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besv_ex1090.htm

EXHIBIT 10.90

 

 

Text Marked By [* * *] Has Been Omitted Pursuant To A Request For Confidential Treatment And Was Filed Separately With The Securities And Exchange Commission.

AGREEMENT FOR PURCHASE OF TERM ASSIGNMENT

THIS AGREEMENT FOR PURCHASE OF TERM ASSIGNMENT (“Agreement”) is made and entered into and made effective this 30th day of November, 2012 ("Effective Date"), by Berexco LLC, for itself and as agent for those parties hereinafter identified as Internal Partners (Berexco LLC and said Internal Partners are hereinafter collectively referred to as “Seller”), and Condor Energy Technology LLC (hereinafter referred to as "Buyer").

For and in consideration of the mutual covenants herein contained, and the payments, conveyances and agreements set forth and provided for herewith, Buyer and Seller hereby agree as set forth below. All undefined, initially capitalized terms used in this Agreement shall have the meanings that are ascribed to such terms in Paragraph 26 of this Agreement.  All Exhibits referred to in this Agreement are listed in Paragraph 25, are hereby incorporated in this Agreement by reference and constitute a part of this Agreement.

1.     PURCHASE OF TERM ASSIGNMENT

Upon the terms and conditions and subject to the exclusions and reservations set forth herein, Seller hereby agrees to transfer, sell, assign, and convey to Buyer, for a set period of time commencing on the Closing Date (as such term is hereinafter defined) and expiring 654 days from said Closing Date ("Primary Term"), and Buyer hereby agrees to purchase and acquire for said Primary Term, all of Seller’s rights, titles and interests in and to the Mississippi Formation underlying those producing and non-producing oil and gas leases in the States of Kansas and Oklahoma, along with certain force-pooled interests in the State of Oklahoma, more particularly described on Exhibit "A" attached hereto and incorporated herein by reference, insofar and only insofar as said leases and pooled interests cover the lands described on Exhibit "A" (each, a "Lease", and collectively, the "Leases"), but limited to production from wells drilled by Buyer thereon and therein after the Closing Date, including all of Seller's right, title, and interest in and to such operating agreements, farmout agreements, pooling orders, assignments and other such contracts and agreements applicable to the Mississippi Formation in and under the Leases in which Seller has an assignable interest (collectively, the “Contracts”), but all without warranty or representation as to effectiveness or validity, or otherwise.

The Primary Term of the said conveyance by Seller to Buyer may be extended as to the Mississippi Formation underlying one or more of the Leases pursuant to the further provisions of this Agreement.  The said rights, titles and interests to be sold by Seller and purchased by Buyer hereunder are sometimes hereinafter referred to as the “Property”.

2.     MISSISSIPPI FORMATION

A.    For the purposes of this Agreement, as to Leases covering lands in the State of Kansas, the Mississippi Formation shall be defined as the stratigraphic equivalent of all depths between 4,982 feet and 5,391 feet, inclusive, as shown on the Log-Tech Dual Compensated Porosity log dated February 22, 2007 for the Peppard #3-20 well (API #15-033-21490-0000) located near the center of the Southeast Quarter of the Southeast Quarter of the Northwest Quarter of the Northeast Quarter of Section 20, Township 31 South, Range 17 West (SE/4SE/4NW/4NE/4 Sec. 20-31s-17w), Comanche County, Kansas.

B.     For the purposes of this Agreement, as to Leases covering lands in the State of Oklahoma, the Mississippi Formation shall be defined as the stratigraphic equivalent of all depths between 5,571 feet and 6,540 feet, inclusive, as shown on the Schlumberger Compensated Neutron Formation Density log dated June 10, 1982, for the Cashdollar #1-19 well located at the center of the Southwest Quarter of the Southwest Quarter of Section 19, Township 27 North, Range 17 West (SW/4SW/4 Sec. 19-27n-17w), Woods County, Oklahoma.

 

  

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3.     PURCHASE PRICE

As consideration for the sale of the Seismic Data (as more particularly set forth in Paragraph 8) and the Property for the Primary Term, Buyer shall pay Seller the sum of Eight Million Six Hundred and Forty-eight Thousand, Six Hundred and Sixty-one Dollars ($8,648,661.00) (“Purchase Price”).  The Purchase Price, as same may be adjusted as hereinafter provided, shall be paid by Buyer to Seller by wire transfer of immediately available funds at the closing of the transaction contemplated hereby (“Closing”).  Within two (2) Business Days following the execution of this Agreement, Buyer shall deposit the sum of Eight Hundred and Sixty-four Thousand, Eight Hundred and Sixty-six Dollars ($864,866.00) with Seller as a deposit ("Performance Deposit") to be held by Seller's counsel Hinkle Law Firm LLC in a client trust account in accordance with the terms and conditions of the Escrow Agreement attached hereto as Exhibit "B".  At the Closing the Performance Deposit shall be credited towards the Purchase Price. 

4.     TERM CONVEYANCE

The leasehold acres and net revenue interests to be conveyed by Seller to Buyer in and to the Mississippi Formation under the Leases are more particularly described on Exhibit "A".  Seller is conveying leasehold and contractual working interest rights only, and is not conveying any royalty, mineral, or overriding royalty interest which Seller or any other party may own in the Leases, and all such interests are specifically excluded from the Property. Seller and Buyer shall, concurrently with the tender of the Purchase Price by Buyer to Seller, execute, acknowledge and deliver one or more Partial Term Assignment of Oil and Gas Leases covering the Property, substantially in the form of Exhibit "C" attached hereto and incorporated herein by reference ("Assignment").  The rights and interests conveyed pursuant to the Assignment shall be expressly limited to the duration of the Primary Term, it being expressly understood that no unilateral action of Buyer, including without limitation the establishment by Buyer of hydrocarbon production from the Property, shall serve to extend the Primary Term of the Assignment as to any Lease. The Primary Term of the Assignment may only be extended, and separately as to each Lease, through (i) the proper exercise by Buyer of the Option (as such term is hereinafter defined), or (ii) the earning by Buyer of a Secondary Term Assignment (as such term is hereafter defined) pursuant to the provisions of Paragraph 11. below, but not otherwise.  Buyer shall promptly file each Partial Term Assignment of Oil and Gas Leases of record in the appropriate counties and states and furnish Seller with copies of such recorded instrument(s).

5.     SELLER'S RESERVATIONS

A.    Seller reserves any and all rights not expressly conveyed to Buyer in the Assignment, including, without limitation, all existing wells, equipment, facilities, and other personal property on or related to the Property; all of Seller's right, title and interest in and to all depths outside the Mississippi Formation; the right to drill and complete new wells on the Leases for the production of Hydrocarbons from formations other than the Mississippi Formation: and all right, title and interest of Seller within the Mississippi Formation necessary to allow Seller to re-enter, workover, complete, re-complete, fracture treat, and produce Hydrocarbons from the Mississippi Formation in any well which has been drilled on the Leases (or on lands unitized therewith) prior to the execution of this Agreement (provided, however, Seller shall not convert an existing vertical well into a horizontal well targeting production from the Mississippi Formation).  It is expressly understood and agreed that Seller shall not have the right to drill and complete wells on any Lease for production of Hydrocarbons from the Mississippi Formation during the Primary Term, Extended Primary Term (as such term is hereinafter defined), or during the term of any Secondary Term Assignment (as such term is hereinafter defined) of such Lease.

B.     As to Leases located in the State of Kansas, Seller shall except and reserve from the Assignment an overriding royalty interest in and to all Hydrocarbons produced from the Property equal to the positive difference, if any, obtained by subtracting leasehold burdens existing as of the Effective Date (as adjusted to reflect any change in leasehold burdens arising as a result of renewals or extensions effected thereafter) from: (i) twenty-two and one-half percent (22.5%) before Payout (as such term is hereinafter defined); (ii) twenty-five percent (25%) upon and after Payout, proportionately reduced to the extent Seller's working interest in the Leases assigned is less than 100%.  As to Leases located in the State of Oklahoma, Seller shall except and reserve from the Assignment an overriding royalty interest in and to all Hydrocarbons produced from the Property equal to the positive difference, if any, obtained by subtracting leasehold burdens existing as of the Effective Date (as adjusted to reflect any change in leasehold burdens arising as a result of renewals or extensions effected thereafter) from twenty-five percent (25%), proportionately reduced to the extent Seller's working interest in the Leases assigned is less than 100%. To the extent leasehold burdens existing as of the Effective Date exceed these respective percentages, Seller shall reserve no overriding royalty interest. It is the intention of Seller to deliver to Buyer a leasehold net revenue interest equal to the lesser of seventy-seven and one-half percent (77.5%) or Seller's actual net revenue interest in and to Leases located in the State of Kansas before Payout; and a leasehold net revenue interest equal to the lesser of seventy-five percent (75%) or Seller's actual net revenue interest in and to Leases located in the State of Kansas after Payout, and in and to Leases located in the State of Oklahoma.

 

  

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C.     The term "Payout" as used herein shall mean that point in time, on a well by well basis, when a well drilled by Buyer on the Property in the State of Kansas has sold the following specified barrels of oil equivalent ("BOE"), in each case utilizing a conversion factor for gas sales of 8 MCF per 1 barrel of oil: for a Vertical Well (as such term is hereinafter defined): Ten Thousand (10,000) BOE; for a Short-Lateral Horizontal Well (as such term is hereinafter defined): Twenty-five Thousand (25,000) BOE; and for an Earning Well or Horizontal Well (as such terms are hereinafter defined) Fifty Thousand (50,000) BOE.  Commencing no later than the last day of the month following the month of first production from a well drilled by Buyer on the Property in the State of Kansas, and no later than the last day of each succeeding month, Buyer shall furnish Seller with a statement showing the oil and gas production and sales from such well during the preceding month, the cumulative sales of oil, gas, and barrels of oil equivalent utilizing the aforesaid conversion factor, and the barrels of oil equivalent remaining to be sold in order to reach Payout with respect to such well.  The After-Payout increase in Seller's reserved overriding royalty interest shall be effective immediately upon Payout of each such well, and Buyer shall ensure that any retroactive adjustments to revenue distributions necessitated by Payout are promptly made.  Upon Buyer's written confirmation of the occurrence of Payout as to any well, Seller shall have the option of recording an affidavit or notice of Payout in the records of the county and state in which such well is located, and any third party shall have the right to rely on said notice or affidavit as conclusive evidence that Payout has occurred; provided, however, Seller shall first submit such notice or affidavit to Buyer for approval as to form and substance prior to recording in the public records, such approval not to be unreasonably withheld.

D.     Seller, or its affiliated designee, reserves the continuing preferential right and option, from time to time and at any time, but not the obligation, to purchase all or any part of the oil and/or other liquid Hydrocarbons (including condensate, distillate, and other liquids recovered from the well stream by normal lease-separation methods) produced and saved from any well drilled by Buyer on the Property.  The price paid therefor shall be Seller's or Seller's affiliated designee's "posted" price, gravity adjusted, applicable thereto for the particular crude type. Transportation charges may be deducted where applicable.  Notwithstanding the foregoing, however, in no event shall the price to be paid to Buyer for a sale of oil and/or liquid Hydrocarbons be less than Buyer can receive from an arms length transaction with a bona fide third party purchaser of such production, including bonuses, pursuant to a written offer furnished to Seller or its affiliated designee no later than forty-five (45) days in advance of an anticipated sale.  No oil or other liquid Hydrocarbons shall be sold by Buyer from any well drilled on the Property until Seller or its affiliated designee has had the chance to exercise its preferential right and option as described above.  Buyer shall notify Seller or its affiliated designee as far in advance as possible of impending production.  Seller or its affiliated designee shall have a reasonable period of time, not to exceed fifteen (15) days, to exercise or waive its preferential right and option.  Any waiver of Seller's preferential right and option to purchase such oil and/or liquid Hydrocarbons shall not preclude Seller from later exercising such right and option.  In the event Buyer's exercises its preferential right to purchase liquid Hydrocarbons pursuant to the provisions of this Paragraph 5.D., Buyer and Seller shall enter into a Crude Oil Purchase Contract substantially in the form of Exhibit "D" attached hereto and incorporated herein by reference.

E.     Seller, or its affiliated designee, reserves the continuing preferential right and option, from time to time and at any time, but not the obligation, to purchase all or any part of the gas (the term "gas" to include natural gas, casinghead gas and other gaseous substances and all constituents thereof in the well stream other than the liquid Hydrocarbons described in Paragraph 5.D. above) produced and saved by Buyer from any well drilled on the Property on the same terms (or terms economically equivalent thereto) as those under which Buyer proposes to sell or dispose of same to another bona fide purchaser that is ready, willing and able to so purchase the gas.  No contract for the sale or other disposition of the gas, or any part thereof, shall ever be made by Buyer until Seller shall have either first exercised or waived in writing its above-described preferential right and option with respect to the gas.  Buyer shall notify Seller or its affiliated designee in writing of any proposed disposition of the gas as much in advance as reasonably possible, and Seller or its affiliated designee shall have a reasonable time, but no less than thirty (30) days after receipt of written notice of all terms of each bona fide offer to purchase gas, or part thereof, in which to notify Buyer of the election to either exercise or waive the preferential right and option, in which event Buyer and Seller shall enter into a mutually acceptable gas purchase contract containing such terms. Any waiver of Seller's preferential right and option to purchase such gas shall not preclude Seller from later exercising such right and option.  Seller does not warrant any gas market for gas that may be produced from the Property, nor does Seller agree to undertake any effort to ensure that such gas is transported, marketed, or sold. In the event such gas is subject to existing gas purchase contract(s) of Seller or Seller's affiliated designee, Buyer agrees to comply with the terms of such contracts, and Seller agrees to assist Buyer in selling such gas thereunder, or in attempting to secure a release of such gas from such contract(s).  However, Seller shall have no liability whatsoever with respect thereto, nor shall Seller have any obligation to allow Buyer to utilize Seller's existing or future gas marketing arrangements or sales facilities.

F.     Whether or not Seller exercises its preferential right to purchase Hydrocarbons produced by Buyer from the Property pursuant to the provisions of Paragraphs 5.D. and/or 5.E. above, Buyer shall ensure that Seller is immediately provided with written notice of any and all changes of ownership affecting surface, mineral, royalty, overriding royalty or other interests under or relating to the Leases of which Buyer, and/or the purchaser of Buyer's production is advised, including copies of all correspondence and documentation pertaining thereto.

 

  

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6.     INFORMATION AND CONFIDENTIALITY

Prior to Closing, Seller shall give Buyer and Buyer's authorized representatives at any reasonable time and upon reasonable notice, access to all contract, land, lease, and title information, data and records to the extent that such information, data and records are in Seller's possession and relate to the Property.  Seller makes no representation, express or implied, with respect to the accuracy or completeness of any information, data or records now, heretofore, or hereafter made available to Buyer in connection with the transaction contemplated hereby, including, without limitation, any description of the Property or Leases, potential for production of Hydrocarbons from the Property, or any other matters contained in any material furnished to Buyer by Seller or by Seller's agents, representatives or Broker (as such term is hereinafter defined).  All information made available to Buyer in connection with this Agreement or the transaction contemplated hereby, including specifically, but without limitation, any supplemental information acquired by Buyer pursuant to Paragraph 7. below, and all information concerning title defects of any nature, shall be maintained strictly confidential by Buyer in accordance with the terms and provisions of that certain letter agreement dated March 8, 2012, by and between Seller and SXTRA LLC, and attached hereto as Exhibit "E" ("Confidentiality Agreement"), and any and all information, data and records provided by Seller to Buyer hereunder concerning the Property shall be considered Confidential Information (as said term is defined in the Confidentiality Agreement).  Notwithstanding the terms and provisions of the Confidentiality Agreement, from and after the Closing, Buyer shall have the right to utilize the Evaluation Material (as said term is defined in the Confidentiality Agreement) for the purpose of attempting to further develop the Property as is contemplated herein, and Buyer's obligation to maintain the confidentiality of the Evaluation Material shall not terminate for a period of ten (10) years from the Closing Date.  Further, Buyer shall take whatever reasonable steps may be necessary to ensure that Buyer's employees, consultants, and agents, including without limitation SXTRA LLC and its employees, comply with the provisions of the Confidentiality Agreement as modified by this Paragraph 6. of this Agreement.

7.     TITLE AND DUE DILIGENCE REVIEW

A.    For a period of sixty (60) days from the Effective Date (“Buyer’s Title Review Period”), Seller shall afford to Buyer and its authorized representatives reasonable access during normal business hours to the office, personnel and books and records of Seller in order for Buyer to conduct a title examination as it may in its sole discretion choose to conduct with respect to the Property in order to determine whether a Material Title Defect (as defined below, and whether one or more) exists.  Such books and records shall include, without limitation, all abstracts of title, title opinions, title files, lease files, assignments, division orders, operating records and agreements, financial and accountings records, and Contracts, in each case insofar as same may now be in existence and in the possession of Seller.  The cost and expense of Buyer’s title review shall be borne solely by Buyer.  Any land, lease or title information, data or records concerning the Leases or Property supplemental to what is in Seller's possession and made available to Buyer pursuant to Paragraph 6. hereof shall be secured by Buyer at Buyer's sole cost and expense, and Buyer shall furnish Seller with copies of all such information so secured, whether before or after the Closing, including without limitation, all documents, title take-offs, and title opinions, at no cost to Seller.  Buyer shall have the right to advise Seller in writing of any Material Title Defect (as such term is hereinafter defined) pertaining to the Leases prior to the expiration of Buyer's Title Review Period.  To be effective, Buyer's written notice shall include both a brief description of the matter constituting the asserted Material Title Defect and supporting documents reasonably necessary for Seller to verify the existence of such asserted Material Title Defect.  Should Buyer fail to give such effective notice to Seller of a Material Title Defect within the time provided, Buyer shall be deemed to have waived any such Material Title Defect.  Seller shall have no obligation to cure any defects in title, but shall cooperate fully with Buyer in any title curative work, both before and after Closing.  If any Material Title Defect in a Lease is not acceptable to, or is not waived by, Buyer, as determined by Buyer in its sole discretion, and Seller does not elect prior to Closing to cure such defect, such Lease shall be excluded from this Agreement and the Purchase Price shall be reduced at Closing on a per acre basis for each net acre subject to Material Title Defect, utilizing $550.00 per net acre for acreage in Comanche, Harper, and Kiowa Counties, Kansas, and $650.00 per net acre for acreage in Barber County, Kansas and Woods County, Oklahoma.

 

  

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B.     The term "Material Title Defect" as used herein shall mean any defect that (i) would prevent Seller from assigning record title to Seller's interest in a Lease to Buyer free of claims and defects other than Permitted Encumbrances (as such term is hereinafter defined); or (ii) would prevent Seller from assigning Seller's interest in a Lease to Buyer free of all mortgages, liens, encumbrances, or other security interests; or (iii) would prevent Seller from assigning Seller's interest in a Lease to Buyer free from pending claims, litigation, or threatened litigation, and shall also include any condition determined to be a Recognized Environmental Condition under any Site Assessment (as such term is hereinafter defined) performed by Buyer pursuant to the provisions of Paragraph 7.F. The term “Permitted Encumbrances” as used herein shall mean such claims and/or defects which are customarily acceptable to a knowledgeable purchaser of oil and gas interests in the area in which the Leases and Property are located and which do not prevent Buyer from entering upon the Leases and Property to conduct customary exploration and production activities.  Buyer and Seller specifically agree that the following are Permitted Encumbrances: (a) defects or irregularities arising out of lack of proof of authority on behalf of a corporation, partnership, limited liability company, or trust (unless it is clear from other documentation that a signatory party has not signed a document in the proper representative capacity) or a variation in corporate or entity name, unless Buyer provides affirmative evidence that such action was not authorized and results in another Person’s superior claim of title to the relevant Property; (b) defects or irregularities in acknowledgements; (c) defects or irregularities arising out of the lack of recorded powers of attorney from corporations to execute and deliver documents on their behalf; (d) defects or irregularities that have been cured or remedied by applicable statutes of limitation or statutes for prescription; (e) defects or irregularities in the chain of title consisting of the failure to recite marital status in documents or omissions of heirship proceedings; (f) defects or irregularities resulting from or related to probate proceedings or the lack thereof which defects or irregularities have been outstanding for five (5) years or more; (g) defects or irregularities in the statutory root of title arising out of the lack of a survey; (h) failure to obtain ratification of pooling or unitization by non-participating royalty and executive mineral interest owners; (i) outstanding deed of trust and mortgage liens burdening the interests of any lessor under any of the Leases, unless there is evidence that the mortgagee or lien holder has asserted a default under any such deed of trust or mortgage and has exercised, or intends to exercise, foreclosure proceedings; (j) preferential rights to purchase which are not exercised with respect to the transaction contemplated by this Agreement; (k) rights to consent by, required notices to, filings with, or other actions by governmental entities in connection with the sale or conveyance of oil and gas leases or interests if the same are customarily obtained routinely and subsequent to such sale or conveyance; (l) rights reserved to or vested in any municipality or governmental, statutory or public authority to control or regulate any of the properties in any manner, and all Applicable Laws, rules and orders of governmental authority; (m) conventional rights of reassignment normally actuated by an intent to abandon or release a lease and requiring notice to the holders of such rights; or (n) defects or irregularities arising out of prior oil and gas leases which, on their face, expired more than three (3) years prior to the Closing, and which have not been released of record unless there is evidence that such leases have been maintained by production, drilling or otherwise.

C.     In the event Seller elects to cure an asserted Material Title Defect, there shall be no reduction in the Purchase Price at Closing on account of such Material Title Defect, and the affected Lease shall be conveyed to Buyer as contemplated herein. Seller shall have a period of ninety (90) days after the Closing to cure all or any portion of such asserted Material Title Defect at its sole cost and expense.  If by such date Seller is not able to cure such Material Title Defect, and such Material Title Defect is not waived by Buyer, the Lease (or portion thereof) still affected by the Material Title Defect shall be reassigned to Seller, and Buyer shall be entitled to a post-closing adjustment to the Purchase Price in the amount provided for hereinabove as if such Lease, or portion thereof, had been excluded from this sale at Closing.

D.    In the event actual net acreage covered under any Lease is determined by Buyer to be less than seventy (70%) percent of the net acreage reflected on Exhibit “A” for such Lease, then such Lease shall, at the option of Buyer, be excluded from the Property and the Purchase Price shall be reduced at Closing by multiplying any reduction in the net leasehold acres delivered by the same per net acre price as is set forth in Paragraph 7.A. above for a Material Title Defect.  Subject to Buyer's rights in the preceding sentence, in the event it is determined Seller is not able to deliver one hundred (100%) percent of the net leasehold acres set forth on Exhibit "A" for any Lease, or in the event it is determined Seller is not able to deliver the net revenue interest set forth on Exhibit "A" (the "Scheduled NRI") for any Lease, such deficiency shall not be considered as a Material Title Defect, and the affected Lease shall remain subject to this Agreement and shall be conveyed by Seller to Buyer at Closing as is contemplated herein.  The Purchase Price shall be reduced at Closing by multiplying any reduction in the net leasehold acres delivered by the same per net acre price as is set forth in Paragraph 7.A. above for a Material Title Defect.  In the event Seller is not able to deliver the Scheduled NRI for any Lease, but the leasehold net revenue interest which can be delivered by Seller in and to such Lease (the "Deliverable NRI") is not less than seventy-five percent (75%), there shall be no adjustment in the Purchase Price for any such reduction in delivered net revenue.  In the event the Deliverable NRI in and to a Lease is less than the Scheduled NRI for such Lease, and is less than seventy-five percent (75%), the Purchase Price shall be reduced at Closing by multiplying the net leasehold acres covered by such Lease as set forth on Exhibit "A" by the same per net acre price as is set forth in Paragraph 7.A. above for a Material Title Defect, and then multiplying that product by a ratio, with the numerator being the difference between (w) the lesser of the Scheduled NRI for such Lease, or seventy-five percent (75%) and (x) the Deliverable NRI, and the denominator being the lesser of (y) the Scheduled NRI for such Lease, or (z) seventy-five percent (75%).

 

  

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E.     In the event it is determined that the net leasehold acres to be delivered by Seller is greater than the net leasehold acres shown on Exhibit "A", the Purchase Price shall be increased at Closing by multiplying any increase in the net leasehold acres delivered by Seller by the same per net acre price as is set forth in Paragraph 7.A. above for a Material Title Defect.  To the extent the additional net leasehold acres delivered by Seller are delivered at a lesser leasehold net revenue interest than is shown on Exhibit "A" for the affected Lease, the increase in the Purchase Price shall be reduced on the same basis and in the same manner as is described in Paragraph 7.D. above.  If the net leasehold acres to be delivered by Seller is greater due to the addition of a Lease not shown on Exhibit "A", such lease shall be delivered at the leasehold net revenue interests provided for in Paragraph 5.B. above, or at the existing leasehold net revenue interest, if less, but in such event the resultant increase in the Purchase Price shall not be reduced. In the event the aggregate increase in the Purchase Price pursuant to this Paragraph 7.E. is more than five percent (5%) of the amount of the unadjusted Purchase Price set forth in Paragraph 3. of this Agreement, Buyer shall have the option not to purchase, and to exclude from this Agreement, sufficient net leasehold acres to reduce such increase to no more than five percent (5%) of said unadjusted Purchase Price. Any net leasehold acres so excluded shall be determined by the mutual agreement of Buyer and Seller by the exclusion of Lease(s) in their entirety, but if such agreement cannot be reached, then the net leasehold acres to be excluded shall be determined by Seller solely from the Lease(s) which resulted in such increase.  In either event, if a Lease is to be excluded from this Agreement pursuant to the provisions of this Paragraph 7.E., all Leases covering any lands covered by such Lease, and all Leases covering lands unitized therewith, shall also be excluded.

F.     Buyer shall have the option, but not the obligation, at reasonable times during Buyer's Title Review Period and upon adequate notice to Seller, to physically access the Property for the purposes of environmental investigation, which shall be limited to conducting a Phase I Environmental Site Assessment in accordance with the American Society for Testing and Materials (A.S.T.M.) Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process (Publication Designation: E1527-05), hereinafter referred to as the "Site Assessment". Buyer shall furnish Seller, free of any cost or expense, with a copy of any written report prepared by or for Buyer related to any Site Assessment as soon as reasonably possible after it is prepared.  Prior to Closing, any environmental report prepared by or for Buyer shall be maintained in strict confidence and for use solely in connection with Buyer's evaluation of the Property.  Except for the obligation to provide reports to Seller as set forth in the preceding sentence, if Closing does not occur, such reports shall not be disclosed to any other party, any such reports or information relating to the Site Assessment shall be deemed the property of Seller, and all such reports or information shall be provided to Seller, or destroyed by Buyer, at Seller's request.

G.     If Buyer exercises its option to access the Property under Paragraph 7.F above, or otherwise, then such access, and any environmental examination and inspection shall be at Buyer's sole cost and risk.  Buyer and its representatives shall abide by all safety rules and other reasonable restrictions imposed by Seller with respect thereto, and Buyer shall, upon written request by Seller, provide Seller with such waivers of liability and/or indemnities as Seller may reasonably request, and with proof of insurance.

8.     SEISMIC ACQUISITION

It is understood the Purchase Price includes payment at the rate of Twenty-five Thousand Dollars ($25,000.00) per square mile for acquisition of approximately 19.5 square miles of 3-D seismic data owned by Seller and covering the Leases and other lands as more particularly described on the Seismic Data License Agreement attached hereto as Exhibit "F" and by reference made a part hereof.  At Closing, Seller shall deliver to Buyer processed 3D seismic data volumes, load sheets, sonic log data within the volumes, and related synthetic seismograms, shoot design, and acquisition parameters for such 3D seismic (the "Seismic Data"), but subject to the said Seismic Data License Agreement, which shall be executed by Buyer and Seller at or before Closing.

9.     BUYER'S OPERATIONS UNDER TERM ASSIGNMENT

A.    Buyer anticipates exploring for production of Hydrocarbons from the Property by the conduct of 3-D seismic operations and the drilling of horizontal wells thereon.  For the purposes of this Agreement, the term "Horizontal Well" shall mean a well drilled for the production of Hydrocarbons from the Mississippi Formation with a lateral length of no less than Four Thousand feet (4000'); the term "Short-Lateral Horizontal Well" shall mean a well drilled for the production of Hydrocarbons from the Mississippi Formation with a lateral length of no less than Two Thousand feet (2000').  Buyer shall have no obligation to conduct any such seismic operations or horizontal drilling during the Primary Term, but Buyer shall not have the right to extend the Primary Term of the conveyance of any Lease unless Buyer shall have complied with the requirements for drilling of horizontal wells set forth in Paragraph 10.A. below.

 

  

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In addition to Horizontal and Short-Lateral Horizontal Wells, Buyer shall have the right to drill wells from the surface location with a lateral length of no more than One Thousand feet (1000') for the production of Hydrocarbons from the Mississippi Formation (each, a "Vertical Well"), provided however, unless otherwise expressly consented to by Seller in writing, in the event Buyer drills a Vertical Well on the Property, Buyer may not commence another Vertical Well on the Property unless Buyer has first drilled at least the same number of Horizontal Wells and Short-Lateral Horizontal Wells on the Property, in aggregate, as the number of Vertical Wells. Other than Horizontal Wells, Short-Lateral Horizontal Wells, and allowed Vertical Wells drilled for the production of Hydrocarbons from the Mississippi Formation, Buyer shall have no right to drill any well, horizontal or otherwise, for the production of Hydrocarbons on any Lease. Buyer may drill one or more pilot wells for the purpose of evaluating (but not producing Hydrocarbons from) the Mississippi Formation (each, a "Pilot Well"), but any such Pilot Well which is not later used to kick off and drill a Horizontal Well, Short-Lateral Horizontal Well, or Earning Well shall not be completed for the production of Hydrocarbons from the Mississippi Formation unless Buyer then has the right to drill a Vertical Well under the provisions of this Paragraph 9.A., and, unless otherwise consented to by Seller in writing, Buyer may not complete any such Pilot Well for the production of Hydrocarbons from the Mississippi Formation unless such Pilot Well is located no less than Six Hundred and Sixty feet (660') from any currently existing well on the Leases.  Any such eligible Pilot Well so completed for the production of Hydrocarbons from the Mississippi Formation shall be considered a Vertical Well for all purposes under this Agreement.

B.     To the extent that Buyer conducts or participates in any seismic survey including any of the Leases during the term of any assignment from Seller to Buyer made hereunder, Buyer shall license to Seller, free of cost to Seller, all raw and processed data (but excluding Buyer's review, analysis and interpretation of the same) acquired or generated from the entirety of such seismic survey.  Such license shall be substantially in the form of the Seismic Data License Agreement attached hereto as Exhibit "F".

C.     Subject to the terms of the applicable Lease, and all Applicable Laws, rules and regulations of any governmental authority with jurisdiction over such matters, Buyer shall have the option, should it choose to do so, to drill one or more vertical wells on the Leases for salt water disposal purposes into depths below the top of the Arbuckle formation ("SWD Well").  For the purposes of this Agreement, as to Leases in the State of Kansas, the top of the Arbuckle formation shall be defined as the stratigraphic equivalent of 5,692 feet as shown on the Log-Tech Dual Compensated Porosity log dated April 18, 2010 for the Berexco LLC Alton #1-3 well (API # 15-033-21568-0000) located near the center of the Northeast Quarter of the Southwest Quarter of the Northwest Quarter of Section 3, Township 31 South, Range 18 West (NE/4SW/4NW/4) Sec. 20-31s-17w), Comanche County, Kansas. As to Leases in the State of Oklahoma, the top of the Arbuckle formation shall be defined as the stratigraphic equivalent of 7,090 feet as shown on the Schlumberger Compensated Neutron Formation Density log referred to in Paragraph 2.B. above.  No salt water disposal into any other zone or formation underlying the Leases shall be permitted.  Buyer shall be solely responsible for securing any and all agreements, including but not limited to rights-of-way and salt water disposal agreements, necessary to drill, operate and utilize any SWD Well for its purposes, but any such agreement obtained by Buyer shall be drawn so as to allow Seller the right to utilize such SWD Well for disposal of salt water produced from wells operated by Seller, and to be assignable to Seller should such well revert to Seller under the provisions of this Agreement.  To the extent of any available capacity, Seller shall have the right to utilize any SWD Well drilled by Buyer for such disposal purposes of Seller, limited only by the capacity of such SWD Well to accept salt water produced by wells drilled by Buyer on the Property. The first 300 barrels per day disposed by Seller into a SWD Well of Buyer shall be free of any charge to Seller by Buyer, provided however, Seller shall reimburse Buyer for any payments made by Buyer on Seller's behalf to allow any such disposal by Seller under the terms of Buyer's landowner agreement(s).  In the event Seller shall dispose of more than 300 barrels per day into a SWD Well of Buyer, Seller shall pay monthly, upon receipt of billing by Buyer, for its proportionate share of the direct costs incurred by Buyer in the operation and maintenance of the SWD Well during that month.  Seller's proportionate share of such costs shall be the percentage determined by dividing the number of barrels disposed by Seller into Buyer's SWD Well by the total number of barrels disposed into Buyer's SWD Well over the preceding six (6) month period.  In the event Seller exercises its right to utilize any such SWD, Seller shall be solely responsible for the costs of installing and maintaining any and all lines, pipe, storage and metering facilities necessary or convenient for utilization of said SWD Well by Seller.

D.    Notwithstanding any provision or authority which may be contained in the Leases, including any amendments thereof, unless otherwise specifically agreed by Seller in writing subsequent to Closing (which agreement may be withheld by Seller for any cause, or without cause), any well drilled by Buyer involving the Property shall be drilled to produce only from lands covered by the Leases, and Buyer shall not have the right to pool or unitize the Leases with other leases covering lands not covered by the Leases, whether or not Buyer may own such other leases covering such other lands. Buyer shall be solely responsible for securing any and all amendments to the Leases necessary to establish any production units desired by Buyer, but unless otherwise agreed by Seller as provided above, all such production units shall encompass only lands covered by the Leases, shall not exceed three hundred and twenty (320) acres for a Horizontal Well and one-hundred and sixty (160) acres for a Short-Lateral Horizontal Well, and shall be subject to prior written approval of Seller, which approval shall not be unreasonably withheld. Notwithstanding the foregoing, Buyer shall not have the right to alter or amend any existing production unit covering the Property, nor shall Buyer apply to alter or amend any existing spacing rules applicable to the Property.  To the extent Buyer drills a producing well and the production therefrom is subject to an existing production or spacing unit, all non-working interest revenues from such well shall be paid in accordance with the terms of the agreement(s) under which such existing production or spacing unit was established.

 

  

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E.     Buyer shall conduct all of its operations on the Leases and locate all of its exploration and production facilities in a manner so as to avoid any damage to, and minimize interference with, Seller's wells and operations, and Buyer shall advise and consult with Seller prior to commencement of any seismic, drilling, completion, or other major operations on the Leases in order to avoid any such damage or interference.  The location of all of Buyer's such facilities shall be agreed upon between Buyer and Seller in advance; such agreement shall not be unreasonably withheld by either party.  Each party shall have the right to use the other's lease roads, including usage for rotary tools or other heavy equipment.  In the event Buyer utilizes Seller's existing lease roads for rotary tools or other heavy equipment, Buyer shall restore such roads to the same or better condition as existed prior to such usage.  In the event Buyer utilizes Seller's existing lease roads for normal operations hereunder, Buyer and Seller shall share equally the cost and expense of maintaining said roads.  Similarly, in the event Seller utilizes new lease roads constructed by Buyer for rotary tools or other heavy equipment, Seller shall restore such roads to the same or better condition as existed prior to such usage, and if Seller utilizes Buyer's new lease roads for its normal operations, Seller and Buyer shall share equally the cost and expense of maintaining such roads.

F.     Buyer shall not conduct vibroseis seismic operations or detonate any seismic charges within three hundred feet (300') of any well currently existing or hereafter drilled by Seller on the Leases unless otherwise specifically consented to by Seller in writing. In addition, Buyer shall not drill the wellbore of any Horizontal Well, Short-Lateral Horizontal Well, or Pilot Well within three hundred feet (300'), and shall not drill the wellbore of any Vertical Well within six hundred and sixty feet (660'), of any currently existing well on the Leases unless otherwise specifically consented to by Seller in writing.  Upon written request by Buyer, Seller will support any application made by Buyer to the regulatory authorities necessary to permit the location and/or production of wells drilled by Buyer in accordance with the foregoing.

G.     Buyer shall notify Seller immediately when the location for any well, including Pilot and SWD Wells, on the Property is staked, when rotary tools for the drilling thereof are moved to the location, and when actual drilling is commenced.  After actual drilling has been commenced, and continuing until such well has been completed, plugged and abandoned as a dry hole, or operations thereof assumed by Seller, Buyer shall furnish Seller with a daily Standard Data Set (as herein defined), as well as any and all other information reasonably requested by Seller with respect to said well.  As used herein, “Standard Data Set” shall mean the following, to the extent such reports and logs are created:  (i) daily drilling reports; (ii) daily completion reports; (iii) daily workover reports; (iv) final logs (any type, including mud log); and (v) core reports (but not the core itself).  Seller shall hold any and all information furnished by Buyer to Seller with respect to the Property in strict confidence and shall not disclose any such information to any party except officers, directors, shareholders, members, partners, managers, employees, attorneys, accountants, engineers, and other agents or consultants of Seller on a confidential basis.

H.     During the drilling and completion of any well, including a Pilot and SWD Wells, on the Property, Buyer shall, unless expressly prohibited by Applicable Law, comply with all of the cementing, logging, reporting, production information, and well data requirements set forth on Exhibit "G" attached hereto and incorporated herein by reference.  Failure by Buyer to comply with such requirements shall constitute a material breach of this Agreement if not cured by Buyer within the applicable notice and cure period provided in Paragraph 19.B. Seller's representatives shall at all reasonable times, but at Seller's sole cost and risk, have access to the rig floor, wellsites, production and disposal facilities; provided, however, Seller shall provide Buyer with at least twenty-four (24) hour notice prior to accessing any active rotary rig or frac site.  In connection with all such access, Seller and its representatives shall abide by all safety rules and other reasonable restrictions imposed by Buyer and Seller shall, upon written request by Buyer, provide Buyer with such waivers of liability and/or indemnities as Buyer may reasonably request, and with proof of insurance.  Seller and Seller's representative shall also have access at all reasonable times to any and all information concerning all Horizontal, Short-Lateral Horizontal, Vertical, Pilot, and SWD Wells drilled by Buyer involving the Property, including without limitation, the items addressed on the said Exhibit "G", provided, however, Buyer shall not be obligated to provide Seller with any interpretations, economic analysis or projections, or any other intellectual property of Buyer.

I.      If in an effort to drill a Horizontal Well or Short-Lateral Horizontal Well on a Lease assigned by Seller to Buyer hereunder, Buyer encounters an impenetrable substance or mechanical difficulty which makes further drilling impracticable, Buyer shall have the option, if applicable, to attempt a completion in the Mississippi Formation in the lateral portion of such well. Any well so completed as a commercial producer of Hydrocarbons shall be considered as an "Earning Well" under the terms of this Agreement, but shall not be considered a Horizontal Well or Short-Lateral Horizontal Well unless the lateral length satisfies the definition of either such Well.

J.      Buyer shall not plug and abandon any well drilled by Buyer on the Property without Seller's express written consent, in accordance with the following:

 

(i)     If Buyer determines to plug and abandon any well drilled by Buyer on a Lease without attempting completion, Buyer shall ensure Seller has been furnished with all electric logs run in said well and all other required well data, and shall not abandon such well until Buyer shall have furnished all such logs and data and given Seller at least twenty-four (24) hours notice of Buyer's intention to so abandon after having satisfied the aforesaid data requirements, unless Seller consents to an earlier abandonment. In the event Seller does not consent to plugging such well, Seller shall elect, within twenty-four (24) hours after receipt of notice of Buyer's intention to abandon, or twenty-four (24) hours after receipt of all electrical logs and other required well data, whichever is the later, to take over operations of such well for its own account.  Failure of Seller to respond to Buyer's notice within the time provided shall be deemed as Seller's consent to plug and abandon such well.

 

  

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(ii)    If Buyer determines to plug and abandon any well drilled by Buyer on a Lease after completion (or after attempting completion), Buyer shall provide notice to Seller of Buyer's intention to abandon and Seller shall, within thirty (30) days from receipt of such notice, either consent to such plugging and abandonment, or elect to take over operations of such well for its own account.  Failure of Seller to respond to Buyer's notice within the time provided shall be deemed as Seller's consent to plug and abandon such well.

(iii)   In the event Seller gives its consent to the plugging and abandonment of any well drilled by Buyer hereunder, Buyer shall promptly plug and abandon such well in accordance with all the requirements of any governmental body having jurisdiction.  In the event Seller elects to take over such well, Seller shall pay Buyer the net salvage value (after plugging and abandonment expense) of the recoverable equipment in the hole, if any, and the well's surface equipment, if any, and effective as of its election, shall assume operations of the well at its sole cost, risk, and expense, which shall include assumption of responsibility for compliance with any directive of any governmental agency having jurisdiction over such well.  In such event, Buyer shall forfeit any and all right to the well so taken over by Seller, and shall promptly reassign to Seller, all Leases of which, by completion of such well, Buyer has either earned or would have earned, in whole or in part, a Secondary Term Assignment, with Buyer retaining only rights to the wellbore(s) of any other wells owned by Buyer then producing in commercial quantities on such Lease(s) and that portion of any Lease(s) of which Buyer has either earned or would have earned  a Secondary Term Assignment with respect to such other producing wells.  Such reassignment shall be in form and content acceptable to Seller, but shall include provision for Seller's assumption of any and all liabilities with respect to the well and Lease(s) assigned and indemnification of Buyer with respect thereto. Any such Lease(s) so reassigned to Seller shall no longer be subject to the terms of this Agreement.

K.     At all times while conducting operations on the Property, Buyer shall comply with the workers compensation laws of the state where the operations are being conducted and shall carry insurance with the minimum limits of liability described on Exhibit "H" attached hereto and incorporated herein by reference.  Buyer agrees to cause the insurance company or companies with whom the said insurance is carried to issue endorsements to the policies representing such insurance to extend the coverage thereof to Seller and the Internal Partners.  Buyer shall at all times keep the Property free and clear of all labor, mechanics' and materialmen's liens, whether through bonding over such liens or through any other means of releasing such liens available at law or in equity.

L.     Buyer shall be responsible for obtaining all necessary Permits or other documentation required under state or federal law or otherwise by public authorities relative to its operations on the Property, including, without limitation, all necessary bonds, plugging or otherwise, and shall comply with all Permits, statutes, rules, regulations, and orders of any governmental authority with respect to its operations on the Property, including, without limitation, any governmental request or requirement in conjunction with Buyer's operations to repair, restore mechanical integrity, plug, re-plug and/or abandon any well of whatsoever type, status or classification located on the Leases, whether or not drilled by Buyer, or to take any cleanup or other action with respect thereto. Buyer shall be responsible for all costs associated with obtaining such Permits or other documentation, and with compliance with such Permits, statutes, rules, regulations, and orders, and shall indemnify and hold Seller harmless from any and all liabilities with respect thereto or arising therefrom.  In addition to the foregoing, Buyer shall, prior to commencement by Buyer of each well drilled by Buyer on the Property, furnish a surety bond in favor of Seller in the amount of Twenty-five Thousand Dollars ($25,000.00), executed by Buyer as principal, and by a corporate surety acceptable to Seller and authorized to do business in the state in which the well is located.  Such bond shall be in form and content satisfactory to Seller, guaranteeing the plugging and abandonment of each such well in accordance with all rules and regulations of the constituted authorities.

M.   Buyer shall comply in all respects with all of the express and implied covenants of the Leases to the extent such Leases cover the Property, including, but not limited to, any necessary environmental or pollution clean-up occasioned by Buyer's operations, and plugging and abandonment of all wells drilled by Buyer on the Leases (unless assumed by Seller pursuant to Paragraph 9.J.(iii) above).  Prior to conducting any operations on the Leases, Buyer shall make satisfactory arrangements with the owners of all surface rights to be affected by such operations for ingress and egress, and shall conduct its operations in a manner to disturb or utilize no more of the surface of the lands than is necessary to conduct prudent operations thereon. Upon plugging and abandonment by Buyer of any well drilled on the Leases, Buyer shall promptly remove all of its equipment, shall restore surface of the lands as nearly as is reasonably practicable to its condition prior to the drilling of such well, and shall comply with any additional or more stringent surface restoration or clean-up requirements under the applicable Lease.

N.     In conducting its operations on the Property, Buyer shall be acting independently of Seller, and none of such operations shall be considered as joint, it being expressly understood that this Agreement does not constitute any type of joint venture or partnership of any nature, mining or otherwise.  Unless assumed by Seller under the provisions of Paragraph 9.J.(iii) above, Seller shall have no responsibility or liability whatsoever in connection with the conduct of any operations, drilling or otherwise, undertaken and prosecuted by Buyer on the Leases and Property. All such operations shall be at Buyer's sole cost, risk, and expense.

 

  

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10.   LEASE EXPIRATIONS AND BUYER'S OPTION TO EXTEND PRIMARY TERM; NON-INTERFERENCE

A.    In the event and only in the event Buyer shall have completed drilling operations on no less than three (3) Horizontal Wells on the Property within 654 days of the Closing (the "Option Date"), Buyer shall have the option (the "Option"), to extend the Primary Term of the then valid Leases for a period of one (1) year, or until the expiration date of such Lease, whichever is the earlier (the "Extended Primary Term") by paying Seller the sum of Two Hundred Dollars ($200.00) per net acre (as shown on Exhibit "A") covered by each of the Leases for which the Option is exercised. For the purposes of the preceding sentence, the completion of drilling operations of two (2) Short-Lateral Horizontal Wells shall be considered the completion of drilling operations on one (1) Horizontal Well.  The completion of drilling operations on Vertical Wells or Earning Wells shall not be considered in determining whether Buyer shall have earned the right to exercise the Option. Provided Buyer has completed the required drilling by the Option Date, Buyer may exercise the Option by notifying Seller in writing, no later than the Option Date, of the Leases for which Buyer wishes to exercise the Option, and by paying Seller therefor as set forth above, within three (3) Business Days thereafter. Failure of Buyer to give such notice as to any Lease, or to make payment for such Lease, within the times provided, shall be deemed an election by Buyer not to exercise the Option with respect to such Lease.

B.     Buyer shall not be obligated to exercise the Option with respect to all of the Leases, but if Buyer elects to exercise the Option with respect to any Lease, Buyer must exercise the Option with respect to all of the then valid Leases included with such Lease within any pre-existing production or spacing unit, and with respect to all of the acreage covered by a Lease, excluding only such Leases or acreage for which Buyer has earned a Secondary Term Assignment.

C.     In the event Buyer timely exercises the Option with respect to a Lease, Seller shall, within fifteen (15) days from receipt of Buyer's payment, execute and deliver to Buyer one or more Extension of Partial Term Assignment of Oil and Gas Leases covering the Leases for which the Option has been exercised, substantially in the form of Exhibit "I" attached hereto and incorporated herein by reference.

D.     In the event Buyer has commenced the actual drilling, below surface casing, of a well on a Lease prior to the expiration of the Primary Term or Extended Primary Term, with rotary tools capable of drilling such well to completion, the expiration of the Primary Term or Extended Primary Term of such Lease shall be deferred, and Buyer shall have the right to continue the drilling of such well to total depth, and if applicable earn a Secondary Term Assignment of such Lease as is provided in Paragraph 11.  Otherwise, Buyer shall not have the right to extend the Primary Term of any Lease except through exercise of the Option, which may only be exercised as is provided in Paragraph 10.A. above; the provisions of this Paragraph 10.D. shall not be construed to alter the requirement that Buyer must have completed drilling operations on no less than three (3) Horizontal Wells (or the equivalent thereof as provided in Paragraph 10.A above) by the Option Date in order to have the right to exercise the Option.

E.     As is set forth on Exhibit "A", the primary term of certain Leases not currently held by production expires prior to the Option Date, and/or prior to the expiration of the Extended Primary Term if the Option is exercised with respect to such Lease(s).  In addition, certain Leases currently held by production could expire in accordance with their terms prior to the Option Date, the expiration of the Primary Term, or the expiration of the Extended Primary Term, due to lack of continued production or other circumstances. Seller shall endeavor to advise Buyer in advance of the pending expiration of any Lease which has been assigned to Buyer hereunder and is within the Primary Term or Extended Primary Term of any such assignment, but shall incur no liability to Buyer for failure to do so, it being expressly understood Seller shall have no obligation to maintain any Lease in force and effect through renewal, extension, re-establishment of production, or otherwise, and shall have no liability whatsoever to Buyer or otherwise with respect thereto.  It is expressly understood that the terms "Primary Term" and "Extended Primary Term" as used in this Agreement bear no relationship to the primary term, or to the extended primary term, as same may affect the duration of any Lease as between the lessor and lessee thereof.  Instead, the terms "Primary Term" and "Extended Primary Term" as used herein relate solely to the duration of the term assignments contemplated under this Agreement, and the interests to be conveyed thereunder may terminate earlier than is contemplated herein to the extent any of the underlying leasehold interests terminate.  It is further understood that Buyer cannot exercise the Option with respect to any lease which has expired, and in the event Buyer exercises the Option and makes payment therefor with respect to any such expired Lease, Seller shall promptly refund any such erroneous payment made.

  

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F.     Upon written notice to Seller, Buyer shall have the right and option, but not the obligation, at its sole cost and expense, to attempt to extend or renew any Lease which expires or is expiring prior to the Option Date, the expiration of the Primary Term, or the expiration of the Extended Primary Term (if the Option has been exercised with respect to such Lease). If requested by Buyer to do so, Seller will attempt to extend or renew any such Lease, but at Buyer's cost and expense, and without any liability for failure to do so.  Any Lease so extended or renewed shall be subject to the terms of this Agreement as fully as if such Lease had been in full force and effect for its extended or renewed term as of the Closing Date.  If not taken in Seller's name, such Lease shall immediately be assigned to Seller without cost, reservation or encumbrance.  Seller will then make a partial term assignment of such extended or renewed Lease to Buyer, insofar as such Lease covers the Property, in accordance with the provisions of this Agreement; provided, however, if possible under the terms and provisions of such renewed or extended Lease, the term of such partial assignment shall be for the Extended Primary Term.

G.     Except as provided by Paragraph 10.F., Buyer shall not make any attempt to lease, renew, extend, top-lease, or otherwise acquire any interest in the lands covered by any Lease, or otherwise attempt to interfere in any manner with Seller's ownership of any Lease, including but not limited to the direct or indirect support of litigation, for a period of two (2) years following the expiration of such Lease, or five (5) years from the Closing Date, whichever is the later date. Buyer shall take whatever reasonable steps may be necessary to ensure that Buyer's employees, consultants, and agents, including without limitation SXTRA LLC and its employees, comply with the provisions of this Paragraph 10.F.

11.   SECONDARY TERM ASSIGNMENT

A.    In the event Buyer drills a well on a Lease, or on a production unit approved by Seller (a "Unit") which includes a Lease, in each case within the Primary Term or, if applicable, the Extended Primary Term of such Lease, and such well is completed as a commercial producer of oil and/or gas (a " Producing Well"), Seller shall execute and deliver to Buyer an assignment of such Lease(s), effective as of first sales of oil and/or gas from such well, and, subject to the provisions of Paragraph 11.B., for so long thereafter as such Producing Well produces in paying quantities from the Mississippi Formation (the "Secondary Term Assignment").  Such assignment shall be limited to the Lease or Leases on which such well is drilled, insofar as such Lease(s) cover the Property, and shall be further limited for a Horizontal Well to a maximum of Three Hundred and Twenty (320) contiguous gross acres covered by such Lease(s), for a Short-Lateral Horizontal Well to a maximum of One Hundred and Sixty (160) contiguous gross acres covered by such Lease(s), and for a Vertical Well to the ten (10) acre governmental quarter-quarter-quarter section covered by such Lease(s) on which such Vertical Well is located; provided, however, in the event Seller has approved a production unit for such a Horizontal Well or Short-Lateral Horizontal Well which includes oil and gas leases other than the Leases, such Secondary Term Assignment shall be limited to the acreage covered by the Lease(s) which is (are) included in such production unit. In the event Buyer completes an Earning Well on a Lease as a commercial producer of oil and/or gas, the Secondary Term Assignment shall be limited to the wellbore of such Earning Well. A Pilot Well shall not earn a Secondary Term Assignment. Any Secondary Term Assignment shall be made substantially in the form of Exhibit "J" attached hereto and incorporated herein by reference.  Buyer shall promptly file each such Secondary Term Assignment of record in the appropriate county and state and furnish Seller with copies of such recorded instrument(s). Seller shall except and reserve from all Secondary Term Assignments the applicable overriding royalty interest as described in Paragraph 5.B, and each Secondary Term Assignment shall, subject to the terms of this Agreement, control the rights and obligations of the parties with respect to the interests conveyed under said Secondary Term Assignment, and shall supersede any Primary Term Assignment to the extent, and only to the extent, said Primary Term Assignment covers the same interests as the relevant Secondary Term Assignment.

B.     In the event a Producing Well ceases to produce in commercial quantities, Buyer shall have the option to commence operations for the reworking of such Producing Well in order to restore commercial production from the Mississippi Formation therefrom, and/or for the drilling and completion of a new well for production from the Mississippi Formation hereunder on the same Lease or Unit on which such Producing Well is located (a "New Well").  Any such reworking operations shall be commenced within ninety (90) days from such cessation of commercial production, and any such drilling operations shall be commenced within ninety (90) days from such cessation of commercial production or ninety (90) days from termination of such reworking operations, whichever is the later date. The Secondary Term Assignment applicable to the Producing Well from which commercial production has ceased shall not terminate so long as such reworking or drilling/completion operations are diligently and continuously prosecuted with no cessation of more than thirty (30) consecutive days. Any cessation of operations for longer than thirty (30) days shall be considered termination of such operations as of the initial date of the cessation.  Notwithstanding the foregoing, Buyer shall not have a period of time in which to commence such operations which is longer than allowed by the applicable Lease(s).

In the event Buyer elects to drill a New Well, and such New Well is completed as commercial producer from the Mississippi Formation, the Secondary Term Assignment applicable to the Producing Well from which commercial production has ceased shall not terminate with respect to any acreage covered by a Lease of which Buyer would have earned a Secondary Term Assignment for completion such New Well.

 

  

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In the event Buyer does not elect to commence reworking operations or drilling/completion operations within the time provided, or if reworking operations are timely commenced and prosecuted but are not successful in restoring commercial production from the Mississippi Formation in such Producing Well, or if operations for a New Well are timely commenced and prosecuted, but do not result in commercial production from the Mississippi Formation, the Secondary Term Assignment applicable to such Producing Well shall thereupon terminate; provided, however, in the event Buyer has drilled (an) additional well or wells hereunder then producing from the Mississippi Formation in commercial quantities on a Lease or Unit covered by the Secondary Term Assignment applicable to such Producing Well, the Secondary Term Assignment shall not terminate with respect to that portion of any Lease(s) of which Buyer would have earned a Secondary Term Assignment by completion of such additional well(s).

Notwithstanding the termination of any Secondary Term Assignment, Buyer shall remain liable for all of its obligations hereunder with respect Buyer's operations on the Lands and Lease(s) covered by such Secondary Term Assignment unless assumed by Seller under the provisions of Paragraph 9.J.(iii).

12.   ASSUMPTION OF LIABILITES 

From and after the Closing, Buyer shall assume and be responsible, on a going forward basis, for all future (but not past) duties, liabilities and obligations of Seller of whatsoever nature, express or implied, with respect to the Property, including, without limitation, those arising under or by virtue of any of the Contracts, or any other lease, contract, agreement, document, permit, or applicable statute or rule, regulation or order of any governmental authority.  Without limiting the generality of the foregoing, Buyer shall assume and be responsible for any and all claims, demands, and causes of action of every kind and character, brought by or in favor of any Person, company, corporation, governmental agency or other entity, for damage to the Property or to the environment, for pollution, or for the condition of the Wells and Leases, or any lands and premises, arising out of Buyer's actions or operations with respect to the Property or any portion thereof, shall indemnify and hold Seller harmless from and against any and all liability with respect thereto, and shall carry all such insurance, including umbrella coverage, necessary to satisfy such responsibilities and indemnities.  Such assumption, responsibility and indemnity shall apply to all such claims, demands or causes of actions arising directly or indirectly from or incident to, the use, occupation, operation, maintenance or abandonment of the Property by Buyer.  Notwithstanding the foregoing, however, Buyer shall not assume, and shall have no responsibility whatsoever with respect to, any Contract by and between Berexco LLC and any its Affiliates (the "Berexco Group"), or by between the Berexco Group, or any of them, and any Internal Partner, nor shall Buyer assume or be liable for any claims, demands and causes of action which arise from acts or omissions occurring prior to the Closing Date or otherwise arising from the acts or omissions of Seller, the Berexco Group or the Internal Partners.

13.   REPRESENTATIONS, WARRANTIES, COVENANTS, INDEMNITIES

A.    As to all of the Property, Seller represents and warrants to Buyer as follows:

(i)     Berexco LLC is acting as agent hereunder for those parties listed on Exhibit "K" (the "Internal Partners") attached hereto and made a part hereof, and has all requisite power and authority to enter into this Agreement for itself and the Internal Partners, and to perform its obligations and those of the Internal Partners hereunder. The consummation of the transactions contemplated by this Agreement will not violate or be in conflict with any provision of Seller's by-laws or governing documents, or any material agreement, or instrument to which Berexco LLC or any Internal Partner is a party or by which it is bound, or any judgment, decree, order, statute, rule or regulation applicable to Seller, or an Internal Partner.  Berexco LLC will fully indemnify and hold Buyer harmless from and against any and all liability asserted by any of the Internal Partners or the Berexco Group arising from Buyer's reliance upon this representation as Berexco LLC's authority to consummate the transactions contemplated hereby on behalf of the Internal Partners, to represent the Berexco Group and Internal Partners with respect to any Contract by, between, or amongst them and as Buyer's authority to make payment of the Purchase Price (including any post-Closing adjustments thereto) issue notices, and do any other act or thing required or contemplated by this Agreement solely to Berexco LLC as agent for the Internal Partners.

(ii)    Seller is validly existing, and, if applicable, in good standing, under the laws of the jurisdiction of its organization. The execution, delivery and performance of this Agreement and the transactions contemplated hereunder have been duly and validly authorized by all requisite action on the part of Seller and the Internal Partners.

(iii)   This Agreement constitutes, and all documents and instruments required hereunder to be executed and delivered by Seller at Closing will constitute, valid, legal and binding obligations of Seller and the Internal Partners in accordance with their respective terms.

 

  

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(iv)   Except as listed on Exhibit "L" attached hereto and made a part hereof, to Seller’s knowledge, as of the date hereof, no suit, action or other Proceeding is pending before any court or governmental agency to which Seller or any Internal Partner is named a party and which might result in impairment or loss of Seller’s or an Internal Partner's title to any part of the Property, that might hinder or impede operation of the Property, or that might otherwise materially and adversely affect the value of the Property, and to the knowledge of Seller, no such suit, action or other Proceeding is threatened.  Seller shall promptly notify Buyer of any such Proceeding arising prior to the Closing.

(v)    Except for the gas purchase contracts listed on Exhibit "M" attached hereto and made a part hereof, to the knowledge of Seller, no Person has any call upon, option to purchase or similar right to obtain production from all or any part of the Property.

(vi)   Seller is not obligated by virtue of a prepayment arrangement, make-up right under a production sales contract containing a “take or pay” or similar provision, production payment or any other arrangement, to deliver Hydrocarbons or proceeds from the sale thereof, attributable to the Property at some future time.

(vii)  There are no bankruptcy, reorganization or arrangement Proceedings pending, being contemplated by, or to Seller’s knowledge, threatened against Seller.

(viii)  Exhibit "N" attached hereto and made a part hereof is a listing of all currently existing wells on the Leases to which Buyer may drill or conduct seismic operations no closer than the distances set forth in Paragraphs 9.A. and 9.F. of this Agreement.

(ix)    Seller and each of the Internal Partners is not a "foreign person" within the meaning of Section 1445 of the Internal Revenue Code.

The phrases "knowledge of Seller", "Seller's knowledge", and any other variations thereof, shall mean the actual knowledge of Adam E. Beren or Charles B. Spradlin, Jr.

B.     From and after the date of execution of this Agreement until the Closing Date, Seller shall not, nor shall any of its officers, directors, employees or agents, directly or indirectly, solicit, initiate, pursue, consider, or otherwise participate in any discussions or negotiations with, or provide any information to or otherwise cooperate in any way with, any Person, concerning (i) any competing offers with respect to the Property or Seller's rights with respect thereto, or (ii) any offer or indication of interest with respect to any transaction involving the sale, transfer, license, or other disposition of the Property. Seller shall immediately terminate any such actions pending on the date of execution of this Agreement. From and after the date of execution of this Agreement and until the Closing, except as may be otherwise consented to by Buyer in writing, Seller shall not dedicate, sell, farmout, encumber or dispose of any of the Property, nor shall Seller drill any new well on the Property for production of Hydrocarbons from the Mississippi Formation.

C.     Seller has made and shall make no other warranty or representation, express or implied, as to the accuracy or completeness of any data, information or materials heretofore or hereafter furnished or conveyed to Buyer in connection with the Property, whether made by Seller or its employees, officers, representatives or agents, including without limitation Riviera-Ensley Energy Advisors ("Broker"), and whether as to the ability, capacity or potential of the Property to produce Hydrocarbons, at any particular rate or in any particular quantity, or otherwise.  Any and all such data, information or other materials which may have been furnished or conveyed to Buyer was so furnished or conveyed as a convenience, and any reliance upon or use thereof shall be at Buyer's sole risk.  Buyer is fully aware of all facts and information related to the contemplated operations, condition, and value of the Property, has not relied on Seller or its agents, including without limitation, Broker, for any such facts or information.  Seller has made and makes no representation whatsoever as to the title to the lands covered hereunder, or by the Leases or Contracts appertaining thereto, nor does Seller make any representation as to the effectiveness or validity of any the Leases or the Contracts, and all such lands, Leases and Contracts shall be assigned without warranty, either express or implied, of title, effectiveness, validity or otherwise, except that Seller shall warrant and defend title from and against any party claiming by, through or under Seller, an Internal Partner, or the Berexco Group, but not otherwise.

 

  

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D.     Buyer represents and warrants to Seller as follows:

(i)     Buyer has all requisite power and authority to enter into this Agreement, to purchase the Property on the terms described in this Agreement, and to perform its other obligations under this Agreement. The consummation of the transactions contemplated by this Agreement will not violate, or be in conflict with, any provision of Buyer's charter, by-laws or governing documents, or any material agreement or instrument to which Buyer is a party or by which Buyer is bound, or any judgment, decree, order, statute, rule or regulation applicable to Buyer.

(ii)    Buyer is validly existing, and, if applicable, in good standing, under the laws of the jurisdiction of its organization. The execution, delivery and performance of this Agreement and the transactions contemplated hereunder have been duly and validly authorized by all requisite action on the part of Buyer.

(iii)   This Agreement constitutes, and all documents and instruments required hereunder to be executed and delivered by Buyer at Closing will constitute, legal, valid and binding obligations of Buyer in accordance with their respective terms.

(iv)   Buyer has examined the Property for all purposes, and is not relying on any prior description of the Property, whether written or verbal, which may have been delivered by Seller or its employees, officers, representatives, or agents, including without limitation Broker.

(v)    Buyer hereby certifies and acknowledges that it has or will obtain all necessary Permits, approvals or other authorities necessary under applicable state and federal law to accept assignment of the Property and conduct the operations contemplated hereby thereon, and will hold Seller harmless from and against any and all liability with respect thereto.

(vi)   To Buyer’s knowledge, as of the date hereof, no suit, action or other Proceeding is pending before any court or governmental agency which might result in impairment of Buyer's ability to pay the Purchase Price and accept assignment of the Property, and to conduct the operations contemplated hereby thereon, and to the knowledge of Buyer, no such suit, action or other Proceeding is threatened.  Buyer shall promptly notify Seller of any such Proceeding arising prior to the Closing.

(vii)  There are no bankruptcy, reorganization or arrangement Proceedings pending, being contemplated by, or to Buyer’s knowledge, threatened against Buyer or any of its members.

E.      Buyer warrants and represents that it is actively engaged in the oil and gas business, and is an experienced and knowledgeable investor in the oil and gas business, familiar with the risks attendant to the conduct of activities in the oil and gas business in general, and the rights and interests covered by this Agreement in particular. Buyer acknowledges and covenants that it has been given the full opportunity to ask questions, and Seller has answered all inquiries, if any, which Buyer has put to it concerning the rights and interests covered by, and the terms and conditions of, this Agreement.

F.     Buyer warrants and represents that it is acquiring the interests covered by this Agreement for its own account as an investment and not with a view to the resale or distribution of all or any part of such interests, and that the representations and warranties of Buyer herein shall be deemed to be made by, and shall be binding upon Buyer and its Affiliates, and their respective assigns.  Buyer recognizes and understands that the interest it is acquiring hereunder has not been registered under the Securities Act of 1933, as amended, or under the securities act of any State, and that Buyer therefore recognizes that it must bear the economic risk of investment for an indefinite period of time.  Buyer specifically waives the applicability of the Kansas Consumer Protection Act and all similar laws of other jurisdictions to the transactions contemplated hereby.  Buyer warrants and represents that prior to entering into this Agreement, Buyer was advised by, and has relied solely upon, its own legal, tax and other professional counsel concerning this Agreement, the Property, and the value thereof.

G.     No broker or finder other than Broker has acted for or on behalf of Seller in connection with this Agreement or the transactions contemplated hereby, and no broker or finder other than Broker is entitled to any brokerage or finder's fees or commission with respect thereto based in any way on agreements, arrangements or understandings made by or on behalf of Seller.  Seller shall be solely responsible and shall hold Buyer harmless from any commission, fee or expense due Broker, and both Buyer and Seller agree to indemnify and hold each other harmless from and against any fees or expenses claimed by any other brokers or finders in connection with this Agreement or the transaction contemplated hereby.

 

  

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H.     Buyer shall defend, indemnify and hold Seller harmless from and against any and all liabilities, debts, claims, damages, and loss incurred in connection with Buyer's operations hereunder on the Property.  Seller shall defend, indemnify and hold Buyer harmless from and against any and all liabilities, debts, claims, damages and loss incurred in connection with Seller's operations on the Leases outside of this Agreement, including with respect to all prior acts or omissions of, and operations conducted by, Seller or its predecessors on the Leases. The indemnities of Seller and Buyer in this Paragraph 13.H. shall survive the Closing.

14.   CLOSING

A.    Unless otherwise agreed to by the parties, the Closing shall take place at the offices of Seller fifteen (15) days following the expiration of Buyer's Title Review Period (the "Closing Date"), or such other earlier date or place, or in such other manner, as may be determined by mutual agreement of the parties.

B.     At Closing, Seller shall deliver to Buyer (or its designee) the following:

(i)     one or more fully executed and recordable Partial Term Assignments of Oil and Gas Leases substantially in the form of Exhibit "C" attached hereto, and such other documents as may be reasonably necessary to convey the Property to Buyer in accordance with the provisions hereof;

(ii)    the executed Seismic Data License Agreement and the Seismic Data;

(iii)   the executed Escrow Agreement;

(iv)   a certification from Seller in form substantially similar to that attached hereto and made a part hereof as Exhibit "O", that such Person is not a "foreign person" within the meaning of Section 1445 of the Internal Revenue Code; and

(iv)   such other and further Closing documents as Buyer may reasonably request prior to Closing.

C.     At Closing, Buyer shall deliver to Seller the following:

(i)     bank wire transfer of immediately available funds in the amount of the Purchase Price less the Performance Deposit, adjusted by any Closing Date Adjustments, payable to the order of Seller;

(ii)    the executed Seismic Data License Agreement;

(iii)   the executed Escrow Agreement;

(iv)   certificates of good standing evidencing Buyer's qualification to transact business in the states of Kansas, Oklahoma, and Buyer's state of formation; and

(v)    such other and further Closing documents as Seller may reasonably request prior to Closing.

 

  

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D.     Unless waived by Seller, at Closing, Buyer shall execute, and Seller shall cause Beredco LLC to execute, a drilling contract in the form of Exhibit "P" attached hereto and made a part hereof providing for the drilling of the first five (5) Horizontal Wells on the Property (and/or an equivalent thereof, as is provided below), and the drilling of the first five (5) SWD Wells on the Property, by rotary rig(s) owned by Beredco LLC; provided, however, nothing herein shall be construed to require Buyer to drill any wells on the Property.  For the purposes of this Paragraph 14.D., two (2) of the first-drilled Short-Lateral Horizontal Wells, and eight (8) of the first-drilled Vertical, SWD or Pilot Wells, shall be considered the equivalent of one (1) Horizontal Well.

15.   CLOSING DATE ADJUSTMENTS

At Closing, the Purchase Price shall be reduced as provided in Paragraph 7.A. for any Lease excluded from this Agreement as a result of a Material Title Defect which is not waived by Buyer and which Seller does not elect to cure, reduced as provided in Paragraph 7.D. for any reduction in net leasehold acres or leasehold net revenue interest actually delivered by Seller in any Lease, and increased as provided in Paragraph 7.E. for any additional net leasehold acres delivered by Seller in any Lease.

16.   CLOSING CONDITIONS

A.    The obligations of Seller under this Agreement are subject, at the option of Seller, to the satisfaction at or prior to Closing of the following conditions:  (i) all representations and warranties of Buyer contained in this Agreement shall be true in all material respects at and as of Closing as if such representations and warranties were made at and as of Closing; (ii) Buyer shall have performed and satisfied all agreements required by this Agreement to be performed and satisfied by Buyer at or prior to Closing; and (iii) the aggregate downward adjustment (if any) to the Purchase Price which results from the procedures set forth in Paragraph 7. does not exceed ten percent (10%) of the unadjusted Purchase Price. To the extent that Seller terminates this Agreement due to closing condition (iii) above, then the Performance Deposit shall be immediately refunded to Buyer. To the extent that Seller terminates this Agreement due to any failure of Buyer to complete any of the closing conditions above, and Seller is not in material breach of this Agreement, then the Performance Deposit shall be immediately paid to Seller.

B.     The obligations of Buyer under this Agreement are subject, at the option of Buyer, to the satisfaction at or prior to Closing of the following conditions:  (i) all representations and warranties of Seller contained in this Agreement shall be true in all material respects at and as of Closing as if such representations were made at and as of Closing, and (ii) Seller shall have performed and satisfied all covenants and conditions required by this Agreement to be performed and satisfied by Seller at or prior to Closing. To the extent that Buyer terminates this Agreement due to any failure of Seller to complete any of the closing conditions above, and Buyer is not in material breach of this Agreement, then the Performance Deposit shall be immediately paid to Buyer. If Buyer proceeds to Closing with knowledge of any condition above not being met by Seller, such condition will be deemed waived by Buyer as a condition to close and Buyer hereby waives any claim for breach of a covenant, representation or warranty or for any indemnity related to such condition which would otherwise be owed pursuant to this Agreement.

17.   POST-CLOSING ADJUSTMENTS

No later than one hundred and twenty (120) days after Closing, Seller shall prepare a statement setting forth each adjustment or payment which was not finally determined as of the Closing under the provisions of Paragraphs 7.C. hereof, and showing the calculation of the final settlement price based upon such statement ("Final Settlement Price").  Seller shall submit such statement to Buyer and shall afford Buyer access to Seller's records pertaining to the computations contained in said statement.  Buyer shall advise Seller in writing of any errors or omissions within fifteen (15) days of receipt of such statement. In the event (i) the Final Settlement Price is more than the amount previously paid to Seller, Buyer shall pay to Seller the amount of such difference in immediately available funds, or (ii) the Final Settlement Price is less than the amount Previously paid to Seller, Seller shall pay to Buyer the amount of such difference in immediately available funds.  Such payments shall be made within five (5) Business Days after expiration of the notice period.

 

  

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18.   TAXES

Any and all sales, conveyance or other similar taxes imposed as a result of the transactions contemplated by this Agreement, other than any income taxes of Seller, shall be paid by and are the responsibility of Buyer.  Buyer shall also be responsible for the payment of all severance, ad valorem or other taxes levied against Buyer's share of any production from any well drilled by Buyer on the Leases. Seller shall be responsible for the payment of all severance, ad valorem or other taxes levied against Seller's share of any production from any well on the Leases.  If requested by Seller, Buyer shall submit any ad valorem tax renditions to Seller on wells drilled by Buyer no later than fifteen (15) days prior to filing such renditions with the applicable county(ies), in order that Seller may review and make suggestions on adjusting such renditions prior to filing.

19.   DEFAULT

A.    Should Buyer default in its obligations hereunder in any material respect prior to Closing, including but not limited to, a failure to be present at the designated time for the Closing hereof, Seller's sole remedy shall be to receive payment of the Performance Deposit from the Hinkle Law Firm LLC client trust account and retain such Performance Deposit as liquidated damages and to terminate this Agreement, Seller hereby waiving all other legal or equitable remedies, including without limitation, damages or a suit for specific performance. BUYER AND SELLER HEREBY ACKNOWLEDGE THAT THE EXTENT OF ACTUAL DAMAGES WHICH SELLER WOULD SUFFER AS A RESULT OF BUYER'S DEFAULT WOULD BE EXTREMELY DIFFICULT TO ASCERTAIN AND HAVE AGREED, AFTER SPECIFIC NEGOTIATION, THAT THE AMOUNT OF THE PERFORMANCE DEPOSIT IS A FAIR AND REASONABLE ESTIMATE OF SUCH DAMAGES UNDER THE CIRCUMSTANCES, IS INTENDED TO CONSTITUTE A FIXED AMOUNT OF LIQUIDATED DAMAGES, AND DOES NOT CONSTITUTE A PENALTY.

B.     Should Seller default in its obligations hereunder in any material respect prior to Closing, including but not limited to, a failure to be present at the designated time for the Closing hereof, Buyer's sole remedy shall be [***]. BUYER AND SELLER HEREBY ACKNOWLEDGE THAT THE EXTENT OF ACTUAL DAMAGES WHICH BUYER WOULD SUFFER AS A RESULT OF SELLER'S DEFAULT WOULD BE EXTREMELY DIFFICULT TO ASCERTAIN AND HAVE AGREED, AFTER SPECIFIC NEGOTIATION, THAT [***] IS A FAIR AND REASONABLE ESTIMATE OF SUCH DAMAGES UNDER THE CIRCUMSTANCES, IS INTENDED TO CONSTITUTE A FIXED AMOUNT OF LIQUIDATED DAMAGES, AND DOES NOT CONSTITUTE A PENALTY.

C.     In the event either party is in default in any material respect of any provision of this Agreement after Closing, the non-defaulting party, as a condition precedent to its remedies, must give the defaulting party written notice of the default in strict accordance with the notice requirements of this Agreement.  The defaulting party shall have thirty (30) Business Days from receipt of such notice to commence curing the default and shall thereafter diligently pursue the completion thereof, but in no event shall such cure period extend beyond ninety (90) days, unless a longer period is mutually agreed by the parties.  If the default is timely cured, this Agreement shall continue in full force and effect.  If the default is not timely cured, the non-defaulting party may pursue its applicable remedies set forth in the following Paragraphs 19.D. and 19.E.

D.     If Buyer fails to comply with any of the material provisions of this Agreement after Closing and fails to cure the same within the applicable cure periods, Seller may, upon the first such occurrence, elect to terminate the Primary Term (including any Extended Primary Term) of any or all of the Leases assigned to Buyer hereunder that are directly related to, or are the subject matter of, Buyer's material uncured default.  Any such election to terminate by Seller shall be made no later than thirty (30) days following the expiration of the applicable cure period.  If Buyer thereafter again fails to comply with any of the material provisions of this Agreement and fails to cure the same within the applicable cure periods, Seller may elect, no later than thirty (30) days following the expiration of the applicable cure period, to terminate the Primary Term (including any Extended Primary Term) of any or all of the Leases assigned to Buyer hereunder that are directly related to, or are the subject matter of, Buyer's material uncured default, and, in the event Buyer's uncured defaults (on a cumulative basis) have given rise to claims in excess of Fifty Thousand  Dollars ($50,000) and/or have resulted from Buyer's failure to comply with the provisions of Paragraphs 6., 9.A., 9. D., 9.F., 9.H., 9.J., 9.K., 9.L., 9.M., 10.G., 20., 21., or 22. of this Agreement, Seller may elect, no later than thirty (30) days following the expiration of the applicable cure period, to terminate this Agreement and/or, at Seller's option, immediately terminate the Primary Term (including any Extended Primary Term) of any or all other Leases assigned to Buyer hereunder.  Notwithstanding any such termination, Seller shall not have the right to unilaterally terminate any Secondary Term Assignment which Buyer has earned under the provisions of this Agreement. In exercising any such election to terminate, Seller shall not waive, or otherwise be precluded from exercising, any other rights or remedies, at law or in equity, which it may have for the breach of the Agreement by Buyer or for Buyer's failure to perform this Agreement in whole or in part.

 

  

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E.     If Seller fails to comply with any of the material provisions of this Agreement after Closing, and fails to cure the same within the applicable cure periods, Buyer may pursue any and all rights or remedies, at law or in equity, which it may have for the breach of the Agreement by Seller or for Seller's failure to perform this Agreement in whole or in part, including specific performance of this Agreement as it relates to delivery of any Assignment, Extension of Primary Term Assignment, or Secondary Term Assignment without the necessity of proving irreparable harm.

20.   NON-ASSIGNABILITY

This Agreement is personal in nature.  Neither this Agreement, the Leases, nor any interest in the Property shall be assigned, conveyed, transferred, or otherwise disposed of by Buyer in any manner (collectively, a "Transfer"), in whole or in part, without the express written consent of Seller, which consent may be withheld by Seller for any cause, or for no cause, provided however, Seller specifically acknowledges that Buyer may, without Seller's consent, assign this Agreement once to any entity into or with which Buyer may be merged, consolidated or reorganized or to any Affiliate of Buyer (a “Permitted Transfer”).  Seller acknowledges that one or more of the members comprising Buyer (“Buyer Members”) are publicly traded entities as of the date of this Agreement, and, subject to the provisions of Paragraph 21. below, that any sale, assignment or other transfer of the stock of Buyer Members by a shareholder(s) shall not be deemed an assignment of this Agreement by operation of law or otherwise.  Should consent to any Transfer be given, or if a Permitted Transfer should occur, no further Transfer shall be made without further written consent from Seller, which consent may also be withheld by Seller for any cause, or for no cause. Any Transfer permitted hereunder shall expressly reference and be made subject to this Agreement, including the Transfer restrictions in this paragraph. Buyer shall keep the Property free and clear of any and all liens of any nature, provided, however, and notwithstanding the foregoing, Buyer may mortgage, pledge, hypothecate or in any manner encumber this Agreement or the Property to fund the cost of any wells or Buyer's other activities with respect to the Property, but any such mortgage, pledge, hypothecation or encumbrance shall expressly reference and be made expressly subject to this Agreement, and shall be made expressly subordinate and expressly subject to Seller's rights under the terms of this Agreement. Any Transfer, mortgage, pledge, hypothecations, or other encumbrance made or created in violation of the provisions of this Paragraph 20. shall be null and void.

21.   PREFERENTIAL RIGHT

Notwithstanding the provisions of Paragraph 20. above, Buyer shall have the right to Transfer all, but not less than all, of its right, title and interest in any Lease of which Buyer has earned a Secondary Term Assignment, but no such Transfer may be made unless and until Buyer shall have given Seller written notice of the offer received by Buyer therefor, with full information concerning the proposed sale, which shall include the name and address of the prospective purchaser (who must be ready, willing, and able to purchase), the purchase price, and all other terms  on which the Transfer is to be made.  Seller shall have a period of fifteen (15) days from receipt of such notice in which to elect to purchase Buyer's interest for the stated consideration and on the same terms and conditions; provided, however, Seller shall have no such preferential right to purchase in the case of a Transfer to an Affiliate or in the case of any sale, assignment or other transfer of the stock of Buyer Members by a shareholder; provided, further, that any change of control of Buyer during the time Buyer holds such Lease pursuant to a Secondary Term Assignment made hereunder, or of an Affiliate transferee or other transferee of Buyer following the Transfer thereto of such Lease which is subject to a Secondary Term Assignment made hereunder, shall be considered a Transfer subject to Seller's option to exercise its preferential right under the provisions of this Paragraph 21 with respect such Lease.  In the event of any Transfer for consideration other than cash or other consideration with quantifiable value (e.g. marketable securities or debt), or in the event of a change of control of Buyer during the time Buyer holds such Lease pursuant to a Secondary Term Assignment made hereunder, or of an Affiliate transferee or other transferee of Buyer following the Transfer thereto of such Lease which is subject to a Secondary Term Assignment made hereunder, Seller's option to exercise its preferential right shall be based upon a price equal to the value allocated in good faith to the Property to be Transferred, or if no such allocation was made in the transaction giving rise to the Transfer, the preferential right shall be based upon the applicable price per net mineral acre set forth in Paragraph 7.A. of this Agreement.

For the purposes of this Paragraph 21, a "change of control" of Buyer, or of an Affiliate transferee or other transferee of Buyer, shall mean a transaction or series of related transactions within a six-month period which result in the security holders of such entity immediately prior to such transaction or series or related transaction no longer holding, directly or indirectly, more than 50% of the voting securities of the entity immediately following such transaction or series of related transactions.

 

  

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22.   [***]

23.   NOTICES

Any notice, request, waiver, demand or consent required or permitted to be given hereunder shall be in writing and delivered by U.S. mail or courier service, addressed to a party at the below addresses. The delivery date of such shall be the date the same is deposited in an official United States Post Office, postage prepaid, certified or registered mail, return receipt requested, or the date delivered by such courier service with the service fee prepaid.

 

	SELLER:	BUYER:
	Berexco LLC	Condor Energy Technology LLC
	2020 N. Bramblewood	4125 Blackhawk Plaza Circle, Suite 201
	
Wichita, Kansas  67206

	Danville, California 94506
	Attn:  Mr. Adam E. Beren	Attn:   Mr. Frank Ingriselli
	With copy to:  Mr. Charles Spradlin	Facsimile: 925-403-0703
	Facsimile:  316-265-7372	 

 

24.   MISCELLANEOUS

A.    Time shall be of the essence of this Agreement.  This Agreement states the entire agreement between the parties, superceding any and all prior communications or agreements between the parties with respect to the subject matter contained herein, and may be supplemented, altered, amended, modified or revoked only by a writing signed by both parties. Should any conflict arise between the terms and conditions of any prior communication or agreement between the parties hereto, oral or written, and this Agreement, then, in such event, this Agreement shall control.  No amendment, modification, supplement or waiver of the terms of this Agreement shall be binding unless executed in writing by both parties hereto.

B.     Seller and Buyer hereby agree from time to time after the Closing, to execute, acknowledge and deliver all such other documents, instruments, or forms as may reasonably be required in connection with the terms and provisions of this Agreement, and to perform and take such actions as may be necessary or appropriate in connection with the performance of the transactions which are contemplated by this Agreement.

C.     The indemnities, representations, warranties and agreements contained in this Agreement and in any certificate or other instrument delivered by or on behalf of either party pursuant to this Agreement shall survive the Closing.

D.     There shall be no press release or public communication by either party concerning this Agreement and/or the transaction contemplated hereby except with the express written consent of the other party, including the express written consent of the other party of the use of such party's identity or any characterization or material information concerning such party to be included in such press release or public communication.  The provisions of this Paragraph 24.D. shall not prevent, in the absence of such consent, a public disclosure or communication which the party making such disclosure or communication is required to make pursuant to Applicable Law or regulation; provided, however, in such event the disclosing party shall not reveal the identity of the other party unless specifically required by law or regulation to do so, and shall limit any other disclosure concerning the other party to only such information as is required by law or regulation to be disclosed. After the Closing Date, Buyer shall have the right to publicly disclose any information (via press releases and other announcements) related to its activities on the Property, including, without limitation, well activity, including drilling locations, IP rates, logs, production data, reserve reports, etc., provided that no such general activity disclosures shall name or identify Seller, without Seller’s prior written consent.

E.     The paragraph headings used in this Agreement are for reference and guidance purposes only and shall have no significance in, and do not affect in any way, the meaning or interpretation of this Agreement.

 

  

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F.     If any term or other provision of this Agreement is judicially determined to be invalid, illegal, or incapable of being enforced under any rule of law, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substances of the transaction contemplated hereby are not affected in a materially adverse manner with respect to either party.

 

G.     Without regard to principles of conflicts of law, this Agreement shall be construed and enforced in accordance with and governed by the laws of the state of Kansas applicable to contracts made and to be performed entirely within such state and the laws of the United States of America, except that, to the extent that the law of a state in which a portion of the Property is located (or which is otherwise applicable to a portion of the Property) necessarily governs, the law of such state shall apply as to that portion of the Property located in (or otherwise subject to the laws of) such state.  EACH PARTY HERETO WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.  Each of the parties hereby (a) irrevocably submits to the exclusive jurisdiction of the state and federal courts of Sedgwick County, Kansas, for the purposes of any suit, action or Proceeding arising out of or relating to this Agreement, and (b) waives, and agrees not to assert in any such suit, action or Proceeding, any claim that (i) it is not personally subject to the jurisdiction of such court or of any other court to which Proceedings in such court may be appealed; (ii) such suit, action or Proceeding is brought in an inconvenient forum; or, (iii) the venue of such suit, action or Proceeding is improper.

H.     NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY NEITHER PARTY SHALL HAVE ANY OBLIGATIONS WITH RESPECT TO THIS AGREEMENT, OR OTHERWISE IN CONNECTION HEREWITH, FOR ANY SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES.

 

I.      Notwithstanding anything herein to the contrary, Seller’s cumulative liability for indemnity obligations and damages for any breach of this Agreement shall not exceed the actual Purchase Price paid by Buyer. The sole and exclusive remedy of Buyer with respect to the Property shall be pursuant to the express provisions of this Agreement.

J.      Each party hereto agrees that it will not voluntarily undertake any course of action inconsistent with the provisions or intent of this Agreement, and will use its reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things reasonably necessary and proper, or advisable under Applicable Laws to consummate the transactions contemplated by this Agreement.

K.     This Agreement and all other provisions hereof shall be deemed to be covenants running with the Lands and shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors, and permitted assigns.

L.     This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which shall constitute one and the same Agreement. Facsimile signatures of the parties hereto shall be sufficient, and shall be treated as original signatures, for all purposes under this Agreement.

M.    It is not the intention of the Parties to create a partnership, joint venture, mining partnership or association taxable as a corporation, and neither this Agreement nor any operations hereunder shall be construed as creating any such relationship. The liability of the parties hereto shall be several and separate, and not joint or collective, and each of the parties hereto shall be responsible for its obligations only.  Nothing contained herein shall be construed to constitute any party hereto as a partner or agent of any other party, and each party hereby waives, disclaims and releases any and all fiduciary duties hereunder.

O.     Subject to the provisions of Paragraphs 20. and 21., this Agreement and the terms, conditions and covenants hereof shall be binding upon the parties hereto and their respective successors and assigns.

 

  

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25.   EXHIBITS

The below listed Exhibits are referred to in this Agreement, are incorporated into this Agreement by reference, and constitute a part of this Agreement.  Both Buyer and Seller have received a full and complete set of Exhibits as of the execution date of this Agreement.

 

	Exhibit "A"	

Leases

	Exhibit "B"	
Escrow Agreement

	Exhibit "C"	
Partial Term Assignment of Oil and Gas Leases

	Exhibit "D"	
Crude Oil Purchase Contract

	Exhibit "E"	
Confidentiality Agreement

	Exhibit "F"	
Seismic Data License Agreement

	Exhibit "G"	
Well Operational and Data Requirements

	Exhibit "H"	
Insurance Requirements

	Exhibit "I"	
Extension of Partial Term Assignment of Oil and Gas Leases

	Exhibit "J"	
Secondary Term Assignment

	Exhibit "K"	
Internal Partners 

	Exhibit "L"	
Suits, Actions, Proceedings

	Exhibit "M"	
Gas Purchase Contracts

	Exhibit "N"	
Current Wells for Setback Requirements

	Exhibit "O"	
FIRPTA Certificate

	Exhibit "P"	
Drilling Contract

 

  

21

  

 

26.   CERTAIN DEFINED TERMS:

As used in this Agreement , each of the following terms has the meaning given it below:

“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person.  For the purposes of this Agreement, “control” when used with respect to any Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract, or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Applicable Law” means any statute, law, rule, or regulation or any judgment, order, writ, injunction, or decree of any Governmental Entity to which a specified Person or property is subject.

“Business Day” shall mean a day other than a Saturday or Sunday or a day on which commercial banks in the State of Kansas are required to be closed for business.

“Governmental Entity” means any court or tribunal in any jurisdiction (domestic or foreign) or any federal, state, municipal, or other governmental body, agency, authority, department, commission, board, bureau, or instrumentality (domestic or foreign).

“Hydrocarbons” shall mean oil, gas, other liquid or gaseous hydrocarbons, and/or other minerals, or any of them or any combination thereof.

“Permits” means licenses, permits, franchises, consents, approvals, variances, exemptions, and other authorizations of or from Governmental Entities.

“Person” means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, enterprise, unincorporated organization, or Governmental Entity.

“Proceedings” means all proceedings, actions, claims, suits, investigations, and inquiries by or before any arbitrator or Governmental Entity.

"Recognized Environmental Condition" means the presence of any hazardous substances or petroleum products on the land covered by a Lease under conditions that indicate an existing release, a past release, or a material threat of a release of any hazardous substances or petroleum products into the ground, ground water, or surface water of the land covered by a Lease, but shall not include de minimis conditions that generally do not present a material risk of harm to public health or the environment and that generally would not be the subject of an enforcement action if brought to the attention of appropriate governmental authorities.

 

  

22

  

27.   CERTAIN ADDITIONAL DEFINED TERMS

 

In addition to such terms as are defined in the preamble to this Agreement and in Paragraph 26. above, the following terms are used in this Agreement as defined in the Paragraphs set forth below opposite such terms:

 

	
"Primary Term"

	
Paragraph 1.

	
"Lease or Leases"

	
Paragraph 1.

	
"Contracts"

	
Paragraph 1.

	
"Property"

	
Paragraph 1.

	
"Closing"

	
Paragraph 3.A.

	
"Purchase Price"

	
Paragraph 3.A.

	
"Performance Deposit"

	
Paragraph 3.A.

	
"Assignment"

	
Paragraph 4.

	
"Payout"

	
Paragraph 5.C.

	
"BOE"

	
Paragraph 5.C.

	
"Confidentiality Agreement"

	
Paragraph 6.

	
"Buyer's Title Review Period"

	
Paragraph 7.A.

	
"Material Title Defect"

	
Paragraph 7.B.

	
"Permitted Encumbrances"

	
Paragraph 7.B.

	
"Scheduled NRI"

	
Paragraph 7.D.

	
"Deliverable NRI"

	
Paragraph 7.D.

	
"Site Assessment"

	
Paragraph 7.F.

	
"Seismic Data"

	
Paragraph 8

	
"Horizontal Well"

	
Paragraph 9.A.

	
"Short-Lateral Horizontal Well"

	
Paragraph 9.A.

	
"Vertical Well"

	
Paragraph 9.A.

	
"Pilot Well"

	
Paragraph 9.A.

	
"SWD Well"

	
Paragraph 9.C.

	
"Standard Data Set"

	
Paragraph 9.G.

	
"Earning Well"

	
Paragraph 9.I.

	
"Option Date"

	
Paragraph 10.A.

	
"Option"

	
Paragraph 10.A.

	
"Extended Primary Term"

	
Paragraph 10.A.

	
"Unit"

	
Paragraph 11.A.

	
"Producing Well"

	
Paragraph 11.A.

	
"Secondary Term Assignment"

	
Paragraph 11.A.

	
"Berexco Group"

	
Paragraph 12.

	
"Internal Partners"

	
Paragraph 13.A.

	
"Broker"

	
Paragraph 13.C.

	
"Closing Date"

	
Paragraph 14.A.

	
"Final Settlement Price"

	
Paragraph 17.

	
"Transfer"

	
Paragraph 20.

	
"Permitted Transfer"

	
Paragraph 20.

	
"Buyer Members"

	
Paragraph 20.

	
"Landowner Demand

	
Paragraph 22.

	
"Demand Litigation"

	
Paragraph 22.

[Remainder of page intentionally left blank,

Signature Page follows]

 

  

23

  

IN WITNESS HEREOF, the parties hereto have entered into and executed this Agreement as of the date first above written.

	
SELLER:

	 
	 	 
	
Berexco LLC 

	 
	 	 	 
	
By: 

	/s/ Adam E. Beren	 
	 	
Adam E. Beren, President

	 

	

BUYER:

	 
	 	 
	

Condor Energy Technology LLC

	 
	 	 	 
	
By: 

	/s/ Frank Ingriselli	 
	 	

Frank Ingriselli, President

	 

 

  

24

  

 

EXHIBIT A

LEASES

	
LEASE DATE

	
BOOK

	
PAGE

	
LANDS

	
STATE

	
COUNTY

	
GROSS ACRES

	
NET ACRES

	
EXPIRATION DATE

	
BPO NRI

	
APO NRI

	
2/20/2008

	
20

	
2108

	
Township 29 South, Range 17 West

Sec. 30:  Lot 1, a/k/a NW/4NW/4; Lots 2, 3 and 4; NE/4NW/4, NW/4NE/4, SE/4SW/4

	
KS

	
Kiowa

	
276.4

	
276.4

	
2/20/2014

	
0.775

	
0.75

	
2/12/2008

	
20

	
2112

	
Township 29 South, Range 17 West

Sec. 30:  E/2E/2, SW/4NE/4, SE/4NW/4, NW/4SE/4, NE/4SW/4

	
KS

	
Kiowa

	
320

	
320

	
2/12/2014

	
0.775

	
0.75

	
2/12/2008

	
20

	
2113

	
Township 29 South, Range 18 West

Sec. 25:  W/2W/2

	
KS

	
Kiowa

	
160

	
160

	
2/12/2014

	
0.775

	
0.75

	
2/20/2008

	
20

	
2110

	
Township 29 South, Range 18 West

Sec. 25:  E/2W/2, E/2

	
KS

	
Kiowa

	
480

	
480

	
2/20/2014

	
0.775

	
0.75

	
4/29/1963

	
6

	
169

	
Township 30 South, Range 18 West

Sec. 9:  SE/4

	
KS

	
Kiowa

	
160

	
80

	
HBP

	
0.775

	
0.75

	
4/26/1963

	
6

	
168

	
Township 30 South, Range 18 West

Sec. 9:  SE/4

	
KS

	
Kiowa

	
"  "

	
80

	
HBP

	
0.775

	
0.75

	
9/23/1964

	
7

	
121

	
INSOFAR AND ONLY INSOFAR AS SAID LEASE COVERS:

Township 30 South, Range 18 West

Sec. 9:  E/2NE/4, SW/NE/4

	
KS

	
Kiowa

	
120

	
120

	
HBP

	
0.775

	
0.75

	
8/5/1965

	
9

	
66

	
Township 30 South, Range 18 West

Sec. 9:  NW/4NE/4, NW/4

	
KS

	
Kiowa

	
200

	
200

	
HBP

	
0.775

	
0.75

	
7/3/1964

	
7

	
55

	
Township 30 South, Range 18 West

Sec. 34:  NW/4

	
KS

	
Kiowa

	
160

	
156.66

	
HBP

	
0.775

	
0.75

	
6/1/1964

	
7

	
433

	
Township 30 South, Range 18 West

Sec. 34:  S/2

	
KS

	
Kiowa

	
320

	
156.66

	
HBP

	
0.775

	
0.75

	
6/1/1964

	
7

	
431

	
Township 30 South, Range 18 West

Sec. 34:  S/2

	
KS

	
Kiowa

	
"  "

	
156.66

	
HBP

	
0.775

	
0.75

	
7/29/1964

	
7

	
273

	
Township 30 South, Range 18 West

Sec. 34:  NE/4

	
KS

	
Kiowa

	
160

	
156.66

	
HBP

	
0.775

	
0.75

	  	  	  	  	  	  	  	  	  	  	  
	
9/23/1966

	
10

	
39

	
Township 30 South, Range 18 West

Sec. 35:  NW/4

	
KS

	
Kiowa

	
160

	
34.63

	
HBP

	
0.775

	
0.75

	
2/10/1966

	
10

	
55

	
Township 30 South, Range 18 West

Sec. 35:  NW/4

	
KS

	
Kiowa

	
"  "

	
69.26

	
HBP

	
0.775

	
0.75

	
12/22/1965

	
9

	
279

	
Township 30 South, Range 18 West

Sec. 35:  NW/4

	
KS

	
Kiowa

	
"  "

	
34.63

	
HBP

	
0.775

	
0.75

	
12/21/1965

	
9

	
269

	
Township 30 South, Range 18 West

Sec. 35:  SE/4

	
KS

	
Kiowa

	
160

	
138.51

	
HBP

	
0.775

	
0.75

	
7/12/1965

	
9

	
79

	
Township 30 South, Range 18 West

Sec. 35:  SW/4

	
KS

	
Kiowa

	
160

	
69.25

	
HBP

	
0.775

	
0.75

	
8/19/1966

	
xx

	
xx

	
Township 30 South, Range 18 West

Sec. 35:  SW/4 (0'-5120')

	
KS

	
Kiowa

	
"  "

	
69.25

	
HBP

	
0.775

	
0.75

	
1/21/1965

	
K-1

	
178

	
Township 30 South, Range 18 West

Sec. 35:  NE/4

	
KS

	
Kiowa

	
160

	
138.51

	
HBP

	
0.775

	
0.75

	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	
Kiowa County total:

	  	  	
2996.4

	
2897.08

	  	  	  

 

 

  

25

  

 

	  	  	  	  	  	  	  	  	  	  	  
	
9/13/1972

	
141

	
575

	
INSOFAR AND ONLY INSOFAR AS LEASE COVERS:

Township 35 South, Range 13 West

Sec. 2:  SW/4

	
KS

	
Barber

	
160

	
160

	
HBP

	
0.775

	
0.75

	
11/1/1966

	
127

	
515

	
Township 34 South, Range 15 West

Sec. 22:  E/2

	
KS

	
Barber

	
320

	
320

	
HBP

	
0.75

	
0.75

	
9/24/1953

	
62

	
389

	
Township 34 South, Range 15 West

Sec. 27:  E/2

	
KS

	
Barber

	
320

	
320

	
HBP

	
0.75

	
0.75

	
6/2/1977

	
162

	
493

	
INSOFAR AND ONLY INSOFAR AS LEASE COVERS:

Township 33 South, Range 11 West

Sec. 35:  SW/4, S/2NW/4

	
KS

	
Barber

	
240

	
240

	
HBP

	
0.775

	
0.75

	
1/3/1948

	
48

	
121

	
INSOFAR AND ONLY INSOFAR AS LEASE COVERS:

Township 34 South, Range 14 West

Sec. 29:  W/2

	
KS

	
Barber

	
320

	
320

	
HBP

	
0.775

	
0.75

	
1/3/1948

	
48

	
121

	
INSOFAR AND ONLY INSOFAR AS LEASE COVERS:

Township 34 South, Range 14 West

Sec. 32:  NW/4 and SE/4

	
KS

	
Barber

	
320

	
320

	
HBP

	
0.775

	
0.75

	
1/3/1948

	
48

	
121

	
INSOFAR AND ONLY INSOFAR AS LEASE COVERS:

Township 34 South, Range 14 West

Sec. 32:  NE/4 and SW/4

	
KS

	
Barber

	
320

	
320

	
HBP

	
0.757813

	
0.75

	
12/9/1969

	
136

	
293

	
Township 33 South, Range 12 West

Sec. 11:  NE/4

	
KS

	
Barber

	
160

	
160

	
HBP

	
0.775

	
0.75

	
7/15/1970

	
137

	
389

	
Township 33 South, Range 12 West

Sec. 11:  SE/4

	
KS

	
Barber

	
160

	
160

	
HBP

	
0.775

	
0.75

	
11/27/1973

	
146

	
409

	
Township 35 South, Range 13 West

Sec. 10:  S/2

	
KS

	
Barber

	
320

	
320

	
HBP

	
0.775

	
0.75

	
11/27/1973

	
146

	
413

	
Township 35 South, Range 13 West

Sec. 15:  Lots 1, 2, 3 and 4 and N/2N/2

	
KS

	
Barber

	
330

	
330

	
HBP

	
0.775

	
0.75

	
10/21/1972

	
141

	
571

	
Township 35 South, Range 13 West

Sec. 14:  NW/4

	
KS

	
Barber

	
160

	
160

	
HBP

	
0.775

	
0.75

	
11/26/2010

	
329

	
25

	
Township 35 South, Range 13 West

Sec. 11:  SW/4

	
KS

	
Barber

	
160

	
160

	
11/26/2013

	
0.775

	
0.75

	
11/26/2010

	
329

	
31

	
Township 35 South, Range 13 West

Sec. 11:  NW/4

	
KS

	
Barber

	
160

	
160

	
11/26/2013

	
0.775

	
0.75

	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	
Barber County total:

	  	  	
3450

	
3450

	  	  	  

 

  

26

  

 

	  	  	  	  	  	  	  	  	  	  	  
	
7/31/1973

	
36

	
330

	
INSOFAR AND ONLY INSOFAR AS SAID LEASE COVERS:

Township 34 South, Range 16 West

Sec. 36:  SW/4

Township 35 South, Range 16 West

Sec.  1:  NW/4

	
KS

	
Comanche

	
320

	
320

	
HBP

	
0.775

	
0.75

	
6/8/1973

	
35

	
518

	
INSOFAR AND ONLY INSOFAR AS SAID LEASE COVERS:

Township 35 South, Range 16 West

Sec. 2:  SW/4NE/4

	
KS

	
Comanche

	
40

	
20

	
HBP

	
0.775

	
0.75

	
3/12/1974

	
37

	
80

	
INSOFAR AND ONLY INSOFAR AS SAID LEASE COVERS:

Township 35 South, Range 16 West

Sec. 2:  SW/4NE/4

	
KS

	
Comanche

	
"  "

	
6.66

	
HBP

	
0.775

	
0.75

	
3/19/1975

	
37

	
394

	
INSOFAR AND ONLY INSOFAR AS SAID LEASE COVERS:

Township 35 South, Range 16 West

Sec. 2:  SW/4NE/4, limited to the Mississippian formation as the same is encountered above the stratigraphic equivalent of 5,240 feet, found in the No. 3 Ballet Ranch Well, located in the SW/4NE/4NW/4 of said Sec. 2.

	
KS

	
Comanche

	
"  "

	
13.33

	
HBP

	
0.722656

	
0.722656

	
7/31/1973

	
36

	
330

	
INSOFAR AND ONLY INSOFAR AS SAID LEASE COVERS:

Township 34 South, Range 16 West

Sec. 35:  SE/4

Township 35 South, Range 16 West

Sec.  2:  Lot 1 and SE/4NE/4

	
KS

	
Comanche

	
224.4

	
224.4

	
HBP

	
0.775

	
0.75

	
1/28/1974

	
37

	
24

	
INSOFAR AND ONLY INSOFAR AS SAID LEASE COVERS:

Township 35 South, Range 16 West

Sec. 2:  Lots 5 and 6

	
KS

	
Comanche

	
55.6

	
9.27

	
HBP

	
0.775

	
0.75

	
1/21/1974

	
37

	
42

	
INSOFAR AND ONLY INSOFAR AS SAID LEASE COVERS:

Township 35 South, Range 16 West

Sec. 2:  Lots 5 and 6

	
KS

	
Comanche

	
"  "

	
27.8

	
HBP

	
0.775

	
0.75

	
1/28/1974

	
37

	
48

	
INSOFAR AND ONLY INSOFAR AS SAID LEASE COVERS:

Township 35 South, Range 16 West

Sec. 2:  Lots 5 and 6

	
KS

	
Comanche

	
"  "

	
18.53

	
HBP

	
0.775

	
0.75

	
7/31/1973

	
36

	
330

	
INSOFAR AND ONLY INSOFAR AS SAID LEASE COVERS:

Township 35 South, Range 16 West

Sec.  1:  SW/4

Sec.  2:  SE/4

	
KS

	
Comanche

	
320

	
320

	
HBP

	
0.775

	
0.75

	
6/29/1953

	
14

	
232

	
INSOFAR AND ONLY INSOFAR AS SAID LEASE COVERS:

Township 33 South, Range 16 West

Sec. 18:  NE/4, W/2SE/4, E/SW/4

	
KS

	
Comanche

	
320

	
313.33

	
HBP

	
0.775

	
0.75

	
6/29/1953

	
14

	
226

	
INSOFAR AND ONLY INSOFAR AS SAID LEASE COVERS:

Township 33 South, Range 16 West

Sec. 7:  E/2

	
KS

	
Comanche

	
320

	
313.33

	
HBP

	
0.775

	
0.75

	
12/3/1965

	
28

	
9

	
INSOFAR AND ONLY INSOFAR AS SAID LEASE COVERS:

Township 31 South, Range 17 West

Sec. 8:  SE/4

Sec. 16: NW/4

Sec. 17: NE/4

	
KS

	
Comanche

	
480

	
404.51

	
HBP

	
0.775

	
0.75

	
5/21/1968

	
32

	
182

	
INSOFAR AND ONLY INSOFAR AS SAID LEASE COVERS:

Township 31 South, Range 17 West

Sec. 17: SE/4

	
KS

	
Comanche

	
160

	
67.42

	
HBP

	
0.775

	
0.75

	
5/21/1968

	
32

	
181

	
INSOFAR AND ONLY INSOFAR AS SAID LEASE COVERS:

Township 31 South, Range 17 West

Sec. 17: SE/4

	
KS

	
Comanche

	
"  "

	
67.42

	
HBP

	
0.775

	
0.75

	
12/3/1965

	
28

	
9

	
INSOFAR AND ONLY INSOFAR AS SAID LEASE COVERS:

Township 31 South, Range 17 West

Sec. 20:  All that part of the W/2NW/4 lying north of the Santa Fe Railroad

	
KS

	
Comanche

	
66.08

	
62.98

	
HBP

	
0.775

	
0.75

 

 

  

27

  

 

	
5/21/1968

	
32

	
182

	
INSOFAR AND ONLY INSOFAR AS SAID LEASE COVERS:

Township 31 South, Range 17 West

Sec. 20:  N/2 except that part of the W/2NW/4 lying north of the center line of A.T.& S.F. railroad right of way; and the NW/4SW/4

	
KS

	
Comanche

	
293.9

	
139.59

	
HBP

	
0.775

	
0.75

	
5/21/1968

	
32

	
181

	
INSOFAR AND ONLY INSOFAR AS SAID LEASE COVERS:

Township 31 South, Range 17 West

Sec. 20:  N/2 except that part of the W/2NW/4 lying north of the center line of A.T.& S.F. railroad right of way; and the NW/4SW/4

	
KS

	
Comanche

	
"  "

	
139.58

	
HBP

	
0.775

	
0.75

	
5/23/1962

	
22

	
474

	
INSOFAR AND ONLY INSOFAR AS SAID LEASE COVERS:

Township 31 South, Range 17 West

Sec. 20:  W/2SE/4; E/2SW/4, SW/4SW/4

	
KS

	
Comanche

	
200

	
190.62

	
HBP

	
0.775

	
0.75

	
5/23/1962

	
22

	
473

	
INSOFAR AND ONLY INSOFAR AS SAID LEASE COVERS:

Township 31 South, Range 17 West

Sec. 20:  E/2SE/4

	
KS

	
Comanche

	
80

	
76.25

	
HBP

	
0.775

	
0.75

	
8/18/2008

	
109

	
307

	
Township 31 South, Range 18 West

Sec. 27:  SW/4

Sec. 28:  S/2

Sec. 33:  N/2

Sec. 34:  W/2NW/4

	
KS

	
Comanche

	
960

	
445.08

	
8/18/2014

	
0.775

	
0.75

	
2/5/2009

	
111

	
389

	
Township 31 South, Range 18 West

Sec. 27:  SW/4

Sec. 28:  S/2

Sec. 33:  N/2

Sec. 34:  NW/4

	
KS

	
Comanche

	
"  "

	
59.94

	
2/5/2015

	
0.775

	
0.75

	
12/9/2008

	
111

	
685

	
Township 31 South, Range 18 West

Sec. 27:  SW/4

Sec. 28:  S/2

Sec. 33:  N/2

Sec. 34:  NW/4

	
KS

	
Comanche

	
"  "

	
59.94

	
12/9/2014

	
0.775

	
0.75

	
12/9/2008

	
111

	
337

	
Township 31 South, Range 18 West

Sec. 27:  SW/4

Sec. 28:  S/2

Sec. 33:  N/2

Sec. 34:  NW/4

	
KS

	
Comanche

	
"  "

	
40.28

	
12/9/2014

	
0.775

	
0.75

	
12/9/2008

	
111

	
331

	
Township 31 South, Range 18 West

Sec. 27:  SW/4

Sec. 28:  S/2

Sec. 33:  N/2

Sec. 34:  NW/4

	
KS

	
Comanche

	
"  "

	
10.16

	
12/9/2014

	
0.775

	
0.75

	
12/9/2008

	
111

	
691

	
Township 31 South, Range 18 West

Sec. 27:  SW/4

Sec. 28:  S/2

Sec. 33:  N/2

Sec. 34:  NW/4

	
KS

	
Comanche

	
"  "

	
17.27

	
12/9/2014

	
0.775

	
0.75

	
12/9/2008

	
111

	
689

	
Township 31 South, Range 18 West

Sec. 27:  SW/4

Sec. 28:  S/2

Sec. 33:  N/2

Sec. 34:  NW/4

	
KS

	
Comanche

	
"  "

	
17.27

	
12/9/2014

	
0.775

	
0.75

	
12/9/2008

	
111

	
687

	
Township 31 South, Range 18 West

Sec. 27:  SW/4

Sec. 28:  S/2

Sec. 33:  N/2

Sec. 34:  NW/4

	
KS

	
Comanche

	
"  "

	
2.54

	
12/9/2014

	
0.775

	
0.75

 

 

  

28

  

 

	
12/9/2008

	
111

	
699

	
Township 31 South, Range 18 West

Sec. 27:  SW/4

Sec. 28:  S/2

Sec. 33:  N/2

Sec. 34:  NW/4

	
KS

	
Comanche

	
"  "

	
2.54

	
12/9/2014

	
0.775

	
0.75

	
7/3/2007

	
108

	
201

	
Township 32 South, Range 18 West

Sec. 4:  Lots 3, 4, S/2NW/4 (a/d/a NW/4) except 10.8 acres North of RR ROW, SW/4

	
KS

	
Comanche

	
304.3

	
304.3

	
7/3/2014

	
0.775

	
0.75

	
7/3/2007

	
108

	
201

	
Township 31 South, Range 18 West

Sec. 33:  SW/4

	
KS

	
Comanche

	
163.6

	
13.4

	
7/3/2014

	
0.775

	
0.75

	
7/5/2007

	
108

	
199

	
Township 31 South, Range 18 West

Sec. 33:  SW/4

	
KS

	
Comanche

	
"  "

	
13.62

	
7/5/2013

	
0.775

	
0.75

	
1/26/2011

	
113

	
893

	
Township 31 South, Range 18 West

Sec. 33:  SW/4

	
KS

	
Comanche

	
"  "

	
6.81

	
1/26/2014

	
0.775

	
0.75

	
8/1/2010

	
113

	
259

	
Township 31 South, Range 18 West

Sec. 33:  SW/4

	
KS

	
Comanche

	
"  "

	
13.63

	
8/1/2014

	
0.775

	
0.75

	
8/1/2010

	
113

	
257

	
Township 31 South, Range 18 West

Sec. 33:  SW/4

	
KS

	
Comanche

	
"  "

	
13.63

	
8/1/2014

	
0.775

	
0.75

	
1/25/2008

	
108

	
165

	
Township 31 South, Range 18 West

Sec. 33:  SW/4

	
KS

	
Comanche

	
"  "

	
6.81

	
1/25/2014

	
0.775

	
0.75

	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	
Comanche County total:

	  	  	
4307.88

	
3762.24

	  	  	  
	  	  	  	  	  	  	  	  	  	  	  
	
12/6/1949

	
30

	
4

	
Towship 31 South, Range 9 West

Sec. 9:  SE/4

	
KS

	
Harper

	
160

	
160

	
HBP

	
0.775

	
0.75

	
3/5/1958

	
48

	
141

	
Towship 31 South, Range 9 West

Sec. 16:  N/2NE/4

	
KS

	
Harper

	
80

	
80

	
HBP

	
0.775

	
0.75

	
12/6/1949

	
29

	
385

	
Towship 31 South, Range 9 West

Sec. 16:  S/2NE/4

	
KS

	
Harper

	
80

	
80

	
HBP

	
0.775

	
0.75

	
4/11/1979

	
78

	
1603

	
Township 31 South, Range 9 West

Sec. 11:  South 100 acres of the SE/4

	
KS

	
Harper

	
100

	
3.84

	
HBP

	
0.775

	
0.75

	
7/19/1979

	
78

	
1830

	
Township 31 South, Range 9 West

Sec. 11:  South 100 acres of the SE/4

	
KS

	
Harper

	
"  "

	
38.41

	
HBP

	
0.775

	
0.75

	
7/12/1979

	
78

	
1831

	
Township 31 South, Range 9 West

Sec. 11:  South 100 acres of the SE/4

	
KS

	
Harper

	
"  "

	
46.09

	
HBP

	
0.775

	
0.75

	
7/20/1979

	
78

	
1832

	
Township 31 South, Range 9 West

Sec. 11:  South 100 acres of the SE/4

	
KS

	
Harper

	
"  "

	
3.84

	
HBP

	
0.775

	
0.75

	
10/17/1950

	
30

	
638

	
INSOFAR AND ONLY INSOFAR AS SAID LEASE COVERS:

Township 31 South, Range 9 West

Sec. 11:  N/2SW/4

	
KS

	
Harper

	
80

	
80

	
HBP

	
0.75

	
0.75

	
10/17/1950

	
30

	
637

	
INSOFAR AND ONLY INSOFAR AS SAID LEASE COVERS:

Township 31 South, Range 9 West

Sec. 11:  S/2SW/4

	
KS

	
Harper

	
80

	
80

	
HBP

	
0.75

	
0.75

	
4/10/1979

	
78

	
1764

	
Township 31 South, Range 9 West

Sec. 11:  North 60 acres of the SE/4

	
KS

	
Harper

	
60

	
27.66

	
HBP

	
0.775

	
0.75

	
7/19/1979

	
78

	
1829

	
Township 31 South, Range 9 West

Sec. 11:  North 60 acres of the SE/4

	
KS

	
Harper

	
"  "

	
27.65

	
HBP

	
0.775

	
0.75

	
6/15/2004

	
88

	
389

	
Township 34 South, Range 6 West

Sec. 1:  W/2NW/4

	
KS

	
Harper

	
80

	
26.67

	
HBP

	
0.775

	
0.75

	
6/15/2004

	
88

	
390

	
Township 34 South, Range 6 West

Sec. 1:  W/2NW/4

	
KS

	
Harper

	
"  "

	
26.67

	
HBP

	
0.775

	
0.75

	
6/15/2004

	
88

	
391

	
Township 34 South, Range 6 West

Sec. 1:  W/2NW/4

	
KS

	
Harper

	
"  "

	
26.66

	
HBP

	
0.775

	
0.75

 

  

29

  

 

	
2/7/2004

	
88

	
144

	
Township 34 South, Range 6 West

Sec. 1:  E2NW/4 excepting the Pulliam #2 wellbore located in the NE/4NE/4NW/4 of said Sec. 1

	
KS

	
Harper

	
80

	
80

	
HBP

	
0.775

	
0.75

	
3/12/2003

	
87

	
1264

	
Township 34 South, Range 6 West

Sec. 1:  N/2 NE/4

	
KS

	
Harper

	
80

	
80

	
HBP

	
0.775

	
0.75

	
9/22/1966

	
64

	
236

	
Township 34 South, Range 6 West

Sec. 1:  SW/4

	
KS

	
Harper

	
160

	
30

	
HBP

	
0.775

	
0.75

	
12/20/1966

	
65

	
466

	
Township 34 South, Range 6 West

Sec. 1:  SW/4

	
KS

	
Harper

	
"  "

	
30

	
HBP

	
0.775

	
0.75

	
11/22/1966

	
64

	
534

	
Township 34 South, Range 6 West

Sec. 1:  SW/4

	
KS

	
Harper

	
"  "

	
54

	
HBP

	
0.775

	
0.75

	
11/22/1966

	
64

	
537

	
Township 34 South, Range 6 West

Sec. 1:  SW/4

	
KS

	
Harper

	
"  "

	
6

	
HBP

	
0.775

	
0.75

	
12/15/2004

	
88

	
657

	
Township 34 South, Range 6 West

Sec. 12:  W/2NW/4

	
KS

	
Harper

	
80

	
80

	
HBP

	
0.775

	
0.75

	
9/21/2001

	
88

	
721

	
Township 34 South, Range 6 West

Sec. 12:  E/2NW/4

	
KS

	
Harper

	
80

	
80

	
HBP

	
0.775

	
0.75

	
4/25/1975

	
77

	
736

	
Township 31 South, Range 9 West

Sec. 11:  NW/4

	
KS

	
Harper

	
160

	
160

	
HBP

	
0.775

	
0.75

	
2/28/1978

	
78

	
860

	
Township 31 South, Range 9 West

Sec. 11:  NE/4

	
KS

	
Harper

	
160

	
160

	
HBP

	
0.775

	
0.75

	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	
Harper County total:

	  	  	
1520

	
1467.49

	  	  	  
	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	
STATE OF KANSAS TOTAL:

	  	  	
12274.28

	
11576.81

	  	  	  
	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  
	
5/12/1979

	
417

	
377

	
Township 27 North, Range 17 West

Sec. 19:  SE/4

	
OK

	
Woods

	
160

	
160

	
HBP

	
0.75

	
0.75

	
5/12/1979

	
417

	
452

	
Township 27 North, Range 17 West

Sec. 19:  NE/4

	
OK

	
Woods

	
160

	
160

	
HBP

	
0.75

	
0.75

	
5/10/1982

	
497

	
184

	
Township 27 North, Range 17 West

Sec. 19:  Lot 1 (a/d/a NW/4NW/4)

	
OK

	
Woods

	
43.91

	
10.98

	
HBP

	
0.72

	
0.72

	
4/2/1982

	
492

	
80

	
Township 27 North, Range 17 West

Sec. 19:  Lot 1 (a/d/a NW/4NW/4)

	
OK

	
Woods

	
"  "

	
10.98

	
HBP

	
0.75

	
0.75

	
5/21/1979

	
497

	
210

	
Township 27 North, Range 17 West

Sec. 19:  Lot 1 (a/d/a NW/4NW/4)

	
OK

	
Woods

	
"  "

	
21.95

	
HBP

	
0.75

	
0.75

	
5/21/1979

	
497

	
210

	
Township 27 North, Range 17 West

Sec. 19:  Lots 1, 2, 3, 4 and E/2W/2

	
OK

	
Woods

	
291.87

	
145.94

	
HBP

	
0.75

	
0.75

	
9/25/1979

	
431

	
585

	
Township 27 North, Range 17 West

Sec. 19:  Lots 2, 3, 4 and E/2W/2

	
OK

	
Woods

	
"  "

	
72.97

	
HBP

	
0.75

	
0.75

	
5/20/1983

	
499

	
591

	
Township 27 North, Range 18 West

Sec. 24:  NE/4NE/4

	
OK

	
Woods

	
40

	
20

	
HBP

	
0.75

	
0.75

	
5/26/1982

	
497

	
559

	
Township 27 North, Range 18 West

Sec. 24:  NE/4NE/4

	
OK

	
Woods

	
"  "

	
10

	
HBP

	
0.75

	
0.75

	
2/9/1984

	
541

	
347

	
Township 27 North, Range 18 West

Sec. 24:  NE/4NE/4

	
OK

	
Woods

	
"  "

	
7.9

	
HBP

	
0.75

	
0.75

	
5/20/1983

	
499

	
591

	
Township 27 North, Range 18 West

Sec. 24:  E/2SE/4, SE/4NE/4

	
OK

	
Woods

	
120

	
60

	
HBP

	
0.75

	
0.75

	
5/26/1982

	
497

	
563

	
Township 27 North, Range 18 West

Sec. 24:  E/2SE/4, SE/4NE/4

	
OK

	
Woods

	
"  "

	
20.41

	
HBP

	
0.75

	
0.75

	
7/9/1982

	
499

	
591

	
Township 27 North, Range 18 West

Sec. 24:  E/2SE/4, SE/4NE/4

	
OK

	
Woods

	
"  "

	
1.22

	
HBP

	
0.75

	
0.75

	
3/14/1984

	
540

	
355

	
Township 27 North, Range 18 West

Sec. 24:  E/2SE/4, SE/4NE/4

	
OK

	
Woods

	
"  "

	
29.34

	
HBP

	
0.75

	
0.75

	
5/1/1981

	
468

	
146

	
Township 27 North, Range 18 West

Sec. 24:  E/2SE/4, SE/4NE/4

	
OK

	
Woods

	
"  "

	
0.97

	
HBP

	
0.75

	
0.75

	
12/9/1980

	
458

	
443

	
Township 27 North, Range 18 West

Sec. 24:  W/2 NE/4, NW/4 and N/2 SW/4

	
OK

	
Woods

	
320

	
126.4

	
HBP

	
0.75

	
0.75

 

  

30

  

 

	
12/9/1980

	
458

	
445

	
Township 27 North, Range 18 West

Sec. 24:  W/2 NE/4, NW/4 and N/2 SW/4

	
OK

	
Woods

	
"  "

	
126.4

	
HBP

	
0.75

	
0.75

	
5/26/1982

	
498

	
487

	
Township 27 North, Range 18 West

Sec. 24:  S/2SW/4, W/2SE/4

	
OK

	
Woods

	
160

	
70

	
HBP

	
0.75

	
0.75

	
6/1/1982

	
501

	
459

	
Township 27 North, Range 18 West

Sec. 24:  S/2SW/4, W/2SE/4

	
OK

	
Woods

	
"  "

	
10

	
HBP

	
0.75

	
0.75

	
12/4/1980

	
462

	
329

	
Township 27 North, Range 18 West

Sec. 24:  W/2 NE/4, NW/4 and N/2 SW/4

	
OK

	
Woods

	
"  "

	
63.2

	
HBP

	
0.75

	
0.75

	
5/12/1979

	
417

	
385

	
Township 27 North, Range 17 West

Sec. 30:  Lot 1, NE/4NW/4, N/2NE/4

	
OK

	
Woods

	
164.08

	
82.04

	
HBP

	
0.75

	
0.75

	
10/8/1979

	
428

	
462

	
Township 27 North, Range 17 West

Sec. 30:  Lot 1, NE/4NW/4, N/2NE/4

	
OK

	
Woods

	
"  "

	
20.51

	
HBP

	
0.75

	
0.75

	
4/2/1982

	
492

	
352

	
Township 27 North, Range 17 West

Sec. 30:  Lot 1, NE/4NW/4, N/2NE/4

	
OK

	
Woods

	
"  "

	
10.25

	
HBP

	
0.75

	
0.75

	
3/12/1982

	
493

	
132

	
Township 27 North, Range 17 West

Sec. 30:  N/2N/2

	
OK

	
Woods

	
"  "

	
9.79000

	
HBP

	
0.75

	
0.75

	
3/19/1982

	
493

	
3

	
Township 27 North, Range 17 West

Sec. 30:  N/2NE/4, N/2NW/4

	
OK

	
Woods

	
"  "

	
29.37

	
HBP

	
0.75

	
0.75

	
1/3/2007

	
1020

	
929

	
Township 27 North, Range 17 West

Sec. 30:  SW/4SW/4

	
OK

	
Woods

	
"  "

	
10.25

	
HBP

	
0.75

	
0.75

	
5/11/1979

	
419

	
25

	
Township 27 North, Range 17 West

Sec. 30:  Lots 2, 3, SE/4NW/4, NE/4SW/4, S/2NE/4, N/2SE/4, SE/4SE/4

	
OK

	
Woods

	
368.69

	
368.69

	
HBP

	
0.75

	
0.75

	
5/25/1979

	
419

	
28

	
Township 27 North, Range 17 West

Sec. 30:  Lots 2, 3, SE/4NW/4, NE/4SW/4, S/2NE/4, N/2SE/4, SE/4SE/4

	
OK

	
Woods

	
"  "

	
Life Estate Lse.

	
HBP

	
0.75

	
0.75

	
3/18/1982

	
493

	
216

	
Township 27 North, Range 17 West

Sec. 30:  SE/4SW/4, SW/4SE/4

	
OK

	
Woods

	
80

	
4.77

	
HBP

	
0.75

	
0.75

	
3/10/1982

	
493

	
222

	
Township 27 North, Range 17 West

Sec. 30:  SE/4SW/4, SW/4SE/4

	
OK

	
Woods

	
"  "

	
47.74

	
HBP

	
0.75

	
0.75

	
3/10/1982

	
493

	
227

	
Township 27 North, Range 17 West

Sec. 30:  SE/4SW/4, SW/4SE/4

	
OK

	
Woods

	
"  "

	
9.55

	
HBP

	
0.75

	
0.75

	
3/18/1982

	
493

	
232

	
Township 27 North, Range 17 West

Sec. 30:  SE/4SW/4, SW/4SE/4

	
OK

	
Woods

	
"  "

	
4.77

	
HBP

	
0.75

	
0.75

	
3/10/1982

	
493

	
234

	
Township 27 North, Range 17 West

Sec. 30:  SE/4SW/4, SW/4SE/4

	
OK

	
Woods

	
"  "

	
9.55

	
HBP

	
0.75

	
0.75

	
3/10/1982

	
493

	
222

	
Township 27 North, Range 17 West

Sec. 30: Lot 4

	
OK

	
Woods

	
44.61

	
21.29

	
HBP

	
0.75

	
0.75

	
3/3/1982

	
493

	
134 as corrected at Book 498, Page 37

	
Township 27 North, Range 17 West

Sec. 30:  N/2N/2

	
OK

	
Woods

	
"  "

	
2

	
HBP

	
0.75

	
0.75

	
4/15/1982

	
503

	
54

	
Township 27 North, Range 17 West

Sec. 30:  SW/4SW/4

	
OK

	
Woods

	
"  "

	
12.39

	
HBP

	
0.72

	
0.72

	
3/26/1982

	
492

	
124

	
Township 27 North, Range 17 West

Sec. 30:  SW/4SW/4

	
OK

	
Woods

	
"  "

	
6.19

	
HBP

	
0.75

	
0.75

	
9/1/2006

	
1011

	
1087

	
Township 27 North, Range 17 West

Sec. 30:  SW/4SW/4

	
OK

	
Woods

	
"  "

	
0.19

	
HBP

	
0.75

	
0.75

	
9/1/2006

	
1012

	
431

	
Township 27 North, Range 17 West

Sec. 30:  SW/4SW/4

	
OK

	
Woods

	
"  "

	
0.19

	
HBP

	
0.75

	
0.75

	
9/1/2006

	
1011

	
425

	
Township 27 North, Range 17 West

Sec. 30:  SW/4SW/4

	
OK

	
Woods

	
"  "

	
0.18

	
HBP

	
0.75

	
0.75

	
9/1/2006

	
1011

	
677

	
Township 27 North, Range 17 West

Sec. 30:  SW/4SW/4

	
OK

	
Woods

	
"  "

	
0.18

	
HBP

	
0.75

	
0.75

	
8/23/1979

	
422

	
469

	
Township 27 North, Range 17 West

Sec. 31:  NE/4

	
OK

	
Woods

	
160

	
2.5

	
HBP

	
0.75

	
0.75

	
8/23/1979

	
422

	
471

	
Township 27 North, Range 17 West

Sec. 31:  NE/4

	
OK

	
Woods

	
"  "

	
10

	
HBP

	
0.75

	
0.75

	
5/20/1982

	
496

	
22

	
Township 27 North, Range 17 West

Sec. 31:  NE/4

	
OK

	
Woods

	
"  "

	
15

	
HBP

	
0.75

	
0.75

	
8/27/1979

	
430

	
198

	
Township 27 North, Range 17 West

Sec. 31:  NE/4

	
OK

	
Woods

	
"  "

	
10

	
HBP

	
0.75

	
0.75

	
9/13/1979

	
426

	
502

	
Township 27 North, Range 17 West

Sec. 31:  NE/4

	
OK

	
Woods

	
"  "

	
2.5

	
HBP

	
0.75

	
0.75

 

  

31

  

 

	
8/27/1979

	
425

	
345

	
Township 27 North, Range 17 West

Sec. 31:  NE/4

	
OK

	
Woods

	
"  "

	
10

	
HBP

	
0.75

	
0.75

	
10/3/1979

	
426

	
500

	
Township 27 North, Range 17 West

Sec. 31:  NE/4

	
OK

	
Woods

	
"  "

	
1

	
HBP

	
0.75

	
0.75

	
10/3/1979

	
429

	
90

	
Township 27 North, Range 17 West

Sec. 31:  NE/4

	
OK

	
Woods

	
"  "

	
1

	
HBP

	
0.75

	
0.75

	
10/3/1979

	
429

	
96

	
Township 27 North, Range 17 West

Sec. 31:  NE/4

	
OK

	
Woods

	
"  "

	
4

	
HBP

	
0.75

	
0.75

	
10/3/1979

	
429

	
100

	
Township 27 North, Range 17 West

Sec. 31:  NE/4

	
OK

	
Woods

	
"  "

	
4

	
HBP

	
0.75

	
0.75

	
10/2/1979

	
431

	
134

	
Township 27 North, Range 17 West

Sec. 31:  NE/4 (0'-6680')

	
OK

	
Woods

	
"  "

	
80

	
HBP

	
0.75

	
0.75

	
8/27/1979

	
425

	
345

	
Township 27 North, Range 17 West

Sec. 31:  S/2SE/4

	
OK

	
Woods

	
80

	
5

	
HBP

	
0.75

	
0.75

	
10/3/1979

	
426

	
500

	
Township 27 North, Range 17 West

Sec. 31:  S/2SE/4

	
OK

	
Woods

	
"  "

	
0.5

	
HBP

	
0.75

	
0.75

	
10/3/1979

	
429

	
90

	
Township 27 North, Range 17 West

Sec. 31:  S/2SE/4

	
OK

	
Woods

	
"  "

	
0.5

	
HBP

	
0.75

	
0.75

	
10/3/1979

	
429

	
96

	
Township 27 North, Range 17 West

Sec. 31:  S/2SE/4

	
OK

	
Woods

	
"  "

	
2.02

	
HBP

	
0.75

	
0.75

	
10/3/1979

	
429

	
100

	
Township 27 North, Range 17 West

Sec. 31:  S/2SE/4

	
OK

	
Woods

	
"  "

	
2.01

	
HBP

	
0.75

	
0.75

	
10/2/1979

	
431

	
134

	
Township 27 North, Range 17 West

Sec. 31:  S/2SE/4 (0'-6680')

	
OK

	
Woods

	
"  "

	
40

	
HBP

	
0.75

	
0.75

	
4/27/1982

	
494

	
207

	
Township 27 North, Range 17 West

Sec. 31:  S/2SE/4

	
OK

	
Woods

	
"  "

	
3.75

	
HBP

	
0.72

	
0.7

	
4/27/1982

	
494

	
209

	
Township 27 North, Range 17 West

Sec. 31:  S/2SE/4

	
OK

	
Woods

	
"  "

	
3.75

	
HBP

	
0.72

	
0.72

	
6/28/1982

	
498

	
491

	
Township 27 North, Range 17 West

Sec. 31:  Lot 3

	
OK

	
Woods

	
44.6

	
5.57

	
HBP

	
0.72

	
0.72

	
5/15/1979

	
419

	
19

	
Township 27 North, Range 17 West

Sec. 31:  Lot 3

	
OK

	
Woods

	
"  "

	
22.3

	
HBP

	
0.75

	
0.75

	
5/15/1979

	
419

	
22

	
Township 27 North, Range 17 West

Sec. 31:  Lot 4, E/2SW/4, N/2SE/4

	
OK

	
Woods

	
204.54

	
194.31

	
HBP

	
0.75

	
0.75

	
5/24/1982

	  	  	
Township 27 North, Range 17 West

Sec. 31:  All

	
OK

	
Woods

	
169.36

	
7.5

	
HBP

	
0.75

	
0.75

	
5/24/1982

	  	  	
Township 27 North, Range 17 West

Sec. 31:  All

	
OK

	
Woods

	
"  "

	
5.73

	
HBP

	
0.72

	
0.72

	
8/9/1982

	  	  	
Township 27 North, Range 17 West

Sec. 31:  All

	
OK

	
Woods

	
"  "

	
12.09

	
HBP

	
0.75

	
0.75

	
8/9/1982

	  	  	
Township 27 North, Range 17 West

Sec. 31:  All

	
OK

	
Woods

	
"  "

	
5.57

	
HBP

	
0.72

	
0.72

	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	
STATE OF OKLAHOMA  TOTAL:

	  	  	
2611.66

	
2229.1

	  	  	  
	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	
GRAND TOTAL:

	  	  	
14885.94

	
13805.91

	  	  	  

 

 

  

32

  

 

EXHIBIT "B"

ESCROW AGREEMENT

This Escrow Agreement (the “Agreement”) is made and entered into this 29th day of November, 2012 (the “Effective Date”), by and among Berexco LLC, a  Kansas limited liability company (“Seller”), Condor Energy Technology LLC, a Nevada limited liability company (“Buyer”), and Hinkle Law Firm, LLC, a Kansas limited liability company (“Escrow Agent”).

WITNESSETH:

WHEREAS, Buyer and Seller are parties to that certain Agreement for Purchase of Term Assignment dated November 29, 2012 (the “AFPOTA”);

WHEREAS, pursuant to the terms and provisions of the AFPOTA, the Seller and Buyer desire to have the Escrow Agent hold in escrow the sum of Eight Hundred and Sixty-four Thousand, Eight Hundred and Sixty-six and No/100 Dollars ($864,866.00) which is referred to in the AFPOTA as the “Performance Deposit”, to be disbursed in accordance with the terms and conditions of this Agreement: and

WHEREAS, Escrow Agent agrees to hold and/or release the Performance Deposit in accordance with the terms and provisions of this Agreement.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1.     Term.  This Agreement shall be effective and in full force and effect and binding upon the parties hereto, from the Effective Date until the final distribution and/or release by Escrow Agent of all of the Performance Deposit, whereupon this Agreement shall terminate and the parties shall have no further obligations hereunder, unless expressly set forth herein.

2.    Appointment of Escrow Agent.  Seller and Buyer hereby appoint Hinkle Law Firm, LLC to serve as Escrow Agent, and the Escrow Agent hereby accepts and agrees to perform its obligation as set forth in the terms of this Agreement.  Escrow Agent shall not be bound by the terms and provisions of the AFPOTA nor any amendments or modifications thereto unless it expressly agrees, in writing, to be bound by such terms and provisions.

3.     Management of Deposit.  Escrow Agent hereby agrees to hold the Performance Deposit in accordance with the terms and provisions of this Agreement.  Buyer and Seller agree that Escrow Agent shall be entitled to place the Performance Deposit in an account with INTRUST BANK, N.A., Wichita, Kansas which account will be established by Escrow Agent for the sole purpose of holding the Performance Deposit (the “Escrow Account”).  The Performance Deposit shall be and remain the property of the Buyer and shall be deemed to be held in trust for the benefit of Buyer.  Escrow Agent shall disburse the Performance Deposit in accordance with the terms of this Agreement.

 

  

33

  

4.     Escrow Information.  The Performance Deposit shall be deposited in the Escrow Account, which Escrow Account shall be a separately segregated interest bearing account.  Any interest earned by the principal in the Performance Deposit shall be accumulated in the Escrow Account, shall be considered a part of the Performance Deposit and shall be released by Escrow Agent as Escrow Agent shall be directed as provided herein; provided, however, any dispute concerning release of the Performance Deposit shall be resolved in accordance with the dispute resolution mechanism set forth in this Agreement.  Buyer and Seller shall provide Escrow Agent with their respective taxpayer ID numbers concurrently with the execution of this Agreement.

5.     Disbursements of Performance Deposit.  Escrow Agent shall disburse the Performance Deposit in accordance with the following terms:

 

(a)    Buyer and Seller may, at any time, provide an agreed written notice to Escrow Agent, requesting that funds be released (the “Funds Release Notice”).  To be valid, the Funds Release Notice must be executed by both Buyer and Seller, must state the amount of such funds to be released, and must state to whom the funds are to be released.

6.     Dispute Resolution Mechanism.  In the event of any disagreement between any of the parties to this Agreement, or between them or either of any of them and any other person, resulting in adverse claims or demands being made in connection with this Agreement or in the event that Escrow Agent may, in good faith, question any action that should be taken hereunder, Escrow Agent may, at Escrow Agent’s option, (i) refuse to comply with any claim or demand on it, or refuse to take any other action hereunder, so long as such disagreement continues or such doubt exists, and in any such event Escrow Agent shall not be or become liable to any person for its failure or refusal to act, and Escrow Agent shall be entitled to continue to so refrain from acting until the rights of Seller and Buyer shall have been fully and finally adjudicated by arbitration or by a court of competent jurisdiction, or all differences shall have been adjusted and all doubt resolved by agreement among all of the interested persons, or (ii) file an action in interpleader to resolve such disagreement and deposit with the registrar of the court in which it files such action any and all of the Performance Deposit in its possession and, thereupon, it shall stand fully relieved and discharged of any further duties under the Agreement.  The rights of the Escrow Agent under this paragraph are cumulative of all other rights which it may have by law or otherwise.

7.     Duties of Escrow Agent.  The duties of Escrow Agent shall be limited to those expressly set forth in this Agreement, including but not limited to: (i) accepting the Performance Deposit, (ii) disbursing the Performance Deposit, and/or (iii) reporting earnings on interest to the IRS.

8      Liability and Protection of Escrow Account.

(a)    Powers – Generally.  Escrow Agent shall have only the rights, powers, privileges and duties expressly set forth in this Agreement, together with those rights, powers, and privileges reasonably incident thereto, and is not a party to, and is not bound by, or charged with notice of any agreement other than this Agreement.

(b)   Actions on Notice, etc.  Escrow Agent shall be protected in acting upon any written notice, request, waiver, consent, certificate, receipt, authorization, power of attorney or other document which Escrow Agent, in good faith, reasonably believes to be genuine and to be signed by the proper party or parties.

 

  

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(c)   Advice of Counsel.  Escrow Agent may rely on the advice of its legal counsel (including any attorneys with Hinkle Law Firm, LLC) in the event of any dispute or question as to the construction of any of the provisions hereof or its duties hereunder, and shall incur no liability as a result of reliance on such advice.

(d)   Resignation.  Escrow Agent shall have the right to resign hereunder upon ten (10) days prior written notice to Seller and Buyer.  If Escrow Agent resigns or otherwise fails or refuses to act as Escrow Agent, then Seller and Buyer shall use their reasonable business efforts to agree upon a substitute Escrow Agent.  In addition, Escrow Agent may be removed by the mutual agreement of Seller and Buyer.

 

(e)    Liability – Negligent Acts.  Escrow Agent shall not be liable for anything which it may do or refrain from doing in connection with this Agreement, except for acts which constitute gross negligence, or willful misconduct or which constitute a breach of its duties hereunder.

(f)    Insurance.  Escrow Agent is not an insurer for the safety of the Performance Deposit.  Escrow Agent shall not be liable or responsible for a loss of any of the funds by reason of bank failure.

9.     Compensation for Services.  Escrow Agent shall be entitled to an Escrow Fee for the services set out in this Agreement which is equal to (i)  the sum of $300.00 per hour for work performed; (ii) all costs, fees, and other expenses incurred by Escrow Agent in establishing a bank account for the Performance Deposit; (iii) the costs associated with the transfer of any of the Performance Deposit including, but not limited to, wire transfer costs and/or cashier’s check expenses; and (iv) reasonable costs and expenses incurred by Escrow Agent including, but not limited to, long distance telephone costs and copy charges.  Buyer and Seller shall be jointly and severally liable for the payment of such compensation but the final responsibility shall lie with Seller.  Escrow Agent shall be entitled to deduct any and all compensation due from the Performance Deposit prior to making any disbursements.

10.   Indemnity.  Seller and Buyer agree, jointly and severally, to indemnify and hold Escrow Agent harmless from and against all costs, damages, judgments, attorneys’ fees, expenses and obligations and liabilities of any kind or nature which Escrow Agent may incur or sustain in connection with or arising out of this Agreement, except to the extent due to Escrow Agent’s gross negligence, willful misconduct, or breach of its duties hereunder.  In addition, each party agrees to indemnify Escrow Agent from all costs, legal fees, and expenses incurred by Escrow Agent (including those legal fees of attorneys who practice with Escrow Agent) in connection with or arising out of (i) seeking recovery from such party under or pursuant to the terms of this indemnity paragraph; (ii) defending any litigation which arises out of or relates to this Agreement or the alleged breach thereof by any party, including Escrow Agent; and (iii)  seeking recovery of any compensation which is due Escrow Agent.  Escrow Agent shall be entitled to deduct any and all such amounts due or alleged to be due from the Performance Deposit.

11.   Survival.  The terms and provisions of paragraphs 9 and 10 of this Agreement shall survive termination or expiration of this Agreement.

12.   Liability, Duties and Obligations of Escrow Agent.  The parties hereby agree as follows:

a.     Escrow Agent undertakes to perform only such obligations as are expressly set forth herein.

b.     Escrow Agent shall not be liable for any action taken by it in good faith and reasonably assumed by it to be authorized or within the rights and powers conferred upon it herein.

 

c.     It is understood that Escrow Agent shall not be required to achieve any minimum return on said Performance Deposit.

 

  

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13.   Waiver.  Neither this Agreement nor any provisions hereof may be waived except by instrument in writing signed by the parties against which the enforcement of such waiver is sought and then only to the extent set forth in such instrument.

14.   Books and Records.  Escrow Agent shall maintain proper books and records for the Escrow Account.  All amounts to be paid or disbursed by Escrow Agent under this Agreement shall be paid solely out of the Performance Deposit.

15.   Notices.  Any notices to be given hereunder shall be given by (i) placing the notice in the United States mail, certified or registered, properly stamped, (ii) overnight delivery service, (iii) facsimile, or (iv) by personal delivery, in each case addressed to the location shown below or such other addresses as the respective party may direct in writing to the other, or to such address.  Such notice shall be deemed effective (A) two (2) days after such placing in the mail when delivered by U.S. Mail Service, (B) on the day actually delivered by an overnight delivery service, (C) upon confirmation of the completion of the fax (electronic or otherwise) when delivered by fax, or (D) upon such personal delivery:

 

	 	If to BUYER:	Condor Energy Technology LLC 

4125 Blackhawk Plaza Circle, Suite 201A

Danville, California 94506

Attn: Mr. Frank Ingriselli

Fax No.: 925-403-0703

	 	 	 
	 	If to SELLER:	Berexco LLC 

2020 N. Bramblewood

Wichita, Kansas 67206

Attn: Mr. Adam E. Beren

With copy to: Mr. Charles Spradlin

Fax No.: 316-265-7372

	 	 	 
	 	If to ESCROW AGENT:	Hinkle Law Firm, LLC 

8621 East 21st Street North, Suite 200

Wichita, Kansas 67206-2991

Attn:  John Broomes

Facsimile:  316-630-8375

 

16.   Amendments.  No amendments or changes to this Agreement shall become effective unless in writing and signed by Seller, Buyer and Escrow Agent.

 

  

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17.   Superseding Effect.  This Agreement shall govern the obligations and rights of the parties notwithstanding the terms and provisions of the AFPOTA.  Escrow Agent shall not be bound by the terms and provisions of the AFPOTA.

18.   Invalidity.  In the case any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any of the provisions hereof, and this Agreement shall be construed as if that provision had never been contained herein.

19.   Time.  Time is of the essence in the performance of each provision of this Agreement.

20.   Counterparts and Facsimile Signatures.  This Agreement may be executed in counterparts, each of which shall be deemed an original and which together shall constitute one and the same agreement.  Signatures sent by one party to the other via facsimile transmission shall be deemed original signatures, binding upon the party so sending such signature, and shall be and hereby are deemed original signatures.

21.   Successors and Assigns.  The terms and provisions of this Agreement shall be binding upon and inure to the benefit of each of the parties hereto, their successors and permitted assigns.

22.   Governing Law.  This Agreement shall be governed by the laws of the State of Kansas.

 

  

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IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto as of the day and year first above written.

 

	 	BUYER	 
	 	
Condor Energy Technology LLC

	 
	 	 	 	 
	 	
By: 

	 	 
	 	 	
Frank Ingriselli, President

	 

 

	 	
SELLER

	 
	 	

Berexco LLC

	 
	 	 	 	 
	 	
By: 

	 	 
	 	 	

Adam E. Beren, President

	 

 

	 	

ESCROW AGENT: 

	 
	 	Hinkle Law Firm, LLC	 
	 	 	 	 
	 	
By: 

	 	 
	 	 	
John Broomes, Member

	 

 

 

  

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EXHIBIT “C”

PARTIAL TERM ASSIGNMENT OF OIL AND GAS LEASES

 

STATE OF  _______________§

 

COUNTY OF  ______________§

 

This Partial Term Assignment of Oil and Gas Leases (the “Assignment”) is made and entered into as of the day of November, 2012 (the “Effective Date”), by and between Berexco LLC, _____________________  , hereinafter collectively referred to as “Assignor”, whether one or more, and Condor Energy Technology LLC, hereinafter referred to as “Assignee”.

 

 

WITNESSETH:

Assignor, in consideration of the sum of Ten and No/100 Dollars ($10.00) in hand paid, and other good and valuable consideration, and of the other agreements of Assignee herein contained, the receipt and sufficiency of which are hereby acknowledged, does hereby transfer, assign and convey unto Assignee, subject to the exceptions, reservations, conditions and other provisions hereinafter set out, all of Assignor’s right, title and interest in and to the leasehold and contractual working interest rights in and to the Oil and Gas Leases described on Exhibit “A attached hereto,such lease(s) being hereinafter sometimes referred to as “the Leases”, and in the "Contracts" as such term is defined in the Agreement (as hereinafter defined), INSOFAR AND ONLY INSOFAR as the Leases and Contracts cover the Mississippi formation underlying lands described in Exhibit “A”, limited to production therefrom from wells drilled by Assignee thereon after the Effective Date.  The Mississippi formation is defined in the State of Kansas as the stratigraphic equivalent of all depths between 4,982 feet and 5,391 feet, inclusive, as shown on the Log-Tech Dual Compensated Porosity log dated February 22, 2007 for the Peppard #3-20 well (API #15-033-21490-0000) located near the center of the Southeast Quarter of the Southeast Quarter of the Northwest Quarter of the Northeast Quarter of Section 20, Township 31 South, Range 17 West (SE/4SE/4NW/4NE/4 Sec. 20-31s-17w), Comanche County, Kansas, and in the State of Oklahoma as the stratigraphic equivalent of all depths between 5,571 feet and 6,540 feet, inclusive, as shown on the Schlumberger Compensated Neutron Formation Density log dated June 10, 1982, for the Cashdollar #1-19 well located at the center of the Southwest Quarter of the Southwest Quarter of Section 19, Township 27 North, Range 17 West (SW/4SW/4 Sec. 19-27n-17w), Woods County, Oklahoma.

Subject to the terms and conditions of the Leases, this Assignment shall be for a term of six hundred fifty-four (654) days commencing on the ­Effective Date, and shall terminate in all respects upon the expiration of such term.

This Assignment is delivered pursuant, and is made expressly subject, to the terms and conditions of that certain Agreement for Purchase of Term Assignment dated November __, 2012, by and between Berexco LLC, et al., and Condor Energy Technology LLC, which agreement is on file in the office of Berexco LLC at 2020 N. Bramblewood, Wichita, KS 67206 (the “Agreement”).  Assignor and Assignee intend that the terms of the Agreement remain separate and distinct from, and not merge into, the terms of this Assignment.  To the extent of any conflict between the terms and conditions of this Assignment and the Agreement, the terms of the Agreement shall govern and prevail.

Assignor hereby reserves unto Assignor and excepts from this Assignment:

a)     Any and all rights not expressly conveyed to Assignee in this Assignment, including, without limitation, all existing wells, equipment, facilities, and other personal property on or related to the Leases; all of Assignor's right, title and interest in and to all depths outside the Mississippi Formation; the right to drill and complete new wells on the Leases for the production of hydrocarbons from formations other than the Mississippi Formation; and all right, title and interest of Assignor within the Mississippi Formation necessary to allow Assignor to re-enter, workover, complete, re-complete, fracture treat, and produce hydrocarbons from the Mississippi Formation in any well which has been drilled on the Leases (or on lands unitized therewith) prior to the execution of the Agreement (provided, however, Assignor shall not convert an existing vertical well into a horizontal well targeting production from the Mississippi Formation).

 

  

39

  

 

b)     As to Leases located in the State of Kansas, an overriding royalty interest in and to all hydrocarbons produced from the Property equal to the positive difference, if any, obtained by subtracting leasehold burdens existing as of the Effective Date from: (i) twenty-two and one-half percent (22.5%) before Payout (as such term is hereinafter defined); (ii) twenty-five percent (25%) upon and after Payout, proportionately reduced to the extent Assignor's working interest in the Lease assigned is less than 100%.  As to Leases located in the State of Oklahoma, an overriding royalty interest in and to all Hydrocarbons produced from the Property equal to the positive difference, if any, obtained by subtracting leasehold burdens existing as of the Effective Date from twenty-five percent (25%), proportionately reduced to the extent Assignor's working interest in the Lease assigned is less than 100%. To the extent leasehold burdens existing as of the Effective Date exceed these respective percentages, Assignor reserves no overriding royalty interest. It is the intention of Assignor to deliver to Assignee a leasehold net revenue interest in each Lease equal to the lesser of seventy-seven and one-half percent (77.5%) or Assignor's actual net revenue interest in and to Leases located in the State of Kansas before Payout; and a leasehold net revenue interest equal to the lesser of seventy-five percent (75%) or Assignor’s actual net revenue interest in and to Leases located in the State of Kansas after Payout, and as to Leases located in the State of Oklahoma. The term "Payout" as used herein shall mean “Payout” as defined in the Agreement.

c)     The continuing preferential right and option, from time to time and at any time, but not the obligation, to purchase all or any part of the hydrocarbons produced and saved by Assignee from any well drilled by Assignee on the Leases, upon the terms and conditions described in the Agreement.

THIS ASSIGNMENT IS MADE WITHOUT ANY WARRANTY OF TITLE, EXPRESS, IMPLIED, STATUTORY, OR AT COMMON LAW; EXCEPT THAT ASSIGNOR SHALL WARRANT AND DEFEND TITLE FROM AND AGAINST ANY PARTY CLAIMING BY, THROUGH OR UNDER ASSIGNOR, BUT NOT OTHERWISE.  ANY OTHER COVENANTS, WARRANTIES AND REPRESENTATIONS, WHETHER OF TITLE OR OTHERWISE, ARE HEREBY EXPRESSLY DISCLAIMED BY ASSIGNOR, AND ASSIGNEE ACCEPTS THIS ASSIGNMENT WITH FULL KNOWLEDGE OF SAME.  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, ASSIGNOR SPECIFICALLY MAKES NO REPRESENTATION, COVENANT, OR WARRANTY, EXPRESS, IMPLIED, STATUTORY, OR AT COMMON LAW, AS TO THE VALIDITY OF ANY OF THE LEASES, CONTRACTS OR AGREEMENTS COVERED HEREBY, OR AS TO THE ACCURACY OF ANY DATA, INFORMATION OR MATERIALS DELIVERED TO ASSIGNEE BY WHATSOEVER MEANS WITH RESPECT TO THE LEASES CONVEYED HEREBY, OR CONCERNING THE QUALITY OR QUANTITY OF HYDROCARBON PRODUCTION OR RESERVES, IF ANY, ATTRIBUTABLE TO THE LEASES CONVEYED, OR THE ABILITY OF THE LEASES TO PRODUCE HYDROCARBONS, OR THE PRICES AT WHICH ASSIGNEE WILL BE ENTITLED TO RECEIVE PAYMENT FOR ANY SUCH HYDROCARBONS, OR OTHERWISE. ANY AND ALL SUCH DATA, INFORMATION AND OTHER MATERIALS FURNISHED BY ASSIGNOR AND ITS REPRESENTATIVES WAS PROVIDED TO ASSIGNEE AS A CONVENIENCE ONLY, AND ANY RELIANCE ON OR USE OF THE SAME HAS BEEN AND SHALL BE AT ASSIGNEE’S SOLE RISK.  ASSIGNEE ACKNOWLEDGES THAT THIS EXPRESS DISCLAIMER AND WAIVER SHALL BE CONSIDERED A MATERIAL AND INTEGRAL PART OF THIS TRANSACTION AND THE CONSIDERATION THEREOF; AND ACKNOWLEDGES THAT THIS DISCLAIMER AND WAIVER HAS BEEN BROUGHT TO THE ATTENTION OF ASSIGNEE AND EXPLAINED IN DETAIL AND THAT ASSIGNEE HAS VOLUNTARILY AND KNOWINGLY CONSENTED TO THIS DISCLAIMER AND WAIVER.

ASSIGNEE HEREBY ACKNOWLEDGES THAT ASSIGNEE HAS PHYSICALLY INSPECTED, OR HAS WAIVED THE RIGHT TO INSPECT, THE LEASES CONVEYED HEREBY FOR ALL PURPOSES, AND HAS SATISFIED ITSELF AS TO THE PHYSICAL AND ENVIRONMENTAL CONDITION THEREOF, BOTH SURFACE AND SUBSURFACE, INCLUDING BUT NOT LIMITED TO CONDITIONS SPECIFICALLY RELATED TO THE PRESENCE, RELEASE OR DISPOSAL OF HAZARDOUS SUBSTANCES, SOLID WASTES, ASBESTOS AND OTHER MAN MADE MATERIAL FIBERS, AND NATURALLY OCCURING RADIOACTIVE MATERIALS; IS NOT RELYING FOR ANY PURPOSE ON ANY PRIOR DESCRIPTION OF SUCH LEASES, WHETHER WRITTEN OR VERBAL, WHICH MAY HAVE BEEN DELIVERED TO ASSIGNEE BY ASSIGNOR; AND ACCEPTS ASSIGNMENT OF THE LEASES "AS IS, WHERE IS, AND WITH ALL FAULTS".

THE PARTIES AGREE THAT, TO THE EXTENT REQUIRED BY LAW TO BE APPLICABLE, THE FOREGOING DISCLAIMERS ARE "CONSPICUOUS" DISCLAIMERS FOR THE PURPOSE OF ANY LAW, RULE OR ORDER.

The provisions of this Assignment and of the Agreement shall be covenants running with the lands covered by the Leases and shall be binding upon and shall inure to the benefit of Assignor and Assignee and their respective successors and assigns.

IN WITNESS WHEREOF, this Assignment is executed as to each executing party as of the date of the notarization for such party, and effective as of the Effective Date.

[Signature Pages follow]

 

  

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ASSIGNOR

	 
	 	 
	
BEREXCO LLC

	 
	 	 	 
	
By: 

	 	 
	 	
Adam E. Beren, President

	 

 

By: ________________________________

Name: ______________________________

Title: _______________________________

 

	

ASSIGNEE

	 
	 	 
	

CONDOR ENERGY TECHNOLOGY LLC

	 
	 	 	 
	
By: 

	 	 
	 	

Frank Ingriselli, President

	 

  

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	STATE OF KANSAS	§
	 	§
	COUNTY OF SEDGWICK	§

 

This instrument was acknowledged to me on the _____ day of_______ , 2012, by Adam E. Beren, as President of BEREXCO LLC.

 

	My commission expires: 	 	 	 
	 	 	Notary Public	 

 

	STATE OF ___________	§
	 	§
	COUNTY OF _________	§

 

This instrument was acknowledged to me on the _____ day of_______ , 2012, by, __________________as ________________________________ of ________________.

 

	My commission expires: 	 	 	 
	 	 	Notary Public	 

 

	STATE OF ___________	§
	 	§
	COUNTY OF _________	§

 

This instrument was acknowledged to me on the _____ day of_______ , 2012, by Frank Ingriselli, as President of Condor Energy Technology LLC.

 

	My commission expires: 	 	 	 
	 	 	Notary Public	 

 

 

  

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EXHIBIT "D"

 

CENTRAL CRUDE CORPORATION

Crude Oil Purchase Contract

CONTRACT NO. ____________

This contract by and between Condor Energy Technology, LLC (“Condor Energy”), with an address of 4125 Blackhawk Plaza Circle, Ste. 201A, Danville, CA 94506 and Central Crude Corporation (“CCC”), covering the sale and delivery by Condor Energy and the purchase and receipt by CCC of the hereinafter specified lease crude oil is entered into in accordance with the following terms and conditions:

 

	1.	
TERM:

	  	
The Primary Term shall be a period of one month from ____________________.

The Term shall be automatically extended for a Secondary Term month to month thereafter unless notice of non-renewal is given by either party hereto upon not less than thirty (30) days advance written notice to the other party.

	  	  	  	  
	2.	
QUALTY AND  CRUDE TYPE:

	  	
Kansas Common Crude Oil, Oklahoma Sweet Crude Oil and/or 

Oklahoma Sour Crude Oil.

	  	  	  	  
	3.	
QUANTITY:

	  	
An amount equal to actual lease receipts from lease(s) indicated on Exhibit A attached hereto and made a part hereof. (approximately ____ barrels per day).  Exhibit A will be updated to reflect the addition or deletion of leases(s), as may be agreed in writing by and between Condor Energy and CCC from time to time.

	  	  	  	  
	4.	
DELIVERY:

	  	
Shall be made at the well tankage into facilities designated by CCC.

	  	  	  	  
	5.	
PRICE:

	  	
For the crude oil sold and delivered hereunder CCC agrees to pay a price per barrel which shall be calculated as follows: 

 

The arithmetic average of the daily settlement price for the “Light Sweet Crude Oil” prompt month contract reported by the New York Mercantile Exchange (“NYMEX”) from the first day of the delivery month through the last day of the delivery month, excluding weekends and U.S. holidays, less $_____ per barrel. 

 

[the deduction amount above to be  determined for each lease on Exhibit A, dependent on crude type and lease location].

	  	  	  	 
	6.	
PAYMENT:

	  	
Payment shall be made by either check or direct deposit  on or about the twentieth (25th) day of the month following the month of delivery.

 

[Condor Energy to furnish banking authorizations if it elects direct deposit]

	  	  	  	 
	7.	
REJECTED TRUCK LOAD FEE:

	  	CCC may assess Condor Energy a fee in an amount of $150.00 per any rejected truck load, which amount shall be deducted from the payment due by CCC to Seller.
	  	  	  	  
	8.	
LETTER(S) OF CREDIT COST:

	  	In the event Condor Energy requires any Letters of Credit in connection with this contract, any cost incurred by CCC in therewith shall be promptly reimbursed by Condor Energy to CCC.

 

  

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ConocoPhillips’s General Provisions dated January 01, 1993 attached hereto as Exhibit B are incorporated herein and made a part hereof; provided, however, it is understood and agreed that this Crude Oil Purchase Contract is for the sale of lease crude by Condor Energy to CCC, that there is no associated obligation of CCC to resell or exchange a similar quantity of crude back to Condor Energy, and that the terms in the ConocoPhillips General Provisions pertaining to such obligations are not applicable.  To the extent of any conflict between the provisions herein and the General Provisions, the provisions herein shall govern.

If Division Orders have been issued to Condor Energy by CCC and executed by Condor Energy covering the wells on Exhibit “A”, the Division Orders are incorporated herein and made a part hereof.  The provisions of this Agreement, including but not limited to those relating to term, rights of termination, price and otherwise, shall be applicable and govern, notwithstanding any provision in the Division Orders to the contrary.

All invoices and notices given pursuant to this contract shall be in writing, faxed or emailed and shall be deemed delivered when received by the other party at the address specified below:

Notices and all other correspondence to CCC shall be mailed, faxed or emailed as follows:

Central Crude Corporation

2020 N. Bramblewood St.

Wichita, KS 67206

Phone:  316-265-8558

Fax:  316-265-8690

Email:  cwilson@berexco.com

 

Notices and all other correspondence to Condor Energy shall be mailed, faxed or emailed as follows:

Condor Energy Technology, LLC

4125 Blackhawk Plaza Circle, Ste. 201A

Danville, CA 94506

Phone:  855-805-0805

Fax:  925-403-0703

Email: cmoore@pacificenergydevelopment.com

            mpeterson@pacificenergydevelopment.com

 

 

[Signature Page follow]

 

  

44

  

 

 

	
Accepted and agreed this _____ day of _____________________,_________.

	 	
Accepted and agreed this _____ day of _____________________,_________.

	 
	 	 	 	 	 	 
	BUYER	 	SELLER	 
	 	 	 	 	 	 
	Central Crude Corporation	 	Condor Energy Technology, LLC	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By: 	________________________________	 	By:	________________________________	 
	 	 	 	 	 	 
	Name: 	Charles B. Wilson 	 	Name:	________________________________	 
	Title: 	Vice President	 	Title:	________________________________	 

 

  

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46

  

 

EXHIBIT “F”

SEISMIC DATA LICENSE AGREEMENT

Berexco LLC (hereinafter referred to as "Berexco") represents that it has ownership rights and authority to make available certain seismic data (more particularly described below) to Condor Energy Technology LLC (hereinafter referred to as “Condor”) and that such seismic data are transferred subject to the following conditions:

	
1.

	
Berexco agrees to provide to Condor approximately 19.5 square miles of 3-D seismic data owned by Berexco and covering the areas depicted on the plats attached hereto, which plats are incorporated by reference.  This license to use the geophysical data on a non-exclusive basis can be terminated by mutual agreement of the parties after forty-nine (49) years from the date of this agreement or in accordance with paragraph 8 hereinbelow.

 

	
2.

	
The 3-D seismic data to be provided by Berexco shall include the Load Sheet; Design, Acquisition Parameters, and Bid Sheets; available sonic log data within the volumes; and Processed 3-D Seismic Volumes in SGY Format.

 

	
3.  

	
Condor agrees that said data, and copies thereof, shall be for its own internal use only, and that such data shall not be sold, traded or otherwise made available to other parties except under the following conditions:

	
a.    

	
Data may be made available to a consultant for the purpose of performing an interpretation forCondor, only if a consultant agrees in writing that the analysis and interpretation made therefrom, will not be divulged to any third party and all data will be returned to Condor, and

	

b.    

	

Condor, shall have the right to reveal said data and any interpretation(s) therefrom, but not provide copies or transfer the data thereof, to any third party or parties with which Condor proposes to conduct good faith negotiations at arm’s length with respect to the development of minerals in, on or under any region which is geologically related to the area on which the data was taken.

	

c.    

	

In no case shall third parties other than consultants who have complied with sub-paragraph a. above be allowed to have the data in their possession outside of Condor’s office or divulge any analysis made therefrom to any other party.

 

	
4.

	
Berexco makes no warranty or representations whatsoever with respect to data delivered hereunder; Condor acknowledges it is accepting the data “as is” and any action which Condor may take based on the data received or interpretations therefrom shall be at its sole and only risk and responsibility, and Condor shall have no claim against Berexco as a result thereof.

 

	
5.

	
Berexco retains title and full ownership rights to said data including, but not limited to, the exclusive right to license, trade, or reproduce the same.

 

	
6.

	
In the event that any government unit should levy a sales or use tax or tax of similar nature related to the licensing or transfer of the data covered under this agreement, Condor shall reimburse Berexco the amount of such levies or taxes.

 

	
7.

	
Without the written consent of Berexco, this Seismic Data License Agreement ("SDLA") and the data subject hereto may not be assigned or transferred by Licensee, in whole or in part, except in the event of a "Permitted Transfer", as such term is defined in that certain Agreement for Purchase of Term Assignment dated November ___, 2012, by and between Berexco (et al.) and Condor ("AFPOTRA").  However, Berexco, having been given sufficient advance notice of such a proposed assignment or transfer (other than a Permitted Transfer), will permit such proposed assignment or transfer upon such terms as may be agreed upon by Berexco and the proposed assignee or transferee, including the payment of a fee which shall be based upon Berexco's then current license fee as of the date of the proposed transfer or assignment.

 

  

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8.

	
This SDLA is delivered pursuant, and is made expressly subject, to the terms and conditions of the AFPOTA, which agreement is on file at the offices of Berexco LLC at 2020 N. Bramblewood, Wichita, Kansas, 67206.  Berexco and Condor intend that the terms of the AFPOTA remain separate and distinct from, and not merge into, the terms of this SDLA.  To the extent of any conflict between the terms and conditions of this SDLA and the AFPOTA, the terms and conditions of the AFPOTA shall govern and prevail.  Any breach of this SDLA shall be deemed to be, and treated as, a breach of the AFPOTA.

 

	
9.  

	
Signature below of Condor’s authorized representative will indicate agreement of the terms and conditions stated above.

	
Berexco LLC

	 	Condor Energy Technology LLC	 
	 	 	 	 	 
	By: 	 	 	By: 	 	 
	 	Adam E. Beren, President	 	 	Frank Ingriselli, President	 

 

 

  

48

  

 

EXHIBIT “G“

 

WELL OPERATIONAL AND DATA REQUIREMENTS

In the drilling of any well under the Agreement to which this Exhibit is attached, Buyer shall comply with the following:

	
1.  

	
Unless otherwise consented to by Seller in writing, Buyer shall run at a minimum a standard open hole suite of logs in the vertical section of the hole below surface casing on (a) the first two (2)  horizontal wells drilled by Buyer in any governmental section under the Agreement; (b) all SWD Wells, and (c) all Pilot or Vertical Wells drilled without a horizontal component.  Provided, however, in the event of lost circulation or other abnormal hole conditions which make the running of such logs impractical, Buyer shall make its best efforts as a prudent operator to run the log suite, but in such event shall not be unconditionally obligated to do so.  Logs shall include dual induction (shallow and deep), neutron/density porosity, SP, and GR and micro log.  Buyer may run additional logging tools at its discretion. Drilling time through the vertical section of the hole will be kept and available on the derrick floor.

	
2.  

	
Unless otherwise consented to by Seller in writing, an attended mud logging unit with gas detector will be employed from 100’ above the Heebner Shale formation to total vertical depth while drilling all wells in which Buyer is required to run logs under paragraph 1 above.  Washed ten-foot rock cuttings samples in cloth sacks will be available at the rig during drilling operations covering the depths the mud logging unit is on location.

	
3.  

	
Buyer shall furnish Seller two (2) copies of each of the following, if obtained:

	
a.  

	
permit forms,

	
b.  

	
completion reports,

	
c.  

	
any other form filed with government agencies,

	
d.  

	
well plans including directional plans,

	
e.  

	
all logs run in the well (including any cased hole logs),

	
f.  

	
core descriptions and analysis,

	
g.  

	
drill stem test data including gas and fluid analyses,

	
h.  

	
water analysis,

	
i.  

	
directional surveys,

	
j.  

	
dip meter calculations, if run (the original dip meter log will be available upon request),

	
k.  

	
geologic reports,

	
l.  

	
mud logs,

	
m.  

	
daily gas analyzer report ,

	
n.  

	
other testing reports.

 

	 	
Buyer shall also furnish daily drilling and completion reports, the latter of which shall show well test information (showing daily oil, gas and water production) for at least ninety (90) days after initial completion of the well before reaching final report status.

 

  

49

  

 

	
4.  

	
At the time of spudding, Buyer shall notify Seller by email to the email addresses below.

	
5.  

	
Buyer shall cause adequate and competent cement to be placed across all potentially oil and/or gas productive horizons in all wells drilled, including disposal wells; provided, however, in the event of lost circulation, depletion, or other cementing irregularities, Buyer shall make its reasonable efforts to cause such placement of cement, but in such event shall not be unconditionally obligated to do so.  In Kansas, the shallowest potentially productive horizon shall be the top of the Lansing formation.  In Oklahoma, the shallowest potentially productive horizon shall be the top of the Tonkawa formation.  Buyer shall comply with all state Underground Injection Control cementing and completion requirements for its disposal wells.

	
6.  

	
Buyer shall furnish a monthly oil, gas and water production and a monthly water disposal report for each production and disposal well drilled and completed.

 

	
EMAIL DAILY DRILLING & COMPLETION REPORTS TO THE FOLLOWING PARTIES:

	BEREXCO LLC	BEREXCO LLC
	Attn:    Linda McCune	Attn:    Dana Wreath
	Email:  wellreports@berexco.com 	Email:  dwreath@berexco.com

 

 

	PARTIES TO BE NOTIFIED IN ADVANCE OF LOGGING OR ABANDONMENT OF WELL:
	 	 	 	 
	NAME: 	Dana Wreath	 	
BUSINESS

	 	 	 	PHONE:  316-337-8331

CELL:      316-215-1220

	 	
or alternate

	 	 
	NAME:	Evan Mayhew	 	
PHONE:  316-337-8312

	 	 	 	
                 316-721-1916

CELL:      316-215-1245

 

  

50

  

 

EXHIBIT “H”

 

INSURANCE PROVISIONS

Buyer shall, as a minimum, carry insurance to cover its operations pursuant to the terms of this Agreement, as follows:

	
(A) 

	
Workman's Compensation Insurance in compliance with the Workman's Compensation Laws of the state applicable, and Employer’s Liability Insurance with a limit of not less than $1,000,000 each accident;

	
(B) 

	
Commercial General Liability Insurance with limits not less than $1,000,000 per occurrence and $2,000,000 General Aggregate;

 

	
(C) 

	
Commercial Automobile Insurance with coverage for all owned, hired and non-owned vehicles with limits of not less than $1,000,000 per occurrence (combined single limit).

	
(D) 

	
Sudden and Accidental Pollution Insurance with limits not less than $5,000,000 per incident and $5,000,000 aggregate;

	
(E) 

	
Umbrella and Excess Liability Insurance providing additional limits of no less than $10,000,000.00 per occurrence and $10,000,000 aggregate for all of the insurance coverage as it may be applicable to subparagraphs (A), (B), (C) and (D).

Buyer shall cause the insurance company or companies with which such insurance is carried to include Seller as a Primary, Non-Contributory Additional Insured and provide a waiver of subrogation in favor of Seller on the foregoing policies, and to issue certificates of insurance representing such insurance to extend the coverage thereof to Seller.

 

  

51

  

 

EXHIBIT “I”

 

EXTENSION OF PARTIAL TERM ASSIGNMENT OF OIL AND GAS LEASES

 

WHEREAS, by Partial Term Assignment of Oil and Gas Leases ("Assignment") dated effective _________, 2012 ("Effective Date"), recorded in Book ____ at Page ____ of the records of ______________ County, ____________, Berexco LLC et al., as Assignor, did transfer, assign and convey unto Condor Energy Technology LLC, as Assignee, certain rights and interests in and to the Oil and Gas Lease(s) which is(are) described on Exhibit “A attached hereto and hereby made a part hereof; and

WHEREAS, the Assignment was valid for a term of six hundred fifty-four (654) days commencing on the Effective Date; and

WHEREAS, both Assignor and Assignee wish to extend the term of the Assignment for a period of one (1) year from the expiration thereof to the extent the Assignment covers the Oil and Gas Lease(s) described on Exhibit "A" hereto;

NOW THEREFORE, for and in consideration of the sum of Ten and No/100 Dollars ($10.00) in hand paid, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Assignor does hereby extend the term of the Assignment, INSOFAR AND ONLY INSOFAR as (i) the Assignment covers the Oil and Gas Lease(s) described on Exhibit "A" attached hereto, and (ii) said Oil and Gas Lease(s) cover the lands described on said Exhibit "A", for a period of one (1) year to  _________________, ______; subject, however, in all other respects to the provisions and conditions of said lease(s) as modified, if any modification thereof may have been heretofore executed.

All other provisions of the Assignment shall remain as originally written.

This Extension of Partial Term Assignment of Oil and Gas Leases is delivered pursuant, and is made expressly subject, to the terms and conditions of that certain Agreement for Purchase of Term Assignment dated November __, 2012, by and between Berexco LLC, et al., and Condor Energy Technology LLC, which agreement is on file in the office of Berexco LLC at 2020 N. Bramblewood, Wichita, KS 67206 (the “Agreement”).  Assignor and Assignee intend that the terms of the Agreement remain separate and distinct from, and not merge into, the terms of this Extension of Partial Term Assignment of Oil and Gas Leases.  To the extent of any conflict between the terms and conditions of this Extension of Partial Term Assignment of Oil and Gas Leases and the Agreement, the terms of the Agreement shall govern and prevail.

 

  

52

  

IN WITNESS WHEREOF, this instrument is executed as to each executing party as of the date of the notarization for such party.

 

	 	
BEREXCO LLC

	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	 	
Adam E. Beren, President

	 
	 	 	 	 
	 	By: 	 	 
	 	Name: 	 	 
	 	Title:	 	 
	 	 	 	 
	 	
CONDOR ENERGY TECHNOLOGY LLC

	 
	 	 	 	 
	 	By: 	 	 
	 	Name:	 	 
	 	Title:	 	 

 

  

53

  

 

	
STATE OF KANSAS

	§
	 	§
	
COUNTY OF SEDGWICK

	§

                                                       

This instrument was acknowledged to me on the _______ day of _______________ , 2012, by Adam E. Beren, as President of BEREXCO LLC.

 

 

	
My commission expires:

	_________________________________
	____________________________	
Notary Public

	 	 

 

	
STATE OF ______________

	§
	 	§
	COUNTY OF ____________	§

 

This instrument was acknowledged to me on the ______  day of _______________, 2012, by ___________, as  _______________ of ______________________

 

 

	
My commission expires:

	_________________________________
	____________________________	
Notary Public

	 	 

 

	STATE OF	§
	 	§
	COUNTY OF	§

 

This instrument was acknowledged to me on the ______  day of _______________, 2012, by ___________, as  ______________ of Condor Energy Technology LLC.

 

	
My commission expires:                                                                           

	_________________________________
	____________________________	
Notary Public

	 	 

 

  

54

  

 

EXHIBIT “J”

SECONDARY TERM ASSIGNMENT OF OIL AND GAS LEASES

 

	STATE OF  	§
	COUNTY OF 	§

 

This Secondary Term Assignment of Oil and Gas Leases (the “Assignment”) is made and entered into as of the___ day of ____________, ____ (the "Effective Date") by and between Berexco LLC, ___________________ hereinafter collectively referred to as “Assignor”, whether one or more, and Condor Energy Technology LLC, hereinafter referred to as “Assignee”.

WITNESSETH:

This Assignment is delivered pursuant, and is made expressly subject, to the terms and conditions of that certain Agreement for Purchase of Term Assignment dated November __, 2012, by and between Berexco LLC, et al., and Condor Energy Technology LLC, which agreement is on file in the office of Berexco LLC at 2020 N. Bramblewood, Wichita, KS 67206 (the “Agreement”).  Assignor and Assignee intend that the terms of the Agreement remain separate and distinct from, and not merge into, the terms of this Assignment.  To the extent of any conflict between the terms and conditions of this Assignment and the Agreement, the terms of the Agreement shall govern and prevail.

Assignor, in consideration of the sum of Ten and No/100 Dollars ($10.00) in hand paid, and other good and valuable consideration, and of the other agreements of Assignee herein contained, the receipt and sufficiency of which are hereby acknowledged, does hereby transfer, assign and convey unto Assignee, subject to the exceptions, reservations, conditions and other provisions hereinafter set out, all of Assignor’s right, title and interest in and to the leasehold and contractual working interest rights in and to the Oil and Gas Lease(s) described on Exhibit “A attached hereto, such lease(s) being hereinafter sometimes referred to as “the Leases”, and in the "Contracts" as such term is defined in the Agreement , INSOFAR AND ONLY INSOFAR as the Leases and Contracts cover the Mississippi formation underlying lands described in Exhibit “A” (that portion of the Leases assigned hereunder being sometimes hereinafter referred to as the "Property").  The Mississippi formation is defined in the State of Kansas as the stratigraphic equivalent of all depths between 4,982 feet and 5,391 feet, inclusive, as shown on the Log-Tech Dual Compensated Porosity log dated February 22, 2007 for the Peppard #3-20 well (API #15-033-21490-0000) located near the center of the Southeast Quarter of the Southeast Quarter of the Northwest Quarter of the Northeast Quarter of Section 20, Township 31 South, Range 17 West (SE/4SE/4NW/4NE/4 Sec. 20-31s-17w), Comanche County, Kansas, and in the State of Oklahoma as the stratigraphic equivalent of all depths between 5,571 feet and 6,540 feet, inclusive, as shown on the Schlumberger Compensated Neutron Formation Density log dated June 10, 1982, for the Cashdollar #1-19 well located at the center of the Southwest Quarter of the Southwest Quarter of Section 19, Township 27 North, Range 17 West (SW/4SW/4 Sec. 19-27n-17w), Woods County, Oklahoma.

Subject to the terms and conditions of the Leases and the Agreement, and to the further provisions hereof, this Assignment shall be for a term commencing on the Effective Date and continuing for so long thereafter as oil, gas, other liquid or gaseous hydrocarbons, and/or other minerals, or any of them or any combination thereof (hereinafter referred to as "Hydrocarbons") are produced in commercial quantities from the Mississippi formation in the __________ well located __________________ (the "Producing Well;"). Subject to the terms and conditions of the Leases and the Agreement, upon cessation of production of Hydrocarbons from the Mississippi formation in commercial quantities from such Producing Well, this Assignment shall not terminate if: (a) Assignee has previously drilled an additional well on the Property or on a production unit approved by Assignor which includes any portion of the Property (an "Additional Well) which Additional Well is then producing Hydrocarbons in commercial quantities from the Mississippi formation, or (b) within the time periods provided in the Agreement, (i) Assignee commences and continuously prosecutes reworking operations on the Producing Well and re-establishes production of Hydrocarbons from the Mississippi formation in commercial quantities from such Producing Well or (ii) Assignee commences and continuously prosecutes drilling and completion operations for a new well on the Property or on a production unit approved by Assignor which includes any portion of the Property(a "New Well") and establishes production of Hydrocarbons from the Mississippi formation in commercial quantities from such New Well; provided, however, unless this Assignment remains in effect under the provisions of (b)(i) above, this Assignment shall terminate as to any acreage for which Assignee would not have earned a Secondary Term Assignment under the Agreement by completion of any such Additional Well or New Well, and, subject to the terms of the Leases and the Agreement, shall remain in effect as to such acreage applicable to any such Additional Well or New Well for so long as Hydrocarbons are produced in commercial quantities from such Additional Well or New Well.

 

  

55

  

Assignor hereby reserves unto Assignor and excepts from this Assignment:

I)      Any and all rights not expressly conveyed to Assignee in this Assignment, including, without limitation, all existing wells, equipment, facilities, and other personal property on or related to the Leases; all of Assignor's right, title and interest in and to all depths outside the Mississippi Formation; the right to drill and complete new wells on the Leases for the production of hydrocarbons from formations other than the Mississippi Formation; and all right, title and interest of Assignor within the Mississippi Formation necessary to allow Assignor to re-enter, workover, complete, re-complete, fracture treat, and produce hydrocarbons from the Mississippi Formation in any well which has been drilled on the Leases (or on lands unitized therewith) prior to the execution of this Agreement (provided, however, Assignor shall not convert an existing vertical well into a horizontal well targeting production from the Mississippi Formation).

 

II)    As to Leases located in the State of Kansas, an overriding royalty interest in and to all hydrocarbons produced from the Property equal to the positive difference, if any, obtained by subtracting leasehold burdens existing as of the Effective Date from: (i) twenty-two and one-half percent (22.5%) before Payout (as such term is hereinafter defined); (ii) twenty-five percent (25%) upon and after Payout, proportionately reduced to the extent Assignor's working interest in the Lease assigned is less than 100%.  As to Leases located in the State of Oklahoma, an overriding royalty interest in and to all Hydrocarbons produced from the Property equal to the positive difference, if any, obtained by subtracting leasehold burdens existing as of the Effective Date from twenty-five percent (25%), proportionately reduced to the extent Assignor's working interest in the Lease assigned is less than 100%. To the extent leasehold burdens existing as of the Effective Date exceed these respective percentages, Assignor reserves no overriding royalty interest. It is the intention of Assignor to deliver to Assignee a leasehold net revenue interest in each Lease equal to the lesser of seventy-seven and one-half percent (77.5%) or Assignor's actual net revenue interest in and to Leases located in the State of Kansas before Payout; and a leasehold net revenue interest equal to the lesser of seventy-five percent (75%) or Assignor’s actual net revenue interest in and to Leases located in the State of Kansas after Payout, and as to Leases located in the State of Oklahoma. The term "Payout" as used herein shall mean “Payout” as defined in the Agreement.

III)   The continuing preferential right and option, from time to time and at any time, but not the obligation, to purchase all or any part of the hydrocarbons produced and saved by Assignee from any well drilled by Assignee on the Leases, upon the terms and conditions described in the Agreement.

THIS ASSIGNMENT IS MADE WITHOUT ANY WARRANTY OF TITLE, EXPRESS, IMPLIED, STATUTORY, OR AT COMMON LAW; EXCEPT THAT ASSIGNOR SHALL WARRANT AND DEFEND TITLE FROM AND AGAINST ANY PARTY CLAIMING BY, THROUGH OR UNDER ASSIGNOR, BUT NOT OTHERWISE.  ANY OTHER COVENANTS, WARRANTIES AND REPRESENTATIONS, WHETHER OF TITLE OR OTHERWISE, ARE HEREBY EXPRESSLY DISCLAIMED BY ASSIGNOR, AND ASSIGNEE ACCEPTS THIS ASSIGNMENT WITH FULL KNOWLEDGE OF SAME.  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, ASSIGNOR SPECIFICALLY MAKES NO REPRESENTATION, COVENANT, OR WARRANTY, EXPRESS, IMPLIED, STATUTORY, OR AT COMMON LAW, AS TO THE VALIDITY OF ANY OF THE LEASES, CONTRACTS OR AGREEMENTS COVERED HEREBY, OR AS TO THE ACCURACY OF ANY DATA, INFORMATION OR MATERIALS DELIVERED TO ASSIGNEE BY WHATSOEVER MEANS WITH RESPECT TO THE LEASES CONVEYED HEREBY, OR CONCERNING THE QUALITY OR QUANTITY OF HYDROCARBON PRODUCTION OR RESERVES, IF ANY, ATTRIBUTABLE TO THE LEASES CONVEYED, OR THE ABILITY OF THE PROPERTY TO PRODUCE HYDROCARBONS, OR THE PRICES AT WHICH ASSIGNEE WILL BE ENTITLED TO RECEIVE PAYMENT FOR ANY SUCH HYDROCARBONS, OR OTHERWISE. ANY AND ALL SUCH DATA, INFORMATION AND OTHER MATERIALS FURNISHED BY ASSIGNOR AND ITS REPRESENTATIVES WAS PROVIDED TO ASSIGNEE AS A CONVENIENCE ONLY, AND ANY RELIANCE ON OR USE OF THE SAME HAS BEEN AND SHALL BE AT ASSIGNEE’S SOLE RISK.  ASSIGNEE ACKNOWLEDGES THAT THIS EXPRESS DISCLAIMER AND WAIVER SHALL BE CONSIDERED A MATERIAL AND INTEGRAL PART OF THIS TRANSACTION AND THE CONSIDERATION THEREOF; AND ACKNOWLEDGES THAT THIS DISCLAIMER AND WAIVER HAS BEEN BROUGHT TO THE ATTENTION OF ASSIGNEE AND EXPLAINED IN DETAIL AND THAT ASSIGNEE HAS VOLUNTARILY AND KNOWINGLY CONSENTED TO THIS DISCLAIMER AND WAIVER.

 

  

56

  

ASSIGNEE HEREBY ACKNOWLEDGES THAT ASSIGNEE HAS PHYSICALLY INSPECTED, OR HAS WAIVED THE RIGHT TO INSPECT, THE LEASES CONVEYED HEREBY FOR ALL PURPOSES, AND HAS SATISFIED ITSELF AS TO THE PHYSICAL AND ENVIRONMENTAL CONDITION THEREOF, BOTH SURFACE AND SUBSURFACE, INCLUDING BUT NOT LIMITED TO CONDITIONS SPECIFICALLY RELATED TO THE PRESENCE, RELEASE OR DISPOSAL OF HAZARDOUS SUBSTANCES, SOLID WASTES, ASBESTOS AND OTHER MAN MADE MATERIAL FIBERS, AND NATURALLY OCCURING RADIOACTIVE MATERIALS; IS NOT RELYING FOR ANY PURPOSE ON ANY PRIOR DESCRIPTION OF SUCH LEASES, WHETHER WRITTEN OR VERBAL, WHICH MAY HAVE BEEN DELIVERED TO ASSIGNEE BY ASSIGNOR; AND ACCEPTS ASSIGNMENT OF THE PROPERTY "AS IS, WHERE IS, AND WITH ALL FAULTS".

THE PARTIES AGREE THAT, TO THE EXTENT REQUIRED BY LAW TO BE APPLICABLE, THE FOREGOING DISCLAIMERS ARE "CONSPICUOUS" DISCLAIMERS FOR THE PURPOSE OF ANY LAW, RULE OR ORDER.

The provisions of this Assignment and of the Agreement shall be covenants running with the lands covered by the Property and shall be binding upon and shall inure to the benefit of Assignor and Assignee and their respective successors and assigns, it being understood, however, that the Agreement to which this Assignment is subject contains, among other terms, certain rights of termination and restrictions on the transfer of the Property.

IN WITNESS WHEREOF, this Assignment is executed as to each executing party as of the date of the notarization for such party, and effective as of the Effective Date.

[Signature Pages follow]

 

  

57

  

	
ASSIGNOR

	 
	
BEREXCO LLC

	 
	 	 	 
	
By: 

	 	 
	 	
Adam E. Beren, President

	 

 

	
ASSIGNEE

	 
	

CONDOR ENERGY TECHNOLOGY LLC

	 
	 	 	 
	
By: 

	 	 
	 	

Frank Ingriselli, President

	 

 

  

58

  

 

	STATE OF KANSAS 	§
	 	§
	COUNTY OF SEDGWICK	§

 

This instrument was acknowledged to me on the __ day of  ________, 2012, by Adam E. Beren, as President of BEREXCO LLC.

 

	My commission expires: 	 	 	 
	 	 	Notary Public	 
	 	 	 	 

 

	STATE OF __________________	§
	 	§
	COUNTY OF ________________	§

 

This instrument was acknowledged to me on the ___day of _____, 2012, by______, as ______of___________ .

 

	My commission expires: 	 	 	 
	 	 	Notary Public	 

	STATE OF __________________	§
	 	§
	COUNTY OF ________________	§

 

This instrument was acknowledged to me on the ___________ day of _________ , 2012, by Frank Ingriselli, as President of Condor Energy Technology LLC.

 

 

	My commission expires: 	 	 	 
	 	 	Notary Public	 

 

 

  

59

  

 

Exhibit K

 

 

INTERNAL PARTNERS:

ADAM INVESTMENTS INC.

ALLAN B. MUCHIN

ANNA MARKUS TRESTON

BAYBERRY OIL & GAS LLC, formerly A-Z Oil, L.P., formerly Arthur Zankel

BEREN CORPORATION

BERENCO RESOURCES INC.

BERENERGY CORPORATION

BERESCO PROPERTIES INC.

BEREXCO INC.

FRANK MARKUS

FRITS-OIL, L.P., formerly Frits Marcus

G-OIL, L.P., formerly David Gottesman

HVI-OIL, L.P., formerly H. F. van Itallie

JW-OIL, L.P., formerly John Wallace

MANUEL CORPORATION, formerly Berexco Inc.

MATZLIACH L.P., formerly Sheldon K. Beren

MICHAEL GREENBAUM

OKMAR OIL COMPANY

ROBEREN PROPERTIES INC.

ROBERT M. BEREN, L.P., formerly Robert M. Beren

SHAMROCK INVESTMENT PARTNERSHIP

SHEFTAL CORPORATION

SHELRO PETROLEUM CORPORATION

THERESE GADOMSKI

 

 

 

 

 

  

60

  

 

EXHIBIT “L”

 

SUITS, ACTIONS, PROCEEDINGS

Case No. 2011CV48 in the District Court of Barber County, Kansas

Terry W. Garman and Betty Garman v. Berexco LLC, BEREXCO INC., Okmar Oil Company, Berenergy Corporation, Robert M. Beren, LP, Matzliach, LP, JW-Oil, LP, G-Oil, LP, Frits-Oil, LP, AZ-Oil, LP

Lands:                      NW/4 of Sec. 14-35S-13W, Barber County, Kansas

	
Allegation:

	
Petition alleges that the oil and gas lease has expired and has been forfeited by reason of a failure to produce oil and/or gas in paying quantities.  In addition, the plaintiffs allege that the defendants have violated the express and implied covenants to explore, develop and market the minerals under the terms of the lease.

 

 

 

  

61

  

 

EXHIBIT “M”

 

GAS PURCHASE CONTRACTS

 

Gas Purchase Agreement dated November 1, 2005 by and Between ONEOK MIDSTREAM GAS SUPPLY, LLC and BEREN CORPORATION.

Gas Purchase Agreement dated May 6, 1996 by and between REDWING GAS SYSTEMS INC. and BEREXCO INC.

Gas Purchase Agreement dated April 1, 2005 by and between BLUESTEM GAS MARKETING, LLC) and BEREN CORPORATION.

Gas Purchase Agreement dated September 1, 2003 by and between ONEOK MIDSTREAM GAS SUPPLY, LLC and BEREXCO INC.

Gas Purchase Agreement dated December 1, 2005 by and between ONEOK MIDSTREAM GAS SUPPLY, LLC and BEREXCO INC.

Gas Purchase Contract dated January 1, 2004 by and between ROBEREN PROPERTIES, REDWING GAS SYSTEMS INC. and KANSAS GAS SERVICE.

Residue Gas Purchase Contract dated January 22, 2004 by and between ROBEREN PROPERTIES INC. and KANSAS GAS SERVICE.

Casinghead Gas Contract dated August 3, 1979 by and between OKMAR OIL COMPANY, ET AL and CITIES SERVICE COMPANY.

Casinghead Gas Contract dated March 4, 1981 by and between BEREXCO INC. ET AL and CITIES SERVICE COMPANY.

Casinghead Gas Contract dated August 21, 1980 by and between OKMAR OIL COMPANY, ET AL and CITIES SERVICE COMPANY.

Gas Purchase Agreement dated May 1, 1986 by and between BEREN CORPORATION and REDWING GAS SYSTEMS INC.

 

 

  

62

  

 

Exhibit N

 

Current Wells for Setback Requirements

	
Well Name

	
Well

Number

	
Spot Call

	
SEC

	
TWP

	
RNG

	
County

	
State

	
UWI (API #)

	
DAVIS RANCH

	
1-22

	
NE SE

	
22

	
34S

	
15W

	
BARBER

	
KS

	
15007302900000

	
DAVIS RANCH

	
2-22

	
N/2 SE NE

	
22

	
34S

	
15W

	
BARBER

	
KS

	
15007231090000

	
DAVIS RANCH

	
1-27

	
NE SE

	
27

	
34S

	
15W

	
BARBER

	
KS

	
15007302600000

	
DAVIS RANCH

	
2-27-A

	
N2 SE NE

	
27

	
34S

	
15W

	
BARBER

	
KS

	
15007230160000

	
DEAN

	
3

	
SE NW

	
35

	
33S

	
11W

	
BARBER

	
KS

	
15007209450000

	
FARLEY

	
3-29

	
NE SW

	
29

	
34S

	
14W

	
BARBER

	
KS

	
15007103780000

	
FARLEY

	
1-32

	
NW NW

	
32

	
34S

	
14W

	
BARBER

	
KS

	
15007103800000

	
FARLEY

	
6-32

	
NW SE SE

	
32

	
34S

	
14W

	
BARBER

	
KS

	
15007227490000

	
FARLEY

	
7-32

	
NE NE SW

	
32

	
34S

	
14W

	
BARBER

	
KS

	
15007228320000

	
IVES

	
1

	
E/2 SE

	
11

	
33S

	
12W

	
BARBER

	
KS

	
15007201820000

	
PIERSON

	
1

	
SW SE

	
10

	
35S

	
13W

	
BARBER

	
KS

	
15007205220000

	
BALLET RANCH

	
1

	
SW SW SW

	
36

	
34S

	
16W

	
COMANCHE

	
KS

	
15033000660000

	
BALLET RANCH

	
2

	
SE SW SE

	
35

	
34S

	
16W

	
COMANCHE

	
KS

	
15033201490000

	
BALLET RANCH

	
4

	
NW NW SW

	
1

	
35S

	
16W

	
COMANCHE

	
KS

	
15033201750000

	
GREGG

	
1-7

	
SW NE

	
7

	
33S

	
16W

	
COMANCHE

	
KS

	
15033301060000

	
GREGG

	
2-18

	
NW NE NE

	
18

	
33S

	
16W

	
COMANCHE

	
KS

	
15033000830000

	
GREGG

	
3-18

	
SE SE SW

	
18

	
33S

	
16W

	
COMANCHE

	
KS

	
15033215570000

	
KENNEDY

	
1-16

	
NE NW

	
16

	
31S

	
17W

	
COMANCHE

	
KS

	
15033206190000

	
KENNEDY

	
1-17

	
N2 NE

	
17

	
31S

	
17W

	
COMANCHE

	
KS

	
15033204870000

	
PEPPERD

	
1-20

	
NE SW

	
20

	
31S

	
17W

	
COMANCHE

	
KS

	
15033200610000

	
PEPPARD

	
3-20

	
SE NW NE

	
20

	
31S

	
17W

	
COMANCHE

	
KS

	
15033214900000

	
DOOLIN

	
1

	
NW NE NE

	
16

	
31S

	
9W

	
HARPER

	
KS

	
15077101800000

	
DRAKE

	
1

	
SE SE

	
11

	
31S

	
9W

	
HARPER

	
KS

	
15077206250000

	
DRAKE-RYAN

	
1

	
NE SW SW

	
11

	
31S

	
9W

	
HARPER

	
KS

	
15077008650000

	
DUNCAN-MILLER

	
1

	
NE SE

	
11

	
31S

	
9W

	
HARPER

	
KS

	
15077207270000

	
VIRGINIA

	
1

	
NW NE NW

	
11

	
31S

	
9W

	
HARPER

	
KS

	
15077203110000

	
WINGATE

	
1

	
NW NW NE

	
11

	
31S

	
9W

	
HARPER

	
KS

	
15077205610000

	
LAHMAN UNIT

	
1X

	
SE SW

	
1

	
34S

	
6W

	
HARPER

	
KS

	
15077301150000

	
LAHMAN UNIT

	
2X

	
NE SW

	
1

	
34S

	
6W

	
HARPER

	
KS

	
15077200490000

	
LAHMAN UNIT

	
5X

	
NE NW

	
12

	
34S

	
6W

	
HARPER

	
KS

	
15077301140001

	
LAHMAN UNIT

	
6X

	
NW NW

	
12

	
34S

	
6W

	
HARPER

	
KS

	
15077210750001

	
JOHNSON

	
1-34

	
NW NW

	
34

	
30S

	
18W

	
KIOWA

	
KS

	
15097207950000

	
MORTON

	
1-35

	
SE NW

	
35

	
30S

	
18W

	
KIOWA

	
KS

	
15097301650000

	
MORTON

	
2-35

	
SE SE

	
35

	
30S

	
18W

	
KIOWA

	
KS

	
15097204830000

	
ROBBINS

	
1-34A SWD

	
SE SE

	
34

	
30S

	
18W

	
KIOWA

	
KS

	
15097301640001

	
ROBBINS

	
1-34

	
SE SE

	
34

	
30S

	
18W

	
KIOWA

	
KS

	
15097190020000

	
ROBBINS

	
2-34

	
NW SE

	
34

	
30S

	
18W

	
KIOWA

	
KS

	
15097208220000

	
SMITH

	
1-34T

	
NW SE SW

	
34

	
30S

	
18W

	
KIOWA

	
KS

	
15097215590000

	
SMITH

	
2-34

	
NW NW SW

	
34

	
30S

	
18W

	
KIOWA

	
KS

	
15097209650000

	
PARKIN UNIT

	
4

	
SW NE

	
9

	
30S

	
18W

	
KIOWA

	
KS

	
15097301830000

	
CASHDOLLAR

	
1-19

	
SW SW NE

	
19

	
27N

	
17W

	
WOODS

	
OK

	
35151213310000

	
MURRAY

	
1-30

	
N2N2SENW

	
30

	
27N

	
17W

	
WOODS

	
OK

	
35151213250000

	
MCCAMMON

	
2-31

	
SWSWNENW

	
31

	
27N

	
17W

	
WOODS

	
OK

	
35151213320000

	
STEWART-WISE

	
1-24

	
E2

	
24

	
27N

	
18W

	
WOODS

	
OK

	
35151214590000

	
STEWART-WISE

	
2-24

	
W2 NE

	
24

	
27N

	
18W

	
WOODS

	
OK

	
35151215750000

 

  

63

  

 

EXHIBIT "O"

 

AFFIDAVIT OF NON-FOREIGN STATUS

 

Section 1445 of the Internal Revenue Code (the “Code”) provides that a transferee of a United States real property interest must withhold tax if the transferor is a foreign person. To inform Condor Energy Technology LLC, as transferee (“Transferee”), that withholding of tax is not required upon the disposition of a United States real property interest by the undersigned, as transferor (“Transferor”), the undersigned hereby certifies the following on behalf of Transferor:

	
  

	
1.

	
Transferor is a(n) _______________________________.  As such, it is not a foreign corporation, foreign partnership, foreign trust, foreign estate or other foreign person as those terms are defined under Section 1445(f)(3) of the Code and Section 1.1445-2(b)(2)(i) of the Treasury Regulations;

	
  

	
2.

	
Transferor is not a disregarded entity as defined in Section 1.1445-2(b)(2)(iii) of the Treasury Regulations;

	
  

	
3.

	
Transferor’s U.S. employer identification number is ______________, and;

	
 

	
  

	
4.

	
Transferor’s office address is:

_______________________________

_______________________________

_______________________________

Transferor understands that this certification may be disclosed to the Internal Revenue Service by Transferee 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 Transferor.

 

TRANSFEROR:

 

By:          __________________________

Name:     __________________________

Title:       __________________________

 

SUBSCRIBED AND SWORN TO BEFORE ME ON THIS ___ DAY OF ________________, 2012.

 

___________________________________

Notary Public

(Personalized Seal)

 

 

  

64

  

 

EXHIBIT “P”

 

NOTE: THIS FORM CONTRACT IS A SUGGESTED GUIDE ONLY AND USE OF THIS FORM OR ANY VARIATION THEREOF SHALL BE AT THE SOLE DISCRETION AND RISK OF THE USER PARTIES. USERS OF THE FORM CONTRACT OR ANY PORTION OR VARIATION THEREOF ARE ENCOURAGED TO SEEK THE ADVICE OF COUNSEL TO ENSURE THAT THEIR CONTRACT REFLECTS THE COMPLETE AGREEMENT OF THE PARTIES AND APPLICABLE LAW. THE INTERNATIONAL ASSOCIATION OF DRILLING CONTRACTORS DISCLAIMS ANY LIABILITY WHATSOEVER FOR LOSS OR DAMAGES WHICH MAY RESULT FROM USE OF THE FORM CONTRACT OR PORTIONS OR VARIATIONS THEREOF. COMPUTER GENERATED FORM, REPRODUCED UNDER LICENSE FROM IADC.

 

		
REVISED APRIL, 2003

	  	  
	
INTERNATIONAL ASSOCIATION OF DRILLING CONTRACTORS

	  
	
DRILLING BID PROPOSAL

	  
	
AND

	  
	
DAYWORK DRILLING CONTRACT - U.S.

	  

 

	
TO:

	
__________________________________________________

	 	
 

__________________________________________________

 

PLEASE SUBMIT BID ON THIS DRILLING CONTRACT FORM FOR PERFORMING THE WORK OUTLINED BELOW, UPON THE TERMS AND FOR THE CONSIDERATION SET FORTH, WITH THE UNDERSTANDING THAT IF THE BID IS ACCEPTED BY ___________________________ THIS INSTRUMENT WILL CONSTITUTE A CONTRACT BETWEEN US. YOUR BID SHOULD BE MAILED OR DELIVERED NOT LATER THAN _________ P.M. ON ___________________, 20____, TO THE FOLLOWING ADDRESS: _____________________________ _____________________________________________________________________________________________

 

THIS CONTRACT CONTAINS PROVISIONS RELATING TO INDEMNITY,

RELEASE OF LIABILITY, AND ALLOCATION OF RISK-

SEE PARAGRAPHS 4.9, 6.3(C), 10,12, AND 14

 

THIS CONTRACT IS MADE AND ENTERED INTO ON THE DATE HEREINAFTER SET FORTH BY AND BETWEEN THE PARTIES HEREIN DESIGNATED AS “OPERATOR” AND “CONTRACTOR.”

 

	
OPERATOR:

	
CONDOR ENERGY TECHNOLOGY LLC

	
ADDRESS:

	
4125 BLACKHAWK PLAZA CIRCLE, SUITE 201-A

	  	
DANVILLE, CA 94506

	
CONTRACTOR:

	
BEREDCO LLC

	
ADDRESS:

	
2020 NO BRAMBLEWOOD

	  	
WICHITA, KS 67206

 

IN CONSIDERATION OF THE MUTUAL PROMISES, CONDITIONS AND AGREEMENTS HEREIN CONTAINED AND THE SPECIFICATIONS AND SPECIAL PROVISIONS SET FORTH IN EXHIBIT ‘A’ AND EXHIBIT “B” ATTACHED HERETO AND MADE A PART HEREOF (THE “CONTRACT”), OPERATOR ENGAGES CONTRACTOR AS AN INDEPENDENT CONTRACTOR TO DRILL THE HEREINAFTER DESIGNATED WELL OR WELLS IN SEARCH OF OIL OR GAS ON A DAYWORK BASIS.

 

FOR PURPOSES HEREOF, THE TERM “DAYWORK” OR ‘DAYWORK BASIS’ MEANS CONTRACTOR SHALL FURNISH EQUIPMENT, LABOR, AND PERFORM SERVICES AS HEREIN PROVIDED, FOR A SPECIFIED SUM PER DAY UNDER THE DIRECTION, SUPERVISION AND CONTROL OF OPERATOR (INCLUSIVE OF ANY EMPLOYEE, AGENT, CONSULTANT OR SUBCONTRACTOR ENGAGED BY OPERATOR TO DIRECT DRILLING OPERATIONS). WHEN OPERATING ON A DAYWORK BASIS, CONTRACTOR SHALL BE FULLY PAID AT THE APPLICABLE RATES OF PAYMENT AND ASSUMES ONLY THE OBLIGATIONS AND LIABILITIES STATED HEREIN. EXCEPT FOR SUCH OBLIGATIONS AND LIABILITIES SPECIFICALLY ASSUMED BY CONTRACTOR, OPERATOR SHALL BE SOLELY RESPONSIBLE AND ASSUMES LIABILITY FOR ALL CONSEQUENCES OF OPERATIONS BY BOTH PARTIES WHILE ON A DAYWORK BASIS, INCLUDING RESULTS AND ALL OTHER RISKS OR LIABILITIES INCURRED IN OR INCIDENT TO SUCH OPERATIONS.

  

65

  

	
1.

	
LOCATION OF WELL:

 

WELL NAME AND NUMBER THE FIRST 5 HORIZONTAL WELLS AND/OR AN EQUIVALENT THEREOF & THE FIRST 5 SWD WELLS AS MORE FULLY DESCRIBED IN SECTION 14-D OF THE AGREEMENT FOR PURCHASE OF TERM ASSIGNMENT BETWEEN CONDOR ENERGY TECHNOLOGY LLC AND BEREXCO LLC.

 

	
PARISH/

COUNTY:

	
SEE EXHIBIT C

	
STATE:

	
KS & OK

	
  FIELD

  NAME:

	  

	
WELL LOCATION AND LAND DESCRIPTION:

	  

	
SEE EXHIBIT C

	  	  	  	  	  

 

1.1 ADDITIONAL WELL LOCATIONS OR AREAS: __________________________________________

 

LOCATIONS DESCRIBED ABOVE ARE FOR WELL AND CONTRACT IDENTIFICATION ONLY AND CONTRACTOR ASSUMES NO LIABILITY WHATSOEVER FOR A PROPER SURVEY OR LOCATION STAKE ON OPERATOR’S LEASE.

 

	
2.

	
COMMENCEMENT DATE:

 

CONTRACTOR AGREES TO USE REASONABLE EFFORTS TO COMMENCE OPERATIONS FOR THE DRILLING OF THE WELL BY THE 1ST DAY OF JANUARY 2013.

 

	
OR

	
OPERATOR AGREES TO GIVE CONTRACTOR AT LEAST SIXTY (60) DAYS ADVANCE WRITTEN NOTICE OF THE SPUDDING OF EACH WELL HEREUNDER, AND CONTRACTOR AGREES, WITHIN TEN (10) DAYS FROM RECEIPT OF SUCH NOTICE, TO EITHER COMMIT TO DRILL SUCH WELL OR CONSENT TO OPERATOR’S DRILLING SUCH WELL WITH A THIRD-PARTY CONTRACTOR WITHOUT PENALTY UNDER THE PROVISIONS OF SUB-PARAGRAPH 6.4(A) HEREOF; PROVIDED, HOWEVER ANY SUCH CONSENT BY CONTRACTOR SHALL NOT REDUCE THE TOTAL NUMBER OF WELLS TO BE DRILLED BY OPERATOR UTILIZING CONTRACTOR HEREUNDER.

 

	
3.

	
DEPTH:

 

3.1 WELL DEPTH: THE WELL(S) SHALL BE DRILLED TO A VERTICAL DEPTH OF APPROXIMATELY 4500 FEET, OR TO THE __________________________ FORMATION, WHICHEVER IS DEEPER, BUT THE CONTRACTOR SHALL NOT BE REQUIRED HEREUNDER TO DRILL SAID WELL(S) BELOW A MEASURED MAXIMUM DEPTH OF 11.000 FEET, UNLESS CONTRACTOR AND OPERATOR MUTUALLY AGREE TO DRILL TO A GREATER DEPTH.

 

	
4.

	
DAYWORK RATES:

 

CONTRACTOR SHALL BE PAID AT THE FOLLOWING RATES FOR THE WORK PERFORMED HEREUNDER.

 

4.1 MOBILIZATION: OPERATOR SHALL PAY CONTRACTOR A MOBILIZATION FEE OF $ ACTUAL COST  OR A MOBILIZATION DAY RATE OF $ ______________ PER DAY. THIS SUM SHALL BE DUE AND PAYABLE IN FULL AT THE TIME THE RIG IS RIGGED UP OR POSITIONED AT THE WELL SITE READY TO SPUD. MOBILIZATION SHALL INCLUDE:

 

TRANSPORTATION OF DRILLING EQUIPMENT AND TUBULARS AND RIGGING UP. _________________________________

 

 

  

66

  

 

4.2 DEMOBILIZATION: OPERATOR SHALL PAY CONTRACTOR A DEMOBILIZATION FEE OF $ 19,500 OR A DEMOBILIZATION DAY RATE DURING TEAR DOWN OF $ _______________ PER DAY, PROVIDED HOWEVER THAT NO DEMOBILIZATION FEE SHALL BE PAYABLE IF THE CONTRACT IS TERMINATED DUE TO THE TOTAL LOSS OR DESTRUCTION OF THE RIG. DEMOBILIZATION SHALL INCLUDE: DEMOB WILL ONLY BE CHARGED IF RIG MUST MOVE BACK TO OKLAHOMA MORE THAN 100 MILES BEFORE ALL WELLS HAVE BEEN DRILLED.                                

 

4.3 MOVING RATE: DURING THE TIME THE RIG IS IN TRANSIT TO OR FROM A DRILL SITE, OR BETWEEN DRILL SITES, COMMENCING ON _________________. OPERATOR SHALL PAY CONTRACTOR A SUM OF $ ____________ PER TWENTY-FOUR (24) HOUR DAY.

 

4.4 OPERATING DAY RATE: FOR WORK PERFORMED PER TWENTY-FOUR (24) HOUR DAY WITH 4 MAN CREW THE OPERATING DAY RATE SHALL BE:

 

	
DEPTH INTERVALS

	  	  	  	  	  	  	  
	
FROM

	  	  	
TO

	  	
WITHOUT DRILL PIPE

	  	
WITH DRILL PIPE

	  
	  	  	  	  	  	
$

	
13.500 RIGS 4, 6, 8

	
 PER DAY

	
$

	
13.500 RIGS 4, 6, 8

	
 PER DAY

	  	  	  	  	  	
$

	
12.500 RIGS 1, 2

	
 PER DAY

	
$

	
12.500 RIGS 1, 2

	
 PER DAY

	  	  	  	  	  	
$

	  	
 PER DAY

	
$

	  	
 PER DAY

 

USING OPERATOR’S DRILL PIPE $ ______________ PER DAY.

 

THE RATE WILL BEGIN WHEN THE DRILLING UNIT IS RIGGED UP AT THE DRILLING LOCATION, OR POSITIONED OVER THE LOCATION DURING MARINE WORK, AND READY TO COMMENCE OPERATIONS; AND WILL CEASE WHEN THE RIG IS READY TO BE MOVED OFF THE LOCATION.

 

IF UNDER THE ABOVE COLUMN “WITH DRILL PIPE” NO RATES ARE SPECIFIED, THE RATE PER TWENTY-FOUR HOUR DAY WHEN DRILL PIPE IS IN USE SHALL BE THE APPLICABLE RATE SPECIFIED IN THE COLUMN “WITHOUT DRILL PIPE” PLUS COMPENSATION FOR ANY DRILL PIPE ACTUALLY USED AT THE RATES SPECIFIED BELOW, COMPUTED ON THE BASIS OF THE MAXIMUM DRILL PIPE IN USE AT ANY TIME CURING EACH TWENTY-FOUR HOUR DAY.

 

DRILL PIPE RATE PER 24-HOUR DAY

 

	
STRAIGHT HOLE

	  	  	
SIZE

	  	  	
GRADE

	  	
DIRECTIONAL OR UNCONTROLLABLE DEVIATED HOLE

	  	  	
SIZE

	  	  	
GRADE

	  
	
$

	
 PER FT.

	  	  	  	  	  	  	
$

	  	
 PER FT.

	  	  	  	  	  	  
	
$

	
 PER FT.

	  	  	  	  	  	  	
$

	  	
 PER FT.

	  	  	  	  	  	  
	
$

	
 PER FT.

	  	  	  	  	  	  	
$

	  	
 PER FT.

	  	  	  	  	  	  

 

DIRECTIONAL OR UNCONTROLLED DEVIATED HOLE WILL BE DEEMED TO EXIST WHEN DEVIATION EXCEEDS __________ DEGREES OR WHEN THE CHANGE OF ANGLE EXCEEDS __________ DEGREES PER ONE HUNDRED FEET.

 

DRILL PIPE SHALL BE CONSIDERED IN USE NOT ONLY WHEN IN ACTUAL USE BUT ALSO WHILE IT IS BEING PICKED UP OR LAID DOWN. WHEN DRILL PIPE IS STANDING IN THE DERRICK, IT SHALL NOT BE CONSIDERED IN USE. PROVIDED, HOWEVER, THAT IF CONTRACTOR FURNISHES SPECIAL STRINGS OF DRILL PIPE, DRILL COLLARS, AND HANDLING TOOLS AS PROVIDED FOR IN EXHIBIT “A”, THE SAME SHALL BE CONSIDERED IN USE AT ALL TIMES WHEN ON LOCATION OR UNTIL RELEASED BY OPERATOR. IN NO EVENT SHALL FRACTIONS OF AN HOUR BE CONSIDERED IN COMPUTING THE AMOUNT OF TIME DRILL PIPE IS IN USE BUT SUCH TIME SHALL BE COMPUTED TO THE NEAREST HOUR, WITH THIRTY MINUTES OR MORE BEING CONSIDERED A FULL HOUR AND LESS THAN THIRTY MINUTES NOT TO BE COUNTED.

 

  

67

  

4.5 REPAIR TIME: IN THE EVENT IT IS NECESSARY TO SHUT DOWN CONTRACTOR’S RIG FOR REPAIRS, EXCLUDING ROUTINE RIG SERVICING. CONTRACTOR SHALL BE ALLOWED COMPENSATION AT THE APPLICABLE RATE FOR SUCH SHUT DOWN TIME UP TO A MAXIMUM OF 4 HOURS FOR ANY ONE RIG REPAIR JOB, BUT NOT TO EXCEED 24 HOURS OF SUCH COMPENSATION FOR ANY CALENDAR MONTH. THEREAFTER, CONTRACTOR SHALL BE COMPENSATED AT A RATE OF $ -0- PER TWENTY-FOUR (24) HOUR DAY. ROUTINE RIG SERVICING SHALL INCLUDE, BUT NOT BE LIMITED TO, CUTTING AND SLIPPING DRILLING LINE, CHANGING PUMP OR SWIVEL EXPENDABLES, TESTING BOP EQUIPMENT, LUBRICATING RIG, AND ________ _______________________________________.

 

4.6 STANDBY TIME RATE: $ 12,500 (1, 2); $ 13.500(4, 6, 8) PER TWENTY-FOUR(24) DAY. STANDBY TIME SHALL BE DEFINED TO INCLUDE TIME WHEN THE RIG IS SHUT DOWN ALTHOUGH IN READINESS TO BEGIN OR RESUME OPERATIONS BUT CONTRACTOR IS WAITING ON ORDERS OF OPERATOR or on materials, services or other items to be furnished by Operator.

 

4.7 Drilling Fluid Rates: When drilling fluids of a type and characteristic that increases Contractor’s cost of performance hereunder, including, but not limited to, oil-based mud or potassium chloride, are in use, Operator shall pay Contractor in addition to the operating rate specified above:

 

	
  

	
(a)

	
$ 20.00          per man per day for Contractor’s rig-site personnel.

 

	
  

	
(b)

	
$ ________ per day additional operating rate; and

 

	
  

	
(c)

	
Cost of all labor, material and services plus ______ hours operating rate to clean rig and related equipment.

 

4.8 Force Majeure Rate: $ 9.000            per twenty-four (24) hour day for any continuous period that normal operations are suspended or cannot be carried on due to conditions of Force Majeure as defined in Paragraph 17 hereof. It is, however, understood that subject to Subparagraph 6.3 below, Operator can release the rig in accordance with Operator’s right to direct stoppage of the work, effective when conditions will permit the rig to be moved from the location.

 

4.9 Reimbursable Costs: Operator shall reimburse Contractor for the costs of material, equipment, work or services which are to be furnished by Operator as provided for herein but which for convenience are actually furnished by Contractor at Operator’s request, plus       10       percent for such cost of handling. When, at Operator’s request and with Contractor’s agreement, the Contractor furnishes or subcontracts for certain items or services which Operator is required herein to provide, for purposes of the indemnity and release provisions of this Contract, said items or services shall be deemed to be Operator furnished items or services. Any subcontractors so hired shall be deemed to be Operator’s contractor, and Operator shall not be relieved of any of its liabilities in connection therewith.

 

4.10 Revision in Rates: The rates and/or payments herein set forth due to Contractor from Operator shall be revised to reflect the change in costs if the costs of any of the items hereinafter listed shall vary by more than   5    percent from the costs thereof on the date of this Contract or by the same percent after the date of any revision pursuant to this Subparagraph:

 

	
  

	
(a)

	
Labor costs, including ail benefits, of Contractor’s personnel;

 

	
  

	
(b)

	
Contractor’s cost of insurance premiums;

 

	
  

	
(c)

	
Contractor’s cost of fuel, including all taxes and fees; the cost per gallon/MCF being $ Supplied by Operator;

 

	
  

	
(d)

	
Contractor’s cost of catering, when applicable;

 

  

68

  

	
  

	
(e)

	
If Operator requires Contractor to increase or decrease the number of Contractor’s personnel;

 

	
  

	
(f)

	
Contractor’s cost of spare parts and supplies with the understanding that such spare parts and supplies constitute _______________ percent of the operating rate and that the parties shall use the U.S. Bureau of Labor Statistics Oil Field and Gas Field Drilling Machinery Producer Price Index (Series ID WPU119102) to determine to what extent a price variance has occurred in said spare parts and supplies;

 

	
  

	
(g)

	
If there is any change in legislation or regulations in the area in which Contractor is working or other unforeseen, unusual event that alters Contractor’s financial burden.

 

	
  

	
(h)

	
Market price increases

 

	
5.

	
TIME OF PAYMENT

 

Payment is due by Operator to Contractor as follows:

 

5.1 Payment for mobilization, drilling and other work performed at applicable rates, and ail other applicable charges shall be due, upon presentation of invoice therefor, upon completion of mobilization, demobilization, rig release or at the end of the month in which such work was performed or other charges are incurred, whichever shall first occur. All invoices may be mailed to Operator at the address hereinabove shown, unless Operator does hereby designate that such invoices shall be mailed as follows: _______________.

 

5.2 Disputed Invoices and Late Payment: Operator shall pay all invoices within   15  days after receipt except that if Operator disputes an invoice or any part thereof, Operator shall, within fifteen days after receipt of the invoice, notify Contractor of the item disputed, specifying the reason therefore, and payment of the disputed item may be withheld until settlement of the dispute, but timely payment shall be made of any undisputed portion. Any sums (including amounts ultimately paid with respect to a disputed invoice) not paid within the above specified days shall bear interest at the rate of 11⁄2  percent or the maximum legal rate, whichever is less, per month from the due date until paid. If Operator does not pay undisputed items within the above stated time, Contractor may suspend operations or terminate this Contract as specified under Subparagraph 6.3.

 

	
6.

	
TERM:

 

6.1 Duration of Contract: This Contract shall remain in full force and effect until drilling operations are completed on the well or wells specified in Paragraph 1 above, or for a term of __________, commencing on the date specified in Paragraph 2 above.

 

6.2 Extension of Term: Operator may extend the term of this Contract for __________ well(s) or for a period of ___________________________ by giving notice to Contractor at least __________ days prior to completion of the well then being drilled or by _______________________________________________________

 

6.3 Early Termination:

 

(a) By Either Party: Upon giving of written notice, either party may terminate this Contract when total loss or destruction of the rig, or a major breakdown with indefinite repair time necessitate stopping operations hereunder.

 

  

69

  

(b) By Operator: Notwithstanding the provisions of Paragraph 3 with respect to the depth to be drilled, Operator shall have the right to direct the stoppage of the work to be performed by Contractor hereunder at any lime prior to reaching the specified depth, and even though Contractor has made no default hereunder. In such event, Operator shall reimburse Contractor as set forth in Subparagraph 6.4 hereof.

 

(c) By Contractor: Notwithstanding the provisions of Paragraph 3 with respect to the depth to be drilled, in the event Operator shall become insolvent, or be adjudicated a bankrupt, or file, by way of petition or answer, a debtor’s petition or other pleading seeking adjustment of Operator’s debts, under any bankruptcy or debtor’s relief laws now or hereafter prevailing, or if any such be filed against Operator, or in case a receiver be appointed of Operator or Operator’s property, or any part thereof, or Operator’s affairs be placed in the hands of a Creditor’s Committee, or, following three business days prior written notice to Operator if Operator does not pay Contractor within the time specified in Subparagraph 5.2 all undisputed items due and owing, Contractor may, at its option, (1) elect to terminate further performance of any work under this Contract and Contractor’s right to compensation shall be as set forth in Subparagraph 6.4 hereof, or (2) suspend operations until payment is made by Operator in which event the standby time rate contained in Subparagraph 4.6 shall apply until payment is made by Operator and operations are resumed. In addition to Contractor’s rights to suspend operations or terminate performance under this Paragraph, Operator hereby expressly agrees to protect, defend and indemnify Contractor from and against any claims, demands and causes of action, including all costs of defense, in favor of Operator, Operator’s co-venturers, co-lessees and joint owners, or any other parties arising out of any drilling commitments or obligations contained in any lease, farmout agreement or other agreement, which may be affected by such suspension of operations or termination of performance hereunder.

 

6.4 Early Termination Compensation:

 

(a) Prior to Commencement: See #27

 

(b) Subsequent to spudding: If such termination occurs after the spudding of the well, Operator shall pay Contractor (1) the amount for all applicable rates and all other charges and reimbursements due to Contractor, but in no event shall such sum, exclusive of reimbursements due, be less than would have been earned for 30 days at the applicable rate “Without Drill Pipe” and the actual amount due for drill pipe used in accordance with the above rates; ________________________________________________________________________________________.

 

	
7.

	
CASING PROGRAM

 

Operator shall have the right to designate the points at which casing will be set and the manner of setting, cementing and testing. Operator may modify the casing program, however, any such modification which materially increases Contractor’s hazards or costs can only be made by mutual consent of Operator and Contractor and upon agreement as to the additional compensation to be paid Contractor as a result thereof.

 

	
8.

	
DRILLING METHODS AND PRACTICES:

 

8.1 Contractor shall maintain well control equipment in good condition at all times and shall use all reasonable means to prevent and control fires and blowouts and to protect the hole.

 

8.2 Subject to the terms hereof, and at Operator’s cost at all times during the drilling of the well, Operator shall have the right to control the mud program, and the drilling fluid must be of a type and have characteristics and be maintained by Contractor in accordance with the specifications shown in Exhibit “A”.

 

8.3 Each party hereto agrees to comply with all laws, rules, and regulations of any federal, state or local governmental authority which are now or may become applicable to that party’s operations covered by or arising out of the performance of this Contract When required by law, the terms of Exhibit “B’’ shall apply to this Contract. In the event any provision of this Contract is inconsistent with or contrary to any applicable federal, state or local law, rule or regulation, said provision shall be deemed to be modified to the extent required to comply with said law, rule or regulation, and as so modified said provision and this Contract shall continue in full force and effect

 

8.4 Contractor shall keep and furnish to Operator an accurate record of the work performed and formations drilled on the IADC.API Daily Drilling Report Form or other form acceptable to Operator. A legible copy of said form shall be furnished by Contractor to Operator.

 

8.5 If requested by Operator, Contractor shall furnish Operator with a copy of delivery tickets covering any material or supplies provided by Operator and received by Contractor.

 

  

70

  

	
9.

	
INGRESS, EGRESS, AND LOCATION:

 

Operator hereby assigns to Contractor all necessary rights of ingress and egress with respect to the tract on which the well is to be located for the performance by Contractor of all work contemplated by this Contract Should Contractor be denied free access to the location for any reason not reasonably within Contractor’s control, any time lost by Contractor as a result of such denial shall be paid for at the standby time rate. Operator agrees at all times to maintain the road and location in such a condition that will allow free access and movement to and from the drilling site in an ordinarily equipped highway type vehicle. If Contractor is required to use bulldozers, tractors, four-wheel drive vehicles, or any other specialized transportation equipment for the movement of necessary personnel, machinery, or equipment over access roads or on the drilling location, Operator shall furnish the same at its expense and without cost to Contractor. The actual cost of repairs to any transportation equipment furnished by Contractor or its personnel damaged as a result of improperly maintained access roads or location will be charged to Operator. Operator shall reimburse Contractor for all amounts reasonably expended by Contractor for repairs and/or reinforcement of roads, bridges and related or similar facilities (public and private) required as a direct result of a rig move pursuant to performance hereunder. Operator shall be responsible for any costs associated with leveling the rig because of location settling.

 

	
10.

	
SOUND LOCATION:

 

Operator shall prepare a sound location adequate in size and capable of properly supporting the drilling rig, and shall be responsible for a casing and cementing program adequate to prevent soil and subsoil wash out. It is recognized that Operator has superior knowledge of the location and access routes to the location, and must advise Contractor of any subsurface conditions, or obstructions (including, but not limited to. mines, caverns, sink holes, streams, pipelines, power lines and communication lines) which Contractor might encounter while en route to the location or during operations hereunder. In the event subsurface conditions cause a entering or shifting of the location surface, or if seabed conditions prove unsatisfactory to properly support the rig during marine operations hereunder, and loss or damage to the rig or its associated equipment results therefrom, Operator shall, without regard to other provisions of this Contract, including Subparagraph 14.1 hereof, reimburse Contractor for all such loss or damage including removal of debris and payment of Force Majeure Rate during repair and/or demobilization if applicable.

 

	
11.

	
EQUIPMENT CAPACITY

 

Operations shall not be attempted under any conditions which exceed 85% of the capacity of the equipment specified to be used hereunder or where canal or water depths are in excess of   N/A   feet. Without prejudice to the provisions of Paragraph 14 hereunder, Contractor shall have the right to make the final decision as to when an operation or attempted operation would exceed the capacity of specified equipment.

 

	
12.

	
TERMINATION OF LOCATION LIABILITY:

 

When Contractor has concluded operations at the well location, Operator shall thereafter be liable for damage to property, personal injury or death of any person which occurs as a result of conditions of the location and Contractor shall be relieved of such liability; provided, however, if Contractor shall subsequently reenter upon the location for any reason, including removal of the rig, any term of the Contract relating to such reentry activity shall become applicable during such period.

 

	
13.

	
INSURANCE

 

During the life of this Contract, Contractor shall at Contractor’s expense maintain, with an insurance company or companies authorized to do business in the state where the work is to be performed or through a self-insurance program, insurance coverages of the kind and in the amount set forth in Exhibit “A”, insuring the liabilities specifically assumed by Contractor in Paragraph 14 of this Contract. Contractor shall procure from the company or companies writing said insurance a certificate or certificates that said insurance is in full force and effect and that the same shall not be canceled or materially changed without ten (10) days prior written notice to Operator. For liabilities assumed hereunder by Contractor, its insurance shall be endorsed to provide that the underwriters waive their right of subrogation against Operator. Operator will, as well, cause its insurer to waive subrogation against Contractor for liability it assumes and shall maintain, at Operator’s expense, or shall self insure, insurance coverage as set forth in Exhibit “A” of the same kind and in the same amount as is required of Contractor, insuring the liabilities specifically assumed by Operator in Paragraph 14 of this Contract. Operator shall procure from the company or companies writing said insurance a certificate or certificates that S3id insurance is in full force and effect and that the same shall not be canceled or materially changed without ten (10) days prior written notice to Contractor. Operator and Contractor shall cause their respective underwriters to name the other additionally insured but only to the extend of the indemnification obligations assumed herein.

 

  

71

  

	
14.

	
RESPONSIBILlTY FOR LOSS OR DAMAGE, INDEMNITY, RELEASE OF LIABILlTY AND ALLOCATlON OF RISK:

 

14.1 Contractor’s Surface Equipment: Contractor shall assume liability at all times for damage to or destruction of Contractor’s surface equipment, regardless of when or how such damage or destruction occurs, and Contractor shall release Operator of any liability for any such loss, except loss or damage under the provisions of Paragraph 10 or Subparagraph 14.3.

 

14.2 Contractor’s In-Hole Equipment: Operator shall assume liability at all times for damage to or destruction of Contractor’s in-hole equipment, including, but not limited to, drill pipe, drill collars, and tool joints, and Operator shall reimburse Contractor for the value of any such loss or damage; the value to be determined by agreement between Contractor and Operator as current repair costs or   100  percent of current like kind replacement cost of such equipment delivered to the well site.

 

14.3 Contractor’s Equipment - Environmental Loss or Damage: Notwithstanding the provisions of Subparagraph 14.1 above, Operator shall assume liability at all times for damage to or destruction of Contractor’s equipment resulting from the presence of H2S1 CO2 or other corrosive elements that enter the drilling fluids from subsurface formations or the use of corrosive, destructive or abrasive additives in the drilling fluids.

 

14.4 Operator’s Equipment: Operator shall assume liability at all times for damage to or destruction of Operator’s or its co-venturers’, co-lessees’ or joint owners’ equipment, including, but not limited to, casing, tubing, well head equipment, and platform if applicable, regardless of when or how such damage or destruction occurs, and Operator shall release Contractor of any liability for any such loss or damage.

 

14.5 The Hole: In the event the hole should be lost or damaged, Operator shall be solely responsible for such damage to or loss of the hole, including the casing therein. Operator shall release Contractor and its suppliers, contractors and subcontractors of any tier of any liability for damage to or loss of tin hole, and shall protect, defend and indemnify Contractor and its suppliers, contractors and subcontractors of any tier from and against any and all claims, liability, and expense relating to such damage to or loss of the hole.

 

14.6 Underground Damage: Operator shall release Contractor and its suppliers, contractors and subcontractors of any tier of any liability for, and shall protect, defend and indemnify Contractor and its suppliers, contractors and subcontractors of any tier from and against any and all claims, liability, and expense resulting from operations under this Contract on account of injury to, destruction of, or loss or impairment of any property right in or to oil, gas, or other mineral substance or water, if at the time of the act or omission causing such injury, destruction, loss, or impairment, said substance had not been reduced to physical possession above the surface of the earth, and for any loss or damage to any formation, strata, or reservoir beneath the surface of the earth.

 

14.7 Inspection of Materials Furnished by Operator: Contractor agrees to visually inspect all materials furnished by Operator before using same and to notify Operator of any apparent defects therein. Contractor shall not be liable for any loss or damage resulting from the use of materials furnished by Operator, and Operator shall release Contractor from, and shall protect, defend and indemnify Contractor from and against, any such liability.

 

14.8 Contractor’s Indemnification of Operator: Contractor shall release Operator of any liability for, and shall protect, defend and indemnify Operator from and against all claims, demands, and causes of action of every kind and character, without limit and without regard to the cause or causes thereof or the negligence of any party or parties, arising in connection herewith in favor of Contractor’s employees or Contractor’s subcontractors of any tier (inclusive of any agent or consultant engaged by Contractor) or their employees, or Contractor’s invitees, on account of bodily injury, death or damage to property. Contractor’s indemnity under this Paragraph shall be without regard to and without any right to contribution from any insurance maintained by Operator pursuant to Paragraph 13. If it is judicially determined that the monetary limits of insurance required hereunder or of the indemnities voluntarily assumed under Subparagraph 14.8 (which Contractor and Operator hereby agree will be supported either by available liability insurance, under which the insurer has no right of subrogation against the indemnities, or voluntarily self-insured, in part or whole) exceed the maximum limits permitted under applicable law, it Is agreed that said insurance requirements or indemnities shall automatically be amended to conform to the maximum monetary limits permitted under such law.

 

14.9 Operator’s Indemnification of Contractor: Operator shall release Contractor of any liability for, and shall protect, defend and indemnify Contractor from and against all claims, demands, and causes of action of every kind and character, without limit and without regard to the cause or causes thereof or the negligence of any party or parties, arising in connection herewith in favor of Operator’s employees or Operator’s contractors of any tier (inclusive of any agent, consultant or subcontractor engaged by Operator) or their employees, or Operator’s invitees, other than those parties identified in Subparagraph 14.8 on account of bodily injury, death or damage to property. Operator’s indemnify under this Paragraph shall be without regard to and without any right to contribution from any insurance maintained by Contractor pursuant to Paragraph 13. If it is judicially determined that the monetary limits of insurance required hereunder or of the indemnities voluntarily assumed under Subparagraph 14.9 (which Contractor and Operator hereby agree will be supported either by available liability insurance, under which the insurer has no right of subrogation against the indemnities, or voluntarily self-insured, in part or whole) exceed the maximum limits permitted under applicable law, it is agreed that said insurance requirements or indemnities shall automatically be amended to conform to the maximum monetary limits permitted under such law.

 

14.10 Liability for Wild Well: Operator shall be liable for the cost of regaining control of any wild well, as well as for cost of removal of any debris and cost of property remediation and restoration, and Operator shall release, protect, defend and indemnify Contractor and its suppliers, contractors and subcontractors of any tier from and against any liability for such cost.

 

  

72

  

14.11 Pollution or Contamination: Notwithstanding anything to the contrary contained herein, except the provisions of Paragraphs 10 and 12, it is understood and agreed by and between Contractor and Operator that the responsibility for pollution or contamination shall be as follows:

 

	
  

	
(a)

	
Contractor shall assume all responsibility for, including control and removal of, and shall protect, defend and indemnify Operator from and against all claims, demands and causes of action of every kind and character arising from pollution or contamination, which originates above the surface of the land or water from spills of fuels, lubricants, motor oils, pipe dope, paints, solvents, ballast bilge and garbage, except unavoidable pollution from reserve pits, wholly in Contractor’s possession and control and directly associated with Contractor’s equipment and facilities.

 

	
  

	
(b)

	
Operator shall assume all responsibility for, including control and removal of, and shall protect, defend and indemnify Contractor and its suppliers, contractors and subcontractors of any tier from and against all claims, demands, and causes of action of every kind and character arising directly or indirectly from all other pollution or contamination which may occur during the conduct of operations hereunder, including, but not limited to, that which may result from fire, blowout, cratering, seepage or any other uncontrolled flow of oil, gas, water or other substance, as well as the use or disposition of all drilling fluids, including, but not limited to, oil emulsion, oil base or chemically treated drilling fluids, contaminated cuttings or cavings, lost circulation and fish recovery materials and fluids. Operator shall release Contractor and its suppliers, contractors and subcontractors of any tier of any liability for the foregoing.

 

	
  

	
(c)

	
In the event a third party commits an act or omission which results in pollution or contamination for which either Contractor or Operator, for whom such party is performing work, is held to be legally liable, the responsibility therefore shall be considered, as between Contractor and Operator, to be the same as if the party for whom the work was performed had performed the same and all of the obligations respecting protection, defense, indemnity and limitation of responsibility and liability, as set forth in (a) and (b) above, shall be specifically applied.

 

14.12 Consequential Damages: Subject to and without affecting the provisions of this Contract regarding the payment rights and obligations of the parties or the risk of loss, release and indemnity rights and obligations of the parties, each party shall at all times be responsible for and hold harmless and indemnify the other party from and against its own special, indirect or consequential damages, and the parties agree that special, indirect or consequential damages shall he deemed to include, without limitation, the following: loss of profit or revenue; costs and expenses resulting from business interruptions; loss of or delay in production; loss of or damage to the leasehold; loss of or delay in drilling or operating rights; cost of or loss of use of property, equipment, materials and services, including without limitation those provided by contractors or subcontractors of every tier or by third parties. Operator shall at all times be responsible for and hold harmless and indemnify Contractor and its suppliers, contractors and subcontractors of any tier from and against all claims, demands and causes of action of every kind and character in connection with such special, indirect or consequential damages suffered by Operator’s co-owners, co-venturers, co-lessees, farmors, farmees, partners and joint owners.

 

14.13 Indemnity Obligation: Except as otherwise expressly limited in this Contract, it is the Intent of parties hereto that all releases, indemnity obligations and/or liabilities assumed by such parties under terms of this Contract, including, without limitation, Subparagraphs 4.9 and 6.3(c), Paragraphs 10 and 12, and Subparagraphs 14.1 through 14.12 hereof, be without limit and without regard to the cause or causes thereof, including, but not limited to, pre-existing conditions, defect or ruin of premises or equipment, strict liability, regulatory or statutory liability, products liability, breach of representation or warranty (express or implied), breach of duty (whether statutory, contractual or otherwise) any theory of fort, breach of contract, fault, the negligence of any degree or character (regardless of whether such negligence is sole, joint or concurrent, active, passive or gross) of any party or parties, including the party seeking the benefit of the release, indemnity or assumption of liability, or any other theory of legal liability. The indemnities, and releases and assumptions of liability extended by the parties hereto under the provisions of Subparagraphs 4.9 and 6.3 and Paragraphs 10,12 and 14 shall inure to the benefit of such parties, their co-venturers, co-lessees, joint owners, their parent, holding and affiliated companies and the officers, directors, stockholders, partners, managers, representatives, employees, consultants, agents, servants and Insurers of each. Except as otherwise provided herein, such indemnification and assumptions of liability shall not be deemed to create any rights to indemnification in any person or entity not a party to this Contract, either as a third party beneficiary or by reason of any agreement of indemnity between one of the parties hereto and another person or entity not a party to this Contract.

 

	
15.

	
AUDIT

 

If any payment provided for hereunder is made on the basis of Contractor’s costs, Operator shall have the right to audit Contractor’s books and records relating to such costs. Contractor agrees to maintain such ‘cooks and records for a period of two (2) years from the date such costs were incurred and to make such books and records readily available to Operator at any reasonable time or times within the period.

 

	
16.

	
NO WAIVER EXCEPT IN WRITING

 

It is fully understood and agreed that none of the requirements of this Contract shall be considered as waived by either party unless the same is done in writing, and then only by the persons executing this Contract, or other duty authorized agent or representative of the party.

 

  

73

  

	
17.

	
FORCE MAJEURE

 

Except as provided in this Paragraph 17 and without prejudice to the risk of loss, release and indemnity obligations under this Contract, each party to this Contract shall be excused from complying with the terms of this Contract, except for the payment of monies when due, if and for so long as such compliance is hindered or prevented by a Force Majeure Event. As used in this Contract, ‘“Force Majeure Event” includes: acts of God, action of the elements, wars (declared or undeclared), insurrection, revolution, rebellions or civil strife, piracy, civil war or hostile action, terrorist acts, riots, strikes, differences with workmen, acts of public enemies, federal or state laws, rules, regulations dispositions or orders of any governmental authorities having jurisdiction in the premises or of any other group, organization or informal association (whether or not formally recognized as a government), inability to procure material, equipment, fuel or necessary labor in the open market, acute and unusual labor or material, equipment or fuel shortages, or any other causes (except financial) beyond the control of either party. Neither Operator nor Contractor shall be required against its will to adjust any labor or similar disputes except in accordance with applicable law. In the event that either party hereto is rendered unable, wholly or in part, by any of these causes to carry out its obligation under this Contract, it is agreed that such party shall give notice and details of Force Majeure in writing to the other party as promptly as possible after its occurrence. In such cases, the obligations of the party giving the notice shall be suspended during the continuance of any inability so caused except that Operator shall be obligated to pay to Contractor the Force Majeure Rate provided for in Subparagraph 4.8 above.

 

	
18.

	
GOVERNING LAW:

 

This Contract shall be construed, governed, interpreted, enforced and litigated, and the relations between the parties determined in accordance with the laws of Kansas.

 

	
19.

	
INFORMATION CONFIDENTIAL:

 

Upon written request by Operator, information obtained by Contractor in the conduct of drilling operations on this well, including, but not limited to, depth, formations penetrated, the results of coring, testing and surveying, shall be considered confidential and shall not be divulged by Contractor or its employees, to any person, firm, or corporation other than Operator’s designated representatives.

 

	
20.

	
SUBCONTRACTS:

 

Either party may employ other contractors to perform any of the operations or services to be provided or performed by it according to Exhibit “A”.

 

	
21.

	
ATTORNEY’S FEES

 

If this Contract is placed in the hands of an attorney for collection of any sums due hereunder, or suit is brought on same, or sums due hereunder are collected through bankruptcy or arbitration proceedings, then the prevailing party shall be entitled to recover reasonable attorney’s fees and costs.

 

	
22.

	
CLAIMS AND LIENS:

 

Contractor agrees to pay all valid clams for labor, material, services, and supplies to be furnished by Contractor hereunder, and agrees to allow no lien by such third parties to be fixed upon the lease, the well, or other property of the Operator or the land upon which said well is located.

 

	
23.

	
ASSIGNMENT:

 

Neither party may assign this Contract without the prior written consent of the other, and prompt notice of any such intent to assign shall be given to the other party. In the event of such assignment the assigning party shall remain liable to the other party as a guarantor of the performance by the assignee of the terms of this Contract If any assignment is made that materially alters Contractor’s financial burden, Contractor’s compensation shall be adjusted to give effect to any increase or decrease in Contractor’s operating costs.

 

	
24.

	
NOTICES AND PLACE OF PAYMENT:

 

Notices, reports, and other communications required or permitted by this Contract to be given or sent by one party to the other shall be delivered by hand, mailed, digitally transmitted or telecopied to the address hereinabove shown. All sums payable hereunder to Contractor shall be payable at its address hereinabove shown unless otherwise specified herein.

 

  

74

  

	
25.

	
CONTINUING OBLIGATIONS:

 

Notwithstanding the termination of this Contract, the parties shall continue to be bound by the provisions of this Contract that reasonably require some action or forbearance after such termination.

 

	
26.

	
ENTIRE AGREEMENT:

 

This Contract constitutes the full understanding of the parties, and a complete and exclusive statement of the terms of their agreement, and shall exclusively control and govern all work performed hereunder. All representations, offers, and undertakings of the parties made prior to the effective date hereof, whether oral or in writing, are merged herein, and no other contracts, agreements or work orders, executed prior to the execution of this Contract, shall in any way modify, amend, alter or change any of the terms or conditions set out herein.

 

	
27.

	
SPECIAL PROVISIONS:

 

The wells listed In Section #1 above will be the first horizontal wells drilled by Condor in Kansas or Oklahoma.

 

6.4 (a) PRIOR TO COMMENCEMENT OR SPUDDING: In the event Operator terminates this contract for any reason (other than 6.3a) prior to spudding the 5th horizontal well and/or an equivalent thereof and the first five SWD wells and Operator drills the remaining wells with another contractor, Operator shall pay Contractor as liquidated damages and not as a penalty a sum equal to (i) the standby time rate for a period of 7 days per horizontal well and/or an equivalent thereof not spudded, plus (ii) the standby rate for a period of 7 days per SWD well not spudded.

 

This contract is entered into pursuant to Paragraph 14.D of the Agreement for Purchase of Term Assignment between Condor Energy Technology LLC and Berexco LLC. Any capitalized terms not defined herein shall have the meanings defined in the Agreement for Purchase of Term Assignment.

 

Contractor will pay to inspect drill pipe prior to spudding of the first horizontal well to establish premium drill pipe. Operator will pay to inspect drill pipe at the end of each horizontal well and will pay to replace any damaged or downgraded drill pipe.

 

	
28.

	
ACCEPTANCE OF CONTRACT:

 

The foregoing Contract, including the provisions relating to indemnity, release of liability and allocation of risk of Subparagraphs 4.9 and 6.3(c), Paragraphs 10 and 12, and Subparagraphs 14.1 through 14.12, is acknowledged, agreed to and accepted by Operator this _____ day of _____________, 2012.  

 

	
OPERATOR: 

	  
	
By: 

	  
	
Title: 

	  

 

The foregoing Contract, including the provisions relating to indemnity, release of liability and allocation of risk of Subparagraphs 4.9, 6.3(c), Paragraphs 10 and 12, and Subparagraphs 14.1 through 14.12, is acknowledged, agreed to and accepted by Contractor this _____ day of November, 2012, which is the effective date of this Contract, subject to rig availability, and subject to all of its terms and provisions, with the understanding that it will not be binding upon Operator until Operator has noted its acceptance, and with the further understanding that unless said Contract is thus executed by Operator within   15   days of the above date Contractor shall be in no manner bound by its signature thereto.

 

	
CONTRACTOR: 

	  
	
By: 

	
Adam E, Beren

	
Title: 

	
President

 

  

75

  

EXHIBIT “A”

 

To Daywork Contract dated ____________, 2012  

 

	
Operator Condor Energy Technology LLC

	
Contractor BEREDCO LLC

 

Well Name and Number See Exhibit C

 

SPECIFICATIONS AND SPECIAL PROVISIONS

 

	
1.

	
CASING PROGRAM (See Paragraph 7)

 

	  	  	
Hole Size

	  	
Casing Size

	  	
Weight

	  	
Grade

	  	
Approximate Setting Depth

	  	
Wait on Cement Time

	  
	
Conductor

	  	  	
 in.

	  	
 in.

	  	
 lbs/ft.

	  	  	  	
 ft.

	  	
 hrs

	
Surface

	  	  	
 in.

	  	
 in.

	  	
 lbs/ft.

	  	  	  	
 ft.

	  	
 hrs

	
Protection

	  	  	
 in.

	  	
 in.

	  	
 lbs/ft.

	  	  	  	
 ft.

	  	
 hrs

	  	  	  	
 in.

	  	
 in.

	  	
 lbs/ft.

	  	  	  	
 ft.

	  	
 hrs

	
Production

	  	  	
 in.

	  	
 in.

	  	
 lbs/ft.

	  	  	  	
 ft.

	  	
 hrs

	
Liner

	  	  	
 in.

	  	
 in.

	  	
 lbs/ft.

	  	  	  	
 ft.

	  	
 hrs

	  	  	  	
 in.

	  	
 in.

	  	
 lbs/ft.

	  	  	  	
 ft.

	  	
 hrs

 

	
2.

	
MUD CONTROL PROGRAM (See Subparagraph 8.2)

 

	
Depth Interval (ft)

	  	  	  	  	  	  	  	  	  	  	  	  	  
	
From

	  	
To

	  	
Type Mud

PER OPERATOR

	  	
Weight

(Ibs./gal.)

	  	
Viscosity

(Secs)

	  	
Water Loss

(cc)

	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  

 

Other mud specifications:                                           ________________________________________________________________________

 

__________________________________________________________________________________________

 

__________________________________________________________________________________________

 

__________________________________________________________________________________________

 

	
3.

	
INSURANCE (See Paragraph 13)

 

3.1 Adequate Workers’ Compensation Insurance complying with State Laws applicable or Employers’ Liability Insurance with limits of   $ 500.000   covering all of Contractor’s employees working under this Contract.

 

3.2 Commercial (or Comprehensive) General Liability Insurance, including contractual obligations as respects this Contract and proper coverage for all other obligations assumed in this Contract. The limit shall be

 

  $ 1,000,000   combined single limit per occurrence for Bodily Injury and Property Damage.

 

3.3 Automobile Public Liability Insurance with limits of   $ 1,000,000  for the death or injury of each person and   $ 1,000,000   for each accident; and Automobile Public Liability Property Damage Insurance with limits of

 

  $ 1,000,000   for each accident.

 

3.4 In the event operations are over water, Contractor shall carry in addition to the Statutory Workers’ Compensation Insurance, endorsements covering liability under the Longshoremen’s & Harbor Workers’ Compensation Act and Maritime liability including maintenance and cure with limits of $ N/A for each death or injury to one person and $ N/A for any one accident.

 

  

76

  

3.5 Other insurance: N/A_________________________________________________________________

___________________________________________________________________________________________

___________________________________________________________________________________________

 

	
4.

	
EQUIPMENT, MATERIALS AND SERVICES TO BE FURNISHED BY CONTRACTOR:

 

The machinery, equipment, tools, materials, supplies, instruments, services and labor hereinafter listed, including any transportation required for such items, shall be provided at the well location at the expense of Contractor unless otherwise noted by this Contract.

 

4.1 Drilling Rig At contractors discretion, either 1,2 for any vertical or SWD well and either 4,6 or 8 for any vertical or horizontal well.

 

Complete drilling rig, designated by Contractor as its Rig No. 1, 2, 4, 6 or 8 the major items of equipment being:

 

Drawworks: Make and Model See Exhibit D________________________

 

Engines: Make, Model, and H.P. __________________________________________________________________

 

No. on Rig  ___________________________________________________________________________

 

Pumps:  No. 1 Make, Size, and Power ______________________________________________________________

 

No. 2 Make, Size, and Power ______________________________________________________________

 

Mud Mixing Pump: Make, Size, and Power __________________________________________________________

 

Boilers: Number, Make, H.P. and W.P ______________________________________________________________

 

Derrick or Mast: Make, Size, and Capacity __________________________________________________________

 

___________________________________________________________________________________________

 

Substructure: Size and Capacity ___________________________________________________________________

 

Rotary Drive: Type _____________________________________________________________________________

 

Drill Pipe: Size _____________ in. _____________ ft.; Size: _____________ in. _____________ ft.

 

Drill Collars: Number and Size ____________________________________________________________________

 

Blowout Preventers: ____________________________________________________________________________

 

	
Size

	  	  	
Series or Test Pr.

	  	  	
Make & Model

	  	  	
Number

	  
	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  
	
B.O.P. Closing Unit:

	  	  	  	  	  	  	  	  	  	  
	
B.O.P. Accumulator:

	  	  	  	  	  	  	  	  	  	  

 

	
  

	
4.2

	
Derrick timbers.

 

	
  

	
4.3

	
Normal strings of drill pipe and drill collars specified above.

 

	
  

	
4.4

	
Conventional drift indicator.

 

	
  

	
4.5

	
Circulating mud pits.

 

	
  

	
4.6

	
Necessary pipe racks and rigging up material.

 

  

77

  

 

	
  

	
4.7

	
Normal storage for mud and chemicals.

 

	
  

	
4.8

	
Shale Shaker.

 

	
  

	
4.9

	
_______________________________________________________________________________

 

	
  

	
4.10

	
_______________________________________________________________________________

 

	
  

	
4.11

	
_______________________________________________________________________________

 

	
  

	
4.12

	
_______________________________________________________________________________

 

	
  

	
4.13

	
_______________________________________________________________________________

 

	
  

	
4.14

	
_______________________________________________________________________________

 

	
  

	
4.15

	
_______________________________________________________________________________

 

	
  

	
4.16

	
_______________________________________________________________________________

 

	
  

	
4.17

	
_______________________________________________________________________________

 

	
5.

	
EQUIPMENT, MATERIALS AND SERVICES TO BE FURNISHED BY OPERATOR:

 

The machinery, equipment, tools, materials, supplies, instruments, services and labor hereinafter listed, including any transportation required for such items, shall be provided at the well location at the expense of Operator unless otherwise noted by this Contract.

 

	
  

	
5.1

	
Furnish and maintain adequate roadway and/or canal to location, right-of-way, including rights-of-way for fuel and water lines, river crossings, highway crossings, gates and cattle guards.

 

	
  

	
5.2

	
Stake location, clear and grade location, and provide turnaround, including surfacing when necessary.

 

	
  

	
5.3

	
Test tanks with pips and fittings.

 

	
  

	
5.4

	
Mud storage tanks with pipe and fittings.

 

	
  

	
5.5

	
Separator with pipe and fittings.

 

	
  

	
5.6

	
Labor and materials to connect and disconnect mud tank, test tank, and mud gas separator.

 

	
  

	
5.7

	
Labor to disconnect and clean test tanks and mud gas separator.

 

	
  

	
5.8

	
Drilling mud, chemicals, lost circulation materials and other additives.

 

	
  

	
5.9

	
Pipe and connections for oil circulating lines.

 

	
  

	
5.10

	
Labor to lay, bury and recover oil circulating lines.

 

	
  

	
5.11

	
Drilling bits, reamers, reamer cutters, stabilizers and special tools.

 

	
  

	
5.12

	
Contract fishing tool services and tool rental.

 

	
  

	
5.13

	
Wire line core bits or heads, core barrels and wire line core catchers if required.

 

	
  

	
5.14

	
Conventional core bits, core catchers and core barrels.

 

	
  

	
5.15

	
Diamond core barrel with head.

 

	
  

	
5.16

	
Cement and cementing service.

 

	
  

	
5.17

	
Electrical wireline logging services.

 

	
  

	
5.18

	
Directional, caliper, or other special services.

 

	
  

	
5.19

	
Gun or jet perforating services.

 

	
  

	
5.20

	
Explosives and shooting devices.

 

	
  

	
5.21

	
Formation testing, hydraulic fracturing, acidizing and other related services.

 

	
  

	
5.22

	
Equipment for drill stem testing.

 

	
  

	
5.23

	
Mud logging services.

 

  

78

  

	
  

	
5.24

	
Sidewall coring service.

 

	
  

	
5.25

	
Welding service for welding bottom joints of casing, guide shoe, float shoe, float collar and in connection with installing of well head equipment if required.

 

	
  

	
5.26

	
Casing, tubing, liners, screen, float collars, guide and float shoes and associated equipment.

 

	
  

	
5.27

	
Casing scratchers and centralizers.

 

	
  

	
5.28

	
Well head connections and all equipment to be installed in or on well or on the premises for use in connection with testing, completion and operation of well.

 

	
  

	
5.29

	
Special or added storage for mud and chemicals.

 

	
  

	
5.30

	
Casinghead, API series, to conform to that shown for the blowout preventers specified in Subparagraph 4.1 above.

 

	
  

	
5.31

	
Blowout preventer testing packoff and testing services.

 

	
  

	
5.32

	
Replacement of BOP rubbers, elements and seals, if required, after initial test.

 

	
  

	
5.33

	
Casing Thread Protectors and Casing Lubricants.

 

	
  

	
5.34

	
H2S training and equipment as necessary or as required by law.

 

	
  

	
5.35

	
Site septic systems.

 

	
  

	
5.36

	
Fresh water system for trailers                                                                                                                                  

 

	
  

	
5.37

	
_______________________________________________________________________________

 

	
  

	
5.38

	
_______________________________________________________________________________

 

	
  

	
5.39

	
_______________________________________________________________________________

 

	
  

	
5.40

	
_______________________________________________________________________________

 

	
  

	
5.41

	
_______________________________________________________________________________

 

	
  

	
5.44

	
_______________________________________________________________________________

 

	
  

	
5.45

	
_______________________________________________________________________________

 

	
  

	
5.46

	
_______________________________________________________________________________

 

	
  

	
5.47

	
_______________________________________________________________________________

 

	
  

	
5.48

	
_______________________________________________________________________________

 

	
  

	
5.49

	
_______________________________________________________________________________

 

	
  

	
5.50

	
_______________________________________________________________________________

 

	
6.

	
EQUIPMENT, MATERIALS AND SERVICES TO BE FURNISHED BY DESIGNATED PARTY:

 

The machinery, equipment, tools, materials, supplies, instruments, services, and labor listed as the following numbered items, including any transportation required for such items unless otherwise specified, shall be provided at the well location and at the expense of the party hereto as designated by an X mark in the appropriate column.

  

79

  

	  	  	  	
To Be Provided By and At The Expense Of

	  	
Item

	  	
Operator

	  	
Contractor

	
6.1

	
Cellar and Runways

	  	
X

	  	  
	
6.2

	
Ditches and sumps

	  	
X

	  	  
	
6.3

	
Fuel (located at RIG                         )

	  	
X

	  	  
	
6.4

	
Fuel Lines (length LOCATION      )

	  	
X

	  	  
	
6.5

	
Water at source, including required permits

	  	
X

	  	  
	
6.6

	
Water well, including required permits

	  	
X

	  	  
	
6.7

	
Water lines, including required permits

	  	
X

	  	  
	
6.8

	
Water storage tanks 330 capacity

	  	  	  	
X

	
6.9

	
Potable water

	  	  	  	
X

	
6.10

	
Labor to operate water well or water pump

	  	
X

	  	  
	
6.11

	
Maintenance of water well, if required

	  	
X

	  	  
	
6.12

	
Water Pump

	  	
X

	  	  
	
6.13

	
Fuel for water pump

	  	
X

	  	  
	
6.14

	
Mats for engines and boilers, or motors and mud pumps

	  	  	  	
X

	
6.15

	
Transportation of Contractor’s property:

	  	  	  	  
	  	
Move in

	  	
X

	  	  
	  	
Move out on final well

	  	  	  	
X

	
6.16

	
Materials for “boxing in” rig and derrick

	  	  	  	
X

	
6.17

	
Special strings of drill pipe and drill collars as follows:

	  	  	  	  
	  	  	  	  	  	
N/A

	  	  	  	  	  	
N/A

	  	  	  	  	  	
N/A

	
6.18

	
Kelly joints, subs, elevators. tongs, slips and BOP rams for use with special drill pipe

	  	
X

	  	  
	
6.19

	
Drill pipe protectors for Kelly joint and each joint of drill pipe running inside of Surface Casing as required, for use with normal strings of drill pipe.............................

	  	  	  	
N/A

	
6.20

	
Drill pipe protectors for Kelly joint and drill pipe running inside of Protection Casing

	  	  	  	
N/A

	
6.21

	
Rate of penetration recording device

	  	  	  	
X

	
6.22

	
Extra labor for running and cementing casing (Casing crews)

	  	
X

	  	  
	
6.23

	
Casing tools

	  	
X

	  	  
	
6.24

	
Power casing tongs

	  	
X

	  	  
	
6.25

	
Laydown and pickup machine

	  	
X

	  	  
	
6.26

	
Tubing tools

	  	  	  	
N/A

	
6.27

	
Power tubing tong

	  	  	  	
N/A

	
6.28

	
Crew Boats, Number __________

	  	  	  	
N/A

	
6.29

	
Service Barge

	  	  	  	
N/A

	
6.30

	
Service Tug Boat

	  	  	  	
N/A

	
6.31

	
Rat Hole

	  	
X

	  	  
	
6.32

	
Mouse Hole

	  	
X

	  	  
	
6.33

	
Reserve Pits

	  	
X

	  	  
	
6.34

	
Upper Kelly Cock

	  	  	  	
N/A

	
6.35

	
Lower Kelly Valve

	  	  	  	
N/A

	
6.36

	
Drill Pipe Safety Valve

	  	  	  	
N/A

	
6.37

	
Inside Blowout Preventer

	  	  	  	
N/A

	
6.38

	
Drilling hole for or driving for conductor pipe

	  	
X

	  	  
	
6.39

	
Charges, cost of bonds for public roads

	  	
X

	  	  
	
6.40

	
Portable Toilet

	  	
X

	  	  
	
6.41

	
Trash Receptacle

	  	
X

	  	  
	
6.42

	
Linear Motion Shale Shaker

	  	  	  	
X

	
6.43

	
Shale Shaker Screens

	  	
X

	  	  
	
6.44

	
Mud Cleaner

	  	  	  	
N/A

	
6.45

	
Mud/Gas Separator

	  	
X

	  	  
	
6.46

	
Desander

	  	  	  	
X

	
6.47

	
Desilter

	  	  	  	
X

	
6.48

	
Degasser

	  	
X

	  	  
	
6.49

	
Centrifuge

	  	
X

	  	  
	
6.50

	
Rotating Head

	  	
X

	  	  
	
6.51

	
Rotating Head Rubbers

	  	
X

	  	  
	
6.52

	
Hydraulic Adjustable Choke

	  	
X

	  	  
	
6.53

	
Pit Volume Totalizer

	  	
X

	  	  
	
6.54

	
Communication, type CELL

	  	  	  	
X

	
6.55

	
Forklift, capacity

	  	
X

	  	  
	
6.56

	
Corrosion Inhibitor for protecting drill string

	  	
X

	  	  
	
6.57

	
Dozer assistance, if needed

	  	
X

	  	  
	
6.58

	
Drill collar inspection and repair

	  	
X

	  	  
	
6.59

	  	  	  	  	  
	
6.60

	  	  	  	  	  

 

7. OTHER PROVISIONS:

  

80

  

EXHIBIT “B”

 

(See Subparagraph 8.3)

 

The following clauses, when required by law, are incorporated in the Contract by reference as if fully set out:

 

	
  

	
(1)

	
The Equal Opportunity Clause prescribed in 41 CFR 60-1.4.

 

	
  

	
(2)

	
The Affirmative Action Clause prescribed in 41 CFR 60-250.4 regarding veterans and veterans of the Vietnam era.

 

	
  

	
(3)

	
The Affirmative Action Clause for handicapped workers prescribed in 41 CFR 60-741.4.

 

	
  

	
(4)

	
The Certification of Compliance with Environmental Laws prescribed in 40 CFR 15.20.

 

  

81

  

EXHIBIT “C”

 

This contract will cover the following five (5) horizontal wells and/or equivalent thereof and the following 5 SWD wells:

 

Barber, Comanche, Harper and Kiowa Counties, Kansas or Woods County, Oklahoma.

 

  

82

  

EXHIBIT “D”

 

BEREDCO LLC

Rotary Drilling Contractor

 

RIG INVENTORY

 

RIG #1-9,000 FEET

 

DRAWWORKS:

Unit U-15

 

POWERED BY:

(2) 3408 Caterpillar Diesel Engines

 

MAST & SUBSTRUCTURE:

DSI 127’ 400,000# Mast w/10’ Substructure.

 

MUD PUMPS:

#1: 1000 Tri-Plex with Caterpillar 3412 engine

#2: Ideco 700 w/ Caterpillar D379 Engine

 

ROTARY EQUIPMENT:

Gardner Denver 17-1/2” X 44”

 

TRAVELING EQUIPMENT:

Blocks 200 ton - Swivel 225 ton

 

BOPS:

11” 3000# Shaffer Annular BOP

11” 3000# Cameron double ram

Valcon 4-Station Accumulator

 

WATER TANK:

500 Bbl

 

MUD SYSTEMS:

Mud pit 490 Bbl

Premix 100 Bbl

 

GENERATORS:

#1: 150 kW powered by 3406 Caterpillar Diesel Engines

#2: 150 kW powered by 3406 Caterpillar Diesel Engines

 

DRILL PIPE AND COLLARS:

As required.

 

RIG MEASUREMENTS:

Centers from conductor to mouse hole 4’6”, 7’8” ahead. Right 7’6”‘ to rat hole, 10’10” diagonal

Location 150’ East (V-Door), 150’ West, 120’ South, 60’ North

KB - 13 feet

 

Phone: 316-265-2856

2020 No Bramblewood

Wichita, KS 67206

08/29/2012

 

  

83

  

BEREDCO LLC

Rotary Drilling Contractor

 

RIG INVENTORY

 

RIG #2 - 8,000 FEET

 

DRAWWORKS:

National Model 370

 

ENGINE:

D353 Caterpillar Engine

 

MAST & SUBSTRUCTURE:

Lee C. Moore 127’, 400,000# Mast, w/10’ H Substructure

 

MUD PUMPS:

#1: Gardner Denver Model FXN Duplex Mud Pump Powered By Caterpillar D353

#2: Gardner Denver Model FXN Duplex Mud Pump Powered By Caterpillar D353

 

ROTARY EQUIPMENT:

Ideco l7-l/2” x 44”

 

TRAVELING EQUIPMENT:

Block -160 ton Ideco, Swivel - Ideco 200 ton

 

BOPS:

11” 3000# Regan annular

Valcon 4-Station Accumulator

3000# Choke Manifold

 

WATER TANK:

295 Bbl

 

MUD SYSTEMS:

450 - Bbl.

80 Bbl Pre-Mix

 

GENERATORS:

150 KW Generator Powered By Cummins KTA Diesel Engine

150 KW Generator Powered By Caterpillar 3306 Diesel Engine

 

DRILL PIPE AND COLLARS:

As required.

 

RIG MEASUREMENTS:

Mouse hole 3’ ahead, Rat hole 6’ 9” ahead, 6’ 8” to the right, 9’ 5” in diagonal

Location 150’ East (V-Door), 140’ West, 50’ North, 120’ South

KB-13 feet

 

Phone: 316-265-2856

2020 No Bramblewood

Wichita, KS 67206

05/07/2012

 

  

84

  

BEREDCO LLC

Rotary Drilling Contractor

 

RIG #4-11,000 FEET

 

INVENTORY

 

DRAWWORKS:

Ideco Model H525

 

ENGINES:

(2) Caterpillar Model 3408 Diesel Engines w/ Torque Converters.

 

MAST & SUBSTRUCTURE:

DSI 131’ 430,000# Mast, w/14’ Substructure.

 

MUD PUMPS:

#1: Brewster 1100 Tri-Plex with Caterpillar D398 engine

#2: Brewster 1100 Tri-Plex with Caterpillar D398 engine

 

ROTARY EQUIPMENT:

Ideco 17-1/2” x 44”

 

TRAVELING EQUIPMENT:

Block - 250 ton, Swivel - Oilwell PC225

 

BOPS:

11” 3000# Shaffer Annular BOP

11” 3000# Cameron double ram

Valcon 4-Station Accumulator

 

WATER TANK:

330 Bbl

 

MUD SYSTEMS:

680 Bbl with 150 Bbl pre-mix, Linear shaker, desander, desilter

 

GENERATORS:

2 - 325 kW Generator Powered By Series 60 Detroit engines

 

DRILL PIPE AND COLLARS:

As required.

 

RIG MEASURMENTS:

From center of Conductor 4’ 9” to Mouse hole, 7’ 8” ahead’

Right 9’ to Rat hole, 11’ 5” diagonal

Location: 50’ North, 150’ East (v-door side), 120’ South, 140’ West

KB -16 feet

 

Phone: 316-265-2856

2020 North Bramblewood

Wichita, Kansas 67206

08/29/2012

 

  

85

  

BEREDCO LLC

Rotary Drilling Contractor

 

RIG INVENTORY

 

RIG #6 - 13,000 FEET

 

DRAWWORKS:

Unit Model SU 15

 

POWERED BY:

(2)- D353 Caterpillar Diesel Engines

 

MAST & SUBSTRUCTURE:

LCM 131 ft 450,000#, 16’ substructure

 

MUD PUMPS:

#1 H&H 1000 HP Triplex Powered by Caterpillar 3508 engine

#2 H&H 1000 HP Triplex Powered by Caterpillar 3508 engine

 

ROTARY EQUIPMENT:

Ideco 17 1⁄2” table

 

TRAVELING EQUIPMENT:

250 ton Block, 200 ton swivel.

 

BOPS:

4 Station Accumulator

11” 3000# Cameron double ram

11” 3000#Hydrill Annular

 

WATER TANK:

500 bbl

 

MUD SYSTEMS:

500 bbl system, linear shaker, desander, desilter.

120 bbl Premix

 

GENERATORS:

2 - 325 kW Generator Powered By Series 60 Detroit engines

 

DRILL PIPE AND COLLARS:

As required.

 

RIG MEASURMENTS:

From center of Conductor 45” to center Mouse hole, 7’7” ahead’

Right 8’8” to Rat hole, 11’6” diagonal

Location: 150’ East (v-door side), 150’ West, 45’ North, 120’ South

KB -18 feet

 

Phone: 316-265-2856

2020 No Bramblewood

Wichita, KS 67206

03/02/2011

 

  

86

  

BEREDCO LLC

Rotary Drilling Contractor

 

RIG INVENTORY

 

RIG #8 - 13,000 FEET

 

DRAWWORKS:

Unit Model SU-15

 

ENGINES:

(2) Series 60 Detroit Engines

 

MAST & SUBSTRUCTURE:

Tofco 131’, 550,000# w/ 12’ Substructure.

 

MUD PUMPS:

2 FM 1000 Triplex Pump Powered By a Caterpillar 3412

 

ROTARY EQUIPMENT:

Oilwell 20-1/2” x 44”

 

TRAVELING EQUIPMENT:

Blocks 250-Ton, Swivel 200-Ton

 

BOPS:

11” 3000# Cameron double ram

11” 3000# Shaffer Spherical

4-Station Accumulator

 

WATER TANK:

350 Bbl

 

MUD SYSTEMS:

600 Bbl Mud System, Linear shaker, Desander, Desilter 125 Bbl Premix Tank

 

GENERATORS:

2 - 325 kW Generator Powered By Series 60 Detroit engines

 

DRILL PIPE AND COLLARS:

As required

 

RIG MEASURMENTS:

From center of Conductor to center of Mouse hole 57”,

From center of hole to past mouse hole 80”,

Right 100” to Rat hole, Diagonal 126”

Location: 45’ North, 150’ East (v-door side), 120’ South, 150’ West

KB-14 feet

 

Phone: 316-265-2856

2020 No Bramblewood

Wichita, KS 67206

05/10/2011

87ccrn_ex101.htm

EXHIBIT 10.1

 

EXECUTION VERSION

 

 

STOCK PURCHASE AGREEMENT

 

dated as of

 

February 2, 2013

 

among

 

ICON CLINICAL RESEARCH INC.

 

and

 

ICON CLINICAL RESEARCH UK LIMITED,

 

as Buyer

 

and

 

CROSS COUNTRY HEALTHCARE, INC.,

 

LOCAL STAFF, LLC

 

and

 

CROSS COUNTRY HEALTHCARE UK HOLDCO LTD.,

 

as Seller

 

 

 

  

1

  

 

STOCK PURCHASE AGREEMENT

 

THIS STOCK PURCHASE AGREEMENT, dated as of February 2, 2013 (this “Agreement”), is entered into by and among ICON Clinical Research Inc. (“US Buyer”) and ICON Clinical Research UK Limited (“UK Buyer”, and together with US Buyer, “Buyer”), and Cross Country Healthcare, Inc. (“Seller Parent”), Local Staff, LLC (“US Seller”) and Cross Country Healthcare UK HoldCo Ltd. (“UK Seller”, and together with Seller Parent and US Seller, “Seller”).

 

RECITALS

 

WHEREAS, Seller Parent owns, directly or indirectly, all of the issued and outstanding membership interests and shares of capital stock, as applicable, of US Seller, UK Seller, the Company and Akos;

 

WHEREAS, US Seller owns all of the issued and outstanding membership interests (the “ClinForce Interests”) of ClinForce, LLC, a Delaware limited liability company (the “Company”);

 

WHEREAS, the Company owns all of the issued and outstanding shares of capital stock of Assent Consulting, Inc., a California corporation, (“Assent”), and Metropolitan Research Associates, Inc., a Delaware corporation, (“Metropolitan”);

 

WHEREAS, UK Seller owns all of the issued and    outstanding shares of capital stock (the “Shares”) of Akos Limited, a United Kingdom company (“Akos”); and

 

  

2

  

 

WHEREAS, Seller wishes to sell to Buyer and Buyer wishes to purchase from Seller all of the ClinForce Interests and the Shares (collectively, the “Interests”), on and subject to the terms and conditions contained herein.

 

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Agreement, the parties agree as follows:

 

ARTICLE I.

 

DEFINITIONS

 

The terms defined in this Article I, whenever used herein (including, without limitation, the Exhibits and Schedules hereto), shall have the following meanings for all purposes of this Agreement:

 

“Acquisition Proposal” shall mean any inquiry, proposal or offer from any Person (other than Buyer or any of its Affiliates) concerning (i) a merger, consolidation, liquidation, recapitalization, share exchange or other business combination transaction involving the Company, Akos, any of their respective Subsidiaries or the Business; (ii) the issuance or acquisition of shares of capital stock or other equity securities of the Company, Akos or any of their respective Subsidiaries; or (iii) the sale, lease, exchange or other disposition of any significant portion of the Company, Akos or any of their respective Subsidiaries’ properties or assets.

 

“Affiliate” of a Person means any other Person that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with such Person.

 

  

3

  

 

“Agreement” has the meaning set forth in the opening caption to this Agreement.

 

“Akos” has the meaning set forth in the recitals hereof.

 

“Akos Business” means any pharmacovigilence business and related work by Metropolitan Research Associates, Inc. and Akos.

 

“Akos Increase” has the meaning set forth in Section 3.4(a)(iii).

 

“Akos Reduction” has the meaning set forth in Section 3.4(a)(iii).

 

“Allocation” has the meaning set forth in Section 3.5.

 

“Ancillary Agreements” means (i) the Purchase Price Escrow Agreement, (ii) the Indemnity Escrow Agreement, (iii) each Employment Agreement, (iv) each Trademark Assignment Agreement and (v) the Transition Services Agreement.

 

“Applicable Law” means any law, rule, regulation, judgment or decree of any professional or licensing authority or other Governmental Entity in all jurisdictions which are applicable to the Business, operations and Properties.

 

“Arena Contract” means the Master Service Agreement dated 16 November 2011 made between AKOS and Arena Pharmaceuticals GmbH pursuant to which AKOS agrees to provide certain pharmacovigilance support services as specified in Schedule 1 thereto.

 

“Assent” has the meaning set forth in the recitals hereof.

 

“Business” means, collectively, the Akos Business and the ClinForce Business.

 

  

4

  

 

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in New York City are required or authorized by law to be closed.

 

“Buyer” has the meaning set forth in the caption hereof.

 

“Buyer Indemnified Parties” has the meaning set forth in Section 9.1.

 

“Buyer Parent” means ICON plc, an Irish public limited company.

 

“Buyer Plans” has the meaning set forth in Section 12.4.

 

“Buyer Subsidiaries” means, collectively, (i) US Buyer, (ii) UK Buyer and (iii) any other direct or indirect Subsidiaries of Buyer Parent designated by Buyer Parent as Buyer Subsidiaries.

 

“Buyer’s Advisors” has the meaning set forth in Section 6.1.

 

“Buyer’s FSA” has the meaning set forth in Section 12.3(c).

 

“Cap” means $7,800,000 plus 15% of any payments made to Seller from the Purchase Price Escrow Amount pursuant to Sections 3.4(a)(iii) and/or 3.4(b)(iii).

 

“Capital Lease” of any Person means any lease of any property by such Person as lessee which would, in accordance with GAAP, be required to be accounted for as a capital lease on the balance sheet of such Person.

 

  

5

  

 

“Change of Control” means, with respect to any company, any transaction that results in any person or group of persons acquiring directly or indirectly: (i) beneficial ownership of securities of such company possessing a majority of the voting power (whether by merger, consolidation or sale of securities), or (ii) all or substantially all of the assets of such company.

 

“ClinForce Business” means the business and operations of the Company, Assent and Metropolitan.

 

“ClinForce Interests” has the meaning set forth in the recitals hereof.

 

“Closing” means the closing of the transactions contemplated by this Agreement which shall occur on the Closing Date.  The Closing shall be deemed to have occurred immediately following the close of business on the Closing Date.

 

“Closing Balance Sheet” has the meaning set forth in Section 3.3(a).

 

“Closing Date” has the meaning set forth in Section 2.4.

 

“Closing Date Purchase Price” means $52,000,000; provided, however, that such amount shall be increased by the amount, if any, by which the Estimated Net Working Capital exceeds the Target Net Working Capital and decreased by the amount, if any, by which the Target Net Working Capital exceeds the Estimated Net Working Capital.

 

“Code” means the United States Internal Revenue Code of 1986, as amended.

 

“Commercial Tax Agreement” means any commercial agreement not primarily related to Taxes that may impose contractual liability on the Company, Akos or any of their respective Subsidiaries for Taxes of another Person, such as credit facilities with gross-up provisions or real estate leases with tax escalation provisions, provided that an agreement relating to a sale or other disposition (including a spinoff or splitoff) of all or a portion of any entity or of any assets shall not be considered a Commercial Tax Agreement.

 

  

6

  

 

“Company” has the meaning set forth in the recitals hereof.

 

“Company Insurance Policy” has the meaning set forth in Section 4.13.

 

“Company IT Systems” means all information technology systems, networks, hardware, computers, Software, servers, workstations, routers, hubs, switches, data communication lines, and other information technology equipment used by the Company, Akos or any of their respective Subsidiaries in the operation of the Business.

 

“Confidential Information” has the meaning set forth in Section 12.12.

 

“Damages” has the meaning set forth in Section 9.1.

 

“Deferred Purchase Price” means an amount not to exceed $3,750,000, which such amount shall include payments, if any, made pursuant to Sections 3.4(a)(iii) and/or 3.4(b)(iii).

 

“Determination Date” has the meaning set forth in Section 3.3(c).

 

“Disclosure Schedules” means the disclosure schedules attached hereto as Exhibit A.

 

“Dispute Notice” has the meaning set forth in Section 3.3(c).

 

“Employee Plan” has the meaning set forth in Section 4.9(a).

 

“Employees” has the meaning set forth in Section 12.4.

 

  

7

  

 

“Employment Agreements” means agreements duly executed and dated as of the date of this Agreement, by (i) DOCS Global Inc. and the individual listed on Schedule 1(a)(i) of the Disclosure Schedules, and (ii) AKOS Limited and the individual listed on Schedule 1(a)(ii) of the Disclosure Schedules.

 

“Encumbrance” means any mortgage, charge, pledge, lien, assignment, hypothecation, security interest (including any created by law), title retention or other security agreement or arrangement.

 

“Environmental Laws” means all applicable federal, state, local and foreign laws, statutes and regulations (including common law) in all applicable jurisdictions concerning the pollution, protection or cleanup of the environment, including those relating to the treatment, storage, disposal, handling, transportation, discharge, emission, release of, or exposure to, Hazardous Substances, including the Clean Air Act, the Clean Water Act, the Solid Waste Disposal Act, the Resource Conservation and Recovery Act, and the Comprehensive Environmental Response, Compensation and Liability Act.

 

“Environmental Liability” means any liability, contingent or otherwise, resulting from or based upon (a) a violation or any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Substances, (c) any exposure to Hazardous Substances, or (d) the Release or threatened Release of any Hazardous Substances into the environment.

 

“ERISA” has the meaning set forth in Section 4.9(a).

 

“Escrow Agent” has the meaning set forth in Section 2.3.

 

  

8

  

 

“Estimated Net Working Capital” means a good faith estimate of Net Working Capital as mutually agreed to by Buyer and Seller no earlier than two (2) Business Days prior to the Closing Date.

 

Estimated Net Working Capital Certificate” has the meaning set forth in Section 7.2(d).

 

“Excluded Taxes” means (i) any Tax of the Company, Akos or any of their respective Subsidiaries that is payable on a Consolidated or Combined Tax Return or (ii) any other Income Taxes.

 

 “Final Allocation” has the meaning set forth in Section 3.5.

 

“Financial Statements” has the meaning set forth in Section 4.4(a).

 

“Fiscal Year” means, for the referenced year, the one (1) year period beginning on January 1 and ending on December 31.

 

“FTE” means the number obtained by dividing: (i) the aggregate number of billed (to clients) hours recorded in the month of March 2013 by the field employees of ClinForce  and Assent for the sale of temporary services and for work done and services provided only during March 2013 by (ii) 159.6.

 

“FTE Calculation” has the meaning set forth in Section 3.4(b)(i).

 

“FTE Condition” means that as of the close of business on March 31, 2013: (i) the FTE was at least 477 and (ii) the FTE Margin was at least 24%.

 

  

9

  

 

“FTE Margin” means the amount calculated by dividing: (i) the difference between (X) the aggregate net revenues from services to customers of ClinForce and Assent, for the three month period ending March 31, 2013 calculated using the line items from the Seller’s Management P&L set forth on Exhibit B hereto and (Y) the direct operating expenses of ClinForce and Assent for the three month period ending March 31, 2013 calculated using the line items from the Seller’s Management P&L set forth on Exhibit B hereto by (ii) the aggregate net revenues from services of ClinForce and Assent for the three month period ending March 31, 2013 calculated using the line items from the Seller’s Management P&L set forth on Exhibit B hereto.  Such calculation shall be appropriately adjusted to provide that any business of ClinForce or Assent during such period with Buyer or any of its Affiliates produced an FTE Margin of at least 24%.

 

“FTE Reduction” has the meaning set forth in Section 3.4(b)(iii).

 

“GAAP” means generally accepted accounting principles in effect in the United States, applied on a consistent basis.

 

“Governmental Entity” means the government of the United States or any other nation, or of any political subdivision thereof, whether state, local, country, provincial or otherwise, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

 

“Hazardous Substance” means any waste, pollutant, contaminant, hazardous, radioactive, or toxic substance, petroleum, petroleum-based or petroleum-derived substance or waste or asbestos-containing material, the presence of which requires investigation or remediation under any Environmental Laws.

 

  

10

  

 

“Income Taxes” means all Taxes based upon, measured by, or calculated with respect to (a) net income or profits or overall gross income or gross receipts (including any capital gains or alternative minimum Taxes) or (b) multiple bases (including corporate franchise, doing business or occupation Taxes) if one or more of the bases on which that Tax may be measured or calculated is described in clause (a) of this definition.

 

“Income Tax Returns” means any Tax Returns with respect to Income Taxes.

 

“Indemnifiable Tax Liability” has the meaning set forth in Section 10.11(a).

 

“Indebtedness” means all of the obligations of the Company, Akos and their respective Subsidiaries (i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar instruments, (iii) under Capital Leases and (iv) all accrued interest on any of the foregoing.

 

“Indemnity Escrow Agreement” has the meaning set forth in Section 2.3.

 

“Indemnity Escrow Amount” has the meaning set forth in Section 2.3.

 

“Independent Auditor” has the meaning set forth in Section 3.3(c).

 

“Intellectual Property” has the meaning set forth in Section 4.8.

 

“Interests” has the meaning set forth in the recitals hereof.

 

“Interim Financials” has the meaning set forth in Section 4.4(a).

 

“IRS” means the United States Internal Revenue Service.

 

  

11

  

 

“Knowledge of Seller” means the actual knowledge after reasonable investigation of each Person set forth on Schedule 1(b) of the Disclosure Schedules.

 

“Liens” has the meaning set forth in Section 4.7(a).

 

“Material Adverse Effect” has the meaning set forth in Section 4.1.

 

“Material Contracts” has the meaning set forth in Section 4.10(a).

 

“Metropolitan” has the meaning set forth in the recitals hereof.

 

“Most Recent Balance Sheet” has the meaning set forth in Section 4.4(a).

 

“Net Revenue” means gross revenue less (i) travel and incidental costs incurred by Akos employees and/or consultants which are charged back to Akos customers, (ii) payments administered by Akos on behalf of a customer of Akos and (iii) any other pass through costs and (iv) value added tax or any other sales or other similar tax, all in accordance with US GAAP.

 

“Net Working Capital” means, as of immediately prior to the Closing, the combined current assets of the Company, Akos and their respective Subsidiaries as of such time (excluding any Tax assets (including deferred Tax assets) other than any refunds receivable in respect of Non-Excluded Taxes) less the combined total liabilities of the Company, Akos and their respective Subsidiaries as of such time (other than (i) Excluded Taxes or deferred Tax liabilities or (ii) Other Long Term Liabilities), in each case determined in accordance with GAAP.

 

“New Employee Insurance Policy” means the employee health benefit plans sponsored or maintained by Buyer or its Affiliates, which such plans provide coverage substantially identical to the coverage provided by Seller’s existing employee health benefit plan as of immediately prior to Closing, and otherwise reasonably acceptable to Buyer.

 

  

12

  

 

“Non-Excluded Taxes” means all Taxes of the Company, Akos or any of their respective Subsidiaries, other than Excluded Taxes.

 

 “Other Long Term Liabilities” means (i) non-qualified payroll deferral, (ii) security deposit payable and/or (iii) accrued workers compensation.

 

“Permits” means all material licenses, permits, consents, approvals, registrations, qualifications and filings under any federal, state or local laws or with any Governmental Entities.

 

“Permitted Liens” has the meaning set forth in Section 4.7(a).

 

“Person” means an individual, corporation, partnership, limited liability company, firm, joint venture, association, joint stock company, trust, unincorporated organization or other entity, or any Governmental Entity or quasi-governmental body or regulatory authority.

 

“Pre-Closing Separate Company Tax Matter” has the meaning set forth in Section 10.11(c).

 

 “Post-Closing Tax Period” means any Tax period beginning after the Closing Date and the portion of any Straddle Period beginning after the Closing Date.

 

“Pre-Closing Tax Period” means any Tax period ending on or before the Closing Date and the portion of any Straddle Period ending on the Closing Date.

 

“Proceedings” has the meaning set forth in Section 4.14.

 

  

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“Property” (or “Properties” when the context requires) means any Real Property and any personal or mixed property, whether tangible or intangible, owned or leased by the Company, Akos or their respective Subsidiaries.

 

“Purchase Price” means (w) the Closing Date Purchase Price, plus (x) the Deferred Purchase Price, if any, minus (y) the Akos Reduction, if any, minus (z) the FTE Reduction, if any.

 

“Purchase Price Escrow Agreement” has the meaning set forth in Section 2.3.

 

“Purchase Price Escrow Amount” has the meaning set forth in Section 2.3.

 

“Real Property” means any real property owned or leased by the Company, Akos or their respective Subsidiaries.

 

“Release” means any spilling, leaking, pumping, pouring, emitting, emptying, discharge, injecting, escaping, leaching, dumping, disposing, depositing or migration into or through the environment.

 

“Representative” means with respect to a particular Person, any director, officer, employee, agent, consultant, advisor, or other representative of such Person, including legal counsel, accountants, and financial advisors.

 

“Revenue Calculation” has the meaning set forth in Section 3.4(a)(i).

 

“Schedule of Adjustments” has the meaning set forth in Section 3.3(b).

 

“Section 338(h)(10) Election” has the meaning set forth in Section 10.12.

 

  

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“Seller” has the meaning set forth in caption hereof.

 

“Seller Breach Claims” has the meaning set forth in Section 9.2.

 

“Seller Indemnified Parties” has the meaning set forth in Section 9.2.

 

“Seller Subsidiaries” means, collectively, (i) US Seller, (ii) UK Seller and (iii) any other direct or indirect Subsidiaries of Seller Parent designated by Seller Parent as Seller Subsidiaries.

 

“Seller’s FSA” has the meaning set forth in Section 12.3(c).

 

“Shares” has the meaning set forth in the recitals hereof.

 

“Software” means computer programs, applications and software, Internet web sites and the content therein, and data, databases and data collections, including all object code, source code, logic, rules, definitions, models, methodologies, algorithms, derivations, updates, enhancements, customizations, diagrams, descriptions, schematics, flow-charts, and other work product used to design, plan, organize and develop, and all documentation, in each case, relating to any of the foregoing.

 

“Straddle Period” means any Tax period that begins on or prior to, and ends after, the Closing Date.

 

“Subsidiary” or “Subsidiaries” means, with respect to any Person, any corporation, partnership, limited liability company or other entity in which such Person, directly or indirectly, owns or controls fifty percent (50%) or more of the voting stock or other ownership interests.

 

“Target Net Working Capital” means $10,419,340.

 

  

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“Tax” or “Taxes” means (i) all federal, state, local or non-U.S. taxes, duties, imposts, levies, assessments, withholdings or similar charges imposed by any Governmental Entity, including all income, corporation, alternative minimum, gross receipts, capital, sales, use, ad valorem, value added, transfer, stamp duty, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, national insurance, unemployment, excise, severance, stamp, occupation, property and estimated taxes, (ii) all interest, penalties, additions to tax or other additional amounts imposed by any Governmental Entity in connection with any item described in clause (i) and (iii) all transferee, successor, joint and several, contractual or other liability (including liability pursuant to Treasury Regulation Section 1.1502-6 or 1.1502-78 (or any similar state, local or foreign provision)) in respect of any items described in clause (i) or (ii).

 

“Tax Claim Notice” has the meaning set forth in Section 10.11(a).

 

“Tax Return” means any original or amended Tax return, statement, report, election, declaration, disclosure, schedule or form (including any estimated tax or information return or report) filed or required to be filed with any Tax authority.

 

“Trademark Assignment Agreement” means an assignment agreement substantially in the form of Exhibit C hereto with respect to each trademark set forth on Schedule 1(c) of the Disclosure Schedule.

 

“Transaction Expenses” has the meaning set forth in Section 12.16.

 

“Transfer Tax” has the meaning set forth in Section 10.6.

 

  

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“Transition Services Agreement” means the agreement, annexed hereto as Exhibit D, dated as of the date hereof, by and between DOCS Global, Inc. and Seller Parent, duly executed by DOCS Global, Inc. and Seller Parent.

 

“UK Companies Act” means the Companies Act of the United Kingdom, 2006, as amended.

 

ARTICLE II.

 

PURCHASE AND SALE; CLOSING

 

Section 2.1. Purchase of Interests.  Upon the terms and subject to the conditions hereof, at the Closing (a) US Seller shall sell to US Buyer, and US Buyer shall purchase and acquire from US Seller, the ClinForce Interests and (b) UK Seller shall sell to UK Buyer, and UK Buyer shall purchase and acquire, free from all Encumbrances and together with all rights attaching or accruing to them now or in the future, the legal and beneficial interest in the Shares from UK Seller.

 

Section 2.2. Consideration.  Subject to Article III, the consideration for the Interests shall be the Purchase Price. The Closing Date Purchase Price (less the Indemnity Escrow Amount) shall be paid to Seller at Closing by wire transfer of immediately available funds to the account designated in writing by Seller.

 

  

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Section 2.3. Escrow Amounts.  Buyer shall withhold from the Closing Date Purchase Price an amount equal to $3,750,000 (the “Indemnity Escrow Amount”).  At Closing, Buyer shall cause the Indemnity Escrow Amount and an amount equal to $3,750,000 (the “Purchase Price Escrow Amount”) to be delivered to JP Morgan Chase Bank N.A., as escrow agent (the “Escrow Agent”), pursuant to two escrow agreements by and among Buyer, Seller and Escrow Agent (respectively, the “Purchase Price Escrow Agreement” and the “Indemnity Escrow Agreement”) annexed hereto as Exhibit E and Exhibit F.  The Purchase Price Escrow Amount and the Indemnity Escrow Amount shall be paid by the Buyer to the Escrow Agent at Closing by wire transfer of immediately available funds to the account designated in writing by the Escrow Agent.  The Purchase Price Escrow Amount will be held by the Escrow Agent as partial security for the Purchase Price adjustments under Section 3.4.  The Indemnity Escrow Amount will be held by the Escrow Agent as partial security for the obligations of Seller to Buyer pursuant to the terms of Section 9.1 of this Agreement.  Obligations of Seller to Buyer pursuant to the terms of Section 9.1 of this Agreement shall be satisfied first by payment from the Indemnity Escrow Amount.

 

Section 2.4. The Closing.  The Closing shall take place at 10:00am New York City time no later than three Business Days after the last of the conditions to Closing set forth in Article VII have been satisfied or waived (other than conditions which, by their nature, are to be satisfied on the Closing Date) at the offices of Proskauer Rose LLP, Eleven Times Square, New York, New York or at such other place as the parties may agree, (the day on which the Closing takes place being the “Closing Date”).

 

Section 2.5. Waiver of Pre-emption Rights.  Seller waives, following Closing, all pre-emption rights or other restrictions on transfer in respect of the Shares or interests in the Shares to which it may be entitled under the articles of association of Akos or otherwise.

 

Section 2.6. Deliveries by Seller. At the Closing, Seller shall deliver (in addition to any other documents required to be delivered pursuant to Article VII) or cause to be delivered to Buyer the following:

 

  

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(a) certificates evidencing all of the ClinForce Interests, in each case duly and properly endorsed for transfer to US Buyer or accompanied by powers duly endorsed in blank in proper form for transfer;

 

(b) transfer of the Shares duly executed by UK Seller in favor of UK Buyer or its nominee(s) together with the relevant share certificates;

 

(c) a certificate of the Secretary of US Seller and Seller Parent certifying copies of the resolutions of the governing body of such Seller authorizing the execution, delivery and performance of this Agreement, the Ancillary Agreements to which such Seller is a party and the transactions contemplated hereby and thereby;

 

(d) a copy of the minutes of a meeting of the directors of UK Seller authorizing (i) the execution and performance by UK Seller of this Agreement and the Ancillary Agreements to which UK Seller is a party and (ii) the resignation of each director of Akos on Closing (such copy minutes being certified as correct by the chairman of the relevant meeting or the secretary of UK Seller);

 

(e) a certificate of the Secretary of each Seller certifying the signature and incumbency of the persons authorized to execute and deliver this Agreement, the Ancillary Agreements to which it is a party and any other agreements, instruments, or other documents or certificates that such Seller is required to deliver pursuant to this Agreement;

 

(f) the certificate of formation of each of the Company and Metropolitan certified as of a recent date by the Secretary of State of the State of Delaware and the certificate of incorporation of Assent certified as of a recent date by the Secretary of State of the State of California;

 

  

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(g) certificates of good standing and satisfactory tax status (where available) as of a recent date with respect to (i) each of the Company and Metropolitan from the Secretary of State of the State of Delaware and (ii) Assent from the Secretary of State of the State of California;

 

(h) the resignations of the officers and managers of the Company and each of its Subsidiaries, effective as of the Closing Date, as are requested by the Buyer prior to Closing;

 

(i) the written resignations (x) of the auditors and (y) signed as a deed from each director and secretary of Akos as resigning on the Closing Date from their respective offices and employments (where applicable) with Akos, and waiving any claim in respect of their removal from office;

 

(j) each Ancillary Agreement to which any Seller is a party, duly executed by the applicable Seller;

 

(k) (1) a non-foreign status certification on behalf of US Seller’s owner, dated as of the Closing Date, in the form set forth in United States Treasury Regulation Section 1.1445-2(b)(2)(iv), certifying that US Seller is a disregarded entity owned by US Seller’s owner and that US Seller’s owner is a US person and (2) an IRS Form W-9 or applicable IRS Form W-8, certifying that each of US Seller’s owner and UK Seller is exempt from U.S. federal backup withholding;

 

  

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(l) an executed copy of IRS Form 8023 and any similar state or local forms required to effect the Section 338(h)(10) Election;

 

(m) the original seals, statutory and minute books, certificates of incorporation, certificates of formation and certificates on change of name, copies of Akos’ memorandum and articles of association, ledger and record books of each of the Company, Akos and their respective Subsidiaries as they exist on the Closing Date, including those documents memorializing the actions taken related to the transactions contemplated by this Agreement, resignations of directors, any change of registered office or change of accounting date, to the extent such documents are not located at the offices of;

 

(n) evidence reasonably satisfactory to Buyer that the domain name registrations set forth on Exhibit G have been transferred from Seller to the Company, Akos or any of their respective Subsidiaries;

 

(o) the consent to the Transaction substantially in the form annexed hereto as Exhibit H, duly executed by Bank of America, N.A.;

 

(p) evidence satisfactory to Buyer that all transactions between the Company, Akos or any of their respective Subsidiaries, on the one hand, and any Seller or any of its Subsidiaries or Affiliates, on the other hand, have been terminated as of Closing; and

 

(q) a certificate of a senior officer of Seller Parent stating whether or not the representations, warranties and agreements of each Seller in Article IV were true and correct in all material respects as of the date of this Agreement and are true and correct on and as of the Closing Date.

 

  

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Section 2.7. Deliveries by Buyer.  At the Closing, Buyer shall deliver (in addition to any other documents required to be delivered pursuant to Article VII) or cause to be delivered to Seller or the Escrow Agent, as applicable, the following:

 

(a) the Closing Date Purchase Price, less the Indemnity Escrow Amount;

 

(b) the Purchase Price Escrow Amount and the Indemnity Escrow Amount to the Escrow Agent;

 

(c) a certificate of the Secretary of each Buyer certifying (i) copies of the resolutions of the governing body of such Buyer authorizing the execution, delivery and performance of this Agreement, the Ancillary Agreements to which such Buyer is a party and the transactions contemplated hereby and thereby and (ii) the signature and incumbency of the persons authorized to execute and deliver this Agreement, the Ancillary Agreements to which it is a party and any other agreements, instruments, or other documents or certificates that such Buyer is required to deliver pursuant to this Agreement;

 

(d) the Ancillary Agreements to which Buyer is a party, duly executed by Buyer; and

 

(e) an executed copy of IRS Form 8023 and any similar state or local forms required to effect the Section 338(h)(10) Election.

 

Section 2.8. Closing Agreements

 

(f) .  At the Closing, the parties shall execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such other instruments or documents as may be reasonably necessary to carry out the transactions contemplated by this Agreement and to comply with the terms hereof

 

  

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ARTICLE III.

 

PURCHASE PRICE ADJUSTMENT

 

Section 3.1. Purchase Price Adjustment.  The Purchase Price shall be subject to adjustment as set forth below and all references in this Agreement to the Purchase Price shall be deemed to be the Purchase Price as adjusted pursuant to this Article III.

 

Section 3.2. Net Working Capital Adjustment.  If Net Working Capital, as finally determined pursuant to Section 3.3, is less than the Estimated Net Working Capital, then the Purchase Price shall be reduced dollar-for-dollar by the amount of such shortfall.  If Net Working Capital, as finally determined pursuant to Section 3.3, is greater than the Estimated Net Working Capital, then the Purchase Price shall be increased dollar for dollar by the amount of such increase.  With respect to non-qualified payroll deferral or accrued workers compensation liability that exists as of the Closing, Seller acknowledges and agrees that all such liabilities, if any, shall be the obligation of Seller, shall not be liabilities of Buyer, the Company, Akos or their respective Subsidiaries, and in the event Buyer, the Company, Akos or their respective Subsidiaries are required to make any payments in respect of such liabilities from and after the Closing, Seller shall, promptly following notice by Buyer, reimburse the Company, Akos or their respective Subsidiaries for all such amounts.

 

Section 3.3. Closing Balance Sheet; Schedule of Adjustments.

 

(a) The determination of the adjustments, if any, required to be made to the Purchase Price pursuant to Section 3.2 shall be made pursuant to the following provisions:

 

  

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(b) Within 120 days after the Closing Date, Buyer shall prepare or cause to be prepared and delivered to Seller the following: (i) a combined balance sheet of the Company, Akos and their respective Subsidiaries as of immediately prior to the Closing (the “Closing Balance Sheet”); (ii) a calculation of Net Working Capital; and (iii) the adjustment, if any, required to be made to the Purchase Price pursuant to Section 3.2 (the “Schedule of Adjustments”).

 

(c) Seller will have a period of sixty (60) days following the delivery of the Closing Balance Sheet, the calculation of Net Working Capital, and the Schedule of Adjustments to notify Buyer in writing of any disagreements with any of the foregoing (such notice, a “Dispute Notice”), specifying the issues in dispute in reasonable detail.  Seller will have reasonable access during normal business hours and upon reasonable notice, to the books, records, work papers and other financial information of the Company, Akos and their respective Subsidiaries related to the preparation of the Closing Balance Sheet, the calculation of Net Working Capital and the Schedule of Adjustments.  Seller’s failure to submit a Dispute Notice to Buyer within such sixty (60) day period shall be deemed acceptance of the Closing Balance Sheet as well as the calculation of Net Working Capital and the Schedule of Adjustments.  In the event Seller timely submits a Dispute Notice to Buyer, the parties will attempt in good faith to resolve such disagreement and, upon such resolution, if any, any Net Working Capital Adjustment shall be made in accordance with the agreement of the parties.  If within ten (10) Business Days (or such longer period as Buyer and Seller shall mutually agree in writing) after delivery to Buyer of the Dispute Notice, the parties are unable to resolve such disagreement, then either Seller, on the one hand, or Buyer, on the other hand, shall have the right to submit the determination of such matters to an independent accountant of national standing reasonably acceptable to Seller and Buyer (the “Independent Auditor”); provided, however, that in default of nomination by agreement within a further period of five (5) Business Days, the Independent Auditor shall be PricewaterhouseCoopers LLP.  Each of Seller and Buyer shall comply, and shall instruct the Independent Auditor to comply, with the terms of reference and procedures set forth below:

 

  

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(i) Seller and Buyer shall each prepare a written submission within thirty (30) Business Days of the formal appointment of the Independent Auditor on the matters in dispute which, together with the relevant supporting documents, shall be submitted to the Independent Auditor for determination, with copies of such submissions submitted at the same time to each of Seller and Buyer.

 

(ii) Following delivery of their respective submissions, each of Seller and Buyer shall have the opportunity to comment once only on the other’s submissions by written comment delivered to the Independent Auditor not later than fifteen (15) Business Days after receipt of the other’s submissions by Seller or Buyer (as the case may be), with copies of such comments submitted at the same time to each of Seller and Buyer.

 

(iii) The Independent Auditor may request further information or clarification on any matter which it in its sole discretion decides is relevant from either of Seller or Buyer.  Any response to such a request which Seller or Buyer (as the case may be) may wish to make shall be delivered to the Independent Auditor not later than ten (10) Business Days after receipt of such request by Seller or Buyer (as the case may be), with copies of such response submitted at the same time to each of Seller and Buyer.

 

  

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(iv) Unless otherwise directed by the Independent Auditor, following delivery of such a response, Seller and Buyer (as the case may be) shall have the opportunity to comment once only on the response by written comment delivered to the Independent Auditor not later than ten (10) Business Days after receipt of the response by Seller or Buyer (as the case may be), with copies of such comment submitted at the same time to each of Seller and Buyer.

 

(v) Thereafter, neither Seller nor Buyer (nor any other person or persons acting on behalf of any of them) shall be entitled to make further submissions except insofar as the Independent Auditor so requests in accordance with Sections 3.3(c)(iii) and (iv).

 

(vi) Each of Seller and Buyer shall instruct the Independent Auditor to give its determination as soon as possible but in any event, unless otherwise agreed between Seller and Buyer, within twenty (20) Business Days of the formal appointment of the Independent Auditor.

 

(vii) In giving its determination, the Independent Auditor shall state what adjustment (if any) are necessary to be made to the Closing Balance Sheet, the calculation of Net Working Capital and/or the Schedule of Adjustments for the purposes solely of this Agreement in respect of the matters in dispute between Buyer and Seller and referred to it pursuant to this Section 3.3(c) (and, for the avoidance of doubt, not any other matters).

 

(viii) The Independent Auditor shall determine (using its own legal advice as appropriate) any question of the legal construction of this Agreement but only insofar as it is relevant to the determination of the Closing Balance Sheet, the calculation of Net Working Capital and/or the Schedule of Adjustments.

 

  

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(ix) The determination of the Independent Auditor shall, in the absence of manifest error, be final and binding on the parties.

 

(x) The Independent Auditor shall determine the proportion in which the parties shall bear its costs.  In the absence of a determination as to costs by the Independent Auditor, all such costs shall be apportioned between the parties equally.  Notwithstanding the foregoing, each party shall at all times be responsible for its own costs of presenting its case to the Independent Auditor.

 

(xi) The Independent Auditor shall act as an expert and, without prejudice to any other rights which they may respectively have under this Agreement, the parties expressly waive, to the extent permitted by law, any rights of recourse to the courts they may otherwise have to challenge the Independent Auditor’s determination.

 

Notwithstanding anything herein to the contrary, the dispute mechanics contained in this Section 3.3(c) shall be the exclusive mechanics for resolving disputes regarding the Purchase Price adjustments set forth in this Article III, and the date on which such adjustments, if any, are finally determined in accordance with the mechanics set forth in this Section 3.3(c) shall be the “Determination Date.”

 

(d) If it is determined pursuant to this Section 3.3 that the aggregate Purchase Price paid to Seller as of the Determination Date is less than the Purchase Price as adjusted pursuant to Section 3.3, then, Buyer shall remit such difference to Seller in cash.

 

(e) If it is determined pursuant to this Section 3.3 that the Purchase Price paid at the Closing is greater than the Purchase Price as adjusted pursuant to Section 3.3, then Seller shall remit such difference to Buyer in cash.

 

  

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(f) Any cash payment to be made pursuant to this Article III as a result of adjustment made in accordance with the mechanics set forth in Section 3.3(c), shall be paid within five (5) Business Days of the Determination Date by wire transfer of immediately available funds.  Any such payment shall be made to such account or accounts as may be designated by the party entitled to such payment.

 

Section 3.4. Other Adjustments and Deferred Purchase Price.

 

(a) Arena Contract.

 

(i) As soon as possible following December 31, 2013, but in no event later than April 30, 2014, Buyer shall prepare and deliver to Seller a calculation of Net Revenues (the “Revenue Calculation”), recognized by the Akos Business during the 2013 Fiscal Year solely from the Arena Contract.  The Revenue Calculation shall be made on the basis of the accounting principles set forth on Exhibit I .

 

(ii) Seller will have a period of sixty (60) days following the delivery of the Revenue Calculation to notify Buyer of any disagreements with such calculation.  Seller will have reasonable access during normal business hours and upon reasonable notice to the books, records, work papers and other financial information related to the preparation of the Revenue Calculation.  Failure to notify Buyer within such sixty (60) day period shall be deemed acceptance of the Revenue Calculation.  In the event Seller disagrees with such Revenue Calculation, the dispute mechanics contained in Section 3.3(c) shall be applied.

 

  

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(iii) In the event the Revenue Calculation (as finally determined ) is less than $697,000, the Purchase Price shall be reduced by $4 for each dollar of shortfall (the “Akos Reduction”); provided, however, in no event will the amount of the Akos Reduction exceed $1,500,000.  The Akos Reduction, if any, shall be satisfied by the payment to Buyer of the amount of such reduction from the Purchase Price Escrow Amount.  The difference, if any, between $1,500,000 and the Akos Reduction will be paid to Seller from the Purchase Price Escrow Amount simultaneously.  In the event the Revenue Calculation equals or exceeds $697,000, Seller shall be promptly paid $1,500,000 from the Purchase Price Escrow Amount. In addition, the Purchase Price will be increased by $2 for each dollar by which the Revenue Calculation exceeds $697,000 (the “Akos Increase”); provided, however, that in no event will the amount of the Akos Increase exceed $750,000.  Any amount payable pursuant to the immediately preceding sentence shall be promptly paid to Seller from the Purchase Price Escrow Amount. The difference, if any, between $750,000 and the Akos Increase will be paid to Buyer from the Purchase Price Escrow Amount.

 

(b) FTE.

 

(i) As soon as possible following March 31, 2013, but in no event later than April 30, 2013, Buyer shall prepare and deliver to Seller a calculation of FTE’s as of March 31, 2013 (the “FTE Calculation”).  The FTE Calculation shall be made on the basis of the accounting principles set forth on Exhibit I attached hereto.

 

(ii) Seller will have a period of sixty (60) days following the delivery of the FTE Calculation to notify Buyer of any disagreements with such calculation.  Seller will have reasonable access during normal business hours and upon reasonable notice to the books, records, work papers and other financial information related to the preparation of the FTE Calculation.  Failure to notify Buyer within such sixty (60) day period shall be deemed acceptance of the FTE Calculation.  In the event Seller disagrees with such FTE Calculation, the dispute mechanics contained in Section 3.3(c) shall be applied.

 

  

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(iii) In the event the FTE Condition (as finally determined) is met, Seller shall be promptly paid $1,500,000 from the Purchase Price Escrow Amount. In the event the FTE Calculation (as finally determined ) is less than the FTE Condition (as finally determined), the Purchase Price shall be reduced by $100,000 for each FTE less than the FTE Condition (the “FTE Reduction”); provided, however, in no event will the amount of the FTE Reduction exceed $1,500,000.  The FTE Reduction, if any, pursuant to this Section 3.4(b) shall be satisfied by the payment to Buyer of the amount of such reduction from the Purchase Price Escrow Amount.  The difference, if any, between $1,500,000 and the FTE Reduction will be paid to Seller from the Purchase Price Escrow Amount simultaneously.

 

(c) Seller acknowledges and agrees that, following the Closing, Buyer shall, in its sole and absolute discretion, have complete control over all strategic and operational decisions concerning the Company, Akos, their respective Subsidiaries, the Business and Buyer’s other businesses and may manage and operate the Company, Akos, their respective Subsidiaries, the Business and Buyer’s other businesses as Buyer determines in its sole and absolute discretion.  Seller further agrees that (i) the right of Seller to receive any Deferred Purchase Price does not create in Seller any right to control or direct the management and operations of the Company, Akos, their respective Subsidiaries or the Business and (ii) Buyer has no obligation to operate the Company, Akos, their respective Subsidiaries or the Business in order to maximize any Deferred Purchase Price.  Notwithstanding the foregoing, (i) Buyer shall act in good faith with respect to the foregoing and will not take any action, or authorize or permit any of its Affiliates (including the Company, Akos and their respective Subsidiaries) to take any action, for the sole purpose of reducing the amount of any Deferred Purchase Price, and (ii) during the period from Closing through March 31, 2013, Buyer (x) will operate the ClinForce Business in the ordinary course of business and (y) will not terminate without cause any ClinForce or Assent employee other than the employees set forth on Schedule 3.5(c); provided, however, the foregoing shall not in any way prohibit any Buyer from assigning, selling or transferring the ClinForce Interests, the Shares or any assets of the Business to any other Buyer, any Subsidiary of any Buyer or any Affiliate of any Buyer.

 

  

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Section 3.5. Purchase Price Allocation.  The Purchase Price (and other relevant items) shall be allocated in accordance with the principles set forth in Exhibit J, which such Exhibit shall be mutually agreed upon by the parties hereto prior to the Closing Date, and the requirements of Sections 338 and 1060 of the Code and the Treasury Regulations promulgated thereunder (the “Allocation”).  Buyer shall prepare and deliver a draft purchase price allocation to Seller within one hundred eighty (180) days after the Closing Date, which shall be subject to the consent of Seller (such Allocation, as agreed to by the parties, the “Final Allocation”).  If the parties are unable to resolve any disagreements regarding the Final Allocation within sixty (60) Business Days after delivery of such draft, such disagreement shall be resolved in accordance with the mechanics set forth in Section 3.3(c).  Unless otherwise required by law, none of the parties shall take any position inconsistent with the Final Allocation on any Tax Return (including IRS Forms 8594 or 8023) or for any other U.S. federal, state, local or non-U.S. income Tax purpose.

 

  

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ARTICLE IV.

 

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Seller Parent, US Seller and UK Seller, jointly and severally, represent and warrant to Buyer as follows, as of the date of this Agreement and as of the Closing:

 

Section 4.1. Organization.  Each of the Company and Akos is a validly existing limited liability company or other legal entity organized pursuant to, and, to the extent applicable, in good standing under the laws of the jurisdiction of its organization and has full corporate, limited liability company or similar power and authority to carry on its business as now conducted by it and to own or lease its properties and assets.  Each of the Company and Akos is duly qualified and/or licensed to do business and is in good standing as a foreign limited liability company or other legal entity in each jurisdiction in which the nature of its business or ownership or leasing of its properties makes such qualification or licensing necessary and where the failure to be so qualified or licensed would not reasonably be expected to result in a Material Adverse Effect.  For purposes of this Agreement, “Material Adverse Effect” shall mean any change, effect, event, occurrence or state of facts that is or could reasonably be expected to become, individually or in the aggregate, materially adverse to (a) the business, condition (financial or otherwise), properties, assets or results of operations of the Company, Akos and their respective Subsidiaries, taken as a whole or (b) the ability of Seller to consummate the transactions contemplated hereby.  Material Adverse Effect shall not include any change, effect, event, occurrence or state of facts directly or indirectly arising out of or attributable to (i) any changes, conditions or effects in the U.S. or U.K. economies or securities or financial markets generally, (ii) any changes, conditions or effects that generally affect the industry in which the Company, Akos or their respective Subsidiaries operate or (iii) conditions caused by an outbreak or escalation or war, armed hostilities or acts of terrorism occurring within or outside of the United States; provided, however, that any event, occurrence, fact, condition, or change referred to in clause (i), (ii) or (iii) immediately above shall be taken into account in determining whether a Material Adverse Effect has occurred or could reasonably be expected to occur to the extent that such event, occurrence, fact, condition, or change has a disproportionate effect on the Company, Akos and their respective Subsidiaries, taken as a whole, compared to other participants in the industries in which the Business is conducted.

 

  

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Section 4.2. Capitalization; Subsidiaries.

 

(a) The number of authorized, issued and outstanding ClinForce Interests are set forth on Schedule 4.2(a) of the Disclosure Schedules.  All of the ClinForce Interests are owned of record and beneficially by US Seller, and will be, as of the Closing, free and clear from Encumbrances and have been issued in compliance in all respects with all applicable securities laws and other Applicable Laws.  The ClinForce Interests have been validly issued and are fully paid and nonassessable.  The Company has not granted to any Person any preemptive or other similar rights with respect to any of such limited liability company interests and there are no offers, options, warrants, rights, agreements or commitments of any kind (contingent or otherwise) entered into or granted by the Company relating to the issuance, conversion, exchange, registration, voting, sale or transfer of any equity interests or other equity securities of the Company (including the ClinForce Interests) or obligating the Company or any other Person to purchase or redeem any of such equity interests or other equity securities.

 

  

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(b) Schedule 4.2(b) of the Disclosure Schedules sets forth, with respect to Akos, the number of authorized, issued and outstanding shares of capital stock of each class, the number of issued shares of capital stock held as treasury shares and the number of shares of capital stock unissued and reserved for any purpose.  The Shares constitute the whole of the allotted and issued share capital of Akos.  UK Seller is the legal and beneficial owner of the Shares, which are validly issued, fully paid and not subject to calls for further payment and as of the Closing will be free from Encumbrances.  There are no agreements, arrangements, options, warrants, calls, rights or commitments of any character relating to the issuance, sale, purchase, allotment, transfer or redemption of the Shares or any loan capital of Akos or creation of any Encumbrances over or in respect of the Shares.

 

(c) Schedule 4.2(c) of the Disclosure Schedules sets forth the names of each Subsidiary of the Company and Akos and shows for each Subsidiary: (i) its jurisdiction of organization and each other jurisdiction in which it is qualified to do business; (ii) the authorized and outstanding capital stock or membership interests; and (iii) the identity of and number of shares of such capital stock or membership interests owned of record by each holder thereof.  Except as set forth on Schedule 4.2(c) of the Disclosure Schedules, none of the Company, Akos or any Subsidiary owns, directly or indirectly, any capital stock or other securities of any other corporation, limited liability company, general or limited partnership, firm, association or business organization, entity or enterprise.

 

(d) Each Subsidiary is duly organized, validly existing and in good standing in its jurisdiction of organization, with all requisite corporate or limited liability company power to own, lease and operate its Properties and to carry on its business as now being conducted.  Each Subsidiary is duly qualified and/or licensed to do business and is in good standing as a foreign corporation or limited liability company in each jurisdiction in which the nature of its business or ownership or leasing of its Properties makes such qualification or licensing necessary and where the failure to be so qualified or licensed would not reasonably be expected to result in a Material Adverse Effect.

 

  

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(e) None of Seller, the Company or Akos has granted to any Person any preemptive or other similar rights with respect to any of the capital stock or limited liability company interests of any such Subsidiary and there are no offers, options, warrants, rights, agreements or commitments of any kind (contingent or otherwise) entered into or granted by Seller, the Company or Akos relating to the issuance, conversion, exchange, registration, voting, sale or transfer of any equity interests or other equity securities of such Subsidiary or obligating such Subsidiary or any other Person to purchase or redeem any of such equity interests or other equity securities.

 

Section 4.3. Organization and Authority of Seller; No Conflict; Required Filings and Consents.

 

(a) Each Seller is a validly existing limited liability company or other legal entity organized pursuant to, and, to the extent applicable, in good standing under the laws of the jurisdiction of its organization and has full corporate, limited liability company or similar power and authority to carry on its business as now conducted by it and to own or lease its properties and assets.  Each Seller has the full legal right, capacity authority and power to enter into, execute and deliver this Agreement and the Ancillary Agreements (to the extent a party thereto), to perform its obligations hereunder and thereunder and to consummate the transactions contemplated to be performed by such Seller hereby and thereby.  The execution and delivery by each Seller of this Agreement and the Ancillary Agreements (to the extent a party thereto), the performance of its obligations under, and the consummation of the transactions contemplated by this Agreement and each Ancillary Agreements (to the extent a party thereto) have been duly authorized by all necessary corporate action on the part of such Seller.  This Agreement has been, and the Ancillary Agreements (to the extent a party thereto) delivered at Closing will be, duly and validly executed and delivered by such Seller and, assuming the due authorization, execution and delivery of the other parties hereto and thereto, constitute legal, valid and binding obligations of each Seller, enforceable against each Seller in accordance with their respective terms, except to the extent limited by applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting the enforcement of creditors’ rights generally and by general principles of equity, regardless of whether such enforceability is considered in a proceeding at law or in equity.

 

  

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(b) Except as set forth on Schedule 4.3(b) of the Disclosure Schedules, the execution and delivery by each Seller of this Agreement and the Ancillary Agreements (to the extent a party thereto) does not, and the consummation by it of the transactions contemplated hereby and thereby will not, (i) conflict with, or result in any violation or breach of any provision of the memorandum or articles of association, statutes, by-laws, organizational documents or other terms of charter or corporate regulation of the Company, Akos, any of their respective Subsidiaries or any Seller, (ii) violate any law, rule or regulation applicable to the Company, Akos, any of their respective Subsidiaries or any Seller, or (iii) conflict with or result in a breach of, or give rise to a right of termination of, or accelerate the performance required by the terms of any judgment, court order or consent decree or any material agreement to which the Company, Akos, any of their respective Subsidiaries or any Seller is a party, or constitute a default thereunder.

 

(c) None of the execution and delivery by Seller of this Agreement or any Ancillary Agreements (to the extent a party thereto) or the consummation of the transactions contemplated hereby or thereby will require any consent, approval, order or authorization of, or registration or filing with, any Governmental Entity on the part of the Company, Akos, any of their respective Subsidiaries or any Seller, except for (i) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable federal and state securities laws, (ii) such filings as may be required under the HSR Act, and (iii) such other consents, authorizations, filings, approvals and registrations which are listed on Schedule 4.3(c) of the Disclosure Schedules.

 

  

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Section 4.4. Financial Statements; Absence of Undisclosed Liabilities.

 

(a) Seller has delivered to Buyer copies of (i) the unaudited combined balance sheet of the Company, Akos and their respective Subsidiaries as of September 30, 2012 (the “Most Recent Balance Sheet”), and the related unaudited combined statements of operations and cash flows of the Company, Akos and their respective Subsidiaries for the nine-month period then ended (together with the Most Recent Balance Sheet, the “Interim Financials”) and (ii) the unaudited combined balance sheet of the Company, Akos and their respective Subsidiaries as of December 31, 2011, and the related unaudited combined statement of operations and cash flows of the Company, Akos and their respective Subsidiaries for the year ended December 31, 2011 ((i) and (ii) collectively, the “Financial Statements”).

 

(b) The Financial Statements present fairly, in all material respects, subject to, in the case of the Interim Financials, normal year-end adjustments, the combined financial position, results of operations and cash flows of the Company, Akos and their respective Subsidiaries as of their historical dates and for the periods indicated.  The Financial Statements have been prepared in accordance with GAAP subject to, in the case of the Interim Financials, normal year-end adjustments and, in the case of all the Financial Statements the absence of footnotes.

 

  

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(c) Except as set forth on Schedule 4.4(c) of the Disclosure Schedules, none of the Company, Akos or their respective Subsidiaries have any debt, liability, or obligation in excess of $75,000, that would, in accordance with GAAP be required to be disclosed on a balance sheet, except those (i) liabilities reflected in the Financial Statements, (ii) liabilities incurred in the ordinary course of business since the date of the Most Recent Balance Sheet or (iii) liabilities or performance obligations arising out of or under agreements, contracts, leases or arrangements to which the Company, Akos or their respective Subsidiaries are a party, none of which liabilities results from any breach of any such agreement, contract, lease or arrangement.

 

Section 4.5. Tax Matters.

 

Except as set forth on Schedule 4.5 of the Disclosure Schedules:

 

(a) The Company, Akos and each of their respective Subsidiaries has timely filed or caused to be timely filed all Tax Returns that are required to be filed by it (taking into account any applicable extension of time within which to file) and each such Tax Return is complete and accurate in all respects.

 

(b) All Taxes of the Company, Akos and each of their respective Subsidiaries that are due and payable (whether or not shown on a Tax Return) have been paid, other than any Taxes being contested in good faith by appropriate proceedings for which reserves have been provided that are adequate (in accordance with GAAP) in all respects.

 

  

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(c) All Tax deficiencies, assessments or other claims asserted in writing against Company, Akos or any of their respective Subsidiaries by any Tax authority have been paid or fully and finally settled.

 

(d) None of the Company, Akos or any of their respective Subsidiaries is (i) currently the subject of any Tax audit or other examination (and no Tax audit or other examination is pending or, to the Knowledge of Seller, proposed or threatened) or (ii) engaged in any administrative or judicial proceeding with any Tax authority.

 

(e) None of the Company, Akos or any of their respective Subsidiaries has entered into a written agreement or waiver extending any statute of limitations relating to any Taxes that has not since expired.

 

(f) All Taxes that the Company, Akos or any of their respective Subsidiaries was required by law to withhold or collect in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, member or other third party has been duly and timely withheld or collected and, to the extent required, timely paid over to the proper Tax authorities.

 

(g) None of the Company, Akos or any of their respective Subsidiaries (i) has been a member of any affiliated, consolidated, combined, unitary or similar Tax group for any U.S. federal, state, local or non-U.S. Tax purpose, other than an affiliated or similar group of which Seller Parent is the common parent or (ii) is liable for the Taxes of any other Person (other than Taxes of the Company, Akos or any of their respective current Subsidiaries) under Treasury Regulation Section 1.1502-6 or 1.1502-78 (or any similar provision of state, local or non-U.S. Tax Law), as a transferee or successor, by contract (other than pursuant to Commercial Tax Agreements) or otherwise.

 

  

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(h) No claim has been made in writing by any Tax authority in a jurisdiction in which the Company, Akos or any of their respective Subsidiaries does not pay Tax or file a Tax Return that such entity is or may be subject to Taxation by that jurisdiction.

 

(i) There are no Tax liens with respect to any asset of the Company, Akos or any of their respective Subsidiaries, other than liens in respect of current Taxes not yet due and payable.

 

(j) Since December 31, 2005, none of the Company, Akos or any of their respective Subsidiaries has been a party to any transaction intended to qualify under Section 355 of the Code.

 

(k) None of the Company, Akos or any of their respective Subsidiaries will be required to include any item of income in, or exclude any item of deduction from, taxable income for any Post-Closing Tax Period as a result of (i) any change in method of accounting with respect to any Pre-Closing Tax Period under Section 481 of the Code (or any similar provision of state, local or non-U.S. law), (ii) any agreement with a Taxing authority or (iii) any installment sale, open transaction or intercompany transaction occurring on or prior to, or prepaid income received on or prior to, the Closing Date.

 

  

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(l) None of the Company, Akos or any of their respective Subsidiaries has ever participated in any "listed transaction" within the meaning of Treasury Regulation Section 1.6011-4(b)(2).

 

(m) Since its inception, the Company has been an entity disregarded from its owner for U.S. federal and applicable state and local income Tax purposes.  Since their respective inceptions, each of Assent, Akos and Metropolitan has been a corporation for U.S. federal and applicable state and local income tax purposes.

 

(n) There is no outstanding power of attorney with respect to any Tax matter of the Company, Akos or any of their respective Subsidiaries.

 

(o) Seller made available to Buyer true and complete copies of (i) all applicable income and franchise Tax Returns filed by the Company, Akos or any of their respective Subsidiaries for the last three (3) taxable years ended prior to the date of this Agreement (except for those Tax Returns that have not yet been filed) and (ii) any material audit correspondence issued by the IRS or any other taxing authority with respect to any Taxable year of the Company, Akos or any Company Subsidiary that remains open.

 

(p) Immediately prior to the Closing, Assent and Metropolitan are members of Seller Parent’s “selling consolidated group” within the meaning of Section 338(h)(10)(B) of the Code and each of them is eligible to be the subject of a Section 338(h)(10) election.

 

(q) None of the property owned by the Company, Akos or any of their respective Subsidiaries is “tax-exempt use property” within the meaning of Section 168(h) of the Code.

 

  

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(r) None of the assets of the Company, Akos or any of their respective Subsidiaries directly or indirectly secures any Indebtedness the interest of which is Tax-exempt under Section 103(a) of the Code, and none of the Company, Akos or any of their respective Subsidiaries is directly or indirectly an obligor or a guarantor with respect to such Indebtedness.

 

Section 4.6. Absence of Certain Changes or Events.    Since June 30, 2012, except as set forth on Schedule 4.6 of the Disclosure Schedules, none of the Company, Akos or any of their respective Subsidiaries have:

 

(a) suffered any change that has had, or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

 

(b) suffered any damage, destruction or loss, whether covered by insurance or not, that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

 

(c) granted or agreed to make any increase in the compensation payable to its directors, officers or employees, except increases (other than to directors, officers, or key employees) granted in the ordinary course of business, consistent with past practices, or increases required by any Employee Plan;

 

(d) adopted, amended or terminated any Employee Plan;

 

(e) entered into any employment or severance agreement with, or granted any severance or termination pay to, any director, officer, key employee, group of employees or independent contractor other than as required by any Employee Plan or as required by Applicable Law;

 

  

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(f) hired or engaged any employee, agent or consultants other than in the ordinary course of business consistent with past practice;

 

(g) made any change in its accounting methods;

 

(h) made any change in any financial or Tax accounting method, principle or practice (including any financial or Tax election), except for any such change required by a change in GAAP or applicable Tax law;

 

(i) settled or compromised any Tax claim, made, modified or revoked any Tax election or amended any Tax Return;

 

(j) amended its governing organizational documents;

 

(k) caused or permitted any delay in the payment or discharge of outstanding payables other than in the ordinary course of business consistent with past practice;

 

(l) taken any action that has resulted in a material change in the historical number of days for the collection of accounts receivable;

 

(m) entered into any offers or discounts with respect to sales, receivables or future contracts other than in the ordinary course of business consistent with past practice;

 

(n) experienced any cancellation or, to the Knowledge of Seller, been notified of any threatened cancellation of any Material Contracts;

 

(o) sold, assigned or transferred, or agreed to sell, assign or transfer any assets or Properties with a fair market or book value in excess of $150,000, or mortgaged, pledged or imposed, or agreed to mortgage, pledge or impose, any Encumbrance on any of the assets or Properties;

 

  

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(p) acquired or agreed to acquire (by merger, consolidation, or acquisition of stock or assets) of any Person or division thereof;

 

(q) incurred or assumed any Indebtedness or issued any debt securities or assumed, granted, guaranteed or endorsed, or made any other accommodation arrangement making the Company, Akos or any of their respective Subsidiaries responsible for, the obligations of any other Person, or any loans, advances, capital contributions or investments in any other Person;

 

(r) made any loan to, or entered into any other transactions with any of its directors, officers or employees other than in the ordinary course of business, consistent with past practices;

 

(s) cancelled, satisfied or discharged any debts or claims or amended, terminated or waived any rights of value, other than in the ordinary course of business or as expressly set forth in the Financial Statements;

 

(t) failed to pay when due any liabilities, except with respect to any such liabilities being contested in good faith and identified in Schedule 4.6 of the Disclosure Schedule or as expressly set forth in the Financial Statements;

 

(u) issued, sold or transferred any of its membership interests or capital stock;

 

  

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(v) redeemed, purchased or otherwise acquired any of its membership interests or capital stock;

 

(w) made any declaration, set aside or paid any dividends or other distributions or payments in respect of any of its membership interests or capital stock;

 

(x) made any capital expenditures exceeding $150,000 per expenditure;

 

(y) made any write-down or write-off of the value of any asset, except for write-downs and write-offs in the ordinary course of business and consistent with past practice or as expressly set forth in the Financial Statements;

 

(z) failed to pay any amount of accounts payable or collect any amount of accounts receivable, other than in the ordinary course of business;

 

(aa) experienced any material change in the manner of conducting the Business or entered into any material transaction (other than the transactions contemplated hereby), in each case other than in the ordinary course of business and consistent with past practice;

 

(bb) sold, assigned, licensed, abandoned or otherwise disposed of any Intellectual Property except in the ordinary course of business;

 

(cc) in connection with or as a result of this Transaction or the receipt by Seller of any payment pursuant to Article III or for any other reason, granted, agreed to make or intend to make any payment (in cash or otherwise) to any officer or employee of Seller that, upon consummation of the Transaction, will be an officer or employee of Buyer;

 

  

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(dd) provided a notice to terminate the contract of employment of any employee of the Company, Akos or any of their respective Subsidiaries and no such  notice is pending, threatened or outstanding, other than such notices issued by Buyer in connection with this Transaction; or

 

(ee) entered into any agreement to do any of the foregoing.

 

Section 4.7. Property.

 

(a) The Company, Akos and their respective Subsidiaries have good and valid title or, in the case of leased assets, a valid leasehold interest, to all of the real property, material tangible and intangible personal property and assets owned or leased by them, free and clear of all mortgages, liens, pledges, charges or encumbrances (collectively “Liens”), except (i) as set forth on Schedule 4.7(a) of the Disclosure Schedules, (ii) Liens for current Taxes not yet due and payable (iii) Liens for amounts not yet delinquent or which are being contested in good faith; (vi) Liens securing the claims or demands of materialmen, mechanics, carriers, warehousemen, landlords, and other like persons for labor, materials, supplies, or rentals, if any; and (v) Liens resulting from deposits made in connection with workers’ compensation, unemployment taxes or insurance, social security and like laws (collectively, “Permitted Liens”).

 

(b) The tangible or intangible personal property owned or leased by the Company, Akos and their respective Subsidiaries, together with all leased real property of the Company, Akos and their respective Subsidiaries, all owned, leased or licensed Intellectual Property of the Company, Akos and their respective Subsidiaries, and all other assets and rights of the Company, Akos and their respective Subsidiaries, are sufficient for the operation of the Business by the Company, Akos and their respective Subsidiaries as currently conducted.  Except as set forth on Schedule 4.7(b) of the Disclosure Schedules and after giving effect to the Transition Services Agreement, immediately after execution and delivery of this Agreement, the Company, Akos and their respective Subsidiaries will own, or have the right to use, all properties and assets that are used in connection with the Business by the Company, Akos and their respective Subsidiaries on the same economic basis (except as set forth in the Transition Services Agreement) as before the execution and delivery of this Agreement.

 

  

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(c) None of the Company, Akos or any of their respective Subsidiaries own any Real Property.

 

(d) Schedule 4.7(d) of the Disclosure Schedules contains a list of all Real Property leased by the Company, Akos and their respective Subsidiaries.  The Company, Akos and their respective Subsidiaries enjoy peaceful possession of all such property.  Seller has previously delivered to Buyer copies of all lease documents relating to such property.  All lease documents are in full force and effect, and except as set forth on Schedule 4.7(d) of the Disclosure Schedules, will continue to be in full force and effect on identical terms after the Closing.  None of the Company, Akos or any of their respective Subsidiaries is in default under any such lease document.  To the Knowledge of Seller, no event has occurred which constitutes or, with the passing of time or giving of notice, or both, would constitute a default by any other party to any such lease document.

 

(e) To the Knowledge of Seller, neither the whole nor any portion of any Real Property leased by the Company, Akos or any of their respective Subsidiaries is subject to any governmental decree or order to be sold or is being condemned, expropriated or otherwise taken by any public authority.

 

  

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Section 4.8. Intellectual Property.    Schedule 4.8 of the Disclosure Schedules contains a list of the trademarks, service marks, trade names, copyrights, patents, and domain names (collectively, together with all trade secrets, technology, inventions, Software, data, databases, trade dress and all other intellectual property and proprietary information, “Intellectual Property”) owned or licensed by the Company, Akos or any of their respective Subsidiaries in their business.  The Company, Akos and their respective Subsidiaries own, or possess adequate and enforceable licenses or other rights to use, all Intellectual Property used or held for use in connection with the Business as currently conducted, and the consummation of the transactions contemplated hereunder, after giving effect to the Transition Services Agreement, will not impair the Company, Akos and their respective Subsidiaries rights therein.  Except as set forth on Schedule 4.8 of the Disclosure Schedules, (a) to the Knowledge of Seller, there is no violation by any third party of any right of the Company, Akos or any of their respective Subsidiaries with respect to their Intellectual Property, (b) no proceedings are pending or, to the Knowledge of Seller, threatened, alleging that the Company, Akos or any of their respective Subsidiaries are infringing in any respect upon the Intellectual Property rights of any third party or disputing the ownership, validity or enforceability of Intellectual Property; and (c) none of the Company, Akos or any of their respective Subsidiaries has granted any Person a license to any one or more items of the Intellectual Property set forth on Schedule 4.8 of the Disclosure Schedules.  Except as set forth on Schedule 4.8 of the Disclosure Schedules, the operation of the Business by the Company, Akos and their respective Subsidiaries does not infringe upon, misappropriate, violate or otherwise conflict with the Intellectual Property rights of any third party.

 

Section 4.9. Employee Benefit Plans.

 

  

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(a) Schedule 4.9(a) of the Disclosure Schedules sets forth a list of all “employee benefit plans,” within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and each other employment, compensation or benefit plan, program, policy, agreement or arrangement, contributed to, sponsored or maintained, by the Company, Akos or any of their respective Subsidiaries or any of their Affiliates for the benefit of any current or former employee or officer of the Company, Akos and their respective Subsidiaries (each an “Employee Plan”).  Copies of each of the Employee Plans and, to the extent applicable, each trust agreement, summary plan description and other material communication, and the most recent determination or opinion letter, actuarial valuation and annual report with respect thereto have been made available to Buyer.

 

(b) Except as set forth on Schedule 4.9(b) of the Disclosure Schedules:  (i) each Employee Plan has been maintained and operated in all material respects in accordance with its terms and Applicable Law, including, without limitation, ERISA and the Code; (ii) each Employee Plan intended to qualify under Section 401(a) of the Code has received a determination letter from the U.S. Internal Revenue Services (the “IRS”) to the effect that the Employee Plan is qualified under Section 401 of the Code or such Employee Plan utilizes a prototype form plan document and the prototype plan’s sponsor has received a favorable opinion or advisory letter from the IRS; (iii) no material claim (other than routine claims for benefits, and appeals of such claims) or lawsuit is pending, or, to the Knowledge of Seller threatened against or in respect of any Employee Plan; and (iv) to the Knowledge of Seller, no Employee Plan is under audit or investigation by the IRS, the U.S. Department of Labor, or any other Governmental Entity.

 

  

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(c) None of the Company, Akos or any of their respective Subsidiaries contributes to or has any liability, and no event of circumstance exists or has occurred (or would reasonably be expected to occur) that would reasonably be expected to result in the Company, Akos or any of their respective Subsidiaries having any liability, with respect to any plan subject to Section 412 of the Code or Title IV of ERISA, including, without limitation, any “multiemployer plan” (within the meaning of Section 3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code).  No Employee Plan provides for benefits or coverage for any current or former employee of the Company, Akos or any of their respective Subsidiaries following termination of employment, except as may be necessary to meet the requirements of Section 4980B(f) of the Code or any other Applicable Law.

 

(d) Except as set forth on Schedule 4.9(d) of the Disclosure Schedules, the consummation of the transactions contemplated by this Agreement will not give rise to any liability or increase the amount of compensation or benefits due to any employee of the Company, Akos or any of their respective Subsidiaries solely by reason of such transactions.  No amounts payable under any Employee Plan to any employee or other service provider of the Company, Akos or any of their respective Subsidiaries will fail to be deductible for U.S. federal income Tax purposes by virtue of Section 280G of the Code.

 

(e) Any Employee Plan that constitutes a “nonqualified deferred compensation plan” within the meaning of Section 409A(d) of the Code has been operated in a manner intended to comply with the requirements of Section 409A of the Code.

 

  

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(f) With respect to each Employee Plan that is subject to the law of any jurisdiction outside the United States: (i) the Employee Plan has been registered, if required, and maintained in good standing with the applicable Governmental Entities; (ii) the Employee Plan, if intended to qualify for special Tax treatment, meets the requirements of such treatment; and (iii) the Employee Plan has been funded and/or book-reserved, if required, in accordance with the requirements applicable thereto.

 

Section 4.10. Contracts.

 

(a) Except as set forth on Schedule 4.10(a) of the Disclosure Schedules, as of the date of this Agreement, none of the Company, Akos or any of their respective Subsidiaries:

 

(i) has any employment, change of control, or severance agreements with any of its employees, officers or directors (other than an agreement setting forth an employment-at-will relationship without liability to the Company, Akos or any of their respective Subsidiaries upon termination thereof);

 

(ii) has any currently effective collective bargaining or union agreements or other collective bargaining agreement with respect to its employees;

 

(iii) is a party to an agreement that restricts it from competing with any Person or from carrying on its business anywhere in the world;

 

(iv) to the Knowledge of Seller, is a party to any contract that contains an “exclusivity” or similar provision;

 

(v) is a party to any lease or agreement under which it is lessee of any real or personal property owned by any other party, for which the annual rental exceeds $50,000;

 

  

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(vi) is a party to any contract with any employee, officer or director of the Company, Akos or any of their respective Subsidiaries (other than Employee Plans);

 

(vii) is a party to any contract with any customer or supplier having an annualized spend with respect to the twelve (12) month period ended September 30, 2012 in excess of (A) £50,000 with respect to the Akos Business and (B) $250,000 with respect to the ClinForce Business;

 

(viii) is a party to any contract relating to a capital expenditure or for the purchase of any equipment, materials, supplies or services in excess of $150,000;

 

(ix) is a party to any joint venture, partnership, or other arrangement involving a sharing of profits;

 

(x) is a party to any contract (or group of related contracts) under which the Company, Akos or any of their respective Subsidiaries has created, incurred, assumed or guaranteed any Indebtedness;

 

(xi) is a party to any contract under which any other Person has provided a guarantee on any Indebtedness of the Company, Akos or any of their respective Subsidiaries;

 

(xii) is a party to any contract under which the consequences of a default or termination would be reasonably likely to have a Material Adverse Effect;

 

(xiii) is a party to any contract not wholly on an arm’s length basis in the ordinary and usual course of business;

 

  

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(xiv) is a party to any material contract which can be terminated by another party thereto as a result of the transactions contemplated by this Agreement; or

 

(xv) is a party to any contract relating to any Intellectual Property used or held for use in connection with the Business.

 

The agreements, documents and instruments set forth on Schedule 4.10(a) of the Disclosure Schedules are referred to herein as “Material Contracts.” Seller has made available to Buyer true and complete copies of each Material Contract, including any amendments or supplements thereto.

 

(b) Each Material Contract is in full force and effect and none of the Company, Akos or any of their respective Subsidiaries is in default under or in breach of any Material Contract that would reasonably be expected to result in a Material Adverse Effect.  Except as described on Schedule 4.10(a) of the Disclosure Schedules or as could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, to the Knowledge of Seller, there is no default or breach or written claim of default or breach by any other party under, or dispute in writing regarding the material terms of, any Material Contract, and, to the Knowledge of Seller, no event has occurred which with the passage of time or the giving of notice or both would constitute a material default or breach by the Company, Akos or any of their respective Subsidiaries or, the Knowledge of Seller, by any other party under any Material Contract or would permit termination, modification or acceleration of any Material Contract or constitute a similar event permitting the termination of the Company, Akos or any of their respective Subsidiaries’ rights under any such Material Contract.

 

Section 4.11. Compliance with Law; Necessary Authorizations.

 

  

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(a) Except as set forth on Schedule 4.11(a) of the Disclosure Schedule, the Company, Akos and their respective Subsidiaries are duly complying with all Applicable Laws, except where such noncompliance would not result in a Material Adverse Effect.

 

(b) Except as set forth on Schedule 4.11(b) of the Disclosure Schedules, (i) the Company, Akos and their respective Subsidiaries have duly obtained all Permits necessary for the conduct of their business, except where the failure to obtain the same would not result in a Material Adverse Effect; (ii) all such Permits are in full force and effect; (iii) each of the Company, Akos and their respective Subsidiaries is in compliance with all the foregoing except where such noncompliance would not reasonably be expected to result in a Material Adverse Effect; and (iv) there are no proceedings pending or, to the Knowledge of Seller, threatened which may reasonably be expected to result in the revocation, cancellation, suspension or modification thereof.

 

Section 4.12. Labor Matters.

 

(a) Except as set forth on Schedule 4.12 of the Disclosure Schedules: (i) there is no unfair labor practice complaint against the Company, Akos or any of their respective Subsidiaries pending or, to the Knowledge of Seller, threatened before the National Labor Relations Board or other Governmental Entity; (ii) there is no strike or material labor dispute pending or, to the Knowledge of Seller, threatened against the Company, Akos or any of their respective Subsidiaries; and (iii) to the Knowledge of Seller, no union organizing activities are taking place with respect to the Business.

 

  

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(b) The Company, Akos and each of their respective Subsidiaries are and have been in compliance in all material respects with Applicable Law relating to labor and employment, including but not limited to requirements relating to discrimination, disability, labor relations, hours of work, payment of wages, immigration, workers compensation, working conditions, worker classifications, employee scheduling, occupational safety and health, family and medical leave, plant closings and employee terminations, and since January 1, 2010, no material claim has been asserted or, to Knowledge of Seller, threatened against the Company, Akos or any of their respective Subsidiaries with respect thereto.

 

(c) The name of each employee of the Company, Akos and each of their respective Subsidiaries, together with the employee’s position, location, start date and annual or hourly rate of pay have been made available to Buyer.  Each officer, member of management and field staff member that is substantially engaged in the Business is an employee of the Company, Akos or one of their respective Subsidiaries.

 

(d) All individuals that have been classified or treated by the Company, Akos or any of their respective Subsidiaries as independent contractors for federal income and employment tax purposes have been so classified or treated in compliance with Applicable Law.

 

Section 4.13. Insurance.    Schedule 4.13 of the Disclosure Schedules sets forth a complete and accurate list of all insurance policies or programs of self-insurance that have a policy limit of greater than $500,000 owned by, or maintained for the benefit of, or respecting which any premiums are paid directly or indirectly by, the Company, Akos or any of their respective Subsidiaries (together, the “Company Insurance Policies”). To the Knowledge of Seller, all Company Insurance Policies are legal, valid, binding and enforceable in accordance with its terms and are in full force and effect and all premiums due thereon hereunder have been paid in full. To the Knowledge of Seller, there are no claims related to the Business pending under any such Company Insurance Policies as to which coverage has been questioned, denied or disputed.   None of the Company, Akos or any of their respective Subsidiaries are in default thereunder.  In the last two years, none of the Company, Akos or any of their respective Subsidiaries has received (i) any notice of cancellation or termination with respect to such Company Insurance Policies, other than in connection with normal renewals of any such insurance policies and programs; (ii) any written notice with respect to any refusal of coverage thereunder; or (iii) any written notice that any issuer of such policy or binder has filed for protection under applicable bankruptcy or insolvency laws or is otherwise in the process of liquidating or has been liquidated.  Seller has made available to Buyer true, correct and complete copies of each of the Company Insurance Policies.

 

  

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Section 4.14. Litigation.  Except as set forth in Schedule 4.14  of the Disclosure Schedules, none of the Company, Akos, any of their respective Subsidiaries is a defendant (including by reason of any crossclaim or counterclaim) in any suit or a party to any other action, legal or administrative proceeding, investigation or arbitration by or before any Governmental Entity (“Proceedings”), nor to the Knowledge of Seller is anyone asserting or threatening to make the Company, Akos, any of their respective Subsidiaries a party to any such Proceedings.  Except as set forth in Schedule 4.14 of the Disclosure Schedules, no Seller is a defendant (including by reason of any crossclaim or counterclaim) in any Proceeding, nor to the Knowledge of Seller is anyone asserting or threatening to make any Seller a party to any such Proceeding, that affects the Company, Akos or any of their respective Subsidiaries or their respective assets, Properties or Business.  Except as set forth in Schedule 4.14 of the Disclosure Schedules, none of the Company, Akos, any of their respective Subsidiaries or any Seller is a defendant (including by reason of any crossclaim or counterclaim) in any Proceeding, nor to the Knowledge of Seller is anyone asserting or threatening to make the Company, Akos, any of their respective Subsidiaries or any Seller a party to any such Proceeding, that challenges or seeks to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement.  There are no unsatisfied judgments, penalties or awards against or encumbering the Company, Akos, any of their respective Subsidiaries or their respective assets, Properties or Business.  To the Knowledge of Seller, there are no conditions, facts or circumstances that would reasonably be expected to result in any Proceeding involving the Company, Akos, any of their respective Subsidiaries, their respective assets, Properties or the Business that would reasonably be expected to have a Material Adverse Effect.

 

  

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Section 4.15. Environmental Matters.  To the Knowledge of Seller, except as set forth on Schedule 4.15 of the Disclosure Schedules:

 

(a) The Company, Akos and each their respective Subsidiaries are in compliance with all applicable Environmental Laws.

 

(b) The Company, Akos and each of their respective Subsidiaries are not subject to any Environmental Liabilities and there are no conditions, facts or circumstances that would reasonably be expected to result in such Environmental Liabilities.

 

(c) Each of the Company, Akos and each their respective Subsidiaries is in compliance with all Permits, licenses and other authorizations that are required pursuant to Environmental Laws for the current operation of the Business.

 

  

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(d) None of the Company, Akos or any of their respective Subsidiaries is in default under, or in violation of, any binding order, judgment or decree or similar binding judicial or administrative ruling issued pursuant to any applicable Environmental Law.

 

(e) None of the Company, Akos or any of their respective Subsidiaries has entered into any consent decree or other written agreement with any Governmental Entity in settlement of any alleged violation of or liability under any applicable Environmental Law, under which decree or agreement the Company, Akos or any of their respective Subsidiaries has any unfulfilled obligations.  Notwithstanding the generality of any other representations and warranties contained in this Agreement, this Section 4.15 contains the sole and exclusive representations and warranties of the Company with respect to environmental matters.

 

Section 4.16. No Brokers.  None of the Company, Akos, any of their respective Subsidiaries or Seller is obligated for the payment of fees or expenses of any broker or finder in connection with the transaction contemplated hereby.

 

Section 4.17. Condition of Assets.  Except as set forth on Schedule 4.17 of the Disclosure Schedules, the equipment and other tangible assets that the Company, Akos and each of their respective Subsidiaries own or lease are free from material defects, have been maintained in accordance with customary industry practice, are in good operating condition and repair, and are suitable for the purposes for which they are used (subject to normal wear and tear).

 

Section 4.18. Customers.  Schedule 4.18(a) of the Disclosure Schedules sets forth a list of each customer that individually accounted for more than $250,000 of the gross revenues of the Company, Akos and each of their respective Subsidiaries for each of the Fiscal Years ended December 31, 2011 and December 31, 2012.  Except as set forth on Schedule 4.18(b) of the Disclosure Schedules, (i) none of the Company, Akos or any of their respective Subsidiaries has received written notice that any such customer plans to discontinue its relationship with the Company, Akos or any of their respective Subsidiaries, and (ii) none of the Company, Akos or any of their Subsidiaries is currently engaged in, and to the Knowledge of Seller no conditions, facts or circumstances exist that would reasonably be expected to result in, a material dispute with any such customer.

 

  

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Section 4.19. Books and Records of the Company.

 

(a) The minute books of the Company have been made available to Buyer, are complete and correct in all material respects and have been maintained in accordance with sound business practices.  The minute books of the Company contain records that are accurate and complete in all material respects of all meetings, and actions taken by written consent of, the members and the managers, and no meeting, or action taken by written consent, of any such members or managers has been held for which minutes have not been prepared and are not contained in such minute books.  At the Closing, all of those books and records will be in the possession of the Company.

 

(b) The Company maintains a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions engaged in by the Company, Akos or any of their respective Subsidiaries are executed in material compliance with the general or specific authorizations of management of the Company, Akos and their respective Subsidiaries, (ii) access to assets of the Company, Akos and their respective Subsidiaries is permitted only in accordance with the general or specific authorizations of management of the Company, Akos and their respective Subsidiaries, and (iii) all intercompany transactions, charges and expenses among or between the Company, Akos, their respective Subsidiaries, any Seller and/or their respective Affiliates are accurately reflected at fair arms’ length value on the books and records of the Company, Akos and/or their respective Subsidiaries, as applicable.

 

  

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Section 4.20. Statutory Books of Akos.

 

(a) The statutory books, books of account, registers and other records of Akos are up-to-date and maintained in accordance with Applicable Law on a proper and consistent basis and are complete and accurate in all material respects for all matters required to be disclosed or dealt with in them.

 

(b) Since January 1, 2011, no notice or allegation has been received that any of the statutory books or registers referred to in clause (a) of Akos is incorrect or should be rectified.

 

(c) All such books and registers are in the possession or under the control of Akos (as applicable).

 

Section 4.21. Transactions with Seller and Affiliates.  Except as disclosed in Schedule 4.21 of the Disclosure Schedules, no Seller nor any of their respective Subsidiaries and, to the Knowledge of Seller, no Affiliate of the Company, Akos or any of their respective Subsidiaries:

 

(a) has any cause of action or other claim whatsoever against, or is owed any amount by, the Company, Akos or any of their respective Subsidiaries;

 

(b) has any interest (including any leasehold interest) in or owns any property (whether real, personal or mixed and whether tangible or intangible) or any right used in the conduct of the Business;

 

  

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(c) has outstanding any loan or advance from the Company, Akos or any of their respective Subsidiaries, except expense account advances in the ordinary course of business; or

 

(d) is a party to any contract, lease, sublease or instrument with the Company, Akos or any of their respective Subsidiaries.

 

Section 4.22. Bank Accounts and Safe Deposit Boxes.  Schedule 4.22 of the Disclosure Schedules lists the title of each bank account of the Company, Akos and each of their respective Subsidiaries and the bank at which that account is maintained.  Schedule 4.22 of the Disclosure Schedules also contains the same information for each safe deposit box leased by the Company, Akos and each of their respective Subsidiaries.

 

Section 4.23. Powers of Attorney.  None of the Company, Akos or any of their respective Subsidiaries has given a power of attorney which is still outstanding or effective to any person to enter into any contract or commitment or do anything on its behalf.

 

Section 4.24. Warranties and Indemnities.

 

(a) None of the Company, Akos or any of their respective Subsidiaries has sold or otherwise disposed of any shares or assets in circumstances such that it is or may be still subject to any liability (whether contingent or otherwise) under any representation, warranty or indemnity given or agreed to be given on or in connection with such sale or disposal.

 

(b) There has been no breach of any representation, warranty, undertaking, term, condition or indemnity made or given by or on behalf of the Company, Akos or any of their respective Subsidiaries, whether in respect of a sale or other disposal of shares or assets.

 

  

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Section 4.25. Insolvency.  None of the Company, Akos or any of their respective Subsidiaries is insolvent or unable to pay its debts or has stopped paying its debts as they fall due.

 

Section 4.26.  Creditors.  To the Knowledge of Seller, no steps have been taken in any applicable jurisdiction to initiate any process by or under which:

 

(a) the ability of the creditors of the Company, Akos or any of their respective Subsidiaries, to take any action to enforce their debts is suspended, restricted or prevented;

 

(b) some or all of the creditors of the Company, Akos or any of their respective Subsidiaries accept, by agreement or in pursuance of a court order, an amount less than the sums owing to them in satisfaction of those sums with a view to preventing the dissolution of the Company, Akos or any of their respective Subsidiaries; or

 

(c) a Person is appointed to manage the affairs, business and assets of the Company, Akos or any of their respective Subsidiaries, on behalf of the Company, Akos or any of their respective Subsidiaries’ creditors.

 

Section 4.27.   Dissolution.  No process has been initiated which could lead to the Company, Akos or any of their respective Subsidiaries being dissolved and its assets being distributed among the relevant company’s creditors, shareholders or other contributors.

 

  

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Section 4.28. Regulatory Matters.

 

(a) There are no lawsuits, arbitrations, tribunals, legal or administrative or regulatory proceedings, charges, complaints or investigations by the U.S. Food and Drug Administration (the “FDA”), the U.S. Department of Health and Human Services (the “HHS”), the U.S. Drug Enforcement Administration (the “DEA”), the U.S. Department of Justice (the “DOJ”), the Medicines and Healthcare products and Regulatory Authority (the “MHRA”) or any other Governmental Entity pending or, to the Knowledge of Seller, threatened against or relating to the Company, Akos or any of their Subsidiaries.

 

(b) Each of the Company, Akos and their respective Subsidiaries are in compliance with Applicable Laws and regulations of the FDA, the DEA, the HHS, the MHRA and any other Governmental Entity, including without limitation the requirements set forth in 21 U.S.C. Section 360 and 21 C.F.R. Parts 11, 50, 56, 207 and 312 and the Medicines Act 1968 (as amended) except where such non-compliance would not result in a Material Adverse Effect and, to the extent required, have obtained licenses from, but not limited to the FDA, the DEA, the European Medicines Agency, the UK Institute for Health and Clinical Excellence and the MHRA (as applicable) except where the failure to obtain the same would not result in an Material Adverse Effect, and are in compliance with all such licenses and all applicable regulations promulgated by, but not limited to the FDA, the DEA, the European Medicines Agency, the UK Institute for Health and Clinical Excellence and the MHRA, except where such non-compliance would not result in a Material Adverse Effect.

 

(c) To the Knowledge of Seller, there are no unresolved reports, warning letters, 483s or other documents received by any Seller, the Company, Assent, Metropolitan or Akos or, to the knowledge of any Seller, Persons providing services for their benefit, from or issued by the FDA, the DEA, the HHS, the MHRA or other Governmental Entity that indicate or suggest lack of compliance with applicable regulatory requirements, in connection with the Business or its operations or activities.

 

  

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(d) Except as set forth on Schedule 4.28(d) of the Disclosure Schedules, since January 1, 2011, no Person has provided written notice to Seller, the Company, Assent, Metropolitan, Akos or any of their Affiliates or filed a claim for loss or potential loss under any indemnity covering participants in clinical trials conducted by or in connection with the Business.

 

(e) None of the Company, Akos or any of their respective Subsidiaries has received any written notice that the FDA, the DEA, the HHS, the MHRA or other Governmental Entity has commenced, or threatened to initiate, (1) any action to withdraw any Permit applicable to any of the Business’s activities or any studies being or planned to be conducted by it, or (2) any action to enjoin any of such activities or studies.

 

(f) None of the Company, Akos or any of their respective Subsidiaries nor, to the knowledge of Seller, any of their officers or employees or persons providing services for their benefit in connection with the Business has been debarred, or convicted of any crime or engaged in any conduct for which debarment is mandated by 21 U.S.C. Section 335(a) or authorized by 21 U.S.C. Section 335a(b) or for which suspension is mandated by 21 U.S.C. Section 335(g) or temporary denial of approval is authorized by 21 U.S.C. Section 335(f) or any other applicable standards of any Governmental Entity.

 

  

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(g) The Company, Akos and their respective Subsidiaries have made available to Buyers copies of all material written communications to or from the FDA, the HHS, the DEA, the MHRA, any other Governmental Entity that have evaluated compliance with requirements enforced by them relating to the Business and its operations or activities.

 

(h) Copies of all regulatory audits of the Group and copies of all sponsor or other third party audits of the Group and all related correspondence since January 1, 2012 have been provided to Buyer.

 

Section 4.29. MHRA Reports.  In relation to the MHRA GCP inspectorate inspection report dated 18 May 2011 (the “2011 GCP Report”), the Company has:

 

(a) not received any written or oral correspondence from the MHRA/GCP Inspectorate since the date of the 2011 GCP Report, whether relating to the 2011 GCP Report or otherwise; and

 

(b) save for the adverse findings disclosed in the 2011 GCP Report, at all times materially complied with all applicable legislative requirements, established GCP/MHRA guidelines and/or International Conference on Harmonisation good clinical practice.

 

Section 4.30. Accounts Receivable.  All of the accounts receivable of the Company, Akos and their respective Subsidiaries have arisen from bona fide transactions in the ordinary course of business consistent with past practice and are not subject to any loan agreements or other financing contracts entered into by the Company, Akos or any of their respective Subsidiaries and providing for the sale, factoring, pledge or other transfer of such accounts receivable by the Company, Akos or any of their respective Subsidiaries to any other Person. The reserves for doubtful accounts included in the Financial Statements are in accordance with GAAP consistently applied. All intercompany accounts between Seller and its Affiliates with and from the Company, Akos or any of their respective Subsidiaries will be settled prior to Closing and no such accounts or payables will exist at the effective time of the Closing.

 

  

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Section 4.31. Absence of Outstanding Indebtedness.  None of the Company, Akos or any of their respective Subsidiaries will have, after giving effect to the Closing, any Indebtedness.

 

Section 4.32. Service Liability. Since December 31, 2011, the Company, Akos and their respective Subsidiaries have not been notified in writing of any material claim against them or their or insurers relating to liability with respect to the services provided by the Company, Akos or any of their respective Subsidiaries, and no payment or settlement of any kind has been made in response to or in anticipation of such a claim

 

Section 4.33. Information Technology.

 

(a) Schedule 4.31 of the Disclosure Schedules sets forth a true and correct list of all (i) Software, and (ii) licenses, leases, development agreements, services or maintenance agreements, in each case, used, held for use or relating exclusively to the Company IT Systems.  The Company, Akos and their respective Subsidiaries own or have valid rights to use (by license or lease) the Company IT Systems used or held for use by the Company, Akos and their respective Subsidiaries in the operation of the Business, and the Company IT Systems are sufficient, including bandwidth, scalability and information storage and processing, for the current need of the Business.

 

  

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(b) The Company, Akos and their respective Subsidiaries have taken commercially reasonable efforts to maintain the Company IT Systems, and the Company IT Systems are functioning in material compliance with all applicable technical specifications.  The Company, Akos and their respective Subsidiaries have taken all actions, in accordance with the good industry practice, to ensure the protection, integrity and security of the Company IT Systems, and all information stored, processed or transmitted thereby, from any unauthorized interruption, access, use or modification by third parties, including employing firewalls, virus and other malicious or disabling code detection and removal programs, and back-up, disaster recovery and business continuity programs.  Since January 1, 2011, there (i) have been no unauthorized intrusions or breaches of security with respect to the Company IT Systems, (ii) has not been any material malfunction of the Company IT Systems that has not been remedied or replaced in all respects, and (iii) has been no material unplanned downtime or service interruption with respect to the Company IT Systems.  The Company, Akos and their respective Subsidiaries have complied with and do comply with, in all material respects, all Applicable Laws and their own rules, policies and procedures, relating to privacy, collection, storage, onward transfer and use of any personally identifiable information or other financial information of all users, employees, customers, and patients of customers that is collected, used, or held for use by the Business, and no claims have been asserted or, to the Knowledge of Seller, threatened, against the Company, Akos or any of their respective Subsidiaries by any third party alleging a violation of any of the foregoing.

 

(c) The Company IT Systems do not contain third party Software or equipment which are not available from third party suppliers on arm’s length commercial terms and contain sufficient user information to enable reasonably skilled personnel in the field to use and operate them without the need for further assistance.  There is no reason to believe that any rights to use such third party Software or equipment will not be renewed when they expire.  Subject to the Transition Services Agreement, the consummation of the transactions contemplated by this Agreement will not impair the rights of the Company, Akos or any of their respective Subsidiaries to use the Company IT Systems.

 

  

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(d) The Company, Akos and their respective Subsidiaries have access to and have not disclosed the source code of all and any software included solely in the Company IT Systems to any third party other than under a binding agreement with a reputable escrow agent on the escrow agent’s standard terms.  Nothing has happened which might, and the consummation of the transactions contemplated by this Agreement or any Ancillary Agreement will not, trigger release of the source code to a third party under any such escrow agreement.

 

Section 4.34. Administrator.  In relation to Akos:

 

(a) no administrator has been appointed;

 

(b) no documents have been filed with the court for the appointment of an administrator; and

 

(c) no notice of an intention to appoint an administrator has been given by the relevant company, its directors or by a qualifying floating charge holder (as defined in paragraph 14 of Schedule B1 to the Insolvency Act 1986).

 

Section 4.35. Dividends.  Akos has complied with all applicable laws in relation to the payment of the dividend contemplated by Schedule 6.8 of the Disclosure Schedules, including without limitation, the provisions of the United Kingdom Companies Act 2006 and the articles of association of Akos.

 

  

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Section 4.36. Actions set out in Schedule 6.7 and Repayment of Indebtedness.  The actions set out in Schedule 6.7 including, without limitation, any write-down of all or a part of the trade receivable owed by Akos to Metropolitan Research Associates, Inc., are lawful and will not result in a breach of any law, regulation, order, judgment or decree of any court or Governmental Entity.

 

ARTICLE V.

REPRESENTATIONS AND WARRANTIES OF BUYER

 

US Buyer and UK Buyer, jointly and severally, represent and warrant to Seller as follows, as of the date of this Agreement and as of the Closing:

 

Section 5.1. Organization of Buyer.  Each Buyer is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all requisite corporate power to own, lease and operate its property and to carry on its business as now being conducted and is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the failure to be so qualified or licensed would reasonably be expected to have a material adverse effect on the business, assets, liabilities, financial condition or results of operation of Buyer.

 

Section 5.2. Authority; No Conflict; Required Filings and Consents.

 

  

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(a) Each Buyer has all requisite corporate power and authority to enter into this Agreement and each Ancillary Agreement (to the extent a party thereto), to perform its obligations hereunder and thereunder, and to consummate the transactions contemplated by this Agreement and the Ancillary Agreements.  The execution and delivery by each Buyer of this Agreement and each Ancillary Agreement (to the extent a party thereto), the performance of its obligations hereunder and thereunder, and the consummation of the transactions contemplated by, this Agreement and the Ancillary Agreements have been duly authorized by all necessary corporate action on the part of such Buyer.  This Agreement and each Ancillary Agreement (to the extent a party thereto) has been duly executed and delivered by each Buyer.  This Agreement and each Ancillary Agreement (to the extent a party thereto) constitutes a valid and binding obligation of each Buyer enforceable by Seller against Buyer, in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting the enforcement of creditors’ rights generally and by general principles of equity, regardless of whether such enforceability is considered in a proceeding at law or equity.

 

(b) The execution and delivery by Buyer of this Agreement and each Ancillary Agreement (to the extent a party thereto) does not, and the performance of its obligations hereunder and thereunder, and consummation of the transactions contemplated by, this Agreement and the Ancillary Agreements will not, (i) conflict with, or result in any material violation or breach of any provision of the governing documents of such Buyer, (ii) violate any law, rule or regulation applicable to Buyer, except as would not reasonably be expected to have a material adverse effect or (iii) conflict with or result in a breach of, or give rise to a right of termination of, or accelerate the performance required by the terms of any judgment, court order or consent decree, or any material agreement to which Buyer is party or constitute a default thereunder, except in each case as would not reasonably be expected to have a material adverse effect.

 

  

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(c) None of the execution and delivery by Buyer of this Agreement or any Ancillary Agreement (to the extent a party thereto), the performance of its obligations hereunder or thereunder, or the consummation of the transactions contemplated by, this Agreement and the Ancillary Agreements  requires or will require any consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity or third party, except for (i) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable federal and state securities laws and the laws of any foreign country, (ii) such filings as may be required under the HSR Act, and (iii) those where the failure to obtain or make, as applicable, such consent, approval, order or authorization of, or registration, declaration or filing would not have a material adverse effect.

 

Section 5.3. Capital Resources.  Buyer has sufficient resources to pay the Purchase Price as well as all Transaction Expenses, and the Closing is not subject to any financing conditions.

 

Section 5.4. No Brokers.  Except as set forth in Schedule 5.4 of the Disclosure Schedules, Buyer is not obligated for the payment of fees or expenses of any broker or finder in connection with the origin, negotiation or execution of this Agreement or in connection with the transaction contemplated hereby.

 

Section 5.5. Investigation by Buyer.  In entering into this Agreement, Buyer has relied solely upon the express representations and warranties of Seller set forth in Article IV.  Buyer acknowledges that, except as set forth in Article IV, neither Seller nor any other Person is making any representation or warranty, either express or implied, as to the accuracy or completeness of any of the information provided or made available to Buyer, or any of its attorneys, accountants, consultants or other agents or representatives or any other Person for their benefit.  Buyer acknowledges that, except as expressly set forth in the representations and warranties in Article IV, there are no representations or warranties by Seller of any kind, express or implied, with respect to the Company, Akos or their respective Subsidiaries or their business or assets.

 

  

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ARTICLE VI.

COVENANTS PRIOR TO CLOSING DATE

 

Section 6.1. Access to Information.  Between the date of this Agreement and the Closing Date, Seller will, and will cause each of the Company, Akos, their respective Subsidiaries and their respective Representatives to, (a) afford Buyer and its Representatives (collectively, “Buyer’s Advisors”) reasonable access to each of the Company, Akos and their respective Subsidiaries’ personnel, properties, contracts, books and records, and other documents and data, (b) furnish Buyer and Buyer’s Advisors with copies of all such contracts, books and records, and other existing documents and data as Buyer may reasonably request, and (c) furnish Buyer and Buyer’s Advisors with such additional financial, operating, and other data and information as Buyer may reasonably request.

 

Section 6.2. Operation of the Business.  Between the date of this Agreement and the Closing Date, Seller will, and will cause each of the Company, Akos and their respective Subsidiaries to:

 

  

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(a) conduct the Business only in the ordinary course of business consistent with past practice;

 

(b) use their commercially reasonable efforts to preserve intact the current business organization of the Company, Akos, their respective Subsidiaries and the Business, take commercially reasonable efforts to keep available the services of the current officers, employees, and agents of the Company, Akos, their respective Subsidiaries and the Business, and take commercially reasonable efforts to maintain the relations and good will with suppliers, customers, landlords, creditors, employees, agents, and others having business relationships with the Company, Akos, their respective Subsidiaries and the Business; and

 

(c) confer with Buyer concerning operational matters of a material nature.

 

Section 6.3. Negative Covenant.  Except as otherwise expressly permitted by this Agreement, between the date of this Agreement and the Closing Date, Seller will not, and will cause the Company, Akos and their respective Subsidiaries not to, without the prior consent of Buyer, take any affirmative action, or fail to take any reasonable action within their or its control, as a result of which any of the changes or events listed in Section 4.6 (other than Sections 4.6(a), (b), (n), (q), (w) and (dd)) is likely to occur.

 

Section 6.4. Required Approvals.  As promptly as practicable after the date of this Agreement, Seller will, and will cause the Company, Akos and their respective Subsidiaries to, seek all consents identified in Schedule 6.4 of the Disclosure Schedules.

 

Section 6.5. No Negotiation.

 

  

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(a) Until such time, if any, as this Agreement is terminated pursuant to Article VIII, Seller will not, and will cause the Company, Akos and their respective Subsidiaries and each of their Representatives not to, directly or indirectly, (i) encourage, solicit, initiate, facilitate or continue inquiries regarding an Acquisition Proposal; (ii) enter into discussions or negotiations with, or provide any information to, any Person concerning a possible Acquisition Proposal; or (iii) enter into any agreements or other instruments (whether or not binding) regarding an Acquisition Proposal.

 

(b) In addition to the other obligations under this Section 6.5, Seller shall promptly (and in any event within three Business Days after receipt thereof by Seller or its Representatives) advise Buyer orally and in writing of any Acquisition Proposal, any request for information with respect to any Acquisition Proposal, or any inquiry with respect to or which could reasonably be expected to result in an Acquisition Proposal, the material terms and conditions of such request, Acquisition Proposal or inquiry, and the identity of the Person making the same.

 

(c) Seller agrees that the rights and remedies for noncompliance with this Section 6.5 shall include having such provision specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed that any such breach or threatened breach shall cause irreparable injury to Buyer and that money damages would not provide an adequate remedy to Buyer.

 

Section 6.6. Commercially Reasonable Efforts.  Between the date of this Agreement and the Closing Date, (i) Seller and Buyer will use their commercially reasonable efforts to cause the conditions in Article VII to be satisfied and (ii) Seller will use its commerically reasonable efforts to have the migration of all Business data to Seller Parent’s cloned system complete prior to the Closing Date.

 

  

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Section 6.7. Completion of Actions set out in Schedule 6.7 and Repayment of Indebtedness.  Between the date of this Agreement and the Closing Date (and, for the avoidance of doubt, prior to the Closing), Seller shall procure the completion of all of the actions and procedures set out in Schedule 6.7 hereto.

 

ARTICLE VII.

CONDITIONS TO CLOSING

 

Section 7.1. Conditions to Each Party’s Obligation.  The respective obligations of each party to this Agreement to consummate the transactions contemplated by this Agreement are subject to the satisfaction prior to the Closing of the following conditions:

 

(a) No Injunctions or Restraints; Illegality.  No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction preventing the consummation of the transactions contemplated by this Agreement shall have been issued; nor shall there be any action taken, or any statute, rule, regulation or order enacted, entered, enforced or deemed applicable to the transactions contemplated by this Agreement which makes the consummation of the transactions contemplated by this Agreement illegal.

 

Section 7.2. Additional Conditions to Obligations of Buyer.    The obligations of Buyer to consummate the transactions contemplated by this Agreement are subject to the satisfaction of each of the following conditions, any of which may be waived in writing exclusively by Buyer:

 

  

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(a) Performance of Obligations of Seller. Seller shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing.

 

(b) Indebtedness.  The Company, Akos and their respective Subsidiaries shall not be subject to any Indebtedness immediately following the Closing.

 

(c) Estimated Net Working Capital Certificate.  Not later than one (1) Business Day, and no earlier than two (2) Business Days, prior to the Closing Date, Seller shall prepare and deliver to Buyer a certificate (the “Estimated Net Working Capital Certificate”) of the Chief Financial Officer of Seller Parent setting forth its good faith Estimated Net Working Capital.  Such certificate shall include a reasonably detailed calculation and description of how the Estimated Net Working Capital was determined, and Buyer shall have agreed with such calculation.

 

(d) Deliverables.  Buyer shall have received the deliveries set forth in Section 2.6.

 

(e) Consents.  Seller shall have obtained all consents set forth on Schedule 6.3 of the Disclosure Schedules.

 

(f) No Material Adverse Effect.  From the date of this Agreement, there shall not have occurred any Material Adverse Effect, nor shall any event or events have occurred that, individually or in the aggregate, with or without the lapse of time, could reasonably be expected to result in a Material Adverse Effect.

 

  

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(g) Certificate. Buyer shall have received a certificate, dated the Closing Date, signed by an officer of Seller to the effect that the conditions set forth in this Section 7.2 have been satisfied.

 

(h) Employee Insurance.  The New Employee Insurance Policy shall be in full force and effect as of the Closing Date.

 

Section 7.3. Additional Conditions to Obligations of Seller.    The obligations of Seller to consummate the transactions contemplated by this Agreement are subject to the satisfaction of each of the following conditions, any of which may be waived, in writing, exclusively by Seller:

 

(a) Performance of Obligations of Buyer.  Buyer shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing.

 

(b) Deliverables.  Seller shall have received the deliveries set forth in Section 2.7.

 

(c) Certificate.  Seller shall have received a certificate, dated the Closing Date, signed by an officer of Buyer to the effect that the conditions set forth in this Section 7.3 have been satisfied.

 

ARTICLE VIII.

TERMINATION

 

Section 8.1. Termination Events.  This Agreement may, by notice given prior to or at the Closing, be terminated:

 

  

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(a) by either Buyer or Seller if a material breach of any provision of this Agreement (other than a breach of the representations or warranties set forth in Article IV or Article V) has been committed by the other party and such breach has not been waived;

 

(b) by either Buyer or Seller if any of the conditions in Section 7.1 has not been satisfied as of the Closing Date or if satisfaction of such a condition is or becomes impossible;

 

(c) (i) by Buyer if any of the conditions in Section 7.2 has not been satisfied as of the Closing Date or if satisfaction of such a condition is or becomes impossible (other than through the failure of Buyer to comply with its obligations under this Agreement) and Buyer has not waived such condition on or before the Closing Date; or (ii) by Seller, if any of the conditions in Section 7.3 has not been satisfied of the Closing Date or if satisfaction of such a condition is or becomes impossible (other than through the failure of Seller to comply with their obligations under this Agreement) and Seller has not waived such condition on or before the Closing Date;

 

(d) by mutual consent of Buyer and Seller; or

 

(e) by either Buyer or Seller if the Closing has not occurred (other than through the failure of any party seeking to terminate this Agreement to comply fully with its obligations under this Agreement) on or before February 15, 2013, or such later date as the parties may agree upon, but in no event later than February 28, 2013.

 

  

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Section 8.2. Effect of Termination.  Each party’s right of termination under Section 8.1 is in addition to any other rights it may have under this Agreement or otherwise, and the exercise of a right of termination will not be an election of remedies.  If this Agreement is terminated pursuant to Section 8.1, all further obligations of the parties under this Agreement will terminate, except that the obligations in Sections 12.12, 12.14 and 12.16 will survive; provided, however, that if this Agreement is terminated by a party pursuant to Section 8.1(a) or because one or more of the conditions to the terminating party’s obligations under this Agreement is not satisfied as a result of the other party’s failure to comply with its obligations under this Agreement, the terminating party’s right to pursue all legal remedies will survive such termination unimpaired.

 

ARTICLE IX.

INDEMNIFICATION

 

Section 9.1. Indemnification of Buyer.    From and after the Closing and subject to the limitations contained in this Article IX, Seller Parent, US Seller and UK Seller will, jointly and severally, indemnify Buyer, its Affiliates (including the Company, Akos and their respective Subsidiaries) and each of their respective officers, directors and Affiliates (collectively, the “Buyer Indemnified Parties”) and hold the Buyer Indemnified Parties harmless against any loss, expense, liability, obligation, cost or other damage, including reasonable attorneys’ fees, to the extent of the actual amount of such loss, expense, liability or other damage (without regard to the use of any multiplier) (collectively, “Damages”) that the Buyer Indemnified Parties have incurred by arising out of (i) the inaccuracy or breach by Seller of any representation or warranty of Seller contained in Article IV of this Agreement; (ii) a breach by Seller of any covenant of Seller contained in this Agreement; (iii) any claim, demand, assessment, action, suit or Proceeding related to or arising out of the alleged or claimed transfer, prior to Closing, of obligations from any client of the Company, Akos or any of their respective Subsidiaries to the Company, Akos or any of their respective Subsidiaries pursuant to 21 CFR 312.52(a) of the Code of Federal Regulations, (iv) the employment and/or any termination of the employees set forth on Schedule 9.1 of the Disclosure Schedules, (v) Akos having been a party to, or engaged in, any agreement, action, decision or activity which is or which may be held to be prohibited, void or illegal or in breach of the financial assistance provisions of Section 151 to 158 of the United Kingdom Companies Act 1985, or (vi) any event resulting in a claim or any claim for medical expenses (including hospitalizations with the first date of hospitalization occuring prior to the Closing Date) incurred on or prior to the Closing Date, but in no event for any medical expenses incurred or hospitalizations with the first date of hospitalization occuring after the Closing Date.  All such calculations of Damages shall take into account any insurance proceeds received by the Buyer Indemnified Parties (net of all reasonable costs, charges and expenses incurred by the Buyer Indemnified Party in obtaining such recovery, and any increase in insurance premiums resulting from such claim) in connection with the matter out of which such Damages shall arise.  The Buyer Indemnified Parties agree to use commercially reasonable efforts to obtain such insurance proceeds.  If an indemnification payment is received by any Buyer Indemnified Party, and such Buyer Indemnified Party later receives insurance proceeds, other third party recoveries in respect of the related Damages, such Buyer Indemnified Party shall promptly pay to Seller such amount.  Nothing in this Section 9.1 shall permit any Seller to delay making any payment owing to a Buyer Indemnified Party under this Section 9.1. Notwithstanding anything herein to the contrary, (a) the Buyer Indemnified Parties shall not be entitled to seek indemnification under this Section 9.1 with respect to any Damages unless and until the aggregate amount of all Damages suffered by the Buyer Indemnified Parties exceeds in the aggregate $500,000 and then the Buyer Indemnified Parties shall only be entitled to indemnification for such aggregate amount in excess of $400,000; (b) the Buyer Indemnified Parties shall not be deemed to have incurred any Damages unless the Damages arising from an individual claim exceed (together with all other claims so substantially related as to effectively constitute one claim) $25,000; (c) the aggregate amount of all payments to which the Buyer Indemnified Parties shall be entitled to receive under this Section 9.1 shall in no event exceed the Cap; and (d) the amount to which any Buyer Indemnified Party may become entitled under this Section 9.1 shall be reduced by any accruals or reserves with respect to the matters to which the Damages relate to the extent such accruals or reserves are included as a liability in the calculation of Net Working Capital.  The limitations set forth in (a), (b) and (c) of the preceding sentence shall not apply to (A) claims pursuant to clause (ii), clause (iii), clause (iv), clause (v) or clause (vi) of the first sentence of Section 9.1; and (B) claims relating to breaches of the representations contained in the first sentence of Section 4.1, Section 4.2(a), Section 4.2(b), the first sentence of Section 4.2(d), Section 4.2(e), Section 4.3(a), Section 4.15 and Section 4.16; and (C) any claims for fraud.  Seller shall not be liable for any punitive, special, consequential, exemplary or incidental Damages, except to the extent such Damages are payable with respect to the claim of a third party for which Seller is required to indemnify the Buyer Indemnified Parties hereunder. Seller shall not be liable for Damages based on lost profits, diminution of value or computed on a multiple of earnings or any similar basis that may have been used at arriving at the Purchase Price. Notwithstanding anything to the contrary in this Agreement, this Article IX shall not apply to any Indemnification with respect to any Tax matters, which shall be exclusively governed by Article X.

 

  

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Section 9.2. Indemnification of Seller.  From and after the Closing and subject to the limitations contained in this Article IX, US Buyer and UK Buyer will, jointly and severally, indemnify Seller, its Affiliates and their respective officers, directors, and Affiliates (collectively, the “Seller Indemnified Parties”) and hold the Seller Indemnified Parties harmless against any Damages that the Seller Indemnified Parties have incurred by reason of (i) the inaccuracy or breach by Buyer of any representation or warranty of Buyer contained in Article V of this Agreement or (ii) by reason of a breach by Buyer, any covenant of Buyer contained in this Agreement (“Seller Breach Claims”).  All such calculations of Damages shall take into account any insurance proceeds received by the Seller Indemnified Parties (net of all reasonable costs, charges and expenses incurred by the Seller Indemnified Party in obtaining such recovery, and any increase in insurance premiums resulting from such claim) in connection with the matter out of which such Damages shall arise.  The Seller Indemnified Parties agree to use commercially reasonable efforts to obtain such insurance proceeds.  If an indemnification payment is received by any Seller Indemnified Party, and such Seller Indemnified Party later receives insurance proceeds or other third party recoveries in respect of the related Damages, such Seller Indemnified Party shall promptly pay to Buyer such amount.  Nothing in this Section 9.2 shall permit any Buyer to delay making any payment owing to a Seller Indemnified Party under this Section 9.2.  Seller shall be deemed to have waived any claim for Damages arising out of Seller Breach Claims if, prior to the Closing, Seller was aware of any fact, matters or circumstances underlying such misrepresentation or breach.  Buyer shall not be liable for any punitive, special, consequential, exemplary or incidental Damages.

 

  

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Section 9.3. Exclusive Remedies.  The parties agree that notwithstanding anything to the contrary set forth in this Agreement or otherwise, following the Closing, except with respect to (i) the adjustments provided in Article III and (ii) claims based on fraud, the indemnification provisions of this Article IX and Article X are the sole and exclusive remedies of the parties pursuant to this Agreement or in connection with the transactions contemplated hereby.  From and after the Closing, to the maximum extent permitted by law, except with respect to claims based on fraud, the parties hereby waive all other rights, claims, remedies or actions with respect to any matter in any way relating to this Agreement or arising in connection with the transactions contemplated hereby, whether under any foreign, federal, state, provincial or local laws, statutes, ordinances, rules, regulations, requirements or orders at common law or otherwise.

 

Section 9.4. Survival of Representations and Warranties.  All representations and warranties contained in Articles IV and V shall survive the Closing and shall remain in full force and effect until the 548th day following the Closing Date; provided, however, that the representations and warranties contained in (i) the first sentence of Section 4.1, Section 4.2(a), Section 4.2(b), the first sentence of Section 4.2(d), Section 4.2(e), Section 4.3(a) and Section 4.16 shall remain in full force and effect indefinitely and (ii) Section 4.15 shall remain in full force and effect until the expiration of the applicable statute of limitations.  No party will have any liability (for indemnification or otherwise) with respect to any representations or warranty unless on or before the applicable survival date the other party provides the liable party with the information required by Section 9.5(a).

 

  

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Section 9.5. Terms and Conditions of Indemnification; Resolution of Conflicts.

 

(a) Any party seeking indemnification must give the other party prompt notice of the claim for Damages (i) stating the aggregate amount of the Damages or an estimate thereof, in each case to the extent known or determinable at such time and (ii) specifying in reasonable detail the individual items of such Damages included in the amount so stated, and the nature of the misrepresentation, breach or claim to which such item is related. So long as notice is received on or prior to the applicable survival date, no delay on the part of the indemnified party in notifying any indemnifying party shall relieve the indemnifying party from any liability or obligation hereunder unless (and then solely to the extent that) the indemnifying party thereby is materially prejudiced by such failure to give notice.

 

(b) The respective obligations and liabilities of the parties to indemnify pursuant to this Article IX in respect of any Damages arising from a claim by a third party shall be subject to the following additional terms and conditions:

 

(i) The indemnifying party shall have the right to undertake, by counsel or other representatives of its own choosing reasonably satisfactory to the indemnified party, the defense, compromise, and settlement of such claim; provided, however, that the indemnifying party shall not, without the prior written consent of the indemnified party (such consent not to be unreasonably withheld, conditioned or delayed), consent to a compromise or settlement of such claim.

 

(ii) In the event that the indemnifying party shall elect not to undertake such defense, or within thirty (30) days after notice of any such claim from the indemnified party shall fail to defend, the indemnified party (upon further written notice to the indemnifying party) shall have the right to undertake the defense, compromise or settlement of such claim, by counsel or other representatives of its own choosing; provided, however, that the indemnified party shall not, without the prior written consent of the indemnifying party (such consent not to be unreasonably withheld, conditioned or delayed), consent to a compromise or settlement of such claim.

 

  

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(iii) Notwithstanding anything in this Section 9.5 to the contrary, (A)  the indemnified party shall have the right, at its own cost and expense, to participate in the defense, compromise or settlement of the claim, (B) the indemnifying party shall not, without the indemnified party’s written consent, settle or compromise any claim or consent to entry of any judgment (such consent not to be unreasonably withheld, conditioned or delayed), (C) in the event that the indemnifying party undertakes defense of any claim, the indemnified party by counsel or other representative of its own choosing and at its sole cost and expense, shall have the right to consult with the indemnifying party and its counsel or other representatives concerning such claim and the indemnifying party and the indemnified party and their respective counsel or other representatives shall cooperate with respect to such claim, subject to the execution and delivery of a mutually satisfactory joint defense agreement, and (D) in the event the indemnifying party and the indemnified party are unable to cooperate or agree with respect to the defense, consent, settlement or compromise of any claim, the parties shall engage an independent arbitrator to consult with the indemnifying party, the indemnified party and their respective counsels and other representatives in connection with such claim, and the decision of the arbitrator as to the defense, consent, settlement or compromise of any claim shall be binding and conclusive upon the parties to this Agreement.

 

  

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(c) If Seller or Buyer shall object in writing to any claim or claims by a Buyer Indemnified Party or Seller Indemnified Party, as the case may be, Seller and Buyer shall attempt in good faith for thirty (30) days to agree upon the rights of the respective parties with respect to each of such claims.

 

ARTICLE X.

TAX MATTERS

 

Section 10.1. Tax Treatment of the Transaction

 

.  The parties agree that, for U.S. federal and applicable state and local income Tax purposes, the sale of the ClinForce Interests shall be treated as a deemed sale of assets of the Company, which assets include the stock of Assent and Metropolitan and, unless otherwise required by law, no party nor any of its Affiliates shall take any position inconsistent therewith on any Tax Return or for any other Tax purpose.

 

Section 10.2. Tax Returns and Tax Payments

 

.

 

(a) Seller shall (i) prepare, or shall cause to be prepared, and timely file, or cause to be timely filed, all consolidated, affiliated, combined, unitary or similar Tax Returns of Seller Parent’s tax group that include the Company, Akos or any of their respective Subsidiaries (“Consolidated or Combined Tax Returns”) and (ii) timely pay all Taxes payable in respect of such Tax Returns, including all such Taxes related to the Section 338(h)(10) Election.  All Consolidated or Combined Tax Returns shall be prepared in a manner that is consistent with the Final Allocation.

 

  

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(b) With respect to any Pre-Closing Tax Period (other than a Straddle Period), Seller shall prepare, or shall cause to be prepared, all Income Tax Returns of the Company, Akos or any of their respective Subsidiaries not described in Section 10.2(a) above.  Each such Income Tax Return shall be prepared in a manner consistent with the past practices of Seller, the Company, Akos and their respective Subsidiaries, except as required by applicable law or the Final Allocation.  With respect to each such Income Tax Return, (i) Seller shall deliver to Buyer, no later than twenty (20) days prior to the due date (taking into account extensions) for the filing of such Income Tax Return, a draft of such Income Tax Return for review by Buyer and (ii) Seller and Buyer shall cooperate to resolve any disagreements prior to the required due date for filing such Income Tax Return.  If the parties are unable to resolve all open issues with respect to any such Income Tax Return no later than five (5) days prior to the due date for filing such Income Tax Return, any unresolved issues shall be resolved by the Independent Auditor in the manner provided in Section 3.3(c). If the Independent Auditor is unable to resolve all open issues before the filing due date, such Income Tax Return shall be finalized and filed in the manner proposed by Buyer.  No later than two (2) Business Days prior to the due date for filing each such Income Tax Return, Seller shall pay to Buyer in cash an amount equal to all Taxes payable with respect to such Income Tax Return, and, if the Independent Auditor subsequently determines that Seller’s position with respect to any unresolved issue was correct, Buyer shall promptly repay any excess amount to Seller. Buyer shall timely file, or cause to be timely filed, each such Income Tax Return and shall timely pay, or cause to be timely paid, all Taxes payable with respect to each such Income Tax Return.

 

(c) With respect to any Pre-Closing Tax Period (other than a Straddle Period), Seller shall prepare, or shall cause to be prepared, all Tax Returns of the Company, Akos or any of their respective Subsidiaries that are neither Consolidated or Combined Tax Returns nor Income Tax Returns.  Each such Tax Return shall be prepared in a manner consistent with the past practices of Seller, the Company, Akos and their respective Subsidiaries, except as required by applicable law or the Final Allocation.  With respect to each such Tax Return, (i) Seller shall deliver to Buyer, no later than the earlier of seven (7) days prior to the due date (taking into account extensions) for the filing of such Tax Return or ninety (90) days after the Closing Date, a draft of such Tax Return for review by Buyer and (ii) Seller and Buyer shall cooperate to resolve any disagreements prior to the required due date for filing such Tax Return.  To the extent the parties are unable to resolve any open issues with respect to any such Tax Return in a timely manner, such Tax Return shall be finalized and filed in the manner proposed by Buyer. Buyer shall timely file, or cause to be timely filed, each such Tax Return and shall timely pay, or cause to be timely paid, all Taxes payable with respect to each such Tax Return.

 

  

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(d) With respect to any Straddle Period, Buyer shall prepare, or shall cause to be prepared, all Income Tax Returns of the Company, Akos or any of their respective Subsidiaries.  Each such Income Tax Return shall be prepared in a manner consistent with the past practices of Seller, the Company, Akos and their respective Subsidiaries, except as required by Applicable Law or the Final Allocation.  With respect to each such Income Tax Return, (i) Buyer shall deliver to Seller, at least twenty (20) days prior to the due date (taking into account extensions) for the filing of such Income Tax Return, a draft of such Income Tax Return for review by Seller and (ii) Seller and Buyer shall cooperate to resolve any disagreements prior to the required due date for filing such Income Tax Return. If the parties are unable to resolve all open issues with respect to any such Income Tax Return no later than five (5) days prior to the due date for filing such Income Tax Return, any unresolved issues shall be resolved by the Independent Auditor in the manner provided in Section 3.3(c). If the Independent Auditor is unable to resolve all open issues before the filing due date, such Income Tax Return shall be finalized and filed in the manner proposed by Buyer.  No later than two (2) Business Days prior to the due date for filing each such Income Tax Return, Seller shall pay to Buyer in cash an amount equal to all Taxes payable with respect to such Income Tax Return, and, if the Independent Auditor subsequently determines that Seller’s position with respect to any unresolved issue was correct, Buyer shall promptly repay any excess amount to Seller. Buyer shall timely file, or cause to be timely filed, each such Income Tax Return and shall timely pay, or cause to be timely paid, all Taxes payable with respect to each such Income Tax Return.

 

  

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(e) With respect to any Straddle Period, Buyer shall (i) prepare or cause to be prepared any Tax Returns other than Income Tax Returns that are due after the Closing Date (taking into account extensions) and (ii) timely file, or cause to be timely filed, each such Tax Return and shall timely pay, or cause to be timely paid, all Taxes payable with respect to each such Tax Return.  Each such Tax Return shall be prepared in a manner consistent with the past practices of Seller, the Company, Akos and their respective Subsidiaries, except as required by Applicable Law or the Final Allocation.

 

Section 10.3. Allocation of Taxes

 

.  For all purposes of this Agreement, any Tax liability with respect to any Straddle Period shall be apportioned between the pre-Closing and post-Closing portions of such Straddle Period based on an interim closing of the books as of the end of the Closing Date (i.e., the Tax liability for each portion of the Straddle Period shall be computed as if each portion were a separate Tax period), except for ad valorem property Taxes, which shall be prorated on a daily basis.

 

Section 10.4. Tax Refunds

 

  Any refunds of Taxes of the Company, Akos or any of their respective Subsidiaries for any Pre-Closing Period or the pre-Closing portion of any Straddle Period (determined in accordance with Section 10.3), other than (i) any refunds resulting from carrybacks from any Post-Closing Tax Period, (ii) any refunds reflected as an asset in the calculation of the final Net Working Capital as determined pursuant to Section 3.3 and (iii) any refund of “excess” Taxes with respect to which Buyer previously repaid to Seller pursuant to the provision contained in the sixth sentence of each of Section 10.2(b) and Section 10.2(d), shall be for Seller’s account and, if received by Buyer, the Company, Akos or any of their respective Subsidiaries, the amount of such refunds (net of any Taxes attributable thereto and any expenses of obtaining such refund) shall be paid in cash by Buyer to Seller within ten (10) Business Days after receipt thereof,  provided that, none of Buyer, the Company, Akos or any of their respective Subsidiaries shall have any obligation to pursue any refunds. If, with respect to any Taxes accrued as a liability in the calculation of the final Net Working Capital as determined pursuant to Section 3.3, the amount actually paid on the applicable Tax Return filed by Buyer is less than the amount accrued with respect to such Taxes, Buyer shall promptly pay the difference to Seller in cash.

 

  

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Section 10.5. Cooperation on Tax Matters

 

.  Seller and Buyer will cooperate fully, as and to the extent reasonably requested by the other party, in connection with any Tax matters relating to the Company, Akos and any of their respective Subsidiaries (including through the provision of any records or information or explanations with respect thereto, reasonably requested).  The Seller and Buyer agree (A) to retain all books and records with respect to Tax matters pertinent to the Company, Akos and their respective Subsidiaries relating to any taxable period beginning before the Closing Date until expiration of the statute of limitations of the respective taxable periods, and to abide by all reasonable record retention agreements entered into with any taxing authority, and (B) to give the other party reasonable written notice prior to destroying or discarding any such books and records and, if the other party so requests, Buyer or Seller, as the case may be, shall allow the other party to take possession of such books and records.

 

 

 

  

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Section 10.6. Transfer Taxes

 

.  Notwithstanding anything to the contrary herein, all transfer, real estate transfer, stock transfer, documentary, sales, use, stamp, recording and other similar Taxes (including any related penalties, additions to Taxes and interest) imposed on or in connection with the purchase of the Interests (“Transfer Taxes”) shall be paid one-half by Seller and one-half by Buyer, other than any Stamp Duty payable in respect of the transfer of the Shares (which shall be the responsibility of Buyer).  Seller shall file all necessary Tax Returns and other documentation with respect to all Transfer Taxes (other than the Stamp Duty, any Tax Return for which shall be prepared and filed by Buyer), and, if required by applicable law, Buyer shall, and shall cause its Affiliates to, join in the execution of any such Tax Returns and other documentation. For the avoidance of doubt, this Section 10.6 shall not apply to any Income Taxes attributable to the Section 338(h)(10) Election, all of which shall be the responsibility of Seller.

 

Section 10.7. Tax Sharing Agreements

 

.  All agreements or arrangements with respect to Tax matters between the Company, Akos or any of their respective Subsidiaries on the one hand, and Seller or Seller Parent or any Affiliate of Seller or Seller Parent on the other hand, shall be terminated or modified prior to the Closing so as to cause there to be no continuing liability on the part of the Company, Akos or any of their respective Subsidiaries.

 

Section 10.8. Tax Indemnification

 

.  Seller shall, without duplication, indemnify, defend and hold Buyer and its respective Affiliates (including, for the avoidance of doubt, the Company, Akos and each of their respective Subsidiaries) harmless from and against all Damages arising from or in connection with (i) any Taxes of the Company, Akos or any of their respective Subsidiaries for, or with respect to, any Pre-Closing Tax Period, including all corporate and shareholder Taxes resulting from the Section 338(h)(10) Election, (ii) any Taxes of any other Person imposed on the Company, Akos or any of their respective Subsidiaries, or for which the Company, Akos or any of their respective Subsidiaries is liable, under Treasury Regulation Section 1.1502-6 or 1.1502-78 or any similar provision of state, local or non-U.S. law, or as a transferee or successor, by contract, operation of law or otherwise, which Taxes relate to an affiliation, connection, event or transaction occurring, or a contract entered into, before the Closing, (iii) any breach of any representations and warranties in Section 4.5 (which representations and warranties shall be read, for this purpose, without any materiality, knowledge or similar qualifiers) and (iv) any breach by Seller of any covenants in this Article X (including with respect to Transfer Taxes described in Section 10.6), except in each case, to the extent such Taxes are specifically accrued as a liability in the calculation of the final Net Working Capital as determined pursuant to Section 3.3 (as reduced by any amount paid by Buyer to Seller pursuant to the last sentence of Section 10.4).  Payment in respect of any Damages shall be made in cash by Seller to Buyer within ten (10) days after a written request therefor is given by Buyer to Seller, accompanied by an explanation of Buyer’s request and any supporting computations.

 

  

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Section 10.9. Tax Treatment of Indemnification Payments

 

.  Any indemnification payment made pursuant to Articles IX or X of this Agreement shall be treated by all parties as an adjustment to the purchase price for all Tax purposes.

 

Section 10.10. Survival

 

.  Notwithstanding anything in this Agreement to the contrary, the representations, warranties, covenants and agreements contained in Section 4.5 and this Article X shall survive the Closing and continue in full force and effect until one hundred twenty (120) days after the expiration of the applicable statute of limitations.

 

  

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Section 10.11. Tax Audits.

 

(a) Upon receipt by Seller or any of its affiliates, on the one hand, or Buyer, the Company, Akos, or any of their respective Subsidiaries, on the other hand, of a written notice of any Tax audits, examinations, assessments or other claims that could give rise to a claim for indemnity under Section 10.8 hereof (an “Indemnifiable Tax Liability”), the receiving party shall give prompt notice thereof to the other party (the “Tax Claim Notice”); provided that any failure of a party to provide a Tax Claim Notice shall not affect such party’s rights to indemnification under Section 10.8 except to the extent that the indemnifying party is actually and materially prejudiced thereby.

 

(b) Seller shall have exclusive control, at its expense, of the contest, either administratively or judicially, of any Tax proceeding with respect to any Tax matter arising in respect of a Consolidated or Combined Tax Return, provided that if any Tax authority directly initiates a Tax proceeding in respect of any such Tax matter against Buyer, the Company, Akos, or any of their respective Subsidiaries pursuant to Treasury Regulation Section 1.1502-6 or 1.1502-78 or any similar provision of state, local or non-U.S. law, Buyer shall have exclusive control with respect to any such Tax proceeding.

 

(c) Buyer shall have exclusive control, at its expense, of the contest of any administrative Tax proceeding with respect to any Tax matter involving the Company, Akos or any of their respective Subsidiaries that relates to a Pre-Closing Tax Period other than a Straddle Period and is not described in Section 10.11(b) (a “Pre-Closing Separate Company Tax Matter”).  To the extent any Pre-Closing Separate Company Tax Matter may give rise to an Indemnifiable Tax Liability, (i) Buyer shall reasonably and in good faith consult with Seller with respect to the defense against, or compromise or settlement of, such administrative Tax proceeding, (ii) Seller may participate, at its own expense, in the defense against, or compromise or settlement of, such administrative Tax proceeding and (iii) Buyer shall not settle or compromise the applicable Tax matter that is the subject of such administrative Tax proceeding without obtaining the prior written consent of Seller (not be unreasonably withheld, delayed or conditioned).  If Buyer is unable to settle or compromise at the administrative level any Pre-Closing Separate Company Tax Matter that may give rise to an Indemnifiable Tax Liability, Seller shall have exclusive control, at its expense, of the contest of any judicial Tax proceeding with respect to such Pre-Closing Separate Company Tax Matter; provided that (i) Seller shall reasonably and in good faith consult with Buyer with respect to the defense against, or compromise or settlement of, such judicial Tax proceeding, (ii) Buyer may participate, at its own expense, in the defense against, or compromise or settlement of, such judicial Tax proceeding and (iii) Seller shall not settle or compromise the applicable Tax matter that is the subject of such judicial Tax proceeding without obtaining the prior written consent of Buyer (not be unreasonably withheld, delayed or conditioned).

 

  

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(d) Buyer shall have exclusive control, at its own expense, of any administrative or judicial Tax proceeding with respect to any Straddle Period; provided, however, that, to the extent such proceeding may give rise to an Indemnifiable Tax Liability, (i) Buyer shall reasonably and in good faith consult with Seller with respect to the defense against, or compromise or settlement of, such administrative or judicial proceeding, (ii) Seller may participate, at its own expense, in the defense against, or compromise or settlement of, such administrative or judicial proceeding and (iii) Buyer shall not settle or compromise the applicable Tax matter that is the subject of such administrative or judicial Tax proceeding without obtaining the prior written consent of Seller (not to be unreasonably withheld, delayed or conditioned).

 

Section 10.12. Section 338(h)(10) Election

 

.  At the Closing, Seller Parent and US Seller shall join with Buyer in making an election under Section 338(h)(10) of the Code (and any corresponding election under state and local Tax law) with respect to the purchase of the stock of Assent and Metropolitan (the “Section 338(h)(10) Election”).  Seller and Buyer shall take any actions (including after Closing) as may be necessary in order to effectuate such Section 338(h)(10) Election and Seller shall pay all corporate and shareholder level Taxes relating to such Section 338(h)(10) Election.

 

  

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ARTICLE XI.

RESTRICTIVE COVENANTS

 

Section 11.1. Non-Competition.  Without the express written consent of Buyer, neither Seller Parent nor any Subsidiary of Seller Parent (the “Restricted Parties”) shall, at any time during the five (5) year period following the Closing Date (the “Restricted Period”), directly or indirectly, for itself or on behalf of or in conjunction with any other Person, in any jurisdiction worldwide (the “Restricted Area”), (i) own, manage, control or participate in the ownership, management or control of any business, or engage in any activity that would be in competition with the Business as it existed as of the Closing Date, whether as an employer, proprietor, partner, stockholder, trustee, beneficiary, owner, joint venturer, investor, independent contractor, consultant, agent, lender, adviser or sales representative or (ii) take any action that is designed, intended or reasonably likely to have the effect of discouraging any customer, supplier, vendor, licensor, lessor, agent, employee, consultant, independent contractor or any other Person under contract or otherwise associated or doing business with the Business from maintaining the same business relationships with Buyer, its Subsidiaries (including the Company, Akos and their respective Subsidiaries) and their respective Affiliates after the Closing as it maintained prior to the Closing; provided that the Restricted Period with respect to the Akos Business shall be two (2) years and the Restricted Area shall be limited to the United Kingdom. Notwithstanding the foregoing, any Restricted Party may own, directly or indirectly, solely as an investment, securities of any Person traded on any national securities exchange if such Restricted Party individually, and the Restricted Parties taken as a whole, are not a controlling Person of, or a member of a group which controls, such Person and does not, directly or indirectly, own 5% or more of any class of securities of such Person.

 

  

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Section 11.2. Non-Solicitation

 

.  During the Restricted Period, no Restricted Party shall hire or solicit any of the individuals set forth on Schedule 11.2(a) of the Disclosure Schedules or encourage any such Person to leave their employment with Buyer or any of its Subsidiaries, except pursuant to a general solicitation which is not directed specifically to any such individual; provided, that nothing in this Section 11.2 shall prevent any Restricted Party from hiring (i) any such Person whose employment has been terminated by Buyer or any of its Subsidiaries; or (ii) after ninety (90) days from the date of termination of employment, any such Person whose employment has been terminated by such Person. Notwithstanding the foregoing, no Restricted Person shall solicit (other than pursuant to a general solicitation which is not directed specifically to any such individual) or hire the individuals sets forth on Schedule 11.2(b) during the Restricted Period.

 

Section 11.3. Continuing Employees

 

.  Seller hereby agrees that following the Closing it will not, directly or indirectly, in connection with or as a result of this Transaction or the receipt by Seller of any payment pursuant to Article III or for any other reason, make any payment (in cash or otherwise) to any officer or employee of Seller that, upon consummation of the Transaction, will be an officer or employee of Buyer, except to the extent set forth in a side letter between Seller Parent and US Buyer dated the date hereof.

 

  

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Section 11.4. General.

 

(a) Each of the parties hereto acknowledges and agrees that the provisions of this Article XI have been specifically negotiated by sophisticated commercial parties and that each was advised by experienced counsel and, to the extent it deemed necessary, other advisors in connection with this Agreement.

 

(b) Seller acknowledges and agrees that (i) the market in which the Business competes is worldwide in scope, there exists worldwide competition for the services of the Business, and that the covenants and agreements contained in Sections 11.1, 11.2 and 11.3 (collectively, the “Restrictive Covenants”) impose a reasonable restraint in light of the activities and business of Seller on the date of this Agreement; (ii) it is the intention of the parties hereto that the entire goodwill of the Business be transferred to Buyer as part of the transactions contemplated hereby, including but not limited to the goodwill existing between the Business, on the one hand, and its customers, suppliers, vendors, licensors, lessors, agents, employees, consultants and other Persons under contract or otherwise associated or doing business with the Business, on the other hand; (iii) Seller and Buyer explicitly considered the value of the goodwill to be transferred and that such goodwill is valued as a component of the consideration to be paid by Buyer pursuant to the terms hereof; (iv) the Restrictive Covenants are (x) a material and substantial part of this Agreement and the transactions contemplated hereby, (y) supported by adequate consideration and (z) a necessary inducement to Buyer’s entering into this Agreement; (v) Buyer’s failure to receive the entire goodwill contemplated hereby may have the effect of reducing the value of the Business to Buyer; and (vi) it shall act, and shall cause each other Restricted Party to act, in good faith with respect to the Restricted Covenants and will not take any action, or authorize or permit any Restricted Party to take any action, which would result in noncompliance with the Restricted Covenants.

 

  

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(c) Each of the parties hereto agrees that if any of the Restrictive Covenants is held to be invalid or not permitted by law in any respect it is the intention of the parties that such Restrictive Covenant shall not be null and void and but instead shall be narrowly construed to effectuate the intent of the parties to the maximum extent permitted by law.

 

(d) Notwithstanding anything contained herein to the contrary, the covenants contained in Section 11.1 shall not (i) apply to any Restricted Party upon the occurrence of a Change of Control of such Person or (ii) prevent any Restricted Party from, directly or indirectly, acquiring one or more entities that compete with the Business so long as the amount of revenue such acquired entity derives from the portion of its business which is in competition with the Business or the assets of such portion of its business comprise less than 20% of the total assets of the acquired entity.

 

Section 11.5. Remedies.

 

(a) Seller acknowledges and agrees that Buyer will be irreparably harmed and that there will be no adequate remedy at law for any violation by any Restricted Party of any of the covenants or agreements contained in the Restrictive Covenants.  It is accordingly agreed that, in addition to any other remedies which may be available upon the breach of any such covenants or agreements, Buyer shall have the right to injunctive relief to restrain a breach or threatened breach of, or otherwise to obtain specific performance of, the covenants and agreements contained in the Restrictive Covenants, in any court of competent jurisdiction over the parties and the matter, in addition to any other remedy to which it may be entitled, at law or in equity.

 

(b) All of the Restrictive Covenants shall be construed as an agreement independent of any other provision in this Agreement or the Ancillary Agreements, and the existence of any claim or cause of action of any Restricted Party against Buyer, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by Buyer of such covenants.  The parties expressly acknowledge that the terms and conditions of Sections 11.1, 11.2 and 11.3 are independent of the terms and conditions of any other agreements, including any Employment Agreements entered into in connection with this Agreement.  It is specifically agreed that the periods set forth in Sections 11.1, 11.2 and 11.3 during which the Restrictive Covenants shall be effective as to any Restricted Party, shall be computed by excluding from such computation any time during which the Person bound by such agreement or covenant is found by a court of competent jurisdiction to have been in violation of any Restrictive Covenant.

 

  

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ARTICLE XII.

MISCELLANEOUS

 

Section 12.1. Notices.  All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (which is electronically confirmed), emailed (which is electronically confirmed) or two (2) Business Days after being mailed by registered or certified mail (return receipt requested) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):

 

	
  

	
(a)

	
if to any Buyer:

 

c/o ICON plc

c/o South County Business Park

Leopardstown

Dublin 18

Ireland

Attention:  ICON General Counsel

Telephone No.: +353 1 291 2000

Email address: diarmaid.cunningham@iconplc.com

	
  

	
(b)

	
if to any Buyer, with a copy to:

 

	
  

	
Cahill Gordon & Reindel llp

	
  

	
80 Pine Street

	
  

	
New York, New York  10005

	
  

	
Attention:  William M. Hartnett, Esq.

	
  

	
Telephone No.: 212-701-3000

	
  

	
Email: whartnett@cahill.com

 

  

97

  

 

	
  

	
and

	
  

	
A&L Goodbody

	
  

	
IFSC, North Wall Quay

	
  

	
Dublin 1

	
  

	
Ireland

	
  

	
Attention:   Mark Ward

	
  

	
Telephone No.: +353 1 649 2000

	
  

	
Email address: mward@algoodbody.com

 

	
  

	
 (c)

	
if to Seller, to:

	
  

	
Cross Country Healthcare Inc.

	
  

	
6551 Park of Commerce Boulevard, N.W.

	
  

	
Suite 200

	
  

	
Boca Raton, Florida 33487

	
  

	
Attention:  General Counsel

	
  

	
Telephone No.: 800-440-5790

Email: sball@crosscountry.com

	
  

	
with a copy to:

	
  

	
Proskauer Rose LLP

	
  

	
Eleven Times Square

	
  

	
New York, New York  10036

	
  

	
Attention:  Stephen W. Rubin, Esq.

	
  

	
Telephone No: 212-969-3330

	
  

	
Email: srubin@proksuaer.com

 

  

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Section 12.2. Acknowledgement.  Buyer acknowledges and agrees that Proskauer Rose LLP is representing Seller in connection with the transactions contemplated by this Agreement and that following the Closing it may continue to represent Seller in connection with the transactions contemplated by this Agreement, including, but not limited to, in connection with any disputes that may arise under this Agreement.  Proskauer Rose LLP shall not be precluded from or restricted from representing Seller in any matter, including, but not limited to, any court proceeding or other matter related to this Agreement or the transactions contemplated by this Agreement.  Buyer, the Company, Akos and their respective Subsidiaries irrevocably consent to any such representation and waive any conflict or appearance of conflict with respect to any such representation.

 

Section 12.3. Employees.

 

(a) Following the Closing Date, through December 31, 2013, Buyer shall make, or shall cause its Affiliates to make, available to the employees of the Company, Akos and their respective Subsidiaries on the Closing Date (the “Employees”) and their eligible dependents employee benefits and compensation plans, programs and arrangements that are substantially comparable in the aggregate to the employee benefits and compensation programs and arrangements that were provided by Seller to the Employees and their eligible dependents immediately prior to the Closing or, at Buyer’s election, that Buyer and its Affiliates make available to their similarly situated employees, in either case without limitations based upon pre-existing conditions for which no exclusion was applicable under the Employer Plans (and Buyer shall use commercially reasonable efforts to ensure that the amount of deductibles and out-of-pocket expenses incurred by, and credited to, the Employees under the Employee Plans prior to the Closing Date for the calendar year of the Closing shall be credited toward the satisfaction of deductibles under the employee benefits and compensation plans, programs and arrangements sponsored or maintained by Buyer or its Affiliates (the “Buyer Plans”)).  Buyer shall ensure that the Buyer Plans grant full credit for all service or employment with, and recognized by, the Company, Akos and their respective Subsidiaries for purposes of eligibility, participation and vesting with respect to any Buyer Plan that is an employee pension benefit plan, as defined in Section 3(2) of ERISA, and, for purposes of eligibility, participation and determining the amount of any benefit with respect to any Buyer Plan that is a vacation plan and any Buyer Plan that is an employee welfare benefit plan, as defined in Section 3(1) of ERISA, including, without limitation, any severance plan or sick leave plan.  Buyer shall ensure that the Company, Akos and their respective Subsidiaries, as applicable, recognize the vacation time and sick leave benefits due to the Employees as of the Closing Date.

 

  

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(b) This Section 12.3 shall be binding upon and inure solely to the benefit of the parties to this Agreement, and nothing in this Section 12.3, express or implied, shall confer upon any other Person any right, including any right to continued employment or compensation or benefits of any kind, nor shall it be construed to establish, modify or amend any benefit plan, program, agreement or arrangement.

 

(c) From and after the Closing, Seller and its Affiliates shall remain solely responsible for all obligations, liabilities and commitment under or with respect to the Employee Plans (other than the Employee Plans identified on Schedule 12.3(c) of the Disclosure Schedules), except as otherwise provided in this Section 12.3(c).  Effective as of the Closing Date, Buyer shall cause to be credited or debited, as the case may be, to the applicable accounts under a flexible spending account plan established by Buyer or an Affiliate of Buyer (“Buyer’s FSA”) the balances of the Employees’ medical and dependent care expense reimbursement accounts under the flexible spending account maintained by Seller (“Seller’s FSA”), provided that, as soon as practicable after the Closing Date, Seller shall transfer to Buyer the amount in cash equal to the net aggregate amount of the account balances of the Employees under Seller’s FSA as of the Closing Date, and Buyer shall give effect to the corresponding elections made by the Employees for the calendar year of the Closing under Seller’s FSA and shall honor all claims for reimbursement made under Buyer’s FSA by the Employees for services rendered prior to the Closing.  Effective as of the Closing Date, Seller shall take all necessary actions to, if elected by the Employees in accordance with applicable law, permit rollovers by the Employees of their account balances under the Cross Country Healthcare, Inc. 401(k) Plan (in the form of cash and notes relating to participant loans) to a defined contribution plan sponsored by Buyer or an Affiliate of Buyer that includes a qualified cash or deferred arrangement within the meaning of Section 401(k) of the Code.

 

  

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Section 12.4. Interpretation.  When a reference is made in this Agreement to Sections, such reference shall be to a Section of this Agreement unless otherwise indicated.  The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  Whenever the words “include,” “includes” or “including” are used in this Agreement they shall be deemed to be followed by the words “without limitation.”  Whenever the word “or” is used, it shall mean “and/or” unless the context clearly indicates otherwise. All references to “dollars” or “$” mean United States dollars. The parties are each represented by legal counsel and have participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

 

Section 12.5. Counterparts.  This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when two or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart.

 

Section 12.6. Entire Agreement.  This Agreement (including the documents and the instruments referred to herein), constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof.

 

  

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Section 12.7. Governing Law.  This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York applicable to agreements made and to be performed entirely within such State, without regard to the conflicts of law principles of such State.  Each of the parties hereto hereby consents to the jurisdiction of the United States District Court for the Southern District of New York, and any New York state court sitting in the Borough of Manhattan, to the exclusion of any other jurisdiction, for the purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby.  Each party hereto irrevocably waives, to the fullest extent permitted by law, any objection which he or it may now or hereafter have to the laying of venue in any such court or that any such proceeding which is brought in accordance with this Section has been brought in an inconvenient forum.  Process in any such proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court.  Nothing herein shall affect the right of any party to serve legal process in any other manner permitted by law or at equity or to enforce in any lawful manner a judgment obtained in one jurisdiction in any other jurisdiction. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, ANY OTHER ANCILLARY AGREEMENT ENTERED INTO IN CONNECTION HEREWITH OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY.  EACH PARTY (A) CERTIFIES THAT NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY CLAIM, ACTION OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER AGREEMENTS CONTEMPLATED HEREBY, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 12.7.

 

  

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Section 12.8. Assignment.  Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties, provided, however, that either party may assign its rights (but not its obligations) hereunder to one or more of its Affiliates or its lenders.  Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns.

 

Section 12.9. Amendment.  This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto.

 

Section 12.10. Severability.  If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future law or regulation, and if the rights or obligations of any party hereto under this Agreement will not be materially and adversely affected thereby, (a) such provision will be fully severable, (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (c) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement and (d) in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible.

 

Section 12.11. Certain Understandings.  Each of the parties acknowledges and agrees that it is sophisticated and was advised by experienced counsel and, to the extent it deemed necessary, other advisors in connection with this Agreement.

 

  

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Section 12.12. Confidentiality.

 

(a) Buyer hereby agrees with Seller that Buyer and its authorized representatives will not, and that Buyer will cause its Affiliates not to, at any time on or after the date of this Agreement, directly or indirectly, without the prior written consent of Seller, disclose or use, any Confidential Information involving or relating to Seller or any of its respective Affiliates; provided, however, that the information subject to the foregoing provisions of this sentence will not include any information generally available to, or known by, the public (other than as a result of disclosure in violation hereof), which is in the public domain or enters into the public domain through no fault of Seller or Buyer, or is available to Buyer on a non-confidential basis from a source other than Seller, Seller’s Affiliates or their advisors, provided that such source is not and was not bound by a confidentiality agreement or other legal duty of confidentiality to such parties; and provided, further, that the provisions of this Section 12.12(a) will not prohibit any retention of copies of records or disclosure (i) required by any Applicable Laws so long as reasonable prior notice is given of such disclosure and a reasonable opportunity is afforded to contest the same or (ii) made in connection with the enforcement of any right or remedy relating to this Agreement or the transactions contemplated hereby.  Buyer agrees that it will be responsible for any breach or violation of the provisions of this Section 12.12(a) by any of its authorized representatives.

 

(b) Seller hereby agrees with Buyer that Seller and its authorized representatives will not, and that Seller will cause its Affiliates not to, at any time on or after the date of this Agreement, directly or indirectly, without the prior written consent of Buyer, disclose or use, any Confidential Information, involving or relating to Buyer or Buyer’s Affiliates (including the Company, Akos and their respective Subsidiaries); provided, however, that the information subject to the foregoing provisions of this sentence will not include any information generally available to, or known by, the public (other than as a result of disclosure in violation hereof), which is in the public domain or enters into the public domain through no fault of Seller or Buyer, or is available to Seller on a non-confidential basis from a source other than Buyer, their respective Affiliates or their advisors; provided, that such source is not and was not bound by a confidentiality agreement or other legal duty of confidentiality to such parties; and provided, further, that the provisions of this Section 12.12(b) will not prohibit any retention of copies of records or disclosure (i) required by any Applicable Laws so long as reasonable prior notice is given of such disclosure and a reasonable opportunity is afforded to contest the same or (ii) made in connection with the enforcement of any right or remedy relating to this Agreement or the transactions contemplated hereby; provided, however, that Seller may make any public disclosures that is required by law or regulation, including the rules or regulations of the Securities and Exchange Commission, the NYSE or NASDAQ (in which case the disclosing party will advise the other parties prior to making the disclosure).  Seller agrees to be responsible for any breach or violation of the provisions of this Section 12.12(b) by any of its authorized representatives.

 

  

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As used herein, “Confidential Information” means all information, matter or thing of a secret, confidential or private nature which is either (x) marked by the disclosing party as “Confidential,” or (y) with respect to which the nature of such information, matter or thing or the circumstances of its disclosure would lead to a reasonable conclusion that such information, matter or thing is confidential to the disclosing party.

 

Section 12.13. Further Assurances.  Each party shall, without further consideration (unless otherwise provided for herein), take such further action (including the execution and delivery of such further documents and instruments and the making or obtaining of any consents not made or obtained prior to the Closing) as the other party reasonably requests in order to carry out the purposes of this Agreement and the Ancillary Agreements.  At all times immediately prior to and following the Closing, and until the termination of the Transition Services Agreement pursuant to its terms, Seller hereby agrees that to the extent the migration of all Business data to Seller Parent’s cloned system is not completed in full prior to the Closing Date, or such cloned system otherwise fails at any time to be operational (in whole or in part), Seller shall use its own systems to maintain such data and provide the services it has agreed to provide Buyer pursuant to the Transition Services Agreement.

 

Section 12.14. Press Releases and Announcements.  No party shall issue any press release or announcement relating to the subject matter of this Agreement without the prior written approval of all other parties; provided, however, that any party may make any public disclosure that is required by law or regulation, including the rules or regulations of the Securities and Exchange Commission, the NYSE or NASDAQ (in which case the disclosing party will advise the other parties prior to making the disclosure).

 

  

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Section 12.15. No Third-Party Beneficiaries.  This Agreement constitutes an agreement solely among the parties hereto and is not intended to and will not confer any rights, remedies, obligations or liabilities, legal or equitable, including any right of employment, on any Person (including but not limited to any employee or former employee of the Company, Akos or any of their respective Subsidiaries) other than the parties hereto and their respective successors or assigns, or otherwise constitute any Person a third-party beneficiary under or by reason of this Agreement.  Nothing in this Agreement, express or implied, is intended to or shall constitute the parties hereto partners or participants in a joint venture.

 

Section 12.16. Expenses.  Except as otherwise expressly provided herein or in the any Ancillary Agreement, all fees, costs and expenses incurred in connection with the drafting, negotiation, execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby, including the fees and disbursements of legal counsel, financial advisors and accountants (collectively, the “Transaction Expenses”), shall be paid by the party incurring such fee, cost or expense; provided, however, that all Transactions Expenses incurred by the Company, Akos or their respective Subsidiaries shall be paid by Seller at or prior to the Closing.  Any Transaction Expenses incurred by the Company, Akos or their respective Subsidiaries and unpaid at or after the Closing, however arising, shall be paid by Seller without contribution by the Company, Akos, their respective Subsidiaries or Buyer.

 

Section 12.17. Receipt of Payments.  From and after the Closing, if Seller shall receive any payment in respect of the Business, then Seller shall promptly, and in any event no later than 30 calendar days, following the date Seller became aware of its receipt of such payment, notify Buyer of such payment and remit such payment to Buyer by wire transfer of immediately available funds to an account designated by Buyer.  

 

[END OF TEXT – SIGNATURE PAGE FOLLOWS]

 

  

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IN WITNESS WHEREOF, Buyer and Seller have caused this Agreement to be signed by their respective officers thereunto duly authorized as of the date first written above.

 

	 	
ICON CLINICAL RESEARCH INC. 

By:____________________________ 

Name:

Title:

ICON CLINICAL RESEARCH UK LIMITED

By:____________________________ 

Name:

Title:

CROSS COUNTRY HEALTHCARE, INC.

By:____________________________

Name:

Title:

LOCAL STAFF, LLC

By:____________________________

Name:

Title:

CROSS COUNTRY HEALTHCARE UK HOLDCO LTD.

By:____________________________

Name:

Title:

 

  

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TABLE OF CONTENTS

	
ARTICLE I. DEFINITIONS

	 	 	3	 
	 	 	 	 	 
	
ARTICLE II. PURCHASE AND SALE; CLOSING

	 	 	17	 
	 	 	 	 	 
	
Section 2.1.

	
Purchase of Interests

	 	 	17	 
	
Section 2.2.

	
Consideration

	 	 	17	 
	
Section 2.3.

	
Escrow Amounts

	 	 	18	 
	
Section 2.4.

	
The Closing

	 	 	18	 
	
Section 2.5.

	
Waiver of Pre-emption Rights

	 	 	18	 
	
Section 2.6.

	
Deliveries by Seller

	 	 	18	 
	
Section 2.7.

	
Deliveries by Buyer

	 	 	22	 
	
Section 2.8.

	
Closing Agreements

	 	 	22	 
	 	 	 	 	 
	
ARTICLE III. PURCHASE PRICE ADJUSTMENT

	 	 	23	 
	 	 	 	 	 
	
Section 3.1.

	
Purchase Price Adjustment

	 	 	23	 
	
Section 3.2.

	
Net Working Capital Adjustment

	 	 	23	 
	
Section 3.3.

	
Closing Balance Sheet; Schedule of Adjustments.

	 	 	23	 
	
Section 3.4.

	
Other Adjustments and Deferred Purchase Price.

	 	 	28	 
	
Section 3.5.

	
Purchase Price Allocation

	 	 	31	 

 

 

108

 

 

	
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SELLER

	 	32	 
	 	 	 	 
	
Section 4.1.

	
Organization

	 	 	32	 
	
Section 4.2.

	
Capitalization; Subsidiaries.

	 	 	33	 
	
Section 4.3.

	
Organization and Authority of Seller; No Conflict; Required Filings and Consents.

	 	 	35	 
	
Section 4.4.

	
Financial Statements; Absence of Undisclosed Liabilities.

	 	 	37	 
	
Section 4.5.

	
Tax Matters.

	 	 	38	 
	
Section 4.6.

	
Absence of Certain Changes or Events

	 	 	42	 
	
Section 4.7.

	
Property.

	 	 	46	 
	
Section 4.8.

	
Intellectual Property

	 	 	48	 
	
Section 4.9.

	
Employee Benefit Plans.

	 	 	48	 
	
Section 4.10.

	
Contracts.

	 	 	51	 
	
Section 4.11.

	
Compliance with Law; Necessary Authorizations.

	 	 	53	 
	
Section 4.12.

	
Labor Matters.

	 	 	54	 
	
Section 4.13.

	
Insurance

	 	 	55	 
	
Section 4.14.

	
Litigation

	 	 	56	 
	
Section 4.15.

	
Environmental Matters

	 	 	57	 
	
Section 4.16.

	
No Brokers

	 	 	58	 
	
Section 4.17.

	
Condition of Assets

	 	 	58	 
	
Section 4.18.

	
Customers

	 	 	58	 
	
Section 4.19.

	
Books and Records of the Company.

	 	 	59	 
	
Section 4.20.

	
Statutory Books of Akos.

	 	 	60	 
	
Section 4.21.

	
Transactions with Seller and Affiliates

	 	 	60	 
	
Section 4.22.

	
Bank Accounts and Safe Deposit Boxes

	 	 	61	 
	
Section 4.23.

	
Powers of Attorney

	 	 	61	 
	
Section 4.24.

	
Warranties and Indemnities.

	 	 	61	 
	
Section 4.25.

	
Insolvency

	 	 	62	 
	
Section 4.26.

	
Creditors

	 	 	62	 
	
Section 4.27.

	
Dissolution

	 	 	62	 
	
Section 4.28.

	
Regulatory Matters

	 	 	63	 
	
Section 4.29.

	
MHRA Reports

	 	 	65	 
	
Section 4.30.

	
Accounts Receivable

	 	 	65	 
	
Section 4.31.

	
Absence of Outstanding Indebtedness

	 	 	66	 
	
Section 4.32.

	
Service Liability

	 	 	66	 
	
Section 4.33.

	
Information Technology.

	 	 	66	 
	
Section 4.34.

	
Administrator

	 	 	68	 
	
Section 4.35.

	
Dividends

	 	 	68	 
	
Section 4.36.

	
Actions set out in Schedule 6.7 and Repayment of Indebtedness

	 	 	69	 

 

 

109

 

 

	
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER

	 	 	69	 
	 	 	 	 	 
	
Section 5.1.

	
Organization of Buyer

	 	 	69	 
	
Section 5.2.

	
Authority; No Conflict; Required Filings and Consents.

	 	 	69	 
	
Section 5.3.

	
Capital Resources.

	 	 	71	 
	
Section 5.4.

	
No Brokers

	 	 	71	 
	
Section 5.5.

	
Investigation by Buyer

	 	 	71	 
	 	 	 	 	 
	
ARTICLE VI COVENANTS PRIOR TO CLOSING DATE

	 	 	72	 
	 	 	 	 	 
	
Section 6.1.

	
Access to Information

	 	 	72	 
	
Section 6.2.

	
Operation of the Business

	 	 	72	 
	
Section 6.3.

	
Negative Covenant

	 	 	73	 
	
Section 6.4.

	
Required Approvals

	 	 	73	 
	
Section 6.5.

	
No Negotiation.

	 	 	73	 
	
Section 6.6.

	
Commercially Reasonable Efforts

	 	 	74	 
	
Section 6.7.

	
Completion of Actions set out in Schedule 6.7 and Repayment of Indebtedness

	 	 	75	 

 

  

110

  

 

	
ARTICLE VII. CONDITIONS TO CLOSING

	 	 	75	 
	 	 	 	 	 
	
Section 7.1.

	
Conditions to Each Party’s Obligation

	 	 	75	 
	
Section 7.2.

	
Additional Conditions to Obligations of Buyer

	 	 	75	 
	
Section 7.3.

	
Additional Conditions to Obligations of Seller

	 	 	77	 
	 	 	 	 	 
	
ARTICLE VIII. TERMINATION

	 	 	77	 
	 	 	 	 	 
	
Section 8.1.

	
Termination Events

	 	 	77	 
	
Section 8.2.

	
Effect of Termination

	 	 	79	 
	 	 	 	 	 
	
ARTICLE IX. INDEMNIFICATION

	 	 	79	 
	 	 	 	 	 
	
Section 9.1.

	
Indemnification of Buye

	 	 	79	 
	
Section 9.2.

	
Indemnification of Seller

	 	 	80	 
	
Section 9.3.

	
Exclusive Remedies

	 	 	81	 
	
Section 9.4.

	
Survival of Representations and Warranties

	 	 	81	 
	
Section 9.5.

	
Terms and Conditions of Indemnification; Resolution of Conflicts

	 	 	82	 

 

 

111

 

 

	
ARTICLE X. TAX MATTERS

	 	 	84	 
	 	 	 	 	 
	
Section 10.1.

	
Tax Treatment of the Transaction

	 	 	84	 
	
Section 10.2.

	
Tax Returns and Tax Payments

	 	 	84	 
	
Section 10.3.

	
Allocation of Taxes

	 	 	87	 
	
Section 10.4.

	
Tax Refunds

	 	 	87	 
	
Section 10.5.

	
Cooperation on Tax Matters

	 	 	88	 
	
Section 10.6.

	
Transfer Taxes

	 	 	89	 
	
Section 10.7.

	
Tax Sharing Agreements

	 	 	89	 
	
Section 10.8.

	
Tax Indemnification

	 	 	89	 
	
Section 10.9.

	
Tax Treatment of Indemnification Payments

	 	 	90	 
	
Section 10.10.

	
Survival

	 	 	90	 
	
Section 10.11.

	
Tax Audits

	 	 	91	 
	
Section 10.12.

	
Section 338(h)(10) Election

	 	 	92	 
	 	 	 	 	 
	
ARTICLE XI RESTRICTIVE COVENANTS

	 	 	93	 
	 	 	 	 	 
	
Section 11.1.

	
Non-Competition

	 	 	93	 
	
Section 11.2.

	
Non-Solicitation

	 	 	94	 
	
Section 11.3.

	
Continuing Employees

	 	 	94	 
	
Section 11.4.

	
General

	 	 	95	 
	
Section 11.5.

	
Remedies

	 	 	96	 

 

  

112

  

 

	
ARTICLE XII. MISCELLANEOUS

	 	 	97	 
	 	 	 	 	 
	
Section 12.1.

	
Notice

	 	 	97	 
	
Section 12.2.

	
Acknowledgement

	 	 	99	 
	
Section 12.3.

	
Employees.

	 	 	99	 
	
Section 12.4.

	
Interpretation

	 	 	101	 
	
Section 12.5.

	
Counterparts

	 	 	101	 
	
Section 12.6.

	
Entire Agreement

	 	 	101	 
	
Section 12.7.

	
Governing Law

	 	 	102	 
	
Section 12.8.

	
Assignment

	 	 	103	 
	
Section 12.9.

	
Amendment

	 	 	103	 
	
Section 12.10.

	
Severability

	 	 	103	 
	
Section 12.11.

	
Certain Understandings

	 	 	103	 
	
Section 12.12.

	
Confidentiality.

	 	 	104	 
	
Section 12.13.

	
Further Assurances

	 	 	105	 
	
Section 12.14.

	
Press Releases and Announcements

	 	 	105	 
	
Section 12.15.

	
No Third-Party Beneficiaries

	 	 	106	 
	
Section 12.16.

	
Expenses

	 	 	106	 
	
Section 12.17.

	
Receipt of Payments.

	 	 	106	 

  

113

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