UNITED STATES
SECURITIES EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of The Securities Exchange Act of 1934
TBX RESOURCES, INC.
-------------------
(Name of Small Business Issuer in its charter)
Texas 75-2592165
- ------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
12300 Ford Road, Suite 265, Dallas, TX 75234
- -------------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (972) 243-2610
----------------
Securities to be registered pursuant to Section 12(b) of the Act:
Not Applicable.
---------------
Securities to be registered pursuant to Section 12(g) of the Act.
Common Stock
--------------------------------------------
(Title of Class)
<PAGE>
TABLE OF CONTENTS
Description of Business.......................................................1
Management Discussion and Analysis or Plan of Operation.......................5
Description of Properties.....................................................6
Security Ownership of Management and Certain Security Holders................11
Directors and Executive Officers, Promoters and Control Persons..............11
Executive Compensation.......................................................12
Securities Being Registered..................................................12
Market For Common Equity and Related Stockholder Matters.....................13
Recent Sales of Unregistered Securities......................................13
Indemnification of Directors and Officers....................................14
Financial Statements.........................................................15
-i-
<PAGE>
DESCRIPTION OF BUSINESS
Background
TBX Resources, Inc., was incorporated in the state of Texas in March,
1995, by our president, Mr. Tim Burroughs. Our primary focus has been to acquire
producing oil and gas properties with opportunities for future development.
Prior to acquiring a property, we analyze the previous production and operating
history of the property, as well as the production history and related operating
procedures for similar wells producing from the same formations in the general
area. While acquiring producing properties which respond positively to improved
production practices and enhanced recovery techniques, we have built an
inventory of low risk, infield development drilling locations.
Mr. Burroughs' experience in the oil and gas industry began as a
financier for an exploration company, where he arranged drilling capital to meet
the company's annual drilling budget. As the major oil and gas companies focused
their investment capital offshore and overseas, and high quality, low risk,
domestic producing properties became available, Mr. Burroughs developed his low
risk strategy for building an oil and gas production company. Over time, Mr.
Burroughs cultivated extensive relationships with various oil and gas engineers,
geologists and operating personnel with a solid background in oil and gas fields
of eastern Texas and western Louisiana. These relationships resulted in a team
of consultants and associates who locate and qualify properties for acquisition
by TBX Resources, perform workover operations on the acquired wells and analyze
the daily production operations to maximize the production of the acquired
leases.
As a result of his extensive operating history in East Texas, Mr.
Burroughs became well acquainted with the oil and gas fields along with the
numerous field operators and service companies. His acquaintances with several
reputable East Texas field operators whereby the field operators locate and
present oil and gas acquisition opportunities in east Texas which meet our
criteria. These agreements provide us with ongoing acquisition opportunities
from which we can select properties with the greatest return potential.
In the past, we acquired and developed our properties by entering into
joint ventures with various third parties. Our compensation for locating,
structuring and managing the joint venture partnership was a retained working
interest ownership position in each acquisition. The working interest partners
enjoyed immediate cash returns and had the comfort of knowing that the managing
partner's working interest ownership position in the venture was strong
motivation to maximize production from the acquisition while controlling
expenses. In addition to the immediate cash flow from proven producing reserves,
the working interest partners also received fax benefits from depletion
allowances and expenses associated with improving operations on the properties.
Our goal is to be a publicly traded, independent oil and gas
exploration and production company which can take full advantage of
opportunities resulting from the major oil companies' divestiture of domestic
oil and gas properties.
DEVELOPMENT AND EXPLORATION ACTIVITIES
Economic factors prevailing in the oil and gas industry change from
time to time. The uncertain nature and trend of economic conditions and energy
-1-
<PAGE>
policy in the oil and gas business generally make flexibility of operating
policies important in achieving desired profitability. We intend to evaluate
continuously all conditions affecting our potential activities and to react to
those conditions as we deem appropriate form time to time by engaging in
businesses most profitable for us. Recently, economic factors have influenced
major integrated oil and gas companies to consolidate and restructure. If such
activities continue, our management believes that we may have opportunities to
acquire domestic producing properties with developmental drilling potential. Any
such opportunity will be evaluated for feasibility at the time based upon such
factors as future development potential of the producing property, the proximity
of property to our existing operations, market prices for oil and gas, current
and proposed drilling activities on existing TBX Resources prospects and our
financial position. In addition, in order to finance future development and
exploration activities, we will consider sponsoring public or private
partnerships depending upon the number, size and economic feasibility of our
generated prospects, the level of participation of our industry partners and
various other factors.
SEASONAL NATURE OF BUSINESS
Oil and gas prices are subject to seasonal fluctuations that are beyond
our ability to control. Historically, the demand for natural gas decreases
during the summer months and increases during the winter months. Recently, mild
winters have lessened the fluctuation. Pipelines and other entities have begun
to more effectively utilize storage capacity by purchasing some of the winter
load in the summer at reduced prices, further reducing seasonal fluctuations in
gas prices.
BUSINESS RISKS
TBX Resources is subject to all of the risks normally associated with
the exploration for and production of oil and gas, including uncontrollable
flows of oil, gas or well fluids into the atmosphere, pollution, and fires, each
of which could result in damage to or destruction of oil and gas wells,
producing formations, or production facilities or damage to persons and other
property. As is common in the industry, we do not fully insure against all these
risks either because insurance is not available or because we elect not to
insure due to prohibitive premium costs. The occurrence of an event affecting
TBX Resources could have a material adverse effect on the financial position and
results of our operations. Matt Davis supervises our land department and is
responsible for making the applicable filings with the Texas Railroad Commission
and other regulatory agencies having control over our operations.
Our exploration activities carry risks that the value of the related
acreage may be decreased by adverse geological studies, unfavorable drilling
results on nearby acreage, or lease expirations. In addition, drilling carries a
significant risk that no commercial oil or gas production will be obtained and
the investment will not e recovered. We prefer to re-complete or rework
producing properties to minimize this risk. The ultimate cost of drilling,
completing, and operating wells is often uncertain. Moreover, drilling
operations may be curtailed or delayed, with the likelihood of increased costs,
as a result of, among other factors, title problems, wellhead prices, weather
conditions, and geologic uncertainty.
EMPLOYEES AND CONSULTANTS
TBX Resources has three (3) full-time employees. Tim Burroughs, our
president, supervises all of the day-to-day operations of the company. Christine
Coley is the secretary/treasurer and director of administration for our company
-2-
<PAGE>
and oversees all phases of accounting, purchasing, customer service, scheduling,
compliance and day-to-day office operations. Matt Davis is in charge of our land
department and is also responsible for insuring that all necessary filings are
made with the Texas Railroad Commission and other regulatory agencies having
jurisdiction over our operations.
Ralph Gillispie serves as a consultant to our company. Dr. Gillispie
has been employed in virtually every facet of the petroleum industry in almost
every global location that has ever produced commercial hydrocarbons. Dr.
Gillispie assists us by acting as an independent consultant for drilling,
production and regulatory issues.
All of the operations conducted in the field on behalf of our company
are conducted by Gulftex Operating, Inc. Our president, Tim Burroughs, owns all
of the common stock of Gulftex Operating, Inc. However, no compensation is paid
to Gulftex Operating, Inc. or Tim Burroughs for the ownership of Gulftex
Operating, Inc. or for the management activities conducted by Gulftex Operating,
Inc. Although we do not anticipate terminating our relationship with Gulftex, if
we did terminate the relationship, or if Gulftex chose to discontinue providing
services to us, through the experience of TBX Resource's management, we are
confident that other, comparable operations supervisors could be found on a
basis that is similar to that currently experienced by us.
We will also from time to time rely on the services of independent
landmen, geologists and reservoir and drilling engineers and other technical
consultants as needed.
We maintain our corporate offices at 12300 Ford Road, Suite 265,
Dallas, Texas, and pay a monthly rental of $941.00 per month. Our lease
originally terminated on April 30, 1996, but in January, 2000, we entered into
an agreement by which our lease was extended until July 31, 2000. We currently
have no plans to move our offices. Although we currently do not have any plans
to terminate our lease, because of the small amount of space required for our
offices, together with the abundance of office space available in the Dallas/Ft.
Worth metroplex, we do not anticipate any problems in obtaining suitable office
space if our lease were terminated.
COMPETITION
Our competitors include major oil companies and numerous independent
oil and gas companies, individuals and drilling and income programs. Many of our
larger competitors possess and employ financial and personnel resources
substantially greater than those available to us. Such companies are able to pay
more for oil and gas properties and to define, evaluate, bid for and purchase a
greater number of properties than our financial or human resources permit. Our
ability to acquire additional properties and to discover reserves in the future
will be dependent upon our ability to evaluate and select suitable properties
and to consummate transactions in a highly competitive environment.
OIL AND GAS MARKETING
General. The availability of a ready market for oil and gas produced
from properties now owned or hereafter acquired by us and the prices for such
production are dependent upon numerous factors, many of which are beyond our
control. These factors include, among other things, the level of domestic
production, the availability of imported oil and gas, actions taken by foreign
-3-
<PAGE>
oil and gas producing nations, the availability of pipelines with adequate
capacity and other transportation facilities, the availability and marketing of
other competitive fuels, fluctuating demand for oil, gas and refined products,
and the extent of government regulation and taxation (under both present and
future legislation) of the production, refining, transportation, pricing, use
and allocation of oil, natural gas, refined products, and substitute fuels. In
view of the many uncertainties affecting the supply and demand for crude oil,
natural gas, and refined petroleum products, we cannot predict the prices or
marketability of our oil and gas production.
Marketing Arrangements. Our oil production is sold at or near our wells
under short-term purchase contracts at prevailing prices in accordance with
arrangements which are customary in the oil industry. Substantially all of our
current gas production is sold on the spot market and is not, therefore, subject
to long term contracts. Although this prevents us from being required to dispose
of our production at low rates, there can be no assurance that purchasers will
be willing to continue to purchase our natural gas on the spot market.
REGULATION
The following discussion of regulation of the oil and gas industry is
necessarily brief, and is not intended to constitute a complete discussion of
the various statutes, rules, regulations or governmental orders to which our
operations may be subject.
Regulation of Production. The production of oil and gas is subject to
extensive federal, state and city laws, rules, orders and regulations governing
a wide variety of matters, including the drilling and spacing of wells,
allowable rates of production, prevention of waste and pollution and protection
of the environment. In addition to the direct costs borne in complying with such
regulations, operations and revenues may be impacted to the extent that certain
regulations limit oil and gas production to below economic levels. Although the
particular regulations applicable in each state in which operations are
conducted vary, such regulations are generally designed to ensure that oil and
gas operations are carried out in a safe and efficient manner and to ensure that
similarly-situated operators are provided with reasonable opportunities to
produce their respective fair share of available oil and gas reserves. However,
since these regulations generally apply to all oil and gas producers, our
management believes that these regulations should not put us at a material
disadvantage to other oil and gas producers.
Price Controls on Liquid Hydrocarbons. While not always the case, sales
of crude oil, condensate, and natural gas liquids by TBX Resources presently can
be made at uncontrolled market prices. While there are currently no federal
price controls on crude oil condensate or natural gas liquids, there can be no
assurance that Congress will not reenact controls at a future time.
Regulation of the Environment. The exploration, development, production
and processing of oil and gas are subject to various federal and state laws and
regulations designed to protect the environment. Compliance with these
regulations is part of our day-to-day operating procedures. Infrequently,
accidental discharge of such materials as oil, natural gas or drilling fluids
can and does occur. Such accidents can require material expenditures to correct.
We maintain levels of insurance customary in the industry to limit our financial
exposure. We are unaware of any material capital expenditures required for
environmental control.
-4-
<PAGE>
To the best of our knowledge, we are in full compliance with all state
and federal environmental laws. This opinion is supported by the fact that we
have never been the subject of any environmental agency investigation nor has
any order involving environmental issues been issued against us.
The trend in environmental regulation has been to place more
restrictions and limitations on activities that impact the environment, such as
emissions off pollutants, general disposal of wastes, and the use and handling
of chemical substances. Increasingly, strict environmental restrictions and
limitations have resulted in higher operating costs for us and other similar
businesses throughout the United States, and it is possible that the costs of
compliance with environmental laws and regulations will continue to increase.
State initiatives to regulate further the disposal of oil and gas
wastes could have a similar impact on us. In addition, we are subject to laws
and regulations concerning occupational health and safety. It is not anticipated
that TBX Resources will be required in the near future to expend amounts that
are material in relation to our total capital expenditures program by reason of
environmental or occupation health and safety laws and regulations, but insomuch
as such laws and regulations are frequently changed, we are unable to predict
the ultimate cost of compliance with these laws.
We do not believe that our environmental risks are materially different
from those of comparable gas and oil companies operating in similar geographic
areas.
Nevertheless, no assurance can be given that environmental laws will
not, in the future, result in a curtailment of production or material increases
in the cost of production, development or exploration or otherwise adversely
affect our operations and financial condition. Although we maintain liability
insurance coverage against certain liabilities from pollution, such
environmental risks generally are not fully insurable.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations for 1998
For the fiscal year ending November 30, 1998, we had total revenues of
$112,086.00 and total expenses of $1,171,000.70 generating a net loss of
$861,825.00. There are two main reasons as to why we experienced such a
significant net loss in 1998. Specifically, in 1998, crude oil prices dropped to
their lowest level in many years. As a result, we suffered an extreme drop in
revenues. This drop in revenues was further exacerbated by the problem that as
oil prices dropped, the commercial viability of our wells was threatened. As a
result, we were required to shut in several oil wells, thus dropping our revenue
to zero from these shut in wells.
Results of Operations for 1999
For the fiscal year ending November 30, 1999, we had total revenues of
$377,965.00 and total expenses of $1,120.822.00 generating a net loss of
$742,857.00. The reasons for our losses in 1999 were similar to those
experienced in 1998. Specifically, during a significant portion of 1999, crude
oil prices remained low, thus decreasing our normal revenue stream. In addition,
-5-
<PAGE>
as oil prices began to recover from their steep decline, we were required to
expend significant sums to re-establish production from wells that had been shut
in, thus increasing our costs of operations.
Plan of Operation for the Future
Our current plan of development does not call for any additional
capital infusions. Instead, as presently constituted, we expect to generate
sufficient revenues from the sale of our production to pay all costs associated
with our company for at least the following twelve months. However, our existing
plan is subject to alterations based on opportunities that may present
themselves. Still, to maintain our status quo, we do not expect to need any
additional funds during at least the next twelve months.
We may purchase new oil and gas properties or additional equipment to
operate same. Any such additional purchases will be done on an "as needed" basis
and will only be done in those instances in which we believe such additional
expenditures will increase our profitability. Additionally, if economic
conditions justify the same, we may hire additional employees although we do not
currently have any definite plans to make additional hires.
The oil and gas industry is subject to various trends. In particular,
the prices of natural gas typically rise in the winter months and fall in the
summer months. In addition, at times crude oil prices increase in the summer,
during the heavy travel months, and are relatively less expensive in the winter.
Of course, the prices obtained for crude oil or natural gas are dependent upon
numerous other factors, including the availability of other sources of natural
gas and crude oil, interest rates, and the overall health of the economy. We are
not aware of any specific trends that are unusual to our company, as compared to
the rest of the oil and gas industry.
We do not currently have any material commitments for capital
expenditures of which we are aware. However, if we decide to purchase additional
oil and gas properties, the funds we would need to acquire such properties could
be material. However, we will not acquire properties without obtaining, in
advance, suitable financing to fund the purchase of such properties.
DESCRIPTION OF PROPERTIES
General: The following is various information concerning production
from our oil and gas wells, and our productive wells and acreage and undeveloped
acreage. Our oil and gas properties are located within the northern part of the
prolific east Texas salt basin. The earliest exploration in this area dates back
to the early 1920s and 1930s, when frontier oil producers were exploring areas
adjacent to the famous "east Texas field" located near the town of Kilgore,
Texas. We have leasehold rights in eight oil and gas fields located in Gregg,
Hopkins, Franklin, Panola, and Wood Counties, Texas.
Reserves Reported to Other Agencies. We are not required and do not
file any estimates of total, proved net oil or gas reserves with reports to any
federal authority or agency.
Production. The following tables set forth for the years indicated by
the geographic areas indicated the average sales price, including transfers, per
unit of oil produced and of gas produced and the average production costs per
unit of production.
-6-
<PAGE>
<TABLE>
<CAPTION>
PRODUCTION
<S> <C> <C> <C> <C>
1997:
Geographic Area Average Sales Average Average Sales Average
Price Per Unit Production Cost Price Per Unit Production Cost
(barrel) of Oil Per Unit (barrel) (thousand cubic Per Unit
Produced of Oil Produced feet) of Gas (thousand cubic
Produced feet) of Gas
Produced
- ------------------------ ------------------------ ----------------------- ----------------------- -----------------------
East Texas Salt
Basin $18.50 $31.20 N/A N/A
- ------------------------ ------------------------ ----------------------- ----------------------- -----------------------
When the above amounts are computed for all of the properties we maintain, on a
weighted average basis, the average sales price per barrel of oil for the oil
wells operated by us for 1997 equaled $18.50 per barrel of oil. In addition, the
average production costs per equivalent barrel in 1997 was $31.20, again
computed by taking into account weighted averages of the above numbers.
1998:
Geographic Area Average Sales Average Average Sales Average
Price Per Unit Production Cost Price Per Unit Production Cost
(barrel) of Oil Per Unit (barrel) (thousand cubic Per Unit
Produced of Oil Produced feet) of Gas (thousand cubic
Produced feet) of Gas
Produced
- ------------------------ ------------------------ ----------------------- ----------------------- -----------------------
East Texas Salt
Basin $11.90 $32.41 N/A N/A
- ------------------------ ------------------------ ----------------------- ----------------------- -----------------------
When the above amounts are computed for all of the properties maintained by the
Company, on a weighted average basis, the average sales price per barrel of oil
for the oil wells operated by TBXR for 1998 equaled $11.90 per barrel of oil. In
addition, the average production costs per equivalent barrel in 1998 was $32.41,
again computed by taking into account weighted averages of the above numbers.
-7-
<PAGE>
1999:
Geographic Area Average Sales Average Average Sales Average
Price Per Unit Production Cost Price Per Unit Production Cost
(barrel) of Oil Per Unit (barrel) (thousand cubic Per Unit
Produced of Oil Produced feet) of Gas (thousand cubic
Produced feet) of Gas
Produced
- ------------------------ ------------------------ ----------------------- ----------------------- -----------------------
East Texas Salt
Basin $17.40 $47.29 N/A N/A
- ------------------------ ------------------------ ----------------------- ----------------------- -----------------------
</TABLE>
When the above amounts are computed for all of the properties maintained by the
Company, on a weighted average basis, the average sales price per barrel of oil
for the oil wells operated by TBXR for 1999 equaled $17.40 per barrel of oil. In
addition, the average production costs per equivalent barrel in 1999 was $47.29,
again computed by taking into account weighted averages of the above numbers.
Notes:
1. All interests in properties, past and present, owned and/or operated by TBX
Resources, Inc. are located in the Geographical Area known as the East Texas
Salt Basin. This area encompasses East Texas, South Arkansas, and North
Louisiana.
2. In fiscal year 1997, the interest in properties were owned by several Joint
Ventures which TBX Resources, Inc. managed. All production costs (also referred
to as lease operating expenses or LOE) were paid through the individual Joint
Ventures. TBX Resources, Inc. received a percentage of the net (after LOE)
revenue from each Joint Venture managed in return for it's services. All Joint
Ventures were closed in the beginning of fiscal year 1998, partners in the Joint
Ventures were issued private stock in TBX Resources and the interests held by
the Joint Ventures were rolled up into TBX Resources, Inc. directly.
3. Average Production Cost per Unit of Oil Produced was calculated by dividing
the total LOE (workover expenses, pumper fees, utility costs, material costs,
taxes, etc.) for all properties by the total barrels of oil sold (25,628.28 bbls
in 1997; 7,961.63 bbls in 1998; 4,325.38 bbls in 1999) during the corresponding
time period.
4. Average Sales Price Per Unit of Oil Produced has been calculated by averaging
each month's posted price during each year. The posted prices used for this
calculation were those published by Sun Oil, the purchaser of production from
our wells.
5. During the fiscal years of 1997, 1998, and 1999 the inconsequential amount of
gas produced by the subject properties was of no commercial value, thus all
references to gas production is not applicable (N/A).
6. We think that the average production cost per unit of oil produced for fiscal
years 1998 and 1999 are not accurate representations of true average production
cost per unit of oil produced. The inaccurate representations are directly
resultant of three distinct causes. The first being that in March of 1998 we
discovered that a trusted employee of TBX Resources, Inc., Mr. Patrick Eskew,
-8-
<PAGE>
had been, among other things, misdirecting funds intended for the maintenance
and workover of wells to his own personal accounts. Mr. Eskew's illegal
activities (between November 1995 and March 1998) caused invoices for routine
maintenance of field equipment, ie: pumps, tubing, tanks, flow lines, etc. to go
unpaid. The unpaid expenses accrued to such a point that companies with which
TBX Resources, Inc. had formerly held good standing with began to refuse work
requests. The inability to contract service for the maintenance of producing
wells caused many to fail mechanically which resulted in pronounced declines of
oil sales and revenues. The expenses and penalties which accrued through the
beginning of 1998 were paid incrementally during fiscal years 1998 and 1999. Mr.
Eskew has since been formally indicted and has plead guilty to crimes pertaining
to his activities and is currently awaiting sentencing. The second cause is due
to amounts owing on properties and equipment acquired by TBX Resources, Inc.
that accrued prior to fiscal year 1998. These amounts were paid by us over
several years ending with fiscal year 1999. The third cause was the drastic
decline in oil prices beginning in October, 1997. The decline in crude oil
prices coupled with the misdirection of funds resulted in a prolonged delay in
our ability to return inactive wells to production and resulted in the shutting
in of additional wells. Current crude oil pricing and access to capital have now
made it possible for us to return to full production and begin developmental
programs. Future average production cost per unit of oil produced (as
represented in the Engineering Appraisal dated July 1, 1999 as prepared by
Harold Neff and Associates as well as the TBX Resources, Inc. Projected Cash
Flows) is estimated to be approximately $2.18 per bbl and future average
production cost per unit of gas produced is estimated to be approximately $0.20
per mcf. These averages are based on full development and production of
properties in which interests are held as of November 30, 1999. The addition of
interest in properties and/or the dispensement of interest in properties may
result in either an increase or decrease in future average production cost per
unit produced. Actual future average production cost per unit produced may vary
from estimates.
7. The average production cost per unit sold for fiscal year 1997 is, again, not
an accurate representation of true average production cost per unit of oil
produced. Records as kept by Mr. Eskew in connection to expenditures were in
part overly inflated, falsified, and on two separate occasions they were
partially or fully destroyed and then recreated by Mr. Eskew. Although it cannot
be known for sure, it appears that two of the Joint Ventures were unaffected by
Mr. Eskew's unique accounting procedures. They are the Pine Mills Joint Venture
and the Talco Field Joint Venture. As can be best calculated, it appears that
the average production cost per unit sold for fiscal year 1997 based on these
two Joint Ventures would be more accurately reported as $4.47 per bbl. This
number is calculated by dividing the total production amount from the two Joint
Ventures, 15,545.20 bbls, into the combined LOE (as it appears to have been) of
the same two Joint Ventures of $69,438.00.
<TABLE>
<CAPTION>
PRODUCTIVE WELLS AND ACREAGE
<S> <C> <C> <C> <C> <C> <C>
Geographic Total Net Total Net Total Net
Area Gross Oil Productive Gross Gas Productive Gross Developed
Wells Oil Wells Wells Gas Wells Developed Acres
Acres
- ----------------- ---------------- ---------------- ---------------- ----------------- ----------------- -----------------
East Texas
Salt Basin 58 57.77719 N/A N/A 3,507.2 3,502.34
- ----------------- ---------------- ---------------- ---------------- ----------------- ----------------- -----------------
</TABLE>
-9-
<PAGE>
Notes:
- -----
1. Total Gross Oil Wells were calculated by subtracting the 8 wells designated
as Injection Wells and the 3 wells designated as Water Supply Wells from the 69
wells owned and/or operated by TBX Resources, Inc. as of November 30, 1999.
2. Net Productive Oil Wells were calculated by multiplying the working interest
held by TBX Resources, Inc. in each of the 58 Gross Oil Wells and adding the
resulting products.
3. Total Gross Developed Acres is equal to the total surface acres of the
properties in which TBX Resources, Inc. holds an Interest.
4. Net Developed Acres is equal to the Total Gross Developed Acres multiplied by
the percentage of the total working interest held by TBX Resources, Inc. in the
respective properties.
5. All acreage in which we hold a working interest as of November 30, 1999 had
existing wells located thereon; thus all acreage leased by TBX Resources, Inc.
may be accurately classified as developed.
- --------------------------------- ----------------- ----------------------
Geographic Area Gross Acres Net Acres
- --------------------------------- ----------------- ----------------------
East Texas Salt Basin 3,507.2 3,502.34
- --------------------------------- ----------------- ----------------------
Notes:
- -----
1. Undeveloped acreage and developed acreage are in some cases contiguous.
Acreage that has existing wells and may be classified as developed may also have
additional development potential based on the number of producible zones beneath
the surface acreage. For the purpose of this filing, TBX Resources, Inc. is
classifying 2,336 acres (the 2,336 acres are also included within the 3,507.2
developed acres) of the total acreage leased as undeveloped.
2. A more comprehensive study of all properties currently leased by us would be
required to determine precise developmental potential. Currently, only the 2,336
acres which make up the NE Bethany Waterflood Unit #3 and its associated leases
have been studied in enough depth to have determined a developmental program
which will be implemented over the entirety of the acreage.
Delivery Commitments. In October, 1996, TexEast Operating Company,
Inc., a company that is affiliated with our company, entered into a crude oil
purchase agreement with Sun Company, Inc. (R&M). Tim Burroughs, our president,
owns all of the common stock of TexEast Operating Company, Inc. Pursuant to the
Sun agreement, Sun agreed to purchase crude oil and condensate produced from our
properties. The Sun agreement had a term of six months commencing on October 1,
1996, and continuing thereafter month-to-month. Although we are in the
"month-to- month" portion of the crude oil purchase agreement, if Sun chose to
terminate the purchase agreement, we are confident that we would be able to
obtain another purchaser in the vicinity of the wells who would purchase our
crude oil on prices similar to those offered by Sun.
-10-
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS
-------------------------------------------------------------
The following table sets forth the stock ownership of the officers,
directors and shareholders holding more than 5% of the common stock of TBX
Resources:
Title of Class Name and Amount Percent of
Address of Owner Owned Class
- -------------- ----------------------- --------- ----------
Common Stock Tim Burroughs 1,700,000 11.767%
12300 Ford Road
Suite 265
Dallas, Texas 75234
Common Stock Burroughs Family Trust1 5,000,000 34.609%
12300 Ford Road
Suite 265
Dallas, Texas 75234
Common Stock Christine Coley 50,000 0.346%
12300 Ford Road
Suite 265
Dallas, Texas 75234
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
-------------------------------------------------------
Our current executive officers and directors, their ages and present
positions with TBX Resources are identified below. Our directors hold office
until the annual meeting of the shareholders following their election or
appointment and until their successors have been duly elected and qualified. Our
officers are elected by and serve at the pleasure of our Board of Directors.
Name Age Position
---- --- --------
Tim Burroughs 40 President and Chairman of the Board of Directors
Christine Coley 44 Secretary and Director
Tim Burroughs is the President, Chairman of the Board and founder of
TBX Resources, Inc. With over ten years experience in financing oil and gas
drilling and development projects for Dallas/Ft. Worth based energy companies
and having studied business administration at Texas Christian University in Fort
Worth, Mr. Burroughs developed and implemented a low risk start-up plan for us.
Essential to the plan were the excellent reputations and successful backgrounds
of the consultants and operating personnel with which Mr. Burroughs had
developed a solid relationship with prior to initiating our business plan.
- --------
1 Tim Burroughs, our President and Chairman of the Board of Directors,
controls the Burroughs Family Trust.
-11-
<PAGE>
Christine Coley is the Secretary-Treasurer; Director of Administration
for TBX Resources. Ms. Coley has over ten years experience in office
administration. A diverse background in office management and operations has
resulted in a business philosophy focusing on streamlined solutions for the
highly detailed oil and gas industry. Ms. Coley's experience includes extensive
responsibilities managing all phases of accounting, purchasing, customer
service, scheduling, compliance and day-to-day office operations.
EXECUTIVE COMPENSATION
----------------------
The following table sets forth the compensation awarded to, earned by,
or paid to the executive officers named:
Name and Position Year Annual Salary Bonus
- ----------------- ---- ------------- -----
Tim Burroughs 1998 $100,000.00 N/A
President 1999 $100,000.00 N/A
2000 $100,000.00 N/A
Christine Coley 1998 $35,000.00 $2,000.00
Secretary/Treasurer 1999 $38,000.00 N/A
2000 $38,000.00
Mr. Burroughs also holds options to purchase 500,000 shares of our
common stock each year for five years at a price equal to one-half of the
average bid price for our common stock.
Ms. Coley was issued 50,000 shares in lieu of cash compensation in
October, 1998. We also have an agreement to issue to Ms. Coley an additional
50,000 shares during the calendar year 2000.
SECURITIES BEING REGISTERED
---------------------------
COMMON STOCK
Our Articles of Incorporation, as amended, authorize 100,000,000 shares
of common stock, $0.01 par value per share. The shares of common stock have no
preemptive or other subscription rights, have no conversion rights and are not
subject to redemption. All shares of common stock will be, when and if issued,
fully paid and non-assessable. No personal liability will attach to the
ownership thereof. The holders of common stock are entitled to one vote for each
share held. The common stock has non-cumulative voting rights. In the event of a
liquidation of TBX Resources, the common shareholders would be entitled to their
proportionate part of the assets of TBX Resources, but only after the
satisfaction of all secured and unsecured creditors.
-12-
<PAGE>
MARKET INFORMATION
At present, prices for our common stock are quoted in the "pink sheets"
maintained by the NASD and our ticker symbol is TBXR. TBX Resources currently
has 5 market makers who assist TBX Resources in maintaining a market for its
stock.
TRANSFER AGENT
The Company's transfer agent is Securities Transfer Corp., 16910 Dallas
Parkway, Suite 100, Dallas, TX 75248, telephone number 972/447-9880.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
--------------------------------------------------------
Prices for our common stock are currently quoted in the "pink sheets"
maintained by the NASD and our ticker symbol is TBXR. Prices for our stock were
approved for quotation on the pink sheets on December 7, 1999. The following
table shows the high and low bid information for our common stock for each
quarter during which prices for our common stock have been quoted in the pink
sheets.
Quarter Low Bid High Bid
- ------- ------- --------
Quarter ending December 31, 1999 $1.00 $1.75
Period from January 1, 2000 to March 7, 2000 $1.75 $6.00
The above information was obtained from the NASD. Because these are
over-the-counter market quotations, these quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commissions and may not represent
actual transactions.
We have approximately 225 shareholders of our common stock as of March
7, 2000.
DIVIDEND POLICY
The holders of common stock are entitled to dividends when, and if,
declared by the Board of Directors from funds legally available therefor,
subject to any preference on preferred stock, if applicable, which may then be
outstanding. We have not paid a dividend on our common stock since inception and
do not anticipate that funds will be utilized for the payment of dividends in
the foreseeable future.
RECENT SALES OF UNREGISTERED SECURITIES
---------------------------------------
We participated in ten joint ventures established for the drilling or
oil and gas wells for the period commencing March 1, 1995 and ending May 28,
1997. In late 1997, we reached an agreement with the other holders of the joint
ventures whereby the joint venture interests in the oil and gas wells developed
by the joint ventures were exchanged for our common stock. The joint venture
interests were exchanged as of October 8, 1997, November 15, 1997, December 1,
1997 and July 13, 1998. All of the exchanges except the N.E. Bethany No. 1 and
No. 2 Joint Ventures were made based on the ratio of one share of common stock
for each dollar invested in a Joint
-13-
<PAGE>
Venture. The ration used on the N.E. Bethany I and II Joint Venture was two
shares of common stock for each dollar invested in each particular Joint
Venture. By virtue of this exchange, 1,638,807 shares of our common stock were
issued in exchange for the Joint Venture interests in the applicable wells.
Because the exchange offer was conducted between existing joint venture
partners, we did not use any underwriters or other persons to assist us in the
exchange so no underwriting discounts or commissions were paid. Because we had a
pre-existing business relationship with all of the joint venture owners, and
because no public offering of the securities was conducted, we relied upon
Section 4(2) of the Securities Act of 1933 (the "1933 Act") for an exemption
from the registration requirements.
For the period from January, 1998 through September, 1999, a total of
2,305,720 shares were sold by us to investors who had either previously
participated in joint ventures or were referred to us by participants in our
joint ventures. Because of our pre-existing relationship with these investors,
no underwriter was used and no commissions or underwriting discounts were paid
with respect to these offerings. Because of our pre-existing relationship of
these investors, we relied upon Section 4(20 of the 1933 Act as our exemption
from the registration requirements of the 1933 Act.
In November , 1999, we issued 100,000 shares to one person for services
rendered to our company. In particular, this individual assisted us in
establishing and maintaining various public relations and marketing
relationships with customers of and suppliers to our company. Because this
person had provided various consulting services to us over a period of time, we
had no need to use an underwriter to assist us in issuing these securities. As a
result, no commissions or underwriting discounts were paid with respect to these
transfers of shares. Because of the limited nature of the issuance of these
securities and our pre-existing relationship with this person, we relied upon
Section 4(2) of the 1933 Act for the exemption from the registration provision
of the 1933 Act.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
On May 21, 1999, we entered into an agreement with our directors
whereby we agreed to indemnify and hold harmless each member of the board of
directors from any and all liability and expenses arising out of the exercise of
their duties under Texas law as a director of our company, absent fraud or gross
misconduct on the part of each director. Our officers or directors could take
the position that this duty of ours to indemnify our directors or officers may
include the duty to indemnify the officer or director for the violation of
securities laws.
Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to directors, officers and controlling persons of our company
pursuant to the above described indemnification agreement, our Articles of
Incorporation, Bylaws, Texas law or otherwise, we have been advised that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by us of expenses incurred or payed by a
director, officer or controlling person of our company and 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, we
-14-
<PAGE>
will, unless in the opinion of its counsel the matter has been settled by a
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
FINANCIAL STATEMENTS
--------------------
The following are the financial statements of TBX Resources, with
independent auditors report, for the periods ending November 30, 1999 and 1998.
-15-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
Date: March 8, 2000
(Registrant) TBX Resources, Inc.
By (Signature and Title): /s/ Tim Burroughs
----------------------------
Tim Burroughs, President
<PAGE>
TBX RESOURCES, INC.
FINANCIAL STATEMENTS
NOVEMBER 30, 1999 AND 1998
TBX RESOURCES, INC.
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
PAGE
----
Independent Accountant's Audit Report Dated December 19, 1999 2
Balance Sheets - November 30, 1999 and 1998 3
Statements of Operations-
For The Twelve Months Ended November 30, 1999 and 1998 4
Statements of Cash Flows-
For The Twelve Months Ended November 30, 1999 and 1998 5
Statements of Changes in Stockholders' Equity-
For The Twelve Months Ended November 30, 1999 and 1998 6
Supplemental Statements of Noncash Investing and Financing Activities-
For The Twelve Months Ended November 30, 1999 and 1998 7
Notes to Financial Statements 8
<PAGE>
JAMES A. MOYERS, CPA
10300 North Central Expressway, Suite 530
Dallas, Texas 75231
(214) 987-4687 FAX (214) 987-4693
To the Board of Directors and Stockholders
TBX Resources, Inc.
Dallas, Texas
INDEPENDENT ACCOUNTANT'S AUDIT REPORT
I have audited the accompanying balance sheets of TBX Resources, Inc.
as of November 30, 1999 and 1998 and the related statements of operations,
changes in stockholders' equity, cash flows and noncash investing and financing
activities for each of the two years in the period ended November 30, 1999. All
information included in these financial statements is the responsibility of the
management. My responsibility is to express an opinion on these financial
statements based on my audit work.
I have conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audit provides a reasonable
basis for my opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of TBX Resources, Inc. as of
November 30, 1999 and 1998, and the results of its operations, cash flows and
noncash investing and financing activities for each of the two years in the
period ended November 30, 1999, in conformity with generally accepted accounting
principles.
December 19, 1999
James A. Moyers, CPA
2
<PAGE>
<TABLE>
<CAPTION>
TBX RESOURCES, INC.
BALANCE SHEETS
(Audited)
November 30,
------------
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
Current Assets
Cash $ 3,174 $ 145,920
Accounts receivable
Trade 2,967 2,969
Affiliates 79,447 117,422
Other 123,965 9,500
Deferred income taxes 56,669 56,669
----------- -----------
Total current assets 266,222 332,480
----------- -----------
Equipment and Property
Office furniture, fixtures and equipment 71,748 71,748
Oil and gas properties, using successful efforts accounting
Proved properties and related equipment 2,363,738 2,566,683
----------- -----------
2,435,486 2,638,431
Less accumulated depreciation, depletion and amortization 81,427 62,438
----------- -----------
Total equipment and property 2,354,059 2,575,993
----------- -----------
Investment in Southern Oil & Gas Company, Inc. 300,000 --
----------- -----------
Deferred Income Taxes 179,073 179,073
----------- -----------
Other Assets 45,712 2,655
----------- -----------
Total Assets $ 3,145,066 $ 3,090,201
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Trade accounts payable $ 91,291 $ 79,228
Taxes payable 54,419 65,624
Accrued expenses 26,895 24,789
----------- -----------
Total current liabilities 172,605 169,641
----------- -----------
Commitments and Contingencies -- --
Stockholders' Equity
Common stock- $.01 par value; authorized 100,000,000 shares;
14,559,027shares outstanding at November 30, 1999; 13,699,010
shares outstanding at November 30, 1998 145,590 136,990
Capital in excess of par value 4,582,976 3,796,818
Accumulated deficit (1,756,105) (1,013,248)
----------- -----------
Total stockholders' equity 2,972,461 2,920,560
----------- -----------
Total Liabilities and Stockholders' Equity $ 3,145,066 $ 3,090,201
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
TBX RESOURCES, INC.
STATEMENTS OF OPERATIONS
(Audited)
For Twelve Months Ended
November 30,
------------
1999 1998
----------- -----------
Revenues:
Oil and gas sales $ 42,995 $ 74,279
Joint venture income 235,880 37,714
Other 99,090 93
----------- -----------
Total revenues 377,965 112,086
----------- -----------
Expenses:
Lease operating and taxes 204,531 258,049
Joint venture costs and expenses 57,840 --
Selling, general and administrative 651,723 899,075
Loss on sale of oil and gas properties and
settlement of litigation 187,739 --
Depreciation, depletion and amortization 18,989 14,046
----------- -----------
Total expenses 1,120,822 1,171,170
----------- -----------
Net (Loss) Before Provision for
Income Taxes (742,857) (1,059,084)
Income tax benefit -- 197,259
----------- -----------
Net (Loss) $ (742,857) $ (861,825)
=========== ===========
Primary (Loss) Per Common Share $ (0.05) $ (0.07)
=========== ===========
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
TBX RESOURCES, INC.
STATEMENTS OF CASH FLOWS
(Audited)
For Twelve Months Ended
November 30,
------------
1999 1998
---------------- --------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income (loss) $ (742,857) $ (861,825)
Adjustments to reconcile net income (loss) to net cash
flow from operating activities:
Depreciation, depletion and amortization 18,989 14,046
Provision for deferred income taxes - (197,259)
Loss on sale of oil & gas properties and
settlement of litigation 187,739 -
Changes in operating assets and liabilities:
Decrease (increase) in:
Trade receivables 2 (2,969)
Affiliate receivables 37,975 (117,422)
Other receivables (114,465) 9,626
Increase (decrease) in:
Accounts payable 12,063 28,652
Taxes payable (11,205) 65,624
Accrued expenses 2,106 24,789
Affiliate payables - (141,578)
---------------- --------------
Net cash provided by (used) for operating activities (609,653) (1,178,316)
---------------- --------------
Cash Flows From Investing Activities:
Cash used in the acquisition of options and stock
of Southern Oil & Gas, Inc. (300,000) -
Cash provided by the disposal of oil and gas properties 15,206 -
Cash used in the acquisition and development
of oil and gas properties - (248,841)
---------------- --------------
(284,794) (248,841)
---------------- --------------
Cash Flows From Financing Activities:
Cash used for legal and professional services for stock offering (43,057) -
Cash provided by the issuance of common stock 794758 1,556,726
---------------- --------------
751,701 1,556,726
---------------- --------------
Net Increase (Decrease) In Cash (142,746) 129,569
Cash at beginning of period 145,920 16,351
---------------- --------------
Cash at end of period $ 3,174 $ 145,920
---------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
TBX RESOURCES, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Audited)
Common Stock Capital in Accum-
------------------------ Excess of ulated
Shares Par Value Par Value Deficit
------------ ------------- ------- -----------
<S> <C> <C> <C> <C>
Balance November 30, 1998 13,699,010 $ 136,990 #### $(1,013,248)
Issuance of common stock 860,017 8,600 #### -
Net loss for period (742,857)
----------------------------------------------------
Balance November 30, 1998 14,559,027 $ 145,590 #### $(1,756,105)
====================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
TBX RESOURCES. INC.
SUPPLEMENTAL STATEMENT OF NONCASH INVESTING
AND FINANCING ACTIVITIES
(Audited)
For Twelve Months Ended
November 30,
------------
1999 1998
---------------- --------------
<S> <C> <C>
Fair value of oil and gas properties acquired $ - $ (2,377,082)
Issuance of common stock for assets - 2,377,082
---------------- --------------
$ - $ -
================ ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
TBX RESOURCES, INC.
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS ACTIVITIES:
TBX Resources, Inc., a Texas Corporation, was organized on March 24, 1995. The
Company's principal business activity is acquiring and developing oil and gas
properties. The Company has 61 oil and gas wells and 8 injection wells that are
located in East Texas and Northern Louisiana. The Company's philosophy is to
acquire properties with the purpose of reworking existing wells and/or drilling
development wells to make a profit.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Office Furniture, Fixtures and Equipment
These assets are stated at the Company's cost and depreciated on an accelerated
basis over five to seven years. Maintenance and repair costs are expensed when
incurred, while major improvements are capitalized.
Oil and Gas Properties
The Company uses the successful efforts method of accounting for oil and gas
producing activities. Costs to acquire mineral interests and to drill and equip
development wells are capitalized. Major costs to enhance existing wells are
capitalized. 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 units of production method. The
computation is based upon recoverable reserves as determined by the Company and
an independent petroleum engineer. Operating costs are expensed as incurred. On
the sale or retirement of a unit of proved property, gain or loss is recognized.
Investment In Southern Oil & Gas Company, Inc.
The Company's investment in Southern Oil & Gas Company, Inc. is accounted for by
the cost method. The impact of the cost versus equity method (the preferred
method) of accounting for the investment is not considered material.
Income Taxes
The Company computes income tax expense using Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes". SFAS 109 requires the
measurement of deferred tax assets for deductible temporary differences and
operating loss carry forwards and of deferred tax liabilities for taxable
temporary differences. Measurement of current and deferred tax liabilities and
assets is based on provisions of enacted law. The effects of future changes in
tax laws and rates are not anticipated.
3. AFFILIATED PARTY TRANSACTIONS:
a. The operators of the oil and gas leases, Texeast Operating Co., Inc. and
Gulf Tex Operating, Inc. are affiliates of TBX Resources. Mr. Burroughs,
the majority stockholder of the Company, is the sole shareholder of Texeast
and Gulf Tex.
b. Affiliate receivables represents advances to companies owned by the
President and majority stockholder of the Company. The amounts due as of
November 30, 1999 and 1998 were $79,447 and $117,422, respectively.
8
<PAGE>
TBX RESOURCES, INC.
NOTES TO FINANCIAL STATEMENTS
4. ACCOUNTS RECEIVABLE-OTHER:
In November 1999, the Company settled a claim against a financial institution
for $75,000. The claim arose as a result of the bank accepting checks forged by
a former employee over several years. The impact of the loss on the financial
statements for the period ended November 30, 1998 is immaterial.
5. INVESTMENT IN SOUTHERN OIL & GAS COMPANY, INC:
The Company's investment in Southern has been accounted for on the cost basis as
follows:
Option to purchase all of the outstanding shares $100,000
Purchase of twenty percent (20%) interest 200,000
-------
Total investment $300,000
=======
Summarized financial information from the unaudited financial statements of
Southern as of November 30, 1999 follows:
November
--------
1999
----
ASSETS
Current assets $294,182
Property and equipment net of depreciation, depletion
and amortization of $1,214,555 562,034
-------
Total Assets $856,216
=======
LIABILITIES AND EQUITY
Current liabilities $ 47,753
TBX Resources, Inc. purchase option 100,000
Equity 708,463
-------
Total Liabilities and Equity $856,216
=======
STATEMENT OF CASH BASIS INCOME AND EXPENSES
FOR NINE MONTHS ENDED NOVEMBER 30, 1999
Revenue $299,075
Total expenses (322,552)
-------
Net loss before depreciation and federal income tax benefit $(23,477)
=======
6. COMMITMENTS AND CONTINGENCIES:
a. TBX Resources, Inc. is planning a 1.5 million dollars ($1,500,000) private
placement in first quarter of year 2000. The Company expects to offer
approximately 150 thousand Series A Convertible Preferred Stock at $10.00
per share bearing a 9% dividend semiannually, and five year warrants to
purchase 150,000 shares of Common Stock, exercisable at $1.50 per share. No
formal agreement has been reached with the Agent at this time; accordingly,
the offering is subject to change
b. On January 6, 1999 the Company entered into an option agreement, as
amended, to purchase all of Southern Oil & Gas Company's (Southern) stock
for one million dollars
9
<PAGE>
TBX RESOURCES, INC.
NOTES TO FINANCIAL STATEMENTS
6. COMMITMENTS AND CONTINGENCIES (continued):
($1,000,000). Under the terms of the agreement TBX paid one hundred
thousand dollars ($100,000) for the option to purchase the shares that runs
up to and including March 31, 2000. The option amount will be applied to
the final payment. Each additional payment of $100,000 will entitle TBX to
10% of the shares of Southern. After 40% of the Southern shares are
acquired by TBX, the next payment must be for $500,000 for the remaining
60% of the Southern shares. As of November 30, 1999 TBX Resources, Inc.
owned a twenty percent (20%) interest in Southern. In addition to the
purchase agreement, TBX and Southern entered into a Management Contract.
Under the terms of the agreement, TBX is to provide operating funds to
Southern in the amount of $40,000. If TBX does not replenish the operating
fund to $40,000 after being notified of the deficiency, the option to
purchase Southern is suspended until such time as the fund is restored. The
Company currently does not plan to increase its interest in Southern.
c. The Company is obligated for $12,322 under operating lease agreements for
rent of its offices and one automobile during the year ending November
30, 2000. Rent expense for the years ended November 30, 1999 and 1998 was
$43,579 and $49,315, respectively.
7. AFFILIATED OIL AND GAS PARTNERSHIP:
In May 1999 the Company sponsored the formation of a joint venture for the
purpose of conducting oil and gas development and production activities on
approximately 229 acres in Panola County, Texas. The Company serves as
General Manager for the joint venture and, as such, has full and exclusive
discretion in the management and control of the venture. The Company has a
1% working interest and 9% carried interest until the development work is
complete. Thereafter, joint venture expenses are allocated 90% to the joint
venture partners and 10% to the Company. Net revenues from the venture's oil
and gas properties are allocated 95% to the joint venture partners and 5% to
the Company.
8. STOCKHOLDERS' EQUITY:
a. During 1998, the Company acquired all of the oil and gas properties of its
joint venture partners in exchange for approximately 4,811,232 shares of
TBX Resources' common stock. The transaction was accounted for as a
purchase of property and equipment at the Company's designated fair value
of the assets acquired. The fair value of the assets of the joint venture
partners was determined to be $2,377,082. The common stock of TBX
Resources, Inc. was valued at the same amount.
b. The bylaws of the Company restrict the transfer of shares of common stock.
Transfers of shares of the Corporation shall be made only (i) if there is
an effective registration covering the shares to be transferred under the
Securities Act of 1933 and applicable state securities laws, (ii) upon the
receipt of a letter from an attorney, acceptable to the board of directors
or its agents, stating that in the opinion of the attorney the proposed
transfer is exempt from registration under the Securities Act of 1933, or
(iii) the transfer is made pursuant to Rule 144 under the Securities Act of
1933. In addition, the bylaws reference Subchapter S of the Internal
Revenue Code that does not apply to the Company at this time.
10
<PAGE>
TBX RESOURCES, INC.
NOTES TO FINANCIAL STATEMENTS
9. SALE OF INTERESTS IN OIL AND GAS PROPERTIES AND SETTLEMENT OF LAWSUIT:
The Company disposed of 12 wells in June of 1999. Management is of the
opinion that the costs of re-working, developing and producing these wells
would far exceed the potential revenues from the wells. The retention of
these wells by the Company would have resulted in substantial expenses in
plugging operations. To avoid future drain on the Company's working capital
resources, Management elected to transfer all of the Company's interest in
these wells to a third party for nominal consideration. The net book value
of the wells at the time of sale was $112,739, which was charged to current
earnings.
The Company assigned its interest in the Pine Mills Field located in East
Texas in April of this year for settlement of a dispute in a civil action.
The net book value of $75,000 was charged to current earnings.
10. INCOME TAXES:
The net deferred tax assets in the accompanying balance sheet includes the
following amounts of deferred tax assets and liabilities:
Deferred tax asset $438,356
Valuation allowance (75,000)
--------
Adjusted deferred tax asset 363,356
Deferred tax liability (127,613)
---------
Net deferred tax asset $235,743
========
The deferred tax assets result from net operating loss carry forwards,
accounts payable and accrued expenses less a valuation reserve. The deferred
tax liability results from deducting depreciation, depletion and
amortization and workover costs prior to recognition in the financial
statements. The components of the income tax benefit are as follows:
Federal
Current $ -0-
Deferred (benefit)
Operating loss carry forward (380,677)
Accounts payable and accruals (57,679)
Workover and other costs 49,802
Depreciation, depletion and
amortization 77,811
Valuation reserve 75,000
---------
Net income tax benefit $(235,743)
=========
For the fiscal year ended November 30, 1999, the Company has not increased
deferred tax assets for its net operating loss.
11
<PAGE>
TBX RESOURCES, INC.
NOTES TO FINANCIAL STATEMENTS
11. SUPPLEMENTARY OIL AND GAS INFORMATION:
Oil and Gas Reserve Quantities
An independent petroleum engineer determined estimated reserves and related
valuations. Estimates of proved reserves are inherently imprecise and are
subject to revisions based on production history, results of additional
exploration and development and other factors.
Proved reserves are reserves judged to be economically producible in future
years from known reservoirs under existing economic and operating conditions.
Proven developed reserves are expected to be recovered through existing wells,
equipment and operating methods.
Following is a summary of the changes in estimated proved developed and
undeveloped oil and gas reserves of the Company, which are located in East Texas
and Northern Louisiana, for the year ended November 30, 1999.
Oil Gas
(BBL) (MCF)
-------- -------
Proved reserves December 1, 1998 1,484,854 6,106,547
Revisions to previous estimates (24,481) (749,174)
Production (2,714) -0-
Sales, transfers and retirements (204,226) -0-
--------- ---------
Proved reserves November 30, 1999 1,253,433 5,357,373
========= =========
Proved developed reserves
December 1, 1998 687,668 -0-
November 30, 1999 500,275 446,155
Standardized Measure of Discounted Cash Flows Relating to Proved Oil and Gas
Reserves
Statement of Financial Accounting Standards No. 69 prescribes guidelines for
computing a standardized measure of future net cash flows relating to estimated
proven reserves. The Company has followed these guidelines, which are briefly
discussed in the following paragraph.
Future cash inflows and future production and development costs are determined
by applying year-end prices and costs to the estimated quantities of oil and gas
to be produced. Estimated future income taxes are computed by using statutory
rates including consideration for previously legislated future statutory
depletion rates. The resulting future net cash flows are reduced to present
value amount by applying a 10% annual discount factor.
The assumptions used to compute the standardized measure are those
prescribed by the Financial Accounting Standards Board and, as such, do not
necessarily reflect the Company's expectations of actual revenues to be derived
from those reserves or their present worth. The limitations inherent in the
reserve quantity estimation process, as discussed previously are equally
applicable to the standardized measure computations since these estimates are
the basis for the valuation process.
12
<PAGE>
TBX RESOURCES, INC.
NOTES TO FINANCIAL STATEMENTS
Standardized Measure of Discounted Cash Flows Relating to Proved Oil and Gas
Reserves (continued):
Presented below is the standardized measure of discounted future net cash
flows relating to proved oil reserves as of November 30, 1999.
Future cash inflows $41,313,558
Future production costs (11,839,259)
Future development costs (5,152,550)
Future income tax expense (8,269,395)
------------
Future net cash flows 16,052,354
10% annual discount for estimated
timing of cash flows (8,701,981)
------------
Standardized measure of discounted future
net cash flows relating to proved reserves $ 7,350,373
============
The following reconciles the change in the standardized measure of discounted
future net cash flow during the twelve months ended November 30, 1999.
December 1, 1998 $3,675,751
Sales of oil and gas produced, net of
production costs 75,616
Net changes in prices and production costs 7,441,420
Net change in future development costs (354,464)
Revisions of previous quantity estimates (1,049,163)
Net change from sales and disposals of
minerals in place (451,077)
Accretion of discount 367,462
Net change in income taxes (2,245,504)
Other (109,668)
-----------
November 30, 1999 $7,350,373
===========
13
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. SEC REFERENCE TITLE OF DOCUMENT
NUMBER
1 2 CHARTER AND BYLAWS
2 6 INDEMNITY AGREEMENT
3 6 CRUDE OIL PURCHASE
AGREEMENT
5 6 III METRO SQUARE OFFICE
LEASE AGREEMENT
6 6 EQUIPMENT AND FURNITURE
LEASE
[symbol omitted]
THE STATE OF TEXAS
SECRETARY OF STATE
IT IS HEREBY CERTIFIED that
Articles of Incorporation of
TBX RESOURCES, INC.
File No. 134992-0
were filed in this office and a certificate of incorporation was issued to this
corporation, and no certificate of dissolution is in effect and the corporation
is currently in existence.
IN TESTIMONY WHEREOF, I have hereunto signed my name
officially and caused to be impressed hereon the Seal of
State at my office in the City of Austin, on May 4, 1998.
[symbol omitted]
/s/ illegible DLM
----------------------------------
Alberto R. Gonzales
Secretary of State
<PAGE>
[symbol omitted]
The State of Texas
Secretary of State
CERTIFICATE OF AMENDMENT
FOR
TBX RESOURCES, INC.
CHARTER NUMBER 01349922
THE UNDERSIGNED, AS SECRETARY OF STATE OF THE STATE OF TEXAS, HEREBY
CERTIFIES THAT THE ATTACHED ARTICLES OF AMENDMENT FOR THE ABOVE NAMED ENTITY
HAVE BEEN RECEIVED IN THIS OFFICE AND ARE FOUND TO CONFORM TO LAW.
ACCORDINGLY THE UNDERSIGNED, AS SECRETARY OF STATE, AND BY VIRTUE OF THE
AUTHORITY VESTED IN THE SECRETARY BY LAW, HEREBY ISSUES THIS CERTIFICATE OF
AMENDMENT.
DATED MAY 25, 1999
EFFECTIVE MAY 25, 1999
[SYMBOL OMITTED]
/s/ illegibe
--------------------------------
Elton Bomer, Secretary of State
<PAGE>
================================================================================
ARTICLES OF AMENDMENT
OF THE ARTICLES OF INCORPORATION OF
TBX RESOURCES, INC.
================================================================================
(Stamped) FILED
in the Office of the
Secretary of State of Texas
May 25 1999
Corporations Section
The undersigned officer of the corporation, described herein, submits
the following amendments to the corporation's Articles of Incorporation to the
Secretary of State, State of Texas:
ARTICLE I
The date of incorporation was March 24, 1995, and the Charter Number is
1349922.
ARTICLE II
The article to be amended, Article Four of the Articles of
Incorporation of TBX Resources, Inc., states:
The aggregate number of shares which the Corporation shall have
authority to issue is 1,000,000 of the par value of $.or (one cent)
each, all of which shares shall be known as "Common Stock."
ARTICLE III
Article Four is to be amended as follows:
The aggregate number of shares which the Corporation shall have
authority to issue is 100,000,000 of the par value of $0.01 (One Cent)
each, all of which shares shall be known as Common Stock.
ARTICLE IV
The date of adoption of this amendment is August 3, 1998,
ARTICLES OF AMENDMENT OF THE ARTICLES
OF INCORPORATION OF TBX RESOURCES, INC. - Page 1
<PAGE>
ARTICLE V
The number of shares issued is 1,000,000. The undersigned owns 680,000
shares, and votes to approve this amendment.
ARTICLE VI
These amendments will be effective upon filing.
The manner of the adoption of these Articles of Amendment, and the vote
by which they were adopted, constitute full legal compliance with the provisions
of applicable law, the corporation's Articles of Incorporation, and the
Corporation's Bylaws.
I HEREBY VERIFY, subject to the penalties of perjury that the
statements contained are true and correct. SIGNED on this the 3rd day
of August, 1998.
--------------------------------
Timothy P. Burroughs, President
ARTICLES OF AMENDMENT OF THE ARTICLES
OF INCORPORATION OF TBX RESOURCES, INC. - Page 2
- ----------------------------------------
<PAGE>
ARTICLES OF INCORPORATION
OF
TBX RESOURCES, INC.
The undersigned natural person of the age of eighteen (18) year to
place of residence, domicile, or organization, acting as incorporator of a
corporation (hereinafter referred to as the "Corporation"), under the Texas
Business Corporation Act (hereinafter referred to as the "Act"), does hereby
adopt the following Articles of Incorporation for such corporation.
ARTICLE ONE
NAME
The name of the Corporation is TBX Resources, Inc.
ARTICLE TWO
DURATION
The period of existence of the Corporation is perpetual.
ARTICLE THREE
PURPOSES AND POWERS
Section 3.01. Purposes and Powers in Addition to Statutory Powers. The
purposes for which the Corporation is organized, and the powers, in addition to
the general powers conferred by the Act, which the Corporation shall be entitled
to exercise, all subject to the limiting provisions set forth in Section 3.03 of
this Article are:
To manage, operate or administer the business or property of
any corporation, firm, or person carrying on any authorized
business, and to sell or dispose of, receive and make
disbursements for, or arrange for the management or
administration of the whole or any part of the business or
property of any corporation, firm, or person and to act as
agent or manager for the development and extension of the
business interests of any corporation, firm or person.
<PAGE>
To acquire, own, hold, improve, develop, operate, exploit,
sell convey, assign, lease, exchange, transfer, dispose of,
pledge, mortgage, create security interests in, deal in, and
loan or borrow money upon, alone or in conjunction with
others, real and personal property, tangible and intangible,
of every kind, character and description or any interest
therein, and all kinds and forms of securities, shares of
capital stock, script, bonds, debentures, coupons, mortgages,
notes, bills of exchange, acceptances, assignments, accounts,
fees, evidences of indebtedness, obligations, trust
certificates, interim receipts, warranties and certificates
issued or created by or being claimed against any corporation,
association, partnership, syndicate, entity, or person, or
governmental, municipal, or public subdivision, district, or
authority.
To further have the power to carry on any of the business and
do any other acts in connection with the foregoing, and to
have and exercise all the powers conferred by the laws of the
State of Texas upon corporation formed under the Texas
Business Corporation Act, and to do any or all things
hereinabove set forth to the same extent as a natural person
might or could do.
Section 3,02. Direction of Purposes and Exercise of Powers of Director
Subject to any limitations or restrictions imposed by the Act, by other law, or
by these Articles of Incorporation, the Board of Directors hereby is authorized
to direct the purposes set forth in this Article and to exercise all the powers
of the Corporation without previous authorization or subsequent approval by the
Shareholders.
Section 3,03. Limiting Provisions. Nothing in these Articles of
Incorporation is to be construed as authorizing or attempting to authorize the
Corporation:
(a) To transact any business in the State of Texas expressly
prohibited by any law of the State of Texas;
(b) To engage in any activity in the State of Texas which cannot
lawfully be engaged in without first obtaining a license under
the laws of the State of Texas, and which license cannot be
granted to a corporation; or
(c) To take any action in violation of the Anti-Trust Laws of the
State of Texas.
<PAGE>
ARTICLE FOUR
AUTHORIZED SHARES
Section 4.01. The aggregate number of shares which the Corporation
shall have authority to issue is 1,000,000 of the par value of $.01 (one cent)
each, all of which shares shall be known as "Common Stock."
ARTICLE FIVE
INITIAL CONSIDERATION FOR ISSUANCE OF SHARES
The Corporation will not commence or transact any business or incur any
indebtedness except such as shall be incidental to its organization or to
obtaining subscriptions to or payment for its shares, until it has received for
the issuance of its shares consideration of the value of at least One Thousand
and No/100 Dollars ($1,000.00), consisting of money, labor done or property
actually received.
ARTICLE SIX
RIGHTS OF DIRECTORS AND OFFICERS
TO DEAL WITH CORPORATION
No Director and no Officer of the Corporation shall be disqualified by
reason of his office from dealing with or contracting with the Corporation,
either as vendor, seller, purchaser, vendee, buyer, mortgagee, mortgagor, or
otherwise; and no transaction of this Corporation shall be void or voidable by
reason of the fact that the Director or Officer of any firm in which a Director
or Officer of this Corporation is a member, or any corporation of which a
Director or Officer of this Corporation is a shareholder or a director or
officer, is in any way interested in such transaction.
<PAGE>
ARTICLE SEVEN
DENIAL OF PREEMPTIVE RIGHTS
Provisions limiting or denying shareholders the preemptive right to
acquire additional or treasury shares of the Corporation are:
No shareholder shall be entitled, as a matter of right, to
subscribe for, purchase or receive any shares of stock or any
rights or options of the Corporation which it may issue or
sell, whether out of the number of shares authorized by these
Articles of Incorporation or by amendment thereof, or out of
the shares of the stock of the Corporation acquired by it
after the issuance thereof, nor shall any shareholder be
entitled, as a matter of right, to subscribe for, purchase or
receive any bonds, debentures or other securities which the
Corporation may issue or sell that shall be convertible into,
exchangeable for, stock or to which shall be attached or
appertain any warrant or warrants or other instrument or
instruments that shall confer upon the holder or owner of such
obligations the right to subscribe for, purchase or receive
from the Corporation any shares of its authorized capital
stock; but all such additional issues of stock, rights and
options or of bonds, debentures or other securities
convertible into, or exchangeable for, stock or to which
warrants shall be attached or appertain or which shall confer
upon the holder the right to subscribe for, purchase or
receive any shares of stock, may be issued, optioned for, and
sold or disposed of by the Corporation pursuant to resolution
of its Board of Directors to such persons, firms or
corporations and upon such terms as may be lawful and may to
such Board of Directors seem proper and advisable, without
first offering such stock or securities or any part thereof to
the shareholder. The acceptance of stock in the Corporation
shall be a waiver of any preemptive rights or preferential
rights which, in the absence of this provision might otherwise
by asserted by shareholder of the Corporation of any of them.
ARTICLE EIGHT
PROHIBITION OF CUMULATIVE VOTING
At each election for Directors, every shareholder entitled to vote at
such election shall have the right to vote, in person or by proxy, the number of
shares owned by him for as many persons as there are Directors to be elected and
for whose election he has the right to vote, but it is prohibited for any
<PAGE>
shareholder to cumulate his votes by giving one candidate as many votes as the
number of such Directors multiplied by his shares shall equal, or by
distributing such votes on such principle among any number of such candidates.
ARTICLE NINE
PROVISIONS FOR REGULATION OF THE CORPORATION
AND ITS INTERNAL AFFAIRS
The following provisions are set forth for the regulation of the
Corporation and its internal affairs to the extent that such provisions are not
inconsistent with the law.
Section 9.01. Bylaws. The power to alter, amend or repeal the Bylaws
and to adopt new Bylaws shall be vested in the Board of Directors and in the
shareholders entitled to vote for the election of Directors; provided, however,
that any Bylaw or amendment thereto as adopted by the Board of Directors may be
altered, amended or repealed, or a new Bylaw in lieu thereof may be adopted, by
vote of such shareholders, but no Bylaw which has been altered, amended or
adopted by vote of such shareholders may be altered, amended or repealed by the
Board of Directors, nor may the substance of any Bylaw repealed by vote of such
shareholders by again adopted by the Board of Directors, until one year shall
have expired since such action by vote of such shareholders.
Section 9.02 - Other Provisions. Other provisions for the regulation of
the Corporation and its internal affairs not inconsistent with law or these
Articles of Incorporation may be set forth in the Bylaws, including, but not
limited to, provisions regulating and providing for compensation of directors,
interest of directors in contracts, provisions for working capital, liability
and indemnification of directors, officers and employees, removal and discharge
of directors, officers, agents and employees, and voting of shares by proxy. All
<PAGE>
rights of the shareholders, directors, officers, agents and employees of the
Corporation shall be deemed subject to all provisions of the Bylaws to the
fullest extent permitted by law.
ARTICLE TEN
INITIAL REGISTERED OFFICE AND AGENT
The post office address of the initial registered office of the
Corporation and the name of the initial registered agent of the Corporation at
such address are:
Registered Agent Registered Office
Tim Burroughs 5881 Preston View Road, #130
Dallas, Texas 75240
ARTICLE ELEVEN
DIRECTORS
Section 11.01. Number. The Board of Directors of the Corporation shall
consist of one or more members. The number of Directors shall be fixed by
resolution of the Board of Directors and may be increased or decreased by
resolution of the Board of Directors; but no decrease shall have the effect of
shortening the term of any incumbent Director.
Section 11.02 Qualification The Directors need not be residents of the
State of Texas or shareholders of the Corporation.
Section 11.03. Initial Directors. The number, names and addresses of
the persons who are to serve as Directors until the first annual meeting of the
shareholders or until their successors are elected and have qualified, are:
Number:
Name Address
Tim Burroughs 5881 Preston View Road, #130
Dallas, Texas 75240
<PAGE>
IN WITNESS WHEREOF, I have hereunto set my hand, this 23rd day of
March, 1995.
/s/ Tim Burroughs
---------------------
Tim Burroughs
THE STATE OF TEXAS ss.
COUNTY OF DALLAS ss.
BEFORE ME, the undersigned authority, on this day personally appeared
TIM BURROUGHS, who being by me first duty sworn, declared that he is the person
who signed the foregoing document as Incorporator, and the statements therein
contained are true.
GIVEN UNDER MY HAND AND SEAL OF OFFICE on this the 23rd day of
March, 1995.
/s/ Rosemary Rico
-----------------
Rosemary Rico
(seal) [graphic omitted] Notary Public in and for the State of Texas
My commission expires:. 7-23-96
STATE OF TEXAS
================================================================================
BYLAWS
OF
TBX RESOURCES, INC.
================================================================================
ARTICLE I
SHAREHOLDERS
Section 1.1. Annual Meeting. Unless otherwise designated by the board
of directors, the Annual Meeting of the shareholders shall be held on the first
Monday in October, at 10:00 o'clock a.m., for the purpose of electing directors
and for the transaction of such other business as may come before the meeting.
If the day fixed for the Annual Meeting is a legal holiday in the State of
Texas, the Annual Meeting shall be held on the next succeeding business day. If
the election of directors is not be held on the day designated herein as the
date for the Annual Meeting of the shareholders or at any adjournment thereof,
the board of directors shall cause the election of directors to occur at a
Special Meeting of the shareholders to be held as soon thereafter as is
reasonable.
Section 1.2. Special Meetings. Unless otherwise prescribed by statute,
Special Meetings of the shareholders may be called for any purpose or purposes
by the president or by the board of directors, and shall be called by the
secretary at the written request of any director or holders of not less than ten
percent (10%) of all the votes entitled to be cast on any issue proposed to be
considered at the meeting demanded.
Section 1.3. Place of Meeting. The Annual Meeting or Special Meetings
of the shareholders may be held at the principal office of the corporation or at
such other place within or without the State of Texas as the board of directors
may from time to time designate. If no designation is made for any annual or
Special Meeting of the shareholders, the place of meeting shall be the principal
office of the corporation.
Section 1.4. Notice of Meetings. Written notice stating the date, time,
and place of a meeting of shareholders and, in case of a Special Meeting of
shareholders the purpose or purposes for which the meeting is called, shall be
given to each shareholder entitled to vote at such meeting at least ten (10)
days and not more than sixty (60) days before the meeting. Such notice shall be
given in one of the following manners: personally, by mail, by telephone, by
private carrier, by telegraph, by teletype, by telephone facsimile, or by such
other manner as permitted by the Texas Business Corporation Act. Such notice
shall be given by the secretary or by the person or persons authorized to call
shareholders' meetings. If such written notice is mailed, correctly addressed to
BYLAWS OF TBX RESOURCES, INC. - Page 1
- -----------------------------
<PAGE>
the shareholder's address shown in the corporation's current record of
shareholders, the notice shall be deemed to have been given to the shareholder
at the time of mailing. If such written notice is sent by private carrier or if
such written notice is sent by United States mail, postage prepaid and by
registered or certified mail, return receipt requested, the notice shall be
deemed to have been given to the shareholder on the date shown on the return
receipt. Otherwise notice is effective when received by the shareholder. Notice
of any shareholders' meeting may be waived by any shareholder before or after
the date and time of the meeting. Such waiver must be in writing, must be signed
by the shareholder, and must be delivered to the corporation for inclusion in
the minutes or filing with the corporate records.
Section 1.5. Action by Shareholders Without a Meeting. Any action
permitted to be taken at a shareholders' meeting may be taken without a meeting
if one (1) or more written consents, setting forth the action so taken, are
signed by all the shareholders entitled to vote on the action. A shareholder may
withdraw such consent only by delivering a written notice to the corporation
prior to the time when all consents have been delivered to the corporation. Any
such action taken shall be effective when all consents have been delivered to
the corporation, unless the consent specifies a later effective date.
Section 1.6. Telephone Meetings. Shareholders may participate in a
meeting of the shareholders by means of communication by which all persons
participating in the meeting can hear each other during the meeting. A
shareholder participating in a meeting by this means is deemed to be present in
person at the meeting.
Section 1.7. Closing of Transfer Books or Fixing of Record Date. For
the purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any distribution, or in order to make a determination of
shareholders 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 a period of seventy (70) days. If the stock
transfer books shall be closed for the purpose of determining shareholders
entitled to notice of or to vote at a meeting of shareholders, such books shall
be closed for at least ten (10) days immediately preceding such meeting. In lieu
of closing the stock transfer books, the board of directors may fix in advance a
date as the record date for any such determination of shareholders, such date in
any case to be not more than seventy (70) days and, in case of a meeting of
shareholders, not less than ten (10) days prior to the date on which the
particular action requiring such determination of shareholders is to be taken.
In the case of a shareholder action without a meeting, the record date shall be
the date that the first shareholder signs such consent. If the stock transfer
books are not closed and no record date is fixed for the determination of
shareholders entitled to notice of or to vote at a meeting of shareholders, or
shareholders entitled to receive payment of a distribution, the date on which
notice of the meeting is sent or the date on which the resolution of the board
of directors declaring such distribution is adopted, as the case may be, shall
be the record date for such determination of shareholders. When a determination
of shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof unless the board of directors fixes a new record date, which it
BYLAWS OF TBX RESOURCES, INC. - Page 2
- -----------------------------
<PAGE>
must do if the meeting is adjourned to a date more than one hundred, twenty
(120) days after the date fixed for the original meeting.
Section 1.8. Shareholders' List for Meeting. After fixing a record date
for a meeting, the corporation shall prepare an alphabetical list of the names
of all shareholders on the record date who are entitled to notice of the
shareholders' meeting. The list must be arranged by voting group, and within
each voting group by class or series of shares, and show the address of and
number of shares held by each shareholder.
The shareholders' list must be available for inspection by any
shareholder, beginning five (5) days prior to the meeting and continuing through
the meeting, at the corporation's principal office or at the place identified in
the meeting notice in the city where the meeting will be held. Subject to
applicable law, a shareholder, the shareholder's agent, or the shareholder's
attorney is entitled to inspect the list at any time during the meeting or any
adjournment.
Section 1.9. Quorum A majority of the votes entitled to be cast on a
matter by a voting group constitutes a quorum of that voting group for action on
that matter. Once a share is represented for any purpose at a meeting, other
than solely to object to holding the meeting or transacting business at the
meeting, it is deemed present for quorum purposes for the remainder of the
meeting and any adjournment of the meeting, unless a new record date is or must
be set for that adjourned meeting. If a quorum exists, action on a matter, other
than the election of directors, is approved by a voting group if the votes cast
within the voting group favoring the action exceed the votes cast within the
voting group opposing the action.
Section 1.10. Proxies. Each shareholder may vote the shareholder's
shares in person or by proxy. A shareholder may appoint a proxy to vote or
otherwise act for the shareholder by signing an appointment form, either
personally or by the shareholder's attorney-in-fact or agent. The appointment of
a proxy is effective when received by the secretary or other officer or agent
authorized to tabulate votes. A appointment is valid for eleven (11) months
unless a longer period is expressly provided in the appointment forms. An
appointment of a proxy is revocable by the shareholder unless the appointment is
coupled with an interest. No proxy may be effectively revoked until notice in
writing of such revocation has been given to the secretary or other officer or
agent authorized to tabulate votes.
Section 1.11. Voting Entitlement of Shares. Except as otherwise
required by law, each outstanding share, regardless of class, is entitled to one
(1) vote on each matter voted on at a shareholders' meeting.
Section 1.12. Voting of Shares by Certain Holders. Shares standing in
the name of another corporation may be voted by that other corporation's
president or by proxy appointed by that president, unless some other person, by
resolution of its board of directors, shall be appointed to vote such shares. In
such case, such other person is entitled to vote the shares upon production of a
certified copy of such resolution.
BYLAWS OF TBX RESOURCES, INC. - Page 3
- -----------------------------
<PAGE>
Shares held by an administrator, executor, guardian, or conservator may
be voted by such person either in person or by proxy, without a transfer of such
shares into such person's name. Shares standing in the name of a trustee may be
voted by the trustee either in person or by proxy, but no trustee shall be
entitled to vote shares held by the trustee without a transfer of such shares
into the trustee's name.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into the receiver's name if authority
so to do be contained in an appropriate order of the court by which such
receiver was appointed.
Where shares are held jointly by three (3) or more fiduciaries, the
will of the majority of such fiduciaries shall control the manner of voting or
giving of a proxy, unless the instrument or order appointing such fiduciaries
otherwise directs.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of the corporation's own stock belonging to it shall not be
voted, directly or indirectly, at any meeting, and shall not be counted in
determining the total number of outstanding shares entitled to vote at any given
time. This does not limit the power of the corporation to vote any of its own
shares held by it in a fiduciary capacity.
ARTICLE 11
BOARD OF DIRECTORS
Section 2.1. General Powers. All corporate powers shall be exercised
by or under the authority of, and the business and affairs of the corporation
managed under the direction of, the board of directors.
Section 2.2. Number, Tenure and Qualifications. The number of directors
of the corporation shall be determined from time to time by the shareholders and
the number of directors, until later changed by the shareholders, shall be two
(2). Each director shall hold office until the next Annual Meeting of the
shareholders and until that director's successor is elected and qualified.
Directors need not be holders of voting stock of the corporation and they need
not be residents of this state.
Section 2.3. Regular Meetings. A regular meeting of the board of
directors shall be held immediately after and at the same place as the Annual
Meeting of the shareholders. Such meeting shall occur without any notice to the
directors other than the notice occurring in this bylaw. By resolution the board
of directors may provide the time and place, either within or without this
state, for the holding of any additional regular meetings without any notice
other than such resolution.
BYLAWS OF TBX RESOURCES, INC. - Page 4
- -----------------------------
<PAGE>
Section 2.4. Special Meetings. Special meetings of the board of
directors may be called by or at the request of the president, of the secretary,
or of any director. The person or persons calling such Special Meeting of the
board of directors may fix any place, either within or without this state, as
the place for holding that Special Meeting.
Section 2.5. Notice. Written notice of the date, time, and place of a
Special Meeting of the board of directors shall be given at least two (2) days
prior to the date set for such meeting. Such notice shall be given in one of the
following manners: personally, by mail, by private carrier, by telegraph, by
telephone facsimile, or by such other manner as permitted by the Texas Business
Corporation Act. Such notice shall be given by the secretary or by the person or
one (1) of the persons authorized to call directors' meetings. If such written
notice is mailed, correctly addressed to the director's address shown in the
corporation's current records, the notice shall be deemed to have been given to
the director at the time of mailing. If such written notice is sent by private
carrier or if such written notice is sent by United States mail, postage prepaid
and by registered or certified mail, return receipt requested, the notice shall
be deemed to have been given to the director on the date shown on the return
receipt. Otherwise notice is effective when received by the director. Notice of
any directors' meeting may be waived by any director before or after the date
and time of the meeting. Such waiver must be in writing, must be signed by the
director, and must be delivered to the corporation for inclusion in the minutes
or filing with the corporate records. The attendance of a director at a meeting
of the board of directors 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 convened.
Section 2.6. Quorum. A quorum of the board of directors consists of a
majority of the number of directors specified in, or fixed in accordance with,
these Bylaws. If a quorum is present when a vote is taken, the affirmative vote
of a majority of directors present is the act of the board of directors.
Section 2.7. Action by Directors Without a Meeting. Any action required
or permitted to be taken at a directors' meeting may be taken without a meeting
if one (1) or more written consents, setting forth the action so taken, shall be
signed by all the directors. Any such action taken shall be effective when all
consents have been delivered to the corporation, unless the consent specifies a
later effective date.
Section 2.8. Telephone Meetings. Any director may participate in a
meeting of the directors by means of communication by which all persons
participating in the meeting can hear each other during the meeting. A director
participating in a meeting by this means is deemed to be present in person at
the meeting.
Section 2.9. Removal. At a Special Meeting of the shareholders called
for that purpose, the entire board of directors or any individual director may
be removed from office by a vote of shareholders holding a majority of the
outstanding shares entitled to vote in an election of directors.
BYLAWS OF TBX RESOURCES, INC. - Page 5
- -----------------------------
<PAGE>
Section 2.10. Vacancies. Any vacancy occurring on the board of
directors for any reason, including an increase in the number of directors, may
be filled by the affirmative vote of a majority of the remaining directors
though there is less than a quorum of the board of directors, or by the
affirmative vote of the shareholders entitled to vote for that director. If the
directors in office constitute fewer than a quorum of the board, they may fill
the vacancy by the affirmative vote of a majority of all the directors in
office. A director elected to fill a vacancy shall be elected for the unexpired
term of his/her predecessor in office.
Section 2.11. Compensation. The board of directors may resolve to
reimburse the directors for their expenses, if any, of attendance at each
meeting of the board of directors, and may resolve to fix compensation for
directors for their service to the corporation as directors.
Section 2.12. Presumption of Assent. A director of the corporation who
is present at a meeting of the board of directors at which action on any
corporate matter is taken shall be presumed to have assented to the action taken
unless: (i) the director objects at the beginning of the meeting, or promptly
upon the director's arrival, to holding the meeting or transacting business at
the meeting; (ii) such director's dissent or abstention from the action taken is
entered in the minutes of the meeting; or (iii) the director delivers written
notice of the director's dissent or abstention to the presiding officer of the
meeting before the adjournment of the meeting or to the corporation within a
reasonable time after adjournment of the meeting. Such right to dissent shall
not apply to a director who voted in favor of such action.
ARTICLE III
COMMITTEES
Section 3. 1. Appointing. The board of directors, by resolution adopted
by a majority of the full board, may designate one (1) or more of its members to
constitute an executive committee or any other committee. Each committee shall
have one (1) or more members, who serve at the pleasure of the board of
directors. The designation of such a committee and the delegation to it of
authority shall not operate to relieve the board of directors, or any member of
it, of any responsibility imposed by law.
Section 3.2. Authority of Executive Committee. If the board of
directors appoints an executive committee, the executive committee shall have
and may exercise all of the authority of the board of directors when the board
of directors is not in session except as set forth in Section 3.3 herein.
Section 3.3. Limits on Authority of Committees. No committee,
including the executive committee, may do any of the following:
a. Authorize or approve distributions;
BYLAWS OF TBX RESOURCES, INC. - Page 6
- -----------------------------
<PAGE>
b. Approve or propose to shareholders action that are required by
law to be approved by shareholders;
c. Fill vacancies on the board of directors or on any of its
committees;
d. Amend Articles of Incorporation;
e. Adopt, amend, or repeal Bylaws;
f. Approve a plan of merger not requiring shareholder approval;
g. Authorize or approve the reacquisition of shares, except
according to a formula or method prescribed by the board of
directors; or
h. Authorize or approve the issuance or sale or contract for sale of
shares, or determine the designation and relative rights,
preferences, and limitations of a class or series of shares,
except that the board of directors may authorize a committee (or
a senior executive officer of the corporation) to do so within
limits specifically prescribed by the board of directors.
Section 3.4. Tenure. Each member of a committee shall serve at the
pleasure of the board of directors.
Section 3.5. Meetings and Notice. Regular meetings of a committee may
be held without notice at such times and places as the committee may fix from
time to time by resolution. Special meetings of a committee may be called by any
member of it upon not fewer than two (2) days' notice stating the place, date,
and hour of the meeting. Notice of Special Meetings shall be given in the same
manner as is notice of special director meetings and as specified in Section 2.5
hereof. Any member of a committee may waive notice of any meeting, and no notice
of any meeting need be given to any member of it who attends in person. The
notice of a meeting of a committee need not state the business proposed to be
transacted at the meeting. Any regular or Special Meeting may be by means of
conference telephone or other device permitted under Section 2.8 of these
Bylaws.
Section 3.6. Quorum. A majority of the members of committee shall
constitute a quorum for the transaction of business at any meeting of that
committee, and action of the committee must be authorized by the affirmative
vote of a majority of the members present at a meeting at which a quorum is
present.
Section 3.7. Action Without a Meeting -- Any action that may be taken
by a committee at a meeting may be taken without a meeting by one (1) or more
written consents, setting forth the action so taken, signed by all members of
that committee.
Section 3.8. Resignation and Removal. Any member of a committee may be
removed at any time, with or without cause, by resolution adopted by a majority
of the full board of
BYLAWS OF TBX RESOURCES, INC. - Page 7
- -----------------------------
<PAGE>
directors. Any member of a committee may resign from the committee at any time
by giving written notice to the president or secretary of the corporation, and
unless other-wise specified in the notice, the acceptance of such resignation
shall not be necessary to make it effective.
Section 3.9. Vacancies. Any vacancy in a committee may be filled by a
resolution adopted by a majority of the full board of directors.
Section 3.10. Procedure. A committee shall elect a presiding officer
from its members and may fix its own rules of procedure which shall not be
inconsistent with these Bylaws. A committee shall keep regular minutes of its
proceedings, and report the same to the board of directors for the board's
information at the meeting thereof held next after the proceedings shall have
occurred.
ARTICLE IV
OFFICERS
Section 4. 1. Number. The board of directors shall appoint a president
and a secretary. The board of directors, in their discretion, may also appoint a
chair of the board, one (1) or more vice presidents, a treasurer, and such other
officers and assistant officers as they shall from time to time deem proper. Any
two (2) or more offices may be held by the same person. The board may choose not
to fill any of the other officer positions for any period.
Section 4.2. Appointment and Term of Office. The officers of the
corporation shall be appointed by the board of directors at the first meeting of
the directors. If the appointment of officers shall not be held at such meeting,
such appointment shall be held as soon thereafter as conveniently may be. Each
officer shall hold office until a successor shall have been duly appointed and
qualified or until the officer's death or until the officer resigns or is
removed in the manner hereinafter provided.
Section 4.3. Removal. Any officer or agent appointed by the board of
directors may be removed by the board of directors at any time with or without
cause, but such removal shall be without prejudice to the contract rights, if
any, of the person so removed.
Section 4.4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or otherwise, may be filled by the board
of directors.
Section 4.5. Chair of the Board. The chair of the board, if there be
such an office, shall, if present, preside at all meetings of the board of
directors, and exercise and perform such other powers and duties as may be from
time to time assigned to the chair by the board of directors.
Section 4.6. President. The president shall be the principal executive
officer of the corporation and, subject to the control of the board of
directors, shall in general supervise and control all of the business and
affairs of the corporation. When present, the president shall preside at all
BYLAWS OF TBX RESOURCES, INC. - Page 8
- -----------------------------
<PAGE>
meetings of the shareholders in the absence of the chair of the board. The
president may sign, with the secretary or any other proper officer of the
corporation authorized by the board of directors, certificates for shares of the
corporation, any deeds, mortgages, bonds, contracts, or other instruments which
the board of directors has authorized to be executed, except in cases where the
signing and execution thereof shall be expressly delegated by the board of
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 board of directors from time to time.
Section 4.7. The Vice Presidents. In the absence of the president or in
the event of the president's death, inability or refusal to act, the vice
president (or in the event there shall be more than one [1] vice president, the
vice presidents in the order designated at the time of their appointment, or in
the absence of any designation then in the order of their appointment) 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; and shall
perform such other duties as from time to time may be assigned to the vice
president by the president or by the board of directors.
Section 4.8. The Secretary. The secretary shall: (a) prepare the
minutes of the shareholders' and board of directors' meetings and keep them in
one (1) or more books provided for that purpose; (b) authenticate such records
of the corporation as shall from time to time be required; (c) see that all
notices are duly given in accordance with the provisions of these Bylaws or as
required by law; (d) be custodian of the corporate records and of the seal of
the corporation, if any, and see that the seal of the corporation, if any, is
affixed to all documents the execution of which on behalf of the corporation
under its seal is duly authorized; (e) keep a register of the post office
address of each shareholder; (f) sign with the president, or a vice president,
certificates for shares of the corporation, the issuance of which shall have
been authorized by resolution of the board of directors; (g) have general charge
of the stock transfer books of the corporation; and (h) in general perform all
duties incident to the office of secretary and such other duties as from time to
time may be assigned to the secretary by the president or the board of
directors.
Section 4.9. The Treasurer. The treasurer shall: (a) have charge and
custody of and be responsible for all funds and securities of the corporation;
receive and give receipts for money due and payable to the corporation from any
source whatsoever, and deposit all such money in the name of the corporation in
such banks, trust companies or other depositories as shall be selected in
accordance with the provisions of Article VI of these Bylaws; and (b) 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 the treasurer by the president or
the board of directors.
ARTICLE V
OFFICES
The principal office and place of business of the corporation in the
State of Texas shall be located at 12300 Ford Road, Suite 265; Dallas, Texas
75234.
BYLAWS OF TBX RESOURCES, INC. - Page 9
- -----------------------------
<PAGE>
The corporation shall have such other offices as the board of directors
may designate or the business of the corporation may require from time to time.
ARTICLE VI
CONTRACTS, LOANS, CHECKS, DEPOSITS
Section 6. 1. Contracts. The board of directors may authorize any
officer or officers, agent or agents, to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
A director or officer of the corporation shall not be disqualified by
his/her office from dealing or contracting with the corporation either as a
vendor, purchaser, or otherwise. The fact that any director or officer, or any
firm of which any director or officer of the corporation is a shareholder,
officer or director, is in any way interested in any transaction of the
corporation shall not make such transaction void or voidable, or require such
director or officer of the corporation to account to the corporation for any
profits therefrom, provided that (a) the material facts of such transaction and
the director's interest are disclosed to or known by the board of directors or
committee of the board of directors at the time that the board of directors or
committee authorizes, ratifies, or approves the transaction; (b) the material
facts of such transaction and the director's interest are disclosed to or known
by the shareholders entitled to vote and they authorize, ratify, or approve the
transaction; or (c) the transaction is fair to the corporation.
Section 6.2. Loans. No loans shall be made, or accepted, on behalf of
the corporation, and no evidences of indebtedness shall be issued in the
corporation's name, unless authorized by a resolution of the board of directors.
Such authority may be general or confined to specific instances.
Section 6.3. Checks, Drafts, Notes. All checks, drafts, or other orders
for the payment of money, notes, or other evidences of indebtedness issued in
the name of the corporation shall be signed by such officer or officers, agent
or agents of the corporation and in such manner as shall from time to time be
determined by resolution of the board of directors.
Section 6.4. Deposits. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies, or other depositories as the board of directors
may select.
BYLAWS OF TBX RESOURCES, INC. - Page 10
- -----------------------------
<PAGE>
ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 7. 1. Certificates for Shares. Certificates representing shares
of the corporation shall be in such form as shall be determined by the board of
directors. Such certificates shall be signed by the president and by the
secretary, or by a vice president and assistant secretary if so authorized by
the board of directors. All certificates for shares shall be consecutively
numbered or otherwise identified. The name and address of the person to whom the
shares represented thereby are issued, with 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 board of directors may
prescribe.
Section 7.2. Transfer of Shares. Transfer of shares of the corporation
shall be made only on the stock transfer books of the corporation by the holder
of record thereof or by his/her legal representative who shall furnish proper
evidence of authority to transfer, or by his/her attorney thereunto authorized
by power of attorney duly executed and filed with the secretary of the
corporation, and on surrender for cancellation of the certificate for such
shares. The person in whose name shares stand on the books of the corporation
shall be deemed by the corporation to be the owner thereof for all purposes.
Section 7.3. Restrictions on Transfer. Transfer of shares of the
corporation shall be made only (i) if there is an effective registration
covering the shares to be transferred under the Securities Act of 1933 and
applicable state securities laws, (ii) upon receipt of a letter from an
attorney, acceptable to the board of directors or its agents, stating that in
the opinion of the attorney the proposed transfer is exempt from registration
under the Securities Act of 1933 and under all applicable state securities laws,
or (iii) the transfer is made pursuant to Rule 144 under the Securities Act of
1933. In addition, if the corporation is then subject to Subchapter S of the
Internal Revenue Code, then the corporation will not transfer this certificate
without first receiving an opinion of counsel, acceptable to the board of
directors or its agents, that the proposed transfer will not adversely affect
the corporation federal S Corporation status. All stock certificates issued by
the corporation shall bear a legend informing the holder thereof of this
restriction using appropriate language thereon.
ARTICLE VIII
FISCAL YEAR
The fiscal year of the corporation shall begin on the first day of
January, and end on the 31st day of December.
BYLAWS OF TBX RESOURCES, INC. - Page 11
- -----------------------------
<PAGE>
ARTICLE IX
AMENDMENTS
Any of these Bylaws may be amended, altered or repealed and new Bylaws
adopted by a majority vote of the shareholders or directors at any regular or
Special Meeting.
BYLAWS OF TBX RESOURCES, INC. - Page 12
- -----------------------------
<PAGE>
I, Tim Burroughs, as secretary of TBX Resources, Inc. hereby certify
that the foregoing constitute the Bylaws of this corporation as adopted and in
full force and effect on this 15th day of October, 1995.
/s/ Tim Burroughs
------------------------
Tim Burroughs, Secretary
BYLAWS OF TBX RESOURCES, INC. - Page 13
- -----------------------------
Sunoco, Inc.
14550 Torrey Chase Blvd.
Suite 245
Houston TX 77014
281 893 7780
August 27, 1999
TexEast Operating Company
P.O. Box 816009
Dallas, TX 75381-6009
Attn: Mr. Tim Burroughs
Re: Crude Oil Purchase Agreement
Sunoco Reference No. 510364
Dear Mr. Burroughs:
Reference is made to the above subject Crude Oil Purchase Agreement whereby
Sunoco, Inc. (R&M) will purchase all of the crude oil and condensate, produced
from the lease(s) listed on Exhibit "A".
This confirms our understanding that by mutual consent said agreement shall be
amended as follows:
Effective September 1, 1999, the Price will be:
5. Price. Sunoco's posted price for East Texas Sweet crude oil
(currently Sunoco's Col. 13), available in Sunoco's Crude Oil Price Bulletin
Summary and Exxon's posted price for East Texas Heavy Talco crude oil, available
in Exxon's Crude Oil Price Bulletin Summary as published, modified by the net
adjustment. Buyer and Seller agree that for all leases listed on the attached
Exhibit "A" and any additions thereto during the term of this agreement, the net
adjustment will be computed as set forth in Exhibit "A".
For pricing purposes, the oil delivered during any calendar month hereunder
shall be deemed to have been delivered in equal daily quantities during such
month.
Except as hereby specifically modified, all terms and conditions of said Crude
Oil Purchase Agreement shall remain in full force and effect.
Please acknowledge your agreement to this contract by signing below and mailing
or faxing a copy to:
Sunoco, Inc. (R&M)
Attn: Darlyne Holt
14550 Torrey Chase Blvd., Ste. 245
Houston, TX 77014
281-893-7780
FAX: 281-893-7781
If we do not receive a signed copy by mail or FAX within ten (10) business days
from the date of receipt of this amendment, we will take that as evidence of
your acceptance of this amendment to the above referenced agreement.
Agreed and accepted this __________ day of 19 ___.
TEXEAST OPERATING CO. SUNOCO, INC. (R&M)
By ____________________________ By (o/s)________________________
Jay Mick
Title ___________________________ Title: Crude Oil Representative
------------------------
Date: 9-10-99
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT "A"
- ------------------------------------------------------------------------------------------------------------------------------------
TEXEAST OPERATING COMPANY
- ------------------------------------------------------------------------------------------------------------------------------------
COFA - 510364 revised 09/01/99
- ------------------------------------------------------------------------------------------------------------------------------------
EFF. SUNOCO QUALITY TRAN. NET
- --------- ---------- ------------------- ---------- ------------ --------- ---------- -- -------- -- -------- -- -------------------
DATE PROP# LEASE NAME FIELD COUNTY/STATE OPERATOR ADJ. (-) ADJ.* (=) ADJ. + POSTED PRICE
- --------- ---------- ------------------- ---------- ------------ --------- ---------- -- -------- -- -------- -- -------------------
10/01/96 0067950000 HAGANSPORT UNIT TALCO FRANKLIN/TX RGP ($1.25) $0.00 ($1.25) EXXON E TEX HVY
TALCO**
- --------- ---------- ------------------- ---------- ------------ --------- ---------- -- -------- -- -------- -- -------------------
10/01/96 4058430000 EARL LEE UNIT EARL LEE WOOD/TX RGP ($1.25) $0.00 ($1.25) EXXON E TEX HVY
TALCO**
- --------- ---------- ------------------- ---------- ------------ --------- ---------- -- -------- -- -------- -- -------------------
03/01/97 0122000000 CANTOS (10579) PINE MILLS WOOD/TX TEXEAST $1.25) $0.00 ($1.25) EXXON E TEX HVY
(WOODBINE) TALCO**
- --------- ---------- ------------------- ---------- ------------ --------- ---------- -- -------- -- -------- -- -------------------
EFF. SUNOCO TEMPORARY TRAN. NET
- --------- ---------- ------------------- ---------- ------------ --------- ---------- -- -------- -- -------- -- -------------------
DATE PROP# LEASE NAME FIELD COUNTY/STATE OPERATOR MKTG. (-) ADJ* (=) ADJ. + POSTED PRICE
ADJ.
- --------- ---------- ------------------- ---------- ------------ --------- ---------- -- -------- -- -------- -- -------------------
06/01/97 0129330000 BETHANY NE BETHANY NE PANOLA/TX RGP $1.55 $0.00 $1.55 EAST TEXAS SWEET
WATERFLOOD (COL 13)*
- --------- ---------- ------------------- ---------- ------------ --------- ---------- -- -------- -- -------- -- -------------------
10/01/98 0129330000 PROTHRO EAST TEXAS GREGG/TX RGP $1.55 $0.00 $1.55 EAST TEXAS SWEET
(COL 13)*
- --------- ---------- ------------------- ---------- ------------ --------- ---------- -- -------- -- -------- -- -------------------
07/01/98 0133540000 FLORENCE EAST TEXAS GREGG/TX RGP $1.55 $0.00 $1.55 EAST TEXAS SWEET
(COL 13)*
- --------- ---------- ------------------- ---------- ------------ --------- ---------- -- -------- -- -------- -- -------------------
11/01/98 0133520000 ROY H LAIRD BLOCK EAST TEXAS GREGG/TX RGP $1.55 $0.00 $1.55 EAST TEXAS SWEET
122 (COL 13)*
- ------------------------------------------------------------------------------------------------------------------------------------
*AS POSTED IN SUNOCO'S CRUDE OIL PRICE BULLETIN SUMMARY
- ------------------------------------------------------------------------------------------------------------------------------------
**AS POSTED IN EXXON'S MONTHLY CRUDE OIL PRICE BULLETIN MINUS THE QUALITY ADJUSTMENT
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Sunoco, Inc.
14550 Torrey Chase Blvd. Suite 245
Houston TX 77014
281 893 7780
August 20, 1999
TBX
Fax: 972-243-2066
Attn: Matt Davis
DEAL CONFUMATION.
Re: New Deal - East Texas
Dear Matt:
Sunoco, Inc. (R&M) confirms the following deal:
COUNTY/STATE IMA POSTED PRICE
------------ --- ------------
All Gregg, Panola/Tx $1.55 Sunoco's East Texas Sweet
All Hopkins/Tx ($1.25) Exxon East Texas Talco
Wood/Tx ($1.25) Exxon East Texas Talco
Franklin/Tx ($1.25) Exxon East TexasTalco
Sunoco agrees to an initial term of one (1) month, commencing. on September 1,
1999, and then month to month thereafter, unless terminated by either party upon
written notice.
If you have any questions, please contact me at 291-893-7786. Thank you for your
business.
Sincerely,
/s/ Jay Mick
- ----------------------------
Jay Mick
Crude Oil Representative
<PAGE>
Sunoco, Inc.
14550 Torrey Chase Blvd. Suite 245
Houston TX 77014
281 893 7780
July 30, 1999
Texeast Operating Company
Attn: Tim Burroughs
P.O. Box &160"
Dallas, TX 75381-6009
FAX#: (972) 243-2066
RE: Sun Crude Oil Purchase Agreement #510364
Please accept this letter as formal notice of cancellation of the above
contract, effective 9/1/99 subject to renegotiation.
Should you have any questions, please feel free to call.
Sincerely,
/s/ Jay Mick
- -------------------------
Jay Mick
Maketing Representative
<PAGE>
Sunoco, Inc.
14550 Torrey Chase Blvd. Suite 245
Houston TX 77014
281 893 7780
CRUDE OIL PURCHASE AGREEMENT
SUN REFERENCE NO. 5103 64
This agreement, made and entered into as of this 1st day of October
1996, by and between "Buyer" and "Seller" as follows:
Buyer: Seller:
Sun Company, Inc. (R&M) TexEast Operating Company, Inc.
("SUN") P.O. Box 816009
P. 0. Box 2039 Dallas, Tx 75381-6009
Tulsa, OK 74102
WITNESSETH:
WHEREAS, Seller owns or is authorized to sell all of the volumes of
crude oil and condensate produced from the properties described in Exhibit "A"
attached hereto, and
WHEREAS, Buyer desires to purchase and receive said crude oil and
condensate and Seller desires to sell and deliver said crude oil and condensate
in accordance with the terms of this agreement;
1. Sale and Purchase. Subject to the provisions hereof, Seller shall
sell to Buyer and Buyer shall purchase from Seller all of the crude oil and
condensate produced from the properties described in Exhibit "A" attached
hereto. Seller hereby commits and dedicates to the performance of this agreement
all of the crude oil and condensate produced from the lease(s) included on
Exhibit "A" attached hereto. The parties hereto, by mutual consent, may amend
this agreement at any time to include additional properties to Exhibit "A".
2. Term. This agreement shall remain in effect for an initial term of
six (6) months, commencing on October 1, 1996 and from month to month
thereafter, unless and until terminated by either party upon written notice
thereof given thirty (30) days in advance of the end of the primary term of this
agreement or any extension thereof.
3. Delivery Point. Delivery shall take place and title shall pass from
the Seller to the Buyer when the crude oil passes the outlet flange of the
Seller's lease facility to the receiving equipment of Buyer or Buyer's
designated agent.
4. Warranty of Title and Authority to Sell. Seller hereby warrants and
guarantees that the title to the portion of the crude oil sold and delivered
hereunder which is owned by Seller is free and clear of all liens and
encumbrances and warrants that as to the remaining portion of the crude oil sold
and delivered hereunder Seller has the right and authority to sell and deliver
said crude oil for the benefit of the true owners thereof. Seller further
warrants that the crude oil has been produced, handled, and transported to the
delivery point hereunder, in accordance with the laws, rules and regulations of
all governmental authorities having jurisdiction thereof Seller shall indemnify
and hold Buyer harmless from and against any and all cost, damage and expense
suffered and incurred by reason of any failure of the title so warranted or any
inaccuracy in the representation of Seller's right and authority to sell said
crude oil made herein.
5. Edge. Exxon's posted price for East Texas Heavy crude oil, available
in Exxon's Crude Oil Price Bulletin Summary as published, modified by the net
adjustment. Buyer and Seller agree that for all leases listed on the attached
Exhibit "A" and any additions thereto during the term of this agreement, the net
adjustment will be computed as set forth in Exhibit "A". The temporary marketing
adjustment currently equals forty-three cents ($0.43) per barrel. For pricing
purposes, the oil delivered during any given calendar month hereunder shall be
deemed to have been delivered in equal daily quantities during such month.
6. Manner of Payment. Subject to verification of deliveries, payment
for crude oil sold and delivered shall be made by check on or about the twelve
(12th) day of the month following the month of delivery. Payment shall be made
to the Seller utilizing Buyer's Division Order excluding taxes.
7. Taxes. Buyer is hereby authorized to withhold from the proceeds
allocable to the sale and delivery of crude hereunder the amount of severance
taxes levied by State and Federal Agencies.
8. Prevailing Document. In the event of any conflict between the
provisions of this agreement and the provisions of any applicable division
order executed in accordance with the terms hereof, the provisions of this
agreement shall control.
9. Quality Requirements. If the crude oil shall not meet East Texas
Heavy requirements at the delivering point, then Buyer shall have the right to
terminate this Crude Oil Purchase Agreement by giving thirty (30) days written
notice.
10. General Provisions. The General Provisions attached to this
agreement are made a part of this agreement.
ALL SIGNATURES MUST BE WITNESSED
SUN COMPANY, INC. (R&M)
Witness
By_______ /s/ _________________
Mark Sleeper
_____ /s/ ___________________
Daniel Ballard
Title: Crude Oil Representative
Date 10/22/96
TEXEAST OPERATING COMPANY INC.
Witness:
By_______ /s/ __________________
______/s/_____________________
Title_______(President)_________
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
EXHIBIT "A"
TEXEAST OPERATING COMPANY
- -------------------------------------------------------------------- --------------- -- -------- -- -------- -- -------------------
COFA - 510364
- -------------------------------------------------------------------- --------------- -- -------- -- -------- -- -------------------
revised 11/01/98
- ------------- ------------ ------------------- -------- ------------ --------------- -- -------- -- -------- -- -------------------
TEMPORARY TRAN. NET
- ------------- ------------ ------------------- -------- ------------ --------------- -- -------- -- -------- -- -------------------
DATE PROP# LEASE NAME FIELD COUNTY/STATE MKTG. ADJ. - ADJ. = ADJ. POSTED PRICE
- ------------- ------------ ------------------- -------- ------------ --------------- -- -------- -- -------- -- -------------------
- ------------- ------------ ------------------- -------- ------------ --------------- -- -------- -- -------- -- -------------------
10/01/96 0067950000 HAGANSPORT UNIT TALCO FRANKLIN/TX $0.43 $0.00 $0.43 EXXON E TEX HVY
TALCO**
- ------------- ------------ ------------------- -------- ------------ --------------- -- -------- -- -------- -- -------------------
</TABLE>
<PAGE>
SUN COMPANY, INC. (R&M)
COPA GENERAL PROVISIONS
1. Existing Laws. This Agreement will be governed by existing laws of
the State of Texas.
2. Force Majeure. Neither party shall be liable to the other for
failure or delay in making or accepting deliveries hereunder to the extent that
such failure or delay may be due to compliance with acts, orders, regulations or
requests of any federal, state or local civilian or military authority or as a
result of insurrections, wars, rebellion, riots, strikes, labor difficulties,
action of the elements, disruption or breakdown of production or transportation
facilities, or any other cause, whether or not of the same class or kind,
reasonably beyond the control of such party.
3. Quality and Measurement. Seller warrants that all crude oil
purchased hereunder shall be of merchantable quality (that is, unaltered and
uncontaminated by any foreign substances or chemicals not normally associated
with oil) and suitability shall be determined within the Buyer's exclusive, good
faith opinion. Quantities of oil delivered hereunder shall be determined by a
method of measurement generally accepted within the industry including, but not
limited to, the use of automatic measuring equipment, tank gauges on 100% tank
table basis, and certified truck gauges and meters. Meters shall be proven in
accordance with the latest American Petroleum Institute standards. Volume shall
be measured in barrels of forty-two (42) U.S. Gallons as adjusted for
temperature to 60 degrees Fahrenheit, less deductions for basic sediment and
water and other impurities determined according to applicable API practices. Oil
containing basic sediment and water in excess of the quantity permitted by the
carrier's tariff shall be treated by Seller to render it merchantable. Tests for
quality shall be made at regular intervals by Buyer or Buyer's Agent in
accordance with recognized procedures. Each party shall have the right to have a
representative present to witness all tests and measurements but in the absence
of either party's representative, the results of the tests and measurements
performed by the Buyer shall be deemed to be conclusive.
4 Waiver. Failure by either party to object to any failure of
performance by the other party of any provision of this Agreement shall not
constitute a waiver of, or estoppel against, the right of such party to require
such performance by the other. Nor shall any such failure to object constitute a
waiver or estoppel with respect to any succeeding failure of performance.
5. Assignment. This Agreement shall not be assignable by either party
without the prior written consent of the other. Any attempted assignment without
such consent shall be void.
6. Compliance with Laws. Each party agrees that the performance of
this contract shall comply with all applicable state, federal and local laws.
Each party shall supply evidence of compliance, if required.
7. Security. If, in the reasonable opinion of either party, the
financial responsibility of the other party is or becomes impaired or
unsatisfactory, or if the other party fails to make any payment or delivery when
required, the requesting party may require satisfactory security to secure
performance or payment or both, whether by way of stand-by or documentary letter
of credit, guaranty, advance payment, or otherwise. Failure to provide the
required security shall constitute a material breach of the Agreement entitling
the requesting party to cancel or suspend its delivery obligation and to offset
any payments or deliveries due the other party under this Agreement or other
Agreements between the two parties.
8. Damages. The parties agree that in the event of a material breach of
this Agreement resulting from a repudiation of an obligation or a failure to
deliver or receive all or a material portion of the required quantities, the
non-breaching party shall be entitled to recover contract damages,
administrative costs for any cover or resale and any other costs including but
not limited to court costs and reasonable legal fees incurred in recovering such
damages.
<PAGE>
9. Default. If the Seller fails to sell and deliver or the Buyer fails
to take delivery of or pay the purchase price for all of the Oil required to be
sold and delivered by the terms of this Agreement; or if either party fails to
establish any letter of credit required elsewhere in this Agreement; or if
either party becomes insolvent (defined for the purposes hereof as a failure to
meet its obligations as they become due); files a voluntary petition in
bankruptcy, or seeks reorganization, receivership, or arrangements with respect
to its debts; files an answer admitting any material allegation of any
insolvency petition filed pursuant to any insolvency act, whether federal or
state; applies for, consents to, or fails to obtain the dismissal or discharge
of an order for the appointment of a receiver or trustee for any substantial
part of its property or assets; or, fails to satisfy or to appeal from any
material judgment or attachment within 30 days from the date of entry; or if
either commits any other material breach of the terms of this Agreement and
fails to promptly cure such breach after notice by the other party, that party
shall be in default. In any such event the other party may cancel or suspend
deliveries or receipts or cancel this Agreement and offset any payments due the
other party under this agreement or other agreements between the two parties and
may do so without prejudice to any claim for damages or any other right or
remedy under this Agreement or applicable law.
10. Integration and Amendments. This Agreement, embodies the entire
understanding of the parties hereto and supersedes all prior negotiations,
understandings and agreements between them with respect to the entire matter
hereof. The provisions hereof may be waived, supplemented or amended only by an
instrument in writing signed by a duly authorized representative of each of the
parties hereto.
11. Severability. If any portion of this Agreement should be adjudged
illegal or unenforceable, the remainder of this Agreement shall continue to be
enforceable if commercially reasonable.
12. Notices. All notices, statements or other communications to be
given, submitted or made by either party to the other shall be sufficiently
given if in writing and sent by air mail, postage prepaid, or by telegraph,
telex, radio or cable to the address of such other party as specified on page
one of this Agreement. Either party may change its address for the purpose set
forth in this paragraph upon giving fifteen (15) days prior written notice to
the other party.
TEXEAST OPERATING COMPANY, INC. COPA 4 510364
<PAGE>
INDEMNITY AGREEMENT
WHEREAS, TBX Resources, Inc. is a Texas corporation and has an active
Board of Directors.
WHEREAS, TBX Resources, Inc. desires to indemnify and hold each member
of the board of directors individually and collectively harmless from any and
all liability and expenses arising out of the exercise of their duties under
Texas law as a director of a Texas Corporation.
NOW, THEREFORE, in consideration of TBX Resources, Inc., for value
received and other good consideration, the receipt and adequacy of which is
hereby acknowledged, TBX Resources, Inc., hereby indemnifies and holds harmless
each member of the director of a Texas corporation absent fraud or gross
misconduct on the part of each director from any liability and expenses arising
the exercise of their duties under Texas law as a director of a Texas
corporation absent fraud or gross misconduct on the part of each director.
Said indemnification shall apply only during the term of office of each
director.
NOW, THEREFORE, the president of TBX Resources, Inc. is hereby
authorized to execute an individually indemnification agreement with each
director upon their election to the Board of Directors.
IN WITNESS WHEREOF, the undersigned has duly executed this Indemnity
Agreement as of this the 21st day of May, 1999
TBX RESOURCES, INC.
/s/
---------------------------
Timothy Burroughs, Director
/s/
----------------------------
Christine Coley, Director
III METRO SQUARE
OFFICE LEASE AGREEMENT
THIS LEASE AGREEMENT is made and entered into on April 12, 1995, by and between
GJSI - Texas, Inc., a Texas Corporation, (hereinafter referred to as "Landlord")
and, TBX Resources, Inc., a Texas Corporation, (hereinafter referred to as
"Tenant").
IN CONSIDERATION OF THE MUTUAL COVENANTS and agreements herein set forth, and
any other consideration, Landlord leases to Tenant and Tenant leases from
Landlord Suite 265 ("Premises"), which is part of III Metro Square located at
12300 Ford Road, Dallas, Texas 75234 (hereinafter referred to as the "Building).
(Refer to Exhibit "All for space plan of Premises.)
LEASE PROVISIONS
1. TERM. The term of this lease shall be twelve (121 months commencing on may 1,
1995, (the "Commencement Date"), and terminating on April 30, 1996, unless
sooner terminated as provided hereinafter.
2. BASIC RENTAL PROVISION. Tenant will pay to Landlord without deduction or
setoffs, the sum of $941.00 ("Basic Rent") as rent for each month of the entire
lease term, unless more specifically itemized in Paragraph 38, Special
Provisions. One full monthly rental installment together with a security deposit
of $941.00 shall be payable by Tenant to Landlord upon execution of this lease
agreement. Rent for any fractional month at the beginning or end of the lease
term shall be pro-rated. The security deposit shall be held by Landlord, without
liability for interest, as security for the performance by Tenant of Tenant's
covenants and obligations under this lease. Such deposit shall not be considered
an advance payment of rent or the full measure of Landlord's damages in case of
a default by Tenant. Upon the occurrence of any event of default by Tenant,
Landlord may, from time to time, without prejudice to any other remedy, use such
security deposit to the extent necessary to make good any arrears of rent or any
other damage, injury, expense or liability caused to Landlord by any such event
of default. Following any such application of the security deposit, Tenant shall
pay to Landlord on demand any amount so applied in order to restore the security
deposit to its original amount. If Tenant is not in default hereunder, any
remaining balance of such deposit shall be returned to Tenant by Landlord upon
termination of this lease. If Landlord transfers its interest in the premises
during the lease term, Landlord may assign the security deposit to the
transferee and thereafter shall have no further liability for the return of such
security deposit.
<PAGE>
3. LANDLORD'S OBLIGATIONS
A. Landlord will furnish to Tenant at Landlord's cost and expense:
(i) water at those points of supply provided for the general use of
tenants of the Building;
(ii) heated and refrigerated air conditioning in season, at such times
as Landlord determines, and at such temperatures and in such amounts as
reasonably considered necessary by Landlord. Service of such conditioning
on Sundays, Saturdays, and holidays are optional on the part of the
Landlord.
(iii) janitorial services to the premises on weekdays other than
holidays and such window washing as may from time to time in Landlord's
judgment be reasonably required. Any person employed by Landlord to do
janitorial work while in the Building is subject to and under the control
and direction of the employer of the janitorial company and does not act as
an agent or employee of the Landlord.
(iv) operatorless passenger elevators for ingress and egress to the
floor on which the premises are located, in common with other tenants.
Landlord reserves the right to regulate at all times the number of
elevators that will be operated in the Building and shall never be held
liable for any claim arising in consequence of the use, non-use, or number
thereof. Landlord also reserves the right to stop the elevators at any time
in cases of breakage, repair, or replacement of machinery or any emergency
or accident.
(v) replacement of Building standard light fixtures; and
(vi) electric lighting for all public areas and special service areas
of the Building in a manner and to the extent deemed by the Landlord to be
reasonable.
B. Landlord shall furnish Tenant all electrical current required by Tenant
in a normal office use, occupancy of the premises. If there is any consumption
or use of electricity for anything other than small office machines and
lighting, Tenant agrees to pay Landlord's cost for any such excess or additional
electricity, which shall be collectible as additional Rent unless otherwise
agreed to hereinafter.
C. Failure to furnish, stoppage, or interruption of these services
resulting from any cause shall not render Landlord liable in any respect for
damages to either person, property or business, or be construed as an eviction
of Tenant, work an abatement of rent, or relieve Tenant from fulfillment of any
covenant or agreement hereof. Should any equipment or machinery furnished by
2
<PAGE>
Landlord break down or for any cause cease to function properly, Landlord shall
use reasonable diligence to repair the same promptly.
4. IMPROVEMENTS. Landlord agrees to install at Landlord's cost and expense the
Building improvements described in "Exhibit Bit attached hereto in accordance
with all the provisions of "Exhibit B". All other or additional improvements to
the premises 'shall be installed at the cost and expense of Tenant in accordance
with plans and specifications which have been previously submitted to and
approved in writing by Landlord. Such work shall be performed only by Landlord
or by contractors and subcontractors approved by Landlord.
5. RELOCATION. Landlord shall have the right to relocate tenant to space the
same size or larger and the rent shall remain the same regardless of the size of
the suite.
6. USE OF PREMISES. Tenant will use the leased premises for office purposes
only, unless Landlord shall give Tenant prior written consent for different use.
Tenant will not use, occupy, permit the use or occupancy, in the Building for
any purpose which is forbidden by law, ordinance or governmental or municipal
regulation or order, or which may be dangerous to life limb or property, or
permit the maintenance of any public or private nuisance, or do or permit any
other thing which may disturb the quiet enjoyment for all of the Building, or
keep any substance or carry on or permit any operation which might emit
offensive odors or conditions into other portions of the Building, or at any
time sell, purchase, or give away, or permit the sale, purchase or gift of food
in any form by or to any of Tenant I s agents or employees or other parties in
the Building, or use any apparatus which might make undue noise or set up
vibrations in the building, or permit anything to be done which would increase
the fire and extended coverage insurance rate on the Building or contents, and
if there is any increase in such rate by reason of acts of Tenants, then Tenant
agrees to pay such increase promptly upon demand therefore by Landlord. Payment
by Tenant of any such rate increase shall not be a waiver of Tenant's duty to
comply herewith.
Tenant shall not inscribe, paint, affix or display any signs,
advertisements or notices on or in the Building except for such tenant
identification information as Landlord permits to be included or shown on
the directory in the main lobby.
7. TENANT'S OBLIGATIONS. Tenant will not in any manner deface or injure the
Building and will pay the cost of repairing any damage or injury done to the
Building or any part thereof by Tenant or Tenant's agents, employees, or
invitees. Tenant shall take good care of the premises and keep them free of
waste and nuisance. Tenant will keep the premises including all fixtures
installed by Tenant in good condition and repair. If Tenant fails to make such
3
<PAGE>
necessary repairs within (15) fifteen days after the occurrence of damage or
injury, Landlord may, at its option, make such repairs and Tenant shall, upon
demand, pay Landlord the cost thereof plus interest at the rate of fifteen (15)
percent per year from demand until paid. Upon termination of this lease, Tenant
shall deliver to Landlord the premises with all improvements located thereon in
good repair and condition, and shall deliver to Landlord all keys to the
premises. Tenant will not make or allow to be made any alterations or physical
additions in or to the premises without prior written consent of Landlord. At
the termination of this lease, Tenant shall, if Landlord so elects, remove all
alterations, physical additions or improvements as directed by Landlord and
restore the premises. All of Tenants fixtures and personal property not removed
from the premises at the termination of this lease shall be presumed to have
been abandoned by Tenant, and shall become the property of the Landlord.
8. INDEMNITY. Landlord shall not be liable for and Tenant will indemnify and
save Landlord harmless of and from all fines, suits, claims , demands, losses,
and actions, including attorney's fees, for any injury to persons or damage to
or loss of property on or about the premises caused by the Tenant, its
employees, invitees, liscencees, or by an other person entering the premises or
the Building under express or implied invitation of the Tenant, or arising out
of Tenant's use of premises.
9. MORTGAGES. Tenant accepts this lease subject to any deeds of trust, security
interests, or mortgages which might now or hereafter constitute a lien upon the
Building or improvements. Tenant shall at any time hereafter, on demand, execute
any such instruments, release or other documents that may be required by any
mortgagee for the purposes of subjecting and subordinating this lease to any
such deed of trust, security interest or mortgage.
10. ASSIGNMENT AND SUBLEASING. Tenant shall not assign this lease, or -' allow
it to be assigned, in whole or in part, by operation of law or otherwise
(including without limitation by transfer of a majority interest of stock,
merger, or dissolution) or mortgage or pledge the same, or sublet the Premises
or any part thereof, without prior written consent of Landlord, and in no event
shall any such assignment or sublease ever release Tenant from any obligation or
liability hereunder. No assignee or sublessee of the Premises or any portion
thereof may assign or sublet the Premises or any portion thereof.
If Tenant desires to assign or sublet all or any part of the Premises, it
shall so notify Landlord at least sixty (60) days in advance of the date on
which Tenant desires to make such assignment or sublease. Tenant shall provide
Landlord with a copy of the proposed assignment or sublease, and such
information as Landlord might request concerning the proposed assigned or
sublessee to allow Landlord to make informed judgments as to the financial
4
<PAGE>
condition, reputation operations, and general desirability of the proposed
sublesees(s) or assignee(s). After such information has been received Landlord
shall have the option to:
A. Cancel the Lease as to the Premises or portion thereof proposed to
be assigned or sublet; or
B. Consent to the proposed assignment or sublease, in which event,
however, is the rent due and payable by any assignee or sublessee under
such permitted assignment or sublease (or a combination of the rent payable
under such assignment or sublease plus any bonus or any other consideration
therefore or any payment incident thereto) exceeds the Rent payable under
the Lease for such space, Tenant shall pay to Landlord all such excess rent
and other excess consideration within ten (10) days following receipt
thereof by Tenant: or
C. Refuse its consent to the proposed assignment or sublease, which
option shall always be deemed to be elected unless Landlord gives Tenant
written notice otherwise.
11. EMINENT DOMAIN. If the Premises shall be taken or condemned in whole or in
part f or public purposes or sold under threat of condemnation, this lease shall
terminate at the option of Landlord. Landlord shall be entitled to receive the
entire award of any condemnation proceedings or the proceeds in sale in lieu
thereof, including any award for the value of the unexpired portion of this
lease.
12. ACCESS. Landlord or its authorized agent shall at any and all times have the
right to enter the Premises to inspect the same, to supply janitorial service or
any other service to be provided by Landlord to Tenant hereunder, to show the
premises to prospective lenders, purchasers or tenants, to alter, improve, or
repair the Premises or any other portion of the Building all without being
deemed guilty of an eviction of Tenant and without abatement of Rent, and may
for that purpose erect scaffolding and other necessary structures where
reasonably required by the character of the work to be performed, provided the
business of Tenant shall be interfered with as little as is reasonably
practicable. Tenant hereby waives any claim for damages for any injury or
inconvenience to or interf erence. with Tenant's business, any loss of occupancy
or quiet enjoyment of the Premises, and any other loss occasioned thereby. For
each of the aforesaid purposes, Landlord shall at all times have and retain a
key with which to unlock all of the doors in, about, and upon the Premises.
Landlord shall have the right to use any and all means which Landlord may deem
proper to open any door(s) in emergency without liability therefore.
13. CASUALTY. In the event the building should be totally destroyed by fire,
tornado, or other casualty or in the event the premises or the Building be so
damaged that repairs cannot be
5
<PAGE>
completed within 120 days after the date of Such damage, Landlord may terminate
this lease. Landlord shall not be required to rebuild, repair, or replace any
part of the furniture, equipment, fixtures, and other improvements which may
have been placed by Tenant or other Tenants in the Building or the premises. Any
insurance which may be carried by Landlord or Tenant against loss or damage to
the Building or the premises, shall be for the sole benef it of the party
carrying such insurance and under its sole control.
14. WAIVER OF SUBROGATION. Tenant waives any and every claim which arises or may
arise in its favor against the Landlord or any other tenant of the building
during the term of this lease, or any renewal or extension hereof, for any and
all loss of or damage to any of its property located within or upon or
constituting a part of the Premises hereunder, which loss or damage is covered
by valid and collectible fire and extended coverage insurance policies to the
extent that such loss or damage is recoverable under said insurance policies.
This waiver shall be in addition to, and not in limitation or derogation of, any
other waiver or release contained in this lease with respect to any loss of or
damage to property of the Tenant. Inasmuch as the above waiver will preclude the
assignment of any aforesaid claim by way of subrogation to an insurance company
(or any other person), Tenant agrees immediately to give to each insurance
company which has issued to it policies of fire and extended coverage insurance
written notice of the terms of this waiver, and to have said insurance policies
properly endorsed, if necessary to prevent the invalidation of said insurance
coverage by reason of this waiver.
15. HOLDING OVER. In the event Tenant, or any other party under Tenant claiming
rights to this agreement, retains possession of the Premises after the
expiration or earlier termination of this lease, such possession shall be an
unlawful detainer, and no tenancy or interest shall result from such possession.
Such parties shall be subject to eviction and removal, and Tenant or any such
party shall pay Landlord as rent for the period of such holdover an amount equal
to twice the rental rate being charged by Landlord for the Premises. Tenant will
vacate the Premises and deliver same to Landlord immediately upon Tenant's
receipt of notice from Landlord to so vacate. No holding over by Tenant whether
with or without the consent of Landlord, shall operate to extend this lease.
16. TAXES ON TENANT'S PROPERTY. Tenant shall be liable for all taxes levied or
assessed against personal property, furniture or fixtures placed by Tenant in
the premises. If any such taxes for which Tenant is liable are rendered against
or assessed against Landlord or Landlord's property, the same can be paid by
Landlord and Tenant shall pay to Landlord upon demand the taxes on Tenant's
property for which Tenant is primarily liable hereunder. Any claim arising
against Tenant by Landlord under this provision shall be
6
<PAGE>
assessed interest at f if teen percent (15%) per year until the claim has been
satisfied.
17. LANDLORDS LIEN. In addition to the statutory Landlords lien,, Tenant hereby
grants to Landlord a security interest to secure payment of all rent or other
sums of money coming due hereunder from Tenant, and to secure payment of any
damages or loss which Landlord may suffer by reason of the breach of Tenant of
any covenant, agreement, or condition contained herein, upon all goods, wares,
or fixtures, in or on the Premises . Such property shall not be removed from the
premises without the consent of the Landlord until all arrearages in rent as
well as any other sums of money due to Landlord hereunder shall first have been
paid and discharged, and all covenants, agreements, and conditions hereof have
been fulfilled and performed by Tenant. In addition, to any other remedies
provided herein, upon an event of default, Landlord or its assigns may sell the
property unless such sale is otherwise prohibited by law. Unless otherwise
provided by law, the requirement of reasonable notice shall be met if such
notice is given to Tenant at the address hereinafter prescribed prior to the
time of the sale. The statutory lien for rent is not waived; the security
interest herein granted is in addition and supplementary thereto.
18. MECHANICS LIENS. Tenant shall keep the Premises free from any liens arising
out of any work performed, materials furnished, or obligations incurred by or
for Tenant. In the event the Tenant shall not, within (10) days following the
imposition of any such lien, cause the same to be released of record by payment
or posting of a proper bond, Landlord shall have, in addition to all other
remedies provided herein and by law, the right but not the obligation, to cause
the same to be release by such means as Landlord shall deem proper, including
payment of or defense against the claim giving rise to such lien. All sums paid
by Landlord and all expenses incurred by it in connection therewith shall create
automatically an obligation of Tenant to pay, on demand, an equivalent" amount,
plus fifteen percent (15%) interest per year thereon as Rent. No work which
Landlord permits Tenant to perform in the Premises shall be deemed to be for the
immediate use and benefit of Landlord so that no mechanics or other lien shall
be allowed against the estate of Landlord by reason of its consent to such work.
19. EVENTS OF DEFAULT. The occurrence of any of the following shall constitute a
default and breach of this lease by Tenant:
A. Any failure by Tenant to pay the Rent or make any other payment
required to be made by Tenant hereunder when due, no notice being required
for default in payment.
7
<PAGE>
B. Any failure by Tenant to observe and perform any provision of this
Lease where such failure continues for fifteen (15) days after notice to
Tenant.
C. When Tenant or any guarantor of Tenant's obligations hereunder,
cannot meet its obligation as they become due, or is declared insolvent
according to any law, or assignment of Tenant's or guarantor's property is
make for the benefit of its creditors, or a receiver or trustee is
appointed for Tenant or guarantor or its property, or the interest of
Tenant or guarantor under this lease is levied on-under execution or under
other legal process, or any petition is filed or other action taken to
reorganize or modify Tenant's or guarantor's debts or obligations, or any
petition is filed or other action taken to reorganize or modify Tenant's or
guarantor's capital structure if either Tenant or guarantor be a
corporation or other entity.
D. The abandonment of the Premises by Tenant which shall mean that the
Tenant is absent from the Premises for (10) ten consecutive days.
20. REMEDIES. Upon the occurrence of any event of default specified in this
lease agreement or otherwise, Landlord shall have the option to pursue any one
or more of the following remedies without any notice or demand whatsoever.
A. Terminate this lease, in which event Tenant shall immediately
surrender the premises to Landlord. If Tenant fails to surrender the
premisses to Landlord, Landlord may, without prejudice to any other remedy,
enter upon and take possession and expel or remove Tenant and any other
person who may be occupying said premises or any part thereof, by force if
necessary, without being liable for prosecution or any claim for damages.
Tenant agrees to pay to Landlord upon demand the amount of all loss and
damage which Landlord may suffer by reason of such termination, whether
through inability to relet the premises on satisfactory terms or otherwise,
including the loss of rental for the remainder of the lease term.
B. If Landlord so elects, Landlord may relet the premises on such
terms as Landlord shall deem advisable and receive the rent therefore.
Tenant agrees to pay the Landlord upon demand any deficiency of rent that
may arise by reason of such reletting for the remainder of the lease term.
C. Enter upon the premises, by force if necessary, without being
liable for prosecution 'or any claim for damages and do whatever Tenant if
obligated to do under the terms of this lease. Tenant agrees to reimburse
Landlord on demand for any expenses which Landlord may incur in thus
effecting compliance with Tenant's obligations under this lease. Tenant
further agrees that Landlord shall not be liable for any damages resulting
to the Tenant from such action.
8
<PAGE>
Pursuit of any of the foregoing remedies shall not preclude the pursuit of
any other remedies herein provided, or any other remedies provided by law,
nor shall pursuit of any remedy herein provided constitute a forfeiture or
waiver of any rent due Landlord hereunder, or of any damages suffered by
Landlord by reason of violation of any term, provision or covenant herein
contained.
No waiver by Landlord of any violation or breach of any term, provision or
covenant herein contained shall be deemed or construed as a waiver of any
violation or breach of any default shall not be deemed or construed to be waiver
of such default.
21. SURRENDER OF PREMISES. No act or thing done by Landlord or its agents during
the term hereby granted shall be deemed as acceptance of surrender of the
premises. No agreement to accept surrender of the premises shall be valid unless
the same is in writing and signed by the Landlord.
22. ATTORNEYS FEES. If, on account of any breach or default by Tenant of any
respective obligation under this lease, it shall become necessary for Landlord
to employ an attorney to enforce or defend any of its rights or remedies
hereunder, and Landlord should prevail, it shall be entitled to reasonable
attorney fees incurred in such connection.
23. FORCE MAJEURE. Whenever a period of time is prescribed for action to be
taken by Landlord, Landlord shall not be liable or responsible for, and there
shall be excluded from the computation for any such period of time any delays
due to strikes, riots, acts of God, shortages of labor or materials, war,
governmental laws, regulations, or restrictions, or any other causes of any kind
whatsoever which are beyond the control of the Landlord.
24. GOVERNMENTAL REGULATIONS. Tenant will comply with all laws, ordinances,
orders, rules and regulation of all governmental agencies having jurisdiction of
the premises with reference to the use, construction, condition or occupancy of
the premises.
25. APPLICABLE LAW. This lease shall be governed by and construed pursuant to
the laws of the state of Texas.
26. SUCCESSORS AND ASSIGNS. Except as otherwise provided in this Lease, all of
the covenants, conditions and provision of this Lease shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
successors, and assigns.
27. SEVERABILITY. If any provision of this Lease or the application thereof to
any person or circumstances shall be invalid or unenforceable to any extent, the
9
<PAGE>
remainder of this Lease and the application of such provisions to other persons
or circumstances shall not be affected thereby and shall be enforced to the
greatest extent permitted by law.
28. NAME. Tenant shall not, without the written consent of Landlord, use the
name of the Building for any purpose other than as the address of the business
to be conducted by Tenant in the Premises, and in no event shall Tenant acquire
any rights in or to such names.
29. NOTICES Any notice or document required to be delivered hereunder shall be
deemed to be delivered whether or not actually received, when deposited in the
United States mail, postage prepaid, certified or registered mail, addressed to
the parties hereto at their respective addresses set forth below:
LANDLORD ADDRESS:
GJSI - TEXAS, INC.
12300 FORD ROAD, SUITE 160
DALLAS, TEXAS 75234
TENANT ADDRESS:
TBX Resources, Inc.
12300 FORD ROAD, SUITE 265
DALLAS, TEXAS 75234
30. DEFINED TERMS AND MARGINAL HEADINGS. The words "Landlord" and "Tenant" as
used herein shall include the plural as well as the singular. If more than one
person is named as Tenant, the obligations of such persons are joint and
several. The headings and titles to the articles of this lease are not part of
this lease and shall have no effect upon the construction or interpretation of
any part thereof. Captions contained herein are for the convenience of reference
only and in no way limit or enlarge the terms or conditions of this lease.
31. CORPORATE AUTHORITY. If Tenant executes this Lease as a corporation, each of
the persons executing this lease on behalf of Tenant does hereby personally
covenant and warrant that Tenant is a duly authorized and existing corporation,
that Tenant has and is qualified to do business in Texas, that the corporation
has full right and authority to enter into this lease, and that each person
signing on behalf of the corporation was authorized to do so.
10
<PAGE>
32. LIQUIDATED DAMAGES. If the space for the Premises is not ready for occupancy
by the commencement date of this lease, the rent under this lease shall not
commence until the lease Premises are ready for occupancy by Tenant. Such
allowance for rent shall be received by Tenant in full settlement for any claims
which Tenant might otherwise have by reason of the leased premises not being
ready for occupancy.
33. INTEGRATED AGREEMENT. This Lease contains the entire integrated agreement of
the parties hereto with respect to any matter covered or mentioned in this
Lease. No prior agreement, understanding or representation pertaining to any
such matter shall be effective for any purpose. No provision of this lease may
be amended or added to except by an agreement in writing signed by the parties
hereto or their respective successors in interest.
34. RENTAL DUE DATE AND LATE FEE. In the event that Tenant fails to pay the full
monthly rent reserved herein, including all additional rents due hereunder, and
any arrears of previous rent, on or before the tenth (10th) day of any month,
Landlord, without waiving any other rights or remedies available to Landlord
under the terms of this lease or under law, shall charge Tenant a sum as
additional rent hereunder as an administration fee equal to ten percent (10%) of
the total of said amount of monthly rent as described above which shall be paid
by Tenant to Landlord immediately upon written notice from Landlord of the basis
and amount of such hereinabove and the failure of Tenant to make immediate
payment of said sum shall constitute a default hereunder in the payment of the
rent reserved herein.
35. INDEMNITY. Tenant will indemnify and hold harmless Landlord from and against
any loss, damage or liability occasioned by or resulting from any default
hereunder or any willful or negligent act on the part of Tenant, its agents,
employees, or invitees, or persons permitted on the Demised Premises by Tenant,
Tenant agrees to place and maintain at Tenant's sole cost and expense, insurance
policies covering Tenant's aforesaid indemnity with respect to Tenant's use and
occupancy of the Demised Premises.Such policies shall be issued in the name of
Tenant and Landlord as their interest may appear, or shall contain an
"additional insured" endorsement in favor of Landlord, and with limits of
liaility of at least FIVE HUNDRED THOUSAND DOLLARS ($500,000.00) per occurrence
for bodily injury and ONE HUNDRED THOUSAND DOLLARS (100,000.00) per occurrence
for property damage.Duplicate originals of such policies and endorsements shall
bedelivered to Landlord within thirty (30) days from the execution date hereof.
A. Insurance Policy Requirements. Insurance policies required hereunder shall be
issued by companies which are currently rated B+ or better in "Best's Insurance
Guide" and are licensed to do business in the state of Texas. The maximum
deductibles for these insurance policies shall not exceed One Thousand Dollars
11
<PAGE>
($1,000.00), and Tenant shall be responsible for paying all deductibles in the
event of an insured loss. Tenant shall deliver to Landlord copies of policies of
liability insurance required in this Section 35 and certificates evidencing the
existence and amounts of property insurance required under this Section 35, all
of which shall include loss payable clauses satisfactory to Landlord. No such
policy shall be cancelable or subject to reduction of coverage or other
modifications except after ten (10) days' prior written notice to Landlord.
Tenant shall, within ten (10) days prior to the expiration of such policies,
furnish to Landlord with renewals or "binders" thereof. If Tenant fails to do so
Landlord may, but shall not be required to, procure such insurance and charge
the cost thereof to Tenant, which amount shall be payable by Tenant upon demand.
Tenant shall not do or permit to be done anything which shall invalidate the
insurance policies required herein under this Section 35.
36. RENTAL ADJUSTMENT one (1) year after the commencement of this lease and each
one (1) year thereafter as set forth herein the base rental shall be adjusted
and changed as follows:
Such adjustment of the base rent shall be determined in accordance with the
cost of living changes in the "Consumer Price Index for all Urban Consumers --
U. S. City Average" as published by the Bureau of Labor Statistics United States
Department of Labor, ("BLS Consumer Price Index").
The "BLS Consumer Price Index" figure for month and year in which this lease
commences is the base figure in the computation of adjustment of rentals. At the
beginning of each one (1) year period as provided in this paragraph the "BLS
Consumer Price Index" for the preceding month thereto shall be ascertained and
noted and the rent commencing with the start of each such period of the lease
and continuing throughout such next one (1) year period shall be adjusted by
increasing the basic rent, percentage-wise, as the said "BLS Consumer Price
Index" for the month has increased as compared with the base "BLS Consumer Price
Index" as herein fixed.
37. EXHIBITS. The following exhibits are attached and made a part hereof:
Exhibit A Space Plan of Premises
Exhibit B Tenant Improvements
Exhibit C Rules and Regulations
38. SPECIAL PROVISIONS.
Not Applicable
12
<PAGE>
IN WITNESS HEREOF this Lease has been executed the day and year set forth below:
LANDLORD: GJSI-TEXAS, INC.
a Texas Corporation
--------------------------------------
Glenn J. Solomon
--------------------------------------
President
--------------------------------------
Date
TENANT: TBX Resources, Inc.
a Texas corporation
/s/ Tim Burroughs
--------------------------------------
By
Tim Burroughs
--------------------------------------
Printed
owner/President
--------------------------------------
Title
April 12-1995
--------------------------------------
Date
13
<PAGE>
EXHIBIT A
SPACE PLAN OF PREMISES
III METRO SQUARE OFFICE LEASE AGREEMENT
[DRAWING OMITTED]
A-1
<PAGE>
EXHIBIT B
TENANT IMPROVEMENTS
Tenant improvements shall consist of fresh building standard paint and new
building standard carpet. The reception area shall be enlarged, the interior
conference room shall also be enlarged, and the interior storage/work area shall
be enclosed. Please refer to Exhibit A for a more specific sketch of the suite.
A-1
<PAGE>
EXHIBIT C
RULES AND REGULATIONS
1. No sign, picture, advertisement, name or notice shall be inscribed,
displayed or affixed on or to any part of the inside of the Building or the
Lease premises without the prior written consent of Lessor and Lessor shall have
the right to remove any such sign, placard, advertisement, name or notice to and
at the expense of Lessee.
All approved signs or lettering on doors and the building directory shall be
printed, painted, affixed or inscribed at the expense of Lessee by a person
approved by Lessor.
Lessee shall not place anything or allow anything to be placed
near the glass of any window, door, partition or wall which may appear
unsightly from outside the leased premises provided, however, that
Lessor may furnish and install a Building standard window covering at
all exterior windows. Lessee shall not-without written consent of
Lessor cover or otherwise sunscreen any window.
2. Lessor shall approve in writing, prior to installation, the method
of attachment of any objects affixed to walls, ceilings, or doors other than
reasonable pictures, plaques and similar items.
3. The directory of the Building will be provided exclusively for the
display of the name and location of Lessee only and Lessor reserves the right to
exclude any other names therefrom.
4. The sidewalks, halls, passages, exits, entrances, elevators and
stairways shall not be. obstructed by Lessee or used by lessee for any purpose
other than ingress to and egress *from the leased premises. The halls, passages,
exits, entrances, elevators, stairways, balconies and roof are not for the use
of the general public and the Lessor shall. in all cases retain the right to
control and prevent access thereto by all persons whose presence in the judgment
of the Lessor shall be prejudicial to the safety, character, reputation and
interests of the Building and its Lessees, provided that nothing herein
contained shall be construed to prevent such access to persons with whom the
Lessee normally deals in the ordinary course of Lessee's business unless such
persons are engaged in illegal activities. No Lessee and no employees or
invitees of any Lessee shall go upon the roof of the Building.
5. Locks - No Additional locks or bolts of any kind shall be placed
upon any of the doors or windows by Lessee, nor shall any changes be made in
existing locks or the mechanisms thereof without the prior written consent of
the Lessor. Lessee must, upon the termination of Lessee"s tenancy, restore to
Lessor all keys of
C-1
<PAGE>
storage, offices and toilet rooms either furnished to or otherwise procured by
Lessee and in the event of the loss of any key so furnished Lessee shall pay to
Lessor the cost thereof or of changing the lock or locks opened by lost keys if
Lessor deems it necessary to make a change.
6. The toilet rooms, urinals, wash bowls and other apparatus shall not
be used for any purpose other than that of which they were constructed and no
foreign substance of any kind whatsoever shall be thrown therein and the expense
of any breakage, stoppage or damage resulting from the violation of this rule
shall be borne by the Lessee who, -or whose employees or invitees, shall have
cause it.
7. Lessee shall not overload the floor of the Leased premises or mark,
drive nails, screw or drill into the partitions, woodwork or plaster or in any
way def ace the leased premises or any part thereof. No boring, cutting or
stringing of wires shall be permitted except with the prior written consent of
the Lessor and as the Lessor may direct.
8. No furniture, freight or equipment of any kind shall be brought into
the Building without the consent of Lessor and. all moving of same into or out
of the Building shall be done at such time and in such manner as Lessor shall
designate. Lessor shall have the right to prescribe the weight, size and
position of all safes and other heavy equipment brought into the Building and
also the times and manner of moving the same in and out of the Building by
moving or maintaining, such safe or other property shall be repaired at the
expense of Lessee. There shall not be used in any space, or in the public halls,
of the Building, either by any Lessee or others, any hand trucks except those
equipped with rubber tires and side guards.
9. Janitorial Service - Lessee shall not employ any person or persons
for the purpose of cleaning the Leased Premises without the consent of Lessor.
Lessor shall be in no way responsible to Lessee for any loss of property from
the leased premises, however, occurring or for any damages done to the effects
of Lessee by the Janitorial Service or any Lessor's employees, or by any other
person. Janitorial service will not include the cleaning of carpets and rugs,
other than vacuuming. Lessee shall not cause unnecessary labor by reason of
Lessee's carelessness and indifference in the preservation of good order and
cleanliness.
10. Lessee shall not use, keep or permit to be used any food or
noxious gas or substance in leased premises, or permit or suffer the leased
premises to be occupied or used in a manner offensive or objectionable to the
Lessor or other occupants of the Building by reason of noise, odors and/or
vibrations, or interfere in any way with other Lessees or those having business
therein nor shall any animals or birds by brought in or kept in or about the
leased
C-2
[GRAPHIC OMITTED][GRAPHIC OMITTED]
<PAGE>
premises or the Building. No Lessee shall make or permit to be made any unseemly
or disturbing noises or disturb or interfere with occupants of this or
neighboring Buildings or leased premises or those having business with them
whether by the use of any musical instruments, radio, phonograph, unusual noise
or in any other way. No Lessee shall throw anything out of doors or down the
passageways. No trash shall be placed in the common area before 5:00 P. M..
11. Tenant shall only be permitted use as general of f ice space. No
Lessee shall occupy or permit any portion of his leased premises to be occupied
for lodging or sleeping or for any illegal purposes.
12. Lessee shall not use or keep in the lease premises or the Building
any kerosene, gasoline or combustible fluid or material.
13. Lessor will direct electricians as to where and how telephone and
telegraph wires shall be introduced. No boring or cutting for wires will be
allowed without the consent of Lessor. The location of telephones, call boxes
and other office equipment affixed to the leased premises shall be subject to
the approval of Lessor.
14. Installation of floor coverings - No Lessee shall lay linoleum or
other similar floor covering so that same shall be affixed to the floor of the
leased premises in any way except by a paste, or other material, which may
easily be removed with water, the use of cement or other similar adhesive
materials being expressly prohibited. The method of affixing any such linoleum
or other similar floor covering to the floor, as well as the method of affixing
carpets or rugs to the leased premises, shall be subject to approval by Lessor.
The expense of repairing any damage resulting from a violation of this rule
shall be borne by Lessee by whom, or by whose agents, employees, or visitors,
the damage shall have been caused.
15. Carpet/Floor protection - Lessee shall provide and use chair pads
and carpet protectors at all desk and furniture locations.
16. No Furniture, packages, supplies equipment or merchandise will be
received in the Building or carried up or down in the elevators, except between
such hours and in such elevators as shall be designated by Lessor.
17. On Saturdays, Sundays and legal holidays and on other days between
the hours of 6:00 p.m. and 6:30 a.m. the following day, access to the Building,
or to the halls, corridors, elevators or stairways in the Building or to the
leased premises may be refused unless the person seeking access is known to the
person or employee of the Building in charge and has a pass or is properly
identified.
C-3
<PAGE>
The Lessor shall in no case be liable for damages for any error with regard to
the admission to or exclusion from the Building of any person. In case of
invasion, mob, riot, public excitement, or other commotion, the Lessor reserves
the right to prevent access to the Building during the continuance of the same
by closing the doors or others for the safety of the Lessees and protection of
property in the Building. The Lessor reserves the right to close and keep locked
all entrance and exit doors of the Building on Saturdays, Sundays and legal
holidays and on other days between the hours of 6:00 a.m. and during such
further hours as Lessor may deem advisable for the - adequate protection of said
Building and the property of Lessees.
18. Access to the building and parking may be controlled by the use of
electronic card key or by other method deemed necessary by Landlord. Tenant
shall be issued card keys or other ingress/egress devices and a deposit for each
card or device shall be paid upon issuance of the cards. In the event that
Tenant shall damage or lose the card key(s) or device(s) then Tenant's deposit
for such card or device will be forfeited and Tenant will pay another deposit in
order to replace it.
C-4
EXHIBIT 6
EQUIPMENT AND FURNITURE LEASE
<PAGE>
EQUIPMENT AND FURNITURE LEASE
This lease, effective as of December 1 , 1999, is between American Eagle
Leasing ("Lessor"), and TBX Resources, Inc. ("Lessee").
1. Description of Equipment and Furniture Leased. Lessor leases to Lessee,
and Lessee leases from Lessor, the equipment and furniture described on Schedule
A annexed hereto and made a part hereof
2. Term of Lease. The term of this lease shall be from the date hereof
until terminated by either party by delivery of 30 days' prior written notice.
3. Lease Payments. Lessee agrees to pay Lessor lease payments in the amount
of $5,000 , payable semi-annually in arrears.
4. Maintenance and Repairs. Lessee shall be responsible for all maintenance
and repairs of the leased equipment and furniture.
5. Insurance. Insurance covering loss will be maintained by Lessee with an
insurance company acceptable to Lessor, the premiums of which shall be paid by
Lessee. In the event Lessee shall fail to pay for or provide any such insurance,
Lessor, at Lessor's option, may pay for such insurance and add the amount paid
to the next monthly lease payment due from Lessee. Lessee will promptly notify
Lessor of any loss, damage, or incident that may give rise to an insurance
claim.
6. Risk of Loss or Damage. Lessee assumes all risks of loss or damage to
any portion of the equipment and furniture leased not covered by insurance. All
replacements, repairs, or substitution of parts or equipment shall be at the
cost and expense of Lessee. Lease payments on the leased equipment and furniture
shall not be prorated or abated while it is being repaired.
7. Security Interest. Lessor reserves a security interest to secure
performance of Lessee's obligations under this lease.
8. Return of Equipment and Furniture. On the termination of the lease for
any reason whatever, Lessee shall return the leased equipment and furniture to
Lessor in as good condition as when received, reasonable wear and tear excepted.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, each party has caused this agreement to be executed
on the date first written above.
LESSOR
By: American Eagle Leasing
Name:
Title: Owner
LESSEE
By: TBX Resources, Inc.
Name:
Title: President
<PAGE>
EXHIBIT A
Item # Qty Description
1. 2 2-DRAWER WOODEN FILE CABINET
2. 2 GL GLASS TOP TABLES WITH WHITE BASE
3. 1 GREY SOFA
4. 1 GREY CLOTH CHAIR
5. 1 BURGUNDY LEATHER SOFA
6. 1 BLACK LAMP
7. 1 CLOCK
8. 6 ARTIFICIAL FICUS TREES
9. 2 PAPER SHREDDER
10. 4 MAUVE LEATHER GUEST CHAIRS
11. 1 G. HARVEY ORIGINAL - "PACKING HOME FOR CHRISTMAS"
12. 1 G. HARVEY PRINT - "A NEW LEASE"
13. 1 G. HARVEY PRINT - "OIL PATCH"
14. 1 G. HARVEY PRINT - "BOOMTOWN DRIFTERS"
15. 1 G. HARVEY PRINT - "CHANGING THE RANGE LAND"
16. 1 G. HARVEY PRINT - "WHEN LEASES CHANGE"
17. 1 G. HARVEY PRINT - "RANCHING PUMP JACK STYLE"
18. 1 G. HARVEY PRINT - "LEAVING THE OIL PATCH"'
19. 1 G. HARVEY PRINT - "TWENTIETH CENTURY RANCHING"
20. 1 G. HARVEY PRINT - "A DIFFERENT KIND OF LEASE"
21. 1 G. HARVEY PRINT - "COWBOYS PAYDAY"
22. 1 G. HARVEY PRINT - "COWTOWN 1880"
23. 1 G. HARVEY PRINT - "INDEPENDENT OILMEN"
24. 1 OIL PAINTING - FOUR HORSEMEN IN DESSERT
25. 1 OIL PAINTING - CACTUS AND FLOWERS
26. 1 OIL PAINTING -"WHEN COWBOYS DON'T CHANGE"
27. 1 OIL PAINTING - "WHISPER VALLEY ROUNDUP"
28. 1 BRONZE & MARBLE STATUE - "COMING THROUGH THE RYE"
29. 1 BRONZE & MARBLE STATUE - "BRONCO BUSTER"
30. 1 BRONZE & MARBLE STATUE - "STAMPEDE"
31. 1 POLO PICTURE
32. 1 TUCKER PRINT - BLUE MATTED MOUNTAIN W/INDIANS
33. 1 FRAMED DUCK PRINT
34. 1 FRAMED PRINT - 5 COWBOYS
35. 1 WOODEN CONFERENCE TABLE
36. 8 BURGUNDY LEATHER SIDE CHAIRS
37. 3 WOODEN DESK W/4 DRAWERS
38. 9 EXECUTIVE DESK
39. 9 BURGUNDY LEATHER EXECUTIVE CHAIR
40. 2 EXECUTIVE CREDENZA
41. 2 WOODEN CREDENZA WITH HUTCH
42. 1 CHERRY COMPUTER DESK, 2 DRAWERS WITH HUTCH
43. 2 IRON & GLASS LAMPS
<PAGE>
44. 1 TIE TELEPHONE UNIT 32-64 KEY SYSTEM; SERIAL #009671
W/POWER SUPPLY
45. 1 WALNUT COFFEE TABLE
46. 1 XEROX COPIER 5335; SERIAL #8W7
47. 1 BRASS HAT RACK
48. 1 SHARP TYPEWRITER PA3100
49. 2 BURGUNDY & GREEN GUEST CHAIRS
50. 1 BOWIE KNIFE W/ANTLER & TURQUOISE HANDLE; BLADE INSCRIBED;
STAND
51. 2 ROUND SIDE TABLE WITH DRAWER
52. 2 BLUE LEATHER GUEST CHAIRS
53. 2 BRASS LAMP WITH BURGUNDY ACCENT
54. 1 BRASS CANDLE LAMP WITH BLACK SHADE
55. 1 NATAMICHI CD PLAYER SERIAL 4V31814579
56. 1 NATAMICHI CD RECEIVER SERIAL #D 11516814
57. 1 CORDLESS PHONE
58. 1 AREA RUG
59. 1 LEATHER BULL WHIP
60. 1 PANASONIC MICRO CASSETTE RECORDER SERIAL #SFCNB39833
61. 1 NOLAN RYAN AUTOGRAPHED BASEBALL
62. 1 WATERFORD CRYSTAL FOOTBALL W/SMALL BOWL
63. 1 WATERFORD CRYSTAL DALLAS COWBOY HELMET
64. 1 SUPERBOWL XXX CUSHION
65. 1 25TH ANNIVERSARY TEXAS STADIUM FOOTBALL (MAC GREGOR)
66. 1 DALLAS COWBOY AUTOGRAPHED FOOTBALL IN HOLDER
67. 2 FOLDING TABLES
68. 2 BEIGE 2 DRAWER FILE CABINETS
69. 2 BEIGE 5 DRAWER FILE CABINET
70. 2 BLACK 4 DRAWER FILE CABINETS
71. 1 DRY ERASE BOARD LARGE
72. 1 DRY ERASE BOARD SMALL AND EASEL
73. 2 BURGUNDY LAMPS
74. 1 RECTANGLE SIDE TABLE
75. 1 SANYO 3.2 CUBIC FT. REFRIGERATOR SERIAL #931168932
76. 3 SEC CHAIR
77. 4 BURGUNDY/TAN PRINT CHAIRS
78. 1 OVAL COFFEE TABLE
79. 2 BRASS LAMP
80. 2 SOFA TABLE
81. 1 MIRROR
82. 1 PHONE SYSTEM: 12 LINES, 12 HAND SETS, CONTROL BOX,
RECEPTION STATION
83. 1 KITCHEN TABLE AND 4 CHAIRS
84. 1 AMANA AUTOMATIC REFRIGERATOR
85. 1 EMERSON MICROWAVE MODEL #AT575 SHARP TV SERIAL #334180
86. 1 SHARP TV SERIAL #334180
87. 1 HP LASER JET PRINTER SERIES 11
88. 1 CASIO 10 KEY CALCULATOR
89. 1 FELLOWS PAPER SHREDDER
<PAGE>
90. 1 BROTHER FAX MACHINE
91. 1 BLACK IRON AND GLASS LAMP
92. 1 BLACK COFFEE TABLE
93. 1 BROTHER P-TOUCH LABELER SERIAL #A78772216
94. 1 KEYBOARD
95. 1 MONITOR W/SPEAKERS SERIAL #96T00529
96. 1 HP DESKJET 600C SERIAL #SG57E183C4
97. 1 HEADSETS
98. 1 HANGING DRY ERASE BOARD
99. 2 BRIEFCASES; 1 BLACK AND 1 BURGUNDY
100. 1 BLUE LEATHER CHAIR AND OTTOMAN
