EXHIBIT 2.1
PURCHASE AND SALE AGREEMENT DATED DECEMBER 29, 2006
POWDER RIVER BASIN PROPERTIES
SHERIDAN, JOHNSON, CONVERSE AND ▇▇▇▇▇▇▇▇ COUNTIES, WYOMING, AND BIG HORN,
CUSTER, POWDER RIVER AND ROSEBUD COUNTIES, MONTANA
PURCHASE AND SALE AGREEMENT
Between
DOLPHIN ENERGY CORPORATION, and
GALAXY ENERGY CORPORATION
and
PETROHUNTER OPERATING COMPANY, and
PETROHUNTER ENERGY CORPORATION
December 29, 2006
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TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS..........................................................1
ARTICLE 2 SALE AND TRANSFER OF THE PROPERTY....................................2
2.1 Sale and Purchase.................................................2
2.2 Purchase Price....................................................3
2.3 Deposit...........................................................3
2.4 Operatorship......................................................4
2.5 Escrowed Funds....................................................4
2.6 Adjustments to Purchase Price.....................................4
2.7 Closing...........................................................4
2.8 Effective Time....................................................4
2.9 Form of Assignment................................................4
ARTICLE 3 TITLE AND INSPECTION.................................................5
3.1 Inspection of Files...............................................5
3.2 Adverse Condition.................................................5
3.3 Title.............................................................5
3.4 Files and Records.................................................5
ARTICLE 4 ACCOUNTING...........................................................6
4.1 Continued Accounting Services.....................................6
4.2 Ownership of Production...........................................6
4.3 Proration of Taxes................................................6
4.4 Letters-in-Lieu...................................................6
4.5 Continued Operations and Costs....................................6
4.6 Prepaids..........................................................7
4.7 Suspended Funds...................................................7
4.8 Revenues and Expenses.............................................7
4.9 Estimated and Final Accounting....................................7
4.10 Audits............................................................7
ARTICLE 5 ASSUMPTION OF OBLIGATIONS............................................7
5.1 Indemnities.......................................................7
5.2 Buyer's Assumption of Obligations.................................8
5.3 Notice of Claims..................................................8
ARTICLE 6 REPRESENTATIONS AND WARRANTIES.......................................9
6.1 Seller's Representations and Warranties...........................9
6.2 Representations and Warranties of Buyer..........................10
6.3 Representations and Warranties at Closing........................10
ARTICLE 7 ADDITIONAL AGREEMENTS AND COVENANTS.................................10
7.1 Covenants of Seller..............................................10
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ARTICLE 8 CONDITIONS PRECEDENT TO CLOSING.....................................11
8.1 Conditions Precedent to Seller's Obligation to Close.............11
8.2 Conditions Precedent to Buyer's Obligation to Close..............12
ARTICLE 9 MISCELLANEOUS.......................................................13
9.1 Notices..........................................................13
9.2 Conveyance Costs.................................................13
9.3 Broker's Fees....................................................13
9.4 Further Assurance................................................14
9.5 Survival of Representations and Warranties.......................14
9.6 Amendments and Severability......................................14
9.7 Successor and Assigns............................................14
9.8 Headings.........................................................14
9.9 Notices After Closing............................................14
9.10 Governing Law....................................................14
9.11 No Partnership Created...........................................14
9.12 Confidentiality..................................................14
9.13 Public Announcements.............................................15
9.14 Counterparts.....................................................15
9.15 Entire Agreement.................................................15
Exhibits
A Lease Schedule
B Well List
C Form of Assignment and ▇▇▇▇ of Sale
D Secured Promissory Note
E Subordination Agreement
F Registration Rights Agreement
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PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT is dated this 29th day of December,
2006, by and between Galaxy Energy Corporation ("Galaxy"), Dolphin Energy
Corporation (hereinafter jointly referred to as "Seller" or "Party") and
PetroHunter Operating Company ("Buyer" or "Party"), and PetroHunter Energy
Corporation, and is based on the following premises:
WHEREAS, Seller desires to sell, assign, and convey to Buyer and Buyer
desires to purchase and accept all of Seller's interests in its oil and gas
properties in the Powder River Basin, and
WHEREAS, the Parties have reached agreement regarding such purchase and
sale,
NOW, THEREFORE, for valuable consideration and the mutual covenants and
agreements herein contained, Seller and Buyer agree as follows:
ARTICLE 1
DEFINITIONS
1.1 "CLAIMS" has the meaning set forth in Section 5.1.
1.2 "CLOSING" has the meaning set forth in Section 0.
1.3 "CLOSING DATE" has the meaning set forth in Section 0.
1.4 "CONTRACTS" has the meaning set forth in Section 2.1(e).
1.5 "DEDUCTIONS" has the meaning set forth in Section 4.3.
1.6 "EFFECTIVE TIME" has the meaning set forth in Section 0.
1.7 "ENVIRONMENTAL LAWS" means any and all Laws that relate to:
(a) the prevention of pollution or environmental damage, (b) the remediation of
pollution or environmental damage, and/or (c) the protection of the environment
generally; including without limitation, the Clean Air Act, as amended, the
Clean Water Act, as amended, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Federal Water Pollution
Control Act, as amended, the Resource Conservation and Recovery Act of 1976, as
amended, the Safe Drinking Water Act, as amended, the Toxic Substance and
Control Act, as amended, the Superfund Amendments and Reauthorization Act of
1986, as amended, the Hazardous and the Solid Waste Amendments Act of 1984, as
amended, and the Oil Pollution Act of 1990, as amended.
1.8 "FINAL ACCOUNTING SETTLEMENT" means a written post-Closing
statement prepared by Seller and delivered to Buyer setting forth a detailed
calculation of all post-Closing adjustments applicable to the period of time
between the Effective Time and Closing ("Final Accounting Settlement").
1.9 "FINANCING" means the series of private offerings of PetroHunter
Energy Corporation common shares which PetroHunter Energy Corporation is
currently pursuing.
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1.10 "LAND" has the meaning set forth in Section 2.1.
1.11 "LAWS" means any and all laws, statutes, ordinances, permits,
decrees, orders, judgments, rules or regulations (including without limitation
Environmental Laws) which are promulgated, issued or enacted by a governmental
entity or tribal authority having appropriate jurisdiction.
1.12 "LEASES" has the meaning set forth in Section 2.1.
1.13 "PROPERTIES" has the meaning set forth in Section 2.1.
1.14 "PURCHASE PRICE" has the meaning set forth in Section 2.2.
1.15 "RECORDS" means all of Seller's books, records, files (paper,
electronic or otherwise) related to the Properties, as further described in
Section 3.1.
1.16 "REGISTRATION RIGHTS AGREEMENT" means the agreement between
Buyer's parent company, PetroHunter Energy Corporation and certain third party
lenders to Seller and Seller's parent company, Galaxy Energy Corporation,
attached hereto as Exhibit F.
1.17 "TAXES" has the meaning set forth in Section 4.3.
1.18 "▇▇▇▇▇" has the meaning set forth in Section 2.1.
ARTICLE 2
SALE AND TRANSFER OF THE PROPERTY
2.1 SALE AND PURCHASE: Upon the terms and conditions hereinafter set
forth, Seller agrees to sell, assign, and convey to Buyer, and Buyer agrees to
buy and accept from Seller, all of Seller's right, title, and interest in and to
the following assets, free and clear of all liens and encumbrances, hereinafter
referred to as the "Properties:"
(a) The entire estates created by all leases, licenses, permits
and other agreements described in Exhibit A attached hereto and made a part
hereof (the "Leases"), insofar as the same cover and relate to the land
described in Exhibit A and any other land covered thereby whether or not
correctly described on Exhibit A (the "Land"), together with all of the oil and
gas ▇▇▇▇▇ on the Land, including, without limitation, the ▇▇▇▇▇ described in
Exhibit B (the "▇▇▇▇▇"), the property and rights incident thereto, including all
rights in, to and under all agreements, product purchase and sale contracts,
leases, permits, rights-of-way, easements, licenses, farmouts, options and
orders in any way relating thereto, insofar as they relate thereto;
(b) All of the personal property, fixtures and improvements,
permits, licenses, approvals, servitudes, rights-of-way, easements, surface
leases and other surface rights (including, but not limited to the ▇▇▇▇▇ listed
on Exhibit B, wellhead equipment, casing, tubing, tanks, crude oil, condensate
or products in storage or in pipelines, pumps, motors, machinery, pipelines,
gathering lines, telephone and telegraph lines, tanks, boilers, buildings,
injection and disposal ▇▇▇▇▇, injection facilities, saltwater disposal
facilities, central processing facilities, metering facilities, compression
facilities, gathering systems, laterals and other appurtenances and facilities)
now or as of the Effective Time on the Land, appurtenant thereto or used
exclusively or obtained in connection therewith or with the production,
gathering, treatment,
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processing, sale or disposal of oil, gas and other hydrocarbons and
non-hydrocarbon gas from the Land (including, without limitation, carbon
dioxide) or water produced therefrom or attributable thereto;
(c) Any overriding royalty interests and fee mineral or fee
surface interests described in Exhibit A;
(d) All existing and effective unitization, pooling and
communitization agreements, declarations and orders, and the properties covered
and the units created thereby and the production of hydrocarbons attributable to
said properties and interests after the Effective Time, insofar as the same
arise from or relate to the interests of Seller described in "(a)," "(b)" or
"(c)" above;
(e) All oil, gas (including carbon dioxide), liquids,
condensate, casinghead gas and gas sales, purchase, exchange, gathering,
transportation and processing contracts, operating agreements, balancing
agreements, joint venture agreements, partnership agreements, farmout agreements
and other contracts, agreements and instruments, insofar as they relate to any
of the properties and interests of Seller described in "(a)," "(b)," "(c)" or
"(d)" above (the "Contracts"); and
(f) To the extent transferable, all geologic, geophysical and
other data (but not internal interpretative data and analyses), including
without limitation, seismic data and licenses relating to the properties and
interests described in "(a)," "(b)," and "(c)" above.
2.2 PURCHASE PRICE: Subject to the other provisions of this
Agreement, the total purchase price to be paid to Seller for the Property by
Buyer shall be Forty-Five Million Dollars ($45,000,000) (the "Purchase Price"),
payable at Closing as follows:
(a) Twenty Million Dollars (US$20,000,000.00) in cash
consideration, in the form of certified funds, cashier's check or by wire
transfer to an account number to be designated by Seller at least two business
days prior to the Closing; and
(b) Twenty-five Million Dollars (US$25,000,000) in the form of
common shares of PetroHunter Energy Corporation. The number of such shares
payable to the Seller at Closing shall be $1.50 (US), which is the price of said
shares as placed in the Financing.
2.3 DEPOSIT: Within ten (10) business days after the date of this
Agreement, Buyer shall deposit One Million Four Hundred Thousand Dollars
($1,400,000) in an account designated by Seller, as ▇▇▇▇▇▇▇ money, which shall
be applied to the Purchase Price at Closing. By January 31, 2007 (unless Closing
has taken place prior thereto), Buyer shall deposit Six Hundred Thousand Dollars
($600,000) in an account designated by Seller, as ▇▇▇▇▇▇▇ money, which shall be
applied to the Purchase Price at Closing. Both deposits are collectively
referred to herein as the "Deposit". In the event the Closing does not occur for
any reason other than a material breach by Buyer, then: (a) Galaxy Energy
Corporation shall execute the Promissory Note (the Note"), attached hereto,
which shall be dated and become effective as of the date of termination of this
Agreement, and shall deliver the original executed Note to PetroHunter Energy
Corporation within two business days after the termination of this Agreement;
(b) PetroHunter Energy Corporation shall sign the Subordination Agreement; and
(c) Galaxy shall have sole responsibility for obtaining the signatures of all
parties to the Subordination Agreement (other than the signature of PetroHunter
Energy Corporation), and shall provide a fully-executed original to PetroHunter
Energy Corporation. Any Party may
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terminate this Agreement, effective upon written notice to the other Parties, if
the Closing has not occurred by February 28, 2007. The actual amount of the
Deposit shall be stated in the Note.
2.4 OPERATORSHIP: Beginning at the Effective Time, Buyer will assume
operatorship of the Property, in the capacity of a contract operator, and will
assume responsibility for all of Seller's costs and expenses related to
operation of the Properties, provided that Buyer, as operator, will incur no
expenses for any individual item in excess of Ten Thousand Dollars ($10,000.00)
without obtaining the prior approval of Seller. At Closing, all operating
expenses incurred by Buyer will be credited against the Purchase Price at
Closing in accordance with Sections 4.5 and 4.8, below. In the event Closing
does not occur for any reason, the aggregate amount of any operating expenses
actually incurred by Buyer (and supported by reasonable back-up documentation)
shall be added to the principal amount of the Note referenced in Section 2.3,
above, and shall be repayable in accordance with its terms.
2.5 ESCROWED FUNDS: At the time of Closing, $500,000 of the Purchase
Price (the "Escrowed Funds") shall be retained by Buyer in a separate account
controlled by Buyer up to the time that: (a) the Registration Rights Agreement
is terminated as a result of Buyer's parent company, PetroHunter Energy
Corporation and the other parties to such agreement having fully performed all
their respective obligations under such agreement; (b) Buyer's determination, in
Buyer's sole discretion, that there is no reasonable possibility of any material
claim being made by one or more of said other parties against PetroHunter; and
(c) Seller having paid all amounts due to Buyer for costs, penalties, damages
and other expenses related to the Registration Rights Agreement, as referenced
in Sections 2.6 and 5.1(a)(i), below. Upon satisfaction of such conditions,
Buyer shall promptly pay the remaining Escrowed Funds, if any, to an account
designated by Seller.
2.6 ADJUSTMENTS TO PURCHASE PRICE: The Purchase Price shall be
subject to adjustment at the Closing pursuant to Sections 3.3, 4.5 through 4.9,
and 5.1(a)(i). In the event of an adjustment of the Purchase Price at Closing,
any such adjustment shall be applied first to the consideration to be paid
pursuant to Section 2.2(a). Buyer may provide to Seller a notice and schedule at
Closing or at any time thereafter (with appropriate backup documentation)
setting forth all costs and expenses incurred by Buyer in connection with the
Registration Rights Agreement (as more fully described in Section 5.1(a)(i)), in
which case such amount shall be credited against the Purchase Price, or if
incurred after Closing shall be paid to Buyer out of the Escrowed Funds or if
the Escrowed Funds have been fully applied, shall be paid directly to Buyer
within ten business days after Seller's receipt of such notice.
2.7 CLOSING: The Closing shall take place on a mutually agreeable
date on or before forty-five days from the date of this Agreement (with the
actual date of Closing being the "Closing Date"). The Closing will be held at
10:00 a.m., at the offices of Buyer at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇.
2.8 EFFECTIVE TIME: The effective time of this purchase and sale of
the Property will be at 7:00 a.m., Mountain Standard Time on January 1, 2007
(the "Effective Time").
2.9 FORM OF ASSIGNMENT: At Closing, Seller shall deliver executed
and acknowledged conveyance documents to Buyer in substantially the form and
content shown in the Assignment and ▇▇▇▇ of Sale attached as Exhibit C (the
"Assignment") to be modified only to the extent necessary to comply with the
provisions of this Agreement, together with all forms necessary to convey
Seller's interest in federal and state leases.
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ARTICLE 3
TITLE AND INSPECTION
3.1 INSPECTION OF FILES: Upon reasonable notice from Buyer, Seller
shall make available during Seller's regular business hours at Seller's offices,
for examination and reproduction by Buyer's authorized representatives, at
Buyer's expense, all documents in Seller's possession relating or in any way
pertaining to the Property, except any documents which are covered by
non-disclosure obligations to third parties. Without limiting the foregoing,
such documents shall expressly include contracts, agreements, revenue and
expense records, suspense account records, division order files, well files,
land and lease files, title opinions, environmental permits, environmental
reports, environmental audits and environmental regulatory notifications
(including SPCC plans and CERCLA Title III notices) (the "Records"). Buyer shall
have the right to copy, at Buyer's sole expense, any portion of the Records.
3.2 ADVERSE CONDITION: If a contract or condition exists that has
a material adverse effect on the value or operation of the Property or that
would subject Buyer to unacceptable costs or potential liability, Buyer may
elect to exclude the affected interest from the conveyance, and the Purchase
Price shall be adjusted by the amount agreed to by the Parties. Within ten (10)
days after the date of this Agreement, Seller shall provide a written status
report to Buyer (the "▇▇▇▇▇▇ Report") which describes the current status of
Seller's leasehold interest in approximately 2,120 acres in the Ucross area and
1,532 acres in the ▇▇▇▇▇▇ townsite, including without limitation copies of any
extensions of, or agreements related to, such leases, a schedule of shut-in
payments that are due within six months after the Closing Date (on a
well-by-well basis), and a description of the status of Seller's dewatering
activities related to the ▇▇▇▇▇ located on or pooled or communitized with such
leases.
3.3 TITLE: Title defects shall refer to those defects or
irregularities that (a) would cause Buyer to receive less than the net revenue
interest set forth on Exhibit A; (b) would obligate Buyer to bear costs and
expenses in an amount greater than Seller's undivided working interest set forth
on Exhibit A without a corresponding increase in the net revenue interest; or
(c) create a lien or encumbrance on any portion of the Property. Title defect
shall not refer to such defects or irregularities in the title to the Properties
that do not interfere with the operation, value or use of the Properties (or
portion thereof) affected thereby and that would not be considered material in
accordance with the industry standards. As soon as is reasonably practicable,
but in no event later than five business days prior to Closing, Buyer shall
provide Seller with a notice of title defects stating its objections, if any, to
the title. Seller may undertake to satisfy some, all, or none of Buyer's title
objections, at Seller's sole cost and expense. If any such title defect cannot
be or is not cured by Seller within twenty (20) days of Seller's receipt of such
notice, then unless such defect is waived by Buyer the affected interest shall
be retained by Seller and the allocated value set forth in Exhibit A for the
affected interest shall be reduced in the proportion that the actual net revenue
interest or the actual working interest bears to that which is set forth in
Exhibit A, and that amount shall be deducted from the Purchase Price. Buyer
shall have the right to terminate this Agreement if title defects asserted by it
affect more than fifteen percent (15%) of the total Purchase Price.
3.4 FILES AND RECORDS: At Closing or as soon thereafter as
practicable, and at Seller's expense, Seller shall furnish to Buyer all Records,
except those merely incidental thereto, any economic analyses of the value of
the Property, and any information covered by non-disclosure obligations.
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ARTICLE 4
ACCOUNTING
4.1 CONTINUED ACCOUNTING SERVICES: Notwithstanding Section 2.4 or
any other provision of this Agreement, Seller agrees to perform for Buyer, at
Buyer's request and sole expense, all record keeping and accounting services of
the nature and quality normally performed by Seller for the production period
from the date of this Agreement for a period not to exceed six (6) months from
the Closing Date. Buyer shall reimburse Seller for all such services within
thirty (30) days after Buyer's receipt of Seller's monthly invoice. These
services shall be as follows:
(a) Provide accounting personnel, data processing services,
and such other services as required to maintain the same level of record keeping
and accounting with respect to the Property as maintained prior to the Effective
Time;
(b) Provide information as may reasonably be required by Buyer's
personnel to facilitate the orderly transition of accounting services;
(c) Provide information sufficient to enable Buyer to record
liquids revenue, gas revenue, operating expenses, capital expenditure and such
other accounting transactions on the basis maintained by Seller; and
(d) File all federal, state and other regulatory filings on the
same basis as prior to the Effective Time.
4.2 OWNERSHIP OF PRODUCTION: Ownership of all production and
products attributable to the Property shall pass to Buyer as of the Effective
Time.
4.3 PRORATION OF TAXES: All taxes, including, but not limited to,
excise taxes, state severance taxes, ad valorem taxes, and any other local,
state and/or federal taxes or assessments attributable to the Property ("Taxes")
prior to the Effective Time shall remain Seller's responsibility, and all
deductions, credits, and refunds pertaining to the aforementioned taxes
attributable to the Property ("Deductions") prior to the Effective Time, no
matter when received, shall belong to Seller. All Taxes attributable to the
Property after the Effective Time, shall be Buyer's responsibility, and all
Deductions pertaining to the Property after the Effective Time, no matter when
received, shall belong to Buyer. The Parties' respective responsibility for ad
valorem Taxes shall be allocated based upon the number of days a Party owned the
Properties in the subject tax year, and shall not be based on the year in which
production occurs.
4.4 LETTERS-IN-LIEU: At Closing, the Parties shall execute all
documents necessary to effect change of ownership, such as letters-in-lieu of
division orders or transfer orders to each purchaser of production for the
Property, instructing each to make payments for all purchases accruing after the
end of the month in which Closing occurs directly to Buyer.
4.5 CONTINUED OPERATIONS AND COSTS: All costs and expenses incurred
by Seller, pursuant to the provisions hereof or with Buyer's written consent,
for normal and necessary operation of the Property, including charges for
administrative overhead associated with joint interest properties, that accrue
after the Effective Time and including the Closing shall be borne by Buyer and
shall constitute an adjustment to the Purchase Price. All costs and expenses
incurred by Seller, pursuant to the provisions hereof or with Buyer's written
consent, for normal
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and necessary operation of the Property, including charges for administrative
overhead associated with joint interest properties, that accrue after the
Closing shall be borne by Buyer and shall be for the account of the Seller as
settled in the Final Accounting Settlement.
4.6 PREPAIDS: Prepaid insurance premiums, utility charges, rentals
and any other prepaids or accrued payables applicable to periods following the
Effective Time, if any, attributable to the Properties shall be prorated as of
the Effective Time, and amounts owing from such proration shall be settled in
the Final Accounting Settlement.
4.7 SUSPENDED FUNDS: Seller shall transfer to Buyer all funds, if
any, held by Seller in suspense owing to third parties on account of production
from the Properties and in such event Buyer shall assume responsibility for the
payment thereof to third parties entitled to the same.
4.8 REVENUES AND EXPENSES: Buyer shall pay Seller all revenues
received after the Closing, insofar as such revenues are attributable to oil,
gas or other hydrocarbon products produced prior to the Effective Time. Seller
shall pay Buyer all revenues received after the Closing, insofar as such
revenues are attributable to oil, gas or other hydrocarbon products produced and
sold after the Effective Time. Such payment shall be made on the first day of
the month following receipt of such revenues. Each party indemnifies the other
for any costs or damages suffered as a result of a party failing to pay its
share of expenses (including taxes) or failing to remit revenues belonging to
the other party, allocated as of the Effective Time.
4.9 ESTIMATED AND FINAL ACCOUNTING: An estimated accounting for net
proceeds from production less applicable operating expenses will be made at or
shortly after the Closing. Final accounting will be made at such time as
complete Records are available, but no later than sixty (60) days after the
Closing. Provided, however, all provisions of this Agreement pertaining to
either Party's right to upward or downward adjustments to the Purchase Price
shall survive the Closing for a period of one year after the Closing Date.
Notwithstanding the final accounting, the Parties shall remain obligated to make
such adjustment at any time and from time to time during said one-year period,
within ten days after receipt of written notice supporting such adjustment.
4.10 AUDITS: In order to verify information provided by the Parties
under this Article 4, Buyer and Seller shall each have the right to conduct an
audit of the other Party's data relating thereto for a period of two (2) years
after the Closing Date.
ARTICLE 5
ASSUMPTION OF OBLIGATIONS
5.1 INDEMNITIES:
(a) INDEMNIFICATION OF BUYER: Seller shall release Buyer from
and shall fully protect, indemnify, and defend Buyer, its officers, agents
and/or employees and hold them harmless from any and all claims, losses,
damages, demands, suits, causes of action, and liabilities (including attorneys'
fees, costs of litigation and/or investigation and costs associated therewith)
(collectively referred to hereafter as "Claims") relating to, arising out of, or
connected, directly or indirectly, with the following:
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(i) the Registration Rights Agreement, and/or any other matter related to
Buyer's relationship with one or more of the third parties to the Registration
Rights Agreement, including without limitation any attorneys fees, penalties,
costs, damages, judgments, or other expenses of any nature directly or
indirectly related thereto; (ii) the ownership or operation of the Properties,
or any part thereof, pertaining to the period prior to the Closing Date,
whenever asserted, including but not limited to any Claims relating to injury or
death of any person or persons whomsoever, and/or damage to or loss of any
property or resource, and/or any pollution and/or environmental damage of any
kind, including without limitation (A) any liability under the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. ss.9601 ET
SEQ., or any other environmental statute, ordinance, law, rule or regulation, as
the same may be or have been amended, (B) common law claims such as negligence,
gross negligence, strict liability, nuisance or trespass, or (C) fault imposed
by statute, rule or regulation. The indemnity obligation provided herein shall
apply regardless of cause or of any negligent acts or omissions of Buyer, its
officers, agents, and/or employees.
(b) INDEMNIFICATION OF SELLER: Buyer shall release Seller from
and shall fully protect, indemnify, and defend Seller, its officers, agents
and/or employees and hold them harmless from any and all Claims relating to,
arising out of, or connected, directly or indirectly, with the ownership or
operation of the Properties, or any part thereof, pertaining to the period after
the Closing Date, including but not limited to any Claims relating to injury or
death of any person or persons whomsoever, and/or damage to or loss of any
property or resource, and/or any pollution and/or environmental damage of any
kind, including without limitation (i) any liability under the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. ss.9601 ET
SEQ., or any other environmental statute, ordinance, law, rule or regulation, as
the same may be or have been amended, (ii) common law claims such as negligence,
gross negligence, strict liability, nuisance or trespass, or (iii) fault imposed
by statute, rule or regulation. The indemnity obligation provided herein shall
apply regardless of cause or of any negligent acts or omissions of Seller, its
officers, agents, and/or employees; provided, however, that the indemnity
contained in this paragraph shall not relieve Seller of any liability or
responsibility arising from Seller's breach of any warranty or representation
contained in this Agreement.
5.2 BUYER'S ASSUMPTION OF OBLIGATIONS: Except as otherwise provided
herein, Buyer assumes and shall timely perform and discharge all duties and
obligations of the owner of the Properties relating to the period, and arising,
at and after the Effective Time, including, but not limited to: restoration of
the surface, environmental and pollution clean up, plugging and abandonment of
any and all existing and future ▇▇▇▇▇; and Seller shall incur no liability for
Buyer's failure to properly perform and discharge such duties and obligations.
5.3 NOTICE OF CLAIMS: Each indemnified Party hereunder agrees that
upon its discovery of facts giving rise to a Claim for indemnity under the
provisions of this Agreement, including, without limitation, receipt by it of
notice of any demand, assertion, action or proceeding, judicial or otherwise, by
any third party with respect to any matter to which it believes itself to be
entitled to indemnity under the provisions of this Agreement, it shall give
prompt notice thereof in writing to the indemnifying Party, together with a
statement of such information regarding any of the foregoing as it shall then
have. Such notice shall include a formal demand for indemnification under this
Agreement. The indemnified Party shall afford the indemnifying Party a
reasonable opportunity to pay, settle or contest the Claim at its expense.
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ARTICLE 6
REPRESENTATIONS AND WARRANTIES
6.1 SELLER'S REPRESENTATIONS AND WARRANTIES: Seller hereby represents
and warrants to Buyer that:
(a) ORGANIZATION AND AUTHORITY: Seller is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all requisite corporate power and
authority to own and lease the Properties and assets it currently owns and
leases and to carry on its business as such business is currently conducted.
Seller has all requisite corporate power and authority to execute and deliver
this Agreement, to consummate the transactions contemplated hereby and to
perform all the terms and conditions hereof to be performed by it;
(b) BOARD APPROVAL: Seller has obtained all approvals from
Seller's board of directors and Seller's parent corporation, Galaxy Energy
Corporation, which are necessary to enter into this Agreement;
(c) ABSENCE OF CERTAIN CHANGES: Since the execution of this
Agreement, there has not been: (i) Any damage, destruction or loss to or of the
Property, whether or not covered by insurance; (ii) Any sale, lease or other
disposition of the Property; (iii) Any mortgage, pledge or grant of a lien or
security interest in any of the Property; (iv) Any contract or commitment to do
any of the foregoing; or (v) Any equipment, facilities, material or other
personal property removed from the Property except for equipment which was
surplus to the operation of the Property;
(d) TAXES: All returns, statements and reports with respect to
Taxes based upon, measured by or imposed with respect to the ownership or
operation of the Property which are required to be filed on or before the
Closing have been (or will have been by the Closing) timely filed with the
appropriate governmental authority and all such taxes have been (or will have
been by the Closing) paid or deposited;
(e) COMPLIANCE WITH LAWS: The Property is being operated in
compliance with and Seller is not charged with a violation of, or to its
knowledge, threatened with a charge of a violation of, any Laws relating to the
Property;
(f) ENVIRONMENTAL MATTERS: Seller has received no notice, nor is
Seller aware of any pending or threatened claim alleging, or condition that
might give rise to, any potential liability (including without limitation,
potential liability for investigatory costs, cleanup costs, governmental
response costs, damage to the environment, property damages, personal injuries
or penalties) arising out of, based on or resulting from any violation or
alleged violation of any environmental Law or any common law theory of recovery;
(g) GAS MARKETING: None of the Properties is subject to any gas
purchase and sale agreements, gas transportation agreements, gas gathering
agreements or similar agreements not cancelable on thirty (30) days notice;
(h) IMBALANCES: There are no agreements, obligations or
imbalances under any operating agreement, prepayment arrangement, gas balancing
agreement, storage agreement or other similar agreement relating to the Property
that would reduce Buyer's share in current or future production proceeds from
the Property;
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(i) CONTRACTS: All Contracts pertaining to the Properties are
in full force and effect;
(j) PENDING OR THREATENED LITIGATION: There are no actions,
suits, claims, proceedings or investigations pending, threatened against or
affecting the Property, including without limitation claims or threats of claims
by one or more third parties owning joint interests in the Leases or pooled
areas comprising the Properties, alleging that Seller has materially breached
any obligation or violated any Law;
(k) LIENS AND ENCUMBRANCES: The Properties are being conveyed
to the Buyer free and clear of liens and encumbrances; and
(l) PREFERENTIAL RIGHTS: There are no preferential rights of
purchase applicable to the Properties.
6.2 REPRESENTATIONS AND WARRANTIES OF BUYER: Buyer hereby covenants,
represents and warrants to Seller as follows:
(a) ORGANIZATION AND AUTHORITY: Buyer has full power and
authority to make and perform this Agreement according to the terms hereof and
is a corporation duly organized, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation and is duly qualified to do
business in the state in which the Properties are located (or will be as of the
Closing Date);
(b) BOARD APPROVAL: Buyer has obtained all approvals from
Buyer's board of directors, and its parent company, PetroHunter Energy
Corporation, which are necessary to enter into this Agreement;
(c) OWN ACCOUNT: Buyer is acquiring the Property for its own
account, for use in its trade or business or for investment, and not with a view
toward or for sale in connection with any distribution thereof, nor with any
present intention of making a distribution thereof within the meaning of the
Securities Act of 1933; and
(d) BOND: Buyer currently has or shall prior to Closing post a
plugging bond sufficient to comply with all rules and regulations of the state
where the Properties are located, if any, pertaining to the plugging and
abandonment of any and all ▇▇▇▇▇ on the Property.
6.3 REPRESENTATIONS AND WARRANTIES AT CLOSING: The representations
and warranties of Buyer and Seller contained in this Agreement shall be true and
accurate on the Closing Date as though such representations and warranties were
made at and as of that time.
ARTICLE 7
ADDITIONAL AGREEMENTS AND COVENANTS
7.1 COVENANTS OF SELLER: Seller covenants and agrees with Buyer as
follows:
(a) CERTAIN COVENANTS WITH RESPECT TO THE PROPERTY: Seller
shall, from the date hereof to the Closing, unless otherwise consented to in
writing by Buyer;
(i) promptly notify Buyer of the receipt of any written
notice or written claim or written threat of notice or claim of which such
Seller becomes aware relating to any
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default or breach under, or of any termination or cancellation or written threat
of termination or cancellation of, any of the Properties or Contracts;
(ii) promptly notify Buyer of any loss of or damage to any
portion of the Property known to Seller and exceeding US$25,000 in amount; and
(iii) cause to be paid all rentals, shut-in royalties,
minimum royalties and other payments that are necessary to maintain in force its
rights in and to the Properties, and pay timely all costs and expenses incurred
by it in connection with the Properties, except such costs and expenses as are
being contested in good faith, in which case Seller shall provide a written
notice to Buyer describing the matter related to such contested costs and
expenses.
(b) ACCESS: Seller will afford to Buyer and its authorized
representatives, at Buyer's sole expense, risk and cost and upon reasonable
notice, reasonable access from the date hereof until the Closing, during normal
business hours, to the Property and to its personnel, properties, books and
records which are related to the Property which Seller is not prohibited from
disclosing by any existing confidentiality requirements with third parties.
(c) OPERATION: Subject to Section 2.4, above, from the date
hereof until Closing, Seller will operate the Properties in a reasonably prudent
manner in accordance with all applicable Laws and Contracts. Seller will not
take any action with respect to the Properties which would impair or encumber
the Properties or diminish the interest of Buyer therein.
ARTICLE 8
CONDITIONS PRECEDENT TO CLOSING
8.1 CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE: Seller
shall be obligated to consummate the sale of the Property as contemplated hereby
on the Closing Date, provided the following conditions precedent exist or have
been waived by Seller:
(a) All representations and warranties of Buyer contained in
this Agreement or in connection with any of the transactions contemplated hereby
shall be true and correct in all material respects at and as of Closing as
though such representations and warranties were made at and as of such time;
(b) Buyer is in compliance in all material respects with all
terms and conditions of this Agreement to be performed or complied with by Buyer
on or prior to the Closing Date;
(c) Seller has obtained all required regulatory approval for
this Agreement and the transactions contemplated hereunder;
(d) Seller has obtained written unconditional approval and
confirmation, in form acceptable to Buyer in its sole discretion, from Seller's
senior secured lender that the sale of the Property under the specific terms of
this Agreement is acceptable to said lender, and that the Properties will be
conveyed and assigned to Buyer free and clear of all liens and encumbrances;
(e) No suit, action, order or other proceedings shall be pending
or threatened before any court or governmental commission, board or agency in
which it is sought by a
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person or entity, to restrain, enjoin or otherwise prohibit the consummation of
the transactions contemplated by this Agreement, or to obtain substantial
damages in connection with this Agreement or the transactions contemplated
thereby, nor shall there be any investigation by any governmental agency pending
or threatened which might result in any such suit, action, order or other
proceedings seeking to restrain or prohibit consummation of the Agreement or the
transaction contemplated thereby;
The consummation of Closing on the Properties shall not be deemed to be a waiver
by the Seller of any of its rights or remedies hereunder for breach of warranty,
covenant, or agreement herein by the Buyer.
8.2 CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE: Buyer shall
be obligated to consummate the sale of the Property as contemplated by this
Agreement on the Closing Date, provided that the following conditions precedent
have been satisfied or have been waived by Buyer:
(a) All representations and warranties of Seller contained in
this Agreement or in connection with any of the transactions contemplated hereby
shall be true and correct in all material respects at and as of Closing as
though such representations and warranties were made at and as of such time;
(b) Seller is in compliance in all material respects with all
terms and conditions required by this Agreement to be performed or complied with
by Seller on or prior to the Closing Date;
(c) No suit, action, order or other proceedings shall be pending
or threatened before any court or governmental commission, board or agency in
which it is sought by a person or entity, to restrain, enjoin or otherwise
prohibit the consummation of the transactions contemplated by this Agreement, or
to obtain substantial damages in connection with this Agreement or the
transactions contemplated thereby, nor shall there be any investigation by any
governmental agency pending or threatened which might result in any such suit,
action, order or other proceedings seeking to restrain or prohibit consummation
of the Agreement or the transaction contemplated thereby;
(d) All consents and approvals, if any, of third parties or any
regulatory body or authority, whether required contractually or by applicable
federal, state, or local law, or otherwise necessary for the execution,
delivery, and performance of this Agreement (except for approvals of
governmental agencies customarily obtained subsequent to transfer of title, and
which have not been waived by Buyer) shall have been obtained and delivered to
Buyer by the Closing Date and shall not have been withdrawn or revoked;
(e) Buyer has obtained and closed the Financing in an amount and
on terms that Buyer determines, within its sole discretion, sufficient to fund
the Purchase Price, with Seller and Galaxy hereby expressly acknowledging that
such determination shall be within Buyer's sole discretion;
(f) Buyer's board of directors and PetroHunter Energy
Corporation's board of directors having approved (by written Resolution) Buyer
proceeding with the Closing, with such approval being within their sole
discretion;
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(g) Buyer has obtained all required regulatory approval for this
Agreement and the transactions contemplated hereunder;
(h) Buyer has received documentary evidence from Seller, in form
acceptable to Buyer in its sole discretion, that Seller has obtained all
required regulatory approval for this Agreement and the transactions
contemplated hereunder; and
(i) Buyer has received documentary evidence from Seller, in form
acceptable to Buyer in its sole discretion, that Seller has obtained approval of
the specific terms and conditions of this Agreement and the transactions
contemplated hereunder from the Seller's senior lender.
The consummation of Closing on the Properties shall not be deemed to be a waiver
by the Buyer of any of its rights or remedies hereunder for breach of warranty,
covenant, or agreement herein by the Seller.
ARTICLE 9
MISCELLANEOUS
9.1 NOTICES: All notices and other communications required,
permitted, or desired to be given hereunder must be in writing and sent by
registered or certified U.S. mail (return receipt requested), properly addressed
as shown below, and with all postage or charges fully prepaid or by hand
delivery or by facsimile transmission. Date of service by mail or hand delivery
is the date on which such notice or other communication is received by the
addressee, by facsimile is the date sent, or if such date is on a weekend or
federal or state holiday, then on the next date which is not Saturday, Sunday or
such holiday. Each Party may change its address by notifying the other Party in
writing.
If to Seller: If to Buyer:
Galaxy Energy Corporation PetroHunter Energy Corporation
Dolphin Energy Corporation PetroHunter Operating Company
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ 1875 ▇▇▇▇▇▇▇▇, Suite 1400
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, President Attn: ▇▇▇▇▇ ▇▇▇▇▇▇, President
Tel. (▇▇▇) ▇▇▇-▇▇▇▇ Tel. (▇▇▇) ▇▇▇-▇▇▇▇
Fax (▇▇▇) ▇▇▇-▇▇▇▇ Fax (▇▇▇) ▇▇▇-▇▇▇▇
9.2 CONVEYANCE COSTS: Buyer shall be solely responsible for all
filing and recording of documents related to the transfer of the Properties from
Seller to Buyer and for all fees connected therewith. Buyer shall furnish Seller
with all pertinent recording data and evidence of all such required filings.
Seller shall be responsible for any and all transfer fees or taxes that may be
assessed on the sale of the Properties.
9.3 BROKER'S FEES: Neither Party has retained any brokers, agents or
finders and none are affiliated with either party or authorized to act on behalf
of either Party in this matter. Each Party agrees to indemnify and hold the
other harmless from and against any claims or causes of action with respect to
any commissions, finders' fees, or other remuneration due to any broker, agent,
or finder claiming by, through, or under such Party.
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9.4 FURTHER ASSURANCE: From and after the Closing, at the request of
Seller but without further consideration, Buyer will execute and deliver or use
reasonable efforts to cause to be executed and delivered such other instruments
of conveyance and transfer and take such other action as Seller reasonably may
be required to more effectively vest in or put Seller in possession of, any
property, document, or information of any kind which was not intended by the
Parties to be conveyed to Buyer. From and after the Closing, at the request of
Buyer but without further consideration, Seller shall execute and deliver or use
reasonable efforts to cause to be executed and delivered such other instruments
of conveyance and transfer and take such other actions as Buyer reasonably may
require more effectively to vest in Buyer, or to put Buyer in possession of, any
of the Properties. If any of the Property is incorrectly described, the
description shall be corrected upon proof of the proper description.
9.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES: All representations,
warranties, covenants, and agreements contained in this Agreement shall survive
the Closing. The Parties hereto have made no representations or warranties
except those expressly set forth in this Agreement.
9.6 AMENDMENTS AND SEVERABILITY: No alterations, modifications,
amendments, or changes in this Agreement shall be effective or binding unless
the same shall be in writing and signed by Seller and Buyer. The invalidity of
any one or more covenants or provisions of this Agreement shall not affect the
validity of the Agreement as a whole, and in case of any such invalidity, this
Agreement shall be construed as if such invalid provision had not been included
herein.
9.7 SUCCESSOR AND ASSIGNS: The terms, covenants and conditions hereof
shall be binding upon and shall inure to the benefit of Seller and Buyer and
their respective successors and assigns; and such terms, covenants and
conditions shall be covenants running with the land and with each subsequent
transfer or assignment of the Property.
9.8 HEADINGS: The titles and headings in this Agreement have been
included solely for ease of reference and shall not be considered in the
interpretation or construction of this Agreement.
9.9 NOTICES AFTER CLOSING: Seller shall notify Buyer of its receipt
after the Closing Date of any instrument, notification, or other document
affecting the Property.
9.10 GOVERNING LAW: The laws of the State of Colorado shall govern the
validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties of the Parties, without regard to the
principles of conflicts of laws, including, but not limited to, matters of
performance, non-performance, breach, remedies, and procedures. The laws of the
state in which the Properties are located shall govern the validity,
construction and interpretation of any conveyances executed pursuant to this
Agreement. Forum and venue shall be exclusively in state or federal court in
Denver, Colorado.
9.11 NO PARTNERSHIP CREATED: It is not the purpose or intention of
this Agreement to create (and it shall not be construed as creating) a joint
venture, partnership, or any type of association, and the Parties hereto are not
authorized to act as agent or principal for each other with respect to any
matter related hereto.
9.12 CONFIDENTIALITY: Except as permitted herein, during the term of
the Agreement and for a period one year thereafter, or for a period of one year
after the termination of this
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243891.01
Agreement prior to Closing, whichever is applicable, both Parties shall maintain
the fact and the provisions of this Agreement as confidential, except
disclosures that as may be required by court order, applicable laws, rules and
regulations of governmental agencies or stock exchanges. Each Party shall inform
the other of such disclosures. Unless prohibited by applicable law, the
disclosing Party shall provide the other Party with advanced notice of any such
disclosure.
9.13 PUBLIC ANNOUNCEMENTS: Unless otherwise agreed, neither Party
shall make any public announcement or statement with respect to this Agreement
or the transactions contemplated hereby unless such Party has an obligation to
make such public announcement or statement under applicable law, rule or
regulation. Unless prohibited by applicable law, the disclosing Party shall
provide the other Party with advanced notice of any such disclosure.
9.14 COUNTERPARTS: This Agreement may be executed by the Parties in
any number of counterparts, each of which shall be deemed to be an original
instrument, but all of which together shall constitute one and the same
instrument. Execution may be evidenced by faxed signatures with original
signature pages to follow promptly.
9.15 ENTIRE AGREEMENT: This Agreement constitutes the entire agreement
and understanding among the Parties, their respective partners, shareholders,
officers, directors and employees with respect to the subject matter hereof.
This Agreement supersedes all prior oral and written discussions, agreements and
understandings relating to such subject matter.
9.16 PARENT COMPANIES: Galaxy Energy Corporation and PetroHunter
Energy Corporation are executing this Agreement: (a) for the purposes of
performing their respective rights and obligations as expressly set forth in
this Agreement; and (b) as guarantors of the performance of their respective
subsidiaries.
IN WITNESS WHEREOF, the Parties have executed this Agreement on the day
and year set forth below, but effective as of the Effective Time.
DOLPHIN ENERGY CORPORATION PETROHUNTER OPERATING COMPANY
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------- -------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, President ▇▇▇▇▇ ▇. ▇▇▇▇▇, Vice President and
General Counsel
GALAXY ENERGY CORPORATION PETROHUNTER ENERGY CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------ -------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, President ▇▇▇▇▇ ▇. ▇▇▇▇▇, Vice President and
General Counsel
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