U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
TENGASCO, INC.
(Name of Small Business Issuer as specified in its charter)
TENNESSEE 87-0267438
(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
603 Main Avenue, Suite 500
Knoxville, Tennessee 37902
(Address of Principal Executive Offic) (Zip Code)
Issuer's Telephone Number, including Area Code: (423) 523-1124
Issuer's Facsimile Number, including Area Code: (423) 523-9894
Securities registered pursuant to Section 12(b) of the Exchange Act:
None
Securities registered pursuant to Section 12(g) of the Exchange Act:
$0.001 par value common voting stock
DOCUMENTS INCORPORATED BY REFERENCE: See Part III, Item 1 of this Report.
TABLE OF CONTENTS
PART I
Item 1. Description of Business
Business Development
General
Special Risk Factors
Developmental Stage Company
Limited Market for Common Stock
General Economic Risks/Potential Volatility of Stock Price
Future Acquisitions
Future Capital Requirements; Uncertainty of Future
Funding
Replacement of Reserves
Uncertainty of Reserve Estimates
Operating Hazards
Future Sales of Common Stock
Voting Control
Competition
Dependence on Technical Personnel
Governmental Regulations
Indemnification of Directors, Officers, Employees
and Agents
Principal Products or Services and Markets
Reserve Analyses
Distribution Methods of Products or Services
Status of Any Publicly Announced New Product
or Services
Competitive Business Conditions, Competitive
Position in the Industry and Methods
of Competition
Sources and Availability of Raw Materials and Names
of Principal Suppliers
Dependence on One or a Few Major Customers
Patents, Trademarks, Licenses, Franchises, Concessions,
Royalty Agreements or Labor Contracts,
including Duration
Need for Governmental Approval of Principal Products
or Services
Effect of Existing or Probable Governmental Regulations
on Business
Research and Development
Cost and Effects of Compliance with Environmental Laws
Number of Total Employees and Number of Full-Time
Employees
Item 2. Managements Discussion and Analysis or Plan of
Operation
Plan of Operation for Existing Leases
Other Significant Plans
Item 3. Description of Property
Property Location, Facilities, Size and Nature of Ownership
Disclosure of Oil and Gas Operations
Item 4. Security Ownership of Certain Beneficial Owners
and Management 29
Security Ownership of Certain Beneficial Owners
Five Percent Stockholders
Directors and Executive Officers
Changes in Control
IRC Voting Trust Agreement
Item 5. Directors. Executive Officers, Promoters and Control
Persons
Identification of Directors and Executive Officers
Business Experience
Walter C. Arzonetti
Jeffrey D. DeMunnik
Charles N. Manhoff
William A. Moffett
Ted P. Scallan
Lyle G. Stockstill
Operations Committee
Employee Policies/Compensation Committee
Audit Committee
Family Relationships
Involvement in Certain Legal Proceedings
Item 6. Executive Compensation
Cash Compensation
Bonuses and Deferred Compensation
Compensation Pursuant to Plans
Pension Table
Other Compensation
Compensation of Directors
Employment Contracts
Termination of Employment and Change of Control
Arrangement
Item 7. Certain Relationships and Related Transactions
Transactions with Management and Others
Certain Business Relationships
Indebtedness of Management
Parents of the Issuer
Transactions with Promoters
Item 8. Description of Securities
Authorized Capital Stock
Common Stock
PART II
Item 1. Market Price of and Dividends on the Company's Common Equity and
Other stockholder Matters
Market Information
Holders
Dividends
Item 2. Legal Proceedings
Item 3. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Change from David T. Thomson, CPA to Charles M. Stivers, CPA
Change from Charles M. Stivers, CPA, to Price-Bednar, LLP,CPA
Change from Price-Bednar, LLP, CPA to Charles M. Stivers, CPA
Item 4. Recent Sales of Unregistered Securities
Item 5. Indemnification of Directors and Officers
PART F/S
PART III
Item 1. Index to Exhibits
PART I
Item 1. Description of Business.
Business Development.
The Company was initially organized under the laws of the State of
Utah on April 18, 1916, under the name "Gold Deposit Mining & Milling
Company." The Company was formed for the purpose of mining, reducing and
smelting mineral ores. A copy of the initial Articles of Incorporation may
be obtained from the Company, without charge; these are not deemed to be
material as the Company has changed its domicile to the State of Tennessee;
and a copy of the current Bylaws of the Company is attached hereto and
incorporated herein by reference. See the Exhibit Index.
At the Company's inception, the Board of Directors authorized the
issuance of 600,000 shares of its then $0.10 par value common voting stock
to directors, executive officers and persons who may be deemed to have been
promoters or founders of the Company in consideration of the conveyance to
the Company of approximately 10 lode mining claims located in the Battle
Mountain Mining District, State of Nevada. The Company conducted limited
mining operations following its organization.
The Company's Articles of Incorporation were amended on April 12,
1966, to provide that the Company shall have a perpetual existence. There
were 701,145 outstanding voting securities of the Company on the date of the
adoption of this amendment by the stockholders of the Company, and all
701,145 shares were voted in favor of the amendment. A copy of the Articles
of Amendment effecting this change may be obtained from the Company without
charge.
On November 10, 1972, the Company conveyed to an unaffiliated
entity its interest in three of the lode mining claims located in the Battle
Mountain Mining District; these claims constituted substantially all of the
Company's assets at that time, and the Company ceased all business
operations.
In connection with a change in control of the Company, in January,
1983, the Board of Directors of the Company authorized the issuance of
1,500,000 "unregistered" and "restricted" shares of its common stock to
certain directors and executive officers in consideration of cash and
services rendered of an aggregate value of $7,500.
On July 12, 1984, the Company's Articles of Incorporation were
again amended to: (i) authorize it to engage in any business or enterprise
deemed to be beneficial to the Company; (ii) increase the authorized capital
of the Company from 1,000,000 shares to 50,000,000 shares of common stock
(which allowed the Company to issue the "unregistered" and "restricted"
shares referred to in the preceding paragraph); (iii) reduce the par value
of its common stock from $0.10 to $0.001; (iv) provide that fully-paid stock
shall not be liable to any further call or assessment; and (v) provide that
stockholders shall not have pre-emptive rights to acquire unissued shares.
There were 980,778 outstanding voting securities of the Company on the date
of the adoption of this amendment by the stockholders of the Company, and
696,146 shares were voted in favor of these amendments with none opposing
and none abstaining. A copy of the Articles of Amendment effecting these
changes may be obtained from the Company, without charge.
From approximately 1983 to 1991, the operations of the Company
were limited to seeking out the acquisition of assets, property or
businesses that would be beneficial to it and its stockholders. The
Company's directors reviewed a number of potential acquisition targets;
however, prior to the acquisition of Onasco Biotechnologies, Inc., a Texas
corporation ("Onasco Texas"), which is discussed below, none progressed
beyond preliminary negotiations.
In contemplation of completing a "reverse" reorganization with
Onasco Texas, the stockholders of the Company adopted, ratified and approved
the following amendments to the Company's Articles of Incorporation: (i) a
forward split of the then outstanding 2,480,778 shares of common stock of
the Company on a basis of 2.015496 for one, resulting in 5,000,000 post-
split shares being outstanding, and retaining the par value at $0.001 per
share, with the appropriate adjustments being made in the additional paid in
capital and stated capital accounts of the Company; and (ii) a change of the
Company's name to "Onasco Companies, Inc." These amendments were subject to
the completion of the contemplated reorganization.
The Company entered into an Agreement and Plan of Reorganization
with Onasco Texas and all of its stockholders on December 17, 1991 (the
"Onasco Plan"). Pursuant to the Onasco Plan, the Company acquired all of
the issued and outstanding shares of common stock of Onasco Texas in
consideration of the Company's issuance of an aggregate total of 15,000,000
post-split "unregistered" and "restricted" shares of its $0.001 par value
common stock to the stockholders of Onasco Texas, pro rata, in accordance
with their respective interests in Onasco Texas.
The Onasco Plan was effective as of December 18, 1991, the date on
which the aforesaid Articles of Amendment respecting the reorganization with
Onasco Texas were filed with the Department of Commerce of the State of
Utah. There were 2,480,778 outstanding voting securities of the Company on
the date of the adoption of this amendment by the stockholders of the
Company, and 1,339,146 shares were voted in favor of these amendments with
none opposing and none abstaining. A copy of the Articles of Amendment
effecting these changes may be obtained from the Company, without charge.
Onasco Texas, which became a wholly owned subsidiary of the
Company following the completion of the Onasco Plan, was organized under the
laws of the State of Texas on October 17, 1991. The Company carried on the
business operations previously conducted by Onasco Texas, which consisted of
the development of diagnostic kits to screen for the presence of Type D
retroviruses in humans and monkeys and a putative synthetic vaccine against
such viruses. These operations, which primarily involved research and
development activities, proved unsuccessful and were discontinued in June,
1994, and Onasco Texas was dissolved by resolution of the Board of Directors
on or about April 10, 1995.
In accordance with the Utah Revised Business Corporation, which
became effective in 1991, on September 11, 1992, the Company's Articles of
Incorporation were further amended (i) to authorize the stockholders of the
Company to take any action that could have been taken at a meeting of the
stockholders without a meeting, if consents are signed by stockholders
holding at least the number of shares that would be necessary to take the
action at a meeting (this action was not possible under prior law); and (ii)
to provide for the reclassification of each outstanding share of its common
stock to become one-twentieth of one share of new common stock (designated
"Reconstituted Common Stock"), effective September 15, 1992, with no
fractional shares being created and no stockholder to hold less than one
share, and with no change in the par value or the authorized capital. The
net effect of this reclassification was a one share for 20 reverse split of
the outstanding shares of common stock. There were 20,259,987 outstanding
voting securities of the Company on the date of the adoption of this
amendment by the stockholders of the Company, and 14,800,000 shares were
voted in favor of these amendments with none opposing and none abstaining;
the outstanding voting securities of the Company were reduced to 1,012,999
shares as a result of the reverse split. A copy of the Articles of
Amendment effecting these changes may be obtained from the Company, without
charge.
In connection with a change in control of the Company in the
summer of 1994, Duane S. Jenson and his son, Jeffrey D. Jenson, purchased
697,500 shares of the Company's common stock, constituting approximately 67%
of the then outstanding voting securities of the Company, from Dr. Robert C.
Bohannon, Ph.D. and his family, in consideration of the sum of $10,000. Dr.
Bohannon was formerly the principal stockholder of Onasco Texas, and had
served as the President, CEO, Vice President and a director of the Company
since the completion of the Onasco Plan. Dr. Bohannon resigned these
positions with the Company, effective June 13, 1994, compromised a debt of
the Company to him for past services rendered to the Company and designated
Jeffrey D. Jenson to serve as President, CEO, Secretary/Treasurer and a
director of the Company. At the time of the change of control, Dr. Bohannon
was the sole director and executive officer of the Company.
At a special meeting of the Board of Directors held April 11,
1995, the Board of Directors adopted resolutions providing for the granting
of options to purchase "unregistered" and "restricted" shares of common
stock of the Company to certain directors, executive officers and
consultants whose service was to commence on the closing of a Purchase
Agreement then being negotiated, as described below, with Industrial
Resources, Corporation, a Kentucky corporation ("IRC"). See the heading
"Other Compensation" of the caption "Executive Compensation," Part I, Item
3, and the "Restricted Stock Options Table," below.
At a special meeting of stockholders held on April 28, 1995, the
Company's stockholders voted to approve the following, subject to the
execution of the Purchase Agreement pursuant to which the Company planned to
acquire certain oil and gas leases, equipment, securities and vehicles owned
by IRC, in consideration of the issuance of 4,000,000 post-split (as
described below) "unregistered" and "restricted" shares of the Company's
common stock:
(i) To amend the Articles of Incorporation of the Company to
effect a reverse split of the Company's outstanding $0.001 par value common
stock on a basis of one share for two, retaining the par value at $0.001 per
share, with appropriate adjustments being made in the additional paid in
capital and stated capital accounts of the Company;
(ii) To change the name of the Company to "Tengasco, Inc."; and
(iii) To change the domicile of the Company from the State of
Utah to the State of Tennessee by merging the Company into Tengasco, Inc., a
Tennessee corporation, formed by the Company solely for this purpose.
The Purchase Agreement was duly executed by the Company and IRC,
effective May 2, 1995. The reverse split, name change and change of
domicile became effective on May 4, 1995, the date on which duly executed
Articles of Merger effecting these changes were filed with the Secretary of
State of the State of Tennessee; a certified copy of the Articles of Merger
from the State of Tennessee was filed with the Department of Commerce of the
State of Utah on May 5, 1995. Unless otherwise noted, all subsequent
computations in this Registration Statement retroactively reflect this one
for two reverse split and all other reverse splits outlined above under this
caption. There were 1,037,650 outstanding voting securities of the Company
on the date of the adoption of the amendments by the stockholders of the
Company, and 801,383 shares were voted in favor of the amendments with none
opposing and none abstaining. Copies of the Articles of Merger and Plan of
Merger to effect the change of domicile, change the name of the Company to
"Tengasco, Inc." and to effect the one for two reverse split; the Purchase
Agreement with IRC; and the Tennessee Articles of Incorporation of the
wholly-owned subsidiary formed for the purpose of changing the Company's
domicile are attached hereto and incorporated hereby by reference. See the
Exhibit Index.
The assets acquired by the Company pursuant to the Purchase
Agreement were only a portion of the assets of IRC, which continues to
conduct oil and gas exploration activities.
On May 2, 1995, in connection with the execution of the Purchase
Agreement, Jeffrey D. Jenson, Kathleen L. Morrison and Travis T. Jenson
resigned as directors and executive officers of the Company, in seriatim,
and the following individuals were appointed to serve as directors in their
stead: George E. Walter, Jr.; Raymond E. Johnson; Jack E. Earnest; Edgar G.
Baugh; Walter C. Arzonetti; Charles N. Manhoff; Joe B. Mattei; William A.
Moffett; John O'Hagan; and Benton L. Becker. George E. Walter, Jr. was also
appointed President/CEO of the Company, and James C. Walter was appointed
Vice President and Secretary/Treasurer.
As compensation for services rendered and to be rendered to the
Company, including services relating to the Purchase Agreement, on May 2,
1995, the Company also executed three written compensation agreements (the
"Compensation Agreements") providing for the issuance of a total of 505,000
"unregistered" and "restricted" shares of common stock to the following
individuals: M. E. Ratliff; Jeffrey D. Jenson; and Leonard W. Burningham,
Esq. Copies of these Compensation Agreements are attached hereto and
incorporated herein by reference. See the Exhibit Index.
The Compensation Agreements of Messrs. Ratliff and Jenson provided
for the issuance of 215,000 and 240,000 "unregistered" and "restricted" post-
split shares (the one for two reverse split was not effected until May 4,
1995), respectively, to these individuals as compensation for services
valued by the Company at $21,500 each. Initially, Mr. Ratliff was to
receive the same number of shares as Mr. Jenson; however, he agreed to
reduce the number of shares he was to receive by 25,000 shares, with the
additional shares being allocated as part of the shares of common stock to
be issued to Mr. Burningham under one of the Compensation Agreements, as
outlined below. These shares were issued pursuant to Rule 701 of the
Securities and Exchange Commission. "Rule 701 Securities" may be publicly
sold by these persons pursuant to Rule 144 ninety days after the effective
date of this Registration Statement. See the caption "Recent Sales of
Unregistered Securities," Part II, Item 5, below, and the Exhibit Index.
The Compensation Agreement of Mr. Burningham provided for the
issuance, pursuant to Rule 701 of the Securities and Exchange Commission of
50,000 "unregistered" and "restricted" post-split shares of common stock as
compensation for legal services rendered and to be rendered to the Company,
exclusive of costs. These services were valued by the Company at $5,000.
See the caption "Recent Sales of Unregistered Securities," Part II, Item 5,
below, and the Exhibit Index.
Pursuant to a Confidential Limited Offering Memorandum dated
September 1, 1995, the Company attempted to offer and sell a minimum of
300,000 non-transferable Units and a maximum of 800,000 non-transferable
Units, consisting of one share of its "unregistered" and "restricted" $0.001
par value common stock and one Class A and one Class B Warrant to
"accredited investors" only, to raise a minimum of $1,500,000 and a maximum
of $4,000,000 in cash. This offering was terminated in November, 1995,
because the Company was having little success in reaching the minimum sale
of 300,000 Units.
The Purchase Agreement between the Company and IRC was amended,
effective as of June 1, 1995, to provide that a portion of the assets
acquired from IRC were to be purchased for the sum of $450,000 (which was in
addition to the 4,000,000 "unregistered" and "restricted" shares of common
stock of the Company issued to IRC on the execution of the Purchase
Agreement. The Company executed a Promissory Note in the amount of
$450,000, bearing interest at 8% per annum and due and payable on or before
December 31, 1997; this note was paid in consideration of the issuance of
"unregistered" and "restricted" common stock of the Company, at market
value, as outlined in the following paragraph. Copies of the Amendment,
General Bill of Sale and Promissory Note are attached hereto and
incorporated herein by reference. See the Exhibit Index.
Effective December 31, 1995, IRC agreed to accept 164,266
"unregistered" and "restricted" shares of the Company's common stock with a
market value of $5.37 per share on such date as full payment for debt of
approximately $882,112.25 of the Company to IRC and the Ratliff family. The
price was determined based upon the average trading price for shares of
common stock of the Company on the OTC Bulletin Board as of December 31,
1995. See the caption "Security Ownership of Certain Beneficial Owners and
Management," Part I, Item 4, below, for information regarding the voting
securities of the Company owned by the Ratliff family.
At the annual meeting of stockholders held January 30, 1996, the
following persons were elected as directors of the Company, to serve until
the next annual meeting of the stockholders of the Company or until their
successors are elected and qualified, or their prior resignations or
terminations: Walter C. Arzonetti; Benton L. Becker; Charles N. Manhoff;
William A. Moffett; and Lyle G. Stockstill. At the annual meeting,
4,047,550 shares of the 5,031,866 outstanding voting securities were voted
in favor of the election, with none opposing and none abstaining.
At the annual meeting of the directors held January 30, 1996,
immediately following the annual meeting of the stockholders, the following
persons were elected as executive officers of the Company, to serve until
the next annual meeting of the Board of Directors of the Company or until
their successors are elected and qualified, or their prior resignations or
terminations: Ted P. Scallan, President and CEO; Kelley S. Grabill,
Secretary; and Jeffrey D. DeMunnik, Treasurer. At its annual meeting, the
Board of Directors also adopted resolutions pursuant to which options to
purchase "unregistered" and "restricted" shares of common stock of the
Company were granted to Messrs. Jeffrey D. DeMunnik, Kelley S. Grabill, Ted
P. Scallan and Lyle G. Stockstill, directors or executive officers of the
Company, and to certain other persons, who were consultants or employees.
See the "Restricted Stock Options Table" of the caption "Executive
Compensation," Part I, Item 3, below.
On March 21, 1996, the Company entered into a Letter of
Understanding with Kenny Securities Corp. ("Kenny Securities") whereby Kenny
Securities, together with a co-manager satisfactory to the Company and Kenny
Securities, would act as the managing underwriters to offer and sell on a
"firm" commitment basis approximately 1,500,000 shares of the Company's
common stock in a combination of 1,000,000 primary shares for the Company,
and up to 500,000 additional shares for Company shareholders presently
owning "unregistered" and "restricted" securities of the Company, such
selling shareholders be limited to directors, executive officers, employees
or consultants to the Company. Under the Letter of Understanding, an
additional 1,597,445 shares are also reserved for the exercise or conversion
of any outstanding warrants, options or convertible securities. The
managing underwriters are to receive warrants equal to 5% of the total
number of shares purchased by the managing underwriters in the "firm"
underwriting at a price of $0.001 per each warrant, which would entitle the
warrant holder to purchase one share of the Company's common stock at a
price equal to 110% of the offering price for the shares of common stock
publicly offered. In addition, the managing underwriters would be allowed a
$200,000 non-accountable expense allowance, payable $50,000 on the signing
of the Letter of Understanding; $50,000 upon the filing of the Registration
Statement with the Securities and Exchange Commission; and $100,000 upon
closing. The Letter of Understanding is subject to various contingencies,
and no assurance can be given that this Letter of Understanding will result
in any definitive agreement between the parties, or that any such proposed
offering of securities of the Company will be successful, if undertaken. A
copy of the Letter of Understanding is attached hereto and incorporated
herein by reference. See the Exhibit Index.
General.
In connection with the Purchase Agreement, the Company acquired
from IRC the following properties:
(i) a 100% working interest in 41 oil and gas leases on a total
of 8,058 acres, more or less, and a 25% working interest on one lease of 462
acres, more or less, located in Clay County, Kentucky (collectively, the
"Beech Creek Leases"). Each of these leases provides for a landowner
royalty of 12.5% of the oil produced and saved from the leased premises or,
at the lessee's option, to pay the market price for such 12.5% royalty. The
leases also provide for a landowner royalty equal to 12.5% of the market
price at the well of the gas sold or used off the premises, except for
injection for secondary recovery of oil. The lessors are also entitled to
free gas for all stoves and inside lights in the principal dwelling house on
the leased properties by making connection to the well or wells at their own
expense and risk. The Beech Creek Leases are also subject to overriding
royalties ranging from 1.25% to 5%. A true and correct copy of the Beech
Creek Lease Schedule is attached hereto and incorporated herein by
reference. See the Exhibit Index.
(ii) a 100% working interest in 5 oil and gas leases on a total of
741 acres, more or less, located in Clay County, Kentucky (collectively, the
"Wildcat Leases"). Each of these leases is subject to a 12.5% landowner
royalty, on the same terms as the Beech Creek Leases, and a 3.125%
overriding royalty. A true and correct copy of the Wildcat Lease Schedule
is attached hereto and incorporated herein by reference. See the Exhibit
Index.
(iii) a 100% working interest in six oil and gas leases on a
total of 744 acres, more or less, located in Clay County, Kentucky
(collectively, the "Burning Springs Leases"). Each of these leases is
subject to a 12.5% landowner royalty, on the same terms as the Beech Creek
Leases and the Wildcat Leases, and overriding royalties ranging from 3.125%
to 7.5%. A true and correct copy of the Burning Springs Lease Schedule is
attached hereto and incorporated herein by reference. See the Exhibit
Index.
(iv) a 100% working interest in nine oil and gas leases on a total
of 2,121 acres, more or less, located in Fentress County, Tennessee
(collectively, the "Fentress County Leases"). Each of these leases is
subject to a 12.5% landowner royalty, on the same terms as the above
referenced leases, and a 19% overriding royalty; and a 25% overriding
royalty on one existing well. Section 60-1-301 of the Tennessee Code
provides for a severance tax of 3% on all gas and oil removed from the
ground in Tennessee. A true and correct copy of the Fentress County Lease
Schedule is attached hereto and incorporated herein by reference. See the
Exhibit Index.
The initial term of each of the above referenced leases ranges
from one year to four years, with each lease to remain in effect thereafter
for as long as (i) oil, gas, casing-head gas or casing-head gasoline is
being produced on the leased premises, (ii) shut-in royalty or rental is
paid for the right to inject, store and remove gas, or (iii) the Company
commences drilling another well or paying rentals within one year of
drilling a dry hole on the leased premises.
For those leases that are subject to a rental requirement, the
date of the Company's next rent payment is shown on the applicable lease
schedule attached hereto. The obligation to pay rent becomes applicable
only when no well has been commenced on the leased premises by that date.
Rent may be paid annually or quarterly, and once it has been paid, the
Company has the right to defer the commencement of a well for the period for
which the rent was paid. Rent amounts vary from $1 to $5 per acre per year,
with certain leases providing for a flat rental payment of $1500.
The Beech Creek Leases contain four wells. These four wells have
been tested and management believes they are capable of producing gas in
paying quantities. Flow lines have been laid to connect these wells to the
end purchasers gas transmission system.
The Wildcat Leases have no wells at this time. The Company
intends to evaluate the potential of this lease block in 1997 and to
schedule promising locations for future drilling. Wiser Oil Company and
Somerset Gas, two of the oil purchasers in the area, have lines running on
or adjacent to the lease block.
The Burning Springs Leases contain a total of 11 gas wells, six of
which are shut-in and five of which are currently active. Each of the
producing wells is hooked up to a nearby Southern Gas Company transport
line. Two of these wells also produce oil with the gas; the gas is
currently being sold to Somerset Gas, a large purchaser in the area. The
Company intends to evaluate the wells that are listed as shut-in for
possible workover or deepening potential; after the evaluation, they will be
either reworked or plugged.
The Fentress County Leases currently have one well, which is shut-
in. The well will require additional work to initiate production.
Following the completion of the Purchase Agreement, the Company
acquired a 100% working interest in 210 oil and gas leases on a total of
25,415 acres, more or less, located in Hancock County, Tennessee
(collectively, the "Swan Creek Leases"). Each of these leases provides for
a landowner royalty of 12.5%, leaving the Company a net royalty interest of
87.5% in each lease.
The initial term of each of these leases is one to four years,
with each lease to remain in effect thereafter for so long as (i) oil, gas,
casing-head gas or casing-head gasoline is being produced on the leased
premises, (ii) shut-in royalty or rental is paid for the right to inject,
store and remove gas, or (iii) the Company commences drilling another well
or paying rentals within one year of drilling a dry hole on the leased
premises.
For those leases that are subject to a rental requirement, the
date of the Company's next rent payment is shown on the applicable lease
schedule attached hereto. The obligation to pay rent becomes applicable
only when no well has been commenced on the leased premises by that date.
Rent may be paid annually or quarterly, and once it has been paid, the
Company has the right to defer the commencement of a well for the period for
which the rent was paid. Rent amounts vary from $1 to $4 per acre per year.
There are five existing wells on the Swan Creek Leases. Two of
the five, the Reed #1 and the Sutton #1, discovered and proved the structure
in the early 1980s. These wells have recently tested at 4.8 million cubic
feet and 1.2 million cubic feet of gas per day, respectively. The remaining
three wells were drilled earlier in 1996 and are scheduled for completion
and testing by late summer of this year. No wells have been placed on
production, thereby ensuring that virgin reservoir pressures still exist.
The field will require the laying of a gas pipeline to deliver the gas to a
major gas transportation company, with the tie-in point being located
approximately 25 miles from the leases. A field development program has
begun, and the Company will be negotiating the cost and terms of the
pipeline project that will serve the entire field.
A true and correct copy of the Swan Creek Lease Schedule is
attached hereto and incorporated herein by reference. See the Exhibit
Index.
The Company also acquired a 100% working interest in four oil and
gas leases on a total of 1,003.19 acres, more or less, located in Lauderdale
County, Alabama (collectively, the "Alabama Leases"). Each of these leases
provides for a landowner royalty of 12.5%, leaving the Company a net royalty
interest of 87.5% in each lease.
The Alabama Leases have no existing wells. These leases will be
designated for wildcat purposes and there is no immediate plan to acquire
additional leases in the area or to begin an exploration program.
The initial term of each of these leases is three years, with each
lease to remain in effect thereafter for so long as (i) oil, gas, casing-
head gas or casing-head gasoline is being produced on the leased premises,
(ii) shut-in royalty or rental is paid for the right to inject, store and
remove gas, or (iii) the Company commences drilling another well or paying
rentals within one year of drilling a dry hole on the leased premises.
For those leases that are subject to a rental requirement, the
date of the Company's next rent payment is shown on the applicable lease
schedule attached hereto. The obligation to pay rent becomes applicable
only when no well has been commenced on the leased premises by that date.
Rent may be paid annually or quarterly, and once it has been paid, the
Company has the right to defer the commencement of a well for the period for
which the rent was paid. Rent amounts are $1 per acre per year.
A true and correct copy of the Alabama Lease Schedule is attached
hereto and incorporated herein by reference. See the Exhibit Index.
Substantial additional evaluation and remedial work will be
necessary in order to determine whether most of the Company's wells will be
able to produce oil and gas in paying quantities and to make them produce in
such quantities. The Company's ability to perform these operations will
depend to a great degree on its ability to raise sufficient funding to
develop its leases, as to which no assurance can be given. Nor can any
assurance be given that if the Company is able to obtain such funding, it
will be able to produce oil and gas in profitable quantities.
Special Risk Factors.
The present and intended business operations of the Company must
be considered to be highly speculative and involve substantial risks, and an
investment in securities of the Company should only be considered by those
persons who can bear the economic risk of loss of their entire investment.
Among the risk factors to be considered are the following:
Developmental Stage Company. Although the Company was organized
in 1916, it must be regarded as being in a formative stage due to its lack
of significant business operations during recent years. Its future success
depends upon its ability to profitably operate its existing wells and to
expand its operations through the acquisition of additional oil and gas
producing properties and/or the acquisition of additional oil and gas
leases. No assurance can be given that the Company will be successful in
making such acquisitions. The Company is subject to all of the risks
inherent in attempting to expand a relatively new business venture. These
risks include, but are not limited to, possible inability to profitably
operate its existing properties or properties to be acquired in the future,
the existence of undisclosed actual or contingent liabilities, the inability
to fund the working capital requirements of such properties and the
inability to acquire additional properties that will have a positive effect
on the Company's operations. There can be no assurance that the Company
will achieve a level of profitability that will provide a return on invested
capital or that will result in an increase in the market value of the
Company's securities. See the caption "Market Price of and Dividends on the
Company's Common Equity and Other Stockholder Matters," Part II, Item 1,
below.
Limited Market for Common Stock. Although the Company's common
stock is listed on the OTC Bulletin Board of the National Association of
Securities Dealers, Inc. (the "NASD"), the market for such shares only
commenced in May, 1995, following the completion of the Purchase Agreement
with IRC; and there can be no assurance that it will continue or be
maintained. Any market price for shares of common stock of the Company is
likely to be very volatile, and factors such as success or lack thereof in
drilling, the ability or inability to acquire additional oil and gas
producing properties, competition, governmental regulation and fluctuations
in operating results may all have a significant effect. In addition, the
stock markets generally have experienced, and continue to experience,
extreme price and volume fluctuations which have affected the market price
of many small capital companies and which have often been unrelated to the
operating performance of these companies. These broad market fluctuations,
as well as general economic and political conditions, may adversely affect
the market price of the Company's common stock. See the caption "Market
Price of and Dividends on the Company's Common Equity and Other Stockholder
Matters," Part II, Item 1, below.
General Economic Risks/Potential Volatility of Stock Price. The
Company's current and future business plans are dependent, in large part, on
the state of the general economy. Adverse changes in general and local
economic conditions may cause high volatility in the market price of the
Company's securities and may adversely affect an investment in these
securities. Oil and gas prices are extremely volatile and are subject to
substantial seasonal, political, world wide supply of oil and gas and other
fluctuations and risks, all of which are beyond the Company's control.
Future Acquisitions. The Company intends to develop and expand
its business, principally by developing its existing oil and gas leases and
acquiring additional oil and gas producing properties and/or leases. See
the caption "Management's Discussion and Analysis or Plan of Operation,"
Part I, Item 2, below. The Company has not selected any particular
properties in connection with its expansion plans. Accordingly, this
Registration Statement lacks substantive information concerning future
specific acquisitions, in contrast to the disclosure which would be
necessary if such targets could be identified; the Company may therefore
become subject to certain additional risks inherent in any such acquisitions
that are made.
Future Capital Requirements; Uncertainty of Future Funding. The
Company presently has limited operating capital. It will require
substantial additional funding in order to realize its goals of conducting
oil and gas exploration operations and acquiring additional oil and gas
properties. The Company is currently negotiating with investment banking
and brokerage firms to raise these funds through equity or debt financings,
which may be very difficult for such a highly speculative enterprise. There
can be no assurance that such additional funding will be made available to
the Company, or if made available, that the terms thereof will be
satisfactory to the Company. Furthermore, any equity funding will cause a
substantial decrease in the proportional ownership interests of existing
stockholders. If such funding is not made available to the Company, it is
doubtful that the Company will be able to conduct its planned business
operations. See this caption "Management's Discussion and Analysis or Plan
of Operation," Part I, Item 2, below.
Replacement of Reserves. The Company's future success will depend
upon its ability to find, acquire and develop additional oil and gas
reserves that are economically recoverable. The proved reserves of the
Company will generally decline as they are produced, except to the extent
that the Company conducts revitalization activities, or acquires properties
containing proved reserves, or both. To increase reserves and production,
the Company must continue its development drilling and recompletion
programs, identify and produce previously overlooked or bypassed zones in
shut-in wells, acquire additional properties or undertake other replacement
activities. The Company's current strategy is to increase its reserve base,
production and cash flow through the development of its existing oil and gas
fields and selective acquisitions of other promising properties where the
Company can utilize new, existing technology. The Company can give no
assurance that its planned revitalization, development and acquisition
activities will result in significant additional reserves or that the
Company will have success in discovering and producing reserves at
economical exploration and development costs. Furthermore, while the
Company's revenues may increase if prevailing oil and gas prices increase
significantly, the Company's exploration costs for additional reserves may
also increase.
Uncertainty of Reserve Estimates. Oil and gas reserve estimates
and the present value estimates associated therewith are based upon numerous
engineering, geological and operational assumptions that generally are
derived from limited data. Common assumptions include such matters as the
extent and average thickness of a particular reservoir, the average porosity
and permeability of the reservoir, the anticipated future production from
existing and future wells, future development and production costs and the
ultimate hydrocarbon recovery percentage. As a result, oil and gas reserve
estimates and present value estimates are frequently revised in subsequent
periods to reflect production data obtained after the date of the original
estimate. If reserve estimates are inaccurate, production rates may decline
more rapidly than anticipated, and future production revenues may be less
than estimated. Moreover, significant downward revisions of reserve
estimates may adversely affect the Company's ability to borrow funds in the
future or have an adverse impact on other financing arrangements.
In addition, any estimates of future net revenues and the present
value thereof are based upon period ending prices and on cost assumptions
made by the Company which only represent its best estimate. If these
estimates of quantities, prices and costs prove inaccurate and the Company
is unsuccessful in expanding its oil and gas reserves base, and/or declines
in and instability of oil and gas prices occur, writedowns in the
capitalized costs associated with the Company's oil and gas assets may be
required. The Company will also rely to a substantial degree on reserve
estimates in connection with the acquisition of producing properties. If
the Company overestimates the potential oil and gas reserves of a property
to be acquired, or if its subsequent operations on the property are not
successful, the acquisition of the property could result in substantial
losses to the Company. See the Reports of Coburn Petroleum Engineering,
copies of which are attached hereto and incorporated herein by reference,
and all of which are modified by the foregoing unknown factors. See the
Exhibit Index. Also, see the heading "General" of this caption, above, and
the caption "Description of Property," Item 3, Part I, below.
Operating Hazards. Oil and gas operations involve a high degree
of risk. Natural hazards, such as excessive underground pressures, may
cause costly and dangerous blowouts or make further operations on wells
financially or physically impractical. Similarly, the testing and
recompletion of oil and gas wells involves a high degree of risk arising
from operational failures, such as blowouts, fires, pollution, collapsed
casing, loss of equipment and numerous other mechanical and technical
problems. Any of the foregoing hazards may result in substantial losses or
liabilities to third parties, including claims for bodily injuries,
reservoir damage, loss of reserves, environmental damage and other damages
to persons or property.
Future Sales of Common Stock. IRC currently beneficially owns
approximately 3,184,788 shares of the common stock of the Company or
approximately 54.12% of its outstanding voting securities. This amount is
based upon 5,884,968 shares being outstanding or beneficially owned, and
assumes the exercise of 497,097 shares vested under options granted by the
Company as of May 31, 1996. Effective May 2, 1997, 3,071,964 of the
common stock owned by IRC will have been beneficially owned for two years,
and subject to compliance with the applicable provisions of Rule 144 of the
Securities and Exchange Commission, IRC may then commence to sell these
"restricted securities" in an amount equal to up to 1% of the then
outstanding securities of the Company, or the average weekly trading volume
in the securities of the Company on any recognized automated system during
the four weeks preceding any Notice of Sale pursuant to Rule 144, in any
three month period, provided the Company satisfies the "current public
information available" requirements of Rule 144 at that time. In such event,
such sales could have a substantial adverse effect on any public market that
may then exist in the Company's common stock. Sales of any of these shares
by IRC could severely affect the ability of the Company to secure the
necessary debt or equity funding for the Company's proposed business
operations. For additional information concerning the present market for
shares of common stock of the Company, see the caption "Market Price of and
Dividends on the Company's Common Equity and Other Stockholder Matters,"
Part II, Item 1, below. For information regarding common stock ownership of
IRC and the Ratliff family, see the caption "Security Ownership of Certain
Beneficial Owners and Management," Part I, Item 4, below. The additional
164,266 shares of common stock of the Company acquired by IRC in exchange
for debt of the Company as outlined under the heading "Business Development"
of this caption, above (76,557 shares were issued in March, 1996, and 87,709
shares were issued in April, 1996), will have satisfied the present two year
Rule 144 holding period in March and April, 1998, respectively, and will
also then be available for resale pursuant to Rule 144.
A total of 505,000 "unregistered" and "restricted" shares of the
Company's common stock were issued to Jeffrey D. Jenson, M. E. Ratliff and
Leonard W. Burningham, Esq., pursuant to the Compensation Agreements that
were executed on May 2, 1995; these securities were issued pursuant to Rule
701 of the Securities and Exchange Commission. Rule 701 provides that 90
days after the issuing company becomes subject to the reporting requirements
of Section 13 or Section 15(d) of the Securities Exchange Act of 1934 Act,
as amended (the "1934 Act") these shares will become eligible for resale
pursuant to Rule 144 without regard to the two-year holding period of Rule
144. The resale of these securities may also have a substantial adverse
impact on any then-existing public market for the Company's common stock.
See the caption "Recent Sales of Unregistered Securities," Part II, Item 4,
below.
The availability of Rule 144 for resales of "restricted
securities" is primarily conditioned upon the Company being a "reporting
company" under the 1934 Act, and being "current" in all reports required to
be filed, or having "currently publicly available" the type of information
usually provided to broker-dealers effecting transactions in securities of a
company as required by Rule 15c2-11(a)(5) of the Securities and Exchange
Commission. If the Company were not a "reporting company" at the time any
holder of "restricted securities" had held such securities for two years,
this type of information would have had to have been provided to
stockholders of the Company on a periodic basis over the previous two years,
and the Company's balance sheet and income statement at such time should be
not less than six months old. Further, this type of information should
also have been provided to nationally recognized manuals, broker-dealers
effecting transactions in the securities of the Company and newspapers of
general circulation, where possible, in order for the Company to satisfy the
requirements of having the required information "currently publicly
available." Assuming this Registration Statement becomes effective, and the
Company thereafter files all reports required to be filed by it with the
Securities and Exchange Commission, the Company would have the required
information "currently publicly available" concerning it as required by
subparagraph c(1) of Rule 144.
The Securities and Exchange Commission has recommended that the
two year holding period for initial sales under Rule 144 be reduced to one
year, and that the three year holding period for sales by non-affiliates
under subparagraph (k) of Rule 144 be reduced from three years to two years.
If this proposal becomes law, IRC could effectively begin to sell a portion
of its "restricted securities" commencing May 2, 1996.
Voting Control. By virtue of IRC's present ownership of
approximately 54.12% of the Company's outstanding voting securities, the
management of IRC has the ability to elect all of the Company's directors,
who in turn elect all executive officers, without regard to the votes of
other stockholders. Subject to the Voting Trust Agreement executed and
delivered by IRC, the management of IRC may be deemed to have absolute
control over the management and affairs of the Company. See the caption
"Security Ownership of Certain Beneficial Owners and Management," Part I,
Item 4, below.
Competition. The Company's oil and gas exploration activities are
centered in a highly competitive field. In seeking any other suitable oil
and gas properties for acquisition, or drilling rig operators and related
personnel and equipment, the Company will be competing with a number of
other companies, including large oil and gas companies and other independent
operators with greater financial resources. Management does not believe
that the Company's initial competitive position in the oil and gas industry
will be significant. See the heading "Competition" under this caption.
Dependence on Technical Personnel. Certain members of present
management have substantial expertise in the areas of endeavors presently
conducted and to be engaged in by the Company; however, to the extent that
their services become unavailable, the Company will be required to retain
other qualified personnel. There can be no assurance that it will be able
to recruit and hire qualified persons upon acceptable terms. See the
caption "Directors, Executive Officers, Promoters and Control Persons," Part
I, Item 5, below.
Similarly, the oil and gas exploration industry requires the use
of personnel with substantial technical expertise. In the event that the
services of its current technical personnel become unavailable, the Company
will need to hire qualified personnel to take their place; no assurance can
be given that it will be able to recruit and hire such persons on mutually
acceptable terms.
Governmental Regulations. The Company is subject to numerous
state and federal regulations, environmental and otherwise, that may have a
substantial negative effect on its ability to operate at a profit. See the
headings "Effect of Existing or Probable Governmental Regulations on
Business" and "Costs and Effects of Compliance with Environmental Laws," of
this caption.
Indemnification of Directors, Officers, Employees and Agents.
Section 48-18-502 of the Tennessee Business Corporation Act allows a
corporation to indemnify any director in any civil or criminal proceeding
(other than a proceeding by or in the right of the corporation in which the
director was adjudged liable to the corporation or any other proceeding in
which he or she was adjudged liable on the basis that he or she improperly
received a personal benefit) by reason of service as a director if the
person to be indemnified conducted himself or herself in good faith and in a
manner reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe the conduct was unlawful. Section 48-18-507
extends certain indemnification rights to officers, employees and agents of
a corporation as well. The foregoing is only a brief summary of the right
of indemnification allowed a corporation under the Tennessee Business
Corporation Act, and is modified in its entirety by this reference. The
Board of Directors of the Company has adopted these provisions to indemnify
its directors, executive officers and agents. See the caption
"Indemnification of Directors and Executive Officers," Part II, Item 5,
below.
Principal Products or Services and Markets
The Company will conduct exploration and production activities to
produce crude oil and natural gas. The principal markets for these
commodities are local refining companies, major natural gas transmission
pipeline companies, local utilities and private industry end users, which
purchase the crude oil, and natural gas pipeline companies, which purchase
the gas. There are currently two gas transmission lines that run through
the Beech Creek Leases; these lines can be accessed to sell produced gas
from the leases. There are two more transmission lines within approximately
two miles of these leases.
In Hancock County, gas production from the Swan Creek Leases will
be delivered into the major transmission line of East Tennessee Natural Gas.
The Company's pipeline will not only service this gas transmission company,
but will provide transportation of gas for small independent producers in
the local area as well. It is anticipated that direct sales could also be
made to some local towns and industries.
No assurance can be given that the Company will be able to produce
a sufficient quantity of crude oil or natural gas to make these operations
profitable.
Reserve Analyses
Coburn Petroleum Engineering of Tulsa, Oklahoma, has performed
reserve analyses of all the Company's productive leases. R. W. Coburn, a
registered petroleum engineer, and the owner of Coburn Petroleum
Engineering, has no interest in the Company or IRC, and performed these
services at his standard rate ($90 per hour was billed and paid for these
reports).
Discounting the net reserve values by 10% results in a present
value of $156,061,539 for the Swan Creek Field, $18,875,514 for the Beech
Creek Leases, $9,398,045 for the Fentress County Leases and $312,044 for the
Burning Springs Leases. Reserve analyses are at best speculative,
especially when based upon limited production; no assurance can be given
that the reserves attributed to these leases exist or will be economically
recoverable. See the heading "Special Risk Factors," specifically the risk
factor entitled "Uncertainty of Reserve Estimates," of this caption.
True and correct copies of these reserve analyses, together with
Mr. Coburn's Drilling and Completion Program and Procedures for the
Company's leases situated in Clay County Kentucky, are attached hereto and
incorporated herein by this reference. See the Exhibit Index.
Distribution Methods of Products or Services
Crude oil is normally distributed in this area by tank truck and
natural gas is distributed and transported via pipeline. Gas purchasers in
the area include Delta Natural Gas Company, Inc.; Wiser Oil Company;
Southern Gas Company of Delaware, Inc., Somerset Gas and Eastern Tennessee
Natural Gas. Delta and Wiser operate a gas gathering system that runs
through the center of the Company's Beech Creek Leases. The existing Beech
Creek wells have been tied into the Wiser Oil Company system in anticipation
of future production. The Burning Springs wells are connected to Southern
Gas Company's gathering system.
Oil from the Fentress County Leases will be stored in a tank
battery consisting of two 210 barrel tanks while awaiting shipment by tank
truck.
Gas production from the Swan Creek Leases will go into the East
Tennessee Natural Gas transmission system. It is anticipated the Company
will construct a pipeline to a tie-in point some 25 miles from the Swan
Creek Leases.
The Company has no farmout agreements with any entity.
Status of Any Publicly Announced New Product or Service
The Company does not have any publicly announced new product or
service; nor does it anticipate any in the foreseeable future.
Competitive Business Conditions, Competitive Position in the Industry and
Methods of Competition
The Company's contemplated oil and gas exploration activities in
the States of Kentucky and Tennessee will be undertaken in a highly
competitive and speculative business. In seeking any other suitable oil and
gas properties for acquisition, the Company will be competing with a number
of other companies located in the State of Kentucky and elsewhere, including
large oil and gas companies and other independent operators with greater
financial resources. Management does not believe that the Company's initial
competitive position in the oil and gas industry will be significant.
At the local level, the Company has only two competitors in the
area of its acreage blocks in the State of Kentucky, who are: Equitable
Resources and Ashland Oil. Its principal competitors in the State of
Tennessee are Ashland Oil and Miller Services; and in the State of Alabama
are Engineering Development Corp. and Torch Operating Co.
Given the Company's relatively large acreage holdings in the area
and the estimated proven undeveloped reserves, management believes that the
Company will become the second largest seller of hydrocarbons in this
geographic area; however, no assurance of this can be given.
Management does not foresee any difficulties in procuring drilling
rigs or the manpower to run them in the area of its operations. The
experience of management has been that in most instances, drilling rigs have
only a one or two day waiting period; however, several factors, including
increased competition in the area, may limit the availability of drilling
rigs, rig operators and related personnel and/or equipment; such an event
may have a significant adverse impact on the profitability of the Company's
operations.
The prices of the Company's products are controlled by the world
oil market and the United States natural gas market; thus, competitive
pricing behaviors are considered unlikely; however, competition in the oil
and gas exploration industry exists in the form of competition to acquire
the most promising acreage blocks and obtaining the most favorable prices
for transporting the product. Management believes that the Company is well-
positioned in these areas because of the transmission lines that run through
and adjacent to the properties it leases and because it holds relatively
large acreage blocks in what management believes are promising areas.
Sources and Availability of Raw Materials and Names of Principal Suppliers
Excluding the development of oil and gas reserves and the
production of oil and gas, the Company's operations are not dependent on the
acquisition of any raw materials. See the headings "Competitive Business
Conditions, Competitive Position in the Industry and Methods of
Competition," of this caption.
Dependence on One or a Few Major Customers
The Company will be dependent on local purchasers of hydrocarbons
in the areas where its properties are located for sales of its products.
The five purchasers in the areas of the Company's operations are Wiser,
Southern, Delta, Somerset and Eastern Tennessee Natural Gas.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements
or Labor Contracts, including Duration
Royalty agreements relating to oil and gas production are standard
in the industry. The amount of the Company's royalty payments varies from
lease to lease. See the heading "General" under this caption. The amounts
of the royalties on each of the Company's leases are listed on the attached
lease schedules. See the Exhibit Index.
Need for Governmental Approval of Principal Products or Services
None of the principal products or services offered by the Company
require governmental approval; however, permits are required for drilling
oil or gas wells. See the heading "Effect of Existing or Probable
Governmental Regulations on Business," of this caption.
Effect of Existing or Probable Governmental Regulations on Business
Exploration and production activities relating to oil and gas
leases are subject to numerous environmental laws, rules and regulations.
The federal Clean Water Act requires the Company to construct a fresh water
containment barrier between the surface of each drilling site and the
underlying water table. This involves the insertion of a seven-inch
diameter steel casing into each well, with cement on the outside of the
casing. The cost of compliance with this environmental regulation is
approximately $10,000 per well.
The State of Kentucky also requires oil and gas drillers to obtain
a permit for their activities and to post with the Division of Oil and Gas
of the Kentucky Department of Minerals and Mines (the "Kentucky Division") a
bond to ensure that each well is properly plugged when it is abandoned.
These bonds are based on $1 per foot, and the Company has posted a $10,000
bond; one bond covers all of the Company's wells in the State of Kentucky.
The Kentucky Division will retain the bond until the subject wells are
plugged.
The State of Tennessee also requires the posting of a bond to
ensure that the Company's wells are properly plugged when abandoned. A
separate $2,000 bond is required for each well drilled. The Company
currently has a $10,000 bond on deposit with the State of Tennessee. See
the heading "Disclosure of Oil and Gas Operations" of the caption
"Description of Property," Part I, Item 3, below.
The State of Alabama also requires the posting of a bond to ensure
that the Company's wells are properly plugged when abandoned. A single-well
bond, which varies between $5,000 and $50,000, depending upon well depth, or
a blanket bond of $100,000, may be obtained for wells drilled onshore. At
the present time, the Company does not have an interest in any wells in the
State of Alabama.
The Company's operations are also subject to laws and regulations
requiring removal and cleanup of environmental damages under certain
circumstances. Laws and regulations protecting the environment have
generally become more stringent in recent years, and may in certain
circumstances impose "strict liability," rendering a corporation liable for
environmental damages without regard to negligence or fault on the part of
such corporation. Such laws and regulations may expose the Company to
liability for the conduct of operations or conditions caused by others, or
for acts of the Company which were in compliance with all applicable laws at
the time such acts were performed. The modification of existing laws or
regulations or the adoption of new laws or regulations relating to
environmental matters could have a material adverse effect on the Company's
operations. In addition, the Company's existing and proposed operations
could result in liability for fires, blowouts, oil spills, discharge of
hazardous materials into surface and subsurface aquifers and other
environmental damage, any one of which could result in personal injury, loss
of life, property damage or destruction or suspension of operations.
The Company believes it is presently in compliance with all
applicable federal, state or local environmental laws, rules or regulations;
however, continued compliance (or failure to comply) and future legislation
may have an adverse impact on the Company's present and contemplated
business operations.
At Board of Directors' meetings held June 6 and 7, 1995, the Board
of Directors adopted resolutions to form an Environmental Response Policy
and Emergency Action Response Policy Program; this program has not yet been
implemented, and will entail an analysis of specific operations.
The foregoing is only a brief summary of some of the existing
environmental laws, rules and regulations to which the Company's business
operations are subject, and there are many others, the effects of which
could have an adverse impact on the Company. Future legislation in this
area will no doubt be enacted and revisions will be made in current laws.
No assurance can be given as to what effect these present and future laws,
rules and regulations will have on the Company's current future operations.
Research and Development
The Company has not expended any material amount in research and
development activities during the last two fiscal years. Research done in
conjunction with its exploration activities will consist primarily of
running radiometric surveys on the lease blocks and conducting geological
research on the surface. This work will fall under the job description of
the geologist to be hired for these activities and will not have a material
cost of anything more than his or her standard salary. See the heading
"Number of Total Employees and Number of Full-Time Employees," of this
caption.
Cost and Effects of Compliance with Environmental Laws
See the heading "Effect of Existing or Probable Governmental
Regulations on Business," of this caption.
Number of Total Employees and Number of Full-Time Employees
The Company presently has twelve full-time employees and no part-
time employees. When it commences its full-scale oil and gas operations,
the Company plans to add additional full-time employees, exclusive of
executive officers, and no part-time employees.
The Company has hired a full-time geologist at a salary of $40,000
per year. His duties for the Company include surface and subsurface
geology, log correlation, surface and subsurface mapping, field research
(i.e., radiometrics, gravity, magnetics and geochemical research) and
wellsite geology.
The Company has hired a full-time petroleum engineer whose salary
is $40,000 per year. The engineer will be principally responsible for in-
house engineering studies and evaluations for exploration efforts, as
applied to annual/quarterly budgeting; depletion, depreciation and
amortization rate calculations; and Securities and Exchange Commission
reserve reporting obligations.
Item 2. Management's Discussion and Analysis or Plan of Operation.
Plan of Operation for Existing Leases
The Company intends to commence full scale development of its Swan
Creek Leases. The Swan Creek structure is confirmed at the surface on
geologic quadrangle maps showing the Clinchport thrust fault controlling the
structure. Additionally, the structure is verified at depth by the
successful drilling of the Reed #1 and Sutton #1, completed in the early
1980s. The Reed #1 and Sutton #1 could be expected to cumulatively produce
approximately six billion cubic feet of gas, at an initial rate of
approximately 3,500,000 cubic feet per day. The Reed #1 tested at 4,800,000
cubic feet per day of gas in the Knox Formation on a 32/64 inch choke. The
well exhibited a flowing pressure of 800 psi during the test. The Sutton #1
well is two miles to the northeast of the Reed well. This well tested
1,200,00 cubic feet per day on a 32/64 inch choke, with a flowing pressure
of 150 psi. The Swan Creek development will consist of an initial twelve-
well program referred to as Phase 1, and is expected to be completed in the
second quarter of 1997, along with the completion of a 6" or 8" pipeline for
gas transmission. It is estimated that 9,000,000 cubic feet of gas per day
could be produced upon the successful completion of the Phase 1 development
program. Total capital investment for Phase 1, which would include the
Company installed pipeline, is estimated to be about $5,300,000. The
Company intends to begin Phase 2 of development immediately upon the
successful completion of Phase 1. Management considers the foregoing to be
"forward looking" information. Management believes that the most material
risks associated with these disclosures relate to: (i) the ability to find
and recover economical quantities of oil and gas; (ii) the acquisition of
rights of way for the construction of an expanded pipeline to transport
anticipated production, assuming the Company's drilling program is
successful in Phase 2, which is briefly discussed below; (iii) the ability
of the Company to raise the required funding to complete its drilling
program; and (iv) the speculative nature of "reserve analyses" relied upon
in the Company's development of its oil and gas leases. Reference is also
made to the heading "Special Risk Factors" of the caption "Description of
Business," Part I, Item 1, above.
It is anticipated that the Company will implement development
programs on the Beech Creek and Fentress County Leases sometime in 1997.
The Swan Creek Leases are being given first priority because of their higher
economic attractiveness.
Funding for the above activities will come primarily from an
equity offering presently being negotiated. Although there are other
options for funding, any extended delays or inability to raise such funds
could dramatically affect the Company's ability to proceed with these
development programs.
Other Significant Plans
The Company also intends to actively pursue the gas marketing
business on the Eastern seaboard. The Eastern seaboard, and Tennessee in
particular, has numerous industrial end users of natural gas that are
currently exposed to a limited number of gas suppliers. No assurance can be
given that any definitive agreement or understanding will be negotiated.
In addition to an active drilling program, the Company intends to
continue strategically acquiring leases in promising areas in the States of
Kentucky and Tennessee. No assurance can be given that the Company will be
able to identify or acquire any such leases or that if it does acquire any
such leases, that they will be profitable.
The Company estimates that the anticipated funding through an
investment banking firm or an equity offering will adequately fund the above-
referenced exploration and production plans for the next 24 months. On
March 21, 1996, the Company entered into a Letter of Understanding with
Kenny Securities whereby Kenny Securities, together with a co-manager
satisfactory to the Company and Kenny Securities, would act as the managing
underwriters to offer and sell on a "firm" commitment basis approximately
1,500,000 shares of the Company's common stock in a combination of 1,000,000
primary shares for the Company, and up to 500,000 additional shares for
Company shareholders presently owning "unregistered" and "restricted"
securities of the Company, such selling shareholders be limited to
directors, executive officers, employees or consultants to the Company.
Reference is made to the heading "Business Development" of the caption
"Description of Business," Part I, Item 1, above. See the Exhibit Index.
If the Company does not have a successful equity offering or if other
funding options cannot be negotiated, it may be unable to proceed with its
exploration and production plans.
Phase 2, which will commence in the second twelve months, will
involve the construction of a pipeline to serve the Swan Creek Field and
anticipated gas production, which is solely dependent upon the success of
the Company's drilling program; construction is estimated to commence in
August of 1997, and be completed by December of 1997. No assurance can be
given that the Company will be able to obtain the required rights of way to
construct any such pipeline, and current pipelines or those contemplated to
be constructed during Phase 1 will only serve present production from the
Swan Creek Field.
This plan of operation is based upon many variables and estimates,
all of which may change or prove to be other than or different from
information relied upon.
Results of Operations
Effective May 2, 1995, and pursuant to a Purchase Agreement, the
Company acquired certain oil and gas leases, equipment, marketable
securities and vehicles from IRC; following the completion of this
transaction, the Company changed its domicile to the State of Tennessee on
May 5, 1995. Prior to the completion of this Purchase Agreement, the
Company had been inactive from 1993, and had little or no assets or
operations. The assets reflected as being owned on December 31, 1995, were
all primarily acquired from IRC.
During the year ended December 31, 1995, and the quarter ended
March 31, 1996, the Company had revenues of $27,800 and $10,700,
respectively, from sales of gas. Increased revenues during the first
quarter of 1996 were the result of having ownership of 100% of the working
interest in Company leases and wells as compared to 100% ownership beginning
in May, 1995. Also, there was an increase in gas prices in the first
quarter of 1996.
Depletion, depreciation and amortization expense increased
proportionately for the quarter ended March 31, 1996, to $28,500, when
compared with $59,100 for the year ended December 31, 1995 (seven months
from the date of closing of the Purchase Agreement with IRC).
General and administrative expense also increased substantially
during the same periods, with the first quarters' proportionate increase
being the result of the addition of four full time employees and salaried
executive officers, and increased rental for new executive offices which
were leased in January, 1996.
The net losses from operations during the year ended December 31,
1995, and the quarter ended March 31, 1996, were primarily due to increased
development activities on the Company's lease acreage and the implementation
of an active drilling program.
Liquidity
Total revenues from operations during the year ended December 31,
1995, and the quarter ended March 31, 1996, were $27,800 and $10,700,
respectively.
Loans in the aggregate total of $882,112 were advanced by IRC, a
related party and an "affiliate" of the Company during the year ended
December 31, 1995, and 164,266 "unregistered" and "restricted" shares of the
Company's common stock were issued as of December 31, 1995, in full payment
of this indebtedness.
These revenues and loans accounted for substantially all of the
Company's liquidity during this year.
During the first quarter of 1996, the Company sold 166,667
marketable securities it acquired from IRC pursuant to the Purchase
Agreement for $250,000; received $22,866 from the exercise of options; and
obtained various loans from outside parties, which accounted for the
principal liquidity of the Company during this quarter.
On March 21, 1996, the Company entered into a Letter of
Understanding with Kenny Securities whereby Kenny Securities, together with
a co-manager satisfactory to the Company and Kenny Securities, would act as
the managing underwriters to offer and sell on a "firm" commitment basis
approximately 1,500,000 shares of the Company's common stock in a
combination of 1,000,000 primary shares for the Company, and up to 500,000
additional shares for Company shareholders presently owning "unregistered"
and "restricted" securities of the Company, such selling shareholders be
limited to directors, executive officers, employees or consultants to the
Company. Reference is made to the heading "Business Development" of the
caption "Description of Business," Part I, Item 1, above. See the Exhibit
Index.
Item 3. Description of Property.
Property Location, Facilities, Size and Nature of Ownership
The Company holds oil and gas leases on the following properties
located near Manchester, Kentucky: (i) 8,058 acres in the Beech Creek
Leases; (ii) 744 acres in the Wildcat Leases; and (iii) 741 acres in the
Burning Springs Leases. The Company also holds leases on 2,121 acres in
Fentress County, Tennessee, near Jamestown. There are currently two
producing wells on the Tennessee acreage, only one of which is owned by the
Company. Additionally, the Company holds leases on 25,415 acres in Hancock
County, Tennessee, and 1,003.19 acres in Lauderdale County, Alabama. See
the heading "General" under the caption "Description of Business," Part I,
Item 1, above.
The Company leases its principal executive offices, consisting of
approximately 4,731 square feet located at 603 Main Avenue, Suite 500,
Knoxville, Tennessee, at a monthly rent of $3,942.50. The Company also
leases a small field office, located at Route 6, Box 248A, Manchester,
Kentucky, for $500 per month.
Disclosure of Oil and Gas Operations
On May 2, 1995, upon the execution of a Purchase Agreement with
IRC, the Company acquired the rights to certain oil and gas leases in the
State of Kentucky (the "Beech Creek Leases," "Wildcat Leases" and "Burning
Springs Leases") and the State of Tennessee (the "Fentress County Leases").
Subsequently, the Company also acquired additional acreage in Tennessee (the
"Swan Creek Leases") and in Alabama (the "Alabama Leases"). Copies of the
lease schedules listing these leases are attached hereto and are
incorporated herein by this reference. See the headings "Business
Development" and "General" under the caption "Description of Business," Part
I, Item 1, above, and the Exhibit Index.
The Company was not engaged in the business of oil and gas
exploration and development prior to the date of the IRC Purchase Agreement.
IRC, the entity from which the Company acquired certain of these properties,
drilled four wells on the Beech Creek Leases in the past three years. All
of these wells are capable of producing gas in paying quantities, according
to tests run on the wells. IRC also drilled a well on one of the Fentress
County Leases; this well is currently shut in and awaiting a workover.
Five wells are currently producing gas that is being sold from the
Burning Springs Leases. The other six wells on this lease are currently
shut-in pending evaluation of possible reconditioning activities.
There are two completed wells on the Swan Creek Leases, the Reed
#1 and the Sutton #1, which discovered and proved the structure in the early
1980s. These wells have recently tested at 4,800,000 and 1,200,000 cubic
feet of gas per day. The Company has drilled three additional wells so far
in 1996; these wells are currently being completed. Development of the Swan
Creek Field will require the laying of a pipeline to deliver gas to a
transmission company with the tie-in point being located approximately 25
miles away from the field.
The Alabama Leases have no existing wells. These leases are
"wildcat" exploration and there is no immediate plan to acquire additional
leases in the area or to begin an exploration program.
No estimate of total, proved net oil or gas reserves has been
filed with or included in reports to any federal authority since the
beginning of the Company's last fiscal year.
The Company is currently not a party to any contract or agreement
obligating it to provide a fixed and determinable quantity of oil or gas in
the future, but anticipates entering into such contracts for delivery of gas
commencing as early as December, 1996.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
Security Ownership of Certain Beneficial Owners
The following tables set forth the share holdings of the Company's
directors and executive officers and those persons who own more than 5% of
the Company's common stock as of May 31, 1996, with these computations being
based upon 5,884,968 shares of common stock being outstanding and assumes
the exercise of 497,097 shares vested under options granted by the Company
as of May 31, 1996. (See the heading "Other Compensation" and the
"Restricted Stock Options Table," under the caption "Executive
Compensation," Part I, Item 6, below).
Five Percent Stockholders
Number of Shares Percent
Name and Address Title Beneficially Owned of Class
Industrial Resources, Stockholder 3,184,788 54.12%
Corporation 1, 2
Route 6, Box 248-A
Manchester, Kentucky 40962
M. E. Ratliff 1 Stockholder 338,750 5.76%
300 Heathermoore Dr.
Knoxville, Tennessee 37922
1 James Ratliff is the sole owner of the outstanding voting
securities of IRC, and accordingly, Mr. Ratliff may be deemed
to be an affiliate of the Company. He is also the father of
M.E. Ratliff, who received 215,000 shares of common stock of
the Company pursuant to one of the Compensation Agreements.
See the heading "Business Development," of the caption
"Description of Business," Part I, Item 1, above.
2 IRC has entered into a Voting Trust Agreement granting Benton
L. Becker, the irrevocable right until December 31, 1995, to
vote all shares of common stock of the Company owned by it.
See the heading "Changes in Control" of this caption.
Directors and Executive Officers
Number of Shares Percent
Name and Address 1 Title Beneficially Owned of Class
Walter C. Arzonetti 2 Director 53,973 .92%
11 Avenue de la Mer
Palm Coast, FL 32137
Benton L. Becker 2, 3 Chairman of 253,973 4.32%
1550 Madruga Ave., #329 the Board of
Coral Gables, FL 33146 Directors
Jeffrey D. DeMunnik 2 Secretary/ 12,452 .21%
1100 Fox Road Treasurer
Knoxville, Tennessee
37922
Charles N. Manhoff 2 Director 53,973 .92%
1119 Rocky Point Ct.
Albuquerque, NM 87123
William A. Moffett 2 CEO and 53,973 .92%
1073 Encantado Dr. Director
Santa Fe, NM 87501
Ted P. Scallan 2 President 148,685 2.53%
5808 North Hills Blvd
Little Rock, Arkansas 72116
Lyle G. Stockstill 2 Director 16,849 .29%
560 Bellemeade Blvd.
Gretna, Louisiana 70056
All directors and executive 593,878 10.11%
officers as a group (7)
1 Each of these persons presently serves in the capacities
indicated.
2 Includes the number of shares owned beneficially or directly
and vested options as of May 31, 1996.
3 IRC has entered into a Voting Trust Agreement granting Benton
L. Becker, the irrevocable right until December 31, 1995, to
vote all shares of common stock of the Company owned by it.
See the heading "Changes in Control" of this caption. The
Voting Trust Agreement is a five year voting trust, which
commenced on September 1, 1995, and runs through September 1,
2000, and was irrevocable as to the grantor from the
commencement date through December 31, 1995.
Also see the caption "Executive Compensation," Part I, Item 6,
below, for a discussion of the contemplated future compensation of the
Company's directors and executive officers.
Changes in Control
Except as indicated below, to the knowledge of the Company's
management, there are no present arrangements or pledges of the Company's
securities which may result in a change in control of the Company.
IRC Voting Trust Agreement. Pursuant to a Voting Trust Agreement
dated as of September 1, 1995, IRC granted Benton L. Becker, as Trustee, the
right to exercise all voting rights whatsoever with respect to the shares of
common stock of the Company owned by IRC, including the right to vote in
person or by proxy at any meeting of the stockholders of the Company, or by
written consent, in lieu of a meeting of the stockholders in accordance with
the provisions of the Tennessee Business Corporation Act. Mr. Becker
currently serves as a director of the Company and has previously served as
legal counsel for IRC, its stockholders and affiliates, including M. E.
Ratliff.
The term of the Voting Trust Agreement is a period of five years,
and was irrevocable until December 31, 1995, and revocable thereafter in the
sole discretion of IRC on 30 days' written notice to the Trustee. To date,
the voting trust is still in effect.
The rights of the Trustee include the right to vote for the
election of directors, including the election of the Trustee to the Board of
Directors of the Company.
The Voting Trust Agreement does not limit IRC from disposing of
any shares of common stock of the Company owned by it, but on any such sale
or disposition, the securities conveyed shall no longer be subject to its
terms and provisions.
The foregoing summary of the provisions of the Voting Trust
Agreement does not purport to be complete. A copy of the Voting Trust
Agreement is attached hereto and incorporated herein by reference, and the
foregoing summary is hereby modified in its entirety by such reference. See
the Exhibit Index and the foregoing tables regarding "Five Percent
Stockholders" and "Directors and Executive Officers."
Item 5. Directors, Executive Officers, Promoters and Control Persons.
Identification of Directors and Executive Officers
The following table sets forth the names of all former and current
directors and executive officers of the Company during the preceding
calendar year and to the date hereof. These persons will serve until the
next annual meeting of stockholders (to be held at such time as the Board of
Directors shall determine) or until their successors are elected or
appointed and qualified, or their prior resignations or terminations.
Date of Date of
Positions Election or Termination
Name Held Designation or Resignation
Walter C. Arzonetti Director 5/95 *
11 Avenue de la Mer
Palm Coast, FL 32137
Benton L. Becker Chairman of 6/95 *
1550 Madruga Ave., #329 the Board of
Coral Gables, FL 33146 Directors
Jeffrey D. DeMunnik Treasurer 1/96 6/96
1100 Fox Road Secretary/ 6/96 *
Knoxville, Tennessee 37922 Treasurer
Kelley S. Grabill Secretary 9/95 6/96
9109 Lullabye Lane
Oakridge, Tennessee 37830
Charles N. Manhoff Director 5/95 *
1119 Rocky Point Ct.
Albuquerque, NM 87123
Ted P. Scallan President 1/96 *
5808 North Hills Blvd. and CEO
Little Rock, Arkansas 72116
Lyle G. Stockstill Director 1/96 *
560 Bellemeade blvd.
Gretna, Louisiana 70056
Edgar G. Baugh Director 5/95 1/30/96
76 Arrowhead Way
Darien, CT 06820
Jack E. Earnest Director 5/95 1/30/96
5945 Shady River Road
Houston, TX 77057
Jeffrey D. Jenson President 6/94 5/95
1787 East Ft. Union Blvd.
Salt Lake City, UT 84121
Travis D. Jenson Vice President 10/94 5/95
1787 East Ft. Union Blvd.
Salt Lake City, UT 84121
Raymond E. Johnson Director 5/95 12/10/95
(Deceased) (Date of Death)
415 North State Street
Bellingham, WA 98225
Joe B. Mattei Director 5/95 1/30/96
72 Sugarberry Circle
Houston, TX 77024
William A. Moffett Director 5/95 *
1073 Encantado Drive CEO 6/96 *
Santa Fe, NM 87501
Kathleen L. Morrison Secretary/ 10/94 5/95
1787 East Ft. Union Blvd. Treasurer
Salt Lake City, UT 84121
John P. O'Hagan Director 5/95 1/25/96
P.O. Box 635
Signal Mountain, TN
37377
George E. Walter, Jr. Director, CEO 5/95 1/25/96
3907 Northfield Ct. and President
Midland, TX 79707
James C. Walter Vice President5/95 1/18/96
96 Canberra Drive and Secretary/
Knoxville, TN 37923 Treasurer
* These persons presently serve in the capacities indicated.
Business Experience
Walter C. Arzonetti. Mr. Arzonetti, age 57, received his B.A.
degree in economics from Denison University in 1960 and his M.B.A. in
finance from the University of Chicago in 1962. After service in the U.S.
Air Force, he held a number of executive positions with the Exxon
Corporation from 1965-1988, including Assistant Treasurer of Esso Europe
(London) and Treasurer of all of Exxon's exploration and production ventures
in Europe and Africa; Treasurer of Esso Inter-America (Miami), where he
managed the finance, planning and public affairs functions for Latin
America; Assistant Treasurer of Exxon Corporation (NY), where he managed the
corporate and international finance functions of the parent company; Chief
Financial Officer of Esso UK in London (the largest Exxon operating company
outside the U.S.), where he was responsible for Treasury, tax, legal,
controllers, information systems and administrative functions. Since 1988,
Mr. Arzonetti has been Managing Director of Halcyon Holdings, a financial
consulting firm in Palm Coast, Florida.
Benton L. Becker. Mr. Becker, age 58, received his B.A. degree
from the University of Maryland in 1960 and his J.D. degree from Washington
College of Law, American University, in 1966. After his graduation from law
school, he served as a trial attorney and as an Assistant United States
Attorney in the U.S. Department of Justice for four years. He was a general
partner in the law firm of Cramer, Haber and Becker, located in Washington,
D.C., from 1970 to 1977. During this period, Mr. Becker represented then
Congressman Gerald R. Ford at his confirmation proceedings before the U.S.
Senate and House of Representatives for the office of Vice President of the
United States. Mr. Becker served as counsel to President Ford during his
presidential transition and among other things, negotiated the pardon terms
with President Nixon on behalf of President Ford. Mr. Becker was a
professor of law and the director of the trial advocacy program at the
University of Miami School of Law from 1977 to 1981. Upon departing the
faculty of the University of Miami School of Law, Mr. Becker assumed the
position of Senior Trial Counsel in the Dade County, Florida State
Attorney's Office of Janet Reno. He has been engaged in the private
practice of law in Coral Gables, Florida and Washington, D.C., since 1983,
and continues as Lecturer of Constitutional Law at the University of Miami.
Jeffrey D. DeMunnik. Mr. DeMunnik is 28 years of age. He
received a B.S. Degree in 1990 from New York University, where he majored in
accounting. From June, 1990, to May, 1993, he was a junior accountant with
Arthur Yorkes & Company, Certified Public Accountants, New York, New York;
and from September, 1993, until April 30, 1995, he was a semi-senior
accountant with Citran Cooperman & Company, LLP, Certified Public
Accountants, New York, New York. He has been employed by the Company since
May of 1995. Mr. DeMunnik's responsibilities in past employment and present
employment with the Company have included the preparation of financial
statements issued under compilations, reviews and audits; organization and
preparation of required work papers as specified by industry standards;
confirmation of cash investments; fixed asset evaluation, observation and
participation in actual accounting of physical inventory; verification and
estimation of various liabilities; and examination of income and expenses.
He has also supervised and delegated field and office assignments to others
and has prepared income tax returns for corporations, including
consolidations and multi-state returns for partnerships and individuals.
Charles N. Manhoff. Mr. Manhoff is 70 years of age. He graduated
from Ohio Wesleyan University in 1949 and received an M.S. degree from
Oklahoma University in 1955. He has over 30 years' experience in
international oil exploration, having served in various management positions
in Somalia, the Philippines, Libya, Australia, Malaysia, Pakistan, Japan and
Indonesia. From 1960 to 1986, he held various positions as Exploration
Advisor and Exploration Manager for Esso Exploration and Production in
Natuna, Jakarta, Indonesia (where he was instrumental in delineating the
Natuna Field, one of the largest gas fields in the world) and P.T. Stanvac
Indonesia, a joint venture with Mobil Oil, in Jakarta, Indonesia. From 1987
to the present, he has worked as an exploration consultant, with principal
clients including Union Pacific International Petroleum Company (Fort Worth,
Texas) and, since 1991, Pexco N.V. (Kuala Lumpur, Malaysia).
William A. Moffett. Mr. Moffett, age 61, graduated from Oklahoma
University in 1956 with a B.S. degree in Geological Engineering. He spent
34 years with Exxon Corporation in various engineering and management
positions. His early assignments were in Texas as a petroleum engineer with
Exxon Company, USA and Exxon Production Research Company. Beginning in
1970, Mr. Moffett held a number of international management positions;
Production Superintendent for Creole Petroleum in Venezuela; Technical
Manager with Esso Australia; Operations Manager for Esso Exploration and
Production United Kingdom (coordinating Shell/Esso's major investments
offshore in the North Sea); Production General Manager assigned to Intercol
(Exxon's affiliate in Colombia) and as CEO of Stanvac, a joint Exxon/Mobil
affiliate, in Indonesia.
Ted P. Scallan. Mr. Scallan is 43 years of age. He began his
career in 1973 with Shell Oil in the offshore facilities engineering
division of the New Orleans, Louisiana office where his duties included
coordination of engineering, fabrication and pipeline installation efforts
of assigned platforms in the Gulf of Mexico Region. He subsequently was
given the opportunity to open a branch office for Shell Oil in Lafayette,
Louisiana, and then returned to New Orleans as head project manager for
Production Management, Corporation, where he was responsible for all turnkey
projects consisting of the engineering, fabrication and installation of oil
and gas production facilities. Mr. Scallan formed EMC Corp., where he
conducted oil and gas installations on a turnkey bid basis, using his own
heavy equipment, including tugs, supply vessels, work barges and lift
cranes. He performed well hook ups, plug and abandonments and the
construction of production platforms and pipelines throughout the southern
states and the Gulf of Mexico Region, until 1985, when he divested his
interest in EMC.
Prior to joining the Company, Mr. Scallan spent the last decade
outside of the oil and gas industry in investment banking, working in public
finance, fixed income trading and as an equity analyst. He has been
recognized and respected by some of the largest institutional research firms
for his fundamental and technical approaches while generating his "Equity
Watch List" for his clientele, which consisted of over 400 banks, pensions,
trust departments, advisors and money managers.
Lyle G. Stockstill. Mr. Stockstill is 53 years of age. In 1976,
he founded Torch, Inc., a pioneering company in hyperbaric welding; Torch
changed its corporate direction to concentrate on offshore pipeline
installation and has become a leader in offshore pipe laying. Mr.
Stockstill is the President and sole owner of Torch. Mr. Stockstill's
training includes Taylor Diving School, Brown & Root Welding Course and
Radiographic courses. He has contributed to various articles in "Offshore
Magazine" regarding "Procedures for Hyperbaric Welding," "Procedures for
Habitat Radiography" and "Procedures for Underwater Tie-Ins."
Committees
Operations Committee. Ted P. Scallan, William A. Moffett and
Charles N. Manhoff.
Employee Policies/Compensation Committee. Walter C. Arzonetti,
Benton L. Becker and William A. Moffett.
Audit Committee. Walter C. Arzonetti, Ted P. Scallan and Jeffrey
DeMunnik.
Family Relationships
There are no family relationships between any of the present
directors or executive officers of the Company.
Involvement in Certain Legal Proceedings
Except as indicated below and/or hereinbefore, to the knowledge of
management, during the past five years, no present or former director,
executive officer, affiliate or person nominated to become a director or an
executive officer of the Company:
(1) Filed a petition under the federal bankruptcy laws or any
state insolvency law, nor had a receiver, fiscal agent or similar officer
appointed by a court for the business or property of such person, or any
partnership in which he or she was a general partner at or within two years
before the time of such filing, or any corporation or business association
of which he or she was an executive officer at or within two years before
the time of such filing;
(2) Was convicted in a criminal proceeding or named subject of a
pending criminal proceeding (excluding traffic violations and other minor
offenses);
(3) Was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining him or her from or
otherwise limiting his or her involvement in any type of business,
securities or banking activities;
(4) Was found by a court of competent jurisdiction in a civil
action, by the Securities and Exchange Commission or the Commodity Futures
Trading Commission to have violated any federal or state securities law, and
the judgment in such civil action or finding by the Securities and Exchange
Commission has not been subsequently reversed, suspended, or vacated.
Item 6. Executive Compensation.
Cash Compensation
Ted P. Scallan is to be paid an annual salary of $60,000 as
compensation for service as President of the Company and this salary
commenced January, 1996. Also, see the "Restricted Stock Options Table"
below.
No salary is being paid to William A. Moffett for service as CEO.
Jeffrey D. DeMunnik is to be paid an annual salary of $33,000 for
his service as Secretary/Treasurer of the Company, and this salary commenced
January of 1996. Also, see the "Restricted Stock Options Table" below.
Excluding stock options granted to directors, directors are not
otherwise compensated in cash for their service in this capacity.
The following table sets forth the aggregate cash compensation
paid by the Company for services rendered during the periods indicated to
its directors and executive officers:
<TABLE>
SUMMARY COMPENSATION
TABLE
<CAPTION>
Long Term
Compensati
on
Payouts
Annual Awards
Compensation
(a) (b) (c) (d) (e) (f) (g) (h) (i)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Name and Principal Year or Other Restric- Securit- All
Position Period Annual ted ies LTIP Other
Ended Compen- Stock Underlying Payouts Compensa-
$ $ sation($) Awards Option/ ($) tion ($)
Salary Bonus ($) SAR's
(#)
Walter C. Arzonetti 12/31/94 $-0- -0- -0- -0- -0- -0- -0-
* 12/31/95 $-0- -0- -0- -0- -0- -0- -0-
Director 3/31/96 $-0- -0- -0- -0- -0- -0- -0-
Benton L. Becker, * 12/31/94 $ -0- -0- -0- -0- -0- -0- -0-
Chairman of the 12/31/95 $ -0- -0- -0- -0- -0- -0- -0-
Board of Directors 3/31/96 $ -0- -0- -0- -0- -0- -0- -0-
Kelley S. Grabill * 12/31/94 $ -0- -0- -0- -0- -0- -0- -0-
Secretary 12/31/95 $10,653 -0- -0- -0- -0- -0- -0-
3/31/96 $ 3,304 -0- -0- -0- -0- -0- -0-
Jeffrey DeMunnik * 12/31/94 $ -0- -0- -0- -0- -0- -0- -0-
Sec'y/Treasurer 12/31/95 $ -0- -0- -0- -0- -0- -0- -0-
3/31/96 $8,884.61 -0- -0- -0- -0- -0- -0-
Charles N. Manhoff * 12/31/94 $ -0- -0- -0- -0- -0- -0- -0-
Director 123105 $ -0- -0- -0- -0- -0- -0- -0-
3/31/96 $ -0- -0- -0- -0- -0- -0- -0-
Edgar G. Baugh * 12/31/94 $ -0- -0- -0- -0- -0- -0- -0-
Director 12/31/95 $ -0- -0- -0- -0- -0- -0- -0-
3/31/96 $ -0- -0- -0- -0- -0- -0- -0-
Jack E. Earnest * 12/31/94 $ -0- -0- -0- -0- -0- -0- -0-
Director 12/31/95 $ -0- -0- -0- -0- -0- -0- -0-
3/31/96 $ -0- -0- -0- -0- -0- -0- -0-
Raymond E. Johnson * 12/31/94 $ -0- -0- -0- -0- -0- -0- -0-
Director 12/31/95 $ -0- -0- -0- -0- -0- -0- -0-
3/31/96 $ -0- -0- -0- -0- -0- -0- -0-
Joe B. Mattei * 12/31/94 $ -0- -0- -0- -0- -0- -0- -0-
Director 12/31/95 $ -0- -0- -0- -0- -0- -0- -0-
3/31/96 $ -0- -0- -0- -0- -0- -0- -0-
William A. Moffett * 12/31/94 $ -0- -0- -0- -0- -0- -0- -0-
CEO & Director 12/31/95 $ -0- -0- -0- -0- -0- -0- -0-
3/31/96 $ -0- -0- -0- -0- -0- -0- -0-
John P. O'Hagan * 12/31/94 $ -0- -0- -0- -0- -0- -0- -0-
Director 12/31/95 $ -0- -0- -0- -0- -0- -0- -0-
2/19/96 $ -0- -0- -0- -0- -0- -0- -0-
Ted P. Scallan * 12/31/94 $ -0- -0- -0- -0- -0- -0- -0-
CEO & President 12/31/95 $ -0- -0- -0- -0- -0- -0- -0-
3/31/96 $9,923.07 -0- -0- -0- -0- -0- -0-
Lyle Stockstill * 12/31/94 $ -0- -0- -0- -0- -0- -0- -0-
Director 12/31/95 $ -0- -0- -0- -0- -0- -0- -0-
3/31/96 $ -0- -0- -0- -0- -0- -0- -0-
George E. Walter, 12/31/94 $ -0- -0- -0- -0- -0- -0- -0-
Jr. * 12/31/95 $ 2,584.63 -0- -0- -0- -0- -0- -0-
Director, CEO and 3/31/96 $ 923.08 -0- -0- -0- -0- -0- -0-
President
James C. Walter * 12/31/94 $ -0- -0- -0- -0- -0- -0- -0-
Vice President and 12/31/95 $23,076.90 -0- -0- -0- -0- -0- -0-
Sec'y/Treasurer 3/31/96 $3,076.92
<FN>
* See the "Restricted
Stock Options Table"
under the heading
"Other compensation"
of this caption.
</FN>
</TABLE>
Bonuses and Deferred Compensation
None; not applicable.
Compensation Pursuant to Plans
The Company does not presently have any stock option, stock
incentive, bonus or similar plan for its directors, executive officers or
employees; however, options have been granted to directors and executive
officers and certain consultants of the Company to purchase shares of
"unregistered" and "restricted" common stock of the Company at various
prices. See the heading "Other Compensation" and the "Restricted Stock
Options Table" of this caption, below.
Pension Table
The Company does not presently have a pension or similar plan for
its directors, executive officers or employees. Management intends to adopt
a 401(k) plan and full liability insurance for directors and executive
officers and a health insurance plan for employees in the near future.
Other Compensation
On April 11, 1995, the Board of Directors resolved that each
member of the Board of Directors would receive compensation in the form of
an option to purchase 100,000 "unregistered" and "restricted" post-split
shares of the Company's common stock at a price of $0.25 per share.
Pursuant to a resolution of the Board of Directors on May 2, 1995, the
exercise price of such options was increased to $0.275 per share, which
amount was then equal to 110% of the average bid prices for the Company's
common stock on the OTC Bulletin Board on the date of the grant.
Commencing on May 4, 1995, certain other officers and consultants
were induced to serve as executive officers or consultants of the Company in
consideration of the grant of a similar option, and these options were
ratified by the Board of Directors at meetings held June 6 and 7, 1995, in
Nashville, Tennessee.
At the annual meeting of the Board of Directors which was held on
January 30, 1996, immediately following the annual meeting of stockholders,
the Board of Directors also granted certain other directors, executive
officers, consultants and employees options to acquire shares of the
Company's "unregistered" and "restricted" shares of common stock of the
Company.
The following table sets forth the names of the optionees, the
number of shares granted and the beginning and expiration dates of the
options granted:
<TABLE>
RESTRICTED STOCK OPTIONS TABLE
<CAPTION>
Name of Option Title or Number Begin- Exerc- Shares Market Shares Market Value Total
Holder Position of ning ise Vested Value at Vested at 3/31/96<F2>Shares Vested
Optioned Date <F1>Price for the 12/31/95<F2> for the at 5/31/96 <F5>
Shares period period
ended ended
12/31/95 3/31/96
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Walter C. Director 100,000 5/4/95 $0.275 33,151 $177,274.98 12,465 $133,687.12 49,863
Arzonetti
Benton L. Director 100,000 5/4/95 $0.275 33,151 $177,274.98 12,465 $133,687.12 49,863
Becker 3
Jeff Brockman Field 100,000 5/4/95 $0.275 33,151 $177,274.98 12,465 $133,687.12 49,863
Supervisor
Robert M. Employee 25,000 5/4/95 $0.275 8,288 $ 44,548.00 3,116 $ 33,419.10 12,466
Carter
Jeffrey D. Secretary/ 25,000 5/4/95 $0.275 8,288 $ 44,548.00 3,116 $ 33,419.10 12,466
DeMunnik Treasurer
Kelley S. Former 25,000 5/4/95 $0.275 8,288 $ 44,548.00 3,116 $ 33,419.10 12,466
Grabill Secretary
Charles N. Director 100,000 5/4/95 $0.275 33,151 $177,274.98 12,465 $133,687.12 49,863
Manhoff
Michael McCown Geologist 50,000 5/4/95 $0.275 16,575 $ 84,532.50 6,233 $ 66,848.92 24,932
Ted P. Scallan President 100,000 7/17/95 $4.00 23,014 $ 31,644.25 12,465 $133,687.12 39,726
100,000 1/30/96 $6.375 0 -0- 8,493 $ 91,087.42 12,740
Lyle G. Director 100,000 1/30/96 $6.375 0 -0- 8,493 $ 91,087.42 12,740
Stockstill
Edgar G. Baugh Former Director 100,000 5/4/95 $0.275 -0- -0- 0*
0* 0*
Jack E. Former Director 100,000 5/4/95 $0.275 -0- -0- 0*
Earnest 0* 0*
Raymond E. Former Director 100,000 5/4/95 $0.275 10,000* $ 51,000.00 -0- 0*
Johnson 0*
(Deceased -
12/10/95)
Joseph B. Former Director 100,000 5/4/95 $0.275 33,151 $177,274.98 -0- 0*
Mattei 0*
William A. Director & CEO 100,000 5/4/95 $0.275 33,151 $177,274.98 12,465 $133,687.12
Moffett
John P. Former Director 100,000 5/4/95 $0.275 -0- -0- 0*
O'Hagan 0* 0*
Market Value Shares Vested
at 3/31/96 2 at 5/31/96 5
Russell Project Manager 100,000 5/4/95 $0.275 33,151 $177,274.98 4,383 $ 47,007.67 0*
Ratliff
Allen H. Consultant 100,000 5/4/95 $0.275 33,151 $177,174.98 12,465 $133,687.12 16,712
Sweeney, CPA
George E. Former 400,000 5/4/95 $0.275 -0- -0- 0*
Walter, Jr. Director, CEO & 0* 0*
President
James C. Former VP & 100,000 5/4/95 $0.275 33,151 $177,174.98 2,465 $ 27,115 0*
Walter Sec'y/Treasurer
Kenny Consultant 100,000 1/30/96 $6.375 0 -0- 100,000 $462,500 100,000
Securities <F4>
Sheila Sloan Employee 5,000 1/30/96 $6.375 0 -0- $1,965.62 637
425
* Adjusted to reflect vested shares, or the exercise of
options, or the expiration of options prior to exercise.
<FN>
<F1>
1 Commencing with the Beginning Date, except as indicated
otherwise in the foregoing Table, the optioned shares vest as
follows, to-wit:
100,000 share stock options vest at a rate of 136.9863 per day
50,000 share stock options vest at a rate of 68.4932 per day
25,000 share stock options vest at a rate of 34.2466 per day
5,000 share stock options vest at a rate of 6.8493 per day
for the 24 month period commencing on the Beginning
Date; the options granted may be exercised at any time
from the Beginning Date to the Expiration Date, and the
first 15 days following the end of each quarter,
commencing with the quarter ending September 30, 1995.
<F2>
2 Market value was computed based upon the average trading
price for shares of common stock of the Company on the
OTC Bulletin Board on the respective dates, after
deduction of the exercise price paid or payable with
respect to the exercise of any of the options granted.
<F3>
3 Benton L. Becker was granted an option to acquire an
additional 200,000 "unregistered" and "restricted"
shares of common stock of the Company owned by IRC, at
an exercise price of $0.275 per share, and in
consideration of his agreement to serve on the Board of
Directors of the Company and for other services rendered
to IRC. These shares were fully vested on the date of
the Stock Option Agreement between Mr. Becker and IRC,
and have been issued to Mr. Becker. A copy of this
Stock Option Agreement is attached hereto and
incorporated herein by reference. See the Exhibit
Index. Also, see the heading "Security Ownership of
Certain Beneficial Owners" of the caption "Security
Ownership of Certain Beneficial Owners and Management,"
Part I, Item 4, above.
<F4>
4 The optioned shares of Kenny Securities vested 100% on
January 30, 1996, the date of grant.
<F5>
5 During the period ended December 31, 1995, Allen H.
Sweeney, CPA, exercised options granted to him to
purchase 33,151 "unregistered" and "restricted" shares
of common stock of the Company; during the period ended
March 31, 1996, the following persons exercised options
to purchase the following number of "unregistered" and
"restricted" shares of common stock of the Company, to-
wit: Russell Ratliff, 37,534 shares; James C. Walter,
35,616 shares; and Mike Johnson (son of Raymond E.
Johnson), 10,000 shares. Also, during the month of
April, 1996, the following persons exercised options to
purchase the following number of "unregistered" and
"restricted" shares of common stock of the Company, to-
wit: Joseph B. Mattei, 37,000; and William A. Moffett,
37,397 shares. Effective May 1, 1996, the options (or
the unexercised vested options) granted to Edward G.
Baugh, Jack E. Earnest and Raymond E. Johnson expired.
</FN>
</TABLE>
Copies of these Stock Option Agreements which are still in force
are attached hereto and incorporated herein by reference. See the Exhibit
Index.
Compensation of Directors
The Board of Directors has resolved to compensate members of the
Board of Directors for attendance at meetings at the rate of $250 per day,
together with direct out-of-pocket expenses incurred in attendance at the
meetings, including travel.
Members of the Board of Directors may also be requested to perform
consulting or other professional services for the Company from time to time.
The Board of Directors will set a rate of compensation for such services
which may be no less favorable to the Company than if the services had been
performed by an independent third party contractor. The Board of
Directors has reserved to itself the right to review all directorial claims
for compensation on an ad hoc basis.
Employment Contracts
There are presently no employment contracts relating to any member
of management; however, depending upon the Company's operations and
requirements, the Company may offer long term contracts to directors,
executive officers or key employees in the future.
Termination of Employment and Change of Control Arrangement
None; not applicable.
Item 7. Certain Relationships and Related Transactions.
Transactions with Management and Others
With the exception of the Compensation Agreements of M. E. Ratliff
and Jeffrey D. Jenson, and the issuance of "unregistered" and "restricted"
shares of the Company's common stock to IRC in cancellation of debt, all as
outlined under the heading "Business Development" of the caption
"Description of Business," Part I, Item 1, above, and those options outlined
under the caption "Executive Compensation," Part I, Item 6, above, there
have been no material transactions, series of similar transactions or
currently proposed transactions, to which the Company or any of its
subsidiaries was or is to be a party, in which the amount involved exceeds
$60,000 and in which any director or executive officer or any security
holder who is known to the Company to own of record or beneficially more
than 5% of the Company's common stock, or any member of the immediate family
of any of the foregoing persons, had a material interest. See the caption
"Description of Business," Part I, Item 1, above, and the Exhibit Index.
Certain Business Relationships
With the exception of the Compensation Agreements of M. E. Ratliff
and Jeffrey D. Jenson, and the issuance of "unregistered" and "restricted"
shares of the Company's common stock to IRC in cancellation of debt, all as
outlined under the heading "Business Development" of the caption
"Description of Business," Part I, Item 1, above, and those options outlined
under the caption "Executive Compensation," Part I, Item 6, above, there
have been no material transactions, series of similar transactions or
currently proposed transactions, to which the Company or any of its
subsidiaries was or is to be a party, in which the amount involved exceeds
$60,000 and in which any director or executive officer or any security
holder who is known to the Company to own of record or beneficially more
than 5% of the Company's common stock, or any member of the immediate family
of any of the foregoing persons, had a material interest. See the caption
"Description of Business," Part I, Item 1, above, and the Exhibit Index.
Indebtedness of Management
With the exception of the Compensation Agreements of M. E. Ratliff
and Jeffrey D. Jenson, and the issuance of "unregistered" and "restricted"
shares of the Company's common stock to IRC in cancellation of debt, all as
outlined under the heading "Business Development" of the caption
"Description of Business," Part I, Item 1, above, and those options outlined
under the caption "Executive Compensation," Part I, Item 6, above, there
have been no material transactions, series of similar transactions or
currently proposed transactions, to which the Company or any of its
subsidiaries was or is to be a party, in which the amount involved exceeds
$60,000 and in which any director or executive officer or any security
holder who is known to the Company to own of record or beneficially more
than 5% of the Company's common stock, or any member of the immediate family
of any of the foregoing persons, had a material interest. See the caption
"Description of Business," Part I, Item 1, above, and the Exhibit Index.
Parents of the Issuer
Unless IRC may be deemed to be a parent of the Company, the
Company has no parents.
Transactions with Promoters
With the exception of the Compensation Agreements of M. E.
Ratliff and Jeffrey D. Jenson, and the issuance of "unregistered" and
"restricted" shares of the Company's common stock to IRC in cancellation of
debt, all as outlined under the heading "Business Development" of the
caption "Description of Business," Part I, Item 1, above, and those options
outlined under the caption "Executive Compensation," Part I, Item 6, above,
there have been no material transactions, series of similar transactions,
currently proposed transactions, or series of similar transactions, to which
the Company or any of its subsidiaries was or is to be a party, in which the
amount involved exceeds $60,000 and in which any promoter or founder or any
member of the immediate family of any of the foregoing persons, had a
material interest. See the caption "Description of Business," Part I, Item
1, above, and the Exhibit Index.
Item 8. Description of Securities.
Authorized Capital Stock
The authorized capital stock of the Company consists of 50,000,000
shares common stock with a one mill ($0.001) par value per share.
Common Stock. The holders of the common stock are entitled to one
vote per share on each matter submitted to a vote at any meeting of
stockholders. Shares of common stock do not carry cumulative voting rights,
and therefore, a majority of the shares of outstanding common stock will be
able to elect the entire Board of Directors and, if they do so, minority
stockholders would not be able to elect any persons to the Board of
Directors. The Company's Bylaws provide that a majority of the issued and
outstanding shares of the Company shall constitute a quorum for
stockholders' meetings, except with respect to certain matters for which a
greater percentage quorum is required by statute or the Bylaws.
Stockholders of the Company have no preemptive rights to acquire
additional shares of common stock or other securities. The common stock is
not subject to redemption and carries no subscription or conversion rights.
In the event of liquidation of the Company, the shares of common stock are
entitled to share equally in corporate assets after satisfaction of all
liabilities.
Holders of common stock are entitled to receive such dividends as
the Board of Directors may from time to time declare out of funds legally
available for the payment of dividends. The Company seeks growth and
expansion of its business through the reinvestment of profits, if any, and
except as indicated under the heading "Dividends" of the caption "Market
Price of and Dividends On the Company's Common Equity and Other Stockholder
Matters," Part II, Item 1, below, the Company does not anticipate that it
will pay dividends in the foreseeable future.
The Board of Directors has the authority to issue the authorized
but unissued shares of common stock without action by the stockholders. The
issuance of such shares would reduce the percentage ownership held by
persons purchasing securities in this offering and may dilute the book value
of the then existing stockholders.
There are no provisions in the Bylaws or Articles of Incorporation
of the Company which would delay, defer or prevent a change in control of
the Company.
PART II
Item 1. Market Price of and Dividends on the Company's Common Equity and
Other Stockholder Matters.
Market Information
The Company's common stock is listed on the OTC Bulletin Board of
the NASD; however, the market for shares of the Company's common stock was
extremely limited until the closing of the Purchase Agreement with IRC in
May of 1995. No assurance can be given that the present market for the
Company's common stock will continue or will be maintained, and the sale of
the Company's "unregistered" and "restricted" common stock pursuant to Rule
144 by IRC or others as outlined under the heading "Special Risk Factors" of
the caption "Description of Business," Part I, Item 1, above, of this
Registration Statement may have a substantial adverse impact on any such
public market. See the specific risk factor entitled "Future Sales of
Common Stock," therein.
The Company's common stock has been listed on the OTC Bulletin
Board since the quarter ended March 31, 1994. The high and low bid prices
for shares of common stock of the Company since that period are as follows:
Bid
Quarter ending: High Low
March 31, 19941 0.25 2
June 30, 1994 0.25 0.125
September 30, 1994 0.25 0.125
December 31, 1994 0.25 0.25
March 31, 1995 0.25 0.25
June 30, 1995 3.75 2.00
September 30, 1995 9.00 3.125
December 31, 1995 8.00 5.375
February 29, 1996 7.625 4.875
March 31, 1996 11.00 7.625
1 The high bid price for the quarter ended March 31, 1994, is a
trading price only.
2 As of the time that these figures were compiled, the low bid
price for the Company's common stock during the quarter ended
March 31, 1994, was unavailable.
These bid prices were obtained from the National Quotation Bureau,
Inc. ("NQB") and do not necessarily reflect actual transactions, retail
markups, mark downs or commissions.
Holders
The number of record holders of the Company's common stock as of
December 31, 1995, was approximately 229; presently, there are approximately
274 record holders.
Dividends
There are no present material restrictions that limit the ability
of the Company to pay dividends on common stock or that are likely to do so
in the future. The Company has not paid any dividends with respect to its
common stock, and does not intend to pay dividends in the foreseeable
future.
Item 2. Legal Proceedings.
The Company is not a party to any pending material legal
proceeding. To the knowledge of management, no federal, state or local
governmental agency is presently contemplating any proceeding against the
Company. To the knowledge of management, no director, executive officer or
affiliate of the Company or owner of record or beneficially of more than 5%
of the Company's common stock is a party adverse to the Company or has a
material interest adverse to the Company in any proceeding.
Item 3. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Change from David T. Thomson, CPA to Charles M. Stivers, CPA
David T. Thomson, Certified Public Accountant, of Salt Lake City,
Utah, audited the financial statements of Onasco Companies, Inc. (the
Company's predecessor), from inception of development stage (October 17,
1991) to December 31, 1994, and for the Three Months Ended March 31, 1995
(Unaudited). These financial statements accompany this Registration
Statement.
Charles M. Stivers, Certified Public Accountant, of Manchester,
Kentucky, was engaged as the Company's accountant on May 4, 1995, and
reviewed interim unaudited financial statements of the Company prepared by
management.
There were no disagreements between the Company and Mr. Thomson,
whether resolved or not resolved, on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure,
which, if not resolved, would have caused him to make reference to the
subject matter of the disagreement in connection with his report.
The report of Mr. Thomson for the past two fiscal years did not
contain any adverse opinion or disclaimer of opinion, and was not qualified
or modified as to uncertainty, audit scope or accounting principles.
The decision to change principal accountants was not submitted for
approval to the Board of Directors; the change was made by the Company's
President to Mr. Stivers because Mr. Stivers was the accountant who audited
the cost basis of the principal assets of the Company acquired from IRC
pursuant to the Purchase Agreement in May of 1995, and the Company had
little or no operations prior to the completion of the Purchase Agreement.
Also, during the Company's two most recent fiscal years, and since
then, Mr. Thomson has not advised the Company that any of the following
exist or are applicable:
(1) That the internal controls necessary for the Company to
develop reliable financial statements do not exist, that
information has come to his attention that has lead him to no
longer be able to rely on management's representations, or
that has made him unwilling to be associated with the
financial statements prepared by management;
(2) That the Company needs to expand significantly the scope of
its audit, or that information has come to his attention that
if further investigated may materially impact the fairness or
reliability of a previously issued audit report or the
underlying financial statements or any other financial
presentation, or cause him to be unwilling to rely on
management's representations or be associated with the
Company's financial statements for the foregoing reasons or
any other reason; or
(3) That he has advised the Company that information has come to
his attention that he has concluded materially impacts the
fairness or reliability of either a previously issued audit
report or the underlying financial statements for the
foregoing reasons or any other reason.
Further, during the Company's two most recent fiscal years and
since then, the Company has not consulted Mr. Thomson regarding the
application of accounting principles to a specified transaction, either
completed or proposed; or the type of audit opinion that might be rendered
on the Company's financial statements or any other financial presentation
whatsoever.
The Company has provided Mr. Thomson with a copy of the disclosure
provided under this caption of the Registration Statement, and has advised
him to provide the Company with a letter addressed to the Securities and
Exchange Commission as to whether he agrees or disagrees with the
disclosures made herein. A copy of his response is attached hereto and
incorporated herein by reference. See the Exhibit Index.
Change from Charles M. Stivers, CPA, to Price-Bednar, LLP, CPA
Price-Bednar, LLP, Certified Public Accountants, were engaged as
the Company's accountants as of February 22, 1996, to audit the financial
statements of the Company for the calendar year ending December 31, 1995,
and review an unaudited stub prepared by management for the period ended
March 31, 1996.
There were no disagreements between the Company and Mr. Stivers,
whether resolved or not resolved, on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure,
which, if not resolved, would have caused him to make reference to the
subject matter of the disagreement in connection with his unaudited reports.
The unaudited reports of Mr. Stivers did not contain any adverse
opinion or disclaimer of opinion, and were not qualified or modified as to
uncertainty, audit scope or accounting principles.
The decision to change principal accountants was submitted for
approval to the Board of Directors; the change was made to Price-Bednar
because the Company was seeking to find a larger accounting firm with more
in-depth experience in Securities and Exchange Commission filings.
Also, during the Company's most recent fiscal year, and since
then, Mr. Stivers has not advised the Company that any of the following
exist or are applicable:
(1) That the internal controls necessary for the Company to
develop reliable financial statements do not exist, that
information has come to his attention that has lead him to no
longer be able to rely on management's representations, or
that has made them unwilling to be associated with the
financial statements prepared by management;
(2) That the Company needs to expand significantly the scope of
its audit, or that information has come to his attention that
if further investigated may materially impact the fairness or
reliability of a previously issued audit report or the
underlying financial statements or any other financial
presentation, or cause him to be unwilling to rely on
management's representations or be associated with the
Company's financial statements for the foregoing reasons or
any other reason; or
(3) That he has advised the Company that information has come to
his attention that he has concluded materially impacts the
fairness or reliability of either a previously issued audit
report or the underlying financial statements for the
foregoing reasons or any other reason.
Further, during the Company's most recent fiscal year and since
then, the Company has not consulted Mr. Stivers regarding the application of
accounting principles to a specified transaction, either completed or
proposed; or the type of audit opinion that might be rendered on the
Company's financial statements or any other financial presentation
whatsoever.
The Company has provided Mr. Stivers with a copy of the disclosure
provided under this caption of the Registration Statement, and has advised
him to provide the Company with a letter addressed to the Securities and
Exchange Commission as to whether he agrees or disagrees with the
disclosures made herein. A copy of his response is attached hereto and
incorporated herein by reference. See the Exhibit Index.
Change from Price-Bednar, LLP, CPA to Charles M. Stivers, CPA
The Company had engaged the services of another accountant to
complete certain preparatory onsite audit activities for preliminary review
by Price-Bednar. These services were not timely provided by the other
accountant. Also, many of the records of Industrial Resources, Corporation,
a predecessor of the Company, were unavailable, and Price-Bednar required a
number of these records to be reconstructed prior to its completion of the
audit. During the week of May 20, 1996, the Company was advised that the
principal accountant of Price-Bednar, who was responsible for the Company's
audit, would be out of town for the following week, and it became clear that
Price-Bednar would not be able to complete the audit for at least three
weeks, because certain information requested by them had not yet been
provided by the Company. Price-Bednar was terminated by the President,
effective June 7, 1996, and Charles M. Stivers, CPA, who had been engaged to
conduct the preparatory onsite audit activities for Price-Bednar when the
other accountant failed to perform as promised, indicated that he could
timely deliver the required audit report and was promptly engaged to do so
by the Board of Directors.
Also, during the Company's two most recent fiscal years, and since
then, Price-Bednar has not advised the Company that any of the following
exist or are applicable:
(1) That the internal controls necessary for the Company to
develop reliable financial statements do not exist, that
information has come to their attention that has lead them to
no longer be able to rely on management's representations, or
that has made them unwilling to be associated with the
financial statements prepared by management;
(2) That the Company needs to expand significantly the scope of
its audit, or that information has come to their attention
that if further investigated may materially impact the
fairness or reliability of a previously issued audit report
or the underlying financial statements or any other financial
presentation, or cause them to be unwilling to rely on
management's representations or be associated with the
Company's financial statements for the foregoing reasons or
any other reason; or
(3) That they have advised the Company that information has come
to their attention that they have concluded materially
impacts the fairness or reliability of either a previously
issued report or the underlying financial statements for the
foregoing reasons or any other reason.
Further, during the Company's two most recent fiscal years and
since then, the Company has not consulted Price-Bednar regarding the
application of accounting principles to a specified transaction, either
completed or proposed; or the type of audit opinion that might be rendered
on the Company's financial statements or any other financial presentation
whatsoever.
The Company has provided Price-Bednar with a copy of the
disclosure provided under this caption of the Registration Statement, and
has advised them to provide the Company with a letter addressed to the
Securities and Exchange Commission as to whether they agree or disagree with
the disclosures made herein. A copy of their response is attached hereto
and incorporated herein by reference. See the Exhibit Index.
Item 4. Recent Sales of Unregistered Securities.
The following table provides information with respect to the sale
of all "unregistered" and "restricted" securities sold by the Company during
the past three years, which were not registered under the 1933 Act:
Number
Date of Aggregate
Name of Owner Acquired Shares Consideration
Robert C. Bohannon, Ph.D. 11/8/94 8,750 1
Henry H. Tate, Jr. 11/8/94 3,750 1
Industrial Resources, 5/4/95 4,000,000 2
Corporation
M. E. Ratliff 5/15/95 215,000 3
Jeffrey D. Jenson 5/15/95 240,000 3
Leonard W. Burningham, Esq. 5/15/95 50,000 3
Duane S. Jenson 9/29/95 4,000 4
Craig Carpenter 9/29/95 4,000 4
Industrial Resources, 3/29/96 76,557 5
Corporation 4/10/96 87,709 5
Allen Sweeney 12/31/96 33,151 6
Russell Ratliff 3/29/96 37,534 6
James C. Walter 3/22/96 35,616 6
Mike Johnson 3/26/96 10,000 6
Joseph B. Mattei 4/19/96 37,000 6
William A. Moffett 4/23/96 37,397 6
1 Issued in consideration of services rendered to the Company.
2 Issued to IRC in consideration of the conveyance by IRC to
the Company of certain oil and gas leases, equipment,
securities and vehicles pursuant to the Purchase Agreement.
See the heading "Business Development," of the caption
"Description of Business," Part I, Item 1, above.
3 Issued in consideration of services rendered to the Company.
See the heading "Business Development," of the caption
"Description of Business," Part I, Item 1, above.
4 Issued in consideration of the conveyance of an Eimco
Caterpillar.
5 Issued in consideration of the cancellation of debt owed by
the Company to IRC. See the heading "Business Development"
of the caption Description of Business," Part I, Item 1,
above.
6 Issued pursuant to Stock Option Agreements adopted by the
Board of Directors granting these persons an option to
purchase "unregistered" and "restricted" shares of the
Company's common stock at a price of $0.275 per share. See
the "Restricted Stock Options Table" under the heading "Other
Compensation" of the caption "Executive Compensation," Part
I, Item 6, above.
Management believes that all of the foregoing persons were either
"accredited investors" as that term is defined under applicable federal and
state securities laws, rules and regulations, or were persons who by virtue
of background, education and experience, either alone or through the aid and
assistance of a personal representative, could accurately evaluate the risks
and merits attendant to an investment in the securities of the Company.
Further, all such persons were provided with access to all material
information regarding the Company, prior to the offer or sale of these
securities, and each had an opportunity to ask of and receive answers from
directors, executive officers, attorneys and accountants for the Company.
The offers and sales of the foregoing securities are believed to have been
exempt from the registration requirements of Section 5 of the 1933 Act, as
amended, pursuant to Section 4(2) thereof, and from similar states'
securities laws, rules and regulations covering the offer and sale of
securities by available state exemptions from such registration.
Item 5. Indemnification of Directors and Officers.
Section 48-18-502 of the Tennessee Business Corporation Act (the
"Act") authorizes a Tennessee corporation to indemnify any director against
liability incurred in a legal proceeding if (i) he or she conducted himself
or herself in good faith; and (ii) he or she reasonably believed that his or
her conduct was in the best interest of the company or, if the conduct was
not undertaken in his or her official capacity, that it was not opposed to
the company's best interests. In the case of a criminal proceeding, the
director must have had no reasonable cause to believe that his or her
conduct was unlawful. A corporation may not indemnify a director under
Section 48-18-502 in connection with a proceeding "by or in the right of the
corporation in which the director was adjudged liable to the corporation" or
in connection with any other proceeding charging improper personal benefit
to him or her, in which he or she was adjudged liable on the basis that he
or she improperly received a personal benefit.
Unless limited by its charter, Section 48-18-503 of the Act
requires a corporation to indemnify a director who was wholly successful, on
the merits or otherwise, in the defense of any proceeding to which he or she
was a party because of his or her role as director against reasonable
expenses incurred in connection with the proceeding.
Pursuant to Section 48-18-504 of the Act, the Company may advance
a director's expenses incurred in defending any proceeding upon receipt of
an undertaking and a statement of the director's good faith belief that he
or she has met the standard of conduct described in Section 48-18-502.
Section 48-18-505 permits a court, upon application of a director,
to order indemnification if it determines that the director is entitles to
mandatory indemnification under Section 48-18-503 or that he or she is
fairly and reasonably entitled to indemnification, whether or not he or she
met the standards set forth in Section 48-18-502.
Section 48-18-506 limits indemnification under Section 48-18-502
to situations in which either (i) the majority of a disinterested quorum of
directors; (ii) independent special legal counsel; or (iii) the stockholders
determine that indemnification is proper under the circumstances.
Unless the corporate charter provides otherwise, Section 48-18-507
extends the rights to indemnification and advancement of expenses to
officers, employees and agents.
Regardless of whether a director, officer, employee or agent has
the right to indemnity under Section 48-18-502 or Section 48-18-503, Section
48-18-508 allows the corporation to purchase and maintain insurance on his
or her behalf against liability resulting from his or her corporate role.
Section 48-18-509 provides that the rights to indemnification and
advancement of expenses shall not be deemed exclusive of any other rights
under any bylaw, agreement, stockholder vote or vote of disinterested
directors; however, no indemnification may be made where a final
adjudication adverse to the director establishes his or her liability for
breach the duty of loyalty to the corporation or its stockholders or for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law.
The Company is seeking bids from insurance companies to provide
Directors' and Executive Officers' Insurance, and has adopted the provisions
of the Act.
PART F/S
Index to Financial Statements
Report of Certified Public Accountants
Financial Statements
Audited Financial Statements from inception (October 17, 1991)
to December 31, 1994, and for the three months ended March 31,
1995 (unaudited)
Independent Auditor's Report
Balance Sheets, March 31, 1995 (Unaudited),
and December 31, 1994, 1993 and 1992
Statements of Operations for the three months
ended March 31, 1995, (Unaudited) and for the
years ended December 31, 1994, 1993 and 1992,
and from development stage inception (October 17,
1991) to March 31, 1995 (Unaudited)
Statements of Stockholders' Equity, from
development stage inception (October 17, 1991)
to December 31, 1994, and for the three months
ended March 31, 1995 (Unaudited)
Statements of Cash Flows, for the three months
ended March 31, 1995 (Unaudited), and for the
years ended December 31, 1994, 1993 and 1992, and
from inception (October 17, 1991) to March 31,
1995 (Unaudited)
Notes to Financial Statements
Audited Financial Statements for the year ended
December 31, 1995 and unaudited Financial
Statements for the period ended March 31, 1996
Compilation Report
Independent Auditor's Reports
Balance Sheets, March 31, 1996 (Unaudited), and December 31,
1995 and 1994
Statement of Operations, for the three months ended March 31, 1996
(Unaudited), and for the years ended December 31, 1995, 1994 and
1993 and cumulative during the development stage
Statement of Stockholder's Equity, for the three months ended
March 31, 1996 (Unaudited), and for the years ended December 31,
1995, 1994 and 1993 and cumulative during the development stage
Statement of Cash Flows, for the three months ended March 31, 1996
(Unaudited), and for the years ended December 31, 1995, 1994 and
1993 and cumulative during the development stage
Notes to the Financial Statements
Supplemental Information
TENGASCO, INC.
FINANCIAL STATEMENTS
FROM THE INCEPTION OF DEVELOPMENT STAGE
TO DECEMBER 31, 1995
AND
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
TENGASCO, INC.
(Formerly Onasco Companies, Inc.
(A Development Stage Company)
CONTENTS
Compilation Report 1
Independent Auditor's Reports 2-3
Balance Sheets, March 31, 1996 (Unaudited) and
December 31, 1995, and 1994 4
Statement of Operations, for the three months ended
March 31, 1996 (unaudited) And for the years ended
December 31, 1995, 1994, and 1993 and cumulative
during the development stage 5
Statement of Stockholder's Equity, for the three months
ended March 31, 1996 (Unaudited) and for the years
ended December 31, 1995, 1994, and 1993 and cumulative
during the development stage 6
Statement of Cash Flows, for the three months ended
March 31, 1996 (Unaudited) and for the years ended
December 31, 1995, 1994, and 1993 and cumulative during
the development stage 7
Notes to the Financial Statements 8-16
Supplemental Information 17
CHARLES M. STIVERS
Certified Public Accountant
1106 Manchester Shopping Center
Manchester, Kentucky 40962
(606) 598-1464
Kentucky Society OF AMERICAN
Certified Public ACCOUNTANTS Institute OF
Certified PUBLIC ACCOUNTANTS
Board of Directors
Tengasco, Inc.
I have compiled the accompanying balance sheet of Tengasco, Inc. (a
development stage company) as of March 31, 1996, and the related statements
of income and retained earnings and cash flows for the three months then
ended, in accordance with Statements on Standards for Accounting and Review
Services issued by the American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. I have not audited or
reviewed the accompanying March 31, 1996 financial statements and,
accordingly, do not express an opinion or any other form of assurance on
them.
The financial statements for the years ended December 31, 1995, 1994, and
1993 were audited by us and other accountants, and we expressed unqualified
opinions on them in our reports dated June 10, 1996 and April 14, 1995
respectively, but we have not performed any auditing procedures since that
date.
Charles M. Stivers
Certified Public Accountant
Manchester, Kentucky
June 11,1996
CHARLES M. STIVERS
Certified Public Accountant
1106 Manchester Shopping Center
Manchester, Kentucky 4O962
(606) 598-1464
Member MEMBER
Kentucky SOCIETY OF AMERICAN
INSTITUTE OF
Certified Public Accountants Certified
Public ACCOUNTANTS
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Tengasco, Inc.
I have audited the balance sheet of Tengasco, Inc. (Formerly Onasco
Companies, Inc.) (a development stage company) as of December 31, 1995 and
the related statement of operations, stockholders' equity, and cash flows
for the year then ended December 31, 1995. These financial statements are
the responsibility of the Company's management. My responsibility is to
express an opinion on these financial statements based on my audit. We did
not audit the financial statements of Onasco Companies, Inc., those
statements were audited by other auditors whose reports have been furnished
to us, and in our opinion, insofar as it relates to the amounts included for
Onasco Companies, Inc. are based solely on the report of the other auditors.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I. plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the. amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. I believe that my audit provides a
reasonable basis for my opinion.
In my opinion, based on our audit and the report of other auditors, the
financial statements referred to above present fairly, in all material
respects, the financial position of Tengasco, Inc. as of December 31, 1995
and Onasco Companies, Inc. as of December 31, 1994 and the results of their
operations and their cash flows for the years ended December 31, 1995, 1994
and 1993 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming' that the
Company will continue as a going concern. As discussed in Note 13, the
Company is in the development stage and its ability to establish itself as a
going concern is dependent upon the Company obtaining sufficient financing
to continue its development activities and, ultimately, to achieve
profitable operations (See Note 14). These items raise substantial doubt
about the Company's ability to continue as a going concern.
Charles M. Stiver
Certified Public Accountant
Manchester, Kentucky
June 10, 1996
David T. Thomson P.C.
Certified Public Accountant
Independent Auditors Report
Board of Directors
ONASCO COMPANIES. INC.
(Formerly Gold Deposit Mining and Milling Company)
I have audited the balance sheets of Onasco Companies. Inc. (Formerly Gold
Deposit Mining and Milling Company) (a development stage company) as of
December 31, 1994, 1993 and 1992, and the related statements of operations,
stockholders' equity and cash flows from November 1, 1991 to December 31,
1994, These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these financial
statements based on my audits. The financial statements of Onasco
Companies, Inc. and its Subsidiary as of, October 31, 1991 and from
development .stage inception (October 17, 1991) October 31, 1991 were
audited by other auditors whose reports (dated November 6, 1991 and
November 18, 1991 expressed unqualified opinions. on those statements.
I conducted my audits in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the financial Statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well is evaluating the
overall financial statements presentation. I believe that my audits
provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Onasco Companies, Inc.
as of December 31, 1994, 1993 and 1992 and the results of its operations
and its cash flows from November 1, 1991 to December 31, 1994, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will Continue as a going concern. As discussed in Note 1, the
Company is in the development stage and its ability to establish itself as
a going concern is dependent upon the Company obtaining sufficient
financing to continue its development activities and, ultimately, to
achieve profitable operations (See Note 8). These items raise substantial
doubt about the Company's ability to continue as a going concern.
David T. Thompson
Salt Lake City. Utah
April 14, 1995
180 South 300 West, Suite 329, Salt Lake City, Utah 84101 (801) 328-3900
TENGASCO, INC.
(Formerly Onasco Companies, Inc.)
(A Development Stage Company)
Balance Sheets
March 31, 1996
(Unaudited)
and
December 31, 1995 and 1994
ASSETS
March 31, December 31, December 31,
1996 1995 1994
(Unaudited)
Current assets:
Cash and cash equivalents $ 12,700 $ 700 $
-
Production Receivable 9,500 9,000
Prepaid expenses 56,100 4,100
Other current assets - 600
Total current assets 78,300 14,400 -
Oil and gas properties using
full cost accounting (Notes 4
and 5)
Properties being amortized 484,100 484,100
Properties not subject to 204,700 60,600
amortization
688,800 544,700
-
Less accumulated depletion 8,400 3,300
680,400 541,400 -
Other Assets
Other property and equipment,
less accumulated,
depreciation $78,100 (Note 6) 592,000 600,900
Deposits 6,000 4,900
Organizational costs, net of
accumulated
amortization of $800 5,700 6,200 -
Marketable securities (Note 7) - 250,000
$1,362,400 $1,417,800 $ -
The accompanying notes are an integral part of these financial statements 4
TENGASCO, INC.
(Formerly Onasco Companies, Inc.)
(A Development Stage Company)
BALANCE SHEETS
March 31, 1996
(Unaudited)
and
December 31, 1995 and 1994
LIABILITIES AND STOCKHOLDER'S
EQUITY
March 31, December 31,December 31,
1996 1995 1994
(Unaudited)
Current liabilities
Accounts payable - trade $ 75,400 $ 47,100 $ -
Production payable 3,800 1,700 -
Accrued and other liabilities 19,000 19,900 -
Notes payable - current (Note 227,000 34,000 -
8 0
Stockholder advances payable - - 500
Net current liabilities of
discontinued operations - - 27,500
Total current assets 325,200 102,700 28,000
Long-term debt 54,800 59,000 -
Total liabilities 380,000 161,700 28,000
Commitments and contingencies
(Note 9)
Stockholders' equity:
Common Stock, $.001 par value;
50,000,000 shares
authorized'
5,312,450, 5,229,300,
1,037,600, 1,012,600
shares issued, and 5,300 5,200 1,000
outstanding respectively
additional paid-in capital 1,824,900 1,802,100 5,300
Deficit accumulated during the
development stage (847,800) (551,200) (34,300)
Total stockholder's 982,400 1,256,100 (28,000)
equity
Total liabilities and
stockholder's equity $1,362,400 $1,417,800 $ -
The accompanying notes are an integral part of these financial statements
<TABLE>
TENGASCO, INC
(Formerly Onasco Companies,
Inc.)
(A Development Stage Company)
STATEMENT OF OPERATIONS
<CAPTION>
For the Cumulative
Three
Months For the Year For the During the
endedFor the Year Year
March ended Dec.31 ended Development
31,ended Dec.31 Dec.31
1996 1995 1994 1993 Stage
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Oil and gas revenues $ 10,700 $ 27,800 $ - $ - $38,500
Other revenues - 700 - - 700
Total revenues 10,700 28,500 - - 39,200
Cost and expenses:
Lease operating expense 3,500 18,900 - - 22,400
Production taxes - 1,200 - - 1,200
Depletion, depreciation 28,500 59,100 - - 87,600
and amortization -
Interest expense 5,700 32,600 - - 38,300
General and administrative 269,600 433,400 - 100 703,800
costs
Total costs and 307,300 545,200 - 100 853,300
expenses
Net (loss) from continuing
operations (296,600) (516,700) - (100) (814,100)
Discontinued Operations
Net (loss) from
discontinued operations - (200) (8,200) (5,700) (78,900)
Extraordinary Items
Income from debt
forgiveness - - 38,300 - 38,300
Utilization of net
operating loss
carry forward - - 6,700 - 6,700
Add: Loss of purchased
company
prior to date of
acquisition - - - - 200
Net Income (loss) $ (296,600) $ (516,900) $ 36,800 $ (5,800) $(847,800)
</TABLE>
The accompanying notes are an integral part of these financial statements
TENGASCO, INC.
(Formerly Onasco Companies,
Inc.)
(A Development Stage Company)
STATEMENT OF STOCKHOLDER'S
EQUITY
Deficit
Accumulated
Additional During the
Common Paid-in Development
Stock
#Shares Amount Capital Stage
BALANCE, December 31, 1992 1,014,100 $ 1,000 $ 5,300 $ (65,300)
Shares compiled under stock
option re-purchase
agreement on
April 10, 1993 at $.001 per
share (1,500) - - -
Net income (loss) for the year
ended December 31, 1993 - - - (5,800)
BALANCE, December 31, 1993 1,012,600 1,000 5,300 (71,100)
Shares issued from October
1, 1994
to December 31, 1994 25,000 - - -
Net income (loss) for the
year
ended December 31, 1994 - - - 36,800
BALANCE, December 31, 1994 1,037,600 1,000 5,300 (34,300)
Net effect of 1 for 2
reverse split (518,800) (500) - -
Common Stock issued
to acquire assets of
Industrial Resources
Corporation 4,000,000 4,000 828,000 -
Common Stock issued
to individuals 505,000 500 47,500 -
Common Stock issued for
equipment 8,000 - 2,200 -
Common Stock issued for
exercised option 33,200 - 9,100 -
Common Stock issued for
the extinguishment of debt 164,300 200 881,900 -
To record forgiveness of
debt - - 28,100 -
Net income (loss) for the
year
ended December 31, 1995 - - - (516,900)
BALANCE, December 31, 1995 5,229,300 5,200 1,802,100 (551,200)
Common Stock issued for
exercised options
(Unaudited) 83,150 100 22,800 -
Net (loss) for the three
months
ended March 31, 1996
(Unaudited) - - - (296,600)
BALANCE, March 31, 1996 5,312,450 $ 5,300 $1,824,900 $(847,800)
(Unaudited)
The accompanying notes are an integral part of these financial statements
<TABLE>
TENGASCO, INC.
(Formerly Onasco Companies, Inc.)
(A Development Stage Company)
STATEMENT OF CASH FLOWS
<CAPTION>
For the Cumulative
Three
Months For the Year For the During the
endedFor Year
the Year
March ended Dec.31 ended Development
31,ended Dec.31
Dec.31
1996 1995 1994 1993 Stage
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash Flows from operating activities:
Net income (loss) $(296,600) $(516,700) $ - $ (100) $(814,100)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depletion, depreciation and amortization 28,500 59,100 - - 87,600
Changes in assets and liabilities:
Deposits (1,100) (4,900) - - (6,000)
Production receivable (500) (9,000) - - (9,500)
Prepaid expenses (52,000) (4,100) - - (56,100)
Other current assets 600 (600) - - -
Accounts payable - trade 28,200 47,100 - 100 75,300
Production payable 2,100 1,700 - - 3,800
Accrued and other liabilities (900) 19,900 - - 19,000
Stockholder Advances Payable - (500) - - (500)
Net current liabilities of discontinued
operations - (27,700) - - (26,900)
Net cash used in operating activities
(291,700) (435,700) - - (727,400)
Cash Flows from investing activities:
Additions to machinery and equipment 13,800 (656,300) - - (670,100)
Additions to oil and gas properties - - (484,100) - - (484,100)
amortized
Additions to oil and gas properties - (144,100) (60,600) - - (204,700)
unamortized
Marketable Securities 250,000 (250,000) - - -
Organizational costs (100) (6,600) - - (6,700)
Net cash used in investing activities 92,000 (1,457,600) - - (1,365,600)
Cash Flows from financing activities:
Proceeds from issuance of debt, net 188,800 93,000 - - 281,800
Proceeds from issuance of common stock 22,900 1,801,000 - - 1,823,900
Net cash provided by financing 211,700 1,894,000 - - 2,105,700
Net increase (decrease) in cash and cash 12,000 700 - - 12,700
equivalents
Cash and cash equivalents at beginning of year 700 - - - -
Cash and cash equivalents at end of year $12,700 $700 $- $- $12,700
Supplement schedule of cash flow information
Cash paid during the years for
Income taxes $- $- $- $- $-
Interest $3,100 $9,600 $- $- $12,700
</TABLE>
The accompanying notes are an integral part of these financial statements
TENGASCO, INC.
(Formerly Onasco Companies, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization - TENGASCO, INC. (the "Company"), a publicly held
corporation, was organized under the laws of the State of Utah on April
18, 1916, as Gold Deposit Mining and Milling Company. The Company
subsequently changed its name to Onasco Companies, Inc.
On May 2, 1995, pursuant to a Purchase Agreement, the Company acquired
the interests of Industrial Resources Corporation, a Kentucky
corporation ("IRC"), in certain oil and gas leases, equipment,
marketable securities and vehicles owned by IRC in exchange for common
stock.
The Company changed its domicile from the State of Utah to the State of
Tennessee on May 5, 1995; and its name was changed from "Onasco
Companies, Inc." to "TENGASCO, INC."
The corporate offices are located in Knoxville, Tennessee.
Cash Equivalents - The Company considers all investments with a
maturity of three months or less when purchased to be cash equivalents.
Oil and Gas Properties - The Company uses the full cost method of
accounting for oil and gas exploration and development costs. All costs
of acquired wells, productive exploratory wells and development wells
are capitalized. Dry hole costs, geological and geophysical expenses
and lease rentals on non-producing leases are capitalized as incurred.
Oil and gas leasehold acquisition costs are capitalized. Cost of
unproved properties are transferred to proved properties when reserves
are proved. Gains or losses on sale of leases and equipment are
capitalized as incurred.
The costs of multiple producing properties acquired in a single
transaction are allocated to individual producing properties based on
estimates of gas and oil reserves and future cash flows.
Depletion is provided by the unit of production method based upon
reserve estimates.
Other Property and Equipment - Other property and equipment is carried
at cost. The Company provides for depreciation of other property and
equipment using the straight-line method over the estimated useful
lives of the assets which range from five to seven years.
Income Taxes - Deferred income taxes, when applicable, arise from
timing differences in the recognition or certain income and expense
items for tax purposes. Such differences arise primarily from the use
of different methods of accounting for depletion, depreciation and
amortization and intangible drilling costs.
Gas Balancing - The Company records gas revenue based on the
entitlement method. Under this method, recognition of revenue is based
on the Company's prorate share of each well's production. During such
time as the Company's sales of gas exceed its prorate ownership in a
well, a liability is recorded, and conversely a receivable is recorded
for wells in which the Company's sales or gas are less than its prorate
share.
Concentration of Credit Risk - The Company's primary business
activities include oil and gas sales in several states. The related
trade receivable subject the Company to concentrations of credit risk.
Management considers this credit risk to be limited due to the large
number of customers comprising the Company's customer base.
2. AFFILIATED OIL AND GAS JOINT VENTURE
The Company generally acquires, explores, and operates oil and gas
properties for its own account; however, in 1995, the Company sponsored
a joint venture for the purpose of conducting oil, gas exploration and
development on certain properties. The joint venture was for a 25
percent working interest in one well, with a total cost of $10,185 to
the Company.
3. RELATED PARTY TRANSACTIONS:
The Company transacted the following business with Industrial Resources
Corporation (a stockholder):
From January 1, 1996 through March 31, 1996, Industrial Resources
Corporation loaned TENGASCO, INC. $87,438, including interest at a rate
of 8% per annum. The Company has received additional monies from IRC in
subsequent months and at June 30, 1996 with Board approval the Company
will issue IRC shares of "Unregistered" and "Restricted" stock at the
market price on June 30, 1996 to extinguish this debt.
4. OIL AND GAS PROPERTIES BEING AMORTIZED
The Company currently follows the full cost method of accounting for
oil and gas properties. Accordingly, all costs associated with
acquisition, exploration, and development are capitalized. Depletion is
provided by the unit of production method based upon reserve estimates.
The Company acquired the following amortized oil and gas properties:
Beech Creek
The Beech Creek leases are a 100 percent working interest in 41 oil and
gas leases and a 25% interest on one lease on a total of 8,058 acres located
in Clay County, Kentucky. They contain four wells which have been tested and
management believes that they are capable of producing gas in paying
quantities.
Current Status: Tested only in December 1995
Certified test
Shut-in pending the installation of production
equipment
Explanation: In late 1995, with the completion of the aforementioned
certified flow test and installation of a gathering system,
Tengasco elected to focus all of its resources into Hancock
County, Tennessee. The ongoing development of Hancock County
will postpone future development and production of its Beech
Creek, Burning Springs and Fentress County properties until
sometime in 1997, at which time Tengasco will have adequate
manpower and finances to continue as planned.
Burning Springs
The Burning Springs leases are a 100 percent working interest in 6 oil and
gas leases on a total of 744 acres located in Clay County, Kentucky. They
contain a total of 11 gas wells, 6 of which are shut-in and 5 of which are
currently active. Each of the producing wells is hooked up to a nearby
Southern Gas Company transport line. The Company intends to evaluate the
wells that are listed as shut-in for possible work-over or deepening
potential; after the evaluation, they will be either reworked or plugged.
Current Status: Currently producing
Explanation: Remedial work-over on primarily all of the wells is
necessary. The required work would be in the form of swabbing the
wells. This activity is scheduled to be completed in 1997 for
reasons as described in the "Beech Creek" explanation.
Fentress County
The Fentress County leases are a 100 percent working interest in 9 oil and
gas leases on a total of 2,121 acres located in Fentress County, Tennessee.
The Fentress County leases have one well which is shut-in. The well will
require additional work to initiate production.
Current Status: Tested (oil producing)
Shut-in
Explanation: Needs work-over; development and production scheduled for 1997
for reasons as described in the "Beech Creek" explanation.
5. OIL AND GAS PROPERTIES NOT SUBJECT TO AMORTIZATION
The Company is currently participating in oil and gas exploration and
development activities. At March 31, 1996, a determination cannot be made
about the extent of additional oil and gas reserves that should be
classified as proved reserves.
The Company had the following oil and gas exploration activities at March
31, 1996:
Wildcat Leases
The Wildcat leases are a 100 percent working interest in 5 oil and gas
leases on a total of 741 acres located in Clay County, Kentucky. The
Wildcat leases have no wells at this time. The Company intends to
evaluate the potential of this lease block in 1997 and to schedule
promising locations for future drilling. Wiser Oil Company and
Somerset Gas, two of the oil and gas purchasers in the area, have
lines running on or adjacent to the lease block.
Alabama Leases
The Alabama leases are a 100 percent working interest in 4 oil and gas
leases on a total of 1003 acres located in Alabama. The Alabama leases
have no wells at this time.
Hancock County
The Hancock County leases are a 100 percent working interest in oil
and gas leases on a total of 21,719 acres located in Hancock County.
6. PROPERTY AND EQUIPMENT
Property and Equipment at March 31, 1996 consists of the following:
March 31, 1996
Machinery and Equipment $556,800
Vehicles 82,500
Furniture and Fixtures 14,700
Telephone Equipment 7,900
Computer Software 1,000
Computer Equipment 6,000
Office Equipment 1.200
Total Equipment 670,100
Less Accumulated Depreciation (78,100)
Equipment Net $ 592,000
Property and Equipment are stated at cost. Depreciation is calculated
using straight line methods over the estimated lives of the assets.
Depreciation expense for the three months ended March 31, 1996, was
$23,100.
11
7. MARKETABLE SECURITIES
Marketable securities are shown in the balance sheet at the lower of
cost or market. The marketable securities were acquired in the Purchase
Agreement with Industrial Resources Corporation on May 5, 1996 and
represent 500,000 shares of United Petroleum Corporation stock. The
United Petroleum Corporation stock had a one-for-three reverse stock
split on June 13, 1995 which left the Company with 166,667 shares. The
United Petroleum Corporation stock was sold on January 24, 1996 for
$250,000.
8. LONG - TERM DEBT
Long - term debt consists of the following:
Loan payable to Affiliate $ 86,800
Loan payable to Third Party $ 100,000
Loan payable to financing company, due in
monthly installments of 420, including
interest at a rate of 10.69%
$ 17,000
Loan payable to financing company, due in
monthly installments of $380, including
interest at a rate of 11.95%
$ 14,800
Loan payable to financing company, due in
monthly installments of 590, including
interest at a rate of 12.12%
$ 23,700
Loan payable to a equipment supplier, due
in monthly installments of 5,300
$ 10,700
Loan payable to a equipment supplier $
14,200
Lease payable to finance company, due
in monthly installments of 60 $ 200
Lease payable to a financing company, due in
monthly installments of 100 $ 400
Lease payable to financing company, due in
monthly installments of 230 for five months
and $ 330 for the remaining months $ 5,400
Lease payable to financing company, due in
monthly installments of 240, including interest
at a rate of 11.52% $8,600
Total long-term debt 281,800
Less: Current portion (227,000)
Long-term debt, excluding current
portion $ 54,800
The approximate aggregate maturities of long-term debt for the
five years ending March 31, 2001, are as follows:
1997 $ 227,000
1998 16,600
1999 17,600
2000 17,200
2001 3,400
Total $ 281,800
9. COMMITMENTS AND CONTINGENCIES:
The Company is obligated under an operating lease for office space.
The operating lease is for a period of five years with payments of
$3,942 starting in January 1996.
Approximate annual minimum lease payments under the operating lease at
March 31, 1996 are as follows:
Year Amount
1996 35,480
1997 47,310
1998 47,310
1999 47,310
2000 47,310
10. EARNINGS PER SHARE
Earnings per common and common equivalent shares are based upon the
weighted average of common and common equivalent shares outstanding for
the three months ended March 31, 1996. Primary and fitlly diluted
earnings per share are the same. The number of common and common
equivalent shares utilized in per share computations were 5,929,040,
4,685,133, 1,037,600, and 1,012,600 for the three months ended March
31, 1996 and in years 1995, 1994, and 1993.
13
EARNINGS PER SHARE (continued)
(Unaudited) 1995 1994 1993
Loss from continuing operations $(296,600) $(516,700) $ 0 $ (100)
Net income (loss) $(296,600) $(516,900) $ 36,800 5,800
Primary earnings (loss) per common
share:
Income (loss) from continuing
operations $ (.05) $ (.11) $ 0 $ 0
Discontinued operations 0 0 (.01) 0
Extraordinary items 0 0 .04 0
Earnings (loss) per common share $ (.05) $ (.11) $ .03 $ 0
Fully diluted earnings (loss) per
common share:
Income (loss) from continuing operations
$ (.05) $(.11) $ 0 $ 0
Discontinued operations 0 0 (.01) 0
Extraordinary items 0 0 .04 0
Earnings (loss) per common share $ (.05) $(.11) $ .03 $ 0
11. INCOME TAXES
The Company has a tax basis net operating loss carryforward at March 31,
1996, in the amount of $(807,500 ) by which it may offset future taxable
income.
12. DISCONTINUED OPERATIONS
In April 1995, the Company dissolved the subsidiary company based in Texas.
The dissolution was approved by Texas in April 1995. For accounting
purposes, the Company has treated the dissolved subsidiary as a discontinued
operation. The results of the subsidiary have been reported separately as a
component of discontinued operations in the Statement of Operations for the
periods presented. At the time of dissolution, the Company wrote-off its
investment and assumed obligations of the subsidiary. The following is a
summary of subsidiary operation.
TENGASCO, INC.
(Formerly Onasco Companies, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
For the For the For the
Year Year Year Cumulative
Ended Ended Ended During the
Dec 31 Dec 31 Dec 31 Development
1995 1994 1993 Stage
Revenue:
Sales $0 $0 $1,100 $1,700
Cost of Sales (800)
Gross Margin 0 0 1,100 900
Expense:
Rent 1,000
Depreciation 200 400 900
Amortization 20 300 500 1,400
Utilities 800 3,800
Professional Fees 10,200
Salaries 1,400 4,100 12,200
Office Supplies 200 900
Shipping 200 500
Equipment Rental 100 1,500
Research 300 25,600
Marketing 100 11,300
Other Taxes 900
Other Expenses 100 3,300
Write-off Organization
Factor 180 100
Write-off Patent costs 6,300 6,200
Total Expenses 200 8,200 6,800 79,800
Net Loss related to
Discontinued Operations$(200) $(8,200) $(5,700) $(78,900)
13. DEVELOPMENTAL STAGE OPERATIONS
Although the Company was organized in 1916, it must be regarded as being in
a formative stage due to its lack of significant business operations during
recent years. Its future success depends upon the ability to operate its
existing wells and to expand its operations. No assurance can be given that
the Company will be successful in making acquisitions.
14. GOING CONCERN
The Company has experienced startup losses totaling $(813,500) as of March
31, 1996. In light of this circumstance, the ability of the Company to
continue as a going concern may be in doubt. The financial statements do not
include any adjustments that might result form the outcome of this
uncertainty.
SUPPLEMENTAL GAS AND OIL INFORMATION (unaudited):
The Company's proved gas and oil reserves are located in the United States.
Proved reserves are those quantities of crude oil and natural gas which,
upon analysis of geological and engineering data, demonstrate with
reasonable certainty to be recoverable in the future from known gas and oil
reservoirs. Proved developed (producing and non-producing) reserves are
those proved reserves which can be expected to be recovered through existing
wells with existing wells with existing equipment and operating methods.
Proved undeveloped gas and oil reserves are proved reserves that are
expected to be recovered from new wells on undrilled acreage, or from
existing wells where a relatively major expenditure is required for
recompletion.
Quantities of proved reserves are as follows:
March 31, 1996
Crude Oil Natural Gas
(bbls) (Mcf)
Proved developed producing 137,313 2,290,580
Proved developed shut-in 0 5,250,016
Proved developed non-producing 101,562 0
Proved undeveloped reserves 914,067 93,146,141
Total proved reserves 1,152,942 100,686,737
Future cash inflows were estimated by applying year end prices
(nonescalated) to the estimated future production, net of future production
costs based on year end costs, and does not purport to present the fair
market value of proved gas and oil reserves. Future net gas inflows were
discounted using a 10% annual discount rate to arrive at the discounted
future net cash flows before consideration of income taxes as follows:
March
1,1996
Future cash inflows 263,035,879
Future costs:
Production 11,518,921
Development 10,235,000
Future net cash flows
10% discount factors 241,281,958
Discounted future net
cash flows before income taxes 151,498,921
PART III
Item 1. Index to Exhibits.
The following exhibits are filed as a part of this Registration
Statement:
Exhibit
Number Description*
3.1 By Laws
3.2 Articles of Incorporation of the Tennessee wholly-
owned subsidiary **
3.3 Articles of Merger and Plan of Merger (taking into
account the formation of the Tennessee wholly-
owned subsidiary for the purpose of changing the
Company's domicile and effecting reverse split)
9 IRC Voting Trust Agreement
10.1(a) Purchase Agreement with IRC
10.1(b) Amendment to Purchase Agreement with IRC
10.1(c) General Bill of Sale and Promissory Note
10.2(a) Compensation Agreement - M. E. Ratliff
10.2(b) Compensation Agreement - Jeffrey D. Jenson
10.2(c) Compensation Agreement - Leonard W. Burningham, Esq.
10.3(a) Option Agreement with signature pages of Walter C. Arzonetti,
Benton L. Becker, Jeff Brockman, Charles N. Manhoff,
William A. Moffett and Allen H. Sweeney
10.3(b) Option Agreement with signature pages of Ted P. Scallan,
Jeffrey DeMunnik, Michael W. McCown, Sheila F. Sloan,
Robert M. Carter, Kelley S. Grabill, Lyle Stockstill and
Kenny Securities
10.4 Letter of Understanding between the Company and
Kenny Securities Corp.
16.1 Letter of David T. Thomson, CPA, Regarding
Change in Certifying Accountant
16.2 Letter of Charles M. Stivers, CPA, Regarding
Change in Certifying Accountant
16.3 Letter of Price-Bednar, LLP, CPA, Regarding
Change in Certifying Accountant
99.1 Beech Creek Lease Schedule
99.2 Wildcat Lease Schedule
99.3 Burning Springs Lease Schedule
99.4 Fentress County Lease Schedule
99.5 Swan Creek Lease Schedule
99.6 Alabama Lease Schedule
99.7 Coburn Engineering Reserve Reports
99.7(a) Beechcreek Reserve Evaluation dated
March 8, 1996
99.7(b) Reserve Analysis of Charles Franklin Lease -
Fentress County, Tennessee, dated March 8, 1996
99.7(c) Appraisal of Swan Creek Field, Knox Formation
Drilling Program, Hancock Co., Tennessee, dated
March 30, 1996
99.7(d) Update - Reserves and Cash Flow, Burning Springs Field
Clay County, Kentucky, dated June 3, 1996
99.8 Coburn Petroleum Engineering Drilling
and Completion Program and Procedures dated
April 17, 1995
* Summaries of all exhibits contained within
this Registration Statement are modified in
their entirety by reference to these Exhibits.
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of
1934, the Registrant has caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
TENGASCO, INC.
Date: 6/7/96 By /s/ Walter C. Arzonetti
Walter C. Arzonetti, Director
Date: 6/7/96 By /s/ Benton L. Becker
Benton L. Becker, Esq.,
Chairman of the Board of Directors
Date: 6/7/96 By /s/ Jeffrey D. DeMunnik
Jeffrey D. DeMunnik, Secretary/Treasurer
Date: 6/7/96 By /s/ Charles N. Manhoff
Charles N. Manhoff, Director
Date: 6/7/96 By /s/ William A. Moffett
William A. Moffett, CEO & Director
Date: 6/7/96 By /s/ Ted P. Scallan
Ted P. Scallan, President
Date: 6/7/96 By /s/ Lyle G. Stockstill
Lyle G. Stockstill, Director
EXHIBIT NUMBER 3.1
BY-LAWS
OF
TENGASCO, INC.
ARTICLE I - OFFICES
The principal office of the corporation in the State of Tennessee
shall be located in the Medical Arts Building, 603 Main Avenue, Suite 500,
Knoxville, Tennessee, County of
Knox. The corporation may have such other offices, either within or without
the State of incorporation as the board of directors may designate or as the
business of the corporation may from time to time require.
ARTICLE II- STOCKHOLDERS
1. ANNUAL MEETING
Unless the date is designated to the contrary by the Board of Directors
or its Executive Committee, the annual meeting of the stockholders shall be
held on the 13th day of March in each year, beginning with the year 1996 at
the hour ten o'clock A.M., for the purpose of electing directors and for the
transaction of such other business as may come before the meeting. If the
day fixed for the annual meeting shall be a legal holiday such meeting shall
be held on the next succeeding business day.
2. SPECIAL MEETINGS.
Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by statute, may be called by the president by a
majority of the directors or by the Chairman of the Board of Directors, and
shall be called by the president at the request of the holders of not less
than 25 per cent of all the outstanding shares of the corporation entitled
to vote at the meeting.
3. PLACE OF MEETING.
The directors may designate any place, either within or without the
State unless otherwise prescribed by statute, as the place of meeting for
any annual meeting or for any special meeting called by the directors. A
waiver of notice signed by all stockholders entitled to vote at a meeting
may designate any place, either within or without the State unless otherwise
prescribed by statute, as the place for holding such meeting. If no
designation is made, or if a special meeting be otherwise called, the place
of meeting shall be the principal office of the corporation.
4. NOTICE OF MEETING.
Written or printed notice stating the place, day and hour of the
meeting and, in case of a special meeting, the purpose or purposes for which
the meeting is called, shall be delivered not less than 30 nor more than 90
days before the date of the meeting, either personally or by mail, by or at
the direction of the president, or the secretary, or the officer or persons
calling the meeting, to each stockholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, addressed to the stockholder at his
address as it appears on the stock transfer books of the corporation, with
postage thereon prepaid.
5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.
For the purpose of determining stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or
stockholders entitled to receive payment of any dividend, or in order to
make a determination of stockholders for any other proper purpose, the
directors of the corporation may provide that the stock transfer books shall
be closed for a stated period but not to exceed, in any case, 5 days. If the
stock transfer books shall be closed for the purpose of determining
stockholders entitled to notice of or to vote at a meeting of stockholders,
such books shall be closed for at least 2 days immediately preceding such
meeting. In lieu of closing the stock transfer books, the directors may fix
in advance a date as the record date for any such determination of
stockholders, such date in any case to be not more than 5 days and, in case
of a meeting of stockholders, not less than 5 days prior to the date on
which the particular action requiring such determination of stockholders is
to be taken. If the stock transfer books are not closed and no record date
is fixed for the determination of stockholders entitled to notice of or to
vote at a meeting of stockholders, or stockholders entitled to receive
payment of a dividend, the date on which notice of the meeting is mailed or
the date on which the resolution of the directors declaring such dividend is
adopted, as the case may be, shall be the record date for such determination
of stockholders. When a determination of stockholders entitled to vote at
any meeting of stockholders has been made as provided in this section, such
determination shall apply to any adjournment thereof.
6. VOTING LISTS.
The officer or agent having charge of the stock transfer books for shares of
the corporation shall make, at least 2 days before each meeting of
stockholders, a complete list of the stockholders and/or trustees of
stockholders voting trust entitled to vote at such meeting, or any
adjournment thereof, arranged in alphabetical order, with the address of the
number of shares held by each, which list, for a period of 30 days prior to
such meeting, shall be kept on file at the principal office of the
corporation and shall be subject to inspection by any stockholder at any
time during usual business hours. Such list shall also be produced and kept
open at the time and place of the meeting and shall be subject to the
inspection of any stockholder during the whole time of the meeting. The
original stock transfer book shall be prima facie evidence as to who are the
stockholders entitled to examine such list or transfer books or to vote at
the meeting of stockholders.
7. QUORUM.
At any meeting of stockholders fifty one per cent of the
outstanding shares of the corporation entitled to vote, represented in
person or by proxy, shall constitute a quorum at a meeting of stockholders.
If less than said number of the outstanding shares are represented at a
meeting, a majority of the shares so represented may adjourn the meeting
from time to time without further notice. At such adjourned meeting at which
a quorum shall be present or represented, any business may be transacted
which might have been transacted at the meeting as originally notified. The
stockholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
8. PROXIES.
At all meetings of stockholders, a stockholder may vote by proxy
executed in writing by the stockholder or by his duly authorized attorney in
fact. Such proxy shall be filed with the secretary of the corporation before
or at the time of the meeting.
9. VOTING.
Each stockholder and/or trustee of stockholders voting trust
entitled to vote in accordance with the terms and provisions of the
certificate of incorporation and these by-laws shall be entitled to one
vote, in person or by proxy, for each share of stock entitled to vote held
by such stockholders or Trustee. Upon the demand of any stockholder, the
vote for directors and upon any question before the meeting shall be by
ballot. All elections for directors shall be decided by plurality vote; all
other questions shall be decided by majority vote except as otherwise
provided by the Certificate of Incorporation or the laws of this State.
10. ORDER OF BUSINESS.
The order of business at all meetings of the stockholders, shall
be as follows.
1. Roll Call
2. Proof of notice of meeting or waiver of notice.
3. Reading of minutes of preceding meeting.
4. Reports of Officers.
5. Reports of Committees.
6. Election of Directors.
7. Unfinished Business.
8. New Business.
11. INFORMAL ACTION BY STOCKHOLDERS.
Unless otherwise provided by law, any action required to be taken
at a meeting of the stockholders, or any other action which may be taken at
a meeting of the stockholders, may be taken without a meeting if a consent
in writing, setting forth the action so taken, shall be signed by all of the
shareholders entitled to vote with respect to the subject matter thereof
ARTICLE III - BOARD OF DIRECTORS
1. GENERAL POWERS.
The business and affairs of the corporation shall be managed by
its board of directors. Subject to have provisions of Art. III, 13 herein,
the directors shall in all cases act as a board, and they may adopt such
rules and regulations for the conduct of their meetings and the management
of the corporation, as they may deem proper, not inconsistent with these by-
laws and the laws of this State. The board shall elect a Chairman from its
members, who shall act as the presiding officer at all board meetings.
2. NUMBER, TENURE AND QUALIFICATIONS.
The number of directors of the corporation shall be 4. All
directors shall serve one year terms. Each director shall hold office until
the next annual meeting of stockholders and until his successor shall have
been elected and qualified.
3. REGULAR MEETINGS.
A regular meeting of the directors, shall be held without other
notice than this by-law immediately after, and at the same place as, the
annual meeting of stockholders. The directors may provide, by resolution,
the time, place and manner for the holding of additional regular meetings
without other notice than such resolution.
4. SPECIAL MEETINGS.
Special meetings of the directors may be collectively called by or at the
collective request of the president, any two directors. The person or
persons authorized to call special meetings of the directors may fix the
place for holding any special meeting of the directors called by them.
5. NOTICE.
Notice of any special meeting shall be given at least 30 days
previously thereto by written notice delivered personally, or by telegram or
mailed to each director at his business address. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail so
addressed, with postage thereon prepaid. If notice be given by telegram,
such notice shall be deemed to be delivered when the telegram is delivered
to the telegraph company. The attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director
attends a meeting for the express purpose of objecting to the transaction of
any business because the meeting is not lawfully called or convened.
6. QUORUM.
At any meeting of the directors 4 shall constitute a quorum for
the transaction of business, but if less than said number is present at a
meeting, a majority of the directors present may adjourn the meeting from
time to time without flightier notice. The directors may provide that quorum
requirements may be satisfied by directors present to be telephonically.
7. MANNER OF ACTING.
The act of the majority of the directors present at a meeting at
which a quorum is present shall be the act of the directors.
8. NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
Newly created directorships resulting from an increase in the
number of directors and vacancies occurring in the board for any reason
except the removal of directors without cause may be filled by a vote of a
majority of the directors then in office, although less than a quorum
exists. Vacancies occurring by reason of the removal of directors without
cause shall be filled by vote of the stockholders. A director elected to
fill a vacancy caused by resignation, death or removal shall be elected to
hold office for the unexpired term of his predecessor.
9. REMOVAL OF DIRECTORS.
Any or all of the directors may be removed for cause by majority
vote of the board. Directors may be removed without cause by majority vote
of the stockholders.
10. RESIGNATION.
A director may resign at any time by giving written notice to the
board, the president or the secretary of the corporation. Unless otherwise
specified in the notice, the resignation shall take effect upon receipt
thereof by the board of such officer, and the acceptance of the resignation
shall not be necessary to make it effective.
11. COMPENSATION.
No compensation shall be paid to directors, as such, for their
services, but by resolution of the board a fixed sum and expenses for actual
attendance at each regular or special meeting of the board may be
authorized. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor.
12. PRESUMPTION OF ASSENT.
A director of the corporation who is present at a meeting of the
directors at which action on any corporate matter is taken shall be presumed
to have assented to the action taken unless his dissent shall be entered in
the minutes of the meeting or unless he shall file his written dissent to
such action with the person acting as the secretary of the meeting before
the adjournment thereof or shall forward such dissent by registered mail to
the secretary of the corporation immediately after the adjournment of the
meeting. Such right to dissent shall not apply to a director who voted in
favor of such action.
13. EXECUTIVE AND OTHER COMMITTEES.
The board, by resolution, may designate from among its members an
executive committee and other committees, each consisting of three or more
directors. Each such committee shall serve at the pleasure of the board.
The board may vest its executive committee with all powers and authority the
board deems appropriate, consistent with State corporate Law. The Chairman
of the Board shall serve as an officio member of every committee of the
board.
ARTICLE IV- OFFICERS
1. NUMBER.
The officers of the corporation shall be a president, a vice-
president, a secretary and a treasurer, each of whom shall be elected by the
directors. Such other officers and assistant officers as may be deemed
necessary may be elected or appointed by the directors.
2. ELECTION AND TERM OF OFFICE.
The officers of the corporation to be elected by the directors
shall be elected annually at the first meeting of the directors held after
each annual meeting of the stockholders. Each officer shall hold office
until his successor shall have been duly elected and shall have qualified or
until his death or until he shall resign or shall have been removed in the
manner hereinafter provided.
3. REMOVAL.
Any officer or agent elected or appointed by the directors may be
removed by a majority vote of the directors without cause at any time,
however such removal shall not prejudice the employment contract rights with
the corporation, if any, of the person removed. All officers serve at the
pleasure of the board.
4. VACANCIES.
A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the directors for the
unexpired portion of the term.
5. PRESIDENT.
The president shall be the principal executive officer of the
corporation and, subject to the control of the directors, shall in general
supervise and control all of the business and affairs of the corporation. He
shall, when present, preside at all meetings of the stockholders. He may
sign, with the secretary or any other proper officer of the corporation
thereunto authorized by the directors, certificates for shares of the
corporation, any deeds, mortgages, bonds, contracts, or other instruments
which the directors have authorized to be executed, except in cases where
the signing and execution thereof shall be expressly delegated by the
directors or by these by-laws to some other officer or agent of the
corporation, or shall be required by law to be otherwise signed or executed;
and in general shall perform all duties incident to the office of president
and such other duties as may be prescribed by the directors from time to
time.
6. VICE PRESIDENT.
In the absence of the president or in event of his death,
inability or refusal to act, the vice-president shall perform the duties of
the president, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the president. The vice-president shall
perform such other duties as from time to time may be assigned to him by the
president and directors.
7. SECRETARY.
The secretary shall keep the minutes of the stockholders' and of
the directors' meetings in one or more books provided for that purpose, see
that all notices are duly given in accordance with the provisions of these
by-laws or as required, be custodian of the corporate records and of the
seal of the corporation and keep a register of the post office address of
each stockholder which shall be furnished to the secretary by such
stockholder, have general charge of the stock transfer books of the
corporation and in general perform all duties incident to the office of
secretary and such other duties ads from time to time may be assigned to him
by the president or by the directors.
8. TREASURER.
If required by the directors, the treasurer shall give a bond for
the faithfully discharge of his duties in such sum and with such surety or
sureties as the directors shall determine. He shall have charge and custody
of and be responsible for all funds and securities of the corporation;
receive and give resource whatsoever, and deposit all such moneys in the
name of the corporation in such banks, trust companies or other depositories
as shall be selected in accordance with these by-laws and in general perform
all of the duties incident to the office of treasurer and such other duties
as from time to time may be assigned to him by the president or by the
directors.
9. SALARIES.
The salaries compensation of the officers shall be fixed from time
to time by the directors and no officer shall be prevented from receiving
such salary or compensation by reason of the fact that the officer also a
director of the corporation.
ARTICLE V - CONTRACTS. LOANS. CHECKS AND DEPOSITS
1. CONTRACTS.
The directors may authorize any officer or officers, agent or
agents, to enter into any contract or execute and deliver any instrument in
the name of and on behalf of the corporation, and such authority may be
general or confined to specific instances.
2. LOANS.
No loans shall be contracted on behalf of the corporation and no
evidences of indebtedness shall be issued in its name unless authorized by a
resolution of the directors. Such authority may be general or confined to
specific instances.
3. CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for the payment of money,
notes or other evidences of indebtedness issued in the name of the
corporation, shall be signed by such officer or officers, agent or agents of
the corporation and in such manner as shall from time to time be determined
by resolution of the directors.
4. DEPOSITS.
All funds of the corporation not otherwise employed shall be
deposited from time to time to the credit of the corporation in such banks,
trust companies or other depositories as the directors may select.
ARTICLE VI- CERTIFICATES FOR SHARES AND THEIR TRANSFER
1. CERTIFICATES FOR SHARES.
Certificates representing shares of the corporation shall be in such form as
shall be determined by the directors. Such certificates shall be signed by
the president and by the secretary or by such other officers authorized by
law and by the directors. All certificates for shares shall be
consecutively numbered or otherwise identified. The name and address of the
stockholders, the number of shares and date of issue, shall be entered on
the stock transfer books of the corporation. All certificates surrendered
to the corporation for transfer shall be canceled and no new certificate
shall be issued until the former certificate for a like number of shares
shall have been surrendered and canceled, except that in case of a lost,
destroyed or mutilated certificate a new one may be issued therefor upon
such terms and indemnity to the corporation as the directors may prescribe.
2. TRANSFER OF SHARES.
(a) Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall
be the duty of the corporation to issue a new certificate to the person
entitled thereto, and cancel the old certificate; every such transfer shall
be entered on the transfer book of the corporation which shall be kept at
its principal office.
(b) The corporation shall be entitled to treat the holder of
record of any share as the holder in fact thereof?, and, accordingly, shall
not be bound to recognize any equitable or other claim to or interest in
such share on the part of any other person whether or not it shall have
express or other notice thereof?, except as expressly provided by the laws
of this state.
ARTICLE VII- FISCAL YEAR
The fiscal year of the corporation shall begin on the 30th day of
December in each year.
ARTICLE VIII- DIVIDENDS
The directors may from time to time declare, and the corporation
may pay, dividends on its outstanding shares in the manner and upon the
terms and conditions provided by law.
ARTICLE IX - SEAL
The directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the
corporation, the state of incorporation, year of incorporation and the
words, "Corporate Seal".
ARTICLE X - WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required
to be given to any stockholder or director of the corporation under the
provisions of these by-laws or under the provisions of the articles of
incorporation, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before or after the time stated therein,
shall be deemed equivalent to the giving of such notice.
ARTICLE XI- AMENDMENTS
These bylaws may be altered, amended or repealed and new by-laws
may be adopted by a vote of the stockholders representing a majority of all
the shares issued and outstanding, at any annual stockholders' meeting or
any special stockholders' meeting when the proposed amendment has been set
out in the notice of such meeting.
Refer to 3.2 **
EXHIBIT 3.3
ARTICLES OF MERGER
OF
ONASCO COMPANIES, INC.
(a Utah Corporation)
AND
TENGASCO, INC.
(a Tennessee Corporation)
Pursuant to the provisions of Section 48-21-102 of the Tennessee
Business Corporation Act and Section 16-10a-1105 of the Utah Revised
Business Corporation Act, these corporations do hereby adopt the following
Articles of Merger.
1. Annexed hereto and made a part hereof is the Plan of Merger
for merging Onasco Companies, Inc., a Utah corporation ("Onasco"), with and
into Tengasco, Inc., a Tennessee corporation ("Tengasco"). This Plan of
Merger has been adopted by the respective Boards of Directors of Onasco and
Tengasco, as required by applicable laws, rules and regulations.
2. The merger of Onasco with and into Tengasco is permitted by
the laws of the States of Utah and Tennessee and has been authorized in
compliance with their respective laws, rules and regulations.
3. The Plan of Merger was submitted to the stockholders of
Onasco at a special meeting held April 28, 1995, pursuant to the provisions
of Section 16-10a-1104(3) of the Utah Revised Business Corporation Act, at
which the required majority of Onasco's stockholders adopted, ratified and
approved the Plan of Merger; the manner of approval thereof by Onasco's
stockholders was as follows:
(i) The designation, number of outstanding shares and
the number of votes entitled to be cast by each class
entitled to vote on the Plan of Merger are as follows:
Number
Entitled
Designation Outstanding Shares to Vote
Common 1,037,650 1,037,650
(ii) The total number of votes cast for and against the
Plan of Merger by each class entitled to vote on the
Plan is as follows:
Designation Voted For Voted Against
Common 801,383 None
(iii) The number of votes cast for the Plan of Merger was
sufficient for the approval thereof by the class.
4. Tengasco was formed by Onasco for the purpose of changing the
domicile of Onasco to the State of Tennessee, and no shares are presently
outstanding, and accordingly, no vote of the stockholders of Tengaso is
required; however, the members of the Board of Directors of Tengasco
unanimously consented to and adopted, ratified and approved the Plan of
Merger in accordance with the Tennessee Business Corporation Act and its
Bylaws.
5. No amendments to the Articles of Incorporation of Tengasco
are effected by the Plan of Merger.
6. The Plan of Merger effects a one for two reverse split of the
outstanding common stock of Onasco.
7. The Plan of Merger shall become effective on the date that
these Articles of Merger are filed with the Secretary of State of the State
of Tennessee and the Department of Commerce of the State of Utah.
8. The address of the principal executive office of the
Surviving Corporation shall be 4928 Homberg Drive, Suite 3, Knoxville,
Tennessee 37919.
ONASCO COMPANIES, INC.
a Utah corporation
Date: 5/2/95 /s/ Jeffrey D. Jenson
Jeffrey D. Jenson, President
Date: 5/2/95 /s/ Kathleen L. Morrison
Kathleen L. Morrison, Secretary
STATE OF UTAH )
) ss
COUNTY OF SALT LAKE )
On May 2, 1995, personally appeared before me, a Notary Public in
and for the State and County aforesaid, Jeffrey D. Jenson, President, and
Kathleen L. Morrison, Secretary of Onasco Companies, Inc., personally known
to me to be the persons whose names are subscribed to the above instrument
in the said capacities, who acknowledged that they executed the said
instrument.
/s/ Sheryl Ross
NOTARY PUBLIC
TENGASCO, INC.
a Tennessee corporation
Date: 5/2/95 /s/ Jeff D. Jenson
Jeffrey D. Jenson, President
Date: 5/2/95 /s/ Kathleen L. Morrison
Kathleen L. Morrison, Secretary
STATE OF UTAH )
) ss
COUNTY OF SALT LAKE )
On May 2, 1995, personally appeared before me, a Notary Public in
and for the State and County aforesaid, Jeffrey D. Jenson, President, and
Kathleen L. Morrison, Secretary of Tengasco, Inc., personally known to me to
be the persons whose names are subscribed to the above instrument in the
said capacities, who acknowledged that they executed the said instrument.
/s/ Sheryl Ross
NOTARY PUBLIC
PLAN OF MERGER
OF
ONASCO COMPANIES, INC.
(a Utah Corporation)
INTO
TENGASCO, INC.
(a Tennessee Corporation)
THIS PLAN OF MERGER entered into this 2nd day of May, 1995, by and
between ONASCO COMPANIES, INC., a Utah corporation ("Onasco"), and TENGASCO,
INC., a Tennessee corporation ("Tengasco").
WHEREAS, Onasco is a corporation organized and existing under the
laws of the State of Utah with its principal office in Salt Lake County,
Utah; and
WHEREAS, Onasco desires to change its domicile to the State of
Tennessee; and
WHEREAS, Onasco has caused Tengasco to be formed under the laws of
the State of Tennessee solely to effect such change of domicile;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreement of the parties hereto, the Plan of Merger ("Plan") and the terms
and conditions thereof and the mode of carrying the same into effect,
together with any provisions required or permitted to be set forth therein,
are hereby determined and agreed upon for submission to the stockholders of
Onasco and Tengasco as required by the laws of the States of Utah and
Tennessee as follows:
1.
Merger and Surviving Corporation
Onasco will merge into Tengasco, and Tengasco will be the
"Surviving Corporation."
2.
Terms and Conditions of Merger
2.1 Each share of common stock of Onasco (the "Shares") shall
first be reverse split on the basis of one for two (1 for 2) and, upon the
effective date of the Plan, be converted into one share of common stock of
Tengasco. On the effective date of the Plan, such shares so converted shall
constitute all of the then issued and outstanding shares of common stock of
the Surviving Corporation.
2.2 The separate existence of Onasco shall cease.
2.3 The Surviving Corporation shall thereupon and thereafter
possess all the rights, privileges, powers and franchises as well of a
public as of a private nature, and be subject to all of the restrictions,
disabilities and duties of Onasco; and all and singular, the rights,
privileges, powers and franchises of Onasco, and all property, real,
personal and mixed, and all debts due to Onasco on whatever account, as well
for stock subscriptions as all other things in action or belonging to Onasco
shall be vested in the Surviving Corporation; and all property, rights,
privileges, powers and franchises, and all and every other interest shall be
thereafter as effectually the property of the Surviving Corporation as they
were of Onasco, and the title to any real estate vested by deed or otherwise
in Onasco shall not revert or be in any way impaired by reason of the Plan;
but all rights of creditors and all liens upon any property of Onasco shall
be preserved unimpaired, and all debts, liabilities and duties of Onasco
shall thenceforth attach to the Surviving Corporation and may be enforced
against it to the same extent as if said debts, liabilities and duties had
been incurred or contracted by it. Specifically, but not by way of
limitation, the Surviving Corporation shall be responsible and liable to
dissenting stockholders of Onasco; and any action or proceeding whether
civil, criminal or administrative, pending by or against Onasco, shall be
prosecuted as if the Plan had not taken place, or the Surviving Corporation
may be substituted in such action or proceeding.
2.4 All corporate acts, plans, policies, contracts, approvals and
authorizations of Onasco and its stockholders, Board of Directors,
committees elected or appointed by the Board of Directors, officers and
agents, which were valid and effective immediately prior to the effective
time of the Plan, shall be taken for all purposes as the acts, plans,
policies, contracts, approvals and authorizations of the Surviving
Corporation and shall be as effective and binding thereon as the same were
with respect to Onasco. The employees of Onasco shall become the employees
of the Surviving Corporation and continue to be entitled to the same rights
and benefits which they enjoyed as employees of Onasco.
2.5 The assets, liabilities, reserves and accounts of Onasco
shall be recorded on the books of the Surviving Corporation at the amounts
at which they, respectively, shall then be carried on the books of Onasco,
subject to such adjustments or eliminations of intercompany items as may be
appropriate in giving effect to the Plan.
2.6 The Articles of Incorporation of Tengasco shall be the
Articles of Incorporation of the Surviving Corporation; and the Bylaws of
Tengasco shall become the Bylaws of the Surviving Corporation.
2.7 All of the present directors and executive officers of Onasco
shall be designated directors and executive officers of the Surviving
Corporation to serve in the same capacities until the next annual meetings
of the stockholders and directors and until their respective successors are
elected and qualified, or their prior resignation or termination.
2.8 The principal office of the Surviving Corporation shall be
4928 Homberg Drive, Suite 3, Knoxville, Tennessee 37919. The Surviving
Corporation shall also maintain a registered agent and registered office in
Tennessee, Wesley Baker, Esq., 4928 Homberg Drive, Suite B-3, Knoxville,
Tennessee 37919..
2.9 The Plan must be adopted by persons owning a majority of the
shares of Onasco and Tengasco. Stockholders of Onasco shall be given such
written notice as may be required by the laws of the State of Utah.
2.10 Stockholders of both corporations shall be afforded all
rights and privileges and be subject to all obligations contained within the
Utah Revised Business Corporation Act and the Tennessee Business Corporation
Act regarding dissenters' rights, and the Surviving Corporation shall be
obligated to notify the stockholders as provided therein.
2.11 The effective date of the Plan shall be the date when
the Articles of Merger are filed and accepted by the Secretary of State of
the State of Tennessee and at such time as all applicable provisions of the
Utah Revised Business Corporation Act have been met.
IN WITNESS WHEREOF, the parties hereto have executed this Plan the
day and year first above written.
ONASCO COMPANIES, INC.,
a Utah Corporation
By /s/ Jeffrey D. Jenson
Jeffrey D. Jenson, President
Attest:
/s/ Kathleen L. Morrison
Kathleen L. Morrison, Secretary
TENGASCO, a Tennessee Corporation
By /s/ Jeffrey D. Jenson
Jeffrey D. Jenson, President
Attest:
/s/ Kathleen L. Morrison
Kathleen L. Morrison, Secretary
STATE OF UTAH )
) ss
COUNTY OF SALT LAKE )
On the 2nd day of May, 1995, personally appeared before me Jeffrey
D. Jenson and Kathleen L. Morrison, who duly acknowledged to me that they
are authorized to and did sign the foregoing Plan for and on behalf of
Onasco Companies, Inc.
/s/ Sheryl Ross
NOTARY PUBLIC
STATE OF UTAH )
) ss
COUNTY OF SALT LAKE )
On the 2nd day of May, 1995, personally appeared before me Jeffrey
D. Jenson and Kathleen L. Morrison, who duly acknowledged to me that they
are authorized to and did sign the foregoing Plan for and on behalf of
Tengasco, Inc.
/s/ Sheryl Ross
NOTARY
EXHIBIT 9
VOTING TRUST AGREEMENT
THIS VOTING TRUST AGREEMENT is made and entered into as of this
1st day of September, 1995, by and between INDUSTRIAL RESOURCES,
CORPORATION, a Kentucky corporation ("IRC" or the "Stockholder"), and BENTON
L. BECKER, ESQ. (the "Trustee");
RECITALS:
WHEREAS, the Stockholder owns in excess of a majority of the
outstanding voting securities of Tengasco, Inc., a Tennessee corporation
("Tengasco"); and
WHEREAS, the Stockholder desires to obtain and maintain an
independent Board of Directors for Tengasco; and
WHEREAS, the Trustee, who is also the beneficial owner of
outstanding voting securities of Tengasco, desires to obtain and maintain an
independent Board of Directors for Tengasco; and
WHEREAS, the Trustee, who presently serves on the Board of
Directors of Tengasco, was requested to serve as a member of the Board of
Directors based upon the Stockholder's belief that the Trustee would provide
independence, continuity and stability to Tengasco's policies and
management; and
WHEREAS, the Stockholder and the Trustee believe that this
Agreement will promote these desired policies and results for their mutual
benefit and for the benefit of the other stockholders of Tengasco;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby
agree as follows:
Section 1
Purpose
The purpose of this Agreement is to grant to the Trustee the sole
right to vote on any matter submitted to the stockholders of Tengasco or by
written consent in lieu of a meeting of Tengasco stockholders in accordance
with the provisions of the Tennessee Business Corporation Act all shares of
Tengasco owned by IRC and with respect to which IRC would be entitled to
vote or give its consent on any such matter (the "Shares"), without
reservation.
Section 2
Term
2.1 The term of this Agreement shall be a period of five (5)
years, commencing from the date hereof, unless sooner terminated as provided
herein.
2.2 This Agreement is irrevocable until December 31, 1995, and
revocable thereafter, in the sole discretion of the Stockholder, on thirty
(30) days' written notice to the Trustee, Tengasco and Tengasco's transfer
agent.
2.3 The Trustee may also terminate this Agreement at any time,
and such termination shall be effective on actual notice thereof to IRC,
Tengasco and Tengasco's transfer agent or five (5) days, whichever is
sooner.
2.4 No prior action taken hereunder by the Trustee shall be
affected by any subsequent termination.
Section 3
Notice of Agreement
3.1 Copies of this Agreement and every supplement or amendment
thereto shall be maintained in the offices of Tengasco and its transfer
agent, American Registrar & Transfer Co., Inc., or any successor transfer
agent. Such copies shall be open to the inspection of the stockholders of
Tengasco daily, during normal business hours. All stock certificates
representing any outstanding voting securities of IRC now owned or hereafter
acquired will be held by IRC subject to the terms and provisions of this
Agreement, and the Stockholder shall be bound by the terms and provisions
hereof.
3.2 So long as IRC, Tengasco and its transfer agent have not
received notice of any termination of this Agreement, and for a period of
five (5) years from the date hereof, the copies hereof maintained by these
entities shall be sufficient evidence of the Trustee to vote all of the
Shares in the name, place and stead of IRC.
3.2 There shall be no requirement to transfer any stock
certificate representing the Shares of Tengasco owned by IRC into the name
of the Trustee, and the sale or other disposition of any of the Shares shall
terminate this Agreement with respect to the portion of the Shares so
disposed of by IRC.
Section 4
Voting of Shares
4.1 During the term of this Agreement, the Trustee shall be
entitled to exercise all voting rights whatsoever with respect to the
Shares, including the right to vote in person or by proxy at any meeting of
the stockholders of Tengasco, or by written consent, in lieu of a meeting of
the stockholders of Tengasco, in accordance with the provisions of the
Tennessee Business Corporation Act.
4.2 If Tengasco is merged with, into or consolidated with another
corporation, or all or substantially all of its assets are transferred to
another corporation, then in connection with such transfer, "Tengasco" shall
be deemed to include such successor corporation, and the voting rights
conferred hereunder by the Stockholder shall be conferred with respect to
the securities of any such successor corporation acquired by IRC as a result
thereof.
Section 5
Sale of Shares
During the term of this Agreement, the Stockholder shall have the
sole right to convey any of the Shares it owns, and on any such sale or
disposition, the Shares so conveyed shall no longer be subject to the terms
and provisions of this Agreement.
Section 6
Rights of Trustee
During the term of this Agreement, the Trustee shall possess and
shall be entitled to exercise, in person or by proxy, all rights and powers
of absolute owners in respect of all of the Shares IRC, except the right to
receive dividends, and including the right to vote on, take part in and
consent to any corporate or stockholders' action of any kind whatsoever.
The Trustee's right to vote shall include the right to vote for the election
of directors, including electing himself to the Board of Directors of
Tengasco, and in favor of or in opposition to any resolutions or proposed
action of any character whatsoever that may require the vote or consent of
the stockholders of Tengasco.
Section 7
Sale or Purchase of Shares of Tengasco
Nothing contained herein shall deprive the Trustee of the
privileges to be enjoyed by all other stockholders of Tengasco or the right
to personally purchase or sell other securities of Tengasco during the
duration of this Agreement.
Section 8
IRC Due Authority
The Stockholder hereby represents and warrants to the Trustee that
all corporate action required on the part of IRC necessary for the
authorization, execution, delivery and performance of this Agreement has
been or shall have been taken prior to the execution and delivery hereof,
and this Agreement, when executed and delivered by the Stockholder, shall
constitute the valid and legally binding obligation of the Stockholder.
Section 9
Trustee's Liability for Negligence
In voting the Shares held by the Trustee or in doing any other act
with respect to the control or management of Tengasco resulting from the
voting of the Shares of Tengasco owned by IRC pursuant to this Agreement,
the Trustee shall exercise his best judgment in the interest of Tengasco to
the end that Tengasco's affairs be properly managed; however, the Trustee
shall not be liable for any error of judgment or mistake of law or fact or
for any error or omission whatsoever, save only his wilful misconduct or
gross negligence. In connection therewith, the Trustee shall be entitled to
all indemnifications and rights to reimbursement available to the Board of
Directors and officers of Tengasco through its Articles of Incorporation,
Bylaws or other documents or agreements and as contained in the Tennessee
Business Corporation Act.
Section 10
General Provisions
10.1 Further Assurances. At any time and from time to time after
the execution and delivery of this Agreement, each party will execute such
additional instruments and take such action as may be reasonably requested
by the other party to confirm or to carry out the intent and purposes of
this Agreement.
10.2 Waiver. Any failure on the part of any party to comply with
any of the obligations, agreements or conditions hereunder may be waived in
writing by the party to whom such compliance is owed.
10.3 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been given if delivered in
person or sent by prepaid first-class registered or certified mail, return
receipt requested, as follows:
If to IRC: Industrial Resources, Corporation
4928 Homberg, Suite 3B
Knoxville, Tennessee 37919
If to Trustee: Benton L. Becker, Esq.
The Kendar Building
1550 Madruga Avenue
Suite 329
Corals Gables, Florida 33146
If to Tengasco: Tengasco, Inc.
4928 Homberg, Suite 3B
Knoxville, Tennessee 37919
and Leonard W. Burningham, Esq.
455 East 500 South, #205
Salt Lake City, Utah 84111
If to Transfer Agent: American Registrar & Transfer Co.,
Inc.
735 Newhouse Building
10 Exchange Place
Salt Lake City, Utah 84111
Attention: Richard M. Day, Esq., President
10.4 Entire Agreement. This Agreement constitutes the entire
agreement between the parties regarding the matters covered hereby and
supersedes and cancels any such other agreement, representation or
communication, whether oral or written, between the parties hereto and which
relate to the subject matter hereof.
10.5 Headings. The section and subsection headings in this
Agreement are inserted for convenience only and shall not affect in any way
the meaning or interpretation of this Agreement.
10.6 Governing law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of
Tennessee, except to the extent pre-empted by federal law, in which event
(and to that extent only), federal law shall govern.
10.7 Assignment. This Agreement shall inure to the benefit of and
be binding upon the parties hereto and their successors and assigns;
provided however, that the Trustee shall have no power to assign his rights,
obligations or duties hereunder.
10.8 Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Voting Trust
Agreement effective the day and year first above written.
INDUSTRIAL RESOURCES, CORPORATION
By /s/ Russell A. Ratliff
Its Secretary/Treasurer
BENTON L. BECKER, ESQ.
By /s/ Benton L. Becker
ACTION BY UNANIMOUS CONSENT
OF THE BOARD OF DIRECTORS OF
INDUSTRIAL RESOURCES, CORPORATION
The undersigned, being all of the duly elected and incumbent
directors of Industrial Resources, Corporation, a Kentucky corporation (the
"Corporation"), acting pursuant to Section 271B.8-210 of the Kentucky
Business Corporation Act, do hereby consent to and adopt the following
resolution, effective the date hereof:
RESOLVED, that the Corporation adopt the Voting Trust
Agreement between the Corporation and Benton L. Becker, Esq.,
effective as of the 1st day of September, 1995, a copy of
which is attached hereto, for and in consideration of the
mutual benefits and the terms and provisions thereof.
Date: 9/7/95 /s/ James W. Ratliff
James W. Ratliff
Date: 9/7/95 /s/ Linda Ratliff
Linda Beth Ratliff
Date: 9/7/95 /s/ Russell A. Ratliff
Russell A. Ratliff
EXHIBIT 10.1(A)
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("Agreement") is made this 2d day of
May, 1995, among ONASCO COMPANIES, INC., a Utah corporation (Onasco or
"Buyer"); and INDUSTRIAL RESOURCES, CORPORATION, a Kentucky corporation
("IRC" or "Seller").
W I T N E S S E T H:
RECITALS
WHEREAS, the respective Boards of Directors of Onasco and IRC and the
stockholders of IRC have adopted resolutions pursuant to which Onasco shall
buy and IRC shall sell the gas leases, equipment and vehicles which are more
particularly described in Exhibit "A" hereof (hereinafter the "Assets"),
which is incorporated herein by reference; and
WHEREAS, Onasco held a special meeting of its stockholders on April 28,
1995, at which the stockholders approved a reverse split of the $0.00l par
value common stock of Onasco on the basis of two shares for one, such
reverse split to be effective as of the Closing of this Agreement, as
outlined in the minutes of such meeting, a copy of which is attached hereto
as Exhibit "B" and incorporated herein by reference; and
WHEREAS, the consideration for the Assets shall be 4 million post-split
"unregistered" and "restricted" shares of $0.001 par value common stock of
Onasco;
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, it is agreed:
Section 1
Purchase and Sale of the Assets
1.1 Purchase and Sale. Onasco hereby agrees to purchase and lRC hereby
agrees to sell the Assets owned by IRC as of March 17, 1995, together with
any accessions thereto and all items received by IRC in exchange for any of
the Assets after March 17, 1995.
1.2 Consideration for the Assets. The consideration paid for the Assets
shall consist solely of 4 million post-split "unregistered" and "restricted"
shares of $0.001 par value common stock of Onasco.
1.3 Delivery of Shares. Upon the execution and delivery by lRC of an
assignment or assignments and other instruments required or necessary to
transfer the Assets to Onasco, Onasco shall deliver one stock certificate to
IRC representing 4 million post-split "unregistered" and "restricted" shares
of common stock of Onasco as full payment for the Assets.
Section 2
Closing
The closing (the "Closing") contemplated hereby shall be held at the offices
of Leonard W. Burningham, 455 East 500 South, #205, Salt Lake City, Utah
84111, within five days of the date hereof.
Section 3
Representations and Warranties of Onasco
Onasco represents and warrants to, and covenants with, IRC as follows:
3.1 Corporate Authority and Due Authorization. Onasco is a corporation
duly organized and in good standing under the laws of the State of Utah and
has full corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder. Execution of this Agreement and
performance by Onasco hereunder have been duly authorized by all requisite
corporate action on the part of Onasco; this Agreement constitutes a valid
and binding obligation of Onasco; and performance hereunder will not violate
any provision of the Articles of Incorporation, Bylaws, agreements,
mortgages or other commitments of Onasco.
3.2 Condition Subsequent. As a condition subsequent to the performance of
this Agreement, Onasco shall prepare and cause to be filed with the
Securities and Exchange Commission a Registration Statement on Form 1 0-SB
within 90 days of the date hereof.
Section 4
Representations and Warranties of IRC
IRC represents and warrants to, and covenants with, Onasco as follows:
4.1 Ownership. IRC owns the Assets, free and clear of any liens or
encumbrances of any type or nature whatsoever, except as stated in the
schedule which is attached as the final page of Exhibit "A" hereof.
4.2 Condition of the Assets. At the time of Closing, the Assets shall be in
good and marketable condition, suitable for the uses for which they were
intended and, reasonable wear and tear excepted, shall be free of any
material defect.
4.3 Corporate Authority and Due Authorization. IRC is a corporation duly
organized and in good standing under the laws of the State of Kentucky and
has full corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder. Execution of this Agreement and
performance by IRC hereunder has been duly authorized by all requisite
corporate action on the part of IRC, including the execution of unanimous
consents of its Board of Directors and its sole stockholder, which are
attached hereto as Exhibits "C" and "D", respectively, and this Agreement
constitutes a valid and binding obligation of IRC and performance hereunder
will not violate any provision of the Articles of Incorporation, Bylaws,
agreements, mortgages or other commitments of IRC.
4.4 No Inventory. None of the Assets constitute inventory of IRC and the
principal business of IRC is not the sale of merchandise from stock.
4.5 Shares Acquired with Investment Intent. IRC represents and agrees as
follows:
(a) That the shares being acquired in consideration of the Assets
are received for investment purposes and not with a view
toward further distribution;
(b) That it has full and complete understanding of the phrase
"for investment purposes and not with a view toward further
distribution;"
(c) That it understands the meaning of "unregistered shares" and
knows that they are not freely tradable;
(d) That any stock certificate issued by Onasco in connection
with the shares being received shall be imprinted with a
legend restricting the sale, assignment, hypothecation or
other disposition unless it can be made in accordance with
applicable laws, rules and regulations;
(e) That the stock transfer records of Onasco shall reflect that
IRC has requested Onasco not to effect any transfer of any
stock certificate representing any of the shares being
acquired unless it shall first have obtained an opinion of
legal counsel to the effect that the shares may be sold in
accordance with applicable securities laws, rules and
regulations, and it understands that any opinion must be from
legal counsel satisfactory to Onasco and, regardless of any
opinion, it understands that the exemption covered by any
opinion must in fact be applicable to the shares;
(f) That it shall not sell, offer to sell, transfer, assign,
hypothecate or make any other disposition of any interest in
the shares being acquired except as may be pursuant to any
applicable securities laws, rules and regulations.
4.6 Further Assurances of IRC. IRC will execute such assignment
or assignments and will perform such other acts as will enable
Onasco to take free and clear title to the Assets.
Section 5
Termination
Prior to Closing, this Agreement may be terminated (1) by mutual consent of
Onasco and lRC; and (2) by either the directors of Onasco or IRC if there
has been a material misrepresentation or material breach of any warranty or
covenant by the other party; provided, however, that all representations and
warranties shall survive the termination hereof.
Section 6
General Provisions
6.1 Further Assurances. At any time and from time to time, after the
execution hereof, each party will execute such additional instruments and
take such action as may be reasonably requested by the other party to carry
out the intent and purposes of this Agreement.
6.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered in person or
sent by prepaid first-class registered or certified mail, return receipt
requested, as follows:
If to Onasco: 1787 East Fort Union Blvd., #106
Salt Lake City, Utah 84121
and
Leonard W. Burningham, Esq.
455 East 500 South, #200
Salt Lake City, Utah 84111
If to IRC: Route 6, Box 248A
Manchester, Kentucky 40962
and
Wesley Baker, Esq.
P.O. Box 22178
Knoxville, Tennessee 37933-0178
6.3 Entire Agreement This Agreement constitutes the entire agreement
between the parties and supersedes and cancels any other agreement,
representation or communication, whether oral or written, between the
parties hereto relating to the transactions contemplated herein or the
subject matter hereof.
6.4 Headings. The section and subsection headings in this Agreement
are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
6.5 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Tennessee,
except to the extent preempted by federal law, in which event (and to
that extent only), federal law shall govern.
6.6 Assignment. No party may assign any rights, duties or obligations
under this Agreement, and in the event of any such assignment, such
assignment shall be deemed null and void.
6.7 Waiver. Any failure on the part of any party hereto to comply with
any of its obligations, agreements or conditions hereunder may be
waived in writing by the party to whom such compliance is owed.
6.8 Counterparts. This Agreement may be executed simultaneously in one
or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
6.9 Default. In the event of default hereunder, the nondefaulting
party shall be entitled to recover reasonable attorney's fees and costs
in enforcing the terms and provisions hereof.
IN Witness WHEREOF, the parties have executed this Agreement effective the
day and year first above written.
ONASCO COMPANIES, INC.
/s/ Jeffry D. Jenson /s/ Kathleen L. Morrison
Its President) Secretary
Attest:
PURCHASE AGREEMENT
COUNTERPART SIGNATURE PAGE
THIS COUNTERPART SIGNATURE PAGE for that certain Purchase Agreement among
ONASCO COMPANIES, INC., a Utah corporation, and INDUSTRIAL RESOURCES,
CORPORATION, a Kentucky corporation, is executed as of the date set forth
hereinbelow.
INDUSTRIAL RESOURCES, CORPORATION
Date: 5/3/95 By /s/ James W. Ratliff
Its President
Attest:
/s/ Russel A. Ratliff
Secretary/Treasurer
EXHIBIT "A"
ASSETS
INVENTORY OF ASSETS
COOPER TC 38-38 DRILLING RIG - Cost $87,291.26, Bought March, 1993.
Double drum well service unit, 00339, braden winch, powered by GM
6-71 diesel engine, Allison transmission, Skytop 84' 155,000# capacity
derick, hydraulically raised and telescoped, 3-sheave crown block assembly,
tubing board, control console, guy lines, stairs, catwalks, handrails,
toolboxes, fuel tank, 2 Fire extinguishers. All above are mounted and
unitized on a four axle "back-in" carrier, 2 front mounted hydraulic jacks
with jack stands, 2 rear mounted hydraulic jacks with jack stands, 10.00 x
20 tires front and rear, approx. 600' of 7/8"th's inch tubing line, approx.
6,000' of 5/8" swab line.
One:McKissick 2-sheave split block.
Foster 58.96 tubing tongs for 2-3/8", 2-7/8",and 4-1/2"
(Reconditioned)
Cavins type B tubing slips (air)
2-3/8 BJ tubing slips (Reconditioned)
Rod tools
Rod Hook
Base Beam & new floor
Two: 5/8" Elevators
PIPE THREADING MACHINE - approx. value $2,000
DITCH WITCH - approx. value $2000
PARTS TRAILER - approx. value $2000
SMALL PARTS BUILDING - approx. value $1000
PIPE TRAILER - approx. value $500.
COPY MACHINES - I Panasonic, 1 Xerox, 1 Monroe. Approx. value $6,000
4 INCH FRAC VALVE - approx. value $600
MFG MOCK METER - approx. value $700
SET OF NEW POWER TONG TEETH - approx. value $500
GAS GATHERING SYSTEM -
SURFACE GAMMA RATEMETER -Approx. value $5000, 1991 Made by Ludlurn
Measurements, Model 2200-16, Serial Number #79086
1500 GALLON VACUUM PUMP AND TANK - approx. value $1,000
3000 FT. 4I/2 CASING - @ $2.50/ft. = $7,500
3000 Fr. 23/8 TUBING - @ $1.05/ft. $3,150
3000 FT. 1" SUCKER RODS - @ $.40/ft. = $1,200
NORRISEAL DEHYDRATOR - approx. value $13,000, Serial #2230450A, model #
25M6O-SLDF-AB, 1001-A Norriseal control
DEHYDRATION UNIT - Purchase price $7,500 on August 14, 1992, approx. value
$12,500. Serial # PESI 421, complete with 25' tall tower; nameplate data:
NWP 1200 Psi, 100-F, SN 67-7615, Year 1985, T.P. 1800, W.O. 4386
DEHYDRATION UNIT w/ TOWER - Approx. value $10,000, Serial #SB 12-6H, tower
#7-74 8111-001
COMPRESSORS
AJAX DPC 160 GAS COMPRESSOR - Purchased 1995 from TABCO for $37,500, with a
GLYCOL RE-BOILER & TOWER for $5,000. Total purchase price of $42,500.
Payments to be made monthly in the amount of $5,312.50, starting February 5,
1995. Approx. value $60,000, ID #'s-K-6001-C 5000, A-2002-G, Model # 507,
Serial #36957, A-2801-F.
INGERSOLL RAND COMPRESSOR - approx. value $30,000, ID #'s-Serial # 13935,
95024A 566567, 46-B7782 87042 F, 47177118 490, 97032 6284, model NKRB-1-S, B-
8791
INGERSOLL RAND (PARTS COMPRESSOR) - approx. value $13,000, ID#'s -Serial #
91890, 2 B-18-4, 25416-361
CHICAGO PNEUMATIC COMPRESSOR - approx. value $62,500 FE-2, 8 1/4"x 4 1/4" x
5" stroke (ID.#86053), with Waukasau X-247S engine (ID. # 52181), and fan
type air exchanger (ID.# 867), all mounted on one oil field skid
CHICAGO PNEUMATIC COMPRESSOR - purchased on February 13,1992 for $25,100,
approx. value $62,500. 1972 Model YCE Gas Compressor (ID. #279936), with
Model 66510 Natural Gas Engine, radiators, coolers etc...
MISC. PARTS USED FOR ALL COMPRESSORS AS JOB REQUIREMENTS
DICTATE: VALUE IS INTEGRAL IN ABOVE COMPRESSOR VALUES
1 compressor muffler
4 fan shroud
4 Radiators
Comp 94701 Ingersoll-Rand 94663 105782
2 gray pipes to comp
BURNT HOUSE
JENSEN PUMP JACK - approx. value $4,000, 1D#'s c-401564, Serial # 9209004
OIL & GAS SEPARATOR - approx. value $500, Serial #4050-1 ROCKWELL METER -
approx. value $1,500, ll)# 87416 COMPRESSOR - approx. value $2,200, ID#15053
350
2 (two) 210 TANKS - approx. value $4,000, ll)#'s 9402-8633, 0510033
Cornett #1
110 TANK - approx. value $1,300, ID #43702
CORNETT #Z
LUFKlN PUMP JACK - approx. value $3,500, Il)#'s 4380, lSKK-35 ROBINSON-
ALVERAS
210 TANK - approximate value $2,000, ID# 0510040
KEITH
2 (TWO) 210 TANKS - approx. value $4,000, ID#s (9401-8632), 9400 (8632)
0510032
PUMP JACK - approx. value $3,500, ID# 5798
WATER TANK - approx. value $1,500, ID #2
BEECH CREEK
2 (TWO) 110 TANKS - approx. value $2,600, Il)#'s
VEHICLES
1993 BLAZER - purchased 1-7-93, VIN# 1GNEK18K9PJ337726, 23 payments left
$615.79 = $14,163.17, purchase price $23,273.90 plus down-payment. 1992
FORD BRONCO purchased 8-14-92, VlN# 1FMEU1SNXNLBO2170, purchase price
$29,050.49
1991 CHEVROLET PICK-UP - purchased new ~(?)9-91, VIN# 26ECK19K8M12225&4,
purchase price $19,906.63
1991 CHEVROLET PICK-UP 4X4 - purchased June 24, 1991, purchase price
$18,029.68. V[N# 1GCEK14lXME16QO4O.
INTERNATIONAL TRACTOR - it)# TDA2274CG, 1982, approximate, value $7,500
INTERNATIONAL TRACTOR - F2OOC)D, ID # D112313H, 1966, approx. value $5,000
LOWBOY TRAILER - 1l)# B12466, 1979, approx. $5,000
GOOSENECK 5TH WHEEL TRAILER - #5027, approx. value $3,500 CATERPILLAR D-5
I)OZER - iD#82H712, approx. value $30,000
WELLS & LEASES
BURNING SPRINGS WELLS - Alveras #1, #2; Robinson-Alveras #1, #2; Cornett
#1,#2; Keith #1, #2, #2A, #2B, #4, #5; Gregory #2; Gib
Hale #1, #2; Approx. value $
BEECH CREEK LEASES - Signed acreage: 8,063.599 Acres. Verbal commitment
acreage: 2,114.14. Total of signed and verbal:
10,177.739 Acres. Approx. value $
WILDCAT LEASES - Signed acreage: 2,971.5 Acres. Verbal commitment acreage:
455 Acres. Total verbal and signed acres: 3,426.5 Acres.
Approx. value $
STOCK - One million shares of United Petroleum Corporation stock valued at
$1.00
per share.
EQUIPMENT PURCHASE PRICE PAYMENTS MADE APPROX. V
COOPER RIG $87,291.26 $87,291.26 $87,291.26
PIPE THREADER $2,000.00
DITCH WITCH $5,500
TRAILER $2,000
PARTS TRAILER $2,000
SMALL PARTS BUILDING $1,000
COPY MACHINES $6,000
FRAC VALVE $600.00
MOCK METER $700.00
TONG TEETH $500.00
GATHERING SYS. $
GAMMA RATEMETER $5,000.00
1500 GALVAC. PUMP $1,000.00
3000 FT. 4 112' CASING $7,500.00
3000 Fr. 2 3/8' TUBING $3,150.00
3000 ET. 1' SUC. RDS. $1,200.00
DEHYDRATOR $13,000.00
DEHYDRATOR $7,500.00 $7,500.00 $12,500.00
DEHYDRATOR $10,000.00
AJAXCOMP. $42,500.00 $5,312.50 $5,312.50
INGERSOLL COMP. $30,000.00
INGERSOLL COMP. $13,000.00
CHICAGO COMP. $62,500.00
CHICAGO COMP. $25,100.00 $25,100.00 $62,500.00
JENSEN PUMPJACK $4,000.00
O&G SEPARATOR $500.00
ROCKWELL METER $1,500.00
LEASE COMPRESSOR $2,200.00
TWO 210 TANKS $4,000.00
110 TANK $1,300.00
LUFKIN PUMP JACK $3,500.00
210 TANK $2,000.00
TWO 210 TANKS $4,000.00
PUMP JACK $3,500.00
WATER TANK $1,500.00
TWO 110 TANKS $2,600.00
1993 BLAZER $23,273.90+D.P. $9,110.73 $9,110.73
1992 BRONCO $29,050.49 $20,436.60 $20,436.60
1991 CHEVY 4x4 $18,029.68 $18,029.68 $18,029.68
1991 CHEV. PICKUP $19,906.63 $17,509.13 $17,509.13
INTERNATIONAL. TRACTOR $5,000.00
INTER NAT. TRACTOR $7,500.00
LOWBOY TRAILER $5,000.00
GOOSENECK TRAILER $3,500.00
0-5 BULLDOZER $30,000.00
BURNING SPRINGS WELLS $
BEECH CREEK LEASES $
WILDCAT LEASES $
UPC STOCK $1,000,000
EXHIBIT "B"
MINUTES OF A SPECIAL MEETING OF THE STOCKHOLDERS
OF
ONASCO COMPANIES, INC.
MINUTES OF A
SPECIAL MEETING OF
THE SHAREHOLDERS OF
ONASCO COMPANIES, INC.
A Special Meeting of the shareholders of Onasco Companies, Inc., a
Utah Corporation, was held at the following time, date and place pursuant to
a written notice has been mailed to all of the shareholders of record on
April 18, 1995:
Time: 10:00 a.m.
Date: April 28, 1995
Place: 1787 East Fort Union Blvd. #106, Salt Lake City, UT 84121
The following individuals, constituting a quorum of the Board of
directors, were present at the meeting
Jeff D. Jenson
Travis T. Jenson
Jeff D. Jenson, chaired the meeting, Travis T. Jenson, the
Corporation's Vice President, served as Secretary of the meeting.
The Secretary presented a list of shareholders as prepared and
certified by the Corporation's transfer agent, American Registrar & Transfer
Company, Inc., dated as of the record date April 18, 1995, to the Chairman
and stated that as of the record date there were 1,037,650 shares of common
stock of the Corporation issued, outstanding and entitled to vote. The
Secretary informed the Chairman that following his review of proxies and
verifying the share holdings of those present at the meeting he had
determined that a total of 801,383 shares were present, representing 77.23%
of the outstanding shares of the Corporation.
Having received the information from the Secretary, the Chairman
announced that the holders of stock in excess of the amount necessary to
constitute a quorum were present in person or represented by proxy and the
meeting could proceed to the matters at hand. The proxies presented were
ordered to be filed with the Secretary.
The Secretary then presented an affidavit, showing that the notice of
the meeting had been duly mailed to each shareholder at the last known
address, ten (10) days prior to the meeting.
The Chairman then reviewed the agenda, and upon motions duly made and
seconded the following resolutions were unanimously adopted:
WHEREAS, subject to the execution of the Purchase Agreement between Onasco
Companies, Inc. and Industrial Resources, Corporation, pursuant ton which
Onasco will purchase real properly and oil & gas leases presently owned by
Industrial Resources, Inc. for 4,000,000 shares of "unregistered" and
"restricted" common stock in Onasco, and 480,000 shares of stock issued
under Rule 701 will be issued to consultants involved in the transaction;
BE IT RESOLVED, that the present issued and outstanding stock of Onasco
Companies, Inc., a Utah Corporation, be subject to a reverse split at the
ratio of 1 new share for every 2 shares presently issued and outstanding,
with such reverse split to be effective as of the date of filing of Articles
of Merger with the State of Tennessee;
FURTHER RESOLVED, that the reversal hereinabove stated shall not alter the
authorized capital of the corporation of 50,000,000 common shares of common
stock a par value of one mil ($.001);
FURTHER RESOLVED, that the Company change its name to Tengasco, Inc., and
change its domicile from the State of Utah to the State of Tennessee, with
such resolutions to be effective as of the date of filing the Articles of
Merger with the State of Tennessee;
FURTHER RESOLVED, that the Board of Directors is hereby authorized,
empowered and directed to make proper application to the Secretary of State
of the State of Utah and the State of Tennessee, for the change of domicile
and any amendments to the articles in the respects hereinabove mentioned,
and to execute, present, and file the applications, petitions, and other
documents required by the laws of the State of Utah and the State of
Tennessee to effect the aforesaid change of domicile and amendments.
FURTHER RESOLVED, that the Company retain the services of Leonard W.
Burningham, Esq., to assist in the stock purchase, change of domicile,
filing a registration statement on Form 10 within 90 days of execution of
the aforementioned purchase agreement, and any other matters deemed
necessary to complete the said transaction;
FURTHER RESOLVED, that the present Board of Directors serve until the stock
purchase agreement is executed and then resign in conjunction with the
following new board members and officers being elected:
DIRECTORS
Raymond E. Johnson (Ray) 415 North State St. (360) 734-0091
Bellingham, WA 98225
Jack E. Earnerst 5945 Shady River Road(713)781-9700
Houston, TX 77057
Edgar G. Baugh (Jack) 76 Arrowhead, Way (203) 655-0624
Darien CT 06820
Walter C. Arzonetti 11 Avenue de la Mer(904) 445-1022
PaIrn Coast FL 32137
Charels. Manhofff 1119 Rocky Point Ct.(505)292-3210
Albuquerque NM 87123
Joe B. Mattei 72 Sugarberry Circle(713) 266-0700
Houston, TX 77024
William A. Mofffett 1073 Encantado Drive(505) 983-9212
Santa Fe., NM 87501
OFFICERS
George E. Walter, Jr. 3907 Northfield Ct.
President; CEO Midland, TX 79707
James C. Walter 1216 Calvary Ct. (606) 877-1830
Vice President London KY 40471
Secretary/Treasurer
The Secretary was then instructed to insert in the minute book copies
of the Notice of Special Meeting, proxies, and the Secretary affidavit of
mailing. With no further business matters at hand, a motion was duly made
and seconded to adjourn the meeting without further ado.
/s/ Jeffry D. Jenson /s/ Travis Jenson
Chairman Secretary
EXHIBIT "C"
UNANIMOUS CONSENT OF THE BOARD OF DIRECTORS
OF
INDUSTRlAL RESOURCES, CORPORATION
UNANIMOUS CONSENT OF THE BOARD OF DIRECTORS OF
INDUSTRIAL RESOURCES, CORPORATION
The undersigned, being all of the duly elected and incumbent directors of
Industrial Resources, Corporation, a Kentucky corporation (the
"Corporation"), acting pursuant to Section 271B.8-2l0 of the Kentucky
Business Corporation Act, do hereby consent to and adopt the following
resolution, effective the date hereof:
WHEREAS, the Corporation has been engaged in negotiations to convey certain
gas leases, equipment and vehicles listed in Exhibit "A" attached to the
Purchase Agreement, which is incorporated herein by reference (the "Assets")
to Onasco Companies, Inc., a Utah corporation ("Onasco"), in consideration
of 4 million "unregistered" and "restricted" post-split shares of the $0.00l
par value common stock of Onasco (the "Purchase Transaction"); and
WHEREAS, the parties to the Purchase Transaction wish to document its terms
by means of the Purchase Agreement; and
WHEREAS, the Board of Directors deems it to be in the best interests of the
Corporation to proceed with the Purchase Transaction and to take such
actions as will facilitate it;
NOW, THEREFORE, be it RESOLVED, that the President and the Secretary of the
Corporation are hereby authorized to execute the Purchase Agreement and to
take such further actions on behalf of the Corporation as are necessary for
the performance thereof.
Date: 5-3-95
/s/ James W. Ratliff
Date: 5/3/95 /s/ Linda Beth
Ratliff
Linda Beth Ratliff
Date: 5/3/95 /s/ Russell A. Ratliff
Russell A. Ratliff
EXHIBIT "D"
CONSENT OF THE SOLE STOCKHOLDER
OF
INDUSTRIAL RESOURCES, CORPORATION
CONSENT OF THE SOLE STOCKHOLDER OF
INDUSTRIAL RESOURCES, CORPORATION
The undersigned, being the holder all of the issued and outstanding shares
of common stock of Industrial Resources, Corporation, a Kentucky corporation
(the "Corporation"), acting pursuant to Section 271 B.7-040 of the Kentucky
Business Corporation Act, does hereby consent to and adopt the following
resolution, effective the date hereof:
WHEREAS, the Corporation has been engaged in negotiations to convey certain
gas leases, equipment and vehicles listed in Exhibit "A" attached to the
Purchase Agreement, which is incorporated herein by reference (the "Assets")
to Onasco Companies, Inc., a Utah corporation (Onasco"), in consideration
of 4 million "unregistered" and "restricted" post-split shares of the $0.001
par value common stock of Onasco (the "Purchase Transaction"); and
WHEREAS, the parties to the Purchase Transaction wish to document its terms
by means of the Purchase Agreement; and
WHEREAS, the Board of Directors and the undersigned stockholder deem it to
be in the best interests of the Corporation to proceed with the Purchase
Transaction and to take such actions as will facilitate it;
NOW, THEREFORE, be it RESOLVED, that the undersigned sole stockholder of the
Corporation hereby consents to the execution by the Corporation of the
Purchase Agreement, the sale of the Assets and the performance by the
executive officers of such other actions as are necessary to carry out its
terms or such sale.
Date:5/3/95 /s/ James W. Ratliff
James W. Ratliff'
EXHIBIT "E"
RESOLUTIONS OF THE BOARD OF DIRECTORS
OF
ONASCO COMPANIES, INC.
RESOLUTIONS OF THE BOARD OF DIRECTORS OF
ONASCO COMPANIES, INC.
The undersigned, being all of the duly elected and incumbent directors of
Onasco Companies, Inc., a Utah corporation (the "Corporation"), acting
pursuant to Section 16-10a-82l of the Utah Revised Business Corporation Act,
do hereby consent to and adopt the following resolutions, effective the date
hereof:
WHEREAS, the Corporation has been engaged in negotiations to acquire certain
assets (the "Assets") currently owned by Industrial Resources, Corporation,
a Kentucky corporation ("IRC"), in consideration of 4 million "unregistered"
and "restricted" post-split shares of the $0.001 par value common stock of
the Corporation (the "Purchase Transaction"); and
WHEREAS, the parties to the Purchase Transaction wish to document its terms
by means of a Purchase Agreement, a copy of which has been presented to a
meeting of the Board of Directors and which is made a part hereof, and
WHEREAS, the Board of Directors deems it to be in the best interests of the
Corporation to proceed with the Purchase Transaction and to take such
actions as will facilitate it; and
WHEREAS, the Board of Directors further deems it to be in the best interests
of the Corporation to change its domicile from the State of Utah to the
State of Tennessee and to appoint a new Board of Directors to manage the
affairs of the Corporation in light of its changed direction; and
WHEREAS, the Board of Directors has caused Tengasco, Inc., a Tennessee
corporation ("Tengasco"), to be organized in order to facilitate the change
of domicile of the Corporation; and
WHEREAS, on April 11, 1995, the Board of Directors resolved that, in the
event that a corporate reorganization is concluded between the Corporation
and IRC, the new directors of the Corporation and Duane S. Jenson shall each
be granted options to purchase 100,000 "unregistered" and "restricted"
shares of common stock of the Corporation at the price of $0.25 per share;
NOW, THEREFORE, be it RESOLVED, that the Board of Directors hereby
authorizes the President and the Secretary of the Corporation to execute the
Purchase Agreement and hereby adopts the Purchase Agreement as a binding
obligation of the Corporation; and
FURTHER, RESOLVED, that the Board of Directors hereby authorizes the
issuance of 4 million "unregistered" and "restricted" post-split shares of
the $0.001 par value common stock of the Corporation under the Purchase
Agreement to IRC, with such shares to be fully paid and non-assessable; and
FURTHER, RESOLVED, that the Corporation adopt a Plan of Merger and such
Articles of Merger as are required by the Utah Revised Business Corporation
Act and/or the Tennessee Business Corporation Act to provide for the merger
of the Corporation into Tengasco in order to effect a change of domicile of
the Corporation to the State of Tennessee; and
FURTHER, RESOLVED, that the exercise price of the options granted pursuant
to the resolution of the Board of Directors on April 11, 1995, shall be
modified to be $0.275 per share, which amount is equal to 110% of the bid
price for the Corporation's common stock on the date of the grant, that the
shares to be purchased thereby shall be post-split shares and that the
Corporation engage counsel to prepare a stock option plan with regard to
these options; and
FURTHER, RESOLVED, that the Corporation adopt written consultant
compensation agreements to issue an aggregate of 480,000 post-split shares
of common stock of the Corporation to Jeffrey D. Jenson, Michael E. Ratliff
and Leonard W. Burningham, Esq., in consideration of services rendered and
to be rendered to the Corporation in "non-capital raising transactions,"
with the appropriate restrictions as provided under Rule 701 of the
Securities and Exchange Commission. Such shares shall be fully paid and non-
assessable upon the performance of said services; and
FURTHER, RESOLVED, that the present directors of the Corporation shall
submit their resignations in seriatim and that the following designees of
IRC shall be appointed to serve as directors in their place, effective as of
the closing of the Purchase Agreement, and subject to the receipt by the
Corporation of a Consent signed by each such person to serve in such
capacity: Edgar G. Baugh; William A. Moffett; Joe Mattei; Jack Earnest; Ray
E. Johnson; Charles N. Manhoff; and Walter Arionetti; and
FURTHER, RESOLVED, that the present executive officers of the Corporation
shall submit their resignations in seriatim and that the following designees
of IRC shall be appointed to sen~e as executive officers in their place,
effective as of the closing of the Purchase Agreement, and subject to the
receipt by the Corporation of a Consent signed by each such person to serve
in such capacity: George E. Walter, Jr. (President/CEO); and James C. Walter
(Vice President and Secretary/Treasurer); and
FURTHER, RESOLVED, that the executive officers of the Corporation are hereby
authorized to retain counsel to prepare and file with the Securities and
Exchange Commission a Registration Statement on Form 1 0-SB within 90 days
of the execution of the Purchase Agreement; and
FURTHER, RESOLVED, that the executive officers of the Corporation are hereby
authorized to engage an accountant to prepare the consolidated financial
statements, taking into account the acquisition of the Assets, that will be
filed concurrently with the Corporation's Form 10-SB; and
FURTHER, RESOLVED, that regardless of the fact that a substantial portion of
the value of the Assets being acquired is represented by securities, the
Corporation shall not be deemed to be an "investment company" as that term
is defined under the Investment Company Act of 1940, as amended, as the
Corporation has no intention of engaging in such business now or in the near
future.
Date: 5/2/95 /s/ Jeffry D. Jenson
Jeffrey D. Jenson
Date: 5/2/95 /s/ Travis T. Jenson
Travis T. Jenson
Date: 5/2/95 /s/ Kathleen L. Morrison
Kathleen L. Morrison
EXHIBIT "F"
RESIGNATIONS OF THE DIRECTORS AND EXECUTIVE OFFICERS
OF
ONASCO COMPANIES, INC.
RESIGNATION OF JEFFREY D. JENSON
Due to the completion of the Purchase Agreement between Onasco
Companies, Inc., a Utah corporation (the "Company"), and Industrial
Resources, Corporation, a Kentucky corporation ("lRC"), the change of
domicile of the Company and the change of direction that it will be taking,
I, Jeffrey D. Jenson, hereby resign my position as a director and executive
officer of the Company, effective immediately.
DATED: 5/2/95 /s/ Jeffry D. Jenson
Jeffrey D. Jenson
RESIGNATION OF KATHLEEN L. MORRISON
Due to the completion of the Purchase Agreement between Onasco Companies,
Inc., a Utah corporation (the "Company"), and Industrial Resources,
Corporation, a Kentucky corporation ("lRC"), the change of domicile of the
Company and the change of direction that it will be taking, I, Kathleen L.
Morrison, hereby resign my position as a director and executive officer of
the Company, effective immediately.
DATED: 5/2/95 /s/ Kathleen L. Morrison
Kathleen L. Morrison
RESIGNATION OF TRAVIS T. JENSON
Due to the completion of the Purchase Agreement between Onasco Companies,
Inc., a Utah corporation (the "Company"), and Industrial Resources,
Corporation, a Kentucky corporation ("IRC"), the change of domicile of the
Company and the change of direction that it will be taking, I, Travis T.
Jenson, hereby resign my position as a director and executive officer of the
Company, effective immediately.
DATED: 5/2/95 /s/ Travis T. Jenson
Travis T. Jenson
EXHIBIT "G"
CERTIFICATE OF GOOD STANDING
OF
ONASCO COMPANIES, INC.
04/26/95 STATE OF UTAH - DEPARTMENT OF COMMERCE
CERTIFICATION OF GOOD STANDING
THE UTAH DIVISION OF CORPORATIONS AND COMMERCIAL CODE HEREBY CERTIFIES
THAT
ONASCO COMPANIES, INC.
IS A UTAH CORPORATION AND IS QUALIFIED TO TRANSACT BUSINESS IN THE STATE
OF UTAH. A CERTIFICATE OF INCORPORATION WAS ISSUED FROM THIS OFFICE ON
04-24-1916 AND SAID CORPORATION IS IN GOOD STANDING, AS APPEARS OF RECORD
IN THE OFFICES OF THE DIVISION.
FILE # 011835 DATED THIS 26TH DAY OF APRIL, 1995 THIS CERTIFICATION IS
NOT VALID UNLESS PRINTED ON PAPER DISPLAYING THE STATE SEAL IN BLUE, THE
REMOTE ACCESS CERTIFICATION # 054540 DIVISION SEAL IN GOLD, AND THE
DIVISION DIRECTOR'S SIGNATURE.
Korla T. Woods
Director, Division of Corporation
EXHIBIT 10.1(B)
INDUSTRIAL RESOURCE, CORP.
Rt. 6, Box 248A
Manchester Kentucky 40962
oft (606))598-77O1 - FAX (606)598-7798
Mr. Jeff Jenson March 5, 1996
1787 E. Fort Union Blvd.
Suite 106
Salt Lake City, UT 84121
Re: Amendment to that certain Purchase Agreement" dated May 2, 1995
between Onasco Companies, Inc. and Industrial Resource, Corp..
Dear Mr. Jenson,
Pursuant to our telephone conversation we hereby agree to amend the subject
Agreement as follows,
1. Equipment listed in Exhibit "A attached hereto shall be excluded from
that Agreement
2 Additionally Industrial Resource, Corp. agrees to sell the assets to
the Corporation at their appraised value or $450,000.00 whichever is lower
The consideration for this sale shall be a note payable for $450,000.00 with
interest at 8% simple annually.
Agreed to by,
/s/ Jeff Jenson
/s/ James Ratliff
For Industrial Resource, Corp.
Miller Services Inc.
Oil/Gas Drilling . Operating And Production
POST OFFICE BOX 130. HUNTSVILLE TN 37756
PHONE (615) 663-9457
FAX (615) 663-9461
February 22, 1996
Mr. Jeff DeMunnik
TENGASCO, INC.
603 Main Ave., Ste. 500
Knoxville, Tn. 37902
Dear Jeff:
Pursuant to your request that I do an appraisal on the following equipment:
COOPER TC 38-36 SERVICE RIG
Double drum well service unit, S/N 00339, Braden winch, powered
by GM 6-71 diesel engine, Allison transmission, Skytop 84' l55,000# capacity
derrick, hydraulically raised and telescoped, 3-sheave crown block assembly,
tubing board, control console, guy lines, stairs, catwalks, handrails,
toolboxes, fuel tank, 2 fire extinguishers. All above are mounted and
unitized on a four axle "back-in" carrier, 2 jack stands, 10.00 x 20 tires
front and rear, approx. 600' of
7/8"th's inch tubing line, approx. 6,000' of 5/8" swab line.
One: McKissick)c 2-sheave split block
Foster 58.96 tubing tongs for 2 3/8", 2 7/8", and
4 1/2" (Reconditioned)
Cavins type "B" tubing slips (air)
2 3/8" BJ tubing slips (Reconditioned)
Rod tools
Rod Hook
Base Beam & new floor
Two: 5/6" Elevators $ 89,300.00
1-4 INCH FRAC VALVE 6000# W.P.
$ 2,300.00
1 - NORRISEAL DEHYDRATOR Serial #2230450A, Model #25M60-
SLDF-AB, 1001-a Norriseal control
$17,000.00
1 - DEHYDRATION UNIT Serial #PESI 421,, complete with 25' tall tower;
nameplate data: NWP 1200 PSI, l00-F, SN 67-7615, Year 1985,, T.P. 1800, W.O.
4386
$16,250.00
1 - DEHYDRATION UNIT w/TOWER Serial #SB 12-6H, tower #7-74
8111-001
$12,400.00
1 - AJAX DPC 160 GAS COMPRESSOR w/GLYCOL RE-BOILER & TOWER ID#s X-6001-C
5000, A-2002-G, Model #507, Serial #36957, A-2801-F
$84,000.00
1 - INGERSOLL RAND COMPRESSOR ID #s-Serial #13936, 95024A 566567, 46-B7782
87042 F, 47177118 490, 97032 62~4,, Model # NKRB-1-5, B-8791
$ 41,000.00
1 - INGERSOLL RAND (PARTS COMPRESSOR) Serial #91890, 2 ~-1S4, 25416-361
$ 9,000.00
CHICAGO PNEUMATlC COMPRESSOR - FE-2, 8 1/4" X 4 1/4" X 5" '6?'
STROKE (ID#86053), with Waukasau H-2475 engine (ID#52181) and fan type air
exchanger (ID#867), all mounted on one oil field skid
$ 71,000.00
CHICAGO PNEUMATIC COMPRESSOR - Model YCE Gas Compressor (ID #279936), with
Model 6G510 Natural Gas Engine, radiators, coolers,, etc.
$ 67,200.00
INTERNATIONAL TRACTOR - ID# TDA2274CG, 1982
$ 7,500.00
INTERNATIONAL TRACTOR - F2000D1 ID #112313H, 1966 w/winch
$ 5,000.00
LOWBOY TRAILER - ID# B12466, 1979 35 Ton
$ 7,200.00
GOOSENECK 5TH WHEEL TRAILER - #5027
$ 3,500.00
CATERPILLAR D-5 DOZER - 10 ft. Blade, Tilt & winch $ 25,000.00
As you know, I am familiar with the history of the above drilling equipment.
Maintenance of this equipment has been very good. I consider this equipment
to be in very good condition.
Sincerely,
Deloy Miller
President
EXHIBIT 10.1(c)
GENERAL BILL OF SALE
In consideration of four hundred fifty thousand dollars ($450, 000.00), paid
to me this day by TENGASCO, INC., as buyer, whose address is 4928 HOMBERG
DR. B-3, KNOXVILLE, Tennessee 379l9, I, INDUSTRIAL RESOURCE CORP., whose
address is RT. 6 BOX 248A RT. 6, MANCHESTER, Kentucky 40962, hereby grant,
transfer, sell and deliver to buyer the following property: OILFIELD
EQUIPMENT PER "EXHIBIT A" ATTACHED HERETO.
I agree that I will warrant and defend the buyer, the buyer's personal
representatives, successors and assigns against any claims made by any
person against this proper
This property is sold "as is" and "where is", and no warranties express or
implied are made as to the condition of this property.
Date 6/1/95 INDUSTRIAL RESOURCE CORP.
PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, TENGASCO, INC., as maker, promises to
pay to the order of INDUSTRIAL RESOURCE CORP., or any subsequent holder of
this Note, the sum of four hundred fifty thousand dollars ($450,000.00) with
interest from the date hereof at the rate of 8.0% per annum, calculated
monthly, the principal and interest to be paid as set forth below.
Payment of Principal and Interest. Payment of principal and interest is to
be made to the holder of this Note on or by December 31st, 1997.
No Prepayment Penalty. The entire principal balance of this Note can be
prepaid at any time without penalty.
Default - Waiver - Acceleration. In the event of default on this Note,
Maker, TENGASCO, INC., waives demand, presentment of payment, protest,
notice of protest, dishonor and any defense by reason of any extension of
time or other indulgence granted by the holder of this Note, and agrees
that, if any payment on this Note is not made when due, the holder shall
have the right to accelerate and make the entire unpaid balance of principal
and interest immediately due and payable. Default is defined as:
a. Failure to make any payment of principal or interest when due under
the terms of this Note;
b. The violation of any other term, condition or promise of this Note;
or
c. A filing by or against Maker, TENGASCO, INC., of any Bankruptcy
proceeding, or any filing of relief of debtors in any court or under any
statute.
Costs. If the holder of this Note incurs any costs in the collection or
enforcement of this Note, including costs of filing suit and reasonable
attorney fees, Maker agrees to pay such costs.
Construction. If more than one party is named as the Maker of this Note,
the obligations incurred by each party are joint and several.
This Note shall be interpreted in accordance with the laws of Tennessee. No
provision of this Note shall be affected by the invalidity of any other
provision or provisions contained herein.
Witness
Date: 6/1/95 TENGASCO, INC.
EXHIBIT 10.2(a)
COMPENSATION AGREEMENT
THIS AGREEMENT made and entered into this 2nd day of May, 1993, by and
between ONASCO COMPANIES, INC., a Utah corporation (Onasco"), of 1787 East
Ft. Union Blvd., #106, Salt Lake City, Utah 84121, and M. E. Ratliff (the
"Consultant").
WITNESSETH:
WHEREAS, the Consultant has provided substantial services for the benefit of
Onasco in connection with its contemplated acquisition of certain assets
from Industrial Resources, Corporation, a Kentucky corporation ("lRC"); and
WHEREAS, Onasco desires to compensate the Consultant for his efforts on
behalf of Onasco estimated to be of a value of $21,300, which shall include
all expenses incurred by the Consultant or paid by him for and on behalf of
Onasco which were in any way related to the acquisition of these assets;
NOW, THEREFORE, in consideration of Ten Dollars ($10.00), and other good and
valuable consideration, and the covenants and conditions contained herein,
the parties hereto hereby agree as follows, to-wit:
1. This Compensation Agreement shall contain the entire agreement between
the parties and may not be altered or amended except in writing signed
by Onasco and the Consultant.
2. Both Onasco and the Consultant intend that this Compensation Agreement
shall be construed as the "Compensation Agreement" contemplated by
Rule 701 of the Securities and Exchange Commission.
3. Onasco shall, upon execution hereof issue to the Consultant 213,000
"unregistered" and "restricted" post-split shares of common stock of
Onasco for $21,300 compensation of the Consultant and for all
services, expenses and payments made for and on behalf of Onasco to
date, regarding the acquisition of assets from IRC.
4. By execution hereof and acceptance of the shares set forth above, the
Consultant releases Onasco and holds Onasco harmless and agrees to
indemnify Onasco from any and all claims, demands, expenses and
liabilities for any such services, costs or expenses incurred for or
on behalf of Onasco prior to the date hereof, related to the
acquisition of assets from IRC.
3. This Compensation Agreement shall be construed in accordance with the
laws of the State of Utah.
IN WITNESS WHEREOF, the parties have set their hands and seals the date set
forth above.
ONASCO COMPANIES, INC.
By /s/ Jeffrey D. Jenson
Jeffrey D. Jenson
President
/s/ M. E. Ratliff
M. E. Ratliff
EXHIBIT 10.2(b)
COMPENSATION AGREEMENT
THIS AGREEMENT made and entered into this 2nd day of May, 1995, by
and between ONASCO COMPANIES, INC., a Utah corporation ("Onasco"), of 1787
East Ft. Union Blvd., #106, Salt Lake City, Utah 84121, and Jeffrey D.
Jenson, the President and a Director of Onasco (the "Director and
President").
W I T N E S S E T H :
WHEREAS, the Director and President has provided substantial
services to Onasco in connection with its contemplated acquisition of
certain assets from Industrial Resources, Corporation, a Kentucky
corporation ("IRC"); and
WHEREAS, Onasco desires to compensate the Director and President
for his efforts on behalf of Onasco estimated to be of a value of $21,500,
which shall include all expenses incurred by the Director and President or
paid by him for and on behalf of Onasco which were in any way related to the
acquisition of these assets;
NOW, THEREFORE, in consideration of Ten Dollars ($10.00), and
other good and valuable consideration, and the covenants and conditions
contained herein, the parties hereto hereby agree as follows, to-wit:
1. This Compensation Agreement shall contain the entire
agreement between the parties and may not be altered or amended except in
writing signed by Onasco and the Director and President.
2. Both Onasco and the Director and President intend that this
Compensation Agreement shall be construed as the "Compensation Agreement"
contemplated by Rule 701 of the Securities and Exchange Commission.
3. Onasco shall, upon execution hereof issue to the Director and
President 240,000 "unregistered" and "restricted" post-split shares of
common stock of Onasco for $21,500 compensation of the Director and
President and for all services, expenses and payments made for and on behalf
of Onasco to date, regarding the acquisition of assets from IRC.
4. By execution hereof and acceptance of the shares set forth
above, the Director and President releases Onasco and holds Onasco harmless
and agrees to indemnify Onasco from any and all claims, demands, expenses
and liabilities for any such services, costs or expenses incurred for or on
behalf of Onasco prior to the date hereof, related to the acquisition of
assets from IRC.
5. This Compensation Agreement shall be construed in accordance
with the laws of the State of Utah.
IN WITNESS WHEREOF, the parties have set their hands and seals the
date set forth above.
ONASCO COMPANIES, INC.
By /s/ Kathleen L. Morrison
Kathleen L. Morrison
Secretary
/s/ Jeffrey D. Jenson
Jeffrey D. Jenson
EXHIBIT 10.2(c)
COMPENSATION AGREEMENT
THIS AGREEMENT made and entered into this 2nd day of May, 1995, by
and between ONASCO COMPANIES, INC., a Utah corporation ("Onasco"), of 1787
East Ft. Union Blvd., #106, Salt Lake City, Utah 84121, and Leonard W.
Burningham, Esq. (the "Consultant").
W I T N E S S E T H :
WHEREAS, the Consultant has provided legal services to Onasco in
connection with its contemplated acquisition of certain assets from
Industrial Resources, Corporation, a Kentucky corporation ("IRC"), and has
agreed to provide legal services to assist Onasco in preparing and filing a
Registration Statement on Form 10-SB of the Securities and Exchagne
Commisson; and
WHEREAS, Onasco desires to compensate the Consultant for his
efforts on behalf of Onasco to date, which have not been paid by Onasco in
cash, estimated to be of a value of $2,500, and for additional services to
be rendered by the Consultant of a value of $2,500, in connection with the
preparation of the Registration Statement on Form 10-SB, not including
expenses, and all as outlined in the letters of the Consultant dated April
19 and April 27, 1995, copies of which are attached hereto (the "Letters"),
and are incorporated herein by reference;
NOW, THEREFORE, in consideration of Ten Dollars ($10.00), and
other good and valuable consideration, and the covenants and conditions
contained herein, the parties hereto hereby agree as follows, to-wit:
1. This Compensation Agreement shall contain the entire
agreement between the parties and may not be altered or amended except in
writing signed by Onasco and the Consultant.
2. Both Onasco and the Consultant intend that this Compensation
Agreement shall be construed as the "Compensation Agreement" contemplated by
Rule 701 of the Securities and Exchange Commission.
3. Onasco shall, upon execution hereof issue to the Consultant
50,000 "unregistered" and "restricted" post-split shares of common stock of
Onasco for $5,000 compensation of the Consultant as outlined in the Letters.
4. By execution hereof and acceptance of the shares set forth
above, the Consultant releases Onasco and holds Onasco harmless and agrees
to indemnify Onasco from any and all claims, demands, expenses and
liabilities for any such services, costs or expenses incurred for or on
behalf of Onasco prior to the date hereof, and for services to be rendered,
all only to the extent outlined in the Letters.
5. This Compensation Agreement shall be construed in accordance
with the laws of the State of Utah.
IN WITNESS WHEREOF, the parties have set their hands and seals the
date set forth above.
ONASCO COMPANIES, INC.
By /s/ Jeffrey D. Jenson
Jeffrey D. Jenson
President
/s/ Leonard W. Burningham
Leonard W. Burningham, Esq.
April 19, 1995
Industrial Resource Corporation
FACSIMILE NO. (615) 450-9375
Attention: The Board of Directors
Mike Ratliff, Consultant
Re: Proposed acquisition of assets of Industrial
Resource Corporation, a Tennessee corporation
("Industrial"), by Onasco Companies, Inc., a Utah
corporation ("Onasco")
Dear Ladies and Gentlemen:
Recently, you forwarded me a retainer in the amount of $5,000 for
legal fees to be rendered in connection with the above referenced matter.
Please be advised that I represent Onasco in connection with this proposed
transaction, regardless of the fact that you have paid these fees; one of
the conditions of Onasco to this proposed transaction was that you pay my
fees, which will amount to $10,000, plus approximately $1,500 in costs,
which should cover new stock certificates, filing fees and transfer fees.
I am enclosing herewith a copy of the Notice of Special Meeting of
Stockholders of Onasco set for April 28, 1995; preliminary drafts of the
Purchase Agreement have been forwarded to you, and, subject to review by the
respective Boards of Directors of Industrial and Onasco, the Purchase
Agreement can be concluded prior to April 28.
On Closing, you will be required to pay the additional $6,500.
You are urged to have your own counsel review all documentation
prepared and submitted to you for your review.
It is my understanding that once the Purchase Agreement is
concluded and your nominees are designated to serve on the Board of
Directors of Onasco, then to be known as "Tengasco," you wish me to prepare
a Confidential Limited Offering Memorandum pursuant to which you may offer
"unregistered" and "restricted" securities of Tengasco, and a Form 10-SB
Registration Statement for filing with the Securities and Exchange
Commission.
Fees for each of these projects can run up to $15,000, for an
aggregate total of $30,000.
I am willing to prepare both of these documents for the sum of
$22,500, which will include all broker agreements, investor questionnaires,
subscription agreements, escrow agreements and other related instruments,
minutes or consents required for the Memorandum, with the exception of
compliance with applicable Blue Sky laws, rules and regulations, which will
be billed at a rate of $350 per state in which these securities are to be
offered, and if no exemption is available in any such state, at a rate of
$175 per hour if you require registration, plus the actual filing fee
required by any such state; and all documents, minutes or consents required
or necessary to complete and file the Form 10-SB Registration Statement,
through all Securities and Exchange Commission comments.
I will require one-half of this amount to be paid in advance,
together with $2,500 for direct costs and expenses I may incur for deposit
in my trust account.
The sooner I receive this retainer and deposit, the sooner I can
begin.
Yours very sincerely,
Leonard W. Burningham
LWB/sr
cc: Jeff Jenson
EXHIBIT 10.3(a)
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT is made and entered into this _____
day of _________________, 1995, by and between TENGASCO, INC., a Tennessee
corporation ("Tengasco"), and
____________________________________________________ (the "Option Holder"),
who is currently a director or consultant of Tengasco;
WITNESSETH:
WHEREAS, by resolutions of the Board of Directors on April 11, May
4 and June 6, 1995, respectively, and subsequently, pursuant to the Board's
unanimous written consent, Tengasco has heretofore adopted, ratified and
approved the granting to certain of its directors and consultants of the
option to purchase "unregistered" and "restricted" shares of its $0.001 par
value common stock (the "Option Shares") at a purchase price of $0.275 per
share (the "Exercise Price"), which is a price equal to 110% of the average
bid prices on the OTC Bulletin Board for the Option Shares of May 4, 1995;
and
WHEREAS, the resolutions provided that the Option Shares would be
granted as an incentive for service as a member of the Board of Directors or
as a consultant to Tengasco for a period of twenty four months commencing on
the date of such election, designation or engagement (the "Beginning Date"),
with the right to exercise the respective options to vest at the rate of
136.9863 shares per day of service; and
WHEREAS, all of the Option Holders commenced service in their
respective capacities on or about May 4, 1995; and
WHEREAS, the directors serve at the sole discretion of persons
owning a majority of the outstanding voting securities of Tengasco, and the
consultants serve at the will of the President and the Board of Directors of
Tengasco;
NOW, THEREFORE, for and in consideration of the mutual covenants
and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto do hereby agree as follows, to-wit:
Section 1
Grant of Option
Tengasco hereby grants to the Option Holder an option to acquire the
following Option Shares at a price of $0.275 per share, subject to the
vesting requirements and the manner of exercise set forth herein (the
"Option"):
Number of Beginning Expiration
Name of Option Holder Option Shares Date Date*
Walter C. Arzonetti 100,000 5/4/95 8/1/97
Edgar G. Baugh 100,000 5/4/95 8/1/97
Benton L. Becker 100,000 5/4/95 8/1/97
Jeff Brockman 100,000 5/4/95 8/1/97
Jack E. Earnest 100,000 5/4/95 8/1/97
Duane S. Jenson 100,000 5/4/95 8/1/97
Raymond E. Johnson 100,000 5/4/95 8/1/97
Charles N. Manhoff 100,000 5/4/95 8/1/97
Joe B. Mattei 100,000 5/4/95 8/1/97
William A. Moffett 100,000 5/4/95 8/1/97
John P. O'Hagan 100,000 5/4/95 8/1/97
Russell A. Ratliff 100,000 5/4/95 8/1/97
Alan Sweeney 100,000 5/4/95 8/1/97
George E. Walter, Jr. 100,000 5/4/95 8/1/97
James C. Walter 100,000 5/4/95 8/1/97
* Subject to the provisions of Section 3.1 below.
Section 2
Vesting
2.1 Commencing on the Beginning Date, and during the period of
which such directorship or consulting arrangement shall continue, 136.9863
of the Option Shares will vest per day for a period of twenty four months
and will be subject to exercise under the Option.
2.2 Subject to Section 3.1, the Option shall terminate forthwith,
with respect to any Option Shares which shall not have vested, on
resignation, termination, removal or failure to be elected as a director or
as a consultant.
2.3 Notwithstanding Section 2.1 hereof, in the event that the
Option Holder shall become 80% disabled during the term hereof and while
serving as a director or a consultant to Tengasco, or in the event of death
during such time, the Option Shares shall vest 100%.
Section 3
Manner of Exercise
3.1 While serving as a director or a consultant to
Tengasco, the Option may be exercised with respect to any of the
Option Shares which have vested during the twenty four month
period commencing on the Beginning Date, at any time, quarterly,
commencing with the quarter ended September 30, 1995; provided,
however, no Option may be exercised after 5:00 p.m. Eastern Time
on the ninetieth day following the expiration of twenty four
months from the Beginning Date, unless such date falls on a
weekend or holiday, in which case the Expiration Date shall be the
next business day; provided, further, however, that in the event
of resignation, termination, removal, failure to be elected as a
director, discontinuance as a consultant, disability or death, the
Option must be exercised within ninety days of any such event (the
"Conditional Expiration Date"), or the Option will be null and
void with respect to any vested Option Shares for which the Option
granted herein has not been exercised.
3.2 Exercise shall be made by tendering the Exercise
Price for the number of vested Option Shares to Tengasco between
the 1st and the 15th day following the end of any quarter,
commencing with the quarter ended September 30, 1995, or on or
before the Expiration Date, or the Conditional Expiration Date, if
applicable, by cash, cashier's check or personal check, together
with the completed and signed attached Notice of Exercise.
3.4 In the event the Option Holder is no longer a
director or consultant of Tengasco on the date of exercise,
Tengasco, prior to acceptance of any such Notice of Exercise,
shall promptly provide the Option Holder with such material
information regarding Tengasco as it and its legal counsel shall
deem sufficient to comply with the disclosure and exemption
requirements of the Securities Act of 1933, as amended, and any
applicable state's securities laws, rules and regulations. In
such event, any period of exercise or any Expiration Date shall be
extended for an additional fifteen days following the delivery by
courier or mailing sent by prepaid first-class registered or
certified mail, return receipt requested, of such information by
Tengasco.
Section 4
Delivery of Shares
On receipt of payment and satisfaction that the Option
has been exercised in accordance with this Agreement, and prompt
compliance by Tengasco with applicable federal and state
securities laws, rules and regulations related to exemptions for
the limited offer and sale of "unregistered" and "restricted"
securities of Tengasco to the Option Holder, all at the sole cost
and expense of Tengasco, a stock certificate representing the
Option Shares will be issued and delivered to the Option Holder,
subject to the representations of the Option Holder contained
herein.
Section 5
Representations of Option Holder
The Option Holder represents and warrants as follows, to-wit:
5.1 That the Option Shares being acquired are being
received for investment purposes and not with a view toward
further distribution.
5.2 That he has a full and complete understanding of the
phrase "for investment purposes and not with a view toward further
distribution."
5.3 That he understands the meaning of "unregistered
shares" and knows that they are not freely tradeable.
5.4 That any stock certificate issued in connection with
this Agreement shall be imprinted with a legend restricting the
sale, assignment, hypothecation or other disposition unless made in
accordance with applicable securities laws, rules and regulations.
5.5 He agrees that the stock transfer records of Tengasco
shall reflect that he has requested Tengasco not to effect any
transfer of any stock certificate representing any of the Option
Shares unless he shall first have obtained an opinion of legal
counsel to the effect that the Option Shares may be sold in
accordance with applicable securities laws, rules and regulations,
and he understands that any such opinion must be from legal counsel
satisfactory to Tengasco and, regardless of any opinion, he
understands that the exemption covered by any such opinion must in
fact be applicable to the Option Shares.
5.6 That he shall not sell, offer to sell, transfer,
assign, hypothecate or make any other disposition of any interest in
the Option Shares except as may be pursuant to any applicable
securities laws, rules and regulations.
5.7 He fully understands that the Exercise Price is
"risked capital," and he is fully capable of bearing the economic
risks attendant to this investment, without qualification.
5.8 He also understands that without approval of counsel
for Tengasco, all Option Shares to be issued and delivered pursuant
to this Agreement shall be represented by one stock certificate only
and which such stock certificate shall be imprinted with the
following legend or a reasonable facsimile thereof on the front and
reverse sides thereof:
"The shares of stock represented by this certificate
have not been registered under the Securities Act of
1933, as amended, and may not be sold or otherwise
transferred unless compliance with the registration
provisions of such Act has been made or unless
availability of an exemption from such registration
provisions has been established, or unless sold pursuant
to Rule 144 under the Act."
Section 6
General Provisions
6.1 Further Assurances. At any time, and from time to
time, after any exercise of any Option, each party will execute such
additional instruments and take such action as may be reasonably
requested by the other party to fulfill the terms and provisions
hereof.
6.2 Waiver. Any failure on the part of any party to
comply with any of its obligations, agreements or conditions
hereunder may be waived in writing by the party to whom such
compliance is owed.
6.3 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been given
if delivered in person or sent by courier or prepaid first-class
registered or certified mail, return receipt requested, as follows:
If to Tengasco: Tengasco, Inc.
4928 Homberg, Suite 3B
Knoxville, Tennessee 37919
and Leonard W. Burningham, Esq.
455 East 500 South, #205
Salt Lake City, Utah 84111
If to the Option Holder: To the address provided below
6.4 Entire Agreement. This Agreement constitutes the entire
agreement between the parties regarding the matters covered hereby and
supersedes and cancels any such other agreement, representation or
communication, whether oral or written, between the parties hereto which
relates to the subject matter hereof.
6.5 Headings. The section and subsection headings
in this Agreement are inserted for convenience only and shall not
affect in any way the meaning or interpretation of this Agreement.
6.6 Governing law. This Agreement shall be governed
by and construed and enforced in accordance with the laws of the
State of Tennessee, except to the extent pre-empted by federal law,
in which event (and to that extent only), federal law shall govern.
6.7 Assignment. This Agreement shall inure to the
benefit of, and be binding upon, the parties hereto and their
successors and assigns; provided however, that the Option Holder
shall have no power to assign his rights, obligations or duties
hereunder; and provided further, however, that in the event of the
death of the Option Holder, any rights with respect to vested Option
Shares for which payment and exercise has not been made will become
an asset of the estate of the Option Holder, subject to exercise and
expiration as provided herein.
6.8 Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Stock Option
Agreement effective the day and year first above written.
TENGASCO, INC.
By /s/ George E. Walter, Jr.
Its President
OPTION HOLDER
/s/ W. C. Arzonetti
Signature
W. C. Arzonetti
Printed Name
11 Ave. de la Mer
Street Address
Palm Coast, Florida 32137
City State Zip
6.7 Assignment. This Agreement shall inure to the
benefit of, and be binding upon, the parties hereto and their
successors and assigns; provided however, that the Option Holder
shall have no power to assign his rights, obligations or duties
hereunder; and provided further, however, that in the event of the
death of the Option Holder, any rights with respect to vested Option
Shares for which payment and exercise has not been made will become
an asset of the estate of the Option Holder, subject to exercise and
expiration as provided herein.
6.8 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Stock Option
Agreement effective the day and year first above written.
TENGASCO, INC.
By /s/ Kelley S. Grabill
Its Secretary/Treasurer
OPTION HOLDER
/s/ Walter C. Arzonetti
/s/ Benton L. Becker
/s/ Jeff Brockman
/s/ Charles N. Manoff
/s/ William A. Moffett
/s/ Allen Sweeney
EXHIBIT 10.3(b)
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT is made and entered into this 30th
day of January, 1996, by and between TENGASCO, Inc., a
Tennessee corporation ("Tengasco"), and
_________________________________________________ , (the "Option
Holder"), who is currently a director, officer, consultant, or
employee of Tengasco;
WITNESSETH:
WHEREAS, by resolutions of the Board of Directors on April 11,
May 4 and June 6, 1995, and January 30, 1996, respectively, and
subsequently, pursuant to the Board's unanimous written consent,
Tengasco has heretofore adopted, ratified and approved the granting
to certain of its directors, consultants, officers, and employees of
the option to purchase "UNREGISTERED" and "RESTRICTED" shares of its
$0.001 par value common stock (the "Option Shares") at a purchase
price (the "Exercise Price"), which is enumerated on the table on
Page 2 of this Agreement; and
WHEREAS, the resolutions provided that the Option Shares would
be granted as an incentive for service as a member of the Board of
Directors or as a consultant, officer or employee to Tengasco for a
period of twenty four months commencing on the date of such
election, designation or engagement (the "Beginning Date"), with the
right to exercise the respective options to vest at the rate of
136.9863 shares per day per 100,000 option shares of service; and
WHEREAS, all of the Option Holders commenced service in their
respective capacities on or about May 4, 1995; and
WHEREAS, the directors serve at the sole discretion of persons
owning a majority of the outstanding voting securities of Tengasco,
the consultants and officers serve at the will of the President and
the Board of Directors, and the employees serve at the will of the
President of Tengasco;
NOW, THEREFORE, for and in consideration of the mutual
covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto do hereby agree as follows,
to-wit:
Section 1
Grant of Option
Tengasco hereby grants to the Option Holder an option to acquire the
following Option Shares at the prices indicated per share, subject to the
vesting requirements and the manner of exercise set forth herein (the
"Option"):
Number of Beginning Expiration Option
Name of Option Holder Option Shares Date Date* Price
Robert Carter (1) 25,000 5/04/95 08/01/97 0.275
Jeffrey DeMunnik (1) 25,000 5/04/95 08/01/97 0.275
Kelley 5. Grabill (I) 25,000 5/04/95 08/01/97 0.275
Michael McCown (1) 50,000 05/04/95 08/01/97 0.275
Ted P. Scallan(l) 100,000 01/30/96 01/30/98 6.375
100,000 07/17/95 10/11/97 4.00
Sheila Sloan (1) 5,000 01/30/96 01/30/98 6.375
Lyle Stockstill (2) 100,000 01/30/96 01/30/98 6.375
Kenny Securities (3) 100,000 01/03/96 Fully Vested 6.375
* Subject to the provisions of Section 3.1 below.
(1) Additional Option Holders since June 6, 1995 Board Meeting
(2) New Director
(3) Consultant
Section 2
Vesting
2.1 Commencing on the Beginning Date, and during the period of
which such directorship, consulting, officership, or employment
arrangement shall continue, 136.9863 of the Option Shares will vest
per day for a period of twenty four months and will be subject to
exercise under the Option.
2.2 Subject to Section 3.1, the Option shall terminate forthwith, with
respect to
any Option Shares which shall not have vested, on resignation,
termination, removal or failure to be elected as a director,
consultant, officer or employee.
2.3 Notwithstanding Section 2.1 hereof, in the event that the
Option Holder shall become 80% disabled during the term hereof and
while serving as a director, consultant, officer or employee to
Tengasco, or in the event of death during such time, the Option
Shares shall vest 100%.
Section 3
Manner of Exercise
3.1 While serving as a director, consultant, officer or as an
employee to Tengasco, the Option Shares which have vested during the
twenty four month period commencing on the Beginning Date, at any
time, quarterly, commencing with the quarter ended September 30,
1995; provided, however, no Option may be exercised after 5:00 p.m.
Eastern Time on the ninetieth day following the expiration of twenty
four months from the Beginning Date, unless such date falls on a
weekend or holiday, in which case the Expiration Date shall be the
next business day; provided, further, however, that in the event of
resignation, termination, removal, failure to be elected as a
director, discontinuance as a consultant, officer or employee,
disability or death, the Option must be exercised within ninety days
of any such event (the "Conditional Expiration Date"), or the Option
will be null and void with respect to any vested Option Shares for
which the Option granted herein has not been exercised.
3.2 Exercise shall be made by tendering the Exercise Price for the
number of vested Option Shares to Tengasco between the 1st and the
15th day following the end of any quarter, commencing with the
quarter ended September 30, 1995, or on or before the Expiration
Date, or the Conditional Expiration Date, if applicable, by cash,
cashier's check or personal check, together with the completed and
signed attached Notice of Exercise.
3.4 In the event the Option Holder is no longer a director,
consultant, officer or employee of Tengasco on the date of exercise,
Tengasco, prior to acceptance of any such Notice of Exercise, shall
promptly provide the Option Holder with such material information
regarding Tengasco as it and its legal counsel shall deem sufficient
to comply with the disclosure and exemption requirement of the
Securities Act of 1933, as amended, and any applicable state's
securities laws, rules and regulations. In such event, any period of
exercise or any Expiration Date shall be extended for an additional
fifteen days following the delivery by courier or mailing sent by
prepaid first-class registered or certified mail, return receipt
requested, or such information by Tengasco.
Section 4
Delivery of Shares
On receipt of payment and satisfaction that the Option has been
exercised in accordance with this Agreement, and prompt compliance
by Tengasco with applicable federal and state securities laws, rules
and regulations related to exemptions for the limited offer and sale
of "UNREGISTERED" and "RESTRICTED" securities of Tengasco to the
Option Holder, all at the sole cost and expense of Tengasco, a stock
certificate representing the Option Shares will be issued and
delivered to the Option Holder, subject to the representations of
the Option Holder contained herein.
Section 5
Representations of Option Holder
The Option Holder represents and warrants as follows, to-wit:
5.1 That the Option Shares being acquired are being received for
investment purposes and not with a view toward further distribution.
5.2 That he has a full and complete understanding of the phrase
"for investment purposes and not with a view toward further
distribution."
5.3 That he understands the meaning of "UNREGISTERED Shares" and
knows that they are not freely tradable.
5.4 That any stock certificate issued in connection with this
Agreement shall be imprinted with a legend restricting the sale,
assignment, hypothecation or other disposition unless made in
accordance with applicable securities laws, rules and regulations.
5.5 He agrees that the stock transfer records of Tengasco shall
reflect that he has requested Tengasco not to effect any transfer of
any stock certificate representing any of the Option Shares unless
he shall first have obtained an opinion of legal counsel to the
effect that the Option Shares may be sold in accordance with
applicable securities laws, rules and regulations, and he
understands that any such opinion must be from legal counsel
satisfactory to Tengasco and, regardless of any opinion, he
understands that the exemption covered by any such opinion must in
fact be applicable to the Option Shares.
5.6 That he shall not sell, offer to sell, transfer, assign,
hypothecate or make any other disposition of any interest in the
Option Shares except as may be pursuant to any applicable securities
laws, rules and regulations.
5.7 He fully understands that the Exercise Price is "risked
capital," and he is fully capable of bearing the economic risks
attendant to this investment, without qualification.
5.8 He also understands that without approval of counsel for
Tengasco, all Option Shares to be issued and delivered pursuant to
this Agreement shall be represented by one stock certificate only
and which such stock certificate shall be imprinted with the
following legend or a reasonable facsimile thereof on the front and
reverse sides thereof:
"The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may not
be sold or otherwise transferred unless compliance with the
registration provisions of such Act has been made or unless
availability of an exemption from such registration provisions has
been established, or unless sold pursuant to Rule 144 under the
Act."
Section 6
General Provisions
6.1 Further Assurances. At any time, and from time to time, after
any exercise of any Option, each party will execute such additional
instruments and take such action as may be reasonably requested by
the other party to fulfill the terms and provisions hereof.
6.2 Waiver. Any failure on the part of any party to comply with any
of its obligations, agreements or conditions hereunder may be waived
in writing by the party to whom such compliance is owed.
6.3 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been given if delivered in
person or sent by courier or prepaid first-class registered or
certified mail, return receipt requested, as follows:
If to Tengasco: 603 Main Avenue
Suite 500
Knoxville, Tennessee 37902
and Leonard W. Burningham, Esq.
455 East 500 South, #205
Salt Lake City, Utah 84111
If to the Option Holder: To the address provided below
6.4 Entire Agreement. This Agreement constitutes the entire
agreement between the parties regarding the matters covered hereby
and supersedes and cancels any such other agreement, representation
or communication, whether oral or written, between the parties
hereto which relates to the subject matter hereof.
6.5 Headings. The section and subsection headings in this
Agreement are inserted for convenience only and shall not affect in
any way the meaning or interpretation of this Agreement.
6.6 Governing law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of
Tennessee, except to the extent pre-empted by federal law, in which
event (and to that extent only), federal law govern.
6.7 Assignment. This Agreement shall inure to the benefit of, and
be binding upon, the parties hereto and their successors and
assigns; provided however, that the Option Holder shall have no
power to assign his rights, obligations or duties hereunder; and
provided further, however, that in the event of the death of the
Option Holder, any rights with respect to vested Option Shares for
which payment and exercise has not been made will become an asset of
the Option Holder, subject to exercise and expiration as provided
herein.
6.8 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have executed this Stock Option
Agreement effective the day and year first above written.
TENGASCO, INC.
Date__1/30/96__________________________________
OPTION HOLDER
/s/ Ted P. Scallan
/s/ Jefferey M. DeMunnik
/s/ Michael McCown
/s/ Sheila F. Sloan
/s/ Robert Carter
/s/ Kelley S. Grabill
/s/ Lyle Stockstill
/s/ Kenny Secutities
EXHIBIT 10.4
KENNY SECURITIES, CORP.
ST. LOUIS Boca Raton
March 21, 1996
CONFIDENTIAL
Board of Directors
Tengasco, Inc.
Medical Arts Building
603 Main Avenue, Suite S00
Knoxville, Tennessee 37902
Attn: Ted Scallan
President and Chief Executive Officer
Gentlemen:
This letter sets forth our understanding regarding a proposed public
offering of Common Stock (the "Offering') of Tengasco, Inc. (the
"Company") with Kenny Securities Corp. ("KSC,') acting as the
managing underwriter, together with a co-manager satisfactory to
both the Company and KSC (together the "Managing Underwriters,,). We
understand that the proceeds of the offering will be used by the
Company primarily for the construction of a gas pipeline in the
Appalachian region, the drilling of at least 30 to 40 wells on the
Company's Swan Creek, Jamestown Prospect, and Beech Creek reserve
properties (the "Reserve Properties"), potential acquisitions and
for general corporate purposes.
The purpose of this letter is to outline the basic terms and
conditions of the offering which are based on information currently
available to us about the Company, the limited review and analysis
performed to date, and the current conditions of the new issue and
securities markets, in general. It is understood that the decision
to proceed with, and the final terms of, the offering will depend on
satisfactory results of additional due diligence, satisfactory
reserve analysis reports of the Company's Reserve properties by an
energy engineering firm satisfactory to both the Company and the
underwriters, as well as prevailing securities market conditions at
the time of the pricing of the Offering. Our due diligence will
include a review of the current status of the Company's business,
legal, personnel, and accounting affairs, including a detailed
review of the Company's business plan and its prospects for
achieving its forecasts and projections, including the continuous
confirmation and validation of the business opportunities which have
been articulated to us by management.
Subject to the foregoing, the principal elements of the proposed
offering as we currently understand them are as follows:
1 Offering and Offering Price. The Company intends to sell
approximately 1,500,000 shares of its Common Stock (the "Shares") in
a combination offering of 1,000,000 primary Shares (the "Company
Shares"), and up to 500,000 Shares (the "Selling Shareholders
Shares") from the Selling Shareholders (the "Selling Shareholder").
KSC understands that as of January 31, 1996 there were S,031,866
Shares then currently outstanding In addition, the Company has
reserved 1,597,445 Shares for issuance upon exercise or conversion
of the outstanding warrants, options and convertible securities
listed on Exhibit A hereto. It is currently anticipated that the
offering price per Share will be approximately equal to the dosing
NASDAQ bid price at the time of the pricing. The final offering
price will be proposed to the Company by the Managing Underwriters
after careful assessment of conditions prevailing at that time
including, the status of the market's receptivity to the offering,
market conditions in general, and market valuations of comparable
publicly-traded companies, allowing for the potential of slight
market appreciation in the immediate after-market. Based on our
understanding of the Company's representations that the Company
expects to generate fiscal 1996 sales of $8.4 million and fully
diluted earnings between 50.26 and $0.30 per Share, and fiscal 199?
revenues of $ 26.7 Trillion and fully diluted earnings of between
52.95 and $3.05 per Share, we are confident that the offering can be
successfully completed. During the offering process we will
regularly discuss with the Company the market's receptivity to the
offering and any significant changes in market and industry
conditions that might effect the final pricing.
2. Underwriters and Underwriter Discount. The Managing
Underwriters would expect to form an underwriting syndicate ",with
other underwriters (collectively the "Underwriters") satisfactory to
the Company and the Managing Underwriters. After the execution of an
Underwriting Agreement, the Underwriters will purchase the Shares
from the Company and the Selling Shareholder, on a firm commitment
basis, and will re-offer them to the public at an offering Price per
Share mutually agreed upon by the Company and the Underwriters, less
an underwriting discount (Underwriting Discount) equal to 8.5
percent of the Offering Price.
3. SEC Registration. The Shares will. be registered under the
Securities Act of 1933, as amended (the Act), and declared
effective by the Securities and Exchange Commission ("SEC") and the
securities commissioners of the states designed for Blue Sky
pursuant to Paragraph 11 below. The Managing Underwriters and the
Company shall agree upon a timetable for the filing of a
Registration Statement and marking the Shares, which is currently
anticipated to be as soon as practicable. The Registration Statement
and exhibits, as originally filed and as amended, will be prepared
by the Company with the cooperation of its legal counsel and
accounting advisors, which will be mutually agreed upon both the
Company and the Underwriters, and shall be subject to review by the
Underwriters and their counsel, and shall be in s~ form and contain
such information as is necessary to comply fully with the Act. The
content of any oral comments and copies of all comment letters from
the SEC shall immediately be supplied to the Underwriters and
Underwriters' counsel and no filing shall be made with the SEC to
which either have reasonable objection given to the Company within a
reasonable time after receipt of a proposed filing.
4. Over-allotment Option. The Company and Selling Shareholder will
grant to the Underwriters an over-allotment option to purchase at
the offering Price less the Underwriting Discount up to that number
of Shares which is equal in the aggregate to 15% of the Shares
originally offered. This option shall be exercisable for 45 calendar
days from the effective date of the Registration Statement (the
"effective Date"). Except where the context requires otherwise, the
term "Shares" shall be deemed to include any over-allotment shares.
5. Managing Underwriters' Warrants. As more fully set forth in the
Warrant Agreement to be executed prior to the Offering, concurrently
with each closing (a "Closing") of the sale of Shares to the
Managing Underwriters, the Company will issue, sell and deliver to
the the Underwriters such number of Managing Underwriters' Warrants
as equals five percent of the total number of Shares purchased by
the Underwriters at such Closing at a price of $.001 per
Underwriters' Warrant which entitles the Warrant Holder thereof to
purchase one Share at a purchase price equal to 110% Of the offering
price of the Shares.
6. Managing Underwriters' Expense Allowance. The order to provide
sufficient funds to reimburse the Managing Underwriters for
anticipated costs and expenses associated with the offering, the
Company shall pay the Managing Underwriters a non-accountable
expense allowance of $200,000 as follows: $50,000 upon counter-
signing this letter agreement; $50,000 upon filing the Registration
Statement with the SEC; and $100,000 upon closing
7. Underwriting Agreement. The offering will be conducted pursuant
to an Underwriting Agreement in customary form containing
representations and warranties from the Company, requiring the
delivery of acceptable comfort letters from the Company's
independent certified public accountant, and providing for the
indemnification of the Underwriters for any material misstatement or
omission in the Registration Statement or, in the event the
indemnification provisions are held to be unenforceable, customary
provisions providing for contribution the parties.
8. Underwriters' Expenses. The Underwrites will pay the expenses
of Underwriters' counsel (exclusive of Blue Sky work for the
Company); Underwriters' outof pocket expenses (including travel and
related expenses other than those covered by Paragraph 9 below) and
expenses of stabilizing the issue after effectiveness.
9. Company Expenses. The Company will, regardless of whether the
offering is consummated, pay all expenses directly and necessarily
incurred in connection with the proposed financing and the
performance of the Company's obligations under this agreement,
including, among others: fees for SEC and NASD filings, the fees and
expenses of the Company's counsel, its independent public
accountants and any other experts; the costs of preparing, printing,
filing mailing and delivering the Registration Statement,
preliminary and final prospectuses, as well as any amendments,
supplements and exhibits thereto; printing and delivering all
underwriting and selling documents, including but not limited to the
Underwriting Agreement, Agreement Among Underwriters , Selling
Agreement, Underwriters' Questionnaire and Power of Attorney and the
Blue Sky Memoranda; all filing and other fees, disbursements and
expenses related to Blue Sky, as provided in Paragraph 9' including
Underwriters' counsel's fees for services and out-of-pocket
disbursements related to Blue Sky matters; issuance, transfer and
delivery of the Shares: "road show" presentation expenses; and
travel and living expenses for Company personnel traveling to :meet
prospective investors, and tombstone advertisements.
10. Blue Sky"' Registration. It shall be the Companys obligation to
use its best efforts to qualify the sale of the Shares in such
states as may be reasonably designated by the Underwriters. The
Company and its officers and directors will comply with the
applicable Blue Sky requirements. The Underwriters' counsel shall
make all required Blue Sky filings.
11. NASDAQ and Standard and Poor's Listings. The Company shall file
the necessary applications to list its Common Stock on the NASDAQ
National Market System and additionally shall file the necessary
application to list the Shares as additional shares on the NASDAQ
National Market System and agrees to list the Company in the Market
Scope, Stock Guide and Stock: Reports (commonly known as "tear
sheets") published by Standard and Poor's Corporation in hard-copy
or electronic form for a minimum of one year after the closing of
the offering.
12. Future Sales. Prior to the Effective Date, the Company shall
use its best efforts to cause each of its officers and directors,
and the Selling Shareholder, to enter into an understanding with the
Underwriters providing that each such shareholders, without the
Underwriters' prior written consent, shall not sell any shares owned
directly or indirectly by him/her to the public for 180 days from
the effective Date. The Company also shall cooperate with the
Managing Underwriters in causing all other shareholders "who are
subject to contractual lock-up undertakings to enter into agreements
not to sell Shares in accordance with such undertakings.
13. Right of First refusal. IT the Company intends to engage the
services of a third party investment banking firm, the Company
agrees to give the Managing Underwriters a right of first refusal to
act as managing underwriter(s), placement agents(s) or advisor(s),
along or in conjunction with such other third patty investment
bankers as selected by the Company, with respect to any issuance or
redemption of equity or debt securities or any merger, acquisition,
divestiture or corporate sale of stock or assets, undertaking by the
Company within one year from the execution of this letter agreement
14. Payment of Fees and Accounting. All fees and expenses payable
pursuant to this agreement or to be covered by the Underwriting
Agreement, shall be paid by Company check immediately when due. The
Company and the Managing Underwriters agree that, no less than 48
hours prior to the first closing for the offering, they will
exchange an itemized statement of all charges and credits pertinent
to the Offering to the extent they are then known or reasonably
estimable, and subject to later adjustment based on actual charges.
15. Termination or Withdrawal. (a) If the Company terminates or
withdraws the offering prior to the Effective Date, then the Company
shall forfeit any payments of the Managing Underwriters' non-
accountable expense allowance previously made or then owing pursuant
to Paragraph 6 above, and should such termination or withdrawal
occur more than 30 days following the Company's execution of this
agreement. the Company shall also reimburse up to $25:000 of the
Managing Underwriters' reasonable out-of-pocket expenses (including,
but not limited to, the fees and disbursements to its counsel) which
exceed the Managing 'Underwriters' non-accountable expense allowance
already paid or owing.
(b)If the offering is canceled by the Company on or before August
31,1996, as a result of a sale, acquisition, merger, business
combination or other material event affecting the ownership of all
or substantially all of its assets or outstanding securities, then
the Company will engage the Managing 'Underwriters as its financial
advisors for any such transaction and the Company will pay, in
addition to any amounts payable by the Company pursuant to Paragraph
9 above, a fee upon dosing, in cash, equal to $250,000.
16. Due Diligence. This agreement is subject to satisfactory
findings from our due diligence review of the Company's business,
management, corporate documents and financial condition. Ml
documents and other information relating to the Company's affairs
shall be made available to the Underwriters and their counsel upon
their reasonable request at the Underwriters' offices or at the
office of the Underwriters' counsel, and copies of any such
documents will be furnished upon reasonable request to the
Underwriters or their counsel. The Company further agrees that the
information provided to KSC and the Underwriters, when taken as a
whole, does not and shall not contain any untrue statements of
material fact or omit to state any material fact necessary to make
the information therein not misleading.
The Company will furnish to the Managing Underwriters no later than
21 days after the signing of this agreement a formal business plan
detailing projected revenues, costs expenses, assets, liabilities,
equity capital expenditure and working capital requirements and
other cash flows by quarter and annually for a two-year period and
the proposed use of proceeds of the offering. In addition, the
Company shall provide the Management Underwriters with unaudited
monthly financial data concerning the Company's current year-to-date
actual and budgeted performance and the comparable prior-year period
from now until the dosing date of the Offering. Additionally, the
Company shall provide to the Management Underwriters satisfactory
reserve analysis reports of the Company's Reserve Properties by an
energy engineering firm satisfactory to bath the Company and the
Underwriters no later than 21 days after the signing of this
agreement. Managing Underwriters agree to keep all confidential
business and financial information provided by the Company strictly
confidential and will take all reasonable action to assure that its
attorneys and other representatives comply with the foregoing
undertaking and the Managing Underwritiers and their representatives
shall not use such information for any purpose other than their
engagement hereunder.
17. Indemnification. It is understood that the proposed
Underwriting Agreement shall provide for customary reciprocal
between the Company and the Underwriters and their respective
controlling persons as to certain liabilities, including liabilities
under the Act, and in the event such provisions are held to be
unenforceable, customary provisions for equitable contribution among
the parties.
l.. Finder. The Company and the Managing Underwriters represent to
each other that no unrelated party or person has acted as a finder
or investment adviser in connection with the transactions
contemplated herein and that each shall indemnify the other with
respect to any claim for a finder's fee in connection herewith.
19. Notice. Any notice required or permitted to be given under this
agreement by one party to the other shall be in writing. Notice
shall be given either by (i) personal delivery; (ii) certified,
registered or Express mail, return receipt requested and postage
prepaid; or (iii) recognized next business day courier, to the
addresses set forth in this agreement (i.e., the letterhead address
for KSC and the address for the Company above) or to such other
address as may be designated by any party hereto by the giving of
notice in accordance with this paragraph; or (iv) by facsimile
transmission to the facsimile number then in use at the premises of
KSC or the Company, provided that the original signed notice is
mailed by first class mail on the same date as the facsimile notice
is sent. Notice shall be deemed to have been received when
delivered, or, if mailed, two (2) business days after deposit in the
United States mail as set forth above, or, if sent by courier, the
business day immediately following the date of delivery to the
courier, or, if sent by facsimile transmission, when the sender
receives confirmation of the transmission.
20. Formal Agreement Contemplated. Although we believe that the
offering contemplated by this letter can be achieved, it is
understood that this letter is merely a statement of intent and is
not a legally binding agreement, except as to the matters set forth
in Paragraphs 6, 8, 15 and 20. The Managing Underwriters reserve the
right in their uncontrolled discretion (until a formal Underwriting
Agreement has been negotiated and executed) to determine whether the
Offering can be successfully marketed through an underwriting
syndicate, and may, without any obligation to the Company, for any
reason (including, without limiting the generally of the foregoing,
the existing or prospective material adverse change in the business,
financial results, prospects or condition of the Company; the
Company's actions or failure to take actions as are reasonably
required hereunder; market conditions and the reaction of
prospective members of the underwriting syndicate and selling group
to the proposed Offering), decline to proceed further with the
offering. Similarly, the Company may terminate this agreement at
any time prior to execution of a formal Underwriting Agreement
without any obligation (except as set forth in this Paragraph 20) to
the Managing Underwriters.
21. Governing Law. This letter agreement shall be governed by and
construed in all respects in accordance with the laws of the State
of Missouri applicable to contracts made and to be performed
entirely within such State.
22. Expiration. This proposal shall terminate and be null and
void, unless counter-signed by the Company on or before March 29,
1996, and when counter-signed, it shall constitute a binding
contractual agreement between the parties subject to the
limitations provided in Paragraph 20 above.
If you are in accord with and prepared to proceed on the forgoing
basis, kindly so indicate by having the enclosed copy of the letter
of intent executed and returned to us.
Very truly yours,
KENNY SECURITIES CORP.
John J. Kenny
President and Chief Executive Officer
Agreed and Accepted This 25th day of March 1996
TENGASCO COMPANIES, INC.
Ted Scallan
President and Chief Executive Officer
Exhibit A
Number of Shares of
Common Stock
reserved for Issuance
upon Exercise or
Conversion of
Outstanding Warrants
and Options
Outstanding Options for Long-Term Incentive Plan, Directors Stock Plan and
other consultants and advisors as January 31, 1996
1,597,445
David T. EXHIBIT 16.1
Thomson P.C. Certified Public Accountant
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20459
Gentlemen:
I was previously the auditor for Tengasco, Inc./Onasco Companies,
Inc. and on April 14, 1995 I reported on the financial statements
of Tengasco, Inc./Onasco Companies, Inc. at December 31, 1994
and the year then ended. I have read statements included under Item
3 of its Form lO-SB. I agree with paragraphs one, three, seven,
eight and items (1), (2) and (3) of paragraph six. I have no
knowledge as to the representations in paragraphs two and
five. As to paragraph four, my opinion dated April 14, 1995
had a paragraph added as to the Company's ability to continue as a
going concern.
Very truly yours,
/s/ David T. Thomson, P.C.
David T. Thomson P.C.
Salt Lake City, Utah
January 5, 1996
EXHIBIT 16.2
CHARLES M. STIVERS
Certified Public Accountant
1106 Manchester Shopping Center
Manchester, Kentucky 40962
(606) 598.1464
MEMBER MEMBER
KENTUCKY SOCIETY OF AMERICAN
INSTITUTE OF
CERTIFIED PUBLIC ACCOUNTANTS
CERTIFIED PUBLIC ACCOUNTANTS
June 10, 1996
United States Securities
and Exchange Commission
450 5th Street, N.W.
Washington, D. C. 20549
Re: Tengasco, Inc.
Form 10SB Registration Statement
Gentlemen:
Please be advised that I have been provided with a copy of the
disclosures made in Item 3. Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure contained within
the above referenced Form 10-SB of Tengasco. Inc. agree with the
disclosures made therein with regard to the change from the
undersigned to Price-Bednar, LLP, CPA.
Very truly yours,
Charles M. Stivers
Tulsa Oklahoma City Denver Los Angeles
EXHIBIT 16.3
PRICE o BEDNAR LLP
A Regional Accounting. Tax and Consulting FirmFifteen East Fifth Street
Suite22OO
Tulsa Oklahoma
74103A300
(918)5844800
fax (918)5844838
June 12, 1996
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
We were previously principal accountants for TENGASCO, Inc.;
however, we have never reported on the company's financial
condition.
On June 7, 1996, we were terminated. We have read TENGASCO's
statements to be included under Part II, Item 3 of its Form 10-SB
dated June 11, 1996, and we agree with such statements.
Very truly yours,
PRICE BEDNAR LLP
EXHIBIT 99.1
BEECH
CREEK
LEASES
NEXT PRIMARY
LEASE # RENT XPIRATION BOOK PAGE NET LOR NRI WI
LESSOR ACRE
NAME
1 BARGER, 7/9/96 6/10/95 80 290 109 12.5% 84.375 100%
FRANK
2 CITY OF 11/15/96 11/15/94 79 543 315 12.5% 84.375 100%
MANCHES
TER
3 DAVIDSO 6/30/96 5/26/95 80 249 30 12.5% 84.375 100%
N,
ROSCOE
4 DEZARN, 8/20/96 8/29/94 79 583 300 12.5% 82.5 100%
GROVER
5 GRAY, 4/27/96 4/27/95 80 66 250 12.5% 82.5 100%
NANNIE
6 GRUBB, 7/9/96 6/10/95 80 294 7 12.5% 84.375 100%
AMOS
7 GRUBB, 7/16/96 7/16/94 79 547 191 12.5% 82.5 100%
HARLAN
8 HENSLEY 10/8/96 10/8/94 79 551 16.68 12.5% 82.5 100%
,
CONLEY
9 HENSLEY 10/8/96 10/8/94 79 567 37.43 12.5% 82.5 100%
,
DELBERT
10 HENSLEY 10/26/96 10/26/94 79 555 18.78 12.5% 82.5 100%
, EDSEL
11 HENSLEY 10/8/96 10/8/94 79 571 18.47 12.5% 82.5 100%
,
EUGENE
12 HENSLEY 10/8/96 10/8/94 79 559 18.36 12.5% 82.5 100%
,
HERSCHE
L
13 JONES, 8/30/96 8/30/94 79 575 3.129 12.5% 82.5 100%
TED
14 LAKES, 5/31/96 5/31/95 80 261 71.4 12.5% 84.375 100%
OLLIE
15 LEE, 6/10/96 6/10/95 80 306 108 12.5% 84.375 100%
JOHN ET
AL
16 LEE, 7/9/96 6/10/95 80 298 110 12.5% 84.375 100%
WILL ET
AL
17 SPURLOC 7/11/96 5/26/95 80 245 115 12.5% 84.375 100%
K, HUGH
18 STOKES, 10/8/96 10/8/94 79 563 7.29 12.5% 84.375 100%
LORENE
19 WEBB, 6/27/96 6/27/95 80 466 301 12.5% 82.5 100%
DONALD
ET AL
20 WHITE, 7/23/96 7/23/94 79 587 462 12.5% 84.375 100%
DAUGH
ET AL
21 WOOTON, 6/30/96 8/3/94 79 579 300 12.5% 82.5 100%
DON
22 COTTON, 5/26/96 5/26/95 80 253 55 12.5% 82.5 100%
MARY
23 SMITH, 6/30/96 6/21/95 80 302 168 12.5% 84.375 100%
VIRGIL
24 LEWIS, 5/21/96 5/31/95 80 257 889 12.5% 84.375 100%
HERMAN
25 LEWIS, 6/7/96 6/7/95 80 454 2431.76 12.5% 84.375 100%
HERMAN
26 WEBB, 6/30/96 6/30/95 80 470 60 12.5% 84.375 100%
DONALD
27 HALE, 9/8/96 9/8/94 79 640 150 12.5% 84.375 100%
GILBERT
28 BURNETT 6/4/96 6/24/95 80 458 265 12.5% 84.375 100%
, EDDIE
29 COWENS, 8/5/96 8/5/95 80 536 92 12.5% 84.375 100%
EVA
30 GARRETT 6/24/96 6/24/95 80 462 175 12.5% 85.938 100%
,
NANNIE
31 BOWLING 8/18/96 8/18/95 80 548 154 12.5% 84.375 100%
,
PRESTON
32 SIZEMOR 8/18/96 8/18/95 80 544 13 12.5% 84.375 100%
E,
RALEIGH
33 WILSON, 8/22/96 8/22/95 80 524 20 12.5% 84.375 100%
HUBERT
34 CAMPBEL 8/22/96 8/22/95 80 528 34 12.5% 84.375 100%
L,
FRANCIS
35 BARRETT 8/17/96 8/17/95 80 532 15 12.5% 84.375 100%
,
EARNEST
36 MCDONAL 8/17/96 8/17/95 80 540 3 12.5% 84.375 100%
D,
JOSEPH
37 B & C 8/31/96 8/31/95 81 180 500 18.8% 80 100%
PROPERT
IES
38 BARRETT 9/30/96 9/20/95 81 206 105.3 12.5% 84.375 100%
, IRVIN
39 JACKSON 9/21/96 9/21/95 81 206 135 12.5% 84.375 100%
, ARMIS
40 PRINGLE 8/3/96 8/3/95 81 5 2 12.5% 84.375 100%
,
ETHLENE
41 WEBB, 8/26/96 8/26/95 81 1 1 12.5% 84.375 100%
MARY
TOTAL 8058
ACREAGE..
EXHIBIT 99.2
WILDCAT
LEASES
NEXT PRIMARY
LEASE # RENT XPIRATION BOOK PAGE NET LOR NRI WI
LESSOR ACRE
NAME
1 GARRETT 6/24/96 6/24/96 80 462 175 12.5% 84.375 100%
,
NANNIE
2 HACKER, 4/7/96 4/7/96 81 489 131 12.5% 84.375 100%
JOE
3 WEBB, 7/29/96 7/29/96 80 466 60 12.5% 84.375 100%
DONALD
4 WHITE, 7/2/96 7/2/96 81 618 300 12.5% 84.375 100%
CARL B.
5 BISHOP, 7/18/96 7/18/96 81 640 75 12.5% 84.375 100%
PAUL &
BRENDA
TOTAL 741
ACREAGE
EXHIBIT 99.3
BURNING
SPRINGS
LEASES
NEXT PRIMARY
LEASE # RENT XPIRATION BOOK PAGE NET LOR NRI WI
LESSOR ACRE
NAME
1 ALVERAS 12/7/92 12/7/92 77 494 260 12.5% 82.5 100
2 CORNETT 12/14/92 12/14/92 78 561 2 12.5% 80 100
3 GREGORY 8/8/92 8/8/93 78 219 85 12.5% 84.375 100
4 HALE 5/11/94 5/11/94 79 640 150 12.5% 84.375 100
5 KEITH 1/1/92 1/1/92 76 444 75 12.5% 82.5 100
6 ROBINSO 10/5/92 10/5/93 78 488 172 12.5% 80 100
N-
ALVERAS
ALL TOTAL 744
PRODUCI ACREAGE
NG
WELLS
EXHIBIT
99.4
NEXT PRIMARY
RENT XPIRATION BOOK PAGE NET LOR NRI WI
LESSOR ACRE
NAME
CONATSE 4/18/96 4/18/96 32 16 50 12.5% 87.5 100%
R,
CHARLES
F.
DELK, 4/25/96 4/25/96 32 10 86 12.5% 87.5 100%
MACK
DILLARD 3/30/96 3/30/96 32 13 451 12.5% 87.5 100%
, RAY
HYDER
DUNCAN, 3/31/96 3/31/96 32 7 150 12.5% 87.5 100%
EUGENE
DUNCAN, 10/3/96 10/3/96 32 1 846 12.5% 87.5 100%
GWENITH
DUNCAN, 4/21/96 4/21/96 32 4 150 12.5% 87.5 100%
GUY O.
FRANKLI 4/1/96 4/1/96 32 25 35 12.5% 87.5 100%
N, JESS
REAGAN, 1/14/96 1/14/96 31 626 263 12.5% 87.5 100%
RAY
WOODS, 7/11/96 7/11/96 31 540 90 12.5% 87.5 100%
EARNEST
TOTAL 2121
ACREAGE
<TABLE>
EXHIBIT 99.5
FROM
OCTOBER
1995
THROUGH
CURRENT
-
Revised
6-11-96
HANCOCK
COUNTY
LEASE
FEE
SCHEDULE
<CAPTION>
NEXT PRIMARY ANNUAL
DATE LESSOR NAME RENT EXPIRATION ACREAGE FEE LESSOR MAILING ADDRESS
OCTOBER
<S> <C> <C> <C> <C> <C> <C>
26 Hensley, William P. and 10/26/96 10/26/98 125 $500.00 Rt. 4 Box 268A Sneedville, TN 37869
Lucretia E.
26 Royston, Leno and Mary 10/26/96 10/26/98 65 $260.00 Rt. 4 Box 266, Sneedville, TN 37869
26 Sutton, Ralph and Mae Dean 10/26/96 10/26/98 30 $200.00 Box 427, Sneedville, TN 37869
27 Russell, Kenneth and Lois 10/26/96 10/26/98 6.25 $25.00 8216 Filson St. Brookville Fl 34613
27 Brewer, Harrison 10/27/96 10/27/98 58 $300.00 Rt. 3 Box 426, Sneedville, TN 37869
TOTAL ACRES AND ANNUAL FEES 284.25 $1,285.00
- OCTOBER
NEXT PRIMARY ANNUAL
DATE LESSOR NAME RENT EXPIRATION ACREAGE FEE LESSOR MAILING ADDRESS
NOVEMBER
3 Cross, Brian Todd and 11/3/96 11/3/98 100 $100.00 Rt. 4 Box 339B, Sneedville, TN
Deanna Hodge 37869
6 Bryant, Edmont T. 11/6/96 11/6/98 110 $440.00 Rt. 4 Box 348, Sneedville, TN 37869
6 Lawson, Cecil 11/6/96 11/6/98 240 $960.00 Rt. 4 Box 337, Sneedville, TN 37869
6 Lawson, Laura J. 11/6/96 11/6/98 300 $1,200.00 Rt. 4 Box 332, Sneedville, TN 37869
6 Lawson, Steven et.al. 11/6/96 11/6/98 302 $1,208.00 Rt. 4 box 338, Sneedville, TN 37869
6 Portrum, Fred and Melisha 11/6/96 11/6/98 68 $272.00 2112 Washington Av, Morristown TN
37814
6 Winkler, Argle 11/6/96 11/6/98 90 $360.00 Rt. 4 Box 316, Sneedville, TN 37869
8 Winkler, Willie and Hester 11/8/98 11/8/96 17 $68.00 Rt. 4 Box 315, Sneedville, TN 37869
8 Barnard, Andy 11/8/96 11/8/98 66.5 $266.00 Rt. 4 Box 248, Sneedville, TN 37869
8 Ferguson, Clarence and 11/8/96 11/8/98 50 $200.00 Rt. 4 Box 284D, Sneedville, TN
Teresa 37869
9 Mitchell, Ester 11/9/95 11/9/98 100 $400.00 8588 Bobolick, Cincinn. Oh 45231
14 Hatfield, George W. and 11/14/96 11/14/98 61.5 $246.00 Rt. 2, Tazewell, TN 37879
Lona
14 Royston, Gustava 11/14/96 11/14/98 12 $48.00 Rt. 3, Box 461A, Sneedville, TN
37869
16 Shaw, Tommy and Allica 11/16/96 11/16/98 6 $25.00 711 Morningside, Rogersville, TN
37857
22 DePriest, Danny and Sharon 11/22/96 11/22/98 47 $188.00 Rt. 4 Box 268, Sneedville, TN 37869
27 DePriest, Robert 11/27/96 11/27/98 50 $200.00 Rt. 3 Box 428F, Sneedville, TN
37869
28 Smith, Cheryl R., Etal 11/28/97 11/28/98 65 $260.00 8221 Sherbourne Dr., Knoxville, TN
37923
TOTAL ACRES AND ANNUAL FEES 1685 $6,441.00
- NOVEMBER
NEXT PRIMARY ANNUAL
DATE LESSOR NAME RENT EXPIRATION ACREAGE FEE LESSOR MAILING ADDRESS
DECEMBER
1 Lawson, Wiley 12/1/96 12/1/98 11 $44.00 Rt. 4 Box 334, Sneedville, TN 37869
7 Mackey, George W. and Ruby 12/7/96 12/7/98 27 $108.00 Rt. 2 Box 228, Sneedville, TN 37869
7 Sutton, Dewey and Tavie 12/7/96 12/7/98 310 $1,240.00 Rt. 3 Box 429, Sneedville, TN 37869
10 Cantwell, Archie and Linda 12/10/96 12/10/98 44 $176.00 4398 Woodhaven Dr. Morristown 37813
10 Cantwell, Cesil and Patti 12/10/96 12/10/98 68 $272.00 Timberlake Sub Division, Rogersville
37857
10 Cantwell, Kenneth and 12/10/96 12/10/98 38.7 $156.00 Rt. 3 Box 387, Sneedville, TN 37869
Katherine
10 Seals, Rodney and Jennie 12/10/96 12/10/98 92 $368.00 Rt. 3 Box 380A, Sneedville, TN
Mae 37869
10 Seal, Edith 12/10/96 12/10/98 90 $360.00 Rt. 3 Box 380, Sneedville, TN 37869
10 Trent, Ralph and Deanna 12/10/96 12/10/98 15 $60.00 Rt. 3 Box 379, Sneedville, TN 37869
11 Carpenter, Lucille 12/11/96 12/11/98 25 $100.00 Rt. 2 Box 238, Sneedville, TN 37869
11 Jefferson, Wright 12/11/96 12/11/98 45 $180.00 Rt. 2 Box 244, Sneedville, TN 37869
11 Jefferson Jr., Wright 12/11/96 12/11/98 52 $208.00 Rt. 2 Box 244A, Sneedville, TN
37869
11 Mackey, Jeptha and Pearl 12/11/96 12/11/98 27 $108.00 Rt. 2 Box 232, Sneedville, TN 37869
11 Zeller, Stanley 12/11/96 12/11/98 108 $432.00 Rt. 2 Box 246A, Sneedville, TN
37869
15 Patton, Gary and Lynn 12/15/96 12/15/98 86 $344.00 360 Chaffin Rd. Roswell, GA 30075
28 Pierce, Dr. Truett H. and 12/28/96 12/28/00 7650 $10,000.00 Box 37, Sneedville, TN 37869
Wanda and Gary Hicks
TOTAL ACRES AND ANNUAL FEES 8688.7 $14,156.00
- DECEMBER
NEXT PRIMARY ANNUAL
DATE LESSOR NAME RENT EXPIRATION ACREAGE FEE LESSOR MAILING ADDRESS
JANUARY
5 Bauer, Virginia and Walter 1/5/97 10.5 $42.02 504 W. Aspen, Kanab, UT 84741
W.
5 Carr, Yvonne (trust) 1/5/97 15.54 $62.16 2215 Vina Del Mar, Oxnard CA 93035
5 Dixon, Richard 1/5/97 5 $20.00 PO Box 249, Bean Station TN 37708
5 Fuller, James M. and Mary 1/5/97 10 $40.00 4200 Easton Dr Ste 3,Bakersfield
B. CA93309
5 Hart, William L. 1/5/97 41.44 $165.76 3112 Solimar Beach Dr. Ventura CA
93001
5 Miller, Donna and Kevin 1/5/97 10.5 $42.02 1589 Wolverton Av, Camarillo CA
93010
5 Powell, Robert 1/5/97 10.9 $43.60 2101 Pinebrook Dr, Kingsport, TN
37662
5 Salzeider, Gary 1/5/97 20.72 $82.88 1724 13th Av Ct. NW, Puyallup, WA
98371
5 Williams, Steven and Lisa 1/5/97 5.25 $21.01 1281 N. Union Av., Ozark, Al. 36360
5 Witherspoon, Nancy and 1/5/97 15.54 $62.16 1375 Sweetwater Av, Camarillo, CA
Wayne 93010
8 Ferguson, Hyle and Diana 1/8/97 1/8/99 100 $400.00 Rt. 2 Box 224, Sneedville, TN 37869
8 McCoy, Maude 1/8/97 1/8/99 100 $400.00 Rt. 2 Box 223, Sneedville, TN 37869
9 McCoy, Dale and Mary 1/9/97 1/9/99 44 $176.00 Rt. 2 Box 223, Sneedville, TN 37869
Lucille
15 Reed, Paul and Lucille 1/15/97 1/15/99 410 $1,640.00
Sneedville, TN 37869
25 Sutton, Darnell 1/25/97 1/25/99 8 $150.00 Rt. 2 box 160, Tazewell, TN 37860
TOTAL ACRES AND ANNUAL FEES 807.39 $3,347.61
- JANUARY
NEXT PRIMARY ANNUAL
DATE LESSOR NAME RENT EXPIRATION ACREAGE FEE LESSOR MAILING ADDRESS
FEBRUARY
15 Nichols, Earl 2/15/97 2/15/00 113 $452.00 Rt. 1 Box 289, Kyles Ford TN 37765
15 Testerman, Henry & Joyce 2/15/97 2/15/00 191 $764.00 Rt. 1 Box 179, Kyles Ford TN 37765
16 Gibson, Harvey Jr. & Lois 2/16/97 2/16/00 80 $320.00 Rt. 1 Box 340, Kyles Ford TN 37765
16 Umbarger, Mary 2/16/97 2/16/00 50 $200.00 Rt. 1 Box 194, Kyles Ford TN 37765
16 Greene, John and Kathleen 2/16/97 2/16/00 25 $100.00 Rt. 1 Box 347, Kyles Ford TN 37765
17 Kirby, Ted 2/17/97 2/17/00 5 $20.00 Rt. 1 Box 225, Kyles Ford TN 37765
17 Wallan, Frank & Kathy 2/17/97 2/17/00 36 $144.00 Rt. 1 Box 201, Kyles Ford, TN 37765
17 Smith, David & Deborah 2/17/97 2/17/00 30 $120.00 Rt. 1 Box 143 Kyles Ford, TN 37765
17 Johnson, Rickey & Delois 2/17/97 2/17/00 57 $228.00 Rt. 1 Box 3129, Kyles Ford TN 37765
17 Johnson, Hugh & Helen 2/17/97 2/17/00 87 $348.00 Rt. 1 Box 324, Kyles Ford TN 37765
19 Testerman, Robert 2/19/97 2/19/00 101 $404.00 Rt. 1 Box 345, Kyles Ford TN 37765
19 Livesay, Mattie 2/19/97 2/19/00 63 $252.00 Rt. 1 Box 246, Kyles Ford, TN 37765
20 Johnson, Roy 2/20/97 2/20/00 50 $200.00 Rt. 1 Box 348, Kyles Ford, TN 37765
20 Kinsler, Robert & Brenda 2/20/97 2/20/99 195 $780.00 Rt. 1 Box 76, Sneedville, TN 37869
20 Gray, Joe and Donna 2/20/97 2/20/00 112 $448.00 Rt. 1 Box 353AA, Kyles Ford TN 37765
21 Dillon, Deborah and James 2/21/97 2/21/00 52 $208.00 Rt. 1 Box 157, Sneedville, TN 37869
21 Gilliam, Linburgh 2/21/97 2/21/00 114 $456.00 Rt. 1 Box 77A, Eidson, TN 37731
21 Reed, Warren and Lillie 2/21/97 2/21/99 250 $1,000.00 Rt. 3 Box 429, Sneedville TN 37869
Bell
21 Gibson, Ulyssus and Rose 2/21/97 2/21/00 115 $460.00 Rt. 1 Box 2015A, Sneedville TN 37869
21 Livesay, H.T. and Viola 2/21/97 2/21/00 435 $1,740.00 1414 Chambers St., Rogersville TN
37857
21 Albright, L.V. and Judy 2/21/97 2/21/00 34 $136.00 Rt. 1 Box 165, Kyles Ford TN 37765
22 Holt, Charles & Maxine 2/22/97 2/22/00 1030 $4,120.00 Rt. 1 Box 97, Eidson, TN 37731
22 Gibson, Danny and Janette 2/22/97 2/22/00 35 $140.00 Rt. 1 Box 327, Kyles Ford TN 37765
23 Gibson, Goldie 2/23/97 2/23/00 111 $444.00 Rt. 1 Box 338, Kyles Ford TN 37765
23 Kinsler, Hobert & Valice 2/23/97 2/23/00 50 $200.00 Rt. 1 Box 303, Kyles Ford, TN 37765
23 Gibson, Harvey Jr., & Lois 2/23/97 2/23/00 12 $48.00 Rt. 1 Box 340, Kyles Ford, TN 37765
23 Johnson, Ada Lee 2/23/97 2/23/00 200 $800.00 Rt. 2 Box 36, Sneedville, TN 37869
24 Nichols, Clyde 2/24/97 2/24/00 42 $168.00 Rt. 1 Box 313, Sneedville, TN 37765
24 Kinsler, Homer & Annette 2/24/97 2/24/00 35 $140.00 Rt. 1 Box 176, Kyles Ford, TN 37765
24 Harrell, John 2/24/97 2/24/00 105 $420.00 Rt. 3 Box 1293, Bean Station, TN
37708
27 Mabe, Luther 2/27/97 2/27/00 87 $348.00 Rt. 1 Box 156, Kyles Ford, TN 37765
NEXT PRIMARY ANNUAL
DATE LESSOR NAME RENT EXPIRATION ACREAGE FEE LESSOR MAILING ADDRESS
FEBRUARY
(Continu
ed)
27 Cagle, Jeannette and Cashus 2/27/97 2/27/00 150 $600.00 Rt. 1 Box 153A, Kyles Ford, TN 37765
28 Dunmore, Lilliam 2/28/97 2/28/00 80 $320.00 Rt. 1 Box 343, Kyles Ford, TN 37765
28 Nichols, Oscar & Bobbie 2/28/97 2/28/00 150 $600.00 Rt. 1 Box 223, Kyles Ford, TN 37765
28 Catron, Bee 2/28/97 2/28/00 39 $156.00 Rt. 1 Box 184, Kyles Ford, TN 37765
28 Nichols, Lincoln and Bobby 2/28/97 2/28/00 4 $16.00 Rt. 1 Box 223, Kyles Ford, TN 37765
28 Johnson, Allen **payment 2/28/97 2/28/00 14 $56.00 Rt. 1 Box 340, Kyles Ford, TN 37765
to: Lois Gibson
28 Nichols, Rodger 2/28/97 2/28/00 13 $52.00 Rt. 1 Box 332, Kyles Ford, TN 37765
28 Gibson, Gene 2/28/97 2/28/00 130 $520.00 Rt. 1 Box 355, Sneedville, TN 37869
28 Baker, Johnathan & Barbara 2/28/97 2/28/00 55 $220.00 Rt. 1 #307, Sneedville, TN 37869
28 Lamb, Helen Nichols 2/28/97 2/28/00 25 $100.00 Rt. 1 Box 332, Kyles Ford, TN 37765
28 Weston, Barbara Ann 2/28/97 2/28/00 14 $56.00 Rt. 1 Box 307B, Sneedville, TN
37869
29 Fugate, Ruby 2-29-97 2/29/00 25 $100.00 Rt. 1 Box 292, Kyles Ford, TN 37765
29 Kinsler, Lucian & 2-29-97 2/29/00 25 $100.00 Rt. 1 Box 290, Kyles Ford, TN 37765
Geneva**payment to: Norma
Flennor
29 Jarvis, Ray 2-29-97 2/29/00 17 $68.00 P. O. Box 125, Sneedville, TN 37869
29 Wallen, Fred 2-29-97 2/29/00 30 $120.00 Rt. 1 Box 200, Kyles Ford, TN 37765
29 Rogers, Etta **payment to: 2-29-97 2/29/00 57 $228.00 Rt. 1 Box 244A, Kyles Ford, TN 37765
Martha Nichols
29 Holt, Lillie 2-29-97 2/29/00 150 $600.00 Rt. 1 Box 96, Eidson, TN 37765
TOTAL ACRES AND ANNUAL FEES 4880 $19,520.00
- FEBRUARY
NEXT PRIMARY ANNUAL
DATE LESSOR NAME RENT EXPIRATION ACREAGE FEE LESSOR MAILING ADDRESS
MARCH
1 Smith, Inez **payment to: 3/1/97 3/1/00 39 $156.00 Rt. 1 Box 193, Kyles Ford, TN 37765
David Smith
1 Johnson, Tyler & Virginia 3/1/97 3/1/00 30 $120.00 Rt. 1 Box 221, Kyles Ford TN 37765
1 Wagner, G. Michael and 3/1/97 3/1/00 87 $348.00 Rt. 1 Box 213, Kyles Ford, TN 37765
Elizabeth Kartinganer
1 Presley, Dorothy and Ruby 3/1/97 3/1/00 280 $1,120.00 Rt. 1 Box 50, Eidson, TN 37731
Blair
1 Johns, Edna 3/1/97 3/1/00 105 $420.00 Rt. 1 Box 162, Kyles Ford, TN 37765
1 Presley, Rufus & Dorothy 3/1/97 3/1/00 275 $1,100.00 Rt. 1 Box 50, Eidson, TN 37731
1 Belcher, Tommy & Brenda 3/1/97 3/1/00 35 $140.00 Rt. 1 Box 285, Kyles Ford, TN
37765
2 Snodgrass, Lula Sue 3/2/97 3/2/00 75 $300.00 1319 Gregreen Ln Lakeland Fl 33813
2 Snodgrass, John & Fern 3/2/97 3/2/00 75 $300.00 8401 Malone Rd. Olive Branch MS
38654
2 Snodgrass, Dwight & Patsy 3/2/97 3/2/00 75 $300.00 Rt. 1, Kyles Ford 37765
2 Snodgrass, Bill& Alice 3/2/97 3/2/00 75 $300.00 212 Russell Dr. Rogersville, TN
37857
2 Snodgrass, Dwight & Etal 3/2/97 3/2/00 100 $400.00 Rt. 1 Kyles Ford, TN 37765
2 Lorenz, Christine & Louis 3/2/97 3/2/00 75 $300.00 Rt. 1 Box 259B, Kyles Ford, TN 37765
Jr.
2 Sizemore, James 3/2/97 3/2/00 6 $24.00 Rt. 1 Box 223, Kyles Ford, TN 37765
2 Trobaugh, James & Judy 3/2/97 3/2/00 28 $112.00 2157 Frank Hodge Rd Talbott TN 37877
3 Gilliam, Shannon and Marie 3/3/97 3/3/00 25 $100.00 Rt. 1 Box 76 Eidson, TN 37731
4 Stewart, Nora and Ida Rimes 3/4/97 3/4/00 226 $904.00 Rt. 1 Box 103, Sneedville, Tn 37869
**Pyble to Nora Stewart
4 Whittney, Damnel, Edith & 3/4/97 3/4/00 91 $364.00 Rt. 1 Box 76 Eidson, TN 37731
Ray
4 Hurd, Eva 3/4/97 3/4/00 21 $84.00 Rt. 1 Box 135, Blackwater VA 24221
4 Johnson, John & Minnie 3/4/97 3/4/00 13 $52.00 Rt. 1 Box 321 Sneedville, TN 37869
4 Willis, Douglas 3/4/97 3/4/00 2 $8.00 Rt. 1 Box 198, Kyles Ford TN 37765
4 Willis, Zelma 3/4/97 3/4/00 75 $300.00 Rt. 1 Box 198A, Kyles Ford TN 37765
5 Anderson, James & Nancy 3/5/97 3/5/00 283 $1,132.00 220 Lloyd Chapel Rd,Church Hill TN
37642
6 Maness, Sterling & 3/6/97 3/6/00 83 $332.00 Rt. 1 Box 216, Kyles Ford TN 37765
Gilbertia
6 Maness, Gilbertia & 3/6/97 3/6/00 115 $460.00 Rt. 1 Box 216, Kyles Ford TN 37765
Sterling
6 Willis, John Jr. 3/6/97 3/6/00 18 $72.00 Rt. 1 Box 230, Kyles Ford TN 37765
7 Kinsler, Mark Edward 3/7/97 3/7/00 58 $232.00 Rt. 1 Box 183, Kyles Ford TN 37765
7 Kinsler, Tyler & Jewell 3/7/97 3/2/00 15 $60.00 Rt. 1 Box 196 Kyles Ford TN 37765
8 Jones, Ronald & Michael 3/8/97 3/8/00 263 $1,052.00 510 Windsor Forrest Dr, Kingsport TN
37663
11 Johnson, Clyde Jr & Dorothy 3/11/97 3/11/00 51 $204.00 1673 Christian Bend Rd Church Hill
J. TN 37642
11 Males, Dayton & Thelma 3/11/97 3/11/00 15 $60.00 Rt. 1 Box 274, Kyles Ford TN 37765
NEXT PRIMARY ANNUAL
DATE LESSOR NAME RENT EXPIRATION ACREAGE FEE LESSOR MAILING ADDRESS
MARCH
(CONTINU
ED)
11 Shelburne, Thomas & Sarah 3/11/97 3/11/00 70 $280.00 P. O. Box 608, Rogersville, TN 37857
11 Stapleton, Edward & Pauline 3/11/97 3/11/00 95 $380.00 538 W. Huntington, Monttelier, Ind
47359
11 Wallen, Ronnie 3/11/97 3/11/00 52 $208.00 117 Wellington Dr. Middlesboro Ky
40965
12 Goodman, Calvie** Make 3/12/97 3/12/00 56 $224.00 Rt. 2 Box 158 Sneedville, TN 37869
check to John Goodman
12 Johnson, Ada 3/12/97 3/12/00 45 $180.00 Box 756, Churchville VA 24421
12 Kinsler, Sonny 3/12/97 3/12/00 20 $80.00 Rt. 1 Box 166 Kyles Ford TN 37765
12 Seals, Naomi and Emery 3/12/97 3/12/00 38 $152.00 4218 Stansberry Rd. Morristown TN
37813
13 Collins, Margaret 3/13/97 3/13/00 115 $460.00 Rt. 2 Box 340 Sneedville TN 37869
(administrator)
13 Horton, Charlie 3/13/97 3/13/00 58 $232.00 948 Melody LN Kingsport TN 37665
13 Livesay, Jerry & Nancy 3/13/97 3/13/00 173 $692.00 Rt. 1 Box 36, Eidson, TN 37731
13 Stout, Ethel 3/13/97 3/13/00 136 $544.00 Rt. 1 Box 38 Eidson TN 37731
14 Hatfield, Lona 3/14/97 3/14/00 40 $160.00 Rt. 2 Box 159, Tazewell TN 37879
15 Barger, Ruth 3/15/97 3/15/00 4 $16.00 921 Myrtle St. Kingsport, TN 37660
15 Nichols, Lee **payment to: 3/15/97 3/15/00 77 $308.00 Rt. 1 Box 313 Kyles Ford TN 37765
Clyde Nichols
15 Turner, Elsie 3/15/97 3/15/00 45 $180.00 Rt. 1 Box 345, Kyles Ford TN 37765
16 Sutton, Dayton & Julia 3/16/97 3/16/00 189.5 $758.00 Rt. 4 IDAS Chapel Rd Sneedville, TN
37869]
18 Cope, Fred & Nancy **Make 3/18/97 3/18/00 80 $320.00 Rt. 4 Box 149 Sneedville TN 37869
check to: Fred Cope
18 Jones, Lewis & Zelma 3/18/97 3/18/00 21 $84.00 Rt. 4 Box 317A Sneedville TN 37869
19 Lawson, Ray E. 3/19/97 14 $56.00 Rt. 3 Box 474 Sneedville TN 37869
20 Anderson, Herbert & Maxine 3/20/97 3/20/00 70 $280.00 160 Lena Dr. Rogersville TN 37857
20 Helton, Doris 3/20/97 3/20/00 30 $120.00 Rt. 2 Box 157 A Tazewell, TN 37879
20 Sizemore, Guy & Betty 3/20/97 3/20/00 435 $1,740.00 987 Lee Valley Rd. Whitesburg TN
37891
20 Winstead, Robert & Joyce 3/20/97 3/20/00 70 $280.00 Rt. 1 Box 173 Kyles Ford TN 37765
21 Greene, Rector & Fay 3/21/97 3/21/00 38 $152.00 312 E. Main St. Rt. 1 Sneedville TN
37869
21 McCoy, Jeff & Polly 3/21/97 3/21/00 24 $96.00 Rt. 2 Tazewell TN 37879
21 Willis, Walter & Alice 3/21/97 3/21/00 40 $160.00 Rt. 1 Box 185, Kyles Ford TN 37765
21 Wilson, Kyle & Ina 3/21/97 3/21/00 23 $92.00 Rt. 4 Box 280 Sneedville TN 37869
22 Rogers, Jack 3/22/97 3/22/00 26 $104.00 Rt. 1 Box 154, Eidson TN 37731
22 Reed, Kenneth Jr. & Penny 3/22/97 3/22/00 35 $140.00 PO Box 82 Sneedville TN 37869
24 Hechmer, Francis & Janet 3/24/97 3/24/99 60 $240.00 Rt. 4 Box 342 Sneedville TN 37869
25 Clonce, John & Louise 3/25/97 3/25/00 32 $128.00 Rt. 3 Box 457 Sneedville TN 37869
NEXT PRIMARY ANNUAL
DATE LESSOR NAME RENT EXPIRATION ACREAGE FEE LESSOR MAILING ADDRESS
MARCH
(CONTINU
ED)
26 Ogden, Sarah Elizabeth 3/26/97 3/26/00 40 $160.00 160 Crossway Rd Brunswick GA
** deposit to acct. no.
0090777, Citizens Bank of
Sneedville
26 Darnell, Callie Mae 3/26/97 3/26/00 74 $296.00 1020 Fairway St. Kingsport TN 37665
27 Baker, Carl & Edith 3/27/97 3/27/00 300 $1,200.00 Rt. 1 Box 264 Kyles Ford TN 37765
28 Livesay, Elsie (Mrs. 3/28/97 3/28/00 196 $784.00 Rt. 1 Box 315 Kyles Ford TN 37765
Braten)
28 Snodgrass, Edward & Kelly 3/28/97 3/28/00 116 $464.00 Rt. 1 Box 234 Kyles Ford TN 37765
29 Dean, Larry E. & Gail 3/29/97 3/29/00 143 $572.00 Rt. 4 Box 288 Sneedville TN 37869
29 Dodson, Earl & Betty 3/29/97 3/29/00 40 $160.00 Rt. 3 Box 419 Sneedville TN 37869
TOTAL ACRES AND ANNUAL FEES 5834.5 $23,338.00
- MARCH
NEXT PRIMARY ANNUAL
DATE LESSOR NAME RENT EXPIRATION ACREAGE FEE LESSOR MAILING ADDRESS
APRIL
2 Dodson, Clarence & Joyce 4/2/97 4/2/00 68 $272.00 Rt. 3 Box 416, Sneedville TN 37869
9 Seal, Jones 4/9/97 3/9/00 50 $200.00 Rt. 2 Box 168A Tazewell TN 37879
10 Yeary, Bobby 4/10/97 4/10/00 40 $160.00 Rt. 2 Box 161 A2 Tazewell TN 37879
10 Smith, Larry and Lois and 4/10/97 133 $532.00 Rt. 2 Box 157, Tazewell TN 37879
Linda
11 Reed, Morris & Johnny 4/11/97 4/11/00 12 $48.00 1465 Windcrest Dr. Morristown TN
37814
** Johnny Reed: 13840
Bridlington Ct. Centerville
VA 22020
17 Colson, William & Anita 4/17/97 4/17/00 60 $240.00 P. O. Box 27150, Panama City FL
32411
18 Sutton, Hazel 4/18/97 4/18/00 42.5 $170.00 Rt. 2 Box 158 Tazewell, TN 37879
18 Sutton, Darnell 4/18/97 4/18/00 102 $408.00 Rt. 2 Box 160 Tazewell, TN 37879
20 Lange, Orville and Doris A. 4/20/97 4/20/00 107 $428.00 5521 Deer Park Dr., Roanoke, VA
24019
22 Tillson, James and Edith 4/22/97 4/27/00 25 $100.00 Rt. 2 Box 20-1, Gore, OK 74435
TOTAL ACRES AND ANNUAL FEES 639.5 $2,558.00
- APRIL
NEXT PRIMARY ANNUAL
DATE LESSOR NAME RENT EXPIRATION ACREAGE FEE LESSOR MAILING ADDRESS
MAY
2 Drinnon, Joel 5/2/97 5/2/00 21 $84.00 Rt. 2, Box 225, Sneedville, TN 37869
2 Kinsler, Edith 5/2/97 5/2/00 71 $284.00 P.O. Box 363, Sneedville, TN 37869
7 Hopkins, Debbie 5/7/97 5/7/00 8 $32.00 P.O. Box 231, Sneedville, TN 37869
8 Davis, Robert J. and Glenda 5/8/97 5/8/00 47 $188.00 Rt. 1 Box 361, Sneedville, TN 37869
J.
8 Hurst, Stan and Peggy 5/8/97 5/8/00 125 $500.00 Rt. 4 Box 316A, Sneedville, TN 37869
8 Wallace, W. Pearl 5/8/97 5/8/00 6 $24.00 P.O. Box 375, Sneedville, TN 37869
10 Shelburne, Thomas D. and 5/10/97 5/10/00 70 $280.00 P.O. Box 608, Rogersville, TN 37857
Sarah C.
11 Seal, Joe F. and Billie S. 5/11/97 5/11/00 20 $80.00 Rt. 2 Box 207, Sneedville, TN 37869
11 Roberts, Wayne and Jeanette 5/11/97 5/11/00 150 $600.00 Rt. 2 Box 212-A, Sneedvile, TN 37869
13 Barnard, Jack, Etal 5/13/97 5/13/00 96.5 $386.00 3775 State Highway 33, Tazewell, TN
37879
13 Barnard, Jack and Jackie 5/13/97 5/13/00 103 $412.00 3775 State Highway 33, Tazewell, TN
37879
13 Barnard, Ethel McDaniel, 5/13/97 5/13/00 175 $700.00 3775 State Highway 33, Tazewell, TN
Etal 37879
13 Barnard, Jack 5/13/97 5/13/00 400 $1,600.00 3775 State Highway 33, Tazewell, TN
37879
13 Hagan, Ronald, Etal 5/13/97 5/13/00 86 $344.00 5757 Brights Pike, Russellville, TN
37860
14 Griffin, Janelle and James 5/14/97 5/14/00 6 $24.00 Rt. 4 Box 383, Rutledge, TN 37861
14 Stewart, Eddie and Karen 5/14/97 5/14/00 13 $52.00 Rt. 1 Box 103, Sneedville, TN 37869
Wallen**ck to Karen Wallen
14 Wallen, Dennis A. and Karen 5/14/97 5/14/00 18 $72.00 Rt. 1 Box 103, Sneedville, TN 37869
15 Greene, Matt. D. Estate 5/15/97 5/15/00 205 $820.00 Rt. 1 Box 172, Rutledge TN 37861
15 Moles, Carson and Etta 5/15/97 117 $468.00 Rt. 2 Box 172, Tazewell, TN 37879
15 Moles, Vester Neal 5/15/97 51 $204.00 Rt. 3 Box 1035, Bean Station, TN
37708
16 LeBlanc, Tammy 5/16/97 5/16/00 68 $272.00 Rt. 4 Box 321A, Sneedville, TN 37869
16 Royston, Grady and Phyllis 5/16/97 5/16/00 50 $200.00 Rt. 1 Box 32, Sneedville, TN 37869
16 Jefferson, Carl and Wanda 5/16/97 5/16/99 Rt. 4 Box 320EE, Sneedville, TN
37869
17 McCoy, James and Elanor 5/17/97 5/17/00 150 $600.00 Rt. 2 Box 221, Sneedville, TN 37869
17 Seal, Horad Seal Estate 5/17/97 5/17/00 150 $600.00 Rt. 2 Box 208, Sneedville, TN 37869
**payable to Myrtle Seal
20 Sutton, James D. and George 5/20/97 92 $368.00 3328 Sheila Circle, Whitepine, TN
E. 37890
28 Johnson, Hugh and Helen 5/28/97 5/28/00 25 $100.00 Rt. 1 Box 324, Kyles Ford, TN 37765
31 Seals, Sherwin and Linda 5/31/97 65 $260.00 Rt. 2 Box 161A, Tazewell, TN 37879
31 Johns, Porter and Ruby 5/31/97 114 $456.00 Rt. 2, Tazewell, TN 37879
TOTAL ACRES AND ANNUAL FEES 2502.5 $10,010.00
- MAY
NEXT PRIMARY ANNUAL
DATE LESSOR NAME RENT EXPIRATION ACREAGE FEE LESSOR MAILING ADDRESS
JUNE
1 Turnmire, J.C. and Joyce 6/1/97 6/1/97 93 $372.00 6905 Mulberry Road, Knoxville, TN
37918
TOTAL ACRES AND ANNUAL FEES 93 $372.00
- JUNE
GRAND TOTAL ACRES 25414.84
GRAND TOTAL ANNUAL FEES $81,027.61
</TABLE>
EXHIBIT
99.6
ALABAMA
LEASES
NEXT PRIMARY
LEASE # LESSOR RENT XPIRATION BOOK PAGE NET LOR NRI WI
NAME ACRE
1 ABRAMSON, 11/30/96 11/30/98 2 413 497 12.5% 87.5% 100%
EDVIN C.
2 ABRAMSON, 11/30/96 11/30/98 2 411 139 12.5% 87.5% 100%
VERNON
3 DALE, 12/18/96 12/18/98 2 415 100.19 12.5% 87.5% 100%
MARK F.
4 WYLIE, 12/20/96 12/20/98 2 419 267 12.5% 87.5% 100%
RUBEN A.
5 BOWERS, 3/14/97 3/14/99 2 423 130
ROY &
LAURA
TOTAL 1133.2
ACREAGE
EXHIBIT 99.7(a)
March 8, 1996
R. W. Coburn
Mr. Mike Ratliff
Tengasco
4928 Homberg, Suite 3B
Knoxville, Tennessee 37919
RE: Beech Creek
Reserve Evaluation
Chattanooga Shale
Clay County, Kentucky
Dear Mr. Ratliff:
Pursuant to your request, I have prepared a reserve analysis of four
(4) proved producing wells and thirtv-six (36) proved undeveloped
wells.
The results of the analysis are set out below:
As of December 31, 1996
Category Net Gas McF Net Profit 10% Discount
Proved Prod. 2,034,387 s 3,162,884 $ 1,562,822
Proved Undev. 22.400.001 32,714,000 17.312.692
24,434,388 $ 35,876,844 $ 18,875,514
The reserves were determined in accordance with Society of
Petroleum Engineering standards and in conformance with SEC
guidelines. Gas prices and costs were not escalated and a 10%
present worth discount factor used.
The methods applied were based on Natural Gas Research Institute
Studies and analogies. However, being theoretical in nature Coburn
Engineering cannot be held liable for inaccuracy caused by
incomplete or inaccurate data. Further it is necessary for the
operator to utilize the best technology available in drilling
and completing the wells in order to obtain the assigned
reserves. Suggested new technology was provided in a separate
letter, relating to the drilling completion of the proved
undeveloped wells.
It is a pleasure to be of service to you.
Respectfully submitted,
Coburn Engineering
R.W. Coburn
Registered Petroleum Engineer
Oklahoma *3349 WC/eaa9 East 4 th Street . Suite 1000 Tulsa. 0klahoma
74103-5107 . 913-587-7585 . facsimile 918-584-4426
EXHIBIT 99.7(b)
March 8, 1996
P. W. Coburn
Mr. Mike Ratliff
Tengasco
4928 Homberg, Suite 3B
Knoxville, Tennessee 37919
RE: Reserve Analysis of Charles
Franklin Lease - Fentriss
County, Tennessee
Dear Mr. Ratliff:
Pursuant to your request, I have prepared a reserve analysis on the
subject lease. At this time there are two (2) producing oil wells,
and a recent project in progress.
Based on the analysis the following net values should accrue to Tengasco:
As of December 31. 1995
NET OIL NET REVENUE
Category Net Oil Bbls Net Profit 10% Discount
Proved Prod. 137,313 $ 1,810,791 $ 1,226,529
Proved Non-Prod. 101,562 1,303,865 864,189
Proved Undeveloped 914.067 11.592.666 7.307.327
1,152,942 $14,707,322 $ 9,398,045
The reserves determined herein were determined by utilizing
standard Petroleum Engineering methods and were a combination of
decline curves, analogy, and volumetric analysis. The economics
were in accordance with Security Exchange Commission Guide
Lines.
The reserves reported herein are thought to be reasonably accurate.
However, Coburn Petroleum Engineering cannot be held liable for inaccuracies
resulting from incomplete or inaccurate data furnished by third parties.
The results of drilling the direct offsets could affect the total
future recoverable reserves from the entire 6000 acre lease.
It is a pleasure to serve you.
Respectfully submitted,
Coburn Petroleum Engineering
R.W. Coburn
Registered Petroleum Engineer
Oklahoma *3349
9 East 4th street . Suite 1000 . Tulsa. 0klahoma 74103-5107 918-587-7585
Facsimile 918-584-4426
EXHIBIT 99.7(c)
R.W.Coburn
March 30, 1996
Mr. Mike Ratliff
Tengasco
603 Main Avenue Suite 500
Knoxville, Tennessee 37902
RE: Appraisal of Swan
Creek Field,
Knox Formation
Drilling Program
Hancock Co, Tenn.
Dear Mr. Ratliff:
Pursuant to your request, I have evaluated the 6400 acre Knox structure in
Hancock County, Tennessee.
The results of this study indicate that 2 proved developed non producing
wells which have recently been purchased from Amoco and have been flow
tested by Amoco in 1982 and retested by Tengasco could produce 6 Bcf of gas.
Based on this data and further geologic information the proposed 24
well drilling program would consist of 22 proved undeveloped locations
and could recover approximately a gross 87 Bcf in 23.5 years. Tabulated
below are the net values that could accrue to Tengasco's interest from a
successful drilling program
As of December 31, 1995
Net Values
Category Net Gas Mcf Net Profit 10% Discount
Proved Dev-SI 5,250,016$ 20,859,239 $ 10,925,207
Proved Undev 70.746.140 273.490,940 145,136,332
75,996,156$ 294,350,179 $156,061,539
The reserves for the 2 wells acquired from Amoco were determined by
volumetric analyses based on well log data and gas well test data. The
reserves for the 22 proved undeveloped wells were estimated using
weighted averages from the two completed wells.
9 East 4th Street . Suite 1000 . Tulsa, 0klahoma 741035107 . 918-587~7585 .
Facsimile 9l8-584-4426
The East-West boundaries of the structure have been established by
the two Amoco wells and a third well to the west of the Reed Unit No. 1.
The North-South boundaries are as yet unknown.
The reader of this report should be aware there is an inherent
risk in this type of analyses and consequently should realize the
actual results could be higher or lower than the results of this report.
Respectfully Submitted,
Coburn Engineering
R.W. Coburn
Registered Petroleum Engineer
RWC/eaa
Preliminary Reserve Analysis
Drilling Program - Swan Creek Prospect
Hancock County, Tennessee
Purpose of Report:
The purpose of this report is to determine the reserve and economics of two
(2) wells, drilled, completed, and tested, but not producing due to lack of
a pipeline connection and using analogy to estimate the probable
results of a drilling program. The formation evaluated is the Knox
which produces in the general area.
Source of Data:
Tengasco provided electric logs on the three shut in gas wells, structure
maps of the area including seismic mapping, state well completion
reports on the drilled wells, two sets of gas well tests(Amoco 1982 and
February 1996 by a third party) and a brief geological description of the
area. The third well west of the Reed Unit #1 has not been completed, but
has the same producing zone that is present in the Reed well.
Geology:
The Swan Creek Prospect is located in the Eastern Overthrust Belt, six
miles southwest of Sneedville, Tennessee. Extensive strike and dip surface
geology was conducted on this prospect showing the structure to be
tracking in a southeastern direction. The surface geology was basically
confirmed by high altitude infrared photography. A surface radiometer
survey also confirmed the structure and probable existence of hydrocarbons
under the base area.
The above geology plus the data obtained from the two Amoco wells fairly
well establishes the width of the field and the presence of hydrocarbons in
this structure.
The Amoco state completion report indicates the top of the Knox at 44l5(-
3237) in the Reed Unit #1 and at 4404(-3250) in the Sutton Unit #1.
The geology available indicates a structure two miles wide and five miles
long containing 6400 acres.
Description of Properties - Hancock Co., Tennessee
Tengasco has 10,000 acres under lease and are negotiating for additional
acreage. Titles were not examined, but are available in Tengasco's
Knoxville office.
History - Current Conditions:
Amoco drilled the Reed Unit in 1982. The well was drilled to 10,569 feet.
The well was completed in 6 zones in the Knox. The perforated intervals
are 4414-24, 4526-4540, 4556-4570, 4576-4582, 4588-4600 and 4612-4624 ft; a
total of 68 feet. The well was treated with- 7500 gallons of Hydrochloric
acid. The initial production test of 72 hours showed a level rate of 1000
Mcf/day on a 14/64' choke, flowing tubing pressure was 800 psi. A recent
flow test indicted a rate of 4,508 Mcf per day. The wells have not been
fractured.
The Sutton Unit was drilled in late 1982 to a depth of 5015 feet.
Completion consists of perforating and acidizing from 4754-4766 and 4594-
4684 ft. No gas was recovered from the zones. However, the zone from
4404-4416 ft was perforated, acidized and fractured. A 72 hour test to
the atmosphere yield 450 Mcf on a 64/64" choke. It is my opinion that
there was and is a typographical error in the reported choke size. It is
believed that the actual choke size was 14/64 in which would yield 905 Mcf/D
flowing rate.
A recent flow test indicted a rate of 1,126 Mcf per day. Initial wellhead
shutin pressures were 1900 psig.
The wells were shutin due to lack of a pipe line connection.
Future Gas Reserves:
Two wells are classified as proved, developed nonproducing. The gas reserves
estimated for each well are 5.0 BCF for the Reed Unit and 1.0 BCF for the
Sutton Unit. Both at an 80% recovery factor.
Tengasco is proposing to develop the field by drilling 22 proved undeveloped
offsets. I have been advised by the geologist that the proved
undeveloped offsets will be drilled along a major fault and the quality
of the wells should be similar to the Amoco Reed #1. Based on data
available, the calculated reserves for 2 nonproducing wells and 22 proved
undeveloped offsets could be in the range of 87 gross Bcf. Data from the
Amoco wells was adjusted using weighted average of the net pay and well test
data to calculate reserves for the 22 undrilled wells wells.
Economics:
The cost of drilling, completion and the gathering system is estimated to be
$205,000 per well.
Gas price used was $3.02 per Mcf which includes Btu adjustment. Gas
prices and operating costs were escalated at 5 percent per year.
It will be necessary to lay a 23 mile pipeline to a gas purchaser. The
cost is estimated to be $3,000,000 which will be paid out at the rate of
$750,000 per month in June, July, August, and September, 1996.
Cash flow sheets have been prepared for each of the categories in
this report.
CERTIFICATE
I, R. W. Coburn, of the City of Tulsa, in the State of Oklahoma, United
States of America, hereby certify:
That I am a Consulting Engineer and a principal of Coburn Petroleum
Engineering, with offices at 9 East Fourth Street, Suite 900, Tulsa,
Oklahoma 74103.
I further certify that:
1. I am a graduate of the University of Tulsa (1943) and hold a B .S.
Degree in Petroleum Engineering.
2. I have been practicing my profession for the past 51 years.
3. I am registered with the Board of Professional Engineers of Oklahoma.
(Registration #3349.)
4. The information for this report was obtained from discussion with
geologists, from examination of production well tests, prior
geological studies, and some state well records were available for
examination.
5. I have no direct or indirect interest whatsoever in the wells
described herein, and do not expect to receive any interest in the
properties or the company involved. All fees are based on services
rendered and are not contingent on the contents of the report.
Dated at Tulsa, Oklahoma, this 8th day of March, 1996.
R. W. Coburn
Registered Petroleum Engineer #3349
PROFESSIONAL HIS TORY
R.W. COBURN
Education
1937 Graduated from Richmond Hill High School, New York
City, New York
1937-1939 Hofstra College, Hempstead, New York
Business Administration
1939-1943 Graduated from Tulsa University, Tulsa, Oklahoma
13.S. Petroleum Engineering
MILITARY
1943-1946 Socony-Vacuum Oil Co.-Summer work (pipe fitter apprentice
and control chemist) Brooklyn New York Refinery
1946-1952 The Atlantic Refinery
1946 Junior Engineer-Reservoir Engineering, Dallas, 'Texas
1947 District Engineer-Franklin, Louisiana
1943 District Production Foreman-Franklin, Louisiana
1949 Ass't. Dist. Superintendent-Denver City, Texas
1952 Drilling Engineer-Offshore.Corpus Christi, Texas
19S2-1958 Champlin Oil & Refining Company-Enid, Oklahoma. Chief
Engineer and Division Production Supt.
1958-1962 W. E. Stiles Consulting Engineers-Vice President and Manager of
Field Operations. Managed and directed the operation of oil and
gas properties in Southwest U.S. Served as Production Manager and
Technical Consultant to a French oil company in Parks.
1963-1992 Consulting Engineer. Engineered and supervised drilling and
completion operations in the U.S., Canada, France and Algeria.
Developed new well completion methods which changed existing
completion methods and are now standard practice throughout the
world.
1992-Present Buttonwood Petroleum
Operations Manager
During the period 1970-19731 was President of King Oil Co., a
public corporation. Built 0 to 700 bbls per day. Directors decided
not to continue to acquire properties or do any drilling.
Resigned.
Wrote and published numerous articles for technical journals and
Engineering Societies.
Preparation of Engineering Evaluations for property purchase, sale
and registration with the Securities Exchange Commission.
Registered Petroleum Engineer - Oklahoma - #3349
R. W. Coburn
June 3, 1996
Tengasco
603 Main Street, Suite 500
Knoxville, Tennessee 37921
Attention: Ms. Elizabeth Stewart
Re: Update - Reserves and Cash Flow
Burning Springs Field
Clay County, Kentucky
Gentlemen:
Pursuant to your request, I have reviewed gas sales and
performance of seven wells currently completed in the subject
field.
The majority of the wells were drilled in 19S5 and put on line
on or before late 1993. Tabulated below are total current
monthly gas sales and present cumulative production for five
wells which were producing the last six months of 1995.
Average Monthly Sales Cumulative 12i31,'95
Alvarez 8,054 mcf(5 months) 323,213 mcf
Keith 2 l~7 mcf(5 months) 34,574 mcf
Cornett 1 2,235 mcf(4 months) 212,872 mcf
Cornett 2 1,193 mcf(5 months) 502,457 mcf
Gilbert-Hate 486 rncf(5 months) 16,367 mcf
9 East 4th Street. Suite 900 . Tulsa. Oklahoma 74103-5107 918-584-2566
Facsimile 918-584-2598
Current net gas reserves are 256,193 mcf and net operating
revenues are $342,751 having a 10% discounted value of $3
12~O44.
This report was prepared in accordance with current SEC
requirements. Gas prices and operating costs were not
escalated.
Very truly yours,
Coburn Petroleum Engineering
R. W. Coburn
Registered Petroleum Engineer
Oklahoma #3349
RWC/ps
enc.
R. W. Coburn
April 17, 1995
Mr. Mike Ratliff
Tengasco
4928 Hornberg Suite 3B
Knoxville, Tennessee 37919
RE: Drilling and Completion
Prognosis and Procedures - Chattanooga Shale,
Clay County. Kentucky
Dear Mike:
During my visit to Manchester two weeks ago, Walter,
James, Jeff, Fred Young (owner of Young Wire Line
Services) and I had some long discussions concerning past
drilling and completion practices and we collectively
arrived at several conclusions leading to what we believe
to be "state of the art" practices.
These practices will not only benefit Tengasco but also
ENRON and UPET if the plan goes through to have Tengasco
handle all drilling and completions. No wells are to be
drilled until a planned radiometric survey has been done
and studied.
Taking it from the top, the following suggestions are presented:
1. Road and Location
A. The lease road should be wide enough to
handle large fracturing equipment. Any small
washes at the bottom of various hills should be
dug out, steel draining installed and a
reasonable level to gather speed for uphill
grades.
B. The location should be flat and large enough to
accommodate as many as ten (10) large frac and
cement trucks.
C. A place should be set up to set frac tanks - a maximum
of five (5)
2. Surface Casing
A. 7-5/8" casing to be set a depth required by Kentucky
regulations.
B. Cement to surface.
9th East 4th Street . Suite 1000 . Tulsa. 0klahoma 74103-51O7 . 918-587-
7585 . Facsimile 918-584-4A26
3. Drilling
A. Air drill/mist with 6-3/4" bit.
B. Connect up a geolograph when drilling out of surface.
C. Hire a mud logger when drilling out of surface.
D. Shut down and circulate as per mud logger's request.
E. Total depth at discretion of mud logger and company
representative
F. Clean up hole.
G. Run suite of logs to include:
1. Compensated density gamma ray
2. Induction electric log
3. Sonic log
4. Temperature log
5. Gyro TV downhole camera
4. Decision to Plug or Complete
A. Company geologist, mud logger and log analyst to make
final decision.
5. Completion Process
A. Run and cement either drifted and tested used 4-
1/2" -9" K-55 casing or new casing. Good casing
will be necessary to handle frac velocities up
to 80 barrels per minute with corresponding
pressure. Under no circumstances are we to
shoot the well with ammonium nitrate.
6. Logging and Perforating
A. Run bond log - correlation log.
B. Perforate intervals indicated by logs as being
most prolific - 2 jet shots/ft with casing gun.
If a long section is to be perforated, I would
prefer to make several runs instead of one long
shot.
7. Stimulation
As mentioned earlier in the report, fracture volumes, sand
concentration and injection rates at high levels appear to
have a significant effect on rate and ultimate recovery.
would suggest contacting major fracturing companies and
getting recommendations and cost estimates. It wouldn't
hurt to try to get results from actual fracture
treatments. If it is determined that a high volume, high
injection rate frac is the way to go, I would suggest
engaging a professional engineer whose prime
responsibilities are design and supervision of the actual
job. Today's new technology make it impossible for a
field engineer to attempt to carry out the work without
help. Even with as many frac jobs which I have designed
and supervised, I have engaged Brian Davidson to:
1. Select the design best suited to the job. (Send proposals
to Brian.)
2. Actually run the job.
The cost will be approximately $5000 to $8000.
8. Clean Up
A. Flow and/or swab back frac load.
B. When relatively clean, run an AOF test by third party.
9. Flow Rate
Initially, I would restrict flow rate to 25% of the A0F.
10. Reporting
Immediately institute procedures to have daily drilling
reports phoned into Manchester and Knoxville. Both
offices maintain a daily written report of operations.
Further, institute a procedure to permit reporting and
maintaining production reports on every well. New wells
daily until leveled out, old wells weekly or monthly.
I realize that the above is a radical departure
from past practices, however, we would be remiss if we did
not utilize the new technology which has recently
surfaced. As the program progresses, I am sure we can
modify and perhaps eliminate some items.
This letter report is an expanded version of ideas which
were discussed with Walter, James, and Jeff with an assist
from Fred Young.
Very truly yours,
Coburn Petroleum Engineering
R.W. Coburn
Registered Petroleum Engineer
Oklahoma #3349
CC: George Walters
