax or legal records which directly relate to any Assumed
Obligations;
(d) Except to the extent constituting Claims, all claims and
causes of action of Sellers (i) arising from acts, omissions or events, or
damage to or destruction of property, occurring prior to the Effective Date, or
(ii) with respect to any of the Excluded Assets;
(e) Except as otherwise provided in clause (vi) of the
definition of Incidental
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Rights or in Article XV hereof, all rights, titles, claims and interests of
Sellers (i) under any policy or agreement of insurance or indemnity or (ii) to
any insurance or condemnation proceeds or awards;
(f) All Hydrocarbons produced from or attributable to the
Assets with respect to all periods prior to the Effective Date, are owned by
Sellers and are in storage, within processing plants, or in pipelines;
(g) Claims of Sellers for refund of or loss carry forwards
with respect to (i) production, windfall profit, severance, ad valorem or other
taxes attributable to any period prior to the Effective Date, (ii) income or
franchise taxes, or (iii) any taxes attributable to the Excluded Assets;
(h) All amounts due or payable to Sellers as adjustments or
refunds under any contracts or agreements respecting periods prior to the
Effective Date, other than Claims;
(i) All amounts due or payable to Sellers as adjustments to
insurance premiums related to the Assets with respect to any period prior to the
Effective Date;
(j) Except to the extent included in the Claims, all proceeds,
benefits, income or revenues accruing (any security or other deposits made) with
respect to (i) the Assets prior to the Effective Date or (ii) any Excluded
Assets;
(k) Any logo, service ▇▇▇▇, copyright, trade name or trademark
associated with Sellers or any business of Sellers;
(l) All files, information and data expressly excluded from
the definition of Incidental Rights;
(m) To the extent and only to the extent that such rights are
divisible, the rights to use the surface and subsurface of any of the lands for
access to those leases and contractual
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rights or portions of leases and contractual rights which are expressly excluded
from Exhibit "A" or to other properties of Sellers or the Limited Partnerships
whose assets are not covered by this Agreement, including, without limitation,
the right to construct, maintain, repair, replace, remove, use and operate
rights and facilities, production facilities, roads, pipe lines, tank batteries
and other facilities for exploration, drilling, operating, producing, treating,
transporting and removing oil and gas, and the rights to drill through depths
and formations included within the Assets and to install, maintain, repair,
replace, remove, use and operate therein production facilities in connection
with and exploration operations, reworking operations, and production operations
(including, without limitations, recycling, water flooding or other pressure
maintenance operations) relating to oil and gas in those depths; provided, that
the exercise of such rights will not materially interfere with Buyer's
operations of the Assets.
1.11 "GAAP" shall mean generally accepted accounting principles,
consistently applied.
1.12 "Hydrocarbons" shall mean crude oil, natural gas, casinghead gas,
condensate, sulfur, natural gas liquids and other liquid or gaseous hydrocarbons
(including C02), and shall also refer to all other mineral of every kind and
character which may be covered by or included in the Subject Interests.
1.13 "Incidental Rights" shall mean all right, title and interest of
Sellers and the Limited Partnerships in and to or derived from the following
insofar as the same are attributable to the Subject Interest: (i) all
unitization, communion and pooling designations, declarations, agreements and
orders covering Hydrocarbons in or under the lands or any portion thereof and
the units and pooled or communitized areas created thereby; (ii) all easements,
rights-of-way, surface leases, permits, licenses, servitudes or other interests;
(iii) all equipment and other personal Property, fixtures and improvements
situated upon the Lands and used or held for use in connection with the
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exploration, development or operation of the Subject Interests or Lands or the
production, treatment, storage, compression, processing or transportation of
Hydrocarbons from or in the Subject Interests; (iv) all Hydrocarbon sales,
purchase, exchange and processing contracts and agreements, farm-out or farm-in
agreements, joint operating agreements and all other contracts and agreements
insofar as the same affect or relate to the Subject Interests or Lands or any
part thereof; (v) all lease files, land files, well files, gas and oil sales
contract files, gas processing files, division order files, abstracts, title
opinions, files and records, information and data (including engineering,
geological and geophysical data), and all rights thereto, of Sellers and the
Limited Partnerships insofar as the same are directly related to and necessary
to the realization of value by Buyer of any of the Subject Interests or lands
and to the extent the transfer thereof is not prohibited by existing contractual
obligations with third parties; and (vi) to the extent transferable and subject
to Article XV hereof, all interest of Sellers in and to all claims and causes of
action which Sellers or the Limited Partnerships may have against insurance
companies and others by reason of injury or damage to or destruction or loss of
all or any part of the Assets by reason of events occurring subsequent to the
Effective Date.
1.14 "Limited Partnerships" shall mean those limited partnerships set
forth on Exhibit "B" owned, managed or operated by Sellers. The term shall also
include Environmental Holding Company, LLC, a California limited liability
company, also listed on Exhibit "B".
1.15 "Lands" shall mean, except to the extent constituting Excluded
Assets, each and every kind and character of right, title, claim or interest
which Sellers and the Limited Partnerships have in and to the lands covered by
the Subject Interests.
1.16 "Non-Producing Properties" shall mean those Subject Interests
which are not Producing Properties.
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1.17 "Oil and Gas Purchase and Processing Agreements" shall mean all
existing contracts and agreements between Sellers and/or the Limited
Partnerships on the one hand and those parties set forth on Exhibit "I" on the
other hand which relate to the purchasing of Hydrocarbons by said parties.
1.18 "Permitted Encumbrances" shall mean any of the following matters:
(a) the terms, conditions, restrictions, exceptions,
reservations, limitations and other matters contained in the agreements,
instruments and documents which create in or reserve to Sellers in their
interests in any of the Assets provided they do not operate to reduce the net
revenue interest, nor increase the working interest, of Sellers in their Subject
Interests as reflected in Exhibit "A" hereto;
(b) Any (i) undetermined or inchoate liens or charges
constituting or securing the payment of expenses which were incurred incidental
to maintenance, development, production, or operation of the Assets for the
purpose of developing, producing or processing Hydrocarbons therefrom or therein
and (ii) materialman's, mechanics', repairman's, employees', contractors',
operators' or other similar liens or charges for liquidated amounts arising in
the ordinary course of business (aa) which Sellers or the Limited Partnerships
have agreed to assume or pay pursuant to the terms hereof, (bb) for which
Sellers or the Limited Partnerships are responsible for paying or releasing at
Closing or (cc) for which Buyer has agreed to assume or pay pursuant to the
terms hereof;
(c) Any liens for taxes and assessments not yet delinquent or,
if delinquent, that are being contested in good faith in the normal course of
business and have been disclosed to Buyer in Exhibit "E" hereto;
(d) Any liens or security interests created by law or reserved
in oil and gas
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leases for royalty, bonus or rental or for compliance with the terms of the
Subject Interests;
(e) Any obligations or duties affecting the Assets to any
municipality or public authority with respect to any franchise, grant, license
or permit, and all applicable laws, rules and order of governmental authority;
(f) (i) Easements, rights-of-way, servitudes, permits, surface
leases and other rights in respect of surface operations, pipelines, grazing,
hunting, fishing, logging, canals, ditches, reservoirs, or the like, or (ii)
easements for streets, alleys, highways, pipelines, telephone lines, power
lines, railways and other similar rights-of-way, on or over, or in respect of
property owned or leased by Sellers or over which Sellers owns rights-of-way,
easements, permits, or licenses to the extent such matters, individually or in
the aggregate, do not interfere materially with oil and gas operations on the
Subject Interests;
(g) All production payments, mortgages, liens and pledges in
favor of lenders or other parties set forth in Exhibit "D" attached hereto;
(h) All lessors' royalties, overriding royalties, net profits
interests, carried interests, reversionary interests and other burdens if the
net cumulative effect of such burdens does not operate to reduce the net revenue
interest of Sellers and the Limited Partnerships in any of the Subject Interests
as reflected in Exhibit "A" hereto;
(i) Preferential rights to purchase and required third party
consents to assignments and similar agreements with respect to which waivers or
consents are obtained from the appropriate parties with respect to the sale
contemplated hereunder, or the appropriate time period for asserting such rights
has expired without an exercise of such rights with respect to such sale;
(j) All rights to consent by, required notice to, with, or
other actions by
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governmental entities in connection with the sale or conveyance of oil and gas
leases or interest therein if the same are customarily obtained
contemporaneously with or subsequent to such sale or conveyance;
(k) Production sales contracts, division orders, contracts for
sale, purchase, exchange, refining, or processing of Hydrocarbons, unitization
and pooling designations, declarations, orders and agreements, operating
agreements, agreements of development, area of mutual interest agreements, gas
balancing or deferred production agreements, processing agreements, plant
agreements, pipelines, gathering and importation agreements, injection,
repressuring and recycling agreements, carbon dioxide purchase or sale
agreements, saltwater or other disposal agreements, seismic or geophysical
permits or agreements, and other agreements which are customary in the oil, gas,
sulfur and other mineral exploration, development or extraction business or in
the business of processing of gas and gas condensate production for the
extraction of products therefrom;
(l) Any encumbrance, title defect or matter (whether or not
constituting a Title Defect) waived or deemed waived by Buyer pursuant to
Section 7.2 hereof;
(m) Any agreement, contract, lease, instrument, permit,
amendment or extension entered into by Sellers in accordance with Article 17.5
hereof; and
(n) The Oil and Gas Purchase and Processing Agreements.
1.19 "Producing Properties" shall mean those Subject Interests which
are identified and set forth in Part One of Exhibit "A" hereto.
1.20 "Purchase Price" shall be defined in Section 3. 1.
1.21 "Reserve Valuation" shall mean the reserve report pursuant to the
terms of Section 3.1.
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1.22 "Royalty Accounts" shall mean those separately identifiable
accounts of Sellers and the Limited Partnerships or any third party operator in
which Sellers and the Limited Partnerships or any third party operator is
holding as of the Effective Date monies which (i) are owing to third party
owners of royalty, overriding royalty, working or other interests in respect of
past production of Hydrocarbons attributable to the Assets or (ii) may be
subject to refund by royalty owners or other third parties to purchasers of past
production of Hydrocarbons attributable to the Assets.
1.23 "Subject Interests" shall mean, except to the extent constituting
Excluded Assets, all interests presently shown to be owned by Sellers and the
Limited Partnerships by instruments recorded in the Counties set forth in
Exhibit "A" or in the official records of any agency of the States set forth in
Exhibit "A" or which Sellers and/or the Limited Partnerships are entitled to
receive by reason of any participation, joint venture, farm-in or other
agreement, in and to the oil, gas and/or mineral leases, permits, licenses,
concessions, leasehold estates, fee, royalty and overriding royalty interests;
and the compressor station and utility projects described in Exhibit "A"
attached hereto.
1.24 "Title Defect" shall be as defined in Section 7.3.
1.25 "Voting Trust" shall mean the voting trust agreement, described in
Section 3.1(f) and in the form of Exhibit "K" attached hereto, to be delivered
at closing.
1.26 "Unwind Date" shall mean the date 60 days subsequent to the
Closing Date.
ARTICLE II
SALE AND PURCHASE
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Subject to the terms and conditions of this Agreement and the Permitted
Encumbrances, Sellers agree to sell and convey to Buyer and Buyer agrees to
purchase and pay for the Assets.
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ARTLCLE III
PURCHASE PRICE AND PAYMENT
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3.1 PURCHASE PRICE. Subject to the terms and conditions of this
Agreement, in reliance of the representations, warranties, and agreements of the
Sellers contained herein, at the closing, the Sellers shall sell, assign,
transfer, and deliver to the Buyer and the Buyer shall purchase the Assets free
and clear of all liens, pledges, claims, options, charges, security interest, or
other encumbrances, for the following consideration:
(a) ▇▇▇▇▇▇▇▇▇ Resources, Inc., a publicly traded, NASDAQ
listed corporation (Symbol: NGASF) (hereafter "▇▇▇▇▇▇▇▇▇") will, at closing,
issue to the Sellers, pursuant to the Allocation Schedule determined exclusively
by the Sellers, Exhibit L hereto, One Million Twenty- Four Thousand Nine Hundred
Twenty-Four (1,024,924) Shares of Limited Series Non-Cumulative, Non-Voting
Preferred Stock, such ▇▇▇▇▇▇▇▇▇ Preferred Stock hereinafter referred to as the
"Purchase Price", upon the following terms and conditions:
(1) The Preferred Stock may be converted into shares
of Common Stock in ▇▇▇▇▇▇▇▇▇ Resources, Inc. by the
Sellers or any subsequent assignee at any time within
two (2) years of its issue on a share for share
basis;
(2) The Preferred Stock may be converted into shares
of Common Stock of ▇▇▇▇▇▇▇▇▇ Resources, Inc., by the
Buyer at any time within two (2) years of its issue
on a share for share basis, if the following
conditions are met:
(a.) The last sales price of the Common
Stock equals or exceeds Ten Dollars ($10.00)
for at least 20 consecutive trading days;
and
(b.) Notice of conversion is given to the
shareholder no sooner than ten (10) days
after the 20th consecutive trading day
above;
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(3) Any Preferred Stock not converted by the Sellers
or the Buyer before the second anniversary of its
issue, shall be converted by ▇▇▇▇▇▇▇▇▇ Resources,
Inc. into shares of Common Stock on a share for share
basis on the second anniversary of its issue;
(4) Any Preferred Stock that is converted pursuant to
subparagraph 3 above, shall receive a Conversion
Bonus of Common Stock equal to 12% of the number of
Preferred Shares which remain unconverted on the
second anniversary date;
(5) Any Preferred Stock that is converted pursuant to
subparagraph 2 above, shall receive a Conversion
Bonus of Common Stock equal to one half of one
percent per month of the number of Preferred Shares
which are converted, times the number of months from
issuance of the Preferred Stock to the date of
conversion;
(6) The Preferred Stock and the Common Stock to which
it is converted shall be restricted as to resale.
▇▇▇▇▇▇▇▇▇'▇ transfer agent will be notified of this
restriction on the ▇▇▇▇▇▇▇▇▇ Stock and the
certificates representing ▇▇▇▇▇▇▇▇▇ Stock will bear
the following restrictive legend:
"The shares represented by this certificate have not
been registered under the Securities Act of 1933, as
amended (the "Securities Act"), or the securities act
of any state in the United States of America and may
not be directly or indirectly offered, sold, gifted,
pledged, hypothecated, transferred, assigned or
otherwise dealt with or disposed of unless either (i)
registered under the applicable securities laws or
(ii) in the written opinion of ▇▇▇▇▇▇▇▇▇ Resources,
lnc.'s United States legal counsel, an exemption from
registration is available."
(b) ▇▇▇▇▇▇▇▇▇ Resources, Inc. will, at closing, issue One
Hundred Seventy Thousand Eight Hundred Twenty-One (170,821) Units of Acquisition
Warrants to the Sellers, pursuant to the Allocation Schedule, Exhibit L hereto..
Each Unit shall consist of two (2) Series
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A Acquisition Warrants, one (1) Series B Acquisition Warrant, one (1) Series C
Acquisition Warrant, one (1) Series D Acquisition Warrant, one (1) Series E
Acquisition Warrant, one (1) Series F Acquisition Warrant, and one (1) Series G
Acquisition Warrant with the following features:
(1) Each Series A Acquisition Warrant entitles the
holders to purchase one (1) share of Common Stock of
▇▇▇▇▇▇▇▇▇ Resources, Inc. at a price of $1.75 per
share at any time commencing with the closing of the
acquisition and ending five (5) years later, at which
time the Series A Acquisition Warrants shall expire;
(2) Each Series B Acquisition Warrant entitles the
holders to purchase one (1) share of Common Stock of
▇▇▇▇▇▇▇▇▇ Resources, Inc. at a price of $2.00 per
share at any time commencing with the closing of the
acquisition and ending five (5) years later, at which
time the Series B Acquisition Warrants shall expire;
(3) Each Series C Acquisition Warrant entitles the
holders to purchase one (1) share of Common Stock of
▇▇▇▇▇▇▇▇▇ Resources, Inc. at a price of $2.50 per
share at any time commencing with the closing of the
acquisition and ending five (5) years later, at which
time the Series C Acquisition Warrants shall expire;
(4) Each Series D Acquisition Warrant entitles the
holders to purchase one (1) share of Common Stock of
▇▇▇▇▇▇▇▇▇ Resources, Inc. at a price of $3.00 per
share at any time commencing with the closing of the
acquisition and ending five
(5) years later, at which time the Series D
Acquisition Warrants shall expire; (5) Each Series E
Acquisition Warrant entitles the holders to purchase
one (1) share of Common Stock of ▇▇▇▇▇▇▇▇▇ Resources,
Inc. at a price of $3.50 per share at any time
commencing with the closing of the acquisition and
ending five (5) years later, at which time the Series
E Acquisition Warrants shall expire;
(6) Each Series F Acquisition Warrant entitles the
holders to purchase one (1) share of Common Stock of
▇▇▇▇▇▇▇▇▇ Resources, Inc. at a price of $4.00 per
share at any time commencing with the closing of the
acquisition and ending five (5) years later, at which
time the Series F Acquisition Warrants shall expire;
(7) Each Series G Acquisition Warrant entitles the
holders to purchase one (1) share of Common Stock of
▇▇▇▇▇▇▇▇▇ Resources, Inc. at a price of $4.50 per
share at any time commencing with the closing of the
acquisition and ending five (5) years later, at which
time the Series G Acquisition Warrants shall expire;
(8) Notwithstanding the foregoing, with regard to all
Acquisition Warrants, Series A, B, C, D, E, F, and G,
the strike or exercise price shall be reduced to
$1.00, while and only while, the Company's Common
Stock becomes and remains de-listed from the NASDAQ
SmallCap Stock Market. In other words, at all times
the Common Stock is listed on the NASDAQ SmallCap
Stock Market, the prices for the Series A, B, C, D,
E, F, and G Acquisition Warrants remain unchanged.
(9) Each Series of Acquisition Warrants is redeemable
by ▇▇▇▇▇▇▇▇▇
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Resources, Inc., as an entire series, at a price of
$.05 per Acquisition Warrant, at the option of
▇▇▇▇▇▇▇▇▇ Resources, Inc., if the following
conditions are met:
(a.) The last sales price of the Common
Stock equals or exceeds 200% of the exercise
price of the Series of Acquisition Warrants
being redeemed for 20 consecutive trading
days;
(b.) Notice of redemption is given to the
Warrantholder no sooner than one day after,
and no later than ten days after the 20th
consecutive trading day as defined above;
(1.) The notice of redemption must
give a minimum of 90 days notice to
the Warrantholder; and
(2.) The Warrantholder shall have
the right to exercise the Warrant
until the close of business of the
date fixed for redemption in the
notice specified above.
(c) While ▇▇▇▇▇▇▇▇▇ Resources, Inc. is not required to
register the Preferred Stock or Common Stock to which it is to be converted; or
any of the Series of Acquisition Warrants to be granted hereby; in the event
that ▇▇▇▇▇▇▇▇▇ Resources, Inc. files a stock registration statement during the
period when the Stock is restricted, the holders of the restricted Stock will
have "piggyback" rights to participate in the registration, subject to the
following terms and conditions:
(1) If at any time, during the period when the Stock
is restricted, ▇▇▇▇▇▇▇▇▇ Resources, Inc. files for
registration of its Common Stock or Preferred Stock
under the Securities Act of 1933 (the "Act"), in
connection with the public offering of such
securities solely for cash on a form that would also
permit the registration of the restricted Stock,
▇▇▇▇▇▇▇▇▇ Resources, Inc. will use its best efforts
to cause to be registered all, subject to the
provisions of Section 3.1(c)(2) and (3) below, of the
restricted Stock;
(2) Whenever required under this Section 3.1(c) to
use its best efforts to effect the registration of
any restricted Stock, ▇▇▇▇▇▇▇▇▇ Resources, Inc. will,
as expeditiously as reasonably possible:
(a.) Prepare and file with the Securities
and Exchange Commission ("SEC") a
registration statement with respect to such
restricted Stock and use its best efforts to
cause such registration statement to become
effective and remain effective; provided,
however, that in connection with any
proposed registration intended to permit an
offering of any securities from time to time
(i.e., a so-called "shelf registration"),
▇▇▇▇▇▇▇▇▇ Resources, Inc. shall in no event
be obligated to cause any such registration
to remain effective for more than one
hundred eighty (180) days;
(b.) Prepare and file with the SEC such
amendments and supplements to such
registration statement and the prospectus
used in connection with such registration
statement as may be necessary to comply with
the provisions of the Act with respect to
the disposition of all securities covered by
such registration statement;
(c.) Furnish to the holders of the
restricted Stock such numbers of copies of a
prospectus, including a preliminary
prospectus, in
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conformity with requirements of the Act, and
such other documents as they may reasonably
request in order to facilitate the
disposition of the Stock owned by them;
(d.) Use its best efforts to register and
qualify the securities covered by the
registration statement under such other
securities or Blue Sky laws of such
jurisdictions as shall be reasonably
appropriate for the distribution of the
securities covered by the registration
statement, provided that ▇▇▇▇▇▇▇▇▇
Resources, Inc. shall not be required in
connection herewith or as a condition hereto
to qualify to do business or to file a
general consent to service of process in any
such states or jurisdictions, and further
provided that if any jurisdiction in which
the securities will be qualified shall
require that expenses incurred in connection
with the qualification of the securities in
that jurisdiction be borne by the selling
shareholders pro rata, to the extent
required by such jurisdiction;
(3) In connection with any offering involving an
underwriting of shares being issued by ▇▇▇▇▇▇▇▇▇
Resources, Inc., ▇▇▇▇▇▇▇▇▇ shall not be required to
include any of the restricted Stockholders' Stock in
such underwriting unless they accept the terms of the
underwriting as agreed upon between ▇▇▇▇▇▇▇▇▇
Resources, Inc. and the underwriters selected by it,
and then only in such quantity as will not, in the
written opinion of the underwriters, jeopardize the
success of the offering by ▇▇▇▇▇▇▇▇▇ Resources, Inc.
If the total amount of restricted Stock to be
included in such offering exceeds the amount of
securities that the underwriters reasonably believe
compatible with the success of the offering,
▇▇▇▇▇▇▇▇▇ Resources, Inc. shall only be required to
include in the offering so many of the securities of
the restricted Stockholders as the underwriters
believe will not jeopardize the success of the
offering (the securities so included to be
apportioned pro rata among the selling restricted
Stockholders according to the total amount of
securities owned by said selling restricted
Stockholders, or in such other proportions as shall
mutually be agreed to by such selling restricted
Stockholders), provided that no such reduction shall
be made with respect to any securities offered by
▇▇▇▇▇▇▇▇▇ Resources, Inc.
(d) ▇▇▇▇▇▇▇▇▇ Resources, Inc. will list all Preferred Stock,
Common Stock, Warrants and Options as "additional shares" with NASDAQ. Copies of
the forms of the Acquisition Warrant and Preferred Stock certificates are
attached hereto as Exhibits "M" and "N", respectively.
(e) All Preferred Stock, Common Stock, Each Series of
Acquisition Warrants and Options shall be subject to adjustments in certain
circumstances, such as stock splits, reverse stock splits and shall receive all
stock dividends, if any, of ▇▇▇▇▇▇▇▇▇ Resources' Common Stock.
(f) All Preferred Stock, Common Stock, and Warrants issued
pursuant to this section shall be subject to a Voting Trust, in the form of
Exhibit "K" attached hereto, until such Preferred Stock, Common Stock, and
Warrants are distributed to the Limited Partnerships Participants whose assets
are acquired pursuant to this Agreement.
(g) Notwithstanding any provision of this Agreement, if
Sellers fail to receive an opinion of Sellers' counsel on security law matters
satisfactory to Sellers, this Agreement shall be terminated by notice of either
of the parties and the parties agree to execute any and all documents
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to accomplish said termination.
3.2 Sellers shall be permitted to conduct due diligence with respect to
▇▇▇▇▇▇▇▇▇ and any of its subsidiaries and affiliates, upon execution of this
Agreement. Buyer agrees that it will provide Sellers with copies of the
documents it obtains with respect to such parties and with any reports prepared
by its underwriter or its accountants, attorneys, or other experts engaged to
conduct such due diligence. The parties hereby acknowledge and agree that if,
based upon such due diligence, Sellers encounter germane information about
▇▇▇▇▇▇▇▇▇ or any of its subsidiaries and affiliates that, in good faith,
substantially or materially impairs the value of the stock to be issued to
Sellers or expose Sellers to additional liability that was not contemplated by
Sellers, then Sellers may, not later than ten (10) days prior to Closing, inform
Buyer in writing and thereby terminate the agreement to sell the Assets. By such
termination, the parties shall be relieved of any and all obligations to
consummate the transaction as contemplated herein.
ARTICLE IV
SELLER'S REPRESENTATIONS
------------------------
4.1 SELLERS' REPRESENTATIONS. Sellers represent to Buyer as of the date
hereof that:
(a) Seller, Environmental Energy, Inc. is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Seller, Environmental Operating, Inc. is a corporation duly organized,
validly existing and in good standing under the laws of the State of Tennessee.
(b) The Limited Partnerships are partnerships (and
Environmental Holding Company, LLC, a California limited liability company is)
duly organized, validly existing and in good standing under the laws of the
State of California.
(c) Sellers have all requisite power and authority to carry on
its business as presently conducted, to conduct the affairs of the Limited
Partnerships, to enter into this Agreement and the other documents and
agreements contemplated hereby, and to perform its obligations under this
Agreement and the other documents and agreements contemplated hereby. The
consummation of the transactions contemplated by this Agreement will not
violate, nor be in conflict with, any provision of its articles, by-laws or
governing documents, the Limited Partnership Agreements, or any material
agreement or instrument to which it is a party or by which it is bound, or any
judgment, decree, order, statute, rule or regulation applicable to Sellers and
the Limited Partnerships;
(d) The execution, delivery and performance of this Agreement
and the transactions contemplated hereunder have been duly and validly
authorized by all requisite corporate action on the part of Sellers and by the
unanimous consent of the Limited partners of the Limited Partnerships.
(e) This Agreement constitutes, and all documents and
instruments required hereunder to be executed and delivered by Sellers at
Closing constitute, legal, valid and binding obligations of Sellers in
accordance with their respective terms, subject to applicable bankruptcy and
other similar laws of general application with respect to creditors;
(f) There are no bankruptcy, reorganization or arrangement
proceedings pending or being contemplated by, or to the knowledge of the
officers and directors of Sellers, threatened against Sellers or the Limited
Partnerships;
(g) No broker or finder has acted for or on behalf of Sellers
or the Limited Partnerships in connection with this Agreement or the
transactions contemplated by this Agreement, and no broker or finder is entitled
to any brokerage or finders fee or commission in respect thereof based in any
way on agreements, arrangement or understandings made by or on
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behalf of Sellers or the Limited Partnerships;
(h) Except as shown on Exhibit "E" hereto, there is no demand
or suit, action or other proceeding pending or to Sellers' knowledge threatened
before any court or governmental agency which might result in an impairment or
loss of title to any part of the Assets or the value thereof or which might
hinder or impede the operation of the Producing Properties; and
(i) Except as shown on Exhibit "E", Sellers and the Limited
Partnerships have not violated, and there are no alleged violations by Sellers
and the Limited Partnerships of, any applicable rules, regulations or orders of
any governmental agency having jurisdiction over the Assets which would affect
the value of the Assets or their operations.
(j) Notwithstanding the listing of items in Exhibit E, with
reference to that certain lawsuit styled, Securities and Exchange Commission v.
Environmental Energy, Inc., Environmental Operating, Inc., et. al., Case #
98-6060, pending in the United States District Court for the Central District of
California, Western Division, Sellers expressly warrant and represent that
nothing plead or claimed in that lawsuit will impair, hinder or impede the
conveyance of title to any part of the Assets or the value thereof or which
might hinder or impede the operation of the Producing Properties;
(k) The Subject Interests include all properties shown on
Exhibit "A" and do not include any properties which are not described in Exhibit
"A". If the Subject Interests do not include a property shown on Exhibit "A",
that circumstance shall constitute a Title Defect with respect to the property
affected thereby;
(l) Other than ▇▇▇▇▇ identified on Exhibit "A" as
non-producing or shut-in (i) to the best of Sellers' knowledge, no ▇▇▇▇▇
included in the Subject Interests were shut-in as of the date hereofand (ii) to
the best of Sellers' knowledge, no other ▇▇▇▇▇ included in the Subject Interests
were shut-in as of the date hereof. All ▇▇▇▇▇ shown on Exhibit "A" to be
producing or temporarily abandoned were producing or capable of production,
respectively, as of the Effective Date. If the Subject Interests include a well
shown to be producing or temporarily abandoned on Exhibit "A" which as of the
Effective Date required, in accordance with sound oil field practice or pursuant
to orders of a governmental authority, or for which AFE's have been issued for
permanent plugging and abandonment, that circumstance shall constitute a Title
Defect with respect to the well affected thereby; and
(m) Sellers have no knowledge of any physical change in the
Subject Interests (other than in consequence of operations and production in the
ordinary course) as of the date hereof which has an adverse effect on the value,
use or operation of the Subject Interests.
ARTICLE V
BUYER'S REPRESENTATIONS
-----------------------
5.1 BUYER'S REPRESENTATIONS. Buyer represents to Sellers as of the date
hereof that:
(a) It is a corporation duly organized, validly existing under
the laws of the Commonwealth of Kentucky, and Buyer is duly qualified to carry
on its business in the Commonwealth of Kentucky;
(b) It has all requisite power and authority to carry on its
business as presently conducted, to enter this Agreement and the other documents
and agreements contemplated hereby, to purchase the Assets on the terms
described in this Agreement, and to perform its other obligations under this
Agreement and the other documents and agreements contemplated hereby. The
consummation of the transactions contemplated by this Agreement will not
violate, nor be in conflict with, any provision of Buyer's charter, by-laws or
governing documents, or any material agreement or instrument to which Buyer is a
party or by which it is bound, or any judgment, decree,
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order statute, rule or regulations applicable to Buyer;
(c) The execution, delivery and performance of this Agreement
and the transactions contemplated hereunder have been duly authorized by all
requisite corporate action on the party of Buyer;
(d) This Agreement constitutes, and all documents and
instruments required hereunder to be executed and delivered by Buyer at Closing
will constitute, legal, valid an binding obligations of Buyer in accordance with
their respective terms, subject to bankruptcy an other laws of general
application with respect to creditors;
(e) There are no bankruptcy, reorganization or arrangement
proceeding pending, being contemplated by, or to the actual knowledge of the
officers of Buyer, threaten against Buyer.
(f) No broker or finder has acted for or on behalf of Buyer in
connection with this Agreement or the transactions contemplated by this
Agreement, and no broker or finder entitled to any brokerage or finder's fee in
respect thereof based in any way on agreements arrangements or understandings
made by or on behalf of Buyer.
ARTICLE VI
ACCESS TO INFORMATION AND INSPECTION
------------------------------------
6.1 TITLE FILES. Promptly after the execution of this Agreement, until
the Closing Date, Sellers shall permit Buyer and its representatives at
reasonable times during normal business hours to examine, in Sellers' offices,
all abstracts of title, title opinions, title files, ownership maps, lease
files, assignments, division orders, check vouchers, payout statements and
agreements pertaining to the Assets insofar as the same may now be in existence
and in the possession of Sellers.
6.2 OTHER FILES. Prior to Closing, Sellers shall make available to
Buyer for inspection by Buyer, at reasonable times during normal business hours
at their actual location, all geological, geophysical, production and
engineering books, records and data in possession of Sellers which are directly
related to the Assets, except such records or data which Sellers is prevented by
contractual obligations with third parties from disclosing.
6.3 CONFIDENTIALITY AGREEMENT. All such information made available to
Buyer shall be
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maintained confidential by Buyer as provided in that certain Confidentiality
Agreement dated January 9, 1997, between Seller, Environmental Energy, Inc., and
Buyer, the terms of which are incorporated herein by reference and made a part
of this Agreement. Buyer and Sellers shall further take whatever reasonable
steps may be necessary to ensure that Buyer's and Sellers' respective employees,
consultants and agents comply with the provisions of this Article VI and the
provisions of said Confidentiality Agreement.
6.4 GEOPHYSICAL DATA. For purposes of this Article VI, seismic and
geophysical records and data shall include (to the extent in existence and in
the possession of Sellers) basic field seismic tapes, observer's logs,
surveyor's notes, base maps showing shot point locations and interpretations and
other information necessary to allow reprocessing thereof, subject to the
limitations in Section 6.2.
6.5 INSPECTIONS. Promptly after the execution of this Agreement,
Sellers, subject to third party operator approval, (if required) shall permit
Buyer and its representatives at reasonable times and at their sole risk, cost
and expense, to conduct reasonable inspections of the Assets.
6.6 LIMITED PARTNERSHIP INFORMATION. Prior to Closing, Sellers shall
make available to Buyer for inspection by Buyer, at reasonable times during
normal business hours at their actual location, copies of all Limited
Partnership Agreements and Offering Memoranda related thereto.
ARTICLE VII
TITLE AND OTHER MATTERS
-----------------------
7.1 WARRANTY AND REPRESENTATIONS. Sellers shall convey Sellers'
interests and the Limited Partnerships' interests in and to the Assets to Buyer
subject to the Permitted Encumbrances and with a special warranty of title, as
provided in the form of Assignment, ▇▇▇▇ of Sale and Conveyance attached as
Exhibit "F" hereto. Buyer's obligations hereunder are contingent
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upon Sellers selling all of the Assets inclusive of all of the Assets owned by
the Limited Partnerships and Buyer shall have no obligation to buy any portion
of the Assets unless all of the Assets are sold. The provisions of this section
shall survive the termination of this Agreement and the Closing.
7.2 BUYER'S TITLE REVIEW.
(a) Upon execution by both parties hereto of this Agreement,
Buyer may at Buyer's sole cost and expense commence examination of title to the
Assets. Sellers shall fully cooperate with Buyer and shall provide Buyer all
documents, records and material in Sellers' possession and all assistance
reasonably necessary to assist Buyer in determining the validly of the title in
and to the Subject Interests to be conveyed to Buyer at Closing. Immediately
upon completion of Buyer's title review (either in whole or in part at Buyer's
option), Buyer shall notify Sellers of any Title Defects associated with such
property in accordance with Section 7.3 below. Buyer will conclude Buyer's title
review and give notice to Sellers of asserted Title Defects in the Subject
Interests not later than March 1, 1999. Failure by Buyer to assert a Title
Defect within the time provided for shall be deemed an election by Buyer to
waive such Title Defect and to accept and pay for the Subject Interests affected
by such uncured Title Defect and such uncured Title Defect shall thereupon be
deemed a Permitted Encumbrance. To be effective, Buyer's written notice of a
Title Defect must include (i) a brief description of the matter constituting the
asserted Title Defect and a proposed adjustment amount and (ii) supporting
documents reasonably necessary for Sellers (or a title attorney or examiner
hired by Seller) to verify the existence of such documents is unreasonably
expensive or otherwise impracticable, Buyer may in lieu thereof make its
personnel available to Sellers to review Buyer's grounds for asserting (and its
calculation of the amount of) a Title Defect.
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(b) Upon receipt of the notice set forth under Section 7.2(a)
Seller shall until the Closing Date have the right but not the obligation to
cure all or any portion of asserted Title Defects at Sellers' expense.
7.3 TITLE DEFECTS. For the purpose of this Agreement, a portion of the
Subject Interests shall be deemed to have a "Title Defect" if any one or more of
the following statements is untrue in any material respect with respect to such
portion of the Subject Interests as of the Effective Date.
(i) Sellers or the Limited Partnerships have Defensible Title
thereto.
(ii) All royalties, rentals, shut-in gas payments and other
Payments due with respect to such portion of the Subject Interests have been
properly and timely paid, except for payments held in suspense for title or
other reasons which are customary in the industry and which will not result in
grounds for cancellation of Sellers' rights in such portion of the Subject
Interests.
(iii) (1) Except as set forth in any of the Exhibits hereto,
neither of the Sellers nor, to the best of Sellers' knowledge, any other party
to the Basic Documents (i) is in breach of 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 material obligations thereunder or (ii) has given or threatened to
give notice of any (aa) default under, (bb) inquiry into any possible default
under, or (cc) action to alter, terminate, rescind or procure a judicial
reformation of, any Basic Document or any provisions thereof.
(2) Except as set forth in Exhibit "E", (i) all
operations (including, without limitation, the exploration and development of
all leases, the drilling, completion and production of all ▇▇▇▇▇ thereon, the
installation, maintenance and operation of the gathering systems and pipelines
and the marketing of all production therefrom) relating to the assets have in
all material respects been conducted in compliance with, and (ii) all items of
tangible personal property and
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fixtures constituting part of the Assets, substantially conform with: all
applicable judgments, decrees, orders, statutes, ordinances, rules, regulations
or permits of all courts and all governmental agencies and authorities having
jurisdiction over Sellers or the Assets, including, but not limited to, the
Natural Gas Act of 1938 (the "NGA") and the Natural Gas Policy Act of 1978 (the
"NGPA") and all laws, regulations and ordinances relating to environmental
protection and health safety. Except as specifically described in Exhibit "E",
no production from the Leases prior to the Effective Date was in excess of
allowable production quotas allowed or permitted by any governmental body having
jurisdiction thereover so as to subject any production from the Assets as of or
after the Effective Date to restrictions or penalties.
(3) Except as set forth in Exhibit "G", with respect
to marketing arrangements relating to the Leases, (i) Sellers have not received,
as of the Effective Date, any advance, "take-or-pay", or other similar payments
under production sales contracts that entitle any purchasers to "make-up" or
other-wise receive deliveries of Hydrocarbons at any time after the Closing Date
without paying at such time the full contract (or market) price therefor, (ii)
Sellers have not received prior to the Effective Date payments for production
which are currently subject to refund, (iii) Sellers have not received as of the
date hereof any notice from any purchaser of gas production indicating any
intent to exercise, or the exercise of, any "market-out" "FERC-out," price
renegotiation or other option available to the purchaser thereunder, to alter
pricing, delivery, or other material provisions thereof, or to contest or
dishonor any "take-or-pay" or other material provisions thereof, (iv) to the
best of Sellers' knowledge, Sellers, and Sellers' predecessors in title, have
filed with the appropriate state and federal agencies all necessary rate and
collection fillings, all necessary applications for well determinations and all
necessary certificate applications or amendments thereto, and have given all
necessary rate and collection notices to purchasers of
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Sellers' production, with respect to the Assets under the NGA, the NGPA, and the
rules and regulations of the Federal Energy Regulatory Commission ("FERC")
thereunder; and except as set forth in Exhibit "E" hereto, Sellers have received
notice that each such application has been approved by the appropriate state or
federal agency, and (v) Sellers have (aa) filed with the appropriate state or
federal agencies all necessary applications for authorization, applications for
rate approval, and reports with respect to the constructions and operation of
any pipeline or gathering system in which an interest is to be conveyed
hereunder ("Pipeline System"), and any transportation services performed using
any such Pipeline System, and (bb) received any necessary regulatory
authorization or approval for such construction, operation, and transportation
and any rates charged in conjunction with such transportation.
(iv) There is no lien, charge, encumbrance, irregularity,
defect or objection (other than a Permitted Encumbrance) against, in or to
Sellers' title thereto or right or interest therein, and no fact or circumstance
relative thereto exists of such significance that a reasonable and prudent
person engaged in the business of the ownership, development and operation of
oil and gas properties with knowledge of all the facts and appreciation of their
legal significance would be unwilling to accept and pay for the Subject
Interests or portion thereof which is affected thereby.
Notwithstanding anything hereinabove to the contrary, any remaining
uncured "Title Defects" existing on the Closing Date shall be deemed Permitted
Encumbrances.
ARTICLE VIII
RIGHTS AND CONSENTS
-------------------
8.1 CONSENTS AND ELECTIONS. All agreements affecting the Subject
Interests containing consents to the sale and assignments of the Assets to be
conveyed at Closing and that must be complied with prior to the assignment of
the Subject Interests to Buyer are set forth in
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Exhibit "C" hereto.
ARTICLE IX
COVENANTS OF SELLERS
--------------------
9.1 COVENANTS OF SELLERS PENDING CLOSING. From and after the date of
execution of this Agreement and until the Closing, except as otherwise consented
to by Buyer in writing and the constraints of applicable operating and other
agreements, Sellers shall:
(a) Continue to operate the Assets owned or managed by it for
the account of Buyer only in the ordinary course of business, as a reasonable
and prudent operator, in accordance with all applicable laws, rules and
regulations;
(b) Maintain in full force and effect all policies of
insurance covering the Assets now maintained by Sellers;
(c) Use reasonable efforts to preserve in full force and
effect all material leases, operating agreements, easements, rights-of-way,
permits, licenses, contracts and other material agreements included in the
Incidental Rights which relate to the Assets in which it owns an interest and
perform all material obligations of Sellers in or under any such agreement
relating to such Assets;
(d) Use reasonable efforts to maintain its relationships with
suppliers, customers and others having material business relations with Sellers
with respect to the Assets so that they will be preserved for Buyer on and after
the Closing Date;
(e) Not enter into any agreement granting any preferential
right to purchase any of the Assets or requiring the consent of any person to
the transfer and assignment of any of the Assets hereunder, except in connection
with the performance by Sellers of an obligation or agreement existing on the
date hereof or pursuant to this Agreement;
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(f) Not dedicate, sell, farm out, encumber or dispose of any
Assets without Buyer's written consent except sales of oil and gas production in
the ordinary course of business;
(g) To the extent permissible under applicable contracts or
with the waiver from the relevant parties, advise Buyer of the occurrence of any
material joint operations meetings or similar meetings having as their subject
joint operations with respect to any of the Subject Interests and Seller shall
permit Buyer to attend such meetings;
(h) Not voluntarily relinquish its position as manager or
operator with respect to any Subject Interests;
(i) Without Buyer's prior written consent, not enter into any
material gas or crude oil sales contracts or material supply contracts with
respect to the Subject Interests;
(j) from and after the date of this Agreement and until the
Closing, consult with Buyer on a regular basis regarding the operations relating
to the Subject Interests and the compliance by Sellers with the covenants set
forth in this Agreement relating to such operations;
(k) Not abandon or permit the abandonment of any ▇▇▇▇▇
constituting a part of the Assets as of the Effective Date without the prior
written consent of Buyer;
(l) Operate the Subject Interests in a Prudent manner;
(m) Maintain all equipment included in the Assets in
accordance with customary industry operating practices and procedures; and
(n) Use reasonable efforts, but without any obligation to
incur any cost or expense in connection therewith, to obtain for Buyer (i)
access to files, records and data relating to the Assets in the possession of
third parties; (ii) access to ▇▇▇▇▇ constituting a part of the Assets operated
by third parties for purposes of inspecting same; and (iii) the waiver of
confidentiality or other restrictions on the review by and/or transfer to Buyer
of seismic, geophysical, engineering or
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other data pertaining to the Subject Interests.
ARTICLE X
CLOSING CONDITIONS
------------------
10.1 SELLERS' CLOSING CONDITIONS. The obligations of Sellers under this
Agreement are subject, at the option of Sellers, to the satisfaction at or prior
to the Closing of the following conditions:
(a) All representations and warranties of Buyer contained in
this Agreement shall be true in all material respects at and as of the Closing
as if such representations and warranties were made at and as of the Closing,
and Buyer shall have performed and satisfied all agreements required by this
Agreement to be performed and satisfied by Buyer at or prior to the Closing;
(b) Sellers shall have received a certificate dated as of the
Closing, executed by a duly authorized officer of Buyer, to the effect that to
such officer's knowledge the statements made under Article V above are true at
and as of the Closing;
(c) Buyer's obtaining of all necessary consents of all state
or federal governmental authorities or agencies relating to the consummation of
the transactions contemplated by this Agreement or receipt of a waiver thereof,
(d) As of the Closing Date, no suit, action or other
proceeding (excluding any such matter initiated by Sellers) shall be pending or
threatened before any court or governmental agency seeking to restrain Sellers
or prohibit the Closing or seeking damages against Sellers as a result of the
consummation of this Agreement; and
(e) Sellers shall have received an opinion or opinions dated
as of the Closing Date from Buyer's counsel with respect to certain of the
matters represented in Sections 5.1(a), 5.1(b), 5.1(c) and 5.1(d), substantially
in the form attached hereto as Part One of Exhibit "H". Such
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counsel may rely with respect to matters involving the laws of states other than
the state in which such counsel is licensed, to the extent such counsel deems
necessary, on the opinions of local counsel, and such opinion or opinions shall
set forth the extent to which reliance is placed upon the opinions of local
counsel.
10.2 BUYER'S CLOSING CONDITIONS. The obligations of Buyer under this
Agreement are subject, at the option of Buyer, to the satisfaction at or prior
to the closing of the following conditions:
(a) All representations and warranties of Sellers contained in
this Agreement shall be true in all material respects at and as of the Closing
as if such representations and warranties were made at and as of the Closing,
and Sellers shall have performed and satisfied all agreements required by this
Agreement to be performed and satisfied by Sellers at or prior to the Closing;
(b) Buyer shall have received a certificate dated as of the
Closing, executed by a duly authorized officer of each Seller, to the effect
that to such officer's knowledge the statements made under Article IV above by
their respective Seller are true at and as of the Closing and that all Limited
Partnership Participants have consented to the sale of the Assets hereunder;
(c) All necessary consents and filings with all state and
federal governmental authority or agency relating to the consummation of the
transactions contemplated by this Agreement shall have been obtained,
accomplished or waived with Sellers' cooperation and assistance, including but
not limited to (i) establishment of a trust for benefit of the EPA on the
waterflood properties, (ii) assumption of the operator's licenses for the
producing properties, and (iii) assignment of the pipeline operating authority;
(d) As of the Closing Date, no suit, action or other
proceeding (excluding any
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such matter initiated by Buyer) shall be pending or threatened before any court
or governmental agency seeking to restrain Buyer or Sellers or prohibit the
Closing or seeking damages against Buyer as a result of the consummation of this
Agreement or in any way affecting the Assets to be conveyed hereunder; and
(e) Buyer shall have received an opinion or opinions dated as
of the Closing Date from Sellers' counsel with respect to certain of the matters
represented in Sections 4.1(a), 4.1(b), 4.1(c) and 4.1(d), substantially in the
form attached hereto as Part Two of Exhibit "H". Such counsel may rely with
respect to matters involving the laws of states other than the state in which
such counsel is licensed, to the extent such counsel deems necessary, on the
opinions of local counsel, and such opinion or opinions shall set forth the
extent to which reliance is placed upon the opinion or opinions shall set forth
the extent to which reliance is placed upon the opinions of local counsel.
ARTICLE XI
CLOSING
-------
11.1 CLOSING. The closing of this transaction (the " Closing ") shall
be held at I0:00 a.m., Eastern Time, at the offices ▇▇▇▇▇▇▇▇▇ Petroleum, Inc.,
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ on March 1, 1999, or at such
other date or place as the parties may agree in writing (herein called "Closing
Date"). Except as provided in Section 16.3, regardless of when the Closing shall
occur, Closing shall be effective with respect to each Asset as of the Effective
Date.
The transactions contemplated by this Purchase Agreement and all
obligations hereunder may be terminated:
(a) By mutual consent of the Buyer and Sellers; or
(b) By either party if the transactions contemplated herein
are not completed by
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April 1, 1999, or
(c) By the Buyer if any of the conditions provided for in
Section 10.2 of Article X of this Purchase Agreement shall not have been met or
waived in writing by the Buyer prior to the Closing; or
(d) By the Sellers, if any of the conditions provided for in
Section 10.1 of Article X of this Purchase Agreement shall not have been met or
waived in writing by the Sellers prior to the Closing; or
11.2 SELLER'S CLOSING OBLIGATIONS. At Closing, Sellers shall deliver to
Buyer the following:
(a) The Assignments, Bills of Sale and Conveyances
substantially in the form attached hereto as Exhibit "F" and such other
documents as may be reasonably necessary to convey all Sellers' interest in the
Assets to Buyer in accordance with the Provisions hereof;
(b) The certificate of Sellers referred to in Section 10.2(b)
hereof;
(c) The legal opinions referred to in Section 10.2(e) hereof;
(d) Transfer or division orders, or letters-in-lieu thereof,
to be effective at the
Effective Date in the form required by the purchasers of the Hydrocarbons from
the Producing Properties, provided that if any purchasers prepare the same, the
execution and delivery thereof may be deferred until they are prepared;
(e) All Title opinions, abstracts of title, lease records,
data sheets, status and other reports pertaining to the Subject Interests
heretofore received by Sellers or to which Sellers have access;
(f) All of the Basic Documents, and files pertaining thereto,
and all other contracts, documents and files affecting title to the Subject
Interests to which Sellers have access;
(g) Ownership maps and surveys relating to the Subject
Interests to which
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Sellers have access;
(h) All tabulations, lists and descriptions of all personal
property, fixtures and equipment included in the Subject Interests;
(i) All salt water disposal agreements, agreements with
pumpers, and other parties engaged in the operation of the Subject Interests;
(j) All books, records, production records, information,
contracts and documents, and all engineering geological, geophysical data,
reports, and maps relating to the Subject Interests, except insofar as Sellers
are prevented from transferring same by contractual obligations to third
parties; and
(k) An executed counterpart of the Voting Trust Agreement.
11.3 BUYER'S CLOSING OBLIGATIONS. At Closing, Buyer shall deliver to
Sellers the following:
(a) The Purchase Price (subject to such adjustments, if any,
as are expressly provided for in this Agreement) evidenced by the certificates
of ▇▇▇▇▇▇▇▇▇ Preferred Stock for each Seller;
(b) The certificates of Buyer referred to in Section 10. 1 (b)
hereof;
(c) The legal opinions referred to in Section 10.1(e) hereof;
(d) An executed counterpart of the Voting Trust Agreement;
(e) The warrant certificates for each Seller.
11.4 SURVIVING OBLIGATIONS OF BUYER. In the event that the Closing does
not occur due to Buyer's Board of Directors failing to grant the requisite
approvals, at Sellers' option, Buyer will manage, operate and supervise the
Sellers' oil and gas assets covered by this Agreement pursuant to a standard
operating agreement between the Parties and for a reasonable fee. In such case,
Buyer shall be held to the reasonable prudent operator standard of care.
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ARTICLE XII.
EFFECT OF CLOSING
-----------------
12.1 REVENUES. All proceeds, accounts receivable, notes receivable,
income, revenues, monies and other items included in or attributable to the
Excluded Assets and all other Excluded Assets shall belong to and be paid over
to Sellers and all other proceeds, accounts receivable, notes receivable,
income, revenues, monies and other items included in or attributable to the
Assets shall belong to and be paid over to Buyer.
12.2 TAXES. Ad valorem and property taxes with respect to the Assets
for the calendar year in which Closing occurs be prorated to the Effective Date
with Sellers paying a fraction thereof based upon the number of days in the
calendar year prior to the Effective Date and Buyer paying the balance thereof.
12.3 EXPENSES. All accounts payable and other costs and expenses with
respect to the Sellers' interest in the Assets which are attributable under GAAP
to the period prior to the Effective Date shall be the obligation of and be paid
by Sellers, and those which are attributable under GAAP to the period commencing
with the Effective Date, as well as all Assumed Obligations, shall be the
obligation of and be paid by Buyer.
12.4 SHARED OBLIGATIONS. If monies are received by any Party hereto
which, under the terms of this Article, belong to another party, the same shall
immediately be paid over to the proper party. If an invoice or other evidence of
an obligation is received which under the terms of the Article is partially the
obligation of Sellers and pay the obligation of Buyer, then the parties shall
consult each other and each shall promptly pay its portion of such obligation to
the obligee, provided that if either party hereto shall fail promptly to pay its
portion of such obligation to the obligee, the other party hereto shall have the
right (but not the obligation) to pay such portion of
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such obligation, whereupon the defaulting party shall promptly reimburse such
other party for the defaulting party's portion so paid.
12.5 SELLERS OPERATED PROPERTIES. It is expressly understood and agreed
that Sellers shall not be obligated to continue operating any of the Assets
following the Closing and Buyer hereby assumes full responsibility for operating
(or causing the operation of) all Assets following the Closing. Without implying
any obligation on Sellers' part to continue operating any Assets after the
Closing, if Sellers continue to operate any Assets following the Closing at the
request of Buyer or any third party working interest owner, due to constraints
of applicable operating agreements, failure of a successor operator to take over
operations or other reasonable cause, such continued operation by Sellers shall
be for the account of Buyer, at the sole risk, cost and expense of Buyer and
Sellers as part of the Assumed Obligations is hereby released and indemnified by
Buyer from all claims, losses, damages, costs, expenses, causes of action and
judgments of any kind of character (including Sellers' negligence) with respect
to such continued operations by Sellers, unless caused by Sellers' gross
negligence or misconduct. In connection with any such continued operation of the
Assets by Sellers, Sellers shall be reimbursed by Buyer for all costs and
expenses incurred by Sellers with respect thereto, including a reasonable charge
for overhead. In the event that Sellers continue operating any Assets after
Closing pursuant to this Section 12.5, Buyer and Sellers shall enter into a
mutually agreed upon nominee agreement which will contain the release,
indemnification and reimbursement provisions set forth in this Section 12.5 and
will further provide that, with respect to any Assets affected thereby, Sellers
shall act as Buyer's nominee but shall be authorized to act only upon and in
accordance with Buyer's specific written instructions and Sellers shall have no
authority, responsibility or discretion to perform any tasks or functions with
respect to such Assets other than those which are purely administrative or
ministerial in nature, unless
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otherwise specifically requested and authorized by Buyer in writing.
12.6 ROYALTY ACCOUNTS. Sellers shall fund and pay over to Buyer at
Closing the Royalty Accounts existing with respect to Seller-operated Subject
Interests or any other Subject Interests as to which Sellers are responsible for
the disbursement of the sales proceeds of Hydrocarbon production to the person
entitled thereto.
ARTICLE XIII
SETTLEMENT OF PRORATIONS
------------------------
13.1 ACCOUNTING. Prior to closing, Sellers shall furnish Buyer with an
estimated accounting showing in reasonable detail the prorating of any amounts
described in and subject to Article VII of this Agreement. If pursuant to such
estimated accounting either Sellers or Buyer shall owe any obligation to the
other then the Purchase Price paid at Closing shall be further adjusted to
reflect such charges and credits which are necessary to accomplish such
adjustment. Promptly after the Closing Date (but not later than sixty (60) days
thereafter), Sellers shall provide Buyer with a final accounting showing in
reasonable detail the prorating of any amounts described in and subject to
Article XII hereof.
13.2 SETTLEMENT OF DISPUTES. If within thirty (30) days after Sellers
furnish such accounting to Buyer, Buyer and Sellers are unable to agree on such
final accounting, then either Sellers or Buyer may submit such proration or
allocation dispute to a mutually agreed upon independent accounting firm and the
determination made as to such proration or allocation by such accounting firm
shall be final and binding upon Sellers and Buyer. Final settlement shall be
made within thirty (30) business days following agreement by the Buyer and
Sellers for final determination by said accounting. All determinations and
adjustments with respect to allocating items to the periods before or after the
Effective Date shall be in accordance with GAAP. The fees charged by
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said accounting firm for making such delegations hereby shall be paid one-half
(1/2) by Buyer and one-half (1/2) by Sellers.
ARTICLE XIV
LIMITATIONS ON WARRANTIES AND REMEDIES
--------------------------------------
14.1 LIMITATIONS. The express representations and warranties of Sellers
contained in this Agreement are exclusive and are in lieu of all other
representations and warranties, express, implied or statutory, including without
limitation any representation or warranty with respect to the quality or volume
of the reserves of oil, gas or other Hydrocarbons in or under the Subject
Interests. The items of personal property, equipment, fixtures and appurtenances
conveyed as part of the Assets are sold hereunder "AS IS, WHERE IS" and no
warranties or representations of any kind or character, express or implied,
including any warranty of quality, merchantability, fitness for a particular
purposes or condition, are given by or on behalf of Seller. THE WARRANTIES OF
SELLER CONTAINED THIS AGREEMENT ARE EXCLUSIVE AND IN LIEU OF OTHER WARRANTIES,
EXPRESS OR IMPLIED, AND BUYER HEREBY WAIVES ALL WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATIONS, ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE OR CONDITIONS.
14.2 SURVIVAL. No representations, warranty, covenant or agreement made
herein shall survive the Closing except as provided in this Section 14.2. It is
expressly agreed that the terms and provisions of Articles I, III, VIII, XII,
XIII, XIV, XV, XVI and XVII (other than Section 17.6 and Sections 4.1(g),
4.1(h), 6.3, and 7.1 shall survive the Closing. The terms and provisions of
Section 17.6 shall survive for a period of two (2) years subsequent to the last
payment of the consideration under Section 3.1.
ARTICLE XV
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CASUALTY LOSS AND CONDEMNATION
------------------------------
15.1 NO TERMINATION. If after the Effective Date and prior to the
Closing any part of the Assets shall be destroyed by fire or other casualty or
if any part of the Assets shall be taken in condemnation or under the right of
eminent domain or if proceedings for such purposes shall be pending or
threatened, this Agreement shall remain in full force and effect notwithstanding
any such destruction, taking or proceeding or the threat thereof.
15.2 PROCEEDS AND AWARDS. With reference to any loss described in
Section 15.1 above, to the extent the insurance proceeds, condemnation awards or
other payments are not committed, used or applied by Sellers prior to the
Closing Date to repair, restore or replace such damaged or taken Assets, Sellers
shall at the Closing pay to Buyer all sums paid to Sellers by reason of such
destruction or taking less any costs and expenses incurred by Sellers in
collecting same. In addition and to the extent such proceeds, awards or payments
have not been committed, used or applied by Sellers in repair, restoration or
replacement as aforesaid, Sellers shall assign, transfer and set over unto
Buyer, without recourse against Sellers, all of the right, title and interest of
Sellers in and to any claims against third parties with respect to the event or
circumstance causing such loss and any unpaid insurance proceeds, condemnation
awards or other payments arising out of such destruction or taking, less any
costs and expenses incurred by Sellers in collecting same. Any such funds which
have been committed by Sellers for repair, restoration or replacement as
aforesaid shall be paid by Sellers for such purposes or, at Sellers' option,
delivered to Buyer by Sellers for such purposes or, at Sellers' option,
delivered to Buyer upon Sellers' receipt from Buyer of adequate assurance and
indemnity from Buyer that Sellers shall incur no liability or expense as a
result of such commitment.
ARTICLE XVI
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DEFAULT AND REMEDIES
--------------------
16.1 SELLERS' REMEDIES. Upon the failure of Buyer to comply herewith by
the Closing Date, as it may be extended in accordance herewith, Sellers, at
their sole option, may (i) enforce specific performance or (ii) terminate this
Agreement with all other remedies (except as expressly retained in Section 16.3)
being expressly waived by Sellers.
16.2 BUYER'S REMEDIES. Upon the failure of Sellers to comply herewith
by the Closing Date, as it may be extended in accordance herewith, Buyer, at its
sole option, may (i) enforce specific performance or (ii) terminate this
Agreement, all other remedies (except as expressly retained in Section 16.3)
being expressly waived by Buyer.
16.3 UNWIND PROVISIONS - PRIOR TO CLOSING. In the event that the
Parties proceed under this Agreement past the Effective Date but the Closing
fails to occur on or before the Unwind Date, notwithstanding the provisions of
Sections 16.1 and 16.2 above, the Parties shall unwind the transaction
contemplated hereby as follows:
(a) The Sellers' rights to receive the preferred shares and
warrants described in Article III hereof shall terminate.
(b) The Sellers shall retain ownership of all Assets as
defined in Section 1.2.
(c) The Buyer's rights to receive title to the Assets as
defined in Section 1.2 shall terminate.
(d) In the event that the Closing fails to occur on or before
Unwind Date, notwithstanding any other provision of this Article XVI, the Buyer
shall be entitled to retain any and all production and proceeds attributable to
production generated from the operation of the Assets from the Effective Date
through the Unwind Date.
(e) In the event that the Closing fails to occur on or before
the Unwind Date,
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because of Buyer's failure, notwithstanding any other provision of this Article
XVI, the Seller shall be entitled to receive and the Buyer shall be required to
deliver shares of ▇▇▇▇▇▇▇▇▇ Common Stock, bearing the restrictive legend found
in Section 3.1(a)(6) herein, in an amount equal to 200 percent of the value of
any and all production and proceeds attributable to production generated from
operation of the Assets from the Effective Date through the Unwind Date less
actual operating costs. Said ▇▇▇▇▇▇▇▇▇ Common Stock shall be valued at the
average of the closing ask price of the stock for the ten days immediately
proceeding the Unwind Date.
16.4 UNWIND PROVISIONS - SUBSEQUENT TO CLOSING. In the event that the
Closing occurs on or before the Unwind Date, and a civil action is filed within
one year of the Closing seeking to set aside or void the transaction or any
part, a Party may elect to unwind the transaction as follows:
(a) If the civil action is filed by a shareholder of ▇▇▇▇▇▇▇▇▇
other than a shareholder who is or has been a partner, officer or director of
any of the Sellers, then at the option of the Sellers, the Buyers shall either
return all Assets acquired from the Sellers and the value of any and all
production and proceeds attributable to production generated from operation of
the Assets from the Effective Date through the Unwind Date less actual operating
costs and capital expenditures thereon, or pay all costs reasonable and
necessary to defend the civil action. In the event that Sellers elect to require
the Buyer to return the Assets, Sellers shall return all ▇▇▇▇▇▇▇▇▇ Preferred
Stock, Warrants and Common Stock obtained through conversion of the Preferred
Stock. Notwithstanding the above, in the event that Sellers have exercised any
of the Warrants, the Sellers shall not have the option of unwinding the
transaction under this Section 16.4 and shall only have the option of requiring
the Buyer to pay the costs of defending the civil action.
(b) If the civil action is filed by a partner, officer or
director of any of the Sellers,
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then at the option of the Buyer, the Sellers shall either return all ▇▇▇▇▇▇▇▇▇
Preferred Stock and Warrants paid in consideration of this Agreement, and any
▇▇▇▇▇▇▇▇▇ Common Stock which has been obtained through conversion of the
Preferred Stock or pay all costs reasonable and necessary to defend the civil
action. In the event that the Buyer elects to have the Sellers pay for the costs
of defending the civil action, the Buyer shall have a lien on the ▇▇▇▇▇▇▇▇▇
Preferred Stock and Warrants to secure the payment of said costs. In the event
that the Buyer elects to require the Sellers to return the ▇▇▇▇▇▇▇▇▇ Preferred
Stock, Warrants and Common Stock obtained through conversion of the Preferred
Stock, Buyer shall return all Assets acquired pursuant to this Agreement and the
value of any and all production and proceeds attributable to production
generated from operation of the Assets from the Effective Date through the
Unwind Date less actual operating costs and capital expenditures thereon to the
Sellers. Notwithstanding the above, in the event that the Buyer has sold or
otherwise disposed of any of the Assets other than by abandonment, the Buyer
shall not have the option of unwinding the transaction under this Section 16.4
and shall only have the option of requiring the Sellers to pay the costs of
defending the civil action.
16.5 OTHER REMEDIES. Notwithstanding the foregoing, termination of this
Agreement shall not prejudice or impair Buyer's obligations under Sections 6.3
(and the Confidentiality Agreement referenced therein), and such other portions
of this Agreement as are necessary to the enforcement and construction of
Section 6.3. The prevailing party in any legal proceeding brought under or to
enforce this Agreement shall be additionally entitled to recover court costs and
reasonable attorney's fees from the non-prevailing party.
ARTICLE XVII
MISCELLANEOUS
-------------
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17.1 PUBLIC ANNOUNCEMENTS. The parties hereto agree that prior to
making any public announcement or statement with respect to the transaction
contemplated by this Agreement, the party desiring to make such public
announcement or statement shall consult with the other party hereto and exercise
its best efforts to (i) agree upon the text of a joint public announcement or
statement to be made by both of such parties or (ii) obtain approval of the
other party hereto to the text of a public announcement or statement to be made
solely by Sellers or Buyer, as the case may be. Nothing contained in this
paragraph shall be construed to require either party to obtain approval of the
other party hereto to disclose information with respect to the transaction
contemplated by this Agreement to any state or federal governmental authority or
agency to the extent required by applicable law or by an applicable rules,
regulations or orders of any governmental authority or agency having
jurisdiction or necessary to comply with disclosure requirements of the NASDAQ
Exchange and applicable securities laws.
17.2 DELIVERY OF RECORDS. To the extent not satisfied as of Closing,
Sellers shall deliver to Buyer as soon after the Closing Date as is practicable
and all of the items described in subsections (f) through (k) of Section 11.2
and all files, data, books and records included in the Assets in the condition
and order in which they then exist.
17.3 FILING AND RECORDING OF ASSIGNMENTS, ETC.. Buyer shall be solely
responsible for all filings and recordings of assignments and other documents
related to the Assets and for all fees connected therewith, and upon request
Buyer shall advise Sellers of the pertinent recording data. Sellers shall not be
responsible for any loss to Buyer because of Buyer's failure to file or record
documents correctly or promptly. Buyer shall promptly file all appropriate
forms, declarations or bonds with Federal, State and Indian agencies relative to
its assumption of operations and Sellers shall cooperate with Buyer in
connection with such filings.
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17.4 ASSUMPTION AND INDEMNITY. Sellers shall assume all risk of loss
with respect to and any change in the condition of the Assets from the Effective
Date until Closing. Buyer agrees to assume and pay, perform, discharge all
Assumed Obligations accruing on and after the Effective Date, and agrees to
indemnify, defend and hold Sellers harmless from and against any and all claims,
losses, damages, costs, expenses, causes of action or judgments of any kind or
character with respect to all liabilities and obligations or alleged or
threatened liabilities and obligations attributable to or arising out of the
Assumed Obligations, accruing on and after the Effective Date, including,
without limitation, any interest, penalty, reasonable attorney's fees and other
costs and expenses incurred in connection therewith or the defense thereof. For
the purpose of this paragraph the Assumed Obligations shall include: the
obligations of the operator, as defined in the applicable Kentucky, Tennessee
and Louisiana regulations, of the Assets. To the extent not included in Assumed
Obligations, Sellers agree to pay, perform, and discharge all costs, expenses
and liabilities in the Assets and accruing prior to the Effective Date, and
agrees to indemnify, defend and hold Buyer harmless from and against any and all
claims, losses, damages, costs, expenses, causes of action or judgments of any
kind or character with respect to all liabilities and obligations or alleged or
threatened liabilities and obligations attributable to or arising out of such
obligations of Sellers, including, without limitation, any interest penalty,
reasonable attorney's fees and other costs and expenses incurred in connections
therewith or the defends thereof. For example, with respect to operations
committed to by Sellers and commenced prior to the Effective Date, but not
completed until after the Effective Date, the costs accruing with respect
thereto prior to the Effective Date shall be the obligation of Sellers. A
schedule of the AFE's for any such operations is attached hereto as Exhibit
"E-1".
17.5 FURTHER ASSURANCES AND RECORDS.
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(a) After the Closing each of the parties will execute,
acknowledge and deliver to the other such further instruments, and take such
other action, as may be reasonably requested in order to more effectively assure
to said party all of the respective properties, rights, titles, interests,
estates, and privileges intended to be assigned, delivered or inuring to the
benefit of such party in consummation of the transactions contemplated hereby.
(b) Buyer agrees to maintain the files and records of Sellers
that are acquired pursuant to this Agreement until the second anniversary of the
Closing Date (or for such longer period of time as Sellers shall advise Buyer is
necessary in order to have records available with respect to open years for tax
audit purposes), or, if any of such records pertain to any claim or dispute
pending on the second anniversary of the Closing Date, Buyer shall maintain any
of such records designated by Sellers until such claim or dispute is finally
resolved and the time for all appeals has been exhausted. Buyer shall provide
Sellers and their representatives reasonable access to and the right to copy
such files and records for the purposes of (i) preparing and delivering any
accounting provided for under this Agreement and adjusting, prorating and
settling the charges and credits provided for in this Agreement, (ii) complying
with any law, rule or regulation affecting Sellers' interest in the Assets prior
to the Closing Date, (iii) preparing any audit of the books and records of any
third party relating to Sellers' interest in the Assets prior to the Closing
Date, or responding to any audit prepared for such third parties, (iv) preparing
tax returns, (v) responding to or disputing any tax audit, or (vi) asserting,
defending or otherwise dealing with any claim or dispute under this Agreement.
In no event shall Buyer destroy any such files and records without giving
Sellers sixty (60) days advance written notice thereof and the opportunity, at
Sellers' expense, to obtain such files and records prior to their destruction.
(c) Buyer agrees that, as soon as practicable after the
Closing, it will remove or
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cause to be removed the names and marks used by Sellers and all variations and
derivatives thereof and logos relating thereto from the Assets and will not
thereafter make any use whatsoever of such names, marks and logos.
(d) To the extent not obtained or satisfied as of Closing,
Sellers agree to continue to use its best efforts, but without any obligation to
incur any cost or expense in connection therewith, and to cooperate with Buyer's
efforts to obtain for Buyer: (i) access to files, records and date relating to
the Assets in the possession of third parties; (ii) access to ▇▇▇▇▇ constituting
a part of the Assets operated by third parties for purposes for inspecting same;
and (iii) the waiver of confidentiality or other restrictions on the review by
and/or transfer to Buyer of seismic, geophysical, engineering or other data
pertaining to the Subject interests.
17.6 NOTICES. Except as otherwise expressly provided herein, all
communications required or permitted under this Agreement shall be writing and
any communication or delivery hereunder shall be deemed to have been duly given
and received when actually delivered to the addresses set forth below of the
party to be notified, addressed as follows:
If to Sellers: Environmental Energy, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Environmental Operating, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
With a copy to: ▇▇▇▇▇ ▇. Grey, Esq.
▇▇▇▇▇ ▇. Grey & Associates
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
If to Buyer: ▇▇▇▇▇▇▇▇▇ Resources, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
With Copy to Attention of: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ III
C/▇ ▇▇▇▇▇▇▇▇▇ Resources, Inc.
Any party may, by written notice so delivered to the other, change the address
to which delivery shall thereafter be made.
17.7 INCIDENTAL EXPENSES. Buyer shall bear and pay (i) all State or
local government sales taxes incident to the transfer of the Assets to Buyer,
(ii) all documentary, transfer and other State and local government taxes
incident to the transfer of the Assets to Buyer, and (iii) all filing, recording
or registration fees for any assignment or conveyance delivered hereunder. Each
party shall bear its own respective expenses incurred in connection with the
Closing of this transaction, including its own consultants' fees, attorneys'
fees, accountants' fees, and other similar costs and expenses.
17.8 ENTIRE AGREEMENT. Except for the Confidentiality Agreement
referenced in Section 6.3, this Agreement embodies the entire agreement between
the parties (superseding all prior agreements, arrangements and understandings
related to the subject matter hereof), and may be supplemented, altered,
amended, modified or revoked by writing only, signed by all of the parties
hereto. The headings herein are for convenience only and shall have no
significance in the interpretation hereof.
17.9 GOVERNING LAW. This Agreement shall be governed and construed and
enforced in accordance with the laws of the Commonwealth of Kentucky.
17.10 EXHIBITS. All Exhibits and Schedules hereto which are referred to
therein are hereby made a part hereof and incorporated herein by reference.
17.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each and every counterpart shall be deemed for all purposes
one (1) agreement.
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17.12 WAIVER. Any of the terms, provisions, covenants, representations,
warranties or conditions hereof may be waived, only by a written instrument
executed by the party waiving compliance. Except as otherwise expressly provided
in this Agreement, the failure of any party at any time or times to require
performance of any provision hereof shall in no manner affect such party's right
to enforce the same. No waiver by any party of any condition, or of the breach
of any term, provision, covenant, representation or warranty contained in this
Agreement, whether by conduct or otherwise, in anyone or more instances, shall
be deemed to be or construed as a further or continuing waiver of any such
condition or breach or a waiver of any other condition or of the breach of any
other term, proton, covenant, representation or warranty.
17.13 BINDING EFFECT; ASSIGNMENT. All the terms, provisions, covenants,
representations, warranties and conditions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the parties hereto and
their respective successors; but this Agreement and the rights and obligations
hereunder shall not be assignable or delegable by any party without the express
written consent of the non-assigning or non-delegating parties. Notwithstanding
anything contained herein to the contrary, the Buyer shall have the right to
accept title to the Assets in either its name or in the name of any wholly owned
subsidiary.
17.14 MERGER. The terms and conditions of that certain Letter of
Intent, dated November 3, 1997, between the Sellers and Buyer are hereby merged
into this Agreement, such that no terms or conditions contained in said Letter
of Intent that conflict with any express term or condition contained herein
shall survive the execution of this Agreement.
17.15 NO RECORDATION. Without limiting any party's right to file suit
to enforce its rights under this Agreement, Buyer and Sellers expressly covenant
and agree not to record or place of record this Agreement or any copy of
memorandum hereof.
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17.16 ALL OR NONE. It is understood and agreed that this agreement is
effective only upon the execution by all parties hereto, including all Sellers,
ENVIRONMENTAL ENERGY PARTNERS I, LTD., ENVIRONMENTAL ENERGY PARTNERS II, LTD.,
ENVIRONMENTAL OPERATING PARTNERS, LTD., and ENVIRONMENTAL PROCESSING PARTNERS,
LTD., ENVIRONMENTAL HOLDING COMPANY, LLC, ENVIRONMENTAL ENERGY, INC., and
ENVIRONMENTAL OPERATING, INC.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
SELLERS
ENVIRONMENTAL ENERGY PARTNERS I, LTD.
By: ENVIRONMENTAL ENERGY, INC.
Its: Managing General Partner
By:
---------------------
Its: President
ENVIRONMENTAL ENERGY PARTNERS II, LTD.
By: ENVIRONMENTAL ENERGY, INC.
Its: Managing General Partner
By:
---------------------
Its: President
ENVIRONMENTAL OPERATING PARTNERS, LTD.
By: ENVIRONMENTAL OPERATING, INC.
Its: Managing General Partner
By:
---------------------
Its: President
ENVIRONMENTAL PROCESSING PARTNERS,
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LTD.
By: ENVIRONMENTAL OPERATING, INC.
Its: Managing General Partner
By:
---------------------
Its: President
ENVIRONMENTAL HOLDING COMPANY, LLC
By: ENVIRONMENTAL ENERGY, INC.
Its: Manager
By:
---------------------
Its: President
By:
------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
Its: Manager
By:
------------------------------
▇▇▇▇ ▇▇▇▇▇▇
Its: Manager
By:
------------------------------
▇▇▇▇ ▇▇▇▇
Its: Manager
ENVIRONMENTAL ENERGY, INC.
BY:
-----------------------------------
ITS:
----------------------------------
ENVIRONMENTAL OPERATING, INC.
BY:
-----------------------------------
ITS:
----------------------------------
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BUYER
▇▇▇▇▇▇▇▇▇ PETROLEUM, INC.
BY:
----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
ITS: President
ACCOMODATION PARTY
▇▇▇▇▇▇▇▇▇ RESOURCES, INC.
BY:
----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
ITS: President
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EXHIBIT K
VOTING TRUST AGREEMENT
THIS AGREEMENT made as of the ___ day of January, 1999, between
Environmental Energy, Inc., Environmental Operating, Inc., Environmental Energy
Partners I, Ltd., Environmental Energy Partners II, Ltd., Environmental
Operating Partners, Ltd., Environmental Holding Company, LLC, and Environmental
Processing Partners, Ltd., as owners and holders of shares of common capital
stock of ▇▇▇▇▇▇▇▇▇ Resources, Inc., (hereinafter collectively referred to as
stockholders) and _____________________, ______________________, and
__________________________ (hereinafter referred to as Trustees)
W I T N E S S E T H:
WHEREAS, Environmental Energy, Inc., Environmental Operating, Inc.,
Environmental Energy Partners I, Ltd., Environmental Energy Partners II, Ltd.,
Environmental Operating Partners, Ltd., Environmental Holding Company, LLC, and
Environmental Processing Partners, Ltd., and ▇▇▇▇▇▇▇▇▇ Resources, Inc. and its
wholly owned subsidiary, ▇▇▇▇▇▇▇▇▇ Petroleum, Inc. entered into an Agreement for
Purchase and Sale, dated the 26th day of January, 1999, which provides for
1,024,924 shares of preferred stock and 170,821 Units of Acquisition Warrants,
representing 1,366,568 underlying shares of common capital stock in ▇▇▇▇▇▇▇▇▇
Resources, Inc. to be issued in exchange for various assets owned by
Environmental Energy, Inc., Environmental Operating, Inc., Environmental Energy
Partners I, Ltd., Environmental Energy Partners II, Ltd., Environmental
Operating Partners, Ltd., Environmental Holding Company, LLC, and Environmental
Processing
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Partners, Ltd.; and
WHEREAS, the Agreement for Purchase and Sale further provides for the
conversion of the preferred stock to common capital stock and for the creation
of a Voting Trust to hold the common capital stock, either by conversion of the
preferred stock or exercise of the Acquisition Warrants, until such time as the
stock is distributed to the various participants of Environmental Energy
Partners I, Ltd., Environmental Energy Partners II, Ltd., Environmental
Operating Partners, Ltd., Environmental Holding Company, LLC, and Environmental
Processing Partners, Ltd.
NOW, THEREFORE, in consideration of the above premises and the sum of
ten dollars and other valuable consideration, and in further consideration of
the mutual covenants, promises and agreements to be kept, observed and performed
by each of the parties hereto, the holders of the common stock and Trustees do
each covenant and agree, as follows:
Upon the condition that either the preferred stock is converted or/and
the Acquisition Warrants are exercised prior to the final distribution of stock
to the various participants of Environmental Energy Partners I, Ltd.,
Environmental Energy Partners II, Ltd., Environmental Operating Partners, Ltd.,
Environmental Holding Company, LLC, and Environmental Processing Partners, Ltd.,
by their managing partners, then the parties hereto, Environmental Energy, Inc.,
Environmental Operating, Inc., Environmental Energy Partners I, Ltd.,
Environmental Energy Partners II, Ltd., Environmental Operating Partners, Ltd.,
Environmental Holding Company, LLC, and Environmental Processing Partners, Ltd.,
shall sell, assign, and transfer unto the said Trustees the number of shares of
capital stock of ▇▇▇▇▇▇▇▇▇ Resources, Inc., owned or held by them, as set forth
on Exhibit "A" attached hereto, save and except one (1) share each, and
covenants and
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agrees upon the request of the Trustees to deliver the said stock to the
Trustees and to properly endorse, transfer and assign the certificates
representing the said stock, in order that the said stock may be transferred on
the books of the company to the names of the Trustees.
The Trustees hereby accept the assignment and transfer of the said
stock, and covenant and agree to hold the same upon the following conditions,
uses and trusts:
1. Upon the actual delivery by each party hereto of the aforesaid stock
to the said trustees, the Trustees will cause the same to be transferred on the
books of the corporation, to themselves, as trustees, and covenant and agree to
execute and deliver to such party a Trustees' Certificate or Certificates in an
amount equal to the amount of the stock so delivered or deposited, which
Trustees' Certificates shall be of substantially the following form:
TRUSTEES' CERTIFICATE
▇▇▇▇▇▇▇▇▇ RESOURCES INC.
No. ______ Shares ______
This certifies that there has been deposited with the
Trustees whose names are signed to this certificate, _____ shares of
the common capital stock of ▇▇▇▇▇▇▇▇▇ Resources, Inc., under and by
virtue of an Agreement entered into between certain stockholders of the
said corporation, and the undersigned Trustees, dated _____, and that
upon the termination of the said Agreement, on _____, 19____, will be
entitled to receive a certificate for ____ shares, subject to
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consolidation or stock split, of the common capital stock of ▇▇▇▇▇▇▇▇▇
Resources, Inc., fully paid and nonassessable, and in the meantime to
receive payments, equal to the dividends, if any, collected by the
undersigned Trustees, or their successors, upon a like number of shares
standing upon the books of the said company, in the name of the
Trustees, or their successors.
Until the actual delivery of such stock certificates,
the Trustees, or their successors, shall possess, and shall be entitled
to exercise all rights of every name and nature, including the right to
vote with respect to any and all such stock, it being expressly
stipulated that no voting right passes by or under this certificate, or
by or under any agreement, expressed or implied.
This certificate and the interest represented thereby
is transferable only on the books of the undersigned trustees, upon
presentation and surrender thereof, and the holder hereof accepts the
same, subject to all the terms and conditions of the aforesaid
Agreement between the Trustees and certain stockholders of the said
corporation, and becomes a party to the said Agreement, and is entitled
to the benefits thereof.
This certificate shall be surrendered to the Trustees
by the holder hereof, at the termination of the Trust Agreement, upon
the delivery to such holder of a like amount of stock in ▇▇▇▇▇▇▇▇▇
Resources, Inc.
In witness whereof, the undersigned Trustees have
executed this
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certificate this ____ day of ______, 19____.
__________________________________, Trustee
__________________________________, Trustee
__________________________________, Trustee
2. The Trustees' Certificates shall be transferable only on the books
of the Trustees, by the holder in person, or by attorney, upon surrender of the
properly assigned and endorsed Trustees' Certificate, subject however to
compliance with any and all applicable state and federal securities laws,
including, but not limited to the Securities Act of 1933 and Rule 144 under such
Act (or any similar rule under such Act relating to the disposition of
securities). Upon such compliance and such assignment and surrender, a new
Trustees' Certificate shall be issued to the transferee by the Trustee, and the
person accepting such assignment, or accepting such new certificate, shall be
bound by the terms of this Agreement, as fully to all intents and purposes, as
if he signed the same.
3. The trust hereby created shall be valid and binding for a period of
10 years from and after January ___, 1999, or the date that the Trustees
distribute the common stock to the to the various participants of Environmental
Energy Partners I, Ltd., Environmental Energy Partners II, Ltd., Environmental
Operating Partners, Ltd., Environmental Holding Company, LLC, and
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Environmental Processing Partners, Ltd., pursuant to distribution instructions
received from Environmental Energy, Inc., and Environmental Operating, Inc., as
managing or general partners of the affiliated entities, whichever is shorter.
At that time, the Trustees, or their successors, will deliver, upon surrender of
the outstanding Trustees' Certificates, corresponding certificates or shares of
the common capital stock in ▇▇▇▇▇▇▇▇▇ Resources, Inc.
4. Should any dividends be paid to the Trustees, or their successors,
on the shares of stock standing in their names as such, they will, within a
reasonable time after the receipt of such dividends, distribute the money so
received to the holders of the Trustees' Certificates issued hereunder, in
proportion to the number of shares named in the certificate or certificates of
each holder. In making payment of dividends the Trustees, or their successors,
shall be entitled to treat the persons in whose names such trustees'
certificates stand upon the books of the Trustees, as the owners thereof for all
purposes.
5. In the event of the death, resignation, removal or incapacity, of
any Trustee, his successor shall be named by an instrument in writing signed by
the remaining Trustees, or by a majority of them, and such successor Trustee, or
Trustees, shall have all the rights, privileges, duties and powers herein
conferred upon the Trustees herein named.
6. The Trustees, or their successors in trust, shall have the sole and
exclusive voting power of the stock standing in their names as such, and shall
always vote the same as a majority of the Trustees shall determine and direct.
They shall have power to vote the stock at every annual and special meeting of
the stockholders, during the life of the Trust Agreement, and shall have full
and complete authority to vote upon any and all questions arising at any such
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meetings. All action to be taken by, and all questions arising between the
Trustees, from time to time, shall be determined by the decision of a majority
of those then acting as Trustees.
7. Any Trustee may vote in person or by proxy, and a proxy in writing
signed by a majority of the Trustees shall be sufficient authority to the person
named therein to vote the stock held by all the Trustees hereunder at any
meeting, general or special, of the stockholders of ▇▇▇▇▇▇▇▇▇ Resources, Inc.
Any proxy executed by the direction of a majority of the trustees, as herein
provided, may be executed by such majority in the names of all the Trustees.
8. Upon the succession to office of a successor to any Trustee, a
majority of the Trustees in office at the time of such succession are hereby
irrevocably invested with full power, should they deem it necessary or advisable
to exercise it, to assign the shares of stock covered by this Agreement to the
trustees then in office, including such successor, to the end that a new
certificate for such stock may be issued in the names of the Trustees at that
time duly appointed hereunder.
9. From time to time the trustees may receive any additional stock
certificates of ▇▇▇▇▇▇▇▇▇ Resources, Inc., and in respect of all such stock
certificates so received, will issue and deliver voting Trust Certificates in
the form corresponding to those above specified, entitling the holder to the
rights therein and herein provided.
10. In case the Trustees shall receive any stock certificates of
▇▇▇▇▇▇▇▇▇ Resources, Inc., issued by way of dividends upon stock certificates
held by them under this Agreement, the said Trustees shall hold such stock
certificates likewise subject to the terms of this
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Agreement, and shall issue Trustees' Certificates representing such stock
certificates to the respective holders of the then outstanding Trustees'
Certificates, entitled to such dividend.
11. In case there is a reduction of share of common capital stock,
through consolidation, merger or other mechanism, the parties hereto agree to
effect such reduction or merger by transferring or assigning new stock
certificates received to the Trustees in exchange for new Trustees'
Certificates. In such case, old Trustees' Certificates and stock certificates
shall be canceled.
12. The Trustees may permit a sufficient number of shares of the said
stock to be withdrawn and released from this Agreement, from time to time to
permit the qualification of one or more individuals to act as directors in
▇▇▇▇▇▇▇▇▇ Resources, Inc., such withdrawal and release to be made upon the
surrender to the Trustees of the Trustees' Certificates in respect of such
amount of stock. Each such release of stock, however, shall be only to an amount
sufficient to meet the requirements of the bylaws of the said corporation, and
the laws of the State or Province within which the corporation is domiciled,
relating to the qualifications of the directors, and shall be made only to such
persons as may be selected by the trustees to become directors of the said
corporation, and in such manner and upon such terms, as may be deemed expedient
by the trustees. The Trustees shall make the necessary arrangements, to provide
for the redeposit hereunder, of any such released stock, in exchange the
Trustees' Certificates, when the holder shall have ceased to be a director of
▇▇▇▇▇▇▇▇▇ Resources, Inc.
13. Wherever in this Agreement, the Trustees are referred to, such
terms shall be held to embrace the Trustees for the time being, in office as
such, whether original or successor.
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And the Trustees shall, at such time as they may deem proper, file a true copy
of this Agreement with ▇▇▇▇▇▇▇▇▇ Resources, Inc.
14. The failure of any party hereinbefore named, to sign and execute
this Agreement shall in no manner render the same void or voidable, as to those
who sign and execute.
15. The Trustees hereby accept the trust created and covenanted and
agree to faithfully and diligently perform the covenants and agreements herein
contained, and to hold the said stock, during the life of this Agreement in
their names as trustees, except as is otherwise herein provided, and to deliver
and transfer the same, to those holding Trustees' Certificates, upon the
termination of this Trust Agreement.
16. The covenants and agreements to be kept, observed and performed by
each party of the first party hereto, shall be binding upon his respective
heirs, executors, administrators, legatees, distributees and assigns.
17. The parties hereto agree that ▇▇▇▇▇▇▇▇▇ Resources, Inc. and
▇▇▇▇▇▇▇▇▇ Petroleum, Inc., and their successors, shall be third party
beneficiaries to his agreement and shall have the right to enforce the terms of
this agreement through all means necessary to carry out the purpose and effect
of the conditions and covenants of this agreement.
18. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, and all of which taken together
shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the respective parties hereto, have hereunto
affixed their hands and seals, all as of the day and year first above written.
STOCKHOLDERS:
ENVIRONMENTAL ENERGY PARTNERS I, LTD.
ENVIRONMENTAL ENERGY PARTNERS II, LTD.
ENVIRONMENTAL OPERATING PARTNERS, LTD.
ENVIRONMENTAL HOLDING COMPANY, LLC,
ENVIRONMENTAL PROCESSING PARTNERS, LTD.
ENVIRONMENTAL ENERGY, INC.
Managing Member or General Partner
BY:
-------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇, PRESIDENT
ENVIRONMENTAL OPERATING, INC.
Managing Member or General Partner
BY:
------------------------------
NAME:
---------------------------
ITS:
-----------------------------
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TRUSTEES:
-----------------------------------
NAME:
---------------------------
-----------------------------------
NAME:
---------------------------
-----------------------------------
NAME:
---------------------------
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EXHIBIT M
[FORM OF SERIES A ACQUISITION WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED MAY NOT BE OFFERED OR SOLD,
TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO (I) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, (II) TO THE EXTENT APPLICABLE, RULE
144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE
DISPOSITION OF SECURITIES), OR (III) AN OPINION OF COUNSEL, IF SUCH OPINION
SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN EXEMPTION
FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE OR (IV) BY WILL OR OPERATION OF
LAW.
EXERCISABLE AT ANY TIME AFTER
JANUARY ___, 1999
Warrant No. A-____
WARRANT CERTIFICATE
This Warrant Certificate certifies that _________________________ is
the registered holder of Warrants to purchase initially, at any time from after
January _____, 1999 and until the expiration date of January ____, 2004, up to
_________ of fully paid shares of common stock Shares (the "Shares") of
▇▇▇▇▇▇▇▇▇ Resources, Inc. (the "Company"), at the exercise price, subject to
adjustment in certain events, of ___________________ ($_____) per Share (the
"Exercise
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Price") upon surrender of this Warrant Certificate and payment of the Exercise
Price at the principal executive office of the Company, but subject to the
conditions set forth herein and in the Agreement for Purchase and Sale dated as
of January _____, 1999, among the Company and Environmental Energy Partners I,
Ltd., Environmental Energy Partners II, Ltd., Environmental Operating Partners,
Ltd., Environmental Holding Company, LLC, Environmental Processing Partners,
Ltd., Environmental Energy, Inc., and Environmental Operating, Inc. (the
"Agreement"). This Warrant expires on January ____, 2004, at which time all
rights hereunder to purchase the Shares of ▇▇▇▇▇▇▇▇▇ Resources, Inc. shall
cease. Payment of the Exercise Price shall be made by certified or official bank
check or wire transfer in New York Clearing House funds payable to the order of
the Company.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Agreement, which Agreement
is hereby incorporated by reference in and made a part of this instrument and is
hereby referred to for a description of the rights, limitation of rights,
obligations, duties and immunities thereunder of the Company and the holders
(the words "holders" or "holder" meaning the registered holders or registered
holder) of the Warrants.
The underlying shares of common capital stock of ▇▇▇▇▇▇▇▇▇ Resources,
Inc. shall be subject to the terms and conditions of a Voting Trust Agreement
between Environmental Energy Partners I, Ltd., Environmental Energy Partners II,
Ltd., Environmental Operating Partners, Ltd., Environmental Holding Company,
LLC, Environmental Processing Partners, Ltd., as owners and holders of the
common capital stock of ▇▇▇▇▇▇▇▇▇ Resources, Inc. and __________________,
________________________, and ________________________, as Trustees.
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The Agreement provides that each Series of Acquisition Warrants is
redeemable by ▇▇▇▇▇▇▇▇▇ Resources, Inc., as an entire series, at a price of $.05
per Acquisition Warrant, at the option of ▇▇▇▇▇▇▇▇▇ Resources, Inc., if the
following conditions are met: (a.) The last sales price of the Common Stock
equals or exceeds 200% of the exercise price of the Series of Acquisition
Warrants being redeemed for 20 consecutive trading days; and (b.) Notice of
redemption is given to the Warrantholder no sooner than one day after, and no
later than ten days after the 20th consecutive trading day as defined above.
Further, (1) The notice of redemption must give a minimum of 90 days notice to
the Warrantholder, and (2) The Warrantholder shall have the right to exercise
the Warrant until the close of business of the date fixed for redemption in the
notice specified above.
The warrants represented by this certificate and the other securities
issuable upon exercise thereof have not been registered may not be offered or
sold, transferred or assigned except pursuant to (i) an effective registration
statement under the Securities Act of 1933, (ii) to the extent applicable, Rule
144 under such act (or any similar rule under such act relating to the
disposition of securities), or (iii) an opinion of counsel, if such opinion
shall be reasonably satisfactory to counsel for the issuer, that an exemption
from registration under such act is available or (iv) by will or operation of
law.
Upon due presentment for registration or transfer of this Warrant
Certificate at the principal executive office of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the
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Agreement, without any charge except for any tax or other governmental charge
imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such numbered of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone or any attempt by the
registered owner to assign or transfer except in compliance with the conditions
contained above), for the purpose of any exercise hereof, and of any
distribution to the holder(s) hereof, and for all other purposes, and the
Company shall not be affected by any notice to the contrary.
All terms used in this Warrant Certificate which are defined in the
Agreement shall have the meanings assigned to them in the Agreement.
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This Warrant Certificate does not entitle any Warrant holder to any of
the rights of a shareholder of the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly
executed under its corporate seal.
Dated as of January ___, 1999.
▇▇▇▇▇▇▇▇▇ RESOURCES, INC.
By: [SEAL]
-----------------------------
Name:
---------------------------
Title:
--------------------------
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FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right, represented by
Warrant Certificate No. _, to purchase Shares (as defined in the Agreement
described below) and herewith tenders in payment for such securities a certified
or official bank check or wire transfer payable in New York Clearing House Funds
or through the use of Appreciation Currency (as defined in the Agreement), or a
combination thereof to the order of ▇▇▇▇▇▇▇▇▇ Resources, Inc., (the "Company")
in the amount of $______, all in accordance with the terms of Agreement for
Purchase and Sale, dated as of January ___, 1999, between the Company and
Environmental Energy Partners I, Ltd., Environmental Energy Partners II, Ltd.,
Environmental Operating Partners, Ltd., Environmental Holding Company, LLC,
Environmental Processing Partners, Ltd., Environmental Energy, Inc., and
Environmental Operating, Inc. (the "Agreement"). The undersigned warrantholder
requests that a certificate for such securities be registered in his/her name
with the following address: _____________________________________ and that such
certificate be delivered to _________________________whose address is
___________________________, and if said number of Shares shall not be all the
Shares purchasable hereunder, that a new Warrant Certificate for the balance of
the Shares purchasable under the within Warrant Certificate be registered in the
name of the undersigned warrantholder as below indicated and delivered to the
address stated below.
Dated :
----------------------
Signature:
----------------------------------
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(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate.)
Address:
-----------------------------------
-----------------------------------
-----------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
Signature Guaranteed:
(Signature must be guaranteed by a bank, savings and loan association,
stockbroker, or credit union with membership in an approved Signature Guaranty
Medallion Program pursuant to Securities Exchange Act Rule 17Ad-15.)
67
