Exhibit 10.1

 

 

 

ASSET PURCHASE AGREEMENT

by and among

GREENHUNTER WATER, LLC

AND

WESTHOFF HUNTER , LLC

as Sellers

and

CLEAR WATER RESOURCES PARTNERS, LLC

as Purchaser

March 26, 2014

 

 

 

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ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement (this “Agreement”) is made and entered into as of
the 26th day of March, 2014 (the “Effective Date”) by and among Westhoff Hunter,
LLC, a Texas limited liability company; GreenHunter Water, LLC, LLC, a Texas
limited liability company (herein collectively called “Sellers”), and Clear
Water Resources Partners, LLC, a Delaware limited liability company or its
assigns (“Purchaser”). Sellers and Purchaser are sometimes herein referred to
collectively as the “Parties” and singly as a “Party.”

RECITALS

 

  A. Sellers own a salt water disposal permit and a salt water disposal well and
operate a salt water disposal well business headquartered in Dallas County,
Texas that provides salt water disposal services to the oil and gas industry in
DeWitt County, Texas (the “Business”) through the following property:

 

  a. Westhoff Hunter SWD – DeWitt County, Texas

 

  B. Purchaser desires to purchase certain assets and assume certain liabilities
of the Sellers used in the Business, and Sellers desire to sell such assets and
assign such liabilities to Purchaser, all upon the terms and conditions set
forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual promises and covenants contained
in this Agreement, the parties hereby agree as follows:

1. PURCHASE AND SALE OF ASSETS.

 

  1.1 Purchase and Sale.

(a) At Closing, Purchaser shall purchase from each Seller, and each Seller shall
sell to Purchaser, all of each such Seller’s right, title and interest in and to
the assets the following assets used in the Business (collectively the
“Purchased Assets”):

(i) Each Seller’s customer business, customer lists and transportation
contracts, contracts and agreements, copies of books and records related to the
Business of Seller;

(ii) Computerized data and software applications used by each Seller in the
Business, in each case to the extent assignable by each Seller;

(iii) Trademarks, copyrights, phone numbers, trade names, and other intellectual
property and know-how specific to Seller, in each case to the extent assignable
by Sellers;

(iv) Texas Railroad Commission of Texas Salt Water Disposal Permit No. 13739 and
copy attached as “Exhibit A”;

(v) The real property, including all easements and lesser property rights, owned
by Sellers related to the Westhoff SWD Permit and the;

 

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(vi) The following salt water disposal wells and equipment owned by Sellers:
Westhoff SWD1 as “Exhibit B”; and

(vii) All assets listed on Westhoff SWD Asset list, including any warranties or
cause of action related to such assets, attached as “Exhibit C.”

(b) Notwithstanding anything in this Agreement to the contrary, the Purchased
Assets shall not include the following (the “Excluded Assets”):

(i) Any item not specifically identified in Schedule 1.1(a);

(ii) All cash and cash equivalents, including cash on hand or in bank accounts,
certificates of deposit, commercial paper and securities, bonds, deposits and
rights to refunds;

(iii) All of each Seller’s accounts receivables, notes receivable, negotiable
instruments, chattel paper, driver receivables and prepaid expenses unless a
purchase agreement covering those items is mutually agreed to and entered into
between Seller and Purchaser and attached hereto as a schedule to this
Agreement;

(iv) All of each Seller’s supplies, furniture, fixtures, computer, telephonic
and electronic equipment and inventories that are located somewhere other than
the facility;

(v) All of each Seller’s prepaid amounts, insurance policies (including any
premium refunds), insurance proceeds, deposits, advances, tax refunds, rights to
payments under letters of credit and/or other prepaid expenses;

(vi) Any and all liabilities and obligations of Seller except those specifically
accepted and assumed by Purchaser under Section 1.2 below;

(vii) Any customer contracts not specifically accepted and assumed by Purchaser
in Section 1.2 below or those contracts not assignable by Seller to Purchaser;

(viii) all rights, demands, claims, causes of action, rights of recovery,
credits, allowances, rebates, recoupment or rights of setoff or subrogation or
defenses of each Seller against any person and general intangibles;

(ix) Copies of books, records and other documents that: (1) relate to employees
who are not hired by Purchaser; (2) cannot be transferred under laws relating to
privacy or health; (3) Seller is not permitted to transfer pursuant to
confidentiality agreements with others; or (4) relate to assets, liabilities or
obligations retained by Seller;

 

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(x) Any membership interests, partnership interests, capital stock, or other
form ownership interest in any direct or indirect subsidiary of Parent or any
right to acquire such ownership interests;

(xi) Each Sellers’ certificates of formation, bylaws, minute books, income tax
returns, books and records;

(xii) All of each Sellers’ additional property, assets, capital stock, rights,
claims, causes of action, contracts, records, goodwill and other intangibles
relating to the Business other than the Purchased Assets; and

(xiii) Each Sellers’ rights under this Agreement and the other agreements,
certificates and instruments to be executed in connection with, or pursuant to,
this Agreement.

1.2 Assumption of Liabilities. Simultaneously with the execution of this
Agreement, the Purchaser shall assume and be solely responsible for those
liabilities and obligations to be performed after 11:59 p.m. Central Time on the
Closing Date under the contracts, leases, agreements and/or permits assigned to
Purchaser and specifically listed on Schedule 1, but specifically excluding any
liabilities or obligations that are a result of or caused by a breach or default
of Seller or any of its affiliates prior to 11:59 p.m. Central Time on the
Closing Date (collectively, the “Assumed Liabilities”).

1.3 Excluded Liabilities. Except for the Assumed Liabilities, Purchaser does not
assume and shall not be responsible for any liabilities or obligations of any
Seller, of any kind or nature, whether or not relating to the Business or the
Purchased Assets, whether known or unknown, absolute, accrued, contingent or
otherwise, or whether due or to become due, arising out of events or
transactions or facts occurring on, prior to, or after the Closing Date
(collectively the “Excluded Liabilities”), including, but not limited to, the
following Excluded Liabilities:

(a) all liabilities and obligations of any kind existing as of the Closing Date
owed or owing by each Seller to any shareholder of Seller and/or any affiliate
of Seller or between the Sellers;

(b) all liabilities and obligations relating to current or former employees,
agents, consultants or other independent contractors of each Seller, whether or
not such persons are employed by the Purchaser after the Closing Date, relating
to services performed, benefit accruals or claims accrued or incurred prior to
the Closing Date or with respect to employee benefit plans, programs or
arrangements at any time on or after the Closing Date, including but not limited
to, any “employee benefit plan,” as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended, (“ERISA”) and all
retirement, stock, stock option, welfare benefit, savings, deferred
compensation, incentive compensation, paid time off, severance pay, salary
continuation, disability, fringe benefit, compensation, accrued payroll, accrued
vacation pay, sick leave, severance, worker’s compensation, unemployment
compensation, employee welfare or retirement benefits (including any liability
or obligation of the Seller under any welfare plan or policy for continuing
health coverage), and other employee benefit arrangements, plans, policies, or
practices maintained, contributed to, or required to be contributed by the
Seller or any ERISA Affiliate (defined as any person, entity, any trade or
business (whether or not incorporated) that is treated as a single employer with
the Seller under

 

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Section 414 of the Code) or with respect to which the Seller or any ERISA
Affiliate may have any liability (collectively the “Benefit Plans”) or
obligations under any employment agreement or arrangement, liabilities under the
Worker Adjustment and Retraining Notification (“WARN”) Act and obligations or
agreements to rehire or give preferential treatment to laid-off or terminated
employees;

(c) all liabilities and obligations, whether absolute, accrued, contingent or
otherwise, for federal, state, county, local, foreign or other employee payroll
or other taxes or assessments (including interest and penalties) of any kind
whatsoever relating to the Business for periods up to and including the Closing
Date including specifically any royalty or royalty burden, liens or security
interests in favor of any third party, and any income taxes resulting from the
transactions contemplated by this Agreement;

(d) any and all damages, losses, liabilities, actions, claims, costs and
expenses (including, without limitation, closure costs, fines, penalties,
expenses of investigation and remediation and ongoing monitoring and reasonable
attorneys’ fees) directly or indirectly based upon, arising out of, resulting
from or relating to (i) any violation of any Environmental Law by the Seller or
any person or entity acting on behalf of the Seller or the person from or
through which the Seller acquired title on or prior to the Closing Date
(including, without limitation, any failure to obtain or comply with any permit,
license or other operating authorization under provisions of any Environmental
Law), (ii) any and all liabilities under any Environmental Law arising out of or
otherwise in respect of any act, omission, event, condition or circumstance
occurring or existing in connection with the Business or the Purchased Assets on
or prior to the Closing Date (including, without limitation, liabilities
relating to (X) removal, remediation, containment, cleanup or abatement of the
presence of any Regulated Substance, whether on-site or off-site and (Y) any
claim by any third party, including without limitation, tort suits for personal
or bodily injury, property damage or injunctive relief; and

(e) all liabilities and obligations arising out of any lawsuit, action,
proceeding, inquiry, claim, order or investigation by or before any governmental
authority related to the Business arising out of events, transactions, facts,
acts or omissions which occurred prior to or on the Closing Date, including,
without limitation, personal injury or property damage, product liability, tax
liability, actions for withholding or payroll taxes, or strict liability.

1.4 Purchase Price. The aggregate purchase price to be paid by Purchaser to
Seller for the Purchased Assets (less any amount withheld pursuant to the
Affidavit of Debts and Liens to be executed by Seller and to be paid directly to
the listed vendors) (“Purchase Price”) shall be Three Million Three Hundred
Seventy Five Thousand Dollars ($3,375,000). The Purchase Price is paid through
the Cash Closing Payment and execution and delivery of the Promissory Note. The
Cash Closing Payment shall be paid by Purchaser to Sellers on Closing date by
wire transfer or delivery of a cashier’s check at closing representing
immediately available funds in the amount of One Million Dollars ($1,000,000).
If funds are to be wired, to the following bank account of Seller;

 

                                                 Wire To:

 

 

 

                                                 Account Name:

                                                 ABA/Routing #:

 

                                                 Account #:

  

Amegy Bank

PO Box 27459

Houston, TX 77227

 

GreenHunter Water LLC

113011258

 

53746356

  

 

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The balance of the Purchase Price shall be paid by the execution and delivery by
Purchaser to Sellers of its Promissory Note in the original principal sum of Two
Million Three Hundred Seventy Five Thousand Dollars ($2,375,000)in the form
attached hereto as “Exhibit D”. Such note shall bear interest at the rate of 10
percent per annum; shall provide for a payment based on a 10 year amortization
of principal; be due and payable in 24 months; and, shall provide that the first
payment in the amount of Thirty One Thousand Three Hundred Eighty Six Dollars
($31,386) shall be paid 30 days after closing and continuing regularly and
monthly thereafter until maturity when all accrued interest and unpaid principal
shall be due and payable.

1.5 Closing. Closing shall be on or before Wednesday, March 26, 2014 in Sellers’
Dallas, Texas offices, unless Purchaser provides written notice to Sellers of
any deficiency in the property transferred under this agreement, where Purchaser
discovers such deficiency and provides notice of as much before closing. Upon
such notice, Sellers shall have thirty (30) days to cure any and all identified
deficiencies to the satisfaction of Purchaser, and Closing shall be on or before
the fifteenth (15) day after such deficiency is cured. In the event Sellers
refuse or otherwise fail to cure any identified deficiency, then Purchaser may
choose to close without regard for the deficiency or may terminate any
contractual obligation to close. Closing Date shall be at a time mutually
agreeable to the parties.

1.6 Allocation of Purchase Price. The Purchase Price shall be allocated among
the Purchased Assets as set forth on Schedule 2 which is attached hereto and
incorporated by this reference herein. Seller and Purchaser each agree to comply
with the requirements of Section 1060 of the Internal Revenue Code and to report
the federal, state and local income and other tax consequences of the
transactions contemplated herein in a manner consistent with the purchase price
allocation set forth on Schedule 2.

1.7 Transfer Taxes. In the event that any sales, use, transfer, license, title
or other similar taxes or charges are assessed on or after the Closing Date as a
result of the transactions described in this Agreement, upon transfer and/or
reissue of vehicle titles or at any time thereafter on the transfer of any of
the Purchased Assets, then in each instance such taxes or charges incurred as a
result of the transactions contemplated hereby, such as filing, recordation, and
transfer taxes and other governmental charges normally levied by the State of
Texas in connection with the sale of the Purchased Assets to Purchaser or the
transfer of titles thereto, will be paid by Purchaser.

1.8 Ad Valorem Taxes. All ad valorem taxes owed for 2013 and prior years shall
be paid by Sellers. All ad valorem taxes with respect to the Purchased Assets
for the calendar year 2014 shall be prorated between Seller and Purchaser as of
the Closing Date. If the amount of such taxes with respect to any of the
Purchased Assets for 2013 occurs has not been determined as of the Closing Date,
then the ad valorem taxes with respect to such Purchased Assets for the
preceding calendar year shall be used to calculate such prorations, with known
changes in valuation applied. Seller shall be responsible for paying the
prorated ad valorem taxes allocable to the number of days in 2014 through the
Closing Date, and Purchaser shall be responsible for paying the remainder of the
prorated Ad Valorem Taxes for such calendar year.

1.9 “As Is, Where Is” Transaction.

(a) Purchaser hereby acknowledges and agrees that, except as otherwise expressly
provided in this Agreement, Sellers make no representations or warranties
whatsoever, express or implied, with respect to any matter relating to the
Purchased Assets or the Business, including, without limitation: (i) income to
be derived or expenses to be incurred in connection with the Purchased Assets or
the Business, (ii) the physical condition, description or location of any of the
Purchased Assets, (iii) the value

 

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of the Purchased Assets (or any portion thereof), (iv) the transferability of
the Purchased Assets, (v) the terms, amount, validity or enforceability of any
Assumed Liabilities, and (vii) THE MERCHANTABILITY OR FITNESS OF THE PURCHASED
ASSETS AS A WHOLE OR ANY ITEM OR PORTION OF THE PURCHASED ASSETS FOR ANY
PARTICULAR PURPOSE, OR ANY OTHER MATTER OR THING RELATING TO THE PURCHASED
ASSETS OR ANY PORTION THEREOF. WITHOUT IN ANY WAY LIMITING THE FOREGOING, SELLER
HEREBY DISCLAIMS ANY WARRANTY, EXPRESS OR IMPLIED, OF MERCHANTABILITY OR FITNESS
FOR ANY PARTICULAR PURPOSE AS TO ANY PORTION OF THE PURCHASED ASSETS.

(b) Purchaser further acknowledges that Purchaser has conducted an independent
inspection and investigation of the physical condition of the Purchased Assets
and all such other matters relating to or affecting the Purchased Assets as
Purchaser deemed necessary or appropriate and that in proceeding with its
acquisition of the Purchased Assets, except for any representations and
warranties expressly set forth in this Agreement, Purchaser is doing so based
solely upon such independent inspections and investigations and is not relying
on any representations, warranties or agreements of Seller except those
expressly set forth in this Agreement. ACCORDINGLY, EXCEPT WITH RESPECT TO ANY
REPRESENTATIONS AND WARRANTIES OF SELLER EXPRESSLY SET FORTH IN THIS AGREEMENT,
PURCHASER WILL ACCEPT THE PURCHASED ASSETS ON THE CLOSING DATE “AS IS,” “WHERE
IS,” AND “WITH ALL FAULTS.” Purchaser hereby irrevocably waives and releases all
claims against Seller and its representatives and affiliates with respect to the
Purchased Assets, other than with respect to Seller’s obligations hereunder
regarding the Post-Closing Credit, the indemnification provisions and/or claims
for breach of the representations, warranties and covenants specifically set
forth in this Agreement.

(c) Notwithstanding the foregoing and subject to any manufacturer restrictions,
Seller shall use commercially reasonable efforts to assign to Purchaser any and
all equipment manufacturers’ warranties applicable to the Purchased Assets if
such equipment manufacturers’ warranties exist and are transferable.

2. CLOSING.

2.1 Seller’s Deliveries. Simultaneously with the Closing of this Agreement on
the Closing Date, Seller has executed and delivered to Purchaser:

(a) Bills of sale and any other instruments of assignment and assumption
conveying title to the Purchased Assets to Purchaser and pursuant to which
Purchaser assumes, and agrees to duly pay and perform, the Assumed Liabilities;

(b) Special Warranty Deeds to the Westhoff SWD Properties, as required to
effectuate this Agreement.

(c) Ad valorem taxes for 2014 shall be pro-rated and any escrow fees shared
equally.

 

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(d) Executed Texas RRC Permit Transfer document prepared by Purchaser; and

(e) Original Texas RRC Permit No. 13739.

(f) Affidavit of Debts and Liens for the Westhoff SWD Property.

(g) Tax Clearance Certificate;

(h) Affidavit of WARN act notice (if applicable); and

(i) Closing Statement.

2.2 Purchaser’s Deliveries. Simultaneously with the Closing of this Agreement on
the Closing Date, Purchaser has executed and delivered to Purchaser the Purchase
Price consisting of the Cash Closing Payment and execution and delivery of the
Promissory Note.

3. REPRESENTATIONS AND WARRANTIES OF SELLER. Each Seller hereby represents and
warrants to Purchaser as follows:

3.1 Organization and Good Standing. Sellers are each a limited liability company
validly existing and in good standing under the laws of the State of Texas.

3.2 Limited Liability Company Power. Sellers each has the limited liability
company power, authority and legal right to execute, deliver and perform this
Agreement, and there are no unnamed subsidiaries or equity investments.

3.3 Authorization, Binding Effect. The execution, delivery and performance of
this Agreement and the other agreements, documents and instruments required to
be delivered by each Seller in accordance with the provisions of this Agreement
(collectively the “Seller Documents”) and the underlying transactions
contemplated by this Agreement and the Seller Documents have been duly
authorized by each Seller. This Agreement and the Seller Documents have been
duly executed and delivered by each Seller. This Agreement is and the Seller
Documents are the legal, valid and binding obligations of Seller enforceable in
accordance with their terms subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors’ rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).

3.4 No Conflicts; Consents and Approvals. The execution and delivery of this
Agreement and the Seller Documents, the consummation of the transactions herein
and therein contemplated, and the performance of, fulfillment of and compliance
with the terms and conditions hereof and thereof by Seller do not and will not
conflict with or result in a breach of the certificate of formation or the
company agreement of Seller. No authorization, approval, consent of, and no
registration or filing with, any governmental or regulatory official body or
authority is required in connection with Seller’s execution, delivery or
performance of this Agreement or the Seller Documents other than with respect to
the registration of Rolling Stock, if any, and transfers of Purchased Assets the
title to which is evidenced by certificates of title or registration, if any.

3.5 Title to Properties. As of the Closing, Sellers have good and marketable
title to the Purchased Assets and all equipment and other personal property,
free and clear of liens and encumbrances. There are no leased assets included in
the Purchased Assets. On the Closing Purchaser will acquire all of Seller’s
right, title and interest in and to all of the Purchased Assets, free and clear
of any lien, claim or encumbrance other than Permitted Liens including but not
limited to any royalty or royalty burden, and there are no undisclosed
liabilities or tax matters that burden any property passing pursuant to this
Agreement. Sellers shall execute an Affidavit of Debts and Liens

 

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known to be owed by Sellers and with respect to the drilling and construction of
the SWD wells located on the properties being acquired pursuant to this
Agreement. Such identified debts shall be paid at Closing. Sellers shall
indemnify and hold Purchaser harmless with respect to all such claims. There are
no options or agreements of any character relating to the Purchased Assets to
which Sellers are parties, or by which Sellers are bound that, if exercised or
consummated, would be likely to result in a material adverse effect.

3.6 Brokers and Finders. Seller has not engaged any person or entity to act or
render services as a broker, finder or similar capacity that would be entitled
to receive a fee and/or commission from Seller in connection with the
transactions contemplated herein. No person or entity has, as a result of any
agreement or action by Seller, any right or valid claim against Purchaser or any
of Purchaser’s affiliates for any commission, fee or other compensation as a
broker or finder, or in any similar capacity in connection with the transactions
contemplated herein.

3.7 Material Adverse Effect. To each Seller’s knowledge, without investigation
and subject to the impact of the transactions contemplated by this Agreement and
any other asset sale transactions each Seller has and/or intends to enter into,
each Seller is not aware of any past, present or impending action or event, or
threatened action or event, that would cause a material adverse effect on the
Business in its current condition on the Closing Date.

3.8 Environmental Claims. Except as set forth in Schedule 3:

(a) The Sellers are not subject to any outstanding judgment, decree, or judicial
order relating to compliance by Sellers with any Environmental Law or to
investigation or cleanup of hazardous substances under any Environmental Law.

(b) There are no claims, actions, proceedings or investigations pending or, to
the Knowledge of any Seller, threatened against the Sellers before any
Governmental Authority under any Environmental Law, except those which could not
reasonably be expected to have a Material Adverse Effect.

(c) To the Knowledge of each Seller, there have been no discharges, emissions or
other releases of hazardous substances by the Sellers that are or were required
to be investigated or reported under any Environmental Law, except those which
could not reasonably be expected to have a Material Adverse Effect.

3.9 Disclosure. No representation or warranty or other statement made by the
Sellers in this Agreement, the certificates to be delivered pursuant to this
Agreement or otherwise in connection with the transactions contemplated hereby,
and any and all reports made or issued, or that may be made or issued prior to
the Closing Date by the Sellers contains or will contain any untrue statement or
omits or will omit a material fact necessary to make any of them, in light of
the circumstances in which it was made, not materially misleading, including but
not limited to all financial information provided by Sellers.

3.10 Other Warranties. Sellers additionally warrant that no employee involved
with any asset passing pursuant to this Agreement is under any contract beyond
at-will employment, the assets on-hand and passing under this Agreement are
sufficient to conduct business operations. Sellers additionally warrant that
there is no pending or threatened litigation impacting assets passing under this
Agreement and there are no pending or threatened customer disputes.

 

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4. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby represents and
warrants to Seller as follows:

4.1 Organization and Good Standing. Purchaser is a duly organized, validly
existing and in good standing under the Laws of the State of Delaware.

4.2 Corporate Power and Authority. Purchaser has the corporate power and
authority to execute, deliver and perform this Agreement.

4.3 Binding Effect. This Agreement has been duly authorized, executed and
delivered by Purchaser and is the legal, valid and binding obligation of
Purchaser, enforceable in accordance with its terms except as their
enforceability may be limited by laws and/or equitable principles relating to or
affecting creditors’ rights.

4.4 Authorization, Binding Effect. The execution, delivery and performance of
this Agreement and the other agreements, documents and instruments required to
be delivered by Purchaser in accordance with the provisions of this Agreement
(collectively the “Purchaser Documents”) and the underlying transactions
contemplated by this Agreement and the Purchaser Documents have been duly
authorized by Purchaser. This Agreement and the Purchaser Documents have been
duly executed and delivered by Purchaser. This Agreement is and the Purchaser
Documents are the legal, valid and binding obligations of Purchaser enforceable
in accordance with their terms subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors’ rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).

4.5 No Conflicts; Consents and Approvals. The execution and delivery of this
Agreement and the Purchaser Documents, the consummation of the transactions
herein and therein contemplated, and the performance of, fulfillment of and
compliance with the terms and conditions hereof and thereof by Purchaser do not
and will not conflict with or result in a breach of the articles of
incorporation or bylaws of Purchaser. No authorization, approval, consent of,
and no registration or filing with, any governmental or regulatory official body
or authority is required in connection with Purchaser’s execution, delivery or
performance of this Agreement or the Purchaser Documents other than with respect
to the registration of Rolling Stock and transfers of Purchased Assets the title
to which is evidenced by certificates of title or registration.

4.6 Brokers and Finders. Purchaser has not engaged any Person to act or render
services as a broker, finder or similar capacity in connection with the
transactions contemplated herein and no Person has, as a result of any agreement
or action by Purchaser any right or valid claim against Seller, or any of its
affiliates for any commission, fee or other compensation as a broker or finder,
or in any similar capacity in connection with the transactions contemplated
herein.

5. CERTAIN POST-CLOSING COVENANTS.

5.1 Consents and Approvals.

(a) Each of the parties hereto shall, and shall cause each of its affiliates to,
use its reasonable efforts in good faith to obtain at the earliest practicable
date any approvals, authorizations and consents, including but not limited to
the third party consents necessary to consummate the transactions contemplated
by this Agreement and take such actions as the other parties may reasonably
request to consummate the transactions contemplated by this Agreement. For a
period of up to thirty (30) days immediately following the Closing Date, Seller
shall use commercially reasonable efforts (which shall not require Seller to
incur any expense) to cooperate with Purchaser in connection with Purchaser’s
application for the transfer, renewal or issuance of any permits, licenses,
plates, approvals or authorizations required to transfer the Purchased Assets
from Seller to Purchaser.

 

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(b) Nothing in this Section 5.1 shall require a party to expend any monies to
obtain any approval or consent required hereunder, except for customary
attorneys’ fees and filing fees incident to the transactions contemplated hereby
or as otherwise specifically required under this Agreement.

5.2 Employees. A list of Seller’s employees with current salaries and location
is included as Schedule 4.

5.3 Collection of Seller Account Receivables.

(a) From and after the Closing Date, Purchaser shall provide Seller with
commercially reasonable assistance with respect to Seller’s collection of its
existing accounts receivables associated with the Business and which are not
Purchased Assets. Within five (5) days of receipt, Purchaser shall remit to
Seller all payments received by Purchaser from customers for revenue that
accrued prior to the Closing Date (which, for the avoidance of doubt, shall
exclude revenues relating to Post-Closing Business) without setoff, netting or
recoupment.

(b) From and after the Closing Date, Seller shall provide Purchaser with
commercially reasonable assistance with respect to Purchaser’s collection of
accounts receivables associated with the Business. Within five (5) days of
receipt, Seller shall remit to Purchaser all payments received by Seller from
customers for revenue that accrued after the Closing Date (which, for the
avoidance of doubt, shall include revenues relating to Post-Closing Business)
without setoff, netting or recoupment.

(c) For not less than 180 days after the Closing Date, Purchaser and Seller
shall keep accurate records of all payments received in connection with the
Business and allow each other reasonable access to such records for the purpose
of verifying the amount and application of such payments to the period before or
after the Closing Date.

5.4 Employee Benefits. Purchaser is not assuming any liability under any Benefit
Plan with respect to any employee, former employee, dependent, beneficiary, or
independent contractor and regardless of whether such liability is incurred
prior to or after the Closing Date. All employees of Sellers who accept
employment with Purchaser on or after the Closing Date shall be new employees of
Purchaser and any prior employment by Sellers of such employees shall not affect
entitlement to, or the amount of, salary or other cash compensation, current or
deferred, which Purchaser may make available to its employees.

5.5 Employees. For a period of thirty (30) days immediately following the
Closing Date, Seller shall use commercially reasonable efforts to assist
Purchaser in employing as new employees of Purchaser, those employees that
Purchaser desires to hire, if any.

5.6 Maintenance of Books and Records. Sellers shall retain all material records
relating to the Purchased Assets and/or the Business (the “Seller Records”)
until the first (1st) anniversary of the Closing Date, but Purchaser shall have
the right to obtain copies of any such records. Without the prior written
consent of Seller, Purchaser and its officers, directors and representatives
shall not disclose trade secrets or confidential business information of Sellers
contained in the Sellers’ Records except (i) as such disclosure is required by
law or (ii) where such information becomes generally known or available to the
public and/or to Purchaser’s competitors through sources other than Purchaser,
its affiliates or its officers, directors or representatives.

 

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5.7 Further Assurances. From time to time after the Closing Date, Sellers shall
upon reasonable request from Purchaser, execute, acknowledge and deliver to
Purchaser such other instruments and take such other actions and execute and
deliver such other documents, certifications and further assurances as Purchaser
may reasonably require to vest more effectively in Purchaser, or to put
Purchaser more fully in possession of, any of the Purchased Assets. Each of the
parties hereto shall cooperate with the other and execute and deliver to the
other parties hereto such other instruments and documents and take such other
actions as may be reasonably requested from time to time by any other party
hereto as necessary to carry out, evidence and confirm the intended purposes of
this Agreement.

5.8 Non-Compete. Sellers, including their corporate parent GreenHunter
Resources, Inc., for and in consideration of Purchaser Closing pursuant to this
Agreement, agree to not compete directly or indirectly with the oil field salt
water disposal business of Purchaser for a period of not less than twenty-four
(24) months in Dewitt, County, Texas. GreenHunter Resources, Inc. join in
execution of this Agreement specifically for the purpose of evidencing their
Agreement to this non-compete agreement as well as the other indemnification
provisions hereof, and shall on request, execute additional Non-Compete,
non-solicitation assurances at the time of Closing.

6. INDEMNIFICATION.

6.1 Indemnification of Purchaser. Subject to the limitations set forth in
Sections 6.3 and 6.4, each Seller and GreenHunter Resources, Inc. shall
indemnify and hold Purchaser harmless from, against, for and in respect of
(i) any and all damages, losses, settlement payments, obligations, liabilities,
claims, actions or causes of action, royalty or royalty burden and encumbrances
suffered, sustained, incurred or required to be paid by Purchaser, net of any
resulting insurance proceeds to Purchaser and income tax benefits to Purchaser
because of the breach of any written representation, warranty, agreement or
covenant of each Seller contained in this Agreement; and (ii) all reasonable
costs and expenses (including, without limitation, attorneys’ fees, interest and
penalties) incurred by Purchaser in connection with any action, suit,
proceeding, demand, assessment or judgment incident to any of the matters
indemnified against in this Section 6.1. Such obligation and indemnification
shall be joint and several, and Purchaser shall be entitled to deduct any claims
against amounts outstanding and otherwise owed to Sellers.

6.2 Indemnification of Sellers. Subject to the limitations set forth in Sections
6.3 and 6.4, Purchaser shall indemnify and hold Sellers harmless from, against,
for and in respect of any and all damages, losses, settlement payments,
obligations, liabilities, claims, actions or causes of action and encumbrances
suffered, sustained, incurred or required to be paid by Sellers, net of any
resulting insurance proceeds to Sellers and income tax benefits to Sellers,
together with all reasonable costs and expenses (including, without limitation,
attorneys’ fees, interest and penalties) incurred by Sellers in connection with
any action, suit, proceeding, demand, assessment or judgment incident thereto
(A) because of the breach of any written representation, warranty, agreement or
covenant of Purchaser contained in this Agreement or (B) in respect of any of
the Assumed Liabilities, or in respect of any liability arising out of any
transaction or event relating to the Purchased Assets occurring after the
Closing Date or (C) any claim made by Four Fountains, LLC, its partners,
shareholders, members, officers or affiliates including, Jason Roberts and
George Atallah, as it relates to any claim made by them that the consummation of
this agreement breaches any term, condition, provision, agreement or covenant
contained in that certain joint venture agreement, dated May 18, 2012 among
GreenHunter Resources, Inc., GreenHunter Water, LLC and Four Fountains LLC
including but not limited to, any consent provision or right of first refusal
provision.

6.3 Survival of Representations, Warranties and Covenants. All representations,
warranties, covenants and agreements made by any party to this Agreement or
pursuant hereto shall survive the execution hereof, notwithstanding any
investigation conducted at any time with respect to such representations and
warranties, for twenty four (24) months immediately following the Closing Date
or until the resolution, pursuant to

 

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the dispute resolution provisions of Section 7.1, of any dispute for which
written notice of such dispute was received by the Indemnifying Party (as
defined below) prior to the expiration of such 24-month period. Immediately
after such 24-month period all representations, warranties, covenants and
agreements made by any Party to this Agreement or in Sellers’ Documents or
Purchaser Documents shall expire and be of no further effect. Notice of any
claim of a breach of a representation, warranty, covenant or agreement must be
given prior to the expiration of such representation, warranty, covenant or
agreement; and any claim not made within such period shall be of no force or
effect. Notwithstanding anything to the contrary herein, the indemnification by
Purchaser under Section 6.2(c) above shall survive the termination of this
Agreement indefinitely.

6.4 General Rules Regarding Indemnification. The obligations and liabilities of
each indemnifying party hereunder with respect to claims resulting from the
assertion of liability by the other party shall be subject to the following
terms and conditions:

(a) The indemnified party shall give prompt written notice (which in no event
shall exceed 30 days from the date on which the indemnified party first became
aware of such claim or assertion) to the indemnifying party of any claim which
might give rise to a claim by the indemnified party against the indemnifying
party based on the indemnity agreements contained in Sections 6.1 or 6.2 hereof,
stating in reasonable detail the nature and basis of said claims and the amounts
thereof, to the extent known;

(b) If any action, suit or proceeding is brought against the indemnified party
with respect to which the indemnifying party may have liability under the
indemnity agreements contained in Sections 6.1 or 6.2 hereof, the action, suit
or proceeding shall, at the election of the indemnified party, be defended
(including all proceedings on appeal or for review which counsel for the
indemnified party shall deem appropriate) by the indemnified party. The
indemnified party shall have the right to employ its own counsel in any such
case, but the fees and expenses of such counsel shall be at the indemnified
party’s own expense unless the employment of such counsel and the payment of
such fees and expenses both shall have been specifically authorized in writing
by the indemnifying party in connection with the defense of such action, suit or
proceeding. Notwithstanding the foregoing, (A) if there are defenses available
to the indemnified party which are inconsistent with those available to the
indemnifying party to such extent as to create a conflict of interest between
the indemnifying party and the indemnified party, the indemnified party shall
have the right to direct the defense of such action, suit or proceeding insofar
as it relates to such inconsistent defenses, and the indemnifying party shall be
responsible for the reasonable fees and expenses of the indemnified party’s
counsel insofar as they relate to such inconsistent defenses (but shall not
otherwise be obligated to raise or pursue such inconsistent defenses), and
(B) if such action, suit or proceeding involves or could have an effect on
matters beyond the scope of the indemnity agreements contained in Sections 6.1
and 6.2 hereof, the indemnified party shall have the right to direct (at its own
expense) the defense of such action, suit or proceeding insofar as it relates to
such other matters (but shall not otherwise be obligated to raise or pursue such
other matters). The indemnified party shall be kept fully informed of such
action, suit or proceeding at all stages thereof whether or not it is
represented by separate counsel.

(c) The indemnified party shall make available to the indemnifying party and its
attorneys and accountants all books and records of the indemnified party
relating to such proceedings or litigation and the parties hereto agree to
render to each other such assistance as they may reasonably require of each
other in order to ensure the proper and adequate defense of any such action,
suit or proceeding.

 

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(d) The indemnified party shall not make any settlement of any claims without
the written consent of the indemnifying party. The indemnifying party shall not
settle any claims without the written consent of the indemnified party if the
settlement would impose any cost or admission of liability or any injunctive
relief upon the indemnified party.

(e) In no event shall the indemnifying party be liable hereunder for
consequential, exemplary, punitive or other speculative damages incurred by the
indemnified party as a result of an indemnified claim, but shall be liable for
such damages asserted by any third party against the indemnified party, subject
to the limitations of this Article 6.

(f) The provisions of this Article 6, shall be the exclusive remedy of the
Parties with respect to the occurrence of any event or condition referred to in
this Article 6 and with respect to the breach of any representation, warranty,
covenant or agreement of another Party hereto.

7. DISPUTE RESOLUTION.

7.1 Arbitration. It is the intention of the parties that in the event any
dispute arises under this Agreement, the parties shall first meet and confer
with one another to attempt to negotiate a resolution of such dispute without
recourse to arbitration and/or litigation. If, after commercially reasonable
efforts to resolve any dispute arising under this Agreement, the parties are
unable to agree, the dispute shall be submitted to arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
(“Rules”), and further subject to the following:

(a) There shall be one (1) independent arbitrator (“Arbitrator”) selected
according to the Rules.

(b) The Arbitrator shall determine what discovery shall be permitted, consistent
with the goal of limiting the cost and time which the parties must expend for
discovery; provided the arbitrator shall permit such discovery as he or she
deems necessary to permit an equitable resolution of the dispute.

(c) The determination of the Arbitrator shall be binding on the parties hereto,
and shall not, absent bad faith on the part of the Arbitrator, be appealable or
otherwise subject to challenge.

(d) Judgment on any award rendered by the Arbitrator may be entered in any court
having jurisdiction thereof.

(e) The right to arbitration hereunder shall survive any termination of this
Agreement.

(f) The Arbitrator shall select an exclusive location for arbitration of any
such dispute, controversy, or claim and such selection shall be limited to
Dallas County, Texas.

 

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(g) The Arbitrator shall be directed that any arbitration under this Agreement
shall be completed as soon as practicable after the filing of notice of a
request for such arbitration, but in any event within ninety (90) days of the
request for arbitration.

(h) All payments determined by the Arbitrator shall be paid in U.S. funds by the
responsible party within five (5) business days following determination thereof.
A disputed performance or suspended performance pending the resolution of the
arbitration shall be completed within a reasonable time period following the
final decision of the arbitrator.

(i) The arbitration proceedings and the decision shall not be made public
without the joint consent of the parties and each party shall maintain the
confidentiality of such proceedings and decision unless otherwise permitted by
the other party.

(j) The fees and expenses payable to the Arbitrator in connection with such
determination will be borne 50% by Seller and 50% by Purchaser pending the final
decision of the Arbitrator. The final decision of the Arbitrator may, however,
award costs of the Arbitrator and the arbitration costs of the parties to the
arbitration in the manner provided in such final arbitration decision.

8. MISCELLANEOUS.

8.1 Certain Definitions and Interpretive Provisions.

(a) For the purposes of this Agreement, the following terms shall have the
meanings specified in this Section 1.1:

(i) “Permitted Liens” means:

(A) all rights reserved to or vested in any governmental authority to control or
regulate the Purchased Assets and Business and all obligations and duties under
all laws or under any permit issued by any governmental authority;

(B) statutory liens for current Taxes not yet due and payable or the amount or
validity of which is being contested in good faith;

(C) statutory and contractual liens in favor of mechanics, materialmen,
warehousemen, and landlords for amounts not yet due and payable or the amount or
validity of which is being contested in good faith; and

(D) liens arising under the terms of the Assumed Contracts or as a matter of law
securing Assumed Liabilities.

(ii) “Business Days” means any day other than (a) a Saturday, (b) a Sunday or
(c) a day on which commercial banks are authorized or required to close in
Corpus Christi, Texas.

 

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(b) Unless indicated otherwise, all days referred to in this Agreement are
calendar days. Whenever any obligation hereunder is required to be performed on
a day which is not a “business day,” the time required for such performance
shall be extended to the next succeeding calendar day which is a business day.

(c) The words “hereof,” “herein,” and “hereunder” and words of similar import,
when used in this Agreement, refer to this Agreement as a whole and not to any
particular provision of this Agreement.

(d) Whenever the words “include,” “includes” or “including” are used in this
Agreement, they shall be deemed to be followed by the words “without
limitation.”

(e) Any agreement, instrument, statute or regulation defined or referred to
herein or in any agreement or instrument that is referred to herein means such
agreement, instrument, statute or regulation as from time-to-time amended,
modified or supplemented including (in the case of agreements or instruments) by
waiver or consent and (in the case of statutes or regulations) by succession of
comparable successor statutes or regulations and references to all attachments
thereto and instruments incorporated therein.

(f) All Exhibits and Schedules annexed hereto or referred to herein are hereby
incorporated in and made a part of this Agreement as if set forth in full
herein. Any capitalized terms used in any Schedule or Exhibit but not otherwise
defined therein shall be defined as set forth in this Agreement.

(g) References to any Party include the successors and permitted assigns of that
Party.

(h) Time is of the essence in the performance of this Agreement.

8.2 Expenses. The Purchaser and each Seller shall pay its own expenses incurred
in connection with this Agreement and the transactions contemplated hereby.
Purchaser shall be responsible for transfer taxes, title registration fees and
similar charges incurred in connection with the sale of the Purchased Assets, if
any.

8.3 Entire Agreement. This Agreement, the Sellers’ Documents, the Purchaser
Documents and the Exhibits and Schedules hereto contain the complete agreement
among the Parties with respect to the transactions contemplated hereby and
supersede all prior agreements and understandings, oral or written, among the
parties with respect to such transactions. Section and other headings are for
reference purposes only and shall not affect the interpretation or construction
of this Agreement. The Parties hereto make no representations or warranties
except as expressly set forth in this Agreement or in any duly executed
certificate or schedule delivered pursuant hereto.

8.4 Counterparts. This Agreement may be executed in any number of counterparts,
each of which when so executed and delivered shall be deemed an original, and
such counterparts together shall constitute only one original.

8.5 Notices. All notices, demands, requests or other communications that may be
or are required to be given, served or sent by any party to any other party
pursuant to this Agreement shall be in writing and shall be transmitted by a
reputable overnight courier service or by hand delivery or facsimile
transmission, addressed as follows:

 

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If to Sellers:

c/o GreenHunter Water, LLC

1048 Texan Trail

Grapevine, Texas 76051

Attn:     Morgan F. Johnston, Senior Vice President

General Counsel and Secretary

Facsimile: 972-410-1066Email: mjohnston@greenhunterresources.com

If to Purchaser:

Clear Water Resources Partners, LLC.

Po Box 2700

San Marcos, Texas 78667

Phone: (512) 665-9220

E-mail: jason@cw-r.com

Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served, or sent.
Each notice, demand, request or communication that is mailed, delivered, or
transmitted in the manner described above shall be deemed sufficiently given,
served, sent and received for all purposes at such time as it is delivered to
the addressee (with the return receipt, the delivery receipt, fax confirmation
sheet or the affidavit of courier or messenger being deemed conclusive evidence
of such delivery) or at such time as delivery is refused by the addressee upon
presentation.

8.6 Assignment; Successors and Assigns. This Agreement may be assigned by either
of the parties hereto by providing the other party with prior written notice of
such assignment. This Agreement and the rights, interests and obligations
hereunder shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.

8.7 Governing Law. This Agreement shall be governed by and interpreted and
enforced in accordance with the Laws of the State of Texas disregarding any
conflicts of law principles to the contrary.

8.8 Waiver and Other Action. This Agreement may be amended, modified, or
supplemented only by a written instrument executed by the parties against which
enforcement of the amendment, modification or supplement is sought.

8.9 Severability. If any provision of this Agreement is held to be illegal,
invalid, or unenforceable, such provision shall be fully severable, and this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision were never a part hereof; the remaining provisions
hereof shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance; and in lieu of
such illegal, invalid or unenforceable provision, there shall be added
automatically as part of this Agreement, a provision as similar in its terms to
such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable so as to give effect to the intention of the
parties.

8.10 Third-Party Beneficiaries. This Agreement and the rights, obligations,
duties and benefits hereunder are intended for the parties hereto, and no other
person or entity shall have any rights, obligations, duties and benefits
pursuant hereto.

8.11 Mutual Contribution. The parties to this Agreement and their counsel have
mutually contributed to its drafting. Consequently, no provision of this
Agreement shall be construed against any party on the ground that such party
drafted the provision or caused it to be drafted or the provision contains a
covenant of such party.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement.

Signature page to follow

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement.

 

SELLERS: WESTHOFF HUNTER, LLC By:  

/s/ Kirk Trosclair

Name: Kirk Trosclair Its: Executive Vice President GREENHUNTER WATER, LLC By:  

/s/ Kirk Trosclair

Name: Kirk Trosclair Its: Executive Vice President PURCHASER: CLEAR WATER
RESOURCES PARTNERS, LLC A Delaware limited liability Company By:  

/s/ Jason M Roberts.

Name: Jason M Roberts. Its:   Member

 

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LIST OF SCHEDULES

SCHEDULE 1

Assumed Liabilities-NONE

SCHEDULE 2

Allocation of Purchase Price

SCHEDULE 3

Environmental Claims-NONE

SCHEDULE 4

Employee Lists_No Employees are to be hired by Purchaser

LIST OF EXHIBITS

EXHIBIT A – WESTHOFF SWD Permit

EXHIBIT B – WESTHOFF SWD real property Special Warranty Deed

EXHIBIT C – WESTHOFF SWD Asset List

EXHIBIT D – Form of Promissory Note

 

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