As filed with the Securities and Exchange Commission May 25, 2000
File No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MOUNTAIN OIL, INC.
(Exact name of registrant as specified in its charter)
Utah 87-0639343
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
P. O. Box 1574
Roosevelt, UT 84066
(435) 722-2992
(Address and telephone number of registrant's principal offices)
Daniel S. Sam
319 West 100 South, Suite A
Vernal, UT 84078
(Name, address and telephone number of agent for service)
Copies to:
Mark E. Lehman, Esq.
Cletha A. Walstrand, Esq.
Lehman, Jensen & Donahue, L.C.
8 East Broadway, Suite 620
Salt Lake City, UT 84111-2204
(801) 532-7858
(801) 363-1715 fax
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the Registration Statement becomes
effective.
The securities being registered on the Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933.
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. [ ]
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If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
Title of Each Amount to be Proposed Offering Proposed Maximum Amount of
Class Of Registered Price Per Share Aggregate Offering Registration
Securities to Price Fee
be Registered
Common Stock 1,000,000 $2.25 per share $2,250,000 $594.00
shares
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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The information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
PROSPECTUS [LOGO]
$500,000 Minimum / $2,250,000 Maximum
MOUNTAIN OIL, INC.
COMMON STOCK
This is Mountain Oil's initial public offering. We are
offering a minimum of 222,222 shares and a maximum of 1,000,000
shares of common stock. The public offering price is $2.25 per
share.
Our shares do not currently trade on any public market but
we anticipate making application for trading on the Over the
Counter Electronic Bulletin Board shortly after the effective
date of this registration statement.
See "Risk Factors" beginning on page 5 for certain
information you should consider before you purchase the shares.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of the
securities or passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal
offense.
The shares are offered on a "minimum/maximum, best efforts"
basis primarily through our officers and directors. No
commission or other compensation related to the sale of the
shares will be paid to any of our officers or directors. The
proceeds of the offering will be placed and held in an escrow
account at Bonneville Bank, 1675 North 200 West, Provo, Utah
84604, until a minimum of $500,000 in cash has been received as
proceeds from sale of shares. If the minimum offering proceeds
have not been received from the sale of the shares within 90 days
from the date of this prospectus, unless extended by us for up to
an additional 30 days, your investment will be promptly returned
to you without interest and without any deductions. The offering
may be terminated by us prior to the expiration date.
Price to Public Commissions Proceeds to Company
Per Share $2.25 $-0- $2.25
Minimum $500,000 $-0- $500,000
Maximum $2,250,000 $-0- $2,250,000
The date of this Prospectus is _______________, _________.
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PROSPECTUS SUMMARY
The Company
We were formed as a Utah Corporation on July 30, 1999, to
acquire and develop oil and gas properties. At the time of
formation, we acquired the working interest in 24 oil and gas
wells on 11,989 leased acres all within 30 miles of Duchense,
Utah. We currently have four wells in production. Our objective
is to bring additional fifteen wells into production during 2000
and identify new drill sites on our acreage.
Our principal executive offices are located at 3954 East 200
North East Highway 40, Ballard, UT 84066 and our mailing address
is P. O. Box 1574, Roosevelt, Utah 84066. Our telephone number
is 435-722-2992.
The Offering
Common Stock Offered by Us 222,222 shares minimum
1,000,000 shares maximum
Common Stock to be 2,075,222 shares minimum
Outstanding 2,853,000 shares maximum
After the Offering
Use of Proceeds Proceeds from this offering will be
used to rework existing wells,
purchase equipment for producing
wells, connect wells to gas
gathering system, identify new
drill sites and working capital.
RISK FACTORS
We have an extremely limited operating history so it will be
difficult for you to evaluate an investment in our stock. We
were formed in July, 1999, and since that time our business
activities have been limited to settling outstanding liabilities,
operating four wells, swabbing six wells for oil production and
initiating refurbishment of our additional wells. There is no
assurance we will be successful in refurbishing our wells or that
the wells will ever be productive. We also have no assurance
that we will be able to sell the gas and oil at a profit should
the wells be productive. Any likelihood of future profitability
must be considered in light of the problems, expenses,
difficulties, complications and delays frequently encountered in
connection with the oil and natural gas exploration, development
and production business in which we operate.
We need additional capital and/or financing to refurbish our
wells and initiate production. We have limited assets and we
need the proceeds of this offering to commence and complete the
refurbishment of our wells. Should we be unable to complete this
offering, we may have to seek other sources of financing. There
can be no assurance that additional sources of financing will be
available at all or at a reasonable cost.
Development of wells may not be successful or profitable. A
portion of our oil and gas reserves are proved undeveloped
reserves. Successful development and production of such
reserves,
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although they are categorized as "proved," cannot be assured.
Additional drilling will be necessary in future years both to
maintain production levels and to define the extent and
recoverability of existing reserves. There is no assurance that
our present oil and gas wells will continue to produce at current
or anticipated rates of production, that development drilling
will be successful, that production of oil and gas will commence
when expected, that there will be favorable markets for oil and
gas which may be produced in the future or that production rates
achieved in early periods can be maintained.
Volatile oil and gas prices may adversely affect our results
of operations. Our largest source of operating income is from
the sale of produced oil, natural gas and natural gas liquids.
The level of our revenues and earnings are affected by the price
at which these commodities are sold. In the past, prices for
oil, natural gas and natural gas liquids has been erratic. It is
likely that these prices will continue to fluctuate in the
future. Various factors beyond our control affect prices of oil
and natural gas, including worldwide and domestic supplies of oil
and natural gas, the ability of the members of the Organization
of Petroleum Exporting Countries ("OPEC") to agree to and
maintain oil price and production controls, political instability
of armed conflict in oil-producing regions, the price of foreign
imports, the level of consumer demand, the price and availability
of alternative fuels, the availability of pipeline capacity and
changes in existing federal regulation and price controls.
The accuracy of our reserve estimates is limited. This
Prospectus contains estimates of reserves and of future net
revenue which have been prepared by petroleum engineers.
Estimates of reserves and of future net revenue prepared by
different petroleum engineers may vary substantially depending,
in part, on the assumptions made and may be subject to adjustment
either up or down in the future. The actual amounts of
production, revenue, taxes, development expenditures, operating
expenses, and quantities of recoverable oil and gas reserves to
be encountered may vary substantially from the engineers'
estimates. Oil and gas reserve estimates are necessarily inexact
and involve matters of subjective and engineering judgment. In
addition, any estimates of future net revenue and the present
value thereof are based on price and cost assumptions made by us
which only represent our best estimate. If these estimates of
quantities, prices and costs prove inaccurate, we are
unsuccessful in expanding our oil and gas reserves base with our
capital expenditure program, and/or declines in and instability
of oil and gas prices occur, then write downs in the capitalized
costs associated with our oil and gas assets may be required.
While we believe that the estimated proved oil and gas reserves
and estimated future net revenues are reasonable and accurate,
there is no assurance that certain revisions will not be made in
the future.
There are business risks related to our operations. The
availability of a ready market for our oil and gas depends on
numerous factors beyond our control, including the demand for and
supply of oil and gas, the proximity of our natural gas reserves
to pipelines, the capacity of such pipelines, fluctuations in
production and seasonal demand, the effects of inclement weather
and governmental regulation. New gas wells maybe shut-in for
lack of a market until a gas pipeline or gathering system with
available capacity is extended into the area. New oil wells may
have production curtailed until production facilities and
equipment are acquired or developed. Our business will always be
subject to these types of risks.
We are subject to operating hazards and uninsured risks.
Our operations are subject to all of the risks incident to
exploration for and production of oil and gas, including blow-
outs, cratering, pollution and fires, each of which could result
in damage to or destruction of oil and gas wells or production
facilities or injury to persons and property. Our insurance may
not fully cover certain of these risks and the occurrence of a
significant event not fully insured against could have a material
adverse effect on our financial position.
We depend on certain key personnel to manage and operate our
business. Our success will be largely dependent upon the efforts
and active participation of Craig Phillips, the President of
Mountain
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Oil, Joe Ollivier, Chief Financial Officer, and Lynn Stratford,
Vice President, Finance. The loss of the services of any the
officers and key consultants may adversely affect our business
decisions. We do not have key man insurance in place for any
personnel and do not anticipate purchasing key man insurance
until such time as revenues from operations allow.
The oil and gas industry is highly competitive. In seeking
suitable opportunities, we compete with a number of other
companies, including large oil and gas companies and other
independent operators with greater financial resources and, in
some cases, with financial resources, personnel and facilities
substantially greater than ours. There can be no assurance we
can compete effectively with these larger entities.
Government and environmental regulation may pose additional
risks. The production and sale of gas and oil are subject to a
variety of federal, state and local government regulations,
including regulations concerning the prevention of waste, the
discharge of materials into the environment, the conservation of
natural gas and oil, pollution, permits for drilling operations,
drilling bonds, reports concerning operations, the spacing of
wells, the unitization and pooling of properties, and various
other matters, including taxes. Many jurisdictions have at
various times imposed limitations on the production of gas and
oil by restricting the rate of flow for gas and oil wells below
their actual capacity to produce. In addition, many states have
raised state taxes on energy sources and additional increase may
occur, although increases in state energy taxes would have no
predictable effect on natural gas and oil prices. We believe we
are in substantial compliance with applicable environmental and
other government laws and regulations. However, there can be no
assurance that significant costs for compliance will not be
incurred in the future.
We currently have outstanding options and convertible notes
that may dilute the ownership interest in Mountain Oil held by
other stockholders. As of May 5, 2000, we have outstanding
options to purchase a total of 75,000 shares of common stock.
The exercise prices of the outstanding options range from $1.00
to $1.10 per share. The holders of the outstanding options might
have the opportunity to profit from a rise in the market price
(of which there is no assurance) of the shares of the common
stock underlying the options. Also as of May-there are $825,000
in outstanding convertible notes. Each $1,000 note is
convertible to 667 shares of common stock ($1.50 per share) until
the due date of March 31, 2001.
We are authorized to issue Preferred Stock. We are
authorized to issue 10,000,000 shares of preferred stock. The
shares of preferred stock may be issued from time to time in one
or more series as may be determined by the Board of Directors
without stockholder approval. Further, the voting powers and
preferences, the relative rights of each such series, and the
qualifications, limitations and restrictions may be established
by the Board of Directors without stockholder approval. We do
not currently have any preferred stock issued.
We have conflicts of interest. Our directors and officers,
are, or may become in their individual capacity, officers,
directors, controlling shareholders and/or partners of other
entities engaged in a variety of businesses. Thus, there exists
potential conflicts of interest including, among other things,
time, effort and corporate opportunity, involved in participation
with such other business entities. The amount of time which our
officers and directors will devote to our business may be
limited. It is not anticipated that any of such other business
interests will be ones that are, or will be, in competition with
us.
We do not intend to pay dividends. No dividend has been
paid on our securities since inception and our management does
not intend to pay dividends at any time in the foreseeable
future. Investors who anticipate the need for immediate
dividends from their investments should refrain from purchasing
any of the shares offered by us.
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We cannot assure the completion of the "Minimum-Maximum,
Best Efforts" offering. The shares are being offered on a
"minimum-maximum, best efforts" only basis and no individual or
firm is committed to purchase or take down any of the shares.
There is no assurance that any portion of the shares will be
sold. In the event that at least $500,000 has not been received
within 90 days of the date of this prospectus, which time period
may be extended for up to an additional 30 days in our
discretion, funds will be promptly returned to investors without
interest and without deducting expenses of this offering. As
such, you could invest money for as long as 120 days and have
your investment returned without interest. Anytime after the
minimum amount is received prior to termination of the offering,
the escrowed funds will be transmitted to us and shares will then
be issued and no refunds will be made to you thereafter.
There is no guaranteed public market for our common stock.
There is no market for our common stock. Presently, we are
privately owned, and there is no market for any of our
securities. This is our initial public offering. Most initial
public offerings are underwritten by a registered broker-dealer
firm or an underwriting group. These underwriters generally will
act as market makers in the stock of a company they underwrite to
help insure a public market for the stock. This offering is to
be sold by our officers and directors. We have no commitment
from any brokers to sell shares in this offering. As a result,
we will not have the typical broker public market interest
normally generated with an initial public offering. Lack of a
market for shares of our common stock could adversely affect a
shareholder in the event a shareholder desires to sell his
shares. The company does anticipate filing for listing on the
Over the Counter Bulletin Board should the offering succeed.
FORWARD-LOOKING STATEMENTS
You should carefully consider the risk factors set forth
above, as well as the other information contained in this
Prospectus. This Prospectus contains forward-looking statements
regarding events, conditions, and financial trends that may
affect our plan of operation, business strategy, operating
results, and financial position. You are cautioned that any
forward-looking statements are not guarantees of future
performance and are subject to risks and uncertainties. Actual
results may differ materially from those included within the
forward-looking statements as a result of various factors.
Cautionary statements in this "Risk Factors" section and
elsewhere in this Prospectus identify important risks and
uncertainties affecting our future, which could cause actual
results to differ materially from the forward-looking statements
made in this Prospectus.
DILUTION AND COMPARATIVE DATA
As of March 31, 2000, we had an unaudited net tangible book
value (total tangible assets less total liabilities) of $601,000,
or a net tangible book value per share of approximately $0.33.
The following table shows the dilution to your equity interest
without taking into account any changes in our net tangible book
value after March 31, 2000, except the sale of the minimum and
maximum number of shares offered and adjustments assuming full
conversion of the outstanding convertible notes.
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Assuming Assuming Assuming Assuming
Minimum minimum Maximum maximum
Shares Sold with full Shares Sold with full
note note
conversion conversion
Shares Outstanding 2,075,222 2,625,222 2,853,000 3,403,000
Public offering $500,000 $500,000 2,250,000 2,225,000
proceeds at $2.25
per share
Net tangible book $0.48 $0.69 $0.96 $1.05
value before
offering $.033
Increase $0.15 $0.36 $0.63 $0.75
attributable to
purchase of shares
by new investors
Pro forma net $989,000 $1,814,467 $2,739,000 $3,564,467
tangible book
value after offering
Dilution per share $1.77 $1.56 $1.29 $1.20
to new investors
Percent dilution 78.67% 69.3% 57.33% 53.3%
The following table summarizes the comparative ownership and
capital contributions of existing common stock shareholders and
investors in this offering as of March 31, 2000:
Shares Owned Total Average Price
Number Consideration $
% Amount
Per Share
Present Shareholders
Minimum Offering 1,803,000 89% $603,000 $0.33
Maximum Offering 1,803,000 64% $603,000 $0.33
New Investors
Minimum Offering 222,222 11% $500,000 $2.25
Maximum Offering 1,000,000 36% $2,250,000 $2.25
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The numbers used for Present Shareholders assumes that none
of the present shareholders purchase additional shares in this
offering and does not account for 50,000 shares received on
exercise of option in May 2000. It also assumes that none of the
convertible notes outstanding are converted by the conclusion of
the offering.
USE OF PROCEEDS
The net proceeds to be realized by us from this offering,
after deducting estimated offering related expenses of
approximately $111,319 is approximately $388,681 if the minimum
number of shares is sold and $2,138,681 if the maximum number of
shares is sold.
The following table sets forth our best estimate of the use
of proceeds from the sale of the minimum and maximum amount of
shares offered. Since the dollar amounts shown in the table are
estimates only, actual use of proceeds may vary from the
estimates shown.
Description Assuming Sale of Assuming Sale of
Minimum Offering Maximum Offering
Payoff Liabilities
Payoff Equipment Loan - Backhoe 20,000
Exercise Option to Purchase
Hot Oil Truck 25,000
Oil & Gas Development
Purchase Service Equipment 50,000
Purchase Oil Well Equipment 50,000 250,000
Rework & Re-complete Oil Wells 200,000 1,200,000
Joint Venture Drilling 300,000
Purchase Tribal Leases 25,000
General & Administrative Expenses
Payroll - Administrative 29,000 29,000
Legal & Professional 6,000 6,000
Office Overhead 5,000 5,000
Insurance 6,000 6,000
Mortgage Payments 2,000 2,000
Interest on Indebtedness 20,000 10,000
Working Capital 20,681 160,681
TOTAL NET PROCEEDS 338,681 2,138,681
The Working Capital Reserve may be used for general
corporate purposes to operate, manage and maintain the current
and proposed operations including wages and salaries,
professional fees, expenses, payment of rent, and other
administrative costs.
Pending expenditures of the proceeds of this offering, we
may make temporary investments in short-term, investment grade,
interest-bearing securities, money market accounts, insured
certificates of deposit and/or in insured banking accounts.
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CAPITALIZATION
The following tables sets forth our capitalization as of
March 31, 2000, on an actual basis. This table should be read in
conjunction with the Financial Statement of the Company and the
notes thereto.
Stockholders' equity:
Preferred stock, no par value,
authorized 10,000,000
shares; no shares issued or outstanding
Common stock, no par value, authorized
50,000,000 Shares; 1,803,000 shares
issued and outstanding 603,000
Additional paid-in capital -0-
Accumulated deficit (2,214)
Total Stockholders equity $600,786
PLAN OF OPERATION
Proposed operations and capital requirements
Our 24 wells are in proven oil fields and we have 11,989
acres under lease. Ten of our wells are currently producing
either with pumps or by swabbing. To date, all of the wells have
produced approximately $6,200,000 in revenues. Under ownership
of Mountain Oil since July 1999, the ten wells have produced
$244,514 in revenues through March 2000. All of the other wells
need some improvement before production can commence or resume.
We have six men in the field each day working on the wells.
The activities currently being performed by the crew include
swabbing, hot oil treatments, repair, maintenance, pump
installation and above ground preparations for refurbishment.
All of our wells are drilled and cased, however, various
refurbishment is required on a majority of the wells. Currently,
four of the wells are producing with pump jacks installed and
another ten are waiting for either permits or the arrival of
pumps. The six wells that do not have pump jacks are swabbed on
a weekly basis. Swabbing brings oil to the surface without a
pump and accounts for about 40% of our current production. The
remaining 14 wells are "Proved Developed Non-producing" wells.
This indicates the sites are known to have liftable oil reserves,
are developed with drilling equipment, but are not currently
producing. We believe all but one of these wells can become
economic through identified refurbishment. The one well that is
not economically feasible is scheduled to be plugged and
abandoned by September 2000.
The following table contains a list of each well, work to be
done, and estimated cost.
WELL WORK TO BE DONE COST ESTIMATE
Nielsen 1-20B 1 Change Down Hole Pump $15,000
Brundage Canyon 1-13 Hot oil, start pumping $1,500
chemical
Brundage Canyon 24-12 Hot oil, start pumping $500
chemical
Brundage Canyon 16-2 Hot oil, start pumping $500
chemical
Rebuild trace pump, glycol
Brundage Canyon 13-15X Refurbishment and well $15,000
stimulation
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Dye Hall 2-21-b-1 Pump Unit, Rod & $350,000
refurbishment
Well stimulation
Lawson 1-21 Review for production $25,000
L.E. Font 3-27-22 Pump Unit, Rod & $250,000
refurbishment, well
stimulation & perforate
Ute 116 A-1 Repair pump unit $10,000
Fausett 1-26-A1E Refurbishment, Surface $60,000
change
Downhole pump
Fausett 1-2B1E Pump unit, rods $250,000
refurbishment
Reperforate
Myron Ranch 1-280B1 Pump unit, rods, surface, $250,000
reperforate
Wilkens 1-24 Pump unit rods, well $250,000
stimulation
Walker 2-24 Plug & Abandon $40,000
Josie 1-3 B5 Test $20,000
1-31 C5 Pump unit, rods $250,000
refurbishment, reperforate,
well stimulation
Coyote Canyon 10-9 Pump unit, treator heater $75,000
separator
1-19 B5 Pump unit, rods, $275,000
refurbishment, recomplete
1-12 B6 Review
Black Jack 1-1406 Pump unit, tank, heater, $200,000
recomplete
11-25 Pump unit, recomplete $110,000
11-18 Pump unit, recomplete $110,000
7-24 Pump, unit well stimulation $75,000
We have estimated the total cost at $2,882,500 to refurbish
our existing wells. We have scheduled our operations and well
development into three phases.
Phase I is now in progress and we plan on completing it in
November 2000. Phase I consists of the refurbishment of existing
wells. We are committed to a minimum of two recompletion
attempts in new zones. The recompletion process pulls and tests
tubing and rods from the well. Certain areas of the well will be
treated with hydrochloric acid. Some portions of the well casing
will be perforated to allow more oil flow into the well bore.
These projects should boost field production. Simultaneously, we
will
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install natural gas gathering systems at wells that lack such
development. This line will deliver gas via the Coastal Gas
collection system to existing mainlines owned by Questar Gas.
Phase II will commence during the fourth quarter of 2000 and
is scheduled for completion in the second quarter of 2001. We
intend to drill horizontally to new zones in existing wells and
complete new oil and gas wells at the Brundage Canyon and West
Willows Creek field. These sites are in proven oil fields. New
wells cost approximately $400,000 each. We may use existing
capital, bank lines of credit and partnerships to drill these
shallow off site wells in proven areas. Through the practice of
injecting water into a low producing well, we will be able to
increase production in an adjoining well. Water flood injection
will also begin during this phase. Finally, during this phase,
we will begin leasing the mineral rights to new reserves in
established areas.
Phase III will commence following Phase II and includes the
continued drilling of natural gas wells in shallow areas of our
lease holdings. We believe that this can be done at a low cost
relative to the production payback. Partnerships with drilling
companies, other oil companies and joint ventures will be pursued
aggressively during this phase.
We completed our first funding in December 1999 by selling
our common stock to accredited investors in which we raised
$519,000. We completed another round of funding in April 2000,
by selling convertible debentures to accredited investors and
raised $825,000. These debentures are convertible at $1.50 per
share (667 shares per $1000 note)-the notes come due on March 30,
2002 and are convertible up to that time. An officer and
director exercised options for $50,000 in April 2000. We
believe these funds along with the funds to be recognized in this
offering will enable us to complete Phase I and commence Phase
II.
We currently have a production contract in place with Enron
Trading & Transportation ("EOTT") at spot prices. The contract
is a month to month contract that may be terminated by either
party upon thirty days written notice. Under the terms of the
contract, EOTT will purchase all of the crude oil we can produce
at the daily posted price for the day of delivery. We receive
our monthly production check on the 20th of the month following
production.
A major cost each month will be royalty payments on gross
revenues to owners of royalty interests in the properties. These
royalties ranges between 16.6% to 25% of revenues with an average
of 20%.
Financing for the completion of Phase II and for Phase III
will be generated internally from operations. In addition, we
will seek additional debt or equity financing or joint ventures
with third parties yet to be identified to fund Phase II and III.
RESULTS OF OPERATIONS
From Inception to Year Ended December 31, 1999
Oil and gas sales were $77,000 from July 30, 1999 (date of
inception) to December 31, 1999. Cost of sales for that period
were $45,000 with a gross profit of $32,000. General and
administrative expenses were $33,000 with depreciation, depletion
and amortization expenses at $12,000. Interest expense was
$4,000. We recognized a net loss in the amount of $17,000 during
the period from inception to December 31, 1999.
Net cash used in operating activities was $186,000 and we
purchased property and equipment for $10,000. We received
$206,000 as proceeds from short-term debt and paid $7,000 against
the debt. We
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also received $509,000 in proceeds from the issuance of our
stock. Net cash provided by financing activities was $708,000.
And as of December 31,1999, we had $512,000 cash on hand.
For the Three Months Ended March 31, 2000
Oil and gas sales were $168,000 for the three months ended
March 31, 2000. Cost of sales for that period were $39,000 with
a gross profit of $129,000. The increase is due to increased
production from our operating wells. General and administrative
expenses were $91,000 with depreciation, depletion and
amortization expenses as $22,000 for the three months ended March
31, 2000. Interest expense was $4,000 and other income was
$3,000. We recognized a net income of $15,000 for the three
months ended March 31, 2000.
Net cash used in operating activities for the three month
period ended March 31, 2000 was $71,000. We paid $100,000 on
related party notes and $7,000 on short-term debt during the
period and we received $10,000 in collection of subscription
receivable. Net cash used in financing activities was $97,000.
We had a net decrease in cash of $427,000. As of March 31, 2000,
we had $85,000 in cash on hand.
BUSINESS
General
We are a Utah corporation formed on July 30, 1999 engaged in
the oil and gas acquisition, exploration, development and
production business. Our wells and operations are located within
a thirty mile radius of Duchesne, Utah. We acquired the assets
of Environmental Remediation Holding Company ("ERHC") which
included the following:
Twenty-four oil and gas wells
Leased mineral rights on 11,989 acres
Downhole and surface equipment on all twenty-four wells
An office building on Highway 40 in Ballard, Utah
The first wells were drilled in 1964 and the last well was
drilled in 1988 and at one time, all wells were producing.
However, due to lack of maintenance by ERHC, most of the wells
had ceased production at the time we acquired them. Since July,
1999, we have focused our efforts on settling outstanding
liabilities, raising capital, and initiating refurbishment of the
wells.
We currently have four wells in production with an
additional fifteen wells scheduled to begin producing by the end
of July, 2000. We produce black wax crude oil, yellow wax crude
oil, and natural gas. The production mix of each type of oil or
gas varies according to each well. To date, these wells have
produced 2,225,000 barrels of oil and 1,960,000,000 cubic feet of
natural gas.
We do not own the land on which the wells are located, but
we lease the minerals rights subject to royalty interests. The
land and royalty interests are owned by the State of Utah, the
Ute Indian Tribe, or by private individuals.
Eleven of the 24 wells are "Proved Developed Producing"
wells, meaning that there is known oil, the wells have been
drilled and cased, and can produce oil. Of these eleven wells,
four are currently producing with pump jacks installed, three are
economic and can produce, and four are breakeven or uneconomic
until they are refurbished. The wells that do not have pump
jacks are swabbed on a weekly
11
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basis. Swabbing brings oil to the surface without a pump and
accounts for about 40% of our current production. The four
economic wells that are in production have reserves of 63,000
barrels of oil and gas reserves of 49,800,000 cubic feet.
The remaining thirteen wells are "Proved Developed Non-
producing" wells. This indicates the sites are known to have
liftable oil reserves, are developed with drilling equipment, but
are not currently producing. We believe all but one of these
wells can become economic through identified refurbishment.
In addition to our existing wells, the mineral leases on
approximately 11,989 acres can support up to 127 new wells that
may need to be drilled.
All of our oil production is sold to Enron Corporation
(EOTT) and our natural gas is sold to Coastal Field Services.
Natural gas produced at the wells is also used to run the pump
jacks and other equipment used for production.
Operations
All of our reserves are located in the Duchesne and Uintah
Counties of Utah. We have no interest in oil and gas applicable
to long-term supply or similar agreements with foreign
governments or authorities in which we act as the producer and
share revenues from the reserves of investors accounted for by
the equity method, accordingly, no information pertaining to
those categories is presented here.
As of December 31, 1999, we leased 11,989 gross (10,900 net)
acres of developed oil and gas properties.
The oil and gas properties in which we own an interest are
held under oil and gas leases negotiated directly with private
mineral owners, the state of Utah and the Ute Indian Tribe. The
leases are held in perpetuity so long as we continue to produce
oil and gas or make minimum lease payments.
Our total Proved Primary net oil and gas reserves are 1,065
Mbbls of oil and 1,389 MMcf of natural gas. Net present value of
the total Proved Primary oil and gas reserves is $2,124,812.
Total Proved Primary plus Proved Improved reserves are 1,647
Mbbls of oil and 2,013 MMcf of natural gas. Net present value of
the total Proved Primary plus Proved Improved oil and gas
reserves is $3,742,769.
All of our wells are completed in the Green River and
Wasatch formations and are located in Duchesne and Uintah
Counties in the state of Utah. Of the 18 un-economic wells,
fifteen wells are shut in. Proved Developed Producing reserves
may be assigned at a future date when economic production history
has been re-established for the 18 wells classified as un-
economic wells. None of the 18 un-economic wells were assigned
any Proved Developed Non-Producing reserves. The four economic
Proved Developed Producing wells have remaining net oil reserves
of 40 Mbbls and remaining net gas reserves of 34 MMcf. Net
present value of the four economic Proved Developed Producing
wells, discounted at 10% as of December 31, 1999, is $228,029.
An oil price of $21.55/bbl for Black Wax, $25.50/bbl for Yellow
Wax, and a gas price of $2.10/mcf was used in the economic
analysis of the reserves. Oil and gas prices were not escalated.
12
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Market
We sell all of our oil production to EOTT at spot prices.
The price for Yellow Wax Crude from the Uinta Basin is
consistently the highest of any type of crude oil in the country.
The spot price on May 5, 2000 was $26.75 per barrel for Yellow
Wax Crude and $23.00 per barrel for Black Wax Crude (eott.com).
Natural gas is currently at $3.10 per thousand cubic feet
(Bloomberg, May 5, 2000). Emerging from a two-year downturn, oil
prices reached their highest level since the Gulf War in 1999 and
have continued to rise. EOTT will take all of the oil that we
can produce.
Prices for oil and gas are driven strictly by supply and
demand. We can sell our products to any one of five
distributors, including Enron, Chevron, Flying J, AMACO, and
Phillips.
Prices among the five distributors are nearly equal. We
decided to sell to Enron based on quality of service and
relationships between our companies.
We currently do not use commodity futures contracts or price
swaps in marketing our crude oil and natural gas.
Title to Properties
As is customary in the oil and gas industry, only a
perfunctory title examination is conducted at the time oil and
gas leases are acquired. Prior to the commencement of drilling
operations, a thorough title examination is conducted. We
believe the title to our properties is good and indefeasible in
accordance with standards generally accepted in the oil and gas
industry. Some prospects may be burdened by customary royalty
interests, liens incident to oil and gas operations and liens for
taxes and other governmental charges as well as encumbrances,
easements and restrictions. We do not believe that any of these
burdens will materially interfere with the use of the property.
Regulation
All aspects of the oil and gas industry are extensively
regulated by federal, state, and local governments. Regulations
govern such things as drilling permits, production rates,
environmental protection and pollution control, royalty rates,
and taxation rates. These regulations may substantially increase
the cost of doing business and sometimes prevent or delay the
start or continuation of any given exploration or development
project. Regulations are subject to future changes by
legislative and administrative action and by judicial decisions,
which may adversely affect the petroleum industry.
We believe our operations comply with all applicable
legislation and regulations in all material respects and that the
existence of such regulations has had no more restrictive effect
on our method of operations than other similar companies in the
industry. Although we do not believe our business operations
presently impair environmental quality, compliance with federal,
state and local regulations which have been enacted or adopted
regulating the discharge of materials into the environment could
have an adverse effect upon our capital expenditures, earnings
and competitive position.
In the areas which we conduct our operations, there are
statutory provisions regulating the production of oil and natural
gas. These rules may restrict the oil and gas production rate to
below the rate our wells can produce. We are also subject to
numerous laws and regulations governing the discharge of
materials into the environment or otherwise relating to
environmental protection. We may be required to obtain permits
before drilling and operating our wells. Also, we may be subject
to liability for pollution which results from our operations. It
is impossible to predict if and to what extent these regulations
may impact our operations.
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State regulatory authorities have established rules and
regulations requiring permits for drilling operations, drilling
bonds and/or reports concerning operations. The state regulatory
authorities may also have statutes and regulations concerning the
spacing of wells, environmental matters and conservation.
We intend to comply with all regulations pertaining to our
operations. However, future legislation and regulation may have
adverse impact on our business.
Competition
The oil and gas industry is highly competitive in all
phases. We will encounter strong competition from other
independent oil companies in all areas of our business including
marketing, production and obtaining external financing. Most of
our competitors have financial resources, personnel, and
facilities substantially greater than ours. However, unless
there is a substantial drop in the market for oil and natural
gas, we can sell our products at daily spot prices.
Employees
We presently have one full-time officer and two full time
office staff. In addition, we employ consultants from time-to-
time to assist in evaluating oil and gas properties. We employ
six additional full time production employees who are on call 24
hours a day.
Legal proceedings
Mountain Oil is not a party to any material pending legal
proceedings, and to the best of its knowledge, no such
proceedings by or against Mountain Oil have been threatened.
Facilities
Our offices are located at 3954 East Highway 40, Ballard,
Uintah County, Utah. Out building consists of a total of 2,400
square feet with 1,200 square feet on each of two floors. All
administrative and managerial functions are performed at our
office location. We have purchased our building for $29,324.55
and are current in our mortgage payments.
OIL AND GAS RESERVE INFORMATION
Table 1 presents a summary of the Proved Developed
Producing, Proved Undeveloped, Probable and Possible net oil and
gas reserves. No reserve value was assigned to Proved Developed
Non-Producing behind pipe reserves pending completion of a
detailed geological report. Table 2 presents a summary of the
Proved Developed Producing, Proved Undeveloped, Improved Proved
Undeveloped, Probable, improved Probable and Possible net oil and
gas reserves. Table 1 presents the primary production value of
the properties if improved oil recovery by waterflooding is not
implemented. Table 2 presents the value of the company if
improved oil recovery by waterflooding is implemented.
We have twenty four wells of which one is slated for plug
and abandonment, the remaining twenty three wells are included in
this report. We have nine economic 40-acre primary Proved
Undeveloped locations in the Green River formation in the
Brundage Canyon and Myton Bench fields and five un-economic
primary locations at current oil prices. We also have three
economic 320 acre primary Proved Undeveloped locations in the
Wasatch and Green River formations in the Altamont and Bluebell
fields. The nine 40-acre Green River primary Proved Undeveloped
locations and three 320-acre Wasatch and Green River primary
Proved Undeveloped locations have a net primary potential
recovery of
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1,025 Mbbls of oil and 1,355 MMcf of natural gas with net present
value of $1,896,783 discounted at 10%.
The nine 40-acre economic Proved Undeveloped Green River
formation wells in Brundage Canyon and Myton Bench fields and the
five un-economic locations have incremental Improved Proved
Undeveloped water flood recovery net potential of 582 Mbbls of
oil and 624 MMcf of natural gas with an incremental Net Present
Value of $1,617,957 discounted at 10%.
We have seven Wasatch and Green River Probable well
locations in the Bridgeland and West Willow Creek North prospect
areas. We also have twenty 40-acre primary Probable locations in
the Green River formation in the Brundage Canyon and Myton Bench
fields west and north of the Antelope Creek field. The antelope
Creek field has been under water flood since 1996. The twenty 40-
acre Green River and seven Wasatch/Green River Probable locations
have a net primary potential recovery of 988 Mbbls of oil and
1,460 MMcf of natural gas with a net present value of $1,489,067
discounted at 10%.
We also have thirty-one Improved Probable 40-acre Green
River well locations located in Brundage Canyon and Myton Bench
fields. These thirty-one well locations have Improved Probable
water flood recovery net potential of 522 Mbbls of oil and 543
MMcf of natural gas with a Net Present Value of $2,223,912
discounted at 10%. Eight Possible Green River and Wasatch
locations are owned in the West Willow Creek North prospect area
and have a net potential of 350 Mbbls of oil and 101 MMcf of gas
with a net present value of $1,554,417 discounted at 10%.
The largest potential up side for development of our oil and
gas reserves is implementation of an improved oil recovery water
flood in the Green River formation in Brundage Canyon and Myton
Bench fields and possible behind pipe Proved Developed Non-
Producing reserves in shut in or un-economic Wasatch wells. The
Proved Developed Non-Producing reserve potential is not accounted
for since geologic studies are not complete at the present time.
However, behind pipe reserves may exist in many of the Green
River and Wasatch wells with significant up side value.
Our undeveloped properties in the Altamont, Bluebell,
Brundage Canyon, Myton Bench, Duchesne, West Willow Creek North,
and Bridgeland fields have significant potential for both primary
and improved recovery of oil and gas. We hold over two sections
with water flood potential in the Green River formation in
Brundage Canyon and Myton Bench fields. Initial water flood
tests were conducted in Section 25 of T5S R4W as early as 1992 by
Ironwood Exploration. Petroglyph Operating Company began water
flooding the Green River formation in T5S R3W in Antelope Creek
field in 1996.
Extensive data has been published by the Department of
Energy ("DOE") under the "Green River Water Flood Demonstration
Project" BOE/BC/14958-11 presenting potential for oil recovery up
to 25% of the original oil in place using water flooding
techniques in the Green River formation in Monument Butte field.
Monument Butte field is located nine miles east of our Myton
Bench and Brundage Canyon fields. Similar Green River sands
flooded in the Monument Butte field exist in our leases.
The DOE study found that 5% primary recovery of the original
oil in place equated to between 35,000 and 55,000 primary bbls of
oil recovery for an average Green River well in Monument Butte
field. Primary oil recovery in Section 13 T5S R4W from Ute # 1-
13 and Ute #1-13X Green River wells matches this DOE forecast.
Average production from the Ute # 1-13 and Ute # 1-13X wells is
49,000 bbls.
The DOE forecast of 25% of the oil in place for Monument
Butte field has not been successfully demonstrated by the water
flood response in Antelope Creed field located immediately east
of our properties. A recovery of 25% of the reserves from water
flooding in Monument Butte field would equate to improved
recovery of 250,000 bbls versus 50,000 bbls from 5% primary
recovery. The Antelope
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Creed field results have demonstrated that improved oil recovery
by waterflooding will approach between 7.5% to10% of the original
oil in place due to the fact that the Green River formation
becomes less permeable west of Monument Butte field. Therefore,
an incremental Improved oil recovery of 2.5% of the original oil
in place was used to assess the Improved Proved Undeveloped and
Improved Probable oil reserves in Section 13 and 24 of T5S R4W in
Brundage Canyon and Myton Bench fields.
Oil reserves were assigned to our Improved Proved
Undeveloped and Improved Probable properties at 50% of the Proved
Developed Producing or Proved Undeveloped offset wells Primary
oil recovery volume. A ratio of water inject well to producing
wells of one to four was used in preparation of the economics.
Our Green River wells in T5S R4W are adjacent to either
Sowers Canyon or Antelope Creek Canyon which both contain
sufficient water in shallow acquifers to initiate a water flood
program. Fresh water sands can be found between 200 and 400 feet
from surface in valley bottoms in Sowers and Antelope Creek
Canyons.
Possible Green River and Wasatch reserves were assigned in
the West Willow Creek North prospect. Geological mapping
indicates the possibility of the extension of both Green River
and Wasatch oil sand from the Duck Greek field in T9S R19E south
west of our properties. Wasatch production and Green River
production immediately surrounding the properties is un-economic.
However, the central sections of leases containing the Green
River and Wasatch formations have not been drilled. Due to the
high uncertainty associated with this prospect, the reserves were
classified as Possible. Improved Possible oil reserves were not
assigned to any properties. However, Bishop has recently
demonstrated Green River water flood recovery east of the West
Willow Creek North properties.
Operating Expenses. The average expense utilized for the
reserve evaluations was $1,700 per month per well for a Green
River and shallow Wasatch well completion in Brundage Canyon,
Myton Bench, West Willow Creek North, and River Junction fields.
Operating expense of $4,000 per month per well was used for
operating expenses for a deep Wasatch and Green River completion
in the Bluebell and Altamont fields. This figure reflects actual
monthly operating costs, excluding all State of Utah Severance
and Conservation Taxes and Duchesne and Uintah County Ad Valorem
property taxes. Monthly operating expenses were not escalated.
Improved oil and gas reserves were calculated using an additional
incremental monthly operating cost of $1,800 per well.
Therefore, the total monthly operating costs for an Improved
Green River well would be $3,500 per month.
Oil and Gas Prices. An oil sales price of $25.50 per barrel
was utilized for Yellow Wax and $21.50/bbl was used for Black Wax
oil sales. This oil price is based upon the oil price in effect
on December 31, 1999 as posted by EOTT on its web site
"eott.com". Oil price was not escalated for the economic
evaluation.
Gas sales price used was $2.10/mcf. The gas price used was
the estimated gas sales price in effect on December 31, 1999
although sales receipts for actual December 1999 gas sales prices
was not available. Gas prices also were not escalated for the
economic life of each well.
Working and Net Revenue Interests. We utilized only the
working and net revenue interests for each well. Each economic
evaluation report states the working and mineral interest
ownership for each well. In some cases the offset Proved
Undeveloped, Probable, Improved Proved Undeveloped and Improved
Probable locations have different working and net revenue
interest than the primary producing well holding the acreage.
Mineral interests held by us including working and net revenue
interests, were not independently verified.
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Uneconomic Wells. Eighteen of the twenty three wells are
currently un-economic.
Ad Valorem and Severance Taxes. 8.75% was utilized for Ad
Valorem taxes based upon Duchesne and Uintah County historical
tax assessments for the wells. A Severance tax rate of 2% was
utilized for the State of Utah.
Depreciation, Depletion, Tax Credits and Federal Taxes. The
analysis was performed using before tax evaluation procedures.
No calculations of federal taxes or credit for depreciation,
depletion, or any type of tax credits were applied to the
analysis.
Computerized Decline Curve Analysis. Production decline
curves were generated on the OGRE and IDEA computer programs
utilizing historical production data. The decline curves were
then adjusted by eliminating all zero values for oil and gas
production and eliminating non representative lower boundary
values prior to computerized curve fitting.
All individual reports, decline curve production plots, and
the oil and gas reserve summary report were generated utilizing
the David P. Cooke and Associates Oil and Gas Reserve Evaluation
(OGRE) and Interactive Decline Evaluation and Analysis (IDEA)
computer programs. The David P. Cooke and Associates computer
programs are widely used and generally accepted by the Oil and
Gas Industry through the United States for oil and gas reserve
and economic analysis.
The computer fit the decline curve history for both oil and
gas production utilizing either Hyperbolic or Harmonic fits. The
optimum decline curve fit was then extended to generate future
production history to economic limit of each well. A maximum
well life of 30 years was utilized as a cut off in the analysis
due to the uncertainty of future oil and gas prices.
If the computer generated a matching mathematical curve fit
which did not accurately reflect past production history,
adjustments were made to the equations in order to create a more
accurate mathematical curve match and generate representative
future production history values for economic analysis.
Well Life Limitation. A maximum of 30 years of well life
was utilized in the analysis.
Improved Development Costs. Each improved well economic
analysis lists the equipment and capital cost required to develop
the Improved Proved Undeveloped and Improved Probable oil and gas
reserves. Costs for Improved well developed is listed below:
Cost of drill and complete a water source well $ 50,000
Cost to convert a producing well to an injection well $ 50,000
Cost for one 1,200 bbl/day water injection station $150,000
Cost to install buried water injection pipelines $20.00/ft
Drilling and Completion Costs. Drilling and completion
costs were assumed to be $355,000 for Green River development in
Brundage Canyon and Myton Bench area. Deep Wasatch and Green
River formation drilling and completion costs in Altamont and
Bluebell fields were assumed to be either $1,600,000 or
$2,600,000 per well, depending on location. Drilling and
completion costs were assumed to be $370,000 for the Green River
and $550,000 for the Wasatch formation in the West Willow Creek
North prospect.
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TABLE 1
NET OIL AND GAS RESERVES AND
NET PRESENT VALUE AS OF DECEMBER 31, 1999
PRIMARY DEVELOPMENT ONLY (i.e., WATER FLOOD NOT IMPLEMENTED)
Reserve Net Oil Net Gas Net Present
Classification Remaining Remaining Value
Mbbls MMcf At 10% Discount
Proved Developed 40 34 $228,029
Producing
Proved 1,026 1,212 $1,896,783
Undeveloped
Primary Total 1,065 1,389 $2,124,812
Proved
Probable 988 1,460 $1,489,067
Primary Total 2,053 2,849 $3,613,879
Proved
And Probable
Possible 350 101 $1,554,417
Primary Total 2,403 2,950 $5,168,296
Proved,
Probable and
Possible
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TABLE 2
NET OIL AND GAS RESERVES AND
NET PRESENT VALUE AS OF DECEMBER 31, 1999
IMPROVED SECONDARY (i.e., WATER FLOOD IS IMPLEMENTED)
Reserve Net Oil Net Gas Net Present
Classification Remaining Remaining Value
Mbbls MMcf at 10% Discount
Proved Developed 40 34 $228,029
Producing
Proved Undeveloped 1,025 1,355 $1,896,783
Uneconomic Proved 284 297 ($469,800)
Undeveloped
Waterflood
Improved Proved 298 327 $2,087,757
Undeveloped
Improved 1,647 2,013 $3,742,769
Total Proved
Probable 988 1,461 $1,489,067
Improved Probable 522 543 $2,223,912
Improved Total 3,157 4,017 $7,455,748
Proved
And Probable
Possible 350 101 $1,554,417
Improved Total 3,507 4,118 $9,010,165
Proved,
Probable and
Possible
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MANAGEMENT
Our business will be managed by our officers and directors.
The following persons are the officers and directors of Mountain
Oil:
Name Age Position Since
Craig K. Phillips 47 President and Director July 1999
Joseph F. Ollivier 58 Vice President - Chief July 1999
Financial Officer/Investor
Relations Officer and
Director
Lynn Stratford 57 Vice President - Finance February 2000
and Director
Daniel S. Sam 37 Secretary, Treasurer, July 1999
General Counsel and
Director
Biographies
The following are brief biographies of the officers and
directors:
Craig K. Phillips, President and Director. Craig K.
Phillips has nearly 30 years of experience in the oil industry.
Mr. Phillips began his career as a roughneck on a drilling crew
and progressed into managing drilling projects, analyzing oil and
gas zones, repair, maintenance, founding oil companies,
purchasing oil and gas properties, refurbishing wells, and
consulting. Mr. Phillips has specifically been involved with the
wells in this project through his former company Uinta Gas and
Oil. Mr. Phillips knows the Uinta Basin oil fields (Altamont,
Bluebell, Myton, and Brundage Canyon) and the detailed history of
each well. Mr. Phillips' primary responsibility is the firm's
day to day operations. Mr. Phillips understands what makes the
wells produce efficiently and is focused on maximizing daily
output. Mr. Phillips is one of the co-founders of Mountain Oil.
Joseph F. Ollivier, Vice President, Chief Financial Officer
and Director. Joseph F. Ollivier is a Stanford MBA graduate who
has been in the investment field for over 25 years. For the
past five years Mr. Ollivier has been a managing member of First
Capital Funding, L.C. where he supervises loan activity. Mr.
Ollivier is responsible for raising capital, interfacing with the
auditors, security attorneys and overseeing the company's
financial direction. Mr. Ollivier also directs investor
relations. Mr. Ollivier is also a director of Datigen.com, Inc.,
a public company.
Lynn Stratford, Vice President and Director. Lynn Stratford
is a Northwestern MBA graduate. Mr. Stratford worked for two
years with Arthur Andersen & Co. after graduate school. For the
last 28 years Mr. Stratford has been the financial specialist in
his own venture capitalist firm, starting new companies as well
as buying and selling companies. Mr. Stratford has expertise in
management, accounting, computers, and financial analysis.
Daniel S. Sam, Secretary, Treasurer, General Counsel and
Director. Daniel S. Sam holds a Juris Doctor degree and has
legal experience in corporations, taxes, real estate, government
affairs and contracts. Mr. Sam is an expert in negotiating oil
and gas leases. Mr. Sam has an established law practice in the
Vernal, Utah, area and is also a CPA. Mr. Sam is the co-founder
of Mountain Oil along with Mr. Phillips.
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COMPENSATION
Mr. Phillips receives a salary of $3,000 per month during
the Company's last fiscal year for acting as the Company's
President. No other director or officer has received any
compensation nor are there any employment agreements in place.
Option Grants
The following table sets forth certain information relating
to options granted to the named executive officers:
Option/SAR Grants in Last Fiscal Year
Individual Grants
Name Number of % of Total Exercise Expiration
Securities Options Price Date
Underlying Granted to $/sh
Options Employees
Granted In Fiscal
Year
Craig Phillips 25,000 20% $1.10 1-15-2010
Joseph Ollivier 25,000 20% $1.00 1-15-2010
Lynn Stratford 50,000 40% $1.00 1-15-2010
Daniel S. Sam 25,000 20% $1.00 1-15-2010
Aggregated Option/SAR Exercises in Last Fiscal Year
And FY-End Option/SAR Values
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
Name Shares Value at May 5, 2000 at FY-End ($)
Acquired on Realized ($) Exercisable/ Exercisable/
Exercise (#) Unexercisable Unexercisable
Craig Phillips -0- -0- 25,000/0 0/0
Joseph Ollivier -0- -0- 25,000/0 0/0
Lynn Stratford 50,000 -0- 0/0 ---
Daniel S. Sam -0- -0- 25,000/0 0/0
Because there is no current public market for our shares, we
have deemed the Fair Market Value to be the exercise price of the
option.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We borrowed $100,000 from Joseph Ollivier and signed a note
for that amount with interest at 12% per year. Interest only is
currently payable with the principal due in November 20, 2000.
We secured the note with pumping equipment that we own. The note
has been paid in full.
We also borrowed $100,000 from Daniel Sam and signed a note
for that amount with interest at 12% per year. This note has
also been paid in full.
PRINCIPAL STOCKHOLDERS
The following table sets for the beneficial ownership of our
common stock as of the date of this prospectus, and as adjusted
to reflect the sale of 222,222 should the minimum number of
shares be sold and to reflect the sale of 1,000,000 should the
maximum number of shares be sold.
The table includes:
each person known to us to be the beneficial owner of more
than five percent of the outstanding shares
each director of Mountain Oil
each named executive officer of Mountain Oil
all directors and executive officer of Mountain Oil as a group
Name & Address # of Shares % Before
Beneficially Offering % After Offering
Owned Minimum Maximum
Craig K. Phillips 390,000 21.04% 18.79% 13.67%
P.O. Box 1622
Roosevelt, UT 84066
Joseph F. Ollivier 347,000 18.72% 16.72% 12.16%
3191 N. Canyon Rd.
Provo, UT 84604
Lynn Stratford 105,000 5.67% 5.06% 3.68%
4376 N. Churchill Dr.
Provo, UT 84604
Daniel S. Sam 390,000 21.04% 18.79% 13.67%
319 W. 100 S.
Vernal, UT 84078
All officers and 1,232,000 66.49% 59.37% 43.18%
Directors as a
Group (4 persons)
The shares attributed to Lynn Stratford are held in the
following names; 35,000 shares in the name LRS Unitrust, Lynn R.
Stratford as Trustee, 40,000 shares in the name LRS Unitrust #3,
Lynn R. Stratford as Trustee, and 20,000 shares in the name of
Lynn R. Stratford.
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DESCRIPTION OF THE SECURITIES
Common Stock
We are authorized to issue up to 50,000,000 shares of common
stock. As of May 22, 2000, there are 1,853,000 shares of common
stock issued and outstanding.
The holders of common stock are entitled to one vote per
share on each matter submitted to a vote of stockholders. In the
event of liquidation, holders of common stock are entitled to
share ratably in the distribution of assets remaining after
payment of liabilities, if any. Holders of common stock have no
cumulative voting rights, and, accordingly, the holders of a
majority of the outstanding shares have the ability to elect all
of the directors. Holders of common stock have no preemptive or
other rights to subscribe for shares. Holders of common stock
are entitled to such dividends as may be declared by the board of
directors out of funds legally available therefor. The
outstanding common stock is, and the common stock to be
outstanding upon completion of this offering will be, validly
issued, fully paid and non-assessable.
We anticipate that we will retain all of our future
earnings, if any, for use in the operation and expansion of our
business. We do not anticipate paying any cash dividends on our
common stock in the foreseeable future.
Preferred Stock
We are authorized to issue up to 10,000,000 shares of
preferred stock. As of May 5, 2000, there are no shares of
preferred stock issued and outstanding.
Our preferred stock may be issued from time to time in one
or more series, with such distinctive serial designations as may
be stated or expressed in the resolution or resolutions providing
for the issue of such stock adopted from time to time by our
Board of Directors. Our Board of Directors are expressly
authorized to fix:
* Voting rights
* The consideration for which the shares are to be issued
* The number of shares constituting each series
* Whether the shares are subject to redemption and the terms
of redemption
* The rate of dividends, if any, and the preferences and
whether such dividends shall be cumulative or noncumulative
* The rights of preferred stockholders regarding
liquidation, merger, consolidation, distribution or sale of
assets, dissolution or winding up of Mountain Oil
* The rights of preferred stockholders regarding conversion
or exchange of shares for another class of our shares
Convertible Debenture
We have sold convertible debentures to accredited investors
for $825,000. These debentures are convertible to common stock
at $1.50 per share (677 shares per $1,000 note) for a total of
550,000 shares of common stock. The notes are due on March
30,2002 and are convertible up to that time. The debentures pay
interest at a rate of 7% per annum from the date of issuance.
23
<PAGE>
Stock Options
We have reserved 300,000 shares of common stock for issuance
to key employees, officers, directors and consultants upon the
exercise of options available for grant under our Long-Term Stock
Incentive Plan.
Currently, we have granted options for 75,000 shares of
common stock. The options are fully vested and are exercisable
at $1.00 and $1.10 per share for a period of ten years. As of
the date of this prospectus, options for 50,000 shares of common
stock have been exercised at $1.00 per share.
The sale of any shares upon exercise of the stock options
could adversely affect the market price for our common stock.
Transfer Agent
Interwest Transfer Company, Inc., 1981 E. 4800 S., Salt Lake
City, Utah 84124 is our transfer agent.
SHARES AVAILABLE FOR FUTURE SALE
As of the date of this prospectus, there are 1,853,000
shares of our common stock issued and outstanding. Upon the
effectiveness of this registration statement, 222,222 shares of
common stock will be freely tradeable if the minimum number of
shares are sold and 1,000,000 shares of common stock will be
freely tradeable if the maximum number of shares are sold. The
remaining 1,853,000 shares of common stock will be subject to the
resale provisions of Rule 144. Sales of shares of common stock
in the public markets may have an adverse effect on prevailing
market prices for the common stock.
Rule 144 governs resale of "restricted securities" for the
account of any person (other than an issuer), and restricted and
unrestricted securities for the account of an "affiliate of the
issuer. Restricted securities generally include any securities
acquired directly or indirectly from an issuer or its affiliates
which were not issued or sold in connection with a public
offering registered under the Securities Act. An affiliate of
the issuer is any person who directly or indirectly controls, is
controlled by, or is under common control with the issuer.
Affiliates of the company may include its directors, executive
officers, and person directly or indirectly owning 10% or more of
the outstanding common stock. Under Rule 144 unregistered
resales of restricted common stock cannot be made until it has
been held for one year from the later of its acquisition from the
company or an affiliate of the company. Thereafter, shares of
common stock may be resold without registration subject to Rule
144's volume limitation, aggregation, broker transaction, notice
filing requirements, and requirements concerning publicly
available information about the company ("Applicable
Requirements"). Resales by the company's affiliates of
restricted and unrestricted common stock are subject to the
Applicable Requirements. The volume limitations provide that a
person (or persons who must aggregate their sales) cannot, within
any three-month period, sell more that the greater of one percent
of the then outstanding shares, or the average weekly reported
trading volume during the four calendar weeks preceding each such
sale. A non-affiliate may resell restricted common stock which
has been held for two years free of the Applicable Requirements.
MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Currently, there is no public trading market for our
securities and there can be no assurance that any market will
develop. If a market develops for our securities, it will likely
be limited, sporadic and highly volatile.
24
<PAGE>
PLAN OF DISTRIBUTION
The officers and directors of the Company will sell the
Common Shares offered hereunder on a "best efforts" basis. The
Company has appointed Bonneville Bank, 1675 North 200 West,
Provo, Utah 84604 as the escrow agent who will hold proceeds
from the sale of shares until the minimum $500,000 has been
received. If we have not received $500,000 within 90 days from
the date of this prospectus, unless extended by us for up to an
additional 30 days, funds will be promptly returned to investors
without interest and without any deductions. In order to buy our
shares, you must completed and execute the subscription and make
payment of the purchase price for each share purchased either in
cash or by check payable to the order of Mountain Oil, Inc.
Solicitation for purchase of our shares will be made only by
means of this prospectus and communications with officers and
directors of Mountain Oil who are employed to perform substantial
duties unrelated to the offering, who will not receive any
commission or compensation for their efforts, and who are not
associated with a broker or dealer.
LEGAL MATTERS
The legality of the issuance of the shares offered hereby
and certain other matters will be passed upon for Mountain Oil by
Lehman, Jensen & Donahue, L.C., Salt Lake City, Utah.
EXPERTS
The financial statements of Mountain Oil as of March 31,
2000 (unaudited) and December 31, 1999 (audited), appearing in
this Prospectus and Registration Statement have been prepared by
Tanner & Co., independent auditors, as set forth in their report
appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of said firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
We have filed a Registration Statement on Form SB-2 under
the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the shares offered hereby. This Prospectus does
not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further
information with respect to Mountain Oil and the shares offered
hereby, reference is made to the Registration Statement and the
exhibits and schedules filed therewith. Statements contained in
this Prospectus as to the contents of any contract or any other
document referred to are not necessarily complete, and in each
instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each
such statement being qualified in all respects by such reference.
A copy of the Registration Statement, and the exhibits and
schedules thereto, may be inspected without charge at the public
reference facilities maintained by the Securities and Exchange
Commission in Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the regional offices of the Commission located at
Seven World Trade Center, New York, New York 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661, and copies of all or any part of the Registration
Statement may be obtained from the Commission upon payment of a
prescribed fee. This information is also available from the
Commission's Internet web site.
25
<PAGE>
MOUNTAIN OIL, INC.
Index to Financial Statements
Page
Independent Auditor's report 27
Balance sheet 28
Statement of operations 29
Statement of stockholders' equity 30
Statement of cash flows 31
Notes to financial statements 32
Schedules of supplementary information on
oil and gas operations 41
26
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and
Stockholders of Mountain Oil, Inc.
We have audited the accompanying balance sheet of
Mountain Oil, Inc. as of December 31, 1999, and the
related statements of operations, stockholders' equity,
and cash flows for the period from July 30, 1999 (date
of inception) to December 31, 1999. These financial
statements are the responsibility of the Company's
management. Our responsibility is to express an
opinion on these financial statements based on our
audit.
We conducted our audit in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are
free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements.
An audit also includes assessing the accounting
principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the
financial position of Mountain Oil, Inc. as of
December 31, 1999, and the results of its operations
and its cash flows for the period from July 30, 1999
(date of inception) to December 31, 1999 in conformity
with generally accepted accounting principles.
TANNER + CO.
Salt Lake City, Utah
February 2, 2000
27
<PAGE>
MOUNTAIN OIL, INC.
Balance Sheet
March 31, 2000 (Unaudited) and December 31, 1999
- ---------------------------------------------------------------------------
2000
(Unaudited) 1999
Assets
Current assets:
Cash $ 85,000 $ 512,000
Accounts receivable 117,000 78,000
Subscription receivable - 10,000
Prepaid expenses 16,000 1,000
Total current assets 218,000 601,000
Property and equipment, net 654,000 417,000
Deposits 11,000 11,000
$ 883,000 $ 1,029,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 129,000 $ 183,000
Accrued expenses 4,000 4,000
Related party notes payable 100,000 200,000
Current portion of long-term debt - 12,000
Total current liabilities 233,000 399,000
Long-term debt 49,000 44,000
Commitments - -
Stockholders' equity:
Preferred stock, no par value,
authorized 10,000,000 shares;
no shares issued or outstanding - -
Common stock, no par value,
authorized 50,000,000 shares;
1,803,000 shares issued and outstanding 603,000 603,000
Accumulated deficit (2,000) (17,000)
Total stockholders' equity 601,000 586,000
$ 883,000 $ 1,029,000
See accompanying notes to financial statements.
28
<PAGE>
MOUNTAIN OIL, INC.
Statement of Operations
Three Months Ended March 31, 2000 (Unaudited) and
July 30, 1999 (Date of Inception) to December 31, 1999
- --------------------------------------------------------------------
2000
(Unaudited) 1999
Oil and gas sales $168,000 $ 77,000
Cost of sales 39,000 45,000
Gross profit 129,000 32,000
General and administrative expenses (91,000) (33,000)
Depreciation, depletion and
amortization expense (22,000) (12,000)
Income (loss) from operations 16,000 (13,000)
Interest expense (4,000) (4,000)
Other income 3,000 -
Income (loss) before provision for
income taxes 15,000 (17,000)
Provision for income taxes - -
Net income (loss) $ 15,000 $ (17,000)
Income (loss) per common share -
basic and diluted $ .01 $ (.02)
Weighted average number of common
shares - basic and diluted 1,803,000 1,106,000
See accompanying notes to financial statements.
29
<PAGE>
MOUNTAIN OIL, INC.
Statement of Stockholders' Equity
Three Months Ended March 31, 2000 (Unaudited) and
July 30, 1999 (Date of Inception) to December 31, 1999
- -------------------------------------------------------------------------------
Preferred Stock Common Stock Accumulated
Shares Amount Shares Amount Deficit Total
Balance at July 30,
1999 (date of
inception) - $ - - $ - $ - $ -
Issuance of common
stock to the founders - - 1,200,000 - - -
Issuance of common
stock for:
Cash - - 509,000 509,000 - 509,000
Stock subscription
receivable - - 10,000 10,000 - 10,000
Equipment - - 84,000 84,000 - 84,000
Net loss - - - - (17,000) (17,000)
Balance at
December 31, 1999 - - 1,803,000 603,000 (17,000) 586,000
Net income (unaudited) - - - - 15,000 15,000
Balance at March
31, 2000 (unaudited) - $ - 1,803,000 $603,000 $(2,000) $ 601,000
See accompanying notes to financial statements.
30
<PAGE>
MOUNTAIN OIL, INC.
Statement of Cash Flows
Three Months Ended March 31, 2000, (Unaudited) and
July 30, 1999 (Date of Inception) to December 31, 1999
2000
(Unaudited) 1999
Cash flows from operating activities:
Net income (loss) $ 15,000 $(17,000)
Adjustments to reconcile net income
(loss) to net cash used in
operating activities:
Depreciation, depletion and amortization 22,000 12,000
(Increase) decrease in:
Accounts receivable (39,000) (78,000)
Prepaid expenses (15,000) (1,000)
Deposits - (11,000)
Increase (decrease) in:
Accounts payable (54,000) (95,000)
Accrued expenses - 4,000
Net cash used in
operating activities (71,000) (186,000)
Cash flows from investing activities-
purchase of property and equipment (259,000) (10,000)
Cash flow from financing activities:
Proceeds from related party notes payable - 206,000
Payments on related party notes payable (100,000) -
Payments on long-term debt (7,000) (7,000)
Collection of subscription receivable 10,000 -
Proceeds from issuance of common stock - 509,000
Net cash (used in) provided by
financing activities (97,000) 708,000
Net (decrease) increase in cash (427,000) 512,000
Cash, beginning of period 512,000 -
Cash, end of period $ 85,000 $ 512,000
See accompanying notes to financial statements.
31
<PAGE>
MOUNTAIN OIL, INC.
Notes to Financial Statements
December 31, 1999
1. Organization
Organization The Company is incorporated under the
and laws of the state of Utah and is primarily
Summary engaged in the business of acquiring,
of Significant developing, producing and selling oil and
Accounting gas products and properties to companies
Policies located in the continental United States.
Unaudited Financial Information
The unaudited financial statements include
the accounts of the Company and include
all adjustments (consisting of normal
recurring items), which are, in the
opinion of the management, necessary to
present fairly the financial position as
of March 31, 2000 and the results of
operations and cash flows for the three
months ended March 31, 2000. The results
of operations for the three months ended
are not necessarily indicative of the
results to be expected for the entire
year.
Cash and Cash Equivalents
For purposes of the statement of cash
flows, the Company considers all highly
liquid investments with a maturity of
three months or less to be cash
equivalents.
Concentration of Credit Risk
Financial instruments which potentially
subject the Company to concentration of
credit risk consist primarily of trade
receivables. In the normal course of
business, the Company provides credit
terms to its customers. Accordingly, the
Company performs ongoing credit
evaluations of its customers and maintains
allowances for possible losses which, when
realized, have been within the range of
management's expectations. As more fully
described in note 5, the Company generated
all of its revenue from one customer. The
Company has aggregate receivables of
approximately $61,000 from this customer
at December 31, 1999.
The Company maintains its cash in bank
deposit accounts which, at times, may
exceed federally insured limits. The
Company has not experienced any losses in
such account. The Company believes it is
not exposed to any significant credit risk
on cash and cash equivalents.
32
<PAGE>
MOUNTAIN OIL, INC.
Notes to Financial Statements
Continued
1.Organization Oil and Gas Producing Activities
and The Company utilizes the successful
Summary of efforts method of accounting for its oil
Significant and gas producing activities. Under this
Accounting method, all costs associated with
Policies productive exploratory wells and
Continued productive or nonproductive development
wells are capitalized while the costs of
nonproductive exploratory wells are
expensed. If an exploratory well finds
oil and gas reserves, but a determination
that such reserves can be classified as
proved is not made after one year
following completion of drilling, the
costs of drilling are charged to
operations. Indirect exploratory
expenditures, including geophysical costs
and annual lease rentals, are expensed as
incurred. Unproved oil and gas properties
that are individually significant are
periodically assessed for impairment of
value, and a loss is recognized at the
time of impairment by providing an
impairment allowance. Capitalized costs
of producing oil and gas properties, after
considering estimated dismantlement and
abandonment costs and estimated salvage
values, are depreciated and depleted by
the unit-of-production method. Support
equipment and other property and equipment
are depreciated over their estimated
useful lives.
On the sale or retirement of a complete
unit of a proved property, the cost and
related accumulated depreciation,
depletion, and amortization are eliminated
from the property accounts, and the
resultant gain or loss is recognized. On
the retirement or sale of a partial unit
of proved property, the cost is charged to
accumulated depreciation, depletion, and
amortization with a resulting gain or loss
recognized in income.
On the sale of an entire interest in an
unproved property for cash or cash
equivalent, gain or loss on the sale is
recognized, taking into consideration the
amount of any recorded impairment if the
property had been assessed individually.
If a partial interest in an unproved
property is sold, the amount received is
treated as a reduction of the cost of the
interest retained.
33
<PAGE>
MOUNTAIN OIL, INC.
Notes to Financial Statements
Continued
1.Organization Property and Equipment
and Property and equipment are stated at cost
Summary of less accumulated depreciation.
Significant Depreciation is provided using the straight-
Accounting line method over the estimated useful lives
Policies of the assets. Expenditures for
Continued maintenance and repairs are expensed when
incurred and betterments are capitalized.
When assets are sold, retired or otherwise
disposed of, the applicable costs and
accumulated depreciation, depletion, and
amortization are removed from the accounts,
and the resulting gain or loss is reflected
in operations.
Income Taxes
Deferred income taxes arise from temporary
differences resulting from income and
expense items reported for financial
accounting and tax purposes in different
periods. Deferred taxes are classified as
current or noncurrent, depending on the
classification of the assets and
liabilities to which they relate. Deferred
taxes arising from temporary differences
that are not related to an asset or
liability are classified as current or
noncurrent depending on the periods in
which the temporary differences are
expected to reverse.
Earnings Per Share
The computation of basic earnings per
common share is based on the weighted
average number of shares outstanding during
the period.
The computation of diluted earnings per
common share is based on the weighted
average number of shares outstanding during
the period plus the common stock
equivalents which would arise from the
exercise of stock options and warrants
outstanding using the treasury stock method
and the average market price per share
during the period. Common stock
equivalents are not included in the diluted
earnings per share calculation when their
effect is antidilutive.
At December 31, 1999, the Company had no
options or warrants outstanding.
Revenue Recognition
Revenue is recognized from oil sales at
such time as the oil is delivered to the
buyer. Revenue is recognized from gas
sales when the gas passes through the
pipeline at the well head. Revenue from
overriding royalty interest is recognized
when earned.
The Company does not have any gas balancing
arrangements.
34
<PAGE>
MOUNTAIN OIL, INC.
Notes to Financial Statements
Continued
1.Organization Use of Estimates in the Preparation of
and Financial Statements
Summary of The preparation of financial statements in
Significant conformity with generally accepted
Accounting accounting principles requires management
Policies to make estimates and assumptions that
Continued 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.
2.Property Property and equipment consists of the
and following at December 31, 1999:
Equipment
Oil and gas properties (successful efforts method) $ 174,000
Oil and gas equipment 104,000
Vehicles and equipment 118,000
Building and land 29,000
Office furniture and fixtures 4,000
429,000
Less accumulated depreciation, depletion
and amortization (12,000)
$417,000
35
<PAGE>
MOUNTAIN OIL, INC.
Notes to Financial Statements
Continued
3.Long- Term Long-term debt consists of the following at
Debt December 31, 1999:
Mortgage payable, due in monthly installments of $300,
including interest at 8%, secured by real property $ 28,000
Note payable to a finance company, due in
monthly installments of $500, including interest at
10.3%, secured by equipment 22,000
Note payable to an individual, bearing
interest at 10%. The note is unsecured
and due on demand 6,000
56,000
Less current portion (12,000)
$44,000
Future maturities of long-term debt are as follows:
Year Ending December 31
2000 $12,000
2001 6,000
2002 7,000
2003 7,000
2004 7,000
Thereafter 17,000
$56,000
36
<PAGE>
MOUNTAIN OIL, INC.
Notes to Financial Statements
Continued
4. Income The provision for income taxes differs from
Taxes the amount computed at federal statutory
rates as follows at December 31, 1999:
Income tax benefit at statutory rate $ 3,000
Change in valuation allowance (3,000)
$ -
Deferred tax assets (liabilities) are
comprised of the following at December 31, 1999:
Net operating loss carry forward $ 3,000
Valuation allowance (3,000)
$ -
A valuation allowance has been recorded for
the full amount of the deferred tax asset
because it is more likely than not that the
deferred tax asset will not be realized.
As of December 31, 1999, the Company had a
net operating loss carryforward of
approximately $17,000. This carry forward
expires in 2019. If substantial changes in
the Company's ownership should occur, there
would be an annual limitation of the amount
of NOL carry forward which could be
utilized. The ultimate realization of this
carry forward is due, in part, on the tax
law in effect at the time and future events
which cannot be determined.
5.Sales to The Company's sales for the period from
Major July 30, 1999 (date of inception) to
Customer December 31, 1999 were all to one customer.
6.Related Related party payables at December 31, 1999
Party consist of notes payable to
Payables officers/shareholders totaling $200,000.
The notes bear interest at rates ranging
from 11% to 12%. The notes are secured by
property and equipment and are due on
demand.
37
<PAGE>
MOUNTAIN OIL, INC.
Notes to Financial Statements
Continued
7.Supplemental Operations reflect actual amounts paid for
Disclosures interest and income taxes as follows:
of Cash
Flow Three Months July 30, 1999
Information Ended (Date of Inception)
March 31, to December
2000 31, 1999
(Unaudited)
Interest $ 4,000 $ 4,000
Income taxes $ - $ -
During the period July 30, 1999 (date of
inception) to December 31, 1999:
* The Company issued 84,000 shares of
common stock in exchange for equipment in
the amount of $84,000.
* The Company acquired oil and gas
properties and related equipment in
exchange for accounts payable and long-term
debt of $307,000.
* The Company acquired equipment in
exchange for long-term debt of $28,000.
* The Company issued 10,000 shares of
common stock in exchange for a stock
subscription receivable which was collected
subsequent to year end.
38
<PAGE>
MOUNTAIN OIL, INC.
Notes to Financial Statements
Continued
8. Preferred The Company's preferred stock may be issued
Stock from time to time in one or more series,
with such distinctive serial designations
as may be stated or expressed in the
resolution or resolutions providing for the
issue of such stock adopted from time to
time by the Board of Directors. In such
resolution or resolutions providing for the
issuance of shares of each particular
series, the Board of Directors is also
expressly authorized to fix:
* The right to vote
* The consideration for which the shares
of such series are to be issued, the number
of shares constituting such series and
whether shares of such series shall be
subject to redemption and the terms
* The rate of dividends, the times at
which dividends shall be payable, and
preferences and whether such dividends
shall be cumulative or noncumulative
* The rights which the holders of shares
of such series shall have in the event of
any voluntary or involuntary liquidation,
merger, consolidation, distribution or sale
of assets, dissolution or winding up of the
affairs of the corporation
* The rights which the holder of shares
of such series shall have to convert such
shares into or exchange such shares for
shares of any other class or any other
series of stock of the corporation
9.Fair Value The Company's financial instruments consist
of Financial of cash, receivables, payables, and notes
Instruments payable. The carrying amount of cash,
receivables and payables approximates fair
value because of the short-term nature of
these items. The aggregate carrying amount
of the notes payable approximates fair
value as the individual borrowings bear
interest at market interest rates.
39
<PAGE>
MOUNTAIN OIL, INC.
Notes to Financial Statements
Continued
10. Recent In June 1999, the FASB issued SFAS No. 137,
Accounting "Accounting for Derivative Instruments and
Pronounce- Hedging Activities - Deferral of the
ments Effective date of FASB Statement No. 133."
SFAS 133 establishes accounting and
reporting standards for derivative
instruments and requires recognition of all
derivatives as assets or liabilities in the
statement of financial position and
measurement of those instruments at fair
value. SFAS 133 is now effective for
fiscal years beginning after June 15, 2000.
The Company believes that the adoption of
SFAS 133 will not have any material effect
on the financial statements of the Company.
40
<PAGE>
MOUNTAIN OIL, INC.
Schedule of Supplementary Information
on Oil and Gas Operations
The information on the Company's oil and gas operations as shown
in this schedule is based on the successful efforts method of
accounting and is presented in conformity with the disclosure
requirements of Statement of Financial Accounting Standards No.
69 "Disclosures about Oil and Gas Producing Activities."
Capitalized Costs Relating to Oil and Gas Producing Activities
December
31, 1999
Proved oil and gas properties and related equipment $ 278,000
Unproved oil and gas properties -
Subtotal 278,000
Accumulated depreciation, depletion and amortization
and valuation allowances 12,000
$ 266,000
Costs Incurred in Oil and Gas Acquisition,
Exploration and Development Activities
Period From
July 30, 1999
(Date of
Inception) to
December 31,
1999
Acquisition of properties:
Proved $ 174,000
Unproved $ -
Exploration costs $ -
Development costs $ -
41
<PAGE>
MOUNTAIN OIL, INC.
Schedule of Supplementary Information
on Oil and Gas Operations
Continued
Results of Operations for Producing Activities
Period From
July 30,1999
(Date of
Inception) to
December 31,
1999
Oil and gas sales $ 77,000
Production costs (45,000)
Exploration costs -
Depreciation, depletion and amortization and
valuation provisions (10,000)
Net income before income taxes 22,000
Income tax provision (3,000)
Results of operations from producing activities
(excluding corporate overhead and interest
costs) $ 19,000
42
<PAGE>
MOUNTAIN OIL, INC.
Schedule of Supplementary Information on Oil and Gas Operations
Continued
Reserve Quantity Information (Unaudited)
The estimated quantities of proved oil and gas reserves disclosed
in the table below are based upon estimates by Ralph L. Nelms, a
petroleum engineer. Such estimates are inherently imprecise and
may be subject to substantial revisions.
Revisions may occur because current prices of oil and gas and
current costs of operating are subject to fluctuations, past
performance of wells does not necessarily guarantee future
performance and rates used to estimate decline of reserves could
vary from that which is projected.
All quantities shown in the table are proved reserves and are
located within the United States.
Period From July 30,1999
(Date of Inception) to
December 31,1999
Oil Gas
(bbls) (mcf)
Proved developed and undeveloped
reserves:
Beginning of period - -
Revision in previous estimates - -
Discoveries and extension - -
Purchase in place 1,068,000 1,396,000
Production (2,000) (150,000)
Sales in place - -
End of period 1,066,000 1,246,000
Proved developed reserves:
Beginning of period - -
End of period 40,000 34,000
43
<PAGE>
MOUNTAIN OIL, INC.
Schedule of Supplementary Information on Oil and Gas Operations
Continued
Standardized Measure of Discounted Future Net Cash Flows
Relating to Proved Oil and Gas Reserves (Unaudited)
Period From
July 30, 1999
(Date of Inception) to
December 31,
1999
Future cash inflows $ 28,283,000
Future production and development costs (20,486,000)
Future income tax expenses (2,651,000)
5,146,000
10% annual discount for estimated timing of
cash flows (4,102,000)
Standardized measure of discounted future
net cash flows $ 1,044,000
The preceding table sets forth the estimated future net cash
flows and related present value discounted at a 10% annual rate
from the Company's proved reserves of oil, condensate and gas.
The estimated future net revenue is computed by applying the
period end prices of oil and gas (including price changes that
are fixed and determinable) and current costs of development and
production to estimated future production assuming continuation
of existing economic conditions. The values expressed are
estimates only, and may not reflect realizable values or fair
market values of the oil and gas ultimately extracted and
recovered. The ultimate year of realization is also subject to
accessibility of petroleum reserves and the ability of the
Company to market the products.
44
<PAGE>
MOUNTAIN OIL, INC.
Schedule of Supplementary Information
on Oil and Gas Operations
Continued
Changes in the Standardized Measure of
Discounted Future Net Cash Flows (Unaudited)
Period From
July 30, 1999
(Date of
Inception) to
December 31,
1999
Balance, beginning of period $ -
Sales of oil and gas produced net of
production costs (30,000)
Net changes in prices and production costs -
Extensions and discoveries, less related costs -
Purchase and sales of minerals in place 1,074,000
Revisions of estimated development costs -
Revisions of previous quantity estimate -
Accretion of discount -
Net changes in income taxes -
Balance, end of period $ 1,044,000
45
<PAGE>
Form of
Subscription Agreement
[See Exhibit No. 15]
46
<PAGE>
[Outside back cover]
================================== ====================================
Until _____________, 2000, all
dealers that effect
transactions in these
securities, whether or not $2,225,000
participating in this offering,
may be required to deliver a
prospectus. This is in
addition to the dealers'
obligation to deliver a MOUNTAIN OIL, INC.
prospectus when acting as [logo]
underwriters and with respect
to their unsold allotments or
subscriptions. 1,000,000 Shares
Common Stock
- ------------------------------- $.001 Par Value
TABLE OF CONTENTS
- ------------------------------
Prospectus Summary 2
Risk Factors 2 ---------------------
Forward-Looking Statements 5 PROSPECTUS
Dilution and Comparative Data 5 ---------------------
Use of Proceeds 7
Capitalization 8
Plan of Operation 8
Results of Operation 10
Business 11
Oil and Gas Reserve
Information 14
Management 20
Compensation 21
Certain Relationships and
Related Transactions 22
Principal Stockholders 22
Description of the Securities 23
Shares Available for Future
Sale 24
Market for Common Stock 24
Plan of Distribution 25
Legal Matters 25
Experts 25
Additional Information 25
Index to Financial Statements 26
No dealer, salesperson or other
person has been authorized to
give any information or to make
any representations other than
those contained in this
Prospectus and, if given or
made, such information or
representations must not be
relied upon as having been
authorized by the Company. This
Prospectus does not constitute
an offer to sell or a
solicitation of an offer to buy __________________ 2000
any of the securities offered
hereby to whom it is unlawful
to make such offer in any
jurisdiction. Neither the
delivery of this Prospectus nor
any sale made hereunder shall,
under any circumstances, create
any implication that
information contained herein is
correct as of any time
subsequent to the date hereof
or that there has been no
change in the affairs of the
Company since such date.
==================================== ===================================
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses in connection
with this Registration Statement. The Company will pay all
expenses of the offering. All of such expenses are estimates,
other than the filing fees payable to the Securities and Exchange
Commission and NASD.
Securities and Exchange $ 594.00
Commission Filing Fee
Printing Fees and Expenses 10,000
Legal Fees and Expenses 50,000
Accounting Fees and Expenses 30,000
Blue Sky Fees and Expenses 10,000
Trustee's and Registrar's Fees 5,000
Miscellaneous 5,725
TOTAL $ 111,319
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Charter provides that, to the fullest extent
that limitations on the liability of directors and officers are
permitted by the Utah Revised Business Corporations Act no
director or officer of the Company shall have any liability to
the Company or its stockholders for monetary damages. The Utah
Revised Business Corporations Act provides that a corporation's
charter may include a provision which restricts or limits the
liability of its directors or officers to the corporation or its
stockholders for money damages except: (1) to the extent that it
is provided that the person actually received an improper benefit
or profit in money, property or services, for the amount of the
benefit or profit in money, property or services actually
received, or (2) to the extent that a judgment or other final
adjudication adverse to the person is entered in a proceeding
based on a finding in the proceeding that the person's action, or
failure to act, was the result of active and deliberate
dishonesty and was material to the cause of action adjudicated in
the proceeding. The Company's Charter and Bylaws provide that the
Company shall indemnify and advance expenses to its currently
acting and its former directors to the fullest extent permitted
by the Utah Revised Business Corporations Act and that the
Company shall indemnify and advance expenses to its officers to
the same extent as its directors and to such further extent as is
consistent with law.
The Charter and Bylaws provide that the Company will
indemnify its directors and officers and may indemnify employees
or agents of the Company to the fullest extent permitted by law
against liabilities and expenses incurred in connection with
litigation in which they may be involved because of their offices
with the Company. However, nothing in the Charter or Bylaws of
the Company protects or indemnifies a director, officer, employee
or agent against any liability to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his office. To the extent that a director has been
successful in defense of any proceeding, the Utah Revised
Business Corporations Act provides that he shall be indemnified
against reasonable expenses incurred in connection therewith.
I
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In August, 1999, we issued 1,200,000 shares of common stock
to individuals for nominal consideration in connection with
services rendered in the formation of Mountain Oil. We believe
this transaction was exempt from registration pursuant to Section
4(2) of the Securities Act as an isolated transaction by an
issuer not involving a public offering.
In November, 1999 we issued 84,000 shares of common stock to
an individual in exchange for equipment valued at $84,000. The
shares were sold in reliance on Regulation D, Rule 506 and
Section 4(2) of the Securities Act in transactions by an issuer
not involving a public offering.
In December, 1999 we issued 509,000 shares of common stock
for $509,000 cash to individuals. The shares were sold in
reliance on Regulation D, Rule 506 and Section 4(2) of the
Securities Act in transactions by an issuer not involving a
public offering.
In January, 2000 we issued 10,000 shares of common stock to
individuals in exchange for a note for $10,000. The shares were
sold in reliance on Regulation D, Rule 506 and Section 4(2) of
the Securities Act in transactions by an issuer not involving a
public offering.
In April, 2000, we issued convertible debentures to
individuals in exchange for $825,000. The debentures were issued
in reliance on Regulation D, Rule 506 and Section 4(2) of the
Securities Act in transactions by an issuer not involving a
public offering.
In May, 2000 we issued 50,000 shares to an officer and
director upon exercise of an option for 50,000 shares. The
exercise price was $1.00 per share and we received $50,000. The
shares were issued in reliance on Section 4(2) of the Securities
Act in an transaction by an issuer not involving a public
offering.
ITEM 16. EXHIBITS.
Exhibits.
Exhibit SEC Ref. Title of Document Location
No. No.
1 3.1 Articles of Incorporation Attached
2 3.1 Amended Articles of Incorporation Attached
3 3.1 By-laws Attached
4 5 Legal Opinion Attached
5 10 Form of Convertible Note Attached
6 24 Consent of Tanner & Co., Certified Attached
Public Accountants
7 27 Financial Data Schedule - December 31,1999 Attached
8 27 Financial Data Schedule - March 31, 2000 Attached
9 99 Options Issued to Management - Phillips Attached
10 99 Options Issued to Management - Ollivier Attached
11 99 Options Issued to Management - Stratford Attached
12 99 Options Issued to Management - Sam Attached
13 99 Stock Option Plan Attached
14 99 Escrow Agreement Attached
15 99 Subscription Agreement Attached
II
<PAGE>
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the
provisions described in this Registration Statement or otherwise,
the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling persons of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes to provide to
the underwriter at the closing specified in the underwriting
agreements certificates in such denominations and registered in
such names as required by the underwriter to permit prompt
delivery to each purchaser.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act, the information omitted from the form of
prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of prospectus
filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to:
(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this registration
statement to:
(i) Include any prospectus required by section
10(a)(3) of the Securities Act;
(ii) Reflect in the prospectus any facts or events
which, individually or together, represent a fundamental change
in the information in the registration statement; and
(iii) Include any additional or changed material
information on the plan of distribution.
(2) For determining liability under the Securities Act,
treat each post-effective amendment as a new registration
statement of the securities offered, and the offering of the
securities at that time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the end
of the offering.
III
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant has duly caused this Registration Statement or
Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in Provo, Utah, on May 23, 2000.
MOUNTAIN OIL, INC.
By /s/ Craig K. Phillips, President
Pursuant to the requirements of the Securities Act of 1933,
this registration statement or Amendment has been signed below by
the following persons in the capacities and on the dates
indicated.
/s/ Craig K. Phillips, Chief Date: May 23, 2000
Executive Officer and Director
/s/ Lynn Stratford, Director Date: May 23, 2000
/s/ Daniel S. Sam, Director Date: May 23, 2000
/s/ Joseph Ollivier, Chief Date: May 23, 2000
Financial Officer and Director
IV
<PAGE>
4
Exhibit 1
Form 10-KSB
Mountain Oil, Inc.
ARTICLES OF INCORPORATION
OF
MOUNTAIN OIL, INC.
The undersigned natural persons of the age of twenty-one (21)
years or more, acting as incorporators under the provisions of the
Utah Business Corporation Act (hereinafter referred to as the
"Act") adopt the following Articles of Incorporation:
ARTICLE I
The name of this corporation is MOUNTAIN OIL, INC.
ARTICLE II
The duration of this corporation shall be perpetual.
ARTICLE III
The purposes for which this corporation is organized are as
follows:
(a) To engage in the leasing of lands believed to contain
petroleum, oils, and gas, the improving, mortgaging, leasing,
assigning, and otherwise disposing of the same, the prospecting,
drilling, pumping, piping, storing, refining, and selling, both at
wholesale and retail, of oils and gas, the buying, otherwise
acquiring, selling, and otherwise disposing of any and all real
estate and personal property for use in the business of the
company, the construction of any and all buildings, pipe line,
pumping stations, and storage tanks, and any and all other
buildings required in carrying on the business of the company; to
act as trustee for holders of oil lands in the receiving and
disbursement of funds to be used in drilling for the common
benefit of the land holders; and to do any and every act or thing,
proper, necessary, and incidental to the general purpose of this
company.
(b) To engage in the manufacture, sale, and distribution of
oil field production equipment and machinery.
(c) To engage in consulting services for oil field drilling,
production, development, or operations of all kinds.
(d) To buy, sell, and otherwise deal in notes, stocks, bonds,
contracts or other investments, including the right to hold, buy,
sell, lease, mortgage or otherwise encumber, sell and dispose of
any and all of the real and personal property of the corporation.
(e) To subscribe or cause to be subscribed for and to
purchase or otherwise acquire, hold for investment, sell, assign,
transfer, mortgage, pledge, exchange, distribute or otherwise
dispose of the whole or any part of the shares of the capital
stock, bonds, coupons, mortgages, deeds of trust,
E-1
<PAGE>
debentures, securities, obligations and other evidences of
indebtedness of any person, firm or corporation now or hereafter
existing, and whether created by or under the laws of the State of
Utah or otherwise; and while the owner of any of said shares of
capital stock or bonds or other property to exercise all rights,
powers and privileges of ownership of every kind and description,
including the right to vote thereon, with the power to designate
some person for that purpose from time to time to the same extent
as natural persons might or could do; and to purchase, hold and
fill any of its obligations, including investment trust
certificates and make credit advances thereon as may be determined
from time to time. None of the above powers by any implication or
construction shall be deemed to grant the corporation the power of
carrying on the business of banking.
(f) To lend money and negotiate loans and generally to carry
on, conduct, promote, operate and undertake any business,
transaction or operation commonly carried on, conducted, promoted,
operating or undertaken by capitalists, financiers, contractors
and builders, insurance brokers and agents, loan brokers and
agents, real estate agents, brokers, dealers, subdividers and
promoters and security brokers and agents.
(g) To purchase, take, receive or otherwise acquire, hold,
own, pledge, transfer or otherwise dispose of its own shares of
capital stock; provided, however, that said purchase of its own
shares, whether direct or indirect, shall be made only to the
extent of unreserved and unrestricted earned surplus available
therefor, and only with the affirmative vote of the holders of at
least two-thirds of all of the shares entitled to vote thereon.
The foregoing clauses shall be construed both as purposes and
powers, and shall not be held to limit or restrict in any manner
the general powers of this corporation, and the enjoyment and the
exercise thereof, conferred by the laws of the State of Utah now
in force or hereafter enacted.
ARTICLE IV
The corporation will not commence business until
consideration of the value of $1,000.00 has been received as
consideration for the issuance of shares.
ARTICLE V
Section 1. The aggregate number of shares which this
corporation shall have authority to issue is 50,000 shares no par
value.
Section 2. If (a) any two or more shareholders or subscribers
to stock of the corporation shall enter into any agreement
abridging, limiting or restricting the rights of any one or more
of them to sell, assign, transfer, mortgage, pledge, hypothecate
or transfer on the books of the corporation, or if (b) the
incorporators or the shareholders entitled to vote shall adopt any
by-law provisions abridging, limiting or restricting the aforesaid
rights of any stockholders, then and in either of such events, ail
certificates for shares of stock subject to such abridgments,
limitations or restrictions shall have a reference thereto
endorsed thereon by an officer of the corporation, and such stock
shall not thereafter be transferred on the books of the
corporation except in accordance with the terms and provisions of
such agreement or by-law as the case may be.
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<PAGE>
Section 3. The holders of the common stock of the
corporation, and, unless otherwise provided in these Articles of
Incorporation or in any resolution adopted by the Board of
Directors pursuant to authority contained in these Articles of
Incorporation, the holders of any other class of stock issued or
to be issued by the corporation and entitled to vote at a meeting
of stockholders, shall be entitled to one vote for each share of
stock held by them. At all elections of directors, cumulative
voting shall be allowed so that each such holder shall be entitled
to as many votes as shall equal the number of votes which (except
for this provision) such holder would be entitled to cast for the
election of directors with respect to his shares of stock
multiplied by the number of directors to be elected by him, and
such holder may cast all such votes for a single director or may
distribute them among the number to be voted for, or for any two
or more of them, as such holder may see f it. The entire Board of
Directors or any individual director may be removed from office
without assignment of cause by a vote of the holders of a majority
of the outstanding shares of stock then entitled to vote at an
election of directors, except that if less than the entire Board
of Directors is to be removed, no one of the directors may be
removed if the votes cast against his removal would be sufficient
to elect him if then cumulatively voted at an election of the
entire Board of Directors.
ARTICLE VI
The address of the initial registered office of this
corporation is Richard Garbrick. The name of the initial
registered agent of this corporation at that address is 295 North
500 West, Provo, Utah 84601.
ARTICLE VII
The initial Board of Directors shall consist of one (1)
member. The name and address of the person who is to serve as
director until the first annual meeting of stockholders or until
their successors be elected and qualify are as follows:
Richard Garbrick 295 North 500 West
Provo, Utah 84601
ARTICLE VIII
The names and addresses of the incorporators of this
corporation are as follows:
Richard Garbrick 295 North 500 West
Provo, Utah 84601
IN WITNESS WHEREOF, the undersigned, being the incorporator
of this corporation, execute these Articles of Incorporation and
certify to the truth of the facts herein stated, this 29 day of
July, 1999.
/s/ RICHARD GARBRICK
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<PAGE>
STATE OF CALIFORNIA )
) ss.
County of PLACER )
On the 29th day of July, 1999, personally appeared before me,
Richard Garbrick, signer of the foregoing instrument, who
acknowledged to me that he executed the same.
/s/ Notary Public
E-4
<PAGE>
4
Exhibit 2
Form 10-KSB
Mountain Oil, Inc.
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION
OF MOUNTAIN OIL, INC.
Pursuant to Utah Code Ann., Section 16-10a-1006, MOUNTAIN
OIL, INC., a Utah corporation (the "Corporation"), hereby files
these Articles of Amendment to its Articles of Incorporation.
A. The Board of Directors of the Corporation by written
consent unanimously approved and recommended to the Corporation's
shareholders that the Articles of Incorporation be amended as set
forth herein.
B. There are currently Five Hundred Fifty (550) shares of
stock of the Corporation which are outstanding and entitled to
vote to approve these Articles of Amendment.
C. The amendment set forth herein to the Articles of
Incorporation of the Corporation has been duly approved on July
30, 1999, by the vote of the holder of all Five Hundred Fifty
(550) shares of stock of the Corporation entitled to vote on, in
accordance with the corporate laws of the State of Utah and the
Articles of Incorporation and all amendments thereto.
AMENDMENT TO THE ARTICLES OF INCORPORATION
OF MOUNTAIN OIL, INC.
1. Effective July 30, 1999, Article IV, of the Articles of
Incorporation of the Corporation shall be deleted and the
following shall be substituted therefore as Amended Article IV of
the Articles of Incorporation:
ARTICLE IV
A director of the Corporation shall have no personal
liability W the Corporation or its shareholders for monetary
damages for any action, or any failure to take action, or any
failure to take action, as a director, except for liability for: W
the amount of a financial benefit received by a director L o which
he or she is not entitled; (ii) an intentional infliction of harm
on the Corporation or the shareholders; (iii) a violation of
section 16-10a-842 of the Utah Revised Business Corporation Act,
and any amended or successor provision thereto; or, (iv) an
intentional violation of criminal law.
2. Effective July 30, 1999, Article V, Sections 1, 2, and
3, of the Articles of Incorporation of the Corporation shall be
deleted and the following shall be substituted therefore as
Amended Article V, Sections 1 and 2, of the Articles of
Incorporation:
ARTICLE V
Section 1. The total number of shares of all classes of
capital stock which the corporation shall have authority to issue
is 60,000,000 shares. Stockholders shall not have any preemptive
rights, nor shall stockholders have the right to cumulative voting
in the election of directors or for
E-5
<PAGE>
any other purpose. The classes and the aggregate number of shares
of stock of each class which the corporation shall have authority
to issue are as follows:
(a) 50,000,000 shares of common stock, no par value ("Common
Stock");
(b) 10,000,000 shares of preferred stock, no par value
("Preferred Stock").
The Preferred Stock may be issued from time to time in one or
more series, with such distinctive serial designations as may be
stated or expressed in the resolution or resolutions providing for
the issue of such stock adopted from time to time by the Board of
Directors. In such resolution or resolutions providing for the
issuance of shares of each particular series, the Board of
Directors is also expressly authorized to fix: the right to vote,
if any; the consideration for which the shares of such series are
to be issued; the number of shares constituting such series, which
number may be increased (except as otherwise fixed by the Board of
Directors) or decreased (but not below the number of shares
thereof then outstanding) from time to time by action of the Board
of Directors; the rate of dividends upon which and the times at
which dividends on shares of such series shall be payable and the
preference, if any, which such dividends shall have relative to
dividends on shares of any other class or classes or any other
series of stock of the corporation; whether such dividends shall
be cumulative or noncumulative, and if cumulative, the date or
dates from which dividends on shares of such series shall be
cumulative; the rights, if any, which the holders of shares of
such series shall have in the event of any voluntary or
involuntary liquidation, merger, consolidation, distribution or
sale of assets, dissolution or winding up of the affairs of the
corporation; the rights, if any, which the holders of shares of
such series shall have in the event of any voluntary or
involuntary liquidation, merger, consolidation, distribution or
sale of assets, dissolution or winding up of the affairs of the
corporation; the rights, if any, which the holder of shares of
such series shall have to convert such shares into or exchange
such shares for shares of any other class or classes or any other
series of stock of the corporation or for any debt securities of
the corporation and the terms and conditions, including price and
rate of exchange, of such conversion or exchange; whether shares
of such series shall be subject to redemption, and the redemption
price or prices and other terms of redemption, if any, for shares
of such series including, without limitation, a redemption price
or prices payable in shares of Common Stock; the terms and amounts
of any sinking fund for the purchase or redemption of shares of
such series; and any and all other designations, preferences, and
relative, participating, optional or other special rights,
qualifications, limitations or restrictions thereof pertaining to
shares of such series' permitted by law.
Section 2. The Board of Directors of the Corporation may from
time to time authorize by resolution the issuance of any or all
shares of the Common Stock and the Preferred Stock herein
authorized in accordance with the terms and conditions set forth
in these Articles of Incorporation for such purposes, in such
amounts, to such persons, corporations or entities, for such
consideration, and in the case of the Preferred Stock, in one or
more series, all as the Board of Directors in its discretion may
determine and without any vote or other action by the
stockholders, except as otherwise required by law. The capital
stock, after the amount of the subscription price has been paid in
shall not be subject to assessment to pay the debts of the
corporation.
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<PAGE>
3. Effective July 30, 1999, Article VI of the Articles of
Incorporation of the Corporation shall be deleted and the
following shall be substituted therefore as Amended Article VI of
the Articles of Incorporation:
ARTICLE VI
The address of the initial registered office of this
corporation is 319 West 100 South, Suite A, Vernal, Utah 84078.
The name of the initial registered agent of this corporation at
that address is Daniel S. Sam.
CONSENT TO SERVE AS REGISTERED AGENT
I, Daniel S. Sam, hereby consent to serve as registered agent
in the State of Utah, for Mountain Oil, Inc., a Utah corporation,
as of July 30, 1999.
DATED this 12 day of October, 1999.
/s/ Daniel S. Sam
4. Effective July 30, 1999, Article VII of the Articles of
Incorporation of the Corporation shall be deleted and the
following shall be substituted therefore as Amended Article VII of
the Articles of Incorporation:
ARTICLE VI
The initial Board of Directors shall consist of three (3)
members. The names and addresses of the persons who are to serve
as directors until the first annual meeting of stockholders or
until their successors be elected and quality are as follows:
Craig K. Phillips 250 North 200 West
Roosevelt, Utah 84066
Daniel S. Sam 319 West 100 South, Ste. A
Vernal, Utah 84078
Joseph F. Ollivier 3191 North Canyon Rd.
Provo, Utah 84604
5. Except as amended by these Articles of Amendment, the
existing Articles of Incorporation of the Corporation shall be
unchanged and remain in full force and effect.
The undersigned hereby certifies that he is the Vice
President and acting President of MOUNTAIN OIL, INC. , a Utah
corporation, and that the foregoing amendment to the Articles of
Incorporation of the Corporation has been duly approved by the
Board of Directors and shareholders of the Corporation and that
the matters set forth herein are true of his own knowledge.
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<PAGE>
DATED this 12 day of October, 1999.
MOUNTAIN OIL, INC.
/s/ Craig K. Phillips,
Vice President and acting
President
ATTEST:
/s/ Daniel S. Sam, Secretary
STATE OF UTAH )
)ss
County of Uintah )
On the 12 day of October, 1999, personally appeared before
me, CRAIG K. PHILLIPS, who, being by me duly sworn, did say, that
he is the President of MOUNTAIN OIL, INC. , that this instrument
was signed on behalf of MOUNTAIN OIL, INC. by authority of its By-
Laws and a resolution of its Board of Directors, and CRAIG K.
PHILLIPS acknowledged to me that such corporation executed the
same.
/s/ Notary Public
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<PAGE>
9
Exhibit 3
Form 10-KSB
Mountain Oil, Inc.
BYLAWS
OF
MOUNTAIN OIL, INC.
ARTICLE I
OFFICES
The principal office of the corporation shall be located at
such place within or without the State of Utah as shall be fixed
from time to time by the Board of Directors. The corporation may
have such other offices, either within or without the State of
Utah as the Board of Directors may designate or as the business of
the corporation may from time to time require.
The corporation shall have and continuously maintain in the
State of Utah a registered off ice, and a registered agent whose
office is identical with such registered office. The registered of
f ice may be, but need not be, identical with the principal
office, and the address of the registered of f ice may be changed
from time to time by the Board of Directors.
ARTICLE II
STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of the
stockholders shall be held on such date and at such time as may be
designated from time to time by the Board of Directors, for the
purpose of electing directors and for the transaction of such
other business as may come before the meeting.
Section 2. Special Meetings. Special meetings of the
stockholders, for any purpose or purposes, unless otherwise
prescribed by statute, may be called by the president, the Board
of Directors or the chairman of the Board, and shall be called by
the president at the request of the holders of not less than ten
percent (10-16) of all the outstanding shares of the corporation
entitled to vote at the meeting. Upon request in writing
specifying the general purpose or purposes of such meeting, to the
chairman of the Board, president, vice president or secretary, by
any person entitled to call a special meeting of stockholders, the
officer receiving such notice forthwith shall cause notice to be
given to the stockholders as provided herein.
Section 3. Place of Meeting. Stockholder meetings may be held
at any place, either within or without the State of Utah, as may
be designated by the Board of Directors. If no designation is
made, the place of meeting shall be the principal place of the
corporation.
Section 4. Notice of Meeting. Written or printed notice
stating the place, day and hour of the meeting and, in case of a
special meeting, the purpose or purposes for which the meeting is
called, shall be delivered not less than ten (10) nor more than
fifty (50) days before the date of the meeting, either personally
or by mail, by or at the direction of the president, or the
secretary, or the officer or persons calling the meeting, to each
stockholder of record entitled to vote at such meeting. If mailed,
such notice shall be deemed to be delivered when deposited in the
United States
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mail, addressed to the stockholder at his address as it appears on
the stock transfer books of the corporation, with postage thereon
prepaid.
Section 5. Closing of Transfer Books or Fixing of Record
Date. For the purpose of determining stockholders entitled to
notice of or to vote in any meeting of stockholders or any
adjournment thereof, or stockholders entitled to receive payment
of any dividend, or in order to make a determination of
stockholders for any other proper purpose, the Board of Directors
of the corporation may provide that the stock transfer books shall
be closed for a stated period but not to exceed, in any case,
fifty (50) days. If the stock transfer books shall be closed for
the purpose of determining stockholders entitled to notice of or
to vote at a meeting of stockholders, such books shall be closed
for at least ten (10) days prior to the date on which the
particular action requiring such determination of stockholders is
to be taken. If the stock transfer books are not closed and no
record date is fixed for the determination of stockholders
entitled to notice of or to vote at a meeting of stockholders, or
stockholders entitled to receive payment of a dividend, the date
on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is
adopted, as the case may be, shall be the record date for such
determination of stockholders. When a determination of
stockholders entitled to vote at a meeting of stockholders has
been made as provided in this section, such determination shall
apply to any adjournment thereof.
Section 6. Voting Lists. The officer or agent having charge
of the stock transfer books for shares of the corporation shall
make a complete list of the stockholders entitled to vote at such
meeting, or any adjournment thereof, arranged in alphabetical
order, with the address of and the number of shares held by each,
which list shall be produced and kept open at the time and place
of the meeting and shall be germane to the meeting during the
whole time of the meeting. The original stock transfer books shall
be prima facie evidence as to who are the stockholders entitled to
examine such list or transfer books or to vote at the meeting of
stockholders.
Section 7. Quorum. At any meeting of stockholders, a majority
of the outstanding shares of the corporation entitled to vote,
represented in person or by proxy, shall constitute a quorum. If a
quorum is present, the affirmative vote of a majority of the
shares represented at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders unless the
vote of a greater number is otherwise required by law or the
provisions of these Bylaws.
Section 8. Proxies. At all meetings of stockholders, a
stockholder may vote by proxy executed in writing by the
stockholder or by his duly authorized attorney in fact. Such proxy
shall be filed with the secretary of the corporation before or at
the time of the meeting.
Section 9. Voting. Each stockholder entitled to vote in
accordance with the terms and provisions of the certificate of in
corporation and these Bylaws shall be entitled to one vote, in
person or by proxy, for each share of stock entitled to vote held
by such stockholders. Upon the demand of any stockholder, the vote
for directors and upon any question before the meeting shall be by
ballot. All elections for directors shall be decided by plurality
vote. All other questions shall be decided by majority vote except
as otherwise provided by law.
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Section 10. Order of Business. The order of business at all
meetings of the stockholders shall be as follows:
1. Roll call.
2. Proof of notice of meeting or waiver of notice.
3. Reading of minutes of preceding meeting.
4. Reports of officers.
5. Reports of committees.
6. Election of directors.
7. Unfinished business.
8. New business.
Section 11. Informal Action by Stockholders. Unless otherwise
provided by law, any action required to be taken at a meeting of
the stockholders, or any other action which may be taken at a
meeting of the stockholders, may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be
signed by all of the stockholders entitled to vote with respect to
the subject matter thereof.
ARTICLE III
BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the
corporation shall be managed by its Board of Directors. The
directors shall in all cases act as a board, and they may adopt
such rules and regulations for the conduct of their meetings and
the management of the corporation, as they may deem proper, not
inconsistent with these Bylaws and the laws of the State of Utah.
Section 2. Number, Tenure and Qualifications. The number of
directors of the corporation shall be three (3), except as long as
a corporation has less than three shareholders entitled to vote
for the election of directors, a corporation may have a minimum
number of directors equal to the number of those shareholders. One
of the directors shall be designated as chairman. Each director
shall hold office until the next annual meeting of stockholders
and until his successor shall have been elected and qualified.
Section 3. Regular Meetings. A regular meeting of the
directors shall be held without other notice than this By-Law
immediately after and at the same place as the annual meeting of
stockholders. The directors may provide, by resolution, the time
and place for the holding of additional regular meetings without
other notice than such resolution.
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Section 4. Special Meeting. Special meeting of the directors
may be called by or at the request of the president, the chairman
of the Board or any two (2) directors. The person or persons
authorized to call special meetings of the directors may fix the
place for holding any special meeting of the directors called by
them.
Section 5. Notice. Notice of any special meeting shall be
given at least four (4) days previously thereto by written notice
delivered personally, or by telegram or mailed to each director at
his business address. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail so addressed,
with postage thereon prepaid. If notice be given by telegram, such
notice shall be deemed to be delivered when the telegram is
delivered to the telegraph company. The attendance of a director
at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose
of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
Section 6. Quorum. At any meeting of the Board of Directors,
the majority of existing directors shall constitute a quorum for
the transaction of business.
Section 7. Manner of Acting. The act of the majority of the
directors present at a meeting at which a quorum is present shall
be the act of the Board of Directors.
Section 8. Newly Created Directorships and Vacancies.
Vacancies and newly created directorships resulting from any
increase in the number of directors may be filled by a majority of
the directors then in office, though less than a quorum, and the
directors so chosen shall hold office until the next annual
meeting of stockholders and until their successors are duly
elected and qualified. A director elected to fill a vacancy caused
by resignation, death or removal shall be elected to hold office
for the unexpired term of his predecessor.
Section 9. Removal of Directors. Any director may be removed,
at a meeting called expressly for that purpose, either for or
without cause, at any time by vote of the holders of a majority of
the outstanding shares of capital stock of the corporation then
entitled to vote at an election of directors, except that if less
than the entire Board of Directors is to be removed, no one of the
directors may be removed if the votes cast against his removal
would be sufficient to elect him if then cumulatively voted at an
election for the entire Board of Directors. Any directorship to be
filled by reason of the removal of a director by the stockholders
pursuant to this section may be filled by a vote of a majority of
the shares represented at the meeting at which the director was
removed, or at an annual meeting of stockholders, and then
entitled to vote at an election of directors.
Section 10. Resignation. A director may resign at any time by
giving written notice to the Board of Directors, the president or
the secretary of the corporation. Unless otherwise specified in
the notice, the resignation shall take effect upon receipt thereof
by the Board or such officer, and the acceptance of the
resignation shall not be necessary to make it effective.
Section 11. Compensation. No compensation shall be paid to
directors, as such, for their services, but by resolution of the
Board of Directors a fixed sum and expenses for actual attendance
at each regular or special meeting of the Board of Directors may
be authorized. Nothing herein
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contained shall be construed to preclude any director from serving
the corporation in any other capacity and receiving compensation
therefor.
Section 12. Presumption of Assent. A director of the
corporation who is present at a meeting of the directors at which
action on any corporate matter is taken shall be presumed to have
assented to the action taken unless his dissent shall be entered
in the minutes of the meeting or unless he shall file his written
dissent to such action with the person acting as the secretary of
the corporation immediately after the adjournment of the meeting.
Such right to dissent shall not apply to a director who voted in
favor of such action.
Section 13. Executive and Other Committees. The Board of
Directors, by resolution, my designate from among its members an
executive committee and other committees, each consisting of two
or more directors. Each such committee shall serve at the pleasure
of the Board.
Section 14. Informal Action by Directors. Unless otherwise
provided by law, any action required to be taken at a meeting of
the Board of Directors, or any other action which may be taken at
a meeting of the Board of Directors, may be taken without a
meeting if a consent in writing, setting forth the action so
taken, shall be signed by all of the directors.
Section 15. Interest of Directors in Contract. Any contract
or other transaction between the corporation and one or more of
its directors shall be valid for all purposes, notwithstanding the
presence of such director or directors at the meeting of the Board
of Directors which acts upon such contract or transaction, and
notwithstanding his or their participating in such action, if the
fact of such interest shall be disclosed or known to the Board of
Directors, and such Board shall nevertheless approve and ratify
such contract or transaction by unanimous vote of the Board of
Directors. This section shall not be construed to invalidate any
contract or other transaction which would otherwise be valid under
the common and statutory law applicable thereto.
ARTICLE IV
OFFICERS
Section 1. Number. The officers of the corporation shall be a
president, a secretary and a treasurer, each of whom shall be
elected by the directors. The directors may also elect a vice
president. Such other officers and assistant officers as may be
deemed necessary may be elected or appointed by the directors.
Section 2. Election and Term of Office. The officers of the
corporation to be elected by the Board of Directors shall be
elected annually at the first meeting of the directors held after
each annual meeting of the stockholders. Each officer shall hold
office until his successor shall have been duly elected and shall
have qualified or until his death or until he shall resign or
shall have been removed in the manner hereinafter provided.
Section 3. Removal. Any officer or agent elected or appointed
by the directors may be removed by the directors whenever in their
judgment the best interests of the corporation would be served
thereby, but such removal shall be without prejudice to the
contract rights, if any, of the person so removed.
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Section 4. Vacancies. A vacancy in any office because of
death, resignation, removal, disqualification or otherwise, may be
filled by the directors for the unexpired portion of the term.
Section 5. President. The president shall be the principal
executive officer of the corporation and, subject to the control
of the directors, shall in general supervise and control all of
the business and affairs of the corporation. He shall, when
present, preside at all meetings of the stockholders and of the
directors. He may sign, with the secretary or any other proper
officer of the corporation thereunto authorized by the directors,
certificates for shares of the corporation, any deeds, mortgages,
bonds, contracts, or other instruments which the directors have
authorized to be executed, except in cases where the signing and
execution thereof shall be expressly delegated by the directors or
by these Bylaws to some other officer or agent of the corporation,
or shall be required by law to be otherwise signed or executed;
and in general shall perform all duties incident to the office of
president and such other duties as may be prescribed by the
directors from time to time.
Section 6. Vice President. In the absence of the president
or in the event of his death, inability or refusal to act, the
vice president shall perform the duties of the president, and when
so acting, shall have all the powers of and be subject to all the
restrictions upon the president. The vice president shall perform
such other duties as from time to time may be assigned to him by
the president or the directors.
Section 7. Secretary. The secretary shall keep the minutes of
the stockholders' and of the directors, meetings in one or more
books provided for that purpose, see that all notices are duly
given in accordance with the provisions of these Bylaws or as
required, be custodian of the corporate records and of the seal of
the corporation and keep a register of the post office address of
each stockholder which shall be furnished to the secretary by such
stockholder, have general charge of the stock transfer books of
the corporation and, in general, perform all duties incident to
the office of secretary and such other duties as from time to time
may be assigned to him by the president or by the directors.
Section 8. Treasurer. If required by the directors, the
treasurer shall give a bond for the faithful discharge of his
duties in such sum and with such surety or sureties as the
directors shall determine. He shall hhave charge and custody of
and be responsible for all funds and securities of the
corporation; receive and give receipts for monies due and payable
to the corporation from any source whatsoever, and deposit all
such monies in the name of the corporation in such banks, trust
companies or other depositories as shall be selected in accordance
with these Bylaws and, in general, perform all of the duties
incident to the office of treasurer and such other duties as from
time to time may be assigned to him by the president or by the
directors.
Section 9. Salaries. The salaries of the officers shall be
fixed from time to time by the Board of Directors, and no officer
shall be prevented from receiving such salary by reason of the
fact that he is also a director of the corporation.
ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
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Section 1. Contracts and Leases. The Board of Directors may
authorize any officer or officers, agent or agents, to enter into
any contract or lease or execute and deliver any instrument in the
name of and on behalf of the corporation, and such authority may
be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of
the corporation, and no evidences of indebtedness shall be issued
in its name unless authorized by a resolution of the Board of
Directors. Such authority may be general or confined to specific
instances.
Section 3. Checks, Drafts, Etc. All checks, drafts or other
orders for payment of money, notes or other evidences of
indebtedness issued in the name of the corporation shall be signed
by such officer or officers, agent or agents of the corporation
and in such manner as shall from time to time be determined by
resolution of the Board of Directors.
Section 4. Deposits. All funds of the corporation not
otherwise employed shall be deposited from time to time to the
credit of the corporation in such banks, trust companies or other
depositaries as the Board of Directors may select.
ARTICLE VI
CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares. Certificates
representing shares of the corporation shall be in such form as
shall be determined by the directors. Such certificates shall be
signed by the president and by the secretary or by such other
officers authorized by law or by the Board of Directors. All
certificates for shares shall be consecutively numbered or
otherwise identified. The name and address of the stockholders,
the number of shares and date of issue, shall be entered on the
stock transfer books of the corporation. All certificates
surrendered to the corporation for transfer shall be canceled and
no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and
canceled, except that in case of a lost, destroyed or mutilated
certificate a new one may be issued therefor upon such terms and
indemnity to the corporation as the directors may prescribe.
Section 2. Transfers of Shares.
(a) Upon surrender to the corporation or the transfer agent
of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the corporation to
issue a new certificate to the person entitled thereto, and cancel
the old certificate; every such transfer shall be entered on the
transfer book of the corporation which shall be kept at its
principal office.
(b) The corporation shall be entitled to treat the holder of
record of any share as the holder in fact thereof, and
accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such share on the part of any other
person whether or not it shall have express or other notice
thereof, except as expressly provided by the laws of the State of
Utah.
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ARTICLE VII
DIVIDENDS
The Board of Directors may from time to time declare and the
corporation may pay dividends on its outstanding shares in the
manner and upon the terms and conditions provided by law.
ARTICLE VIII
WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is
required to be given to any stockholder or director of the
corporation under the provisions of these Bylaws or under the
provisions of the Articles of Incorporation, a waiver thereof in
writing, signed by the person or persons entitled to such notice
whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice.
ARTICLE IX
AMENDMENTS
These Bylaws may be altered, amended or repealed and new
Bylaws may be adopted by a vote of the stockholders representing a
majority of all the shares issued and outstanding, at any annual
stockholders, meeting or at any special stockholders' meeting when
the proposed amendment has been sent out in the notice of such
meeting.
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Exhibit 4
Form 10-KSB
Mountain Oil, Inc.
May 22, 2000
The Board of Directors
Mountain Oil, Inc.
P. O. Box 1574
Roosevelt, UT 84066
Gentlemen:
We have been retained by Mountain Oil, Inc. (the "Company"),
in connection with the Registration Statement on Form SB-2 filed
by the Company with the Securities and Exchange Commission (the
"Registration Statement") relating to 1,000,000 shares of common
stock, par value $0.001 per share. You have requested that we
render an opinion as to whether the common stock as proposed to
be issued on the terms set forth in the Registration Statement
will be validly issued, fully paid and non-assessable.
In connection with this engagement, we have examined the
following:
1. the articles of incorporation of the Company;
2. the Registration Statement;
3. the bylaws of the Company; and
4. unanimous consents of the board of directors.
We have examined such other corporate records and documents
and have made such other examinations as we deemed relevant.
Based upon the above examination, we are of the opinion that
the shares of common stock proposed to be issued pursuant to the
Registration Statement, are validly authorized and, when issued
in accordance with the terms set forth in the Registration
Statement, will be validly issued, fully paid, and non-
assessable.
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The Board of Directors
Mountain Oil, Inc.
May 22, 2000
Page 2
We hereby consent to being named in the Prospectus included
in the Registration Statement as having rendered the foregoing
opinion and as having represented the Company in connection with
the Registration Statement.
Sincerely yours,
LEHMAN, JENSEN & DONAHUE, L.C.
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9
Exhibit 5
Form 10-KSB
Mountain Oil, Inc.
$5,000 No. 023
AMOUNT
MOUNTAIN OIL, INC.
7% Convertible Debenture
Due March 31, 2002
MOUNTAIN OIL, INC., a corporation duly organized and
existing under the laws of the state of Utah (hereinafter
referred to as the "Company"), for value received, hereby
promises to pay to __________________ or registered assigns, the
registered holder hereof, the principal sum of _______________
Dollars ($______) on March 31, 2002, upon presentation and
surrender of the Debenture at the offices of the Company at 3954
East 200 North (East Highway 40) Ballard, Utah 84066, in such
lawful money of the United States of America as at the time of
payment shall be legal tender for the payment of public and
private debt, and to pay monthly in like lawful tender interest
on the unpaid principal at a rate per annum (calculated on the
basis of the actual number of days elapsed in a 365-day year)
equal to 7% (subject to adjustment as provided below), from and
after the date of issuance or from the most recent interest
accrual date for which interest has been paid or duly provided
for, as the case may be.
This Debenture is subject to the following further terms and
material provisions:
1. Series. This Debenture is one of a duly authorized
issue of Debentures of the Company designated as its 7%
Convertible Debentures Due March 31, 2002 (herein called the
"Debentures"), limited in aggregate principal amount to One
Million Dollars ($1,000,000), issued and to be issued pursuant to
the terms contained herein (the "Series"). These Debentures
shall not be issued in amounts less than One Thousand Dollars
($1,000).
2. Term. The date of maturity of the Debenture shall be
March 31, 2002 (the "Maturity Date").
3. Payment. The principal on the Debenture shall be
payable at the offices of the Company. Each payment of accrued
interest shall be made on or before the thirtieth day following
the end of each calendar month after the date hereof until the
final payment of interest on the date the principal is paid or
made available for payment. The interest so payable will, as
provided below, be paid to the person in whose name this
Debenture is registered at the close of business on the regular
payment date for such interest. The interest will be paid by
check mailed to the last known address of the person in whose
name the Debenture is registered by the 30th day of the month
after which such interest payment is due or if no such address is
listed at the office of the Company.
4. Conversion. Subject to, and in compliance with, the
provisions contained herein, the holder of the Debenture is
entitled, at holder's option, at any time after September 1, 2000
and before the Maturity Date (or in case this Debenture or some
portion hereof shall be called for repayment prior to such date,
then until and including, but not after, the close of business
within 30 days of the date of notice of repayment), to convert
all or any portion of the principal amount of this
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Debenture into fully paid and non-assessable shares of common
stock, no par value ("Common Stock"), at a conversion ratio of
one share of Common Stock for each $1.50 of the principal amount
of the Debenture. Conversion shall be effected by surrender of
this Debenture, duly endorsed (if so required by the Company), to
the Company at its offices in Ballard, Utah, accompanied by
written notice of conversion specifying the amount of the
principal of the Debenture to be converted. On conversion, no
adjustment for interest is to be made, but if any holder
surrenders a Debenture for conversion after the end of a calendar
year and before the end of the then current year, the holder of
such Debenture when surrendered for conversion shall be entitled
to payment in cash of the interest accrued to the date of
conversion, which shall be paid on the next interest payment
date. No fractional shares will be issued upon conversion, but
if the conversion results in a fractional interest, an amount
equal to the market value of such fractional interest, will be
paid in cash. The conversion price and number of Shares issued
upon conversion of this Debenture may be subject to adjustment
from time to time as follows:
(a) If the Company shall take a record of the holders
of its Common Stock for the purpose of entitling them
to receive a dividend in Common Stock, the conversion
ratio in effect immediately prior to such record date
shall be proportionately increased, such adjustment to
become effective immediately after the opening of
business on the date following such record date;
(b) If the Company shall subdivide the outstanding
Common Stock into a greater number of shares or combine
the outstanding shares into a smaller number of shares,
or issue by reclassification any of its shares of
Common Stock, the conversion ratio shall be adjusted so
that the holder of the Debenture thereafter surrendered
for conversion shall be entitled to receive after the
occurrence of any of the events described the number of
shares of Common Stock to which the holder would have
been entitled had such Debenture been converted
immediately prior to the occurrence of such event, such
adjustment to become effective immediately after the
opening of business on the date following the date upon
which such subdivision or combination or
reclassification, as the case may be, becomes
effective;
(c) Neither the purchase or other acquisition by the
Company of any shares of Common Stock, nor the sale or
other disposition by the Company of any Common Stock,
warrants, or other securities shall affect any
adjustment of the conversion price or be taken into
account in computing any subsequent adjustment of the
conversion price; and
(d) If at any time:
(i) The Company proposes to pay any dividend
payable in shares upon its Common Stock or make
any distribution, including a cash or property
dividend, out of earnings or earned surplus, to
the holders of its shares;
(ii) The Company proposes to enter into any
plan of capital reorganization or of
reclassification of the Common Stock of the
Company; or
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(iii) The Company proposes to merge,
consolidate or encumber or sell all or
substantially all of its assets other than in the
ordinary course of business,
then, in any one or more of said cases, the
Company shall cause notice to be mailed to the
registered holder of this Debenture at the address of
such holder set forth in the registration records of
the Company. Such notice shall be solely for the
convenience of such registered holder and shall not be
a condition precedent to, nor shall any defect therein
or failure in connection therewith affect the validity
of, the action proposed to be taken by the Company.
Such notice shall be mailed, at least 20 days prior to
which the books of the Company shall close, or a record
date shall be taken for such dividend, share split or
reclassification, consolidation, merger, or sale of
properties and assets, as the case may be. Such notice
shall specify such record date for the closing of the
transfer books.
5. Prepayment. The Debentures are subject to prepayment
at any time after the issue date, upon not less than 30 nor more
than 50 days' notice by mail, in whole or in part, at the
election of the Company. At any time prior to the date fixed for
prepayment set forth in the written notice, the holder may
convert the outstanding amount of the Debenture, or any portion
thereof, to Common Stock as provided in paragraph 4, above. On
the date fixed for prepayment, the Debentures shall cease to bear
interest. Upon surrender of the Debenture for repayment in
accordance with said notice of prepayment by the Company, the
amount of principal and interest due shall be paid in cash or
certified funds. Any Debenture that is prepaid only in part
shall be presented for notation thereon by the Company of such
partial prepayment. The obligation of the Company to redeem any
Debentures shall be evidenced by a resolution of the board of
directors.
6. Satisfaction and Discharge of Debenture. This
Debenture shall cease to be of further effect (except as to any
surviving rights of conversion, transfer or exchange of
Debentures herein expressly provided for) when,
(a) The Company has paid or caused to be paid all sums
payable hereunder by the Company, including all
principal amounts and interest accrued under the
Debenture; and
(b) All the conditions precedent herein provided for
relating to the satisfaction and discharge of this
Debenture have been complied with.
7. Events of Default. "Event of Default" when used
herein, whatever the reason for such event of default and whether
it shall be voluntary or involuntary or be effected by operation
of law pursuant to any judgment, decree or order of any court, or
any order, rule or regulation of any administrative or
governmental body or be caused by the provisions of any paragraph
herein means any one of the following events:
(a) Default in the payment of any interest of any Debenture in
this Series when it becomes due and payable, and continuance of
such default for a period of 60 days;
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(b) Default in the payment of the principal on any
Debentures in this Series when due, whether at
maturity, upon prepayment by declaration, or otherwise;
(c) Default in the performance or breach of any
covenant or warranty of the Company (other than a
covenant or warranty the default or breach of which is
elsewhere in this section specifically dealt with), and
continuation of such default or breach for a period of
60 days after there has been given, by registered or
certified mail, to the Company by the holders of 75% or
more in principal amount of the outstanding Debentures
in this Series, a written notice specifying such
default or breach and requiring it to be remedied and
stating that such notice is a notice of default
hereunder;
(d) The entry of a decree or order by a court having
jurisdiction in the premises adjudging the Company a
bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the
Company under the Federal Bankruptcy Act or any other
applicable federal or state law, or appointing a
receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of the Company or of any
substantial part of its property, or ordering the
winding up or liquidation of its affairs, and the
continuance of any such decree or order not stayed and
in effect for a period of 60 consecutive days; or
(e) The institution by the Company of proceedings to
be adjudicated a bankrupt or insolvent, or the consent
by it to the institution of bankruptcy or insolvency
proceedings against it, or a filing by it of a petition
or answer or consent seeking reorganization or relief
under the Federal Bankruptcy Act or any other
applicable federal or state law; or the consent by it
to the filing of any such petition or the appointment
of a receiver, liquidator, assignee, trustee,
sequestrator, or other similar official of the Company
or of any substantial part of its property, or the
making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its
inability to pay its debts generally as they become
due, or the taking of corporate action by the Company
in furtherance of any such actions.
8. Acceleration of Maturity. If an event of default
occurs and is continuing then, in every such case, the holders of
75% in principal amount of the outstanding Debentures in this
Series may declare the principal of all the Debentures to be due
and payable immediately, by a notice in writing to the Company of
such default, and upon any such declaration, such principal shall
become immediately due and payable. At any time after such
declaration of acceleration has been made and before a judgment
or decree for payment of money due has been obtained by the
holders, the holders of 75% in principal amount of the Debentures
in this Series outstanding, by written notice to the Company, may
rescind and annul such declaration and its consequences if all
events of default, other than the non-payment of the principal of
Debentures which have become due solely by such acceleration,
have been cured or waived as provided below. No such rescission
shall affect any subsequent default or impair any right
consequent thereon.
E-22
<PAGE>
9. Suits for Enforcement. If an event of default occurs
and is continuing, the holders of 75% in principal amount of the
outstanding Debentures in this Series may, in their discretion,
proceed to protect and enforce their rights by such appropriate
judicial proceedings as the holders shall deem most effectual to
protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement under this Debenture or
in aid of the exercise of any power granted herein, or to enforce
any other proper remedy.
10. Limitation on Suits. No holder of any Debenture shall
have any right to institute any proceeding, judicial or
otherwise, with respect to this Debenture, or for the appointment
of a receiver or trustee, or for any remedy hereunder, except as
specifically provided herein. The holder understands and
acknowledges that no one or more holders of Debentures shall have
any right in any manner whatever by virtue of, or by availing of,
any provisions of this Debenture or otherwise to effect, disturb,
or prejudice the right of any other holders of Debentures, or to
obtain or to seek to obtain priority or preference over any other
holders or to enforce any right under this Debenture, except in
the manner herein provided and for the equal and ratable benefit
of all the holders of Debentures.
11. Unconditional Right of Holders to Receive Principal and
Interest. Notwithstanding any other provision in this Debenture,
the holder of any Debenture shall have the right which is
absolute and unconditional to receive payment of the principal of
and interest on such Debenture on the respective stated maturity
dates expressed in such Debenture (or, in the case of prepayment,
on the prepayment date) and, subject to the provisions hereof, to
institute suit for the enforcement of any such payment and the
right to convert such Debenture in accordance with paragraph 4,
and to institute suit for the enforcement of such right to
convert, and such right shall not be impaired without the consent
of such holder.
12. Corporate Obligation. No recourse under or upon any
obligation, covenant, or agreement contained in this Debenture,
or of any claim based thereon or otherwise in respect thereof,
shall be had against any officer, director, or controlling
shareholder of the Company, past or present, or of any subsidiary
corporation, either directly or through the Company or any
successor corporation, it being expressly understood that this
Agreement is solely a corporate obligation of the Company.
13. Acts of Holders. Any request, demand, authorization,
direction, notice, consent, waiver, or other action provided by
this Debenture to be given or taken by the holder hereof or by
the holders of the Debentures in this Series may be embodied in
and evidenced by one or more instruments of substantially similar
tenor signed by such holders in person or by their agent or
attorney-in-fact, duly appointed in writing; and, except as
otherwise expressly provided herein, such action shall become
effective when such instrument or instruments are delivered to
the Company in the manner provided for giving notices herein.
Such instrument or instruments and the action embodied therein or
evidenced thereby, are herein sometimes referred to as the "act"
of the holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any
such agent shall be sufficient for any purpose of this Debenture
if the fact and date of execution by any person of any such
instrument or writing is verified by the affidavit of a witness
of such execution or by the certificate of a notary public or
other officer authorized by law
E-23
<PAGE>
to take acknowledgements. Any request, demand, authorization,
direction, notice, consent, waiver, or other action by the holder
of any Debenture shall bind every Debenture holder of the same
Debenture and the holder of every Debenture issued upon the
transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done or suffered to be done by any person in
reliance thereon, whether or not notation of such action is made
upon such Debenture.
14. Notices to Holders; Waiver. Where this Debenture
provides for notice to holders of any event, such notice shall be
sufficiently given if in writing and mailed, registered, postage
prepaid, to each holder affected by such event, at his address as
it appears in the Debenture register maintained by the Company,
not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case
where notice to holders is given by mail, neither the failure to
mail such notice, nor any defect in any notice so mailed, to any
particular holder shall affect the sufficiency of such notice
with respect to holders of other Debentures issued in this
Series. Where this Debenture provides for notice to the Company,
such notice shall be sufficiently given if in writing and mailed,
registered, postage prepaid, to the Company at its address set
forth above (or at such other address as shall be provided to the
holders of the Debentures of this Series in the manner for giving
notices set forth herein), not later than the latest date, and
not earlier than the earliest date, prescribed for the giving of
such notice. Where this Debenture provides for notice, such
notice may be waived in writing by the person entitled to receive
such notice, either before or after the date on which the person
entitled to receive such notice and either before or after the
event, and such waiver shall be the equivalent of such notice.
15. Restrictions. The holder of this Debenture, by
acceptance hereof, both with respect to the Debenture and the
Common Stock issuable upon conversion of the Debenture, agrees
and acknowledges that:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES
LAWS OF ANY STATE. THESE SECURITIES HAVE BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE TRANSFERRED OR SOLD IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION OR OTHER
COMPLIANCE UNDER THE ACT OR THE LAWS OF THE APPLICABLE
STATE OR A "NO ACTION" OR INTERPRETIVE LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE ISSUER, AND ITS
COUNSEL, TO THE EFFECT THAT THE SALE OR TRANSFER IS
EXEMPT FROM REGISTRATION UNDER THE ACT AND SUCH STATE
STATUTES.
16. Modification. The Company, with the consent of the
holders of not less than the majority in aggregate principal
amount of the Debentures, may modify or amend the provisions of
the Debenture or any supplemental Debenture, or the rights of the
holders of the Debenture, provided, however:
E-24
<PAGE>
(a) That no such modification shall: extend the fixed
maturity of any Debentures; reduce the principal amount
thereof; reduce the rate or extend or accelerate the
time of payment of interest thereon; or reduce any
premium payable upon the redemption thereof; and
(b) That any provisions which would have an adverse
affect upon less than all the holders of Debentures
must be consented to by holders of not less than the
majority in aggregate principal amount of said
Debentures so affected.
In addition, the Company may execute, without the consent of any
Debenture holder, any supplemental Debenture: evidencing the
succession of another corporation to the Company; adding to the
covenants of the Company; curing ambiguities, defects, or
inconsistencies in the Debenture or any supplemental Debentures;
and issuing additional debentures in a different series.
17. Subordination. The Company covenants and agrees, and
each holder (and each person holding any Debenture, whether upon
original issue, or upon transfer, assignment or exchange thereof)
of the Debentures, by its acceptance thereof, likewise covenants
and agrees that: (i) the payment of the principal of, and
interest on, the Debentures by the Company shall be subordinated
and junior in right of payment to the prior payment in full, in
cash or cash equivalents, of all senior indebtedness now existing
or hereafter created; and (ii) the subordination is for the
benefit of, and shall be relied upon and be enforceable directly
by, the holders of senior indebtedness. The Company and each
holder hereby agree not to amend, modify or change in any manner
any provision of this Debenture so that the terms and conditions
hereof, as so amended, modified or changed, are less favorable to
the holders of the senior indebtedness than the terms hereof on
the issue date, without the prior written consent of the
necessary holders of senior indebtedness. For purposes of the
Debentures, "senior indebtedness" shall mean all indebtedness of
the Company now existing or hereafter incurred, whether secured
or unsecured, which by its terms is superior in right of payment
to the Debentures. Each of the holders of the Debentures by such
holders' acceptance thereof authorizes and expressly directs the
Company on its behalf to take such action as may be necessary or
appropriate to effectuate, as between the holders of Debentures
and the holders of senior indebtedness, the subordination
provisions contained herein, and appoints the Company such
holders' attorney-in-fact for such purpose.
18. Severability. In case any provision in this Debenture
shall be invalid, illegal, or unenforceable, the validity,
legality, and enforceability of the remaining provisions shall
not in any way be affected or impaired thereby.
19. Governing Law. This Debenture shall be governed by and
construed and interpreted in accordance with the laws of the
state of Utah. The holder hereby irrevocably agrees that any
legal suit, action, or proceeding arising out of or relating to
this Debenture shall only be instituted in any state or federal
court in the state of Utah.
20. Legal Holidays. In any case where any date provided
herein shall not be a business day, then (notwithstanding any
other provision of this Debenture) the event required or
permitted on such date shall be required or permitted, as the
case may be, on the next succeeding business day with the same
force and effect as if made on the date upon which such event was
required or permitted pursuant hereto.
E-25
<PAGE>
21. Delay or Omission; No Waiver. No delay or omission of
any holder of any Debenture to exercise any right or remedy
accruing upon any event of default shall impair any such right or
remedy or constitute a waiver of any such event or default or an
acquiescence therein. Every right or remedy given hereby or any
law may be exercised from time to time, and as often as may be
deemed expedient.
DATED this ________ day of _______________________________,
2000.
MOUNTAIN OIL, INC.
By__________________________________
Duly Authorized Officer
E-26
<PAGE>
Conversion Form
The undersigned hereby irrevocable elects to convert
______________________________ in principal amount of the
Debenture represented by the within instrument to common Stock of
Mountain Oil, Inc., and requests that the certificate(s) for such
shares be delivered to:
_________________________________________________________________
______________
_________________________________________________________________
______________
_________________________________________________________________
______________
and if the principal amount of the Debenture converted shall not
be all of the principal amount represented by the within
instrument, that the instrument be returned to the undersigned
with notation of the conversion and resulting reduction in
principal at:
_________________________________________________________________
______________
_________________________________________________________________
______________
_________________________________________________________________
______________.
Dated _______________________________________,
_______________.
____________________________________
In presence of
_________________________________________
E-27
<PAGE>
Exhibit 6
Form 10-KSB
Mountain Oil, Inc.
CONSENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the use in this Registration
Statement on Form SB-2 of our report dated February 2, 2000,
relating to the financial statements of Mountain Oil, Inc.,
and to the reference to our Firm under the caption "Experts"
in the Prospectus.
TANNER + CO.
Salt Lake City, Utah
May 23, 2000
E-28
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 512,000
<SECURITIES> 0
<RECEIVABLES> 78,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 601,000
<PP&E> 429,000
<DEPRECIATION> 12,000
<TOTAL-ASSETS> 1,029,000
<CURRENT-LIABILITIES> 399,000
<BONDS> 256,000
0
0
<COMMON> 603,000
<OTHER-SE> (17,000)
<TOTAL-LIABILITY-AND-EQUITY> 1,029,000
<SALES> 77,000
<TOTAL-REVENUES> 77,000
<CGS> 45,000
<TOTAL-COSTS> 90,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,000
<INCOME-PRETAX> (17,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (17,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,000)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-2000
<CASH> 85,000
<SECURITIES> 0
<RECEIVABLES> 117,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 218,000
<PP&E> 689,000
<DEPRECIATION> 35,000
<TOTAL-ASSETS> 883,000
<CURRENT-LIABILITIES> 233,000
<BONDS> 149,000
0
0
<COMMON> 603,000
<OTHER-SE> (2,000)
<TOTAL-LIABILITY-AND-EQUITY> 883,000
<SALES> 168,000
<TOTAL-REVENUES> 171,000
<CGS> 39,000
<TOTAL-COSTS> 152,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,000
<INCOME-PRETAX> 15,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 15,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,000
<EPS-BASIC> .01
<EPS-DILUTED> .01
</TABLE>
Exhibit 9
Form 10-KSB
Mountain Oil, Inc.
MOUNTAIN OIL, INC.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following stock option grant
(the "Option") to purchase shares of the Common Stock of Mountain
Oil, Inc. (the "Company"):
Optionee: Craig Phillips
________________________
________________________
Grant Date: 1-15-200
Expiration Date: 1-15-2010
Exercise Price: $1.10 per share
Number of Option Shares: 25,000
Type of Option: XX Incentive Stock Option
Non-Statutory Option
Exercise Schedule: The Option shall become exercisable for one
hundred percent (100 %) of the Option Shares immediately.
Optionee understands and agrees that the Option is granted
subject to and in accordance with the express terms and condition
of the Company's Long-Term Stock Incentive Plan adopted by the
Board of Directors on January 15, 2000 (the "Plan"). Optionee
further agrees to be bound by the terms and conditions of the
Plan and the terms and conditions of the Option as set forth in
the Stock Option Agreement attached hereto as Exhibit A. The
Company shall provide to Optionee a copy of the Plan upon written
request to the Company.
Dated: January 15, 2000
Mountain Oil, Inc. Optionee
By:_________________________________
Signature:___________________________
Title:________________________________
Name:______________________________
E-31
<PAGE>
Exhibit 10
Form 10-KSB
Mountain Oil, Inc.
MOUNTAIN OIL, INC.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following stock option grant
(the "Option") to purchase shares of the Common Stock of Mountain
Oil, Inc. (the "Company"):
Optionee: Joseph Ollivier
________________________
________________________
Grant Date: 1-15-200
Expiration Date: 1-15-2010
Exercise Price: $1.00 per share
Number of Option Shares: 25,000
Type of Option: ______ Incentive Stock Option
XXX Non-Statutory Option
Exercise Schedule: The Option shall become exercisable for one
hundred percent (100 %) of the Option Shares immediately.
Optionee understands and agrees that the Option is granted
subject to and in accordance with the express terms and condition
of the Company's Long-Term Stock Incentive Plan adopted by the
Board of Directors on January 15, 2000 (the "Plan"). Optionee
further agrees to be bound by the terms and conditions of the
Plan and the terms and conditions of the Option as set forth in
the Stock Option Agreement attached hereto as Exhibit A. The
Company shall provide to Optionee a copy of the Plan upon written
request to the Company.
Dated: January 15, 2000
Mountain Oil, Inc. Optionee
By:_________________________________
Signature:___________________________
Title:________________________________
Name:______________________________
E-32
<PAGE>
Exhibit 11
Form 10-KSB
Mountain Oil, Inc.
MOUNTAIN OIL, INC.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following stock option grant
(the "Option") to purchase shares of the Common Stock of Mountain
Oil, Inc. (the "Company"):
Optionee: Lynn Stratford
________________________
________________________
Grant Date: 1-15-200
Expiration Date: 1-15-2010
Exercise Price: $1.00 per share
Number of Option Shares: 50,000
Type of Option: ______ Incentive Stock Option
XXX Non-Statutory Option
Exercise Schedule: The Option shall become exercisable for one
hundred percent (100 %) of the Option Shares immediately.
Optionee understands and agrees that the Option is granted
subject to and in accordance with the express terms and condition
of the Company's Long-Term Stock Incentive Plan adopted by the
Board of Directors on January 15, 2000 (the "Plan"). Optionee
further agrees to be bound by the terms and conditions of the
Plan and the terms and conditions of the Option as set forth in
the Stock Option Agreement attached hereto as Exhibit A. The
Company shall provide to Optionee a copy of the Plan upon written
request to the Company.
Dated: January 15, 2000
Mountain Oil, Inc. Optionee
By:_________________________________
Signature:___________________________
Title:________________________________
Name:______________________________
E-33
<PAGE>
Exhibit 12
Form 10-KSB
Mountain Oil, Inc.
MOUNTAIN OIL, INC.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following stock option grant
(the "Option") to purchase shares of the Common Stock of Mountain
Oil, Inc. (the "Company"):
Optionee: Daniel S. Sam
________________________
________________________
Grant Date: 1-15-200
Expiration Date: 1-15-2010
Exercise Price: $1.00 per share
Number of Option Shares: 25,000
Type of Option: ______ Incentive Stock Option
XXX Non-Statutory Option
Exercise Schedule: The Option shall become exercisable for one
hundred percent (100 %) of the Option Shares immediately.
Optionee understands and agrees that the Option is granted
subject to and in accordance with the express terms and condition
of the Company's Long-Term Stock Incentive Plan adopted by the
Board of Directors on January 15, 2000 (the "Plan"). Optionee
further agrees to be bound by the terms and conditions of the
Plan and the terms and conditions of the Option as set forth in
the Stock Option Agreement attached hereto as Exhibit A. The
Company shall provide to Optionee a copy of the Plan upon written
request to the Company.
Dated: January 15, 2000
Mountain Oil, Inc. Optionee
By:_________________________________
Signature:___________________________
Title:________________________________
Name:______________________________
E-34
<PAGE>
11
Exhibit 13
Form 10-KSB
Mountain Oil, Inc.
MOUNTAIN OIL, INC.
LONG-TERM STOCK INCENTIVE PLAN
SECTION 1
GENERAL
1.1.Purpose. The Mountain Oil, Inc., Long-Term Stock
Incentive Plan (the "Plan") has been established by Mountain Oil,
Inc. (the "Company") to (i) attract and retain persons eligible
to participate in the Plan; (ii) motivate Participants, by means
of appropriate incentives, to achieve long-range goals; (iii)
provide incentive compensation opportunities that are competitive
with those of other similar companies; and (iv) further identify
Participants' interests with those of the Company's other
shareholders through compensation that is based on the Company's
common stock; and thereby promote the long-term financial
interest of the Company and the Subsidiaries, including the
growth in value of the Company's equity and enhancement of long-
term shareholder return.
1.2.Participation. Subject to the terms and conditions of
the Plan, the Committee shall determine and designate, from time
to time, from among the Eligible Persons (including transferees
of Eligible Persons to the extent the transfer is permitted by
the Plan and the applicable Award Agreement), those persons who
will be granted one or more Awards under the Plan, and thereby
become "Participants" in the Plan. In the discretion of the
Committee, a Participant may be granted any Award permitted under
the provisions of the Plan, and more than one Award may be
granted to a Participant. Awards may be granted as alternatives
to or replacement of awards outstanding under the Plan, or any
other plan or arrangement of the Company or a Subsidiary
(including a plan or arrangement of a business or entity, all or
a portion of which is acquired by the Company or a Subsidiary).
1.3.Operation, Administration, and Definitions. The
operation and administration of the Plan, including the Awards
made under the Plan, shall be subject to the provisions of
Section 4 (relating to operation and administration).
Capitalized terms in the Plan shall be defined as set forth in
the Plan (including the definition provisions of Section 6 of the
Plan).
SECTION 2
OPTIONS AND SARS
2. 1. Definitions.
(a) The grant of an "Option" entitles the Participant to
purchase shares of Stock at an Exercise Price established by
the Committee. Options granted under this Section 2 may be
either Incentive Stock Options ("ISOs") or Non-Qualified
Options ("NQOs"), as determined in the discretion of the
Committee. An "ISO" is an Option that is intended to
satisfy the requirements applicable to an "incentive stock
option" described in section
E-35
<PAGE>
422(b) of the Code. An "NQO" is an Option that is not
intended to be an "incentive stock option" as that term is
described in section 422(b) of the Code.
(b) A stock appreciation right (an "SAR") entities the
Participant to receive, in cash or Stock (as determined in
accordance with subsection 2.5), value equal to (or
otherwise based on) the excess of: (a) the Fair Market Value
of a specified number of shares of Stock at the time of
exercise; over (b) an Exercise Price established by the
Committee.
2.2. Exercise Price. The "Exercise Price" of each Option
and SAR granted under this Section 2 shall be established by the
Committee or shall be determined by a method established by the
Committee at the time the Option or SAR is granted; except that
the Exercise Price shall not be less than 100% of the Fair Market
Value of a share of Stock on the date of grant.
2.3. Exercise. An Option and an SAR shall be exercisable in
accordance with such terms and conditions and during such periods
as may be established by the Committee.
2.4. Payment of Option Exercise Price. The payment of the
Exercise Price of an Option granted under this Section 2 shall be
subject to the following:
(a) Subject to the following provisions of this subsection 2.4,
the full Exercise Price for shares of Stock purchased upon
the exercise of any Option shall be paid at the time of such
exercise (except that, in the case of an exercise
arrangement approved by the Committee and described in
paragraph 2.4(c), payment may be made as soon as practicable
after the exercise).
(b) The Exercise Price shall be payable in cash or by tendering,
by either actual delivery of shares or by attestation,
shares of Stock acceptable to the Committee (including
Shares deemed issued for purposes of exercising a conversion
right under an Award), and valued at Fair Market Value as of
the day of exercise, or in any combination thereof, as
determined by the Committee.
(c) The Committee may permit a Participant to elect to pay the
Exercise Price upon the exercise of an Option by irrevocably
authorizing a third party to sell shares of Stock (or a
sufficient portion of the shares) acquired upon exercise of
the Option and remit to the Company a sufficient portion of
the sale proceeds to pay the entire Exercise Price and any
tax withholding resulting from such exercise.
2.5. Settlement of Award. Shares of Stock delivered
pursuant to the exercise of an option or SAR shall be subject to
such conditions, restrictions and contingencies as the Committee
may establish in the applicable Award Agreement. Settlement of
SARs may be made in shares of Stock (valued at their Fair Market
Value at the time of exercise), in cash, or in a combination
thereof, as determined in the discretion of the Committee. The
Committee, in its discretion, may impose such conditions,
restrictions and contingencies with respect to shares of Stock
acquired pursuant to the exercise of an Option or an SAR as the
Committee determines to be desirable.
E-36
<PAGE>
SECTION 3
OTHER STOCK AWARDS
3.1. Definitions.
(a) A "Stock Unit" Award is the grant of a right to receive
shares of Stock in the future.
(b) A "Performance Share" Award is a grant of a right to receive
shares of Stock or Stock Units which is contingent on the
achievement of performance or other objectives during a
specified period.
(c) A "Restricted Stock" Award is an grant of shares of Stock,
and a "Restricted Stock Unit" Award is the grant of a right
to receive shares of Stock in the future, with such shares
of Stock or right to future delivery of such shares of Stock
subject to a risk of forfeiture or other restrictions that
will lapse upon the achievement of one or more goals
relating to completion of service by the Participant, or
achievement of performance or other objectives, as
determined by the Committee.
3.2. Restrictions on Stock Awards. Each Stock Unit Award,
Restricted Stock Award, Restricted Stock Unit Award and
Performance Share Award shall be subject to the following:
(a) Any such Award shall be subject to such conditions,
restrictions and contingencies as the Committee shall
determine. The Committee may designate whether any such
Award being granted to any Participant are intended to be "
performance-based compensation" as that term is used in
section 162(m) of the Code. Any such Awards designated as
intended to be "performance-based compensation" shall be
conditioned on the achievement of one or more Performance
Measures. For Awards intended to be "performance-based
compensation," the grant of the Awards and the establishment
of the Performance Measures shall be made during the period
required under Code section 162(m). The "performance
measures" that may be used by the Committee for such Awards
shall be based on one or more of the following, as selected
by the Committee:
(i) operating profits (including EBITDA), net
profits, earnings per share, profit returns and margins,
revenues, shareholder return and/or value, stock price, or
working capital, which may be measured on a Company,
Subsidiary, or business unit basis; or
(ii) any one or more of the performance criteria
set forth in the next preceding paragraph (i) measured on
the basis of a relative comparison of entity performance to
the performance of a peer group of entities or other
external measure of the selected performance criteria;
provided, that profit, earnings, and revenues used for any
performance measure shall exclude: gains or losses on
operating asset sales or dispositions; litigation or claim
E-37
<PAGE>
judgments or settlements; accruals for historic
environmental obligations; effect of changes in tax law or
rate on deferred tax liabilities; accruals for
reorganization and restructuring programs; uninsured
catastrophic property losses; the cumulative effect of
changes in accounting principles; and any extraordinary non-
recurring items as described in Accounting Principles Board
Opinion No. 30.
SECTION 4
OPERATION AND ADMINISTRATION
4.1. Effective Date. Subject to the approval of the
shareholders of the Company in the manner required by the laws of
the state of Utah, the Plan shall be effective as of January 15,
2000 (the "Effective Date"); provided, however, that to the
extent that Awards are granted under the Plan prior to its
approval by shareholders, the Awards shall be contingent on
approval of the Plan by the shareholders of the Company. The
Plan shall be unlimited in duration and, in the event of Plan
termination, shall remain in effect as long as any Awards under
it are outstanding; provided, however, that, to the extent
required by the Code, no ISO may be granted under the Plan on a
date that is more than ten years from the date the Plan is
adopted or, if earlier, the date the Plan is approved by
shareholders.
4.2. Shares Subject to Plan. The shares of Stock for which
Awards may be granted under the Plan shall be subject to the
following:
(a) Subject to the following provisions of this subsection 4.2,
the maximum number of shares of Stock that may be delivered to
Participants and their beneficiaries under the Plan shall be
500,000.
(b) To the extent that any shares of Stock covered by an Award
are not delivered to a Participant or beneficiary because the
Award is forfeited or canceled, or the shares of Stock are not
delivered because the Award is settled in cash or used to satisfy
the applicable tax withholding obligation, such shares shall not
be deemed to have been delivered for purposes of determining the
maximum number of shares of Stock available for delivery under
the Plan.
(c) If the exercise price of any stock option granted under the
Plan or any Prior Plan is satisfied by tendering shares of Stock
to the Company (by either actual delivery or by attestation),
only the number of shares of Stock issued net of the shares of
Stock tendered shall be deemed delivered for purposes of
determining the maximum number of shares of Stock available for
delivery under the Plan.
(d) Subject to paragraph 4.2(e), the following additional
maximums are imposed under the Plan.
(i) The maximum number of shares of stock that may be
issued by Options intended to be ISOs shall be 500,000
shares.
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(ii) The maximum number of shares of Stock that may be
issued in conjunction with Awards granted pursuant to
Section 3 (relating to Stock Awards) shall be 150,000
shares.
(iii) The maximum number of shares that may be covered
by Awards granted to any one individual pursuant to Section
2 (relating to Options and SARs) shall be 100,000 shares
during any one-calendar year period.
(iv) No more than 150,000 shares of Stock may be subject to
Stock Unit awards, Restricted Stock Awards, Restricted Stock
Unit Awards and Performance Share Awards that are intended
to be "performance-based compensation" (as that term is used
for purposes of Code section 162(m)) granted to any one
individual during any one-calendar-year period (regardless
of when such shares are deliverable).
(e) In the event of a corporate transaction involving the
Company (including, without limitation, any stock dividend,
stock split, extraordinary cash dividend, recapitalization,
reorganization, merger, consolidation, split-up, spin-off,
combination or exchange of shares), the Committee may adjust
Awards to preserve the benefits or potential benefits of the
Awards. Action by the Committee may include: (i) adjustment
of the number and kind of shares which may be delivered
under the Plan; (ii) adjustment of the number and kind of
shares subject to outstanding Awards; (iii) adjustment of
the Exercise Price of outstanding Options and SARs; and (iv)
any other adjustments that the Committee determines to be
equitable.
4.3. General Restrictions. Delivery of shares of Stock or
other amounts under the Plan shall be subject to the following:
(a) Notwithstanding any other provision of the Plan, the Company
shall have no liability to deliver any shares of Stock under
the Plan or make any other distribution of benefits under
the Plan unless such delivery or distribution would comply
with all applicable laws (including, without limitation, the
requirements of the Securities Act of 1933), and the
applicable requirements of any securities exchange or
similar entity.
(b) To the extent that the Plan provides for issuance of stock
certificates to reflect the issuance of shares of Stock, the
issuance may be effected on a non-certificated basis, to the
extent not prohibited by applicable law or the applicable
rules of any stock exchange.
4.4. Tax Withholding. All distributions under the Plan are
subject to withholding of all applicable taxes, and the Committee
may condition the delivery of any shares or other benefits under
the Plan on satisfaction of the applicable withholding
obligations. The Committee, in its discretion, and subject to
such requirements as the Committee may impose prior to the
occurrence of such withholding, may permit such withholding
obligations to be satisfied through cash payment by the
Participant, through the surrender of shares of Stock which the
Participant already owns, or through the surrender of shares of
Stock to which the Participant is otherwise entitled under the
Plan.
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<PAGE>
4.5. Use of Shares. Subject to the overall limitation on
the number of shares of Stock that may be delivered under the
Plan, the Committee may use available shares of Stock as the form
of payment for compensation, grants or rights earned or due under
any other compensation plans or arrangements of the Company or a
Subsidiary, including the plans and arrangements of the Company
or a Subsidiary assumed in business combinations.
4.6. Dividends and Dividend Equivalents. An Award
(including without limitation an Option or SAR Award) may provide
the Participant with the right to receive dividend payments or
dividend equivalent payments with respect to Stock subject to the
Award (both before and after the Stock subject to the Award is
earned, vested, or acquired), which payments may be either made
currently or credited to an account for the Participant, and may
be settled in cash or Stock as determined by the Committee. Any
such settlements, and any such crediting of dividends or dividend
equivalents or reinvestment in shares of Stock, may be subject to
such conditions, restrictions and contingencies as the Committee
shall establish, including the reinvestment of such credited
amounts in Stock equivalents.
4.7. Payments. Awards may be settled through cash payments,
the delivery of shares of Stock, the granting of replacement
Awards or combination thereof as the Committee shall determine.
Any Award settlement, including payment deferrals, may be subject
to such conditions, restrictions and contingencies, as the
Committee shall determine. The Committee may permit or require
the deferral of any Award payment, subject to such rules and
procedures as it may establish, which may include provisions for
the payment or crediting of interest, or dividend equivalents,
including converting such credits into deferred Stock
equivalents. Each Subsidiary shall be liable for payment of cash
due under the Plan with respect to any Participant to the extent
that such benefits are attributable to the services rendered for
that Subsidiary by the Participant. Any disputes relating to
liability of a Subsidiary for cash payments shall be resolved by
the Committee.
4.8 Transferability. Except as otherwise provided by the
Committee, Awards under the Plan are not transferable except as
designated by the Participant by will or by the laws of descent
and distribution.
4.9 Form and Time of Elections. Unless otherwise specified
herein, each election required or permitted to be made by any
Participant or other person entitled to benefits under the Plan,
and any permitted modification, or revocation thereof, shall be
in writing filed with the Committee at such times, in such form,
and subject to such restrictions and limitations, not
inconsistent with the terms of the Plan, as the Committee shall
require.
4.10 Agreement With Company. An Award under the Plan shall
be subject to such terms and conditions, not inconsistent with
the Plan, as the Committee shall, in its sole discretion,
prescribe. The terms and conditions of any Award to any
Participant shall be reflected in such form of written document
as is determined by the Committee. A copy of such document shall
be provided to the Participant, and the Committee may, but need
not require that the Participant shall sign a copy of such
document. Such document is referred to in the Plan as an "Award
Agreement" regardless of whether any Participant signature is
required.
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<PAGE>
4.11 Action by Company or Subsidiary. Any action required
or permitted to be taken by the Company or any Subsidiary shall
be by resolution of its board of directors, or by action of one
or more members of the board (including a committee of the board)
who are duly authorized to act for the board, or (except to the
extent prohibited by applicable law or applicable rules of any
stock exchange) by a duly authorized officer of such company.
4.12.Gender and Number. Where the context admits, words in
any gender shall include any other gender, words in the singular
shall include the plural and the plural shall include the
singular.
4.13.Limitation of Implied Rights.
(a) Neither a Participant nor any other person shall, by reason
of participation in the Plan, acquire any right in or title
to any assets, funds or property of the Company or any
Subsidiary whatsoever, including, without limitation, any
specific funds, assets, or other property which the Company
or any Subsidiary, in their sole discretion, may set aside
in anticipation of a liability under the Plan. A
Participant shall have only a contractual right to the Stock
or amounts, if any, payable under the Plan, unsecured by any
assets of the Company or any Subsidiary, and nothing
contained in the Plan shall constitute a guarantee that the
assets of the Company or any Subsidiary shall be sufficient
to pay any benefits to any person.
(b) The Plan does not constitute a contract of employment, and
selection as a Participant will not give any participating
person the right to be retained in the employ of the Company
or any Subsidiary, nor any right or claim to any benefit
under the Plan, unless such right or claim has specifically
accrued under the terms of the Plan. Except as otherwise
provided in the Plan, no Award under the Plan shall confer
upon the holder thereof any rights as a shareholder of the
Company prior to the date on which the individual fulfills
all conditions for receipt of such rights.
4.14.Evidence. Evidence required of anyone under the Plan
may be by certificate, affidavit, document or other information,
which the person acting on it considers pertinent and reliable,
and signed, made or presented by the proper party or parties.
SECTION 5
COMMITTEE
5.1. Administration. The authority to control and manage
the operation and administration of the Plan shall be vested in a
committee (the "Committee") in accordance with this Section 5.
The Committee shall be selected by the Board, and shall consist
solely of one or more members of the Board who are not employees.
If the Committee does not exist, or for any other reason
determined by the Board, the Board may take any action under the
Plan that would otherwise be the responsibility of the Committee.
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<PAGE>
5.2. Powers of Committee. The Committee's administration of
the Plan shall be subject to the following:
(a) Subject to the provisions of the Plan, the Committee will
have the authority and discretion to select from among the
Eligible Persons those persons who shall receive Awards, to
determine the time or times of receipt, to determine the
types of Awards and the number of shares covered by the
Awards, to establish the terms, conditions, performance
criteria, restrictions, and other provisions of such Awards,
and (subject to the restrictions imposed by Section 6) to
cancel or suspend Awards.
(b) To the extent that the Committee determines that the
restrictions imposed by the Plan preclude the achievement of
the material purposes of the Awards in jurisdictions outside
the United States, the Committee will have the authority and
discretion to modify those restrictions as the Committee
determines to be necessary or appropriate to conform to
applicable requirements or practices of jurisdictions
outside of the United States.
(c) The Committee will have the authority and discretion to
interpret the Plan, to establish, amend, and rescind any
rules and regulations relating to the Plan, to determine the
terms and provisions of any Award Agreement made pursuant to
the Plan, and to make all other determinations that may be
necessary or advisable for the administration of the Plan.
(d) Any interpretation of the Plan by the Committee and any
decision made by it under the Plan is final and binding on
all persons.
(e) In controlling and managing the operation and administration
of the Plan, the Committee shall take action in a manner
that conforms to the articles and by-laws of the Company,
and applicable state corporate law.
5.3. Delegation by Committee. Except to the extent
prohibited by applicable law or the applicable rules of a stock
exchange, the Committee may allocate all or any portion of its
responsibilities and powers to any one or more of its members and
may delegate all or any part of its responsibilities and powers
to any person or persons selected by it. Any such allocation or
delegation may be revoked by the Committee at any time.
5.4. Information to be Furnished to Committee. The Company
and Subsidiaries shall furnish the Committee with such data and
information as it determines may be required for it to discharge
its duties. The records of the Company and Subsidiaries as to a
Participant's employment, termination of employment, leave of
absence, reemployment and compensation shall be conclusive on all
persons unless determined to be incorrect. Participants and
other persons entitled to benefits under the Plan must furnish
the Committee such evidence, data or information as the Committee
considers desirable to carry out the terms of the Plan.
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<PAGE>
SECTION 6
AMENDMENT AND TERMINATION
The Board may, at any time, amend or terminate the Plan,
provided that no amendment or termination may, in the absence of
written consent to the change by the affected Participant (or, if
the Participant is not then living, the affected beneficiary),
adversely affect the rights of any Participant or beneficiary
under any Award granted under the Plan prior to the date such
amendment is adopted by the Board; provided that adjustments
pursuant to subject to subsection 4.2(e) shall not be subject to
the foregoing limitations of this Section 6.
SECTION 7
DEFINED TERMS
In addition to the other definitions contained herein, the
following definitions shall apply:
(a) Award. The term "Award" shall mean any award or benefit
granted under the Plan, including, without limitation, the
grant of Options, SARs, Stock Unit Awards, Restricted Stock
Awards, Restricted Stock Unit Awards and Performance Share
Awards.
(b) Board. The term "Board" shall mean the Board of Directors
of the Company.
(c) Code. The term "Code" means the Internal Revenue Code of
1986, as amended. A reference to any provision of the Code
shall include reference to any successor provision of the
Code.
(d) Eligible Person. The term "Eligible Person" shall mean any
director, officer, employee or consultant of the Company or
a Subsidiary. An Award may be granted to a person in
connection with hiring, retention or otherwise prior to the
date the person first performs services for the Company or
the Subsidiaries, provided that such Award shall not become
vested prior to the date the person first performs such
services.
(e) Fair Market Value. For purposes of determining the "Fair
Market Value" of a share of Stock as of any date, the
following rules shall apply:
(i) If the principal market for the Stock is a national
securities exchange or the Nasdaq stock market, then the
"Fair Market Value" as of that date shall be the mean
between the lowest and highest reported sale prices of the
Stock on that date on the principal exchange which the Stock
is then listed or admitted to trading.
(ii) If sale prices are not available or if the principal
market for the Stock is not a national securities exchange
and the Stock is not quoted on the Nasdaq stock market, the
average between the highest bid and lowest asked prices for
the Stock on such day as
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<PAGE>
reported on the NASDAQ OTC Bulletin Board Service or by the
National Quotation Bureau, Incorporated or a comparable
service.
(iii) If the day is not a business day, and as a result,
paragraphs (i) and (ii) next above are inapplicable, the
Fair Market Value of the Stock shall be determined as of the
last preceding business day. If paragraphs (i) and (ii)
next above are otherwise inapplicable, then the Fair Market
Value of the Stock shall be determined in good faith by the
Committee.
(f) Subsidiaries. The term "Subsidiary" means any company
during any period in which it is a "subsidiary corporation"
(as that term is defined in Code section 424(f)) with
respect to the Company.
(g) Stock. The term "Stock" shall mean shares of common stock
of the Company.
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2
Exhibit 14
Form 10-KSB
Mountain Oil, Inc.
PROCEEDS ESCROW AGREEMENT
PROCEEDS ESCROW AGREEMENT ("Agreement") dated as of May 22,
2000, by and between Mountain Oil, Inc., a Utah corporation (the
"Company") and BONNEVILLE BANK of Provo, Utah (the "Escrow
Agent")
W I T N E S S E T H
WHEREAS, the Company intends to engage in a private offering
of certain of its securities (the "Offering"), which Offering
contemplates minimum aggregate offering proceeds of $500,000 and
maximum aggregate offering proceeds of $2,250,000;
WHEREAS, there will be deposited into an escrow account with
Escrow Agent from time to time funds from prospective investors
who wish to subscribe for securities offered in connection with
the Offering ("Subscribers"), which funds will be held in escrow
and distributed in accordance with the terms hereof; and
WHEREAS, the Escrow Agent is willing to act as an escrow
agent in respect of the Escrow Funds (as hereinafter defined)
upon the terms and conditions set forth herein;
NOW, THEREFORE, for good and valuable considerations, the
receipt and adequacy of which are hereby acknowledged by each of
the parties hereto, the parties hereto hereby agree as follows:
1. Appointment of Escrow Agent. The Company hereby
appoints the Escrow Agent as escrow agent in accordance with the
terms and conditions set forth herein, and the Escrow Agent
hereby accepts such appointment.
2. Delivery of Escrow Funds.
(a) The Company shall deliver to the Escrow Agent
checks or wire transfers made payable to the order of "Bonneville
Bank, Mountain Oil, Inc., Escrow Account" together with the
Subscribers mailing address. The funds delivered to the Escrow
Agent shall be deposited by the Escrow Agent into a non-interest-
bearing account designated "Bonneville Bank, Mountain Oil, Inc.,
Escrow Account" (the "Escrow Account") and shall be held and
distributed by the Escrow Agent in accordance with the terms
hereof. The collected funds deposited into the Escrow Account
are referred to herein as the "Escrow Funds." The Escrow Agent
shall acknowledge receipt of all Escrow Funds by notifying the
Company of deposits into the Escrow Account in the Escrow Agent's
customary manner no later than the next business day following
the business day on which the Escrow Funds are deposited into the
Escrow Account.
(b) The Escrow Agent shall have no duty or
responsibility to enforce the collection or demand payment of any
funds deposited into the Escrow Account. If, for any reason, any
check deposited into the Escrow Account shall be returned unpaid
to the Escrow Agent, the sole duty of the Escrow Agent shall be
to return the check to the Company.
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<PAGE>
3. Investment of the Escrow Funds. The Escrow Account
shall not bear interest and no other investment of the Escrow
Funds shall be made while held by the Escrow Agent.
4. Release of Escrow Funds. The Escrow Funds shall be
paid by the Escrow Agent in accordance with the following:
(a) Provided that the Escrow Funds total at least
$500,000 at or before 4:00 p.m., Salt Lake City time, on August
22, 2000, (or September 22, 2000 if extended by the Company by
written notice to the Escrow Agent given on or before August 22,
2000), or on any date prior thereto, the Escrow Funds (or any
portion thereof) shall be paid to the Company or as otherwise
instructed by the Company, within one (1) business day after the
Escrow Agent receives a written release notice in substantially
the form of Exhibit A attached hereto (a "Release Notice") signed
by an authorized person of the Company and thereafter, the Escrow
Account will remain open for the purpose of depositing therein
the subscription price for additional securities sold by the
Company in the Offering, which additional Escrow Funds shall be
paid to the Company or as otherwise instructed by the Company
upon receipt by the Escrow Agent of a Release Notice as described
above; and
(b) if the Escrow Agent has not received a Release
Notice from the Company at or before 4:00 p.m. Salt Lake City
time, on August 22, 2000, (or September 22, 2000 if extended by
the Company by written notice to the Escrow Agent given on or
before August 22, 2000), and the Escrow Funds do not total at
least $500,000 at such time and date, then the Escrow Funds shall
be returned to Subscribers.
In the event that at any time the Escrow Agent shall receive from
the Company written instructions signed by an individual who is
identified on Exhibit B attached hereon as a person authorized to
act on behalf of the Company, requesting the Escrow Agent to
refund to a Subscriber the amount of a collected check or other
funds received by the Escrow Agent, the Escrow Agent shall make
such refund to the Subscriber within one (1) business day after
receiving such instructions.
5. Limitation of Responsibility and Liability of the
Escrow Agent. The Escrow Agent:
(a) shall not be liable for any error of judgment or
for any act done or step taken or omitted by it in good faith, or
for any mistake of fact or law, or for anything which it may do
or refrain from doing in connection herewith, except its own
gross negligence and willful misconduct;
(b) shall be authorized to rely upon all written
instructions and/or communications of the non-bank Party which
appear to be valid on their face;
(c) shall have no implied obligations or
responsibilities hereunder, nor shall it have any obligation or
responsibility to collect funds or seek the deposit of money or
property;
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<PAGE>
(d) may consult with legal counsel of its choice with
regard to any legal question arising in connection with this
duties or responsibilities hereunder, and shall have no liability
or responsibility by reason of any action it may take or fail to
take in accordance with the opinions of such counsel;
(e) acts hereunder as a depository only, and is not responsible
or liable in any manner whatsoever for the sufficiency,
correctness, genuineness, or validity of any instrument deposited
with it, or with respect to the form or execution of the same, or
the identity, authority, or rights of any person executing or
depositing the same; and
(f) shall be entitled to comply with any final order,
judgment or decree of a court of competent jurisdiction, and/or
with the consistent written instructions from the non-bank Party.
6. Costs and Expenses. The fee of the Escrow Agent is
$_____, receipt of which is hereby acknowledged. In addition, if
the Escrow Funds are returned to subscribers under 4(b), above,
the Escrow Agent shall receive a fee of $_______ per check for
such service. The fee agreed on for services rendered hereunder
is intended as full compensation for the Escrow Agent's services
as contemplated by this Agreement; however, in the event that the
conditions of this Agreement are not fulfilled, the Escrow Agent
renders any material service not contemplated by this Agreement,
there is any assignment of interest in the subject matter of this
Agreement, there is any material modification hereof, any
material controversy arises hereunder, or the Escrow Agent is
made a party to or justifiably intervenes in any litigation
pertaining to this Agreement or the subject matter hereof, the
Escrow Agent shall be reasonably compensated for such
extraordinary expenses, including reasonable attorneys' fees,
occasioned by any delay, controversy, litigation, or event and
the same may be recoverable only from the Company.
7. Notices. All notices and communications shall be
deemed to have been duly given: at the time delivered by hand,
if personally delivered; when received, if deposited in the mail,
postage prepaid, addressed as provided below; when transmission
is verified, if telecopied; and on the next business day, if
timely delivered to an air courier guaranteeing overnight
delivery;
To the Company: Mountain Oil, Inc.
P. O. Box 1574
Roosevelt, UT 84066
Attn: Craig Phillips,
President
To Escrow Agent: BONNEVILLE BANK
1675 North 200 West
Provo, UT 84604
Attn:_______________________
Any party may change its address by providing written notice of
such change to the other parties hereto.
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<PAGE>
8. Resignation by Escrow Agent. Upon thirty (30) calendar
days' prior written notice to the non-bank Party delivered or
sent as required above, the Escrow Agent shall have the right to
resign as escrow agent hereunder and to thereby terminate its
duties and responsibilities hereunder, and shall thereupon be
released from these instructions. Upon resignation by the Escrow
Agent, the Escrow Agent shall provide the non-bank Party with
sufficient information concerning the status of the Escrow Fund
to enable the non-bank parties to provide the same to a successor
escrow agent.
9. Termination of Escrow Agreement. The Escrow Agent's
responsibilities thereunder shall terminate at such time as the
Escrow Fund shall have been fully disbursed pursuant to the terms
hereof, or upon earlier termination of this escrow arrangement
pursuant to written instructions executed by the non-bank Party.
Such written notice of earlier termination shall include
instruction to the Escrow Agent for the distribution of the
Escrow Fund.
10. Entire Agreement. This Agreement contains the entire
understanding by and among the parties hereto; there are no
promises, agreements, understandings, representations or
warranties, other than as herein set forth. No change or
modification of this Agreement shall be valid or effective unless
the same is in writing and is signed by all of the parties
hereto.
11. Applicable Law, Successors and Assigns. This Agreement
shall be governed in all respects by the laws of the state of
Utah, and shall be binding upon and shall inure to the benefit of
the parties hereto, and their respective heirs, executors,
administrators, legal representatives, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused their
respective hands to be set hereto with the intention of being
bound effective in all respects as of the date and year first
hereinabove written.
MOUNTAIN OIL, INC.
By:
______________________________________
Its:
______________________________________
BONNEVILLE BANK
By:
______________________________________
Its:
______________________________________
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<PAGE>
EXHIBIT A
Release Notice
BONNEVILLE BANK
1675 North 200 West
Provo, UT 84604
Gentlemen:
The undersigned hereby authorize and instruct BONNEVILLE
BANK, escrow agent, to release [$______________] of Escrow Funds
from the Escrow Account and to deliver such funds as follows:
[Insert Delivery Instructions]
IN WITNESS WHEREOF, this release has been executed on
________________, 2000.
MOUNTAIN OIL, INC.
By:
______________________________________
Its:
______________________________________
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<PAGE>
EXHIBIT B
Authorized Personnel
The Escrow Agent is authorized to accept instructions and notices
signed or believed by the Escrow Agent to be signed by any one of
the following each of whom is authorized to act on behalf of the
Company:
On Behalf of MOUNTAIN OIL, INC.
Name Title Signature
Craig Phillips President
______________________________
Joseph F. Ollivier Vice President
______________________________
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<PAGE>
EXHIBIT 15
FORM 10-KSB
MOUNTAIN OIL, INC.
MOUNTAIN OIL, INC. - COMMON STOCK
SUBSCRIPTION AGREEMENT
Initial Subscription
Additional Investment: Account Number Previously Assigned:
INVESTMENT
I desire to purchase $ aggregate
principal amount of IBF VI - Participating Income Corporation.
Make Checks Payable to: Bonneville Bank , Mountain Oil, Inc., Escrow Account
Subscriber Information: Please clearly print name(s) in which Shares are to be
acquired. All checks and correspondence will go to the Investor Residence
Address unless specified otherwise in the Check Distribution Section
Investor 1 (First, Middle I., Last):
Investor 2 (First, Middle I. Last):
REGISTRATION FOR THE INVESTMENT (HOW THE INVESTMENT SHOULD BE TITLED):
INVESTOR RESIDENCE ADDRESS 1: CHECK ONE OF THE
FOLLOWING:
U.S. Citizen
Investor Residence Address 2:
Resident Alien
City, State ZIP Code Foreign
Resident; Country ________
U.S. Citizen residing outside
the U.S.
OCCUPATION:
Check Distribution Information (if different):
Financial Institution (Bank, Trust Company, etc.):
Address:
City, State ZIP Code
Account Number:
Enter the taxpayer identification number. For most individual taxpayers, it is
their Social Security Number. Note: If the purchase is in more than one name,
the number should be that of the first person listed. For IRAs, Keoghs, and
qualified plans, enter both the Social Security Number and the Taxpayer
Identification Number for the plan.
SOCIAL SECURITY NUMBER TAXPAYER IDENTIFICATION NUMBER (IF
APPLICABLE)
Form of Ownership (Individual, IRA, Trust, UGMA, Pension Plan, etc.)
Broker/Dealer - Registered Representative Information (To be completed by
Registered Representative)
I hereby certify that the investor(s) has read the prospectus and meets the
suitability requirements.
Broker/Dealer Firm Name:
Registered Representative:
Sales Representative Signature:
Subscriber Signature: (the undersigned has the authority to enter into this
subscription agreement on behalf of the person(s) or entity registered above.
I (We) certify under penalty of perjury that this is my (our) correct Social
Security Number (and/or Tax Identification Number) and that interest income on
this account should be reported on this number. I acknowledge and agree to
this statement on the reverse side hereof.
Authorized Signature of Investor 1 Date
Authorized Signature of Investor 2 Date
Company's Acceptance (To be completed only by an authorized representative of
the Company.)
The foregoing subscription is accepted this ____________ day of
________________, _____
___________________________________
Authorized Representative of the
Company
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