ASSET SALE AND PURCHASE AGREEMENT
THIS ASSET SALE AND PURCHASE AGREEMENT is entered into as of the 1st
day of May 1999, by and among the following: Shotgun Ridge Gas System,
L.C., a Kansas limited liability company (hereinafter referred to as
"SRGS");
Ponderosa Gas Pipeline Company, Inc., a Kansas corporation ("PGPC");
and
4\10 Energy Fund, Inc., a Kansas corporation ("4\10").
WHEREAS, SRGS is in the business of transporting and marketing natural
gas (the "Business"); and
WHEREAS, PGPC desires to purchase the Assets (as hereinafter defined)
from SRGS in accordance with and subject to the terms and conditions
hereinafter set forth; and
WHEREAS, 4\10 has a perfected security interest in the Assets and
agrees to release all of its Encumbrances on the Assets in exchange for
substitution of collateral by SRGS;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby
agree as follows:
1. Definitions and References. As used herein, the following terms
shall have the meanings set forth below, unless the context otherwise
requires:
"Assets" mean the Business and all real and personal property, both
tangible and intangible, wherever located, that is owned or held by the
SRGS and used or useful in connection with the Business as follows:
(a) all fixtures, easements and rights of way, as
more fully described in Exhibit "A";
(b) all meters, pipeline, gauges, valves,
compressors, regulators, fittings, connections,
machinery, equipment, inventory, supplies, and other
property owned or held by SRGS and used or useful in
connection with the Business, as more fully described
in Exhibit "B";
(c) all permits, licenses, gas purchase and sale
contracts, the name "Shotgun Ridge Gas System", and
other intangible assets owned or held by SRGS and
used in connection with the Business, including,
without limitation, the contracts described in
Exhibit "B"; and
(d) all telephone numbers, books, papers, files
and records pertaining to the Business, but not the
articles of organization, operating agreement,
membership interest transfer records, minutes of
meetings or other organizational records of SRGS.
"Closing" means the closing of the purchase, assignment and sale of the
Assets contemplated hereunder.
"Closing Date" means the time and date on which the Closing takes
place, as established by Section 6.01.
"Encumbrances" means perfected security interest held by 4\10 and any
other mortgage, pledge, lien, claim, security interest, agreement, restriction,
defect in title, easement, encumbrance or charge held by 4\10.
"Consideration" shall have the meaning specified in Section 2.02.
2. Sale and Purchase of Assets; Consideration; Release of Encumbrance.
2.01 Asset Sale. On the basis of the representations, warranties
and agreements contained herein, and subject to the terms and
conditions hereof, SRGS agrees to sell, assign, transfer, convey and
deliver to PGPC, and PGPC agrees to purchase from SRGS, the Assets at
the Closing.
Prior to the Closing Date, SRGS agrees to obtain title to an account receivable
owed by PGPC to 4\10 in the amount of $10,200. SRGS agrees to cancel such
obligation on the Closing Date. The cancellation of the obligation shall be
evidenced by the execution of the instrument attached as Exhibit "F" to this
agreement.
2.02 Consideration. For and in consideration of the conveyances and
assignments described herein, PGPC agrees to pay to SRGS, and SRGS
agrees to accept from PGPC, the following consideration (the
"Consideration"): delivery of 160,000 shares of restricted common stock
of HYTK Industries, Inc., a Nevada corporation. Such shares shall be
issued in blank and with an assignment separate from certificate
executed by PGPC to SRGS.
2.03 Release of Encumbrances. At the Closing, SRGS agrees to
immediately convey 150,000 shares of restricted common stock of HYTK
Industries, Inc. to 4\10. Such conveyance shall be evidenced by an
assignment separate from certificate executed by SRGS to 4\10. At the
Closing, 4\10 agrees to release the Encumbrances by executing the lien
release and satisfaction of loan that is attached as Exhibit "D" to
this agreement and by executing two Forms UCC-2, release of security
interest, that are attached as Exhibit "E". As additional consideration
for the conveyance of the HYTK common stock, 4\10 agrees to assign to
SRGS all of 4\10's right, title and interest in an account receivable
from PGPC to 4\10 in the amount of $10,200.
2.05 Assumption of Liabilities. PGPC shall not assume any
liabilities or obligations of SRGS, except for the following
obligation:
Promissory note: dated June 5, 1995 in the principal amount of
$45,098.53
Obligee: Bonanza Energy Corporation
Assignee: Quest Energy Service
Security Agreement: dated June 5, 1995 and grants security
interest in pipeline
Financing Statement: No. 2145804 filed June 8, 1995
The Closing shall be contingent upon Quest Energy Service consenting to the
assignment of the obligation by executing the consent attached as Exhibit "C".
2.06 Sale of Gas in Pipeline. The assignment of inventory shall
include all gas in the pipeline on the Closing
Date.
3. Representations and Warranties by SRGS. SRGS represents and
warrants to PGPC as follows:
3.01 Organization and Standing. SRGS is a limited liability company
that is duly organized under the laws of the State of Kansas. SRGS has
failed to timely file annual reports with the Kansas Secretary of
State. However, SRGS has not been liquidated or dissolved. Except for
such failure and except for the terms of the security agreement with
Bonanza Energy Corporation, the limited liability company has the full
and unrestricted power and authority to enter into and perform the
terms of this agreement and the transactions contemplated hereby.
3.02 Authorization. The execution, delivery and performance of this
agreement and of the agreements and instruments called for hereunder,
and the consummation of the transactions contemplated hereby and
thereby, have been duly and validly authorized by all necessary actions
of SRGS (none of which actions have been modified or rescinded and all
of which actions are in full force and effect). This agreement
constitutes a valid and binding agreement and obligation of SRGS,
enforceable in accordance with its terms.
3.03 Litigation: Compliance with Law. Except for the forfeiture of
the filing with the Kansas Secretary of State, there is no action,
suit, investigation, claim, arbitration or litigation pending or, so
far as SRGS knows, threatened against or involving SRGS, the Assets,
the Business and its operations. The Business is not being operated
under or subject to any order, judgment, decree or injunction of any
court, arbitrator or governmental authority. Except for the forfeiture
of the filing with the Kansas Secretary of State, SRGS has complied and
is in compliance in all material respects with all laws, ordinances,
regulations, awards, orders, judgments, decrees and injunctions
applicable to SRGS, to the Assets, to the Business and operations.
3.04 Assets; Consents. The Assets constitute all of the real and
personal property, both tangible and intangible, that are used, held
for use, or necessary for the Business and operations of the Business
as presently conducted. SRGS is the sole owner of and has good and
marketable title to all Assets free and clear of any liens or
encumbrances, except for the Encumbrances and except for the security
interest granted to Bonanza Energy Corporation. The obligation to
Bonanza Energy Corporation has been assigned to Quest Energy Service.
Subject to the terms of the Encumbrances and the security interest
granted to Bonanza Energy Corporation, the Assets are transferable by
SRGS's sole act and deed, and no consent on the part of any other
person is necessary to validate the transfer to PGPC.
3.05 Condition of Tangible Assets. All tangible Assets are in good
operating condition and repair, free of defects, and are suitable,
adequate and fit for the uses for which thy are intended or are being
used.
3.06 Disclosure. All facts of material importance to the Assets and
to the Business have been fully and truthfully disclosed to PGPC. No
representation or warranty by SRGS and no document or exhibit to be
furnished or delivered to PGPC pursuant to this agreement, contains or
will contain any material untrue or misleading statement of fact or
omits or will omit any fact necessary to make the statements contained
therein not materially misleading.
4. Representations and Warranties by PGPC. PGPC represents, warrants
and covenants to SRGS as follows:
4.01 Organization and Standing. PGPC is a corporation duly
organized, validly existing, and in good standing under the laws of the
State of Kansas. PGPC has the requisite corporate power and corporate
authority to enter into and perform the terms of this agreement and to
carry out the transactions contemplated hereby.
4.02 Authorization. The execution, delivery and performance of this
agreement and of the agreements and instruments called for hereunder,
and the consummation of the transactions contemplated hereby and by
such agreements and instruments, have been duly and validly authorized
by all necessary actions of PGPC (none of which actions have been
modified or rescinded and all of which actions are in full force and
effect). This agreement constitutes, and upon execution and delivery
each such agreement and instrument will constitute, a valid and binding
agreement and obligation of PGPC, enforceable in accordance with its
respective terms.
5. Representations and Warranties by 4\10. 4\10 represents, warrants
and covenants to PGPC as follows:
5.01 Organization and Standing. 4\10 is a Kansas corporation that
has the requisite corporate power and corporate authority to enter into
and perform the terms of this agreement and to carry out the
transactions contemplated hereby.
5.02 Authorization. The execution, delivery and performance of this
agreement and of the agreements and instruments called for hereunder,
and the consummation of the transactions contemplated hereby and by
such agreements and instruments, have been duly and validly authorized
by all necessary actions of 4\10 (none of which actions have been
modified or rescinded and all of which actions are in full force and
effect). This agreement constitutes, and upon execution and delivery
each such agreement and instrument will constitute, a valid and binding
agreement and obligation of PGPC, enforceable in accordance with its
respective terms. 5.03 Release of Encumbrance. If, at any time after
the Closing, PGPC requests any additional evidence of the release of
the Encumbrances, 4\10 shall promptly provide such evidence to PGPC.
6. The Closing.
6.01 Closing. Unless otherwise agreed by the parties hereto, the
Closing hereunder shall be held on May 1, 1999. The assignment and
delivery of assets shall be effective at 12:01 a.m. on May 1, 1999.
6.02 Deliveries by SRGS. At or before the Closing, SRGS shall
deliver to PGPC:
6.02(a) Transfer Documents. Bills of sale and assignments, dated as of
the Closing Date, in form sufficient to transfer and convey title to
the Assets to PGPC.
6.02(b) Release of Encumbrance. A duly executed release and
satisfaction of the Encumbrances by 4/10, a duly executed Form UCC-2
evidencing release of the 4/10 security interest, and a duly executed
consent by Quest Energy Service. 6.02(c) Corporate Resolutions. Copies
of the resolutions of members of SRGS, certified as of the Closing Date
as being correct and complete and then in full force and effect,
authorizing the execution, delivery and performance of this agreement.
6.03 Deliveries by PGPC. At or before the Closing, PGPC shall
deliver to SRGS:
6.03(a) Consideration. PGPC shall deliver, in consideration of SRGS
entering this transaction, a certificate issued in blank for 160,000
shares of restricted common stock of HYTK Industries, Inc. Such
conveyance shall be evidenced by an assignment separate from
certificate executed by PGPC to SRGS.
6.03(b) Resolutions. Copies of the resolutions of the directors of
PGPC, certified as being correct and complete and then in full force
and effect, authorizing the execution, delivery and performance of this
agreement.
6.04 Deliveries by 4\10. At or before the Closing, 4\10 shall
deliver to PGPC:
6.04(a) Release of Encumbrance. A duly executed release and
satisfaction of the Encumbrances and a duly executed Form UCC-2
releasing the security interest.
6.04(b) Corporate Resolutions. Copies of the resolutions of the
directors of 4\10, certified as being correct and complete and then in
full force and effect, authorizing the execution, delivery and
performance of this agreement
7. Risk of Loss. The risk of loss or damage by fire or other casualty
or cause to the Assets until the Closing Date shall be upon SRGS.
8. Survival; Indemnification.
8.01 Survival of Representations. Except as otherwise specified,
the representations, warranties, covenants and agreements made by SRGS,
PGPC, and 4\10 in this agreement or pursuant hereto shall survive the
Closing Date for a period of one year.
8.02 Indemnification. Each party agrees to indemnify, defend and
hold harmless the other parties from and against any and all demands,
claims, complaints, actions or causes of action, suits, proceedings,
investigations, arbitrations, assessments, losses, damages,
liabilities, costs and expenses, including, but not limited to,
interest, penalties and attorneys' fees and disbursements asserted
against, imposed upon or incurred by such other parties, directly or
indirectly, by reason of or resulting from (a) any liability or
obligation of or claim against the indemnifying party (whether
absolute, accrued, contingent or otherwise and whether a contractual,
tax or any other type of liability or obligation or claim) not
expressly assumed, arising out of, relating to, or resulting from the
Assets or the Encumbrance during the period prior to the Closing Date;
(b) any misrepresentations and warranties of contained in or made
pursuant to this agreement; or (c) any noncompliance with any
covenants, agreements or undertakings contained in or made pursuant to
this agreement.
8.03 Conditions of Indemnification. The obligations and liabilities
of the parties with respect to their respective indemnities pursuant to
this Section 8, resulting from any claim or other assertion of
liability by third parties (hereinafter called collectively, "Claims"),
shall be subject to the following terms and conditions:
8.03(a) The party seeking indemnification (the "Indemnified Party")
must give the other party or parties, as the case may be (the
"Indemnifying Party"), notice of any such Claim promptly after the
Indemnified Party receives notice thereof.
8.03(b) The Indemnifying Party shall have the right to undertake, by
counsel or other representatives of its own choosing, the defense of
such claim.
8.03(c) In the event that the Indemnifying Party shall elect not to
undertake such defense or, within a reasonable time after notice of any
such Claim from the Indemnified Party, shall fail to defend, the
Indemnified Party (upon further written notice to the Indemnified
Party) shall have the right to undertake the defense, compromise or
settlement of such Claim, by counsel or other representatives of its
own choosing, on behalf of and for the account and risk of the
Indemnifying Party (subject to the right of the Indemnifying Party to
assume defense of such Claim at any time prior to settlement,
compromise or final determination thereof).
8.03(d) Anything in this Section 8 to the contrary notwithstanding,
(i) if there is reasonable probability that a Claim may materially and
adversely affect the Indemnified Party other than as a result of money
damages or other money payments, the Indemnified Party shall have the
right, at its own cost and expense, to participate in the defense,
compromise or settlement of the Claim; (ii) the Indemnifying Party
shall not, without the Indemnified Party's written consent, settle or
compromise any Claim or consent to entry of any judgment that does not
include as an unconditional term thereof the giving by the claimant or
the plaintiff to the Indemnified Party of a release from all liability
in respect of such Claim; and (iii) in the event that the Indemnifying
Party undertakes defense of any Claim, the Indemnified Party, by
counsel or other representative of its own choosing and at its sole
cost and expense, shall have the right to consult with the Indemnifying
Party and its counsel or other representatives concerning such Claim,
and the Indemnifying Party and the Indemnified Party and their
representative counsel or other representatives shall cooperate with
respect to such Claim.
9. Specific Performance. SRGS and 4\10 acknowledges that the Assets to
be sold and delivered to PGPC pursuant to this agreement are unique and that
PGPC has no adequate remedy at law if SRGS and 4\10 shall fail to perform any of
their obligations hereunder. SRGS and 4\10 therefore confirm and agree that
PGPC's right to specific performance is essential to protect the rights and
interests of PGPC. Accordingly, in addition to any other remedies that PGPC may
have hereunder or at law or in equity or otherwise, SRGS and 4\10 hereby agree
that PGPC shall have the right to have all obligations, undertakings, agreements
and other provisions of this agreement specifically performed by SRGS and 4\10.
In addition, PGPC shall have the right to obtain an order or decree of such
specific performance in any of the courts of the United States or of any state
or other political subdivision thereof.
10. Additional Actions and Documents. Each of the parties hereto agrees
that it will, at any time prior to, at, or after the Closing Date, take or cause
to be taken such further actions, and execute, deliver and file, or cause to be
executed, delivered and filed, such further documents and instruments as may be
necessary or reasonably requested in connection with the consummation of the
transactions contemplated hereby in order to fully effectuate the purposes,
terms and conditions of this agreement.
11. Expenses. Each party hereto shall pay its own expenses incurred in
connection with this agreement and in the preparation for and consummation of
the transactions provided for herein.
12. Notices. All notices, demands, requests or other complications that
may be or are required to be given or made by a party to any other party
pursuant to this agreement shall be in writing and shall be mailed by
first-class mail (registered or certified, return receipt requested, postage
prepaid), transmitted by telegram or telex, express delivery service,
hand-delivered, addressed as follows:
(i) If to PGPC: Ponderosa Gas Pipeline Company, Inc.
P. O. Xxx 000
Xxxxxxxx, Xxxxxx 00000
(ii) If to SRGS: Xxxxxxxxx Energy Corporation
P. X. Xxx 000
Xxxxxxxx, Xxxxxx 00000
(iii) If to 4\10: 4\10 Energy Fund, Inc.
P. O. Xxx 000
Xxxxxxxx, Xxxxxx 00000
13. Waiver. No delay or failure on the part of any party hereto in
exercising any right, power or privilege under this agreement, or under any
other instrument or document given in connection with or pursuant to this
agreement, shall impair any such right, power or privilege or be construed as a
waiver of any default or any acquiescence therein. No single or partial exercise
of any such right, power or privilege shall preclude the further exercise of
such right, power or privilege, or the exercise of any other right, power or
privilege. No other actions taken or failed to be taken by any party, including,
without limitation, any investigation or inspection by or on behalf of such
party, shall be deemed to constitute a waiver, extension or acknowledgment by
such party of compliance with any representation, warranty, condition, agreement
or indemnification set forth in this agreement. No waiver shall be valid against
any party hereto unless made in writing and signed by the party against whom
enforcement of such waiver is sought, and then only to the extent expressly
specified therein.
14. Benefit and Assignment. Except as hereinafter specifically provided
in this Section 14, no party hereto shall assign this agreement, in whole or in
part, whether by operation of law or otherwise, without the prior written
consent of SRGS (if the assignor is PGPC) or PGPC (if the assignor is SRGS), and
any purported assignment contrary to the terms hereof shall be null, void and of
no force and effect.
This agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns as permitted
hereunder. No person or entity other than the parties hereto is or shall be
entitled to bring any action to enforce any provision of this agreement against
any of the parties hereto, and the covenants and agreements set forth in this
agreement shall be solely for the benefit of, and shall be enforceable only by,
the parties hereto or their respective successors and assigns as permitted
hereunder.
15. Entire agreement; Amendment. This agreement, including the
Schedules and Exhibits hereto and other instruments and documents referred to
herein or delivered pursuant hereto, contains the entire agreement among the
parties with respect to the subject matter hereof and supersedes all prior oral
or written agreements, commitments or understandings with respect to such
matters. No amendment, modification or discharge of this agreement shall be
valid or binding unless set forth in writing and duly executed by the party
against whom enforcement of the amendment, modification or discharge is sought.
16. Severability. If any part of any provision of this agreement or any
other agreement, document or writing given pursuant to or in connection with
this agreement shall be invalid or unenforceable under applicable law, such part
shall be effective to the extent of such invalidity or unenforceability only,
without in any way affecting the remaining parts of such provisions or the
remaining provisions of said agreement.
17. Headings. The headings of the sections and subsections contained in
this agreement are inserted for convenience only and do not form a part or
affect the meaning, construction or scope thereof.
18. Governing Law. This agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto, shall be governed
by and construed under and in accordance with the laws of the State of Kansas,
excluding the choice of law rules thereof.
19. Signature in Counterparts. This agreement may be executed in
separate counterparts, none of which need contain the signatures of all parties,
each of which shall be deemed to be an original, and all of which together
constitute one and the same instrument. It shall not be necessary in making
proof of this agreement to produce or account for more than the number of
counterparts containing the respective signatures of, or on behalf of, all the
parties hereto.
IN WITNESS WHEREOF, each of the parties hereto has executed this
agreement, or has caused this agreement to be duly executed and delivered in its
name on its behalf, all as of the day and year first above written.
"SRGS"
SHOTGUN RIDGE GAS SYSTEM, L.C.
By: Xxxxxxxxx Energy Corporation, Member
By: /s/ Xxxxxxx X. Xxxx
-------------------------------------
Xxxxxxx X. Xxxx, President
By: Ponderosa Gas Pipeline Company, Inc., Member
By: /s/ Xxxxxxx X. Xxxx
-------------------------------------
Xxxxxxx X. Xxxx, President
"PGPC"
PONDEROSA GAS PIPELINE COMPANY, INC.
By: /s/ Xxxxxxx X. Xxxx
-------------------------------------
Xxxxxxx X. Xxxx, President
"4\10"
4\10 ENERGY FUND, INC.
By: /s/ Xxxxxxx X. Xxxx
-------------------------------------
Xxxxxxx X. Xxxx, President
Consent to Sale and to Assignment of Note and Security Interest
BONANZA ENERGY CORPORATION
By: /s/ Xxxxxxx X. Xxxx
----------------------------------
Xxxxxxx X. Xxxx, President
