BUFFALO CAPITAL V, LTD.
7331 S. Meadow Court
Boulder, CO 80303
December ___, 1998
Dear Shareholder:
On behalf of the Board of Directors, I cordially invite you to
attend a Special Meeting of Shareholders of Buffalo Capital V, Ltd.
("Buffalo") to be held at ___ a.m. local time on December ___, 1998,
at 4750 Table Mesa Drive, Boulder, CO 80303.
At the Special Meeting, you are being asked to consider and
vote upon two matters which are: (i) a 1:2 reverse stock split of all of
the Company's issued and outstanding common stock, and (ii) the
proposed merger between Buffalo and Aladdin Oil Corporation, a
Nevada corporation ("Aladdin"), pursuant to the terms of an
Agreement and Plan of Merger and Reorganization dated November
23, 1998 (the "Agreement").
You are urged to vote your proxy even if you currently plan to
attend the Special Meeting. Please remember to sign and date the
proxy card; otherwise, it is invalid. Returning your proxy will not
prevent you from voting in person, but will assure that your vote is
counted if you are unable to attend the meeting. Please return your
proxy as soon as possible.
Sincerely,
Grant W. Peck
President<PAGE>
BUFFALO CAPITAL V, LTD.
7331 S. Meadow Court
Boulder, CO 80303
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
to be held December ____, 1998
TO THE SHAREHOLDERS OF BUFFALO CAPITAL V, LTD.:
NOTICE IS HEREBY GIVEN that a Special Meeting of the
Shareholders (the "Meeting") of Buffalo Capital V, Ltd. ("Buffalo")
will be held at 4750 Table Mesa Drive, Boulder, Colorado, 80303, at
9:00 a.m. local time, on December ___, 1998, for the following
purpose:
1. To consider and vote upon a proposed 1:2 reverse split
of Buffalo's issued and outstanding common stock.
2. To consider and vote upon a proposed merger of
Buffalo with Aladdin Oil Corporation, a Nevada corporation, pursuant
to the terms of an Agreement and Plan of Merger and Reorganization
dated November 23, 1998, between Buffalo and Aladdin Oil
Corporation ("Aladdin").
3. To transact such other business as may properly come
before the Meeting and at any and all adjournments, postponements or
continuations thereof.
You are cordially invited and urged to attend the Meeting. All
shareholders, whether or not they expect to attend the Meeting in
person, are requested to complete, date and sign the enclosed form of
proxy and return it as soon as possible in the postage paid,
return-addressed envelope provided for that purpose. Shareholders
who attend the Meeting may revoke a prior proxy and vote their
proxy in person as set forth in the Proxy Statement.
Shareholders are or may be entitled to assert dissenters' rights
under Article 113 of the Colorado Business Corporation Act with
respect to the proposed merger transaction, and a copy of Article 113
of the Colorado Business Corporation Act is included as Appendix A
to the accompanying Proxy Statement.
THE ENCLOSED PROXY IS BEING SOLICITED BY THE BOARD
OF DIRECTORS OF BUFFALO. THE BOARD OF DIRECTORS
RECOMMENDS THAT YOU VOTE IN FAVOR OF THE
PROPOSALS. YOUR VOTE IS IMPORTANT.
By Order of the Board of Directors
Grant W. Peck
Chairman of the Board
Boulder, Colorado
Dated: December ____, 1998<PAGE>
BUFFALO CAPITAL V, LTD.
7331 S. Meadow Court
Boulder, CO 80303
_________________
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
To be held December ___, 1998
__________________
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the
solicitation of proxies by and on behalf of the Board of Directors (the
"Board") of Buffalo Capital V, Ltd. ("Buffalo"), for use at the Special
Meeting of Shareholders of Buffalo to be held at 4750 Table Mesa
Drive, Boulder, Colorado 80303, at 9:00 a.m. local time, and at any
and all postponements, continuations or adjournments thereof
(collectively the "Meeting"). This Proxy Statement, the
accompanying form of proxy (the "Proxy") and the Notice of Special
Meeting will be first mailed or given to Buffalo's shareholders on or
about December ____, 1998.
All shares of Buffalo's common stock ("Common Stock"),
represented by properly executed and valid Proxies received in time
for the Meeting will be voted at the Meeting in accordance with the
instructions marked thereon or otherwise as provided therein, unless
such Proxies have previously been revoked. Unless instructions to the
contrary are marked, or if no instructions are specified, shares
represented by the Proxies will be voted "FOR" the proposals set
forth in the Proxy, and in the discretion of the persons named as
proxies, on such other matters as may properly come before the
Meeting. Any Proxy may be revoked at any time prior to the
exercise thereof by submitting another Proxy bearing a later date and
depositing it with the Secretary of Buffalo or by giving written notice
of revocation to Buffalo at the address indicated above or by voting in
person at the Meeting. Any notice of revocation sent to Buffalo must
include the shareholder's name and must be received prior to the
Meeting to be effective.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Description Page
<S> <C>
Summary 6
Proposal I - Reverse Stock Split 13
Proposal II - Merger Transaction 17
Disclosure Regarding Forward-Looking
Statement 22
Risk Factors 23
Business and Properties of Buffalo 34
Business and Properties of Aladdin 37
Selected Financial Information
of Buffalo 41
Buffalo Management's Discussion and
Analysis of Financial Condition and
Results of Operations 42
Selected Historical Financial Data
of Old Aladdin 44
Aladdin Management's Discussion and
Analysis of Financial Condition and
Results of Operations 45
Market Price of Buffalo Stock 49
Management of New Aladdin After
the Effective Date 49
Ownership of Capital Stock 54
Description of New Aladdin
Common Stock 56
Preferred Stock 57
Rights of Dissenting Shareholders 59
Other Matters 60
Shareholder Proposals 60
Notice to Banks, Broker-Dealers,
and Voting Trustees and their Nominees 60
Appendix A - Dissenters' Rights Statute
Appendix B - Agreement and Plan of Merger
and Reorganization
Appendix C - Amended and Restated Articles of
Incorporation and
Bylaws of Aladdin Oil Corporation
Appendix D - Audited Financial Statements
of Old Aladdin
/TABLE
<PAGE>
SUMMARY
The following is a brief summary of certain information
contained elsewhere in this Proxy Statement and the appendices
hereto. This summary does not contain a complete statement of all
material information relating to the Agreement and Plan of Merger
and Reorganization, dated November 23, 1998 (the "Agreement"),
and the transactions contemplated thereby, and is subject to and
qualified in its entirety by reference to the more detailed information
and financial statements contained elsewhere in this Proxy Statement,
including the appendices. Certain capitalized terms used in this
summary are defined elsewhere in this Proxy Statement.
Parties to the Transactions
Buffalo Capital V, Ltd.
Buffalo Capital V, Ltd. ("Buffalo") was incorporated under the
laws of the State of Colorado on September 19, 1997. It was
incorporated as a "blind pool" or "blank check" company for the
purpose of seeking to acquire one or more properties or businesses.
Buffalo elected to voluntarily file a registration statement in order to
become a reporting company under the Securities Exchange Act of
1934, as amended (the "34 Act"). The principal executive offices of
Buffalo are located at 7331 South Meadow Court, Boulder Colorado
80303, and its telephone number is (303) 494-3000.
Aladdin Oil Corporation.
Aladdin Oil Corporation ("Old Aladdin") was incorporated
under the laws of the State of Nevada on January 17, 1997. It is an
independent oil and gas company engaged in the acquisition and
exploration of oil and gas within the United States. The principal
executive offices of Old Aladdin are located at 11911 San Vicente
Boulevard, Suite 385, Los Angeles, California, 90049, and its
telephone number is (310) 440-4471.
New Aladdin.
Upon the Effective Date of the merger, Old Aladdin will be
merged with and into Buffalo, and Buffalo will change its name to
Aladdin Oil Corporation ("New Aladdin"). New Aladdin will be a
Colorado corporation, will be a reporting company under the 34 Act,
and will carry on the business activities previously conducted by Old
Aladdin. Old Aladdin will cease to exist. The principal executive
offices of New Aladdin will be located at 11911 San Vicente
Boulevard, Suite 385, Los Angeles, California, 90049, and its
telephone number will be (310) 440-4471.
Description of Meeting
General.
A Special Meeting of the shareholders of Buffalo will be held
at 9:00 a.m. local time on December ___ , 1998, at 4750 Table Mesa
Drive, Boulder, CO 80303. The purpose of the Special Meeting will
be to consider and vote upon the proposed 1:2 reverse stock split of
the issued and outstanding common stock of Buffalo, and to consider
and vote upon the proposed merger between Buffalo and Old Aladdin
pursuant to the terms of an Agreement and Plan of Merger and
Reorganization dated November 23, 1998 (the "Agreement").
Voting.
Only holders of record of Buffalo shares at the close of
business on November 30, 1998 ("Record Date") will be entitled to
receive notice of and to vote at the Meeting. On the Record Date
there were 4,620,000 shares of Common Stock outstanding, each of
which will be entitled to one vote on each matter properly submitted
for vote to Buffalo's shareholders at the Meeting.
The presence in person or by proxy of holders of a minimum
one-third of the shares will be required to constitute a quorum for the
transaction of business at the Meeting. Approval of the proposed
reverse stock split will require the affirmative vote of a majority of a
quorum of the outstanding shares represented in person or by proxy at
the special shareholders meeting. In addition, the affirmative vote of
a majority of the Shares will be required to approve the proposed
merger of Buffalo with Old Aladdin.
Votes cast by proxy will be tabulated by Dean F. Sessions,
Secretary of Buffalo, or by a duly appointed assistant secretary.
Votes cast by proxy or in person at the Meeting will be counted by
the person or persons appointed by Buffalo to act as the judge of
election for the Meeting. Abstentions, broker non-votes and shares
for which authority to vote on any proposal is withheld, will all be
included in the determination of the number of shares present and
voting at the Meeting for purposes of obtaining a quorum, but will not
be counted for purposes of determining whether a proposal has been
approved.
Securities Ownership of Directors, Executive Officers and Affiliates
Buffalo.
As of the record date for the Special Meeting of the directors
and officers (and their affiliates), Buffalo held voting power with
respect to an aggregate of 4,360,000 votes (approximately 94.37% of
the outstanding votes). Each of the directors, executive officers and
affiliates of Buffalo has advised Buffalo that he intends to vote or to
direct the vote of all shares of Buffalo Common Stock over which he
has voting control in favor of the proposed 1:2 reverse stock split and
in favor of completion of the proposed merger with Old Aladdin
pursuant to the terms of the Agreement. Accordingly, Buffalo
anticipates that both proposals will be affirmed by the requisite vote.
Description of the Transactions
Reverse Stock Split and Cancellation of Shares
Pursuant to the Agreement between Buffalo and Old Aladdin
dated November 23, 1998, Buffalo will have a total of 406,099
shares of common stock issued and outstanding immediately prior to
completion of the merger transaction. In order to reduce Buffalo's
issued and outstanding common stock from 4,620,000 shares to
406,099 shares, a two-step process is proposed. First, the Board of
Directors has proposed a 1:2 reverse split of Buffalo's currently
issued and outstanding common stock. Second, contingent upon
approval of the proposed reverse stock split and the proposed merger
transaction, certain shareholders of Buffalo, including its officers,
directors and affiliates, have agreed to voluntarily surrender for
cancellation a total of 1,903,901 of their remaining shares of common
stock. Following completion of the specified two-step process,
Buffalo will have a total of 406,099 shares issued and outstanding.
Merger.
The proposed transaction between Buffalo and Old Aladdin
will be structured as a merger of the two entities (the "Merger"). Old
Aladdin will be merged with and into Buffalo pursuant to the laws of
the States of Nevada and Colorado. The surviving entity will be New
Aladdin. For federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended.
If completed, the Merger will result in an effective change of
control of Buffalo, with current shareholders of Old Aladdin owning
3,718,320 shares of common stock, or approximately 90.15% of the
shares to be issued and outstanding immediately following completion
of the Merger, and with the current shareholders of Buffalo owning
406,099 shares, or approximately 9.85% of the shares to be issued
and outstanding immediately following completion of the Merger.
The entity surviving following completion of the Merger is referred to
herein as "New Aladdin".
As part of the Agreement, all currently outstanding Class A
and Class B Warrants of Buffalo will be cancelled, and Buffalo will
issue a total of 3,718,320 shares of authorized but previously unissued
common stock to the current shareholders of Old Aladdin. In
addition, Buffalo will authorize the issuance of 1,677,000 shares of a
new Series A Convertible Preferred Stock, 1,088,500 new Class A
Warrants, 1,688,000 new Class B Warrants, and 417.6 Units, each of
which consists of a 12% Convertible Debenture in the face amount of
$1,000, 625 Class A Warrants and 625 Class B Warrants, and will
issue such securities on a one-for-one basis to existing holders of like
securities of Old Aladdin.
Series A Convertible Preferred Stock.
Holders of Series A Preferred Stock of New Aladdin will be
entitled to received cash dividends of $0.09 (12%) per annum. The
shares will have a liquidation preference of $0.75 per share. Holders
of Series A Preferred stock will not be entitled to cash dividends after
June 30, 1999. Each holder of Series A Preferred Stock will have the
right at any time to convert such shares into a number of shares of
New Aladdin common stock obtained by dividing the liquidation
preference per share ($0.75) by the "conversion price" per share.
The conversion price will be equal to $0.75 per share. For instance,
each share of Preferred A is convertible into 1 share ($0.75 divided
by $0.75) of common stock of New Aladdin or an aggregate amount
of 1,677,000 shares if every share of Preferred A was converted.
Class A and Class B Warrants.
Holders of Class A Warrants of New Aladdin will be entitled
to purchase one share of New Aladdin common stock at a price of
$1.50 per share until December 31, 1999. Holders of Class B
Warrants will be entitled to purchase one share of New Aladdin
common stock at a price of $1.00 per share until December 31, 1999.
A total of 1,088,500 shares of New Aladdin common stock would be
issued if every Class A Warrant was exercised, and New Aladdin
would receive gross cash proceeds of $1,632,750. A total of
1,688,000 shares of New Aladdin common stock would be issued if
every Class B Warrant was exercised, and New Aladdin would
receive gross cash proceeds of $1,688,000. Neither the Class A nor
the Class B Warrants will hold any of the rights of common stock,
including voting, until such time as they are converted and the
common shares are paid for.
Units.
The Units will consist of one 12% Convertible Debenture in
the face amount of $1,000, bearing interest at 12% per annum for the
first year of issuance only, and convertible at any time for 1.25 shares
of New Aladdin common stock for each $1.00 in face amount of such
Debenture, 625 Class A Warrants, as described above, and 625 Class
B Warrants, as described above.
Amendment of Articles of Incorporation and Change of Name.
Pursuant to the terms of the Agreement, Buffalo's Articles of
Incorporation will be amended to change the name of the Corporation
to Aladdin Oil Corporation and to make certain other minor
modifications at the time of closing of the Merger.
Board of Directors.
The closing of the Merger will result in a change of control of
Buffalo. In conjunction with the change of control, the existing
directors of Buffalo will resign and will appoint the current members
of the board of directors of Old Aladdin as members of the board of
directors of New Aladdin.
Background to the Transaction
Buffalo was incorporated under the laws of the State of
Colorado on September 19, 1997, as a blind pool or blank check
company for the purpose of seeking to acquire one or more properties
or businesses, and as of the date hereof, it remains in the
developmental stage. Its only activities to date have been
organizational ones, directed at developing its business plan and
raising its initial capital. Buffalo has not commenced any commercial
operations. Buffalo has no full-time employees and owns no real
estate.
In June of 1998, Buffalo received some preliminary
information in relation to Aladdin Oil Corporation ("Old Aladdin").
In conversations that ensued, Old Aladdin communicated its desire to
possibly enter into a form of business combination with Buffalo in
order to become a reporting company under the 34 Act. Further
information was exchanged, including Buffalo's most recent filing(s)
of periodical reports.
In late June, definitive discussions were held, and a Letter of
Intent was executed between Buffalo and Old Aladdin on June 30,
1998. Following execution of the Letter of Intent, Buffalo and Old
Aladdin continued further due diligence resulting in the execution of
the Agreement.
Buffalo believes that the proposed merger transaction with Old
Aladdin is consistent with its business plan. It is believed that Old
Aladdin has a sound business plan, a qualified management team, and
an opportunity to grow into a larger oil and gas exploration and
production company.
Recommendation of Buffalo Board
The Board of Directors of Buffalo has unanimously approved
and adopted the Agreement and unanimously recommends, that the
holders of Buffalo's Common Stock vote for adoption of the
Agreement and approval of the proposed Merger. See "Description
of Transactions".
Finders Fee
Buffalo has agreed to pay a finder's fee equal to $10,000, to
Cynthia Keefover, upon the closing of the Merger. Ms. Keefover
acted as a finder for Buffalo by initiating the preliminary contacts
with Old Aladdin which led to execution of the Agreement.
Risk Factors to be Considered in Connection with the Transactions
The information set forth under "Risk Factors" should be
considered by Buffalo's stockholders with respect to the proposed
Transactions. Specifically, such persons should be aware of the
following risks:
Investment-Specific Risks.
There has been no prior trading for New Aladdin's capital
stock and there can be no assurance as to the future trading prices of
such shares;
After the Effective Date, approximately 74% of the
outstanding shares of Common Stock will be owned by members of
the Robins family, which will enable the family to exercise substantial
influence over Buffalo's affairs; and
Buffalo does not expect to pay dividends on its Common Stock
after the Effective Date.
Industry-Specific Risks.
New Aladdin's operations will be substantially dependent upon
natural gas and oil prices and the economic and operating risks
associated with the oil and gas business;
New Aladdin's future results of operation will depend upon its
ability to develop additional reserves;
New Aladdin's business is subject to certain local, state and
federal regulations; and
New Aladdin operates in a highly competitive industry.
Conditions to the Consummation of the Transactions
Pursuant to the Agreement, Old Aladdin is obligated to
consummate the proposed Merger subject only to the following: the
accuracy of the representations and warranties given by Buffalo and
performance by Buffalo of its respective obligations under the
Agreement; the absence of any proceeding to prohibit the
consummation of the merger transaction; and, receipt of necessary
shareholder approval. The obligation of Buffalo to close the Merger
is subject to a number of matters, including the accuracy of the
representations and warranties of Old Aladdin and the performance by
Old Aladdin of its obligations under the Agreement, the approval by
Buffalo's stockholders of the proposed Merger and the absence of any
proceeding to prohibit the consummation of the Agreement.
Dissenter's Rights
Under Colorado law, dissenting shareholders of Buffalo will be
entitled to dissenters' rights if the proposed Merger is consummated.
Any shareholder who desires to exercise such dissenters' rights must
strictly comply with the requirements of Article 113 of the Colorado
Business Corporation Act, and failure to so comply may result in the
loss of such dissenters' rights. A copy of Article 113 of the Colorado
Business Corporation Act is attached hereto as Appendix A, and
shareholders are referred to Appendix A for a full statement of its
provisions.
Termination of Agreement
The Agreement may be terminated at any time prior to the
effective date of the Merger: (i) by mutual consent of the Boards of
Directors of Buffalo and Old Aladdin; (ii) by either party in the event
that a representation or warranty made by the other party is incorrect
or in the event the other party has breached the Agreement and
subsequently been unable to cure or otherwise resolve the breach; (iii)
by either party in the event that a condition to consummation of the
Merger has, in the good faith judgment of its Board of Directors,
become impractical to be fulfilled; (iv) by either party in the event of
entry of a permanent injunction or other court order preventing the
consummation of the Merger; or (v) by either party in the event that
the merger has not become effective by December 31, 1998, unless an
extension of such date has been agreed upon in writing.
Certain Federal Income Tax Consequences
It is the intention of the parties that the Merger qualify as a
statutory merger which is a tax-free reorganization within the meaning
of Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as
amended. In a merger transaction, the continuing entity absorbs the
corporate enterprise and steps into the shoes of the disappearing entity
by assuming or acquiring all of its assets and liabilities.
There are no specific restrictions or limitations on the nature
of the consideration which may be used in a statutory merger
transaction as long as the doctrine of continuity of interest is met.
Thus, the issuance of not-voting securities such as warrants and units,
will not cause the transaction to fail to qualify as a tax-free
reorganization. The continuity of interest requirement is satisfied in
the event that following completion of the transaction, there is
continuity at the corporate level through a continuation of the business
enterprise, and continuity at the ownership level through continued
participation by the existing group of security holders in ownership
and control of the entity.
The parties believe that the proposed Merger qualifies as a tax-
free reorganization within the meaning of Section 368(a)(1)(A) of the
Internal Revenue Code of 1986, as amended. Based upon that belief,
the individual security holders of Old Aladdin will not recognize any
gain or loss upon the exchange of their securities in Old Aladdin for
matching securities in New Aladdin. However, there is no assurance
that, upon audit, the Internal Revenue Service will agree with the
characterization of the transaction as a tax-free reorganization. In the
event the Internal Revenue Service determines that the Merger did not
qualify as a tax-free reorganization, the individual security holders of
Old Aladdin would be required to recognize gain or loss as a result of
completion of the Merger.
Regulatory Requirements
Buffalo is not aware of any federal or state regulatory
requirements which must be complied with, or any federal or state
regulatory approval which must be obtained in connection with the
proposed Merger, other than proxy solicitation requirements under
federal and state securities laws.
Market Prices and Listings
Buffalo Common Stock is currently approved for trading on
the OTC Electronic Bulletin Board under the symbol "BUFH,"
although no actual trading activity has occurred. Until such time as
New Aladdin qualifies for listing on an alternate exchange, the
Common Stock is expected to continue to trade on the OTC
Electronic Bulletin Board following completion of the Merger.
However, in conjunction with Buffalo's name change to Aladdin Oil
Corporation, it is anticipated that the trading symbol will also be
changed.
PROPOSAL I
REVERSE STOCK SPLIT
Background.
As of the date hereof, Buffalo has a total of 4,620,000 shares
of common stock issued and outstanding. Under the terms of the
Agreement, Buffalo is to have a total of only 406,099 shares of
common stock issued and outstanding immediately prior to
consummation of the Merger. Thus, in order to comply with the
terms of the Agreement, prior to completion of the Merger, the
number of issued and outstanding shares of common stock of Buffalo
must be reduced from 4,620,000 to 406,099. Buffalo proposes to
reach this figure through a two-step process, including a 1:2 reverse
stock split, and the voluntary surrender of shares by the certain
shareholders, as more fully discussed below.
The number of shares of Common Stock of Buffalo to be
outstanding immediately prior to completion of the Merger was based
upon arms length negotiations between Buffalo and Old Aladdin. The
negotiations resulted in an agreement that, in order to complete the
Merger, Buffalo would issue one share of its Common Stock for each
presently outstanding share of Common Stock of Old Aladdin, and
one share of Series A Preferred Stock for each presently outstanding
share of Series A Preferred Stock of Old Aladdin. The negotiations
also resulted in an agreement that the current shareholders of Buffalo
would own 7% of the issued and outstanding Common Stock of New
Aladdin on a fully diluted basis, following completion of the Merger.
For purposes of the Agreement, the term "fully diluted" is defined as
including all issued and outstanding common stock, as well as all
Common Stock which would be issued and outstanding if all of the
Series A Preferred Stock was converted to Common Stock in
accordance with its terms (i.e. on a one-for-one basis), but does not
include any shares to be outstanding upon exercise of any Class A or
Class B Warrants.
Based upon the foregoing, the Agreement provides that Buffalo
will issue 3,718,320 shares of its common stock and 1,677,000 shares
of its Series A Preferred Stock to the shareholders of Old Aladdin in
order to complete the Merger. In other words, on a fully diluted
basis, Buffalo will issue a total of 5,395,320 shares of its Common
Stock in order to complete the Merger, and those shares are to
represent 93% of the issued and outstanding common stock of New
Aladdin following completion of the Merger. The current
shareholders of Buffalo will own the remaining 7% of the issued and
outstanding common stock of New Aladdin, or a total of 406,099
shares.
Description of Proposal.
The plan proposed by Buffalo's Board of Directors for
purposes of reducing the number of issued and outstanding shares of
common stock includes completion of 1:2 reverse stock split of the
presently issued and outstanding Common Stock, and the voluntary
surrender of shares for cancellation by Buffalo's officers, directors,
affiliates and others.
In the event that the 1:2 reverse stock split is approved, the
number of issued and outstanding shares of Common Stock will be
reduced from 4,620,000 to 2,310,000. In order to further reduce the
issued and outstanding common stock from 2,310,000 shares to the
agreed upon number of 406,099 shares, the Board of Directors has
requested various shareholders, including Buffalo's officers, directors
and their affiliates, to voluntarily surrender a total of 1,903,901
additional shares for cancellation.
The decision made by Buffalo's Board of Directors to effect
the reduction in issued and outstanding shares partially through a
reverse stock split and partially through a voluntary cancellation of
shares by certain shareholders, was arbitrary and was not made as a
result of arm's length negotiation. In order to complete the required
reduction in the number of issued and outstanding shares solely
through means of a reverse stock split applicable to all shareholders
on a pro-rata basis, it would have been necessary to propose a reverse
stock split of approximately 1:11.38. Thus, although the decision to
accomplish the share reduction partially through a reverse stock split,
and partially through a voluntary cancellation of shares, was arbitrary,
the Board believes the decision is beneficial to shareholders other than
Buffalo's officers, directors and affiliates.
See "Ownership of Capital Stock" for additional information
regarding the ownership of shares by Buffalo's officers, directors and
affiliates, including the number of shares of Common Stock currently
beneficially owned by each such person (as adjusted to reflect
completion of the proposed 1:2 reverse stock split), the number of
shares of common stock which each such person has voluntarily
agreed to surrender following completion of the 1:2 reverse stock
split, and the number of shares of common stock of New Aladdin
which each such person will own following completion of the
proposed Merger.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE "FOR" PROPOSAL I TO APPROVE A
1:2 REVERSE SPLIT OF BUFFALO'S ISSUED AND
OUTSTANDING COMMON STOCK.
PROPOSAL II
MERGER TRANSACTION
DESCRIPTION OF THE MERGER TRANSACTION
Background
Buffalo was incorporated under the laws of the State of
Colorado on September 19, 1997. It was incorporated as a "blind
pool" or "blank check" company for the purpose of seeking to acquire
one or more properties or businesses, and as of the date hereof
remains in the developmental and promotional stages. To date
Buffalo's only activities have been organizational ones, directed at
developing its business plan and raising its initial capital. Buffalo has
no full-time employees, owns no real estate, and has not commenced
any commercial operations.
In June of 1998, Buffalo received some preliminary
information in relation to Old Aladdin. In conversations that ensued,
Old Aladdin communicated its desire to possibly enter into a form of
business combination with Buffalo. Further information was
exchanged, including Buffalo's most recent periodical report filing(s).
On June 30, 1998, a Letter of Intent relating to a business
combination transaction was executed between Buffalo and Old
Aladdin. Following execution of the Letter of Intent, Buffalo and Old
Aladdin continued further due diligence which ultimately resulted in
the execution of the Agreement on November 23, 1998.
The following is a summary of the Agreement and the
transactions contemplated thereby. A copy of the Agreement is
attached to this Proxy Statement as Appendix B and is incorporated
herein by reference.
Buffalo - Aladdin Merger.
Pursuant to the Agreement, the transaction will be structured
as a merger of the two entities. Old Aladdin will be merged with and
into Buffalo pursuant to the laws of the States of Nevada and
Colorado, and Buffalo will change its name to Aladdin Oil
Corporation ("New Aladdin"). For federal income tax purposes, it is
intended that the Merger shall qualify as a reorganization within the
meaning of Section 368(a)(1)(A) of the Internal Revenue Code of
1986, as amended.
If completed, the Merger will result in an effective change of
control, with current shareholders of Buffalo owning 7% of the issued
and outstanding Common Stock of New Aladdin on a fully diluted
basis, and with the current shareholders of Old Aladdin owning
approximately 93% of the issued and outstanding Common Stock of
New Aladdin on a fully diluted basis.
As part of the Agreement, Buffalo will cancel its existing
outstanding Class A and Class B Warrants, will issue shares of
Common Stock, and will create and issue Series A Convertible
Preferred Stock, stock purchase warrants, and units consisting of
convertible debentures and stock purchase warrants, to existing
holders of like securities of Old Aladdin on a one-for-one basis. As a
result, Buffalo will issue 3,718,320 shares of Common Stock,
1,677,000 shares of Series A Convertible Preferred Stock, 1,088,500
Class A, $1.50 Stock Purchase Warrants, 1,688,000 Class B, $1.00
Stock Purchase Warrants, and 417.6 Units, each of which consists of
a 12% convertible debenture in the face amount of $1,000, 625 Class
A Warrants and 625 Class B Warrants. The current shareholders of
Buffalo will retain ownership of 406,099 shares of Common Stock of
New Aladdin.
Series A Convertible Preferred Stock.
Holders of Series A Preferred Stock of New Aladdin will be
entitled to received cash dividends of $0.09 (12%) per annum. The
shares will have liquidation preference of $0.75 per share. Holders of
Series A Preferred stock will not be entitled to cash dividends after
June 30, 1999. In conjunction with completion of the Merger,
Buffalo will issue 1,677,000 shares of Series A Preferred Stock on a
one-for-one exchange basis with current holders of Series A Preferred
Stock of Old Aladdin. Each holder of Series A Preferred Stock will
have the right at any time to convert such shares into shares of New
Aladdin Common Stock on a one-for-one basis. Thus, if fully
converted, the Series A Preferred Stock is convertible into 1,677,000
shares of Common Stock.
New Class A Warrants.
The Class A Warrants of New Aladdin will give the holders
thereof the right to purchase one share of New Aladdin Common
Stock at a price of $1.50 per share at any time on or before December
31, 1999. Class A Warrants will not give the holders thereof any
rights as shareholders of New Aladdin until such time as they are
exercised. In conjunction with completion of the Merger, Buffalo will
issue 1,088,500 Class A stock purchase warrants on a one-for-one
exchange basis with current holders of Class A Warrants of Old
Aladdin. Thus, a total of 1,088,500 shares of New Aladdin Common
Stock would be issued if every Class A Warrant is exercised resulting
in gross proceeds of $1,632,750 to New Aladdin.
New Class B Warrants.
The Class B Warrants of New Aladdin will give the holders
thereof the right to purchase one share of New Aladdin Common
Stock at a price of $1.00 per share at any time on or before December
31, 1999. Class B Warrants will not give the holders thereof any
rights as shareholders of New Aladdin until such time as they are
exercised. In conjunction with completion of the Merger, Buffalo will
issue 1,688,000 Class B stock purchase warrants on a one-for-one
exchange basis with current holders of Class B Warrants of Old
Aladdin. Thus, a total of 1,688,000 shares of New Aladdin Common
Stock would be issued if every Class B Warrant is exercised resulting
in gross proceeds of $1,688,000 to New Aladdin.
Units.
The Units will consist of one 12% Convertible Debenture of
New Aladdin in the principal amount of $1,000, bearing interest at
the rate of 12% per annum for one year from the original issuance
date of each Unit, 625 Class A Warrants for purchase of one share of
New Aladdin Common Stock at a price of $1.50 per share at any time
on or before December 31, 1999, and 625 Class B Warrants for
purchase of one share of New Aladdin at a price of $1.00 per share at
any time on or before December 31, 1999. Interest on the
Convertible Debentures is payable monthly, and such Debentures are
convertible at any time on the basis of 1.25 shares of common stock
for each $1.00 in face amount. In conjunction with completion of the
Merger, Buffalo will issue 417.6 Units, on a one-for-one exchange
basis with current holders of Old Aladdin Units. A total of 522,000
shares of New Aladdin Common Stock would be issued upon
conversion of all outstanding debentures, and a total of 522,000 shares
of New Aladdin Common Stock would be issued if every Class A and
Class B warrant issued as a part of the Units is exercised, resulting in
gross proceeds of $652,500 to New Aladdin.
Change of Name.
As part of the Agreement, Buffalo will change its name to
Aladdin Oil Corporation at the time of closing.
Board of Directors.
A change in control of Buffalo will occur as a result of
completion of the Merger. In conjunction with such change in
control, the existing directors of Buffalo have agreed to resign and to
appoint the current members of the board of directors of Old Aladdin
as their successors.
Sale and Cancellation of Existing Class A and Class B Warrants.
As part of the Agreement, Old Aladdin will purchase all of the
issued and outstanding Class A and Class B Warrants of Buffalo from
the current holders thereof for a purchase price of $125,000 prior to
consummation of the Merger. In conjunction with consummation of
the Merger, Buffalo will cause such existing warrants to be cancelled.
Articles of Incorporation and Bylaws.
The articles of incorporation and the bylaws of Buffalo,
amended in the manner specified herein, shall be the articles of
incorporation and the bylaws of New Aladdin following the date of
closing of the Merger. A vote in favor of the Merger will be
considered your assent to the amendment of the Buffalo Articles of
Incorporation and Bylaws, as set forth in Appendix C. The
substantive changes to these documents are as follows: First, the
name has been changed to Aladdin Oil Corporation. Second, they
have been modified to clarify that cumulative voting is not allowed on
any matter. Third, the number of shareholders required to constitute
a quorum has been increased from one-third to the holders of at least
a majority of the shares entitled to vote. The effect of this change is
that holders of at least 50.1% of the shares entitled to vote on a
particular matter must be present, in person or by proxy, in order to
act on that matter. Fourth, the number of directors has been changed
to be no less than two and no more than seven.
Representations and Warranties.
Under the terms of the Agreement, Old Aladdin makes a
number of representations and warranties to and for the benefit of
New Aladdin. Such representations and warranties are consistent with
those normally given in transactions involving oil and gas assets and
include representations to the effect that Old Aladdin has clear title to
all of its assets, that there are no undisclosed liabilities and no
undisclosed litigation or claims that adversely affect such assets, that
Old Aladdin has materially complied with the leases, contracts and
governmental regulations affecting its assets, and that Old Aladdin has
the power and authority to enter into the Agreement.
Conditions to Old Aladdin's Obligation to Close.
Pursuant to the Agreement, Old Aladdin is obligated to close
and to consummate the transactions described therein, subject only to
the following: the accuracy of the representations and warranties
given by Buffalo and performance by Buffalo of its obligations under
the Agreement, the absence of any proceeding to prohibit the
consummation of such transactions, and necessary shareholder
approval by the shareholders of Old Aladdin and by the shareholders
of Buffalo.
Conditions to Buffalo's Obligations to Close.
Pursuant to the Agreement, Buffalo is obligated to close and to
consummate the transactions described therein, subject only to the
following: the accuracy of the representations and warranties of Old
Aladdin and performance by Old Aladdin of its obligations under the
Agreement, the absence of any proceeding to prohibit the
consummation of such transactions, and necessary shareholder
approval by the shareholders of Buffalo and the shareholders of Old
Aladdin.
Termination.
The Agreement may be terminated at any time prior to its
Effective Date (i) by mutual agreement of the parties, (ii) by either
party in the event of any material misrepresentation or breach by the
other party, unless such misrepresentation or breach is cured or
resolved prior to the closing date to the reasonable satisfaction of the
non-breaching party, (iii) by either party if any condition to
consummation of the Merger becomes impractical to be fulfilled, (iv)
by either party in the event of entry of a permanent injunction or
other court order preventing consummation of the Merger, or (v) by
either party if the Merger has not become effective on or before
December 31, 1998.
Government and Regulatory Approvals.
Buffalo is not aware of any federal or state regulatory
requirements which must be complied with or any federal or state
regulatory approval which must be obtained in connection with
consummation of the Agreement, other than proxy solicitation
requirements under federal and state securities laws.
Buffalo's Reasons for the Transaction.
Buffalo's Board of Directors believes that the terms of the
Agreement are fair to the stockholders of Buffalo and that
consummation of the Merger with Old Aladdin is consistent with
Buffalo's business plan and is in the best interest of the shareholders
of Buffalo. Consummation of the Agreement will result in an
immediate increase in the assets and revenues of Buffalo. In addition,
Buffalo's Board of Directors believes that Old Aladdin has a sound
business plan, qualified management, and a reasonable opportunity to
grow into a larger oil and gas exploration and production company.
The Board of Directors believes that there will be no adverse tax
consequences to shareholders of Buffalo as a result of this Merger.
Buffalo's Common Stock will continue to be listed on the over-the-
counter Bulletin Board following completion of the Merger, although
its trading symbol will be changed to reflect its new name. For the
reasons described herein, subject to the requisite vote of Buffalo's
stockholders which is solicited hereby, approving consummation of
the Merger through the issuance of shares, and other items included in
this proxy statement, the members of the Board of Directors have
unanimously approved the Agreement and consummation of the
Merger described therein.
THE BOARD OF BUFFALO RECOMMENDS THAT THE
STOCKHOLDERS VOTE FOR APPROVAL OF THE
CONSUMMATION OF THE PROPOSED MERGER AND
RELATED TRANSACTIONS DESCRIBED IN THE AGREEMENT
AND PLAN OF MERGER AND REORGANIZATION BY AND
BETWEEN BUFFALO AND ALADDIN OIL CORPORATION
DATED NOVEMBER 23, 1998.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENT
This Proxy Statement includes "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "securities Act') and Section 21 E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). All
statements other than statements of historical fact included in this
Proxy Statement regarding reserve estimates, planned capital
expenditures, future oil and gas production and prices, future drilling
activity, financial position of Buffalo, Old Aladdin or New Aladdin,
business strategy and other plans and objectives for future operations,
are forward-looking statements. Although Buffalo, Old Aladdin and
New Aladdin believe that the expectations reflected in such forward-
looking statements are reasonable, Buffalo can give no assurance that
such expectations will prove to be correct. There are numerous
uncertainties inherent in estimating quantities of proved oil and natural
gas reserves and in projecting future rates of production and timing of
development expenditures, including many factors beyond the control
of the participating entities. Reserve engineering is a subjective
process of estimating underground accumulations of oil and natural
gas that cannot be measured in an exact way, and the accuracy of any
reserve estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. As a result,
estimates made by different engineers often vary from one another.
In addition, results of drilling, testing and production subsequent to
the date of an estimate may justify revisions of such estimate and such
revisions, if significant, would change the schedule of any further
production and development drilling. Accordingly, reserve estimates
are generally different from the quantities of oil and natural gas that
are ultimately recovered. Additional important factors that could
cause actual results to differ materially from the expectations
described herein include changes in oil and gas prices, changes in
regulatory or environmental policies, production difficulties,
transportation difficulties and future drilling results. All subsequent
written and oral forward-looking statements attributable to Buffalo,
Old Aladdin or New Aladdin, or persons acting on their behalf are
expressly qualified in their entirety by such factors.
RISK FACTORS
In determining whether to vote in favor of the proposals
described in this Proxy Statement, Buffalo's shareholders should
consider all of the risks associated with the transactions and with the
planned business operations of New Aladdin following consummation
of the Merger. Unforeseen conditions and unexpected events may
arise, and the following list may not be all-inclusive. Buffalo's
shareholders should consider all of the risks associated with the
proposed transactions and with the planned business operations
following consummation of the proposed Merger, including the
following risk factors:
Market Conditions and Prices
New Aladdin's success will depend heavily upon its ability to
market its oil and gas production at favorable prices, of which there
can be no assurance. In recent decades, there have been both periods
of worldwide overproduction and underproduction of hydrocarbons
and periods of increased and relaxed energy conservation efforts.
Such conditions have resulted in periods of excess supply of, and
reduced demand for, crude oil on a worldwide basis and for natural
gas on a domestic basis; these periods have been followed by periods
of short supply of, and increased demand for, crude oil and, to a
lesser extent, natural gas. The excess or short supply of oil and gas
has placed pressures on prices and has resulted in dramatic price
fluctuations.
Change in Control; Concentration of Ownership in the Robins Family;
Ability to Influence Election of Directors and Other Matters
Submitted to Stockholders
In the event of consummation of the Merger, there will be a
change in control of Buffalo. The current shareholders of Buffalo
will own only approximately 7% of the issued and outstanding
Common Stock of New Aladdin on a fully diluted basis following
completion of the Merger, and the current officers and directors of
Buffalo will resign and be replaced by the persons who are the current
officers and directors of Old Aladdin. Following consummation of
the Merger, Ms. Meghan Robins and her affiliates and family
members collectively will own an aggregate of 3,049,101 shares of
Common Stock, representing approximately 74% of the issued and
outstanding shares (not including options or warrants) of New
Aladdin. Accordingly, such persons will be able to exercise
substantial influence over the business and affairs of New Aladdin,
including the election of directors and other matters submitted to a
vote of stockholders, and will essentially control New Aladdin. There
are no voting or similar agreements among such persons. See
"Ownership of Capital Stock."
Historical Operating Losses and Variability of Operating Results
Old Aladdin has incurred net losses since its inception and
there can be no assurance that New Aladdin will be profitable in the
future following completion of the Merger. In addition, the future
operating results of New Aladdin may fluctuate significantly
depending upon a number of factors, including industry conditions,
prices of oil and gas, rates of production, timing of capital
expenditures and drilling success. This variability could have a
material adverse effect on the business, financial condition and results
of operations of New Aladdin. See "Selected Historical Consolidated
Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Uncertainty of Estimates of Oil and Gas Reserves
The proven oil and gas reserves of Old Aladdin, and the
estimated future net revenues therefrom to be received by New
Aladdin, rely upon various assumptions, including assumptions as to
oil and gas prices, drilling and operating expenses, capital
expenditures, taxes and availability of funds. The process of
estimating oil and gas reserves is complex, requiring significant
decisions and assumptions in the evaluation of available geological,
geophysical, engineering and economic data for each reservoir. As a
result, such estimates are inherently imprecise. Actual future
production, oil and gas prices, revenues, taxes, development
expenditures, operating expenses and quantities of recoverable oil and
gas reserves may vary substantially from those estimated in the
reports obtained from reserve engineers. Any significant variance in
these assumptions could materially affect the estimated quantities and
present value of the estimated reserves. In addition, the proven
reserves of New Aladdin may be subject to downward or upward
revision based upon production history, results of future exploitation
and development, prevailing oil and gas prices and other factors,
many of which will be beyond the control of New Aladdin. Actual
production, revenues, taxes, development expenditures and operating
expenses with respect to the such reserves will likely vary from the
estimates used, and such variances may be material.
Replacement of Reserves
In general, the volume of production from oil and gas
properties declines as reserves are depleted. Except to the extent New
Aladdin acquires properties containing additional proven reserves or
conducts successful development and exploitation activities, or both,
the proven reserves and the volume of production from proven
reserves of New Aladdin will decline as a result of production from
its existing properties. The future oil and gas production of New
Aladdin will, therefore, be highly dependent upon its level of success
in finding or acquiring additional reserves. The business of acquiring,
enhancing or developing reserves is capital intensive. To the extent
cash flow from operations is reduced and external sources of capital
become limited or unavailable, the ability of New Aladdin to make the
necessary capital investment to maintain or expand its asset base of oil
and gas reserves would be impaired. In addition, there can be no
assurance that the future acquisition and development activities of
New Aladdin will result in additional proven reserves or that New
Aladdin will be able to drill productive wells at acceptable costs.
Reserve Concentration Risk
At the time of completion of the Merger, substantially all of
the reserves of Old Aladdin will be located in Ohio and California.
Any interruption in the production from these reserves following
completion of the Merger could materially adversely affect the
operations of New Aladdin.
Industry Risks
Oil and gas drilling and production activities are subject to
numerous risks, many of which will be beyond the control of New
Aladdin. These risks include the risk that no commercially productive
oil or gas reservoirs will be encountered, that operations may be
curtailed, delayed or canceled, and that title problems, weather
conditions, compliance with governmental requirements, mechanical
difficulties or shortages or delays in the delivery of drilling rigs and
other equipment may limit the ability of New Aladdin to develop,
produce and market its reserves. There can be no assurance that new
wells drilled by New Aladdin will be productive or that New Aladdin
will recover all or any portion of its investment. Drilling for oil and
gas may involve unprofitable efforts, not only from dry wells but also
from wells that are productive but do not produce sufficient net
revenues to return a profit after drilling, operating and other costs. In
addition, the properties of New Aladdin may be susceptible to
hydrocarbon drainage from production by other operators on adjacent
properties.
Industry operating risks include the risks of fire, explosions,
blow-outs, pipe failure, abnormally pressured formations and
environmental hazards, such as oil spills, natural gas leaks, ruptures
or discharges of toxic gases, the occurrence of any of which could
result in substantial losses to New Aladdin due to injury or loss of
life, severe damage to or destruction of property, natural resources
and equipment, pollution or other environmental damage, clean-up
responsibilities, regulatory investigation and penalties and suspension
of operations. In accordance with customary industry practice, it is
anticipated that New Aladdin will maintain insurance against some,
but not all, of the risks described above. There can be no assurance
that any insurance will be adequate to cover losses or liabilities. It is
not possible for New Aladdin to predict the continued availability of
insurance at premium levels that justify its purchase.
Acquisition Risks
The growth of New Aladdin following consummation of the
proposed Merger is expected to be attributable largely to acquisitions
of producing oil and gas properties containing proven reserves. In
conjunction with acquisition of such properties, New Aladdin will
make an effort to assess recoverable reserves, future oil and gas
prices, operating costs, potential environmental and other liabilities
and other factors. However, such assessments are necessarily inexact
and their accuracy inherently uncertain, in part because many of the
factors being assessed are not subject to control. In connection with
making such an assessment, it is anticipated that New Aladdin will
perform a review of the subject properties that it believes to be
generally consistent with industry practices. Such a review, however,
will not reveal all existing or potential problems, nor will it permit
New Aladdin to become sufficiently familiar with the properties to
fully assess their deficiencies and capabilities. Inspections may not
always be performed on every well, and structural and environmental
problems are not necessarily observable even when an inspection is
undertaken. In most cases, it is anticipated that New Aladdin will not
be entitled to contractual indemnification for pre-closing liabilities,
including environmental liabilities, and that it will generally acquire
interests in the properties on an "as is" basis with limited remedies for
breaches of representations and warranties. In those circumstances in
which New Aladdin is able to negotiate contractual indemnification
rights for pre-closing liabilities, there can be no assurance that the
seller will be able to fulfill its contractual obligations. In addition,
competition for producing oil and gas properties is intense and many
of New Aladdin's competitors will have financial and other resources
which are substantially greater than those available to New Aladdin.
Therefore, no assurance can be given that New Aladdin will be able
to acquire producing oil and gas properties which contain
economically recoverable reserves or that it will make such
acquisitions at acceptable prices.
Substantial Capital Requirements
It is currently anticipated that New Aladdin will continue to
make substantial capital expenditures in its exploration and
development projects. Initially, New Aladdin intends to finance these
capital expenditures with the cash flow from operations and its
existing financing arrangements. However, it is anticipated that
additional financing may be required in the future to fund the
developmental and exploration activities of New Aladdin. No
assurance can be given as to the availability or terms of any such
additional financing that may be required or that financing will
continue to be available under any existing or new financing
arrangements. If additional capital resources are not available to New
Aladdin, its developmental and other activities may be curtailed and
its business, financial condition and results of operations could be
materially adversely affected. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations-Financial
Condition and Capital Resources."
Marketability of Production
The marketability of the natural gas production of New
Aladdin will depend in part upon the availability, proximity and
capacity of natural gas gathering systems, pipelines and processing
facilities. Most of the natural gas produced by New Aladdin is
expected to be delivered through natural gas gathering systems and
natural gas pipelines that will not be owned by New Aladdin.
Federal, state and local regulation of oil and gas production and
transportation, tax and energy policies, changes in supply and demand
and general economic conditions all could adversely affect the ability
of New Aladdin to produce and market its oil and gas. Any dramatic
change in market factors could have a material adverse effect on the
financial condition and results of operations of New Aladdin. See
"Business and Properties" and "Governmental Regulation."
Dependence on Key Personnel
The business of New Aladdin will depend on the continued
services of its president and chief executive officer, Meghan Robins.
Effective as of January 5, 1998, Old Aladdin entered into an
employment agreement with Ms. Robins for a period of 5 years which
will be assumed by New Aladdin following completion of the Merger.
The loss of the services of Ms. Robins would be particularly
detrimental to New Aladdin because of her background and
experience in the oil and gas industry.
Competition
The oil and gas industry is highly competitive in all its phases.
Competition is particularly intense with respect to the acquisition of
desirable producing properties, the acquisition of oil and gas prospects
suitable for enhanced production efforts, and the hiring of experienced
personnel. The competitors of New Aladdin in oil and gas
acquisition, development, and production include the major oil
companies, in addition to numerous independent oil and gas
companies, individual proprietors, and drilling programs. Many of
these competitors possess and employ financial and personnel
resources substantially in excess of those which will be available to
New Aladdin and may, therefore, be able to pay more for desirable
producing properties and prospects and to define, evaluate, bid for,
and purchase a greater number of producing properties and prospects
than the financial or personnel resources of New Aladdin will permit.
The ability of New Aladdin to generate reserves in the future will be
dependent on its ability to select and acquire suitable producing
properties and prospects in competition with these companies.
Governmental Regulation
Domestic exploration for, and production and sale of, oil and
gas are extensively regulated at both the federal and state levels.
Legislation affecting the oil and gas industry is under constant review
for amendment or expansion, frequently increasing the regulatory
burden. Also, numerous departments and agencies, both federal and
state, are authorized by statute to issue, and have issued, rules and
regulations affecting the oil and gas industry which often are difficult
and costly to comply with and which carry substantial penalties for
noncompliance. State statutes and regulations require permits for
drilling operations, drilling bonds, and reports concerning operations.
Most states in which New Aladdin will operate also have statutes and
regulations governing conservation matters, including the unitization
or pooling of properties and the establishment of maximum rates of
production from wells. Many state statutes and regulations may limit
the rate at which oil and gas could otherwise be produced from
acquired properties. Some states have also enacted statutes
prescribing ceiling prices for natural gas sold within their states. The
operations of New Aladdin will also be subject to numerous laws and
regulations governing plugging and abandonment, the discharge of
materials into the environment or otherwise relating to environmental
protection. The heavy regulatory burden on the oil and gas industry
increases its costs of doing business and consequently affects its
profitability. Although Old Aladdin believes it is currently in
compliance with such laws, rules and regulations, there can be no
assurance that a change in such laws, rules or regulations, or the
interpretation thereof, will not have a material adverse effect on the
financial condition or results of operations of New Aladdin following
completion of the Merger.
Lack of Active Trading Market
Buffalo has voluntarily registered under the 34 Act, and its
Common Stock is approved for trading in the over-the-counter market
on the NASD Bulletin Board. However, no actual trading activity has
occurred with respect to such shares. Following completion of the
Merger, the shares of Common Stock of New Aladdin will continue
to be approved for trading in the over the counter market on the
NASD Bulletin Board. There can be no assurance that a trading
market will develop for such shares, that holders of such shares will
ever enjoy the benefit of liquidity created as a result of an active
trading market, or that the trading price for such shares in the public
market will accurately reflect the value of such shares as calculated
through traditional means involving book value, earnings per share,
and the like.
Regulation of Penny Stocks
It is anticipated that immediately following completion of the
Merger, and for an indefinite period of time thereafter, any trading
market which may develop for the common stock of New Aladdin
will be subject to a Securities and Exchange Commission rule that
imposes special sales practice requirements upon broker-dealers who
sell low-priced securities (commonly referred to as "penny stocks") to
persons other than established customers or accredited investors. For
transactions covered by the rule, the broker-dealer must make a
special suitability determination for the purchaser and receive the
purchaser's written agreement to the transaction prior to the sale.
Consequently, the rule may affect the ability of the shareholders of
New Aladdin to sell their securities in any market that might develop
therefor.
Shareholders should be aware that, according to Securities and
Exchange Commission Release No. 34-29093, the market for penny
stocks has suffered in recent years from patterns of fraud and abuse.
Such patterns include (i) control of the market for the security by one
or a few broker-dealers that are often related to the promoter or
issuer; (ii) manipulation of prices through prearranged matching of
purchases and sales and false and misleading press releases; (iii)
"boiler room" practices involving high-pressure sales tactics and
unrealistic price projections by inexperienced sales persons; (iv)
excessive and undisclosed bid-ask differentials and markups by selling
broker-dealers; and (v) the wholesale dumping of the same securities
by promoters and broker-dealers after prices have been manipulated to
a desired level, along with the resulting inevitable collapse of those
prices and with consequent investor losses. Although the management
of New Aladdin will use its best efforts, within the confines of
practical limitations to prevent the described patterns from being
established with respect to its securities, there can be no assurance
that some or all of such abuses will not occur in any trading market
which may develop with respect to the securities of New Aladdin.
Shares Eligible for Future Sale
Immediately following completion of the Merger, New Aladdin
will have 4,124,419 shares of its Common Stock issued and
outstanding. The 3,718,320 shares to be issued pursuant to the terms
of the Agreement will all constitute restricted securities as that term is
defined in Rule 144 adopted under the Securities Act of 1933, and
will not be eligible for resale without registration under the Securities
Act and applicable state securities laws or an exemption therefrom. A
substantial majority of the 406,099 shares of Common Stock to be
owned by the current shareholders of Buffalo following completion of
the Merger will also constitute restricted securities. Although most of
such shares may be available for immediate resale under Rule 144
because the holders of such shares will have satisfied applicable
holding period requirements under Rule 144, a total of approximately
320,000 of such shares, which will be owned by persons who are
currently principal shareholders of Buffalo, are expected to be subject
to standstill agreements for a period of up to 12 months. The
standstill restrictions are being imposed because resale of significant
quantities of such shares could have an adverse effect on the market
price of the Common Stock of New Aladdin.
In general, under Rule 144 as currently in effect, a person (or
persons) whose shares are aggregated, who has beneficially owned
shares for at least one year (including in certain cases, the holding
period of any prior owner except an affiliate), is entitled to sell in
"broker's transactions" or to market makers, within any three-month
period, a number of shares that does not exceed the greater of (i) 1%
of the then outstanding shares of Common Stock or (ii) generally, the
average weekly trading volume in the Common Stock during the four
calendar weeks preceding the sale and certain other limitations and
restrictions. Under Rule 144(k), a person who is not deemed to have
been an affiliate of the company at any time during the 90 days
preceding a sale, and who has beneficially owned the shares proposed
to be sold for at least two years, would be entitled to sell such shares
without having to comply with the manner of sale, volume limitation
or notice filing provisions described above.
Certain of the holders of Series A Preferred Stock and the
Class A and Class B Warrants of New Aladdin to be issued in
conjunction with consummation of the Merger, will have demand
registration rights with respect to the shares of Common Stock
issuable upon the exercise of their warrants or conversion of their
Series A Preferred Stock. Holders of demand registration rights may,
under certain circumstances and subject to customary limitations,
require New Aladdin to use its best efforts to register the resale of the
shares of Common Stock held by such holder when New Aladdin
otherwise files a registration statement with the SEC registering shares
of its Common Stock.
Preferred Stock
In accordance with the provisions of the articles of
incorporation of New Aladdin, the Board of Directors will be
authorized, without shareholder action, to issue Preferred Stock in one
or more series and to designate the dividend rate, voting rights and
other rights, preferences and restrictions of each such series. It will
not be possible to state the actual effects, if any, of the potential
issuance of additional Preferred Stock upon the rights of holders of
Common Stock of New Aladdin, unless and until the Board of
Directors of New Aladdin determines to issue additional preferred
stock and establishes the specific rights, preferences and restrictions
of the class of Preferred Stock to be issued. Such effects might
include restricting dividends on the Common Stock, diluting the
voting power of the Common Stock, impairing the liquidation rights
of the Common Stock, and delaying or preventing a change in control
of New Aladdin without further action by the shareholders. See
"Description of Securities - Preferred Stock."
Investment Risks as to Minority or Royalty Interest Purchases
New Aladdin may in the future acquire interests in oil and gas
properties which consist of less than a controlling working interest, or
which consist of an overriding (or other form of) royalty interests. In
such cases, it is likely that these properties would not be operated by
New Aladdin. It is anticipated that New Aladdin will seek to limit
such acquisitions to properties operated by competent entities with
which New Aladdin has discussed the operator's plans for the
properties, but New Aladdin will not have complete control over
decisions affecting such properties.
Environmental Liability
Oil and gas activities can result in liability under federal, state
and local environmental regulations for activities involving, among
other things, water pollution and hazardous waste transport, storage,
and disposal. Such liability can attach not only to the operator of
record of the well, but also to other parties that may be deemed to be
current or prior operators or owners of the wells or the equipment
involved. See "Business and Properties-Environmental Matters."
No Dividends on Common Stock
The Board of Directors of Old Aladdin has indicated that
following its appointment as the Board of Directors of New Aladdin,
it intends to retain all of the earnings of New Aladdin for the
expansion of its business, except as required by the terms of the
issued and outstanding Preferred Stock. New Aladdin therefore does
not anticipate the distribution of cash dividends on its Common Stock
in the foreseeable future. Any future decision of the Board of
Directors of New Aladdin to pay cash dividends will depend, among
other factors, upon its earnings, financial position, and cash
requirements at the time such decision is made. See "Price Range of
Common Stock and Dividend Policy."
Cumulative Voting, Preemptive Rights, and Control
The persons who are holders of the Common Stock of New
Aladdin following completion of the Merger will have no preemptive
rights in connection with such shares. As a result, the shareholders of
New Aladdin may be further diluted in their percentage ownership of
New Aladdin if additional shares of Common Stock are issued by
New Aladdin in the future. Cumulative voting in the election of
directors for New Aladdin will also be prohibited. Accordingly, the
holders of a majority of the shares of Common Stock of New Aladdin
present, in person or by proxy, will be able to elect all the members
of the Board of Directors of New Aladdin. See "Description of
Securities."
BUSINESS AND PROPERTIES OF BUFFALO
General
Buffalo was incorporated under the laws of the State of
Colorado on September 19, 1997, and remains in the developmental
stage. Its only activities to date have been organizational ones, and
activities related to completing the proposed Merger with Old
Aladdin.
Buffalo was formed as a "blind pool" or "blank check"
company, with a business plan of seeking to acquire one or more
properties or businesses, and it voluntarily elected to file a registration
statement on Form 10-SB under the 34 Act in order to become a
reporting company. The registration statement became effective on or
about May 4, 1998, and since that date, Buffalo has filed all required
periodical reports and remained current in its reporting obligations.
In accordance with Buffalo's business plan, its acquisition of a
business opportunity could be made by purchase, merger, exchange of
stock, or otherwise, and may encompass assets or a business entity,
such as a corporation, joint venture, or partnership. Buffalo's
business plan also provided that its discretion in selection of business
opportunities would be unrestricted, subject to the availability of such
opportunities, economic conditions, and other factors. However, its
search for a business acquisition was intended to be directed toward
small and medium-sized enterprises having a desire to become a
public corporation and which may be able to satisfy, or anticipate,
within a reasonable period of time following completion of a merger
or acquisition with Buffalo, being able to satisfy the minimum asset
requirements in order to qualify shares for trading on the National
Market System, or on an exchange such as the American Stock
Exchange. It was also intended that Buffalo would concentrate its
acquisition efforts on properties or businesses that it believed to be
undervalued or that it believed could realize a substantial benefit from
being publicly owned with a public trading market for their securities.
The types of factors to be considered by Buffalo in selecting a
business opportunity included the following:
(1) Potential for growth and profitability, indicated by new
technology, anticipated market expansion, or new products;
(2) Buffalo's perception of how any particular business
opportunity would be received by the investment community and by
Buffalo's stockholders;
(3) Whether, following the business combination, the financial
condition of the business opportunity would be, or would have a
significant prospect in the foreseeable future of becoming sufficient to
enable its securities to qualify for listing on an exchange or on a
national automated securities quotation system, such as NASDAQ, so
as to permit the trading of such securities to be exempt from the
restrictions imposed on broker-dealers by the Securities and Exchange
Commission in conjunction with dealings in penny stocks. (See "Risk
Factors - Buffalo - Regulation of Penny Stocks").
(4) Capital requirements and anticipated availability of re-
quired funds, to be provided from operations, through the sale of
additional securities, through joint ventures or similar arrangements,
or from other sources;
(5) Competitive position as compared to other companies of
similar size and experience within the industry segment as well as
within the industry as a whole;
(6) Strength and diversity of existing management, or man-
agement prospects that are scheduled for recruitment; and,
(7) The accessibility of required management expertise, per-
sonnel, raw materials, services, professional assistance, and other
required items.
Form and Terms of Acquisition
Buffalo had a substantial amount of discretion in negotiating
both the form and the terms of its proposed Merger with Old Aladdin.
The possibility of structuring the Merger as an asset purchase or as a
share exchange, in which Aladdin would have become a wholly
owned subsidiary of Buffalo, were both considered. However, based
primarily upon the desire of Old Aladdin to structure the Merger as a
tax-free reorganization, and the desire of Old Aladdin to include
various types of securities, including preferred stock, warrants and
debentures, as part of the consideration, the parties agreed to structure
the proposed transaction as a statutory merger. The number of shares
to be retained by the current shareholders of Buffalo and the cash
consideration to be paid by Old Aladdin for purchase of the
outstanding warrants of Buffalo, were determined by arms length
negotiations with Old Aladdin.
In conjunction with completion of the proposed Merger, it was
determined that it would be in the best interest of the Buffalo
shareholders for Buffalo's officers and directors to resign and to
nominate the current Board of Directors of Old Aladdin as their
successors on the Board of Directors of New Aladdin. None of the
current officers or directors of Buffalo has experience in the operation
of an oil and gas business, and Old Aladdin represented that it had an
experienced group of officers and directors which would be capable of
managing the on-going business operations of New Aladdin.
Administrative Offices
Buffalo currently maintains a mailing address at 7331 S.
Meadow Court, Boulder, Colorado 80301, which is the office address
of its President. The Company's telephone number there is (303)
530-3353. Other than this mailing address, the Company does not
currently maintain any other office facilities, and does not anticipate
the need for maintaining office facilities at any time in the foreseeable
future. Following completion of the proposed Merger, this mailing
address will be closed and all operations and activities will be
transferred to the offices of New Aladdin.
Employees
Buffalo currently has no employees. It has used consultants,
attorneys and accountants as necessary to assist in completion of its
organizational activities and for purposes of negotiating the terms and
conditions of the proposed business combination transaction with Old
Aladdin. Following completion of the proposed Merger, all
employees of New Aladdin will be persons currently employed by Old
Aladdin or persons hired by New Aladdin following completion of the
Merger.
Legal Proceedings
Buffalo is not a party to any legal proceedings, and its board
of directors is not aware of any threatened proceedings that can
reasonably be expected to have a material adverse effect on the
Buffalo's properties or financial condition, or its ability to complete
the proposed Merger.
BUSINESS AND PROPERTIES OF ALADDIN
General
Old Aladdin was incorporated under the laws of the State of
Nevada on January 17, 1997. It is an independent oil and gas
company engaged in the acquisition and exploration of oil and gas
within the United States. Since its inception, Old Aladdin has focused
its business strategy on the acquisition of producing oil and gas
properties in geographic areas where fragmented ownership should
create the opportunity for a consolidation or "roll-up of these assets.
Furthermore, these assets generally would provide for increases in
reserves, or production as a result of enhancement, better field
management, and tighter financial controls.
In addition, Old Aladdin holds certain exploration sub-surface
easements within the Los Angeles Basin of California, which
encompass several portions of the producing Salt Lake Field.
Following completion of the Merger, New Aladdin intends to develop
these pass-through easements into a drilling district, followed by the
drilling and exploration for potential oil and natural gas. In addition,
Old Aladdin recently acquired interests in 16 natural gas wells in the
state of Ohio, the operations of which are more specifically described
below. Finally, Old Aladdin seeks to apply modern exploration
technology and applications to certain producing oil and gas basins
where such technology has yet to be applied.
Appalachian Operations
Effective June 30, 1998, Old Aladdin acquired interests in 16
natural gas wells within the counties of Morgan and Muskingham,
Ohio, from Industrial International, Inc., an Ohio corporation
("Industrial International") in exchange for issuance of 419,219 shares
of Common Stock of Old Aladdin. Industrial International was
previously owned by Mr. Max P. Lammers, who is an officer and
director of Old Aladdin. The natural gas wells purchased from
Industrial International comprise the Appalachian Operations, which
are being operated by Aladdin - International, Inc., an Ohio
corporation ("Aladdin International"), a subsidiary of Old Aladdin.
As the time the Appalachian Operations were acquired from
Industrial International, Old Aladdin entered into a management
agreement with Mr. Lammers (the "Lammers Management
Agreement") pursuant to which Mr. Lammers is to act as Vice
President - Appalachian Region on behalf of Old Aladdin. To provide
Mr. Lammers with certain assurances, the Lammers Management
Agreement provides that if New Aladdin is not a "public reporting"
company as defined by the 34 Act, and the Common Stock of New
Aladdin is not publicly quoted prior to June 30, 1999, Mr. Lammers
will have the right to purchase 100% of the outstanding shares of
Common Stock of Aladdin International for the sum of $1.00.
Old Aladdin believes that the Merger will in fact qualify New
Aladdin as a "public reporting" company as defined by the 34 Act,
and that following completion of the Merger, the Common Stock of
New Aladdin will be publicly quoted. As a result, Old Aladdin
believes that the consummation of the Merger will extinguish the right
of Mr. Lammers to purchase the shares of Aladdin International.
California Operations
In its California operations, Old Aladdin has specialized in
development and production of oil and gas from leases on town lots
located in areas within the Los Angeles Basin, including Culver City,
Cheviot Hills, Sawtelle, Santa Monica and West Salt Lake. After
acquiring leases from landowners, Old Aladdin has coordinated
production arrangements with major petroleum companies. Following
completion of the Merger, it is anticipated that New Aladdin will
continue to seek to capitalize on development and production of town-
lot oil leases in the urban Los Angeles area.
Operator Activities
Old Aladdin currently acts as the operator of the 16 oil and/or
natural gas wells acquired from Industrial International. To facilitate
these activities, Old Aladdin has established a field office in
Cleveland, Ohio, and utilizes certain contract service providers for the
day to day operation, upkeep, and maintenance of these properties.
Drilling Activities
To date, Old Aladdin has not drilled any wells. It has,
however, established a capital expenditure budget for the 3rd quarter
of 1998 to enhance and work over certain of the 16 wells acquired
from Industrial International.
Old Aladdin currently anticipates that it will commence and/or
participate in one or more developmental drilling programs on certain
acreage within the Appalachian Basin.
Marketing
Old Aladdin does market its production based upon the
applicable operating agreement for each property and/or well. Old
Aladdin or its agents sell its production, as well as the production of
other interest owners' in each property on the spot market and by
entering into marketing arrangements, processing agreements,
transportation agreements and oil and natural gas condensate
agreements. Old Aladdin does not charge itself marketing fees for its
own activities, but it does pay for its pro rata share of transportation
and processing expenses.
Title to Properties
As is customary in the natural gas and oil industry, Old
Aladdin makes only a cursory review of title to farm-out acreage and
to undeveloped natural gas and oil leases upon the execution of
contracts. In the case of acquisitions, a thorough title examination is
conducted and curative work is performed with respect to significant
defects at prospective properties. To the extent title opinions or other
investigations reflect title defects, the seller of the properties, rather
than Old Aladdin is responsible to cure any such title defects at its
expense. Old Aladdin has obtained title on substantially all of its
producing properties and believes that it has satisfactory title to such
properties in accordance with standards generally accepted in the oil
and gas industry. Old Aladdin's natural gas and oil properties are
subject to customary royalty interests, liens for current taxes and other
burdens that Old Aladdin believes do not materially interfere with the
use of, or affect the value of, such properties.
Operational Risks and Insurance
Old Aladdin's operations are subject to the usual hazards
incident to the drilling and producing of oil and natural gas, such as
blowouts, cratering, explosions, uncontrollable flows of oil, natural
gas or well fluids, fires, formations with abnormal pressures,
pollution, releases of toxic gases and other environmental hazards and
risks. These hazards can cause personal injury and loss of life, severe
damage to and destruction of property and equipment, pollution or
environmental damages and suspension of operations. As a result,
Old Aladdin could incur substantial liabilities to third parties or
governmental entities, the payment of which could reduce or eliminate
the funds available for development, acquisitions or exploration, or
result in the loss of Old Aladdin's properties.
Old Aladdin is covered by various types of insurance policies
with the minimum being a $1,000,000 liability policy and a
$5,000,000 umbrella policy. Old Aladdin is also covered under
additional insurance, including both commercial property and workers
compensation policies. This insurance coverage does not cover every
potential risk associated with the drilling and production of oil and
natural gas. Among other things, coverage is not obtainable for
certain types of environmental hazards. The occurrence of a
significant adverse event, the risks of which are not fully covered by
insurance, could have a material adverse effect on Old Aladdin's
financial condition and results of operation. Moreover, there can be
no assurances that Old Aladdin's insurance coverage will be adequate
to cover any losses or exposure to liability or that Aladdin will be
able to maintain adequate insurance coverage in the future at rates it
considers reasonable.
Regulatory and Environmental Matters
Old Aladdin's business and properties are subject to substantial
governmental regulation, including regulations affecting production,
transportation and environmental matters.
Legal Proceedings
Old Aladdin is not a party to any legal proceedings, and its
board of directors is not aware of any threatened proceedings that can
reasonably be expected to have a material adverse effect on Old
Aladdin's properties or financial condition.
Employees
Old Aladdin currently has three full-time employees and one
part-time office assistant. It also pays for a percentage of certain
office expenses incurred in Ohio, including office staff.
Offices
Old Aladdin currently maintains its corporate offices at 11911
San Vicente Blvd., Suite 385, Los Angeles California 90049, where
it has entered into a two-year lease with an option for an additional
two years. The lease covers approximately 3,400 square feet and
requires payment of monthly rental of $4,250. In addition, Old
Aladdin pays $2,500 per month toward office expenses in Ohio.
These expenses are broken down between office expenses and clerical
staff support.
SELECTED FINANCIAL INFORMATION OF BUFFALO
Set forth below is certain selected financial information of
Buffalo for the periods and as of the dates indicated. The information
is derived from and should be read in conjunction with, the financial
statements of Buffalo, including the Notes thereto, which have been
incorporated by reference in this Proxy Statement.
<TABLE>
<CAPTION>
Year ended Nine months
12/31/97 ended 9/30/98
(audited) (unaudited)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenues - -
Net Loss (10,184) (23,195)
Net Loss Per Share nil (0.01)
Weighted Average Shares
Outstanding 1,020,000 2,011,900
</TABLE>
<TABLE>
<CAPTION>
12/31/97 9/30/98
(audited) (unaudited)
<S> <C> <C>
BALANCE SHEET DATA
Total Assets 7,366 1,699
Total Liabilities - -
Deficit Accumulated During
Development Stage (10,184) (33,379)
Stockholders Equity (deficit) 7,366 1,699
</TABLE>
This Proxy Statement incorporates by reference certain documents not
presented herein or delivered herewith. Buffalo will provide without
charge to each shareholder on the written request of such shareholder
a copy of any such documents. Request should be addressed to Grant
W. Peck, President, 7331 S. Meadow Court, Boulder, Colorado
80303, telephone number (303) 530-3353.
The following documents filed with the Securities and Exchange
Commission by Buffalo are incorporated by reference:
1. Registration Statement on Form 10-SB filed on March
4, 1998
2. Quarterly Report on Form 10-QSB for the quarter
ended June 30, 1998, filed August 14, 1998.
3. Quarterly Report on Form 10-QSB for the quarter
ended September 30, 1998, filed November 12, 1998.
BUFFALO CAPITAL V, LTD. MANAGEMENTS'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Liquidity and Capital Resources
Buffalo remains in the development stage and, since inception,
has experienced no significant change in liquidity or capital resources
or stockholder's equity other than the receipt of proceeds in the
amount of $7,500 from its inside capitalization funds. Buffalo's
balance sheet as of September 30, 1998, reflects current assets of
$1,169 in the form of cash, and a total asset value of $1,699.
Buffalo believes that it has sufficient liquidity and capital
resources to meet its cash needs until completion of the proposed
Merger with Old Aladdin. However, in the event the proposed
Merger is not approved, or is not completed in a timely manner, it is
anticipated that Buffalo will require additional capital in order to meet
its cash needs. Completion of the proposed Merger with Old Aladdin
will result in a substantial increase in the capital resources of the
company.
Results of Operations
During the period from September 19, 1997 (inception)
through September 30, 1998 (the latest date for which financial
information concerning Buffalo is available), Buffalo has engaged in
no significant operations other than organizational activities,
acquisition of capital and preparation for registration of its securities
under the 34 Act, as amended, and activities related to negotiating and
completing the proposed Merger with Old Aladdin. No revenues
were received by Buffalo during this period.
For the current fiscal year, Buffalo anticipates incurring a loss
as a result of organizational expenses, expenses associated with
registration under the 34 Act, and expenses associated with locating,
evaluating, negotiating and completing the proposed Merger with Old
Aladdin. The consolidated results of operations of Buffalo and Old
Aladdin for the current fiscal year, will primarily reflect the results of
operation of Old Aladdin.
Need for Additional Financing
Buffalo believes that its existing capital will be sufficient to
meet its cash needs, including the costs of compliance with the
continuing reporting requirements of the Securities Exchange Act of
1934, as amended, and the cost of completing the proposed Merger,
in the event that the Merger is completed in a timely manner.
Accordingly, in the event the Company is able to complete the
proposed Merger prior to December 31, 1998, it anticipates that its
existing capital will be sufficient to allow it to accomplish the goal of
completing a business combination. Once the proposed Merger is
completed, the needs of the company for additional financing will
increase substantially.
No commitments to provide additional funds have been made
by management or other stockholders, and Buffalo has no plans,
proposals, arrangements or understandings with respect to the sale or
issuance of additional securities prior to completion of the proposed
Merger. Accordingly, in the event that additional funds are required
prior to completion of the proposed Merger, there is no assurance that
they will be available. Old Aladdin has agreed to reimburse Buffalo
for up to $5,000 of expenses it incurs in conjunction with the
completion of the proposed Merger.
SELECTED HISTORICAL FINANCIAL DATA OF OLD
ALADDIN
Set forth below is certain selected financial information of Old
Aladdin for the periods and as of the dates indicated. The
information is derived from and should be read in conjunction with,
the financial statements of Old Aladdin, including the Notes thereto,
included elsewhere in this Proxy Statement.
<TABLE>
<CAPTION>
6/30/98
(audited)
<S> <C>
STATEMENT OF OPERATIONS DATA:
Revenues -
Net Loss (620,101)
Net Loss Per Share (0.21)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
BALANCE SHEET DATA:
Total Assets 925,427
Total Liabilities 160,578
Accumulated Deficit (620,101)
Stockholders' Equity 764,849
</TABLE>
The audited financial statements of Old Aladdin for its fiscal year
ended June 30, 1998, are attached hereto as Appendix D and
incorporated herein by this reference.
ALADDIN MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The following discussion is intended to assist in the
understanding of Old Aladdin's historical financial position and results
of operations. Old Aladdin is an independent oil and gas company
engaged in the development, production and acquisition of, and the
exploration for, natural gas and oil. Old Aladdin owns working
interest in 16 wells in Ohio, and sub surface pass through easements
in several proven producing fields in the Los Angeles basin. Old
Aladdin was formed in January 1997, but did not conduct any
business operations until July 1, 1997, when the company acquired
the oil and gas assets of the Murray Metzenbaum Trust. Since
inception, Old Aladdin has been incurring operating losses, due in
part to its stage of development, and the on-going process of
implementing its business strategy. Old Aladdin intends to grow
through the acquisition of producing properties, wherein it can utilize
its financial resources for further exploration to increase production
volumes and cash flow. Old Aladdin has completed one acquisition in
Ohio, through the purchase of the oil and gas assets of Industrial
International, Inc. effective June 30, 1998.
The Selected Historical Financial Data for the period presented
represents the revenues and direct operating expenses of the
operations of Old Aladdin. For purposes of this discussion, Old
Aladdin commenced operations in July of 1997, and therefore, the
financial information presented represents the only year of operations
for Old Aladdin.
The future results of Old Aladdin will depend on its ability to
locate and develop additional natural gas and oil properties. Due to
the nature of Old Aladdin's business activities and the general risks
relating to exploration for and production of natural gas and oil,
including volatility of prices for natural gas and oil products, there
can be no assurances that these efforts will be successful.
Historically, the markets for natural gas and oil have been
volatile and are likely to continues to be volatile in the future.
Although the price of natural gas has recently declined, such decline
has not had material adverse effects on Old Aladdin. However, lower
oil and natural gas prices in the future may reduce the amount of Old
Aladdin's natural gas and oil reserves that are economical to produce
and accordingly negatively impact Old Aladdin's cash flow.
On November 23, 1998, Old Aladdin entered into the
Agreement with Buffalo. Under the terms of the Agreement, Old
Aladdin will merge into Buffalo in exchange for the issuance of
3,718,320 shares of Common Stock and the exchange, on a one-for-
one basis, of certain additional securities.
Results of Operations for the Year Ended June 30, 1998
Revenues.
All of Old Aladdin's activities for the year ended June 30,
1998 were based upon the establishment of Old Aladdin, the
acquisition of the oil and gas assets from the Metzenbaum Trust, and
the formulation and execution of its business strategy. As a result,
Old Aladdin recognized no revenues for the year ended June 1998.
General and administrative.
For the year ended June 30, 1998, Old Aladdin incurred
general and administrative expenses of $337,676. These expenses
were the result of the commencement of operations, including the
establishment of corporate offices, the retention of certain personnel,
and the preparation of certain geological studies and reports. Old
Aladdin also incurred legal and accounting expenses of $136,436
related to its corporate formation, the acquisition of certain oil and
gas assets, and the raising of initial seed capital. Management
believes that these expenses will be reduced in 1998, based in part on
lower legal and accounting activities.
Depreciation, depletion, and amortization.
Deprecation, depletion and amortization expenses equaled
$10,761 for the year ended June 30, 1998. The bulk of these
expenses were related to equipment purchased by Old Aladdin during
the year. Management anticipates that deprecation, depletion and
amortization expense will increase in fiscal 1999 as a result of the
recent acquisition of certain producing properties.
Interest Expense.
Interest expense of $114,484 was the result of the interest
payable on the debentures sold by Old Aladdin to raise its initial seed
capital. These debentures have since been converted into Series A
Preferred stock, paying an annual dividend, which ceases on June 30,
1999. It is anticipated by management that interest and dividend
expenses will increase for fiscal 1999 as a result of certain financing
activities to be undertaken by Old Aladdin.
Taxes.
Old Aladdin paid no taxes in 1998, and anticipates that little or
no taxes will be paid in 1999, with the exception of production taxes,
and the like, associated with its oil and gas operations.
Liquidity and Capital Resources
Net cash provided by operating activities was ($448,762) for
the year ended June 30, 1998. These losses resulted from expenses
related to the formation of Old Aladdin and the initial expenses related
to the establishment of corporate offices, the retention of personnel
and the preparation of certain geological studies and reports.
During the year ended June 30, 1998, Old Aladdin received
net proceeds of $983,000 from the issuance of securities. These
proceeds were utilized by Old Aladdin to cover its net operating
losses and to position itself to commence acquisition of certain
producing properties. As of June 30, 1998, Old Aladdin had working
capital of $147,785.
After the Effective Date of the Merger, New Aladdin may seek
to raise additional capital of up to $1,000,000 through a private
placement of debentures.
Other Matters
Old Aladdin has certain obligation based on federal, state and
local laws relating to the protection of the environment. Costs of
compliance through June 30, 1998 have not been material and
currently Old Aladdin does not anticipate that such costs will become
material in the near term.
Inflation has not had a significant effect on Old Aladdin's
financial condition or earnings since inception.
MARKET PRICE OF BUFFALO CAPITAL STOCK
Buffalo Common Stock is currently approved for trading over
the counter on the NASD Bulletin Board under the symbol "BUFH".
After completion of the proposed Merger, it is expected that the
Common Stock of New Aladdin will continue to trade over the
counter, but it is likely that the trading symbol will be changed to be
consistent with the new name, Aladdin Oil Corporation. Although
Buffalo's Common Stock is approved for trading, no reported
transactions have occurred, and as a result, there are no bid or ask
prices to report. It is not anticipated that there will be a public
market for either the Series A Preferred Stock or the Class A or Class
B Warrants of New Aladdin.
There are currently approximately 60 holders of record of
Buffalo Common Stock.
Buffalo did not declare or pay any cash dividends on its
Common Stock during the periods indicated.
MANAGEMENT OF NEW ALADDIN AFTER THE EFFECTIVE
DATE
Upon closing under the terms of the Agreement, the Board of
Directors of New Aladdin will consist of four persons, all four of
whom currently serve as directors of Old Aladdin. The terms of
office of the directors expire at the annual meeting of stockholders on
an annual basis. The officers are elected by, and serve until their
successors are elected by, the Board of Directors.
Set forth below is certain information with respect to those
individuals who will serve as members of the Board of Directors and
executive officers of New Aladdin after consummation of the
proposed Merger:
<TABLE>
<CAPTION>
Name Age Position with the Company
<S> <C> <C>
Meghan R. Robins 50 Chairman of the Board, President
Chief Executive Officer
Max P. Lammers 69 Vice President, Director
Haskell Robins 73 Director
Amy R. Montano 30 Director
</TABLE>
Meghan Robins is President and Founder of Old Aladdin, a
Nevada Corporation, which was incorporated January 17, 1997. Prior
to this, Ms. Robins was employed (since June 1965) by Aladdin Oil,
a California corporation established in February, 1953 (the
predecessor to Aladdin Oil Corporation of Nevada). Ms. Robins'
responsibilities included title research, landowner liaisons,
coordination of recordation data and permit requirements and filings.
Ms. Robins is a graduate of the University of Southern California and
is the wife of Haskell Robins.
Mr. Max P. Lammers has served as a director of Old Aladdin
since June of 1998 when Old Aladdin acquired substantially all of the
oil and gas assets of Industrial International, Inc. Prior to this, Mr.
Lammers was President and Chairman of Industrial International, Inc,
from 1976 to June, 1998. Mr. Lammers continues to serve as
President of Maxwell Capital Corporation a financial advisory and
consulting firm which commenced operations in April of 1996. Prior
to this, Mr. Lammers served as an account executive in the brokerage
industry with Maxus Securities from January, 1996, to April, 1996,
and with Robert Thomas Securities from April, 1995, to December,
1995. Mr. Lammers served as Vice President for the brokerage firm
of A.T. Brod & Company from October 1, 1993, until March, 1995.
Haskell Robins is President of H. Robins, Inc., a packaging
distribution company he established in 1987 in Nevada. The company
is a distributor of corrugated shipping containers and packaging
supplies. It serves major national manufacturers and distribution
centers across the commercial spectrum. Prior to establishing H.
Robins, Inc., Mr. Robins was employed by Container Corporation of
America from 1955 to 1987. Mr. Robins is a retired naval pilot. He
joined the board of directors of Old Aladdin in July, 1998 and is the
husband of Meghan Robins.
Ms. Amy R. Montano has served as director of Old Aladdin
since June of 1998. At this time, Ms. Montano also serves as the
President of Investors Information Services, an investor relations firm
headquartered in Irvine, California, which has serviced primarily
smaller oil and gas companies since August of 1996. Ms. Montano
also serves as an Officer and Director of C. K. Cooper & Company
an investment banking firm focusing on smaller oil and gas
companies, also headquartered in Irvine since July, 1996. From
April, 1995, to June, 1996, Ms. Montano served as Syndicate
Manager for Brookstreet Securities Corporation of Irvine, California.
From August, 1992 to April, 1995 Ms. Montano served as Vice
President - Syndicate & Branch Operations for Montano Securities
Corporation. Ms. Montano filed for personal bankruptcy in
December, 1997, as a result of certain litigation resulting from
employment as an officer of Montano Securities Corporation dating
back to 1994.
Committees of the Board of Directors
Upon consummation of the proposed Merger, New Aladdin
will have no standing committees of the Board of Directors.
However, following completion of the proposed Merger, it is
anticipated that the Board will establish both a compensation
committee and an audit committee. As of the date of this Proxy
Statement, no committee members have been designated.
Compensation of Directors
General.
For serving on New Aladdin's Board of Directors, each of the
directors who are not also officers of the company, or its subsidiaries,
will be paid $250 for each Board of Directors meeting attended. In
addition, they will be entitled to reimbursement for their reasonable
out-of-pocket expenses in connection with travel to and from meetings
of the Board of Directors or committees thereof and to periodic grants
of options to purchase Common Stock.
Executive Compensation
As described above in "Business and Properties of Aladdin",
Old Aladdin has three full time employees and several part-time staff
people.
Also from time to time Old Aladdin has engaged, and it is
anticipated that New Aladdin will engage, independent consultants to
provide evaluation work regarding geologic, engineering and
environmental issues.
Set forth below is certain information with respect to the
compensation paid to Ms. Meghan Robins by Old Aladdin. Ms.
Robins is the Chairman of the Board of the Company and President
and CEO. She will continue to serve in such positions after the
consummation of the Merger.
Summary Compensation Table
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
Name and Awards Payouts All Other
Principal Position LTIP Compensation
<S> <C> <C> <C>
Meghan Robins - - -
Chief Executive Officer
</TABLE>
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
Name and Year Salary Bonus SARs
Principal Position ($) ($) (#)
<S> <C> <C> <C> <C>
Meghan Robins 1997 0 0 -
Chief Executive Officer
</TABLE>
Robins Employment Agreement
Old Aladdin entered into the Robins Employment Agreement
with Ms. Robins effective January 5, 1998 pursuant to which Ms.
Robins was employed as President and Chief Executive Officer of Old
Aladdin and will be employed as President and Chief Executive
Officer of New Aladdin. She will devote her full-time attention to the
affairs of New Aladdin at an initial base salary of $120,000 which
will be increased by 10% per year throughout the term of the Robins
Employment Agreement. The Robins Employment Agreement will
have an initial term of five years and will be subject to automatic one
year renewals unless terminated by either party thereto.
Employment and Consulting Agreements
In connection with the acquisition of the oil and gas assets of
Industrial International, Inc., Old Aladdin entered into a two year
management agreement with Mr. Max Lammers pursuant to which
Mr. Lammers will be employed as Vice President Appalachian Region
for New Aladdin. Mr. Lammers will not devote his full-time
attention to the affairs of New Aladdin and will not be compensated in
the form of salary. Mr. Lammers will, however, be entitled to a
monthly bonus equal to 25% of the net cash flow increase from any
properties acquired or operated by New Aladdin in the Appalachian
region. For purposes of calculating this monthly bonus, New Aladdin
will establish a benchmark for net cash flow based upon production
during the 30 days immediately prior to acquisition of any property by
New Aladdin. The bonus amount payable to Mr. Lammers will be
equal to 25% of the net cash flow received by New Aladdin each
month in excess of the established benchmark.
In addition, the Lammers Management Agreement will have an
initial term of two years and will be subject to automatic one year
renewals unless terminated by either party thereto.
Certain Relationships and Related Transactions
In connection with the founding of Old Aladdin in January
1997, Old Aladdin entered into a Purchase and Sale Agreement with
the Metzenbaum Trust (of which Meghan Robins is the trustee),
wherein Old Aladdin acquired 100% of the oil and gas assets of the
trust in exchange for 3,000,000 shares of Common Stock.
Meghan Robins is the President and Chairman of the Board of
Old Aladdin. She is married to Haskell Robins who is also a director
and Corporate Secretary of Old Aladdin.
In August, 1998, Old Aladdin retained Investors Information
Services to act as independent investor relations counsel for Old
Aladdin for a period of six months. The terms of the agreement
include monthly compensation of $1,500 plus a non-refundable
expense advancement of $1,500 upon engagement. The President of
Investors Information Services is Amy R. Montano who also serves as
a Director for Old Aladdin. Ms. Montano also is an officer of C. K.
Cooper & Company, financial advisor to Old Aladdin.
As noted above in "Business and Properties of Aladdin," Old
Aladdin and Mr. Lammers, from whom Old Aladdin purchased
Industrial International, have entered into the Lammers Management
Agreement, which provides that if New Aladdin is not a "public
reporting" company as defined by the 34 Act, and the Common Stock
of New Aladdin is not publicly quoted by June 30, 1999, Mr.
Lammers will have the right to purchase 100% of the outstanding
shares of Common Stock of Aladdin International for the sum of
$1.00. Old Aladdin believes that the Merger will qualify New
Aladdin as a "public reporting" company as defined by the 34 Act,
and that the Common Stock of New Aladdin will be publicly quoted
following completion of the Merger. As a result, Old Aladdin
believes that the consummation of the Merger will extinguish the right
of Mr. Lammers to purchase the shares of Aladdin International.
OWNERSHIP OF CAPITAL STOCK
Ownership of the Capital Stock of the Company After the Effective
Date
Buffalo currently has 4,620,000 shares of Common Stock
issued and outstanding. As discussed above (See "Proposal I"), the
number of issued and outstanding shares of Buffalo Common Stock
must be reduced to 406,099 shares prior to consummation of the
proposed Merger. Upon consummation of the proposed Merger,
Buffalo will issue an additional 3,718,320 shares of its Common Stock
to the existing holders of Old Aladdin Common Stock, on a one for
one basis. The following table sets forth the amount of Common
Stock expected to be beneficially owned immediately after the closing
of the Merger by (i) each person who is known to Old Aladdin who
will own 5% or more of the outstanding shares of Common Stock of
New Aladdin immediately after the closing, (ii) each person who will
be a director or officer of New Aladdin immediately after the closing,
and (iii) all directors and officers of New Aladdin as a group. Unless
otherwise indicated, the information in the table is based upon the
listed person's current ownership of Common Stock of Old Aladdin.
<TABLE>
<CAPTION>
Number of Shares Percent of
Name of Beneficial Owner Beneficially Owned Class
<S> <C> <C>
Meghan R. Robins <F1> 3,049,101 74%
Max P. Lammers <F2> 419,219 10%
Haskel R. Robins <F1> - -
Amy R. Montano - -
Metzenbaum Trust <F1> 3,000,000 73%
Directors and Executive
Officers as a Group 3,468,320 84%
Behrooz Sarafraz 250,000 6%
<FN>
<F1> As to Meghan Robins includes 3,000,000 shares held by the
Metzenbaum Trust, a trust in which Ms. Robins serves as Trustee. Meghan
Robins and Haskell Robins are husband and wife.
<F2> Includes 419,219 owned by Industrial International, Inc. of which
Max P. Lammers serves as President and Chairman, and is the sole
shareholder.
</FN>
</TABLE>
Ownership of Buffalo Capital Stock
The following table reflects the current ownership of Buffalo
Common Stock and the ownership of New Aladdin Common Stock
following completion of the proposed Merger, by (i) persons or
groups who are known to Buffalo to be the beneficial owners of more
than 5% of the outstanding shares of Buffalo Common Stock, (ii) each
director and (iii) all directors and executive officers as a group. The
share ownership reflected in this table has been adjusted to take into
effect the reduction in the number of shares of Buffalo to be issued
and outstanding, as a result of completion of the proposed 1:2 reverse
stock split, and the agreed-upon voluntary surrender of shares for
cancellation by certain persons following approval of the proposed 1:2
reverse stock split. Buffalo believes that, except as noted, the
stockholders listed below have sole investment and voting power with
respect to Buffalo Common Stock beneficially owned by them.
<TABLE>
<CAPTION>
% of Class % of Class
# Shares Prior to Following
Name of Beneficial Owner Beneficially Owned Merger Merger
<S> <C> <C> <C>
Grant Peck <F1, F2> 81,830 20.15% 1.98%
Dean Sessions <F1, F3> 81,830 20.15% 1.98%
Gary Joiner <F3> 81,830 20.15% 1.98%
Mark DiSalvo <F4> 75,000 18.47% 1.82%
All Officers and
Directors as a Group
(2 in number) 163,660 40.30% 3.97%
<FN>
<F1> The person listed is an officer, a director, or both, of the Company
<F2> Reflects ownership after completion of 1:2 reverse stock split and
voluntary surrender for cancellation of 572,750 shares. Prior to completion of
the 1:2 reverse stock split and the voluntary surrender of shares for
cancellation, Mr. Peck was the owner of 1,308,800 shares of Buffalo common
stock representing approximately 28.33% of its outstanding common stock.
<F3> Reflects ownership after completion of 1:2 reverse stock split and
voluntary surrender for cancellation of 572,970 shares. Prior to completion of
the 1:2 reverse stock split and the voluntary surrender of shares for
cancellation, Mr. Sessions and Mr. Joiner each owned 1,309,600 shares of
Buffalo common stock representing approximately 28.35% of its outstanding
common stock.
<F4> Reflects ownership after completion of 1:2 reverse stock split and
voluntary surrender for cancellation of 141,000 shares. Prior to completion of
the 1:2 reverse stock split and the voluntary surrender of shares for
cancellation, Mr. DiSalvo was the owner of 432,000 shares of Buffalo
Common Stock, representing approximately 9.35% of its outstanding common
stock.
</FN>
</TABLE>
DESCRIPTION OF NEW ALADDIN COMMON STOCK
The authorized capital stock of New Aladdin upon completion
of the Merger will consist of 20,000,000 shares of Common Stock,
$0.01 par value, and 4,000,000 shares of Preferred Stock, $0.01 par
value. The following description is a summary of the material terms
of the capital stock of New Aladdin. For a complete description of
the terms of the capital stock, reference is made to the Old Aladdin's
Articles of Incorporation and Bylaws which are attached hereto as
Appendix C.
Common Stock
Holders of Common Stock are entitled to one vote for each
share held of record on all matters submitted to a vote of the
stockholders. Holders of Common Stock do not have the right to
cumulate their votes in the election of directors. Holders of Common
Stock are entitled to receive dividends when, as and if declared by the
Board of Directors of New Aladdin out of funds legally available
therefor, subject to any dividend preferences of any outstanding shares
of Preferred Stock. In the event of the liquidation, dissolution or
winding up of New Aladdin, holders of Common Stock have the right
to share ratably in any assets remaining after the satisfaction in full of
the liabilities of New Aladdin and of all liquidation preferences on any
outstanding shares of Preferred Stock. Holders of Common Stock
have no preemptive or preferential rights to purchase or subscribe for
any part of any additional securities or rights to convert their
Common Stock into other securities and are not subject to future calls
or assessments by the Company. All shares of Common Stock to be
issued and outstanding following completion of the Merger and all
shares of Common Stock which may be issued in the future upon
conversion of the Series A Preferred Stock will be fully paid and
nonassessable.
PREFERRED STOCK
Generally
Under the Articles of Incorporation of New Aladdin, the Board
of Directors is authorized, without further action by the stockholders,
to issue up to 4,000,000 shares of Preferred Stock and to fix and
determine the designations, series, powers, preferences, rights,
qualifications, limitations and restrictions of the Preferred Stock. The
rights of the holders of Common Stock will be subject to, and may be
adversely affected by, the rights of the holders of any such Preferred
Stock issued from time to time. The issuance of any new series of
Preferred Stock by New Aladdin could have the effect of delaying,
deferring or preventing a change of control of New Aladdin.
Series A Convertible Preferred Stock.
In conjunction with completion of the Merger, New Aladdin
will issue 1,677,000 shares of Series A Convertible Preferred Stock in
exchange for outstanding shares of Old Aladdin Preferred Stock. The
terms and provisions of the Preferred Stock are substantially identical
to those of the Old Aladdin Preferred. The Preferred Stock will rank
senior to the Common Stock with respect to dividends and
distributions of assets upon the liquidation, dissolution or winding up
of New Aladdin. No shares of Preferred Stock are outstanding as of
the date hereof.
Holders of shares of Preferred Stock will be entitled to
receive, when as and if declared by the Board of Directors of the
Company, out of any funds legally available therefor, cash dividends
at the annual rate of 12%, or $0.09 per share, accruing without
interest and cumulative from the date of first issuance, payable
monthly. Dividends and distributions (other than dividends payable
solely in junior ranking capital stock) may not be declared, paid or set
apart for payment or for purchase, redemption or other acquisition of
shares of Common Stock or other junior ranking capital stock unless
all accrued and unpaid dividends on the Preferred Stock have been
paid or declared, or funds have been set apart for payment.
In the event of a voluntary or involuntary liquidation,
dissolution or winding up of New Aladdin, holders of shares of Series
A Preferred Stock will be entitled to receive, out of the assets of New
Aladdin legally available therefor, a sum equal to $0.75 per share of
Preferred Stock, subject to adjustments for stock splits or
combinations, plus all dividends, if any, accrued and unpaid to the
distribution date.
Holders of shares of Series A Preferred Stock will have no
voting rights, except as required by law.
The Holders of shares of Preferred stock will have the right, at
the holder's option, to convert any or all such shares into Common
Stock at any time prior to redemption. Each share of Series A
Preferred Stock will be convertible into shares of Common Stock at a
conversion rate which is equal to the then liquidation preference of the
shares of Series Preferred Stock, divided by the conversion price
(which is currently $0.75, but is subject to customary adjustments).
Thus, as of the date hereof, the Series A Preferred Stock is
convertible into shares of Common Stock on a one-for-one basis.
Transfer Agent
The transfer agent for New Aladdin is:
Corporate Stock Transfer, Inc.
370 17th Street, Suite 2350
Denver, CO 80202
RIGHTS OF DISSENTING SHAREHOLDERS
Under Colorado Law, dissenting shareholders of Buffalo will
be entitled to dissenters' rights if the proposed Merger is
consummated. Any shareholder who desires to exercise such
dissenters' rights must strictly comply with the requirements of
Article 113 of the Colorado Business Corporation Act; failure to so
comply may result in the loss of such dissenters' rights. A copy of
Article 113 is attached hereto as Appendix A, and shareholders are
referred to Appendix A for a full statement of its provisions.
In general, Article 113 requires a shareholder seeking to
enforce dissenter's right to:
(a) file with Buffalo, prior to the vote, a written statement
that the shareholder intends to demand payment for his or her share if
the Merger is effectuated:
(b) not vote in favor of the Merger; and
(c) file with Buffalo, within 30 days after receipt of a
notice from Buffalo stating that the Merger was approved by Buffalo's
shareholders, a written notice to demand payment in compliance with
Article 113 and to deposit with the company the shareholder's
certificate(s) representing shareholder's shares. After filing the
demand payment notice, the shareholder will retain all the rights of a
shareholder, except for the ability to transfer Shares, until the
effective date of the Merger, upon which date all shareholders' rights
as a shareholder shall terminate except only to receive the fair value
of the shares.
Upon receipt of the shareholders' notice, in the event that
Buffalo and the shareholder do not agree on the fair market value of
such shareholders' Common Stock, Buffalo or the Shareholder may
institute a special court proceeding to determine the rights of the
dissenting shareholder and to fix the fair value of shareholder's shares
of the Common Stock.
A vote against the Merger will not satisfy the notice
requirement under Colorado Law. Any shareholder wishing to
enforce his rights under Article 113 must file a separate notice of
election to exercise dissenter's rights, in the manner and within the
time frames, specified in Article 113. All such notices may be sent to
the Company at 7331 S. Meadow Court, Boulder, Colorado 80301.
FAILURE TO COMPLY WITH ANY OF THE
PROCEDURAL REQUIREMENTS OF ARTICLE 113 MAY
RESULT IN A TERMINATION OR WAIVER OF DISSENTERS'
RIGHTS UNDER ARTICLE 113.
OTHER MATTERS
Buffalo is not aware of any business to be presented for
consideration at the Meeting, other than that specified in the Notice of
Special Meeting. If any other matters are properly presented at the
Meeting, it is the intention of the persons named in the enclosed
Proxy to vote in accordance with their best judgment.
SHAREHOLDER PROPOSALS
New Aladdin has not determined when it plans to hold its
annual meeting each year. As soon as that determination is made, it
will notify shareholders and advise them of the deadline for submitting
shareholder proposals to be considered at the next annual meeting.
NOTICE TO BANKS, BROKER-DEALERS AND VOTING
TRUSTEES AND THEIR NOMINEES
Please advise Buffalo whether other persons are the beneficial
owners of the Shares for which proxies are being solicited from you,
and, if so, the number of copies of this Proxy Statement and other
soliciting materials you wish to receive in order to supply copies to
the beneficial owners of the shares.
IT IS IMPORTANT THAT PROXIES BE RETURNED
PROMPTLY. SHAREHOLDERS, WHETHER OR NOT THEY
EXPECT TO ATTEND THE MEETING IN PERSON, ARE
REQUESTED TO COMPLETE, DATE AND SIGN THE
ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN
THE ENVELOPE PROVIDED FOR THAT PURPOSE. BY
RETURNING YOUR PROXY PROMPTLY YOU CAN HELP
BUFFALO AVOID THE EXPENSE OF FOLLOW-UP MAILINGS
TO ENSURE A QUORUM SO THAT THE MEETING CAN BE
HELD. SHAREHOLDERS WHO ATTEND THE MEETING MAY
REVOKE A PRIOR PROXY AND VOTE THEIR PROXY IN
PERSON AS SET FORTH IN THIS PROXY STATEMENT.
By Order of the Board of Directors
Grant W. Peck
Chairman of the Board
Boulder, Colorado
____, 1998.<PAGE>
APPENDIX A - Dissenters' Rights Statute
PART I - Right of Dissent - Payment for Shares
7-113-101 Definitions. For the purpose of this article:
(1) "Beneficial shareholder means the beneficial owner of
shares held in a voting trust or by a nominee as the record
shareholder.
(2) "Corporation" means the issuer of the shares held by a
dissenter before the corporation action, or the surviving or acquiring
domestic or foreign corporation, by merger or share exchange of that
issuer.
(3) "Dissenter" means a shareholder who is entitled to
dissent from corporate action under section 7-113-102 and who
exercises that right at the time and in the manner required by part 2 of
this article.
(4) "Fair value", with respect to a dissenter's shares,
means the value of the shares immediately before the effective date of
the corporate action to which the dissenter objects, excluding any
appreciation or depreciation in anticipation of the corporate action
except to the extent that exclusion would be inequitable.
(5) "Interest" means interest from the effective date of the
corporate action until the date of payment, at the average rate
currently paid by the corporation on its principal bank loans or, if
none, at the legal rate as specified in section 5-12-101, C.R.S.
(6) "Record Shareholder" means the person in whose name
shares are registered in the records of a corporation or the beneficial
owner of shares that are registered in the name of a nominee to the
extent such owner is recognized by the corporation as the shareholder
as provided in section 7-107-204.
(7) "Shareholder" means either a record shareholder or a
beneficial shareholder.
7-113-102 Right to Dissent.
(1) A shareholder, whether or not entitled to vote, is
entitled to dissent and obtain payment of the fair value of his or her
shares in the event of any of the following corporate actions:
(a) Consummation of a plan of merger to which the
corporation is a party if:
(I) Approval by the shareholders of that
corporation is required for the merger by section 7-111-103 or 7-111-
104 or by the articles of incorporation; or
(II) The corporation is a subsidiary that is
merged with its parent corporation under section 7-111-104;
(b) Consummation of a plan of share exchange to
which the corporation is a party as the corporation whose shares will
be acquired;
(c) Consummation of a sale, lease, exchange, or
other disposition of all, or substantially all, of the property of the
corporation for which a shareholder vote is required under section 7-
112-102(1); and
(d) Consummation of a sale, lease, exchange, or
other disposition of all, or substantially all, of the property of an
entity controlled by the corporation if the shareholders of the
corporation were entitled to vote upon the consent of the corporation
to the disposition pursuant to section 7-112-102(2).
(2) A shareholder, whether or not entitled to vote, is
entitled to dissent and obtain payment of the fair value of the
shareholder's shares in the event of:
(a) An amendment to the articles of incorporation
that materially and adversely affects rights in respect to the shares
because it:
(I) Alters or abolishes a preferential right
of the shares; or
(II) Creates, alters, or abolishes a right in
respect to redemption of the shares, including a provision respecting a
sinking fund for their redemption or repurchase; or
(b) An amendment to the articles of incorporation
that affects rights in respect of the shares because it:
(I) Excludes or limits the right of the
shares to vote on any matter, or to cumulate votes, other than a limitation by
dilution through issuance of shares or other securities with similar
voting rights; or
(II) Reduces the number of shares owned by
the shareholder to a fraction of a share or to scrip if the fractional
share or scrip so created is to be acquired for cash or the scrip is to
be voted under Section 7-106-104.
(3) A shareholder is entitled to dissent and obtain payment
of the fair value of the shareholder's shares in the event of any
corporate action to the extent provided by the bylaws or a resolution
by the board of directors.
(4) A shareholder entitled to dissent and obtain payment for
the shareholder's shares under this article may not challenge the
corporate action creating such entitlement unless the action is unlawful
or fraudulent with respect to the shareholder or the corporation.
7-113-103 Dissent by Nominees and Beneficial Owners.
(1) A record shareholder may assert dissenters' rights as to
fewer than all the shares registered in the record shareholder's name
only if the record shareholder dissents with respect to all shares
beneficially owned by any one person and causes the corporation to
receive written notice which states such dissent and the name,
address, and federal taxpayer identification number, if any, of each
person on whose behalf the record shareholder asserts dissenters'
rights. The rights of a record shareholder under this subsection (1)
are determined as if the share as to which the record shareholder
dissents and the other shares of the record shareholder were registered
in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as
to the shares held on the beneficial shareholder's behalf, only if:
(a) The beneficial shareholder causes the
corporation to receive the record shareholder's written consent to the
dissent not later than the time the beneficial shareholder asserts
dissenters' rights; and
(b) The beneficial shareholder dissents with respect
to all shares beneficially owned by the beneficial shareholder.
(3) The corporation may require that, when a record
shareholder dissents with respect to the shares held by any one or
more beneficial shareholders, each such beneficial shareholder must
certify to the corporation that the beneficial shareholder and the
record shareholder or record shareholders of all shares owned
beneficially by the beneficial shareholder have asserted, or will timely
assert, dissenters' rights as to all such shares as to which there is no
limitation on the ability to exercise dissenters' rights. Any such
requirement shall be stated in the dissenters' notice given pursuant to
section 7-113-203.
PART 2 Procedure for Exercise of Dissenters' Rights
7-113-201 Notice of Dissenters' Rights.
(1) If a proposed corporate action creating dissenters' rights
under section 7-113-102 is submitted to a vote at a shareholders'
meeting, the notice of the meeting shall be given to all shareholders,
whether or not entitled to vote. The notice shall state that
shareholders are or may be entitled to assert dissenters' rights under
this article and shall be accompanied by a copy of this article and the
materials, if any, that, under articles 101 and 117 of this title, are
required to be given to shareholders entitled to vote on the proposed
action at the meeting. Failure to give notice as provided by this
subsection (1) to shareholders not entitled to vote shall not affect any
action taken at the shareholders' meeting for which the notice was to
have been given.
(2) If a proposed corporate action creating dissenters' rights
under section 7-113-102 is authorized without a meeting of
shareholders pursuant to section 7-107-104, any written or oral
solicitation of a shareholder to execute a writing consenting to such
action contemplated in section 7-107-104 shall be accompanied or
preceded by a written notice stating that shareholders are or may be
entitled to assert dissenters' rights under this article, by a copy of this
article, and by the materials, if any, that, under article 101 and 117 of
this title, would have been required to be given to a shareholder
entitled to vote on the proposed action if the proposed action were
submitted to a vote at a shareholders' meeting. Failure to give notice
as provided by this subsection (1) to shareholders not entitled to vote
shall not affect any action taken pursuant to section 7-107-104 for
which the notice was to have been given.
7-113-202 Notice of Intent to Demand Payment.
(1) If a proposed corporate action creating dissenters' rights
under section 7-113-102 is submitted to a vote at a shareholders'
meeting, a shareholder who wishes to assert dissenters' rights shall:
(a) Cause the corporation to receive, before the vote
is taken, written notice of the shareholder's intention to demand
payment for the shareholder's shares if the proposed corporate action
is effectuated; and
(b) Not vote the shares in favor of the proposed
corporate action.
(2) If a proposed corporate action creating dissenters' rights
under section 7-113-102 is authorized without a meeting of
shareholders pursuant to section 7-107-104, a shareholder who wishes
to assert dissenters' rights shall not execute a writing consenting to the
proposed corporate action.
(3) A shareholder who does not satisfy the requirements of
subsection (1) or (2) of this section is not entitled to demand payment
for the shareholder's shares under this article.
7-113-203 Dissenters' Notice.
(1) If a proposed corporate action creating dissenters' rights
under section 7-113-102 is authorized, the corporation shall give a
written dissenter's notice to all shareholders who are entitled to
demand payment for their shares under this article.
(2) The dissenter's notice required by subsection (1) of this
section shall be given no later than ten days after the effective date of
the corporate action creating dissenters' rights under section 7-113-
102 and shall:
(a) State that the corporate action was authorized
and state the effective date or proposed effective date of the corporate
action;
(b) State an address at which the corporation will
receive payment demands and the address of a place where certificates
for certified shares must be deposited.
(c) Inform holders of uncertified shares to what
extent transfer of the shares will be restricted after the payment
demand is received.
(d) Supply a form for demanding payment, which
form shall request a dissenter to state an address to which payment is
to be made;
(e) Set the date by which the corporation must
receive the payment demand and certificates for certified shares,
which date shall not be less than thirty days after the date of the
notice required by subsection (1) of this section is given;
(f) State the requirement contemplated in section 7-
113-103(3), if such requirement is imposed; and
(g) Be accompanied by a copy of this article.
7-113-204 Procedure to Demand Payment.
(1) A shareholder who is given a dissenters' notice
pursuant to section 7-113-203 and who wishes to assert dissenters'
rights shall, in accordance with the terms of the dissenters' notice:
(a) Cause the corporation to receive a payment
demand, which may be the payment demand form contemplated in
section 7-113-203(2)(d), duly completed, or may be stated in another
writing; and
(b) Deposit the shareholder's certificates for
certified shares.
(2) A shareholder who demands payment in accordance
with subsection (1) of this section retains all rights of a shareholder,
except the right to transfer the shares, until the effective date of the
proposed corporate action giving rise to the shareholder's exercise of
dissenters' rights and has only the right to receive payment for the
shares after the effective date of such corporate action.
(3) Except as provided in section 7-113-207 or 7-113-209
(1)(b), the demand for payment and deposit of certificates are
irrevocable.
(4) A shareholder who does not demand payment and
deposit the shareholder's share certificates as required by the date or
dates set in the dissenters' notice is not entitled to payment for the
shares under this article.
7-113-205 Uncertificated Shares.
(1) Upon receipt of a demand for payment under Section 7-
113-204 from a shareholder holding uncertified shares, and in lieu of
the deposit of certificates representing the shares, the corporation may
restrict the transfer thereof.
(2) In all other respects, the provisions of section 7-113-
204 shall be applicable to shareholders who own uncertificated shares.
7-113-206 Payment.
(1) Except as provided in section 7-113-208, upon the
effective date of the corporate action creating dissenters' rights under
section 7-113-102 or upon receipt of a payment demand pursuant to
section 7-113-204, whichever is later, the corporation shall pay each
dissenter who complied with section 7-113-204, at the address stated
in the payment demand, or if no such address is stated in the payment
demand, at the address shown on the corporation's current record of
shareholders for the record shareholder holding the dissenter's shares,
the amount the corporation estimates to be the fair value of the
dissenter's shares, plus accrued interest.
(2) The payment made pursuant to subsection (1) of this
section shall be accompanied by:
(a) The corporation's balance sheet as of the end of
its most recent fiscal year or, if that is not available, the corporation's
balance sheet as of the end of a fiscal year ending not more than
sixteen months before the date of payment, an income statement for
that year, and, if the corporation customarily provides such statements
to shareholders, a statement of changes in shareholders' equity for
that year and a statement of cash flow for that year, which balance
sheet and statements shall have been audited if the corporation
customarily provides audited financial statements to shareholders, as
well as the latest available financial statements, if any, for the interim
or full-year period, which financial statements need not be audited:
(b) A statement of the corporation's estimate of the
fair value of the shares;
(c) An explanation of how the interest was
calculated;
(d) A statement of the dissenter's right to demand
payment under section 7-113-209; and
(e) A copy of this article.
7-113-207 Failure to Take Action.
(1) If the effective date of the corporate action creating
dissenters' rights under section 7-113-102 does not occur within sixty
days after the date set by the corporation by which the corporation
must receive the payment demand as provided in section 7-113-203,
the corporation shall return the deposited certificates and release the
transfer restrictions imposed on uncertified shares.
(2) If the effective date of the corporate action creating
dissenters' rights under section 7-113-102 occurs more than sixty days
after the date set by the corporation by which the corporation must
receive the payment demand as provided in section 7-113-203, then
the corporation shall send a new dissenters' notice, as provided in
section 7-113-203, and the provisions of section 7-113-204 and 7-113-
209 shall again be applicable.
7-113-208 Special Provisions Relating to Shares Acquired After
Announcement of Proposed Corporate Action.
(1) The corporation may, in or with the dissenters' notice
given pursuant to section 7-113-203, state the date of the first
announcement to news media or to shareholders of the terms of the
proposed corporate action creating dissenters' rights under section 7-
113-102 and state that the dissenter shall certify in writing, in or with
the dissenter's payment demand under section 7-113-204, whether or
not the dissenter (or the person on whose behalf dissenters' rights are
asserted) acquired beneficial ownership of the shares before that date.
With respect to any dissenter who does not so certify in writing, in or
with the payment demand, that the dissenter or the person on whose
behalf the dissenter asserts dissenters' rights acquired beneficial
ownership of the shares before such date, the corporation may, in lieu
of making the payment provided in section 7-113-206, offer to make
such payment if the dissenter agrees to accept it in full satisfaction of
the demand.
(2) An offer to make payment under subsection (1) of this
section shall include or be accompanied by the information required
by section 7-113-206(2).
7-113-209 Procedure if Dissenter is Dissatisfied with Payment or
Offer.
(1) A dissenter may give notice to the corporation in
writing of the dissenter's estimate of the fair value of the dissenter's
shares and of the amount of interest due and may demand payment of
such estimate, less any payment made under section 7-113-206, or
reject the corporation's offer under section 7-113-208 and demand
payment of the fair value of the shares and interest due, if:
(a) The dissenter believes that the amount paid
under section 7-113-206 or offered under section 7-113-208 is less
than the fair value of the shares or that the interest due was
incorrectly calculated;
(b) The corporation fails to make payment under
section 7-113-206 within sixty days after the date set by the
corporation by which the corporation must receive the payment
demand; or
(c) The corporation does not return the deposit
certificates or release the transfer restrictions imposed on uncertified
shares as required by section 7-113-207(1).
(2) A dissenter waives the right to demand payment under
this section unless the dissenter causes the corporation to receive the
notice required by section (1) of this section within thirty days after
the corporation made or offered payment for the dissenter's shares.
PART 3 Judicial Appraisal of Shares.
7-113-301 Court Action.
(1) If demand for payment under section 7-113-209 remains
unsolved, the corporation may, within sixty days after receiving the
payment demand, commence a proceeding and petition the court to
determine the fair value of the shares and accrued interest. If the
corporation does not commence the proceeding within the sixty-day
period, it shall pay to each dissenter whose demand remains
unresolved the amount demanded.
(2) The corporation shall commence the proceeding
described in subsection (1) of this section in the district court of the
county in this state where the corporation's principal office is located
or, if it has no principal office in this state, in the district court of the
county in which its registered office is located. If the corporation is a
foreign corporation without a registered office in this state, it shall
commence the proceeding in the county in this state where the
registered office of the domestic corporation merged into, or whose
shares were acquired by, the foreign corporation was located.
(3) The corporation shall make all dissenters, whether or
not residents of this state, whose demands remain unresolved parties
to the proceeding commenced under subsection (2) of this section as
in an action against their shares, and all parties shall be served with a
copy of the petition. Service on each dissenter shall be by registered
or certified mail, to the address stated in such dissenter's payment
demand, or if no such address is stated in the payment demand, at the
address shown on the corporation's current record of shareholders for
the record shareholder holding the dissenter's shares, or as provided
by law.
(4) The jurisdiction of the court in which the proceeding is
commenced under subsection (2) of this section is plenary and
exclusive. The court may appoint one or more person as appraisers
to receive evidence and recommend a decision on the question of fair
value. The appraisers have the powers described in the order
appointing them, or in any amendment to such order. The parties to
the proceeding are entitled to the same discovery rights as parties in
other civil proceedings.
(5) Each dissenter made a part to the proceeding
commenced under subsection (2) of this section is entitled to judgment
for the amount, if any, by which the court finds the fair value of the
dissenter's shares, plus interest, exceeds the amount paid by the
corporation, or for the fair value, plus interest, of the dissenter's
shares for which the corporation elected to withhold payment under
section 7-113-208.
7-113-302 Court Costs and Counsel Fees.
(1) The court in an appraisal proceeding commenced under
section 7-113-301 shall determine all costs of the proceeding,
including the reasonable compensation and expenses of appraisers
appointed by the court. The court shall assess the costs against the
corporation; except that the court may assess costs against all or some
of the dissenters, in amounts the court finds equitable, to the extent
the court finds the dissenters acted arbitrarily, vexatiously, or not in
good faith in demanding payment under section 7-113-209.
(2) The court may also assess the fees and expenses of
counsel and experts for the respective parties, in amounts the court
finds equitable:
(a) Against the corporation and in favor or any
dissenters if the court finds the corporation did not substantially
comply with the requirements of part 2 of this article; or
(b) Against either the corporation or one or more
dissenters, in favor of any other party, if the court finds that the party
against whom the fees and expenses are assessed acted arbitrarily,
vexatiously, or not in good faith with respect to the rights provided by
this article.
(3) The court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters similarly
situated, and that the fees for those services should not be assessed
against the corporation, the court may award to said counsel
reasonable fees to be paid out of the amounts awarded to the
dissenters who were benefitted.
<PAGE>
Appendix B - Agreement and Plan of Merger and Reorganization
What do you want to do about the page numbers on this table, since
they do not match the ongoing page numbering of the entire proxy?
AGREEMENT AND PLAN OF MERGER
AND REORGANIZATION
BY AND BETWEEN
ALADDIN OIL CORPORATION
AND
BUFFALO CAPITAL V, LTD.
Dated as of November 23, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
<S> <C>
ARTICLE 1 - THE MERGER 4
1.1 The Merger 4
1.2 Articles of Incorporation and Bylaws
of the Surviving Corporation 4
1.3 Surrender and Exchange of Aladdin
Common Stock 5
ARTICLE 2 - REPRESENTATIONS AND WARRANTIES OF
ALADDIN 6
2.1 Organization; Qualification 6
2.2 Subsidiaries 6
2.3 Authority Relative to this Agreement 7
2.4 Capitalization 7
2.5 Governmental Consents and Approvals 7
2.6 No Violations 7
2.7 Litigation 8
2.8 Absence of Changes 8
2.9 Information for Filings 8
2.10 Records 8
2.11 No Default 8
2.12 Copies of Documents; Accuracy of
Information Furnished 9
2.13 Financial Statements 9
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF
BUFFALO 9
3.1 Organization; Qualification 9
3.2 Authority Relative to this Agreement
3.3 Capitalization 10
3.4 Validity of Shares to be Issued 10
3.5 SEC Filing 10
3.6 Governmental Consents and Approvals 10
3.7 No Violations 11
3.8 Litigation 11
3.9 Absence of Changes 11
3.10 Information of Filings 11
3.11 No Default 11
3.12 Copies of Documents; Accuracy of
Information Furnished 12
3.13 Financial Statements 12
ARTICLE 4 ADDITIONAL AGREEMENTS
4.1 Purchase of Buffalo Warrants 12
4.2 Confidentiality 12
4.3 Disclosure 13
4.4 Legal and Other Fees 13
4.5 Agreement to Consummate 13
4.6 Aladdin Shareholders' Approval 13
4.7 Buffalo Shareholders' Approval 13
4.8 Articles of Merger 14
ARTICLE 5 CONDITIONS PRECEDENT TO CLOSING AND
POST-CLOSING COVENANTS
5.1 General Conditions 14
5.2 Conditions to Closing in Favor of Aladdin 14
5.3 Conditions to Closing in Favor of Buffalo 15
5.4 Post-Closing Covenants 16
ARTICLE 6 TERMINATION, AMENDMENT AND WAIVER
6.1 Termination 17
6.2 Effect of Termination 17
6.3 Amendment 17
6.4 Extension; Waiver 17
ARTICLE 7 GENERAL PROVISIONS
7.1 Notices 18
7.2 Interpretation 19
7.3 Counterparts 19
7.4 Miscellaneous 19
7.5 Effectiveness for Bookkeeping Purposes;
Closing 19
</TABLE>
EXHIBIT A - Form of Confidentiality Agreement
EXHIBIT B - Form of Buffalo Legal Opinion
EXHIBIT C - Form of Aladdin Legal Opinion
EXHIBIT D - Rights, Preferences and Privileges of
Buffalo Preferred Stock
EXHIBIT E - Purchase Date of Convertible Debentures
SCHEDULE A - Aladdin Disclosure Schedule
SCHEDULE B - Buffalo Disclosure Schedule
AGREEMENT AND PLAN OF MERGER AND
REORGANIZATION
This AGREEMENT AND PLAN OF MERGER AND
REORGANIZATION ("Agreement") is made as of November 23,
1998, by and between Aladdin Oil Corporation, a Nevada corporation
("Aladdin") and Buffalo Capital V, Ltd., a Colorado corporation
("Buffalo" or "Surviving Corporation").
RECITALS OF THE PARTIES:
A. The respective Boards of Directors of Aladdin and
Buffalo have approved the merger (the "Merger") of Aladdin with and
into Buffalo in accordance with the laws of the States of Nevada and
Colorado, respectively, and the provisions of this Agreement.
B. For federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended.
C. Aladdin and Buffalo desire to make certain
representations, warranties and agreements in connection with, and to
establish various conditions precedent to, the Merger.
NOW, THEREFORE, in consideration of the foregoing and
the representations, warranties and agreements contained herein, the
parties hereto agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. Pursuant to the terms and conditions of
this Agreement, Aladdin will be merged with and into Buffalo
pursuant to the laws of the States of Nevada and Colorado,
respectively, and in the manner and with the effect set forth herein.
1.2 Articles of Incorporation and Bylaws of the Surviving
Corporation. The Articles of Incorporation of Buffalo as in effect on
the Effective Date of the Merger (as defined hereafter) shall be the
Articles of Incorporation of the Surviving Corporation until same shall
be amended in accordance with law or the Articles of Incorporation
except that after the Merger the Surviving Corporation shall operate
as "Aladdin Oil Corporation." The Bylaws of Buffalo as in effect on
the Effective Date of the Merger shall be the Bylaws of the Surviving
Corporation until same shall thereafter be altered, amended or
repealed in accordance with law, the Articles of Incorporation or said
Bylaws.
The directors of the Surviving Corporation following the
Effective Date of the Merger shall be as follows: (1) Meghan Robins,
(2) Max Lammers, (3) Amy R. Montano and (4) Haskell Robins.
The officers of the Surviving Corporation at the Effective Date of the
Merger shall be as follows: President, Meghan Robins; Vice
President, Max Lammers; Secretary, Haskell Robins; and Chief
Financial Officer and Treasurer, Meghan Robins.
1.3 Surrender and Exchange of Aladdin Securities. Aladdin
and Buffalo contemplate that upon the completion of the Merger,
shareholders of Aladdin will receive shares equal to 93% ownership
of Buffalo on a fully diluted basis. For purposes of this Agreement,
"fully diluted" shall mean all shares of common stock issued and
outstanding, plus the common shares that would be issued if 100% of
the current preferred shares of Aladdin were converted into common
stock.
(a) The surrender and exchange shall occur as follows:
(i) Preferred Stock. On the Effective Date, each
holder of an outstanding certificate or certificates representing shares
of Aladdin stock designated "Series A 12% Convertible Preferred
Stock, $0.01 Per Share" ("Aladdin Preferred Stock") shall surrender
such stock certificate or certificates to Buffalo or to such agent or
agents (the "Transfer Agent") as may be designated by Buffalo and
shall receive in exchange therefor (upon satisfaction of customary
delivery requirements and subject to applicable law), on a one-for-one
basis, certificates representing the same number of whole shares of
Buffalo Preferred Stock (as defined below), which shall have the same
terms and conversion features as are contained in the Aladdin
Preferred Stock.
(ii) Common Stock. On the Effective Date, each
holder of an outstanding certificate or certificates representing shares
of Aladdin common stock ("Aladdin Common Stock") shall surrender
such stock certificate or certificates to Buffalo or to the Transfer
Agent and shall receive in exchange therefore (upon satisfaction of
customary delivery requirements and subject to applicable law), on a
one-for-one basis, certificates representing the same number of whole
shares of Buffalo Common Stock (as defined below).
(iii) Warrants. On the Effective Date, each holder
of an outstanding certificate or certificates representing stock purchase
warrants in Aladdin stock as described in Section 2.4 hereof
("Aladdin Warrants") shall surrender such certificate or certificates to
Buffalo or to the Transfer Agent and shall receive in exchange
therefore (upon satisfaction of customary delivery requirements and
subject to applicable law), on a one-for-one basis, certificates
representing the same number of Buffalo Warrants (as defined below),
which shall have the same rights and privileges as are contained in the
Aladdin Warrants.
(iv) Units. On the Effective Date, each holder of an
outstanding Aladdin Unit (as defined in Section 2.4 hereof) shall
surrender such Unit to Buffalo or to the Transfer Agent and shall
receive in exchange therefore (upon satisfaction of customary delivery
requirements and subject to applicable law), on a one-for-one basis,
the same number of Buffalo Units, which shall have the same rights
and privileges as are contained in the Aladdin Units.
(b) If any certificate evidencing shares of Aladdin Preferred
Stock, Aladdin Common Stock or Aladdin Warrants is to be issued in
a name other than that in which such certificate surrendered in
exchange therefor is registered, it shall be a condition of the issuance
thereof that the certificate so surrendered shall be properly endorsed
and otherwise be in proper form for transfer and that the person
requesting such exchange pay to Buffalo or to the Transfer Agent any
transfer or other taxes required by reason of the issuance of a
certificate in any name other than that of the registered holder of the
certificate surrendered, or establish to the satisfaction of the Transfer
Agent that such tax has been paid or is not payable.
(c) After the Effective Date, until surrendered or
exchanged, certificates representing Aladdin Preferred Stock, Aladdin
Common Stock or Aladdin Warrants shall be deemed to be certificates
representing a like number and type of shares or warrants, as the case
may be, of Buffalo. If, after the Effective Date, previously
unsurrendered certificates representing Aladdin Preferred Stock,
Aladdin Common Stock or Aladdin Warrants are presented to Buffalo
or the Transfer Agent for transfer or any other reason, such
certificates shall be canceled and like certificates of Buffalo shall be
substituted therefor.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF ALADDIN
Except as expressly set forth in the disclosure schedule
delivered to Buffalo by Aladdin contemporaneously with the execution
hereof (the "Aladdin Disclosure Schedule"), Aladdin hereby
represents and warrants to Buffalo as follows, which representations
and warranties are made as of the date hereof and as of the Effective
Date and shall survive the Effective Date regardless of what
investigations, if any, Buffalo shall have made prior hereto.
2.1 Organization; Qualification. Aladdin is a corporation
duly organized, validly existing and in good standing under the laws
of the State of Nevada. Aladdin has full corporate power and
authority to own and lease all of the properties and assets it now owns
and leases and to carry on its business as now being conducted.
Aladdin is duly qualified as a foreign corporation and is in good
standing to do business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except where the
failure so to qualify would not have a material adverse effect on the
condition (financial or otherwise), business, assets, liabilities,
capitalization, financial position, operations, results of operations or
prospects (a "Material Adverse Effect") on Aladdin.
2.2 Subsidiaries. The Aladdin Disclosure Schedule
identifies all Aladdin subsidiaries ("Subsidiary" or "Subsidiaries").
Each Subsidiary has full corporate power and authority to own and
lease all of the properties and assets it now owns and leases and to
carry on its business as now being conducted. Each is duly qualified
as a foreign corporation and is in good standing to do business in each
jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes qualification
necessary, except where failure to so qualify, would not have a
Material Adverse Effect on such Subsidiary. Except as set forth in
the Aladdin Disclosure Schedule, (a) Aladdin has good and valid title,
free and clear of all liens, to its equity interests in each Subsidiary,
(b) there are no outstanding subscriptions, warrants or other rights to
purchase or otherwise acquire any equity securities of any Subsidiary,
(c) there are no securities of Aladdin or any of its affiliates
convertible into or exchangeable for equity securities of or voting
securities of any Subsidiary, and (d) there are no obligations of
Aladdin or any of its affiliates to issue, deliver or sell any capital
stock, voting securities or securities convertible into or exchangeable
for equity securities of or voting securities of any Subsidiary. The
outstanding equity securities of each Subsidiary are validly issued,
fully paid and non-assessable. As used in this Agreement,
"Subsidiary" or "Subsidiaries," with respect to any corporation, shall
mean any other corporation of which at least a majority of the
securities having by their terms ordinary voting power to elect a
majority of the Board of Directors of such other corporation is at the
time directly or indirectly owned or controlled by Aladdin.
2.3 Authority Relative to this Agreement. Aladdin has full
corporate power and authority to execute, deliver and perform this
Agreement and, subject to approval by the holders of Aladdin
Common Stock, to consummate the transactions contemplated hereby.
The execution and delivery by Aladdin of this Agreement, and the
consummation of the transactions contemplated hereby, have been
duly and validly authorized by the Board of Directors of Aladdin and,
except for approval of the Merger by the holders of Aladdin Common
Stock, no other corporate proceedings on the part of Aladdin are
necessary with respect thereto. This Agreement has been duly and
validly executed and delivered by Aladdin and, subject to approval by
the holders of Aladdin Common Stock, constitutes a legal, valid and
binding obligation of Aladdin, enforceable against it in accordance
with its terms except as may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally and
by general principles of equity.
2.4 Capitalization. The authorized capital stock of Aladdin
consists of the following: (a) 20,000,000 shares of Aladdin Common
Stock, $0.01 par value, of which, as of the date hereof, 3,718,320
shares are validly issued and outstanding, fully paid and
nonassessable; (b) 4,000,000 shares of Aladdin Preferred Stock, $0.01
par value, of which, as of the date hereof, 1,677,000 shares are
validly issued and outstanding, fully paid and nonassessable; (c)
1,088,500 outstanding Aladdin Class A Warrants, with an expiration
date of December 31, 1999, exercisable for one share of Aladdin
Common Stock at $1.50 (the "Aladdin Class A Warrants"); (d)
1,688,000 Aladdin Class B Warrants, with an expiration date of
December 31, 1999, exercisable for one share of Aladdin Common
Stock at $1.00 (the "Aladdin Class B Warrants" and, together with
Aladdin Class A Warrants, the "Aladdin Warrants"); and (e) 417.6
Units, with each Unit consisting of (i) one 12% Convertible
Debenture in the principal amount of $1,000 bearing interest at 12%
per annum for the first year of issuance only, and convertible at any
time for 1.25 shares of Aladdin Common Stock for each $1.00 of
such Convertible Debenture; (ii) one Aladdin Class A Warrant for
each two shares of Aladdin Common Stock which may potentially be
so converted; and (iii) one Aladdin Class B Warrant for each two
shares of Aladdin Common Stock which may potentially be so
converted (the "Aladdin Units"). No shares of Aladdin's capital stock
have been issued in violation of any preemptive rights or applicable
federal or state securities laws. Except pursuant to applicable law,
there are no restrictions, including but not limited to self-imposed
restrictions, on the retained earnings of Aladdin or on the ability of
Aladdin to declare and pay dividends. There are no outstanding
obligations of Aladdin to repurchase, redeem or otherwise acquire any
capital stock or other securities of Aladdin.
2.5 Governmental Consents and Approvals. Except as
disclosed on the Aladdin Disclosure Schedule, the execution, delivery
and performance by Aladdin of this Agreement and the consummation
of the transactions contemplated hereby require no consent, approval,
order or authorization of, action by or in respect of, or registration or
filing with, any federal, state, municipal, foreign or other
governmental department, commission, board, bureau, agency,
instrumentality, court, or authority ("Governmental Body"), except
the filing of those documents required to be filed with the Secretaries
of State of Nevada or Colorado to effectuate the Merger.
2.6 No Violations. Except as disclosed on the Aladdin
Disclosure Schedule, the execution, delivery and performance of this
Agreement by Aladdin, the consummation by Aladdin of the
transactions contemplated hereby or compliance by Aladdin with any
of the provisions hereof does not and will not (a) conflict with or
result in any breach or violation of any provision of the Articles of
Incorporation or Bylaws (or similar charter documents) of Aladdin,
(b) result in a default, or give rise to any right of termination,
cancellation or acceleration or loss of any material benefit (with or
without the giving of notice or lapse of time or both), or require the
consent, approval, waiver or other action by any person under any of
the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, trust (constructive or otherwise), agreement, lease
(of real or personal property) or other instrument or obligation to
which Aladdin is a party or by which Aladdin may be bound, or
(c) result in the creation or imposition of any claim, lien, pledge,
security interest, obligation, restriction or other encumbrance on any
of the property of Aladdin.
2.7 Litigation. Except as disclosed in the Aladdin
Disclosure Schedule, there is no action, order, claim, suit,
proceeding, litigation, investigation, inquiry, review or notice
("Proceeding") pending or threatened in writing, or to the best
knowledge of Aladdin, threatened verbally, against, relating to or
affecting Aladdin or any officer or director of Aladdin relating to, or
arising from such person's activities as an officer or director of
Aladdin, at law or in equity, before any Governmental Body nor, to
the best of Aladdin's knowledge, is there any basis for commencing a
Proceeding that could have a Material Adverse Effect on Aladdin.
2.8 Absence of Changes. Since the date of the most recent
Aladdin balance sheet, except as disclosed in the Aladdin Disclosure
Schedule, the consolidated business of Aladdin has been operated in
the ordinary course consistent with past practice and there has not
been (a) any material adverse change in the business, operations,
properties, condition (financial or otherwise), prospects, assets or
liabilities (contingent or otherwise, whether due or to become due,
known or unknown); (b) any dividend declared or paid or distribution
made on capital stock, or any capital stock redeemed or repurchased;
(c) any incurrence of debt with a maturity greater than one year; (d)
any salary, bonus or compensation increases to any officers,
employees or agents; (e) any pending or, to the best knowledge of
Aladdin, threatened litigation or disputes; or (f) any other change in
the nature of, or the manner of conducting, the business, other than
changes that neither have had, nor reasonably may be expected to
have, a Material Adverse Effect on Aladdin.
2.9 Information for Filings. None of the information
supplied or to be supplied by Aladdin for inclusion in documents to be
filed with any regulatory authority in connection with the transactions
contemplated hereby, if any, will, at the respective times such
documents are filed with any such regulatory authority, be false or
misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements therein not
misleading.
2.10 Records. The respective minute books, books of
account, stock record books and other records of Aladdin, all of
which have been or will be made available to Buffalo, contain
accurate and complete records of all corporate actions of the
shareholders and Board of Directors (and committees thereof) during
the periods of time in which such minute books were maintained.
2.11 No Default. Aladdin is not in default under, and no
condition exists that with notice or lapse of time or both would
constitute a default under (a) its respective Articles of Incorporation or
Bylaws (or other similar charter documents); (b) any mortgage, loan,
agreement, contract, arrangement, lease, lease purchase, indenture or
other evidences of indebtedness for borrowed money or other
instrument to which Aladdin is now a party or by which Aladdin or
any of its assets is bound which would have a Material Adverse Effect
on Aladdin; or (c) to the best knowledge of Aladdin, any judgment,
order, writ, injunction, or decree of any court, arbitrator, agency,
official, authority or other Governmental Body.
2.12 Copies of Documents; Accuracy of Information
Furnished. Aladdin has delivered or made available to Buffalo
complete and accurate copies of all documents listed on the Aladdin
Disclosure Schedule, if any. All of the exhibits and schedules
provided by Aladdin are true, correct and complete in all material
respects and no written representation, warranty or statement made by
Aladdin in or pursuant to this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to state any
material fact necessary to make such representation, warranty or
statement not misleading to Buffalo which is seeking complete and
accurate information with respect to Aladdin.
2.13 Financial Statements. Aladdin has delivered to Buffalo:
(a) audited consolidated balance sheet of Aladdin for the fiscal year
ended June 30, 1998, including the notes thereto, and the related
consolidated statements of income, changes in stockholders' equity
and cash flow for the fiscal year then ended, together with the report
thereon of independent certified public accountants, and (b) unaudited
consolidated balance sheet of Aladdin for the four months since the
end of the last fiscal year and the related unaudited statements of
income, changes in stockholders' equity, and cash flow for the same
period, including in each case the notes thereto. Such financial
statements and notes fairly present the financial condition and the
results of operations, changes in stockholders' equity, and cash flow
of Aladdin as at the respective dates of and for the periods referred to
in such financial statements, all in accordance with GAAP.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUFFALO
Except as expressly set forth in the disclosure schedule
delivered to Aladdin by Buffalo contemporaneously with the execution
hereof (the "Buffalo Disclosure Schedule"), Buffalo hereby represents
and warrants to Aladdin as follows, which representations and
warranties are made as of the date hereof and as of the Effective Date
and shall survive the Effective Date regardless of what investigations,
if any, Aladdin shall have made prior hereto:
3.1 Organization; Qualification. Buffalo is a corporation
duly organized, validly existing and in good standing under the laws
of the State of Colorado. Buffalo has full corporate power and
authority to own and lease all of the properties and assets it now owns
and leases and to carry on its business as now being conducted.
3.2 Authority Relative to this Agreement. Buffalo has full
corporate power and authority to execute, deliver and perform this
Agreement and, subject to stockholder approval or written consent, if
permitted, to consummate the transactions contemplated hereby. The
execution and delivery by Buffalo of this Agreement, and the
consummation of the transactions contemplated hereby, have been
duly and validly authorized by the Board of Directors of Buffalo and,
except for the approval of the Merger by the shareholders of Buffalo
or by written consent, if permitted, no other corporate actions on the
part of Buffalo are necessary with respect thereto. This Agreement
has been duly and validly executed and delivered by Buffalo and
constitutes a legal, valid and binding obligation of Buffalo enforceable
in accordance with its terms except as may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally and by general principles of equity.
3.3 Capitalization. As of the date hereof, the authorized
capital stock of Buffalo consists of the following: (i) 100,000,000
shares of Buffalo common stock, $0.01 par value (the "Buffalo
Common Stock"), of which, 4,620,000 shares are currently issued and
outstanding, fully paid and nonassessable, provided that no later than
the Effective Date of the Merger, the number of shares of Common
Stock shall be reduced to 406,099; (ii) 1,020,000 Class A Warrants,
with an expiration date of December 31, 2002, exercisable for one
share of Buffalo Common Stock at $2.00; and (iii) 510,000 Class B
Warrants, with an expiration date of December 31, 2000, exercisable
for one share of Buffalo Common Stock at $4.00.
3.4 Validity of Shares to be Issued. The shares of Buffalo
Preferred Stock, Common Stock and Buffalo Warrants to be issued to
the stockholders of Aladdin as a result of the Merger have been duly
authorized and, upon delivery thereof pursuant to the provisions of
this Agreement, will be validly issued and outstanding, fully paid and
non-assessable, not subject to any preemptive rights, and issued in
compliance with applicable securities laws.
3.5 SEC Filings. Buffalo has timely prepared and filed all
documents required to be filed pursuant to the Securities Exchange
Act of 1934, as amended (the "Securities Exchange Act"), and all
such filings were timely filed and are current as of the date hereof.
3.6 Governmental Consents and Approvals. Except as set
forth on the Buffalo Disclosure Schedule, the execution, delivery and
performance by Buffalo of this Agreement and the consummation of
the transactions contemplated hereby by Buffalo require no consent,
approval, order or authorization of, action by or in respect of, or
registration or filing with, any Governmental Body, court, agency, or
authority, except the filing of those documents required to be filed
with the Secretaries of State of Nevada or Colorado to effectuate the
Mergers.
3.7 No Violations. Except as set forth on the Buffalo
Disclosure Schedule, the execution, delivery and performance of this
Agreement by Buffalo, the consummation by Buffalo of the
transactions contemplated hereby or compliance by Buffalo with any
of the provisions hereof does not and will not (a) conflict with or
result in any breach or violation of any provision of the Articles of
Incorporation or Bylaws of Buffalo, (b) result in a default, or give
rise to any right of termination, cancellation or acceleration, or loss of
any material benefit (with or without the giving of notice or lapse of
time or both), or require the consent, approval, waiver or other action
of any person, under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, license, trust (constructive or
otherwise) agreement, lease or other instrument or obligation to which
Buffalo is a party or by which Buffalo may be bound other than that
which has been or will be obtained, or (c) result in the creation or
imposition of any claim, lien, pledge, security interest, obligation,
restriction or other encumbrance on any of the property of Buffalo.
3.8 Litigation. Except as disclosed in the Buffalo
Disclosure Schedule, there is no material Proceeding pending or, to
the knowledge of Buffalo, threatened against, relating to or affecting
Buffalo or any of its respective properties or assets or any officer or
director of Buffalo relating to Buffalo at law or in equity, before any
Governmental Body nor, to the best of Buffalo's knowledge, is there
any basis for commencing a Proceeding that could have a Material
Adverse Effect on Buffalo.
3.9 Absence of Changes. Since the date of the most recent
Buffalo balance sheet, except as disclosed in the Buffalo Disclosure
Schedule, the consolidated business of Buffalo has been operated in
the ordinary course consistent with past practice and there has not
been (a) any material adverse change in the business, operations,
properties, condition (financial or otherwise), prospects, assets or
liabilities (contingent or otherwise, whether due or to become due,
known or unknown); (b) any dividend declared or paid or distribution
made on capital stock, or any capital stock redeemed or repurchased;
(c) any incurrence of debt with a maturity greater than one year; (d)
any salary, bonus or compensation increases to any officers,
employees or agents; (e) any pending or, to the best knowledge of
Buffalo, threatened litigation or disputes; or (f) any other change in
the nature of, or the manner of conducting, the business, other than
changes that neither have had, nor reasonably may be expected to
have, a Material Adverse Effect on Buffalo.
3.10 Information of Filings. None of the information
supplied or to be supplied by Buffalo for inclusion in documents to be
filed with any regulatory authority in connection with the transactions
contemplated hereby, if any, will, at the respective time such
documents are filed with such regulatory authority, be false or
misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements therein in light
of the circumstances under which they were made, not misleading.
3.11 No Default. Buffalo is not in default under, and no
condition exists that with notice or lapse of time or both would
constitute a default under (a) its respective Articles of Incorporation or
Bylaws (or other similar charter documents); (b) any mortgage, loan,
agreement, contract, arrangement, lease, lease purchase, indenture or
other evidences of indebtedness for borrowed money or other
instrument to which Buffalo is now a party or by which Buffalo or
any of its assets is bound which would have a Material Adverse Effect
on Buffalo; or (c) to the best knowledge of Buffalo, any judgment,
order, writ, injunction, or decree of any court, arbitrator, agency,
official, authority or other Governmental Body.
3.12 Copies of Documents; Accuracy of Information
Furnished. Buffalo has delivered or made available to Aladdin
complete and accurate copies of all documents listed on the Buffalo
Disclosure Schedule. All of the exhibits and schedules provided by
Buffalo are true, correct and complete in all material respects and no
written representation, warranty or statement made by Buffalo in or
pursuant to this Agreement contains or will contain any untrue
statement of a material fact or omits or will omit to state any material
fact necessary to make such representation, warranty or statement not
misleading to Aladdin which is seeking complete and accurate
information with respect to Buffalo.
3.12 Financial Statements. Buffalo has delivered to Aladdin:
(a) unaudited consolidated balance sheet of Buffalo for the fiscal year
ended December 31, 1997, including the notes thereto, and the related
consolidated statements of income, changes in stockholders' equity,
and cash flow for the fiscal year then ended, together with the report
thereon of independent certified public accountants, and (b) unaudited
consolidated balance sheet of Buffalo for the nine months since the
end of the last fiscal year and the related unaudited statements of
income, changes in stockholders' equity, and cash flow for the same
period, including in each case the notes thereto. Such financial
statements and notes fairly present the financial condition and the
results of operations, changes in stockholders' equity, and cash flow
of Buffalo as at the respective dates of and for the periods referred to
in such financial statements, all in accordance with GAAP.
ARTICLE 4
ADDITIONAL AGREEMENTS
4.1 Purchase of Buffalo Warrants. Prior to the
consummation of the Merger, Aladdin will purchase all of the issued
and outstanding Buffalo Warrants from the current holders thereof for
a purchase price of $125,000, $25,000 of which has been paid by
Aladdin to Buffalo prior to the execution hereof. The remaining
$100,000 shall be paid by Aladdin to an escrow agent mutually
agreeable to Aladdin and Buffalo (the "Escrow Agent"), and may be
paid in full on the closing date or pursuant to an installment plan
mutually agreed upon by Aladdin and Buffalo. In conjunction with
consummation of the Merger, Buffalo will cause such existing
warrants to be cancelled.
4.2 Designation of Preferred Stock. No later than the
Effective Date of the Merger, Buffalo shall amend its Articles of
Incorporation to provide for the authorization of 3,000,000 shares of
preferred stock, 1,677,000 shares of which shall be designated with
the rights, preferences and privileges set forth on Exhibit D hereto
("Buffalo Preferred Stock").
4.3 Authorization of Buffalo Warrants. No later than the
Effective Date of the Merger, Buffalo shall take such steps as are
necessary or appropriate to provide for the authorization of no less
than (a) 1,088,500 Class A Warrants ("Buffalo Class A Warrants"),
with an expiration date of December 31, 1999, exercisable for one
share of Buffalo Common Stock at $1.50; and (b) no less than
1,688,000 Class B Warrants, with an expiration date of December 31,
1999, exercisable for one share of Buffalo Common Stock at $1.00
("Buffalo Class B Warrants" and, together with the Buffalo Class A
Warrants, the "Buffalo Warrants").
4.4 Authorization of Buffalo Units. No later than the
Effective Date of the Merger, Buffalo shall take such steps as are
necessary to provide for the authorization of no less than 417.6 Units
and the securities contained therein, which securities shall consist of
(a) one 12% Convertible Debenture in the principal amount of $1,000
bearing interest at 12% per annum for one year from the original
issuance date of each Unit, as set forth on Exhibit E attached hereto,
which interest shall be paid monthly, and which are convertible at any
time for 1.25 shares of Buffalo Common Stock for each $1.00 of such
Convertible Debenture; (b) one Buffalo Class A Warrant for each two
shares of Buffalo Common Stock which may potentially be so
converted; and (c) one Buffalo Class B Warrant for each two shares
of Buffalo Common Stock which may potentially be so converted
("Buffalo Units").
4.5 Confidentiality. Except as and to the extent required by
law, neither Aladdin nor Buffalo shall disclose or use, nor direct its
representatives or agents to disclose or use any Confidential
Information (as defined below) with respect to either Aladdin or
Buffalo furnished, or to be furnished, by one party to the other, or its
respective representatives, at any time or in any manner other than in
connection with its evaluation of the Merger. For purposes of this
Section 4.2, "Confidential Information" means any information about
Aladdin or Buffalo stamped "confidential" or identified in writing as
such by either Aladdin or Buffalo promptly following its disclosure,
unless (a) such information is already known to the other party or its
representatives or agents or to others not bound by a duty of
confidentiality or such information becomes publicly available through
no fault of the other party or its representatives or agents, (b) the use
of such information is necessary or appropriate in making any filing
or obtaining any consent or approval required for the consummation
of the Merger, or (c) the furnishing or use of such information is
required by or necessary or appropriate in connection with legal
proceedings. Upon written request of Aladdin or Buffalo to the other
party, both Aladdin and Buffalo will promptly return to the other or
destroy any Confidential Information in its possession and certify in
writing to the other party that is has done so. Aladdin and Buffalo
agree to execute a separate material confidentiality agreement in the
form attached hereto as Exhibit A.
4.6 Disclosure. Except as and to the extend required by
law, without the prior written consent of the other party, neither
Aladdin nor Buffalo will make, and each will direct its representatives
and agents not to make, directly or indirectly, any public comment,
statement, or communication with respect to the terms, conditions, or
other aspects of the Merger contemplated herein. If either Aladdin or
Buffalo is required by law to make any such disclosure, it must first
provide to the other party the content of the proposed disclosure, the
reasons that such disclosure is required by law and the time and place
that the disclosure will be made.
4.7 Legal and Other Fees. Aladdin shall bear all of its
legal fees incurred in furtherance of the Merger as well as up to
$5,000 of the legal fees incurred by Buffalo. Buffalo shall be
responsible for the payment of any advisory and/or finder's fees owed
by Buffalo. Aladdin shall be responsible for any and all expenses
related to financial advisory, accounting, transfer agent, and/or
regulatory fees related to the Merger.
4.8 Agreement to Consummate. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use
reasonable efforts to do all things necessary, proper or advisable
under applicable laws and regulations to consummate and make
effective, as soon as reasonably practicable, the Merger contemplated
by this Agreement.
4.9 Aladdin Shareholders' Approval. Within 60 business
days after the execution of this Agreement by Aladdin and Buffalo,
Aladdin shall hold a meeting of its shareholders for the purpose of
voting upon the Merger. In connection with such meeting, Aladdin
shall mail all required notices and other materials to its shareholders,
and the Board of Directors of Aladdin shall recommend approval of
the matters related to the Merger to be voted upon by the holders of
Aladdin Common Stock at such shareholder meeting and shall use its
best efforts to obtain such shareholder approval.
4.10 Buffalo Shareholder's Approval. Within 60 business
days after the execution of this Agreement by Aladdin and Buffalo,
Buffalo shall either (a) hold a meeting of its shareholders for the
purpose of voting upon the Merger, or (b) obtain approval of the
Merger by written consent, if permissible. If a shareholder meeting is
held, Aladdin shall mail all required notices and other materials (after
receiving such notices and materials and the appropriate mailing
addresses from Buffalo) to the Buffalo shareholders, and the Board of
Directors of Buffalo shall recommend approval of the matters related
to the Merger to be voted upon at such shareholder meeting and shall
use its best efforts to obtain such shareholder approval.
4.11 Articles of Merger. Buffalo (as the Surviving
Corporation) shall comply with all requirements of section 92A.200
et seq. of the Nevada General Corporation Law and Article 111 of the
Colorado Business Corporation Act with respect to the filing of
Articles of Merger.
ARTICLE 5
CONDITIONS PRECEDENT TO CLOSING
AND POST-CLOSING COVENANTS
5.1 General Conditions. Consummation of the Merger
shall be subject to the fulfillment at the Effective Date of each of the
following conditions:
(a) No Injunction. No court having jurisdiction shall have
issued, to the knowledge of Aladdin or Buffalo, an injunction
preventing the consummation of the Merger that shall not have been
stayed or dissolved at the Effective Date.
(b) Securities Law. Buffalo shall have filed all applicable
federal and state securities law notices of issuance of Buffalo Common
Stock, if any, in connection with the Merger. In addition, Buffalo
shall have prepared and filed all proxy materials required under
Schedule A of the Securities Exchange Act, and shall have mailed all
such proxy material in definitive form to all Buffalo shareholders in
compliance with the Securities Exchange Act.
(c) Corporate and Other Actions. All actions taken or to
be taken in connection with the transactions contemplated hereby, and
all documents incident thereto shall be reasonably satisfactory in form
and substance to the parties and their counsel, and the parties and
their counsel shall have received all such counterpart originals or
certified or other copies of such documents as the parties or their
counsel may reasonably request.
5.2 Conditions to Closing in Favor of Aladdin.
Consummation of the Merger shall be subject to the fulfillment, to the
satisfaction of Aladdin, or written waiver, at or before the Effective
Date, of each of the following conditions:
(a) Opinion of Counsel for Buffalo. Buffalo shall have
furnished Aladdin with an opinion of Buffalo's counsel, dated the
Effective Date, in the form attached hereto as Exhibit B.
(b) Representations and Warranties of Buffalo. The
representations, warranties and statements of Buffalo contained in this
Agreement, shall be complete and accurate as of the date of this
Agreement and shall also be complete and accurate at and as of the
Effective Date, except for changes contemplated by this Agreement,
as if made on the Effective Date; and Buffalo shall have performed or
complied with all agreements and covenants required by this
Agreement to be performed or complied with by it at or prior to the
Effective Date.
(c) Buffalo Officers' Certificate. Buffalo shall have
delivered to Aladdin an Officer's Certificate, dated the Effective Date,
to the effect that (i) such officer is familiar with the provisions of this
Agreement and (ii) the conditions specified in Section 5.1 and in
paragraph (b) of this Section 5.2 have been satisfied in all material
respects.
(d) Governmental Consents, Authorizations, Etc. All
material consents, authorizations, orders or approvals of, and filings
or registrations with, and any permits, licenses or other authorizations
required by any applicable Governmental Body in connection with the
execution and delivery of this Agreement by Buffalo and the
consummation by Buffalo of the transactions contemplated hereby
shall have been obtained or made.
(e) Buffalo Shareholder Approval. The requisite number
of shareholders of Buffalo shall have voted in favor of the Merger.
(f) Cancellation of Buffalo Warrants. Pursuant to section
5(a) of Buffalo's Warrant Agent Agreement (attached as Exhibit 3.1
to Buffalo's Form 10SB Registration Statement), Aladdin requires that
Buffalo cancel the Buffalo Warrants in order to consummate the
Merger. Accordingly, all such Buffalo Warrants shall have been
cancelled.
(g) Shareholder Approval of Reincorporation. If
reincorporation of the Surviving Corporation in the State of Nevada
will not require compliance with the regulation provisions of the
Securities Act of 1933, such reincorporation in the State of Nevada is
approved by the requisite number of shareholders of Buffalo. If
reincorporation of the Surviving Corporation in the State of Nevada
requires compliance with the regulation provisions of the Security Act
of 1933, shareholder approval of such reincorporation need not be
obtained in order to consummate the Merger.
(h) Qualified Securities. All Buffalo Common Stock, is
qualified for quotation on the NASD Bulletin Board.
(i) Consents. On or before the Effective Date, Buffalo
shall have obtained all necessary or required consents to the
transactions contemplated by this Agreement or otherwise necessary.
5.3 Conditions to Closing in Favor of Buffalo.
Consummation of the Merger shall be subject to the fulfillment, to the
satisfaction of Buffalo, or written waiver, at or before the Effective
Date of the following conditions:
(a) Opinion of Counsel for Aladdin. Aladdin shall have
furnished Buffalo with an opinion of Aladdin's counsel, dated the
Effective Date, in the form attached hereto as Exhibit C.
(b) Representations and Warranties of Aladdin. The
representations, warranties and statements of Aladdin contained in this
Agreement, shall be complete and accurate as of the date of this
Agreement and shall also be complete and accurate at and as of the
Effective Date, except for changes contemplated by this Agreement,
as if made at and as of the Effective Date; and Aladdin shall have
performed or complied with all agreements and covenants required by
this Agreement to be performed or complied with by it at or prior to
the Effective Date.
(c) Aladdin Officers' Certificates. Aladdin shall have
delivered to Buffalo an Officer's Certificate, dated the Effective Date,
to the effect that (i) such officer is familiar with the provisions of this
Agreement and (ii) the conditions specified in Section 5.1 and in
paragraph (b) of this Section 5.3 have been fully satisfied.
(d) Governmental Consents, Authorizations, Etc. All
material consents, authorizations, orders or approvals of, and filings
or registrations with, and any permits, licenses or other authorizations
required by any applicable Governmental Body in connection with the
execution and delivery of this Agreement by Aladdin and the
consummation by Aladdin of the transactions contemplated hereby
shall have been obtained or made.
(e) Aladdin Shareholder Approval. The requisite number
of the holders of Aladdin Common Stock shall have voted in favor of
the Merger.
5.4 Post-Closing Covenants.
(a) Appointment and Resignation of Buffalo Directors. It
is the intent of Aladdin and Buffalo that, upon the consummation of
the Merger, a change in control of Buffalo will occur. Accordingly,
upon the consummation of the Merger, Buffalo's current Board of
Directors will appoint the following persons to the Board of Directors
of Buffalo: (1) Meghan Robins, (2) Max Lammers, (3) Amy R.
Montano and (4) Haskell Robins to the Board of Directors the current
members of Aladdin's Board of Directors. Following such
appointment, each current member of Buffalo's Board of Directors
shall resign.
(b) Assumption of Agreements. Upon the consummation
of the Merger, any and all employment agreements and/or consulting
agreements previously entered into by Buffalo shall be terminated, and
any and all such agreements made by Aladdin shall be assumed by
Buffalo.
(c) Name Change. Following the consummation of the
Merger, the name of Buffalo will be changed to Aladdin Oil
Corporation and the trading symbol will be changed to better reflect
the new name of the company.
(d) Qualification to Conduct Business in California. The
Surviving Corporation shall be qualified by the California Secretary of
the State as a foreign corporation authorized to conduct business in
the State of California.
ARTICLE 6
TERMINATION, AMENDMENT AND WAIVER
6.1 Termination. This Agreement may be terminated at
any time prior to the Effective Date, whether or not stockholder
approval has been received:
(a) by mutual consent of the Boards of Directors of
Aladdin and Buffalo;
(b) by Aladdin if any representation or warranty of
Buffalo, or by Buffalo if any representation or warranty of Aladdin,
contained herein shall have been incorrect or breached in any material
respect, as to which notice shall have been given to such party, and
shall not have been cured or otherwise resolved to the reasonable
satisfaction of the other party on or before the Effective Date, or by
either Aladdin or Buffalo if any condition to the consummation of the
Merger that must be fulfilled to its satisfaction has (in the good faith
judgment of its Board of Directors) becomes impractical to be
fulfilled;
(c) by either Aladdin or Buffalo if any permanent
injunction or other order of a court or other competent authority
preventing the consummation of the Merger shall have become final
and non-appealable; or
(d) by Aladdin or Buffalo if the Merger has not become
effective by December 31, 1998 (unless an extension of such date is
agreed to in writing by Aladdin and Buffalo); provided, however, that
no party shall be permitted to terminate hereunder if such party is in
violation of this Agreement.
6.2 Effect of Termination. In the event of the termination
of this Agreement as provided herein, this Agreement shall become
wholly void and have no further force and effect except as hereinafter
provided; and there shall be no liability on the part of Aladdin or
Buffalo (or their respective officers of directors) except to comply
with the confidentiality provisions of Section 4.2 hereof, and except as
otherwise provided herein. Nothing contained herein shall relieve any
party from liability for its breach of this Agreement.
6.3 Amendment. This Agreement may be amended by the
parties hereto at any time prior to the Effective Date; provided,
however, that any amendment must be by an instrument or
instruments in writing signed and delivered on behalf of each of the
parties hereto.
6.4 Extension; Waiver. At any time prior to the Effective
Date, any party hereto that is entitled to the benefits hereof, by action
taken by its Board of Directors or a duly authorized officer, may (a)
extend the time for the performance of any of the obligations or other
acts of any of the other parties hereto, (b) in whole or in part, waive
any inaccuracy in the representations and warranties of any of the
other parties hereto contained herein or in any exhibit or schedule
hereto or in any document delivered pursuant hereto, and (c) in whole
or in part, waive compliance with any of the agreements of any of the
other parties hereto or conditions contained herein. Any agreement
on the part of any party hereto to any such extension or waiver shall
be valid as set forth in an instrument in writing signed and delivered
on behalf of such party.
ARTICLE 7
GENERAL PROVISIONS
7.1 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if and when
delivered personally or transmitted by telecopy or telegram, mailed by
registered or certified mail (return receipt requested) or sent by a
recognized next business day courier to the persons at the following
addresses (or at such other address for a party as shall be specified by
like notice):
If to Aladdin:
Aladdin Oil Corporation
11911 San Vicente Blvd., Suite 385
Los Angeles, California 90049
Attention: Meghan Robins, President
and Chief Executive Officer
Facsimile: (310) 440-4481
with a copy to:
Arter & Hadden
725 S. Figueroa Street
34th Floor
Los Angeles, California 90017
Attention: Ronald Warner, Esq.
Facsimile: (213) 617-9255
If to Buffalo:
Buffalo Capital V, Ltd.
7331 S. Meadow Court
Boulder, Colorado 80301
Attention: Grant Peck, President
Facsimile: (303) 530-1727
with a copy to:
Frascona, Joiner & Goodman
4750 Table Mesa Drive
Boulder, Colorado 80303-5500
Attention: Gary S. Joiner, Esq.
Facsimile: (303) 494-6309
7.2 Interpretation. The headings contained in this
Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement. Terms such as "herein,"
"hereof," "hereinafter" refer to this Agreement as a whole and not to
the particular sentence or paragraph where they appear, unless the
context otherwise requires. Terms used in the plural include the
singular, and vice versa, unless the context otherwise requires.
7.3 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
7.4 Miscellaneous. This Agreement, including the exhibits
and schedules hereto, if any, (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written
and oral, among the parties, or any of them, with respect to the
subject matter hereof; (b) is not intended to and shall not confer upon
any other person any rights or remedies hereunder or otherwise with
respect to the subject matter hereof, except for rights that may
expressly arise as a consequence of the Merger; (c) shall not be
assigned by operation of law or otherwise; (d) has been drafted by all
of the parties to this Agreement and should not be construed against
any of the parties hereto; and (e) shall be governed in all respects,
including validity, interpretation and effect by the substantive laws of
the State of Nevada without regard to conflict of law provisions.
7.5 Effectiveness for Bookkeeping Purposes; Closing. For
tax and accounting purposes, if all conditions precedent to the
effectiveness of the Merger, including the execution of this
Agreement, shall have occurred prior to December 31, 1998, this
Agreement shall be deemed effective as of December 31, 1998. If all
conditions precedent to the effectiveness of the Merger, including
execution of this Agreement, shall have occurred after December 31,
1998, this Agreement shall be deemed effective on such other date as
Aladdin and Buffalo shall mutually agree in writing (the "Effective
Date"). The exchange and delivery of instruments necessary to
accomplish the Merger shall occur at such place as Aladdin and
Buffalo may initially agree. Unless otherwise agreed by Aladdin and
Buffalo, such exchange and delivery of instruments shall occur on the
Effective Date.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement or have caused this Agreement to be executed by their
duly authorized officers.
ALADDIN OIL CORPORATION
By/s/ Meghan Robins, President and
Chief Executive Officer
BUFFALO CAPITAL V, LTD.
By/s/ Grant Peck, President<PAGE>
EXHIBIT A
Form of Confidentiality Agreement
This Confidentiality Agreement (this "Agreement") is made
this 23rd day of November, 1998, by and between Aladdin Oil
Corporation, a Nevada corporation ("Aladdin"), and Buffalo Capital
V, Ltd., a Colorado corporation ("Buffalo") (where applicable,
Aladdin and Buffalo will sometimes be referred to individually as the
"Other Party" or collectively as the "Parties").
In consideration of the matters set forth in Paragraph 2 below,
the mutual covenants hereinafter set forth, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Aladdin and Buffalo hereby mutually agree as follows:
1. Definitions. As used in this Agreement, the terms set
forth below shall have the following meanings:
1.1 "Affiliate(s)." An "affiliate" of, or a Person
"affiliated" with, a specified Person, is (a) a Person that directly, or
indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the specified Person,
(b) a Person owning or controlling ten percent or more of the
outstanding voting securities of such specified Person, and (c) any
officer, director or partner of such specified Person.
1.2 "Person." Any natural person, partnership,
corporation, association, trust or other legal entity.
1.3 "Proprietary Information" shall mean (a) with respect to
aladdin, all information, data, reports, records, terms, structures,
arrangements (financing or otherwise), analyses, forecasts, projections
and all other information, oral or written, relating directly or
indirectly, to the business operations of Aladdin or its Affiliates,
including, but not limited to, any and all information relating to the
acquisition of, or exploration or drilling activities on, any oil or
natural gas properties presently owned by Aladdin or acquired by
Aladdin during the term of this Agreement; and (b) with respect to
Buffalo, all information, data, reports, records, terms, structure,
arrangements (financing or otherwise), analyses, forecasts, projections
and all other information, oral or written, relating directly or
indirectly, to the business operations of Buffalo or its Affiliates.
Proprietary Information shall not include information
that:
(i) is or become publicly available through no act
or omission of Aladdin or Buffalo in breach hereof;
(ii) came or comes into the possession of Aladdin or
Buffalo through sources not involving a breach hereof;
(iii) is or becomes known to any third party without
restriction through no act or omission of Aladdin or Buffalo in breach
hereof, or
(iv) either Aladdin or Buffalo is required to disclose or
discloses with the consent or the Other Party, to any governmental
agency.
2. Covenant of Nondisclosure and Confidentiality.
2.1 Commencing on the date hereof until the date this
Agreement shall be terminated in accordance with Paragraph 3 hereof,
all Proprietary information previously disclosed by Aladdin or Buffalo
to the Other Party, or disclosed by Aladdin or Buffalo in the future to
the Other Party shall be maintained in confidence by the Parties and
their Affiliates and shall not be disclosed to third parties or used for
any purpose whatsoever not specifically authorized by the terms of
this Agreement or by a subsequent written agreement between the
Parties.
2.2 No copies shall be made by Aladdin or Buffalo of any
documents comprising or containing any Proprietary without the prior
consent of the Other Party. The Parties shall be deemed to have
complied with their respective obligations hereunder provided the
Parties protect and safeguard the confidentiality of any Proprietary
Information in the manner and as they protect and safeguard the
confidentiality of their own proprietary information of like kind.
2.3 The Parties agree that upon the termination of this
Agreement, or upon the written request of the Other Party, whichever
shall first occur, the Parties shall return (and shall cause each of their
Affiliates to return) to the Other Party all material and items
containing Proprietary Information, including all copies thereof.
3. Termination and Duration. Unless this Agreement shall
be earlier terminated by the express written consent of each of the
Parties hereof, this Agreement shall be terminated and of no further
force and effect on the date which is five years after the date hereof.
4. Invalidity; Unenforceability. If any of the provisions
set forth in this Agreement are determined by a court of competent
jurisdiction to be invalid or unenforceable by reason of this
Agreement extending for too great a period of time or over too great
a geographical areas, or by reason of its being too extensive in any
other respects, this Agreement shall be interpreted to extend only over
the maximum time and geographical area, and to the maximum extent
in all other respect, as to which it is valid and enforceable, all as
determined by such court in such action. Any determination that any
provision hereof is invalid and unenforceable, in whole or in part,
shall have no effect upon the validity or enforceability of any
remaining provision hereof.
5. Indemnification. The Parties and their Affiliates hereby
indemnify and agree to hold each other and their respective Affiliates
harmless from and against any and all actions, suits, claims, demands,
liabilities, losses, damages, costs and expenses, including litigation
costs and reasonable attorneys' fees, arising from, out of, or in any
way connected with any disclosure, dissemination or use of any
Proprietary Information not expressly authorized or permitted
pursuant to the terms and provisions of this Agreement.
6. Damages and Disputes. The Parties acknowledge that
breach of any of the foregoing covenants by the Other Party will
cause irreparable damage to the non-breaching party, the exact
amount of which will be difficult or impossible to ascertain, and that
the remedies at law for such breach are inadequate. Accordingly, the
Parties agree that upon a breach under this Agreement, the non-
breaching party shall be entitled to preliminary and final injunctive
relief, including the imposition of a temporary restraining order, upon
ex parte application for such an order, ordering the breaching party
specifically to perform the foregoing covenants or to refrain from any
act or omission in violation of this Agreement. Notwithstanding the
foregoing, nothing contained herein shall limit the rights of the Parties
to enforce any remedy available to it or them from time to time,
whether at law or in equity.
The prevailing party in any actin or proceeding arising out of
or relating to this Agreement or the subject matter hereof shall be
entitled to recover all of its reasonable attorneys' fees and other
expenses of litigation actually incurred in connection with such action
or proceeding.
7. Counterparts. This Agreement may be executed in
counterparts, and when one counterpart shall have been executed and
delivered by each of the Parties to the Other Party, each such
counterpart will thereupon be deemed an original and will together
with the other such counterparts constitute one Agreement.
8. Successors and Assigns. This Agreement shall inure to
the benefit of, and be binding upon, the respective successors and
assigns of the respective parties hereto.
9. Notices. All notices which may or are required to be
given or made by either party hereto to the other party shall be in
writing. All such notices shall be made by registered or certified
mail, return receipt requested, or by facsimile transmission, or by
telephone (promptly thereafter confirmed in writing), as follows:
(a) If to Aladdin:
Aladdin Oil Corporation
11911 San Vicente Blvd., Suite 385
Los Angeles, California 90049
Attention: Meghan Robins, President and
Chief Executive Officer
Facsimile: (310) 440-4481
with a copy to:
Arter & Hadden
725 S. Figueroa Street
34th Floor
Los Angeles, California 90017
Attention: Ronald Warner, Esq.
Facsimile: (213) 617-9255
If to Buffalo:
Buffalo Capital V, Ltd.
7331 S. Meadow Court
Boulder, Colorado 80301
Attention: Grant Peck
Facsimile: (303) 530-1727
with a copy to:
Frascona, Joiner & Goodman, P.C.
4750 Table Mesa Drive
Boulder, Colorado 80303-5500
Attention: Gary S. Joiner, Esq.
Facsimile: (303) 430-6309
10. Governing Law. This Agreement has been executed
and delivered in, and shall be construed in accordance with the laws
of, the State of Nevada, without giving effect to any conflicts of law
or choice of law provisions.
11. Construction. The captions assigned to the provisions
of this Agreement are for convenience only and shall be disregarded
in construing this Agreement. Unless this context otherwise requires,
the pronouns of any gender shall include the other genders, either the
singular or plural shall include the other, the word "any" shall include
the word "all" and the word "or" is not exclusive.
The Parties have cooperated in the drafting, preparation and
review of this Agreement, and in any construction to be made of this
Agreement, it shall not be construed as against either of the Parties.
12. Entire Agreement. This Agreement incorporates the
complete the entire Agreement between the Parties with reference to
the subject matter hereof, and there are no other oral agreements,
understandings, representations or warranties, express or implied,
relating thereto between the parties. No modification or amendment
of this Agreement shall be binding upon the parties unless executed in
writing by the Parties.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date first above written.
Aladdin Oil Corporation
By: /s/ Meghan Robins, President and Chief Executive Officer
Buffalo Capital V, Ltd.
By: /s/ Grant Peck
President
<PAGE>
EXHIBIT B
Buffalo Capital Opinion Letter
November 23, 1998
Meghan Robins, President
Aladdin Oil Corporation
11911 San Vicente Boulevard, Suite 385
Los Angeles, CA 90049
Re: Buffalo Capital V, Ltd\Aladdin Oil Corporation Merger
Dear Ms. Robins:
We represent Buffalo Capital V, Ltd., a Colorado corporation
(the "Company"). In that capacity, we have been asked to provide
you with our legal opinion in connection with closing under the
Agreement and Plan of Merger and Reorganization dated November
23, 1998 (the "Merger Agreement") executed between Aladdin Oil
Corporation ("Aladdin") and the Company.
This letter is furnished to you pursuant to Section 5.3(a) of the
Merger Agreement.
In conjunction with the request for an opinion, we have
examined the corporate records and proceedings of the Company with
respect to:
(i). The organization and continuing existence of the
Company;
(ii). The legal sufficiency of all corporate proceedings of the
Company taken in connection with the creation, issuance, the form
and legality, and full payment and nonassessability, of all presently
issued and outstanding stock of the Company;
(iii). The legal sufficiency of all corporate proceedings of the
Company taken in connection with the execution, delivery and
performance of the Merger Agreement by the Company; and
(iv). The legal sufficiency of all corporate proceedings of the
Company taken in conjunction with its registration under Section
12(g) of the Securities Exchange Act of 1934 by filing its registration
statement on Form 10-SB, and its subsequent compliance with
applicable reporting obligations under the Securities Exchange Act of
1934.
In addition to examination of the records and proceedings
described above, we have made such other and further factual and
legal examinations and inquiries as we deemed necessary or
appropriate. As to factual matters bearing upon our opinion, we
have, with the Company's permission, relied entirely upon
information, documents and certificates presented to us by the
Company, the accuracy and completeness of which we have not
undertaken to verify or confirm.
Based upon all of the foregoing, we are of the opinion that:
1. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Colorado
and is duly qualified as a corporation and is in good standing to do
business in the State of Colorado with authority to enter into the
Merger Agreement and to carry out the transactions contemplated
thereby.
2. The Merger Agreement has been duly executed and
delivered by the Company and constitutes a valid and binding
agreement of the Company enforceable against the Company in
accordance with its terms.
3. The execution, delivery and performance of the Merger
Agreement by the Company will not conflict with or result in a breach
of the terms, conditions, or provisions of, or constitute a default
under, the Articles of Incorporation or Bylaws of the Company, or
under any material agreement to which the Company is a party or by
which the Company is bound, and will not violate any law or
regulation applicable to the Company.
4. The Company has obtained all consents, approvals,
authorizations, and orders of third parties, including governmental
authorities, if any, necessary for the authorization, execution and
delivery of the Merger Agreement and the consummation of the
transactions contemplated thereby.
5. There is no currently pending or, to the best of our
knowledge, threatened litigation or governmental proceeding that
would restrain, invalidate or adversely affect the transactions which
are the subject of the Merger Agreement.
6. The Company has a class of securities registered
pursuant to Section 12(g) of the Securities Exchange Act of 1934, and
as of the date hereof, has filed all reports and information required to
be filed pursuant to Section 13 of the Securities Exchange Act. All of
such filings were prepared in accordance with the requirements of
Section 13 of the Securities Exchange Act of 1934, and to the best of
our knowledge and belief, did not, at the time they were filed, contain
any untrue statement of a material fact, or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
We are members of the State Bar of Colorado. We express no
opinion as to the laws of any jurisdiction other than the laws of the
State of Colorado and, to the extent applicable to the foregoing
opinion, the federal laws of the United States of America. This
opinion is limited to the matters expressly stated herein and no
opinions are to be inferred or may be implied beyond the opinions
expressly set forth herein.
This opinion is as of the date hereof, and we undertake no,
and hereby disclaim any, obligation to advise you of any change in
any matter set forth herein, whether based on a change in the law, a
change in any fact relating to the Company or any other person or
entity, or any other circumstance. This opinion is provided to you as
a legal opinion only and, without our prior written consent, may not
be relied upon or quoted in whole or in part or otherwise referred to
in any report or document or furnished to any person or entity other
than you, the Company, your respective counsel, and your respective
successors and assigns.
Please also be advised that in connection with the preparation
of the Proxy Statement, we consulted with officers and representatives
of the Company, made inquires of, and discussed the contents of the
Proxy Statement with, such officers and representatives, and
performed such other examinations as we have described herein. In
connection with the preparation of the Proxy Statement, we have also,
with the knowledge and permission of Aladdin Oil Corporation,
received and relied upon information and documents supplied by
officers and representatives of Aladdin Oil Corporation.
Without taking any action to independently verify the
statements made in the Proxy Statement, nothing has come to our
attention that would lead us to believe that the Proxy Statement, or
any amendment or supplement thereto made prior to the date hereof
(if any), contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that we
express no statement as to the financial statements and related
schedules and other financial or statistical data included in the Proxy
Statement.
Frascona, Joiner & Goodman, P.C.
/s/ Gary S. Joiner
<PAGE>
EXHIBIT C - FORM OF ALADDIN LEGAL OPINION
Buffalo Capital V, Ltd.
7331 S. Meadow Court
Boulder, CO 80301
Re: Merger of Aladdin Oil Corporation into Buffalo Capital V, Ltd.
Gentlemen:
We have acted as counsel to Aladdin Oil Corporation, a
Nevada corporation ("Aladdin") in connection with the preparation of
the Agreement and Plan of Merger and Reorganization dated
November 23, 1998 (the "Merger Agreement") executed by Aladdin
and Buffalo Capital V, Ltd. ("Buffalo").
This letter is furnished to you pursuant to Section 5.3(a) of the
Merger Agreement. All capitalized terms used herein and not
otherwise defined herein shall have the meanings set forth in the
Merger Agreement.
In connection with this opinion, we have examined and are
familiar with originals or copies of (i) the Merger Agreement; (ii) the
Articles of Incorporation of Aladdin; (iii) the Bylaws of Aladdin; and
(iv) such other records, documents and instruments as we have
deemed necessary or appropriate as a basis for the opinions set forth
below.
Whenever our opinion with respect to the existence or absence
of facts is indicated to be based on our knowledge or awareness, we
are referring solely to the conscious awareness of facts or other
information by lawyers in this firm who have given substantive
attention to the transaction described in the Merger Agreement, who
are Ronald Warner, David R. Decker, and Brett M. Broderick.
Except as expressly set forth herein, we have not undertaken any
independent investigation to determine the existence or absence of
such facts and no inference as to our knowledge concerning such facts
should be drawn from the fact that such representation has been
undertaken by this firm.
In our examination, and for all purposes of the opinions
express in this letter, we have assumed, with your permission and
without independent investigation, that:
(a) the signatures of persons (other than individuals signing
on behalf of Aladdin) signing all documents in connection with which
this opinion is rendered are genuine and authorized.
(b) all documents submitted to us as copies, whether
certified or not, conform to authentic original documents;
(c) all parties (other than Aladdin) to the documents
reviewed by us have the appropriate power (corporate or individual)
and authority (corporate or individual) to execute, deliver and perform
thereunder, and all such documents have been duly authorized by all
necessary actions on the part of such parties, have been duly executed
by such parties, have been duly delivered by such parties and, as to
all such parties other than Aladdin, constitute the legal, valid and
binding obligations of such parties; and
(d) No consent, approval, authorization, declaration or
filing by or with any governmental commission, board or agency is
required for the valid execution and delivery by you of the Merger
Agreement which has not been duly obtained.
Based on the foregoing, and subject to the limitations,
qualifications and exceptions set forth below, we are of the opinion
that:
1. Aladdin (a) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada
and is duly qualified as a foreign corporation and is in good standing
to do business in each jurisdiction in which it owns, leases or operates
property, except where the failure to so qualify would not have a
material adverse effect on the condition (financial or otherwise),
business assets, liabilities, capitalization, financial position,
operations, results of operations or prospects of Aladdin; and (b) has
corporate power and authority to enter into the Merger Agreement
and to carry out the transactions contemplated thereby.
2. The Merger Agreement has been duly executed and
delivered by Aladdin and constitutes a valid and binding agreement of
Aladdin enforceable against Aladdin in accordance with its terms.
3. The execution, delivery and performance of the Merger
Agreement by Aladdin will not conflict with or result in the breach of
the terms, conditions or provisions of, or constitute a default under,
the Articles of Incorporation or Bylaws of Aladdin or any material
agreement or instrument known to us to which Aladdin is a party or
by which it is bound or any laws or regulatory provisions which are
known to us be applicable to Aladdin.
4. To our knowledge, Aladdin has obtained all consents,
approvals, authorizations, orders of third parties, including
governmental authorities, if any, necessary for the authorization,
execution and delivery of the Merger Agreement and the
consummation of the transactions contemplated thereby.
5. We are not aware of any pending or threatened
litigation or governmental proceeding that would restrain, invalidate
or adversely affect the transaction which are the subject of the Merger
Agreement.
The opinions set forth above are subject to the following
qualifications:
(a) The effect of any applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, fraudulent transfer,
marshaling and other laws relating to or affecting the rights of
creditors generally; and
(b) The effect of general principles of equity, including,
without limitation, concepts of materiality, reasonableness, and good
faith and fair dealing (regardless of whether considered in a
proceeding in equity or at law).
This opinion is limited to matters involving the federal laws of
the United States of America and the laws of the State of Nevada.
Our opinions are an expression of professional judgment and
are not a guaranty of a result. We do not undertake to advise you of
matters which may come to our attention subsequent to the date hereof
which may affect our legal opinions expressed herein.
This opinion is solely for the benefit of the addressee hereof
and may not be relied upon in any manner by any other person or
entity without the express written permission of this firm. Copies of
this opinion letter may not be furnished to any other person or entity,
nor may any portion of this opinion letter be quoted, circulated or
referred to in any other document, without our prior written consent.
Our opinion is limited to the matters stated herein and no opinion is
implied or may be inferred beyond the matters expressly stated herein.
Very truly yours,
Arter & Hadden
/s/<PAGE>
EXHIBIT D
Rights, Preferences and Privileges of Buffalo Preferred Stock
Certificate of Determination of Privileges, Rights and Preferences of
the Series A, 12% Convertible Preferred Stock, $0.01 Par Value of
Aladdin Oil Corporation (a Nevada corporation).
The undersigned, Meghan Robins, hereby certifies that:
1. She is the duly elected and acting President and
Secretary of Aladdin Oil Corporation, a Nevada corporation (the
"Corporation").
2. The Corporation is authorized to issue 4,000,000 share
of Preferred Stock. The number of shares being authorized in the
series of Preferred Stock designated as "Series A 12% Convertible
Preferred Stock, $0.01 par value" is 2,000,000. There are no shares
of said Series A 12% Convertible Stock, $0.01 par value outstanding
as of the date of this Certificate of Determination.
3. Under authority given by the Corporation's Articles of
Incorporation, the Board of Directors has duly adopted the following
recitals and resolutions:
WHEREAS, the Articles of Incorporation of the Corporation
provide for a class of shares known as Preferred Stock, issuable from
time to time in one or more series; and
WHEREAS, the Board of Directors of the Corporation is
authorized within the limitations and restrictions stated in said Articles
of Incorporation to determine or to alter the rights, preferences,
privileges, and restrictions granted to or imposed on any wholly
unissued series of Preferred Stock, to fix the number of shares
constituting any such series, and to determine the designation thereof,
or any of them; and
WHEREAS, the Corporation has not issued any shares of such
Series A 12% Convertible Preferred Stock, $0.01 par value and the
Board of Directors of this Corporation desire to determine the rights,
preferences, privileges and restrictions relating to this series of
Preferred Stock, and the number of shares constituting and the
designation of said series;
RESOLVED, that the Board of Directors hereby determined
the designation of, number of shares constituting, and the rights,
preferences, privileges and restrictions relating to said Series A 12%
Convertible Preferred Stock, $0.01 par value, as follows:
(a) Designation. This series of Preferred Stock shall be
designated "Series A 12% Convertible Preferred Stock, $0.10 Per
Share" (referred to herein as the "Preferred Stock, Series A").
(b) Number of Shares. The number of shares constituting the
Preferred Stock, Series A shall be 2,000,000.
(c) Par Value. The par value of the Preferred Stock, Series A
shall be $0.01 per share.
(d) Voting. The Preferred Stock, Series A shall have no
voting rights on any Corporation matter.
(e) Dividends. Dividends on the Preferred Stock, Series A
shall be cumulative at the rate of 12% per annum. The dividends
shall be paid on a monthly basis at the rate of one percent per month
at the end of each month. Dividends shall not be paid for any month
after the money of June, 1999, and may cease to be paid earlier upon
conversion of the Preferred Stock, Series A into Common Stock. In
the event the Corporation does not pay the dividend in any one
month, the dividend owed to the Preferred Stock, Series A for that
month shall be added to the dividend due the Preferred Stock, for the
following month. In the event there are not sufficient legally
available funds to pay the Preferred Stock, Series A dividends, no
dividends will be paid or set apart for payment on the Common Stock,
no distribution shall be made on the Common Stock (other than a
dividend payable in Common Stock), and no shares of Common Stock
will be redeemed, retired or otherwise acquired for valuable
consideration (except upon conversion of the Preferred Stock, Series
A) unless full cumulative dividends on the Preferred Stock, Series A
for all past quarters and for the current quarter have been paid.
(f) Preference on Liquidation. In the event of a liquidation of
the Corporation, the Preferred Stock, Series A shall have a first claim
over and above the Common Stock and any other Series of Preferred
Stock on the net assets of the Corporation. The net assets shall be
those assets remaining after payment of the liabilities of the
Corporation and prior to any distribution to the shareholders holding
Common Stock. The holders of the Preferred Stock, Series A will
share pro rata in proportion to the dollar amount of the par value of
their respective holdings with any other Series of Preferred Stock
which has been granted a preference on liquidation. In the event the
net assets are not sufficient to return the $0.75 per share to the
Preferred Stock, Series A shareholders, they shall share pro rata in
proportion to the dollar amount of the par value of their respective
holdings.
(g) Conversion. The Preferred Stock, Series A may be
converted at any time, at the option of the holders, into Common
Stock on the basis of one share of Common Stock for each share of
Preferred Stock, Series A.
(h) Transferability. The Preferred Stock, Series A shall not
be transferable, provided that in the event of the death of a holder of
shares of the Preferred Stock, Series A to the heirs or estate of such
person.
This Certificate of Determination is hereby executed by the
President and the Secretary of the Corporation this 23rd day of July,
1998.
/s/ Meghan Robins
President
/s/ Meghan Robins
Secretary
<PAGE>
EXHIBIT E
Purchase Date of Convertible Debentures
<TABLE>
<CAPTION>
Number of Date
Name Units Paid
<S> <C> <C>
Crowder, Brent 15.00 8/1/98
Kamishita, Scott 7.50 8/1/98
Kutcher, Al & Frances 250.00 7/1/98
Lee, Harvey 7.50 8/1/98
Runnels, Jack & Judith 15.10 8/1/98
Sturm, Dagmar 77.50 8/1/98
Taniguchi, Kazue 22.50 8/1/98
Taniguchi Land Trust 15.00 8/1/98
Tagioka Motomu 7.50 8/1/98
</TABLE>
<PAGE>
SCHEDULE A
Aladdin Disclosure Schedule
1. Section 2.2. Aladdin has two wholly-owned subsidiaries: (a)
Aladdin International, Inc., an Ohio corporation; and (b) Aladdin Oil
Corporation of Ohio, an Ohio corporation.
2. Section 2.2(d). Aladdin has a contingent obligation to sell 100%
of the outstanding shares of Common Stock of Aladdin International,
Inc., to Mr. Max P. Lammers for the sum of $1.00. This obligation
arises only if Aladdin is not a "public reporting" company, as defined
by the Securities and Exchange Act of 1934, and the Common Stock
of Aladdin is not quoted on a national stock exchange by June 30,
1999.<PAGE>
SCHEDULE B
Buffalo Disclosure Schedule
3.6 The Proxy Statement to be sent to the shareholders of the
company must be filed with the Securities and Exchange Commission
not less than 10 calendar days prior to the date it is first given or sent
to the shareholders.
3.7 Closing under the Merger Agreement will give rise to right to
cancel the outstanding Class A and Class B Warrants.
<PAGE>
Appendix C - Amended and Restated Articles of Incorporation of
Aladdin Oil Corporation
The undersigned, who, if a natural person, is eighteen years of
age or older, hereby establishes a corporation pursuant to the
Colorado Business Corporation Act as amended and adopts the
following Articles of Incorporation:
FIRST: The name of the corporation is Aladdin Oil
Corporation.
SECOND: The corporation shall have and may exercise all
of the rights, powers and privileges now or hereafter conferred upon
corporations organized under the laws of Colorado. In addition, the
corporation may do everything necessary, suitable or proper for the
accomplishment of any of its corporate purposes. The corporation
may conduct part or all of its business in any part of Colorado, the
United States or the world and may hold, purchase, mortgage, lease
and convey real and personal property in any of such places.
THIRD: The aggregate number of shares which the
corporation shall have authority to issue is one hundred ten million
(110,000,000) shares of which a portion shall be common stock and a
portion shall be preferred stock, all as described below.
A. Common Stock. The aggregate number of common
shares which the corporation shall have the authority to issue is one
hundred million (100,000,000), which shares shall be designated
"Common Stock." Subject to all the rights of the Preferred Stock as
expressly provided herein, by law or by the Board of Directors
pursuant to this Article, the Common Stock of the corporation shall
possess all such rights and privileges as are afforded to capital stock
by applicable law in the absence of any express grant of rights or
privileges in these Articles of Incorporation, including, but not limited
to, the following rights and privileges:
(a) dividends may be declared and paid or set apart
for payment on the Common Stock out of any assets or funds
of the corporation legally available for the payment of
dividends;
(b) the holders of Common Stock shall have
unlimited voting rights, including the right to vote for the
election of directors and on all other matters requiring
stockholder action. Each holder of Common Stock shall have
one vote for each share of Common Stock standing in his name
on the books of the corporation and entitled to vote.
Cumulative voting shall not be permitted in the election of
directors or otherwise.
(c) on the voluntary or involuntary liquidation,
dissolution or winding up of the corporation, and after paying
or adequately providing for the payment of all of its
obligations and amounts payable in liquidation, dissolution or
winding up, and subject to the rights of the holders of
Preferred Stock, if any, the net assets of the corporation shall
be distributed pro rata to the holders of the Common Stock.
B. Preferred Stock. The aggregate number of
preferred shares which this corporation shall have the authority to
issue is ten million (10,000,000) shares, each with no par value,
which shares shall be designated "Preferred Stock." Shares of
Preferred Stock may be issued from time to time in one or more
series as determined by the Board of Directors. The Board of
Directors is hereby authorized, by resolution or resolutions, to
provide from time to time, out of the unissued shares of Preferred
Stock not then allocated to any series of Preferred Stock, for a series
of the Preferred Stock. Each such series shall have distinctive serial
designations. Before any shares of any such series of Preferred Stock
are issued, the Board of Directors shall fix and determine, and is
hereby expressly empowered to fix and determine, by resolution or
resolutions, the voting powers, full or limited, or no voting powers,
and the designations, preferences and relative, participating, optional
or other special rights, and the qualifications, limitations and
restrictions thereof as provided by Colorado law. Before issuing any
shares of a class or series, the corporation shall deliver to the
secretary of state for filing articles of amendment to these articles of
incorporation that set forth information required by Colorado law,
including but not limited to, the designations, preferences, limitations,
and relative rights of the class or series of shares.
C. Voting. Unless otherwise ordered by a court of
competent jurisdiction, at all meetings of shareholders of at least a
majority of the shares of a voting group entitled to vote at such
meeting, represented in person or by proxy, shall constitute a quorum
of that voting group.
FOURTH: The number of directors of the corporation shall
be fixed by the bylaws, should the bylaws fail to fix such a number,
then by resolution adopted from time to time by the board of
directors, provided that the number of directors shall not be more than
seven (7) nor less than two (2). Two (2) directors shall constitute the
initial board of directors. The following persons are elected to serve
as the corporation's initial directors until the first annual meeting of
shareholders or until their successors are duly elected and qualified:
<TABLE>
<CAPTION>
Name Address
<S> <C>
Grant W. Peck 7331 South Meadow Court
Boulder, CO 80301
Dean F. Sessions 2040 W. 10th Avenue,
Apt.E-301
Broomfield, Colorado 80020
</TABLE>
FIFTH: The street address of the initial registered office
of the corporation is 1600 Broadway, Denver, Colorado 80202. The
name of the initial registered agent of the corporation at such address
is CT Corporation System.
SIXTH: The address of the principal office of the
corporation is 1911 San Vicente Blvd., Los Angeles, California
90049.
SEVENTH: The following provisions are inserted for the
management of the business and for the conduct of the affairs of the
corporation, and the same are in furtherance of and not in limitation
or exclusion of the powers conferred by law.
(a) Conflicting Interest Transactions. As used in
this paragraph, "conflicting interest transaction" means any of the
following: (i) a loan or other assistance by the corporation to a
director of the corporation or to an entity in which a director of the
corporation is a director or officer or has a financial interest; (ii) a
guaranty by the corporation of an obligation of a director of the
corporation or of an obligation of an entity in which a director of the
corporation is a director or officer or has a financial interest; or (iii) a
contract or transaction between the corporation and a director of the
corporation or between the corporation and an entity in which a
director of the corporation is a director or officer or has a financial
interest. No conflicting interest transaction shall be void or voidable,
be enjoined, be set aside, or give rise to an award of damages or
other sanctions in a proceeding by a shareholder or by or in the right
of the corporation, solely because the conflicting interest transaction
involves a director of the corporation or an entity in which a director
of the corporation is a director or officer or has a financial interest, or
solely because the director is present at or participates in the meeting
of the corporation's board of directors or of the committee of the
board of directors which authorized, approves or ratifies a conflicting
interest transaction, or solely because the director's vote is counted
for such purpose if: (A) the material facts as to the director's
relationship or interest and as to the conflicting interest transaction are
disclosed or are known to the board of directors or the committee,
and the board of directors or committee in good faith authorizes,
approves or ratifies the conflicting interest transaction by the
affirmative vote of a majority of the disinterested directors, even
though the disinterested directors are less than a quorum; or (B) the
material facts as to the director's relationship or interest and as to the
conflicting interest transaction are disclosed or are known to the
shareholders entitled to vote thereon, and the conflicting interest
transaction is specifically authorized, approved or ratified in good
faith by a vote of the shareholders; or (C) a conflicting interest
transaction is fair as to the corporation as of the time it is authorized,
approved or ratified by the board of directors, a committee thereof, or
the shareholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the board of
directors or of a committee which authorizes, approves or ratifies the
conflicting interest transaction.
(b) Loans and Guaranties for the Benefit of
Directors. Neither the board of directors nor any committee thereof
shall authorize a loan by the corporation to a director of the
corporation or to an entity in which a director of the corporation is a
director or officer or has a financial interest, or a guaranty by the
corporation of an obligation of a director of the corporation or of an
obligation of an entity in which a director of the corporation is a
director or officer or has a financial interest, until at least ten days
after written notice of the proposed authorization of the loan or
guaranty has been given to the shareholders who would be entitled to
vote thereon if the issue of the loan or guaranty were submitted to a
vote of the shareholders. The requirements of this paragraph (b) are
in addition to, and not in substitution for, the provisions of paragraph
(a) of Article SEVENTH.
(c) Indemnification. The corporation shall
indemnify, to the maximum extent permitted by law, any person who
is or was a director, officer, agent, fiduciary or employee of the
corporation against any claim, liability or expenses arising against or
incurred by such person made party to a proceeding because he is or
was a director, officer, agent, fiduciary or employee of the
corporation or because he was a director, officer, agent, fiduciary or
employee of the corporation or because he is or was serving another
entity as a director, officer, partner, trustee, employee, fiduciary or
agent at the corporation's request. The corporation shall further have
the authority to the maximum extent permitted by law to purchase and
maintain insurance providing such indemnification.
(d) Limitation on Director's Liability. No director
of this corporation shall have any personal liability for monetary
damages to the corporation or its shareholders for breach of his
fiduciary duty as a director, except that this provision shall not
eliminate or limit the personal liability of a director to the corporation
or its shareholders for monetary damages for: (i) any breach of the
director's duty of loyalty to the corporation or its shareholders; (ii)
acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (iii) voting for or assenting
to a distribution in violation of Colorado Revised Statutes Section 7-
106-401 or the articles of incorporation if it is established that the
director did not perform his duties in compliance with Colorado
Revised Statutes Section 7-108-401, provided that the personal
liability of a director in this circumstance shall be limited to the
amount of the distribution which exceeds what could have been
distributed without violation of Colorado Revised Statutes Section 7-
106-401 or the articles of incorporation; or (iv) any transaction from
which the director directly or indirectly derives an improper personal
benefit. Nothing contained herein will be construed to deprive any
director of his right to all defenses ordinarily available to a director
nor will anything herein be construed to deprive any director of any
right he may have for contribution from any other director or other
person.
(e) Negation of Equitable Interests in Shares or
Rights. Unless a person is recognized as a shareholder through
procedures established by the corporation pursuant to Colorado
Revised Statutes Section 7-107-204 or any similar law, the corporation
shall be entitled to treat the registered holder of any shares of the
corporation as the owner thereof for all purposes permitted by the
Colorado Business Corporation Act, including without limitation all
rights deriving from such shares, and the corporation shall not be
bound to recognize any equitable or other claim to, or interest in,
such shares or rights deriving from such shares on the part of any
other person including without limitation, a purchaser, assignee or
transferee of such shares, unless and until such other person becomes
the registered holder of such shares or is recognized as such, whether
or not the corporation shall have either actual or constructive notice of
the claimed interest of such other person. By way of example and not
of limitation, until such other person has become the registered holder
of such shares or is recognized pursuant to Colorado Revised Statutes
Section 7-107-204 or any similar applicable law, he shall not be
entitled: (i) to receive notice of the meetings of the shareholders; (ii)
to vote at such meetings; (iii) to examine a list of the shareholders;
(iv) to be paid dividends or other distributions payable to
shareholders; or (v) to own, enjoy and exercise any other rights
deriving from such shares against the corporation. Nothing contained
herein will be construed to deprive any beneficial shareholder, as
defined in Colorado Revised Statutes Section 7-113-101(1), of any
right he may have pursuant to Article 113 of the Colorado Business
Corporation Act or any subsequent law.
EIGHTH: The name and address of the incorporator is:
Gary S. Joiner
4750 Table Mesa Drive
Boulder, Colorado 80303
DATED the 19th day of September, 1997.
/s/ Gary S. Joiner
Incorporator
Gary S. Joiner hereby consents to the appointment as the initial
registered agent for Buffalo Capital V, Ltd.
/s/ Gary S. Joiner
Initial Registered Agent
<PAGE>
Appendix C (continued)
BYLAWS
OF
ALADDIN OIL CORPORATION
ARTICLE I
Offices
The principal office of the corporation shall be designated from
time to time by the corporation and may be within or outside of
Colorado.
The corporation may have such other offices, either within or
outside Colorado, as the board of directors may designate or as the
business of the corporation may require from time to time.
The registered office of the corporation required by the
Colorado Business Corporation Act to be maintained in Colorado may
be, but need not be, identical with the principal office, and the
address of the registered office may be changed from time to time by
the board of directors.
ARTICLE II
Shareholders
Section 1. Annual Meeting. The annual meeting of the
shareholders shall be held during the month of September of each year
on a date and at a time fixed by the board of directors of the
corporation (or by the president in the absence of action by the board
of directors), beginning with the year 1998, for the purpose of
electing directors and for the transaction of such other business as
may come before the meeting. If the election of directors is not held
on the day fixed as provided herein for any annual meeting of the
shareholders, or any adjournment thereof, the board of directors shall
cause the election to be held at a special meeting of the shareholders
as soon thereafter as it may conveniently be held.
A shareholder may apply to the district court in the county in
Colorado where the corporation's principal office is located or, if the
corporation has no principal office in Colorado, to the district court of
the county in which the corporation's registered office is located to
seek an order that a shareholder meeting be held (i) if an annual
meeting was not held within six months after the close of the
corporation's most recently ended fiscal year or fifteen months after
its last annual meeting, whichever is earlier, or (ii) if the shareholder
participated in a proper call of or proper demand for a special meeting
and notice of the special meeting was not given within thirty days
after the date of the call or the date the last of the demands necessary
to require calling of the meeting was received by the corporation
pursuant to C.R.S. Section 7-107-102(1)(b), or the special meeting
was not held in accordance with the notice.
Section 2. Special Meetings. Unless otherwise prescribed
by statute, special meetings of the shareholders may be called for any
purpose by the president or by the board of directors. The president
shall call a special meeting of the shareholders if the corporation
receives one or more written demands for the meeting, stating the
purpose or purposes for which it is to be held, signed and dated by
holders of shares representing at least ten percent of all the votes
entitled to be cast on any issue proposed to be considered at the
meeting.
Section 3. Place of Meeting. The board of directors may
designate any place, either within or outside Colorado, as the place
for any annual meeting or any special meeting called by the board of
directors. A waiver of notice signed by all shareholders entitled to
vote at a meeting may designate any place, either within or outside
Colorado, as the place for such meeting. If no designation is made,
or if a special meeting is called other than by the board, the place of
meeting shall be the principal office of the corporation.
Section 4. Notice of Meeting. Written notice stating the
place, date, and hour of the meeting shall be given not less than ten
nor more than sixty days before the date of the meeting, except that
(i) if the number of authorized shares is to be increased, at least thirty
days' notice shall be given, or (ii) any other longer notice period is
required by the Colorado Business Corporation Act. Notice of a
special meeting shall include a description of the purpose or purposes
of the meeting. Notice of an annual meeting need not include a
description of the purpose or purposes of the meeting except the
purpose or purposes shall be stated with respect to (i) an amendment
to the articles of incorporation of the corporation, (ii) a merger or
share exchange in which the corporation is a party and, with respect
to a share exchange, in which the corporation's shares will be
acquired, (iii) a sale, lease, exchange or other disposition, other than
in the usual and regular course of business, of all or substantially all
of the property of the corporation or of another entity which this
corporation controls, in each case with or without the goodwill, (iv) a
dissolution of the corporation, or (v) any other purpose for which a
statement of purpose is required by the Colorado Business
Corporation Act. Notice shall be given personally or by mail, private
carrier, telegraph, teletype, electronically transmitted facsimile or
other form of wire or wireless communication by or at the direction
of the president, the secretary, or the officer or persons calling the
meeting, to each shareholder of record entitled to vote at such
meeting. If mailed and if in a comprehensible form, such notice shall
be deemed to be given and effective when deposited in the United
States mail, addressed to the shareholder at his address as it appears
in the corporation's current record of shareholders, with postage
prepaid. If notice is given other than by mail, and provided that such
notice is in a comprehensible form, the notice is given and effective
on the date received by the shareholder.
If requested by the person or persons lawfully calling such
meeting, the secretary shall give notice thereof at corporation
expense. No notice need be sent to any shareholder if three
successive notices mailed to the last known address of such
shareholder have been returned as undeliverable until such time as
another address for such shareholder is made known to the
corporation by such shareholder. In order to be entitled to receive
notice of any meeting, a shareholder shall advise the corporation in
writing of any change in such shareholder's mailing address as shown
on the corporation's books and records.
When a meeting is adjourned to another date, time or place,
notice need not be given of the new date, time or place if the new
date, time or place of such meeting is announced before adjournment
at the meeting at which the adjournment is taken. At the adjourned
meeting the corporation may transact any business which may have
been transacted at the original meeting. If the adjournment is for
more than 120 days, or if a new record date is fixed for the adjourned
meeting, a new notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the meeting as of the new
record date.
A shareholder may waive notice of a meeting before or after
the time and date of the meeting by a writing signed by such
shareholder. Such waiver shall be delivered to the corporation for
filing with the corporate records. Further, by attending a meeting
either in person or by proxy, a shareholder waives objection to lack of
notice or defective notice of the meeting unless the shareholder objects
at the beginning of the meeting to the holding of the meeting or the
transaction of business at the meeting because of lack of notice or
defective notice. By attending the meeting, the shareholder also
waives any objection to consideration at the meeting of a particular
matter not within the purpose or purposes described in the meeting
notice unless the shareholder objects to considering the matter when it
is presented.
Section 5. Fixing of Record Date. For the purposes of
determining shareholders entitled to (i) notice of or vote at any
meeting of shareholders or any adjournment thereof, (ii) receive
distributions or share dividends, or (ii) demand a special meeting, or
to make a determination of shareholders for any other proper purpose,
the board of directors may fix a future date as the record date for any
such determination of shareholders, such date in any case to be not
more than seventy days, and, in case of a meeting of shareholders not
less than ten days, prior to the date on which the particular action
requiring such determination of shareholders is to be taken. If no
record date is fixed by the directors, the record date shall be the date
on which notice of the meeting is mailed to shareholders, or the date
on which the resolution of the board of directors providing for a
distribution is adopted, as the case may be. When a determination of
shareholders entitled to vote at any meeting of shareholders is made as
provided in this Section, such determination shall apply to any
adjournment thereof unless the board of directors fixes a new record
date, which it must do if the meeting is adjourned to a date more than
120 days after the date fixed for the original meeting.
Notwithstanding the above, the record date for determining the
shareholders entitled to take action without a meeting or entitled to be
given notice of action so taken shall be the date a writing upon which
the action is taken is first received by the corporation. The record
date for determining shareholders entitled to demand a special meeting
shall be the date of the earliest of any of the demands pursuant to
which the meeting is called.
Section 6. Voting Lists. The secretary shall make, at the
earlier of ten days before each meeting of shareholders or two
business days after notice of the meeting has been given, a complete
list of the shareholders entitled to be given notice of such meeting or
any adjournment thereof. The list shall be arranged by voting groups
and within each voting group by class or series of shares, shall be in
alphabetical order within each class or series, and shall show the
address of and the number of shares of each class or series held by
each shareholder. For the period beginning the earlier of ten days
prior to the meeting or two business days after notice of the meeting
is given and continuing through the meeting and any adjournment
thereof, this list shall be kept on file at the principal office of the
corporation, or at a place (which shall be identified in the notice) in
the city where the meeting will be held. Such list shall be available
for inspection on written demand by any shareholder (including for
the purpose of this Section 6 any holder of voting trust certificates) or
his agent or attorney during regular business hours and during the
period available for inspection. The original stock transfer books
shall be prima facie evidence as to the shareholders entitled to
examine such list or to vote at any meeting of shareholders.
Any shareholder, his agent or attorney may copy the list
during regular business hours and during the period it is available for
inspection, provided (i) the shareholder has been a shareholder for at
least three months immediately preceding the demand or holds at least
five percent of all outstanding shares of any class of shares as of the
date of the demand, (ii) the demand is made in good faith and for a
purpose reasonably related to the demanding shareholder's interest as
a shareholder, (iii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to
inspect, (iv) the records are directly connected with the described
purpose and (v) the shareholder pays a reasonable charge covering the
costs of labor and material for such copies, not to exceed the
estimated cost of production and reproduction.
Section 7. Recognition Procedure for Beneficial Owners.
The board of directors may adopt by resolution a procedure whereby
a shareholder of the corporation may certify in writing to the
corporation that all or a portion of the shares registered in the name
of such shareholder are held for the account of a specified person or
persons. The resolution may set forth (i) the types of nominees to
which it applies, (ii) the rights or privileges that the corporation will
recognize in a beneficial owner, which may include rights and
privileges other than voting; (iii) the form of certification and the
information to be contained therein, (iv) if the certification is with
respect to a record date, the time within which the certification must
be received by the corporation, (v) the period for which the nominee's
use of the procedure is effective, and (vi) such other provisions with
respect to the procedure as the board deems necessary or desirable.
Upon receipt by the corporation of a certificate complying with the
procedure established by the board of directors, the persons specified
in the certification shall be deemed, for the purpose or purposes set
forth in the certification, to be the registered holders of the number of
shares specified in place of the shareholder making the certification.
Section 8. Quorum and Manner of Acting. At least a
majority of the votes entitled to be cast on a matter by a voting group
shall constitute a quorum of that voting group for action on the
matter. If less than a majority of such votes are represented at a
meeting, a majority of the votes so represented may adjourn the
meeting from time to time without further notice, for a period not to
exceed 120 days for any one adjournment. If a quorum is present at
such adjourned meeting, any business may be transacted which might
have been transacted at the meeting as originally noticed. The
shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of
enough shareholders to leave less than a quorum, unless the meeting
is adjourned and a new record date is set for the adjourned meeting.
If a quorum exists, action on a matter other than the election
of directors by a voting group is approved if the votes cast within the
voting group favoring the action exceed the votes cast within the
voting group opposing the action, unless the vote of a greater number
or voting by classes is required by law or the articles of
incorporation.
Section 9. Proxies. At all meetings of shareholders, a
shareholder may vote by proxy by signing an appointment form or
similar writing, either personally or by his duly authorized attorney-
in-fact. A shareholder may also appoint a proxy by transmitting or
authorizing the transmission of a telegram, teletype, or other
electronic transmission providing a written statement of the
appointment to the proxy, a proxy solicitor, proxy support service
organization, or other person duly authorized by the proxy to receive
appointments as agent for the proxy, or to the corporation. The
transmitted appointment shall set forth or be transmitted with written
evidence from which it can be determined that the shareholder
transmitted or authorized the transmission of the appointment. The
proxy appointment form or similar writing shall be filed with the
secretary of the corporation before or at the time of the meeting. The
appointment of a proxy is effective when received by the corporation
and is valid for eleven months unless a different period is expressly
provided in the appointment form or similar writing.
Any complete copy, including an electronically transmitted
facsimile, of an appointment of a proxy may be substituted for or used
in lieu of the original appointment for any purpose for which the
original appointment could be used.
Revocation of a proxy does not affect the right of the
corporation to accept the proxy's authority unless (i) the corporation
had notice that the appointment was coupled with an interest and
notice that such interest is extinguished is received by the secretary or
other officer or agent authorized to tabulate votes before the proxy
exercises his authority under the appointment, or (ii) other notice of
the revocation of the appointment is received by the secretary or other
officer or agent authorized to tabulate votes before the proxy exercises
his authority under the appointment. Other notice of revocation may,
in the discretion of the corporation, be deemed to include the
appearance at a shareholders' meeting of the shareholder who granted
the proxy and his voting in person on any matter subject to a vote at
such meeting.
The death or incapacity of the shareholder appointing a proxy
does not affect the right of the corporation to accept the proxy's
authority unless notice of the death or incapacity is received by the
secretary or other officer or agent authorized to tabulate votes before
the proxy exercises his authority under the appointment.
The corporation shall not be required to recognize an
appointment made irrevocable if it has received a writing revoking the
appointment signed by the shareholder (including a shareholder who is
a successor to the shareholder who granted the proxy) either
personally or by his attorney-in-fact, notwithstanding that the
revocation may be a breach of an obligation of the shareholder to
another person not to revoke the appointment.
Subject to Section 11 and any express limitation on the proxy's
authority appearing on the appointment form, the corporation is
entitled to accept the proxy's vote or other action as that of the
shareholder making the appointment.
Section 10. Voting of Shares. Each outstanding share,
regardless of class, shall be entitled to one vote, and each fractional
share shall be entitled to a corresponding fractional vote on each
matter submitted to a vote at a meeting of shareholders, except to the
extent that the voting rights of the shares of any class or classes are
limited or denied by the articles of incorporation as permitted by the
Colorado Business Corporation Act. Cumulative voting shall not be
permitted in the election of directors or for any other purpose. Each
record holder of stock shall be entitled to vote in the election of
directors and shall have as many votes for each of the shares owned
by him as there are directors to be elected and for whose election he
has the right to vote.
At each election of directors, that number of candidates
equaling the number of directors to be elected, having the highest
number of votes cast in favor of their election, shall be elected to the
board of directors.
Except as otherwise ordered by a court of competent
jurisdiction upon a finding that the purpose of this Section would not
be violated in the circumstances presented to the court, the shares of
the corporation are not entitled to be voted if they are owned, directly
or indirectly, by a second corporation, domestic or foreign, and the
first corporation owns, directly or indirectly, a majority of the shares
entitled to vote for directors of the second corporation except to the
extent the second corporation holds the shares in a fiduciary capacity.
Redeemable shares are not entitled to be voted after notice of
redemption is mailed to the holders and a sum sufficient to redeem the
shares has been deposited with a bank, trust company or other
financial institution under an irrevocable obligation to pay the holders
the redemption price on surrender of the shares.
Section 11. Corporation's Acceptance of Votes. If the
name signed on a vote, consent, waiver, proxy appointment, or proxy
appointment revocation corresponds to the name of a shareholder, the
corporation, if acting in good faith, is entitled to accept the vote,
consent, waiver, proxy appointment or proxy appointment revocation
and give it effect as the act of the shareholder. If the name signed on
a vote, consent, waiver, proxy appointment or proxy appointment
revocation does not correspond to the name of a shareholder, the
corporation, if acting in good faith, is nevertheless entitled to accept
the vote, consent, waiver, proxy appointment or proxy appointment
revocation and to give it effect as the act of the shareholder if:
(i) the shareholder is an entity and the name signed
purports to be that of an officer or agent of the entity;
(ii) the name signed purports to be that of an
administrator, executor, guardian or conservator representing the
shareholder and, if the corporation requests, evidence of fiduciary
status acceptable to the corporation has been presented with respect to
the vote, consent, waiver, proxy appointment or proxy appointment
revocation;
(iii) the name signed purports to be that of a receiver
or trustee in bankruptcy of the shareholder and, if the corporation
requests, evidence of this status acceptable to the corporation has been
presented with respect to the vote, consent, waiver, proxy
appointment or proxy appointment revocation;
(iv) the name signed purports to be that of a pledgee,
beneficial owner or attorney-in-fact of the shareholder and, if the
corporation requests, evidence acceptable to the corporation of the
signatory's authority to sign for the shareholder has been presented
with respect to the vote, consent, waiver, proxy appointment or proxy
appointment revocation;
(v) two or more persons are the shareholder as co-
tenants or fiduciaries and the name signed purports to be the name of
at least one of the co-tenants or fiduciaries, and the person signing
appears to be acting on behalf of all the co-tenants or fiduciaries; or
(vi) the acceptance of the vote, consent, waiver,
proxy appointment or proxy appointment revocation is otherwise
proper under rules established by the corporation that are not
inconsistent with this Section 11.
The corporation is entitled to reject a vote, consent, waiver,
proxy appointment or proxy appointment revocation if the secretary or
other officer or agent authorized to tabulate votes, acting in good
faith, has reasonable basis for doubt about the validity of the signature
on it or about the signatory's authority to sign for the shareholder.
Neither the corporation nor its officers nor any agent who
accepts or rejects a vote, consent, waiver, proxy appointment or
proxy appointment revocation in good faith and in accordance with the
standards of this Section is liable in damages for the consequences of
the acceptance or rejection.
Section 12. Informal Action by Shareholders. Any action
required or permitted to be taken at a meeting of the shareholders may
be taken without a meeting if a written consent (or counterparts
thereof) that sets forth the action so taken is signed by all of the
shareholders entitled to vote with respect to the subject matter thereof
and received by the corporation. Such consent shall have the same
force and effect as a unanimous vote of the shareholders and may be
stated as such in the document. Action taken under this Section 12 is
effective as of the date the last writing necessary to effect this action
is received by the corporation, unless all of the writings specify a
different effective date, in which case such specified date shall be the
effective date for such action. If any shareholder revokes his consent
as provided for herein prior to what would otherwise be the effective
date, the action proposed in the consent shall be invalid. The record
date for determining shareholders entitled to take action without a
meeting is the date the corporation receives a writing upon which the
action is taken.
Any shareholder who has signed a writing describing and
consenting to action taken pursuant to this Section 12 may revoke
such consent by a writing signed by the shareholder describing the
action and stating that the shareholder's prior consent thereto is
revoked, if such writing is received by the corporation before the
effectiveness of the action.
Section 13. Meetings by Telecommunication. Any or all of
the shareholders may participate in an annual or special shareholders'
meeting by, or the meeting may be conducted through the use of, any
means of communication by which all persons participating in the
meeting may hear each other during the meeting. A shareholder
participating in a meeting by this means is deemed to be present in
person at the meeting.
ARTICLE III
Board of Directors
Section 1. General Powers. All corporate powers shall be
exercised by or under the authority of, and the business and affairs of
the corporation shall be managed under the direction of its board of
directors, except as otherwise provided in the Colorado Business
Corporation Act or the articles of incorporation.
Section 2. Number, Qualifications and Tenure. The
number of directors of the corporation shall be fixed from time to
time by the board of directors, within a range of no less than two or
more than seven. A director shall be a natural person who is eighteen
years of age or older. A director need not be a resident of Colorado
or a shareholder of the corporation.
Directors shall be elected at each annual meeting of
shareholders. Each director shall hold office until the next annual
meeting of shareholders following his election and thereafter until his
successor shall have been elected and qualified. Directors shall be
removed in the manner provided by the Colorado Business
Corporation Act.
Section 3. Vacancies. Any director may resign at any
time by giving written notice to the corporation. Such resignation
shall take effect at the time the notice is received by the corporation
unless the notice specifies a later effective date. Unless otherwise
specified in the notice of resignation, the corporation's acceptance of
such resignation shall not be necessary to make it effective. Any
vacancy on the board of directors may be filled by the affirmative
vote of a majority of the shareholders or the board of directors. If the
directors remaining in office constitute fewer than a quorum of the
board, the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If elected by the
directors, the director shall hold office until the next annual
shareholder's meeting at which directors are elected. If elected by the
shareholders, the director shall hold office for the unexpired term of
his predecessor in office; except that, if the director's predecessor was
elected by the directors to fill a vacancy, the director elected by the
shareholders shall hold office for the unexpired term of the last
predecessor elected by the shareholders.
Section 4. Regular Meetings. A regular meeting of the
board of directors shall be held without notice immediately after and
at the same place as the annual meeting of shareholders. The board
of directors may provide by resolution the time and place, either
within or outside Colorado, for the holding of additional regular
meetings without other notice.
Section 5. Special Meetings. Special meetings of the
board of directors may be called by or at the request of the president
or any two directors. The person or persons authorized to call special
meetings of the board of directors may fix any place, either within or
outside Colorado, as the place for holding any special meeting of the
board of directors called by them, provided that no meeting shall be
called outside the State of Colorado unless a majority of the board of
directors has so authorized.
Section 6. Notice. Notice of any special meeting shall be
given at least two days prior to the meeting by written notice either
personally delivered or mailed to each director at his business address,
or by notice transmitted by telegraph, telex, electronically transmitted
facsimile or other form of wire or wireless communication. If
mailed, such notice shall be deemed to be given and to be effective on
the earlier of (i) three days after such notice is deposited in the United
States mail, properly addressed, with postage prepaid, or (ii) the date
shown on the return receipt, if mailed by registered or certified mail
return receipt requested. If notice is given by telex, electronically
transmitted facsimile or other similar form of wire or wireless
communication, such notice shall be deemed to be given and to be
effective when sent, and with respect to a telegram, such notice shall
be deemed to be given and to be effective when the telegram is
delivered to the telegraph company. If a director has designated in
writing one or more reasonable addresses or facsimile numbers for
delivery of notice to him, notice sent by mail, telegram, telex,
electronically transmitted facsimile or other form of wire or wireless
communication shall not be deemed to have been given or to be
effective unless sent to such addresses or facsimile numbers, as the
case may be.
A director may waive notice of a meeting before or after the
time and date of the meeting by a writing signed by such director.
Such waiver shall be delivered to the corporation for filing with the
corporate records. Further, a director's attendance at or participation
in a meeting waives any required notice to him of the meeting unless
at the beginning of the meeting, or promptly upon his arrival, the
director objects to holding the meeting or transacting business at the
meeting because of lack of notice or defective notice and does not
thereafter vote for or assent to action taken at the meeting. Neither
the business to be transacted at, nor the purpose of, any regular or
special meeting of the board of directors need be specified in the
notice or waiver of notice of such meeting.
Section 7. Quorum. A majority of the number of
directors fixed by the board of directors pursuant to Section 2 or, if
no number is fixed, a majority of the number in office immediately
before the meeting begins, shall constitute a quorum for the
transaction of business at any meeting of the board of directors. If
less than such majority is present at a meeting, a majority of the
directors present may adjourn the meeting from time to time without
further notice, for a period not to exceed sixty days at any one
adjournment.
Section 8. 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 board of directors. No director may vote or act by
proxy at any meeting of directors.
Section 9. Compensation. By resolution of the board of
directors, any director may be paid any one or more of the following:
his expenses, if any, of attendance at meetings, a fixed sum for
attendance at each meeting, a stated salary as director, or such other
compensation as the corporation and the director may reasonably
agree upon. No such payment shall preclude any director from
serving the corporation in any other capacity and receiving
compensation therefor.
Section 10. Presumption of Assent. A director of the
corporation who is present at a meeting of the board of directors or
committee of the board at which action on any corporate matter is
taken shall be presumed to have assented to the action taken unless (i)
the director objects at the beginning of the meeting, or promptly upon
his arrival, to the holding of the meeting or the transaction of business
at the meeting and does not thereafter vote for or assent to any action
taken at the meeting, (ii) the director contemporaneously requests that
his dissent or abstention as to any specific action taken be entered in
the minutes of the meeting, or (iii) the director causes written notice
of his dissent or abstention as to any specific action to be received by
the presiding officer of the meeting before its adjournment or by the
corporation promptly after the adjournment of the meeting. A
director may dissent to a specific action at a meeting, while assenting
to others. The right to dissent to a specific action taken at a meeting
of the board of directors or a committee of the board shall not be
available to a director who voted in favor of such action.
Section 11. Committees. By resolution adopted by a
majority of all the directors in office when the action is taken, the
board of directors may designate from among its members an
executive committee and one or more other committees, and appoint
one or more members of the board of directors to serve on them. To
the extent provided in the resolution, each committee shall have all
the authority of the board of directors, except that no such committee
shall have the authority to (i) authorize distributions, (ii) approve or
propose to shareholders actions or proposals required by the Colorado
Business Corporation Act to be approved by shareholders, (iii) fill
vacancies on the board of directors or any committee thereof, (iv)
amend articles of incorporation, (v) adopt, amend or repeal the
bylaws, (vi) approve a plan of merger not requiring shareholder
approval, (vii) authorize or approve the reacquisition of shares unless
pursuant to a formula or method prescribed by the board of directors,
or (viii) authorize or approve the issuance or sale of shares, or
contract for the sale of shares or determine the designations and
relative rights, preferences and limitations of a class or series of
shares, except that the board of directors may authorize a committee
or officer to do so within limits specifically prescribed by the board of
directors. The committee shall then have full power within the limits
set by the board of directors to adopt any final resolution setting forth
all preferences, limitations and relative rights of such class or series
and to authorize an amendment of the articles of incorporation stating
the preferences, limitations and relative rights of a class or series for
filing with the Secretary of State under the Colorado Business
Corporation Act.
Sections 4, 5, 6, 7, 8 and 12 of Article IV, which govern
meetings, notice, waiver of notice, quorum, voting requirements and
action without a meeting of the board of directors, shall apply to
committees and their members appointed under this Section 11.
Neither the designation of any such committee, the delegation
of authority to such committee, nor any action by such committee
pursuant to its authority shall alone constitute compliance by any
member of the board of directors or a member of the committee in
question with his responsibility to conform to the standards of care set
forth in Article IV, Section 14 of these bylaws.
Section 12. Action Without a Meeting. Any action
required or permitted to be taken at a meeting of the directors or any
committee designated by the board of directors may be taken without
a meeting if a written consent (or counterparts thereof) that sets forth
the action so taken is signed by all of the directors entitled to vote
with respect to the action taken. Such consent shall have the same
force and effect as a unanimous vote of the directors or committee
members and may be stated as such in any document. Unless the
consent specifies a different effective date, action taken under this
Section 12 is effective at the time the last director signs a writing
describing the action taken, unless, before such time, any director has
revoked his consent by a writing signed by the director and received
by the president or secretary of the corporation.
Section 13. Telephonic Meetings. The board of directors
may permit any director (or any member of a committee designated
by the board) to participate in a regular or special meeting of the
board of directors or a committee thereof through the use of any
means of communication by which all directors participating in the
meeting can hear each other during the meeting. A director
participating in a meeting in this manner is deemed to be present in
person at the meeting.
Section 14. Standard of Care. A director shall perform his
duties as a director, including, without limitation his duties as a
member of any committee of the board, in good faith, in a manner he
reasonably believes to be in the best interests of the corporation, and
with the care an ordinarily prudent person in a like position would
exercise under similar circumstances. In performing his duties, a
director shall be entitled to rely on information, opinions, reports or
statements, including financial statements and other financial data, in
each case prepared or presented by the persons herein designated.
However, he shall not be considered to be acting in good faith if he
has knowledge concerning the matter in question that would cause
such reliance to be unwarranted. A director shall not be liable to the
corporation or its shareholders for any action he takes or omits to take
as a director if, in connection with such action or omission, he
performs his duties in compliance with this Section 14.
The designated persons on whom a director is entitled to rely
are (i) one or more officers or employees of the corporation whom the
director reasonably believes to be reliable and competent in the
matters presented, (ii) legal counsel, public accountant, or other
person as to matters which the director reasonably believes to be
within such person's professional or expert competence, or (iii) a
committee of the board of directors on which the director does not
serve if the director reasonably believes the committee merits
confidence.
ARTICLE IV
Officers and Agents
Section 1. General. The officers of the corporation shall
be a president, one or more vice presidents, a secretary, a treasurer,
and/or such other officers as may be appointed from time to time by
the board of directors, each of whom shall be a natural person
eighteen years of age or older. The board of directors or an officer
or officers authorized by the board may appoint such other officers,
assistant officers, committees and agents, including a chairman of the
board, assistant secretaries and assistant treasurers, as they may
consider necessary. The board of directors or the officer or officers
authorized by the board shall from time to time determine the
procedure for the appointment of officers, their term of office, their
authority and duties and their compensation. One person may hold
more than one office. In all cases where the duties of any officer,
agent or employee are not prescribed by the bylaws, or by the board
of directors, such officer, agent or employee shall follow the orders
and instructions of the president of the corporation.
Section 2. Appointment and Term of Office. The officers
of the corporation shall be appointed by the board of directors at each
annual meeting of the board held after each annual meeting of the
shareholders. If the appointment of officers is not made at such
meeting or if an officer or officers are to be appointed by another
officer or officers of the corporation, such appointment shall be made
as soon thereafter as conveniently may be. Each officer shall hold
office until the first of the following occurs: his successor shall have
been duly appointed and qualified, his death, his resignation, or his
removal in the manner provided in Section 3.
Section 3. Resignation and Removal. An officer may
resign at any time by giving written notice of resignation to the
corporation. The resignation is effective when the notice is received
by the corporation unless the notice specifies a later effective date.
Any officer or agent may be removed at any time with or
without cause by the board of directors or an officer or officers
authorized by the board. Such removal does not affect the contract
rights, if any, of the corporation or of the person so removed. The
appointment of an officer or agent shall not in itself create contract
rights.
Section 4. Vacancies. A vacancy in any office, however
occurring, may be filled by the board of directors, or by the officer or
officers authorized by the board, for the unexpired portion of the
officer's term. If an officer resigns and his resignation is made
effective at a later date, the board of directors, or officer or officers
authorized by the board, may permit the officer to remain in office
until the effective date and may fill the pending vacancy before the
effective date if the board of directors or officer or officers authorized
by the board provide that the successor shall not take office until the
effective date. In the alternative, the board of directors, or officer or
officers authorized by the board of directors, may remove the officer
at any time before the effective date and may fill the resulting
vacancy.
Section 5. President. Subject to the direction and
supervision of the board of directors, the president shall be the chief
executive officer of the corporation, and shall have general and active
control of its affairs and business and general supervision of its
officers, agents and employees. Unless otherwise directed by the
board of directors, the president shall attend in person or by substitute
appointed by him, or shall execute on behalf of the corporation
written instruments appointing a proxy or proxies to represent the
corporation, at all meetings of the stockholders of any other
corporation in which the corporation holds any stock. On behalf of
the corporation, the president may in person or by substitute or by
proxy execute written waivers of notice and consents with respect to
any such meetings. At all such meetings and otherwise, the president,
in person or by substitute or proxy, may vote the stock held by the
corporation, execute written consents and other instruments with
respect to such stock, and exercise any and all rights and powers
incident to the ownership or said stock, subject to the instructions, if
any, of the board of directors. The president shall have custody of
the treasurer's bond, if any.
Section 6. Vice Presidents. The vice presidents shall
assist the president and shall perform such duties as may be assigned
to them by the president or by the board of directors. In the absence
of the president, the vice president, if any (or, if more than one, the
vice presidents in the order designated by the board of directors, or if
the board makes no such designation, then the vice president
designated by the president, or if neither the board nor the president
makes any such designation, the senior vice president as determined
by first election to that office), shall have the powers and perform the
duties of the president.
Section 7. Secretary. The secretary shall (i) prepare and
maintain as permanent records the minutes of the proceedings of the
shareholders and the board of directors, a record of all actions taken
by the shareholders or board of directors without a meeting, a record
of all actions taken by a committee of the board of directors in place
of the board of directors on behalf of the corporation, and a record of
all waivers of notice of meetings of shareholders and of the board of
directors or any committee thereof, (ii) see that all notices are duly
given in accordance with the provisions of these bylaws and as
required by law, (iii) serve as custodian of the corporate records and
of the seal of the corporation and affix the seal to all documents when
authorized by the board of directors, (iv) keep at the corporation's
registered office or principal place of business a record containing the
names and addresses of all shareholders in a form that permits
preparation of a list of shareholders arranged by voting group and by
class or series of shares within each group, that is alphabetical within
each class or series and that shows the address of, and the number of
shares of each class or series held by each shareholder, unless such a
record shall be kept at the office of the corporation's transfer agent or
registrar, (v) maintain at the corporation's principal office the
originals or copies of the corporation's articles of incorporation,
bylaws, minutes of all shareholders' meetings and records of all action
taken by shareholders without a meeting for the past three years, all
written communications within the past three years to shareholders as
a group or to the holders of any class or series of shares as a group, a
list of the name and business addresses of the current directors and
officers, a copy of the corporation's most recent corporate report filed
with the Secretary of State, and financial statements showing in
reasonable detail the corporation's assets and liabilities and results of
operations for the last three years, (vi) have general charge of the
stock transfer books of the corporation, unless the corporation has a
transfer agent, (vii) authenticate records of the corporation, and (vii)
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 board of directors. Assistant secretaries, if any,
shall have the same duties and powers subject to supervision by the
secretary. The directors and/or shareholders may however
respectively designate a person other than the secretary or assistant
secretary to keep the minutes of their respective meetings.
Any books, records, or minutes of the corporation may be in
written form or in any form capable of being converted into written
form within a reasonable time.
Section 8. Treasurer. The treasurer shall be the principal
financial officer of the corporation, shall have the care and custody of
all funds, securities, evidences of indebtedness and other personal
property of the corporation and shall deposit the same in accordance
with the instructions of the board of directors. He shall receive and
give receipts and acquittances for money paid in on account of the
corporation, and shall pay out of the corporation's funds on hand all
bills, payrolls and other just debts of the corporation of whatever
nature upon maturity. He shall perform all other duties incident to
the office of the treasurer and, upon request of the board, shall make
such reports to it as may be required at any time. He shall, if
required by the board, give the corporation a bond in such sums and
with such sureties as shall be satisfactory to the board, conditioned
upon the faithful performance of his duties and for the restoration to
the corporation of all books, papers, vouchers, money and other
property of whatever kind in his possession or under his control
belonging to the corporation. He shall have such other powers and
perform such other duties as may from time to time be prescribed by
the board of directors or the president. The assistant treasurers, if
any, shall have the same powers and duties, subject to the supervision
of the treasurer.
The treasurer shall also be the principal accounting officer of
the corporation. He shall prescribe and maintain the methods and
systems of accounting to be followed, keep complete books and
records of account as required by the Colorado Business Corporation
Act, prepare and file all local, state and federal tax returns, prescribe
and maintain an adequate system of internal audit and prepare and
furnish to the president and the board of directors statements of
account showing the financial position of the corporation and the
results of its operations.
ARTICLE V
Stock
Section 1. Certificates. The board of directors shall be
authorized to issue any of its classes of shares with or without
certificates. The fact that the shares are not represented by
certificates shall have no effect on the rights and obligations of
shareholders. If the shares are represented by certificates, such shares
shall be represented by consecutively numbered certificates signed,
either manually or by facsimile, in the name of the corporation by one
or more persons designated by the board of directors. In case any
officer who has signed or whose facsimile signature has been placed
upon such certificate shall have ceased to be such officer before such
certificate is issued, such certificate may nonetheless be issued by the
corporation with the same effect as if he were such officer at the date
of its issue. Certificates of stock shall be in such form and shall
contain such information consistent with law as shall be prescribed by
the board of directors. If shares are not represented by certificates,
within a reasonable time following the issue or transfer of such
shares, the corporation shall send the shareholder a complete written
statement of all of the information required to be provided to holders
of uncertificated shares by the Colorado Business Corporation Act.
Section 2. Consideration for Shares. Certificated or
uncertificated shares shall not be issued until the shares represented
thereby are fully paid. The board of directors may authorize the
issuance of shares for consideration consisting of any tangible or
intangible property or benefit to the corporation, including cash,
promissory notes, services performed or other securities of the
corporation. Future services shall not constitute payment or partial
payment for shares of the corporation. The promissory note of a
subscriber or an affiliate of a subscriber shall not constitute payment
or partial payment for shares of the corporation unless the note is
negotiable and is secured by collateral, other than the shares being
purchased, having a fair market value at least equal to the principal
amount of the note. For purposes of this Section 2, "promissory
note" means a negotiable instrument on which there is an obligation to
pay independent of collateral and does not include a non-recourse
note.
Section 3. Lost Certificates. In case of the alleged loss,
destruction or mutilation of a certificate of stock, the board of
directors may direct the issuance of a new certificate in lieu thereof
upon such terms and conditions in conformity with law as the board
may prescribe. The board of directors may in its discretion require
an affidavit of lost certificate and/or a bond in such form and amount
and with such surety as it may determine before issuing a new
certificate.
Section 4. Transfer of Shares. Upon surrender to the
corporation or to a transfer agent of the corporation of a certificate of
stock duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, and receipt of such
documentary stamps as may be required by law and evidence of
compliance with all applicable securities laws and other restrictions,
the corporation shall issue a new certificate to the person entitled
thereto, and cancel the old certificate. Every such transfer of stock
shall be entered on the stock books of the corporation which shall be
kept at its principal office or by the person and at the place designated
by the board of directors.
Except as otherwise expressly provided in Article V, Sections
7 and 11, and except for the assertion of dissenters' rights to the
extent provided in Article 113 of the Colorado Business Corporation
Act, the corporation shall be entitled to treat the registered holder of
any shares of the corporation as the owner thereof for all purposes,
and the corporation shall not be bound to recognize any equitable or
other claim to, or interest in, such shares or rights deriving from such
shares on the part of any person other than the registered holder,
including without limitation any purchaser, assignee or transferee of
such shares or rights deriving from such shares, unless and until such
other person becomes the registered holder of such shares, whether or
not the corporation shall have either actual or constructive notice of
the claimed interest of such other person.
Section 5. Transfer Agent, Registrars and Paying Agents.
The board may at its discretion appoint one or more transfer agents,
registrars and agents for making payment upon any class of stock,
bond, debenture or other security of the corporation. Such agents and
registrars may be located either within or outside Colorado. They
shall have such rights and duties and shall be entitled to such
compensation as may be agreed.
ARTICLE VI
Indemnification of Certain Persons
Section 1. Indemnification. For purposes of Article VI, a
"Proper Person" means any person who was or is a party or is
threatened to be made a party to any threatened, pending, or complete
action, suit or proceeding, whether civil, criminal, administrative or
investigative, and whether formal or informal, by reason of the fact
that he is or was a director, officer, employee, fiduciary or agent of
the corporation, or is or was serving at the request of the corporation
as a director, officer, partner, trustee, employee, fiduciary or agent of
any foreign or domestic profit or nonprofit corporation or of any
partnership, joint venture, trust, profit or nonprofit unincorporated
association, limited liability company, or other enterprise or employee
benefit plan. The corporation shall indemnify any Proper Person
against reasonably incurred expenses (including any attorneys' fees),
judgments, penalties, fines (including any excise tax assessed with
respect to an employee benefit plan) and amounts paid in settlement
reasonably incurred by him in connection with such action, suit or
proceeding if it is determined by the groups set forth in Section 4 of
this Article that he conducted himself in good faith and that he
reasonably believed (i) in the case of conduct in his official capacity
with the corporation, that his conduct was in the corporation's best
interests, or (ii) in all other cases (except criminal cases), that his
conduct was at least not opposed to the corporation's best interests, or
(iii) in the case of any criminal proceeding, that he had no reasonable
cause to believe his conduct was unlawful. A Proper Person will be
deemed to be acting in his official capacity while acting as a director,
officer, employee or agent on behalf of this corporation and not while
acting on this corporation's behalf for some other entity.
No indemnification shall be made under this Article VI to a
Proper Person with respect to any claim, issue or matter in connection
with a proceeding by or in the right of a corporation in which the
Proper Person was adjudged liable to the corporation or in connection
with any proceeding charging that the Proper Person derived an
improper personal benefit, whether or not involving action in an
official capacity, in which he was adjudged liable on the basis that he
derived an improper personal benefit. Further, indemnification under
this Section in connection with a proceeding brought by or in the right
of the corporation shall be limited to reasonable expenses, including
attorneys' fees, incurred in connection with the proceeding.
Section 2. Right to Indemnification. The corporation shall
indemnify any Proper Person who was wholly successful, on the
merits or otherwise, in defense of any action, suit, or proceeding as to
which he was entitled to indemnification under Section 1 of this
Article VI against expenses (including attorneys' fees) reasonably
incurred by him in connection with the proceeding without the
necessity of any action by the corporation other than the determination
in good faith that the defense has been wholly successful.
Section 3. Effect of Termination of Action. The
termination of any action, suit or proceeding by judgment, order,
settlement or conviction, or upon a plea of nolo contendere or its
equivalent, shall not of itself create a presumption that the person
seeking indemnification did not meet the standards of conduct
described in Section 1 of this Article VI. Entry of a judgment by
consent as part of a settlement shall not be deemed an adjudication of
liability, as described in Section 2 of this Article VI.
Section 4. Groups Authorized to Make Indemnification
Determination. Except where there is a right to indemnification as set
forth in Sections 1 or 2 of this Article or where indemnification is
ordered by a court in Section 5, any indemnification shall be made by
the corporation only as authorized in the specific case upon a
determination by a proper group that indemnification of the Proper
Person is permissible under the circumstances because he has met the
applicable standards of conduct set forth in Section 1 of this Article.
This determination shall be made by the board of directors by a
majority vote of those present at a meeting at which a quorum is
present, which quorum shall consist of directors not parties to the
proceeding ("Quorum"). If a Quorum cannot be obtained, the
determination shall be made by a majority vote of a committee of the
board of directors designated by the board, which committee shall
consist of two or more directors not parties to the proceeding, except
that directors who are parties to the proceeding may participate in the
designation of directors for the committee. If a Quorum of the board
of directors cannot be obtained and the committee cannot be
established, or even if a Quorum is obtained or the committee is
designated and a majority of the directors constituting such Quorum
or committee so directs, the determination shall be made by (i)
independent legal counsel selected by a vote of the board of directors
or the committee in the manner specified in this Section 4, or, if a
Quorum of the full board of directors cannot be obtained and a
committee cannot be established, by independent legal counsel
selected by a majority vote of the full board (including directors who
are parties to the action) or (ii) a vote of the shareholders.
Section 5. Court-Ordered Indemnification. Any Proper
Person may apply for indemnification to the court conducting the
proceeding or to another court of competent jurisdiction for
mandatory indemnification under Section 2 of this Article, including
indemnification for reasonable expenses incurred to obtain court-
ordered indemnification. If the court determines that such Proper
Person is fairly and reasonably entitled to indemnification in view of
all the relevant circumstances, whether or not he met the standards of
conduct set forth in Section 1 of this Article or was adjudged liable in
the proceeding, the court may order such indemnification as the court
deems proper except that if the Proper Person has been adjudged
liable, indemnification shall be limited to reasonable expenses
incurred in connection with the proceeding and reasonable expenses
incurred to obtain court-ordered indemnification.
Section 6. Advance of Expenses. Reasonable expenses
(including attorneys' fees) incurred in defending an action, suit or
proceeding as described in Section 1 may be paid by the corporation
to any Proper Person in advance of the final disposition of such
action, suit or proceeding upon receipt of (i) a written affirmation of
such Proper Person's good faith belief that he has met the standards
of conduct prescribed by Section 1 of this Article VI, (ii) a written
undertaking, executed personally or on the Proper Person's behalf, to
repay such advances if it is ultimately determined that he did not meet
the prescribed standards of conduct (the undertaking shall be an
unlimited general obligation of the Proper Person but need not be
secured and may be accepted without reference to financial ability to
make repayment), and (iii) a determination is made by the proper
group (as described in Section 3 of this Article VI) that the facts as
then known to the group would not preclude indemnification.
Determination and authorization of payments shall be made in the
same manner specified in Section 4 of this Article VI.
Section 7. Witness Expenses. The sections of this Article
VI do not limit the corporation's authority to pay or reimburse
expenses incurred by a director in connection with an appearance as a
witness in a proceeding at a time when he has not been a named
defendant or respondent in the proceeding.
Section 8. Report to Shareholders. Any indemnification
of or advance of expenses to a director in accordance with this Article
VI, if arising out of a proceeding by or on behalf of the corporation,
shall be reported in writing to the shareholders with or before the
notice of the next shareholders' meeting. If the next shareholder
action is taken without a meeting at the instigation of the board of
directors, such notice shall be given to the shareholders at or before
the time the first shareholder signs a writing consenting to such
action.
ARTICLE VII
Provision of Insurance
By action of the board of directors, notwithstanding any
interest of the directors in the action, the corporation may purchase
and maintain insurance, in such scope and amounts as the board of
directors deems appropriate on behalf of any person who is or was a
director, officer, employee, fiduciary or agent of the corporation, or
who, while a director, officer, employee, fiduciary or agent of the
corporation, is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee, fiduciary or agent of any
other foreign or domestic corporation or of any partnership, joint
venture, trust, profit or nonprofit unincorporated association, limited
liability company or other enterprise or employee benefit plan, against
any liability asserted against, or incurred by, him in that capacity
arising out of his status as such, whether or not the corporation would
have the power to indemnify him against such liability under the
provisions of Article VI or applicable law. Any such insurance may
be procured from any insurance company designated by the board of
directors of the corporation, whether such insurance company is
formed under the laws of Colorado or any other jurisdiction of the
United States or elsewhere, including any insurance company in which
the corporation has an equity interest or any other interest, through
stock ownership or otherwise.
ARTICLE VIII
Miscellaneous
Section 1. Seal. The corporate seal of the corporation
shall be circular in form and shall contain the name of the corporation
and the words, "Seal, Colorado."
Section 2. Fiscal Year. The fiscal year of the corporation
shall be as established by the board of directors.
Section 3. Amendments. The board of directors shall
have power, to the maximum extent permitted by the Colorado
Business Corporation Act, to make, amend and repeal the bylaws of
the corporation at any regular or special meeting of the board unless
the shareholders, in making, amending or repealing a particular
bylaw, expressly provide that the directors may not amend or repeal
such bylaw. The shareholders also shall have the power to make,
amend or repeal the bylaws of the corporation at any annual meeting
or at any special meeting called for that purpose.
Section 4. Gender. The masculine gender is used in these
bylaws as a matter of convenience only and shall be interpreted to
include the feminine and neuter genders as the circumstances indicate.
Section 5. Conflicts. In the event of any irreconcilable
conflict between these bylaws and either the corporation's articles of
incorporation or applicable law, the latter shall control.
Section 6. Definitions. Except as otherwise specifically
provided in these bylaws, all terms used in these bylaws shall have
the same definition as in the Colorado Business Corporation Act.
THE FOREGOING BYLAWS, consisting of eighteen (18)
pages, including this page, constitute the bylaws of Buffalo Capital V,
Ltd. adopted by the board of directors of the corporation as of
September 20, 1997.
/s/ Dean F. Sessions
Secretary<PAGE>
Appendix D - Audited Financial Statements of Old Aladdin
ALADDIN OIL CORPORATION
Consolidated Financial Statements
with Report of Independent Auditors
June 30, 1998<PAGE>
ALADDIN OIL CORPORATION
<TABLE>
<CAPTION>
Index to Financial Statements and Supplementary Data Page
<S> <C>
Index to Financial Statements
Report of Brown, Armstrong, Randall, Reyes, Paulden and
McCown, Independent Auditors
Consolidated Financial Statements:
Balance Sheet at June 30, 1998
Statement of Operations for the
Year Ended June 30, 1998
Statement of Stockholders' Equity
for the Year Ended
June 30, 1998
Statement of Cash Flows
for the Year Ended
June 30, 1998
Notes to the Financial Statements
Supplemental Information About
Oil and Gas Producing
Activities (Unaudited)
</TABLE>
Financial statement schedules have been omitted since they are
either not required, are not applicable, or the required information is
shown in the financial statements and related notes.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Aladdin Oil, Inc.
West Los Angeles, California
We have audited the accompanying balance sheet of Aladdin,
Inc. (a Nevada corporation) as of June 30, 1998 and the related
statements of operations, 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 audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly in all material respects, the financial position of Aladdin
Oil, Inc., as of June 30, 1998, and the results of their operations and
their cash flows for the year then ended in conformity with generally
accepted accounting principles.
BROWN ARMSTRONG RANDALL
REYES PAULDEN & McCOWN
ACCOUNTANCY CORPORATION
Bakersfield, California
November 13, 1998
<PAGE>
ALADDIN OIL, INC.
CONSOLIDATED BALANCE SHEET
JUNE 30, 1998
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current Assets
Cash and cash equivalents 160,363
Oil And Gas Properties
(successful efforts basis) 699,886
Equipment and Fixtures, net 64,569
764,455
Other Assets
Start up costs, net 609
925,427
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ALADDIN OIL, INC.
CONSOLIDATED BALANCE SHEET
JUNE 30, 1998
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
LIABILITIES
Current Liabilities
Accrued interest payable, debentures 12,578
Non-Current Liabilities
Convertible debentures 148,000
Total Liabilities 160,578
STOCKHOLDERS' EQUITY
Common stock, $.01 par value,
20,000,000 shares authorized;
3,718,320 shares issued
and outstanding 37,183
Convertible preferred stock,
Series A, $.01 par value,
4,000,000 shares authorized;
1,677,000 shares issued and
outstanding 16,770
Additional paid in capital 1,330,997
Accumulated deficit (620,101)
Total Stockholders' Equity 764,849
925,427
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ALADDIN OIL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
<S> <C>
Costs and Expenses
General and administrative 337,676
Legal and accounting 136,436
Marketing 20,744
Depreciation, depletion
and amortization 10,761
Interest 114,484
Loss before income tax expense (620,101)
Income tax expense -
Net loss (620,101)
Basic loss per share (.21)
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ALADDIN OIL, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED JUNE 30, 1998
(Page 1 of 3)
<TABLE>
<CAPTION>
Common Stock
Number of
Shares Issued
and Outstanding Amount
<S> <C> <C>
Balance, July 1, 1997 3,000,000 30,000
Shares issued in connection with
preferred stock Series A Conversion - -
Shares issued in connection with
fund raising activity 250,000 2,500
Shares issued in connection with
property acquisition 419,219 4,192
Shares issued in lieu of compensation 49,101 491
Net Loss - -
Balance, June 30, 1998 3,716,320 37,183
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ALADDIN OIL, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED JUNE 30, 1998
(Page 2 of 3)
<TABLE>
<CAPTION>
Preferred Series A
Number of
Shares Issued
and Outstanding Amount
<S> <C> <C>
Balance, July 1, 1997 - -
Shares issued in connection with
preferred stock Series A Conversion 1,677,000 16,770
Shares issued in connection with
fund raising activity - -
Shares issued in connection with
property acquisition - -
Shares issued in lieu of compensation - -
Net Loss - -
Balance, June 30, 1998 1,677,000 16,770
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ALADDIN OIL, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED JUNE 30, 1998
(Page 3 of 3)
<TABLE>
<CAPTION>
Additional
Paid-In Accumulated
Capital Deficit Total
<S> <C> <C> <C>
Balance, July 1, 1997 (30,000) - -
Shares issued in connection with
preferred stock Series A Conversion 963,239 - 980,009
Shares issued in connection with
fund raising activity - - 2,500
Shares issued in connection with
property acquisition 397,758 - 401,950
Shares issued in lieu of compensation - - 491
Net Loss - (620,101) (620,101)
Balance, June 30, 1998 1,330,997 (620,101) 764,849
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ALADDIN OIL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (620,101)
Adjustment to reconcile net loss to net
cash used by operating activities:
Depreciation, depletion and amortization 10,761
Increase (decrease) in:
Accrued interest payable (debentures) 12,578
Net Cash Used by Operating Activities (596,762)
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for oil and gas properties (297,936)
Expenditures for furniture and fixtures (30,257)
Expenditures for computers and equipment (45,073)
Expenditures for start-up costs (609)
Net Cash Used by Investing Activities (373,875)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of convertible debentures 148,000
Proceeds from stock issuance 1,257,750
Less cost of issuance (274,750)
Net Cash Provided by Financing Activities 1,131,000
Net Increase in Cash and Cash Equivalents 160,363
Cash at Beginning of Year -
Cash at End of Year 160,363
SUPPLEMENTAL INFORMATION:
Cash paid for interest 128,672
NONCASH TRANSACTIONS:
Common stock issued for the acquisition
of oil producing property 401,950
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ALADDIN OIL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
This summary of significant accounting policies of Aladdin
Oil, Inc. (the "Company") is presented to assist in understanding the
Company's financial statements. The financial statements and notes
are representations of the Company's management, which is
responsible for their integrity and objectivity. These accounting
policies conform to generally accepted accounting principles and have
been consistently applied in the preparation of the financial
statements.
Description of Business
Aladdin is an independent oil and gas company engaged in the
acquisition and exploration of oil and gas within the United States. At
this time, Aladdin has focused its business strategy on the acquisition
of producing oil and gas properties, in geographic areas where
fragmented ownership should provide for a consolidation or "roll-up"
of these areas. Furthermore, these assets generally would provide for
increases in reserves or production as a result of enhancement, better
field management, and tighter financial controls.
In addition, Aladdin holds certain exploration sub-surface
easements within the Los Angeles Basin of California. Aladdin intends
to develop these pass through easements into a drilling district,
followed by the drilling and exploration for potential oil and natural
gas. Furthermore, Aladdin seeks to apply modern exploration
technology and applications to certain producing oil and gas basins,
where such technology has yet to be applied.
Appalachian Operations
Effective June 30, 1998, Aladdin acquired interests in 16
natural gas wells within the countries of Morgan and Muskugham,
Ohio. At this time, Aladdin owns an average 83% working interest in
these wells and operates the field.
These wells were acquired from Industrial International, Inc.,
an Ohio Corporation, in exchange for the issuance of 419,219 shares
of Common Stock. Industrial International previously had operated
the wells commencing in February, 1997.
In addition to these wells, Aladdin continues to believe that the
fragmented ownership of oil and/or natural gas wells within the
Appalachian Basin will provide additional acquisition opportunities. It
is believed that with each additional acquisition, operating efficiencies
and economics of scale should be achieved.
Aladdin intends to commence an enhancement program to its
16 wells in the 3rd and 4th quarters of 1998, and may commence a
developmental drilling program to extrapolate certain other potentials
that have been identified.
Use of Estimates
The preparation of financial statements, in conformity with
generally accepted accounting principles, 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. Actual results
could differ from those estimates.
Material estimates that are particularly susceptible to
significant change relate to the estimate of Company oil and gas
reserves prepared by an independent engineering consultant. Such
estimates are subject to numerous uncertainties inherent in the
estimation of quantities of proved reserves. Estimated reserves are
used in the calculation of depletion, depreciation and amortization as
well as the Company's assessment of proved oil and gas properties for
impairment.
Revenue Recognition
The Company will recognize revenues from the sales of oil
and gas in the period of delivery.
Oil and Gas Property and Equipment (Successful Efforts)
The Company accounts for its oil and gas exploration and
development costs using the successful efforts method. Under this
method, costs to acquire mineral interests in oil and gas properties, to
drill and complete development wells, and drill and complete
exploratory wells that find proved reserves are capitalized.
Exploratory dry-hole costs and other exploratory costs, including
geological and geophysical costs, are charged to expense when
incurred. The costs of carrying and retaining unproved properties are
also expensed when incurred. Depletion, depreciation and
amortization of oil and gas producing properties are computed on an
aggregate basis using the units-of-production method.
In March 1995, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 121, "Accounting for the Impairment of Long-Lived Assets
and/or Long-Lived Assets to be Disposed of." This statement requires
that long-lived assets be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. It establishes guidelines for determining
recoverability based on future net cash flows from the use of the asset
and for the measurement of the impairment loss. Impairment loss
under SFAS No. 121 is calculated as the difference between the
carrying amount of the asset and its fair value. Any impairment loss
is recorded in the current period in which the recognition criteria are
first applied and met. Under the successful efforts method of
accounting for oil and gas operations, the Company periodically
assessed its proved properties for impairments by comparing the
aggregate net book carrying amount of all proved properties with their
aggregate future net cash flows. The statement requires that the
impairment review be performed on the lowest level of asset
groupings for which there are identifiable cash flows. In the case of
the Company, this results in a field by field impairment review.
Upon the sale of oil and gas reserves in place, costs less
accumulated amortization of such property are removed from the
accounts and resulting gain or loss on sale is reflected in operations.
Upon abandonment of properties, the reserves are deemed fully
depleted and any unamortized costs are recorded in the statement of
operations under loss on leases.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and on
deposit, and highly liquid debt instruments with maturities of three
months or less.
Equipment and Fixtures
Equipment and fixtures are stated at cost and depreciated over
the estimated useful lives of the assets, which range from three to
seven years, using the straight-line method. Repairs and maintenance
are charged to expense as incurred. When assets are sold or retired,
the cost and related accumulated depreciation, are removed from the
accounts and any resulting gain or loss is included in income.
Maintenance and repairs, which neither materially add to the
value of the property, nor appreciably prolong its life, are charged to
expense as incurred. Gains or losses on dispositions of property and
equipment, other than oil and gas, are reflected in operations.
Capitalization of Interest
Interest cost is capitalized on construction and development
programs until placed into operation.
During the year the Company incurred $14,187 in capitalizable
interest cost.
Earnings Per Share (SFAS 128)
In February 1997, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards No. 128
(SFAS 128), "Earnings Per Share", which was adopted by the
Company for the year ended June 30, 1998. SFAS 128 replaces the
presentation of primary earnings per share with a presentation of basic
earnings per share based upon the weighted average number of
common shares for the period. It also requires dual presentation of
basic and diluted earnings per share for companies with complex
structures. During 1997, 3,000,000 shares of common stock were
issued at a $.01 par value. During 1998, 718,320 shares of common
stock were issued at a $.01 par value. Diluted earnings per share are
not completed as it would be antidilutive.
Basic Loss per share is calculated as follows:
<TABLE>
<CAPTION>
For the Year Ended 1998
Loss Shares Per-Share
(Numerator) (Denominator)
Amount
<S> <C> <C> <C>
Basic EPS
Loss available
to common
stockholders (620,101) 3,001,968 (.21)
</TABLE>
There was no dividend due to preferred shareholders at June
30, 1998, as their conversion from debentures occurred at June 30,
1998, as shortly before with a June 30,1998 effective date.
Income Taxes
The provision for income taxes is based on pretax financial
accounting income. Deferred tax assets and liabilities are recognized
for the expected tax consequences of temporary differences between
the tax basis of assets and liabilities and their reported net amounts.
Fair Values of Financial Instruments
Disclosure of the estimated fair value of financial instruments
is required under SFAS No. 107, "Disclosure About Fair Value of
Financial Instruments." The fair value estimates are made at discrete
points in time based on relevant market information and information
about the financial instruments. These estimates may be subjective in
nature and involve uncertainties and significant judgment and
therefore cannot be determined with precision.
The Company includes fair value in the notes to financial
statements when the fair value of its financial instruments is different
from the book value. The Company assumes that the book value of
financial instruments that are classified as current approximate fair
value because of the short maturity of these instruments. For
noncurrent financial instruments, the Company uses quoted market
prices or, to the extent that there are no available quoted market
prices, market prices for similar instruments.
New Accounting Pronouncements
In June 1997, the FASB issued Statement of Financial
Accounting Standards No. 130 (SFAS 130), Reporting Comprehensive
Income. This statement requires that all items that are required to be
recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements.
SFAS 130 was adopted by the Company for the year ended June 30,
1998. Upon adoption, the SFAS 130 did not have a material affect
upon the Company's financial condition or results of operations.
In June 1997, the FASB issued Statements of Financial
Accounting Standards No. 131 (SFAS 131), Disclosures about
Segments of an Enterprise and Related Information. The statement
requires the Company to report income/loss, revenue, expense and
assets by business segment including information regarding the
revenues derived from specific products and services and about the
countries in which the Company is operating. The Statement also
requires that the Company report descriptive information about the
way that operating segments were determined, the products and
services provided by the operating segments, differences between the
measurements used in reporting segment information and those used
in the Company's general-purpose financial statements, and changes in
the measurement of segment amounts from period to period. SFAS
131 was adopted by the Company for the year ended June 30, 1998,
and had no material effect upon the financial condition or results of
operations.
NOTE 2 - OIL AND GAS PROPERTIES, EQUIPMENT AND
FIXTURES
<TABLE>
<CAPTION>
Oil and gas properties, equipment and fixtures consist of the following at June
30, 1998:
<S> <C>
Oil and Gas
Proved properties:
Producing properties, including
intangible drilling costs 220,350
Lease and well equipment 181,600
401,950
Prospects 297,936
Accumulated depletion,
depreciation and amortization -
Reserve for lease impairment -
699,886
Commercial and Other
Furniture and equipment 75,330
Accumulated depreciation (10,761)
64,569
764,455
</TABLE>
The following sets forth costs incurred for oil and gas property
acquisition and development activities, whether capitalized or expended:
<TABLE>
<CAPTION>
1998
<S> <C>
Acquisition 401,950
Development 297,936
</TABLE>
Results of Operations from Oil and Gas Producing and Exploration Activities
There were no results of operations from oil and gas producing and
exploration activities (excluding corporate overhead and interest costs) for the
year ended June 30, because the Company is in the first year of operations.
The major earning property was acquired on the last day of the fiscal year.
NOTE 3 - CONVERTIBLE DEBT
<TABLE>
<CAPTION>
1998
<S> <C>
Convertible debentures at 12% per
annum interest to Preferred Series
A stock bearing a 12 % per annum
dividend. These debentures are
historically always converted to
preferred stock and therefore have
been classified as non-current notes. 148,000
</TABLE>
Maturities of long-term debt for years subsequent to June 30, 1998 are as
follows:
June 30, 1999 - 148,000
NOTE 4 - INCOME TAXES
There are no provisions for income taxes for the year ended June 30,
1998, as the Company experienced a loss. Management has established a
complete allowance for the deferred tax asset arising from possible future
utilization of the operating loss.
As of June 30, 1998, the Company had an approximate federal net
operating loss carryforwards as indicated:
<TABLE>
<CAPTION>
Year Year of Net Operating
Originated Expiration Loss
<S> <C> <C> <C>
1998 2016 600,000
</TABLE>
The components of the net deferred tax assets were as follows:
<TABLE>
<CAPTION>
1998
<C> <S>
Deferred Tax Assets:
Net operating loss carry forwards 210,000
Valuation Allowance 210,000
Net Deferred Tax Assets -
</TABLE>
A full valuation allowance has been established for the
deferred tax assets generated by net operating loss carry forwards due
to the uncertainty of future utilization.
NOTE 5 - SERIES A PREFERRED STOCK
In June 1998, the Company's Board of Directors authorized
the conversion of $1,257,750 in convertible debentures at a 12% per
annum interest rate to 1,677,000 shares of Preferred Series A Stock,
bearing a 12% per annum dividend with a "sunset" of June 30, 1999.
NOTE 6- STOCK WARRANTS
Changes in the Company's common stock warrants were as
follows:
<PAGE>
<TABLE>
<CAPTION>
Year Ended
June 30, 1998
<S> <C>
Outstanding warrants at
beginning of period -
Additional warrants issued 2,777,000
- Exercise of stock warrants -
- Warrants expired or ineligible -
Outstanding warrants at
end of period 2,777,000
</TABLE>
The Board of Directors on June 30, 1998 issued one Class A
$1.50 warrant for every two Series A Preferred Stock owned for the
purchase of the Company's common stock. The total number of
Class A $1.50 warrants issued amounted to 1,088,500. In addition,
the Company has also issued a total of 1,688,000 Class B $1.00
Warrants. The warrants expire at the close of business on December
31, 1999.
NOTE 7 - OPERATING LEASES
In October, 1997, the Company entered into a twenty-four month
noncancellable operating lease, which expires in September 1999.
The lease calls for monthly payments of $4,250. Future minimum
lease obligations as of June 30, 1998 are as follows:
<TABLE>
<CAPTION>
Year Ended June 30
1999 2000 Total
<S> <C> <C> <C>
Obligation 51,000 12,750 63,750
</TABLE>
Rental expense for the year ended June 30, 1998, was $42,520.
NOTE 8 - ENVIRONMENTAL MATTERS
The Company has established procedures for the on-going
evaluation of its operations to identify potential environmental
exposures and assure compliance with regulatory policies and
procedures. Management monitors these laws and regulations and
periodically assesses the propriety of its operational and accounting
policies related to environmental issues. The nature of the Company's
business requires routine day-to-day compliance with environmental
laws and regulations. The Company incurred no environmental
investigation, compliance and remediation costs in 1998.
The Company is unable to predict whether its future operations
will be materially affected by these laws and regulations.
Management believes that legislation and regulations relating to
environmental protection will not materially affect the results of
operations of the Company.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
The Company has entered into an agreement to merge with a
small company that is publicly traded, to be effective within 60 days.
It will be recorded as a reverse acquisition with the Company as the
survivor. After the effective date of the merger, Aladdin may seek to
raise additional capital of up to $1,000,000 through a private
placement of debentures.
ALADDIN OIL CORPORATION
SUPPLEMENTAL INFORMATION ABOUT OIL AND GAS
PRODUCING ACTIVITIES (UNAUDITED)
The following estimates of proved oil and gas reserves, both
developed and undeveloped, represent interests owned by the
Company located solely in the United States. Proved reserves
represent estimated quantities of crude oil and natural gas which
geological and engineering data demonstrate to be reasonably certain
to be recoverable in the future from known reservoirs under existing
economic and operating conditions. Proved developed oil and gas
reserves are reserves that can be expected to be recovered through
existing wells, with existing equipment and operating methods.
Proved undeveloped oil and gas reserves are reserves that are
expected to be recovered from new wells on undrilled acreage, or
from existing wells for which relatively major expenditures are
required for completion.
Disclosures of oil and gas reserves which follow are based on
estimates prepared by independent engineering consultants for the year
ended June 30, 1998. Such estimates are subject to numerous
uncertainties inherent in the estimation of quantities of proved
reserves and in the projection of future rates of production and the
timing of development expenditures. These estimates do not include
probable or possible reserves.
These estimates are furnished and calculated in accordance
with requirements of the Financial Accounting Standards Board and
the Securities and Exchange Commission (SEC). Because of
unpredictable variances in expenses and capital forecasts, crude oil
and natural gas price changes, largely influenced and controlled by
U.S. and foreign government actions, and the fact that the bases for
such estimates vary significantly, management believes the usefulness
of these projections is limited. Estimates of future net cash flows
presented do not represent management's assessment of future
profitability or future cash flows to the Company. Management's
investment and operating decisions are based upon reserve estimates
that include proved reserves prescribed by the SEC as well as
probable reserves, and upon different price and cost assumptions from
those used here.
It should be recognized that applying current costs and prices
and a 10 percent standard discount rate does not convey absolute
value. The discounted amounts arrived at are only one measure of the
value of proved reserves.
Changes in Estimated Reserve Quantities
The net interest in estimated quantities of proved developed
reserves of crude oil and natural gas at June 30, 1998, and changes in
such quantities during the year then ended, were as follows:
<TABLE>
<CAPTION>
1998
Oil Gas
(BBL) (MCF)
<S> <C> <C>
Proved developed and undeveloped reserves:
Beginning of period - -
Revisions of previous estimates - -
Production - -
Extensions, discoveries and
improved recovery - -
Purchase of minerals in place 6,293 320,995
Sale of minerals in place - -
Proved reserves end of period 6,293 320,995
Gas equivalent reserve 62,930
Proved developed reserves:
Beginning of period - -
End of period 6,293 320,995
</TABLE>
Standardized measure of discounted future net cash flows
relating to proved oil and gas reserves
The standardized measure of discounted future net cash flows
is presented below for the year ended June 30, 1998.
The future net cash inflows are developed as follows:
(1) Estimates are made of quantities of proved reserves and
the future periods during which they are expected to be produced
based on year-end economic conditions.
(2) The estimated future production of proved reserves is
priced on the basis of year-end prices.
(3) The resulting future gross revenue streams are reduced
by estimated future costs to develop and to produce proved reserves,
based on year end estimates.
(4) The resulting future net revenue streams are reduced to
present value amounts by applying a ten percent discount.
Disclosure of principal components of the standardized
measure of discounted future net cash flows provides information
concerning the factors involved in making the calculation. In
addition, the disclosure of both undiscounted and discounted net cash
flows provides a measure of comparing proved oil and gas reserves
both with and without an estimate of production timing. The
standardized measure of discounted future net cash flow relating to
proved reserves reflects estimated income taxes.
<TABLE>
<CAPTION>
1998
<S> <C>
Future cash inflows 1,076,259
Future production costs (288,000)
Future development costs (134,534)
Future severance tax expenses (65,922)
Future net cash flows 587,803
10% annual discount for estimated
timing of cash flows (185,853)
Standardized measure of discounted
future net cash flow 401,950
</TABLE>
Changes in standardized measure of discounted future net cash
flow from proved reserve quantities
This statement discloses the sources of changes in the
standardized measure from year to year. The amount reported as "Net
changes in prices and production costs" represents the present value of
changes in prices and production costs multiplied by estimates of
proved reserves as of the beginning of the year. The "accretion of
discount" was computed by multiplying the ten percent discount factor
by the standardized measure on a pretax basis as of the beginning of
the year. The "Sales of oil and gas produced, net of production costs"
are expressed in actual dollar amounts. "Revisions of previous
quantity estimates" is expressed at year-end prices. The "Net change
in income taxes" is computed as the change in present value of future
income taxes.
<TABLE>
<CAPTION>
1998
<S> <C>
Standardized measure - beginning of year -
Sales of oil and gas produced, net of
production costs -
Purchase of minerals in place 401,950
Revisions of estimates of reserves provided
in prior years:
Net changes in prices and production costs -
Sales of minerals in place -
Extensions, discoveries and improved recovery -
Accretion of discount -
Net change in income taxes -
Net increase 401,950
Standardized measure - end of year 401,950
</TABLE>
<PAGE>
PROXY CARD:
BUFFALO CAPITAL V, LTD.
_________________, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
The undersigned, a registered shareholder of the Corporation, hereby appoints
Grant W. Peck, or failing him, Dean F. Sessions, both directors of the
Corporation, as proxyholder, with power of substitution, to attend and vote for
the undersigned at the Special meeting of shareholders of the Corporation to be
held on December ___, 1998, and at any adjournment thereof. The
undersigned hereby revokes any instrument of proxy heretofore given with
respect to the meeting or any adjournment thereof.
The Proxyholder is hereby directed to vote on any poll as follows:
1. A 1:2 reverse stock split of all of the Company's issued and
outstanding common stock.
FOR( ) AGAINST( ) WITHHOLD( )
2. The proposed merger between Buffalo and Aladdin Oil
Corporation, a Nevada corporation ("Aladdin"), pursuant to the terms
of an Agreement and Plan of Merger and Reorganization dated
November 23, 1998 (the "Agreement").
FOR( ) AGAINST( ) WITHHOLD( )
THE SHARES REPRESENTED BY THIS PROXY WILL BE
VOTED OR WITHHELD FROM VOTING ON ANY BALLOT IN
ACCORDANCE WITH THE INSTRUCTIONS OF THE
SHAREHOLDER. WHERE THE UNDERSIGNED HAS NOT
SPECIFIED A CHOICE WITH RESPECT TO ANY OF THE
FOREGOING MATTERS, THIS PROXY CONFERS
DISCRETIONARY AUTHORITY WITH RESPECT TO SUCH
MATTER(S) UPON THE ABOVE-NAMED PROXYHOLDER. IF
NO SPECIFICATION IS MADE, THE SHARES REPRESENTED
BY THIS PROXY WILL BE VOTED IN FAVOR OF THOSE
ITEMS.
THIS PROXY CONFERS DISCRETIONARY AUTHORITY WITH
RESPECT TO AMENDMENTS OR VARIATIONS OF THE
MATTERS IDENTIFIED IN THE NOTICE OF MEETING AND
WITH RESPECT TO OTHER MATTERS WHICH MIGHT
PROPERLY COME BEFORE THE MEETING.
A proxy, to be valid, must be dated and signed by the shareholder or
by his attorney authorized in writing or, where the shareholder is a
corporation, under its corporate seal or by a duly authorized and
appointed officer, attorney or representative of the corporation.
Please sign exactly as your name appears on the proxy. If the proxy
is executed by an attorney for an individual shareholder or by an
officer, attorney or representative of a corporate shareholder, the
instrument so empowering the officer, attorney or representative, as
the case may be, or a notarial copy thereof, must accompany the
proxy instrument. If this proxy is not dated in the space below, it is
deemed to bear the date on which it is mailed to the shareholder.
Signature:_____________________________
Dated this ___ day of ____________, 1998.
