UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
UNDER
THE SECURITIES EXCHANGE ACT OF 1934
COMANCHE ENERGY, INC.
(Exact name of registrant as specified in its charter)
UTAH 87-0362159
(State or other jurisdiction (I.R.S. Employer
of Identification Number)
incorporation or organization)
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3015 East Skelly Drive
Suite 450
Tulsa, OK 74105-6369
(Address of principal executive offices, including zip code)
(918) 743-6555
(Registrant's Telephone Number, Including Area Code)
(918) 745-6021
(Registrant's Facsimile Number, Including Area Code)
Securities to be registered pursuant to Section 12(b) of the Act: None
====
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, No Par
(Title of class)
Information Required in Registration Statement
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Defined Terms Used in the Registration Statement
"MCF" means thousand cubic feet, "MMCF" means million cubic feet and "Bcf"
means billion cubic feet, "MCFPD" means thousand cubic feet per day, "MCFE"
means thousand cubic feet equivalent, "MMCFE" means million cubic feet
equivalent and "Bcfe" means billion cubic feet equivalent. "BBL" means barrel,
"BOPD" means barrels of oil per day, "MBBLS" means thousand barrels and "MMBBLS"
means million barrels. "BOE" means equivalent barrels of oil and "MBOE" means
thousands equivalent barrels of oil. Unless otherwise indicated herein. natural
gas volumes are stated at the legal pressure base of the state or area in which
the reserves are located and at 60 degrees Fahrenheit. Natural gas equivalents
are determined using the ratio of six MCF of natural gas to one BBL of crude
oil.
The term "gross" refers to the total leasehold acres or wells in which the
Company has a working interest. The term "net" refers to gross leasehold acres
or wells multiplied by the percentage working interest owned by the Company.
"Net production" means production that is owned by the Company less royalties
and production due others.
"Proved reserves" are estimated quantities of crude oil, natural gas and natural
gas liquids, which geological and engineering data demonstrate with reasonable
certainty to be recoverable in future years from known reservoirs under existing
economic and operating conditions "Proved developed reserves" are those reserves
which are expected to be recovered through existing wells with existing
equipment and operating methods. "Proved undeveloped reserves" are those
reserves which are expected to be recovered from new wells on undrilled acreage
or from existing wells where a relatively major expenditure is required for
recompletion.
The term "oil" includes crude oil, condensate and natural gas liquids.
As used herein, the term "Comanche" and the "Company" includes Comanche Energy,
Inc. and its wholly owned subsidiaries Comanche Well Service Corporation and
Double Eagle Petroleum Corporation on a consolidated basis unless the context
indicates otherwise.
Certain Forward-Looking Information
Certain statements included in this report which are not historical facts are
forward looking statements, including the information provided with respect to
future business opportunities, expected financing sources and related matters.
These forward looking statements are based on current expectations, estimates,
assumptions and beliefs of management, and words such as "expects,"
"anticipates," "intends," "believes," "estimates" and similar expressions are
intended to identify such forward looking statements. Since this information is
based on current expectations that involve risks and uncertainties, actual
results could differ materially from those expressed in the forward looking
statements.
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Part I
Item 1. Description of Business.
(a) Business Development.
1. Form and Year of Organization.
The Company was organized under the laws of the State of Utah in January 1980
under the original name of Quest Resources, Inc. Effective January 25, 1995, the
Company changed its name to Comanche Energy, Inc. On July 9, 1996, Comanche
formed Comanche Well Service Corporation as a wholly-owned subsidiary
incorporated under the laws of the State of Texas. Comanche Well Service
Corporation issued 1,000 shares of its common stock to the Company in exchange
for $25,000.
2. Bankruptcy, Receivership or Similar Proceeding.
Comanche has never been in a bankruptcy, receivership or similar proceeding.
3. Material Mergers, Reclassifications and Purchases of Assets.
See the attached exhibits attached hereto:
Exhibit "A-1" Asset Purchase Agreement with E. B. Germany & Sons
Exhibit "A-2" Agreement to Exchange Stock between Oil City Comanche
Exhibit "A-3" Agreement to Exchange Properties Comanche & Sha Stephens
Exhibit "A-4" Stock Purchase Agreement with Benchmark
Exhibit "A-5" Agreement between Comanche and Enighma
(b) Business of Issuer
1. Principal Products and Services and Their Markets
Comanche is engaged in the development of oil and natural gas reserves through
the acquisition of producing oil and natural gas wells, interests and leases
from existing companies. Comanche through its wholly-owned subsidiaries, Double
Eagle Petroleum Corporation and Comanche Energy, Inc., owns crude oil and
natural gas properties and pipeline systems located in the states of Texas,
Oklahoma and Mississippi. At6/1999, Comanche owned an interest in approximately
63 producing natural gas wells and 28 producing oil properties with daily net
production to the Company's interest of 1,667 MMCFPD and 136 BOPD. Comanche
estimates its net proven oil and natural gas reserves as of August 31, 1999 to
be approximately 12,474 MMCF of gas and 1,056 MBBL of oil. The Company believes
it can acquire properties from others at attractive prices and enhance the oil
and natural gas production from those properties through the application of
known workover and rework techniques.
2. Distribution Methods of Products and Services.
Comanche sells its products to other oil and gas purchasing companies.
3. Status of Publicly Announced new Products or Services.
Comanche has not announced any new products or services.
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4. Competitive Business Conditions, Competitive Position and Methods of
Competition.
There are many companies and individuals engaged in the oil and gas business.
Some are very large and well established with substantial financial and business
capabilities and long earnings records. Comanche is at a competitive
disadvantage with some other firms and individuals in acquiring and disposing of
oil and gas properties, since they have greater financial resources and larger
technical staffs than the Company. In addition, in recent years a number of new
small companies have been formed which have objectives similar to those of the
Company and which present substantial competition to the Company.
A number of factors, beyond the Company's control and the effect of which cannot
be accurately predicted, affect the production and marketing of oil and gas and
the profitability of the Company. These factors include crude oil imports,
actions by foreign oil producing nations, the availability of adequate pipeline
and other transportation facilities, the marketing of competitive fuels and
other matters affecting the availability of ready market, such as fluctuating
supply and demand.
5. Sources of Raw Materials and the Names of Principal Suppliers.
Comanche obtains all requisite items either through its contractors or from a
variety of suppliers at market conditions. There are no principal suppliers upon
which Comanche relies.
6. Dependence on One or Few Major Customers.
Comanche currently sells a substantial portion of its oil production to six
purchasers, Koch Oil Company, Aquila Southwest Pipeline, Inc, Duke Energy Field
Services, Texas Energy Management, LLC an Sun Oil Company. Comanche has no
written contracts with any purchasers. Comanche does not believe that the loss
of either of these purchasers would significantly impair its operation, since
there are a number of purchasers of oil and gas products upon terms and
conditions similar to those ineffective with Koch and Sun.
7. Patents, Trademarks, Licenses, Royalty Agreements or Labor Contracts.
Intellectual property rights are generally not important to oil and gas
companies. Comanche does not own or rely upon any patents, trademarks, or
similar intellectual property rights. Comanche has no labor agreements.
8. Need for Governmental Approvals.
Federal, state and local authorities extensively regulate the energy industry.
Legislation affecting the energy industry is under constant review for amendment
or expansion. Numerous departments and agencies, both federal and state, have
issued rules and regulations binding on the energy industry and their individual
members some of which carry substantial penalties for the failure to comply. The
regulatory burden on the energy industry increases their cost of doing business
and consequently, affects their profitability. Inasmuch as such laws and
regulations are frequently amended or reinterpreted, Comanche is unable to
predict the future cost or impact of complying with such regulations.
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9. Effect of Existing or Probable Governmental Regulation.
Comanche's operations are subject to extensive federal, state and local laws and
regulations relating to the generation, storage, handling, emission,
transportation and discharge of materials into the environment. Permits are
required for various Company operations, and these permits are subject to
revocation, modification and renewal by issuing authorities. Governmental
authorities have the power to enforce compliance with their regulations and
violations are subject to fines, injunctions or both. It is possible that
increasingly strict requirements will be imposed by environmental laws and
enforcement policies thereunder. Comanche is also subject to laws and
regulations concerning occupational safety and health. It is not anticipated
that Comanche will be required in the near future to expend amounts that are
material in the aggregate to the Company's overall operations by reason of
environmental or occupational safety and health laws and regulations but
inasmuch as such laws and regulations are frequently changed, Comanche is unable
to predict the ultimate cost of compliance.
10. Estimate of the Amount Spent on Research and Development.
Comanche is constantly looking for oil and gas properties that fits its
acquisition criteria. Except for such activities, Comanche does not expect to
incur any substantial costs for research and development, and no customer has or
is expected to bear any direct research and development expense.
11. Costs and effects of Environmental Compliance.
The operations of Comanche are subject to all risks inherent in the exploration
for and operation of oil and natural gas, including such natural hazards as
blowouts, cratering and fires, which could result in damage or injury to, or
destruction of, drilling rigs and equipment, producing facilities or other
property or could result in personal injury, loss of life or pollution of the
environment. Any such event could result in substantial expense to the Company
which could have a material adverse effect upon the financial condition of
Comanche to the extent it is not fully insured against such risk. The Company
carries insurance against certain of these risks but, in accordance with
standard industry practices, the Company is not fully insured for all risks,
either because such insurance is unavailable or because the Company elects not
to obtain insurance coverage because of cost, although such operational risks
and hazards may to some extent be minimized. No combination of experience,
knowledge and scientific evaluation can eliminate the risk of investment or
assure a profit to any company engaged in oil and natural gas operations.
Oil and gas activities have in the past involved exploratory drilling, which
carries a significant risk that no commercial oil or gas production will be
found. The cost of drilling, completing and operating wells is often uncertain.
Further, drilling may be curtailed or delayed as a result of many factors,
including title problems, weather conditions, delivery delays, shortages of pipe
and equipment, and the availability of drilling rigs, among other reasons.
The oil and gas business is further subject to many other contingencies, which
are beyond the control of the Company. Wells may have to be shut-in, because
they have become uneconomical to operate due to changes in the price of oil,
depletion of reserves, or deterioration of equipment. Changes in the price of
imported oil, the discovery of new oil and gas fields and development of
alternative energy sources have had and will continue to have an effect on
Comanche's business.
Comanche has not incurred any cost during fiscal 1999 associated with
environmental compliance and does not expects to incur any cost during fiscal
2000.
12. Number of Employees.
Comanche has 4 full time employees at its headquarters in Tulsa, Oklahoma and 3
employees located at its operations office in Weatherford, Texas. Comanche
retains consultants with respect to current and proposed properties and
operations. Comanche from time to time retains independent engineering and
geological consultants and the services of lease brokers and geophysicists in
connection with its operations.
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Item 2. Management's Discussion and Analysis of Plan of Operation.
(a) Plan of Operation.
1. Plan of Operation for the Next Twelve Months.
Comanche expects to develop and acquire for future development oil and gas
properties as opportunities arise in the geographic and other areas of its
interest.
(i) Cash Requirements
At August 31, 1999, the Company had current assets of $410,394 and current
liabilities of $2,403,457, which resulted in negative working capital of
$1,993,063 of which $1,049,328 represented current maturities of long-term debt
under the Company's prior credit facility. As a result of the replacement of the
Company's prior credit facility with the credit facility from Bank of Oklahoma,
the company believes its working capital position will improve dramatically. The
Company has notes payable to shareholders and related parties totaling
$1,436,049. The Company had an accumulated net loss carry-forward of $2,936,145
as of August 31, 1999. Comanche believes that as a result of the acquisition of
Double Eagle and others and the availability of the credit facility with Bank of
Oklahoma, it will be able to meet its working capital requirements in the
current fiscal year and fund its capital projects.
(ii) Product Development and Research Plan for the Next Twelve Months
Comanche expects to continue to produce oil and gas products and to sell those
products to purchasers at market conditions.
(iii) Expected Purchase or Sale of Plant and Significant Equipment
Comanche expects to continue to acquire additional oil and gas properties and
interests as the opportunities arise and to produce and acquire oil and gas
products therefrom.
(iv) Expected Significant Changes in the Number of Employees
Comanche expects to add staff as operations expand. Comanche currently
coordinates all oil field maintenance and supervision activities using contract
labor.
(1) Management's Discussion and Analysis of Financial Condition and Results of
Operations.
(2) Full Years.
The factors which most significantly affect the Company's results of operations
are (i) the sale prices of crude oil and natural gas, (ii) the level of oil and
gas sales, (iii) the level of lease operating expenses, and (iv) the level of
and interest rates on borrowings.
The Company was unable to satisfy all of its general working capital
requirements with cash flow generated from operations during the 1999 fiscal
year. As in past years, this deficit in working capital was financed by direct
cash advances made by affiliated companies and shareholders.
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Effective June 1, 1999, the Company completed the acquisition of Double Eagle
Petroleum Corporation, the acquisition of working interests operated by E.B.
Germany & Sons and the acquisition of working interests from Sha Stephens, Inc.
The reserves acquired were valued at approximately $14.8 million, based upon the
future net revenue of its future oil and gas production discounted at 8%.
Monthly operating income as a result of these acquisitions is estimated to be
approximately $120,000. On August 31, 1999, the Company completed a $15,000,000
secured oil and gas reserve-based credit agreement with Bank of Oklahoma with
the initial base set at $ 3,000,000. As a result of the acquisitions, the
Company expects its financial condition to improve significantly and based upon
the cash flow from these acquisitions and the availability of a new credit
facility, the Company expects to be in a position to fund its working capital
requirements during the next fiscal year.
Year ended December 31, 1998 compared to year ended December 31, 1997. Total
revenues for the Company for the year ended August 31, 1998 were $690,950
compared to $531,082 for the year ended August 31, 1997 and reflects an increase
in revenues from the operation of the Company's gathering systems. The Company
expects its revenues to remain at or about these levels.
Operating expenses for the year ended August 31, 1998 were $595,566 compared to
$453,821 for the same period a year earlier and reflect an increase in gathering
system costs as a result of handling greater volumes of gas during fiscal year
1998. The Company expects to incur operating expenses at or near these levels.
General and administrative expenses increased dramatically from $219,712 for the
year ended August 31, 1997 to $373,401 for the year ended August 31, 1998 and
reflects the expenses associated with its increased activity. The Company
expects its general and administrative expenses to remain at these levels.
The Company incurred an after tax net loss of $490,334 ($0.03 per share) for the
year ended August 31, 1998 compared to an after tax net loss of $309,253 ($0.02
per share) for the prior year. The increase in the loss is a result of the high
level of general and administrative expenses for 1998.
Year ended December 31, 1997 compared to year ended December 31, 1996. Total
revenues for the Company for the year ended August 31, 1997 were $531,082
compared to $442,185 for the year ended August 31, 1996.
Operating expenses for the year ended August 31,1997 were $453,821 compared to
$377,193 for the year ended August 31, 1996. The level of expenses is expected
to remain about the same for fiscal 1998. General and administrative expenses
increased to $219,712 for the year ended August 31,1997 compared to $75,560 for
the prior year end and reflects the Company's increased activities.
The Company incurred an after tax loss of $309,253 ($0.02 per share) for the
year ended August 31, 1997 compared to a loss of $200,610 ($0.015 per share) for
the year ending August 31, 1996.
(2) Interim Periods.
Eight months ended August 31, 1999 compared to year ended December 31, 1998.
Total revenues for the Company for the eight months ended August 31, 1999 were
$680,071 compared to $690,950 for the year ended December 31, 1998. The Company
did not report any well service revenues in 1999. The loss of well service
revenues which made up $253,800 of the fiscal 1998 revenues is more than offset
in oil and gas revenues from the acquisitions, which represent about 3 months of
revenues. Revenues from oil and gas production, for a full year, are estimated
at approximately $2.3 million, based upon current price levels.
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Operating expenses for the eight months ended August 31, 1999 were $449,959
compared to $595,566 for the year ended December 31, 1998. Direct operating
expenses for oil and gas operations are estimated to total approximately $0.9
million on an annual basis. General and administrative expenses increased from
$373,401 for the year ended December 31, 1998 to $451,217 for the eight months
ended August 31, 1999. The Company expects the level of its general and
administrative expenses to be approximately $600,000 on an annual basis.
Interest expense was $134,362 for the eight months ended compared to $159,143
for the year ended August 31, 1998. Interest expense, based upon the current
level of borrowings, is expected to average approximately 350,000 annually.
The Company incurred a non-recurring charge against earnings of $444,812 during
the eight months ended August 31, 1999 as a result of the write-down of its oil
and gas assets. The Company incurred an after tax net loss of $1,122,832 ($0.02
per share) for the eight months ended August 31, 1999 compared to an after tax
net loss of $490,334 ($0.03 per share) for the prior year. The increase in the
loss is a result of the write-down of the Company's oil and gas assets and an
increase in general and administrative and operating expenses as a result of the
acquisitions.
Capital Resources and Liquidity.
The Company's capital requirements relate primarily to its oil and gas
production activities and the expansion of those activities. Prior to the
acquisition of Double Eagle, Sha Stephens, the E.B.Germany interests and others,
the Company funded its very limited activities from cash flow and borrowings
from an affiliate of the Company.
Comanche is actively reviewing additional acquisition opportunities available in
the oil and gas business which will require significant capital expenditures.
The Company has a wide degree of discretion in the level of capital expenditures
it can devote to acquisitions and the capital it must devote to each project on
an annual basis and the timing of the development of each project. In order to
develop its properties in a continuous manner in the future, management believes
the Company will need to utilize the debt facility available as a result of the
acquisitions and to raise capital from outside sources. In the event that
additional capital is not obtained from other sources, it may become necessary
to alter development plans or otherwise abandon certain ventures.
The timing of expenditures for Comanche's development activities are distributed
over several months and as a result, the Company anticipates its current working
capital and available debt facility will be sufficient to meet its capital
expenditures. The level of Comanche's capital expenditures will vary in the
future depending on commodity market conditions and upon the success of its
acquisition efforts. Comanche anticipates that its cash flow will be sufficient
to fund its operations at their current levels.
Comanche has obtained a revolving credit line as a result of the acquisitions
previously discussed from Bank of Oklahoma, N.A. in an amount of $15,000,000
based upon the periodic review of its oil and gas properties. The borrowings
under the line bear interest at the ban's prime lending rate plus 1% with
interest and principal payable monthly. Borrowings under the credit line are
limited to a borrowing base determined by the bank based upon periodic reviews
of the Company's oil and gas properties. At April 1, 2000, Comanche had
approximately $ 2,750,000borrowed against this credit facility and approximately
$ 250,000available for future borrowings. All principal and interest is due
under the terms of the facility by September 1, 2001. The credit facility is
collateralized by principal producing properties of Comanche.
Seasonality
The results of operations of the Company are seasonal due to seasonal
fluctuations in the ability to conduct remedial operations in certain areas,
resulting in lower production volumes and due to seasonal fluctuations in oil
and natural gas prices. Due to these seasonal fluctuations, results of
operations for individual quarterly periods may not be indicative of results,
which may be realized on an annual basis.
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Inflation and Prices
The Company's revenues and the value of its oil and gas properties have been and
will be affected by changes in crude oil and natural gas prices. The Company's
ability to maintain current borrowing capacity and to obtain additional capital
on attractive terms is also substantially dependent on these prices. Prices for
these commodities are subject to significant fluctuations that are beyond the
Company's ability to control or predict.
Item 3. Description of Property.
(a) Location and Description of Property.
A thorough title examination has been performed by the Company or its
predecessor in interest with respect to substantially all of the Company's
producing properties and the Company believes that the title to its properties
is generally acceptable to third parties. However, as is customary in the oil
and gas industry, the Company conducts only a preliminary title examination
prior to acquisition of properties believed to be suitable for drilling
operations. Prior to the commencement of actual drilling operations, a title
examination is usually conducted and any significant defects all remedied before
proceeding with operations. The Company's properties are subject to royalty,
overriding royalty and other interests customary in the industry, liens incident
to operation agreements, current taxes and other burdens, minor encumbrances,
and easement restrictions. The Company does not believe that any of these
burdens materially detract from the value of the properties or will materially
interfere with their use. Oil and gas leases generally provide that properties
are subject to reversion for non-production.
Major Properties
The Company is principally engaged in the exploration and production of crude
oil and natural gas in Oklahoma, Texas, Louisiana and Mississippi. The Company
presently owns an interest in 47 producing gas wells and 43 producing oil wells
with current net daily production of 1,667 MMCFPD and 136 BOPD to the Company's
interest. A brief description of the major fields in which the Company owns an
interest follows.
1. CENTRAL TEXAS
The BBC Acquisition covers nearly 3,000 acres in Jack and Parker Counties,
Texas. There are 14 well bores with last year's production of 43 MMCF and
2,500 barrels of oil. Since the death of the original Owner/Operator, the
lease has been mis-managed and somewhat abused and for the most part ignored.
With no substantial cash outlay, the production can possibly be brought back
to respectable standards. The area, is a multi pay horizon area. All of the
wells are still in their original zone of completion; this makes the
upside potential outstanding. Gas reserves are in excess of 10 billion cubic
feet of gas and 500,000 barrels of oil. The company has commenced the
workover program on the property. Production has increased from 80 MCFPD
to 300 MCFPD and from 10 BOPD to 80 BOPD. Estimated cash flow to the company
is $36,000/mo.
2. WEST-CENTRAL ALABAMA
Comanche has acquired a 23% Working Interest in a new Lewis Sand (Basal
Mississippian) completion in the Alabama Black Warrior Basin. The well has
been drilled, cased and perforated, but requires a hydrofracture treatment in
order to produce. Analogous offsets produce at a rate of 800 to 1,200 cubic
feet of gas per day. Estimated cash flow to the company is $12,000/mo.
3. EAST TEXAS
The company recently acquired nine wells in East Texas. Current production
from two of the wells is 700 MCFPD and 43 BOPD. The company has
multi-recompletion opportunities, i.e., Cotton Valley, Travis Peak, and
Pettit. Average total depth on these wells is 10,000'. The company owns
approximately 98% of these properties.
4. WESTERN MISSISSIPPI
The Bovina Field is one of the most valuable properties the company currently
owns and operates. The field is comprised of two producing and one inactive
well. The active wells produce against an 850 psi sales line pressure at a
rate of 1,200 MCFPD. In an attempt to increase daily production rates to 2.0
MMCFD, compressors have been designed for both leases. The company believes
it has tremendous upside potential in the Bovina field with respect to a
Cotton Valley re-entry and our undeveloped acreage position. The company has
been in discussion with an offset operator to acquire their interest in this
field. If this acquisition is successful, the company could triple its
production and double its undeveloped acreage position. The company currently
has a 54% working interest in this field.
5. SOUTHERN MISSISSIPPI
The Tuscaloosa Marine Shale (TMS) lies between the Upper and Lower Tuscaloosa
Sands and can vary in thickness from 500' to 2000'. The aerial extent ranges
from the Florida Panhandle to Southeastern Louisiana. The majority of the
Marine Shale consists of a dense black matrix which yields low induction log
resistivity values. There is a distinctive member within the TMS section
which is identified by a noticeably higher induction resistivity value. This
interval is known as the "Oil Saturated Marine Shale" section. The
oil-saturated section varies in thickness from 70' on the structural flanks
to 250' in the center of the structure. According to the Basin Research
Institute of LSU, original oil in place values average 50 bbl/acre foot over
the entire structure. OOIP estimates for flank wells would calculate in
excess of 2.2 million barrels per section while center structure wells would
calculate 16 million barrels in place.
The Board of Supervisors #1, which was previously drilled to the Cotton
Valley at 18000', was cased through the TMS with 7 5/8" casing. The
oil-saturated section extends from 11170' to 11300', for a total of 130' net.
The restivity values increase from 2 to 15 ohms coupled with a distinct
invasion profile. The invasion profile of a sandstone matrix typically
indicates reservoir permeability. Within a shale section the invasion profile
suggests secondary fracturing. The key to economic success during the
completion of the Board of Supervisors well will consist of the connection
of the fracture sets through stimulation. The shale is extremely sensitive to
water based fluids. Therefore, the zone will be hydrofractured with
intermediate strength proppant laiden oil based fracture fluid. The
aforementioned stimulation design will encounter virgin reservoir beyond the
damaged area. Using a 20% recovery factor, the estimated recoverable reserves
for the Board of Supervisors well are in excess of 1.2 MMB.
In 1998, an offset well to the Northeast of the proposed prospect was
completed in TMS. Although this well would be considered a flank well,
production rates were very encouraging. Following fracture stimulation, rates
of 100 BPD were experienced. Due to the operators displeasure with the
obtained rates, the well was plugged-back and horizontally drilled. During
the drilling operation, rates in excess of 800 BOPD were experienced.
Consistent production following completion has yet to be established. A
recent workover included the modification of the bottom-hole production
assembly. Unfortunately, 200 BBL of drilling mud was inadvertently dumped on
the producing zone. Post workover production data is encouraging, however the
success of the modified assembly will be unknown until the entire volume of
drilling mud is removed.
(b) Investment Policies.
Comanche seeks to acquire interests in oil and gas properties at prices and
terms and conditions that will enable it to achieve profitable returns to the
shareholders. It does not intend to make investments in real estate, except as
it relates to such oil and gas interests.
Reserves
Oil and Natural Gas
The following table is a summary, as of August 31, 1999, of the proved reserves
of oil and natural gas net to the Company's interest based upon estimates
prepared by the Company. These estimates are based on assumptions Comanche
believes are reasonable regarding production costs, future production rates and
declines. The most material assumptions of oil and gas prices and operating
costs. There are numerous uncertainties inherent in the preparation of estimates
of reserves, including many factors beyond the Company's control. The accuracy
of any such estimates is a function of the quality of available data and of
engineering and geological interpretation and judgement. It can be expected as
the Company conducts additional evaluation, drilling and testing with respect to
its properties that these estimates will be adjusted and could be revised. No
estimates have been filed with or included in reports to any federal authority
or agency other than the SEC. The Company has no reserves outside the United
States.
Oil prices are based on $20.00 per barrel for the year 2000 and $ 18.00 per
barrel esculated at 3% per year thereafter to a high of $ 26.00 per barrel. Gas
is estimated to be at $ 2.30 per MCF for the year 2000 and esculated at 3% per
year thereafter to a high of $ 3.33 per MCF.
As of August 31, 1999
Oil Natural Gas FutureNet Present Value
Category (MBO) (MMCF) Revenue(M$) Discounted @ 10%
Producing 648.7 4,872 10,678.4 9,610.6
Non-Producing 38.3 1,072 2,369.7 2,132.7
Undeveloped 368.5 6,530 15,508.8 13,957.9
(Behind Pipe)
Total Proved 1,055.5 12,474 28,556.9 25,701.2
Oil prices are based on $20.00 per BBL for the year 2000 and $18.00 per BBL
thereafter at a 3% escalation factor to a high of $26.00 per BBL; Gas is
estimated to be $2.30 per MCF for the eyar 2000 and thereafter at 3% escalation
to a high of $3.33 per MCF.
Undeveloped - The Company is currently compiling engineering data to determine
the Company's undeveloped property value. The Company believes the undeveloped
value to be in excess of $35,000,000.
Acreage - The following table shows the developed and undeveloped leasehold
acreage held by the Company as of August 31, 1999:
Developed Acreage Undeveloped Acreage
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(1) Gross (2) Net (1) Gross (2) Net
Louisiana 160 64 480 192
Mississippi 1,280 656 1,920 998
Oklahoma 14,300 10,725 - -
Texas 12,200 9,150 8,600 6,020
Total 27,940 20,595 11,000 7,210
Productive Wells - The following table summarizes the productive oil and gas
wells in which the Company had an interest at August 31, 1999:
Oil Wells Gas Wells Total
----------------------------------------------
(1)Gross (2)Net (1)Gross (2)Net (1)Gross (2)Net
Louisiana 1.0 0.4 1.0 0.4 2.0 0.8
Mississippi 0 0 3.0 1.6 3.0 1.6
Oklahoma 62.0 46.5 18.0 10.8 80.0 57.3
Texas 11.0 6.3 44.0 33.0 55.0 39.3
Total 74.0 53.2 66.0 45.8 140.0 99.0
(1) A "gross acre' or a "gross well" is an acre or well in which a working
interest is owned by the Company and the number of gross acres or gross wells is
the total number of acres or wells in which a working interest is owned by the
Company.
(2) A "net acre" or a "net well" exists when the sum of the Company's fractional
ownership interests in gross acres or gross wells equals one. The number of net
acres or net wells is the sum of the fractional interests owned in gross acres
or gross wells, and does not include any royalty, overriding royalty or
reversionary interests.
Production, Price and Cost Data - The following table summarizes certain
information relating to the production, price and cost data for the Company for
the fiscal years ended, August 31, 1999, 1998 and 1997.
Year Ended August 31
1999 1998 1997
Oil:
Production (BBLS) 25,977 809 862
Revenue $ 474,990 10,049 15,022
Average barrels per day 106.9 2.2 2.4
Average sales price
per barrel $ 18.29 12.42 17.42
Natural Gas:
Production (Mcf) 55,869 31,288 38,345
Revenue $ 201,570 56,945 85,126
Average Mcf per day 230 85 105
Average sales price
per Mcf $ 2.32 1.82 2.22
Production costs $ 339,012 54,463 63,292
Equivalent (Bbls) (1) 35,289 6,024 7,252
Production costs per $ 9.61 9.04 8.72
equivalent bbl
Total oil and gas revenues $ 676,560 66,994 100,148
(1) Gas production is converted to barrel equivalents at the rate of six Mcf per
barrel representing the estimated relative energy content of natural gas to oil.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
(a) Beneficial Owners of More than Five Percent.
Name and Address Relationship to Common Shares Percentage of
Company Owned Outstanding Shares
As of April 1, 2000, the Company had [57,412,384] issued and outstanding
shares of common stock. The following table sets forth, as of that date, the
number and percentage of shares of common stock of the Company owned
beneficially by (i) each director of Comanche, (ii) each executive officer of
Comanche, (iii) all directors and executive officers as a group, and (iv) each
person known by Comanche to own of record or beneficially more than five (5%) of
the Company's common stock. Except as otherwise indicated, the persons named in
the table have sole voting and investment power with respect to the shares
indicated.
Name of Beneficial Number of Shares Percent of
Owner Beneficially Owned Class
James G. Borem(1) 1,751,672 3.2%
Frank W Cole 923,151 1.7
Sha Stephens 3,620,000 6.5
Faye E. Cobb (1) 505,658 0.9
Jeffrey T. Wilson (2) 959,333 1.7
All officers and directors
as a group (5 persons) 7,448,483 13.4%
Imperial Petroleum, Inc. 5,481,901 10.0%
_________________________________
(1) Includes shares owned by Imperial Petroleum, Inc. Mr. Borem is a 4.5%
shareholder of Imperial Petroleum, Inc. and Mrs. Cobb is a 1.2% shareholder of
Imperial Petroleum, Inc.
(2) Mr. Wilson owns no shares directly. Mr. Wilson is Chairman and President of
Imperial Petroleum, Inc. and is a 17.5% shareholder of Imperial Petroleum, Inc.
The address of Mr. Borem is PO Box 35984, Tulsa, OK 74153.
The address of Mr. Cole is 4785 Preston Road, #550, Dallas, TX 75240.
The address of Mr. Stephens is PO Box 189, Weatherford, TX 76086.
The address of Mrs. Cobb is PO Box 35286, Tulsa, OK 74153.
The address of Mr. Wilson is 100 NW Second Street, Suite 312, Evansville, IN
47708.
The address of Imperial Petroleum, Inc. is 100 NW Second Street, Suite 312,
Evansville, IN 47708
(b) Security Ownership of Management
See Item 4(a) above.
(c) Changes in Control
There are presently no arrangements which may result in a change in control of
Comanche.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
(a) Identify Directors and Executive Officers
(1)-(4) Names, Ages, Positions, Offices and Business Experience
The following table sets forth certain information regarding the directors,
executive officers and key employees of the Company.
Name Age Position
James G. Borem 53 Chairman, CEO, CFO/Director
Frank W Cole 74 Vice Chairman/Director
Sha Stephens 37 President/Director
Faye E. Cobb 57 Comptroller and Secretary
Jeffrey T. Wilson 46 Director
Norman Munro Director
Elise Blount-Johnston Director
Charles B. Crowell Director
All directors hold office until the next annual meeting of shareholders of
Comanche and until their successors have been elected and qualified. Officers of
the Company are elected annually and serve at the pleasure of the Board of
Directors.
James G. Borem: Mr. Borem is Chairman and Chief Executive officer of
Comanche Energy, Inc. Mr. Borem is Chairman and Chief Executive Officer of Oil
City Petroleum Inc., an oil and gas exploration company (OTC BB:) since July,
1997. Mr. Borem was COO of LaTex Resources, Inc., oil and gas exploration
company (OTC BB:) from 1991 to 1995 as well as founder and President of Elite
Enterprises, Inc., privately held oil and gas company, as well as Sable
Investments Corporation, a privately held oil and gas company. Mr. Borem was
vice president of Vintage Petroleum from 1983-89, and Manger of Administration
for Andover Oil Company from 1979-83 Mr. Borem brings to the Company a wealth of
experience in oil and natural gas production as past responsibilities have
included oil and gas sales, regulatory affairs, risk management and corporate
administration. Early in his career, Mr. Borem was employed by Sun Oil Company
(Oryx) and Texas Eastern Corporation.
Frank W Cole: Mr. Cole is the founder and current Vice Chairman and a
Director of Comanche Energy, Inc. Mr. Cole has a long and productive association
with oil and natural gas production. Mr. Cole began his petroleum career with
Humble Oil Company (Exxon) and later was an Associate Professor of Petroleum
Engineering at the University of Oklahoma. Mr. Cole authored four oil and gas
text books, still in use by students nationally and internationally. He has also
authored 30 technical articles in U.S., Canadian and Middle Eastern petroleum
production journals. Comanche Energy, Inc. is the fourth company for Mr. Cole to
found, administrate and take public. His past expertise as a university
academician, author, consultant and company founder gives Comanche a tremendous
wealth of knowledge and experience.
Sha Stephens: Mr. Stephens is President and Chief Operating Officer and a
Director of Comanche. He is the founder of Sha Stephens, Inc. Mr. Stephens
brings an operational experience base to the company as his petroleum production
experience spans the past 17 years with his and a family company. He brings a
great deal of natural gas acquisition, exploration and production experience.
His hands-on experience and knowledge of petroleum production promises to be a
definite asset for Comanche.
Faye E. Cobb: Mrs. Cobb is the Comptroller and a director of Comanche and
has been associated with Mr. Borem in like capacities since 1990. Mrs. Cobb
brings 25 years of oil and gas accounting experience as well as extensive
experience in all phases of SEC reporting functions.
Jeffrey T. Wilson: Mr. Wilson is a Director of the Company. Mr. Wilson is a
Director and Chairman of the Board and President of Imperial Petroleum, Inc. Mr.
Wilson was formerly Chairman and President of Latex Resources, Inc. from July
1991 to April 1997. Mr. Wilson was a Director and Executive Vice President of
Vintage Petroleum, Inc. from May 1990 to July 1991. He was Vice President of
Production for Vintage from January 1984 to May 1990 and Manager of Acquisitions
for Vintage from May 1983 to January 1984. From August 1980 to May 1983, Mr.
Wilson was an engineer with Netherland, Sewell & Associates, Inc., a petroleum
engineering consulting firm, where his assignments included annual reserve
appraisals, reserve acquisition appraisals and field studies. From May 1975 to
August 1980, Mr. Wilson gained experience in the oil and gas industry with Exxon
Company, U.S.A. in various engineering and supervisory capacities in Louisiana
and South Texas areas. Mr. Wilson holds a bachelor of Science Degree in
Mechanical Engineering from Rose-Hulman Institute of Technology.
(5) Other Directorships
(b) Other Significant Consultants
Not Applicable.
(c) Family Relationships
None.
(d) Involvement in Legal Proceedings of Officers, Directors and Control Persons
None.
Item 6. Executive Compensation.
Mr. Borem receives an annual salary of $96,000. Mrs. Cobb receives an annual
salary of $54,000. No other officer or director is paid cash compensation. There
are no other forms of employee compensation or employee benefits paid at this
time that exceeds $50,000 for any officer or director.
Item 7. Certain Relationships and Related Transactions.
(a) Describe Related Party Transactions
Crown Petroleum, a company owned by Mr. M. L. Johnson, a shareholder of the
Company, operates certain gas gathering systems on behalf of the Company and is
reimbursed for costs associated with the operation of those systems. The Company
has an account payable balance with Crown Petroleum at August 31, 1999 of
$8,819.
Frank W. Cole Engineering, a company owned by Frank W. Cole, a shareholder and
director of the Company, operated the Company's Texas oil and gas properties
through August 31, 1999 and was reimbursed for costs associated with the
operation. The Company has an account balance with Frank W. Cole Engineering at
August 31, 1999 of $297,131. The Company has terminated the arrangement with
Frank W. Cole Engineering and retired the account payable.
The Company acquired oil and natural gas properties for stock from Sha Stephens,
Inc. and E.B. Germany & Sons during fiscal 1999. The Company had payables due
these entities of $2,073 and $254,322 , respectively at August 31, 1999.
The Company has entered into a consulting arrangement with one of its
shareholders which provides for the payment of $30,000 each year for two years
beginning at the time the Company achieves cash flow targets set by the Board of
Directors. As of August 31, 1999, these targets had not been met.
Item 8. Description of Securities.
Description of Securities
Common Stock.
Comanche is authorized to issue 100,000,000 Shares of Common Stock, no par value
of which 57,412,384 shares were issued and outstanding on April 1, 2000. All
shares of Common Stock are, when issued and paid for, fully paid and
non-assessable.
Voting Rights.
Holders of Shares of Common Stock are entitled to one vote per Share on all
matters submitted to a vote of the Shareholders. Shares of Common Stock do not
have cumulative voting rights, which means that the holders of a majority of the
Shares which are eligible to vote and voting for the election of the Board of
Directors can elect all members of the Board of Directors. Holders of a majority
of the issued and outstanding Shares of Common Stock may take action by written
consent without a meeting.
Dividend Rights.
Holders of record of Shares of Common Stock are entitled to receive dividends
when and if declared by the Board of Directors out of funds legally available
therefor. Comanche intends to retain any earnings for the operation and
expansion of its business and has not paid and does not anticipate paying cash
dividends in the foreseeable future. Any future determination as to the payment
of cash dividends will depend upon future earnings, results of operations,
capital requirements, Comanche's financial condition and such other factors as
the Board of Directors may consider.
Liquidation Rights.
Upon any liquidation, dissolution or winding up of Comanche, holders of Shares
of Common Stock are entitled to receive pro rata all of the assets of Comanche
available for distribution to Shareholders after liabilities are paid and
distributions are made to the holders of Comanche's Preferred Stock, if any.
No Preemptive Rights.
Holders of Common Stock do not have any preemptive rights to subscribe for or to
purchase any stock or other securities of Comanche.
Part II.
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters.
(a) Market Information
(1) Identify the Principal Market or Markets where Common Stock is Traded
Until October 1999, the Common Stock of the Company was traded on the OTC BB.
Since that date the Common Stock of Comanche is traded in the pinksheets.
The Company's common stock is traded in the pinksheets under the symbol CMCY. At
April 1, 2000, Comanche's common stock was quoted at approximately $0.27 (ask)
and $0.25 (bid) per share. Stock information is received from registered
securities dealers and reflects inter-dealer prices, without retail mark-up,
mark-down or commission and may not necessarily represent actual transactions.
The following table provides the quarterly high and low bid and ask price as
reflected in the over-the-counter market for period indicated.
Quarter Bid Ask
Ended High Low High Low
- ------- -------------- -------------
Qtr Ended August 31, 1997 7/8 1/2 1 3/4
Qtr Ended November 30, 1997 7/8 11/16 15/16 11/16
Qtr Ended February 28, 1998 3/4 11/16 3/4 11/16
Qtr Ended May 31, 1998 5/8 1/2 15/16 3/4
Qtr Ended August 31, 1998 3/4 11/16 15/16 11/16
Qtr Ended November 30, 1998 11/16 5/8 3/4 11/16
Qtr Ended February 28, 1999 11/16 5/8 3/4 11/16
Qtr Ended May 31, 1999 11/16 1/2 5/8 7/16
Qtr Ended August 31, 1999 7/16 3/8 1/2 7/16
Qtr Ended November 30, 1999 5/16 3/16 7/16 6/16
Qtr Ended February 29, 2000 1/4 1/5 6/16 1/4
(2) Amounts of Common Equity
(b) Holders
At April 1, 2000, there are approximately 570 holders of record of the Company's
common stock.
(c) Dividends
Comanche has not declared any dividends in the past. Comanche intends to retain
profits from operations for the purchase of its oil and gas acquisitions and
operations. It has no intention of paying dividends in the near future.
Item 2. Legal Proceedings.
None.
Item 3. Changes in and Disagreements with Accountants.
None.
Item 4. Recent Sales of Unregistered Securities.
(a) Date, Title and Amount of Securities Sold
(b) Names of Principal Underwriters
There was no public offering of the shares. The shares were offered to
accredited investors in compliance with SEC Regulation D, Rule 506.
(c) Consideration
The total offering price for the Common Stock sold for cash was $ 0.22 1/2 per
share and $ 0.45 per share in property. Comanche paid total commissions,
consulting fees, finders fees, due diligence fees and expenses in connection
with the sale of shares of its Common Stock of $ 0.35 per share. No such
payments were made to affiliates.
(d) Section under which Exemption from Registration was Claimed
The issuance of the securities described above were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) and SEC
Regulation D, Rule 506, among other exemptions. Each investor represented that
investor's purchase of the securities was for investment only and not with a
view to or for sale in connection with any distribution thereof. Appropriate
legends were affixed to the share certificates issued in such transactions.
Item 5. Indemnification of Officers and Directors.
The Articles of Incorporation of Comanche provide for indemnification to the
full extent permitted by law of all persons it has the power to indemnify under
law. In addition, Comanche's Bylaws provide for indemnification to the full
extent permitted by law of all persons it has the power to indemnify under law.
Such indemnification is not deemed to be exclusive of any other rights to which
those indemnified may be entitled, under any bylaw, agreement, vote of
stockholders or otherwise. The provisions of Comanche's Articles of
Incorporation and Bylaws which provide indemnification may reduce the likelihood
of derivative litigation against directors and officers for breach of their
fiduciary duties, even though such action, if successful, might otherwise
benefit Comanche and its stockholders.
In addition, Comanche has entered into indemnification agreements with the
following present and past officers or directors: [list] These agreements
provide that Comanche will indemnify each officer for acts committed in their
official capacities and for virtually all other claims for which a contractual
indemnity might be enforceable.
Part F/S
(a) Annual Financial Statements
Financial Statements of Comanche Energy, Inc.
Reports of Independent Public Accountants;
Consolidated Balance Sheets as of August 31, 1999 and 1998;
Consolidated Statements of Operations for the years ended August 31, 1999,
1998, and 1997;
Consolidated Statements of Stockholder Equity for the years ended August
31, 1999, 1998, and 1997;
Consolidated Statements of Cash Flows for the years ended August31, 1999,
1998, and 1997;
Notes to Consolidated Financial Statements.
Supplemental Financial Information
Schedule II - Amounts Receivable from Related Parties. Other Schedules are
omitted as they are not required.
(b) Interim Financial Statements
Part III
Index to Exhibits
Exhibit Number Description of Exhibit
2.1 Articles of Incorporation of Comanche (see attached) as
amended
2.2 Bylaws of Comanche
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
April ______, 2000 COMANCHE ENERGY, INC.
By:____________________________
James G. Borem, Chairman,
Chief Executive Officer
Chief Financial Officer
COMANCHE ENERGY, INC.
Independent Auditors' Report
and Consolidated Financial Statements
August 31, 1999
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
INDEPENDENT AUDITORS' REPORT 1
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheet 2
Statement of Loss 4
Statement of Changes in Shareholders' Equity 5
Statement of Cash Flows 6
Notes to Consolidated Financial Statements 8
Supplemental Information 17
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders
Comanche Energy, Inc.
We have audited the accompanying consolidated balance sheet of Comanche Energy,
Inc. (a Utah corporation) as of August 31, 1999, and the related consolidated
statements of loss, changes in shareholders' equity, and cash flows for the
eight months then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Comanche Energy, Inc. as of August 31, 1999, and the consolidated results of its
operations and cash flows for the eight months then ended, in conformity with
generally accepted accounting principles.
/s/ HUTTON, PATTERSON & COMPANY
February 4, 2000
Dallas, Texas
1
<PAGE>
COMANCHE ENERGY, INC.
Consolidated Balance Sheet
August 31, 1999
- --------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash $ 6,859
Accounts receivable, trade 205,122
Revenue receivable 194,569
Prepaid insurance 3,844
------------------
TOTAL CURRENT ASSETS 410,394
------------------
PROPERTY AND EQUIPMENT
Oil and gas properties 17,400,000
Gas gathering systems and pipelines 1,267,001
Gas liquids plants 396,084
Compressors 88,000
Automobile 19,600
------------------
19,170,685
Less accumulated depreciation,
depletion, and amortization 637,396
------------------
NET PROPERTY AND EQUIPMENT 18,533,289
------------------
OTHER ASSETS
Notes receivable, long-term 139,726
Loan acquisition costs, net of accumulated
amortization of $50,737 84,648
Deposits 7,250
Deferred tax asset, net allowance of $998,289 -
------------------
TOTAL OTHER ASSETS 231,624
------------------
$19,175,307
==================
(Continued)
2
<PAGE>
COMANCHE ENERGY, INC.
Consolidated Balance Sheet (Continued)
August 31, 1999
- --------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable, trade $ 455,594
Accounts payable, related parties 562,345
Revenue payable 104,322
Accrued interest 28,808
Accrued expenses 1,482
Notes payable, current maturities 1,049,328
Note payable, BankOne, current maturities 180,000
Capital lease payable, current maturities 21,578
------------------
TOTAL CURRENT LIABILITIES 2,403,457
------------------
LONG-TERM LIABILITIES
Notes payable, net of current maturities 386,721
Note payable, BankOne, net of current maturities 767,017
Capital lease payable, net of current maturities 41,045
------------------
TOTAL LONG-TERM LIABILITIES 1,194,783
------------------
TOTAL LIABILITIES 3,598,240
------------------
SHAREHOLDERS' EQUITY
Common stock (100,000,000 shares authorized,
55,092,007 issued and outstanding, no par) 18,993,307
Subscribed stock (14,350 shares, no par) 6,458
Retained deficit (3,422,698)
------------------
TOTAL SHAREHOLDERS' EQUITY 15,577,067
------------------
$19,175,307
==================
The accompanying notes are an integral
part of these consolidated financial
statements.
3
<PAGE>
COMANCHE ENERGY, INC.
Consolidated Statement of Loss
For the Eight Months Ended August 31, 1999
- --------------------------------------------------------------------------------
REVENUES
Oil and gas revenue $ 676,560
Miscellaneous income 3,511
-----------
TOTAL REVENUE 680,071
EXPENSES
Oil and gas expenses
Lease operating 339,012
Production taxes 23,400
Well service expenses 87,547
Depreciation, depletion, and amortization 375,471
Adjustment for reserve study 444,812
Interest expense 134,362
General and administrative 451,217
-----------
TOTAL EXPENSES 1,855,821
-----------
LOSS FROM OPERATIONS (1,175,750)
GAIN FROM DISPOSITION OF ASSETS 52,918
NET LOSS BEFORE PROVISION FOR INCOME TAXES (1,122,832)
PROVISION FOR INCOME TAXES -
NET LOSS (1,122,832)
============
EARNINGS PER SHARE:
Basic $ (0.02)
Diluted $ (0.02)
============
The accompanying notes are an integral part
of these consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
COMANCHE ENERGY, INC.
Consolidated Statement of Changes in Shareholders' Equity
For the Eight Months Ended August 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Number Common Subscribed Retained
of Shares Stock Stock Deficit Total
---------------- ----------------- ---------------- ----------------- ------------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1998 17,516,330 $ 3,098,080 $ 106,000 $(2,299,866) $ 904,214
Capital stock issued for cash 1,047,370 305,210 - - 305,210
Capital stock issued for assets 138,000 69,000 - - 69,000
Capital stock issued for various
services 609,209 298,739 - - 298,739
Capital stock issued for retirement
of debt 1,370,461 591,950 - - 591,950
Capital stock issued for acquisition
of net assets from various entities
and 100% interest in Double Eagle 34,078,637 15,547,288 - - 15,547,288
Subscribed stock exchanged for capital
stock 332,000 106,000 (106,000) - -
Cash received for subscribed stock - - 6,458 - 6,458
Distribution of assets - (1,022,960) - - (1,022,960)
Net loss - - - (1,122,832) (1,122,832)
BALANCE, August 31, 1999 ----------- ----------------- ---------------- ----------------- ------------------
55,092,007 $ 18,993,307 $ 6,458 $(3,422,698) $ 15,577,067
=========== ================= ================ ================= ==================
The accompanying notes are an integral part
of these consolidated financial statements.
5
</TABLE>
<PAGE>
COMANCHE ENERGY, INC.
Consolidated Statement of Cash Flows
For the Eight Months Ended August 31, 1999
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,122,832)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation, depletion, and amortization 375,471
Adjustment for reserve study 444,812
Gain on disposition of assets (52,918)
Services acquired with common stock 298,739
Changes in assets and liabilities
Increase in accounts receivable, trade (137,175)
Increase in revenue receivable (163,367)
Increase in prepaid insurance (1,230)
Decrease in deposits 3,341
Increase in accounts payable, trade 14,983
Increase in accounts payable, related parties 819,065
Increase in revenue payable 104,322
Increase in accrued interest 15,837
Decrease in accrued expenses (27,673)
-------------
Net cash flows provided by operating activities 571,375
-------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (1,114,517)
Proceeds received from sale of assets 73,000
Principal given for notes receivable (35,000)
Principal received on notes receivable 7,905
-----------------
Net cash flows used in investing activities (1,068,612)
-----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings, notes payable 306,000
Payments on notes payable (108,440)
Payments on notes payable, BankOne (60,000)
Payments on capital lease payable (10,377)
Proceeds provided from sale of common stock 305,210
Proceeds provided from sale of subscribed stock 6,458
-----------------
Net cash flows provided by financing activities 438,851
-----------------
NET DECREASE IN CASH (58,386)
CASH, beginning 65,245
-----------------
CASH, ending $ 6,859
=================
(Continued)
6
<PAGE>
COMANCHE ENERGY, INC.
Consolidated Statement of Cash Flows (Continued)
For the Eight Months Ended August 31, 1999
- --------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
Cash paid for interest $ 134,362
=================
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING ACTIVITIES
Common stock issued for acquisition of assets $ 69,000
=================
Common stock issued for acquisition of net assets
from various entities, including settlement of
related party payable $ 12,853,309
=================
Common stock issued for acquisition of 100%
interest in Double Eagle $ 2,693,979
=================
Common stock issued for retirement of debt $ 591,950
=================
Common stock issued for subscribed stock $ 106,000
=================
Common stock issued for services $ 298,739
=================
Net assets distributed in spin off of
wholly owned subsidiary $ 1,022,960
=================
The accompanying notes are an integral part
of these consolidated financial statements.
7
<PAGE>
COMANCHE ENERGY, INC.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
Organization
Comanche Energy, Inc. (the Company), a Utah corporation, was
incorporated in January 1980, as Quest Resources. Effective January
25, 1995, the Company changed its name to Comanche Energy, Inc.
On July 9, 1996, the Company formed Comanche Well Service
Corporation as a wholly owned subsidiary incorporated under the laws
of the state of Texas. Comanche Well Service Corporation issued 1,000
shares of its common stock to the Company in exchange for $25,000. On
August 31, 1999, the Company spun off Comanche Well Service
Corporation to its shareholders. (NOTE G)
At December 31, 1998, the Company's financial statements
reflected an investment which consisted of its one percent general
partner interest in two limited partnerships. Effective January 1,
1999, the Company acquired the remaining assets and assumed the
outstanding liabilities of these partnerships. Each partner received
shares of the Company's unregistered common stock for their ownership
interests. (NOTE H)
Effective June 1, 1999, the Company acquired all of the
outstanding stock of Double Eagle Petroleum Corporation (Double
Eagle). The Company issued shares of its unregistered common stock for
a 100% interest in Double Eagle. The business combination was
accounted for as a purchase, with the Company designated as the
purchasing entity. (NOTE H)
As a result of the acquisitions, management has elected to change
its fiscal year end to August 31. Therefore, the accompanying
financial statements present the results of operations, changes in
shareholders' equity, and cash flows for the eight months ending
August 31, 1999.
Business Activity
The Company is principally engaged in the production of oil and
gas. The Company owns working interests and overriding royalty
interest in oil and gas properties located in the southern
midcontinent region, which includes Texas, Louisiana, and Oklahoma.
The Company acts as operator of the oil wells on two leases which
constitute the bulk of its working interests. The Company also devotes
its efforts to the purchase, transportation, and sale of natural gas
produced by wells located along its gas gathering systems and pipeline
in Oklahoma (Comanche Gas System, Nellie Gas System, and Cotton Gas
System).
Comanche Well Service Corporation provided contract drilling and well operation
services.
(Continued)
8
<PAGE>
COMANCHE ENERGY, INC.
Notes to Consolidated Financial Statements (Continued)
- --------------------------------------------------------------------------------
NOTE A - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Estimates and Assumptions
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the Company and its wholly owned subsidiary, Double Eagle.
The results of operations for the three months from acquisition (June
1, 1999) to August 31, 1999, are included for Double Eagle.
Additionally, the Company's share of income from Comanche Well Service
Corporation through August 31, 1999 (the date of disposition), are
included. All significant intercompany accounts and transactions have
been eliminated in consolidation.
Oil and Gas Properties
The Company follows the successful efforts method of accounting
for its oil and gas producing activities. Under the successful efforts
method, the Company capitalizes all oil and gas leasehold acquisition
costs. For unproved properties, leasehold impairment is recognized
based upon an individual property assessment and exploration
experience. Upon discovery of commercial reserves, such leasehold
costs are transferred to proved properties.
Geological and geophysical expenses, production costs, and
overhead are charged against income as incurred. Exploratory drilling
costs are capitalized when incurred. If exploratory wells are
determined to be unsuccessful (dry holes), applicable costs are
expensed. Costs incurred to drill and equip developmental wells,
including unsuccessful development wells, are capitalized.
Expenditures related to extensive well workover projects are
capitalized upon determining that the workover resulted in
significantly increased proved reserves. All other workover costs are
expensed as incurred. These costs include those for deepening existing
producing wells within the same producing formation when such
operations are conducted for the purpose of restoring efficient
operating conditions as well as other repairs, reconditioning, or
reworking costs of wells already drilled and operating.
(Continued)
9
<PAGE>
COMANCHE ENERGY, INC.
Notes to Consolidated Financial Statements (Continued)
- --------------------------------------------------------------------------------
NOTE A - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Depreciation, depletion, and amortization of the cost of proved
producing oil and gas properties, including wells and related
equipment and facilities, are determined by the units-of-production
method based on quantities produced as a percent of estimated proved
recoverable reserves. Depreciation of the automobile and gas gathering
systems are provided for by the straight-line method over estimated
useful lives ranging from 5 to 15 years.
When complete units of depreciable property are retired or sold,
the asset cost and related accumulated depreciation and depletion are
eliminated with any gain or loss reflected in income.
Loan Acquisition Costs
The loan acquisition costs are related to a revolving line of
credit obtained during the year ended August 31, 1998, related
amendments effective through August 31, 1999, and loans obtained
through various individuals and shareholders. Total loan acquisition
cost as of August 31, 1999, was $135,385. The cost is being amortized
from 36 to 60 months based on the remaining life of the loan.
Amortization of the loan acquisition cost for the eight months ended
August 31, 1999, was $30,177.
Federal Income Taxes
The Company accounts for federal income taxes under the
provisions of SFAS No. 109 which requires the recognition of deferred
tax assets and liabilities for the future tax consequences
attributable to differences between financial statement carrying
amounts of existing assets and liabilities and their respective tax
basis. In addition, the recognition of future tax benefits, such as
net operating loss carryforwards, are required to the extent that
realization of such benefits are more likely.
NOTE B - NOTES PAYABLE
Notes payable consisted of the following at August 31, 1999:
Credit agreement, BankOne, dated September 19,
1997, current amendment dated March 31,
1999, providing a borrowing base of
$2,400,000 with monthly installment payments
of $15,000, including interest at prime
plus one percent, secured by certain oil and gas
properties and other assets of the Company $ 947,017
(Continued)
10
<PAGE>
COMANCHE ENERGY, INC.
Notes to Consolidated Financial Statements (Continued)
- --------------------------------------------------------------------------------
NOTE B - NOTES PAYABLE (Continued)
Note payable, Imperial Petroleum, Inc., interest
will begin to accrue and principal and interest
payments will be determined in the fourth year
of the note, with payment in full due September 1,
2006 165,000
Notes payable to various shareholders, interest
due quarterly at 12%, with principal due in full
at various maturity dates through 2001, unsecured 256,100
Notes payable to various individuals, interest
due quarterly at 12%, with principal due in full
at various maturity dates through 2001, unsecured 490,950
Notes payable to various individuals, quarterly
payments ranging from $4,423 to $22,722 including
interest ranging from 8% to 16%, maturing at various
dates through 2001, secured by various oil and
gas properties 523,999
-----------
2,383,066
-----------
Less current maturities 1,229,328
-----------
$1,153,738
===========
The credit agreement with BankOne does not specify a final
maturity date. This credit agreement originally dated September 19,
1997, contained various loan covenants. The Company has violated
covenants relating to general and administrative expenses, the debt
service coverage ratio, and current ratio. However, the bank waived
loan covenant violations in various amendments to the debt agreement
which also modified certain terms of the agreement and the borrowing
base. The most recent amendment was effective March 31, 1999.
Effective August 31, 1999, the Company established an additional
line of credit with Bank of Oklahoma in the amount of $15,000,000.
Interest is due monthly at prime plus one percent with the entire
principal due on September 1, 2001. At August 31, 1999, there were no
outstanding balances under this agreement. However, subsequent to
August 31, 1999, draws were taken on this line of credit which were
used to repay the entire outstanding balance due to BankOne.
(Continued)
11
<PAGE>
COMANCHE ENERGY, INC.
Notes to Consolidated Financial Statements (Continued)
- --------------------------------------------------------------------------------
NOTE B - NOTES PAYABLE (Continued)
Aggregate maturities on long-term debt for the next five years
are as follows:
2000 $ 1,229,328
2001 401,721
2002 180,000
2003 180,000
2004 180,000
Thereafter 212,017
------------
Total $2,383,066
==========
NOTE C - LEASES PAYABLE
During the eight months ended August 31, 1999, the Company
acquired compressors totaling $73,000, which were financed through a
capital lease. Future minimum rental payments under this capital lease
are as follows for the years ended August 31:
2000 $ 34,566
2001 34,566
2002 14,403
---------
Total minimum lease payments 83,535
Amount representing interest (20,912)
----------
Present value of future lease
payments 62,623
Less current portion (21,578)
----------
$ 41,045
NOTE D - RELATED PARTY TRANSACTIONS
The Company has entered into several agreements with related
parties involving its operations as follows:
M. L. Johnson, a shareholder of the Company, owns Crown
Petroleum, an Oklahoma partnership. Crown Petroleum is the operator
for the Company's Oklahoma oil and gas properties. Crown Petroleum
pays the direct operating expenses and acquisition costs of the gas
systems and in turn submits invoices to the Company for reimbursement.
The following is a summary of transactions between Crown Petroleum and
the Company for the eight months ended August 31, 1999:
Operating costs of oil and gas properties $16,759
=======
Purchases of property and equipment $88,927
=======
(Continued)
12
<PAGE>
COMANCHE ENERGY, INC.
Notes to Consolidated Financial Statements (Continued)
- --------------------------------------------------------------------------------
NOTE D - RELATED PARTY TRANSACTIONS (Continued)
At August 31, 1999, the Company had an account payable balance to
Crown Petroleum of $8,819.
Frank W Cole Engineering, a sole proprietorship of Frank W Cole,
a shareholder and director, operates the Company's Texas oil and gas
properties. Frank W Cole Engineering pays the direct operating
expenses and acquisition costs of these properties and in turn submits
invoices to the Company for reimbursement. The following is a summary
of transactions between Frank W Cole Engineering and the Company for
the eight months ended August 31, 1999:
Oil and gas revenue - working interests $59,060 Less production
taxes and lease operating costs - working interests
34,441
Net income remitted to the Company $ 24,619
=========
Purchases of property and equipment, work-over costs, and
evaluation reports $44,004
=======
Operating expense of well service operations $16,000
=======
At August 31, 1999, the Company had an account payable balance to
Frank W Cole Engineering of $297,131.
As discussed at NOTE H, the Company acquired oil and gas
properties from Sha Stephens, Inc. and E.B. Germany & Sons. At August
31, 1999, the Company had payables due to these two entities of $2,073
and $254,322, respectively.
The Company has entered into a consulting agreement with one of
the shareholders which provides for a payment of $30,000 each year for
two years beginning at the time the Company achieves cash flow
requirements set by the Board of Directors. As of August 31, 1999,
these requirements had not been met.
NOTE E - INCOME TAXES
Due to operating losses, the Company currently has no liability
for state or federal income taxes. The Company has no significant
temporary differences between financial statement carrying amounts and
their respective tax basis resulting in deferred taxes. A deferred tax
asset of $998,289 related to the operating loss carryforwards has been
recorded; however, a valuation allowance has been provided for the
entire balance of this deferred tax asset. Therefore, the provision
for income taxes for the year ended December 31, 1998, is zero. The
Company has an aggregate net operating loss carryforward of
$2,936,145. The majority of these net operating loss carryforwards
will begin to expire in 2011.
13
<PAGE>
COMANCHE ENERGY, INC.
Notes to Consolidated Financial Statements (Continued)
- --------------------------------------------------------------------------------
NOTE F - COMMITMENTS AND CONTINGENCIES
The exploration, development, and production of oil and gas is
subject to various federal and state laws and regulations to protect
the environment. Various state and governmental agencies are
considering or have adopted laws and regulations regarding
environmental control which could adversely affect the business of the
Company. Compliance with such legislation and regulations, together
with penalties resulting from noncompliance therewith, will increase
the cost of oil and gas development and production. Some of these
costs may ultimately be borne by the Company.
On January 1, 1999, Double Eagle, the Subsidiary located in
Tulsa, Oklahoma, entered into an operating lease for office space. The
agreement provided for monthly rentals of $1,560 through December 31,
2000. Effective June 1, 1999, the Company acquired a 100% interest in
Double Eagle and relocated all operations to Tulsa. The Company had
previously leased office space in Dallas, Texas on a month-to-month
basis. Effective June 1, 1999, this lease was terminated. On July 19,
1999, the Company increased the square footage of the offices in Tulsa
and the lease agreement was revised. Under the new agreement, monthly
rentals increased to $2,560 per month beginning September 1, 1999,
through January 31, 2002. The Company expects to renew the lease in
the normal course of business. Rental expense totaled $20,449 for the
eight months ended August 31, 1999.
NOTE G - ASSET DISPOSITIONS
At August 31, 1999, the Company entered into an agreement with a
newly formed corporation, Energytec.com, Inc., to dispose of certain
properties, equipment, and its wholly owned Subsidiary, Comanche Well
Service, in a spin-off transaction. Each shareholder as of the date of
record, July 29, 1999, will receive one share of stock in
Energytec.com, Inc. for each share of the Company's common stock held.
The transaction excludes those individuals or entities which received
stock in the Company's acquisition of Double Eagle and the acquisition
of assets acquired from Sha Stephens, Inc. and E. B. Germany & Sons.
(NOTE H) The result to each shareholder is an allocation of their
basis between their shares of the Company's stock and the newly
acquired shares of Energytec.com, Inc. The result of the transaction
to the Company is a reduction in various assets as follows, with an
off-setting reduction in capital stock in the amount of $1,022,960.
Note receivable $ 4,094
Inventory 16,515
Property, plant, and equipment
(net of accumulated depreciation
of $63,751) 1,030,638
Notes payable (28,287)
-------------
$1,022,960
14
<PAGE>
COMANCHE ENERGY, INC.
Notes to Consolidated Financial Statements (Continued)
- --------------------------------------------------------------------------------
NOTE H - ASSET ACQUISITIONS
As discussed at NOTE A, the Company held a one percent general
partner interest in Comanche 95 Income Fund, Ltd. and in Comanche 96
Income Fund, Ltd. at December 31, 1998. Effective January 1, 1999, the
partnerships were dissolved and the Company acquired the assets and
assumed the liabilities of both partnerships. The transaction was
structured as follows:
Comanche 95 Income Comanche 96 Income
Fund, Ltd. Fund, Ltd.
--------------------- ---------------------
Shares of unregistered
common stock issued 674,449 1,319,967
========== ==========
Liabilities assumed $ 269,157 $ 306,799
========= ==========
Assets acquired $ 505,214 $ 768,787
========= ==========
Value of common stock issued $ 236,057 $ 461,988
========= ==========
Price per share $ 0.35 $ 0.35
============ =============
As of the effective date of the transaction, the Company's common
stock was selling at a price of $0.70 per share. Because the stock
issued was unregistered and restricted, management believed the value
should be discounted by 50%.
Effective June 1, 1999, the Company closed an agreement to
purchase oil and gas properties held by Sha Stephens, Inc. Pursuant to
the agreement, the Company issued 4,000,000 shares of its unregistered
common stock and assumed liabilities totaling $274,999. The Company's
wholly owned subsidiary, Double Eagle, had entered into a similar
agreement with E. B. Germany & Sons. This agreement was also finalized
June 1, 1999, concurrent with the Company's acquisition of Double
Eagle. The Company issued 26,644,221 shares of its unregistered common
stock to obtain 100% of the outstanding stock of Double Eagle and to
acquire the working interests in the properties held by E. B. Germany
& Sons and various working interest owners. The owners of E. B.
Germany & Sons and other working interest owners received 16,087,946
shares of the stock issued. The properties acquired from Sha Stephens,
Inc. and E. B. Germany & Sons were recorded at a value of $7,703,156
which equals $0.39 per share. The property value recorded is
significantly less than the value presented in current reserve
studies. However, due to the fact that the properties are not
currently producing to their full potential, management decided to
record the properties at a more conservative value based upon a
discounted per share price as of June 1, 1999. At that date, the
Company's common stock was selling at an approximate price of $0.60.
(Continued)
15
COMANCHE ENERGY, INC.
Notes to Consolidated Financial Statements (Continued)
- --------------------------------------------------------------------------------
NOTE H - ASSET ACQUISITIONS (Continued)
The total cost allocated to the acquisition of Double Eagle
totaled $2,693,979. Based upon current reserve studies, the oil and
gas properties held by Double Eagle were understated by approximately
$2,600,000. Management believed that using a per share price of $0.39
would inflate the value of the properties. Therefore, each property
was revalued based upon the reserve studies. Shares issued in exchange
for Double Eagle totaled 10,379,407. The resulting price per share of
$0.26 approximates the value per share utilized in the previously
discussed acquisitions.
Effective August 31, 1999, the Company acquired additional
properties valued at $4,452,108 in exchange for 1,440,000 shares of
its unregistered common stock. Based upon production and revenues,
management believed a value based upon stock prices would
significantly undervalue the assets. Therefore, it was determined that
these properties should be valued based upon reserve studies.
The following summarized proforma (unaudited) information assumes
the acquisition had occurred on January 1, 1999:
Net sales $ 1,238,707
===========
Net loss $ 889,373
============
Earnings per share:
Basic $ (.02)
===============
Diluted $ (.02)
===============
NOTE I - MAJOR CUSTOMERS
Four major customers accounted for approximately 61% of the
Company's oil and gas sales for the eight months ended August 31,
1999.
16
<PAGE>
SUPPLEMENTAL INFORMATION
17
<PAGE>
INDEPENDENT AUDITORS' REPORT
ON SUPPLEMENTAL INFORMATION
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders
Comanche Energy, Inc.
The supplemental information related to oil and gas producing activities,
reserves, and the standardized measure of discounted future net cash flows on
pages 18 through 20 is not a required part of the basic financial statements of
Comanche Energy, Inc., but is supplementary information required by the
Financial Accounting Standards Board. We have applied certain limited
procedures, which consisted principally of inquiries of management regarding the
methods of measurement and presentation of the supplemental information.
However, we did not audit the information and express no opinion on it.
/s/ HUTTON, PATTERSON & COMPANY
February 4, 2000
Dallas, Texas
18
<PAGE>
COMANCHE ENERGY, INC.
Supplemental Information (Unaudited)
For the Eight Months Ended August 31, 1999
- --------------------------------------------------------------------------------
Capitalized Costs Relating to Oil and Gas Producing
Activities at August 31, 1999
Unproved oil and gas properties $ -
Proved oil and gas properties 17,400,000
Support equipment and facilities -
-----------
17,400,000
Less accumulated depreciation, depletion, amortization,
and impairment 305,270
-----------
Net capitalized costs $ 17,094,730
===========
Costs Incurred in Oil and Gas Producing Activities for
the Year Ended August 31, 1999
Property acquisition costs
Proved $ 16,896,860
Unproved $ -
Exploration costs $ -
Development costs $ -
Amortization rate per equivalent barrel of production .00609
Results of Operations for Oil and Gas Producing Activities
for the Year Ended August 31, 1999
Oil and gas sales $ 676,560
Production costs 362,412
Depreciation, depletion, and amortization 260,231
-----------
53,917
Income tax expense -
-----------
Results of operations for oil and gas producing
activities (excluding corporate overhead and
financing costs) $ 53,917
===========
(Continued)
19
<PAGE>
COMANCHE ENERGY, INC.
Supplemental Information (Unaudited)(Continued)
For the Eight Months Ended August 31, 1999
- --------------------------------------------------------------------------------
Reserve Information
The following estimates of proved and unproved developed reserve quantities and
related standardized measure of discounted net cash flows are estimates only,
and do not purport to reflect realizable values or fair market values of the
Company's reserves. The Company emphasizes that reserve estimates are inherently
imprecise and that estimates of new discoveries are more imprecise than those of
producing oil and gas properties. Accordingly, these estimates are expected to
change as future information becomes available. All of the Company's reserves
are located in the United States.
Proved reserves are estimated reserves of crude oil (including condensate and
natural gas liquids) and natural gas that geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years from
known reservoirs under existing economic and operating conditions. Proved
developed reserves are those expected to be recovered through existing wells,
equipment, and operating methods.
The standardized measure of discounted future net cash flows is computed by
applying year-end prices of oil and gas (with consideration of price changes
only to the extent provided by contractual arrangements) to the estimated future
production of proved oil and gas reserves, less estimated future expenditures
(based on year-end costs) to be incurred in developing and producing the proved
reserves, less estimated future income tax expenses (based on year-end statutory
rates, with consideration of future tax rates already legislated) to be incurred
on pretax net cash flows less the tax basis of the properties and available
credits, and assuming continuation of existing economic conditions. The
estimated future net cash flows are then discounted using a rate of 10 percent a
year to reflect the estimated timing of the future cash flows.
TOTAL
-----------------------------
Oil (Bbls) Gas (Mcf)
---------- ---------
Proved Developed and Undeveloped Reserves
Beginning of year 1,045,425 3,122,887
Revisions of previous estimates - -
Improved recovery - -
Purchases of minerals in place 41,856 8,553,206
Extensions and discoveries - -
Production (9,842) (51,053)
Sales of minerals in place - -
---------------------------------
End of year 1,077,439 11,625,040
========= ==========
Proved Developed Reserves
Beginning of year 62,931 42,261
==============================
End of year 648,678 4,871,377
========== ===========
(Continued)
20
<PAGE>
COMANCHE ENERGY, INC.
Supplemental Information (Unaudited)(Continued)
For the Eight Months Ended August 31, 1999
- --------------------------------------------------------------------------------
Standardized Measure of Discounted Future
Net Cash Flows at August 31, 1999
Future cash inflows $57,038,160
Future production costs (12,974,290)
Future development costs (1,334,441)
Future income tax expenses (14,528,006)
------------
28,201,423
Future net cash flows
10% annual discount for estimated timing of cash flows (6,751,196)
------------
Standardized measures of discounted future net cash flows
relating to proved oil and gas reserves $21,450,227
============
The following reconciles the change in the standardized measure of discounted
future net cash flows during 1999:
Beginning of year $ 4,631,240
Sales of oil and gas produced, net of production costs (314,148)
Development costs incurred during the year which were
previously estimated -
Net change in estimated future development costs -
Revisions of previous quantity estimates
Net change from purchases and sales of minerals in place 29,128,083
Accretion of discount -
Net change in income taxes (11,994,948)
Other -
------------
End of year $21,450,227
============
See independent auditors' report
on supplemental information
21
EXHIBIT A-1 [GERMANY AGREEMENT]
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement"), is entered into as of this
day of May, 1999, by and between ("SELLER") an individual, as SELLER, E. B.
Germany & Sons, a Texas corporation "OPERATOR") as OPERATOR of SELLER'S
interests and Double Eagle Petroleum, Inc., an Oklahoma corporation ("Double
Eagle"), and Oil City Petroleum, Inc., a Texas corporation, ("Oil City")
collectively referred herein as BUYER.
W I T N E S S E T H:
WHEREAS, SELLER is the owner of certain producing oil and natural gas wells
and developed and undeveloped leases as set forth on Exhibit A attached hereto
and such interests are managed by OPERATOR on SELLER'S behalf; and
WHEREAS, SELLER desires to sell, transfer and assign to BUYER all of its
right, title and interest in and to those assets comprising those properties as
described on Exhibit A and any and all equipment used by SELLER in conjunction
with the operation of said properties and located on the premises, collectively
referred to as the "Acquired Assets"; and
WHEREAS, the Board of Directors of the BUYER has approved the transaction
herein contemplated;
NOW, THEREFORE, in consideration of the promises and of the mutual
agreements, provisions, covenants, representations and warranties herein
contained, the parties hereto hereby agree as follows:
1. Purchase and Sale of Assets.
1.01 Purchase and Sale. On and subject to the terms and conditions of this
Agreement, BUYER agrees to purchase from SELLER and SELLER agrees to sell,
transfer, convey and deliver to BUYER all of SELLER's right, title and interest
in and to the Acquired Assets, including without limitation, the following
assets:
1.02 Acquired Assets. The "Acquired Assets" hereunder shall consist of the
following and shall hereafter collectively, in whole or in part, be referred to
as the "Acquired Assets".
(a) All of Seller's undivided right, title and interest in, to and under
the leases, the wells located therein, overriding royalty interests, mineral
servitudes, mineral rights, royalty interests, carried interests, licenses,
permits and other interests and agreements described in Exhibit "A", together
with all other interests of Seller in and to the lands subject thereto (all of
which are hereafter referred to as "Leasehold Interests" and the lands covered
thereby which shall be referred to herein collectively as the "Lands" or
singularly as the "Land").
(b) All of Seller's undivided right, title and interest in and to all
Hydrocarbons produced from or allocated to the Leasehold Interests or Lands,
after the Effective Time. "Hydrocarbons" shall mean and include oil, gas well
gas, casinghead gas, condensate, and all components of any of them.
(c) To the extent Seller may lawfully assign and convey the same, all of
Seller's undivided interest in and to all documents and agreements relating to
the Leasehold Interests or Lands, including without limitation: leases;
operating agreements; gas balancing agreements; oil, gas and condensate purchase
and sale agreements; processing, gathering, compression and/or transportation
agreements; joint venture agreements; farm-out agreements, farm-in agreements;
dry hole agreements; bottom hole agreements; acreage contribution agreements;
area of mutual interest agreements; salt water disposal agreements; servicing
contracts; servitudes; surface use and/or right-of-way agreements; permits;
licenses; unitization or pooling agreements; and all other contracts and
agreements relating to the Leasehold Interests or Lands.
(d) All of Seller's undivided interests in and to all of the real, personal
and mixed, movable and immovable property, (including, without limitation,
wells, fixtures, equipment, personal property, gas gathering or processing
systems, gas plants or pipelines, gas, crude oil, condensate or products in
storage or in pipelines) and all other fixtures and improvements appurtenant to
the Leasehold Interests or Lands used in connection therewith.
(e) All of Seller's interest and estate in and to or derived under any oil
and gas or oil, gas and mineral unitization or pooling agreement, declaration or
order relating to the Leasehold Interests or Lands, and the units or pools, if
any, created thereby (including, without limitation, all units or pools formed
under orders, regulations, rules or other official acts of any federal, state or
other governmental agency having or asserting jurisdiction); all production from
the unit or pool allocated to the Leasehold Interests or Lands, and all
interests in any wells within the unit or pool associated with the Leasehold
Interests or Lands.
(f) All of Seller's interests in all permits, franchises, servitudes,
rights-of-way, surface rights, contract rights, intangible rights, inchoate
rights, rights under warranties made by prior owners of the Leasehold Interests
or Lands, manufacturers, vendors and other third parties, rights accruing under
applicable statutes of limitation or prescription and other rights, estates and
hereditaments incident or relating to the Leasehold Interests or Lands, or any
of the foregoing items set forth in this definition of Properties.
(g) Without limiting the foregoing, all of Seller's interests and estate,
whether real, personal or mixed, movable or immovable, corporeal or incorporeal
of every nature and description in and to or derived under the Leasehold
Interests or Lands, whether such right, title, claim or interest be under and by
virtue of an oil and gas lease, oil, gas and mineral lease, overriding royalty
assignment or reservation, production payment, operating agreement, unitization,
pooling, declaration or order, division order, transfer order, or any other type
of contract, conveyance or instrument, or under and by virtue of any other type
of claim or title to the Properties, present or reversionary, and even though
Seller's interests therein be incorrectly described in, or a description of such
interests be omitted from an Exhibit hereto.
(h) all books, records, ledgers, files, documents, correspondence, lists,
plats, maps, plans, drawings, blueprints, specifications, assays, studies,
reports and other written or printed materials necessary, useful for, held for
use by SELLER useful in the ownership or operation of the properties on Exhibit
A.
1.03 Effective Time. The purchase and sale of the Acquired Assets shall be
effective as of March 1, 1999, at 7:00 A.M., Central Daylight Time (herein
called the "Effective Time"). SELLER shall be responsible for all costs and
expenses and shall be entitled to receive all revenue from sales prior to the
Effective Time. Buyer shall be responsible for all costs and expenses and shall
be entitled to receive all revenue from sales after the Effective Time.
1.04 Purchase Price. BUYER agrees to purchase the Acquired Assets from SELLER at
Closing for the following consideration:
(a) BUYER will issue stock certificates to SELLER representing shares of
fully paid, non-assessable restricted common stock of Oil City Petroleum, Inc. (
herein referred to as the "Oil City Shares").
1.05 Closing. Subject to the terms and provisions of this Agreement, the closing
of the transactions contemplated by this Agreement will be at 10:00 a.m. at the
offices Oil City Petroleum, Inc. at 3015 East Skelly Drive, Suite 450, Tulsa, OK
74105, on or before, May 31, 1999, or at such earlier or later date or such
other place as shall be mutually agreed upon by BUYER and SELLER, such date and
time sometimes being referred to herein as the "Closing" or "Closing Date."
2. Representations and Warranties of DOUBLE EAGLE and OIL CITY
DOUBLE EAGLE and OIL CITY represent and warrant to SELLER that, to the best
of their knowledge, the statements contained in this Section 2 are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 2.
2.01.A Organization, Qualification and Corporate Power. DOUBLE EAGLE is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Oklahoma. DOUBLE EAGLE is duly authorized to conduct business
and is in good standing under the laws of each jurisdiction in which the nature
of its business or the ownership or leasing of its properties requires such
qualification. DOUBLE EAGLE has full corporate power and authority to carry on
the business in which it is engaged and to own and use the properties owned and
used by it.
2.02.A Authority. DOUBLE EAGLE has all requisite corporate power and authority
to execute and deliver this Agreement and all agreements, instruments and
documents to be executed and delivered by DOUBLE EAGLE hereunder, to consummate
the transactions contemplated hereby and to perform all terms and conditions
hereof to be performed by it. The execution and delivery of this Agreement by
DOUBLE EAGLE and all agreements, instruments, and documents to be executed and
delivered by DOUBLE EAGLE hereunder, the performance by DOUBLE EAGLE of all the
terms and conditions hereto to be performed by it and the consummation of the
transactions contemplated hereby have been duly authorized and approved by the
Board of Directors of DOUBLE EAGLE, and no other corporate proceedings of DOUBLE
EAGLE are necessary with respect thereto. All persons who have executed and
delivered this Agreement, and all persons who will execute and deliver the other
agreements, documents and instruments to be executed and delivered by DOUBLE
EAGLE hereunder, have been duly authorized to do so by all necessary actions on
the part of DOUBLE EAGLE. This Agreement constitutes, and each other agreement
and instrument to be executed by DOUBLE EAGLE hereunder, when executed and
delivered by DOUBLE EAGLE, will constitute, the valid and binding obligation of
DOUBLE EAGLE enforceable against it in accordance with its terms.
2.03.A Capitalization. The entire authorized capital stock of DOUBLE EAGLE, as
of the date of the Agreement, consists of 30,000,000 shares of common stock, par
value $ 0.001 per share, of which 21,366,620 shares are, as of the date of this
Agreement, issued and outstanding, including 0.00 shares held in treasury.
Certain employees and other individuals have been granted warrants to acquire
restricted common stock of DOUBLE EAGLE, which if exercised would result in the
issuance of an additional 0.00 shares of common stock as more fully described in
the DOUBLE EAGLE Disclosure Schedule Section 2.03 attached hereto and made a
part hereof. All of the issued and outstanding shares of DOUBLE EAGLE common
stock have been duly authorized, are validly issued, fully paid, and
non-assessable. Except as disclosed in the DOUBLE EAGLE Disclosure Schedule,
there are no outstanding or authorized options, warrants, rights, contracts,
calls, puts, rights to subscribe, conversion rights or other agreements or
commitments to which DOUBLE EAGLE is a party or which are binding upon DOUBLE
EAGLE providing for the issuance, disposition or acquisition of any of its
capital stock. Upon issuance, the DOUBLE EAGLE Shares to be issued to Sellers,
pursuant to this Agreement will be duly authorized, validly issued, fully paid
and non-assessable.
2.04.A Non-contravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge or other restriction of any federal, state or local
government, governmental agency or court to which DOUBLE EAGLE is subject or any
provision of its Certificate of Incorporation, Bylaws or Board of Directors or
stockholder resolutions of DOUBLE EAGLE or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel or require any
notice under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, security interest or other arrangement to which DOUBLE EAGLE is a
party or by which it is bound or to which any of its assets is subject or result
in the imposition of any security interest upon any of its assets. DOUBLE EAGLE
is not required to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any federal, state or local government,
governmental agency, bank, financial institution or other person or entity in
order for DOUBLE EAGLE to consummate the transactions contemplated by this
Agreement.
2.05.A Subsidiaries. The subsidiaries of DOUBLE EAGLE are disclosed in the
DOUBLE EAGLE Disclosure Schedule, Section 2.05 attached hereto and made a part
hereof.
2.06.A Disclosure. The representations and warranties contained in this Section
2 do not contain any untrue statement of a fact or omit to state any fact
necessary in order to make the statements and information contained in this
Section 2 not misleading.
2.07.A Representation. DOUBLE EAGLE represents and warrants that in making the
decision to acquire the Acquired Assets, it has relied upon its own independent
investigations and the independent investigations by its representatives,
including its own professional legal, tax, and business advisors, and that
DOUBLE EAGLE and its representatives have been given the opportunity to examine
all relevant documents and to ask questions of and to receive answers from
SELLER.
2.01.B Organization, Qualification and Corporate Power. OIL CITY is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas. OIL CITY is duly authorized to conduct business and is in
good standing under the laws of each jurisdiction in which the nature of its
business or the ownership or leasing of its properties requires such
qualification. OIL CITY has full corporate power and authority to carry on the
business in which it is engaged and to own and use the properties owned and used
by it.
2.02.B Authority. OIL CITY has all requisite corporate power and authority to
execute and deliver this Agreement and all agreements, instruments and documents
to be executed and delivered by OIL CITY hereunder, to consummate the
transactions contemplated hereby and to perform all terms and conditions hereof
to be performed by it. The execution and delivery of this Agreement by OIL CITY
and all agreements, instruments, and documents to be executed and delivered by
OIL CITY hereunder, the performance by OIL CITY of all the terms and conditions
hereto to be performed by it and the consummation of the transactions
contemplated hereby have been duly authorized and approved by the Board of
Directors of OIL CITY, and no other corporate proceedings of OIL CITY are
necessary with respect thereto. All persons who have executed and delivered this
Agreement, and all persons who will execute and deliver the other agreements,
documents and instruments to be executed and delivered by OIL CITY hereunder,
have been duly authorized to do so by all necessary actions on the part of OIL
CITY. This Agreement constitutes, and each other agreement and instrument to be
executed by OIL CITY hereunder, when executed and delivered by OIL CITY, will
constitute, the valid and binding obligation of OIL CITY enforceable against it
in accordance with its terms.
2.03.B Capitalization. The entire authorized capital stock of OIL CITY, as of
the date of the Agreement, consists of 30,000,000 shares of common stock, par
value $0.00 per share, of which 19,194,340 shares are, as of the date of this
Agreement, issued and outstanding, including 0.00 shares held in treasury.
Certain employees and other individuals have been granted warrants to acquire
restricted common stock of OIL CITY, which if exercised would result in the
issuance of an additional 1,000,000 shares of common stock as more fully
described in the OIL CITY Disclosure Schedule Section 2.03 attached hereto and
made a part hereof. All of the issued and outstanding shares of OIL CITY common
stock have been duly authorized, are validly issued, fully paid, and
non-assessable. Except as disclosed in the OIL CITY Disclosure Schedule, there
are no outstanding or authorized options, warrants, rights, contracts, calls,
puts, rights to subscribe, conversion rights or other agreements or commitments
to which OIL CITY is a party or which are binding upon OIL CITY providing for
the issuance, disposition or acquisition of any of its capital stock. Upon
issuance, the OIL CITY Shares to be issued to Sellers, pursuant to this
Agreement will be duly authorized, validly issued, fully paid and
non-assessable.
2.04.B Non-contravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge or other restriction of any federal, state or local
government, governmental agency or court to which OIL CITY is subject or any
provision of its Certificate of Incorporation, Bylaws or Board of Directors or
stockholder resolutions of OIL CITY or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel or require any
notice under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, security interest or other arrangement to which OIL CITY is a
party or by which it is bound or to which any of its assets is subject or result
in the imposition of any security interest upon any of its assets. OIL CITY is
not required to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any federal, state or local government,
governmental agency, bank, financial institution or other person or entity in
order for OIL CITY to consummate the transactions contemplated by this
Agreement.
2.05.B Subsidiaries. The subsidiaries of OIL CITY are disclosed in the OIL CITY
Disclosure Schedule, Section 2.05 attached hereto and made a part hereof.
2.06.B Disclosure. The representations and warranties contained in this Section
2 do not contain any untrue statement of a fact or omit to state any fact
necessary in order to make the statements and information contained in this
Section 2 not misleading.
2.07.B Representation. OIL CITY represents and warrants that in making the
decision to acquire the Acquired Assets, it has relied upon its own independent
investigations and the independent investigations by its representatives,
including its own professional legal, tax, and business advisors, and that OIL
CITY and its representatives have been given the opportunity to examine all
relevant documents and to ask questions of and to receive answers from SELLER.
3. Representations and Warranties Concerning SELLER.
SELLER, represents and warrants to BUYER that, to the best of their
knowledge, the statements contained in this Section 3 are correct and complete
as of the date of this Agreement and will be correct and complete as of the
Closing Date as though the Closing Date were substituted for the date of this
Agreement throughout this Section 3.
3.01 Authority. SELLER has all requisite power and authority to execute and
deliver this Agreement and all agreements, instruments and documents to be
executed and delivered by SELLER hereunder, to consummate the transactions
contemplated hereby and to perform all terms and conditions hereof to be
performed by it. This Agreement constitutes, and each other agreement and
instrument to be executed by SELLER hereunder, when executed and delivered by
SELLER, will constitute, the valid and binding obligation of SELLER enforceable
against it in accordance with its terms.
3.02 Non-contravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge or other restriction of any government, governmental agency
or court to which SELLER is subject or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel or require any
notice under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, security interest or other arrangement to which SELLER is a party
or by which it is bound or to which any of its assets is subject or result in
the imposition of any security interest upon any of its assets. SELLER is not
required to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any federal, state or local government,
governmental agency, bank, financial institution or other party in order for
SELLER and BUYER to consummate the transactions contemplated by this Agreement.
3.03 Title. SELLER has, and upon the Closing Date will have, valid and binding
contractual rights to acquire the Acquired Assets, free and clear of all liens,
claims, mortgages, security interests, pledges, encumbrances or restrictions on
transfer of any kind or nature. SELLLER warrants the validity of its title to
the Acquired Assets.
3.04 Federal or State Securities Laws. The SELLER understands and acknowledges
that the Oil City Shares have not been, and will not be, registered under the
Securities Act of 1933, as amended (the "1933 Act"), or applicable state
securities laws and the SELLER is aware that no federal or state agency has made
any review, finding or determination regarding the terms of their acquisition of
the Oil City Shares nor any recommendation or endorsement of the Oil City Shares
as an investment, and the SELLER must forego the security, if any, that such a
review would provide.
3.05 Acquisition for Own Account. The SELLER understands and acknowledges that
the Oil City Shares are being offered and sold under exemptions from
registration provided by the 1933 Act and exemptions provided by applicable
state securities laws and the SELLER warrants and represents that the Oil City
Shares are being acquired by them solely for their own account, for investment
purposes only, and not with a view to or for the resale, distribution,
subdivision or fractionalization thereof. The SELLER represents and warrants
that they have no agreement or other arrangement, formal or informal, with any
person to sell, transfer or pledge any part of the Oil City Shares or which
would guarantee them any profit or protect them against any loss with respect to
the Oil City Shares. Further, the SELLER has no plans to enter into any such
agreement or arrangement, and, consequently, they must each bear the economic
risk of an investment in the Oil City Shares for an indefinite period of time.
3.06 Limitations on Resale or Transfer. The SELLER understands and acknowledges
that the Oil City Shares will be "restricted" as defined in Rule 144 under the
Act and that therefore they cannot offer to sell, sell or otherwise transfer or
distribute the Oil City Shares without registration thereof, which Oil City is
not obligated to do, under both the Act and any applicable state securities
laws, or unless an exemption is, in the opinion of Oil City's counsel, available
to them under the Act and any applicable state securities laws. Such exemption
is not now available and it is not anticipated that any such exemption will
become available in the future. The SELLER further understands and acknowledges
that the restrictions on the transfer of the Oil city Shares will be noted on
the books of Oil City and that the stock certificate representing the Oil City
Shares will bear a written legend setting forth the restriction on the
transferability of the Oil City Shares in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED FOR VALUE IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION OF THEM UNDER THE SECURITIES ACT OF 1933,OR AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE ACT.
3.07 Disclosure. The representations and warranties contained in this Section 3
do not contain any untrue statement of a fact or omit to state any fact
necessary in order to make the statements and information contained in this
Section 3 not misleading.
4.0 Representations and Warranties Concerning OPERATOR
OPERATOR, represents and warrants to BUYER on behalf of SELLER'S interest,
that, to the best of their knowledge, the statements contained in this Section 4
are correct and complete as of the date of this Agreement and will be correct
and complete as of the Closing Date as though the Closing Date were substituted
for the date of this Agreement throughout this Section 4.
4.01 Authority. OPERATOR has all requisite power and authority to execute and
deliver this Agreement and all agreements, instruments and documents to be
executed and delivered by OPERATOR hereunder, to consummate the transactions
contemplated hereby and to perform all terms and conditions hereof to be
performed by it. This Agreement constitutes, and each other agreement and
instrument to be executed by OPERATOR hereunder, when executed and delivered by
OPERATOR, will constitute, the valid and binding obligation of OPERATOR
enforceable against it in accordance with its terms.
4.02 Non-contravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge or other restriction of any government, governmental agency
or court to which OPERATOR is subject or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel or require any
notice under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, security interest or other arrangement to which OPERATOR is a
party or by which it is bound or to which any of its assets is subject or result
in the imposition of any security interest upon any of its assets. OPERATOR is
not required to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any federal, state or local government,
governmental agency, bank, financial institution or other party in order for
OPERATOR and BUYER to consummate the transactions contemplated by this
Agreement.
4.03 Acquired Assets.
(a) Each of the properties comprising the Acquired Assets is legal, valid,
binding, enforceable and in full force and effect. OPERATOR has performed each
and every obligation and requirement under each agreement affecting the Acquired
Assets necessary to create, preserve and maintain each of the properties
comprising the Acquired Assets as legal, valid, binding, enforceable and in full
force and effect. OPERATOR has made each and every required filing with all
federal, state and local governmental authorities, and similar documents,
necessary to create, preserve and maintain the Acquired Assets and all such
filings are complete, true and correct. OPERATOR is not in breach of or default
under any agreements affecting the properties comprising the Acquired Assets and
no event has occurred which, with notice or passage of time, would constitute a
breach of or default under or permit revocation, termination or modification of
the Acquired Assets and OPERATOR has received no notice and have no knowledge of
any such breach, default, revocation, termination or modification which would
materially affect the Acquired Assets.
(b) With respect to each property comprising the Acquired Assets: (i)
OPERATOR has good and marketable title, free and clear of any security interest,
easement, covenant or other restriction; (ii) there are no pending or threatened
condemnation proceedings, lawsuits or administrative actions relating to any
Acquired Assets or other matters affecting adversely the current use, occupancy
or value thereof; (iii) the legal description for each property as set forth on
Exhibit A attached hereto describes such property fully and adequately; (iv) all
facilities thereon have received all approvals of governmental authorities
(including licenses and permits) required in connection with the ownership or
operation thereof and have been operated and maintained in accordance with
applicable laws, rules and regulations; (v) there are no leases, subleases,
licenses, concessions or other agreements, written or oral, granting to any
party or parties the right of use or occupancy of any portion of the Acquired
Assets; (vi) there are no outstanding options or rights of first refusal to
purchase the Acquired Assets, or any portion thereof or interest therein.
4.04 Permits. Each of the permits affecting the Acquired Assets is legal, valid,
binding, enforceable and in full force and effect. OPERATOR has made all
payments and performed each and every obligation and requirement under each
Permit necessary to preserve and maintain each permit as legal, valid, binding,
enforceable and in full force and effect. OPERATOR is not in breach of or
default under any permit and no event has occurred which, with notice or the
passage of time, would constitute a breach of or default under or permit
revocation, termination or modification of any permit and OPERATOR has received
no notice and have no knowledge of any such revocation, termination or
modification of any permit.
4.05 Governmental Approvals. No consent, approval, waiver, order or
authorization of, or registration, declaration or filing with, any federal,
state or local governmental authority (including, without limitation, any
department, bureau or agency), is required to be obtained or made in connection
with the execution and delivery of this Agreement by OPERATOR or the
consummation by OPERATOR of the transactions contemplated hereby the failure of
which to obtain would have a material adverse affect on the Acquired Assets,
BUYER or BUYER's ability to own, operate or exploit the Acquired Assets.
4.06 Tax Matters. OPERATOR has filed or will file all federal, state and local
tax returns that it is required to file. All federal, state and local taxes owed
by OPERATOR (whether or not shown on any tax return) including, without
limitation, income, withholding, excise, ad valorem, social security,
unemployment, occupation, transfer, sales, use and property taxes, have been or
will be paid. OPERATOR is not currently the beneficiary of any extension of time
within which to file any tax return. No claim has ever been made by an authority
in a jurisdiction where OPERATOR does not file tax returns that it is or may be
subject to taxation by that jurisdiction. There are no security interests or
liens on any of the assets of OPERATOR that arose in connection with any failure
(or alleged failure) by OPERATOR to pay any federal, state or local tax.
OPERATOR have withheld and paid all taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee, creditor,
independent contractor or other third party. No director or officer (or employee
responsible for tax matters) of OPERATOR or any affiliate expects any federal,
state or local authority to assess any additional taxes for any period for which
tax returns have been filed. There is no dispute or claim concerning any
federal, state or local tax liability either (A) claimed or raised by any
authority in writing or (B) as to which OPERATOR or any of the directors and
officers (and employees responsible for tax matters) of OPERATOR or any
affiliate have knowledge based upon personal contact with any agent of such
authority.
4.07 Litigation. There is no litigation and there are no arbitration proceedings
or governmental proceedings, suits or investigations pending, instituted or
threatened against OPERATOR or any of the Acquired Assets. Neither OPERATOR nor
any of the Acquired Assets, are subject to any judicial or administrative
judgment, order, decree or restraint currently affecting OPERATOR in a manner
that is material and adverse to the Acquired Assets. OPERATOR has not received
any notifications or charges from any federal, state, or local governmental
authority involving oil and gas, occupational safety and health or water quality
or other environmental matters.
4.08 Environment, Health and Safety.
(a) OPERATOR and its predecessors and affiliates have each complied with
all laws (including rules and regulations thereunder) of federal, state and
local governments (and all agencies thereof) concerning the environment, public
health and safety and employee health and safety, and no charge, complaint,
action, suit, proceeding, hearing, investigation, claim, demand or notice has
been filed or commenced against any of them alleging any failure to comply with
any such law or regulation.
(b) OPERATOR has no liability (and there is no basis related to the past or
present operations, properties or facilities of OPERATOR and its respective
predecessors and affiliates) for any present or future charge, complaint,
action, suit, proceeding, hearing, investigation, claim or demand against
OPERATOR giving rise to any liability under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Resource Conservation and
Recovery Act of 1976, the Federal Water Pollution Control Act of 1972, the Clean
Air Act of 1970, the Safe Drinking Water Act of 1974, the Toxic Substances
Control Act of 1976, the Refuse Act of 1899, or the Emergency Planning and
Community Right-to-Know Act of 1986 (each as amended), or any other law (or rule
or regulation thereunder) of any federal, state or local government (or agency
thereof), concerning release or threatened release of hazardous substances,
public health and safety, or pollution or protection of the environment.
(c) OPERATOR has no liability and none of their predecessors and affiliates
have handled or disposed of any substance, arranged for the disposal of any
substance or owned or operated any property or facility in any manner that could
form the basis for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim or demand (under the common law or
pursuant to any statute) against giving rise to any liability for damage to any
site, location, or body of water (surface or subsurface) or for illness or
personal injury.
(d) OPERATOR has no liability and there is no basis for any present or
future charge, complaint, action, suit, proceeding, hearing, investigation,
claim, or demand against OPERATORs giving rise to any liability under the
Occupational Safety and Health Act, as amended, or any other law (or rule or
regulation thereunder) of any federal, state or local government (or agency
thereof) concerning employee health and safety.
(e) OPERATOR has no liability and has not exposed any employee or
contractor to any substance or condition that could form the basis for any
present or future charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand (under the common law or pursuant to statute)
against OPERATOR giving rise to any liability for any illness of or personal
injury to any employee or contractor.
(f) OPERATOR has obtained and been in compliance with all of the terms and
conditions of all permits, licenses and other authorizations which are required
under, and have complied with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
which are contained in, all federal, state and local laws (including rules,
regulations, codes, plans, judgments, orders, decrees, stipulations, injunctions
and charges thereunder) relating to public health and safety, worker health and
safety and pollution or protection of the environment, including laws relating
to emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, groundwater, or lands or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants or chemical, industrial,
hazardous, or toxic materials or wastes.
(g) All properties and equipment used in the business of OPERATOR have been
free of asbestos, PCB's, methylene chloride, trichloroethylene, 1,2
trans-dichloroethylene, dioxins, dibenzofurans, and other hazardous substances.
(h) All product labeling of OPERATOR has been in conformity with applicable
laws (including rules and regulations thereunder).
(i) No pollutant, contaminant, or chemical, industrial, hazardous, or toxic
material or waste ever has been buried, stored, spilled, leaked, discharged,
emitted, or released on any real property comprising the Acquired Assets.
(j) There are no underground storage tanks located on the Acquired Assets.
4.09 Legal Compliance.
(a) OPERATOR has complied with all laws (including rules and regulations
thereunder) of federal, state and local governments (and all agencies thereof),
and no charge, complaint, action, suit, proceeding, hearing, investigation,
claim, demand, or notice has been filed or commenced against OPERATOR alleging
any failure to comply with any such law or regulation.
(b) OPERATOR has complied with all applicable laws (including rules and
regulations thereunder) relating to the employment of labor, employee civil
rights, and equal employment opportunities.
(c) OPERATOR has complied with all applicable federal, state and local laws
(including rules and regulations thereunder) relating to crude oil and natural
gas production, exploration and extraction or the processing or transportation
and storage of crude oil and natural gas.
(d) OPERATOR has not violated in any respect or received a notice or charge
asserting any violation of the Sherman Act, the Clayton Act, the Robinson-Patman
Act, or the Federal Trade Commission Act, each as amended.
(e) OPERATOR has not: (i) made or agreed to make any contribution, payment
or gift of funds or property to any governmental official, employee, or agent
where either the contribution, payment or gift or the purpose thereof was
illegal under the laws of any federal, state, local or foreign jurisdiction;
(ii) established or maintained any unrecorded fund or asset for any purpose or
made any false entries on any books or records for any reason; (iii) made or
agreed to make any contribution made by any other person, to any candidate for
federal, state, local or foreign public office.
(f) OPERATOR has filed in a timely manner all reports, documents, and other
materials it was required to file (and the information contained therein was
correct and complete in all respects) under all applicable laws (including rules
and regulations thereunder).
(g) OPERATOR has possession of all records and documents it was required to
retain under all applicable laws (including rules and regulations thereunder).
4.10 Disclosure. The representations and warranties contained in this Section 4
do not contain any untrue statement of a fact or omit to state any fact
necessary in order to make the statements and information contained in this
Section 4 not misleading.
5. Survival and Indemnity.
5.01 Survival. All of the representations and warranties of SELLER and OPERATOR
contained in this Agreement and the representations of DOUBLE EAGLE and OIL CITY
contained in this Agreement shall survive the Closing Date, even if the damaged
party knew or had reason to know of any misrepresentation or breach of warranty
at the time of the Closing Date, and shall continue in full force and effect for
a period of six months thereafter.
5.02 Indemnification for Benefit of the BUYER . In the event SELLER or OPERATOR
breaches any of their representations, warranties or covenants contained herein,
and provided that BUYER makes a written claim for indemnification against SELLER
pursuant to Section 10.04, then SELLER AND OPERATOR agree to indemnify and hold
harmless BUYER from and against the entirety of any Adverse Consequences BUYER
may suffer through and after the date of the claim for indemnification
(including any Adverse Consequences BUYER may suffer after the end of the
applicable survival period) resulting from, arising out of, relating to, in the
nature of, or caused by the breach.
5.03 Indemnification for Benefit of Seller In the event BUYER breaches any of
its representations, warranties and covenants contained herein, and provided
that SELLER makes a written claim for indemnification against BUYER pursuant to
Section 10.04, then BUYER agrees to indemnify and hold harmless SELLER from and
against the entirety of any Adverse Consequences SELLER may suffer through and
after the date of the claim for indemnification resulting from, arising out of,
relating to, in the nature of or caused by the breach.
5.04 Indemnification Procedure. If any third party shall notify any party to
this Agreement (the "Indemnified Party") with respect to any matter which may
give rise to a claim for indemnification against any other party (the
"Indemnifying Party") under this Section 5, then the Indemnified Party shall
notify each Indemnifying Party thereof promptly; provided however, that no delay
on the part of the Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any liability or obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is damaged. In
the event any Indemnifying Party notifies the Indemnified Party within 10 days
after the Indemnified Party has given notice of the matter that the Indemnifying
Party is assuming the defense thereof, (i) the Indemnifying Party will defend
the Indemnified Party against the matter with counsel of the Indemnified Party's
choice reasonably satisfactory to the Indemnifying Party, (ii) the Indemnified
Party may retain separate co-counsel at its sole cost and expense, (iii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the matter without the written consent of the
Indemnifying Party not to be withheld unreasonably, and (iv) the Indemnifying
Party will not consent to the entry of any judgment with respect to the matter,
or enter into any settlement which does not include a provision whereby the
plaintiff or claimant in the matter releases the Indemnified Party for all
liability with respect thereto, without the written consent of the Indemnified
Party not to be withheld unreasonably. In the event no Indemnifying Party
notifies the Indemnified Party with 10 days after the Indemnified Party has
given notice of the matter that the Indemnifying Party is assuming the defense
thereof, however, the Indemnified Party may defend against, or enter into any
settlement with respect to, the matter in any manner it reasonably may deem
appropriate.
5.05 Determination of Loss. The parties shall make appropriate adjustment for
tax benefits and insurance proceeds (reasonably certain of receipt and utility
in each case) and for the time cost of money in determining the amount of loss
for purposes of this Section 5.
5.06 Other Indemnification Provisions. The foregoing indemnification provisions
are in addition to, and not in derogation of, any statutory or common law remedy
any party may have for breach of representation, warranty or covenant.
5.07 Definition of Adverse Consequences. As used in this Section 5, "Adverse
Consequences" means all charges, complaints, actions, suits, proceedings,
hearings, investigations, claims, demand, judgments, orders, decrees,
stipulations, injunctions, damages, dues, penalties, fines, costs, amounts paid
in settlement, liabilities, obligations, taxes, liens, losses (including any
losses resulting from the loss or invalidity of the leases comprising the
Acquired Assets), expenses and fees, including all attorneys' fees and court
costs.
6. Conduct and Transactions prior to Closing.
6.01 Covenants of SELLER AND OPERATOR. Between the date of this Agreement and
the Closing Date or, if earlier termination of this Agreement:
(a) SELLER AND OPERATOR agree to give BUYER its agents and representatives,
full access to the Acquired Assets and all of SELLER AND OPERATOR's premises and
books and records relating to the Acquired Assets and its operation, and to
furnish BUYER with such financial and operating data and other information with
respect to the Acquired Assets and its ownership and operation as BUYER shall
from time to time request; provided, however, that any such investigation shall
not affect any of the representations and warranties of SELLER AND OPERATOR
hereunder; and provided further, that any such investigation shall be conducted
in such manner as not to interfere unreasonably with the operation of the
business of SELLER AND OPERATOR. In the event of termination of this Agreement,
BUYER will return to SELLER AND OPERATOR all documents, work papers, and other
material obtained from SELLER AND OPERATOR in connection with the transactions
contemplated hereby and will keep confidential any information obtained pursuant
to this Agreement unless such information is ascertainable from public or
published information or trade sources.
(b) SELLER AND OPERATOR, to the extent required for continued ownership and
operation of the Acquired Assets without impairment, will use their best efforts
to preserve substantially intact the business organization of SELLER AND
OPERATOR, to keep available the services of the present officers and employees
of SELLER AND OPERATOR, and to preserve the present relationships of SELLER AND
OPERATOR with persons having significant business relationships with SELLER AND
OPERATOR. All lease and rental payments required pursuant to SELLER AND
OPERATOR's existing agreement will be current at the time of Closing.
(c) SELLER AND OPERATOR will conduct their business relating to the
Acquired Assets only in the ordinary course and will not engage in any practice,
take any action or enter into any transaction relating to the Acquired Assets or
Permits outside the ordinary course of business. By way of amplification and not
limitation and except as otherwise provided in this Agreement, SELLER AND
OPERATOR will not, without the prior written consent of BUYER, (i) make any
material change in the conduct of the business of the Acquired Assets or fail to
conduct its operations in the ordinary course consistent with past practice;
(ii) fail to maintain and keep the Acquired Assets in the same condition in all
material respects in which the Acquired Assets were on the date of this
Agreement, normal wear and tear excepted, or fail to perform routine maintenance
on the Acquired Assets not materially less frequently and to a degree not
materially less in magnitude than in accordance with the schedule and magnitude
of routine maintenance carried out by SELLER AND OPERATOR prior to the date of
the Agreement; (iii) sell or dispose of any of its assets employed in the
business conducted on the Acquired Assets; or (iv) commit itself to do any of
the foregoing.
(d) SELLER AND OPERATOR will: (i) promptly notify BUYER of the receipt of
any written notice or written claim of a material breach or default by SELLER
AND OPERATOR, or of any termination or cancellation, or written threat of
termination or cancellation, of any of the Acquired Assets; (ii) promptly notify
BUYER of any action, suit, proceeding, claim or investigation which is
threatened or commenced against SELLER AND OPERATOR which relates to or affects
in any material respect the ownership or operation of the Acquired Assets by
BUYER after the Closing of this Agreement or the transactions contemplated
thereby; (iii) promptly notify BUYER of any condition or circumstance occurring
from the date hereof up to and including the Closing Date that would cause the
representations and warranties of SELLER AND OPERATOR contained herein to become
untrue in any material respect; and (iv) cooperate with BUYER to effect an
orderly transition of the ownership and operation of the Acquired Assets and use
its best efforts to protect the relationships with SELLER AND OPERATOR's
existing customers and suppliers relating to the Acquired Assets.
(e) SELLER AND OPERATOR agree that neither it nor its affiliates nor any
employee, representative or advisor of SELLER AND OPERATOR or their affiliates
will, directly or indirectly, (i) solicit, initiate or encourage any Acquisition
Proposal (as defined below) relating to the Acquired Assets or afford access to
the properties or permits or the books and records relating to the Acquired
Assets, to any person that may be considering making or has made an Acquisition
Proposal. SELLER AND OPERATOR shall immediately cease or cause to be terminated
any existing activities, discussions or negotiations with any persons conducted
heretofore with respect to any Acquisition Proposal. As used herein, the term
"Acquisition Proposal" means any offer or proposal for, or any indication of
interest in, (i) the acquisition of all or a substantial portion of the Acquired
Assets (other than the transactions contemplated by this Agreement). The
provisions of this Section 6.01 shall remain in effect until the earlier of the
termination of this Agreement pursuant to Section 9 or the Closing.
6.02 Covenants of BUYER.
(a) Between the date of this Agreement and the Closing Date, BUYER agrees
to give to SELLER, their agents and representatives, full access to all premises
and books and records, and to cause BUYER's officers to furnish SELLER with such
financial and operating data and other information with respect to the business
and properties of BUYER as SELLER shall from time to time reasonably request;
provided, however, that any such investigation shall not affect any of the
representations and warranties of BUYER hereunder; and provided further, that
any such investigation shall be conducted in such manner as not to interfere
unreasonably with the operation of the business of BUYER. In the event of
termination of this Agreement, SELLER will return to BUYER all documents, work
papers and other material obtained from BUYER in connection with the
transactions contemplated hereby and will use all reasonable efforts to keep
confidential any information obtained pursuant to this Agreement unless such
information is ascertainable from public or published information or trade
sources.
(b) BUYER waives compliance by SELLER with the bulk sales law of the Texas
Uniform Commercial Code and any other applicable bulk sales law in connection
with the sale of Acquired Assets contemplated by this Agreement. SELLER hereby
agrees to indemnify and hold BUYER harmless from and against all losses, damages
and expenses incurred by BUYER as a result of such noncompliance.
6.03 Consents. Prior to Closing, SELLER and BUYER shall each use their or its
respective best efforts to obtain the consent or approval of each person
(including any federal, state or local governmental authority) whose consent or
approval shall be required in order to permit BUYER or SELLER, as the case may
be, to consummate the transactions contemplated by this Agreement.
7. Conditions to Closing.
7.01 Conditions to Obligations of BUYER. The obligation of BUYER to effect the
Closing of the transactions contemplated by this Agreement shall be subject to
the following conditions:
(a) SELLER, if applicable, AND OPERATOR shall have furnished BUYER with
certified copies of resolutions duly adopted by its Board of Directors, if
applicable, authorizing all necessary and proper corporate action approving the
execution, delivery and performance of this Agreement.
(b) Except to the extent waived hereunder, (i) the representations and
warranties of SELLER AND OPERATOR contained herein shall be true and correct in
all material respects at the Closing Date with the same effect as though made at
such time; and (ii) SELLER AND OPERATOR shall have performed all obligations and
complied with all covenants required by this Agreement to be performed or
complied by them prior to the Closing Date.
(c) SELLER AND OPERATOR shall have obtained and delivered to BUYER all
consents required to consummate the transactions contemplated by this Agreement.
(d) There shall not have occurred (i) any material adverse change in the
Acquired Assets or the business, properties, results of operations or financial
condition of OPERATOR, (ii) any loss of or damage to any of the Acquired Assets
(whether or not covered by insurance) of SELLER which will materially affect or
impair the ability of BUYER to own or operate the Acquired Assets.
(e) All statutory requirements for the valid consummation by SELLER AND
OPERATOR of the transactions contemplated by this Agreement shall have been
fulfilled and all authorizations, consents and approvals of all federal, state
or local governmental agencies and authorities required to be obtained in order
to permit consummation by SELLER AND OPERATOR of the transactions contemplated
by this Agreement and to permit the business now or previously carried on by
SELLER AND OPERATOR at the Acquired Assets to continue unimpaired to any
material degree immediately following the Closing Date shall have been obtained.
Between the date of this Agreement and the Closing Date, no governmental agency,
whether federal, state or local, shall have instituted (or threatened to
institute) an investigation or other proceeding which is pending at the Closing
Date relating to the transactions contemplated by this Agreement and between the
date of this Agreement and the Closing Date no action or proceeding shall have
been instituted or, to the knowledge of SELLER AND OPERATOR, shall have been
threatened by any party (public or private) before a court or other governmental
body to restrain or prohibit the transactions contemplated by this Agreement or
to obtain damages in respect thereof.
(f) BUYER shall have received from SELLER AND OPERATOR all files and
records, including without limitation, contracts, assignments, agreements,
receipts, deeds, leases, assays and correspondence and any other documents or
files, which in any way relate to the current or former operations of the
Acquired Assets.
(g) SELLER AND OPERATOR shall have complied with the delivery requirements
set forth in Section 8.03 of this Agreement.
7.02 Conditions to Obligations of SELLER. The obligation of SELLER to effect the
Closing of the transactions contemplated by this Agreement shall be subject to
the following conditions:
(a) BUYER shall have furnished SELLER with certified copies of resolutions
duly adopted by its Board of Directors authorizing all necessary and proper
corporate action approving the execution, delivery and performance of this
Agreement.
(b) Except to the extent waived hereunder, (i) the representations and
warranties of BUYER contained herein shall be true in all material respects at
the Closing Date with the same effect as though made at such time; and (ii)
BUYER shall have performed all material obligations and complied with all
material covenants required by this Agreement to be performed or complied with
by it prior to the Closing Date.
(c) All statutory requirements for the valid consummation by BUYER of the
transactions contemplated by this Agreement shall have been fulfilled and all
authorizations, consents and approvals of all federal, state, local and foreign
governmental agencies and authorities required to be obtained in order to permit
consummation by BUYER of the transactions contemplated by this Agreement shall
have been obtained. Between the date of this Agreement and the Closing Date, no
governmental agency, whether federal, state or local, shall have instituted (or
threatened to institute) in a writing directed to SELLER, BUYER or any of their
subsidiaries, an investigation which is pending at the Closing Date relating to
the transactions contemplated by this Agreement and between the date of this
Agreement and the Closing Date no action or proceeding shall have been
instituted or, to the knowledge of BUYER, shall have been threatened by any
party (public or private) before a court or other governmental body to restrain
or prohibit the transactions contemplated by this Agreement or to obtain the
damages in respect thereof.
8. Actions at Closing.
8.01 Transactions at the Closing. At the Closing the following events shall
occur, each event under the control of one party hereto being a condition
precedent to the events under the control of the other party, and each event
being deemed to have occurred simultaneously with the other events.
8.02 Deliveries by BUYER. At Closing, BUYER will deliver to SELLER:
(a) a certificate(s) for the SELLER Shares, properly issued;
(b) certified copies of corporate resolutions and other corporate
proceedings taken by BUYER to authorize the execution, delivery and performance
of this Agreement; and
(c) Certificates of Incumbency and signatures of officers of BUYER dated as
of the date of this Agreement.
8.03 Deliveries by SELLER AND OPERATOR. At Closing, SELLER AND OPERATOR shall
deliver to BUYER:
(a) such bills of sale, deeds, mineral deeds, assignments, certificates of
title, stock certificates and other instruments of transfer, assignment and
conveyance as BUYER shall reasonably request to vest in BUYER good and
marketable title to the Acquired Assets; and
(b) certified copies of corporate resolutions and other corporate
proceedings taken by SELLER, if applicable, AND OPERATOR to authorize the
execution, delivery and performance of this Agreement; and
(c) duly executed copies of consents to the assignment, if necessary, from
any third parties.
9. Termination.
9.01 Termination of the Agreement. The parties may terminate this Agreement as
provided below:
(a) BUYER and SELLER may terminate this Agreement by mutual written consent
at any time prior to the Closing;
(b) BUYER may terminate this Agreement by giving written notice to SELLER
on or before the Closing Date if BUYER is not satisfied with the results of its
continuing business, legal and accounting due diligence regarding SELLER and the
Acquired Assets;
(c) BUYER may terminate this Agreement by giving written notice to SELLER
at any time prior to the Closing (i) in the event SELLER OR OPERATOR have
breached any material representation, warranty or covenant contained in this
Agreement in any material respect, BUYER has notified SELLER of the breach and
the breach has continued without cure for a period of 10 days after the notice
of breach or (ii) if the Closing shall not have occurred on or before May 31,
1999, or such later date as may be agreed to by BUYER and SELLER in writing, by
reason of the failure of any condition precedent under Section 6.01 hereof
(unless the failure results primarily from BUYER itself breaching any
representation, warranty or covenant contained in this Agreement); and
(d) SELLER may terminate this Agreement by giving written notice to BUYER
at any time prior to the Closing (i) in the event BUYER has breached any
material representation, warranty or covenant contained in this Agreement in any
material respect, SELLER has notified BUYER of the breach and the breach has
continued without cure for a period of 10 days after the notice of breach or
(ii) if the Closing shall not have occurred on or before May 31, 1999, or such
later date as may be agreed to by BUYER and SELLER in writing, by reason of the
failure of any condition precedent under Section 7.02 hereof (unless the failure
results primarily from SELLER itself breaching any representation, warranty or
covenant contained in this Agreement).
9.02 Effect of Termination. If either BUYER or SELLER terminates this Agreement
pursuant to Section 9.01 above, all rights and obligations of the parties
hereunder shall terminate without any liability of any party to any other party.
10. Miscellaneous.
10.01 Survival of Covenants, Representations and Warranties. Except as otherwise
specifically provided, the covenants, representations and warranties contained
herein shall expire and be terminated and extinguished at the Closing Date.
10.02 Governing Law. This Agreement and the legal relations between the parties
shall be governed by and construed in accordance with the laws of the State of
Texas.
10.03 Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if sent by registered mail or certified
mail, postage prepaid if addressed as follows:
To: BUYER
Oil City Petroleum, Inc.
3015 E. Skelly Dr., Suite 450
Tulsa, OK 74105
Attention: Mr. James G. Borem,
President
To: SELLER AND OPERATOR
Ted C. Newell
C/O E. B. Germany & Sons
4925 Greenville Ave., Suite 210
Dallas, TX 75206
Attention: Mr. Forrest Germany
10.04 No Assignment. This Agreement may not be assigned by either party or by
operation of law or otherwise and, in the event of an attempted assignment, this
Agreement shall terminate.
10.05 Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the parties and supersedes any
prior understandings, agreements or representations by or among the parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
10.06 Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which together will
constitute one and the same instrument.
10.07 Headings. The section headings contained in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.08 Amendments and Waivers. No amendment of any provision of this Agreement
shall be valid unless the same shall be in writing and signed by BUYER and
SELLER. No waiver by an party of any default, misrepresentation, or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
10.09 Severability. Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the validity
or enforceability of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any other situation or
in any other jurisdiction.
10.10 Expenses. Except as otherwise expressly provided herein, each of the
parties will bear his or its own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
10.11 Construction. The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement. Any reference to any federal, state, local or foreign statute or
law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word "including" shall
mean including without limitation. The parties intend that each representation,
warranty and covenant contained herein shall have independent significance. If
any party has breached any representation, warranty or covenant contained herein
in any respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the party has not breached shall not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
BUYER
Oil City Petroleum, Inc. Double Eagle Petroleum, Inc.
By: _______________________ By:________________________
James G. Borem James G. Borem
President President
SELLER OPERATOR
E. B. Germany & Sons
By: ________________________ By: _____________________
N. Forrest Germany
President
EXHIBIT A-2 [STOCK EXCHANGE AGREEMENT - Comanche and Oil City]
AGREEMENT TO EXCHANGE STOCK
THIS AGREEMENT TO EXCHANGE STOCK (the "Agreement"), dated as of the day of
June 1999, by and between Comanche Energy, Inc., a Utah corporation ("COMANCHE")
and Oil City Petroleum, Inc., a Texas corporation ("OIL CITY"), and those
persons listed on Exhibit "A" attached hereto and collectively owning is excess
of 90% of OILCITY voting stock (such persons listed on Exhibit "A" attached
hereto are sometimes collectively referred to herein as the "OIL CITY
Stockholders."
WHEREAS, the OIL CITY Stockholders and the Board of Directors of COMANCHE
and OIL CITY deem it advisable and in the best interests of OIL CITY, the OIL
CITY Stockholders and COMANCHE that COMANCHE acquire 100% of the issued and
outstanding capital stock of Double Eagle Petroleum Corporation, ("Double
Eagle") a wholly-owned subsidiary of OILC ITY, in exchange for (1.) 20,000,000
shares of COMANCHE common stock herein as the "COMANCHE Shares" pursuant to this
Agreement and applicable provisions of law (such transaction being hereinafter
referred to as the "Oil City Acquisition"); and
WHEREAS, the Board of Directors of COMANCHE and OIL CITY and the OIL CITY
Stockholders have approved and adopted this Agreement; and
WHEREAS, OIL CITY owns and has the right to sell, transfer and exchange
100% of the issued and outstanding capital stock of Double Eagle to Comanche in
accordance with the terms, of this Agreement and applicable provisions of law.
NOW, THEREFORE, in consideration of the promises and of the mutual
agreements, provisions and covenants herein contained, the parties hereto hereby
agree as follows:
1.Exchange of Common Stock
1.01 Exchange. Subject to the terms and conditions herein set forth, at
the time of closing set forth in Section 1.02 hereof, COMANCHE will issue and
deliver or cause to be issued and delivered to the Oil City Stockholders the
following: (1.) a total of 20,000,000 shares of COMANCHE'S authorized and
unissued common stock, no par value per share (the "COMANCHE Shares"), in
exchange for the conveyance by the OIL CITY to COMANCHE of a total of shares of
Double Eagle capital stock ( the "Double Eagle Shares"), representing 100% of
the issued and outstanding capital stock of Double Eagle.
1.02 Closing. Subject to the terms and provisions of this Agreement, the
closing of the OIL CITY Acquisition will be at 10:00 a.m. at the offices of Oil
City Petroleum, Inc., 3015 E. Skelly Drive, Suite 450, Tulsa, Ok 74105 on or
before June 15, 1999,or at such earlier or later sate such other place as shall
be mutually agreed upon by COMANCHE, OIL CITY and the OIL CITY Stockholders,
such date and time sometimes begin referred to herein as the "Closing" or
"Closing Date."
2. Representations and Warranties of the
OIL CITY Stockholders
Each of the OIL CITY Stockholders severally, and not jointly, represents
and warrants to COMANCHE that the statements contained in this Section 2 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 2.
2.01 Authorization. The OIL CITY Stockholder has full power and authority
to execute and deliver this Agreement and to perform his obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of the OIL
CITY Stockholder, enforceable in accordance with its terms and conditions. The
OIL CITY Stockholder need not give any notice to, make any filing with, or
obtain any authorization, consent or approval of any government, governmental
agency, or other person in order to consummate the transactions contemplated by
this Agreement.
2.02 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
violate any statute, regulation, rule, judgement, order, decree, stipulation,
injunction, charge or other restriction of any government, governmental agency
or court to which the OIL CITY Stockholder is subject or conflict with, result
in a breach of, constitute a default under, result in the acceleration of ,
create in any party of the right to accelerate, terminate, modify, or cancel, or
require any notice under any contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, security interest, or other arrangement to which the
OIL CITY Stockholder is a party or by which he is bound or to which any of his
assets are subject.
2.03 Ownership. The OIL CITY stockholder holds of record and owns
beneficially the number of OIL CITY Shares set forth opposite his name as set
forth on Exhibit "A" attached hereto. The OIL CITY Stockholder holds his OILCITY
Shares free and clear of any restrictions on transfer (other than restrictions
under federal and state securities laws), claims, taxes, security interests,
options, warrants, rights, contracts, calls commitments, equities and demands.
The OIL CITY is not a party to any option, warrant, contract, call, put or other
agreement or commitment providing for this disposition or acquisition of any
capitol stock of OIL CITY (other than this Agreement). The OIL CITY Stockholder
is not a party to any voting trust, proxy or other agreement or understanding
with respect to the voting of any capital stock of OIL CITY.
2.04 Speculative Nature and Risk. The OIL CITY Stockholders each
understand and acknowledge the speculative nature if and substantial risk of
loss associated with an investment in the COMANCHE Shares which may be subject
to substantial dilution. The OIL CITY Stockholders each represents and warrant
that the COMANCHE Shares constitute an investment which is suitable and
consistent with their respective financial conditions and that they are each
able to bear the risks of this investment for an indefinite period of time,
which may include the total loss if their investment in COMANCHE. The OIL CITY
Stockholders each further represent that they have adequate means of providing
for their respective current financial needs and corporated and personal
contingencies and no need for liquidity in their investment in COMANCHE and that
they each have sufficient financial and business experience to evaluate the
merits and risk of an investment in COMANCHE.
2.05 Federal or State Securities Laws. The OIL CITY Stockholders each
understand and acknowledge that the COMANCHE Shares have not been, and will not
be, registered under the Securities Act of 1933, as amended (the "1933 Act"), or
applicable State securities laws and the OIL CITY Stockholders are each aware
that no federal or state agency has made any review, finding or determination
regarding the terms or their acquisition of the COMANCHE Shares nor any
recommendation or endorsement of the COMANCHE Shares as an investment, and the
OIL CITY Stockholders must each forego the security, if any, that such a review
would provide.
2.06 Acquisition for Own Account. The OIL CITY Stockholders each
understand and acknowledge that the COMANCHE Shares are being offered and sold
under exemptions from registration provided by the Act and exemptions provided
by applicable state securities laws and the OIL CITY Stockholders each warrant
and represent that the COMANCHE shares are being acquired by them solely for
their own account, for investment purposes only, and not with a view to or for
the resale, distribution, subdivision or fractionalization thereof. The OIL CITY
Stockholders each represent and warrant that they have no agreement or other
arrangement, formal or informal, with any person to sell, transfer or pledge any
part of the COMANCHE Shares or which would guarantee them any profit them
against any loss with respect to the COMANCHE Shares. Further, the OIL CITY
Stockholders have no plans to enter into any such agreement or arrangement, and,
consequently, they must each bear the economic risk of an investment in the
COMANCHE Shares for an indefinite period of time.
2.07 Limitations of Resale or Transfer. The OIL CITY Stockholders each
understand and acknowledge that the COMANCHE Shares will be "restricted" as
defined in Rule 144 under the Act and that therefore they cannot offer to sell,
sell or otherwise transfer or distribute the COMANCHE Shares without
registration thereof, which COMANCHE is not obligated to do, under both the Act
and any applicable state securities laws, or unless an exemption is, in the
opinion of COMANCHE's counsel, available to them under the Act and any
applicable state securities laws. Such exemption is not now available and it is
not anticipated that any such exemption will become available in the future. The
OILC ITY Stockholders each further understand and acknowledge that the
restrictions on the transfer of the COMANCHE Shares will be noted on the books
of COMANCHE and that the stock certificate representing the COMANCHE Shares will
bear a written legend setting forth the restriction on the transferability of
the COMANCHE Shares is substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED FOR VALUE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION OF THEM UNDER THE SECURITIES ACT OF 1933, OR AN OPINION
OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE ACT.
3. Representation and Warranties
Concerning DOUBLE EAGLE AND OIL CITY
DOUBLE EAGLE AND OIL CITY, severally, and jointly, represent and warrant to
COMANCHE that the statements contained in this Section 3 are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date except as set forth in the disclosure schedule delivered by OIL
C ITY to COMANCHE on the date hereof and initialed by the parties (The "OIL CITY
Disclosure Schedule"). Nothing in the OIL CITY Disclosure Schedule shall be
deemed adequate to disclose an exception to a representation or warranty made
herein, however, unless the OIL CITY Disclosure Schedule identifies the
exception with reasonable particularly and describes the relevant facts in
reasonable detail. Without limiting the generality of the foregoing, the mere
listing (or inclusion of a copy) of a document or other item shall not be deemed
adequate to disclose an exception to a representation or warranty made herein
*unless the representation or warranty has to do with the existence of the
document or other items itself). The DOUBLE EAGLE and OIL CITY Disclosure
Schedule will be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this Section 3.
3.01. A Organization, Qualification and Corporate Power. DOUBLE EAGLE is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Oklahoma. DOUBLE EAGLE is duly authorized to conduct business
and is in good standing under the laws or each jurisdiction in which the nature
of its business or the ownership or leasing of its properties requires such
qualification. DOUBLE EAGLE has full corporate power and authority to carry on
the business is which it is engaged and to own and use the properties owned and
used by it.
3.02 A Authority. DOUBLE EAGLE has all requisite corporate power and authority
to execute and deliver this Agreement and all agreements, instruments and
documents to be executed and delivered by DOUBLE EAGLE hereunder, to consummate
the transactions contemplated hereby and to perform all terms and conditions
hereof to be performed by it. The execution and delivery of this Agreement by
DOUBLE EAGLE and all agreements, instruments, and documents to be executed and
delivered by DOUBLE EAGLE hereunder, the performance by DOUBLE EAGLE of all the
terms and conditions hereto to be performed by it and the consummation of the
transactions contemplated hereby have duly authorized and approved by the Board
of Directors of DOUBLE EAGLE, and no other corporate proceedings of DOUBLE EAGLE
are necessary with respect thereto. All persons who have executed and delivered
by DOUBLE EAGLE hereunder, have been duly authorized to do so by all necessary
actions o the part of DOUBLE EAGLE.
This Agreement constitutes, and each other agreement and instrument to be
executed by DOUBLE EAGLE hereunder, when executed and delivered by DOUBLE EAGLE,
will Constitute, the valid and binding obligation of DOUBLE EAGLE enforceable
against it in accordance with its terms.
3.03 A Capitalization. The entire authorized capital stock of DOUBLE EAGLE, as
of the date of the Agreement, consists of ______________________shares of common
stock, par value $ _____________________ per share of which ____________________
shares are, as of the date of this Agreement, issued and outstanding, including
_____________________ shares held in treasury. All of the issued and outstanding
shares of DOUBLE EAGLE common stock have been duly authorized, are validly
issued, fully paid, and non-assessable. Except as disclosed in the DOUBLE EAGLE
Disclosure Schedule, there are no outstanding or authorized options, warrants,
rights, contracts, calls, puts, rights to subscribe, conversion rights or other
agreements or commitments to which DOUBLE EAGLE is a party in which are binding
upon DOUBLE EAGLE providing for the issuance, disposition or acquisition of any
of its capital stock. Upon issuance, the DOUBLE EAGLE Shares to be issued to
Sellers, pursuant to this Agreement will be duly authorized, validly issued,
fully paid and non-assessable.
3.04 A Non-contravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any statute, regulation, rule, judgement, order, decree,
stipulation, injunction, charge or other restriction of any federal, state or
local government, governmental agency or court to which DOUBLE EAGLE is subject
or any provision of its Certificate of Incorporation, Bylaws or Board of
Directors or stockholder resolutions of DOUBLE EAGLE or (ii) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel or
require any notice under any contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, security interest or other arrangement to which
DOUBLE EAGLE is a party or by which it is bound or to which any of its assets is
subject or result in the imposition of any security interest upon any of its
assets. DOUBLE EAGLE is not required to give any notice to, make any filing upon
any of its assets. DOUBLE EAGLE is not required to give any notice to, make any
filing with, or obtain any authorization, consent or approval of any federal,
state or local government, governmental agency, bank, financial institution or
other person or entity in order for DOUBLE EAGLE to consummate the transactions
contemplated by this Agreement.
3.05 A Financial Statements. Attached as Section 3.05 of the DOUBLE EAGLE
Disclosure Schedule are the following financial statements (collectively, the
"DOUBLE EAGLE Financial Statements"): (i) unaudited balance sheets of DOUBLE
EAGLE as of March 31, 1999 ("Most Recent DOUBLE EAGLE Balance sheet"); and (ii)
unaudited statements of operations, retained earnings and cash flows for the
period ended March 31, 1999. The DOUBLE EAGLE Financial Statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods covered thereby, are correct and
complete and are consistent with the books and records of DOUBLE EAGLE which
books and records are correct and complete.
3.06 A Undisclosed Liabilities. Except to the extent reflected or reserved
against in the Most Recent DOUBLE EAGLE Balance Sheet on the dates shown, or as
set forth in Section 3.06 of the DOUBLE EAGLE Disclosure Schedule, as of those
dates, DOUBLE EAGLE had no liabilities or obligations of any material nature,
whether accrued, absolute, contingent or otherwise and, as of such dates, knows
nor has reasonable grounds to know any basis for the assertion against DOUBLE
EAGLE of any liability of any nature or in any amount not fully reflected or
reserved against in the Most Recent DOUBLE EAGLE Balance Sheet.
3.07 A Events Subsequent. Subsequent to the Most Recent DOUBLE EAGLE Balance
Sheet and except as set forth in Section 3.07 of the DOUBLE EAGLE Disclosure
Schedule, DOUBLE EAGLE has not (i) incurred any material liabilities or
obligations, absolute or contingent except current liabilities and obligations
under contracts entered into in the ordinary course of business; (ii) declared
or made any payment or distribution to stockholders or purchased or redeemed any
of its capital stock; (iii) mortgaged or pledged or subjected to lien, charge or
any other encumbrance, any of its assets, tangible or intangible, excepting
extensions or renewals of liens for liabilities set forth on the Most Recent
DOUBLE EAGLE Balance Sheet; (iv) sold or transferred any of its tangible assets
or cancelled any debts or claims except in each case in the ordinary course of
business; (v) made any capital expenditures other than in the ordinary course of
business; or (vi)incurred any material or adverse losses or damages, to be
involved in strikes, or other labor disputes.
3.08 Litigation. Except as set forth in Section 3.08 of the DOUBLE EAGLE
Disclosure Schedule, there are no actions, suits or proceedings at law or in
equity pending or, to the knowledge of DOUBLE EAGLE, threatened against DOUBLE
EAGLE seeking damages nor are there any suits threatened or pending before any
federal, state or municipal government or any board, department or agency
thereof involving DOUBLE EAGLE. To the best of DOUBLE EAGLE's knowledge, DOUBLE
EAGLE has no pending violation proceedings relating to state or federal
environmental regulations.
3.09 Employment Matters. DOUBLE EAGLE is not a party to any employment contract
with any officer, director or other employee. DOUBLE EAGLE is not bound by a
contract with a labor union, pension or profit share plan or employee benefit
plan, other than as listed in Section 3.09 of the DOUBLE EAGLE Disclosure
Schedule.
3.10 A. Subsidiaries. The subsidiaries of DOUBLE EAGLE are disclosed in the
DOUBLE EAGLE Disclosure Schedule, Section 3.10 attached hereto and made a part
hereof.
3.11 A Tax Matters. DOUBLE EAGLE has no knowledge or any reasonable grounds to
know of any tax deficiencies which might be asserted against OIL CITY. Since the
date of the DOUBLE EAGLE Financial Statements, DOUBLE EAGLE has paid or has
provided for payment of all federal and state withholding and unemployment
insurance taxes and has filed all federal, state and local tax returns and
reports when due.
3.12 A Properties. Section 3.12 of the DOUBLE EAGLE Disclosure Schedule sets
forth a true and complete list of all material leases, contracts,
understandings, commitments, plans or mortgages now in effect, to which DOUBLE
EAGLE is a party, or under which it is obligated, or which materially affect its
properties. DOUBLE EAGLE has complied with all material provisions of such
leases, contracts, understandings, commitments, plans and mortgages and is not
in material default with respect to any thereof.
3.13 A. Adverse Changes. There has been no material adverse change in the
condition, financial or otherwise, of DOUBLE EAGLE from that set forth in the
Most Recent DOUBLE EAGLE Balance Sheet. To the best of DOUBLE EAGLE's knowledge,
DOUBLE EAGLE is not aware of any facts that might result in any actions, suit or
other proceeding that would result in any adverse change in the financial
condition of DOUBLE EAGLE. The business, properties and assets reflected in the
DOUBLE EAGLE Financial Statements have not been materially and adversely
affected as a result of any fire, explosion, earthquake, accident, strike,
lookout, requisition or taking of property by any government or agency thereof,
flood, drought, embargo, riot, activities of armed forces or acts of God or the
public.
3.14 A. Books and Records. All of the minute books, stock certificate books and
stock transfer ledgers of DOUBLE EAGLE are complete and accurate in all material
respects.
3.15 A. Disclosure. The representations and warranties contained in this Section
3 do not contain any untrue statement of a fact or omit to state any fact
necessary in order to make the statements and information contained in this
Section 3 not misleading.
3.01 B. Organization, Qualification and Corporate Power. OIL CITY is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas. OIL CITY is duly authorized to conduct business and is in
good standing under the laws of each jurisdiction in which the nature of its
business or the ownership or leasing of its properties requires such
qualification. OIL CITY has full corporate power and authority to carry on the
business in which it is engaged and to own and use the properties owned by it.
3.02 B. Authority. OIL CITY has all requisite corporate power and authority to
execute and deliver this Agreement and all agreements, instruments and documents
to be executed and delivered by OIL CITY hereunder, to consummate the
transactions contemplated hereby and to perform all terms and conditions hereof
to be performed by it. The execution and delivery of this Agreement by OIL CITY
and all agreements, instruments, and documents to be executed and delivered by
OIL CITY hereunder, the performance by OIL CITY of all the terms and conditions
hereto to be performed by it and the consummation of the transactions
contemplated hereby have been duly authorized and approved by the Board of
Directors of OIL CITY, and no other corporate proceedings of OIL CITY are
necessary with respect thereto. All persons who have executed and delivered this
Agreement, and all persons who will execute and deliver the other agreements,
documents and instruments to be executed and delivered by OIL CITY hereunder,
have been duly authorized to do so by all necessary actions on the part of OIL
CITY. This Agreement constitutes, and each other agreement and instrument to be
executed by OIL CITY hereunder, when executed and delivered by OIL CITY, will
constitute, the valid and binding obligation of OIL CITY enforceable against it
in accordance with its terms.
3.03 B Capitalization. The entire authorized capital stock of OIL CITY, as of
the date of the Agreement, consists ___________________of shares of common
stock, par value $ __________per share, of which _________________shares are, as
of the date of this Agreement, issued and outstanding, including
____________________ shares held in treasury. Certain employees and other
individuals have been granted warrants to acquire restricted common stock of OIL
CITY, which if exercised would result in the issuance of an additional _________
shares of common stock as more fully described in the OIL CITY Disclosure
Schedule Section 2.03 attached hereto and made a part hereof. All of the issued
and outstanding shares of OIL CITY common stock have been duly authorized, are
validly issued, fully paid, and non-assessable. Except as disclosed in the OIL
CITY Disclosure Schedule, there are no outstanding or authorized options,
warrants, rights, contacts, calls, puts, rights to subscribe, conversion rights
or other agreements or commitments to which OIL CITY is a party of which are
binding upon OIL CITY providing for the issuance, disposition or acquisition of
any of its capital stock. Upon issuance, the OIL CITY Shares to be issued to
Sellers, pursuant to the Agreement will be duly authorized, validly issued,
fully paid and non-assessable.
3.04 B Non-contravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge or other restriction of any federal, state or local
government, governmental agency or court to which OIL CITY is subject or any
provision of its Certificate of Incorporation, Bylaws or Board of Directors or
stockholder resolutions of OIL CITY or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel or require any
notice under any contract, lease, sublease, license, sublicense, franchise
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, security interest or other arrangement to which OIL CITY is a
party or by which it is bound or to which any of its assets is subject or result
in the imposition of any security interest upon any of its assets. OIL CITY is
not required to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any federal, state or local government,
governmental agency, bank, financial institution or other person or entity in
order for OIL CITY to consummate the transactions contemplated by this
Agreement.
3.05 B Subsidiaries. The subsidiaries of OIL CITY are disclosed in the OIL CITY
Disclosure Schedule, Section 3.05 attached hereto and made a part hereof.
3.06 B Disclosure. The representations and warranties contained in this Section
3 do not contain any untrue statement of a fact or omit to state any fact
necessary in order to make the statements and information contained in this
Section 3 not misleading.
3.07 B Representation. OIL CITY represents and warrants that in making the
decision to sell DOUBLE EAGLE, it has relied upon its own independent
investigations and the independent investigations by its representatives,
including its own professional legal, tax, and business advisors, and that OIL
CITY and its representatives have been given the opportunity to examine all
relevant documents and to ask questions of and to receive answers from COMANCHE.
4. Representations and Warranties of COMANCHE
COMANCHE represents and warrants to the OIL CITY Stockholders and OIL CITY
that the statements contained in this Section 4 are correct and complete as of
the date of this Agreement and will be correct and complete as of the Closing
Date except as set forth in the disclosure schedule delivered by COMANCHE to the
OIL CITY Stockholders and OIL CITY on the date hereof and initialed by the
parties (the "COMANCHE Disclosure Schedule"). Nothing it the COMANCHE Disclosure
Schedule shall be deemed adequate to disclose an exception to a representation
or warranty made herein, however, unless the COMANCHE Disclosure Schedule
identifies the exception with reasonable particularity and describes the
relevant facts in reasonable detail. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or other item
shall not be deemed adequate to disclose an exception to a representation or
warranty made herein (unless the representation or warranty has to do with the
existence of the document or other items itself). The COMANCHE Disclosure
Schedule will be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this Section 4.
4.01 Organization, Qualification and Corporate Power. COMANCHE is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Utah. COMANCHE is duly authorized to conduct business and is in
good standing under the laws of each jurisdiction in which the nature of its
business or the ownership or leasing of its properties requires such
qualification. COMANCHE has full corporate power and authority to carry on the
business in which it is engaged and to own and use the properties owned and used
by it. Section 4.01 of the COMANCHE Disclosure Schedule lists the directors and
officers of COMANCHE. COMANCHE has made available for inspection by OIL CITY
correct and complete copies of the Certificate of Incorporation and Bylaws of
COMANCHE (AS AMENDED TO DATE). The minute books containing the records of
meetings of the stockholders, the Board of Directors and any committee of the
Board of Directors, the stock certificate books and the stock record books of
COMANCHE are correct and complete. COMANCHE is not if default under or in
violation of any provision of its Certificate of Incorporation or Bylaws.
4.02 Capitalization. The entire authorized capital stock of COMANCHE
consists of (i) 30,000,000 shares of common stock, no par value per share, of
which 18,300,000 shares are issued and outstanding. All of the issued and
outstanding shares have been duly authorized, are validly issued, fully paid,
and non-assessable and are held of record by the respective COMANCHE
shareholders as set forth in COMANCHE's stock record books. There are no
outstanding or authorized options, warrants, rights, contracts, calls, puts,
rights to subscribe, conversion rights or other agreements or commitments to
which COMANCHE is a party or which are binding upon COMANCHE providing for the
issuance, disposition or acquisition of any of its capital stock, except as
disclosed in Section 4.02 of the COMANCHE Disclosure Schedule. There are no
outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to COMANCHE. There are no voting trusts, proxies or any other
agreements or understanding with respect to the voting of the capital stock of
COMANCHE. There are no voting trusts, proxies or any other agreements or
understanding with respect to the voting of the capital stock of COMANCHE. Upon
issuance, the COMANCHE Shares to be issued to the OIL CITY Stockholders pursuant
to this Agreement will be duly authorized, validly issued, fully paid and
non-assessable.
4.03 Non-contravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge or other restriction of any government, governmental agency
or court to which the COMANCHE is subject or any provision of its Certificate of
Incorporation or Bylaws of COMANCHE or (ii) conflict with result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel or require any notice
under any contract, lease, sublease, license, sublicense, franchise, permit,
indenture, agreement or mortgage for borrowed money, instrument of indebtedness,
security interest or other arrangement to which COMANCHE is a party or by which
it is bound or to which any of its assets is subject or result in the imposition
of any security interest upon any of its assets. COMANCHE is not required to
give any notice to, make any filing with, or obtain any authorization, consent
or approval of any government, governmental agency or other person in order for
COMANCHE to consummate the transactions contemplated by this Agreement.
4.04 Subsidiaries. The Subsidiaries owned by COMANCHE are disclosed in
Section 4.04 of the COMANCHE Disclosure Schedule and, except as set forth in
Section 4.04 of the COMANCHE Disclosure Schedule, COMANCHE does not own,
directly or indirectly, any capital stock, security, partnership interest or
other interest of any kind in any corporation, partnership joint venture,
association or other entity.
4.05 Common Stock Trading Market. The common stock of COMANCHE is eligible
for quotation and is quoted on the OTC Bulletin Board in accordance with the
applicable rules of the NASD and Securities and Exchange Commission ("SEC") and
is in compliance with applicable NASD and SEC rules for continuing quotation of
the Bulletin Board. The broker-dealers which are market-makers in the common
stock of COMANCHE are listed in the Disclosure Schedule. COMANCHE has furnished
each Market-Maker and each other broker-dealer effecting transactions in the
Company's common stock with all information required by SEC Rule 15c2-11.
COMANCHE, its officers, directors and affiliates have fully complied with any
and all requests for information by the Market-Makers and all other
broker-dealers, whether or not acting in the capacity of a market-maker,
pursuant to SEC Rules 15c2-11. Any and all information provided by COMANCHE to
the Market-Makers and all other broker-dealers, whether or not acting in the
capacity of a market-maker, was, at the time it was furnished, accurate in all
material respects.
4.06 Financial Statements. Attached as Section 4.06 of the COMANCHE
Disclosure Schedule are the following COMANCHE financial statements
(collectively, the COMANCHE Financial Statements): (i) audited consolidated
balance sheets as of the fiscal years ended December 31, 1996 and 1997 and
unaudited consolidated balance sheets for the year ended December 31, 1998 and
the three months ended March 31, 1999 and audited consolidated statements of
income, changes in stockholders' equity and cash flow as of and for the fiscal
years ended December 31, 1996 and 1997 and unaudited Financial Statements for
the year ended December 31, 1998 and the unaudited statements of operations for
the three months ending March 31, 1999 (the "Most Recent COMANCHE Fiscal
Quarter") for COMANCHE. The COMANCHE Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods covered thereby, are correct and complete and are
consistent with the books and records of COMANCHE which books and records are
correct and complete; provided, however, that the unaudited COMANCHE Financial
Statements are subject to normal adjustments (which will not be material) and
lack complete footnotes and other presentation items.
4.07 Events Subsequent. Subsequent to the Most Recent COMANCHE Balance
Sheet and except as set forth in Section 4.07 of the COMANCHE Disclosure
Schedule, COMANCHE has not (i) incurred any material liabilities or obligations,
absolute or contingent, except current liabilities and obligations under
contracts entered into in the ordinary course of business; (ii) declared or made
any payment or distribution to stockholders or purchased or redeemed any of its
capital stock; (ii) mortgaged or pledged or subjected to lien, charge or any
other encumbrance, any of its assets, tangible or intangible, excepting
extensions or renewals of liens for liabilities set forth on the Most Recent
COMANCHE Balance Sheet; (iv) sold or transferred any of its tangible assets or
cancelled any debts or claims except in each case in the ordinary course of
business; (v) made any capital expenditures other than in the ordinary course of
business; or (vi) incurred any material or adverse losses or damages, to be
involved in strikes, or other labor disputes.
4.08 Undisclosed Liabilities. Except as set forth in Section 4.08 of the
Comanche Disclosure Schedule, COMANCHE has no liability (and there is no basis
for any present or future charge, complaint, action, suit, proceeding, hearing,
investigation, claim or demand against it giving rise to any liability), except
for (i) liabilities set forth on the face of the COMANCHE Financial Statements
(rather than in any notes thereto) and (ii) liabilities which have arisen after
the Most Recent COMANCHE Fiscal Year End in the ordinary course of business, non
of which relates to any breach of contract, breach of warranty, tort,
infringement or violation of law or arose out of any charge, complaint, action,
suit, proceeding, hearing, investigation, claim or demand.
4.09 Tax Matters. COMANCHE has no knowledge or any reasonable grounds to
know of any tax deficiencies which might be asserted again COMANCHE. Since the
date of the COMANCHE Financial Statements, COMANCHE has paid or has provided for
payment of all federal and state withholding and unemployment insurance taxes
and has filed all federal, state and local tax returns and reports when due.
4.10 Title to Properties. Except as set forth in Section 4.09 of the
Comanche Disclosure Schedule, COMANCHE has good and marketable title to, or
valid leasehold interests in, all its properties and assets, real, personal and
intangible, including without limitation, the assets reflected in the COMANCHE
Financial Statements (except s since sold or otherwise disposed of in the
ordinary course of business) free and clear of all mortgages, pledges,
conditional sales agreements, claims, liens, security interests and
encumbrances, except (i) as referred to or reflected in the Interim COMANCHE
Financial Statements or in the notes thereto, and (ii) statutory liens for taxes
not yet due and payable. COMANCHE has no received notice of violation of any
applicable law, ordinance, regulation, order or requirement relating to such
properties or assets. All leases pursuant to which COMANCHE leases any real or
personal property are valid and effective in accordance with their respective
terms and there is not, under any of such leases, any existing default or event
of default or event which, with notice or lapse of time, or both, would
constitute a default which has been noticed to COMANCHE or of which COMANCHE is
aware.
4.11 Real Property Leases. COMANCHE is not a party to any lease or sublease
of real property, except two gas compressor leases as more fully described in
the Disclosure Statements.
4.12 Intellectual Property.
(a) Except as disclosed in Section 4.12 of the COMANCHE Disclosure
Schedule, COMANCHE does not own any Intellectual Property and is not a party to
any license, sublicense, agreement, or permission with respect to any
Intellectual Property (as defined following) necessary for the operation of its
business as presently conducted and as presently proposed to be conducted.
COMANCHE has not interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any Intellectual Property rights of third parties, and
non of the directors and officers (and employees with responsibility for
Intellectual Property matters) of COMANCHE have ever received any charge,
complaint, claim, or notice alleging any such interference, infringement,
misappropriation, or violation.
(b) As used herein, "Intellectual Property" means all (i) patents, patent
applications, patent disclosures, and improvements thereto, (ii) trademarks,
service marks, trade dress, logos, trade names, and corporate names and
registrations and applications for registration thereof, (iii) copyrights and
registrations and applications for thereof, (iv) mask works and registrations
and applications for registration thereof, (v) computer software, data, and
documentation, (vi) trade secrets and confidential business information
(including ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, manufacturing
and production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial, marketing, and business data, pricing and cost
information, business and marketing plans, and customer and supplier lists and
information), (vii) other proprietary rights, and (viii) copies and tangible
embodiments thereof (in whatever form or medium).
4.13 Tangible Assets. Except as set forth on the COMANCHE Financial
Statements, COMANCHE does not own or lease any tangible assets of any kind or
nature.
4.14 Inventory. COMANCHE has no inventory of products, raw materials or
other supplies, except those used in the ordinary course of business.
4.15 Litigation. COMANCHE (i) is not subject to any unsatisfied judgment,
order, decree, stipulation, injunction or charge and (ii) is a not party and, to
the knowledge of any of the directors and officers (and employees with
responsibility for litigation matters) of COMANCHE, is not threatened to be made
a party to any charge, complaint, action, suit, proceeding, hearing, or
investigation of or in any court or quasi-judicial or administrative agency of
any federal, state, local or foreign jurisdiction or before any arbitrator,
except as set forth in Section 4.15 of the Comanche Disclosure Schedule.
4.16 Adverse Changes. There has been no material adverse change in the
condition, financial or otherwise, of COMANCHE from that set forth in the Most
Recent COMANCHE Balance Sheet. To the best of COMANCHE's knowledge, COMANCHE is
not aware of any facts that might result in any actions, suit or other
proceeding that would result in any adverse change in the financial condition of
COMANCHE. The business, properties and assets reflected in the COMANCHE
Financial Statements have not been materially and adversely affected as a result
of any fire, explosion, earthquake, accident, strike, lockout, requisition or
taking of property by any government or agency thereof, flood, drought, embargo,
riot, activities of armed forces or acts of God of the public.
4.17 Books and Records. All of the minute books, stock certificate books
and stock transfer ledgers of COMANCHE are complete and accurate in all material
respects.
4.18 Certain Business Relationships with COMANCHE. Except as disclosed in
the COMANCHE Disclosure Schedule, none of the OIL CITY shareholders and their
affiliates has been involved in any business arrangement or relationship with
COMANCHE within the past 36 months, and none of the OIL CITY shareholders and
their affiliates owns any property or right, tangible or intangible, which is
used in the business of COMANCHE.
4.19 Independent Investigation of OIL CITY. COMANCHE confirms that it has
received, reviewed, understands and has fully considered (including, without
limitation, the financial statements contained therein) for purposes of its
acquisition of DOUBLE EAGLE, the business prospects and leases of OIL CITY.
COMANCHE represents and warrants that in making the decision to acquire the
DOUBLE EAGLE, it has relied upon its own independent investigation of OIL CITY
and DOUBLE EAGLE and the independent investigations by its representatives,
including its own professional legal, tax and business advisors, and that
COMANCHE and its representatives have been given the opportunity to examine all
relevant documents and to ask questions of and to receive answers from OIL CITY
and DOUBLE EAGLE, or person(s) acting on its behalf, concerning the terms and
conditions of acquisition by COMANCHE of the DOUBLE EAGLE and any other matters
concerning an investment in DOUBLE EAGLE, and to obtain any additional
information COMANCHE deems necessary to verify and the accuracy of the
information provided.
4.20 Disclosure. The representations and warranties contained in the
Section 4 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 4 not misleading.
5. Survival and Indemnity.
----------------------
5.01 Survival. All of the representations and warranties of the parties
contained in this Agreement shall survive the Closing Date, even if the damaged
party knew or had reason to know of any misrepresentation or breach of warranty
at the time of the Closing Date, and shall continue in full force and effect for
a period of one year thereafter.
5.02 Indemnification for Benefit of the OIL CITY Stockholders. In the
event COMANCHE breaches any of its representations, warranties and covenants
contained herein, and provided that any OIL CITY Stockholder or OIL CITY makes a
written claim for indemnification against COMANCHE pursuant to Section 10.05.
then COMANCHE agrees to and does hereby indemnify OIL CITY and the OIL CITY
Stockholders from and against the entirety of any Adverse Consequences it may
suffer through and after the date of the claim for indemnification (including
any Adverse Consequences that OIL CITY or the OIL CITY Stockholders may suffer
after the end of the applicable survival period) resulting from, arising out of,
relating to, in the nature of, or caused by the breach.
5.03 Indemnification for Benefit of COMANCHE. In the event any of the OIL
CITY Stockholders breach any of their respective representations, warranties and
covenants contained herein, and provided the COMANCHE makes a written claim for
indemnification against the OIL CITY Stockholder in breach pursuant to Section
10.05, then the OIL CITY Stockholders severally, and not jointly, agree to
indemnify COMANCHE from and against the entirety of any Adverse Consequences
COMANCHE may suffer through and after the date of the claim for indemnification
resulting from, arising out of, relating to, in the nature of, or caused by the
breach.
5.04 Matters Involving Third Parties. If any third party shall notify any
party to this Agreement (the "Indemnified Party") with respect to any matter
which may give rise to a claim for indemnification against any other party (the
"Indemnifying Party") under this Section 5, then the Indemnified Party shall
notify each Indemnifying Party thereof promptly; provided however, that no delay
on the part of the Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any liability or obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is damaged. In
the event any Indemnifying Party notifies the Indemnified Party within 10 days
after the Indemnified party has given notice of the matter that the Indemnifying
Party is assuming the defense thereof, (i) the Indemnifying Party will defend
the Indemnified Party against the matter with counsel of its choice reasonably
satisfactory to the Indemnified party, (II) the Indemnified Party may retain
separate co-counsel at its sole cost and expense (except that the Indemnifying
Party will be responsible for the fees and expenses of the separate co-counsel
to the extent the Indemnified Party concludes reasonably that the counsel the
Indemnifying Party has selected has a conflict of interest), (iii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the matter without the written consent of the
Indemnifying Party will not to be withheld unreasonably, and (iv) the
Indemnifying Party will not consent to the entry of any judgment with respect to
the matter, or enter into any settlement which does not include a provisions
whereby the plaintiff of claimant in the matter releases the Indemnified Party
for all liability with respect thereto, without the written consent of the
Indemnified Party not to be withheld unreasonably. In the event no Indemnifying
Party notifies the Indemnified Party within 10 days after the Indemnified Party
has given notice of the matter that the Indemnifying party is assuming the
defense thereof, however, the Indemnified Party may defend against, or enter
into any settlement with respect to, the matter in any manner it reasonably may
deem appropriate.
5.05 Determination of Loss. The parties shall make appropriate adjustment
for tax benefits and insurance proceeds (reasonably certain of receipt and
utility in each case) and for the time cost of money in determining the amount
of loss for purposes of this Section 5.
5.06 Other Indemnification Provisions. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory or common
law remedy any party may have for breach of representation, warranty or
covenant.
5.07 Definition of Adverse Consequences. As used in this Section 5,
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgment, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
(including costs incurred to comply with applicable rules and regulations of the
National Association of Securities Dealers and Securities and Exchange
Commission) amounts paid in settlement, liabilities, obligations, taxes, liens,
losses, expenses and fees, including all attorneys' fees, accountants' fees and
court costs.
6. Conduct and Transactions Prior to Closing.
-----------------------------------------
6.01 Investigation; Operation of Business of OIL CITY.
Between the date of this Agreement and the Closing Date:
(a) OIL CITY agrees to give COMANCHE, its agents and representatives, full
access to all of OIL CITY' premises and books and records, and to cause OIL
CITY' officers to furnish COMANCHE with such financial and operating data and
other information with respect to its business and properties as COMANCHE shall
from time to time request. Provided, however, that any such investigation shall
not affect any of the representations and warranties of OIL CITY hereunder and
provided further, that any such investigation shall be conducted in such manner
as not to interfere unreasonably with the operation of the business of OIL CITY.
In the event of termination of this Agreement, COMANCHE will return to OIL CITY
all documents, work papers, and other material obtained from OIL CITY in
connection with the transactions contemplated hereby and will keep confidential
any information obtained pursuant to this Agreement unless such information is
ascertainable from public or published information or trade sources.
(b) Except as set forth in the OIL CITY Disclosure Schedule, OIL CITY, to
the extent required for continued operation of the business of OIL CITY without
impairment, will use reasonable efforts to preserve substantially intact the
business organization of OIL CITY, to keep available to the services of the
present officers and employees of OIL CITY, and to preserve the present
relationships of OIL CITY with persons having significant business relationships
with OIL CITY.
(c) Except as set forth in the OIL CITY Disclosure Schedule, prior to
Closing, OIL CITY, will conduct its business only in the ordinary course and, by
way of amplification and not limitation, OIL CITY will not, without the prior
written consent of COMANCHE (i) issue any capital stock, or (ii) grant any stock
options or warrants or other rights to purchase or otherwise acquire any shares
of OIL CITY capital stock or issued any securities convertible into shares of
OIL CITY capital stock, or (iii) adopt any employee benefit plans or modify or
alter any existing employee benefit plan, or (iv) declare, set aside, or pay any
dividend or distribution with respect to the capital stock of OIL CITY, or (v)
directly or indirectly redeem, purchase or otherwise acquire any capital stock
of OIL CITY, or (vi) effect a split or reclassification of any capital stock of
OIL CITY or a recapitalization of OIL CITY, or (vii) amend or change the
Certificate of Incorporation or Bylaws of OIL CITY, or (viii) grant any increase
in the compensation payable or to become payable by OIL CITY to officers or
salaried employees of OIL CITY or any increase regardless of amount, in any
bonus, insurance, pension or other benefit plan, program, payment or arrangement
made to for or with any officers or employees, or (ix) borrow or agree to borrow
any funds, or guarantee or agree to guarantee the obligations of others except
in the ordinary course of business, of (x) waive any rights of substantial
value, or (xi) except in the ordinary course of business, enter into an
agreement, contract or commitment.
6.02 Investigation: Operation of Business of COMANCHE.
Between the date of this Agreement and the Closing Date:
(a) COMANCHE agrees to give to OIL CITY, its agents and representatives,
full access to all premises and books and records, and to cause COMANCHE's
officers to furnish OIL CITY with such financial and operating data and other
information with respect to the business and properties of COMANCHE as OIL CITY
shall from time to time request. Provided, however, that any such investigation
shall not affect any of the representations and warranties of COMANCHE
hereunder; and provided further, that any such investigation shall be conducted
in such manner as not to interfere unreasonable with the operation of the
business of COMANCHE. In the event of termination of this Agreement, OIL CITY,
will return to COMANCHE all documents, work papers and other material obtained
from COMANCHE in connection with the transactions contemplated hereby and will
use all reasonable efforts to keep confidential any information obtained
pursuant to this Agreement unless such information is ascertainable from public
or published information or trade sources.
(b) COMANCHE, to the extent required for continued operation of the
business of COMANCHE without impairment, will use reasonable efforts to preserve
substantially intact the business organization of COMANCHE, to keep available
the services of the present officers and employees of COMANCHE, and to preserve
the present relationships of COMANCHE with persons having significant business
relationships to COMANCHE.
(c) Prior to Closing, except as set forth in Section 6.02 of the Comanche
Disclosure Statement, COMANCHE will cause COMANCHE to, conduct its business only
in the ordinary course and, by way of amplification and not limitation, COMANCHE
will not, without the prior written consent of OIL CITY, (i) issue any capital
stock, or (ii) grant any stock options or warrants or other rights to purchase
or otherwise acquire any shares of COMANCHE capital stock or issue any
securities convertible into shares of COMANCHE capital stock, or (iii) adopt any
employee benefit plans or modify or alter any existing employee benefit plant,
or (iv) declare, set aside, or pay any dividend or distribution with respect to
the capital stock of COMANCHE, or (v) directly or indirectly redeem, purchase or
otherwise acquire any capital stock of COMANCHE, or (vi) effect a split or
reclassification of any capital stock of COMANCHE or a re-capitalization of
COMANCHE, or (vii) amend or change the certificate of Incorporation or Bylaws of
COMANCHE, or (viii) grant any increase in the compensation payable or to become
payable to COMANCHE to officers or salaried employees of COMANCHE or any
increase regardless of amount, in any bonus, insurance, pension or other benefit
plan, program, payment of arrangement made to, for or with any officers or
employees, or (ix) borrow or agree to borrow any funds, or guarantee or agree to
guarantee the obligations of others except in the ordinary course of business,
or (x) waive any rights of substantial value, or (xi) except in the ordinary
course of business, enter into an agreement, contract or commitment.
7. Consents.
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Prior to Closing, OIL CITY and COMANCHE shall each use his or its
respective reasonable efforts to obtain the consent or approval of each person
whose consent or approval shall be required in order to permit OIL CITY or
COMANCHE, as the case may be, to consummate the COMANCHE Acquisition.
8. Conditions to Closing.
---------------------
8.1 General Conditions. The obligations of the parties to effect the DOUBLE
EAGLE Acquisition shall be subject to the following conditions:
(a) The Board of Directors and, to the extent required by law, the
shareholders of COMANCHE, shall have approved this Agreement in accordance with
applicable provisions of state law.
(b) No action, suit or proceeding shall be pending or threatened before
any court or quasi-judicial or administrative agency of any federal, state,
local or foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, filing or charge would (i) prevent
consummation of any of the transactions contemplated by this Agreement, (ii)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, (iii) affect adversely the right of COMANCHE to acquire
and own DOUBLE EAGLE, (iv) affect adversely the right of the OIL CITY
Stockholders to acquire and own the COMANCHE Shares; or (v) affect adversely the
right of either COMANCHE or OIL CITY to own its assets and to operate its
businesses (and no such injunction, judgment, order, decree, ruling or charge
shall be in effect).
(c) All governmental approvals, the absence of which would have a
materially adverse effect on COMANCHE or OIL CITY, respectively, on a
consolidated basis, after the Closing Date, shall have been received.
8.02 Conditions of Obligations of COMANCHE. The obligation of COMANCHE to
effect the DOUBLE EAGLE Acquisition AND TO PROCEED with the Closing on the
Closing Date shall at all times be subject to the following conditions
precedent, any of which may be waived by COMANCHE in writing:
(a) (i) the representations and warranties of the OIL CITY Stockholders,
DOUBLE EAGLE and OIL CITY contained herein shall be true and correct in all
material respects at the Closing Date with the same effect as though made at
such time, and (ii) the OIL CITY Stockholders, OIL CITY and DOUBLE EAGLE shall
have each performed all material obligations and complied with all material
covenants required by this Agreement to be performed or complied with by him or
it prior to the Closing Date.
(b) The OIL CITY Stockholders and OIL CITY shall have each obtained and
delivered to COMANCHE consents to the transactions contemplated by this
Agreement from the parties to all material contracts, referred to in the OIL
CITY Disclosure Schedule attached hereto in accordance with this Agreement,
which require such consent, and in particular, the consent of Bank One Texas,
N.A.
(c) There shall not have occurred (i) any material adverse change, since
the Most Recent DOUBLE EAGLE Balance Sheet, in the business, properties, results
of operations or financial condition of DOUBLE EAGLE, or (ii) any loss or damage
to any of the properties or assets (whether or not covered by insurance) of
DOUBLE EAGLE which will materially affect or impair the ability of DOUBLE EAGLE
to conduct after the DOUBLE EAGLE Acquisition of the Business now being
conducted by DOUBLE EAGLE.
(d) All statutory requirements for the valid consummation by the OIL CITY
Stockholders, DOUBLE EAGLE and OIL CITY of the transactions contemplated by this
Agreement shall have been fulfilled and all authorizations, consents and
approvals of all federal, state or local governmental agencies and authorities
required to be obtained in order to permit consummation by the OIL CITY
Stockholders, DOUBLE EAGLE and OIL CITY of the transactions contemplated by this
Agreement and to permit the business presently carried on by DOUBLE EAGLE to
continue unimpaired to any material degree immediately following the Closing
Date shall have been obtained. Between the date of this Agreement and the
Closing Date, no governmental agency, whether federal, state or local, shall
have instituted (or threatened to institute in a writing directed to the OIL
CITY Stockholders, DOUBLE EAGLE, OIL CITY, COMANCHE or any of their subsidiaries
or affiliates) an investigation which is pending at the Closing Date relating to
the COMANCHE acquisition and between the date of this Agreement and the Closing
Date no action or proceeding shall have been instituted or, to the knowledge of
the OIL CITY Stockholders, shall have been threatened by any party (public or
private) before a court or other governmental body to restrain or prohibit the
transactions contemplated by this Agreement or to obtain damages in respect
thereof.
(e) The stockholders of OIL CITY shall have each acknowledged to COMANCHE
in writing (i) that the shares of COMANCHE common stock to be issued to them
pursuant to the DOUBLE EAGLE Acquisition will be issued without registration
under the Securities Act of 1933, as amended (the "Securities Act"), or the
securities laws of any state in reliance upon available exemptions from the
registration requirements thereof; (ii) that all such shares of COMANCHE common
stock will be subject to restrictions on transferability and may not be offered
for sale, sold or otherwise transferred unless subsequently registered under the
Securities Act and all other applicable securities laws or unless exemptions
from the registration requirements of the Securities Act and all other
applicable securities laws are available, as established to the satisfaction of
COMANCHE, and (iii) the certificates evidencing such COMANCHE common stock will
bear an appropriate legend evidencing the above referenced restrictions on
transferability.
(f) DOUBLE EAGLE and OIL CITY shall have furnished COMANCHE with a
certificate, dated the Closing Date, stating that the respective representations
and warranties of each contained in Section 3 are true and correct on the
Closing Date in all material respects as if then made.
(g) All papers, documents, agreements and other items required to be
delivered at Closing pursuant to Section 9.03 shall be delivered at Closing.
8.03 Conditions of Obligation of the OIL CITY Stockholders and OIL CITY.
The obligations of the OIL CITY Stockholders to effect the DOUBLE EAGLE
Acquisition and to proceed with the Closing on the Closing Date shall at all
times be subject to the following conditions precedent, any of which may be
waived by the OIL CITY Stockholders and OIL CITY in writing.
(a) COMANCHE shall have furnished OIL CITY with (i) certified copies of
resolutions duly adopted by its Board of Directors and, to the extent required
by law, the shareholders of COMANCHE, authorizing all necessary and proper
corporate action to enable COMANCHE to comply with terms of this Agreement and
approving the execution, delivery and performance of this Agreement, including
the issuance of the COMANCHE Shares, and (ii) an Incumbency Certificate for the
appropriate officers of COMANCHE.
(b) (i) the representations and warranties of COMANCHE herein shall be
true in all material respects at the Closing Date with the same effect as though
made at such time; and (ii) COMANCHE shall have performed all material
obligations and complied with all material covenants required by this Agreement
to be performed or complied with by it prior to the Closing Date.
(c) COMANCHE shall have obtained and delivered to OIL CITY consents to the
transactions contemplated by this Agreement from the parties to all material
contracts , referred to in the COMANCHE Disclosure Schedule attached hereto in
accordance with this Agreement, which require such consent.
(d) There shall not have occurred (i) any material adverse change since
the Most Recent COMANCHE Fiscal Quarter in the business, properties, results of
operations of financial condition of COMANCHE, or (ii) any loss or damage to any
of the properties or assets (whether or not covered by insurance) of COMANCHE
which will materially affect or impair the ability of COMANCHE to conduct, after
the COMANCHE Acquisition, the business now being conducted by COMANCHE.
(e) All Statutory requirements for the valid consummation by COMANCHE of
the transactions contemplated by this Agreement shall have been fulfilled and
all authorizations, consents and approvals of all federal, state, local and
foreign governmental agencies and authorities required to be obtained in order
to permit consummation by COMANCHE of the transactions contemplated by this
Agreement shall have been obtained. Between the date of this Agreement and the
Closing Date, no governmental agency, whether federal, state or local, shall
have instituted (or threatened to institute in a writing directed to the OIL
CITY Stockholders, DOUBLE EAGLE, OIL CITY, COMANCHE or any of their subsidiaries
or affiliated) an investigation which is pending at the Closing Date relating to
the DOUBLE EAGLE Acquisition and between the date of the Agreement and the
Closing Date no action or proceeding shall have been instituted or, to the
knowledge of COMANCHE shall have been threatened by any party (public or
private) before a court or other governmental body to restrain or prohibit the
transaction contemplated by this Agreement or to obtain the damages in respect
thereof.
(f) COMANCHE shall have furnished OIL CITY with a certificate, dated the
Closing Date, stating that the representations and warranties of COMANCHE
contained in Section 4 are true and correct on the Closing Date in all material
respects as if then made.
(g) all papers, documents, agreements and other items required to be
delivered at Closing pursuant to Section 9.02 shall have been delivered at
Closing.
9. Actions at Closing
9.01 Actions at the Closing. At the Closing, COMANCHE, OIL CITY and the
OIL CITY Stockholders, will each deliver, or cause to be delivered to the other,
the securities to be exchanged in accordance with Section 1.01 of this
Agreement, and each party shall pay any and all federal and state taxes required
to be paid in connection with the issuance of delivery of their own securities.
Certificates representing the COMANCHE Shares shall be issued and delivered as
set forth on Exhibit "A" attached hereto. Certificates representing the DOUBLE
EAGLE Shares shall be duly endorsed by OIL CITY for transfer to COMANCHE or in
blank, or have appropriately executed powers of attorney attached, and
signatures shall be witnessed.
9.02 Deliveries by COMANCHE. At Closing, COMANCHE will deliver to the OIL
CITY Stockholders:
(a) certificate for the COMANCHE Shares as provided by Section 9.01 hereof;
(b) certified copies of corporate resolutions and other corporate
proceedings taken by COMANCHE to authorize the execution, delivery and
performance of this Agreement;
(c) a certificate of Incumbency and signatures of officers of COMANCHE
dated as of the date of this Agreement:
(d) resignations of the current officers and Board of Directors of
COMANCHE, except Mr. Frank Cole and resolutions appointing Mr. Jeffrey T.
Wilson, Mr. James G. Borem and Mrs. Faye Cobb to the Board of COMANCHE.
9.03 Deliveries by the OIL CITY Stockholders, DOUBLE EAGLE and OIL CITY.
At Closing, the OIL CITY Stockholders, DOUBLE EAGLE and OIL CITY shall deliver
to COMANCHE:
(a) certificates for the DOUBLE EAGLE Shares a provided by Section 9.01
hereof;
(b) certified copies of corporate resolutions and other corporate
proceedings taken by DOUBLE EAGLE and OIL CITY to authorize the execution,
delivery and performance of this Agreement;
(c) a certificate of Incumbency and signatures of the officers of OIL CITY
dated as of the date of this Agreement and consenting to the sale of DOUBLE
EAGLE to COMANCHE;
10. Termination.
-----------
10.01 Termination of the Agreement. The parties may terminate this
Agreement as provided below:
(a) COMANCHE, OIL CITY and the OIL CITY Stockholders may terminate this
Agreement by mutual written consent at any time prior to the Closing;
(b) Either party may terminate this Agreement by giving written notice to
other party on or before the Closing Date if either party is not satisfied with
the results of their continuing business, legal and accounting due diligence
regarding each other.
(c) OIL CITY and/or the OIL CITY Stockholders may terminate this Agreement
by giving written notice to COMANCHE at any time prior to the Closing (i) in the
event COMANCHE has breached any representation, warranty or covenant contained
in this Agreement in any material respect, OIL CITY and/or the OIL CITY
Stockholders has notified COMANCHE of the breach and the breach has continued
without cure for a period of 10 days after the notice of breach, or (ii) if the
Closing shall not have occurred on or before June 15, 1999, or such later date
as may be agreed to by OIL CITY, the OIL CITY Stockholders and COMANCHE, in
writing, by reason of the failure of any condition precedent under Section 8.03
hereof (unless the failure results primarily from OIL CITY or the OIL CITY
Stockholders themselves breaching any representation, warranty or covenant
contained in this Agreement); and
(d) COMANCHE may terminate this Agreement by giving written notice to OIL
CITY and the OIL CITY Stockholders at any time prior to the Closing (i) in the
event OIL CITY or an OIL CITY Stockholder has breached any representation,
warranty or covenant contained in this Agreement in any material respect
COMANCHE has notified OIL CITY and the OIL CITY Stockholders of the breach and
the breach has continued without cure for a period of 10 days after the notice
of breach or (ii) if the Closing shall not have occurred on or before June 15,
1999, or such later date as may be agreed to by OIL CITY, the OIL CITY
Stockholders and COMANCHE in writing, by reason of the failure of any condition
precedent under Section 8.02 hereof (unless the failure results primarily from
COMANCHE itself breaching any representation, warranty or covenant contained in
this Agreement).
10.02 Effect of Termination. If either OIL CITY and/or the OIL CITY
Stockholders or COMANCHE terminates this Agreement pursuant to Section 10.01
above, all rights and obligations of the parties hereunder shall terminate
without any liability of any party to any other party.
<PAGE>
11. General
11.01 Brokers and Finders. Except as set forth in Section 11.1 of the
Comanche Disclosure Statement, each Party hereto represents that no broker,
agent, finder, or other party has been retained by either Party, and no
brokerage or finder's fees or agent's commissions or other like payment has been
agreed to be paid by him or it in connection with this Agreement or on account
of the transactions contemplated by this Agreement. Each Party agrees to
indemnify and hold harmless the other parties from and against any and every
claim arising by breach of the aforesaid representation and warranty and all
costs and expenses, legal or otherwise, which any such party may incur as the
result of any such claim, except as noted in Section 11.1 of the Comanche
Disclosure Statement.
11.02 Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other Parties. Provided
however, that any Party any make any public disclosure it believes in good faith
is required by applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will use it
reasonable efforts to advise the other Party prior to making the disclosure).
11.03 Schedules. The DOUBLE EAGLE, OIL CITY and COMANCHE Disclosure
Schedules delivered pursuant to the terms of this Agreement shall be bound
together, initialed by COMANCHE and SHA STEPHENS and deemed attached hereto and
made a part hereof.
11.04 Survival of Covenants, Representations and Warranties. Except as
otherwise specifically provided, the covenants, representations and warranties
contained herein shall expire and be terminated and extinguished at the Closing
Date.
11.05 Governing Law. This Agreement and the legal relations between the
parties shall be governed by and construed in accordance with the laws of the
State of Utah.
11.06 Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if sent by registered mail or certified
mail, postage prepaid if addressed as follows:
If to COMANCHE:
COMANCHE Energy, Inc.
8111 LBJ Freeway, Suite 787
Dallas, TX 75251
Attn: Mr. Frank W Cole
President
<PAGE>
If to OIL CITY and OIL CITY Stockholders:
Oil City Petroleum, Inc.
5577 South Lewis Avenue
Tulsa, OK 74105
Attn: Mr. James G. Borem
President
11.07 No Assignment. This Agreement may not be assigned by operation of law
or otherwise, without the express written consent of each party hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
COMANCHE ENERGY, INC.
By: /s/______________________________
Frank W Cole, President
Oil City Petroleum, Inc.
By: /s/________________________________
James G. Borem, President
EXHIBIT A-3 [EXCHANGE PROPERTIES]
AGREEMENT TO EXCHANGE PROPERTIES
THIS AGREEMENT TO EXCHANGE STOCK (the "Agreement"), dated as of the day of
June 1999, by and between Comanche Energy, Inc., a Utah corporation ('COMANCHE')
and Sha Stephens, Inc., a Texas corporation ("SHA STEPHENS").
WHEREAS, SHA STEPHENS, INC. and the Board of Directors of COMANCHE deem it
advisable and in the best interests of SHA STEPHENS, INC. and COMANCHE that
COMANCHE acquire certain oil and gas properties and related equipment,
("Properties") more fully described in the attached Exhibit A, in exchange for
4,000,000 shares of COMANCHE common stock, referred herein as the "COMANCHE
Shares" pursuant to this Agreement and applicable provisions of law (such
transaction being hereinafter referred to as the "Sha Stephens Acquisition");
and
WHEREAS, the Board of Directors of COMANCHE and SHA STEPHENS, INC., have
approved and adopted this Agreement; and
WHEREAS, SHA STEPHENS, INC. Owns and has the right to sell, transfer and
exchange the properties to COMANCHE in accordance with the terms of this
Agreement and applicable provisions of law.
NOW THEREFORE, in consideration of the promises and of the mutual
agreements, provisions and covenants herein contained, the parties hereto hereby
agree as follows
1. Exchange of Common Stock
1.01 Exchange. Subject to the terms and conditions herein set forth, at
the time of closing set forth in Section 1.02 hereof, COMANCHE will issue and
deliver or cause to be issued and delivered to SHA STEPHENS, INC. the following:
a total of 4,000,000 shares of COMANCHE'S authorized and unissued restricted
common stock, no par value per share (the "COMANCHE Shares"), in exchange for
the conveyance by SHA STEPHENS, INC. to COMANCHE the Properties shown in Exhibit
A.
1.02 Closing. Subject to the terms and provisions of this Agreement, the
closing of the Sha Stephens Acquisition will be at 10:00 a.m. at the offices of
Comanche Energy, 8111 LBJ Freeway, Suite 787, Dallas, Texas 75251 on or before
June 15, 1999, or at such earlier or later date or such other place as shall be
mutually agreed upon by COMANCHE, and SHA STEPHENS, such date and time sometimes
being referred to herein as the "Closing" or "Closing Date.
2. Representations and Warranties of
SHA STEPHENS, INC.
SHA STEPHENS, INC., represents and warrants to COMANCHE that the
statements contained in this Section 2 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Section 2.
2.01 Authorization. The SHA STEPHENS Directors have full power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of SHA STEPHENS, INC., enforceable in accordance with its terms and conditions.
SHA STEPHENS, INC. need not give any notice to, make any filing with, or obtain
any authorization, consent or approval of any government, governmental agency,
or other person in order to consummate the transactions contemplated by this
Agreement.
2.02 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge or other restriction of any government, governmental agency
or court to which SHA STEPHENS, INC. is subject to or conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, security interest, or other arrangement to which SHA STEPHENS,
INC. is a party or by which it is bound or to which any of its assets are
subject.
2.03 Ownership. SHA STEPHENS, INC. holds of record and owns beneficially
the Properties set forth on Exhibit "A" attached hereto. SHA STEPHENS, INC.
Shares are free and clear of any restrictions (other than restrictions under
federal and state securities laws), claims, taxes, security interests, options,
warrants, rights, contracts, calls, commitments, equities and demands. SHA
STEPHENS, INC. is not a party to any voting trust, proxy or other agreement or
understanding with respect to the voting of any capital stock of SHA STEPHENS,
INC.
2.04 Speculative Nature and Risk. SHA STEPHENS, INC. understands and
acknowledges the speculative nature of and substantial risk of loss associated
with an investment in the COMANCHE Shares which may be subject to substantial
dilution. SHA STEPHENS, INC. represents and warrants that the COMANCHE Shares
constitute an investment which is suitable and consistent with its financial
condition and that it is able to bear the risks of this investment for an
indefinite period of time, which may include the total loss of its investment in
COMANCHE. SHA STEPHENS, INC. represents that it has adequate means of providing
for its financial needs and corporate and personal contingencies and no need for
liquidity in its investment in COMANCHE and that it has sufficient financial and
business experience to evaluate the merits and risk of an investment in
COMANCHE.
2.05 Federal or State Securities Laws. SHA STEPHENS, INC. understands and
acknowledges that the COMANCHE Shares have not been, and will not be, registered
under the Securities Act of 1933, as amended (the "1933 Act"), or applicable
State securities laws and SHA STEPHENS, INC. Is aware that no federal or state
agency has made any review, finding or determination regarding the terms or its
acquisition of the COMANCHE Shares nor any recommendation or endorsement of the
COMANCHE Shares as an investment SHA STEPHENS must forego the security, if any,
that such a review would provide.
2.06 Acquisition for Own Account. SHA STEPHENS, INC. directors understand
and acknowledge that the COMANCHE Shares are being offered and sold under
exemptions from registration provided by the Act and exemptions provided by
applicable state securities laws and SHA STEPHENS, INC. directors warrant and
represent that the COMANCHE shares are being acquired solely, for investment
purposes only, and not with a view to or for the resale, distribution,
subdivision or fractionalization thereof. SHA STEPHENS directors represent and
warrant that they have no agreement or other arrangement, formal or informal,
with any person to sell, transfer or pledge any part of the COMANCHE Shares or
which would guarantee them any profit or protect them against any loss with
respect to the COMANCHE Shares. Further, SHA STEPHENS, INC. directors have no
plans to enter into any such agreement or arrangement, and, consequently, they
must each bear the economic risk of an investment in the COMANCHE Shares for an
indefinite period of time.
2.07 Limitations on Resale or Transfer. SHA STEPHENS, INC. understand and
acknowledge that the COMANCHE Shares will be "restricted" as defined in Rule 144
under the Act and that therefore it cannot offer to sell, sell or otherwise
transfer or distribute the COMANCHE Shares without registration thereof, which
COMANCHE is not obligated to do, under both the Act and any applicable states
securities laws, or unless an exemption is, in the opinion of COMANCHE's
counsel, available to them under the Act and any applicable state securities
laws. Such exemption is not now available and it is not anticipated that any
such exemption will become available in the future. SHA STEPHENS further
understands and acknowledges that the restrictions on the transfer of the
COMANCHE Shares will be noted on the books of COMANCHE and that the stock
certificate representing the COMANCHE Shares will bear a written legend setting
forth the restriction on the transferability of the COMANCHE Shares in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MY NOT BE SOLD OR TRANSFERRED FOR VALUE IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION OF THEM UNDER THE SECURITIES ACT OF 1933, OR AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS
NOT REQUIRED UNDER THE ACT.
3. Representation and Warranties
SHA STEPHENS
SHA STEPHENS, INC. represents and warrants to COMANCHE that the statements
contained in this Section 3 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date except as set
forth in the Disclosure Schedule delivered by SHA STEPHENS to COMANCHE on the
date hereof and initialed by the parties (The "SHA STEPHENS Disclosure
Schedule"). Nothing in the SHA STEPHENS Disclosure Schedule shall be deemed
adequate to disclose an exception to a representation or warranty made herein,
however, unless the SHA STEPHENS Disclosure Schedule identifies the exception
with reasonable particularity and describes the relevant facts in reasonable
detail. Without limiting the generality of the foregoing, the mere listing (or
inclusion of a copy) of a document or other item shall not be deemed adequate to
disclose an exception to a representation or warranty made herein (unless the
representation or warranty has to do with the existence of the document or other
items itself). The SHA STEPHENS Disclosure Schedule will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Section 3.
3.01.A Organization, Qualification and Corporate Power. SHA STEPHENS, INC.
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Texas. SHA STEPHENS, INC. is duly authorized to conduct
business and is good standing under the laws or each jurisdiction in which the
nature of its business or the ownership or leasing of its properties requires
such qualification. SHA STEPHENS, INC. has full corporate power and authority to
carry on the business in which it is engaged and to own and use the properties
owned and used by it.
3.02.A Authority. SHA STEPHENS, INC., has all requisite corporate power and
authority to execute and deliver this Agreement and all agreements, instruments
and documents to be executed and delivered by SHA STEPHENS hereunder, to
consummate the transactions contemplated hereby and to perform all terms and
conditions hereof to be performed by it. The execution and delivery of this
Agreement by SHA STEPHENS and all agreements, instruments, and documents to be
executed and delivered by SHA STEPHENS hereunder, the performance by SHA
STEPHENS of all the terms and conditions hereto to be performed by it and the
consummation of the transactions contemplated hereby have duly authorized and
approved by the Board of Directors of SHA STEPHENS, and no other corporate
proceedings of SHA STEPHENS are necessary with respect thereto. All persons who
have executed and delivered this Agreement, and all persons who will execute and
deliver the other agreements, documents and instruments to be executed and
delivered by SHA STEPHENS hereunder, have been duly authorized to do so by all
necessary actions on the part of SHA STEPHENS.
This Agreement constitutes, and each other agreement and instrument to be
executed by SHA STEPHENS hereunder, when executed and delivered by SHA STEPHENS
will constitute, the valid and binding obligation of SHA STEPHENS enforceable
against it in accordance with its terms.
3.03.A Non-contraventon. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge or other restriction of any federal, state or local
government, governmental agency or court to which SHA STEPHENS is subject or any
provision of its Certificate of Incorporation, Bylaws or Board of Directors or
stockholder resolutions of SHA STEPHENS or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel or require any
notice under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, security interest or other arrangement to which SHA STEPHENS is a
party or by which it is bound or to which any of its assets is subject or result
in the imposition of any security interest upon any of its assets. SHA STEPHENS
is not required to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any federal, state or local government,
governmental agency, bank, financial institution or other person or entity in
order for SHA STEPHENS to consummate the transactions contemplated by this
Agreement.
3.04.A Financial Statements. Attached as Section 3.04 of the SHA STEPHENS
Disclosure Schedule are the following financial statements (collectively, the
"SHA STEPHENS Financial Statements"): (i) unaudited balance sheets of SHA
STEPHENS as of March 31, 1999 ("Most Recent SHA STEPHENS Balance sheet"); and
(ii) unaudited statements of operations, retained earnings and cash flows for
the period ended March 31, 1999. The SHA STEPHENS Financial statements have been
prepared in accordance with generally accepted accounting principals applied on
a consistent basis throughout the periods covered thereby, are correct and
complete and are consistent with the books and records of SHA STEPHENS which
books and records are correct and complete.
3.05.A Undisclosed Liabilities. Except to the extent reflected or reserved
against in the Most Recent SHA STEPHENS Balance Sheet on the dates shown, or as
set forth in Section 3.05 of the SHA STEPHENS Disclosure Schedule, as of those
dated, SHA STEPHENS had no liabilities or obligations of any material nature,
whether accrued, absolute, contingent or otherwise and, as of such dates, knows
nor has reasonable grounds to know any basis for the assertion against SHA
STEPHENS of any liability of any nature or in any amount not fully reflected or
reserved against in the Most Recent SHA STEPHENS Balance Sheet.
3.06.A Events Subsequent. Subsequent to the Most Recent SHA STEPHENS
Balance Sheet and except as set forth in Section 3.06 of the SHA STEPHENS
Disclosure Schedule, SHA STEPHENS has no (i) incurred any material liabilities
or obligations, absolute or contingent, except current liabilities and
obligations under contracts entered into in the ordinary course of business;
(ii) declared or made any payment or distribution to stockholders or purchased
or redeemed any of its capital stock; (iii) mortgaged or pledged or subjected to
lien, charge or any other encumbrance, any of its assets, tangible or
intangible, excepting extensions or renewals of liens for liabilities set forth
on the Most Recent SHA STEPHENS Balance Sheet; (iv) sold or transferred any of
its tangible assets or cancelled any debts or claims except in each case in the
ordinary course of business; (v) made any capital expenditures other than in the
ordinary course of business; or (vi) incurred any material or adverse losses or
damages, to be involved in strikes, or other labor disputes.
3.07 Litigation. Except as set forth in Section 3.07 of the SHA STEPHENS
Disclosure Schedule, there are no actions, suits or proceedings at law or in
equity pending or, to the knowledge of SHA STEPHENS, threatened against SHA
STEPHENS seeking damages nor are there any suits threatened or pending before
any federal, state or municipal government or any board, department or agency
thereof involving SHA STEPHENS. To the best of SHA STEPHENS'S knowledge, SHA
STEPHENS has no pending violation proceedings relating to state or federal
environmental regulations.
3.08 Employment Matters. SHA STEPHENS is not a party to any employment
contract with any officer, director or other employee. SHA STEPHENS is not bound
by a contract with a labor union, pension or profit share plan or employee
benefit plan, other than as listed in Section 3.08 of the SHA STEPHENS
Disclosure Schedule.
3.09 Subsidiaries The subsidiaries of SHA STEPHENS are disclosed in the SHA
STEPHENS Disclosures Schedule, Section 3.09 attached hereto and made a part
hereof.
3.10 Tax Matters. SHA STEPHENS has no knowledge or any reasonable grounds
to know of any tax deficiencies which might be asserted against SHA STEPHENS.
Since the date of the SHA STEPHENS Financial Statements, SHA STEPHENS has paid
or has provided for payment of all federal and state withholding and
unemployment insurance taxes and has file all federal, state and local tax
returns and reports when due.
3.11 Properties. Section 3.11 of the SHA STEPHENS Disclosure Schedule sets
forth a true and complete list of all material leases, contracts,
understandings, commitments, plans or mortgages now in effect, to which SHA
STEPHENS is a party, or under which it is obligated, or which materially affect
its properties. SHA STEPHENS has complied with all material provisions of such
leases, contracts, understandings, commitments, plans and mortgages and is not
in material default with respect of any thereof.
3.12 Adverse Changes. There has been no material adverse change in the
condition, financial or otherwise, of SHA STEPHENS from that set forth in the
Most Recent SHA STEPHENS Balance Sheet. To the best of SHA STEPHENS' knowledge,
SHA STEPHENS is not aware of any facts that might result in any actions, suit or
other proceeding that would result in any adverse change in the financial
condition of SHA STEPHENS. The business, properties and assets reflected in the
SHA STEPHENS Financial Statements have not been materially and adversely
affected as a result of any fire, explosion, earthquake, accident, strike,
lookout, requisition or taking of property by any government or agency thereof,
flood, drought, embargo, riot, activities of armed forces or acts of God or the
public.
3.13 Books and Records. All of the minute books, stock certificate books
and stock transfer ledgers of SHA STEPHENS are complete and accurate in all
material respects.
3.14 Disclosure. The representations and warranties contained in this
Section 3 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 3 not misleading.
4. Representatives and Warranties of Comanche
COMANCHE represents and warrants to SHA STEPHENS that the statements
contained in this Section 4 are correct and complete as of date of this
Agreement and will be correct and complete as of the Closing Date except as set
forth in the disclosure schedule delivered by COMANCHE to SHA STEPHENS on the
date hereof and initialed by the parties (the "COMANCHE Disclosure Schedule").
Nothing in the COMANCHE Disclosure Schedule shall be deemed adequate to disclose
an exception to a representation or warranty made herein, however, unless the
COMANCHE Disclosure Schedule identifies the exception with reasonable
particularity and describes the relevant facts in reasonable detail. Without
limiting the generality of the foregoing, the mere listing (or inclusion of a
copy) of a document or other item shall not be deemed adequate to disclose an
exception to a representation or warranty made herein (unless the representation
or warranty has to do with the existence of the document or other items itself).
The COMANCHE Disclosure Schedule will be arranged in paragraphs corresponding to
the lettered and numbered paragraphs contained in this Section 4.
4.01 Organization, Qualification and Corporate Power. COMANCHE is a
corporation duly organized validly existing and in good standing under the laws
of the State of Utah. COMANCHE is duly authorized to conduct business and is in
good standing under the laws of each jurisdiction in which the nature of its
business or the ownership or leasing of its properties requires such
qualification. COMANCHE has full corporate power and authority to carry on the
business in which it is engaged and to own and use the properties owned and used
by it. Section 4.01 of the COMANCHE Disclosure Schedule lists the directors and
officers of COMANCHE. COMANCHE has made available for inspection by SHA STEPHENS
correct and complete copies of the Certificate of Incorporation and Bylaws of
COMANCHE (as amended to date). The minute books containing the records of
meetings of the stockholders, the Board of Directors and any committee of the
Board of Directors, the stock certificate books and the stock record books of
COMANCHE are correct and complete. COMANCHE is not in default under or in
violation of any provision of its Certificate of Incorporation or Bylaws.
4.02 Capitalization. The entire authorized capital stock of COMANCHE
consists of (i) 100,000,000 shares of common stock, no par value per share, of
which approximately 20,300,000 shares are issued and outstanding. All of the
issued and outstanding shares have been duly authorized, are validly issued,
fully paid, and non-assessable and are held of record by the respective COMANCHE
shareholders as set forth in COMANCHE's stock record books. There are no
outstanding or authorized options, warrants, rights, contracts, calls, puts,
rights to subscribe, conversion rights or other agreements or commitments to
which COMANCHE is a party or which are binding upon COMANCHE providing for the
issuance, disposition or acquisition of any of its capital stock, except as
disclosed in Section 4.02 of the COMANCHE Disclosure Schedule. There are no
outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to COMANCHE. There are no voting trusts, proxies or any other
agreements or understanding with respect to the voting of the capital stock of
COMANCHE. Upon issuance, the COMANCHE Shares to be issued to the SHA STEPHENS
pursuant to this Agreement will be duly authorized, validly issued, fully paid
and non-assessable.
4.03 Non-contravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge or other restriction of any government, governmental agency
or court to which the COMANCHE is subject or any provision of its Certificate of
Incorporation or Bylaws of COMANCHE or (ii) conflict with result in a breach of,
constitute a default under, result in the acceleration f,, create in any party
the right to accelerate, terminate, modify, or cancel or require any notice
under any contract, lease, sublease, license, sublicense, franchise, permit,
indenture, agreement or mortgage for borrowed money, instrument of indebtedness,
security interest or other arrangement to which COMANCHE is a party or by which
it is bound or to which any of its assets is subject or result in the imposition
of any security interest upon any of its assets. COMANCHE is not required to
give any notice to, make any filing with, or obtain any authorization, consent
or approval of any government, governmental agency or other person in order for
COMANCHE to consummate the transactions contemplated by this Agreement.
4.04 Subsidiaries. The Subsidiaries owned by COMANCHE are disclosed in
Section 4.04 of the COMANCHE Disclosure Schedule and, except as set forth in
Section 4.04 of the COMANCHE Disclosure Schedule, COMANCHE does not own,
directly or indirectly, any capital stock, security, partnership interest or
other interest of any kind in any corporation, partnership joint venture,
association or other entity.
4.05 Common Stock Trading Market. The common stock of COMANCHE is eligible
for quotation and is quoted on the OTC Bulletin Board in accordance with the
applicable rules of the NASD and Securities and Exchange Commission ("SEC") and
is in compliance with applicable NASD and SEC rules for continuing quotation of
the Bulletin Board. The broker-dealers which are market-makers in the common
stock of COMANCHE are listed in the Disclosure Schedule. COMANCHE has furnished
each Market-Maker and each other broker-dealer effecting transactions in the
Company's common stock with all information required by SEC Rule 15c2-11.
COMANCHE, its officers, directors and affiliates have fully complied with any
and all requests for information by the Market-Makers and all other
broker-dealers, whether or not acting in the capacity of a market-maker,
pursuant to SEC Rules 15c2-11. Any and all information provided by COMANCHE to
the Market-Makers and all other broker-dealers, whether or not acting in the
capacity of a market-maker, was, at the time it was furnished, accurate in all
material respects.
4.06 Financial Statements. Attached as Section 4.06 of the COMANCHE
Disclosure Schedule are the following COMANCHE financial statements
(collectively, the COMANCHE Financial Statements): (i) audited consolidated
balance sheets as of the fiscal years ended December 31, 1996 and 1997 and
unaudited consolidated balance sheets for the year ended December 31, 1998 and
the three months ended March 31, 1999 and audited consolidated statements of
income, changes in stockholders' equity and cash flow as of and for the fiscal
years ended December 31, 1996 and 1997 and unaudited Financial Statements for
the year ended December 31, 1998 and the unaudited statements of operations for
the three months ending March 31, 1999 (the "Most Recent COMANCHE Fiscal
Quarter") for COMANCHE. The COMANCHE Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods covered thereby, are correct and complete and are
consistent with the books and records of COMANCHE which books and records are
correct and complete; provided, however, that the unaudited COMANCHE Financial
Statements are subject to normal adjustments (which will not be material) and
lack complete footnotes and other presentation items.
4.07 Events Subsequent. Subsequent to the Most Recent COMANCHE Balance
Sheet and except as set forth in Section 4.07 of the COMANCHE Disclosure
Schedule, COMANCHE has not (i) incurred any material liabilities or obligations,
absolute or contingent, except current liabilities and obligations under
contracts entered into in the ordinary course of business; (ii) declared or made
any payment or distribution to stockholders or purchased or redeemed any of its
capital stock; (ii) mortgaged or pledged or subjected to lien, charge or any
other encumbrance, any of its assets, tangible or intangible, excepting
extensions or renewals of liens for liabilities set forth on the Most Recent
COMANCHE Balance Sheet; (iv) sold or transferred any of its tangible assets or
cancelled any debts or claims except in each case in the ordinary course of
business; (v) made any capital expenditures other than in the ordinary course of
business; or (vi) incurred any material or adverse losses or damages, to be
involved in strikes, or other labor disputes.
4.08 Undisclosed Liabilities. Except as set forth in Section 4.08 of the
Comanche Disclosure Schedule, COMANCHE has no liability (and there is no basis
for any present or future charge, complaint, action, suit, proceeding, hearing,
investigation, claim or demand against it giving rise to any liability), except
for (i) liabilities set forth on the face of the COMANCHE Financial Statements
(rather than in any notes thereto) and (ii) liabilities which have arisen after
the Most Recent COMANCHE Fiscal Year End in the ordinary course of business, non
of which relates to any breach of contract, breach of warranty, tort,
infringement or violation of law or arose out of any charge, complaint, action,
suit, proceeding, hearing, investigation, claim or demand.
4.09 Tax Matters. COMANCHE has no knowledge or any reasonable grounds to
know of any tax deficiencies which might be asserted again COMANCHE. Since the
date of the COMANCHE Financial Statements, COMANCHE has paid or has provided for
payment of all federal and state withholding and unemployment insurance taxes
and has filed all federal, state and local tax returns and reports when due.
4.10 Title to Properties. Except as set forth in Section 4.09 of the
Comanche Disclosure Schedule, COMANCHE has good and marketable title to, or
valid leasehold interests in, all its properties and assets, real, personal and
intangible, including without limitation, the assets reflected in the COMANCHE
Financial Statements (except s since sold or otherwise disposed of in the
ordinary course of business) free and clear of all mortgages, pledges,
conditional sales agreements, claims, liens, security interests and
encumbrances, except (i) as referred to or reflected in the Interim COMANCHE
Financial Statements or in the notes thereto, and (ii) statutory liens for taxes
not yet due and payable. COMANCHE has no received notice of violation of any
applicable law, ordinance, regulation, order or requirement relating to such
properties or assets. All leases pursuant to which COMANCHE leases any real or
personal property are valid and effective in accordance with their respective
terms and there is not, under any of such leases, any existing default or event
of default or event which, with notice or lapse of time, or both, would
constitute a default which has been noticed to COMANCHE or of which COMANCHE is
aware.
4.11 Real Property Leases. COMANCHE is not a party to any lease or sublease
of real property, except two gas compressor leases as more fully described in
the Disclosure Statements.
4.12 Intellectual Property.
(a) Except as disclosed in Section 4.12 of the COMANCHE Disclosure
Schedule, COMANCHE does not own any Intellectual Property and is not a party to
any license, sublicense, agreement, or permission with respect to any
Intellectual Property (as defined following) necessary for the operation of its
business as presently conducted and as presently proposed to be conducted.
COMANCHE has not interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any Intellectual Property rights of third parties, and
non of the directors and officers (and employees with responsibility for
Intellectual Property matters) of COMANCHE have ever received any charge,
complaint, claim, or notice alleging any such interference, infringement,
misappropriation, or violation.
(b) As used herein, "Intellectual Property" means all (i) patents, patent
applications, patent disclosures, and improvements thereto, (ii) trademarks,
service marks, trade dress, logos, trade names, and corporate names and
registrations and applications for registration thereof, (iii) copyrights and
registrations and applications for thereof, (iv) mask works and registrations
and applications for registration thereof, (v) computer software, data, and
documentation, (vi) trade secrets and confidential business information
(including ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, manufacturing
and production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial, marketing, and business data, pricing and cost
information, business and marketing plans, and customer and supplier lists and
information), (vii) other proprietary rights, and (viii) copies and tangible
embodiments thereof (in whatever form or medium).
4.13 Tangible Assets. Except as set forth on the COMANCHE Financial
Statements, COMANCHE does not own or lease any tangible assets of any kind or
nature.
4.14 Inventory. COMANCHE has no inventory of products, raw materials or
other supplies, except those used in the ordinary course of business.
4.15 Litigation. COMANCHE (i) is not subject to any unsatisfied judgment,
order, decree, stipulation, injunction or charge and (ii) is a not party and, to
the knowledge of any of the directors and officers (and employees with
responsibility for litigation matters) of COMANCHE, is not threatened to be made
a party to any charge, complaint, action, suit, proceeding, hearing, or
investigation of or in any court or quasi-judicial or administrative agency of
any federal, state, local or foreign jurisdiction or before any arbitrator,
except as set forth in Section 4.15 of the Comanche Disclosure Schedule.
4.16 Adverse Changes. There has been no material adverse change in the
condition, financial or otherwise, of COMANCHE from that set forth in the Most
Recent COMANCHE Balance Sheet. To the best of COMANCHE's knowledge, COMANCHE is
not aware of any facts that might result in any actions, suit or other
proceeding that would result in any adverse change in the financial condition of
COMANCHE. The business, properties and assets reflected in the COMANCHE
Financial Statements have not been materially and adversely affected as a result
of any fire, explosion, earthquake, accident, strike, lockout, requisition or
taking of property by any government or agency thereof, flood, drought, embargo,
riot, activities of armed forces or acts of God of the public.
4.17 Books and Records. All of the minute books, stock certificate books
and stock transfer ledgers of COMANCHE are complete and accurate in all material
respects.
4.18 Certain Business Relationships with COMANCHE. None of the
shareholders and their affiliates has been involved in any business arrangement
or relationship with COMANCHE within the past 36 months, and none of the SHA
STEPHENS shareholders and their affiliates owns any property or right, tangible
or intangible, which is used in the business of COMANCHE, except as noted in the
Disclosure Statements.
4.19 Independent Investigation of SHA STEPHENS. COMANCHE confirms that it
has received, reviewed, understands and has fully considered (including, without
limitation, the financial statements contained therein) for purposes of its
acquisition of SHA STEPHENS, the business prospects and leases of SHA STEPHENS.
COMANCHE represents and warrants that in making the decision to acquire the SHA
STEPHENS properties, it has relied upon its own independent investigation of the
properties and the independent investigations by its representatives, including
its own professional legal, tax and business advisors, and that COMANCHE and its
representatives have been given the opportunity to examine all relevant
documents and to ask questions of and to receive answers from SHA STEPHENS or
person(s) acting on its behalf, concerning the terms and conditions of
acquisition by COMANCHE of the SHA STEPHENS properties, and any other matters
concerning an investment in SHA STEPHENS, and to obtain any additional
information COMANCHE deems necessary to verify and the accuracy of the
information provided.
4.20 Disclosure. The representations and warranties contained in Section 4
do not contain any untrue statement of a fact or omit to state any fact
necessary in order to make the statements and information contained in this
Section 4 not misleading.
5. Survival and Indemnity
5.01 Survival. All of the representations and warranties of the parties
contained in this Agreement shall survive the Closing Date, even if the damaged
party knew or had reason to know of any misrepresentation or breach of warranty
at the time of the Closing Date, and shall continue in full force and effect for
a period of one year thereafter.
5.02 Indemnification for Benefit of SHA STEPHENS, INC,. In the event
COMANCHE breaches any of its representations, warranties and covenants contained
herein, and provided that SHA STEPHENS makes a written claim for indemnification
against COMANCHE pursuant to Section 10.05, then COMANCHE agrees to and does
hereby indemnify SHA STEPHENS from and against the entirety of any Adverse
Consequences it may suffer through and after the date of the claim for
indemnification (including and Adverse Consequences that SHA STEPHENS may suffer
after the end of the applicable survival period) resulting from, arising out of,
relating to, in the nature of, or caused by the breach.
5.03 Indemnification for Benefit of COMANCHE. In the event SHA STEPHENS
breaches any of its respective representations, warranties and covenants
contained herein, and provided that COMANCHE makes a written claim for
indemnification against SHA STEPHENS in breach pursuant to Section 10.05, then
SHA STEPHENS agrees to indemnify COMANCHE from and against entirety of any
Adverse Consequences COMANCHE may suffer through and after the date of the claim
for indemnification resulting from, arising out of, relating to, in the nature
of, or caused by the breach.
5.04 Matters Involving Third Parties. If any third party shall notify any
party to this Agreement (the "Indemnified Party") with respect to any matter
which may give rise to a claim for indemnification against any other party (the
"Indemnifying Party") under this Section 5, then the Indemnified Party shall
notify each Indemnifying Party thereof promptly; provided however, that no delay
on the part of the Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any liability or obligation hereunder unless
( and then solely to the extent) the Indemnifying Party thereby is damming. In
the event any Indemnifying Party notifies the Indemnified Party within 10 days
after the Indemnified party has given notice of the matter that the Indemnifying
Party is assuming the defense thereof, (i) the Indemnifying Party will defend
the Indemnified party, (ii) the Indemnified Party may retain separate co-counsel
at its sole cost and expense (except that the Indemnifying Party will be
responsible for the fees and expenses of the separate co-counsel to the extent
the Indemnified Party concludes reasonably that the counsel the Indemnifying
Party has selected has a conflict of interest), (iii) the Indemnified Party will
not consent to the entry of any judgment or enter into any settlement with
respect to the matter without the written consent of the Indemnifying Party will
not to be withheld unreasonably, and (iv) the Indemnifying Party will not
consent to the entry of any judgment with respect thereto, without the written
consent of the Indemnified Party not to be withheld unreasonably. In the event
no Indemnifying Party notifies the Indemnified Party within 10 days after the
Indemnified Party has given notice of the matter that the Indemnifying party is
assuming the defense thereof, however, the Indemnified Party may defend against,
or enter into any settlement with respect to, the matter in any manner it
reasonably may deem appropriate.
5.05 Determination of Loss. The parties shall make appropriate adjustment
for tax benefits and insurance proceeds (reasonably certain of receipt and
utility in each case) and for the time cost of money in determining the amount
of loss for purposes of this Section 6.
5.06 Other Indemnification Provisions. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory or common
law remedy any party may have for breach of representation, warranty or
covenant.
5.07 Definition of Adverse Consequences. As used in this Section 5,
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
(including costs incurred to comply with applicable rules and regulations of the
National Association of Securities Dealers and Securities and Exchange
Commission) amounts paid in settlement, liabilities, obligations, taxes, liens,
losses, expenses and fees, including all attorneys' fees, accountants' fees and
court costs.
6. Conduct and Transactions Prior to Closing.
6.01 Investigation: Operation of Business of SHA STEPHEN. Between the date
of this Agreement and the Closing Date:
(a) SHA STEPHENS agrees to give COMANCHE, its agents and representatives,
full access to all of SHA STEPHENS' premises and books and records, and to cause
SHA STEPHENS' officers to furnish COMANCHE with such financial and operating
data and other information with respect to its business and properties as
COMANCHE shall from time to time request. Provided, however, that any such
investigation shall not affect any of the representations and warranties of SHA
STEPHENS hereunder and provided further, that any such investigation shall be
conducted in such manner as not to interfere unreasonably with the operation of
the business of SHA STEPHENS. In the event of termination of this Agreement,
COMANCHE will return to SHA STEPHENS all documents, work papers, and other
material obtained from SHA STEPHENS in connection with the transactions
contemplated hereby and will keep confidential any information obtained pursuant
to this Agreement unless such information is ascertainable from public or
published information or trade sources.
(b) Except as set forth in the SHA STEPHENS Disclosure Schedule, SHA
STEPHENS, to the extent required for continued operation of the business of SHA
STEPHENS without impairment, will use reasonable efforts to preserve
substantially intact the business organization of SHA STEPHENS, to keep
available to the services of the present officers and employees of SHA STEPHENS,
and to preserve the present relationships of SHA STEPHENS with persons having
significant business relationships with SHA STEPHENS.
(c) Except as set forth in the SHA STEPHENS Disclosure Schedule, prior to
Closing, SHA STEPHENS, will conduct its business only in the ordinary course
and, by way of amplification and not limitation, SHA STEPHENS will not, without
the prior written consent of COMANCHE (i) issue any capital stock, or (ii) grant
any stock options or warrants or other rights to purchase or otherwise acquire
any shares of SHA STEPHENS capital stock or issued any securities convertible
into shares of SHA STEPHENS capital stock, or (iii) adopt any employee benefit
plans or modify or alter any existing employee benefit plan, or (iv) declare,
set aside, or pay any dividend or distribution with respect to the capital stock
of SHA STEPHENS, or (v) directly or indirectly redeem, purchase or otherwise
acquire any capital stock of SHA STEPHENS, or (vi) effect a split or
reclassification of any capital stock of SHA STEPHENS or a recapitalization of
SHA STEPHENS, or (vii) amend or change the Certificate of Incorporation or
Bylaws of SHA STEPHENS, or (viii) grant any increase in the compensation payable
or to become payable by SHA STEPHENS to officers or salaried employees of SHA
STEPHENS or any increase regardless of amount, in any bonus, insurance, pension
or other benefit plan, program, payment or arrangement made to for or with any
officers or employees, or (ix) borrow or agree to borrow any funds, or guarantee
or agree to guarantee the obligations of others except in the ordinary course of
business, of (x) waive any rights of substantial value, or (xi) except in the
ordinary course of business, enter into an agreement, contract or commitment.
6.02 Investigation: Operation of Business of COMANCHE. Between the date of
this Agreement and the Closing Date:
(a) COMANCHE agrees to give to SHA STEPHENS, its agents and
representatives, full access to all premises and books and records, and to cause
COMANCHE's officers to furnish SHA STEPHENS with such financial and operating
data and other information with respect to the business and properties of
COMANCHE as SHA STEPHENS shall from time to time request. Provided, however,
that any such investigation shall not affect any of the representations and
warranties of COMANCHE hereunder; and provided further, that any such
investigation shall be conducted in such manner as not to interfere unreasonable
with the operation of the business of COMANCHE. In the event of termination of
this Agreement, SHA STEPHENS, will return to COMANCHE all documents, work papers
and other material obtained from COMANCHE in connection with the transactions
contemplated hereby and will use all reasonable efforts to keep confidential any
information obtained pursuant to this Agreement unless such information is
ascertainable from public or published information or trade sources.
(b) COMANCHE, to the extent required for continued operation of the
business of COMANCHE without impairment, will use reasonable efforts to preserve
substantially intact the business organization of COMANCHE, to keep available
the services of the present officers and employees of COMANCHE, and to preserve
the present relationships of COMANCHE with persons having significant business
relationships to COMANCHE.
(c) Prior to Closing, except as set forth in Section 6.02 of the Comanche
Disclosure Statement, COMANCHE will cause COMANCHE to, conduct its business only
in the ordinary course and, by way of amplification and not limitation, COMANCHE
will not, without the prior written consent of SHA STEPHENS, (i) issue any
capital stock, or (ii) grant any stock options or warrants or other rights to
purchase or otherwise acquire any shares of COMANCHE capital stock or issue any
securities convertible into shares of COMANCHE capital stock, or (iii) adopt any
employee benefit plans or modify or alter any existing employee benefit plant,
or (iv) declare, set aside, or pay any dividend or distribution with respect to
the capital stock of COMANCHE, or (v) directly or indirectly redeem, purchase or
otherwise acquire any capital stock of COMANCHE, or (vi) effect a split or
reclassification of any capital stock of COMANCHE or a re-capitalization of
COMANCHE, or (vii) amend or change the certificate of Incorporation or Bylaws of
COMANCHE, or (viii) grant any increase in the compensation payable or to become
payable to COMANCHE to officers or salaried employees of COMANCHE or any
increase regardless of amount, in any bonus, insurance, pension or other benefit
plan, program, payment of arrangement made to, for or with any officers or
employees, or (ix) borrow or agree to borrow any funds, or guarantee or agree to
guarantee the obligations of others except in the ordinary course of business,
or (x) waive any rights of substantial value, or (xi) except in the ordinary
course of business, enter into an agreement, contract or commitment.
7. Consents.
Prior to Closing, SHA STEPHENS and COMANCHE shall each use his or its
respective reasonable efforts to obtain the consent or approval of each person
whose consent or approval shall be required in order to permit SHA STEPHENS or
COMANCHE, as the case may be, to consummate the COMANCHE Acquisition.
8. Conditions to Closing.
8.1 General Conditions. The obligations of the parties to effect the
SHA STEPHENS Acquisition shall be subject to the following conditions:
(a) The Board of Directors and, to the extent required by law, the
shareholders of COMANCHE, shall have approved this Agreement in accordance with
applicable provisions of state law.
(b) No action, suit or proceeding shall be pending or threatened before
any court or quasi-judicial or administrative agency of any federal, state,
local or foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, filing or charge would (i) prevent
consummation of any of the transactions contemplated by this Agreement, (ii)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, (iii) affect adversely the right of COMANCHE to acquire
and own the SHA STEPHENS properties, (iv) affect adversely the right of SHA
STEPHENS to acquire and own the COMANCHE Shares; or (v) affect adversely the
right of either COMANCHE or SHA STEPHENS to own its assets and to operate its
businesses (and no such injunction, judgment, order, decree, ruling or charge
shall be in effect).
(c) All governmental approvals, the absence of which would have a materially
adverse effect on COMANCHE or SHA STEPHENS, respectively, on a consolidated
basis, after the Closing Date, shall have been received.
8.02 Conditions of Obligations of COMANCHE. The obligation of COMANCHE to
effect the SHA STEPHENS Acquisition and to proceed with the Closing on the
Closing Date shall at all times be subject to the following conditions
precedent, any of which may be waived by COMANCHE in writing:
(a) (i) the representations and warranties of SHA STEPHENS contained
herein shall be true and correct in all material respects at the Closing Date
with the same effect as though made at such time, and (ii) SHA STEPHENS has
performed all material obligations and complied with all material covenants
required by this Agreement to be performed or complied with by it prior to the
Closing Date.
(b) SHA STEPHENS shall have obtained and delivered to COMANCHE consents to
the transactions contemplated by this Agreement from the parties to all material
contracts, referred to in the SHA STEPHENS Disclosure Schedule attached hereto
in accordance with this Agreement, which require such consent, and in
particular, the consent.
(c) There shall not have occurred (i) any material adverse change, since
the Most Recent SHA STEPHENS Balance Sheet, in the business, properties, results
of operations or financial condition of SHA STEPHENS, or (ii) any loss or damage
to any of the properties or assets (whether or not covered by insurance) of SHA
STEPHENS which will materially affect or impair the ability of SHA STEPHENS to
conduct, after the SHA STEPHENS Acquisition, the business now being conducted by
SHA STEPHENS.
(d) All statutory requirements for the valid consummation of the
transactions contemplated by this Agreement shall have been fulfilled and all
authorizations, consents and approvals of all federal, state or local
governmental agencies and authorities required to be obtained in order to permit
consummation by SHA STEPHENS of the transactions contemplated by this Agreement
and to permit the business presently carried on by SHA STEPHENS to continue
unimpaired to any material degree immediately following the Closing Date shall
have been obtained. Between the date of this Agreement and the Closing Date, no
governmental agency, whether federal, state or local, shall have instituted (or
threatened to institute in writing directed to SHA STEPHENS and COMANCHE or any
of their subsidiaries or affiliates) an investigation which is pending at the
Closing Date relating to the COMANCHE acquisition AND BETWEEN THE DATE OF THIS
Agreement and the Closing Date no action or proceeding shall have been
instituted or, to the knowledge of SHA STEPHENS, shall have been threatened by
any party (public or private) before a court or other governmental body to
restrain or prohibit the transactions contemplated by this Agreement or to
obtain damages in respect thereof.
(e) SHA STEPHENS shall have acknowledged to COMANCHE in writing (i) that
the shares of COMANCHE common stock to be issued to it pursuant to the SHA
STEPHENS Acquisition will be issued without registration under the Securities
Act of 1933, as amended (the "Securities Act"), or the securities laws of any
state in reliance upon available exemptions from the registration requirements
thereof; (ii) that all such shares of COMANCHE common stock will be subject to
restrictions on transferability and may not be offered for sale, sold or
otherwise transferred unless subsequently registered under the Securities Act
and all other applicable securities laws or unless exemptions from the
registration requirements of the Securities Act and all other applicable
securities laws are available, as established to the satisfaction of COMANCHE,
and (iii) the certificates evidencing such COMANCHE common stock will bear an
appropriate legend evidencing the above referenced restrictions on
transferability.
(f) SHA STEPHENS shall have furnished COMANCHE with a certificate, dated
the Closing Date, stating that the respective representations and warranties
contained in Section 3 are true and correct on the Closing Date in all material
respects as if then made.
(g) All papers, documents, agreements and other items required to be
delivered at Closing pursuant to Section 9.03 shall be delivered at Closing.
8.03 Conditions of Obligation of SHA STEPHENS. The obligations of SHA
STEPHENS to effect the Acquisition and to proceed with the Closing on the
Closing Date shall at all times be subject to the following conditions
precedent, any of which may be waived by COMANCHE in writing.
(a) COMANCHE shall have furnished SHA STEPHENS with (i) certified copies
of resolutions duly adopted by its Board of Directors and, to the extent
required by law, the shareholders of COMANCHE, authorizing all necessary and
proper corporate action to enable COMANCHE to comply with terms of this
Agreement and approving the execution, delivery and performance of this
Agreement, including the issuance of the COMANCHE Shares, and (ii) an Incumbency
Certificate for the appropriate officers of COMANCHE.
(b) (i) the representations and warranties of COMANCHE herein shall be
true in all material respects at the Closing Date with the same effect as though
made at such time; and (ii) COMANCHE shall have performed all material
obligations and complied with all material covenants required by this Agreement
to be performed or complied with by it prior to the Closing Date.
(c) COMANCHE shall have obtained and delivered to SHA STEPHENS consents to
the transactions contemplated by this Agreement from the parties to all material
contracts, referred to in the COMANCHE Disclosure Schedule attached hereto in
accordance with this Agreement, which require such consent.
(d) There shall not have occurred (i) any material adverse change since
the Most Recent COMANCHE Fiscal Quarter in the business, properties, results of
operations of financial condition of COMANCHE, or (ii) any loss or damage to any
of the properties or assets (whether or not covered by insurance) of COMANCHE
which will materially affect or impair the ability of COMANCHE to conduct, after
the COMANCHE Acquisition, the business now being conducted by COMANCHE.
(e) All statutory requirements for the valid consummation by COMANCHE of
the transactions contemplated by this Agreement shall have been fulfilled and
all authorizations, consents and approvals of all federal, state, local and
foreign governmental agencies and authorities required to be obtained in order
to permit consummation by COMANCHE of the transactions contemplated by this
Agreement shall have been obtained. Between the date of this Agreement and the
Closing Date, no governmental agency, whether federal, state or local, shall
have instituted (or threatened to institute in a writing directed to SHA
STEPHENS and COMANCHE or any of their subsidiaries or affiliates) an
investigation which is pending at the Closing Date relating to the SHA STEPHENS
Acquisition and between the date of this Agreement and the Closing no action or
proceeding shall have been instituted or, to the knowledge of COMANCHE shall
have been threatened by any party (public or private) before a court or other
governmental body to restrain or prohibit the transaction contemplated by this
Agreement or to obtain the damages in respect thereof.
(f) COMANCHE shall have furnished SHA STEPHENS with a certificate, dated
the Closing Date, stating that the representations and warranties of COMANCHE
contained in Section 4 are true and correct on the Closing Date in all material
respects as if then made.
(g) All papers, documents, agreements and other items required to be
delivered at Closing pursuant to Section 9.02 shall have been delivered at
Closing.
9. Actions at Closing
9.01 Actions at the Closing. At the Closing, COMANCHE and SHA STEPHENS will each
deliver, or cause to be delivered to the other, the securities to be exchanged
in accordance with Section 1.01 of this Agreement, and each party shall pay any
and all federal and state taxes required to be paid in connection with the
issuance of delivery of their own securities. Certificate representing the
COMANCHE Shares shall be issued and delivered as set forth on Exhibit "A"
attached hereto. Assignments representing the SHA STEPHENS properties shall be
duly endorsed by SHA STEPHENS for transfer to COMANCHE.
9.02 Deliveries by COMANCHE. At Closing, COMANCHE will deliver to the
SHA STEPHENS:
(a) certificates for the COMANCHE Shares as provided by Section 9.01
hereof;
(b) certified copies of corporate resolutions and other corporate
proceedings taken by COMANCHE to authorize the execution, delivery and
performance of this Agreement:
(c) a certificate of Incumbency and signatures of officers of COMANCHE
dated as of the date of this Agreement;
(d) resignations of the certain officers and Board of Directors of
COMANCHE, except Mr. Frank Cole and appointment of SHA STEPHENS (personally) to
the Board of COMANCHE.
9.03 Deliveries by the SHA STEPHENS. At Closing, SHA STEPHENS shall deliver
to COMANCHE;
(a) assignments of the properties described in Exhibit "A";
(b) certified copies of corporate resolutions and other corporate
proceedings taken by SHA STEPHENS to authorize the execution, delivery and
performance of this Agreement;
(c) a certificate of Incumbency and signatures of the officers of SHA
STEPHENS dated as of the date of this Agreement and consenting to the sale to
COMANCHE;
10. Termination.
10.01 Termination of the Agreement. The parties may terminate this
Agreement as provided below:
(a) COMANCHE and SHA STEPHENS may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(b) Either party may terminate this Agreement by giving written notice to
the other party on or before the Closing Date if either party is not satisfied
with the results of their continuing business, legal and accounting due
diligence regarding each other;
(c) SHA STEPHENS may terminate this Agreement by giving written notice to
COMANCHE at any time prior to the Closing (i) in the event COMANCHE has breached
any representation, warranty or covenant contained in this Agreement in any
material respect SHA STEPHENS has notified COMANCHE of the breach and the breach
has continued without cure for a period of 10 days after the notice of breach,
or (ii) if the Closing shall not have occurred on or before June 15, 1999, or
such later date as may be agreed to by SHA STEPHENS and COMANCHE, in writing, by
reason of the failure of any condition precedent under Section 8.03 hereof
(unless the failure results primarily from SHA STEPHENS breaching any
representation, warranty or covenant contained in this Agreement); and
(d) COMANCHE may terminate this Agreement by giving written notice to SHA
STEPHENS at any time prior to the Closing (i) in the event SHA STEPHENS has
breached any representation, warranty or covenant contained in this Agreement in
any material respect COMANCHE has notified SHA STEPHENS of the breach and the
breach has continued without cure for a period of 10 days after the notice of
breach or (ii) if the Closing shall not have occurred on or before June 15,
1999, or such later date as may be agreed to by SHA STEPHENS and COMANCHE in
writing, by reason of the failure of any condition precedent under Section 8.02
hereof (unless the failure results primarily from COMANCHE itself breaching any
representation, warranty or covenant contained in this Agreement).
10.02 Effect of Termination. If either SHA STEPHENS or COMANCHE terminates
this Agreement pursuant to Section 10.01 above, all rights and obligations of
the parties hereunder shall terminate without any liability of any party to any
other party.
11. General
11.01 Brokers and Finders. Except as set forth in Section 11.1 of the
Comanche Disclosure Statement, each Party hereto represents that no broker,
agent, finder, or other party has been retained by either Party, and no
brokerage or finder's fees or agent's commissions or other like payment has been
agreed to be paid by him or it in connection with this Agreement or on account
of the transactions contemplated by this Agreement. Each Party agrees to
indemnify and hold harmless the other parties from and against any and every
claim arising by breach of the aforesaid representation and warranty and all
costs and expenses, legal or otherwise, which any such party may incur as the
result of any such claim, except as noted in Section 11.1 of the Comanche
Disclosure Statement.
11.02 Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other Parties. Provided
however, that any Party any make any public disclosure it believes in good faith
is required by applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will use it
reasonable efforts to advise the other Party prior to making the disclosure).
11.03 Schedules. The SHA STEPHENS and COMANCHE Disclosure Schedules
delivered pursuant to the terms of this Agreement shall be bound together,
initialed by COMANCHE and SHA STEPHENS and deemed attached hereto and made a
part hereof.
11.04 Survival of Covenants, Representations and Warranties. Except as
otherwise specifically provided, the covenants, representations and warranties
contained herein shall expire and be terminated and extinguished at the Closing
Date.
11.05 Governing Law. This Agreement and the legal relations between the
parties shall be governed by and construed in accordance with the laws of the
State of Utah.
11.06 Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if sent by registered mail or certified
mail, postage prepaid if addressed as follows:
If to COMANCHE:
COMANCHE Energy, Inc.
8111 LBJ Freeway, Suite 787
Dallas, TX 75251
Attn: Mr. Frank Cole
President
<PAGE>
If to SHA STEPHENS:
Sha Stephens, Inc.
1317 Ranger Highway
Weathrford, Texas 76086
Attn: Mr. Sha Stephens
President
11.07 No Assignment. This Agreement may not be assigned by operation of law
or otherwise, without the express written consent of each party hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
COMANCHE Energy, Inc.
By: _______________________________
Frank Cole, President
Sha Stephens, Inc.
By: _______________________________
Sha Stephens, President
EHXIBIT A-4 [BENCHMARK AGREEMENT]
---------------------------------
STOCK PURCHASE AGREEMENT
This stock Purchase Agreement is executed this 15th day of June, 1999,
between Oil City Petroleum, Inc., a Texas Corporation, and Comanche Energy,
Inc., a Utah Corporation, hereinafter referred to as "Oil City/Comanche", and
Benchmark Crude, Inc., an Oklahoma corporation, hereinafter referred to as
"Benchmark".
RECITALS
WHEREAS, Oil City and Comanche are hereby providing to Benchmark an option
to purchase up to five million shares of its common stock under the terms and
conditions of this Agreement, and
WHEREAS, Benchmark shall. have the right to purchase these shares in Oil
City and/or Comanche according tot he terms and conditions of this agreement.
The parties hereby mutually agree as follows:
1. Benchmark shall have the option to purchase up to 2,287,531 shares of
the common stock of Oil City and/or Comanche at a price of $0.22.5(cent),per
share. This option to purchase these shares shall continue for a period of six
(6) months from the date of this agreement, or until such a time as Benchmark
has purchased the maximum amount of 2,287,531 shares of Oil City or Comanche
stock.
2. Oil City and Comanche further agrees that for each share purchased of
its stock by Benchmark, Oil City or Comanche will provide to Benchmark a warrant
for each such share purchased which will allow Benchmark to purchase an
additional share of Oil City and/or Comanche for the exercise price of $0.50 for
20% of the shares purchased and an exercise price of $1.00 per share for 80% of
the shares purchased for a period of two (2) years from July 1, 1999. Therefore,
for each share of Oil City or Comanche stock purchased by Benchmark, Benchmark
shall have the right to purchase an additional share of Oil City or Comanche
stock for the sum of $0.50 or $1.00 as above provided that Benchmark exercises
this purchase option and pays to Oil City or Comanche the purchase price of
$0.50 or $1.00 per share for each such warrant exercised on or before June 30,
2001 based on 20% @ $0.50 and 80% @ $1.00.
3. Oil City and Comanche represents and warrants to Benchmark that it has
the corporate authority and the necessary authorized share of Oil City and
Comanche to sell to Benchmark according to the terms of this agreement. The
stock warrants described herein to Benchmark for the purchase of an additional
share of Oil City or Comanche for the exercise price of $1.00 per share will
also be a valid and binding obligation on the corporation.
4. Benchmark shall have the right at its option to exchange each share
purchased in Oil City for a like share in Comanche Energy, Inc., a Utah
corporation, hereinafter referred to as "Comanche", Therefore, Benchmark shall
have the right to exchange one (1) share of Oil City stock for one (1) share of
Comanche stock. In addition, the stock warrant to Benchmark for a period of one
(1) years at an exercise price of $1.00 per share for the purchase of a share in
<PAGE>
5
Oil City/Benchmark
Stock Purchase Agreement.
Oil City may likewise be exchanged by Benchmark for a similar warrant in order
to purchase an additional share of Comanche stock.
5. Oil City and Comanche warrants and represents to Benchmark that in the
event Benchmark purchases any or all of the five million shares as specified by
the terms of this Agreement, that it has the authority to exchange any or all of
the five million shares for the stock in Comanche and to issue a corresponding
warrant to be exercised on or before Nov. 30, 2001 to purchase an additional
share in Comanche.
6. Benchmark shall have the right to exercise its option to purchase shares
in Oil City at any time during this six (6) month period provided that at all
times no purchase by Benchmark will be less than a block of 4,000 shares.
Further, such stock will be issued by Oil City to Benchmark upon full payment of
the purchase price for such shares to be made at the offices of Oil City at 3015
E. Skelly Drive, Suite 450, Tulsa, Oklahoma, 74105-6369.
7. Benchmark represents to Oil City and Comanche and its officers,
directors, and shareholders that it has had an adequate opportunity to review
all of the books and records concerning the financial conditions of both Oil
City and Comanche. Regardless of whether Benchmark elects to exchange said stock
as defined by the terms of this Agreement. Oil City and Comanche, its officers,
directors and shareholders make no warranty or representation of any kind as to
the suitability or financial success of this investment in Oil City and/or
Comanche shares by Benchmark. Benchmark warrants that it is purchasing said
shares for its own account and assumes all risk for the purchase of said shares
and in no event will Benchmark or any of its successors and assigns make any
claim whatsoever against Oil City or Comanche, its officers, directors and
shareholders as a result of the purchase of the shares as set forth by the terms
of this agreement. Further, Benchmark understands and agrees that without this
hold harmless and complete release by Benchmark in favor of Oil City and/or
Comanche, its officers, directors and shareholders that Oil City and Comanche
would not have entered into this stock purchase agreement with Benchmark.
Benchmark further recognizes and warrants to Oil City and Comanche that it has
had the right to accurately review all books and records of Oil City and
Comanche with respect to the financial condition of the respective companies and
that Benchmark and its professional advisers and consultants are satisfied with
the purchase of the shares of Oil City and Comanche, if exchanged, and will make
no claim against anyone as a result of the purchase of the purchase of the
subject shares.
<PAGE>
Oil City/Benchmark
Stock Purchase Agreement
8. That the shares to be issued in Oil City or Comanche shall be
transferred to Benchmark free and clear of all liens and encumbrances other than
restrictions placed on such shares as required under Federal and State
Securities Laws. Upon full payment of the purchase price for said share as
designated by the terms of this Agreement, Benchmark will become the beneficial
owner of all purchased shares either in Oil City or in Comanche, it exchanged.
9. Benchmark understands and acknowledges the speculative nature of and
substantial risk of loss associated with an investment In either the Oil City
and/or the. Comanche shares, if exchanged. Benchmark represents and warrants
that the Oil City or Comanche shares Constitute an investment which is suitable
and consistent with its respective financial needs and condition and that
Benchmark is able to bear the risks of this investment for an indefinite period
of time, which may include the total loss of its investment in the shares of Oil
City or Comanche, if exchanged. Benchmark further warrants and represents to Oil
City and Comanche that it has sufficient financial and business experience to
evaluate the merits and risk of an investment in the shares of Oil City or in
Comanche, if exchanged.
10. Benchmark understands and acknowledges that the Oil City or Comanche
shares have not been, and will not be, registered under the Securities Act of
1933, as amended, Or registered under any applicable State securities laws,
Benchmark is aware that no federal or state agency has made any review, finding
or determination regarding the terms of its acquisition of the Oil City or
Comanche share nor has made any recommendation or endorsement of the Oil City or
Comanche shares as an investment, ad Benchmark must forego the security, if any,
that such a review would provide.
11. Benchmark understands and acknowledges that the oil City and Comanche
shares are being offered and sold under exemptions from registration provided by
the Securities Act and the exemptions provided by applicable state securities
laws. Benchmark warrants and represents that the Oil City and/or Comanche share
are being acquired by Benchmark for its own account, for investment purposes
only, and not with a view to or for the resale, distribution, subdivision or
fractionalization thereof. Benchmark represents and warrants that thy have no
agreement or any other arrangement, formal or informal, with any person to sell,
transfer or pledge any part of the Oil City or Comanche shares or which would
guarantee Benchmark any profit or protect it against any lose with respect to
the Oil City or Comanche shares. Further, Benchmark has no plans to enter into
any such agreement or arrangement, and, consequently, Benchmark must bear the
economic risk of an investment in either the Oil City or Comanche shares for an
indefinite period of time.
<PAGE>
Oil City/Benchmark
Stock Purchase Agreement
12. Benchmark understands and acknowledges that the Oil City and/or
Comanche shares will be "restricted" as defined in Rule 144 under the Securities
Act and that therefore Benchmark cannot offer to sell, or otherwise transfer or
distribute the Oil City or Comanche shares without the registration thereof,
which Oil City or Comanche are no manner obligated to do, under both the
Securities Act and any applicable state securities laws, or unless an exemption
is, in the opinion, of Oil City's and Comanche's counsel, available to then
under the Act and any applicable state securities laws. such exemption will
become available in the future. Benchmark further understands and acknowledges
that the restrictions on the transfer of the Oil City and Comanche shares will
be noted on the books, of Oil City and/or Comanche and that the stock
certificate representing the Oil City or Comanche shares will bear a written
legend setting forth the restrictions on the transferability of the shares in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SECURITIES HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED FOR
VALUE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OF THEM UNDER THE
SECURITIES ACT OF 1993, OR AN OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THIS ACT.
13. This agreement shall be enforced in accordance with the laws of the
State of Oklahoma and shall be deemed to have been entered into in Tulsa County,
Oklahoma.
14. The parties further agree that should any dispute arise under the terms
and conditions of this Stock Purchase Agreement no matter the nature of the
claims or the origins of such claims, that any such dispute shall be determined
solely by arbitration determined pursuant to the rules and regulations of the
American Arbitration Association and both parties hereby waive any right to
pursue any matter in either State or Federal Court. The decision of the
arbitrators shall be binding upon the parties to determine all disputes under
the terms. of this agreement.
15. This Agreement constitutes the entire agreement between the parties and
supersedes all prior agreements whether written on oral concerning the purchase
and sale of the shares in either Oil City or Comanche by Benchmark. That all
oral agreements or written agreements are hereby specifically merged into the
terms of this Agreement.
16. There are no oral warranties or representations made to either party
other than those set forth in this Agreement. No change in any term or provision
of this Agreement shall be valid unless such change is in writing and
acknowledged by both Oil City and/or Comanche and Benchmark.
<PAGE>
Oil City/Benchmark
Stock Purchase Agreement
17. Oil City and Comanche and Benchmark arrived at the terms and conditions
of this Stock Purchase Agreement of their own accord. That Lee I. Levinson acted
as attorney in this transaction for Oil City and Comanche; however, he offered
no independent legal advice on behalf of Benchmark. Both Oil City and Comanche
and Benchmark understand and agree that Lee I. Levinson was authorized to
prepare this Agreement although he has represented Benchmark in the past and
Benchmark had the absolute right to have another attorney review this Stock
Purchase Agreement prior to its execution by Benchmark.
IN WITNESS WHEREOF the parties have executed this Stock Purchase Agreement
the day and first above written;
OIL CITY PETROLEUM, INC. COMANCHE ENERGY, INC.
By ________________________________ By _________________________________
James G. Borem, Chairman & C.E.O. James G. Borem, Chairman, & C.E.O.
BENCHMARK CRUDE, INC.
By _________________________
Ken Keltner, President
EXHIBIT A-5 - [AGREEMENT - ENIGMA]
AGREEMENT
This Agreement is made by, between and among.
COMANCHE ENERGY, INC., a Utah Corporation ("COMANCHE");
ENIGMA ENERGY COMPANY, a Texas limited liability company ("ENIGMA"); and
The MEMBERS (collectively the "MEMBERS" and singularly "MEMBER") whose
names and share interests in ENIGMA are set forth on Annex "A" hereto each of
whom has signed an identical copy hereof. and provides, in consideration of the
mutual covenants and premises contained herein, as follows:
ARTICLE I - OPTION TO ACQUIRE MEMBER SHARES
1.1 Grant of Option As consideration for this Agreement and the payment of
the Purchase Price, each MEMBER hereby grants to COMANCHE the exclusive right
and option to purchase all the shares in ENIGMA set forth by his respective name
in Annex "A" (collectively the"MEMBER Shares") for the consideration (the
"Exercise Price") set forth in 1.3 below.
1.2 The Purchase Price As consideration for this Agreement and the grant of
the option hereunder COMANCHE will issue to the MEMBERS total of 1,440,000
shares of its Common Stock to be distributed to the MEMBERS in accordance with
their respective interests in ENIGMA.
1.3 The Exercise Price In the event COMANCHE elects to exercise its option
hereunder, it will issue and assign to the MEMBERS in proportion to their
respective interests in ENIGMA as shown on Annex "A" hereto 3,360,000 shares of
its Common Stock in addition to those shares already issued as the Purchase
Price, the combination of shares issued as the Purchase Price and the Exercised
Price sometimes referred to hereinafter as the "COMACNHE Shares."
1.4 Option Period The option to purchase the Member Shares shall commence
on the date hereof and extend through January 7, 2000, such period including any
extension thereof herein called the "Option Period."
1.5 Exercise of Option COMANCHE may exercise the option created hereunder
by providing notice of its intention to ENIGMA within the Option Period.
1.6 Automatic Termination If COMANCHE fails to exercise the option in
accordance with the terms of this Agreement and with the Option Period the
option granted hereunder shall terminate automatically and immediately without
notice.
1.7 Assignment of Option COMANCHE may not assign the Option or any of the
rights created hereunder and any attempt to assign the Option is in violation of
this 1.7 and shall result in the automatic and immediate termination without
notice of the option granted hereunder.
1.8 Closing of Acquisition of the MEMBER Shares The closing of the purchase
of the MEMBER Shares shall take place on or before (15) days after the exercise
of the option as provided in 2.5 above, such closing being called hereinafter
the "Closing."
1.9 Payment of Consideration At the Closing, COMANCHE shall deliver to the
MEMBERS in accordance with 1.3 above the appropriate amount of COMANCHE shares
for the MEMBER Shares to be acquired and the MEMBERS and ENIGMA shall deliver to
COMACNHE such evidence of the transfer of ownership of the MEMBER Shares to
COMANCHE as COMANCHE may require.
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF ENIGMA
2.1 ENIGMA covenants represents and warrants as follows and acknowledges
that COMANCHE is relying upon such covenants representations and warranties in
connection with its possible acquisition of the MEMBER Shares:
2.1.1 ENIGMA is now and will remain during the Term hereof a limited
liability company duly organized and validly existing under the laws of the
State of Texas with the requisite power and authority to carry on its business
and to enter into and perform all of its obligations under this Agreement.
2.1.2 This Agreement has been duly executed and delivered by ENIGMA and the
documents and instruments required hereunder to be executed and delivered by
ENIGMA will be duly executed and delivered. This Agreement does and such
documents and instruments will constitute legal valid and binding obligations of
ENIGMA enforceable in accordance with respective terms.
2.1.3 The execution delivery and performance of this Agreement and the
transaction contemplated hereby have been duly and validly authorized by all
requisite action on the part of ENIGMA.
2.1.4 There are no charges, claims, proceedings, actions, lawsuits or
governmental investigations including environmental claims or actions in
existence or, to the best of ENIGMA's knowledge, contemplated or threatened,
against ENIGMA or with respect to the assets of ENIGMA or the interests of
ENIGMA therein.
2.1.5 The consummation of the transactions contemplated herein will not
violate, or be in conflict with any provision of ENIGMA's regulations or any
agreement or instrument to which ENIGMA is a party or is bound or any judgement,
decree, order, statute, rule or regulation applicable to ENIGMA.
2.1.6 ENIGMA has now and will have on the Closing Date good and marketable
title to its assets and has no liabilities other than those arising in the
ordinary course of business or as disclosed in writing to COMANCHE as of the
date of this Agreement.
2.1.7 The total number of shares issued in ENIGMA is 5,435 and such shares
represent one hundred percent (100%) of the ownership in ENIGMA.
2.1.8 From the time this Agreement is executed by COMANCHE through the
Closing, ENIGMA will give COMANCHE complete access to its records and
operations.
2.1.9 From the date hereof through the Closing ENIGMA will make no
distributions of cash or property to the MEMBERS and issue no additional shares
in ENGIMA.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE MEMBERS
3.1 Each MEMBER with respect to this ownership in ENIGMA, covenants,
represents and warrants as follows, and acknowledges that COMANCHE is relying
upon such covenants, representations and warranties in connection with its
acquisition of the MEMBER Shares.
3.1.1 This Agreement has been duly executed and delivered by such MEMBER
along such other documents required to be executed hereunder and constitute
legal and binding obligations of such MEMBER.
3.1.2 The number of shares in ENIGMA set forth by such MEMBER'S name on
Annex "A" hereto is a correct statement of the total shares in ENIGMA owned by
such MEMBER.
3.1.3 Such MEMBER now has, and at the time of their transfer to COMANCHE
will have, good and valid title to the MEMBER Shares owned by him, free and
clear of all options, liens, mortgages, charges, encumbrances, adverse claims or
other third party interests of whatsoever nature, and is entitled at law and in
equity to sell, assign and transfer good and marketable title to the MEMBER
Shares owned by him pursuant to this agreement.
3.1.4 Such MEMBER has read this Agreement and with his signature hereto
consents to ENIGMA's entering into this Agreement and to the actions to be
performed by ENIGMA hereunder.
ARTICLE IV - REPRESNETATION AND WARRANTIES OF COMACNHE
4.1 COMANCHE covenants, represents and warrants as follows, and
acknowledges that ENIGMA and the MEMBERS are relying upon such covenants
representations and warranties in entering into this Agreement:
4.1.1 COMANCHE is now and throughout the Term hereof will be a corporation
duly incorporated and validly existing under the laws of the State of Utah with
the requisite corporate power and authority to enter into and perform all of its
obligations under this Agreement.
4.1.2 The consummation of the transactions contemplated by this Agreement
will not violate nor be in conflict with any provisions of COMACNHE's by-laws or
charter, or any agreement or instrument to which COMANCHE is a party or is
bound, or any judgement, decree, order, statute, rule or regulation applicable
to COMANCHE.
4.1.3 The execution, delivery, and performance of this Agreement and the
transactions contemplated hereby have been duly and validly authorized by all
requisite corporation action on the part of COMANCHE.
4.1.4 This Agreement has been duly executed and delivered by COMACNHE and
the documents and instruments required hereunder to be executed and delivered by
COMACNHE will be duly executed and delivered. This Agreement does and such
documents and instruments will constitute legal, valid and binding obligations
of COMANCHE in accordance with their respective terms.
4.1.5 As of the date hereof, the authorized capital of COAMNCHE consists of
shares of Common Stock ___________________ shares of Preferred Stock. There are
no warrants or options authorized.
4.1.6 COMANCHE has been supplied and read and understands the Regulations
of ENIGMA.
4.1.7 COMANCHE has conducted as independent review of the properties and
oil and gas reserves of ENIGMA.
ARTICLE V - OPERATIONS OF PROPERTIES
5.1 COMANCHE as Operator Effective September 1, 1999, COMANCHE has assumed
operation of ENIGMA'a oil and gas properties and as partial consideration for
this Agreement and the ability to become more familiar with ENIGMA's properties,
COMANCHE will continue to operate those properties through the term's hereof
COMANCHE will operate ENIGMA's properties in accordance with customary practices
in the industry.
5.2 Compensation Terms From September 1, 1999, through such time as
COMANCHE remains operator for ENIGMA, COMANCHE shall be entitled to al revenues
from ENIGMA;s properties and be responsible for all liabilities arising after
September 1, 1999, with respect to the operation of the properties.
5.3 Bank of Oklahoma In order to assist COMANCHE in obtaining a credit
facility with Bank of Oklahoma and facilitate the potential purchases of ENIGMA
by COMANCHE, ENIGMA has entered into the credit facility with Bank of Oklahoma
as a joint borrower and pledged a portion of its properties to the Bank of
Oklahoma.
5.4 Termination of Agreement In the event of COMANCHE opts for any reason
not to exercise its option hereunder to acquire the MEMBER Shares it will allow
ENIGMA a minimum of sixty (60) days in which to find a new operator and separate
its credit facility from COMANCH's.
ARTICLE VI - SURVIVAL OF REMEDIES
6.1 Notwithstanding anything to the contrary herein, expressed or implied
it is expressly agreed and understood that the foregoing covenants
representations and warranties are true on the date hereof, and shall be
repeated at Closing as being true at such time and notwithstanding closing
and/or deliveries of covenants, representations and warranties in any other
agreements at closing, prior or subsequent thereto or investigations by or on
behalf of ENIGMA, COMANCHE or the MEMBERS, the foregoing representations and
warranties shall survive closing and shall continue and remain in full force and
effect for the benefit of the ENIGMA, COMANCHE and the MEMBERS.
ARTICLE VII - COMACHE'S CONDITIONS OF CLOSING
7.1 Conditions The purchase of the MEMBER Shares by COMANCHE in accordance
with this Agreement is subject to and conditional upon the fulfillment and
performance by ENIGMA and the MEMBERS of the following conditions at or before
closing.
7.1.1 ENIGMA and the MEMBERS shall have complied with all covenants and
agreements herein agreed to be performed.
7.1.2 All representations and warranties of ENIGMA and the MEMBERS set
forth herein shall be true and correct at the Closing with the same effect as if
made again at such time.
7.1.3 Any restrictions on and all legal requirements pertaining to the
sale, transfer, and assignments of the MEMBER Shares shall be complied with.
7.2 Waiver The foregoing conditions shall be for the benefit of COMANCHE
and may without prejudice to any of the rights of COMANCHE hereunder (including
reliance on or enforcement of warranties or covenants which are preserved
dealing with or similar to the condition or conditions waived) be waived by it
in writing, in whole or in part at any time.
ARTICLE VIII - CONDITIONS OF CLOSING BY ENIGMA AND MEMBERS
8.1 Conditions The sale of the MEMBER Shares in accordance with this
Agreement is subject to and conditional upon the fulfillment and performance by
COMACNHE of the following conditions at or before the closing:
8.1.1 COMANCHE shall have complied with all covenants and agreements herein
agreed to be performed by it.
8.1.2 All representation and warranties of COMANCHE set forth herein shall
be true and correct at each closing with the same effects as if made again at
such time; and
8.1.3 Any restrictions on and all legal requirements pertaining to the
sale, transfer, assignment and the issuance of COMANCHE Shares shall be complied
with including the application for and receipt by COMANCHE as the case may be of
all necessary consents approvals and authorizations from all applicable third
parties, including governmental bodies duly constituted public authorities and
stock exchanges having jurisdiction over the COMACNHE Shares.
8.2 Waiver The foregoing conditions shall be for the benefit of ENIGMA and
the MEMBER and may without prejudice to any of the rights of ENIGMA or the
MEMBERS hereunder (including reliance on or enforcement of warranties or
covenants which are preserved dealing with or similar tot he condition or
conditions waived) be waived as applicable by ENIGMA or seventy five percent
(75%) in interest of the MEMBERS in writing in whole or in part at any time.
ARTICLE IX - INVESTMENT CONSIDERATIONS
9.1 INVESTMENT RISK. COMANCHE SHARES BEING GIVEN AS CONSIDERATION
HEREINUNDER INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE ACCEPTED ONLY BE PERSONS
WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT.
9.2 NO APPROVAL OR DISAPPROVAL THE ISSUE AND TRANSFER OF THE COMACNHE
SHARES TO THE MEMBERS HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITES PASSED UPON OR ENDORSED THE
MERITS OF THE OPTION OR CONSIDERATAION THEREOF OR THE ACCURACY OR ADEQUACY OF
THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
9.3 Construction The MEMEBRS are not to construe any of the contents of
this Agreement as legal, investment to tax advise and should consult their own
advisors as to all legal, investment, tax and related matters.
9.4 No Offer to Sell or Solicitation No dealer, salesman or any other
person has been authorized to give any information or to make any representation
not contained herein in connection with the COMANCHE Shares and if given or made
such information or representation must not be relied upon as having been
authorized by COMANCHE. This Agreement does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such an offer or
solicitation in such jurisdiction. Neither the delivery of this document nor any
sale made hereunder shall under any circumstances create any implication that
there has been no change in the affairs of COMANCHE or that the information set
forth herein is correct as of any date subsequent to the date hereof.
9.5 Lack of Liquidity The COMANCHE offering will involve substantial risks
and should only be considered by investors who have no need for liquidity in
their investment.
9.6 Accredited and Sophisticated Investors The COMANCHE Shares are being
offered only to those MEMBERS who are either Accredited Investors or
Sophisticated Non Accredited Investors.
9.7 Financial Data Each MEMBER has received a copy of COMACHE's most recent
financial filings with the Securities and Exchange Commission. Each MEMBER will
also receive a copy of COMANCHE's most recent financial filings prior to the
Closing Date. Each MEMBER may if he or she so desires, make inquiries of
appropriate members of the management of COMANCHE with respect tot he business
of COMANCHE or any other matters set forth herein and may obtain any additional
information which such person deems to be necessary in order to verify the
accuracy of the information contained in this documents (to the extent that
COMANCHE possesses such information or can acquire it without unreasonable
effort or expense).
9.8 Additional Consideration In evaluating COMANCHE, each MEMBER should
consider all the information and financial statements accompanying this document
and such other factors deemed pertinent and including or in addition thereto the
following:
9.8.1 Lack of Possible Market for the Securities of the Company The Common
Stock of COMACHE has traded on only a very limited basis in the over - the-
counter market.
9.8.2 Other Limitation's Further, investors may find it more difficult to
sell the COMANCHE Shares than securities that are listed for trading on the
NASDAQ or a national securities exchange. In part this is because securities
that trade on the NASDAQ "electronic bulletin board" or in the "Pink Sheets" are
normally subject to a rule that imposes additional sales practice requirements
on broker-dealer who sell such securities to persons other than to accredited
investors (generally defined as investors with net worth's in excess of
$1,000,000 or annual income exceeding $200,000 [or $300,000 for a husband and
wife) or an established customer. For transactions covered by this rule, the
broker-dealer must make a special suitably determination for the purchaser and
must receive the purchaser's written consent tot he transactions prior to the
sales.
9.8.3 Penny Stock Rules In addition it is likely that COMACNHE's Common
Stock is likely to be deemed "penny stock" under regulations of the Securities
and Exchange Commission (subject to certain exceptions a "penny stock" is any
equity security that has a market price of less than $5.00 per share). Subject
to certain exceptions transactions involving "penny stocks" require the
delivery, prior to the transaction of a disclosure schedule prepared by the
Securities and Exchange Commission relating to the penny stock market; further
the broker-dealer must disclose the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and if the broker-dealer is the sole market-maker, the
broker-dealer's presumed control over the market; and finally, monthly
statements must be sent disclosing the recent price information for the penny
stock held in account and information on the limited market to penny stocks.
9.8.4 Blue Sky Laws A MEMBER may not be able to transfer or sell any of the
COMANCHE shares in all state or other jurisdictions, dependent upon the "Blue
Sky" securities laws of the State or other jurisdiction in which you intend to
sell.
9.9 The Company's Line of Credit Substantially all of the assets of
COMANCHE are pledged as security for COMANCHE's credit facility. Were COMANCHE
to default on the same that event could materially adversely affect COMANCHE,
it's pledged assets, and it's ability to continue in business.
9.10 No Dividend History COMANCHE has never declared or paid a dividend on
its capital stock and does not anticipate a change in that policy with respect
to the Common Stock.
ARTICLE X - REPRESENTATIONS OF MEMBERS TO COMANCHE IN
CONNECTION WITH INVESTMENT CONSIDERATIONS AND RISKS.
10.1 Each Member represents to COMANCHE that:
10.1.1 Such MEMBER has read this Agreement which sets forth the terms of
and some of the risks, has reviewed COMANCHE's financial data and that any
additional information on any aspect of COMANCHE has been answered to his or her
satisfaction and all requests for information necessary to verify the accuracy
of the information contained in this document or COMANCHE's financial data have
been fulfilled.
10.1.2 Such MEMBER is knowledgeable and experienced in financial and
business matters and is capable of evaluation the merits and risks of owner the
COMANCHE Shares.
10.1.3 Such MEMBER can bear the economic risks of holding the COMANCHE
shares.
10.1.4 Such MEMBER is accepting the COMANCHE Shares for his own account for
investment and not with a view toward resale or distribution.
10.1.5 Such MEMBER has adequate means of providing for his current needs
and possible personal contingencies, has no need for liquidity of the investment
and has no reason to anticipate any change in personal circumstances, financial
or otherwise, which may cause or require any sale or distribution of such
securities.
10.1.6 Such MEMBER is familiar with the nature and risks incident to
investment and has determined that acquiring the COMANCHE Shares is consistent
with his investment objectives and income prospects.
10.1.7 The overall commitment to investments of such MEMBER which are not
readily marketable is not disproportionate to his net worth, and his invest-
ment in the COMANCHE Shares will not cause such overall commitment to become
excessive.
10.1.8 Such MEMBER realizes that since the COMANCHE Share may not be
readily transferred, such MEMBER may not readily liquidate his investment and
must not accept the COMANCHE Shares unless he or she has sufficient liquid
assets to assume himself that such purchase will cause him no undue financial
difficulties.
10.1.9 Limitations on Resale or Transfer. The MEMBERS have represented that
they understand and acknowledge that the COMANCHE Shares will be "restricted" as
defined in Rule 144 under the Act and that they cannot offer to sell, sell or
otherwise transfer or distribute the COMANCHE Shares without registration
thereof which COMANCHE is not obligated to do under both the Act and any
applicable state securities laws or unless an exemption is in the opinion of
COMANCHE's counsel, available to them under the Act and any applicable state
securities laws. Such exemption is not now available and it is not anticipated
that any such exemption will become available in the future. The MEMBERS further
understand and acknowledge that the restrictions on the transfer of the COMANCHE
Shares will be noted on the books of Assignee and that the stock certificate
representing the COMANCHE Shares will bear a written legend setting forth the
restriction on the transferability of the COMANCHE Shares in substantially the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THE SECURITIES HAVE BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE SOLD OR TRANS-
FERRED FOR VALUE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION OF THEM UNDER THE SECURITIES ACT
OF 1933, OR AN OPINION OF COUNSEL SATISFACTORY
TO THE ISSUER THAT SUCH REGISTRATION IS NOT RE-
QUIRED UNDER THE ACT.
10.1.10 In the event COMANCHE files a registration statement with the
Securities and Exchange Commission with respect to its capital stock, it will
include the COMANCHE Shares in such filing.
ARTICLE XI - MISCELLANEOUS
11.1 Assignability This Agreement shall not be assignable in whole or in
part by any party hereto without the prior written consent of the other parties
hereto.
11.2 Binding Effect This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their successors and permitted assigns.
11.3 Binding Effect No amendment or variation of the terms, conditions,
warranties, covenants, agreements and undertakings set forth herein shall be of
any force or effect unless the same shall be reduced to writing, duly executed
by all parties hereto, in the same manner and in the same formality as this
Agreement is executed.
11.4 Waiver No provision of this Agreement shall be deemed to be waived
unless such waiver is in writing. Any waiver of any default committed by any of
the parties hereto in the observance or performance of any part of this
Agreement shall not extend to or be taken in any manner to affect any other
default.
11.5 Severability of Provision If any provisions of this Agreement or the
application thereof to any person or circumstances shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extend permitted by law.
11.6 Further Assurances Each of the parties shall be at any time and from
time to time hereafter, take any and all steps, and execute, acknowledge and
deliver to the other party, any and all further instruments and assurances that
the other party any reasonable require for the purpose of giving full force and
effect to the provisions of this Agreement.
11.7 Time of the Essence Time shall be of the essence of this Agreement.
11.8 Counterparts This Agreement may be executed in counterparts, each of
which shall be deemed to be an original and all of which shall be construed
together as one agreement.
11.9 Headings Headings of the articles or sections hereof are inserted for
convenience of reference only and shall not affect the construction or
interpretation of this Agreement.
11.10 Governing Law This Agreement and all amendments modifications,
alterations or supplements thereto shall, in all respects, be subject to and
interpreted, construed and enforced in accordance with the laws of the State of
Texas.
11.11 Term The term (the "Term") of this Agreement shall commence on the
date of execution set forth below and continue through the first to occur of the
termination of COMANCHE's option to acquire the MEMBER Shares or the closing of
the acquisition of the MEMBER Shares by COMANCHE.
11.12 Notice Unless otherwise provided herein, any notice, tender or
delivery to be given hereunder by one party to another may be effected by (i)
personal delivery, (ii) registered mail (iii) facsimile transmission or in over
night delivery and shall be effective when delivered to COMANCHE or ENIGMA at
the address or facsimile number below or to the MEMBERS at the address or
facsimile number set forth by their signatures:
TO COMANCHE:
COMANCHE, Inc.
3015 East Skelly Drive, #450
Tulsa, Oklahoma 74105-6369
Attention: James G. Borem
Chairman and CEO
Facsimile: (918) 745-6021
TO ENIGMA OR THE MEMBERS:
Enigma Energy Company, L.L.C.
800 Preston Commons West
8117 Preston Road
Dallas, Texas 75225
Attention: Charles B. Crowell
Facsimile: (214) 696-5971
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the day
of , _______________1999.
COMANCHE ENERGY, INC.
by ___________________________________
James G. Borem
Title Chairman and CEO
ENIGMA ENERGY COMPANY, L.L.C.
by __________________________________
Charles B. Cromwell
Title
MEMBER
Address:
REVOLVING CREDIT AGREEMENT
Dated as of
August 31, 1999
between
COMANCHE ENERGY COMPANY,
a Utah corporation,
and
DOUBLE EAGLE, INC.,
an Oklahoma corporation
"BORROWERS"
and
BANK OF OKLAHOMA, NATIONAL ASSOCIATION
"BANK"
<PAGE>
i
TABLE OF CONTENTS
ARTICLE I CERTAIN DEFINITIONS 1
1.1 "Applicable Prime Rate" .......................................... 1
1.2 "Authorized Signatory(ies)" ...................................... 1
1.3 "Base Rate Option" ............................................... 2
1.4 "Business Day" ................................................... 2
1.5 "CERCLA" ......................................................... 2
1.6 "Closing Date" ................................................... 2
1.7 "Collateral" ..................................................... 2
1.8 "Collateral Borrowing Base" ...................................... 2
1.9 "Commitment" ..................................................... 2
1.10 "Commitment Termination Date" .................................... 2
1.11 "Current Assets" ................................................. 2
1.12 "Current Liabilities" ............................................ 2
1.13 "Current Ratio" .................................................. 2
1.14 "Debt" ........................................................... 2
1.15 "Deed of Trust" .................................................. 2
1.16 "Default Rate" ................................................... 2
1.17 "Environmental Laws" ............................................. 2
1.18 "ERISA" .......................................................... 3
1.19 "Evaluated Property" ............................................. 3
1.20 "Event of Default" ............................................... 3
1.21 "GAAP" ........................................................... 3
1.22 "hereby," "herein," "hereof," "hereunder" ........................ 3
1.23 "HMTA" ........................................................... 3
1.24 "HSWA" ........................................................... 3
1.25 "Hydrocarbons" ................................................... 3
1.26 "Indebtedness" ................................................... 3
1.27 "Laws" ........................................................... 4
1.28 "Letters of Credit" .............................................. 4
1.29 "Lien" ........................................................... 4
1.30 "Loans" .......................................................... 4
1.31 "Loan Documents" ................................................. 4
1.32 "LongTerm Debt" .................................................. 4
1.33 "Mortgaged Property" ............................................. 4
1.34 "Note" ........................................................... 4
1.35 "OPA" ............................................................ 4
1.36 "Other Property" ................................................. 4
1.37 "Person" ......................................................... 4
1.38 "Polluting Substances" ........................................... 4
1.39 "RCRA" ........................................................... 5
1.40 "Revolving Credit Loans" ......................................... 5
1.41 "SARA" ........................................................... 5
1.42 "Security Instruments" ........................................... 5
1.43 "Taxes" .......................................................... 5
1.44 "Tribunal" ....................................................... 5
1.45 "TSCA" ........................................................... 5
ARTICLE II REVOLVING CREDIT LOANS ................................ 5
2.1 Revolving Credit Loans ........................................... 5
2.2 Note ............................................................. 5
2.3 Revolving Credit Advances, Payments and Voluntary Prepayment ..... 6
2.5 Collateral Borrowing Base ........................................ 6
2.6 Variance from Borrowing Base ..................................... 7
2.7 Letters of Credit ................................................ 7
2.8 Interest Rate .................................................... 7
2.9 Prepayments ...................................................... 7
2.10 Interest Payments Dates .......................................... 8
2.11 Commitment Fee; Loan Commitment Fee .............................. 8
ARTICLE III COLLATERAL BORROWING BASE ............................ 8
3.1 Initial Collateral Borrowing Base ................................ 8
3.2 Determination of the Collateral Borrowing Base ................... 8
3.3 Collateral Borrowing Base Deficiency ............................. 9
ARTICLE IV SECURITY .............................................. 10
4.1 Collateral ....................................................... 10
4.2 Additional Properties ............................................ 10
ARTICLE CONDITIONS PRECEDENT TO LOANS .................................... 11
5.1 Conditions Precedent ............................................. 11
(a) No Default ....................................................... 11
(b) Covenants, Representations and Warranties ........................ 11
(c) Loan Documents/Security Instruments .............................. 11
(d) Note ............................................................. 11
(e) Certificates ..................................................... 11
(f) Proceedings ...................................................... 11
(g) Subordination .................................................... 11
(h) Loan Fees, Consents and Other Information ........................ 12
5.2 Conditions Precedent to All Additional Revolving Credit Loans .... 12
ARTICLE VI COVENANTS ............................................. 12
6.1 Payment of Taxes and Claims ...................................... 12
6.2 Maintenance of Entity Existence .................................. 12
6.3 Preservation of Property ......................................... 12
6.4 Insurance ........................................................ 13
6.5 Compliance with Applicable Laws .................................. 13
6.6 Environmental Covenants .......................................... 13
6.7 Environmental Indemnities ........................................ 13
6.8 Financial Statements ............................................. 15
6.9 Notice of Default ................................................ 15
6.10 Notice of Litigation ............................................. 15
6.11 Notice of Claimed Default ........................................ 15
6.12 Requested Information ............................................ 15
6.13 Inspection ....................................................... 16
6.14 Maintenance of Employee Benefit Plans ............................ 16
6.15 Limitation on Liens .............................................. 16
6.16 Disposition/Negative Pledge re Encumbrance of
Collateral and Other Assets ...................................... 16
6.17 Other Agreements ................................................. 16
6.18 Limitation on Other Indebtedness ................................. 16
6.19 Investments, Loans and Advances .................................. 17
6.20 Current Ratio .................................................... 17
ARTICLE VII REPRESENTATIONS AND WARRANTIES ....................... 17
7.1 Litigation ....................................................... 17
7.2 Conflicting Agreements and Other Matters ......................... 17
7.3 Financial Statements ............................................. 17
7.4 Title to Properties; Authority ................................... 17
7.5 Environmental Representations .................................... 18
7.6 Purposes ......................................................... 18
7.7 Compliance with Applicable Laws .................................. 19
7.8 Possession of Franchises, Licenses ............................... 19
7.9 Leases, Easements and Rights of Way .............................. 19
7.10 Taxes ............................................................ 19
7.11 Disclosure ....................................................... 19
7.12 ERISA ............................................................ 19
7.13 Ownership of Mortgaged Property .................................. 20
7.14 Organization and Capacity ........................................ 20
ARTICLE VIII EVENTS OF DEFAULT ................................... 20
8.1 Events of Default ................................................ 20
8.2 Remedies ......................................................... 21
ARTICLE IX MISCELLANEOUS ......................................... 22
9.1 Notices .......................................................... 22
9.2 Place of Payment ................................................. 22
9.3 Survival of Agreements ........................................... 23
9.4 Parties in Interest .............................................. 23
9.5 Governing Law .................................................... 23
9.6 Submission to Jurisdiction ....................................... 23
9.7 Maximum Interest Rate ............................................ 23
9.8 No Waiver; Cumulative Remedies ................................... 23
9.9 Costs ............................................................ 23
9.10 Headings ......................................................... 24
9.11 Severability ..................................................... 24
9.12 Exceptions to Covenants .......................................... 24
9.13 Counterparts ..................................................... 24
9.14 Waiver of Jury ................................................... 24
<PAGE>
4
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT, dated effective as of August 31, 1999, is
made and entered into between COMANCHE ENERGY COMPANY, a Utah corporation
("Comanche"), and DOUBLE EAGLE, INC., an Oklahoma corporation ("DE"), (Comanche
and DE collectively the "Borrowers") and BANK OF OKLAHOMA, NATIONAL ASSOCIATION
("Bank").
WITNESSETH:
WHEREAS, Borrowers have jointly applied to Bank for a revolving line of
credit in the maximum principal amount of FIFTEEN MILLION and NO/100 DOLLARS
($15,000,000) with an initial maximum borrowing base under the revolving line of
credit of $2,500,000, for the purpose of funding (i) purchases of producing oil
and gas properties and leasehold working interests, (ii) workovers and
exploration expenses and other development, drilling and operating expenses
pertaining thereto, (iii) the issuance of standby letters of credit on one or
both of the Borrowers' account as the operator of certain of its oil and gas
producing properties; and (iv) general corporate and business purposes,
including repayment of the Borrowers' obligations to existing financial
institution lenders (in the approximate amount of $1,381,000).
WHEREAS, Bank is willing to extend the Commitment to the Borrowers upon
the terms and conditions herein set forth, including, without limitation,
Borrowers' granting in favor of Bank a continuing and continuous first and prior
deed of trust and mortgage lien, pledge of and security interest in certain oil
and gas leasehold, mineral and mining interests in certain properties, all as
more particularly described and defined in the Deed of Trust hereinafter defined
as collateral and security for all Indebtedness incurred pursuant to the
Commitment.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, receipt of which is
acknowledged by the parties hereto, the parties agree, as follows:
ARTICLE ICERTAIN DEFINITIONS
When used herein, the following terms shall have the following meanings:
1.1 "Applicable Prime Rate" shall mean the annual rate of interest
announced by Chase Manhattan Bank, National Association, New York, New York
("Chase") from time to time as its prime or base rate, which shall be the rate
used by Chase as a base or standard for pricing purposes and which shall not
necessarily be its "best" or lowest rate. Should Chase cease to announce a prime
or base rate, or should it be merged, consolidated, liquidated or dissolved in
such a manner that it loses its separate corporate or banking identity, then the
Applicable Prime Rate shall be the Prime Rate published by The Wall Street
Journal in its "Money Rates" column or a similar rate if such rate ceases to be
published. Any change in the Applicable Prime Rate shall be effective as of the
date of the change.
1.2 "Authorized Signatory(ies)" shall mean James G. Borem or any other
person(s) authorized in writing thereby or pursuant to corporate resolutions
duly adopted by Borrowers' boards of directors to request Revolving Credit Loan
advances hereunder, request the issuance of standby letters of credit or direct
voluntary prepayment(s) of the Note as permitted hereby.
1.3 "Base Rate Option" shall have the meaning ascribed to that term in
Section 2.8(a) of this Agreement.
1.4 "Business Day" shall mean a day other than a Saturday, Sunday or a day
upon which banks in the State of Oklahoma are closed to business generally.
1.5 "CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, together with all
regulations and rulings promulgated with respect thereto.
1.6 "Closing Date" shall mean August 31, 1999.
--------------
1.7 "Collateral" shall have the meaning assigned to that term in
Article IV of this Agreement.
1.8 "Collateral Borrowing Base" shall have the meaning ascribed to that
term in Section 3.2 of this Agreement.
1.9 "Commitment" shall mean the agreement of Bank to make Revolving Credit
Loans under Section 2.1 of this Agreement for the limited purposes therein
provided.
1.10 "Commitment Termination Date" shall mean the earlier of September 1,
2001, or such date as the Commitment is otherwise terminated, canceled or
extinguished in accordance with the terms and provisions of the Agreement.
1.11 "Current Assets" shall mean the value of Comanche's consolidated
current assets determined in accordance with GAAP plus, as of any date, the
current unused availability on the Commitment.
1.12 "Current Liabilities" shall mean the amount of Comanche's
consolidated current liabilities as determined in accordance with GAAP,
excluding therefrom current maturities of all Long Term Debt.
1.13 "Current Ratio" shall mean the ratio of Current Assets to Current
Liabilities.
1.14 "Debt" shall mean and include, as of any date, all items which, in
accordance with GAAP, would be included on the consolidated liabilities side of
Comanche's balance sheet, including all obligations under leases which, in
accordance with GAAP, would be recorded as capital leases, but excluding stated
capital, paid-in capital and retained earnings.
1.15 "Deed of Trust" shall have the meaning assigned to that term in
Section 4.1 of this Agreement.
1.16 "Default Rate" shall mean the Applicable Prime Rate plus five
percentage points (5%) per annum.
1.17 "Environmental Laws" shall mean Laws, including without limitation
federal, state or local Laws, ordinances, rules, regulations, interpretations
and orders of courts or administrative agencies or authorities relating to
pollution or protection of the environment (including, without limitation,
ambient air, surface water, groundwater, land surface and subsurface strata),
including without limitation CERCLA, SARA, RCRA, HSWA, OPA, HMTA, TSCA and other
Laws relating to (i) Polluting Substances or (ii) the manufacture, processing,
distribution, use, treatment, handling, storage, disposal or transportation of
Polluting Substances.
1.18 "ERISA" shall mean the Federal Employee Retirement Income Security
Act of 1974, as amended, together with all regulations and rulings promulgated
with respect thereto.
1.19 "Evaluated Property" shall mean all of the Mortgaged Property and the
Other Property, collectively.
1.20 "Event of Default" shall mean any of the events specified in Section
8.1 of this Agreement, and "Default" shall mean any event, which together with
any lapse of time or giving of any notice, or both, would constitute an Event of
Default.
1.21 "GAAP" shall mean generally accepted accounting principles applied on
a consistent basis in all material respects to those applied in the preceding
period. Unless otherwise indicated herein, all accounting terms will be defined
according to GAAP.
1.22 "hereby," "herein," "hereof," "hereunder" and similar such terms
shall mean and refer to this Agreement as a whole and not merely to the specific
section, paragraph or clause in which the respective word appears.
1.23 "HMTA" shall mean the Hazardous Materials Transportation Act, as
amended, together with all regulations and rulings promulgated with respect
thereto.
1.24 "HSWA" shall mean the Hazardous and Solid Waste Amendments of 1984,
as amended, together with all regulations and rulings promulgated with respect
thereto.
1.25 "Hydrocarbons" shall have the meaning assigned to that term in the
Deed of Trust.
1.26 "Indebtedness" shall mean and include any and all: (i) indebtedness,
obligations and liabilities of Borrowers to Bank incurred or which may be
incurred or purportedly incurred hereafter pursuant to the terms of this
Agreement or any of the other Loan Documents, and any extensions, renewals,
substitutions, amendments and increases in amount thereof, including such
amounts as may be evidenced by the Note and all lawful interest, service fees,
commitment fees, letter of credit issuance fees and other charges, and all
reasonable costs and expenses incurred in connection with the preparation,
filing and recording of the Loan Documents, including attorneys fees; (ii) all
reasonable costs and expenses, including attorneys' fees, paid or incurred by
Bank in enforcing or attempting to enforce collection of any Indebtedness and in
enforcing or realizing upon or attempting to enforce or realize upon any
collateral or security for any Indebtedness and in protecting and preserving
Bank's interest in the Indebtedness or any collateral or security for any
Indebtedness in any bankruptcy or reorganization proceeding, including interest
on all sums so expended by Bank accruing from the date upon which such
expenditures are made until paid, at an annual rate equal to the Default Rate;
(iii) sums expended by Bank in curing any Event of Default or Default of
Borrowers under the terms of this Agreement, the other Loan Documents or any
other security agreement or other writing evidencing or securing the payment of
the Note together with interest on all sums so expended by Bank accruing from
the date upon which such expenditures are made until paid, at an annual rate
equal to the Default Rate; and (iv) all "Indebtedness" or "Secured Indebtedness"
as said terms are defined in each of the Loan Documents.
1.27 "Laws" shall mean all statutes, laws, ordinances, regulations,
orders, writs, injunctions, or decrees of the United States, any state or
commonwealth, any municipality, any foreign country, any territory or
possession, or any Tribunal.
1.28 "Letters of Credit" shall mean any and all letters of credit issued
by Bank pursuant to the request of either or both of the Borrowers in accordance
with the provisions of Section 2.7 hereof which at any time remain outstanding
and subject to draw by the beneficiary, whether in whole or in part.
1.29 "Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement, any
lease in the nature thereof, and the filing of or agreement to give any
financing statement or other similar form of public notice under the Laws of any
jurisdiction).
1.30 "Loans" shall mean the Revolving Credit Loans or any advance made by
Bank under the Note.
1.31 "Loan Documents" shall mean this Agreement, the Note, the Security
Instruments, the Subordination Agreement and all other documents, instruments
and certificates executed and delivered to Bank by Borrowers pursuant to the
terms of this Agreement.
1.32 "Long-Term Debt" shall mean, as of any date, all Debt of Borrowers
which, in accordance with GAAP, would be classified as long-term debt or as the
long-term portion of capitalized lease obligations on Borrowers' balance sheet.
1.33 "Mortgaged Property" shall have the meaning assigned to that term in
the Mortgage.
1.34 "Note" shall mean the revolving credit note described in Section 2.2
of this Agreement, together with each and every extension, renewal,
modification, replacement, substitution and change in form thereof which may be
from time to time and for any term or terms effected.
1.35 "OPA" shall mean the Oil Pollution Act of 1990, as amended, together
with all regulations and rulings promulgated with respect thereto.
1.36 "Other Property" shall have the meaning assigned to that term in
Section 3.2(c) of this Agreement.
1.37 "Person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization, and a
government or any department, agency or political subdivision thereof.
1.38 "Polluting Substances" shall mean all pollutants, contaminants,
chemicals or industrial, toxic or hazardous substances or wastes and shall
include, without limitation, any flammable explosives, radioactive materials,
oil, hazardous materials, hazardous or solid wastes, hazardous or toxic
substances or related materials defined in CERCLA/SARA, RCRA/HSWA and in the
HMTA; provided, in the event either CERCLA/SARA, RCRA/HSWA or HMTA is amended so
as to broaden the meaning of any term defined thereby, such broader meaning
shall apply subsequent to the effective date of such amendment and, provided
further, to the extent that the Laws of any State or other Tribunal establish a
meaning for "hazardous substance, "hazardous waste," "hazardous material,"
"solid waste" or "toxic substance" which is broader than that specified in
CERCLA/SARA, RCRA/HSWA, or HMTA, such broader meaning shall apply.
1.39 "RCRA" shall mean the Resource Conservation and Recovery Act of 1976,
as amended, together with all regulations and rulings promulgated with respect
thereto.
1.40 "Revolving Credit Loans" shall have the meaning assigned to that term
in Section 2.1 of this Agreement.
1.41 "SARA" shall mean the Superfund Amendments and Reauthorization Act of
1987, as amended, together with all regulations and rulings promulgated with
respect thereto.
1.42 "Security Instruments" shall mean the Deed of Trust and all other
financing statements, mortgages, deeds of trust, assignments, lien entry forms,
security agreements, documents or writings of any and all amendments and
supplements thereto, granting, conveying, assigning, transferring or in any
manner providing Bank with a security interest or mortgage lien in any property
as security for the repayment of all or any part of the Indebtedness.
1.43 "Taxes" shall mean all taxes, assessments, fees, or other charges or
levies from time to time or at any time imposed by any Laws or by any Tribunal.
1.44 "Tribunal" shall mean any municipal, state, commonwealth, Federal,
foreign, territorial or other sovereign, governmental entity, governmental
department, court, commission, board, bureau, agency or instrumentality.
1.45 "TSCA" shall mean the Toxic Substances Control Act, as amended,
together with all regulations and rulings promulgated with respect thereto.
ARTICLE IIREVOLVING CREDIT LOANS
2.1 Revolving Credit Loans . Bank agrees, upon the terms and subject to
the conditions hereinafter set forth, to make loans ("Revolving Credit Loans")
on a joint and several basis to Borrowers from the Closing Date until the
Commitment Termination Date or until such later date as Bank shall have extended
its Commitment in writing unless its Commitment shall be sooner terminated
pursuant to the provisions of this Agreement, in such amounts as may from time
to time be requested by Borrowers for the purpose of funding its purchase of
certain of the Evaluated Property; workovers and exploration expenses in
connection therewith and other development, drilling and operating expenses
pertaining thereto; the issuance of standby letters of credit on Borrowers'
account as operator of certain of the Mortgaged Property; and Borrowers' general
corporate and business needs, so long as the aggregate principal amount of all
Revolving Credit Loans outstanding and unpaid at any time under the Note,
together with the unfunded portions of all Letters of Credit outstanding or
requested by Borrowers, does not exceed the lesser of the Commitment or the
Collateral Borrowing Base then in effect (presently $2,500,000).
2.2 Note . On the Closing Date Borrowers shall execute and deliver, to the
order of Bank, Borrowers' revolving credit note in the principal amount of
$15,000,000, the form of which is annexed hereto as Exhibit A and hereby made a
part hereof (hereinafter referred to as the "Note"). The Note shall be dated as
of the Closing Date, and shall bear interest as described in Section 2.8 hereof.
After maturity (whether by acceleration or otherwise) the Note shall bear
interest at the Default Rate, payable on demand. Interest shall be calculated on
the basis of a year of 360 days but assessed for the actual number of days
elapsed in each accrual period.
2.3 Revolving Credit Advances, Payments and Voluntary Prepayment.
Revolving Credit Loans requested by Borrowers from Bank shall (i) be requested
in writing on the form of Revolving Loan Request annexed hereto as Exhibit B and
hereby made a part hereof (the "Request"), executed by Comanche on behalf of
Borrowers and delivered to Bank no later than one Business Day prior to the date
upon which the advance is to be made, or alternatively, requested telephonically
before 12:00 noon (applicable current time in Tulsa, Oklahoma), specifying the
amount and the proposed date thereof, such telephonic request to be promptly
confirmed by a written request; (ii) not cause the aggregate outstanding and
unpaid principal amount of the Revolving Credit Note to exceed the Revolving
Credit Borrowing Base; (iii) be for one of the purposes described in Section 2.1
hereof; (iv) be in the amount of $10,000 or an integral multiple thereof; and
(v) be advanced by Bank on the applicable date, provided the Revolving Loan
Request is timely received by Bank in accordance with Section 2.3(i) hereof and
all other conditions of funding established herein are met. All advances made by
Bank shall, for mutual convenience, be deposited to the general depository
account of Comanche with Bank, and Bank shall have no responsibility to monitor
the allocation or distribution of such advances in any other respect. The
initial advance made on the Closing Date shall be approximately $ , including
funding the payoff of Borrowers' existing note obligations to their existing
financial institution lenders in the approximate amount of $1,381,000. In
consideration of Bank permitting Borrowers to make requests for Revolving Credit
Loans by telephone, Borrowers state that they are fully aware of the risks
attendant thereto, and agree to accept all such risks and to hold Bank harmless
from any loss which Borrowers may incur by reason of any such nonwritten
request, other than such as result from Bank's gross negligence or wanton
disregard.
All advances made by Bank on the Note and all payments or prepayments of
principal and interest thereon made by Borrowers shall be recorded by Bank in
its records, and the aggregate unpaid principal amount so recorded shall be
conclusive evidence of the principal amount owing and unpaid on the Note. The
unfunded portion of each outstanding Letter of Credit shall be deemed a funding
against the Commitment but not for the purpose of accrual of interest on the
Note until the date portions thereof are actually funded by Bank. The failure to
so record shall not, however, limit or otherwise affect the obligations of
Borrowers hereunder or under the Note to repay the principal amount of each
Revolving Credit Loan together with all interest accrued thereon.
Borrowers may from time to time make prepayments of principal without
premium or penalty on the Loans with no notice on or prior to 2:00 p.m
(applicable current time in Tulsa, Oklahoma) on the date of such prepayment.
Borrowers may reborrow amounts paid or prepaid subject to the limitations and
conditions for Revolving Credit Loans contained herein. All payments and
prepayments shall be made in lawful money of the United States of America in
immediately available funds. Any payments or prepayments on the Note received by
Bank after 2:00 o'clock P.M. (applicable current time in Tulsa, Oklahoma) shall
be deemed to have been made on the next succeeding Business Day. All outstanding
principal of and accrued interest on the Note not previously paid hereunder
shall be due and payable at maturity on September 1, 2001, unless such maturity
shall be extended by Bank in writing or accelerated pursuant to the terms
hereof.
2.4 Authorized Signatory. An Authorized Signatory may, from time to time,
notify Bank in writing of a change in the Authorized Signatories. From and after
Bank's receipt of such written notice, Bank may rely on any such request or
certificate purportedly signed by any individual who has been so designated as
an Authorized Signatory pursuant to this Agreement unless or until it receives
written notice from an Authorized Signatory of the deletion of an Authorized
Signatory.
2.5 Collateral Borrowing Base . Borrowers will not request, nor will it
accept, the proceeds of any Revolving Credit Loan or advance under the Note (or
the issuance of any Letter of Credit) at any time when the amount thereof,
together with the sum of the unpaid principal amount of the Note plus the
unfunded portion of all Letters of Credit outstanding or requested by either or
both of the Borrowers to be issued by Bank on behalf of or for the account of
Borrowers at the time of such borrowing base calculation, exceeds the lesser of
(a) the Collateral Borrowing Base in effect at that time, or (b) the Commitment.
2.6 Variance from Borrowing Base . Any Revolving Credit Loan shall be
conclusively presumed to have been made to Borrowers by Bank under the terms and
provisions hereof and shall be secured by all of the Collateral and security
described or referred to herein or in the Security Instruments, whether or not
such loan conforms in all respects to the terms and provisions hereof. If Bank
should (for the convenience of Borrowers or for any other reason) make loans or
advances which would cause the unpaid principal amount of the Note plus the
unfunded portion of all Letters of Credit issued under the Commitment to exceed
the lesser of the amount of the then applicable Collateral Borrowing Base or the
Commitment, no such variance, change or departure shall prevent any such loan or
loans from being secured by the Collateral and security created or intended to
be created herein or in the Security Instruments. The Collateral Borrowing Base
shall not in any manner limit the extent or scope of the Collateral and security
granted for the repayment of the Note (or any other Indebtedness) or limit the
amount of indebtedness under the Note (or any other Indebtedness) to be secured.
2.7 Letters of Credit . Bank agrees, upon the terms and subject to the
conditions hereinafter set forth and set forth in Bank's standard form letter of
credit application agreement, to issue Letters of Credit at the request of
either or both of the Borrowers, provided that (i) no Letters of Credit will be
issued on behalf of or for the account of either or both of the Borrowers after
July 31, 2001, and no such Letters of Credit will be issued with an expiring
date later than August 31, 2001, (ii) no Letter of Credit will be issued on
behalf of or for the account of either or both of the Borrowers if at the time
of issuance the outstanding amount of all Revolving Credit Loans under the Note
would exceed the lesser of the Commitment or the Collateral Borrowing Base
taking into account the issuance of such Letter of Credit, and (iii) the amount
of all issued and outstanding Letters of Credit on behalf of or for the account
of either or both of the Borrowers shall not exceed, at any time, $500,000 in
the aggregate. If any Letter of Credit is drawn upon at any time, each amount
drawn, whether a full or partial draw on the Letter of Credit, shall be
reflected by Bank as an advance on the Note effective as of the time of the
draw. In consideration of Bank's agreement to issue the Letters of Credit
hereunder, Borrowers agree to pay to Bank issuance fees equal to two and
one-quarter percent (2 1/4%) per annum on the face amount of each Letter of
Credit prorated for the life of each Letter of Credit, which fees shall be due
and payable to Bank at the time of issuance of each Letter of Credit. In the
event any Letters of Credit are issued on behalf of or for the account of either
or both of the Borrowers with an expiration date later than August 31, 2001,
(unless the Commitment is renewed in writing by Bank) Borrowers agree to fully
secure such Letter of Credit on or before August 1, 2001, with a certificate of
deposit or time deposit with Bank through the expiration date of such Letters of
Credit, such pledge to be in form and content acceptable to Bank.
2.8 Interest Rate . All Revolving Credit Loan advances shall accrue
interest at the Base Rate Option. The "Base Rate Option" is a rate per annum
equal to the Applicable Prime Rate plus one percentage point (1.00%) per annum.
After the principal amount of any of the Loans outstanding shall have become
past due (by acceleration or past the stated maturity date, such Loans shall
bear interest for each day until paid (before and after judgment) at the Default
Rate.
2.9 Prepayments . Borrowers shall have the right at their option from time
to time to prepay the Loans in whole or part without premium or penalty at any
time with respect to the Base Rate Option Loans.
2.10 Interest Payments Dates . All interest accrued on the Note shall be
due and payable on the last day of each calendar month, commencing September 30,
1999, and on the final maturity date of the Note. After maturity of the Loans
(by acceleration or otherwise), interest thereon shall be due and payable on
demand.
2.11 Commitment Fee; Initial Loan Fee . From the Closing Date until the
Commitment is terminated, the Borrowers shall pay to the Bank, as a commitment
fee for its Commitment, an amount equal to onefourth of one percentage point
(0.25%) per annum of the amount by which the lesser of the Collateral Borrowing
Base or the Commitment (currently $2,500,000) exceeds the outstanding unpaid
principal balance of the Note from time to time computed daily on the basis of a
calendar year of 360 days but assessed for the actual number of days elapsed
during each accrual period. Such fee shall be payable quarterly twenty (20) days
after the end of each quarterannual period ending June 30, September 30 and
December 31, commencing October 20, 1999 (for the period from the Closing Date
through September 30, 1999) and at the stated maturity date of the Note, whether
on September 1, 2001, or by acceleration or otherwise. The amount of Commitment
Fee payable for each such calendar quarter shall be paid in arrears by Borrowers
within ten (10) days after Borrowers receive an invoice for such fees. At the
Closing on the Closing Date Borrower shall pay to the Bank a $5,000 initial loan
fee in immediately available funds.
ARTICLE IIICOLLATERAL BORROWING BASE
3.1 Initial Collateral Borrowing Base . Until further determination by
Bank pursuant to Section 3.2 of this Agreement, Bank and Borrowers agree that
the initial Collateral Borrowing Base is $2,500,000.
3.2 Determination of the Collateral Borrowing Base .
----------------------------------------------
(a) Borrowers shall deliver to Bank at Borrowers' cost by each
January 31 and July 31, commencing January 31, 2000, such current data,
reports and engineering information as is necessary or appropriate for
Bank's engineers or any other independent petroleum engineer acceptable to
Bank to compile and prepare by each February 28 and August 31 (commencing
February 28, 2000), an engineering report in form and substance
satisfactory to Bank, evaluating the proven producing oil and gas reserves
attributable to Borrowers' aggregate interest in the Mortgaged Property
(as defined in subsection (b) below) and the Other Property (as defined in
subsection (c) below), together with the expenses attributable thereto.
Such well by well engineering data and information furnished to Bank by or
on behalf of Borrowers shall be accompanied by such other information as
shall be requested by Bank in order for it to make its determination of
the Collateral Borrowing Base, and by a joint certificate of Borrowers
certifying that Borrowers have good and indefeasible title to the
Mortgaged Property and the Other Property interest valued and that
payments are being received from purchasers of production with respect to
said interests. At any time after thirty (30) days of the receipt of such
information and in no event later than each February 28 and August 31
(commencing February 28, 2000) Bank shall (i) make a determination of the
present worth, using such pricing and discount factor as it deems
appropriate pursuant to Bank's then applicable energy lending policies and
procedures, of the future net revenue estimated by Bank to be received by
Borrowers from production from the Mortgaged Property and the Other
Property so evaluated, multiplied by a percentage determined by Bank to be
appropriate on the basis of Bank's then applicable energy lending
criteria; and (ii) report in writing to Comanche the sum of the evaluation
by Bank of such evaluated oil and gas properties (the "Collateral
Borrowing Base"), which shall in no event exceed Fifteen Million Dollars
($15,000,000). The good faith determinations of Bank in all such respects
shall be conclusive.
(b) The term "Mortgaged Property" shall refer only to such
properties of Borrowers covered by the Deed of Trust (or a supplemental
mortgage or deed of trust, duly executed, acknowledged and delivered by
one or both of the Borrowers, as applicable, to Bank in form satisfactory
to counsel for Bank) and which properties are, at the time:
(i) particularly and adequately described under the Deed
of Trust or other supplemental mortgage and deed of trust as
security for the Indebtedness evidenced by the Note;
(ii) completed or developed (in the case of oil and gas
leases) to the extent that value is being assigned to them by Bank
in connection with its evaluation of the Collateral Borrowing Base
and Bank has determined that such properties are capable of
producing oil or gas in commercial quantities; and
(iii) approved as to title to the satisfaction of Bank.
(c) The term "Other Property" shall refer only to such properties
of Borrowers which are not described in the Deed of Trust, but which are
at the time:
(i) completed or developed (in the case of oil and gas
leases) to the extent that value is being assigned to them by
Bank in connection with its evaluation of the Collateral
Borrowing Base and Bank has determined that such properties
are capable of producing oil or gas in commercial quantities;
and
(ii) approved as to title to the satisfaction of Bank.
(d) The initial Collateral Borrowing Base ($2,500,000) shall
remain in effect until otherwise changed by written agreement between
Borrowers and Bank or by Bank pursuant to the procedures established
herein.
3.3 Collateral Borrowing Base Deficiency . Should the unpaid outstanding
principal balance of the Note, together with the unfunded portion of all
outstanding and requested Letters of Credit, at any time be greater than the
Collateral Borrowing Base in effect at such time, Bank may notify Comanche in
writing of the deficiency. Within fifteen (15) days from and after the date of
any such deficiency notice Comanche shall notify Bank in writing of its election
to:
(a) Make a prepayment upon the Note in an amount sufficient to
reduce the unpaid principal amount of the Note, when added to the unfunded
portion of all outstanding and requested Letters of Credit, to an amount
equal to or less than the amount of the Collateral Borrowing Base;
(b) Make mandatory equal monthly principal prepayments on the Note
due on the next six (6) successive monthly interest installment due dates
on the Note equal in an aggregate amount that will reduce the outstanding
principal balance of the Note, when added to the unfunded portion of all
outstanding and requested Letters of Credit, to the projected Collateral
Borrowing Base as of the next immediate semiannual redetermination thereof
in accordance with the provisions of Section 3.2(a) hereof; or
(c) Execute and deliver to Bank one or more supplemental
mortgages, deeds of trust, security agreements or pledges encumbering such
Other Property or other collateral or assets in form, substance and value
satisfactory to Bank and its counsel as additional security for the Note
(and all other Indebtedness) to the extent such collateral or properties
are acceptable to Bank and of such value, as determined by Bank, that the
Collateral Borrowing Base will be increased to an amount equal to or
greater than the sum of the unpaid principal balance of the Note plus the
unfunded portion of all outstanding and requested Letters of Credit.
If Borrowers shall have elected to make a prepayment on the Note under Section
3.3(a) hereof, such prepayment shall be due within five (5) Business Days after
Borrowers shall have notified Bank of such election, and the prepayment shall be
applied, at Bank's option, to the principal payments of the Note in inverse
order of maturity. If Borrowers shall elect to make six (6) equal monthly
principal prepayments on the Note due to Bank under Section 3.3(b) hereof, Bank
shall roll forward its then most current engineering determination and determine
the projected Collateral Borrowing Base for the next successive determination
date (either February 28 or August 31 as the case may be).
ARTICLE IV SECURITY
4.1 Collateral . The repayment of the Indebtedness shall be secured by a
first and prior mortgage lien, deed of trust and security interest in and to all
of the portions of the Mortgaged Property owned or hereafter acquired by either
of the Borrowers, which has been granted to Bank, pursuant to the terms of that
certain Mortgage, Deed of Trust, Security Agreement, Financing Statement and
Assignment (with power of sale) dated as of the Closing Date, in form and
content acceptable to the Bank and the Bank's legal counsel (the "Deed of
Trust") together with all proceeds and products of the items or types of
collateral described in this Article IV including without limitation, insurance
proceeds and all cash, money, deposits and deposit or demand accounts of either
or both of the Borrowers at any time in the possession or control of Bank (the
collateral described herein and in the Security Instruments being collectively
referred to as the "Collateral").
4.2 Additional Properties . As an additional condition precedent to any
Revolving Credit Loans (other than the initial Revolving Credit Loan made at the
Closing) requested by Borrowers pursuant to Section 2.3 hereof, Bank has the
right, in its sole discretion, to elect to take any or all of the Other
Properties, or any properties to be acquired in domestic oil and gas reserve
acquisitions made by either of the Borrowers with Revolving Credit Loans funded
hereunder, as Collateral for the Indebtedness pursuant to such supplemental or
additional mortgages, deeds of trusts or security agreements covering such
additional properties in form and substance satisfactory to Bank and its counsel
and in full compliance with the criteria of clauses (i), (ii) and (iii) of
subsection 3.2(b) above as additional security for the Note and the
Indebtedness. All of such additional properties will be deemed part and parcel
of the Collateral constituting security for the repayment of the Indebtedness.
ARTICLE VCONDITIONS PRECEDENT TO LOANS
5.1 Conditions Precedent . The obligation of the Bank to make the
Revolving Credit Loans is subject to the satisfaction of all of the following
conditions on or prior to the Closing Date (in addition to the other terms and
conditions set forth herein):
(a) No Default . There shall exist no Event of Default or Default
on the Closing Date.
(b) Covenants, Representations and Warranties . The
representations, warranties and covenants set forth in Articles VI and VII
shall be true and correct on and as of the Closing Date, with the same
effect as though made on and as of the Closing Date.
(c) Loan Documents/Security Instruments . Borrowers shall have
delivered to Bank the Deed of Trust, and the other Loan Documents, each
appropriately executed by the appropriate parties and, where applicable,
acknowledged to the satisfaction of Bank and dated as of the Closing Date,
together with such financing statements, and other documents as shall be
necessary and appropriate to perfect Bank's mortgage liens, pledge and
security interests in the Collateral covered by said Security Instruments.
(d) Note . Borrowers shall have delivered the Note to the order of
Bank, appropriately executed.
(e) Certificates . Each of the Borrowers shall have delivered to
Bank a Certificate, dated as of the Closing Date, and signed by the
President of each of the Borrowers certifying (i) to the matters covered
by the conditions specified in subsections (a) and (b) of this Section
5.1, (ii) that such Borrower and the directors thereof have performed and
complied with all agreements and conditions required to be performed or
complied with thereby prior to or on the Closing Date, (iii) to the name
and signature of the officers of each Borrower authorized to execute and
deliver the Loan Documents and any other documents, certificates or
writings and to borrow under this Agreement, and (iv) to such other
matters in connection with this Agreement which Bank shall reasonably
determine to be advisable. Bank may conclusively rely on such Certificates
until it receives notice in writing to the contrary.
(f) Proceedings . On or before the Closing Date, all corporate
proceedings of each of the Borrowers shall be taken in connection with the
transactions contemplated by the Loan Documents and shall be satisfactory
in form and substance to Bank and its counsel; and Bank shall have
received certified copies, in form and substance satisfactory to Bank and
its counsel, of a full and complete copy of the certificate or articles of
incorporation and bylaws of each of the Borrowers, authorizing the
execution and delivery of the mortgage liens and Loan Documents, the
borrowings under this Agreement, including the Note, and the granting of
the mortgage liens and security interests in the Collateral pursuant to
the Security Instruments, to secure the payment of the Indebtedness.
(g) Subordination . Borrowers shall have received from the
subordinated creditors more particularly described on Exhibit "C" hereof a
Subordination Agreement in form, substance and scope acceptable to the
Bank and its legal counsel.
(h) Loan Fees, Consents and Other Information . Bank shall have
received a $5,000 initial loan fee from the Borrowers and such
certificates, consents, ratifications, information, documents and
assurances as shall be reasonably requested by Bank.
5.2 Conditions Precedent to All Additional Revolving Credit Loans . Bank
shall not be obligated to make any Revolving Credit Loan after the initial
Revolving Credit Loan (i) if at such time any Default shall have occurred and be
continuing; (ii) if any of the representations, warranties and covenants
contained in Article VII of this Agreement shall be false or untrue in any
material respect on the date of such loan, as if made on such date; or (iii)
unless Borrowers shall have provided to Bank a Request (whether a written
Request or a telephonically authorized request confirmed by a written Request
pursuant to Section 2.3 hereof) for any requested Revolving Credit Loan, duly
executed by Borrowers and in proper form, establishing that the Revolving Credit
Borrowing Base will support the additional Revolving Credit Loan and that the
purpose of such request strictly complies with the limitations of Article II
hereof. Each Request by Borrowers for an additional Revolving Credit Loan shall
constitute a joint representation by Borrowers that there is not at the time of
such request an Event of Default or a Default, and that all representations,
warranties and covenants in Article VII of this Agreement are true and correct
on and as of the date of each such request.
ARTICLE VI COVENANTS
Borrowers covenant and agree with Bank that from the date hereof and so
long as this Agreement is in effect (by extension, amendment or otherwise) and
until payment in full of all Indebtedness and the performance of all other
obligations of Borrowers under this Agreement, unless Bank shall otherwise
consent in writing:
6.1 Payment of Taxes and Claims . Borrowers will pay and discharge or
cause to be paid and discharged all Taxes imposed upon the income or profits of
Borrowers or upon the property, real, personal or mixed, or upon any part
thereof, belonging to Borrowers before the same shall be in default, and all
lawful claims for labor, rentals, materials and supplies which, if unpaid, might
become a Lien upon its property or any part thereof; provided however, that
Borrowers shall not be required to pay and discharge or cause to be paid or
discharged any such Tax, assessment or claim so long as the validity thereof
shall be contested in good faith by appropriate proceedings, and adequate book
reserves shall be established with respect thereto, and Borrowers shall pay such
Tax, charge or claim before any property subject thereto shall become subject to
execution.
6.2 Maintenance of Entity Existence . Each of the Borrowers will do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence, rights and franchises and will continue to
conduct and operate such Borrower's business substantially as being conducted
and operated presently.
6.3 Preservation of Property . Each of the Borrowers will at all times
maintain, preserve and protect all of such Borrower's properties which are used
or useful in the conduct of such Borrower's business whether owned in fee or
otherwise, or leased, in good repair and operating condition; from time to time
make, or cause to be made, all needful and proper repairs, renewals,
replacements, betterments and improvements thereto so that the business carried
on in connection therewith may be properly and advantageously conducted at all
times; and comply with all material leases to which it is a party or under which
it occupies property so as to prevent any material loss or forfeiture
thereunder.
6.4 Insurance . Borrowers will keep or cause to be kept (either Borrowers
or, if applicable, the operator of the Evaluated Property), adequately insured
by financially sound and reputable insurers each of the Borrower's equipment,
motor vehicles, and all other property of a character usually insured by
businesses engaged in the same or similar businesses, including the Collateral
and the Evaluated Property. Upon demand by Bank any insurance policies covering
the Collateral and the Evaluated Property shall be endorsed to provide for
payment of losses to Bank as its interest may appear, to provide that such
policies may not be canceled, reduced or affected in any manner for any reason
without thirty (30) days prior notice to Bank, and to provide for any other
matters which Bank may reasonably require; and such insurance shall be against
fire, casualty and any other hazards normally insured against and shall be in
the amount of the full value (less a reasonable deductible not to exceed amounts
customary in the industry for similarly situated businesses and properties) of
the property insured. Borrowers shall at all times maintain or, where
applicable, cause the operators of the Evaluated Property maintain adequate
insurance by financially sound and reputable insurers, including without
limitation, the following coverages: (i) insurance against damage to persons and
property, including comprehensive general liability, worker's compensation and
automobile liability and (ii) insurance against sudden and accidental
environmental and pollution hazards and accidents that may occur on the
Evaluated Property.
6.5 Compliance with Applicable Laws . Each of the Borrowers will comply,
or, where applicable, will use its best efforts to cause the operator to comply,
with the requirements of all applicable Laws and orders of any Tribunal and
obtain any licenses, permits, franchises or other governmental authorizations
necessary to the ownership of such Borrower's properties or to the conduct of
such Borrower's business.
6.6 Environmental Covenants . Borrowers will immediately notify Bank of
and provide Bank with copies of any notifications of discharges or releases or
threatened releases or discharges of a Polluting Substance on, upon, into or
from the Collateral or the Evaluated Property which are given or required to be
given by or on behalf of either of the Borrowers to any federal, state or local
Tribunal if any of the foregoing may materially and adversely affect such
Borrowers or any part of the Collateral or the Evaluated Property, and such
copies of notifications shall be delivered to Bank at the same time as they are
delivered to the Tribunal. Borrowers further agree promptly to undertake and
diligently pursue to completion any appropriate and legally required or
authorized remedial containment and cleanup action in the event of any release
or discharge or threatened release or discharge of a Polluting Substance on,
upon, into or from the Collateral or the Evaluated Property. At all times while
owning and operating the Collateral or the Evaluated Property, Borrowers will
maintain and retain complete and accurate records of all releases, discharges or
other disposal of Polluting Substances on, onto, into or from the Collateral or
Evaluated Property, including, without limitation, records of the quantity and
type of any Polluting Substances disposed of on or off the Collateral or the
Evaluated Property.
6.7 Environmental Indemnities . Each of the Borrowers hereby agree to
indemnify, defend and hold harmless Bank and each of its officers, directors,
employees, agents, consultants, attorneys, contractors and each of its
affiliates, successors or assigns, or transferees from and against, and
reimburse said Persons in full with respect to, any and all loss, liability,
damage, fines, penalties, costs and expenses, of every kind and character,
including reasonable attorneys' fees and court costs, known or unknown, fixed or
contingent, occasioned by or associated with any claims, demands, causes of
action, suits and/or enforcement actions, including any administrative or
judicial proceedings, and any remedial, removal or response actions ever
asserted, threatened, instituted or requested by any Persons, including any
Tribunal, arising out of or related to: (a) the breach of any representation or
warranty of Borrowers contained in Section 7.5 set forth herein; (b) the failure
of either of the Borrowers to perform any of its covenants contained in Section
6.5 or 6.6 hereunder; (c) the ownership, construction, occupancy, operation, use
of the Collateral or the Evaluated Property prior to the earlier of the date on
which (i) the Indebtedness and obligations secured hereby have been paid and
performed in full and the Security Instruments have been released, or (ii) the
Collateral or the Evaluated Property has been sold by Bank following Bank's
ownership of the Collateral or the Evaluated Property by way of foreclosure of
the Liens granted pursuant hereto, deed in lieu of such foreclosure or otherwise
(the "Release Date"); provided, however, this indemnity shall not apply with
respect to matters caused by or arising solely from Bank's activities during any
period of time Bank acquires ownership of the Collateral or the Evaluated
Property.
The indemnities contained in this Section 6.7 apply, without limitation,
to any violation on or before the Release Date of any Environmental Law and any
liability or obligation relating to the environmental conditions on, under or
about the Collateral or the Evaluated Property on or prior to the Release Date
(including, without limitation: (a) the presence on, upon or in the Collateral
or the Evaluated Property or release, discharge or threatened release on, upon
or from the Collateral or the Evaluated Property of any Polluting Substances
generated, used, stored, treated, disposed of or otherwise released prior to the
Release Date, and (b) any and all damage to real or personal property or natural
resources and/or harm or injury including wrongful death, to persons alleged to
have resulted from such release of any Polluting Substances regardless of
whether the act, omission, event or circumstances constituted a violation of any
Environmental Law at the time of its existence or occurrence). The term
"release" shall have the meaning specified in CERCLA/SARA and the terms
"stored," "treated" and "disposed" shall have the meanings specified in
RCRA/HSWA; provided, however, any broader meanings of such terms provided by
applicable laws of the State of Oklahoma shall apply.
The provisions of this Section 6.7 shall be in addition to any other
obligations and liabilities Borrowers may have to Bank at common law and shall
survive the Release Date and shall continue thereafter in full force and effect.
Bank agrees that in the event that such claim, suit or enforcement action
is asserted or threatened in writing or instituted against it or any of its
officers, employers, agents or contractors or any such remedial, removal or
response action is requested of it or any of its officers, employees, agents or
contractors for which Bank may desire indemnity or defense hereunder, Bank shall
give written notification thereof to Comanche.
Notwithstanding anything to the contrary stated herein, the indemnities
created by this Section 6.7 shall only apply to losses, liabilities, damages,
fines, penalties, costs and expenses actually incurred by Bank as a result of
claims, demands, actions, suits or proceedings brought by Persons who are not
the beneficiaries of any such indemnity. Bank shall act as the exclusive agent
for all indemnified Persons under this Section 6.7. With respect to any claims
or demands made by such indemnified Persons, Bank shall notify Comanche within
thirty (30) days after Bank's receipt of a writing advising Bank of such claim
or demand. Such notice shall identify (i) when such claim or demand was first
made, (ii) the identity of the Person making it, (iii) the indemnified Person
and (iv) the substance of such claim or demand. Failure by Bank to so notify
Comanche within said thirty (30) day period shall reduce the amount of
Borrowers' obligations and liabilities under this Section 6.7 by an amount equal
to any damages or losses suffered by Borrowers resulting from any prejudice
caused Borrowers by such delay in notification from Bank. Upon receipt of such
notice, Comanche shall have the exclusive right and obligation to contest,
defend, negotiate or settle any such claim or demand through counsel of their
own selection (but reasonably satisfactory to Bank) and solely at Borrowers' own
cost, risk and expense; provided, that Bank, at its own cost and expense shall
have the right to participate in any such contest, defense, negotiations or
settlement. The settlement of any claim or demand hereunder by Borrowers may be
made only upon the prior approval of Bank of the terms of the settlement, which
approval shall not be unreasonably withheld.
6.8 Financial Statements . As soon as practicable after the end of each
quarter of the fiscal year period and in any event within fortyfive (45) days
thereafter, Comanche shall furnish to Bank the following financial statements,
prepared on a GAAP basis or other comprehensive basis of accounting currently
used and consistently applied and certified by Borrowers' chief executive
officer or chief financial officer:
(i) a consolidated balance sheet of Comanche at the end of such
quarter period, (ii)a consolidated statement of income of Comanche
for such quarter period, and
(iii) a consolidated statement of cash flows of Comanche for such
quarter period,
setting forth in each case in comparative form the consolidated figures for the
previous fiscal year for that period, if applicable, and cumulative figures for
the fiscal year to date, all in reasonable detail. As soon as practicable after
the end of each fiscal year of Comanche, and in any event within one hundred
twenty (120) days thereafter, Borrowers shall also deliver to Bank their audited
consolidated annual financial statements (with all footnotes thereto) together
with a full and complete copy of each report submitted to either or both of the
Borrowers by independent accountants in connection with such annual audit made
by them including, without limitation, any comment letter submitted thereby to
management pertaining thereto or in connection with their audit.
6.9 Notice of Default . Immediately upon the happening of any condition or
event which constitutes an Event of Default or Default or any default or event
of default under any other loan, mortgage, financing or security agreement,
Borrowers will give Bank a written notice thereof specifying the nature and
period of existence thereof and what actions, if any, Borrowers are taking and
propose to take with respect thereto.
6.10 Notice of Litigation . Immediately upon becoming aware of the
existence of any action, suit or proceeding at law or in equity before any
Tribunal, an adverse outcome which would (i) materially impair the ability of
either or both of the Borrowers to carry on its business substantially as now
conducted, (ii) materially and adversely affect the condition (financial or
otherwise) of either of the Borrowers, or (iii) result in monetary damages in
excess of $100,000, Borrowers will give Bank a written notice specifying the
nature thereof and what actions, if any, Borrowers are taking and proposes to
take with respect thereto.
6.11 Notice of Claimed Default . Immediately upon becoming aware that the
holder of any note or any evidence of indebtedness or other security of
Borrowers has given notice or taken any action with respect to a claimed default
or event of default thereunder, Borrowers will give Bank a written notice
specifying the notice given or action taken by such holder and the nature of the
claimed default or event of default thereunder and what actions, if any,
Borrowers are taking and proposes to take with respect thereto.
6.12 Requested Information . With reasonable promptness, Borrowers will
give Bank such other data and information as from time to time may be reasonably
requested by Bank.
6.13 Inspection . Borrowers will keep complete and accurate books and
records with respect to the Collateral and its other properties, business and
operations and will permit employees and representatives of Bank, upon
reasonable notice, to audit, inspect and examine the same and to make copies
thereof and extracts therefrom during normal business hours. All such records
shall be at all times kept and maintained at the principal offices of Borrowers
in Tulsa, Oklahoma. Upon any Default or Event of Default of Borrowers, it will
surrender all of such records relating to the Collateral to Bank upon receipt of
any request therefor from Bank.
6.14 Maintenance of Employee Benefit Plans . Borrowers will maintain each
employee benefit plan and/or pension plan as to which Borrowers may have any
liability or responsibility in compliance with ERISA and all other Laws
applicable thereto.
6.15 Limitation on Liens . Borrowers will not create or suffer to exist
any Lien upon any of its property or assets except (i) Liens in favor of Bank
securing the Indebtedness; (ii) Liens arising in the ordinary course of business
for sums not due or sums being contested in good faith and by appropriate
proceedings and not involving any deposits, advances, borrowed money or the
deferred purchase price of property or services; and (iii) Liens permitted to
exist under the terms of any of the Security Instruments.
6.16 Disposition/Negative Pledge re Encumbrance of Collateral and Other
Assets . Borrowers will not sell or encumber any of the Collateral without first
obtaining Bank's written consent thereto and Borrowers will not sell, lease,
transfer, scrap or otherwise dispose of or mortgage, pledge, grant a security
interest in or otherwise encumber any of Borrowers' other properties or assets,
whether for replacement or not, unless such sale or disposition shall be in the
ordinary course of business and for a full and fair consideration, subject to
Borrowers' limited right to sell up to $100,000 worth in the aggregate of their
properties or assets not constituting Collateral (other than and expressly
excluding (i) oil and gas leasehold, mining or other mineral interests wherever
located, and (ii) the capital stock of DE owned by Comanche) in the ordinary
course of business during any calendar year without obtaining Bank's prior
consent. Prior to consenting to any sale of Collateral, Bank shall be entitled
to redetermine the Collateral Borrowing Base as provided in Section 3.2 of this
Agreement and Borrowers shall deliver to Bank at Borrowers' cost the data and
information described in Section 3.2 needed to make such redetermination. In no
event shall Borrowers cause or permit the voluntary or involuntary pledge,
mortgage or other encumbrance, attachment or levy of or against any of the
properties or assets of whatsoever nature or type to any Person (financial
institution or otherwise) without first obtaining Bank's written consent
thereto.
6.17 Other Agreements . Borrowers will not enter into or permit to exist
any agreement (i) which would cause an Event of Default or a Default hereunder;
or (ii) which contains any provision which would be violated or breached by the
performance of Borrowers' obligations hereunder or under any of the other Loan
Documents.
6.18 Limitation on Other Indebtedness . Borrowers will not create, incur,
assume, become or be liable in any manner in respect of, or suffer to exist, any
indebtedness whether evidenced by a note, bond, debenture, agreement, letter of
credit or similar or other obligation, or accept any deposits or advances of any
kind, except (i) trade payables and current indebtedness (other than for
borrowed money) incurred in, and deposits and advances accepted in, the ordinary
course of Borrowers' existing business; (ii) the Indebtedness; or (iii) the
existing indebtedness more particularly described on Exhibit C hereto but if and
only to the extent the repayment thereof is fully subordinated to the
Indebtedness pursuant to the Subordination Agreement described in Section 5.1(g)
hereof.
6.19 Investments, Loans and Advances . Borrowers will not make loans or
advances to any other Person and will not make capital contributions to or
investments in any other Person.
6.20 Current Ratio . Borrowers will maintain a Current Ratio, calculated
as of the last day of each fiscal quarter, of not less than 1.2:1.
ARTICLE VII REPRESENTATIONS AND WARRANTIES
To induce Bank to enter into this Agreement and to make the Loans to
Borrowers under the provisions hereof, and in consideration thereof, Borrowers
represent, warrant and covenant as follows:
7.1 Litigation . Except as set forth on Exhibit D attached hereto, there
is no action, suit, investigation or proceeding threatened or pending before any
Tribunal against or affecting either of the Borrowers or any properties or
rights of Borrowers, which, if adversely determined, would result in a liability
of greater than $100,000 or would otherwise result in any material adverse
change in the business or condition, financial or otherwise, of Borrowers.
Neither of the Borrowers are in default with respect to any judgment, order,
writ, injunction, decree, rule or regulation of any Tribunal.
7.2 Conflicting Agreements and Other Matters . Neither of the Borrowers
are in default in the performance of any material obligation, covenant, or
condition in any agreement to which it is a party or by which it is bound.
Neither of the Borrowers are a party to any contract or agreement which
materially and adversely affects its business, property or assets, or financial
condition. Neither of the Borrowers are a party to or otherwise subject to any
contract or agreement which restricts or otherwise affects the right or ability
of Borrowers to execute the Loan Documents or the performance of any of their
respective terms. Neither the execution nor delivery of any of the Loan
Documents, nor fulfillment of nor compliance with their respective terms and
provisions will conflict with, or result in a breach of the terms, conditions or
provisions of, or constitute a default under, or result in any violation of, or
result in the creation of any Lien (except those created by the Loan Documents)
upon any of the properties or assets of either or both of the Borrowers pursuant
to, or require any consent, approval or other action by or any notice to or
filing with any Tribunal (other than routine filings after the Closing Date with
the Securities and Exchange Commission, any securities exchange and/or state
blue sky authorities) pursuant to any award of any arbitrator, or any agreement,
instrument or Law to which either or both of the Borrowers is subject.
7.3 Financial Statements . The financial statements of Borrowers furnished
to Bank have been prepared on a GAAP basis or other comprehensive basis of
accounting currently used and consistently applied, show all material
liabilities, direct and contingent, and fairly present the consolidated
financial condition of Borrowers as at date thereof and the results of its
operations for the periods then ended, and since such date there has been no
material adverse change in the business, financial condition or operations of
Borrowers.
7.4 Title to Properties; Authority . Each of the Borrowers has full power,
authority and legal right to own and operate the properties which it now owns
and operates, and to carry on the lines of business in which it is now engaged,
and as of the Closing Date will have good and marketable title to the Evaluated
Property subject to no Lien of any kind except Liens permitted by this
Agreement. Each of the Borrowers has full power, authority and legal right to
execute and deliver and to perform and observe the provisions of this Agreement
and the other Loan Documents. Borrowers further represent to Bank that any and
all after acquired interest in any one or more of the Evaluated Property being
concurrently or subsequently assigned of record to either of the Borrowers is
and shall be deemed encumbered by the Mortgage in all respects.
7.5 Environmental Representations .
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(a) Neither of the Borrowers are subject to any liability or
obligation relating to (i) the environmental conditions on, under or about
the Collateral or the Evaluated Property, including, without limitation,
the soil and ground water conditions at the location of any of Borrowers'
properties, or (ii) the use, management, handling, transport, treatment,
generation, storage, disposal, release or discharge of any Polluting
Substance;
(b) Neither of the Borrowers have obtained and are not required to
obtain or make application for any permits, licenses or similar
authorizations to construct, occupy, operate or use any buildings,
improvements, facilities, fixtures and equipment forming a part of the
Collateral or the Evaluated Property by reason of any Environmental Laws;
(c) Borrowers have taken all reasonable steps necessary to
determine and has determined that no Polluting Substances have been
disposed of or otherwise released on, onto, into, or from the Collateral
or the Evaluated Property (the term "release" shall have the meanings
specified in CERCLA/SARA, and the term "disposal" or "disposed" shall have
the meanings specified in RCRA/HSWA; provided, in the event either
CERCLA/SARA or RCRA/HSWA is amended so as to broaden the meaning of any
term defined thereby, such broader meaning shall apply subsequent to the
effective date of such amendment and provided further, to the extent that
the laws of any State or Tribunal establish a meaning for "release,"
"disposal" or "disposed" which is broader than that specified in
CERCLA/SARA, RCRA/HSWA or other Environmental Laws, such broader meaning
shall apply);
(d) To the best of each Borrower's knowledge, there are no PCB's
or asbestoscontaining materials, whether in the nature of thermal
insulation products such as pipe boiler or breech coverings, wraps or
blankets or sprayedon or troweledon products in, on or upon the Collateral
or the Evaluated Property; and
(e) To the best of each Borrower's knowledge, there is no urea
formaldehyde foam insulation in, on or upon the Collateral or the
Evaluated Property.
7.6 Purposes . Neither of the Borrowers are engaged principally, or as one
of its important activities, in the business of extending credit for the purpose
of purchasing or carrying margin stock (within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System) and no part of the
proceeds of any borrowing hereunder will be used to purchase or carry any margin
stock or to extend credit to others for the purpose of purchasing or carrying
any margin stock. If requested by Bank, Borrowers will furnish to Bank a
statement in conformity with the requirements of Federal Reserve Form U1,
referred to in Regulation U, to the foregoing effect. Neither of the Borrowers
nor any agent acting on behalf of either thereof has taken or will take any
action which might cause this Agreement or the Note to violate any regulation of
the Board of Governors of the Federal Reserve System (including Regulations G,
T, U and X) or to violate any Securities Laws, state or federal, in each case as
in effect now or as the same may hereafter be in effect.
7.7 Compliance with Applicable Laws . Each of the Borrowers is in
compliance with all Laws, ordinances, rules, regulations and other legal
requirements applicable to it and the businesses conducted thereby, the
violation of which could or would have a material adverse effect on its business
condition, financial or otherwise.
7.8 Possession of Franchises, Licenses . Each of the Borrowers possesses
all franchises, certificates, licenses, permits and other authorizations from
governmental political subdivisions or regulatory authorities, free from
burdensome restrictions, that are necessary in any material respect for the
ownership, maintenance and operation of its properties and assets, and neither
Borrower is in violation of any thereof in any material respect.
7.9 Leases, Easements and Rights of Way . To the best of their knowledge,
each Borrower enjoys peaceful and undisturbed possession of all leases,
easements and rights of way necessary in any material respect for the operation
of its properties and assets, none of which contains any unusual or burdensome
provisions which might materially affect or impair the operation of such
properties and assets. All such leases, easements and rights of way are valid
and subsisting and are in full force and effect.
7.10 Taxes . Each of the Borrowers has filed all Federal, state and other
income tax returns which are required to be filed and have paid all Taxes, as
shown on said returns, and all Taxes due or payable without returns and all
assessments received to the extent that such Taxes or assessments have become
due. All Tax liabilities of Borrowers are adequately provided for on the books
of Borrowers, including any interest or penalties. No income tax liability of a
material nature has been asserted by taxing authorities for Taxes in excess of
those already paid.
7.11 Disclosure . Neither this Agreement nor any other Loan Document or
writing furnished to Bank by or on behalf of Borrowers in connection herewith
contains any untrue statement of a material fact nor do such Loan Documents and
writings, taken as a whole, omit to state a material fact necessary in order to
make the statements contained herein and therein not misleading. There is no
fact known to Borrowers and not reflected in the financial statements provided
to Bank which materially adversely affects its assets or in the future may
materially adversely affect the business, property, or assets, or financial
condition of Borrowers which have not been set forth in this Agreement, in the
Loan Documents or in other documents furnished to Bank by or on behalf of
Borrowers prior to the date hereof in connection with the transactions
contemplated hereby.
7.12 ERISA . Since the effective date of Title IV of ERISA, no Reportable
Event has occurred with respect to any Plan. For the purposes of this section
the term "Reportable Event" shall mean an event described in Section 4043(b) of
ERISA. For the purposes hereof the term "Plan" shall mean any plan subject to
Title IV of ERISA and maintained for employees of Borrowers, or of any member of
a controlled group of corporations, as the term "controlled group of
corporations" is defined in Section 1563 of the Internal Revenue Code of 1986,
as amended (the "Code"), of which Borrowers are a part. Each Plan established or
maintained by Borrowers is in material compliance with the applicable provisions
of ERISA, and Borrowers have filed all reports required by ERISA and the Code to
be filed with respect to each Plan. Borrowers have met all requirements with
respect to funding Plans imposed by ERISA or the Code. Since the effective date
of Title IV of ERISA there have not been any nor are there now existing any
events or conditions that would permit any Plan to be terminated under
circumstances which would cause the lien provided under Section 4068 of ERISA to
attach to the assets of either of the Borrowers. The value of each Plan's
benefits guaranteed under Title IV of ERISA on the date hereof does not exceed
the value of such Plan's assets allocable to such benefits on the date hereof.
7.13 Ownership of Mortgaged Property . As of the Closing Date each of the
Borrowers owns working interests, royalty interests and net revenue interests in
the oil and gas leasehold estate for the Mortgaged Property covered by the
Mortgage not less than the amounts set forth on a tract basis on Exhibit E
attached hereto.
7.14 Organization and Capacity . Comanche is duly organized, validly
existing and in good standing under the Laws of the State of Utah as a
corporation, and DE is duly organized, validly existing and in good standing
under the Laws of the State of Oklahoma as a corporation. Each of the Borrowers
has the necessary capacity and authority to enter into this Agreement, the Note,
the Security Instruments and the other Loan Documents and to perform and carry
out the terms and provisions hereof. DE is a wholly owned subsidiary of
Comanche.
ARTICLE VIII EVENTS OF DEFAULT
8.1 Events of Default . If any one or more of the following events (herein
called "Events of Default") shall occur and be continuing for any reason
whatsoever (and whether such occurrence shall be voluntary or involuntary or
come about or be effected by operation of Law or otherwise):
(a) Borrowers shall fail to make any monthly payment of interest
due on the Note, or otherwise shall fail to pay the Note within five (5)
days after the same shall become due and payable (whether by extension,
renewal, acceleration, maturity or otherwise); or
(b) Any representation or warranty of Borrowers made herein or in
any writing furnished in connection with or pursuant to any of the Loan
Documents shall have been false or misleading in any material respect on
the date when made and not subsequently cured; or
(c) Borrowers shall fail to duly observe, perform or comply with
any covenant, agreement or term (other than payment provisions which are
governed by Section 8.1(a) hereof) contained in this Agreement or any of
the Loan Documents and such default or breach shall have not been cured or
remedied within the earlier of thirty (30) days after Borrowers shall know
(or should have known) of its occurrence or twenty (20) days following
receipt of written notice thereof from Bank; or
(d) Borrowers shall default in the payment of principal or of
interest on any other obligation for money borrowed or received as an
advance (or any obligation under any conditional sale or other title
retention agreement, or any obligation issued or assumed as full or
partial payment for property whether or not secured by purchase money
Lien, or any obligation under notes payable or drafts accepted
representing extensions of credit) beyond any grace period provided with
respect thereto, or shall default in the performance of any other
agreement, term or condition contained in any agreement under which such
obligation is created (or if any other default under any such agreement
shall occur and be continuing beyond any period of grace provided with
respect thereto) if the effect of such default is to cause, or to permit
the holder or holders of such obligation (or a trustee on behalf of such
holder or holders) to cause such obligation to become due prior to its
date of maturity; or
(e) Any of the following: (i) either Borrower shall be unable to
pay its debts as they mature, or shall make an assignment for the benefit
of creditors or admit in writing its inability to pay its debts generally
as they become due or fail generally to pay its debts as they mature; or
(ii) an order, judgment or decree is entered adjudicating either Borrower
insolvent or an order for relief under the United States Bankruptcy Code
is entered with respect to such Borrowers; or (iii) either Borrower shall
petition or apply to any Tribunal for the appointment of a trustee,
receiver, custodian or liquidator of such Borrower or of any substantial
part of the assets of such Borrower or shall commence any proceedings
relating to such Borrower under any bankruptcy, reorganization,
compromise, arrangement, insolvency, readjustment of debts, dissolution,
or liquidation Law of any jurisdiction, whether now or hereafter in
effect; or (iv) any such petition or application shall be filed, or any
such proceedings shall be commenced, against either Borrower and such
Borrower by any act shall indicate its approval thereof, consent thereto
or acquiescence therein, or an order, judgment or decree shall be entered
appointing any such trustee, receiver, custodian or liquidator, or
approving the petition in any such proceedings, and such order, judgment
or decree shall remain unstayed and in effect for more than sixty (60)
days; or (vi) either Borrower shall fail to make timely payment or deposit
of any amount of tax required to be withheld by such Borrower and paid to
or deposited to or to the credit of the United States of America pursuant
to the provisions of the Internal Revenue Code of 1986, as amended, in
respect of any and all wages and salaries paid to employees of either of
the Borrowers; or
(f) Any final judgment on the merits for the payment of money in
an amount in excess of $100,000 shall be outstanding against either of the
Borrowers, and such judgment shall remain unstayed and in effect and
unpaid for more than thirty (30) days; or
(g) Any Reportable Event described in Section 7.15 hereof which
Bank determines in good faith might constitute grounds for the termination
of a Plan therein described or for the appointment by the appropriate
United States District Court of a trustee to administer any such Plan
shall have occurred and be continuing thirty (30) days after written
notice to such effect shall have been given to either of the Borrowers by
Bank, or any such Plan shall be terminated, or a trustee shall be
appointed by an appropriate United States District Court to administer any
such Plan or the Pension Benefit Guaranty Corporation shall institute
proceedings to terminate any such Plan or to appoint a trustee to
administer any such Plan; or
(h) Any default or event of default under any of the other Loan
Documents.
8.2 Remedies . Upon the occurrence of any Event of Default referred to in
Section 8.1(e), the Commitment shall immediately and automatically terminate and
the Note and all other Indebtedness shall be immediately due and payable,
without notice of any kind. Upon the occurrence of any other Event of Default,
and without prejudice to any right or remedy of Bank under this Agreement or the
Loan Documents or under applicable Law of under any other instrument or document
delivered in connection herewith, Bank may (i) declare the Commitment terminated
or (ii) declare the Commitment terminated and declare the Note and the other
Indebtedness, or any part thereof, to be forthwith due and payable, whereupon
the Note and the other Indebtedness, or such portion as is designated by Bank
shall forthwith become due and payable, without presentment, demand, notice or
protest of any kind, all of which are hereby expressly waived by Borrowers. No
delay or omission on the part of Bank in exercising any power or right hereunder
or under the Note, the Loan Documents or under applicable law shall impair such
right or power or be construed to be a waiver of any default or any acquiescence
therein, nor shall any single or partial exercise by Bank of any such power or
right preclude other or further exercise thereof or the exercise of any other
such power or right by Bank. In the event that all or part of the Indebtedness
becomes or is declared to be forthwith due and payable as herein provided, Bank
shall have the right to set off the amount of all the Indebtedness of Borrowers
owing to Bank against, and shall have a lien upon and security interest in, all
property of either of the Borrowers in Bank's possession at or subsequent to
such default, regardless of the capacity in which Bank possesses such property,
including but not limited to any balance or share of any deposit, demand,
collection or agency account. At any time after the occurrence of any Event of
Default, Bank may, at its option, cause an audit of any and/or all of the books,
records and documents of Borrowers to be made by auditors satisfactory to Bank
at the expense of Borrowers. Bank also shall have, and may exercise, each and
every right and remedy granted to it for default under the terms of the other
Loan Documents.
ARTICLE IX MISCELLANEOUS
9.1 Notices . Unless otherwise provided herein, all notices, requests,
consents and demands shall be in writing and shall be either handdelivered (by
courier or otherwise) or mailed by certified mail, postage prepaid, to the
respective addresses specified below, or, as to any party, to such other address
as may be designated by it in written notice to the other parties:
If to Borrowers, to:
Comanche Energy Company
3015 East Skelly Drive, Suite 450
Tulsa, Oklahoma 74105
Attention: James G. Borem, President
Fax: (918) 745-6021
If to Bank, to:
Bank of Oklahoma, National Association
P. O. Box 2300
Bank of Oklahoma Tower
One Williams Center
Tulsa, Oklahoma 74192
Attention: Energy Department
Fax: (918) 588-6880
All notices, requests, consents and demands hereunder will be effective when
handdelivered by Bank to the applicable notice address of Comanche (for, on
behalf of and as agent for both of the Borrowers) or when mailed by certified
mail, postage prepaid, addressed as aforesaid by either party hereto.
9.2 Place of Payment . All sums payable hereunder shall be paid in
immediately available funds to Bank, at its principal banking offices at Bank of
Oklahoma Tower, One Williams Center in Tulsa, Oklahoma, or at such other place
as Bank shall notify Comanche in writing. If any interest, principal or other
payment falls due on a date other than a Business Day, then (unless otherwise
provided herein) such due date shall be extended to the next succeeding Business
Day, and such extension of time will in such case be included in computing
interest, if any, in connection with such payment.
9.3 Survival of Agreements . All covenants, agreements, representations
and warranties made herein shall survive the execution and the delivery of Loan
Documents. All statements contained in any certificate or other instrument
delivered by Borrowers hereunder shall be deemed to constitute representations
and warranties by Borrowers.
9.4 Parties in Interest . All covenants, agreements and obligations
contained in this Agreement shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto, except that neither of
the Borrowers may assign its rights or obligations hereunder without the prior
written consent of Bank.
9.5 Governing Law . This Agreement and the Note shall be deemed to have
been made or incurred under the Laws of the State of Oklahoma and shall be
construed and enforced in accordance with and governed by the Laws of Oklahoma.
9.6 SUBMISSION TO JURISDICTION . BORROWERS HEREBY CONSENT TO THE
JURISDICTION OF ANY OF THE LOCAL, STATE, AND FEDERAL COURTS LOCATED WITHIN TULSA
COUNTY, OKLAHOMA AND WAIVE ANY OBJECTION WHICH BORROWERS MAY HAVE BASED ON
IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY
SUCH COURT AND WAIVE PERSONAL SERVICE OR ANY AND ALL PROCESS UPON THEM, AND
CONSENT THAT ALL SUCH SERVICE OF PROCESS BE MADE BY MAIL OR MESSENGER DIRECTED
TO IT AT THE ADDRESS SET FORTH IN SUBSECTION 9.1 HEREOF AND THAT SERVICE SO MADE
SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT OR THREE (3)
BUSINESS DAYS AFTER MAILED OR DELIVERED BY MESSENGER.
9.7 Maximum Interest Rate . Regardless of any provision herein, Bank shall
never be entitled to receive, collect or apply, as interest on the Indebtedness
any amount in excess of the maximum rate of interest permitted to be charged by
Bank by applicable Law, and, in the event Bank shall ever receive, collect or
apply, as interest, any such excess, such amount which would be excessive
interest shall be applied to other Indebtedness and then to the reduction of
principal; and, if the other Indebtedness and principal are paid in full, then
any remaining excess shall forthwith be paid to Borrowers.
9.8 No Waiver; Cumulative Remedies . No failure to exercise, and no delay
in exercising, on the part of Bank, any right, power or privilege hereunder or
under any other Loan Document or applicable Law shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
of Bank. The rights and remedies herein provided are cumulative and not
exclusive of any other rights or remedies provided by any other instrument or by
law. No amendment, modification or waiver of any provision of this Agreement or
any other Loan Document shall be effective unless the same shall be in writing
and signed by Bank. No notice to or demand on Borrowers in any case shall
entitle Borrowers to any other or further notice or demand in similar or other
circumstances.
9.9 Costs . Borrowers agree to pay to Bank on demand all costs, fees and
expenses (including without limitation reasonable attorneys fees and legal
expenses and the fees of Bank's engineers for evaluating the Mortgaged Property)
incurred or accrued by Banking connection with the preparation, execution,
closing, delivery, filing, recording and administration of this Agreement, the
Note, the Security Instruments and the other Loan Documents, or any amendment,
waiver, consent or modification thereto or thereof, or any enforcement thereof.
In any action to enforce or construe the provisions of this Agreement or any of
the Loan Documents, the prevailing party shall be entitled to recover its
reasonable attorneys' fees and all costs and expenses related thereto.
9.10 Headings . The article and section headings of this Agreement are for
convenience of reference only and shall not constitute a part of the text hereof
nor alter or otherwise affect the meaning hereof.
9.11 Severability . The unenforceability or invalidity as determined by a
Tribunal of competent jurisdiction, of any provision or provisions of this
Agreement shall not render unenforceable or invalid any other provision or
provisions hereof.
9.12 Exceptions to Covenants . Borrowers shall not be deemed to be
permitted to take any action or fail to take any action which is permitted as an
exception to any of the covenants contained herein or which is within the
permissible limits of any of the covenants contained herein if such action or
omission would result in the breach of any other covenant contained herein.
9.13 Counterparts . This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument.
9.14 WAIVER OF JURY . BORROWERS FULLY, VOLUNTARILY AND EXPRESSLY WAIVE ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS UNDER THIS AGREEMENT, THE NOTE, THE MORTGAGE OR UNDER ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED (OR WHICH MAY IN THE FUTURE BE
DELIVERED) IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING RELATIONSHIP
EXISTING IN CONNECTION WITH THIS AGREEMENT. BORROWERS AGREE THAT ANY SUCH ACTION
OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
<PAGE>
28
656307
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in Tulsa, Oklahoma effective as of the day and
year first above written.
COMANCHE ENERGY COMPANY,
a Utah corporation
By:______________________________
James G. Borem, President
DOUBLE EAGLE, INC.,
an Oklahoma corporation
By:_______________________________
James G. Borem, President
"Borrowers"
BANK OF OKLAHOMA, NATIONAL ASSOCIATION
By: __________________________________
Kevin A. Humphrey, Vice President
"Bank"
<PAGE>
EXHIBITS
Exhibit A Revolving Credit Note
Exhibit B Revolving Loan Request and
Certification (the "Request")
Exhibit C Other Indebtedness
Exhibit D Litigation
Exhibit E Ownership of Mortgaged Property
<PAGE>
EXHIBIT C
OTHER INDEBTEDNESS
NONE
<PAGE>
EXHIBIT D
LITIGATION
NONE
<PAGE>
EXHIBIT E
OWNERSHIP OF MORTGAGED PROPERTY
Comanche: (Panola County, Texas)
- -------------------------------------------------------------------------------
Well or Unit Name GWI NRI
- ----------------- --- ---
- -------------------------------------------------------------------------------
Bethany Mills Bell No. 100.000 81.512800%
- -------------------------------------------------------------------------------
Carthage Moss W.S. Estate 98.248975% 75.000000%
- -------------------------------------------------------------------------------
Carthage Latham 2 No. 2 100.00 75.35721700%
- -------------------------------------------------------------------------------
DE:
- -------------------------------------------------------------------------------
Well or Unit Name GWI NRI
- ----------------- --- ---
- -------------------------------------------------------------------------------
Bovina 7-2 #1
- -------------------------------------------------------------------------------
Bovina Cauther 6-15
- -------------------------------------------------------------------------------
Cushing Minnic Washington
- -------------------------------------------------------------------------------
Cushing Newman Deere
- -------------------------------------------------------------------------------
Cushing Foley #1
- -------------------------------------------------------------------------------
Cushing Minnie Washington
- -------------------------------------------------------------------------------
Cushing Foley #2
- -------------------------------------------------------------------------------
Cushing Kirschner
- -------------------------------------------------------------------------------
Cushing Carman
- -------------------------------------------------------------------------------
Sparks East
- -------------------------------------------------------------------------------
Sparks Prue
- -------------------------------------------------------------------------------
ARTICLES OF INCORPORATION
OF
QUEST RESOURCES, INC.
We, the undersigned natural persons over the age of twenty-one (21)
years or more, acting as incorporators of a corporation under the Utah Business
Corporation Act do hereby adopt the following Articles of Incorporation for said
Corporation.
ARTICLE I - NAME
The name of this corporation is: QUEST RESOURCES, INC.
ARTICLE - DURATION
The period of the coroporation's duration is perpetual.
ARTICLE III - PURPOSES
The purpose of the corporation shall be to conduct any or all
lawaful busniess for which corporations may be organized under the Utah
Business Corporation Act as from the time to time authorized by its Board
of Directors, includiong the accumulation of investment capital and the
acquistion of the assets and/or businesses of other corporations,
partnerships, sole proprietorships or other forms of business entities;
provided however, the corporation shall not:
(1) engage in the banking business, the trust company business or
the practice of any profession permitted to be incorporated
under Utah laws;
(2) engage primarily or hold itself out as being primarily
engaged in the business of investing, reinvesting or trading
in securities;
(3) engage in the business of issuing face-amount certificates of
the installment type, nor have any such certificate
outstanding.
(4) engage in or propose ti engage in, the busniess of investing,
reinvesting, owing, holding or trading in securities having a
value of the corporation's total assests (exclusive of
Government securities and cash items) on an unconsolidated
basis;
(5) for compensation, engage in the business of advising others,
either directly or through publications or writings, as to the
value of securirties or as to the advisability of investing
in, purchasing, or selling securities; or
(6) for compensation, and as a part of a regular business, issue
or promulgate analyses or reports concerning securitities.
In pursuit of its purposes, the corporation shall have all the
powers granted by law to corporations under the laws of the State of Utah
and elsewhere as pertinent.
ARTICLE IV - STOCK
The aggregate number of shares which the corporation shall be
authorized to issue is fifteen million shares having no par value per
share. All stock of this corporation shall be of the same class, common,
and shall habe the same rights and preferences. Fully paid stocl of this
corporation shall not be liabile to any call and is non-assessable.
ARTICLE V - PRE-EMPTIVE RIGHTS AND CUMULATIVE VOTING
A shareholder shall have no pre-emptive rights to acquire any securities of
this corporation. Cumulative voting of the shares of this coroporation shall not
be permitted.
ARTCLE VI - CAPITALIZATION
This corporation will commence busniess until consideration of a
calue of at least $1,000 has been received for the issuance of shares.
ARTCLE VII - INITIAL OFFICE AND AGENT
The address of this coroporation's initial registered office and the
name of its initial registered agent at such address is:
Name of Agent Address of Registered Office
Peter D. Meldrum c/o A. Reed Reynolds
320 Kearns Building
Salt Lake City, Utah 84101
ARTICLE VIII - DIRECTORS
The number of Directors constituting the initial Board of Directors
of othis corporation is "three". The names and addresses of the persons
who are to serve as Directors until the first annual meeting of
stockholders, or until their successors are elected and qualified, are:
Name Address
G. Bruce McKee, Jr. 2696 Skyline Drive
Salt Lake City, Utah 84108
William C. McCarty 1779 Mill Lane
Salt Lake City, Utah 84117
Peter D. Meldrum 1616 South 2200 East
Salt Lake City, Utah 84108
ARTICLE IX - INCORPORATORS
The name and address of each incorporator is:
Name Address
G. Bruce McKee, Jr. 2696 Skyline Drive
Salt Lake City, Utah 84108
William C. McCarty 1779 Mill Lane
Salt Lake City, Utah 84117
Peter D. Meldrum 1616 South 2200 East
Salt Lake City, Utah 84108
ARTICLE X - MEETINGS OF SHAREHOLDERS
At any meeting of the shareholders, a majority of the shares
entitled to vote, represented in person or by proxy, shall constitute a
quorum is present, the affirnative vote of the shares represented at the
meeting and entitled to vote on the subject matter shall be the act of the
shareholders, unless the vote of a greater number is required by law, by
these Articles of Incorporation, or by the By-Laws of the corporation.
ARTICLE XI - BY LAWS
By-Laws of this corporation shall be sdopted by its Board of
Directors, which shall also habe the power to alter, amend or repeal the
By-Laws or to adopt new By-Laws; subject, however, to the power of the
shareholders to alter, repeal or adopt new By-Laws for the coporation.
DATED this day of January, 1980.
--------
INCORPORATOR - G. BRUCE McGEE, JR.
INCORPORATOR - WILLIAM C. McCARTY
INCORPORATOR - PETER D. MELDRUM
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
I, A. Reed Reynolds, a Notary Public, hereby certify that on the day of
Janaury ________ 1980, G. Bruce McKee, Jr., William C. McCarty and Peter D.
Meldrum personally appeared before me, who being by me first duly sworn,
severally declared that they are the persons who signed the foregoing document
as incoporators and that the statements therein contained are true.
DATED this dau of January, 1980.
-------
NOTARY PUBLIC
Residing at Salt Lake City, Utah
My Commission Expires:
ARTICLES OF AMENDMENT
to the
ARTICLES OF INCORPORATION
of
COMANCHE ENERGY, INC.
ARTICLE I. In accordance with sections 16-10a-1003 and 10-10a-1006 of the Utah
Revised Business Corporation, Comanche Energy, Inc. ("Corporation"), does hereby
adopt the following amendment (the "Amendment"), to its Articles of
Incorporation:
(a) The article of incorporation hereby amended by deleting all of Article
IV and inserting the following in lieu thereof:
ARTICLE IV-STOCK
The aggregate number of shares which the corporation shall be
authorized to issue is One Hundred Million (100,000,000) shares having no
par value per share. All stock of this corporation shall be of the same
class, common, and shall have the same rights and preferences. Fully paid
stock of this corporation shall not be liable to any call and is
non-assessable.
(b) The articles of incorporation are hereby amended by adding new Article
XII, which reads as follows:
ARTICLE XII-LIMIT ON LIABILITY
Directors of the corporation shall have no personal liability to the
corporation or its shareholders for monetary damages for any action, or
any failure to take action, as a director, except for liability for: (i)
the amount of a financial benefit received by a director to which he or
she is not entitled; (ii) an intentional infliction of harm on the
corporation or the shareholders; (iii) a violation of section 16-10a-842
of the Utah Revised Business Corporation Act, and any amended or successor
provision thereto; or (iv) an intentional violation of criminal law.
ARTICLE II. The foregoing Amendments were adopted by the shareholders of the
Corporation on June 16, 1999. One June 16, 1999, there was only one voting group
entitled to vote on the Amendments. The sole voting group of the Corporation was
the common stock, no par value, of which 18,453,930 shares were issued and
outstanding and entitled to vote on the Amendments. Of the 18,453,830 shares of
the Corporation's common stock issued and outstanding, shares were indisputably
represented at the meeting, so that a quorum was present. At the meeting there
were shares of common stock voted for the Amendment, and the number of votes
cast for the Amendment was sufficient for approval by the sole voting group
entitled to vote on the Amendment.
IN WITNESS WHEREOF, these Articles of Amendment are executed for and on
behalf of the Corporation at its act and deed by the undersigned officer
hereunto duly authorized, who certifies that the facts herein stated are true
this day of June, 1999.
Frank W. Cole, President
ARTICLES OF AMENDMENT
to the
ARTICLES OF INCORPORATION
of
QUEST RESOURCES, INC.
(Changed herein to Comanche Energy, Inc.)
ARTICLE I. In accordance with sections 16-10a-1003 and 16-10a-1006 of the
Utah Revised Business Corporation Act, Quest Resources, Inc.
("Corporation"), does hereby adopt the following amendment
(the "Amendment"), to its Articles of Incorporation:
(a) The articles of incorporation are hereby amended by deleting all
of Article I and inserting the following in lieu thereof:
ARTICLE I-NAME
The name of this corporation is: Comanche Energy, Inc.
ARTICLE II. The foregoing Amendments were adopted by the shareholders of the
Corporation on January 25, 1995. On January 25, 1995, there was only
one voting group entitled to vote on the Amendments. The sole voting
group of the Corporation was the common stock, no par value, of
which 15,938,770 shares were issued and outstanding and entitled to
vote on the Amendments. Of the 15,938,770 shares of the
Corporation's common stock issued and outstanding, shares were
indisputably represented at the meeting, so that a quorum was
present. At the meeting there were shares of common stock voted for
the Amendment, and the number of votes cast for the Amendment was
sufficient for approval by the sole voting group entitled to vote on
the Amendment.
IN WITNESS WHEREOF, these Articles of Amendments are executed for
and on behalf of the Corporation at its act and deed by the
undersigned officer hereunto duly authorized, who certifies that the
facts herein stated are true this day of February, 1995.
Frank W. Cole, President
BY-LAWS
of
QUEST RESOURCES, INC.
(a Utah Corporation)
ARTICLE I
OFFICES - BOOKS AND RECORDS
Section 1.1 Offices. The registered office of the corporation and its
principal place of business is:
320 Kearns Building
Salt Lake City, Utah 84101
Section 1.2 Registered Agent. The registered agent of the corporation is
Peter D. Meldrum, whose address is:
1616 South 2200 East
Salt Lake City, Utah 84108
Section 1.3 Books and Records. The corporation shall keep at its
registered office the following books and records and any shareholder of record,
upon written demand stating the purpose thereof, shall have the right to
examine, in person, or by agent or attorney at any reasonable time or times, for
any proper purpose the same and to make extracts from any of the following:
(a) Its books and records of account.
(b) Its minutes of meetings of the Board of Directors and
any meeting thereof.
(c) Its minutes of meetings of the shareholders.
(d) Its record of shareholders which shall give their
names and addresses and the number and class of the
shares held by each.
(e) Copies of its Articles of Incorporation and By-Laws as
originally executed and adopted together with all sub-
sequent amendments thereto.
Section 1.4 Financial Statements. Upon the written request of any
shareholder of the corporation, the corporation shall mail to such shareholder
its most recent annual and quarterly financial statements showing, in reasonable
detail, its assets and liabilities and the results of its operations unless the
shareholder has already received the same.
<PAGE>
ARTICLE II
BY-LAWS
Section 2.1 Amendments. These By-Laws may be altered, amended or repealed
and new By-Laws adopted by the Board of Directors. Any such action shall be
subject to repeal or change by action of the shareholders, but unless and until
such action by the shareholders, the alteration amendment, repeal, change or new
By-Laws (and the repeal of the old By-Laws) shall be valid and effective and no
director, officer, shareholder, employee or agent of the corporation shall incur
any liability by reason of any action taken or omitted in reliance on such
By-Laws(s). The Board of Directors shall not have the authority to alter, amend,
or repeal By-Laws adopted by the shareholders.
Section 2.2 By-Laws Provisions Additional and Supplemental to Provisions of Law.
All restrictions, limitations, requirements and other provisions of these
By-Laws shall be construed, insofar as possible, as supplemental and additional
to all provisions of law applicable to the subject matter thereof and shall be
fully complied with in addition to the said provisions of law unless such
compliance shall be unlawful.
Section 2.3 By-Laws Provisions Contrary to or Inconsistent with Provisions of
Law. Any article, section, subsection, subdivision, sentence, clause or phrase
of these By-Laws which, upon being construed in the manner provided in Section
2.2 hereof, shall be contrary to or inconsistent with any applicable provision
of law, shall not apply so long as said provisions of law shall remain in
effect, but such result shall not affect the validity or applicability of any
other portions of these By-Laws, it being hereby declared that these By-Laws
would have been adopted and each article, section, subsection, subdivision,
sentence, clause or phrase thereof, irrespective of the fact that any one or
more articles, sections, subsections, subdivisions, sentences, clauses or
phrases is or are unlawful.
ARTICLE III
MEETINGS OF SHAREHOLDERS
Section 3.1. Place of Meetings. The Board of Directors may designate any
place, either within or without the State of Utah, as the place of meeting for
any annual meeting or for any special meeting called by the Board of Directors.
A waiver of notice signed by all shareholders entitled to vote at a meeting may
designate any place either within or without the State of Utah as the place for
holding such meeting. If a special meeting is otherwise called, the place of
meeting shall be at such place in the State of Utah as designated in the notice
of the meeting.
Section 3.2. Annual Meeting. An annual meeting of the shareholders shall
be held on the third Thursday of April of each year commencing with the year
1981 (unless that day is a legal holiday, and then on the next succeeding day,
that is not a legal holiday) at 10:00 a.m., the local time of the place of the
meeting in effect on the day of the meeting.
Section 3.3. Special Meetings. Special meetings of the shareholders may be
called by the chairman of the board, the president, the board of directors or
the holders of not less than one tenth of all the shares entitled to vote at the
meeting.
Section 3.4. Notice of Shareholders' Meetings. Written or printed notice
stating the place, day and hour of the meeting and, in the case of a special
meeting, the purpose or purposes for which the meeting is called shall be
delivered not less than ten (10) nor more than fifty (50) days before the date
of the meeting, either personally or by mail, by or at the direction of the
president, the secretary, or the officer or persons calling the meeting to each
shareholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United State Mail
addressed to the shareholder at his address as it appears on the stock transfer
books of the corporation with postage thereon prepaid.
Section 3.5. Waiver of Notice. Any shareholder may waive notice of any
meeting of shareholders, (however called or noticed, whether or not called or
noticed and whether before, during or after the meeting) by signing a written
waiver of notice or a consent to the holding of such meeting, or an approval of
the minutes thereof. Attendance at a meeting, in person or by proxy, shall
constitute waiver of all defects of call or notice regardless of whether waiver,
consent or approval is signed or any objections are made. All such waivers,
consents, or approvals shall be made a part of the minutes of the meeting.
Section 3.6. Fixing Record Date for Meetings. For the purposes 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 dividend, 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, in any case, thirty (30) 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 boos, the Board of Directors may fix, in advance, a date as a record
date for any such determination of shareholders. Such date, in any case, shall
not be more than fifty (50) 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. If the stock
transfer books are not closed and no record date is fixed for the determination
of shareholders entitled to receive payment of a dividend, the date on which
notice of the meeting is mailed or the date on which the resolution of the Board
of Directors declaring such dividend is adopted, as the case may be, shall be
the record date for such determination of 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.
Section 3.7. Voting List. (a) At least ten (10) days before each meeting
of shareholders, the officer or agent having charge of the stock transfer books
for shares of the corporation shall make a complete list of the shareholders
entitled to vote at such meeting or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares held by each,
which list, for a period of ten (10) days prior to the meeting, shall be kept on
file at the registered office of the corporation and shall be subject to
inspection by any shareholder at any time during usual business hours. Such list
shall also be produced and kept open at the time and place of the meeting and
shall be subject to the inspection of any shareholder for the entire duration of
the meeting. The original stock transfer books shall be prima facie evidence as
to who are the shareholders entitled to examine such list or transfer books or
to vote at any meeting of shareholders.
(b) Failure to comply with the requirements of this section shall not affect the
validity of any action taken at such meeting.
Section 3.8. Quorum of Shareholders, Vote. A majority of the shares
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. If a quorum is present, the affirmative vote of
the majority of the shares represented at the meeting and entitled to vote on
the subject shall be the act of the shareholders, unless the vote of a greater
number or voting by classes is required by the Utah Business Corporations Act or
the Articles of Incorporation. Shares shall not be counted to make up a quorum
for a meeting if voting of them at the meeting has been enjoined or for any
reason they cannot be lawfully voted at the meeting. The shareholders present at
a duly called or held meeting at which a quorum is present may continue to do
business until adjournment, notwithstanding the withdrawal of shareholders
sufficient in number to cause less than a quorum to be constituted.
Section 3.9. Voting of Shares. Each outstanding share, regardless of
class, shall be entitled to one vote on each matter submitted to vote at a
meeting of shareholders, except to the extent that the voting rights of the
shares of any class or classes are limited or denied by the Articles of
Incorporation.
Section 3.10. Voting of Shares by Certain Holders. (a) Shares standing in
the name of another corporation may be voted by such officer, agent or proxy as
the By-Laws of such corporation may prescribe, or, in the absence of such
provision, as the Board of Directors of such corporation may determined.
(b) 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.
(c) 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 transfer thereof into the receiver's name, if authority so to do is
contained in an appropriate order of the court by which such receiver was
appointed.
(d) 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.
(e) Shares of its own stock belonging to the corporation or held by it in a
fiduciary capacity, or shares held by another corporation if a majority of the
shares entitled to vote for the election of directors of such other corporation
is held by the corporation, shall not be voted, directly or indirectly, at any
meeting, and shall not be counted in determining the total number of outstanding
shares at any given time.
Section 3.11. Order of Business. The order of business at all meetings of
the shareholders, shall be as follows:
(a) Roll call.
(b) Proof of notice of meeting or waiver of notice.
(c) Reading of minutes of preceding meeting.
(d) Reports of officers.
(e) Reports of committees.
(f) Election of directors.
(g) Unfinished business.
(h) New business.
Section 3.12. Proxies. A shareholder may vote either in person or by
proxy, executed in writing by the shareholder, or by his duly authorized
attorney in fact. No proxy shall be valid after eleven months from the date of
its execution, unless otherwise provided in the proxy, specifically providing a
longer length of time for which the proxy is to continue in force, which in no
case shall exceed seven (7) years from the date of execution. Any shareholder
giving a written consent, or his proxy, or his transferee or personal
representative, or their respective proxies, may revoke the same prior to the
time that the vote of, or written consents of, the number of shares required to
authorize the proposed action have been cast or have been filed with the
Secretary of the Corporation, as the case requires, but may not do so
thereafter.
Section 3.13. Elections of Directors. 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 each of as many
persons as there are directors to be elected and for whose election he has a
right to vote. The candidates receiving the highest number of votes shall be
declared elected. Elections for directors need not be by ballot except upon
demand made by a shareholder at the election and before the voting begins.
Cumulative voting for directors shall not be permitted.
Section 3.14. Adjournments. Any shareholders' meeting, whether or not a
quorum is present, may be adjourned, from time to time, by the vote of a
majority of the shares, the holders of which are either present in person or
represented by proxy thereat, but, except as provided in Section 3.8 hereof, in
the absence of a quorum, no other business may be transacted at such meeting.
When a meeting is adjourned for thirty (30) days or more, notice of the
adjourned meeting shall be given as in the case of an original special meeting.
Save as aforesaid, it shall not be necessary to give any notice of the time and
place of the adjourned meeting or of the business to be transacted thereat other
than by announcement at the meeting at which such adjournment is taken.
Section 3.15 Informal Action by Shareholders. Any action required to be taken at
a meeting of the shareholders, or any other action which may be taken at a
meeting of the shareholders, may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all of the
shareholders entitled to vote with respect to the subject matter thereof.
ARTICLE IV
BOARD OF DIRECTORS
Section 4.1. General Powers. The business and affairs of the corporation
shall be managed by its Board of Directors who shall have all powers as granted
them by the Articles of Incorporation of this corporation, the laws of the State
of Utah, and these By-Laws and shall have such general power necessary and/or
implied for the efficient operation of this corporation.
Section 4.2. Number, Tenure and Qualifications. The number of directors of
the corporation shall be not less than three (3) and as many additional
directors as the Board of Directors may, from time to time, determine are
necessary for the operation of the corporation. The initial number of directors
shall be three (3). Each director shall hold office until the next annual
meeting of shareholders following his election or appointment and until his
successor shall have been elected or appointed and qualified. Directors need not
be residents of the State of Utah.
Section 4.3. Regular Meeting. A regular meeting of the Board of Directors
shall be held without other notice than this by-law immediately after, and at
the same place as the annual meeting of shareholders. The Board of Directors may
provide, by resolution, the time and place, either within or without the State
of Utah, for the holding of additional regular meetings without other notice
than such resolution.
Section 4.4. Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of the chairman of the Board, the President,
any two Directors, or by a sole remaining Director. The directors may fix any
place, either within or without the State of Utah, as the place for holding any
special meeting of the Board of Directors called by them.
Section 4.5. Notice. Notice of any special meeting shall be given at least
five (5) days prior thereto by written notice delivered personally or mailed to
each director at his business address, or by telegram. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail so
addressed, with postage thereon prepaid. If notice be given by telegram, such
notice shall be deemed to be delivered when the telegram is delivered to the
telegraph company. Any director may waive notice of any meeting. The attendance
of a director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened. The business to be transacted, and the purpose of the special meeting
of the Board of Directors shall be specified in the notice or waiver of notice
of such meeting.
Section 4.6. Quorum. Two-thirds (2/3) of the number of directors fixed by
the Board of Directors pursuant to Section 4.2 of this Article IV shall
constitute a quorum for the transaction of business at any meeting of the Board
of Directors, but if less than such majority is present at a meeting, the
director(s) present may adjourn the meeting, from time to time, without further
notice.
Section 4.7. Manner of Acting. The acts of two-thirds (2/3) of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
Section 4.8. Vacancies. Any vacancy occurring in the Board of Directors
may be filled by the affirmative vote of a majority of the remaining directors,
though less than a quorum of the Board of Directors, or by a sole remaining
director. A director appointed to fill a vacancy shall be appointed for the
un-expired term of his predecessor in office. Any directorship to be filled by
reason of an increase in the number of directors shall be filled by the Board of
Directors, such appointment to be until the next annual meeting or a special
meeting of stockholders called for that purpose.
Section 4.9. Compensation. By resolution of the Board of Directors, the
directors may be paid their expense, if any of attendance at each meeting of the
Board of Directors and may be paid a fixed sum for attendance at each meeting of
the Board of Directors or a stated salary as a director, or both. No such
payment shall preclude any director from servicing the corporation in any other
capacity and receiving compensation therefor.
Section 4.10. No such payment shall preclude any director from servicing
the corporation in any other capacity and receiving compensation therefor.
Section 4.10. Presumption of Assent. A director 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 his dissent
shall be entered into the minutes of the meeting or unless he shall file his
written dissent to such action with the person acting as the Secretary f the
meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the Corporation within two (2) days after
the adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action.
Section 4.11. Acting Without a Meeting. Any action required or permitted
to be taken by the Board of Directors may be taken without a meeting if all
members of the Board of Directors shall individually or collectively consent in
writing to such action. Such written consent or consents shall be filed with the
minutes of the proceedings of the Board of Directors.
Section 4.12. Removal. At a shareholders meeting expressly called for that
purpose, one or more directors may be removed by a vote of a majority of the
shares entitled to vote at an election of directors.
Section 4.13. Committees. The Board of Directors by resolution adopted by
the majority of the number of directors fixed by the by-laws may designate a
committee or committees consisting of not less than two directors which
committee or committees, to the extent provided in such resolution, shall have
and may exercise all the authority therein provided; but the designation of such
committee or committees and the delegation thereto of authority shall not
operate to relieve the Board of Directors, or any member thereof, of any
responsibility imposed upon it or him by law.
ARTICLE V
OFFICERS
Section 5.1. Number. The officers of the corporation shall be a President,
one or more Vice Presidents (the number thereof to be determined by the Board of
Directors), a Secretary and a Treasurer, each of whom shall be elected by the
Board of Directors. Such other officers and assistant officers as may be deemed
necessary may be elected or appointed by the Board of Directors. The offices of
Secretary and Treasurer may be held by the same person, but the offices of
President and Secretary shall not be held by the same person.
Section 5.2. Appointment and Term of Office. The officers of the
corporation shall be appointed by the board of Directors and shall be appointed
annually by the Board of Directors following the annual meeting of the
shareholders. If the appointment of officers shall not occur at such meeting,
such appointment shall be made as soon thereafter as conveniently may be.
Section 5.3. Removal. Any officer or agent elected or appointed by the
Board of Directors may be removed by the Board of Directors, with or without
cause, whenever in its judgment the best interests of the corporation will be
served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. The election or appointment of any
officer or agent shall not of itself create any particular term of office or
rate of compensation.
