Tombstone Exploration Corp. v. Eurogas, Inc.

          MEMORANDUM DECISION AND ORDER CONSTRUING AGREEMENTS

          DAVID NUFFER, UNITED STATES DISTRICT JUDGE.

         This Memorandum Decision and Order construes and interprets four key documents which are the foundation of many claims in the case, dealing with the material terms. The Memorandum Decision and Order was provided in draft before trial to assist the parties in presentation of proof. Following the findings of fact entered March 21, 2018, it was again provided as a basis for the eventual decision. After the conclusions of law were announced March 22, 2018, this order is entered.

         FACTS AND DOCUMENTS ......................................................................................................... 2

         DISCUSSION ................................................................................................................................. 3

         The Agreement ............................................................................................................................ 3

         The First Amendment ................................................................................................................. 5

         The Second Amendment ............................................................................................................. 5

         The Extension Agreement ........................................................................................................... 7

         No Need to Consider Extrinsic Evidence ................................................................................... 9

         Summary of Parties' Obligations Under the Agreements ......................................................... 10

         FACTS AND DOCUMENTS

         The parties have stipulated to the existence, execution and authenticity of four significant documents and to some pertinent facts.^[1]

         1. On December 13, 2013, EuroGas, Inc., (“Eurogas”); Eurogas AG, and Tombstone Exploration Company (“Tombstone”) entered into a Stock-for-Stock Exchange Agreement (“Agreement”). A true and correct copy of the Agreement is Joint Exhibit 3.

         2. On January 13, 2014, the parties entered into a First Amendment to the Agreement (the “First Amendment”). A true and correct copy of the First Amendment is Joint Exhibit 4. The First Amendment re-affirmed the original Agreement but added that EuroGas granted to Tombstone an amount equal to 20% of any award obtained by EuroGas or EuroGas AG, an indirect subsidiary, relating to EuroGas's lawsuit against the Slovak Republic in Paris, France.

         3. On May 13, 2014, EuroGas and Tombstone entered into a Second Amendment to the Exchange Agreement (the “Second Amendment”). A true and correct copy of the Second Amendment is Joint Exhibit 8.

         4. On May 20, 2014, pursuant to the Second Amendment, EuroGas's Utah counsel wired $100, 000 to Tombstone and received a certificate representing 69 million shares of Tombstone stock from Tombstone's transfer agent. The certificate representing the 69 million shares was agreed by the parties to be issued in the name of ZB Capital AG, a EuroGas subsidiary.

         5. In August 2014, Tombstone filed a lawsuit in the federal district court of Utah against EuroGas and others. The Complaint was denominated as Tombstone v. EuroGas, et al., No. 2:14-cv-00606-PMW. A true and correct copy of the Complaint is Joint Exhibit 18.

         6. On November 19, 2014, EuroGas and Tombstone (along with EuroGas AG and ZB Capital AG) entered into an Extention Agreement [sic] (the “Extension Agreement”). The Extension Agreement re-affirmed the original Agreement, as amended, but added new provisions. A true and correct copy of the Extension Agreement is Joint Exhibit 20.

         7. Tombstone voluntarily dismissed No. 2:14-cv-00606 without prejudice on November 25, 2014.

         DISCUSSION

         The Agreement

         The Agreement effective December 10, 2013, calls for exchange of stock and payment of money. In the exchange of stock, Tombstone was to deliver 348 million shares of its stock to Eurogas while Tombstone was to receive 240 million shares of Eurogas AG, an indirect subsidiary of Eurogas. The 240 million Eurogas AG shares were recited as 26% of the Eurogas AG issued and outstanding shares. The parties have stated, though the documents do not state, that the 348 million shares of Tombstone stock were to give Eurogas control of Tombstone. Eurogas was to have “the right to appoint two Members” to the Tombstone Board and Tombstone was to have the rights to appoint two members to the board of Eurogas AG.

         Closing under the Agreement was to occur December 10, 2013. Eurogas was to pay for exploration work by Tombstone, with “$500, 000 on closing; $500, 000 on or before April 30, 2014, and $4, 000, 000 on or before September 30, 2014.” The Agreement contains many covenants and conditions.

         The Agreement refers to the Eurogas AG shares of common stock as the “Shares.” Seller is willing to exchange 240 million shares (the “Shares”) of [Eurogas AG] common stock (the “Shares”) representing approximately 26% of [Eurogas AG]'s total issued and outstanding shares of Common Stock for common stock of [Tombstone].

         The Agreement also contains a merger clause:

14. Miscellaneous.

d. Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the Parties and supersedes any prior understandings, agreements, or representations by or among the Parties, written or oral, to the extent they related [sic] in any way to the subject matter hereof.

         and a clause regarding amendments:

j. Amendments and Waivers. No. amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by [Tombstone] and [Eurogas] or their respective representatives. No. waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or ...