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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
Registration Statement Under The Securities Act of 1933
TENGASCO, INC.
(Name of small business issuer in its charter)
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<S> <C> <C>
Tennessee 1381 87-0267438
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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603 Main Avenue, Suite 500, Knoxville, Tennessee 37902 (423) 523-1124
(Address and Telephone number of Principal Executive Offices)
603 Main Avenue, Knoxville, Tennessee 37902
(Address of Principal Place of Business or Intended Place of Business)
Wesley Baker, 603 Main Avenue, Suite 500,
Knoxville, Tennessee 37902 (423) 523-1124
(Name Address and Telephone number of Agent for Service of Process)
Approximate Date of Proposed Sale to Public: As soon as practicable after
this Registration Statement becomes effective.
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant
to Rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
Title of each class Dollar Amount to Proposed Proposed Amount of
of securities to be be registered maximum offering maximum Registration Fee
registered price per unit aggregate offering
price
<S> <C> <C> <C> <C>
Shares of common $3,317,096 $8.63(1) $3,317,096 $1,005.18
stock, $0.001 par
value
</TABLE>
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
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1 This is the average of the closing bid and ask price of the
Company's Common Stock as listed on the OTC Bulletin Board on
July 28, 1997.
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TENGASCO, INC.
384,368 Shares of Common Stock, $0.001 par value
This Prospectus relates to the resale of 384,368 shares of common
stock, $0.001 par value (the "Shares") owned by certain shareholders
(hereinafter collectively referred to as the "Selling Shareholders") of
Tengasco, Inc., a Tennessee corporation (the "Company"). The Company will not
receive any of the proceeds on the resale of the Shares by the Selling
Shareholders. The resale of the Shares of the Selling Shareholders is subject to
the requirements of the Securities Act of 1933, as amended (the "Act"). Sales of
the Shares or the potential of such sales at any time may have an adverse effect
on the market price of the Shares offered hereby. See "Risk Factors".
The Shares offered by this Prospectus may be resold from time to time
by the Selling Shareholders, or by their transferess. No underwriting
arrangements have been entered into by the Selling Shareholders or the Company.
The distribution of the Shares by the Selling Shareholders may be effected in
one or more transactions that may take place on the over-the-counter market
including ordinary broker's transactions, privately negotiated transactions or
through sales to one or more dealers for resale of such Shares as principals at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Shareholders against certain liabilities, including liabilities under the Act.
The Selling Shareholders and intermediaries through whom the Shares may
be sold may be deemed "underwriters" within the meaning of the Act with respect
to the Shares offered and any profits realized or commissions received may be
deemed underwriting compensation. The Company has agreed to indemnify the
Selling Shareholders against certain liabilities, including liabilities under
the Act.
All costs incurred in the registration of the Shares of the Selling
Shareholders are being borne by the Company.
AN INVESTMENT IN THE SHARES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK AND SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN AFFORD THE
LOSS OF THEIR ENTIRE INVESTMENT. SEE "DILUTION" AND "RISK FACTORS"
WHICH BEGIN ON PAGE 6.
THESE SHARES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is July 30, 1997
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AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2 (together with all
amendments and exhibits thereto the "Registration Statement") under the
Securities Act of 1933, as amended with respect to the Common Stock offered
hereby. This Prospectus does not include all of the information set forth in the
Registration Statement pursuant to the Rules and Regulations of the Commission.
Statements contained in this Prospectus as to the contents of any contract or
other document referred to are not necessarily complete and, in each instance,
if such contract or document is filed as an exhibit, reference is made to the
copy of such contract or other document filed as an exhibit to the Registration
Statement. The Registration Statement, including schedules and exhibits thereto
may be obtained from the principal offices of the Commission at 450 Fifth
Street, N.W., Washington D.C. 20549 upon payment of the fee prescribed or may be
examined there without charge.
As of the date hereof, the Company is not a reporting company, as that
term is defined under the Securities Acts, and therefore, does not file reports
and other information with the Commission. However, the Company intends to
furnish an annual report, which will include audited financial statements, to
its stockholders. In addition, the Company will provide, without charge, to its
stockholders, upon written or oral request by such stockholder, a copy of any
information referred to herein that is incorporated by reference except exhibits
to such information that is incorporated by reference unless the exhibits are
themselves specifically incorporated by reference. All such requests should be
directed to Wesley Baker, at Tengasco, Inc., 603 Main Avenue, Knoxville,
Tennessee 37902, telephone number (423) 523-1124.
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL DATA APPEARING ELSEWHERE IN THIS PROSPECTUS. AN
INVESTMENT IN THE SHARES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE FACTORS IDENTIFIED UNDER THE
HEADING "RISK FACTORS".
THE COMPANY
The Company is in the business of exploring for and developing
oil and natural gas properties. Although the Company has been in existence for
81 years, its activities in the oil and gas business commenced only in 1995 with
the acquisition of numerous oil and gas properties. These properties include the
following:
(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");
(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");
(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");
(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").
(v) a 100% working interest in 210 oil and gas leases on a total
of 30,367 acres more or less, located in Hancock and Claiborn Counties,
Tennessee (collectively, the "Swan Creek Leases").
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 gas
transmission system of Wiser Oil Co. However, the wells are not presently in
production.
The Burning Springs Leases contain a total of 11 gas wells,
all of which are shut-in. Several of the wells were in production in 1996 and
were hooked up to a nearby Southern Gas Company transport line. At present, the
wells are not producing since the compressors and related equipment have been
moved to the
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Swan Creek leases where, it is anticipated, the wells will be more profitable.
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.
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.
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 gas produced 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. At the
present time, there is no completed pipeline from these leases to the East
Tennessee Natural Gas pipeline. The Company is in the process of constructing
such a pipeline which is approximately 70% completed and is expected to be
completed during the last quarter of 1997. The pipeline will be approximately 23
miles long and is made of 8 inch steel pipe. The cost to date has been
approximately $1,500,000. Completion is expected to cost approximately an
additional $700,000. The Company has acquired all necessary regulatory approvals
and 99% of necessary property rights to complete this pipeline. It anticipates
having the remaining property rights within two months. The Company's pipeline
will not only service the Company's wells, 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.
The estimated present net reserve values based upon a
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report from Coburn Petroleum Engineering, an independent expert, indicate a
present value of $33,874,577 for the Swan Creek Field, $5,929,992 for the Beech
Creek Leases, $996,280 for the Fentress County Leases and $547,248 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.
THE OFFERING
Shares of Common Stock Offered ........... 384,368(1)
Shares of Common Stock outstanding
as of June 30, 1997 ...................... 6,124,216
Use of Proceeds .......................... None of the proceeds
will be received by
the Company
SUMMARY FINANCIAL DATA
The following table sets forth certain consolidated financial
data of the Company for six months ended June 30, 1997 and the two years
ended December 31, 1996.
Data relating to the years ended December 31, 1996 and 1995 is
derived from Consolidated Financial Statements appearing elsewhere in this
Prospectus. 1996 data has been audited by BDO Seidman, LLP. 1995 data has been
audited by Charles M. Stivers, CPA. The selected consolidated financial data
should be read in conjunction with, and is qualified in its entirety by
reference to, the consolidated financial statements, the notes thereto and the
reports thereon included elsewhere in this Prospectus.
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(1) This includes 100,000 shares issuable to one of the Selling
Shareholders upon the exercise of an option granted to that Selling
Shareholder on January 30, 1996 by the Company. The exercise price of
that option is $6.375 per share.
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<TABLE>
<CAPTION>
(unaudited)
Six months ended Year ended Year ended
Income Statement Data 6/30/97 12/31/96 12/31/95
<S> <C> <C> <C>
Revenue $0 $26,253 $28,526
Costs and other
deductions $1,357,785 $1,787,317 $1,275,000
Net loss ($1,357,785) ($1,761,064) ($1,246,481)
Balance Sheet Data:
Working Capital ($1,860,853) ($1,065,711) $161,933
Total Assets $3,000,256 $2,727,221 $1,180,969
Long-Term Liabilities $85,137 $47,828 $59,000
Stockholders' Equity $827,692 $1,455,007 $1,019,386
</TABLE>
RISK FACTORS
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND SHOULD
NOT BE PURCHASED BY PERSONS WHO CANNOT AFFORD THE LOSS OF THEIR TOTAL
INVESTMENT. PROSPECTIVE INVESTORS OF THE SHARES OFFERED HEREIN SHOULD GIVE
CAREFUL CONSIDERATION, IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS,
TO THE FOLLOWING RISK FACTORS.
1. Limited History. 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 and the fact that it did not acquire any
oil or gas leases until 1995. Prior to its acquisition of these leases, the
Company had never been involved in the oil and gas business. Its future success
depends upon its ability, to profitably operate its existing wells and to expand
its operations through the acquisition of additional
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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. If the Company is successful in acquiring additional
leases, it faces the risk that the geology reports on which it relies are
inaccurate, that the oil and/or gas reserves are less than anticipated, that it
will not have sufficient funds to drill on the property, that it will not be
able to market the oil and/or gas due to a lack of a market or the lack of
pipelines, and that fluctuations in the prices of oil and/or gas will make
development of those leases uneconomical. The Company is also 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 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, "Market Price of and
Dividends on the Company's Common Equity and Other Stockholder Matters."
2. 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 acquisition of the oil and gas leases described above, 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,"Market
Price of and Dividends on the Company's Common Equity and Other Stockholder
Matters."
3. 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
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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.
4. 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,
"Management's Discussion and Analysis or Plan of Operation" below. The Company
has not selected any particular properties in connection with its expansion
plans and may not be able to locate desirable property and/or it may not be able
to provide the funds necessary to acquire additional property.
5. 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 firms and other
entities to raise these funds through equity or debt financing, 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 "Management's Discussion and
Analysis or Plan of Operation".
6. 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 proven 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
proven reserves, or both. To increase reserves and production, the Company must
continue its development and drilling programs, identify and produce previously
overlooked or by-passed zones and 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 and 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.
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The Company may not be able to locate geologically satisfactory property,
particularly since it will be competing for such property with other oil and gas
companies, many of which have much greater financial resources than the Company.
Moreover, even if desirable properties are available to the Company, it may not
have sufficient funds with which to acquire additional leases. 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.
7. 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 estimates. If reserve
estimates are inaccurate, production rates may decline more rapidly than
anticipated, and future production and 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, write-downs 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, "Description of Property".
8. 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
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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 damage to persons or property.
9. Future Sales of Common Stock. Industrial Resources Corporation
("IRC") currently beneficially owns approximately 2,771,671 shares of the common
stock of the Company or approximately 45.3% of its outstanding voting
securities. This amount is based upon 6,124,216 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 June 30, 1997, all
of the shares 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
Stock and Other Stockholder Matters." For information regarding common stock
ownership of IRC and the Ratliff family, see, "Security Ownership of Certain
Beneficial Owners and Management." 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" below (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. Pursuant to Rule 144 of the Commission the shares owned
by Messrs. Jenson and Burningham, who are non-affiliates, may now be sold
without restriction. The shares owned by M. E. Ratliff, who is an affiliate, may
not be sold until the Company is 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").
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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, "Recent Sales
of Unregistered Securities."
The availability of Rule 144 for resales of "restricted securities" by
affiliates 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 l5c2-1 1 (a)(5) of the Securities and Exchange Commission. If the
Company was not a "reporting company" at the time any holder of "restricted
securities" had held such securities for one year (two years in the case of an
affiliate), 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." Simultaneously with the
filing of this Prospectus and the Company's SB-2 Registration Statement for the
Shares offered hereby, the Company is filing a Registration Statement on Form
10SB to become a reporting company. Assuming that 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)(l) of Rule 144. Shares held by non-affiliates would then be
able to be sold without restriction after a holding period of two years and
could be sold in limited quantities after a holding period of one year.
10. Control by Current Security Holders. The Shares offered hereby
represent a minority of the Company's outstanding voting equity. By virtue of
IRC's present ownership of approximately 45.3% of the Company's outstanding
voting securities, the management of IRC has the ability to effect significantly
the election of the Company's directors, who in turn elect all executive
officers. The management of IRC may be deemed to have substantial control over
the management and affairs of the Company. See, "Security Ownership of Certain
Beneficial Owners and Management." Upon conclusion of this offering IRC's
control will not be diminished.
11. 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,
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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, "Competition."
12. Dependence on Technical Personnel. Certain members of present
management have substantial expertise in the areas of endeavor presently
conducted and to be engaged in by the Company. 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, "Directors, Executive Officers,
Promoters and Control Persons."
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.
13. 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. For a
discussion of the risks involved as a result of such regulations, see, "Effect
of Existing or Probable Governmental Regulations on Business" and "Costs and
Effects of Compliance with Environmental Laws."
14. Market for the Shares. The Company's Common Stock is presently
traded on the OTC Bulletin Board. There can be no assurance that there will be a
market for the Shares or that the price of such stock will be maintained
hereafter. Due to numerous factors the price of the Company's Common Stock may
fluctuate significantly. If the price of the Company's Common Stock trades for
less than $5.00 per share on the OTC Bulletin Board or the National Quotation
Bureau's "pink sheets", the stock will become subject to the Commission's penny
stock disclosure requirements. This may have a substantial adverse affect on the
liquidity of the Company's common stock and, in addition, these regulations
could limit the ability of brokers/dealers to sell the Company's securities and
thus the ability of purchasers of the Company's securities, including the Shares
offered hereby to sell such securities in the secondary market.
15. Dividends Unlikely. The holders of Common Stock of the Company are
entitled to receive dividends when, as and if declared by the Company's Board of
Directors. The Board does not intend to declare any dividends in the foreseeable
future and earning, if any, will be used to finance the requirements of the
Company.
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16. Going Concern. The Company's auditors have indicated doubts about
the Company's ability to continue as a going concern in view of the recurring
losses from operations and the Company's working capital deficiency.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of
Shares by the Selling Shareholders. All of the proceeds from such sales will be
retained by the Selling Shareholders.
DETERMINATION OF PRICE OF SHARES
The price received by the Selling Shareholders will be determined by
prevailing market prices at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
DILUTION
The Company is not selling any of the Shares offered. As a result, no
dilution will result from the sale of the Shares in this Offering.
SELLING SHAREHOLDERS
The following table sets forth certain information with respect to
persons for whom the Company is registering the Shares for resale to the public.
The Company will not receive any of the proceeds from the sale of the Shares by
the Selling Shareholders. Beneficial ownership of the Shares by such Selling
Shareholders after this Offering will depend on the number of Shares sold by
each Selling Shareholder. This table assumes that all of the Shares offered
hereby will be sold.
13
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially Owned Shares Beneficially Owned
Name and Address of Prior To Offering (2) Number of After the Offering
Beneficial Owner Number Percent Shares Offered Number Percent
-------------------------- -------------- -------------------------
<S> <C> <C> <C> <C> <C>
Gregory K. Allsberry 1,418 *(3) 1,418 0 0
7711 Carondelet
St. Louis, MO. 63105
James P. Enright, Jr. 5,939 * 5,939 0 0
728 Zeiss Street
St. Louis, MO. 63125
William Evans 12,121 * 12,121 0 0
5 Wellington Ln.
Southwest Harbor,
ME. 04679
Constance Gianella 2,228 * 2,228 0 0
IRA Rollover
1028 Summer Tree Dr.
Manchester, MO. 63011
Richard Gianella 1,151 * 1,151 0 0
IRA Rollover
1028 Summer Tree Dr.
Manchester, MO. 63011
Richard Gianella 1,731 * 1,731 0 0
Rev Trust
U/A/D 1-13-94
Richard Gianella TTEE
1028 Summer Tree Dr.
Manchester, MO. 63011
Arthur J. Giorgio IRA 254 * 254 0 0
1251 Cliffridge Ln.
Valley, Park, MO. 63088
</TABLE>
- --------
(2) Applicable percentage of ownership is based upon 6,124,216 shares of
Common Stock of the Company outstanding as of June 30, 1997.
(3) * Indicates that the percentage of shares beneficially owned does not
exceed one percent of the Company's outstanding Common Stock.
14
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Sarah J. Goy 6,470 * 6,470 0 0
IRA Rollover
1028 Summer Tree Dr.
Manchester, M0. 63011
Neal Harding 129,424 2% 129,424 0 0
5544 Fairfax St.
Orlando, Fl. 32812
Christopher Harding 5,000 * 5,000 0 0
2509 Planside Dr.
Louisville, Ky. 40299
Shannon Shay Herlihy 5,000 * 5,000 0 0
2509 Plantside Dr.
Louisville, Ky. 40299
Donald Janda 2,131 * 2,131 0 0
105 14th Ave.
Charles City, IA. 50616
Robert Janda 22,730 * 22,730 0 0
Bank of St. Edward
P.O. Box 188.
St. Edward, NE
Kenny Securities Corp. 100,000(4) 1.5% 100,000 0 0
7711 Carondelet Ave.
St. Louis, Mo. 63105
Peter Kollinger, 15,909 * 15,909 0 0
MD Rev Trust
U/A/D 7-25-90
Peter Kollinger, MD TTEE
900 W. Temple Ave. - Suite 205
Effingham, IL. 62401
</TABLE>
- --------
(4) Represents 100,000 shares of Common Stock issuable upon exercise of
option granted to this Selling Shareholder by the Company on January 6,
1996. The exercise price of the option is $6 3/8 per share.
15
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Kossmeyer & Associates 15,489 * 15,489 0 0
Profit Sharing Plan
U/A/D 12-12-85
FBO Carl F. Kossmeyer
38 Muirfield
St. Louis, MO. 63141
Brandon S. Kossmeyer 2,504 * 2,504 0 0
401(k) Profit Sharing Plan
U/A/D 9-26-85
FBO Carl F. Kossmeyer
12161 Lackland Rd.
St. Louis, MO. 63146
Carl F. Kossmeyer 1,542 * 1,542 0 0
Rev Trust
U/A/D 1-13-94
Carl F. Kossmeyer TTEE
38 Muirfield
St. Louis, MO. 63141
Chase B. Kossmeyer IRA 254 * 254 0 0
38 Muirfield
St. Louis, MO. 63141
Clayton C. Kossmeyer IRA 254 * 254 0 0
38 Muirfield
St. Louis, MO. 63141
Maria P. Kossmeyer 4,369 * 4,369 0 0
Rev Trust
U/A/D 1-13-94
Maria P. Kossmeyer TTEE
38 Muirfield
St. Louis, MO. 63141
Maria P. Kossmeyer 272 * 272 0 0
Custodian for
Chase B. Kossmeyer
38 Muirfield
St. Louis, MO. 63141
</TABLE>
16
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Maria P. Kossmeyer 199 * 199 0 0
Custodian for
Clayton C. Kossmeyer
38 Muirfield
St. Louis, MO. 63141
Maria P. Kossmeyer 713 * 713 0 0
Custodian for
Meryl A. Kossmeyer
38 Muirfield
St. Louis, MO. 63141
Meryl A. Kossmeyer IRA 254 * 254 0 0
38 Muirfield
St. Louis, MO. 63141
Mark Kruger 12,121 * 12,121 0 0
27 Arundel Pl.
St. Louis, M0. 63015
Samuel Mickelson and 6,470 * 6,470 0 0
Seena Mickelson JT WROS
8089 Whispering Palm Dr.
Boca Raton, FL. 33496
Robert Nicholson 5,515 * 5,515 0 0
5734 Paddington Way
Boca Raton, FL 33486
William Stern 6,470 * 6,470 0 0
c/o Mark Twain Bank
1631 S. Lindbergh Blvd.
St. Louis, MO. 63131
Tornado Fund 7,127 * 7,127 0 0
Attn: Dean Carlton
2010 Winter Haven
St. Louis, MO. 63052
Paul J. Wirtz 1,418 * 1,418 0 0
11078 Oregon Curve
Bloomington, MN. 55438
</TABLE>
17
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Gudrun A. Zoeller 7,491 * 7,491 0 0
7572 Sierra Dr. East
Boca Raton, FL. 33433
</TABLE>
PLAN OF DISTRIBUTION
Upon the effectiveness of the Registration Statement, the Selling
Shareholders may use this Prospectus, as updated from time to time, to offer the
Shares for sale by the Selling Shareholders directly, or through broker-dealers
or agents as may be designated from time to time by the Selling Shareholders, or
through a combination of such methods. Sales may be effected on the OTC Bulletin
Board or otherwise, at market prices prevailing at the time of sale, at prices
related to prevailing market prices, or at negotiated prices. Broker-dealers and
agents will receive compensation in the form of concessions or commissions from
the Selling Shareholders and/or purchasers of the Shares for whom they may act
as agent. Such compensation will be negotiated and paid for by either the
Selling Shareholders and/or purchasers. The Company has not arranged for the
sale of any of the Shares and is not responsible for any concessions or
commissions to be paid in connection with such sales. Each Selling Shareholder
and any brokers or agents that participate in the distribution of the Shares may
be deemed underwriters under the Securities Acts.
The Shares may be sold on the OTC Bulletin Board or in privately
negotiated transactions. Sales of the Shares on the OTC Bulletin Board may be
made by one or more of the following means: (a) block trades in which a
broker-dealer will attempt to sell shares as agent but may position and resell a
portion of the block as principal to facilitate the transactions; (b) purchases
by a broker-dealer as principal and resale by such broker-dealer for its account
pursuant to this Prospectus; (c) ordinary brokerage transactions and transaction
in which the broker-dealer solicits purchasers; and (d) any other means
permitted by applicable regulations and laws. In addition, any Shares which
qualify for sale pursuant to Rule 144 under the Act may be sold under Rule 144
rather than pursuant to this Prospectus.
Upon the Company being notified by a Selling Shareholder that any
material arrangement has been entered into with a broker-dealer for the sale of
Shares under any circumstances which require the filing of a supplemental
prospectus, a supplemental prospectus will be filed under Rule 424(c) under the
Act setting forth the names of the participating broker-dealers, the number
Shares involved, the price at which such Shares were sold by the Selling
Shareholder, and the commission paid or discounts or concessions
18
<PAGE>
allowed by the Selling Shareholder to such broker-dealers.
LEGAL PROCEEDINGS
Except as described hereafter, 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.
The Company is a defendant in an action in New York by a lender seeking
the recovery of $250,000 based upon a promissory note. The Company has moved to
dismiss that action. The Company has filed an action in Tennessee against that
lender and two other lenders to invalidate warrants which were issued in
connection with those loans. The warrants authorize the lenders to purchase
common Stock of the Company at prices which vary as the market price of the
Company's stock varies. Should the market value of the Company's stock drop low
enough, the holders of the warrants could theoretically acquire a controlling
interest in the Company. It is the position of management that these warrants
were never validly issued and are null and void.
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.
19
<PAGE>
<TABLE>
<CAPTION>
Date of Date of
Positions Election or Termination
Name Held Designation or Resignation
- ---- --------- ----------- --------------
<S> <C> <C> <C>
Jeffrey D. Jenson President 6/94 5/95
1787 E.Ft. Union Blvd.
Salt Lake City, UT 84121
Kathleen L. Morrison Secretary/ 10/94 5/95
1787 East Ft. Union Blvd. Treasurer
Salt Lake City, UT 84121
Travis D. Jenson Vice-President 10/94 5/95
1787 E. Ft. Union Blvd.
Salt Lake City, UT 84121
Walter C. Arzonetti Director 5/95 2/7/97
11 Avenue de la Mer
Palm Coast, FL 32137
Charles N. Manhoff Director 5/95 2/7/97
11 19 Rocky Point Ct.
Albuquerque, NM 87123,
Edgar G. Baugh Director 5/95 1/30/96
76 Arrowhead Way
Darien, CT 06820
Raymond E. Johnson Director 5/95 12/9/95
(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
John P. O'Hagan Director 5/95 1/31/96
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 President, 5/95 1/18/96
96 Canberra Drive Secretary,
Knoxville, TN 37923 Treasurer
William A. Moffett Director 5/95 Present
1073 Encantado Drive
</TABLE>
20
<PAGE>
<TABLE>
<S> <C> <C> <C>
Santa Fe, NM 87501
Benton L. Becker Chairman of 6/95 1/30/97
1550 Madruga Ave. #329 the Board of
Coral Gables, FL 33146 Directors
Kelly S. Grabill Secretary 9/95 5/2/96
9109 Lullabye Lane Treasurer 9/95 1/30/96
Oak Ridge, TN 37830
Jeffrey D. DeMunnik Treasurer 1/96 1/17/97
1100 Fox Road Secretary/ 6/96 12/4/96
Knoxville, TN 37922
Ted P. Scallan President 1/96 11/26/96
1613 Kilmer Drive
Knoxville, TN 37922
Lyle G. Stockstill Director 1/96 11/25/96
560 Bellemeade Blvd.
Gretna, LA 70056
James B. Kreamer Director 3/13/97 Present
3621 Cabin Creek Road
London, KY 40741
Shigemi Morita Director 3/13/97 Present
80 Park Avenue
New York, N.Y. 10016
Allen Sweeney Chairman of 3/13/97 Present
1400 Oak Tree Drive Board
Edmund, OK73003
Joseph E. Armstrong Director 3/13/97 Present
2624 Selma Avenue
Knoxville, TN 37914
</TABLE>
Business Experience
Joseph Earl Armstrong is 40 years old and a resident of Knoxville,
Tennessee. He is a graduate of the University of Tennessee and Morristown
College where he received a Bachelor of Science Degree in Business
Administration. From 1988 to the present, he has been an elected State
Representative for Legislative District 15 in Tennessee. From 1994 to the
present he has been in charge of government relations for the Atlanta Life
Insurance Co. From 1981 to 1994 he was a District Manager for the Atlanta Life
Insurance Co.
James B. Kreamer is 58 years old. He earned a Degree in
21
<PAGE>
Business from the University of Kansas in 1963. He has been the owner of several
business enterprises. In 1982, he purchased a seat on the Kansas City Board of
Trade where he served on several committees working on the development of
futures trading. Since 1979, he has been engaged in the oil and gas business as
an investor. He currently serves as a member of the Board of Directors of
Panaco, Inc., a NASDAQ energy company.
William A. Moffett is 63 years old. He received a BS Degree in
Geological Engineering from Oklahoma University in 1956. From 1977 to 1982, he
was Operations Manager for Esso Exploration and Production in the United
Kingdom. From 1982 to 1984, he was General Production Manager for Intercol ( an
affiliate of Exxon in Colombia). From 1984 to 1991 he was CEO for Stan Vac
Indonesia, a joint Exxon/Mobil affiliate. From 1991 until his employment by the
Company, Mr. Moffett was retired.
Shigemi Morita is 62 years old. He received an A.B. Degree from Elon
College in North Carolina. From 1969 to 1996 he was the President and CEO of
Morita & Co., an insurance agency specializing in insurance for Japanes
companies doing business in the United States. In 1996, Morita & Co., Inc. was
acquired by Tokio Marine Management, Inc., Mitsubishi International Corporation
in New York and Mitsubishi International, Ltd. in Tokyo. He remains as President
and as a consultant.
Allen H. Sweeney is 47 years old. He received an MBA in finance from
Oklahoma City University in 1972 and a Bachelor Degree in Accounting from
Oklahoma State University in 1969. From 1978 to 1980, he served as Treasurer and
CEO of Phoenix Resources Company. From 1980 to 1981, he served as
Vice-President-Finance for Plains Resources, Inc. From 1982 to 1984, he was
Vice-President-Finance for Wildcat Mud, Inc. From 1984 to 1992 he operated an
independent consulting service under the name of AHS and Associates, Inc. Since
1992, he has served as Director and President of Columbia Production Company and
Mid-America Waste Management, Inc. Mr. Sweeney is a Director of Frontier Natural
Gas Corporation of Houston, Texas, a public corporation.
Committees
At the present time, the Company has no operating committees.
Family Relationships
There are no family relationships between any of the present
directors or executive officers of the Company.
22
<PAGE>
Involvement in Certain Legal Proceeding
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.
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 June 30, 1997 with these computations
being based upon 6,124,216 shares of common stock being outstanding and assumes
the exercise of 281,376 shares vested under options granted by the Company as of
June 30, 1997. (See the heading "Other Compensation" and the "Restricted Stock
Options Table," under the caption "Executive Compensation," below).
23
<PAGE>
Five Percent Stockholders
Number of Shares Percent
Name and Address Title Beneficially Owned of Class
- ---------------- ----- ------------------ --------
Industrial Resources Stockholder 2,777,671 45.3%
Corporation (5)
Ste. 500-600 Main Ave.
Knoxville, TN 37902
M. E. Ratliff Stockholder 252,485 4.1%
12608 Avallon Place
Knoxville, Tennessee 37922
Directors and Executive Officers
Shares Beneficially Percent of
Name and Address Title Owned Class
- ---------------- ----- ------------------ ----------
Joseph Earl Armstrong Director 0 0
2624 Selma Avenue
Knoxville, TN 37914
Robert M. Carter Exec. Vice 23,000 0 .4%
317 Heathermoor Drive President
Knoxville, TN 37922
Daniel G. Follmer President 0 0
8219 Mecklenburg Ct. & CFO
Knoxville, TN 37923
James B. Kreamer Director 0 0
3621 Cabin Creek Rd.
London, KY 40741
- --------
James Ratliff is the sole owner of the outstanding securities of IRC,
and, accordingly, he 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".
24
<PAGE>
William A. Moffett Director 37,397 0.6%
1073 Encantado Drive
Santa Fe, NM 87501
Shigemi Morita Director 114,300 1.9%
80 Park Avenue
New York, N.Y. 10016
Michael E. Ratliff(6) CEO 252,485 4.12%
12008 Avallon Place
Knoxville, TN
Sheila F. Sloan Treasurer 2,000 0
121 Oostanali Way
Loudon, TN 37774
Allen H. Sweeney Chairman of 100,500 1.6%
1400 Oak Tree Drive the Board
Edmund, OK 73003
Elizabeth Wendelken Secretary 0 0
8023 Stanley Road
Powell, TN 37849
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.
DESCRIPTION OF SECURITIES
Authorized Capital Stock
The authorized capital stock of the Company consists of 50,000,000
shares of common stock, $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
- --------
(6) The principal shareholder of IRC is the father of Michael E. Ratliff.
103,500 shares of stock are owned by Tracmark, Inc., a corporation, the
principal shareholders of which are Michael E. Ratliff and his father.
25
<PAGE>
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
"Market Price of and Dividends On the Company's Common Equity and Other
Stockholder Matters" - "Dividends" 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 existing
shareholders and may dilute the book value of their shares.
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.
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES and AGENTS
Section 48-18-502 of the Tennessee Business Corporation Act (the
"TBCA") 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.
Unless limited by its charter, Section 48-18-503 of the TBCA
requires a corporation to indemnify a director who was wholly successful, on the
merits or otherwise, in the defense of any
26
<PAGE>
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. The
Company's charter does not provide any limitations on this right of
indemnification.
Pursuant to Section 48-18-504 of the TBCA, 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 of the TBCA permits a court, upon application of a
director, to order indemnification if it determines that the director is
entitled to mandatory indemnification under Section 48-18-503 or that be 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 of the TBCA 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.
Section 48-18-507 of the TBCA extends certain indemnification rights
to officers, employees and agents of a corporation as well.
Regardless of whether a director, officer, employee or agent has the
right to indemnity under Section 48-18-502 or Section 48-18-503 of the TBCA,
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 of the TBCA 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
of 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.
Insofar as indemnification for liabilities arising under the Act may
be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against
27
<PAGE>
such liabilities (other than payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defenses of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being offered
hereunder, the Company will, unless in the opinion of its counsel that matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the questions whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
DESCRIPTION OF BUSINESS
Glossary of Terms
Confirmed Structure: A structure that is defined due to actual
geological testing and information.
Farmout Agreement: A form of agreement between oil and gas operators
whereby the owner of a lease who is not interested in drilling at the time,
agrees to assign the lease or a portion of it to another operator who wishes to
drill the acreage. The assignor may or may not retain an interest (royalty or
production payment) in the production.
Hydrocarbons: Organic chemical compounds of hydrogen and carbon atoms.
There are a vast number of these compounds, and they form the basis of all
petroleum products. They may exist as gases, liquids or solids. An example of
each is methane, hexane and asphalt.
Verified Structure: A structure that is verified by actual geological
testing and/or penetration.
Wildcat: A term applied to a mining company organized, or to a
mine or well dug, in an attempt to develop unproven ground far from previous
production. Any risky venture in the mining or petroleum industry.
Shut-in Well: A well that is not in production because of a lack of a
market or a pipeline connection.
Shut-in Royalty: Payment to royalty owners under the terms of a mineral
lease that allows the operator or lessee to defer production from a shut-in
well.
28
<PAGE>
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.
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,
by unanimous vote of the shareholders, to provide that the Company shall have a
perpetual existence.
On November 10, 1972, the Company conveyed to an unaffiliated entity
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 for
any further call or assessment; and (v) provide that stockholders shall not have
preemptive 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.
From approximately 1983 to 1991, the operations of the Company were
limited to seeking out the acquisition of assets, property or businesses.
In contemplation of completing a "reverse" reorganization
29
<PAGE>
with Onasco Biotechnologies, Inc. ("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.
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 retrovirus
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.
The dissolution did not involve any bankruptcy or similar proceeding.
In accordance with the Utah Revised Business Corporation Law, 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 without a meeting, that could have been taken at a
meeting of the stockholders, 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);
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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 twenty 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.
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 prior to the change in control, 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. The remaining 33% of
the Company's stock was held by original public shareholders. Subsequent to the
change in control, Dr. Bohannon did not perform any services for the Company.
Prior to the change in control, no director of the Company received compensation
in excess of $100,000 per annum.
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 with
Industrial Resources Corporation, a Kentucky corporation ("IRC"). See,
"Executive Compensation" - "Other Compensation" below.
At a special meeting of stockholders held on April 28, 1995, the
Company's stockholders voted;
(i) to approve the execution of the Purchase Agreement pursuant to
which the Company would 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
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below) "unregistered" and "restricted" shares of the Company's
common stock:
(ii) 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;
(iii) to change the name of the Company to "Tengasco, Inc."; and
(iv) 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 Prospectus
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.
Thereafter, the Purchase Agreement was amended to provide for the sale
of certain additional assets for a price of $450,000 paid by the execution by
the Company of a promissory note in that amount.
The assets acquired by the Company pursuant to the Purchase Agreement,
as amended, consisted of machinery and equipment, vehicles, computer equipment,
furniture and fixtures, well equipment, land leases, intangible drilling costs
and stock of United Petroleum Corp., a public company. The book value of these
assets was $1,752,000 at the time of the acquisition. The 4,000,000 shares of
the Company's stock given as consideration for those assets had a market value,
at that time, of $1,000,000 based upon a bid price of $.25 as reported by the
National Quotation Bureau. The total cost of these assets to the Company,
including the $450,000 note, was $1,450,000.
On May 2, 1995, in connection with the execution of the Purchase
Agreement, Jeffrey D. Jenson, Kathleen L. Morrison and
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Travis T. Jenson resigned as directors and executive officers of the Company 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. None of the retiring directors had received
compensation in excess of $100,000 prior to May 2, 1995.
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.
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. The shares issued to Mr. Jenson
who is a non-affiliate, may be sold without restriction at any time after May 4,
1997. The shares issued to Mr. Ratliff, who may be deemed an affiliate, may not
be sold until such time as the Company becomes a reporting company in accordance
with the Rules of the Commission.
The Compensation Agreement of Mr. Burningham provided for the issuance
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. The
shares owned by Mr. Burningham, who is not an affiliate, became free trading on
May 4, 1997 pursuant to Rule 144 of the Rules of the Securities and Exchange
Commission.
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. This debt included the note for
$450,000 plus advances of $403,613 made by IRC in 1995, for use as working
capital; for payment of salaries; for the acquisition of leases (approximately
100 leases at a cost of $4 per acre); for expert evaluations; and
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for legal services. These shares represented approximately 3% of the outstanding
shares of the Company. 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, "Security Ownership of Certain Beneficial Owners and
Management", for information regarding the voting securities of the Company
owned by IRC.
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 5,239,300
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, "Executive
Compensation" "Restricted Stock Options Table" below.
Mr. Stocksill and Mr. Manhoff resigned on November February 7,1997. Mr.
Valliant resigned on January 27, 1997. Mr. Becker resigned on January 30, 1997.
Mr. Arzonetti resigned on February 7, 1997. Mr. Fetter and Mr. Wright resigned
on March 13, 1997. On March 13, 1997, Joseph Armstrong, James B. Kreamer,
Shigemi Morita and Allen Sweeney were elected by the Board of Directors to serve
as directors to replace resigned directors until the next annual meeting of
shareholders.
Theodore P. Scallan resigned as President and CEO on November 26, 1996
and was replaced by James E. Kaiser who served until January 24, 1997 and was
then replaced as President by Daniel G. Follmer and as CEO by Michael E.
Ratliff. Mr. Follmer has also served as Chief Financial Officer since March 13,
1997.
Jeffrey DeMunnik resigned as Secretary on December 4, 1996 and as
Treasurer on January 17, 1997. He was replaced as Secretary by Elizabeth
Wendelken and as Treasurer by Sheila F.
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Sloan.
Robert C. Carter was elected a Vice-President on December 4,
1996 and served until March 13, 1997 when he was elected Executive
Vice-President.
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%.
(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.
(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%.
(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.
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
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casing-head gasoline is being produced on the leased premises, (ii) the Company
has drilled a producing well and shut-in royalty 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
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 gas
transmission system of Wiser Oil Co., however, the wells are not presently in
production.
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, all of
which are shut-in. Several of the wells were in production in 1996 and were
hooked up to a nearby Southern Gas Company transport line. At present, the wells
are not producing since the compressors and related equipment have been moved to
the Swan Creek leases where, it is anticipated, the wells will be more
profitable. 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 30,367
acres more or less, located in Hancock, Claiborn 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 term of these leases is similar to the terms set forth above with
respect to the leases acquired from IRC.
There are five existing wells on the Swan Creek Leases.
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All of these wells have been completed and will be available for production as
soon as the pipeline is completed. The first two wells have recently tested at
4.8 million cubic feet and 1.2 million cubic feet, respectively, of gas per day.
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 term of these leases is similar to the terms described above with
respect to the leases acquired from IRC.
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.
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.
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. For a discussion of the risks involved as a
result of such regulations, see, "Effect of Existing or Probable Governmental
Regulations on Business" and "Costs and Effects of Compliance with Environmental
Laws" hereinafter in this section.
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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 gas produced 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. At the
present time, there is no completed pipeline from these leases to the East
Tennessee Natural Gas pipeline. The Company is in the process of constructing
such a pipeline which is approximately 70% completed and is expected to be
completed during the last quarter of 1997. The pipeline will be approximately 23
miles long and is made of 8 inch steel pipe. The cost to date has been
approximately $1,500,000. Completion is expected to cost approximately an
additional $700,000. The Company has acquired all necessary regulatory approvals
and 99% of necessary property rights to complete this pipeline. It anticipates
having the remaining property rights within two months. The Company's pipeline
will not only service the Company's wells, 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). The net reserve
values used hereafter were obtained from a report dated June 18, 1997 prepared
by Coburn Petroleum Engineering. In substance, the report, used estimates of oil
and gas reserves based upon standard petroleum engineering methods which include
decline curve analysis, volumetric calculations, pressure history, analogy,
various correlations and technical judgment. Information for this purpose was
obtained from owners of interests in the areas involved, state regulatory
agencies, commercial services, outside operators and files of Coburn Petroleum
Engineering.
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Discounting the net reserve values by 10% results in a present value of
$33,874,577 for the Swan Creek Field, $5,929,992 for the Beech Creek Leases,
$996,280 for the Fentress County Leases and $547,248 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, "Risk Factors" -
"Uncertainty of Reserve Estimates."
It is standard in the industry for reserve analyses such as these to be
used as a basis for financing of drilling costs. Thus, based upon the reserve
analyses for the Swan Creek leases, Enserch has agreed to provide funds for
drilling in that field.
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 East 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.
Should the Company decide to use transmission lines owned by other
businesses, it will have to negotiate the prices to be paid with the owner of
that transmission line, provided capacity is available. There can be no
assurance that prices can be negotiated which will enable the Company to sell
its products profitably.
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 through use of the pipeline presently
under construction by the Company, as described above.
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.
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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 atmosphere. 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. In the area of the Company's pipeline, the Company
is in a favorable position since it will own the only pipeline within a 20 mile
radius. Within that area, the Company owns leases on approximately 30,367 acres.
In addition, remaining landowners will find it difficult to deal with any other
oil and gas companies since such companies will not have access to a pipeline.
Geological studies indicate the existence of many possible productive fields in
the area of the Company's pipeline.
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 Company anticipates no difficulty in procuring well drilling
permits which are obtained from the Tennessee Oil and Gas Board. They are
usually issued within one week of application. The Company generally does not
apply for a permit until it is actually ready to commence drilling operations.
The Company presently has five well drilling permits for use anywhere in
Tennessee.
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
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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, "Competitive Business Conditions, Competitive Position
in the Industry and Methods of Competition" set forth above.
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 East Tennessee Natural Gas. The only customers with which the
Company has a written contract are Hawkins County Utilities and Powell Valley
Electric Cooperative. Those entities have agreed to purchase gas from the
Company's Hancock County fields upon completion of the pipeline. It is
anticipated that sales to Hawkins County Utilities will amount to approximately
4,000 MCF per day. Sales to Powell Valley Electric Cooperative are to be
determined at a future date.
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 section. The amounts of the
royalties on each of the Company's leases may be obtained from the Company.
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, "Effect of Existing or Probable Governmental Regulations on
Business " below in this
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section.
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, Each of the Kentucky wells has a $5,000 bond which was
originally posted by IRC and remains in place. 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, "Description of Property" -
"Disclosure of Oil and Gas Operations" 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 on-shore. At the present
time, the Company does not have plans to drill 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
42
<PAGE>
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 and 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, Number of Total Employees and Number of
Full-Time Employees" set forth below in this section.
Cost and Effects of Compliance With Environmental Laws
See, "Effect of Existing or Probable Governmental Regulations on
Business" set forth above in this section.
43
<PAGE>
Number of Total Employees and Number of Full-Time Employees
The Company presently has ten full-time employees and eight 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.
The Company has hired a full-time geologist at a salaryof $40,000 per
year. His duties for the Company include: surface and sub-surface geology, log
correlation, surface and sub-surface mapping, field--research (i.e.,
radiometric, gravity, magnetic and geochemical research) and well-site geology.
MANAGEMENT'S DISCUSSION and ANALYSIS or PLAN of OPERATION
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. Management's assertions with respect to the
capacity of these wells is based upon engineering reports and confirmation of
estimates based upon the results from the completed wells.
The Company's present plans call for the drilling of approximately
fifty additional wells on the Swan Creek leases over a two to three year period
at a cost of approximately $225,000 per well. Completion of the pipeline
presently being constructed by the Company and which is necessary in order for
the Company to be able to sell its gas is anticipated by the end of 1997 at a
cost of approximately $750,000.
Thereafter, the Company plans to construct two extensions to its
pipelines so as to enable it to exploit other leases which are part of the Swan
Creek leases. These extensions which will be approximately 40 miles in length
will cost approximately $4,000,000. The Company's ability to expand its
operations in this manner is dependent upon the success of the Company's
drilling program. Moreover, no assurance can be given that the Company will be
able to obtain the required rights of way to construct any such
44
<PAGE>
pipeline, and the pipeline currently under construction will only serve
production from a portion of the Swan Creek Field.
The Company does not have the funds needed to enable it to complete the
pipeline and to conduct its planned drilling activities. It is engaged in
discussions with certain entities and anticipates that it will be able to
acquire the necessary funds.
Exploitation of the other leases held by the Company is being placed on
hold at the present time.
The sales price for gas is determined on the basis of an index used by
all suppliers and users of gas. The price fluctuates between $2.50 per MCF and
$4.50 per MCF, usually higher during the cold weather months. The cost of
production from the well averages approximately $.22 per MCF. Transportation
costs are approximately $.40 per MCF which includes amortization of the
pipeline. In addition, the Company anticipates receiving revenue from third
parties who desire to use the pipeline.
To date, the Company has not drilled any dry wells.
There can be no assurance, of course, that all of the funding
necessary for the completion of the wells will become available. It is
anticipated that the Company will implement development programs on the Beech
Creek and Fentress County Leases sometime in the future The Swan Creek Leases
are being given first priority because of their higher economic attractiveness.
Management anticipates both short term and long term increases in oil
and gas prices which should have a positive effect on the Company's income and
profits.
The Company has no plans, at present, to increase the number of its
employees significantly.
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. The Company has entered into an
agreement with Enserch Energy Services, Inc. ("Enserch") pursuant to which the
Company and Enserch will market each other's product in Tennessee.
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, they will be
45
<PAGE>
profitable.
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, 1996, the Company had revenues of
$26,253 as compared with revenues of $28,526 for the year ended December 31,
1995. The revenues resulted from the sale of gas. The Company has shut in the
wells which produced that gas, transferring some of the equipment to the Swan
Creek lease in anticipation of the completion of the pipeline.
Depletion, depreciation and amortization expense increased from $89,528
for 1995 to $133,187 for 1996 as a result of the fact that the Company did not
acquire its assets from IRC until May, 1995 so that there were only seven months
of depreciation during 1995.
Unrealized holding losses on marketable equity securities ($593,792 in
1995) were a one-time event and were not incurred in 1996.
General and administrative expense also increased substantially during
the same periods as 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.
Interest expense increased from $32,594 to $145,302 in 1996 due to the
amortization of long-term debt discounts associated with certain stock warrants
granted in connection with such debt.
The increase in net loss from operations during the year ended December
31, 1996 as compared with the year ended December 31, 1995 was due primarily to
the increased general and administrative expense, offset somewhat by the
non-recurrence of losses on marketable equity securities.
46
<PAGE>
The Company had no revenues during the six month period ending June 30,
1997 since it shut in the wells which it had been operating in 1996 in order to
concentrate on the pipeline and the Swan Creek leases.
Liquidity
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.
Revenues from operations during the year ended December 31, 1996 and
the six months ended June 30, 1997 were insufficient to fund the Company's
operations. The Company has relied upon loans of $1,000,000 from third parties
in 1996 and a loan of $750,000 from a third party in 1997 to fund its
activities. In addition, during 1996, loans of approximately $941,000 were
advanced by IRC and $110,350 by Michael E. Ratliff. These loans plus accrued
interest were satisfied by the issuance of 101,146 shares of the Company's
common stock to IRC and 13,320 shares to Michael E. Ratliff.
In 1997, IRC advanced $323,005 to the Company, Michael E. Ratliff
advanced $12,000 and Tracmark, Inc., a subsidiary of IRC, advanced $133,420.
These loans, plus accrued interest, were satisfied by the issuance of 59,328
shares of the Company's common stock to IRC, 2,204 shares to Michael E. Ratliff
and 24,552 shares to Tracmark, Inc. The Company anticipates meeting its
operating needs for 1997 by means of its agreement with Enserch.
During the first quarter of 1996, the Company sold 166,667 shares of
stock it had acquired from IRC pursuant to the Purchase Agreement for $250,000;
received $91,119 from the exercise of options; and $280,690 from a private
placement of stock.
These revenues and loans accounted for substantially all of
the Company's liquidity during this year.
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
47
<PAGE>
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 30,363 acres in
Hancock County, Tennessee, and 1,003.19 acres in Lauderdale County, Alabama. The
initial terms of these leases varies from one to four years. Many of them can be
extended at the option of the Company by payment of annual rent. Some of them
will terminate unless the Company has commenced drilling. However, the Company
does not anticipate any difficulty in continuing those leases, particularly in
Hancock County, since the Company's pipeline will be the only means available to
landowners in that area to sell any gas produced from wells on their property.
See, "Description of Business" "General" above.
The Beech Creek Leases provide 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%.
The Wildcat Leases provide for a 12.5% landowner royalty, on the same
terms as the Beech Creek Leases, and a 3.125% overriding royalty.
The Burning Springs Leases are 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%.
The Fentress County Leases are 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.
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.
In addition, the Company has drilling equipment and vehicles which it
acquired from IRC. All of this equipment is in satisfactory operating condition.
The securities which the Company acquired from IRC were sold during 1996 for
$250,000.
48
<PAGE>
Disclosure of Oil and Gas Operations
On May 2, 1995, upon the execution of the 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 (then "Fentress
County Leases"). Subsequently, the Company also acquired additional
acreage in Tennessee (the "Swan Creek Leases") and in Alabama (the
"Alabama Leases"). See, "Description of Business" - "Business
Development" and "General" above.
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.
Eleven wells on the Burning Springs leases are currently shut-in. 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 in 1996. Development of the Swan
Creek Field will require the completion of the pipeline to deliver gas to a
transmission company with the tie-in point being located approximately 23 miles
away from the field. The pipeline is approximately two-thirds completed and is
expected to be complete by the end of the year.
Tests to date on the completed wells on the Swan Creek leases indicate
substantial potential for future deliverability. Based upon engineering reports,
management believes that the wells drilled to date have a life expectancy of
approximately 37 years on a declining basis.
The Company does not pay any taxes on its leased property and does not
carry any insurance on the vacant land.
The Alabama Leases have no existing wells. These leases are "wildcat"
explorations 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.
49
<PAGE>
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, 1997.
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 above
under the heading "Description of Business" - "Business Development" above and
those options outlined under the caption "Executive Compensation" below, 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.
Certain Business Relationships
There are no business relationships, existing or planned, between the
Company or any of its subsidiaries and 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.
Indebtedness of Management
No officer, director or security holder 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 is indebted to the
Company.
Parents of the Issuer
Unless IRC may be deemed to be a parent of the Company, the Company has
no parents.
50
<PAGE>
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 "Description of Business" - "Business Development" above, and those
options outlined under the caption "Executive Compensation" below, 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.
MARKET FOR COMMON EQUITY and RELATED 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 "Risk Factors" above, may have a substantial adverse impact on
any such public market. See, "Risk Factors" - "Future Sales of Common Stock."
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 ( including inter-dealer
transactions) are as follows:
Quarter ending: High Low
March 31, 1994 (7) 0.25 2
June 30, 1994 0.25 0.125
September 30, 1994 0.25 0.125
December 31, 1994 0.25 0.25
- -------------------
(7) The high bid price for the quarter ended March 31, 1994 is a
trading price only.
51
<PAGE>
March 31, 1995 0.25 0.25
June 30, 1995 3.75 0.25
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
June 30,1996 14.50 5.50
September 30, 1996 18.00 8.25
December 31, 1996 18.50 9.50
March 31, 1997 17.25 10.00
June 30, 1997 14.50 10.50
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. The transactions include inter-dealer transactions.
Holders
The number of record holders of the Company's common stock as of
December 31, 1996, was approximately 341.
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.
EXECUTIVE COMPENSATION
Cash Compensation
The following table sets forth the aggregate cash
52
<PAGE>
compensation paid by the Company for services rendered during the periods
indicated to its directors and executive officers:
SUMMARY CASH COMPENSATION TABLE (8)
Name & Position Year Salary
--------------- ---- ------
Walter C. Anzonetti 1994 0
Director 1995 0
1996 0
Edgar G. Baugh 1994 0
Director 1995 0
1996 0
Benton L. Becker 1994 0
Chairman of 1995 0
the Board 1996 0
Robert M. Carter(9) 1994 0
Vice-President 1995 0
1996 $31,570
Jeffrey DeMunnik 1994 0
Secretary 1995 0
Treasurer 1996 $34,077
Jack E. Earnest 1994 0
Director 1995 0
1996 0
Daniel G. Follmer(10) 1994 0
Chief Financial 1995 0
Officer 1996 $ 2,885
Kelly S. Grabill 1994 0
Secretary 1995 $10,653
1996 $ 7,104
Raymond E. Johnson 1994 0
Director 1995 0
1996 0
- -----------------
(8) No other compensation was received by any officer or director.
(9) Has 75,000 options exercisable at $5.00 per share which expire
on February 24, 1999. 22,346 are vested.
(10) Has 100,000 options exercisable at $5.00 per share, which expire
on February 24, 1999. 29,795 are vested.
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<PAGE>
James E. Kaiser 1994 0
President 1995 0
1996 $20,000
Charles N. Manhoff 1994 0
Director 1995 0
1996 0
Joe B.Mattei 1994 0
Director 1995 0
1996 0
William A. Moffett 1994 0
CEO & Director 1995 0
1996 0
John P. O'Hagan 1994 0
Director 1995 0
1996 0
Ted P. Scallan 1994 0
President 1995 0
1996 $53,120
Sheila Sloan(11) 1994 0
Treasurer 1995 0
1996 $17,850
Lyle Stocksill 1994 0
Director 1995 0
1996 0
George E. Walter Jr. 1994 0
President and 1995 $ 2,584
Director 1996 923
James C. Walter 1994 0
Vice-President 1995 $23,076
Secretary/Treasurer 1996 3,077
Elizabeth Wendelken 1994 0
Secretary 1995 0
1996 $14,500
- -----------------
(11) Has 10,000 options exercisable at $5.00 per share, which expire on
6/12/98. 3,333 are vested,
54
<PAGE>
The following table sets forth the options exercised during
the past 18 months by each of the directors and executive officers, the exercise
price, the number of unexercised options and the value of the unexercised
options as of June 30,1997:
Name Options Exercise Unexercised Value of
Exercised Price Options Unexercised
Options
- -------------------------------------------------------------------------------
Walter C. Arzonetti 88,493 .275 11,507 $133,768
Robert M. Carter 25,000 .275 0 0
Jeffrey D. DeMunnik 20,644 .275 4,366 50,754
Kelly S. Grabill 12,500 .275 0 0
Raymond Johnson, Dec'd 10,000 .275 0 0
Charles N. Manhoff 88,356 .275 11,644 135,361
Joseph B. Mattei 37,000 .275 63,000 732,375
William A. Moffett 100,000 .275 62,613 727,876
Allen Sweeney 66,849 .275 0 0
James C. Walter 35,616 .275 64,384 748,464
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, "Other
Compensation" and the "Restricted Stock Options Table" set forth below in this
section.
55
<PAGE>
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 e expiration dates of the options
granted:
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<PAGE>
RESTRICTED STOCK OPTIONS TABLE
<TABLE>
<CAPTION>
Number Amount Value as
Name of Option of Issue Date Amount Vested of June
Holder Options Date Price Expires Exercised June 30, 30, 1997
1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Joseph Armstrong 50,000 3/13/97 5.0 * 6/12/98 0 16,666 193,671
Walter C. Arzonetti 100,000 5/4/95 0.275 5/7/97 88,493 0 0
Wesley Baker 10,000 3/13/97 5.0 * 6/12/98 0 3,333 38,729
Edgar G. Baugh 100,000 5/4/95 0.275 4/29/96 0 0 0
Benton L. Becker 100,000 5/4/95 0.275 5/4/97 0 0 0
Jeff Brockman 100,000 5/4/95 0.275 8/4/97 72,329 27,671 321,537
Robert M. Carter 25,000 5/4/95 0.275 8/4/97 25,000 0 0
75,000 11/26/96 5.0 * 2/25/99 0 22,346 259,661
Jeffrey DeMunnik 25,000 5/4/95 0.275 4/17/97 20,644 0 0
Jack E. Earnest 100,000 5/4/95 0.275 4/29/96 0 0 0
Daniel G. Follmer 100,000 1/26/96 5.0 * 2/24/99 0 29,795 346,218
Kelly S. Grabill 25,000 5/4/95 0.275 8/2/96 12,500 0 0
Raymond E. Johnson, 100,000 5/4/95 0.275 3/10/96 10,000 0 0
Dec'd
Kenny Securities 100,000 1/30/96 6.375 * 5/4/99 0 100,000 1,162,000
James Kreamer 50,000 3/13/97 5.0 * 6/12/98 0 16,667 193,671
===================================================================================================================================
</TABLE>
57
<PAGE>
<TABLE>
<CAPTION>
Name of Option Number Amount Value as
Holder of Issue Date Amount Vested of June
Options Date Price Expires Exercised June 30, 30, 1997
1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Charles N. Manhoff 100,000 5/4/95 0.275 5/7/97 88,356 0 0
Joseph B. Mattei 100,000 5/4/95 0.275 4/29/96 37,000 0 0
Michael McCown 50,000 11/26/96 5.0 * 2/25/99 0 14,897 173,103
50,000 5/4/95 0.275 8/4/97 50,000 0 0
Willilam A. Moffett 100,000 5/4/95 0.275 8/4/971 All 0 0
James Morita 50,000 3/13/97 5.0 * 6/12/98 0 16,667 193,671
John P. O'Hagan 100,000 5/4/95 0.275 4/29/96 0 0 0
Russell Ratliff 100,000 5/4/95 0.275 5/2/96 37,534 0 0
Ted P. Scallan 100,000 7/17/95 4.0 2/26/97 0 0 0
100,000 1/30/96 6.375 2/26/97 0 0 0
Sheila Sloan 10,000 3/13/97 5.0 * 6/12/98 0 3,333 38,729
Lyle G. Stocksill 100,000 1/30/96 6.375 2/25/97 0 0 0
Allen H. Sweeney 100,000 5/2/95 0.275 8/02/97 All 0 0
50,000 3/13/97 5.0 * 6/12/98 0 16,667 193,671
George E. Walter, Jr. 400,000 5/4/95 0.275 4/29/96 0 0 0
James C. Walter 100,000 5/4/95 0.275 4/19/96 35,616 0 0
Elizabeth Wendelken 10,000 3/13/97 5.0 * 6/12/98 0 3,333 38,729
===================================================================================================================================
</TABLE>
* Below Market
58
<PAGE>
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 directors' 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.
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) for the year ended December 31, 1994. This financial statement
accompanies this Prospectus.
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.
59
<PAGE>
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 led 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
60
<PAGE>
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 Prospectus, and he has provided
the Company with a letter addressed to the Commission stating that he agrees
with the disclosures made herein.
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.
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 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 led 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
61
<PAGE>
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 he has
provided the Company with a letter addressed to the Commission stating that he
agrees with the disclosures made herein.
Change from Price-Bednar, LLP, CPA to Charles M. Stivers, CPA
The Company had engaged the services of another accountant to
complete certain preparatory on-site 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 on-site 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
62
<PAGE>
Company to develop reliable financial statements do not
exist, that information has come to their attention that has
led 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 it has
provided the Company with a letter addressed to the Commission stating that it
agrees with the disclosures made herein.
Change from Charles M. Stivers, CPA, to BDO Seidman,LLP
The Company terminated Charles M. Stivers, CPA and retained
BDO Seidman, LLP effective to conduct the audit of the Company's financial
statements for the year ended December 31, 1996 because it became apparent that
Charles M. Stivers, as an individual practitioner, would not be able to perform
the required audit on a timely basis.
During, the Company's two most recent fiscal years, and since
then, Charles M. Stivers has not advised the Company that any of the following
exist or are applicable:
63
<PAGE>
(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 led 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 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 Charles M. 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 Charles M. Stivers with a copy of the
disclosure provided under this caption of the Registration Statement, and he has
provided the Company with a letter addressed to the Commission stating that he
agrees with the disclosures made herein.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon
for the Company by the law firm of Robson & Miller, LLP, 666 Third Avenue, New
York, New York 10017, telephone number (212) 949- 1860. Robson & Miller, LLP was
not hired on a contingent basis and is not receiving any interest, direct or
indirect in the Company. Neither Robson & Miller, LLP or any of its partners or
employees is a director, officer, employee, voting trustee promotor or
underwriter of the Company.
64
<PAGE>
EXPERTS
The financial statements included in this Prospectus and in
the Registration Statement have been audited by David T. Thomson, CPA (1994),
Charles M. Stivers, CPA (1995) and BDO Seidman, LLP, Independent certified
public accountants (1996), to the extent and for the periods set forth in their
reports, which contain an explanatory paragraph regarding the Company's ability
to continue as a going concern, appearing elsewhere herein and in the
Registration Statement, and are included in reliance upon such reports given
upon the authority of said firms as experts in auditing and accounting.
65
<PAGE>
[Letterhead of David T. Thompson P.C.]
INDEPENDENT AUDITOR'S 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) to 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 as 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.
/s/ David T. Thomson P.C.
Salt Lake City, Utah
April 14, 1995
F-1
<PAGE>
TENGASCO, INC.
(Formerly Onasco Companies, Inc.)
(A Development Stage Company)
BALANCE SHEETS
December 31, 1994
ASSETS
------
December 31, 1994
Current assets: -----------------
Cash and cash equivalents 0
Production receivable
Prepaid expenses
Other current assets
Total current assets 0
Oil and gas properties using full cost
accounting (Notes 4 and 5):
Properties being amortized
Properties not subject to amortization
--------
0
Less accumulated depletion
--------
0
Other Assets
Other property and equipment, less accumulated
depreciation $55,300 (Note 6)
Deposits
Organizational costs net of accumulated 0
amortization of $400
--------
0
F-2
<PAGE>
TENGASCO, INC.
(Formerly Onasco Companies, Inc.)
(A Development Stage Company)
BALANCE SHEETS
December 31, 1994
LIABILITIES AND STOCKHOLDER'S EQUITY
-------------------------------------
December 31, 1994
-----------------
Current liabilities:
Accounts payable - trade 0
Production payable
Accrued and other liabilities
Long-term debt - current (Note 8)
Stockholder advances payable 500
Net current liabilities of discontinued operations 27,500
-------
Total current Liabilities 28,000
Long-term debt (Note 8)
Total liabilities 28,000
Commitments and Contingencies (Note 9)
Stockholders' equity:
Common Stock, $.001 par value; 50,000,000 shares authorized
5,229,300, 1,037,600, 1,012,600 shares issued, 1,000
and outstanding respectively
Additional paid-in capital 5,300
Deficit accumulated during the development stage (34,300)
--------
Total stockholder's equity (28,000)
--------
Total liabilities and stockholder's equity 0
F-3
<PAGE>
TENGASCO, INC.
(Formerly Onasco Companies, Inc.)
(A Development Stage Company)
STATEMENT OF OPERATIONS
For the years ended December 31, 1994 and 1993
Cumulative During the Development Stage
Cumulative
For the Year For the Year During the
ended ended Development
Dec. 31, 1994 Dec. 31, 1993 Stage
------------- ------------- -----------
Revenues:
Oil and gas revenues 0 0 27,800
Other revenues 700
------ ------ --------
Total revenues 0 0 28,500
Cost and expense:
Lease operating expense 18,900
Production taxes 1,200
Depletion, depreciation and
amortization 59,100
Interest expense 32,600
General and administrative costs 100 434,200
------ --------
Total costs and expenses 0 100 546,000
------ ------ --------
Net (loss) from continuing
operations 0 (100) (517,500)
Discontinued Operations
Net (Loss) from discontinued
operations (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) 36,800 (5,800) (551,200)
------ ------ --------
F-4
<PAGE>
TENGASCO, INC.
(Formerly Onasco Companies, Inc.)
(A Development Stage Company)
STATEMENT OF STOCKHOLDER'S EQUITY
For the years ended December 31, 1994 and 1993
Deficit
Accumulated
Commmon Stock Additional During the
------------- Paid in Development
#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) 0 0 0
Net income (loss) for
the year ended
December 31, 1993 0 0 0 (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 0 0 0
Net income (loss) for
the year ended
December 31, 1994 0 0 0 36,800
---------- ------ ------ --------
BALANCE
December 31, 1994 1,037,600 1,000 5,300 (34,300)
F-5
<PAGE>
TENGASCO, INC.
(Formerly Onasco Companies, Inc.)
(A Development Stage Company)
STATEMENT OF CASH FLOWS
For the years ended December 31, 1994 and 1993
<TABLE>
<CAPTION>
Cumulative
Year ended Year ended During the
Dec. 31 Dec. 31 Development
1994 1993 Stage
---------- ---------- -------------
<S> <C> <C> <C>
Cash Flows from operating activities:
Net income (loss) $ 0 $ (100) (517,500)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depletion, depreciation and amortization 59,100
Changes in assets and liabilities:
Deposits (4,900)
Production receivable (9,000)
Prepaid expenses (4,100)
Other current assets (600)
Accounts payable - trade 100 47,100
Production payable 1,700
Accrued and other liabilities 19,900
Stockholder Advances Payable (500)
Net current liabilities of discontinued operations (26,900)
---------- ---------- -------------
Net cash used by operating activities 0 0 (435,700)
Cash Flow used in investing activities:
Additions to machinery and equipment 0 0 (656,300)
Additions to oil and gas properties - amortized (484,100)
Additions to oil and gas properties - unamortized (60,600)
Marketable Securities (250,000)
Organizational cost (6,600)
---------- ---------- -------------
Net cash used in investing activities 0 0 (1,457,600)
Cash Flow from financing activities:
Proceeds from issuance of debt, net 0 0 93,000
Proceeds from issuance of common stock 1,801,000
---------- ---------- -------------
Net cash provided by financing 0 0 (1,894,000
---------- ---------- -------------
Net increase (decrease) in cash and cash equivalents 0 0 700
Cash and cash equivalents at beginning of year 0 0 0
---------- ---------- -------------
Cash and cash equivalent at end of year 0 0 700
---------- ---------- -------------
Supplemental schedule of cash flow information
Cash paid during the years for
Income taxes 0 0 0
---------- ---------- -------------
Interest 0 0 9,600
---------- ---------- -------------
</TABLE>
F-6
<PAGE>
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.
The corporate offices are located in Knoxville, Tennessee.
2. EARNINGS PER SHARE
Earnings per common and common equivalent shares are based upon the weighted
average of common and common equivalent shares outstanding during the year.
Primary and fully diluted earnings per share are the same. The number of common
and common equivalent shares utilized in per share computations were 1,037,600,
and 1,012,600 in years 1994 and 1993.
EARNINGS PER SHARE:
1994 1993
--------- --------
Loss from continuing operations 0 (100)
Net income (loss) 36,800 5,800
--------- --------
Primary earnings (loss) per common share:
Income (loss) from continuing operations 0 0
Discontinued operations (.01) 0
Extraordinary items .04 0
--------- --------
Earnings (loss) per common share .03 0
--------- --------
Fully diluted earnings (loss)
per common share:
Income (loss) from continuing operations 0 0
Dicontinued operations (.01) 0
Extraordinary items .04 0
--------- --------
Eaernings (loss) per common share .03 0
--------- --------
F-7
<PAGE>
TENGASCO, INC.
(Formerly Onasco Companies, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
3. DISCONTINUED OPERATION
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.
Cumulative
For the Year For the Year During the
ended ended Development
Dec. 31, 1994 Dec. 31, 1993 Stage
------------- ------------- ------------
Revenue:
Sales $ 0 $ 1,100 $ 1,700
Cost of Sales (800)
-------------- ------------- ----------
Gross Margin 0 1,100 900
-------------- ------------- ----------
Expense:
Rent 1,000
Depreciation 200 400 900
Amortization 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 100
Write-off Patent costs 6,300 6,200
-------------- ------------- ----------
Total Expenses 8,200 6,800 79,800
-------------- ------------- ----------
Net Loss related to
Discontinued Operations (8,200) (5,700) (78,900)
-------------- ------------- ----------
F-8
<PAGE>
TENGASCO, INC.
(Formerly Onasco Companies, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
4. 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.
5. GOING CONCERN.
The Company has experienced startup losses for the year ended December 31,
1994. 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 from the outcome of this uncertainty.
F-9
<PAGE>
Tengasco, Inc.
(formerly Onasco Companies, Inc.)
- --------------------------------------------------------------------------------
Consolidated Financial Statements
Years Ended December 31, 1996 and 1995
F-10
Tengasco, Inc.
(formerly Onasco Companies, Inc.)
Contents
____________________________________________________________________________
Report of Independent Certified Public Accountants 2
Report of Independent Certified Public Accountants 3
Consolidated Financial Statements
Balance sheets 4
Statements of loss 5
Statements of stockholders' equity 6
Statements of cash flows 7
Notes to financial statements 8-27
F-11
<PAGE>
[LOGO] BDO Seidman, LLP 285 Peachtree Center Avenue, Suite 800
Accountants and Consultants Atlanta, Georgia 30303-1230
Telephone: (404) 688-6841
Fax: (404) 688-1075
Report of Independent Certified Public Accountants
Board of Directors
Tengasco, Inc
Knoxville, Tennessee
We have audited the accompanying consolidated balance sheet of Tengasco,
Inc. and subsidiary as of December 31, 1996, and the related consolidated
statements of loss, stockholders' equity and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we 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. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Tengasco, Inc. and subsidiary as of December 31, 1996, and the results of
their operations and their cash flows for the year then ended 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 2 to the
financial statements, the Company has suffered recurring losses from
operations and has a working capital deficiency that raise substantial
doubt about its ability to continue as a going concern. In addition, as of
December 31, 1996, management estimates that additional costs of
approximately $l,200,000 are required to complete its pipeline facilities
under construction. Management's plans in regard to these matters are also
described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ BDO Seidman, LLP
Atlanta, Georgia
June 5, 1997
F-12
<PAGE>
[Letterhead of Charles M. Stivers]
Report of Independent Certified Public Accountants
Board of Directors
Tengasco, Inc.
Knoxville, Tennessee
I have audited the balance sheet of Tengasco, Inc. as of December 31, 1995,
and the related statements of loss, stockholders' equity and cash flows for
the year then ended. These financial statements are the responsibility of
the Company's management. My responsibility is to express an opinion on
these financial statements based on our audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that we 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 our audit provides
a reasonable basis for our opinion.
In my opinion financial statements referred to above present fairly, in all
material respects, the financial position of Tengasco, Inc. as of December 31,
1995, and the results of their operations and their cash flows for the
year then ended 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 2 to the
financial statements, the Company has suffered losses from operations and
has a working capital deficiency that raise substantial doubt about its
ability to continue as a going concern.
/s/Charles M. Stivers
Charles M. Stivers
Certified Public Accountant
Manchester, Kentucky
June 5, 1997
F-13
<PAGE>
================================================================================
December 31, 1996 1995
- --------------------------------------------------------------------------------
Assets (Note 9)
Current
Cash and cash equivalents $ 146,554 $ 712
Marketable equity securities (Note 5) -- 250,000
Accounts receivable 4,658 9,018
Prepaid expenses and other 7,463 4,786
- --------------------------------------------------------------------------------
Total current assets 158,675 264,516
Oil and gas properties, net (on the basis
of full cost accounting) (Note 6) 1,287,142 658,082
Pipeline facilities under construction,
at cost (Note 7) 887,315 --
Property and equipment, net (Notes 8 and 10) 203,244 247,401
Other 190,845 10,970
- --------------------------------------------------------------------------------
$2,727,221 $1,180,969
================================================================================
F-14
<PAGE>
Tengasco, Inc.
(formerly Onasco Companies, Inc.)
Consolidated Balance Sheets
- --------------------------------------------------------------------------------
December 31, 1996 1995
- --------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current
Notes payable (Note 9) $ 780,000 $ -
Loans payable to affiliates (Note 4) 48,190 -
Current maturities of long-term debt (Note 10) 14,017 34,038
Accounts payable - trade 347,093 46,922
Accrued liabilities 35,086 21,623
- --------------------------------------------------------------------------------
Total current liabilities 1,224,386 102,583
Long term debt, less current maturities (Note 10) 47,828 59,000
- --------------------------------------------------------------------------------
Total liabilities 1,272,214 161,583
- --------------------------------------------------------------------------------
Commitments and contingencies (Notes 7, 9 and 11)
Stockholders' equity (Note 9)
Common stock, $.001 par value; 50,000,000 shares
authorized 5,708 5,229
Additional paid-in capital 4,783,369 2,425,185
Unamortized stock option awards (292,186) (130,208)
Accumulated deficit (3,041,884) (1,280,820)
- --------------------------------------------------------------------------------
Total stockholders' equity 1,455,007 1,019,386
- --------------------------------------------------------------------------------
$2,727,221 $1,180,969
- --------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
F-15
<PAGE>
Tengasco, Inc.
(formerly Onasco Companies, Inc.)
Consolidated Statements of Loss
- --------------------------------------------------------------------------------
Years ended December 31, 1996 1995
- -------------------------------------------------------------------------
Revenues
Oil and gas revenues $ 26,253 $ 27,802
Other revenues - 724
- -------------------------------------------------------------------------
Total revenues 26,253 28,526
- -------------------------------------------------------------------------
Costs and expenses
Production costs and taxes 17,138 20,072
Depletion, depreciation and amortization 133,187 89,528
General and administrative costs 1,491,690 539,061
Unrealized holding loss on marketable equity
securities (Note 5) - 593,752
Interest expense 145,302 32,594
- -------------------------------------------------------------------------
Total costs and expenses 1,787,317 1,275,007
- -------------------------------------------------------------------------
Net Loss $(1,761,064) $(1,246,481)
- --------------------------------------------------------------------------
Net loss per common share $(0.32) $(0.36)
- --------------------------------------------------------------------------
Weighted average common shares outstanding 5,427,247 3,484,207
- --------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
F-16
Tenegasco, Inc.
(formerly Onasco Companies, Inc.)
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Unamortized
Common Stock Additional stock
-------------------- paid-in option Accumulated
Shares Amount capital awards deficit
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 1,037,600 $1,038 $ 5,300 $ - $ (34,339)
Net effect of 1 for 2 reverse split (518,800) (519) - - -
Common stock issued to acquire assets
of Industrial Resources Corporation 4,000,000 4,000 1,215,460 - -
Common stock issued to individuals 505,000 505 47,500 - -
Common stock issued for equipment 8,000 8 2,200 - -
Common stock issued for exercised options 33,200 33 9,100 - -
Common stock subscribed for the
extinguishment of debt 164,300 164 881,900 - -
Stock option awards - - 190,625 (190,625)
Amortization of stock option awards - - - 60,417 -
Common stock options granted to
non-employees - - 45,000 - -
Transfer of debt to equity by shareholder - - 28,100 - -
Net loss for the year ended
December 31, 1995 - - - - (1,246,481)
- ------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 5,229,300 5,229 2,425,185 (130,208) (1,280,820)
Common stock issued for exercised options 327,079 327 90,792 - -
Common stock issued for the
extinguishment of debt 65,569 66 638,823 - -
Common stock subscribed for the
extinguishment of debt 48,897 49 421,052 - -
Stock option awards - - 225,000 (225,000) -
Amortization of stock option awards - - - 63,022 -
Common stock options granted to
non-employees - - 371,864 - -
Common stock issued for private
placements 36,982 37 280,653 - -
Stock warrants issued in connection with
notes payable - - 330,000 - -
Net loss for the year ended
December 31, 1996 - - - - (1,761,064)
- ------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 5,707,827 $5,708 $4,783,369 $(292,186) $(3,041,884)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-17
<PAGE>
Tengasco, Inc.
(formerly Onasco Companies, Inc.)
Consolidated Statements of Cash Flows
- -------------------------------------------------------------------------------
Years ended December 31, 1996 1995
- -------------------------------------------------------------------------------
Operating activities
Net loss $(1,761,064) $(1,246,481)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depletion, depreciation and amortization 133,187 89,528
Unrealized holding loss on marketable
equity securities -- 593,752
Loss on disposal of property and equipment 3,671 --
Compensation paid in stock options 434,886 105,417
Amortization of imputed value of stock warrants
issued in connection with notes payable 110,000 --
Changes in assets and liabilities:
Accounts receivable 4,360 (9,018)
Prepaid expenses and other (2,677) (4,786)
Accounts payable 300,171 19,422
Accrued liabilities 13,463 21,623
Stockholder advances payable -- (500)
- -------------------------------------------------------------------------------
Cash used in operating activities (764,003) (431,043)
- -------------------------------------------------------------------------------
Investing activities
Proceeds from sale of marketable equity
securities 250,000 --
Additions to property and equipment (60,754) (86,786)
Net additions to oil and gas properties (644,951) --
Additions to pipeline facitlities under
construction (887,315) --
- -------------------------------------------------------------------------------
Cash used in investing activites (1,343,020) (86,786)
- -------------------------------------------------------------------------------
Financing activities
Payment of loan costs and other (238,798) (10,970)
Proceeds from borrowings 2,156,581 93,038
Repayments of borrowings (36,727) --
Proceeds from issuance of common stock 371,809 436,473
- -------------------------------------------------------------------------------
Cash provided by financing activities 2,252,865 518,541
- -------------------------------------------------------------------------------
Net increase in cash and cash equivalents 145,842 712
Cash and cash equivalents, beginning of year 712 --
- -------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 146,554 $ 712
- -------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
F-18
<PAGE>
Tengasco, Inc.
(formerly Onasco Companies, Inc.)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
1. Summary of Organization
Significant Accounting
Policies 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
and Exchange Agreement, the Company
acquired from Industrial Resources
Corporation, a Kentucky corporation
("IRC"), certain oil and gas leases,
equipment, marketable securities and
vehicles in exchange for common stock
(see Note 3).
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 Company's principal business consists
of oil and gas well drilling, production
and related property management in the
Appalachian region of eastern Tennessee
and eastern Kentucky. The Company's
corporate offices are in Knoxville,
Tennessee.
During 1996, the Company formed Tengasco
Pipeline Corporation, a wholly-owned
subsidiary, to manage the construction
and operation of a 23-mile gas pipeline.
Consolidation
The consolidated financial statements
include the accounts of the Company and
Tengasco Pipeline Corporation. All
significant intercompany balances and
transactions have been eliminated.
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 follows the full cost method
of accounting for oil and gas property
acquisition, exploration and development
activities. Under this method, all
productive and nonproductive costs
incurred in connection with the
acquisition of, exploration for and
development of oil and gas reserves for
each cost center
F-19
<PAGE>
Tengasco, Inc.
(formerly Onasco Companies, Inc.)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
are capitalized. Capitalized costs
include lease acquisitions, geological
and geophysical work, delay rentals and
the costs of drilling, completing and
equipping oil and gas wells. Gains or
losses are recognized only upon sales or
dispositions of significant amounts of
oil and gas reserves. Proceeds from all
other sales or dispositions are treated
as reductions to capitalized costs.
The capitalized costs of oil and gas
properties, plus estimated future
development costs relating to proved
reserves and estimated costs of plugging
and abandonment, net of estimated salvage
value, are amortized on the
unit-of-production method based on total
proved reserves. The costs of unproved
properties are excluded from amortization
until the properties are evaluated,
subject to an annual assessment of
whether impairment has occurred. The
costs of significant development projects
awaiting completion of pipeline
facilities are excluded from amortization
until such time as the pipeline
facilities are completed. The Company's
proved gas reserves were estimated by
Coburn Petroleum Engineering, independent
petroleum engineers, as of December 31,
1996.
The capitalized oil and gas property and
pipeline costs, less accumulated
depreciation, depletion and amortization
and related deferred income taxes, if
any, are generally limited to an amount
(the ceiling limitation) equal to the sum
of: (a) the present value of estimated
future net revenues computed by applying
current prices in effect as of the
balance sheet date (with consideration of
price changes only to the extent provided
by contractual arrangements) to estimated
future production of proved oil and gas
reserves, less estimated future
expenditures (based on current costs) to
be incurred in developing and producing
the reserves using a discount factor of
10% and assuming continuation of existing
economic conditions; and (b) the cost of
investments in unevaluated properties
excluded from the costs being amortized.
Pipeline Facilities Under Construction
Pipeline facilities under construction
are carried at cost. The Company will
provide for depreciation of the pipeline
facilities using the straight-line method
over the estimated useful life of the
asset once the pipeline is completed and
placed in service. The pipeline
facilities are expected to be completed
during the
F-20
<PAGE>
Tengasco, Inc.
(formerly Onasco Companies, Inc.)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
third quarter of 1997. Accordingly, no
depreciation expense has been recorded
for 1996 and 1995 relating to the
pipeline facilities.
Property and Equipment
Property and equipment are carried at
cost. The Company provides for
depreciation of property and equipment
using the straight-line method over the
estimated useful lives of the assets
which range from five to seven years.
Other Assets
Other assets consist principally of
deferred loan costs that the Company is
amortizing over the term of the
respective loans, which is six months.
Income Taxes
The Company accounts for income taxes in
accordance with Statement of Financial
Accounting Standards No. 109, "Accounting
for Income Taxes" which requires the use
of the "liability method." Accordingly,
deferred tax liabilities and assets are
determined based on the temporary
differences between the financial
statement and tax bases of assets and
liabilities, using enacted tax rates in
effect for the year in which the
differences are expected to reverse.
Concentration of Credit Risk
The Company's primary business activities
include oil and gas sales to several
customers in the states of Tennessee and
Kentucky. The related trade receivables
subject the Company to a concentration of
credit risk within the oil and gas
industry.
Loss Per Common Share
Loss per share amounts are computed by
dividing net loss by the weighted average
number of common shares outstanding
during the year. Common stock equivalents
have not been considered because their
effect would be anti-dilutive.
F-21
<PAGE>
Tengasco, Inc.
(formerly Onasco Companies, Inc.)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Accounting Estimates
The accompanying financial statements are
prepared in conformity with generally
accepted accounting principles which
requires management to make estimates and
assumptions that affect the reported
amounts of assets and liabilities and
disclosure of contingent assets and
liabilities at the date of the financial
statements and the reported amounts of
revenues and expenses during the
reporting period. The actual results
could differ from those estimates.
Fair Values of Financial Instruments
Fair values of cash and cash equivalents
and short-term debt approximate cost due
to the short period of time to maturity.
Fair values of long-term debt are based
on quoted market prices or pricing models
using current market rates.
Significant Risks and Uncertainties
The Company's operations are subject to
all of the environmental and operational
risks normally associated with the oil
and gas industry. The Company maintains
insurance that is customary in the
industry; however, there are certain
risks for which the Company does not
maintain full insurance coverage. The
occurrence of a significant event that is
not fully covered by insurance could have
a significant adverse effect on the
Company's financial position.
New Accounting Pronouncements
On March 3, 1997, the Financial
Accounting Standards Board issued
Statement of Financial Accounting
Standards No. 128, Earnings Per Share
(SFAS 128). This pronouncement provides a
different method of calculating earnings
per share than is currently used in
accordance with Accounting Principles
Board Opinion No. 15, Earnings Per
Share. SFAS 128 provides for the
calculation of "Basic" and "Diluted"
earnings per share. Basic earnings per
share includes no dilution and is
calculated by dividing income available
to common shareholders by the weighted
average number of common shares
outstanding for the period. Diluted
earnings per share reflects the potential
dilution of securities that could share
in the earnings of an entity, similar to
fully diluted earnings per share. The
Company will adopt SFAS
F-22
<PAGE>
Tengasco, Inc.
(formerly Onasco Companies, Inc.)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
128 in 1997 and its implementation is not
expected to have a material effect on the
consolidated financial statements.
2. Going Concern The Company has experienced losses
totaling $1,761,064 and $1,246,481 for
the years ended December 31, 1996 and
1995, respectively, and has a working
capital deficit of $1,065,711 at December
31, 1996. These matters raise substantial
doubt about the Company's ability to
continue as a going concern. In addition,
as of December 31, 1996, management
estimates that additional costs of
approximately $1,200,000 are required to
complete its pipeline facilities under
construction. Management's plans include
raising additional capital in order to
complete the pipeline facilities and
drill additional oil and gas wells. In
addition, the Company is seeking joint
venture partners to assist in the sales
and marketing of its energy services (see
Note 14). The accompanying financial
statements do not include any adjustments
relating to the recoverability and
classifications of recorded asset
amounts or the amounts and
classifications of liabilities that might
be necessary should the Company be unable
to continue as a going concern.
3. Business Acquisition Effective May 2, 1995, the Company
acquired approximately 60% of the assets
of IRC in a reverse acquisition in which
IRC's stockholders acquired voting
control of the Company. The acquisition
was accomplished through the Company's
issuance of 4,000,000 shares of Tengasco,
Inc. common stock and a $450,000 8%
promissory note payable to IRC. The
promissory note was converted into 83,799
shares of Tengasco, Inc. common stock in
December 1995 (see Note 15). For
financial reporting purposes, the portion
of IRC'S assets involved in the
transaction is deemed to be the acquiring
entity. Since the Company had no
significant assets or operations at the
acquisition date, as required by the
Securities and Exchange Commission, the
accounts of the Company have been
recorded at IRC's cost basis.
F-23
<PAGE>
Tengasco, Inc.
(formerly Onasco Companies, Inc.)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
The following unaudited pro forma
information indicates what the revenues
and net loss of the Company would have
been if the acquisition had occurred on
January 1, 1995:
Revenues $ 47,555
----------------------------------------
Net loss $(1,393,520)
----------------------------------------
Net loss per common share $ (0.40)
----------------------------------------
4. Related Party Transactions The Company has loans payable due to
affiliates aggregating $48,190. A major
stockholder of the Company is also a
major stockholder of the affiliates. The
loans bear interest at the rate of 8% per
annum and are due on demand.
During 1996, the Company converted
approximately $1,060,000 of debt payable
to IRC, a related party, to common stock
and common stock subscribed (see Note
15). The Company also converted
approximately $100,000 of debt payable to
a major stockholder to common stock
subscribed (see Note 15).
5. Marketable Equity Securities Marketable securities were carried at the
lower of cost or market. The marketable
securities were acquired in the Purchase
and Exchange Agreement with IRC on May 2,
1995 and consisted of 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 marketable securities
were written down to market in 1995,
resulting in a loss of approximately
$594,000. The United Petroleum
Corporation stock was sold in January
1996 for $250,000.
F-24
<PAGE>
Tengasco, Inc.
(formerly Onasco Companies, Inc.)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
6. Oil and Gas Properties The following table sets forth
information concerning the Company's
oil and gas properties at December 31:
1996 1995
-----------------------------------------------
Evaluated $1,288,243 $654,258
Unevaluated 26,317 15,352
-----------------------------------------------
1,314,560 669,610
Accumulation depreciation,
depletion and amortization (27,418) (11,528)
-----------------------------------------------
$1,287,142 $658,082
-----------------------------------------------
Evaluated costs excluded from
amortization at December 31, 1996 consist
of approximately $730,000 of costs
relating the Company's Swan Creek
development project which is awaiting the
completion of a gas pipeline expected to
be completed in the third quarter of 1997.
7. Pipeline Facilities During the fourth quarter of 1996, the
Under Construction Company began construction of a 23-mile gas
pipeline which will (1) connect the Swan Creek
development project to a gas purchaser
and (2) enable the Company to develop gas
transmission business opportunities in
the future.
As of December 31, 1996, management
estimates the costs to complete the
pipeline are approximately $l,200,000.
In January 1997, the Company entered into
an agreement with the Tennessee Valley
Authority ("TVA") whereby the TVA will
allow the Company to bury the pipeline
within the TVA's transmission line
rights-of-way. In return for this right,
the Company paid $35,000 plus agreed to
annual payments of approximately $6,200
for 20 years. This agreement expires in
2017 at which time the parties may renew
the agreement for another 20 year term in
consideration of similar inflation-adjusted
payment terms.
F-25
<PAGE>
Tengasco, Inc.
(formerly Onasco Companies, Inc.)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
8. Property and Equipment Property and equipment consisted of the
following:
<TABLE>
<CAPTION>
1996 1995
------------------------------------------------------------------------------
<S> <C> <C>
Machinery and equipment $245,756 $260,693
Vehicles 83,299 85,455
Other 42,113 20,991
------------------------------------------------------------------------------
371,168 367,139
Less accumulated depreciation (167,924) (119,738)
------------------------------------------------------------------------------
Property and equipment - net $203,244 $247,401
------------------------------------------------------------------------------
9. Notes Payable
Notes payable consisted of the following:
1996 1995
------------------------------------------------------------------------------
Note payable to an
investment company
due May 1997 with
interest payable
monthly at 10% per
annum; less
unamortized discount
of $123,750 relating
to stock warrants
issued; collateralized by a
subordinated security
interest in all
assets of the Company (A).
$376,250 $ -
Note payable to an
individual due April
1997 with interest
payable monthly at
10% per annum; less
unamortized discount
of $48,125 relating
to stock warrants
issued; collateralized by all
assets of the Company (B). 201,875 -
Note payable to a
company due April
1997 with interest
payable monthly at
10% per annum; less
unamortized discount
of $48,125 relating
to stock warrants
issued; collateralized by all
assets of the Company (A). 201,875 -
------------------------------------------------------------------------------
$780,000 $ -
------------------------------------------------------------------------------
</TABLE>
F-26
<PAGE>
Tengasco, Inc.
(formerly Onasco Companies, Inc.)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
In conjunction with the issuance of the
notes payable listed above, the Company
granted the lenders detachable stock
warrants which enable the holder to
obtain up to 200,000 shares of the
Company's common stock at a price of $5
per share.
(A) These notes had not been repaid as
of the above noted due dates. As noted
in (C) below, the Company has filed a
claim against the lenders.
(B) In March 1997, the individual note
holder (above) filed a lawsuit asserting
the Company was in default of the
$250,000 note. This action seeks the
principal amount, interest, and costs of
collection. No additional costs have
been accrued in the accompanying
consolidated financial statements in
connection with this lawsuit. Management
believes it has certain defenses to this
motion as noted in (C) below.
(C) Also in March 1997, the Company
filed a claim against the above three
lenders and a former officer of the
Company asserting that the Company did
not authorize the issuances of certain
stock warrants related to the borrowings
and seeking rescission of the warrant
agreements. The Company is disputing
the validity of the stock warrant
agreements based upon certain provisions
which were not authorized by the board
of directors. If the Company is
unsuccessful in its attempt to rescind
these stock warrant agreements, these
provisions could result in the lenders
obtaining additional shares.
F-27
<PAGE>
Tengasco, Inc.
(formerly Onasco Companies, Inc.)
Notes to Consolidated Financial Statements
- -------------------------------------------------------------------------------
10. Long Term Debt Long-term debt consisted of the following:
<TABLE>
<CAPTION>
1996 1995
--------------------------------------------------------------------
<S> <C> <C>
11% installment note, payable $667
monthly, including interest, due
December 2001, collateralized by a
vehicle $30,563 $ -
10.7% installment note, payable $423
monthly, including interest, due May
2000, collateralized by a vehicle 14,466 17,800
12% installment note, payable $385
monthly, including interest, due April
2000, collateralized by a vehicle 12,545 15,500
10.5% installment note, payable $789
monthly, including interest, due
August 2000, collateralized by a vehicle - 25,000
Loan payable to an equipment
supplier, due in monthly installments
of $5,300 - 15,900
Other 4,271 18,838
----------------------------------------------------------------------
Total long term debt 61,845 93,038
Less current maturities (14,017) (34,038)
----------------------------------------------------------------------
Long term debt, less current maturities $47,828 $59,000
----------------------------------------------------------------------
</TABLE>
F-28
<PAGE>
Tengasco, Inc.
(formerly Onasco Companies, Inc.)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
The approximate future maturities of
debt were as follows:
Year Amount
_________________________________________
1997 $ 14,017
1998 15,259
1999 14,849
2000 10,166
2001 7,554
_________________________________________
$61,845
=========================================
11. Commitments As of December 31, 1996, the future
minimum payments to be made under
noncancellable operating leases were:
Year Amount
_________________________________________
1997 $ 51,000
1998 51,000
1999 51,000
2000 47,000
_________________________________________
$200,000
=========================================
Rent expense was approximately $54,000
and $5,000 for the years ended December
31, 1996 and 1995, respectively.
F-29
<PAGE>
Tengasco, Inc.
(formerly Onasco Companies, Inc.)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
12. Stock Options Changes that occurred in options outstanding in 1996 and
1995 are summarized below:
1996 1995
----------------------- ------------------
Average Average
Exercise Exercise
Shares Price Shares Price
-------------------------------------------------------------
Outstanding,
beginning
of year 1,791,849 $0.483 - $ -
Granted 730,000 5.566 1,825,000 0.479
Exercised (327,079) 0.275 (33,151) 0.275
Expired/canceled (992,350) 0.275 - -
---------- ----------
Outstanding
end of year 1,202,420 3.295 1,791,849 0.483
Exercisable
end of year 538,805 1.882 562,260 0.427
------------------------------------------------------------
The following table summarizes information about stock
options outstanding at December 31, 1996:
Options Outstanding Options Exercisable
--------------------------------------- -------------------
Average
Exercise Remaining Average Average
Price Contractual Exercise Exercise
Range Shares Life Price Shares Price
------------------------------------------------------------
$0.275 472,420 0.58 yrs. $0.275 365,687 $0.275
4.000- 730,000 1.19 yrs. 5.565 173,118 5.275
6.375
------- -------
Total 1,202,420 0.95 yrs. 3.269 538,805 1.882
------------------------------------------------------------
F-30
<PAGE>
Tengasco, Inc.
(formerly Onasco Companies, Inc.)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
The fair value of stock options used to
compute compensation expense to
non-employees is the estimated present
value at grant date using the
Black-Scholes option-pricing model with
the following weighted average
assumptions for 1996 and 1995: expected
volatility of 54% for both years; a
risk-free interest rate of 5.21% in
1996 and 6.40% in 1995; and an expected
option life of 2.45 years in 1996 and
2.25 years in 1995. The amount of
compensation expense included in general
and administrative costs in the
accompanying consolidated statements of
loss was approximately $372,000 and
$45,000 at December 31, 1996 and 1995,
respectively.
Statement of Financial Accounting
Standards No. 123, (SFAS 123),
"Accounting for Stock-Based
Compensation" was implemented in January
1996. As permitted by SFAS 123, the
Company has continued to account for
stock compensation to employees by
applying the provisions of Accounting
Principles Board Opinion No. 25. If the
accounting provisions of SFAS 123 had
been adopted, net loss and loss per share
would have been as follows:
1996 1995
_________________________________________
Net loss
As reported $(1,761,064) $(1,246,481)
Pro forma (1,932,628) (1,307,960)
________________________________________
Loss per share
As reported $(.32) $(0.36)
Pro forma (.36) (0.38)
________________________________________
For employees, the fair value of stock
options used to compute pro forma net
loss and loss per share disclosures is
the estimated present value at grant
date using the Black-Scholes
option-pricing model with the following
weighted average assumptions for 1996
and 1995: Expected volatility of 54% for
both years; a risk free interest rate
of 5.52% in 1996 and 6.32% in 1995; and
an expected option life of 2.72 years in
1996 and 2.25 years in 1995.
F-31
<PAGE>
Tengasco, Inc.
(formerly Onasco Companies, Inc.)
Notes to Consolidated Financial Statements
- -------------------------------------------------------------------------------
13. Income Taxes The Company had no taxable income during
the years ended December 31, 1996 and
1995.
A reconciliation of the statutory U.S.
Federal income tax and the income tax
provision included in the accompanying
consolidated statements of loss is as
follows:
<TABLE>
<CAPTION>
Year ended December 31, 1996 1995
----------------------------------------------------------------
<S> <C> <C>
Statutory rate 34% 34%
Tax (benefit) at statutory rate $(599,000) $(424,000)
State income tax (benefit) (99,000) (75,000)
Other 3,000 17,000
Increase in deferred tax asset
valuation allowance 695,000 482,000
----------------------------------------------------------------
Total income tax provision $ - $ -
----------------------------------------------------------------
<CAPTION>
The components of the net deferred tax assets and liabilities are
as follows:
Year ended December 31, 1996 1995
----------------------------------------------------------------
Deferred tax asset:
Basis difference in marketable
equity securities $ - $ 238,000
Net operating loss carryforward 798,000 218,000
Capital loss carryforward 238,000 -
Accrued expenses 223,000 39,000
----------------------------------------------------------------
1,259,000 495,000
Valuation allowance (1,177,000) (482,000)
----------------------------------------------------------------
82,000 13,000
----------------------------------------------------------------
Deferred tax liability:
Oil and gas properties 81,000 13,000
Property and equipment 1,000 -
----------------------------------------------------------------
82,000 13,000
----------------------------------------------------------------
Net deferred taxes $ - $ -
----------------------------------------------------------------
</TABLE>
F-32
<PAGE>
Tengasco, Inc.
(formerly Onasco Companies, Inc.)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
The Company recorded a valuation
allowance at December 31, 1996 and 1995
equal to the excess of deferred tax
assets over deferred tax liabilities as
management is unable to determine that
these tax benefits are more likely than
not to be realized.
As of December 31, 1996, the Company had
net operating loss carryforwards for
federal income tax purposes of
approximately $l,995,000 which will
expire, if not utilized, as follows:
Year Amount
----------------------------------------------------------
2010 $ 546,000
2011 1,449,000
----------------------------------------------------------
Total $1,995,000
----------------------------------------------------------
Additionally, at December 31, 1996, the
Company has a capital loss carryforward
of approximately $594,000 which will
expire, if not offset against a capital
gain, in 2001.
14. Subsequent Events In May 1997, the Company entered into a
term loan with an individual for
aggregate proceeds of $l,000,000 which
the Company will receive at various
times in the second and third quarters
of 1997. The Company provided the lender
with 100,000 shares of common stock as a
loan origination fee. The loan, which
is due December 31, 1997, bears interest
at 11% per annum and is secured by
equipment owned by a major shareholder
of the Company. IRC is serving as
guarantor on the loan facility. In
conjunction with the loan agreement, the
lender has an option to purchase 300,000
shares of the Company's common stock
from IRC.
In May 1997, the Company entered into a
joint venture agreement with Enserch
Energy Services, Inc. ("EES") whereby
the Company will share equally in the
gross profit from any sales to customers
the parties refer to each other for
energy services. The agreement is in
effect until 2002 at which time the
Company and EES can continue the
agreement for successive one-year terms.
F-33
<PAGE>
Tengasco, Inc.
(formerly Onasco Companies, Inc.)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
15. Supplemental Disclosure of
Cash Flows The Company paid approximately $26,000
and $33,000 for interest in 1996 and
1995, respectively. The Company paid $0
for income taxes in 1996 and 1995.
In 1996, the Company transferred
property and equipment with a net book
value of $46,539 to lenders in exchange
for debt reductions aggregating $42,865
resulting in a loss of $3,674.
In 1996, the Company issued 114,466
shares of common stock and common stock
subscribed to extinguish approximately
$1,060,000 of debt, which approximated
fair value of the shares.
In 1995, The Company issued 4,000,000
shares of common stock and a $450,000 8%
promissory note to IRC (see Note 3) to
acquire approximately $l,752,000 of
assets including property, plant, and
equipment, oil and gas properties and
marketable equity securities. The
Company recorded these assets at the
lower of market or IRC's historical
cost basis, except for the marketable
equity securities which were brought
over at their lower market value.
In 1995, the Company issued
approximately 164,300 shares of common
stock to extinguish approximately
$882,000 of debt, which approximated
fair value of the shares. The
extinguished debt included the $450,000
8% promissory note, discussed above.
16. Supplemental Oil
and Gas Information Information with respect to the
Company's oil and gas producing
activities is presented in the following
tables. Estimates of reserve quantities,
as well as future production and
discounted cash flows before income
taxes, were determined by Coburn
Petroleum Engineering, independent
petroleum engineer, as of December 31,
1996 and 1995.
Oil and Gas Related Costs
The following table sets forth
information concerning costs related to
the Company's oil and gas property
acquisition, exploration and development
activities in the United States during
the years ended December 31, 1996 and
1995:
F-34
<PAGE>
Tengasco, Inc.
(formerly Onasco Companies, Inc.)
Notes to Consolidated Financial Statements
- -------------------------------------------------------------------------------
1996 1995
----------------------------------------------------------
Property acquisition
Proved $ 78,991 $607,809
Unproved 25,274 15,352
Less - proceeds from sales of
properties (100,000) -
Development costs 673,022 43,210
-----------------------------------------------------------
$ 677,287 $666,371
-----------------------------------------------------------
Results of Operations from Oil and Gas Producing Activities
The following table sets forth the Company's results of
operations from oil and gas producing activities for the
years ended December 31, 1996 and 1995:
1996 1995
-----------------------------------------------------------
Revenues $ 26,253 $ 27,802
Production costs and taxes (17,138) (20,072)
Depreciation, depletion and
amortization (52,145) (24,011)
-----------------------------------------------------------
Results of operations before
income taxes (43,030) (16,281)
Income taxes - -
-----------------------------------------------------------
Results of operations from oil
and gas producing activities $(43,030) $(16,281)
-----------------------------------------------------------
In the presentation above, no deduction has been made for
indirect costs such as corporate overhead or interest
expense. No income taxes are reflected above due to the
Company tax loss carryforwards. For the years ended
December 31, 1996 and 1995, the depreciation, depletion
and amortization rate per barrel of oil equivalent
production was $20.16 and $90.84, respectively.
Oil and Gas Reserves (unaudited)
The following table sets forth the Company's net proved oil
and gas reserves at December 31, 1996 and 1995 and the
changes in net proved oil and gas reserves for the years
then ended. Proved
F-35
<PAGE>
Tengasco, Inc.
(formerly Onasco Companies, Inc.)
Notes to Consolidated Financial Statements
- -------------------------------------------------------------------------------
reserves represent the estimated
quantities of crude oil and natural gas
which geological and engineering data
demonstrate with reasonable certainty to
be recoverable in the future years from
known reservoirs under existing economic
and operating conditions. The reserve
information indicated below requires
substantial judgment on the part of the
reserve engineers, resulting in estimates
which are not subject to precise
determination. Accordingly, it is
expected that the estimates of reserves
will change as future production and
development information becomes available
and that revisions in these estimates
could be significant.
<TABLE>
<CAPTION>
Oil (bbls) Gas (Mcf)
------------------------------------------------------------------------
<S> <C> <C>
Proved reserves
Balance, January 1, 1995 - -
Acquisition of proved reserves 101,565 5,337,978
Production - (1,586)
------------------------------------------------------------------------
Balance, December 31, 1995 101,565 5,336,392
Discoveries and extensions - 17,212,571
Revisions of previous estimates - 33,902
Production - (15,510)
-------------------------------------------------------------------------
Balance, December 31, 1996 101,565 22,567,355
-------------------------------------------------------------------------
Proved developed non-producing
reserves at, December 31, 1996 - 7,167,350
-------------------------------------------------------------------------
Proved developed non-producing
reserves at, December 31, 1995 - 2,536,388
-------------------------------------------------------------------------
</TABLE>
Of the Company's total proved reserves as
of December 31, 1996, approximately 31%
were classified as proved developed
nonproducing and approximately 69% were
classified as proved undeveloped. All of
the Company's reserves are located in the
continental United States.
F-36
<PAGE>
Tengasco, Inc.
(formerly Onasco Companies, Inc.)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Standardized Measure of Discounted
Future Net Cash Flows (unaudited)
The standardized measure of discounted
future net cash flows from the Company's
proved oil and gas reserves at December
31, 1996 and 1995 is presented in the
following table:
<TABLE>
<CAPTION>
1996 1995
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Future cash inflows $84,106,507 $11,892,672
Future production costs and taxes (6,219,598) (1,818,322)
Future development costs (5,775,000) (600,000)
Future income tax expenses (18,909,520) (2,156,985)
---------------------------------------------------------------------------------------------
Net future cash flows 53,202,389 7,317,365
Discount at 10% for timing of cash flows (22,823,876) (3,653,903)
---------------------------------------------------------------------------------------------
Discounted future net cash
flows from proved reserves 30,378,513 $3,663,462
---------------------------------------------------------------------------------------------
The following table sets forth the
changes in the standardized measure of
discounted future net cash flows from
proved reserves during 1996 and 1995:
<CAPTION>
1996 1995
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of year $ 3,663,462 $ -
---------------------------------------------------------------------------------------------
Sales, net of production costs
and taxes (9,115) (7,730)
Acquisition of proved reserves - 4,665,382
Discoveries and extensions 33,874,577 -
Changes in prices and
production costs 2,374,267 -
Revisions of quantity estimates 42,164 -
Net change in income taxes (9,975,394) (994,190)
Interest factor - accretion of discount 465,765 -
Changes in production rates
and other (57,213) -
---------------------------------------------------------------------------------------------
Balance, end of year $30,378,513 $3,663,462
---------------------------------------------------------------------------------------------
</TABLE>
F-37
<PAGE>
Tengasco, Inc.
(formerly Onasco Companies, Inc.)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Estimated future net cash flows
represent an estimate of future net
revenues from the production of proved
reserves using current sales prices,
along with estimates of the operating
costs, production taxes and future
development and abandonment costs (less
salvage value) necessary to produce such
reserves. The average prices used at
December 31, 1996 and 1995 were $19.10
and $17.00 per barrel of oil and $2.94
and $l.91 per mcf of gas, respectively.
No deduction has been made for
depreciation, depletion or any indirect
costs such as general corporate overhead
or interest expense.
Operating costs and production taxes are
estimated based on current costs with
respect to producing gas properties.
Future development costs are based on
the best estimate of such costs assuming
current economic and operating
conditions.
Income tax expense is computed based on
applying the appropriate statutory tax
rate to the excess of future cash
inflows less future production and
development costs over the current tax
basis of the properties involved, less
applicable carryforwards, for both
regular and alternative minimum tax.
The future net revenue information
assumes no escalation of costs or
prices, except for gas sales made under
terms of contracts which include fixed
and determinable escalation. Future
costs and prices could significantly
vary from current amounts and,
accordingly, revisions in the future
could be significant.
F-38
<PAGE>
TENGASCO, INC.
(formerly Onasco Companies, Inc.)
CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended
June 30, 1997
F-39
<PAGE>
TENGASCO, INC.
(formerly Onasco Companies, Inc)
CONTENTS
Consolidated Financial Statements
Balance sheets 2
Statements of loss 3
Statements of stockholders' equity 4
Statements of cash flows 5
Notes to financial statements 6
F-40
<PAGE>
TENGASCO, INC.
(Formerly Onasco Companies, Inc.)
Balance Sheets
June 30, 1997
ASSETS
June 30, December 31,
1997 1996
(Unaudited) (Audited)
------------- -------------
Current Assets:
Cash and cash equivalents $ 220,937 $ 146,554
Accounts Receivable 2,561 4,658
Other current assets 3,076 7,463
------------- -------------
Total current assets 226,574 158,675
Oil and gas properties, net (on the basis
of full cost accounting) 1,351,798 1,287,142
------------- -------------
Pipeline facilities, under construction,
at cost 1,167,192 887,315
Property and equipment, net 235,791 203,244
Other 18,901 190,845
------------- -------------
$ 3,000,256 $ 2,727,221
============= =============
The accompanying notes are an integral part of these financial statements
F-41
<PAGE>
TENGASCO, INC.
(Formerly Onasco Companies, Inc.)
CONSOLIDATED BALANCE SHEETS
June 30, 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
1997 1996
(Unaudited) (Audited)
----------- -------------
Current liabilities
Notes payable $ 1,750,000 $ 780,000
Loans payable to affiliates 0 48,190
Current maturities of long-term debt 24,742 14,017
Accounts payable - trade 249,916 347,093
Accrued liabilities 62,769 35,086
------------ ------------
Total current liabilities 2,087,427 1,224,386
Long term debt, less current maturities 85,137 47,828
------------ ------------
Total liabilities 2,172,564 1,272,214
------------ ------------
Stockholders' equity
Common stock, $.001 par value,
50,000,000 shares authorized 6,123 5,708
Additional paid-in capital 5,400,615 4,783,369
Unamortized stock award (179,377) (292,186)
Deficit (4,399,669) (3,041,884)
------------- ------------
Total stockholders' equity 827,692 1,455,007
------------- -------------
$ 3,000,256 $ 2,727,221
============= =============
The accompanying notes are an integral part of these financial statements
F-42
<PAGE>
TENGASCO, INC.
(Formerly Onasco Companies, Inc.)
STATEMENT OF LOSS
(Unaudited)
For the Six For the Six
Months ended Months ended
June 30, June 30,
1997 1996
------------ ------------
Revenues:
Oil and gas revenues $ 0 $ 18,400
---------- ----------
Total Revenues 0 18,400
---------- ----------
Costs and other deductions
Field Expenses 41,718 6,103
Depletion, depreciation and amortization 33,296 40,860
Amortization of deferred loan costs 170,833 0
Interest expense 300,322 7,001
General and administrative costs 811,606 641,800
---------- ----------
Total costs and other deductions 1,357,785 695,764
---------- ----------
Net loss (1,357,785) (677,364)
- ---------------------------------- ---------- ----------
Loss per share of common stock (.24) (.12)
- ---------------------------------- ========== ==========
The accompanying notes are an integral part of these financial statements
F-43
<PAGE>
TENGASCO, INC.
(Formerly Onasco Companies, Inc.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Additional Unamortized
Common Stock Paid-in Stock
------------------- Capital Award Deficit
# Shares Amount ---------- ------------ --------
--------- ------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1996 5,707,827 $5,708 $4,783,369 $(292,186) $(3,041,884)
Common Stock issued for exercised options 330,305 329 90,504
Common stock subscribed for the
extinguishment of debt 86,084 86 484,135
Stock option award 30,000 (30,000)
Amortization of stock award (69,061) 142,809
Common stock options issued 81,668
Net loss for period ended June 30, 1997 (1,357,785)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance June 30, 1997 6,124,216 $6,123 $5,400,615 $(179,377) $(4,399,669)
========= ====== ========== ========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements
F-44
<PAGE>
TENGASCO, INC.
(Formerly Onasco Companies, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six For the Six
Months Ended Months Ended
June 30, 1997 June 30, 1996
-------------- --------------
Operating activities
Net loss $ (1,357,785) $ (677,364)
Adjustments to reconcile net loss to
cash used in operating activities:
Depletion, depreciation and amortization 33,296 40,860
Amortization of deferred loan costs 170,833 0
Amortization of imputed value of stock
warrants issued 220,000 0
Compensation paid in stock options 155,416 119,200
Changes in assets and liabilities:
Accounts receivable 2,097 4,818
Prepaid expenses and other 4,387 (49,310)
Accounts payable (97,177) 223,812
Accrued liabilities 27,683 1,605
Stockholder advances payable (48,190) 0
-------------- --------------
Cash used in operating activities (889,440) (336,379)
-------------- --------------
Investing activities
Proceeds from sale of marketable equity
secuurities 0 250,000
Additions to property and equipment (64,735) (18,935)
Additions to oil and gas properties (64,656) (610,740)
Additions to pipeline facilities (279,877) 0
-------------- --------------
Cash used in investing activities (409,268) (379,675)
-------------- --------------
Financing activities
Proceeds from borrowings 809,387 27,750
Repayments of borrowings (11,350) (5,350)
Proceeds from issuance of common stock 575,054 685,200
-------------- --------------
Cash provided by financing activities $ 1,373,091 $ 707,600
-------------- --------------
Net increase (decrease) in cash and cash
equivalents 74,383 (8,454)
Cash and cash equivalents, beginning of
period 146,554 712
Cash and cash equivalents, end of period $ 220,937 $ (7,742)
============== =============
The accompanying notes are an integral part of these financial statements
F-45
<PAGE>
TENGASCO, INC.
(Formerly Onasco Companies, Inc.)
Notes to Consolidated Financial Statements
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form l0-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of Management,
all adjustments (consisting of only normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the six month period ended June 30, 1997 are not necessarily indicative of
the results that may be expected for the year ending December 31, 1997. For
further information, refer to the Company's consolidated financial
statements and footnotes thereto for the year ended December 31, 1996,
included in Form 10-SB, which are incorporated by reference herein.
F-46
<PAGE>
No dealer, salesman or other person has been authorized to
give any information or to make any representation not contained in this
Prospectus and, if given or made, such information or representation must not be
relied upon as having been authorized by the Company. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any security
other than the securities offered by this Prospectus or an offer to sell or a
solicitation of an offer to buy the securities to or from any person in any
jurisdiction in which such offer or solicitation would be unlawful. Neither the
delivery of this Prospectus nor any sale made hereunder at any time shall, under
any circumstances, imply that there has been no change in the business or
affairs of the Company since the date hereof or that the information in this
Prospectus herein is correct as of any time subsequent to its date.
TABLE OF CONTENTS
Page
----
Available Information . . . . . . . . . . . . . . 2
Prospectus Summary . . . . . . . . . . . . . . . 3
The Company . . . . . . . . . . . . . . 3
The Offering . . . . . . . . . . . . . . 5
Summary Financial Data . . . . . . . . . 5
Risk Factors . . . . . . . . . . . . . . . . . . . 6
Use of Proceeds . . . . . . . . . . . . . . . . . . 13
Determination of Price of Shares . . . . . . . . . 13
Dilution . . . . . . . . . . . . . . . . . . . . . 13
Selling Shareholders . . . . . . . . . . . . . . 13
Plan of Distribution . . . . . . . . . . . . . . . 18
Legal Proceedings . . . . . . . . . . . . . . . . 19
Directors, Executive Officers, Promoters and
Control Persons . . . . . . . . . . . . . . . . . 19
Identification of Directors and Officers . 19
66
<PAGE>
Business Experience . . . . . . . . . . . 21
Committees . . . . . . . . . . . . . . . . 22
Family Relationships . . . . . . . . . . . 22
Involvement in Certain Legal Proceedings . . 23
Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . . . . 23
Security Ownership of Certain Beneficial
Owners . . . . . . . . . . . . . . . . . . . 23
Changes in Control . . . . . . . . . . . . . 25
Description of Securities . . . . . . . . . . . . . . 25
Authorized Capital Stock . . . . . . . . . . 25
Indemnification of Directors, Officers,
Employees and Agents . . . . . . . . . . . . . . . . . 26
Description of Business . . . . . . . . . . . . . . . 28
Glossary of Terms . . . . . . . . . . . . . 28
Business Development . . . . . . . . . . . . 29
General . . . . . . . . . . . . . . . . . . 35
Governmental Regulations . . . . . . . . . . 37
Principal Products or Services and Markets . . 38
Reserve Analyses . . . . . . . . . . . . . . . 38
Distribution Methods of Products or Services . 39
Status of Any Publicly Announced
New Product or Service . . . . . . . . . . . . 39
Competitive Business Conditions, Competitive
Position in the Industry and
Methods of Competition . . . . . . . . . . . . 40
Sources and Availability of Raw Materials
and Names of Principal Suppliers . . . . . . 41
Dependence on One or a Few Major Customers . . 41
67
<PAGE>
Patents, Trademarks, Licenses, Franchises,
Concessions, Royalty Agreements, Labor
Contracts, including Duration . . . . . . . . 41
Need for Governmental Approval of Principal
Products or Services . . . . . . . . . . . . . 41
Effect of Existing or Probable Governmental
Regulations on Business . . . . . . . . . . . . 42
Research and Development . . . . . . . . . . . 43
Cost and Effects of Compliance with
Environmental Laws . . . . . . . . . . . . . . 43
Number of Total Employees and
Number of Full-Time Employees . . . . . . . . . 44
Management's Discussion and Analysis of
Plan of Operation . . . . . . . . . . . . . . . . . . . . 44
Other Significant Plans . . . . . . . . . . . . 45
Results of Operations . . . . . . . . . . . . . 46
Liquidity . . . . . . . . . . . . . . . . . . 47
Description of Property . . . . . . . . . . . . . . . . . 47
Property Location, Facilities, Size and Nature
of Ownership . . . . . . . . . . . . . . . . . 47
Disclosure of Oil and Gas Operations . . . . . . 49
Certain Relationships and Related Transactions
Transactions with Management and Others . . . . . . . . . 50
Certain Business Relationships . . . . . . . . 50
Indebtedness of Management . . . . . . . . . . 50
Parents of the Issuer . . . . . . . . . . . . . 50
Transactions with Promoters . . . . . . . . . . 51
Market Price of and Dividends on the Common Stock
and Other Stockholder Matters . . . . . . . . . . . . . . 51
Market Information . . . . . . . . . . . . . . 51
Holders . . . . . . . . . . . . . . . . . . . . 52
68
<PAGE>
Dividends . . . . . . . . . . . . . . . . . . . 52
Executive Compensation . . . . . . . . . . . . . . . . . 52
Cash Compensation . . . . . . . . . . . . . . . 52
Bonuses and Deferred Compensation . . . . . . . 55
Compensation Pursuant to Plans . . . . . . . . . 55
Pension Table . . . . . . . . . . . . . . . . . 56
Other Compensation . . . . . . . . . . . . . . . 56
Compensation of Directors . . . . . . . . . . . 59
Employment Contracts . . . . . . . . . . . . . . 59
Termination of Employment and Change of Control . 59
Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure . . . . . . . . . . . . . . . . . 59
Change from David T. Thomson, CPA to
Charles M. Stivers, CPA . . . . . . . . . . . . 59
Change from Charles M. Stivers, CPA, to
Price-Bednar, LLP, CPA . . . . . . . . . . . . . 61
Change from Price-Bednar, LLP, CPA to
Charles M. Stivers, CPA . . . . . . . . . . . . 62
Change from Charles M. Stivers, CPA to
BDO Seidman, LLP . . . . . . . . . . . . . . . . 63
Legal Matters . . . . . . . . . . . . . . . . . . . . . . 64
Experts . . . . . . . . . . . . . . . . . . . . . . . . . 65
Financial Statements . . . . . . . . . . . . . . . . . . . F-1
Audited Financial Statements for 1994 . . . . . F-1
Audited Financial Statements for 1995 and 1996 . F-10
Unaudited Financial Statements for
Six Months ended June 30, 1997 . . . . . . . . . F-39
69
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24 - INDEMNIFICATION OF OFFICERS AND DIRECTORS
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. The Company's charter does not
provide any limitations on this right of indemnification.
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
entitled to mandatory indemnification under Section 48-18-503 or that be 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
II-1
<PAGE>
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. The Company's corporate charter does not provide
for any limitations on these rights of indemnification.
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 of 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.
ITEM 25 - OTHER EXPENSES OF ISSUANCE and DISTRIBUTION
The following table sets forth the estimated costs and
expenses to be borne by the Company in connection with the Offering described in
the Registration Statement other than underwriting commissions and discounts.
Registration Fee $ 1,005.18
Legal Fees and Expenses $10,000.00
Accounting Fees and Expenses $15,000.00
Printing Expenses $ 500.00
Consulting Fee $ 500.00
Miscellaneous Expense $ 1,000.00
----------
Total $28,005.18
II-2
<PAGE>
ITEM 26 - 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
Estate of Raymond E. Johnson 4/3/96 10,000 6
Charles N. Manhoff 4/10/96 88,356 6
Joseph B. Mattei 4/19/96 37,000 6
William A. Moffett 4/23/96 37,397 6
6/25/97 72,603 6
II-3
<PAGE>
Jeffrey DeMunnik 5/29/96 16,664 6
3/15/97 4,000 6
Robert M. Carter 6/15/96 15,671 6
8/26/96 2,000 6
6/30/97 7,329 6
Kelly S. Grabill 7/29/96 12,500 6
Jeff Brockman 7/29/96 10,000 6
8/29/96 62,329 6
Robert Janda 9/5/96 22,730 $187,520
Donald Janda 9/5/96 2,131 $ 17,580
William Evans 9/5/96 12,121 $100,000
Walter C. Arzonetti 4/22/97 88,493 6
Neil Harding 5/21/97 100,000 8
Michael McCown 6/30/97 50,000 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, "Description of Business"
- "Business Development" above.
3 Issued in consideration of services rendered to the
Company. See, "Description of Business" - "Business
Development" 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, "Description of
Business" - "Business Development" 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
II-4
<PAGE>
$0.275 per share. See, "Executive Compensation" -
"Restricted Stock Options Table" above.
7 Issued in exchange for an oil drilling rig.
8 Issued as consideration for the granting of a loan
in the amount of $1,000,000.
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 state securities laws, rules and regulations covering the offer and
sale of securities by available state exemptions from such registration.
ITEM 27 - EXHIBITS
The following exhibits are filed as a part of this
Registration Statement:
Number Description
3.1 Initial Articles of Incorporation
3.2 Bylaws
3.3 Articles of Amendment dated April 12, 1966
3.4 Articles of Amendment dated July 12, 1984
3.5 Articles of Amendment dated December 18, 1991
3.6 Articles of Amendment dated September 11, 1992
3.7 Articles of Incorporation of the Tennessee
II-5
<PAGE>
wholly-owned subsidiary **
3.8 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)
5.1 Opinion of Robson & Miller, LLP
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 Agreement with The Natural Gas Utility District
of Hawkins County, Tennessee
10.4 Agreement with Powell Valley Electric Cooperative, Inc.
10.5 Agreement with Enserch Energy Services, Inc.
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
23.1 Consent of Charles M. Stivers, CPA
23.2 Consent of David T. Thomson, CPA
23.3 Consent of BDO Seidman, LLP
23.4 Consent of Robson & Miller, LLP
99.1 Beech Creek Lease Schedule
99.2 Wildcat Lease Schedule
II-6
<PAGE>
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 Report
* Summaries of all exhibits contained within this
Registration Statement are modified in their entirety by
reference to these Exhibits.
** These are form documents much of which are substantially
handwritten and may be illegible. The best available copy
thereof has been filed with the Commission and copies may
be obtained from the principal executive offices of the
Company at no charge.
ITEM 28 - UNDERTAKINGS
The Company hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to the Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3)
of the Act;
(ii) Reflect in the Prospectus any facts or events which
individually or together represent a fundamental change in the information in
the Registration Statement; and
(iii) Include any additional or changed material
information on the plan of distribution.
(2) That, for the purpose of determining any liability under
the Act, treat each post-effective amendment as a new registration statement of
the securities offered, and the offering of the securities at that time to be
the initial bona fide offering.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
II-7
<PAGE>
The Company hereby undertakes:
(1) For determining any liability under the Act, treat the
information omitted from the form prospectus filed as part of this Registration
Statement in reliance upon Rule 430A and contained in a form of prospectus filed
by the Company under Rule 424(b)(1) or (4) or 497(n) under the Act as part of
the Registration Statement as of the time the Commission declared it effective.
(2) For determining liability under the Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and the offering of the securities as that time as the initial bona fide
offering of those securities.
Insofar as indemnification for liabilities arising under the
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised in the opinion of the Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than payment by the Company of expenses incurred or paid by a
director, officer or controlling person of the Company in the successful
defenses of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel that matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the questions whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-8
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of
1933, the registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements of filing of Form SB- 2 and authorized this
registration statement on its behalf by the undersigned, thereunto duly
authorized, in the City of Knoxville, State of Tennessee on the 30th day of
July, 1997.
Tengasco, Inc.
By: /s/ Michael E. Ratliff
--------------------------
Michael E. Ratliff
In accordance with the requirements of the Securities Act of
1933, this registration statement has been signed by the following persons in
the capacities and on the dates stated.
Signature Title Date
- --------- ----- ----
/s/ Michael E. Ratliff Chief Executive Officer July 29, 1997
- -----------------------
Michael E. Ratliff
/s/ Allen H. Sweeney Chairman of the Board July 29, 1997
- -------------------- of Directors
Allen H. Sweeney
/s/ Daniel G. Follmer President and Chief July 29, 1997
- --------------------- Financial Officer
Daniel G. Follmer
/s/ Joseph Earl Armstrong Director July 29, 1997
- -------------------------
Joseph Earl Armstrong
/s/ James B. Kreamer Director July 29, 1997
- ---------------------
James B. Kreamer
/s/ William A. Moffett Director July 29, 1997
- -----------------------
William A. Moffett
II-9
<PAGE>
/s/ Shigemi Morita Director July 29, 1997
- -------------------
Shigemi Morita
/s/ Robert M. Carter Executive Vice-President July 29, 1997
- ---------------------
Robert M. Carter
/s/ Sheila F. Sloan Treasurer July 29, 1997
- --------------------
Sheila F. Sloan
/s/ Elizabeth Wendelken Secretary July 29, 1997
- -----------------------
Elizabeth Wendelken
II-10
<PAGE>
EXHIBIT 3.1
<PAGE>
11835
Articles of Incorporation
OF THE
GOLD DEPOSIT MINING & MILLING COMPANY [LOGO] Mining Company
United States of America,
State of Utah,
County of Cache
-----------
For the purpose of establishing and conducting the business of mining and
reduction of ores, the undersigned do hereby associate themselves together by
incorporating under and in pursuance of the Laws of the State of
Utah, and do declare and agree as follows, that is to say:
I.
That the said Corporation shall be called and known by the name of GOLD
DEPOSIT MINING & MILLING COMPANY and shall be and is formed and organized at
Logan, Cache County, State of Utah in which said City shall be located its
principal and general office for the transaction of its official, financial,
general and commercial business; and the period of its existence shall be fifty
years, unless sooner dissolved according to law.
II.
That the names of the parties in this agreement, who are the Corporators of
this Incorporation, and their places of residence respectively, in full, are as
follows, to wit:
Robert Murdock Sen. Logan, Cache County, State of Utah
- -------------------------------------------------------------------------------
Robert Murdock Jr. Logan, Cache County, State of Utah
- -------------------------------------------------------------------------------
Haskell Engineering Co. Salt Lake City, State of Utah
- -------------------------------------------------------------------------------
William Green Salt Lake City, State of Utah
- -------------------------------------------------------------------------------
E. Green Salt Lake City, State of Utah
- -------------------------------------------------------------------------------
J. A. Crockett Logan, Cache County, State of Utah
- -------------------------------------------------------------------------------
III.
That the business and pursuit of this Corporation, and the objects for
which it is established are, and shall continue to be, to carry on and conduct a
general Mining, Milling, Leaching, Concentrating, Ore reducing and Smelting
business.
To examine, prospect and explore, and to work, develop, mine and extract
ores and minerals from lands, mines, works, options and claims.
To erect mills, smelters and reduction works in any suitable place, and
also any buildings, tramways, electric power, telegraph or telephone lines,
water ditches, pipe lines or works necessary or convenient for the purposes of
the company.
To purchase, or otherwise acquire, ores, and mineral-bearing substances,
tailings and concentrates, and to smelt and reduce the same, as well as the ores
and products extracted or produced from the property of the Company.
To acquire any invention, or the right or license to use any invention,
capable of being used for any of the purposes of the Company.
<PAGE>
2
Generally, to purchase, take or lease or in exchange, hire, locate, or
otherwise acquire any real and personal property, and any rights or privileges
which the Company may think necessary or convenient for the purposes of its
business; and in particular, any lands, mines, works, options, claims,
buildings, mills, reduction works, water, water rights, ditches, pipe-lines,
tramways, electric power, telegraph and telephone lines, licenses,
easements and privileges.
To improve, develop, sell, convey, lease, mortgage, dispose of, turn to
account or otherwise deal with all or any part of the property or rights of the
Company. To do all such other things as are incidental or conducive to the
attainment of the above objects, or any of them.
IV.
The amount of the Capital Stock of said Corporation shall be One Hundred
Thousand ($100,000.00) Dollars, which shall be divided into One Million
(1,000,000.00) Shares, of the face or par value of Ten cents each.
V.
The amount of stock subscribed and taken by each of the Corporators
above named, parties to this agreement, is as follows, to wit:
Robert Murdock Sen. 315,000.00
- -------------------------------------------------------------------------------
Robert Murdock Jr. 163,000.00
- -------------------------------------------------------------------------------
Haskell Engineering Co. 119,000.00
- -------------------------------------------------------------------------------
William Green 1,000.00
- -------------------------------------------------------------------------------
E. Green 1,000.00
- -------------------------------------------------------------------------------
J. A. Crockett 1,000.00
- -------------------------------------------------------------------------------
Remaining in the treasury 400,000.00
- -------------------------------------------------------------------------------
VI.
That the officers of said Company shall be: First, a Board of Five
Directors. Second, a President; Third, a Vice-President; Fourth, a Treasurer;
Fifth, a Secretary.
- --------------------------------------------------------------------------------
Said offices of Treasurer and Secretary may be held by the same person.
The President, Vice-President, and Treasurer, shall be Directors.
VII.
That the qualification of the officers of said Corporation shall be as
follows: To be elegible to the office of Director, President, Vice-President or
Treasurer, the person must be the owner, as shown by the books of the
Corporation, of at least One Thousand shares of the Capital Stock of said
Corporation. A person need not be a stockholder of said Corporation to be
eligible to the office of Secretary thereof.
The term of office of said officers of said Corporation shall be one year
and until their successors shall be duly elected and qualified, unless sooner
resigned or removed, and any vacancy in the Board of Directors may be
filled by the remaining members thereof, and any vacancy in any of the other
offices may be filled by the Board of Directors until the next regular meeting
of the Stockholders, provided, that the following named persons, parties hereto,
shall be Directors of said Corporation from the date of incorporation hereof,
until their successors shall have been duly elected at the first regular
election of said Corporation, as hereinafter provided, and shall have duly
qualified, namely:
Robert Murdock Sen., Robert Murdock Jr., Wm. Green, E. Green and J. A.
Crockett and that the said Robert Murdock Sen. shall be President; the said E.
Green, Vice-President; the said Robert Murdock Jr., Treasurer, and the said
Robert Murdock Jr., Secretary.
From the date hereof until their successors shall have been duly elected at
the first regular (illegible) of officers of said Corporation, as hereinafter
provided, and shall have duly qualified.
<PAGE>
3
VIII.
The first meeting of the stockholders of said Corporation for the election
of officers, being the first annual meeting, shall be held as above provided, on
the Second day of January 1917, and it is hereby provided, that a failure to
hold said last named meeting, or any annual meeting of the stockholders of said
Corporation, at the day appointed, shall not forfeit or in any way interfere
with the corporate rights acquired under this agreement, but any such meeting
may be held at any subsequent time upon call and giving notice as provided by
law. Such notice must specify the purpose or purposes for which any special
meeting is called. No notice shall be required of stated or annual meetings.
IX.
That any or either of the officers of said Corporation may be removed by
the holders of a majority of the capital stock of said Corporation voting
therefor at a stockholders' meeting, duly called and held to consider the
question of such removal, and any or either of said officers may resign by
filing a written resignation in the general office of said Corporation.
X.
That three members of the entire Board of Directors, provided in Article VI
of this Agreement, shall constitute a quorum thereof, and be authorized to
transact the business of said Corporation, and exercise its corporate powers.
XI.
That the private property of the stockholders shall not be liable for the
debts or obligations of said Corporation.
XII.
That said Corporation shall, and hereby does, purchase, take, receive and
hold the following described mining property, with appurtenances, privileges and
franchises, situated in The Battle Mountain Mining District, Lander County,
State of Nevada, in full payment of and for the Six Hundred Thousand (600,000.)
shares of the Capital Stock of the Corporation, issued in pursuance to this
agreement, to wit: The Greenwitch, the Gold Flake, the Seal, the Hardy, the
Silver Dipper, the Carbonate Hill, the Gold Metal, the Triangle, the Republic,
lode mining claims, and undivided one half interest in, to and of the Buzzard
Lode Mining Claim, all situate in said Battle Mountain Mining District.
<PAGE>
STATE OF UTAH )
COUNTY OF CACHE ) ss.
Robert Murdock Sen. and Robert Murdock Jr. and John A. Crockett being first
severaly duly sworn, each for himself says: That they and each of them are
parties to the foregoing Articles of Agreement for the incorporation of the Gold
Deposit Mining & Milling Company: That all of the said incorporators are
residents of the State of Utah: That it is bona fide their intention to commence
and carry on the business mentioned in said agreement: That affiants, and each
of them, verily believe that each and all parties to said agreement have paid
the full amount of the stock subscribed for by them, and each of them
respectively, in manner and form as therein set forth, and that the full par
value of said Capital Stock has been paid in manner and form as set forth in
said agreement, and that all the statements made in said agreement are true.
/s/ Robert Murdock
-----------------------------
/s/ Robert Murdock Jr.
-----------------------------
/s/ John A. Crockett
-----------------------------
Subcribed and sworn to before me this 12th day of April, [illegible]
[SEAL] /s/ [illegible]
------------------------------
Notary Public
My Commission expires March 15th, 1920
STATE OF UTAH )
COUNTY OF CACHE ) ss.
On the 16th day of April A.D. 1916 personally appeared before me Robert
Murdock Sen. and Robert Murdock Jr., the signers of the above investment, who
duly acknowledged to me that they executed the same.
[SEAL] /s/ [illegible]
------------------------------
Notary Public
My Commission expires March 15th, 1920
<PAGE>
STATE OF UTAH )
COUNTY OF CACHE ) ss.
I, the undersigned County Clerk, in and for the County of Cache, State of
Utah, do hereby certify that the foregoing is a full, true and correct copy of
the Articles of Incorporation of the Gold Deposit Mining and Milling Company and
the oath of affirmation of the Incorporators, and I further certify that the
said corporation has duly filed in my office the Articles of Incorporations,
together with the oath of affirmation of the incorporators and oath of office of
each officer, as required by Chapter 1 of Title 14, Complied Laws of Utah, 1907.
In witness whereof I have hereunto set my hand and affixed my official seal
this 24 day of April A.D. 1916.
/s/ [illegible]
-------------------------------
County Clerk
By /s/ [illegible]
-------------------------------
Deputy Clerk
[SEAL]
<PAGE>
EXHIBIT 3.2
<PAGE>
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.
by-laws 1
<PAGE>
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
by-laws 2
<PAGE>
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.
by-laws 3
<PAGE>
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
by-laws 4
<PAGE>
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 further 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.
by-laws 5
<PAGE>
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
ex officio member of every committee of the board.
by-laws 6
<PAGE>
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
by-laws 7
<PAGE>
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 as 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
faithful 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.
by-laws 8
<PAGE>
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
by-laws 9
<PAGE>
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.
by-laws 10
<PAGE>
ARTICLE XI - AMENDMENTS
These by-laws 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.
by-laws 11
<PAGE>
EXHIBIT 3.3
<PAGE>
ARTICLES OF AMENDMENT TO THE [SEAL]
ARTICLES OF INCORPORATION OF
Gold Deposit Mining & Milling Company
Pursuant to the provisions of Section 16-10-57 of the Utah Business
Corporation Act, the undersigned corporation adopts the following Articles of
Amendment to its Articles of Incorporation:
FIRST: The name of the corporation is Gold Deposit Mining & Milling
Company.
SECOND: The following amendment of the Articles of Incorporation was
adopted by the shareholders of the corporation on April 1, 1966, in the manner
prescribed by the Utah Business Corporation Act.
(Insert or attach Amendment)
RESOLVED that Article I of the Articles of
Incorporation of Gold Deposit Mining & Milling
Company be and hereby is amended so as to read as
follows:
[ILLEGIBLE]
I
"That the said corporation shall be called and
known by the name of GOLD DEPOSIT MINING & MILLING
COMPANY, and the period of its existence shall be
perpetual."
THIRD: The number of shares of the corporation outstanding at the time of
such adoption was 983,015; and the number of shares entitled to vote thereon was
983,015.
<PAGE>
[ILLEGIBLE]
FIFTH: The number of shares voted for such amendment was 701,145; and the
number of shares voted against such amendment was: None.
SIXTH: The number of shares of stock [ILLEGIBLE] entitled to vote thereon
as a class voted for and against such amendment, respectively was: None
[ILLEGIBLE]
SEVENTH: the manner, if not set forth in such amendment, in which any
exchange, reclassification, or [ILLEGIBLE] provided for in the amendment shall
be effected, is, [ILLEGIBLE]
No change
EIGHTH: [ILLEGIBLE] in the amount of stated capital, and the amount
of [ILLEGIBLE], by such amendment, are as follows. [ILLEGIBLE]
No change
Dated April 9, 1966.
Gold Deposit Mining & Milling Company (Note 3)
/s/ [ILLEGIBLE] )
its President )
)(Note 4)
/s/ [ILLEGIBLE] )
its Secretary and )
Treasurer )
State of Utah )
County of Salt Lake ) ss
I, [ILLEGIBLE], notary public, do hereby certify that on this 11th day of
April, 1966, personally appeared before me J.W. Andrews [ILLEGIBLE]
/s/ [ILLEGIBLE]
<PAGE>
and Treasurer of the corporation, and that the statements therein contained
are true.
In witness whereof I have hereunto set my hand and seal this 11th day of
April, A.D. 1966.
My commission expires May, 14, 1967.
/s/ [ILLEGIBLE]
Notary Public
Notes: 1. If inapplicable, insert "None".
2. If inapplicable, insert "No change".
3. Exact corporate name of corporation adopting the Articles of
Amendment.
4. Signatures and titles of officers signing for the corporation.
<PAGE>
EXHIBIT 3.4
<PAGE>
STATE OF UTAH
[STAMP]
Office of Lt. Governor/Secretary of State
CERTIFICATE OF AMENDMENT
OF
GOLD DEPOSIT MINING & MILLING COMPANY
I, DAVID S. MONSON, Lt. Governor/Secretary of State of the State of Utah,
hereby certify that duplicate originals of Articles of Amendment to the Articles
of Incorporation of
GOLD DEPOSIT MINING & MILLING COMPANY
duly signed and verified pursuant to the provisions of the Utah Business
Corporation Act, have been received in my office and are found to conform to
law.
ACCORDINGLY, by virtue of the authority vested in me by law, I hereby issue
this Certificate of Amendment to the Articles of Incorporation of
GOLD DEPOSIT MINING & MILLING COMPANY
and attach hereto a duplicate original of the Articles of Amendment.
File No. 11835
IN TESTIMONY THEREOF, I have
hereunto set my hand and affixed the
Great Seal of the State of Utah at Salt
Lake City, this l2th day of
July 1984 A.D.
/s/ David S. Monson
----------------------------------------
LT. GOVERNOR/SECRETARY OF STATE
<PAGE>
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
GOLD DEPOSIT MINING & MILLING COMPANY
Pursuant to the provisions of Section 16-10-57 of the Utah Business
Corporation Act, the undersigned corporation hereby adopts the following
Articles of Amendment to its Articles of Incorporation.
FIRST: The name of the corporation is Gold Deposit Mining & Milling
Company.
SECOND: The following amendments to the Articles of Incorporation of Gold
Deposit Mining & Milling Company were duly adopted by the shareholders of the
corporation at meetings held October 3, 1983, and July 9, 1984, in the manner
prescribed by the Utah Business Corporation Act, to-wit:
ARTICLE III - PURPOSES
a. To conduct business in all fields of high technology, including medical,
computer, and any other business or enterprise deemed to be beneficial to the
corporation.
b. To acquire by purchase, exchange, gift, bequest, subscription or
otherwise, and to hold, own, mortgage, pledge, hypothecate, sell, assign,
transfer, exchange or otherwise dispose of or deal in or with its own corporate
securities or stock or other securities, including without limitations, any
shares of stock, bonds, debentures, notes, mortgages, or other obligations, and
any certificates, receipts or other
<PAGE>
-2-
instruments representing rights or interests therein or any property or assets
created or issued by any person, firm, association, or corporation, or any
government or subdivisions, agencies or instrumentalities thereof; to make
payment therefor its own securities or to use its unrestricted and unreserved
earned surplus for the purchase of its own shares, and to exercise as owner or
holder of any securities, any and all rights, powers and privileges in respect
thereof.
c. To do each and every thing necessary, suitable or proper for the
accomplishment of any of the purposes or the attainment of any one or more of
the subjects herein enumerated, or which may at any time appear conducive to or
expedient for protection or benefit of this corporation, and to do said acts as
fully and to the same extent as natural persons might, or could do, in any part
of the world as principals, agents, partners, trustees or otherwise, either
alone or in conjunction with any other person, association or corporation.
d. The foregoing clauses shall be construed both as purposes and powers and
shall not be held to limit or restrict in any manner the general powers of the
corporation, and the enjoyment and exercise thereof, as conferred by the laws of
the State of Utah; and it is the intention that the purposes and powers
specified in each of the paragraphs of this Article III shall be regarded as
independent purposes and powers.
ARTICLE IV - CAPITAL STRUCTURE
The aggregate number of shares which this corporation shall have authority
to issue is 50,000,000 shares of one mill ($0.001) par value.
<PAGE>
-3-
All stock of the corporation shall be of the same class, common, and shall have
the same rights and preferences. Fully-paid stock of this corporation shall not
be liable to any further call or assessment. The Board of Directors is
authorized to establish other stock classes than common, to convert treasury or
unissued shares to other classes, and to fix and determine the relative rights
with respect to shares in each class.
Shareholders shall not have pre-emptive rights to acquire unissued shares
of stock of this corporation.
THIRD: The number of shares of the corporation outstanding at the time of
the adoption of such amendments was 980,778, and the number entitled to vote
thereon was 980,778.
FOURTH: The designation and number of outstanding shares of each class
entitled to vote thereon as a class were as follows, to-wit:
CLASS NUMBER OF SHARES
----- ----------------
Common 980,778
FIFTH: The number of shares voted for such amendments was 696,146, with
none opposing and none abstaining.
SIXTH: These amendments do not provide for any exchange, reclassification
or cancellation of issued shares.
SEVENTH: These amendments decrease the stated capital of the corporation
from $100,000 divided into 1,000,000 shares to $50,000 divided into 50,000,000.
IN WITNESS WHEREOF, the undersigned President and Secretary, having been
thereunto duly authorized have executed the foregoing Articles
<PAGE>
-4-
of Amendment for the corporation under the penalties of perjury this 10th
day of July, 1984.
GOLD DEPOSIT MINING & MILLING COMPANY
By /s/ Richard E. deButts
----------------------------------
Richard E. deButts, President
Attest:
/s/ Melissa Rodee
- ----------------------------
Melissa Rodee, Secretary
<PAGE>
EXHIBIT 3.5
<PAGE>
ARTICLES OF AMENDMENT
T0 THE ARTICLES OF INCORPORATION OF
GOLD DEPOSIT MINING & MILLING COMPANY
Pursuant to the provisions of Section 16-10-57 of the Utah Business
Corporation Act, the undersigned corporation hereby adopts the following
Articles of Amendment to its Articles of Incorporation.
FIRST: The name of the corporation is Gold Deposit Mining & Milling
Company.
SECOND: The following amendments to the Articles of Incorporation of Gold
Deposit Mining & Milling Company were duly adopted by the stockholders of the
corporation at a meeting held November 22, 1991, in the manner prescribed by the
Utah Business Corporation Act, to-wit:
ARTICLE I - NAME
The name of this corporation is "Onasco Companies, Inc.
and
To forward split the corporation's one mill ($0.001) par value common
voting stock presently issued and outstanding on a basis of 2.015496 for
one, retaining the par value at one mill per share, with appropriate
adjustments being made in the additional paid in capital and stated capital
accounts of the corporation.
THIRD: The number of shares of the corporation outstanding at the time of
the adoption of such amendments was 2,480,778, and the number entitled to vote
thereon was 2,480,778.
FOURTH: The designation and number of outstanding shares of each class
entitled to vote thereon as a class were as follows, to-wit:
CLASS NUMBER OF SHARES
----- ----------------
Common 2,480,778
FIFTH: The number of shares voted for such amendments was 1,339,146, with
none opposing and none abstaining.
SIXTH: Except as provided in Paragraph Seventh below, these amendments do
not provide for any exchange, reclassification or cancellation of issued shares.
SEVENTH: These amendments do effect a change in the stated capital of the
corporation. Pursuant to the resolution adopted by the stockholders of the
corporation at a meeting held November 22, 1991, the
<PAGE>
2,480,778 one mill ($0.001) par value common voting shares issued and
outstanding were forward split on a basis of 2.015496 for one, retaining the par
value at one mill ($0.001) per share, with appropriate adjustments being made in
the additional paid in capital and stated capital accounts of the corporation,
and resulting in a total of 5,000,000 shares of one mill ($0.001) par value
common voting stock being then issued and outstanding.
IN WITNESS WHEREOF, the undersigned President and Secretary, having been
thereunto duly authorized have executed the foregoing Articles of Amendment for
the corporation under the penalties of perjury this 16th day of December, 1991.
GOLD DEPOSIT MINING & MILLING COMPANY
By /s/ Jeannette Nikes
-------------------
Attest:
/s/ [illegible]
- -------------------
2
<PAGE>
EXHIBIT 3.6
<PAGE>
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
ONASCO COMPANIES, INC.
Pursuant to the provisions of Section 16-10a-1006 of the Utah Business
Corporation Act, the undersigned corporation hereby adopts the following
Articles of Amendment to its Articles of Incorporation.
ARTICLE ONE
The name of the corporation is Onasco Companies, Inc.
ARTICLE TWO
The corporation's Articles of Incorporation are hereby amended by adding an
Article XVII and an Article XVIII to such Articles of Incorporation, the text of
which additional articles is set forth in full below:
"ARTICLE XVII
Effective as of 9:00 A.M. Central Time on September 15, 1992 (the
"Effective Time"), all of the outstanding common stock, par value $0.001 per
share, of the Corporation is hereby reclassified and combined so that, at the
Effective Time, each outstanding share of common stock shall become one
twentieth of a share of new common stock ("Reconstituted Common Stock").
Following the Effective Time, the holders of issued and outstanding shares of
common stock of the Corporation outstanding prior to the Effective Time shall
cease to be holders of such shares and shall be issued one share of
Reconstituted Common Stock for each 20 shares of common stock previously held.
Following the Effective Time, each share of common stock outstanding prior to
the Effective Time shall be deemed for all purposes to represent one twentieth
of a share of Reconstituted Common Stock, and each certificate representing
shares of common stock outstanding prior to the Effective Time shall be deemed
to represent a number of shares of Reconstituted Common Stock which is equal to
one twentieth of the number of shares of common stock previously represented by
such certificate. No fractional shares or scrip shall be issued upon such
reclassification and combination. In lieu of the issuance of fractional shares
or scrip, any shareholder that would receive less than a full share of
Reconstituted Common Stock as a result of such transaction shall be issued one
additional share of Reconstituted Common Stock. In addition, following the
Effective Time, the par value of shares of the Corporation's common stock shall
remain at $0.001 per share and the Corporation shall continue to have authority
to issue an aggregate of 50,000,000 shares in the manner specified in Article IV
hereof.
<PAGE>
ARTICLE XVIII
Except as otherwise expressly provided by the Utah Business Corporation
Act, any action which may be taken at any annual or special meeting of the
shareholders of the Corporation may be taken without a meeting and without prior
notice, if one or more consents in writing, setting forth the action so taken,
shall be signed by the holders of outstanding shares having not less than the
minimum number of votes that would be necessary to authorize or take the action
at a meeting at which all shares of the Corporation entitled to vote thereon
were present and voted."
ARTICLE THREE
Following the reclassification and combination described in ARTICLE XVII
above, the corporation will issue in the name of each holder of record of
outstanding shares of common stock of the corporation, certificates representing
the number of shares of Reconstituted Common Stock which such shareholder shall
be entitled to receive as a result of the reclassification and combination. The
corporation will deliver certificates representing such shares of Reconstituted
Common Stock to each shareholder upon the surrender to the corporation for
cancellation of the stock certificates representing such holder's shares that
were outstanding prior to such reclassification and combination.
ARTICLE FOUR
The foregoing amendments to the Articles of Incorporation were duly adopted
by the shareholders of the corporation on September 1, 1992 in accordance with
Section 16-10a-1003 of the Utah Business Corporation Act. The number of shares
of the corporation outstanding at the time of such adoption was 20,259,987
shares of Common Stock, all of which were entitled to vote on the amendments.
ARTICLE FIVE
The designation and number of outstanding shares of each class of the
corporation entitled to vote on the amendments as a class were as follows:
Class Number of Shares
----- ----------------
Common 20,259,987
ARTICLE SIX
Holders of a total of 14,800,000 shares of Common Stock were present and
voted at the meeting. The number of shares voted for such amendments was
14,800,000 shares of Common Stock. No shares were voted against the amendments.
-2-
<PAGE>
IN WITNESS WHEREOF, the undersigned President of the corporation, having
been duly authorized, has executed these Articles of Amendment this 10th day of
September, 1992.
Onasco Companies, Inc.
By: /s/ Robert C. Bohannon Ph.D, President
---------------------------------------
Robert C. Bohannon
President
-3-
<PAGE>
EXHIBIT 3.7
<PAGE>
CHARTER
OF
TENGASCO, INC.
--------------
The undersigned person(s) under the Tennessee Business Corporation Act adopt(s)
the following charter for the above listed corporation:
1. The name of the corporation is TENGASCO, INC.
---------------
[NOTE: Pursuant to Tennessee Code Annotated Section 48-14-101(a)(1), each
corporation name must contain the word "corporation", "incorporated", or
"company" or the abbreviation "corp.", "inc." or "co."]
2. The number of shares of stock the corporation is authorized to issue is
50 million shares with par value of $.001/share
- -----------------------------------------------
3. (a) The complete address of the corporation's initial registered office in
Tennessee is
Wesley M. Baker, 4928 Homberg Dr., Knoxville, TN 37919
- --------------------------------------------------------------------------
Street Address City State, Zip Code
County of Knox
------
[NOTE: A street address, a zip code and the county are required by Tennessee
Code Annotated Section 48-12-102(a)(3).]
(b) The name of the initial registered agent, to be located at the address
listed in 3 (a), is
Wesley M. Baker, Esq.
- --------------------------------------------------------------------------
4. The name and complete address of each incorporator is:
Wesley M. Baker, 4928 Homberg Dr., Suite B-3, Knoxville, TN 37919
- --------------------------------------------------------------------------
Name Address Zip Code
- --------------------------------------------------------------------------
Name Address Zip Code
- --------------------------------------------------------------------------
Name Address Zip Code
[NOTE: An address and zip code are both required by Tennessee Code Annotated
Section 48-12-102 (a)(4).]
5. The complete address of the corporation's principal office is:
4928 Homberg Dr., Suite B-3, Knoxville, TN 37919
- -------------------------------------------------------------------------
Street Address City State/Country, Zip Code
[NOTE: An address and a zip code are both required by Tennessee Code Annotated
Section 48-12-102 (a)(5).]
6. The corporation is for profit.
7. Other provisions:
[NOTE: Insert here any provision(s) desired and permitted by law. Examples:
names and addresses of persons serv-[ILLEGIBLE]
<PAGE>
[ILLEGIBLE]the corporation, provision [ILLEGIBLE]
duly, etc. See Tennessee Code Annotated Section 48-12-102(b).]
April 26, 1995 /s/ Wesley M. Baker
- -------------- --------------------------------------
Signature Date Incorporator's Signature
Wesley M. Baker
--------------------------------------
Incorporator's Name (typed or printed)
[SEAL] State of Tennessee BDA 1678
- --------------------------------------------------------------------------------
Secretary of State
Corporations Section DATE: 04/28/95
James K. Polk Building, Suite 1800 REQUEST NUMBER: 3005-0107
Nashville, Tennessee 37243-0306 TELEPHONE CONTACT: (615) 741-0537
FILE DATE/TIME: 04/28/95 1024
EFFECTIVE DATE/TIME: 04/28/95 1024
CONTROL NUMBER: 0294055
TO:
WESLEY BAKER, ATTY AT LAW
4928 HOMBERG DR
SUITE B-3
KNOXVILLE, TN 37919
RE:
TENGASCO, INC.
CHARTER - FOR PROFIT
CONGRATULATIONS UPON THE INCORPORATION OF THE ABOVE ENTITY IN THE STATE OF
TENNESSEE, WHICH IS EFFECTIVE AS INDICATED.
A CORPORATION ANNUAL REPORT MUST BE FILED WITH THE SECRETARY OF STATE ON OR
BEFORE THE FIRST DAY OF THE FOURTH MONTH FOLLOWING THE CLOSE OF THE
CORPORATION'S FISCAL YEAR. ONCE THE FISCAL YEAR HAS BEEN ESTABLISHED, PLEASE
PROVIDE THIS OFFICE WITH THE WRITTEN NOTIFICATION. THIS OFFICE WILL MAIL THE
REPORT DURING THE LAST MONTH OF SAID FISCAL YEAR TO THE CORPORATION AT THE
ADDRESS OF ITS PRINCIPAL OFFICER OR TO A MAILING ADDRESS PROVIDED TO THIS OFFICE
IN WRITING. FAILURE TO FILE THIS REPORT OR TO MAINTAIN A REGISTERED AGENT AND
OFFICE WILL SUBJECT THE CORPORATION TO ADMINISTRATIVE DISSOLUTION.
WHEN CORRESPONDING WITH THIS OFFICE OR SUBMITTING DOCUMENTS FOR FILING, PLEASE
REFER TO THE CORPORATION CONTROL NUMBER GIVEN ABOVE. PLEASE BE ADVISED THAT THIS
DOCUMENT MUST ALSO BE FILED IN THE OFFICE OF THE REGISTER OF DEEDS IN THE COUNTY
WHEREIN A CORPORATION HAS ITS PRINCIPAL OFFICE IF SUCH PRINCIPAL OFFICE IS IN
TENNESSEE.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FOR: CHARTER - FOR PROFIT ON DATE: 04/28/95
FEES
FROM: RECEIVED: $50.00 $50.00
BUBBY, INC.
4928 HOMBERG DR TOTAL PAYMENT RECEIVED: $100.00
KNOXVILLE, TN 37919-0000 RECEIPT NUMBER: 00001801452
ACCOUNT NUMBER: 00215698
[SEAL] State of Tennessee /s/ Riley C. Darnell
--------------------
RILEY C. DARNELL
SECRETARY OF STATE
SS-4458
<PAGE>
EXHIBIT 3.8
<PAGE>
[STAMP]
FILED 95 MAY-4 AM 9:36
RILEY DARNELL
SECRETARY OF STATE
MAY-4 1995
CERTIFIED COPY
/S/RILEY DARNELL
SECRETARY OF STATE
ARTICLES OF MERGER
OF
ONASCO COMPANIES, INC.
(A Utah Corporation)
AND
TENGASCO, INC.
(a Tennessee Corporation)
RECEIVED
MAY - 5 1995
UT DIV. OF CORP. & COMM. CODE
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
<PAGE>
[STAMP]
FILED 95 MAY-4 AM 9:36
RILEY DARNELL
SECRETARY OF STATE
MAY-4 1995
CERTIFIED COPY
/S/RILEY DARNELL
SECRETARY OF STATE
(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 Tengasco 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/ Jeff D. Jenson
-------------------------------
Jeffrey D. Jenson, President
Date: 5-2-95 /s/ Kathleen L. Morrison
-------------------------------
Kathleen L. Morrison, Secretary
<PAGE>
[STAMP]
RECEIVED 95 MAY-4 AM 9:36
RILEY DARNELL
SECRETARY OF STATE
MAY-4 1995
CERTIFIED COPY
/S/RILEY DARNELL
SECRETARY OF STATE
[SEAL] SHERYL ROSS
Notary Public
STATE OF UTAH
My Comm. Expires JAN 06,1996
3785 SO 300 E SLC UT 84115
STATE OF UTAH )
) ss
COUNTY OF SALT LAKE )
On May 2nd, 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.
[SEAL] SHERYL ROSS /s/ Sheryl Ross
Notary Public -------------------------------
STATE OF UTAH NOTARY PUBLIC
My Comm. Expires JAN 06,1996
3785 SO 300 E SLC UT 84115
<PAGE>
[STAMP]
RECEIVED 95 MAY-4 AM 9:36
RILEY DARNELL
SECRETARY OF STATE
MAY-4 1995
CERTIFIED COPY
/S/RILEY DARNELL
SECRETARY OF STATE
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,
<PAGE>
[STAMP]
RECEIVED 95 MAY-4 AM 9:36
RILEY DARNELL
SECRETARY OF STATE
MAY-4 1995
CERTIFIED COPY
/S/RILEY DARNELL
SECRETARY OF STATE
such shares so converted 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.
<PAGE>
[STAMP]
RECEIVED 95 MAY-4 AM 9:36
RILEY DARNELL
SECRETARY OF STATE
MAY-4 1995
CERTIFIED COPY
/S/RILEY DARNELL
SECRETARY OF STATE
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/ Jeff D. Jenson
----------------------------
Jeffrey D. Jenson, President
Attest:
/s/ Kathleen L. Morrison
- -------------------------------
Kathleen L. Morrison, Secretary
TENGASCO, a Tennessee Corporation
By /s/Jeff D. Jenson
----------------------------
Jeffrey D. Jenson, President
Attest:
/s/ Kathleen L. Morrison
- -------------------------------
Kathleen L. Morrison, Secretary
<PAGE>
[STAMP]
RECEIVED 95 MAY-4 AM 9:36
RILEY DARNELL
SECRETARY OF STATE
MAY-4 1995
CERTIFIED COPY
/S/RILEY DARNELL
SECRETARY OF STATE
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.
[SEAL] SHERYL ROSS /s/ Sheryl Ross
Notary Public ------------------------
STATE OF UTAH NOTARY PUBLIC
My Comm. Expires JAN 06,1996
3785 SO 300 E SLC UT 84115
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.
[SEAL] SHERYL ROSS /s/ Sheryl Ross
Notary Public ------------------------
STATE OF UTAH NOTARY PUBLIC
My Comm. Expires JAN 06,1996
3785 SO 300 E SLC UT 84115
<PAGE>
July 29, 1997
Tengasco, Inc.
603 Main Avenue - Suite 500
Knoxville, Tennessee 37902
Re: Tengasco, Inc.
Gentlemen:
We have acted as counsel to Tengasco, Inc., a Tennessee corporation
(the "Company"), in connection with a registration statement on Form SB-2 (the
"Registration Statement"), to be filed with the Securities and Exchange
Commission for the purpose of registering an aggregate of 384,368 shares (the
"Shares") of common stock, $.001 par value per share (the "Common Stock") owned
by certain shareholders (collectively the "Selling Shareholders") of the Company
under the Securities Act of 1933, as amended (the "Act").
As counsel for the Company, we have examined and are familiar with the
Certificate of Incorporation and By-Laws of the Company, and all amendments
thereto. We are also familiar with the form of the Company's stock certificate,
as well as all corporate proceedings taken by the Company in connection with the
authorization of the issuance of its Common Stock. Throughout such examination
we have assumed the genuineness of signatures and accuracy and conformity to
original documents of all copies of documents supplied to us. As to questions of
fact material to the opinion expressed herein, we have, when relevant facts were
not independently determinable, relied upon information furnished to us by
officers and directors of the Company or their duly authorized agents or
employees.
Based upon the foregoing, it is our opinion that the Shares
have been duly executed and delivered and the consideration therefor
duly paid, and such Shares are validly issued, fully paid and
nonassessable and owned by the Selling Shareholders.
<PAGE>
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
Robson & Miller, LLP
<PAGE>
EXHIBIT 10.1(a)
<PAGE>
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("Agreement") is made this 2nd day of May, 1995,
among ONASCO COMPANIES, INC., a Utah corporation ("Onasco" or "Buyer"); and
INDUSTRIAL RESOURCES, CORPORATION, a Kentucky corporation ("IRC" or "Seller").
WITNESSETH:
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 $0.001 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 IRC 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 IRC 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
<PAGE>
"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 10-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.
2
<PAGE>
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 traceable;
(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.
3
<PAGE>
4.6 Further Assurances of IRC. IRC 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 IRC; 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
4
<PAGE>
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 non-defaulting 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.
By [ILLEGIBLE]
--------------------------
Its President
--------------------------
Attest:
[ILLEGIBLE]
- ----------------------------
Its Secretary
-----------------------
5
<PAGE>
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 [ILLEGIBLE]
----------------------------
Its President
----------------------------
Attest:
[ILLEGIBLE]
- ------------------------------
Its Sec & Treasurer
-------------------------
6
<PAGE>
EXHIBIT "A"
ASSETS
<PAGE>
INVENTORY OF ASSETS
COOPER TC 38-38 DRILLING RIG - Cost $87,291.26, Bought March, 1993
Double drum well service unit, S/N 00339, braden winch, powered by GM 6-71
diesel engine, Allison transmission, Skytop 84' 155,000# capacity derick,
hydraulically raised and telescoped, 3-sheave crow 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 518" 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 -1 Panasonic, 1 Xerox, 1 Monroe. Approx. Value $6,000
- --------------------------------------------------------------------------------
4 INCH FRAC VALUE - approx. value $600
- --------------------------------------------------------------------------------
MFG MOCK METER- approx. value $700
- --------------------------------------------------------------------------------
<PAGE>
SET OF NEW POWER TONG TEETH - approx. value $500
- --------------------------------------------------------------------------------
GAS GATHERING SYSTEM -
- --------------------------------------------------------------------------------
SURFACE GAMMA RATEMETER -Approx. value $5000, 1991
Made by Ludlum Measurements, Model 2200-16, Serial Number #79086
- --------------------------------------------------------------------------------
1500 GALLON VACUUM PUMP AND TANK - approx. value $1,000
- --------------------------------------------------------------------------------
3000 FT. 4 1/2 CASING - @ $2.50/ft. = $7,500
3000 FT. 2 3/8" TUBING - @ $1.05/ft. = $3,150
3000 FT. 1" SUCKER RODS - @ $.40/ft. = $1,200
- --------------------------------------------------------------------------------
NORRISEAL DEHYDRATOR - approx. value $13,000, Serial #2230450A, Model #
25M60-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 # 13936, 95024A
566567, 46-B7782 87042 F, 47177118 490, 97032 6284, Model# NKRB-1-5, 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 H-2475 engine (ID.#52181), and fan type air
exchanger (ID.#867), all mounted on one oil field skid
<PAGE>
CHICAGO PNEUMATIC COMPRESSOR - Purchased on February 13, 1992 for $25,100,
approx. value $62,500. 1972 Model YCE Gas Compressor (ID. #279936), with Model
6G510 Natural Gas Engine, radiators, coolers etc...
MISC. PARTS USED FOR ALL COMPRESSORS AS JOB REQUIREMENTS DICTATE: VALUE IS
INTEGRAL IN 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, ID#'s c-401564, Serial # 9209004
OIL & GAS SEPARATOR - approx. value $500, Serial # 4050-1
ROCKWELL METER - approx. value $1,500, ID# 87416
COMPRESSOR - approx. value $2,200, ID#15053 350
2 (two) 210 TANKS - approx. value $4,000, ID#'s 9402-8633, 0510033
- --------------------------------------------------------------------------------
CORNETT #1
110 TANK - approx. value $1,300, ID # 43702
- --------------------------------------------------------------------------------
CORNETT #2
LUFKIN PUMP JACK - approx. value $3,500, ID#'s 4380, 18KK-35
- --------------------------------------------------------------------------------
ROBINSON-ALVERAS
210 TANK - approx value $2,000, ID# 0510040
- --------------------------------------------------------------------------------
KEITH
2 (TWO) 210 TANKS - approx. value $4,000, ID#'s (9401-8632), 9400 (8632) O510032
PUMP JACK - approx. value $3,500, ID# 5798
WATER TANK - approx. value $1,500, ID #2
- --------------------------------------------------------------------------------
BEECH CREEK
<PAGE>
2 (TWO) 110 TANKS - approx. value $2,600, ID#'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, VIN# 1FMEU15NXNLB02170, purchase price
$29,050.49
1991 CHEVROLET PICK-UP - purchased new 7(?)9-91, VIN# 2GECK19K8M1222564,
purchase price $19,906.63
1991 CHEVROLET PICK-UP 4X4 - purchased June 24, 1991, purchase price $18,029.68.
VIN# 1GCEK14ZXME160040.
INTERNATIONAL TRACTOR - ID# TDA2274CG, 1982, approx, value $7,500
INTERNATIONAL TRACTOR - F2000D, ID # D112313H, 1966, approx. value $5,0OO
LOWBOY TRAILER - ID# B12466, 1979, approx. $5,000
GOOSENECK 5TH WHEEL TRAILER - #5027, approx. value $3,500
CATERPILLAR D-5 DOZER- 1D#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.
<PAGE>
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 GAL VAC. PUMP $1,000.00
3000 FT. 4 1/2" CASINO $7,500.00
3000 FT. 2 3/8" TUBING $3,150.00
3000 FT. 1" SUC. RDS. $1,200.00
DEHYDRATOR $13,000.00
DEHYDRATOR $7,500.00 $7,500.00 $12,500.00
DEHYDRATOR $10,000.00
AJAX COMP. $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
IWO 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 $l8,029.68 $18,029.68
1991 CHEV. PICKUP $19,906.63 $17,509.13 $17,509.13
INTERNAT. TRACTOR $5,000.00
INTERNAT. TRACTOR $7,500.00
LOWBOY TRAILER $5,000.00
GOOSENECK TRAILER $3,500.00
D-5 BULLDOZER $30,000.00
BURNING SPRINGS WELLS $
BEECH CREEK LEASES $
WILDCAT LEASES $
UPC STOCK $1,000,000
<PAGE>
EXHIBIT "B"
MINUTES OF A SPECIAL MEETING OF THE STOCKHOLDERS
OF
ONASCO COMPANIES, Inc.
<PAGE>
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 having 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, persuant ton which
<PAGE>
Onasco will purchase real property 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 Tennesse;
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 with 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 dte of filing the Articles of Merger with
the State of Tennesse;
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
<PAGE>
Walter C. Arzonetti 11 Avenue de la Mer (904) 445-1022
Palm Coast FL 32137
Charels N. Manhofff 1119 Rocky Point Ct. (505) 292-3210
Albuquerque NM 87123
Joe B. Mattei 72 Sugerberry 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.
[ILLEGIBLE] [ILLEGIBLE]
- --------------------- --------------------
Chairman Secretary
<PAGE>
EXHIBIT "C"
UNANIMOUS CONSENT OF THE BOARD OF DIRECTORS
OF
INDUSTRIAL RESOURCES, CORPORATION
<PAGE>
UNANIMOUS OF TO 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:
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 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
-------------- ----------------------------------
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
<PAGE>
EXHIBIT "D"
CONSENT OF THE SOLE STOCKHOLDER
OF
INDUSTRIAL RESOURCES, CORPORATION
<PAGE>
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 271B.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
<PAGE>
EXHIBIT "E"
RESOLUTIONS OF THE BOARD OF DIRECTORS
OF
ONASCO COMPANIES, INC.
<PAGE>
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-821 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;
N0W, 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
<PAGE>
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 Arzonetti; 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 serve 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 10-SB within 90 days of the
execution of the Purchase Agreement; and
2
<PAGE>
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/ Jeffrey 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
3
<PAGE>
EXHIBIT "F"
RESIGNATIONS OF THE DIRECTORS AND EXECUTIVE OFFICERS
OF
ONASCO COMPANIES, INC.
<PAGE>
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 ("IRC"), 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/ Jeffrey D. Jenson
-------------- ----------------------------------
Jeffrey D. Jenson
<PAGE>
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 ("IRC"), 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
<PAGE>
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
<PAGE>
EXHIBIT "G"
CERTIFICATE OF GOOD STANDING
OF
ONASCO COMPANIES, INC.
<PAGE>
04/26/95 --- STATE OF UTAH - DEPARTMENT OF COMMERCE --- 09:49:45
--- 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.
DATED THIS 26TH DAY
FILE # 011835 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.
- ----------------------------------
- --------------------------------------------------------------------------------
CTRL "B" = EXIT _
Menu: [Ctrl R-Shift] 19200 8N1 VT100 Online
[STAMP]
DIVISION OF CORPORATIONS /s/ Korla T. Woods
AND COMMERCIAL CODE ----------------------------------
Korla T. Woods
Director, Division of
Corporations and Commercial Code
<PAGE>
EXHIBIT 10.1 (b)
<PAGE>
INDUSTRIAL RESOURCE, CORP.
Rt. 6, Box 248A
Manchester, Kentucky 40962
ofc (606)598-7701 -- 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 there 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
- ----------------------------
Jeff Jenson
/s/ James Ratliff
- ----------------------------
James Ratliff
for Industrial Resource, Corp.
<PAGE>
[LOGO] Miller Services, lnc.
---------------------------------------------
OIL/GAS DRILLING o OPERATING AND PRODUCTION
---------------------------------------------
POST OFFICE B0X 130 o HUNTSVILLE, TN 37756
PHONE (615) 663-9457
FAX (615) 663-9461
February 22, 1996
Mr. Jeff DeMussik
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 38-38 SERVICE RIG
Double drum well service unit, S/N 00339, Braden winch, powered by GM 6-71
diesel engine, Allison transmission, Skytop 84' 155, 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 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
$ 89,300.00
<PAGE>
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, 100-F, SN 67-7615, Year 1985, T.P. 1800, W.O. 4386
$16,250.00
1 - AJAX DPC 160 GAS COMPRESSOR w/GLYCOL RE-BOILER & TOWER ID#s K-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 6284, Model # NXRB-1-5, B-8791
$ 41,000.00
1 - INGERSOLL RAND (PARTS COMPRESSOR) Serial #91890, 2 B-184,
25416-361
$ 9,000.00
CHICAGO PNEUMATIC COMPRESSOR - FE-2, 8 1/4" X 4 1/4" X 5" 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 - 1D# TDA2274CG, 1982
$ 7,500.00
INTERNATIONAL TRACTOR - F2000D, 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
<PAGE>
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,
/s/ Deloy Miller
----------------
Deloy Miller
President
<PAGE>
EXHIBIT 10.1 (c)
<PAGE>
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 37919, 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.
6/1/95 [illegible]
- ------- --------------------------
Date INDUSTRIAL RESOURCE CORP.
<PAGE>
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
<PAGE>
Page 2
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.
/s/ [illegible] June 1, 1995
- --------------- -------------
TENGASCO, INC. Date
- ---------------- -------------
Witness Date
<PAGE>
EXHIBIT 10.2(a)
<PAGE>
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 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 ("IRC"); and
WHEREAS, Onasco desires to compensate the Consultant for his efforts on
behalf of Onasco estimated to be of a value of $21,500, 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 215,000
"unregistered" and "restricted" post-split shares of common stock of Onasco for
$21,500 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.
5. This Compensation Agreement shall be construed in accordance with the
laws of the State of Utah.
<PAGE>
IN WITNESS WHEREOF, the parties have set their hands and seals the date set
forth above.
ONASCO COMPANIES, INC.
By /s/ Jeff D. Jenson
----------------------
Jeffrey D. Jenson
President
/s/ M. E. Ratliff
-----------------
M. E. Ratliff
2
<PAGE>
EXHIBIT 10.2(b)
<PAGE>
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").
WITNESSETH:
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.
<PAGE>
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
2
<PAGE>
EXHIBIT 10.2(c)
<PAGE>
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").
WITNESSETH:
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 Exchange Commission; 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.
<PAGE>
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, Esq.
----------------------------------
Leonard W. Burningham, Esq.
<PAGE>
LEAONARD W. BURNINGHAM
LAWYER
HERMES BUILDING o SUITE 205
455 EAST FIFTH SOUTH
SALT LAKE CITY, UTAH 84111-3323
TELEPHONE (801) 363-7411
FAX: (801) 355-7126
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.
<PAGE>
Page 2
April 19, 1995
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 $l75 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,
/s/ Leonard W. Burningham
-----------------------------------
Leonard W. Burningham
LWB/sr
cc: Jeff Jenson
<PAGE>
LEAONARD W. BURNINGHAM
LAWYER
HERMES BUILDING o SUITE 205
455 EAST FIFTH SOUTH
SALT LAKE CITY, UTAH 84111-3323
TELEPHONE (801) 363-7411
FAX: (801) 355-7126
April 27, 1995
Industrial Resources, Corporation
FACSIMILE NO. (615) 450-9375
Attention: The Board of Directors
Mike Ratliff, Consultant
Re: Proposed acquisition of assets of Industrial Resources,
Corporation, a Kentucky corporation ("Industrial"), by Onasco
Companies, Inc., a Utah corporation ("Onasco"), and fee
arrangements for services to be rendered as outlined in my letter
under date of April 19, 1995
Dear Ladies and Gentlemen:
The following is my understanding of the fee arrangements to which you and
Onasco are agreeable, regarding my services related to the acquisition of
assets, the preparation of a limited offering memorandum (the "Memorandum") and
the preparation of a registration statement of Form 10-SB of the Securities and
Exchange Commission (the "Registration Statement."
First, I have been paid the sum of $5,000 in cash for services related to
the acquisition, and I will receive 25,000 post-split shares of common stock of
Onasco under a written compensation agreement and in conformance with Rule 701
of the Securities and Exchange Commission, following the one for two reverse
split that is contemplated to be completed at a stockholders' meeting set for
April 28, 1995.
I will receive $6,500 today, $5,000 of which will be for services related
to the Memorandum and all related documents and agreements as outlined in my
letter of the 19th, with the exception that all "blue sky" fees and costs
outlined in my letter will also be paid as such services are rendered. The
$1,500 shall be for unallocated costs related to the acquisition, including
federal express, filing fees for the Articles of Amendment the Certificate of
Merger to change the domicile of Onasco to Tennessee, printing of new stock
certificates and transfer fees related to the acquisition, but excluding mailing
costs of any stockholders' letter.
<PAGE>
Page 2
April 27, 1995
Additionally, I will receive 25,000 post-split shares under Rule 701 for
the preparation of the Registration Statement, with you to pay all filing fees
and my related direct out-of-pocket costs, including copies, federal express and
the like.
I will prepare the necessary written compensation plan for your review and
acceptance. This letter is being addressed to you because your designees will be
assuming control of Onasco following the completion of the acquisition, and a
copy thereof is being forwarded to Onasco.
If you have any questions, please contact me.
Yours very sincerely,
/s/ Leonard W. Burningham
-----------------------------------
Leonard W. Burningham
Accepted:
Industrial Resources, Corporation
By ______________________________
Onasco Companies, Inc.
By ______________________________
<PAGE>
EXHIBIT 10.3
<PAGE>
GAS PURCHASE AND SALES AGREEMENT
Table of Contents
Section Title Page
1 Definitions 1
2 Construction of Facilities 2
3 Quantity 3
4 Point of Delivery 3
5 Delivery Pressure 3
6 Price 3
7 Term 5
8 Title, Possession And Control 5
9 Taxes 6
10 Quality 6
11 Standards for Measurement and Tests 7
12 Billings and Payments 9
13 Warranty of Title to Gas 10
14 Force Majeure 10
15 Defaults and Remedies 13
16 Miscellaneous 14
Signature Page 15
<PAGE>
GAS PURCHASE AND SALES AGREEMENT
THIS AGREEMENT made, entered into and effective this ___ day of
________________________, 1996, by and between The Natural Gas Utility
District of Hawkins County, TN., hereinafter referred to as "Buyer", and
TENGASCO, hereinafter referred to as "Seller".
WITNESSETH:
WHEREAS, Seller has a supply of natural gas available for sale to be
produced from various wells located in Hancock County, Tennessee; and
WHEREAS, Buyer owns and operates a natural gas distribution system, located
in Hawkins County, Tennessee; and
WHEREAS, Seller desires to sell and deliver to Buyer and Buyer desires to
purchase and receive from Seller natural gas in the quantities and under the
terms and conditions hereinafter set forth; and
WHEREAS, Seller desires to transport gas in excess of Buyer's requirements
as set forth herein and Buyer agrees to transport such excess gas under the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual benefits and covenants
contained herein, Buyer and Seller have agreed as follows:
1.0 DEFINITIONS
Unless expressly stated otherwise, the following terms, when used in this
Agreement, shall mean:
1.1 The terms "gas" and "natural gas" shall mean and include casinghead gas
produced with crude oil, natural gas from gas wells, and residue gas resulting
from processing casinghead gas, gas well gas, or both.
1
<PAGE>
1.2 A day shall begin at 8:00 a.m. in the time zone at the point of delivery on
each calendar day and end at 8:00 a.m. on the following calendar day; a month or
year shall begin at 8:00 a.m. on the first calendar day of such period of time
and end at 8:00 a.m. on the first calendar day following such period.
1.3 The term "cubic foot" shall mean the volume of gas which occupies one cubic
foot when such gas is at a temperature of 60 degrees Fahrenheit and at a
pressure of 14.73 pounds per square inch absolute.
1.4 The term "Mcf" shall mean one thousand (1,000) cubic feet.
1.5 The term "Btu" shall mean the quantity of heat that must be added to one
pound avoirdupois of pure water to raise its temperature from 58.5 degrees
Fahrenheit to 59.5 degrees Fahrenheit at a constant pressure of fourteen and
seventy-three hundredths pounds per square inch absolute (14.73 psia).
1.6 The term "MMBtu" shall mean one million (1,000,000) Btu's.
1.7 The term "Seller's Facilities" shall mean any and all facilities required to
be constructed and installed by Seller, at its sole cost and expense, to enable
Seller to deliver gas to Buyer at the Point of Delivery specified in Section 4
hereof, in the quantities provided for in Section 3 hereof and meeting the
quality specifications provided for in Section 10 hereof.
1.8 The term "Buyer's Facilities" shall mean any and all facilities required to
be constructed and installed by Buyer, at its sole cost and expense, to enable
Buyer to commence the receipt of gas from Seller at the Point of Delivery
specified in Section 4 hereof.
2.0 CONSTRUCTION OF FACILITIES
2.1 Upon the execution of this Agreement, Seller and Buyer agree to proceed in
good faith and with due diligence in the construction of Seller's and Buyer's
facilities, respectively, and upon completion of such facilities the parties
shall commence the delivery and receipt of gas as soon as practical thereafter.
In no event shall Buyer be obligated to pay for any gas hereunder prior to the
time Seller's and Buyer's facilities have been constructed and made available to
deliver and receive gas.
2
<PAGE>
3.0 QUANTITY
3.1 Daily Quantity - On each day during the term of this agreement, Buyer shall
have the right to purchase and receive Seller's available production up to a
total quantity of 4,000 MCF/D. Seller shall be obligated to sell and deliver to
Buyer from its production wells in Hancock County, Tennessee, its available
production up to a total quantity of 4,000 MCF/D.
3.2 Buyer shall have first option to purchase and receive Seller's production in
excess of 4,000 MCF/D. In the event Buyer chooses not to purchase such excess
quantities, or does not take it's total quantity of 4,000 MCF/D, Buyer agrees to
receive such quantities and transport such gas across its distribution system to
the extent possible with existing facilities on behalf of Seller or third party
purchaser to mutually agreeable points of delivery and at an initial
transportation rate of $0.20 per MMBtu. In no event shall gas be sold by Seller
or transported and delivered by Buyer or Seller to any customer or potential
customer of Buyer within Buyer's service area without the written consent of
Buyer. Seller shall be responsible for all facilities including compression, if
necessary, to deliver gas into the ETNG pipelines or other third party
facilities. In no event shall Buyer be required to install additional facilities
for transporting gas for Seller. In the event facilities on Buyer's system are
required for transporting Seller's excess gas, Buyer may, at it's option,
construct necessary facilities and Seller hereby agrees to reimburse Buyer for
the cost of such facilities.
4.0 POINT OF DELIVERY
4.1 Seller shall make deliveries of gas hereunder to Buyer at the point of
delivery. The point of delivery for all gas delivered under this Agreement shall
be at the interconnection of Seller's and Buyer's facilities located at a
mutually agreeable point on Buyer's Distribution System in Hawkins County,
Tennessee.
5.0 DELIVERY PRESSURE
5.1 Seller shall make deliveries of gas hereunder to Buyer at the pressure
required by Buyer from time to time to enable the gas to enter Buyer's
facilities at Buyers normal distribution pressure.
6.0 PRICE
6.1 The initial price per MMBtu to be paid by Buyer to Seller for all gas
purchased and sold hereunder for the first 12 months following the commencement
of deliveries hereunder shall be
3
<PAGE>
priced at the first of the month index price as published in "Inside FERC Gas
Market Report" under "prices of spot gas delivered to pipelines" for deliveries
into Tennessee Gas Pipeline, On Shore La., zone 1 plus $0.20 per MMBtu. In the
event that the "Inside FERC" index is no longer published, the parties shall
mutually agree to utilize some other index which is representative of gulf coast
gas supplies.
6.2 One hundred Eighty (180) days prior to the expiration of the first 12 months
following initial deliveries hereunder, Seller and Buyer shall have the right to
request that the initial price set forth above in Section 6.1 be redetermined as
provided in Section 6.3 and 6.4 below.
6.3 In the event Seller or Buyer exercises its right provided in Section 6.2
above to request a redetermination of the initial contract price for gas
delivered to Buyer hereunder, such request shall be made in writing and Seller
and Buyer agree to negotiate in good faith to arrive at a mutually agreeable
price based on current market conditions and Seller's ability to maintain a
constant level of production.
In the event Seller or Buyer allows its right to request a price
redetermination hereunder to lapse by failing to make timely written request as
provided herein, Seller or Buyer shall thereafter next be entitled to request a
price redetermination 270 days following initial deliveries.
6.4 In the event that Seller and Buyer cannot agree on a redetermined price for
gas deliverable hereunder, Seller may solicit bona fide offers from third party
purchasers for Seller's available gas supplies. Seller shall submit in writing
to Buyer a notice setting out in reasonable detail the terms of any offer for
such gas from third party purchases which is acceptable to Seller. Buyer shall
have thirty (30) days after the date of Seller's Notice in which to elect in
writing to continue purchasing such gas from Seller in accordance with the
terms of the bona fide offer from third party purchases set out in Se11er's
Notice, or to release such gas from commitment hereunder. In the event Buyer
elects to release the gas, the obligations of the parties hereunder with respect
to the sale and purchase of such gas shall continue for an interim period until
the third party purchaser is able to accept deliveries of the released gas but
in no event to exceed ninety (90) days, after which the obligations of the
parties hereunder shall, except as otherwise provided herein, cease as to such
4
<PAGE>
released gas. During such interim period, the price applicable to deliveries of
gas by Seller to Buyer shall be the price determined according to Section 6.1
hereof, or such re-determined price in force and effect according to Section 6.2
and 6.3 hereof. Also, Buyer agrees to transport such released gas to the extent
possible with existing facilities on behalf of Seller or such third party
purchaser to mutually agreeable points of delivery and at a mutually agreeable
transportation charge. In no event shall such released gas be sold by Seller and
delivered by Buyer or Seller to any customer or potential customer of Buyer
within Buyers service area without the written consent of Buyer. Seller shall be
responsible for all facilities including compression, if necessary, to deliver
gas into the ETNG pipeline or other third party facilities. In no event shall
buyer be required to install additional facilities for transporting gas for
Seller.
6.5 The initial transportation rate set forth in Section 3.2 herein shall be
subject to re negotiation and adjustment contemporaneously with the price re
determinations in this Section 6.
7.0 TERM
7.1 This agreement shall be in force and effect from the date first herein above
written and continue for a term of 3 years following initial deliveries by
Seller, unless terminated earlier as provided elsewhere herein, and on a
year-to-year basis thereafter until terminated by either party driving 180 day
prior notice to the other party to cancel this Agreement.
8.0 TITLE, POSSESSION AND CONTROL
8.1 As between the parties hereto, Seller shall be deemed to be in control and
possession of the gas deliverable hereunder and responsible for any injuries,
claims, liabilities or damages caused thereby prior to delivery to Buyer at the
point of delivery. Buyer shall be deemed to be in exclusive control and
possession thereof after receipt of gas meeting the quality specification set
forth in Section 10 hereof, at the point of delivery and responsible for any
injuries, claims, liabilities or damages caused by Buyer's possession and
control. The party in control and possession of the gas meeting the quality
specification set forth in Section 10 hereof, shall indemnify the other party
with respect to any injuries, claims, liabilities, or damages occurring
5
<PAGE>
while the gas is in it's control and possession. Title to the gas sold hereunder
shall pass from Seller to Buyer at the point of delivery.
9.0 TAXES
9.1 Buyer shall not be responsible for any federal, state or local taxes on
production, gathering, severance or other taxes levied on gas volumes delivered
by Seller. Seller hereby agrees to indemnify Buyer for any and all losses,
damages, or claims, including attorney fees, for Seller's failure to report and
pay for any and all federal and state production, gathering, severance or
similar taxes levied on gas volumes delivered by Seller.
10.0 QUALITY
Seller agrees that the gas delivered hereunder at the point of delivery
specified in Section 4.1 will, upon delivery:
10.1 Have a total heating value of not less than one thousand (1,000) Btu's per
cubic foot;
10.2 Be commercially free from dust, hydrocarbon liquids, water and any other
substance that might become separated from the gas in Buyer's facilities, and
Seller shall furnish, install and maintain and operate such drips, separators,
heaters and other mechanical devices as may be necessary to effect compliance
with such requirements;
10.3 Not contain more than twenty (20) grains of total sulfur, nor more than 1/4
of one grain of hydrogen sulfide per one hundred (100) cubic feet;
10.4 Not contain more than ten (10) parts per million by volume of oxygen, and
Seller shall make every reasonable effort to keep the gas totally free of
oxygen.
10.5 Not contain more than four percent (4%) by volume of a combined total of
carbon dioxide and nitrogen components; provided, however, that the total carbon
dioxide content shall not exceed three percent (3%) by volume.
10.6 Have a temperature of not more than one hundred (100) degrees Fahrenheit.
10.7 All gas shall have been dehydrated by Seller for removal of entrained water
present therein in a vapor state, and in no event contain more than seven (7)
pounds of entrained water per million cubic feet, at a pressure base of fourteen
and seventy three (14.73) pounds per square inch and a
6
<PAGE>
temperature of sixty (60) degrees Fahrenheit as determined by dew-point
apparatus approved by the Bureau of Mines or such other apparatus as may be
mutually agreed upon.
10.8 As to gas which fails to meet the quality specifications set forth above,
Buyer, in addition to any legal remedies it may have, shall have the right to
refuse delivery of such gas.
11.0 STANDARDS FOR MEASUREMENT AND TESTS
11.1 A purchase/sales meter shall be installed, maintained and operated by
Seller at the point of delivery to measure all gas sold and/or delivered for
transportation or displacement under this agreement. The volume shall be
measured by orifice meters with linear charts, twenty-four (24) hour rotation,
or other mutually agreeable measuring devices installed and operated, and
computations made as prescribed in Gas Measurement Committee Report No. 3 of the
American Gas Association, as such report may be amended or revised from time to
time.
11.2 The unit of volume for purposes of measurement shall be one (1) cubic foot
of gas at a temperature base of sixty degrees (60) Fahrenheit and at a pressure
base of fourteen and seventy-three hundredths (14.73) pounds per square inch
absolute.
11.3 Temperature shall be determined by a recording thermometer, when
applicable, with twenty-four (24) hour chart rotation continuously used and
installed so as to record properly the temperature of the gas flowing through
the meter. The arithmetical average of the hourly temperatures recorded during
each day shall be used to calculate volumes hereunder.
11.4 Specific gravity shall be determined with accuracy to the nearest
one-thousandth (0.001) by taking samples of the gas at the point of measurement
at such times as may be designated by the parties hereto, but not more often
than once each month and having the specific gravity determined by the use of
the Acme Senior Gravity Balance, or any other instrument mutually agreed upon.
11.5 The total heating value of the gas shall be determined by joint tests made
by taking samples of gas at the point of delivery but not more than once each
month. Such samples to have the Btu content per cubic foot determined by: (1)
chromatographic analysis; or, (2) by calculation of gross heating value by
compositional analysis. Buyer and Seller may mutually agree to utilize other
7
<PAGE>
acceptable industry methods for determination of heating value. The Btu content
shall be determined for a cubic foot of gas at a temperature of sixty degrees
(60) Fahrenheit and a pressure of fourteen and seventy-three hundredths (14.73)
pounds per square inch absolute on a dry basis.
11.6 Tests to determine sulfur, hydrogen sulfide, oxygen, carbon dioxide,
nitrogen and water content shall be made by approved standard methods in general
use by the gas industry. Such tests shall be made at the request of either
party. The cost of such test are to be paid by the requesting party.
11.7 The accuracy of the measuring and testing equipment shall be verified at
least once each year and at other times upon request of Buyer or Seller. Tests
for quality of the gas may be made at the time of testing equipment or at other
times, but not more often than once each month. Notice of the time and nature of
each test shall be given to the other party sufficiently in advance to permit
convenient arrangement for a representative to be present. Tests and adjustments
shall be made in the presence of and observed by representatives of both Buyer
and Seller. All tests shall be made by Buyer at Buyer's expense, except that
Seller shall bear the expense of tests made at its request.
11.8 If at any time any of the measuring or testing equipment is found to be out
of service or registering inaccurately in any percentage, it shall be adjusted
at once to read accurately, within the limits prescribed by the manufacturer. If
such equipment is out of service, or inaccurate by an amount exceeding two
percent (2%) at a reading corresponding to the average rate of flow for the
period since the last preceding test, the previous readings of such equipment
shall be disregarded for any period definitely known or agreed upon, or if not
so known or agreed upon, for a period of fifteen (15 days) or one-half of the
elapsed time since the last test, whichever is shorter. The volume of gas
delivered during such period shall be estimated (i) by using the data recorded
by an check-measuring equipment, if installed and accurately registering, or, if
not installed or registering accurately, (ii) by correcting the error if the
percentage of error is ascertainable by calibration, test or mathematical
calculation, or, if neither such method is feasible, (iii) by estimating the
quantity or quality delivered, based upon deliveries under similar conditions
during a period when the
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<PAGE>
equipment was registering accurately. No correction shall be made for recorded
inaccuracies of two percent (2%) or less.
11.9 Buyer and Seller shall have the right to inspect equipment installed or
furnished by the other, and the charts and other measurement or testing data of
the other, at all times during business hours, but the calibration and
adjustment of such equipment shall be done only by the party that installs or
furnishes such equipment unless otherwise agreed upon. Each party shall preserve
all original test data, charts and other similar records in such party's
possession for a period of at least two (2) years.
12.0 BILLINGS AND PAYMENTS
12.1 On or before the 15th working day of each month after deliveries of gas are
commenced, Seller shall render to Buyer an invoice for the preceding month
showing the total volume and the gross heating value of gas delivered at the
point of delivery hereunder.
12.2 Buyer will pay Seller on or before the 25th day of each month, or as to
statements rendered after the 15th day of each month, within ten (10) days after
receipt of such statements, for gas delivered during the preceding month. If the
correct amount is not paid when due and such payment is not successfully
disputed by Buyer, interest on any unpaid amount shall accrue at the rate of
nine percent (9%) per annum. If such failure to pay continues for sixty (60)
days, Seller, in addition to all other remedies, may thereafter suspend
deliveries of gas hereunder and if such default continues for thirty (30)
additional days, Seller may thereafter, in addition to any other rights Seller
may have suspend or terminate this contract. Provided, however, if Buyer in good
faith shall dispute the amount of any such invoice or part thereof and shall pay
to Seller such amounts as it concedes to be correct and shall undertake and
guarantee to make payment to Seller of the amount ultimately found due upon such
invoice after a final determination which may be reached either by agreement or
judgment of the courts, as may be the case, then Seller shall not be entitled to
suspend or terminate this contract.
12.3 Each party shall have the right to inspect and examine at all reasonable
times the records and charts of the other party pertaining to the purchase and
sale of gas hereunder. If any overcharge or
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undercharge in any amount whatsoever shall be determined within 12 months from
the date of the invoice and the invoice therefor has been paid, Seller shall
refund the amount of any overcharge or Buyer shall pay the amount of any
undercharge within thirty (30) days after the final determination thereof.
13.0 WARRANTY OF TITLE TO GAS
13.1 Seller warrants title to all gas delivered or to be delivered hereunder,
that Seller has the right to sell the same, and that such gas is free from liens
and adverse claims of every kind. Seller will pay, or cause to be paid, all
royalties, taxes and other sums due on production, gathering, severance or
handling of the gas delivered by Seller to Buyer. Seller will indemnify and save
Buyer harmless against all loss, damage and expense of every character on
account of adverse claims to the gas delivered by it or of royalties, taxes,
payments or other charges thereon applicable before or upon delivery to Buyer.
If Seller's title is questioned or involved in any action, Buyer may thereafter
refuse without penalty to accept further deliveries from Seller and/or Buyer may
withhold payment (without interest) of sums due hereunder up to the amount of
the claim until title is free from such question or such action is finally
determined, or until such time as Seller furnishes bond conditioned to save
Buyer harmless with sureties satisfactory to Buyer.
14.0 FORCE MAJEURE
14.1 If either Buyer or Seller is rendered unable, wholly or in part, by force
majeure to perform its obligations under this Agreement, other than the
obligation to make payments then due for gas previously delivered, it is agreed
that performance of the respective obligations of the parties hereto to deliver
and receive gas, so far as they are affected by such force majeure, shall be
suspended from the inception of any such inability until it is corrected but for
no longer period. The party claiming such inability shall give notice thereof to
the other party as soon as practicable after the occurrence of the force
majeure. If such notice is first given by telephone or facsimile communication,
it shall be confirmed promptly in writing giving full particulars. The party
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<PAGE>
claiming such inability shall promptly correct such inability to the extent it
may be corrected through the exercise of reasonable diligence.
14.2 Neither party shall be liable to the other for any losses or damages,
regardless of the nature thereof and howsoever occurring, whether such losses or
damages be direct or indirect, immediate or remote, by reason of, caused by,
arising out of, or in any way attributable to the suspension of performance of
any obligation of either party to the extent that such suspension occurs because
a party is rendered unable, wholly or in part, by force majeure to perform its
obligations.
14.3 The term "force majeure" as used herein shall mean, cover and include the
following:
(a) Acts of God or Acts of Providence including, without limitation, epidemics,
landslides, hurricanes, floods, washouts, lightning, earthquakes, storm
warnings, extreme heat or extreme cold; any other adverse weather conditions and
threats of any of the foregoing, and whether preceded by, concurrent with, or
followed by acts or omissions of any human agency, whether foreseeable or not,
which may directly or indirectly contribute to or result in either party's
inability to perform its obligations.
(b) Acts of Government including, without limitation, laws, orders, rules,
decrees, judgments, judicial actions, regulations, acts of arrests or restraint,
and threats of any of the foregoing, by any government (de jure or de facto), or
any agency, subdivision or instrumentality thereof, having, claiming or
asserting authority or jurisdiction over the severance, production, gathering,
transportation, handling, sale or delivery of the subject matter of this
Agreement, when any such Act of Government directly or indirectly contributes to
or results in either party's inability to perform its obligations.
(c) Acts of Civil Disorder including, without limitation, acts of sabotage, acts
of the public enemy, acts of war (declared or undeclared), blockades,
insurrections, riots, mass protests or demonstrations and threats of any of the
foregoing, and police action in connection with or in reaction to any such Acts
of Civil Disorder, when any such Act of Civil Disorder directly or indirectly
contributes to or results in either party's inability to perform its
obligations.
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<PAGE>
(d) Acts of Industrial Disorder including, without limitation, strikes,
lockouts, picketing and threats of any of the foregoing, when any such Acts of
Industrial Disorder directly or indirectly contributes to or results in either
party's inability to perform its obligations; provided, however, that the
settlement of any labor dispute to prevent or end any such Acts of Industrial
Disorder shall be within the sole discretion of the party to this Agreement
involved in such labor dispute, and the above requirement that any inability
shall be corrected with reasonable diligence shall not apply to labor disputes.
(e) Failure of Facilities including, without limitation, freezing of wells or
lines of pipe, failures resulting from fires, washouts, mechanical breakdowns
of, malfunctions of or necessities for making repairs or alterations to
machinery, lines of pipe, pumps, compressors, valves, gauges or any of the
equipment therein or thereon, and cratering, blowout, or failure of any well or
wells to produce, when any such Failure of Facilities directly or indirectly
contributes to or results in either party's inability to perform its
obligations.
(f) Inability to obtain or acquire at reasonable cost grants, servitudes,
rights-of-way, permits, licenses, or any other authorizations from third parties
or agencies (private or governmental) or inability to obtain or acquire at
reasonable cost necessary materials and supplies, to construct, maintain and
operate any facilities required for the performance of any obligations under
this Agreement, when any such inability directly or indirectly contributes to or
results in either party's inability to perform its obligations.
(g) Any occurrence, condition, situation, or threat thereof, not covered by
Subparagraphs (a) through (f) above, which renders either party unable to
perform its obligations, provided such occurrence, condition, situation, or
threat thereof is not under or within the control of the party claiming such
inability, provided such party could not have prevented such occurrence,
condition, situation, or threat thereof by the exercise of reasonable diligence.
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<PAGE>
15.0 DEFAULTS AND REMEDIES
15.1 If a triggering event (as defined in Section 15.2 below) occurs at any time
during the term of this agreement, then the non-defaulting party may terminate
this agreement in accordance with the following:
(i) The non-defaulting party shall notify the other party in writing stating
specifically the cause for terminating the agreement and declaring the intention
of the non-defaulting party to terminate this agreement.
(ii) The other party shall have thirty (30) days after receipt of such notice in
which to remedy or remove the cause or causes stated in the notice for
termination. If within said thirty (30) day period the other party does so
remove or remedy said cause or causes and fully indemnifies the nondefaulting
party for any and all consequences of such breach, then such notice shall be
withdrawn and this agreement shall continue in full force and effect
(iii) If the other party does not so remedy and remove the cause or causes or
does not indemnify the non-defaulting party within said thirty (30) day period,
then this agreement shall terminate without waiver by the non-defaulting party
of any other remedy it may have under this agreement or otherwise.
15.2 A "triggering event" shall occur when:
(i) The failure by Seller or Buyer to make, when due, any payment required under
this agreement if such failure is not remedied within five (5) business days
after written notice of such failure is given to the other party.
(ii) Either Seller or Buyer fails to perform a material covenant or obligation
under this agreement or breeches any material provision of this agreement.
(iii) Any material representation or warranty made by Seller or Buyer in
accordance with this agreement proves to be false or misleading in any material
respect.
(iv) Seller or Buyer shall (1) make an assignment or any general arrangement for
the benefit of creditors: (2) file a petition or otherwise commence, authorize
or acquiesce in the commencement of a proceeding or cause the initiation of a
proceeding under any bankruptcy or similar law for the
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protection of creditors, or have such petition filed against it and such
proceeding remains undismissed for sixty (60) days: (3) otherwise become
bankrupt or insolvent (however evidenced), or (4) be unable to pay it's debts
when due;
(v) Seller's unexcused failure to deliver Buyer's requested quantity for a
cumulative period of 30 or more days in a twelve (12) month period.
16.0 MISCELLANEOUS
16.1 No waiver by Buyer or Seller of any default of the other under this
Agreement shall operate as a waiver of any future default, whether of a like or
different character.
16.2 Every notice, request, statement or invoice provided for in this Agreement
shall be in writing directed to the party to whom given, made or delivered at
such party's address as follows:
Buyer: The Natural Gas Utility District of Hawkins County, TN.
202 Park Blvd.
PO Box 667
Rogersville, Tennessee 37857
Phone (615) 272-8841
Fax (615) 272-4645
Seller: Tengasco
Medical Arts Building
603 Main Avenue
Suite 500
Knoxville, Tennessee 37902
Phone (423) 523-1124
Fax (423) 523-9894
or at such other address as such party shall from time to time designate as the
address for such purpose by letter addressed to the other party or parties.
16.3 The parties agree that the place of execution of this Agreement is Hawkins
County, Tennessee. Buyer and Seller agree that this Agreement shall be construed
according to the law of the State of Tennessee.
16.4 This Agreement shall bind and inure to the respective successors and
assigns of the parties hereto, but no assignment shall relieve any party's
obligations hereunder without written consent of the other party.
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16.5 The parties hereto understand and agree that the total price to be paid for
gas delivered hereunder is the price set forth in section 6.0 hereof inclusive
of all taxes, royalties, payments or any other charges thereof applicable before
or upon delivery to Buyer
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate originals as of the day and year first herein above written.
Buyer: The Natural Gas Utility District of Hawkins County, TN.
By: /s/ Tommy W. Young
-------------------------
Title: General Manager
-------------------------
Date: 9/26/96
-------------------------
Seller: TENGASCO
By: /s/ Ted P. Scaller
-------------------------
Title: Pres/CEO
-------------------------
Date: 10/1/96
-------------------------
Signature page to Gas Purchase and Sales Agreement dated 9/26/96 , 1996, between
The Natural Gas Utility District of Hawkins County, TN. Buyer, and TENGASCO
Seller, relating to the purchase and sale of gas from various wells in Hancock
County, Tennessee.
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EXHIBIT 10.4
<PAGE>
GAS PURCHASE AND SALES AGREEMENT
BETWEEN
POWELL VALLEY ELECTRIC COOPERATIVE, INC.
BUYER
AND
TENGASCO, INC.
SELLER
PRODUCTION FROM VARIOUS WELLS IN HANCOCK CO., TN
<PAGE>
GAS PURCHASE AND SALES AGREEMENT
Table of Contents
Section Title Page
- ------- ----- ----
1 Definitions...........................................................1
2 Construction of Facilities............................................3
3 Quantity..............................................................3
4 Point of Delivery.....................................................3
5 Delivery Pressure.....................................................4
6 Price.................................................................4
7 Term..................................................................4
8 Title, Possession and Control.........................................4
9 Taxes.................................................................5
10 Quality...............................................................5
11 Standards for Measurement and Tests...................................7
12 Billings and Payments................................................10
13 Warranty of Title to Gas.............................................11
14 Force Majeure........................................................12
15 Miscellaneous........................................................15
Signature Page.......................................................17
<PAGE>
GAS PURCHASE AND SALES AGREEMENT
THIS AGREEMENT, made, entered into and effective this 21st day of November,
1996, by and between Powell Valley Electric Cooperative, Inc., hereinafter
referred to as "Buyer" and Tengasco, Inc., hereinafter referred to as "Seller."
WITNESSETH:
WHEREAS, Seller has a supply of natural gas available for sale to be
produced from various wells located in Hancock County, Tennessee, and
WHEREAS, Buyer may install a natural gas distribution system located in
Buyer's service area, and
WHEREAS, Seller desires to sell and deliver to Buyer and Buyer may purchase
and receive from Seller natural gas in the quantities and under the terms and
conditions hereafter set forth.
NOW, THEREFORE, in consideration of the mutual benefits and covenants
contained herein, Buyer and Seller have agreed as follows:
1.0 DEFINITIONS
Unless expressly stated otherwise, the following terms, when used in this
Agreement, shall mean:
1.1 The terms "gas" and "natural gas" shall mean and include casinghead gas
produced with crude oil, natural gas from gas wells, and residue gas from
processing casinghead gas, gas well gas or
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both.
1.2 A day shall begin at 8:00 a.m. in the time zone at the point of
delivery on each calendar day and end at 8:00 a.m. on the following calendar
day; a month or year shall begin at 8:00 a.m. on the first calendar day of such
period of time and end at 8:00 a.m. on the first calendar day following such
period.
1.3 The term "cubic foot" shall mean the volume of gas which occupies one
cubic foot when such gas is at a temperature of 60 degrees Fahrenheit and at a
pressure of 14.73 pounds per square inch absolute.
1.4 The term "Mcf" shall mean one thousand (1,000) cubic feet.
1.5 The term "Btu" shall mean the quantity of heat that must be added to
one pound avoirdupois of pure water to raise its temperature from 58.5 degrees
Fahrenheit to 59.5 degrees Fahrenheit at a constant pressure of fourteen and
seventy-three hundredths pounds per square inch absolute (14.73 psia).
1.6 The term "MMBtu" shall mean one million (1,000,000) Btus.
1.7 The term "Seller's Facilities" shall mean any and all facilities
required to be constructed and installed by Seller, at its sole cost and
expense, to enable Seller to deliver gas to Buyer at the Point of Delivery
specified in Section 4 hereof, in the quantities provided for in Section 3
hereof and meeting the quality specifications provided for in Section 10 hereof.
1.8 The term "Buyer's Facilities" shall mean any and all facilities
required to be constructed and installed by Buyer, at
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<PAGE>
its sole cost and expense, to enable Buyer to commence the receipt of gas from
Seller at the Point of Delivery specified in Section 4 hereof.
2.0 CONSTRUCTION OF FACILITIES
2.1 Upon written request by the Buyer, Seller and Buyer agree to proceed in
good faith and with due diligence in the construction of Seller's and Buyer's
facilities, respectively, and upon completion of such facilities the parties
shall commence the delivery and receipt of gas as soon as practical thereafter.
In no event shall Buyer be obligated to pay for any gas hereunder prior to the
time Seller's and Buyer's facilities have been constructed and made available to
deliver and receive gas.
3.0 QUANTITY
3.1 Daily Quantity - Daily quantities shall be mutually determined by the
Buyer and Seller at some future date prior to the Buy purchasing gas hereunder.
Seller shall be obligated to sell and deliver to Buyer from its production wells
in Hancock County, Tennessee, or from any other source interconnected to the
Seller's facilities.
3.2 In no event shall gas be sold from any source by Seller or transported
and delivered by Buyer or Seller to any customer of Buyer within Buyer's service
area without the written consent of Buyer, within twenty years from the initial
date of this Agreement.
4.0 POINT OF DELIVERY
4.1 Seller shall make deliveries of gas hereunder to Buyer at the point of
delivery. The point of delivery for all gas
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<PAGE>
delivered under this Agreement shall be at the interconnection of Seller's and
Buyer's facilities located at a mutually agreeable point on Buyer's Distribution
System in Hancock County, Tennessee.
5.0 DELIVERY PRESSURE
5.1 Seller shall make deliveries of gas hereunder to Buyer at the pressure
required by Buyer from time to time to enable the gas to enter Buyer's
facilities at Buyer's normal distribution pressure.
6.0 PRICE
6.1 The initial price per MMBtu to be paid by Buyer to Seller for all gas
purchased and sold hereunder shall be mutually determined by the Buyer and
Seller at some future date prior to the Buyer purchasing gas hereunder, but in
no case shall the price exceed "the inside FERC price plus 20 cents."
7.0 TERM
7.1 This agreement shall be in force and effect from the date first above
written and shall continue for a term of twenty years and on a year-to-year
basis thereafter until terminated by either party giving 180 day prior notice to
the other party to cancel this Agreement.
8.0 TITLE POSSESSION AND CONTROL
8.1 As between the parties hereto, Seller shall be deemed to be in control
and possession of the gas deliverable hereunder and responsible for any
injuries, claims, liabilities or damages caused thereby prior to delivery to
Buyer at the point of delivery. Buyer shall be deemed to be in exclusive control
and possession thereof
4
<PAGE>
after receipt of gas meeting the quality specification set forth in Section 10
hereof, at the point of delivery and responsible for any injuries, claims,
liabilities or damages caused by Buyer's possession and control. The party in
control and possession of the gas meeting the quality specification set forth in
Section 10 hereof shall indemnify the other party with respect to any injuries,
claims, liabilities or damages occurring while the gas is in the former's
control and possession. Title to the gas sold hereunder shall pass from Seller
to Buyer at the point of delivery.
9.0 TAXES
9.1 Buyer shall not be responsible for any federal, state or local taxes on
production, gathering, severance or other taxes levied on gas volumes delivered
by Seller. Seller hereby agrees to indemnify Buyer for any and all losses,
damages, or claims, including attorney fees, for Seller's failure to report and
pay for any and all federal and state production, gathering, severance or
similar taxes levied on gas volumes delivered by Seller.
10.0 QUALITY
Seller agrees that the gas delivered hereunder at the point of delivery
specified in Section 4.1 will, upon delivery:
10.1 Have a total heating value of not less than one thousand (1,000) Btus
per cubic foot;
10.2 Be commercially free from dust, hydrocarbon liquids, water and any
other substance that might become separated from the gas in Buyer's facilities,
and Seller shall furnish, install and maintain and operate such drips,
separators, heaters and other
5
<PAGE>
mechanical devices as may be necessary to effect compliance with such
requirements;
10.3 Not contain more than twenty (20) grains of total sulfur, nor more
than one-fourth (1/4) of one (1) grain of hydrogen sulfide per one hundred (100)
cubic feet;
10.4 Not contain more than five (5) parts per million (PPM) by volume of
oxygen, and Seller shall make every reasonable effort to keep the gas totally
free of oxygen;
10.5 Not contain more than four percent (4%) by volume of a combined total
of carbon dioxide and nitrogen components; provided, however, that the total
carbon dioxide content shall not exceed three percent (3%) by volume;
10.6 Have a temperature of not more than one hundred degrees (100 degrees)
Fahrenheit;
10.7 All gas shall have been dehydrated by Seller for removal of entrained
water present therein in a vapor state, and in no event contain more than seven
(7) pounds of entrained water per million cubic feet, at a pressure base of
fourteen and seventy-three hundredths pounds (14.73) per square inch and a
temperature of sixty degrees (60 degrees) Fahrenheit as determined by dew-point
apparatus approved by the Bureau of Mines or such other apparatus as may be
mutually agreed upon.
10.8 As to gas which fails to meet the quality specifications set forth
above, Buyer, in addition to any legal remedies it may have, shall have the
right to refuse delivery of such gas.
6
<PAGE>
11.0 STANDARDS FOR MEASUREMENT AND TESTS
11.1 A purchase/sales meter shall be installed, maintained and operated by
Seller at the point of delivery to measure all gas sold and/or delivered for
transportation or displacement under this agreement. The volume shall be
measured by orifice meters with linear charts, twenty-four (24) hour rotation,
or mutually agreeable measuring devices installed and operated, and computations
made as prescribed in Gas Measurement Committee Report No. 3 of the American Gas
Association, as such report may be amended or revised from time to time.
11.2 The unit of volume for purposes of measurement shall be one (1) cubic
foot of gas at a temperature base of sixty degrees (60 degrees) Fahrenheit and
at a pressure base of fourteen and seventy-three hundredths (14.73) pounds per
square inch absolute.
11.3 Temperature shall be determined by a recording thermometer, when
applicable, with twenty-four (24) hour chart rotation continuously used and
installed so as to record properly the temperature of the gas flowing through
the meter. The arithmetical average of the hourly temperatures recorded during
each day shall be used to calculate volumes hereunder.
11.4 Specific gravity shall be determined with accuracy to the nearest
one-thousandth (0.001) by taking samples of the gas at the point of measurement
at such times as may be designated by the parties hereto, but not more often
than once each month and having the specific gravity determined by the use of
the Acme Senior Gravity Balance, or any other instrument mutually agreed upon.
7
<PAGE>
11.5 The total heating value of the gas shall be determined by joint tests
made by taking samples of gas at the point of delivery but not more than once
each month. Such samples to have the Btu content per cubic foot determined by:
(1) chromatographic analysis; or (2) by calculation of gross heating value by
compositional analysis. Buyer and Seller may mutually agree to utilize other
acceptable industry methods for determination of heating value. The Btu content
shall be determined for a cubic foot of gas at a temperature of sixty degrees
(60 degrees) Fahrenheit and a pressure of fourteen and seventy-three (14.73)
pounds per square inch absolute on a dry basis.
11.6 Tests to determine sulfur, hydrogen sulfide, oxygen, carbon dioxide,
nitrogen and water content shall be made by approved standard methods in general
use by the gas industry. Such tests shall be made at the request of either
party. The cost of such tests are to be paid by the requesting party.
11.7 The accuracy of the measuring and testing equipment shall be verified
at least once each year and at other times upon request of Buyer or Seller.
Tests for quality of the gas may be made at the time of testing equipment or at
other times, but not more often than once each month. Notice of the time and
nature of each test shall be given to the other party sufficiently in advance to
permit convenient arrangement for a representative to be present. Tests and
adjustments shall be made in the presence of and observed by representatives of
both Buyer and Seller. All tests shall be made by Buyer at Buyer's expense,
except that Seller shall bear the
8
<PAGE>
expense of tests made at its request.
11.8 If at any time of the measuring or testing equipment is found to be
out of service or registering inaccurately in any percentage, it shall be
adjusted at once to read accurately, within the limits prescribed by the
manufacturer. If such equipment is out of service, or inaccurate by an amount
exceeding two percent (2%) at a reading corresponding to the average rate of
flow for the period since the last preceding test, the previous readings of such
equipment shall be disregarded for any period definitely known or agreed upon,
or if not so known or agreed upon, for a period of fifteen (15) days or one-half
of the elapsed time since the last test, whichever is shorter. The volume of gas
delivered during such period shall be estimated (i) by using the data recorded
by any check-measuring equipment, if installed and accurately registering, of,
if not installed or registering accurately, (ii) by correcting the error if the
percentage of error is ascertainable by calibration, test or mathematical
calculation, or, if neither such method is feasible, (iii) by estimating the
quantity or quality delivered, based upon deliveries under similar conditions
during a period when the equipment was registering accurately. No correction
shall be made for recorded inaccuracies of two percent (2%) or less.
11.9 Buyer and Seller shall have the right to inspect equipment installed
or furnished by the other, and the charts and other measurement or testing data
of the other, at all times during business hours, but the calibration and
adjustment of such
9
<PAGE>
equipment shall be done only by the party that installs or furnishes such
equipment unless otherwise agreed upon. Each party shall preserve all original
test data, charts and other similar records in such party's possession for a
period of at least two (2) years.
12.0 BILLINGS AND PAYMENTS
12.1 On or before the 15th working day of each month after deliveries of
gas are commenced, Seller shall render to Buyer an invoice for the preceding
month showing the total volume and the gross heating value of gas delivered at
the point of delivery hereunder.
12.2 Buyer will pay Seller on or before the 25th day of each month, or as
to statements rendered after the 15th day of each month, within thirty (30) days
after receipt of such statements, for gas delivered during the preceding month.
If the correct amount is not paid when due and such payment is not successfully
disputed by Buyer, interest on any unpaid amount shall accrue at the rate of
nine percent (9%) per annum. If such failure to pay continues for sixty (60)
days, Seller, in addition to all other remedies, may thereafter suspend
deliveries of gas hereunder and if such default continues for thirty (30)
additional days, Seller may thereafter, in addition to any other rights Seller
may have, suspend or terminate this contract. Provided, however, if Buyer in
good faith shall dispute the amount of any such invoice or part thereof and
shall pay to Seller such amounts as it concedes to be correct and shall
undertake and guarantee to make payment to Seller
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of the amount ultimately found due upon such invoice after a final determination
which may be reached either by agreement or judgement of the courts, as may be
the case, then Seller shall not be entitled to suspend or terminate this
contract.
12.3 Each party shall have the right to inspect and examine at all
reasonable times the records and charts of the other party pertaining to the
purchases and sale of gas hereunder. If any overcharge or undercharge in any
amount whatsoever shall be determined within 12 months from the date of the
invoice and the invoice therefor has been paid, Seller shall refund the amount
of any overcharge or Buyer shall pay the amount of any undercharge within thirty
(30) days after the final determination thereof.
13.0 WARRANTY OF TITLE TO GAS
13.1 Seller warrants title to all gas delivered or to be delivered
hereunder, that Seller has the right to sell the same, and that such gas is free
from liens and adverse claims of every kind. Seller will pay, or cause to be
paid, all royalties, taxes and other sums due on production, gathering,
severance or handling of the gas delivered by Seller to Buyer. Seller will
indemnify and save Buyer harmless against all loans, damage and expense of every
character on account of adverse claims to the gas delivered by it or of
royalties, taxes, payments or other charges thereon applicable before or upon
delivery to Buyer. If Seller's title is questioned or involved in any action,
Buyer may thereafter refuse without penalty to accept further deliveries from
Seller and/or Buyer may withhold payment (without interest) of sums due
hereunder
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up to the amount of the claim until title is free from such question or such
action is finally determined, or until such time as Seller furnishes bond
conditioned to save Buyer harmless with sureties satisfactory to Buyer.
14.0 FORCE MAJEURE
14.1 If either Buyer or Seller is rendered unable, wholly or in part, by
force majeure to perform its obligations under this Agreement, other than the
obligation to make payments then due for gas previously delivered, it is agreed
that performance of the respective obligations of the parties hereto to deliver
and receive gas, so far as they are affected by such force majeure, shall be
suspended from the inception of any such inability until it is corrected but for
no longer period. The party claiming such inability shall give notice thereof to
the other party as soon as practicable after the occurrence of the force
majeure. If such notice is first given by telephone or facsimile communication,
it shall be confirmed promptly in writing giving full particulars. The party
claiming such inability shall promptly correct such inability to the extent it
may be corrected through the exercise of reasonable diligence.
14.2 Neither party shall be liable to the other for any losses or damages,
regardless of the nature thereof and howsoever occurring, whether such losses or
damages be direct or indirect, immediate or remote, by reason of, caused by,
arising out of, or in any way attributable to the suspension of performance of
any obligation of either party to the extent that such suspension
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occurs because a party is rendered unable, wholly or in part, by force majeure
to perform its obligations.
14.3 The term "force majeure" as used herein shall mean, cover and include
the following:
(a) Acts of God or Acts of Providence including, without limitation,
epidemics, landslides, hurricanes, floods, washouts, lightning, earthquakes,
storm warnings, extreme heat or cold, any other adverse weather conditions and
threats of any of the foregoing, and whether preceded by, concurrent with, or
followed by acts of omissions of any human agency, whether foreseeable or not,
which may directly or indirectly contribute to or result in either party's
inability to perform its obligations.
(b) Acts of Government including, without limitation, laws, orders, rules,
decrees, judgements, judicial actions, regulations, acts of arrests or
restraint, and threats of any of the foregoing by any government (de jure or
defacto), or any agency subdivision or instrumentality thereof, having, claiming
or asserting authority or jurisdiction over the severance, production,
gathering, transportation, handling, sale or delivery of the subject matter of
this Agreement, when any such Act of Government directly or indirectly
contributes to or results in either party's inability to perform its
obligations.
(c) Acts of Civil Disorder including, without limitation, acts of sabotage,
acts of the public enemy, acts of war (declared or undeclared), blockades,
insurrections, riots, mass protests or demonstrations and threats of any of the
foregoing, and police
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<PAGE>
action in connection with or in reaction to any such Acts of Civil Disorder,
when any such Act of Civil Disorder directly or indirectly contributes to or
results in either party's inability to perform its obligations.
(d) Acts of Industrial Disorder including, without limitation, strikes,
lockouts, picketing and threats of any of the foregoing, when any such Acts of
Industrial Disorder directly or indirectly contributes to or results in either
party's inability to perform its obligations; provided, however, that the
settlement of any labor dispute to prevent or end any such Acts of Industrial
Disorder shall be within the sole discretion of the party to this Agreement
involved in such labor disputes, and the above requirement that any liability
shall be corrected with reasonable diligence shall not apply to labor disputes.
(e) Failure of Facilities including, without limitation, freezing of wells
or lines of pipe, failure resulting from fires, washouts, mechanical breakdowns
of, malfunctions of or necessities for making repairs or alterations to
machinery, lines of pipe, pumps, compressors, valves, gauges or any of the
equipment therein or thereon, and cratering, blowout, or failure to any well or
wells to produce, when any such Failure of Facilities directly or indirectly
contributes to or results in either party's inability to perform its
obligations.
(f) Inability to obtain or acquire at reasonable cost grants, servitudes,
rights-of-way, permits, licenses, or any other authorization from third parties
or agencies (private or
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governmental) or inability to obtain or acquire at reasonable cost necessary
materials and supplies, to construct, maintain and operate any facilities
required for the performance of any obligations under this Agreement, when any
such inability directly or indirectly contributes to or results in either
party's inability to perform its obligations.
(g) Any occurrence, condition, situation, or threat thereof, not covered by
Subparagraphs (a) through (f) above, which renders either party unable to
perform its obligations, provided such occurrence, condition, situation or
threat thereof is not under or within the control of the party claiming such
inability, provided such party could not have prevented such occurrence,
condition, situation or threat thereof by the exercise of reasonable diligence.
15.0 MISCELLANEOUS
15.1 No waiver by Buyer or Seller of any default of the other under this
Agreement shall operate as a waiver of any future default, whether of a like or
different character.
15.2 Every notice, request, statement or invoice provided for in this
Agreement shall be in writing directed to the party to whom given, made or
delivered at such party's address as follows:
Buyer: Powell Valley Electric Cooperative, Inc.
325 Straight Creek Road
P.O. Box 1528
New Tazewell, TN 37825
Telephone: (423) 626-5204
Fax: (423) 626-0711
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Seller: Tengasco, Inc.
Suite 500, Medical Arts Building
603 Main Avenue
Knoxville, TN 37902
Telephone: (423) 523-1124
Fax: (423) 523-9894
or at such other address as such party shall from time to time designate as the
address for such purpose by letter addressed to the other party or parties.
15.3 The parties agree that the place of execution of this Agreement is
Hancock County, Tennessee. Buyer and Seller agree that this Agreement shall be
construed according to the law of the State of Tennessee.
15.4 This Agreement shall bind and inure to the respective successors and
assigns of the parties hereto, but no assignment shall relieve any party's
obligations hereunder without written consent of the other party.
15.5 The parties hereto understand and agree that the total price to be
paid for gas delivered hereunder is the price set forth in Section 6.0 hereof
inclusive of all taxes, royalties, payments or any other charges thereof
applicable before or upon delivery to Buyer.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate as of the day and year first above written.
POWELL VALLEY ELECTRIC COOPERATIVE, INC., Buyer
By: [illegible]
Title: [illegible]
Date: 11/18/96
TENGASCO, INC., Seller
By: /s/ Ted P. Scallon
Title: President/C.E.O.
Date: 11/15
Signature page to Gas Purchase and Sales Agreement dated November 18th, 1996,
between Powell Valley Electric Cooperative, Inc., Buyer, and Tengasco, Inc.,
Seller, relating to the purchase and sale of gas from various wells in Hancock
County, Tennessee.
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CONSULTING AGREEMENT
THIS AGREEMENT, made and entered into the 30th day of October, 1996, by and
between Powell Valley Electric Cooperative, Inc. and ________________________
("Consultants"), and Tengasco, Inc. ("Tengasco").
WHEREAS, Consultants agree to provide certain services pertaining to the
acquisition of pipeline rights-of-way to Tengasco under the following terms and
conditions:
1. Services. Tengasco hereby retains the Consultants to provide pipeline
acquisition services as requested from Tengasco from time to time in Tengasco's
sole discretion. The services to be performed under this Agreement shall
commence upon execution of this Agreement. Title work may also be performed.
2. Fees. As full and complete compensation for all services provided
hereunder during the term of this Agreement, Tengasco shall pay Powell Valley
Electric Cooperative, Inc. for all billable hours worked (except title work) at
a rate of $35.00 per man hour. Title work shall be at the rate of $75.00 per man
hour. Consultants will record all billable hours on a daily basis. Consultants
will invoice Tengasco for all services performed by Consultants during the term
of this Agreement. Tengasco will pay such invoice within thirty (30) days of
receipt of said invoice. Tengasco agrees to reimburse Consultants for reasonable
expenses including mileage at $0.30 per mile and other miscellaneous expenses
related to pipeline right-of-way acquisition. Tengasco agrees that Consultants
may employ additional landsmen if necessary to obtain certain rights-of-way.
Consultants agree to compensate only additional landsmen and
<PAGE>
invoice Tengasco for same at a rate not to exceed that agreed upon above.
3. Term. The provisions of this Agreement shall be effective as of the date
hereof and shall continue in full force and effect until terminated by either
party without cause on five (5) days notice to the other. Provided, however, the
provisions of Paragraph 4 herein shall survive termination of this Agreement
consistent with the terms set out in said paragraph.
4. Confidential Information Agreement. Consultants hereby acknowledge and
agree to be bound by the terms of that certain Confidential Information
Agreement executed between the parties on even date herewith.
5. No other representations, written or oral, have been made by any party
to this Agreement. This Agreement shall be amendable only in writing. All work
done by Consultants for Tengasco shall be deemed pursuant to this Agreement
unless otherwise agreed upon between the parties in writing.
6. Indemnity. To the fullest extent permitted by law, any provision hereof
to the contrary notwithstanding, Consultants shall not be liable or responsible
for any accident, loss, injury or damage, happening or accruing during the term
of this Agreement, and Tengasco shall and does hereby fully indemnify, protect,
defend, and hold harmless Consultants from and against all liens, claims of
liens, demands, liabilities, causes of action, judgments, costs, claims,
damages, suits, losses and expenses, including attorney fees of any nature kind,
or description (collectively "Liabilities"), of the Consultants arising out of,
caused by, or resulting from the performance of services provided by
Consultants.
7. Should any part of this Agreement be unenforceable or ever deemed
invalid, null
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or void all remaining provisions of this Agreement shall continue in full force
and effect.
8. This Agreement shall be governed by the laws of the State of Tennessee.
Executed the day and year above written.
TENGASCO, INC.
By: /s/ Ted P. Scallon
Title: President/C.E.O.
POWELL VALLEY ELECTRIC COOPERATIVE, INC.
Consultants
By: [illegible]
Title: President
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EXHIBIT 10.5
<PAGE>
ENERGY MARKETING AGREEMENT
THIS AGREEMENT, made and entered into this 27th day of May, 1997, by and
between Enserch Energy Services, Inc. ("Enserch"), and Tengasco ("Tengasco").
WHEREAS; Enserch is an energy marketer with considerable experience in the
marketing of natural gas and other energy products to industrial and commercial
end-users; and
WHEREAS; Enserch wishes to increase its retail and wholesale market share a
joint effort with Tengasco; and
WHEREAS; Enserch has developed proprietary services and pricing programs
for its existing and potential customers and wishes to maintain same as
confidential between itself and its customers, and
WHEREAS; Tengasco is an energy producer and marketer and has many well-
established long-term relationships with potential customers for natural gas and
other energy products in the State of Tennessee, and
WHEREAS, Tengasco is interested in aligning itself with Enserch in order to
develop customer leads and/or referrals to help promote Enserch's and Tengasco's
natural gas marketing efforts, under a mutually beneficial arrangement,
NOW, THEREFORE, for good and valuable consideration, the parties hereby
agree as follows:
1. Definitions
The term "Best Efforts" means the use of reasonable effort and due
diligence, but does not require the expenditure of unreasonable amount of money
or time.
The term "Market Area" shall mean the State of Tennessee.
The term "Products" shall mean natural gas, electricity, fuel oil and other
energy commodities that may be sold from time to time by either Enserch or
Tengasco.
The term "Referred Customer(s)" shall mean those retail and wholesale Sales
Customers referred to Enserch by Tengasco wishing to enter into an agreement to
purchase Products from Enserch.
The term "Sales Contact" shall mean (a) any contract for the sale of
Products in the Market Area between Enserch and a Sales Customer, or between
Tengasco and a Sales Customer, and (b) any contract for the sale of Products by
either party outside the Market Area if, and only if, the parties hereto
unanimously agree in writing to designate such contract as a Sales Contract for
purposes of this agreement.
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The term "Sales Customer" shall mean (a) a customer under a Sales Contract
who is an industrial and/or commercial end-user of Products and purchases
Products for its own use and does not re-sell same ("retail customer"), and (b)
a customer under a Sales Contract purchasing Products for the purposes of resale
("wholesale customer").
2. Term
This agreement shall be effective on the date first hereinabove written and
shall continue in force and effect for a primary term ending May 31, 2002. This
Agreement shall continue in effect thereafter for successive periods of one (1)
year each unless terminated by either party at the end of the primary term or at
the end of any one (1) year period thereafter by giving at least sixty (60) days
prior written notice to the other party.
3. Scope
During the term of this Agreement, either party may enter into Sales
Contracts in the Market Area without the participation of the other party.
Further, Tengasco may refer potential Sales Customers to Enserch, and Enserch
shall use its best efforts to market natural gas owned and/or controlled by
Enserch to Referred Customer(s) within the Market Area. Neither party shall have
the authority to bind the other to any agreement, and shall have no liability
associated with any Sales Contract executed by the other party.
4. Referral Services of New Accounts by Tengasco.
If and when Tengasco finds a Sales Customer that it desires to refer to
Enserch, Tengasco shall notify Enserch by telephone and follow-up fax
transmittal ("Notice of Potential Referred Customer" - form of notice attached
hereto as Exhibit "A"). The Notice of Potential Referred Customer shall specify
(1) The name, address, phone and fax numbers of the Sales Customer, (2) the name
and title of the customer contact, (3) the LDC(s) serving the customer, (4) the
volumes of Products required by the Sales Customer on a monthly basis, (5) the
term and pricing methodology sought by the Sales Customer, and (6) any other
material terms, and conditions for the sale (including without limitation
whether Products will required on a firm or interruptible basis). Enserch shall,
immediately upon notification of a potential Referred Customer by Tengasco,
inform Tengasco of any bona fide pre-existing relationship present between
Enserch and the potential Referred Customer pursuant to paragraph 8, below.
Absent the existence of such a bona fide pre-existing relationship,
Tengasco shall (1) notify potential Referred Customer of Enserch's and
Tengasco's relationship and of Enserch's interest in contracting with customer
for its Products needs and (2) schedule an introductory meeting between Referred
Customer, Tengasco and Enserch.
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5. Marketing of Natural Gas to Referred Customers
Following acceptance by Enserch of a referral by Tengasco of a potential
Sales Customer, and prior to said introductory meeting, Enserch and Tengasco
shall meet, at a time and location agreeable to the parties, to perform the
following tasks:
o plan a sales strategy for the Referred Customer,
o establish parameters or limits on the terms of any Sales Contract and
o ascertain and agree on a recommended supply; services and pricing
program for any new Referred Customer.
Enserch shall be empowered to enter into its own separate Sales Contract
with the Referred Customer. Enserch will provide Tengasco with periodic progress
reports with respect to the negotiation of any Sales Contract with a Referred
Customer. If required, Enserch will negotiate directly with the Referred
Customer's Local Distribution Company, its agents and/or representatives, on
behalf of the Referred Customer with regard to the natural gas sales contract.
Enserch reserves the right, at its sole discretion, to accept or reject any
potential Referred Customer, and is accordingly not obligated to sell any
minimum quantity of gas under this Agreement. In addition, should the financial
responsibility of any Referred Customer under a Sales Contract with Enserch
become impaired or unsatisfactory to Enserch, in Enserch's reasonable judgment,
Enserch shall have the right, in its sole discretion, to suspend deliveries
and/or terminate any Sales Contract following written notice to the Sales
Customer and Tengasco. Enserch shall provide as much notice as practicable to
the Sales Customer and Tengasco in order that the Sales Customer and Tengasco
may acquire a substitute supply arrangement.
6. Compensation and Administration
6.1 Revenue Distribution. The party hereto which is named as a seller under
a Sales Contract shall pay to the other party hereto an amount equal to fifty
percent (50%) of the Transfer Price Margin, as hereinafter defined, resulting
from sales of Products under all Sales Contracts entered into by such selling
party, or fifty percent (50%) of the Adjusted Gross Profits, as hereinafter
defined, resulting from the sale of Products under Sales Contracts for which a
Transfer Price Margin is not determined in the ordinary course of business. No
payments shall be due from one party to the other hereunder with respect to the
sale of any Products for which payment has not been received by the seller
thereof
6.2 Definitions.
6.2.1 "Transfer Price Margin" shall be determined by Enserch, and shall
mean, for any Sales Contract, the positive difference between (a) the sales
price of the applicable Product established pursuant to the Sales Contract,
deducting my direct costs (e.g. taxes,
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<PAGE>
hedging costs and transportation) relating to making the sale which are not
included in the offer price hereinafter described, and (b) the offer price
for such Product determined by Enserch's risk management group through
established procedures. Documentation reflecting the Transfer Price Margin
shall be furnished to Tengasco not later than five (5) business days after
the effective date of a transaction, or in the case of Sales Contracts
entered into by Tengasco, not later then five (5) business days after the
date Tengasco furnishes a detailed report of such Sales Contract to
Enserch.
6.2.2. "Adjusted Gross Profits" shall mean the amount or amounts determined
by subtracting (a) the purchase price, if any, of the Products designated
to any sale which is subject to the terms hereof, plus all additional
direct costs (but not indirect costs, such as overhead) of marketing such
Products, including, without limitation, transportation costs associated
with movement of such Products to the delivery points and all taxes which
the seller is required to bear in relation to such sale (except income
taxes), from (b) the sales price the seller actually receives for such
Products.
6.3 Net Present Value Payments. Either party may request for any executed Sales
Contract of the other party that it be paid the net present value ("NPV") of its
payments hereunder in lieu of the payments set forth above. Such request must
be made in writing. Upon receipt of such request, the parties hereto shall
attempt in good faith to agree within thirty (30) days thereafter upon the
volumes, prices, discount rate and other variable factors affecting the NPV. In
the event the parties reach such agreement, the NPV shall be paid to the party
entitled to payment within thirty (30) days thereafter. In the event the parties
fail to agree upon all the terms and conditions necessary to calculate the NPV
within thirty (30) days after receipt of the notice as set forth above, then the
payments due under the contract shall be made periodically as set forth above.
In the event there is a payment made for any Sales Contract on the basis of the
NPV, and thereafter there is a material adverse change in the volumes or price
of gas sold under such Sales Contract, the NPV shall be adjusted to reflect the
new price or volumes, as applicable, and the party that received the NPV payment
shall promptly refund to the other party the difference between the amount
received and the recalculated NPV, without interest.
6.4 Reports. Following execution of a Sales Contract, Enserch or Tengasco, as
applicable, will provide the other with detailed contract information and
account activity reports with respect to such Sales Contract. The costs of
negotiating, entering into and administering and performing under any and all
Sales Contracts shall be borne solely by the party selling Products thereunder,
and neither party shall be responsible for any losses on a sale that the other
party may incur.
Each party shall be responsible for administering any and all Sales
Contracts it enters into, including without limitation, daily balancing,
billing, and general customer service.
7. Billings and Payments
By the fifteenth (15th) day of the calendar month following each calendar
quarter in which natural gas was delivered under Sales Contracts, i.e., on or
before the 15th day of April,
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July, October and January, the selling party shall provide the other hereunder
with a written statement showing the total quantities of gas sold, the Transfer
Price Margin associated with such sales and the amount due and owing the other
party with respect to such sales.
Each shall pay to the other the stated total amount due by check, by the
twenty-fifth (25th) day of the calendar month in which the statement was
rendered, provided that if the twenty-fifth (25th) day is not a business day,
payment will be due on the next business day following that date.
Notwithstanding the above, for any billing period when money is owed by each
party to the other hereunder, the party owing the greater amount of money shall
be entitled, at its election, to effect payment by offsetting the amount due to
it by the other party against amounts due to the other party, and paying the
difference to the other party.
Compensation will be paid to by the parties on each Sales Contract so long
as this Agreement is in force and effect and so long thereafter as said Sales
Customer has remained under a Sales Contract with Enserch or Tengasco on a
continuous and uninterrupted basis from inception of such Sales Contract.
Both parties shall have the right at any reasonable time, but no more often
than once in any twelve(12) month period, after giving reasonable notice, to
examine the books and records of the other party to the extent necessary to
verify the accuracy of any statement, charge or payment made. If any such
examination reveals, or if either party discovers, any error or inaccuracy in
its own or the other party's statements, payments, calculations or
determinations, then adjustments and corrections shall be made as promptly as
practicable thereafter, provided however, that no adjustment or correction shall
be made on or with respect to any error or inaccuracy which is discovered more
than one (1) year after such statement, charge, computation or payment was made.
8. Exclusive Agreement
The parties hereto acknowledge that this is an exclusive services agreement
and that neither party may engage in similar arrangements with other parties
within the Market Area. Notwithstanding anything herein to the contrary, any
contracts entered into by either party prior to the date hereof for the sale of
Products in the Market Area shall not be subject to the provisions hereof, and
no compensation shall be due by either party to the other hereunder with respect
thereto. Further, in the event Enserch has an established Products sales
relationship with a customer with whom Tengasco does not have an existing Sales
Contract, and who has offices outside the Market Area, and that customer has
facilities within the Market Area, then Enserch may sell Products directly to
such customer's offices in the Market Area, and Tengasco shall not be entitled
to any compensation with respect to such contract.
9. Notices
All notices sent under the Agreement must be sent by fax, with follow-up
written copy by mail. Notices should be sent to the follow designees below:
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For Enserch: Enserch Energy Services, Inc.
1301 Fannin, Suite 2300
Houston, Texas 77002
Attention: ________________________
Ph.: (713) 651-7888
Fax: (713) 659-7505
For Tengasco:
Ph.:
Fax:
10. Change in Control
In the event of a Change in Control of Tengasco, as defined in Exhibit "B",
attached hereto and made a part hereof, or in the event of a sale of all or
substantially all of Tengasco's assets, Tengasco shall, at the election of
Enserch, either (a) cause the acquiring or continuing entity of Tengasco to
assume all the obligations of this contract or (b) purchase Enserch's rights
under this contract for an amount equal to four (4) times the NPV of all Sales
Contracts entered into by Tengasco and Enserch hereunder. In the event Enserch
elects to have Tengasco purchase Enserch's rights under this contract, this
contract shall terminate, and each party hereto shall retain its rights to any
Sales Contracts under which it is a seller. Further, in the event of a sale of
all or substantially all of Tengasco's assets to an unrelated third party,
Tengasco shall notify Enserch of any bona fide offer to purchase such assets and
Enserch shall have the right of first refusal, to be exercised within thirty
(30) days after receipt of Tengasco's notice, to purchase such assets under the
same terms and conditions as are contained in such offer.
For purposes of this Section 10 only, in the event the parties are unable
to agree upon the NPV, the matter shall be settled by a major independent public
accounting firm selected by mutual agreement of the parties. In the event the
parties cannot agree upon the selection of a major independent public accounting
firm, such firm shall be selected by Enserch from a list of four major
independent accounting firms which have not represented either Enserch, Tengasco
or their affiliates within the five year period preceding such selection. The
decision of such accounting firm shall be final and binding, and the costs
incurred in connection with retaining such accounting firm shall be shared
equally by Tengasco and Enserch.
11. Miscellaneous
11.1 This document, including the Attachments constitutes the entire
Agreement between the parties with respect to the subject matter thereof.
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11.2 A waiver by either party of any one or more defaults by the other in
the performance of any provisions of this Agreement shall not operate as a
waiver of any future default or defaults, whether a like or of a different
character.
11.3 No modification, amendment, or change herein shall be enforceable
unless reduced to writing and executed by both parties.
11.4 The rights and obligations under this Agreement shall inure to and be
binding upon the permitted successors and assigns of the parties hereto. No
assignment of this Agreement or any of the rights or obligations hereunder shall
be made by either party unless the other party has consented in writing thereto,
which consent shall not be unreasonably withheld.
11.5 Tengasco is not authorized to act as agent for Enserch and shall not
represent to any person or entity that it is an agent for Enserch. Enserch is
not authorized to act as agent for Tengasco and shall not represent to any
person or entity that it is an agent for Tengasco.
11.6 The terms of this Agreement and any Sales Contract entered into
pursuant hereto, including, but not limited to pricing, contract quantity,
customer name and location, and all other material terms thereof shall be kept
confidential by the parties hereto, except to the extant that any information
must be disclosed to a third party for the purpose of effectuating
transportation of gas subject to the terms of this Agreement or to meet New York
Mercantile Exchange requirements or regulatory filing requirements where
necessary. Further, it is recognized that in connection with performance under
this agreement, Enserch may disclose to Tengasco certain other information or
material which it considers confidential or proprietary (the "Confidential
Information"), which Enserch shall identify as such at the time of the
disclosure. Tengasco shall treat Confidential Information confidentially and
shall not disclose the same to any person or entity except those employees and
professional advisors who have a need to know in connection with Tengasco's
performance under this Agreement. Tengasco shall not use Confidential
Information for any purpose other than the furtherance of the interest of the
parties hereto under this Agreement. Tengasco shall cause any employee,
professional advisor or any other individual receiving Confidential Information
to be bound by the terms of this confidentiality provision, and Tengasco shall
be liable for any breach of these provisions by any such party.
11.7 This Agreement shall be construed and interpreted in accordance with
the laws of the State of Texas, and any litigation of such construction or
interpretation issues may only be filed and maintained in federal or state court
in Texas.
Tengasco Corp. Enserch Energy Services, Inc.
AGREED and ACCEPTED AGREED and ACCEPTED
this 27 day of May, 1997 this 23 day of May 1997
By: /s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE]
Its: C.F.O. Its: Senior Vice President
7
<PAGE>
Exhibit "A" To Energy Marketing Agreement dated ___________, 1997
between Tengasco and Enserch Energy Services Inc.
NOTICE OF
POTENTIAL REFERRED CUSTOMER
Name of Customer: _________________________________________________________
Address: _________________________________________________________
Phone/fax: Ph.: ( ) _______________ Fax: ( ) _______________
Type of Company: _________________________________________________________
Name of LDC: _________________________________________________________
Name of LDC Rep: _________________________________________________________
Phone of LDC Rep: _________________________________________________________
Estimated load (therms,
MMBtu, etc.) Summer/mo _____ Winter/mo. _______ Annual _____
Desired Pricing: _________________________________________________________
Comments: _________________________________________________________
9
<PAGE>
Exhibit "B" To Energy Marketing Agreement dated ______________, 1997, between
Tengasco and Enserch Energy Services Inc.
A Change in Control shall be deemed to have occurred upon, and shall mean:
(i) The acquisition by any individual, entity or group (within the meaning
of Section l3(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended, (the "Exchange Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 40% or more of
either (1) of the then outstanding shares of Common Stock of Tengasco (also
referred to herein as the "Company") the Company (the "Outstanding Company
Common Stock") or (2) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however, that
the following acquisitions shall not constitute a Change in Control: (w) any
acquisition directly from the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege), (x) any acquisition by the Company, (y) any
acquisition by any employee benefit plan(s) (or related trust(s)) sponsored or
maintained by the Company or any corporation controlled by the Company, or (z)
any acquisition by any corporation pursuant to a reorganization, merger or
consolidation, if, immediately following the same, the conditions described in
clauses (1), (2) and (3) of subparagraph (iii) of this section are satisfied; or
(ii) Individuals who, as of the date hereof, constitute the Company's Board
of Directors (the "Incumbent Board"), cease for any reason to constitute at
least a majority of the Company's Board of Directors, provided, however, that
any individual becoming a director subsequent to the date hereof whose election,
or nomination for election by the Company's stockholders, was approved by a vote
of at least a majority of the directors constituting the Incumbent Board shall
be considered as though such individual were a member of the Incumbent Board,
but excluding for this purpose any such individual whose initial assumption of
office occurs as a result of either (1) an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act), or an actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Company's Board of Directors or (2) a
plan or agreement to replace a majority of the members of the Company's Board of
Directors then comprising the Incumbent Board; or
(iii) Approval by the stockholders of the Company of a reorganization,
merger or consolidation, in each case unless, immediately following such
reorganization, merger or consolidation, (1) more than 60% of, respectively, the
then outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation (including, without limitation, a
corporation which as a result of such transaction owns the Company through one
or more subsidiaries) and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, to the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as their ownership,
immediately prior to such
10
<PAGE>
reorganization, merger or consolidation, of the Outstanding Company Common Stock
and Outstanding Company Voting Securities, as the case may be, (2) no person
(excluding the Company, any employee benefit plan (or related trust) of the
Company or such corporation resulting from such reorganization, merger or
consolidation and any Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or indirectly, 40% or more of
the Outstanding Company Common Stock or Outstanding Company Voting Securities,
as the case may be) beneficially owns, directly or indirectly, 40% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidation or the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and (3) at least a
majority of the members of the board of directors of the corporation resulting
from such reorganization, merger or consolidation were members of the Incumbent
Board at the time of the execution of the initial agreement providing for such
reorganization, merger or consolidation; or
(iv) Approval by the stockholders of the Company of (1) a complete
liquidation or dissolution of the Company or (2) the sale or other disposition
of all or substantially all of the assets of the Company, other than to a
corporation with respect to which immediately following such sale or other
disposition, (A) more than 60% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally in
the election of directors as then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such sale or other
disposition in substantially the same proportion as their ownership immediately
prior to such sale or other disposition of the Outstanding Company Common Stock
and Outstanding Company Voting Securities, as the case may be, (B) no person
(excluding the Company and any employee benefit plan (or related trust) of the
Company and/or its subsidiaries or such corporation and any Person beneficially
owning, immediately prior to such sale or other disposition, directly or
indirectly, 40% or more of the Outstanding Company Common Stock or Outstanding
Company Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 40% or more of, respectively, the then outstanding shares of common
stock of such corporation or the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the election
of directors and (C) at least a majority of the members of the board of
directors of such corporation were members of the Incumbent Board at the time of
the execution of the initial agreement or action of the Company's Board of
Directors providing for such sale or other disposition of assets.
11
<PAGE>
EXHIBIT 16.1
<PAGE>
David T.
Thomson P.C. Certified Public Accountant
================================================================================
Securities and Exchange Commission
459 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
I was previously the auditor for Tengasco, Inc. (Formerly Onasco Companies,
Inc.) and on April 14, 1995 I reported on the financial statements of Tengasco,
Inc. at December 31, 1994, 1993 and 1992 and the years then ended. I have read
the statements made by Tengasco, Inc. in Form SB-2, which I understand will be
filed with the Commission, with respect to the change in accountants from my
firm to Charles M. Stivers. I agree with paragraphs one, three, seven, and items
(1), (2), and (3) of paragraph six. I have little or 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
July 28, 1997
180 South 300 West, Suite 329, Salt Lake City, Utah 84101 (801)328-3900
<PAGE>
EXHIBIT 16.2
<PAGE>
CHARLES M. STIVERS
Certified Public Accountant
1106 Manchester Square Shopping Center
Manchester, Kentucky 40962
(606)598-1464
MEMBER MEMBER
KENTUCKY SOCIETY OF AMERICAN INSTITUTE OF
CERTIFIED PUBLIC ACCOUNTANTS CERTIFIED PUBLIC ACCOUNTANTS
July 28, 1997
Securities and Exchange Commission
459 Fifth Street
Washington, D.C. 20549
Gentlemen:
We have read the statements made by Tengasco in Form SB-2, which we
understand will be filed with the Commission, with respect to the change in
accountants from Price-Bednar, LLP to our firm and thereafter, from our firm to
DBO Seidman LLP. We agree with the statements concerning our firm in such Form
SB-2.
Very truly yours,
/s/ Charles M. Stivers
Charles M. Stivers
Certified Public Accountant
<PAGE>
EXHIBIT 16.3
<PAGE>
[LOGO]PRICE o BEDNAR LLP
- --------------------------------------------------------------------------------
A Regional Accounting, Tax and Consulting Firm Fifteen East Fifth Street
Suite 2200
Tulsa, Oklahoma
74103-4300
(918) 584-4843
fax (918) 584-4838
July 28, 1997
Securities and Exchange Commission
459 Fifth Street
Washington, D.C. 20549
Gentlemen:
We have read the statements made by Tengasco in Form SB-2, which we understand
will be filed with the Commission, with respect to the change in accountants
from our firm to Charles M. Stivers. We agree with the statements concerning our
firm in such Form SB-2.
Very truly yours,
/s/ Price Bednar LLP
Tulsa o Oklahoma City o Denver o Los Angeles
<PAGE>
EXHIBIT 23.1
<PAGE>
CONSENT OF ACCOUNTANTS
I consent to the reference to me under the captions "Experts" and
"Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure" and to the use of my report for the year ended December 31, 1995 in
the Registration Statement (Form 10SB) of Tengasco, Inc.
/s/ Charles M. Stivers
-------------------------
Charles M. Stivers
<PAGE>
EXHIBIT 23.2
<PAGE>
David T.
Thomson P.C. Certified Public Accountant
==================================================================
CONSENT OF INDEPENDENT ACCOUNTANT
To The Board of Directors
Tengasco, Inc.
(Formerly Onasco Companies, Inc.)
I have issued my report dated April 14, 1995, accompanying the financial
statements of Tengasco, Inc., (Formerly Onasco Companies, Inc.) for the years
ended December 31, 1994, 1993 and 1992 included in the Registration Statement
(Form SB-2) and the related Prospectus (the Registration Statement) of
Tengasco, Inc. for the registration of 384,368 share of its common stock. I
Consent to the use of my report, as stated above, in the Registration Statement
and I consent to the reference to me under the captions "experts" and "Changes
in and Disagreements with Accountants on Accounting and Financial Disclosures".
David T. Thomson P.C.
/s/ David T. Thomson P.C.
Salt Lake City, Utah
July 28, 1997
180 South 300 West, Suite 329, Salt Lake City, Utah 84101 (801) 328-3900
<PAGE>
EXHIBIT 23.3
<PAGE>
Consent of Independent Certified Public Accountants
Tengasco, Inc.
Knoxville, Tennessee
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated June 5, 1997, relating to the
consolidated financial statements of Tengasco, Inc., which is contained in that
Prospectus. Our report contains an explanatory paragraph regarding the Company's
ability to continue as a going concern.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO SEIDMAN, LLP
BDO SEIDMAN, LLP
Atlanta, Georgia
July 28, 1997
<PAGE>
EXHIBIT 23.4
<PAGE>
CONSENT OF COUNSEL
The consent of Robson & Miller, LLP is contained in the opinion filed as
Exhibit 5.1 to the Registration Statement.
<PAGE>
EXHIBIT 99.1
<PAGE>
EX-99.1
BEECH CREEK LEASES
<TABLE>
<CAPTION>
NEXT PRIMARY
LEASE # LESSOR NAME RENT XPIRATION BOOK PAGE NET ACRE LOR NRI WI
============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 BARGER, FRANK 7/9/96 6/10/95 80 290 109 12.5% 84.375 100%
- ----------------------------------------------------------------------------------------------------------------------------
2 CITY OF MANCHESTER 11/15/96 11/15/94 79 543 315 12.5% 84.375 100%
- ----------------------------------------------------------------------------------------------------------------------------
3 DAVIDSON, ROSCOE 6/30/96 5/26/95 80 249 30 12.5% 84.375 100%
- ----------------------------------------------------------------------------------------------------------------------------
4 DEZARN, GROVER 8/20/96 8/29/94 79 583 300 12.5% 82.5 100%
- ----------------------------------------------------------------------------------------------------------------------------
5 GRAY, NANNIE 4/27/96 4/27/95 80 66 250 12.5% 82.5 100%
- ----------------------------------------------------------------------------------------------------------------------------
6 GRUBB, AMOS 7/9/96 6/10/95 80 294 7 12.5% 84.375 100%
- ----------------------------------------------------------------------------------------------------------------------------
7 GRUBB, HARLAN 7/16/96 7/16/94 79 547 191 12.5% 82.5 100%
- ----------------------------------------------------------------------------------------------------------------------------
8 HENSLEY, CONLEY 10/8/96 10/8/94 79 551 16.68 12.5% 82.5 100%
- ----------------------------------------------------------------------------------------------------------------------------
9 HENSLEY, DELBERT 10/8/96 10/8/94 79 567 37.43 12.5% 82.5 100%
- ----------------------------------------------------------------------------------------------------------------------------
10 HENSLEY, EDSEL 10/26/96 10/26/94 79 555 18.78 12.5% 82.5 100%
- ----------------------------------------------------------------------------------------------------------------------------
11 HENSLEY, EUGENE 10/8/96 10/8/94 79 571 18.47 12.5% 82.5 100%
- ----------------------------------------------------------------------------------------------------------------------------
12 HENSLEY, HERSCHEL 10/8/96 10/8/94 79 559 18.36 12.5% 82.5 100%
- ----------------------------------------------------------------------------------------------------------------------------
13 JONES, TED 8/30/96 8/30/94 79 575 3.129 12.5% 82.5 100%
- ----------------------------------------------------------------------------------------------------------------------------
14 LAKES, OLLIE 5/31/96 5/31/95 80 261 71.4 12.5% 84.375 100%
- ----------------------------------------------------------------------------------------------------------------------------
15 LEE, JOHN ET AL 6/10/96 6/10/95 80 306 108 12.5% 84.375 100%
- ----------------------------------------------------------------------------------------------------------------------------
16 LEE, WILL ET AL 7/9/96 6/10/95 80 298 110 12.5% 84.375 100%
- ----------------------------------------------------------------------------------------------------------------------------
17 SPURLOCK, HUGH 7/11/96 5/26/95 80 245 115 12.5% 84.375 100%
- ----------------------------------------------------------------------------------------------------------------------------
18 STOKES, LORENE 10/8/96 10/8/94 79 563 7.29 12.5% 84.375 100%
- ----------------------------------------------------------------------------------------------------------------------------
19 WEBB, DONALD ET AL 6/27/96 6/27/95 80 466 301 12.5% 82.5 100%
- ----------------------------------------------------------------------------------------------------------------------------
20 WHITE, DAUGH ET AL 7/23/96 7/23/94 79 587 462 12.5% 84.375 100%
- ----------------------------------------------------------------------------------------------------------------------------
21 WOOTON, DON 6/30/96 8/3/94 79 579 300 12.5% 82.5 100%
- ----------------------------------------------------------------------------------------------------------------------------
22 COTTON, MARY 5/26/96 5/26/95 80 253 55 12.5% 82.5 100%
- ----------------------------------------------------------------------------------------------------------------------------
23 SMITH, VIRGIL 6/30/96 6/21/95 80 302 168 12.5% 84.375 100%
- ----------------------------------------------------------------------------------------------------------------------------
24 LEWIS, HERMAN 5/21/96 5/31/95 80 257 889 12.5% 84.375 100%
- ----------------------------------------------------------------------------------------------------------------------------
25 LEWIS, HERMAN 6/7/96 6/7/95 80 454 2431.76 12.5% 84.375 100%
- ----------------------------------------------------------------------------------------------------------------------------
26 WEBB, DONALD 6/30/96 6/30/95 80 470 60 12.5% 84.375 100%
- ----------------------------------------------------------------------------------------------------------------------------
27 HALE, GILBERT 9/8/96 9/8/94 79 640 150 12.5% 84.375 100%
- ----------------------------------------------------------------------------------------------------------------------------
28 BURNETT, EDDIE 6/4/96 6/24/95 80 458 265 12.5% 84.375 100%
- ----------------------------------------------------------------------------------------------------------------------------
29 COWENS, EVA 8/5/96 8/5/95 80 536 92 12.5% 84.375 100%
- ----------------------------------------------------------------------------------------------------------------------------
30 GARRETT, NANNIE 6/24/96 6/24/95 80 462 175 12.5% 85.938 100%
- ----------------------------------------------------------------------------------------------------------------------------
31 BOWLING, PRESTON 8/18/96 8/18/95 80 548 154 12.5% 84.375 100%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 99.1 CONTINUED
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
32 SIZEMORE, RALEIGH 8/18/96 8/18/95 80 544 13 12.5% 84.375 100%
- ----------------------------------------------------------------------------------------------------------------------------
33 WILSON, HUBERT 8/22/96 8/22/95 80 524 20 12.5% 84.375 100%
- ----------------------------------------------------------------------------------------------------------------------------
34 CAMPBELL, FRANCIS 8/22/96 8/22/95 80 528 34 12.5% 84.375 100%
- ----------------------------------------------------------------------------------------------------------------------------
35 BARRETT, EARNEST 8/17/96 8/17/95 80 532 15 12.5% 84.375 100%
- ----------------------------------------------------------------------------------------------------------------------------
36 MCDONALD, JOSEPH 8/17/96 8/17/95 80 540 3 12.5% 84.375 100%
- ----------------------------------------------------------------------------------------------------------------------------
37 B & C PROPERTIES 8/31/96 8/31/95 81 180 500 18.8% 80 100%
- ----------------------------------------------------------------------------------------------------------------------------
38 BARRETT, IRVIN 9/30/96 9/20/95 81 206 105.3 12.5% 84.375 100%
- ----------------------------------------------------------------------------------------------------------------------------
39 JACKSON, ARMIS 9/21/96 9/21/95 81 206 135 12.5% 84.375 100%
- ----------------------------------------------------------------------------------------------------------------------------
40 PRINGLE, ETHLENE 8/3/96 8/3/95 81 5 2 12.5% 84.375 100%
- ----------------------------------------------------------------------------------------------------------------------------
41 WEBB, MARY 8/26/96 8/26/95 81 1 1 12.5% 84.375 100%
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL ACREAGE .. 8058
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 99.2
<PAGE>
EXHIBIT 99.2
WILDCAT LEASES
<TABLE>
<CAPTION>
NEXT PRIMARY
LEASE # LESSOR NAME RENT XPIRATION BOOK PAGE NET ACRE LOR NRI WI
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 GARRETT, NANNIE 6/24/96 6/24/96 80 462 175 12.5% 84.375 100%
- ------------------------------------------------------------------------------------------------------------------------------------
2 HACKER, JOE 4/7/96 4/7/96 81 489 131 12.5% 84.375 100%
- ------------------------------------------------------------------------------------------------------------------------------------
3 WEBB, DONALD 7/29/96 7/29/96 80 466 60 12.5% 84.375 100%
- ------------------------------------------------------------------------------------------------------------------------------------
4 WHITE, CARL B. 7/2/96 7/2/96 81 618 300 12.5% 84.375 100%
- ------------------------------------------------------------------------------------------------------------------------------------
5 BISHOP, PAUL & BRENDA 7/18/96 7/18/96 81 640 75 12.5% 84.375 100%
- --------------------------------------------------------------------------------------------===-------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ACREAGE 741
</TABLE>
Page 1
<PAGE>
EXHIBIT 99.3
<PAGE>
EXHIBIT 99.3
BURNING SPRINGS LEASES
<TABLE>
<CAPTION>
NEXT PRIMARY
LEASE # LESSOR NAME RENT XPIRATION BOOK PAGE NET ACRE LOR NRI WI
============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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 ROBINSON-ALVERAS 10/5/92 10/5/93 78 488 172 12.5% 80 100
- ----------------------------------------------------------------------------------------------------------------------------
ALL PRODUCING WELLS TOTAL ACREAGE 744
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE>
EXHIBIT 99.4
<PAGE>
EXHIBIT 99.4
FENTRESS COUNTY, TN. LEASES
<TABLE>
<CAPTION>
NEXT PRIMARY
LEASE # LESSOR NAME RENT XPIRATION BOOK PAGE NET ACRE LOR NRI WI
============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 CONATSER, CHARLES F. 4/18/96 4/18/96 32 16 50 12.5% 87.5 100%
- ----------------------------------------------------------------------------------------------------------------------------
2 DELK, MACK 4/25/96 4/25/96 32 10 86 12.5% 87.5 100%
- ----------------------------------------------------------------------------------------------------------------------------
3 DILLARD, RAY HYDER 3/30/96 3/30/96 32 13 451 12.5% 87.5 100%
- ----------------------------------------------------------------------------------------------------------------------------
4 DUNCAN, EUGENE 3/31/96 3/31/96 32 7 150 12.5% 87.5 100%
- ----------------------------------------------------------------------------------------------------------------------------
5 DUNCAN, GWENITH 10/3/96 10/3/96 32 1 846 12.5% 87.5 100%
- ----------------------------------------------------------------------------------------------------------------------------
6 DUNCAN, GUY O. 4/21/96 4/21/96 32 4 150 12.5% 87.5 100%
- ----------------------------------------------------------------------------------------------------------------------------
7 FRANKLIN, JESS 4/1/96 4/1/96 32 25 35 12.5% 87.5 100%
- ----------------------------------------------------------------------------------------------------------------------------
8 REAGAN, RAY 1/14/96 1/14/96 31 626 263 12.5% 87.5 100%
- ----------------------------------------------------------------------------------------------------------------------------
9 WOODS, EARNEST 7/11/96 7/11/96 31 540 90 12.5% 87.5 100%
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL ACREAGE 2121
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE>
EXHIBIT 99.5
<PAGE>
SWAN CREEK
(Hancock County)
LEASE FEE SCHEDULE
<PAGE>
<TABLE>
<CAPTION>
NEXT PRIMARY ANNUAL
DATE LESSOR NAME RENT EXPIRATION ACREAGE FEE LESSOR MAILING ADDRESS
---- ----------- ---- ---------- ------- --- ----------------------
OCTOBER
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10 Moore, Paul & Sharon 10/10/97 10/10/99 52 $208 00 Rt. 2, Box 244B, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
10 Greene, Randell & Marjorie 10/10/97 10/10/98 105 $420.00 P.O. Box 176, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
14 Big Creek Missionary Baptist Church 10/14/97 10/14/00 0.5 $100.00 c/o Carson Moles, Rt. 2, Box 172,
Sneedville TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
26 Hensley, William P. and Lucretia E. 10/26/97 10/26/98 125 $500.00 Rt. 4 Box 268A Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
26 Royston, Leno and Mary 10/26/97 10/26/98 65 $260.00 Rt. 4 Box 266, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
26 Sutton, Ralph and Mae Dean 10/26/97 10/26/98 30 $200.00 Box 427, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
27 Russell, Kenneth and Lois 10/26/97 10/26/98 6.25 $25.00 8216 Filson St. Brookville FL 34613
- ------------------------------------------------------------------------------------------------------------------------------------
27 Brewer, Harrison 10/27/97 10/27/98 58 $300.00 Rt. 3 Box 426, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ACRES & ANNUAL FEES -OCTOBER 441.75 $2,013.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Hancock Co. Lease Fee Schedule
Page 1
<PAGE>
<TABLE>
<CAPTION>
NEXT PRIMARY ANNUAL
DATE LESSOR NAME RENT EXPIRATION ACREAGE FEE LESSOR MAILING ADDRESS
---- ----------- ---- ---------- ------- --- ----------------------
NOVEMBER
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
3 Cross, Brian Todd and Deanna Hodge 11/3/97 11/3/98 100 +/- $100.00 Rt. 4 Box 339B, Sneedville TN 37869
- -----------------------------------------------------------------------------------------------------------------------------------
6 Bryant, Edmont T. 11/6/97 11/6/98 110 $440.00 Rt. 4 Box 348, Sneedville, TN 37869
- -----------------------------------------------------------------------------------------------------------------------------------
6 Lawson, Cecil 11/6/97 11/6/98 240 $960.00 Rt. 4 Box 337, Sneedville, TN 37869
- -----------------------------------------------------------------------------------------------------------------------------------
6 Lawson, Laura J. 11/6/97 11/6/98 300 +/- $1,200.00 Rt. 4 Box 332, Sneedville, TN 37869
- -----------------------------------------------------------------------------------------------------------------------------------
6 Lawson, Steven et.al. 11/6/97 11/6/98 302 $1,208.00 Rt. 4 Box 338, Sneedville, TN 37869
- -----------------------------------------------------------------------------------------------------------------------------------
6 Portrum, Fred and Melisha 11/6/97 11/6/98 68 $272.00 2112 Washington Av, Morristown TN 37814
- -----------------------------------------------------------------------------------------------------------------------------------
6 Winkler, Argle 11/6/97 11/6/98 90 $360.00 Rt. 4 Box 316, Sneedville, TN 37869
- -----------------------------------------------------------------------------------------------------------------------------------
8 Winkler, Willie and Hester 11/8/97 11/8/96 17 $68.00 Rt. 4 Box 315, Sneedville, TN 37869
- -----------------------------------------------------------------------------------------------------------------------------------
8 Barnard, Andy 11/8/97 11/8/98 66.5 $266.00 Rt. 4 Box 248, Sneedville, TN 37869
- -----------------------------------------------------------------------------------------------------------------------------------
8 Ferguson, Clarence and Teresa 11/8/97 11/8/98 50 $200.00 Rt. 4 Box 284D, Sneedville, TN 37869
- -----------------------------------------------------------------------------------------------------------------------------------
9 Mitchell, Ester 11/9/97 11/9/98 100 $400.00 8588 Bobolick, Cincinn. Oh 45231
- -----------------------------------------------------------------------------------------------------------------------------------
14 Hatfield, George W. and Lona 11/14/97 11/14/98 61.5 $246.00 Rt. 2, Tazewell, TN 37879
- -----------------------------------------------------------------------------------------------------------------------------------
14 Royston, Gustava 11/14/97 11/14/98 12 $48.00 Rt. 3, Box 461A, Sneedville, TN 37869
- -----------------------------------------------------------------------------------------------------------------------------------
16 Shaw, Tommy and Allica 11/16/97 11/16/98 6 $25.00 711 Morningside, Rogersville, TN 37857
- -----------------------------------------------------------------------------------------------------------------------------------
22 DePriest, Danny and Sharon 11/22/97 11/22/98 47 $188.00 Rt. 4 Box 268, Sneedville, TN 37869
- -----------------------------------------------------------------------------------------------------------------------------------
27 DePriest, Robert 11/27/97 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 & ANNUAL FEES - NOV. 1685 $6,441.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Hancock Co. Lease Fee Schedule
Page 2
<PAGE>
<TABLE>
<CAPTION>
NEXT PRIMARY ANNUAL
DATE LESSOR NAME RENT EXPIRATION ACREAGE FEE LESSOR MAILING ADDRESS
---- ----------- ---- ---------- ------- --- ----------------------
DECEMBER
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Lawson, Wiley 12/1/97 12/1/98 11 $44.00 Rt. 4 Box 334, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
7 Mackey, George W. and Ruby 12/7/97 12/7/98 27 $108.00 Rt. 2 Box 228, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
7 Sutton, Dewey and Tavie 12/7/97 12/7/98 310 $1,240.00 Rt. 3 Box 429, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
10 Cantwell, Archie and Linda 12/10/97 12/10/98 44 $176.00 4398 Woodhaven Dr. Morristown 37813
- ------------------------------------------------------------------------------------------------------------------------------------
10 Cantwell, Cesil and Patti 12/10/97 12/10/98 68 $272.00 Timberlake Sub Division, Rogersville 37857
- ------------------------------------------------------------------------------------------------------------------------------------
10 Cantwell, Kenneth and Katherine 12/10/97 12/10/98 38.7 156.00 Rt. 3 Box 387, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
10 Seals, Rodney and Jennie Mae 12/10/97 12/10/98 92 $368.00 Rt. 3 Box 380A, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
10 Seal, Edith, make ck. pbl:
Deanna Trent 12/10/97 12/10/98 90 $360.00 Rt. 3 Box 379, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
10 Trent, Ralph and Deanna 12/10/97 12/10/98 15 $60.00 Rt. 3 Box 379, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
11 Carpenter, Lucille 12/11/97 12/11/98 25 $100.00 Rt. 2 Box 238, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
11 Jefferson, Wright 12/11/97 12/11/98 45 $180.00 Rt. 2 Box 244, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
11 Jefferson Jr., Wright 12/11/97 12/11/98 52 $208.00 Rt. 2 Box 244A, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
11 Mackey, Jeptha and Pearl 12/11/97 12/11/98 27 $108.00 Rt. 2 Box 232, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
11 Zeller, Stanley 12/11/97 12/11/98 108 $432.00 Rt. 2 Box 246A, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
15 Patton, Gary and Lynn 12/15/97 12/15/98 86 $344.00 360 Chaffin Rd. Roswell, GA 30075
- ------------------------------------------------------------------------------------------------------------------------------------
28 Pierce, Dr. Truett H. and
Wanda and Gary Hicks 12/28/97 12/28/00 350 $1,400.00 Box 37, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ACRES AND ANNUAL FEES - DECEMBER 1,386.70 $5,556.00
</TABLE>
Hancock Co. Lease Fee Schedule
Page 3
<PAGE>
<TABLE>
<CAPTION>
NEXT PRIMARY ANNUAL
DATE LESSOR NAME RENT EXPIRATION ACREAGE FEE LESSOR MAILING ADDRESS
---- ----------- ---- ---------- ------- --- ----------------------
JANUARY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
5 Bauer, Virginia and Walter W. 1/5/98 1/5/99 10.5 $42.02 504 W. Aspen, Kanab, UT 84741
- ------------------------------------------------------------------------------------------------------------------------------------
5 Carr, Yvonne (trust) 1/5/98 1/5/99 15.54 $62.16 2215 Vina Del Mar, Oxnard CA 93035
- ------------------------------------------------------------------------------------------------------------------------------------
5 Dixon, Richard 1/5/98 1/5/99 5 $20.00 PO Box 249, Bean Station TN 37708
- ------------------------------------------------------------------------------------------------------------------------------------
5 Fuller, James M. And Mary B. 1/5/98 1/5/99 10 $40.00 4200 Easton Dr Ste 3, Bakersfield CA 93309
- ------------------------------------------------------------------------------------------------------------------------------------
5 Hart, William L. 1/5/98 1/5/99 41.44 $165.76 3112 Solimar Beach Dr. Ventura CA 93001
- ------------------------------------------------------------------------------------------------------------------------------------
5 Miller, Donna and Kevin 1/5/98 1/5/99 10.5 $42.02 1589 Wolverton Av, Camarillo CA 93010
- ------------------------------------------------------------------------------------------------------------------------------------
5 Powell, Robert 1/5/98 1/5/99 10.9 $43.60 2101 Pinebrook Dr. Kingsport, TN 37662
- ------------------------------------------------------------------------------------------------------------------------------------
5 Salzeider, Gary 1/5/98 1/5/99 20.72 $82.88 1724 13th Av Ct. NW, Puyallup, WA 98371
- ------------------------------------------------------------------------------------------------------------------------------------
5 Williams, Steven and Lisa 1/5/98 1/5/99 5.25 $21.01 620 Willow Oaks Drive, Ozark, AL 36360
- ------------------------------------------------------------------------------------------------------------------------------------
5 Witherspoon, Nancy and Wayne 1/5/98 1/5/99 15.54 $62.16 1375 Sweetwater Av, Camarillo, CA 93010
- ------------------------------------------------------------------------------------------------------------------------------------
8 Ferguson, Hyle and Diana 1/8/98 1/8/99 100 $400.00 Rt. 2 Box 224, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
8 McCoy, Maude 1/8/98 1/8/99 100 $400.00 Rt. 2 Box 223, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
9 McCoy, Dale and Mary Lucille 1/9/98 1/9/99 44 $176.00 Rt. 2 Box 223, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
15 Reed, Paul and Lucille 1/15/98 1/15/99 410 $1,640.00 Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
25 Sutton, Darnell 1/25/98 1/25/99 8 150.00 Rt. 2 Box 160, Tazewell, TN 37860
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ACRES AND ANNUAL FEES - JANUARY 807.39 $3,347.61
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Hancock Co. Lease Fee Schedule
Page 4
<PAGE>
<TABLE>
<CAPTION>
NEXT PRIMARY ANNUAL
DATE LESSOR NAME RENT EXPIRATION ACREAGE FEE LESSOR MAILING ADDRESS
---- ----------- ---- ---------- ------- --- ----------------------
FEBRUARY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
15 Nichols, Earl 2/15/98 2/15/00 113 $452.00 Rt. 1 Box 289, Kyles Ford TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
15 Testerman, Henry & Joyce 2/15/98 2/15/00 191 $764.00 Rt. 1 Box 179, Kyles Ford TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
16 Gibson, Harvey Jr. & Lois 2/16/98 2/16/00 80 $320.00 Rt. 1 Box 340, Kyles Ford TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
16 Umbarger, Mary 2/16/98 2/16/00 50 $200.00 Rt. 1 Box 194, Kyles Ford TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
16 Greene, John and Kathleen 2/16/98 2/16/00 25 $100.00 Rt. 1 Box 347, Kyles Ford TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
17 Kirby, Ted 2/17/98 2/17/00 5 $20.00 Rt. 1 Box 225, Kyles Ford TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
17 Wallan, Frank & Kathy 2/17/98 2/17/00 36 $144.00 Rt. 1 Box 201, Kyles Ford, TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
17 Smith, David & Deborah 2/17/98 2/17/00 30 $120.00 Rt. 1 Box 143 Kyles Ford, TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
17 Johnson, Rickey & Delois 2/17/98 2/17/00 57 $228.00 Rt. 1 Box 329, Kyles Ford TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
17 Johnson, Hugh & Helen 2/17/98 2/17/00 87 $348.00 Rt. 1 Box 324, Kyles Ford TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
19 Testerman, Robert 2/19/98 2/19/00 101 $404.00 Rt. 1 Box 345, Kyles Ford TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
19 Livesay, Mattie 2/19/98 2/19/00 63 $252.00 Rt. 1 Box 246, Kyles Ford, TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
20 Johnson, Roy 2/20/98 2/20/00 50 $200.00 Rt. 1 Box 348, Kyles Ford, TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
20 Kinsler, Robert& Brenda 2/20/98 2/20/99 195 $780.00 Rt. 1 Box 76, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
20 Gray, Joe and Donna 2/20/98 2/20/00 112 $448.00 Rt. 1 Box 353AA, Kyles Ford TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
21 Dillon, Deborah and James 2/21/98 2/21/00 52 $208.00 Rt. 1 Box 157, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
21 Gilliam, Linburgh 2/21/98 2/21/00 114 $456.00 Rt. 1 Box 77A, Eidson, TN 37731
- ------------------------------------------------------------------------------------------------------------------------------------
21 Reed, Warren and Lillie Bell 2/21/98 2/21/99 250 $1,000.00 Rt. 3 Box 429, Sneedville TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
21 Gibson, Ulyssus and Rose 2/21/98 2/21/00 115 $460.00 Rt. 1 Box 2015A, Sneedville TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
21 Livesay, H.T. And Viola 2/21/98 2/21/00 435 $1,740.00 1414 Chambers St., Rogersville TN 37857
- ------------------------------------------------------------------------------------------------------------------------------------
21 Albright, L.V. And Judy 2/21/98 2/21/00 34 $136.00 Rt. 1 Box 165, Kyles Ford TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
22 Holt, Charles & Maxine 2/22/98 2/22/00 1030 $4,120.00 Rt. 1 Box 97 Eidson, TN 37731
- ------------------------------------------------------------------------------------------------------------------------------------
22 Gibson, Danny and Janette 2/22/98 2/22/00 35 $140.00 Rt. 1 Box 327 Kyles Ford TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
23 Gibson, Goldie 2/23/98 2/23/00 111 $444.00 Rt. 1 Box 338, Kyles Ford TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
23 Kinsler, Hobert & Valice 2/23/98 2/23/00 50 $200.00 Rt. 1 Box 303, Kyles Ford, TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
23 Gibson, Harvey Jr. & Lois 2/23/98 2/23/00 12 $48.00 Rt. 1 Box 340, Kyles Ford, TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
23 Johnson, Ada Lee 2/23/98 2/23/00 200 $800.00 Rt. 2 Box 36, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
24 Nichols, Clyde 2/24/98 2/24/00 42 $168.00 Rt. 1 Box 313, Sneedville, TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Hancock Co. Lease Fee Schedule
Page 5
<PAGE>
<TABLE>
<CAPTION>
NEXT PRIMARY ANNUAL
DATE LESSOR NAME RENT EXPIRATION ACREAGE FEE LESSOR MAILING ADDRESS
---- ----------- ---- ---------- ------- --- ----------------------
FEBRUARY (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
24 Kinsler, Homer & Annette 2/24/98 2/24/00 35 $140.00 Rt. 1, Box 176, Kyles Ford, TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
24 Harrell, John 2/24/98 2/24/00 105 $420.00 Rt. 3, Box 1293, Bean Station, TN 37708
- ------------------------------------------------------------------------------------------------------------------------------------
27 Mabe, Luther 2/27/98 2/27/00 87 $348.00 Rt. 1, Box 156, Kyles Ford, TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
27 Cagle, Jeannette and Cashus 2/27/98 2/27/00 150 $600.00 Rt. 1 Box 153A, Kyles Ford, TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
28 Dunsmore, Lillian 2/28/98 2/28/00 80 $320.00 Rt. 1 Box 343, Kyles Ford, TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
28 Nichols, Oscar & Bobbie 2/28/98 2/28/00 150 $600.00 Rt. 1 Box 223, Kyles Ford, TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
28 Catron, Bee DECEASED 1996 2/28/98 2/28/00 39 $156.00 Rt. 1 Box 184, Kyles Ford, TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
28 Nichols, Lincoln and Bobby 2/28/98 2/28/00 4 $16.00 Rt. 1 Box 223, Kyles Ford, TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
28 Johnson, Allen **payment to:
Lois Gibson 2/28/98 2/28/00 14 $56.00 Rt. 1 Box 340, Kyles Ford, TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
28 Nichols, Rodger 2/28/98 2/28/00 13 $52.00 Rt. 1 Box 332, Kyles Ford, TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
28 Gibson, Gene 2/28/98 2/28/00 130 $520.00 Rt. 1 Box 355, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
28 Baker, Johnathan & Barbara 2/28/98 2/28/00 55 $220.00 Rt. 1 #307, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
28 Lamb, Helen Nichols 2/28/98 2/28/00 25 $100.00 Rt. 1 Box 332, Kyles Ford, TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
28 Weston, Barbara Ann 2/28/98 2/28/00 14 $56.00 Rt. 1 Box 307B Sneedville TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
29 Fugate, Ruby 2-29-98 2/29/00 25 $100.00 Rt. 1 Box 292, Kyles Ford, TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
29 Kinsler, Lucian & Geneva
**payment to: Norma Flennor 2-29-98 2/29/00 25 $100.00 Rt. 1 Box 290, Kyles Ford, TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
29 Jarvis, Ray 2-29-98 2/29/00 17 $68.00 P. O. Box 125, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
29 Wallen, Fred 2-29-98 2/29/00 30 $120.00 Rt. 1 Box 200, Kyles Ford, TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
29 Rogers, Etta **payment to:
Martha Nichols 2-29-98 2/29/00 57 $228.00 Rt. 1 Box 244A, Kyles Ford, TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
29 Holt, Lillie 2-29-98 2/29/00 150 $600.00 Rt. 1 Box 96, Eidson, TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ACRES AND ANNUAL FEES - FEBRUARY 4880 $19,520.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Hancock Co. Lease Fee Schedule
Page 6
<PAGE>
<TABLE>
<CAPTION>
NEXT PRIMARY ANNUAL
DATE LESSOR NAME RENT EXPIRATION ACREAGE FEE LESSOR MAILING ADDRESS
---- ----------- ---- ---------- ------- --- ----------------------
MARCH
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Smith, Inez **payment to: David Smith 3/1/98 3/1/00 39 $156.00 Rt. 1 Box 193, Kyles Ford, TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
1 Johnson, Tyler & Virginia 3/1/98 3/1/00 30 $120.00 Rt. 1 Box 221 Kyles Ford, TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
1 Wagner, G. Michael and
Elizabeth Kartinganer 3/1/98 3/1/00 87 $348 00 Rt. 1 Box 213, Kyles Ford, TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
1 Presley, Dorothy and Ruby Blair 3/1/98 3/1/00 280 $1,120.00 Rt. 1 Box 50, Eidson, TN 37731
- ------------------------------------------------------------------------------------------------------------------------------------
1 Johns, Edna 3/1/98 3/1/00 105 $420 00 Rt. 1 Box 162, Kyles Ford, TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
1 Presley, Rufus & Dorothy 3/1/98 3/1/00 275 $1,100.00 Rt. 1 Box 50, Eidson, TN 37731
- ------------------------------------------------------------------------------------------------------------------------------------
1 Belcher, Tommy & Brenda 3/1/98 3/1/00 35 $140.00 Rt. 1 Box 285, Kyles Ford, TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
2 Snodgrass, Lula Sue 3/2/98 3/2/00 75 $300.00 1319 Gregreen Ln Lakeland FL 33813
- ------------------------------------------------------------------------------------------------------------------------------------
2 Snodgrass, John & Fern 3/2/98 3/2/00 75 $300.00 8401 Malone Rd. Olive Branch MS 38654
- ------------------------------------------------------------------------------------------------------------------------------------
2 Snodgrass, Dwight & Patsy 3/2/98 3/2/00 75 $300.00 Rt. 1, Kyles Ford 37765
- ------------------------------------------------------------------------------------------------------------------------------------
2 Snodgrass, Bill & Alice 3/2/98 3/2/00 75 $300.00 212 Russell Dr. Rogersville, TN 37857
- ------------------------------------------------------------------------------------------------------------------------------------
2 Snodgrass, Dwight & Etal 3/2/98 3/2/00 100 $400.00 Rt. 1 Kyles Ford, TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
2 Lorenz, Christine & Louis Jr. 3/2/98 3/2/00 75 $300.00 Rt. 1 Box 259B, Kyles Ford, TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
2 Sizemore, James 3/2/98 3/2/00 6 $24.00 Rt. 1 Box 223, Kyles Ford, TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
2 Trobaugh, James & Judy 3/2/98 3/2/00 28 $112.00 2157 Frank Hodge Rd Talbott TN 37877
- ------------------------------------------------------------------------------------------------------------------------------------
3 Gilliam, Shannon and Marie 3/3/98 3/3/00 25 $100.00 Rt. 1 Box 76 Eidson, TN 37731
- ------------------------------------------------------------------------------------------------------------------------------------
4 Stewart Nora and Ida Rimes
**Pyble to Nora Stewart 3/4/98 3/4/00 226 $904.00 Rt. 1 Box 103 Sneedville TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
4 Whitney, Damnel, Edith & Ray 3/4/98 3/4/00 91 $364.00 Rt. 1 Box 76 Eidson, TN 37731
- ------------------------------------------------------------------------------------------------------------------------------------
4 Hurd, Eva 3/4/98 3/4/00 21 $84.00 Rt. 1 Box 135 Blackwater, VA 24221
- ------------------------------------------------------------------------------------------------------------------------------------
4 Johnson, John & Minnie 3/4/98 3/4/00 13 $52.00 Rt. 1 Box 321 Sneedville TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
4 Willis, Douglas 3/4/98 3/4/00 2 $8.00 Rt. 1 Box 198, Kyles Ford TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
4 Willis, Zelma 3/4/98 3/4/00 75 $300.00 Rt. 1 Box 198A, Kyles Ford TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
5 Anderson, James & Nancy 3/5/98 3/5/00 283 $1,132.00 220 Lloyd Chapel Rd, Church Hill TN 37642
- ------------------------------------------------------------------------------------------------------------------------------------
6 Maness, Sterling & Gilbertia 3/6/98 3/6/00 83 $332.00 Rt. 1 Box 216, Kyles Ford TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
6 Maness, Gilbertia & Sterling 3/6/98 3/6/00 115 $460.00 Rt. 1 Box 216, Kyles Ford TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
6 Willis, John Jr. 3/6/98 3/6/00 18 $72.00 Rt. 1 Box 230, Kyles Ford TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
7 Kinsler, Mark Edward 3/7/98 3/7/00 58 $232.00 Rt. 1 Box 183, Kyles Ford TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
7 Kinsler, Tyler & Jewell 3/7/98 3/2/00 15 $60.00 Rt. 1 Box 196, Kyles Ford TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Hancock Co. Lease Fee Schedule
Page 7
<PAGE>
<TABLE>
<CAPTION>
NEXT PRIMARY ANNUAL
DATE LESSOR NAME RENT EXPIRATION ACREAGE FEE LESSOR MAILING ADDRESS
---- ----------- ---- ---------- ------- --- ----------------------
MARCH (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
8 Jones, Ronald & Michael 3/8/98 3/8/00 263 $1,052.00 510 Windsor Forrest Dr., Kingsport, TN 37663
- ------------------------------------------------------------------------------------------------------------------------------------
11 Johnson, Clyde, Jr. & Dorothy J. 3/11/98 3/11/00 51 $204.00 1673 Christian Bend Rd, Church Hill, TN 37642
- ------------------------------------------------------------------------------------------------------------------------------------
11 Moles, Dayton & Thelma 3/11/98 3/11/00 15 $60.00 Rt. 1, Box 274, Kyles Ford, TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
11 Shelburne, Thomas & Sarah 3/11/98 3/11/00 70 $280.00 P. O. Box 608, Rogersville, TN 37857
- ------------------------------------------------------------------------------------------------------------------------------------
11 Stapleton, Edward & Pauline 3/11/98 3/11/00 95 $380.00 538 W. Huntington, Monttelier Ind 47359
- ------------------------------------------------------------------------------------------------------------------------------------
11 Wallen, Ronnie 3/11/98 3/11/00 52 $208.00 117 Wellington Dr. Middlesboro KY 40965
- ------------------------------------------------------------------------------------------------------------------------------------
12 Goodman, Calvie
** Make check to John Goodman 3/12/98 3/12/00 56 $224.00 Rt. 2 Box 158 Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
12 Johnson, Ada 3/12/98 3/12/00 45 $180.00 Box 756, Churchville VA 24421
- ------------------------------------------------------------------------------------------------------------------------------------
12 Kinsler, Sonny 3/12/98 3/12/00 20 $80.00 Rt. 1 Box 166 Kyles Ford TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
12 Seals, Naomi and Emery 3/12/98 3/12/00 38 $152.00 4218 Stansberry Rd. Morristown TN 37813
- ------------------------------------------------------------------------------------------------------------------------------------
13 Collins, Margaret (administrator) 3/13/98 3/13/00 115 $460.00 Rt. 2 Box 340 Sneedville TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
13 Horton, Charlie 3/13/98 3/13/00 58 $232.00 948 Melody LN Kingsport TN 37665
- ------------------------------------------------------------------------------------------------------------------------------------
13 Livesay, Jerry & Nancy 3/13/98 3/13/00 173 $692.00 Rt. 1 Box 36, Eidson, TN 37731
- ------------------------------------------------------------------------------------------------------------------------------------
13 Stout, Ethel 3/13/98 3/13/00 136 $544.00 Rt. 1 Box 38 Eidson TN 37731
- ------------------------------------------------------------------------------------------------------------------------------------
14 Hatfield, Lona 3/14/98 3/14/00 40 $160.00 Rt. 2 Box 159, Tazewell TN 37879
- ------------------------------------------------------------------------------------------------------------------------------------
15 Barger, Ruth 3/15/98 3/15/00 4 $16.00 921 Myrtle St. Kingsport, TN 37660
- ------------------------------------------------------------------------------------------------------------------------------------
15 Nichols, Lee
**payment to: Clyde Nichols 3/15/98 3/15/00 77 $308.00 Rt. 1 Box 313 Kyles Ford TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
15 Turner, Elsie 3/15/98 3/15/00 45 $180.00 Rt. 1 Box 345, Kyles Ford TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
16 Sutton, Dayton & Julia 3/16/98 3/16/00 189.5 $758.00 Rt. 4 IDAS Chapel Rd Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
18 Cope Fred & Nancy
*Make check to: Fred Cope 3/18/98 3/18/00 80 $320.00 Rt. 4 Box 149 Sneedville TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
18 Jones, Lewis & Zelma 3/18/98 3/18/00 21 $84.00 Rt. 4 Box 317A Sneedville TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
19 Lawson, Ray E. 3/19/98 3/19/00 14 $56.00 Rt. 3 Box 474 Sneedville TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
20 Anderson, Herbert & Maxine 3/20/98 3/20/00 70 $280.00 160 Lena Dr. Rogersville TN 37857
- ------------------------------------------------------------------------------------------------------------------------------------
20 Helton, Doris 3/20/98 3/20/00 30 $120.00 Rt. 2 Box 157 A Tazewell, TN 37879
- ------------------------------------------------------------------------------------------------------------------------------------
20 Sizemore, Guy & Betty 3/20/98 3/20/00 435 $1,740.00 987 Lee Valley Rd. Whitesburg TN 37891
- ------------------------------------------------------------------------------------------------------------------------------------
20 Winstead, Robert & Joyce 3/20/98 3/20/00 70 $280.00 Rt. 1 Box 173 Kyles Ford TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
21 Greene, Rector & Fay 3/21/98 3/21/00 38 $152.00 312 E. Main St. Rt. 1 Sneedville TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
21 McCoy, Jeff & Polly 3/21/98 3/21/00 24 $96.00 Rt. 2 Tazewell TN 37879
- ------------------------------------------------------------------------------------------------------------------------------------
21 Willis, Walter & Alice 3/21/98 3/21/00 40 $160.00 Rt. 1 Box 185, Kyles Ford TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
21 Wilson, Kyle & Ina 3/21/98 3/21/00 23 $92.00 Rt. 4 Box 280 Sneedville TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
22 Rogers, Jack 3/22/98 3/22/00 26 $104.00 Rt. 1 Box 154, Eidson TN 37731
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Hancock Co. Lease Fee Schedule
Page 8
<PAGE>
<TABLE>
<CAPTION>
NEXT PRIMARY ANNUAL
DATE LESSOR NAME RENT EXPIRATION ACREAGE FEE LESSOR MAILING ADDRESS
---- ----------- ---- ---------- ------- --- ----------------------
MARCH (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
22 Reed, Kenneth, Jr. & Penny 3/22/98 3/22/00 35 $140.00 P.O. Box 82, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
24 Hechmer, Francis & Janet 3/24/98 3/24/99 60 $240.00 Rt. 4, Box 342, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
25 Clonce, John & Louise 3/25/98 3/25/00 32 $128 00 Rt. 3, Box 457, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
26 Ogden, Sarah Elizabeth 3/26/98 3/26/00 40 $160.00 160 Crossway Rd Brunswick GA
** deposit to acct. No. 0090777, Citizens Bank of Sneedville
- ------------------------------------------------------------------------------------------------------------------------------------
26 Darnell, Callie Mae 3/26/98 3/26/00 74 $296.00 1020 Fairway St. Kingsport TN 37665
- ------------------------------------------------------------------------------------------------------------------------------------
27 Baker, Carl & Edith 3/27/98 3/27/00 300 $1,200.00 Rt. 1 Box 264 Kyles Ford TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
28 Livesay, Elsie (Mrs. Braten) 3/28/98 3/28/00 196 $784.00 Rt. 1 Box 315 Kyles Ford TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
28 Snodgrass, Edward & Kelly 3/28/98 3/28/00 116 $464.00 Rt 1 Box 234 Kyles Ford TN 37765
- ------------------------------------------------------------------------------------------------------------------------------------
29 Dean, Larry E. & Gail 3/29/98 3/29/00 143 $572.00 Rt. 4 Box 288 Sneedville TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
29 Dodson, Earl & Betty 3/29/98 3/29/00 40 $160.00 Rt. 3 Box 419 Sneedville TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ACRES AND ANNUAL FEES - MARCH 5834.5 $23,338.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Hancock Co. Lease Fee Schedule
Page 9
<PAGE>
<TABLE>
<CAPTION>
NEXT PRIMARY ANNUAL
DATE LESSOR NAME RENT EXPIRATION ACREAGE FEE LESSOR MAILING ADDRESS
---- ----------- ---- ---------- ------- --- ----------------------
APRIL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
2 Dodson, Clarence & Joyce 4/2/98 4/2/00 68 $272.00 Rt. 3 Box 416, Sneedville TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
8 Pierce, Dr. Truett H., et al 4/8/98 4/8/99 7650 $10,000.00 P. O. Box 37, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
9 Seal, Jones 4/9/98 3/9/00 50 $200.00 Rt. 2 Box 168 A Tazewell TN 37879
- ------------------------------------------------------------------------------------------------------------------------------------
10 Yeary, Bobby 4/10/98 4/10/00 40 $160.00 Rt. 2 Box 161 A2 Tazewell TN 37879
- ------------------------------------------------------------------------------------------------------------------------------------
10 Smith, Larry and Lois and Linda 4/10/98 4/10/97 133 $532.00 Rt. 2 Box 157, Tazewell TN 37879
- ------------------------------------------------------------------------------------------------------------------------------------
11 Reed, Morris & Johnny 4/11/98 4/11/00 12 $48.00 1465 Windcrest Dr. Morristown TN 37814
** Johnny Reed: 13840 Bridlington Ct. Centerville VA 22020
- ------------------------------------------------------------------------------------------------------------------------------------
17 Colson, William & Anita 4/17/98 4/17/00 60 $240.00 P. O. Box 27150, Panama City FL 32411
- ------------------------------------------------------------------------------------------------------------------------------------
18 Sutton, Hazel 4/18/98 4/18/00 42.5 $170.00 Rt. 2 Box 158 Tazewell, TN 37879
- ------------------------------------------------------------------------------------------------------------------------------------
18 Sutton, Darnell 4/18/98 4/18/00 102 $408.00 Rt. 2 Box 160 Tazewell, TN 37879
- ------------------------------------------------------------------------------------------------------------------------------------
20 Lange, Orville and Doris A. 4/20/98 4/20/00 107 $428.00 5521 Deer Park Dr., Roanoke, VA 24019
- ------------------------------------------------------------------------------------------------------------------------------------
22 Tillson, James and Edith 4/22/98 4/27/00 25 $100 00 Rt. 2 Box 20-1, Gore, OK 74435
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ACRES AND ANNUAL FEES - APRIL 8289.5 $12,558.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Hancock Co. Lease Fee Schedule
Page 10
<PAGE>
<TABLE>
<CAPTION>
NEXT PRIMARY ANNUAL
DATE LESSOR NAME RENT EXPIRATION ACREAGE FEE LESSOR MAILING ADDRESS
---- ----------- ---- ---------- ------- --- ----------------------
MAY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
2 Drinnon, Joel 5/2/98 5/2/00 21 $84.00 Rt. 2, Box 225, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
2 Kinsler, Edith 5/2/98 5/2/00 71 $284.00 P.O. Box 363 Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
7 Hopkins, Debbie 5/7/98 5/7/00 8 $32.00 P.O. Box 231, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
8 Davis, Robert J. and Glenda J. 5/8/98 5/8/00 47 $188.00 Rt. 1 Box 361, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
8 Hurst, Stan and Peggy 5/8/98 5/8/00 125 $500.00 Rt. 4 Box 316A, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
8 Wallace, W. Pearl 5/8/98 5/8/00 6 $24.00 P.O. Box 375, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
10 Rhea, Estate of Victor 5/10/98 5/10/00 115 $460.00 c/o Jewell Brown, Box 303 Rogersville, TN 37857
- ------------------------------------------------------------------------------------------------------------------------------------
10 Shelburne, Thomas D. And Sarah C. 5/10/98 5/10/00 70 $280.00 P.O. Box 608, Rogersville, TN 37857
- ------------------------------------------------------------------------------------------------------------------------------------
11 Seal, Joe F. And Billie S. 5/11/98 5/11/00 20 $80.00 Rt. 2 Box 207, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
11 Roberts, Wayne and Jeanette 5/11/98 5/11/00 150 $600.00 Rt. 2 Box 212-A, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
13 Barnard, Jack, Etal 5/13/98 5/13/00 96.5 $386.00 3775 State Highway 33, Tazewell, TN 37879
- ------------------------------------------------------------------------------------------------------------------------------------
13 Barnard, Jack and Jackie 5/13/98 5/13/00 103 $412.00 3775 State Highway 33, Tazewell, TN 37879
- ------------------------------------------------------------------------------------------------------------------------------------
13 Barnard, Ethel McDaniel, Etal 5/13/98 5/13/00 175 $700.00 3775 State Highway 33, Tazewell, TN 37879
- ------------------------------------------------------------------------------------------------------------------------------------
13 Barnard, Jack 5/13/98 5/13/00 400 $1,600.00 3775 State Highway 33, Tazewell, TN 37879
- ------------------------------------------------------------------------------------------------------------------------------------
13 Hagan, Ronald, Etal 5/13/98 5/13/00 86 $344.00 5757 Brights Pike, Russellville, TN 37860
- ------------------------------------------------------------------------------------------------------------------------------------
14 Griffin, Janelle and James 5/14/98 5/14/00 6 $24.00 Rt. 4 Box 383, Rutledge, TN 37861
- ------------------------------------------------------------------------------------------------------------------------------------
14 Stewart, Eddie and Karen Wallen
**ck to Karen Wallen 5/14/98 5/14/00 13 $52.00 Rt. 1 Box 103, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
14 Wallen, Dennis A. And Karen 5/14/98 5/14/00 18 $72.00 Rt. 1 Box 103, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
15 Greene, Matt. D. Estate 5/15/98 5/15/00 205 $820.00 Rt. 1 Box 172, Rutledge TN 37861
- ------------------------------------------------------------------------------------------------------------------------------------
15 Moles, Carson and Etta 5/15/98 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 5/16/98 5/16/00 68 $272.00 Rt. 4 Box 321A, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
16 Royston, Grady and Phyllis 5/16/98 5/16/00 50 $200.00 Rt. 1 Box 32, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
16 Jefferson, Carl and Wanda 5/16/98 5/16/99 2 $10.00 Rt. 4 Box 320EE, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
17 McCoy, James and Elanor 5/17/98 5/17/00 150 $600.00 Rt. 2 Box 221, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
17 Seal, Horad Seal Estate
**payable to Myrtle Seal 5/17/98 5/17/00 150 $600.00 Rt. 2 Box 208, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
20 Sutton, James D. And George E. 5/20/98 5/20/99 92 $368.00 3328 Sheila Circle, Whitepine, TN 37890
- ------------------------------------------------------------------------------------------------------------------------------------
28 Johnson, Hugh and Helen 5/28/98 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 - MAY 2619.5 $10,480.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Hancock Co. Lease Fee Schedule
Page 11
<PAGE>
<TABLE>
<CAPTION>
NEXT PRIMARY ANNUAL
DATE LESSOR NAME RENT EXPIRATION ACREAGE FEE LESSOR MAILING ADDRESS
---- ----------- ---- ---------- ------- --- ----------------------
JUNE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Turnmire J.C. and Joyce 6/1/97 93 $372.00 6905 Mulberry Road, Knoxville, TN 37918
- ------------------------------------------------------------------------------------------------------------------------------------
7 McDaniel, Jewell, Admin.,
Est. of Jepp Shockley 6/7/98 6/7/00 60 $240.00 136 Cardwell Drive, Tazewell TN 37879
- ------------------------------------------------------------------------------------------------------------------------------------
9 Seal, Ronald W. & Kimberly 6/9/98 6/9/00 25 $100.00 Rt. 2, Box 74, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
18 Moles, Nellie 6/18/98 6/18/98 86 $344.00 Route 2, Box 164, Tazewell, TN 37879
- ------------------------------------------------------------------------------------------------------------------------------------
20 Seal, Clem D. & Lois 6/20/98 6/20/99 288 $1,152.00 Route 2, Box 113, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
20 Wingo, Tom & Peggy 6/20/98 6/20/00 110 $440.00 Rt. 3, Box 486, Briar Cr. Rd., Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
20 Winstead, Carl & Eveline 6/20/98 6/20/00 76 $304.00 Route 3, Box 502, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
24 Seal, Clint and Mae 6/24/98 6/24/00 140 $560.00 Route 3, Box 292, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
24 Seal, Tony H. & Pat 6/24/98 6/24/00 101 $404.00 Route 3, Box 483-B, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
24 Seal, Tony H., Timothy D. & Jeff S. 6/24/98 6/24/00 218 $872.00 Route 3, Box 483-B, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
24 Marion, Wilbur & Katherine 6/24/98 6/24/00 25 $100.00 Route 3, Box 506, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
24 White, Randy & Patricia 6/24/98 6/24/00 40 $160.00 Route 3, Box 395, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
25 Louthan, Euna & Charles
on behalf Everett Sutton Est. 6/25/98 6/25/00 123 $492.00 Rt. 4, Box 239, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
28 Johnson, Kenneth & Tammy 6/28/98 6/28/00 65 $260.00 Rt. 4, Box 203, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
28 Seal, Ora M. 6/28/98 6/28/00 8 $32.00 Rt. 3, Box 389, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ACRES & ANNUAL FEES - JUNE 1458 $5,832.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Hancock Co. Lease Fee Schedule
Page 12
<PAGE>
<TABLE>
<CAPTION>
NEXT PRIMARY ANNUAL
DATE LESSOR NAME RENT EXPIRATION ACREAGE FEE LESSOR MAILING ADDRESS
---- ----------- ---- ---------- ------- --- ----------------------
JULY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Greene, Bessie Lee & Tillman, Jr. 7/1/98 7/1/99 17 $68.00 Rt. 2, Box 301, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
2 Seal, Tyler C. & Tener 7/2/98 7/2/00 420 $1,680.00 Rt. 3, Box 510, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
2 Reed, Ruby & Heirs,
Est. Of Lawrence Reed 7/2/98 7/2/00 317 $1,268.00 Rt. 4, Box 264, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
8 Lawson, Ray & Glenda 7/8/98 7/8/00 25 $100.00 Rt. 3, Box 474, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
9 Mathis, Jeff & Barbara 7/9/98 7/90/00 70 $280.00 Rt. 3, Box 740, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
9 Bryant, Herman & Ethel 7/9/98 7/9/00 6 $24.00 P. O. Box 223, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
11 Tabor, Jack Claiborne Co. 7/11/98 7/11/00 465 $1,860.00 600 Sugar Loaf Road, Brevard, NC 28712
- ------------------------------------------------------------------------------------------------------------------------------------
11 Cook, Richard A., Jr. And Denese 7/11/98 7/11/00 123.3 $738.00 9449 Decatur Road, Laurel, MD 20723
- ------------------------------------------------------------------------------------------------------------------------------------
11 Clonce, Estate of John Pd. 7/11/97 34 $500.00 (Total) c/o John Clonce,Jr., Rt.3, Box 457,
Sneedville 37869
- ------------------------------------------------------------------------------------------------------------------------------------
15 Seal, Wilma G. Pd. 7/15/98 4 $100.00 (Total) Rt. 3, Box 376, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
15 Seal, James & Inez 7/15/98 7/15/00 61 $244.00 4023 Old Kentucky Rd., Morristown, TN 37814
- ------------------------------------------------------------------------------------------------------------------------------------
16 Pendey Jimmy & Charlotte 7/16/98 7/16/00 $24.00 Rt. 3, Box 492C, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
16 Trent, Buddy 7/16/98 7/16/00 4 $16.00 Rt. 3, Box 493, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
17 Mills, Mattie L. 7/17/98 7/17/00 6 $24.00 P. O. Box 346, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
17 Greene, Faye (Mrs. Rector) 7/17/98 7/17/00 36 $144.00 Rt. 1, 312 E. Main St., Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
18 Seal, Mamie Hopkins 7/18/98 7/18/00 43 $172.00 Rt. 3, Box 475, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
23 Lawson, Fay H. 7/23/98 7/23/00 33 $132.00 Rt. 3, Box 477, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
23 Lawson, Fay H. & Ray E. 7/23/98 7/23/00 35 $140.00 Rt. 3, Box 477, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
25 Seal, Randy & Joyce 7/25/98 7/25/99 210 $840.00 Rt. 1, Box 384, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
26 Mathis, George L. & Bobbie A. 7/26/98 7/26/00 15 $60.00 3116 Westlake Dr., Rogersville, TN 37857
- ------------------------------------------------------------------------------------------------------------------------------------
26 Rippy, James & Geneva J. 7/26/98 7/26/99 25 $100.00 2617 W. Crenshaw, Tampa, FL 33614
- ------------------------------------------------------------------------------------------------------------------------------------
29 Johnson, Est. Of Glen
*Chk. To Betty Johnson 7/29/98 7/29/00 44 $176.00 Rt.3, Box 507, Ferguson Rd., Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ACRES & ANNUAL FEES - JULY 1998.3 $8,690.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Hancock Co. Lease Fee Schedule
Page 13
<PAGE>
<TABLE>
<CAPTION>
NEXT PRIMARY ANNUAL
DATE LESSOR NAME RENT EXPIRATION ACREAGE FEE LESSOR MAILING ADDRESS
---- ----------- ---- ---------- ------- --- ----------------------
AUGUST
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
5 Hardin, E. J. & Betsey
Claiborne Co. 8/5/97 8/5/00 250 $1,000.00 Box 162, Tazewell, TN 37879
- ------------------------------------------------------------------------------------------------------------------------------------
7 Johnson, Ellis, James & Larry
*Ck. to Ellis 8/7/97 8/7/00 7 $28.00 Rt. 2, Box 4990, Bean Station, TN 37708
- ------------------------------------------------------------------------------------------------------------------------------------
8 Seal, Carl 8/8/97 8/8/00 72 $288.00 P. O. Box 326 Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
13 Reed, Kyle & Ma Jo 8/13/97 8/13/00 35 $144.00 1518 N. Glen Street, Morristown, TN 37814
- ------------------------------------------------------------------------------------------------------------------------------------
15 Smith, David & K.D. Claiborne Co. 8/15/97 8/15/00 56 $224.00 3823 Kingston Pike, Knoxville, TN 37919
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ACRES AND ANNUAL FEES - AUGUST 420 $1,680.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Hancock Co. Lease Fee Schedule
Page 14
<PAGE>
<TABLE>
<CAPTION>
NEXT PRIMARY ANNUAL
DATE LESSOR NAME RENT EXPIRATION ACREAGE FEE LESSOR MAILING ADDRESS
---- ----------- ---- ---------- ------- --- ----------------------
SEPT.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
4 Pareti, Ronald & Susan 9/4/97 9/4/00 135 $550.00 Rt. 3, Box 394 River Road, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
9 Cantwell, Jeff and Myrtle 9/9/97 9/9/98 166.5 $666.00 Rt. 3, Box 401, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
9 Roberts, Hugh, Bruce and J. B. 9/9/97 9/9/98 156 $624.00 2105 Brights Pike, Morristown, TN 37814
- ------------------------------------------------------------------------------------------------------------------------------------
9 Roberts, Hugh 9/9/97 9/9/98 61 $244.00 2105 Brights Pike, Morristown, TN 37814
- ------------------------------------------------------------------------------------------------------------------------------------
17 Bailey, Linda S. 9/17/97 9/17/99 26 $104.00 Route 2, Box 122, Sneedville, TN 37869
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ACRES AND ANNUAL FEES - SEPTEMBER 544.5 $2,188.00
- ------------------------------------------------------------------------------------------------------------------------------------
GRAND TOTAL ACRES AND ANNUAL FEES 30367.14 $101,643.61
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Hancock Co. Lease Fee Schedule
Page 15
<PAGE>
EXHIBIT 99.6
<PAGE>
EXHIBIT 99.6
ALABAMA LEASES
<TABLE>
<CAPTION>
NEXT PRIMARY
LEASE # LESSOR NAME RENT XPIRATION BOOK PAGE NET ACRE LOR NRI WI
============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 ABRAMSON, EDVIN C. 11/30/96 11/30/98 2 413 497 12.5% 87.5% 100%
- ----------------------------------------------------------------------------------------------------------------------------
2 ABRAMSON, VERNON 11/30/96 11/30/98 2 411 139 12.5% 87.5% 100%
- ----------------------------------------------------------------------------------------------------------------------------
3 DALE, MARK F. 12/18/96 12/18/98 2 415 100.19 12.5% 87.5% 100%
- ----------------------------------------------------------------------------------------------------------------------------
4 WYLIE, RUBEN A. 12/20/96 12/20/98 2 419 267 12.5% 87.5% 100%
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL ACREAGE .......... 1003.19
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE>
EXHIBIT 99.7
<PAGE>
Coburn Petroleum Engineering
R.W. Coburn
June 18, 1997
Mr. Dan Follmar, President
Tengasco, Inc.
603 Main Avenue, Suite 500
Knoxville, Tennessee 37902
RE: Tengasco, Inc.
December 31, 1996
Dear Mr. Follmar:
Pursuant to your request, I have evaluated the oil and gas properties of
Tengasco, Inc., as of December 31, 1996. The results of this study are as
follows:
As of December 31, 1996
(All Values Net)
Net
Net Future Revenue
Oil Gas Undisc. Disc @ 10%
(Bbls) (Mcf) ($) ($)
Proved Developed ------ ---------- ---------- ----------
Non Producing 0 7,167,350 21,762,357 12,438,762
Proved Undeveloped 10,156 15,400,005 50,349,552 28,909,335
------ ---------- ---------- ----------
10,156 22,567,355 72,111,909 41,348,097
Required Future Investment..........................................$ 5,775,000
The investment figure above includes the remaining cost of building a pipeline
to the Swan Creek Field. Costs of the pipeline will be recovered by a gathering
charge accounted for by adjusting the gas price to be received by producing gas
wells in the in the Swan Creek Field. The large increase in reserves over the
report as of December 31, 1995 is due to acquisition and development of the Swan
Creek Field in Hancock County Tennessee. A discussion of this field as well as
the Burning Springs, Beech Creek, and Fentress properties has been covered in
reports previously submitted to you.
Details by properties are shown in the following tables. All of the oil and gas
properties are located in the states of Kentucky and Tennessee. In the absence
of and operating cost history our
9 East 4th Street o Suite 1000 o Tulsa, Oklahoma 74103-5107 o
918-587-7585 o Facsimile 918-584-4426
<PAGE>
best judgement was used to estimate future operating costs. Well costs are based
on drilling costs in the area.
Reserve and future performance estimates were prepared utilizing standard
petroleum engineering methods. These methods include decline curve analysis,
volumetric calculations, pressure history, analogy, various correlations and
technical judgment. Reserve definitions conform to the Securities and Exchange
Commission Guidelines.
Information was obtained from interest owners, State Regulatory Agencies,
commercial services, outside operators and our files.
Information furnished is accepted as true and correct. Changes in economic
conditions, reservoir performance, and unforeseen mechanical problems will
likely make it necessary to make future reserve revisions.
Respectfully Submitted,
Coburn Petroleum Engineering
/s/ R.W. Coburn
R.W. Coburn
Registered Petroleum Engineer
Oklahoma #3449
RWC/eaa
Coburn Petroleum Engineering
<PAGE>
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 4th 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 field
operating personal, from examination of production data, well tests, prior
engineering studies and prior geologic studies. Some state well records were
available for examination as were oil and gas sales records.
5. I have no direct or indirect interest whatsoever 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 18 day of June, 1997.
/s/ R.W. Coburn
------------------------------------
R.W. Coburn
Registered Petroleum Engineer #3349
<PAGE>
PROFESSIONAL HISTORY
R.W. COBURN
EDUCATION
1937 Graduated from Richmond Hill High School,
New York City, New York
1937-1939 Hofstra College, Hemstead, New York
Business Administration
1939-1943 Graduated from Tulsa University, Tulsa
Oklahoma * B.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
1948 District Production Foreman- Franklin,
Louisiana
1949 Ass't Dist. Superintendent-Denver City,
Texas
1952 Drilling Engineer- Offshore-Corpus Christi,
Texas
1952-1958 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 Petrorep, French oil
company.
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.
<PAGE>
1992-Present Staghorn (was Buttonwood) Petroleum
Operations Manager
Wrote and published numerous articles on well completions for technical journals
and Engineering Societies.
Preparation of Engineering Evaluations for property purchases, sale and
registration with the Securities Exchange Commission.
Registered Petroleum Engineer - Oklahoma - #3349
GEOGRAPHICAL AREAS OF KNOWLEDGE & EXPERIENCE
1. U.S. Oklahoma Tennessee Indiana
Arkansas Kansas Kentucky
Texas West Virginia Mississippi
New Mexico Pennsylvania Montana
Louisiana Ohio California
Illinois
2. CANADA Alberta Ontario
3. EUROPE Paris Basin
4. AFRICA Algeria Sudan (Redsea) Nigeria
Tunisia
SPECIFIC AREAS OF EXPERTISE
1. Drilling-Planning-Supervision
2. Workover-Planning-Supervision
3. Production-Operation-Supervision
4. Reserve Evaluation-Securities-Banking
5. Prospect Evaluation-Drilling Programs
6. Legal Expert Witness
<PAGE>
<TABLE>
<CAPTION>
COBURN PETROLEUM ENGINEERING / PETROLEUM ENGINEERS / TULSA, OKLAHOMA
TENGASCO INC. AS OF DECEMBER 31, 1996 UNESC. CASE
- ---------------------------------------------------------------------------------------------------------------------------------
SUMMARY LEVEL 2
PROVED DEVELOPED NON-PRODUCING & PROVED UNDEVELOPED
* RESERVE ESTIMATES AND PREDICTED CASH FLOW * BEFORE FEDERAL INCOME TAX *
PERIOD ENDING 12-31-1997 12-31-1998 12-31-1999 12-31-2000 12-31-2001 12-31-2002 12-31-2003 12-31-2004 12-31-2005
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GROSS VALUES UNITS
OIL/COND BBL 13616 23022 18363 14648 11684 9320 7434 5930
GAS MCF 369110 3635245 3647919 3237408 2684119 2228264 1052008 1541226 1204231
OPERATING COST $ 67200 147600 162000 162000 162000 162000 162000 162000 162000
INTANGIBLE INVES $ 1250000 1225000
CAPITAL INVES $ 2600000 700000
NET VALUES
OIL/COND BBL 11063 18705 14920 11952 9493 7573 6040 4818
GAS MCF 311168 2991201 3035345 2702399 2239405 1057633 1542498 128122 1066818
OIL/COND $ 204997 346804 276468 220544 175985 140326 111921 80278
GAS $ 1022271 10874861 10909243 1562441 7910556 6549596 5427357 4501241 3736469
REVENUE TO HI $ 1022271 11079858 11255847 9838909 8131100 6725501 5567685 4813162 3825747
INTANGIBLE INVES $ 1250600 1225008
CAPITAL INVES $ 2600000 700006
OPERATING COST $ 66000 143706 158100 158100 158100 158100 158100 158100 158100
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ -2893723 9011158 11097147 9660909 7973000 6587401 5409585 4455082 3667647
CUMULATIVE INCOME $ -2893723 6117435 17215182 26805901 34868991 41436392 46845977 51301039 54968686
CUM. P WORTH @ 10.00% $ -2759457 5051673 13796539 20731391 25923629 29811698 32723164 34902924 36534283
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
P WORTH @ 12.00% 37796873 P WORTH @14.00% 34716928 P WORTH @ 15.00% 33326253 P WORTH @ 20.00% 27544471
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL OF
PERIOD ENDING 12-31-2006 12/31/2006+ 85.39 YRS
---------- ----------- ----------
<S> <C> <C> <C> <C>
GROSS VALUES UNITS
OIL/COND BBL 4730 16253 125000
GAS MCF 1071511 5848766 27419739
OPERATING COST $ 162000 2004413 3595213
INTANGIBLE INVES $ 2475800
CAPITAL INVES $ 3300808
NET VALUES
OIL/COND BBL 3843 13208 181565
GAS MCF 808639 4650129 22567355
OIL/COND $ 71211 244748 1882802
GAS $ 3104527 15885993 79484561
REVENUE TO HI $ 3175738 16130739 81366563
INTANGIBLE INVES $ 2475008
CAPITAL INVES $ 3300808
OPERATING COST $ 158100 2005154 3479554
- ------------------------------------------------------------------
NET INCOME $ 3017638 14125585 72111909
CUMULATIVE INCOME $ 57986324 14125585 72111909
CUM. P WORTH @ 10.00% $ 37754499 3593598 41340097
- ------------------------------------------------------------------
P WORTH @ 25.00% 23204705
- ------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COBURN PETROLEUM ENGINEERING / PETROLEUM ENGINEERS / TULSA, OKLAHOMA
TENGASCO INC. AS OF DECEMBER 31, 1996 UNESC. CASE
- ---------------------------------------------------------------------------------------------------------------------------------
SUMMARY LEVEL 1
PROVED DEVELOPED NON-PRODUCING
* RESERVE ESTIMATES AND PREDICTED CASH FLOW * BEFORE FEDERAL INCOME TAX *
PERIOD ENDING 12-31-1997 12-31-1998 12-31-1999 12-31-2000 12-31-2001 12-31-2002 12-31-2003 12-31-2004 12-31-2005
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GROSS VALUES UNITS
OIL/COND BBL
GAS MCF 389110 1437151 1190026 989656 626081 691854 581265 489846 414076
OPERATING COST $ 67200 81600 81600 81600 81640 81600 81600 81600 81600
INTANGIBLE INVES $
CAPITAL INVES $ 1200000
NET VALUES
OIL/COND BBL
GAS MCF 311168 1067869 884688 735623 613622 513327 430598 362165 305425
OIL/COND $
GAS $ 1022277 3681600 3048219 2531577 2108138 1750798 1472437 1234819 1037953
REVENUE TO HI $ 1022277 3681600 3048219 2531577 2108138 1759798 1472437 1234819 1037953
INTANGIBLE INVES $
CAPITAL INVES $ 1200000
OPERATING COST $ 66000 77700 77700 77700 77700 77700 77700 77700 77700
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ -243723 3603980 2970519 2453877 2030438 16482098 1394737 1157119 960253
CUMULATIVE INCOME $ -243723 3360177 6338696 8704573 10815011 12497109 13891846 15048965 16009218
CUM. P WORTH @ 10.00% $ -232381 2891423 5232150 6989986 8312263 9308109 10058765 10624917 11052035
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
P WORTH @ 12.00% 11446869 P WORTH @ 14.00% 10591287 P WORTH @ 15.00% 10285895 P WORTH @ 20.00% 8605662
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL OF
PERIOD ENDING 12-31-2006 12/31/2006+ 85.39 YRS
---------- ----------- ----------
<S> <C> <C> <C> <C>
GROSS VALUES UNITS
OIL/COND BBL
GAS MCF 351098 2459582 9819739
OPERATING COST $ 81600 648148 1449748
INTANGIBLE INVES $
CAPITAL INVES $ 1200000
NET VALUES
OIL/COND BBL
GAS MCF 258277 1684568 7167350
OIL/COND $
GAS $ 874552 5525176 24296546
REVENUE TO HI $ 874552 5525176 24296546
INTANGIBLE INVES $
CAPITAL INVES $ 1200000
OPERATING COST $ 77700 568689 1334189
- -----------------------------------------------------------------
NET INCOME $ 796852 4956287 21762357
CUMULATIVE INCOME $ 16806070 4956287 21762357
CUM. P NORTH @ 10.00% $ 11374252 1064510 12436762
- -----------------------------------------------------------------
P WORTH @ 25.00% 7401758
- -----------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COBURN PETROLEUM ENGINEERING / PETROLEUM ENGINEERS / TULSA, OKLAHOMA
TENGASCO INC. AS OF DECEMBER 31, 1996 UNESC. CASE
- ------------------------------------------------------------------------------------------------------------------------------------
SUMMARY
PROVED DEVELOPED NON-PRODUCING
LEASE NUMBER LEASE NAME N.I. CURRENT F.N.R. NET EXPEN NET OIL OIL PR. ULT OIL CUN OIL REM OIL INITIAL LIFE
PM RANKING OPERATOR N.I. CURRENT PM@ 10.00% NET INVES NET GAS GAS PR. ULT GAS CUN GAS REM GAS RATE NO WELL(S)
- ----------- --------------- FRACTION----- $--------- $-------- MB,MMF- $/B,S/N MB,MMF MB,MWF-- MB,MMF-- B/M,W/M ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11 Daugh White #1 .2500000 728108 27900 0.0 0.00 0.0 0.0 0.0 0 85.4 YRS
9 Tengasco .2187500 318276 0 262.5 3.00 1200.0 0.0 1200.0 12000 1 WELL(S)
12 Daugh White #2 1.0000000 2156484 111600 0.0 0.00 0.0 0.0 0.0 0 73.5 YRS
5 Tengasco .8750000 960480 0 787.5 3.00 900.0 0.0 900.0 9120 1 WELL(S)
13 Grubb #1 1.0000000 1778407 111600 0.0 0.00 0.0 0.0 0.0 0 67.1 YRS
6 Tengasco .8750000 800036 0 656.3 3.00 750.0 0.0 750.0 7600 1 WELL(S)
14 Dezarn 1.0000000 833405 111600 0.0 0.00 0.0 0.0 0.0 0 47.4 YRS
6 Tengasco .8750000 396297 0 328.1 3.00 375.0 0.0 375.0 3800 1 WELL(S)
21 Combined Leases 1.0000000 702966 483540 0.0 0.00 0.0 0.0 0.0 0 10.1 YRS
7 Tengasco .8750000 547248 0 520.4 2.35 613.6 10.9 594.7 10000 6 WELL(S)
31 B. Colson #1 1.0000000 3795578 127433 0.0 0.00 0.0 0.0 0.0 0 25.8 YRS
2 Tengasco .8750000 2440356 0 1050.0 3.00 1200.0 0.0 1200.0 20000 1 WELL(S)
32 George Patton #2 .7500000 2049894 95576 0.0 0.00 0.0 0.0 0.0 0 25.8 YRS
3 Tengasco .6583000 1830406 0 787.6 3.00 1200.0 0.0 1200.0 20000 1 WELL(S)
33 Paul Reed #1 1.0000000 8261417 153600 0.0 0.00 0.0 0.0 0.0 0 32.2 YRS
1 Tengasco .7500000 5067365 0 2250.0 3.86 3000.0 0.0 3000.0 45000 1 WELL(S)
34 Sutton UT #1 1.0000000 1852178 111340 0.0 0.00 0.0 0.0 0.0 0 22.3 YRS
4 Tengasco .8750000 1202446 0 525.0 3.80 600.0 0.6 600.0 10000 1 WELL(S)
35 Gas Transmission Line 1.0000000 -1260000 0 0.0 0.00 0.0 0.0 0.0 0 0.0 YRS
10 Tengasco 1.0000000 -1144155 1200000 0.0 0.00 0.0 0.0 0.0 0 0 WELL(S)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COBURN PETROLEUM ENGINEERING / PETROLEUM ENGINEERS / TULSA, OKLAHOMA
TENGASCO INC. AS OF DECEMBER 31, 1996 UNESC. CASE
- ------------------------------------------------------------------------------------------------------------------------------------
Daugh White #1 Beech Crk/ Blg Squeal (1)NI 25 % NI 21.875 % LIMIT
Tengasco Devonian Shale (2)NI % NI % LIMIT
- - DEPTH 1100/2000 FT (3)NI % NI % LIMIT
Clay COUNTY Kentucky (4)NI % NI % LIMIT
LEASE NO: 11 API NO. 16-051-XXXXX RRC/OTC NO
* RESERVE ESTIMATES AND PREDICTED CASH FLOW * BEFORE FEDERAL INCOME TAX *
- ------------------------------------------- ------------------------------------------------- ----------------------------
CUMULATIVE: OIL = 0 BBL, GAS = 0 MCF *** ULTIMATE: OIL = 0 BBL, GAS = 1200000 MCF *** FUTURE NET INCOME = $ 728106
- ------------------------------------------- ------------------------------------------------- ----------------------------
FIRST PERIOD STARTS 12-31-1997 DELAY IS = 12 months (From as of date)
PERIOD ENDING 12-31- 12-31- 12-31- 12-31- 12-31- 12-31- 12-31- 12-31- 12-31- 12-31- 12-31- TOTAL OF
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2006+ 85.39 YRS
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GROSS VALUES UNITS
OIL/COND BBL
GAS MCF 129930 106800 89341 75848 65184 56627 49650 43889 39875 543664 1200000
GOR M/B
OPERATING COST $ 3600 3600 3600 3600 3600 3600 3600 3600 3600 79200 111600
OIL PRICES $/B
GAS PRICES $/W 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
INTANGIBLE INVES $
CAPITAL INVES $
TAXES
OIL SERVERANCE $/B
GAS SERVERANCE $/B .12 .12 .12 .12 .12 .12 .12 .12 .12 .12
MISC TAXES $/B
NET VALUES
OIL/COND BBL
GAS MCF 26422 23363 19543 16590 14259 12387 10861 9601 8548 118928 262502
OIL/COND $
GAS $ 81855 67285 56284 47779 41066 35675 31280 27651 24618 342515 756000
REVENUE TO NI $ 81855 67285 56284 47779 41066 35675 31280 27651 24618 342515 756000
INTANGIBLE INVES $
CAPITAL INVES $
OPERATING COST $ 900 900 900 900 900 900 900 900 900 19800 27900
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 80955 66385 55384 46079 40166 34715 30380 26751 23718 322715 728108
CUMULATIVE INCOME $ 80955 147348 202724 249603 289769 324544 354924 381675 405393 322715 728108
CUM. P WORTH @ 10.00% $ 70171 122481 102155 192684 216463 235180 250844 261943 271533 46743 318276
- ------------------------------------------------------------------------------------------------------------------------------------
P WORTH @ 12.00% 288205 P WORTH @ 14.00% 263458 P WORTH @ 15.00% 252626 P WORTH @20.00% 209373 P WORTH @ 25.00% 178343
- ------------------------------------------------------------------------------------------------------------------------------------
REMARKS/BASIS OF RESERVE ESTIMATES ......... STARTING PRICES & COSTS PROJECTIONS.......................
Gas price is $3.50/Wcf adj less $ 0.50/Mcf Gas: 3 $/W INITIAL RATE IS = 12000 W/N
for gathering and compression charge. Oil: 0 $/B (1)NYP @ 19.39 %/YR TO ELG AT 1200 NWF
Operating Cost: 300 $/M (2)
(3)
NUMBER OF WELL(S) = 1 GAS (4)
ECONOMIC LIMIT = 114.3 N/M (5)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COBURN PETROLEUM ENGINEERING / PETROLEUM ENGINEERS / TULSA, OKLAHOMA
TENGASCO INC. AS OF DECEMBER 31, 1996 UNESC. CASE
- ------------------------------------------------------------------------------------------------------------------------------------
Daugh White #2 Beech Crk/ Blg Squeal (1)NI 100 % NI 87.5 % LIMIT
Tengasco Chattanooga Shale (2)NI % NI % LIMIT
- - DEPTH 1100/2000 FT (3)NI % NI % LIMIT
Clay COUNTY Kentucky (4)NI % NI % LIMIT
LEASE NO : 12 API NO. 16-051- XXXXX RRC/OTC NO.
* RESERVE ESTIMATES AND PREDICTED CASH FLOW * BEFORE FEDERAL INCOME TAX *
- ------------------------------------------- ------------------------------------------------ ----------------------------
CUMULATIVE: OIL = 0 BBL, GAS = 0 MCF *** ULTIMATE: OIL = 0 BBL, GAS = 900000 MCF *** FUTURE NET INCOME = $2156484
- ------------------------------------------- ------------------------------------------------ ----------------------------
FIRST PERIOD STARTS 12-31-1997 DELAY IS = 12 months (from as of date)
PERIOD ENDING 12-31- 12-31- 12-31- 12-31- 12-31- 12-31- 12-31- 12-31- 12-31- 12-31- 12-31- TOTAL OF
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2006+ 73.46 YRS
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GROSS VALUES UNITS
OIL/COND BBL
GAS MCF 98774 81238 67979 57726 49630 43126 37821 33439 29776 400499 900000
GOR M/B
OPERATING COST $ 3600 3600 3600 3600 3600 3600 3600 3600 3600 79200 111600
OIL PRICES $/B
GAS PRICES $/M 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
INTANGIBLE INVES $
CAPITAL INVES $
TAXES
OIL SEVERANCE $/B
GAS SEVERANCE $/N .12 .12 .12 .12 .12 .12 .12 .12 .12 .12
MISC TAXES $/B
NET VALUES
OIL/COND BBL
GAS MCF 86427 70076 59482 50510 43426 37735 33093 29259 26054 350439 787501
OIL/COND $
GAS $ 248910 204699 171308 145469 125067 108677 95308 84206 75036 1019264 2260084
REVENUE TO NI $ 248910 204699 171308 145469 125067 108677 95308 84206 75036 1019264 2260084
INTANGIBLE INVES $
CAPITAL INVES $
OPERATING COST $ 3600 3600 3600 3600 3600 3600 3600 3600 3600 79280 111600
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 245310 201099 167708 141869 121467 105077 91766 80666 71436 930084 2156404
CUMULATIVE INCOME $ 245310 446409 614117 755986 877453 982538 1074236 1154954 1226340 930064 2156404
CUM. P WORTH @ 10.00% $ 212631 371094 491232 583621 655532 712085 756956 792836 821722 138759 960480
- ------------------------------------------------------------------------------------------------------------------------------------
P WORTH @ 12.00% 870451 P WORTH @ 14.00% 796166 P WORTH @ 15.00% 763594 P WORTH @ 20.00% 633315 P WORTH @ 25.00% 539675
- ------------------------------------------------------------------------------------------------------------------------------------
REMARKS/BASIS OF RESERVE ESTIMATES ......... STARTING PRICES & COSTS PROJECTIONS.......................
Gas price is $3.50/Wcf adj less $ 0.50/Wcf Gas: 3 $/W INITIAL RATE IS = 9120 M/W
for gathering and compression charge. Oil: 0 $/B (1)NYP @ 19.34 %/YR TO ELG AT 900 MWF
Operating Cost 300 $/N (2)
(3)
NUMBER OF WELL(S) = 1 GAS (4)
ECONOMIC LIMIT = 114.3 N/M (5)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COBURN PETROLEUM ENGINEERING / PETROLEUM ENGINEERS / TULSA, OKLAHOMA
TENGASCO INC. AS OF DECEMBER 31, 1996 UNESC. CASE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Grubb #1 Beech Crk/Blg Squeal (1) NI 108 % NI 87.5 % LIMIT
Tengasco Chattanooga Shale (2) NI % NI % LIMIT
- - DEPTH 1100/2000 FT (3) NI % NI % LIMIT
Clay COUNTY Kentucky (4) NI % NI % LIMIT
LEASE NO: 13 API NO. 16-051-XXXXX ARC/OTC NO. -
<CAPTION>
* RESERVE ESTIMATES AND PREDICTED CASH FLOW * BEFORE FEDERAL INCOME TAX *
- ------------------------------------------- ------------------------------------------------ -------------------------------
<S> <C> <C> <C> <C> <C>
CUMULATIVE: OIL = 0 BBL, GAS = 0 MCF *** ULTIMATE: OIL = 0 BBL, GAS = 750000 MCF *** FUTURE NET INCOME= $ 1778407
- ------------------------------------------- ------------------------------------------------ -------------------------------
FIRST PERIOD STARTS 12-31-1997 DELAY IS = 12 months (From as of date)
<CAPTION>
PERIOD ENDING 12-31-1997 12-31-1998 12-31-1999 12-31-2000 12-31-2001 12-31-2002 12-31-2003
- ------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
GROSS VALUES UNITS
OIL/COND BBL
GAS MCF 82406 67916 56938 48423 41685 36262
GOR M/B
OPERATING COST $ 3600 3600 3600 3600 3600 3600
OIL PRICES $/B
GAS PRICES $/N 3.00 3.00 3.00 3.00 3.00 3.00
INTANGIBLE INVES $
CAPITAL INVES $
TAXES
OIL SEVERANCE $/B
GAS SEVERANCE $/N .12 .12 .12 .12 .12 .12
MISC TAXES $/B
NET VALUES
OIL/COND BBL
GAS MCF 72187 59427 49821 42370 36474 31729
OIL/COND
GAS 207668 171150 143484 122026 165045 91380
REVENUE TO NI $ 207668 171150 143484 122026 165045 91380
INTANGIBLE INVES $
CAPITAL INVES $
OPERATING COST $ 3600 3600 3600 3600 3600 3600
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME 204068 167550 139884 118426 101445 87780
CUMULATIVE INCOME $ 204068 371618 511502 629928 731373 819153
CUM. P. WORTH AT 10.00% $ 176883 300910 409116 486238 546296 593540
- ------------------------------------------------------------------------------------------------------------------------------------
P WORTH AT 12.00% 725256 P WORTH AT 14.00% 663472 P WORTH AT 15.06% 636366
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL OF
PERIOD ENDING 12-31-2004 12-31-2005 12-31-2006 12-31-2006+ 67.06 YRS
- ------------- ---------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
GROSS VALUES
OIL/COND
GAS 31032 20168 25102 331266 750200
GOR
OPERATING COST 3600 3600 3600 79200 111600
OIL PRICES
GAS PRICES 3.00 3.00 3.00 3.00
INTANGIBLE INVES
CAPITAL INVES
TAXES
OIL SEVERANCE
GAS SEVERANCE .12 .12 .12 .12
MISC TAXES
NET VALUES
OIL/COND
GAS 27053 24647 21964 289860 656252
OIL/COND
GAS 80217 70983 63256 834798 1890007
REVENUE TO N1 80217 70983 63256 834798 1890007
INTANGIBLE INVES
CAPITAL INVES
OPERATING COST 3600 3600 3600 79200 111680
- -----------------------------------------------------------------------------------------------------------------------
NET INCOME 76617 67363 59656 755598 1778407
CUMULATIVE INCOME 895778 963153 1022809 755598 1778407
CUM. P. WORTH AT 10.00% 631027 660999 685121 114915 808036
- -----------------------------------------------------------------------------------------------------------------------
P WORTH AT 12.00% P WORTH AT 20.00% 527824 P WORTH AT 25.00% 449760
- -----------------------------------------------------------------------------------------------------------------------
REMARKS / BASIS OF RESERVE ESTIMATES. . . . . . . STARTING PRICES & COSTS PROJECTIONS . . . . . . . . . . . . . .
Gas price is $3.50/Ncf adj less $0.50/Mcf Gas: 3 $/N INITIAL RATE IS = 7600 M/W
for gathering and compression charge. Oil: 0 $/0 (1) HYP @ 19.13 %/YR TO ELG AT 750 MWF
Operating cost: 300 $/N (2)
(3)
NUMBER OF WELL(S) = 1 GAS (4)
ECONOMIC LIMIT = 114.3 M/W (5)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COBURN PETROLEUM ENGINEERING / PETROLEUM ENGINEERS / TULSA, OKLAHOMA
TENGASCO INC. AS OF DECEMBER 31, 1996 UNESC. CASE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dezarn #1 Beech Crk/Blg Squeal (1) %1 108 % NI 87.5 % LIMIT
Tengasco Chattanooga Shale (2) %1 % NI % LIMIT
- - DEPTH 1100 / 2000 FT (3) %1 % NI % LIMIT
Clay COUNTY Kentucky (4) %1 % NI % LIMIT
LEASE NO: 14 API NO. 16-015-XXXXX ARC/OTC NO. -
<CAPTION>
* RESERVE ESTIMATES AND PREDICTED CASH FLOW * BEFORE FEDERAL INCOME TAX *
- ------------------------------------------- ------------------------------------------------ -------------------------------
<S> <C> <C> <C> <C> <C>
CUMULATIVE: OIL = 0 BBL, GAS = 0 MCF *** ULTIMATE: OIL = 0 BBL, GAS = 375088 MCF *** FUTURE NET INCOME= $ 833405
- ------------------------------------------- ------------------------------------------------ -------------------------------
FIRST PERIOD STARTS 12-31-1997 DELAY IS = 12 months (From as of date)
<CAPTION>
PERIOD ENDING 12-31-1997 12-31-1998 12-31-1999 12-31-2000 12-31-2001 12-31-2002 12-31-2003
- ------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GROSS VALUES UNITS
OIL/COND BBL
GAS MCF 41435 34500 29171 24989 21646 16931
GOR M/B
OPERATING COST $ 3600 3600 3600 3600 3600 3600
OIL PRICES $/B
GAS PRICES $/N 3.00 3.00 3.00 3.00 3.00 3.00
INTANGIBLE INVES $
CAPITAL INVES $
TAXES
OIL SEVERANCE $/B
GAS SEVERANCE $/N .12 .12 .12 .12 .12 .12
MISC TAXES $/B
NET VALUES
OIL/COND BBL
GAS MCF 36256 36188 25525 21865 18948 16565
OIL/COND
GAS $ 104417 86941 73512 62971 54547 47707
REVENUE TO NI $ 104417 86941 73512 62971 54547 47707
INTANGIBLE INVES $
CAPITAL INVES $
OPERATING COST $ 3600 3600 3600 3600 3600 3600
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 100817 83341 69912 59371 56947 44107
CUMULATIVE INCOME $ 100817 184158 254070 313441 364386 488495
CUM. P. WORTH AT 10.00% $ 87387 153058 203140 241804 271966 295704
- ------------------------------------------------------------------------------------------------------------------------------------
P WORTH AT 12.00% 359939 P WORTH AT 14.00% 329652 P WORTH AT 15.00% 316303
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL OF
PERIOD ENDING 12-31-2004 12-31-2005 12-31-2006 12-31-2006+ 67.06 YRS
- ------------- ---------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
GROSS VALUES
OIL/COND
GAS 16697 14837 13271 159523 375000
GOR
OPERATING COST 3600 3600 3600 79200 111600
OIL PRICES
GAS PRICES 3.00 3.00 3.00 3.00
INTANGIBLE INVES
CAPITAL INVES
TAXES
OIL SEVERANCE
GAS SEVERANCE .12 .12 .12 .12
MISC TAXES
NET VALUES
OIL/COND
GAS 14618 12982 11612 139584 328127
OIL/COND
GAS 42077 37368 33443 402002 945005
REVENUE TO NI 42077 37368 33443 402002 945005
INTANGIBLE INVES
CAPITAL INVES
OPERATING COST 3600 3600 3600 79200 111608
- -----------------------------------------------------------------------------------------------------------------------
NET INCOME 38477 33786 29843 322802 833405
CUMULATIVE INCOME 446972 400700 510603 322802 833405
CUM. P. WORTH AT 10.00% 314530 329559 341626 50671 396297
- -----------------------------------------------------------------------------------------------------------------------
P WORTH AT 20.00% 262601 P WORTH AT 25.00% 223794
- -----------------------------------------------------------------------------------------------------------------------
REMARKS / BASIS OF RESERVE ESTIMATES. . . . . . . STARTING PRICES & COSTS PROJECTIONS . . . . . . . . . . . . .
Gas price is $3.50/Mcf adj less $0.50/Mcf Gas: 3 $/M INITIAL RATE IS = 3800 M/M
for gathering and compression charge. OIL : 0 $/B (1) HYP AT 18.14 %/YR TO ELG AT 375 MWF
Operating cost: 300 $/M (2)
(3)
NUMBER OF WELL(S) = 1 GAS (4)
ECONOMIC LIMIT = 114.3 M/W (5)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COBURN PETROLEUM ENGINEERING / PETROLEUM ENGINEERS / TULSA, OKLAHOMA
TENGASCO INC. AS OF DECEMBER 31, 1996 UNESC. CASE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Combined leases Burning Springs (1) NI 100 % NI 87.5 % LIMIT
Tengasco Murfsboro (2) NI % NI % LIMIT
S - T - R Approx 2600 ft (3) NI % NI % LIMIT
Clay COUNTY Kentucky (4) NI % NI % LIMIT
LEASE NO: 21 API NO. 16-051-xxxxx ARC/OTC NO.
<CAPTION>
* RESERVE ESTIMATES AND PREDICTED CASH FLOW * BEFORE FEDERAL INCOME TAX *
- ------------------------------------------- ------------------------------------------------ -------------------------------
<S> <C> <C> <C> <C> <C>
CUMULATIVE: OIL = 0 BBL, GAS = 18675 MCF *** ULTIMATE: OIL = 0 BBL, GAS = 613614 MCF *** FUTURE NET INCOME = $ 702966
- ------------------------------------------- ------------------------------------------------ -------------------------------
FIRST PERIOD STARTS 12-31-1996
<CAPTION>
PERIOD ENDING 12-31-1997 12-31-1998 12-31-1999 12-31-2000 12-31-2001 12-31-2002 12-31-2003
- ------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GROSS VALUES UNITS
OIL/COND BBL
GAS MCF 110756 94143 80021 68018 57815 49143 41712
GOR M/B
OPERATING COST $ 48000 48000 48000 48000 48000 48000 48000
OIL PRICES $/B
GAS PRICES $/N 2.35 2.35 2.35 2.35 2.35 2.35 2.35
INTANGIBLE INVES $
CAPITAL INVES $
TAXES
OIL SEVERANCE $/B
GAS SEVERANCE $/N .07 .07 .07 .07 .07 .07 .07
MISC TAXES $/B
NET VALUES
OIL/COND BBL
GAS MCF 96912 82375 70019 59516 50589 43000 36550
OIL/COND $
GAS $ 220959 187815 159643 135696 115343 98040 83334
REVENUE TO NI $ 220959 187815 159643 135696 115343 98040 83334
INTANGIBLE INVES $
CAPITAL INVES $
OPERATING COST $ 48000 48000 48000 48000 48000 48000 48000
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME 172959 139815 111643 87696 67343 50040 35334
CUMULATIVE INCOME $ 172959 312774 424417 512113 579456 629496 664830
CUM. P. WORTH AT 10.00% $ 164910 286099 374072 436894 480749 510374 529391
- ------------------------------------------------------------------------------------------------------------------------------------
P WORTH AT 12.00% 524131 P WORTH AT 14.00% 562966 P WORTH AT 15.00% 493046
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL OF
PERIOD ENDING 12-31-2004 12-31-2005 12-31-2006 12-31-2006+ 10.07 YRS
- ------------- ---------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
GROSS VALUES
OIL/COND
GAS 35606 30100 25653 1732 594739
GOR
OPERATING COST 48000 48000 48000 3546 483540
OIL PRICES
GAS PRICES 2.35 2.35 2.35 2.35
INTANGIBLE INVES
CAPITAL INVES
TAXES
OIL SEVERANCE
GAS SEVERANCE .07 .07 .07 .07
MISC TAXES
NET VALUES
OIL/COND
GAS 31068 26408 22446 1515 520398
OIL/COND
GAS 70835 60210 51177 3454 1186506
REVENUE TO NI 70835 60210 51177 3454 1186506
INTANGIBLE INVES
CAPITAL INVES
OPERATING COST 48000 48000 48000 3548 483548
- -----------------------------------------------------------------------------------------------------------------------
NET INCOME 22835 12210 3177 -86 702966
CUMULATIVE INCOME 687665 699875 703052 -86 702966
CUM. P. WORTH AT 10.00% 540564 545995 547279 -32 547248
- -----------------------------------------------------------------------------------------------------------------------
P WORTH AT 20.00% 449119 P WORTH AT 25.00% 412921
- -----------------------------------------------------------------------------------------------------------------------
REMARKS / BASIS OF RESERVE ESTIMATES. . . . . . . STARTING PRICES & COSTS PROJECTIONS . . . . . . . . . . . . . . . .
MAP QUAD MANCHESTER 7.5 SEC: AC Gas: 2.35 $/7 INITIAL RATE IS = 10000 M/M
Wells included are the Alverez - Kleth 2 - OIL: 0 $/8 (1) CPD AT 15 %/YR TO ELG AT 613.614 MWF
Cornett 1- Cornett 2 Operating cost: 4000 $/M (2)
Glibert - Hale cumulative prod shown is 1996 prod only (3)
NUMBER OF WELL(S) = 0 GAS (4)
ECONOMIC LIMIT = 1945.3 M/W (5)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COBURN PETROLEUM ENGINEERING / PETROLEUM ENGINEERS / TULSA, OKLAHOMA
TENGASCO INC. AS OF DECEMBER 31, 1996 UNESC. CASE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
B. Colson #1 Swan Creek (1) NI 100 % NI 87.5 % LIMIT
Tengasco Knox Formation (2) NI % NI % LIMIT
11-1S-74E 4449-4523 OA (3) NI % NI % LIMIT
Hancock COUNTY Tennessee (4) NI % NI % LIMIT
LEASE NO: 31 API NO. 41-067-xxxxx ARC/OTC NO. --
<CAPTION>
* RESERVE ESTIMATES AND PREDICTED CASH FLOW * BEFORE FEDERAL INCOME TAX *
- ------------------------------------------- ------------------------------------------------ -------------------------------
<S> <C> <C> <C> <C> <C>
CUMULATIVE: OIL = 0 BBL, GAS = 0 MCF *** ULTIMATE: OIL = 0 BBL, GAS = 1200000 MCF *** FUTURE NET INCOME= $ 3799578
- ------------------------------------------- ------------------------------------------------ -------------------------------
FIRST PERIOD STARTS 09-31-1997 DELAY IS = 9 months (From as of date)
<CAPTION>
PERIOD ENDING 12-31-1997 12-31-1998 12-31-1999 12-31-2000 12-31-2001 12-31-2002 12-31-2003
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
GROSS VALUES UNITS
OIL/COND BBL
GAS MCF 58533 207694 169755 139149 114060 93495 76638
GOR M/B
OPERATING COST $ 4800 4800 4800 4800 4800 4800 4800
OIL PRICES $/B
GAS PRICES $/M 3.86 3.86 3.86 3.86 3.86 3.86 3.86
INTANGIBLE INVES $
CAPITAL INVES $
TAXES
OIL SEVERANCE $/B
GAS SEVERANCE $/M .12 .12 .12 .12 .12 .12 .12
MISC TAXES $/B
NET VALUES
OIL/COND BBL
GAS MCF 51216 161207 148536 121755 99803 81886 67058
OIL/COND $
GAS $ 191548 677714 555525 455364 373263 365962 250797
REVENUE TO NI $ 191548 677714 555525 455364 373263 365962 250797
INTANGIBLE INVES $
CAPITAL INVES $
OPERATING COST $ 4800 4800 4800 4800 4800 4800 4800
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 186748 672914 550725 450564 368463 301162 245997
CUMULATIVE INCOME $ 186748 859662 1410387 1860951 2229414 2536576 2776573
CUM. P WORTH @ 10.00 % $ 178057 761328 1195292 1518054 1758007 1936302 2668699
- ------------------------------------------------------------------------------------------------------------------------------------
P WORTH @ 12.00% 2272497 P WORTH @ 14.00% 2125197 P WORTH @ 15.00% 2858143
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL OF
PERIOD ENDING 12-31-2004 12-31-2005 12-31-2006 12-31-2006+ 25.80 YRS
---------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
GROSS VALUES
OIL/COND
GAS 62826 51494 42210 184752 1280000
GOR
OPERATING COST 4800 4800 4800 79433 127433
OIL PRICES
GAS PRICES 3.86 3.86 3.86 3.86
INTANGIBLE INVES
CAPITAL INVES
TAXES
OIL SEVERANCE
GAS SEVERANCE .12 .12 .12 .12
MISC TAXES
NET VALUES
OIL/COND
GAS 54968 45057 36934 161661 1050003
OIL/COND
GAS 265580 168513 138133 604612 3927011
REVENUE TO NI 265580 168513 138133 604612 3927011
INTANGIBLE INVES
CAPITAL INVES
OPERATING COST 4800 4800 4800 79433 127433
- --------------------------------------------------------------------------------------------------------------------
NET INCOME 200786 163713 133833 525179 3799578
CUMULATIVE INCOME 2977353 3141066 3274399 525179 3799578
CUM. P WORTH @ 10.00 % 2166936 2239755 2293670 146686 2440356
- --------------------------------------------------------------------------------------------------------------------
P WORTH @ 20.00% 1775471 P WORTH @ 25.00% 1558596
- --------------------------------------------------------------------------------------------------------------------
REMARKS/BASIS OF RESERVE ESTIMATES................ STARTING PRICES & COSTS PROJECTIONS............................
July 1996 flowed 1250 Mcf/d 1/2 inch choke Gas: 3.86 $/M INITIAL RATE IS = 20000 M/N
ftp=185 psi @ltp 1750 (72 hrs) 795 fnl 1000 fel Oil: 0 $/B (1) CPD @ 18.02 %/YR TO ELG AT 1200 MMF
pfs 4449-55 4476-84 4492-96 4512-23 Operating Cost: 400 $/M (2)
Gas price $4.26/Mcf (w/Btu adj) less $0.40/Wcf (3)
Pipeline Gathering Charge NUMBER OF WELL(S) = 1 GAS (4)
ECONOMIC LIMIT = 118.4 M/N (5)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COBURN PETROLEUM ENGINEERING / PETROLEUM ENGINEERS / TULSA, OKLAHOMA
TENGASCO INC. AS OF DECEMBER 31, 1996 UNESC. CASE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
George Patton #2 Swan Creek (1) NI 75 % NI 65.63 % LIMIT
Tengasco Knox Gas (2) NI % NI % LIMIT
6-15-75E 4590-4610 OA (3) NI % NI % LIMIT
Hancock COUNTY Tennessee (4) NI % NI % LIMIT
LEASE NO: 32 API NO. 41-867-xxxxx ARC/OTC NO. --
<CAPTION>
* RESERVE ESTIMATES AND PREDICTED CASH FLOW * BEFORE FEDERAL INCOME TAX *
- ------------------------------------------- ------------------------------------------------ -------------------------------
<S> <C> <C> <C> <C> <C>
CUMULATIVE: OIL = 0 BBL, GAS = 0 MCF *** ULTIMATE: OIL = 0 BBL, GAS = 1200606 MCF *** FUTURE NET INCOME = $ 2849694
- ------------------------------------------- ------------------------------------------------ -------------------------------
FIRST PERIOD STARTS 09-31-1997 DELAY IS = 9 months (From as of date)
<CAPTION>
PERIOD ENDING 12-31-1997 12-31-1998 12-31-1999 12-31-2000 12-31-2001 12-31-2002 12-31-2003
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
GROSS VALUES UNITS
OIL/COND BBL
GAS MCF 58533 207694 169755 139149 114860 93495 70638
GOR M/B
OPERATING COST $ 4800 4800 4800 4800 4800 4800 4800
OIL PRICES $/B
GAS PRICES $/M 3.86 3.86 3.86 3.86 3.86 3.86 3.86
INTANGIBLE INVES $
CAPITAL INVES $
TAXES
OIL SEVERANCE $/B
GAS SEVERANCE $/M .12 .12 .12 .12 .12 .12 .12
MISC TAXES $/B
NET VALUES
OIL/COND BBL
GAS MCF 38415 135916 111418 91323 74858 61361 50298
OIL/COND $
GAS $ 143672 508326 416673 341548 279969 229490 188115
REVENUE TO NI $ 143672 508326 416673 341548 279969 229490 188115
INTANGIBLE INVES $
CAPITAL INVES $
OPERATING COST $ 3600 3600 3600 3600 3600 3600 3600
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 140072 504726 413073 337948 276369 225890 184515
CUMULATIVE INCOME $ 140072 644798 1057871 1395819 1672180 1898078 2482593
CUM. P WORTH @ 10.00 % $ 133553 571042 696538 1138627 1318686 1452338 1551645
- ------------------------------------------------------------------------------------------------------------------------------------
P WORTH @ 12.00% 1704567 P WORTH @ 14.00% 1594016 P WORTH @ 15.00% 1543727
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL OF
PERIOD ENDING 12-31-2004 12-31-2005 12-31-2006 12-31-2006+ 25.80 YRS
---------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
GROSS VALUES
OIL/COND
GAS 62820 51494 42210 184752 1280000
GOR
OPERATING COST 4800 4800 4800 79435 127435
OIL PRICES
GAS PRICES 3.86 3.86 3.86 3.86
INTANGIBLE INVES
CAPITAL INVES
TAXES
OIL SEVERANCE
GAS SEVERANCE .12 .12 .12 .12
MISC TAXES
NET VALUES
OIL/COND
GAS 41229 33796 27702 121251 707559
OIL/COND
GAS 154196 126397 103605 453479 2945479
REVENUE TO NI 154196 126397 103605 453479 2945479
INTANGIBLE INVES
CAPITAL INVES
OPERATING COST 3600 3600 3600 59576 95576
- --------------------------------------------------------------------------------------------------------------------
NET INCOME 150596 122797 100005 393903 2849894
CUMULATIVE INCOME 2233189 2355986 2455991 393903 2849894
CUM. P WORTH @ 10.00 % 1625329 1679948 1720386 110020 1838486
- --------------------------------------------------------------------------------------------------------------------
P WORTH @ 20.00% 1331706 P WORTH @ 25.00% 1169040
- --------------------------------------------------------------------------------------------------------------------
REMARKS/BASIS OF RESERVE ESTIMATES..................... STARTING PRICES & COSTS PROJECTIONS............................
June 1996 fwd 1500 Mcf/day ftp = 250 1/2 inch Gas: 3.86 $/M INITIAL RATE IS = 20000 M/N
Choke slp 1750 72 hrs 2950 fnl 2550 fel Oil: 0 $/B (1) CPD @ 18.02 %/YR TO ELG AT 1200 MMF
Gas price $4.26/Mcf (w/Btu adj) less $0.40/Mcf Pipeline Operating Cost: 400 $/M (2)
Gathering Charge (3)
NUMBER OF WELL(S) = 1 GAS (4)
ECONOMIC LIMIT = 118.4 M/N (5)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COBURN PETROLEUM ENGINEERING / PETROLEUM ENGINEERS / TULSA, OKLAHOMA
TENGASCO INC. AS OF DECEMBER 31, 1996 UNESC. CASE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Paul Reed #1 Swan Creek (1) NI 100 % NI 75 % LIMIT
Tengasco Knox Formation (2) NI % NI % LIMIT
18-1S-74E 4414-4624 0A (3) NI % NI % LIMIT
Hancock COUNTY Tennessee (4) NI % NI % LIMIT
LEASE NO: 33 API NO. 41-867-xxxxx ARC/OTC NO. --
<CAPTION>
* RESERVE ESTIMATES AND PREDICTED CASH FLOW * BEFORE FEDERAL INCOME TAX *
- ------------------------------------------- ------------------------------------------------ -------------------------------
<S> <C> <C> <C> <C> <C>
CUMULATIVE: OIL = 0 BBL, GAS = 0 MCF *** ULTIMATE: OIL = 0 BBL, GAS = 3860606 MCF *** FUTURE NET INCOME = $ 8261417
- ------------------------------------------- ------------------------------------------------ -------------------------------
FIRST PERIOD STARTS 09-31-1997 DELAY IS = 9 months (From as of date)
<CAPTION>
PERIOD ENDING 12-31-1997 12-31-1998 12-31-1999 12-31-2000 12-31-2001 12-31-2002 12-31-2003
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GROSS VALUES UNITS
OIL/COND BBL
GAS MCF 132017 472636 394997 336111 275885 230566 192691
GOR M/B
OPERATING COST $ 4800 4800 4800 4800 4800 4800 4800
OIL PRICES $/B
GAS PRICES $/M 3.86 3.86 3.86 3.86 3.86 3.86 3.86
INTANGIBLE INVES $
CAPITAL INVES $
TAXES
OIL SEVERANCE $/B
GAS SEVERANCE $/M .12 .12 .12 .12 .12 .12 .12
MISC TAXES $/B
NET VALUES
OIL/COND BBL
GAS MCF 99013 354477 296248 247583 206914 172925 144518
OIL/COND $
GAS $ 370309 1325744 1107968 925968 773858 646740 540497
REVENUE TO NI $ 370309 1325744 1107968 925968 773858 646740 540497
INTANGIBLE INVES $
CAPITAL INVES $
OPERATING COST $ 4800 4800 4800 4800 4800 4800 4800
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 365509 1320944 1103168 921160 769058 641948 535697
CUMULATIVE INCOME $ 365509 1686453 2769621 3710781 4479839 5121779 5657476
CUM. P WORTH @ 10.00 % $ 348499 1493473 2362753 3622626 3523458 3963503 4191818
- ------------------------------------------------------------------------------------------------------------------------------------
P WORTH @ 12.00% 4714981 P WORTH @ 14.00% 4391341 P WORTH @ 15.00% 4244963
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL OF
PERIOD ENDING 12-31-2004 12-31-2005 12-31-2006 12-31-2006+ 32.24 YRS
---------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
GROSS VALUES
OIL/COND
GAS 161038 134585 112417 562997 3000608
GOR
OPERATING COST 4800 4800 4800 105608 153600
OIL PRICES
GAS PRICES 3.86 3.86 3.86 3.86
INTANGIBLE INVES
CAPITAL INVES
TAXES
OIL SEVERANCE
GAS SEVERANCE .12 .12 .12 .12
MISC TAXES
NET VALUES
OIL/COND
GAS 128779 100939 84358 422250 2250004
OIL/COND
GAS 451713 377512 315499 1579217 8415017
REVENUE TO NI 451713 377512 315499 1579217 8415017
INTANGIBLE INVES
CAPITAL INVES
OPERATING COST 4800 4800 4800 105600 153600
- ---------------------------------------------------------------------------------------------------------------------
NET INCOME 446913 372712 318699 1473617 8261417
CUMULATIVE INCOME 6104389 8477101 6787800 1473617 8261417
CUM. P WORTH @ 10.00 % 4410482 4576263 4701898 385471 5097369
- ---------------------------------------------------------------------------------------------------------------------
P WORTH @ 20.00% 3634150 P WORTH @ 25.00% 3172165
- ---------------------------------------------------------------------------------------------------------------------
REMARKS/BASIS OF RESERVE ESTIMATES.......................... STARTING PRICES & COSTS PROJECTIONS............................
Reserves are based on: Bht=124F GasSG= .6 (drid Amoco) Gas 3.86 $/M INITIAL RATE IS = 45000 M/M
Net Pay=68 ft (pfs) 80 acres Pul= 1900 psl Por = .17 Su=.30 Oil: 0 $/B (1) CPD @ 16.42 %/YR TO ELG AT 3000 MMF
Purchased from Amoco 850 fsl 850 fel Operating Cost: 400 $/W (2)
Gas price $4.26/Mcf (w/Btu adj) less $0.40/Mcf Pipeline (3)
Gathering Charge NUMBER OF WELL(S) = 1 GAS (4)
ECONOMIC LIMIT = 138.2 M/M (5)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COBURN PETROLEUM ENGINEERING / PETROLEUM ENGINEERS / TULSA, OKLAHOMA
TENGASCO INC. AS OF DECEMBER 31, 1996 UNESC. CASE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sutton UT #1 Swan Creek (1) NI 100 % NI 87.5 % LIMIT
Tengasco Knox Formation (2) NI % NI % LIMIT
4 - IS - 75E 4464-4416 (3) NI % NI % LIMIT
Hancock COUNTY Tennessee (4) NI % NI % LIMIT
LEASE NO: 34 API NO. 41-667-xxxxx ARC/OTC NO.--
<CAPTION>
* RESERVE ESTIMATES AND PREDICTED CASH FLOW * BEFORE FEDERAL INCOME TAX *
- ------------------------------------------- ------------------------------------------------ -------------------------------
<S> <C> <C> <C> <C> <C>
CUMULATIVE: OIL = 0 BBL, GAS = 0 MCF *** ULTIMATE: OIL = 0 BBL, GAS = 600000 MCF *** FUTURE NET INCOME = $ 1852178
- ------------------------------------------- ------------------------------------------------ -------------------------------
FIRST PERIOD STARTS 09-31-1997 DELAY IS = 9 months (From as of date)
<CAPTION>
PERIOD ENDING 12-31-1997 12-31-1998 12-31-1999 12-31-2000 12-31-2001 12-31-2002 12-31-2003
- ------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GROSS VALUES UNITS
OIL/COND BBL
GAS MCF 29271 103637 85852 69800 57283 47010 38588
GOR M/B
OPERATING COST $ 4800 4800 4800 4800 4800 4800 4800
OIL PRICES $/B
GAS PRICES $/N 3.86 3.86 3.86 3.86 3.86 3.86 3.86
INTANGIBLE INVES $
CAPITAL INVES $
TAXES
OIL SEVERANCE $/B
GAS SEVERANCE $/N .12 .12 .12 .12 .12 .12 .12
MISC TAXES $/B
NET VALUES
OIL/COND BBL
GAS MCF 25612 90682 74421 61075 50123 41134 334758
OIL/COND
GAS 95789 339151 276335 228421 187460 153641 126255
REVENUE TO NI $ 95789 339151 276335 228421 187460 153641 126255
INTANGIBLE INVES $
CAPITAL INVES $
OPERATING COST $ 4800 4800 4800 4800 4800 4800 4800
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 90989 334351 273535 223621 182660 149641 121455
CUMULATIVE INCOME $ 90989 425340 698675 922496 1105156 1254197 1375652
CUM. P. WORTH AT 10.00% $ 86755 376565 592186 752297 871251 959487 1024854
- -----------------------------------------------------------------------------------------------------------------------------------
P WORTH AT AT 12.00% 1120794 P WORTH AT 14.00% 1048920 P WORTH AT 15.00% 1016139
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL OF
PERIOD ENDING 12-31-2004 12-31-2005 12-31-2006 12-31-2006+ 22.25 YRS
- ------------- ---------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
GROSS VALUES
OIL/COND
GAS 31662 25984 21324 90397 600060
GOR
OPERATING COST 4800 4800 4800 63340 111340
OIL PRICES
GAS PRICES 3.86 3.86 3.86 3.86
INTANGIBLE INVES
CAPITAL INVES
TAXES
OIL SEVERANCE
GAS SEVERANCE .12 .12 .12 .12
MISC TAXES
NET VALUES
OIL/COND
GAS 27704 22736 18659 79100 525004
OIL/COND
GAS 103613 85033 69785 295835 1963518
REVENUE TO NI 103613 85033 69785 295835 1963518
INTANGIBLE INVES
CAPITAL INVES
OPERATING COST 4800 4800 4800 63340 111348
- ------------------------------------------------------------------------------------------------------------------
NET INCOME 98813 80233 64985 232495 1852178
CUMULATIVE INCOME 1474465 1554898 1619683 232495 1852178
CUM. P. WORTH AT 10.00% 1073201 1106889 1135166 67286 1202446
- ------------------------------------------------------------------------------------------------------------------
P WORTH AT 20.00% 677548 P WORTH AT 25.00% 770837
- ------------------------------------------------------------------------------------------------------------------
REMARKS / BASIS OF RESERVE ESTIMATES . . . . . . . . . . STARTING PRICES & COSTS PROJECTIONS . . . . . . . . . . . . . . .
Reserves are based on: Bht=124F Gas SG=.6 (drid Amoco) Gas: 3.86 $/mM INITIAL RATE IS + 10000 M/M
Net Pay=$2 ft (pfs) 80 acres Pwd=1900 psi Per=.17 Sw=.30 OIL : 0 $/0 {1} CPD AT 17.93 %/YR TO ELG AT 600 MMF
Purchased from AMOCO 400 fsl 900 fel Operating cost: 400 S/M {2}
Gas price $4.26/Ncf(w/Btu adj) less $8.48/Mcf Pipeline {3}
Gathering Charge NUMBER OF WELL(S) = 1 GAS {4}
ECONOMIC LIMIT = 118.4 M/M {5}
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COBURN PETROLEUM ENGINEERING / PETROLEUM ENGINEERS / TULSA, OKLAHOMA
TENGASCO INC. AS OF DECEMBER 31, 1996 UNESC. CASE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gas Transmission Line Swan Creek (1) NI 100 % NI 100 % LIMIT
Tengasco -- (2) NI % NI % LIMIT
xx-xxS-xxZ -- (3) NI % NI % LIMIT
Hancock COUNTY Tennessee (4) NI % NI % LIMIT
LEASE NO: 35 APT NO. 41-667-xxxxx ARC/OTC NO. --
<CAPTION>
* RESERVE ESTIMATES AND PREDICTED CASH FLOW * BEFORE FEDERAL INCOME TAX *
- ------------------------------------------- ------------------------------------------------ -------------------------------
<S> <C> <C> <C> <C> <C>
CUMULATIVE: OIL = 0 BBL, GAS = 0 MCF *** ULTIMATE: OIL = 0 BBL, GAS = 0 MCF *** FUTURE NET INCOME = $ -1200000
- ------------------------------------------- ------------------------------------------------ -------------------------------
FIRST PERIOD STARTS 12-31-1996 DELAY IS = 6 months (From as of date)
<CAPTION>
PERIOD ENDING 12-31-1997 12-31-1998 12-31-1999 12-31-2000 12-31-2001 12-31-2002 12-31-2003
- ------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GROSS VALUES UNITS
OIL/COND BBL
GAS MCF
GOR M/B
OPERATING COST $
OIL PRICES $/B
GAS PRICES $/N
INTANGIBLE INVES $
CAPITAL INVES $ 1200000
TAXES
OIL SEVERANCE $/B
GAS SEVERANCE $/N
MISC TAXES $/B
NET VALUES
OIL/COND BBL
GAS MCF
OIL/COND
GAS
REVENUE TO NI $
INTANGIBLE INVES $
CAPITAL INVES $ 1200000
OPERATING COST $
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ -1200000
CUMULATIVE INCOME $ -1200000
CUM. P. WORTH AT 10.00% $ -1144155
- ------------------------------------------------------------------------------------------------------------------------------------
P WORTH AT AT 12.00% -1133893 P WORTH AT 14.00% -1123903 P WORTH AT 15.00% 1119806
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL OF
PERIOD ENDING 12-31-2004 12-31-2005 12-31-2006 12-31-2006+ 6.06 YRS
- ------------- ---------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
GROSS VALUES
OIL/COND
GAS
GOR
OPERATING COST
OIL PRICES
GAS PRICES
INTANGIBLE INVES
CAPITAL INVES 1200000
TAXES
OIL SEVERANCE
GAS SEVERANCE
MISC TAXES
NET VALUES
OIL/COND
GAS
OIL/COND
GAS
REVENUE TO N1
INTANGIBLE INVES
CAPITAL INVES 1200000
OPERATING COST
- ---------------------------------------------------------------------------------------------------------------------
NET INCOME -1200000
CUMULATIVE INCOME -1200000
CUM. P. WORTH AT 10.00% -1144155
- ---------------------------------------------------------------------------------------------------------------------
P WORTH AT 20.00% -1895445 P WORTH AT 25.00% -1073313
- ---------------------------------------------------------------------------------------------------------------------
REMARKS / BASIS OF RESERVE ESTIMATES . . . . . . . . . . STARTING PRICES & COSTS PROJECTIONS . . . . . . . . . . .
Cost estimated to complete line 1200 N$ Gas: 0 $/M INITIAL RATE IS = 6 M/M
Operating and amortization costs are accounted for by $0.40/Mcf OIL : 0 $/B {1}
Gathering fee charged producing wells. Operating cost: 0 $/M {2}
{3}
NUMBER OF WELL(S) = 0 GAS {4}
ECONOMIC LIMIT = 0.0 M/M {5}
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COBURN PETROLEUM ENGINEERING / PETROLEUM ENGINEERS / TULSA, OKLAHOMA
TENGASCO INC. AS OF DECEMBER 31, 1996 UNESC. CASE
- ------------------------------------------------------------------------------------------------------------------------------------
S U M M A R Y LEVEL 1
PROVED UNDEVELOPED
* RESERVE ESTIMATES AND PREDICTED CASH FLOW * BEFORE FEDERAL INCOME TAX *
<CAPTION>
PERIOD ENDING 12-31-1997 12-31-1998 12-31-1999 12-31-2000 12-31-2001 12-31-2002 12-31-2003
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GROSS VALUES UNITS
OIL/COND BBL 13616 23022 18363 14648 11684 9320
GAS MCF 2198094 2457893 2247744 1858838 1536350 1270743
OPERATING COST $ 66000 80400 80400 80400 80400 80400
INTANGIBLE INVES $ 1250000 1225000
CAPITAL INVES $ 1400000 700000
NET VALUES
OIL/COND BBL 11053 16705 14920 11902 9493 1573
GAS MCF 1923332 2150657 1966776 1825783 1344306 1111900
OIL/COND $ 204997 346604 276466 220544 175905 140328
GAS $ 7193261 7661824 7030864 5802418 4789798 3954920
REVENUE TO NI $ 7398258 8207626 7307332 6022962 4965703 4095248
INTANGIBLE INVES $ 1250000 1225000
CAPITAL INVES $ 1400000 700000
OPERATING COST $ 66000 80400 80400 80400 80400 80400
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ -2650000 5407258 8127228 7226932 5942562 4885303 4014848
CUMULATIVE INCOME $ -2650000 2757258 10884486 10111418 24053980 28939283 32954131
CUM. P WORTH AT 10.00 % $ -2526676 2160250 8564389 13741485 17611366 20503589 22664399
- ------------------------------------------------------------------------------------------------------------------------------------
P WORTH AT 12.00% 26358084 P WORTH AT 14.00% 24125641 P WORTH AT 15.00% 23120358
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL OF
PERIOD ENDING 12-31-2004 12-31-2005 12-31-2006 12-31-2006+ 28.58 YRS
- ------------- ---------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
GROSS VALUES
OIL/COND 7434 5938 4730 16253 125000
GAS 1051380 870161 720413 3369164 17600000
OPERATING COST 80400 80400 80400 1436265 2145465
INTANGIBLE INVES 2475000
CAPITAL INVES 2100000
SET VALUES
OIL/COND 6040 4818 3843 13208 101565
GAS 919957 701391 630362 2965541 15400005
OIL/COND 111921 89278 71211 244746 1882002
GAS 3266422 2698516 2229975 10360817 55180015
REVENUE TO NI 3378343 2787194 2301186 10665563 57076017
INTANGIBLE INVES 2475000
CAPITAL INVES 2100000
OPERATING COST 80400 80400 80400 1436265 2145465
- ---------------------------------------------------------------------------------------------------------------------
NET INCOME 3297943 2707394 2220786 9169290 58349552
CUMULATIVE INCOME 36252074 38959468 41180254 9169290 58349552
CUM. P WORTH AT 10.00 % 2428007 25482248 26388247 2529080 28989335
- ---------------------------------------------------------------------------------------------------------------------
P WORTH AT 20.00% 18930889 P WORTH AT 25.00% 15802947
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COBURN PETROLEUM ENGINEERING / PETROLEUM ENGINEERS / TULSA, OKLAHOMA
TENGASCO INC. AS OF DECEMBER 31, 1996 UNESC. CASE
- ------------------------------------------------------------------------------------------------------------------------------------
SUMMARY
PROVED UNDEVELOPED
LEASE NUMBER LEASE NAME N.I. CURRENT F.H.R. NET EXPEN NET OIL OIL PR. ULT OIL CUM OIL REN OIL INITIAL LIFE
PW RANKING OPERATOR N.I. CURRENT PW@ 16.66% NET INVES NET GAS GAS PR. ULT GAS CUM GAS REN GAS RATE NO WELL(S)
- ------------ ---------------------- FRACTION---- $--------- $-------- MB,MNF- $/B,$/N NB,NMF- NB,NWF- NB,NWF- B/N,M/N ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 PUD 4 Well Group 1.0000000 7152012 432000 0.0 0.00 0.0 0.0 0.0 0 28.5 YRS
3 Tengasco .8750000 3454697 488008 2880.0 3.08 3200.0 0.0 3200.0 42000 4 WELL(S)
2 PUD Offse Franklin #1 1.0000000 1601734 160268 101.6 19.10 125.0 0.0 125.0 2400 17.5 YRS
4 Tengesco .8125000 996283 120000 0.0 0.00 0.0 0.0 0.0 0 1 WELL(S)
3 PUD 1997 Knox Drilling Prg 1.0000000 27736933 1029005 0.0 0.80 0.0 0.0 0.0 0 26.0 YRS
1 Tengasco .6750000 16506212 2650000 6400.0 3.86 9600.8 0.0 9600.8 160000 8 WELL(S)
4 PUD 1998 Knox Drilling Prg 1.0000000 13858873 524132 0.0 0.88 0.0 0.0 0.0 0 25.5 YRS
2 Tengesco .8750000 7949946 1325000 4200.0 3.86 4800.0 0.0 4800.0 80000 4 WELL(S)
-----------------------------------------------------------------------------------------------
TOTALS 4.0000000 50349552 2145465 101.6 125.0 0.0 125.0 2400 28.5 YRS
3.4375000 28909336 4575000 15400.0 17600.8 0.0 17600.8 282000 17 WELLS
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COBURN PETROLEUM ENGINEERING / PETROLEUM ENGINEERS / TULSA, OKLAHOMA
TENGASCO INC. AS OF DECEMBER 31, 1996 UNESC. CASE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
4 Well Group Beech Crk/Big Squeal (1) NI 100 % NI 87.5 % LIMIT
Tengasco Chattanooga Shale (2) NI % NI % LIMIT
- - Depth 1100/2000 ft (3) NI % NI % LIMIT
Clay COUNTY Kentucky (4) NI % NI % LIMIT
LEASE NO: 1 PUD API NO. 16-051-XXXXX ARC/OTC NO. --
<CAPTION>
* RESERVE ESTIMATES AND PREDICTED CASH FLOW * BEFORE FEDERAL INCOME TAX *
- ------------------------------------------- ------------------------------------------------ -------------------------------
<S> <C> <C> <C> <C> <C>
CUMULATIVE: OIL = 0 BBL, GAS = 0 MCF *** ULTIMATE: OIL = 0 BBL, GAS = 3200000 MCF *** FUTURE NET INCOME= $ 7152012
- ------------------------------------------- ------------------------------------------------ -------------------------------
FIRST PERIOD STARTS 07-3-1999 DELAY IS = 30 months (From as of date)
<CAPTION>
PERIOD ENDING 12-31-1997 12-31-1998 12-31-1999 12-31-2000 12-31-2001 12-31-2002 12-31-2003
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
GROSS VALUES UNITS
OIL/COND BBL
GAS MCF 242435 431731 369458 316154 270547
GOR M/B
OPERATING COST $ 14400 14400 14400 14400 14400
OIL PRICES $/B
GAS PRICES $/M 3.00 3.00 3.00 3.00 3.00
INTANGIBLE INVES $ 480000
CAPITAL INVES $
TAXES
OIL SEVERANCE $/B
GAS SEVERANCE $/M .12 .12 .12 .12 .12
MISC TAXES $/B
NET VALUES
OIL/COND BBL
GAS MCF 212131 377765 323269 276635 236729
OIL/COND $
GAS $ 616937 1087963 931015 796709 681780
REVENUE TO NI $ 616937 1087963 931015 796709 681780
INTANGIBLE INVES $ 480000
CAPITAL INVES $
OPERATING COST $ 14460 14400 14400 14400 14400
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ -480000 598537 1673563 916615 782389 667380
CUMULATIVE INCOME $ -480000 116537 1190100 2106715 2889624 3556404
CUM. P WORTH @ 10.00 % $ -416056 54006 823054 1419979 1883125 2242313
- ------------------------------------------------------------------------------------------------------------------------------------
P WORTH @ 12.00% 3057298 P WORTH @ 14.00% 2728649 P WORTH @ 15.00% 2571361
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL OF
PERIOD ENDING 12-31-2004 12-31-2005 12-31-2006 12-31-2006+ 67.06 YRS
---------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
GROSS VALUES
OIL/COND
GAS 231518 198126 169540 970505 3200080
GOR
OPERATING COST 14400 14400 14400 316808 432000
OIL PRICES
GAS PRICES 3.00 3.00 3.00 3.00
INTANGIBLE INVES 406606
CAPITAL INVES
TAXES
OIL SEVERANCE
GAS SEVERANCE .12 .12 .12 .12
MISC TAXES
NET VALUES
OIL/COND
GAS 202578 173355 148348 149194 2800804
OIL/COND
GAS 583425 499282 427242 2445679 8064012
REVENUE TO NI 583425 499282 427242 2445679 8064012
INTANGIBLE INVES 480000
CAPITAL INVES
OPERATING COST 14400 14400 14400 316800 432098
- --------------------------------------------------------------------------------------------------------------------
NET INCOME 569025 484862 412842 2128879 7152012
CUMULATIVE INCOME 4125429 4610291 5023133 2128879 7152012
CUM. P WORTH @ 10.00 % 2520723 2736389 2903326 551571 3454897
- --------------------------------------------------------------------------------------------------------------------
P WORTH @ 20.00% 1970930 P WORTH @ 25.00% 1544712
- --------------------------------------------------------------------------------------------------------------------
REMARKS/BASIS OF RESERVE ESTIMATES.............................. STARTING PRICES & COSTS PROJECTIONS............................
Forecast assumes initial rates of 360 Mcf/D/Well Ultimate Gas: 3 $/M INITIAL RATE IS = 42000 M/M
Recovery of 600 MMF/Well & operating costs of $300/well/month. Oil: 0 $/B (1) CPD @ 14.42 %/YR TO ELG AT 3200 MMF
$3.50/Mcf adj less $0.50/Mcf for gathering & compression charge. Operating Cost: 1260 $/M (2)
(3)
NUMBER OF WELL(S) = 4 GAS (4)
ECONOMIC LIMIT = 674.8 M/M (5)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COBURN PETROLEUM ENGINEERING / PETROLEUM ENGINEERS / TULSA, OKLAHOMA
TENGASCO INC. AS OF DECEMBER 31, 1996 UNESC. CASE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Offse Franklin #1 Fentress fld7 (1) NI 100 % NI 81.25 % LIMIT
Tengasco Wells Creek/Knox (2) NI % NI % LIMIT
- - DEPTH 2000 FT (3) NI % NI % LIMIT
Fentress COUNTY Tennessee (4) NI % NI % LIMIT
LEASE NO: 2 PUD API NO. 41-049-xxxxx ARC/OTC NO. --
<CAPTION>
* RESERVE ESTIMATES AND PREDICTED CASH FLOW * BEFORE FEDERAL INCOME TAX *
- ------------------------------------------- ------------------------------------------------ -------------------------------
<S> <C> <C> <C> <C> <C>
CUMULATIVE: OIL = 0 BBL, GAS = 0 MCF *** ULTIMATE: OIL = 125000 BBL, GAS = 0 MCF *** FUTURE NET INCOME= $ 1601734
- ------------------------------------------- ------------------------------------------------ -------------------------------
FIRST PERIOD STARTS 07-1-1998 DELAY IS = 18 months (From as of date)
<CAPTION>
PERIOD ENDING 12-31-1997 12-31-1998 12-31-1999 12-31-2000 12-31-2001 12-31-2002 12-31-2003
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
GROSS VALUES UNITS
OIL/COND BBL 13616 23022 18363 14648 11684 9320
GAS MCF
GOR M/B
OPERATING COST $ 8400 8400 8400 8400 8400 8400
OIL PRICES $/B 19.10 19.10 19.10 19.10 19.10 19.10
GAS PRICES $/M
INTANGIBLE INVES $ 120000
CAPITAL INVES $
TAXES
OIL SEVERANCE $/B .57 .57 .57 .57 .57 .57
GAS SEVERANCE $/M
MISC TAXES $/B
NET VALUES
OIL/COND BBL 11063 18705 14928 11902 9493 7573
GAS MCF
OIL/COND $ 204997 346604 276460 220544 175905 140328
GAS $
REVENUE TO NI $ 204997 346604 276460 220544 175905 140328
INTANGIBLE INVES $ 120000
CAPITAL INVES $
OPERATING COST $ 8400 8400 8400 8400 8400 8400
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 76597 338204 268068 212144 167505 131928
CUMULATIVE INCOME $ 76597 414801 682869 895013 1002518 1194446
CUM. P WORTH @ 10.00 % $ 60393 332896 524924 663078 762245 883249
- ------------------------------------------------------------------------------------------------------------------------------------
P WORTH @ 12.00% 917700 P WORTH @ 14.00% 848263 P WORTH @ 15.00% 816536
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL OF
PERIOD ENDING 12-31-2004 12-31-2005 12-31-2006 12-31-2006+ 67.06 YRS
---------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
GROSS VALUES
OIL/COND 7434 5930 4730 16253 125808
GAS
GOR
OPERATING COST 8400 8400 8400 84668 160268
OIL PRICES 19.10 19.10 19.10 19.10
GAS PRICES
INTANGIBLE INVES 120000
CAPITAL INVES
TAXES
OIL SEVERANCE .57 .57 .57 .57
GAS SEVERANCE
MISC TAXES
NET VALUES
OIL/COND 6040 4818 3843 13288 101565
GAS
OIL/COND 111921 89278 71211 244746 1882002
GAS
REVENUE TO NI 111921 89278 71211 244746 1882002
INTANGIBLE INVES 120000
CAPITAL INVES
OPERATING COST 8400 8400 8400 84600 168260
- --------------------------------------------------------------------------------------------------------------------
NET INCOME 103521 80878 62811 160678 1601734
CUMULATIVE INCOME 1297967 1378845 1441656 160678 1601734
CUM. P WORTH @ 10.00 % 883988 919874 945272 51008 996280
- --------------------------------------------------------------------------------------------------------------------
P WORTH @ 20.00% 682274 P WORTH @ 25.00% 579244
- --------------------------------------------------------------------------------------------------------------------
REMARKS/BASIS OF RESERVE ESTIMATES................ STARTING PRICES & COSTS PROJECTIONS...........................
Reserve is based on analogy Franklin $1Np > 100 MB Gas 0 $/M INITIAL RATE IS = 2400 B/M
Oil: 19.1 $/B (1) CPD @ 20.23 %/YR TO ELG AT 125 WBF
Operating Cost: 708 $/M (2)
(3)
NUMBER OF WELL(S) = 1 Oil (4)
ECONOMIC LIMIT = 36.0 B/M (5)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COBURN PETROLEUM ENGINEERING / PETROLEUM ENGINEERS / TULSA, OKLAHOMA
TENGASCO INC. AS OF DECEMBER 31, 1996 UNESC. CASE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 Knox Dribling Prg Swan Creek (1) NI 100 % N1 87.5 % LIMIT
Tengasco Knox Formation (2) NI % N1 % LIMIT
S-1S-75E 4500 ft (3) NI % N1 % LIMIT
Hancock COUNTY Tennessee (4) NI % N1 % LIMIT
LEASE NO : 3 PUD API NO. 41-067- xxxxx ARC/OTC NO. --
<CAPTION>
* RESERVE ESTIMATES AND PREDICTED CASH FLOW * BEFORE FEDERAL INCOME TAX *
- ------------------------------------------- ------------------------------------------------ -------------------------------
<S> <C> <C> <C> <C> <C>
CUMULATIVE: OIL = 0 BBL, GAS = 0 MCF *** ULTIMATE: OIL = 0 BBL, GAS = 9600000 MCF *** FUTURE NET INCOME = $ 27736933
- ------------------------------------------- ------------------------------------------------ -------------------------------
FIRST PERIOD STARTS 12-31-1997 DELAY IS = 12 months (From as of date)
<CAPTION>
PERIOD ENDING 12-31-1997 12-31-1998 12-31-1999 12-31-2000 12-31-2001 12-31-2002 12-31-2003
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GROSS VALUES UNITS
OIL/COND BBL
GAS MCF 1741181 1427248 1169917 958982 786078 644349
GOR M/B
OPERATING COST $ 38400 30400 38400 38400 38400 38400
OIL PRICES $/B
GAS PRICES $/M 3.86 3.86 3.86 3.86 3.86 3.86
INTANGIBLE INVES $ 1250000
CAPITAL INVES $ 1400000
TAXES
OIL SEVERANCE $/B
GAS SEVERANCE $/M .12 .12 .12 .12 .12 .12
MISC TAXES $/B
NET VALUES
OIL/COND GBL
GAS MCF 1523533 1248042 1023677 839109 687818 563805
OIL/COND $
GAS $ 5698013 4670669 3628552 3138268 2572439 2108631
REVENDUE TO NI $ 5698013 4670669 3628552 3138268 2572439 2108631
INTAGIBLE INVES $ 1250000
CAPITAL INVES $ 1400000
OPERATING COST $ 38400 38400 38400 38400 38400 38400
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ -2650000 5659613 4632269 3790152 3099868 2534039 2676231
CUMULATIVE INCOME $ -2650000 3009613 7641882 11432034 14531902 17065941 19136172
CUM. P WORTH AT 10.00% $ -2526676 2378967 6029148 8744226 18762946 12263104 13377369
- ------------------------------------------------------------------------------------------------------------------------------------
P WORTH AT 12.00% 15131640 P WORTH AT 14.00% 13927847 P WORTH AT 15.00% 13379930
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL OF
PERIOD ENDING 12-31-2004 12-31-2005 12-31-2006 12-31-2006+ 26.00 YRS
---------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
GROSS VALUES
OIL/COND
GAS 528174 432944 354885 1556242 9600000
GOR
OPERATING COST 38400 38400 38400 683465 1029065
OIL PRICES
GAS PRICES 3.86 3.86 3.86 3.86
INTANGIBLE INVES 1250000
CAPITAL INVES 1400000
TAXES
OIL SEVERANCE
GAS SEVERANCE .12 .12 .12 .12
MISC TAXES
NET VALUES
OIL/COND
GAS 462152 378026 310524 1361714 8406000
OIL/COND
GAS 1728448 1416809 1161360 5092809 31415990
REVENDUE TO NI 1728448 1416809 1161360 5092809 31415990
INTAGIBLE INVES 1250000
CAPITAL INVES 1400000
OPERATING COST 38460 38400 38400 683465 1629065
- ---------------------------------------------------------------------------------------------------------------------
NET INCOME 1690048 1378409 1122960 4409344 27736933
CUMULATIVE INCOME 20626220 22204629 23327589 4409344 27736933
CUM. P WORTH AT 10.00% 14264271 14817384 15271465 1236747 16508212
- ---------------------------------------------------------------------------------------------------------------------
P WORTH AT 20.00% 11083749 P WORTH AT 25.00% 9336507
- ---------------------------------------------------------------------------------------------------------------------
REMARKS / BASIS OF RESERVE ESTIMATES . . . . . . . . . . . . STARTING PRICES & COSTS PROJECTIONS . . . . . . . . . . . . . .
Reserve estimate 1200 MMcf/w - analogy with completed wells Gas: 3.66 $/m INITIAL RATE IS = 100000 M/M
8 GW w/ gathering line + 2 dn per program Oil: 8 $/m (1)CPD AT 18.82 $/YR TO ELG AT 9600 MMF
Tangible: B(125+50) = 1400 MS Intangible: 10(125)= 1250 MS Operating Cost: 3200 $/m (2)
Gas price $4.26/Mcf (w/Btu adj) less $6.40/mcf Pipeline (3)
Gathering Charge NUMBER OF WELL(S) = 8 Gas (4)
ECONOMIC LIMIT = 776.6 M/M (5)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COBURN PETROLEUM ENGINEERING / PETROLEUM ENGINEERS / TULSA, OKLAHOMA
TENGASCO INC. AS OF DECEMBER 31, 1996 UNESC. CASE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998 Knox Drilling Prg Swan Creek (1) WI 108 % N1 87.5 % LIMIT
Tengasco Knox Formation (2) WI % N1 % LIMIT
S-1S-75E 4500 ft (3) WI % N1 % LIMIT
Hancock COUNTY Tennessee (4) WI % N1 % LIMIT
LEASE NO : 4 PUD API NO. 41-067- xxxxx ARC/OTC NO. --
<CAPTION>
* RESERVE ESTIMATES AND PREDICTED CASH FLOW * BEFORE FEDERAL INCOME TAX *
- ------------------------------------------- ------------------------------------------------ -------------------------------
<S> <C> <C> <C> <C> <C>
CUMULATIVE: OIL = 0 BBL, GAS = 0 MCF *** ULTIMATE: OIL = 0 GBL, GAS = 4806900 MCF *** FUTURE NET INCOME = $ 13858873
- ------------------------------------------- ------------------------------------------------ -------------------------------
FIRST PERIOD STARTS 07-1-1996 DELAY IS = 18 months (From as of date)
<CAPTION>
PERIOD ENDING 12-31-1997 12-31-1998 12-31-1999 12-31-2000 12-31-2001 12-31-2002 12-31-2003
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GROSS VALUES UNITS
OIL/COND BBL
GAS MCF 456913 768210 646096 529606 434116 355647
GDR M/B
OPERATING COST $ 19200 19200 19200 19200 19200 19200
OIL PRICES $/B
GAS PRICES $/M 3.86 3.86 3.86 3.86 3.86 3.86
INTANGIBLE INVES $ 625000
CAPITAL INVES $ 700000
TAXES
OIL SEVERANCE $/B
GAS SEVERANCE $/M .12 .12 .12 .12 .12 .12
MISC TAXES $/B
NET VALUES
OIL/COND BBL
GAS MCF 399799 689684 565334 463405 379853 311366
OIL/COND $
GAS $ 1495246 2579416 2114349 1733135 1420650 1164509
REVENUE TO NI $ 1495246 2579416 2114349 1733135 1420650 1164509
INTAGIBLE INVES $ 625000
CAPITAL INVES $ 700000
OPERATING COST $ 19200 19200 19200 19200 19200 19200
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 151048 2500218 2695149 1713935 1461450 1145389
CUMULATIVE INCOME $ 151048 2711206 4800415 6520350 7921600 9067169
CUM. P WORTH AT 10.00% $ 136926 2148341 3649202 4765364 5595058 6211469
- ------------------------------------------------------------------------------------------------------------------------------------
P WORTH AT 12.00% 7243366 P WORTH AT 14.00% 6629682 P WORTH AT 15.00% 6352531
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL OF
PERIOD ENDING 12-31-2004 12-31-2005 12-31-2006 12-31-2006+ 25.50 YRS
---------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
GROSS VALUES
OIL/COND
GAS 291686 239697 195986 862437 4800000
GDR
OPERATING COST 19200 19200 19200 351332 524132
OIL PRICES
GAS PRICES 3.86 3.86 3.86 3.86
INTANGIBLE INVES 625000
CAPITAL INVES 700000
TAXES
OIL SEVERANCE
GAS SEVERANCE .12 .12 .12 .12
MISC TAXES
NET VALUES
OIL/COND
GAS 255227 209210 171490 754633 4200001
OIL/COND
GAS 954549 762445 641373 2822329 15700005
REVENUE TO NI 954549 762445 641373 2822329 15700005
INTAGIBLE INVES 625000
CAPITAL INVES 700000
OPERATING COST 19200 19200 19200 351332 524132
- ---------------------------------------------------------------------------------------------------------------------
NET INCOME 935340 763246 622173 2470997 13856873
CUMULATIVE INCOME 10002458 10765703 11387870 2470997 13856873
CUM. P WORTH AT 10.00% 6869114 7000603 7260160 689761 7949946
- ---------------------------------------------------------------------------------------------------------------------
P WORTH AT 20.00% 5201856 P WORTH AT 25.00% 4342464
- ---------------------------------------------------------------------------------------------------------------------
REMARKS / BASIS OF RESERVE ESTIMATES . . . . . . . . . . . . STARTING PRICES & COSTS PROJECTIONS . . . . . . . . . . . . . .
Reserve estimate 1200 MMcf/w - analogy with completed wells Gas: 3.66 $/m INITIAL RATE IS = 00000 M/M
4 GW w/ gathering line +1 DH per program Oil: 0 $/m (1)CPD AT 18.82 $/YR TO ELG AT 9600 MMF
Tangible: 4(125+50) = 700 MS Intangible: 5(125)= 625 MS Operating Cost: 1600 $/m (2)
Gas price $4.26/Mcf (w/Btu adj) less $0.40/Ncf Pipeline (3)
Gathering Charge NUMBER OF WELL(S) = 4 Gas (4)
ECONOMIC LIMIT = 388.3 M/M (5)
</TABLE>
