Document:

exhibit10-1.htm

 

 

Exhibit 10.1

ASSET PURCHASE AGREEMENT

 

This Asset Purchase Agreement (the “Agreement”) dated June 15, 2012 (the “Effective Date”), is between CALIBRUS, INC., a Nevada corporation (“Seller”), and CALIBRUS HOSTED BUSINESS SOLUTIONS, LLC, an Arizona limited liability company (“Buyer”).

 

RECITALS

 

A.           Seller operates a third party verification business located in Tempe, Arizona (the “Business”).

 

B.           Buyer desires to purchase substantially all assets of Seller used to operate the Business, and Seller desires to sell such assets, in exchange for the consideration described herein.

 

C.           The parties hereto desire to provide for the acquisition of substantially all assets of Seller used to operate the Business by Buyer on the terms and conditions set forth in this Agreement.

 

AGREEMENT

 

The parties agree as follows:

 

	
SECTION 1.  

	
ACQUISITION OF ASSETS; ASSUMPTION OF LIABILITIES.

 

1.1     Purchase and Sale of Assets.  Subject to the terms and conditions of this Agreement, at the Closing (defined below), Seller will sell, assign, transfer and convey to Buyer, free and clear of any liens, security interests, encumbrances, mortgages, pledges or other defects of title other than permitted encumbrances, if any, and Buyer will purchase from Seller, all of Seller’s right, title and interest in and to the assets listed below, all of which are used exclusively by Seller to operate the Business and constitute all of the assets required to operate the Business as of the Effective Date (collectively, the “Purchased Assets”):

 

(a) the assets listed on Schedule 1.1(a) attached hereto;

 

(b) any and all customer lists related to the Business;

 

(c) the service provider contracts and agreements listed on Schedule 1.1(c) ("Assumed Contracts"); and

 

(d) all intellectual property related to the Business, including, without limitation, the “Calibrus” trade name and trademarks used in the Business and certain software upgrades and add-ons made by Seller to certain of its software used in connection with the Business.  Seller will take any and all action necessary to transfer the foregoing trade name, trademarks and software upgrades and add-ons to Buyer at Closing, including, but not limited to, filing Articles of Amendment (or a similar instrument) with the Nevada Secretary of State and Arizona Corporation Commission, thereby changing the name of Seller.

 

 

  

  

  

 

 

1.2     Excluded Assets.  Other than the Purchased Assets subject to Section 1.1, Buyer expressly understands and agrees that it is not purchasing or acquiring, and Seller is not selling or assigning, any other assets or properties of Seller, and all such other assets and properties shall be excluded from the Purchased Assets (the "Excluded Assets").  Excluded Assets include, but are not limited to, the following assets and properties of Seller:

 

(a) cash, cash equivalents, investments, bank accounts, security deposits and safe deposit boxes of Seller, except for any of the foregoing that are derived from the Purchased Assets after the Closing;

 

(b) accounts receivable of Seller, except for accounts receivable derived from the Purchased Assets after the Closing.  With respect to accounts receivable of Seller derived from the Purchased Assets prior to the Closing (the “Pre-Closing A/R”), on or prior to the Closing Date, Seller will prepare invoices and a schedule listing all Pre-Closing A/R and deliver such invoices to both the customers and to Buyer.  After Closing, Buyer will collect all Pre-Closing A/R and remit such amounts to Seller as Buyer receives such amounts.  Seller agrees that the provisions of Section 10.2 will apply with respect to Seller contacting any customer listed on the Pre-Closing A/R schedule prepared under this Section 1.2(b);

 

(c) claims relating to Seller prior to Closing, including without limitation, those for income tax refunds and insurance payments; and

 

(d) any and all assets not constituting a Purchased Asset.

 

For avoidance of doubt, the Excluded Assets are listed on Schedule 1.2 attached hereto. With respect to any cash, cash equivalents, or accounts receivables derived from the Purchased Assets after Closing, any such amounts received by Seller will be immediately payable to Buyer without demand, deduction, or setoff.

 

    1.3     Assumed Liabilities.  Subject to the terms and conditions set forth herein, Buyer shall assume and agree to pay, perform and discharge when due any and all liabilities and obligations of Seller arising out of or relating to the Business or the Purchased Assets on or after the Closing, other than the Excluded Liabilities (collectively, the "Assumed Liabilities"), including, without limitation, the following:

 

(a) all the liabilities and obligations related to or arising out of the operation of the Purchased Assets on and after the Closing Date; and

 

(b) all liabilities and obligations to be performed or discharged after the Closing pursuant and related to the Purchased Assets.

 

1.4     Excluded Liabilities.   Buyer assumes only the Assumed Liabilities and no other liabilities associated with Seller or the operation of the Business.  Notwithstanding any other provision of this Agreement, except for the Assumed Liabilities, Buyer will not assume, or otherwise be responsible for, any of Seller’s liabilities or obligations, whether actual or contingent, matured or unmatured, liquidated or unliquidated, known or unknown, or related or unrelated to the Business or the Assets, whether arising out of occurrences prior to, at, or after the Closing Date (collectively, “Excluded Liabilities”).

 

 

  

  

  

 

 

1.5     Taxes.  All sales, use, transfer, documentary, stamp, excise, privilege, income, or other similar taxes payable as a result of the consummation of the transactions contemplated hereby will be paid by Seller.  Seller will indemnify, defend, protect, and hold Buyer and its managers, members, directors, officers, and employees harmless for, from, and against any liabilities that may be assessed against Buyer for taxes, interest, or penalties payable as a result of the consummation of the transactions contemplated herein.

 

	
SECTION 2.  

	
CONSIDERATION; INVESTIGATION PERIOD; CLOSING.

 

2.1     Consideration.  The consideration for the Purchased Assets (the “Purchase Price”) is the payment of Three Million Dollars ($3,000,000), subject to the adjustments set forth below, payable as follows:

 

(a) On the Closing Date, Buyer will pay Seller the amount of Two Million Dollars ($2,000,000) in cash, cashier’s check, or immediately available funds, subject to adjustment for any amounts unpaid by Seller to Buyer under that certain Senior Multiple Advance Promissory Note, dated April 26, 2012, executed by Seller, as Maker, in favor of Buyer, as Holder, subsequently replaced by that certain Amended and Restated Senior Multiple Advance Promissory Note dated June 15, 2012 executed by Seller, as Maker, in favor of Buyer, as Holder (the “Buyer Note”), and that certain Senior Multiple Advance Promissory Note, dated June 15, 2012, executed by Seller, as Maker, in favor of Marcus Shotey, as Holder (the “Shotey Note”) (the Buyer Note and the Shotey Note are collectively referred to herein as the “Pre-Closing Note”).  The initial payment described in this Section 2.1(a) will be reduced by the amount, if any, outstanding and payable to Buyer under the Pre-Closing Note and the Pre-Closing Note will then be cancelled and treated as paid in full.

 

(b) Within thirty (30) days after the end of the twelve (12) month period immediately following the Closing Date, Buyer will pay Seller the amount of Five Hundred Thousand Dollars ($500,000) in cash, cashier’s check, or immediately available funds (the “Twelve Month Payment”), subject to the adjustment provided for in this Section 2.1(b).  Within thirty (30) days after the end of the twelve (12) month period immediately following the Closing Date, Buyer will calculate the gross revenues received from all of the existing customers of the Business as of the Closing Date and from six prospective customers of the Business that Seller has actively engaged or can demonstrate proof of active engagement for new business as listed on Schedule 2.1 hereto (collectively, the "Business Customers") for the twelve (12) month period beginning on the Closing Date and ending on the last day of the twelfth month following the Closing Date (the “Twelve Month Revenue”). If the Twelve Month Revenue is equal to $3,500,000, then there will be no adjustment to the Twelve Month Payment. If the Twelve Month Revenue is less than $3,500,000, the Twelve Month Payment will be reduced by the amount of $1.25 for every $1.00 the Twelve Month Revenue is less than $3,500,000. If the Twelve Month Revenue is equal to or less than $3,100,000, Buyer will not owe the Twelve Month Payment to Seller.  If the Twelve Month Revenue is greater than $3,500,000, the Twelve Month Payment will be increased by the amount of $0.20 for every $1.00 the Twelve Month Revenue is greater than $3,500,000 until the Twelve Month Revenue equals or exceeds $5,000,000, at which time no further payments will be due Seller under this Section 2(b).  With respect to the Business Customers listed on Schedule 2.1, if any of the prospective customers become customers of the Business prior to the Closing Date, the Seller shall have the right to substitute a new prospective customer for each customer listed below that became a customer of the Business.

 

 

  

  

  

 

 

(c) Within thirty (30) days after the end of the eighteen (18) month period immediately following the Closing Date, Buyer will pay Seller the amount of Five Hundred Thousand Dollars ($500,000) in cash, cashier’s check, or immediately available funds (the “Eighteen Month Payment”), subject to the adjustment provided for in this Section 2.1(c).  Within thirty (30) days after the end of the eighteenth month following the Closing Date, Buyer will calculate the gross revenues received from the Business Customers for the twelve (12) month period beginning on the first day of the seventh month following the Closing Date and ending at the end of the eighteenth month following the Closing Date (the “Eighteen Month Revenue”).  If the Eighteen Month Revenue is equal to $3,500,000, then there will be no adjustment to the Eighteen Month Payment.  If the Eighteen Month Revenue is less than $3,500,000, the Eighteen Month Payment will be reduced by the amount of $1.25 for every $1.00 the Eighteen Month Revenue is less than $3,500,000. If the Eighteen Month Revenue is equal to or less than $3,100,000, Buyer will not owe the Eighteen Month Payment to Seller.  If the Eighteen Month Revenue is greater than $3,500,000, the Eighteen Month Payment will be increased by the amount of $0.20 for every $1.00 the Eighteen Month Revenue is greater than $3,500,000 until the Eighteen Month Revenue equals or exceeds $5,000,000, at which time no further payments will be due Seller under this Section 2(c).

      

            (d) Notwithstanding anything herein to the contrary, Buyer will have the right to offset the Twelve Month Payment or the Eighteen Month Payment due Seller to the extent Seller breaches any representation or warranty of Seller contained in this Agreement, provided, that, Buyer shall first provide notice of such alleged breach and intent to offset ("Notice of Offset") to Seller.  Upon receipt of the Notice of Offset, the parties shall have a fifteen (15) day period in which to resolve the potential offset, if any, provided however, that, Buyer shall pay the Twelve Month Payment and Eighteen Month Payment when due, less the disputed potential offset amount.  If the parties are unable to resolve the potential offset, then the parties shall utilize the arbitration process set forth in Section 8.6 of this Agreement to resolve the amount of the offset, if any.  The amount of offset shall not exceed the amount of damages caused to Buyer (including reasonable attorneys’ fees and court costs) as a result of any such breach of a Seller representation or warranty contained in this Agreement and shall be determined by agreement of the parties or through the arbitration process, as set forth above.

 

2.2     Closing and Closing Date.  The closing of the purchase and sale provided for in this Agreement (the “Closing”) will be held on or before August 31, 2012 (“Closing Date”) at the offices of Gallagher & Kennedy, P.A. in Phoenix, Arizona, or such other date or location that the parties agree to in writing, after the satisfaction or waiver of the conditions to Closing specified in Section 7 hereof (other than those conditions that are normally performed at the Closing, but subject to the satisfaction or waiver of such conditions); provided, however, that the Closing Date shall be automatically extended up to a maximum of forty-five (45) additional days if required in order to comply with any regulatory requirements of the United States Securities Exchange Commission.  Seller shall provide written notice to Buyer of any such required extension.

 

 

  

  

  

 

 

2.3    Allocation of Consideration.  The consideration for the Purchased Assets will be allocated to Seller and among the Purchased Assets as specified on Schedule 2.3.  Within ninety (90) days following the Closing, Buyer will prepare and submit to Seller an Internal Revenue Form 8594 (relating to purchase price allocation), prepared in accordance with such allocation.  Seller and Buyer will prepare their respective federal, state and local tax returns and reports employing the allocation made pursuant to this Section 2.3 and will not take a position in any tax proceeding or audit or otherwise that is inconsistent with such allocation.  Seller and Buyer will give prompt notice to each other of the commencement of any tax audit or the assertion of any proposed deficiency or adjustment by any tax authority or agency that challenges such allocation.

 

	
SECTION 3.  

	
REPRESENTATIONS AND WARRANTIES OF SELLER.

 

Seller represents and warrants to Buyer that the following are true, accurate, and correct as of the Effective Date and as of the Closing Date:

 

3.1     Organization and Authorization.  Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada and all other states in which Seller conducts its business.  Seller has the requisite power and authority to execute and deliver this Agreement and perform its obligations thereunder.  This Agreement has been duly and validly authorized, executed, and delivered by Seller and constitutes the legal, valid, and binding obligations of Seller, enforceable in accordance with its terms subject to applicable bankruptcy, insolvency, reorganization, and other similar laws affecting the enforceability of creditors’ rights generally, general equitable principles, and the discretion of courts in granting equitable remedies.

 

3.2     Ownership of the Assets.  Except as disclosed on Schedule 3.2, Seller owns and has valid title to and ownership of the Purchased Assets, free and clear of any lien, security interest, encumbrance, mortgage, pledge, or other defect of title.  On or prior to the Closing Date, Seller shall cause any liens, security interests, encumbrances, mortgages, pledges or other defects of title encumbering the Purchased Assets to be released.

 

3.3     No Violation or Conflict.  Neither the execution and delivery of this Agreement, nor the performance of its obligations hereunder, by Seller is a violation of any provision of its articles of incorporation or bylaws, or any law, rule, regulation, order, writ, injunction, judgment, decree, contract, or other obligation to which it is a party or to which it or the Purchased Assets are subject.

 

3.4     Licenses and Permits.  Schedule 3.4 sets forth all licenses, permits, authorizations, franchises, and certifications of governmental and non-governmental authorities held by Seller that are material to Seller or the Business.  Seller is in compliance in all material respects with all such licenses, permits, authorizations, franchises, and certifications, all of which are in full force and effect.  There are no other licenses, permits, authorizations, franchises, or certifications that are material to Seller or the Business that Seller is required to obtain.  Seller does not know of any threatened suspension, revocation, or invalidation of any such licenses, permits, authorizations, franchises, or certifications, or any basis therefor.

 

 

  

  

  

 

 

3.5     Consents.  Except as disclosed on Schedule 3.5, no consent or approval by, or filing with, any governmental authority or any other Person is required in connection with the execution and delivery by Seller of this Agreement or the consummation by Seller of the transactions contemplated hereby.

 

3.6     Adverse Proceedings.  Except as disclosed on Schedule 3.6, there are no actions, suits, proceedings, or arbitrations pending or, to the Knowledge of Seller (defined below), threatened against Seller that would materially adversely affect the Purchased Assets or any portion thereof.

 

3.7     Condition of the Purchased Assets.  All of the tangible Purchased Assets are free from material defects and are in good operating condition and repair, normal wear and tear excepted.

 

3.8     Taxes.  All federal, state, county, and local tax and other returns and reports required and due to be filed with respect to Seller, the Purchased Assets, or both have been filed, and all taxes, levies, license and registration fees, charges or withholdings of any nature whatsoever, including, without limitation, ad valorem taxes (collectively, “Taxes”) have been paid, or adequate provision for the payment thereof has been made.  Buyer will not be responsible for, and Buyer specifically assumes no obligations to pay, any Taxes or any other similar liability or obligation of Seller.  To the Knowledge of Seller, Seller is not in default of the payment of any Taxes due or payable or of any assessments received in respect thereof and Seller has not waived any statute of limitations in connection with, or granted any extension of a period for the assessment of, any Tax.

 

3.9     Environmental Matters.  To the Knowledge of Seller, the conduct of Seller’s operations and its operation of the Business, have at all times complied in all material respects with all applicable foreign, federal, state and local statutes, laws, ordinances, judgments, decrees, orders, rules, regulations, policies and guidelines relating to pollution, environmental protection, hazardous substances, human health and safety, and related matters (collectively, the “Environmental Legal Requirements”).  Seller has not received any notice from any governmental authority or any other Person of any alleged violation or noncompliance by Seller or of any liabilities or potential liabilities of Seller arising under the Environmental Legal Requirements.  For purposes of this Section 3.9, “hazardous substance “ means oil or any other substance which is included within the definition of a “hazardous substance,” “pollutant,” “toxic substance,” “toxic waste,” “hazardous waste,” “contaminant,” or other words of similar import in any federal or state environmental law, statute, ordinance, rule or regulation.

 

3.10    No Finders or Brokers.  Except as set forth on Schedule 3.10, Seller has not engaged any finder or broker in connection with the transactions contemplated hereunder.

 

 

  

  

  

 

 

3.11    Real Property.

 

(a) Owned Real Property.  Seller does not own any real property.

 

(b) No Other Leases.  Except as specifically disclosed on Schedule 3.11, there are no leases, subleases, licenses, occupancy agreements, options, rights, concessions or other agreements or arrangements, written or oral, granting to any Person the right to purchase, use or occupy real property in connection with the operation of the Business.  Schedule 3.11 sets forth a true and complete list of each location of real property leased, subleased, or licensed to Seller with respect to the Business.  Seller has delivered to Buyer true and complete copies of the leases, subleases, or other agreements relating to such leased real property, including all amendments, supplements, modifications, and guaranties associated therewith (each a “Real Property Lease”).  After the Effective Date, no Real Property Lease will be modified or supplemented without Buyer’s prior written consent.  Except as specifically disclosed on Schedule 3.11, each Real Property Lease is in full force and effect and is valid and enforceable against the landlord of each such Real Property Lease in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, or creditor’s rights laws.  Except as set forth on Schedule 3.11, Seller is not in receipt of any notice of default pursuant to any Real Property Lease, no rentals are past due and to the Knowledge of Seller, no conditions exist which with the giving of notice or the lapse of time or both would constitute a default under a Real Property Lease by any party thereto.

 

3.12    Financial Statements.  Attached hereto as Schedule 3.12(a) are the audited financial statements of Seller as of December 31, 2011 (the "Audited Financial Statements") and the unaudited financial statements of Seller for the quarter ended March 31, 2012 (the "Unaudited Financial Statements" and, together with the Audited Financial Statements, the “Financial Statements”).  Attached hereto as Schedule 3.12(b) are the unaudited pro forma financial statements relating to the Business (the "Pro Forma Financials"). The Audited Financial Statements (a) are consistent with the underlying books and records of Seller, (b) have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods covered thereby, and (c) fairly and accurately present the assets, liabilities (including all reserves) and financial position of the Business as of the respective dates thereof and the results of operations and changes in cash flows for the periods then-ended.  The Unaudited Financial Statements (a) are consistent with the underlying books and records of Seller, and (b) fairly and accurately present the assets, liabilities (including all reserves) and financial position of the Business as of the respective dates thereof and the results of operations and changes in cash flows for the periods then-ended. At the respective dates of the Financial Statements and except as set forth on Schedule 3.12, there were no liabilities of Seller (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due, including any liability for taxes) which, in accordance with generally accepted accounting principles, should have been shown or reflected in the Financial Statements or the notes thereto, which are not shown or reflected in the Financial Statements or the notes thereto.

 

3.13    Compliance with Law.  To the Knowledge of Seller, Seller’s conduct of the Business has not violated in any respect and is in compliance in all respects with any and all local, state, federal, and foreign laws, statutes, ordinances, regulations, rules, codes, decisions, decrees, and orders. Seller has not received any notice to the effect that, or otherwise been advised that, it is not in compliance with any such statutes, regulations, rules, judgments, decrees, orders, ordinances, or other laws.

 

 

  

  

  

 

 

3.14    Intellectual Property.  Schedule 3.14 lists all of Seller’s intellectual property (collectively, the “Intellectual Property”).  Except as set forth on Schedule 3.14, (i) no Person has a right to receive a royalty or similar payment in respect of any of the Intellectual Property, (ii) Seller has no licenses granted, sold, or otherwise transferred by or to it or other similar agreements to which it is a party, restricting or limiting Seller’s rights, in whole or in part, to any of the Intellectual Property, and (iii) Seller owns or controls and has the sole right to use the Intellectual Property.  Seller has taken commercially reasonable steps to protect the Intellectual Property from infringement by any other Person.  To the Knowledge of Seller, Seller’s use of the Intellectual Property is not infringing upon or otherwise violating the rights of any third party.

 

3.15    Employees.  Schedule 3.15 sets forth (i) a list of all employees of Seller, and their wage rates or salaries, as of the Effective Date, (ii) the dates of employment for such employees, and (iii) a list of each contract, plan, arrangement, policy, program or commitment, whether oral or written, providing for insurance coverage (including, without limitation, any self-insured arrangements), workers’ compensation, disability benefits, supplemental unemployment benefits, vacation benefits, retirement benefits, life, health, dental, disability or accident benefits or for deferred compensation, pension, profit-sharing, bonuses, stock options, stock appreciation rights, stock purchases or other forms of incentive compensation or post-retirement insurance, compensation or benefits (collectively, “Employee Plans”).  Seller has paid all benefits due to its employees at any time under its Employee Plans.  Seller complies and has complied in all material respects with all applicable laws respecting employment, and, no administrative charges, claims, controversies, investigations, or suits are pending or threatened, with respect to such laws or regulations, either by private individuals or by any governmental authority.

 

3.16    Insurance.  Schedule 3.16 sets forth and describes all policies of insurance which are maintained by Seller and which relate to the Purchased Assets, and all of such policies of insurance are in good standing, valid and subsisting, and in full force and effect in accordance with their terms and Seller is not in default with respect to its payment obligations under any such policies.  Seller has not been refused any insurance with respect to the Purchased Assets or the Business, and its coverage has not been limited by any insurance carrier to which it has applied for any such insurance or with which it has carried.

 

3.17    Customers.  Schedule 3.17 sets forth the top ten (10) customers of Seller (based on dollar amounts of services purchased from Seller) for the twelve (12) months ended March 31, 2012 (the “Material Customers”) and the amounts for which such Seller invoiced such Material Customers during such period.  Except as set forth on Schedule 3.17, (i) all Material Customers continue to be customers of Seller in connection with the Business, (ii) Seller has not received any notice, nor does Seller have knowledge, that any Material Customer will reduce materially its business with Seller in connection with the Business from the levels achieved during the twelve (12) months ended March 31, 2012, (iii) no Material Customer has terminated its relationship with Seller in connection with the Business or, threatened to do so, (iv) no Material Customer has modified or, indicated that it intends to modify its relationship with Seller in connection with the Business in a manner that is less favorable in any material respect to Seller, or, to the Knowledge of Seller, indicated it will not agree to do business on such terms and conditions at least as favorable as the terms and conditions provided to Seller on March 31, 2012, and (v) Seller is not involved in any material claim, dispute, or controversy with any Material Customer.  Since March 31, 2012 and except as otherwise set forth on Schedule 3.17, there has been no other material adverse change in the relationship between Seller and any Material Customer.

 

 

  

  

  

 

 

3.18    Assumed Contracts.  All of the Assumed Contracts which will be assigned by Seller and assumed by Buyer and listed on Schedule 3.18 are valid and in full force and effect.  Seller has duly performed all of its obligations under the Assumed Contracts to the extent those obligations to perform have accrued and no violation of, or default or breach under any Assumed Contracts by Seller or, to the Knowledge of Seller, any other party has occurred and neither Seller nor any other party has repudiated any provisions thereof.  No event or action has occurred, is pending, or, to the Knowledge of Seller, is threatened, which, after the giving of notice, the lapse of time, or otherwise, will result in a breach or default in any material respect by Seller, or, to the Knowledge of Seller, any other person, under any Assumed Contract.

 

3.19    Disclosure.  Neither this Agreement nor any of the Schedules or Exhibits hereto contains or will contain when delivered at Closing any untrue statement by Seller of a material fact or will omit to state a material fact necessary to make the statements contained herein or therein, in light of the circumstances in which they were made, not misleading.

 

3.20    No Other Representations and Warranties.  Except for the representations and warranties contained in this Section 3 (including the related portions of the relevant Schedules), neither Seller nor any other Person has made or makes any other express or implied representation or warranty, either written or oral, on behalf of Seller.

 

	
SECTION 4.  

	
REPRESENTATIONS AND WARRANTIES OF BUYER

 

Buyer hereby represents and warrants to Seller as of the date of this Agreement and as of the Closing Date as follows:

 

4.1     Organization and Authorization.  Buyer is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Arizona, and has the requisite power and authority to execute and deliver this Agreement and perform its obligations hereunder.  This Agreement has been duly and validly executed and delivered by Buyer and constitutes the legal, valid and binding obligation of Buyer enforceable in accordance with its terms, subject to applicable bankruptcy and other similar laws affecting the enforceability of creditors’ rights generally, general equitable principles and the discretion of courts in granting equitable relief.

 

4.2     No Violation or Conflict.  Neither the execution nor delivery of this Agreement, nor the performance of its obligations hereunder, by Buyer is a violation of any provision of any law, rule, regulation, order, writ, injunction, judgment or decree.

 

4.3     Consents.  No consent or approval by, or filing with, any governmental authority or any other Person is required in connection with the execution and delivery by Buyer of this Agreement or for consummation by Buyer of the transactions contemplated hereby.

 

 

  

  

  

 

 

4.4     Brokers.  Buyer has not engaged any finder or broker in connection with the transactions contemplated hereunder.

 

4.5     Sufficiency of Funds.  Buyer has sufficient cash on hand or other sources of immediately available funds to enable it to make payment of the Purchase Price in accordance with the provisions of Section 2.1 and consummate the transactions contemplated by this Agreement.

 

4.6     Solvency.  Immediately after giving effect to the transactions contemplated hereby, Buyer shall be solvent and shall:  (a) own property that has a fair saleable value greater than the amounts required to pay its debts (including a reasonable estimate of the amount of all contingent liabilities); and (b) have adequate capital to carry on its business.  No transfer of property is being made and no obligation is being incurred in connection with the transactions contemplated hereby with the intent to hinder, delay, defraud either present or future creditors of Buyer or Seller.  In connection with the transactions contemplated hereby, Buyer has not incurred, nor plans to incur, debts beyond its ability to pay as they become absolute and matured.

 

4.7     Independent Investigation.  Buyer has conducted its own independent investigation, review and analysis of the Business and the Purchased Assets, and acknowledges that it has been provided adequate access to the personnel, properties, assets, premises, books and records, and other documents and data of Seller for such purpose. Buyer acknowledges and agrees that: (a) in making its decision to enter into this Agreement and to consummate the transactions contemplated hereby, Buyer has relied solely upon its own investigation and the express representations and warranties of Seller set forth in Section 3 of this Agreement (including related portions of the relevant Schedules); and (b) neither Seller nor any other Person has made any representation or warranty as to Seller, the Business, the Purchased Assets or this Agreement, except as expressly set forth in Section 3 of this Agreement (including the related portions of the relevant Schedules).

 

	
SECTION 5.  

	
COVENANTS OF SELLER; CERTAIN OTHER MATTERS.

 

5.1     Representations and Warranties.  Until the Closing Date, Seller will not take any action that would cause any of the representations and warranties made by Seller in this Agreement not to be true and correct in all material respects on and as of the Closing Date with the same force and effect as if such representations and warranties had been made on and as of the Closing Date.

 

5.2     Confidential Information.  Seller will not, and will cause all Affiliates (defined below) not to, directly or indirectly, use or disclose to any third Person, any confidential or proprietary information relating to Buyer, except as required by law.

 

5.3     Due Diligence Review.  Seller will, at all reasonable times prior to the Closing Date, make all aspects of the Business reasonably available for examination by the Buyer’s officers or agents, including, but not limited to, Persons having business relationships with Seller, including Material Customers and vendors of the Business, as Buyer will reasonably determine.  Buyer will provide reasonable prior notice to Seller if it desires to meet with any Person having a business relationship with Seller.  Any examination of the Business will be conducted, to the extent practicable, (i) after reasonable notice and during normal business hours, (ii) under the supervision of Seller’s personnel, (iii) in such a manner as to maintain the confidentiality of the transactions contemplated hereby, and (iv) without unreasonably interfering with the operations of the Business.  No such examination, inspection, or review by Buyer or its representatives will in any way affect, diminish, or terminate any of the representations, warranties, or covenants of Seller expressed in this Agreement.   Without limiting the generality of the foregoing, Buyer and Seller acknowledge and agree that Buyer’s examination will include confirming the business relationship of the customers of the Business.

 

 

  

  

  

 

 

5.4     Consents.   To the extent consents are required under any Assumed Contract, Seller will use all commercially reasonable efforts (with the reasonable assistance of Buyer) to obtain the written consent, authorization, or approval to the assignment by Seller to Buyer of the Assumed Contracts prior to the Closing Date.

 

5.5     No Alternative Transactions.  Seller will (i) not directly, or indirectly through any manager, officer, director, shareholder, partner, employee, agent or advisor of Seller, solicit, initiate, pursue, or encourage (by way of furnishing information or otherwise) any inquiries or proposals, or enter into any discussions, negotiations, or agreements (whether preliminary or definitive) with any Person, contemplating or providing for any merger, acquisition, purchase, or sale of the stock of Seller or any material part of the assets of Seller (any thereof, an “Alternative Proposal”); (ii) deal exclusively with Buyer with respect to the sale of the Business and the Assets; and (iii) notify Buyer within 24 hours upon receipt by Seller or its Affiliate, member, partner, manager, officer, director, shareholder, employee or agent of Seller of any Alternative Proposal.

 

5.6     Conduct of Business Pending the Closing.  From the Effective Date until the Closing, except as otherwise provided in this Agreement or approved in writing by Buyer, Seller will comply with the following covenants:

 

(a) No Material Changes; Compliance with Laws.  Seller will carry on the Business and maintain the Business in the ordinary course of business and in substantially the same manner as heretofore conducted.  Seller will duly comply with all laws applicable to the Business or the Purchased Assets.

 

(b) Related Party Transactions.  Seller will not enter into any transaction, including, without limitation, the leasing of property, the purchase or sale of goods or services, or the borrowing or lending of money with any Affiliate that relates to or is likely to effect the Purchase Assets.

 

(c) No Encumbrances.  Seller will not suffer or permit the creation of any lien or encumbrance upon any of the Purchased Assets.

 

(d) Intellectual Property.  Seller will duly maintain all the Intellectual Property, and with respect to each item of pending, issued, or registered Intellectual Property, will fully and diligently prosecute and not allow abandonment of such item of Intellectual Property.

 

(e) Maintenance of Assumed Contracts.  Seller will not change, amend, terminate, or otherwise modify any material term of any Assumed Contract in connection with, or in any way relating to, the Business, to which Seller is a party.

 

(f) Maintenance of Insurance.  Seller will maintain all of the insurance policies in effect as of the date hereof unless replaced by policies which are substantially comparable to such policies.

 

 

  

  

  

 

 

	
SECTION 6.  

	
COVENANTS OF BUYER.

 

6.1     Representations and Warranties.  Until the Closing Date, Buyer will not take any action that would cause any of the representations and warranties made by Buyer in this Agreement not to be true and correct in all material respects on and as of the Closing Date with the same force and effect as if such representations and warranties had been made on and as of the Closing Date.

 

6.2     Confidential Information.  Buyer will not, and will cause all Affiliates not to, directly or indirectly, use or disclose to any third Person, any confidential or proprietary information relating to Seller, except as required by law.

 

	
SECTION 7.  

	
CLOSING DELIVERIES; CONDITIONS TO CLOSING; CLOSING COSTS AND PRORATIONS

 

	
7.1 

	
    Closing Deliveries.

 

(a) At Closing, Buyer will deliver all of the following:

 

(i) the various certificates, instruments, and documents referred to in Section 7.3 below; and

 

(ii) such other documents or instruments of conveyance or transfer as may be reasonably requested by Seller, each in form or substance satisfactory to Seller and executed by Buyer.

 

(b) At Closing, Seller will deliver all of the following:

 

(i) the various certificates, instruments, and documents referred to in Section 7.2 below;

 

(ii) company resolutions from the board of directors and shareholders of Seller authorizing the transactions contemplated hereby;

 

(iii) a non-foreign affidavit properly executed and containing such information as is required by IRC Section 1445(b)(2) and its regulations; and

 

(iv) such other documents or instruments of conveyance or transfer as may be reasonably requested by Buyer, each in form or substance satisfactory to Buyer and executed by Seller.

 

 

  

  

  

 

 

7.2     Conditions to Obligations of Buyer.  Unless waived in writing by Buyer, the obligation of Buyer hereunder to consummate the transactions contemplated by this Agreement is subject to the satisfaction at or prior to the Closing Date of the following conditions:

 

(a) Representations and Warranties True. The representations and warranties of Seller contained in this Agreement will be true and accurate in all material respects on and as of the Closing Date with the same effect as though made on and as of such date.

 

(b) Covenants Performed.  Seller will have performed and complied in all material respects with the covenants, agreements and conditions required to be performed or complied with by it hereunder on or prior to the Closing Date.

 

(c) Compliance Certificate.  Buyer will have received a certificate of Seller certifying as to the matters set forth in Sections 7.2(a) and (b) above.

 

(d) Required Consents Received.  Seller will have obtained and delivered to Buyer copies of all required consents listed on or required to be listed on Schedule 3.5, and no such required consents will have been withdrawn, suspended or conditioned.

 

(e) Bill of Sale.  Seller will have delivered to Buyer an executed Bill of Sale in substantially the form attached hereto as Schedule 7.2(e).

 

(f) Assignment and Assumption of Contracts.  Seller will have delivered to Buyer an executed Assignment and Assumption of Contracts in substantially the form attached hereto as Schedule 7.2(f).

 

(g) Assignments of Intellectual Property.  Seller will have delivered to Buyer assignments of intellectual property, in recordable form to the extent necessary to assign such rights, each in a form reasonably acceptable to Buyer.

 

(h) Employment Agreements. Seller will have caused each of Tom Harker, Kelly M. Robinson, Michael Brande and Mike Rae (each individually a “Key Employee” and collectively, the “Key Employees”) to execute and deliver to Buyer an employment agreement in form and substance satisfactory to Buyer.  At such time as the form of employment agreement is agreed upon, Schedule 7.2(h) to this Agreement will be updated to include such form of employment agreement.

 

(i) Release of Factors Southwest Lien.  Seller will cause the liens encumbering the Purchased Assets in favor of Factors Southwest, LLC, as secured party, to be released in full.  Such release will include, without limitation, the filing of UCC-3 termination statements with the Nevada Secretary of State and Arizona Secretary of State along with terminations of any credit or factoring agreements between Seller and Factors Southwest, LLC.

 

(j) Shareholder Approval.  Seller will have received approval and consent of the required number of shareholders under Nevada law to consummate the transaction contemplated by this Agreement and such consent will not have been withdrawn, suspended or conditioned.  Seller will certify such shareholder approval in writing to Buyer on or before the Closing Date.

 

(k) Telephone and Internet.  Seller will have delivered to Buyer an assignment of all telephone numbers, facsimile numbers and internet addresses currently used in the Business, including the execution of all documents and the performance of any steps reasonably required by the applicable telephone company or internet domain registrar to effect such an assignment.

 

(l) Required Contract Renewals Received.  Seller will have obtained and delivered to Buyer copies of all required Business Customer contract renewals as listed Schedule 3.5.

 

 

  

  

  

 

 

7.3     Conditions to Obligations of Seller.  Unless waived in writing by Seller, the obligation of Seller hereunder to consummate the transactions contemplated by this Agreement is subject to the satisfaction at or prior to the Closing of the following conditions:

 

(a) Representations and Warranties True. The representations and warranties of Buyer contained in this Agreement will be true and accurate in all material respects on and as of the Closing Date with the same effect as though made on and as of such date.

 

(b) Covenants Performed. Buyer will have performed and complied in all material respects with the covenants, agreements and conditions required to be performed or complied with by it hereunder on or prior to the Closing Date.

 

(c) Compliance Certificate.  Seller will have received a certificate of Buyer certifying as to the matters set forth in Sections 7.3(a) and (b) above.

 

(d) Bill of Sale.  Buyer will have delivered to Seller an executed Bill of Sale in substantially the form attached hereto as Schedule 7.2(e).

 

(e) Assignment and Assumption of Contracts.  Buyer will have delivered to Seller an executed Assignment and Assumption of Contracts in substantially the form attached hereto as Schedule 7.2(f).

 

(f) Shareholder Approval.  Seller will have received approval and consent of the required number of shareholders under Nevada law to consummate the transaction contemplated by this Agreement and such consent will not have been withdrawn, suspended or conditioned.

 

7.4     Cooperation.  Seller and Buyer will use commercial reasonably efforts, and will cooperate fully with each other, to comply as soon as practicable with all governmental requirements applicable to, or necessary for the consummation of, the transactions contemplated hereby.  Seller and Buyer will provide such information and communications to governmental authorities as such governmental authorities may request, including Seller cooperating with Buyer in the transfer or application for permits and licenses required to operate the Business and reasonably cooperating in the resolution of the administrative actions (if any) brought before such governmental authorities.

 

 

  

  

  

 

 

	
SECTION 8.  

	
INDEMNIFICATION.

 

8.1     Indemnification by Seller.  Seller will indemnify, defend, protect and hold harmless Buyer, its Affiliates and their respective shareholders, managers, directors, officers, employees, representatives and members (“Buyer Indemnitees”) for, from and against any and all losses, costs, expenses, claims, damages, actions, suits, proceedings, hearings, investigations, charges, complaints, demands, injunctions, judgments, orders, decrees, rulings, directions, dues, penalties, fines, amounts paid in settlement, liabilities, obligations, taxes, liens, losses, and fees, court costs, reasonable obligations and liabilities, including interest, penalties and reasonable attorneys fees and disbursements (“Damages”), arising out of, based upon or otherwise in respect of:

 

(a) any inaccuracy in or breach of any representation or warranty of Seller made in or pursuant to this Agreement;

 

(b) any breach or nonfulfillment by Seller of any covenant or obligation contained in this Agreement;

 

(c) any and all liabilities, claims, damages, costs or expenses arising under any Assumed Contract as a result of obligations and duties of Seller under any Assumed Contract arising or occurring prior to the Closing Date; and

 

(d) other than the Assumed Liabilities, any liability relating to Seller’s operation of the Business or ownership of the Purchased Assets prior to the Closing Date.

 

8.2     Indemnification by Buyer.  Buyer will indemnify, defend, protect and hold harmless Seller, its Affiliates and their officers, directors, employees, representatives and shareholders (“Seller Indemnitees”) for, from and against any and all Damages, arising out of, based upon or otherwise in respect of:

 

(a) any inaccuracy in or breach of any representation or warranty of Buyer made in or pursuant to this Agreement;

 

(b) any breach or nonfulfillment by Buyer of any covenant or obligation contained in this Agreement;

 

(c) any and all liabilities, claims, damages, costs or expenses arising any Assumed Contract as a result of obligations and duties of Seller under any Assumed Contract arising or occurring after the Closing Date; and

 

(d) the Assumed Liabilities and any liability relating to the operation of the Purchased Assets as of or after the Closing Date.

 

8.3     Defense of Claims. If a claim for damages (a “Claim”) is to be made by a party entitled to indemnification hereunder against the indemnifying party, the party claiming such indemnification shall give written notice (a “Claim Notice”) to the indemnifying party as soon as practicable after the party entitled to indemnification becomes aware of any fact, condition or event which may give rise to damages for which indemnification may be sought under this Section 8; provided, that the omission by any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its indemnification obligation under this Section 8 except to the extent that such omission results in a failure of actual notice to the indemnifying party and such indemnifying party is damaged as a result of such failure to give notice.  After such notice, if the indemnifying party shall acknowledge in writing to the indemnified party that the indemnifying party shall be obligated under the terms of its indemnity hereunder in connection with such lawsuit or action, then the indemnifying party shall be entitled, if it so elects, (i) to take control of the defense and investigation of such lawsuit or action, (ii) to employ and engage attorneys of its own choice (which shall be reasonably acceptable to the indemnified party) to handle and defend the same, at the indemnifying party’s cost, risk and expense unless the named parties to such action or proceeding include both the indemnifying party and the indemnified party and the indemnified party has been advised in writing by counsel that there may be one or more legal defenses available to such indemnified party that are different from or additional to those available to the indemnifying party; provided, that the indemnified party may participate in such defense, but only at such indemnified party’s expense pursuant to this Section 8.3, and (iii) to compromise or settle such claim, which compromise or settlement shall be made only with the written consent of the indemnified party, such consent not to be unreasonably withheld.  In any event, Seller and Buyer shall cooperate in the defense of any action or claim subject to this Section 8 and the records of each shall be available to the other with respect to such defense.

 

 

  

  

  

 

 

8.4     Monetary Limitations.  Seller will not be obligated to indemnify the Buyer Indemnitees hereunder until the aggregate amount of Damages suffered by the Buyer Indemnitees exceeds Fifty Thousand Dollars ($50,000) (the “Indemnification Threshold”); provided, however, that indemnification for Damages arising out of, resulting from or relating to a breach of any representation or warranty from fraud or willful misrepresentation shall not be subject to the Indemnification Threshold.

 

The Indemnification Threshold will not apply to Buyer’s right to offset the Twelve Month Payment or Eighteen Month Payment due Seller to the extent Seller breaches any representation or warranty of Seller contained in this Agreement as set forth in Section 2.1(d).

 

(a) Once the aggregate amount of Damages suffered by the Buyer Indemnitees exceeds the Indemnification Threshold, the Buyer Indemnitees shall be entitled to indemnification from and against all Damages relating back to the first dollar.

 

(b) Notwithstanding the foregoing, the maximum amount of Damages payable to the Buyer Indemnitees hereunder with respect to indemnification hereunder is equal to the amount of the Purchase Price that has been actually received by the Seller as of the date of such Claim (the “Indemnification Cap”), except that the Indemnification Cap shall not apply to any Damages arising out of, resulting from or relating to a breach of any representation or warranty from fraud or willful misrepresentation by the Seller.  Buyer shall have the right to offset any Damages in excess of the Indemnification Cap against the Twelve Month Payment or Eighteen Month Payment due Seller in accordance with Section 2.1(d).

 

(c) Buyer shall not be obligated to indemnify the Seller Indemnitees hereunder with respect to breaches of representations or warranties until the aggregate amount of Damages suffered by the Seller Indemnitees relating to breaches of representations or warranties exceeds the Indemnification Threshold.  Once the aggregate amount of such Damages suffered by the Seller Indemnitees exceeds the Indemnification Threshold, the Seller Indemnitees shall be entitled to indemnification from and against all Damages relating back to the first dollar; provided, however, that indemnification for Damages arising out of, resulting from or relating to a breach of any representation or warranty from fraud or willful misrepresentation shall not be subject to the Indemnification Threshold.  The maximum amount for which Buyer is obligated to indemnify the Seller Indemnitees hereunder with respect to breaches of representations and warranties is an amount equal to the Indemnification Cap; provided, however, that indemnification for Claims arising out of, resulting from or relating to a breach of any representation or warranty from fraud or willful misrepresentation shall not be subject to the Indemnification Cap.

 

(d)           In no event shall any indemnifying party be liable to any indemnified party for any punitive, incidental, consequential, special or indirect damages, including loss of future revenue or income, loss of business reputation or opportunity relating to the breach or alleged breach of this Agreement, or diminution of value or any damages based on any type of multiple.

 

(e)           Each indemnified party shall take, and cause its Affiliates to take, all reasonable steps to mitigate any Damages upon becoming aware of any event or circumstance that would be reasonably expected to, or does, give rise thereto, including incurring costs only to the minimum extent necessary to remedy the breach that gives rise to such Damage.

 

(f)           Seller shall not be liable under this Section 8 for any Damages based upon or arising out of any inaccuracy in or breach of any of the representations or warranties of Seller contained in this Agreement if Buyer has knowledge of such inaccuracy or breach prior to the Closing.

 

 

  

  

  

 

 

8.5     Survival of Representations and Warranties.  The representations and warranties of the parties contained in this Agreement will survive the Closing until two (2) years from the Closing Date.

 

8.6     Dispute Resolution.

 

(a)           Dispute.  As used in this Agreement, “Dispute” means any dispute or disagreement between or among Seller and Buyer arising after the Closing concerning the interpretation of this Agreement, the validity of this Agreement, any breach or alleged breach by any party of this Agreement or any other matter relating in any way to this Agreement.

 

(b)           Process.  If a Dispute arises, the parties will follow the procedures specified in subsections (c) through (m) below.

 

(c)           Notice of Dispute.  If a Dispute arises, then Seller or Buyer, as applicable, will serve a written notice (the "Notice of Dispute") on the other party specifying the existence of the Dispute and set forth in reasonably specific detail the grounds of the Dispute.  The Notice of Dispute shall be given not later than ten (10) business days after the Dispute has arisen. The parties will promptly attempt to resolve any Dispute by negotiations between Seller and Buyer.  Either Seller or Buyer may give the other party written notice of any Dispute not resolved in the normal course of business.  If the Dispute has not been resolved by these parties within thirty (30) business days of the Notice of Dispute, or if the parties fail to meet within such thirty (30) business days, either Seller or Buyer may initiate arbitration as provided in Section 8.6 (d).

 

(d)           Arbitration.  The Dispute will be settled by arbitration and be governed by the Commercial Rules of the American Arbitration Association ("AAA") in effect on the date of the Notice of Dispute, except that the terms of Section 8.6 will control in the event of any difference or conflict between such Rules and the terms of Section 8.6.

 

(e)           Selection of Arbitrator.  There will be one arbitrator except as provided below.  The arbitrator selected, in order to be eligible to serve, will be a lawyer in Phoenix, Arizona with at least fifteen (15) years experience in general corporate and commercial matters.  If the parties cannot agree on a mutually acceptable single arbitrator within ten (10) business days of the initiation of arbitration, each party will select one arbitrator, and such arbitrators will select a third arbitrator within ten (10) business days. At the time of appointment and as a condition of the appointment, the arbitrator(s) will be apprised of the time limitations and other provisions of Section 8.6 and will agree to comply with such provisions and time limitations. The arbitrator(s) will reach a decision on the merits on the basis of applicable legal principles as embodied in the law of the State of Arizona.  The arbitration hearing will take place in Phoenix, Arizona.

 

(f)           Arbitration Procedures and Timing.  During the thirty (30) day period following appointment of the arbitrator(s), either party may serve on the other a request for limited numbers of documents directly related to the dispute.  Such documents will be produced within seven (7) days of the request.  Following the thirty (30) day period of document production, there will be a ten (10) day period during which limited depositions will be permissible.  Neither party will take more than five (5) depositions, and no deposition will exceed three (3) hours of direct testimony.  Disputes as to discovery or prehearing matters of a procedural nature will be promptly submitted to the arbitrator(s) pursuant to telephone conference call or otherwise.  The arbitrator(s) will make every effort to render a ruling on such interim matters at the time of the hearing (or conference call) or within five (5) business days thereafter. Following the period of depositions, the arbitration hearing will promptly commence.  The arbitrator(s) will make every effort to commence the hearing within thirty (30) days of the conclusion of the deposition period and, in addition, will make every effort to conduct the hearing on consecutive business days to conclusion.

 

(g)           Decision of Arbitrator.  The arbitrator(s) will render a decision, at the latest, within fifteen business days (15) of the close of the arbitration hearing.  The award will set forth the grounds for the decision (findings of fact and conclusions of law) in reasonably specific detail.  The award will be final and nonappealable.

 

(h)           Provisional Remedies.  At any time during the procedures specified in subsections (c) and (g), a party may seek a preliminary injunction or other provisional judicial relief if in its judgment such action is necessary to avoid irreparable damage or to preserve the status quo.  Despite such action, the parties will continue to participate in good faith in the procedures specified in this Section 8.6.

 

 

  

  

  

 

 

(i)           Tolling Statutes of Limitations.  All applicable statutes of limitation and defenses based upon the passage of time will be tolled with respect to matters that are the subject of the procedures specified in this Section 8.6 while such procedures are pending.  The parties will take such action, if any, as is required to effectuate such tolling.

 

(j)           Performance to Continue. Each party is required to continue to perform its obligations under this Agreement pending final resolution of any Dispute.

 

(k)           Extension of Deadlines. All deadlines specified in this Section 8.6 may be extended by mutual agreement between Seller and Buyer.

 

(l)           Enforcement. The parties regard the obligations in this Section 8.6 to constitute an essential provision of this Agreement and one that is legally binding on them. In case of a violation of the obligations in this Section 8.6 by any party, the other party may bring an action to seek enforcement of such obligations in any court of law having jurisdiction thereof.

 

(m)           Costs. The party that prevails shall pay the fees and expenses of the arbitrator in connection with the application of the provisions of this Section 8.6.

 

	
SECTION 9.  

	
DEFINITIONS

 

Whenever used in this Agreement, the following terms and phrases will have the following respective meanings:

 

“Affiliate” will mean, with respect to any Person, (i) each Person that, directly or indirectly, owns or controls, whether beneficially, or as a trustee, guardian or other fiduciary, 50% or more of the stock having ordinary voting power in the election of directors of such Person, (ii) each Person that controls, is controlled by or is under common control with such Person or any Affiliate of such Person, and (iii) each of such Person’s officers, directors, joint ventures and partners.  For the purpose of this definition, “control” of a Person will mean the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership or voting securities, by contract or otherwise.

 

“Knowledge of Seller” or any variation thereof, shall mean the knowledge, after reasonable inquiry, of Mr. Jeff Holmes, Mr. Greg Holmes and Mr. Kevin Asher.

 

 “Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a business or other trust, a joint venture, a company, any other business entity, and an unincorporated organization.

 

	
SECTION 10.  

	
ADDITIONAL PROVISIONS.

 

	
10.1 

	
     Termination.

 

(a) Anything herein or elsewhere to the contrary notwithstanding, this Agreement may be terminated by written notice of termination at any time before the Closing Date only as follows:

 

(i) by mutual consent of Seller and Buyer;

 

(ii) by Buyer at any time if any or representation or warranty of Seller contained in Section 3 hereof is incorrect in any material respect, or if Seller breaches any material covenant contained in this Agreement;

 

(iii) by Seller at any time if any representation and warranty of Buyer contained in Section 4 hereof is incorrect in any material respect, or if Buyer breaches any material covenant contained in this Agreement;

 

(iv) by Seller if the Second Advance (as that term is defined in the Shotey Note) is not made to Seller; or

 

(v) by either party if the Closing has not occurred by September 7, 2012, subject to Section 2.2 hereof.

 

(b) In the event of the termination of this Agreement pursuant to the provisions of this Section 10.1, this Agreement will become void and have no effect, without any liability on the party of any of the parties or their directors, managers, officers, stockholders or members in respect of this Agreement, except that the termination will not relieve a breaching party from liability incurred for the breach of this Agreement. The obligations of Seller under Section 5.2 and the obligations of Buyer under Section 6.2 will survive the termination of this Agreement for a period of two (2) years.

 

 

  

  

  

 

 

	
10.2

	
     Non-Competition; Non-Solicitation.

 

(a) As an inducement for Buyer to enter into this Agreement and as additional consideration for the consideration to be paid to Seller under this Agreement, during the Restricted Period (defined below), Seller will not, nor will Seller allow any of its respective Affiliates to, directly or indirectly, engage in, acquire, participate in, assist, provide services to, own or hold a business in the Restricted Area (defined below) that competes with the Business.

 

(b) During the Restricted Period, Seller will not, nor will Seller allow its respective Affiliates to, without the prior written consent of Buyer, directly or indirectly, (i) hire or attempt to hire away any employee of Buyer or any of its subsidiaries or the Business or persuade any such employee to leave employment with Buyer or the Business; (ii) solicit, divert, or take away, or attempt to solicit, divert or take away, the business of any Person with whom Buyer or the Business has established, or are actively seeking to establish a business or customer relationship with respect to competing services or products; (iii) accept the business or customer relationship of any Person with whom Buyer or the Business has established, or are actively seeking to establish, a business or customer relationship with respect to competing services or products; or (iv) solicit, induce or attempt to induce any salesperson, distributor, supplier, vendor, manufacturer, representative, agent, jobber or other person transacting business with Buyer or the Business to terminate their relationship or association with Buyer or the Business, or to represent, distribute or sell services or products in competition with the business of Buyer or the Business.

 

(c) Seller acknowledges that because a remedy at law for any violation or breach of the provisions of this Section 10.2 may be inadequate, in addition to any relief at law that may be available to Buyer for such violation or breach and regardless of any other provision contained in this Agreement, Buyer will be entitled to injunctive and other equitable relief restraining such violation or breach.

 

(d)           For purposes of this Section, (i) “Restricted Period” means the period commencing on the Closing Date and continuing until the 5th anniversary of the Closing Date, provided that the period will be extended to include any period in which Seller is not in compliance with the terms of this Section, and (ii) “Restricted Area” means any state in which Buyer conducts the Business during the Restricted Period.

 

10.3     Headings.  The headings of the Sections and Subsections herein are inserted for convenience of reference only and will be ignored in the construction or interpretation hereof.

 

10.4     Further Assurances. Following the Closing Date, the parties will execute and deliver such documents and take such other actions as may be reasonably requested from time to time by Buyer or Seller in order to fully consummate the transactions contemplated hereby.

 

10.5     Third Party Beneficiaries. Nothing in the Agreement will be construed to confer any right, benefit or remedy upon any Person that is not a party hereto or a permitted assignee of a party hereto, except as otherwise expressly set forth in this Agreement.

 

10.6     Costs and Expenses.  After execution of this Agreement by the parties, if Seller fails to close the transaction contemplated by this Agreement after satisfaction or waiver of all required conditions to Closing as set forth in Sections 5, 6 and 7 of this Agreement, then Seller will pay Buyer Two Hundred Fifty Thousand Dollars ($250,000) plus all reasonable out of pocket expenses incurred by Buyer (including without limitation attorneys’ fees) in an amount not to exceed One Hundred Thousand Dollars ($100,000) to compensate and reimburse Buyer for expenses incurred by Buyer in connection with pursuing the transaction contemplated by this Agreement.  The provisions of this Section 10.6 will not waive or limit any of Buyer’s rights or remedies available at law, equity or under this Agreement.  Except as otherwise expressly provided herein, each party will bear its own expenses in connection herewith.

 

 

  

  

  

 

 

10.7     Notices.  All notices or other communications permitted or required under this Agreement will be in writing and will be sufficiently given if and when hand delivered to the Persons set forth below or if sent by documented overnight delivery service or registered or certified mail, postage prepaid, return receipt requested, or by telegram, telex or telecopy or e-mail, receipt acknowledged, addressed as set forth below or to such other Person or Persons and/or at such other address or addresses as will be furnished in writing by any party hereto to the others.  Any such notice or communication will be deemed to have been given as of the date received, in the case of personal delivery, or on the date shown on the receipt or confirmation therefor in all other cases.

 

To Seller:                               Calibrus, Inc.

1225 West Washington, #213

Tempe, Arizona 85281

Phone: (602) 778-7500

Fax: (602) 778-7569

 

With a copy to:                    Quarles & Brady LLP

One Renaissance Square

Two North Central Avenue

Phoenix, Arizona  85004

Phone: (602) 229-5336

Fax:  (602) 420-5008

Email:  chris.hoffmann@quarles.com

Attn: Christian J. Hoffmann, III

 

To Buyer:                             Calibrus Hosted Business Solutions, LLC

1225 West Washington, Suite 213

Tempe, Arizona 85281

Phone: (602) 741-7402

 

With a copy to:                    Gallagher & Kennedy, P.A.

2575 East Camelback Road

Phoenix, Arizona  85016

Phone: (602) 530-8000

Fax:     (602) 530-8500

Attn: Timothy D. Brown, Esq.

 

 

  

  

  

 

 

10.8     Assignment and Benefit.  A party will not assign this Agreement or any rights hereunder, or delegate any obligations hereunder, without prior written consent of the other party.  Subject to the foregoing, this Agreement and the rights and obligations set forth herein will inure to the benefit of, and be binding upon, the parties hereto, and each of their respective successors, heirs and assigns.

 

10.9     Amendment, Modification and Waiver.  The parties may amend or modify this Agreement in any respect if such amendment or modification is in writing and agreed to by both parties.  The waiver by a party of any breach of any provision of this Agreement will not constitute or operate as a waiver of any other breach of such provision or of any other provision hereof, nor will any failure to enforce any provision hereof operate as a waiver of such provision or of any other provision hereof.

 

10.10    Governing Law.  This Agreement is made pursuant to, and will be construed and enforced in accordance with, the laws of the State of Arizona (and United States federal law, to the extent applicable), irrespective of the principal place of business, residence or domicile of the parties hereto, and without giving effect to otherwise applicable principles of conflicts of law.  Nothing contained herein will prevent or delay either party from seeking, in any court of competent jurisdiction, specific performance or other equitable remedies in the event of any breach or intended breach by the other party of any of its obligations hereunder.

 

10.11    Severability.  The invalidity or unenforceability of any particular provision, or part of any provision, of this Agreement will not affect the other provisions or parts hereof, and this Agreement will be construed in all respects as if such invalid or unenforceable provisions or parts were omitted.

 

10.12    Counterparts.  This Agreement may be executed in one or more counterparts, each of which will be deemed an original (including facsimile signatures).

 

10.13    Entire Agreement.  This Agreement and the agreements, exhibits, schedules and certificates referred to herein or delivered pursuant hereto, constitutes the entire agreement between the parties hereto with respect to the purchase and sale of the Purchased Assets and supersedes all prior agreements and understandings.  The submission of a draft of this Agreement or portions or summaries thereof does not constitute an offer to purchase or sell the Purchased Assets, it being understood and agreed that neither Buyer nor Seller will be legally obligated with respect to such a purchase or sale or to any other terms or conditions set forth in such draft or portion or summary unless and until this Agreement has been duly executed and delivered by all parties.

 

10.14    Schedules and Exhibits.  All schedules and exhibits to this Agreement are an integral part of this Agreement and are incorporated herein by reference in this Agreement for all purposes of this Agreement.  All Schedules delivered with this Agreement will be arranged to correspond with the numbered and lettered Sections and Subsections contained in this Agreement, and the disclosures in such Schedules will qualify only the corresponding Sections and Subsections contained in this Agreement, unless otherwise expressly provided herein.

 

10.15    Publicity.  Pending and following the Closing, no party will issue a press release or make any other public announcement concerning the transactions contemplated by this Agreement without the prior written consent of the other party, except to the extent required by law.

 

[Signature blocks to appear on the following page.]

 

 

 

  

  

  

 

IN WITNESS WHEREOF, each of the parties hereto has duly executed this Agreement, and it will be effective as of the Effective Date.

SELLER:

CALIBRUS, INC., a Nevada corporation

By: /s/ Jeff W. Holmes                             

Name:  Jeff W. Holmes                           

Title:  Chief Executive Officer                

 

BUYER:

 

CALIBRUS HOSTED BUSINESS SOLUTIONS, LLC, an Arizona limited liability company

 

By: /s/ Chris Camberlango                       

Name:  Chris Camberlango                      

Title: Manager                                          

 

 

[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]aedc101.htm

Exhibit 10.1

 

NOTE: PORTIONS OF THIS EXHIBIT INDICATED BY “[*]” ARE SUBJECT TO A CONFIDENTIAL TREATMENT REQUEST, AND HAVE BEEN OMITTED FROM THIS EXHIBIT.  COMPLETE, UNREDACTED COPIES OF THIS EXHIBIT HAVE BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AS PART OF THIS COMPANY’S CONFIDENTIAL TREATMENT REQUEST.

 

LEASE ACQUISITION AGREEMENT

 

This Lease Acquisition Agreement (this “Agreement”), dated as of June 15, 2012, is between Range Michigan LLC, a Wyoming limited liability company (“Seller”), whose address is 504 Fremont Street, Thermopolis, WY 82443, and American Energy Development Corp., a Nevada corporation (“Buyer”), whose address is 1230 Avenue of the Americas, 7th Floor, New York, New York 10020.  Seller and Buyer are sometimes referred to herein as a “Party” or the “Parties.”

 

RECITALS

 

A. Seller owns certain rights and interests in, to and under the leasehold estates created by the oil and gas leases described in Exhibit A (the “Property”).

 

B. Seller desires to sell and convey to Buyer and Buyer desires to purchase and acquire from Seller an undivided forty-three and three-quarters percent (43.75%) of Seller’s right, title and interest in and to the Property.

 

In consideration of the mutual promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller agree as follows:

 

ARTICLE 1

PURCHASE AND SALE

 

1.1 Purchase and Sale.  Subject to the terms and conditions of this Agreement, Buyer agrees to purchase and acquire from Seller and Seller agrees to sell and convey to Buyer, all of Seller’s right, title and interest in and to the Assets (as defined below).

 

1.2 Assets.  “Assets” shall mean an undivided forty three and three quarters percent (43.75%) of Seller’s right, title and interest in and to the following:

 

    (a) The leasehold estates created by the oil and gas leases described in Exhibit A (the “Leases”), insofar and only insofar as the Leases cover and relate to the lands described in Exhibit A (the “Lands”);

 

(b) The unitization, pooling and communitization agreements, declarations and orders, and the units created thereby related to the Lands and the Leases (insofar as they cover the Lands) and all other such agreements relating to the production of oil, gas and related hydrocarbons, if any, attributable to said properties and interests;

 

(c) All existing and effective sales, purchase, exchange, gathering, transportation and processing contracts, operating agreements, balancing agreements, farmout agreements, service agreements and other contracts, agreements and instruments (hereinafter collectively, the “Contracts”), insofar as they relate to the Lands and the Leases (insofar as they cover the Lands);

 

  

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(d) All seismic, geophysical, geological and other data and all licenses therefor and all analyses, interpretations, compilations and evaluations thereof relating to the properties and interests described above, if any, subject to any third party contractual restrictions on assignment or transfer;

 

(e) Copies of all files, records and data relating to the properties and interests described above (the “Records”);

 

(f) the Oil and Gas Substances produced from the Leases and Lands hereafter; and

 

(g) the equipment, personal property and fixtures associated with each oil and gas well presently existing on the Leases, if any, including without limitation, all casing, tubing, meters, valves and all other equipment of any type or description related to, or used in connection with, any such well.

 

For purposes of this Agreement, the term “Oil and Gas Substances” shall mean oil, gas, casinghead gas, gas condensate, and/or all other liquid or gaseous hydrocarbons and other marketable or non-marketable substances produced therewith.

 

ARTICLE 2

PURCHASE PRICE

 

2.1 Purchase Price.  The purchase price for the Assets shall be US$487,500 (the “Purchase Price”), which shall be paid as follows: (a) Eighty Seven Thousand Five Hundred US Dollars (US$87,500), previously paid to Seller in cash on March 20, 2012, (b) Two Hundred Thousand US Dollars (US$200,000), payable at Closing in shares of Buyer’s US$0.001 par value common stock (the “Shares”), calculated using a per share price equal to the volume weighted average price of one share of Buyer’s US$0.001 par value common stock for the ten Business Day period ending on the Business Day prior to the Closing Date and (c) up to Two Hundred Thousand US Dollars (US$200,000), payable as set forth in Section 3.1 in cash delivered to Seller by wire transfer in immediately available funds (the “Seismic Payment”).

 

2.2 Effective Time.  The effective time of the transfer of the Assets for the purpose of allocating revenues and expenses shall be 7:00 a.m. Eastern Time, March 31, 2012 (the “Effective Time”).

 

ARTICLE 3

SEISMIC PROGRAM

 

3.1 Seismic Program.  In order to facilitate the development of the Property, Seller shall conduct a seismic program covering the Property, which shall include a high resolution 3D geophysical seismic survey of the Property, and may include the acquisition of existing 2D geophysical seismic surveys from third parties (the “Seismic Program”), the costs of which shall be paid as follows.

 

(a) Buyer shall pay 100% of the costs of the Seismic Program up to US$200,000.

 

(b) Any costs of the Seismic Program in excess of US$200,000 shall be borne by Buyer and Seller in proportion to their respective working interests in the Property.

 

(c) Prior to commencing the Seismic Program, Seller shall provide Buyer an authorization for expenditure for the costs of the Seismic Program (the “Seismic AFE”), which shall detail the costs and expenses related to the Seismic Program including all costs and expenses of studies required under the permits, surface damage settlements, permit acquisition fees and expenses.

 

(d) Within 5 Business Days of Buyer’s receipt of the Seismic AFE, Buyer shall pay to Seller US$200,000, plus any amounts in excess of US$200,000 attributable to Buyer’s working interest in the Property.

 

  

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(e) Within 15 days of Buyer’s receipt of the final invoice for the Seismic Program, Buyer shall pay to Seller Buyer’s working interest share of any expenses related to the Seismic Program not included in the Seismic AFE.

 

3.2 Remedies for Failure to Pay Seismic Payment.  If Buyer fails to make the payments set forth in Section 3.1, Seller may foreclose on the liens and security interests granted to Seller, as working interest owner and operator pursuant to the Joint Operating Agreement, and Buyer hereby agrees that its obligations hereunder are secured by such liens and security interests.

 

ARTICLE 4

SELLER’S REPRESENTATIONS AND WARRANTIES

 

Seller makes the following representations and warranties as of the Closing Date:

 

4.1 Status.  Seller is a limited liability company duly organized, validly existing and in good standing under the Laws of the State of Wyoming.  Seller is duly qualified to do business and in good standing in each jurisdiction in which the nature of the business conducted by it or the ownership or leasing of its properties requires it to so qualify, except to the extent that failure to have such qualifications would not reasonably be expected to have a Seller Material Adverse Effect.

 

4.2 Power.  Seller has (with respect to this Agreement), or on the Closing Date and at the time of Closing will have (with respect to the Transaction documents to which it is party), full power and authority to enter into this Agreement and the Transaction Document to which it is party and to perform its obligations hereunder and thereunder and to comply with the terms and conditions hereunder and thereunder.  The execution and delivery of this Agreement and such other documents and the performance by Seller of its obligations hereunder and thereunder have or will have been duly authorized by the appropriate governing body of Seller, and no other proceedings on the part of Seller are or will be necessary to authorize such execution, delivery and performance.  This Agreement and the Transaction Documents to which Seller is party have been (in the case of this Agreement), or will be at the Closing (in the case of the Transaction Documents to which it is party), duly executed and delivered by Seller and constitute (in the case of this Agreement), or will constitute at the Closing (in the case of the Transaction Documents to which it is Party) Seller’s valid and binding obligation enforceable against Seller in accordance with its terms.

 

4.3 No Default or Consents.  Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will:

 

(a) conflict with or result in a breach, default or violation of the certificate of formation or organizational agreements of Seller;

 

(b) to Seller’s knowledge conflict with or result in a breach, default or violation of, any agreement, under which Seller is a party except to the extent that such breach, default or violation would not reasonably be expected to have a Seller Material Adverse Effect;

 

(c) result in the creation of any lien, charge or other encumbrance upon any of the Assets;

 

(d) require Seller to obtain or make any waiver, consent, action, approval, clearance or authorization of, or registration, declaration or filing with, any Governmental Authority, except to the extent the same are customarily obtained following the closing of a transaction;

 

(e) give any Person any preferential right, right of first refusal, tag-along right, change of control right, or similar right to acquire any part of any Lease; or

 

(f) violate any Law applicable to Seller except to the extent that such violation would not reasonably be expected to have a Seller Material Adverse Effect.

 

  

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4.4 Liability for Brokers’ Fees.  Seller has not incurred any liability, contingent or otherwise, for brokers’ or finders’ fees relating to the transactions contemplated by this Agreement for which Buyer shall have any responsibility whatsoever.

 

4.5 No Bankruptcy.  There are no bankruptcy proceedings pending, or to Seller’s knowledge, being contemplated by or, threatened against Seller.

 

4.6 Title.  (a) the Assets are not subject to or burdened by any lien, security interest, mortgage, deed of trust or other encumbrance arising by, through or under Seller, and (b) Seller has not created or assigned to any third party any overriding royalty, production payment, net profits, interest or other non-cost bearing interest that would cause the net revenue interest in the Assets being delivered to Buyer to be less than 35%.

 

4.7 Litigation.  There are no Legal Proceedings pending against Seller with respect to the Assets or the Contracts and to Seller’s knowledge there is no Legal Proceedings pending or threatened with respect to the Assets or the Contracts.  “Legal Proceeding” shall mean any judicial or administrative, suits, proceedings (public or private), claims, investigations or proceedings before any Governmental Authority, court, or arbitral actions.

 

4.8 Compliance With Laws.  Seller has not received written notice from any governmental agency or other person, and to the knowledge of Seller none is threatened, that Seller’s ownership or operation of the Assets is in violation of any applicable federal, state, tribal or local Laws, ordinances, rules, regulations, orders and codes, including any Environmental Law.  To Seller’s knowledge, Seller and the Assets are in compliance in all material respects with all such Laws, ordinances, rules, regulations, orders and codes.

 

4.9 Investment Intent; Investment Experience; Restricted Securities Representations.  In acquiring the Shares, the Seller acknowledges that it can bear the economic risk of its investment in the Shares, and has such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of an investment in such Shares.

 

(a) The Seller is an “accredited investor” as such term is defined in Regulation D under the Securities Act.

 

(b) The Seller confirms that it has been given sufficient access to information regarding the Buyer and in connection with its decision to receive the Shares, as consideration under this Agreement, including the opportunity to ask questions of, and receive answers from, persons acting on behalf of Buyer and concerning the Buyer’s financial affairs, prospects and condition.  The Seller has received and carefully reviewed the information and documentation relating to the Buyer, including without limitation, the Buyer’s filings with the Securities and Exchange Commission.

 

(c) The Seller represents and warrants that (i) it is a resident in or otherwise subject to the securities legislation of the United States, and the issuance of the Shares to Seller has occurred only in the United States; and (ii) Seller has such knowledge and experience in financial and business matters as to make it capable of evaluating the risks of the prospective investment and to make an informed investment decision.

 

(d) The Seller represents, warrants and covenants that it shall acquire the Shares issuable under this Agreement for its own account and not for the account or on behalf of others.

 

(e) The Seller acknowledges that: (i) no securities commission or similar authority has reviewed or passed on the merits of the Shares issuable pursuant to this Agreement; (ii) there is no government or other insurance coving such Shares; and (iii) there are risks associated with the acquisition of the Shares.

 

(f) The Seller acknowledges that, except as specifically set forth elsewhere herein, (i) it must and shall bear the economic risk of holding the Shares, which may be for an indefinite period of time, because at the time such Shares are issued they are “restricted securities” and will not have been registered under the Securities Act of 1933, as amended, or any other securities Law and, therefore, cannot be sold unless they are subsequently registered under applicable federal and state securities Laws or an exemption from such registration is available; (ii) the Shares may not be resold or transferred on the official stock transfer records of Company without furnishing to Company an opinion of counsel reasonably acceptable to Company that such sale or transfer of the Shares will not violate the registration provisions of applicable federal and state securities Laws; and (iii) certificates representing the Shares shall have endorsed on them a restrictive legend to this effect.

 

 

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(g) The Seller acknowledges that Buyer is relying on the representations, warranties, covenants and acknowledgements in this Section 4.9 to ensure that any of the Shares issued under the terms of this Agreement can be issued in reliance on exemptions from registration requirements under United States federal and state securities Laws.

 

4.10 Seller has never produced any oil and gas from the Leases and has never paid nor, to Seller’s knowledge, has any liability for any royalties, overriding royalties, compensatory royalties, net profits interests or other payments due from or in respect of production prior to the Closing Date with respect to the Leases.

 

4.11 All payments of any kind required to be made by the Seller to third parties under or pursuant to the Leases or the Contracts that are due and payable on or prior to the Effective Time have been or will be properly and timely paid prior to Closing.

 

4.12 The Seller has not received any notice, whether oral or written, of any claimed defaults, offsets or cancellations from any lessors with respect to the Leases, and the Seller does not have knowledge of the existence of any default existing with respect to any of the Leases or any express or implied term of any Lease.

 

ARTICLE 5

BUYER’S REPRESENTATIONS AND WARRANTIES

 

Buyer makes the following representations and warranties as of the Closing Date:

 

5.1 Status.  Buyer is a corporation duly organized, validly existing and in good standing under the Laws of the State of Nevada.  Buyer is duly qualified to do business and in good standing in Michigan and each jurisdiction in which the nature of the business conducted by it or the ownership or leasing of its properties requires it to so qualify, except to the extent that failure to have such qualifications would not reasonably be expected to have a Buyer Material Adverse Effect.

 

5.2 Power.  Buyer has (with respect to this Agreement), or on the Closing Date and at the time of Closing will have (with respect to the Transaction documents to which it is party), full power and authority to enter into this Agreement and the Transaction Document to which it is party and to perform its obligations hereunder and thereunder and to comply with the terms and conditions hereunder and thereunder.  The execution and delivery of this Agreement and such other documents and the performance by Buyer of its obligations hereunder and thereunder have or will have been duly authorized by the appropriate governing body of Buyer, and no other proceedings on the part of Buyer are or will be necessary to authorize such execution, delivery and performance.  This Agreement and the Transaction Documents to which Buyer is party have been (in the case of this Agreement), or will be at the Closing (in the case of the Transaction Documents to which it is party), duly executed and delivered by Buyer and constitute (in the case of this Agreement), or will constitute at the Closing (in the case of the Transaction Documents to which it is Party) Buyer’s valid and binding obligation enforceable against Buyer in accordance with its terms.

 

5.3 No Default or Consents.  Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will:

 

(a) conflict with or result in a breach, default or violation of the Articles of incorporation, bylaws or organizational agreements of Buyer;

 

(b) to Buyer’s knowledge conflict with or result in a breach, default or violation of, any agreement, under which Buyer is a party except to the extent that such breach, default or violation would not reasonably be expected to have a Buyer Material Adverse Effect;

 

(c) require Buyer to obtain or make any waiver, consent, action, approval, clearance or authorization of, or registration, declaration or filing with, any Governmental Authority, except to the extent the same are customarily obtained following the closing of a transaction; or

 

  

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(d) violate any Law applicable to Buyer except to the extent that such violation would not reasonably be expected to have a Buyer Material Adverse Effect.

 

5.4 Liability for Brokers’ Fees.  Buyer has not incurred any liability, contingent or otherwise, for brokers’ or finders’ fees relating to the transactions contemplated by this Agreement for which Buyer shall have any responsibility whatsoever.

 

5.5 No Bankruptcy.  There are no bankruptcy proceedings pending, or, to Buyer’s knowledge, being contemplated by or threatened against Buyer.

 

5.6 Compliance With Laws.  To Buyer’s knowledge, Buyer is in compliance in all material respects with all Laws, ordinances, rules, regulations, orders and codes.

 

5.7 Buyer’s Evaluation.  Buyer is not acquiring the Assets with a view to or for sale in connection with any distribution thereof or any other security related thereto within the meaning of Securities Act of 1933, as amended.  Buyer is an experienced and knowledgeable investor in the oil and gas business.  Buyer has been advised by and has relied solely upon its own expertise in legal, tax and other professional counsel concerning the transaction contemplated by this Agreement, the Assets and the value thereof.  Buyer (a) is familiar with investments of the nature of the Assets, (b) understands that this investment involves substantial risks, (c) has adequately investigated the Assets, including Seller’s title thereto, (d) has substantial knowledge and experience in financial and business matters such that it is capable of evaluating, and has evaluated, the merits and risks inherent in an investment in the Assets, and (e) is able to bear the economic risks of such investment.  Buyer has had the opportunity to visit with Seller and meet with its officers and other representatives to discuss the Assets, has received all materials, documents and other information that Buyer deems necessary or advisable to evaluate an investment in the Assets, and has made its own independent examination, investigation, analysis and evaluation of an investment in the Assets, including its own estimate of the value of the Assets.  Buyer has undertaken such due diligence as Buyer deems adequate.

 

5.8 Qualified to Hold Leases.  Buyer is eligible under all applicable Laws and regulations to own the Assets.

 

ARTICLE 6

CLOSING

 

6.1 Closing.  The “Closing” of the transaction contemplated hereby shall be held at Seller’s offices on June 15, 2012, or such other date and location as the Parties may agree.  The date the Closing actually occurs is referred to herein as the “Closing Date.”

 

6.2 Closing Obligations.  At Closing, the following events shall occur, each being a condition precedent to the others and each being deemed to have occurred simultaneously with the others:

 

(a) Assignment, Bill of Sale and Conveyance.  Seller and Buyer shall execute, acknowledge and deliver to Buyer an Assignment, Bill of Sale and Conveyance of the Assets, substantially in the form of Exhibit B.

 

(b) Joint Operating Agreement.  The Parties shall execute, acknowledge and deliver a Joint Operating Agreement substantially in the form of Exhibit C, naming Seller as Operator (the “Joint Operating Agreement”), and a memorandum of the same in recordable form.

 

(c) Purchase Price.  Buyer shall deliver to Seller one or more stock certificates representing the Shares.

 

(d) Non-Foreign Status.  Seller shall execute and deliver to Buyer an affidavit of non-foreign status and no requirement for withholding under Section 1445 of the Internal Revenue Code of 1986, as amended, substantially in the form of Exhibit D.

 

  

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ARTICLE 7

POST-CLOSING OBLIGATIONS

 

7.1 Records.  Seller shall make copies of the Records available for pick-up by Buyer within ten (10) Business Days after the Closing Date.

 

7.2 Transfer Taxes and Recording Fees.  Buyer shall pay all sales, transfer, use or similar taxes occasioned by the sale or transfer of the Leases and all documentary, transfer, filing, licensing, and recording fees required in connection with the processing, filing, licensing or recording of any assignments.

 

7.3 Further Assurances.  From time to time after Closing, Seller and Buyer shall each execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such further instruments and take such other action as may be reasonably requested in order to accomplish more effectively the purposes of the transactions contemplated by this Agreement, including assurances that Seller and Buyer are financially capable of performing any indemnification required hereunder.

 

ARTICLE 8

ASSUMPTION AND RETENTION OF OBLIGATIONS AND

INDEMNIFICATION; DISCLAIMERS

 

8.1 Buyer’s Assumption of Liabilities and Obligations.  Upon Closing, Buyer shall assume and pay, perform, fulfill and discharge all claims, costs, expenses, liabilities and obligations relating to the ownership or operation of the Assets (including those arising under Environmental Laws) that are attributable to periods after the Effective Time (the “Assumed Liabilities”).

 

8.2 Indemnification.

 

(a) Losses.  “Losses” shall mean any actual losses, costs, expenses (including court costs, reasonable fees and expenses of attorneys, technical experts and expert witnesses and the cost of investigation), liabilities, damages, demands, suits, claims, and sanctions of every kind and character (including civil fines) arising from, related to or reasonably incident to matters indemnified against; excluding however any special, consequential, punitive or exemplary damages, loss of profits incurred by a Party hereto or Loss incurred as a result of the indemnified party indemnifying a third party, except to the extent the indemnified party suffers such damages to a third party (other than as a result of the indemnified party’s indemnification of such third party).

 

(b) Seller’s Indemnification of Buyer.  Subject to Section 9.11, upon Closing, Seller shall defend, indemnify, and save and hold harmless Buyer, its officers, directors, employees and agents, from and against all Losses which arise directly or indirectly from or in connection with any breach by Seller of this Agreement or relate to ownership or operation of the Assets prior to the Effective Time.

 

(c) Buyer’s Indemnification of Seller.  Upon Closing, Buyer assumes all risk, liability, obligation and Losses in connection with, and shall defend, indemnify, and save and hold harmless Seller, its officers, directors, employees and agents, from and against all Losses which arise directly or indirectly from or in connection with (i) the Assumed Liabilities, and (ii) any breach by Buyer of this Agreement.

 

8.3 No Insurance.  The indemnifications provided in this Article 8 shall not be construed as a form of insurance.

 

8.4 Reservation as to Non-Parties.  Nothing herein is intended to limit or otherwise waive any recourse Buyer or Seller may have against any non-party for any obligations or liabilities that may be incurred with respect to the Assets.

 

  

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ARTICLE 9

AREA OF MUTUAL INTEREST

 

9.1 Rights in AMI.  An area of mutual interest covering Exhibit E, is hereby established (the “AMI”), effective as of the Effective Time.  The term of the AMI shall be for a period three years commencing the Effective Time (the “AMI Term”).  If either Party (or any of its affiliates) (any such party, an “Acquiring Party”), acquires or agrees to acquire any oil and gas interests within the AMI (“Acquired Interests”) during the AMI Term, such Acquiring Party shall offer the other Party (the “Non-Acquiring Party”) its AMI Share (as defined in Section 9.2) of the Acquired Interests.  If any transaction contains oil and gas interests that are both within and outside of the AMI, only oil and gas interests subject to the transaction that are within the AMI shall be Acquired Interests and the purchase price for the Acquired Interests shall be the percentage of the total purchase price for the transaction equal to the percentage of the total oil and gas interests acquired that are within the AMI, on a net acre basis.

 

9.2 AMI Share.  The Non-Acquiring Party shall have the right to purchase a share in any Acquired Interests equal to its working interest share in the AMI prior to the Acquiring Party’s acquisition of the Acquired Interests (its “AMI Share”).

 

9.3 Notice of Acquisition.  Within 20 days after the Acquiring Party acquires or agrees to acquire the Acquired Interests, the Acquiring Party shall provide the Non-Acquiring Party with written notice thereof (a “Notice of Acquisition”).  Simultaneous with such written notice, the Acquiring Party also shall make available in its offices, during normal business hours, to the Non-Acquiring Party for its examination all information in the possession of the Acquiring Party regarding such Acquired Interests, including acquisition and brokerages costs and expenses (“Acquisition Costs”), and all title, brokerage, surveying, geological, and geophysical information and data.

 

9.4 Election to Acquire Interests.  Within 20 days after receipt of a Notice of Acquisition from the Acquiring Party, the Non-Acquiring Party shall notify the Acquiring Party in writing (a “Notice of Election”) whether or not it elects to exercise its option to acquire its AMI Share of such Acquired Interests.  Any such election must be as to all of the Acquired Interests.  If the Non-Acquiring Party (a) notifies the Acquiring Party that it elects not to acquire its AMI Share of such Acquired Interests, or (b) fails to so notify the Acquiring Party in writing within such 20-day period as to whether or not it elects to acquire its AMI Share of such Acquired Interests, then it shall be deemed that the Non-Acquiring Party elected not to exercise its option to participate in such Acquired Interests.

 

9.5 Assignments

 

(a) .  If the Non-Acquiring Party elects to acquire its AMI Share of the Acquired Interests, the Acquiring Party shall, within 30 days after receipt of the Notice of Election, execute and deliver to the Non-Acquiring Party an assignment transferring and assigning to the Non-Acquiring Party its AMI Share in such Acquired Interests.  Any such assignments shall be effective as of the date the Acquired Interests are effectively acquired by the Acquiring Party, shall contain a Special Warranty and shall be subject to any contracts binding on such Acquired Interests, if any.  Simultaneous with the receipt of such assignment, the Non-Acquiring Party shall pay the Acquiring Party for the Non-Acquiring Party’s pro rata share of the Acquisition Costs attributable to the Acquired Interests assigned to the Non-Acquiring Party.

 

9.6 No Reservations.  Assignments of Acquired Interests by the Acquiring Party to the Non-Acquiring Party shall be made without reservation to the assignor of any overriding royalty, net profits interest, production payment or any other similar burden or encumbrance, but shall be subject to all applicable contracts and agreements burdening the Acquired Interests immediately before the Acquiring Party acquired such Acquired Interests.

 

  

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9.7 Compliance by Affiliates.  Each Party shall use its best efforts to have its affiliates comply with the provisions of this Article IX and each Party shall indemnify the other Party for any failure by its affiliates to so comply.

 

9.8 Elections.  Prior to making assignments to the Non-Acquiring Party, the Acquiring Party (after consultation with the Non-Acquiring Party) shall be entitled to make all elections with respect to the Acquired Interests, including whether to participate, or not to participate, in any proposed operation, and shall pay all costs and expenses associated therewith (for which the Acquiring Party shall be reimbursed by the Non-Acquiring Party as provided in Section 9.5).

 

ARTICLE 10

MISCELLANEOUS

 

10.1 Exhibits and Schedules.  The Exhibits and Schedules to this Agreement are hereby incorporated in this Agreement by reference and constitute a part of this Agreement.

 

10.2 Expenses.  Except as otherwise specifically provided, all fees, costs and expenses incurred by Buyer or Seller in negotiating this Agreement or in consummating the transactions contemplated by this Agreement shall be paid by the Party incurring such fees, costs or expenses, including engineering, land, title, legal and accounting fees, costs and expenses.

 

10.3 Notices.  All notices and other communications under this Agreement shall be in writing and delivered (a) personally, (b) by registered or certified mail with postage prepaid, and return receipt requested, (c) by nationally recognized commercial overnight courier service with charges prepaid, or (d) by facsimile transmission, directed to the intended recipient as follows:

 

	
If to Seller:

	  
	  	
Range Michigan LLC

	  	
504 Fremont Street

	  	
Thermopolis, WY 82443

	  	
Attn:

	
Tolly Dewey

	  	
Telephone:

	
(307) 864-3754

	  	
Facsimile:

	
(307) 864-3756

	  	  	  
	
If to Buyer:

	  	  	  
	  	
American Energy Development Corp.

	  	
1230 Avenue of the Americas, 7th Floor

	  	
New York, New York 10020

	  	
Attn:

	
Herold Ribsskog

	  	
Telephone:

	
(855) 645-2332

	  	
Facsimile:

	(917) 639-4000 
	  	  	  

 

  

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A notice or other communication shall be deemed delivered on the earlier to occur of (i) its actual receipt, (ii) the fifth Business Day following its deposit in registered or certified mail, with postage prepaid and return receipt requested, (iii) the first Business Day following its deposit with a nationally recognized commercial overnight courier service, with charges prepaid, or (iv) the date it is sent by confirmed facsimile transmission (if sent before 4:00 p.m. local time of the receiving party on a Business Day) or the next Business Day (if sent after 4:00 p.m. of such local time or sent on a day that is not a Business Day).  Any Party may change the address to which notices and other communications hereunder can be delivered by giving the other Party notice in the manner herein set forth.

 

10.4 Amendments.  Except for waivers specifically provided for in this Agreement, this Agreement may not be amended nor any rights hereunder waived except by an instrument in writing signed by the Party to be charged with such amendment or waiver and delivered by such Party to the Party claiming the benefit of such amendment or waiver.

 

10.5 Headings.  The headings of the Articles and Sections of this Agreement are for guidance and convenience of reference only and shall not limit or otherwise affect any of the terms or provisions of this Agreement.

 

10.6 Counterparts/Fax Signatures.  This Agreement may be executed by Buyer and Seller in any number of counterparts, each of which shall be deemed an original instrument, but all of which together shall constitute but one and the same instrument.  Fax or .pdf signatures shall be considered binding.

 

10.7 References.  References made in this Agreement, including use of a pronoun, shall be deemed to include where applicable, masculine, feminine, singular or plural, individuals or entities.  As used in this Agreement, “person” shall mean any natural person, corporation, partnership, trust, limited liability company, court, agency, government, board, commission, estate or other entity or authority.

 

10.8 Governing Law; Wavier of Jury Trial.  This Agreement and the transactions contemplated hereby shall be construed in accordance with, and governed by, the Laws of the State of Michigan, without regard to its conflicts of Laws rules.  EACH OF THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY.  THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THIS AGREEMENT.

 

10.9 Entire Agreement.  This Agreement constitutes the entire understanding among the Parties, their respective partners, members, trustees, shareholders, officers, directors and employees with respect to the subject matter hereof, superseding all negotiations, prior discussions and prior agreements and understandings relating to such subject matter.

 

10.10 Binding Effect.  This Agreement shall be binding upon, and shall inure to the benefit of, the Parties hereto, and their respective successors and assigns.

 

10.11 Survival.  The representations, warranties, indemnities and covenants contained in this Agreement shall survive indefinitely following the Closing Date; provided that Seller’s representations and warranties contained in Section 4.6 through Section 4.8 shall terminate six months following the Closing Date.

 

10.12 No Third-Party Beneficiaries.  This Agreement is intended only to benefit the Parties hereto and their respective permitted successors and assigns.

 

10.13 Waiver.  The waiver or failure of any Party to enforce any provision of this Agreement shall not be construed or operate as a waiver of any further breach of such provision or of any other provision of this Agreement.

 

10.14 Limitation on Damages.  The Parties hereto expressly waive any and all rights to consequential, special, incidental, punitive or exemplary damages, or loss of profits resulting from any breach of this Agreement.

 

  

10

  

10.15 Severability.  It is the intent of the Parties that the provisions contained in this Agreement shall be severable.  Should any provisions, in whole or in part, be held invalid as a matter of Law, such holding shall not affect the other portions of this Agreement, and such portions that are not invalid shall be given effect without the invalid portion.

 

10.16 Confidentiality.  The Parties agree that the provisions of this Agreement shall be kept confidential and except as and to the extent required by Law, neither Buyer nor Seller will make, directly or indirectly, any public announcement or statement with respect to a transaction between the Parties or any of the terms, conditions, or other aspects of this Agreement or the transaction contemplated thereby, without the prior written consent of the other, which consent shall not be unreasonably withheld.  To the extent any Party is required by Law to disclose any information regarding this Agreement, such Party shall inform the other Party in advance of all such disclosures by the disclosing Party.

 

10.17 References, Titles and Construction.  All references in this Agreement to Exhibits, Schedules, Sections, and other subdivisions refer to the Exhibits, Schedules, Sections, and other subdivisions of this Agreement unless expressly provided otherwise.  Titles and headings appearing at the beginning of any subdivision are for convenience only and do not constitute any part of any such subdivision and shall be disregarded in construing the language contained in this Agreement.  The words “this Agreement,” “herein,” “hereby,” “hereunder” and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited.  The phrases “this Section” and “this Subsection” and similar phrases refer only to the Sections or Subsections hereof in which the phrase occurs.  The word “or” is not exclusive, and “including” (and its various derivatives), means “including without limitation.” Pronouns in masculine, feminine and neuter gender shall be construed to include any other gender.  Words in the singular form shall be construed to include the plural and words in the plural form shall be construed to include the singular, unless the context otherwise requires.  “Business Days” means any day other than a Saturday, Sunday or a day on which national banks are allowed by the Federal Reserve to be closed; and “days,” without further qualification, means calendar days.  In the event an ambiguity or question of intent or interpretation of this Agreement arises, this Agreement shall be construed as if jointly drafted by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring a Party as a result of authorship or drafting of any provision of this Agreement.

 

10.18 Additional Definitions.

 

(a) “Buyer Material Adverse Effect” means a material adverse effect on (i) the ability of Buyer to perform its obligations under this Agreement or any Transaction Document, or (ii) the validity or enforceability of any of this Agreement or any Transaction Document.

 

(b) “Environmental Laws” shall mean all Laws that relate to the prevention, abatement or elimination of pollution, or the protection of the environment, including the federal Comprehensive Environmental Response, Compensation and Liability Act, the Resource Conservation and Recovery Act, the Oil Pollution Act of 1990, the Clean Water Act, the Safe Drinking Water Act, the Toxic Substance Control Act, the Hazardous Materials Transportation Act and all state statutes serving similar or related purposes.

 

(c) “Governmental Authority” shall mean any United States federal, state, county or municipal entity, and any political subdivision or other executive, legislative, administrative, judicial, quasi-judicial or other governmental department, commission, court, board, bureau, agency or instrumentality.

 

(d) “Law or Laws” shall mean any constitution, statute, code, regulation, rule, injunction, judgment, order, decree, ruling, charge, directive, letter or other official act of any applicable Governmental Authority.

 

(e) “Seller Material Adverse Effect” means a material adverse effect on (i) the ability of Seller to perform its obligations under this Agreement or any Transaction Document, or (ii) the validity or enforceability of any of this Agreement or any Transaction Document.

 

(f) “Special Warranty” means a warranty of title whereby the assignor agrees to warrant and forever defend the title of the assignee against all defects, encumbrances, liens, security interests and claims created by, through or under the assignor, but not otherwise; provided that the assignee shall, to the extent permitted by applicable Law, be subrogated to the assignor’s rights in and to prior warranties of title and covenants and shall assign to assignee, its successors and assigns, to the extent so transferable, the benefit of and the right to enforce the covenants, representations and warranties, if any, that assignor is entitled to enforce.

 

(g) “Transaction Document” means any agreement, document, instrument or certificate delivered in connection with this Agreement, including the assignment delivered pursuant to Section 6.2(c) and the Joint Operating Agreement.

 

 

[SIGNATURES ON NEXT PAGE]

 

  

11

  

 

 

The Parties have executed this Agreement effective as of the Effective Time.

 

 

	 	
SELLER:

	 
	 	  	 
	 	
RANGE MICHIGAN LLC

 

	 
	 	
By:           Range Exploration Partners LLC,

 its Manager

	 
	 	
By:

	
/s/ Frode Aschim

	 
	 	
Name:

	Frode Aschim	 
	 	
Title:

	Manager	 

	 	
BUYER:

	 
	 	  	 
	 	
AMERICAN ENERGY DEVELOPMENT

CORP.

	 
	 	
By:

	/s/ Herold Ribsskog	 
	 	
Name:

	
Herold Ribsskog

	 
	 	
Title:

	
Chief Executive Officer

	 

 

  

12

  

 

 

EXHIBIT “A”

 

LEASES AND LANDS

 

[*]

 

 

 

 

  

A-1

  

 

[*]

 

 

 

  

A-2

  

 

[*]

 

 

 

 

A-3

 

 

[*]

 

 

 

  

A-4

  

 

EXHIBIT “B”

 

ASSIGNMENT, BILL OF SALE AND CONVEYANCE

 

This Assignment, Bill of Sale and Conveyance (this “Assignment”), dated effective as of 7:00 a.m. Eastern Time, March 31, 2012, is between Range Michigan LLC, a Wyoming limited liability company (“Assignor”), whose address is 504 Freemont Street, Thermopolis, WY 82443, and American Energy Development Corp., a Nevada corporation (“Assignee”), whose address is 1230 Avenue of the Americas, 7th Floor, New York, New York 10020.

 

For Ten Dollars and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), Assignor does hereby grant, bargain, sell, convey, assign, transfer, set over and deliver to Assignee an undivided forty-three and three-quarters percent (43.75%) of Assignor’s right, title and interest in and to the following (collectively, the “Assets”):

 

A. The leasehold estates created by the oil and gas leases described in Exhibit A (the “Leases”), insofar and only insofar as the Leases cover and relate to the lands described in Exhibit A (the “Lands”);

 

B. The unitization, pooling and communitization agreements, declarations and orders, and the units created thereby related to the Lands and the Leases (insofar as they cover the Lands) and all other such agreements relating to the production of oil, gas and related hydrocarbons, if any, attributable to said properties and interests;

 

C. All existing and effective sales, purchase, exchange, gathering, transportation and processing contracts, operating agreements, balancing agreements, farmout agreements, service agreements and other contracts, agreements and instruments, insofar as they relate to the Lands and the Leases (insofar as they cover the Lands);

 

D. All seismic, geophysical, geological and other data and all licenses therefor and all analyses, interpretations, compilations and evaluations thereof relating to the properties and interests described above, if any, subject to any third party contractual restrictions on assignment or transfer; and

 

E. Copies of all files, records and data relating to the properties and interests described above.

 

F. The Oil and Gas Substances produced from the Leases and Lands hereafter; and

 

G. The equipment, personal property and fixtures associated with each oil and gas well presently existing on the Leases, if any, including without limitation, all casing, tubing, meters, valves and all other equipment of any type or description related to, or used in connection with, any such well.

 

For purposes of this Assignment, the term “Oil and Gas Substances” shall mean oil, gas, casinghead gas, gas condensate, and/or all other liquid or gaseous hydrocarbons and other marketable or non-marketable substances produced therewith.

 

TO HAVE AND TO HOLD the Assets unto Assignee, its successors and assigns, forever, subject to the following terms and conditions.

 

Assignor, for itself and its successors, does covenant and agree that it will WARRANT and DEFEND title to the Assets unto Assignee, its successors and assigns, against all persons claiming or to claim the whole or any part thereof, by, through or under Assignor, but not otherwise, and hereby warrants with respect to the Assets assigned by it that title to such Assets is free and clear of all liens, claims, security interests, mortgages, charges and encumbrances arising by, through or under Assignor, but not otherwise.  Assignee shall be and is hereby subrogated to all covenants and warranties of title by parties heretofore given or made to either Assignor or its predecessors in title in respect of any of the Assets.  EXCEPT AS EXPRESSLY SET FORTH IN THE PRECEDING SENTENCES OF THIS PARAGRAPH, THIS ASSIGNMENT IS MADE WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESS, IMPLIED OR STATUTORY.  ASSIGNOR EXPRESSLY DISCLAIMS AND NEGATES ANY WARRANTY AS TO THE CONDITION OF ANY PERSONAL PROPERTY, EQUIPMENT, FIXTURES AND ITEMS OF MOVEABLE PROPERTY COMPRISING ANY PART OF THE ASSETS, INCLUDING (a) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (b) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, (c) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, (d) ANY RIGHTS OF ASSIGNEE UNDER APPLICABLE STATUTES TO CLAIM DIMINUTION OF CONSIDERATION, AND (e) ANY CLAIM BY ASSIGNEE FOR DAMAGES BECAUSE OF DEFECTS, WHETHER KNOWN OR UNKNOWN, IT BEING EXPRESSLY UNDERSTOOD BY ASSIGNEE THAT SAID PERSONAL PROPERTY, FIXTURES, EQUIPMENT, AND ITEMS ARE BEING CONVEYED TO ASSIGNEE “AS IS”, “WHERE IS”, WITH ALL FAULTS, AND IN THEIR PRESENT CONDITION AND STATE OF REPAIR.

 

This Assignment binds and inures to the benefit of Assignor and Assignee and their respective successors and assigns.

 

This Assignment may be executed in several counterparts and all of such counterparts together shall constitute one and the same instrument.

 

[Signature Pages Follow]

 

  

B-1

  

 

 

This Assignment has been executed by the parties hereto effective as of March 31, 2012.

 

 

	 	
ASSIGNOR:

	 
	 	  	 
	 	
RANGE MICHIGAN LLC

 

	 
	 	
By:           Range Exploration Partners LLC,

 its Manager

	 
	 	
By:

	 	 
	 	
Name:

	Frode Aschim	 
	 	
Title:

	 	 

	 	
ASSIGNEE:

	 
	 	  	 
	 	
AMERICAN ENERGY DEVELOPMENT CORP.

	 
	 	
By:

	
 

	 
	 	
Name:

	
Herold Ribsskog

	 
	 	
Title:

	
Chief Executive Officer

	 

 

  

B-2

  

	
STATE OF

	 	
)

	  
	  	
)

	
ss.

	
COUNTY OF

	 	
)

	  

The foregoing instrument was acknowledged before me this _____ day of ______, 2012, by Frode Aschim, Manager of Range Exploration Partners LLC, Manager of Range Michigan LLC, a Wyoming limited liability company, on behalf of such limited liability company.

 

Witness my hand and official seal.

 

	
My commission expires:

	 	  	  
	  	
Notary Public

	
Printed Name:

	 
	
Address:

	  
	  	  

 

(Serial Number, if any)

 

	
STATE OF

	  	
)

	  
	  	
)

	
ss.

	
COUNTY OF

	  	
)

	  

The foregoing instrument was acknowledged before me this _____ day of _____, 2012, by Herold Ribsskog as Chief Executive Officer of American Energy Development Corp., a Nevada corporation, on behalf of such corporation.

 

Witness my hand and official seal.

 

	
My commission expires:

	  	  	  
	  	
Notary Public

	
Printed Name

	  
	
Address:

	  
	  	  

(Serial Number, if any)

 

 

  

B-3

  

 

EXHIBIT “C”

FORM OF JOINT OPERATING AGREEMENT

[See Attached]

 

 

 

 

  

C-1

  

 

EXHIBIT “D”

NON-FOREIGN STATUS CERTIFICATE

Section 1445 of the Internal Revenue Code provides that a transferee of a U.S.  real property interest must withhold tax if the transferor is a foreign person.  To inform American Energy Development Corp., a Nevada corporation (“Buyer”) that withholding of tax is not required upon the disposition of U.S.  real property interests owned by Range Michigan LLC, a Wyoming limited liability Company (“Seller”), the undersigned hereby certifies to Buyer as follows:

 

1.           Seller is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Internal Revenue Code and Income Tax Regulations).

2.           Seller’s U.S.  employer identification number is [].

 

        3.           Seller’s office address is: 504 Fremont Street, Thermopolis, WY 82443.

Seller understands that this certificate may be disclosed to the Internal Revenue Service by Buyer and that any false statement contained herein could be punished by fine, imprisonment, or both.

Under penalties of perjury I declare that I have examined this certification and to the best of my knowledge and belief it is true, correct and complete, and I further declare that I have authority to sign this document on behalf of Seller.

This certificate is executed this 14th day of June, 2012.

	
RANGE MICHIGAN LLC

 

	 
	
By:           Range Exploration Partners LLC,

 its Manager

	 
	
By:

	/s/ Frode Aschim	 
	
Name:

	
Frode Aschim

	 
	
Title:

	
Manager

	 

 

  

D-1

  

 

EXHIBIT “E”

To Lease Acquisition Agreement between Range Michigan LLC, as Seller, and

American Energy Development Corp., as Buyer, dated June 15, 2012, effective March 31, 2012

DESCRIPTION OF LANDS

[*]

 

 

 

E-1

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