ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of
January 1, 2010 (the "Effective Date") by and among United States Oil & Gas Corporation, a
Delaware corporation ("Buyer"), Mike Werner and Debbie Werner, individuals resident in the
State of North Dakota ("Sellers"), and Debbie Werner in her individual capacity as escrow agent
WHEREAS, Buyer and Sellers are party to that certain Securities Purchase Agreement
dated as of the date hereof (the "Securities Purchase Agreement"), pursuant to which Sellers
shall sell to Buyer all of the issued and outstanding stock of United Oil & Gas, Inc. (the "Target
WHEREAS, certain of the assets (the "Assigned Property") used in the business of the
Target Company are owned by the Sellers rather than by the Target Company;
WHEREAS, in connection with the sale of the Target Company stock to Buyer, Sellers
desire to assign the Assigned Property to the Buyer on the terms set forth herein;
WHEREAS, Buyer and Sellers desire that the assignment of the Assigned Property to
Buyer become effective on the date upon which the Note (as defined in the Securities Purchase
Agreement) has been satisfied and paid in full by Buyer; and
WHEREAS, to induce Buyer to proceed with the transactions contemplated by this
Agreement, Sellers are prepared to make certain representations, warranties and covenants to
NOW, THEREFORE, in consideration of the mutual covenants and promises contained
herein and in the Securities Purchase Agreement, and for other good and valuable consideration,
the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows:
PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES
Agreement to Purchase and Sell. Upon the terms and subject to the conditions set
forth in this Agreement, upon the Closing Date (as defined in Section 2.3), Sellers shall convey,
sell, transfer, assign and deliver to Buyer, and Buyer shall purchase from Sellers, all of their
right, title and interest existing now or at any time hereafter through the Closing Date (whether
or not in inchoate form) in or to all of the following assets, properties and rights of Sellers:
Personal Property. The buildings, machinery, equipment, pumps, vehicles
and other tangible personal property located at 203 East 11
Street, Bottineau, ND 58318
Real Property. The real property described in the warranty deed attached
hereto as Exhibit A (the "Real Property" and, collectively with the Personal Property, the
Permits. All permits, including all pending applications therefor or
renewals thereof with respect to the Transferred Assets (the "Permits"), in each case to the extent
their transfer is permitted by law; and
Warranties. All rights under express or implied warranties from the
providers of goods and services in connection with the operation of the Transferred Assets or the
ownership of the Transferred Assets.
The assets, properties and rights to be conveyed, sold, transferred, assigned and delivered to
Buyer pursuant to this Section 1.1 are collectively referred to as the "Purchased Assets". All of
the Purchased Assets shall be sold to Buyer free and clear of any liens or other encumbrances.
The Purchased Assets shall not include those assets, properties and rights of Seller identified by
Buyer as Excluded Assets herein.
Excluded Assets. Sellers will retain all of their right, title and interest in and to,
and will not, and will not be deemed to, sell, transfer, assign, convey or deliver to Buyer, and the
Purchased Assets will not include, any assets, rights or properties other than those specifically
described in Section 1.1 (the "Excluded Assets").
Agreement to Assume Certain Obligations. At the Closing and subject to the
terms and conditions of this Agreement, Buyer shall assume and agree to discharge and perform
when due, the mortgage balance of $5,155.92 (at December 31, 2009) on the Real Property listed
in Section 1.1(b) (the "Assumed Obligations") that by their terms are to be performed after the
Retained Liabilities. Except for the Assumed Obligations, Sellers agree that
Buyer shall not be obligated to assume or perform and is not assuming or performing any
liabilities or obligations of Sellers (the "Retained Liabilities"), and Sellers shall remain
responsible for all Retained Liabilities.
PURCHASE PRICE, MANNER OF PAYMENT AND CLOSING
Consideration. Upon the terms and subject to the conditions contained in this
Agreement, in consideration for the Purchased Assets and the covenants contained herein and in
full payment therefor, (i) Buyer shall pay to Sellers the consideration set forth in Section 2.2, and
(ii) Buyer shall assume the Assumed Obligations.
Payment of Note. As the sole consideration for the Purchased Assets, Buyer shall
pay in full and otherwise satisfy its obligations under that certain Promissory Note dated as of the
date hereof (the "Note") issued by Buyer to Sellers in connection with the consummation of the
transactions contemplated by the Securities Purchase Agreement.
Time and Place of Closing. Subject to the terms and conditions set forth herein,
the transactions contemplated by this Agreement shall be consummated (the "Closing") at 10:00
AM central time on the Closing Date as determined pursuant to Section 2.4.
Transfer of Property on Closing Date. Upon payment by Buyer in full of the Note
(by payment in cash, reduction in principal amount pursuant to Section 4 of the Note, or a
combination of both), Buyer shall send to Sellers and Escrow Agent a Notice of Assignment in
the form attached hereto as Exhibit B (the "Notice"). Such Notice of Assignment shall specify
the date upon which the transactions consummated by this Agreement shall take place (the
"Closing Date"), which date shall at least seven days following the date of such Notice.
Personal Property. At 10:00 AM Texas time ("Transfer Time") on the
Closing Date, without further action by any party, all of Sellers' right, title and interest in the
Personal Property shall be sold, assigned and transferred to Assignee, effective immediately as of
Transfer Time. Such transfer shall be effected pursuant to that certain Bill of Sale, Assignment
and Assumption Agreement attached hereto as Exhibit C (the "Assignment Agreement"), which
Assignment Agreement shall be executed by Sellers on the Effective Date and placed into
escrow with the Escrow Agent on the Effective Date. After the Transfer Time, the parties agree
to use their respective best efforts to effect the physical transfer of the Personal Property into
Buyer's sole possession if so requested by Buyer.
Real Property. On the Closing Date, all of Sellers' right, title and interest
in the Real Property shall be sold, assigned and transferred to Assignee. Such transfer shall be
effected pursuant to that certain warranty deed attached hereto as Exhibit A (the "Warranty
Deed"), which Warranty Deed shall be executed by Sellers on the Effective Date and placed into
escrow with the Escrow Agent on the Effective Date.
Duties of Escrow Agent on Closing Date. On the Closing Date, the Escrow Agent
covenants and agrees to take the following actions:
Escrow Agent shall promptly deliver the Warranty Deed to the Buyer.
Escrow Agent shall date the Assignment Agreement as of the Closing
Date and shall promptly send the originally-executed, dated Assignment Agreement to Buyer.
REPRESENTATIONS AND WARRANTIES
Sellers hereby represent and warrant to Buyer as applicable, and Buyer hereby represents
to Sellers as applicable, that as of the date hereof and as of the Closing Date.
Seller Representations and Warranties.
Each Seller has all requisite power and authority (i) to execute and deliver
this Agreement, (ii) to sell the Personal Property and Real Property and (iii) to execute and
deliver this Agreement and to carry out and perform its obligations hereunder. This Agreement,
when executed and delivered by Seller, will constitute a valid and binding obligation of eac
Seller, enforceable in accordance with its terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, and (ii) as limited by laws relating to the availability
of specific performance, injunctive relief or other equitable remedies. The execution, delivery
and performance by Sellers of this Agreement, and the consummation of the transactions
contemplated hereby, will not
contravene, conflict with or result in a violation of any provision of
the organizational documents of the Target Company;
contravene, conflict with or result in a violation of any of the terms
of, or give any federal, state or local governmental authority the right to challenge the transaction
contemplated hereby or to exercise any remedy or obtain any relief under, any law or
governmental order to which the Seller, the Target Company, or any of the assets owned or used
by the Sellers may be subject;
cause the Buyer or the Target Company to become liable for the
payment of any tax, or cause any of the assets owned by the Target Company to be reassessed or
revalued by any taxing authority;
result in any violation or be in conflict with or constitute, with or
without the passage of time or giving of notice, a default under any provision of any mortgage,
indenture, agreement, instrument or contract to which the Target Company or any Seller is a
party or by which the Target Company or any Seller is bound; or
result in the imposition or creation of any lien or other
encumbrance upon or with respect to any of the assets owned or used by the Target Company.
Condition of Purchased Assets.
Condition of Personal Property. Each Seller represents and
warrants that the Personal Property assets are in good working order and condition, ordinary
wear and tear excepted, have been properly maintained, are suitable for the uses for which they
are being utilized in the business, do not require more than regularly scheduled maintenance in
the ordinary course, consistent with Sellers' established maintenance policies, to keep them in
good operating condition and comply with all requirements under applicable laws, regulations
and licenses which govern the use and operation thereof.
Title to of Purchased Assets. Sellers represent and warrant that
Sellers have, and on the Closing Date will convey and transfer to Buyer, good, complete and
marketable title to all of the Purchased Assets free and clear of all liens or other encumbrances of
any nature whatsoever.
Representations and Warranties of Seller. The representations and
warranties of Sellers contained herein do not contain any statement of a material fact that was
untrue when made or omit any information necessary to make any such statement contained
therein not misleading.
Buyer Representations and Warranties.
The Buyer is a corporation organized, existing and in good standing under
the laws of the state of Delaware. The Buyer has all requisite power and authority to execute and
deliver this Agreement and carry out and perform its obligations hereunder. This Agreement,
when executed and delivered by the Buyer, will constitute a valid and legally binding obligation
of the Buyer, enforceable in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally, and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable remedies.
Conditions to Closing. The obligations of Sellers and Buyer to consummate and
effect this Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Closing Date of each of the following conditions:
Sellers and Buyer shall have executed the Assignment Agreement in the
form attached hereto as Exhibit C as of the date hereof and shall have delivered such executed
Assignment Agreement to Escrow Agent.
Sellers shall have executed the Warranty Deed in the form attached hereto
as Exhibit A as of the date hereof and shall have provided such executed Warranty Deed to
Buyer shall have paid the Note in full, and shall have delivered to Sellers a
Notice of Assignment in the form attached hereto as Exhibit B in accordance with the Notice
procedures set forth in Section 6.1(c) hereof.
The Closing Date specified in the Notice of Assignment shall have
Representations, Warranties and Covenants. The representations and warranties
of Seller in this Agreement shall be true and correct in all respects on and as of the Closing Date
as though such representations and warranties were made on and as of such time.
Escrow Agent Obligations at Closing. On the Closing Date, Escrow Agent shall
execute its duties as set forth in Section 2.5 hereof.
The representations and warranties made by the Sellers pursuant hereto or
in any document, certificate, schedule, or instrument delivered in connection herewith shall
survive the Effective Date and shall continue in effect for twelve (12) months following the
Closing Date, except that (i) the representations and warranties set forth in Section 3.1(b)(ii)
shall survive the Closing Dates in accordance with the applicable statute of limitations; provided,
however, that any indemnification obligation shall not terminate as to any Losses, as defined
below, with respect to which a Claim Notice, as defined below, has been delivered to the Sellers
prior to the expiration of the applicable survivability period, and provided further that Sellers'
indemnification obligations for fraud or intentional misrepresentation shall not terminate until
the expiration of the applicable statute of limitations, regardless of whether the underlying
representation or warranty has terminated.
Except to the extent caused by the Buyer's gross negligence or willful
misconduct, the Sellers shall indemnify and hold harmless the Buyer and its directors, officers,
employees, shareholders and agents from and against any and all demands, actions or causes of
action, claims, liabilities, damages, losses, fines, costs and expenses (including interest, penalties
and reasonable attorneys fees and expenses) (collectively, "Losses"), incurred by any of them
and arising out of or based upon:
any breach by the Sellers of their representations, warranties,
covenants or agreements set forth in this Agreement, or any other document or instrument
delivered by the Sellers pursuant hereto or thereto;
any breach by the Sellers of any covenant or obligation of such
party in this Agreement; or
any obligation of the Sellers' imposed on the Buyer by operation
of law in connection with the transactions contemplated by this Agreement.
THE BUYER AND THE SELLERS INTEND THAT SUCH BUYER, ITS
AGENTS AND REPRESENTATIVES BE INDEMNIFIED FROM LIABILITY FOR ITS OWN
NEGLIGENCE PURSUANT TO THIS SECTION 5.1(a).
Promptly after the incurrence of any Losses by a party entitled to
indemnification pursuant to Section 5.1 (an "Indemnitee"), including any claim by a third party
described in subsection 5.2(b), which might give rise to indemnification, the Indemnitee shall
deliver to the party from which indemnification is sought (the "Indemnitor") a notice that
specifies in a reasonable detail each individual item of Loss, the basis for any anticipated liability
and the nature of the misrepresentation, breach of warranty, breach of covenant or claim to
which each such item is related and the computation of the amount to which such Indemnitee
claims to be entitled hereunder. Claims for Losses to which an Indemnitor shall not object in
writing within thirty (30) days after receipt of notice, and claims for Losses which are contested
and resolved by agreement or judicial determination or shall have been settled with the consent
of the Indemnitor shall be paid within ten (10) days.
If a claim or demand is made against either party by any third party (a
"Third Party Claim") as to which the Indemnitor may be obligated to provide indemnification
pursuant to this Agreement, such Indemnitee, within a reasonable time after receipt of such claim
or demand, shall notify the Indemnitor in writing, and in reasonable detail, of the Third Party
Claim (a "Claim Notice"). The failure by any Indemnitee to deliver a Claim Notice to the
Indemnitor shall not relieve the Indemnitor from any liability that it may have to such
Indemnitee under this Agreement, except to the extent that the Indemnitor shall have
demonstrated that it has been actually prejudiced as a result of such failure. Upon receipt of a
Claim Notice, the Indemnitor shall have the right, but not the obligation, to assume and control
the defense and settlement of the Third Party Claim for and on behalf of the Indemnitee. The
Indemnitor shall have 5 (five) business days to notify the Indemnitee in writing of its decision in
this regard. If the Indemnitor is entitled to and elects to exercise its right to assume and control
the defense and settlement of the Third Party Claim, then the Indemnitor shall diligently and
continuously defend such Third Party Claim through counsel reasonably satisfactory to the
Indemnitee, and the Indemnitee shall have the right to participate in the defense and settlement
thereof at its own expense. The Indemnitee shall cooperate with the Indemnitor in the defense
and settlement thereof (including preserving and sharing relevant documents and records,
attending and testifying at hearings and proceedings, and the like), and the Indemnitor shall not,
without the Indemnitee's prior written consent, settle such Third Party Claim unless the sole
relief provided in such settlement is monetary in nature and shall be paid in full by the
Indemnitor. If the Indemnitor declines to assume and control the defense of the Third Party
Claim, then the Indemnitee may proceed to defend the Third Party Claim as it sees fit, with a full
reservation of rights against the Indemnitor.
The Sellers' indemnification obligations shall not be affected by any
investigation conducted or knowledge acquired (or capable of being acquired) by or on behalf of
the Buyer at any time, whether before or after the execution and delivery of this Agreement, with
respect to the accuracy or inaccuracy of or compliance with any representation, warranty,
covenant or agreement. Neither the exercise of nor the failure to exercise the foregoing rights
shall constitute an election of remedies or limit in any manner the enforcement of any other
remedies that may be available.
Governing Law. This Agreement shall be governed by and construed
under the laws of the State of North Dakota, without regard to the conflict of law provisions
Additional Undertakings. Each party hereto hereby agrees to take such
additional action and execute such additional documents as the Buyer may deem reasonably
necessary or advisable in order to carry out or effect one or more of the obligations or restrictions
imposed on any party or the Shares pursuant to the express provisions of this Agreement.
Notice. All notices, requests, demands or other communications
hereunder shall be in writing and shall be deemed to have been duly given to the person
designated below (i) on the date of delivery if delivered in person; (ii) on the first business day
after being sent by fax, provided that the successful transmission of the fax has been confirmed
through a confirmation function sheet provided by the fax machine used for such transmission;
(iii) on the third business day following the deposit thereof in the United States Mail, provided it
is mailed by certified mail, return receipt requested and postage prepaid and properly addressed;
or (iv) on the second business day after being sent by air courier. Furthermore and
notwithstanding the foregoing, an electronic communication ("Electronic Notice") shall be
deemed written notice for purposes of this Section 6.1(c) if sent with return receipt requested to
the electronic mail address specified by the receiving party in a signed writing in a nonelectronic
form. Electronic Notice shall be deemed received at the time the party sending Electronic Notice
receives verification of receipt by the receiving party. Any party receiving Electronic Notice
may request and shall be entitled to receive the notice on paper, in a nonelectronic form
("Nonelectronic Notice") which shall be sent to the requesting party within ten (10) days of
receipt of the written request for Nonelectronic Notice. Any party hereto may from time to time,
by written notice to the other parties, designate a different address, which shall be substituted for
the one specified below:
if to Buyer, to:
United States Oil & Gas Corp.
11782 Jollyville Road
Austin, TX 78750
Attention: Alex Tawse
Fax: (512) 628-6880
and a copy (which shall not constitute notice) to:
Andrews Kurth LLP
111 Congress Avenue, Suite 1700
Austin, TX 78701
Attention: Ted Gilman
Fax: (512) 320-9292
and if to the Sellers, to:
Mike and Debbie Werner
P.O. Box 386
Bottineau, ND 58318
and if to Debbie Warner in her capacity as Escrow Agent, to the address specified
for the Sellers.
Entire Agreement; Amendment. This Agreement and the Securities
Purchase Agreement represent the entire agreement among the parties and supersedes all prior
agreements and understandings relating to the subject matter hereof. This Agreement may only
be amended, modified or waived in a writing referencing this Agreement signed by the Buyer
and the Sellers.
Titles and Subtitles. The titles of the paragraphs and subparagraphs of this
Agreement are for convenience of reference only and are not to be considered in construing this
Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original and all of which together shall constitute one instrument. This
Agreement may be executed and delivered by facsimile transmission.
Expenses. Each party hereto shall be responsible for and pay its own
legal, accounting and other professional fees and charges and all other costs and expenses
incurred in connection with the transactions contemplated herein.
Successors and Assigns. The provisions of this Agreement shall inure to
the benefit of, and be binding upon, the Company and its successors and assigns and the Buyer
and the Buyer's legal representatives, heirs, legatees, distributees, assigns and transfers by
operation of law, whether or not any such person shall have become a party to this Agreement
and have agreed in writing to join herein and be bound by the terms and conditions hereof.
Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this Agreement and
the balance of the Agreement shall be interpreted as if such provision were so excluded and shall
be enforceable in accordance with its terms.
Joint Product. This Agreement is the joint product of the Sellers and the
Buyer and each provision hereof and thereof has been subject to the mutual consultation,
negotiation and agreement of the Sellers and the Buyer and shall not be construed against any
[Signature page follows]
IN WITNESS WHEREOF, the parties hereto have executed this Asset Purchase
Agreement as of the date first above written.
UNITED STATES OIL & GAS
/s/ Alex Tawse
President and Chief Executive Officer
Notice of Assignment
Mike and Debbie Werner
P.O. Box 386
Bottineau, ND 58318
Dear Mike and Debbie:
I am writing to in connection with that certain Asset Purchase Agreement dated as of January 1,
2010, by and between yourselves and United States Oil & Gas Corporation (the "Purchase
Agreement"). This letter shall serve as notice to you pursuant to Section 2.4 of the Purchase
Agreement that the Note has been paid in full and terminated. Capitalized terms used but not
defined herein shall have the meanings given to such terms in the Purchase Agreement.
You are hereby notified that the Closing Date shall be ________________.
I direct your attention to Section 2.5 of the Closing Date, which sets forth the duties of Debbie
Werner as Escrow Agent on the Closing Date. Please deliver the items specified therein to me
promptly following the Closing Date.
Thank you for your cooperation in this matter. Please contact me if you have any questions
regarding the actions to take place on the Closing Date.
President and Chief Executive Officer
United States Oil & Gas Corp.
BILL OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS BILL OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT (this
"Bill of Sale"), is entered into as of January 1, 2010, by and between by and among United
States Oil & Gas Corporation, a Delaware corporation ("Buyer") and Mike Werner and Debbie
Werner, individuals resident in the State of North Dakota ("Sellers"). All capitalized terms used
and not otherwise defined herein shall have the respective meanings ascribed to such terms in the
Purchase Agreement (as defined below). This Bill of Sale shall be effective upon the Closing Date
(as defined in the Purchase Agreement).
WHEREAS, pursuant to that certain Asset Purchase Agreement between Buyer and
Sellers dated as of the date hereof (the "Purchase Agreement"), Seller has agreed to sell,
convey, transfer, assign and to Buyer, free and clear of all liens and other encumbrances, and
Buyer has agreed to purchase from Sellers, all of Sellers' right title and interest in and to the
WHEREAS, in accordance with the terms of the Purchase Agreement, Sellers has further
agreed to assign to Buyer, and Buyer has further agreed to assume from Seller, the Assumed
Obligations (if any) listed on Schedule 1.3 to the Purchase Agreement;
WHEREAS, the assignment of the Purchased Assets and the assignment and the
assumption of the Assumed Obligations shall take place on the Closing Date, which date shall be
determined in accordance with the Purchase Agreement; and
WHEREAS, the Seller desires to deliver to Buyer such instruments of sale, transfer,
conveyance, assignment and delivery as are required to sell, convey, transfer, assign and deliver
to Buyer all of the Purchased Assets and Assumed Obligations, such instruments to be held in
escrow and delivered to Buyer on the Closing Date in accordance with the Purchase Agreement.
NOW, THEREFORE, pursuant to the Purchase Agreement and in consideration of the
mutual promises herein and therein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
Assignment and Assumption. For good and valuable consideration, the receipt,
adequacy and legal sufficiency of which are hereby acknowledged, and as contemplated by
Section 1.1 of the Purchase Agreement, Sellers hereby sell, convey, transfer, assign and deliver
to Buyer all of the Purchased Assets free and clear of all liens and other encumbrances and all of
the Assumed Obligations listed on Schedule 1.3 of the Purchase Agreement.
Assumption. Buyer hereby purchases, accepts and acquires from Sellers the
Purchased Assets free and clear of all liens and other encumbrances. Buyer hereby further
assumes and agrees to discharge, to be bound, and perform when due the Assumed Obligations
listed on Schedule 1.3 of the Purchase Agreement, subject to any terms, conditions and
limitations set forth in the Purchase Agreement.
Terms and Conditions. This Bill of Sale is subject to all of the terms, conditions
and limitations set forth in the Purchase Agreement (including, without limitation, the
representations, warranties and covenants set forth in the Purchase Agreement).
Terms. In the event of any conflict or inconsistency between
the terms of this Bill of Sale and the terms of the Purchase Agreement, the terms of the Purchase
Agreement will prevail. Nothing contained herein will be deemed to alter, modify, expand or
diminish the terms of the Purchase Agreement.
Governing Law; Consent to Jurisdiction. This Bill of Sale shall be
governed by and construed in accordance with the choice of law provisions set forth in the
Severability. Should any term, provision or paragraph of this Bill of Sale
be determined to be illegal or void or of no force and effect, the balance of the Bill of Sale shall
Counterparts. This Bill of Sale may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each of which shall be
deemed to be an original but all of which taken together shall constitute one and the same
[Signature page follows]
IN WITNESS WHEREOF, the undersigned have caused this Bill of Sale and
Assignment and Assumption Agreement to be executed as of the date first written above.
UNITED STATES OIL & GAS
President and Chief Executive Officer
SIGNATURE PAGE TO BILL OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT